CEPU & Ors v Silcar Pty Ltd

[2013] FWC 856

[2013] FWC 856

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia

“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)

The Australian Workers’ Union

v
Silcar Pty Ltd
(C2013/2745), (C2013/68), (C2013/2755)

COMMISSIONER GOOLEY MELBOURNE, 7 FEBRUARY 2013

Alleged dispute concerning Annual Leave and Notice of Termination with respect to pending Redundancies.

[1] The “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) and the Australian Workers’ Union (AWU) (the Unions) notified the Fair Work Commission of a dispute with Silcar Pty Ltd (Silcar) over its employees’ entitlements.

[2] Silcar provided maintenance services to Bluescope Steel Limited under a contact which expired on 26 January 2013.

[3] On 19 December 2012 the employees of Silcar were given notice of termination of employment, and advised employees that their employment would end on 26 January 2013.

[4] On 24 December 2012 the employees went on a mandatory period of annual leave and returned to work on 7 January 2013. Some employees returned to work prior to 7 January 2013 and some had additional annual leave.

[5] Silcar advised the employees that their annual leave would run concurrently with their notice period.

[6] The Unions considered that notice and annual leave could not run concurrently and the employees on annual leave between 24 December 2012 and 26 January 2013 should have their annual leave recredited.

[7] The work of the employees is regulated by three agreements namely the Western Port Site Services Certified Agreement (Silcar) 2011-14 1 (the AWU Agreement) which covers the AWU; the BSL Western Port Maintenance Alliance Agreement 2010-20132 (the AMWU Agreement) which covers the AMWU; and the Western Port Electrical Certified Agreement (Silcar) - 2012-20153(the Electrical Agreement).

[8] The Electrical Agreement provides for annual leave at clause 12.1 and provides that such annual leave is exclusive of public holidays. By virtue of the incorporation of the Metal, Engineering and Associated Industries Award 1998 into the Electrical Agreement, notice of termination or payment in lieu of notice of termination is provided by clause 4.3.1 and further provisions about annual leave are found at clause 7.1 of the incorporated award.

[9] The AMWU Agreement at clause 14.1 provides for annual leave in the same terms as that of the Electrical Agreement. The AMWU Agreement incorporates the terms of the Manufacturing and Associated Industries and Occupations Award 2010 which in addition to noting the application of the National Employment Standards (NES) provides for annual leave at clause 41. The AMWU Agreement, again because of the incorporation of the modern award, notes that notice of termination is provided for in the NES.

[10] The AWU Agreement at clause 12.1 provides for annual leave in the same terms as that of the Electrical Agreement. The AWU Agreement incorporates the Manufacturing and Associated Industries and Occupations Award 2010 and the NES.

[11] The NES provides for annual leave at Division 6.

[12] The NES also provides for notice of termination of employment or payment in lieu of notice at Division 11.

[13] However these provisions do not deal with the matter in dispute namely whether annual leave and notice of termination can run concurrently. There is no dispute between the parties that Silcar was entitled to give the employees notice of termination of their employment when they did.

[14] Mr West for Silcar traced the case law relevant to this dispute.

[15] The Western Australian Industrial Appeal Court in McSharer trading as Hillview Nursing Home v Hospital Employees’ Industrial Union of Workers 4 considered the circumstances of an employee who commenced annual leave on 17 January1974. On 5 February 1974 whilst still on annual leave she received on week’s notice of termination of her employment. As her leave was to run until 21 February 1974 no payment in lieu of notice was paid. Burt J determined that “an employer cannot give notice which in its terms would terminate the employment within the period of annual leave.”5 Wallace J held that in this case “the notice of termination of the worker’s employment was bad in that the expiration thereof fell short by some eight days of the worker’s leave, during which period I believe the contract of employment remained extant.”6

[16] The Western Australian Industrial Appeal Court in Amalgamated Metal Workers and Shipwrights Union of Western Australia and Multicon Engineering (WA) Pty Ltd 7considered the case of an employee who was on annual leave when he was given notice terminating his employment on the last day of his annual leave. Wallace J held that “annual leave constitutes a contractural right arising out of an employee’s service and is there, inter alia, to contribute to his well being and efficiency as an employee. The award does not provide a right in the employer to interfere therewith. The giving of notice of termination is an interference with the benefit that the leave provision provides. The giving of notice of termination of employment is an interference with the benefit that the leave provision provides.”8 Brinsden J held that “for the employer to be able concurrently to run the period of notice with annual leave would in effect be to deny the worker the benefit of annual leave to the extent of one week.”9 He therefore concluded that the notice was not effective to terminate the contract of employment and the employee was entitled to a week’s pay in lieu of notice.

