National Union of Workers v Ego Pharmaceuticals Pty Ltd T/A Ego

[2017] FWC 2735

[2017] FWC 2735

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

National Union of Workers
v
Ego Pharmaceuticals Pty Ltd T/A Ego
(C2017/729)

COMMISSIONER RYAN MELBOURNE, 31 JULY 2017

Alleged dispute about annual leave loading provisions – meaning of ordinary pay.

[1] The principles to be applied in the interpretation of the terms of an enterprise agreement have been clearly stated in AMWU v Berri P/L. 1

The Issue in Dispute

[2] Ego Pharmaceuticals P/L (Ego) operates a manufacturing facility at the Melbourne suburb of Braeside and the facility operates with three production shifts: day, afternoon and night. Production and warehouse employees at Braeside are covered by the Ego Pharmaceuticals Pty Ltd and National Union of Workers Enterprise Agreement 2014 (the Agreement). The Agreement provides for a shift penalty of 15% for afternoon shift and a shift penalty of 30% for night shift. No shift penalty applies to day shift. The Agreement provides that employees are entitled to 4 weeks annual leave during which they will be paid their ordinary pay. The Agreement also provides that employees will be paid an annual leave loading of 17.5% of 4 weeks ordinary pay which is paid to an employee in the last pay before Christmas. Ego pay the annual leave loading on the basis that ordinary pay means the base rate of pay excluding shift penalties. When employees take a period of annual leave the employee is not paid the relevant shift penalty but is instead paid an annual leave loading of 17.5%. The effect of this arrangement is that when a day shift employee takes a period of annual leave the day shift employee is paid 17.5% more than what they would have been paid if at work, an afternoon shift employee is paid 2.5% more than if at work and a night shift employee is paid 12.5% less than if at work. The NUW contend that night shift employees should be paid the annual leave loading in addition to their night shift penalty when taking periods of annual leave rather than being paid the annual leave loading in lieu of the night shift penalty.

The relevant terms of the Agreement

[3] The dispute centres on the meaning and application of clause 10.1 of the Agreement which relevantly provides:

“10. ANNUAL HOLIDAY AND LONG SERVICE LEAVE

10.1. Annual Holiday

10.1.1. Except as otherwise provided in this Agreement employees, excluding casuals, shall become entitled to an annual holiday of four weeks on ordinary pay plus a loading of 17.5%. Annual leave accrues progressively every four weeks during a year of service according to the employee’s ordinary hours of work calculated according to the nominal hours worked, and accumulates from year to year.

10.1.2. The annual holiday leave loading prescribed in this sub-clause ·excludes casuals, and shall not be· applicable to proportionate leave on termination of· employment.

10.1.6 ii. In accordance with sub-clause 10.1.1 Ego shall pay each worker entitled to the holiday leave loading of 17.5% of four weeks ordinary pay in the last pay before Christmas.”

[4] Other relevant provisions of the Agreement are as follows:

“1. OPERATION OF AGREEMENT

1.5 This Agreement -shall be read and interpreted- wholly in conjunction with the Pharmaceutical Industries Award 2010, provided that where there is an inconsistency between this Agreement and the Award, this Agreement shall take precedence to the extent of the inconsistency.

2. WAGES

2.5 Adult Wage Rates

An adult employee shall be paid not less than the rate of wages set out in the table for their classification.

5. OVERTIME

5.1 The following rates based on one thirty-sixth of the weekly rate shall be paid for all work done;

5.1.1 Outside the times of beginning and ending work in any one day- time and a half for the first two hours and double time thereafter.

5.1.2 Within the times of beginning and ending work in excess of eight hours in any day- time and a half for the first two hours and double time thereafter.

5.1.3 On Saturday- time and a half for the first two hours and double time thereafter with a minimum payment as for three hours work.

5.1.4 On a rostered day off- time and a half for the first two hours and double time thereafter with a minimum payment as for three hours work.

5.1.5 On Sunday- double time (excluding ordinary night shift hours).

8. TERMINATION OF EMPLOYMENT

8.1.4 1n calculating payment in lieu of notice the wages an employee would have received in respect of the ordinary time he/she would have worked during the period of notice had his/her employment not been terminated shall be used.

8.2 Notice of Termination by Employee

The notice of termination to be given by an employee shall be the same as that required of Ego, except that there shall be no additional notice based on the age of the employee concerned.

If an employee fails to give notice Ego shall have the right to withhold monies due to the employee with a maximum amount equal to the ordinary time rate of pay for the period of notice.

9. HOLIDAYS

9.1. All weekly employees shall be entitled to the following holidays without deduction of pay: New Year’s Day, Australia Day, Union Picnic Day, Labour Day, Good Friday, Easter Monday, Easter Saturday, Anzac Day, Queen’s Birthday, Melbourne Cup Day, Christmas Day, and Boxing Day, but if any other day be by Act of Parliament or Proclamation substituted for any of the above-named holidays the provisions of this clause shall apply only to the day substituted.

