CPSU, the Community and Public Sector Union v Parks Victoria

[2014] FWC 5613

[2014] FWC 5613

FAIR WORK COMMISSION

DECISION

Workplace Relations Act 1996
s.699 - Application to FWC to have a dispute resolution process conducted (Div 3)

CPSU, the Community and Public Sector Union
v
Parks Victoria
(DR2013/230)

Local government administration
DEPUTY PRESIDENT SMITH	MELBOURNE, 18 AUGUST 2014

Retrospective operation; equity considerations, mutual intention.

[1] Mr Derek Somers is a Field Services Officer with Parks Victoria (Parks) at the Olinda Work Centre. He has been employed since 2008. In October 2012, Mr Somers was notified that a preliminary investigation would take place on an incident which occurred on 25 August 2012 to determine whether or not a disciplinary investigation was required. On 7 December 2012, Mr Somers received a letter 1 in which it informed him that he had breached the Code of Conduct for Victorian Public Sector Employees and that he would be given a verbal warning. This was the extent of the action taken against him.

[2] However, these events then resulted in a letter to Mr Somers dated 25 October 2013 advising him that he would not be eligible for salary progression “due to proven misconduct during the course of this performance cycle.” 2 The finding made against Mr Somers on 7 December did not use the word misconduct rather it stated that he had breached the Code of Conduct. I note that a breach of the Code of Conduct is considered to be misconduct.

[3] Between the time of the decision to give Mr Somers a verbal warning and the assessment for salary progression in the performance cycle, the Parks Victoria Workplace Determination 2013 [AG400010](the Determination) had replaced the Parks Victoria Agreement 2008 [AC328236] (the Agreement) and there were more criteria for assessing salary progression. At the time of the verbal warning, it is said that it was not open to Parks to determine that Mr Somers should miss a salary progression and it was only the operation of the Determination which appeared to create this benefit for the employer.

[4] The Community and Public Sector Union (CPSU) made an application in December 2013 for the Commission to deal with a dispute dealing with the decision of Parks in not granting Mr Somers salary progression. In the proceedings the CPSU was represented by Ms A Spencer and Parks by Ms N Mudditt of Counsel (with permission).

[5] This is the background to a dispute about the proper operation of the Determination and the interrelationship if, any, of the Agreement under which Mr Somers received a verbal warning. Regrettably conciliation failed and the matter was listed for hearing on 27 May 2014.

The Relevant Instruments

[6] There are two instruments which need to be appreciated in this dispute as a starting point to examining the matter. The first is the Agreement and the second is the Determination.

Under the Agreement, there are no disciplinary provisions. Disciplinary action is taken through policies adopted by Parks. Progression within a grade is governed by clause 7.5.1 which provides:

“(a) Progression within the classification and salary structure is not automatic, consistent with wage fixing principles. Rather, progression by the specified amount within a Grade (or Level within Grade 2) occurs when an employee is assessed at his/her annual performance review as having met agreed performance criteria in accordance with Clause 7.8.

(b) Progression amounts (or steps) within a Grade are not points of defined work value.

(c) Progression amounts are expressed in terms of dollars (ie; not a percentage) and are common to all employees within a given Grade, or Level within Grade 2. Refer to Schedule 1 for the applicable progression amount for each Grade, for each of the financial years specified in Clause 7.8.

(d) Within Grades 1 to 7 “performance-based” progression is by the specified progression amount for the Grade up to the ceiling of the work value range

(e) Within Grade 8, unless the Senior Officer has entered into an AEA that has an alternative performance pay regime pursuant to clause 5.6.4, performance pay is by the specified progression amount up to the ceiling of the work value range.”

[7] Relevantly in this case progression is achieved when the employee meets agreed performance criteria established in accordance with clause 7.8 of the Agreement. Clause 7.8 provides:

“(a) Parks Victoria recognises the mutual benefits of a structured Performance and Development Program to both the organisation and its employees. The Program’s objectives are to enhance employees’ capacity and achievement of their potential; and to simultaneously improve the efficiency and output of Parks Victoria by linking the organisation’s Vision, Values and Corporate Plan to the behaviour and performance of each employee over a 12 month review period.”

[8] Clauses 7.8.2 (2)(a),(c) & (d) are particularly instructive in this case. They provide:

...“(2)(a) Where an employee’s substantive salary is within the salary range of his/her Grade performance pay will be in the form of an increase in substantive salary (via a “progression step” as described in Clause 7.5.1 and 7.5.2”

...“(c) Performance pay will be effective from the start of the first pay period on or following each of the following dates: 1 July 2008; 1 July 2009; and 1 July 2010. Subject to the following requirements being met:

(i) Employees collectively have made a substantial contribution to the successful outcome of the Parks Victoria Business Plan for the financial year, as determined by the Chief Executive.

