“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers' Union (AMWU) v BAE Systems Australia Limited T/A BAE Systems

[2015] FWC 49

[2015] FWC 49

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)
v
BAE Systems Australia Limited T/A BAE Systems
(C2014/1956)

COMMISSIONER RYAN MELBOURNE, 4 MARCH 2015

Alleged dispute concerning capacity or incapacity of an employee to perform the inherent requirements of the job.

[1] On 21 October 2014 the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) made an application under s.739 of the Fair Work Act 2009 (the Act) to deal with a dispute in accordance with the dispute resolution process found in clause 14 of the BAE Systems Australia Defence Pty Limited - Williamstown Maritime Agreement 2013-2016 (the current Agreement). The Agreement was approved under the Fair Work Act 2009 (the Act) on 19 July 2013. The employer covered by the Agreement is BAE Systems Australia Limited (BAE).

[2] The AMWU described the dispute in its Form F10 application as follows:

“4.1 The respondent has indicated that it proposes to terminate the employment of one of the applicant’s members on the grounds of being unable to fulfil the inherent requirements of his job due to physical incapacity.

4.2 The applicant argues that to do so would be unlawful as the employee is currently on paid leave in accordance with the sick leave pool provisions under the enterprise agreement. (Ref s352 of the Fair Work Act; see also R3.01 of the Fair Work Regulations).”

[3] The employee of BAE who is the subject of this dispute is Mr Colton.

[4] This matter was subject to a conciliation of the parties on 28 October 2014 and was not resolved.

[5] The matter was subsequently programmed for arbitration on 25 November 2014 and directions issued for the AMWU to file and serve by 14 November 2014 and BAE to file and serve by 21 November 2014.

[6] Following compliance with the directions, the parties, by consent, requested that the matter be determined by me on the papers without holding a hearing.

Background and the Issue in Dispute

[7] Mr Colton has been employed at the Williamstown ship building facility of BAE for a number of years and commenced his employment at Williamstown in 1988 before BAE acquired the site from the previous owner. Mr Colton suffered a non-work related injury on 9 September 2013 and exhausted all of his sick leave on 24 October 2013. Having exhausted his personal sick leave entitlements Mr Colton was entitled to make an application for additional paid sick leave from a sick leave pool. The potential for Mr Colton to access additional sick leave was provided for under the terms of clause 34.10 of the current Agreement which provides as follows:

“Sick Leave Pool

Until 31 December 2013, the Sick Leave Pool will operate as per clause 34 of the BAE Systems Australia Defence Pty Ltd Maritime Collective Agreement 2010-2013.

With the introduction of employee income protection, employee income support will cease on the 31 of December 2013. All open claims at the time of cessation will continue on the employee income support until the committee decides to cease payment.”

[8] Clause 34 of the BAE Systems Australia Defence Pty Limited - Maritime Collective Agreement - 2010-2013 (the 2010 Agreement)provides as follows:

“34. Sick Leave Pool

34.1 As part of this Agreement, eight (8) hours per annum in respect to each employee shall be allocated by The Company to a pool which shall be administered by a Review Committee.

Accumulated pool credits will be available for access by employees who have exhausted all personal sick leave entitlements and who meet relevant criteria established by the Sick Leave Pool Review Committee.

34.2 Sick Leave Pool Review Committee

The Sick Leave Pool will be administered by a Review Committee comprised of 6 personnel, viz: (3) elected Shop Stewards (i.e. one from each respondent Union, or in the case of an absence, a nominated accredited alternate) and (3) Company nominees, e.g. representatives from Employee Relations, Pay Administration and Human Resources.

The Committee will administer the Sick Leave Pool balance; receive, consider and review applications for access to the Sick Leave Pool funds. It will monitor payments, Sick leave accruals and progress of employees in receipt of Sick Leave Pool funds.
The Review Committee will determine the period/payment to be granted to an employee granted access to the Pool.

The Committee will meet monthly to consider all applications. It will keep proper Minutes of Meetings and publish detailed reports.

The Committee will keep confidential all relevant aspects of an employee's medical condition.

The Committee and its functional operations shall be monitored and reviewed each 6 months.

34.3 Access to the Sick Leave Pool

Access to the Sick Leave Pool will be by way of application to the Sick Leave Pool Review Committee. The Committee has discretion as to the administration and eligibility of employees to access Sick Leave Pool credits. The decision of the Committee in such matters will be final.

In the event of any dispute arising within the Committee, such disputes shall be resolved by access to the Disputes Resolution Procedure set out in clause 13 of this Agreement.

All applications for access to the Sick Leave Pool shall be accompanied by relevant and appropriate medical evidence.

34.4 Criteria for Access

• The employee shall exhaust all accumulated personal sick leave credits
• Subsequent to having exhausted all personal sick leave credits, the employee shall produce relevant and appropriate medical evidence to confirm that he/she has been unable to engage in remunerative work for no less than 10 consecutive working days.
• The employee may elect, as a matter of individual choice, to supplement the 10 consecutive working days above, by accessing his/her preserved annual leave credits.”

[9] Mr Colton was successful with his application for access to the Sick Leave Pool funds and commenced receiving payment from the pool from 7 November 2013.

