Bates and Secretary, Department of Employment
[2016] AATA 577
•5 August 2016
Bates and Secretary, Department of Employment [2016] AATA 577 (5 August 2016)
Division: GENERAL DIVISION
File Number: 2015/3931
Re: LESTER BATES
APPLICANT
And:SECRETARY, DEPARTMENT OF EMPLOYMENT
RESPONDENT
And: PHILOMENA MARIE BATES
PARTY JOINED
DECISION
Tribunal Deputy President S A Forgie
Date 5 August 2016
Place Melbourne
The Tribunal decides:
to affirm the decision of a delegate of the respondent dated 1 July 2015 affirming an earlier decision dated 6 November 2014.
……[sgd]……………….
Deputy President
CATCHWORDS
FAIR ENTITLEMENTS GUARANTEE – employment entitlements - annual leave entitlement – long service leave entitlement – payment in lieu of notice entitlement – redundancy pay entitlement – wages entitlement - basis for calculation of advancements – meaning of ordinary hours of work – whether determined by reference to terms of employment at time of liquidation or whether regard may be had to terms of employment over many years before required by employer to reduce them – determined by reference to employment at time of liquidation – decision affirmed
PRACTICE AND PROCEDURE – INTERPRETATION – Enterprise Agreements – whether enterprise agreements legislative instruments – interpretation of terms of Enterprise Agreement approved by Fair Work Australia.
LEGISLATION
Acts Interpretation Act 1901 ss 19B, 46, 46(1)
Acts and Instruments (Framework Reform) Act 2015 s 3; Item 3, Item 167, Items 168(1) and 168(2) of Schedule 1
Fair Entitlements Guarantee Act 2012 ss 3, 3(1), 5, 6, 6(1), 10, 10(1), 10(2), 11, 12, 13, 20, 21, 22(b), 23(b), 24, 25
Fair Work Act 2009 ss 7(a), 12, 16, 20, 54, 54(1)(a), 182(3), 182(4), 185, 186, 186(1), 187; Item 18; Part 2-2 of Chapter 2Legislation Act 2003 ss 4(1) and 5
Legislative Instruments Act 2003 ss 4(1), 5, 5(1), 5(2)
Taxation Administration Act 1953 Part 2-5 of Schedule 1
Workplace Relations Act 1996 s 567
CASES
Kezich v Leighton Contractors Pty Ltd [1974] HCA 50; (1974) 131 CLR 362; 5 ALR 549; 48 ALJR 423
Catlow v Accident Compensation Commission [1989] HCA 43; (1989) 167 CLR 543; 87 ALR 663; 63 ALJR 619
City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union [2006] FCA 813
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490
Re Bates and Secretary, Department of Employment [2016] AATA 250Toyota Motor Corp Australia Ltd v Marmara [2014] FCAFC 84; (2014) 222 FCR 152
SECONDARY MATERIAL
Black’s Law Dictionary with pronunciations, 5th edition, 1989, West Publishing Company, St Paul
Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
Logic Australia Pty Ltd and National Union of Workers Enterprise Agreement 2010 Clause 17.1, 18, 18.4, 18.5, 18.5(i), 18.6, 18.7, 25.1, 25.2, 25.3
REASONS FOR DECISION
In my earlier decision, I decided that Mrs Philomena Bates should be joined as a party to the proceedings begun when her late husband, Mr Lester Bates lodged an application for review in the Tribunal. Mr Bates sought review of a decision that had been made by a delegate of the Secretary of the Department of Employment (Secretary) on 6 November 2014 and that had been affirmed by the decision of another delegate on 1 July 2015.[1] The decision related to Mr Bates’ entitlements under the Fair Entitlements Guarantee Act 2012 (FEG Act) following the termination of his employment on 27 February 2014[2] when his employer, Logic Australia (Logic), went into liquidation[3] without paying him accrued annual leave, long service leave and redundancy entitlements. The delegate decided that Mr Bates’ entitlement was determined by reference to his wages as a part-time employee at the date of the liquidation and termination of his employment and not a few months earlier when he had been a full-time employee and had been for over 40 years with either Logic or its predecessor, Automotive Components Ltd (ACL). I have decided to affirm the decision of a delegate of the Secretary dated 1 July 2015 affirming an earlier decision dated 6 November 2014.