9.2. All work performed on the holidays set out in sub-clause 9.1 save and except for Union Picnic Day shall be paid at the rate of double time and a half.

11. PERSONAL/CARER’S LEAVE AND COMPASSIONATE LEAVE

11.1 Entitlement to paid personal/carer’s leave

11.1.1. A full-time employee shall be entitled to leave of 10 days for each year of completed service, accrued progressively for the first year, based on ordinary working time (pro-rata for part-time). For each subsequent year, the year’s accrual shall be allocated at the commencement of each anniversary year.

11.1.2. If an employee takes personal/carer’s leave, Ego must pay the employee, for the period of the personal/carer’s leave the employee’s ordinary base rate of pay for ordinary hours of work.

11.5.3. Payment for compassionate leave

When an employee takes compassionate leave, Ego must pay the employee, for the period of the compassionate leave, the employee’s ordinary base rate of pay for ordinary hours of work.

23. JURY SERVICE

An employee on weekly hiring required to attend for jury service during ordinary hours shall be reimbursed by Ego an amount equal to the difference between the amount paid in respect of his/her attendance for such jury service and the amount of wage he/she would have received in respect of the ordinary time he/she would have worked had he/she not been on jury service.

24. BLOOD DONORS

A weekly employee who is absent during ordinary working hours for the purpose of donating blood shall not suffer any deduction of pay for a period of an absence subject to a maximum of four separate absences for the purpose of donating blood each calendar year.

28. PARENTAL LEAVE

28.10. Paid No Safe Job Leave

28.10.1. If:

• there is no appropriate safe job available; and

• the employee is entitled to unpaid parental leave; and

• the employee has complied with the notice and evidence requirements for taking unpaid parental leave;

then the employee is entitled to paid no safe job leave for the risk period.

28.10.2. If the employee takes paid no safe job leave for the risk period, Ego must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the risk period.

30. REDUNDANCY

30.2. Transfer to Lower Paid Duties

Where an employee is transferred to lower paid duties for reasons set out in sub-clause 30.1.1 the employee shall be entitled to the same period of notice of transfer as he or she would have been entitled to if his or her employment had been terminated, and Ego may at its option, make payment in lieu thereof of any amount equal to the difference between the former ordinary time rate of pay and the new lower ordinary time rates for the number of weeks of notice still owing.

30.3 Severance Pay

• Four weeks’ notice, with additional two weeks for those over 45 years of age.

• Four weeks’ pay for each year of service or part thereof, up to a maximum payment of 52 weeks.

• Payout of all accumulated unused sick pay.

• Pro-rata long-service leave for those with five years or more service.

• Pro-rata annual leave loading plus all annual leave entitlements, not already provided for in this Agreement.

31. OCCUPATIONAL SUPERANNUATION

31.1. Definitions

31.1.1. “Fund”:

In this clause all references to “Fund” shall mean the Ego Superannuation Fund, being a fund which complies with the Occupational Superannuation Standards Act and Regulations and any other relevant Government requirements.

31.1.2. “Ordinary Time Earnings”:

In this clause the term “Ordinary Time Earnings” shall include the classification rate, shift work premiums, service grants and any penalties where such penalties are part of the employee’s noru1al earnings, excluding overtime, travel, meals, or annual leave loading.

32. TRAINING OF STAFF REPRESENTATIVE

32.6 Each employee on leave approved in accordance with this sub-clause, shall be paid all ordinary time earnings. For the purpose of this sub-clause “ordinary time earnings” for an employee means the classification rate, payment, superannuation and shift loading which otherwise would have been payable.

36. SHIFTWORK

36.5. Afternoon and night shift allowances:

36.5.1. An employee who works on afternoon shift must be paid 15% extra on the ordinary hours for the shift.

36.5. An employee who works on night shift must be paid 30% extra on the ordinary hours for the shift.

36.6. A night shift commencing on a Sunday evening will be paid at the night shift rate (30%) and not at Sunday rates.”

The relevant authorities

[5] The Full Bench decision in AMWU v Berri P/L sets out the principles to be followed in interpreting the terms of an enterprise agreement as follows:

“[114] The principles relevant to the task of construing a single enterprise agreement may be summarised as follows:

1. The construction of an enterprise agreement, like that of a statute or contract, begins with a consideration of the ordinary meaning of the relevant words. The resolution of a disputed construction of an agreement will turn on the language of the agreement having regard to its context and purpose. Context might appear from:

(i) the text of the agreement viewed as a whole;

(ii) the disputed provision’s place and arrangement in the agreement;

(iii) the legislative context under which the agreement was made and in which it operates.

2. 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.

3. The common intention of the parties is sought to be 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, without regard to the subjective intentions or expectations of the parties.

