F W Hercus Pty Ltd v Sutton, N R
[1994] FCA 13
•27 JANUARY 1994
F. W. HERCUS PTY LTD v. NATHAN RICHARD SUTTON
No. SI12 of 1993
FED No. 13/94
Number of pages - 8
Industrial Law
COURT
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIAN DISTRICT REGISTRY
INDUSTRIAL DIVISION
VON DOUSSA J
CATCHWORDS
Industrial Law - Award breach - proper interpretation of award - whether severance pay due on redundancy of employee - meaning of "period of continuous service" - whether period served as an apprentice to be included
Metal Industry Award 1984, clauses 6 and 42
Bell v Gillen Motors Pty Ltd (1989) 24 FCR 77 followed
HEARING
ADELAIDE, 20 September 1993
#DATE 27:1:1994
The appellant appeared in person by its director Mr P Hercus
Counsel for the respondent: Mr J Weatherill
Solicitor for the respondent: Mr D Prendergast
ORDER
THE COURT ORDERS THAT:
1. The order of the Industrial Magistrate be varied so as to increase the sum awarded to $3,887.60 (to allow for additional interest from the date of the said order).
2. The appeal in all other respects be dismissed.
3. No order as to costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
VON DOUSSA J This is an appeal brought under s56 of the Industrial Relations Act 1988 from the order of an Industrial Magistrate (Mr Cunningham I.M.) made in the Industrial Court of South Australia on a summons laid under s15(1)(d) of the Industrial Relations Act 1972 (SA) seeking the imposition of a penalty and recovery of an underpayment of an amount which the respondent claimed was due to him under the redundancy provisions of the Metal Industry Award 1984 ("the Award"). The learned Industrial Magistrate found there had been an underpayment and ordered that the applicant recover $3,737.60 being a sum equal to eight weeks pay together with interest. No penalty for breach of the Award was imposed as the Industrial Magistrate considered there had been a genuine dispute over the interpretation of the Award. Before this Court the appellant has again contended that on the proper construction of the Award no payment was due to the respondent. There is no cross-appeal against the order refusing the imposition of a penalty.
The essential facts are straight forward. The respondent carries on business in South Australia as a machine tool manufacturer and gear specialist. The respondent became an indentured apprentice to the appellant on 14 January 1987. The period of apprenticeship was four years. From 14 January 1991 the respondent was employed by the appellant as a tradesperson. On 6 December 1991 in consequence of a downturn in the appellant's business the respondent was retrenched. He was paid three weeks in lieu of notice together with accrued annual leave, and his employment was terminated forthwith.
The respondent contended in the Court below that there had been an underpayment under sub-clause 42(c) of the Award. That sub-clause provides:
"Severance pay
(c) In addition to the period of notice prescribed for ordinary termination in subclause 6(d), and subject to further order of the Commission, an employee whose employment is terminated for reasons set out in paragraph 42(a)(i) hereof shall be entitled to the following amount of severance pay in respect of a continuous period of service:
Period of continuous service Severance pay 1 year or less nil 1 year and up to the completion
of 2 years 4 weeks' pay 2 years and up to the completion
of 3 years 6 weeks' pay 3 years and up to the completion
of 4 years 7 weeks' pay 4 years and over 8 weeks' pay 'Week's pay' means the ordinary time rate of pay for the employee concerned.
Provided that the severance payments shall not exceed the amount which the employee would have earned if employment with the employer had proceeded to the employee's normal retirement date."
There was no "further order of the Commission" which varied the operation of sub-clause 42(c) in the circumstances of this case. It is common ground that the respondent's job had become redundant so that his employment was terminated for the reasons set out in paragraph 42(a)(i) (which operates where the "employer no longer wishes the job the employee has been doing done by anyone and this is not due to the ordinary and customary turnover of labour...").
The respondent has claimed throughout that his "period of continuous service" within the meaning of sub-clause 42(c) was from 14 January 1987 to 6 December 1991, nearly five years, so as to attract an entitlement of eight weeks pay in addition to the period of notice prescribed for ordinary termination in sub-clause 6(d).
