Construction, Forestry, Mining and Energy Union v Peabody Energy Australia Coal Pty Ltd
[2015] FWC 446
•17 FEBRUARY 2015
| [2015] FWC 446 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.739—Dispute resolution
Construction, Forestry, Mining and Energy Union
v
Peabody Energy Australia Coal Pty Ltd
(C2013/6892)
COMMISSIONER STANTON | NEWCASTLE, 17 FEBRUARY 2015 |
Section 739 - application to deal with a dispute under a disputes settlement procedure – bonus scheme payments – interpretation of agreement – principles of interpreting industrial instruments – transfer of business – transfer of employment – application of bonus scheme to transferring employees – transferring employees made redundant by first employer – whether service with first employer counts as service with the second employer for purposes of bonus scheme – meanings of service, continuous service and transfer of employment – held – application of specific bonus scheme payment service based with second employer – service with first employer not counted as service with second employer.
[1] This decision deals with an application by the Construction, Forestry, Mining and Energy Union (the Union) for the Fair Work Commission (the Commission) to deal with a dispute concerning the application of Clause 3.3.8 ‘Loyalty Bonus Scheme’ (the bonus scheme) under the Downer EDI Mining Wambo Enterprise Agreement 2011 (the Agreement) following the insourcing of contract mining operations. The bonus scheme was negotiated by Downer EDI Mining Pty Ltd (Downer) and its employees as part of the 2011 enterprise bargaining negotiations. It was attendance based.
[2] The Agreement was approved by the Commission to operate from 12 September 2011, with a nominal expiry date of 12 September 2014. Downer applied the benefits of the Agreement and the bonus scheme from 26 August 2011. The bonus scheme contemplated pro-rata payments to qualifying employees of up to $5000, $6500 and $8000 for attendance on the anniversary dates of the Agreement being 26 August 2012, 2013 and 2014.
[3] The Agreement covered Downer’s contract mining operations at the Wambo Mine operated by Wambo Open Cut Pty Ltd (Wambo).
[4] On 31 March 2013, Downer’s mining contract at the Wambo Mine came to an end and mining was insourced to Wambo. All Downer employees were subsequently made redundant. The relevant redundancy payments included an employee’s pro-rata entitlement under the bonus scheme.
[5] Downer employees did not transfer to Wambo on 31 March 2013. Rather, Wambo conducted an external recruitment program whereby a number of ex-Downer employees were successful in gaining employment to commence on 1 April 2013.
[6] The effect of the arrangement between Wambo and Downer was that a transfer of business occurred in accordance with s.311 of the Fair Work Act 2009 (the Act). Accordingly, the Agreement commenced to apply to those former Downer employees who accepted an offer of employment with Wambo and became employees of Wambo.
[7] An order effective 1 April 2013 was made by the Commission to provide that the Agreement would also apply to non-transferring employees of Wambo who perform, or are likely to perform, transferring work at Wambo after 1 April 2013.1
[8] The dispute was characterised by the Union in the following terms:
The dispute concerns the operation and interpretation of the Enterprise Agreement, specifically clause 3.3.8 ‘Loyalty Bonus Scheme’ and how much is required to be paid in accordance with that scheme in this current year.
The CFMEU and its members believe with respect to the annual payment to be made under the scheme when the respondent insourced the mining operations from Downer EDI Mining that the scheme operates from the date the Enterprise Agreement was made. The respondent is of the view it started afresh.
Jurisdiction
[9] The dispute was brought pursuant to the terms of the Agreement. The parties agreed that the Commission’s jurisdiction to arbitrate this dispute arose from Clause 2.10, Dispute/Grievance Procedure, which provides that unresolved disputes may be arbitrated by the Commission. The Agreement provides that where a dispute is subject to arbitration, the Commission may exercise those powers under s.739 of the Act “which are necessary to make the arbitration effective”. I find this particular dispute falls within the scope of s.739:
“739 Disputes dealt with by the FWC
(1) This section applies if a term referred to in section 738 requires or allows the FWC to deal with a dispute.
(2) The FWC must not deal with a dispute to the extent that the dispute is about whether an employer had reasonable business grounds under subsection 65(5) or 76(4), unless:
(a) the parties have agreed in a contract of employment, enterprise agreement or other written agreement to the FWC dealing with the matter; or
(b) a determination under the Public Service Act 2999 authorises the FWC to deal with the matter.
Note: This does not prevent the FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effectas subsection 65(5) or 76(4) (see also subsection 55(5)).