4. The fact that the instrument being construed is an enterprise agreement made pursuant to Part 2-4 of the FW Act is itself an important contextual consideration. It may be inferred that such agreements are intended to establish binding obligations.

5. The FW Act does not speak in terms of the ‘parties’ to enterprise agreements made pursuant to Part 2-4 agreements, rather it refers to the persons and organisations who are ‘covered by’ such agreements. Relevantly s.172(2)(a) provides that an employer may make an enterprise agreement ‘with the employees who are employed at the time the agreement is made and who will be covered by the agreement’. Section 182(1) provides that an agreement is ‘made’ if the employees to be covered by the agreement ‘have been asked to approve the agreement and a majority of those employees who cast a valid vote approve the agreement’. This is so because an enterprise agreement is ‘made’ when a majority of the employees asked to approve the agreement cast a valid vote to approve the agreement.

6. Enterprise agreements are not instruments to which the Acts Interpretation Act 1901 (Cth) applies, however the modes of textual analysis developed in the general law may assist in the interpretation of enterprise agreements. An overly technical approach to interpretation should be avoided and consequently some general principles of statutory construction may have less force in the context of construing an enterprise agreement.

7. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or it is ambiguous or susceptible of more than one meaning.

8. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

9. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

10. If the language of the agreement is ambiguous or susceptible of more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

11. The admissibility of evidence of the surrounding circumstances is limited to evidence tending to establish objective background facts which were known to both parties which inform and the subject matter of the agreement. Evidence of such objective facts is to be distinguished from evidence of the subjective intentions of the parties, such as statements and actions of the parties which are reflective of their actual intentions and expectations.

12. Evidence of objective background facts will include:

(i) 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;

(ii) notorious facts of which knowledge is to be presumed; and

(iii) evidence of matters in common contemplation and constituting a common assumption.

13. The diversity of interests involved in the negotiation and making of enterprise agreements (see point 4 above) warrants the adoption of a cautious approach to the admission and reliance upon the evidence of prior negotiations and the positions advanced during the negotiation process. Evidence as to what the employees covered by the agreement were told (either during the course of the negotiations or pursuant to s.180(5) of the FW Act) may be of more assistance than evidence of the bargaining positions taken by the employer or a bargaining representative during the negotiation of the agreement.

14. Admissible extrinsic material may be used to aid the interpretation of a provision in an enterprise agreement with a disputed meaning, but it cannot be used to disregard or rewrite the provision in order to give effect to an externally derived conception of what the parties’ intention or purpose was.

15. In the industrial context it has been accepted that, in some circumstances, subsequent conduct may be relevant to the interpretation of an industrial instrument. But such post-agreement conduct must be such as to show that there has been a meeting of minds, a consensus. Post-agreement conduct which amounts to little more than the absence of a complaint or common inadvertence is insufficient to establish a common understanding.”

[6] I approach the task of discerning the meaning of the terms of the Agreement having regard to the decision in AMWU v Berri P/L.

The NUW case

[7] The NUW contend that the meaning of “ordinary pay” in clause 10.1.1 should be understood as including shift loadings. The NUW contend that because the Agreement has two separate terms “base rate of pay” and “ordinary pay” then the two terms must have different meanings. As the annual leave loading provision of clause 10.1.1 uses the term “ordinary pay” and not “base rate of pay” then “ordinary pay” should refer to what the workers would have ordinarily received (inclusive of their night shift loading) and the annual leave loading would be 17.5% of the ordinary pay of an employee. In support of this contention the NUW contends “that in construing the objective intentions of the parties, reference should be given to the Award’s role in the Agreement as an aid to interpretation.” The Award explicitly contains a saving provision to ensure that shift workers do not have a pay cut while on annual leave. It is submitted that as the term ‘ordinary pay’ is sufficiently vague, the saving provision of the Award should be taken as its meaning.” The saving provision in the Award which the NUW refers to is clause 26.5(b)(ii). For the sake of completeness clause 26.5 provides as follows:

“26.5 Annual leave loading

(a) During a period of annual leave an employee must also be paid a loading calculated on the wages prescribed in clause 26.2.

(b)The loading must be as follows:

(i) Day work

An employee who would have worked on day work only had they not been on leave must be paid a loading equal to 17.5% of the wages prescribed in clause 26.2.

(ii) Shiftwork

An employee who would have worked on shiftwork had they not been on leave must be paid a loading equal to 17.5% of the wages prescribed in clause 26.2 or the shift loading including relevant weekend penalty rates they would have received had they not been on leave, whichever is the greater but not both.

[8] The NUW contends that the dispute should be resolved by the Commission making a finding that:

“The term ‘ordinary pay’ in this Agreement includes shift loadings, and therefore night shift workers are entitled to an additional 17.5% annual leave loading, calculated from base rate plus 30% night shift loading.”

