National Union of Workers v Coles Group Supply Chain Pty Ltd

[2011] FWA 4233

[2011] FWA 4233

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.739 - Application for Fair Work Australia to deal with a dispute in accordance with a Dispute Settlement Procedure

National Union of Workers
v
Coles Group Supply Chain Pty Ltd
(C2011/3703)

National Union of Workers
v
Coles Group Supply Chain Pty Ltd
(C2011/3704)

COMMISSIONER CAMBRIDGE SYDNEY, 5 JULY 2011

Dispute settlement procedure - interpretation of particular provisions of enterprise agreements - dispute as to quantum of entitlements arising in respect to severance payments made in redundancy circumstances.

[1] This decision is made in respect of two related matters each initiated by an application made pursuant to section 739 of the Fair Work Act 2009, (the Act), for Fair Work Australia (FWA) to deal with a dispute in accordance with a dispute settlement procedure. The applications were lodged at Melbourne on 21 March 2011. The applications were made by the National Union of Workers (NUW) and taken against Coles Group Supply Chain Pty Ltd, (the respondent).

[2] Each of the matters is referable to a dispute settlement procedure (DSP) contained in an enterprise agreement. In matter C2011/3703 the relevant DSP is found at Clause 11, Grievance Procedure, of the Coles Group Supply Chain Pty Ltd/National Union of Workers Woodlands 2010-2012 Certified Agreement (the 2010 Braeside Agreement). In matter C2011/3704 the relevant DSP is found at Clause 6, Procedure For The Avoidance of Industrial Disputes, of the Coles Group Supply Chain Pty Ltd and National Union of Workers (Hoppers Crossing) Enterprise Agreement -2010-2012 (the 2010 HC Agreement).

[3] The matters were the subject of unsuccessful conciliation before another Member of FWA. The matters have proceeded to arbitration which involved a Hearing conducted on 16 June 2011 in Melbourne, at which time the following appearances were recorded;

Mr D Mujkic appeared for the NUW;

Mr M Follett, counsel, appeared for the respondent together with Mr J Young.

[4] At the commencement of the Hearing, the Parties advised FWA that each side would accept the evidence of the other side uncontested, and not require any of the individuals who had made witness statements to be called for cross-examination on the contents of their respective statements. Essentially the Parties were jointly of the belief that the issues in contest could be determined without the need to settle any of the factual conflicts that may have arisen from the evidence. The Hearing proceeded with the respective verbal submissions made by each side supplementing the documentary material that had been filed earlier.

Background

[5] For the purposes of these matters the respondent has operated two warehouse distribution sites which are respectively described as, the Braeside site, and the Hoppers Crossing site. Employment of members of the NUW working at the Braeside site is governed by the terms of the 2010 Braeside Agreement, and the relevant industrial instrument for those working at the Hoppers Crossing site is the 2010 HC Agreement. The two Agreements have been collectively referred to as the 2010 Agreements.

[6] In about April and August 2009 the employees at respectively the Braeside and Hoppers Crossing sites were told that each site would be closing in about early 2011 for operational reasons. These site closures would mean that the employment of each employee working at the sites would be terminated by reason of redundancy in the lead up to, or at the time of the actual site closure.

[7] The 2010 Braeside Agreement was approved by FWA on 4 August 2010 and the 2010 HC Agreement was approved by FWA on 10 August 2010. There was no dispute that the 2010 Agreements were negotiated in the full knowledge of the impending closures of the Braeside and Hoppers Crossing sites. Both sites have subsequently closed and all employees have been made redundant.

[8] The disputes that have arisen relate to the interpretation of specific, different terms contained in the respective 2010 Agreements. Although both disputes involve argument about clauses in the 2010 Agreements which provide for accident insurance, the respective clauses of the Agreements deal with different aspects of accident insurance. The disputed interpretation of the respective clauses involve contest about different aspects of accident insurance which potentially impact upon the amount of redundancy payment that employees would be entitled to receive.

[9] Consequently, although each dispute has certain common elements and potentially similar outcomes, the issues in contest are different and each dispute must be the subject of separate analysis and determination.

