Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Kentz Pty Ltd

[2017] FWC 376

[2017] FWC 376 [Note: An appeal pursuant to s.604 (C2017/999) was lodged against this decision - refer to Full Bench decision dated 11 May 2017 [[2017] FWCFB 2600] for result of appeal.]

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
v
Kentz Pty Ltd
(C2016/4384)

COMMISSIONER BISSETT MELBOURNE, 2 FEBRUARY 2017

Application to deal with a dispute – income protection insurance.

[1] On 6 July 2016 the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) made an application to the Fair Work Commission (Commission) pursuant to s.739 of the Fair Work Act 2009 (FW Act) for the Commission to deal with a dispute in accordance with the dispute settlement procedure of the Kentz Pty Ltd Ichthys Onshore Construction Greenfields Agreement 1 (Agreement).

[2] The dispute relates to the application of clause 19 of the Agreement (which is with respect to income protection insurance) and the claim of the CEPU that Kentz Pty Ltd (Kentz) is not paying income protection insurance for its members employed under the Agreement as required by the Agreement. In particular, the CEPU says that the Agreement requires that Kentz pay income protection insurance into the Energy Super Protection (ESP) for members of the Energy Super superannuation fund, and Australian Income Protection Ltd (AIPL) for those who are not members of Energy Super. Kentz claims that it is meeting its obligations under the Agreement although through a different insurer to that claimed by the CEPU.

[3] The matter in dispute has been subject to conciliation proceedings where it failed to settle. It is fair to say that a proportion of those discussions involved some comparison of the parties’ preferred income protection scheme to determine if that being paid into by Kentz meets the requirements of the Agreement both parties agree must be met.

[4] There was some debate as to the role of the Commission in resolving this dispute and whether the Commission should (or could) determine the income protection insurance policy to be paid into for the electrical and instrumentation employees and relevant Storepersons (relevant employees).

[5] Ultimately, it was agreed that there were a number of threshold questions that needed to be answered before the Commission could consider if it had, and should exercise, powers to determine the income protection insurance policy to be used. The threshold questions are:

1. What do the words “approved insurer” mean in clause 19(a) of the Agreement?

2. What is the meaning and effect of the 1.4% cap provision in clause 19(b) of the Agreement?

3. Does “[e]mployee’s gross earnings” in clause 19(b) of the Agreement include payments made into the Contracting Industry Redundancy Trust (Queensland) (CIRTQ) for the relevant employees?

4. If the parties are unable to reach agreement on an income protection insurance policy, is the dispute settlement procedure in the Agreement able to be used as the ‘circuit-breaker’?

The Agreement

[6] Clause 18 of the Agreement states:

18 Dispute Resolution Process

18.1 Objective of the Dispute Resolution Process

(a) The objective of this procedure is to:

(1) Avoid the escalation of disputes or grievances; and

(2) Provide prompt resolution of issues of concern.

18.2 Steps in the Dispute Resolution Process

(a) Any disagreement or dispute in respect of any matters arising under the Agreement or the National Employment Standards (NES) will be dealt with as outlined in this clause 18.2.

(b) Subject to clause 18.2(c), a disagreement or dispute will be dealt with as follows:

(1) The Employee concerned shall raise the matter with the appropriate team leader for resolution.

(2) If not resolved, the Employee may raise the matter with the supervisor/superintendent of the Employer for resolution.

(3) If the matter remains unresolved, either the Employee or the supervisor/superintendent shall request a formal meeting with the Employer’s most senior manager on the Project Site, or that manager’s representative.

(4) At any stage of this process the Employee may elect to have an Employee representative in attendance.

(5) Once this dispute resolution process has been invoked, both the Employee and the Employer shall attempt in good faith to resolve the issue by utilising the above steps until resolution is achieved. In the event that resolution is not achieved, any party or the Employee may refer the matter to Fair Work Australia for conciliation and/or arbitration.

(6) While the above process is being pursued, work shall continue as normal. Failure to work within the process described in this subclause and/or the failure of any Employee to continue work as normal shall constitute a fundamental breach of the Agreement by the Employee(s) involved.

(c) Any disagreement or dispute relating to demarcation of Employee classifications or scope of work in relation to a matter under clause 23 will be dealt with as follows:

(1) The Party concerned shall informally raise the matter with the appropriate other Party or Parties for resolution.

(2) If not resolved, either Party shall require the other Party or Parties involved in the dispute or disagreement to attend a formal meeting to discuss the dispute.