The Ego case

[9] Ego contended that the Agreement expressly provided that only a 17.5% annual leave loading is payable on the base rate of pay and that contrary to the assertion by the NUW the leave loading provisions of the Award has no application in these circumstances. Ego contended that:

“While the term “ordinary pay” is not expressly defined in the Agreement it should be given an “ordinary” definition meaning the base rate of pay for the work performed, before the provision of any applicable loading, allowances or penalty rates.”

Ego further contended that:

“Although it may not be ideal to have two multiple expressions in the one Agreement with the same meaning, by applying the plain meaning to the terms, it becomes evident that the use of the terms “ordinary pay” and base rates of pay” are consistent and their ordinary interpretation does not result in an unusual or unintended outcome.

[10] Ego supported its contentions by referring to the language used in clauses10, 31 and 36 of the Agreement.

Consideration

[11] The NUW contention “that in construing the objective intentions of the parties, reference should be given to the Award’s role in the Agreement as an aid to interpretation” must be rejected as being too simplistic. The mere existence of the modern award cannot give rise to a conclusion that the objective intention of the parties was to “ensure that shift workers do not have a pay cut while on annual leave”. As the decision in AMWU v Berri P/L makes clear, “The common intention of the parties is sought to be 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, without regard to the subjective intentions or expectations of the parties.” The mere existence of a modern award and the mere fact of its incorporation into the Agreement is, of itself, an insufficient basis to objectively determine the common intention of the parties.

[12] The Ego contention that the NUW claim is an extra claim made contrary to the terms of the Agreement is a contention that must be rejected. There is nothing in the issue raised by the NUW which could be characterised as a new claim made contrary to clause 35 of the Agreement. The issue raised and prosecuted by the NUW solely relates to the operation of the existing clauses of the Agreement. The very language used by the NUW is consistent with the issue raised by the NUW being characterised as one of interpretation and application of the terms of the Agreement rather than as a claim which is additional to the existing terms of the Agreement.

[13] On its face clause 10.1.1 appears to be expressed in simple, plain and unambiguous language. However the competing contentions of the parties make clear that there are different interpretations being given to clause 10.1.1.

[14] The NUW seeks to use the terms of the Award and in particular clause 26.5(b)(ii) of the Award as an aid in the interpretation of clause 10.1.1 of the Agreement. Clause 1.5 of the Agreement specifically requires that the Agreement “be read and interpreted - wholly in conjunction with the Pharmaceutical Industries Award 2010”. What the NUW seeks to do is more than reading and interpreting a term of the Agreement wholly in conjunction with the Award. Rather the NUW seeks to give a very specific meaning to the term “ordinary pay” in the Agreement by having regard to a term of the Award that does not deal with or define the term “ordinary pay”. The specific contention of the NUW needs to be examined. The NUW contends that:

“The Award explicitly contains a saving provision to ensure that shift workers do not have a pay cut while on annual leave. It is submitted that as the term “ordinary pay” is sufficiently vague, the saving provision of the Award should be taken as its meaning.”

[15] There is a fundamental flaw in the contention of the NUW. It is obvious from the whole of the NUW application and submissions that the NUW is not seeking to reflect the saving provision of the Award which would “ensure that shift workers do not have a pay cut while on annual leave.” It is clear from the outcome sought by the NUW that it seeks to ensure that shift workers are paid more while on annual leave than they are paid while at work. The case advanced by the NUW would result in night shift workers being paid a 17.5% annual leave loading on an “ordinary pay” which included the night shift allowance. This is so because the NUW contends that the meaning to be given to the term “ordinary pay” in clause 10.1.1 is the base rate of pay specified by the Agreement for ordinary hours of work without any penalties plus the appropriate shift allowance. Clause 26.5(b)(ii) of the Award clearly provides that any annual leave loading (whether at 17.5% or a higher shift loading) is to be paid on the base rate of pay specified by the Award for ordinary hours of work without any penalties or shift loadings. Clause 26.5(b)(ii) of the Award is not a ‘savings provision’ as that term is normally used in industrial relations. Rather clause 26.5(b)(ii) of the Award creates a specific entitlement for night shift employees who are usually paid a 30% night shift loading to have that 30% loading paid to them for a period of annual leave. The NUW are not seeking to replicate the operation of clause 26.5(b)(ii) of the Award through the operation of clause 10.1 of the Agreement. Rather the NUW is seeking to have clause 10.1 read and applied on the basis of providing an entitlement to shift workers which is significantly better than the entitlement which would exist under clause 26.5(b)(ii) of the Award. The ‘savings provision’ of clause 26.5(b)(ii) of the Award cannot assist in determining the proper meaning of “ordinary pay” in clause 10.1 of the Agreement.

[16] A practical difficulty which exists in relation to interpreting the terms of the Agreement is that the Agreement does not contain a definition term in which key concepts are defined. The Agreement uses a range of terms when referring to the same or similar concepts. Both parties have sought to draw support for their competing positions from the language used in various terms of the Agreement. The term “ordinary pay” is only used in clause 10 of the Agreement and even then it is used in two slightly different expressions:

● an annual holiday of four weeks on ordinary pay plus a loading of 17.5%.

