Mr Geoff Wolfe v Manpower Services (Australia) Pty Ltd

[2019] FWC 5150

[2019] FWC 5150

FAIR WORK COMMISSION

DECISION

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

Mr Geoff Wolfe
v
Manpower Services (Australia) Pty Ltd
(C2019/2592)

DEPUTY PRESIDENT BULL SYDNEY, 24 JULY 2019

Dispute about redundancy provisions in enterprise agreement. No power for Commission to deal with remedy claimed. Enterprise agreement terms unambiguous and being applied by respondent.

Background

[1] This application proceeds pursuant to s.739 of the Fair Work Act 2009 (the FW Act). Mr Geoff Wolfe, the applicant, requests that the Fair Work Commission (the Commission) resolves a dispute under the Manpower Services (Australia) Pty Ltd Kimberly-Clark Ingleburn Mill Enterprise Agreement 2018 (the Agreement) approved by the Commission on 26 July 2018, which covers the applicant’s existing employment.    1

[2] Mr Wolfe is employed as a full-time electrician by the respondent at its Ingleburn Mill.

[3] The respondent employer Manpower Services Australia (Manpower) objects to the matter proceeding on the basis that the Commission has no power to determine the dispute.

[4] The parties were directed to file any written submissions and witness statements, and the matter was listed for an arbitration hearing on 4 July 2019.

[5] Part 6-2 of the FW Act titled "Dealing with Disputes" at s.738(b) provides the Commission with the ability to deal with disputes arising out of an enterprise agreement which includes a term that provides a procedure for dealing with disputes.

[6] Mr Wolfe submits that this section of the FW Act provides the jurisdiction for his dispute to be dealt with by the Commission.

[7] Section 739 of the FW Act, which is titled "Disputes dealt with by the Fair Work Commission, states at s.739(1):

“This section applies if a term referred to in section 738 requires or allows the Commission to deal with a dispute.”

[8] Further, sub-s.739(4) states:

“If, in accordance with the term, the parties have agreed that the Commission may arbitrate the dispute, however described, the Commission may do so.”

[9] It is therefore necessary to ascertain the nature of the dispute the applicant wants the Commission to determine, whether the Agreement includes a term that provides a procedure for dealing with the dispute, and whether such a procedure requires and allows the Commission to deal with the dispute, including by arbitration under ss.738 and 739 of the FW Act.

[10] The Agreement at clause 18 Dispute Settlement Procedure states at 18.2 that the dispute resolution procedure applies to disputes arising under the Agreement. At clause 18.3 Procedure it provides that following the exhaustion of attempts to resolve the dispute at the workplace level a party may refer the dispute to the Commission for resolution and at clause 18.4 the Commission is empowered to deal with the dispute in a number of ways, including arbitration.

Applicant’s submissions

[11] Mr Wolfe’s application states that the dispute revolves around the employer’s application of the redundancy entitlements of the Agreement.

[12] Clause 16 Redundancy of the Agreement states at 16.1:

“The Company will make redundancy contributions to MERT at the following rate per completed week of service for all Employees covered by the Agreement, excepting apprentices; … ”

[13] MERT, while not defined in the Agreement, is accepted to be the Mechanical & Electrical Redundancy Trust and is managed by a trustee company whose directors are sourced from two unions and one employer association. MERT funds are accumulated and held on trust for members until such time as a claim is submitted by the member. Employees who have been terminated or have ceased employment are eligible to submit a benefit claim. The employer makes contributions as per the Agreement. Mr Wolfe is a MERT member.

[14] Clause 16.3 of the Agreement provides a table listing payment of up to 20 weeks’ pay payable on redundancy calculated on an employee’s years of service and age.

[15] At 16.6 the following is provided:

“The Employee’s MERT account balance will be offset against the payment in clause 16.3. If the Employee’s account is greater than the payment required in clause 16.3, the Employee will be entitled to the greater amount. If the MERT account is less than the payment required in clause 16.3 at the time of the redundancy, the Company will pay the Employee the difference.”

