Conroy's Smallgoods v Australasian Meat Industry Employees Union
[2023] FCAFC 59
•19 April 2023
FEDERAL COURT OF AUSTRALIA
Conroy’s Smallgoods v Australasian Meat Industry Employees Union [2023] FCAFC 59
Appeal from: Australasian Meat Industry Employees Union v Conroy’s Smallgoods Pty Ltd [2021] SAET 234 File number: SAD 225 of 2021 Judgment of: BROMBERG, O’SULLIVAN AND RAPER JJ Date of judgment: 19 April 2023 Catchwords: INDUSTRIAL LAW – s 113 of the Fair Work Act 2009 (Cth) – meaning of “applicable award-derived long service leave terms” – appeal allowed Legislation: Constitution
Acts Interpretation Act 1901 (Cth) ss 15AA, 15AB
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) Sch 4, Pt 3
Fair Work Act 2009 (Cth) ss 5(3), 5(4), 5(5), 5(6), 12, 14, 26, 26(1), 27(1A), 27(1), 27(1)(c), 27(2), 27(2)(g), 29, 29(1), 29(2), 29(2)(b), 61(1), 61(2), 66, 67, 86, 95, 112, 113, 113(1), 113(2), 113(2)(a), 113(2)(b), 113(3), 113(3)(a), 113(3)(a)(i), 113(3)(a)(ii), 113(3A), 113(4), 113(5), 113(6), 113A, 123(1)(c), 323(1), 520, 527(2)(d), 527(3), 557A
Industrial Relations Act 1988 (Cth) (repealed)
Workplace Relations Act 1996 (Cth) ss 16(1), 16(2), 16(2)(c), 16(3), 16(3)(f), 17, 89A(2)(f), 513, 528(2) (repealed)
Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 (Cth) s 576J
Workplace Relations Amendment (Work Choices) Act 2005 (Cth)
Industrial Relations Act 2016 (Qld)
Long Service Leave (Amendment) Act 1963 (NSW)
Long Service Leave Act 1976 (ACT)
Long Service Leave Act 1955 (NSW) s 4
Long Service Leave Act 1981 (NT)
Long Service Leave Act 1987 (SA) ss 5, 5(6)
Long Service Leave Act 1976 (Tas)
Long Service Leave Act 2018 (Vic) s 6
Long Service Leave Act 1958 (WA)
Explanatory Memorandum, Fair Work Bill 2008 (Cth)
Explanatory Memorandum, Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008 (Cth)
Federal Meat Industry (Smallgoods) Award 2000
Cases cited: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27
APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322
Arnold v Britton [2015] AC 1619
Australia Education Union v Department of Education and Children’s Services (2012) 248 CLR 1
Australasian Meat Industry Employees Union v Conroy’s Smallgoods Pty Ltd [2021] SAET 234
Certain Lloyd’s Underwriters v Cross [2012] HCA 56; 248 CLR 378
CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; 187 CLR 384
Compass Group (Australia) Pty Ltd v Bartram [2007] FCAFC 26; 239 ALR 262
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; 147 CLR 297
Cooper v Maughan Thiem Auto Sales Pty Ltd [2012] SAIRC 51
Decisions – Graphic Arts and Metal Trades (re Long Service Leave) (1964) 106 CAR 412
Epona Pty Ltd Enterprise Agreement 2015 [2015] FWCA 5890
Esso Australia Resources Ltd v Federal Commissioner of Taxation (1998) 83 FCR 511
Esso Australia v Australian Workers Union (2017) 263 CLR 551
Ganter v Whalland (2001) 54 NSWLR 122
Gould, Robinson & Boxshall (Civil Dispute) v Effective People [2019] ACAT 124
H Lundbeck A/S v Sandoz Pty Ltd (2022) 399 ALR 184
Independent Commission Against Corruption v Cunneen [2015] HCA 14; 256 CLR 1
Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508
Lehman Brothers Holdings Inc v City of Swann (2010) 240 CLR 509
Masson v Parsons (2019) 266 CLR 554
Maughan Thiem Auto Sales Pty Ltd v Cooper [2014] FCAFC 94; 222 FCR 1
Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29; 271 CLR 495
Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) (2019) 270 FCR 513
Northern Territory of Australia v GPAO (1999) 196 CLR 553
Poletti v Ecob (No 2) [1989] FCA 779; 91 ALR 381
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355
R v A2 (2019) 269 CLR 507
Ray v Radano [1967] AR (NSW) 471
SAS Trustee Corporation v Miles (2018) 265 CLR 137
Swissport Australia Pty Ltd v Australian Municipal Administrative Clerical and Services Union (No 3) [2019] FCA 37; 284 IR 97
Sydney Seaplanes Pty Ltd v Page (2021) 362 FLR 1
SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362
Tabcorp Holdings Ltd v Victoria (2016) 328 ALR 375
Taylor v Owners — Strata Plan No 1 1564 (2014) 253 CLR 531
TransAdelaide v Leddy (No 2) (1998) 71 SASR 413
University of Wollongong v Metwally (1984) 158 CLR 447
Victims Compensation Fund Corporation v Brown (2003) 201 ALR 260
WorkPac Pty Ltd v Rossato [2020] FCAFC 84; 278 FCR 179
Division: Fair Work Division Registry: South Australia National Practice Area: Employment and Industrial Relations Number of paragraphs: 293 Date of hearing: 24 May 2022 Counsel for the Appellant: Mr B Roberts KC with Ms K Stewart Solicitor for the Appellant Piper Alderman Counsel for the Respondent Mr S Blewett Solicitor for the Respondent Australasian Meat Industry Employees Union Counsel for the First Intervener Mr F Parry KC with Mr A Manos Solicitor for the First Intervener King & Wood Mallesons Counsel for the Second Intervener Mr M Irving KC with Ms Knowles Solicitor for the Second Intervener Wage Inspectorate Victoria Counsel for the Third Intervener Ms T Wong SC with Mr M Pulsford Solicitor for the Third Intervener Crown Solicitor for New South Wales
ORDERS
SAD 225 of 2021 BETWEEN: CONROY’S SMALLGOODS PTY LTD (ACN 007 569 628)
Applicant
AND: AUSTRALASIAN MEAT INDUSTY EMPLOYEES UNION
Respondent
ORDER MADE BY:
BROMBERG, O’SULLIVAN AND RAPER JJ
DATE OF ORDER:
19 APRIL 2023
THE COURT DECLARES THAT:
1.Pursuant to s 113(1) of the Fair Work Act 2009 (Cth) there are applicable award-derived long service leave terms in relation to Mr Matthew Finch contained within the Federal Meat Industry (Smallgoods Award) 2000.
2.Mr Finch’s entitlement to long service leave is nil.
THE COURT ORDERS THAT:
1.The appeal is allowed and the decision of the South Australian Employment Tribunal is set aside.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
BROMBERG J:
Mr Finch was employed by Conroy’s Smallgoods Pty Ltd (Appellant) in the position of “boner” on a casual basis. Whilst so employed, Mr Finch was not provided with long service leave and he was not paid out any long service leave entitlements upon the termination of his employment in October 2018.
On his behalf, the respondent union (Respondent) instituted proceedings in the South Australian Employment Tribunal (Tribunal), seeking a declaration that Mr Finch was entitled to long service leave in accordance with the Long Service Leave Act 1987 (SA) (LSL Act (SA)). Like counter-part legislation which exists in each State and Territory (Long Service Leave Act 1976 (ACT); Long Service Leave Act 1955 (NSW); Long Service Leave Act 1981 (NT); Industrial Relations Act 2016 (Qld); Long Service Leave Act 1976 (Tas); Long Service Leave Act 2018 (Vic); Long Service Leave Act 1958 (WA)), the LSL Act (SA) relevantly provided long service leave entitlements to all employees, including casual employees, whose years of service qualified the employee for the entitlements. It is not in contest that, if Mr Finch was entitled to long service leave entitlements under the LSL Act (SA) (State-based LSL entitlement), he was entitled to 10.4 weeks of accrued long service leave equating to a payment upon termination of $9,950.23.
The Tribunal declared that Mr Finch was entitled to his State-based LSL entitlement. On this appeal, the declaration made by the Tribunal is supported by the respondent as well as two interveners — the Wage Inspectorate Victoria (WIV) and the State of New South Wales (NSW) (collectively, the Respondent/Interveners). The validity of the declaration is challenged by the Appellant and an intervener – the National Australia Bank (NAB) (collectively the Appellant/Intervener).
The legislation and competing contentions as to its construction
Broadly speaking, the Appellant/Intervener contended that Mr Finch’s State‑based LSL entitlement was negated by the operation of the Fair Work Act 2009 (Cth) (FW Act).
To understand how that was put, it is necessary to appreciate how, relying principally on the operation of s 109 of the Commonwealth Constitution and the corresponding principles developed in relation to Territory laws, the FW Act deals with the interaction of that Act with State and Territory laws. It is relevant in that respect to note the principles in Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508 at [11] (French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ) that “[f]or the purposes of s 109, an industrial award, while not of itself a law of the Commonwealth, has the force and effect of such a law where so provided by the machinery of a Commonwealth statute”. Section 109 only applies to inconsistency between Commonwealth and State laws. It does not apply in relation to Territory laws. However, in University of Wollongong v Metwally (1984) 158 CLR 447, Mason J stated at 464 that “[i]t is significant that a conflict between a Commonwealth law and a Territory law, which is unaffected by the provisions of s 109, is resolved in favour of the primacy of the Commonwealth law by reference to the same doctrine of inconsistency”. The High Court has affirmed this principle in a number of other cases, including Northern Territory of Australia v GPAO (1999) 196 CLR 553 at [59], [80] (Gleeson CJ and Gummow J), [202], [219] (Kirby J).
The intended interaction of the FW Act with State and Territory laws is specifically addressed in Div 2 of Pt 1-3 headed “Interaction with State and Territory Laws”. Section 26(1) provides that the FW Act is “intended to apply to the exclusion of all State or Territory industrial laws so far as they would otherwise apply in relation to a national system employee or a national system employer”. The meaning of “national system employee” and “national system employer” is given by ss 13 and 14 of the FW Act, respectively, and it is not in issue that Mr Finch and the Appellant each fell within the applicable definition.
Section 27 identifies certain State and Territory laws that are not excluded by s 26. Relevantly, s 27(1)(c) provides that s 26 does not apply to a law of a State or Territory insofar as the law deals with “any non-excluded matters”. Section 27(2) then specifies the “non‑excluded matters” and, relevantly, they include “long service leave, except in relation to an employee who is entitled under Div 9 of Pt 2-2 to long service leave” (s 27(2)(g)).
Part 2-2 of the FW Act contains the “National Employment Standards” (NES) which s 59 describes as the “minimum standards that apply to the employment of national system employees”. Section 61(2) lists each of the ten “minimum standards” and includes at subpara (g) “long service leave” which is the subject of Div 9 of Pt 2-2 of the Act (Div 9).
In Div 9, s 113(1) of the Act provides that (emphasis added):
(1)If there are applicable award-derived long service leave terms (see subsection (3)) in relation to an employee, the employee is entitled to long service leave in accordance with those terms.
