National Union of Workers v Cryovac Australia Pty Ltd

[2013] FWC 8996

[2013] FWC 8996

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

National Union of Workers
v
Cryovac Australia Pty Ltd
(C2013/5231)

DEPUTY PRESIDENT GOSTENCNIK MELBOURNE, 15 NOVEMBER 2013

Alleged dispute concerning severance pay and leading hand allowance

[1] On 16 September 2013 I issued a decision 1 dealing with part of a dispute which was the subject of an application by the National Union of Workers (NUW) under s.739 of the Fair Work Act 2009 (the Act) for the Fair Work Commission (the Commission) to deal with a dispute in accordance with Clause 14 of the Cryovac Australia Pty Ltd (Fawkner) & National Union of Workers Enterprise Agreement 2012- 2015 (the Agreement). That part of the dispute concerned the correct interpretation of severance pay provisions contained in the Agreement and whether annual leave loading for certain employees would be payable as part of the severance pay arrangements.

[2] At the time of deciding the annual leave loading severance pay dispute, I was not satisfied that I had sufficient material before me to determine the other matter in dispute. That matter concerned the inclusion of “leading hand” allowances received periodically by two former employees in the calculation of their severance pay under the Agreement. Consequently I allowed Cryovac Australia Pty Ltd (Cryovac) and the NUW time to file and serve further written submissions on this issue. This decision concerns that aspect of the dispute.

[3] The relevant statutory framework, the principles of construction to be applied to the interpretation of enterprise agreements and the general background to the dispute are dealt with in my earlier decision and are not repeated here 2.

Factual background

[4] The following factual matters are not in dispute.

[5] Mr Nathan Spooner and Mr Khalid Abdulkadar are the former employees who are the subject of this part of the dispute. They were each employed as day shift work employees under the Agreement and they worked on the same shift. Neither was appointed to a Leading Hand position by Cryovac but, since September 2012, each employee acted as a Leading Hand on alternating weeks. Mr Abdulkardar appears to have performed the leading hand duties prior to this and over a longer period than Mr Spooner. Each employee was paid an allowance for the relevant week during which that employee acted as a Leading Hand.

[6] Other persons who performed leading hand duties were appointed as Leading Hands and were classified at a level 6 under the site classification provisions in attachments G and J to the Agreement. The level 6 classification corresponds with the C10 classification under the Manufacturing and Associated Industries Award 2010 (Award).

[7] Mr Abdulkardar was classified as level 5 under attachments G and J of the Agreement (C 11 under the Award) and commenced undertaking leading hand duties on 13 May 2012. Between that date and the date on which Mr Abdulkardar’s employment ended through voluntary redundancy he had undertaken the leading hand duties for 32 weeks. Mr Spooner was classified as level 4 under attachments G and J of the Agreement (C11 under the Award). He commenced undertaking leading hand duties on 9 September 2012. Between that date and the date on which Mr Spooner’s employment ended through voluntary redundancy, he had undertaken leading hand duties for 23 weeks.

Competing contentions of the parties

Cryovac

[8] Simply put, Cryovac submits that as the two former employees were not appointed as Leading Hands, they were not entitled to be paid the leading hand allowance provided for under the Award provision that is incorporated into the Agreement. The employees were instead paid in accordance with the higher duties provision of the Award that is incorporated into the Agreement. Employees who were appointed as Leading Hands were classified at level 6 under the Agreement in recognition of their leading hand responsibilities. A Leading Hand appointed as such who is a 7 day shift worker receives payment based on a calculation of an average rate of pay 3. If that employee had their employment terminated by reason of redundancy, then for the purposes of determining the severance pay entitlements under the Agreement, payment for a week is calculated by multiplying the average rate for that employee by 38 hours4. No other allowances, shift penalty or loading is to be taken into account as these are already subsumed by the calculation of the average rate.

[9] As Mr Abdulkardar and Mr Spooner were not appointed as Leading Hands, their average rate was calculated by reference to their substantive level 5 and level 4 classifications respectively, and the higher duties allowance that each periodically received was not calculated as part of the average rate because it did not form part of their base rate of pay upon which the average rate is then calculated. Consequently the higher duties allowance does not form part of the “employees’ average rate” upon which is calculated the payment of a week for a 7 day shift employee under the severance pay provisions of the Agreement.

NUW

[10] The NUW argues that both Mr Abdulkardar and Mr Spooner should have been paid a severance payment which included the payment of the “leading hand allowance” that each employee had been receiving on an alternating weekly basis. The NUW argues that it was not appropriate to describe the allowance received by the two employees in recognition of their performance of leading hand duties as a higher duties allowance. They were in fact receiving (or entitled to receive) a leading hand allowance every second week. A higher duties allowance is by its nature temporary and is not an appropriate mechanism by which to pay employees who are performing long-term and semi permanent supervisory functions. In any event the leading hand allowance is not a “classification” carrying a higher minimum wage.

[11] Payment for the performance of leading hand duties in such circumstances should be through payment of a leading hand allowance. The leading hand allowance payable under the Agreement by reason of the incorporation of the Award provision is an all-purpose allowance and is incorporated into an employee’s base weekly pay. Therefore that allowance should have formed part of Mr Abdulkardar’s and Mr Spooner’s base rate of pay necessary to calculate the average rate of pay for the purposes of calculating the payment of a week in respect of the severance pay entitlements payable to these employees.

