Health Services Union, Tasmania No. 1 Branch v Liviende Inc

[2013] FWC 6830

[2013] FWC 6830 [Note: This decision has been varied. See [2013] FWC 7360]

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739 - Dispute resolution

Health Services Union, Tasmania No. 1 Branch
v
Liviende Inc
(C2012/5869)

COMMISSIONER JOHNS MELBOURNE, 10 SEPTEMBER 2013

Application by the Health Services Union, Tasmania No. 1 Branch in respect of alleged dispute concerning classification of staff.

[1] This decision concerns how the respondent employer should go about determining what it should be (have been) paying Residential Support Officers in the context of section 206 of the Fair Work Act 2009.

[2] On 2 November 2012 the Health Services Union, Tasmania No. 1 Branch (HSU) asked the Fair Work Commission (Commission) to deal with a dispute in accordance with the dispute settlement procedure in the Tasmanian Disability Services Industry Multi-Employer Enterprise Agreement 2011 (Agreement).

[3] The respondent is Liviende Inc (formerly Northern Residential Support Group Inc) (Employer). The Employer provides residential support to people with intellectual disabilities through the management of group homes and the provision of a day support program.

The dispute

[4] In short, there is a dispute about what wage rate is payable to Residential Support Officers (RSOs) under the Agreement. However, for the reasons explained below, the answer depends upon the classification of RSOs under the Social, Community, Home Care and Disability Services Award 2010 (Award) and the operation of section 206 of the Fair Work Act 2009 (Act).

[5] Consequently:

● the dispute is “in relation to a potential breach of an employee’s terms and conditions and employment”; and

● the dispute resolution procedure in clause 15 of the Agreement is enlivened.

[1] Conferences were conducted on 19 November 2012, 6 May 2013 and 17 June 2013.

[2] On 6 May 2013 the parties indicated that they wanted the Commission to express an opinion about the operation of section 206 of the Act. To assist the Commission the parties were invited to file submissions. Submissions were filed on the following dates:

● 20 May 2013, HSU submissions (Exhibit “A1”); and

● 3 June 2013, Employer submissions (Exhibit “R1”).

[1] On 17 June 2013 the Commission expressed an opinion, but the dispute remained unresolved. Consequently, the parties agreed to the Commission arbitrating the dispute under clause 15(c)(i)(C) of the Agreement.

[2] On 1 July 2013 the Commission invited the parties to make submissions about what, if any, weight the Commission should attach to the Employer’s answers on the Form F17 Application it made for approval of the Agreement. An opportunity was provided to file supplementary submissions, which the parties did as follows:

● 3 July 2013, HSU supplementary submissions (Exhibit “A2”); and

● 5 July 2013, Employer supplementary submissions (Exhibit “R2”).

[1] The arbitration hearing occurred on 8 July 2013 and at it the:

● HSU was represented by its Legal Officer, Mr James Eddington; and

● Employer was represented by Mr Bruce McTaggart of Senior Counsel.

[1] The HSU did not oppose the Employer’s application to be represented by a lawyer. The Commission was satisfied that, taking into account the complexity of the matter, granting permission for the Employer to be represented by a lawyer would enable the matter to be dealt with more efficiently. Consequently, Mr McTaggart SC was granted permission to represent the Employer.

[2] At the arbitration hearing the parties relied upon their earlier filed submissions which were formally marked as exhibits. Each party was then provided with an opportunity to make further oral submissions.

The relevant industrial instruments

[3] The Agreement commenced operation on 1 July 2011. The classification definitions for employees covered by the Agreement are contained in Schedule 3 of the Agreement.

[4] In making application for approval of the Agreement in June 2011, the employer applicants declared that:

● for the purposes of the better off overall test, the relevant transitional reference instrument was the Disability Service Providers Award (State 2B Award) (State Award); and

● the classification structure in the Agreement was based on the State Award.

[1] The modern award that covers the employees is the Award. The Award commenced on 1 January 2010. The classification definitions for employees covered by the Award are contained in Schedule B of the Award.

