Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Nilsen (SA) Pty Ltd

[2016] FWC 2095

[2016] FWC 2095 [Note: An appeal pursuant to s.604 (C2016/3535) was lodged against this decision - refer to Full Bench decision dated 25 May 2016 [[2016] FWCFB 3119] for result of appeal.]

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739 - Application to deal with a dispute

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
v
Nilsen (SA) Pty Ltd
(C2016/2523)

SENIOR DEPUTY PRESIDENT O'CALLAGHAN ADELAIDE, 5 APRIL 2016

Alleged dispute about any matters arising under the enterprise agreement and the NES;[s186(6)] – agreement interpretation – redundancy pay.

[1] On 5 February 2016 the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (the CEPU) lodged an application pursuant to s.739 of the Fair Work Act 2009 and clause 11 of the Nilsen (SA) Pty Ltd-Contracting Division Collective Agreement 2013 (the Agreement), through which it sought the assistance of the Fair Work Commission (the FWC) in the resolution of a dispute about redundancy payments.

[2] This matter was the subject of a conference on 11 March 2016. The parties were unable to reach agreement about the matter in dispute and acknowledged that, pursuant to the dispute settlement procedure in the Agreement, the matter should be referred to the FWC for arbitration.

[3] In directions issued on 11 March 2016 I described the matter in dispute in the following terms:

“The parties disagree about how clause 41.2(c) of the Agreement is to be applied. The CEPU asserts that this provision operates to provide a pro rata redundancy payment from the commencement of employment. Nilsen (SA) Pty Ltd (Nilsen) asserts that clause 41.2(c) is inconsistent with clause 41.2(a) and, properly applied, gives employees less than the redundancy entitlements in clause 41.2(a). Consequently, Nilsen argue that clause 41.2(c) should not be applied. In the alternative, Nilsen argue that if clause 41.2(c) is to be applied, pro rata payments should commence after one year’s service has been completed consistent with the table in clause 41.2(a).” 1

[4] Both parties provided written submissions consistent with the 11 March 2016 directions. I note that neither party requested a hearing in this matter. In reaching my conclusion about the matter in dispute I have taken all of the material provided to me into account.

The matter in dispute

[5] Clause 41.2 relevantly states:

“41.2 Pay

(a) In addition to the period of notice prescribed for ordinary termination, an employee whose employment is terminated by reason of redundancy, shall be entitled to the amount of redundancy pay in respect of a continuous period of service in accordance with the following table.

Employee's period of continuous service with employer on termination	Redundancy pay period
At least 1 year but less than 2 years	4 week's pay
At least 2 years but less than 3 years	6 week's pay
At least 3 years but less than 4 years	7 week's pay
At least 4 years but less than 5 years	8 week's pay
At least 5 year but less than 6 years	10 weeks
At least 6 year but less than 7 years	11 weeks
At least 7 years but less than 8 years	13 weeks
At least 8 years but less than 9 years	14 weeks
At least 9 years but less than 10 years	16 weeks
At least 10 years	12 weeks

(b) Week's pay means the gross weekly base rate of pay, at the date of termination.

(c) An employee shall be entitled to a pro rata payment for any period of continuous service which is less than a full year at any of the year levels referred to above.

(d) Where an employee who is terminated receives a benefit from a severance pay scheme, he/she shall only receive the difference between the redundancy pay specified above and the amount of the severance benefit he or she receives which is attributable to employer contributions. If the severance benefit is greater than the amount under the table herein then he/she shall receive no payment under that table.

41.3 Exemption

Redundancy shall not apply:

• where termination of employment is a consequence of malingering, inefficiency, neglect of duty, misconduct or refusing duty, or conduct that justifies summary dismissal.
• to apprentices and trainees.
• to employees employed on a casual basis.
• to employees employed by employers who operate exclusively within the cottage sector of the housing industry.
• to employees engaged for a specific period of time for a specific task or tasks.
• where legislation provides that the employer is not required to pay redundancy.”

[6] In its submissions, the CEPU asserts that a proper construction of the Agreement, consistent with established authorities, establishes that the Agreement provisions have a plain meaning, are not ambiguous and have been consistent since 2003. The CEPU asserts that the Agreement provisions operate to the effect that employees are entitled to pro rata redundancy payments. The CEPU seeks an order which establishes that the correct interpretation of the redundancy provision in clause 41.2 of the Agreement, entitles the Nilsen (SA) Pty Ltd (Nilsen) employees, covered by the agreement, to pro rata redundancy payments from the commencement of their employment.

