"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) and United Workers' Union v VIP Plastic Packaging Pty Ltd

[2021] FWC 2036

[2021] FWC 2036

FAIR WORK COMMISSION

DECISION

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

"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) and United Workers’ Union
v
VIP Plastic Packaging Pty Ltd
(C2020/8037) (C2020/8139)

COMMISSIONER CIRKOVIC MELBOURNE, 14 APRIL 2021

Enterprise agreement – dispute about matters arising under the VIP Packaging Enterprise Agreement 2018 – whether certain redundancy entitlements are “service related payments” or “statutory entitlements” – application of 78 week cap on certain redundancy entitlements.

[1] By separate applications lodged on 30 October 2020 and 5 November 2020 respectively, the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (AMWU) and the United Workers’ Union (UWU) (collectively the Unions) have applied to the Fair Work Commission (Commission) under s.739 of the Fair Work Act 2009 (Act) for the Commission to deal with a dispute in accordance with the dispute settlement procedure in the VIP Packaging Enterprise Agreement 2018 (Agreement). The respondent is VIP Packaging Pty Ltd (VIP Packaging), a company which is primarily engaged in the manufacturing of plastic packaging related products. 1

[2] The Parties are covered by the Agreement. The Agreement was approved by the Commission on 27 June 2018. It has a nominal expiry date of 28 February 2022. The Agreement is a “roll-over” agreement and is predated by the VIP Packaging Agreement 2009, the VIP Packaging Agreement 2011 and the VIP Packaging Agreement 2015 (Predecessor Agreements).

[3] The Agreement applies to:

All persons:

6.1.1 who perform work in or in connection with the manufacturing, maintenance, storage, distribution and supervisory operations of VIP Packaging or who are otherwise eligible to be members of the Unions in Clause 7.1; and

6.1.2 employed by the employer in any of its Victorian operations, namely:

VIP Packaging (Kingsway), 4 Kingsway, Moorabbin, 3189.

VIP Packaging (Beverage Closures), 4 Kingsway, Moorabbin, 3189. 2

[4] The Parties jointly submitted the following questions for arbitration:

“1. Is the severance payment equal to the balance of untaken sick leave with a maximum payment of up to 6 weeks, provided for in clause 20.2.4, included in the sum of “service related payments other than statutory entitlements” to which a cap of 78 weeks applies under clause 20.2.8?” (Question 1); and

“2. Is the severance payment of two weeks' severance pay provided for in clause 20.2.1(a) included in the sum of “service related payments other than statutory entitlements” to which a cap of 78 weeks applies under clause 20.2.8?” (Question 2). 3

[5] The Unions contend that the answers to these questions should be “no”. In support of this position, the Unions posit that:

•  the payment, equal to the balance of untaken sick leave with a maximum payment of up to six weeks, provided for in clause 20.2.4 of the Agreement (Sick Leave Payment); and

•  the severance payment of two weeks' severance pay provided for in clause 20.2.1(a) (Severance Payment),

are not service related payments and/or are statutory entitlements, for the purposes of clause 20.2.8 of the Agreement and accordingly these payments are not included in the “cap of 78 weeks”.

[6] VIP Packaging contends the answers to both questions is “yes”. VIP Packaging argues that the Sick Leave Payment and the Severance Payment are service related payments which are not statutory entitlements and are therefore included in the “cap of 78 weeks”.

[7] Neither “service related payment” nor “statutory entitlement” are defined in the Agreement.

Background

[8] The AMWU filed an application on 30 October 2020. The matter was listed for conference on 5 November 2020 at 2:00PM and did not resolve. The UWU filed an application in relation to the same dispute later that afternoon and the Parties agreed that the matters be heard jointly.

[9] The Parties provided consent directions for the filing of submissions and witness statements, and the Commission subsequently listed the matter for arbitration on 28 January 2021 and 3 March 2021.

Issues in dispute

[10] In summary, the issue(s) in dispute require me to interpret clause 20.2 of the Agreement and to determine whether, for the purposes of the clause, the Sick Leave Payment and the Severance Payment are included in a sum to which the cap of 78 weeks applies.

Jurisdiction

[11] Section 739 of the Act empowers the Commission to deal with certain disputes under enterprise agreement dispute settlement terms. The Agreement contains such a term at Clause 14. It is not in dispute that the steps taken by the Parties to resolve the dispute constituted compliance with the dispute resolution provision of the Agreement. Having regard to the information in the Form F10 applications and the views of the Parties, I am satisfied that the Commission has jurisdiction to deal with the dispute, including by arbitration.