[10] Payment of funds from the pool did not occur during the period from 21 July to 3 August 2014 as BAE had not received current medical certificates in relation to Mr Colton.

[11] In May 2014 Mr Colton was able to participate in a return to work plan on restricted duties starting with 2 hours of work a day initially, then increased to 4 hours per day on 3rd June 2014. At the start of July 2014 Mr Colton was unable to continue his restricted duties and unable to attend work. Mr Colton underwent further surgery in July 2014. Mr Colton has been unable to attend work since July 2014.

[12] In October 2014 BAE indicated to Mr. Colton and the AMWU that BAE intended to terminate Mr. Colton's employment forthwith on the grounds that according to the available medical evidence he was unlikely to be able to fulfil the inherent requirements of his position in the foreseeable future.

[13] Mr. Colton and the AMWU activated the disputes procedure contained in the Agreement arguing that for BAE to terminate Mr. Colton's employment would be a breach of s352 of the Act.

The AMWU Submissions

[14] The AMWU’s written submissions of 14 November 2014 contended that the intention of BAE to terminate the employment of Mr Colton amounted to a breach of s.352 of the Act. The AMWU contended that the income support which Mr Colton was receiving under the terms of the current Agreement amounted to a form of paid personal leave for the purposes of Regulation 3.01 of the Fair Work Regulations 2009 and thus any attempt to terminate Mr Colton because of his alleged incapacity to work would be in breach of s.352 of the Act.

In order to prevent the breach of s.352 the AMWU sought the following remedy:

“19. The AMWU seeks determination of this matter from the Fair Work Commission in accordance with the Disputes Resolution Procedure contained at clause 14 of the Agreement. In particular the AMWU seeks a determination that for BAE to proceed to terminate Mr. Colston’s employment under the circumstances would constitute a breach of s352 of the Fair Work Act 2009 (Cth).”

BAE Submissions

[15] The written submissions of BAE included the following:

“1. Background of the sick leave pool:

a. The purpose of the sick leave pool was to provide employees with long term injuries a form of income support once their sick leave entitlements had been exhausted. The benefit provided by the scheme is not and has never been a paid personal/carer’s leave entitlement for the purposes of s.97(a) of the Act. It is not a leave entitlement accruing to any particular employee at all - rather an income support benefit extended at the discretion of a committee.

b. The current Enterprise Agreement Clause 34.10 (see Attachment 1) advises the sick pool was replaced by an Income Protection Scheme (Clause 35) with pool sick pool claims to continue until the committee decides to cease payment. The Sick Pool Committee operate under a set of guidelines (Attachment 2)

c. The previous Collective Agreement (BAE Systems Australia Defence Pty Limited Maritime Collective Agreement 2010 – 2013, Clause 34, Attachment 3) applied the same guidelines for the committee to administer the sick pool. The rate of accrual changed from four (4) hours to eight (8) per annum to eligible employee to accommodate a sharp rise in employee numbers after a large reduction of employees after the ANZAC Frigate project to ensure adequate funds were in the scheme.

d. The scheme provided a cascading level of support to ensure longer serving employees received more support and to ensure the scheme could remain self sustaining.

2. Tom Colton’s circumstances

a. Mr Colton commenced employment in the shipyard with an earlier employer on 28 July 1988.

b. Mr Colton suffered a non-work related injury on 9 September 2013 and exhausted all of his sick leave on 24 October 2013 and commenced sick pool payments on 7 November 2013.

c. The committee did cease payments to Mr Colton briefing in July/August (21 July to 3 August 2014) as the company had not received current medical certificates.

d. Mr Colton has been able to participate in a return to work plan on restricted duties from May 2014 starting with 2 hours of work a day initially, then increased to 4 hours per day on 3rd June. At the start of July 2014 Mr Colton was unable to continue his restricted duties and unable to attend work which is the current situation.

e. The Fitness for Duty assessment was completed by Dr Majid Rahgozar (20 years experience, with 8 years specialising in occupational and environmental medicine) in May 2014 (Attachment 4). The medical outlines the following capacity:

• Purely Sedentary Roles



• Occasional Short Walks



• Avoiding stairs



• Being able to elevate your right foot 25-50% of the time



• No forklift driving



• Graduated working hours commencing from 2hour to 4 hours and so on, depending on how you were coping/transitioning as per RTW plan.



• With a suggestion that you continue to review on a 3 monthly basis.

f. Mr Colton’s treating surgeon, Dr Nick Howells advised it was difficult to say if Mr Colton could return to pre-injury duties. He may not regain the capacity to return to his prior role. It is likely to take 6-9 months following surgery as a minimum before he is fit for full duties.

g. We acknowledge Mr Colton’s difficult circumstances. We have tried to adopt a practical way forward to provide the parties with time to consider their respective positions.

3. There is nothing in the enterprise agreement that requires the company to continue an employee’s employment indefinitely in circumstances where they are not fit to perform their pre-injury duties and will be unable to do so for the foreseeable future, as in this case. The sick leave pool scheme has never operated in this way in the past and does not require this.”

