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

[2017] FWC 2618

[2017] FWC 2618

FAIR WORK COMMISSION

DECISION

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

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia; "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU)
v
Kentz Pty Ltd
(C2017/1353)
(C2017/2118)

COMMISSIONER SIMPSON BRISBANE, 17 MAY 2017

Alleged dispute about any matters arising under the enterprise agreement and the NES;[s186(6)].

[1] On 14 March 2017, the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) filed an application pursuant to s.739 of the Fair Work Act 2009 (the Act) to deal with a dispute in accordance with the dispute settlement procedure in the Kentz Pty Ltd Ichthys Onshore Construction Greenfields Agreement (the Agreement).

[2] On 21 April 2017, the Australian Manufacturing Workers' Union (AMWU) filed an application in substantially similar terms to the application by the CEPU. The CEPU and the AMWU (the Applicants) were granted leave for the matters to be consolidated.

[3] The substantive applications concerned the treatment of the Living Away From Home Allowance (LAFHA) under clause 10.1 of the Agreement for taxation purposes.

[4] Kentz Pty Ltd (the Respondent) has raised a jurisdictional objection to applications, stating that:

(a) The dispute does not relate to a matter arising under the Agreement or the National Employment Standards (NES);

(b) The dispute raises issues of interpretation and application of the Fridge Benefits Tax Assessment Act 1986 (FBT Act) and the Income Tax Assessment Act 1997 (ITAA) which the Commission does not possess the jurisdiction to interpret and apply; and

(c) The orders sought are in excess of the jurisdiction of the Commission. 1

[5] The Applicants submitted that the Commission has jurisdiction where the subject matter of the dispute arises under the Agreement. 2 The Applicants submitted that the applications relate to the interpretation of clause 10.1 and does not require the Commission to exercise power outside of its jurisdiction.

RELEVANT PROVISIONS

[6] Clause 18 of the Agreement provides:

“18.1 Objective of the Dispute Resolution Process

(a) The objective of this procedure is to:

(1) Avoid the escalation of disputes or grievances; and

(2) Provide prompt resolution of issues of concern.

18.2 Steps in the Dispute Resolution Process

(a) Any disagreement or dispute in respect of any matters arising under the Agreement or the National Employment Standards (NES) will be dealt with as outlined in this clause 18.2.

(b) Subject to clause 18.2(c), a disagreement or dispute will be dealt with as follows:

(1) The Employee concerned shall raise the matter with the appropriate team leader for resolution.

(2) If not resolved, the Employee may raise the matter with the supervisor/superintendent of the Employer for resolution.

(3) If the matter remains unresolved, either the Employee or the supervisor/superintendent shall request a formal meeting with the Employer’s most senior manager on the Project Site, or that manager’s representative.

(4) At any stage of this process the Employee may elect to have an Employee representative in attendance.

(5) Once this dispute resolution process has been invoked, both the Employee and the Employer shall attempt in good faith to resolve the issue by utilising the above steps until resolution is achieved. In the event that resolution is not achieved, any party or the Employee may refer the matter to Fair Work Australia for conciliation and/or arbitration.

(6) While the above process is being pursued, work shall continue as normal. Failure to work within the process described in this subclause and/or the failure of any Employee to continue work as normal shall constitute a fundamental breach of the Agreement by the Employee(s) involved.

(c) Any disagreement or dispute relating to demarcation of Employee classifications or scope of work in relation to a matter under clause 23 will be dealt with as follows:

(1) The Party concerned shall informally raise the matter with the appropriate other Party or Parties for resolution.

(2) If not resolved, either Party shall require the other Party or Parties involved in the dispute or disagreement to attend a formal meeting to discuss the dispute.

(3) Any Employees involved in the disagreement or dispute may, at any stage of this process, elect to have an Employee representative in attendance.

(4) Once the Dispute Resolution Process has been invoked, all Parties involved shall attempt in good faith to resolve the issue by utilising the above steps until resolution is achieved. In the event that resolution is not achieved, but only in situations where disagreement or dispute has disrupted or adversely affected the Project or performance of any work on, related to or incidental to the Employer party’s scope of work, any Party may refer the matter to Fair Work Australia for conciliation and/or arbitration.

(d) While the above process is being pursued, work shall continue as normal. Failure to work within the process described in this subclause and/or the failure of any Employee to continue work as normal shall constitute a fundamental breach of the Agreement by the Parties or Employees involved.

(e) Any settlement of a dispute pursuant to this clause shall not vary the terms and conditions contained in this Agreement. It is a condition of employment that no industrial action be taken during the life of the Agreement. Industrial action of any nature will be contrary to the Dispute Resolution Process set out in this clause and a breach of the Agreement.”

