Johnson v Finance Sector Union of Australia

[2018] FWC 1035

[2018] FWC 1035

FAIR WORK COMMISSION

DECISION

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

Catherine Johnson
v
Finance Sector Union of Australia
(C2017/2461)

DEPUTY PRESIDENT COLMAN MELBOURNE, 16 FEBRUARY 2018

Application to deal with a dispute – interpretation of agreement – whether jurisdiction exists to deal with dispute under superseded agreement - entitlement to paid parental leave whilst on unpaid leave – whether entitlement is a ‘service benefit’

[1] This decision concerns an application made by Ms Catherine Johnson under s.739 of the Fair Work Act 2009 (Act) for the Commission to deal with a dispute in accordance with the dispute settlement procedure in clause 50 of the Finance Sector Union Staff Collective Agreement 2015 (2015 Agreement).

[2] Ms Johnson is employed as an information and advice officer in the Finance Sector Union’s National Response Centre. She has been on consecutive periods of parental leave, together with one period of leave without pay, since 2009. During her period of leave without pay, she requested a fourth period of parental leave, which was approved without pay. She remains on unpaid parental leave.

[3] The dispute concerns whether on a proper construction of the 2015 Agreement, Ms Johnson was entitled to paid parental leave in respect of her fourth period of parental leave.

Background

[4] The factual background to this matter is not contested. Ms Johnson commenced employment with the FSU on 21 April 2007. On 14 August 2009, the FSU approved Ms Johnson’s request for parental leave commencing on 16 September 2009 for a period of 12 months. On 27 July 2010, the union approved Ms Johnson’s request for a 12 month unpaid extension to her parental leave. Her expected date of return to work was recorded as 9 September 2011.

[5] On 19 May 2011, Ms Johnson advised the FSU that she was expecting her second child. She requested that she be granted paid parental leave from 9 September 2011. On 17 June 2011, the FSU approved her application for parental leave, including paid parental leave from 9 September 2011. It noted that the question of whether she was actually entitled to paid parental leave was in doubt (for reasons unrelated to the present application), but that it would approve the request as an ‘act made in good faith’. Ms Johnson’s expected date of return to work was recorded as 19 September 2012. The FSU subsequently granted a request by Ms Johnson for a one year unpaid extension of her parental leave. Ms Johnson’s expected date of return to work was recorded as 19 September 2013.

[6] On 14 June 2013, Ms Johnson advised the FSU that she was expecting her third child. She requested that she be granted paid parental leave from 19 September 2013. On 4 July 2013, the FSU approved her application. Ms Johnson’s expected date of return to work was recorded as 18 September 2014. Ms Johnson later requested a 12 month unpaid extension to her third period of parental leave, and her request was approved. Ms Johnson’s expected date of return to work was then 18 September 2015.

[7] On 11 May 2015, Ms Johnson applied to the FSU for leave without pay for a period of two years commencing on 18 September 2015. The FSU initially refused this request. Between 9 June 2015 and 10 September 2015, there was a series of exchanges between Ms Johnson and the FSU about her leave without pay request. Ms Johnson’s union, the Australian Services Union (ASU), engaged in discussions with the FSU pursuant to the dispute resolution provisions of the 2015 Agreement. On 14 September 2015, the FSU, as a further ‘act of good faith’, approved Ms Johnson’s request for leave without pay for two years. Ms Johnson’s expected date of return to work was 18 September 2017.

[8] On 14 October 2016, Ms Johnson wrote to the FSU advising that she was expecting her fourth child. She requested that she be granted paid parental leave from March 2017. On 22 December 2016, the FSU approved Ms Johnson taking unpaid parental leave. However, it refused her request for paid parental leave on the basis that paid parental leave was a ‘service benefit’ which, pursuant to clause 35.6.4 of the 2015 Agreement, is suspended during periods of leave without pay.

[9] On 13 January 2017, the FSU wrote to Ms Johnson, confirming that it had approved her unpaid parental leave commencing on 28 March 2017, but that she was not eligible for all other ‘service benefits’, which included paid parental leave, on the basis that she was on leave without pay at the time the request was made.

