National Union of Workers v Coles Group Supply Chain Pty Ltd

[2011] FWA 4288

[2011] FWA 4288

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.739—Dispute resolution

National Union of Workers
v
Coles Group Supply Chain Pty Ltd
(C2010/4802)

COMMISSIONER BISSETT MELBOURNE, 12 JULY 2011

Alleged dispute concerning recognition of prior service.

[1] This is an application by the National Union of Workers (NUW) with respect to redundancy entitlements of its member Mr Jason Smith.

[2] This matter has been the subject of a decision 1 by me (the initial decision) which was subsequently appealed.2 On appeal the Full Bench determined that:

• I had properly characterised the task before me. 3



• There was no error in determining that Mr Smith’s period of casual employment did not break his continuity of service. 4



• I was in error in finding that there had been a contractual deeming of Mr Smith’s employment with Kmart retail as employment with Coles Group Supply Chain for the purposes of redundancy. 5

[3] The circumstances of the redundancy and the history of Mr Smith’s employment are relevant to this decision. They are succinctly set out in the Appeal decision:

[5] The employment history of Mr Smith, which is relevant to the dispute, is as follows:

• From October 1989 to August 1997: employed full-time by Kmart at an Altona North retail store;

• From August 1997 to April 1998: employed as a casual at the Kmart Hoppers Crossing warehouse;

• From April 1998 to September 2000: employed as a casual at the Coles Myer Logistics (CML) Hoppers Crossing warehouse;

• From September 2000 to January 2007: employed full-time at CML Hoppers Crossing warehouse;

• From January 2007 to August 2010: employed full-time at CGSC Hoppers Crossing warehouse; and

• From August 2010 until redundancy: employed full-time at CGSC Laverton warehouse.

[6] In the matter before Commissioner Bissett, there was no dispute about the following matters:

• CML and CGSC are the same legal entity;

• Kmart and CML/CGSC were members of the “Coles Myer Group” and are related entities;

• The change of operations at the Hoppers Crossing warehouse from Kmart to CML in April 1998 involved a transmission of business;

• The period of full-time employment from September 2000 until the time of redundancy was counted toward Mr Smith’s permanent employment, with the Agreement applying at both the Hoppers Crossing and Laverton sites; and

• The period of casual warehouse employment from August 1997 to September 2000 did not count towards Mr Smith’s permanent employment.

[4] It should be stressed that this matter does not relate to Mr Smith seeking recognition of a period of casual employment for the purposes of redundancy pay. Rather it goes to whether a period of permanent employment with Kmart retail that is continuous with his casual employment and later ongoing employment with Coles Group Supply Chain (CGSC) should be recognised as service for redundancy purposes.

[5] On appeal the NUW ‘advanced the proposition that there was legal or industrial deeming found in the incorporation of clause 6.3 of the Award as part of the Agreement through the operation of clause 5.1.1 of the Agreement.’ 6 This was not an argument raised during the initial hearing and CGSC had not previously had the opportunity to make submissions on this point. On this basis the Full Bench determined that the matter should be remitted to me to ‘deal with the subject matter of the decision in [2011] FWA 167’7 that is, Mr Smith’s redundancy entitlement.

[6] The remittal was heard on 14 June 2011.

[7] At this hearing it was agreed that the matter for determination is whether or not there had been any industrial deeming of Mr Smith’s Kmart retail employment as service with CGSC by virtue of the operation of clause 5.1 of the Coles Group Supply Chain Pty Ltd and National Union of Workers (Hoppers Crossing) Enterprise Agreement 2010-2012 (the Agreement).

[8] Clause 5.1 of the Agreement provides:

5.1 PARENT AWARD

5.1.1 This Agreement shall incorporate the Storage Services Retail Victorian Warehouses Award 2000 (as at 08 March 2002), provided that this Agreement shall prevail to the extent of any inconsistency.

[9] The Storage Services Retail Victorian Warehouses Award 2000 (the Award) contains a clause with respect to transmission of business which, by virtue of the operation of clause 5.1.1 of the Agreement, is incorporated into the Agreement. It provides:

6.3 Transmission of business

6.3.1 Where a business is before, on or after the date of this award, transmitted from an employer (in this clause called the transmittor) to another employer (in the clause called the transmittee) and an employee who at the time of such transmission was an employee of the transmittor in that business becomes an employee of the transmittee:

6.3.1(a) the continuity of the employment of the employee shall be deemed not to have been broken by reasons of such transmission; and

6.3.1(b) the period of employment which the employee has had with the transmittor or any prior transmittor shall be deemed to be service of the employee with the transmittee.