[1] Re Bates and Secretary, Department of Employment [2016] AATA 250
[2] T documents; T5 at 87
[3] T documents; T4 at 73
THE ISSUES
The essence of the disagreement between Mrs Bates and the Secretary is the rate of pay on which the late Mr Bates’ entitlements have been calculated. On her behalf, her son, Mr Barry Bates, submits that the entitlements should be assessed on the basis of his father’s having been a full-time employee of Logic and of its predecessor, ACL, for the vast majority of his employment with them. Mr Holcombe, submits on behalf of the Secretary that, in assessing his entitlements, regard should be had to Mr Bates’ ordinary hours of employment at the date of the termination of his employment with Logic.
BACKGROUND
Mr Lester Bates was employed as a Senior Rubber Technologist by ACL on 25 February 1971 when he was 23 years of age.[4] Later, he became ACL’s Quality Assurance Manager until that company was sold to Logic Australia on 16 March 2006. Mr Bates’ accrued employee entitlements were transferred to Logic.[5] In May 2013, Logic reduced Mr Bates’ working hours from full time to three days, or 22.8 hours, each week. His hourly rate of pay remained the same.
[4] T documents; T15 at 134 and see also T1 at 21
[5] T documents; T8 at 105 and T9 at 106
Mr Bates was first diagnosed with cancer in 1992. The cancer metastasised and Mr Bates suffered from it and various other ailments in the latter years of his life. He continued working full-time until 2013.[6] In 2013, Logic was experiencing financial difficulties as a result of a drop in sales and asked a number of employees, including Mr Bates, to work reduced weekly hours. At the time, Mr Bates was admitted to hospital for major surgery as part of his treatment for cancer. He remained there for two months before undertaking rehabilitation. I accept Mr Barry Bates’ submission that, due to his very poor state of health at the time, his father did not indicate that he agreed with Logic that his working hours should be reduced. That is consistent with the correspondence between the Department of Employment (Department) and Logic’s liquidator when the liquidator noted that no change of employment had been formally agreed upon. What had happened was that Mr Bates’ weekly hours had been altered in Logic’s books of accounts and records so that they reflected a reduction from 38 to 22.8 hours per week.[7] Between May 2013 and February 2014, Logic paid Mr Bates for 22.8 hours each week that he worked and for the periods of paid leave to which he was entitled. His entitlement to leave was reduced to 1.1754 hours per week in light of the 22.8 hour week he then worked rather than 2.293 hours that Mr Bates would have accrued for working a 38 hour week.
[6] T documents; T1 at 21
[7] T documents; T12 at 122
When Mr Bates lodged a claim under the FEG Act on 25 March 2014, the delegate of the Secretary decided on 6 November 2014 that Mr Bates’ entitlements under the FEG Act amounted to, before tax, $98,834.30.[8] That amount was determined under s 15(2) by reference to unpaid wages, annual leave payments, payment in lieu of notice (PILN), redundancy and long service leave entitlements. Mr Bate’s unpaid entitlements were determined, in turn, by reference to the weekly wage that he had been paid immediately before termination i.e. $707.71. The total sum payable comprised the following amounts:
[8] T documents; T15 at 130-131
Entitlement
Rate of pay
Weeks/years of service
Total
Wages
$707.71
$2,831.08
Annual Leave
$707.71
$401.85
PILN
$707.71
5 weeks
$3,538.55
Redundancy
$707.71
3 weeks x 43.01 (years of service)
$91,315.82
Long Service Leave
$707.71
$747.00
Had Mr Bates been working a 38 hour week in February 2014, his gross weekly wage would have been $1,179.62.
THE SUBMISSIONS
Mr Barry Bates submitted that the “ordinary hours” that his father worked for 98.45% of his time in that employment amounted to 38 hours per week. What is “ordinary” should not be assessed by reference to a single point of time being the date of the termination of employment. On behalf of the Secretary, Mr Holcombe submitted that an employee’s entitlements under the FEG Act could only be calculated by reference to the ordinary hours he or she was working at the time that the employment terminated. He submitted that Mr Bates had agreed to work reduced hours from 10 June 2013.
LEGISLATIVE FRAMEWORK
Objects of the FEG Act
The FEG Act has two main objects. In this case, only the first is relevant. It provides that the legislation is intended:
“to provide for the Commonwealth to pay advances on account of unpaid employment entitlements of former employees of employers in cases where:
(i) the employers are insolvent or bankrupt; and
(ii)the end of the employment of the former employees was connected with that insolvency or bankruptcy; and
(iii)the former employees cannot get payment of the entitlements from other sources; …”[9]
The reference to “employer” includes a former employer.[10]
[9] FEG Act; s 3(1)
[10] FEG Act; s 5
What is an advance?
