Michael Hough v Luturn Pty Ltd T/A Primo Port Wakefield Abattoir
[2015] FWC 2567
•16 APRIL 2015
| [2015] FWC 2567 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.739 - Application to deal with a dispute
Michael Hough
v
Luturn Pty Ltd T/A Primo Port Wakefield Abattoir
(C2014/6115)
DEPUTY PRESIDENT BARTEL | ADELAIDE, 16 APRIL 2015 |
Application to deal with a dispute involving interpretation of enterprise agreement.
[1] Michael Hough (the applicant) is in dispute with Luturn Pty Ltd T/A Primo Port Wakefield Abattoir (the employer) regarding the interpretation of a clause appearing in Appendix 1 - Remuneration Structure of the Maintenance Enterprise Agreement Primo Port Wakefield Abattoir (the Agreement). 1 The Agreement was approved by the Fair Work Commission (the Commission) on 8 November 2013 and has a nominal expiry date of 30 June 2016.2
[2] The applicant was an employee bargaining representative for the Agreement and is supported in his application by a number of employees covered by the Agreement. One of these employees, Kerin Warren, assisted in the presentation of the case for the applicant.
[3] The matter has been referred for arbitration by consent of the parties and in accordance with Clause 25 Dispute Resolution of the Agreement.
The disputed clause
[4] Appendix 1 of the Agreement specifies the rates of pay which came into effect on approval of the Agreement by the Commission. Whilst not stated within the Agreement, it is common ground between the parties that the specified rates of pay reflect a 2.75% increase on the rates that previously applied, and that this increase was backdated to 1 July 2013.
[5] The clause in dispute (“the disputed clause”) appears at the foot of Appendix 1 as follows:
“Effective on the anniversary date of this agreement, (first full pay period after 1st July 2014 and 1st July 2015) an overall increase of 3% shall apply inclusive or exclusive of the SGC (Superannuation Guarantee Charge).”
[6] Mr Rodgers, of counsel for the employer, 3 noted that the disputed clause contains an error in that the reference to the Superannuation Guarantee Charge (SGC) should in fact be a reference to “increases in” the SGC. It is clear that the employees have interpreted the clause as referring to increases in the SGC and I have therefore proceeded on the basis that the disputed clause reads as follows:
Effective on the anniversary date of this agreement, (first full pay period after 1st July 2014 and 1st July 2015) an overall increase of 3% shall apply inclusive or exclusive of increases in the SGC (Superannuation Guarantee Charge).
[7] The SGC increased from 9.25% to 9.5% on 1 July 2014. The employer increased the maintenance employees’ rates of pay by 2.75% and increased its superannuation contribution by 0.25% from this date. Shortly after this time, the current dispute application was filed.
[8] The applicant argues that the consistent position put to management from the maintenance employees throughout the negotiation of the Agreement was that they would not accept a wage increase which was discounted by increases in the SGC. It was submitted that the employees supported the Agreement on the basis that the disputed clause meant that increases of 3% would apply on 1 July 2014 and 1 July 2015, regardless of whether or not there were increases in the SGC on these dates.
[9] The employer acknowledges that the disputed clause is ambiguous on an ordinary and grammatical reading of its terms. However, Mr Rodgers argued that when the relevant context is taken into account it is clear that the effect of the disputed clause is to reflect a combined increase of 3% including wages and superannuation. If the SGC increases then the employees’ wage increase would be reduced accordingly. If there is no increase to the SGC, the employees receive the full 3% by way of increased wages.
The evidence
[10] The evidence of the applicant and Mr Warren will be referred to where relevant in the facts section of this decision, below. Statutory declarations for the following employees who are covered by the Agreement were admitted by consent: 4 Luke Stone, Groundsman; Raymond Dunphy, Welder; Barry Johns, Refrigeration Mechanic; and William Blackburn, Maintenance. These employees were not required for cross-examination.
[11] The statutory declaration of Mr Stone attested to his “impression” that he was to receive a 3% increase in pay from 1 July 2014 and 1 July 2015. The statutory declarations of Messes Dunphy, Johns and Blackburn are expressed in almost identical terms and convey the position that: the disputed clause was understood to prevent any increase in the SGC from reducing the 3% increase; that each now feels that he has been misled; and that maintenance employees made it clear to management that there was opposition to any reduction in a 3% wage increase. The main difference in the content of these three statutory declarations is the inclusion of an additional paragraph in Mr Johns’ declaration that the employees accepted an initial increase of 2.75% because it was backdated.
