Construction, Forestry, Maritime, Mining and Energy Union v Programmed Industrial Maintenance Pty Ltd

[2020] FWC 4498

[2020] FWC 4498

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Construction, Forestry, Maritime, Mining and Energy Union
v
Programmed Industrial Maintenance Pty Ltd
(C2020/1733)

DEPUTY PRESIDENT COLMAN MELBOURNE, 25 AUGUST 2020

Dispute arising under an enterprise agreement – annualised salary – calculation of redundancy payments – whether consultation obligations were met – whether redundancies were genuine

[1] This decision concerns an application made by the Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) under s 739 of the Fair Work Act 2009 (Act) and the dispute resolution procedure in the Programmed Industrial Maintenance East Swanson Dock (Patrick) Site Maintenance Enterprise Agreement 2018-2021 (Agreement). The dispute relates to a decision by Programmed Industrial Maintenance Pty Ltd (company) to make redundant several positions at the maintenance terminal at East Swanson Dock in Melbourne. The redundancies took effect on 30 March 2020. The employment of relevant employees was covered by the Agreement. The employees are members of the CFMMEU.

[2] There are three dimensions to the dispute. First, the CFMMEU contends that the company failed to comply with its obligations under the Agreement to consult with affected employees and the union about the redundancies. Secondly, it says that the dismissals of the employees were not genuine redundancies. Thirdly, the union says that the company did not correctly calculate redundancy and accrued leave payments because it based these payments on employees’ base rate of pay instead of the annualised weekly salary.

[3] The company says that it met its consultation obligations, that the redundancies were genuine, and that the redundancy and leave payments were properly calculated on the base rate of pay.

[4] The dispute settlement procedure in clause 13 of the Agreement applies to a ‘dispute or issue concerning interpretation or application’ of the Agreement (clause 13.1). A dispute may be referred to the Commission ‘for conciliation and if necessary, arbitration’. The parties agreed that the Commission is authorised to determine the present dispute by arbitration.

Background

[5] The company provides maintenance services to Patrick Stevedores at East Swanson Dock in Melbourne. The services were previously provided to Patrick by Skilled Engineering, which also traded as ATIVO. The company employs fitters, electricians and trades assistants who are covered by the Agreement. In early 2020, Patrick significantly reduced the maintenance shifts that it allocated to the company. On 26 February 2020, the company decided to implement seven redundancies. Four employees volunteered for redundancy. Three other employees were selected for redundancy.

[6] In late March 2020, the union raised a dispute with the company about the calculation of employees’ redundancy and accrued leave payments. It said that these should be based on employees’ annualised weekly salaries, not the employees’ hourly base rate of pay. The union later raised concerns that the company had not properly consulted with employees and the union about the redundancies as required by the Agreement, and that the redundancies were not genuine, because some employees had been offered ongoing casual work.

[7] The parties asked the Commission to determine the following three questions in resolution of the dispute:

(i) Has the respondent complied with the requirements of clause 15 and Part F of the Agreement in all the circumstances of this matter regarding the various obligations to consult with the union and the employees?

(ii) Were the seven employee positions that were made redundant genuine redundancies in all the circumstances of this matter?

(iii) What is the ‘weekly salary rate’ for the purpose of clause 15.4 redundancy payments and accrued but untaken leave?

Question 1: Consultation

[8] Two preliminary matters should be noted in connection with question 1. First, it is not clear what consequences would flow from a decision of the Commission that the company had not complied with its obligations to consult in respect of the redundancies of the seven employees. The employment of the seven employees has terminated and the union, quite properly, does not contend that the Commission has any power to undo, or require the company to revisit, the decision to make these positions redundant. I have some doubt as to whether question 1 pertains to a dispute for the purposes of clause 13 of the Agreement. Whereas question 3 clearly concerns a current and ongoing interpretative dispute between the union and the company about the proper basis on which redundancy payments are to be calculated, question 1 concerns a bare disagreement about whether the company contravened its consultation in respect of persons who are no longer employees of the company and will not be affected by the answer to the question. Further, the answer to such a question would at least arguably be declarative in nature, and therefore not meet the description of ‘arbitration’ in clause 13.4(f) of the Agreement. Nevertheless, given that the company agreed to the first question being put to the Commission, I am prepared to accept that it relates to a dispute about the interpretation or application of the Agreement insofar as it may inform the proper approach to consultation obligations in future cases of redundancy.

