National Union of Workers v Coles Group Supply Chain Pty Ltd
[2016] FWC 8929
•14 DECEMBER 2016
| [2016] FWC 8929 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.739—Dispute resolution
National Union of Workers
v
Coles Group Supply Chain Pty Ltd
(C2016/5714)
DEPUTY PRESIDENT BULL | SYDNEY, 14 DECEMBER 2016 |
S.739 Application to deal with a dispute
[1] In this matter, the National Union of Workers (NUW) has made an application for the Commission to deal with a dispute in accordance with the dispute settlement procedure contained in the Coles Smeaton Grange (NUW) Regional Distribution Centre Enterprise Agreement 2014 (the Agreement). The respondent to the dispute is Coles Group SupplyChain Pty Ltd (Coles) who is named as the employer in the Agreement.
[2] Clause 8 - Dispute Settlement Procedure of the Agreement provides that any dispute concerning the application of the terms of the Agreement may be referred to the Fair Work Commission (the Commission) for conciliation and arbitration. Appendix C of the Agreement sets out the process to be followed and powers of the Commission in settling disputes.
[3] The matter was subject to a conciliation conference before the Commission on 17 October 2016. On 1 November 2016 the NUW advised that the dispute could not be resolved between the parties and requested that the matter be listed for arbitration. Mr Keats, a solicitor from W G McNally Jones, appeared on behalf of the NUW and Mr Jolly, a solicitor from Minter Ellison, appeared on behalf of the respondent. 1
Issue to be determined
[4] The issue for determination is the interpretation of the wording found in clause 22.1 Personal Leave and in particular subclause 22.1.2 of the Agreement.
[5] The relevant clause reads as follows:
“22.1.2 A full-time employee shall be entitled to ten (10) days of paid personal leave per year of service. This is calculated as the employees normal daily rostered hours multiplied by ten (10). A part time or limited tenure employee shall be entitled to pro rata entitlement (sic).
For a fulltime employee in their first year of employment, leave shall accrue to equal ten (10) days at the normal rostered hours. A part-time or limited tenure employee shall accrue, in their first year of employment, at a pro rata rate. In the second and subsequent years, the leave shall be credited in advance on each anniversary date of the commencement of employment.”
(My underline)
[6] The underlined sentence above is the wording subject to the interpretation dispute which the parties require the Commission to arbitrate. In essence the question to be answered is whether the wording of subclause 22.1.2 provides employees with an entitlement to 10 days paid personal leave on the anniversary of the commencement of their second and subsequent years of employment without deduction or adjustment on account of having been granted a period of unpaid leave during the preceding 12 month period.
Submissions
NUW
[7] Mr Keats on behalf of the NUW advised the Commission that the dispute arose when an email 2 was sent by the respondent’s Human Resources Manager to the NUW on 12 November 2015. The email advised that employees do not accrue any entitlements where unpaid leave of one week or more is taken. This would allow for a negative personal leave balance to be recorded where an employee has exhausted their personal leave credited in advance (on their anniversary date) and the employee has taken a period of unpaid leave.
[8] The NUW disputed the practice adopted by the respondent stating that periods of unpaid leave do not alter an employee’s entitlement to 10 days paid personal leave being credited to their balance on the 2nd and subsequent anniversary dates. The adoption of this position was based upon the words in subclause 22.1.2 which state that in the 2nd and subsequent years, the leave shall be credited in advance on each anniversary date of the commencement of employment. It was submitted that the clear and ordinary meaning of the words is that employees are automatically credited 10 days of personal leave without any requirement to accrue the entitlement as occurs in the first year of employment consistent with the National Employment Standards (NES).
[9] As such, it was put that periods of unpaid leave cannot create a negative personal leave balance as there is no caveat on the entitlement to the crediting of 10 days personal leave on each anniversary date following completion of the first year of employment, as per subclause 22.1.2.
[10] It was further put that the interpretation adopted by Coles effectively applies an accrual system in the 2nd and subsequent years to personal leave, contrary to the clear and ordinary meaning of the words used.
[11] The NUW submitted that once credited with the 10 days personal leave in advance on an employee’s 2nd and subsequent anniversary dates there is no requirement to perform service for the balance of the 12 months to retain the full 10 day entitlement. A service based accrual system, while one that applies under the NES, it was put, does not apply under the Agreement for an employee’s 2nd or subsequent year of service. An employee’s personal leave credit is only to be reduced by the actual taking of the leave itself for which the credit relates.
[12] The NUW seeks a declaration confirming its interpretation of the disputed wording.
Coles
[13] Mr Jolly on behalf of the respondent submitted that the plain reading of the relevant subclause can only result in the conclusion that where an employee takes a period of unpaid leave, irrespective of the year of service, they do not accrue personal leave and where it is provided for in advance an adjustment must be made to account for the non-accrual of personal leave during a period of unpaid leave.
[14] The only exception to this is the practice adopted by the respondent where unpaid leave of periods of one week or less is taken no adjustment is made to an employee’s personal leave record. This would appear to be based on an administrative efficiency as opposed to a conscious decision by Coles to provide a benefit to employees over and above the NES. 3
[15] Coles submitted that their argument is consistent with Federal Court authority, the NES, other provisions of the Agreement and is consistent with the terms of the Fair Work Act 2009 (the Act).