(ii) The employee individual has satisfactorily met both the performance targets and job behaviours described in his/her Work Plan for the year.”

...“(d) An employee will be ineligible for the performance pay applying to any of the financial years described if:

(i) Any required job behaviours were inconsistently displayed over the applicable period; or

(ii) The agreed performance targets in the Work Plan were only partially met.

[9] It was open to Parks to make Mr Somers ineligible for a progression step if “any required job behaviours were inconsistently displayed over the applicable period.” This was not the sanction imposed upon Mr Somers after he had been found to have breached the VPS Code of Conduct. The letter written on 7 December 2012 advised Mr Somers:

“As there seems to be a lack of evidence available relating to information and training around the role of authorised officers and non authorised and following the findings and mitigating circumstances, the outcome will be that you are given a verbal warning and must attend training on role of authorised officers, in particular the issuing of infringement notices and the collection of evidence” 3

[10] The Determination provides a clearer avenue to withholding salary progression and provides in clause 7.4.1(b)(vii) which provides:

“An Employee will be eligible to access progression if an Employee has been in his or her role for i3 months or more, except in the following circumstances:

1. has been appointed on probation under clause 5.6.11 and has been in his or her role for less than 6 months at the time the performance review is undertaken;

2. has completed a formal underperformance process or is subject to one under clause 5.13 during the performance cycle,

3. is subject to proven misconduct in accordance with clause 5.12 during the course of the performance cycle, or

4. is already at the ceiling of their grade classification.”

[11] It can be seen that Parks relies upon clause 7.4.1(b)(vii)(3) which now refers to a disciplinary process contained in the Agreement at clause 5.12. In this connection it argues that the words “in accordance with” should not be taken to apply to the clause as it exists now after the event but whether or not the earlier process was in conformity with the clause. I shall return to this aspect later.

Consideration

[12] This is not the usual dispute about the operation of an Agreement. The tests are well known [Kucks v CSR Ltd (1996) 66 IR 182]. The language appears plain in both the Agreement and the Determination. This is more about what might be inferred to be the mutual intention of the parties and matters of equity and procedural fairness.

[13] Simply stated the facts are these:

1. Mr Somers was found to have breached the VPS Code of Conduct on 7 December 2102
2. The outcome determined by Parks was that he was given a verbal warning. In the scheme of disciplinary processes, although serious, this is at the lower end.
3. The Agreement which applied at the time did not contain a disciplinary process but there was an internal appeal mechanism
4. Mr Somers accepted the outcome and did not lodge an internal appeal. He submits that he would not have done so if the outcome had been more serious.
5. A Determination was made by a Full Bench on 1 March which decided a number of questions but many agreed items were put in place. The new disciplinary process and salary progression were “agreed” items

[14] I turn firstly to consider the broad concept of the mutual intention of the parties. In CPSU v Telstra and others [PR954989], a Full Bench discussed the issue of mutual intention of the parties in the context of ambiguity:

“[32] The objectively ascertained mutual intention of the parties at the time the Agreements were made is clearly relevant to the exercise of the discretion23. So much is common ground between the parties. Vice President Lawler held that “an application of the principles in Codelfa does not permit a finding that, ascertained objectively, all the parties mutually intended the Increase Date definitions to have one or other of the competing meanings.” Telstra contends that his Honour was wrong in so concluding.

[33] The judgment of the High Court in Codelfa Construction Pty Ltd v State Rail Authority of NSW established widely accepted principles for resolving ambiguity in contracts. In that case Mason J stated the rule thus:

“The true rule is that evidence of surrounding circumstance is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.”

[34] In BP Australia Pty Ltd v Nyran Pty Ltd, Nicholson J distilled, by reference to Codelfa, the following points of principle for resolving ambiguity in contracts:

● it is necessary firstly to determine whether the contract has a plain meaning or contains an ambiguity;
● if the contract has a plain meaning, evidence of surrounding circumstances will not be admissible to contradict the language of the contract;
● if the language of the contract is ambiguous or susceptible of more than one meaning evidence of surrounding circumstances is admissible to assist in the interpretation of the contract;
● the concept of surrounding circumstances is to be understood to be a reference to the objective framework of facts. It will include:
○ evidence of prior negotiations so far as they tend to establish objective background facts known to both parties and the subject matter of the contract;
○ facts so notorious that knowledge of them is to be presumed;
○ evidence of a matter in common contemplation and constituting a common assumption.

