Automotive, Food, Meals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (“the AMWU”) and Communications, Electrical, Electronic, Energy, Information, Postal,...

[2021] FWC 2494

[2021] FWC 2494

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739 – Application to deal with a dispute

Automotive, Food, Meals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (“the AMWU”) and Communications, Electrical, Electronic, Energy,
Information, Postal, Plumbing and Allied Services Union of Australia (“the CEPU)
v
Joy Global Australia Pty Ltd (Komatsu)
(C2021/395 & C2021/396)

DEPUTY PRESIDENT LAKE BRISBANE, 5 MAY 2021

Application to deal with a dispute whether the leading hand allowance is an all purpose allowance, whether annual leave loading applies and the method of calculation.

[1] The Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union and Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and the Allied Services Union of Australia (the Unions) and Joy Global Pty Ltd are in dispute about the proper construction of clause 18 and 23 of the Joy Global Australia Pty Ltd Rockhampton Enterprise Agreement 2018 (the Agreement) (Dispute).

[2] On 27 January 2020, the Applicants filed two applications pursuant to s 739 of the Fair Work Act 2009 (Cth) (the Act) in the Fair Work Commission (the Commission) for the Commission to deal with the Dispute.

[3] Following an unsuccessful conciliation conference, I made directions and listed the Dispute for arbitration. Both parties filed and served witness statements and submissions in accordance with my directions. A hearing was conducted virtually. Both the Unions and the Respondent were present at the hearing.

[4] There is no dispute between the parties, and I am satisfied on the evidence, that I have jurisdiction to arbitrate the Dispute.

A brief outline of the Dispute

[5] Throughout 2020, as a consequence of the COVID-19 pandemic, Komatsu Mining Corporation underwent a review of its operations, to ensure long-term viability of the Parkhurst Plant. The result of this review was a range of mitigation strategies, including 20 employees being made redundant due to a lack of work.

[6] As part of this work, a review was undertaken to ensure that Komatsu’s operations and practices complied the Agreement. As an outcome of the review, the Respondent identified several practices where they believed they had been paying employees above what was required by the Agreement. To reduce their expenses and liabilities the Respondent began consultation with their work force to correct these overpayments.

[7] Komatsu also reviewed the number of Leading Hand positions required following a significant reduction in work, and it was deemed that a minimum of 12 Leading Hands were required rather than the 23 which were engaged.

[8] On 24 November 2020, the Respondent wrote to employees at the Komatsu Parkhurst site Rockhampton (‘Parkhurst Site’) advising employees (without limitation) that:

“a. following a review of the Agreement, Komatsu would be implementing changes to the payment of allowances on site as part of its cost cutting initiative; and

b. that it had not been paying allowances in accordance with the Agreement and, accordingly, proposed to alter the way they paid various allowances.”

[9] Historically, the Respondent has paid employees annual leave loading as 17.5% of the wages (which included allowances).

[10] They also indicated they would not be paying annual leave loading on specific allowances (Electrical, First Aid, National Electrical Standard) provided within the Agreement. On 17 December 2020 and 1 February 2021, the Respondent wrote to the employees agreeing to pay these allowances as all-purpose allowances until the nominal expiry of the Agreement.

[11] While the dispute on allowances has been on foot, the Respondent has raised during conciliation discussions that their position has now changed. The Respondent is now asserting that employees covered by the Agreement are not entitled to annual leave loading.

[12] Prior to the pay period beginning 2 December 2020, employees who performed leading hand duties were paid the leading hand allowance on top of their base rate of pay, which incorporated the leading hand allowance as it is an all-purpose allowance as prescribed in clause 32.1 of the Manufacturing and Associated Industries and Occupations Award 2010 being the 21 November 2018 version (the Award).

[13] On and from 2 December 2020, the Respondent has paid employees performing leading hand duties the leading hand allowance on top of their normal classification rate/Hourly Wage Rate (which is used interchangeably in the Agreement) without the incorporation of the leading hand allowance.

[14] Just to be clear, for the purposes of this decision, I have adopted the common industrial understanding of an ‘all-purpose allowance’ which I articulate for ensuring clarity. An allowance that is regarded as an all-purpose allowance is unlike other allowances as it applies for all purposes of the Award. The result of this is that an allowance that is regarded as an all-purpose allowance will form part of the employee’s base rate of pay for the purposes of calculation for overtime and weekend penalties, are calculated on the compounded rate of pay.