Principles of Interpretation of Enterprise Agreements

[12] The principles that apply to the interpretation of an enterprise agreement were summarised by a Full Bench of the Commission in AMWU v Berri Pty Ltd (Berri), 4 drawing on the earlier Full Bench decision in AMIEU v Golden Cockerel Pty Ltd.5 The Full Bench in Berri affirmed that the interpretation 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 dispute over the interpretation of an enterprise agreement will turn on the language of the agreement, having regard to its context and purpose. Context might appear from the text of the agreement as a whole, the disputed provision’s place and arrangement in the agreement, and the legislative framework under which the agreement was made. The task of interpreting an enterprise agreement does not involve re writing the agreement to achieve what might be regarded as fair or just outcome.

[13] Both Parties sought to rely on these principles to advance their case in their submissions. I adopt and apply the principles in Berri in this decision without restating them.

Relevant provisions of the agreement

[14] The operative provision of the Agreement is clause 20.2. This is reproduced below:

20.2 Redundancy Payments

Employees deemed to qualify will receive the following:

20.2.1 Four (4) weeks notice

20.2.1(a) Two (2) weeks severance pay.

20.2.2 A payment of three and a quarter (3.25) weeks' pay for each completed year of continuous service and a pro rata amount for completed months of service.

20.2.3(a) Employees whose age falls within the ranges below will receive in addition to the above: 20.2.3(a) 45 years to 54 years of age – one (1) weeks' notice.

20.2.3(b) 55 years and over – two (2) weeks' notice.

20.2.4 A severance payment equal to the balance of untaken sick leave with a maximum payment being six (6) weeks.

20.2.5 Annual Leave

The balance of untaken and accrued annual leave will be paid including 17.5% loading.

20.2.6 Long Service Leave

All Retrenched employees with greater than five (5) years continuous service will receive pro-rata Long Service Leave.

20.2. 7 Payment

The Payment of monies due from this redundancy package will be paid no later than the time of termination.

20.2.8 Savings

Service related payments other than statutory entitlements are subject to a maximum of seventy eight (78) weeks pay. Employees made redundant who are affected by the cap of seventy eight (78) weeks service payment shall receive an ex-gratia payment of $2000.

Evidence

[15] Mr Robert Nguyen, an AMWU organiser who was a bargaining representative for employees during the negotiation for the Agreement, filed a witness statement on behalf of the AMWU. In summary, Mr Nyugen states that:

•  during negotiations for the Agreement, there were no discussions about how redundancy payments were calculated or how clause 20 of the Agreement operated; 6

•  he has spoken to “a lot of [AMWU] members at the site” who work for VIP Packaging, who “say that their understanding has always been that the payment for sick leave is paid on top of the 78 week cap”. 7

•  he was involved in contacting Mr Wayne Thomas, Group Manager – Employee Relations for VIP Packaging regarding the calculation of Mr Les Barker’s redundancy payment. Mr Nyugen states he expressed the view of the AMWU that Mr Barker was entitled to a payment of sick leave separate to his redundancy payment based on his years of service, which Mr Thomas disagreed with;  8 and

•  in May 2014, VIP Packaging provided a redundancy payment calculation to a Mr Zdzislaw Kwiecien, a member of the AMWU, which “included a payment for untaken sick leave on top of the 78-week cap”. 9

[16] Mr Wayne Thomas, Group Manager – Employee Relations for VIP Packaging, filed a witness statement for the company. Mr Thomas’s statement sets out the sequence of events preceding the dispute currently before the Commission. This includes the basis on which VIP Packaging selected employees for voluntary redundancy, making it “quite clear” that the company had “accepted voluntary redundancies on the basis that the 78 week cap had been reached and not based on a cost of 84 or 86 weeks which is what the unions are seeking” 10 and “that the purpose is to avoid compulsory redundancies or forced layoffs”.11 It also includes details of VIP Packaging’s communications with the Unions regarding its interpretation of clause 20.2, and identifies some alleged errors in the statement of Mr Nyugen principally relating to the precise timeline of events precipitating the filing of the Unions’ applications. Regarding the redundancy calculation made in respect of Mr Kwiecien, Mr Thomas stated “if the personal leave was paid on top of the 78-week capping then this would be an error. If within the statute of limitations, the company may look to have this overpayment returned.12

[17] Generally, there was little factual contest between the Parties as to matters of significance and where it has been necessary to address the differences in coming to my decision, I have done so.

Submissions of the Parties

[18] The Unions submit that the answer to both the questions before the Commission should be answered in the negative.

