CEPU of Australia v CJ Manfield Pty Ltd
[2011] FMCA 374
•21 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CEPU OF AUSTRALIA v CJ MANFIELD PTY LTD | [2011] FMCA 374 |
| INDUSTRIAL LAW – Alleged breach of award – alleged failure to pay redundancy entitlements – relationship between award and contract of employment – rate at which redundancy entitlement to be paid – ordinary time rate of pay for employee concerned. INDUSTRIAL LAW – Alleged breach of award – alleged failure to pay annual leave entitlements – whether entitlement to set-off – whether estoppel or waiver. CONTRACT – Alleged breach of contract of employment. WORDS AND PHRASES – “ordinary time rate of pay” – “ordinary time rate of pay for the employee concerned” – “ordinary rate of wage” – “preserved award term” – “more generous” – “basic periodic rate of pay”. |
| Electrical, Engineering and Contracting Industries (Northern Territory) Award 1995 Fair Work Act 2009 (Cth), s.92 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), Schedule 2, Item 11 Federal Magistrates Act 1999 (Cth), s.14 Industrial Relations Act 1988 (Cth), s.141 Metal, Engineering and Associated Industries Award 1998 Workplace Relations Act 1996 (Cth), ss.3(c), (f) and (g), 173, 178, 232, 233, 234, 235, 236, 516(1), 520, 525(1), 527, 529, 530, 718, 719, Schedule 6, Item 82, Parts 7, 10, 14 Workplace Relations Amendment (Work Choices) Act 2005 (Cth), Schedule 4, Item 4 Workplace Relations Regulations 2006 (Cth), regs.2.10.3, 10.03(2), Ch.2 |
| Amcor Ltd v Construction, Forestry, Mining and Energy Union & Ors (2005) 222 CLR 241; [2005] HCA 10 Kucks v CSR Ltd (1996) 66 IR 182 Lee and Others v Minister for Immigration and Multicultural Affairs and Anor (2006) 205 FLR 117; [2006] FMCA 480 NSW Nurses Association v Ramsay Health Care Australia Pty Ltd (2009) 185 IR 1; [2009] FMCA 579 PKIU v Vista Paper Products Pty Ltd (1994) 127 ALR 673 Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd (2002) 121 IR 250; [2002] FCA 1406 Williams v MacMahon Mining Services Pty Ltd (2009) [182 IR 104;] 231 FLR 59; [2009] FMCA 511 Williams v MacMahon Mining Services Pty Ltd (No 2) (2009) 187 IR 426; [2009] FMCA 763 |
| M Woodley (Ed), Osborn’s Concise Law Dictionary (10th Edition) (London: Sweet and Maxwell, 2005) | ||
| Applicant: | COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING AND ALLIED SERVICES UNION OF AUSTRALIA | |
| Respondent: | CJ MANFIELD PTY LTD |
| File Number: | DNG 5 of 2010 |
| Judgment of: | Lucev FM |
| Hearing date: | 23 September 2010 |
| Date of Last Submission: | 2 March 2011 |
| Delivered at: | Darwin |
| Delivered on: | 21 June 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr W Friend |
| Solicitors for the Applicant: | Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing And Allied Services Union Of Australia |
| Counsel for the Respondent: | Mr M Follett |
| Solicitors for the Respondent: | Ward Keller |
ORDERS
That by 19 July 2011 the respondent pay:
(a)Gregory Stewart the sum of $4,778.75; and
(b)Julie DiIulio the sum of $5,374.08.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT DARWIN |
DNG 5 of 2010
| COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING AND ALLIED SERVICES UNION OF AUSTRALIA |
Applicant
And
| CJ MANFIELD PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction – the claims
The applicant’s claims in this matter are for:
a)failure by the respondent to pay a redundancy entitlement of:
i)$7,392.98 to Gregory Stewart; and
ii)$7,676.76 to Julie DiIulio;
b)failure by the respondent to pay annual leave entitlements of:
i)$13,363.87 to Gregory Stewart; and
ii)$14,744.16 to Julie DiIulio.
A claim for underpayment of wages in relation to Mr Stewart was not pursued.
Jurisdiction
Conduct which occurred before the commencement of the Fair Work Act 2009 (Cth)[1] remains subject to the Workplace Relations Act 1996 (Cth).[2] This Court has jurisdiction to deal with compliance with awards under the WR Act.[3]
[1] “FW Act”.
[2] “WR Act”. The Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), Schedule 2, Item 11.
[3] WR Act, Part 14.
There was no dispute that:
a)the relevant award was entitled the Electrical, Engineering and Contracting Industries (Northern Territory) Award 1995,[4] and was declared a common rule under s.141 of the Industrial Relations Act 1988 (Cth) on 28 August 1995; and
b)the Award continued as a common rule award under Item 82 of Schedule 6 of the WR Act as amended by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth).[5]
Facts
[4] “Award”.
[5] “Work Choices Act”.
Statement of agreed facts
In this matter there is a Statement of Agreed Facts as follows:
1.The Applicant is and was at all material times, an organisation of employees registered pursuant to either the Workplace Relations Act 1996 (WR Act) or the Fair Work (Registered Organisations) Act 2009.
2.The Applicant has standing to bring this application on behalf of Mr Gregory Vincent Stewart and Ms Julie Neptina DiIulio.
3.The Respondent is and was at all material times, a constitutional corporation.
4.The Respondent is and was at all material times, bound by the pre-reform Award known as the Electrical Engineering and Contracting Industries (Northern Territory) Award 2002 (Award).
Mr Stewart
5.Mr Stewart was employed by the Respondent as an electrical fitter mechanic at the Alcan Gove Processing Plant and Mine on the Nhulunbuy Peninsula, continuously from on or about September or October 2007, until 9 April 2009.
6.Mr Stewart’s employment with the Respondent was regulated by the provisions of the WR Act, the Award and a contract of employment (Exhibit “GS-1” to the Affidavit of Gregory Vincent Stewart, affirmed 18 March 2010).
7.Mr Stewart was a “fly in-fly out” employee, on a rotating shift of 12 hour days (84 hours per week) for a period of 3 weeks on, and then 3 weeks off.
8.Over each 6 week roster cycle period, Mr Stewart worked 84 hours, 84 hours, 84 hours, 0 hours, 0 hours and 0 hours. Over each 6 week roster cycle period, Mr Stewart was paid for 42 hours per week.
9.Mr Stewart was paid a flat hourly rate of pay for all hours of work performed by him, commencing at $44.54 per hour, and ending at $48.638 per hour.
10.Mr Stewart’s employment was terminated by the Respondent by reason of redundancy, with effect from 9 April 2009.
11.Mr Stewart was paid a severance payment by the Respondent of $8,171.18 (calculated as 4 weeks x 42 hours per week x $48.638 per hour).
12.Mr Stewart did not take any periods of annual leave over the course of his employment with the Respondent.
13.Mr Stewart was not specifically paid any amounts by reference to accrued annual leave upon the termination of his employment with the Respondent.
Ms DiIulio
14.Ms DiIulio was employed by the Respondent as an instruments technician/electrical fitter mechanic at the Alcan Gove Processing Plant and Mine on the Nhulunbuy Peninsula, continuously from on or about 22 August 2007, until 9 April 2009.
15.Ms DiIulio’s employment with the Respondent was regulated by the provisions of the WR Act, the Award and a contract of employment (part of Exhibit “JD-3” to the Affidavit of Julie Neptina DiIulio, affirmed 28 January 2010).
16.Ms DiIulio was a “fly in-fly out” employee, on a rotating shift of 12 hour days (84 hours per week) for a period of 2 weeks on, and then 2 weeks off.
17.Over each 4 week roster cycle period, Ms DiIulio worked 84 hours, 84 hours, 0 hours and 0 hours. Over each 4 week roster cycle period, Ms DiIulio was paid for 42 hours per week.
18.Ms DiIulio was paid a flat hourly rate of pay for all hours of work performed by her, commencing at $46.25 per hour, and ending at $50.505 per hour.
19.Ms DiIulio’s employment was terminated by the Respondent by reason of redundancy, with effect from 17 April 2009. Her last working day was 8 April 2009.
20.Ms DiIulio was paid a severance payment by the Respondent of $8,484.84 (calculated as 4 weeks x 42 hours per week x $50.505 per hour).
21.Ms DiIulio did not take any periods of annual leave over the course of her employment with the Respondent.
22Ms DiIulio was not specifically paid any amounts by reference to accrued annual leave upon the termination of her employment with the Respondent.
Award rates of pay
23.All rates of pay specified in clause 14.1 of the Award were increased three times by the Australian Fair Pay Commission between the last safety net review of the Award (the May 2004 Safety Net Review Decision) and the time of the termination of the employment of Mr Stewart and Ms DiIulio.
24.All rates of pay specified in clause 14.1 of the Award below Level 9 (Electrical tradesman 6), were increased by 72c per hour, 27c per hour and 57c per hour.
25.All rates of pay specified in clause 14.1 of the Award at Level 9 (Electrical tradesman 6) and above, were increased by 58c per hour, 14c per hour and 57c per hour.
26.As at the time Mr Stewart and Ms DiIulio had their employment with the Respondent terminated, the wages rates payable under the pay scale derived from the Award were as follows:
Level
Classification
38 hour weekly rate
1
Electrical worker 1
$569.48
2
Electrical worker 2
$591.18
3
Electrical worker 3
$625.68
4
Electrical tradesman 1
$636.48
5
Electrical tradesman 2
$658.18
6
Electrical tradesman 3
$677.78
7
Electrical tradesman 4
$699.48
8
Electrical tradesman 5
$721.08
9
Electrical tradesman 6
$754.22
10
Electrical tradesman 7
$775.82
11
Electrical tradesman 8
$817.12
Further facts
Mr Stewart’s written contract of employment contained a provision as follows:
The weekly/hour rate specified in the “Offer of Employment” reflect the all purpose weekly wage rate. These wage rates comprehend all/any allowances including, without limiting, agreement/award entitlements, industry or company agreements, over award payments, the generality of site disability payments including award special rates, ie confined space, wet underfoot, height, dust, dirt, special skill payments, wind, training, laundry and other similar or like payments which may be provided for in any relevant awards or agreements (be they Federal or State) and not expressly provided for elsewhere in this agreement, and/or relative to the scope or work to be undertaken on this site.
All the Award provisions, which provide for an industry or like allowance, disability or similar allowance, special rates, fair and/or travelling allowances other than those stated elsewhere in this clause, are deemed to be incorporated in this agreement.[6]
[6] Affidavit of Gregory Vincent Stewart, affirmed 18 March 2010 (“Mr Stewart’s March 2010 Affidavit”), para.3 and annexure GS1 – Employment Agreement, cl.6 (“Employment Agreement”). There was no dispute that an employment agreement in the same terms applied to Ms DiIulio.
The Employment Agreement also provided that:
a)in clause 2.1:
Manfield Collier will be responsible for the setting of wages and working conditions for its employees covered by this agreement. The wages and working conditions of the workforce employed will comply with all statutory requirements and applicable industrial instruments and will take into consideration and generally align with the enterprise bargaining agreements in place with other contractors and their employees on the Alcan Gove site. Any conditions not included within this agreement or not clearly stated, in all cases will be covered by and no less than the Electrical Engineering and Contracting Industries (Northern Territory) Award 2002.[7]
[7] Employment Agreement, cl.2.1.
b)in clause 6.1:
FIFO Employee
A FIFO Employee shall work within the guidelines of either of the following 2 structures.
1/ Work on a rotating shift of 12 hour days, 3 weeks on, 3 weeks off site basis with one days leave unpaid while on site so as to not to work more than 13 consecutive days in any shift (refer to clause 4.5)
· the flat hourly rate is inclusive of all overtime penalties, 20% loading in respect of annual leave, sick days, rostered days off and public Holidays. This hourly rate is inclusive of all allowances.[8]
[8] Employment Agreement, cl.6.1.