● the holiday leave loading of 17.5% of four weeks ordinary pay

[17] The other terms used in the Agreement are:

“rate of wages” – clause 2.5

“the wages an employee would have received in respect of the ordinary time he/she would have worked during the period of notice” – clause 8.1.4

“the ordinary time rate of pay” – clause 8.2

“the employee’s ordinary base rate of pay for ordinary hours of work” – clause 11.1.2 and 11.5.3

“the amount of wage he/she would have received in respect of the ordinary time he/she would have worked” – clause 23

“A weekly employee who is absent during ordinary working hours….. shall not suffer any deduction of pay for a period of an absence” – clause 24

“at the employee’s base rate of pay for the employee’s ordinary hours of work” – clause 28.10.2

“any amount equal to the difference between the former ordinary time rate of pay and the new lower ordinary time rates” – clause 30.2

“four weeks pay” – clause 30.3

“the term “Ordinary Time Earnings” shall include the classification rate, shift work premiums, service grants and any penalties where such penalties are part of the employee’s normal earnings, excluding overtime, travel, meals, or annual leave loading” – clause 31.1.2

“For the purpose of this sub-clause “ordinary time earnings” for an employee means the classification rate, payment, superannuation and shift loading which otherwise would have been payable”. – clause 32.6

“afternoon shift must be paid 15% extra on the ordinary hours for the shift”. – clause 36.5.1

“night shift must be paid 30% extra on the ordinary hours for the shift” – clause 36.5.2

“paid at the night shift rate (30%) “– clause 36.6

[18] In two terms of the Agreement, clauses 31.1.2 and 32.6, the term “ordinary time earnings” is used, and is defined, and, in both cases the definition includes shift loadings. However in each case the definition is specific to the clause.

[19] In a number of clauses the amount of pay is calculated by reference to the time worked by the employee. Yet even here the terms of the Agreement have very different meanings when referring to similar concepts. In clause 24 an afternoon shift employee attending a blood donation appointment which fell within the ordinary working hours would not suffer any deduction of pay. This means that the rate of pay for those ordinary hours would include the shift penalty loading of 15%. By way of contrast for an afternoon shift worker accessing paid leave under clauses 11.1.2, 11.5.3 and 28.10.2 the rate of pay for a period of leave during ordinary hours of work is only the base rate of pay and not the base rate plus shift loading. The most that can be said of the various terms of the Agreement dealing with the amount of money to be paid to an employee as ordinary pay or for ordinary time is that there is no consistent meaning across the various terms used.

[20] The surest means of gleaning the meaning of a specific term is to have regard to the purpose of the term and the language used in the term. Trying to understand the meaning of ordinary pay in clause 10.1 by looking at the language used in other terms of the Agreement does not provide a clear answer. However looking at the history of clause 10 is very useful especially when looked at in the light of the use of shift work at Ego.

[21] The NUW draw attention to the fact that night shift at Ego commenced in February 2015. Even though the Agreement provided for a night shift rate of pay in clauses 36.5, 36.6 and 5.1.5 there was no night shift being worked at the time the Agreement was made and apparently there was no night shift during the life of the previous enterprise agreements. During the time that Ego was only operating a day and afternoon shift the way in which Ego applied clause 10.1.1 and 10.1.6.ii was sufficient to ensure that day and afternoon shift employees received a 17.5% annual leave loading which meant that afternoon shift employees were receiving an annual leave loading in excess of their afternoon shift loading. Ego’s application of clauses 10.1.1 and 10.1.6.ii on the basis that ordinary pay meant base rate of pay provided an outcome which was consistent with the operation of clause 26.5(b)(ii) of the Award.

[22] The current language of clauses 10.1.1 and 10.1.6ii have been in previous agreements but with some minor variations.

[23] Both the Manufacturing Chemists (Ego Pharmaceuticals Pty Ltd) Agreement 2005 and the Manufacturing Chemists (Ego Pharmaceuticals Pty Ltd) Agreement 2005 (as varied in June 2008) contained the following:

“Clause 11 Annual Holiday

11(a) Except as otherwise provided in this Agreement every worker shall at the end of each year of his employment by his employer become entitled to an annual holiday of four weeks on ordinary pay plus a loading of 17.5 per cent.

11(f) (iii) The employer shall pay each worker a holiday leave loading of 17 .5per cent of 4weeks ordinary pay in the last pay before Christmas.”

[24] The Ego Pharmaceuticals Pty Ltd and National Union of Workers Enterprise Agreement 2011 contained the following:

“Clause 11 Annual Holiday

11(a) Except as otherwise provided in this Agreement every employee shall at the end of each year of his employment by his employer become entitled to an annual holiday of four weeks on ordinary pay plus a loading of 17.5 per cent.