[7] In its submissions, Nilsen assert that the CEPU position is inconsistent with the established principles and practices which have applied since the commencement of the Agreement. Nilsen assert that sub clause 41.2(c) has no current purpose and is inconsistent with the Redundancy table at clause 41.2(a). Nilsen asserts that clause 41.2(c) was unintentionally left in the 2013 Agreement following the inception of the FW Act and the National Employment standards. Nilsen request the removal of clause 41.2 (c). Alternatively, Nilsen argues that the only meaningful interpretation of clause 41.2(c) must operate to the detriment of employees as they would only receive pro rata payment of redundancy pay. In support of its contentions, Nilsen referred to the redundancy provisions of the National Electrical, Electronic and Communications Contracting Industry Award 1998 which was the precursor to the Electrical, Electronic and Communications Contracting Award 2010. It argued that these provisions differed from the redundancy pay treatment established by the National Employment Standards. Nilsen referred to clause 41.3 on the basis that it does not require redundancy payments if the legislation does not require these payments to be made.

Principles of Interpretation

[8] In The Australasian Meat Industry Employees Union v Golden Cockerel Pty Limited 2 a Full Bench of the Commission summarised the principles for the interpretation of agreements in the following terms:

“[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.”

[9] I have applied these principles to the Agreement provisions in dispute.

[10] Section 55 of the FW Act provides the capacity for an Enterprise Agreement to include terms which supplement the National Employment Standards provided that the effect of those terms is not detrimental to an employee in any respect, when compared to the National Employment Standards.

[11] Clause 41.2(a) establishes a table which prescribes redundancy pay in terms which are consistent with the redundancy pay entitlements set out in the National Employment Standards in s.119 of the FW Act. Clause 41.2(b) provides for a definition of a week’s pay in terms which are clearly consistent with the provisions of ss.55 and 119 of the FW Act.

[12] Clause 41.2(c) provides for a pro rata payment arrangement. I am unable to regard this provision as ambiguous. On its plain words it appears to me to provide for recognition of periods of continuous service which are less than the full year specified in the table in clause 41.2(a). On this basis the table in clause 41.2(a) establishes a minimum requirement of one year’s continuous service to entitle an employee to four weeks’ redundancy pay clause 41.2(c) provides that this four weeks’ pay is to be calculated on a pro rata basis over that first year. Once an employee has completed that first year of continuous service, the pro rata payment will then apply in the event of a redundancy situation calculated on the basis of the next increase in redundancy payment amounts. For example, an employee who has completed, say 1.5 years’ continuous service would receive five weeks redundancy pay and an employee who had completed 2.5 years’ continuous service would receive 6.5 weeks’ pay. In each case, continuous service which reflects the minimum entitlement for an amount of redundancy pay specified in clause 41.2(a) must qualify any employee for that payment and the pro rata amount will vary between that minimum and the next specified maximum payment. Once an employee has achieved 10 years’ continuous service the provisions of clause 41.2(c) have no further work to do as a maximum redundancy pay of 12 weeks is then specified. There is a potential issue associated with the calculation of pro rata amounts for an employee who has between nine and 10 years’ service. My preliminary view is that the 16 week payment cannot be reduced on a pro rata basis until the employee has achieved 10 years’ service because such a reduction would be inconsistent with the National Employment Standards. This matter has not, however, been argued to me.

[13] With respect to the secondary Nilsen position, there is nothing in the Agreement which would limit the pro rata payment mechanism to situations where an employee has completed one year’s service.

[14] Notwithstanding this conclusion, based on the plain words of the Agreement, it is appropriate that I note that a similar provision was included in the pre-reform Award. The National Electrical, Electronic and Communications Contracting Award 1998 included an almost identical provision. As the CEPU has argued, this longstanding Award provision was the subject of disputation at the time of the formulation of the Electrical, Electronic and Communications Contracting Award 2010. In that matter, Watson SDP stated:

“[19] Clause 15.1 of the 2010 modern award provides that redundancy pay is provided for in the National Employment Standards (NES), but supplements the NES in several respects, including clause 15.6 which states:

“An employee will be entitled to a pro rata payment for any period of continuous service which is less than a full year at any of the year levels referred to.”

[20] NECA contended that clause 15.6 of the 2010 modern award appears to provide a pro rata redundancy payment entitlement to any employee who has been employed for less than 12 months, which is at odds with the redundancy scale provided for in the NES in s.119 of the Act and s.121 of the Act which states that the redundancy scale in s.119 “does not apply to the termination of an employee’s employment if, immediately before the time of the termination, or at the time when the person was given notice of the termination . . . the employee’s period of continuous service with the employer is less than 12 months” and extends the redundancy benefit generally by the provision of pro rata payments.

