Carmody and Secretary, Department of Employment
[2016] AATA 191
•31 March 2016
Carmody and Secretary, Department of Employment [2016] AATA 191 (31 March 2016)
Division
GENERAL DIVISION
File Number
2014/5514
Re
Reginald Carmody
APPLICANT
And
Secretary, Department of Employment
RESPONDENT
DECISION
Tribunal Deputy President F J Alpins
Date 31 March 2016 Place Melbourne The decision under review is affirmed.
[sgd]........................................................................
Deputy President F J Alpins
EMPLOYMENT ENTITLEMENTS – Fair Entitlements Guarantee Act 2012 (Cth) – amount of advance – redundancy pay entitlement – whether includes amount of accrued personal leave payable on termination of employment under enterprise agreement – meaning of “redundancy pay” – principles of interpretation applicable to industrial agreements
Legislation
Fair Entitlements Guarantee Act 2012 (Cth) ss 3, 4, 5, 6, 10, 15, 16, 23, 38, 39, 40
Fair Work Act 2009 (Cth) ss 55, 61, 95-101, 119
Cases
Amcor Limited v CFMEU (2005) 222 CLR 241
Australian Nursing and Midwifery Federation v Eastern Health [2013] FCAFC 137
Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Qantas Airways Ltd (2001) 106 IR 307
Chan v Cresdon Pty Ltd (1989) 168 CLR 242
City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (2006) 153 IR 426
City of Wanneroo v Holmes (1989) 30 IR 362
Commonwealth v Baume (1905) 2 CLR 405
Gibb v Federal Commissioner of Taxation (1966) 118 CLR 628
James Cook University v National Tertiary Education Union [2014] FCA 1213
Kelly v R (2004) 218 CLR 216
Lennon v Gibson and Howes Ltd [1919] AC 709
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Termination, Change and Redundancy Case [1984] 8 IR 34
Secondary Materials
DC Pearce & RS Geddes, Statutory Interpretation in Australia (8th ed, 2014), [4.20]
REASONS FOR DECISION
Deputy President F J Alpins
31 March 2016
INTRODUCTION
This is an application for review of the respondent’s decision on the amount of an advance on account of unpaid employment entitlements for which the applicant, Mr Reginald Carmody, is eligible under the Fair Entitlements Guarantee Act 2012 (Cth) (the “Act”).
The issue before the Tribunal is whether the amount of personal leave (originally described as accrued sick leave), to which the applicant was entitled upon the termination of his employment in the context of his former employer’s insolvency constitutes part of his “redundancy pay entitlement” for the purposes of s 6(5) of the Act and therefore ought to be taken into account in working out the amount of his advance.
LEGISLATION
The main objects of the Act are expressed in s 3 to be:
“(a)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; and
(b)to allow the Commonwealth to recover the advances through the winding up or bankruptcy of the employers and from other payments the former employees receive for the entitlements.”
Part 2 of the Act governs eligibility for an advance, which is defined in s 5 to mean “financial assistance under this Act on account of employment entitlements”. Shortly stated for present purposes, its provisions require (amongst other things) that the Secretary be satisfied that the person’s employment has ended, its ending is connected with the insolvency or bankruptcy of the employer and that the person is owed debts attributable to one or more “employment entitlements” (s 10(1)(d); see also s 4(2)).
Part 3 of the Act governs the amount of an advance (see also s 4(4)). Relevantly, the general rule for working out the amount of an advance is set out in s 16(1):
“If a person is eligible for an advance for the person’s employment by an employer, the amount of the advance is the total of the amount worked out under Division 2 for each of the person’s employment entitlements for the employment.” (Emphasis added)
The term “employment entitlement” is defined disjunctively in s 5 of the Act to mean “annual leave entitlement”, “long service leave entitlement”, “payment in lieu of notice entitlement”, “redundancy pay entitlement” or “wages entitlement”.
Those terms are, in turn, defined in s 6 of the Act (see also each of their definitions in s 5), which therefore encompasses each of the kinds of employment entitlements in respect of which advances may be paid to former employees under the Act, in the following relevant terms:
6Kinds of employment entitlements
(1)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.
...
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 the 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.
.....
(Emphasis added in ss 6(1) and 6(5).)
The term “governing instrument”, as employed in s 6, is defined as follows (in s 5):
“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).”
