Gavin McDonald v Victorian Department of Health and Human Services

[2021] FWC 5579

[2021] FWC 5579

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739 - Application to deal with a dispute

Gavin McDonald
v
Victorian Department of Health and Human Services
(C2021/2756)

COMMISSIONER O'NEILL MELBOURNE, 8 SEPTEMBER 2021

Application under dispute resolution process in enterprise agreement – payment of annual salary – dispute determined.

[1] Mr McDonald has applied to the Fair Work Commission to deal with a dispute with the Victorian Department of Health and Human Services. The dispute relates to whether the Department applied the correct approach in paying Mr McDonald the salary he was entitled to receive under the Victorian Public Service Agreement 2020. 1

[2] The dispute was unable to be resolved through conciliation. It was common ground that the disputes process in the Agreement had been followed and that the Commission was empowered to arbitrate the dispute pursuant to section 739 of the Fair Work Act 2009 and clause 13 of the Agreement.

[3] I granted permission for the Department to be legally represented at the hearing as I was satisfied that it would enable the matter to be dealt with more efficiently.

The dispute

[4] There are no significant factual disputes between the parties and no witness evidence was led.

[5] Mr McDonald was employed by the Department from 1 June 2020 to 30 June 2021. He was employed on a full-time basis on a fixed term contract. He was classified as a VPS Grade 5.2 employee and paid at the top of the value range for this classification. His ordinary hours of work were 76 hours per fortnight.

[6] Mr McDonald’s annual salary was $120,838 for the period of 1 June 2020 to 30 November 2020 (Period 1). His annual salary then increased to $122,348 for the remainder of his employment - 1 December 2020 to 30 June 2021 (Period 2). 2 These are the annual salary rates set out in the Agreement for employees at the top of the value range for VPS Grade 5.2 employees.

[7] Mr McDonald was paid on a fortnightly basis. When calculating his pay, the Department applied the definition of ‘Fortnightly Salary’ at clause 2 of the Agreement. Using this formula, the Department paid Mr McDonald an hourly rate of $60.94357 for Period 1 and $61.70513 per hour for Period 2.

[8] Mr McDonald contends that the formula that should have been applied to calculate his pay is to divide his annual salary by 26 (fortnights in a year) and then divided by 76 (hours per fortnight). Using this formula, Mr McDonald asserts that his hourly rate during Period 1 should have been $61.15283 and for Period 2, $61.91700.

[9] The differential between the hourly rates paid and what Mr McDonald contends should have been paid is $0.20926 per hour in Period 1 and $0.21188 per hour in Period 2. Multiplying these hourly differentials to Period 1 (comprising 13 fortnights and one day) and Period 2 (comprising 15 fortnights and 2 days), Mr McDonald contends that he was underpaid a total of $453.10 (as at the date the dispute was lodged). At the time Mr McDonald’s employment ceased, the relevant sum was $487.90.

[10] For the reasons set out below, I have concluded that the Department did apply the correct approach in paying Mr McDonald.

[11] Shortly before the hearing, the Department advised that it had processed a payment to Mr McDonald of $487.90 (before tax). I questioned the parties whether the fact that the payment had been made meant that the substantive dispute was resolved, and there remained no dispute to arbitrate. Mr McDonald continued to press for arbitration as the Department had made no concessions as to his lawful entitlements. The Department submitted that arbitration of the dispute in these circumstances raised questions of utility but made no submission that the Commission was no longer empowered to arbitrate the dispute.

Approach to interpreting Agreement

[12] Deputy President Gostencnik has succinctly summarised the approach to construing an enterprise agreement, and which I intend to take:

[3] The answer to the question turns on the proper construction of the Agreement. The construction of provisions of an enterprise agreement begins with a consideration of the ordinary meaning of the words, read in context, taking account of the evident purpose of the provisions or expressions being construed. Context may be found in the provisions of the agreement taken as a whole, or in their arrangement and place in the agreement. The statutory framework under which the agreement is made or in which it operates may also provide context, as might an antecedent instrument or instruments from which a particular provision or provisions might have been derived. The industrial context in which an agreement is made and operates is also relevant. Thus, the language of an agreement is to be understood in the light of its industrial context and purpose, not in a vacuum or divorced from industrial realities. But context is not itself an end and a consideration of the language contained in the text of the agreement being considered remains the starting point and the end point to the task of construction. A purposive approach to interpretation is appropriate, not a narrow or pedantic approach. 3

The relevant provisions in the Agreement

[13] The Agreement applies to and covers the State of Victoria in respect of all its Employees (as defined). It is a comprehensive document, comprising more than 400 pages. It was approved on 2 October 2020 and has a nominal expiry date of 20 March 2024. It contains rates of pay over 4 years – from 20 March 2020 when the first increase is payable until its nominal expiry date of 20 March 2024.

