Knox, Lynette v Grace Brothers Holdings Ltd
[1985] FCA 159
•24 APRIL 1985
Re: LYNETTE KNOX
And: GRACE BROS. HOLDINGS LIMITED
No. ACT 14 of 1984
Industrial Law
(1985) 6 FCR 411, (1985) 11 IR 54
COURT
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY
INDUSTRIAL DIVISION
Neaves J.(1)
CATCHWORDS
Industrial Law - Leave loading - Employee entitled to the benefit of the Retail and Wholesale Shop Employees (Australian Capital Territory) Award, 1968 as varied - Whether award provides for payment, on voluntary termination of employment, of 17.5% leave loading on accrued annual leave.
Conciliation and Arbitration Act 1904, section 123
Industrial Law - Conciliation and arbitration - Award - Enforcement - Leave loading - Whether loading must be paid on accrued annual leave when employment is voluntarily terminated - Retail and Wholesale Shop Employees' (Australian Capital Territory) Award 1968. cl 33.
HEADNOTE
Clause 33(g) of the Retail and Wholesale Shop Employees' (Australian Capital Territory) Award 1968 provides for the payment to employees of a 17.5 per cent loading on normal wage rates paid during a period of annual leave. The provision is qualified by a proviso that the "loading prescribed by this sub-clause shall apply to proportionate leave on termination of employment where employment is terminated by the employer but it shall not apply where the reason for termination is misconduct or wilful disobedience".
Held: Clause 33 does not entitle an employee who has resigned voluntarily to the payment of any loading on accrued annual leave entitlements.
HEARING
Canberra, 1985, February 27; April 24. #DATE 24:4:1985
APPLICATION
Application for payment of arrears of wages pursuant to s 123 of the Conciliation and Arbitration Act 1904 (Cth).
P L Dodson, for the applicant.
F Marks, for the respondent and interveners.
Cur adv vult
Solicitors for the applicant: Liu & Robb.
Solicitors for the respondent and interveners: Snedden, Hall & Gallop.
RRST
ORDER
The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
Application dismissed
JUDGE1
Lynette Knox ("the applicant") sues Grace Bros. Holdings Limited ("the respondent") pursuant to section 123 of the Conciliation and Arbitration Act 1904 ("the Act"). That section provides -
"An employee entitled to the benefit of an award may, at any time within six years from any payment becoming due to him under the award, but not later, sue for the amount of the payment in the Court, or in any other court of competent jurisdiction."
The reference to the Court is a reference to the Federal Court of Australia in its Industrial Division (section 118A of the Act).
The facts are not in dispute and may be shortly stated. From 25 May 1982 until 2 July 1983 the applicant was employed by the respondent as a shop assistant. At all material times the applicant was a member of the Shop, Distributive and Allied Employees' Association. At all material times the respondent was bound by, and the applicant was a person entitled to the benefit of, the Retail and Wholesale Shop Employees' (Australian Capital Territory) Award, 1968 as varied ("the award").
On 2 July 1983 the applicant voluntarily retired from her employment with the respondent and her services with the respondent terminated by agreement with the respondent on that date. It was a term of the contract of service between the applicant and the respondent that the applicant was entitled to receive four weeks' annual paid recreation leave. On the date the applicant voluntarily retired she had an entitlement to 175 hours of recreation leave. When she ceased her employment the applicant was paid the award rate for the leave which she had accumulated but was not paid 17.5% of that amount for leave loading. The reason given by the respondent for the non-payment of the leave loading was that the applicant had voluntarily terminated her employment.
The applicant claims -
"1. The sum of $165.97 being a payment due to her under the Retail and Wholesale Shop Employees (Australian Capital Territory) Award 1968 as varied pursuant to section 123 of the Conciliation and Arbitration Act 1904.
2. Alternatively, the sum of $165.97 being the sum due to the Applicant pursuant to a contract of employment entered into with the Respondent on or about the 25th day of May, 1982.