(3) In dealing with a dispute, the FWC must not exercise any powers limited by the term.
(4) If, in accordance with the term, the parties have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so.
Note: The FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).
(5) Despite subsection (4), the FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.
(6) The FWC may deal with a dispute only on application by a party to the dispute.”
[10] Wambo was legally represented with permission. Given the nature of this particular dispute, permission pursuant to s.596(2)(a) of the Act was granted at conciliation. In that regard, I advised the parties I was satisfied that legal representation would enable more efficient consideration of issues associated with this matter in arbitration.
The Bonus Scheme
[11] The terms of the bonus scheme set out under Clause 3.3.8 of the Agreement state:
A Loyalty Scheme will be paid in accordance with the DEDIM Wambo Project Loyalty Scheme and Letter of Understanding (Annexure 1).
Annexure 1 sets out correspondence dated 28 July 2011 from Downer to Mr Williams, the Union’s District Vice President and states that upon approval of the proposed enterprise agreement by the Commission:
The terms of the Loyalty Bonus Scheme (dated and signed by the parties) are enforceable under the Agreement.
[12] The following details concerning the operation of the bonus scheme were set out in Annexure RW-4 to Mr Williams’ statement filed in proceedings: 2
Purpose
The Loyalty Bonus Scheme is designed to foster and promote the retention of Downer EDI Mining (“DEDIM”) employees at Wambo Mine. The Loyalty Bonus Scheme is calculated on attendance and recognises an employee’s contribution to the operation of the mine.
Table 1
Service | Payment |
0-1 YEARS | $5,000 |
1-2 years | $6,500 |
2-3 years | $8,000 |
Principles
1 The Loyalty Bonus Scheme applies to all employees covered by the Agreement except for junior apprentices.
2. Following the lodgement of the downer EDI Mining Wambo Enterprise Agreement 2011 employees will become eligible for payment of the Loyalty Bonus Scheme on the 1st, 2nd, and 3rd anniversary dates of the Agreement.
3. Where an employee commences employment with DEDIM after the making of the Agreement, they will become eligible for payment of the Loyalty Bonus Scheme on their anniversary date (within the nominal term of the Agreement).
4. The Loyalty Bonus Scheme does not apply to incomplete years and Downer is not liable for any proportionate payment, except for incomplete years that occur due to an end in the contract between DEDIM and the Client.
…
Effect of Insourcing
[14] Following the decision by Wambo to insource contract mining from 1 April 2013, Downer employees were paid their redundancy entitlements, including accrued entitlements applicable under the Agreement and a bonus scheme pro-rata payment.
[15] In terms of the insourcing arrangements, Wambo acknowledged that for the purposes of the Act:
- there was a “transfer of business” in accordance with s.311(1);
- the Agreement was a “transferrable instrument” as provided by ss.312 and 313; and
- there was a “transfer of employment” in relation to those former Downer employees subsequently engaged by Wambo as provided by s.22(7). Such employees were “transferring employees” in accordance with s.311(2).
[16] Subsequent to the transfer of business Wambo continued to recognise “26 August” as the relevant anniversary date for the purposes of the bonus scheme with one significant change concerning the calculation of service. Wambo proposed 1 April 2013, the date insourcing commenced, as the first day of service “for all purposes” for employee accruals afforded under the Agreement, including accrual for the bonus scheme.
[17] Wambo did not recognise the service of former Downer employees who transferred on or around 1 April 2013 on the grounds that such employees commenced as “new starters”. As a consequence of being made redundant, Downer had paid all such employees their entitlements with respect to their service with the company. The decision of Downer to make employees redundant and be paid their entitlements under the Agreement was acknowledged by the Union.
[18] Wambo subsequently paid a bonus scheme pro-rata payment for the period 1 April to 26 August 2013. That payment was based on the 0-1 years of service rate of $5,000. This payment is at the core of the dispute. The Union argues this payment should have been based on the 1-2 years of service rate of $6,500 on the grounds that the Agreement was in its second year of operation.
[19] Wambo also proposed to base the bonus scheme pro-rata payment applicable for the period 27 August 2013 to 26 August 2014 on the 1-2 years of service rate of $6,500, rather than the 2-3 years of service rate of $8,000 contemplated when the Agreement was made with Downer. Shortly stated, the Union argues that Wambo should recognise the service of former Downer employees for the purposes of assessing the bonus scheme payment.
Evidence
Robin Williams
[20] The Union relied on the witness statement filed by Mr Robin Williams. Mr Williams was conversant with the nature of the Agreement and bonus scheme subject to these proceedings.