As stated in s 16, Div 2 of Pt 3 of the Act contains provisions for working out the amount for each of a person’s employment entitlements for the purposes of working out the amount of an advance (under Div 1). In general terms, it is necessary to work out the “basic amount” as reduced by certain other amounts for each entitlement.
Relevantly for present purposes, s 23 of the Act prescribes the “basic amount” for a person’s “redundancy pay entitlement”, as follows:
“The basic amount for a person’s redundancy pay entitlement for his or her employment by an employer is so much of the entitlement as:
(a)is not a cost of the winding up or bankruptcy of the employer; and
(b)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).”
It is instructive to note that in his Second Reading Speech concerning the Fair Entitlements Guarantee Bill 2012, the relevant Minister said:
“The bill will protect redundancy pay, up to a maximum of four weeks per year of service. This will mean that most employees will receive all of the redundancy entitlements they are owed.”
FACTS AND PROCEDURAL HISTORY
Applicant’s employment and claim
The applicant’s employment by Bruck Textile Technologies Pty Ltd commenced on 27 November 1998. His employment was terminated on 11 July 2014, upon his employer being placed into liquidation. Consequently, the applicant made a claim that he was eligible for an advance for that employment pursuant to the Act. The respondent decided that the applicant was eligible for an advance and decided that the amount of the advance worked out in accordance with Pt 3 of the Act was $45,739.66 (before tax) (see s 15(2) of the Act); relevantly, that amount did not encompass the applicant’s entitlement to accrued but untaken sick leave (as that entitlement was originally known), in the amount of $374.72.
Upon application by the applicant, the respondent’s decision was varied upon internal review, but in a respect that it immaterial for present purposes (see ss 38, 39(1) of the Act). This proceeding is therefore an application for review of the respondent’s original decision on the amount of an advance the applicant is eligible for (see s 40(1)(b) of the Act).
Governing instrument
In considering the issue before the Tribunal, it is necessary to identify the “governing instrument” for the purposes of s 6 of the Act. The term “governing instrument” is defined widely (in s 5) to mean any of various general or specific sources which might have legal consequence with respect to the employment of a claimant. In my opinion it is contemplated by that definition that, according to the facts of any given case, that might any number of the enumerated matters that governs the relevant employment; the enumerated matters are therefore not intended to be mutually exclusive.
Furthermore, in my opinion that definition, read in the context in which it is used in s 6, requires that the governing instrument be identified on a holistic basis – that is to say according to which matters govern the employment, not merely the particular entitlement in issue under s 6. Only after the governing instrument is identified is it appropriate to then consider whether the entitlement in issue constitutes an entitlement within the terms of s 6.
I say that because in addressing the issue before the Tribunal in this proceeding it would be erroneous to confine attention to the particular provision concerning the entitlement in issue and to seek to characterise that entitlement in isolation from the governing instrument of which it forms part; however, as will be apparent from the reasons that follow, that principle is not ultimately determinative of the issue before the Tribunal.
At the time the applicant’s employment ended, it was governed by The Bruck Textiles Enterprise Agreement 2011 (the “2011 Enterprise Agreement”), which was approved for the purposes of the Fair Work Act 2009 (Cth) (the “FWA”) on 25 January 2012, with a nominal expiry date of 1 January 2015. Further, as the applicant’s employment commenced before 1 January 2007, the “governing instrument” also comprised the Bruck Textiles Pty Ltd Redundancy Agreement 1997 (the “1997 Redundancy Agreement”), as incorporated for the purposes of the 2011 Enterprise Agreement, as is explained below.
The “governing instrument” also comprised the National Employment Standards contained in the FWA. Clause 6.3 of the 2011 Enterprise Agreement provided that it operated in conjunction with the National Employment Standards as contained in the FWA (see also ss 55 and 61 of the FWA). Clause 3.3 of the 2011 Enterprise Agreement provided that, where the 2011 Enterprise Agreement referred to a condition of employment provided for in the National Employment Standards, the definition in those standards applied. (I note that it was acknowledged in clause 6.1 that the 2011 Enterprise Agreement incorporated the relevant award; there is no suggestion that clause 6.2, to the extent that it provided for subsequent beneficial variations to the award to prevail to the extent of any inconsistency, was of any relevance to this case.)