3. Further or in the alternative, a declaration that on the voluntary termination with the Respondent on or about the 2nd day of July, 1983 the Applicant was entitled to a loading of 17.5% on annual leave due to her at the time of retirement."
No separate argument was presented in support of the claim based upon the contract of employment. If the applicant is to succeed it must be because she is entitled to the amount claimed by virtue of the terms of the award.
When the matter came on for hearing application was made by the Confederation of A.C.T. Industry and the Retail Traders' Association of New South Wales for leave to intervene pursuant to sub-section 106(2) of the Act. In support of the application it was represented that there are a large number of awards operative in the Australian Capital Territory which contain identical or similar provisions to those which fall for consideration in this case. I formed the opinion that it was desirable that those bodies be heard and leave to intervene was accordingly granted.
The applicant directed attention to the provisions of the Annual Holidays Ordinance 1973 (A.C.T.) not as being the source of any right which she sought to vindicate in this proceeding but as part of the surrounding circumstances against which the award was to be construed. That Ordinance provides, inter alia, that, subject to the Ordinance, an employee is entitled to an annual holiday at the end of every year of his employment by a person (sub-section 4(1)), the duration of the holiday being four weeks (sub-section 5(1)). An employee who takes a holiday to which he is entitled under sub-section 4(1) is entitled to receive from his employer payment of an amount equal to the ordinary remuneration the employee would have received in respect of the period of the holiday if he had not taken the holiday (sub-section 6(1)). Section 7 provides for the annual holiday to be taken in one or two periods and requires that it be taken before the expiration of the period of six months after the date on which the employee becomes entitled to the holiday or within such further period as the prescribed officer allows. Where the employment of a person is terminated at a time at which that person is entitled under the Ordinance to an annual holiday, that person is entitled to receive from the employer an amount equal to the amount that would have been payable to him under the Ordinance if he had been taking that annual holiday from the date on which his employment is terminated (sub-section 11(2)). Where the employment of a person is terminated at a time at which the person has been employed by his employer for a period less than twelve months but not less than one month or for a period not less than one month during a year of employment, the person is entitled to receive from the employer an amount equal to one-twelfth of the ordinary remuneration paid or payable to the person during the period of his employment or during the current year of employment, as the case may be (sub-section 11(3)). Section 14 provides -
"14.(1) Subject to sub-section (2), this Ordinance has effect notwithstanding any award or agreement to the contrary.
(2)Nothing in this Ordinance affects the operation of an award or agreement to the extent that the award or agreement confers upon an employee rights that are more advantageous to the employee than the rights conferred upon the employee by this Ordinance."
The relevant provision of the award is clause 33 which is in the following terms -
"33 - ANNUAL LEAVE
(a) In addition to the public holidays specified in this award all employees not otherwise entitled to recreation leave under this award shall be entitled to leave of absence on full pay for a period equal to four working weeks exclusive of public holidays where any such employee has been in the continuous employment of the same employer during the preceding twelve months.
(b) Continuous employment as specified in subclause (a) of this clause means constant weekly employment until the termination of an engagement. Absences up to one month owing to illness covered by a medical certificate under two days' absence, or an absence with a medical certificate extending beyond one month in the case of an employee with an accumulation of sick leave to the extent of such accumulation; three months owing to injury received in the course of his employment; or one month owing to other causes for which leave has been granted by the employer concerned, shall not be deemed to break the continuity of employment.
(c) Annual leave shall be taken at a time mutually agreed upon by the employer and the employee, and in the absence of agreement at a time fixed by the employer, within a period not exceeding six months from the date when the right to annual leave accrued due and after not less than six weeks' notice to the employee.
Annual leave shall be taken in a continuous period, or in the event of an agreement between the employer and an employee, in two separate periods and not otherwise.
In cases where the employer and employee have agreed on two separate periods of leave, one of the periods shall be not less than two consecutive weeks exclusive of any public holiday or holidays which may occur during such period of leave. Any two such periods of leave shall be granted to an employee within six months from the date when the right to annual leave occurred.