The relevant provisions of the Agreement

[12] The severance pay entitlements are contained in clause 20.2 of the Agreement, the last dot point of which provides as follows:

“in relation to the redundancy provision the definition of base rate in the employee’s ordinary time earnings, which includes any over award payments, to allowance, leading hand allowance, service allowance and shift loading. In determining the payment of a week for 7 day shift employee (sic), it is defined as 38 hours at the employees’ average rate.”

[13] Calculation of the average rate of a 7 day shift work employee is dealt with at clause 32.2 and is discussed in my earlier decision at paragraphs [30] – [33]. Relevantly attachments G and J of the Agreement combined to set out the classification descriptors and wage rates applicable to those classifications for manufacturing employees. It seems clear from the terms of attachment G that an employee may be classified as a level 6 by either obtaining a capability to operate all machine types described in the attachment or by being appointed a Leading Hand. Attachment G also makes clear that an employee who is classified as a level 6 because of the capability to operate all machine types and who is then asked to perform leading hand duties will be paid a leading hand allowance. Attachment J sets out of wage rates applicable to the level 6 classification during the life of the Agreement.

[14] Clause 8.1 of the Agreement provides that the Agreement incorporates by reference the Award as in operation at the time that the Agreement commenced to operate. Clause 8.2 provides that if there is an inconsistency between term of the Agreement and a term of the Award incorporated by clause 8.1, the term of the Agreement shall take precedence to the extent of the inconsistency. Clause 8.3 provides that in incorporating Award terms into the Agreement, those terms are to be read as altered to incorporate necessary changes resulting from those terms being terms of the Agreement rather than terms of the Award.

[15] Clause 24.2 of the Award provides:

“An employee engaged for more than two hours during one day or shift on duty carrying a higher minimum wage than that ordinary classification must be paid the minimum wage for such day or shift. If engaged for two hours or less during one day or shift, they must be paid the higher minimum wage for the time so worked.”

[16] Clause 32.1 of the Award sets out a number of all-purpose allowances including a leading hand allowance. That allowance is payable to a leading hand employee by reference to the number of employees that the person has under his or her charge. The allowance is calculated by variable percentage uplifts per week on the “standard rate”. That phrase is defined in clause 3.1 of the Award as the minimum hourly wage prescribed for the C10 level provided for in the Award.

Consideration

[17] It is in my view correct, as the NUW points out, that the higher duties provision of the Award provides for payment of a higher rate when a person is performing work in a higher classification. The provision of the Award dealing with the leading hand allowance is not couched in terms of a leading hand classification but rather as an all-purpose allowance payable when an employee in an existing classification carries out function of being in-charge of 3 or more employees. When read as an award only provision, the payment of higher duties to Mr Abdulkardar and Mr Spooner would be inappropriate and the proper payment would be a leading hand allowance in accordance with formula in clause 32.1 of the Award.

[18] However the higher duties and leading hand allowance Award provisions must be read in context of the Agreement into which those provisions are incorporated, taking into account inconsistency with other Agreement provisions and necessary variation to take account of the fact that the Award provisions are incorporated and operate as terms of the Agreement. When the higher duties provision and the leading hand allowance provisions of the Award are read in this way, then it seems to me that Cryovac have correctly described the payments made to Mr Abdulkardar and Mr Spooner when performing leading hand duties as higher duties payments.

[19] This is because the leading hand allowance under the Award (as incorporated into the Agreement) is payable only to an employee who is, by reason of their capability to operate all machine types described in attachment G of the Agreement, already classified as a level 6 employee under the Agreement’s classification structure  5.

[20] An employee, who by reason of their capability to operate only some of the types of machinery described in attachment G, is classified at a lower level than level 6, but who is appointed as a Leading Hand is then classified as a level 6 employee. Thus, the Agreement contains a classification for a Leading Hand, namely the level 6 classification.

[21] As I indicated earlier in these reasons, Mr Abdulkardar and Mr Spooner were classified as level 5 and 4 employees respectively. They were not appointed by Cryovac to be Leading Hands but rather they were required to perform leading hand duties periodically. When they did so, they were performing duties carrying a higher minimum wage (level 6) than their ordinary classification (levels 5 and 4 respectively) within the meaning of clause 24.2 of the Award as incorporated into the Agreement. They were not entitled to a payment of the leading hand allowance under clause 32.1 of the Award as incorporated into the Agreement because they had not obtained the necessary machinery operation skills to be classified as level 6 employees in accordance with attachment G of the Agreement. Nor were they entitled to be classified as level 6 employees because they had not been appointed as Leading Hands.

Conclusion

[22] It follows from the foregoing that in calculating the average rate for Mr Abdulkardar and Mr Spooner in order to assess their respective “payment for a week” entitlement under the severance pay provisions of the Agreement, Cryovac was correct in excluding from the calculation the higher duties payments that have been made periodically to the two employees concerned. The remaining aspect of the dispute is determined accordingly and no order is necessary.

DEPUTY PRESIDENT

Appearances:

A Portelli for the National Union of Workers.

A Dalton of the Australian Industry Group for Cryovac Australia Pty Ltd.

Hearing details:

2013

Melbourne:

28 August and 16 September.

Further written submissions by NUW on 25 October and by Cryovac Australia Pty Ltd on 8 November.

 1   [2013] FWC 7036

 2   Ibid at [6]-[25]

 3   see clause 32.2 of the Agreement; see also [2013] FWC 7036 at [30] – [33]

 4   see clause 20.2 of the Agreement

 5   the attachment G of the agreement

Printed by authority of the Commonwealth Government Printer

<Price code C, PR544591>