Clause 20 of the 2011 Enterprise Agreement governed redundancy of employees. Although not applicable to the applicant’s circumstances, it is instructive to note the terms of clauses 20.1 and 20.2:
“20.1Redundancy pay is provided for in the [National Employment Standards]. Unless otherwise prescribed, the redundancy provisions in this Agreement operate in conjunction with the redundancy provisions in the [FWA].
20.2Redundancy pay
For the purposes of this clause, and except as provided in clause 20.7, the amount of redundancy pay to which such an employee is entitled must be calculated in accordance with the following table in lieu of the calculation required by s. 119 of the [FWA].
....”
The table in clause 20.2 provides for the calculation of the amount of redundancy pay according to an employee’s period of continuous service on termination, with corresponding “redundancy pay periods”, measured in terms of weeks.
It is convenient to note at this point that s 119(1) of the FWA (for which the terms of clause 20.2 were substituted) provides for an entitlement to be paid “redundancy pay” by the employer if the employee’s employment is terminated, relevantly, “because of the insolvency or bankruptcy of the employer”. Section 119(2) provides for the amount of redundancy pay, according to the same factors as in the table in clause 20.2 of the 2011 Enterprise Agreement.
However, for the purposes of clause 20 of the 2011 Enterprise Agreement, clause 20.7 instead applied to the applicant’s circumstances given that his relevant employment commenced in 1998. Clause 20.7 relevantly provided as follows:
“Notwithstanding clauses 20.1 and 20.2, for an employee whose period of continuous service with the Company commenced before 1 January 2007 (an “eligible employee”) the terms of the ... 1997 Redundancy Agreement ... , a copy of which appears at Appendix 2, will continue to apply, subject to the following conditions:
...
(b)Clause 36 of this Agreement will apply in lieu of clause 8 of the 1997 Redundancy Agreement.
...
(d)The reference to accumulated sick leave at clause 9 of the 1997 Redundancy Agreement will be taken to be a reference to personal leave under this Agreement.
...
(f)Employees shall be entitled to apply to the Company to buy back redundancy pay on a voluntary basis. ...
...
(h)Subject to payment of compensation in accordance with sub-clause (i), the amount of severance under clause 6 of the 1997 Redundancy Agreement to an eligible employee will be reduced progressively as provided ... until the maximum amount payable to an eligible employee equates to 16 weeks, this being the maximum entitlement payable under clause 20.2 of this Agreement.
An eligible employee will be paid compensation at the rate of one week’s pay for each four (4) weeks’ reduction in his/her severance pay entitlement ...
...
(k)Should an eligible employee because entitled to a severance payment after the approval of this Agreement, the severance amount will be calculated according to the reduced scale provided for above and will be paid the balance of redundancy pay outstanding as at the date of termination.” (Emphasis added.)
Provisions concerning personal leave were set out in clause 37 of the 2011 Enterprise Agreement, which stated that personal leave is provided for in the National Employment Standards (see ss 95-101 of the FWA). Clause 36 of the 2011 Enterprise Agreement contained provisions concerning annual leave, which were said to supplement the National Employment Standards.
I turn now to the relevant provisions of the 1997 Redundancy Agreement which, as I have indicated, was retained but affected by clause 20.7 of the 2011 Enterprise Agreement. The Bruck Textiles Pty Ltd Redundancy Agreement 1997 between the Textile, Clothing and Footwear Union of Australia and Bruck Textiles Pty Ltd was certified for the purposes of the Workplace Relations Act 1996 (Cth) (since repealed) on 10 June 1997, to remain in force until 1 December 1997. As is apparent from its name, it set out the terms which the parties had agreed were to apply in the circumstances of employees’ redundancy. The prefatory words of the 1997 Redundancy Agreement stated that “[w]here employment levels must be reduced the following arrangements will be applied subject to the minimum standards provided in the award”.
The 1997 Redundancy Agreement relevantly provided for the following entitlements in such circumstances:
“6. REDUNDANCY PAYMENTS & CONDITIONS
Severance pay will be 3.5 weeks per completed year of service for all retrenched employees calculated on completed months of service.
Less than 12 months to be paid pro-rata on completed months of service.
Payment of severance pay is capped at 75 weeks.
7.LONG SERVICE LEAVE
Pro rata long service leave payments shall apply to employees with three (3) years or more service, based on completed months of service.
8.ANNUAL LEAVE
All annual leave entitlements shall be paid out & annual leave loading of 17.5% shall be paid.
9.ACCUMULATED SICK LEAVE
The employer shall pay an employee his/her accumulated sick leave in full, calculated to day of termination.”