[16] Mr Wolfe’s complaint is that the Australian Taxation Office (ATO) via a private ruling does not consider a payment made from MERT as a redundancy payment as opposed to an Eligible Termination Payment (ETP) which is taxed at higher rate than if it was considered a redundancy payment. This appears to be because the MERT payment is not conditional on an employee being made redundant. It is also paid where an employee retires, is terminated or dies. Mr Wolfe submits that an ETP cannot be used to substitute for a redundancy payment.

[17] The dispute is of particular concern to Mr Wolfe as his worksite the Kimberly Clark Ingleburn Mill is programmed to close on 31 July 2019 at which time he will be made redundant along with other electricians.

[18] Mr Wolfe submits that clause 16 Redundancy is unclear as it should have been made clear that MERT payments are treated as an ETP by the ATO. The more generous taxation of redundancy payments by the ATO as opposed to ETPs results in the net amount Mr Wolfe will receive being less than what he expected. Mr Wolfe submits that clause 16.6 is deficient as it fails to state the significant loss of money with redundancy payments being held in MERT due to tax. 2

[19] Mr Wolfe further contended that the redundancy clause of the Agreement does not pass the Better Off Overall Test (BOOT).

[20] Mr Wolfe’s remedy is for the Commission to rule that the redundancy payment under the Agreement not be offset with an employee’s MERT account balance. He submits that the employer’s weekly redundancy contributions should have been paid into a fund that is taxed by the ATO as a redundancy payment when claimed. Mr Wolfe submits that the Commission should rule that clause 16.6 of the Agreement which provides the offsetting referred to above should be disregarded in calculating an employee’s redundancy payment.

Respondent’s submissions

[21] The respondent employer opposes the application and states that clause 16.6 of the Agreement is clear and unambiguous. The clause was the subject of discussions between employees covered by the Agreement and their union representative in lengthy bargaining for the Agreement.

[22] Manpower submits that the purpose of clause 16 Redundancy of the Agreement is clear with the employer required to make redundancy contributions into the MERT for each completed week of service. In the event an employee is made redundant their entitlement is specified at 16.3 which provides a payment in weeks’ pay dependent on an employee’s age and years of service. In Mr Wolfe’s case with 6 years’ service he is entitled to a payment of 20 week’s pay.

[23] The amount is paid from the employee’s MERT fund where the balance of the fund is offset against the Agreement entitlement, such that if an employee’s MERT fund account is greater than the redundancy calculation in 16.3 the employee is entitled to the greater amount. If the MERT account is less than the payment calculated at 16.3 of the Agreement based on age and years of service the employer is to pay the employee the difference.

[24] Manpower submits that it is applying the terms of the Redundancy clause in the manner intended and in the only way it can be interpreted. The taxation of the redundancy payment is not a matter that has any bearing on the application of the clause. The manner in which a redundancy payment is taxed is within the control of the ATO and not an issue in which the Commission can involve itself.

[25] It is put by Manpower that while a MERT account balance can be paid out for reasons other than redundancy it does not change the character of the payment when made on the basis of a redundancy. 3

[26] Manpower does not accept that the Redundancy clause in the Agreement raises any BOOT issues as the Agreement has already been approved on the basis that the BOOT has been satisfied and in any event the Agreement’s redundancy provisions are similar to those found in the relevant award the Electrical, Electronic and Communications Contracting Award 2010 (the Award) at clause 15.7, which allows for a set off of the Award redundancy payments against any amount an employee receives from a redundancy pay fund. Under the Award, a redundancy pay fund (scheme) must be an Approved Worker Entitlement Fund under the Fringe Benefits Tax Regulations 1992. The employer states that MERT is such a fund.

Conclusion

[27] I am satisfied as per clause 18 Dispute Settlement Procedure of the Agreement that the dispute concerning the understanding of the redundancy provisions raised by Mr Wolfe is a matter arising under the Agreement providing the Commission with jurisdiction to deal with the dispute.

[28] The applicant’s submissions are premised on not having been aware of how the employer’s redundancy payments into the MERT were to be taxed, although this is disputed by Manpower who states it was discussed during the enterprise agreement negotiations.

[29] It is not argued that Manpower is not currently or not intending to apply the redundancy provisions of the Agreement. Manpower is meeting their Agreement obligation under clause 16.1 of the Agreement by making the specified weekly redundancy contributions in respect of the applicant.