11(f) (iii) The employer shall pay each worker a holiday leave loading of 17 .5per cent of four [4] weeks ordinary pay in the last pay before Christmas.”

[25] Whilst the current Agreement has rearranged the clauses of the Agreement so that annual holidays is now dealt with long service leave in clause 10 and what were clauses 11(a) and 11(f)(ii) are now clauses 10.1.1 and 10.1.6, the substance of the clauses has not changed.

[26] The NUW rely upon the clause 26.5 of the Pharmaceutical Industry Award 2010 which, apart from a renumbering of the annual leave loading clause in the Award from clause 26.4 to clause 26.5, has remained unchanged since the Award was first made in 2009. The Award provision was in operation prior to the 2011 Agreement being made and had been in place for 5 years before the current Agreement commenced.

[27] It is reasonable to conclude that the language of clause 26.5(b)(ii) of the Award was not included in either of the 2011 or 2014 Agreements because of the absence of night shift work at Ego. In circumstances where there was no night shift at Ego any Agreement with the wording of clause 10.1 of the Agreement would produce the same outcome as provided by clause 26.5 of the Award even without including the wording of clause 26.5(b)(ii) in circumstances where the term “ordinary pay” in clause 10.1 of the Agreement was treated as meaning base rate of pay..

[28] From the submissions of the parties it is clear that in bargaining over the terms of the 2014 Agreement the issue of a possible night shift at Ego was considered and that some terms of the Agreement were written to allow for the introduction of a night shift. Ego contended that the issue of a possible night shift was first raised in the negotiations for the 2011 Agreement and was dealt with in the 2014 Agreement:

“Please note in the negotiations for the 2011 Enterprise Agreement Ego management notified the NUW and other bargaining representatives that at some point Ego may need to go to 3 shifts but that it was unlikely to do so in the next 3 year period. This was referenced in minutes at the time. As a result there was not express inclusion of night shift in that 2011 Enterprise Agreement and the applicable shift work clause was:

38. SHIFTWORK

(a) Afternoon shift means any shift finishing after 6.00pm and at or before midnight.

(b) Part or full time afternoon or night shifts work may be worked to meet production needs.

(c) Except as provided for by sub-clauses 5(a)(iv) or 5(b), the ordinary hours for afternoon shift shall not exceed eight in anyone day, Monday to Friday and any excess shall be paid at the rate of time and a half for the first two hours and double time thereafter.

(d) A penalty rate of fifteen per cent in excess of ordinary rates shall be paid for afternoon shift.

However, the negotiations for the 2014 Enterprise Agreement (the current Agreement) specifically addressed the issue of the introduction of a night shift.

……minutes of the meetings indicate discussions around a range of matters including (a) the nightshift spread of hours (b) night shift starting times (c) shift loading for night shift work; and (d) that the shift that commenced on Sunday night would attract the night shift loaded rate and not Sunday rates.

Claim 6 of the NUW log of claims dated 17 June 2014 (attached) made a specific claim

“That 30% shift allowance apply for night shift work”.

Ego accepted this claim and it was reflected in a revised shift work clause as follows (as per current 2014 EA):

36 SHIFTWORK

36.1 The afternoon shift shall mean a shift finishing after 6.00pm and at or before midnight.

36.2 The night shift shall mean a shift finishing after midnight and at or before 8.00am.
…

36.5 Afternoon and night shift allowances:

36.5.1 An employee who works on afternoon shift must be paid 15% extra on the ordinary hours for the shift.

36.5.2 An employee who works on night shift must be paid 30% extra on the ordinary hours for the shift.

36.6 A night shift commencing on a Sunday evening will be paid at the night shift rate (30%) and not at Sunday rates.

The reference to the payment of shift loading expressly referenced the entitlement for an employee “who works” the shift. This reflected the wording of the NUW claim.

The minutes of meetings (and log of claims) indicate that introduction of night shift was a very significant issue in the bargaining that took place for the 2014 Enterprise Agreement.” 2

[29] The NUW responded to this submission with the following:

“Although during the 2014 EBA negotiations, the NUW bargained for a night shift loading, the fact remains that at that point, there were no night shift workers on site. The issue of how annual leave loadings and night shift loadings would interact were not resolved because the parties had not turned their minds to that issue. The NUW would submit that such an oversight was in fact reasonable, as the negotiations were surrounding creating a whole new category of workers. It was reasonable to overlook this complex interaction between two different sections of the EBA. The practical implication of the Respondent’s interpretation would be that night shift workers would effectively suffer a 12.5% pay cut when taking annual leave. It should be evident that such an interpretation was not intended, but rather overlooked, leaving the current ambiguity that needs to be resolved.”

