Chinese Australian Services Society Limited v Sun
[2022] FCA 1076
•14 September 2022
FEDERAL COURT OF AUSTRALIA
Chinese Australian Services Society Limited v Sun [2022] FCA 1076
Appeal from: Wei v Chinese Australian Services Society Ltd [2020] FCCA 1293 File number: NSD 989 of 2020 Judgment of: SNADEN J Date of judgment: 14 September 2022 Catchwords: INDUSTRIAL LAW – employment – appeal from Federal Circuit Court of Australia – application of National Employment Standards and modern award – whether Saturday penalty entitlements paid – whether salary packaging arrangement allowed under Award – whether agreement between parties that Saturday loading entitlement displaced by remuneration that was paid – whether employee had accrued and untaken annual leave at the time of termination of employment – whether adjustment of annual leave accruals reflected the taking of annual leave – appeal allowed in part Legislation: Fair Work Act 2009 (Cth) ss 44, 45, 87, 88, 90 and 570
Social, Community, Home Care and Disability Services Industry Award 2010 cll 14 and 26
Cases cited: Poletti v Ecob (No 2) (1989) 31 IR 321
Ray v Radano [1967] AR (NSW) 471Wei v Chinese Australian Services Society Ltd [2020] FCCA 1293
WorkPac Pty Ltd v Rossato (2020) 278 FCR 179
Division: Fair Work Division Registry: New South Wales National Practice Area: Employment and Industrial Relations Number of paragraphs: 39 Date of hearing: 28 April 2022 Counsel for the Appellant: Mr G Lucarelli Solicitor for the Appellant: Australegal Counsel for the Respondent: Mr N Y H Li Solicitor for the Respondent: Ting Legal ORDERS
NSD 989 of 2020 BETWEEN: CHINESE AUSTRALIAN SERVICES SOCIETY LIMITED
Appellant
AND: WEI SUN
Respondent
ORDER MADE BY:
SNADEN J
DATE OF ORDER:
14 SEPTEMBER 2022
THE COURT ORDERS THAT:
1.The appeal be allowed in part.
2.The parties confer and, if possible within 14 days of the date of these orders, submit to the court an agreed minute of orders giving effect to the attached reasons for judgment.
3.In the event that the parties are unable to reach agreement under Order 2, leave be granted to the parties to request that the matter be relisted on no less than 14 days’ notice.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
SNADEN J:
BACKGROUND
The appellant, Chinese Australian Services Society Limited (“CASS”), operates a Chinese language school. Between February 2004 and December 2017, it engaged the respondent as the principal of the school’s Kogarah campus. Pursuant to that engagement (at least at the times that are presently relevant), the respondent oversaw the provision of language classes, which were held on Saturdays in lessons of three hours’ duration.
By an application made to the Federal Circuit Court of Australia (the “FCCA”, as it was then known) in November 2018, the respondent alleged that the appellant had failed to pay her amounts that it was obliged under the Fair Work Act 2009 (Cth) (the “FW Act”) to pay her in connection with her employment. Specifically, she alleged that the appellant had failed to pay her weekend loading rates under the Social, Community, Home Care and Disability Services Industry Award 2010 (hereafter, the “Award”) and, upon the termination of her employment, had failed to pay out her accrued but untaken annual leave. Those failures were said to have been effected in contravention of, respectively, ss 45 and 44(1) of the FW Act. By a judgment dated 29 May 2020, the FCCA upheld those claims: Wei v Chinese Australian Services Society Ltd [2020] FCCA 1293 (hereafter, the “FCCA Judgment”; Judge Altobelli). The appellant now appeals from that judgment and the orders that were made subsequently in consequence of it.
The application before the FCCA proceeded as a “small claim” under div 3 of pt 4-1 of the FW Act. With the parties’ consent, it was determined on the papers. Those realities visit some measure of complication upon the resolution of the appeal (although, to be clear, they continue to strike as sensible accommodations to which the court below reasonably assented).
Perhaps in consequence of the manner in which the application proceeded, the terms upon which the appellant employed the respondent are difficult precisely to discern. There is some suggestion that they were written, although no evidence of any such contract was forthcoming. On the available evidence, the primary judge proceeded on the basis that the parties had concluded an oral contract of employment, pursuant to which the respondent was engaged to work six hours per week, for each of which she was paid an initial rate of $22.36 per hour (which later increased to $28.75 per hour). The respondent was paid that amount every week, even though the school only operated for 35 or 36 weeks per year. The other 16 or 17 weeks per year were the appellant’s normal school holidays, during which the school was closed.