(3) Any Employees involved in the disagreement or dispute may, at any stage of this process, elect to have an Employee representative in attendance.

(4) Once the Dispute Resolution Process has been invoked, all Parties involved shall attempt in good faith to resolve the issue by utilising the above steps until resolution is achieved. In the event that resolution is not achieved, but only in situations where disagreement or dispute has disrupted or adversely affected the Project or performance of any work on, related to or incidental to the Employer party’s scope of work, any Party may refer the matter to Fair Work Australia for conciliation and/or arbitration.

(d) While the above process is being pursued, work shall continue as normal. Failure to work within the process described in this subclause and/or the failure of any Employee to continue work as normal shall constitute a fundamental breach of the Agreement by the Parties or Employees involved.

(e) Any settlement of a dispute pursuant to this clause shall not vary the terms and conditions contained in this Agreement. It is a condition of employment that no industrial action be taken during the life of the Agreement. Industrial action of any nature will be contrary to the Dispute Resolution Process set out in this clause and a breach of the Agreement.

[7] No issue is raised that the dispute settlement procedure has not been complied with such that I am satisfied that the Commission does have jurisdiction to deal with the dispute.

[8] Clause 19 of the Agreement requires that income protection insurance be taken out for employees:

19 Income Protection

(a) The Employer will take out income protection insurance for all Employees that provides cover for the Employee for any period of absence on leave without pay for illness, accident or injury, while it remains available, with an approved insurer such as.

(1) Energy Super Protection (ESP) – for electrical and instrumentation employees and Storepersons who are members of SPEC Super – ESP (a division of SPEC Super) or Australian Income Protection Pty Ltd.

(2) Wage Guard – for mechanical and fabrication employees, non-destructive testing employees and Storepersons.

(3) Chifley or Construction Income Protection Ltd – in respect of all classifications within the scope of the classification structure except those classifications listed above in subclauses 19 (a) (1) and (2) and appropriate Storepersons.

(b) Provided that the cost of each such policy is no more than 1.4% (inclusive of GST and stamp duty) of the Employee’s gross earnings.

(c) During the period for which an Employee is in receipt of income protection insurance payments, the Employee shall not be entitled to any other accruals or payments under this Agreement.

The decision of Commissioner Wilson

[9] On 3 February 2016 Commissioner Wilson issued a decision in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Kentz (Australia) Pty Ltd 2 (CEPU v Kentz (Aust)) with respect to a clause in the same terms as in the Agreement before me. Kentz (Australia) Pty Ltd and Kentz Pty Ltd, whilst separate companies, are apparently related and have directors in common.

[10] In his decision Commissioner Wilson found:

[52] A careful analysis of the whole of clause 19(a) shows that regard has to be had to the whole of the term, and not merely to the phrase “approved insurer”. Such analysis shows the term “approved insurer” to have adjectival effect, and that the operative part of the term are the words that follow, both immediately and in the 3 paragraphs that follow. The operative words that follow are “such as”, which cannot be removed either from the words that follow or the words that precede.

[53] Having regard to the full term leads to the conclusion that the plain meaning of the clause is to require Kentz to make income protection arrangements “with an approved insurer such as” one of the entities named in each of paragraphs 19(a) (1), (2) and (3). The term “such as” plainly makes clause 19(a) a non-restrictive clause, with the Macquarie Dictionary giving meaning to the term as either “of the kind specified” or “for example”.

[54] The plain meaning of the disputed term is evident. While non-restrictive, the obligation on Kentz is as follows;

● In the case of electrical and instrumentation employees, as well as Storepersons who are members of SPEC Super, insurance is to be taken out with ESP (a division of SPEC Super) or Australian Income Protection Pty Ltd.

● In the case of mechanical and fabrication employees, non-destructive testing employees and Storepersons who are not members of SPEC Super, insurance is to be taken out with Wage Guard.

● In the case of all other classifications within the scope of the classification structure, insurance is to be taken out with Chiefly or Construction Income Protection Queensland.

[55] Unlike other parts of the Agreement, there is no specific remit within clause 19(a) of the Agreement to allow for an insurer to be determined by some process external to the Agreement. While use of the term “such as” in the clause shows it plainly contemplates something other than one of the entities named in each of paragraphs (1), (2) and (3) of clause 19, there is no reference to a decision making process external to the Agreement. While Kentz have made the submission that a consequence of the CEPU’s position that alternatives to one of the listed insurers might be that there was no agreement reached on the subject, that does not pre-dispose of the subject, or negate the possibility. It was the parties who contemplated a non-restrictive list, and the parties who formed the consultation and dispute resolution procedures agreed within the Agreement. Those clauses may, or may not, provide an answer to the proposition raised by Kentz – that agreement on an alternative insurer may not be reached.