[19] In summary, the AMWU submits in support of this argument that:

(1) The Agreement, with respect to the payments contemplated under clause 20.2.1(a) and 20.2.4, “is ambiguous or susceptible of more than one meaning”. 13

(2) The term “service related payment” is “not defined in the Agreement… is not used in any other context in the Agreement” and “does not have a plain or notorious meaning”. 14

(3) The term “statutory entitlement” does have a plain meaning – an entitlement provided for in a statute – however an ambiguity arises in the context of clause 20.2 because “clause 20.2.8 follows a list of entitlements which are provided for elsewhere in the Agreement, including personal leave, annual leave and long service leave”. These entitlements reflect or import entitlements that are provided for in statute “but are in different and in many cases more beneficial terms”. Therefore, “they would be characterised more correctly as “Agreement entitlements””. 15

(4) As the Agreement is ambiguous, evidence to aid the interpretation of the Agreement, including evidence of prior negotiations, notorious facts of which knowledge is presumed and evidence of matters in common contemplation and constituting a common assumption may be admissible. 16

(5) In relation to the meaning of the term ‘service’ in ‘service related payment’:

(a) the term “service” is not defined in the Agreement; 17

(b) the term “continuous service” is defined in clause 20.6 as ‘the unbroken period of employment up to the point at which the employee is terminated. Broken periods of service are not taken into account’; 18

(c) section 22 of the Act provides that a period of service ‘is a period during which the employee is employed by the employer but does not exclude period (an excluded period) that does not count as service because of subsection (2)’; 19

(d) in the context of a “service related payment” in clause 20.2.8, the term service means, and is interchangeable with, the term “period of service”; 20

(e) the meaning of the term “service related payment” is a payment which is directly proportionate to the period of service of the relevant employee. That is, it is a payment which relates to the employee's period of service and “no other factor”; 21 and

(f) a payment which is made to any employee regardless of their period of service is not “service related” because there is no relationship between the employee's period of service and the amount of the payment. 22

(6) On the basis of (5):

(a) “the severance payment of two weeks' pay, provided for in cl 20.2.1(a), cannot be a “service related payment””; 23 and

(b) “payment which is made to an employee with respect to an untaken amount of leave [including sick leave] is not “service related”” because an employee’s leave balance at the time of termination is dependant on two factors, being their period of service and the amount of leave they have taken throughout their employment; “Therefore, the amount of “untaken sick leave” at the time of termination does not relate to an employee's period of service.” The link between the payment and the employee’s service is further “severed” by the six week “cap”. 24

(7) In relation to surrounding circumstances:

(a) The wording of clause 20.2, and its meaning, were not discussed during the negotiation for the Agreement and the clause has been carried over from earlier versions of the Agreement without alteration and without contemplation of its meaning. There is therefore no evidence relating to prior negotiations which can aid the interpretation of the clause. 25

(b) The fact that redundancy entitlements paid to employees in 2014 “included an amount equal to accrued sick leave, in accordance with clause 20.2.4” is evidence of “consensus” among the AMWU, VIP Packaging and VIP Packaging’s employees regarding, the interpretation of clause 20 of the Agreement; “That interpretation is that the payment for untaken sick leave is paid in addition to the sum that is subject to the 78 week cap.” 26

[20] At the hearing, the UWU stated its position as arriving at the “much the same conclusion” as the AMWU, “albeit in a slightly different matter”.  27 The UWU’s overarching argument is that “the entitlement to the payment of the sick leave…is a statutory entitlement and in the alternative if it is not a statutory entitlement it is most certainly not a service related payment”.28 A summary of its written submissions in support of this argument is as follows:

(1) “[T]he word ‘service’ in ‘service related payment’ should be given the same meaning as the term ‘continuous service’ as defined in cl 20.6 [‘the unbroken period of employment up to the point at which the employee is terminated. Broken periods of service are not taken into account’] and should be taken to mean as such. 29

(2) Based on (1), the term ‘service related payment’ in clause 20.2.8 “is a payment which is exclusively ‘connected to’ or ‘derived from’ an employee’s ‘continuous service’” and this only captures the pro-rata payment of 3.25 weeks’ pay per completed year of continuous service provided under clause 20.2.2 of the Agreement. 30

(3) The ordinary and plain meaning of the term ‘statutory entitlements’ in clause 20.2.8 of the Agreement, having regard to its context and purpose, extend to entitlements “which build on and are more beneficial than the terms of the statute from which the entitlements rise”. 31

(4) The payment of unused sick leave under clause 20.2.4 of the Agreement “arises from the statutory entitlement to accrue sick leave” under the Act and ought to be construed as a statutory entitlement. 32

(5) Whilst the entitlement to redundancy pay under clause 20.2.2 of the Agreement also arise from the statutory entitlement to accrue redundancy pay under the Act, an interpretation in which these benefits were regarded as statutory entitlements which were not subject to the 78-week cap in clause 20.2.8 would “produce an absurd or illogical result” and “the term ‘service related payments’ would have no work to do” in clause 20.2.8. 33

(6) The definition of Weeks Pay in cl 20.6 of the Agreement as an employee’s ‘ordinary week’s work at the time of termination’ excluding shift and overtime penalties’ “bolsters the interpretation of ‘service related payments’ in cl 20.2.8 as only extending to the redundancy payment of 3.25 ‘weeks pay’ per year of continuous service in cl 20.2.2”. 34