[9] Secondly, the first question is cast broadly and asks the Commission to determine whether the company complied with the ‘various obligations’ to consult with the union and the employees under clause 15 and Part F. At the hearing, I made clear to the partiesthat I would confine my consideration of this question to the particular consultation obligations that the union said the company had not met. The Commission’s authority under the disputes procedure is to deal with relevant disputes. It does not extend to undertaking a general investigation of compliance with provisions in respect of which there is no dispute.

[10] The union confirmed at the hearing that it contended that the company had failed to observe its consultation obligations in two respects. First, it said that the company had not complied with clause 15.2 of the Agreement, which requires the company to ‘indicate to employees and their union details such as the number of affected employees, skills and affected areas’. Pursuant to clause 15.1, this obligation arises where the company has made a ‘definite decision’ to reduce the size of its full-time workforce. The union said that there was only one meeting with all affected employees, which was general in nature and already invited expressions of interest for redundancy, and that the details referred to in clause 15.2 were not provided either in this meeting or in any other meeting or correspondence.

[11] Secondly, the union contended that the company did not follow the model consultation term which, as noted in the approval decision 1, is a term of the Agreement. Clause 1 of the model term applies if the employer ‘has made a definite decision to introduce major change to production, program, organisation, structure or technology in relation to its enterprise that is likely to have a significant effect on the employees’. It is not in dispute that a decision to make employees redundant would be a decision that falls within the scope of the term. The union submitted that the company did not comply with clauses 5(b) and 7 of the model term. Clause 5(b) states that, as soon as practicable after making a relevant decision, the employer must discuss with employees the change in question and, for the purposes of the discussion, it must provide employees, in writing, with the following:

“(i) all relevant information about the change including the nature of the change proposed; and

(ii) information about the expected effects of the change on the employees; and

(iii) any other matters likely to affect the employees.”

[12] Clause 7 of the model consultation term requires the employer to give ‘prompt and genuine consideration’ to matters raised about the major change by the relevant employees.

[13] The union contended that the company did not genuinely consult with employees for the purposes of the model term, because consultation requires providing relevant persons with an opportunity to be heard about the nominated subjects before any final decision is made. Further, it said that for consultation to be genuine, the employer must provide information that is reasonably necessary for the making of suggestions in respect of the subject for consultation, and must be receptive to any suggestions, and that these things did not occur.

[14] The union submitted that the company did not comply with its obligations to provide employees with the information referred to in clause 5(b) of the model term and did not give genuine consideration to matters raised by employees under clause 7 of the model term. More generally it said that there was no genuine consultation because whatever discussions occurred related to the company’s decision to reduce the size of its workforce, which was presented to employees and the union as a fait accompli.

[15] The company said that it complied with its obligations to consult about the redundancies. The evidence of Mr Cooke, the company’s general manager, was that on 26 February 2020, he sent a memorandum to the union and to all employees at East Swanson Dock stating that there had been a significant decrease in work due to a reduction in the number of ships coming into port, which had resulted in a corresponding reduction in available work. The letter stated that the company had decided to reduce the size of the workforce and that it would commence consultation with affected employees and the union about the impact and any measures to avert or mitigate the impact of the reductions. It further stated that details of the likely number of redundancies and affected areas would be provided. Employees were also told that the company would consider any expressions of interest for voluntary redundancy.

[16] Mr Cooke said that on 10 March 2020 the company held a consultation meeting with the workforce. Mr Lumsden, the assistant Victorian branch secretary of the union, attended the meeting. Mr Cooke said that he told employees that the company had made a decision to make seven positions redundant, which was in line with the reduction in maintenance shifts being provided by Patricks to the company. He said that the positions in question would be a combination of positions that were not fully recoverable on site due to the downturn, and that the company was working through this. One employee delegate said to Mr Cooke that the redundancy calculations he had received were ‘shit’ and that employees were being ripped off. Mr Cooke said that payments would be made in accordance with the Agreement. There was a discussion about the work performed by other contractors at the terminal. Mr Cooke asked employees what the company could do to mitigate the reduction in work and avert redundancies. No suggestions were made. Mr Cooke told employees that if they had any thoughts on how to mitigate the redundancies, they should contact Mr Mastilovich, the operations manager.

