BM & KA Group as trustee for BM & KA Group Unit Trust

[2013] FWC 3654

[2013] FWC 3654

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185—Enterprise agreement

BM & KA Group as trustee for BM & KA Group Unit Trust
(AG2013/4567)

COMMISSIONER CRIBB MELBOURNE, 6 JUNE 2013

Application to approve the BM & KA Group Enterprise Agreement 2013.

[1] This decision concerns an application by BM & KA Group as trustee for BM & KA Group Unit Trust (the Applicant), under section 185 of the Fair Work Act 2009 (the Act), for approval of the BM & KA Group Enterprise Agreement 2013 (the proposed Agreement).

[2] The application has been the subject of detailed correspondence between the Fair Work Commission and the Applicant’s representative regarding issues arising out of sections 185 and 186 of the Act. Undertakings have been subsequently provided by the employer and the Commission is satisfied that all but one of the requirements of sections 186 and 187 of the Act have been met. The Commission is also satisfied that the requirements of sections 186(2)(a), (b) and (d); 186(3), (4), 4(A); s.186(5) and (6) and 187(2) and (4) have been met.

[3] The remaining requirement, that the Commission is not satisfied has been met, is section 186(2)(c). Specifically, the Commission is concerned that clause 32 of the proposed Agreement contravenes section 55 of the Act. This section deals with the interaction between the National Employment Standards (NES) and enterprise agreements.

[4] The matter was listed for hearing on 23 May 2013. Mr C O’Grady, of Counsel, appeared on behalf of the Applicant. He provided written 1 and oral submissions, which addressed the concerns raised by the Commission regarding clause 32 of the proposed Agreement.

Clause 32 of the proposed Agreement

[5] It was argued by the Applicant that clause 32 of the proposed Agreement is not a term providing for the cashing out of leave. This was because, inherent in the concept of “cashing out” was the foregoing of an accrued entitlement in consideration for a monetary payment. 2 Rather, clause 32 was said to provide for the “pre-payment” of moneys potentially payable in respect of leave, together with the absence of any requirement to repay those moneys in the event that the leave is not taken. The entitlement is therefore not foregone or reduced as the employee remains entitled to take leave and be absent from work, albeit on the basis that payment for such leave will have already been made - through pre-payment rather than at the conclusion of the pay period.3

[6] Further, it was contended that the clause provides that an employee will have a choice about whether or not to be paid the loaded wage rate. Mr O’Grady stated that the clause also contained mechanisms to ensure that any difference in the timing between when the loading is paid and when the leave is taken does not disadvantage the employee. 4

The legal cases

[7] The Applicant indicated that it was accepted that there is a tension between the observations made in Construction, Forestry, Mining and Energy Union v Jeld-Wen Glass Australia Pty Ltd 5 (Jeld-Wen) and the reasoning of the majority in Hull-Moody Finishes Pty Ltd6 (Hull-Moody).7 Given the apparent tension between the decision of a Federal Court Judge at first instance and a decision of a Full Bench of the Commission, which appeared to be directly on point, it was submitted that it was important to precisely ascertain what was decided in the respective decisions.8

Jeld-Wen case

[8] With regard to the Jeld-Wen decision, the Applicant contended that:

• Jeld-Wen did not concern the approval of an enterprise agreement or the operation of section 186 of the Act. 9 Rather, the question was whether the operation of the Fair Work Transitional Provisions and Consequential Amendment Act meant that Australian Workplace Agreements (AWA) were to be read as if they incorporated the NES. Further, the case dealt with whether or not the payments that were contemplated are, in the pre-payment provisions, breaching the NES, which contain various stipulations with respect to cashing out of personal leave.10 The issue was said to have been about whether paying the additional loading was in breach of the cashing-out provisions of the NES. This was on the basis that a separate written agreement had not been obtained and that the employer did not ensure that there was the minimum retention of leave required by the NES.11



• Even though Jeld-Wen was brought as a breach proceeding, it was stated that there was no suggestion that any employee had sought to take personal leave and had not received payment in respect of it. 12 Further, the Applicant argued that a proportion of what His Honour decides was not necessary and so could be properly characterised as obiter dicta.13 However, it was accepted that His Honour’s observations in paragraphs 27 and 28 of his decision tend against the approach adopted in Hull-Moody.14