[14] The Agreement is structured into two sections, with Section I detailing Core Terms and Conditions of Employment and Section II dealing with Agency Specific Arrangements.

[15] Section I comprises 9 Parts and Schedules A to G:

Part 1 - Application and operation of Agreement

Part 2 - Flexible work

Part 3 - Communication, consultation and dispute resolution

Part 4 - Employment relationship and related arrangements

Part 5 - Salary and related matters

Part 6 - Hours of work and related matters

Part 7 - Leave of absence and public holidays

Part 8 - Emergency management

Part 9 - Occupational health and safety

Schedule A - Redeployment

Schedule B - Supported wage system

Schedule C - VPS Salaries and classification and value range descriptors

Sch D - Legal Officer adaptive structure and classification and value range descriptors

Sch E – Allied Health adaptive structure and classification and value range descriptors

Schedule F – Science adaptive structure and classification and value range descriptors

Schedule G – Adaptive structures

[16] Section II deals with arrangements in Appendix 1 to 16, making specific provision for the specified 16 individual agencies. Appendix 4 deals with agency specific arrangements relating to the Department of Health and Human Services.

[17] Part 5 in Section I deals with Salary and related matters, and includes clauses 27 and 33, which relevantly provide:

27.1 Positions will be classified within the VPS Structure, or the following Adaptive classification structures aligned to it, based on work value:

(a) Legal officer

(b) Allied Health

(d) ………

(k) Police Custody Officer.

27.2 Classifications are divided into Grades and Value ranges.

27.3 Employees will be employed within one of these grades and Value Ranges based on work requirements in accordance with the Classification and Value Range Standard Descriptors at Schedule C to Schedule F and Section II (Agency Specific Arrangements) to this Agreement.

…

27.6 Classification and Salary on Appointment

(a) Employees will be appointed to a grade and Value range based on work requirements in accordance with the Classification and Value Range Standard Descriptors at [sic] relevant to the Employee’s role as set out in this Agreement.

….

33 Payment of Salaries

33.1 Salaries, allowances, penalty or overtime payments due to an Employee must be paid by the Employer by fortnightly electronic direct credit to a bank account, credit union or building society account, nominated by the Employee. In exceptional circumstances, including significant delays in payment of salary, the Employer will make provision for off-line payments.

….

[18] Schedule C in Part I, comprises 2 sections. The first is headed “VPS Salaries” followed by a series of six tables setting out grades, value ranges, salary ranges and progression amounts as at 20 March 2020, 1 December 2020, 1 September 2021, 1 June 2022, 1 March 2023 and 1 December 2023.

[19] Extracting the contents of the tables in respect of Grade 5 employees for the period of Mr McDonald’s employment, the tables provide:

VPS Salaries

Effective 20 March 2020

Grade	Value Range	Salary Ranges	Progression amounts
Min.	Max.
Senior Officer	5	5.1	$99,872	$110,355	$2,994
5.2	$110,357	$120,838

Effective 1 December 2020

Grade	Value Range	Salary Ranges	Progression amounts
Min.	Max.
Senior Officer	5	5.1	$101,120	$111,734	$3,031
5.2	$111,736	$122,348

[20] The second section in Part I of Schedule C is headed “VPS Career Structure Classification and Value Range Standard Descriptors” and sets out the relevant level of skill for each value range for Grades 1 to 6 in the VPS Structure.

[21] Clause 2 of the Agreement is the definitions clause, and includes:

“Fortnightly Salary means an Employee’s annual salary divided by 365.25 multiplied by 14.”

[22] Outside the definitions clause, the term “Fortnightly Salary” appears only once. It appears in clause 12.1(d) of Appendix 1 of Section II. This Appendix is the agency specific arrangements for the Department of Justice and Community Safety, and the clause deals with allowances for Sheriff’s Officers. Subparagraph (d) reads:

“12.1(d) the allowances payable under this clause must be paid as part of fortnightly salary and shall form part of the salary specified for superannuation purposes and all paid leave provided for under this Agreement. …”

Submissions

[23] Mr McDonald’s contention is a simple one. He submits that he was entitled to an annual salary of $120,838 for Period 1 and $122,348 for Period 2, and he did not receive this. Mr McDonald’s submission is premised on the plain meaning of the words ‘annual salary’ as meaning the amount an employee will receive in salary over a year. He submits that his pay should have been calculated by dividing his annual salary by 26 (being fortnights in a year) and then dividing this amount by 76 hours per fortnight (being his ordinary hours of work). Using this formula Mr McDonald asserts that his hourly rate for Period 1 should have been $61.15283 and for Period 2, $61.91700.

