KERNAGHAN v Neffray Pty Ltd

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FEDERAL CIRCUIT COURT OF AUSTRALIA

KERNAGHAN v NEFFRAY PTY LTD & ORS [2020] FCCA 1141

Catchwords:
INDUSTRIAL LAW – Awards – Road Transport (Long Distance Operations) Award 2010 – Methods of calculating wages under award – whether ‘driving time’ alone the basis of remuneration – operation of ‘guaranteed minimum’ rate provision – wages calculated on ‘driving time’ provided the amount exceeds ‘guaranteed minimum’.

INDUSTRIAL LAW – Awards – Interaction between contractual payments and award obligations – whether nature of contractual payments met obligations under award – nature of industrial law ‘set off’ – application of principles to unusual terms of Road Transport (Long Distance Operations) Award 2010

Legislation:

Fair Work Act 2009 (Cth), ss.14, 45, 539, 545, 546

Road Transport (Long Distance Operations) Award 2010, cls.3, 13, 14, 20, 22, 23, 24.

Cases cited:

Australia and New Zealand Banking Group Limited v Finance Sector Union of Australia [2001] FCA 1785; (2001) 111 IR 227

Byrne v Australian Airlines Ltd (1995) 131 ALR 422; 69 ALJR 797;(1995) 185 CLR 410
Fair Work Ombudsman v Lindsay F. Nelson Manufacturing Pty Limited & Anor [2019] FCCA 2151
Fair Work Ombudsman v Transpetrol TM AS [2019] FCA 400

James Turner Roofing Pty Ltd v Peters [2003] WASCA 28; (2003) 132 IR 122

Kent v Tal & Ors [2018] FCCA 3218
Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate [2015] FCAFC 99

Lynch v Buckley Sawmills Pty Ltd [1984] FCA 306; (1984) 3 FCR 503

Phillips & Ors v Linfox Australia Pty Ltd [2006] SAIRC 68

Poletti v Ecob (No.2) [1989] FCA 779; (1989) 31 IR 321

Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd [2002] FCA 1406

Applicant: PATRICK KERNAGHAN
First Respondent: NEFFRAY PTY LTD
Second Respondent: BAKER TRANSPORT CO PTY LTD
Third Respondent: PETER BAKER
File Number: MLG 2689 of 2017
Judgment of: Judge Riethmuller
Hearing date: 21 and 23 August 2019
Date of Last Submission: 23 August 2019
Delivered at: Melbourne
Delivered on: 13 May 2020

REPRESENTATION

Counsel for the Applicant: Mr Partos
Solicitors for the Applicant: Nevin Lenne & Gross
Counsel for the Respondents: Ms Symons
Solicitors for the Respondents: Sparke Helmore

ORDERS

  1. The matter be listed on 12 June 2020 at 10.00am for Mention.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 2689 of 2017

PATRICK KERNAGHAN

Applicant

And

NEFFRAY PTY LTD

First Respondent

BAKER TRANSPORT CO PTY LTD

Second Respondent

PETER BAKER

Third Respondent

REASONS FOR JUDGMENT

Introduction

  1. The applicant claims that the respondents contravened the Road Transport (Long Distance Operations) Award 2010 (‘the Award’) during the term of his employment as a long-distance truck driver, because they failed to pay him various entitlements. The third respondent in this matter is the Director and Secretary of the first and second respondents and was joined to proceedings pursuant to section 14 of the Fair Work Act 2009 (Cth) (‘the Act’). The applicant seeks relief in the sum of $27,756.36 from the respondents, pursuant to sections…

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Details
Case
[2020] FCCA 1141
Decision Date

CaseChat Overview and Summary

Kernaghan (the applicant) brought proceedings against Neffray Pty Ltd (the respondent) in the Federal Court of Australia concerning the calculation of wages under the Road Transport (Long Distance Operations) Award 2010. The dispute centred on whether the respondent had correctly remunerated the applicant for his driving time and other entitlements under the Award, particularly in light of the contractual terms of his employment.

The court was required to determine several key legal issues. These included whether the respondent's method of paying a flat hourly rate for all hours worked constituted an election to use the hourly driving rate method under the Award, rather than the default cents per kilometre method. Further, the court had to consider how the Award's provisions for guaranteed minimum weekly rates interacted with the methods for payment based on cents per kilometre or hourly driving time. The court also needed to assess whether payments made during the first period of employment for non-driving hours could be offset against amounts owing for driving time. Finally, a dispute arose regarding the correct reference rate for calculating annual leave entitlements under the Award.