[2] On 26 March 2010 a Full Bench of Fair Work Australia (as it then was) deleted the definition of “disability services sector” in the Award and added additional words to the definition of “social and community services sector”. The tribunal then made orders for consequential variations to the classifications and some conditions. 1 The Full Bench noted that “the new wage structure in the modern award does not come into operation until 1 July 2011”.2

[3] However, on 22 June 2012 a Full Bench of the Commission issued an order 3 in the Equal Remuneration Case (Equal Remuneration Order 2012) dealing with the Award. The Equal Remuneration Order 2012 commenced transitioning increases to the wage rates of social and community services employees and crisis accommodation employees from 1 July 2012.

[4] Accordingly, at the time that the application for approval of the Agreement was lodged (in June 2011) neither the new wage structure in the Award nor the transitioned wage rates under the Equal Remuneration Order 2012 had commenced. For this reason the Agreement does not contain a classification structure translation table that would assist an employer to determine how classifications in the Award translate to classifications in the Agreement.

What are RSOs to be classified as?

[5] It is conceded by the Employer, 4 and therefore common ground, that RSOs are classified as “Disability Service Workers - Level 4” under the Agreement.

[6] However, under the Award:

● the HSU says RSOs should be classified as “Social and community service employees - Level 3”; and

● the Employer says RSOs should be classified as “Social and community service employees - Level 2”.

The import of the matter

[1] Much turns on the classification because of the operation of section 206 of the Act.

[2] Sections 206(1) and 206(2) of the Act provides that:

(1)  If:

(a)  an enterprise agreement applies to an employee; and

(b)  a modern award that is in operation covers the employee;

the base rate of pay payable to the employee under the agreement (the agreement rate) must not be less than the base rate of pay that would be payable to the employee under the modern award (the award rate) if the modern award applied to the employee.

(2)  If the agreement rate is less than the award rate, the agreement has effect in relation to the employee as if the agreement rate were equal to the award rate.

[3] In the current matter, the preconditions of section 206 of the Act are satisfied; that is:

● there is an enterprise agreement that applies to RSOs; and

● a modern award is in operation that covers RSOs.

[1] It is therefore necessary to determine how the base rate of pay under the Agreement compares with the base rate of pay under the Award.

[2] If RSOs are classified under the Award as:

● Level 3 (consistent with the HSU’s submissions), then likely:

○ the Agreement rate of pay being paid to RSOs is less than the Award rate of pay; and

○ the Employer may be underpaying its RSOs;

● Level 2 (consistent with the Employer’s submissions), then likely:

○ the Agreement rate of pay being paid to RSOs is higher than the Award; and

○ the Agreement rate of pay applies.

[1] The determination of the classification of RSOs under the Award has implications beyond those of the Employer and the affected employees (approximately 16). This is because the Agreement is a multi-employer agreement and 14 employers are a party to it.

Issue to be determined

[2] In simple terms, the issue to be determined is the classification of RSOs under the Award.

[3] However, the parties disagree about how to undertake:

● that task; or

● the exercise of determining “the base rate of pay that would be payable to the employee (in the present case RSOs) under the modern award”.

Submissions

[1] Neither party has drawn the Commission’s attention to or relied upon any authorities about the interpretation of section 206.

[2] The HSU says the exercise to be performed under section 206 is relatively simple. They say:

● section “206 provides for a comparative test”. 5

● “in determining what the agreement rate is one would naturally look at the rate of pay described in the enterprise agreement next to the appropriate level. The appropriate level is defined by the classification descriptor for that level.” 6

● “the process for determining the ‘award rate’ is the same as determining the agreement rate. Therefore ... the same classification descriptor must be used as the common denominator to compare with the Modern Award classification descriptors.” 7

[1] In deciding how to determine which classification descriptor in the Award applies, the HSU says the Commission should look at the classification descriptors for Level 4 in the Agreement and compare them with the classification descriptors in the Award and determine the “best fit”. It then says the “best fit” is Level 3 in the Award. In this sense the HSU proposal can be characterised as a “descriptor to descriptor” comparison. The HSU submits that “the comparative exercise for the purposes of the Act can be done efficiently when the classification descriptor is used for the comparison.” 8

[2] In support of its argument the HSU says, “... guidance on this matter may also be had by considering the other major comparative exercise of note under the Act, namely the ‘better off overall test’ (BOOT).” 9 It says

“... the language of this provision [section 193(1)] is very similar to the language of section 206. Both require that in the circumstances of an employee being ‘covered’ by an Award that the test to be done comparing the agreement that ‘applies’ to the employee with the ‘relevant modern award that applied’ to the employee.