Note:This Act does not exclude State and Territory laws that deal with long service leave, except in relation to employees who are entitled to long service leave under this Division (see paragraph 27(2)(g)), and except as provided in subsection 113A(3).
The current wording of s 113 is identical to the wording when the FW Act commenced on 1 January 2010, except that the references to the Fair Work Australia and Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) are now to the Fair Work Commission and Transitional Act (as defined in s 12).
Section 113(2) specifies certain circumstances in which s 113(1) does not apply and I will return to that provision.
Sections 113(3) and (3A) define the critical phrase “applicable award-derived long service leave terms” utilised in s 113(1) as follows (emphasis added):
(3)Applicable award-derived long service leave terms, in relation to an employee, are:
(a)terms of an award, or a State reference transitional award, that (disregarding the effect of any instrument of a kind referred to in subsection (2)):
(i)would have applied to the employee at the test time (see subsection (3A)) if the employee had, at that time, been in his or her current circumstances of employment; and
(ii)would have entitled the employee to long service leave; and
(b)any terms of the award, or the State reference transitional award, that are ancillary or incidental to the terms referred to in paragraph (a).
(3A) For the purpose of subparagraph (3)(a)(i), the test time is:
(a)immediately before the commencement of this Part; or
(b)if the employee is a Division 2B State reference employee (as defined in Schedule 2 to the Transitional Act)—immediately before the Division 2B referral commencement (as defined in that Schedule).
The appeal turns on the proper construction of the definition provided by s 113(3) which must be read into the terms of s 113(1). The primary question is whether “there are applicable award‑derived long service leave terms” in relation to “an employee” (relevantly, Mr Finch) within the meaning of s 113(1). If there are such terms, then Mr Finch “is entitled to long service leave in accordance with those terms” with the effect that Mr Finch would be “an employee who is entitled under Division 9 of Pt 2-2 to long service leave” within the meaning of s 27(2)(g). Therefore, s 26 would apply to exclude the application of the LSL Act (SA) to Mr Finch’s employment and thus deny to him the State-based LSL entitlement. If, on the other hand, there are not “applicable award-derived long serve leave terms” in relation to Mr Finch, the FW Act would not exclude the operation of the LSL Act (SA) and the Tribunal was correct to have declared that Mr Finch was entitled to the State-based LSL entitlement.
The Appellant/Intervener relied upon an award known as the Federal Meat Industry (Smallgoods) Award 2000 (Award) as providing the “applicable award-derived long service leave terms” in relation to Mr Finch. The Award is an award made in 2001 under a predecessor of the FW Act, the Workplace Relations Act 1996 (Cth) (WR Act), some eight or nine years prior to the commencement of the FW Act. Awards of that kind are often referred to as “pre‑modernised” awards in order to distinguish those awards from the “modern awards” made pursuant to Pt 2-3 of the FW Act. It is not in contest that the Appellant was bound by the Award and that the Award applied in relation to the employment of Mr Finch.
Nor is it in issue that the terms of the Award “applied” to Mr Finch “at the test time” within the requirements of the first condition (first condition) provided by subpara (a)(i) of the definition of “applicable award-derived long service leave terms” in s 113(3)(a). The satisfaction of the first condition is not otherwise in issue. What is at the heart of the contest between the parties is whether the terms of the Award, and relevantly cl 32 of the Award, satisfied the second condition (second condition) specified by s 113(3)(a)(ii), that the terms “would have entitled [Mr Finch] to long service leave”, in circumstances where it is accepted that cl 32 of the Award did not provide Mr Finch any entitlement to accrue and be paid long service leave whilst employed on a casual basis. That was because, as a casual employee whose employment terminated at the end of each engagement in accordance with cl 8.6.3(b) of the Award, Mr Finch could never satisfy the long service leave eligibility requirement in cl 32 of the Award that he complete 15 years of service “under an unbroken contract of employment”.
It was not in dispute that the second condition is satisfied where the employee in question would have had a right to long service leave under the terms of an award, irrespective of whether at that time the employee would have actually accrued long service leave. That was the holding of a Full Court of this Court in Maughan Thiem Auto Sales Pty Ltd v Cooper (2014) 222 FCR 1: see at [43] the reasons of Katzmann J with whom Greenwood and Besanko JJ agreed. The Full Court was not there concerned with the constructional issue raised in this appeal, although both the Appellant/Intervener and the Respondent/Interveners each sought to draw some comfort from that judgment.
The Appellant/Intervener contended that the phrase “entitled the employee to long service leave” in the second condition should not be construed in accordance with its ordinary or grammatical meaning. The ordinary meaning of “entitled … to long service leave” being that an employee has a right or benefit to long service leave. The Appellant/Intervener contended that, by reference to context, s 113(1) is to be read as intending to wholly preserve both the terms and the effect of long service leave terms in pre-modernised awards (including terms which provide to particular employees a nil entitlement to long service leave) pending the development of a national uniform scheme for long service leave. This conception of the purpose was, according to the Appellant, supported by Katzmann J’s observation in Maughan at [44] (Greenwood and Besanko JJ agreeing) that “113 is a transitional provision that is designed to preserve the effect of long service leave terms in awards as they stood before the commencement of the National Employment Standards”.The core of this contention was that Parliament intended that the status quo in relation to long service leave arrangements be preserved without alteration pending a national uniform scheme. The “mischief that Parliament aimed to remedy” was said to be avoiding the consequences of the status quo being disturbed. Those consequences being the increased financial burden on employers as well as the additional administrative burdens which employers would face if the status quo of arrangements were altered so as to provide long service leave under State or Territory legislation to employees who were not previously entitled to long service leave under federal industrial instruments.
For those reasons, the Appellant/Intervener say that the ordinary meaning of “entitled the employee to long service leave” is displaced by its legal meaning.
The legal meaning was essentially identified in terms of the operation of the second condition. The Appellant contended that the second condition is to be construed as being satisfied where the “applicable award-derived long serve leave terms” “applied to” the employee. The Appellant submitted that “Mr Finch had an ‘entitlement’ because the long service terms applied to him”. In the case of the NAB, it contended that the second condition is satisfied “[i]f an employee is covered by a pre-modernised award that provides for long service leave … irrespective of whether the employee is included or excluded from those provisions, [then] the employee is ‘entitled to’ long service leave in accordance with the award” (emphasis in original).
The Respondent did not dispute that the purpose or intent of s 113(1) of the FW Act is to preserve the application of terms of a pre-modernised award dealing with long service leave but said that the intended preservation is limited. The Respondent contended that s 113(1) “preserves the application of the terms of a pre-modernised award only in so far as they would have conferred an entitlement to long service leave on an employee”. That contention is consistent with the contentions put by NSW and WIV and also consistent with the approach taken by the Tribunal: see Australasian Meat Industry Employees Union v Conroy’s Smallgoods Pty Ltd [2021] SAET 234 at [52], [74]–[82] (DP Cole).
Broadly stated, the Respondent/Interveners submitted that the construction they contended for, including as to intent and purpose, arise from, and are unambiguously supported by, the text of s 113(1) of the FW Act and the text of its surrounding provisions. NSW and WIV also relied on the change made to s 113(1) as compared to its legislative predecessor to demonstrate that s 113(1) did not intend to fully preserve the status quo ante. They contended that, in so far as the extrinsic material was capable of assisting, it assisted their construction but that, in any event, neither the extrinsic material or the consequences for employers of their construction could displace the plain intention of s 113(1) as revealed by its text.
Although unnecessary to sustain their primary defence of the decision of the Tribunal, the Respondent/Interveners also contended that a purpose of the legislative scheme provided for by Div 9 is to provide for a minimum standard of long service leave for employees covered by the FW Act, such that the State and Territory long service leave laws act as a “de facto floor for the long service leave entitlements of national system employees”. In that respect, I understood them to suggest that the scheme had the effect of providing all employees covered by federal industrial instruments an entitlement to long service leave. For the reasons later given in relation to the operation of s 113(2), I do not accept that the purpose of the scheme was to ensure that all employees the subject of federal industrial instruments had access to a long service leave entitlement.
The applicable principles of statutory construction
The applicable principles for construing a statute were not in contest, although different emphasis was given to those principles. The Appellant/Intervener propounded a more purposive approach to construction than did the Respondent/Interveners. It is convenient now to set out an outline of the principles which need to be applied.
It is well settled that the literal meaning of the words in a statute “may be ascribed a different legal meaning after the process of construction is complete”: R v A2 (2019) 269 CLR 507 at [32] (Kiefel CJ and Keane J). See also CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ); Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [78] (McHugh, Gummow, Kirby and Hayne JJ).
This process of construction was explained by Bell and Gageler JJ in A2 where their Honours stated at [124] that “the court starts with consideration of the ordinary and grammatical meaning of the words taking into account both context and legislative purpose” (see also Kiefel CJ and Keane J at [32]–[33]). The “modern approach” to statutory construction emphasises that context and purpose are considered at the “first instance” of interpretation and not at some later stage, as suggested by s 15AB(1) of the Acts Interpretation Act 1901 (Cth) (AIA): Bankstown at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ); Independent Commission Against Corruption v Cunneen (2015) 256 CLR 1 at [57] (French CJ, Hayne, Kiefel and Nettle JJ); SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362 at [14] (Kiefel CJ, Nettle and Gordon JJ), [35]–[36] (Gageler J). See also Sydney Seaplanes Pty Ltd v Page (2021) 362 FLR 1 at [41] (Bell J).
Context may encompass the structure of the Act, surrounding provisions, legislative history, extrinsic materials and the mischief towards which the Act, or a particular provision, is directed: AIA s 15AB(2); A2 at [37]–[44] (Kiefel CJ and Keane J), [162] (Edelman J). As Gageler said in SZTAL at [38], the context may point to a “constructional choice … between one meaning which can be characterised as the ordinary or grammatical meaning and another meaning which cannot be so characterised”. This constructional choice may be resolved by the discernment and application of statutory purpose (see SZTAL at [39]). In this way, context both informs the statutory purpose and “reinforces the need for purposive construction” (Sydney Seaplanes at [33] (Bell J)) — a need which is further reinforced by the requirement in s 15AA of the AIA that “the interpretation that would best achieve the purpose or object of the Act … is to be preferred to each other interpretation”.
It may be “entirely appropriate” for a court to depart from the literal, grammatical meaning of a provision when such a meaning is at odds with the statutory purpose: A2 at [37] (Kiefel CJ and Keane J). See also A2 at [124] (Bell and Gageler JJ); Project Blue Sky at [78] (McHugh, Gummow, Kirby and Hayne JJ).
However, the text of the statute remains important and the text itself, rather than “paraphrases of the statutory language in extrinsic materials”, is to be considered: A2 at [35] (Kiefel CJ and Keane J). A court’s ability to depart from the ordinary meaning of the statutory text is constrained as Kiefel CJ, Keane, Nettle and Edelman JJ explained in Esso Australia v Australian Workers Union (2017) 263 CLR 551 at [52]:
The Court’s ability to construe a statutory provision in a manner that departs from the natural and ordinary meaning of the terms of the provision in the context in which they appear is limited to construing the provision according to the meaning which, despite its terms, it is plain that Parliament intended it to have.