As I have indicated, clause 20.7(b) of the 2011 Enterprise Agreement provided that clause 36 of that agreement applied “in lieu of” clause 8 of the 1997 Redundancy Agreement. In contrast, clause 9 of the 1997 Redundancy Agreement, being the clause in issue, was not replaced by a substituted provision of the 2011 Enterprise Agreement. Rather, clause 20.7(d) of the 2011 Enterprise Agreement provided that the reference to accumulated sick leave in clause 9 of the 1997 Redundancy Agreement “will be taken to be” a reference to personal leave under the 2011 Enterprise Agreement. As clause 20.7(d) is a deeming provision, it follows that clause 9 remained operative upon the commencement of the 2011 Enterprise Agreement, as affected by that deeming provision.
Evidence
The applicant relied upon two witness statements. In his witness statement, the applicant explained, in the context of his knowledge based on his lengthy period of employment by his former employer, the importance to workers at the company of conditions governing the event of their redundancy. He also described the events surrounding his being made redundant and his distress in that regard. He said that the “sick leave clause” in issue in this proceeding was a “longstanding entitlement that had been hard-fought in negotiations” between the Textile, Clothing and Footwear Union of Australia and his employer in the 1990s and in 2007.
The applicant also relied upon a witness statement made by Ms Jennifer Kruschel, the Assistant Secretary of the Victorian/Queensland Branch of the Textile, Clothing and Footwear Union of Australia. Ms Kruschel described her involvement in the negotiations relating to the 2011 Enterprise Agreement and also its predecessor, the “Bruck Textiles Pty Ltd Enterprise Agreement 2008 – 2011”, a copy of which was annexed to her statement. She also referred to the awards preceding that latter agreement and historical aspects of entitlements payable in the event of redundancy, namely accrued annual leave and accrued long service leave.
With respect to entitlements of the kind in dispute in this proceeding she stated:
“It is a common clause in enterprise agreements in the [textile, clothing and footwear industry] that sick leave payments, payable on termination due to redundancy, form part of redundancy pay. This entitlement is viewed as recognition of employees’ service, the hardship of finding new employment in the industry, and the faultlessness of employees in redundancy situations.”
... There are many examples of Enterprise Agreements in the TCF industry which provide for sick leave payout on termination.” (Emphasis added.)
Ms Kruschel explained the importance of the entitlements under the 1997 Redundancy Agreement to union members and the hard-fought nature of the negotiations leading to the predecessor of the 2011 Enterprise Agreement to which I have referred. (I note that the terms of that agreement, in similar terms to those of the 2011 Enterprise Agreement, provided for the incorporation of the terms of the 1997 Redundancy Agreement with respect to relevant employees.) She explained that “by incorporating sick leave into redundancy pay, the enterprise agreement provides a greater quantum of redundancy pay for longer serving workers who would have accrued more sick leave”. Finally, she stated:
“On the basis of my experience in the TCF industry, it is my view that payments of sick leave on redundancy as provided for in the [1997 Redundancy Agreement] form pay of redundancy pay under the [2011 Enterprise Agreement]”.
CONSIDERATION
The gravamen of the applicant’s case was that his entitlement under clause 9 of the 1997 Redundancy Agreement, as retained in the 2011 Enterprise Agreement, satisfied the definition of “redundancy pay entitlement” in s 6(5) and thus ought to be taken into account in calculating the amount of the advance for which he was eligible under the Act, because the entitlement was payable in the event of his redundancy.
In his Statement of Facts, Issues and Contentions, he submitted that not only clause 6 (severance pay), but also clause 7 (accrued long service leave) and, more relevantly, clause 9 of the 1997 Redundancy Agreement, which provided for the payment of accumulated sick leave, each comprised redundancy pay. The applicant also submitted that “it follows from s 6(5) of the … Act that the meaning of redundancy pay entitlement will vary depending on the Award or Enterprise Agreement which applies.”
In approaching the issue before the Tribunal, it is necessary to bear in mind certain principles affecting the construction of both the Act and the “governing instrument” in question.
First, the definition of the term “redundancy pay entitlement” in s 6(5) of the Act must be construed in its context, which includes not only the other provisions of s 6 but also other provisions of the Act, particularly those employing that defined expression. As McHugh J said in Kelly v R (2004) 218 CLR 216 at [103]:
“ … the function of a definition is not to enact substantive law. It is to provide aid in construing the statute. … To construe the definition before its text has been inserted into the fabric of the substantive enactment invites error as to the meaning of the substantive enactment.”