[17] Mr Lumsden gave evidence that he regarded this meeting as an information session because the company appeared to have made its mind up, and that he said as much to Mr Mastilovich. Mr Lumsden said that there was no meeting or forum for the consideration of alternatives to redundancies.

[18] Mr Cooke said that on 17 March 2020, he sent an email to Mr Lumsden stating that the company had considered ways to mitigate the number of redundancies but that as the union was aware, the number of maintenance shifts allocated by Patrick to the company had been reduced to 25 per week. The email stated that if the union had any proposals for the company it should present them now. Mr Cooke said that the company did not receive any alternative proposals from the union or employees regarding the redundancies. Mr Mastilovich’s evidence was that the company considered whether there were other options that might avert or mitigate the need for redundancies. He said that the company reviewed all charge rates, hours of work, and roster patterns, but none of these offered a viable alternative.

[19] Mr Cook said that four employees requested voluntary redundancy, leaving three involuntary redundancies to be made. It was determined that the two wash down trades assistant roles were redundant due to the lack of work in that area. The remaining redundant position would be from among the mechanical employees. A skills and competency matrix was developed by Mr Mastilovich. The lowest scoring mechanical employee was then selected for redundancy.

[20] On 25 March 2020, meetings were held with each of the seven employees, either in person with the union also in attendance, or, for employees who were on leave, by telephone. Mr Cooke said that during the individual consultation meetings each employee was told that their position had been identified for redundancy due to a reduction in available work, that the company would still try to find alternative positions or redeployment opportunities across the Programmed Group, but that employees should consider the internal jobs list and contact the company if they were interested in any vacant position. They were told that a further meeting would be conducted on 30 March 2020 to finalise any alternative positions, redeployment opportunities or redundancy related matters. Mr Cooke said that at the conclusion of the meetings, the employees were given an opportunity to respond to the proposed redundancies.

[21] Mr Lumsden and Mr Jones, a mechanic employed by the company who is a union delegate, attended several of the individual meetings between the company representatives and the seven employees and spoke with employees after their meetings. Mr Jones said that he was aware that the employees who had expressed interest in voluntary redundancy had done so on the basis that the redundancy payments would be made at the weekly salary rate. One of these employees was Mr Paul Sorenson. During Mr Sorenson’s meeting with the company, which Mr Jones attended, Mr Sorenson stated that he would only take redundancy at the weekly salary rate. Mr Cooke said to Mr Sorenson that he did not have to take a redundancy. Mr Sorenson replied with words to the effect that this was all the thanks he got after 40 years on the waterfront. Mr Lumsden said that Mr Sorenson felt forced to accept the redundancy because otherwise the company might choose one of his workmates who was not interested in redundancy. Mr Lumsden also said that the one employee who was made involuntarily redundant, Mr John Curic, was told that he had been selected based on a skills matrix, but when he asked Mr Cooke for details of the matrix, none were provided. On 25 March 2020, the seven employees were each provided a letter from Mr Cooke confirming what had been said at the meetings that day.

[22] Mr Mastilovich gave evidence that the company did not identify any suitable redeployment opportunities for any of the employees, and none of the employees expressed interest in any vacant positions in the group. On 30 March 2020, Mr Mastilovich conducted a final consultation meeting with each affected employee, at which the company confirmed that the positions were redundant and that the company had not identified any alternative positions. Employees were provided with a letter confirming the termination of their employment and their final termination calculations. Mr Jones’s evidence was that, when Mr Mastilovich handed employees the final pay calculations on 30 March 2020, they were very upset, because their payments were not based on the weekly salary derived from their annualised rate.