[21] Clause 15.6 was a feature of the National Electrical, Electronic and Communications Contracting Industry Award 1998 (NEECCI award) at clause 12.3.3 which stated:

“Provided that an employee shall be entitled to a pro rata payment for any period of continuous service which is less than a full year at any of the year levels referred to above”.

[22] NECA submitted that the NEECCI award “only covered Victoria, Tasmania, South Australia and the Australian Capital Territory, with NAPSAs covering the other States”, none of which had the provision contained in clause 15.6 of the 2010 modern award. It submitted that, as a result, an obligation, whose origins stem from clause 12.3.3 of the NEECCI award, has been extended from a minority of the States and Territories to the entire country and industry.

[23] NECA submitted that to extend the pro rata redundancy payment obligation provided for by clause 15.6 to all those electrical employers (who have 15 or more employees) throughout all the States and Territories, is arguably at odds with the modern awards objective provided for by s.134(1)(f) of the Act.

[24] NECA submitted that clause 15.6 of the 2010 modern award should be deleted.

[25] AFEI noted that the 2010 modern award provides an entitlement to redundancy pay to employees with less than 12 months employment with an employer, an unusual award entitlement only previously applicable in the minority of States and Territories.

[26] The CEPU submitted that the increased benefit of the award, as opposed to the NES, reflects the transitory nature of the industry. This is particularly important in an industry that experiences significant “peaks and troughs” and short term contracts. For example, in the Northern Territory, there are 21 construction projects scheduled to commence in the next six months, of which only two are planned to take longer than 12 months to complete. This is a reflection of the nature of the industry generally across the Commonwealth.

Consideration

[27] I am not persuaded by NECA and AFEI that the variation proposed is necessary to achieve the modern awards objective. Clause 15.6 was included in the 2010 modern award by the Award Modernisation Full Bench, supplementing the NES entitlement, having regard to the circumstances of the industry, including then current award regulation across the industry. The issues now raised by NECA were raised by it and considered in the making of the 2010 modern award. The exposure draft published on 23 January 2009 contained the provision in clause 16.6 which NECA now seeks to delete. NECA in its 13 February 2009 submissions concerning that exposure draft put the same argument then 11 as it puts now.

[28] The Award Modernisation Full Bench was not persuaded by those arguments to alter the exposure draft by deleting that clause, having regard to the object of Part 10A of the Workplace Relations Act 1996 (WR Act), the matters in s.576B of that Act and the terms of the Minister’s request, including its objects. These considerations broadly reflect the modern awards objective. In specific terms, the object of Part 10A of the WR Act, to which the Award Modernisation Full Bench was directed by the Minister’s request, included a requirement that modern awards “must be simple to understand and easy to apply, and must reduce the regulatory burden on business” and “must be economically sustainable and promote flexible modern work practices and the efficient and productive performance of work”. Also s.576B of the WR Act requires that regard be had to “promoting the creation of jobs, high levels of productivity, low inflation, high levels of employment and labour force participation, national and international competitiveness, the development of skills and a fair labour market”. These matters include the considerations within s.134(1)(f) of the Act on which NECA relies in support of this element of its application.

[29] NECA has not identified changed circumstances which would warrant reconsideration of clause 15.6 nor that the decision of the Award Modernisation Full Bench was wrong or inappropriate in light of the modern awards objective. That part of the NECA application to delete clause 15.6 of the 2010 modern award is refused.” 3

[15] The provisions of the Electrical, Electronic and Communications Contracting Award 2010 at clause 15.6 reflect this conclusion in the following terms:

“15.6 An employee will be entitled to a pro rata payment for any period of continuous service which is less than a full year at any of the year levels referred to.”

[16] It may well have been the case that either or both parties intended that the table at clause 41.2(a) of the Agreement would prescribe the entirety of redundancy payment entitlements. However, given that the provisions of clause 41.2(c) reflect earlier Agreement provisions and were part of the Agreement proposal endorsed by employees and approved by the FWC, there is no basis for them to be disregarded now.

Conclusion

[17] For the reasons I have specified, the dispute relative to redundancy payment entitlements must be resolved on the basis that pro rata redundancy payments which commence after an employee is employed, and up to a maximum of 10 years’ continuous service must apply so as to recognise a part year’s continuous service.

 1   Directions, 11 March 2016, para [2]

 2   [2014] FWCFB 7447

 3   [2010] FWA 4410, paras [19] – [29]

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