James Turner Roofing Pty Ltd v Peters
[2003] WASCA 28
•10 MARCH 2003
JAMES TURNER ROOFING PTY LTD -v- PETERS [2003] WASCA 28
| WESTERN AUSTRALIAN INDUSTRIAL APPEAL COURT | Citation No: | [2003] WASCA 28 | |
| Case No: | IAC:7/2002 | 3 DECEMBER 2002 | |
| Coram: | ANDERSON J (PRESIDING JUDGE) SCOTT J PARKER J | 10/03/03 | |
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed | ||
| A | |||
| PDF Version |
| Parties: | JAMES TURNER ROOFING PTY LTD CHRISTOPHER LAWRENCE PETERS |
Catchwords: | Industrial law Breach of award Underpayments and denial of benefits Flat hourly rate in excess of award entitlement for ordinary time Right of set-off Method of calculation of amount due to employee Whether claim truly for breach of award or for breach of over award agreement Claim procedures General jurisdiction Prosecution jurisdiction |
Legislation: | Annual Holidays Act 1944 (NSW) Industrial Relations Act 1979, Pt III, s 81CA(5), s 83 Justices Act |
Case References: | Amalgamated Collieries of WA Ltd v True (1938) 59 CLR 417 ANZ Banking Group Ltd v Finance Sector Union of Australia [2001] FCA 1785 Churchill Engineering Contractors Pty Ltd v Dortmans (1987) 22 IR 278 Josephson v Walker (1914) 18 CLR 691 Logan v Otis Elevator Co Pty Ltd [1999] IRCA 4 Pacific Publications Pty Ltd v Cantlon (1983) 4 IR 415 Poletti v Ecob (No 2) (1989) 31 IR 321 Ray v Radano (1967) AR (NSW) 471 Club Sierra v ALHMWU (1994) 74 WAIG 2637 Construction, Forestry, Mining and Energy Union v Warren (1999) 85 FCR 599 Ingamells v Petroff (1934) 50 CLR 451 Jose v Geraldton Resource Centre Inc (1995) 75 WAIG 2316 Metropolitan Health Services Board v Australian Nursing Federation (2000) 99 FCR 95 Silberschneider v MRSA Earthmoving Pty Ltd 68 WAIG 1004 Transport Workers' Union v Arrow Holdings Pty Ltd 69 WAIG 1050 |
JURISDICTION : WESTERN AUSTRALIAN INDUSTRIAL APPEAL COURT CITATION : JAMES TURNER ROOFING PTY LTD -v- PETERS [2003] WASCA 28 CORAM : ANDERSON J (PRESIDING JUDGE)
- SCOTT J
PARKER J
- Appellant
AND
CHRISTOPHER LAWRENCE PETERS
Respondent
Catchwords:
Industrial law - Breach of award - Underpayments and denial of benefits - Flat hourly rate in excess of award entitlement for ordinary time - Right of set-off - Method of calculation of amount due to employee - Whether claim truly for breach of award or for breach of over award agreement - Claim procedures - General jurisdiction - Prosecution jurisdiction
Legislation:
Annual Holidays Act 1944 (NSW)
Industrial Relations Act 1979, Pt III, s 81CA(5), s 83
Justices Act
(Page 2)
Result:
Appeal allowed
Category: A
Representation:
Counsel:
Appellant : Mr D G Taylor
Respondent : Ms Y D Henderson
Solicitors:
Appellant : David Taylor Solicitors
Respondent : Gibson & Gibson
Case(s) referred to in judgment(s):
Amalgamated Collieries of WA Ltd v True (1938) 59 CLR 417
ANZ Banking Group Ltd v Finance Sector Union of Australia [2001] FCA 1785
Churchill Engineering Contractors Pty Ltd v Dortmans (1987) 22 IR 278
Josephson v Walker (1914) 18 CLR 691
Logan v Otis Elevator Co Pty Ltd [1999] IRCA 4
Pacific Publications Pty Ltd v Cantlon (1983) 4 IR 415
Poletti v Ecob (No 2) (1989) 31 IR 321
Ray v Radano (1967) AR (NSW) 471
Case(s) also cited:
Club Sierra v ALHMWU (1994) 74 WAIG 2637
Construction, Forestry, Mining and Energy Union v Warren (1999) 85 FCR 599
Ingamells v Petroff (1934) 50 CLR 451
Jose v Geraldton Resource Centre Inc (1995) 75 WAIG 2316
Metropolitan Health Services Board v Australian Nursing Federation (2000) 99 FCR 95
Silberschneider v MRSA Earthmoving Pty Ltd 68 WAIG 1004
Transport Workers' Union v Arrow Holdings Pty Ltd 69 WAIG 1050
(Page 3)
1 ANDERSON J (PRESIDING JUDGE): This is an appeal from a decision of the Full Bench dismissing an appeal against orders made by an Industrial Magistrate sitting as an Industrial Magistrate's Court in Perth. The appeal is by an employer who was found by the Industrial Magistrate, Mr Cicchini SM, to have committed numerous breaches of an award, mostly in the form of underpayments. The Industrial Magistrate imposed monetary penalties and administered cautions and he also made an order for payment to the employee of $18,992.78, being his assessment of the value of the underpayments.