[21] Mr Williams deposed that the dispute concerned approximately 115 employees who had “ceased” employment with Downer on 31 March 2013 and following the insourcing of coal mining operations, commenced work with Wambo on 1 April 2013. Mr Williams further explained that the former Downer employees had received redundancy pay entitlements applicable under the Agreement together with a bonus scheme pro-rata payment and the payment of all accrued entitlements.3
[22] Mr Williams contended that the bonus scheme required a payment to be made with respect to service up to 26 August each year, the anniversary date of the Agreement as applied by Downer in 2011. Moreover, as the bonus scheme was negotiated as “a component of the wages to be paid” under the Agreement,4 Wambo should pay former Downer employees a payment under the bonus scheme at the 1-2 years of service rate in the second year of the Agreement and at the 2-3 year rate in the third year of the Agreement, “consistent with the transmission of business provisions of the Act”.5
[23] In cross-examination, Mr Williams confirmed that upon termination by Downer, employees received a redundancy payment equivalent to three weeks’ pay for each year of service, notice, personal and annual leave entitlements and a bonus scheme pro-rata payment.6 He further agreed that Downer did not secure employment for those transferring employees who were recruited to commence with Wambo on or around 1 April 2013.7
[24] Mr Williams acknowledged that in the event Downer had secured the transferred employees employment with Wambo, those employees would not have been entitled to redundancy benefits on the grounds that their employment with Wambo could be regarded as reasonable alternative employment, which, under the Agreement excludes payments associated with redundancy.8
[25] Insofar as redundancy under the Agreement was concerned, Mr Williams accepted the proposition, “the clock resets for those employees (on) 1 April 2013,”9 to prevent “double dipping.” However, Mr Williams was adamant that Wambo should take into consideration prior service with Downer for the purposes of the bonus scheme.10
Geoffrey Moore
[26] Mr Geoffrey Moore was the Open Cut Mine Manager for Wambo and prior to 1 April 2013, he superintended the mining contract between Wambo and Downer. Mr Moore deposed the Wambo mine transferred to owner-operator status from 1 April 2013 11 and prior to that date, all open cut employees engaged at the mine were employed by Downer. He confirmed that Downer employees were made redundant and paid their entitlements.12
[27] Mr Moore stated that from 1 April 2013, Wambo was required to recruit a new workforce. He was involved in the recruitment process that utilised local media, and mine site notice boards. 13 Peabody Corporate managed the employment offers. In short, he estimated approximately 100 former Downer employees and 30 external applicants were subsequently employed by Wambo. In that regard, Mr Moore also understood approximately 50% of Downer employees were unsuccessful in their applications for employment with Wambo.14
[28] Mr Moore contended there was no arrangement between Downer and Wambo concerning the transfer of employees. Rather, applicants were required to participate in a formal application and selection process and competed with applicants from the labour market at large. 15
[29] It was Mr Moore’s evidence that while Clause 3.3.8 of the Agreement provides for a bonus scheme, the scheme itself is not part of the Agreement. 16 He subsequently confirmed that Wambo had agreed to apply 26 August as the anniversary date for the purpose of the bonus scheme.
[30] Mr Moore deposed that on 29 April 2013, he attended a meeting with the Union to discuss potential changes to rosters and the various bonus schemes in operation at Wambo. The Union was represented by Mr Williams and Mr G Crossley. Wambo’s General Manager, Operations Manager - Open Cut and Human Resources Superintendent were also in attendance. Mr Moore stated his notes from the meeting were that the “clock starts at April”, a reference to the fact that Wambo’s employees commenced in April 2013 and therefore their eligibility for the bonus scheme was to be calculated by reference to the anniversary date of their employment and not, as had previously been the case, the 26 August anniversary date of the Agreement. 17
[31] Mr Moore stated that during the meeting with the Union, he had referred to the 0-1 year, $5,000 bonus scheme amount to explain how Wambo proposed to calculate the quantum of bonus payable to those employees who satisfied the requisite service requirements. 18 However, Wambo subsequently acknowledged that employees would not be eligible for the 0-1 year bonus until 1 April 2014 and given the Agreement’s nominal expiry date of 12 September 2014, employees would not qualify for the 1-2 year bonus scheme payment.19
[32] Wambo subsequently decided to apply 26 August as the relevant anniversary date. The practical effect of this decision was that those employees who commenced employment with Wambo prior to 26 August 2013 were paid a bonus scheme pro-rata payment based on service prior to that date and would be eligible for the 1-2 year bonus in the event they were employed by Wambo on 26 August 2014, prior to the nominal expiry date of the Agreement.