[12] The evidence of Mr Hough and Mr Warren indicates that a meeting was held where maintenance employees were requested to provide statutory declarations. There is some dispute as to whether the information to be included in the statutory declaration was ‘spelt out’ at the meeting. 5 Even if it wasn’t then the content of the statutory declarations must have been the result of a discussion at which all three employees were present - the similarity of wording in all the three declarations cannot be mere coincidence. Accordingly, these declarations are given limited weight, although other evidence before the Commission suggests that the majority of maintenance employees held the views expressed in the declarations.
[13] The other employee bargaining representative for the Agreement, Paul Tomlinson, was not called to give evidence. Mr Tomlinson filed a Statutory Declaration but unfortunately it did not address his involvement in the negotiations or the disputed clause.
[14] The employer submitted witness statements for Timothy Golinski, National Human Resources Manager for the Primo Group and Anne Marie Curran, Human Resources Manager for the employer.
[15] Mr Golinski was present at several negotiation meetings. The content of these meetings is not in dispute and is referred to in the facts section of the decision. The thrust of Mr Golinski’s evidence was the decision of the employer to limit the combined cost of wage increases and increases in the SGC to 3% per annum for employees under each of the three enterprise agreements it was negotiating at the site, being the Agreement, the Production Enterprise Agreement Primo Port Wakefield Abattoir (the Production Agreement) and the Security Enterprise Agreement, Primo Port Wakefield Abattoir (the Security Agreement). 6
[16] The applicant did not seek to cross-examine Mr Golinski and his evidence is accepted. Ms Curran’s evidence is referred to below.
The relevant facts
[17] Negotiations for a new enterprise agreement covering maintenance employees commenced on 21 May 2013. At the time, the Labor Government had enacted legislation to increase the SGC from 9% to 12%. The increase was to be phased-in in instalments of 0.25% on each of 1 July 2013 and 1 July 2014, then increases of 0.5% on 1 July in 2015, 2016, 2017, 2018 and 2019.
[18] Further negotiations were held on 12 June, 4 July and 17 July 2013. As at 17 July, the employer’s wages offer was 7% over three years, with the potential to increase the offer to 7.5% over three years subject to resolution of allowances claims. The employees had reduced their wages claim from an initial 6% per annum to 4.5% per annum over three years. 7
[19] On 24 July 2013 Mr Hough filed an application pursuant to s.240 of the Act seeking the Commission’s assistance with a bargaining dispute. 8 A conciliation conference was held on 8 August 2013 where wages were discussed.
[20] I note that the applicant relies on certain statements that he alleges I made in the course of the conciliation on 8 August. Mr Hough contends that I told the employer that the wages and superannuation were separate items and should not be combined. As advised to Mr Hough at the hearing of the present matter, 9 I have no record of any such statement being made, but having regard to my notes it is quite possible that I suggested to the employer (somewhat prophetically given the present dispute) that for the purposes of the discussions any offer should be expressed in terms of identifiable wage outcomes.
[21] More importantly, any statements I made were in the context of a conciliation conference and were not binding on the parties. The dispute on wages was not resolved in the Commission but as a result of subsequent negotiations between the parties. Statements I may have made in the context of an unsuccessful conciliation of a bargaining dispute cannot be relied upon to support the applicant’s interpretation of a clause drafted by the employer some two months later.
[22] Following the unsuccessful conciliation, further negotiations between the parties took place on 6 August 2013 where the employer put a position of 9% over three years (3% per annum) inclusive of any increases in the SGC.
[23] At a meeting of maintenance employees on 9 August 2013, the employer’s position was conveyed by the bargaining representatives as an increase of 2.75% per annum. This was rejected by the employees in favour of an increase of 3.75% per annum. 10
[24] On 21 August 2013 the employer reiterated its previous position of 3% per annum inclusive of increases in the SGC.