2 Industrial Magistrate's Courts are established under Pt III of the Industrial Relations Act 1979 with jurisdiction to hear applications by employees for enforcement of awards and employer/employee agreements: Section 83(1), s 83(2). The Court has the power to issue cautions and impose monetary penalties (s 83(4)) and may order that any monetary penalty be paid to the employee affected by the contravention: Section 83F(2). The Court may order also that the employer pay to the employee any amount which the employee has been underpaid: Section 83A(1). That amount then becomes a "penalty" and may be recovered accordingly: Section 83A(3). Applications for enforcement of awards brought under s 83 and s 83A are heard by the Industrial Magistrate's Court exercising its "general jurisdiction": Section 81CA. As well the Court has what is called a "prosecution jurisdiction" to hear complaints for contraventions or failures to comply with the Act: Section 81CA(1), s 83D. Ordinarily a breach of a statutory obligation which constitutes an offence is prosecuted in the Court of Petty Sessions by complaint laid under the Justices Act. However, complaints of contraventions against the Industrial Relations Act may only be heard by an Industrial Magistrate's Court so that complaints under the Justices Act alleging a contravention of the Industrial Relations Act must be laid in the Industrial Magistrate's Court: Section 83D(3). Nevertheless the proceedings are criminal in their nature: Section 81CA(5).
3 The proceedings in question here arise out of the relationship which was entered into between the appellant and the respondent in July 1998. The appellant carries on business as a roofing contractor and the respondent is a roofing plumber. According to the findings of the Industrial Magistrate, a short time prior to 9 July 1998 the respondent answered a newspaper advertisement placed by the appellant seeking the services of a roof plumber. This brought him into contact with the appellant's proprietor, Mr Turner, and there was a discussion between the two men on the terms of the engagement. The evidence as to exactly what was said is not very clear but the effect of Mr Turner's evidence which
(Page 4)
- was accepted by the Industrial Magistrate was that he offered employment to the respondent on the basis that he would be paid $25 an hour "all-in" for all hours worked.
4 Mr D Taylor, who appeared for the appellant, informed us that at the material time the relevant award prescribed an hourly rate for roof plumbers of not more than $16.92 for ordinary time or $642.96 per week for 38 hours. Ms Y Henderson, who appeared for the respondent, did not dispute this and I would deal with this appeal on the basis that the ordinary hourly rate prescribed in the award with respect to work done by the respondent for the appellant was at all times $16.92 or not more than that amount.
5 As it turns out the appellant intended to engage the respondent as a sub-contractor and not an employee whereas the respondent thought he had been offered employment as an employee and accepted the engagement on that basis. The appellant, believing that it had employed the respondent as a sub-contractor at an hourly all-in rate of $25, made payments to the respondent at that rate for every hour worked. The rate of $25 per hour was later increased to $28 per hour and for a brief time I think $30 per hour but the appellant made no extra payment to the respondent specifically for overtime nor for time worked on public holidays. The appellant did not allow the respondent a rostered day off on full pay nor did it recognise any obligation to make payments for sick leave or to allow holidays on full pay; nor did the appellant make any additional payments on account of superannuation. For his part, the respondent believed that he was entitled to these benefits and almost from the inception of his employment he complained about not getting them.
6 There was apparently no system of invoicing whereby the appellant's sub-contractors would present individual invoices claiming payment for work done. There was instead a timesheet system on which the time worked by each "sub-contractor" was recorded and periodically paid at the rate agreed between the appellant and that "sub-contractor". We were told in the course of argument that this is how the respondent's payments were calculated and paid. He put in timesheets and was paid for every hour worked at the flat rates mentioned.
7 The relationship between the parties came to an end after about a year and some months later the respondent commenced these proceedings by making a complaint before a Justice of the Peace and lodging it in the Industrial Magistrate's Court in Perth. The complaint alleged that the appellant had failed to comply with the provisions of a Federal award
(Page 5)
- called the Plumbing Industry (Queensland and WA) Award 1976, alternatively the Building Trades (Construction) Award 1978 in failing to pay to him a range of benefits provided for in those awards including overtime, public holidays worked and a redundancy payment; and in failing to allow him other benefits such as rest and meal breaks, rostered days off and the like.
Nature of proceedings
8 I think it is clear that the respondent intended to invoke the general jurisdiction of the Industrial Magistrate's Court not its prosecution jurisdiction. Resort to the complaint procedures was therefore wholly inappropriate. The only complaint that is authorised to be made pursuant to s 83D is a complaint of an offence against the Act. There is no such allegation in the complaint lodged by the respondent. The allegation is of a breach of one or other or both of the awards. The complaint ought to have been dismissed as disclosing no offence known to the law. A claim should have been lodged pursuant to s 83 and Reg 19 and initiated by the filing of a form of claim prescribed by the regulations (Form 1). No point was taken about this at any stage below or before us.