(d) Should an employee not complete twelve months' service he shall on the termination of his employment provided that he has been employed continuously for one month or more, be entitled to pay on a pro rate basis for each completed month of service.
(e) Before an employee proceeds on annual leave he shall be paid any monies then due to him in respect of the annual leave being taken or which may accure due to him during his period of leave.
(f) Payment in lieu of annual leave shall not be made by an employer and not accepted by an employee except in accordance with all requirements of this clause. An employee shall not offer his services to any other employer during the period he is on paid leave and an employer shall not engage an employee who is on paid annual leave.
(g) During a period of annual leave an employee shall receive a loading of 17.5 per cent calculated on the appropriate rate of wage prescribed by clause 5 or clause 6 of this award.
The loading prescribed by this subclause shall apply to proportionate leave on termination of employment where employment is terminated by the employer but it shall not apply where the reason for termination is misconduct or wilful disobedience.
(h) In the event of any dispute arising in connection with any part of this clause, such dispute shall be referred to the Commission within fourteen days of such dispute occurring for determination."
It was submitted on behalf of the applicant that the second sentence in sub-clause (g) of clause 33 is to be construed as drawing a distinction between the termination of the employment of a satisfactory employee and the termination of the employment of an unsatisfactory employee, that is one who is guilty of misconduct or wilful disobedience. It was submitted that the fact that the termination may in some cases be said to arise from the actions of the employer and in others from the actions of the employee is irrelevant because termination is a general term and, had it been intended to base the operation of the provision upon a distinction other than that between satisfactory and unsatisfactory employees, different words would have been chosen. Unless the provision was so construed, so it was argued, the untenable position would arise that an entirely satisfactory employee who approached his employer and suggested termination and obtained the consent of the employer to that termination would be in the same position as an employee whose services had been terminated by the employer for misconduct or wilful disobedience. The employer, it was argued, should receive no advantage by reason of the fact that the impetus for terminating the employment came from the employee.
Counsel for the applicant sought support for this argument in sub-clause (f) of clause 33. He submitted that under that sub-clause an employee whose employment had been terminated could be regarded (notionally) as being on annual leave from the date of termination of his employment until the expiration of a period corresponding with the period of accumulated leave. It was submitted that this consequence made it more likely than not that the intention of the draftsman of sub-clause (g) of clause 33 was that leave loading is payable to an employee during the period of such accrued leave.
It was further submitted that the second sentence in sub-clause (g) of clause 33 should be read as if the word "even" were inserted before the phrase "where employment is terminated by the employer". This would make it clear, so it was argued, that leave loading was payable in all cases of termination of employment except those precipitated by misconduct or wilful disobedience on the part of the employee.
However, as the above arguments, if accepted, would entitle the applicant to payment of leave loading only in respect of the proportionate leave referable to the uncompleted period of twelve months' service (see sub-clause (d) of clause 33), counsel for the applicant found it necessary to argue that the applicant's entitlement to payment of leave loading in respect of the period of leave that accrued by reason of the twelve months' service with the respondent from 25 May 1982 was to be found in the first sentence of sub-clause (g) of clause 33.
For the respondent and the interveners it was submitted that the source of the liability, if any, in the respondent to make the payment sought by the applicant must be found in the terms of the award: indeed, no other source was suggested by the applicant. It was further submitted that the language of the relevant provisions of the award are clear and unambiguous and provide for the payment of leave loading in respect of proportionate leave upon termination of an employee's service but only where the employer has taken action to bring the relationship of master and servant to an end and then only when that action is taken otherwise than by reason of misconduct or wilful disobedience on the part of the employee. That not being the situation in which the applicant's employment was terminated, the applicant is, so it was submitted, not entitled to succeed in her claim. Reference was made to clause 29 of the award which provides for the circumstances in which the employment of a person may be terminated as throwing light on the meaning of the phrase "where employment is terminated by the employer" in sub-clause (g) of clause 33. That phrase, it was said, was clearly apt only to include cases where the employer took action to bring the employment to an end.
