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

[2016] FWC 1671

[2016] FWC 1671

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)
v
Sealed Air Australia Pty Ltd
(C2016/288)

COMMISSIONER CAMBRIDGE SYDNEY, 17 MARCH 2016

Dispute settlement procedure - interpretation of terms of enterprise agreement - disputed terms dealing with entitlements when employees made redundant - whether terms of relevant enterprise agreement obliged payment for period of notice when an employee elects to terminate employment - surrounding circumstances - ambiguity found - interpretation of terms provided.

[1] This Decision is made in respect of an application that was taken under section 739 of the Fair Work Act 2009 (the Act) for the Fair Work Commission (the Commission) to deal with a dispute in accordance with a Dispute Settlement Procedure (DSP). The application was lodged at Sydney on 12 February 2016, and it was made by the "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) (the AMWU), and taken against Sealed Air Australia Pty Ltd (the employer or Sealed).

[2] The Commission is empowered to deal with this matter by virtue of a DSP which is found at Annexure “C” of the Sealed Air Australia Pty Limited (St. Peters Site) AMWU / CEPU NSW - Certified Agreement 2015-2018 (the Agreement).

[3] The dispute was unable to be resolved by conciliation and the matter has proceeded to arbitration involving a Hearing conducted in Sydney on 15 March 2016. The AMWU was represented by Ms L Saunders. Ms Saunders introduced evidence by way of an agreed statement of facts.

[4] The employer was represented by Ms J O’Brien, from The Australian Industry Group. Ms O’Brien called Mr Laurie Vanderlann as a witness, who provided evidence in elaboration of a statement that he had made for these proceedings.

[5] Ms Saunders and Ms O’Brien both made extensive oral submissions in elaboration of documentary material that each had filed on behalf of the respective Parties.

Background

[6] There was essentially no factual contest between the Parties about the circumstances which gave rise to the dispute in this matter.

[7] The employer intends to cease operations at its premises located in the Sydney suburb of St Peters, and to relocate some of the work currently performed in Sydney to Melbourne. Consequently, the employees of Sealed engaged at St Peters will become redundant, and these redundancies are considered to be genuine redundancies within the meaning of s. 389 of the Act.

[8] Sealed has indicated that on or around 18 March 2016, it intends to give notice of termination to the employees who will become redundant at the St Peters site. Sealed intends to require these employees to work out their respective periods of notice rather than making payment in lieu of notice. Sealed has particular production requirements which involve the on-going engagement of the notified, redundant employees prior to the closure of the St Peters site.

[9] The dispute involves a contest as to one particular entitlement which the AMWU asserts should be paid to any employee who decides to leave employment before the expiry of the notice period. All other entitlements, and aspects of the termination of employment due to genuine redundancy, are not in contest.

[10] Consequently, the Parties have agreed that the resolution of the dispute involves the Commission making a determination of the following question:

If an employee who has been given notice of termination due to redundancy elects to leave employment earlier than the date that the notice is to take effect, what payments should Sealed make in relation to the period of notice?

[11] In view of the timeframe involving the anticipated issuing of notices of termination on the basis of redundancy on or around 18 March, the Commission has, at the request of the Parties, provided for an expedited Hearing and determination of the matter. Consequently, this Decision has been abbreviated accordingly.

The AMWU Case

[12] In short summary, the AMWU has asserted that the relevant provisions of the Agreement require Sealed to pay any employee who elects to leave their employment during the notice period, (in addition to all other non-contentious entitlements), an amount equivalent to any remaining period of notice not yet worked, at the time of the termination.

[13] Ms Saunders made submissions which identified the particular contested terms contained in Annexure “A” to the Agreement and in particular, the words contained in clause 10 of Annexure “A” were analysed. Ms Saunders asserted that by way of application of relevant principles for interpretation, these words establish an entitlement for payment of any period of notice remaining at the time of termination of employment.