9 Even if we were to ignore this fundamental irregularity in the proceedings and treat the complaint as in substance a claim pursuant to s 83 and Reg 19 it remains a claim for enforcement of the applicable award. There is no allegation against the appellant that it breached an employer/employee agreement. The complaint alleges that the appellant:
"…being a party bound by Award No E1939(P0090) of 1979 Plumbing Industry Queensland and WA Award 1979 or in the alternative the Building Trades (Construction) Award 1987, Award No R14 of 1978 … underpaid the complainant and denied him benefits provided by the Plumbing Industry Award in breach of clauses 17, 19, 9, 32, 23, 11, 18, 1, 12, 16, 38, 10, 34 and 20 or in the alternative underpaid the complainant and denied him benefits provided by the Building Trades (Construction) Award 1987 in breach of clauses 25, 16, 17, 50, 15, 20, 27, 51, 22, 9, 8, 27 and 13."
10 There are 51 paragraphs of particulars which enumerate failures to pay amounts allegedly prescribed in the awards. The heads of claim and the amounts claimed under each head are summarised in the Industrial Magistrate's judgment at Appeal Book page 77 as follows:
(Page 6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 It is now common ground that the applicable award is the State award, ie the Building Trades (Construction) Award, and it is the provisions of that award which are relevant. The Industrial Magistrate, after a detailed consideration of the evidence, expressed his final conclusion as follows:
"Mr Peters has proved that at all material times he was an employee of the defendant. He has also proved that his employment was governed by the Building Trades (Construction) Award 1978 and that Award binds the defendant. I am satisfied that the defendant breached the award by failing to pay Mr Peters various entitlements. I am further satisfied that in consequence of the breaches Mr Peters was underpaid a total amount of $18,992.78. I find that the defence of estoppel
(Page 7)
- does not apply and further that any amounts paid to Mr Peters in excess of the award rate cannot be set off."
12 There is no appeal against the finding that the respondent was an employee whose employment was covered by the award.
13 I note that the "total amount of $18,992.78" is arrived at not by reference to the hourly rates prescribed in the award but by reference to the higher rate agreed between the parties and actually paid to the appellant for the hours which he worked. For myself, I can see no basis upon which the amount due upon enforcement of an award can be calculated by reference to an hourly rate which is not the rate prescribed in the award. This is not to say that an employer and an employee may not enter into an over-award agreement, ie an agreement, express or implied, most of the content of which is supplied by the terms of the award but with agreed additions. There is no reason why parties cannot contract by reference to the terms and conditions of an award. So for example, an employer might offer employment expressly or impliedly on the basis that the employee is to receive all of the benefits of the award save that instead of the ordinary hourly base rate prescribed by the award, a higher base rate will be paid. But then the employee who complains of a breach of the obligation to pay at the higher rate is not seeking to enforce the award but is seeking to enforce the agreement: Amalgamated Collieries of WA Ltd v True (1938) 59 CLR 417 per Evatt J at 434 and Dixon J at 431. See also (1940) 62 CLR 451 (Privy Council) per Lord Russell at 455. The failure to pay at the agreed rate would be a breach of the agreement, not a breach of the award. No employer/employee agreement is averred in the complaint which started these proceedings. Whilst unquestionably the Industrial Magistrate's Court has the jurisdiction to enforce employer/employee agreements: (Section 83(1), s 83(2)) the Court was not called on to do so in this case. It is not possible to read the complaint or the particulars of the complaint in any other way than as a claim to enforce the award. It is not a claim to enforce an over award agreement.
14 I should perhaps say that it was not submitted that agreed over award payments are picked up by the award and become part of its terms and conditions; nor was our attention drawn to any statute which brings about such situation, that is, which converts an over award arrangement into an award condition. Therefore an application for enforcement of the terms and conditions of the award, which is what this application is, cannot proceed on the basis that what is due under the award is to be calculated by reference to the over award rate agreed between the parties.
(Page 8)
15 On this ground alone the order of the Industrial Magistrate cannot stand and must be set aside.
16 It should also be observed that, prima facie, it is only where the award provides for payment in lieu of an entitlement (such as for example, in the case of holidays worked, as per cl 17(4)) that an order for monetary payment by way of enforcement of the award can be made. Where the award does not provide for monetary payment in lieu of a (denied) entitlement, an order for the payment of money would have to be justified on some basis other than that the amount was due under the terms of the award. I have in mind for example, meal breaks, crib time, annual leave etc which the award obliges the employer to allow but (so far as I can see) with no penalty rates of pay prescribed in the event that the benefits are not allowed. However, we do not have the whole of the award before us and we were not addressed on this aspect of the matter and I therefore say no more about it.
Set off
17 I now turn to the rather vexed question of so-called set off.
18 It should be recognised at the outset that the term "set off" is used loosely in this area of industrial law. Strictly speaking it is a misuse of the term. The right of set off is a common law right to plead a debt due from the claimant as a defence to his claim and in partial satisfaction or extinction of it. The right arises at common law only where there are mutual debts between claimant and defendant. Meagher, Gummow and Lehane, "Equity: Doctrines and Remedies" (3rd ed) par [3704]. In the area of law with which we are dealing there is no question of mutual debts between employer and employee. The term "set off" is conveniently used merely to denote a defence by the employer to the effect that the payments which he actually made to the employee were sufficient to discharge all of his obligations. That is not really a claim of set off. It involves no allegation of mutual indebtedness.