[10] Ms Johnson is currently on approved unpaid parental leave. She disagrees with the FSU’s interpretation of the 2015 Agreement and maintains that she is entitled to paid parental leave. She contends that paid parental leave is not a ‘service benefit’, and was therefore not a benefit excluded during periods of leave without pay by clause 35.6.4.

Question for determination

[11] The parties agreed that the dispute could be resolved by the Commission determining the following question:

‘Is the Paid Parental leave in clause 10.1.2 of the FSU Staff Collective Agreement 2015 (Agreement) a service benefit for the purposes of clause 35.6.4 of the Agreement?’

[12] If paid parental leave is a ‘service benefit’ for the purpose of clause 35.6.4, eligibility for and access to it is suspended during a period of leave without pay, and Ms Johnson was not entitled to paid parental leave at the relevant time.

[13] On 13 October 2017, I issued directions for the filing and service of submissions and materials. The parties agreed that I should determine the matter on the papers. The FSU was represented by its solicitors, who prepared its contentions. I have granted permission for the FSU to be represented in this regard, as I determined that it would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter, in accordance with s.596(2)(a).

Jurisdiction

[14] In their written submissions, Ms Johnson and the FSU agreed that the jurisdiction of the Commission had been properly invoked and that the Commission could resolve the dispute by exercising arbitration power for which provision is made in clause 50 of the 2015 Agreement.

[15] However, after the submissions were filed, I raised with the parties the following jurisdictional question. In July 2017, the Commission approved the Finance Sector Union Staff Collective Agreement 2016 (2016 Agreement), which has the same coverage as the 2015 Agreement. It would appear therefore that there are no employees to whom the 2015 Agreement now applies, including Ms Johnson. The consequence of this is that the 2015 Agreement has ceased operation because of the effect of s.54(2)(b) of the Act. This raised the question as to whether the Commission had jurisdiction to arbitrate a matter referred to it under a disputes procedure in an agreement that was no longer in operation. The question was not addressed by the parties’ written submissions. I invited their comment on the matter.

[16] I later forwarded to the parties a copy of the decision of the Full Bench in BlueScope Steel v AMWU and CEPU 1which was handed down on 8 February 2018. In that case, a Full Bench of the Commission refused to grant permission to appeal against a decision of Commissioner Riordan, in which the Commissioner found that he had jurisdiction to continue to deal with a matter under a disputes procedure in an enterprise agreement after that agreement had ceased operation. I dissented in that case, but am bound in the present matter by the decision of the majority to the extent it is relevant.

[17] In response, Ms Johnson did not contend that the Commission had jurisdiction to hear her dispute, but requested that the Commission make a recommendation as to how the dispute should be resolved. The FSU’s position was that the Commission ceased to have jurisdiction to deal with the matter when the 2016 Agreement came into operation. It did not agree to the Commission making a recommendation, and contended that there would be no jurisdiction for it to do so.

[18] On one view, the decision of the majority in BlueScope might support a contention that the Commission retains jurisdiction to determine her application, despite the fact that the 2015 Agreement is no longer in operation and has been replaced. In my opinion however, the better view is that the decision of the majority in BlueScope is confined to the peculiar facts of that case. There, the Commissioner had made an earlier decision, while the old agreement was still in operation; that decision contemplated that the Commission would conduct a review of certain new arrangements introduced pursuant to the decision. A new enterprise agreement was then made. Later, the Commissioner sought to conduct the review contemplated by his earlier decision. In the present matter, the 2015 Agreement ceased to operate prior to any decision of the Commission in relation to the application, and prior to the request for the Commission to arbitrate being made.

[19] The 2015 Agreement is no longer in operation and Ms Johnson was not covered by it at the time she made her application. Her employment is now, and was at the time of her application, covered by the 2016 Agreement. Although the dispute settlement provisions in the two agreements are in the same terms (clauses 50 and 57 respectively), the present matter was brought under the 2015 Agreement, and there is no savings provision in the 2016 Agreement that preserves disputes brought under the earlier agreement that are yet to be determined. Nor does the wording of the disputes provision in the 2016 Agreement contemplate employees bringing disputes relating to matters under the earlier agreement (see in particular clause 57.4, which refers to matters arising ‘from this Agreement’).