[16] The respondent points to the NES provision of 10 days personal leave per year of service, with a ‘period of service’ under the Act defined as excluding unpaid leave. 4 The respondent submitted that there is no indication that the Agreement intended to depart from the statutory entitlement for the accrual of paid personal leave which does not accrue during periods of unpaid leave.5
[17] The argument put with most force was that the clear wording of the subclause provides no entitlement to the accrual of paid personal leave when an employee is on unpaid leave. This is because the subclause only provides an entitlement based on each year of service and unpaid leave does not count as service. The crediting in advance of the annual entitlement of 10 days is still dependent upon 12 months service.
[18] The word “service” is said by the respondent to require work to be performed or wages paid. It has a different meaning from the word ‘employment’ as was expressed by the Federal Court in Australian Journalists Association v Advertiser Newspapers Ltd [1982] FCA 142 (3 IR 144). Justice Evatt made the following observation:
“Several judgments had emphasized the difference between an award provision based upon continuity of service on the one hand and, alternatively, award provisions based upon periods of employment (see Australian Rope and Cordage Workers Union -v- Forsythe & Co. (1944) 51 C.A.R. 794; Re Annual Leave (1945) 55 C.A.R. 595 @ 599; Metal Trade Award 1941 69 C.A.R. 108 @ 110-111; Re Australian Iron and Steel Limited (1944) 2 A.R. 737 @ 741; Bermingham -v- Francis (1975) Queensland Government Gazette 965).”
[19] It was put that personal leave is only accrued on a per year of service basis, the crediting of the leave in advance does not alter this position. When credited with personal leave in advance, employees still need to earn the entitlement by engaging in ‘service’ during the year. Similar to adjusting the entitlement when personal leave is taken, an adjustment to an employee’s entitlement must also occur where a period of unpaid leave is taken.
[20] Ms Elizabeth Jeffrey, the respondent’s Payroll Manager, Payroll Operations gave evidence and provided a witness statement 6 and was cross examined on the respondent’s practice with respect to employees taking unpaid leave.
Interpretation of industrial agreements
[21] The Full Bench decision of Australasian Meat Industry Employees Union v Golden Cockerel Pty Limited 7 (Golden Cockerel) traversed the approach to be taken in interpreting enterprise agreements and stated that the general approach to the construction of enterprise agreements was as explained in the judgment of French J, as he then was, in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (2006) (City of Wanneroo).
[22] In City of Wanneroo French J, observed: 8
“The construction of an award, like that of a statute, begins with a consideration of the ordinary meaning of its words. As with the task of statutory construction regard must be paid to the context and purpose of the provision or expression being construed. Context may appear from the text of the instrument taken as a whole, its arrangement and the place in it of the provision under construction. It is not confined to the words of the relevant Act or instrument surrounding the expression to be construed. It may extend to ‘...the entire document of which it is a part or to other documents with which there is an association’. It may also include ‘....ideas that gave rise to an expression in a document from which it has been taken’ - Short v FW Hercus Pty Ltd (1993) 40 FCR 511 at 518 (Burchett J); Australian Municipal, Clerical and Services union v Treasurer of the Commonwealth of Australia (1998) 80 IR 345 (Marshall J).” 9
[23] The Full Bench in Golden Cockerel then drew on other authorities to expand on the approach to be taken at paragraphs 20 to 22 of their decision including the decision in Kucks v CSR Limited 10 (Kucks).
[24] In Kucks, a matter relating to the interpretation of an industrial award, Madgwick J held that that a narrow pedantic approach to interpretation of awards should be avoided and meanings which avoid inconvenience or injustice may reasonably be strained for:
“It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, 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. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.
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. Deciding what an existing award mean is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.” 11
[25] At paragraph [41] of Golden Cockerel; 10 principles are listed in what the Full Bench describe as being distilled from the authorities and are stated as:
“1. The AI Act 12 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.”
[26] Based on the above, the interpretation of an industrial agreement begins with a consideration of the natural and ordinary meaning of the words in question. The words are to be read as a whole and in context. Ambiguity and uncertainty, if any, may be resolved by a consideration of the history and subject matter of an agreement.
[27] Despite the parties’ different interpretations, both parties submitted that the words are clear and unambiguous. Where the words are plain and unambiguous the parties must accept the meaning ascribed, unless an absurd outcome is the result.
Conclusion
[28] Based on the NUW’s interpretation of the disputed subclause, an employee who in their 2nd year of employment is credited in advance with 10 days personal leave would retain the 10 days subject to the actual taking of any personal leave over the forthcoming 12 month period, irrespective of whether during the 12 month period any amount of unpaid leave was taken. For example if an employee only worked for 6 months and took 6 months unpaid leave during their 2nd year of employment they would still retain their 10 days paid personal leave.
[29] The NUW interpretation is to be contrasted with the approach advocated by the respondent in the above circumstances where at the end of the 12 month period an employee who had taken 6 months unpaid leave would have their personal leave adjusted by a reduction of 5 days, which depending on how much actual personal leave had been taken in the 6 months while at work, may result in an employee having a negative personal leave balance.