19 With this understanding, the question of set off arises in this case because the appellant contends that the amount paid to the respondent exceeds the maximum amount which the appellant was obliged to pay to the respondent under the award in respect of any of the periods of work in question. For his part the respondent contends that none of the money which was paid by the appellant over and above the award entitlement for ordinary time can be applied in satisfaction of the appellant's obligation under the award to pay the other entitlements claimed.
(Page 9)
20 What is at issue here is the manner in which amounts which had been paid to the respondent should be credited to the appellant's obligations under the award. Cases in which this question has been discussed include Ray v Radano (1967) AR (NSW) 471;Pacific Publications Pty Ltd v Cantlon (1983) 4 IR 415; Poletti v Ecob (No 2) (1989) 31 IR 321; Logan v Otis Elevator Co Pty Ltd [1999] IRCA 4 and ANZ Banking Group Ltd v Finance Sector Union of Australia [2001] FCA 1785.
21 These cases must be discussed in some detail, which I will do later, but meanwhile I think the relevant principles that are to be extracted from them can be stated as follows:
1. If no more appears than that (a) work was done; (b) the work was covered by an award; (c) a wage was paid for that work; then the whole of the amount paid can be credited against the award entitlement for the work whether it arises as ordinary time, overtime, weekend penalty rates or any other monetary entitlement under the award.
2. However, if the whole or any part of the payment is appropriated by the employer to a particular incident of employment the employer cannot later claim to have that payment applied in satisfaction of his obligation arising under some other incident of the employment. So a payment made specifically for ordinary time worked cannot be applied in satisfaction of an obligation to make a payment in respect to some other incident of employment such as overtime, holiday pay, clothing or the like even if the payment made for ordinary time was more than the amount due under the award in respect of that ordinary time.
3. Appropriation of a money payment to a particular incident of employment may be express or implied and may be by unilateral act of the employer debtor or by agreement express or implied.
4. A periodic sum paid to an employee as wages is prima facie an appropriation by the employer to all of the wages due for the period whether for ordinary time, overtime, weekend penalty rates or any other monetary entitlement in respect of the time worked. The sum is not deemed to be referable only to ordinary time worked unless specifically allocated to other obligations arising within the employer/employee relationship.
5. Each case depends on its own facts and is to be resolved according to general principles relating to contracts and to debtors and creditors.
(Page 10)
22 Applying these principles to the case before us, the first question is whether the appellant made any implied or express allocation to a particular incident of employment, such as ordinary time.
23 In this respect, the Industrial Magistrate's findings are quite clear. He said:
"I am satisfied that the defendant [appellant] has throughout his relationship with Mr Peters [respondent] operated on the basis that the hourly rate paid to Mr Peters constituted an 'all-in rate'. I accept that Mr Turner may have expressed the rate to be an all-in rate when he initially spoke to Mr Peters."
24 The Industrial Magistrate made no express finding as to the meaning of the expression "all-in rate" but it is implicit in his reasons that he took it to mean payment to cover all the monetary obligations arising in the employment relationship whatever they may be.
25 On this finding the question might be thought to be simply whether the all-in rate actually paid did in fact, as a matter of arithmetic, cover all the money entitlements provided for in the award.
26 The Industrial Magistrate (and the Full Bench in upholding his decision) saw the case differently but this was I think due to a misconception on their part that the law is that there is no right by an employer to rely on higher than award rates actually paid unless there was an express or implied allocation of that payment to obligations arising under the award which in this case there was not. Mr Turner did not say to the respondent that the $25 per hour flat rate for every hour worked was to cover all obligations arising under the award to pay for time worked whether ordinary time, overtime, weekend work or holidays worked.
27 It was this which led the Industrial Magistrate to say:
"The agreement as to the payment by the defendant of an 'all up' or 'all in rate' had nothing to do with its obligation under the award. It was a term of a private contract that did not in any way contemplate the application of an award. Indeed Mr Turner's evidence dictates that he had little or no knowledge of the award. He did not even contemplate that the defendant might be bound by it. He dealt with Mr Peters on the basis that he was a sub-contractor. In those circumstances the application of the expression 'all in' or 'all up' could have nothing to do with
(Page 11)
- the defendant's satisfaction of any of the particular components of the award."
28 Later he said:
"The $25 per hour payment that later increased to $28 must in all the circumstances be seen as a private contract between the parties for purposes outside an award."