Consideration

[16] The purpose of any sick leave scheme, whether provided for by statute, contract or enterprise agreement, is to provide an employee, who is suffering from an illness or injury which prevents the employee from performing their normal duties, the right to be absent from work whilst the employee is suffering that illness or injury without such absence being considered to break or end the employment relationship.

[17] Some sick leave schemes provide for the employee to be paid whilst absent from work on account of illness or injury and some merely provide the employee with the right to be absent from work without payment for the period of the illness or injury.

[18] An essential element of any sick leave scheme is that the employee will return to work and will resume the performance of his or her normal duties.

[19] Where an illness or injury prevents the employee from ever returning to work and resuming the performance of his or her normal duties, then the employer is generally entitled, subject to statutory, contractual or enterprise agreement constraints, to terminate the employment relationship due to the incapacity of the employee to fulfil the inherent requirements of the position.

[20] Two simple illustrative examples paint a clear picture of how any sick leave system operates.

[21] Employee A contracts a viral infection, the Flu, and is confined to bed for a week. In that week the employee is incapable of performing their contractual obligations to their employer. However as the period of incapacity of the employee to perform his or her contractual obligations is expected to be very short the employment relationship is not ended and the employee will be treated as being temporarily absent from work, either on paid sick leave or on unpaid sick leave. Both the employer and the employee expect the employee to return to work and to resume his or her normal duties after a brief absence.

[22] Employee B suffers a serious trauma as a result of an accident whilst not at work and is hospitalised for appropriate treatment. The employee is unable to attend work when next required to do so. Until such time as the permanent effects of the injury suffered by the employee are known, the period of incapacity of the employee to perform his or her contractual obligations would normally be treated as being temporary and the employment relationship would be treated as continuing and the employee will be treated as being temporarily absent from work, either on paid sick leave or on unpaid sick leave. However after one month of hospitalisation it is clear from the medical evidence that the employee will suffer from significant permanent impairment and will permanently require high levels of direct assistance to live. At this point the incapacity of the employee to perform his or her contractual obligations is no longer temporary but is permanent and complete. Even if the employee has a significant entitlement to accrued paid sick leave (either under statute, contract or enterprise agreement) the employer is generally entitled to terminate the contract of employment by reason of the permanent incapacity of the employee.

[23] Between these two extremes lies the present matter.

[24] Mr Colton has suffered an injury which has prevented him from performing his normal duties for a considerable period of time. The terms of the enterprise agreement applying to Mr Colton and BAE have ensured that Mr Colton’s continues to be paid for the period of absence due to his injury.

[25] Two important questions in this matter are:

• Whether the Mr Colton’s absence from work on account of his injury is temporary or permanent?



• If the absence is temporary is the temporary period either so long or so ill defined as to entitle the employer to treat the contract of employment as being effectively frustrated?

[26] Consideration of these two questions assists in addressing the issues raised by both the AMWU and BAE.

[27] The medical evidence presented by both BAE and the AMWU makes clear that Mr Colton’s injury will not lead to him being permanently unable to return to work and to his normal duties. In fact the medical evidence relied on by both BAE and the AMWU makes clear that Mr Colton is expected to be fit to resume his normal duties at a future date.

[28] BAE relied on the expert opinion expressed by Dr Rahgozar on 8 May 2014 in which the doctor answered a question posed by BAE as follows:

“5. When would it be expected that Mr Colton be able to return to the full inherent requirements of his position (please specify time frame)?

Given the type of injury, extent of complications and concomitant medical conditions, the time frame of Mr Colton’s disability is unclear. I would expect Mr Colton to experience some levels of disability another 6-12 months.

6. Are there any long-term employment ramifications or implications for the employer to consider?

As above.

7. Are there any further recommendations the employer should consider?

No.”

[29] I note that Dr Rahgozar’s opinion was expressed before Mr Colton required further surgery in July 2014.

[30] The AMWU relied upon the opinions expressed by Mr Nick Howells, the surgeon treating Mr Colton.

[31] In September 2014 Mr Howells in response to questions put to him by BAE responded as follows:

“3. How long will it be expected that Mr Colton be unfit for any work duties? (please give timeframe)

He will be unfit for any work duties for a minimum of 3 months following surgery.

4. When Mr Colton becomes fit for work, what restrictions will he need to be on and for how long will these restrictions need to be in place?

He will need workplace restrictions and activity modifications for 6 months or more following surgery.

He will be limited in his ability to perform manual working lifting, prolonged standing or extensive walking.

5. When would it be expected that Mr Colton be able to return to the full inherent requirements of his position (please specify time frame)?

This is difficult to say currently. He may not regain the capacity to return to his prior role. It is likely to take 6-9 months following surgery as a minimum before he is fit for full duties.”

[32] On Friday 14 November 2014 Mr Howells wrote to Mr Vroland of the AMWU as follows:

“I reviewed Thomas yesterday. He is making excellent progress.

His ankle had progressed to union quicker than expected. We are planning to remove his frame earlier than previously expected. This is likely to be before Christmas.

After review yesterday I am confident that his likely functional level will be better than previously predicted.

I now think it highly likely that Thomas will be able to return to his previous work, albeit initially probably with some measures in place to accommodate a graduated return. I foresee this being possible within the next 3 to 4 months.