[7] Further, clause 10.1 of the Agreement relevantly provides:

“10.1 Living Away From Home Provisions

(a) Subject to the remainder of this clause, Non-Local Employees will be provided with either:

(1) accommodation in the Project-provided village, or if that is unavailable, a motel or hotel style room with meals supplied; or

(2) a Living Away From Home Allowance (LAFHA) of $580.00 per week.

(b) A Non-Local Employee will only be entitled to receive a LAFHA where:

(1) the Employee mobilises his or her partner and/or family to Darwin with the bona fide intention of his or partner and/or family remaining in Darwin for the duration of the Employee’s time on the Project; and

(2) the Employee provides the Employer with a written declaration that the conditions set out in clause 10.1(b)(1) exist; and

(3) the Employer is satisfied, and remains satisfied throughout the period during which the Employee receives the LAHFA, that the Employee is living with his or her partner and/or family in Darwin in accordance with the details set out in the Employee’s declaration; and

(4) the Employer is satisfied, and remains satisfied throughout the period during which the Employee receives the LAHFA, that the accommodation in which the Employee and his or her partner and/or family are residing, is suitable accommodation.

(c) If the Employer becomes aware at any time that any of the conditions in clause 10.1(b)(1)are not satisfied, the Employer may, after giving the Employee reasonable notice, cease providing LAHFA to the Employee.

(d) While an Employee receives a LAHFA in accordance with this clause:

(1) the Employer will reimburse the Employee upon presentation of receipts, the cost of moving personal effects from their Usual Place of Residence to Darwin and back to their Usual Place of Residence, up to a maximum value of $3,500.00, each way; and

(2) the Employee shall not be entitled to reimbursement for demobilisation of personal effects unless their employment with the Employer has lasted for longer than six months from the date on which the Employee was granted the LAHFA, or for a lesser period, should the work for which the Employee was mobilised be completed in less than six months;

(3) the reimbursement referred to in clause 10.1(d)(1) is paid to the Employee in lieu of entitlements to R&R flights, as the Employee now has their family with them in Darwin; and

(4) the Employee will be deemed to be a Local Employee for the purposes of this Agreement, and therefore will not be entitled to benefits such as R&R travel flights.”

[8] Sections 738 and 739 of the Act provide:

“738 Application of this Division

This Division applies if:

(a) a modern award includes a term that provides a procedure for dealing with disputes, including a term in accordance with section 146; or

(b) an enterprise agreement includes a term that provides a procedure for dealing with disputes, including a term referred to in subsection 186(6); or

(c) a contract of employment or other written agreement includes a term that provides a procedure for dealing with disputes between the employer and the employee, to the extent that the dispute is about any matters in relation to the National Employment Standards or a safety net contractual entitlement; or

(d) a determination under the Public Service Act 1999 includes a term that provides a procedure for dealing with disputes arising under the determination or in relation to the National Employment Standards.

739 Disputes dealt with by the FWC

(1) This section applies if a term referred to in section 738 requires or allows the FWC to deal with a dispute.

(2) The FWC must not deal with a dispute to the extent that the dispute is about whether an employer had reasonable business grounds under subsection 65(5) or 76(4), unless:

(a) the parties have agreed in a contract of employment, enterprise agreement or other written agreement to the FWC dealing with the matter; or

(b) a determination under the Public Service Act 1999 authorises the FWC to deal with the matter.

Note: This does not prevent the FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effect as subsection 65(5) or 76(4) (see also subsection 55(5)).

(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.

Note: The FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

(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.

(6) The FWC may deal with a dispute only on application by a party to the dispute.”

SUMMARY OF THE RESPONDENT’S SUBMISSIONS

[9] The Respondent submitted, pursuant to clause 18 of the Agreement, for the Commission to have jurisdiction to determine the dispute, it must be a disagreement about a matter arising under the Agreement or NES; and any settlement of the dispute must not vary the terms of the Agreement. 3

[10] The dispute does not concern the entitlement to receive LAFHA, rather the tax treatment of the entitlement. The Respondent submitted that the Agreement is silent on whether the payment is gross or net of tax; and whether it is treated as a fringe benefit or as income assessed under the ITAA.

[11] The Respondent referred to the decision CEPU & Ors v Laing O’Rourke Australia Construction Pty Ltd where I stated that:

“…in order for the FWC to have jurisdiction in this dispute, the dispute must be about a matter arising under the agreement. If such a dispute exists the jurisdiction exists in accordance with s.738 and s.739 of the FW Act...” 4

[12] It was submitted that “the Agreement does not mention or otherwise deal with the tax treatment of payments, including the LAFHA, there is nothing which the Commission can interpret or apply within the Agreement”. 5

[13] The Respondent submitted that neither the FBT Act nor the ITAA vest jurisdiction in the Commission to determine disputes in relation to issues of taxation. 6 Further, any determination in respect of the treatment of the LAFHA for tax purposes would effectively vary the terms of the Agreement contrary to clause 18.2(e).