By reference to that observation as well as other longstanding authority, Kiefel CJ, Bell, Gageler, Keane, Nettle and Gordon JJ said in Masson v Parsons (2019) 266 CLR 554 at [26] that “a court will not construe a provision in a way that departs from its natural and ordinary meaning unless it is plain that Parliament intended it to have some different meaning”.
Quite obviously questions of degree will arise but as Edelman J stated in SAS Trustee Corporation v Miles (2018) 265 CLR 137 at [64] “the clearer the natural meaning [of the text] the more difficult it is to justify departing from it”: quoting Arnold v Britton [2015] AC 1619 at [18] (Lord Neuberger, with whom Lord Sumption and Lord Hughes JJSC agreed).
Further, as French CJ, Hayne, Kiefel and Bell JJ noted in Australia Education Union v Department of Education and Children’s Services (2012) 248 CLR 1 at [28] “it is not for a court to construct its own idea of a desirable policy, impute it to the legislature, and then characterise it as a statutory purpose”. See also Esso at [52] (Kiefel CJ, Keane, Nettle and Edelman JJ); Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378 at [40] (French CJ and Hayne J).
Justice Bell explained the difficulties of identifying statutory purpose in Sydney Seaplanes at [36], [39] (citations omitted):
It will not, however, always be easy to identify or discern the purpose of any given statute or statutory provision, and care must be taken against ascribing an overly broad purpose based upon a priori assumptions as to the legislation’s intended reach. Furthermore, a statute may have multiple purposes and, as enacted, may (and often will) give effect to political and policy compromises such that the legislative purpose, whatever may have been intended originally, is obscured.
….
The purpose of a statute or statutory provision, or the “mischief” which a statute is intended to address, may sometimes also be identified in an explanatory memorandum to a parliamentary bill or in the second reading speech although these sources of potential enlightenment, particularly the explanatory memorandum, are frequently of limited utility in this regard, often being little more than summaries or paraphrases of provisions of the bill. Although the occasions when such assistance will in fact be given have been said to be “rare”, they nevertheless sometimes present themselves.
A court similarly cannot ignore or displace the words of the statute by reference to a general purpose (that is otherwise clear): Victims Compensation Fund Corporation v Brown (2003) 201 ALR 260 at [33] (Heydon J); Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [51]–[53] (Hayne, Heydon, Crennan and Kiefel JJ); A2 at [34]–[36] (Kiefel CJ and Keane J). This is because the “general purpose” of a statute may say “nothing meaningful” about a particular provision. Rather, the text itself may be a better guide to legislative intention than some “general purpose” discerned by reference to extrinsic material such as an explanatory memorandum: A2 at [35] (Kiefel CJ and Keane J).
The foregoing discussion illustrates that if the purpose of a statute or statutory provision is to be discerned from a consideration of context, the assumed purpose must be plainly demonstrated and be capable of articulation with clarity and specificity to justify departing from the ordinary meaning of the statutory text in question. The clearer the natural meaning of the text the more difficult will be the task of demonstrating that “it is plain” that Parliament intended it to have some different meaning.
Deliberation
I should say at the outset that I am in no way disinclined to adopt an approach to statutory construction which takes into account all available indicators of statutory purpose. However, as the relevant principles demonstrate, a purposive approach to construction must never lose sight of the text being construed because ultimately the purpose of a provision must be found in the enactment itself.
In my view, this is a case where, having considered the context, the intended purpose of the provision in question is found in its text and structure, supported by both the surrounding text and by the legislative history of the scheme in which it sits. The purpose of s 113(1) is to preserve the operation of those “award-derived long service leave terms” which provide an employee with an entitlement to long service leave. The contrary purpose contended for by the Appellant/Intervener — that s 113(1) has an absolute preservation purpose rather than the more limited preservation purpose revealed by its text — is not made out, let alone plainly established (as it would need to be), by either the extrinsic material relied upon or the asserted “inconvenient and improbable” consequences for employers in relation to the construction which I prefer.
Although the Appellant/Intervener has not misstated the applicable principles, they have very substantially misapplied them. It seems to me that the submissions of the Appellant/Intervener assume a legislative purpose that is not apparent, let alone clearly apparent, from either the text or context and have then worked backwards to re-engineer the meaning to be attributed to the text of s 113(1) and (3). The dangers of such an approach are well known. In Certain Lloyd’s, French CJ and Hayne J at [40] warned about the “dangers of reasoning from legislative ‘intention’ that is not based, as it must be, in the text of the relevant legislation”. Their Honours stated at [41]:
It is not legitimate to identify a legislative purpose not apparent from the text of the relevant provisions (or in this case even expressed in some extrinsic material), to examine extrinsic material and notice that there is nothing positively inconsistent with the identified purpose, and then to answer the question of construction by reference to the purpose that was initially assumed. That reasoning is not sound.
Their Honours also warned at [26] about the related danger of “identifying a statute’s purpose … [by] the making of some a priori assumption about its purpose. The purpose of legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provisions.” See further APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at [424] (Hayne J).
It is convenient to commence the detailed analysis here by restating the legal meanings contended for by the Appellant and by the NAB. The Appellant, in essence, seeks to have the ordinary meaning of the second condition — that the award terms “would have entitled the employee to long service leave” — displaced by a meaning that the award terms need only apply to the employee. The NAB contends that the ordinary meaning should be displaced by the meaning that the award terms “provide for”, in the sense of “deal with”, long service leave.
The first difficulty with the meanings contended for by the Appellant and by the NAB is a difficulty which those parties in essence acknowledge: the meaning they seek to have ascribed to the second condition is not its ordinary meaning.
I can well accept that the word “entitled” can mean different things in different contexts. The same may be said of the word “entitlement”. It is, for instance, grammatical to say that a person is entitled to nothing. However, what s 113(3)(a)(ii) is doing is identifying a characteristic of the award terms being defined. To say that award terms “would have entitled the employee to long service leave” is to characterise the award terms as providing an entitlement to something, namely, long service leave. Those words are not capable of being grammatically construed as referring to award terms that would have entitled the employee to no long service leave at all.
Once it is appreciated that an entitlement means a right to long service leave rather than accrued long service leave (see Maughan at [43] (Katzmann J)), the text of the second condition is clear and, on its face, seems unambiguous. I accept, in accordance with the principles I have set out already, that ambiguity may become apparent once context is taken into account. However, before considering context, namely the legislative history and the extrinsic material, there are other textual indications in Div 9, beyond the text of the second condition, which support the proposition that the purpose and intent of the second condition is to preserve the application of the terms of a pre‑modernised award but only in so far as those terms would have conferred an entitlement to long service leave on an employee.
The word “entitled” (or a derivative thereof) is used on 10 occasions in Div 9. It is highly unlikely that the draftsperson would have intended the term to have other than a consistent meaning throughout (Tabcorp Holdings Ltd v Victoria (2016) 328 ALR 375 at [65] (French CJ, Kiefel, Bell, Keane and Gordon JJ) and it is only the ordinary meaning of the term that sensibly accords with each of those uses.
The word “entitled” is first used in Div 9 in s 113(1). Its meaning must have been intended to be the same as the meaning intended for the term when used in the second condition in s 113(3)(a)(ii), that condition being part of a definition to be read into s 113(1). Similarly, the term “entitled” when used for the second time in Div 9 in the Note to s 113(1) must have been intended to have the same meaning as its meaning in s 113(1). Further, the word “entitled” as used in the Note must have been intended to have a consistent meaning with its use in s 27(2)(g) to which the Note specifically refers.
On each of those occasions of its use, the ordinary meaning of “entitled”, as having a right or benefit to something, is grammatical and accords with the apparent purpose of the provision and the explanation for the provision provided for by the Note.
It is unlikely that a competent draftsperson would, in any of the contexts just illustrated or, indeed, on the other seven occasions in which the word “entitled” (or a derivative thereof) is used in Div 9, have adopted that word to say that the terms or instruments being there addressed need merely “apply to” an employee or “deal with” the subject of long service leave.
That is particularly so in circumstances where, when the draftsperson sought to address particular terms or instruments which “applied” or “applies” to an employee or which “deal with” long service leave, those words or phrases (and not the word “entitled”) were used to communicate that intent.
The word “entitled” or “entitles” appears in contra-distinction to “deals with” or “applied” or “applies” in the same provision of Div 9 on three occasions, including in s 113(3)(a) itself where “applied” is used in the first condition and “entitled” in the second condition.
Given that textual content, it is not open to conclude that the use of the word “entitled” in the second condition is the product of infelicitous drafting or that it was other than a deliberate use of the term. It is highly unlikely that the term would have been deliberately used to communicate a meaning other than its ordinary meaning. That conclusion is further reinforced by the terms of s 113A(1)(b) where the phrase “not entitled” is used in a similar way to the use of the word “entitled” in the second condition: to limit the applicability of an instrument by reference to whether or not the instrument provides a right or benefit to the employee in question.
Furthermore, I agree with the Respondent’s contention that the fact that “entitled” was intended to communicate its ordinary meaning is supported by its use in a scheme (Pt 2-2 — the National Employment Standards) the very objective of which is to provide employees with entitlements and because the focus of the provision is upon the particular employee.
Next, turning to the structure of s 113(3), the construction contended for by the Appellant/Intervener would give the second condition little or no work to do. In this respect, the Appellant/Intervener do not simply seek to displace the ordinary meaning of the second condition but, in essence, seek to displace its operation.
If the second condition was merely conditioned upon whether the “award-derived long service terms” would have “applied to” the employee, as the Appellant contended, the second condition would be superfluous. Whether the terms of the award “would have applied to the employee” is expressly the subject of the first condition.
Turning to the NAB’s asserted meaning, if the function of the second condition is to do no more than identify that the “award-derived long service leave terms” must be terms that “provide for”, in the sense of” “deal with”, long service leave, that requirement is otherwise fairly apparent from the terms of s 113(1) even before the definition provided by s 113(3) is read into s 113(1). That is because the notion of “award-derived long service leave terms” in s 113(1) (emphasis added) necessarily requires that any applicable award will have terms that deal with long service leave. I appreciate, however, that a careful and cautious draftsperson drafting a definition provision may have nevertheless wanted to put the position beyond doubt. On that view, there would be some work for the second condition to do if it was intended to have the meaning the NAB asserts it has. On that construction, s 113(3)(a)(i) merely concerns whether an award applied to the employee at the relevant time (not yet asking whether that award contained any clauses dealing with long service leave) and s 113(3)(a)(ii) concerns whether that award included terms that “deal with” long service leave (irrespective of whether they conferred an entitlement to long service leave on the employee in question). However, if I am to presume in favour of the NAB’s position that the second condition was carefully drafted, how can I accept that a careful and cautious draftsperson used “entitled” to communicate “deals with”?