The Hoppers Crossing Dispute

[10] In late 2010 employees were advised that the Hoppers Crossing site was anticipated to close in about March 2011 and redundancies would continue to be progressively implemented during the first few months of 2011.

[11] Since about 2000 the employees at the Hoppers Crossing site were provided with accident insurance pursuant to provisions contained in various Enterprise Agreements the specific terms of which did not significantly alter from the provisions contained in the 2010 HC Agreement. The relevant provisions of the 2010 HC Agreement are found at clause 50 which is in the following terms:

“50. SAFETY NET AND JOURNEY ACCIDENT INSURANCE

50.1 The Company will pay a maximum of 1% of base remuneration on behalf of all Team Members towards a Safety Net and Journey Insurance organised by the NUW. Any additional cost of this insurance will be funded by the Team Members.

50.2 The Team Members (by majority) may elect to withdraw from the Safety Net and Journey Insurance on the following dates - July 2006 and July 2007. At the time of withdrawal the Company will transfer the 1% of base remuneration payment, which would otherwise be payable in respect of the Safety Net and Journey Insurance, to the Team Members’ base pay rate as a one off payment.

50.3 In the event that the union elects to continue with insurance coverage, any further increases in premium over and above the existing premium will be calculated and deducted from the next applicable wage rate increase. The rates of pay will therefore be adjusted accordingly to reflect this increase.”

[12] The more recent history of the accident insurance provisions contained in various Agreements and ultimately manifest in the terms of clause 50 of the 2010 HC Agreement can be summarised as follows.

[13] In the 2000 Agreement negotiations it was decided that a percentage of what would have been paid by the respondent as an annual wage increase would instead be paid to fund the premium required to provide accident insurance. At that time the premium required was an amount equivalent to 1% of employees’ base remuneration. Therefore, in simple terms, the employer redirected 1% of what would have otherwise been paid as a base wage increase to an accident insurance premium payment.

[14] The first manifestation of a clause which contained the terms of clause 50 of the 2010 HC Agreement appeared in the 2002 Agreement. Importantly these terms specified that a majority of employees could, at particular times, elect to withdraw from the accident insurance and in so doing the respondent would transfer the 1% payment to the base rate of pay of employees. The particular times for withdrawal from the accident insurance were stipulated in the 2002 Agreement to be July 2003 and July 2004. These dates were altered in the 2005 Agreement to July 2006 and July 2007. The accident insurance clause was then included in the 2008 Agreement and ultimately the 2010 HC Agreement in terms that were unchanged from those which appeared in the 2005 Agreement. Thus, the terms of sub clause 50.2 of the 2010 HC Agreement refers to dates of July 2006 and July 2007.

[15] In late 2010 the employees at the Hoppers Crossing site started to consider withdrawing from the accident insurance. Discussions about such a withdrawal were commenced with the respondent. The respondent unequivocally rejected the prospect that the employees could withdraw from the insurance and thereby establish an entitlement to have a 1% increase in base rate of pay.

[16] In early February 2011 the number of warehouse employees had decreased from about 220 to about 120 as the redundancies were progressively invoked. The employees held a meeting and voted, by majority, not to withdraw from the accident insurance. In late February the number of employees had decreased to about 72 and a further meeting was held at which a majority voted to withdraw from the insurance. The accident insurance was cancelled on and from 1 March 2011 and the respondent has not increased the base rate of pay by 1%.

[17] The Hoppers Crossing dispute essentially involves a claim that the employees who remained after the accident insurance was cancelled on 1 March 2011, are entitled to a 1% increase in base rate of pay for all time worked until they were made redundant and that corresponding adjustment to severance payments should also be made.