...

It would be unusual for an agreement to pass the BOOT if, at the outset, the wages contained in it were less than the equivalent Modern Award. In assessing wages in the Agreement as they compare to the Modern Award we submit that FWC would consider the classification descriptor that gives rise to the agreement wages level and make an assessment as to where that descriptor would sit at the equivalent Modern Award level.” 10

[3] The Employer says the exercise to be performed under section 206 is not a “descriptor to descriptor” comparison. The Employer submits that,

“in looking at the Modern Award rate of pay one must first look at it [i.e. the classifications and rates of pay in the Modern Award] as if an agreement was not in place, that is, what would be ‘the base rate of pay that would be payable to the employee under the Modern Award (the award rate) if the modern award applied to the employee” 11

[4] The Employer says it should only have regard to the classification structure and wording in the Award “in classifying the employee ... [and not be] influenced by extraneous wording or comparisons [with the Agreement].” 12

[5] The Employer says that, consequently, “what [it] must do is ... to look at the employee’s duties, tasks, level of authority, relationship to other employees, etc and determine the appropriate classification level under the Award.” 13 In this sense the Employer proposal can be characterised as requiring an individual work level assessment of what RSOs do to determine “the base rate of pay that would be payable [to them] under the modern award”.

[6] The Employer says that the HSU’s “descriptor to descriptor” comparison cannot be what is required by section 206 because,

“... this would not always be possible. Many enterprise agreements have classification structures that do not have similar wording to award wording, many use different words altogether, may not have any wording, or may have more levels than the Modern Award or less. The classifications in the enterprise agreement may be based on qualifications only, or years of service, or job title, or tasks performed, or may use simplistic terms such as ‘more experience than an employee at Level X’.

[7] In its supplementary submissions the HSU went to the operation of the BOOT. It relied upon the Commission’s Form F17 to argue that,

“it is clear that the comparison task, therefore, is to use the classifications in the Agreement and Modern Award. The Commission at question 3.3 directs the Employer to provide a table showing how the agreement classifications relate to the Modern Award classifications.” 14

[8] For the reasons explained above, a translation table was not prepared by the Employer in the present case.

[9] In reinforcing its point that the exercise to be performed under section 193(1) of the Act is the same as the exercise to be performed under section 206 of the Act the HSU submits that,

... given the similarity of the language of the two provisions as well as their proximity as sections under the same Part of the Act it is unlikely, to the point of being unbelievable, that the legislature intended that two completely separate tests or meanings should be employed in implementing the respective sections.” 15

[10] In its supplementary submissions the Employer submitted that the information submitted by it in its application to have the Agreement approved “has no relevance”. 16

[11] In answer to the HSU’s submission that the exercise to be performed under section 193(1) of the Act is the same as the exercise to be performed under section 206 of the Act, the Employer notes that “section 193(7) of the Act,

“provides that ... the FWC is entitled to look at a class of employees. If the agreement as applied to that class passes the test then the FWC is entitled to assume, in the absence of evidence to the contrary, that the employee would be better off overall if the agreement applied to the employee. The very existence of this sub-section suggests that in the absence of this presumption the BOOT requires FWC to be satisfied that each award covered employee and each prospective award covered employee will be better off overall i.e. the BOOT is to be applied to each individual employee not to classes of employees”. 17

[12] The Employer then relies upon the definition of “Award covered employee” and “Prospective award covered employee” in sections 193(4) and (5) respectively. They say “an employee who is covered by a modern award that ‘covers the employee in relation to the work that he or she is to perform under the agreement” (the underlining is that of the Employer). 18 The Employer says “this supports [its] submission that when considering the modern award the focus is the work that the employee performs not his or her classification”.19