[20] I note further that the 2016 Agreement contains a substantive change to the provisions concerning paid parental leave, the effect of which is that Ms Johnson could not simply make a new application under the 2016 Agreement, as it is clear that she would not be entitled to paid parental leave under the terms of the current agreement. In any event the 2016 Agreement did not apply to her at the time she requested the paid parental leave.

[21] In my view, the source of the Commission’s authority to deal with the present dispute, namely the 2015 Agreement, no longer exists, and the peculiar circumstances that were the subject of the majority decision in BlueScope are not relevant to the present matter. Accordingly, in my opinion the Commission does not have jurisdiction to determine the present dispute, or to make a recommendation.

[22] However, even if I am wrong in my conclusion that the Commission does not have jurisdiction to determine the dispute, I would determine that paid parental leave is a ‘service benefit’ for the purposes of the 2015 Agreement, and that Ms Johnson was not entitled to paid parental leave, for the reasons set out below.

Terms of the 2015 Agreement

[23] The Agreement contains an appendix entitled ‘FSU Terms and Conditions’ (Terms and Conditions) that form part of the Agreement. Clause 35 of the Terms and Conditions provides for leave without pay in the following relevant terms:

‘Subject to the following, leave without pay within the FSU means the process by which the Union allows employees and officials to interrupt their career with the Union for a specified time without severing their employment relationship…’

[24] Clause 35.1 provides that an employee with at least 12 months service with the FSU shall be entitled to apply to take leave without pay for up to two years for reasons including family responsibilities.

[25] Clause 35.6 deals with the effect of leave without pay on ‘service benefits.’ It provides as follows:

‘35.6 Effect of Leave Without Pay on Service Benefits

35.6.1 Annual Leave

Accrual of annual leave will be suspended during the approved period of leave.

35.6.2 Long Service Leave

No long service leave entitlement will accrue during the period of leave.

35.6.3 Superannuation

Employer superannuation contributions will be suspended for the duration of the leave.

35.6.4 Other

Eligibility for and access to all other service benefits will be suspended during the period of leave.

35.6.5 Continuity of Service

The period of leave associated with the FSU leave without pay will not break the employee’s or official's continuity of service.’ (Emphasis added)

[26] Parental leave is dealt with in clause 10 of the Agreement and provides as follows:

‘10. Parental Leave

Subject to the following, employees and officials are entitled to parental, secondary carer's and adoption leave. The provisions of this clause apply to FSU officials and full time, part time and eligible casual employees, but do not apply to other casual employees and, temporary employees.

The Commonwealth Government Paid Parental Leave Scheme and the Commonwealth Dad and Partner Pay scheme will apply in addition to the Parental Leave arrangements contained in this Agreement.

10.1 Basic Entitlement

10.1.1 After twelve months continuous service, employees and officials are entitled to parental leave of 12 months as set out in the NES in relation to the birth or adoption of their child. Adoption leave may be taken in the case of adoption.

10.1.2 For employees or officials eligible for parental leave, the first 14 weeks shall be paid leave.’

[27] It should be noted that clause 10 of the Agreement is replicated in clause 34 of the Appendix. The Appendix forms part of the Agreement, in accordance with clause 5, and there is no indication in the Agreement that the 55 clauses in the Appendix are subject to the 15 clauses in the Agreement.

[28] The principles that apply to the interpretation of enterprise agreements were summarised by the Full Bench of the Commission in Berri.  2 It is not necessary to restate them.

Ms Johnson’s submissions

[29] Ms Johnson contends that she is entitled to 14 weeks paid parental leave in respect of her current, fourth period of parental leave, in accordance with clause 10.1.2 of the 2015 Agreement. She is a person with 12 months continuous service with the FSU, and says that she is entitled to receive the ‘basic entitlement’.