In the context of the FEG Act, an “advance” means “… financial assistance under this Act on account of employment entitlements.”[11] The expression “employment entitlements” means:
“(a) annual leave entitlement; or
(b)long service leave entitlement; or
(c)payment in lieu of notice entitlement; or
(d)redundancy payment entitlement; or
(e)wages entitlement.”[12]
[11] FEG Act; s 5
[12] FEG Act; s 5
The meaning to be given to each of these entitlements is set out in s 6.[13] That section begins with a general statement in s 6(1) that:
[13] FEG Act; s 5
“This section defines the various kinds of employment entitlements of a person whose employment by an employer has ended, by reference to the person’s entitlements under the governing instrument for the employment.
Note: Part 3 may affect the calculation of the person’s employment entitlements for the purposes of working out the amount of an advance the person is eligible for.”
A “governing instrument for employment”:
“… means any of the following that governs the employment:
(a)a written law of the Commonwealth, a State or a Territory;
(b)an award, determination or order that is made or recorded in writing;
(c)a written instrument;
(d)an agreement (whether a contract or not).”[14]
[14] FEG Act; s 5
Mr Bates’ claim relates to five entitlements: annual leave entitlement, payment in lieu of notice entitlement, redundancy pay entitlement and long service leave entitlement. Those entitlements are defined in s 6:
“Annual leave entitlement
(2)The person’s annual leave entitlement is the amount the person is entitled to under the governing instrument from the employer for paid annual leave that the person:
(a)had accrued at the end of the employment; and
(b)had not taken by then.”
Long service leave entitlement
(3)The person’s long service leave entitlement is the amount the person is entitled to under the governing instrument from the employer:
(a)for long service leave that person had accrued at the end of the person’s employment and had not taken by then; or
(b)on account of long service leave that, had the person’s employment continued until the person qualified for long service leave, would have been attributable to the period before the actual end of the person’s employment.
Payment in lieu of notice entitlement
(4)The person’s payment in lieu of notice entitlement is the amount the person is entitled to under the governing instrument from the employer for a shortfall in the period of notice of termination of the employment.”
Redundancy pay entitlement
(5)The person’s redundancy pay entitlement is the amount of redundancy pay the person is entitled to under the governing instrument from the employer for termination of the employment.
Wages entitlement
(6)The person’s wages entitlement is the amount of wages the person is entitled to under the governing instrument from the employer for work done, or paid leave taken, in the wages entitlement period.”
Eligibility for an advance
Section 10 of the FEG Act sets out the basic conditions of eligibility for an advance. Sections 11, 12 and 13 qualify those conditions by excluding certain groups of persons from eligibility. Mr Bates did not fall within any of those excluded groups. In so far as the basic conditions of eligibility are concerned, he must meet the general conditions in s 10(1). Those in s 10(2) are not relevant as Mr Bates was not employed by a partnership. Those specified in s 10(1) are:
“A person is eligible for an advance if the Secretary is satisfied of all of the following:
(a)the person’s employment by a particular employer has ended;
(b)after the commencement of this section, an insolvency event happened to the employer;
(c)the end of the employment:
(i)was due to the insolvency of the employer; or
(ii)occurred less than 6 months before the appointment of an insolvency practitioner for the employer; or
(iii)occurred on or after the appointment of an insolvency practitioner for the employer;
(d)the person is (or would, apart from the discharge of the bankruptcy of the employer, be) owed one or more debts wholly or partly attributable to all or part of one or more employment entitlements;
(e)the person has taken steps, so far as reasonable, to prove those debts in the winding up or bankruptcy of the employer;
(f)if the person was owed any of those debts before the insolvency event happened, the person took reasonable steps before that event to be paid those debts;
(g)when the employment ended, the person was an Australian citizen or, under the Migration Act 1958, the holder of a permanent visa or a special category visa;
(h)an effective claim (see section 14) that the person is eligible for the advance has been made to the Secretary by or on behalf of that person.”
Amount of an advance
I am limited by the terms of the FEG Act in deciding whether Mr Bates is entitled to an advance and the amount of any advance. It is clear from its provisions that it is not intended to indemnify an employee for all the entitlements he or she would have been paid had the employer given the employee notice of the termination of employment in the normal course of business.