SUMMARY OF THE APPLICANT’S SUBMISSIONS

[14] The Applicants submitted that the dispute falls within the purview of s.739 of the Act. Clause 18(2)(a) of the Agreement states that, “any disagreement in respect of any matter arising under the Agreement or the [NES] will be dealt with as outlined in clause 18.2”.

[15] The Applicants submitted that the term “arising under the Agreement” is of “wide import”. 7 The Applicants relied on the decision in Construction, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union (CTH) v Thiess Pty Ltd where it was held that:

“All parties accepted that the phrases “relating to”, “arising out of” and “in connection with” were of wide import. They were correct to do so.

…

The phrase “arising out of” implies “a sense of consequence”: see Government Insurance Office (NSW) v RJ Green & Lloyd Pty Ltd (1966) 114 CLR 437 at 447 (per Windeyer J). It refers to a less immediate association than a direct causal relationship between the dispute or grievance on the one hand and the application and interpretation of the Agreement on the other.”  8

[16] The Applicants further referred to the ordinary principles of interpretation of agreements, 9 and the recent decision of the Full Court of the Federal Court in Construction, Forestry, Mining and Energy Union v Anglo Coal (Callide Management) Pty Ltd where it was held that:

“In the context of clause 16.1 “the application of this Agreement” will occur when a party seeks to bring one of its provisions into use for some purpose. It may also be attracted if one party complains that another has failed to do something which the Agreement required that party to do. The clause will not, however, be engaged unless the association between the grievance and the Agreement is founded on something more substantial than an assertion that it has application. The grievance will not arise out of the application of the Agreement unless it can be said that, on its proper construction, the Agreement has the effect for which the aggrieved person contends.” 10

[17] While that case can be readily distinguished, the Applicants submitted that the phrase, “arising out of the application of this Agreement” is not materially different to the phrase, “arising under the Agreement”. 11

[18] The Applicants submitted that the dispute does not concern whether the Agreement requires tax to be withheld, rather what the Agreement requires to be paid to employees for the entitlement. 12 It was submitted that, for this reason, the dispute arises under the Agreement.

CONCLUSION

[19] I am required to determine whether the Commission has jurisdiction to determine the dispute. The Respondent has relied on the fact that the Agreement does not express how the LAFHA is to be treated for taxation purposes and therefore, that issue does not arise under the Agreement. The Applicants contend that the dispute concerns the amount payable to employees under the Agreement, having regard to the effect of taxation on that amount.

[20] The issue of taxation is intrinsic to any entitlements employees have under any agreement. Having regard to the relevant authorities, there is no explicit requirement that for a dispute to arise under an agreement, it must arise in isolation of any ordinary and sensible considerations. The issue of taxation is such a consideration.

[21] It is not the case that the Commission would be required to make a tax determination outside of its jurisdiction, rather interpret the meaning of the terms of the Agreement to determine the amount payable to employees under clause 10.1. Moreover, such a determination would not alter the terms of the Agreement.

[22] On this basis, the objections in respect of both applications are dismissed.

RECOMMENDATION

[23] For the reasons stated above, I have found that the Commission has jurisdiction to determine the dispute. However, given that the dispute is associated with the issue of taxation, I am minded to propose that the parties approach the Commissioner of Taxation to determine the matter. I am cognisant of the expressed concerns of the applicants that the matter should progress expeditiously given the Respondent’s work on the project site may conclude later this year.

[24] However the approach I suggest would alleviate the possibility of arriving at a decision that may be contrary the views of the Commissioner of Taxation.

[25] I invite the parties to file submissions in respect of this recommendation by no later than 5:00pm Monday 22 May 2017, indicating whether they intend to follow this approach. Following receipt of these submissions, the arbitration date may be adjourned.

COMMISSIONER

 1 Outline of the Respondent’s Submissions dated 3 May 2017 at [5].

 2 Submissions of the Applicants as to Jurisdictional Objection dated 8 May 2017 at [31].

 3 Outline of the Respondent’s Submissions dated 3 May 2017 at [8].

 4   [2016] FWC 3699 at [48].

 5 Outline of the Respondent’s Submissions dated 3 May 2017 at [17].

 6 Ibid at [22].

 7 Submissions of the Applicants as to Jurisdictional Objection dated 8 May 2017 at [10].

 8 (2011) 212 IR 327 at [49] and [51].

 9   See for example City of Wanneroo v Australian Municipal, Administrative, Clerical And Services Union [2006] FCA 813 at [53]; and Kucks v CSR Limited [1996] IRCA 166.

 10 [2015] FCA 696 at [55].

 11 Submissions of the Applicants as to Jurisdictional Objection dated 8 May 2017 at [19].

 12 Ibid at [22].

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