[30] Mr Wolfe’s redundancy entitlements specified at 16.3 of the Agreement relating to his years of service and age are also not in dispute.

[31] Clause 16.6 of the Agreement provides that the MERT balance is to be offset against the payment in clause 16.3. If the employee’s MERT account is greater than the payment required in clause 16.3, the employee will be entitled to the greater amount. Manpower applies this provision of the Agreement to all redundant employees.

[32] Manpower thus cannot be said to be doing anything contrary to its Agreement obligations in respect of redundancy.

[33] On this basis it is relevant to have regard to ss. 739(4) and (5) of the FW Act:

739 Disputes dealt with by FWC

…

(4) If, in accordance with the term, the parties have agreed that FWC may arbitrate (however described) the dispute, FWC may do so.

Note: FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

(5) Despite subsection (4), FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.

(My emphasis)

[34] The meaning of s.739(5) of the FW Act was outlined in Endeavour Energy v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (“Endeavour Energy”),⁴ where the Full Court said:

“Section 739(5) does not alter the character of the arbitration which the Commission undertakes under an enterprise agreement … It merely places a limit on the range of arbitrated (but not conciliated, it may be noted) outcomes available to the Commission in those cases in which the parties have agreed that the Commission may arbitrate.”

[35] Section 739(5) of the FW Act limits the Commission’s role in determining a dispute referred to it via a dispute settlement procedure in an enterprise agreement to the extent that any decision must not be inconsistent with the referring enterprise agreement. To do otherwise would be to provide entitlements or rights not otherwise provided for in the enterprise agreement.

[36] The Commission’s power under s.739 of the FW Act is not at large. As stated in Endeavour Energy, there is a limit on the range of outcomes available to the Commission. There is no reference to the taxation requirements of MERT payments under the Agreement. The Commission cannot as urged by Mr Wolfe determine that redundancy payments not be offset by any MERT payment as per clause 16.6 of the Agreement. 5 This is because that outcome would be inconsistent with the plain wording of the Agreement and be contrary to the prohibition imposed on the Commission’s powers by s.739(5) of the FW Act.

[37] The knowledge or lack of knowledge as to how redundancy payments are to be taxed under the Agreement does not in my view raise any issue of ambiguity or lack of clarity in the Agreement wording that the Commission can be called upon to clarify with an arbitrated decision as per the Dispute Settlement Procedure of the Agreement. The applicant’s claim is not a case of determining a right under the Agreement or interpreting the meaning of any particular clause of the Agreement.

[38] Mr Wolfe claims that the ATO taxation rates should have been stated in the redundancy clause. That may have been a preferred outcome but the Commission can only adjudicate on what is in the Agreement made between the employer and its employees and approved by the Commission. The Commission would be exceeding its powers under the FW Act to hold that clause 16.6 of the Agreement should not be complied with.

[39] What the applicant seeks can only be achieved with a variation to the Agreement or its replacement following the expiration of the nominal expiry date with the wording sought. The applicant is at liberty to take up the matter of the taxation rate applied to payments from the MERT with the ATO itself. It is not a matter that can be resolved to the applicant’s satisfaction as a s.739 dispute under the Agreement.

[40] Based on my findings in this matter, the application must in the first instance be dismissed as the Commission is without power to grant the relief sought by Mr Wolfe. Secondly, there is no dispute to resolve regarding the application of the Agreement as the employer is complying with the terms of the Agreement that on their plain meaning are clear and unambiguous.

DEPUTY PRESIDENT

Appearances:

Applicant: Mr G Wolfe on his own behalf

Respondent: Ms H MacAlister General Counsel for the Respondent.

Hearing details:

2019

Sydney

4 July

Printed by authority of the Commonwealth Government Printer

<PR710655>

 1   [2018] FWCA 4380

 2   Applicant’s Written Submissions Exhibit A1 at [7]

 3   Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Kentz Pty Ltd[2017] FWC 376 at [75]

4 [2016] FCAFC 82 (‘Endeavour Energy’).

 5   See Relief Sought at 3.1 of F10 and point (6) of written submissions of 7 June 2019, Ex A1