The appellant, by leave, has presented its case through its director Mr P Hercus. The appellant has contended that the time during which the respondent was an indentured apprentice should not be included as part of his continuous service. The Award, it is contended, treats that period as a separate one, and that for the purpose of clause 42 the respondent's "period of continuous service" commenced on 14 January 1991. His relevant period of continuous service was therefore less than one year, and no severance pay became due to him.
The appellant's argument is based on paragraph 42(k)(i) which provides:
"Employees exempted
(k) (i) This clause shall not apply where employment is terminated as a consequence of conduct that justifies instant dismissal, including malingering, inefficiency or neglect of duty, or in the case of casual employees, apprentices, or employees engaged for a specific period of time or for a specified task or tasks."
The appellant contends that the statement in paragraph 42(k)(i) that clause 42 does not apply "in the case of ... apprentices" has the effect for which it contends. The appellant argues that this follows clearly from the ordinary meaning of the words used. Even if this is not so, there is ambiguity such that it is permissible to consider the reasons of the Full Bench of the Australian Conciliation and Arbitration Commission in the Termination, Change and Redundancy Case Decision handed down on 14 December 1984, (1984) 294 CAR 673. It is common ground that clause 42 had its genesis in that decision. The appellant contends that it is significant that the Commission did not insert into the Award a clause with like effect to sub-clause 5(2) of the Metal Industry (Long Service Leave) Award 1984 which provides:
"5(2) Where an employee has entered or enters into a contract of employment with an employer within a period of twelve months after the completion of an apprenticeship with the employer the period of apprenticeship shall be taken into account for the purpose of calculating the period of his service with that employer under that contract of employment."
Moreover as there is ambiguity in the language of paragraph 42(k)(i) clause 42 should be construed strictly in favour of the employer as the severance pay prescription is a penalty imposed by law on the employer. Finally it is contended that the interpretation which the applicant seeks to give to the Award is a common sense one that will encourage employers to keep on former apprentices after the expiration of their apprenticeship, whereas the interpretation adopted by the Magistrate, allowing, as it were, credit for four years' service on the first day of employment under a contract of service to a former apprentice who is kept on by the employer, will act as a substantial disincentive.
The Magistrate in reaching his decision applied the reasoning of Wilcox J in Bell v Gillen Motors Pty Ltd (1989) 24 FCR 77. That decision concerned the interpretation of The Vehicle Industry - Repair, Services and Retail - Award 1983 in respect of the period of notice required to be given to an employee who had his indentures of apprenticeship with another company (Donnelly Datsun Pty Ltd) transferred to the respondent on 1 February 1983. The period of apprenticeship ended on 3 December 1984. Thereafter the employee was employed, without any interruption in his activities, as a tradesperson. On 12 May 1986 the respondent company gave notice that it intended to terminate the employee's service. The question in issue was the length of notice required to be given under sub-paragraph 6(d)(i)(1) of that Award. That sub-paragraph is in precisely the same terms as sub- paragraph 6(d)(i)(1) of the Metal Industries Award. Clause 6 dealt with the "contract of employment". The sub-paragraph read:
"(d)(i)(1) In order to terminate the employment of an employee the employer shall give to the employee the following notice: Period of continuous service Period of notice Less than 1 year 1 week 1 year and up to the completion of
3 years 2 weeks 3 years and up to the completion of 5 years 3 weeks 5 years and over 4 weeks"
It was held that the period during which the employee served the employer as an apprentice, being a period immediately prior to service as a tradesperson, was to be included in the calculation of the period of continuous service.
The appellant has sought to distinguish the decision of Bell v Gillen Motors Pty Ltd on the ground that it dealt with the requirement for notice on termination, not with severance pay. Counsel for the respondent however contends that the reasoning of Wilcox J applies directly to the Metal Industries Award; that the Magistrate was correct to apply the decision; and that this Court should follow it.
It will be noted that in the present case the respondent was paid three weeks wages in lieu of notice. For the purpose of sub-paragraph 6(d)(i)(1) it seems that the respondent's "period of continuous service" was treated as "3 years and up to the completion of 5 years". But the appellant says that "the period of continuous service" under sub-paragraph 6(d)(i)(1) is not the same as the "period of continuous service" under sub-clause 42(c) by reason of the provisions of paragraph 42(k)(i).