There is no dispute that Mr Stewart and Ms DiIulio were FIFO employees.
The redundancy claim
Mr Stewart and Ms DiIulio redundant
In relation to the redundancy claim there is no dispute that Mr Stewart and Ms DiIulio were each made redundant in April 2009.
Award provisions
The Award makes provision for redundancy in clause 12. Clause 12.3.1 of the Award entitles an employee to severance pay linked to years of service. Relevantly, it provides that if an employee has a period of continuous service of one year and less than two years they are entitled to severance pay of four weeks’ pay. What constitutes a “Week’s pay” is defined in clause 12.1.5 of the Award as follows:
Week’s pay means the ordinary time rate of pay for the employee concerned. Provided that such rate shall exclude:
· overtime;
· penalty rates;
· disability allowances;
· shift allowances;
· special rates;
· fares and travelling time allowances;
· bonuses; and
· any other ancillary payments of a like nature.
The dispute
In this case the dispute between the parties is on what basis the redundancy pay should be calculated.
In essence:
a)the applicant says that the “ordinary time rate of pay” is that specified for each employee in the Employment Agreement; and
b)the respondent says that the “ordinary time rate of pay” means the rate of pay fixed by the Award, that is the base rate of pay in the Award regardless of what the employee is paid for his or her ordinary hours of work.
Applicant’s submissions
The applicant submits that:
a)the Award operates on the Employment Agreement between the parties;
b)the parties have agreed upon an ordinary time rate of pay, which includes compensation for a number of things which might otherwise be paid under the Award, but does not bear any relationship to any particular entitlements;
c)the Employment Agreement stipulate 84 hours of work per week, and a rate of pay for those hours, and it is that to which the Award refers when it refers to “ordinary time rate of pay”;
d)if the respondent’s contention were correct the Award might easily have stipulated the rate of pay as being that contained in clause 14 of the Award for the employee’s classification;
e)it is clear that the Award contemplates employees being paid redundancy based upon their actual ordinary time rate of pay, and not the minimum award rate of pay, and that where, as here, the parties have agreed upon an actual rate of pay, the Award operates on that as the ordinary time rate of pay; and
f)the respondent made payments which averaged the payments over the weeks employed, and those weeks not worked, and therefore contends that the employees have been overpaid, a contention the applicant rejects.
Respondent’s submissions
The respondent says that the applicant claims redundancy payments in contract and under the Award.
In relation to the contract claim the respondent says that it ought to be rejected, arguing that:
a)the Employment Agreement does not contain any redundancy terms, nor does it incorporate by express reference, the Award term;
b)the clause relied upon by the applicant, clause 2.1 of the Employment Agreements, does not purport to incorporate each and every term of the Award into the Employment Agreements, but merely provides that matters not covered by the Employment Agreements, are dealt with in the Award, and recognises that those terms are “not included in this [Employment] Agreement”; and
c)even if the Employment Agreement does incorporate the Award terms, the basis and extent of the claims is exactly the same, and the respondent does not dispute the entitlement to a redundancy payment under the Award. Therefore, the contract claim does not add anything.
As to the Award claim the respondent says that the question in this case is how the amount of the obligation to pay redundancy is to be calculated for each of Mr Stewart and Ms DiIulio, and says that it is only if they have been paid an amount less than that to which they are entitled under the Award that any question of underpayment or penalty arises.
The respondent contends that it was required to pay by way of redundancy the amount of:
a)$2,711.12 to Mr Stewart; and
b)$2,797.92 to Ms DiIulio.
The respondent says, and it is agreed, that redundancy amounts of:
a)$8,171.18 to Mr Stewart; and
b)$8,484.84 to Ms DiIulio,
were actually paid.
The respondent therefore contends that it has overpaid the amount due for redundancy by:
a)$5,460.06 to Mr Stewart; and
b)$5,686.92 to Ms DiIulio.
The respondent argues that:
a)the phrase “ordinary time rate of pay”, when used in an award or other industrial instrument or industrial/employment legislation, means the base rate of pay fixed in the Award for the employee concerned, multiplied by the 38 ordinary hours fixed under the Award, and says that that proposition is effectively unarguable;[9]
[9] Citing Catlow v Accident Compensation Commission (1989) 167 CLR 543; Scott v Sun Alliance Australia Ltd (1993) 178 CLR 1 (“Scott”); Australian Communication Exchange Ltd v Deputy Commissioner of Taxation (2003) 201 ALR 271; [2003] HCA 55; SDAEA v Woolworths Ltd (2006) 151 FCR 513; [2006] FCA 616 (“Woolworths”); Automotive, Food, Metals Engineering, Printing and Kindred Industries Union v Mechanical Engineering Services Pty Ltd v Mechanical Engineering Services Pty Ltd (No 2) (2008) 175 IR 351; [2008] FCA 1249 (“Mechanical Engineering Services (No. 2)”).
b)the Mechanical Engineering Services (No.2) case is for all intents and purposes, on all fours, with the present circumstances, and that:
i)clause 4.4.1(e) of the Metal, Engineering and Associated Industries Award 1998 is word-for-word identical to clause 12.1.5 of the Award; and
ii)this Court is for all intents and purposes, obliged to follow Mechanical Engineering Services (No. 2);[10]
[10] Citing Minister for Immigration and Multicultural and Indigenous Affairs v SZANS (2005) 141 FCR 586 at 592 per Weinberg, Jacobson and Lander JJ; [2005] FCAFC 41 at paras.35-39 per Weinberg, Jacobson and Lander JJ (“SZANS”).
c)it does not matter what the normal or standard hours worked by Mr Stewart or Ms DiIulio were (whether 84, 42 or something less), nor does it matter what their actual rate of pay under the Employment Agreements was;
d)the claim arises under the Award, and that as such, Mr Stewart and Ms DiIulio were each entitled to four weeks’ pay at their respective levels, being:
i)level 6 for Mr Stewart; and
ii)level 7 for Ms DiIulio,
e)the above entitlement gives rise to a redundancy payment of:
i)$2,711.12 for Mr Stewart; and
ii)$2,797.92 for Ms DiIulio.
The respondent therefore submits that the redundancy claim fails.
The Award applies to Mr Stewart and Ms DiIulio’s employment as a matter of law, but only provides minimum rates and entitlements.[11] There is nothing to prevent a contractual payment being made at an over-award rate to an employee under the Award. Indeed, the objects of the WR Act are to provide for minimum or safety net of entitlements for employees, thus leaving anything in excess of those minimum or safety net entitlements to be agreed between the parties whether by a form of regulated industrial instrument or a contract of employment.[12]
[11] Kilminster v Sun Newspapers Ltd (1931) 46 CLR 284 at 289 per Gavan Duffy CJ, Starke, Dixon and McTiernan JJ (“Kilminster”); Byrne and Frew v Australian Airlines Limited (1995) 185 CLR 410 at 421 per Brennan CJ, Dawson and Toohey JJ (“Byrne and Frew”).
[12] WR Act, s.3(c), (f) and (g).
The Employment Agreement recognises that the Award prescribes minimum rates of wage and allowance, because it:
a)expressly provides in clause 6 that the “weekly/hourly rate … reflect[s] the all purpose weekly wage rate” which “comprehend all/any allowances” and includes not only “award entitlements” but also:
i)“agreement entitlements”;
ii)industry or company agreements; and
iii)especially, in this context, “over-award payments”; and
iv)general site disability payments “including award special rates” provided in Federal or State awards or agreements not expressly provided for elsewhere in the Employment Agreement; and
b)provides in clause 2.1 that:
i)wages “will comply with all statutory requirements and applicable industrial instruments”, but that it “will take into consideration and generally align with the enterprise bargaining agreements in place with other contractors and their employees on site.”;[13] and
ii)any conditions “not included or not clearly stated” in the Employment Agreement “in all cases, will be covered by and no less than” the Award,
and it can therefore be seen that the Employment Agreement comprehends the possibility of payment of wages and allowances at rates higher than those in the Award.
[13] Emphasis in the Employment Agreement.
In this case the Employment Agreement does not provide for a redundancy entitlement for employees. Therefore, recourse must be had to clause 12 of the Award for the redundancy entitlement for Mr Stewart and Ms DiIulio.
The question arises as to whether or not there is, by reason of the terms of the Employment Agreement a contractual entitlement to the redundancy entitlement prescribed by the Award.
In Byrne and Frew the High Court made a number of observations as to the relationship between awards and contracts of employment. The High Court made the following relevant observations:
A right to the payment of award rates is imported by statute into the employment relationship, which is contractual in origin, and, express promise apart, it is only in that sense that it can be said that award rates are imported into the contract of employment. The award regulates what would otherwise be governed by the contract. But award rates are imported as a statutory right imposing a statutory obligation to pay them. The importation of the statutory right into the employment relationship does not change the character of the right.[14]
In a system of industrial regulation where some, but not all, of the incidents of an employment relationship are determined by award, it is plainly unnecessary that the contract of employment should provide for those matters already covered by the award. The contract may provide additional benefits, but cannot derogate from the terms and conditions imposed by the award and, as we have said, the award operates with statutory force to secure those terms and conditions. Neither from the point of view of the employer nor the employee is there any need to convert those statutory rights and obligations to contractual rights and obligations.[15]
[14] Byrne and Frew at 420 per Brennan CJ, Dawson and Toohey JJ.
[15] Byrne and Frew at 421 per Brennan CJ, Dawson and Toohey JJ.
The High Court rejected the suggestion that a term, in that case as to dismissal, ought to be implied into the contract of employment where the award contained provisions concerning unjust or unreasonable dismissal. Applying the test for implied terms set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings[16] the High Court in Byrne and Frew said that:
The contract is capable of operating reasonably and effectively in the absence of such a term and in the presence of an award provision offering limited remedies in the event of breach.[17]
[16] (1977) 180 CLR 266 at 283 per Lord Simon of Glaisdale, Viscount Dilhorne and Lord Keith of Kinkel.
[17] Byrne and Frew at 423 per Brennan CJ, Dawson and Toohey JJ. See also observations to similar effect at 444, 445, 446, 456 and 461-462 per McHugh and Gummow JJ.
In order for there to be a contractual entitlement to redundancy there must be something either express or implied in the Employment Agreement to that effect. There is nothing express in the Employment Agreement conferring an entitlement to redundancy. Indeed, the terms of clause 2.1 of the Employment Agreement indicate that there are likely to be conditions which are not included within the Employment Agreement, and that those conditions are to be covered by the terms of the Award. In those circumstances, there is no justification for holding that it is an implied term of the Employment Agreement that the redundancy terms of the Award are to be implied into the Employment Agreement. The Employment Agreement is perfectly capable of operating reasonably and effectively in the absence of a redundancy term in it, and in the presence of a redundancy term in the Award. For those reasons, the Court has concluded that the Employment Agreement does not confer a contractual right to redundancy or payment for redundancy, either in terms of the Award or otherwise, on Mr Stewart and Ms DiIulio. Their entitlement to redundancy or payment for redundancy is governed by the terms of the Award alone.
Both parties recognise that the question, in those circumstances, then becomes what is meant by “ordinary time rate of pay” in the definition of “Week’s pay” in clause 12.5 of the Award, because it is the meaning of that phrase, “ordinary time rate of pay”, which regulates what Mr Stewart and Ms DiIulio are entitled to by way of a redundancy payment.
In Scott the High Court held that the expression “ordinary time rate of pay” in Tasmanian workers’ compensation legislation referred to a rate fixed by an industrial award or agreement and did not cover a rate fixed by an individual employment contract.[18] In Scott the High Court observed that:
a)it would be difficult to apply the concept of ordinary time rate of pay to an amount of compensation which could be increased or decreased by private agreement between employer and employee;[19] and
b)the expression “ordinary time rate of pay” was one which:
… has an established special meaning in the context of employment and industrial relations … it is that meaning which the words must bear … in their application to employment governed by an industrial award or agreement … [and that in] such an award or agreement, the expression “ordinary time” cannot mean the customary or usual hours of work … [and that] being so, no justification exists for interpreting the expression in its application to an individual employment contract as meaning the customary or usual hours of work.[20]
[18] Scott at 6 per Mason CJ, Brennan, Dawson, Toohey and McHugh JJ.