29 Literally what this means is that amounts paid in excess of an award obligation cannot be relied on in defence to a claim for enforcement of the award obligation unless the payment was made with reference to and in order to cover that award obligation; and as the appellant never had the award in mind when it engaged the respondent, the appellant cannot now claim that the payments it made to the respondent did in fact satisfy its obligations under the award. The Full Bench appears to have upheld this reasoning. With respect it cannot be right and is, I think, contrary to the decision in ANZ Banking Group Ltd v Finance Sector Union (supra), to which case I will return in a moment. If the proposition is correct it would seem to be a warrant to claim double payment of wages, that is, to accept and retain all payments made pursuant to an employment contract in which there is no reference to the award and as well claim all payments prescribed in the award. Justice and the law would have parted company.
30 The claim for underpayment does not go so far as to claim that the payments made under what the Industrial Magistrate referred to as the "private contract" satisfied none of the appellant's obligations under the award. There is no claim for underpayment with respect to ordinary time worked. It is therefore implicit in the claim that the respondent accepts that the flat rate which was paid to him did at least satisfy the appellant's obligations to pay him for ordinary time worked even although the flat rate was paid under a contract and without any regard at all for the provisions of the award and without reference to the award. However, the respondent made no such concession in formulating the claims which he made for underpayment of overtime, etc. An examination of those claims, which were allowed in full by the Industrial Magistrate, whose judgment the Full Bench upheld, shows that the amounts which were actually paid to the respondent have been left out of account altogether in calculating the underpayments.
31 Take the first item in the particulars of claim by way of example. Under the heading "Particulars of Breaches" it is pleaded:
(Page 12)
- "1. On and about 9 July 1998 at Perth the respondent failed to pay the complainant for two hours overtime worked at time and a half pursuant to [cl 15] of the award and the respondent owes the complainant $75 for this breach."
32 The evidence shows that on 9 July 1998 the respondent worked 10 hours for which he put in a timesheet or "invoice" and was paid $250 being $25 multiplied by 10. His claim of underpayment is based on the proposition that for the last two hours (hours 9 and 10) he should have been paid time and a half; that is according to him $75 instead of the $50 which he was paid. Yet the claim is not for the difference but for $75 with no credit given for the $50 received. In this regard the proposition, which I have said cannot be right, does appear to have been literally applied. The Industrial Magistrate allowed the claim in full (as he did in respect to each other similar claim) holding that the $50 which had been paid could not be brought to account in assessing the extent of the underpayment because the $50 had been paid under a "private contract that did not in any way contemplate the application of the award" and the Full Bench held that he was correct. So the most astonishing result is that by judicial decree the respondent, who was entitled under cl 15 of the award to time and a half for each of the two overtime hours worked (a total of $50.76 at the award rate of $16.92) will receive a total of $125 for those two hours.
33 With respect I cannot accept the reasoning which produces this result nor do I consider any support for it can be found in the leading cases on the subject. It is now necessary to turn to those cases.
34 Ray v Radano (supra) concerned a claim for overtime payments. By agreement the employee, a chef, had been paid a weekly wage in excess of the award wage. The finding was that agreed wage was for 40 hours. The majority (Richards and Sheehy JJ) in the New South Wales Industrial Commission held that the employer was entitled to set off the amount by which the agreed wage exceeded the award wage against the amount due under the award for overtime. Sheldon J dissented and his opinion has been widely accepted as correct and repeatedly applied. He held that because the agreed weekly wage was for ordinary time the employer could not answer the claim for overtime by now seeking to allocate the over award payments in discharge of the obligation to pay overtime. Having made payments on one account the employer could not claim that that same payment discharged his liability on another account. It is important to understand that it was a case in which no payment at all had
(Page 13)
- been made for the overtime which the chef actually worked. And neither was his weekly wage an "all-in" wage. It is not this case.
35 In Pacific Publications Pty Ltd v Cantlon (supra) the employee, a journalist, was retrenched without notice and claimed 16 weeks pay in lieu of notice as provided for in the relevant award. That amounted to $6,203.20. When he was retrenched he was given a letter to which was attached a cheque for $4,999.20 made up of various amounts itemised in the letter including an amount of $4,000 designated as a "special gratuity". In the claim for salary in lieu of notice the employer sought to off set the $4,000 as a pro tanto satisfaction of its obligation to pay salary in lieu of notice. The court held that on the wording of the letter the payment of $4,000 was intended to be in the nature of a bonus in addition to any amount to which the employee might be legally entitled and the employer could not therefore later seek to make an appropriation of the payment in purported satisfaction of its legal obligations. See especially at 421. That is not this case.
36 Poletti v Ecob (No 2) (supra) concerned a stable foreman in the racing industry employed by a horse trainer. The arrangement was that the employee could live on the training premises without payment of rent and would be paid cash wages each week and other non-cash benefits and would work as many hours as were needed to get the work done. The cash wages were placed in an envelope on which was written an amount but the envelope usually contained an additional cash amount, the purpose of this being to enable the additional amount to be received tax free. This arrangement continued for seven or eight years and when it terminated the employee's union through its authorised representative, Mr Ecob, made several complaints against the employer alleging underpayment of annual leave entitlements, underpayment of wages, underpayment of public holiday entitlements and non-payment of overtime. The employer sought to aggregate the total amount of the payments made to the employee, including the additional cash payments, and to off set this against the total amount found to have been under paid. The court held that there was in fact "an agreement between the employer and the employee as to the manner in which the amounts paid were to be applied" (335). This agreement was to the effect that all of the payments, including the additional cash payments, were to cover the ordinary time worked by the employee (40 hours per week) plus annual leave and hence because the total payment exceeded the award entitlement for ordinary time and annual leave there was no underpayment in respect of those entitlements. However, as the additional cash payments had been appropriated by agreement to those entitlements only, no part of the payments in excess of
(Page 14)
- what was required to satisfy them could be appropriated to any other incident of employment. In particular, the employer could not seek to appropriate any of the excess in satisfaction of its obligation to pay overtime. Once again, that is not this case.