[56] Since I have not had argument or evidence about what would happen in the event that a party desired an insurer other than one contemplated in the non-restrictive list, it is not proper that I determine the subject. However, it is foreseeable that in such a case the parties might form a consensus that a further insurer can be used and that to do so would not breach the Agreement; alternatively they might take the view that, even in the face of consensus a variation to the Agreement under the FW Act was either prudent or necessary. Such avenues are plainly available.

[Endnote omitted, emphasis in original]

[11] Commissioner Wilson concluded:

[64] As a result of the foregoing, I find as follows;

● The plain meaning of clause 19(a) requires Kentz to make income protection arrangements with an approved insurer such as one of the entities named in each of paragraphs 19(a) (1), (2) and (3). That list is non-restrictive.

● Which of the named insurers listed in paragraphs 19(a) (1), (2) and (3) that is to be engaged by Kentz will depend on the classification of the persons it employs, with each paragraph plainly specifying which fund applies in each case.

● There is insufficient material before me for me to express a concluded view about what a party may be required to do if it desires to depart from one of the named insurers listed in paragraphs 19(a) (1), (2) and (3).

[12] Kentz says that Commissioner Wilson did not reach a concluded view on the questions it says require answering whilst the CEPU says that the Commissioner did reach a concluded view and it would be inappropriate for me to make a different decision. Whilst accepting that I am not bound to follow the decision of Commissioner Wilson, the CEPU submits that sound and consistent decision making suggest I should not depart from it.

[13] Apart from a re-agitation of the arguments, nothing has been put to me as to why Commissioner Wilson was in error in the conclusions he reached. However, the dispute before me is about a different agreement (albeit the clauses are in the same terms). Whilst the CEPU complains that Kentz (Australia) Pty Ltd did not appeal the decision of Commissioner Wilson it could be that, because of the end of the effective operation of the Agreement subject to that decision, it saw no utility in doing so.

[14] I accept that I am not bound by the decision of Commissioner Wilson but I have taken note of it as I would any other decision of a single member of the Commission put before me.

Principles of construction

[15] The CEPU and Kentz both put to me the principles of construction. Neither was wrong in its submissions but caution must always be exercised to ensure that the correct stating point is used.

[16] The correct principles and approach to determining the proper construction of the terms of an agreement are set out in the decision in The Australasian Meat Industry Employees Union v Golden Cockerel Pty Limited 3 where the Full Bench said:

[41] From the foregoing, the following principles may be distilled:

1. The AI Act does not apply to the construction of an enterprise agreement made under the Act.

2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.

3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include:

(a) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;

(b) notorious facts of which knowledge is to be presumed;

(c) evidence of matters in common contemplation and constituting a common assumption.

7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.

8. Context might appear from:

(a) the text of the agreement viewed as a whole;

(b) the disputed provision’s place and arrangement in the agreement;

(c) the legislative context under which the agreement was made and in which it operates.

9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.

10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.

[17] I have applied these principles to the matter before me.

What does ‘approved insurer’ mean?

[18] Kentz submits that clause 19(a) of the Agreement imposes an obligation on the employer to take out income protection insurance. It submits that the purpose of the insurance is to provide coverage for employees for any absence on leave without pay for illness, accident or injury. The insurer, it submits, must be one approved under the relevant regulatory scheme.

[19] Kentz submits that the word “approved” is defined in The Macquarie Dictionary as meaning “to confirm or sanction officially”. It submits that, in the context of clause 19(a) it is likely that the intention is that an “approved insurer” is one who is authorised to provide insurance within the appropriate regulatory framework. That framework is the Insurance Act 1973 and the regulatory authority of the Australian Prudential Regulation Authority (APRA).

[20] Further, Kentz submits that the ordinary meaning of “such as” as it appears in clause 19(a) means “for example” or “of a kind that; like”. The list of products appearing in clause 19(a)(1), (2) and (3) should therefore be seen as non-exhaustive, non-binding examples of the kind of product offerings that may be taken out by Kentz. In any event it says that what is listed are insurance products and not insurers.

[21] Kentz submits that the type of insurance product that Kentz must take out is informed by paragraphs (1), (2) and (3) in clause 19(a) but what must be approved is the insurer who offers the ultimate product purchased. That is “approved” is concerned with the status of the insurer, not the insurance.