The Braeside Dispute

[18] Employees at the Braeside site have been entitled to accident insurance prescribed by provisions contained in various Agreements that can be traced back to at least 1997. However, unlike the Hopper Crossing site, there has not been any Agreement clause for accident insurance which contemplated withdrawal from the insurance. Consequently the relevant terms of the 2010 Braeside Agreement are briefer than for Hoppers Crossing and are as follows:

“50. SAFETY NET AND JOURNEY INSURANCE

The company will provide Safety Net and Journey Insurance on behalf of all employees. The insurance shall provide for a 14 day excess period and provide 100% wage cover for the life of the Agreement Wage increases in Clause 18 have been adjusted to take into account the increase in the insurance premium payable by the Company, as at 30 January 2004. Any further increase in such premium, during the life of this Agreement shall be similarly deducted from the wage increase payable on 1 February 2005.

The company’s contribution to this as at 1 February 2004 is 1.08%. The employee’s contribution is 0.856%. The total rate for the insurance is 1.936%..”

[19] The accident insurance at the Braeside site has a recent history somewhat different to the Hoppers Crossing site. At the Braeside site the respondent had historically paid the premium to provide accident insurance for employees. In about 2002 these insurance premiums were increased and there was an arrangement established whereby the employees rather than the respondent paid for the increases in the premiums. The component of the premiums paid for by the employees was obtained by way of a redirection of a wage increase in a not dissimilar fashion to the 1% transfer of potential wage increase which funded the substantial proportion of the premiums for the insurance at the Hoppers Crossing site.

[20] Consequently the terms of clause 50 of the 2010 Braeside Agreement includes mention that the employee’s contribution to the accident insurance premiums was 0.856%. This reflects the position of employees as they were made redundant during 2010-2011. That is, at the time of being made redundant from the Braeside site each employee’s base rate did not include an amount equivalent to 0.856% of the base rate which had been redirected to fund the accident insurance.

[21] The severance pay prescriptions of the 2010 Braeside Agreement, specifically clause 12.10.5, require that calculations of severance pay be based on weeks of “ordinary time”. When the employees at the Braeside site were made redundant in 2010-2011 their severance payments were calculated on “ordinary time” which did not include the 0.856% which represented the employees’ contribution to the accident insurance.

[22] The Braeside dispute essentially involves a claim that employees severance pay should have been calculated so that “ordinary time” included the 0.856% which was base rate remuneration redirected to fund accident insurance.

The NUW Case

[23] In brief, the NUW submitted that the terms of clause 50 of the 2010 HC Agreement should be interpreted so as to establish an entitlement for those employees who continued in employment after the accident insurance was cancelled on 1 March 2011, to receive a 1% increase in base rate of pay.

[24] Mr Mujkic for the NUW said that the terms of clause 50 should be interpreted with regard for the industrial purpose for which it was created rather than by the adoption of a strict or literal approach. Mr Mujkic submitted that such a purposive approach was supported by, in particular two Authorities, Amcor Limited v Construction Forestry Mining and Energy Union¹,“Amcor” and Kucks v CSR Limited ², “Kucks”.

[25] Therefore, according to the submissions of Mr Mujkic, the dates of July 2006 and July 2007 contained in sub clause 50.2 of the 2010 HC Agreement should not operate to impede the capacity for the employees to, by majority vote, withdraw from the accident insurance in February 2011. Mr Mujkic submitted that the dates of July 2006 and July 2007 were included because the insurance premiums were reviewed and adjusted on an annual basis in July during each year of operation of the 2002 and 2005 Agreements and more recently, in October of each year. Mr Mujkic said that these dates had not been updated in either the 2008 or 2010 Agreements.

[26] According to the submissions of Mr Mujkic the dates of July 2006 and July 2007 should carry little or no meaning other than to establish that the primary purpose of the introduction of specific dates was to allow employees to cancel the insurance, which they did in March 2011. Mr Mujkic submitted that a purposive interpretation of clause 50 of the 2010 HC Agreement meant that the inclusion of dates, which were now clearly obsolete, did not lock in the only time at which employees could withdraw from the accident insurance. Instead Mr Mujkic said that the clause provided that the employees had the ability to withdraw from the insurance at any time.

[27] The NUW sought an Order from FWA requiring the respondent to make payment of an additional 1% to the base rate of pay of all employees covered by the 2010 HC Agreement who were no longer provided with the accident insurance after 1 March 2011.