The Employer’s Case

[14] Ms O’Brien made submissions which rejected the interpretation that was advanced by the AMWU. Ms O’Brien acknowledged that the Parties were broadly agreed on the correct principles which should apply to the contested interpretation of the words contained in clause 10 of Annexure “A” of the Agreement. However, Ms O’Brien said that when properly considered in context, the relevant words did not provide for an entitlement to payment of any period of notice remaining at the time that an employee elected to leave the employment.

[15] The submissions made by Ms O’Brien asserted that the correct interpretation of the contested provisions meant that an employee who elected to leave employment during the period of notice would receive their full severance payment entitlement, as if they had worked to the completion of the notice period, but no further payment in respect to any period after the termination of the employment. In broad terms, Ms O’Brien submitted that the alternative interpretation as was advanced by the AMWU, would, for practical purposes, effectively defeat the giving of notice because an employee could immediately elect to leave, and be paid all of the remaining notice period.

Consideration

[16] The dispute in this instance has involved a contest regarding the correct interpretation or construction that should apply to particular terms of the Agreement.

[17] The approach to resolving questions of contested interpretation/construction of the terms contained in an enterprise agreement has been the subject of an authoritative Decision of a Full Bench of this Commission in the matter of The Australasian Meat Industry Employees Union v Golden Cockrell Pty Limited  1 (Golden Cockerel). Both Parties acknowledged and referred to the Golden Cockrell Decision and in particular, the principles set out at paragraph 41 of that Decision and which, for present purposes, do not require repeating.

[18] Further, the Parties acknowledged the additional guidance provided by, inter alia, firstly; the Full Bench Decision in Essential Energy v Australian Municipal, Administrative, Clerical and Services Union and Others  2 (Essential Energy) and, secondly; the Judgement of Madgwick J in Kucks v CSR Limited 3 (Kucks).

[19] Accordingly, the principles as established by the Full Bench Decisions in Golden Cockerel and Essential Energy have been adopted, and relevantly applied in this instance to the contested construction of the terms of the Agreement. Further, the approach to the interpretation of the terms of the Agreement has been undertaken cognisant of the guidance provided by various Judgments including that in Kucks.

Clauses 2 and 10 of Annexure “A”

[20] It is helpful to set out the particular terms of clauses 2 and 10 of Annexure “A” of the Agreement which are central to the contest that has arisen in this instance. Firstly, clause 2 relevantly states:

“2) PERIOD OF NOTICE

Where an employee is made redundant, payment in lieu of notice shall be made available if the appropriate notice period is not given. The intention is this payment will be made in full from the day of each individual’s formal notification. The employee shall be entitled to the following amount of pay including shift allowance if applicable, in respect of a continuous period of service, at his ordinary rate of pay:

….”

[21] Clause 10 is in the following terms:

“10) TERMINATION DURING NOTICE PERIOD

Employees under formal notice of retrenchment, in accordance with clause 2, may leave at any time during the period of notice and receive their full severance pay entitlement, and period of notice payment, unless otherwise agreed with each individual.”

[22] The contest in this instance has focussed upon the construction that should be given to the words; “and period of notice payment” appearing in clause 10. These words would appear to give rise to an entitlement for an employee, who had been given notice and then decides to leave rather than continue to work out the notice, to receive payment in respect to “a period of notice”. However, upon closer examination it is necessary to contemplate what precisely the “period of notice payment” would entail.

The Question of Ambiguity

[23] The approach to resolving the contested construction question should logically commence with an examination of the relevant words, so as to discern whether or not these words contain some ambiguity. It is well established that the approach to resolving questions of contested construction should focus upon providing the words under examination with their plain and ordinary meaning, unless for some cogent reason such ordinary meaning is inappropriate and unavailable.