(See also Gibb v Federal Commissioner of Taxation (1966) 118 CLR 628 at 635.)
Furthermore, as the prefatory words of s 6 make expressly clear, that section “defines the various kinds of employment entitlements of a person who employment by an employer has ended, by reference to the person’s entitlement under the governing instrument for the employment” (s 6(1)). It follows that each of the definitions in s 6 are to be construed in the context that the entitlement in question is, as each subsection provides, that “under the governing instrument”, that is to say that the relevant entitlement arises pursuant to or by virtue of the governing instrument (see Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 249-50).
Furthermore, given that the term “governing instrument” is defined to mean various things as applicable, including Commonwealth law that governs the employment, it is necessary to have regard to such law as will necessarily answer that description, not only in ascertaining a person’s relevant employment entitlements for the purposes of s 6 of the Act, but also as part of the wider context to be taken into account in construing the provisions of s 6. In the absence of any contrary indication, the Act is to be construed consonantly with laws that might necessarily comprise the governing instrument, as they should be regarded as statutes in pari materia – it “may be presumed that the Legislature intended to attach the same meaning to the same words when used in a subsequent statute in a similar connection (Lennon v Gibson and Howes Ltd [1919] AC 709 at 711-712).
It is also convenient to note at this point that, as s 6(1) of the Act makes expressly clear, satisfaction of each of the enumerated definitions in s 6 is predicated on the relevant person’s employment having ended. That reflects the context in which those definitions are employed in the Act. In order for a person to be eligible for an advance, their employment by a particular employer must have ended, and the end of that employment must have had the requisite connection to the insolvency or bankruptcy of the employer (see s 10); that much is confirmed by the objects expressed in s 3. As I explain later in these reasons, it does not follow that any entitlement under a governing instrument payable in the event of redundancy is ipso facto an employment entitlement within the compass of the Act - an entitlement must be of the requisite character. It is for that reason that the focus of each of the definitions in s 6 is on the nature of the entitlement, while the end of the employment is presumed in that context.
It is therefore necessary to identify the “governing instrument” for a claimant’s employment and to ascertain the claimant’s entitlements under that governing instrument. One must then characterise those entitlements to ascertain whether they satisfy any of the definitions in s 6, properly construed and, if so, ascertain their amount.
To the extent that the governing instrument comprises legislation, that legislation must also be construed according to relevant principles of statutory interpretation. To the extent that it comprises other matters enumerated in the definition of governing instrument, such as an enterprise agreement, they should be interpreted according to the general principles relevant to the interpretation of industrial instruments. I return to the latter point shortly in the context of the governing instrument in question.
I turn now to the issue before the Tribunal. As I have indicated, the issue is whether the applicant’s entitlement to what was originally termed accumulated sick leave under clause 9 of the 1997 Redundancy Agreement, as preserved in clause 20.7 of the 2011 Enterprise Agreement, ought to be taken into account in working out the amount of his advance for the purposes of the Act, on the basis that it constitutes part of his “redundancy pay entitlement” as defined in s 6(5) of the Act.
The definition in s 6(5) requires that one ascertain the amount of “redundancy pay” to which a claimant is entitled under the governing instrument “for termination of the employment”. The term “redundancy pay” must be given meaning and effect (Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [71], citing Commonwealth v Baume (1905) 2 CLR 405 at 414). The term “redundancy pay” is not defined in the Act. However, it is to be read in the context that an entitlement to “redundancy pay” will arise under the FWA for employees within its ambit upon termination of their employment because of the insolvency or bankruptcy of the employer pursuant to s 119 of the FWA; that statutory entitlement cannot be excluded by operation of a modern award or enterprise agreement (s 55(1) of the FWA). The National Employment Standards are minimum standards that apply to the employment of employees which cannot be displaced (see s 61(1) of the FWA).