(7) The entitlement to paid sick leave under the Act “has been characterised as a ‘statutory form of income protection,’ by Bromberg and Rangiah JJ in Mondelez v AMWU [2019] FCAFC 138”. The entitlement to paid sick leave in clause 36 of the Agreement “is consistent with the leave entitlements being conferred thereunder being a form of ‘income protection’” and “there can be no doubt that the entitlement to paid sick leave in cl 36 is based on the statutory entitlement to sick leave” under the Act. 35

(8) That, in the event that the Commission does not agree that that the entitlement to payment equal to unused sick leave of up to 6 weeks under clause 20.2.4 of the Agreement is a statutory entitlement within the meaning of clause 20.2.8, “‘sick leave’ cannot be characterised, having regard to its ordinary and plain meaning as established in an industrial context, and to its basis in statute, as being based on an employee’s service.” This is because:

(a) the payment in cl 20.2.4 “is contingent on an employee’s balance of unused sick leave, upon which an employee’s period of ‘continuous service’ has no bearing”; and

(b) although an employee’s sick leave balance “accrued progressively at a uniform rate per annum, such that an employee with longer service may very well have a greater sick leave balance than an employee with less service – is not practically related or based solely on their service, or indeed at all, but rather on external, unforeseeable factors that may require them to be absent from work.” 36

(9) That, in relation to the two weeks’ severance pay under clause 20.2.1(a), “having regard for its context and purpose, is such that it too cannot be deemed a ‘service related payment.’” because it “provides employees made redundant, an entitlement to a flat payment of 2 weeks’ severance pay, regardless of the employee’s period of ‘continuous service.’” 37

(10) That, if the Commission finds that the terms ‘service related payments’ and ‘statutory entitlements’ are ambiguous when interacting with cls 20.2.1(a) and 20.2.4, the post-agreement conduct of the Parties supports a construction whereby clauses 20.2.1(a) and 20.2.4 are not subject to the cap in clause 20.2.8 38 because:

(a) consistent with Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290, cited with approval in Berri, ‘conduct [which] evidences a clear and mutual subjective intention as to what the contract originally meant’ can be considered; 39

(b) the wording of the clauses in dispute was “entirely unchanged [from those] in previous agreements” and there is evidence of VIP Packaging making redundancy payments to employees in 2014 “in line with the Applicants’ preferred construction”; 40 and

(c) the redundancy payments made by VIP Packaging in 2014 “cannot be characterised as a ‘common inadvertence,’ as distinguished from the ‘common understanding’” identified by Gray J in ALHMWU v Prestige Property Services Pty Ltd (2006) 149 FCR 209.

[21] VIP Packaging submits that the answer to both of the questions to be arbitrated is “yes”. In support of this position, it advances the following submissions:

(1) The ordinary meaning of the words in clause 20 of the Agreement (entitled ‘Redundancy’) deals with payment entitlements when an employee is made redundant. The clause“needs to be given its ordinary meaning within the context of a redundancy payment arising out of a decision which impacts an employee leaving their employment.” 41

(2) A voluntary redundancy is a financial incentive designed to encourage employees to voluntarily resign and avoid compulsory redundancies, and the costings of the voluntary redundancies which precipitated this dispute was “a major consideration” of VIP Packaging in offering the redundancy pay outs. 42

(3) The wording within clause 20 has plain meaning and as such the Commission can “interpret the clause based on the ordinary meanings of the words used, in particular that of ‘Service related payments’, ‘statutory entitlements’ as included in clause 20.2.8 Savings of the Agreement”. These words are common place within the industrial relations landscape and capable of being interpreted within the overall context of a redundancy payment situation as outlined in total under clause 20. 43

(4) Where an agreement has a plain meaning, evidence of surrounding circumstances will not be admitted to “contradict the plain language of the agreement”; this is the case with the Agreement. 44

(5) Applying the ordinary meaning to the words in clause 20.2 of the Agreement, it sets out “how much an employee will receive by way of a ‘Redundancy Payments’”. This is the specific clause under which a "redundancy payment", consisting of various components, is calculated. These payments are subject to a ‘Savings Clause’ at sub-clause 20.2.8 whereby service related payments, other than statutory entitlements, within the redundancy payment are subject to a maximum of seventy eight weeks pay cap. 45

(6) The plural noun ‘savings’ within its ordinary meaning is defined by the Cambridge Dictionary as ‘an economy of or reduction in money, time or another resource’. The “ordinary meaning of sub- clause 20.2.8 is to limit the redundancy payment to a defined cap of seventy-eight (78) weeks when dealing with service related payments associated with the redundancy payment”. Statutory entitlements are not subject to the savings clause, which is consistent with the applicable statutory provisions providing for annual and long service leave.  46

(7) In contrast the pay out of accrued, untaken sick leave on termination is not a statutory entitlement under the Act. 47

(8) The ordinary meaning of ‘service related payments’ means payments that are linked to the duration an employee, or time that employee has spent, working for an employer. This is based on the ordinary meaning (under the Cambridge Dictionary) of the following terms:

(a) Service – a period of employment with a company or organisation.