[33] Wambo made a bonus scheme pro-rata payment for the period 1 April to 26 August 2013 on 9 October 2013. Relevant correspondence to employees announcing the bonus payment 20 stated the payment was for the period that commenced from their start date with Wambo, being 1 April 2013 or later and, the second anniversary of the Agreement on 26 August 2013.
[34] In cross-examination, Mr Moore confirmed that in or around early April 2013, Wambo made offers to former Downer employees “on the basis that it was fresh employment.”21
[35] Mr Moore agreed that a term of the bonus scheme was that a payment was contemplated on the first, second and third anniversary of the Agreement. He also agreed that the Agreement continued to apply to those former Downer employees subsequently engaged by Wambo on or after 1 April 2013.22
[36] Mr Moore agreed that under Wambo’s proposal, no employees would receive the 2-3 year payment of $8,000 as their service commenced on or after 1 April 2013.23
[37] In re-examination, Mr Moore stated Downer employees were made redundant on 28 March 2013 and Wambo notified all applicants concerning their success or otherwise for advertised positions after that date.24
Statutory Context
[38] In submissions, the parties referred extensively to the meanings of the terms “service” and “continuous service” are dealt with in s.22 of the Act:
22 Meanings of service and continuous service
General meaning
(1) A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2).
(2) The following periods do not count as service:
(a) any period of unauthorised absence;
(b) any period of unpaid leave or unpaid authorised absence, other than:
(i) a period of absence under Division 8 of Part 2-2 (which deals with community service leave); or
(ii) a period of stand down underPart 3-5, under an enterprise agreement that applies to the employee, or under the employee’s contract of employment; or
(iii) a period of leave or absence of a kind prescribed by the regulations;
(c) any other period of a kind prescribed by the regulations.
(3) An excluded period does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service.
(3A) Regulations made for the purposes of paragraph (2)(c) may prescribe different kinds of periods for the purposes of different provisions of this Act (other than provisions to which subsection (4) applies). If they do so, subsection (3) applies accordingly.
Meaning for Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2
(4) For the purposes of Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2:
(a) a period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include:
(i) any period of unauthorised absence; or
(ii) any other period of a kind prescribed by the regulations; and
(b) a period referred to in subparagraph (a)(i) or (ii) does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service; and
(c) subsections (1), (2) and (3) do not apply.
Note: Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2 deal, respectively, with requests for flexible working arrangements, parental leave and related entitlements, and notice of termination or payment in lieu of notice.
(4A) Regulations made for the purposes of subparagraph (4)(a)(ii) may prescribe different kinds of periods for the purposes of different provisions to which subsection (4) applies. If they do so, paragraph (4)(b) applies accordingly.
When service with one employer counts as service with another employer
(5) If there is a transfer of employment (see subsection (7)) in relation to a national system employee:
(a) any period of service of the employee with the first employer counts as service of the employee with the second employer; and
(b) the period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee’s continuous service with the second employer(taking account of the effect of paragraph (a)), but does not count towards the length of the employee’s continuous service with the second employer.
Note: This subsection does not apply to a transfer of employment between non-associated entities, for the purpose of Division 6 of Part 2-2 (which deals with annual leave) or Subdivision B of Division 11 of Part 2-2 (which deals with redundancy pay), if the second employer decides not to recognise the employee’s service with the first employer for the purpose of that Division or Subdivision (see subsections 91(1) and 122(1)).
(6) If the national system employee has already had the benefit of an entitlement the amount of which was calculated by reference to a period of service with the first employer, subsection (5) does not result in that period of service with the first employer being counted again when calculating the employee’s entitlements of that kind as an employee of the second employer.
Note: For example:
(a) the accrued paid annual leave to which the employee is entitled as an employee of the second employer does not include any period of paid annual leave that the employee has already taken as an employee of the first employer; and
(b) if an employee receives notice of termination or payment in lieu of notice in relation to a period of service with the first employer, that period of service is not counted again in calculating the amount of notice of termination, or payment in lieu, to which the employee is entitled as an employee of the second employer.
Meaning of transfer of employment etc.
(7) There is a transfer of employment of a national system employee from one national system employer (the first employer) to another national system employer (the second employer) if:
(a) the following conditions are satisfied:
(i) the employee becomes employed by the second employer not more than 3 months after the termination of the employee’s employment with the first employer;
(ii) the first employer and the second employer are associated entities when the employee becomes employed by the second employer; or
(b) the following conditions are satisfied:
(i) the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer;
(ii) the first employer and the second employer are not associated entities when the employee becomes employed by the second employer.