I am happy to provide a more detailed report in due course.”

[33] Certainly as at November 2014 there was a real likelihood that Mr Colton would be able to return to the performance of his normal duties within a reasonable timeframe.

[34] The letter written to Mr Colton on 1 October 2014 put his continuing employment with BAE in question.

“Following our discussion, I am writing to you in relation to the medical results from your fitness for duties assessment with Sonic Health Plus dated 08/05/2014 and your treating surgeons supplement email dated 16/09/2014.

Based on this medical advice we have concerns that your incapacity prevents you from carrying out the inherent requirements of your position, highlighting that your condition is unlikely to improve in the near future. To this end, we are currently reviewing your ongoing employment with the Company due to your inability to meet your contractual requirements on the basis of ill health.”

[35] The position of BAE was further clarified in its written submission filed on 21 November 2014 when it contended that:

“3. There is nothing in the enterprise agreement that requires the company to continue an employee’s employment indefinitely in circumstances where they are not fit to perform their pre-injury duties and will be unable to do so for the foreseeable future, as in this case. The sick leave pool scheme has never operated in this way in the past and does not require this.”

[36] In its reply submissions filed on 26 November 2014 BAE further contended:

“9. For present purposes, there is nothing in the terms of the sick pool scheme or the role of the Committee, which deals with termination of employment. It is confined to providing an “income support benefit”. The clause then regulates the circumstances under which this benefit is provided and when it may cease. It does not regulate or confine any decision by BAE Systems to end the employment of a person accessing the benefit. Any decision by BAE Systems can be tested by the AMWU in the appropriate jurisdiction should it wish to do so. There is no basis for a remedy restricting or confining a decision to end the employment in the present matter and, to the extent that such relief is sought, it respectfully ought to be denied.”

[37] The contentions of BAE are essentially correct, although the rights of BAE are not unrestricted.

[38] Importantly the right of an employee to access the extended sick leave pool under the 2010 enterprise agreement or to access the income support provision under the current Agreement is very separate from the rights of either the employer or employee to terminate the contract of employment or the employment relationship. Having said that, the very presence in the present matter of Mr Colton’s continuing entitlement to receive income support, is a factor which impacts on the right of BAE to terminate the employment relationship with Mr Colton.

[39] The AMWU contended that BAE’s intention to terminate the employment of Mr Colton would, if carried out, constitute a breach of s.352 of the Act.

[40] Section 352 and Regulation 3.01 relevantly provide as follows:

“352 Temporary absence—illness or injury

An employer must not dismiss an employee because the employee is temporarily absent from work because of illness or injury of a kind prescribed by the regulations.

Note: This section is a civil remedy provision (see Part 4-1).”

` “3.01 Temporary absence—illness or injury

(1) For section 352 of the Act, this regulation prescribes kinds of illness or injury.

Note: Under section 352 of the Act, an employer must not dismiss an employee because the employee is temporarily absent from work because of illness or injury of a kind prescribed by the regulations.

(2) A prescribed kind of illness or injury exists if the employee provides a medical certificate for the illness or injury, or a statutory declaration about the illness or injury, within:

(a) 24 hours after the commencement of the absence; or

(b) such longer period as is reasonable in the circumstances.

Note: The Act defines medical certificate in section 12.

(3) A prescribed kind of illness or injury exists if the employee:

(a) is required by the terms of a workplace instrument:

(i) to notify the employer of an absence from work; and

(ii) to substantiate the reason for the absence; and

(b) complies with those terms.

(4) A prescribed kind of illness or injury exists if the employee has provided the employer with evidence, in accordance with paragraph 107(3)(a) of the Act, for taking paid personal/carer’s leave for a personal illness or personal injury, as mentioned in paragraph 97(a) of the Act.

Note: Paragraph 97(a) of the Act provides that an employee may take paid personal/carer’s leave if the leave is taken because the employee is not fit for work because of a personal illness, or personal injury, affecting the employee.

(5) An illness or injury is not a prescribed kind of illness or injury if:

(a) either:

(i) the employee’s absence extends for more than 3 months; or
(ii) the total absences of the employee, within a 12 month period, have been more than 3 months (whether based on a single illness or injury or separate illnesses or injuries); and

(b) the employee is not on paid personal/carer’s leave (however described) for a purpose mentioned in paragraph 97(a) of the Act for the duration of the absence.

(6) In this regulation, a period of paid personal/carer’s leave (however described) for a purpose mentioned in paragraph 97(a) of the Act does not include a period when the employee is absent from work while receiving compensation under a law of the Commonwealth, a State or a Territory that is about workers’ compensation.”

[41] The AMWU further contended as follows:

“14. It is submitted that Mr. [Colton] has complied with all of the necessary requirements of r3.01(2)- (4) which deal with notification, substantiation of illness or injury. This much is not understood to be in contest.

15. Instead it appears that the heart of this issue is whether Mr. [Colton’s] injury would not be a prescribed injury due to the operation of r3.01(5).

16. It is submitted that as Mr. [Colton] has received payment under the sick leave pool provisions of the Agreement since November 2013 he has in effect been on paid personal leave and thus r3.01(5) has no application to the situation. It is noted that the words “however described” as they appear at r3.01(5)(b) clearly indicate that the scope of the term paid personal leave as it appears at the same point is intended to be viewed broadly.