(b) Related – belonging to the same family, group or type or connected’.

(c) Payment –something given as a reward or in recompense for something done, namely the action or process of paying someone. 48

(9) The amount an employee receives in a redundancy payment under clause 20 of the Agreement is linked to their service or time spent with VIP Packaging: “The longer the period of service an employee has the more redundancy payments they will receive compared to others with lesser service. It is a service or time based mechanism to calculate and entitlement with regards to a redundancy payment.” 49 This is consistent with how redundancy pay is calculated under section 119 of the Act.

(10) This is the ordinary meaning and basis which redundancy payments are calculated under the Australian workplace relations system – ie based on service – and clause 20 of the Agreement is capable of being applied in the same way.

(11) Applying the ordinary meaning to ‘a severance payment’, this is a payment in compensation that applies to situations where employers terminate an employee and can include redundancy payments. These are ordinarily based “on how long an employee has been in the role” and redundancy pay and severance pay are commonly interlinked. 50

(12) “Applying the simple meaning to clause 20.2.4 it says the 6 weeks cap on the payment of sick leave is a 'severance' payment. The same reference to 'severance' is used under subclause 20.2.1(a), ie 'two (2) weeks’ severance pay' which is under the clause 20.2 Redundancy Payments. Sub-clause 20.2.2 is also a 'service related payment' as the amounts is based on service with additional payments depending upon an employee's age added.” 51

Consideration

[22] In accordance with the Berri principles earlier stated, the construction of the Agreement begins with a consideration of the ordinary meaning of the relevant words. Context may appear from the text of the Agreement viewed as a whole, or the place and arrangement of clause 20.2 in the Agreement. The statutory framework under which the Agreement was made and in which it operates may also provide context.

[23] Clause 20.2 is titled “Redundancy Payments”. That the clause seeks to regulate redundancy entitlements for employees covered by the Agreement is not in dispute. The title is followed by the words “Employees deemed to qualify will receive the following”, following which the clause relevantly sets out:

•  at 20.2.1, “four weeks [sic] notice”;

•  at 20.2.1.(a), “Two (2) weeks [sic] severance pay”;

•  at 20.2.2, “A payment of three and a quarter (3.25) weeks’ pay for each completed year of continuous service and pro rata amount for completed months of service”; and

•  at 20.2.4, “A severance payment equal to the balance of untaken sick leave with a maximum payment being six (6) weeks”.

[24] The remainder of clause 20.2 purports to regulate other aspects of employees’ redundancy entitlements under the Agreement, including in relation to annual leave (20.2.5), long service leave (20.2.6), the treatment of employees who are 55 years and over (20.2.3(b)) and the timing of any payment made pursuant to the redundancy entitlements (20.2.7).

[25] Clause 20.2.8 is titled “Savings” and provides for “Service related payments other than statutory entitlements” to be capped at a maximum of “seventy eight (78) weeks pay” and, with respect to those employees “affected by” the cap, an entitlement to “an ex-gratia payment of $2000”.

[26] The questions posed by the Parties require me to first determine whether the entitlements provided for in clause 20.2.1.(a) and 20.2.4 are “service related payments” for the purposes of clause 20.2.8. The answer to that question will determine the necessity of considering whether or not the entitlements under 20.2.1(a) and 20.2.4 are “statutory entitlements”. In the event that I conclude that a payment is not a service related payment, it is not affected by the “cap” under clause 20.2.8. In that circumstance, I do not need to consider if the payment is also a statutory entitlement. Alternatively, if a payment is a service related payment, it is prima facie included in the “capped” amount of 78 weeks unless it is a statutory entitlement. In that circumstance, in order to answer Question 1 and Question 2, I would then need to consider whether the respective payment is a statutory entitlement.

Question 1: Clause 20.2.4 – Sick Leave Payment

Is the Sick Leave Payment a “service related payment”?

[27] Question 1 requires me to consider, in the first instance, whether the “severance payment equal to the balance of untaken sick leave with a maximum payment being six (6) weeks” under clause 20.2.4 is a service related payment.

[28] The AMWU argue that this payment is not a service related payment. In advancing this position, it argues that “the meaning of the term “service related payment” is a payment which is directly proportionate to the period of service of the relevant employee”. 52 The meaning of the term “service”, according to the AMWU, is interchangeable with, the definition of “period of service” provided for under s.22 of the Act, with the effect that only a payment “which relates to the employee’s period of service and no other factor”53 (my emphasis) is a service related payment. As such, the payment under clause 20.2.4 is not a service related payment, because the balance of sick leave payable at the time of termination is dependant on at least two factors, being the period of service and the amount of leave taken by the employee throughout their employment. Further, the fact that any payment under clause 20.2.4 is “capped” to the extent that the maximum amount payable is six weeks’ pay further “sever[s]” the link between the payment and the employee’s service.54