In my opinion in the Metal Industries Award the meaning of "period of continuous service" under sub-paragraph 6(d)(i)(1) cannot be distinguished from the meaning of the same words in sub-clause 42(c) on this ground. The argument overlooks that in sub-paragraph 6(d)(i)(5) the Metal Industries Award provides:
"(5) The period of notice in this clause shall not apply in the case of dismissal for conduct that justifies instant dismissal, including malingering, inefficiency or neglect of duty, or in the case of casual employees, apprentices, or employees engaged for a specific period of time or for a specific task or tasks."
This provision, in similar terms to paragraph 42(k)(i), exempts apprentices, amongst others, from the operation of the earlier provision of the clause which creates an entitlement dependant on the concept of the "period of continuous service". Moreover sub-clause 42(c) of the Metal Industries Award specifically refers to the period of notice prescribed for ordinary termination under sub-clause 6(d), and both sub-clauses of the Award were inserted at the same time. In these circumstances it would be very odd if precisely the same expression had different meanings in each of those clauses.
Sub-paragraph 6(d)(i)(6) of the Metal Industries Award goes on to provide:
"(6) For the purposes of this clause, continuity of service shall be calculated in the manner prescribed by subclause 25(e) - Calculation of continuous service of this Award."
These provisions in substance, are the same as sub-clauses 6(d)(i)(7) and 6(d)(i)(10) of the Vehicle Industry - Repair, Services and Retail - Award considered by Wilcox J: see Bell v Gillen Motors Pty Ltd at 80 and 81. Having regard to the similarity, in substance, between the relevant provisions of the Metal Industries Award, and the Vehicle Industry - Repair, Services and Retail - Award, and to the similarity between sub- paragraph 6(d)(i)(5), and paragraph 42(k)(i) of the Metal Industries Award, I consider the reasoning of Wilcox J applies directly to the ascertainment of the meaning of "period of continuous service" in sub- clause 42(c) of the Metal Industries Award. I consider I should follow and apply that reasoning both because I respectfully consider it to be correct, and because of the importance that there be consistency between decisions of single Judges of this Court when construing similar provisions in Awards. I refer in particular to those parts of the judgment reported in Bell v Gillen Motors Pty Ltd at 82-83. At pp 83-84 Wilcox J said:
"In the case of cl 6(d), it seems to me that the better view is that the subclause does not apply to the termination of the employment of an apprentice during the period of the apprenticeship itself. I say this not only because cl 6 deals with the 'contract of employment', a concept which differs from the relationship engendered by an indenture of apprenticeship, but also because there are special restrictions upon the termination of an indenture of apprenticeship, contained in this case in cl 14(d) of the award. I think that those provisions were intended exhaustively to cover the termination of the relationship between an apprentice and a master."
I interrupt the passage to say that clauses 14, 14A and 15 of the Metal Industries Award which deal with apprentices, and in particular sub-clauses 14(e), 14A(b) and 15(d), render this reasoning of Wilcox J applicable here. The passage continues:
"However, whatever may be the position in relation to the termination of an apprenticeship during the course thereof, it does not follow that a past period of apprenticeship should be disregarded for the purpose of computing the 'period of continuous service' of a person who has served as an apprentice and then continued in the service of the ex-master as a qualified tradesman. The award, except for those parts of it which relate to the rights and duties of apprentices and masters during the period of apprenticeship, governs the rights and duties of all employees, including ex-apprentices. In the present case, as is common ground, cl 6(d)(i)(1) applied to the relationship between Mr Simpson and Gillen Motors. The question is, in its application, what did cl 6(d)(i)(1) mean by the words 'period of continuous service'?
As a matter of ordinary English the noun 'service' is apt to describe the relationship of an apprentice to a master."
His Honour then went on to consider an argument that ambiguity arose whether service as an apprentice was to be included in the "period of continuous service", and that the Court should make use of extrinsic materials. The same argument was, in part at least, repeated by the applicant in the present case. Like Wilcox J, I do not think the provisions of the Award give rise to any ambiguity, and furthermore I do not think any support of the applicant's argument arises from the omission of clause 5(2) of the Metal Industry (Long Service Leave) Award 1984 which deals with a different question, namely when discontinuous periods of service should be treated as a continuous period under a contract of service. Here, on any view (and subject to sub-clause 25(e)) the Award provisions under consideration are only concerned with a period of continuous service.