I am unable to accept the submissions put to the Court on behalf of the applicant. The scheme of the award so far as annual leave is concerned is that an employee is entitled to a period of four weeks' leave on full pay after completing twelve months' continuous service with the one employer and he must take that leave within the period specified. If his employment terminates after that leave has accrued but before he has had the benefit of it, there is no provision entitling the employee to payment in lieu of taking that leave. The only provision for payment in lieu of leave in the case of termination of employment is that made by sub-clause (d) of clause 33 which deals with payment on a pro rata basis where the employee has not completed a period of twelve months' service. I do not stay to consider whether an employee may be entitled to payment in respect of leave previously accrued by virtue of the Annual Holidays Ordinance 1973 (A.C.T.) as the provisions of that Ordinance can throw no light on the meaning of clause 33 of the award. Sub-clause (f) of clause 33 is, in my view, directed only to the situation where the contract of employment remains extant: it has nothing to say in a case where that contract has been terminated.
Sub-clause (g) of clause 33, in its first sentence, makes provision for the payment of a leave loading but only, in my opinion, in a case where the contract of employment remains on foot and the employee proceeds on annual leave. The payment is made "during" the period of annual leave. That expression is not apt in my view, to encompass a situation where the contract of employment has been terminated and the employee receives a payment, either as a legal entitlement or as a matter of grace, calculated by reference to the period of leave that had accrued but had not been taken prior to the termination of his employment. The second sentence of sub-clause (g) gives an employee whose circumstances fall within the provision an entitlement to a payment by way of leave loading but only in respect of "proportionate leave". That expression, although the language is not entirely apt, seems to me to reflect the provisions of sub-clause (d) of clause 33 entitling an employee whose services are terminated to pay on a pro rata basis for each completed month of service. The benefit of the provision contained in the second sentence of sub-clause (g), however, only applies where the employment has been terminated by the employer for reasons other than the misconduct or wilful disobedience of the employee.
So construed the provisions of the award provide no foundation for the applicant's claim. That conclusion, to which I have come upon a consideration of the language of the award alone, is reinforced when reference is made to the history of what is now clause 33 of the award.
Prior to 27 June 1974 the award (originally clause 30 but since 20 September 1973 clause 33) dealt with the subject of annual leave but made no provision for the payment of a leave loading. On 27 June 1974 the award was varied by inserting the following sub-clause -
"(g) During a period of annual leave an employee shall receive a loading of 17.5 per cent calculated on the appropriate rate of wage prescribed by clause 5, Wages, or clause 6, Junior Wages, of this award. The loading prescribed by this sub-clause shall not apply to proportionate leave on termination."
That variation was to operate in respect of any period of annual leave which became due and was taken on or after 3 September 1973 but was to apply only in respect of employees of certain named companies. The latter limitation was removed by a variation of the award made on 19 February 1976. By that variation sub-clause (g) was deleted and a new sub-clause in identical terms was inserted. The new provision was to operate in respect of any period of annual leave which became due and was taken on or after 1 September 1975.
On 11 March 1976, on an application by the Shop, Distributive and Allied Employees Association to vary the award in relation to the 17.5 per cent loading on pro rata leave on termination, the award was varied by deleting from sub-clause (g) of clause 33 the words "The loading prescribed by this sub-clause shall not apply to proportionate leave on termination" and by inserting the following words -
"The loading prescribed by this sub-clause shall apply to proportionate leave on termination of employment where employment is terminated by the employer but it shall not apply where the reason for termination is misconduct or wilful disobedience."
That is the language of the current provision.
It is thus apparent that prior to the variation of the award on 11 March 1976 an employee whose services were terminated, however that situation arose, was not entitled to receive a payment by way of leave loading. The variation made on that date, a variation which was made on the application of the Shop, Distributive and Allied Employees Association imposed an obligation on an employer to pay a loading in respect of proportionate leave on termination of employment but only in the circumstances mentioned.
For the reasons set out above the applicant has failed to establish any basis for her claim. The application should be dismissed.
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