[22] Kentz submits that if it had been the intention that an “approved insurer” would be one agreed to between the parties (as put by the CEPU) then the Agreement would have used those words. Further, it says that when the Agreement has intended that agreement be reached by the parties, in the conventional sense, this is identified. 4 Kentz contrast this to the use of the word “approved” in the Agreement which is used in the sense of external or official sanction.

[23] Kentz submits that if “approved” meant “agreed between the parties” it would be required to reach agreement with all parties to the Agreement before taking out insurance. This would require agreement with four unions and the employees. This would be onerous. Further, it submits that there would be no circuit breaker if agreement could not be reached (a matter recognised but not dealt with in CEPU v Kentz (Aust)). It submits that if clause 19 requires that agreement be reached between the parties, whether it is or is not is a matter of fact.

[24] Kentz submits that the Commission, in dealing with the extant dispute, is not bound by the decision of Commissioner Wilson although regard may be had to it. In any event, it submits that “To the extent that the decision of Commissioner Wilson is to be understood as construing clause 19 as requiring Kentz to take out the insurance nominated (ESP for Energy Super members, and AIPL for non-members) in respect of electrical and instrumentation employees, unless Kentz otherwise reaches the agreement of the Parties, the construction is plainly wrong and should not be followed.” 5

[25] The CEPU submits that the meaning of clause 19(a) is clear and unambiguous.

[26] It submits that the issue sought to be agitated by Kentz in this case is identical to the matter considered and determined in CEPU v Kentz (Aust). It submits that, whilst Kentz Pty Ltd and Kentz (Australia) Pty Ltd are different corporate entities, the Directors of the two entitles are the same and they share many managers in common including Mr Robert Twomey who has or had a senior managerial position in both organisations. On this basis it says that both entitles have the same “controlling mind”.

[27] The CEPU says that Kentz (Australia) did not appeal the decision of Commissioner Wilson but now, effectively, seeks to have a second bite of the cherry and argue that Commissioner Wilson’s decision is “plainly wrong and should not be followed”. The CEPU submits that such a submission is without foundation or argument and, in any event, is not available to Kentz which is bound by the principal of estoppel.

[28] The CEPU submits that “approved insurer” means an insurer agreed between the parties to the Agreement. It submits that “approve” means to “officially agree or to accept as satisfactory” and that a synonym for approve is “agree to”. On this basis, it says that the insurer in clause 19(a) must be one “accepted as satisfactory” or “agreed to” by the parties. It therefore submits that the insurer who is to provide income protection insurance must be one approved or accepted as satisfactory by Kentz and the Union parties (the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU), Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) and Construction, Forestry, Mining and Energy Union (CFMEU)) to the Agreement.

[29] Whilst the CEPU accepts that the word “approved” is used in other provisions in the Agreement, it says that in each case the word must be read in context which makes clear how the word is to operate, either by reference to external agencies (approval of the Agreement by the Commission, Worker Entitlement Fund approved by the Australian Taxation Office etc) or some other means (leave approved by the employer).

[30] The CEPU submits however that there is no reason to read “approved insurer” as meaning “an insurer authorised by the regulator (APRA) to carry on an insurance business in Australia under section 12 of the Insurance Act 1973” as put by Kentz. It submits that Kentz, in this matter, put nothing to support such a submission in circumstances where it was specifically rejected in CEPU v Kentz (Aust). 6

[31] Further, the CEPU submits that neither the Insurance Act1973 nor APRA approve insurers, rather, an insurer is authorised under the Insurance Act 1973 to conduct new or renewal insurance business. This, it says is supported, by the material attached to the submission of Kentz which is a list of authorised insurers and registered life insurance companies. 7

[32] The CEPU submits that it is clear the parties understood the use of the word “approved” in the context of the Agreement and chose to use the word “approved” and not “authorised” in clause 19(a). Further, it says that, in circumstances where the parties used the word approved appropriately in other clauses, there is no reason to assume they meant “authorise” in this context. To reach such a conclusion is what could be characterised as reaching for an “anteriorly derived notion…regardless of what has been written”. 8

Consideration

[33] The task before me is not to determine what “approved insurer” means in isolation of the remainder of clause 19(a) of the Agreement but what clause 19(a) means and if there is any ambiguity or uncertainty inherent in it. Such an approach ensures that context is properly taken into account and is consistent with the principles of construction set out above.

[34] It is true that the parties have used the word “approve” a number of times in the Agreement. It seems to me that, each time, they have given the word a meaning derived from the context of the specific clause. In four clauses the word is used with reference to an external authority 9 and in two cases it is otherwise – once by reference to the authority of the employer10 and otherwise in the matter before me.