6.3.2 In this clause business includes trade, process, business or occupation and includes part of any such business, and transmission includes transfer, conveyance, assignment or succession whether by agreement or by operation of law, and transmitted has a corresponding meaning.

[10] This clause forms part of clause 6 - Definitions in the Award.

[11] There is no dispute that s.257 of the Fair Work Act 2009 (the Act) provides for material to be incorporated by reference into an agreement. The terms of the Storage Services Retail Victorian Warehouses Award 2000 (the Award) were therefore incorporated as terms of the Agreement, subject to the Agreement prevailing to the extent of any inconsistency.

Submissions

[12] The NUW submits that

(i) Mr Smith’s service with Kmart is deemed to be service with the Respondent by virtue of clause 6.3 of the Storage Services Retail Victorian Warehouses Award 2000 (as at 8 March 2002) (“the Award”) and therefore may form a part of Mr Smith’s permanent employment for the purposes of redundancy;

(ii) At the time of the 1998 transfer of business, section 170MB of the then operative Workplace Relations Act 1996 (“the WR Act”) deemed Mr Smith’s service with Kmart to be service with the Respondent, meaning the service may form part of Mr Smith’s permanent employment for the purposes of redundancy; and

(iii) The redundancy provision of the 2010 Agreement, when interpreted in its wider context and with regards to its industrial purpose and the meaning intended by the framers of the document, recognises the relevant part of Mr Smith’s service with Kmart as permanent employment for the purposes of that provision. 8

[13] CGSC on the other hand submits that

(i) industrial deeming through the operation of clause 6.3 of the award would ‘involve substantial violence...being done to the original meaning, scope of operation and intent of clause 6.3’ 9 because:

• clause 6.3 of the award was originally tied to the redundancy test case provisions of the award and is only concerned with periods of service at the time of the transmission of business;

• clause 6.3 deals with periods of service under the Award (and hence the Agreement) or at least within the scope of the Agreement and Mr Smith’s Kmart retail work does not come within such a scope; and/or

• clause 6.3 of the Award is inconsistent with the Agreement and therefore has no work to do. 10

(ii) Section 170MB of the WR Act did no more than ensure that any certified agreement applying to the business of Kmart would apply to the business of the Respondent. 11

[14] A determination of this matter requires a consideration of the effect of the incorporation of the Award, and in particular clause 6.3, into the Agreement and therefore the intended operation of the clause in the Agreement.

[15] In determining the intent of the clause the relevant rules of construction are:

• The words must be understood in the ordinary and natural usage;



• An interpretation which will avoid absurdity, repugnancy or inconsistency should be preferred;



• Particular provisions should be understood in context of the Agreement read as a whole;



• The history of the relationship between the parties as reflected inter alia by previous Awards and Enterprise Agreements between them may be relevant;



• The conduct of the parties subsequent to the drafting of the Agreement save as indicative of pre-draft intent is an irrelevant consideration. 12

The operation of clause 6.3 in the Award

[16] Clause 6.3 forms part of clause 6 - Definitions in the Award.

[17] The ‘definitions’ clause contained in the Award must be considered in the context of the Award as a whole. The principles associated with interpreting an award apply to the definitions clause as to all other clauses in an award.

[18] The history of the redundancy clause in awards demonstrates that the transmission of business clause has historically been part of the termination, change and redundancy clause of awards.

[19] The transmission of business provision now included at clause 6.3 of the Award arises from the TCR Case 13and the TCR Supplementary Decision.14 The ‘model’ TCR clause included a sub-clause in the form of the transmission of business clause now under consideration. In the Award Simplification Decision it was decided that the definition of ‘transmission of business’ be relocated, in part, to the ‘Who is Bound by this Award’ clause15 of the award. However, when the Storemen and Packers (Retail Warehouses, Victoria) Award 1981 was simplified:16

• there was no TCR clause in the award;



• the TCR provisions were included in the simplified award; and



• the transmission of business provision was placed in the ‘definitions’ clause of the simplified award and not the ‘who is bound’ clause as discussed in the Award Simplification Decision.

[20] The form of the definition of ‘transmission of business’ included in awards arising from the TCR Case was taken from the Metal Industry (Long Service Leave) Award 1976 where it assisted in the definition of ‘service’ for the purposes of long service leave. In determining to include such a provision in the TCR standard, the Full Bench said ‘we would make it clear that we do not envisage severance payments being made in cases of succession, assignment or transmission of a business.’ 17 That is, where there was a transmission of business ‘service’ would not be broken and redundancy entitlements would be based on service which includes service with the transmittor where there was such service at the time of transmission.