37 In Logan v Otis Elevator Co Pty Ltd (supra) the employee was employed as a local representative for the employer in a country area of New South Wales. On termination of his employment he claimed to be entitled to various sums of money under his award. Essentially these claims were for "standing by" and "call backs". The employer had paid a salary in excess of the wages prescribed for ordinary time and sought to off set the difference against the payments due to the employee for standing by and call backs. The Court held that the employer was not entitled to do so. As I understand the judgment this was because the annual salary, which was higher than ordinary wages calculated in accordance with the award, was paid for the additional responsibilities which attended the position of a local representative. The court said at [30]:
"The whole of the excess was paid and received as an amount appropriate to reflect the difference between the position of a local representative, with all that entails, and an ordinary electrician special class."
38 The court held that none of the excess could be reasonably identified as intended to cover overtime and call backs and it held that "accordingly, set off against the overtime and call back payments due to Mr Logan under the 1989 Award" were not permissible. Again, that is not this case.
39 I now come to ANZ Banking Group Ltd v Finance Sector Union (supra). The facts of this case are complex to say the least. At the risk of over-simplification it is perhaps enough to say that six bank managers had been retrenched and were paid a final amount on termination under a special retirement/severance allowance scheme into which they had agreed to enter a few years previously. The effect of this scheme operating in conjunction with the relevant award (ANZ Group Award 1991) was that participants would be paid a termination entitlement based on length of service from which was to be deducted the award entitlement for unused long service leave. The latter sum would be paid separately and specifically as an award entitlement. The aggregate scheme entitlement was always greater than the award entitlement due to calculation provisions in the scheme which were somewhat more generous than those prescribed in the award; so there would always be a
(Page 15)
- balance in favour of the employee after deduction and separate payment of the award entitlement. The six retrenched managers each received a "Payment Summary" on retrenchment which showed the way in which the Bank calculated the payment which was made to them. The method of calculation was as follows (Finance Sector Union v Australia and New Zealand Banking Group Ltd [2000] FCA 1748 par 38). The Bank calculated the total retirement benefits due under the scheme. Then it calculated the unused long service leave entitlement due under the award. That amount was then deducted from the entitlement due under the scheme and paid as an award entitlement designated "long service leave" and the difference was designated in five cases as "retiring allowance" and in one case "ex gratia payment". The total payment received by each employee was the sum of the two that is, the amount designated "long service leave" and the amount designated "retiring allowance" or "ex gratia payment".
40 The Union disputed the correctness of the calculation of "long service leave" contending that it was less than it should have been and made an application in the Federal Court under s 178 of the Workplace Relations Act 1996 (Cwth) seeking penalties for breach of the award. The Bank said that, in the first place, its calculation was correct; and in the second place, even if the Union's calculation was correct, the aggregate amount actually paid to each of the six managers was in excess of the award entitlement for long service leave so that the Bank was not in contravention of the award. North J at first instance held that the Union's calculation was correct and on that basis the amount calculated as payable for unused long service leave was less than it should have been. But as the aggregate payment was more than enough to cover the true amount due for unused long service leave was the Bank guilty of breach of the award? The question was expressed by North J in the following terms:
"Thus, the question arises whether the respondent is able to rely on the payment of the amount designated as a retirement allowance or an ex gratia payment under the scheme in the Final Payment Summary to discharge the obligation to pay out unused long service leave under the award as construed in these reasons for decision."
41 North J said that because the additional payments had been made to the employees in discharge of the contractual obligation under the scheme and not to cover the award liability the payments could not be offset against the award liability and the Bank was therefore in breach of the award.
(Page 16)
42 This is much the same reasoning as was adopted by the Industrial Magistrate and the Full Bench in the case that is before us. However, on appeal to the Full Court of the Federal Court (Black CJ, Wilcox and von Doussa JJ) the approach was rejected. The Full Court held that because the payment under the scheme was itself and in reality a payment in respect of untaken or unused long service leave it could be set off against the liability under the award to make a payment on that account. The Court held that whilst there must be a close correlation between the nature of the contractual obligation and the nature of the award obligation before one could be off set against the other it was a matter of looking to see whether both the award entitlement and the contractual payment arose out of the same agreed purpose. It was not necessary that the same label be used in describing each. Because both the award obligation and the obligation imposed by the scheme were obligations to make money payments in respect of long service the Court said at par 57:
"The whole of the money paid to each of the six employees is to be taken into account in determining whether they have received the moneys due to them under the ANZ Group Award. On that approach, ANZ has not contravened the award."