[15]  This is a dispute regarding the interpretation and meaning of clause 18.8 of the Agreement relating to the payment of allowances and clause 23.1 of the Agreement, being the rate applicable for the payment of annual leave loading.

Questions for determination

[16] There are two questions before me for determination:

1. Does the leading hand allowance in clause 18.8.4 apply to the hourly base rate of pay for all purposes?

2. Does the annual leave provision in clause 23.1 exclude the Award annual leave entitlements and should employees be entitled to annual leave loading, and if entitled, should this loading be calculated on the base rate or as 17.5% of wages (which includes allowances, loadings and penalties)?

Relevant provisions of the Agreement

[17] Bargaining for the current enterprise agreement to replace the 2016 Agreement commenced in May 2019. The Agreement was made in December 2019 and commenced operation on 13 March 2020. It has a nominal expiry date of 30 November 2022.

[18] The provisions of the Agreement are relevant to the Dispute are set out below.

[19] Clause 5 of the Agreement expressly incorporates the Award as at the time of approval of the Agreement, into the Agreement and provides that:

“5.1. The terms of the Award as at the date of the commencement of this Agreement are incorporated into the Agreement. If an incorporated Award term is inconsistent with an express term of the Agreement, the express term of the Agreement prevails over the incorporated term to the extent of the inconsistency.

5.2. In the Agreement, references to the Award shall mean the Award incorporated into the Agreement, unless the context requires otherwise.

5.3. Upon incorporating Award terms into the Agreement, the incorporated Award terms are to be read as altered with the appropriate changes to make them provisions of the Agreement rather than provisions of the Award. So, for example, the loadings, penalties and allowances in the Award apply to the rates of pay due under the Agreement, not the Award rate.”

[20] Clause 18.8 of the Agreement establishes the allowance payable to employees undertaking the higher duties, including as a Leading Hand. Clause 18.8 relevantly states:

“18.8.1 Employees engaged for more than one hour, during one day or shift, on duties carrying a higher rate than their normal classification rate will be paid the higher rate for that day or shift (emphasis added).

...

18.8.4 An employee performing the duties of a Leading Hand as per Appendix A, and has been appointed by the Team Leader and Workshop Manager will be paid an additional allowance of 10% of the Hourly Wage Rate in addition to their current classification rate (emphasis added).

18.8.5 In the event that a Leading Hand is requested to temporarily perform part or all of his/her Team Leader's role in the absence of that Team Leader, and such temporary period exceeds 3 days, the Leading Hand will be paid an additional allowance of 22% of the Hourly Wage Rate in addition to their classification rate. This is in place of the Leading Hand rate referred to in Clause 18.8.4 (emphasis added)

18.8.6 Any employee whose skill level or qualification allows them to be utilised by the business outside their usual occupation, will be paid at a higher duties rate of 10% above their current classification. This classification may also include Leading Hand rates which will be taken into consideration. The higher duty rate will be paid for a minimum period of one (1) week; eg: C8 + higher duties of 10% or LH or TL allowance+ higher duties rate of 10% (emphasis added).”

Principles of construction

[21] As agreed by the parties the principles I must apply in properly construing the Agreement were summarised by the Full Bench in AMWU v Berri Pty Ltd 1as follows:

“1. The construction of an enterprise agreement, like that of a statute or contract, begins with a consideration of the ordinary meaning of the relevant words. The resolution of a disputed construction of an agreement will turn on the language of the agreement having regard to its context and purpose. Context might appear from:

(i) the text of the agreement viewed as a whole;

(ii) the disputed provision’s place and arrangement in the agreement;

(iii) the legislative context under which the agreement was made and in which it operates.

2. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.

3. The common intention of the parties is sought to be identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement, without regard to the subjective intentions or expectations of the parties.

4. The fact that the instrument being construed is an enterprise agreement made pursuant to Part 2-4 of the FW Act is itself an important contextual consideration. It may be inferred that such agreements are intended to establish binding obligations.

5. The FW Act does not speak in terms of the ‘parties’ to enterprise agreements made pursuant to Part 2-4 agreements, rather it refers to the persons and organisations who are ‘covered by’ such agreements. Relevantly s.172(2)(a) provides that an employer may make an enterprise agreement ‘with the employees who are employed at the time the agreement is made and who will be covered by the agreement’. Section 182(1) provides that an agreement is ‘made’ if the employees to be covered by the agreement ‘have been asked to approve the agreement and a majority of those employees who cast a valid vote approve the agreement’. This is so because an enterprise agreement is ‘made’ when a majority of the employees asked to approve the agreement cast a valid vote to approve the agreement.