[21] The decision in award simplification to move the definition of ‘transmission of business’ from the termination, change and redundancy clause to the coverage or, in this case, the definitions clause of the award cannot be seen to have given the clause any greater meaning than originally intended. That is, its relevance remains to the recognition of service at the time of a transmission.

The operation of clause 6.3 in the Agreement

[22] In considering the incorporation of the Award into the Agreement it is important to consider the totality of what has been incorporated and its context. In this respect it is not possible and would be the wrong approach to consider clause 6.3 of the Award in isolation of the incorporation of the entire award (subject to the conflict provisions in clause 5.1.1 of the Agreement).

[23] There being no other intention expressed by the parties to the Agreement, it can only have been intended that the incorporated provisions would operate as they had in the Award subject to any specific Agreement provisions altering the operation of the incorporated Award provision.

[24] In this case there is nothing in the Agreement that affects the operation of clause 6.3 of the Award. That the redundancy clause of the Award may be affected and altered by the operation of the redundancy provision of the Agreement does not alter the operation of clause 6.3. Clause 6.3, as incorporated into the Agreement, does no more than assist in the determination of ‘service’. No specific provision of the Agreement alters this.

[25] Had it been the intention that the transmission of business clause should have some broader application then no evidence has been given to this end.

[26] I therefore find that clause 6.3 of the Award as incorporated into the Agreement has not altered the operation of the clause.

Does the transmission of business clause operate to deem Smith’s earlier service with Kmart retail as service with CGSC?

[27] At the time of the transmission of business Mr Smith worked at the Kmart Hoppers Crossing Warehouse (Kmart warehouse) as a casual employee. Prior to commencing as a casual at Kmart warehouse Mr Smith had worked as a full time employee at the Kmart Altona North retail store (Kmart retail).

[28] The transmission of business was from the Kmart warehouse to Coles Myer Logistics (CML) warehouse.

[29] The purpose of the transmission of business clause is to ensure that service with a transmittor at the time of transmission is recognised as service with the transmittee. In Mr Smith’s case it would operate to ensure that, as at April 2008, his service with Kmart warehouse (the transmittor) was recognised as service with CML (the transmittee).

[30] It is true that, at the date of transmission, Mr Smith had no ‘accrued’ service with Kmart warehouse that could be recognised by CML. Mr Smith was a casual employee in the warehouse. He had resigned from his Kmart retail position. As such he had no ‘service’ that could have been recognised for redundancy purposes. As the NUW concedes, while Mr Smith remained a casual employee he had no entitlement to redundancy. Had his employment been terminated at the time of transmission to CML he would have had no claim to redundancy.

[31] There was no transmission of business between Kmart retail and Kmart warehouse or Kmart retail and CML. Mr Smith’s service with Kmart retail ended when he ceased employment in retail. Mr Smith did not ‘carry’ this service with him to Kmart warehouse. Mr Smith’s Kmart retail service was not recognised by Kmart warehouse by virtue of the operation of transmission of business provisions of the award or agreement that covered him at the time. His Kmart retail service was not recognised as Kmart warehouse service through any other arrangement. It is not plausible that Mr Smith carried eight years service with Kmart retail ‘in his back pocket’ waiting for the circumstances that might cause this to be reactivated. The transmission of business provision does not operate to provide for this. Mr Smith had no service with Kmart warehouse at the time of transmission that could be recognised by CML (and hence CGSC).

[32] I therefore conclude that the transmission of business provision at clause 6.3 of the Award as incorporated into the Agreement does not operate to recognise Mr Smith’s Kmart retail service as service with CGSC for the purpose of the redundancy provisions of the Agreement.

Did s170MB operate to recognise Smith’s Kmart retail employment?

[33] At the time of transmission from Kmart warehouse to CML employees at the Kmart warehouse at Hoppers Crossing were covered by the Kmart Australia Ltd and National Union of Workers (Hoppers Crossing) Agreement 1997 (the Kmart Agreement), an agreement certified by the AIRC on 5 August 1997. 18

[34] The effect of s.170MB of the Workplace Relations Act 1996 (the WR Act) as at the time of the transmission of business to CML is that the Kmart Agreement, which had previously bound Kmart and the NUW, would now be binding on CML and the NUW. The Kmart Agreement contained no provision that suggests that Mr Smith’s previous employment with Kmart retail was recognised for any purpose.

[35] Further, Mr Smith’s previous employment was with Kmart in the retail store. No part of Kmart’s retail store operations transmitted to CML. The transmission of the Kmart Agreement would not, of itself, cause Mr Smith’s Kmart retail employment to be transmitted to CML.