[35] After referring to the foregoing points of principle Nichlson J continued as follows:

“From the evidence of that setting the parties’ presumed intention may be taken into account in determining which of two or more possible meanings is to be given to a contractual provision. What cannot be taken into account is evidence of statements and actions of the parties which are reflective of their actual intentions and expectations. Objective background facts can include statements and actions of the parties which reflect their mutual actual intentions. That is, evidence of the mutual subjective intention of the parties to a contract may be part of the objective framework of facts within which the contract came into existence. It is the mutuality which makes the evidence admissible.”

[36] What is clear from these principles of construction of contracts is the resolve of the Courts to give effect to the contract once it is established that the parties intended to be bound by their agreement. And Courts will impute a common intention by reference to the terms of a contract and the surrounding circumstances. In the absence of mutual intention, imputed or actual, the agreements must fail for frustration. In this regard reference may be had to the words of McHugh JA in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd:

“[T]he decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances. If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction.”

[37] The point was made even more forcefully by Hand J in Hotchkiss v National City Bank:

“A contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If, however, it were proved by twenty bishops that either party when he used the words intended something else than the usual meaning which the law imposes on them, he would still be held, unless there were mutual mistake or something else of the sort.” [citations omitted]

[15] It is apparent to me that the clause 7.4.1(b)(vii)(3) of the Determination with its reference back to clause 5.12 is capable of more than one meaning. It could have the meaning submitted by Parks or a meaning which required implementation of the terms of the disciplinary procedures contained in the Determination before action could be taken to forfeit a progression point. This later point is arguable in the circumstances where the clause did not exist in the Agreement but arrived for the first time in the Determination.

Therefore what were the surrounding circumstances?

[16] It was the evidence of Mr Price for the CPSU that in the negotiations it was the aim of the union to provide a disciplinary process in the industrial instrument rather than leaving these matters to the policy of Parks. It was the intention to expressly link the disciplinary process in the agreement to the issue of progression. It is clear from the evidence that the CPSU saw strict compliance with a process in an industrial instrument as the only basis upon which a progression could be forfeited.

[17] The evidence of Mr G Mead for Parks was that it intended to “raise the bar” for progression during a performance cycle and that it needed to provide demonstrable productivity savings to generate wage increases. Mr Mead’s evidence was that Mr Somers performance cycle fell during the operation of the Determination and as a consequence it applied to him by denying him access to a progression point given the finding made against him.

[18] There are three other factors which I take into account which were notorious in Victorian Public Sector bargaining. They are:

● The Victorian Government would not accept any productivity achieved in the past by its employees as a basis for wage increases in the future.
● Any increase in wage outcomes beyond the 2.5% must be based on future and bankable productivity savings.
● There would be no retrospectivity in any agreement.

[19] I pause to again note that this is not an agreement but a Determination although many aspects reflect the agreement of the parties.

[20] A number of observations can be made at this stage. The penalty sought to be visited upon Mr Somers is as a consequence of past conduct for which an outcome had already been determined. A denial of a progression point does not relate to productivity in this case because it is a past occurrence - it is no more than a cost saving. The implementation of the new clause might impact upon productivity in the future if employees are aware of the consequences of their actions, but in this case the consequences of Mr Somers actions were determined and to deny him a progression now cannot related to productivity but simply cost cutting.

[21] Whilst I accept that the assessment of Mr Somers is in the current cycle, its consequence is to put in place a retrospective penalty against Mr Somers of which he was not aware at the time. There is an issue of procedural fairness involved. It is not an answer to argue that he did not progress an appeal against the decision to give him a verbal warning as the penalty proposed against him now was not known at the time. It has the effect of retrospective application something which the Victorian Government had strongly put its face against in the bargaining with employees. This proposed action seeks to revisit a decision already taken and to impose an additional sanction without any ability for Mr Somers to consider his options about the original outcome.

[22] Against this background I am of the view that the proposed action by Parks to revisit the outcome without any consequential ability for Mr Somers to do the same, is inequitable.

[23] These are all matters which go to how the Commission should objectively consider the proper operation of the Determination in this matter. I cannot find that the parties intended clause 7.4.1(b)(vii)(3) to operate in the absence of the specific terms of clause 5.12. In this context I do not accept that the reference to clause 5.12 in clause 7.4.1(b)(vii)(3) is to be read so broadly so as to import earlier policy documents of Parks. In reaching this conclusion I am not preferring a narrow or pedantic approach, but one which accords more with all the circumstances of this case.

[24] It follows that I find that as clause 5.12 of the Determination was not applied then there is no basis for withholding a progression point from Mr Somers under clause 7.4.1(b)(vii)(3).

DEPUTY PRESIDENT

Appearances:

Hearing details:

Final written submissions:

 1   Exhibit CPSU 1 attachment B

 2   Ibid: attachment C

 3   Ibid attachment B

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<Price code C, AG400010  PR554367>