6. Enterprise agreements are not instruments to which the Acts Interpretation Act 1901 (Cth) applies, however the modes of textual analysis developed in the general law may assist in the interpretation of enterprise agreements. An overly technical approach to interpretation should be avoided and consequently some general principles of statutory construction may have less force in the context of construing an enterprise agreement.

7. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or it is ambiguous or susceptible of more than one meaning.

8. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

9. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

10. If the language of the agreement is ambiguous or susceptible of more than one meaning then evidence of the surrounding circumstance will be admissible to aid the interpretation of the agreement.

11. The admissibility of evidence of the surrounding circumstances is limited to evidence tending to establish objective background facts which were known to both parties which inform and the subject matter of the agreement. Evidence of such objective facts is to be distinguished from evidence of the subjective intentions of the parties, such as statements and actions of the parties which are reflective of their actual intentions and expectations.

12. Evidence of objective background facts will include:

(i) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;

(ii) notorious facts of which knowledge is to be presumed; and

(iii) evidence of matters in common contemplation and constituting a common assumption.

13. The diversity of interests involved in the negotiation and making of enterprise agreements (see point 4 above) warrants the adoption of a cautious approach to the admission and reliance upon the evidence of prior negotiations and the positions advanced during the negotiation process. Evidence as to what the employees covered by the agreement were told (either during the course of the negotiations or pursuant to s.180(5) of the FW Act) may be of more assistance than evidence of the bargaining positions taken by the employer or a bargaining representative during the negotiation of the agreement.

14. Admissible extrinsic material may be used to aid the interpretation of a provision in an enterprise agreement with a disputed meaning, but it cannot be used to disregard or rewrite the provision in order to give effect to an externally derived conception of what the parties’ intention or purpose was.

15. In the industrial context it has been accepted that, in some circumstances, subsequent conduct may be relevant to the interpretation of an industrial instrument. But such post-agreement conduct must be such as to show that there has been a meeting of minds, a consensus. Post-agreement conduct which amounts to little more than the absence of a complaint or common inadvertence is insufficient to establish a common understanding.”

[22] More recently, the Full Court of the Federal Court of Australia stated the principles applicable to the interpretation of an enterprise agreements in James Cook University v Ridd: 

“(i) The starting point is the ordinary meaning of the words, read as a whole and in context.

(ii) A purposive approach is preferred to a narrow or pedantic approach — the framers of such documents were likely to be of a “practical bent of mind”. The interpretation “turns upon the language of the particular agreement, understood in the light of its industrial context and purpose”.

(iii) Context is not confined to the words of the instrument surrounding the expression to be construed. It may extend to “... the entire document of which it is a part, or to other documents with which there is an association”.

(iv) Context may include “... ideas that gave rise to an expression in a document from which it has been taken”.

(v) Recourse may be had to the history of a particular clause “Where the circumstances allow the court to conclude that a clause in an award is the product of a history, out of which it grew to be adopted in its present form...”

(vi) A generous construction is preferred over a strictly literal approach, but “Awards, whether made by consent or otherwise, should make sense according to the basic conventions of the English language. They bind the parties on pain of pecuniary penalties”.

(vii) Words are not to be interpreted in a vacuum divorced from industrial realities but in the light of the customs and working conditions of the particular industry.” 2[references omitted]

[23]  Furthermore, the observations made by Justice Burchett in Short v FW Hercus Pty Ltd regarding the history of a particular provision are of value:

“The context of an expression may thus be much more than the words that are its immediate neighbours. Context may extend to the entire document of which it is a part, or to other documents with which there is an association. Context may also include, in some cases, ideas that gave rise to an expression in a document from which it has been taken. When the expression was transplanted, it may have brought with it some of the soil in which it once grew, retaining a special strength and colour in its new environment. There is no inherent necessity to read it as uprooted and stripped of every trace of its former significance, standing bare in alien ground. True, sometimes it does stand as if alone. But that should not be just assumed, in the case of an expression with a known source, without looking at its creation, understanding its original meaning, and then seeing how it is now used. Very frequently, perhaps most often, the immediate context is the clearest guide, but the court should not deny itself all other guidance in those cases where it can be seen that more is needed. In literature, Milton and Joyce could not be read in ignorance of the source of their language, nor should a legal document, including an award, be so read.” 3