[29] The UWU’s starting proposition is that the plain and ordinary meaning of the phrase ‘service related payment’ is a “payment related to an employee’s service”, being a payment which is “defined by reference to, or derived from the employee’s service”. 55 It further refers to the Macquarie Dictionary definition of ‘related’, being “associated, connected; allied by nature, origin”.56 It goes on to argue that the term “service” in clause 20.2.8 “should be given the same meaning as the term ‘continuous service’ as defined in cl 20.6 and should be taken to mean as such.”57 The term continuous service is defined in clause 20.6 as “the unbroken period of employment up to the point at which the employee is terminated. Broken period of service are not taken into account”. Thus, the phrase ‘service related payment’ in clause 20.2.8 means “a payment which is exclusively ‘connected to’ or ‘derived from’ an employee’s continuous service” (my emphasis).58 The UWU submits that, adopting this interpretation, only those payments under clause 20.2.2, being payment(s) of 3.25 week’s pay for each completed year of continuous service, meet the definition of “service related payment”.59

[30] The Unions agree with the statement of principles of construction set out at paragraph 12 above. What is required here is a textual analysis of clause 20.2.4, construed in context and having regard to the purpose of the provision. It is not in contest that the term “service related payment” is not defined in the Agreement. In those circumstances, the words of the Agreement ought be given their “ordinary meaning”, “unless there is contrary indication”.  60 I agree with the UWU that the “the plain and ordinary meaning of the phrase ‘service related payment’ is a payment which is related to an employee’s service.” 61

[31] That said, I disagree with the Unions’ respective submissions that, in effect, the analysis of the meaning of the term “service related payment” as it applies to clause 20.2.4(a), is largely informed by the fact that an employee’s entitlement to the relevant sick leave payment decreases depending on how many sick leave days the relevant employee has taken during employment and the six week cap.

[32] In my view, it does not follow that a cap of 6 weeks on the payment of unused sick leave and a potential reduction of the payment equal to the amount of unused sick leave, ‘severs’ the connection between the sick leave payment and the ‘service’. To do as the Unions suggest would in my view involve an unduly narrow and artificial reading of the term “service related payment” that does not reflect the ordinary and plain meaning of the words and require the Commission to read into the clause words that are not there.

[33] I am satisfied that, understood in the light of its industrial context and purpose, the Sick Leave Payment is a service related payment for the purposes of clause 20.2 of the Agreement.

Is the Sick Leave Payment a “statutory entitlement”?

[34] In accordance with my comments at paragraph 26 above, I must now turn to consider whether the Sick Leave Payment is a “statutory entitlement”. If the payment is a statutory entitlement, it is not affected by the 78 week cap imposed under clause 20.2.8 of the Agreement (ie, the answer to Question 1 will be “no”).

[35] The AMWU seeks to characterise the Sick Leave Payment (alongside other leave entitlements) as “Agreement entitlements”. It states that whilst the term statutory entitlement does have a plain meaning, “an ambiguity does arise in the context of the clause dispute” as clause 20.2.8 “follows a list of entitlements which are provided for in statute” which are “in many cases more beneficial terms” than under the relevant statute.

[36] The UWU argue that the Sick Leave Payment under clause 20.2.4 of the Agreement is a statutory entitlement. It submits:

•  There is no basis to “limit” the meaning of the term ‘statutory entitlement’ to “those entitlements which are replicated from the statute and not to those which build on and are more beneficial than the terms of the statute from which the entitlements arose”. 62

•  Its argument that the ordinary and plain meaning of the term ‘statutory entitlement’ is “entitlements which arise from or have a basis in statute” is bolstered by sections 55(4) and 55(6) of the Act, which permits enterprise agreements to have more beneficial than the National Employment Standards (NES).  63

•  Beneficial agreement entitlementsderived from or based in statute are appropriately construed, still, as statutory entitlements. For example, an entitlement to six weeks’ annual leave under an enterprise agreement (supplementing the NES minimum by two weeks) is still a statutory entitlement, comprising “a statutory entitlement sitting underneath the more beneficial agreement entitlement”.  64

•  It is “uncontroversial” that employees’ annual leave and long service leave entitlements under the Agreement, which are more beneficial than those provided for under the relevant statutes, are “provided for by statute”.  65

•  There is no statutory entitlement to the payment of unused sick leave, and the Sick Leave Payment under clause 20.2.4 “cannot be ordinarily or plainly construed as a ‘statutory entitlement’”. However, “weight should be given to the fact that the exclusion of ‘statutory entitlements’ from the cap in cl 20.2.8 is expressed in such terms as to distinguish entitlements, as in ‘statutory entitlements,’ from payments, as in ‘service related payments.’ The accrual of sick leave is a statutory entitlement, as contrasted with a ‘service payment,’ and any payment in cl 20.2.4 of unused sick leave arises from the statutory entitlement to accrue sick leave.” 66

[37] I am not persuaded by the arguments of the AMWU and the UWU. In my view, the entitlement to sick leave provided by statute is of a fundamentally different nature to “a severance payment equal to the balance of untaken sick leave with a maximum payment being six (6) weeks”. There is no basis on which to construe the Sick Leave Payment in clause 20.2.4 as a ‘statutory entitlement’ for the purposes of clause 20.2.8.