[30] It is not in dispute that under the Agreement, paid sick leave is not accrued while an employee is on unpaid leave during their first year of employment.
[31] The NES which provides a minimum entitlement for all national system employees provides that an employee is entitled to 10 days of paid personal/carer’s leave for each year of service (which accrues progressively) with the caveat that any period of unpaid leave does not count as service.13
[32] Agreements can and often do provide more favourable entitlements than minimum statutory or award entitlements. However in this application the respondent does not accept that the Agreement provides for or was ever intended to provide for, the accrual of paid personal leave when an employee is on unpaid leave. While not relied upon by the respondent, the statutory declaration filed in support of the Agreement’s approval (F17) application makes no reference to this additional entitlement when asked to list terms or conditions more beneficial than the Award for the purposes of the better off overall test. 14
[33] In this instance the NUW argue that the Agreement provides a greater entitlement in respect of paid personal leave than that found in the NES or the relevant award. The relevant award is said to be the Storage Services and Wholesale Award 2010 which refers to the NES entitlement in respect of personal leave.15
[34] The Agreement provides an entitlement to 10 days paid personal leave; this is stated in the first paragraph of subclause 22.1.2 in the following manner:
“A full-time employee shall be entitled to ten (10) days of paid personal leave per year of service.”
[35] As can be seen from the above wording, the entitlement to paid personal leave is based on each year of service.
[36] The following paragraph then refers to a full time employee accruing 10 days leave in their first year of employment, whereas in the following and subsequent years of employment the leave is credited in advance on each anniversary date of the employee’s commencement.
[37] The benefit of the variation in the second and subsequent years of employment results in an employee being able to access their paid personal leave entitlement in advance without the necessity to have actually accrued the paid time taken off. Thus an employee whose anniversary date is 1 January and who does not otherwise have any accrued personal leave may take 10 days paid personal leave in January as their 10 days for the year have been credited in advance.
[38] The clause provides that “the leave” is calculated per year of service as per paragraph one and in the second paragraph “the leave” is then credited in advance at the commencement of year two and onwards.
[39] I accept, as put by Mr Jolly for Coles, that the first paragraph of subclause 22.1.2 provides the personal leave entitlement and the second paragraph provides the accrual and crediting mechanism dependent upon an employee’s year of service, but does not alter the fact that the entitlement relates to service.
[40] Clause 22.5 of the Agreement - Continuity of Service provides that a period of paid personal leave does not break an employee’s continuity of service. This clarification in the Agreement would serve little purpose in the Agreement if unpaid leave also counted towards continuous service for an employee’s second and subsequent years of service.
[41] I am unable to accept that the crediting of personal leave in advance in the second and subsequent years of employment has, by the wording used, altered the basis upon which the entitlement to the leave is provided. An employee’s years of service remain relevant to the calculation of the entitlement in all scenarios. All that has happened by the wording of the second paragraph in subclause 22.1.2 is that the leave has been advanced prior to its normal progressive accrual. It has not been credited without limitation, as it has been credited in advance, it must be subject to adjustment on the basis that it otherwise accrues, that is, per year of service as per paragraph one of the sub clause.
[42] I note the annual leave entitlement under the Agreement at 24.5 Annual leave in advance provides that such leave may be taken in advance (by agreement) before the employee has become entitled to the leave. This again is a more beneficial entitlement than the NES but it does not result in disregarding the annual leave accrual basis based on continuous service.
[43] The NUW interpretation is not supported by any evidence of an intended additional benefit provided by Coles. If the words used provide such a benefit, it could only be described as a windfall gain. While infelicitous wording in industrial instruments can provide on occasions an unintended outcome favouring one party over another, in applying the relevant principles of interpretation this not such an occasion.
[44] When considering the wording in the Agreement in its entirety, the reference to ‘service’ having to be undertaken to accrue personal leave is not disturbed simply because the entitlement is provided in advance. Unpaid leave is not service as per the Agreement.
[45] For the reasons provided above, I do not consider the disputed wording provides the benefit claimed by the NUW. While I agree with the parties that the disputed wording is not ambiguous, the second paragraph in subclause 22.1.2 could benefit from some improved drafting.
[46] The application is dismissed.
DEPUTY PRESIDENT
Appearances:
Mr N Keats, solicitor for the Applicant and Mr G Noshie from the National Union of Workers
Mr G Jolly and Mr D Shaw, solicitors for the Respondent
Hearing details:
2016:
Sydney
November 24
1 Leave was granted under s.596(2)(a) of the Fair Work Act 2009
2 Exhibit A2
3 The practice is not reflected in the Agreement
4 S.22 of the Fair Work Act 2009
5 At 2.17of respondent’s written submissions of 24 November 2016
6 Exhibit R1
7 [2014] FWCFB 7447
8 (2006) 153 IR 426
9 Ibid at 438
10 (1996) 66 IR 182
11 Ibid at 184
12 Acts Interpretation Act1901
13 See s.96(1) and s.22(2)(b) of the Fair Work Act 2009
14 See question 3.4
15 Clause 27
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