[24]  Regarding post agreement conduct the remarks by Gray ACJ in Shop Distributive and Allied Employees’ Association v Woolworths Ltd are illuminating:

“There is authority that, if a provision has appeared in a series of agreements between the same parties, and if they can be shown to have conducted themselves according to a common understanding of the meaning of that provision, then it can be taken that they have agreed that the term should continue to have the commonly understood meaning in the current agreement. It is necessary to take great care in the application of this limited principle, to avoid infringing the general principle that the conduct of parties to an agreement cannot be taken into account in construing the agreement. For the limited principle to operate, there must be clear evidence that the parties have acted upon a common understanding as to the meaning of the relevant provision and not for other reasons, such as common inadvertence as to its true meaning.” 4 [references omitted]

[25] Further, the High Court in Con-stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd considered the circumstances in which custom or usage may form the basis for the implication of terms into a contract. Quoting from Nelson v Dahl, which itself was approved by Knox CJ in Thornley v Tilley (1925) 36 CLR, the High Court made clear that: 5

“... (3) A term will not be implied into a contract on the basis of custom where it is contrary to the express terms of the agreement... One explanation of this principle is that, in so far as it relates to written contracts, it is simply an application of the parol evidence rule, by which extrinsic evidence is generally inadmissible to add to, vary or contradict the express terms of a contract which has been reduced to writing... A more fundamental explanation is that the presumed intention of the parties, on which the importation of the custom rests…, must yield to their actual intention as embodied in the express terms of the contract, regardless of whether the contract is written or oral.” [references omitted]

[26] The approach taken by the High Court in Con-Stan has been followed in various other decisions by the Fair Work Commission and is well-understood as the correct approach for the Full Bench of the Commission to rely on. 6

Unions’ s submissions

[27] The Unions argue that clauses 18.8.5. and 18.8.6 of the Agreement indicate that the leading hand allowance is to be incorporated into the base rate of pay for all purposes they argue giving an Altered Hourly Wage Rate.

[28] Use of the terminology “the Leading Hand rate” in clause 18.8.4. suggesting a revised rate for calculating penalties and loadings instead of simply a separate allowance. Further the use of the same term “Leading Hand rates” in clause 18.8.6. to include the normal classification rate plus the 10 % Leading Hand allowance.

[29] The Applicants acknowledge that whilst clause 18.8 clearly establishes that performing higher duties adjusts the hourly wage rate, it does not explicitly state that such an adjustment to the hourly wage rate is applicable for all purposes.

[30] The Unions assert that using the words in the relevant Award at clause 32.1 of the Award, the Leading Hand Allowance is described as an all-purpose allowance. That is, the Leading Hand allowance is added to the minimum rate, being the Hourly Wage Rate as prescribed at clause 13 of the Award. The effect would be that all penalties and overtime are calculated using this altered/higher rate.

[31] The Unions further suggest that viewing clause 18.8 of the Agreement in light of clause 18.8.1, which describes the remuneration for higher duties being “a higher rate than their normal classification rate” and that employees engaged as such “will be paid the higher rate for that day or shift”, leads to the conclusion that the Leading Hand allowance is applied to the normal Hourly Wage effectively increasing the hourly rate.

[32] The Unions contend that had the Leading Hand allowance not been an all-purpose rate as per the Award that there would have been specific reference to that in the Agreement. They point to clause 18.9.2 which specifically identifies the method of calculation and states that the allowance is paid on top of the rate Hourly plus afternoon shift and the Site allowance is then paid on top of this rate of pay.

[33] Finally, the Applicants point to the practise of paying the Leading Hand allowance as an all-purpose rate prior to the Respondent’s alleged revelation that they are not paying in accordance to the agreement as they interpret late last year. They proffered evidence from employees to support this contention of a custom and practise of paying Leading Hand as an all-purpose allowance.

Employers submissions

[34] The Respondent contends that the provision of the Leading Hand allowance is not ambiguous. It reads as follows:

“An employee performing the duties of a Leading Hand as per Appendix A, and has been appointed by the Team Leader and Workshop Manager will be paid an additional allowance of 10% of the Hourly Wage rate in addition to their current classification.”

[35] They argue that the clause is unambiguous in its wording, the allowance is to be an additional and separate payment that is to be paid in addition to the employees’ hourly wage rate. The Respondent asserts that it does not increase the hourly wage rate or the classification rate.