[30] Ms Johnson submits that although clause 10 uses the term ‘service’, this of itself does not mean that ‘parental leave’ is a category of ‘service benefit’ for the purposes of clause 35.6 or the 2015 Agreement more generally. She says that the relevance of ‘service’ in clause 10 is to define the qualification of an employee for the entitlement, not to characterise the benefit that clause 10 provides. She notes that ‘service benefit’ is not a term defined by the Agreement or the Act. 3

[31] I would note at this point that these propositions are in my view not contentious and can be accepted.

Clause 10 and the NES

[32] Ms Johnson submits that the FSU’s argument seeks to have clause 35.6.4 operate to exclude all of clause 10. To the extent that clause 10 deals with unpaid parental leave, she says the FSU’s construction would result in a breach of sections 55 and 56 of the Act. This argument cannot be accepted. The FSU does not contend that clause 35.6.4 excludes all of clause 10. It submits that only paid parental leave is excluded. Clause 10.1.1, which provides for the basic unpaid entitlement ‘set out in the NES’, could not be excluded because it reflects a statutory entitlement.

[33] Ms Johnson further contends that there is an inconsistency in the FSU position that paid parental leave is a service benefit, but unpaid parental leave is not. I do not agree. The question of what is meant by ‘service benefit’ in clause 35.6.4 is a question of the proper construction of the Agreement. Ms Johnson had a right to take unpaid parental leave under the National Employment Standards in the Act. In this regard, clause 10.1.1 is very clear: it states that after 12 months’ service, employees are entitled to parental leave ‘as set out in the NES’. This is a statutory entitlement entirely independent of any rights she has under the 2015 Agreement.

[34] It would not be possible for an enterprise agreement to exclude the NES entitlement to unpaid parental leave. Section 56 of the Act states that an enterprise agreement has no effect to the extent that it contravenes s.55; this provides that a provision of the NES cannot be excluded by an enterprise agreement or diminished by ancillary or supplementary terms of an agreement. 4 However, while clause 35.6.4 could not exclude clause 10.1.1 (effectively, the NES entitlement), it could exclude clause 10.1.2 which relates to a period of paid parental leave. The NES makes no provision for such leave.

[35] Ms Johnson next contended that paid parental leave is a substantive entitlement and that the place and arrangement of clause 10 (noting that it is replicated in clause 34) indicates its ‘importance and primacy’. I do not accept this contention. Clause 10 has no primacy or greater importance than other provisions. The various terms of the 2015 Agreement are to be read in the context of the Agreement as a whole. If one term prevails over or derogates from another, that conclusion must arise from a proper construction of the words of the provisions, read in context.

Ambiguity and surrounding circumstances

[36] Ms Johnson submits that the terms ‘service benefit’ and ‘eligibility for and access to’ in clause 35.6.4 of the 2015 Agreement are ambiguous. In accordance with accepted principles of interpretation, regard may be had to the surrounding circumstances to assist in determining whether ambiguity exists, and as an aide to interpreting the agreement. Ms Johnson contends that the surrounding circumstances indicate that, because of the exchanges between the parties over the preceding years, the FSU was aware of the controversy over the interpretation of clause 35.6.4 and its interaction with clause 10 at the time it negotiated the 2015 Agreement; however it agreed to include clause 10 unaltered in the 2015 Agreement.

[37] Further, Ms Johnson submits that the FSU Staff Collective Agreement 2016 now contains a provision, clause 41.1.7, which states that the granting of ‘consecutive periods of paid parental leave without returning to work in between will be provided for in FSU policy’. Ms Johnson submits that this new clause supports her argument that, under the 2015 Agreement, there was no requirement for employees to return to work in order to take consecutive periods of paid parental leave; why else, she says, would the position have needed to be clarified?

[38] I do not accept these contentions. The fact that the FSU did not change the wording in the 2015 Agreement to address the circumstances of its dispute with Ms Johnson is not to be taken as some interpretative concession. The union may simply have had full confidence in the correctness of its position, or not considered the matter at all. In any event, to the extent that intention is relevant to the construction of an agreement that is made between an employer and a group of employees who vote on that agreement, it would be necessary to look beyond the state of mind of the employer (the FSU) alone.