I note that in Statutory Interpretation in Australia, DC Pearce and RS Geddes (8th ed) at [4.20], the authors remarked that “industrial legislation is a prime source” of expressions which have acquired a customary usage in a particular context. The expression “redundancy pay”, which is employed both in the definition of “redundancy pay entitlement” in s 6(5) and in s 119 of the FWA, serves as one such example; the omission of any definition of that expression in either statute is explicable in that context. In James Cook University v National Tertiary Education Union [2014] FCA 1213, Logan J, in construing a redundancy payment clause of an enterprise agreement, observed:
“A consideration of the industrial context and purpose of [the] clause necessarily commences with the recollection that compensation for redundancies in a workforce is a relatively new subject for provision by award or agreement. The origins of such provision may be traced to a decision of a Full Bench of what was then known as the Australian Conciliation and Arbitration Commission in the Termination, Change and Redundancy Case [1984] 8 IR 34 … . What is apparent from the decision of the Full Bench in that case is that the Commission was persuaded of the industrial need in modern times for provision beyond a particular notice period where termination of employment was occasioned by redundancy. Particularly persuasive was the appreciation by the Full Bench that at page 73:
… it would be misleading to assume that success in obtaining a new job indicated that an individual made redundant had managed to recovery [sic] the security built up over years of service in the redundant job and we are prepared to grant severance pay, in addition to the measures we have awarded to assist employees to find alternative employment.
… At page 76, the Full Bench recorded being persuaded to decide that an employee whose employment is terminated due to redundancy should be entitled to severance payments in addition to the extended period of termination based on length of service, with particular prescriptions then of weekly pay made in respect of particular lengths of service, weekly pay meaning, in that case, the ordinary time rate of pay for the employee concerned.”
It is instructive to note that the Full Bench referred to leave entitlements in contradistinction to severance pay, saying of sick leave “[n]umerous decisions of this Commission and other industrial tribunals make it clear that sick leave should be regarded as a contingent right analogous to insurance”.
In any event, the meaning of the term “redundancy pay” in the Act may be gleaned from its more immediate statutory context - the definition of “redundancy pay entitlement” in s 6(5) of the Act is to be read in the context in which it is used in s 23, being the key substantive provision in which the definition is employed.
It is apparent from the terms of s 23 that the legislature contemplated that “redundancy pay” under the governing instrument would necessarily be calculated according to relevantly the same criteria governing the capping formula in that provision (hence the use of the phrase “at the rate relevant to working out that entitlement” in para (b)(i) of s 23; see also para (b)(ii)). Accordingly, the nomenclature “redundancy pay” within the definition in s 6(5) is consonantly used to encapsulate an entitlement the amount of which will necessarily be calculated according to a certain number of weeks’ pay at the employee’s rate of pay, depending upon the number of their years of service.
The context in which the term “redundancy pay” is used in the Act therefore accords to that extent with the terms of s 119 of the FWA with respect to the factors to be taken into account. (I note however that s 23 of the Act, while capping the number of weeks’ pay for each year of service, does not in its present form prescribe a maximum redundancy pay period and is in that respect not aligned with s 119 of the FWA.)
I consider that the expression “for termination of the employment” is used in s 6(5) in contradistinction to those provisions of s 6 which refer to the “end of the employment”, given the context that an entitlement to redundancy pay will arise only in the context of the employment ending upon termination (see also s 119 (1) of the FWA). In any event, it is clear that it is necessary to ascertain the amount of “redundancy pay” the claimant is entitled to under the governing instrument for termination of the employment. As I have said, what must be ascertained for the purpose of the employment entitlements enumerated in s 6 is the character of the entitlement under the governing instrument; the ending of the employment is merely an assumed prerequisite in that context.
I turn now to the “governing instrument” in question. As I have said, for the purposes of the applicant’s claim under the Act, the “governing instrument” comprised the 2011 Enterprise Agreement, the 1997 Redundancy Agreement (to the extent maintained by the 2011 Enterprise Agreement) and the FWA.
Construction of industrial instruments such as the 2011 Enterprise Agreement and the 1997 Redundancy Agreement begins with a consideration of the ordinary meaning of the words used (Australian Nursing and Midwifery Federation v Eastern Health [2013] FCAFC 137 at [11]; City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (2006) 153 IR 426 at 438 per French J). The clauses of those agreements must be read in their context. It is therefore necessary to have regard to their text, the surrounding clauses and other particular clauses, and to the text and operation of the agreements as a whole (Amcor Limited v CFMEU (2005) 222 CLR 241 at [30]). In construing such agreements, one must consider “the language of the particular agreement, understood in the light of its industrial context and purpose” (Amcor at [2] per Gleeson CJ and McHugh J; Eastern Health at [11]).