17. It is further submitted that there is nothing in the terms of the Agreement and in particular of clause 34 that indicate any limitation on the ongoing receipt of sick leave pool payments for an employee who was in receipt of such payments as at 31 December 2013. Indeed, the plain words of sub-clause 34.10 indicate quite the reverse, where they state:

All open claims at the time of cessation will continue on the employee income support until the committee decides to cease payment.

18. The AMWU is unaware of any evidence that the Sick Leave Pool Review Committee has decided to cease payment to Mr. [Colton] and indeed it is submitted that this is not the case.”

[42] BAE contended that nothing in the present matter relates to s.352 of the Act:

“Sick leave pool is not “personal leave”

1. In paragraph 2 of the AMWU Response Submissions, the AMWU maintains that the sick leave pool is a supplementary form of personal leave under the relevant enterprise agreement because of the matters set out in sub-paragraphs 2(a) to 2(c). These matters do not lead to the conclusion reached by the AMWU. Specifically:

(a) The provisions concerning the sick leave pool in clause 34 of the BAE Systems Defence Pty Limited Maritime Collective Agreement 2013 - 2016 (2013 Agreement) make it clear that the benefit operates in accordance with clause 34 of the BAE Systems Defence Pty Limited Maritime Collective Agreement 2010 - 2013 (2010 Agreement) until 31 December 2013.

(b) This benefit is described in terms as “employee income support” in the clause. Open claims continue on “employee income support”. Clause 34 of the 2013 Agreement does not contemplate that this benefit is “personal leave” at all.

(d) Further, the 2010 Agreement, which regulates the substance of the scheme, provides for the Sick Leave Pool under a separate provision from personal leave, clause 34 of the 2010 Agreement. The terms of this clause make it clear that the benefit is not a personal leave benefit of any description. In fact, it provides expressly that it is only employees who have “exhausted all personal sick leave entitlements” who meet the criteria to access the scheme.

(e) Accordingly, it is a precondition to access the pool that there be no leave remaining of the type described by section 97(a) of the Act.

(f) The benefit then provided under the scheme is “access to Sick Pool funds”, not an entitlement to take leave. The period and the amount of the payment from the fund is then determined by a Committee.

4. Accordingly, the construction advanced by the AMWU is not supported by the terms of the clause. Indeed, to interpret the clause in the manner claimed by the AMWU would be directly inconsistent with the express requirement in the clause that all personal sick leave must be exhausted before access to the scheme is permitted.

5. For the reasons set out above, this “income support” benefit is not within the terms of R3.01(5)(ii). It cannot be properly characterized as a personal leave benefit within the meaning of s.97(a) of the Act as it is not in the nature of “leave”. It does not provide an authorisation to take leave or not to be at work because of illness of injury. The sick leave pool benefit cannot be said to describe such a benefit. Rather, it is confined to access to an income support payment scheme when all such personal leave benefits (howsoever described) have been exhausted.

6. It follows that the absence from work is not a temporary absence for the purposes of s.352 of the Act.”

[43] In reply the AMWU contended:

“2. In response to paragraph [1(a)] of the respondent’s submissions, the AMWU contends that the sick leave pool is by its nature clearly a supplementary personal leave scheme under the relevant enterprise agreement. This is because:

a. The scheme is set out at sub-clause 34.10 of the Agreement which is itself contained within clause 34, entitled “Personal Leave.”

b. The preamble of clause 34 states “This clause describes an employees (other than a casual employee’s) entitlement to personal leave that is sick leave and carer’s leave.

c. The interrelationship between the sick leave pool and primary personal leave is plain on its face.

3. Given the above, Mr. Colton’s absence from work constitutes a prescribed kind of injury for the purposes of s352 of the FW Act as set out in the AMWU’s primary submissions.

4. Further, with respect to the further assertion at [1(a)] that the sick leave pool is “not a leave entitlement accruing to any particular employee at all – rather an income support benefit extended at the discretion of a committee,” the AMWU says:

a. R3.01(5)(ii) of the FW Regulations does not require that the payment for personal/carer’s leave be subject to accrual but instead is intended to have extremely broad application as indicated by virtue of the words “however described” as they appear in that sub regulation.”

[44] Neither clause 34.10 of the current Agreement nor clause 34 of the 2010 Agreement explicitly provide for a system of personal leave. Clause 34.10 of the current Agreement refers to the continuation of income support and clause 34 of the 2010 Agreement refers to access to the Sick Leave Pool funds or Accumulated pool credits.

[45] However to read either of clause 34.10 of the current Agreement or clause 34 of the 2010 Agreement as not dealing with sick leave ignores the context in which those clauses exist and the history of those clauses.

[46] It is explicit in the language of clause 34 of the 2010 Agreement that access to the Sick Leave pool or to accumulated pool credits is only available to employees who have exhausted their personal sick leave entitlements. If an employee is unfit for work and has exhausted their personal sick leave credits then the employee could only access the Sick Leave pool or the accumulated pool credits if the employer continues to treat the employment relationship as ongoing. In other words it is implicit to the working of clause 34 of the 2010 Agreement that the employer is continuing to approve of the absence of the employee from work and that the employee has an entitlement to be absent from work.