[23] I accept the evidence of Mr Cooke and Mr Mastilovich concerning the company’s reasons for making the seven positions redundant. There had been a forty percent reduction in work. There was an obvious need to reduce employee numbers to reflect the decline in work. I also accept their evidence about the company’s correspondence with the union and employees, and their meetings with employees. The affected employees and the union were notified in writing of the proposed redundancies on 26 February 2020. The company conducted individual consultation meetings with affected employees on or around 25 March 2020, as well as a final consultation meeting with each affected employee on 30 March 2020. The company sought from the union and the affected employees proposals to avert or mitigate the redundancies, but none were received. The company considered alternatives but did not identify any.

[24] I also accept the evidence of Mr Lumsden and Mr Jones that the seven employees were aggrieved that their redundancy payments had been calculated on the base rate of pay and not on the weekly salary rate derived from the annualised salary, and that, to their knowledge, maintenance companies that preceded Programmed Industrial Maintenance in providing services to Patrick, whose enterprise agreements were in the same or similar terms to the Agreement, had calculated redundancy payments at the higher rate.

[25] It is not in dispute that four employees volunteered for redundancy, and although they were upset about the quantum of their payment, they chose to accept redundancy. The union had told them that it would dispute the calculations in the Commission. Three employees were made compulsorily redundant, two because their function was not needed, and one based on the application of the skills matrix. That employee did not see the matrix, and neither did the union.

[26] I consider that, for the purpose of clause 15.2 of the Agreement, the company provided to employees and the union details of the ‘number of affected employees, skills and affected areas’. Mr Cooke told employees at the meeting of 10 March 2020 that there would be seven position made redundant. Mr Lumsden was at this meeting. The positions in question were not known then, but soon became clear. Four were the positions of the relevant volunteers. Two were wash down roles. One was the product of the skills matrix selection tool. It does not appear that the company separately confirmed the details of the positions to be made redundant in writing to the union. But information was provided about the affected individuals, whose positions were clearly known to the union. There is no indication in the evidence that the question of which areas could or should be affected by the redundancies was contentious. The company did not provide the union or Mr Curic with the selection matrix. Mr Curic asked for details of the matrix and in my view such details ought to have been provided to him. However it does not appear that Mr Curic ultimately disputed the outcome or that he contended that he should not have been selected for redundancy. I do not accept that the absence of consultation about the skills matrix affected the ability of employees or the union to take up the company’s offer to suggest alternatives to redundancies. I consider that in all the circumstance the company did enough to comply with clause 15.2 of the Agreement.

[27] I also consider that, for the purpose of clause 5(b) of the model consultation term, the company provided employees with all relevant information in writing about the change and the expected effects on the employees. Confirmation of the positions to be made redundant was not separately confirmed in writing. But the definite decision to reduce the size of the workforce was the subject of the consultation obligation, and this was addressed in writing in the letter of 26 February 2020. The identification of the affected positions came later. It was clear which positions these were.

[28] The union submitted that no data, statistics, or other explanatory material was provided to employees. However the rationale for the redundancies was explained in the letter of 26 February 2020. The rationale was both clear and uncontested: the significant decline in available work required a reduction in employee numbers. Also, all employees were told that they could volunteer for redundancy and were provided with information on their projected redundancy payments. There was no formal ‘expression of interest’ document, but there is nothing to suggest that there should have been, as employees raised their interest directly with Mr Mastilovich and in at least one case an employee withdrew his interest. The process for volunteering was clear and effective, and ensured that most of the redundancies were voluntary. I consider that the company was prepared to give ‘prompt and genuine consideration’ to matters raised about the major change by the relevant employees, however no alternatives to the redundancies were raised. Objections were raised in relation to the calculation of redundancy payments. However these did not concern the proposed change (the redundancies themselves) or alternatives to or mitigants of redundancy, but rather the monetary implications of the change and the employees’ interpretation or understanding of the terms of the Agreement, which the company did not accept.

[29] As to the union’s broader contention that the consultation was not genuine because the company had already made its decision, I note that both clause 15.2 of the Agreement and the model term are engaged only if a ‘definite decision’ has been made to make the relevant change. The company was not required to consult at an earlier, contemplative stage. The company had made a definite decision to proceed with redundancy. It then consulted in relation to the decision. It asked the union and employees for suggestions as to alternatives options. None were received. The company conducted its own deliberations and identified no alternatives. In my view, although the process was quite short, it amounted to genuine consultation for the purposes of the Agreement.