[35] The parties have also used the word “authorise” in the Agreement on a number of occasions – generally used to signify permission. 11

[36] I am not convinced that close scrutiny of the use of the word “approve” or “authorise” in the Agreement assists in a determination of whether or not clause 19(a) is ambiguous. In all other cases it is clear that the words must be read in context and that context clarifies the meaning of the word. That “approve” is used in different contexts suggest that the context of clause 19(a) is critical to properly ascribing meaning to “approved insurer” in that clause.

[37] Clause 19(a) is clear that it requires that income protection insurance be taken out while it (the insurance) remains available. The insurance must be taken out with an approved insurer and must be “like” the insurance products specified in paragraphs (1), (2) and (3) of clause 19(a).

[38] I agree with Commissioner Wilson’s view that ““approved insurer” [has an] adjectival effect, and that the operative part of the term are the words that follow, both immediately and in the 3 paragraphs that follow. The operative words that follow are “such as”, which cannot be removed either from the words that follow or the words that precede.” 12

[39] This conclusion is supported by the lack of any punctuation between “approved insurer” and “such as”. This also suggests that the parties, in drafting the Agreement, did not distinguish between the insurance product and the insurer who offered the product. Clearly the list of insurance products in paragraphs (1), (2) and (3) of clause 19(a) were considered by the parties as examples of an “approved insurer”. A plain reading of the clause strongly suggests that the parties at least intended that those insurers who offered the products specified in clause 19(a)(1), (2) and (3) are examples of “approved insurers”. Such a view avoids importing any unnecessary technicalities or unwritten words or unexpressed punctuation into clause 19(a) and recognises that the Agreement was drafted by people “with a practical bent of mind” 13.

[40] To conclude in favour of Kentz would require that punctuation be inserted between “insurer” and “such as”. Such punctuation would have the effect of changing the meaning of the clause. Such an approach, when the clause is otherwise clear, must be avoided.

[41] In my view, it is open to conclude that clause 19(a) provides a list of “approved insurers”– it is those that offer the listed products. Should those products not be available then the search for products which meet the requirements of the clause would need to be undertaken. The Agreement is silent on who or how a determination of a like product occurs but this is a hypothetical problem. There is no suggestion that the listed products are not available at this time.

[42] I consider it overly technical to suggest that, in the context of finalising the Agreement, the parties intended some fine distinction between the product offered by an insurer and the insurer itself. It is more logical, given the language used, to conclude that the parties defined the insurer by reference to the insurance product. The requirement that the insurer be approved seems to me no more than a safety net in circumstances where an insurer might cease to offer the particular identified product (although must be referable to a product that meets the requirements of the clause).

[43] There is nothing in the context of the clause to indicate that I should read into the word “approved” some reference to APRA or the Insurance Act 1973 (which, in any event, does not use “approve” insurers but rather authorises them).If it was that the parties intended that the “approved insurer” meant one authorised by APRA or the Insurance Act 1973 there is no logical reason why they would list insurance products instead of stopping at the generic description of what the product must offer (cover while an employee is on leave without pay for illness, accident or injury etc). No evidence has been put by Kentz to suggest that its preference as to the meaning of the “approved insurer” was the intention of the parties in reaching agreement with the unions and its employees. This is more so when it is acknowledged that the parties have used the terms “authorised” and “approved” in various contexts throughout the Agreement suggesting deliberate selection of the word to be used.

[44] A preference for an alternative meaning does not create ambiguity in the clause. That Kentz chose to take out income protection insurance for employees that is not one of the products listed in the Agreement is a decision it made. To agree to the meaning of the clause as put forward by Kentz means that the products listed in the clause have no work to do. On Kentz’ construction, they provide no direction as to the insurance to be made available.

[45] As to Kentz’ submission that the CEPU construction would require it to reach Agreement with each of the Union parties and employees to the Agreement on the insurance product offered, there are three things to say. Firstly, the Agreement defines the “parties” (rightly or wrongly) as the Employer (Kentz Pty Ltd) and the Union parties (the AMWU, CEPU and CFMEU). There is no suggestion that it would be required to reach some agreement with the unions and employees. Second, there is no evidence that reaching agreement with the three Union parties and/or employees would not be possible. The creation of a hypothetical situation and the use of it to support a particular view as to the meaning of an Agreement is not a sustainable approach to construction. Third, the Agreement contains commitments by the Union parties in respect to representation and demarcation matters and how these would be resolved, including through paragraph (c) of the dispute resolution procedure at clause 18. 14 I am of the view that the process outlined could be utilised to resolve any dispute that might arise as to which union’s agreement might be necessary should the product offering of income insurance need to be revisited.