The context in which clauses of an industrial agreement are to be read includes the legislative background against which the agreement was made and in which it was to operate (see Amcor at [30], [13]). As the 2011 Enterprise Agreement was the primary agreement governing the applicant’s employment at the time it was terminated, it is appropriate to have regard to the FWA as the relevant legislative context; in any event, the FWA forms part of the governing instrument for the purposes of the Act.
It did not appear to be in dispute that the amount to which the applicant was entitled under clause 6 of the 1997 Redundancy Agreement, which is headed “redundancy payments & conditions” and describes the payment for which it provides as “severance pay”, satisfied the definition of “redundancy pay entitlement”. That much is confirmed by clause 20.7 of 2011 Enterprise Agreement, particularly the progressive adjustment of the amount in clause 6 to equate to clause 20.2 of the 2011 Enterprise Agreement, which provides for “redundancy pay” for other employees (see also clause 20.7(i)). I note also that the expression “redundancy pay” is expressly used in sub-clauses (f) and (k) of clause 20.7 with respect to employees the subject of the 1997 Redundancy Agreement.
However, as I have indicated, the applicant submitted that the amount payable under clause 9, which is headed “accumulated sick leave”, also answers the description in s 6(5) of the Act, because it was payable in the event of the applicant’s redundancy. It is convenient to reiterate that, as set out above, that clause prior to its modification by the 2011 Enterprise Agreement provided that “[t]he employer shall pay an employee his/her accumulated sick leave in full, calculated to day of termination”. As is also set out above, clause 20.7(d) of the 2011 Enterprise Agreement provided that “[t]he reference to accumulated sick leave at clause 9 of the 1997 Redundancy Agreement will be taken to be a reference to personal leave under this Agreement”.
As I have said, the effect of that deeming provision was to preserve the operation of clause 9 of the 1997 Redundancy Agreement, which would only have effect upon termination of relevant employees’ employment, but in the context of the entitlement described as “personal leave” all other aspects of which were provided for in clause 37 of the 2011 Enterprise Agreement, which provided for “personal/carer’s leave” and “compassionate leave”. The prefatory words of clause 37 state that “personal/carer’s leave and compassionate leave are provided for in the [National Employment Standards]” (see Div 7 of the National Employment Standards contained in Pt 2-2 of the FWA). Subdivision A (ss 95-101) of Div 7 of the National Employment Standards provides an entitlement to “paid personal/carer’s leave”.
In my view it is clear from the terms of clause 9 of the 1997 Redundancy Agreement, read in the context of the other clauses of that agreement (particularly clause 6), that the amount to which the applicant was entitled upon termination of his employment for “accumulated sick leave”, as it was originally termed (albeit not at the time his employment was terminated), does not satisfy the definition of “redundancy pay entitlement” in s 6(5), especially when that definition is read in its context.
That much is made abundantly clear when one has regard to the terms of the 2011 Enterprise Agreement and the deeming provision in clause 20.7(d) by which the reference in clause 9 of the 1997 Redundancy Agreement to “accumulated sick leave” was rendered a reference to personal leave as under the later agreement. According to the express terms of the 2011 Enterprise Agreement, the applicant’s entitlement under clause 9 of the 1997 Redundancy Agreement did not constitute an entitlement to “redundancy pay”, whether for its own purposes or for the purposes of s 6(5) of the Act. As I have said, the deeming provision in the 2011 Enterprise Agreement referred to personal leave under that agreement and the clause making such provision expressly acknowledges that that entitlement is provided for in the National Employment Standards in the FWA, those provisions of the FWA being discrete from the provisions of the FWA dealing with redundancy pay.
While the agreements are not to “be interpreted in a vacuum divorced from industrial realities” (Wanneroo at 440), the provisions of both agreements clearly provide for redundancy pay and accrued sick leave (as originally termed) as discrete entitlements, albeit that share the commonality that they arise in the event of redundancy; in that respect the agreements “make sense according to the basic conventions of the English language” (City of Wanneroo v Holmes (1989) 30 IR 362 at 380 per French J). It is evident that the industrial purpose sought to be achieved is that employees within the ambit of the 1997 Redundancy Agreement, as affected by the 2011 Enterprise Agreement, should receive various kinds of entitlements upon being made redundant including, but not limited to, severance pay as provided for in clause 6, which is equated to what is termed “redundancy pay” under clause 20 of the 2011 Enterprise Agreement.