The general rules governing the way in which a person’s various entitlements are calculated are set out in ss 20 to 24 of the FEG Act. The basic amount for a person’s wages entitlement is his or her wages entitlement less any amount required to be withheld under Part 2-5 of Schedule 1 to the Taxation Administration Act 1953 i.e. the Pay As You Go or PAYG withholdings.[15] The basic amount of a person’s annual leave entitlement and long service leave entitlements for his or her employment by an employer is so much of the entitlement as is not a cost of the winding up or bankruptcy of the employer.[16]
[15] FEG Act; s 24
[16] FEG Act; s 20 and 21
Subject to a qualification, the same is true of the basic amount for a person’s PILN and redundancy pay entitlements. The qualification is that each is subject to a maximum number of weeks for which the entitlement is payable. In the case of PILN, the maximum number of weeks is five.[17] In relation to redundancy pay, the basic amount is so much of the entitlement as is not a cost of winding up or bankruptcy of the employer and:
“does not exceed the total of:
(i)4 weeks’ pay (at the rate relevant to working out that entitlement) for each full year of the person’s service with the employer for which the employer was required to pay redundancy pay by the governing instrument for that employment; and
(ii)If that instrument requires payment of redundancy pay for a proportion of a year (less than a full year) of the person’s service with the employer – that proportion of 4 weeks’ pay (at the rate relevant to working out that entitlement).”[18]
[17] FEG Act; s 22(b)
[18] FEG Act; s 23(b)
Subdivision C of Division 2 of Part 3 of the FEG Act qualifies what would otherwise be the basic amounts of an employment entitlement in certain circumstances. Those circumstances did not arise in Mr Bates’ case.
THE GOVERNING INSTRUMENT FOR MR BATES’ EMPLOYMENT
It is apparent from the structure of the FEG Act that it provides for the Commonwealth to pay advances of unpaid employment entitlements where the end of the employment relationship between employer and employee was connected with the employer’s insolvency or bankruptcy and former employees cannot recover their unpaid entitlements from other sources. When s 3 of the FEG Act sets out its objects and refers to employees’ entitlements, it is not speaking of employees’ entitlements that have arisen at any time during the period of the employment relationship. As is clear from the summary of the legislative provisions that I have already set out, the term “employment entitlement” is limited to five types of entitlement. Each type is then defined in s 6 and each definition prescribes the amount of the relevant entitlement by reference to the governing instrument. The FEG Act sets limits on those amounts in the case of PILN and redundancy pay entitlements but not on the manner in which those entitlements are determined under the governing instrument.
General terms
The Logic Australia Pty Ltd and National Union of Workers Enterprise Agreement 2010 (Logic Enterprise Agreement) was the Governing Instrument relating to Mr Bates’ employment. Clause 17.1 of that agreement set out the notice that Logic was required to give an employee in order to terminate his or her employment. In the case of an employee, such as Mr Bates, who had more than five years of continuous service, Logic was required to give four weeks’ notice. For those employees over the age of 45 years of age, the entitlement included an additional week if they had rendered not less than two years’ continuous service. As Mr Bates was over 45 years of age at the time of the termination of his employment, he was entitled to that additional week making his overall entitlement five weeks’ pay at the rate relevant to working out his entitlement. An overall entitlement of five weeks accords with the entitlement provided for in s 22(b) of the FEG Act. Putting aside the issue of the appropriate rate of pay, that is the basis on which the delegate of the Secretary calculated Mr Bates’ entitlement.
As for redundancy, the Logic Enterprise Agreement provides that an employee was entitled to three weeks’ pay for each completed year of service together with an additional pro rata amount of each three week period for an uncompleted year.[19] The amount is not subject to a cap. It is in addition to accrued annual leave and long service leave and unused personal or carers’ leave. Clause 18.5 provides that “A weeks pay is the employee’s base rate of pay for his or her ordinary hours of work.” Again, this entitlement accords with that provided for in s 23(b) of the FEG Act.