[47] Whilst clause 34.10 of the current Agreement only refers to the continuation of income support which derived from the 2010 Agreement as against income protection under the current Agreement, nevertheless clause 34.10 of the current Agreement must be understood in the context of continuing an entitlement arising under the 2010 Agreement.

[48] The very structure of the process set out in the 2010 Agreement for an employee to access Sick Leave Pool funds or accumulated pool credits implies that whilst the Committee established under that provision continues to approve the payment of the funds to the employee then the employee has an entitlement to remain an employee.

[49] Separating the right of the employer to terminate the employment relationship from the entitlement of an employee to receive payment under clause 34.10 of the current Agreement divorces the wording of clause 34.10 of the current Agreement and clause 34 of the 2010 Agreement from the industrial relations context in which the clauses are intended to operate. (AMIEU v Golden Cockerel P/L 1)

[50] The real and practical effect of both clause 34.10 of the current Agreement and clause 34 of the 2010 Agreement is to provide an employee with a period of leave from work on account of an illness or injury suffered by the employee and to remunerate the employee either in whole or in part for the period of that leave.

[51] In the context of the present matter s.352 of the Act may apply if BAE terminated the employment of Mr Colton. The critical issue would be determining the reason for the termination as at the time of the termination. To the extent that BAE contend that Mr Colton’s inability to perform the inherent requirements of the job he was employed to do gives rise to an entitlement to BAE to terminate Mr Colton’s employment such contention will stand or fall on the medical evidence available at the time of any termination taking effect.

[52] Both the AMWU and BAE made submissions concerning the relevance or otherwise of a decision of O’Callaghan SDP in Cooper v Balfours Bakery P/L 2.

[53] In canvassing the authorities on the relationship between an employee’s incapacity to work and termination by the employer of the employment relationship, O’Callaghan SDP said:

“[44] The issue of incapacity as a result of illness or injury was addressed at some length by a Full Bench of the Australian Industrial Relations Commission in Smith and others v Moore Paragon Australia Ltd (Moore Paragon) in the following terms:

“[48] The traditional view was that when an employee is so incapacitated by illness or injury that he or she cannot work, at least in the longer term, the contract may be frustrated and thus terminated by operation of law and not at the initiative of the employer. In Marshall v. Harland & Wolff Ltd Donaldson J, giving the judgment of UK National Industrial Relations Court stated:

“In the context of incapacity due to sickness, the question of whether or not the relationship has come to an end by frustration sounds more difficult than it is. The tribunal must ask itself: ‘Was the employee’s incapacity, looked at before the purported dismissal, of such a nature, or did it appear likely to continue for such a period, that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and agreed to be accepted by the employer under the agreed terms of his employment?’ In considering the answer to this question, the tribunal should take account of:

(a) The terms of the contract, including the provisions as to sickness pay
The whole basis of weekly employment may be destroyed more quickly than that of monthly employment and that in turn more quickly than annual employment. When the contract provides for sick pay, it is plain that the contract cannot be frustrated so long as the employee returns to work, or appears likely to return to work, within the period during which such sick pay is payable. But the converse is not necessarily true, for the right to sick pay may expire before the incapacity has gone on, or appears likely to go on, for so long as to make a return to work impossible or radically different from the obligations undertaken under the contract of employment.

(b) How long the employment was likely to last in the absence of sickness

The relationship is less likely to survive if the employment was inherently temporary in its nature or for the duration of a particular job than if it was expected to be long term or even lifelong.

(c) The nature of the employment

Where the employee is one of many in the same category, the relationship is more likely to survive the period of incapacity than if he occupies a key post which must be filled and filled on a permanent basis if his absence is prolonged.

(d) The nature of the illness or injury and how long it has already continued and the prospects of recovery

The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it is that the relationship has been destroyed.

(e) The period of past employment

A relationship which is of long standing is not so easily destroyed as one which has but a short history. This is good sense and, we think, no less good law, even if it involves some implied and scarcely detectable change in the contract of employment year by year as the duration of the relationship lengthens. The legal basis is that over a long period of service the parties must be assumed to have contemplated a longer period or periods of sickness than over a shorter period.

These factors are inter-related and cumulative, but are not necessarily exhaustive of those which have to be taken into account. The question is and remains: ‘Was the employee’s incapacity, looked at before the purported dismissal, of such a nature, or did it appear likely to continue for such a period, that further performance of his obligations in the future would either be impossible or would be a thing radically different from that undertaken by him and accepted by the employer under the agreed terms of his employment?’ Any other factors which bear on this issue must also be considered.”

[49] The traditional approach was subjected to a careful and comprehensive analysis by Wootten J in Finch v Sayers who concluded

“The review of the authorities shows that, before one can answer the question whether a contract of employment is frustrated, one must look at the whole of the terms of the contract, express and implied, and at all the surrounding circumstances, including the provisions made for the sickness and retirement of the employee and the general practice of the particular employer, or in similar employment. When one does this, it may well be that, in many areas of employment in contemporary society, particularly where one is dealing with an indefinitely continuing relationship, and not the performance of a specific task, there is relatively little room for the operation of the doctrine of frustration due to illness. It is notable that...employers...in every reported case in the last seventy years, have in fact acted on the basis that it was for them to terminate the sick employee’s employment when they were no longer willing to maintain the continuity of his employment.”