[9] Mr O’Grady stated that Jeld-Wen turned on the second point. He highlighted Gray J’s determination that Jeld-Wen had not contravened any obligations it owed in respect of Mr de Thierry’s personal/carer’s leave and that His Honour had dismissed the application for penalties. Reference was also made to Gray J’s decision that there had been no contravention of the individual agreement because Mr de Thierry did not take any of the paid personal/carer’s leave to which he was entitled so no occasion arose for making any payment to him. 15

[10] Further, it was noted that Jeld-Wen was handed down on 6 February 2012 and the Hull-Moody decision on 29 November 2011. The Applicant argued that, if Justice Gray had intended to suggest that the approach offered by the majority of the Full Bench in Hull-Moody was incorrect or could no longer be applied in light of his reasoning in Jeld-Wen, His Honour would have dealt with the Full Bench’s reasoning. This was not done. 16

[11] Finally, Mr O’Grady submitted that the proper characterisation of Jeld-Wen is that what His Honour was determining was whether the breach contended by the CFMEU was made out. The Judge held that it was not. 17

Hull-Moody case

[12] With respect to the Hull-Moody decision, Mr O’Grady argued that the Full Bench saw themselves as providing guidance and certainty to the Commission as to how the issue of the prepayment of leave was to be dealt with when determining whether or not to approve an enterprise agreement. 18 It was stated that the majority decided that, with the pre-payment of annual leave, employees do not lose an entitlement to take leave nor payment with respect to leave that they take or that is untaken on the termination of their employment. Further, the majority determined that employees receive payment in respect of their leave entitlements at the time the entitlement arises. Because they have already been paid for leave at the time it accrues, they do not receive any payment at the time they take their leave.19

[13] Finally, it was submitted that the Commission was under a clear duty to follow the approach outlined in Hull-Moody. Reference, in this regard, was made to the Full Bench decision 20 in Pacific Access Pty Ltd v CPSU.21 The Applicant argued that there was nothing in Jeld-Wen that relieved the Commission of its duty to follow Hull-Moody even when a member of the Commission feels that the Full Bench decision is wrong.22

[14] Mr O’Grady argued further that, where there is a case dealing with a different type of application, albeit with pertinent observations made, which is inconsistent with a decision of a Full Bench of the Commission which is right on point, the authorities make it clear that the Commission is to apply the Full Bench’s determination. 23

Considerations and Conclusions

[15] As has been set out above, the Applicant distinguished between the Jeld-Wen decision and the Hull-Moody decision on the basis that:

• The Jeld-Wen case was concerned with a different matter to that in Hull-Moody.



• The Jeld-Wen decision determined whether or not there was a breach of the enterprise agreement by the incorporation of payments in respect of personal leave.



• In Jeld-Wen, the Judge was not asked to determine whether an enterprise agreement, in the terms of the AWA, could have been approved by the Commission.



• Hull-Moody was right on point with the current application as it was concerned with whether a provision in an enterprise agreement providing for the prepayment of leave means that the agreement cannot be approved pursuant to section 186(2).



• The majority of the Full Bench in Hull Moody saw themselves as providing guidance and certainty to the Commission on the issue of prepayment of leave.

[16] In essence, the Applicant submitted that the appropriate course of action was for the Commission to apply Hull-Moody. This was on the basis of the differences between the applications that were being considered in the two cases; that the observations of Gray J were obiter dicta and that the majority in Hull-Moody were clearly trying to set out the approach in these types of applications.

[17] Further, it was contended that the Commission has a duty to follow the decision in Hull-Moody as it is the relevant Full Bench decision on the issue of pre-payment of leave provision in an enterprise agreement.