[19] Logic Enterprise Agreement; cl 18.5(i)
The issue in both instances is what is meant by the expression “ordinary hours of work”. It is not defined in the Logic Enterprise Agreement. That agreement does prescribe that the number of hours to constitute “an ordinary week’s work” shall be 38.[20] Ordinary hours of work are to be worked between 6:00am and 6:00pm from Monday to Friday.[21] An employee may elect, with the consent of Logic, to take time off ordinary hours and work those hours at a later time, during the spread of ordinary hours at the ordinary rate of pay.[22] These clauses tend to suggest that the ordinary hours of work are 38 hours a week or full‑time but it is clear from cl 16 that there were five bases on which an employee might be engaged by Logic. Among them, is regular part-time employment:
“A regular part-time employee is an employee who
a)works less than full-time hours of 38 per week;
b)has reasonably predictable hours of work; and
c)receives, on a pro-rata basis, equivalent pay and conditions to those of full‑time employees who do the same kind of work.”[23]
[20] Logic Enterprise Agreement; cl 25.1
[21] Logic Enterprise Agreement; cl 25.2
[22] Logic Enterprise Agreement; cl 25.3
[23] Logic Enterprise Agreement; cl 16.3
The nature of Mr Bates’ employment
The terms on which Mr Bates was employed arise from an agreement between him and, in the first instance, ACL, and later, between him and Logic. I accept that Mr Bates never expressly agreed to his being engaged on reduced hours by Logic but that does not mean that he cannot, or should not, be taken as having entered an agreement with Logic to work those reduced hours. His actions in accepting those hours and the reduced payment can be taken as implied acceptance of those terms. There is no evidence that counteracts his acceptance. Certainly, he was unquestionably very ill and incapacitated when Logic first reduced the basis on which it would engage him and it is to be expected that he was not in a position to argue with them. During the subsequent nine months, however, he did nothing to indicate that he did not agree and, by accepting the reduced wages, indicated that he agreed, albeit unwillingly to work for Logic on reduced hours and commensurately reduced pay. Therefore, I find that the basis on which Mr Bates was employed when Logic went into liquidation was that he was a regular part-time employee i.e. he worked fewer than full-time hours but had predictable hours of work (being 22.8 hours each week) and received proportionately less pay and conditions than he would have received as a full-time employee.
Interpretation of the Logic Enterprise Agreement
Mr Holcombe referred me to the cases of Kezich v Leighton Contractors Proprietary Limited[24] (Kezich) and Catlow v Accident Compensation Commission[25] (Catlow) regarding the meaning of terms such as “ordinary hours”. Kezich required the High Court to consider the meaning of an “ordinary wage or salary”. In Catlow, it considered the meaning of the expression “normal number of hours per week”. Mr Barry Bates submitted that those expressions were considered in a worker’s compensation context and not that of the Logic Enterprise Agreement.
[24] [1974] HCA 50; (1974) 131 CLR 362; 5 ALR 549; 48 ALJR 423; Menzies, Gibbs, Stephen and Mason JJ
[25] [1989] HCA 43; (1989) 167 CLR 543; 87 ALR 663; 63 ALJR 619; Deane, Dawson and McHugh JJ; Brennan and Gaudron JJ dissenting
If the Logic Enterprise Agreement were part of the FEG Act, I would agree with Mr Barry Bates without further thought. I would do so because, to adopt the words of Brennan and Gaudron JJ in Catlow, I do not:
“… think that interpretations placed by tribunals and courts on words found in a different statutory context can be of much assistance in the interpretation of the critical phrases …”.[26]
[26] [1989] HCA 43; (1989) 167 CLR 543; 87 ALR 663; 63 ALJR 619 at 550; 668; 622
Although in dissent in that case, their Honours’ approach is consistent with the approach explained by McHugh, Gummow, Kirby and Hayne JJ in their joint judgment Project Blue Sky Inc v Australian Broadcasting Authority:[27]
“ The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute ... The meaning of the provision must be determined ‘by reference to the language of the instrument as a whole’ ... In Commissioner for Railways (NSW) v Agalianos ..., Dixon CJ pointed out that ‘the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed’. Thus, the process of construction must always begin by examining the context of the provision that is being construed ...