[24] The Department submitted that it had paid Mr McDonald his lawful entitlements under the Agreement, because the Agreement required Mr McDonald’s fortnightly salary to be calculated by reference to the formula in the definition of Fortnightly Salary which appears in clause 2 of the Agreement. They submit that this interpretation is supported by:

(a) the plain and ordinary meaning of the relevant words;

(b) the broader textual context; and

(c) the broader historical and industrial context surrounding the provisions in the Agreement.

[25] In relation to the plain and ordinary meaning of the relevant words, the Department submits that clause 33 provides for Mr McDonald to be paid his salary by way of fortnightly payments. Applying the ordinary meaning of these words means that what is required is the payment of a ‘fortnightly salary’. The methodology set out in the definition of ‘Fortnightly Salary’ provides a readily understandable methodology for calculating this fortnightly payment. The definition is also based on the ordinary meaning of the key concepts, being 14 days in a fortnight, and 365 days in a year (except for each fourth year which has 366 days).

[26] Conversely, the Department contends that Mr McDonald’s construction is not supported by the words of the Agreement, that there is no reference in the Agreement to calculating payments by reference to the concepts of 26 weeks and/or 76 hours. Mr McDonald’s approach requires the Commission to read into the Agreement words that do not appear.

[27] In relation to the textual context, the Department draws on the fact that the definition of Fortnightly Salary is in Section I – Core Terms and Conditions as evidence of an intention that the definition has some role to play in this section of the Agreement. It submits that it would be unusual for the parties to have included a definition in Section 1 that only has work to do in relation to a single type of payment to a single group of employees in Section II.

[28] For these reasons, the Department contends that Mr McDonald’s construction is only correct if additional words are read into the Agreement, and accordingly based on the plain and ordinary meaning of the terms in the Agreement, the Department’s approach is correct.

[29] To the extent that the relevant terms are ambiguous, the interpretation advanced by the Respondent is also said to be supported by the broader industrial and commercial context that informs the operation of the clause. Such contextual considerations include:

(a) The use of the Department’s approach is a longstanding practice in the VPS, since the 1980s;

(b) This longstanding practice was understood by employees when voting on the Agreement; and

(c) It has never been suggested by any relevant party that fortnightly salaries should be calculated in any other way, and that this is evidence of a common understanding of the intended application of the provisions in the Agreement.

[30] The Department provided further detailed submissions on the historical context of the approach to the calculation of fortnightly salaries, including:

•  The methodology described in the definition of Fortnightly Salary in clause 2 of the Agreement has been used in the Victorian Public Service since at least the 1980s;

•  The term ‘fortnightly salary’ did not appear in the principal industrial instruments between 1996 and 2001 4, however each referred to salaries being paid by fortnightly direct credit;

•  The term ‘fortnightly salary’ was not separately defined in the principal industrial instruments between 2004 and 2009 5, however payment was required to be made fortnightly and overtime for all employees was to be calculated in accordance with the “Fortnightly Salary” formula that is in clause 2 of the Agreement. This is said to indicate an intention that the relevant methodology be applied to all employees;

•  The definition of Fortnightly Salary first appeared in its current form in the Victorian Public Service Workplace Determination 2012 6in clause 3.6. The use of the definition was not discussed in the decision, rather the provision was one of the agreed terms included in the determination.

Consideration

[31] I agree with Mr McDonald that under the Agreement he is entitled to be paid his annual salary in full. It seems to me to be unarguable that ‘salary’ and ‘Annual salary’ mean the amount an employee is entitled to receive in salary in a ‘year’.

[32] However, there are two difficulties with Mr McDonald’s approach. He submits that his fortnightly pay should have been calculated by dividing his annual salary by 26. The problem is that there are not 26 fortnights in a year: 365 days divided by 14 equals 26.07143.

[33] The second problem is the meaning of the term ‘year’. There is no singular meaning of ‘year’. In the Gregorian common calendar, a year has either 365 days or 366 days (in leap years). Expressed differently, a year in the Gregorian calendar means an average of 26.25 days. It seems to me that under the Gregorian common calendar a year can mean either:

(a) 365 days in years other than leap years, and in leap years 366 days; or

(b) 365.25 days.