[39] Further, the wording of an enterprise agreement is not to be interpreted by reference to the provisions of a subsequent agreement. The simple point is that there is no safe conclusion to be drawn about the significance of the change in wording; perhaps the FSU included the new provision in the 2016 Agreement to confirm what it always considered to be the position, rather than to effectuate a change.

[40] For the reasons discussed below, I do not consider that the 2015 Agreement contains a relevant ambiguity. However, even if I had reached a contrary view on this question, I do not consider that the matters above could have assisted Ms Johnson’s interpretation. In Berri, the Full Bench, in summarising the principles that are relevant to the interpretation of enterprise agreements, noted the following: 5

‘11. The admissibility of evidence of the surrounding circumstances is limited to evidence tending to establish objective background facts which were known to both parties which inform the subject matter of the agreement. Evidence of such objective facts is to be distinguished from evidence of the subjective intentions of the parties, such as statements and actions of the parties which are reflective of their actual intentions and expectations.

12. Evidence of objective background facts will include:

(i) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;

(ii) notorious facts of which knowledge is to be presumed; and

(iii) evidence of matters in common contemplation and constituting a common assumption.’

[41] I do not consider that the evidence of surrounding circumstances referred to in Ms Johnson’s submissions falls within the above. 6 Even if it did, it does not in my view provide any particular support for her interpretation of the Agreement.

The meaning of ‘service benefit’

[42] Ms Johnson’s submissions then address the interpretative nub of the current dispute: what do the words ‘service benefit’ mean? The expression is not defined. Ms Johnson submits that it refers to benefits that accrue on the basis of service, such as sick leave, annual leave, and long service leave, the last two being expressly referred to in clause 35.6 as service benefits that are suspended during leave without pay. 7 She contends that by contrast, parental leave is an entitlement that arises automatically on the completion of a qualifying period, namely 12 months service.

[43] I would note firstly that long service leave differs from sick and annual leave. It does not simply accrue progressively with service; instead, in common with parental leave benefits, it first arises upon completion of a qualifying period of service.

[44] Secondly, in my view ‘service benefit’ can simply be understood as a benefit that applies or accrues or is provided when a person is rendering service. All of the benefits specifically referred to in clause 35.6 are of this nature. Wages would be another example.

[45] Thirdly, the meaning of the expression ‘service benefit’ is to be understood in the context of the 2015 Agreement as a whole. The expression appears in several clauses in the Agreement, 8 including clause 7.5, which deals with the loading paid to casual employees. That clause states:

‘A casual employee shall be paid a loading of 25% in addition to their hourly rate in lieu of all service benefits and entitlements. Provided that an ‘eligible casual employee’ will be entitled to parental leave in accordance with clause 34.’

[46] In my view this clause provides a clear indication that paid parental leave is intended to be a ‘service benefit’ for the purposes of the Agreement. Had this not been the case, there would have been no need for the proviso in the second sentence of the clause.

[47] Under the Act, casual employees are eligible for unpaid parental leave if they satisfy the requirements of s.67(2). And as clause 10.1.1 makes clear, employees are entitled to take parental leave in accordance with the NES. This is a separate, statutory entitlement. The significance of this for clause 7.5 is that the casual loading could never have been ‘in lieu’ of unpaid parental leave, nor was it necessary for the proviso in clause 7.5 to ‘save’ it. It applies anyway by force of the Act. By contrast, the paid parental leave provided under clause 10.1.2 does not have a counterpart in the Act; it is a benefit provided under the 2015 Agreement, and was capable of being rolled into the casual loading. The effect of the proviso in the second sentence of clause 7.5 was to ensure that this did not happen; although other service benefits are not available to casuals, paid parental leave under clause 10 is available.