[13] At the arbitration hearing Mr Eddington restated the HSU’s submissions the essence of which is the “descriptor to descriptor” comparison. In respect of the operation of the BOOT Mr Eddington conceded that “when you are looking at the BOOT test, yes, you look at individual employees. The subsection (7) under 193 ... is really just to underline the convenience for the FWC”. 20 However, Mr Eddington submitted that it is still necessary to “look at the individual employee in relation to the actual classification descriptors that relate to that individual employee.”21 Mr Eddington submitted on behalf of the HSU that this conclusion is drawn from the words “under the agreement” being included in section 193(4)(b)(ii) of the Act.22

[14] At the arbitration hearing Mr McTaggart SC restated the Employer’s submissions the essence of which is that in undertaking the section 206 exercise “you ignore the enterprise agreement and determine the appropriate classification and therefore base rate of pay for that classification in the Modern Award.” 23 In answer to Mr Eddington’s submissions about the words “under the agreement” being included in section 193(4)(b)(ii) of the Act, Mr McTaggart SC submitted that “it is only descriptive because of course the employee performs work under the agreement because the agreement applies to him or her.”24

Consideration

[15] Section 15AA of the Acts Interpretation Act 1901 (Cth) provides:

In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying be Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.

[16] For present purposes, the relevant object of the Act is to ensure “a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through… modern awards”. 25

[17] However, the legislature has not provided any further guidance on how to determine “the base rate of pay that would be payable to the employee under the modern award”.

[18] Consequently, sections 15AB(1) and (2)(e) of the Acts Interpretation Act 1901 (Cth) allows regard to be had to the relevant explanatory memoranda if it is “capable of assisting in the ascertainment of the meaning of” section 206 of the Act.

[19] The Fair Work Act 2009 Explanatory Memoranda states,

879. ... clause [206] will ensure that the base rate of pay under an enterprise agreement cannot be less than the base rate of pay under either the modern award (the award rate) ... at any time during the life of the agreement.

880. This clause protects an employee's minimum wage entitlement after FWA approves an enterprise agreement and the agreement commences operation, thus ensuring the integrity of the safety net. In deciding whether or not to approve an enterprise agreement, FWA will consider the base rate of pay provided for by the agreement (the agreement rate) as part of the better off overall test

Subclauses 206(2) and (4) deal with the situation where the agreement rate falls below the award rate or the employee's order rate while the agreement is in operation.

881. If FWA approves an enterprise agreement (under clause 186 or clause 190) that provides for a base rate of pay that is less than the award rate ..., the employee would be entitled to a base rate of pay that is equal to the award rate ... on the day that the agreement commences operation.

882. Subclauses 206(1) and 206(2) operate where an employee is covered by a modern award that is in operation. If an enterprise agreement applies to the employee and the agreement rate is less than the award rate, the employee is entitled to be paid under the agreement at a rate equal to the award rate.

[20] However, the Explanatory Memoranda also does not provide further guidance on how to determine “the base rate of pay that would be payable to the employee under the modern award”.

[21] In interpreting section 206 of the Act, consistent with the rules of statutory interpretation, it is appropriate to have regard to the fact that the Act is a remedial Act 26 and,

“like all such Acts [the FW Act] should be construed beneficially... This means, of course, not that the true significance of the provisions should be strained or exceeded, but that it should be construed so as to give the fullest relief which the fair meaning of its language will allow.” 27

[22] Also consistent with the ordinary rules of statutory interpretation, if there is a “choice ... between two strongly competing interpretations ... the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention.” 28 That is to say, it is permissible to interpret section 206 of the Act by reference to the consequences of the interpretations put forward by each of the parties.

[23] Another important rule of statutory interpretation is that words are assumed to be used consistently. 29 In the present matter, each of sections 193 and 206 are a part of Chapter 2, Part 2-4 of the Act.30 Each section requires a comparison with the modern award. Each section includes a like phrases:

● section 193 of the Act requires a comparison as “if the relevant modern award applied to the employee”;

● section 206 of the Act requires a comparison as “if the modern award applied to the employee”.