Note Paragraph (a) applies whether or not there is a transfer of business from the first employer to the second employer.
(8) A transfer of employment:
(a) is a transfer of employment between associated entities if paragraph (7)(a) applies; and
(b) is a transfer of employment between non-associated entities if paragraph (7)(b) applies.
Submissions
[39] The Union urged the Commission to determine that a transferring employee’s continuous service with Downer should be treated as service with Wambo for the purposes of the bonus scheme.25 The practical effect of that submission was that such employees should be treated by Wambo as being in their second year of service when engaged on or after 1 April 2013. Such treatment would afford them the higher 1-2 years $6,500 bonus payment. In support of that proposition, the Union submitted:26
- there was a transmission of business between Downer and Wambo as provided by s.311 of the Act;
- approximately 115 former Downer employees transferred to Wambo consistent with the provision of s.311 and subsection 7(b) of s.22, Meaning of Service and Continuous Service of the Act:
- the Act provides that the period of service of a transferring employee is counted as service with Wambo when subsection 22(5), When Service with One Employer counts as service with Another Employer, is considered; and
- the Agreement became a transferrable instrument following the transmission of business.
[40] The Union submitted that the Clause 3.3.8, ‘Loyalty Bonus Scheme’ fell within Part 3, Wages and Allowances of the Agreement and required Wambo to apply the bonus scheme payments consistent with the requirement to pay agreed wage increases during the life of the Agreement. Moreover, the bonus scheme “forms the material term of the Agreement.”27
[41] The bonus scheme pro-rata payment for employees is based on their attendance for their respective rostered shifts and not their service with the employer. It is not paid to employees “that do not complete a year of service other than on the end of contract….”28
[42] The Union acknowledged that Item 115 of the Explanatory Memorandum to the Fair Work Bill 2008 (the Eplanatory Memorandum) noted that s.22(6) of the Act, was designed to prevent “double dipping” and ensure “no one gets a windfall out of transmission of business arrangements.” 29
[43] The Union also submitted a transfer of business required Wambo to ensure it complied with all obligation s imposed by the Agreement.
[44] The Union contends the provisions of Part 3, Wages and Allowances under the Agreement confers an obligation upon Wambo to pay the bonus scheme as if Downer was the current employer. Consistent with that proposition, the Union has claimed that Wambo should pay the 1-2 year and 2-3 year bonus scheme payments at the rate of $6,500 and $8,000 for eligible employees. The obligation to pay such payments is created by Clause 3.3.8, Loyalty Bonus Scheme of the Agreement and the terms of that scheme as set out in Attachment RW-4 to Mr Williams statement. 30The bonus scheme is a service based payment.31
[45] The Union considered that a finding in favour of Wambo “...would fly in the face of the “entire legislature structure” about ensuring the obligations under enterprise agreements are met on transmissions of businesses and transmissions of employment.” 32
[46] For its part, Wambo accepts that despite not engaging former Downer employees with continuity of service, a transfer of business occurred consistent with the provisions of s.311 of the Act.
[47] Wambo argued that Downer’s mining contract ended on 31 March 2013, part way through the term of the Agreement and in accordance with the terms of that Agreement, employees were paid their respective pro-rata entitlements under the bonus scheme. 33 Moreover, Wambo did not agree to a transfer of Downer employees but rather former Downer employees, amongst others, were invited to respond to an advertised external recruitment process which subsequently “triggered” a transfer of business.34
[48] Wambo did not recognise, nor was it required by the Act to recognise, the transfer of employees’ service with Downer for any purpose nor did Wambo assume responsibility for any of their accrued entitlements. Rather, the accrued entitlements of Downer employees were paid out when they were made redundant at the end of the Downer mining contract. 35
[49] Wambo submitted that given a number of former Downer employees commenced with Wambo on 1 April 2013, their service for the purposes of calculating the bonus scheme payment commenced from that date. Accordingly, a payment based on service for the period 1 April to 26 August 2013 was made. Thereafter, eligible employees would be treated as if they were in their second year (1-2 years) of the bonus scheme and not the third year (2-3 years) as pressed by the Union. 36 Wambo contended the approach it had adopted to the bonus scheme recognised an employee’s “loyalty” to Wambo from 1 April 2013.37
[50] Wambo argued that s.22 of the Act does not assist the Union’s case as the operation of that section only concerns benefits which arise under the Act itself, whereas the bonus scheme is not a benefit protected by the Act. 38 In the event s.22 did have application, former employees of Downer were paid a bonus scheme pro-rata payment based on their service up to the completion of the mining contract. Accordingly, consistent with s.22(6) of the Act, which deals with circumstances where an employee has already had the benefit of an entitlement, such service should not be “counted again when calculating the employee’s entitlements of that kind.”39
[51] It was Wambo’s case that the Act does not require an employer to recognise service with a previous employer unless it has agreed to do so. Moreover, s.22 of the Act is concerned with benefits that arise under it. The bonus scheme is not regulated by the Act. Rather, it is a benefit that exists following an agreement reached between Downer and its then employees.