It is convenient to set out the appellant’s grounds of appeal in their entirety (errors original):
1. In circumstances where:
i.the Respondent was a part-time Principal of a Language School [1] that had school vacations 15-16 weeks per year [11], and
ii.His Honour found that the Respondent was paid, in effect, 312 hours annually to compensate her for all duties pertaining to her employment, whenever and wherever actually undertaken, and of course including her annual leave [22],
His Honour was in error in finding that:
a.the Appellant improperly deducted annual leave of 2 weeks pay from the Respondent by treating the Respondent as having had annual leave for 2 weeks per year over a 4 year period [26];
b.there was no provision in the Award or in the Fair Work Act which entitled the Appellant to have treated the Respondent as having taken annual leave [27] ;
c.the Respondent had accrued leave owing to her on the termination of her employment [28];
d.the Respondent had contravened the relevant provisions of the Award in relation to payment of annual leave and annual leave loading [29];
e.that a trade-off in entitlements under which Saturday loadings were traded off for the Appellant being paid 52 weeks (including the 15-16 weeks of school holidays) would have to be expressly articulated, either orally or in writing [24]; and
f.that there was no evidence in support of the “trade off in entitlements” [24];
2. In circumstances where:
i.His Honour rejected the Respondent’s evidence that she worked 5 hours every Saturday during school holidays [23] and [24] on ‘plausibility’ grounds;
ii.there was evidence before the Court from the Respondent as to the hours worked by the Respondent on Saturdays [Affidavit of Robin Chen of 24 April 2020 – paras 8, 9 and 10; Affidavit of Bosco Chen of 24 April 2020 – paras 8 and 11; Affidavit of Hun Low of 24 April 2020 – paras 4, 8 and 9; Affidavit of Henry Pan of 24 April 2020 – paras 28, 33, 34, 35;
His Honour was in error in finding that:
a.only the Respondent was in a position to depose as to her actual time on campus, on a Saturday [23];
b.the only evidence on hours worked by the Respondent was the evidence of the Respondent [23];
c.the Court should not accept the evidence of the Appellant [23]; and
d.the Court should accept the evidence of the Respondent, in preference to the evidence of the Appellant, even where His Honour found significantly parts of the Respondent’s evidence lacked plausibility [24];
3.His Honour was in error in finding that the Respondent had contravened the relevant provisions of the Award in relation to payment of casual rates [32], in circumstances where the Court found that the Respondent was employed on a permanent part-time basis [22].
Only the first two grounds of appeal were pressed. The appellant maintains that:
(1)the FCCA erred by awarding the respondent payment for the weekend loading rate to which the Award entitled her for work conducted on Saturdays (to which I shall refer hereafter as “Saturday Loading”), either because that Award entitlement was displaced by a lawful salary packaging arrangement or because it was satisfied by the remuneration that the respondent received; and
(2)at the time of the termination of her employment, the respondent was not entitled to be paid what the FCCA awarded in respect of untaken accrued annual leave because that leave (or at least a relevant portion of it) had, in fact, been taken—it was said that the respondent took annual leave during the standard school holidays, such that her accrued entitlement at the time of termination was not what the court below concluded that it was.
STATUTORY FRAMEWORK
Part 2-2 of the FW Act establishes the National Employment Standards (“NES”). The NES contain eleven minimum employment entitlements, one of which is an entitlement to annual leave (and to payment of accrued leave on termination): FW Act, s 90.
Part 2-3 of the FW Act regulates the content and effect of “modern awards”. Modern awards are made by the Fair Work Commission and apply subject to their terms and to the provisions of the FW Act. For present purposes, there was no dispute that the NES and the Award applied in respect of the respondent’s employment by the appellant.
Sections 44 and 45 of the FW Act concern the enforcement of the NES and modern awards. Section 44 of the FW Act reads very simply as follows:
44 Contravening the National Employment Standards
(1)An employer must not contravene a provision of the National Employment Standards.
Section 45 is in similarly simple terms:
45 Contravening a modern award
(1)A person must not contravene a term of a modern award.
Division 6 of pt 2-2 of the FW Act stipulates the annual leave components of the NES. Section 87 of the FW Act, in particular, provides relevantly as follows:
87 Entitlement to annual leave
Amount of leave
(1)For each year of service with an employer (other than periods of employment as a casual employee of the employer), an employee is entitled to:
(a) 4 weeks of paid annual leave; or
…
Accrual of leave
(2)An employee’s entitlement to paid annual leave accrues progressively during a year of service (other than periods of employment as a casual employee of the employer) according to the employee’s ordinary hours of work, and accumulates from year to year.
Note:If an employee’s employment ends during what would otherwise have been a year of service, the employee accrues paid annual leave up to when the employment ends.
Section 88 of the FW Act concerns the taking of annual leave under the NES. It relevantly provides as follows:
88 Taking paid annual leave
(1)Paid annual leave may be taken for a period agreed between an employee and his or her employer.