[48] Accordingly, a casual employee receives a loading instead of ‘service benefits and entitlements’ save for one particular type of service benefit, namely paid parental leave in accordance with clause 10.1.2. Employees on leave without pay however are in a different position. For them, there is no proviso in clause 35.6.4 saving paid parental leave from exclusion.

[49] The analysis of the present dispute tends naturally to focus on the provisions of the 2015 Agreement dealing with parental leave and other benefits, and whether they fall within the exclusion of the leave without pay provision in clause 35.6.4. However, the substantive leave without pay provision is also of interpretative significance. The introductory paragraph to clause 35 states that leave without pay allows employees to ‘interrupt their career’ without severing their employment relationship. An employee’s career and service are interrupted or suspended; so too are their service benefits. Continuity of employment is not broken.

[50] I note that among the purposes for which leave without pay may be taken is to undertake employment in another sector that may be beneficial to the employee’s career with the FSU (clause 35.1). On Ms Johnson’s interpretation of clause 35.6, an employee could be working for another employer, on leave without pay from the union, and yet claim various benefits from the FSU (such as paid parental leave), on the basis that they are not ‘service’ (accrual-based) benefits. A further consequence of Ms Johnson’s interpretation would be that other benefits that do not accrue by reference to service, such as use of a motor vehicle, compassionate leave, and public holidays, would all be available to employees on leave without pay. It seems improbable that this was intended.

[51] In my view, the wording of clause 35, and the commonly understood meaning of taking leave without pay, support a broad, rather than a narrow reading of the expression ‘service benefit’.

[52] Ms Johnson contends that, had clause 35.6.4 been intended to exclude access to paid parental leave during periods of leave without pay, it would have been expressly excluded, as was done in relation to annual leave, long service leave and superannuation. However, there is nothing surprising in the use of a catch-all provision of the type used. It plainly speaks to the exclusion of other benefits. The only question is to construe the category of excluded benefits that has been identified, and ascertain whether paid parental leave falls within it. In my view, it does.

[53] The meaning of the expression ‘service benefit’, in the context of the 2015 Agreement as a whole, is not ambiguous. It has a plain meaning, namely a benefit that applies or accrues or is provided when a person is rendering service. The paid parental leave provided under clause 10.1.2 is a service benefit. During a period of leave without pay, an employee is not rendering service and is not eligible for service benefits.

[54] Accordingly, as paid parental leave was a service benefit under clause 35.6.4, it was suspended at the time Ms Johnson applied for it, during a period of leave without pay.

Discrimination

[55] Finally, Ms Johnson submits that the denial of her request for paid parental leave results in a discriminatory outcome against her based solely on her pregnancy. She points to clause 10.9 which states that the FSU will ensure that employees or officials who become pregnant are not discriminated against on the basis of their pregnancy.

[56] This contention must be rejected. Ms Johnson has not been discriminated against because of her pregnancy; she has been discriminated against (in the sense of being treated differently from other people) because she was on leave without pay. The people she was treated differently from were other women who requested paid parental leave, but who were not on leave without pay.

Conclusion

[57] In my view, the Commission does not have jurisdiction to determine the dispute, for the reasons mentioned earlier.

[58] However, if I am wrong in this conclusion, my determination of the agreed question posed by the parties for resolution of the present dispute is that paid parental leave in clause 10.1.2 of the FSU Staff Collective Agreement 2015 is a service benefit for the purposes of clause 35.6.4 of the 2015 Agreement. Accordingly, Ms Johnson was not entitled to paid parental leave in respect of her fourth period of parental leave, which commenced at a time when she was on leave without pay.

DEPUTY PRESIDENT

 1   [2018] FWCFB 856.

 2   Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union’ known as the Australian Manufacturing Workers Union (AMWU) v Berri Pty Limited[2017] FWCFB 3005.

 3   Applicant’s outline of submissions, paragraph 15.

 4   Sections 55(1) and (4).

 5 At [114].

 6   See Applicant’s submissions at paragraphs 32 to 37.

 7   Ibid, at paragraph 38(f).

 8   Clauses 5, 6.4, 7.5, 29.6 and 47.

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