[30] I conclude that the company consulted with the union and the employees as required by clause 15 and the model consultation term. The answer to question 1 is ‘yes’.

Question 2: Genuine redundancies?

[31] The second question asks whether the seven positions that were made redundant were ‘genuine redundancies’ in all the circumstances.

[32] As was the case with the first question, it is not clear what consequence could flow from a conclusion that the redundancies were not ‘genuine’. Further, the Agreement does not use the expression ‘genuine redundancy’. Clause 15 concerns situations where the company has made a ‘definite decision’ to reduce the size of its full time workforce. There is no suggestion that the company did not genuinely make such a decision. If there were no genuine or valid redundancies for the purpose of clause 15, the implication would be that the redundancy payments would have been made in error. I do not understand the union to advance this contention.

[33] The CFMMEU’s submissions on the second question were framed with reference to the definition of ‘genuine redundancy’ in s 389 of the Act. The significance of a dismissal being a case of genuine redundancy is that the former employee cannot bring an unfair dismissal claim under Part 3-2 of the Act. The present proceeding concerns a dispute referred to the Commission under an enterprise agreement and s 739 of the Act, not an application for an unfair dismissal remedy. I do not see how the second question properly relates to a dispute for the purposes of dispute resolution procedure in the Agreement. I propose simply to express a view about the answer to this question. For the reasons that follow, that view is that the dismissals were genuine redundancies.

[34] I accept the evidence of Mr Cooke and Mr Mastilovich that they did not need the full-time positions of the seven employees to be performed due to the significant reduction in available work. The redundancy of the seven positions was a response to the reduction in maintenance shifts. The company no longer required the jobs of the seven employees to be performed by anyone because of changes in the company’s operational requirements.

[35] The union said that, because the company had offered employees casual employment doing the same work, and several employees had in fact been performing casual work since their redundancy, their positions were not in fact redundant. However, a genuine redundancy for the purpose of s 389 occurs when the employer no longer requires the person’s ‘job’ to be done by anyone because of changes in the operational requirements of the enterprise (s 389(1)(a)). It is the position that is the focus of the inquiry, not the work that is performed. It is very common for a position to be made redundant, but for the work of that position to be redistributed to other employees, or for the number of positions of a particular kind to be reduced to align with a reduction in work. In both cases, work done by the employee still exists, but the position does not. These situations are compatible with a genuine redundancy.

[36] The fact that employees were offered casual work does not impugn the genuineness of the redundancies. It might have been different, had the evidence established that the employees returned as casuals working full-time equivalent hours on a continuing basis, but this is not the case. Rather, several of the employees have been working casual hours from week to week and in some weeks have worked no hours. The permanent full-time positions were surplus to requirements because of the downturn in work. Certain casual work has been offered depending on the availability of such work. In this regard, each casual engagement stands alone. There is no evidence of any permanent employment. The offering of occasional causal shifts to the employees does not call into question the genuineness of the decision to make their full-time positions redundant.

[37] I have concluded earlier that the company complied with its obligations under the Agreement to consult with employees and the union about the redundancies. Therefore, the consultation requirement in s 389(1)(b) would be met.

[38] As to the question of redeployment (see s 389(2)), the union submitted that the onus falls on the employer to prove that it was ‘not reasonable in all the circumstances’ for an employee to be redeployed. This is not the case. No party bears an onus in respect of s 389(2). The provision simply states that a dismissal is not a case of genuine redundancy if it would have been reasonable for the employee to be redeployed. Whether this is so will depend on the available evidence. In the present case, the evidence of Mr Cooke and Mr Mastilovich demonstrates that they considered redeployment and did not believe it was viable. Their evidence was not contradicted, and I accept it. The evidence in this matter does not establish that it would have been reasonable in all the circumstances for the employees to be redeployed.

[39] To the extent that s 389 has any relevance to a dispute for the purpose of clause 13 of the Agreement, it is my view that the dismissals of the employees were genuine redundancies, as described in that section.