[28] In respect of the Braeside dispute the NUW submitted that the same purposive approach should be applied to interpretation of terms albeit in a different Agreement. In the Braeside case the combination of clauses 50 and 12.10.5 of the 2010 Braeside Agreement meant that the term “ordinary time” should be interpreted to include the employee’s contribution of 0.856% to the accident insurance.

[29] The employee’s contribution of 0.856% had been automatically deducted from what would have otherwise been paid as part of base rate remuneration. Therefore, according to the submissions made by Mr Mujkic, this amount should be identified as “ordinary time”.

[30] The NUW urged FWA to make an Order requiring that the respondent adjust all severance payments made pursuant to clause 12.10.5 of the Braeside Agreement so that the ordinary time used as basis for severance pay calculations include the 0.856% employee contribution to accident insurance.

The Respondent’s Case

[31] Mr Follett who appeared on behalf of the respondent, made verbal submissions in addition to the written outline of submissions filed by the solicitors for the respondent. Essentially the case advanced on behalf of the respondent rejected the interpretations placed on the terms of the two 2010 Agreements by the NUW.

[32] The submissions made by the respondent asserted that the meanings that the NUW sought to give to the terms of clause 50 of the 2010 HC Agreement and clauses 50 and 12.10.5 of the 2010 Braeside Agreement were, as a matter of ordinary construction of an industrial instrument, simply not available. Mr Follett submitted that the applications made by the NUW represented attempts to gain benefits that could not be obtained from the terms of the 2010 Agreements and should have been issues raised during the enterprise bargaining negotiations.

[33] Mr Follett said that clause 50 of the 2010 HC Agreement could not be interpreted to mean that employees could withdraw from the accident insurance at any time because such an interpretation would ignore the actual terms of the clause which included the dates of July 2006 and July 2007. Mr Follett acknowledged that it may be conceivable to accept that the dates of July 2006 and July 2007 appearing in sub clause 50.2 had been inadvertently overlooked during more recent enterprise bargaining negotiations and these dates had therefore become obsolete.

[34] However Mr Follett strongly rejected that the clause could be interpreted to mean that the employees could withdraw from the insurance at any time. Mr Follett submitted that the dates may have been capable of being updated but one could not “...pretend they weren’t there”. According to Mr Follett the words used in the Agreement had to be given some respect and dates, even obsolete dates, must stand for something and could not be given to mean at any time as was asserted by the NUW.

[35] Mr Follett also mentioned that the closure of the sites was clearly known to all when the 2010 Agreements were negotiated. The pending redundancies of employees at both sites was a major issue during the 2010 negotiations and matters such as those now the subject of these applications should have been raised by the NUW as part of the 2010 enterprise bargaining negotiations.

[36] The respondent strongly objected to the meaning that the NUW now sought to give to the term “ordinary time” in clause 12.10.5 of the 2010 Braeside Agreement. Mr Follett submitted that this was a matter that should have been raised as part of the 2010 Agreement negotiations regarding redundancy and the term “ordinary time” could not, in the absence of some clearly established alternative, comprehend an amount that had been redirected out of base rate pay to fund some other benefit, in this case, accident insurance.

[37] Mr Follett urged FWA to reject the meanings that the NUW sought to apply to the relevant clauses of the 2010 Agreements as such meanings would only be obtained by ignoring the actual words used in those terms. The respondent submitted that both applications should be dismissed.

Consideration

[38] These disputes are about the meaning that should be given to particular words which appear in industrial agreements. The approach to interpretation of industrial instruments is not a matter of strict statutory interpretation. However that does not mean that the principles which have been established for statutory interpretation should be disregarded. The result is that the principles for statutory interpretation provide the basic framework for interpretation of industrial instruments and that framework is to be applied in combination with a more expansive, purposive and contextual consideration.

[39] Consequently I have accepted and adopted that the determination of these matters should involve the purposive approach urged by the NUW and as broadly based upon the authority established by Judgements such as Amcor and Kucks. In addition, I have been guided and assisted by a more recent Decision of a Full Bench of FWA in,Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) v Silcar Pty Ltd [2011] FWAFB 2555.