[25] At a meeting on 30 August 2013, outstanding issues other than the quantum of the wage increase were resolved. The employees indicated that they would accept an initial increase of 2.75% backdated to 1 July 2013 and two increases of 3% (excluding any increase in the SGC) for the second and third increases. 11
[26] On 14 September 2013 the Liberal National Coalition was elected to Government, promising to freeze further increases in the SGC. On 25 September 2013 Ms Curran met with the employee bargaining representatives. She stated that Messrs Hough and Tomlinson advised that the employees would accept 2.75% back paid to 1 July 2013, but wanted 3% wage rises for the following two years “because the Abbott Government have deferred the 0.25 percent superannuation increase.” 12
[27] Ms Curran stated that the employer considered that there was still some uncertainty about the SGC increases, and the following clause (the initial clause) was inserted into Appendix 1 of the draft Agreement:
“Effective on the anniversary date of this agreement (first full pay period after 1st July 2014 and 1st July 2015), an increase of 2.75% shall apply. If, however, the mandated increase in the SGC (Superannuation Guarantee Charge) is delayed by the Federal Government, the wage increase will be 3% and shall apply for years two and three of this agreement.” 13
[28] Ms Curran stated that this wording was not rejected by the maintenance employees. 14
[29] Ms Curran stated that the employer wanted to have consistent wording in the wages schedules of all three enterprise agreements it was negotiating and the disputed clause had been proposed by the employer in the context of the negotiations with the production and security employees. Those negotiations successfully concluded and the disputed clause appears in the wages provisions of the Production Agreement and the Security Agreement.
[30] The disputed clause was emailed by Ms Curran to the maintenance administration email address for distribution to Mr Tomlinson on 3 October 2013, under cover of an email which read:
“Can you print the attachment for Paul [Tomlinson] please
Tell him I have included the other grades for Rendering and tidied up the statement on the bottom of Appendix 1 and corrected a spelling mistake in 4.1
Please ask him if he thinks we need to place the same statement re annual increases at the bottom of Appendix 3 please” 15
[31] According to Ms Curran, there was no feedback from the employee bargaining representatives and the draft Agreement, including the disputed clause in Appendix 1, was put to the employees for a vote. An initial vote was conducted on 11 October 2013, and a further vote was conducted on 31 October 2013 to ensure legislative requirements were met.
[32] The ballot of employees was overseen by the applicant. It appears from the documentation before the Commission that the vote of employees conducted on 31 October 2013 only addressed the first pay rise of 2.75%. 16 As there was no suggestion from the applicant that a majority of employees did not support the Agreement I tend to the view that the documentation, rather than the process, was deficient.
[33] The applicant’s witness statement indicates that the employees rejected the initial clause and that the employer apologised saying that it was supposed to have been rectified so that it protected them from losing a percentage of their annual pay rise. The applicant indicated that as a result of this discussion, the disputed clause was inserted into Appendix 1 and the employees were under the impression that the 3% increase was protected. 17
[34] However, the applicant was unable to recall who had apologised, but he believed it was Ms Curran. He conceded under cross-examination that he was not told that the disputed clause protected employees’ wage increases from discount due to any increase in the SGC. He also acknowledged that the employees interpreted the clause in the absence of any advice from the employer and that he did not question the employer in relation to the effect of the disputed clause. 18
[35] In response to questions as to why he came to the view that the disputed clause protected the employees’ wages from any discounting, the applicant indicated it was because of the change in wording from the initial clause. He was unable to identify with any certainty if and when meetings took place with Ms Curran on the initial clause and/or the disputed clause and if meetings did take place, whether they occurred before or after the Agreement was submitted to a vote of the maintenance employees. 19 I therefore prefer the evidence of Ms Curran that there was no discussion between the parties in relation to the wording of either the initial clause or the disputed clause.
The submissions
[36] Mr Hough focussed his submissions on the view of the workers that they were entitled to 3% and felt they had been misled by the employer. He submitted that at no stage did the employees indicate that they were willing to accept an increase in wages of less than 3% per annum and this was known to the employer. He also suggested that:
- The employer’s absorption of the increase in the SGC was in contravention of Clause 13 of the Agreement which obliged the employer to make contributions in accordance with the relevant superannuation legislation; and
- The inclusion of the reference to the SGC in the Wages Appendix was misleading.
[37] Mr Rodgers addressed the principles of interpretation of enterprise agreements with reference to various authorities. He submitted that the disputed clause was ambiguous and in accordance with the authorities, evidence of surrounding circumstances is admissible to aid in the interpretation. In this regard he submitted that the following “objective framework of facts” was relevant:
- The consistent position maintained by the employer regarding the absorption of increases in the SGC;
- The political landscape, and in particular the position of the Liberal opposition in the lead up to the 2013 election that it would freeze increases in the SGC and the subsequent election victory of the Abbott Government;
- The applicant assumed that there would be no increase in the SGC in 2014 or 2015 and accepted the disputed clause believing it would deliver a 3% increase for years two and three of the Agreement.