A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals ...”[28]
[27] [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490; McHugh, Gummow, Kirby and Hayne JJ; Brennan CJ dissenting
[28] [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490 at [69]- [70]; 381-382; 855; 509
The Logic Enterprise Agreement is not the FEG Act and nor, on its face, is it a piece of legislation. That, however, does not resolve how I am to approach its interpretation. An Enterprise Agreement must be submitted for approval by the Fair Work Commission (FWC) under ss 182(4) or 185 of the Fair Work Act 2009 (FWA). The FWC must approve it if the requirements set out in ss 186 and 187 are met.[29] In the case of the Logic Enterprise Agreement, an application for approval was made under s 185 and approved by the FWC under s 54 on 8 December 2010. Approval of the Logic Enterprise Agreement did not equate with the FWC’s making the agreement. The agreement, which was a single‑enterprise agreement, was made when it was signed by on behalf of Logic and on behalf of the National Union of Workers.[30] It came into operation on 15 December 2010 and so seven days after approval by the FWC.[31]
[29] FWA; s 186(1)
[30] FWA; s 182(3)
[31] FWA; s 54(1)(a)
In that sense, an Enterprise Agreement appears to have the hallmarks of a legislative instrument within the meaning of s 5 of the Legislative Instruments Act 2003 (LI Act) as it was known and as it was drafted when the Logic Enterprise Agreement was made. The name was changed to the Legislation Act 2003 by the Acts and Instruments (Framework Reform) Act 2015[32] (AIFR Act), which also made substantial amendments to the LI Act. Of particular significance in this case are the amendments made to the definition of a “legislative instrument” in ss 4(1) and 5. They are made by s 3 and Schedule 1 of the AIFR Act and came into effect on 5 March 2016. Item 167 of Schedule 1 provided that, subject only to the enactment itself, the amendments made by the Schedule apply in relation to an instrument made before, on or after its commencement.
[32] AIFR Act; s 3, Schedule 1, Item 3
Item 168 is concerned with the status of an instrument made before the commencement of Schedule 1 to the AIFR Act. As the Logic Enterprise Agreement has not been registered but was made in 2010 and so before the AIFR Act came into operation, I will set out only the first two sub-clauses of Item 168:
“Status of legislative instruments
(1)An instrument made before the commencement of this Schedule that was a legislative instrument under the Legislative Instruments Act 2003 is taken to continue to be a legislative instrument on and after that commencement despite the amendments of that Act made by Part 1 of this Schedule.
Status of non-legislative instruments
(2)An instrument made before the commencement of this Schedule that was not a legislative instrument under the Legislative Instruments Act 2003 immediately before the commencement of this Schedule is taken to continue not to be a legislative instrument despite the amendments of that Act made by Part 1 of this Schedule.”
The effect of Item 168(1) and (2) is that, in considering whether an Enterprise Agreement made before the AIFR Act is a legislative instrument, I must have regard to the LI Act before its amendment and name change that took effect from 5 March 2016.
A “legislative instrument” is a written instrument of a “legislative character” that was made, in the sense that it came into operation, by the exercise of a power delegated by the Parliament. Once made, an Enterprise Agreement becomes part of the fabric of laws that regulates the pay and entitlements of Australian workers and with which employers and employees must comply. Other parts include Modern Awards and the National Employment Standards, with which the others must be consistent. This is inherent in Chapter 2 of FWA. In that regard, it is arguable that an Enterprise Agreement is of a legislative character in that, consistently with s 5(2) of the LI Act:
“(a) it determines the law or alters the content of the law, rather than applying the law in a particular case; and
(b)it has the direct or indirect effect of affecting a privilege or interest, imposing an obligation, creating a right, or varying or removing an obligation or right.”
Whether it was made in the exercise of a power delegated by Parliament would depend on whether the FWC could be said to have made it by approving it. I do not need to consider that further for, even if an Enterprise Agreement were a legislative instrument within the meaning of s 5(1) of the LI Act, it was excluded from the scope of the LI Act. Section 7(a) and Item 18 of the FWA provided that “Fair work instruments (within the meaning of the Fair Work Act 2009)” are not legislative instruments for the purposes of the LI Act. Section 12 of the FWA defined a “fair work instrument” in terms that include “an enterprise agreement”.