[46] Further, there is nothing in the dispute settlement procedure that suggests disputes over a failure to reach some future agreement, were it necessary because the agreed product was no longer available, could not be referred to the Commission. That there is no specific provision as to how an impasse in reaching agreement might be resolved does not favour the interpretation sought by Kentz of the meaning of “approved insurer”.

[47] I am therefore satisfied that there is no ambiguity in clause 19(a) of the Agreement. I am satisfied that an “approved insurer” is one who delivers the products specified in clause 19(a)(1), (2) and (3).

[48] I would note, however, that there is nothing to stop the relevant parties (taking into account other commitments in the Agreement) to agreeing to other insurance products, as long as they meet the requirements of the clause. The use of the phrase “such as” connotes permission to vary from that otherwise agreed by the clause. To do so, however, is to vary from what was otherwise agreed at the time the Agreement was made and should, in my view, be subject to agreement.

The 1.4% cap

[49] The second matter to be resolved is in relation to clause 19(b) of the Agreement.

[50] Clause 19(b) of the Agreement states that the cost of each policy is to be no more than 1.4% of the employee’s gross earnings (which I will come to later). The policy referred to is that taken out in accordance with clause 19(a).

[51] Kentz says that the 1.4% cap applies to the cost of the policy whilst the CEPU submits that 1.4% is a cap on the employer payment towards the policy and employees may choose to pay more for greater coverage.

[52] For the reasons given below, I do not consider that the clause in respect of the 1.4% is ambiguous. It applies to the total cost of the policy and not, as suggested by the CEPU, the employer cost only.
[53] Clause 19(b) logically (and sequentially) follows from clause 19(a). Clause 19(a) places obligations on the employer to take out insurance for employees. Clause 19(b) places a limit on the cost of each policy that the employer is obliged to take out. Clause 19(b) does not seek to limit the employer contribution to some part of an otherwise undefined cost of the policy but rather limits the cost of each policy. That is, clause 19(b) places a maximum cost limit on the policy arising from clause 19(a). There is no ambiguity in this.

[54] This conclusion is supported by the absence of any provision in the Agreement that would govern employee contributions to a higher cost policy.

[55] Whilst the CEPU suggests that an employee might wish to augment the cost of the insurance policy to gain a higher level of coverage, there is nothing in the Agreement that confers such a right on the employees. Of course, nothing operates to limit the capacity of Kentz to put such an arrangement in place by policy if it so chooses, but the limitations of the Agreement are clear.

[56] There is no ambiguity in this aspect of clause 19(b). Importantly, however, this cap will operate to constrain the products available in clause 19(a).

What is included in an employee’s gross earnings?

[57] The 1.4% cap on the cost of each policy is determined by reference to the employee’s gross earnings. There is disagreement between the parties as to what is included in “gross earnings”.

[58] Following the hearing I sought further submissions from the parties with respect to this matter to ensure that all issues were properly canvassed. I have considered those submissions in reaching my decision.

[59] The CEPU submits that, in the absence of any definition in the Agreement, the employee’s gross earnings should be determined by reference to the definition of earnings in s.332 of the FW Act. It submits that it is reasonable to have regard to the legislative context under which the Agreement was made. 15 On this basis it submits that earnings is broad enough to include the compulsory employer contribution to an Approved Worker Entitlement Fund (CIRTQ, ACIRT or BERT – depending on classification) made in accordance with clause 7.5 of the Agreement.16 In its further submissions, and for the same reasons, it says that earnings should also include payments made on the employee’s behalf for income protection insurance.

[60] Kentz submits that monies paid to (or from) CIRTQ (on application by an employee once the employee is terminated from employment or leaves the industry) is not a reward for the rendering of services but rather is compensation for the loss of a job. For this reason, it can be distinguished from earnings which is the reward granted for the rendering of services of the employee.

[61] Kentz says that the definition of earnings in the FW Act is not relevant to the matter at hand as it is restricted in its application to considerations of the high income threshold and has no application beyond that.

[62] Kentz submits that the necessary consideration is the essential nature and purpose of the payments made under clause 7.5 and whether that falls within the plain and ordinary meaning of employee earnings.