[30] The most that can be said of the parties conduct in negotiating the 2014 Agreement is that both parties agree that the issue of the quantum of annual leave loading to paid to night shift workers was not specifically addressed by the parties. At this point it is necessary to refer to the what the Full Bench said in AMWU v Berri which gave rise to the 5^th and 13th principles they identified:

“[85] It is important to bear in mind that while the 2014 Agreement (and indeed the antecedent agreements) may have been negotiated by Berri and the AMWU, the agreement itself is ‘made’ when a majority of the employees that will be covered by it cast a valid vote to approve it.

[86] The 2014 Agreement is a single enterprise agreement made pursuant to Part 2-4 of the FW Act. Unlike times past, the ‘parties’ to such agreements are not an employer and an employee organisation. Indeed the FW Act does not speak in terms of the ‘parties’ to such agreements, rather it refers to the persons and organisations who are ‘covered by’ such agreements. Relevantly s.172(2)(a) provides that an employer may make an enterprise agreement ‘with the employees who are employed at the time the agreement is made and who will be covered by the agreement’. Section 182(1) provides that an agreement is ‘made’ if the employees to be covered by the agreement ‘have been asked to approve the agreement and a majority of those employees who cast a valid vote approve the agreement’.

[87] It is also relevant to observe that an employee organisation that was a bargaining representative for a proposed agreement may be covered by the agreement once it has been made (see ss.183 and 201(3)).

[88] The diversity of interests involved in the negotiation and making of enterprise agreements warrants the adoption of a cautious approach to the admission and reliance upon evidence of positions advanced during the negotiation process. As Rares J recently observed, in Australian International Air Pilots Association v Qantas Airways Limited: 

‘Substantially, the Act provided that the agreement was a tripartite document between a body of employees, a corporation with numerous officers and an industrial association. The involvement of so many individuals in the formation of the agreement re-emphasises the importance of approaching the construction of that document in accordance with the principle of objectivity. It is important, in doing so, to be cautious and bear firmly in mind the fact that the agreement was formed by a diversity of persons who had sought to protect their differing interests by various formulations of words in it. Those disparate intentions cannot be determinative of the proper construction to be given to the words chosen. In Health Services Union v Ballarat Health Services [2011] FCA 1256 at [79], Gray J said:

“In the days when an award might be negotiated between a union and an employer, and made by consent, the existence of a common understanding between the union and the employer as to the meaning of terms might have had some role to play in their construction. Whatever were the terms of such an agreement, and whatever was their meaning, those terms were imposed upon the employees who became bound by the award. In the current era, most industrial instruments are required to be put to a vote of the employees whose work will be covered by them, before they can be certified or approved so as to become enforceable by statute. The union and the employer who negotiated the terms might have had a common understanding of the meaning of them, but that understanding might not have been shared by all or some of the employees who voted for the operation of the agreement. They may have been entirely ignorant of the common understanding. In those circumstances, the occasions on which it can be said that a party to an agreement who entered into it on a common understanding should not be allowed to resile from that understanding will be rarer than they have been in the past.”‘

[96] Further, even if there had been evidence that the laundry allowance had been discussed during the negotiations of the 2014 Agreement, such evidence would need to be approached with a degree of caution. As mentioned above, while the 2014 Agreement was negotiated by Berri and the AMWU, it was ultimately a ‘tripartite document between a body of employees, a corporation with numerous officers and an industrial association’. In these circumstances evidence as to what, if anything, the employees covered by the 2014 Agreement were told about the laundry allowance (either during the course of the negotiations or pursuant to s.180(5) of the FW Act) may be of more assistance than evidence of the bargaining positions taken by the employer or a bargaining representative during the negotiation of the agreement. This is so because an enterprise agreement is ‘made’ when a majority of the employees asked to approve the agreement cast a valid vote to approve the agreement.

[31] In the present matter there is no evidence, in the form of witness evidence, which would permit the Commission to come to any concluded view as to what the employees were told before they voted to make the Agreement in 2014. Even the submissions of the NUW and Ego do not address the contents of what was said to employees before they voted to make the Agreement or what explanation was given to employees as required by s.180(5) of the Act.

[32] There is however one relevant fact that was known to employees (or at least known by some of them) at the time they voted to make the Agreement, and that is, that clauses 11(a) and 11(f)(ii) of the 2011 Agreement, and which became clause 10.1.1 and 10.1.6 of the 2014 Agreement, had consistently been applied by Ego on the basis that shift employees were paid the 17.5% annual leave loading on their base rate of pay only and not on a rate of pay which was the total of base rate of pay plus shift loading. Whether this fact was known to all of the employees who were to be covered by the 2014 Agreement at the time they voted to make the Agreement is unknown. Clearly the afternoon shift employees of Ego at that time would have known of this fact. The day shift employees or day workers employed by Ego at that time may not have known of this fact simply because its existence had no impact on them.