[40] The terms of clause 50 of the 2010 HC Agreement display an obvious difficulty. The reference in sub clause 50.2 to the dates of July 2006 and July 2007 immediately opens the prospect for contested interpretation. Even if using a strict approach to statutory interpretation the inclusion of obsolete dates would provide for ambiguity, uncertainty and a result that was manifestly absurd or unreasonable and thus permit the interpretation to involve the use of extrinsic materials via application of section 15AB of the Acts Interpretation Act 1901.

[41] It was accepted that the obsolete dates appeared essentially as the result of inattention to detail during the 2008 and 2010 enterprise agreement negotiations. Consequently if sub clause 50.2 of the 2010 HC Agreement had been properly updated the dates of July 2006 and July 2007 would have, in all likelihood, been replaced with the dates of October 2010 and October 2011.

[42] In the context of the process involving the renegotiation of industrial agreements where the participants do not ordinarily have the resources to carefully review every clause of the agreement that is being renegotiated, it is reasonable and appropriate to interpret the provisions of sub clause 50.2 to include the updated dates of October 2010 and October 2011. If such an interpretation was not provided the sub clause would be meaningless.

[43] Having regard for the history and development of clause 50 of the 2010 HC Agreement, the plain intention of sub clause 50.2 is to enable the employees to withdraw from the accident insurance and to receive a coincident, interdependent 1% increase to base pay rates.

[44] The ordinary application of this sub clause operating in accordance with this intention would be unremarkable. It would usually make little difference to the respondent if it was required to pay an amount calculated to represent 1% of base rate payroll either directly to employees or alternatively as premiums for the accident insurance. In effect the cost to the respondent is the same; the only difference is whether the amount is paid to employees or to an insurance company.

[45] The complication that has emerged with the application of this interpretation of sub clause 50.2 arises from the withdrawal from the accident insurance at a time shortly before redundancy occurred. Clause 50 was constructed at the time when there was no contemplation of redundancy. Therefore the ongoing liability for payment of either the 1% base rate or the equivalent amount as insurance premiums was effectively indefinite. The closure of the HC site created a specific limitation to the respondent’s liability to make either payment of the insurance premiums or the conversion of that amount to a one-off 1% base rate increase.

[46] The inclusion of the dates in the early incarnations of clause 50 logically coincided with the annual review of the premiums for the accident insurance. These dates clearly established a structured regime to permit any withdrawal from the accident insurance. These dates subsequently became obsolete, nevertheless, in order to properly interpret the industrial purpose for which the clause was designed it is important to examine other aspects of this regime.

[47] Firstly, there was no suggestion of any prospect for a subsequent return to accident insurance if an election to withdraw on either of the anniversary dates had been made. The clause provided only a single opportunity to withdraw from the accident insurance. Secondly, the stipulation that there be a majority to elect to withdraw removed any prospect for individual choice. There was no capacity for some of the employees to elect to withdraw from the accident insurance and receive the 1% base rate payment, while others remained covered by the accident insurance scheme. These elements strongly suggest that the respondent’s agreement to the prospect of withdrawal from the accident insurance was firmly grounded upon a regime that created specificity about the single occasion that an irreversible and universal decision to withdraw from accident insurance could occur.

[48] Consequently, the regime for withdrawal from the accident insurance stipulated annual dates and although the dates in the 2010 HC Agreement were obsolete and could be interpreted to be the dates of October 2010 and October 2011, the underlying basis for the inclusion of annual dates involved the respondent's legitimate and reasonable intention to have a clearly established regime to deal with the arrangements for accident insurance. The interpretation as urged by the NUW, that the terms of clause 50 provided for withdrawal from the accident insurance at any time, would be plainly contrary to the level of specificity of a regime that stipulated inter alia, withdrawal on nominated annual dates.

[49] Clause 50 of the 2010 HC Agreement even when interpreted to include the dates of October 2010 and October 2011 in sub clause 50.2, cannot be interpreted to mean that the employees at the HC site who withdrew from the accident insurance arrangements on about 1 March 2011, did so in accordance with clause 50. The withdrawal from the accident insurance was not in accordance with the terms of clause 50 of the 2010 HC Agreement and therefore no obligation can be established on the respondent to increase base rates of pay by 1%.

