National Union of Workers v Warehouse Solutions Pty Ltd
[2013] FWC 3409
•13 JUNE 2013
[2013] FWC 3409 |
FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.739 - Application to deal with a dispute
National Union of Workers
v
Warehouse Solutions Pty Ltd
(C2012/4998)
Storage services | |
COMMISSIONER LEE | MELBOURNE, 13 JUNE 2013 |
Alleged dispute concerning wage increase.
[1] On 21 August 2012, the National Union of Workers (the Applicant) referred a dispute with Warehouse Solutions Pty Ltd (the Respondent) to Fair Work Australia (now the Fair Work Commission (the Commission)) pursuant to the dispute settlement procedure contained in the Altona Regional Distribution Centre Enterprise Agreement 2010 (the Agreement). It is noted that the Respondent is a wholly owned subsidiary of Myer Holdings Limited and provides supply chain and logistics services to Myer Pty Ltd (also a wholly owned subsidiary of Myer Holdings Limited).
[2] The application lodged by the Applicant stated that the dispute related to clause 16 and 17 of the Agreement. The Applicant alleges that the Respondent has not passed on a wage increase in line with the Agreement.
[3] Clause 9 of the Agreement deals with the resolution of disputes. The parties agree that the necessary steps outlined in the dispute settlement procedure were followed prior to the dispute being notified to the Commission.
Proceedings
[4] A conference between the parties was conducted by me on 25 September 2012. The dispute was not resolved between the parties at this time and I indicated to the parties that they should continue discussions in an effort to resolve the matter.
[5] On 26 October 2012, the Applicant notified my Chambers that the matter remained unresolved between the parties. The Applicant sought a hearing to determine appropriate timelines for the determination of the matter. Correspondence from the Respondent confirmed that the matter remained unresolved.
[6] I convened a conference and hearing on 20 November 2012. At the conclusion of those proceedings, the parties agreed that the matter should be determined by arbitration, and that the question to be determined was as follows;
“Should the three and a half per cent wage increase payable from 1 August 2012 pursuant to clause 16 of the Altona Regional Distribution Centre Enterprise Agreement 2010 be applied to the actual rates of pay of employees?”
[7] The parties agreed that I have the necessary jurisdiction to answer the abovementioned question and the parties have agreed to be bound by the arbitrated decision in this matter, under the terms of the Agreement, subject to any appeal rights either party may have. I am satisfied that the requisite jurisdiction exists to determine this matter under the terms of the dispute settlement procedure in the Agreement.
[8] The Applicant sought, at the conference and hearing on 20 November 2012, that I issue an order to enforce the status quo. That matter was resolved between the parties in conference with an arrangement whereby the Respondent gave an undertaking that they would separately record on the balance sheet of the company, the balance of the amount that would have been paid on 1 August 2012 to the relevant employees and which continues to accrue with interest at the market rate.
[9] In order that there is no dispute between the parties as to the actual rates of pay of employees, the parties filed an agreed statement of facts, specifying the actual rates of pay of each relevant employee. That document was filed with the Commission by the Applicant on 6 December 2012 and was marked in proceedings as Exhibit M1.
[10] Both parties complied with my directions for the filing of materials. The matter was set down for arbitration on 31 January and 1 February 2013. Mr D Mujkic appeared on behalf of the National Union of Workers and Mr D Proietto was granted permission to appear on behalf of the Respondent. Mr Ian Emery (NUW delegate), Mr Gary Stutz (NUW organiser), Mr Michael Cunningham (Storeperson) and Ms Rieta Medancic (Storeperson) gave evidence on behalf of the Applicant. Ms Kathryn Smith, Mr Alan Riches and Ms Fontini Papageorgiou submitted witness statements on behalf of the Applicant, but did not provide oral evidence. Mr Stewart Tully (Regional Distribution Manager (South)) and Ms Louise Tebutt (Group General Manager of Human Resources) gave evidence on behalf of the Respondent.