[38] Mr Rodgers submitted that the Production and Security Agreements are documents which have an association with the Agreement. It is relevant that these instruments each include the disputed clause and that no challenge has been made to the employer’s interpretation by the affected employees or, in the case of the Production Agreement, by the Australasian Meat Industry Employees’ Union.
[39] In the context of the objective facts and relevant associated documents, Mr Rodgers argued that a reasonable person would understand the disputed clause to mean that the total benefit to the employee would be 3%.
[40] Mr Rodgers placed weight on two documents that were said to support the employer’s interpretation. The first was the transcript of a radio interview on 3AW on 21 March 2012 between The Honourable Bill Shorten, then, Minister for Financial Services and radio broadcaster Neil Mitchell. In the course of the interview Mr Shorten appeared to endorse employers taking into account increases in the SGC when determining a position on employee wage outcomes under enterprise bargaining. The second document was a “Member Advice” issued by the Australian Industry Group (AIG) to the same effect. 20
Consideration
[41] Based on the information presented at the hearing, I consider that the process of approval of the Agreement at the workplace miscarried. I interpose that this would not have been able to be discerned on the documents available to the Member of the Commission who approved the Agreement.
[42] The manner in which the disputed clause was advised to the employee bargaining representatives, i.e. under cover of a note requesting the administration employee to convey management’s position to the bargaining representative, was unwise at the least. More importantly however, I consider that the employer did not take reasonable steps to ensure that employees understood the effect of the terms of the Agreement prior to it being voted upon, as required by s.180(5) of the Act:
“180 Employees must be given a copy of a proposed enterprise agreement etc.
...
Terms of the agreement must be explained to employees etc.
(5) The employer must take all reasonable steps to ensure that:
(a) the terms of the agreement, and the effect of those terms, are explained to the relevant employees; and
(b) the explanation is provided in an appropriate manner taking into account the particular circumstances and needs of the relevant employees.
(6) Without limiting paragraph (5)(b), the following are examples of the kinds of employees whose circumstances and needs are to be taken into account for the purposes of complying with that paragraph:
(a) employees from culturally and linguistically diverse backgrounds;
(b) young employees;
(c) employees who did not have a bargaining representative for the agreement.”
[43] The absence of union representation and the relative inexperience of the employee representatives are matters that the employer needed to take into account under s.180(5) of the Act, but did not.
[44] Compliance with the obligation to take reasonable steps to ensure that employees understand the effect of the agreement is one of the matters taken into account in determining whether employees have genuinely agreed to the agreement. 21 In the absence of genuine agreement the requirements for approval under s.186 of the Act have not been met.
[45] Fairness of enterprise bargaining is one of the overriding objects of the Act and an object of Part 2-4 of the Act. Such fairness is to be achieved through negotiations underpinned by good faith bargaining and by the statutory framework for the negotiation and approval of enterprise agreements. 22
[46] The statutory context serves to underscore the seriousness of the employer’s failure to explain the effect of the terms of the Agreement to the employees. Nonetheless the Agreement has been approved and I have no jurisdiction to set it aside. I will return later to the weight, if any, that attaches to this miscarriage of process in the context of the interpretation of the disputed clause.
The principles of interpretation
[47] In Australasian Meat Industry Employees Union v Golden Cockerel Pty Limited a Full Bench considered an appeal against the decision at first instance which concerned a dispute involving the proper construction of an enterprise agreement. The Full Bench discusses the reasoning in a number of authorities on the proper approach to the interpretation of awards and contracts, including on the use of extrinsic material as an aid to interpretation. 23 The Full Bench then conveniently distils ten principles on the approach to interpretation of an enterprise agreement, as follows:24
“1. The [Acts Interpretation Act 1901] does not apply to the construction of an enterprise agreement made under the Act.
2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.
3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.
4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.
5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.
6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include:
(a) 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;
(b) notorious facts of which knowledge is to be presumed;
(c) evidence of matters in common contemplation and constituting a common assumption.
7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.
8. Context might appear from:
(a) the text of the agreement viewed as a whole;
(b) the disputed provision’s place and arrangement in the agreement;
(c) the legislative context under which the agreement was made and in which it operates.
9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.
10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.”
[48] As the disputed clause is ambiguous it is permissible to have regard to the context of the disputed clause and surrounding circumstances. However there is nothing within the legislation that assists in ascertaining the proper interpretation of the disputed clause. Similarly, there are no other provisions within the Agreement that assist in interpreting the disputed clause, nor does the context in which the disputed clause appears within the Agreement shed any light on it meaning.