…
Section 90 of the FW Act is headed “payment for annual leave”. It provides as follows:
90Payment for annual leave
(1)If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.
(2)If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.
In addition to the FW Act, several provisions of the Award assume some prominence in this appeal. Clause 14 of the Award is headed “Salary Packaging” and, at material times, provided as follows:
Where agreed between the employer and a full-time or part-time employee, an employer may introduce remuneration packaging in respect of salary, as provided for in clauses 15 to 17. The terms and conditions of such a package must not, when viewed objectively, be less favourable than the entitlements otherwise available under this award.
The Saturday Loading requirements of the Award are contained within cl 26, which is headed “Saturday and Sunday work”. Throughout the respondent’s employment, that clause relevantly provided as follows:
26. Saturday and Sunday work
26.1Employees whose ordinary working hours include work on a Saturday and/or Sunday will be paid for ordinary hours worked between midnight on Friday and midnight on Saturday at the rate of time and a half, and for ordinary hours worked between midnight on Saturday and midnight on Sunday at the rate of double time. These extra rates will be in substitution for and not cumulative upon the shift premiums prescribed in clause 29 – Shiftwork.
…
There is no contest that the FW Act conferred upon the FCCA jurisdiction to determine the respondent’s application. This court’s jurisdiction to entertain an appeal from such a determination is similarly uncontroversial.
THE PRIMARY JUDGMENT
The primary judge found that the respondent worked for five hours each Saturday, but only when the school was within term. That finding was not the subject of formal challenge in this court (although the respondent did appear to put it in issue at the hearing of the appeal).
It was accepted—and the primary judge found—that the appellant “deducted” two weeks of annual leave each year from what the respondent otherwise accrued. His Honour concluded that CASS was not entitled to effect those deductions and that, as a result of its having done so, the respondent was, upon the termination of her employment, not paid what she ought to have been paid under s 90(2) of the FW Act (above, [13]). The appellant does put that finding in issue on appeal.
THE SATURDAY LOADING ENTITLEMENT
The first issue for this court to consider is whether the respondent was entitled to Saturday Loading under the Award—and if she was, whether the amounts that she was paid were paid and received in satisfaction (or partial satisfaction) of that entitlement.
The appellant’s primary submission was that the contractual arrangement between the parties was such as to “displace” the entitlement to Saturday Loading under cl 26 of the Award because it amounted to a salary packaging arrangement under cl 14.
I do not accept that submission. Properly construed, cl 14 of the Award does not permit, via the means of an agreed salary packaging arrangement, the payment of Saturday Loading under cl 26. By its terms, the clause limits permissible “remuneration packaging” to “salary, as provided for in clauses 15 to 17”. The Saturday Loading entitlement, it is to be recalled, applies by operation of cl 26.
Further, an arrangement entered into under cl 14 of the Award must be “agreed between the employer and a…part-time employee”. The existence of any such agreement must be proved in the usual way and, in this case, it wasn’t. The court below made no finding on that score and, in any event—appreciating that the application was determined on the papers and that the rules of evidence did not apply to the “small claim” procedure under which it proceeded—it is not apparent how such evidence as there was might be said to have established what the appellant needed to establish. I do not accept that it did.
In the alternative, the appellant submitted that the respondent’s entitlement to Saturday Loading was discharged by what the appellant paid her: in other words, that the amounts that she received were received in satisfaction not merely of her salary or wage entitlements; but also in satisfaction of any entitlement that she had to Saturday Loading under the Award.
Again, that submission cannot be accepted. In order that the amounts that the appellant paid to the respondent might be understood to have been paid (and received) in satisfaction of her entitlement to Saturday Loading, the appellant must demonstrate that they were paid with that agreed purpose in mind: WorkPac Pty Ltd v Rossato (2020) 278 FCR 179, 372‑384 [983]‑[1021] (Wheelahan J; Bromberg and White JJ concurring), citing (amongst others) Poletti v Ecob (No 2) (1989) 31 IR 321, 332-333 (Keely, Ryan and Gray JJ) and Ray v Radano [1967] AR (NSW) 471, 478-479 (Sheldon J).
The primary judge below found—and it was not controversial between the parties—that the respondent was paid an agreed hourly rate for six hours per week, 52 weeks per year. There was, however, no finding—nor any evidence sufficient to ground a finding—that those amounts were, by agreement, designated (or partly designated) toward satisfaction of the respondent’s entitlement to Saturday Loading. Again, appreciating the evidential limitations that confronted the primary judge, it is simply not possible fairly to conclude that what was paid was paid partly with that presumed or agreed design.
