Detmold Packaging Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (AMWU)

[2011] FWA 8301

[2011] FWA 8301

FAIR WORK AUSTRALIA

STATEMENT AND

RECOMMENDATIONS

Fair Work Act 2009
s.739—Dispute resolution

Detmold Packaging Pty Ltd
v
Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (AMWU)
(C2011/983)

DETMOLD PACKAGING (SA) ENTERPRISE AGREEMENT 2010
(ODN AG2010/13455)  [AE880420]

Graphic Arts
COMMISSIONER HAMPTON	ADELAIDE, 9 DECEMBER 2011

Dispute relates to calculating annual leave entitlements given unique RDO provisions of agreement - parties seeking recommendation as part of agreed conciliation process - whether present operation of agreement is consistent with its terms and the minimum standards provided by the NES.

[1] This is an application by Detmold Packaging Pty Ltd (Detmold or the employer) pursuant to s.739 of Fair Work Act 2009 (the Act) for the resolution of a dispute relating to an enterprise agreement. That agreement is the Detmold Packaging (SA) Enterprise Agreement 2010 (the Agreement). 1

[2] The Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (the AMWU or the Union) is covered by the Agreement and is a party to this application representing relevant employees.

[3] Appendix 4 Dispute Settlement Procedure of the Agreement contemplates that Fair Work Australia may assist the parties to resolve a dispute about its application including through mediation and conciliation. 2

[4] At a conference conducted on 29 November 2011 both parties confirmed an understanding that in the circumstances of this case, Fair Work Australia would be requested to consider the matter and provide a recommendation that could be used by the parties to resolve the dispute. Having regard to that position and the circumstances of the matter, I consider that this approach is appropriate.

[5] In reaching my views on the matter I have been assisted by the constructive contributions of Mr Luke and Ms Gurry (who appeared with permission) and Mr Jefferies for Detmold and Mr Hardie, Mr Larner and Mr Tatyzo for the AMWU. I add however that I have not heard formal submissions or evidence as would be necessary for the Tribunal to formally determine this matter.

The issue in dispute

[6] The matter relates to the accumulation (and payment) of annual leave entitlements for a group of employees under the Agreement. In particular, the issue is how the annual leave entitlements for the production, warehousing and services employees are to be calculated given the particular rostered day off (RDO) arrangements applying under the Agreement.

[7] The Agreement is relevantly in the same terms as previous agreements going back some years. It is designed to be read in conjunction with the terms of the Graphic Arts General Award 2000 (as standing on 1 March 2006) (the Award). Indeed, clause 3.11 of the Agreement incorporates the terms of the Award, which are to be applied with the explicit Agreement provisions overriding in the event of any inconsistency.

[8] Without overlooking the broader context within the Agreement, the RDO arrangements are most relevantly established by Clause 16.7 b) in the following terms:

“16.7 Flexible Leave Provisions:

...

b) RDO, Flexibility Arrangements:

The hours of work, shift and RDO arrangements and entitlements for the duration of this Agreement will be as follows:

Production/Warehousing/Services:

(i) Work basic 38 hours pay 35.5 hours, accrue 2.5 hours per week

(ii) 16 RDO’s accrued per calendar year

Maintenance:

(i) Work basic 40 hours, pay 38.0 hours, accrue 2.0 hours per week

12 RDO’s accrued per calendar year

...”

[9] Although the dispute relates only to the first category of employees, the provisions applying to the maintenance employees are also in my view important because they assist in revealing the apparent intention of the Agreement more generally.

[10] The terms of an enterprise agreement cannot operate contrary to the provisions of the National Employment Standards (the NES). 3 The annual leave component of the NES is provided by Division 6 of Part 2-2 of the Act. Section 87 of the Act relevantly provides:

“87  Entitlement to annual leave

Amount of leave

(1) For each year of service with his or her employer, an employee is entitled to:

(a) 4 weeks of paid annual leave; or

(b) 5 weeks of paid annual leave, if:

(i) a modern award applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(ii) an enterprise agreement applies to the employee and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards; or

(iii) the employee qualifies for the shiftworker annual leave entitlement under subsection (3) (this relates to award/agreement free employees).