[36] Further they point to clause 18.8.5 which states “… the Leading Hand will be paid an additional allowance of 22% of the Hourly Wage Rate in addition to their classification rate.” They say that such a clause is pellucid, in contrast to 18.8.1, which states that an employee working higher duties will be paid at the higher rate.

[37] The Respondent argues that the term, “Altered Hourly Wage Rate”, which is utilised by the Applicant, is a creation of the Applicant and not in the Agreement.

[38] The application of penalties is contained in clauses 15.1.2, 15.1.3, 15.1.7, 15.4.6, 15.4.7, 17.3 and 18.9.7, which deal with the calculation of shift premiums, penalty rates, special rates and allowances. They argue that any calculation of penalties are based on the ‘Hourly Wage Rate” or the “Hourly Base Rate”, as used interchangeably, not on an “Altered Hourly Wage Rate” as the Applicant has represented.

[39] The Respondent submits that the Agreement is quite clear in its language with respect to the term “Hourly Wage Rate”. These figures are provided in clause 13 of the Agreement; they are not referred to as a base rate, or minimum rate but specifically as the “Hourly Wage Rate”. For the purposes of the payment of penalties, they suggest that it cannot be reasonably argued that the Leading Hand allowance is or was intended to be for all purposes. The Respondent asserts that the Agreement is clear in that it formed an additional payment and there is no ambiguity as to the intention of the parties in this regard.

[40] The two employees who provided sworn evidence for the Applicant were the only employees that the Respondent and the two Unions were able to provide who had an incorporated Leading Hand allowance in their contracts. The Applicant has provided evidence that these two employees had a separate common law contract which provided that the allowance formed part of their base rate of pay. It is the Respondent’s position that these contracts are unique. This does not form a pattern of practice and is exclusive to those employees.

[41] Further, they argue the remaining principles that the Full Court outlined in Ridd are superfluous for the purposes of this matter as the question of the dispute is not one where a term has not been adequately defined within the Agreement. Rather it is one where the starting point of understanding the ordinary meaning of the words, read as a whole and in context, is sufficient to establish that the Agreement makers had a clear intention as to what amount made up the “Hourly Wage Rate” and there is no requirement to look further.

Consideration

[42] The first step in following the principals as articulated in Berri is to look at the plain and ordinary meaning of the words. It becomes clear that the clause dealing with the Leading Hand allowance does not state that it whether it is for all purposes or not. The tool allowance for example does state that it is an allowance for all purposes. The agreement does not provide a definition of what all-purpose rate is nor what it includes.

[43] The words read plainly state that the allowance is 10% in addition to the hourly rate but does not state whether the allowance should be included for the purposes of overtime or other penalties.

[44] The ordinary meaning of addition means that the amount is additional or additive to the hourly rate but does not indicate the next step which is the priority in which the calculations might be done for say overtime. For example, the calculation favoured for overtime by the Respondent is Hourly Rate times 1.5 plus the 10% leading hand allowance. Clearly the outcome favoured by the Unions put the priority of the allowance before the multiplier of overtime.

[45] As I find the language in the agreement regarding the Leading Hand allowance and whether it is an all-purpose allowance is susceptible of more than one meaning and is ambiguous on the point of all purposes for the Leading Hand allowance, I turn to the surrounding circumstances to aid in the interpretation of the agreement.

[46] The Agreement is one of a series or line of agreements the predecessor was the Joy Global Australia Pty Ltd Rockhampton Enterprise Agreement 2016. This Agreement utilises the same terminology and expression regarding Leading Hand Allowance and provides no further clarity.

[47] The Agreement specifically incorporates the Award at clause 5 and states that the exception is where there are inconsistencies and in which case the Agreement prevails. In this question of the Leading Hand Allowance, the relevant Award expresses the Leading Hand Allowance as an all-purpose allowance at clause 30.2

[48] The Leading Hand allowance in the Award provides a scale of fixed additional amounts based on the number of employees supervised. This is contrasted in the Agreement where the allowance is an additional hourly allowance with no provision considering the number of employees supervised. The Respondent asserts that the Leading Hand Allowance in the Agreement expressly overrides that in the Award, and subsequently overrides the reference to the allowance being paid for all purposes.