It follows that the primary judge was, with respect, correct to conclude that the appellant contravened cl 26 of the Award in the way that was found. This aspect of the appeal cannot succeed.
THE ANNUAL LEAVE ENTITLEMENT
The second issue for the court to determine concerns the amount of annual leave to which the respondent was entitled at the point that her employment terminated. That, in part, turns upon whether the respondent was, over the course of her employment, absent from work without loss of pay such that her accrued annual leave depleted in the ways that the appellant alleged.
It is to be recalled that it was accepted that the appellant had a practice of “deducting” (presumably by means of an accounting practice) two weeks’ leave per year from what the respondent accrued. The respondent described those deductions as (or otherwise attributed them to) “forced leave”. At issue is whether they were referrable to periods during which the respondent took annual leave.
The appellant maintains that the two weeks per year that it deducted from the respondent’s annual leave accrual reflected the fact that she took periods of annual leave during the school holidays (when the school did not operate). The respondent maintains that she did not take any such periods of leave and that, instead, she continued to work throughout the school holidays.
The appellant countered that by contending that there was no work for the respondent to do during school holiday times and that it went without saying that her leave entitlements would be met during those periods (throughout which she continued to be paid). The respondent said that, in fact, there was at least some work for her to perform during the holiday periods. In particular, she said that she performed various administrative tasks in the weeks either side of the school terms (which the respondent’s counsel described as “shoulder periods”).
Despite the respondent’s best efforts, it is (and was) abundantly clear that the respondent did not work throughout the entirety of school holiday periods. Even accounting (perhaps generously) for eight weeks of “shoulder periods” throughout each calendar year, there were at least eight other weeks per year during which she was paid despite not working. It is not possible to see how that might have reflected anything other than an acknowledgement that she would be absent from work during those times without loss of pay.
That was the conclusion to which the primary judge was drawn. His Honour relevantly noted (FCCA Judgment, [22]):
The Court accepts the Applicant's contention as to the terms of her oral contract with the Respondent. She was employed on a part-time basis, six hours each week, for 52 weeks of the year. She was paid, in effect, 312 hours annually which was to compensate her for all duties pertaining to her employment, whenever and wherever actually undertaken, and of course including her annual leave. The hourly rate of pay was to be in accordance with the Award referred to above.
(emphasis added)
The primary judge went on (at [23]):
It is clear from the Annexures to her Small Claim filed 8 November 2018 that she asserts she worked 5 hours each Saturday on campus but, of course, that must be limited to when the campus was open, and that was not 52 weeks of the year.
Notwithstanding those observations, the primary judge proceeded to conclude that the appellant had wrongly “deducted” two weeks’ leave per year from the respondent’s store of untaken, accrued annual leave. The orders that were subsequently made in consequence of that conclusion required that the appellant make an additional payment in lieu of that which it had deducted.
Respectfully, that course is impossible to reconcile with his Honour’s earlier findings that the respondent was paid her annual leave over the course of her employment. As is set out above, there was no real doubt that the two weeks that were deducted each year were referrable to periods throughout which it was agreed that the respondent would take leave from work without loss of pay; in other words, to periods of annual leave. The “deductions” were unremarkable accounting exercises that reflected the reality of the respondent’s engagement.
The primary judge was, with respect, wrong to conclude as he did on that front and, insofar as concerns its annual leave claims, the appellant’s appeal should succeed.
CONCLUSION
The appeal should succeed in part. Respectfully, the primary judge was right to conclude that the appellant contravened clause 26 of the Award by failing to pay the respondent’s Saturday Loading entitlements. However, the appellant’s argument in relation to annual leave is made good. Again with respect, the primary judge was wrong to conclude that the appellant had contravened s 90(2) (or, as the case may have been, s 44) of the FW Act.
In the court below (and at the primary judge’s request), the final form of relief was the subject of agreement between the parties (informed, of course, by the court’s reasons on the issues of substance). Pursuant to that consent position, the respondent was awarded $12,843.71. Plainly given the appellant’s partial success in this appeal, that order will need to be set aside and a new one will need to be made incorporating a new figure.
That invites some consideration as to what that new figure ought to be. That, sadly, is an endeavour upon which this court cannot presently embark. How much of the $12,843.71 that was awarded below was referrable to what the primary judge incorrectly considered had been wrongfully “deducted” from the respondent’s accrued and untaken annual leave was not the subject of submissions before this court and is very difficult, if not impossible, now to discern. That being so, it is appropriate for this court to follow the course that was favoured below and to order that the parties confer and, if possible, reach agreement on orders that give effect to these reasons. There shall be orders accordingly. In light of s 570(1) of the FW Act (and consistently with the parties’ submissions), there shall be no order as to costs.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Snaden. Associate:
Dated: 14 September 2022
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