That does not necessarily mean that there are no rules regarding the interpretation of an Enterprise Agreement but, whether there are, depend on whether it comes within the terms of s 46(1) of the Acts Interpretation Act 1901 (AI Act). That section provides, in part, that:
“If a provision confers on an authority the power to make an instrument that is neither a legislative instrument for the purposes of the Legislative Instruments Act 2003 nor a rule of court, then:
(a)this Act applies to any instrument so made as if it were an Act and as if each provision of the instrument were a section of an Act; …
(b)…
(c)…”
An Enterprise Agreement is an “instrument” in the sense of being a formal or legal written document.[33] The crucial question is whether a provision of, in this case, the FWA confers a power on an authority to make that instrument. The FWC is an “authority” in the sense in which that word is used in the AI Act but the employer and the employees are not. Section 19B of the AI Act makes clear that authorities are those that are part of the machinery of government. The FWC approves an Enterprise Agreement and its approval brings that agreement into operation. It does not, however, make the agreement for the effect of s 182(3) of the FWA is that it is made between the parties and not by the FWC. That does not mean that the FWC does not have a role in ensuring that an Enterprise Agreement complies with the FWA before giving its approval but its approval determines only when an Enterprise Agreement that has already been made comes into operation.
[33] Black’s Law Dictionary with pronunciations, 5th edition, 1989, West Publishing Company, St Paul and see also Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers (Chambers)
The current legislative scheme regarding Enterprise Agreements is to be contrasted with that which previously applied under the Workplace Relations Act 1996 (WR Act) before its repeal. Under that legislative scheme, the Arbitration and Industrial Relations Commission (AIRC) made an award under s 567. It was in this context that French J said in City of Wanneroo v Australian Municipal, Administrative, Clerical And Services Union[34] that s 46 of the AI Act applies to an award made under the WR Act. Under the FWA, the FWC does not make an Enterprise Agreement and therefore, s 46 does not apply. This was the conclusion reached by the Full Court of the Federal Court in Toyota Motor Corporation Australia Limited v Marmara.[35]
[34] [2006] FCA 813
[35] [2014] FCAFC 84; (2014) 222 FCR 152 at [68]; 173;Jessup, Tracey and Perram JJ
The upshot is that I do not approach the interpretation of an Enterprise Agreement as if it were an Act. At the same time, it is part of the regulatory framework established by the FWA and directed to the determination of the mutual obligations of employers and employees. Its terms must accord with the NE Standards. That suggests that there must be a consistency in their interpretation even if the AI Act does not, strictly speaking, apply to the interpretation of an Enterprise Agreement.
Base rate of pay for his or her ordinary hours of work under the Logic Enterprise Agreement
The object of the Logic Enterprise Agreement is, as part of the regulatory framework of the FWA, directed to the determination of the mutual obligations of Logic, as the employer, and its employees in so far as pay and terms and conditions of employment are concerned. It is clear from the terms of the Logic Enterprise Agreement that it is intended to determine those obligations at a particular point in time. I will illustrate this by reference to its provisions relating to redundancy.
I have summarised those provisions as they applied to Mr Bates at [19] above but will now set out them out in a little more detail. Clause 18 of the Logic Enterprise Agreement applies to redundancy but, except in so far as it deals with it, redundancy was in accordance with the National Employment Standards (NE Standards). Those NE Standards are set out in Part 2-2 of Chapter 2 of the FWA and provide the minimum terms and conditions for all national system employees.[36] Provision is made in cl 18 for Logic to hold discussions with the affected employee or employees, the Union and the employees’ nominated employee representative after it had decided that it no longer wished a particular job to be done. Logic was required by cl 18.3 to give details of those employees who would be affected and the time over which the redundancies would occur. Clause 18.5 provided for three weeks’ pay for each completed year of service in the event of redundancy.
[36] The meaning to be given to the words “employer” and “employee” in Part 2-2 are those of “national system employer” and “national system employee”: FWA; s 60 and see s 12. A “national system employer” includes a “constitutional corporation” and so, among others, a trading corporation formed within the limits of the Commonwealth (FWA; s 12. Section 51(xx) of the Commonwealth Constitution applies to a trading corporation formed within the limits of the Commonwealth), so far as it employs, or usually employs, an individual.
Clauses 18.6 and 18.7 of the Logic Enterprise Agreement catered for an employee’s obtaining alternative employment. If an employee were to leave during a period of notice of the termination of employment, his or her entitlements to redundancy payments would not vary. All that would vary would be that he or she would not be entitled to payments in lieu of notice. If Logic had obtained acceptable alternative employment for an employee, it could have approached Fair Work Australia to have the employee’s entitlements under cl 18 varied.
