National Union of Workers v Serco Sodexo Defence Services Pty Limited

[2013] FWC 7115

[2013] FWC 7115

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

National Union of Workers
v
Serco Sodexo Defence Services Pty Limited
(C2013/4673)

VICE PRESIDENT LAWLER SYDNEY, 18 SEPTEMBER 2013

Dispute resolution - increase to “base rate of pay” effected by operation of Item 15 of Schedule 9 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 - whether agreement on its proper construction required annualised salaries to be recalculated to reflect that increase..

[1] This is an application by the National Union of Workers (“NUW”), pursuant to section 739 of the Fair Work Act 2009 (“FW Act”), for the Commission to deal with a dispute in accordance with the dispute settlement procedure in the Serco Sodexo Defence Services Pty Ltd Garrison Support Services Central Northern NSW Collective Agreement 2009 (“Agreement”).

[2] The dispute relates to the salaries paid by Serco Sodexo Defence Services Pty Ltd (“Serco”) to security employees who are engaged on annualised salaries and, in particular, how the annualised salary is calculated in the events that have happened.

[3] Part 5 of the Agreement, beginning at clause 18, deals with “Wages and Related Matters”. Clause 18(1) states:

“The wages set out in this Agreement at Schedule A - H provide for:

(a) Wage rates payable on approval of the agreement by Fair Work Australia,

(2009 wage rates);

(b) 3% increase to base rates of pay the first full pay period twelve months after approval of the agreement by Fair Work Australia or on 1 September 2010, whichever is earlier.

(c) 3% increase to base rates of pay the first full pay period twenty four months after approval of the agreement by Fair work Australia or on 1 September 2011, whichever is earlier.”

(emphasis added)

[4] Clause 21.3 of the Agreement provides for annualised salaries and was the centre of argument. Clause 21.3.1 states:

“SSDS may engage employees under an annualised salary arrangement where employees are paid an annualised rate and where regular fortnightly wages are calculated to ensure consistency of wage payments to employees concerned, such calculation will include payment for overtime worked, public holidays and weekend penalties, shift allowance and annual leave loading. The annualised rate is calculated on the roster to be worked and averaged over a 12 month period.”

[5] Clause 1.5 notes:

“Schedules to this agreement will prescribe the different wages, classifications, hours of work, shift arrangements and specific allowances that will apply to each employee in each different classification and Service Stream under this agreement. All core common conditions, including core common allowances, will be prescribed within the body of this agreement.”

[6] Clause 18.1 of the Agreement, together with the Schedules, set out the increases in wage rates that were to apply for the first 3 years of the Agreement’s operation.

[7] Schedule D of the Agreement applies to security employees.

[8] Item 2 of Schedule D to the Agreement contains a table specifying the “F/T Hourly Rate” and “Annual Salary” for security employees on annualised salaries according to their classification level.

[9] Item 3 of Schedule D to the Agreement contains a table specifying the “F/T Hourly Rate” and “Casual Rate” for security employees who are not on an annualised salary.

[10] The remaining items in Schedule D specify loadings, penalties and allowances payable to employees who are not on an annualised salary as entitlements additional to their base rate of pay for ordinary hours worked.

[11] As Serco’s written submissions note, the annualised rates of pay in Item 2 “incorporate payment for overtime, public holidays, weekend penalties, shift allowance and annual leave loading, and as such, are higher than the corresponding non-annualised rates of pay for security employees under the Agreement.”

[12] Serco employs most of its security guards on annualised salaries and pays them in accordance with the rates specified in Item 2 of Schedule D. However, it also employees a number of security officers as casuals who are paid for the hours actually worked in accordance with Item 3 of Schedule D.

[13] Item 15 of Schedule 9 of the Fair Work (Transitional Provisions and Consequential Amendments) Act2009 (“Transitional Act”) provides:

“15 Enterprise agreement base rate of pay not to be less than transitional minimum wage instrument rate

15(1) If:

(a) a transitional minimum wage instrument covers an employee; and

(b) an enterprise agreement applies to the employee;

the base rate of pay payable to the employee under the enterprise agreement (the agreement rate) must not be less than the base rate of pay that is payable to the employee under the transitional minimum wage instrument (the instrument rate).

15(2) If the agreement rate is less than the instrument rate, the enterprise agreement has effect in relation to the employee as if the agreement rate were equal to the instrument rate.

Note: If a transitional instrument applies to an employee who is covered by a transitional minimum wage instrument, then (subject to the continued application of the AFPCS interaction rules) the employee must be paid at least the rate required by the continued AFPCS wages provisions.”

(emphasis added)

[14] Section 206 of the FW Act has a similar operation in relation to enterprise agreements applying to employees covered by a modern award.

[15] It is common ground that the requirements of Item 15(1)(a) and (b) are satisfied. The employees are covered by the Australian Liquor Hospitality and Miscellaneous Workers Union (Defence Contracting) Award 1992 as the transitional award that, together with the APCS derived from that transitional award, underpinned the Agreement.

[16] The rate specified in Item 3 of Schedule 4 (i.e. the ordinary hourly rate for a security employee not on an annualised salary) fell below the applicable award rate. Serco, in apparent compliance with Item 15(2) of Schedule 9 of the Transitional Act, increased the ordinary time hourly above the rate specified item 3 of Schedule D.

[17] The NUW, supported by United Voice, contends that on the proper construction of the Agreement Serco is also obliged to increase the rates paid to security employees on annualised salaries to reflect those increases.