[1] Having regard to the above, it was common ground between the parties that the exercise to be performed for the purposes of the BOOT under section 193 of the Act is relevant in the present matter where the dispute concerns section 206 of the Act. 31

[2] It is also common ground that the exercise to be performed under both sections requires an assessment of the circumstances of individual employees. 32 By reason of the use of the definite article “the” in the relevant sections, the submissions of the parties on this point are correct. Therefore, it is the circumstances of each individual RSO that are to be had regard to in the determination of what each of them is to be paid by reason of the operation of section 206 of the Act.

[3] The first part of the section 206 exercise requires the Employer to consider “the base rate of pay payable to the employee (in the present case individual RSOs) under the agreement”. That is a simple exercise. Each RSO is employed under a contract of employment. Further they have a position description which sets out their classification. Those position descriptions indicate that, under the Agreement, RSOs are classified as “Disability Service Workers - Level 4”. Consequently, they are paid as such.

[4] By reason of how RSOs are employed or promoted to that classification, it is reasonable to assume that, having employed each RSO as a “Disability Service Workers - Level 4” or promoted an employee to the position of RSO, the Employer has made a considered decision and determined that each employee in question performs or is expected to perform the tasks listed in the position description and at the level provided for in the Agreement (i.e. Level 4). It is not relevant if, on any particular day, the Employer does not require the RSOs to perform the tasks listed in the position description or at the level provided for in the Agreement. It is the basis upon which they were engaged or promoted that is important. There can be no other reason for the classification of employees who have been classified as RSOs by the Employer.

[5] Having determined the base rate of pay payable by the Employer to RSOs under the Agreement, how to determine “the base rate of pay that would be payable to the employee (in the present case individual RSOs) under the modern award”?

[6] At this point it is to be noted that there is little dispute about and the Employer agrees 33 that the descriptors in Level 4 of the Agreement most closely align with the descriptors in Level 3 of the Award. However, the Employer says this is irrelevant to the question of how section 206 operates.34 I agree. The exercise of working out what to pay (or what “would be payable to”) an employee under a modern award is a stand-alone exercise. This must be the case because in not all instances will there be an agreement available by which the modern award can be interpreted.

[7] Therefore, the Employer is correct in its submission that, in considering what would be payable to the employee under the Award for the purposes of section 206, the HSU’s submission (that the descriptors in the Agreement are the sole determinant by way of comparison) is wrong.

[8] However, the descriptors in the Agreement are not irrelevant for all purposes. They are relevant for a different reason than that advanced by the HSU.

[9] There is a long line of authority on how to determine whether an employee is covered by an Award. 35 That authority is relevant to determining what “would be payable to [an] employee under [a] modern award if the modern award applied to the employee.” This is because section 206(1)(b) refers to “a modern award that is in operation [that] covers the employee” (my emphasis).

[10] First it is necessary to examine the provisions of the modern award in order to determine its scope and operation. In the present matter it is conceded that the Award applies. The Award has classifications (relevantly for present purposes) contained in Schedule B. In determining which classification applies to RSOs it is then necessary to have regard to the work RSOs perform. But that is not the end of the exercise in determining the major and substantial portion of an employee’s working week. “It is not merely a matter of quantifying the time spent on the various elements of work performed...: the quality of the different types of work done is also a relevant consideration.” 36

[11] Equally relevant is “ascertaining the principal purposes for which the worker is employed”. 37 The long established correct approach “is to place the major emphasis on the major and substantial purpose or object of the [employee’s] engagement rather than on the major and substantial time spent on the performance of duties”.38

[12] Consequently, the Level 4 descriptor in the Agreement is relevant (and cannot be ignored by the Employer) because it assists in ascertaining the principal purposes for which RSOs have been employed. The Employer having employed employees at Level 4 or promoted them to Level 4, the Level 4 descriptor in the Agreement is evidence of the essence or object of the work of RSOs (even if the Employer does not require the RSOs to always perform at that level).

[13] That evidence is then relevant to determining what would be payable to RSOs under the Award.

[14] RSOs perform or are expected to perform (but are not necessarily required to perform) the tasks listed in their position description and at the level provided for in the Agreement (i.e. Level 4), which classification in Schedule B of the Award then applies to RSOs?