Note: Section 196 affects whether FWA may approve an enterprise agreement covering an employee, if the employee is covered by a modern award that is in operation and defines or describes the employee as a shiftworker for the purposes of the National Employment Standards.

Accrual of leave

(2) An employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

Note: If an employee’s employment ends during what would otherwise have been a year of service, the employee accrues paid annual leave up to when the employment ends.

....”

[11] Section 90 of the Act also provides:

“90 Payment for annual leave

(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.

(2) If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.”

[12] The base rate of pay for the purposes of the NES is defined in s.16 of the Act as follows:

“16  Meaning of base rate of pay

General meaning

(1) The base rate of pay of a national system employee is the rate of pay payable to the employee for his or her ordinary hours of work, but not including any of the following:

(a) incentive-based payments and bonuses;

(b) loadings;

(c) monetary allowances;

(d) overtime or penalty rates;

(e) any other separately identifiable amounts.

...”

[13] The Agreement includes an annual leave policy however this does not address any of the relevant issues. The terms of the Award incorporated into the Agreement include clause 7.1 Annual Leave.

[14] The Award provision in clause 7.1.1 establishes the basic entitlement to four weeks leave per year for relevant employees. Clause 7.1.2 of the Award also provides as follows:

“7.1 ANNUAL LEAVE

7.1.1 When and how much annual leave is an employee entitled to?

Employees other than casuals are entitled to four weeks paid annual leave at the end of each year of continuous service. Year will include the period of leave.

7.1.2 What are the pay rates for annual leave?

7.1.2(a) Employees before going on leave will be paid their wages for the period of leave. The pay will be at the rate prescribed by 5.1.1 for the occupation in which the employee was ordinarily employed immediately prior to the commencement of their leave, unless the employee was being paid a higher wage, when it will be that higher wage. A wage will not be so computed as to include overtime. In addition, employees other than shift workers will receive a loading of 17.5%.

7.1.2(b) Where an employee is a shift worker and would have received a shift allowance as prescribed by 6.2.3 had the employee not been on annual leave during the relevant period, then that shift allowance will be added to the rate of wage prescribed by 7.1.2(a) instead of the 17.5% loading.”

[15] Clause 7.1.11 of the Award provides relevantly as follows:

“7.1.11(a) Except for the following absences, any absences from work are not to be taken into account and will not count as time worked in calculating the leave entitlement:

• in a twelve months period the employee is entitled to have off up to 152 ordinary working hours because of sickness or accident and this will be counted as time worked (i.e. workers compensation leave, paid sick leave, paid carer’s leave).

• long service leave, annual leave, public holidays, paid bereavement leave, paid training leave and jury service taken by an employee will count as time worked.

• any interruption or termination of the employment by the employer which has been made with the intention of avoiding obligations under this subclause.

7.1.11(b) Absences from work which do not count as time worked in calculating the leave entitlement but do not break continuity of service for the purpose of this award include:

• Any absence with reasonable cause, proof of which will be upon the employee.



• Any leave without pay taken with the agreement of the employer.



• Parental leave.




...”

[16] I note that as the incorporated award provisions are drawn from the March 2006 version, the Australian Fair Pay and Conditions Standards operating after that time are not relevant. 4

The current approach as applied by Detmold

[17] At present, the relevant employees are entitled to four weeks of annual leave but accrue 142 hours of such leave per year. That is, the accrual is based upon 35.5 hours per week. Annual leave loading is however based upon 38 hours per week.

[18] I also understand that the accrual of RDOs continues in a period of annual leave with 7.6 hours being deducted (from the leave accrual) for each day of such leave and .5 of an hour being re-credited to the RDO bank.