The terms of the agreements are relevantly unambiguous; I did not understand the applicant to be relying on his or Ms Kruschel’s evidence so as to contend otherwise, but in any event, I note in passing that I do not consider that their evidence could somehow displace the text of those agreements (see James Cook University per Logan J at [22]-[23], citing Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Qantas Airways Ltd (2001) 106 IR 307 at [56] per North J).
In any event, irrespective of the parties’ agreement, the Act must be construed according to proper principles of statutory interpretation. As I have indicated, it is in the very nature of s 6 of the Act that it is concerned with different entitlements under the governing instrument arising in the circumstances with which the Act is concerned; s 6(5) is solely concerned with a particular kind of entitlement, in the nature of “redundancy pay”.
It follows that, reading clause 9 of the 1997 Redundancy Agreement as affected by the deeming provision in the 2011 Enterprise Agreement according to its text, in the context of the other clauses of those agreements and in the context of the FWA, which also comprised the governing instrument, one reaches the ineluctable conclusion that the amount of the entitlement in issue did not constitute nor form part of the applicant’s “redundancy pay entitlement” for the purposes of s 6(5) of the Act.
As the respondent submitted, the essential flaw in the applicant’s argument lies in its erroneous conflation of the term “redundancy pay” with payments to be made in the event of redundancy. Such conflation also underlay the evidence of Ms Kruschel. Although her evidence provided useful background about the circumstances in which the agreements in issue were made, her references to entitlements payable in the event of redundancy, such as accrued sick leave, as forming part of “redundancy pay” essentially begged the question which must properly be answered by interpretation of the Act and the governing instrument in question. The true question is whether the entitlement in issue under the governing instrument satisfies the definition in s 6(5) of the Act, read in its context. Contrary to what is suggested by Ms Kruschel’s concluding statement set out above, that is not a question to be answered by expert opinion.
The erroneous conflation to which I have referred was also revealed by the applicant’s submissions about the proper interpretation of s 6 of the Act. Section 6 is concerned with various kinds of payments to be made in the event of redundancy, including accrued annual leave and accrued long service leave. If the legislature had intended to include amounts reflecting accrued sick leave or, to use the terminology employed in the FWA, accrued personal leave, in calculating the amount of advances to be made under the Act, it would have made express provision to that effect.
Contrary to the applicant’s essential argument, it is not enough that that amount was payable in the event of his redundancy. As I have said, s 6(1) and other provisions of the Act reflect the fact that the making of an advance is predicated on a claimant’s employment having ended in the specified circumstances. As the applicant ultimately conceded, the acceptance of his argument would have the consequence that amounts of accrued annual leave and accrued long service leave would satisfy not only the definitions in s 6(2) and s 6(3) respectively, but would also satisfy the definition of “redundancy pay entitlement” in s 6(5), thus resulting in “double-counting” for the purposes of calculating the amount of an advance under Pt 3 of the Act.
There is no indication in the provisions of the Act, nor in the extrinsic materials concerning the relevant Bill, that Parliament intended such an outcome. Conversely, it is clear from provisions including s 23, which operates to “cap” the amount of an advance in certain respects insofar as it reflects a claimant’s entitlement to redundancy pay under the governing instrument, that the Act is not intended necessarily to provide full compensation in respect of employees’ entitlements; rather, it is intended to provide, as the definition of “advance” in s 5 is expressed, “financial assistance … on account of employment entitlements”.
More to the point, the entitlements reflected in the amount of an advance are those for which express provision is made in s 6, not all entitlements under a governing instrument which might arise in the event of an employee’s redundancy. The Act operates so as to afford a minimum level of financial assistance to relevant claimants in the prescribed circumstances, calculated according to prescriptive criteria and formulae. It is designed to provide a valuable societal safety net; it is not intended to achieve perfect recompense.
CONCLUSION
For the above reasons, the decision under review is affirmed.
I certify that the preceding 65 (sixty-five) paragraphs are a true copy of the reasons for the decision herein of Deputy President F J Alpins.
[sgd]........................................................................
Administrative Assistant
Dated 31 March 2016
Date of hearing 3 August 2015 Date final materials received 13 August 2015 Representative for Applicant Ms O Tran
Textile, Clothing and Footwear
Union of AustraliaRepresentative for Respondent Mr N Moy Solicitors for Respondent Clayton Utz
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