Background to dispute
[11] The dispute relates to the application of the Agreement, which was approved by the Commission on 6 August 2010. The dispute relates to clause 16 of the Agreement which is entitled “Wage Rates”.
[12] The wages table in clause 16 specifies the hourly rates of pay applying to particular classifications. These rates increase over time, in accordance with the table, on specified dates. The increases across the table are relevantly 3%, 3% and 3.5%.
[13] Clause 16 of the Agreement is as follows;
“PART FOUR- WAGES AND RELATED MATTERS
16. WAGES RATES
The classification definitions as set out in clause 13.1 and 13.2 apply to the Company's operations located at Lot 1 Doherty's Road, Altona.
Storeworker | hourly rate as at first pay period on after 1 August 2010 | hourly rate as at first pay period on or after 1 August 2011 | hourly rate as at first pay period on or after 1 August 2012 |
Grade 1 | $26.5825 | $27.3800 | $28.3383 |
Grade 2 | $27.7994 | $28.6334 | $29.6355 |
Grade 3 | $28.3281 | $29.1779 | $30.1992 |
Grade 4 | $30.4511 | $31.3647 | $32.4624 |
Grade 5 | $30.8890 | $31.8156 | $32.9292 |
Clerical | |||
Grade 1 & 2 | $26.5825 | $27.3800 | $28.3383 |
Grade 3 | $27.7994 | $28.6334 | $29.6355 |
Grade 4 | $28.3281 | $29.1779 | $30.1992 |
Grade 5 | $30.4511 | $31.3647 | $32.4624 |
Grade 6 | $30.8890 | $31.8156 | $32.9292 |
The hourly rate of pay for a part-time employee shall be an amount equal to 1/36th of the appropriation classification rate of pay.
Casual employees shall be paid an amount equal to 1/36th of the appropriate classification rate of pay. In addition a casual penalty of 25% and annual leave loading of 8.33% for all ordinary hours worked (Monday to Friday).”
[14] At the time the Agreement was approved by the Commission on 6 August 2010, there were 54 employees covered by it. There was, at the time of hearing before me, 51 employees covered. 1 The majority of employees are paid the rates specified in clause 16 of the Agreement as they apply to their particular classification. There are however, a significant number of employees (approximately 25 per cent) who are paid in excess of the rates specified in the clause 16 table.
[15] This dispute revolves around those employees and whether they are entitled to receive pay increases on their actual rates of pay thereby maintaining into the future, a rate of pay for these employees above the rates specified in the Agreement.
[16] The Respondent has notified the employees in question that it intends to change the method of applying the increases, in that the third increase payable under the Agreement will be absorbed into their over agreement rates of pay. Simply put, this means that these employees will maintain their current actual rate of pay and will not receive an increase in remuneration from 1 August 2012.
[17] It is not contested that historically, the practice of the Respondent has been to apply pay increases to the actual rates of pay of employees. Not only has this been the practice under predecessor enterprise agreements, it was also the approach adopted for the first two wage increases payable under this Agreement.
[18] The Applicant argues that the Agreement provides that wage increases, that are payable pursuant to clause 16, including the increase payable on 1 August 2012, must be applied to employee’s actual rates of pay. The Respondent argues that the terms of the Agreement are clear and that there is nothing in the Agreement which requires the Respondent to pass on a 3.5% wage increase to those employees who are already receiving a rate of pay in excess of the amount specified in the fourth column of the table.
The law to be applied
[19] Both parties provided extensive references as authority for the proper construction of agreement terms. There was no real disagreement between the parties on the leading authorities. However, both sides sought to emphasise particular aspects of the leading decisions that were most favourable to their submissions on interpretation of the clause in question.
[20] In a recent Full Bench decision of the Commission, Cape Australia Holdings Pty Ltd T/A Total Corrosion Control Pty Ltd v Construction, Forestry, Mining and Energy Union 2, the general approach to the construction of enterprise agreements was considered. The Full Bench stated that;
“[7] As to the general approach to the construction of enterprise agreements the observations of French J, as he then was, in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (Wanneroo) are apposite:
“[53] 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).”