[50] The approach of Wootten J in Finch v Sayers has been approved and applied by the New South Wales Industrial Relations Commission in Court Session in Cachia v State Authorities Superannuation Board and in Hilton Hotels of Australia Limited v Pasovska. It has also been applied in this Commission by Simmonds C in his careful decision in Foster v Copper Mines of Tasmania Pty Ltd. We endorse that approach.”

[45] In Smith v Capral Aluminium Lawler VP recited the approach in Moore Paragon and concluded that:

“[16] It seems to me that these principles are equally applicable when considering whether incapacity arising from a work-related injury provides a valid reason for terminating the employment of an employee.

[17] Thus, subject to an obligation to provide continued employment arising under state legislation, incapacity arising from a work-related injury provides a valid reason for termination of the employment of an incapacitated employee where:

(a) further performance of the employee’s contractual obligations in the future would either be impossible or would be a thing radically different from that undertaken by him or her and accepted by the employer under the agreed terms of his or her contract of employment; or

(b) continued employment would involve imposing a material productivity burden or some other unreasonable burden on the employer; or

(c) continued employment would impose an unreasonable burden on other employees.

If the termination of an employee on account of incapacity arising from a work-related injury involves a breach of an obligation arising under state legislation to provide continued employment to that employee then such incapacity will usually not constitute a reason for termination that is “sound, defensible or well-founded” and thus a valid reason within the meaning of s.170CG(3)(a).”

[46] A Full Bench in J Boag & Son Brewing v Button observed:

“[29] It is well established that a valid reason is one which is “sound, defensible or well founded”, but not “capricious, fanciful, spiteful or prejudiced”. An inability to perform the inherent requirements of a position will generally provide a valid reason for dismissal. But this will not invariably be so. For example, the dismissal may be prohibited by State workers compensation legislation or otherwise unlawful. It is highly likely, bordering on certain, that there could be no valid reason for the dismissal in that event. Further, a dismissal based on an incapacity to perform the inherent requirements of a position may not be valid reason for dismissal if the employee has a capacity to perform the inherent requirements of their job. Plainly, there can be a valid reason for the dismissal of an employee where he or she simply does not have the capacity (or ability) to do their job. But, again, there may be circumstances where such incapacity does not constitute a valid reason in the relevant sense.

[30] In the present case, it is clear that both Mr Button’s position and his job had important features that he could not perform because of his lifting restriction. Mr Button had an incapacity to perform the all of the inherent requirements of his job and, on balance, this constituted a valid reason for his dismissal.”

[47] The Full Federal Court further dealt with the issue of an employee’s capacity to do a job in Crozier on the basis that an employee’s incapacity to do the job can represent a valid reason for dismissal.” [footnotes removed]

[54] If the opinion expressed by Mr Howells in November 2014 detailed in paragraph [31] above proves true then it would appear that, consistent with the authorities, BAE will not be entitled to terminate the employment relationship with Mr Colton for the reason of Mr Colton’s current incapacity to perform the inherent requirements of his job.

[55] It would also appear that the concept of incapacity to perform the inherent requirements of a position is not available to BAE to justify the termination of any employee who is entitled to and receives the benefit of clause 34 of the 2010 Agreement and clause 34.10 of the current Agreement.

[56] The very fact that BAE provides half of the decision makers who comprise the Review Committee under clause 34 of the 2010 Agreement makes clear that BAE has used its position on the committee to, at the very least, acquiesce to the continued payment of income support to Mr Colton as a continuing employee. As a matter of logic if BAE firmly held the view that Mr Colton’s incapacity was not temporary and that Mr Colton was not able to perform the inherent requirements of his job then BAE would not have agreed or acquiesced to continue to provide Mr Colton with income support under clause 34 of the current Agreement.

[57] In its written submissions the AMWU sought a very specific outcome from the arbitration in this matter:

“19. The AMWU seeks determination of this matter from the Fair Work Commission in accordance with the Disputes Resolution Procedure contained at clause 14 of the Agreement. In particular the AMWU seeks a determination that for BAE to proceed to terminate Mr. [Colton’s] employment under the circumstances would constitute a breach of s352 of the Fair Work Act 2009 (Cth).”

[58] BAE contended that the FWC could not grant the remedy sought. In its written submissions in reply BAE said:

“Remedy sought beyond power

1........ the AMWU continues to press for a determination concerning a breach of s. 352 of the Act. This raises a question of jurisdiction about which the Commission must be satisfied.

2. Section 352 of the Act forms part of the General Protections contained in Part 3-1 of the Act. It is a civil remedy provision. While the Act confers certain functions in respect of general protections matters in Part 3-1, these functions do not and cannot extend to the determination of whether a civil remedy provision has been breached. The Act confers jurisdiction to determine such an application on the Federal Court and the Federal Circuit Court.