[15] Noting that it is common ground between the parties that the descriptors in Level 4 of the Agreement most closely align with the descriptors in Level 3 of the Award, it necessarily follows that Level 3 of the Award would apply to RSOs and, consequently, Level 3 in the Award is the proper comparator to Level 4 in the Agreement for the purposes of the exercise to be performed under section 206 of the Act.

[16] This is the comparison exercise that the Employer should now undertake to determine what it should be (have been) paying Residential Support Officers.

[17] This reading is consistent with a beneficial interpretation of the FW Act and its object to “guarantee [a] safety net of fair, relevant and enforceable minimum terms and conditions through… modern awards.” It is also the reading that produces the fairer and more convenient operation of section 206 of the Act.

COMMISSIONER

Appearances:

Mr J Eddington representing the Health Services Union, Tasmania No 1. Branch.

Mr B McTaggart SC representing Liviende Inc.

Hearing details:

2013.

Launceston.

8 July.

 1   Social, Community, Home Care and Disability Services Industry Award 2010 [2010] FWAFB 2024 and PR995399.

 2   Ibid.

 3   Equal Remuneration Case [2012] FWAFB 5184, and order PR525485.

 4   Transcript PN108 and PN110.

 5   Exhibit “A1”, [5].

 6   Ibid.

 7 Ibid [6].

 8 Ibid [9].

 9 Ibid [10].

 10   Ibid.

 11   Exhibit “R1”, [3].

 12 Ibid [4].

 13 Ibid [5].

 14   Exhibit “A2”, [6].

 15 Ibid [8].

 16   Exhibit “R2”, [2].

 17 Ibid [6].

 18 Ibid [8].

 19   Ibid.

 20   Transcript PN17.

 21   Ibid PN23.

 22   Ibid PN59-61.

 23   Transcript PN101.

 24   Ibid PN139.

 25   Section 3(b) of the Act.

 26   Fair Work Ombudsman v Ballina Island Resort Pty Ltd & Anor [2011] FMCA 500 (1 July 2011), para 87 and 88.

 27   Bull v Attorney-General (NSW) (1913) 17 CLR 370, 384.

 28   Cooper Brookes (Wollongong) Pty Ltd v FCT (9181) 147 CLR 297, 321.

 29   Craig Williamson Pty Ltd v Barrowcliff [1915] VLR 450, 452.

 30 Section 193 is in Division 4. Section 206 is Division 5.

 31   Mr Eddington at transcript PN 19. Mr McTaggart at transcript PN 126.

 32   Mr Eddington at transcript PN 23. Mr McTaggart at transcript PN 136.

 33   In Exhibit “A1”, the HSU asserted that “the Respondent [is] in agreement that the words contained in ... Level 4 [classification in the Agreement] are most aligned or best fit with the equivalent Modern Award descriptor at level 3.” In neither of its submissions did the Employer demur from this submission. Mr McTaggart SC then conceded this during the arbitration hearing, see transcript PN143.

 34   Transcipt PN 106.

 35 Reg v Industrial Court (SA); ex parte Pipeline Engineering Pty Ltd (1984) 9 IR 38; San Remo (Southland) Pty Ltd v Farrell (1987) 22 IR 291;

 36   Ware v O’Donnell Griffin (Television Services) Pty Ltd [1971] AR (NSW) 18, 19; followed in Carpenter v Corona Manufacturing Pty Ltd (2002) 122 IR, 387, 389 which was cited with approval in Enovtec Pty Ltd (t/as Australian Envelopes v Goldie (2006) 157 IR 395, 402-403.

 37   Merchant Service Guild of Australia v J Fenwick & Co Pty Ltd (1973) IAS Current Review 5, cited in Robinson v Roxburgh & Alexander Pty Ltd (t/a Power Price) (1988) 25 IR 1, 6.

 38   Briggs v Customtone Kitchens Australia Pty Ltd (1988) 24 IR 446, 452-453; followed in Nornews Pty Ltd and Another v Everett (1988) 81 IR 76, 83-84.

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