[18] Serco submits that the plain words of clause 18 and Item 2 of Schedule D only require it to pay at the rates specified in that table and since those rates are above “the base rate of pay” in the applicable award, there is no occasion to increase them on account of Item 15(2) of Schedule 9 of the Transitional Act. Serco argues that “there is nothing in clause 21.3 or Schedule D of the Agreement, which requires (either expressly or by implication) that the annualised salaries for security employees:

a. be based on the non-annualised base rates of pay for security employees under the Agreement as adjusted from time to time;

b. be equivalent to the amount of pay that non-annualised security employees would receive under the Agreement for performing the same hours of work as annualised salary security employees from time to time.”

[19] For the reasons that follow I reject Serco’s arguments and agree with the contentions of the NUW and United Voice.

[20] The effect of Item 15(2) of Schedule 9 of the Transitional Act is to require the Agreement to be interpreted “as if the base rate of pay payable to the employee under the agreement” - the “agreement rate” - “were equal to the instrument rate”.

[21] The expression “base rate of pay” in Item 15(2) is a reference to what is often called the ordinary time rate of pay. That rate does not cease to be the ordinary time rate for a security employee employed on an annualised salary because the annualised salary rate is derived from that ordinary time rate in accordance with the calculations specified in clause 21.3.1. In other words, the “F/T Hourly Rate” of pay for an employee on an annualised salary is derived from, but different to, the “base rate of pay” to which Item 15 of Schedule 9 refers. The ordinary time rate in Item 3 of Schedule D is the “based rate of pay” for all security employees under the Agreement.

[22] The relevant principles of construction for industrial agreements are set out at length in the written submissions filed and served by the NUW. They are well known and do not need to be repeated here.

[23] In my view, on the proper construction of the Agreement, the parties intended clause 21.3.1 to facilitate the administrative and personal convenience associated with the payment of annualised salaries and did not intend it to effect a substantive change in the overall financial position that a security employee on an annualised salary would have been in if they had been paid in accordance with Item 3 of Schedule D, together with the loadings, penalties and allowances provided for in the balance of Schedule D, “calculated on the roster to be worked and averaged over a 12 month period”.

[24] That intention is evident from the language of clause 21.3.1. It specifies that the “regular fortnightly wages” of an employee on an annualised salary are “calculated to ensure consistency of wage payments to employees concerned”. In relation to security employees, what is being “ensured” by the calculations specified in clause 21.3.1 is not simply a level of regular payment but, rather, a level of regular payment calculated to reflect what the employee would have earned if they were being paid for the hours actually worked over a year on their “roster to be worked” by reference to the ordinary time rate together with “payment for overtime worked, public holidays and weekend penalties, shift allowance and annual leave loading” applicable to an employee under Item 3 of Schedule D of the Agreement. In short, clause 21.3.1 defines the linkage between Items 2 and 3 of Schedule D and specifies how the figures in Item 2 of Schedule D are derived.

[25] Where the base (ordinary time) rate of pay is increased by operation of Item 15(2) of Schedule 9 of the Transitional Act, clause 21.3.1, on its proper construction, requires the annualised salaries to be recalculated, using the same methodology that was used when Item 2 of Schedule D was prepared. That construction reflects the practical approach specified in Kucksv CSR Limited (1996) 66 IR 182 at 184 and Short v F W Hercus Pty Ltd (1993) 50 FCR 511 at 518. The table in Item 2 of Schedule 3 is a practical way of specifying annualised salary rates but remains subject to the overriding requirement in the express words of clause 21.3.1 as to what the calculations generating the figures in the table were intended by the parties to achieve. The construction for which Serco contends would deprive clause 21.3.1 of any substantive operation (because even in the absence of clause 21.3.1, the form of Schedule D, and items 2 and 3 in particular, would disclose an intent that Serco is entitled to engage employees on annualised salaries). A construction that gives clause 21.3.1 substantive operation is to be preferred.

[26] That construction is also supported by the language of clause 18.1, which specifies what “the wage rates set out in... Schedules A - H provide for” - namely wages rates payable on approval and, in clause 18.1(b) and (c), specified increases “to the base rates of pay” during the life of the Agreement. Again, the “base rates of pay” should be construed as the ordinary time rates for employees, not on annualised rates. The language of clause 18.1 and the schedule structure of the Agreement suggests an intent that the words of clauses 18.1(b) and (c) should prevail over the figures specified for those wage increases in the tables in Schedules A - H.

[27] The deeming effect of Item 15(2) of Schedule 9 of the Transitional Act is operative in relation to the rates for annualised employees in Item 2 of Schedule D of the Agreement because those rates must be calculated, in conformity with clause 21.3.1, by reference to the base rate of pay for a security employee as specified in Item 3 of Schedule D, adjusted as required by Item 15(2), together with the loadings, penalties and allowances specified in items 4 and following of Schedule D.

[28] For these reasons, my determination as private arbitrator is that, on its proper construction, the Agreement required Serco to vary the rates in Item 2 of Schedule D to the Agreement to reflect the increase in the ordinary time rate of pay for security employees employed under Item 3 of Schedule D required by Item 15(2) of Schedule 9 of the Transitional Act, using the same methodology that was used when the table in Item 2 of Schedule D to the Agreement was prepared. I direct the parties to hold discussions with a view to reaching agreement on the variations effected to Item 3 of Schedule D by Item 15(2) of Schedule 9 of the Transitional Act and clause 21.3.1. In the event that the parties are unable to agree those calculations, either party may seek to have the matter relisted and I will further arbitrate any disagreement as to the proper calculations to give effect to this determination (and facilitate consequential back payment to the affected security employees).

VICE PRESIDENT

Appearances:

Mr. A. Snowball for the applicant

Ms. G. Starr appearing on behalf of United Voice

Ms. S. La Penna for the respondent

Hearing details:

2013.

Sydney (via teleconference)

2 September 2013

Final written submissions:

For the applicant: 30 August 2013

For the respondent: 23 August 2013

Printed by authority of the Commonwealth Government Printer

<Price code C, PR541962>