[38] I have also considered the UWU’s submission with respect to the Federal Court Mondelez 67 decision, but am not persuaded that the views expressed by Bromberg and Rangiah JJ in the context of that decision are relevant to the consideration before me.

Relevance of “post-Agreement” conduct

[39] It is uncontroversial that, in accordance with Berri, I am permitted to take into account evidence of surrounding circumstances to assist with interpreting an Agreement where ambiguity exists. Relevantly, this includes post-agreement conduct, if it is “such as to show that there has been a meeting of minds, a consensus”. Conversely, post-agreement conduct “which amounts to little more than the absence of a complaint or common inadvertence is insufficient to establish a common understanding.” 68

[40] I have concluded that, notwithstanding the conflicting interpretations advanced by the Parties as to the meaning of clause 20.2.4, that the relevant provisions are not ambiguous.

[41] For completeness however, I note that the Unions argued that, to the extent there was ambiguity surrounding the meaning of clause 20.2, the Commission ought to have regard to certain post-agreement conduct. Specifically, the Unions submitted that VIP Packaging, under one of the Predecessor Agreements, made a number of employees redundant in 2014 and “the redundancy entitlements paid to those employees included an amount equal to accrued sick leave, in accordance with clause 20.2.4, in addition to a redundancy pay component capped at 78 weeks”. 69 The AMWU argued “this is evidence that there has been a consensus among the Applicant, the Respondent and the Respondent’s Employees about the interpretation of clause 20 of the Agreement” to the effect that “payment for untaken sick leave is paid in addition to the sum that is subject to the 78 week cap”.70 The UWU agreed, and stated that the 2014 redundancy payments “cannot be characterised as a ‘common inadvertence’”.71

[42] In my view, there is insufficient material before me to come to the conclusions sought by the Unions. The Unions’ evidence, which in essence comprises:

•  a “redundancy quotation” dated 8 May 2014 in respect of a Mr Zdzislaw Kwiecien, which “included a payment for untaken sick leave, on top of the 78-week cap”; 72

•  Mr Nyugen’s evidence that he has “spoken to a lot of [AMWU] members at the site” who “say that their understanding has always been that the payment for sick leave is paid on top of the 78 week cap”,

falls short of the evidence that would be required to demonstrate a “meeting of the minds” in relation to clause 20.2.4. In this regard, I am sympathetic with VIP Packaging’s submission that “mistakes do happen in payroll” and that the materials relied on by the Applicant “is somewhat weak in its probative value”. 73 On this basis, even if I am incorrect and the relevant words in clause 20.2 are ambiguous, the evidence before me which the Unions’ argue establish a “common understanding” of the Parties would not have influenced my conclusion.

Question 2: Clause 20.2.1(a) – Severance Payment

[43] In accordance with my comments at paragraph 26 above, Question 2 requires me to consider, first, whether “two (2) weeks severance pay” constitutes a service related payment for the purposes of clause 20.2.8. In my view on a proper construction, the answer to this question is “no”.

[44] The Severance Payment is not a “service related payment”. Clause 20.2.1.(a) speaks plainly as to the entitlement to a one off or “flat” 74 payment with respect to an employee “deemed to qualify” for redundancy payments. The word “severance pay” has an ordinary meaning – “money paid by a firm to employees or directors in compensation for loss of employment”75 – and in the context of the Agreement as a whole is not ambiguous. The clause operates such that employees to whom the Agreement applies, and who qualify for a redundancy payment, are entitled to two weeks’ severance payment, irrespective of their length of service.

[45] In coming to my conclusion, I have considered VIP Packaging’s submissions and do not disagree that “the amount an employee receives in a redundancy payment under clause 20 of the Agreement is linked to their service or time spent with VIP Plastics”. That said, I do not accept the proposition advanced by VIP Packaging that, because the overall payment an employee may be entitled to under clause 20 in a redundancy situation is related to their service – in the sense that “the longer the period of service an employee has the more redundancy payments they will receive” – that therefore the individual Severance Payment in clause 20.2.1(a) is service related.