[19] Scott at 6 per Mason CJ, Brennan, Dawson, Toohey and McHugh JJ.
[20] Scott at 8 per Mason CJ, Brennan, Dawson, Toohey and McHugh JJ.
The High Court recognised that the expression “ordinary time rate of pay” was one which had a particular meaning, and it was said that:
The expression “ordinary time rate of pay” is well known in the industrial relations field in Australia and New Zealand. It and similar terms have long been used in legislation. Unless the context otherwise requires, “ordinary time rate of pay” means the rate of pay for the standard or ordinary hours of work in contrast to the overtime or penalty rate of pay for hours of work other than the standard or ordinary hours. When expressed by reference to a week, it refers to the product and multiplying that hourly rate by the standard 35, 38 or 40 hour week, as the case may be, fixed by legislation, industrial award or agreement.[21]
[21] Scott at 5 per Mason CJ, Brennan, Dawson, Toohey and McHugh JJ
In Woolworths the Federal Court referred to the fact that “the phrase ‘ordinary time rate of pay’ … and similar phrases have acquired a technical meaning in Australian law” and having referred to the relevant cases, including Scott, it was said that “the High Court made it clear that where the expression ‘ordinary time rate of pay’ is used in relation to conditions of work fixed by an industrial award or collective agreement, it is a reference to the rate of pay for ‘the fixed standard hours’ as opposed to overtime or usual or customary time”.[22] And, where the expression “ordinary time rate of pay” is not defined in an industrial award or industrial agreement then “[i]t must be taken that it is used in the technical sense recognised in the authorities.”[23]
[22] Woolworths at 521-522 per Gray ACJ.
[23] Woolworths at 522 per Gray ACJ.
In Mechanical Engineering Services (No.2) the award provided that redundancy payments were a multiple of a “week’s pay” which was the “ordinary time rate of pay for the employee concerned”. The applicants in that case contended that this was the actual rate paid. The respondent in that case contended that this was the award rate.
The Federal Court found that the respondent’s contention that it was the award rate that was to be paid was correct. The Federal Court said that:
2. It is convenient to start with the money claims. The award provides that severance pay (redundancy) is to be calculated as a multiple of a “week’s pay”. The multiple is determined by the number of years the employee has been in continuous service. The point in dispute is how is a “week’s pay” … to be determined.
3. The award defines “week’s pay” to mean “the ordinary time rate of pay for the employee concerned”, with certain rates and allowances excluded. The dispute between the parties is this. The applicants contend that the “ordinary time rate of pay” is the pay which was in fact paid to former employees. That rate was fixed by agreement between the employees and the respondent. The contrary position, which is taken by the respondent, is that the expression refers to the rate fixed by the award, or the rate which has replaced the award rate.
4. In Catlow v Accident Compensation Commission (1989) 167 CLR 543 at 560, McHugh J noted that most industrial awards and agreements provide for “ordinary time rate of pay” for hours worked. In Scott v Sun Alliance Australia Ltd (1993) 178 CLR 1 at 5, the High Court observed that the expression is also used in legislation. The Court went on to say that by reason of usage, the phrase has come to mean the standard rate of pay as fixed by the relevant legislative instrument, award or agreement. It is, of course, true that the context may suggest a different meaning, as for example in Brain & Robinson v Goodyear Tyre & Rubber Co (Aust) Ltd [1959] AR(NSW) 643. But in my opinion there is no contrary indication in the award. I did, for a time, toy with the notion that the composite expression “the ordinary time rate of pay for the employee concerned” drew attention to the rate actually paid to the “employee concerned”. That type of approach, however, did not find favour with the Court in Scott: see 178 CLR at 6. Nor is it consistent with the award. I have in mind the provisions dealing with payment in lieu of notice which is calculated by reference to the amounts actually payable to employees. In other words, those who drafted the award drew a distinction between standard rates of pay and actual rates of pay. Redundancy falls into the first category.[24]
[24] Mechanical Services (No. 2) IR at 352-353 per Finkelstein J; FCA at paras.2-4 per Finkelstein J.
Unaided by authority, the Court as presently constituted might have considered that the use of the words “for the employee concerned” in clause 12.1.5 of the Award might, as the Federal Court said in Mechanical Engineering Services (No.2), have drawn attention to the rate actually paid to the employee concerned, and thereby constituted context which otherwise required the Court to depart from the usual meaning of the phrase “ordinary time rate of pay”.[25] However, as the Federal Court noted in Mechanical Engineering Services (No.2), this approach was eschewed by the High Court in Scott, and therefore did not find favour with the Federal Court in Mechanical Engineering Services (No.2). Further, in Mechanical Engineering Services (No.2) it was noted that it was not consistent with award provisions dealing with pay in lieu of notice which were calculated by reference to the amounts actually payable to employees. The position is likewise in relation to the Award which requires:
[25] Scott at 5 per Mason CJ, Brennan, Dawson, Toohey and McHugh JJ.
“payment in lieu of notice [that] must equal or exceed the total of all amounts that, if the employee’s employment had continued until the end of the required period of notice, the employer would have become liable to pay to the employee because of the employment continuing during that period, that total must be calculated on the basis of:
(a) the employee’s ordinary hours of work (even if not standard hours); and
(b) the amounts ordinarily payable to the employee in respect of those hours, including, for example, allowances, loading and penalties; and
(c) any other amounts payable under the employee’s contract of employment.”[26]
In that regard, the Federal Court judgment in Mechanical Engineering Services (No. 2) is on all fours with the circumstances in this case. This Court must follow the judgment in Mechanical Engineering Services (No. 2) unless it is plainly wrong.[27]
[26] Award, clause 13.4.
[27] SZANS FCR at 592 per Weinberg, Jacobson and Lander JJ; FCAFC at paras.38-39 per Weinberg, Jacobson and Lander JJ; Lee and Others v Minister for Immigration and Multicultural Affairs and Anor (2006) 205 FLR 117 at 133 per Driver FM; [2006] FMCA 480 at para.28 per Driver FM; Verge & Anor v Devere Holdings Pty Ltd & Ors (No. 2) [2008] FMCA 743 at para.12(e) and (d) per Lucev FM.
Having regard to the accepted meaning of the phrase “ordinary time rate of pay” in its usage in Australia and New Zealand, the High Court’s judgment in Scott and the Federal Court judgment in Woolworths, it cannot be said that the judgment in Mechanical Engineering Services (No.2) is wrong. It must therefore be followed by this Court.
In the above circumstances, the “ordinary time rate of pay” for the calculation of redundancy payments to Mr Stewart and Ms DiIulio is that fixed as the ordinary time rate of pay under clause 12.1.5 of the Award. The applicant’s case with respect to the alleged failure by the respondent to pay the correct redundancy entitlements to Mr Stewart and Ms DiIulio must therefore fail.
The annual leave claim
Mr Stewart and Ms DiIulio – taking of and payment for annual leave
In relation to the annual leave claim there is no dispute that Mr Stewart and Ms DiIulio did not take any period of annual leave during the time they were employed by the respondent, and were not paid any specific amount as accrued annual leave on termination of their employment.
Award provisions
Clause 33 of the Award provides for annual leave, and is relevantly in the following terms:
33. ANNUAL LEAVE
33.1 A period of 28 consecutive days annual leave without loss of pay shall be allowed annually to an employee on weekly hire after twelve months continuous service (less the period of annual leave).
33.2 Shift workers who are rostered to work continuous shift work (which includes working regularly on Sundays and holidays) in addition to the leave specified above, shall be allowed an extra seven consecutive days leave including non-working days.
33.3 Annual leave is exclusive of public holidays
The annual leave prescribed by this clause shall be exclusive of any public holiday. If a holiday falls within an employee’s period of annual leave and is observed on what would have been an ordinary working day for that employee, one day for each such holiday shall be added to that annual leave.
33.4 Calculation of continuous service
33.4.1 For the purpose of this clause, service shall be deemed to be continuous notwithstanding:
33.4.1(a) any interruption or termination of the employment by the employer if such interruption or termination has been made merely with the intention of evading obligations under this award;
33.4.1(b) any absence from work on account of personal sickness or accident, or on account of leave granted, imposed or agreed by the employer; or
33.4.1(c) any absence with reasonable cause, proof shall be on the employee.
33.4.2 In cases of personal sickness or accident, or absence with reasonable cause, the employee, to become entitled to the benefit of this subclause shall notify the employer, if practicable within 24 hours of the commencement of such absence, of the employee’s inability to attend for duty.
33.4.3 In calculating the period of twelve months continuous service, any such absence in a twelve monthly period as aforesaid shall not, except to the extent of not more than fourteen days or the period for which an employee is entitled to, and is paid sick leave in accordance with the provisions of this award (whichever period is the longer) in the case of sickness or accident, be taken into account in calculating the period of twelve months continuous service.
33.4.4 Any other absences from work by reason of any other cause being a cause specified in this subclause, will not be deemed to have broken the continuity of service unless the employer states in writing that the absence breaks the continuity of service within fourteen days of the employee’s return from the absence.
…
33.7 Leave to be taken
The annual leave provided by this clause shall be allowed and shall be taken. Payment shall not be made or accepted in lieu of annual leave except on termination of employment.
33.8 Time of taking leave
33.8.1 Annual leave shall be given at a time fixed by mutual agreement, or failing that, at a time fixed by the employer and the leave provided in 34.1 may at the option of the employee be taken in conjunction with leave becoming due after the following twelve months of continuous service.
33.8.2 Leave shall be given within six months of its becoming due, or as required by the employee, and after two weeks notice to the employer.
33.9 Payment for period of leave
33.9.1 Each employee before going on leave shall be paid such wages which have accrued on account of annual leave at the rate applicable at the time the leave is taken.
33.9.2 During a period of annual leave, an employee shall receive a loading calculated on the rate of wage prescribed by 33.9.1 of this clause.
33.9.3 The loading shall be as follows:
33.9.3(a) Day workers - an employee who would have worked on day work only had he not been on leave - a loading of 17.5%.
33.9.3(b) Shift workers - an employee who would have worked on shift work had he not been on leave a loading of 17.5%.
Provided that where the employee would have received shift loadings prescribed by clause 32 - Shift work, had he not been on leave during the relevant period and such loadings would have entitled him to a greater amount than the loading of 17.5%, then the shift loadings shall be added to the rate of wage prescribed by 33.9.1 in lieu of the 17.5% loading.
Provided further, that if the shift loadings would have entitled him to a lesser amount than the loading of 17.5%, then such loading of 17.5% shall be added to the rate of wage prescribed by 33.9.1 in lieu of the shift loadings.
33.10 Proportionate leave on termination
If, after one month’s continuous service in any qualifying twelve monthly period, an employee lawfully leaves his or her employment, or his or her employment is terminated by the employer through no fault of the employee, the employee shall be paid at his or her ordinary rate of wage of 2.923 hours in respect of each completed week of continuous service, being service in respect of which leave has not been granted hereunder.
The loading on annual leave pay prescribed by 33.9.2 shall apply to proportionate leave on termination.
The dispute
In this case the dispute between the parties is as to whether:
a)as asserted by the applicant, Mr Stewart and Ms DiIulio were entitled to a lump sum payment of accrued annual leave on termination of employment in accordance with clause 33.10 of the Award; or
b)as asserted by the respondent, Mr Stewart and Ms DiIulio have no entitlement to a payment for accrued annual leave on termination because any such entitlement has effectively merged with the payment of the twenty percent loading provided for in clause 6.1 of the Employment Agreement.