[8] While his Honour’s observations were made in the context of interpreting an award the same principles apply to the interpretation of enterprise agreements. For example, similar observations were made by their Honours Gummow, Hayne and Heydon JJ in Amcor v CFMEU:
“Clause 55.1.1 must be read in context. It is necessary, therefore, to have regard not only to the text of cl 55.1.1, but also to a number of other matters: first, the other provisions made by cl 55; secondly, the text and operation of the Agreement both as a whole and by reference to other particular provisions made by it; and, thirdly, the legislative background against which the Agreement was made and in which it was to operate.”
[9] The fact that the instrument being construed is an enterprise agreement is itself an important contextual consideration. As French J observed in Wanneroo, at paragraph [57]:
“It is of course necessary, in the construction of an award, to remember, as a contextual consideration, that it is an award under consideration. Its words must not be interpreted in a vacuum divorced from industrial realities - City of Wanneroo v Holmes (1989) 30 IR 362 at 378-379 and cases there cited. There is a long tradition of generous construction over a strictly literal approach where industrial awards are concerned - see eg GeoA Bond and Co. Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 503-504 (Street J). It may be that this means no more than that courts and tribunals will not make too much of infelicitous expression in the drafting of an award nor be astute to discern absurdity or illogicality or apparent inconsistencies. But while fractured and illogical prose may be met by a generous and liberal approach to construction, I repeat what I said in City of Wanneroo v Holmes (at 380):
“Awards, whether made by consent or otherwise, should make sense according to the basic conventions of the English language. They bind the parties on pain of pecuniary penalties.”” 3 [Footnotes omitted]
[21] I referred the parties to the decision of the Full Bench in Cape Australia Holdings Pty Ltd T/A Total Corrosion Control Pty Ltd v Construction, Forestry, Mining and Energy Union 4and allowed the parties to make any submissions they sought to on the decision.
[22] The Applicant indicated that they did not take issue with the summary of the relevant principles by the Full Bench as it dealt with largely the same cases that were referred to in the course of the hearing of this matter. The Applicant also sought to highlight the requirement in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union 5 to have regard to the context and purpose of the provision.6
[23] The Respondent did not take issue with the principles in Cape Australia Holdings Pty Ltd T/A Total Corrosion Control Pty Ltd v Construction, Forestry, Mining and Energy Union 7and similarly sought to highlight aspects of the decision that were supportive of the Respondent’s preferred approach to construction of agreements.8
[24] Considerable time in the hearing was spent dealing directly with the issue of extrinsic material and whether or not it is necessary to find ambiguity before it is admissible.
[25] The Applicant contends that it is permissible to have recourse to extrinsic materials in the absence of an ambiguity. The Respondent submits that it is not permissible to consider extrinsic material unless there is an ambiguity found.
[26] In Watson v ACT Department of Disability Housing and Community Services 9, a decision of Vice President Lawler, it was held that;
“[15] In summary, the general principles governing the construction of contracts laid down by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales apply to the construction of industrial agreements. However, consistent with the approach in Kucks and Short v FW Hercus Pty Ltd, an industrial agreement must always be construed in context: the context of particular provisions within the agreement as a whole and the context in which the agreement was made including any relevant statutory or historical context. Extrinsic evidence as to the context in which the agreement was made, including the statutory and historical context, will be admissible to demonstrate the existence of ambiguity and or to resolve ambiguity.” 10 [Footnotes omitted]
[27] The Applicant submitted that this approach was favourably referred to by the Full Bench in The Australian Workers’ Union v Co-operative Bulk Handling Limited 11where it was stated that;
“[14] The extract from Watson and the approach of Logan, J, inform the manner in which we approach the test of construing the agreement and leads to the conclusion that regard must be had to extrinsic material in order that the meaning of the clause in question may properly be understood.” 12
[28] The Applicant also submitted that this was consistent with the approach adopted by his Honour Marshall J in Australian Municipal, Administrative, Clerical and Services Union v The Treasurer (Cth) and others 13 where it was stated that;