[17] A Full Bench of the Western Australian Industrial Relations Commission in Reynolds v Swift and Moore Pty Ltd 10considered whether an employee’s employment could be terminated whilst they were on paid sick leave. The Full Bench held that “where a person is entitled to sick leave, has accumulated it, and has gone on leave for a quantified period with approval, then the notice of termination has been given, there is no authority in the award which amends or removes the employee’s right and the notice to terminate is invalid.”11

[18] In Swingler v Methodist Ladies College 12 Commissioner Smith held that notice of termination could not operate at law if given when the employee was on long service leave.13

[19] In LHMU v Cuddles Management Pty Ltd 14 Lucev FM held that “an employer cannot give notice of termination of employment to an employee on approved leave, or, at least, the notice cannot run concurrently with that approved leave because to do so is to deprive the employee of their right to paid leave.”15 For reasons not relevant to this case, Lucev FM held that an employer did not have the right to terminate an employee’s employment whilst they are on maternity leave. In any event Lucev FM held that “to do so would entitle an employer to give notice during a period during which the employee is not being paid. If notice were to run during this period the employee’s entitlement to a paid notice period, or pay in lieu of notice, would be vitiated.”16

[20] In Wanders v Richards Mining Services Pty Ltd 17, the employee was given notice of termination on 15 December 2011 with his last day of work to be 13 January 2012. The workplace was shut from 22 December 2011 to 9 January 2012 and employees were to take annual leave on those days which were not public holidays. Industrial Magistrate Ardlie followed the line of authorities set out above and held that the employee “was deprived of his annual leave as it became incorporated into the notice period.”18

[21] Mr West submitted that these decisions were either wrong or distinguishable from the dispute before the Commission.

[22] In contrast to this line of authorities Mr West relied upon the decision in the Australian Institute of Marine and Power Engineers v Australian Coastal Shipping Commission  19 in which Ludeke J considered the termination of employment of an employee who received notice of the termination of his employment whilst he was on leave. The employee was paid in lieu of notice. There was however a set off of the amount due in lieu of notice against the amount due for leave.20

[23] Ludeke J held that there was:

“nothing in the leave provisions of the Award which expressly or by necessary implication limits the rights of an employer to terminate employment under clause 34. . . .  In my opinion there is nothing in clause 34 of the Award which prevents an employer from terminating the employment of an employee by giving a period of notice which runs concurrently with a period of annual leave. It follows that the prescribed payment may be made as an alternative to notice. However, it is not open to the employer to reduce the payment prescribed as an alternative to notice, on the grounds that the days of notice coincide with the days of leave; the employee’s entitlement to payment in lieu of notice is independent of his entitlement to payment while on leave.” 21

[24] Mr West also relied upon the decision of the Queensland Court of Appeal in Macauslane v Fisher & Paykel Finance Pty Ltd  22 where the employee’s barrister conceded correctly in Holmes J’s view that “the appellant would have been within its rights to require the respondent to exhaust his leave entitlements as part of the nine month period of notice”23 It should be noted that no consideration in that case was given to the National Employment Standards which provide that for award free employees an employer may only require the employee to take annual leave if that request is reasonable and for award employees annual leave is taken at time agreed between the employer and employee unless the modern award or enterprise agreement deals with the taking of annual leave. Therefore I cannot agree that an employer has the right to direct an employee to take annual leave during the notice period.

[25] Mr West also relied upon the discussion of this matter in Macken’s Law of Employment 24 which states that “unless there is some award or contractual term to the like effect, there seems to be no legal impediment to giving notice which expires during a period of leave. In that case the employment contract and the leave would expire, for there can be no leave from employment which has ended. The contrary view is that it is not open to the employer to deprive the employee of the entitlement to paid leave, or alternatively to deprive the employee of an entitlement to return to work from unpaid parental leave.”25

[26] Mr West submitted that the facts in this dispute are distinguishable from the Western Australian cases which dealt with circumstances where an employee was given notice of termination whilst on leave. That is not the case here as the employees were given notice prior to the taking of annual leave.

[27] Mr West also submitted that if the interpretation adopted in the Western Australian cases was good law, then employees would not be able to take any form of paid leave during the notice period.

[28] The cases sighted by Mr West do not support this conclusion. None of the decisions addressed the circumstances where, for example, an employee asked to take annual leave during the notice period.

[29] The Unions relied on many of the authorities referred to by Mr West to support their contention that annual leave and notice could not run concurrently. That submission was supported by submissions as to the purpose of notice. It was submitted that during a period of notice an employee has an opportunity to find alternative work and if notice runs concurrently with annual leave employees will be denied this opportunity.