The applicant’s submissions
The applicant submits that the Award provides for annual leave, and that Mr Stewart and Ms DiIulio were:
a)never granted annual leave, and
b)not paid in lieu for annual leave.
The applicant says that the respondent contends that the flat ordinary rate of pay specifically included a component of compensation for annual leave entitlements.
The applicant submits that:
a)the provisions of the Employment Agreement do not make an allowance for annual leave at all;
b)it is well settled that an over-award payment cannot be used to satisfy liability for another award entitlement unless the parties have specifically agreed that the over-award payment is made in respect of that entitlement;[28]
c)it is not open for an employer and employee to contract out of the payment of annual leave, by, for example cashing in annual leave, as such a practice was prohibited until 1 July 2009 by s.233 of the WR Act;[29] and
d)there is no provision for cashing out annual leave in the Award.
[28] Citing Poletti v Ecob (No 2) (1989) 91 ALR 381 at 393 per Keely, Ryan and Gray JJ [(“Poletti (No 2)”); Australian and New Zealand Banking Group Ltd v Finance Sector Union of Australia (2001) 111 IR 227 at 238-239 per Black CJ, Wilcox and von Doussa JJ; [2001] FCA 1785 at paras.48-50 per Black CJ, Wilcox and von Doussa JJ (“ANZ”).
[29] And is now prohibited by s.92 of the FW Act.
The applicant therefore contends that there is no basis upon which the respondent can contend that it has paid or granted annual leave to Mr Stewart and Ms DiIulio.
Respondent’s submissions
Subject to the question of set-off (which is considered below) the respondent contends that the Court must determine how much the respondent was otherwise obliged to pay to Mr Stewart and Ms DiIulio for annual leave by reference to accrued annual leave on termination of employment under the Award.
The respondent submits that:
a)ordinarily, s.235(2) of the WR Act, and its associated provisions, would determine the obligation to pay annual leave;
b)the Award is an “award” within the meaning of Part 10 of the WR Act;[30]
c)ordinarily, on and from 27 March 2006, annual leave provisions of awards under Part 10 of the WR Act, including the Award, have been non-allowable matters and of no effect,[31] with annual leave entitlements of federal system employees being provided for by the Australian Fair Pay and Conditions Standard;[32]
d)however, under the terms of s.520 of the WR Act, awards may include preserved award terms which continue to have effect, and by reason of s.527(2) of the WR Act, if an award term deals with a matter, including annual leave, and provides a more generous entitlement than the corresponding entitlement in the AFPCS, then the preserved award term continues to apply to the exclusion of the AFPCS;[33] and
e)the respondent says that clause 33.10 of the Award provides a more generous entitlement to payment of accrued annual leave on termination of employment than the corresponding provisions of the AFPCS because proportionate leave on termination of employment includes a loading of 17.5%, and therefore clause 33.10 of the Award continues to apply to the exclusion of the AFPCS, and in particular, s.235(2) of the WR Act.
[30] Being a pre-reform award under Item 4 of Schedule 4 to the Work Choices Act.
[31] WR Act, ss.516(1) and 525(1).
[32] WR Act, Part 7; “AFPCS”.
[33] WR Act, s.529(2).
The respondent then submits that there are two issues to be determined under clause 33.10 of the Award, namely:
a)how many hours of accrued annual leave are Mr Stewart and Ms DiIulio entitled to on termination of their employment; and
b)at what rate of pay are they to be remunerated for those hours?
The respondent submits that Mr Stewart has 78 weeks of continuous service, and Ms DiIulio has 85 weeks of continuous service, and that equates to 227.994 and 248.455 hours of annual leave respectively.
As to the rate of pay applicable in each case the respondent submits that the base rate of pay established in the Award is referable to each employee’s classification. Therefore, the respondent says that where clause 33.10 of the Award uses the phrase “ordinary rate of wage” that that phrase (even though slightly different to the words used in clause 12.1.5 of the Award) was intended to reflect the ordinary rate of pay for the employee concerned.
The respondent therefore says that there is no basis to give the phrase “ordinary rate of wage” any other meaning, other than the base rate of pay established under the Award. The respondent says that, contextually, this is supported by other clauses in the Award, including clause 15.6 which distinguishes all loadings, penalties and other allowances from the “wages paid for work at ordinary rate”, and clauses 32.2 and 32.3, which add shift allowances to the “ordinary rate”. The respondent also notes that where the Award seeks to include over-award payments in a calculation methodology, it specifically does so, as in clause 27.1.3 of the Award which defines “Ordinary time earnings”, for the purposes of superannuation, as follows:
Ordinary time earnings shall mean the employee’s award classification rate, any over-award payment, district allowance, tool allowance, leading hand allowance, shift loadings, including weekend and public holiday rates where the shift work is part of the employee’s ordinary hours of work, but shall not include payment for overtime, bonus or any other ancillary payments of a like nature prescribed by the award.
The respondent points out that clause 33.10 of the Award does not include an over-award payment calculation methodology.
The respondent submits that the appropriate hourly rate is 117.5% of the rate of pay for the classification in the Award, and that for:
a)Mr Stewart, this amounts to $20.96 per hour for 227.994 hours being an amount of $4,778.75 payable by way of accrued annual leave; and
b)Ms DiIulio is $21.63 per hour for 248.455 hours which amounts to $5,374.08 payable by way of accrued annual leave.
The respondent however submits that no obligation to pay such amount arises because it is entitled to set-off over-award payments against its obligation to pay accrued annual leave on termination under the Award.
Legislative provisions
Section 235 of the WR Act sets out payment rules for annual leave, including accrued annual leave on termination, and provides in that latter respect as follows:
(2) If the employment of an employee who has not taken an amount of accrued annual leave ends at a particular time, the employee’s untaken accrued annual leave must be paid at a rate that is no less than the employee’s basic periodic rate of pay at that time.
Section 520 of the WR Act provides that “an award may include preserved award terms”.
Section 527 of the WR Act relevantly provides as follows:
(1) A term, or more than one term, of an award is a preserved award term if:
(a) the term or terms are about a matter referred to in subsection (2); and
(b) the term or terms were in effect immediately before the reform commencement.
(2) For the purposes of paragraph (1)(a), the matters are as follows:
(a) annual leave;
….
(3) If a term of an award referred to in subsection (1) is about both matters referred to in subsection (2) and other matters, it is taken to be a preserved award term only to the extent that it is about the matters referred to in subsection (2).
(4) If more than one term of an award is about a matter referred to in subsection (2), then those terms, taken together, constitute the preserved award term of that award about that matter.
(6) A preserved award term continues to have effect for the purposes of this Act.
Section 529 of the WR Act provided as follows:
(1) This section applies to an employee if:
(a) the employee's employment is regulated by an award that includes a preserved award term about a matter; and
(b) the employee has an entitlement (the preserved award entitlement ) in relation to that matter under the preserved award term.
(2) If:
(a) the preserved award term is about a matter referred to in paragraph 527(2)(a), (b) or (c); and
(b) the employee's preserved award entitlement in relation to the matter is more generous than the employee's entitlement in relation to the corresponding matter under the Australian Fair Pay and Conditions Standard;
the employee's entitlement under the Australian Fair Pay and Conditions Standard is excluded, and the employee's preserved award entitlement has effect in accordance with the preserved award term. Otherwise, the employee's entitlement under the Australian Fair Pay and Conditions Standard has effect.
(3) If:
(a) the preserved award term is about a matter referred to in paragraph 527(2)(a), (b) or (c) and the employee has no entitlement in relation to the corresponding matter under the Australian Fair Pay and Conditions Standard; or
(b) the preserved award term is about a matter referred to in paragraph 527(2)(d), (e), (f) or (g);
the employee's preserved award entitlement has effect in accordance with the preserved award term.
Section 530 of the WR Act provides as follows:
(1) Whether an employee's entitlement under a preserved award term in relation to a matter is more generous than the employee's entitlement in relation to the corresponding matter under the Australian Fair Pay and Conditions Standard:
(a) is as specified in, or as worked out in accordance with a method specified in, regulations made under this paragraph; or
(b) to the extent that regulations made under paragraph (a) do not so specify--is to be ascertained in accordance with the ordinary meaning of the term more generous.
(2) If a matter to which an entitlement under a preserved award term relates does not correspond directly to a matter to which the Australian Fair Pay and Conditions Standard relates, regulations made under paragraph (1)(a) may nevertheless specify that the matters correspond for the purposes of this Division.
Chapter 2 reg.10.03 of the Workplace Relations Regulations 2006 (Cth)[34] deals with the meaning of “more generous” for the purposes of s.530(1)(a) of the WR Act, and provides as follows
[34] “WR Regs”.
(1) For paragraph 530 (1) (a) of the Act, this regulation explains how to determine whether an employee's entitlement under a preserved award term in relation to:
(a) annual leave; …
…;
is more generous than the employee's entitlement in relation to the corresponding matter under the Australian Fair Pay and Conditions Standard.
(2) The entitlements are to be compared on the basis of their effect on the employee alone, rather than on the basis of their effect on employees generally.
(3) However:
(a) if the total annual quantum of a kind of leave permitted under the preserved award term is greater than the total annual quantum of that kind of leave permitted under the Australian Fair Pay and Conditions Standard, the entitlement specified under the preserved award term is taken to be more generous; and
(b) if the total annual quantum of a kind of leave permitted under the preserved award term is less than or equal to the total annual quantum of that kind of leave permitted under the Australian Fair Pay and Conditions Standard, the entitlement under the Australian Fair Pay and Conditions Standard has effect.
Examples of comparisons between preserved award terms and the Australian Fair Pay and Conditions Standard for a full‑time employee
Preserved award term
Australian Fair Pay and Conditions Standard
The entitlement that applies is set out in
1 Annual leave
Workers other than shift workers
Not more than 4 weeks
4 weeks
Australian Fair Pay and Conditions Standard
More than 4 weeks
4 weeks
the preserved award term
Shift workers
Not more than 5 weeks
5 weeks
Australian Fair Pay and Conditions Standard
More than 5 weeks
5 weeks
the preserved award term
…
(3A) A reference in the table in subregulation (3) to a period of annual leave or personal/carer's leave is a reference to paid annual leave or personal/carer's leave.
(4) If, under this regulation, an entitlement under the Australian Fair Pay and Conditions Standard, or the preserved award term, is taken to be more generous, the entitlement is to be applied in accordance with the administrative provisions and other arrangements (if any) that relate to the entitlement.
Consideration – annual leave
The first issue to be determined is whether, and to what extent, clause 33 of the Award, is a “preserved award term”.
Clause 33 of the Award is about “annual leave”,[35] and is therefore “a matter referred to” for the purposes of s.527(1)(a) of the WR Act. The parties agree that the Award is a “pre-reform Award”.[36] Therefore the Award terms “were in effect immediately before reform commencement”.[37] Therefore as clause 33 of the Award, as a whole, deals with “annual leave”, clause 33 of the Award is, in its entirety, a preserved award term under s.527(1) of the WR Act.
[35] WR Act, s.527(2)(a).
[36] Statement of Agreed Facts, para.4.
[37] WR Act, s.527(1)(b).
The entitlement to leave under s.235(2) of the WR Act, which forms part of the AFPCS, will be excluded if, as contended by the respondent, clause 33 (and in particular sub-clause 33.10) of the Award provide for annual leave entitlements on more generous terms than the AFPCS.
Mr Stewart and Ms DiIulio’s annual leave entitlements must be “compared on the basis of their effect on the employee alone”[38] to determine whether the Award is “more generous” than the AFPCS entitlement. As the relevant terms are identical in this case (save for rate of pay) this does not require Mr Stewart and Ms DiIulio’s entitlements to be considered separately for present purposes. Specifically, the respondent argues that the payment of annual leave loading of 17.5% on proportionate leave on termination means that Mr Stewart and Ms DiIulio’s entitlement to payment for annual leave under the Award is more generous than under the AFPCS.