“There is no sound reason why recourse to probative extrinsic material by the Court should be conditional on identification of an ambiguity. Further, there is no sound reason why use of extrinsic material should be limited to identifying the mischief sought to be addressed by the award, as distinct from construing the meaning of the award itself. But the debate is rather academic. I regard myself bound by the approach of Burchett J in Short v Hercus, Drummond J having agreed with his Honour’s approach on the issue of award interpretation and the use of extrinsic material.” 14
[29] The Respondent referred me to the following section the decision of Burchett J in Short v FW Hercus Pty Ltd 15;
“The context of an expression may thus be much more than the words that are its immediate neighbours. Context may extend to the entire document of which it is a part, or to other documents with which there is an association. Context may also include, in some case, ideas that gave rise to an expression in a document from which it has been taken. When the expression was transplanted, it may have brought with it some of the soil in which it once grew, retaining a special strength and colour in its new environment. There is no inherent necessity to read it as uprooted and stripped of every trace of its former significance, standing bare in alien ground. True, sometimes it does stand as if alone. But that should not be just assumed, in the case of an expression with a known source, without looking at its creation, understanding its original meaning, and then seeing how it has been used.” 16
[30] The Respondent submitted the following in relation to this passage;
“...I think it’s important because it focuses on the word “expression”. It comes back to the point I was making earlier...that what we’re talking about when we’re looking at extrinsic material is helping us to determine there’s a word or a phrase or a term or an expression which is ambiguous, what does it mean?” 17
[31] In my view, there is considerable authority to support an approach that allows for the admissibility of extrinsic material even in circumstances where ambiguity is not present. However, I agree with the submission of the Respondent that such an approach does not allow a departure from the principles as they apply to the reliance on extrinsic material in Short v FW Hercus Pty Ltd 18. As described above, Marshall J in Australian Municipal, Administrative, Clerical and Services Union v The Treasurer (Cth) and others19 makes clear he is bound by those principles.
[32] Nor does recourse to extrinsic material allow a departure from the principles applying to construction as set out in Cape Australia Holdings Pty Ltd T/A Total Corrosion Control Pty Ltd v Construction, Forestry, Mining and Energy Union 20already set out.
[33] The issue of conduct post the operation of the Agreement was raised in submissions. The Respondent directed me to the decision in Community and Public Sector Union v Telstra Corporation Ltd 21 which the Respondent contends provides authority on the approach to be taken when dealing with past conduct. In this case, the Full Bench stated;
“[42] Generally speaking, it is well established that the subsequent conduct of the parties to a contract is not admissible as an aid to construction of a contract. A contrary view was expressed by Santow J in Spunwill Pty Ltd v BAB Pty Ltd. However even on the Spunwill approach, subsequent conduct will only be relevant to the limited extent that the “conduct evidences a clear and mutual subjective intention as to what the contract originally meant.”” 22
[34] I refer also to the decision of Marshall J in Australian Municipal, Administrative, Clerical and Services Union v The Treasurer (Cth) and others 23 where his His Honour stated;
“A further issue in respect of award interpretation was raised at the hearing. This issue related to whether it was permissible to have regard to the conduct of the parties subsequent to the making of the award. In my view, the overwhelming weight of authority supports the proposition that it is impermissible to have regard to such subsequent conduct.” 24
[35] I will apply these principles in the determination of this matter.
Submissions and evidence
[36] A great deal of the evidence, in so far as it relates to the history of the application of clause 16 of the Agreement and its predecessor clauses in earlier agreements, is not contested. Similarly, there is a common view between the parties as to many of the aspects of the negotiations leading up to the Agreement.
[37] There are, however, some significant differences, which will be described below.
[38] In summary, the Applicant submits that the three and a half per cent wage increase payable from 1 August 2012 pursuant to the Agreement should be applied to the actual rates of pay of employees for the following reasons:
- This is the only outcome consistent with the content of the Agreement, its historical and industrial context and the intention of the framers of the document; and
- A failure to apply the wage increase to the actual rates of pay of employees would be inconsistent with clause 7 of the Agreement, No Extra Claims and would lead to a breach of this clause by the Respondent.