[50] Although the employees do not have any entitlement to a 1% base rate increase the respondent has no entitlement to retain monies that would have otherwise been paid as accident insurance premiums after the policy was cancelled on 1 March 2011. In effect, the cancellation of the accident insurance was not made in accordance with clause 50 of the 2010 HC Agreement and was therefore invalid. There is of course no practical means by which the invalidity could be remedied so as to provide for insurance coverage for a period that has passed.

[51] However, the respondent is part of a large, well-known corporation which is broadly recognised by the Australian public as the retail company known as Coles. Coles appears to have concern that the Australian public recognise it as a responsible corporate citizen. I accept that the respondent had no control over the actions of the employees when they cancelled the accident insurance but those actions, unintentionally, provided the respondent with the financial benefit of no longer having to pay the accident insurance premiums for the short period until site closure. It would be unethical and unconscionable if the respondent was to retain that financial benefit and such unethical and unconscionable conduct would reflect directly upon Coles. If the respondent as part of Coles, is the responsible and ethical corporate citizen that the Coles name seeks to portray it is incumbent upon it to make payment of the unpaid accident insurance premiums to those employees who did not have accident insurance cover after 1 March 2011.

[52] Clause 50 of the 2010 Braeside Agreement identifies that the employee’s contribution to accident insurance was 0.856%. This amount was redirected from what would have been an increase to base rate remuneration. If this amount had not been redirected it would have been paid as part of the “ordinary time” used as basis for calculation of severance payments pursuant to clause 12.10.5.

[53] In the absence of any expressed term to provide for the inclusion of this redirected amount as part of “ordinary time” it represents something that would not be comprehended by the established, usual meaning of “ordinary time”. The employee's contribution to accident insurance is not dissimilar to the initial 3% compulsory superannuation contribution which was established as a redirected base wage increase.

[54] The fact that the amount of the employee's contribution was identified in clause 50 does not provide basis to include the contribution as part of “ordinary time”. There would need to be an expressed provision in the 2010 Braeside Agreement which mentioned the inclusion of the 0.856% as part of “ordinary time” before the employee’s contribution could be included as part of “ordinary time”. The mere identification of the component in clause 50 cannot be construed as an operative term that acted to cause a departure from adoption of the established, usual meaning of “ordinary time”.

Conclusions

[55] The determination of these disputes has involved the interpretation of particular terms in two separate enterprise agreements which applied at separate sites both of which were operated by the respondent. The matters of contested interpretation have involved different but related issues concerning accident insurance.

[56] In respect to the interpretation of the 2010 HC Agreement I have concluded that the employees withdrew from the accident insurance scheme in contravention of the terms of clause 50. Therefore there was no entitlement for those employees who withdrew from the accident insurance to receive the 1% base rate payment mentioned in sub clause 50.2.

[57] However in respect to the HC site dispute, there is a strong ethical and moral obligation on the respondent to make payment of the unpaid accident insurance premiums to those employees who did not have accident insurance cover after 1 March 2011.

[58] In respect to the interpretation of the 2010 Braeside Agreement I have concluded that the term “ordinary time” as it appears in clause 12.10.5, does not include the employee's contribution of 0.856% mentioned in clause 50.

[59] In view of the conclusions that I have reached the applications made by the NUW in both matters must be dismissed and the proceedings concluded accordingly.

COMMISSIONER

Appearances:

Mr D Mujkic appeared for the NUW;

Mr M Follett, counsel, appeared for the respondent together with Mr J Young.

Hearing details:

Melbourne, 16 June 2011.

¹ Amcor Limited v Construction Forestry Mining and Energy Union [2005] HCA 10; (2005) 222 CLR 241; (2005) 214 ALR 56; (2005) 79 ALJR 703 (9 March 2005).

² Kucks v CSR Limited [1996] IRCA 166 (19 April 1996), 66IR182.

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