[19] It is acknowledged by both parties that the above approach has been adopted by Detmold since the introduction of the concept set out in clause 16.7 of the Agreement, in 2006. It is also evident that the implications of that approach may not, perhaps understandably, have been fully appreciated by some of the employees until earlier this year.

The contentions of Detmold

[20] Detmold contends that the production/warehousing/services employees are working an average of 35.5 ordinary hours per week in order to achieve the requisite 16 RDOs per year. This produces an annual leave entitlement of 142 hours per year, being 20 days at 7.1 hours per day.

[21] The employer does not accept the AMWU proposition that the employees are, in effect, purchasing additional RDOs, but rather contend that the actual ordinary hours of work are 35.5 per week for these employees.

[22] In terms of the Award, Detmold contends that RDOs are in effect unpaid absences and as such they do not count as service pursuant to clause 7.1.11.

The contentions of the AMWU

[23] The AMWU contends that the employees work 38 hours per week and this should be considered to be their ordinary hours of work for all purposes, including the NES.

[24] In effect, it is said that the employees have purchased additional RDOs and this should not lead to a reduction in their annual leave entitlements.

[25] Further, the AMWU contends that under clause 7.1.11 of the Award, RDOs should not be excluded from the calculation of service for the purposes of annual leave.

How should the Agreement be applied?

[26] The application of the terms of the Agreement is not without difficulty. Indeed, both approaches taken by the parties in this matter are more than arguable.

[27] The primary consideration in this matter is the appropriate construction of the Agreement. In that context, the approach of the High Court in Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 as applied in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Telstra Corporation [2007] FCA 1515 and Kucks v CSR Ltd (1996) 66 IR 184 is apposite.

[28] As a result, I am obliged to take a purposive approach having regard to the whole of the particular clauses and to the Agreement as a whole. Further, a narrow or pedantic approach is not to be taken. The intention of the framers of the document is to be ascertained objectively, bearing in mind that they are likely to have been people of a practical bent of mind. Their intention may well have been expressed in ways likely to have been understood in the relevant industry, rather than in “legal niceties or jargon”.

[29] In making recommendations in this matter I am at least initially attempting to ascertain and give effect to the apparent objective intention of the parties when making their agreement. That intention must also be guided by the framework and operation of the Act.

[30] In that light, in this case, the terms of the Agreement, which are to be drawn from both its express and imported provisions, are to be applied provided they do not contravene the NES. In effect, this means that the apparent intention of the Agreement should be applied unless it is less beneficial to the employees than the application of the relevant elements of the NES.

[31] The NES relevantly requires that annual leave accruals are based upon the employee’s ordinary hours of work and the leave must be paid at the base rate of pay. The base rate of pay again relies upon the concept of ordinary hours of work.

[32] The award based provision establishes four weeks of annual leave based upon years of continuous service but does in clause 7.1.11 indicate that absences from work are not to be taken into account, except for various forms of paid leave. It is however relevant that the Award is based upon a 38 ordinary hour week for full-time employees and in my view it is not the intention of clause 7.1.11 to treat RDOs as absences from work for present purposes. If that approach was applied more generally, this would lead to different accruals of annual leave depending upon the form of averaging applied to achieve the 38 hour week. That is, both with a 7.6 hour day and an RDO each four weeks, an average of 38 ordinary hours per week is worked. However, if the RDO is treated as an absence for present purposes, there would be less accrual of annual leave in that case. This would be an unfair and unlikely intended approach by the award makers.

[33] On that basis, it is necessary to consider what the ordinary hours of work are for the employees concerned given the particular terms of this Agreement. It is insightful to note that clause 16.7 b) of the Agreement for the maintenance employees provides a “work basic” of 40 hours, “pay” for 38 hours and the accrual of 2.0 hours per week towards 12 RDOs per year. This is a standard 38 hour per week RDO concept where (generally) 40 hours are worked over three weeks with an RDO being due in the fourth week. The concept of “work basis” in this provision does not refer to the ordinary hours; rather it refers to the hours that are worked when an RDO is not taken. The ordinary hours of work are in fact 38, which are described as being those hours that are “paid”.