I turn next to the legislative history. The legislative history of federal industrial laws dealing with long service leave is somewhat complex and need not be fully rehearsed. It is sufficient for present purposes to note that, following the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) (Work Choices Amendment Act), long service leave was no longer included as an “allowable award matter” under s 513 of the WR Act. This did not mean that award-covered employees switched to State or Territory long service leave legislation. That is because, first, pre-reform awards, which included terms relating to long service leave, continued to bind certain employers, employees and organisations pursuant to item 4 of sch 4 of the Work Choices Amendment Act. Second, s 520 of the WR Act allowed new awards to include “preserved award terms” which, as defined in s 527(1)–(2), extended to terms about long service leave. For those reasons, the WR Act contained a scheme for preserving “award‑derived long service leave terms”. Accordingly, s 527 of the WR Act, though broader in its subject matter, may be regarded as the immediate predecessor provision to s 113(1) of the FW Act.
Immediately prior to the enactment of the FW Act, s 527 of the WR Act provided (emphasis added):
527 Preservation of certain award terms
(1) A term, or more than one term, of an award is a preserved award term if:
(a)the term or terms are about a matter referred to in subsection (2); and
(b)the term or terms were in effect immediately before the reform commencement.
Note: Section 525, which provides for certain terms of awards to cease immediately after the reform commencement, does not affect the operation of preserved award terms—see subsection 525(2).
(2) For the purposes of paragraph (1)(a), the matters are as follows:
(a)annual leave;
(b)personal/carer’s leave;
(c)parental leave, including maternity and adoption leave;
(d)long service leave;
(e)notice of termination;
(f)jury service;
(g) superannuation.
(3)If a term of an award referred to in subsection (1) is about both matters referred to in subsection (2) and other matters, it is taken to be a preserved award term only to the extent that it is about the matters referred to in subsection (2).
(4)If more than one term of an award is about a matter referred to in subsection (2), then those terms, taken together, constitute the preserved award term of that award about that matter.
(6) A preserved award term continues to have effect for the purposes of this Act.
Note: Preserved award terms may not be varied.
(7) In this section:
personal/carer’s leave includes war service sick leave, infectious diseases sick leave and other like forms of sick leave.
(8) The regulations may provide that for the purposes of subsection (2):
(a)the matter referred to in paragraph (2)(c) does not include one or both of the following:
(i)special maternity leave (within the meaning of section 265);
(ii)the entitlement under section 268 to transfer to a safe job or to take paid leave; and
(b) personal/carer’s leave does not include one or both of the following:
(i) compassionate leave (within the meaning of section 257);
(ii) unpaid carer’s leave (within the meaning of section 244).
Note: The effect of excluding a form of leave or an entitlement in relation to a matter is that the entitlement in relation to that form of leave or matter under the Australian Fair Pay and Conditions Standard will automatically apply.
(9)Regulations under subsection (8) may be expressed to apply generally or in respect of employees engaged in specified types of employment, such as full‑time employment, part-time employment, casual employment, regular part-time employment or shift work.
This provision, like s 113(1) of the FW Act, deals with the preservation of some of the terms of pre-modernised awards. It designates certain terms to be “preserved award terms” and then at s 527(6) provides that a preserved award term continues to have effect. Like s 113(3), it provides the criteria or the conditions which must be satisfied for the operation of a term to be preserved. That is done is subs (1) and subs (2). Relevantly, and in relation to long service leave, there are two conditions:
(1)the term or terms “are about” long service leave; and
(2)the term or terms were in effect immediately before the reform commencement.
The second condition is of no present significance. The first condition is. It requires that, to be preserved, the term must be “about”, or in other words “deal with” or “generally provide for”, long service leave. On the NAB’s construction, that requirement is the only requirement made by what I have described as the second condition in s 113(3) of the FW Act, in circumstances where the NAB say that the second condition and s 113(1) as a whole was intended to maintain the status quo without alteration and, as just demonstrated, the relevant status quo was s 527 of the WR Act.
Despite the NAB’s assertion of no intended change, intended change is manifest in relation to the preservation of the operation of long service leave terms in pre-modernised awards when one compares s 527 of the WR Act with s 113 of the FW Act. Relevantly, there is a change in focus from what is generally provided by the term (ie what it is “about”) to what is provided to “the employee” in particular and, by the use of the word “entitled”, it is evident that the focus from the general to the particular was concerned with whether the term provided a right or benefit to the employee. It can thus be readily seen that s 113(1) is an intended change from the status quo ante because it imposes an additional condition for the preservation of the operation of a long service leave term in respect of a particular employee, being that the term provide the employee with an entitlement to long service leave.
It is not in contest that, under the WR Act, Mr Finch was not entitled to any long service leave under the LSL Act (SA). It is informative, however, to demonstrate why that was so. Under the WR Act, a term of an award “about” long service leave which applied to Mr Finch’s employment was a preserved term within the meaning of s 527 and continued to have effect under the WR Act. That term (namely cl 32 of the Award) provided no entitlement to long service leave to Mr Finch. Section 17 of the WR Act relevantly provided that an award prevails over a law of a State or Territory to the extent of any inconsistency. Accordingly, any entitlement to long service leave under the LSL Act (SA) which Mr Finch may have had was displaced by reason of its inconsistency with cl 32 of the Award, which was preserved in its operation in relation to Mr Finch.
On the Respondent/Interveners construction of s 113(1) and the construction which I prefer, because of the change brought about by the enactment of ss 27(2)(g) and 113(1) and (3) of the FW Act, Mr Finch was no longer the subject of any inconsistency between cl 32 of the Award and the LSL Act (SA). That was primarily so because cl 32 did not “entitle [Mr Finch] to long service leave” within the meaning of the second condition and therefore did not constitute “an award-derived long service leave term”. Accordingly, as Mr Finch was not “entitled under Division 9 of Part 2-2 to long service leave” (s 27(2)(g)), cl 32 of the Award was no longer in conflict with the LSL Act (SA) in relation to Mr Finch’s entitlement to long service leave and did not displace it pursuant to s 26.
A comparison with its legislative predecessor shows that a change was made to the scheme for preserving “award-derived long service leave terms”. A scheme for preserving “award-derived long service leave terms” of the kind that the Appellant/Intervener says now exists, did exist but was discontinued. The changed language and structure confirms the deliberate nature of the alteration to the scheme, including that the second condition was intended to have its ordinary meaning. The text and legislative history are powerful indicators which, it seems to me, leave little room for doubt as to what it was that Parliament intended.
I turn then to other contextual considerations found in the enactment itself. It needs to be noticed that the preservation of the operation of “award-derived long service terms” effectuated by s 113(1) is constrained by s 113(2). That is so because s 113(2) provides that s 113(1) does not apply whilst certain industrial agreements exist (irrespective of whether they deal with long service leave) or whilst certain industrial agreements or other instruments exist and “deal … with long service leave”.
Section 113(2) provides:
(2) However, subsection (1) does not apply if:
(a)a workplace agreement, or an AWA, that came into operation before the commencement of this Part applies to the employee; or
(b)one of the following kinds of instrument that came into operation before the commencement of this Part applies to the employee and expressly deals with long service leave:
(i) an enterprise agreement;
(ii) a preserved State agreement;
(iii) a workplace determination;
(iv) a pre-reform certified agreement;
(v) a pre-reform AWA;
(vi) a section 170MX award;
(vii) an old IR agreement.
Note:If there ceases to be any agreement or instrument of a kind referred to in paragraph (a) or (b) that applies to the employee, the employee will, at that time, become entitled under subsection (1) to long service leave in accordance with applicable award-derived long service leave terms.
Without here detailing the somewhat complex history and provenance of the kinds of agreements and other instruments specified by s 113(2) and without specifying the many and various provisions of relevance in the WR Act, as at 20 January 1997, 16 December 2005, 31 March 2006 and 6 January 2009, and the Industrial Relations Act 1988 (Cth), as at 30 April 1992, 6 November 1992 and 10 May 1996, it is necessary to appreciate that the kinds of agreements and instruments specified in s 113(2) all arise out of industrial bargaining processes rather than the purely arbitrated outcomes imposed by the former Australian Industrial Relations Commission under the WR Act through the making of an “award” of the kind addressed by s 113(1). In each case, the industrial instruments displaced the effect of the applicable award whilst they operated and prevailed over, and continue to prevail over by operation of cl 5A(1) of sch 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transition Act), the law of a State or Territory to the extent of any inconsistency.
It is true to say that, by reason of s 113(2), an agreement or instrument of the kind specified by s 113(2) which “applies” to a particular employee will, whilst it is in operation (see the Note to s 113(2)), dis-apply the operation of s 113(1) with the effect that there will not be an “award‑derived long service leave term” in relation to the employee. Therefore, by the operation of ss 26, 27 and 30 of the FW Act and cl 5A(1) of sch 3 of the Transition Act, even if the particular instrument in s 113(2) does not provide the employee with an entitlement to long service leave, the instrument will nevertheless prevail over State or Territory long service leave laws provided the instrument exists (in the case of workplace agreements and AWAs) or exists and “deal[s] with long service leave” (in the case of all other instruments).
If the intended result of the operation of s 113(2) was that the employee would become entitled to State or Territory long service leave entitlements if the relevant industrial instrument did not provide an entitlement to long service leave, the construction contended for by the Appellant/Intervener may have been significantly enhanced. That is so because it seems unlikely that it was intended that an employee who had traded away his or her entitlement to long service leave through an industrial bargaining process, leading to the making of one or other of the instruments specified in s 113(2), would become entitled to State or Territory long service leave on the commencement of the FW Act. Such a result would have provided a windfall for the employee and have imposed unfairness on the employer now burdened with both the obligation to provide the additional benefit for which the long service leave benefit was traded away and also a long service leave benefit under State or Territory law.
That such a result was to be avoided reveals the very purpose of s 113(2). That purpose is confirmed by the extrinsic material, including the following paragraph of the Federal Department of Education, Employment and Workplace Relations’ Discussion Paper: National Employment Standards Exposure Draft (February 2008) (emphasis added):
Will every employee be entitled to long service leave under a pre-modernised award or NAPSA when the NES commence?
239.No. To avoid interfering with bargained outcomes, the proposed provisions protecting long service leave will not apply to employees covered by certain agreements while they are in operation.
The avoidance of interference with bargained outcomes is achieved when it is recognised that, in the words of s 30 of the FW Act, s 113(2) is “intended to apply to the exclusion of, or prevail over, laws of the States and Territories”.
That intended displacement of State or Territory long service leave entitlements for an employee who does not have “applicable award-derived long service leave terms”, but for whom an instrument specified by s 113(2) applies, is also apparent from the Explanatory Memorandum at [446]. When read in the context of [444] and [445], it can be seen that the intended displacement effect of the s 113(2) instrument is addressed in the words in parenthesis which I have emphasised at the end of [446]:
444.However, subclause 113(2) provides that an employee’s award-derived entitlement will not apply if:
•a workplace agreement or AWA that came into operation before the commencement of the Bill continues to apply to the employee after commencement (whether or not that agreement deals with long service leave); or
•one of a number of listed industrial instruments that came into operation before commencement applies to the employee and expressly deals with long service leave.
445.The legislative note after this subclause makes clear if such an agreement or instrument ceases to apply, the employee will then be entitled to long service leave in accordance with any applicable award-derived long service leave terms.