43 If the term "all-in" rate has the meaning which the Industrial Magistrate implicitly took it to have in this case namely, a rate paid in satisfaction of the whole of the employee's legal obligations to make monetary payments for hours worked, the case before us would appear to be on all fours with ANZ Banking Group Ltd v Finance Sector Union (supra). Both the award obligation and the obligation arising under the contract may each aptly be described as an obligation to make money payments in respect of hours worked. Their purpose is the same, namely, to remunerate the respondent for the hours which he has worked. Reducing this to concrete terms the appellant paid the respondent the sum of $25 flat for each of the 10 hours of work on 9 July 1998. In terms of the award the respondent was entitled to be paid ordinary rate of $16.92 for the first eight hours ($135.36) and time and a half at award rates for the ninth and tenth hours ($50.76). The amount paid to him in respect of the ten hours of work ($250) substantially exceeded that entitlement. Therefore, in making the payment which it did make for the work done on that day the appellant did not contravene the award.
44 There is nothing in the cases referred to which is to the effect that, where payments are made pursuant to a contractual arrangement without regard for award obligations, they are to be completely ignored and left out of account in looking to see whether an obligation imposed by the
(Page 17)
- award has been satisfied. At their highest they are authority for the proposition that if an employer impliedly or expressly appropriates a payment of money to a particular obligation arising in the employment relationship (ie to a particular incident of employment) the employer is to be held to that appropriation and cannot seek later to reappropriate or "reprobate". The cases are not authority for the proposition (upon which the judgments below seem to have proceeded) that unless there is an express appropriation to a particular award entitlement the sums paid by the employer to the employee are to be ignored or treated as referable only to ordinary time worked.
Conclusion
45 The payment of an amount as wages for hours worked in a period can be relied on by the employer in satisfaction of an award obligation to pay wages for that period whether in relation to wages for ordinary time, overtime, weekend penalty rates, holidays worked or any other like monetary entitlement under the award. This is so, whether the payment of the wages is made in contemplation of the obligations arising under the award or without regard for the award. However, if a payment is made expressly or impliedly to cover a particular obligation (whether for ordinary time, overtime, weekend penalty rates, fares, clothing or any other entitlement whether arising under the award or pursuant to the contract of employment) the payment cannot be claimed as a set off against monies payable to cover some other incident of employment. A payment made on account of say ordinary time worked cannot be used in discharge of an obligation arising on some other account such as a claim for overtime. Whether or not the payment was for a particular incident of employment will be a question of fact in every case.
46 In this case, if the arrangement between the respondent and the appellant had been (which it was not) that the respondent would be paid a base rate of $25 per hour for ordinary time the difference between that rate paid for ordinary time and the base rate prescribed in the award for ordinary time could not go in discharge of an obligation with respect to other entitlements such as overtime, holidays worked and so on.
47 These are the principles according to which this case should have been decided and the case should be remitted to the Industrial Magistrate for reconsideration in the light of this judgment.
48 I do not say that in no instance has the appellant contravened the award. It may be, for example, that some of the entitlements prescribed in
(Page 18)
- the award and which were denied to the respondent cannot be discharged by payment of money. The obligation to provide those entitlements may not be capable of being discharged by the payment of an all-in rate, no matter how much it may exceed the rates set forth in the award. In that case there could be no question of set off. For example, I would doubt that there is a sufficient degree of correlation between the nature of the payment made to the respondent and the nature of the obligation to pay untaken long service leave. I would doubt that the over award payment for hours worked could be set-off against the obligation to pay untaken long service leave. It will be for the Industrial Magistrate to consider these matters.
49 It is worth making one other observation. We heard no argument on the question whether an agreement to pay over award rates for ordinary time carries through to overtime and penalty rates. The question does not arise in this case because the Industrial Magistrate found that the flat rate which was agreed was "all-in", that is, to cover everything, not just ordinary time. I therefore express no concluded view but, in case it may be of some assistance and recognising that what I am about to say is mere obiter, it seems to me that the question is to be resolved by the ordinary rules which apply to the construction of contracts. The worker seeking to recover penalty rates calculated by reference to an agreed over award base rate is not seeking to recover an amount to which he is entitled by virtue of a statutory obligation arising from the award provisions but is seeking to recover moneys due by virtue of the contract to pay more than is prescribed in the award. The worker would have to prove not only that he had a contract under which he was to be paid over the award for ordinary time but also that under the contract he was to be paid overtime etc calculated by reference to the over award amount agreed for ordinary time. See Josephson v Walker (1914) 18 CLR 691 especially per Isaacs J at 700.