[49] I regard the lack of clarity on the status of the increases in the SGC at the time of the negotiations as an objective fact. The inclusion within the disputed clause of contradictory language regarding the impact of any increase in the SGC may be reasonably viewed in the circumstances as reflecting the uncertainty about future increases.
[50] The Production and Security Agreements are documents that have an association with the Agreement, The documents apply at the same site and were negotiated at the same time as the Agreement. It is relevant that the Production and Security Agreements follow the same format as the Agreement, include the disputed clause in the wage provision and have a number of other provisions common to the Agreement. The interpretation advanced by the employer is consistent with the increases paid as at 1 July 2014 to the security and production employees.
[51] I have placed no weight on the impact that the position adopted by Mr Shorten in the 3AW interview and/or the advice from AIG concerning the absorption of increases in the SGC may have had on the position adopted by the employer. There is no evidence that these matters were notorious facts of which the employees would or should have been aware in the negotiations.
[52] I also do not regard the employees’ acceptance of a first wage increase of 2.75% as evidence of an acceptance that there was a cap of 3% on the combined increase in the SGC and wages. The evidence before the Commission is that employees accepted a first increase of less than 3% because it was made retrospectively.
Conclusion
[53] The disputed clause manages to encapsulate the contradictory positions steadfastly advanced by both parties in the course of the negotiations, and which were never explicitly reconciled.
[54] I have considered what weight, if any, should attach to the problems with the pre-approval stage of the negotiations and the employer’s responsibility in this regard. In so doing, I accept that the maintenance employees have legitimate grounds for complaint with the wages outcome which has been implemented.
[55] The extent to which notions of fairness can be taken into account in the interpretation of disputed provision was touched upon by Madgwick J in Kucks v CSR Limited 25 when His Honour stated that:
“… it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. ...
But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. ...”
[56] I consider that the miscarriage of the process and any unfairness to employees is not sufficient to interpret the disputed clause in the manner advanced by the applicant. Firstly, the outcome of the interpretation advanced by the employer is that the maintenance employees receive the same level of wage increases as other employees in the workplace and in all the circumstances such an outcome is not inherently unfair or unjust.
[57] Secondly, in applying the principles of interpretation, the most significant matters in my mind are the terms of the Production and Security Agreements. The inclusion of the disputed clause and the overall commonality of approach to all three agreements in terms of structure and content, points to an interpretation which supports a commonality of wage outcomes.
[58] I therefore conclude that the increase granted by the employer effective on 1 July 2014 is consistent with the proper interpretation of the disputed clause.
DEPUTY PRESIDENT
Appearances:
Mr M Hough in person with Mr K Warren
Mr M Rodgers of counsel with Mr T Golinski for the respondent
Hearing details:
2015:
Adelaide
12 February
1 An application pursuant to s.739 of the Fair Work Act 2009 was filed on 29 August 2014.
2 [2013] FWCA 8712; PR544190.
3 Permission for the employer to be represented by a lawyer was granted pursuant to s.596 of the Fair Work Act 2009 in earlier proceedings.
4 Ex A1-A4, incl.
5 PN244-8 (XXN Hough); PN82 (XXN Warren).
6 [2013] FWCA 8730, PR544214, approved 7 November 2013; [2013] FWCA 8847, PR544383, approved 18 November 2013, respectively.
7 Ex R2, Attach AMC E.
8 B2013/1058.
9 At PN22-3.
10 Ex R2, Attach AMC J.
11 Ex R2, Attach AMC L
12 Ex R2 at para 54.This evidence was supported by the applicant at PN324-6.
13 Ex R2 Attach AMC N.
14 Ex R2 at para 60.
15 Ex R2 attach AMC Q. Appendix 3 of the Agreement contains apprentice rates of pay.
16 At PN205-211; Ex R2 attach AMC R.
17 Ex A6.
18 At PN315-22; 229; 220.
19 At PN347-72; 385-92.
20 Ex R1, Attachments TG C and TG D.
21 Section 188(a)(i) of the Act.
22 Sections 3(f) and s.171(a) of the Act, respectively.
23 [2014] FWCFB 7447 at paras [23] - [30].
24 As above, at para [41].
25 (1996) 66 IR 182 at 184.
Printed by authority of the Commonwealth Government Printer
<Price code C, PR563070>
0
5
1