[30] This view is consistent with the reasoning of Wallace J 26 who said “if the purpose of the notice of termination of employment is, inter alia to enable each party to make new arrangements and the payment of wages in lieu of notice would still enable a worker to make such new arrangements, then the giving of notice of termination of employment whilst the worker is on leave may be criticised even though the giving of such notice may not be prohibited by the contract of service.”27

[31] The circumstances of this case is similar to that considered by Commissioner Gay in AMWU v ADI Limited t/a Thales Australia. 28 In that case the employees were given notice of termination on 15 December 2008. The employees were advised that their employment would cease at the end of the notice period and that during some of the notice period employees were not obliged to attend work. During the notice period the Christmas shut down occurred. The employees were on annual leave from 23 December 2008 until 12 January 2009. Commissioner Gay held that “it was not open to Thales to reduce both the retrenchees’ notice period and their annual leave.”29 Commissioner Gay concluded that “from 23 December those employees with sufficient annual leave would have their annual leave entitlement reduced for the relevant number of working days falling over the period excluding weekends, public holidays, the fixed RDO relevant to the Christmas period and the ADI Day. It would then not be open to Thales to decline to pay the redundancy notice to the retrenchees. This is because there is at clause 53.4.1 an explicit obligation to do so. To absorb the redundancy notice period into annual leave is to eliminate the entitlement set out in clause 53.4.1.”30

The jurisdiction of the Fair Work Commission.

[32] The FW Act provides as follows:

“738 Application of this Division

This Division applies if:

(a) a modern award includes a term that provides a procedure for dealing with disputes, including a term in accordance with section 146; or

(b) an enterprise agreement includes a term that provides a procedure for dealing with disputes, including a term referred to in subsection 186(6); or

(c) a contract of employment or other written agreement includes a term that provides a procedure for dealing with disputes between the employer and the employee, to the extent that the dispute is about any matters in relation to the National Employment Standards or a safety net contractual entitlement; or

(d) a determination under the Public Service Act 1999 includes a term that provides a procedure for dealing with disputes arising under the determination or in relation to the National Employment Standards.

739 Disputes dealt with by FWA

(1) This section applies if a term referred to in section 738 requires or allows FWC to deal with a dispute.

(2) FWC must not deal with a dispute to the extent that the dispute is about whether an employer had reasonable business grounds under subsection 65(5) or 76(4), unless:

(a) the parties have agreed in a contract of employment, enterprise agreement or other written agreement to FWC dealing with the matter; or

(b) a determination under the Public Service Act 1999 authorises FWC to deal with the matter.

Note: This does not prevent FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effectas subsection 65(5) or 76(4) (see also subsection 55(5)).

(3) In dealing with a dispute, FWC must not exercise any powers limited by the term.

(4) If, in accordance with the term, the parties have agreed that FWC may arbitrate (however described) the dispute, FWC may do so.

Note: FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

(5) Despite subsection (4), FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.

(6) FWC may deal with a dispute only on application by a party to the dispute.”

[33] The dispute resolution clause in each agreement provides a mechanism and procedures for resolving industrial disputes. The dispute resolution procedures are not limited to resolving disputes about matters arsing under the agreement. 31

[34] In arbitrating an industrial dispute the only limitation on the decision of the Commissin is that the decision must not be inconsistent with the FW Act or the agreements under consideration.

[35] As the High Court said in Construction, Forestry, Mining And Energy Union v The Australian Industrial Relations Commission And Another 32

“Where parties agree to submit their differences for decision by a third party, the decision-maker does not exercise judicial power, but a power of private arbitration. Of its nature, judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought and results in a judgment or order that is binding of its own force. In the case of private arbitration, however, the arbitrator’s powers depend on the agreement of the parties, usually embodied in a contract, and the arbitrator's award is not binding of its own force. Rather, its effect, if any, depends on the law which operates with respect to it.”

[36] It clear that in arbitrating a dispute the Fair Work Commission may, subject to the terms of the Agreement and the dispute resolution clause, create new rights.

[37] As the Full Bench said in Metropolitan Fire and Emergency Servics Board v United Firefighters’ Union of Australia: 33

“[19] The MFB submitted that the reservation of a discrete matter for arbitration does not pertain to the employer/employee or employer/union relationship. It submitted, further, that the Agreement, by this mechanism, permitted Fair Work Australia to award new entitlements during the nominal life of the Agreement, contrary to the provisions of section 739(3) and (5) of the Act. It contends that, whilst a clause that provides some form of income protection might have been a permitted matter within section 172(1), a clause that merely allows Fair Work Australia to arbitrate in respect of whether there should be such an entitlement, and if so, what form it should take, is not a permitted matter pertaining to the relationship between an employer and its employees.

[20] The MFB’s argument is that because under section 793(5) Fair Work Australia may not make a decision that is inconsistent with the Act and, as the power to arbitrate generally does not pertain to the relationship between employers and employees, the decision is inconsistent with section 172(1).

[21] In our view, this argument is not tenable. If there were no prohibition on the making of extra claims and the UFU had made a claim for disability insurance which the MFB had rejected, the parties would be in dispute about whether such a scheme should be introduced. That dispute clearly pertains to the employer/employee relationship and if the Agreement permits, such a dispute could be settled by Fair Work Australia exercising arbitral powers.