[38] WR Regs, reg.2.10.03(2).
Under the AFPCS Mr Stewart and Ms DiIulio “must” be paid any outstanding leave on termination “at a rate that is no less than the employee’s basis periodic rate of pay at that time.”[39]
[39] WR Act, s.235(2).
In Williams v MacMahon Mining Services Pty Ltd (No.2)[40] this Court found that the provisions of s.235(2) do not require payment of the basic periodic rate of pay, but rather payment at a rate “no less than” the basic periodic rate of pay.[41] As the Court observed in MacMahon Mining Services (No.2):
67.There must be a basic periodic rate of pay. It cannot be unascertainable, as an employee is guaranteed annual leave, and payment for that annual leave under ss.232(2) and (3) and 235(2).[42]
[40] (2009) 187 IR 426; [2009] FMCA 763 (“MacMahon Mining Services (No. 2)”).
[41] MacMahon Mining Services (No. 2) IR at 449 per Lucev FM; FMCA at para.75 per Lucev FM. An appeal against MacMahon Mining Services (No. 2) was dismissed by the Federal Court: see MacMahon Mining Services Pty Ltd v Williams (2010) 201 IR 123; [2010] FCA 1321 (“MacMahon Mining Services Appeal”).
[42] MacMahon Mining Services (No. 2) IR at 448 per Lucev FM; FMCA at para.67 per Lucev FM.
Section 178 of the WR Act excludes from the basic period rate of pay “incentive based payments and bonuses, loadings, monetary allowances, penalty rates or any other similar separately identifiable entitlements.” The “basic periodic rate of pay” does not include “loadings”.[43] Therefore, in undertaking the comparison of paid annual leave entitlements on termination, the loading paid under the Award cannot be considered to be part of the basic periodic rate of pay. It therefore follows that the entitlement under the Award, including the loading, is “more generous” than the entitlement provided under the AFPCS, because the Award entitlement provides a paid annual leave entitlement 17.5% greater than would be payable under the basic periodic rate of pay entitlement.[44] Because the entitlement under the Award to paid annual leave on termination is more generous than that payable under the entitlement under the basic periodic rate of pay, the AFPCS is excluded and has no effect in relation to any entitlement Mr Stewart and Ms DiIulio have to annual leave under the Award.[45]
[43] This definition, and its effect, is not inconsistent with the meaning of “ordinary time rate of pay” adopted by the courts in respect of legislative and award entitlements: see paras.29-37 above.
[44] WR Regulations, Ch.2 reg.10.03(2).
[45] WR Act, s.529(2).
The question now becomes what is the entitlement of Mr Stewart and Ms DiIulio to paid annual leave on termination under the Award.
In this case there was no evidence of or reliance sought to be placed upon:
a)the intent of the framers of the Award;[46]
b)the context of the making of, and the practical purpose intended to be served by, the Award;[47] or
c)the history of the Award.[48]
Therefore, in interpreting the Award the Court must:
d)begin with a consideration of the ordinary meaning of the words of the Award;[49]
e)generally give ordinary or well-understood words their ordinary or usual meaning;[50]
f)have regard to the context and purpose of the provision being construed, where context may appear from the whole of the text of the Award, the arrangement of the text, or the place in the text of the relevant provision;[51] and
g)have regard, as a contextual consideration, to the fact that it is an industrial award being construed, and therefore not open to literal, narrow or pedantic construction.[52]
[46] Kucks v CSR Ltd (1996) 66 IR 182 at 184 per Madgwick J (“Kucks”).
[47] Kucks at 184 per Madgwick J; Finance Sector Union of Australia v Commonwealth Bank of Australia (2001) 106 IR 172 at 175 per Gyles J; [2001] FCA 335 at para.11 per Gyles J.
[48] Short v FW Hercus Pty Ltd (1993) 40 FCR 511 at 518-519 per Burchett J; NSW Nurses Association v Ramsay Health Care Australia Pty Ltd (2009) 185 IR 1 at 26-27 per Barnes FM; [2009] FMCA 579 at para.122 per Barnes FM.
[49] City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (2006) 153 IR 426 at 438 per French J; [2006] FCA 813 at para.53 per French J (“City of Wanneroo”).
[50] Kucks at 184 per Madgwick J.
[51] Amcor Ltd v Construction, Forestry, Mining and Energy Union & Ors (2005) 222 CLR 241 at 246 per Gleeson CJ and McHugh J; [2005] HCA 10 at para.2 per Gleeson CJ and McHugh J; City of Wanneroo IR at 438-439 per French J; FCA at para.53 per French J.
[52] City of Wanneroo IR at 440 per French J; FCA at para.57 per French J; Kucks at 184 per Madgwick J; Australasian Meat Industry Employees Union (WA Branch) v Woolworths Ltd (2007) 164 FCR 420 at 424 per Siopis J; [2007] FCAFC 201 at para.21 per Siopis J.
There is no dispute that:
a)Mr Stewart commenced employment on 10 October 2007;[53]
b)Ms DiIulio commenced employment on 22 August 2007;[54]
and, therefore, relevant service for Mr Stewart and Ms DiIulio is continuous for the purpose of clause 33.4 of the Award until the date of their respective terminations.
[53] The matter was in dispute prior to hearing: see Statement of Agreed Facts, para.5. However, Counsel for the applicant accepted the date of 10 October 2007 at hearing: see Transcript at page 5.
[54] Statement of Agreed Facts, para.14.
Continuous service for:
a)Mr Stewart is 78 weeks; and
b)Ms DiIulio is 85 weeks,
and for each week of continuous service Mr Stewart and Ms DiIulio are entitled to 2.923 hours payment for accrued annual leave on termination at the “ordinary rate of wage”.[55] Mr Stewart is therefore entitled to payment for 227.994 hours of accrued annual leave on termination, and Ms DiIulio is entitled to payment for 248.455 hours of accrued annual leave on termination.
[55] Award, clause 33.10.
There does not appear to be any dispute that:
a)Mr Stewart was classified at level 6 (being an Electrical Tradesman 3); and
b)Ms DiIulio was classified at Level 7 (being an Electrical Tradesman 4),
under the Award.[56]
[56] Transcript at page 18.
At the time of termination of employment the wage rates payable under the Award were:
a)for Mr Stewart, a Level 6 was $677.78 per week; and
b)for Ms DiIulio, a Level 7 was $699.48 per week.[57]
[57] Statement of Agreed Facts, para.26.
The hourly rate for each of Mr Stewart and Ms DiIulio was therefore:
a)$20.96 per hour (being $677.78 (ordinary rate) divided by 38 (hours) plus 17.5% (leave loading)) for Mr Stewart; and
b)$21.63 per hour (being $699.48 (ordinary rate) divided by 38 (hours) plus 17.5% (leave loading)) for Ms DiIulio.
The question arises as to what is meant by “ordinary rate of wage” in clause 33.10 of the Award. That is, what is the “ordinary rate of wage” for the purposes of payment of accrued annual leave on termination? If, as the Court has found, the “ordinary time rate of pay” for the purposes of clause 12.1.5 of the Award meant the relevant Award rate of pay, and not the actual rate of pay, it follows that a reference to “ordinary rate of wage” in clause 33.10 of the Award means “ordinary rate of wage” under the Award, and for the same reasons as set out above in relation to “ordinary time rate of pay”.[58] For present purposes, the “ordinary rate of wage” is the rate of wage for each classification under clause 14.1 of the Award. Clause 14 of the Award is headed “Wage Rates and Classifications” and sets out the wage for each specific classification. That the wage set is the “ordinary” rate of wage for annual leave purposes is, in addition to the matters set out above,[59] evident from provisions of the Award, including the following:
[58] See paras.29-37 above.
[59] See paras.29-37 above.
a)clause 15 which deals with payment of wages and which prescribes that payslips must set out:
i)“the amount of wages paid for work at the ordinary rate”;
ii)“the gross amount of wages and allowances paid”;
iii)“the net amount of wages and allowances paid”;
iv)“the number of hours paid at overtime rates …”; and
v)“the amount of allowances for special rates paid”;[60]
[60] Award, clause 15.6.
b)clause 16, entitled “Special Rates” which:
i)provides that:
In addition to the rates otherwise prescribed the following extra rates shall be paid to employees engaged in any of the classes of work described in this clause.[61]
[61] Award, clause 16.1.
ii)provides for a variety of special rates for materials handling,[62] hot work,[63] cold work,[64] cramped or unventilated spaces,[65] working at heights,[66] and working on multi-storey buildings;[67]
[62] Award, clause 16.2.
[63] Award, clause 16.3.
[64] Award, clause 16.4.
[65] Award, clause 16.5.
[66] Award, clause 16.6.
[67] Award, clause 16.7-16.9.
c)other clauses which provide for:
i)construction allowance;[68]
ii)site and/or establishment allowances;[69]
iii)tool allowances;[70]
iv)accommodation and camping allowances;[71]
v)leading hand allowance;[72]
vi)motor vehicle allowance;[73] and
vii)first aid allowance;[74] and
d)clause 32 – Shift Work which provides for shift workers on afternoon or night shifts “to be paid 15% more than the ordinary rate for such shifts”.[75]
[68] Award, clause 17.
[69] Award, clause 18.
[70] Award, clause 19.
[71] Award, clause 20.
[72] Award, clause 21.
[73] Award, clause 22.
[74] Award, clause 23.
[75] Award, clause 32.2.
Even allowing for the principle that industrial awards ought not be interpreted too narrowly, pedantically or literally,[76] the combination of additional allowances, special rates, and particularly the payment for shift work at above the “ordinary rate”, reinforces the conclusion that the “ordinary rate of wage” for the purposes of clause 33.10 of the Award is the particular rate specified in clause 14.1 of the Award for the classification in which an employee is employed. It therefore follows that the applicant’s claim that the ordinary rate of wage for the purposes of payment of accrued annual leave on termination is the actual rate of pay of each of Mr Stewart and Ms DiIulio cannot be sustained, and must fail.
[76] See para.68(g) above.
Mr Stewart was therefore entitled to be paid $4,778.75 for accrued annual leave on termination (being 227.994 hours at $20.96 per hour)
Ms DiIulio was therefore entitled to be paid $5,374.08 for accrued annual leave on termination (being 248.455 hours at $21.63 per hour).
The respondent did not pay the amounts to which Mr Stewart and Ms DiIulio were entitled by way of accrued annual leave on termination as a specific sum on termination. On the face of it, there was therefore, in relation to both Mr Stewart and Ms DiIulio, a contravention of clause 33.10 of the Award by reason of a failure to pay them their entitlement to accrued annual leave on termination in the amount of $4,778.75 for Mr Stewart, and $5,374.08 for Ms DiIulio. However the respondent contends that it is entitled to set-off other payments against that entitlement.
Set-off
Respondent’s submissions
The respondent contends that it is entitled to set-off any over-award payments made to Mr Stewart and Ms DiIulio which have not been specifically allocated to the payment of some other entitlement or benefit so as to extinguish any liability it has to them for annual leave under clause 33.10 of the Award.[77]
[77] Citing cases including Poletti v Ecob (No 2); ANZ; James Turner Roofing Pty Ltd v Peters (2003) 132 IR 122 at 127 per Anderson J; [2003] WASCA 28 at para.21 per Anderson J; and Williams v MacMahon Mining Services Pty Ltd (2009) 231 FLR 59; [2009] FMCA 511 (“MacMahon Mining Services (No 1))”.
The respondent points in particular to MacMahon Mining Services (No.1) where this Court concluded that over-award payments could be set-off against any amounts not paid by way of accrued annual leave on termination,[78] but went on to find that it was not possible to set-off on the facts of that case because a specific amount had not been expressly apportioned to the relevant obligation.[79]
[78] MacMahon Mining Services (No 1) FLR at 75 per Lucev FM; FMCA at paras.75-76 per Lucev FM.