3. The Commission does not have jurisdiction, under the disputes procedure or otherwise, to make a determination of whether the termination of Mr Colton’s employment would contravene s.352 as this would require the exercise of judicial power. It is unnecessary in this case for the Commission to form a view about this matter for the exercise of some other matter within its jurisdiction. Rather, this is the sole matter the AMWU seeks to have determined and to form the subject of a determination. In these circumstances, the Commission should not issue a determination in the terms sought in an application made under s.739 of the Act and pursuant to the dispute resolution procedure of the BAE Systems Defence Pty Limited Maritime Collective Agreement 2013 - 2016.”

[59] The powers of the FWC to deal with the present matter arise from both s.739 of the Act and the terms of the current Agreement.

[60] Clause 14 of the current Agreement provides for a procedure to resolve disputes of the following types:

● any grievance
● any major changes in employment conditions
● any major changes in Agreement terms
● any dispute between the Company and its employees with respect to a matter contained within this Agreement
● any dispute between the Company and its employees with respect to a National Employment Standard matter.

[61] Given that an enterprise agreement may only be made about permitted matters then the reference to “any grievance” must be understood as being a reference to ‘any grievance about a permitted matter’.

[62] Clause 14 of the current Agreement clearly provides for arbitration of a dispute by the Commission.

[63] Section 739 places some limitations on the powers of the Commission in relation to dealing with disputes under the terms of an enterprise agreement. Relevantly, s.739 provides as follows:

“(3) In dealing with a dispute, the FWC must not exercise any powers limited by the term.

(4) If, in accordance with the term, the parties have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so.

(5) Despite subsection (4), the FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.”

[64] There is nothing in clause 14 of the current Agreement which limits the power of the FWC to arbitrate any dispute of the types identified in that clause.

[65] In the present matter the entitlement of Mr Colton to continued payment of income support arises from clause 34.10 of the current Agreement continuing the entitlement which arose under clause 34 of the 2010 Agreement. Clause 34.10 of the current Agreement also specifies that the entitlement to continued payments of income support is conditional on the Sick Leave Pool Review Committee established under clause 34 of the 2010 Agreement not ceasing the payment. Clause 34.10 of the current Agreement does not repeat the words in clause 34.3 of the 2010 Agreement which provided that “in the event of any dispute arising within the Committee, such disputes shall be resolved by access to the Disputes Resolution Procedure set out in clause 13 of this Agreement”. However, the very breadth of the disputes resolution procedure in clause 14 of the current Agreement (which is in the same terms as clause 13 of the 2010 Agreement) means that any dispute about a refusal of the Committee to make a decision to cease income support payments could be subject to the disputes resolution procedure.

[66] The FWC as presently constituted has no doubt that the FWC has the jurisdiction to deal with a dispute about Mr Colton’s continuing employment and Mr Colton’s continuing receipt of income support payments.

[67] In the present matter the AMWU has not sought that the FWC make any order in relation to Mr Colton or against BAE in relation to BAE’s possible termination of Mr Colton’s employment. The FWC strongly doubts whether any such orders could be made within the jurisdiction of the FWC.

[68] To the extent that the AMWU specifically seek a determination from the FWC “that for BAE to proceed to terminate Mr. [Colton’s] employment under the circumstances would constitute a breach of s352 of the Fair Work Act 2009 (Cth)” the FWC considers that such a determination is not open to it.

[69] The determination would require the FWC to authoritatively determine that future conduct of BAE would be in breach of s.352 of the Act. Whilst the FWC is entitled pursuant to s.595(2) of the Act to express an opinion or make a recommendation about future or intended conduct of BAE in relation to Mr Colton it would be a step too far for the FWC to determine that future or intended conduct of BAE in relation to Mr Colton is in breach of s.352 of the Act.

[70] In the present matter the Commission can make a decision to settle the dispute as at November 2014. However such a decision would be futile and would not assist the parties at the present time.

[71] Whether or not the conduct of BAE in relation to Mr Colton’s continuing employment will constitute a breach of a general protections provision of the Act or constitute an unfair dismissal will depend on what BAE actually do, when they do it and why they do it and whether BAE has had regard to the most current medical evidence as to the capacity or incapacity of Mr Colton to perform the inherent requirements of his position either now or within a reasonable period of time from the present.

[72] Mr Colton, or the AMWU on his behalf, may be entitled to seek an order from a court of competent jurisdiction temporarily enjoining BAE from taking any action to terminate the employment relationship with Mr Colton and to do so would appear to be an appropriate course of action.

[73] In the present matter the evidence available to the FWC considered in light of the relevant authorities leads to a conclusion that as at late November 2014 any action by BAE to terminate the employment of Mr Colton on the grounds of his incapacity to perform the inherent requirements of his position would most likely have constituted an unfair dismissal and may have constituted a breach of the general protections provisions of the Act.

[74] The position adopted by each of Mr Colton, the AMWU and BAE needs to be reconsidered in light of the current medical advice available as to Mr Colton’s capacity to perform the inherent requirements of his position either immediately or within a reasonable period of time.

COMMISSIONER

Appearances:

Mr D Vroland for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU).

Mr L. Hillier for BAE Systems Australia Limited.

 1   [2014] FWCFB 7447.

 2   [2011] FWA 4595.

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