[36] Unless the Kmart Agreement provided for some recognition of Mr Smith’s employment in Kmart retail it is difficult to see how the employment could otherwise be recognised by virtue of the operation of s.170MB of the WR Act.

[37] The NUW submits that, based on the reasoning in Amcor v Construction, Forestry, Mining and Energy Union & Others, 19 s.170MB of the WR Act operates to recognise service with the transmittor as service with the transmittee.

[38] In Amcor it was found that:

There is a further point that follows from s 170MB. If the section is engaged, and a new employer becomes bound by the certified agreement, those provisions of the agreement which depend for their operation upon the length of an employee’s service (like provisions for leave) may well have to be construed as depending upon the combined length of service with both the old and the new employer. That is, it may well be that the certified agreement would be construed, in such circumstances, as neither permitting nor requiring differentiation between service with one employer and service with the other. These, however, are questions which were not pursued in argument and need not be decided. 20

[39] The judgment in Amcor does not assist Mr Smith. Mr Smith, while working at Kmart warehouse, had no ‘service’ such that s.170MB of the WR Act could operate to recognise. For the same reason that the transmission of business clause fails to assist Mr Smith, so does s.170MB and the reasoning in Amcor.

[40] On this basis I find that s.170MB of the WR Act does not operate to recognise Mr Smith’s employment with Kmart retail as employment with CGSC for the purposes of the redundancy provision of the Agreement.

Was there an intent to recognise service such as Mr Smith’s service?

[41] This submission of the NUW is related to both matters determined above. This is the argument that seeks to enable Mr Smith to carry his eight years of Kmart retail employment ‘in his back pocket’ awaiting some activation. The NUW submits that it was the intention of the parties that such activation did arise in Mr Smith’s case when he became a permanent employee of Kmart warehouse and was then made redundant. I consider this for completeness, although given my finding above, it is not strictly necessary.

[42] The NUW seeks that I attribute some broad intention to the parties in including transmission of business provisions in the Award and then in incorporating that in the Agreement beyond what I have set out above. However, it provides no evidence of any specific or additional intention to reach so far back into a person’s employment so that that Mr Smith’s Kmart retail employment should be carried forward and recognised as proposed.

[43] Further, there is no evidence that the parties intended any change in the purpose of the transmission of business clause when incorporating the Award into the Agreement. It is clear that the parties turned their minds to matters of redundancy but this is not evidence of an intended change to the recognition of service through transmission of business.

[44] I find that there is no evidence of an intention by those who negotiated the Agreement (or the Award) to recognise service such as Mr Smith’s service with Kmart retail at the time of redundancy from CGSC.

Conclusion

[45] Mr Smith has found himself in a unique set of circumstances. How his history of employment would ultimately play out with respect to any entitlements he may have under the Agreement would inevitably vary depending on when and how he exited from CGSC. The circumstances of his departure are such that his earlier service with Kmart retail is not recognised for redundancy purposes under the Agreement.

[46] On the basis of all of the evidence and submissions of the parties, including that in the initial matter, I find that Mr Smith’s service for redundancy purposes under the Agreement is his service from September 2000 until the date of the termination of his employment for reasons of redundancy from CGSC.

[47] My finding in the initial decision that Mr Smith’s period of casual employment did not break his continuity of service is not altered by this decision.

COMMISSIONER

Appearances:

D. Mujkic for the National Union of Workers.

M. Follett with J. Young for Coles Group Supply Chain.

Hearing details:

2011.

Melbourne.

14 June 2011.

 1   [2011] FWA 167.

 2   [2011] FWAFB 2425.

 3   [2011] FWAFB 2425, [14].

 4   [2011] FWAFB 2425, [15].

 5   [2011] FWAFB 2425, [21].

 6   [2011] FWAFB 2425, [26].

 7   [2011] FWAFB 2425, [30].

 8   NUW4, paragraph 6.

 9   Coles4, paragraph 15.

 10   Coles4, paragraph 16.

 11   Coles4, paragraph 55.

 12   See Transadelaide v Leddy 80 IR 265, 271.

 13 (1984) 8 IR 34.

 14 (1984) 9 IR 115, 129.

 15 (1997) 75 IR 272, 279.

 16   Print T1577.

 17 (1984) 8 IR 34, 75.

 18   Print K0323.

 19 [2005] 222 CLR 241.

 20 [2005] 222 CLR 241, 258 (per Gummow, Hayne and Heydon JJ).

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