[79] MacMahon Mining Services (No 2) IR at 451 per Lucev FM; FMCA at paras.87-88 per Lucev FM.
In this case, the respondent argues that there has been an express appropriation of part of the all-in rate paid to Mr Stewart and Ms DiIulio to satisfy their entitlements to annual leave under the Award. The respondent points to clause 6.1 of the contract of employment, which it says expressly designates 20% of the base rate of pay established under the Employment Agreement as being in satisfaction of their entitlements to annual leave under the Award. The base rate being $28.00 in each case, the respondent says that $5.60 an hour was therefore appropriated to annual leave.[80]
[80] Second Francis Affidavit, paras.12-14.
The respondent says that this is not a case of contracting out of the Award but rather discharging its Award obligations by reference to the contractual payments made. The respondent says that those principles are clearly distinguishable.[81]
[81] Citing Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd (2002) 121 IR 250 at 256-259 and 263-267 per Goldberg J; [2002] FCA 1406 at paras.23-35 and 53-65 per Goldberg J (“Givoni”).
The respondent therefore argues that there has been a complete discharge of the obligation to pay annual leave on termination by reason of the flat rate component of annual leave paid on an hourly basis to Mr Stewart and Ms DiIulio. The respondent says that:
a)Mr Stewart’s 78 weeks of service constitute 13 rotations of 6 weeks and that at 252 hours worked per 6 weeks, that equates to 3,276 hours of work and that $5.60 per hour for the annual leave component equals a payment over time of $18,345.60; and
b)Ms DiIulio’s 85 weeks of service constitute 21.25 rotations of 4 weeks and at 168 hours worked per each 4 weeks that equates to 3,570 hours of work, and at the $5.60 per hour rate, she has been paid annual leave over time of $19,992.00.
The respondent therefore says it has fully discharged its obligations in respect of annual leave in any event and that the annual leave claim must also be dismissed.
Applicant’s submissions
The applicant’s submissions are those set out above.[82]
[82] At paras.41-44 above.
Further submissions
After judgment was reserved following the hearing of this matter the Federal Court delivered judgment in MacMahon Mining Services Appeal. Consequently, this Court made further orders on 10 January 2011 in the following terms:
1. The respondent file and serve submissions in relation to the Federal Court Judgment in Williams v MacMahon Mining Services Pty Ltd [2010] FCA 1321 and associated matters by 14 February 2011.
2. The applicant file and serve any reply to the respondent’s submissions by 28 February 2011.
Although the applicant’s further submissions argue that the respondent’s further submissions give rise to issues that were not raised at hearing, and that there is evidentiary prejudice to the applicant arising therefrom, the Court has taken the view that the matters having been raised, arguably in accordance with the Court’s 10 January 2011 orders, the Court ought to determine those matters.[83] Further, so far as evidentiary prejudice is concerned, the Court has, for reasons set out below, formed the view that it is the respondent who suffers evidentiary prejudice of its own making in raising these matters, there being, for the most part, no or no sufficient evidence to establish matters it has now put in issue.
[83] Federal Magistrates Act 1999 (Cth), s.14.
Respondent’s further submissions
The respondent further submits that the ratio of MacMahon Mining Services Appeal involves the operation of s.173 of the WR Act, and the interaction of a contractual provision with the AFPCS, particularly ss.234-236 of the WR Act. The respondent submits, relying on its original submissions, that the annual leave aspects of the case do not involve the AFPCS or ss.234-236 of the WR Act, but rather the relevant provisions of the Award, particularly clause 33.10 of the Award.
The respondent therefore says that even if the judgment in MacMahon Mining Services Appeal is correct, that it says nothing about the disposition of this case. The respondent says that all the Court is left with is cases which have consistently held that the principles of set-off are applicable to award-based entitlements, including leave entitlements, and the issue of apportionment, including the alleged express contractual apportionment in this case, each of which was addressed in the original submissions.
Alternatively, the respondent submits that if the Court is of the view that the ratio of the MacMahon Mining Services Appeal judgment extends to this case, so as to render the relevant contractual provisions of no effect, and to preclude the availability of set-off, then the respondent formally submits that MacMahon Mining Services Appeal is plainly wrong. It says that MacMahon Mining Services Appeal involves an erroneous construction of s.173 of the WR Act, giving s.173 a broader application than could ever have been intended by parliament in the light of a century of industrial law in Australia, and that it leads to completely unworkable decisions. The respondent concedes that if the Court regards the ratio of MacMahon Mining Services Appeal as indistinguishable from the circumstances of this case, then it is bound to follow it.
Applicant’s further submissions
The applicant submits that:
a)the respondent’s argument that MacMahon Mining Services Appeal can be distinguished because its reasoning is confined to circumstances where the entitlement arises from the AFPCS is a distinction without a difference, and that in both MacMahon Mining Services Appeal and the present case the entitlement arises by reason of statute, or an instrument, the Award, with statutory force;[84]
b)that whilst MacMahon Mining Services Appeal had recourse to s.173 of the WR Act that section was no more than a statutory expression for the purposes of the AFPCS of a principle which is applied in respect of awards since the High Court judgment in Josephson v Walker.[85] Thus, the fact that the source of the principle that an entitlement (and indeed the source of the entitlement) are different has no bearing on the fact that the application of the principle leads to the same result in each case;
c)in MacMahon Mining Services Appeal the Federal Court said that:
68 The intent of the statute is that there will be entitlements in accordance with the AFPCS. If it were open to an employer to make a contract of employment that included terms such as that the subject of consideration here, such a process could no doubt have a real impact on bargaining rights. While it may be correct to say that some attempt has been made in the contract here to pay an additional sum allocated to potential leave entitlements, the effect of such a contractual provision is, in fact, to exclude an entitlement to be paid annual leave and other forms of leave under the Act at the termination of the employment. In those circumstances, s 173 of the WR Act applies to render such a contractual provision of no effect.[86]
d)the WR Act and the FW Act both prohibit the cashing out of paid annual leave,[87] and there was no suggestion that the employer had complied with the conditions set out in s.233 of the WR Act. Therefore, payment of cash in lieu of accrued annual leave on termination was contrary to the intent of the WR Act, namely that employees would be granted annual leave or paid their annual leave on termination of their employment in accordance with the Award.
[84] Citing Ex parte McLean (1930) 43 CLR 472 at 479 per Isaacs CJ and Starke J.
[85] (1914) 18 CLR 691 at 700 per Isaacs J (“Josephson”).
[86] MacMahon Mining Services Appeal IR at 135 per Barker J; FCA at para.68 per Barker J.
[87] WR Act, s.233 and FW Act, s.92.
The applicant notes the respondent’s argument that the judgment in MacMahon Mining Services Appeal is wrong, but reiterates that this Court is bound to follow MacMahon Mining Services Appeal.
Set-off consideration
The respondent’s case relies upon the validity, and enforceability, of clause 6.1 of the Employment Agreement. In order to be able to contract out of any obligation, the relevant contractual provision must be one which has force and effect. That is a question to which the Court now turns.
Section 173 of the WR Act provides that:
A term of a workplace agreement or a contract has no effect to the extent to which it purports to exclude the Australian Fair Pay and Conditions Standard or any part of it.
Section 173 appears in Division 1 of Part 7 of the WR Act, and is not itself part of the AFPCS, which are constituted by Divisions 2 to 6 inclusive of Part 7 of the WR Act.
The question is therefore whether the terms of clause 6.1 of the Employment Agreement have effect at all. Put differently, do the provisions of clause 6.1 of the Employment Agreement purport to exclude the AFPCS? This question is not affected by the fact that because the Award annual leave clause is more generous than the AFPCS provision for annual leave the AFPCS is excluded. Section 173 of the WR Act is directed at a different issue: namely, the effect of workplace agreements and contracts of employment which purport to exclude the AFPCS.
Sections 232-236 of the WR Act deal with annual leave as part of the AFPCS, and provide as follows:
232 The guarantee
(1) For the purposes of this Division, annual leave means leave to which an employee is entitled under this Subdivision.
All employees to whom this Division applies
(2) An employee is entitled to accrue an amount of paid annual leave, for each completed 4 week period of continuous service with an employer, of 1 / 13 of the number of nominal hours worked by the employee for the employer during that 4 week period.
Example: An employee whose nominal hours worked for a 12 month period were 38 hours per week would be entitled under this subsection to 152 hours of annual leave (which would be the equivalent of 4 weeks of annual leave if his or her nominal hours worked remained unchanged).
Additional leave entitlement for shift workers
(3) An employee is also entitled to accrue an amount of paid annual leave, for each completed 12 month period of continuous service with an employer, of 1 / 52 of the number of nominal hours worked by the employee, for the employer, as a shift worker during that 12 month period.
Example: A shift worker whose nominal hours worked for a 12 month period were 38 hours per week, and who worked as a shift worker throughout that period, would be entitled under this subsection to an additional 38 hours of annual leave (which would be the equivalent of one week of annual leave if his or her nominal hours worked remained unchanged).
233 Entitlement to cash out annual leave
(1) An employee is entitled to forgo an entitlement to take an amount of annual leave credited to the employee by an employer if:
(a) a provision in a workplace agreement binding the employee and the employer entitles the employee to forgo the entitlement to the amount of annual leave; and
(b) the employee gives the employer a written election to forgo the amount of annual leave; and
(c) a provision in a workplace agreement binding the employee and the employer entitles the employee to receive pay in lieu of the amount of annual leave at a rate that is no less than the rate that, at the time the election is made, is the employee's basic periodic rate of pay (expressed as an hourly rate); and
(d) the employer authorises the employee to forgo the amount of annual leave.
Note: If, under this section, an employee forgoes an entitlement to take an amount of annual leave, the employee's employer may deduct that amount from the amount of accrued annual leave credited to the employee.
(2) However, during each 12 month period, an employee is not entitled to forgo an amount of annual leave credited to the employee by an employer that is equal to more than 1 / 26 of the nominal hours worked by the employee for the employer during the period.
(3) An employer must not:
(a) require an employee to forgo an entitlement to take an amount of annual leave; or
(b) exert undue influence or undue pressure on an employee in relation to the making of a decision by the employee whether or not to forgo an entitlement to take an amount of annual leave.
(4) If, under this section, an employee forgoes an entitlement to take an amount of annual leave, the employer must, within a reasonable period, give the employee the amount of pay that the employee is entitled to receive in lieu of the amount of annual leave.
234 Annual leave--accrual, crediting and accumulation rules
Accrual
(1) Annual leave accrues on a pro‑rata basis.
Crediting
(2) Each month an employer must credit to an employee of the employer the amount (if any) of annual leave accrued by the employee under subsection 232(2) since the employer last credited to the employee an amount of annual leave accrued under that subsection.
(3) Each year an employer must credit to an employee of the employer the amount (if any) of annual leave accrued by the employee under subsection 232(3) since the employer last credited to the employee an amount of annual leave accrued under that subsection.
Accumulation
(4) Annual leave is cumulative.
235 Annual leave--payment rules
(1) If an employee takes annual leave during a period, the employee must be paid a rate for each hour (pro‑rated for part hours) of annual leave taken that is no less than the rate that, immediately before the period begins, is the employee's basic periodic rate of pay (expressed as an hourly rate).
(2) If the employment of an employee who has not taken an amount of accrued annual leave ends at a particular time, the employee must be paid a rate for each hour (pro‑rated for part hours) of the employee's untaken accrued annual leave that is no less than the rate that, immediately before that time, is the employee's basic periodic rate of pay (expressed as an hourly rate).
236 Rules about taking annual leave
General rules
(1) Subject to this section and section 233, an employee is entitled to take an amount of annual leave during a particular period if:
(a) at least that amount of annual leave is credited to the employee; and
(b) the employee's employer has authorised the employee to take the annual leave during that period.
(2) To avoid doubt, there is no maximum or minimum limit on the amount of annual leave that an employer may authorise an employee to take.