[22] Section 172(1) provides that an enterprise agreement may only be made about matters that pertain. Clause 19, the dispute resolution clause only allows disputes about matters that pertain to be dealt with under its terms. Ergo, the dispute settlement clause is a clause that pertains to the relationship between employer and employee.

[23] Albeit this might have the effect that the settlement of pertaining disputes results in the creation of new rights and obligations, as is the case here, that is a result of the parties specifically agreeing that disputes that extend beyond matters dealt with by the Agreement are amenable to resolution under the dispute settlement procedure in the Agreement. Whilst section 186(6) requires that an enterprise agreement provide procedures for the settlement of disputes arising under the agreement, section 172(1) makes it clear that the clause need not be so limited, as long as it pertains to the relationship. Despite MFB’s submissions that we should find that it was wrongly decided, we agree with the conclusion of the Full Bench that so found in Boral Resources (NSW) Pty Ltd v Transport Workers’ Union of Australia.”

[38] In this matter the Unions are not making an extra claim. There is an existing right to notice of termination and an existing right to annual leave. Seeking to have arbitrated a dispute over the interaction of the provisions is not an extra claim.

[39] In this case there is uncertainty about the interaction between the obligation to give notice of termination of employment and the obligation to afford employees annual leave.

[40] This case is not about whether employees can be given notice of termination whilst on annual leave as the employees were given notice prior to going on annual leave.

[41] The matter to be determined is whether an employee can be serving a period of notice at the same time as they are on annual leave.

[42] Notice is provided to employees to enable them to seek alternative work whilst they are still working. This is clear from the provisions of the Manufacturing and Associated Industries and Occupations Award 2010 which makes express provision at clause 22.3 for employees to have time off during the notice period to look for work:

“22.3 Job search entitlement

Where an employer has given notice of termination to an employee, an employee must be allowed up to one day’s time off without loss of pay for the purpose of seeking other employment. The time off is to be taken at times that are convenient to the employee after consultation with the employer.”

[43] An employee who was given notice of termination before she or he was to take annual leave or whilst she or he was on annual leave would be denied this opportunity.

[44] Further annual leave is provided to employees to enable them to have a break from work.

[45] An employee to whom notice of termination is given prior to going on annual leave or whilst on annual leave either loses the benefit of that annual leave as she or he has to seek alternative employment whilst on annual leave or she or he loses the benefit of the notice period as her or his pre-existing annual leave plans may mean that they are not able to seek alternative work during the notice period.

[46] In my view the authorities establish the right to notice and the right to annual leave are independent and cannot be used to cancel out the other right. For example if an employer gives an employee four weeks notice of termination and after one week the employee is on approved annual leave for two weeks and returns to work out the notice for one week then the two weeks on annual leave must be absorbed by the notice period and the employee recredited with the annual leave or they must be given an additional period of notice.

[47] I therefore find that to the extent the employees annual leave ran concurrently with the notice period the employees are entitled to an additional period of notice or pay pay in lieu of notice equivalent to the period of annual leave taken during the period of notice.

COMMISSIONER

Appearances:

K Reidy for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia

B Terzic for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)

P Reilly for the The Australian Workers’ Union.

R West for Silcar Pty Ltd.

Hearing details:

2013.

Melbourne:

January 24.

 1   [2012] FWAA 1558

 2   [2010] FWAA 7661

 3   [2012] FWAA 5039

 4   Western Australian Industrial Gazette 15 January 1975 at 1545

 5   Ibid at 1546

 6   Ibid at 1547

 7   Western Australian Industrial Gazette 23 July 1980 at 1055

 8   Ibid at 1056

 9   Ibid at 1057

 10   74 Western Australian Industrial Gazette 861

 11   Ibid at 864

 12   [2002] WAIRC Comm 5170

 13   Ibid at [42]

 14 [2009] FMCA 463

 15   Ibid at [116]

 16   Ibid at [117]

 17   [2012] SAIRC 46

 18   Ibid at [20]

 19 (1972) CAR 468

 20   Ibid

 21   Ibid at 470

 22 [2002] QCA 282

 23   Ibid at [31]

 24   Sappideen, O’Grady, Riley, Waburton,7th Edition, Lawbook Co 2011

 25   Ibid at 293-294

 26   McSharer op cit at 1547

 27   Ibid

 28 [2009] AIRC 643

 29   Ibid at [86]

 30   Ibid at [89]

 31   See Boral Resources (NSW) Pty Ltd v Transport Workers’ Union of Australia. [2010] FWAFB 8437

 32 (2001) 203 CLR 645 at [31]

 33   [2012] FWAFB 9555

Printed by authority of the Commonwealth Government Printer

<Price code C, PR533868>