[34] It is evident that the same formulation of words in clause 16.7 b) for the production/warehousing/services employees strongly implies that the ordinary hours of work in their case are 35.5 hours per week. That is, without the taking of RDOs, the employees work 38 hours per week however, when the 16 RDOs are taken into account, the ordinary hours of work become an average of 35.5 per week.

[35] This is consistent with the current practice and would not appear to contravene the NES as the accrual and payment of the annual leave is based upon the ordinary hours of work for these employees.

[36] I do however recognise that the present deduction for each day of annual leave taken, of 7.6 hours, with .5 being accrued for an RDO, is not strictly necessary. That is, the accumulation of 16 RDOs per year is not dependent upon having the RDO accrual operating during the period of annual leave and on that basis, only 7.1 hours would need to be deducted from the annual leave accruals for each day of such leave. Whilst this practice could be reviewed, the current arrangement as a package does not in fact disadvantage the employees. Indeed, the combined effect of these provisions is to grant slightly more than the required 16 RDOs in a year.

[37] Further, the calculation of annual leave loading is presently based upon a full 38 hours per week. This is not expressly required by the Agreement and I have considered the fact that this is, of itself, more consistent with the approach urged by the AMWU. However, as alluded to above, its effect is to avoid any potential disadvantage to employees that might arise from the deduction of 7.6 hours (with .5 of an hour re-credited to the RDO bank) for each annual leave day taken. In that context, the approach to the payment of leave loading is not decisive, or inappropriate.

[38] I have considered whether the present approach has unintended “knock on” effects. Nothing has been suggested in that regard and I note that Clause 18 Personal/Carer’s Leave expressly establishes an entitlement to 76 hours/10 days of such leave. I note that this provision applies to all relevant employees, including the maintenance employees who work a traditional RDO based 38 hour week, and is not therefore necessarily indicative of the intent of the instrument in relation to the ordinary hours of the production, warehousing and services employees more generally. There is also nothing in the balance of clause 16 of the Agreement, or elsewhere in the instrument, that makes the present approach problematic.

[39] As discussed above, the alternative approach adopted by the AMWU is clearly arguable. In particular, the award provisions drawn into the Agreement are clearly based upon the concept of a 38 hour week. However, the express provisions of clause 16.7 of the Agreement in relation to the RDOs are strongly supportive of an alternative intention with respect to the establishment of ordinary hours for the production, warehousing and services employees.

[40] Given that the more natural and consistent application of the Agreement’s terms is in line with the ordinary hours for present purposes being treated as being 35.5 per week, and the present practices and approach were in operation at the time that this and the previous agreement were approved by the employees and the relevant Tribunals, including this arm of Fair Work Australia, I do not consider that I should recommend a change in the present overall approach.

[41] I do also accept that the concept of treating the additional RDOs for these employees in the same manner as purchased leave, and thereby maintaining a full 38 hour per week based annual leave entitlement, has merit and this may be considered by the parties when the next enterprise agreement is negotiated. This may however also involve a review of the apparent “over-agreement” practices that have been adopted as part of the existing RDO and annual leave arrangements for the relevant employees.

RECOMMENDATION

THAT the parties further assess their stance in the light of the above observations and confirm their positions to each other and Fair Work Australia at the earliest opportunity.

[42] Liberty to apply the have the matter relisted has been granted to both parties.

COMMISSIONER

 1   I approved the Agreement pursuant to the Act on 31 August 2010.

 2   The dispute settlement procedure also permits FWA to arbitrate the matter.

 3   S.55 and s.56 of the Act.

 4   The AFPCS operated under the Workplace Relations Act 1996 after 30 March 2006.

Printed by authority of the Commonwealth Government Printer

<Price code C>, AE880420  PR517351>