50 Of course, the award itself may provide that the overtime and penalty rates, etc are to be calculated by reference to such over award arrangement as may have been entered into. For example, the award may define "ordinary rates" or "ordinary time" for the purpose of calculating penalty rates as meaning the rate usually paid to a worker for ordinary time as distinct from the rate prescribed in the award for ordinary time. This seems to be what Watson J was referring to in Churchill Engineering Contractors Pty Ltd v Dortmans (1987) 22 IR 278 at 279-280. In that case there was a claim for accrued holiday pay on termination of employment. The claim was made under the Annual Holidays Act which provided for the recovery of pro rata holiday pay calculated by reference
(Page 19)
- to the employee's "ordinary pay". The Industrial Magistrate upheld a claim for payment calculated by reference to the award wage payable to each employee which was less than the wage actually being paid. In confirming this decision Watson J commented, obiter, that "ordinary pay" as defined in the Act may mean the wage actually paid so as to permit a claim for accrued annual leave to be based upon that higher rate of pay. I mention this case only because it was included in Ms Henderson's list of authorities and only to distinguish it from the case which we have under consideration. Although we were not provided with the whole of the relevant award it is not suggested in the judgments below nor was it argued that the award provisions themselves provided for a calculation of overtime based upon rates actually paid. Churchill Engineering Contractors Pty Ltd v Dortmans is therefore clearly distinguishable and would not assist the respondent to contend that his claim for entitlements based on an hourly rate higher than those provided in the award is a claim to enforce the award rather than a claim of breach of contract.
51 The orders should be that the appeal be allowed and the matter should be remitted to the Industrial Magistrate to be dealt with according to law in the light of this judgment.
52 SCOTT J: In this matter I have had the opportunity of reading in draft the reasons of the Presiding Judge. I generally agree with those reasons and the disposition proposed by his Honour. There are, however, a few observations I would like to add.
53 This matter was commenced by a document which purports to be a charge by summons on a complaint and pursuant to the Western Australian Industrial Arbitration Act 1979 ("the Industrial Relations Act"). It is a complaint made by the present respondent.
54 The complaint purports to be made before a Justice of the Peace and alleges that the appellant, being bound by a specified award, committed a breach thereof in certain specified ways which are particularised in the summons.
55 The summons commands the appellants to appear before the Industrial Magistrate.
56 The summons also specified that the appellant may enter a plea of guilty by completing the appropriate section on the reverse side of the summons and returning it to the clerk of courts to reach him prior to the hearing date or enter a plea of not guilty within certain time limits and with specified consequences.
(Page 20)
57 The complaint was followed by a document in the appeal book called "Re-amended Particulars of Claim" which purported to particularise the breaches of the Plumbing Industry (Queensland and WA) Award 1999 committed by the appellant.
58 In response to that document the present appellant filed an amended defence and set off and the matters appears to have proceeded to trial in that form.
59 The first thing to note about the document which initiated these proceedings is that it purported to be a complaint which could lead to a conviction. The particulars of the complaint, however, do not identify any offence of which the appellant could be guilty or, indeed, to which it was required to plead.
60 It would have been open to the present appellant to plead under the provisions of s 616 of the Criminal Code of Western Australia that the complaint did not disclose any offence cognisable by the Court.
61 As the Presiding Judge points out, in the schedule to the Industrial Relations Commission Regulations 1985 there is a provision for an application in Form 1 and a further Form 21 which may have been modified to accommodate the present application. Neither of those forms were used in this case.
62 Whilst it is appreciated that the exercise of jurisdiction under the Industrial Relations Act1979 is governed by s 26 which requires the Commission to act according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms, that provision, in my view, would not save the form of summons used in this case which was appropriate for a criminal prosecution leading to a conviction.
63 The application here appears to have been brought under s 83 and s 83A of the Industrial Relations Act. Section 83 provides:
"83. Enforcement of certain instruments
(1) Subject to this Act, where a person contravenes or fails to comply with a provision of an instrument to which this section applies any of the following may apply in the prescribed manner to an industrial magistrate’s court for the enforcement of the provision."
(Page 21)
64 Thereafter in subs (a) to subs (f) various organisations and persons are designated who may bring such an application.
65 By the provisions of s 83(4) of the Industrial Relations Act:
"On the hearing of an application under subsection (1) the industrial magistrate’s court may, by order —
(a) if the contravention or failure to comply is proved —
(i) issue a caution; or
(ii) impose such penalty as the industrial magistrate’s court thinks just but not exceeding $2000 in the case of an employer, organisation or association and $500 in any other case;
or
(b) dismiss the application."
66 In my view, it is clear from those provisions that to proceed in this case by complaint was wholly inappropriate and could have resulted in the complaint being struck out had an application been made to do so. However, the matter has progressed through to this Court without the point having been taken. I would add that there was no challenge to the complaint in this Court.
67 In the circumstances, therefore, and as the matter has not been argued before us, it is inappropriate to say any more about the matter, except that, as the matter is to be remitted to the Industrial Magistrate to be further dealt with accordingly to law, in my view, this issue should be exposed at least for the assistance of the Industrial Magistrate to whom the matter will ultimately be returned.
68 PARKER J: I have had the advantage of reading in draft the reasons of the Presiding Judge with which I respectfully concur.
69 For those reasons the orders proposed by his Honour should be made.
133
8
3