[24] During the Hearing, there were three potential alternative prescriptions identified which could be applied to the terminology “period of notice payment” contained in clause 10. Firstly, as was advanced by the AMWU, the “period of notice payment” would be payment for the remaining period of notice. Secondly, as was contended by Sealed, the “period of notice payment” was that period already worked up to the time of termination. A third proposition emerged which involved the full period of the notice, including both any period worked and the remaining period of the notice.

[25] Neither the AMWU nor Sealed supported the third proposition that involved payment in respect to the full period of notice. Upon this construction of the terminology “period of notice payment”, it became readily apparent that an employee could elect to leave on the last day of the period of the notice, and then attract payment for the entire period of the notice. Both Parties considered such an interpretation would provide for an essentially absurd outcome.

[26] Therefore, the contested construction has involved two competing propositions as to the meaning of the words “period of notice payment”, and at least one other alternative for the construction of the contested terms could be identified. Further, when the words “period of notice payment” are considered in the context of the surrounding provisions of the Agreement, they do not provide for a clear and unambiguous meaning, and an ambiguity arises.

Neither Side has a Plausible Practical Construction

[27] When each of the competing constructions for the words “period of notice payment” are carefully examined, neither provides for a practical, realistic interpretation which could, on any proper and objective foundation, be adopted.

[28] If, as was contended by the AMWU, the “period of notice payment” meant the period of notice remaining after the termination, despite the absence of any words such as “remaining” or “residual” or “untaken”, there would be overwhelming prospect that most, if not all employees, would elect to leave as soon as notice was given. Why would you go to work if you could be paid to stay at home or possibly start replacement employment with the redundancy payment in the bank?

[29] Further, upon the construction advocated by the AMWU, the employer would be required to pay for the entire notice period without, in all likelihood, having any work performed for the period of the notice. This represented the realistic outcome if the AMWU was successful.

[30] However, the employer would logically address this circumstance by simply not providing any notice, but instead, make payment in lieu of notice on the last day of the site operation. As was identified during the Hearing, this outcome would give employees a monetary windfall of the notice period payment, but deny employees other benefits such as time off for attending job interviews, and outplacement services.

[31] The AMWU interpretation would also mean that employees would potentially loose their redundancy payment if they had to resign to take up replacement employment. Conversely, if the employees were under notice of retrenchment, they could take up the replacement employment and still receive the redundancy payment.

[32] Practical difficulties similar to those identified with the “AMWU” construction for the words “period of notice payment” in clause 10, can also be recognised with the construction contended for by Sealed. It would be nonsensical to have the terms of the clause provide for payment for a period of time already worked, albeit under formal notice of retrenchment. The words “period of notice payment” could not realistically refer to payment in respect to a period when work was actually performed and for which payment would have already been made.

A Logical Construction via Mistake

[33] During the Hearing, the Parties referred to clause 6 of the Agreement which is titled “RELATIONSHIP TO PARENT AWARD”. Clause 6 essentially operates to incorporate into the Agreement, the terms of the Metal, Engineering and Associated Industries Award 1998 (the Metals Award) and the Graphic Arts General Award 2000 (the Graphic Arts Award) as they were at 1 March 2006, except to the extent where there is any inconsistency between the Agreement and these Awards.

[34] In the course of examining the counterpart provisions contained in sub-clause 4.2.5 (e) of the Graphic Arts Award, an obvious mistake was identified, whereby the word “employer” was used instead of “employee”. (No similar mistake exists in the counterpart provisions of sub-clause 4.4.7 of the Metals Award.) As was discussed during the Hearing, industrial instruments frequently contain errors involving the use of a clearly incorrect word, or even the absence of a particular word which would be necessary to provide for a coherent construction of a particular phrase or sentence.

[35] In the context of the contested construction for the words “and period of notice payment” appearing in clause 10, whereby, neither of the propositions advanced by the respective Parties established a plausible, practical construction, the prospect of a mistake of the nature identified in sub-clause 4.2.5 (e) of the Graphic Arts Award has emerged. Specifically, if the word “not” is introduced after the word “and” and before the word “period”, the sentence then makes sense and provides for a coherent and logical construction.