[33] It is reasonably clear that if the NUW had specifically addressed the interaction between annual leave loading and night shift work when bargaining for the Agreement that the result may very well have been different to what actually happened. As the NUW contend it would not have been their intention as a bargaining representative of employees to have a situation where night shift employees suffered a 12.5% reduction in pay when taking annual leave. However the very contention itself is useful in considering the matter in dispute. Very clearly it was a case of inadvertence by the NUW in making a claim in relation to annual leave loading for night shift workers which led the parties negotiating the Agreement to not consider the interaction between annual leave loading and the introduction of a night shift. Ego makes no submission as to its subjective intention in relation to how the Agreement should deal with the issue of night shift workers annual leave loading entitlements. Ego says no more than that the NUW did not make a claim in relation to a night shift workers annual leave loading entitlements. Nothing put by either party in relation to the negotiations for the Agreement assist the Commission in resolving the issue in dispute.

[34] The meaning attributed by the NUW to the term “ordinary pay” in clause 10.1 is clearly a possible meaning but it is a highly improbable meaning. The meaning attributed by the NUW to the term “ordinary pay” is very different to the approach adopted by clause 26.5 of the Award and it is very different to the practice in place prior to the making of the Agreement.

[35] The reasoning adopted by Ego in coming to the view that the term “ordinary pay” in clause 10.1 of the Agreement should mean base rate of pay is quite flawed and is rejected.

[36] In the context of the present matter the factor which has the strongest influence over the meaning to be attributed to the term “ordinary pay” is the practice which was in place at the time the Agreement was put to employees to vote on. In the absence of any objective evidence as to what the negotiating parties intended to be the operation of clause 10.1 and in the absence of any evidence as to what was put to the employees before they voted to approve the Agreement the only sure and objective fact is that Ego had been paying annual leave loading on the base rate of pay. Payment of the 17.5% annual leave loading on the base rate of pay plus shift loading (the position advanced by the NUW in interpreting the 2014 Agreement) had not occurred during the life of the 2011 or 2005 Agreements.

[37] The very manner in which the NUW has identified the matter in dispute and the remedy sought from the Commission is a relevant consideration in determining the meaning to be given to “ordinary pay” in clause 10.1 of the Agreement. In its Form F10 the NUW identifies the issue in dispute as “Leave Loading Payment” and identifies the remedy sought as:

“Night shift employees have not been receiving 17.5% loading paid out on their ordinary pay (which includes night shift loading), instead they have been paid 17.5% on the base rate of pay which excludes the night shift loading included in their ordinary pay.”

[38] In its written submissions filed on 3 May 2017 the NUW identified the remedy it sought in the following terms:

“The Applicant seeks findings by the Commission that:

The term ‘ordinary pay’ in this Agreement includes shift loadings, and therefore night shift workers are entitled to an additional 17.5% annual leave loading, calculated from base rate plus 30% night shift loading.

In resolution of the dispute, the Applicant seeks an Order requiring the Respondent to:

Begin paying the night shift annual leave rates as per above, and provide back pay to workers affected from February 2015.”

[39] Whilst the submissions and contentions of the NUW as to the meaning to be given to “ordinary pay” in clause 10.1 would appear to have an impact on the amount of annual leave loading being paid to afternoon shift and night shift employees the NUW only seeks to have orders made in relation to night shift employees. The NUW has not sought to complain about the historic payment of annual leave loading to afternoon shift employees. Yet the submissions made by the NUW in relation to night shift workers, must as a matter of logic, apply to afternoon shift employees and must mean that afternoon shift employees have not been paid the correct amount of annual leave loading at any time under the terms of the current Agreement and under the terms of at least the two previous enterprise agreements. The failure of the NUW to address both the historic and current position of afternoon shift workers in relation to an entitlement to an amount of annual leave loading is a relevant matter and tells against giving the term “ordinary pay” in clause 10.1 the meaning of base rate of pay plus shift loading.

[40] Having considered all of the circumstances of this matter the Commission determines that the term “ordinary pay” in clause 10.1 of the Agreement means the ordinary hourly rate of pay of an employee without any shift loading or other penalty or loading included.

[41] The fact that such an interpretation means that night shift employees are paid less whilst on annual leave than when working night shift may be an undesirable and unintended consequence (as the NUW contends). However the Commission must not rewrite the Agreement to remove any such undesirable or unintended consequence (if such exist). 3 The parties can address this issue through negotiations for any new enterprise agreement, and if they do it would be extremely prudent for the NUW and Ego to carefully explain to employees who are to vote on any future agreement what each term of the new agreement means and what will be the effect of each term of the new agreement. If such explanations are done in writing then the Commission would be assisted in the future if there are disputes about the meaning of any term of a new agreement. If the requirement in s.180(5) is taken seriously and a detailed and comprehensive explanation is given to employees disputes such as the present one may not even arise.

COMMISSIONER

 1   [2017] FWCFB 3003.

 2   Respondent’s written submissions 23 May 2017.

 3   See AMIEU v Golden Cockerel Pty Ltd, [2014] FWCFB 7447 at [41] and Kucks v CSR Limited, (1996) 66 IR 182 at 184.

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