[1] The Applicant submits that, on that basis, the question to be determined should be answered in the affirmative. Further, the Applicant submits that it is open to me to make that determination even without recourse to extrinsic materials.
[2] The Respondent submits that the terms of the Agreement are clear. The Respondent submits that;
“The terms of the [Agreement] are clear and unambiguous and do not, in anyway, support the interpretation proposed by the [Applicant]. Accordingly, there is no need for [the Commission] to consider any extrinsic materials in construing the [Agreement] and it should not do so. To the extent that [the Commission] does consider it necessary to consider extrinsic material, it must limit itself to the surrounding circumstances that evidence the mutual intentions of the parties at the time the [Agreement] was made. There is no such evidence in this case which supports the [Applicant’s] construction of the [Agreement]. In particular, the evidence strongly suggests that there was no mutual intention in relation to wage rates as between the Respondent and the [Applicant] during negotiations for the [Agreement].
The [Agreement] should be given its plain and ordinary meaning and the [Applicant’s] application should be dismissed.” 25
The meaning of the words of Clause 16 “Wage Rates” in the Agreement.
[3] The Applicant’s written submissions did not directly deal with the ordinary meaning of the words of Clause 16. The emphasis of the Applicant’s written submissions was on the industrial and historical context of the Agreement. During the hearing, Mr Mujkic for the Applicant outlined the basis of his position that the terms of Clause 16 are of themselves ambiguous. 26 In essence the position advanced by the Applicant was that the clause was ambiguous as there are two possible readings of the clause;
(a) that the rates in Clause 16 are minimum rates; or
(b) the rates in Clause 16 are the specific rates of pay that must be paid.
[4] The Respondent submits that the terms of the Agreement are clear and unambiguous and do not in any way support the interpretation proposed by the Applicant. 27 In respect of the clause specifically, the Respondent submits that there is nothing in any way ambiguous about the way the clause is drafted and that clause 16 is drafted in a way that is exactly the same as most modern awards.28
[5] The position of the Respondent as to the ordinary meaning of the words was put most clearly by Mr Proietto for the Respondent as follows;
“The only possible interpretation of this clause is that employees who are covered by the agreement, by the 2010 agreement are entitled to the wage rates specified in clause 16. Any person who was to pick up this agreement for the first time...would be under absolutely no doubt that come 1 August 2012 the wage rates that the respondent is required to pay to its employees are those listed in the final column of the table. There’s no room for any other construction. Mr Mujkic, I think, laboured to try to find ambiguity in this point, with respect and in my submission his views or opinions or submissions as to why there’s ambiguity in this clause cannot be accepted.” 29
The history of the wage increase clause and its application.
[6] The wording of the wages clauses in the enterprise agreements which have applied to the Respondent have changed over time. The various enterprise agreements that applied to the Respondent, going back to 1993, are set out as attachments to the Applicant’s written submissions. It is important to consider the history of various changes to the wage increase clauses over time in order to properly consider the context of the Agreement in dispute.
[7] The 1993 agreement (attachment VIII to the Applicant’s submissions) listed the percentage wage increases to be paid on particular dates. There was not a table of rates to be paid. Clause 10(c) provided that “The wage increase referred to in subclause (a) of this clause shall be paid on the actual rate and shall not be absorbed into any over award payment”.
[8] The 1995 agreement (attachment VII to the Applicant’s submissions) was similar but varied slightly from the 1993 agreement. In particular, it expressly departs from the 1993 agreement which provides for increases to be paid on the actual rate. Instead the 1995 agreement specifies in clause 10(c) that “The wage increases...shall be paid on the classification rate (as of May 1 1995) for each classification of employee covered by this agreement, and shall not be calculated on over award amounts” However clause 10(c) continues to explicitly protect wage increases from absorption into over award payments.