Clauses 18.6 and 18.7 of the Enterprise Agreement point to the operation of cl 18 very much in the present. That would suggest that the base rate of pay for an employee’s ordinary hours of work is a reference to that base rate and those ordinary hours at the time of the redundancy. It would accord with the definition of “base rate of pay” in s 16 of the FWA:
“The base rate of pay of a national system employee is the rate of pay payable to the employee for his or her ordinary hours of work, but not including any of the following:
(a)incentive-based payments and bonuses;
(b)loadings;
(c)monetary allowances’
(d)overtime or penalty rates;
(e)any other separately identifiable amounts.”[37]
[37] FWA; ss 12 and 16
The expression “ordinary hours of work” are defined in the FWA only for award or agreement free employees.[38] Logic’s employees did not come within that category. Therefore, I have turned to the meaning of the expression according to ordinary language. When used as an adjective, as it is the FEG Act, the meanings of the word “ordinary” include:
“… 1 of the usual everyday kind; unexceptional. …”.[39]
[38] FWA; ss 12 and 20
[39] Chambers
Given that meaning, the expression “ordinary hours of work” means the hours of work that were Mr Bates’ usual hours of work at the time that he was made redundant. At the time his employment was terminated, they were 22.8 hours per week and had been for the previous nine months or so. The FWA and the Logic Enterprise Agreement do not make provision for reductions in remuneration that have occurred in the months leading up to an employer’s insolvency. Only when changes have been made that favour an employee in the six months leading up to insolvency will past entitlements come into play and may be disregarded under s 25 of the FEG Act.
I have considered the meaning of “ordinary hours of work” in the context of redundancy entitlements but the situation is no different under any of the other entitlements in relation to which Mr Bates was entitled to an advance under the FEG Act.
An alternative scenario
I include this section of my reasons because Mrs Bates feels that her late husband did not receive all that he was owed by Logic. He was a long-standing and loyal employee who was, I understand, very well-regarded as an innovator in the rubber/cork industry in which he worked as a chemist. Employees of his ilk are to be greatly admired. He accepted payment for fewer hours when he was asked or required to do that by Logic. It is hard to accept that loyalty and dedication can be rewarded with lesser recompense than it might seem to deserve. That said, I am bound by the provisions of the FEG Act and cannot change the amounts of the advances to which Mr Bates was entitled. What I can do is set out the consequences of a couple of other choices that Mr Bates could have made to illustrate that, given the hand that he was dealt, the late Mr Bates made the best choices that he could.
Had Logic terminated Mr Bates’ employment nine or so months earlier rather than reducing his hours, his ordinary hours of work would have been 38 hours per week. His termination payments would have been calculated on the basis of the amount he was paid for a 38 hour week. He would either have worked out the period of notice he was given or he would have been paid in lieu of notice at the rate that he was then paid for the 38 hours that he usually worked each week. All of his entitlements to accrued leave and the like would have been worked out on the same basis. On the evidence, that was not an option offered to Mr Bates.
What Logic offered Mr Bates was that he continue working but at reduced hours of 22.8 hours per week. Had Mr Bates decided not to accept Logic’s decision to reduce his ordinary working hours from full-time to part-time and left Logic’s employment, he would have been entitled to his accrued annual and long service leave. On the evidence, it would seem that he had taken most of that leave and the entitlements would have been relatively small.
There would, however, have been a question whether Mr Bates was entitled to redundancy payments and associated PILN entitlements. The question would have arisen because Logic had, for all practical purposes, brought a contract of full-time employment to an end. How that question would have been answered is not clear for cl 18.4 of the Logic Enterprise Agreement might have had some relevance in reducing any entitlement to redundancy payments.
Had the question been asked and had he been found to be entitled to redundancy payments under cl 18, Mr Bates’ entitlement would have been calculated on the basis of his then usual, or ordinary, hours of work i.e. 38 hours per week. There is, however, a great deal of unknown territory between asking the question and having a positive outcome from Mr Bates’ point of view. Had he decided to ask the question and not take the part-time hours offered by Logic, he could have ended up having the question answered against his interests, no part-time employment with Logic at the time that it went into liquidation and no claim under the FEG Act.
DECISION
For the reasons I have given, I affirm the decision of a delegate of the Secretary dated 1 July 2015 affirming an earlier decision dated 6 November 2014.
I certify that the forty-six preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie.
Signed: ………..............[sgd].........................
Associate
Date of Hearing 13 July 2016
Date of Decision 5 August 2016
Applicant’s representative Mr Barry Bates
Respondent’s solicitor Mr Lex Holcombe
HWL Ebsworth Lawyers
9
8