[46] I have also considered the Respondent’s submission that “A voluntary redundancy is a financial incentive offered by an organisation to encourage employees to voluntarily resign” and that “The costing associated with the expressions of interest received in October 2020, by way of voluntary redundancy was a major consideration with VIP Packaging in offering the redundancy payouts”. 76 In relation to these submissions, I observe the following. Firstly, the ordinary meaning of the words in clause 20.2 do not confine the entitlements of employees to redundancy payments to those connected with “voluntary” redundancies. Rather, the clause sets out the general mechanism (including the method of calculating various payments) by which entitlements are calculated. Secondly, the clause specifically contemplates at clause 20.1.2, redundancies that are implemented in circumstances where “the company doesn't get an acceptable number of volunteers”. Thirdly, whilst I accept that there is a “savings” clause which caps payments to employees at 78 weeks, it also specifically contemplates exceptions to the “savings” in circumstances where the payments are either not service related payments, or are “statutory entitlements”. That said, in my view this submission does not attract the interpretative analysis suggested by the Respondent.

[47] I am satisfied that the Severance Payment is not a service related payment. It follows that, in accordance with paragraph 26 above, I do not need to consider whether it is a “statutory entitlement” for the purposes of clause 20.2.8.

Conclusion

[48] On the basis of the above reasoning, I conclude that:

•  the answer to Question 1 is yes; and

•  the answer to Question 2 is no.

COMMISSIONER

Appearances:

Mr J Gardner for the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union

Ms S Ananth for the United Workers’ Union

Mr A Powter for VIP Packaging Pty Ltd

Hearing details:

3 March 2021 (by Microsoft Teams)

Printed by authority of the Commonwealth Government Printer

<PR728618>

 1   Statement of Wayne Thomas dated 14 December 2020 (Thomas Statement), [2].

 2   Clause 6.1.1 and clause 6.1.2 of the Agreement.

 3   Email from AMWU dated 23 November 2020.

 4   [2017] FWCFB 3005 at [114].

 5   Australian Meat Industry Employees Union v Golden Cockerel Pty Ltd[2014] FWCFB 7447 at [19] – [40].

 6   Witness Statement of Robert Nguyen dated 1 December 2020 (Nguyen Statement), [3].

 7   Nguyen Statement, [7].

 8 Nguyen Statement, [4] – [6].

 9   Nguyen Statement, [8].

 10   Statement of Wayne Thomas dated 14 December 2020 (Thomas Statement), [17].

 11   Thomas Statement, [12].

 12   Thomas Statement, [18].

 13   Australian Manufacturing Workers Union Submissions lodged 2 December 2020 (AMWU Submissions), [9].

 14   AMWU Submissions, [10].

 15   AMWU Submissions, [11].

 16   AMWU Submissions, [12].

 17   AMWU Submissions, [13].

 18   AMWU Submissions, [13].

 19   AMWU Submissions, [14].

 20   AMWU Submissions, [15].

 21   AMWU Submissions, [16].

 22   AMWU Submissions, [17].

 23   AMWU Submissions, [18].

 24 AMWU submissions, [19] – [21].

 25   AMWU Submissions, [22].

 26   AMWU Submissions, [28].

 27   Transcript, PN161.

 28   Transcript, PN162.

 29   United Workers’ Union Submissions dated 2 December 2020 (UWU Submissions), [25] – [26].

 30 UWU Submissions, [27] – [28].

 31   UWU Submissions, [31].

 32 UWU Submissions, [33], [38] – [40].

 33 UWU Submissions, [34] – [35].

 34   UWU Submissions, [36].

 35 UWU Submissions, [39] – [40].

 36   UWU Submissions, [42].

 37   UWU Submissions, [44].

 38   UWU Submissions, [45].

 39   UWU Submissions, [46].

 40   UWU Submissions, [46].

 41   Respondent Submissions, [35].

 42   Respondent Submissions, [36].

 43   Respondent Submissions, [37].

 44   Respondent Submissions, [37].

 45   Respondent Submissions, [40].

 46   Respondent Submissions, [41].

 47   Respondent Submissions, [42].

 48   Respondent Submissions, [43].

 49   Respondent Submissions, [44].

 50   Respondent Submissions, [47].

 51   Respondent Submissions, [48].

 52   AMWU Submissions, [16].

 53   AMWU Submissions, [16].

 54   AMWU Submissions, [19].

 55   UWU Submissions, [23].

 56   UWU Submissions, [23].

 57   UWU Submissions, [26].

 58   UWU Submissions, [27].

 59   UWU Submissions, [27].

 60   WorkPac Pty Ltd v Skene [2018] FCAFC 131, [202].

 61   UWU Submissions, [23].

 62   UWU Submissions, [31].

 63   UWU Submissions, [31].

 64   UWU Submissions, [31].

 65   UWU Submissions, [32].

 66   UWU Submissions, [33].

 67   Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union (AMWU) [2019] FCAFC 138.

 68   Berri, [114].

 69   AMWU Submissions, [26].

 70   AMWU Submissions, [28].

 71   UWU Submissions, [47].

 72   Nyugen Statement, [8], RN-3.

 73   Transcript, PN193.

 74   UWU Submissions, [44].

 75   Macquarie Dictionary, <

 76   Respondent Submissions, [36].