In its reasoning, the court emphasised that the Award must be read as a whole and outlined its multi-step process for determining minimum employee payments. This process mandates that for long-distance operations, employees must be paid for all driving time, either by a cents per kilometre method or an hourly rate method, with the employer required to nominate one at the commencement of employment. Crucially, if the amount calculated under either of these methods for a fortnight falls below the guaranteed minimum rate, the employee must be paid at least twice the minimum weekly rate for that fortnight. The court also considered the contractual provision allowing for the offset of above-component payments against other applicable entitlements, noting that the nature of industrial law set-off principles would apply.

The court found that the applicant's contractual remuneration, which included a flat hourly rate for all hours worked and a cents per kilometre rate for driving, did not necessarily satisfy the Award's requirements. The interaction between the contractual terms and the Award's specific payment mechanisms, particularly the guaranteed minimum rate provision, was central to the determination. The court's analysis focused on whether the total remuneration paid met or exceeded the minimum entitlements prescribed by the Award, considering the different calculation methods available and the employer's obligations.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The contract of employment for the second period was a lengthy written document. Clause 11 of the contract relevantly provided:11. REMUNERATION AND ALLOWANCES11.1 You will be paid on a cents per kilometre basis for the driving component of each long distance journey.11.2 For the purposes of the guaranteed minimum payment, your base rate of pay is set out at Item 8 of the Schedule, provided that this rate of pay may be increased from time to time if required in order to comply with the applicable Industrial Instrument.…11.5 … you will be entitled to any allowances appropriate to your position as set out in the Industrial Instrument.11.6 Where your pay exceeds your legislative entitlements, any above-component not otherwise allocated may be offset against any other applicable entitlements.… The relevant schedule to the contract provided:Long Distance Routes40 cents per kilometre exclusive of superannuation (off GPS readings with direct routes being taken)Loading/Unloading - $20.00 B Double $15.00 Single$36.53 Travel Allowance…orMinimum weekly rate$767.00 The substance of the dispute arises from the fact that the flat hourly rate of $25 per hour is a rate less than the ‘driving time’ hourly rate under the Award. Thus, the applicant’s principle claim is for the difference between $25 per hour and the relevant hourly rate for hours when he was ‘driving’. This seemingly straightforward claim gives rise to many complexities when analysed through the prism of the Award. A number of key points arise:a)Whether the payment of a flat hourly rate for all hours worked evidences a choice by the employer to use the hourly driving rate method under cl.13.5 rather than the default cents per kilometre rate under cl.13.4.b)How the provisions of the Award that provide for guaranteed minimum weekly rates (cl.13.2) interact with the provisions for payment on a ‘cents per kilometre’ rate (cl.13.4) or hourly driving rate (cl.13.5) in the Award.c)Whether the payments in the first period of the applicant’s employment for hours that were not ‘driving time’ can be taken as satisfying the amounts owing under the Award for ‘driving time’. There is also a dispute as to the correct reference rate in the Award for calculating annual leave: the minimum rate under cl.13.1 or the hourly driving rate under cl.13.5 of the Award. The Award, like most modern awards, is a long and complex document. The Award must be read as a whole. The parts of the Award particularly relevant for this judgment are: The Award provides a relatively unusual scheme for determining minimum payments to the employee by the employer. In substance there is a multistep process:a)Where an employee is engaged in a ‘long distance operation’, the employee must be paid ‘for all driving time’ either by way of i)a ‘cents per kilometre method’ (as provided for in cl.13.4); or ii)the ‘hourly rate method’ (as provided for in cl.13.5): as is set out in cl.13.3. b)The employer must nominate which of these two methods is to be used at the start of the employment (and if no nomination is made, the cents per kilometre method applies): cl.13.3.c)The Award nominates numbers of kilometres and driving hours for common journeys.d)If the amount calculated under cl.13.4 or cl.13.5 (cents per kilometre or hourly driving time methods) for a fortnight is less than the minimum guaranteed rate, then the employee must be paid at least twice the minimum weekly rate for the relevant fortnight: see cl.13.2. e)The minimum rate of pay for ordinary hours is set out in cl.13.1 of the Award, expressed as a weekly rate. The number of hours in an ordinary week is 38: see cl.20.1.