446. If an employee does not have applicable award-derived long service leave terms, any entitlement to long service leave will be derived from State or Territory long service leave legislation (subject to its modification or exclusion by certain industrial instruments).
The rationale of avoiding interference with bargaining outcomes, where long service leave entitlements might have been traded away, is also reflected in the scheme provided for by s 113A and, in particular, by the specific arrangements capable of being made for prior service not to count in respect of future entitlements to long service leave. That explains the different approach to what the NAB called the “transition” to State or Territory schemes between the arbitral outcomes which are dealt with under s 113(1) and the bargained outcomes which are dealt with in ss 113(2) and 113A. Therefore, the differentiation of treatment and the fact that a “transition” is not provided for in respect of the arbitral outcomes addressed by s 113(1) is not a basis for saying that the second condition was not intended to have its ordinary meaning.
It is informative to notice paragraph [446] of the Explanatory Memorandum for another reason. The terms of [446] succinctly set out the fundamental aspects of the scheme which is established on the construction of s 113(1) which I prefer. That paragraph spells out the two requirements which determine whether an employee will be entitled to long service leave derived from State or Territory long service leave legislation. The first requirement is that the employee not have “applicable award-derived long service leave terms”. The second requirement is that there are no applicable s 113(2) instruments which would displace the State or Territory laws. In relation to the first requirement, and consistently with the use in [446] of the ordinary meaning of the word “entitlement”, an employee does not have “applicable award‑derived long service leave terms” where those terms do not provide the employee with an entitlement to long service leave. The rationale of the scheme, as confirmed by the Explanatory Memorandum at [446], is simple. Where the source of the employee’s entitlement to long service leave is not derived from the terms of an award, it will be derived from the applicable State or Territory long service leave legislation, unless that legislation has been displaced by the operation of s 113(2).
It should also be observed that the simple explanation of the fundamental aspects of the scheme given at [446] of the Explanatory Memorandum is repeated at [439] of the Explanatory Memorandum made in the following context (emphasis added):
436. This Division sets out the entitlement to long service leave for national system employees.
437. This entitlement is a transitional entitlement, pending development of a uniform, national long service leave standard with the States and Territories.
438. This Division preserves long service leave entitlements in pre-modernised awards (referred to as applicable award-derived long service leave terms).
439.If an employee does not have applicable award-derived long service leave terms, any entitlement to long service leave will be derived from State or Territory long service leave legislation (subject to its modification or exclusion by certain industrial instruments).
The reference to “transitional” at [437] of the Explanatory Memorandum and “preserves” at [438], and similar references elsewhere in the extrinsic material, was relied upon by the Appellant/Intervener in support of their construction. I will return to consider those submissions below. However, first it is convenient to refer to the indications found in s 113(2) and in the extrinsic material which, contrary to the case put by the Appellant/Intervener, tend to suggest that there was an intended disturbance of the status quo.
The operation of s 113(2) and the capacity of previously suspended award entitlements to become operative when a s 113(2) instrument ceases, of itself, shows that there was no intent to leave “the position in awards” entirely undisturbed. Furthermore, award-derived rights or benefits which had not simply been suspended but which were dispensed with, were revived. That is so because, under the version of the WR Act that was in force immediately prior to the commencement of the FW Act, an award had no effect in relation to an employee even if a workplace agreement covering their employment ceased operation (see s 399).
Furthermore, there is no reason to think that, if there was a never disturb intent in relation to award-derived entitlements, that intent would not have extended to entitlements however derived (ie agreement-derived entitlements). Yet, the scheme provided for significant other potential for disturbance to existing long service leave entitlements or arrangements, including by the regime created by s 113(4)–(6) and also that created by s 113A (which are both fully set out in the reasons of Raper J). Further, the Explanatory Memorandum reinforced the intended disturbance by advising that the Department of Education, Employment and Workplace Relations (Department) expected the provisions dealing with long service leave to have some (though minimal) “impact” upon the status quo ante.
The Explanatory Memorandum contained a section headed “Regulatory Analysis” which was prepared by the Department and “analyse[d] the regulatory implications of the key legislative proposals contained” in the Fair Work Bill 2008 (Cth). The analysis was said to state the regulatory implications of the legislative proposals in the Bill “compared with arrangements which existed under the legislative framework of the previous Government” (which must be taken to be a reference to the WR Act). The analysis contained a section dealing with the proposed NES. At [r.25] it was stated that the “Government’s key objective is to address public concern about the adequacy of the safety net under the current workplace relations system by providing a safety net which is fair for employers and employees and supports productive workplaces”. In a summary of “Proposed Changes” at [r.26], the analysis identified each of the ten “NES provisions” including long service leave, in relation to which it said this (emphasis added):
Long service leave: an entitlement to long service leave is currently provided by state and territory legislation, awards and agreements. Initially, the NES will draw on current state and territory arrangements for long service leave in providing this entitlement. Meanwhile, the Government is working with state and territory governments to develop nationally consistent long service leave entitlements.
In the following section headed “Impact Analysis”, the analysis considered the impact of the various proposed NES provisions including long service leave, in relation to which this was said (emphasis added):
Long Service Leave
r.76.An entitlement to long service leave is currently provided by state and territory legislation, awards and agreements. The NES will preserve current arrangements for long service leave. Meanwhile, the Government is working with the states and territories to develop nationally consistent long service leave entitlements.
r.77.Given that the overwhelming majority of employees currently have access to long service leave, the Department expects a minimal impact from this NES.
r.78. The department is not aware of any data on the usage of long service leave. As noted above, there are divergent entitlements to long service leave in awards, agreements and state and territory legislation. However, an indication of the entitlement to long service leave is the number of employees with 10 years service or over. Table 2 displays ABS data that show an estimated 21.3 per cent of employees (2.2 million) were employed by their current employer/business for 10 years or more.
As seems to be apparent from the observations I have emphasised (particularly when read with [439] and [446] of the Explanatory Memorandum), the Explanatory Memorandum explained that, in providing the NES entitlement to long service leave, the NES would “draw on current state and territory arrangements for long service leave in providing this entitlement”. The impact of that was expected to be “minimal” because “the overwhelming majority of employees currently have access to long service leave”. In comparing the proposed position with the status quo under the WR Act (which, as explained above, must have been largely a comparison with what s 527 of the WR Act provided), the Department was saying here that, as the overwhelming majority of employees currently had access to long service leave (either under a relevant federal award or agreement, or under State or Territory law), there would be some employees, but only a very small minority, who were not entitled to long service leave under federal instruments and therefore, as a result of the change from the status quo, would become entitled to long service leave under State and Territory legislation.
It is evident that at least those persons who drafted the Explanatory Memorandum recognised that, although it was expected to be minimal, there would be some disturbance of the status quo in respect of long service leave entitlements.
I should add that, in my view, the Department could not have had in mind here award-free employees becoming entitled to long service leave because award-free employees would have already been entitled to long service leave under State and Territory legislation. That observation is further supported by the fact that where the Department did have in mind an impact being brought about by award-free employees becoming entitled to a NES entitlement, the Explanatory Memorandum said so expressly. For example, with respect to notice of termination and redundancy provisions, it stated that “the Department expects only a minor impact from extending notice of termination and redundancy provisions to currently award‑free employees” ([r.86]). It follows that what the Department likely had in mind when drafting [r.76]–[r.77] were employees covered by federal awards or other federal industrial instruments who, like Mr Finch, had no entitlement to long service leave.
These observations made by the Explanatory Memorandum are, in my view, significant indicators against the Appellant/Intervener’s attempts to show that the legislative purpose of s 113(1) was to preserve the status quo ante in relation to long service leave conditions without any change or disturbance. That point is reinforced when it is realised that where, in relation to the introduction of an NES entitlement, the regulatory analysis in the Explanatory Memorandum apprehended that there would be no disturbance or no impact, it said so expressly. For example, the Explanatory Memorandum notes with respect to: annual leave — “[t]he NES will not change the coverage or quantum of the annual leave entitlement” ([r.57]); and, with respect to public holidays — “the Department does not expect an impact from this NES” ([r.81]).
To this point, I have set out those indications which, in my view, support the proposition that the second condition was intended to have its ordinary meaning and tend to deny that an ungrammatical meaning was intended because Parliament intended to avoid the “mischief” of creating any disturbance to long service leave entitlements for employees covered by federal awards. I turn then to further consider the mischief for which the Appellant/Intervener contended. The existence of that mischief was sought to be established, in part, by reference to what the extrinsic material said but, in far larger part, by what the extrinsic material did not say. The onerous nature of that task is evident: the Appellant/Intervener seek to deny what was apparently said by the statutory text, largely by reference to what was not said by the extrinsic material.
The NAB point to the absence of any express statements in the extrinsic material adverting to an intent to “provide additional benefits” to employees or that entitlements would be “uprooted” from their industrial instrument source and placed into State or Territory sources. I accept that no express statements to that effect appear in the extrinsic material. But before dealing with an available response, I will set out another submission made by the NAB which, I think, should ultimately be construed as a contention that the extrinsic material did not warn Parliament of the asserted serious consequences for employers whose employees would switch to State or Territory long service leave laws upon the commencement of Div 9.
In making what was perhaps its primary suggestion of an absurdity arising from the second condition being given its ordinary meaning, the NAB submitted that it could not be accepted that “Parliament would have created a statute that caused employers to move into a State or Territory long service leave scheme where they would be criminally liable for non‑compliance without any warning”.
Read literally, the submission suggests that Parliament may have been expected to warn employers of the consequences for them of a law made. Parliament makes the law. It does not warn of its consequences. I do not think the contention was intended to be read in this way. Rather, I think the NAB was suggesting that the Executive might have been expected to warn employers about the consequences of the law. That submission would also go nowhere because the intent of Parliament cannot be discerned from any response the Executive makes (or fails to make) to the law Parliament has enacted.
If the NAB has any point to make in relation to Parliament’s awareness of the possible criminal liability of employers, it can only be made by reference to the extrinsic material which was before the Parliament. The only point that could be made (although I ultimately think it is without much merit) is that if the draftsperson of the Explanatory Memorandum was proceeding on the basis that s 113(1) would have the effect of providing some employees access to State and Territory long service leave entitlements and thus expose their employers to criminal liability if they failed to provide such entitlements, the Explanatory Memorandum might have been expected to warn Parliament of that possible impact. The absence of such a warning may then be said to suggest that the draftsperson did not proceed with that intent and that, consequently, neither did Parliament.
However, if that is the real point to be addressed, it ought to be done free of the exaggeration made in the NAB’s submission that the asserted consequence is that employers would “move into a State or Territory long service leave scheme where they would be criminally liable for non‑compliance”. It is commonplace in Australia for an employer covered by a federal award or agreement to also be subject to one or other of the State or Territory long service leave schemes. That is so because generally at least some employees employed by an employer (managerial employees and others) will not have their employment regulated by federal instruments at all or because, if so regulated, those instruments do not deal with long service leave and therefore do not displace State and Territory long service leave legislation. The NAB’s assertion that giving the second condition its ordinary meaning would cause “employers to move into a State or Territory long service leave scheme”, as if for the first time, is an unhelpful exaggeration of the likely position.