[52] Wambo further contended that in the event the bonus scheme was a benefit governed by s.22 of the Act, former Downer employees had already been paid a pro-rata payment based on their service with Downer and as a consequence of s.22(6) of the Act, “that period of service is not counted again.” 40 Accordingly, Wambo rejected the Union’s submission that given the Agreement was now in its second year, the bonus scheme should be interpreted in a manner similar to the annual wage increments contemplated.
[53] Wambo also argued that the Explanatory Memorandum gave a strong indication that the operation of s.22 of the Act was intended to affect those benefits that arise under the Act itself. 41 Further, in circumstances where there is a transfer of business between non-related entities, the second employer does not have to recognise service for the purposes of annual leave or redundancy pay, both of which are National Employment Standards (NES) benefits. It must therefore follow that the second employer is not required to recognise service with the first employer for the purposes of a non-NES benefit such as the bonus scheme.
[54] Wambo submitted that on termination by Downer, employees were paid a bonus scheme pro-rata payment based on 7 months service in the second year of the scheme at the 1-2 year rate of $6,500 42 and a minimum redundancy payment of approximately $7,000.
Consideration
[55] The Full Bench decision in Cape Australia Holdings Pty Ltd T/A Total Corrosion Control Pty Ltd v Construction, Forestry, Mining and Energy Union 43 is relevant to the general approach to be taken by the Commission with respect to the interpretation of enterprise agreements:
The Interpretation of Enterprise Agreements
[7] As to the general approach to the construction of enterprise agreements the observations of French J, as he then was, in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (Wanneroo) are apposite:
“[53] The construction of an award, like that of a statute, begins with a consideration of the ordinary meaning of its words. As with the task of statutory construction regard must be paid to the context and purpose of the provision or expression being construed. Context may appear from the text of the instrument taken as a whole, its arrangement and the place in it of the provision under construction. It is not confined to the words of the relevant Act or instrument surrounding the expression to be construed. It may extend to ‘...the entire document of which it is a part or to other documents with which there is an association’. It may also include ‘....ideas that gave rise to an expression in a document from which it has been taken’ - Short v FW Hercus Pty Ltd [1993] FCA 51; (1993) 40 FCR 511 at 518 (Burchett J); Australian Municipal, Clerical and Services union v Treasurer of the Commonwealth of Australia (1998) 80 IR 345 (Marsall J).”
[8] While his Honour’s observations were made in the context of interpreting an award the same principles apply to the interpretation of enterprise agreements. For example, similar observations were made by their Honours Gummow, Hayne and Heydon JJ in Amcor v CFMEU:
“Clause 55.1.1 must be read in context. It is necessary, therefore, to have regard not only to the text of cl 55.1.1, but also to a number of other matters: first, the other provisions made by cl 55; secondly, the text and operation of the Agreement both as a whole and by reference to other particular provisions made by it; and, thirdly, the legislative background against which the Agreement was made and in which it was to operate.”
[9] The fact that the instrument being construed is an enterprise agreement is itself an important contextual consideration. As French J observed in Wanneroo, at paragraph [57]:
“It is of course necessary, in the construction of an award, to remember, as a contextual consideration, that it is an award under consideration. Its words must not be interpreted in a vacuum divorced from industrial realities - City of Wanneroo v Holmes[1989] FCA 369; (1989) 30 IR 362 at 378-379 and cases there cited. There is a long tradition of generous construction over a strictly literal approach where industrial awards are concerned - see eg GeoA Bond and Co. Ltd (in liq) v McKenzie[1929] AR (NSW) 498 at 503-504 (Street J). It may be that this means no more than that courts and tribunals will not make too much of infelicitous expression in the drafting of an award nor be astute to discern absurdity or illogicality or apparent inconsistencies. But while fractured and illogical prose may be met by a generous and liberal approach to construction, I repeat what I said in City of Wanneroo v Holmes (at 380):
“Awards, whether made by consent or otherwise, should make sense according to the basic conventions of the English language. They bind the parties on pain of pecuniary penalties.” (Footnotes omitted)
[56] Downer employees were made redundant on 30 March 2013. They were afforded a redundancy payment together with the payment pro-rata accruals such as annual leave. Downer had no role in assisting employees with obtaining work with Wambo. The evidence was that Wambo established a recruitment campaign with the object of seeking applications from Downer employees as well as the general labour market.