[18] The clause at issue is clause 32 of the proposed BM & KA Group Enterprise Agreement 2013. It is as follows:

“32. PAYMENT OF ANNUAL LEAVE AND PERSONAL LEAVE AS LOADED WAGE RATE

By agreement between an Employee and the Employer, all paid annual leave and paid personal leave provided for in this Agreement may be paid as a Loaded Wage Rate, in accordance with the following conditions:

32.1. The Employee's Loaded Wage Rate is inclusive of an additional loading representing a prorate payment of the entitlement to annual leave and personal leave;

32.2. The Employee will still accrue a pro-rata entitlement to take annual leave and personal leave, however, when such annual leave or personal leave is taken it will be unpaid; and

32.3. If the Employee's Loaded Wage Rate increases after the Employee has received payment of unused accrued annual leave and personal leave, but before the Employee takes such annual leave or personal leave, the Employer will, at the time such unpaid annual leave or personal leave is taken, pay to the Employee an amount equal to the difference between:

(a) The former pro-rata payment of the Employee's entitlement to annual leave or personal leave; and

(b) The new pro-rata payment of the Employee's entitlement to annual leave or personal leave;

32.4. Any Overtime loadings payable pursuant to Clause 18, pro rata long service leave on termination pursuant to Clause 36,payment in lieu of notice of termination payable pursuant to Clause 44.2or severance pay payable pursuant to Clause 47, shall be calculated with reference to the respective Ordinary Wage Rate exclusive of any loading for annual leave and personal leave.”

[19] The National Employment Standards set out the entitlements for annual leave and personal / carer’s leave at Division 6 and Division 7 respectively of Chapter 2 Part 2-2 of the Act. With respect to the entitlement to annual leave, section 87(1) provides as follows:

“87 Entitlement to annual leave

Amount of leave

(1) For each year of service with his or her employer, an employee is entitled to:

(a) 4 weeks of paid annual leave; or

(b) 5 weeks of paid annual leave, if:

(i) a modern award applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(ii) an enterprise agreement applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(iii) the employee qualifies for the shiftworker annual leave entitlement under subsection (3) (this relates to award/agreement free employees).

Accrual of leave

(2) An employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

Award/agreement free employees who qualify for the shiftworker entitlement

(3) An award/agreement free employee qualifies for the shiftworker annual leave entitlement if:

(a) the employee:

(i) is employed in an enterprise in which shifts are continuously rostered 24 hours a day for 7 days a week; and

(ii) is regularly rostered to work those shifts; and

(iii) regularly works on Sundays and public holidays; or

(b) the employee is in a class of employees prescribed by the regulations as shiftworkers for the purposes of the National Employment Standards.

(4) However, an employee referred to in subsection (3) does not qualify for the shiftworker annual leave entitlement if the employee is in a class of employees prescribed by the regulations as not being qualified for that entitlement.

(5) Without limiting the way in which a class may be described for the purposes of paragraph (3)(b) or subsection (4), the class may be described by reference to one or more of the following:

(a) a particular industry or part of an industry;

(b) a particular kind of work;

(c) a particular type of employment.”

[20] Sections 88 - 94 provide further provisions regarding paid annual leave.

[21] In terms of personal / carer’s leave, section 96 of the Act states:

“96 Entitlement to paid personal/carer’s leave

Amount of leave

(1) For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave.

Accrual of leave

(2) An employee’s entitlement to paid personal/carer’s leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.”

[22] Subsequent provisions for paid personal / carer’s leave are at sections 97 - 101 of the Act. Sections 102 and 103 deal with unpaid carer’s leave.

[23] Therefore, it can be seen from paragraphs 20 to 22 above, the NES provides an entitlement to either 4 weeks or 5 weeks of paid annual leave. Similarly, the NES provides an entitlement to 10 days of paid personal / carer’s leave.

[24] The proposed Agreement, at clause 32.3 provides that “...when such annual leave or personal leave is taken it will be unpaid...”

[25] The decision in Jeld-Wen was made by a single Judge of the Federal Court after the decision of the majority in Hull-Moody. In Jeld-Wen, Gray J deals with the entitlement to paid personal / carer’s leave and recognises the entitlement in section 96 of the Act as not just an entitlement to personal / carer’s leave but an entitlement to paid personal / carer’s leave. His Honour regards the term “paid personal / carer’s leave” in section 96 as a composite term.

[26] As His Honour says:

“The question, therefore, is whether the payment of an additional 1.5 hours’ pay each week amounted to cashing out of Mr de Thierry’s paid personal / carer’s leave” 24 (emphasis added)

[27] There are further references to the composite term in paragraphs 18 - 19 and 21 of Jeld-Wen.