That being so, the point really being made is that, if the draftsperson of the Explanatory Memorandum was proceeding on the basis that some employees of some employers would gain access to State or Territory long service leave entitlements, it might have been expected that Parliament would have been made aware by the Explanatory Memorandum that some employers may face some additional exposure to criminal liability to that which they already face, in respect of any failure to comply with State and Territory long service leave legislation.
There is little or no merit in that point. First, it is not the function of an explanatory memorandum to alert Parliament to that which is otherwise obvious, namely, that serious sanctions will likely be imposed upon those who fail to comply with the law. The fact that those consequences might be penalties imposed as criminal sanctions, rather than civil sanctions (which are more commonly imposed in relation to the contravention of industrial laws) is not so earth shattering as to suggest that the Explanatory Memorandum should have done here that, which, as a matter of common experience, explanatory memorandums do not generally do.
Second, and in any event, even if there was a failure to warn of the possibility in question and even if any such failure was inexplicable, that failure would only be an indicator of whether or not the draftsperson of the Explanatory Memorandum was or was not proceeding on the basis that no employee would gain access to State or Territory long service leave entitlements. The force of any such indication would need to be assessed against any contrary indicators, including that the Explanatory Memorandum has specifically addressed the impact or consequence of the provisions in question. As observed at [74]–[80] above, the Explanatory Memorandum recognised that some employees will become entitled to State or Territory long service leave entitlements, that change being the impact which it regarded as “minimal”.
Furthermore, the Explanatory Memorandum recognised that some employees would switch to State or Territory based entitlements at [446] (the terms of which are repeated at [439]). What is said at [446] is to be read in context by reference to the terms of s 113(1), including the terms of the second condition in s 113(3)(a)(ii). When read in that context — and applying the ordinary meaning of the language used in ss 113(1), (3)(a)(ii) and [r.26] and [446] of the Explanatory Memorandum — an explanation is there given that:
(1)an employee covered by a federal award, the terms of which do not entitle the employee to long service leave, would not have “applicable award-derived long service leave terms”;
(2)if (i) is the case, the employee’s “entitlement to long service leave will be derived from State or Territory long service leave legislation”; and
(3)it follows that their employer will, in relation to those State or Territory based entitlements, be liable under the applicable State or Territory long service leave legislation.
Contrary to the NAB’s contentions, it is at least arguable that Parliament was told, and thus may be taken to be aware of the fact, that the employment of some employees covered by federal industrial instruments may, as a result of the enactment of s 113, move from federal to State or Territory regulation of long service leave. I accept, however, that the extrinsic material did not say that expressly and with the detail that the NAB contended was to be expected.
However, the issue here is not about what may have been done in a perfect world, but what would reasonably have been expected to be done by the Explanatory Memorandum in question. This was an Explanatory Memorandum which sought to explain a Bill which it described as implementing “major reforms” and, as it states and as was stated in the Second Reading Speech, created or built “a new workplace relations system” (page i).
The Explanatory Memorandum had much ground to cover which it sought to do over 429 pages and some 2849 numbered paragraphs (without counting the regulatory analysis section). Only eleven of those paragraphs were devoted to explaining the whole of Div 9 which contains the regime created by s 113(1)–(3A) dealing with “award-derived long service leave terms”, the regime created by s 113(4)–(6) dealing with “agreement-derived long service leave terms” and the regime in s 113A dealing with the replacement of certain agreements and whether, and in what circumstances, prior service will be counted for the purpose of an employee qualifying for long service leave. Each of those regimes may fairly be described as complex. The way in which each regime was dealt with by the Explanatory Memorandum may fairly be described as very brief. However, in the circumstances, the brevity of treatment, or what may be fairly described as the bare bones explanation given about the operation of s 113(1), can hardly provide a basis, let alone a sufficient basis, for displacing the ordinary meaning of the statutory text.
For many of the same reasons, I see no merit in the NAB’s contention that it would have been expected that “guidance” would have been given as to how employees would “transition” into State or Territory based regulation of long service leave. That is, how the prior service of an employee would be recognised for the purposes of eligibility for, and accrual of, long service leave. I would add the further observation that reliance upon the fact that “transition” was addressed in relation to the other NES entitlements to leave is misplaced. Of course it was, as it had to be, because those entitlements were entitlements directly conferred by the FW Act. But here, the Explanatory Memorandum and the Bill were not dealing with entitlements to be provided by the FW Act, but entitlements that may become available under State or Territory legislation upon the FW Act effectively “vacating the field”. It is understandable that the prior service of an employee in respect of a benefit provided by a State or Territory law, should be left to be dealt with by that law. I might add that it is also understandable, for the reasons given at [66]–[69] above, why the FW Act permitted parties to bargained instruments to determine how prior service of an employee in respect of a benefit provided by a State or Territory law would be counted once the instrument, which previously did not entitle certain employees to long service, ceased.
By the next aspect of its appeal to context, the Appellant/Intervener sought to suggest that the “literal construction” could not have been intended because it would impose financial burdens on employers and result in administrative difficulties, including difficulties arising from an increased lack of uniformity of treatment of long service leave for employers whose workforce extended beyond any particular State or Territory.
The NAB referred to these difficulties as results which were “inconvenient and improbable” relying upon what was said by Brennan CJ, Dawson, Toohey and Gummow JJ in Bankstown at 408 that “the inconvenience or improbability of a result may assist the court in preferring to the literal meaning an alternative construction, which by the steps identified above, is reasonably open and more closely conforms to the legislative intent”. For those observations their Honours cited the observations of Mason and Wilson JJ in Cooper Brookes Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320–321.
In Cooper Brookes, Mason and Wilson JJ prefaced the observation picked up at 408 of Bankstown by saying that “[g]enerally speaking, mere inconvenience of result in itself is not a ground for departing from the natural and ordinary sense of the language read in its context” (at 320). Their Honours went on to point out at 321 that the proprietary of departing from a literal interpretation is not confined to situations which raise absurdity or are capricious, irrational or the like but “extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions”. They continued:
Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended.
This is not a case where a construction which produces a more convenient operation is to be chosen. This is a case where one interpretation has a powerful advantage in ordinary meaning and grammatical sense and, in order for that meaning to be displaced, the consequences of its operation must be shown to be unintended.
As Campbell J observed at [36] in Ganter v Whalland (2001) 54 NSWLR 122, given the “strength of the language” used in the authorities, it is only a “very serious” anomalous result which would justify a departure from, what otherwise would seem, the correct construction of statutory text.
A financial burden will always be imposed upon employers by the statutory grant of an entitlement to their employees and, particularly where that entitlement is new rather than merely the extension of an existing benefit, the grant will likely be accompanied by some initial (if not ongoing) administrative burden. But inconvenience of that kind is the ordinary and expected consequence of the grant of an entitlement and, without more, is to be regarded as “mere inconvenience”. It is only where the scale and nature of the inconvenience is at least shown to be extraordinary that its likelihood may begin to become informative as to whether its source — the grant of the entitlement — was or was not intended.
In this case, the extent of any inconvenience or “impact” that Div 9 was likely to produce was specifically addressed by the Explanatory Memorandum. As discussed earlier, Parliament was essentially told that, by reason of the overwhelming majority of employees currently having access to long service leave, “the Department expect[ed] a minimal impact from this NES”.
There is therefore no basis for thinking that, if Parliament intended the second condition to have its ordinary meaning, Parliament had in mind anything other than that only a relatively small number of employees who were covered by pre-modernised awards without an entitlement to long service leave would gain access to long service leave entitlements and that, consequently, the impact of those new entitlements on employers would be anything other than “minimal”. In that context, an argument that Parliament could not have intended the second condition to have its ordinary meaning, because it must have both appreciated and sought to avoid extraordinary inconvenience or impact upon employers, is simply unsound.
An additional complexity arises where employees move back and forth between the pre-modernised award and the State or Territory scheme depending on their employment status. This might happen because, under the literal interpretation, a casual employee working for an affected employer might fall within the State or Territory schemes. A part time or permanent employee, however, would fall within the award scheme because that individual would have “applicable award-derived long service leave terms” and therefore fall within s 113(1). To the extent it is said that the additional complexity is overstated, NAB submits that one only needs to look to how State and Territory Acts define “ordinary pay” to understand that it is confusing and difficult.
In addition, there is the cost, inconvenience and administrative burden of moving the affected cohort of employees into the new uniform national scheme. Under a literal interpretation, employers and employees would be moved, first, from the pre-modernised awards, secondly, to the State and Territory scheme, and then thirdly, to the uniform national scheme. Given that such movement would have to occur over a short period of time, NAB submits that is inherently unlikely to have been intended.
With respect to what NAB contends are “inconvenient” or “improbable” results that arise from the Union’s construction of s 113, the Union maintains that such results are overstated, involve assumptions that are not reflected in the text or structure of the provision, and in any event, were anticipated by the legislative scheme. The Union advances three reasons to support this contention.
First, with respect to the argument that its construction may impose financial burdens on employers, the Union argues that the legislature must have intended for the imposition of the NES to impose additional costs on some employers. That is to say, there can be no rationale why certain employers, with respect to long service leave, should be exempted from the imposition of a standard. For the reasons set out below, at [261]–[263], I do not accept that a “standard” was in fact imposed at all and the Union’s and interveners’ repeated reliance on this proposition is misconceived.
Secondly, with respect to the “administrative difficulties” in dealing with different legislative systems in different jurisdictions, the Union contends that the FW Act expressly contemplated circumstances where employers from different jurisdictions would be subject to differing laws of different jurisdictions. This includes, for example, ss 27(1A), (1) and (2) of the FW Act with respect to equal opportunity or anti-discrimination, superannuation and worker’s compensation. Therefore, in its submission, given the FW Act expressly contemplates that multi-jurisdictional employers of all employees who are not entitled under s 113 to long service leave will need to deal with differing legislative regimes of different jurisdictions, the Union argues that there is no rationale as to why some employers should be exempted from that arrangement with respect to employees not entitled to long service leave under s 113. For the reasons set out below, I do not accept that this was Parliament’s intention at all with respect to long service leave. This is apparent from the way that s 113 sought to maintain the existing regime with respect to multiple kinds of industrial instruments. Similarly, it is clear from the staggered transition both on the terms of s 113 and 113A and as contained in the transitional legislation. Furthermore, s 113A and the transitional legislation recognised that where there was a new entitlement, past service (prior to the inception of the FW Act) would not apply.
Thirdly, with respect to complications involving converting casual employees to permanent employees (or vice versa), the Union submits that it was intended by Parliament for such conversion to give rise to different consequences and entitlements. Therefore, it says that any complications with respect to long service leave consequences arising from such a conversion can be neither lesser nor greater than many other consequences that will arise. Contrary to this submission, it seems to me that there is nothing in s 113 which accounts for this conversion and such an effect would be contrary to what the Federal system had been seeking to avoid since the 1960s as set out above.