[49] I find that although the Leading Hand Rates expressed in the Agreement apply (10% of Hourly Rate) as they clearly are inconsistent with the quantum in the Award. The method of calculation is not specified in the Agreement. The Respondent points to the Hourly Rate definition as being the reference point for calculation of overtime and penalties which is silent on the issue of Leading Hand allowance. However, I do not find that a persuasive argument to support the view that the Leading Hand Allowances is not incorporated into the hourly rate as an all-purpose rate. That the method of calculation is silent in the Agreement points towards either the matter not having been discussed during several rounds of bargaining or it may have been discussed and not concluded. No evidence from either party indicated that the Leading Hand allowance as an all-purpose allowance was raised during any of the previous bargaining rounds.

[50] In this matter weighting the evidence and submissions made I do not find that the parties had turned their minds to the matter of Leading Hand being an all-purpose allowance or not. The F17 Statutory Declaration that was lodged as part of the approval of the Agreement does not identify the Leading Hand Allowance not being an all-purpose allowance as a clause that is less beneficial in the Agreement. That the Award expresses Leading Hand as an all purposes Allowance and the F17 does not identify this clause as a reduction indicates that the drafters of the Agreement had not explicitly turned their minds to the method of treatment of the Leading Hand Allowance. It would seem to be that this matter was not one where there was a common understanding of the application of the Leading Hand Allowance but rather there was “common inadvertence.”  7

[51] The parties had not specifically considered the question of the Leading Hand Allowance not being an all-purpose rate until the matter was brought into sharp relief by the Respondent determining that they had been applying the allowance incorrectly and then changing the calculation methodology. The evidence provided by both parties is that the Leading Hand allowance was paid as an all-purpose rate up until December 2020 when the employer determined that in their view of the agreement wording that they had made an error in their methodology in the past and decided to make a change to the calculation methodology. In doing this they brought the matter into contrast with past practice.

[52] In considering all the evidence and submissions on this question. I find then that on question of the calculation methodology for Leading Hand that through Clause 5.1 of the Agreement the Award is incorporated, subject to any inconsistencies. The rates outlined in Clause 18.1 of the Agreement displace the Award rates however it does not displace clause 30.2(a)(ii) which states “this allowance will be paid for all purposes’

[53] Accordingly, I have concluded that the Leading Hand allowance of 10% is to be applied as an all purpose rate.

Second question

[54] The second question I must consider is whether the annual leave provision in clause 23.1 exclude the Award annual leave entitlements and should employees be entitled to annual leave loading, and if entitled, should this loading be calculated on the base rate or as 17.5% of wages(which includes allowances, loadings and penalties)?

[55] The relevant clauses of the Agreement are Clauses 5 and 23.1. Clause 5 was set out above. Clause 23.1 reads:

“Annual Leave

23.1 Annual Leave is as per the National Employment Standards.”

Unions Submissions

[56] The Unions’ acknowledge that Annual Leave in the Agreement references the entitlement as per the National Employment Standards, at section 87 (1) of the Fair Work Act 2009 (the Act) which is four weeks. They note the Agreement is silent on annual leave loading.

[57] The Unions contend that through the effect of clause 5.1 in the Agreement the Award clauses 34.3 and 34.4 are incorporated in the Agreement. Given that there is no inconsistency with an expressed term in the Agreement they ought to be given some work to do. 8

[58] The Unions further contend that following that the Full Bench recently as stated in Auld and Ors v Teekay Shipping (Australia) Pty Ltd[2019] FWCFB 6047 at [86]:

“the incorporation of the Award “is an indication that all terms (express and incorporated) are to be given full effect except where there is direct inconsistency”.

[59] They argue that their interpretation is supported by the Full Bench decision in Construction, Forestry, Maritime, Mining and Energy Union v CoreStaff NSW Pty Ltd which states:

“employees plainly are entitled to all applicable modern award terms, namely those that apply under the relevant incorporated award, unless they are inconsistent with one of the express terms of the Agreement”. 9

[60] Therefore, they contend as the Agreement is silent on annual leave loading, there can be no inconsistency with the incorporated Award term. They propose the method of calculation for the loading should be, following the wording of clause 34.4 of the Award, paid on an hourly rate of pay that incorporates the allowances, loading and penalties (or wages), in accordance with Award provision 34.3 which states a loading of 17.5% of the wages (which includes allowances, loadings and penalties).