[34] In the context of the calculation of Annual salary, if the meaning of a year is (a) then the Department has not applied the right approach to paying Mr McDonald. This is fundamental to Mr McDonald’s contention, as he was not employed during a leap year. However, if the meaning in (b) is correct, then it has.

[35] Whilst I arrive at the same conclusion as the Department, I do so for slightly different reasons. I do not agree with its submission that the Respondent is required to calculate Mr McDonald’s fortnightly salary by reference to the formula in the definition of Fortnightly Salary which appears in clause 2 of the Agreement. In my view, clause 33 of the Agreement simply requires that an employee’s annual salary is to be paid on a fortnightly basis. It does not require that the fortnightly payments be calculated based on the definition of Fortnightly Salary in clause 2. It can be calculated by whatever formula is necessary to ensure that Mr McDonald is paid the annual salary to which he is entitled. The Respondent’s construction requires additional words to be read into clause 33, for example the obligation to pay ‘salaries due to an employee’ is an obligation to pay ‘Fortnightly Salary due to an employee’, or similar.

[36] However, in my view, considering the evident purpose of the provisions, and the industrial and historical context in which the agreement was made and operates, the payment of Annual Salary under Schedule C means the amount an employee is entitled to receive in 365.25 days.

[37] In this context it is relevant that the definition of Fortnightly Salary in clause 2 is consistent with and only explicable with a year meaning 365.25 days. At least without explanation, it is inherently unlikely that a ‘year’ for one purpose in the Agreement means 365.25 days and means 365 days in another part of the Agreement. This is particularly the case in the context of an Agreement of such size and scale, where such an approach would necessitate different salary calculations from year to year, depending on whether the particular year was a leap year or not. I am also persuaded by the Department’s submissions relating to the historical and industrial context of fortnightly salary arrangements.

[38] My conclusion, therefore, is that the Department has applied the correct approach in paying Mr McDonald.

[39] I note that if I am wrong in relation to my conclusion that a ‘year’ for the purpose of calculating Annual Salary is 365.25 days, it does not follow that Mr McDonald’s assessment of his underpayment is accurate. As set out earlier, there are two difficulties with Mr McDonald’s contentions: the incorrect premise that there are 26 fortnights in a year; and whether for relevant purposes a ‘year’ comprises 365 or 365.25 days. If the amounts are calculated on 365 days and not 365.25, then as at the date of his application, the relevant amount would have been $83.60095 and not the $453.11170 calculated by Mr McDonald. Annexure A sets out the relevant calculations.

[40] Mr McDonald has, in my view, obtained a windfall by the Department making a payment to him of $487.90.

COMMISSIONER

Appearances:

G McDonald, Applicant.
E Goodwin of Minter Ellison for the Respondent.

Hearing details:

2021

Melbourne (by video):

July 20.

Final written submissions:

Applicant, 29 July 2021.
Respondent, 27 July 2021.

Printed by authority of the Commonwealth Government Printer

<PR733628>

Annexure A

Period 1	Period 2	Total
1 June 20 – 30 Nov 20	1 Dec 20 – 30 Jun 21
Annual salary	$120,838	$122,348
(a) Applicant’s claimed rate per hour	$61.15283	$61.91700
(b) Actual rate per hour	$60.94357	$61.70512
(c) Rate per hour if based on 365 days (not 365.25)	$60.98529	$61.74737
Difference between (a) and (b) per hour	-$0.20926	-$0.21188
Total difference between (a) and (b) over Period	-$208.34325	-$244.76845	$453.11170
Difference between (b) and (c) per hour	-$0.04172	-$0.04225
Total difference between (a) and (b) over Period	-$41.53842	-$42.06253	-$83.60095

 1   AE509129

 2   The formal offer of employment of 26 May 2020 specified an annual salary of $119,052 pa for Mr McDonald. However, when the Agreement was approved on 2 October 2020, the relevant rates of $120,838 applied from 20 March 2020.

 3   ASU v Powercor Australia Ltd & CitiPower Pty Ltd [2021] FWC 4526 at [3].

 4   See para 3.2(b) of the Respondent’s further submissions dated 27 July 2021; Public Service (Non Executive Staff – Victoria) Interim Award 1996, Victorian Public Service [Non Executive Staff - Victoria] Agreement 2000, the Victorian Public Service (Non-Executive Staff) Certified Agreement 2001 or the Public Service (Non Executive Staff - Victoria) (Section 170MX) Award 2000.

 5   Ibid at para 3.2(c).

 6   PR526534.