I should note, for completeness, that there was a distinct failure by the Union and the State interveners to grapple at all with the fact that instant criminal liability would result for failure to grant leave to an employee who had never had any such entitlement. To suggest that this was a consequence of the operation of the State or Territory rather than the Federal system is no answer and in any event, this is not entirely the position on the Union’s case. The Union sought in its application before the Deputy President civil penalties under the FW Act by reason of the purported breaches. Accordingly, on the Union’s case, there would be potentially criminal liability not only under the State system but also liability for civil penalties at the Federal level.
The purported “clear meaning of the text”
The Union and State interveners contend that the meaning of the section is “clear” and while recourse may be had in determining the purpose of a provision to extrinsic materials, in addition to the text and structure of the provision, the purpose of the statute resides in its text and structure. So much may be accepted when identifying the purpose of a provision. However, I do not accept that the section is “clear” in the manner submitted by the Union for the reasons that follow.
As stated above, there is an attractiveness to the Union’s submission that when one reads s 113(3)(a)(i) in isolation that the provision “preserves the application of the terms of a pre-modernised award only insofar as they would have conferred an entitlement to long service leave on an employee” (emphasis added). That attractiveness is fortified by the use of the term “entitled” and how it is difficult to say entitlement includes “nil entitlement”. However, for the reasons which follow, a myopic focus on that phrase alone is erroneous and belies the mischief the provision was intended to overcome.
Furthermore, there appears to be a superficial attraction to the argument that s 113 contains different notions, contrasting the use of the phrase “entitled to” (in s 113(1)) and “entitled” (in s 113(3)(a)(ii) to “expressly deals with” (in s 113(2)(b)) or the absence of any reference to entitlement or long service leave itself in s 113(5), implicit from the nomenclature of the term. However, a consideration of the operation of the entirety of the scheme reveals that these arguments cannot be deployed in this way. Read in context, the phrase “would have entitled” is sufficiently broad to contemplate a position where the particular employee is, at that point ineligible for long service leave by reason of insufficient accrual of leave or because at that point he or she is ineligible because of his or her current employment status as a casual employee. It does, in terms, on a purposive reading, include a nil entitlement. Reliance on previous Full Court authority regarding leave entitlements comprising a compound entitlement to and payment for leave is misguided: WorkPac Pty Ltd v Rossato [2020] FCAFC 84; 278 FCR 179 at [227]–[231] (Bromberg J), [319]–[322], [799]–[800], [913]–[914] (White J); [1012] (Wheelahan J). This reasoning arose in a different context, where there must be like for like consideration of the entitlement and payment in “set off” circumstances. It provides no answer for how one interprets what “entitled” means in this case.
Contrary to the Union’s position, the section is not “clear” and is markedly different from the other standards contained in Part 2-2 of the Act. Contrary to the submission of the WIV, the enacted provisions do support a construction that concerns the preservation of an existing regime that was “transitional” pending a national scheme.
Contrary to the submission of the Union and the State interveners, s 113 neither intended nor created “a set of minimum standards for long service leave for all employees, using the relevant state and territory law as a de facto floor where a relevant pre-modernised award does not provide an entitlement” (emphasis added).
No standard is created
Contrary to the Union and State interveners’ submission, s 113 does not create a right to long service leave. Rather, it preserves the existence of “award-derived” or “agreement-derived” long service leave entitlements. The fact that s 113 was seeking to preserve an existing state of affairs is evident from its identification, recognition and preservation of the different forms of extant arrangements: see ss 113(2)–(6). There is no basis to assert, as the WIV suggests, that “[i]t was a transition from the old scheme to the new enacted eternal scheme”. No so-called “inversion of the inquiry”, as the WIV suggests, is necessary, given the same may be gleaned from a reading of the entire scheme without resort to the extrinsic material. Nonetheless, the extrinsic material, as identified at [238]–[241] above, reinforces the same. Further, the construction I have adopted is consistent with Maughan, to which I have referred to above.
The so-called standard in s 113 is anomalous to the other “Standards”
The same is revealed by the fact that s 113 is anomalous when compared with the rest of Part 2-2. Unlike the rest of the standards, no “standard” comprising a consistent set of terms is created. Section 113, on its terms, recognises the existence of a myriad of different arrangements which are preserved in different ways for different periods. It goes no way to establishing a “standard”.
The Union’s and State interveners’ purported long service leave “standard” has no application or “guarantee” with respect to a person covered by a “workplace agreement” or an “AWA” whilst it was in operation: s 113(2)(a). Furthermore, if an employee is covered by the kinds of instruments referred to in s 113(2)(b) and the agreement “expressly deals with long service leave”, that instrument regulates any entitlement (or exclusion from entitlement). The incongruity in this argument is revealed by the comparative operation of s 113(2) to s 113(1). If the Union and State interveners’ interpretation were correct, s 113(2) allows an employee to have no long service leave entitlement for a transitional period (while their agreements are in operation), and for them to instantly switch into the State or Territory system. By stark contrast, on the Union’s and State interveners’ submission, no transition applies to employees covered by Federal award terms at all.
Part 2-2 states expressly that the following provisions do not apply to casual employees: parental leave (s 67); annual leave (s 86); personal/carer’s leave (s 95); and notice and redundancy (s 123(1)(c)). Accordingly, it is telling that there is no reference either way in the text of s 113 nor in the extrinsic material to the position of casuals and how, in stark contrast to these other “standards” which are service-related, casuals are instantly so entitled. If it was truly the intention of Parliament to make State or Territory laws the “de facto floor” and create instantly entitlements for employees who had never had such entitlements (and for which suddenly there could be civil or criminal liability at the Federal or State level respectively), it seems to me that it would be absurd for the legislation not to make this clear nor for any of the explanatory material to refer to it.
Ambiguous on its terms
The meaning of “would have entitled the employee to long service leave” is ambiguous given long service leave is an accrual-based entitlement. This Court has recognised this ambiguity already in Maughan. That case concerned an appeal with respect to a decision of the Industrial Relations Court of South Australia (Cooper v Maughan Thiem Auto Sales Pty Ltd [2012] SAIRC 51), in which the industrial magistrate found Mr Cooper, a motor mechanic employed by Maughan, was entitled to pro-rata long service leave payments under the SA LSL Act because s 113 did not apply. No orders were made in relation to this finding by the industrial magistrate, however, Maughan appealed this finding (Maughan at [1]–[4]), and in a decision of the Full Federal Court, Katzmann J (with whom Greenwood and Besanko JJ agreed) allowed the appeal.
Justice Katzmann identified two questions in determining whether s 113(3)(a) of the FW Act applied to Mr Cooper: first, whether there was an award containing terms which would have applied to Mr Cooper immediately before Pt 2–2 of the FW Act; and secondly, whether the terms of that award would have entitled him to long service leave: Maughan at [29].
In the case before Katzmann J, Maughan argued that the Vehicle Industry — Repair, Services and Retail — (Long Service Leave) Award 1977 (Vehicle Industry LSL Award) applied to Mr Cooper and therefore, the SA LSL Act did not govern the claim. Its primary challenge was with respect to the industrial magistrate’s conclusion (Cooper v Maughan at [47]), being the magistrates’ finding that for there to be “applicable award-derived long service leave terms”, there must be “an actual entitlement to take long service leave or to pro-rata long service leave at [the test time]”, and that Mr Cooper had no such entitlement in this case because he had worked an insufficient number of years to accrue long service leave under the Vehicle Industry LSL Award.
Maughan submitted before the Full Federal Court that given the transitional nature of s 113, and the intent manifested by the section to maintain schemes for provision of long service leave as supported by the Explanatory Memorandum (at [441]), s 113(3) must continue the application of provisions that confer long service leave entitlements, both to employees already bound by such awards, and extending the effect. As such, limiting the continuity of long service leave entitlements to entitlements actually accrued, as the industrial magistrate had done, would have the “reverse effect” by disrupting expectations of employers and employees alike: Maughan at [32]–[33].
Noting that the language of s 113(3)(a) was “awkward” and the meaning “ambiguous”, Katzmann J determined that there were two possible interpretations of the phrase “would have entitled the employee to long service leave”, the first being that it simply refers to terms that provide for an entitlement to long service leave, and the second being that it refers to “an entitlement that would have actually accrued”: Maughan at [42]. Katzmann J preferred the first interpretation for the following reasons:
(1)Having regard to the legislative context and purpose, it cannot have been Parliament’s intention that, from the point at which an employee had worked sufficient years to accrue long service leave under the relevant award, the award would govern the employee’s long service leave, but before that point, long service leave would be governed by the State or Territory Act. Instead, the transitional nature of s 113 makes it evident that its purpose is to “preserve the effect of long service leave terms in awards as they stood before the commencement of the [NES]”: Maughan at [44].
(2)Although the industrial magistrate had concluded at [47] that the first interpretation makes s 113(3)(a)(ii) “a superfluous restatement of s 113(3)(a)(i)”, her Honour disagreed, given that paragraph (a)(i) says nothing about long service leave. Her Honour continued that paragraph (a)(i) concerns whether an award that was in place at the relevant time applied to the employee whereas paragraph (a)(ii) concerns whether the award includes an entitlement to long service leave. The two paragraphs must be read together: Maughan at [45].
(3)Contrary to the industrial magistrate’s conclusion that the Vehicle Industry LSL Award must be considered against the individual employee’s circumstances on the basis that it only covered permanent full-time employees (citing cl 16), whereas casual and part-time employees in South Australia were covered by the SA LSL Act, that conclusion should be rejected, given that the Vehicle Industry LSL Award was intended to apply to all employees in the relevant industries, and Mr Cooper remained a permanent full-time employee upon being transferred to the afternoon shift: Maughan at [46]–[50].
Consequently, Katzmann J concluded that there was, in that case, “applicable award-derived long service leave terms” and that Mr Cooper’s entitlement to long service leave was governed by the terms of that award, and not by the terms of the SA LSL Act. Therefore, Mr Cooper was not entitled to long service leave: Maughan at [52].
One needs to be careful not to overstate the applicability of Maughan to this case. Clearly, the reasoning in Maughan is relevant. Her Honour’s reasoning correctly disavows Mr Cooper’s overly narrow interpretation of s 113 and rightly identifies the legislative purpose to “preserve the effect of long service leave terms in awards as they stood before the commencement of the [NES]”: Maughan at [44]. Accordingly, Conroy’s argument in this case is not inconsistent with her Honour’s reasoning, although I accept that her Honour was not called on to consider a claim of Mr Finch’s kind.
Contrary to the submission of the Union, nothing much can be made of the fact that s 113(3) is phrased to be with respect to the particular employee rather than generally to employees. This is so because one has to identify whether a particular employee was entitled to be covered by the Award at a particular point in time (s 113(3)(a)(i)). It necessarily follows that s 113(3)(a)(ii) would be crafted in complementary terms.
The provision codifies staggered transition
Subsections 113(1) and 113(3)(a)(ii) must be read within the context of the whole provision which, on each of its terms, is concerned with the maintenance of various arrangements according to a staggered scheme by which entitlements may change: see ss 113(2), 113(4) and 113A. Accordingly, the incongruity of a literal interpretation is revealed when considering these provisions and the purported instant change of circumstance for employees covered by pre-modernised award terms.