[57] The case for the Union was that Wambo was bound to pay transferring employees who remained employed as at 26 August 2013 a bonus scheme pro-rata payment at the 1-2 year rate of $6,500. In support of that proposition, the Union submitted the bonus scheme provision was contained in Part 3, Wages and Conditions of the Agreement. The nominal term of the Agreement was three years, with wage increases applying following approval and at the 12 and 24 month anniversary dates.
[58] The bonus scheme clause of the Agreement states that a bonus will be paid in accordance with the scheme and “Letter of Understanding, Annexure 1.” Annexure 1 simply notes the Agreement provides for a bonus scheme at Clause 3.3.8 and the terms of that scheme are enforceable under the Agreement. A further document agreed to by the Union and Downer states employees will be entitled to the payments set out in paragraph [12] above on the first, second and third year anniversary dates of the Agreement.
[59] In my view, the bonus scheme provisions very briefly referred to under Part 3 of the Agreement are set out under that Part for the simple reason of convenience. The bonus scheme does not form part of the aggregated annualised wage defined under Clause 3.1, Classification Structure and Rates. Clause 3.3.8, Loyalty Bonus Scheme nor Annexure 1 to Mr Williams’ statement suggest otherwise.
Issues for determination
[60] There are two principal issues for determination by the Commission. Firstly, should a transferring employee’s service with Downer, as argued by the Union, be taken into account by Wambo when determining the quantum of bonus scheme payment to be made. Secondly, what quantum of bonus scheme payment should be paid on the anniversary of the Agreement? In determining this application, I have considered all the evidence and submissions put by the parties.
Does service with Downer count as service with Wambo?
[61] Payments under the bonus scheme are governed by a set of 12 Principles. Principle 3 relevantly states:
Where an employee commences employment with (Downer) after the making of the Agreement, they will become eligible for payment of the Loyalty Bonus on their anniversary date (within the nominal term of the Agreement).
[62] Accordingly, those employees engaged by Downer at or before the making of the Agreement, an employee engaged for example, on 1 December 2011, would not become eligible for a bonus scheme payment until 1 December 2012 and 2013 had the mining contract continued.
[63] The Union considers that s.22(5) of the Act required a transferring of employee’s service with Downer to be counted as service with Wambo for the purpose of administering the bonus scheme. In that regard, the Union argued that s.22(5), When service with one employer counts as service with another employer, provides where a transfer of employment from Downer to Wambo occurs, the relevant period of service with Downer counts as service for that employee with Wambo. 44 The Union further contended that s.22(5), supports its claim that service with Downer is to be regarded “as service with (Wambo) in the global sense.”45
[64] However, the legislative note under s.22(5) states that where the second employer is not an associated entity of the first employer, it may decide not to accept a transferring employee’s previous period of service for the purpose of annual leave and redundancy pay applicable under the NES. Moreover, Downer and Wambo are non-associated entities.
[65] In the present case, Downer elected to pay all of its employees a redundancy payment in accordance with Clause 2.4 of the Agreement – a payment that it was required to make because Wambo had decided not to recognise a transferring employee’s service with Downer concerning annual leave and redundancy as provided by ss.91(1) and 122(1) of the Act. As such, transferring Downer employees commenced work with Wambo as “new starters”.
[66] As a matter of construction, it must therefore follow that s.22(5) cannot require an employer to recognise service for the purposes of conferring a benefit outside of those established under the NES, such as the bonus scheme. The application of s.22(5) is restricted to a situation where there is a transfer of employment and the second employer elects to recognise the employee’s service with the first employer for the purposes of redundancy. Moreover, s.22(6) states that where a transferring employee has already received an entitlement based on service with the first employer, the provisions of s.22(5) do not require that period of service to be counted again when calculating the employee’s entitlements with the second employer. Wambo was not required to recognise a transferring employee’s service with Downer with respect to the NES requirements concerning annual leave and redundancy pay.