[36] When the sentence is reconstructed with the addition of the single word “not” before “period of notice payment” the expression which follows these words, namely “unless otherwise agreed with each individual” is then given some obvious work to perform. In this reconstructed sentence, the words “unless otherwise agreed with each individual” specifically refer to the prospect that a particular individual might secure agreement to have some part of the period of notice payment made to them.

[37] The reconstructed sentence with the addition of just the one word “not”, reads coherently and it then provides for all of the words in the sentence to have some work to perform. The sentence would then involve a series of logical operative aspects. The reconstructed sentence then clearly establishes that; employees under notice of retrenchment may leave at any time during the period of notice and receive their full severance pay entitlement, and not period of notice payment, unless an individual negotiated some payment in respect to the period of notice.

[38] The practical circumstances for the exception established by the use of the words “unless otherwise agreed with each individual” might, realistically, involve the employer seeking to delay the departure of a particular individual for part of the remaining notice period, by offering to pay for the entire period. Further, the prospect that there may have been a simple drafting mistake involving the absence of a single word in clause 10 of Annexure “A” is supported by a variety of other examples of imprecise or faulty terminology that can be identified in Annexure “A” 4 and throughout the Agreement generally.

Conclusion

[39] The determination of the dispute in this instance has involved a requirement to settle a contested construction question arising from particular terms contained in the Agreement. The contest has focussed upon the terms contained in clauses 2 and 10 of Annexure “A” of the Agreement. In particular, the Parties advanced competing propositions as to the construction that should be given to the words “and period of notice payment” appearing in clause 10.

[40] The competing propositions for construction of the terms of clause 10 have been evaluated and balanced. The contested terms of the Agreement have been examined having regard for evidence of surrounding circumstances so as to determine whether an ambiguity exists.

[41] Upon analysis, and application of the principles for resolution of questions of contested construction as primarily established by the Golden Cockerel Decision, I have concluded that the disputed terms of the Agreement cannot be given a plain and ordinary meaning, and an ambiguity has been established.

[42] An examination of the competing proposals for the construction of the disputed terms of clause 10, has led to the conclusion that neither of the respective Parties’ propositions established a plausible, practical construction. In the alternative, the proper construction for the disputed terms has involved the identification of a simple drafting mistake concerning the omission of a single word.

[43] Consequently, the Commission has determined that the correct construction for the terms of clause 10 of Annexure “A” of the Agreement, requires the inclusion of the word “not” after the word “and” and before the word “period” so that the relevant part of the clause should read “… and not period of notice payment,…”.

[44] In view of the determination made as to the correct construction and interpretation that should be given to the contested terms of the Agreement, the answer to the question that the Parties have requested the Commission to arbitrate upon, is provided as follows;

In circumstances where an employee has been given notice of termination due to redundancy and then that employee elects to leave employment earlier than the date that the notice is to take effect, Sealed is under no obligation to make any payment to that employee in respect to any period of notice that is not worked.

[45] The dispute is determined accordingly, and the application is dismissed.

COMMISSIONER

Appearances:

Ms L Saunders for the Australian Manufacturing Workers’ Union.

Ms J O’Brien, solicitor for Sealed Air Australia Pty Ltd.

Hearing details:

2016.

Sydney:

March, 15.

 1   The Australasian Meat Industry Employees Union v Golden Cockrell Pty Limited [2014] FWCFB 7447.

 2   Essential Energy v Australian Municipal, Administrative, Clerical and Services Union; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia; The Association of Professional Engineers, Scientists and Managers, Australia [2015] FWCFB 1981.

 3 Kucks v CSR Limited [1996] IRCA 166 (19 April 1996), 66IR182.

 4   See for example, clause 8 of Annexure “A” where the word “is” appears to be missing between the words “penalties” and “to”.

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