[63] Kentz says that the purpose of CIRTQ is to provide redundancy benefits. This operates in lieu of any requirement to make redundancy payments based on years of service. On this basis it says that the nature of the payments to CIRTQ is an employer expense and not employee earnings.

[64] Kentz concedes that clause 7.5, viewed alone, might suggest that the payments are consistent with the accepted meaning of earnings. However, it says that just because the payment is referable to service does not mean it is earnings. That periodical payments are made “is not decisive of the essential character and purpose of the payments” under the clause.

[65] Kentz says that once the purpose of redundancy pay is considered it is clear that the payments to CIRQ do not fall within the contextual meaning of earnings.

Consideration

[66] I am not satisfied that the amounts paid on behalf of employees into CIRTQ should be considered as part of the gross earnings of employees for the purposes of clause 19(b) of the Agreement.

[67] Clause 7.5(a) of the Agreement states:

7.5 Redundancy Entitlements

(a) Each month, the Employer will pay $80.00 per week (pro-rata for part time) to each Employee, for each week of service which that Employee completed on the Project, into an Approved Worker Entitlement Fund…

[68] This matter is not about the benefit that may be paid out of the Fund to an employee at some point in the future or how that is accessed; it is whether the $80.00 (increased in accordance with the Agreement) should be included in the determination of gross earnings.

[69] I accept that there is uncertainty as to what is included in “gross earnings” for the purpose of clause 19(b) of the Agreement. As such I am satisfied that it is reasonable to consider the legislative context under which the Agreement was made.

[70] I am not satisfied that s.322 of the FW Act provides any assistance in determining whether payments made pursuant to clause 7.5 of the Agreement should be considered earnings for the purpose of clause 19(b) of the Agreement. Section 332 of the FW Act provides a definition of earnings for the specific purpose of defining the high income threshold in relation to a guarantee of annual earnings for a high income employee and, by specific reference, determining if an employee is protected from unfair dismissal. It is notable that, beyond these purposes, the term “earnings” is not otherwise used in the FW Act. (References to earnings in ss.316, 341(4) and 344 of the FW Act also relate to high income employees and the guarantee of annual earnings.) The definition is confined by its use and there is no basis on which it should be given some wider meaning. For this reason I do not consider that the definition of the earnings in the FW Act has relevance to the matter before me.

[71] CIRTQ is the trustee for CIRT. CIRT is described on its website as having been “established in 1991 to preserve the redundancy entitlements of workers in the electrical contracting industry”. The “sole purpose of CIRT is to benefit employees and employers of the electrical contracting industry in relation to redundancy entitlements.” The trustee “has equal employer/employee representation consisting of the ECAQ and the ETU together with an independent director.” 17

[72] Clause 7.5(d) of the Agreement states that:

The payments under this clause are inclusive of any statutory entitlements an Employee may have to severance or redundancy payments.

[73] I am satisfied that the purpose of payments into CIRTQ is to meet any redundancy entitlements to employees in the electrical contracting industry. I am satisfied that this is a fact known to both parties. In any event the CEPU (or which the ETU is a constituent part) did not dispute this purpose as put into evidence by Kentz.

[74] It is noteworthy that clause 7.5(d) does not speak of payments from CIRTQ meeting statutory redundancy obligations but of payments to CIRTQ (that is, made by the employer under the clause) meeting the statutory redundancy obligation. This is clear from the words. The payments made by the employer meet the employee entitlement to redundancy payments.

[75] This, along with the purpose of CIRTQ, convinces me that payments to CIRTQ are akin to redundancy payments. That these payments are held by the trustee until such time as the employee leaves the industry or loses his or her job does not change the character of the payments made by the employer pursuant to clause 7.5.

[76] Redundancy payments cannot be earnings by definition – they are received after employment has ended and are not for services to the employer but are in “compensation for [the loss of] non-transferable credits and the inconvenience and hardship imposed on employees.” 18 “Hardship” covers “areas such as loss of seniority, loss of security of employment and other kinds of losses…”19 The purpose of redundancy payments makes clear that they are not “earnings” as understood.

[77] For these reasons, I find that payments to CIRTQ are not part of an employee’s “gross earnings” as contemplated by clause 19(b) of the Agreement.

[78] The CEPU makes no additional or separate submissions as to why payments to an approved insurer by the employer should be considered part of the “gross earnings” of an employee pursuant to clause 19(b) except to say that, for the same reasons payments to CIRTQ should be considered “gross earnings” then so should payments to an approved insurer. This argument relies on the definition of earnings in s.332 of the FW Act. For the same reasons given above, I do not consider the definition of earnings in s.332 relevant to the matter I am to determine. For this reason and absent any other submissions in support of the proposition, I reject the submission of the CEPU that such payments should be considered part of gross earnings.