[67] The proposition put by the Union that s.22(5) requires Wambo to recognise a transferring of employee’s service with Downer for the purpose of administering the bonus scheme has no legislative support. The provisions of s.22 of the Act do not create an obligation on the employer per se but rather provide a set of definitions concerning the meaning of “service’, “continuous service”, “transfer of business” and the like. Nor does s.22 of the Act require that prior service with Downer be recognised “for all purposes” as contended by the Union. The provisions of s.22(6) clearly prevent “double dipping” and prevents a period of service in respect of an entitlement taken with the first employer from being counted again when calculating the same entitlement of the transferring employee with the second employer. For the sake of further clarity, the Explanatory Memorandum relevantly states at Items 103 and 113 to 115:
103. Clause 22 defines the meaning of service and continuous service in general terms that apply to the Bill as a whole (including the NES), and also in the specific context of identified Divisions of the NES where a particular meaning is required.
…
113 Broadly, these provisions are intended to ensure that an employee’s service-related entitlements under the NES are not affected merely because the employee’s employer changes as a result of a transfer of business, or because the employee’s employer changes within a group of employers who are associated entities.
114. A legislative note under paragraph 22(5)(b) makes clear that this subclause does not apply to a transfer of employment between non-associated entities in relation to the NES annual leave provisions in Division 6 of Part 2-2 of the Bill, or the NES redundancy pay provisions in Subdivision B of Division 11 of Part 2-2 if the second employer decides not to recognise the employee’s service with the first employer.
115. Subclause 22(6) is an ‘anti-double dipping’ provision. Where an employee has taken the benefit of an entitlement and that entitlement was calculated by reference to a period of service with the first employer, then subclause 22(5) does not result in the employee’s period of service with the first employer being counted again when calculating the employee’s entitlements of that kind as an employee of the second employer.
[68] The proposition advanced by the Union that Wambo should recognise a transferring employee’s service for the purposes of the bonus scheme must fail. All such employees were “new starters” on and from 1 April 2013 as contemplated by Principle 3 outlined above. The relevant definitions set out under s.22(5), (6) and (7) do not confer an obligation on Wambo to pay the bonus scheme at the 1-2 year level of $6,500 on the second anniversary of the Agreement as pressed by the Union. Whilst acknowledged by Clause 3.3.8 of the Agreement, there is no evidence to suggest the bonus scheme is a benefit protected or contemplated by s.22 of the Act.
What quantum of bonus payment should be paid on the anniversary of the Agreement?
[69] Given my finding a transferring employee’s service with Downer should not be taken into account when assessing bonus scheme payments, it must follow that the correct quantum of bonus scheme payment due to transferring employees on the second anniversary of the Agreement on 26 August 2013 was the 0-1 rate of $5000. The correct payment to be made on the third anniversary of the Agreement on 26 August 2014 is the 1-2 year rate of $6500. These proceedings are now concluded.
COMMISSIONER
Appearances:
For the applicant, Mr K Endacott, Construction, Forestry, Mining and Energy Union, Northern Mining and NSW Energy District.
For the respondent, Mr D Williams, Minter Ellison Lawyers.
1 [2013] FWC 1825
2 Exhibit 1 - witness statement of Mr Robin Williams
3 Ibid at para 11
4 Ibid at para 14
5 Ibid at para 21
6 Transcript at PN118-123
7 Ibid at PN163
8 Ibid at PN161-164
9 Ibid at PN166
10 Ibid at PN170
11 Exhibit 2 at para 5
12 Ibid at para 6
13 Ibid at para 8
14 Ibid at para 14
15 Ibid at para 12
16 Ibid at para 16
17 Ibid at para 19
18 Ibid at para 20
19 Ibid at para 21
20 Exhibit 1, RW-5
21 Transcript at PN240 and 247
22 Ibid at PN272-274
23 Ibid at PN279-281
24 Ibid at PN287-290
25 Ibid at PN309
26 Ibid at PN381-387
27 Ibid at PN403
28 Written Submissions – Applicant at para 12
29 Transcript at PN370-371
30 Exhibit 1
31 Transcript at PN312
32 Ibid at PN 317
33 Written Submissions - Respondent at paras 4-5
34 Ibid at para 7
35 Ibid at para 14
36 Ibid at paras 10-11
37 Ibid at para 14
38 Ibid at para 18
39 Ibid at para 18
40 Ibid at para 18
41 Ibid at para 19
42 Transcript at PN450
43 [2012] FWAFB 3994 at [5]-[9]
44 Ibid at PN354-359
45 Ibid at PN309
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