[61] They further argue that the statement and attachments of Dominic Vignale (an employee) shows that, since the annual leave clause in the 2016 Agreement, the intention of the annual leave clause was to include the payment of annual leave loading. Further, during the negotiations for the 2018 agreement, Mr Vignale stated that the clause was not discussed or even raised during the negotiations with the clause forming part of the Agreement by virtue of its inclusion as the same clause in the previous agreement. 10 There was also no dispute with respect to the way the Respondent had always applied it.

[62] The Unions state as the wording in the 2018 Agreement has remained consistent from the 2016 Agreement, the intention of the clause for the current agreement should be the same as for the clause in the 2016 Agreement. That is, the Respondent has always provided for annual leave loading.

[63] Therefore, the Union conclude that employees should be paid annual leave loading in accordance with clause 34.3 (b) of the Award and calculated as a loading equal to 17.5% of wages inclusive of allowances loadings and penalties).

The Respondent’s submission

[64] The Respondent submits that the Agreement states explicitly that all entitlements for annual leave are only those which are contained within the National Employment Standards (“NES”).

[65] Part 2-1, Division 6 of the Act provides the annual leave entitlements under the NES. Specifically, the only reference to the amount of payment of annual leave in the NES, is contained within section 90 of the Act which reads:

“Payment for annual leave

(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee's base rate of pay for the employee's ordinary hours of work in the period.

(2) If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.”

[66] Clause 23.1 of the Agreement reads that annual leave is as per the NES. The Respondent believes it should be read to limit any further entitlements being bestowed on employees other than those that they are entitled to under the NES.

[67] The Respondent contends that clause 34 of the Award is explicitly excluded by the reference to the annual leave entitlement of the NES. The entirety of clause 34 in the Award seeks to amend and supplement the annual leave entitlement of the NES. As such the entirety of clause 34 of the Award, including the provision of annual leave loading in clause 34.4 is excluded by the Agreement.

[68] There were negotiations between the employer and the employees and, at the request of the AMWU and the ETU, there were negotiations around the leave provisions in the predecessor Agreement in 2016. 11

[69] During the negotiation between the parties in 2016, it was agreed that the relevant clause 23.1 would be included in the Agreement, as well as the remainder of the clause which provides the employees with the ability to request to take annual leave at half pay. There were robust discussions regarding the annual leave clause and there was a strong move to incorporating NES in the Agreements and move away from the Award.

[70] It was the Applicants who initially proposed amending the annual leave provisions from those in the Award and as such it was raised at the bargaining table. This is evidenced by Gerard McCarthy’s comments on the proposed 2016 Enterprise Agreement where he wrote on the addition of the clause which appeared in the 2016 Agreement and 2018 Agreement, “Annual Leave provisions as per the NES however we will make a provision for leave to be taken as Half-pay.”

[71] The Agreement states that annual leave entitlements will be as per the NES, which explicitly includes s 90(1). They argue that the Award term seeks to replace the provision of section 90(1), specifically the Award clause states, “instead of the base rate of pay as referred to in section 90(1) of the Act”.

[72] The existence of such a provision in the Award is inconsistent with an express term of the Agreement and as such the express term of the Agreement prevails over the incorporated Award term. Thus, the Respondent submits that clause 34.3 of the relevant Award and section 90(1) of the Act cannot both be taken as terms of the Agreement.

[73] The Respondent relies on the decision of AMWU v Simplot Australia Pty Ltd, where the Full Bench found that an incorporated term only applies if the Agreement is silent on the issue and that incorporated award terms have no work to do unless the agreement is silent on the issue. 12

[74] The Respondent claims that the Agreement is not silent on the payment of annual leave. Rather, the Agreement directly refers to the NES which states that payment for annual leave must be paid at the employees base rate of pay for ordinary hours in that period.

[75] Alternatively, if Annual Leave loading is payable the Respondent argues that the appropriate loading is 17.5% of the base rate of pay as per section 90(1) of the Act and for shift work inclusive of shift loading including relevant weekend penalty rates, whichever is the greater.

Consideration

[76] There is no identified inconsistency between leave loading expressed in the NES and the Award. The NES is silent on the matter of loading. It neither supports that Leave Loading should be paid or not. In this case the Award does clearly express the requirement for leave loading to be paid. Noting that the Award is incorporated into the Agreement except where there are inconsistencies, then the full force of the Award applies up until the point that there is an inconsistency.