[79] In summary, I do not consider payments by the employer to CIRTQ or to an approved insurer to be part of the “gross earnings” of an employee for the purposes of clause 19(b) of the Agreement.

Next steps

[80] For the reasons given above, I have concluded that, in respect of clause 19 of the Agreement:

● “approved insurer”, in the context of clause 19(a) of the Agreement is an insurer offering the relevant income protection insurance specified in paragraphs (1), (2) or (3) of the clause;

● The intention of the clause is that the income protection insurance specified in clause 19(a) be the insurance taken out for the relevant class of employees for as long as it remains available;

● If no other income protection insurance is agreed between the relevant parties, the listed products are the default products for as long as they remain available and meet the requirements of clause 19 of the Agreement;

● Should the insurance no longer be available, the parties should confer with a view to reaching agreement as to an insurer/insurance product which is like the insurance that is no longer available;

● There is no prohibition on the parties agreeing to an alternative product that meets the requirements of clause 19(a) of the Agreement. The use of the phrase “such as” is permissive in this respect;

● The 1.4% cap on the cost of the policy is the maximum limit on the cost of the policy. The Agreement does not allow for additional contributions by employees;

● The cost of the employer contribution to the relevant Approved Worker Entitlement Fund and to the approved insurer is not part of the employee’s gross earnings for the purpose of clause 19 of the Agreement.

[81] I would now direct the parties to confer on the resolution of the underlying dispute – that is, the income protection insurance to be provided for the relevant employees.

[82] I do not understand at this point in time that the insurance product specified in clause 19(a)(1) is no longer available.

[83] The CEPU is required to advise the Commission within six weeks of the issue of this decision progress in discussions and/or of the need to re-list the matter for programming.

COMMISSIONER

Appearances:

P. Rogers for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia.

R. Dalton, of counsel, for Kentz Pty Ltd.

Hearing details:

2016.

Melbourne:

December 19.

Final written submissions:

Applicant: 24 January 2017.

Respondent: 20 January 2017.

 1   AE410259.

 2   [2016] FWC 718.

 3   [2014] FWCFB 7447.

 4   See for example clause 7.6 of the Kentz Pty Ltd Ichthys Onshore Construction Greenfields Agreement in relation to circumstances where an employee has agreed to undertake duties at a higher classification; clause 8.1(e) which refers to agreement of affected employees to vary the pattern of working ordinary hours; clause 8.4(b) and (c) which allow shorter periods of notice where agreed by a majority of employees. See also clause 3(c)(11), clause 8.1(e), clause 17.2(j), clause 23, clause 25(a), and clause 26.

 5   Exhibit Kentz1, paragraph 42.

 6   [2016] FWC 718 at [60].

 7   Exhibit Kentz1, attachment Kentz1.

 8   Kucks v CSR Limited, (1996) 66 IR 182 at p.184.

 9   Clause 5 references the Fair Work Act 2006 and the approval processes therein; clause 7.5(a) refers to approval as defined in the Fringe Benefits Tax Assessment 1986; clause 20(a) refers to approved issue PPE where “approved” refers to the Australian Standard; and Appendix 1(e) refers to approved post trades courses referable to the relevant government department/training authority.

 10   Clause 8.6(j) of the Kentz Pty Ltd Ichthys Onshore Construction Greenfields Agreement which refers to approved leave, suggesting a formal decision by the employer to grant leave.

 11   See, for example clause 7.3(e) of the Kentz Pty Ltd Ichthys Onshore Construction Greenfields Agreement where the employer is “authorised” to make deductions in certain circumstances; clause 8.5(b) which provides that R&R is “authorised” non-work time; clause 17.1(f) which refers to “authorised” leave etc.

 12 2016] FWC 718 at [52].

 13   Kucks v CSR Limited, (1996) 66 IR 182 at p.184.

 14   Kentz Pty Ltd Ichthys Onshore Construction Greenfields Agreement, clause 23.

 15   See AMIEU vGolden CockerelLimited[2014] FWCFB 7447 at [41] 8(c).

 16   See Savannah Nickel Mines v Bryan Crowley [2016] FWCFB 2630.

 17   Exhibit Kentz3.

 18   Termination, Change and Redundancy Case Print F6230, pa.46; (1984) 8 IR 34 at 73.

 19   Redundancy Case 2004 PR032004 at [134].

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