Question 3: Calculation of redundancy payments

[40] The third question asks the Commission to determine what is the ‘weekly salary rate’ for the purpose of redundancy payments and accrued but untaken leave under clause 15.4? Clause 15.4 states:

“Redundancy payments shall be calculated on the basis of three weeks’ pay for each completed year of service and pro-rata for any incomplete year as a weekly Employee at the weekly salary rateto a maximum payment, including notice of termination payments, not exceeding the equivalent of:

…

(c) fifty-two weeks at the salary rate until 1 January 2021.”

[41] The CFMMEU submitted that the ‘weekly salary rate’ for the purpose of this provision is the weekly salary actually paid to the affected employees which is derived from the annualised salary in clause 16.1. That clause applies to employees engaged to perform work under an annualised salary arrangement as set out in clause 16.3 (see clause 16.1(a)). It is not in dispute that the seven employees were engaged on this basis. Clause 16.1(b) states that employees will receive the annualised salary in lieu of all other arrangements relating to wages, overtime, allowances and loadings. And clause 16.1(c) identifies particular payments that are comprehended by the annualised salary, which includes the base rate of pay (clause 16.1(c)(i)). The union contended that, for an employee on an annualised salary, the ‘weekly salary rate’ is derived from the annualised salary, and that this is the meaning of that expression in clause 15.4.

[42] Clause 16.6 is of particular significance for question 3. It states:

“a) The following hourly base rates of pay shall be applicable for the purpose of calculating weekly salary rates in the following circumstances:

i) Workers compensation make up;

ii) Termination payments;

iii) Pay in lieu of leave; and

iv) Severance payments.”

[43] The company contended that clause 16.6 is very clear about the basis upon which severance payments are to be paid, namely the hourly base rates of pay that are set out in clause 16.6(b). The clause identifies certain payments and stipulates that they are calculated on the base rate. The company says that this is the end of the matter.

[44] The union submitted that clause 16.6 does not say that severance and other relevant payments are based on the base rates of pay. Rather, it says that the base rates of pay ‘shall be applicable for the purpose of calculating weekly salary rates’. The union says that ‘applicable’ means ‘relevant to’, and that the base rates of pay are only one aspect of the ‘calculation’ referred to in clause 16.6. The calculation further involves identifying which of the three classifications in clause 16.3 are relevant (MTL2, MTL1 and MWL1), as annualised salaries vary for each, and then working out the relevant figure.

[45] The union further said that the meaning of ‘weekly salary rates’ should be understood in light of the practical reality which is that employees on an annualised salary receive a weekly salary which is identified in their payslips. Annual leave accruals are also shown on payslips in amounts based on the weekly salary rate. The union submitted that the meaning of clause 15.4, and its reference to the weekly salary rate as it applied to the redundancy of the seven employees, is clear and unambiguous, and that there is no need for the Commission to have regard to surrounding circumstances. It said however that if the Commission were to consider the Agreement to be ambiguous in this regard, recourse to surrounding circumstances would bear out the meaning for which the union contended. It referred to the fact that previous agreements binding on Skilled at the site contained the same or similar provisions, which it said were interpreted to require payment of redundancies at the annualised weekly salary rate.

[46] In my opinion, the purpose of clause 16.6 is to prescribe the calculation of the relevant payments by reference to the base rate of pay. The clause says that the ‘following hourly base rates of pay shall be applicable for the purpose of calculating weekly salary rates in the following circumstances’, which circumstances include pay in lieu of leave and ‘severance payments’. The latter is clearly a reference to the redundancy payments in clause 15.4. There is, as the union contended, a calculation that must be performed pursuant to clause 16.6. But that calculation does not involve reconstituting the annualised rate from the base rate of pay. This would be redundant because clause 16.1(c) already makes clear what the annualised salary is comprised of, and clause 16.1(c)(i) specifically states that one of the constitutive elements is the base rate of pay. On the union’s interpretation, clause 16.6 serves no real purpose. However, the clause does have a purpose. It is the purpose that the clause spells out: to make the base rates of pay applicable for calculating severance and certain other benefits.