[9] In the 1997 agreement (attachment VI to the Applicant’s submissions) at clause 15, there is a change as to how wage increases are dealt with in the agreement. There is still a list of the percentage increases that are payable (5%), however there is also a table showing the rates that are payable to each classification at particular points in time, similar to the Agreement. Notably, the wages clause does not deal one way or the other with the question of whether increases should be applied to the classification rates or actual rates. Nor does the clause refer at all to whether or not increases can be absorbed. The wages clause in the 2001 agreement (attachment V) is, in all material ways, the same as that in the 1997 agreement.
[10] In the 2003 agreement (attachment IV to the Applicant’s submissions), the wages clause changes again in as much as the listing of the increases to be paid on particular dates is not present. There is simply a wages table, though it is noteworthy that the amount of the percentage wage increase is identified in the header to the table (the amounts of 4% and 3.6%). The 2005 agreement (attachment III to the Applicant’s submissions) wage clause is the same structure as that for the 2003 agreement, again with the relevant percentage increases noted in the header of the wages table.
[11] The 2007 agreement (attachment II to the Applicant’s submissions) wages table at clause 16 is virtually the same as the 2005 version, except the amount of the percentage increases to be paid at each relevant time period is not spelt out in the header of the table. The wages clause in the 2010 agreement (attachment I to the Applicant’s submissions) is identical in structure to that of the 2007 agreement.
[12] Ms. Tebutt gave evidence that she recollected that the Respondent deliberately set out to change the language in the wages clause after 2001 because it was aware of the compounding effect that these wage increases were having for those employees already receiving over agreement rates of pay. Ms Tebutt conceded however that she was not involved in those negotiations. Ms Judy Barnsby, a former employee of Coles Myer was named by Ms. Tebutt as the one responsible for the change to the 2001 agreement.
[13] Mr. Emery disputes this version of events and says that the intent of the change was never discussed at the time. 30
[14] Irrespective of the various changes to the wording of the pay clause in the various agreements, it is uncontested that the practice of the Respondent was to apply the percentage pay increases that were either explicit (i.e. in the heading of the wages table) or in the case of the 2007 and 2010 agreements, implicit, to the actual rates of employees, including the employees who were paid rates of pay above the amounts specified in the agreement. It is also not contested that this was the practice that applied to the first two wage increases that were available under the terms of the Agreement.
[15] The evidence of Ms. Tebutt was clear that the decision to stop applying the pay increases to actual rates of pay was related to the financial circumstances of the Respondent. She claims the decision to make the change was made in August 2012.
[16] In her evidence, Ms. Tebutt made the following comment that outlined clearly the circumstances that precipitated the change in approach;
“...there were 100 redundancies which occurred. We had made two profit downgrades for the year. The question was asked and it really was from our general manager of supply chain with regards to was there an opportunity with regards to cost savings at the site. We knew that we could act on this clause if we wanted to which we’ve been relying upon our long held view that we could have if circumstances warranted it and in light of that I say we made the decision.” 31
The history of the agreement negotiations.
[17] It is common ground that the negotiations in the lead up to the making of the Agreement were not lengthy. There were three meetings in total that went for around 2 hours each. 32
[18] During negotiations, the Respondent tabled an extensive log of claims that included a claim for sunsetting of the practice of applying the pay increases in the agreement to the actual rates of pay of employees. This claim was more commonly referred to in the evidence as the “red-circling” claim. Ultimately, the “red-circling” claim was withdrawn, with Mr. Stutz saying it would only be agreed to over his “cold, dead fat body”. 33
[19] There was no disagreement as to this occurring in the negotiation and witnesses recalled there being much mirth surrounding the comment by Mr. Stutz on all sides. Mr. Stutz recalls that Ms. Tebutt said “I suppose that’s off the table then”. 34 It is not in dispute that the “red-circling” claim was withdrawn by the Respondent during negotiations.