[77] The Agreement provides for leave loading. There is no inconsistency in the Agreement that has been identified through evidence or submissions and thus no contradiction is apparent. Thus the Award expression regarding leave loading can be given its full force without limitation. Further, no evidence was provided that leave loading was discussed at any bargaining meetings and that there was an informed decision to reduce or bargain away leave loading.

[78] The Agreement explicitly states the NES prevails in the annual leave provisions. As discussed above, the NES requires the payment of four weeks but is silent upon the matter of loading. In turning to the F17 statutory declaration, the relevant table is extracted below identifies that for the Agreement, the relevant Annual leave loading the rate is 17.5%.

Agreement	Relevant modern award(s)
Hours	38	38
Part-time employees	N/A	N/A
Casual employees	25% loading + Min. 4 hours	25% loading + Min. 4 hours
Shift penalties	Night Shift = 30% Afternoon Shift = 15%	Night Shift = 30% Afternoon Shift = 15%
Weekend penalties	Saturday= 50% loading for all hours worked. Sunday = 100% loading for all hours worked.	Saturday = T1.5 for 1st 3 hours, then DT (min. 4 hours). Sunday= DT for all hours, min. 4 hours.
Public holiday penalties	200% loading for all hours worked.	DT1.5 for all hours worked (min. 4 hours)
Overtime	T1.5 for 1st 3 hours, then DT	T1.5 for 1st 3 hours, then DT
Annual leave loading	17.5%	17.5%
Allowances	Meal - $14.25 Tools= incorporated into hourly rates Heat = $1.0275ph Dirt= $0.74ph Wet Places= $0.74ph Confined Places = $0.92ph Electrical Safety= $42.89pw 1st Aid= $16.66pw NES Electrical = $97.22pw System Test= $64.82pw Dual Crane = $64.82 per lift Non-Slew Crane = $36.10pw	Meal = $14.25 Tools= $0.40/hr x 38 = $15.20pw Heat= $0.84ph Dirt = $0.64ph Wet Places= $0.74ph Confined Places = $0.84ph Electrical Safety = Nil 1st Aid - $16.66pw NES Electrical = Nil System Test = Nil Dual Crane = $Nil Non-Slew Crane = $Nil

[79] Further the F17 does not identify any less beneficial terms at 3.5 of the same document whilst referencing the Manufacturing Award as the reference instrument.

[80] That leave loading was paid up until December 2020 as a practice and that it appeared in an employment contract of two employees is not primary in my finding that loading should be paid.

[81] As to the quantum of the leave loading the F17 identifies 17.5% for both the Agreement and the Award. As discussed previously there is no definition of ‘all purposes” or methodology of calculation in the Agreement. Given the incorporation of the Award at clause 5.1 of the Agreement and that I can identify no inconsistency with the proposed calculation methodology proposed by the Award clause 32.1, I determine that following the expression of clause 34.4 of the Award, leave loading is calculated on an hourly rate of pay that incorporates the allowances, loading and penalties in accordance with clause 34.3.

[82] Accordingly, I find that the answers to the two questions posed for arbitration are:

1. Does the leading hand allowance in clause 18.8.4 apply to the hourly base rate of pay for all purposes? Yes

2. Does the annual leave provision in clause 23.1 exclude the Award annual leave entitlements and should employees:

a) be entitled to annual leave loading; Yes

and if entitled,

b) should this loading be calculated on the base rate or as 17.5% of wages (which includes allowances, loadings and penalties)?

To be calculated on Allowances, loadings, and penalties.

DEPUTY PRESIDENT

Printed by authority of the Commonwealth Government Printer

<PR729212>

 1   AMWU v Berri Pty Ltd[2017] FWCFB 3005.

 2   James Cook University v Ridd [2020] FCAFC 123 at [65].

 3   Short v FW Hercus Pty Ltd [1993] FCA 51.

 4   Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67.

 5 (1986) 160 CLR 228 at [8].

 6   See Transport Workers’ Union of Australia v Linfox Australia Pty Ltd [2016] FWCFB 443 at [28].

 7   ALHMWU v Prestige Property Services Pty Ltd [2006] FCA 11 per Gray J.

 8   Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Simplot Australia Pty Ltd[2018] FWC 3718 at [28].

 9   [2019] FWCFB 5916 at [19].

 10   Statement of Mr Dominic Vignale dated 19 February 2021 at [9] [10] and [16].

 11   Witness Statement of Janine Chadwick dated 11 March 2021.

 12   [2018] FWCFB 1156 at [28].