Section 113(6) contains a mechanism by which the Fair Work Commission (or FWA as it was named at the time of the commencement of the section), on application, could make an order that those terms of the instrument comprise “applicable agreement-derived long service leave terms” where the scheme (applying to more than one State or Territory) is “considered on an overall basis” to be “no less beneficial to the employees” than would otherwise apply in relation to employees under State and Territory laws.
The legislative scheme specifically recognises that there may be employees that become entitled to long service leave who have never been so entitled before, under s 113A, but makes express allowance for a mechanism by which such employees will not instantly become so entitled. Section 113A notably allows for new enterprise agreements which cover employees who under former agreements, AWAs or other prescribed instruments were not entitled to long service leave, to contain terms which do not “count” as service the prior service of the employee under the former agreement. If the Union, the WIV and the State of NSW’s argument were correct, it would go against what is evidently the “mischief” upon which s 113A has sought to avoid with employers covered by enterprise agreements and there is nothing to suggest that employers operating with respect to award-derived terms should be treated so markedly differently.
To the extent that the WIV makes much of the fact that the former entitlement could be displaced through enterprise bargaining and could not be now, care must be taken to consider the entirety of the transitional scheme as it made provision for. This submission is no answer to the fact that the effect of the WIV’s submission is that there was no warning or transitional scheme created by which, over time, casual employees under Federal award-derived instruments who, up until that point, had not been entitled to long service leave would suddenly have an entitlement. Future enterprise bargaining allowed for all previous service to not be counted in any future right (as per s 113A). Therefore, to suggest that “now it cannot be bargained away or displaced”, as the WIV contends, misstates the true circumstances.
Again, this provision reveals a legislative scheme that seeks to maintain the status quo and specifically address the “mischief” as it may relate to employees becoming entitled to long service leave who had never had such entitlements previously. The Union and State interveners provided no cogent argument as to why the legislature would have sought to address such a mischief with respect to agreements but not with respect to employees covered by pre-modernised awards.
A literal reading would go against the operation of the transitional scheme
A literal reading of s 113, which allows for the instant operation of State and Territory laws with respect to a class of employees who were not formally entitled to long service leave, is entirely inconsistent with the labyrinthine transitional arrangements which came into play to deal with all of the extant arrangements under the Workplace Relations Act and how they would remain under the FW Act: see the Transitional Act.
Contrary to the submission of the WIV and the State of NSW, a consideration of these arrangements reveal why their interpretation of s 113 is out of step with the whole of the legislative scheme at the time. Contrary to the oral submission of the WIV, the Transitional Act did not set out “in relation to all NES long service leave and other NES entitlements, how service [was] to be counted”. Rather, the Transitional Act deals with the staggering of all other NES entitlements save for long service leave: see Schedule 4, Part 3. It states the “General Rule” in item 5, that an “an employee’s service with an employer before the FW (safety net provisions) commencement day counts as service of the employee with the employer for the purpose of determining the employee’s entitlements under the [NES], other than entitlements to: (a) paid annual leave; and (b) paid personal/carer’s leave”. However, it thereafter excludes from the “General Rule” redundancy pay (Item 5(4)) if “the terms and conditions of employment that applied to the employee’s employment by the employer immediately before the FW (safety net provisions) commencement day did not provide for an entitlement to redundancy pay” (emphasis added).
The Schedule then thereafter specifically deals with the “accrual of entitlements” in relation to paid annual leave or paid personal/carer’s leave (Item 6), community service leave (Item 8), notice of termination (Item 9), redundancy pay (Item 10), recognised emergency management bodies (Item 12) and the Fair Work Information Statement (Item 13) but does not deal at all with long service leave. This omission is entirely consistent with Parliament’s intention that the current long service leave arrangements would remain and there would not be suddenly a new cohort of employees that would become entitled to long service leave who had not previously been so entitled. The Transitional Act, by operation of these terms, ensures a new regime whereby employees do not suddenly become entitled to an accrual-based entitlement for which they had not previously been entitled. Furthermore, consistent with the operation of ss 113(2), (4), (6) and 113A, the Transitional Act ensures a staggered transition.
There was such change of the same magnitude with respect to the other entitlements
The creation of the other standards within Part 2-2 did not have the effect of the kind that the Union contends s 113 had. The Union submitted there was nothing “absurd, or incongruous” about enacting a new standard because it occurred as part of “the enactment of 10 minimum, irreplaceable, standards,” in circumstances “where no such obligation had previously existed”. This submission assumes erroneously that the other nine standards created new obligations which had not previously existed.
There were already five basic “standards” contained in the Australian Fair Pay and Conditions Standard, prior to the inception of the FW Act, including basic rates of pay and casual loadings, maximum ordinary hours of work and minimum entitlements to annual leave, personal leave and parental leave. The previous Workplace Relations Act (as it existed prior to the inception of the FW Act) contained notice provisions and the introduction of a new entitlement to redundancy pay in the NES contained various safeguards to ensure that there was not an immediate right to “redundancy” which had not existed before. This standard did not apply to small businesses and modern awards were able to include industry specific redundancy entitlements.
To the extent that the WIV submits that “[a]ll of the NES in Part 2-2… impose financial burdens on employers”, it is relevant to note the limited change the NES brought about and to note specifically how the Explanatory Memorandum considered each of the proposed 10 standards and analysed the potential impact arising from them. By way of example, with respect to:
(a)“maximum weekly hours” – “a negligible impact” (r.44, page xiv);
(b)“parental leave” – “a more generous provision than currently provided” – no impact section provided (r.56, page xvii);
(c)“annual leave” – “[t]he NES will not change the coverage or quantum of the annual leave entitlement” (r.57, page xvii);
(d)“personal/carer’s leave” – “[p]ersonal/carer’s leave is also a common entitlement in federal collective agreements – 92.9 per cent of current agreements provide for paid personal leave” (r.65, page xviii);
(e)“community service leave” – “net additional cost to employers Australia-wide is $7,793,524” (r.70, page xix);
(f)“emergency services leave” – “given… unpaid…the Department expects a minimal impact” (r.75, page xxi);
(g)“public holidays” – “the Department does not expect an impact [because employees already receive this entitlement]” (r.81, page xxiv); and
(h)“notice of termination and redundancy provisions” – “the Department expects only a minor impact from extending notice of termination and redundancy provisions to currently award-free employees” (r.86, page xxiv).
Notably this reveals, first, contrary to the submission of the Union, there was no suite of new measures that created new entitlements which did not otherwise exist either in the former Workplace Relations Act or under industrial awards; and secondly, this brings into stark relief the anomalous effect the Union asserts as arising from its interpretation of s 113. Contrary to the submission of the WIV, the argument advanced by Conroy’s and NAB was not to render the State and Territory laws as “ineffective” where “one of 1000s of pre-reform awards applied, if those awards contained a clause that provided for [long service leave] for non-casuals”. Rather, it was to continue the extant system by which Federal awards had, for 50 years, been able to provide for long service leave (including people excluded by it) until a new system could come into operation.
This is particularly so when one notes the “impact” as anticipated by the Department of Education, Employment and Workplace Relations, which predicts that the impacts will be “minimal” because they preserve current arrangements: see [r.76] –[r.78] of the Explanatory Memorandum extracted above at [239].
What if anything can be made of the amendments to the interaction provisions in the FW Act as to the purpose of s 113?
Both the WIV and the State of NSW contend that a literal reading of s 113 is supported by a consideration of the provisions relating to the “Interaction with State and Territory Laws” (Part 1-3, Div 2) and how those provisions differ from the predecessor provisions under the Workplace Relations Act. That Act was intended to apply to the exclusion of State and Territory laws to the extent of any inconsistency (s 16(1)), albeit for a small number of matters that were explicitly “carved out” or “non-excluded”: ss 16(2)(c) and (3)(a)–(m). Awards, agreements and Commission orders were also intended to prevail over State and Territory laws: s 17. The FW Act subsequently introduced, to a significant extent, parallel provisions, notwithstanding a number of changes as outlined below.
Section 26 states that the FW Act is intended to apply to the exclusion of all State or Territory industrial laws so far as they would otherwise apply in relation to a national system employee or a national system employer: s 26(1). Section 27 of the FW Act (similar to its predecessor, s 16(2)–(3) of the Workplace Relations Act) sets out an expanded list of matters that are “carved out” or “non-excluded” by s 26: ss 27(1)(c) and (2)(a)–(p).
Two differences are seized upon by the WIV and the State of NSW. First, s 27, unlike its predecessor, states long service leave as a “non-excluded” matter under s 27(2)(g), except in relation to an employee who is entitled under Division 9 of Part 2–2 to long service leave. Secondly, similar to s 17 of the Workplace Relations Act, s 29(1) of the FW Act states that a term of a modern award or enterprise agreement prevails over a State or Territory law to the extent of any inconsistency. Unlike its predecessor, s 29 explicitly states that the operation of s 29(1) is subject to the “carve outs” or “non-excluded matters” set out in s 27: s 29(2)(b).
Both the WIV and the State of NSW contend that the amendments to ss 26, 27 and 29 reveal an intention that “the state provisions dominate unless there’s an entitlement under the federal instruments”.
More specifically, with respect to the change between ss 17 and 29, the WIV submits that the proposition that the status quo was maintained is therefore contradicted by the terms of the legislation itself. I do not accept that a consideration of ss 26 to 29 can be used to constitute a “deliberate redrawing of the boundary” between the operation of State law and Federal law for the following reasons.
Since the enactment of the Work Choices Act, “long service leave” had been a “non-excluded matter” (thus, the Workplace Relations Act did not prevail over State long service leave laws): s 16(3)(f) of the Workplace Relations Act. Accordingly, before the inception of the FW Act, there had already been the recognition of State laws of this kind in the Federal field.
However, there was the ability, by operation of s 17 of the Workplace Relations Act, for long service leave provisions in awards or agreements to prevail over State laws dealing with the same subject matter. The issue is whether, by the omission from the equivalent provision to s 17 of the Workplace Relations Act, s 29(2) of the FW Act tells against Conroy’s construction of s 113. In particular, that raises the question of whether it reveals what the WIV submits is the “deliberate redrawing” of boundaries, with the consequence being that employees who had never had access to State-based long service leave benefits became instantly entitled. It seems to me that this argument is circular because it requires one to return to the phrase in s 27(2)(g) “long service leave, except in relation to an employee who is entitled under Division 9 of Part 2-2 to long service leave”, namely s 113. If Conroy’s and NAB’s construction of s 113 is correct, the combined effect of ss 27 and 29 is the same as the predecessor provisions s 16 and 17 of the Workplace Relations Act. The provisions reveal nothing more than to point to the transition and the continued operation of the preserved terms.
Conclusion
For the foregoing reasons, the appeal should be allowed and orders be made that the decision of the Tribunal be set aside and declarations made that pursuant to s 113(1) of the FW Act there are applicable award-derived long service leave terms in relation to Mr Matthew Finch contained within the Award and Mr Finch’s entitlement to long service leave is nil.
I certify that the preceding one hundred and fifteen (115) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Raper. Associate:
Dated: 19 April 2023
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