(3) Any authorisation given by an employer enabling an employee to take annual leave during a particular period is subject to the operational requirements of the workplace or enterprise in respect of which the employee is employed.
(4) An employer must not unreasonably:
(a) refuse to authorise an employee to take an amount of annual leave that is credited to the employee; or
(b) revoke an authorisation enabling an employee to take annual leave during a particular period.
….
In summary, ss.232-236 of the WR Act provide for:
a)a guarantee of 4 weeks, or 5 weeks for a shift worker, annual leave each year;[88]
b)a limited entitlement to forego an entitlement to annual leave and to take pay in lieu of annual leave, up to a maximum of 2 weeks each year;[89]
c)the pro rata accrual, and monthly and yearly crediting of accrued annual leave, which is cumulative;[90]
d)the payment of annual leave taken (which is not the case here),[91] or, where annual leave is not taken, the payment of the accrued annual leave at the time at which the employment ends;[92] and
e)an employee’s entitlement to take the leave which has been credited.[93]
[88] WR Act, s.232.
[89] WR Act, s.233.
[90] WR Act, s.234.
[91] WR Act, s.235(1).
[92] WR Act, s.235(2).
[93] WR Act, s.236(1)-(4).
Clause 6.1 of the Employment Agreement provides for payment of a loading of 20% in lieu of annual leave, and also in lieu of sick days, rostered days off and public holidays. The loading of 20% is a loading on a base hourly rate. Whatever the proportion of the 20% loading notionally allocated to annual leave, and even if the entire portion were to be allocated to annual leave, the effect of the payment of the loading is that:
a)annual leave does not accrue, or accumulate, and is not taken, or able to be taken, as a period of leave during employment, contrary to ss.232, 234 and 236(1)-(4) of the WR Act;
b)accrued annual leave is not paid on termination, contrary to s.235(2) of the WR Act, because it has not been allowed to accrue, contrary to s.234 of the WR Act; and
c)the entire entitlement to annual leave is foregone, not just two weeks of that entitlement, as provided for in s.233(2) of the WR Act.
On its face, clause 6.1 of the Employment Agreement purports to contract out of the AFPCS, and therefore is a provision which has no effect because of s.173 of the WR Act.
In MacMahon Mining Services (No. 2) this Court observed that:
69 Macmahon Mining submits that the basic periodic rate of pay is to be calculated by deducting a casual loading of 20%, being the casual loading referred to in the Flat Hourly Rate under the Contract of Employment. That approach ignores the fact that this Court has found that Mr Williams is not a casual employee, and therefore is not a person to whom a casual loading (be it 20% or any other amount) could have been paid, or was payable. In short, there was no entitlement to a casual loading because Mr Williams was not a casual employee, notwithstanding that there was a sum paid in lieu of leave entitlements and which was ostensibly a casual loading. Furthermore, to the extent that the Contract of Employment purports to pay a loading in lieu of paid leave entitlements (which must include annual leave), the payment of the loading is a term that has no effect because of the provisions of s 173, read in conjunction with ss 232(2) and (3) and to 233.
73 Because s 178 speaks of "other similar separately identifiable entitlements" it follows that if entitlements to loadings, monetary allowances or penalty rates are included in Mr Williams' Flat Hourly Rate that they too must be "separately identifiable entitlements". There is nothing in the provisions of the Contract of Employment or the Flat Hourly Rate which makes any of the matters there referred to "separately identifiable entitlements". There is no specification of any of the matters referred to as an actual entitlement, save for the reference to paid leave entitlements which are also not specific as to what leave entitlements are included and the loading for which has no effect because of the provisions of s 173. Otherwise, it is not apparent what entitlement to allowances, or rates for shift, public holiday and weekend work Mr Williams actually had or which it was intended be compensated for. In the Court's view it is implicit that any of the entitlements referred to in s 178 as not being included in the rate of pay for the purposes of the basic periodic rate of pay must be quantifiable entitlements, otherwise a basic periodic rate of pay cannot be determined. Where, as here, there is neither specification nor quantification of any of the matters referred to, it cannot be an entitlement. The gist of an entitlement for these purposes is that an employee is to be paid a particular quantum. If that quantum is not, or cannot be, specified then there is no entitlement, or no entitlement which is payable.
88 In any event, Mr Williams now raises the argument that s 173 means that the term of the Flat Hourly Rate clause that provides that a loading is payable in lieu of paid leave entitlements is a term of no effect. The effect of s 173 was not a matter considered by the Court in Macmahon Mining Services (No 1). The Court accepts that s 173 has the effect of making the provision purporting to pay a loading in lieu of annual leave entitlements to be of no effect. A similar conclusion must follow insofar as the loading purports to be in lieu of sick leave entitlements.[94]
[94] MacMahon Mining Services (No. 2) IR at 448, 449 and 451; FMCA at paras.69, 73 and 88 per Lucev FM.
On appeal from MacMahon Mining Services (No.2), MacMahon Mining Services ran the argument which is being run in this case by the respondent, namely that the payment of the loading constitutes an advance payment of annual leave, and therefore does not infringe s.173 of the WR Act. In MacMahon Mining ServicesAppeal that argument was rejected by the Federal Court. The Federal Court relevantly found that:
66 … there is a real inconsistency between the contractual term and the entitlement that s 173 seeks to preserve. …. Section 173 reflects a parliamentary intention that a person cannot, by one means or the other, contract out of their entitlement to be paid out annual leave and other leave entitlements at the end of a employment period, save for the particular provisions allowing for the sacrifice of annual leave.
67 In any event, as the Federal Magistrate found, the Contract does not attempt to make any particular allocation between different types of leave, which it contends have been provided for in advance. It simply asserts the hourly rate is inclusive. In doing so it simply purports to justify the payment of a more generous hourly rate by asserting it is inclusive of any of the nominated benefits. This is a plain attempt to contract out of the payment of those benefits without regard to whether or not they are actually payable at the time of payment of the hourly rate.
68 The intent of the statute is that there will be entitlements in accordance with the AFPCS. If it were open to an employer to make a contract of employment that included terms such as that the subject of consideration here, such a process could no doubt have a real impact on bargaining rights. While it may be correct to say that some attempt has been made in the contract here to pay an additional sum allocated to potential leave entitlements, the effect of such a contractual provision is, in fact, to exclude an entitlement to be paid annual leave and other forms of leave under the Act at the termination of the employment. In those circumstances, s 173 of the WR Act applies to render such a contractual provision of no effect.[95]
[95] MacMahon Mining Services Appeal IR at 135 per Barker J; FCA at paras.66-68 per Barker J.
In the circumstances, not only is MacMahon Mining Services Appeal a judgment which this Court does not consider to be wrong, it is also a judgment which:
a)is binding on this Court;[96] and
b)supports the conclusion expressed above[97] that clause 6.1 of the Employment Agreement is a provision which has no effect because of s.173 of the WR Act.
[96] MacMahon Mining Services (No 1) FLR at 74 per Lucev FM; FMCA at para.71 per Lucev FM; R v Casey; R v Smythe [1977] Qd R 132 at 134 per Wanstall SPJ, Douglas and Dunn JJ; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 167 per Toohey J, 158 per Dawson J, and 125 and 129-130 per Brennan J; SZANS FCR at 592 per Weinberg, Jacobson and Lander JJ; FCAFC at paras.38-39 per Weinberg, Jacobson and Lander JJ; Lee and Others v Minister for Immigration and Multicultural Affairs and Anor (2006) 205 FLR 117 at 133 per Driver FM; [2006] FMCA 480 at para.28 per Driver FM; Verge & Anor v Devere Holdings Pty Ltd & Ors (No. 2) [2008] FMCA 743 at para.12(e) and (d) per Lucev FM.
[97] See para.100 above.
Therefore, the Court concludes that clause 6.1 of the Employment Agreement has no effect. As such it cannot constitute a basis on which any loading paid in reliance on it can be set-off against the entitlement that Mr Stewart and Ms DiIulio otherwise have to payment of accrued annual leave on termination of their services with the respondent.
The conclusion set out above is not diminished by the fact that the annual leave clause of the Award is a “preserved award term”. If anything, the fact that a more generous term of the Award is preserved, reinforces the fact that the AFPCS are minimum terms which are not to be contracted out of, save as provided for by the Parliament.
Not dissimilar considerations arise in relation to the applicability of the Award. The Award expressly provides not only for the payment of untaken accrued annual leave on termination,[98] but also expressly prohibits payment in lieu of annual leave being “made or accepted … except on termination of employment”.[99] An award cannot be contracted out of.[100]
[98] Award, clause 33.10.
[99] Award, clause 33.7.
[100] Josephson at 700 per Isaacs J; Byrne and Frew at 421 per Brennan CJ, Dawson and Toohey JJ; Metropolitan Health Service Board v Australian Nursing Federation (2000) 99 FCR 95 at 103-104 and 106-107 per French J; [2000] FCA 784 at paras.18-20 and 24 per French J (“Metropolitan Health Service Board”); Givoni IR at 257-258 per Goldberg J; FCA at paras.29-32.
Because the respondent could not contract out of the Award, clause 6.1 of the Employment Agreement also has no effect for that reason. This is not a case of a provision of the Employment Agreement conferring additional benefits over and above the Award, to which there can be no objection.[101] In this case additional benefits were not sought to be conferred, but an existing irreducible benefit was sought to be wholly avoided, or at the least varied, in a manner made impermissible because of the obligation derived from statute to pay what is prescribed by the Award.
[101] Kilminster at 289 per Gavan Duffy CJ, Starke, Dixon and McTiernan JJ; Byrne and Frew at 421 per Brennan CJ, Dawson and Toohey JJ; Metropolitan Health Service Board at 103 per French J; FCA para.18 per French J.
In any event, the nature of the 20% loading poses particular problems for any attempt to set it off against any Award entitlement to be paid accrued annual leave on termination. The 20% loading is not solely a loading in lieu of an annual leave entitlement. Whilst particular paid leave entitlements that the loading is said to be in lieu of are identified, those entitlements are not entitlements which are apportioned in any way within the loading. Why should the Court allocate the entire 20% loading as a set-off in lieu of annual leave entitlement when the 20% loading is also in lieu of sick leave, rostered days off and public holidays? The Award prescribes an entitlement to:
a)up to ten days sick leave a year;[102]
b)specified public holidays;[103] and
c)rostered days off.[104]
[102] Award, clause 34.
[103] Award, clause 38.
[104] Award, clause 28.7.
There is in this case however no evidence as to:
a)whether there were additional public holidays gazetted under clause 38.7 of the Award; and
b)whether or not the respondent and a majority of its employees agreed to accrue the up to five rostered days off provided for in clause 28.7.1 of the Award,
for the locality in which Mr Stewart and Ms DiIulio were working
It is therefore not possible to accurately quantify the amount of the loading attributable to the annual and sick leave entitlements, rostered days off, and public holidays, the loading is said to be in lieu of. The evidence does not establish any basis on which the entitlements can be allocated in a specific way against specified quantums so as to allow the proper calculation of any set-off,[105] and the respondent has therefore not established the evidentiary basis for the claimed set-off.[106]
[105] MacMahon Mining Services (No. 2) IR at 452 per Lucev FM; FMCA at para.89 per Lucev FM.
[106] MacMahon Mining Services (No. 2) IR at 451 per Lucev FM; FMCA at para.87 per Lucev FM.
For all of the above reasons, and in all the circumstances, the set-off claim must fail.
Estoppel and waiver
Respondent’s submissions
On the assumption that the Court does not otherwise decide in the respondent’s favour in relation to the annual leave claim, the respondent further submits that Mr Stewart and Ms DiIulio are estopped from claiming the annual leave entitlements, and that the applicant is likewise estopped from claiming the annual leave entitlements on their behalf.