[47] The calculation that is required by clause 15.4 and 16.6 is to multiply an employee’s base hourly rate by the number of weekly hours, namely 35 (see clause 19.1), and then to multiply this figure by three for each year of service, up to the prescribed maximum. Clause 16.6 is not concerned with the annualised salary. It is concerned with stipulating the basis for calculating the four kinds of payments referred to in the clause, which is the base rate of pay.

[48] There is no definition of ‘weekly salary rate’ in the Agreement. However, in respect of the use of that expression in clause 15.4, clause 16.6 serves as a definition. The clause says that ‘for the purpose of calculating weekly salary rates in the following circumstances’, the hourly base rates of pay shall be applicable. This means that for payments under this clause the weekly rates are calculated on the base hourly rates. It does not mean that the base rates are simply taken into account, and that really the annualised salary is to be used.

[49] The union said that, where the Agreement intends for the base hourly rate to be used to pay employees, it expressly provides for it. It pointed to clause 27.2(d), which states that unused sick leave is paid ‘at the base rate of pay prescribed in clause 16.6(b)’; and to clause 11.2, which provides that ‘in calculating any payment in lieu of notice, the base rates set out in clause 16.6 shall be used’. But there is in fact an express provision that requires severance and other specified payments to be calculated on the base rate of pay. That provision is clause 16.6.

[50] Clause 16.6 is the kind of provision one commonly finds in an enterprise agreement that establishes an annualised salary. An annualised salary usually absorbs other individual payments that are payable in respect of time worked, but the annualised rate is not always payable for all purposes. Payments not referrable to time worked are often calculated at a lower rate. I note that the National Employment Standards in the Act require that payments in lieu of notice of termination of employment (which stand in the place of payment for work that would otherwise have been performed if notice had been given) are paid at the ‘full rate of pay’ (s 117(2)(b)), whereas payments of accrued leave and redundancy are required to be made only at the base rate of pay (ss 90 and 119(2)). Of course, an enterprise agreement can provide for redundancy payments to be based on an annualised rate of pay. But in my opinion the agreement in the present matter does not do so.

[51] I appreciate that employees on annualised salaries receive a weekly salary that is a derivative of the annualised salary and that this is reflected in the weekly payslips. But question 3 is concerned specifically with the meaning of ‘weekly salary rates’ in clause 15.4, read in the context of the Agreement as a whole.

[52] The union contended that, under the transmission of business provision in clause 44.4 of the Agreement, the company must ensure that all accumulated leave balances previously acknowledged are paid out or carried over to the new employment. It also said that, for the company to pay severance and accrued leave based on the base rate would effectively give the employer a windfall gain that was not predicted or agreed to with the transmitter. However, it is not clear to me how these contentions are said to affect the proper construction of clause 16.6. And it has not been shown that the company has not observed clause 44.4 in relation to any of the seven employees in the present case, or that it has had a windfall gain.

[53] The CFMMEU further contended that there is a difference between redundancy pay and severance payments, and that the latter is broader, encapsulating benefits such as health insurance, and that redundancy pay is only one aspect of severance pay. This is a doubtful proposition, but even if the union were right about this, it would still be the case that redundancy payments prescribed by clause 15.4 are subject to clause 16.6. The suggested distinction between the concepts of redundancy and severance does not further the union’s argument about the answer to question 3.

[54] The CFMMEU’s alternative argument was that, if there were any ambiguity in the Agreement in respect of the meaning of clause 15.4 and 16.6, recourse should be had to surrounding circumstances. In this regard, it submitted that it is ‘notorious’ that the weekly (annualised) salary rate has always been applied to redundancy payments and payment out of accrued leave under previous enterprise agreements at the site, which have contained the same or similar provisions as those in the Agreement.

[55] Where a provision has appeared in a number of successive enterprise agreements between the same parties, and it is demonstrated that the parties have acted in accordance with a common understanding of that provision, then a conclusion may be available that the parties have agreed that the provision in question shall continue to have the commonly understood meaning. 2 However, there must be clear evidence that the parties have acted on the common understanding, rather than for some other reason, such as inadvertence or generosity.3 In the present case, there is not a succession of enterprise agreements between the same parties. Rather, there is a new employer which is bound by an enterprise agreement that contains provisions that were reflected in earlier agreements made with a different employer at the same site. The union contends nevertheless that the meaning of the clauses in question is notorious or commonly understood. However, in my opinion, the evidence simply does not establish any such notorious or commonly understood meaning.