[28] The majority in Hull-Moody does not appear to have considered that the term “paid annual leave”, in section 87 of the Act, is a composite term. The Hull-Moody decision refers to “annual leave” and “leave’ but not to “paid annual leave.” For example:

• “In our view the concept of cashing out on entitlement to annual leave...” 25



• “Under the Agreement in this matter employees do not lose an entitlement to take leave.” 26



• “Employees under the Agreement can take leave as provided in the NES...If they do not take leave it will accrue until they subsequently take it.” 27



• “As the amount of leave available to be taken...” 28



• “We find that the payment arrangement in the Agreement does not exclude the NES because the NES is expressly adopted, each of the annual leave benefits in the NES are reflected in the Agreement...” 29

[29] In the circumstances, I am satisfied that I should follow the approach of His Honour, Gray J, in Jeld-Wen and that I am not bound to apply the majority in Hull-Moody. The entitlement in section 87 of the Act is not to annual leave, but it is to paid annual leave.

[30] Therefore, I find that clause 32 of the proposed Agreement, by only providing for unpaid annual leave and unpaid personal / carer’s leave, excludes the NES entitlement to paid annual leave and paid personal / carer’s leave, in contravention of section 55 of the Act. I note that section 102 of the Act provides an entitlement to unpaid personal / carer’s leave which is consistent with the notion that “paid personal / carer’s leave”, in section 96 of the Act, is a composite term.

[31] Section 55 of the Act requires that the Commission must be satisfied that the terms of the agreement do not contravene section 55. I am not so satisfied.

[32] The Act provides, at sections 190(1)(b) and (c) that, if the Commission has a concern that the agreement does not meet the requirements set out in sections 186 and 187, the Commission may approve the agreement if satisfied that an undertaking accepted by the Commission meets the concern.

[33] Accordingly, the Commission may be prepared to accept an undertaking to the effect that, when an employee takes annual leave or personal / carer’s leave, they will be paid at their base rate of pay. This is the applicable Ordinary Wage Rate in the Minimum Wage Schedules of the proposed Agreement.

[34] The Commission is to be advised by Friday, 14 June 2013, as to whether the employer wishes to provide such an undertaking.

COMMISSIONER

Appearances:

Mr C O’Grady of Counsel for the Applicant

Hearing details:

2013.

Melbourne:

May 23.

 1   Exhibit A1

 2   Ibid at paragraph 6

 3   Ibid at paragraphs 6 - 7 and Transcript PN 15 - 16

 4   Ibid at paragraph 8 and ibid PN 17

 5 [2012] FCA 45

 6   [2011] FWAFB 6709

 7   Exhibit A1 at paragraph 9 and Transcript PN 18 and 28

 8   Ibid

 9   Exhibit A1 at paragraph 9(a) and Transcript PN 12 and 19

 10   Transcript PN 19 and 42

 11   Ibid PN 20

 12   Ibid PN 43 and Exhibit A1 at paragraph 9(b)

 13   Ibid PN 42, 45 - 46 and 48 and ibid

 14   Ibid PN 44 and 50

 15   Ibid PN 44 and Exhibit A1 at paragraph 9(c)

 16   Ibid PN 52 - 56 and ibid at paragraph 9(d)

 17   Ibid at paragraph (9)(e)

 18   Ibid at paragraphs 28(g) - (h) and Transcript PN 58 - 59

 19   Ibid at paragraph 28(h)

 20 (1998) 83 IR 323

 21   Exhibit A1 at paragraph 10 and Transcript PN 13, 31 and 59 - 60

 22   Ibid at paragraph 11

 23   Transcript PN 34 - 41 and 57

 24   Construction, Forestry, Mining and Energy Union v Jeld-Wen Glass Australia Pty Ltd [2012] FCA 45, [2] (emphasis added).

 25   Hull-Moody Finishes Pty Ltd [2011] FWAFB 6709, [38].

 26   Ibid, [39].

 27   Ibid, [40].

 28   Ibid, [43].

 29   Ibid, [44].

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