The respondent submits that the traditional elements of an equitable estoppel[107] have been made out against Mr Stewart and Ms DiIulio because:
a)the respondent assumed that it was fully complying with its legal obligations to Mr Stewart and Ms DiIulio in relation to annual leave insofar as it paid over award amounts attributable to the annul leave benefits;
b)Mr Stewart and Ms DiIulio each induced the respondent into that assumption by expressly agreeing to the terms of the Employment Agreements and by not raising the matter once during their respective periods of employment;
c)the respondent acted on its assumption, by failing to alter the terms of the Employment Agreements or take other steps available to it to avoid these proceedings;
d)Mr Stewart and Ms DiIulio obviously knew that the respondent had so acted;
e)there is clear detriment to the respondent if the assumption is not fulfilled, in the form of overpayments to compensate for annual leave, and then the payment of annual leave in any event; and
f)Mr Stewart and Ms DiIulio have failed to avoid the detriment: indeed, they have brought about the detriment by supporting the applicant in the bringing of these proceedings.
[107] Citing Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429 per Brennan J; Commonwealth v Verwayen (1990) 170 CLR 394 at 502 per McHugh J.
The respondent submits that the departure of Mr Stewart and Ms DiIulio from the assumption created is unjust and unconscionable and that they cannot both approbate and reprobate, or as it is quaintly put, “[s]ince the days of the Year Books it has been recognised that you cannot have the egg and halfpenny too”.[108]
[108] O’Connor v SP Bray Ltd (1936) 36 SR (NSW) 248 at 257 per Jordan CJ. The Year Books are a series of anonymous reports, in the form of notes of cases, commencing in the 13th century and ending in 1535: M Woodley (Ed), Osborn’s Concise Law Dictionary (10th Edition) (London: Sweet and Maxwell, 2005) at page 435.
The respondent accepts that the orthodox view is that the principles of estoppel do not operate against employees in relation to rights and benefits conferred on them under awards and industrial legislation,[109] but says that the majority in the Metropolitan Health Service Board case did not express any view on this issue.[110]
[109] Citing Metropolitan Health Service Board FCR at 104-106 per French J; FCA at paras.20-22 per French J (“Metropolitan Health Service Board”); and Givoni IR at 256-259 per Goldberg J; FCA at paras.23-35 per Goldberg J.
[110] Metropolitan Health Service Board FCR at 114-115 per Lee and Carr JJ; FCA at paras.62-64 per Lee and Carr JJ.
The respondent argues that there is a qualitative difference in this case in that the employee has taken a more generous benefit, expressly contemplated and agreed as an alternative to that provided by the Award or statute, and has then sought to keep the specific hourly contribution for annual leave and now seeks to take the annual leave as well: that is, to keep the egg and take the halfpenny too. The respondent says that none of the estoppel cases appear to directly grapple with this issue and that there is a fundamental unfairness in allowing Mr Stewart and Ms DiIulio to approbate and reprobate in such a fundamental way. The respondent argues that there is a clear public policy in ensuring employees cannot agree to forgo that to which they are legally entitled, but that there is no public policy nor any public interest in allowing an employee to agree to more generous compensation in lieu of some benefit, accept the more generous benefit for a period of time without complaint or comment, and then to sue for the benefit they have already been compensated for in a more generous fashion, relying upon public policy considerations in relation to legal entitlements by reason of statute or the Award.
The respondent recognises that if this Court concludes that the facts of this case are not distinguishable from the many other estoppel cases, and that those general statements and principle apply in this case, then those decisions are binding on this Court.[111] But, if the facts of this case are distinguishable, then there is a valid estoppel as against Mr Stewart and Ms DiIulio which prevents them from claiming that they have been underpaid their accrued annual leave on termination in breach of the Award, and that that estoppel extends to the applicant claiming on their behalf.
[111] See the authorities cited at fn.96 above.
Applicant’s submissions
The applicant argues that the Court should not entertain this argument since it was not within the leave granted by the orders of 11 January 2011. Further, it says that:
a)it is a new point raised for the first time after the close of each party’s case;
b)no evidence was directed at the point and the applicant has not been on notice and was not on notice that it might be raised at the time the evidence was led;
c)the respondent’s view makes a number of assertions which are in effect conclusions based on a particular view of the evidence, and it would be a denial of natural justice if the applicant was to consider those matters when estoppel was never raised and the applicant was not given any opportunity to test the evidentiary bases of the respondent’s argument;
d)in any event, even if the estoppel argument is to be considered it must fail because the weight of authority is such that any conclusion allowing an estoppel to be raised in respect of a payment of an Award would be bound to fail;[112]
e)the effect of allowing an argument of estoppel to succeed would be to undermine the efficacy of awards, and to allow contractual arrangements to prevail over awards in every case, a difficulty recognised by the respondent who seeks to carve out an exception to the general principle by submitting that an estoppel may arise where there is another more generous benefit expressly contemplated and agreed as an alternative to that provided by the award or statute;
f)the difficulty with the exception which the respondent seeks to create is that it assumes that the other benefit is referable to the Award entitlement, in which case the obligation is discharged,[113] but not otherwise;
g)the respondent has not pointed to any evidence, as opposed to submissions, which would give rise to estoppel in any event; and
h)an estoppel can only arise between parties and their privies, but this does not prevent the officer of an industrial organisation from exercising the right of the organisation (or its office bearers) from taking action in relation to members’ rights.[114]
[112] Citing Metropolitan Health Service Board FCR at 103-107 per French J; FCA at paras.17-25 per French J; Kidd v Savage River Mines (1994) 6 FCR 398 at 409 per Gray J (“Savage River Mines”).
[113] Poletti(No 2).
[114] Savage River Mines at 410 per Gray J.
Estoppel – consideration
In MacMahon Mining Services (No.1) this Court observed that recent judgments of the Federal Court in relation to estoppel made it clear that an estoppel cannot defeat a statutory obligation or statutory guarantee.[115] Thus, estoppel cannot defeat the statutory obligation not to breach the Award, which arises by reason of ss.718 and 719 of the WR Act, and even if each requisite element of an estoppel were made out the estoppels would be unenforceable or ineffectual because each of the estoppels is inconsistent with the requirements of the Award,[116] which expressly prohibited payment in lieu of annual leave, except on termination, [117] and required the respondent to pay accrued annual leave on termination to each of Mr Stewart and Ms DiIulio.[118]
[115] MacMahon Mining Services (No 1) FLR at 74 per Lucev FM; FMCA at para.71 per Lucev FM.
[116] McLennan v Surveillance Australia Pty Ltd (2005) 142 FCR 105; [2005] FCAFC 46; Regional Express Holdings Ltd v Clarke (2007) 165 IR 251; [2007] FCA 957; Givoni IR at 257-258 per Goldberg J; FCA at paras.29-32 per Goldberg J, citing relevant passages from Metropolitan Health Service Board.
[117] Award, clause 33.7.
[118] Award, clause 33.10.
For reasons set out above,[119] it has not been established that even if the estoppels were made out, that any payment referable to the estoppels was equal to or more than the unpaid accrued annual leave on termination for each of Mr Stewart and Ms DiIulio.
[119] See paras.108-110 above.
Finally, there can be no estoppel against the applicant in its capacity as a registered organisation. A registered organisation is not estopped from pursuing a breach of an award, even if the member of the registered organisation was estopped.[120]
[120] Savage River Mines at 410 per Gray J, cited with approval in Metropolitan Health Service Board FCR at 105-106; FCA at para.22 per French J, as authority for the proposition that statutory rights, especially where conferred for the benefit of the public or a section of the public, should not be estopped.
Therefore, in all the circumstances, the respondent’s claim in estoppel fails.
Whether to exercise discretion to make an order
Respondent’s submissions
On the assumption that the Court is against the respondent on all of the above matters, the respondent also submits that the Court has a discretion not to make an order with respect to repayment of an underpayment,[121] and if the Court accepts that there has been underpayment, the respondent submits that it must also accept that Mr Stewart and Ms DiIulio were paid a specific amount for each and every hour they worked which was supposed to, and did, in equivalent money terms, compensate them for that underpayment. The respondent submits that the Court might justifiably decline to make an order in those circumstances because there is no significant loss notwithstanding the respondent’s failure to comply with the Award. Further, the respondent submits that the employees actually received more than the Award prescribed. Therefore, in the respondent’s submission this is an appropriate case in which to exercise discretion in favour of the respondent, and for the Court to refuse to make an order with respect to any underpayments.
[121] PKIU v Vista Paper Products Pty Ltd (1994) 127 ALR 673 at 691-692 per Wilcox J (“Vista Paper”); Givoni IR at 268 per Goldberg J; FCA at para.69 per Goldberg J.
Applicant’s submissions
The applicant says that this point should not be permitted to be agitated as it was not raised at first instance and there was no notice of it and that the Court should exercise its discretion not to entertain the point.
In any event the applicant says that the authority relied upon does not support the contention put. In Vista Paper it is said that the Federal Court was suggesting that where an employee suffers no loss from the breach of an award the Court might decline an order and that that was nothing more than a recognition that the employee’s loss is a relevant consideration.[122]
[122] Vista Paper at 691-692 per Wilcox J.
The applicant says that in Givoni the Federal Court dealt with the very point raised by the respondent in this case and rejected it.[123]
[123] Givoni IR at 268 per Goldberg J; FCA at paras.70-71 per Goldberg J.
Consideration – exercise of discretion to refuse to make an order
The Court has discretion which it may exercise so as to refuse to make an order in relation to an alleged contravention.[124]
[124] Givoni IR at 268 per Goldberg J; FCA at paras.69-71 per Goldberg J.
In this case however the central tenet behind the respondent’s claim that the Court ought not exercise its discretion to make an order is not made out. That is because the contractual provision relied upon, clause 6.1 of the Employment Agreement, has no effect, and therefore there has not been, in law or fact, a payment of a monetary amount referable to accrued annual leave on termination of employment. Nor was there, for reasons set out above,[125] an ability on the part of the respondent to specify what, if any, amount was purportedly paid to Mr Stewart and Ms DiIulio referable to accrued annual leave. So, even if the general proposition contended for by the respondent was made out, there is no means of determining, on the evidence, what, if any, amount was actually paid by way of a loading in lieu of annual leave. There is therefore no basis on which to properly exercise the discretion, even if the Court were minded to do so.
[125] See paras.108-110 above.
The Court is not, however, minded to exercise the discretion to refuse to make an order in this case. It would, in the Court’s view, be an improper exercise of the discretion to refuse to make an order for the following three reasons. First, the contractual provision relied upon has no effect at all. Second, the contractual provision relied upon was one which sought to avoid an obligation to allow Mr Stewart and Ms DiIulio to take annual leave to which they were entitled, or to be paid for accrued annual leave on termination if not taken. To exercise the discretion so as to not make an order in those circumstances would be to give the imprimatur of the Court to future arrangements whereby benefits in lieu of statutory or award entitlements of various kinds could be agreed so as to forego those entitlements. It was clearly not the intention of the Parliament that the WR Act operate in that way, particularly as to prescribed minimum entitlements or preserved award terms. Third, the amount purportedly paid to Mr Stewart and Ms DiIulio by way of loading under clause 6.1 of the Employment Agreement is not able to be disaggregated in a way which demonstrates on the evidence what, if any, part of the loading was actually paid in lieu of annual leave.
In all of the above circumstances the Court will not exercise its discretion to refuse to make an order in this matter.
Conclusion and orders
The Court has concluded that:
a)the applicant’s case with respect to the alleged failure by the respondent to pay the correct redundancy payments to Mr Stewart and Ms DiIulio has failed;
b)the respondent has contravened clause 33.10 of the Award, by failing to pay:
i)Mr Stewart the sum of $4,778.75; and
ii)Ms DiIulio the sum of $5,374.08,
by way of accrued annual leave on termination, and the Court will therefore make an order that the respondent pay Mr Stewart and Ms DiIulio the above amounts.
The Court will hear the parties as to penalty and costs.
I certify that the preceding one hundred and thirty-two (132) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 21 June 2011
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