[56] Mr Lumsden said that, prior to the current Agreement, employees were covered by the ATIVO East Swanson Dock (Patrick) Site Maintenance Enterprise Agreement 2015-2017, which contained the text of clauses 15.4 and 16.6, and that redundancies made under that agreement were paid at the weekly (annualised) salary rate. Mr Jones said that he was aware that in 2015, five positions were made redundant and that payments were made by the employer at the ‘weekly salary rate’, by which he meant the weekly rate derived from the annualised salary. Mr Jones said that he understood that this had been the basis for making redundancy payments over successive agreements going back to 2000. And Mr Cushion, who was the assistant Victorian branch secretary of the Maritime Union of Australia from 1999 to 2015, said that since 1999, workers on site had been paid redundancy and accrued leave on termination based on the higher rate. He also said that he had been involved in the negotiations for the Agreement and had advised the MUA representatives on the meaning of clause 15.

[57] This evidence concerned the witnesses’ understanding of the basis on which other employers have made redundancy payments in the past. It does not establish why the employers made these payments on this basis. The evidence does not establish that the reason for the payment at the higher rate reflected a common understanding of the meaning of the provision, rather than inadvertence, generosity, or some other cause, such as a concession by the employer to resolve a disagreement or dispute. Nor does the evidence say anything about the common understanding of Programmed Industrial Maintenance and the union at the time the Agreement was made. The fact that Mr Cushion advised the union negotiators what he considered the meaning of clause 15 to be is of little assistance, as it reflects only the subjective intention or understanding of the union. There is no evidence of a common understanding between the company and the union about the meaning of ‘weekly salary rate’ in clause 15.4. Further, I note that the agreement-making provisions in Part 2-4 of the Act do not recognise ‘parties’ to an enterprise agreement. An agreement is made when it is approved by employees. There is no evidence that any common understanding of the relevant provisions was conveyed to employees as part of the explanation process under s 180(5) of the Act prior to the vote. Nor has it been established that it was notorious that redundancy pay or accrued leave on termination was calculated on the annualised weekly salary rate.

[58] In my view, the meaning of clauses 15.4 and 16.6 is clear and unambiguous, and there is no need to have regard to surrounding circumstances. The lack of ambiguity does not preclude my recourse to the surrounding circumstance. 4 However, I do not consider that the evidence of the surrounding circumstances in this case has established any common understanding of the meaning of ‘weekly salary rate’ in the context of redundancy and accrued leave payments that are to be made to employees under the terms of the Agreement.

[59] While the words ‘weekly salary rate’ might generally refer to the annualised salary that is received each week, in the context of clause 15.4 and clause 16.6 they clearly have a different meaning. As clause 16.6 says, ‘for the purpose of calculating the weekly salary rate in the following circumstances’, which include severance payments, it is the base rates of pay that are applicable, not the weekly installment of the annualised salary. The answer to question 3 is that the words ‘weekly salary rate’ in clause 15.4 mean the employee’s hourly base rate of pay, multiplied by 35.

DEPUTY PRESIDENT

Appearances:

B. Baarini for the Construction, Forestry, Maritime, Mining and Energy Union
J. Forbes of counsel for Programmed Industrial Maintenance Pty Ltd

Hearing details:

2020
Melbourne
17 August

Printed by authority of the Commonwealth Government Printer

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 1   [2018] FWCA 7389. See s 205(2) of the Act and the model consultation clause in Schedule 2.3 of the Fair Work Regulations 2009.

 2   Shop Distributive and Allied Employees’ Association v Woolworths Ltd (2006) 151 FCR 513 at [31], noted with approval in Australian Nursing and Midwifery Federation v Eastern Health [2013] FCAFC 137 (ANMF), [7] to [10]

 3   Ibid

 4   ANMF, above, at [23]