In my opinion paragraph 42(k)(i) does not have the meaning contended for by the appellant. The paragraph says that clause 42 shall not apply in certain defined situations. Relevantly, the clause does not apply "in the case...of apprentices...". The respondent at the date of the termination of his employment was no longer an apprentice. According to its terms paragraph 42(k)(i) had no operation in relation to the termination of his employment. It is impossible, in my view, on any reading of the paragraph to find support for the submission that it has the effect of excluding from the computation of the period of continuous service of an employee, that part of the employee's service which occurred under a contract of apprenticeship. The paragraph, as its heading "Employees exempted" implies, is concerned to exclude particular employees from the benefits of clause 42. The paragraph is not one concerned with the meaning of the expression "period of continuous service".
In my opinion there is no ambiguity arising in the language of the Award in its application to the facts of this case. Whilst the respondent remained an apprentice, clause 42 could have no application to him, nor could sub-clause 6(d). At the completion of his term of apprenticeship the employer was under no obligation to continue to employ him, but if the employer chose to do so under a contract of service (otherwise than as a casual employee, or for a specified period of time or for a specified task or tasks) then the Award by its terms operated to include the time served under the contract of apprenticeship as part of that employee's "period of continuous service" for the purposes of sub-clauses 6(d) and 42(c). It may be that this consequence would provide a disincentive to some employers in times of economic hardship to retain the services of former apprentices, but that fact can provide no justification for departing from the plain meaning of the words used in the relevant provisions of the Award. Even if the words of the Award were ambiguous, it is not correct to characterise the provisions of clause 42, and of sub-clause 42(c) in particular, as a penalty imposed on employers, and from that premise to argue that the provisions of the clause should be strictly construed in favour of the employer. The provisions of clause 42 have the effect of prescribing the terms and conditions under which employees in the Metal Industry are employed. Those terms and conditions have been arrived at in accordance with the procedures laid down in the Conciliation and Arbitration Act 1904 and the Industrial Relations Act 1988. In no relevant sense can those terms and conditions be described as penal provisions. The terms and conditions of employment are not intended to, and do not, operate as a punishment for non-compliance with a statutory or other obligation. The provisions of clause 42 impose certain rights on employees in the event that they become redundant, and corresponding obligations on the employer, but those obligations are not penal in nature.
The appellant sought to equate the present case with a decision of Industrial Magistrate Hardy in the South Australian Industrial Court in Mezzino v CSR Limited (unreported decision, 3 May 1991). In that case an employer retained the services of a former apprentice for a period of three months after his term of apprenticeship expired, but did not further employ him. The employee sought a redundancy payment calculated on the footing that his period of continuous service with the employer dated from the commencement of his apprenticeship. His employment was governed by the Metal Industry Award, but it is clear from the reasons for decision that the main ground for the claim was based on a separate agreement entered into between the employer and the several unions with members working for the employer at its Glanville premises. In the result, the employee's claim failed, but the facts of that case are clearly distinguishable, and the reasons for the decision do not support the appellant's argument. The Industrial Magistrate found that at the end of the period of apprenticeship the employee was engaged for a fixed period of three months. When that fixed period expired no further contract of service was offered by the employer. It was in this context that the Industrial Magistrate said "the applicant can draw no comfort from the award itself". This was so because paragraph 42(k)(i) exempts from the benefits of clause 42 employees "engaged for a specific period of time..." The Industrial Magistrate then considered the claim under the separate agreement and found that the employee was not a person entitled to the benefit of that agreement.
In the present case there was evidence that during the respondent's apprenticeship the respondent had sought time from work to attend an additional training course. This request had been granted, and at the time the appellant stipulated that in return the respondent would be expected to work for the appellant for one year after the completion of his training. The respondent had agreed to do so. However on this evidence the Industrial Magistrate found that this agreement was not a contract of employment, and held that there was no evidence on which it could be found that the respondent was "engaged for a specific period of time" within the meaning of the Award. The Notice of Appeal does not challenge these findings, nor was any attempt made to do so by the appellant in the presentation of its argument.
In my opinion the Industrial Magistrate was correct to hold that the respondent's "period of continuous service" commenced on 14 January 1987. The appeal should be dismissed.
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