[20] However, the Respondent claims that that the “red-circling” claim was only made for the purpose of the negotiations and as something to take off the table in the context of the negotiations. Ms. Tebutt was clear in her evidence that the “red circling” claim was put in as something the Respondent could withdraw without losing anything by doing so. 35 Mr. Stutz’s evidence is supportive of the proposition that the red circling claim was made without any real endeavour on the part of the company. He stated that;
“...it was not a claim that the company pushed particularly hard for. I don’t believe Ms. Tebutt believed they were going to get the claim. I think it was just one of those throwaways that occasionally unions or companies will put forward” 36
[21] As the negotiations progressed it became clear to Ms. Tebutt that the Applicant was looking for a “roll over agreement” and there was no further need in the context of the negotiations, for the extensive counter claims from the company, including the “red circling” clause.
[22] However, Ms. Tebutt maintains that the Respondent was at all times aware they had the right to not pay the increases on actual rates and to absorb the increases payable under the Agreement into the above agreement rates payable to the relevant employees. 37 Ms Tebutt’s evidence was that;
“While we withdrew the claim, we did not in any way concede or withdraw our managerial prerogative not to pass on a wage increase at any time in the future.” 38
[23] Similarly, Mr. Tully held to the view that while the “red-circling” claim was withdrawn, and conceded that revisiting it during the life of the Agreement was not discussed, that, “we believed that we could always revisit that particular issue at any time”. 39 Mr. Tully concedes that, once the claim was withdrawn, they did not say to the Applicant, “we can do it anyway”, as it was always the understanding of the Respondent that they could and therefore there was no need for an explanation. Mr. Emery confirmed that the claim of the Respondent to hold the prerogative to not pass on increases, notwithstanding the withdrawal of the “red circling” claim, was never discussed.40
[24] It was also claimed by Mr. Emery in his witness statement that when the “red-circling” claim was withdrawn that the Respondent’s Human Resources representative agreed it was harsh and hard to do. 41 However, Mr Emery’s evidence on this point was not convincing. At the hearing he was asked “Do you remember what was said and who said it?”. Mr Emery responded that “To be quite honest I could not recognise the people that were there”. Mr Emery also agreed under cross examination that if comments were made they would have been made by Ms Tebutt.42 However, Ms Tebbut stated that she had “no recollection of saying [those words] or words to that effect, and I do not believe that I used those words. They are simply not words that I would use, particularly during negotiations for an agreement”.43Mr. Stutz’s evidence was that he did not recall that particular conversation (about it being a harsh thing to do) or indeed recall whether he was there or not at the time.44
[25] The Applicant submits that the fact that the Respondent pursued the “red-circling” claim demonstrates that they did not hold to the view that they had the right to not apply the increases to the actual rates. The Applicant argues that if the Respondent held to that view there would be no point to making the claim in bargaining. This key development in the negotiations of the Agreement, combined with the history of the practical application of the clause provide important context when considering the proper construction of Clause 16.
[26] The evidence of the Applicant’s negotiators was that at no time did the Respondent indicate or express an intention to end the practice of applying the increases to actual rates other than by seeking the “red-circling” clause which they ultimately abandoned. Having so abandoned the claim, the Applicant asserts the mutual intention of the parties was to continue the current practice of applying the wage increases to the actual rates of pay and that this is clear.
[27] Mr. Stutz, in his evidence in chief, stated that his recollection was that at no stage was it brought to his attention that the wage increases were not for every employee covered by the Agreement. 45 Mr Stutz claimed that once the “red circling” claim was withdrawn, he understood that it was “dead”.46 In his statement, Mr. Stutz claimed that ”[i]n his mind, it was clear the increases were to be paid to all workers”47
[28] The Respondent contends, that it was always understood that the increases were to be based on the wage rates specified in the Agreement. The evidence of Ms Tebbut was that during negotiations she referred to wage increases as being increases in relation to the rates in the Agreement and not actual rates of pay. 48 This is disputed by Mr. Emery49, however when asked on cross examination, “[b]ut if Mr. Tully and Ms. Tebbutt say, as they have in their witness statements, that they always talked about wage increases to the rates of pay in the agreement you cannot dispute that, can you Mr. Emery?”, Mr Emery replied, “I cannot dispute, sir, no”.50
Consideration and conclusion
[29] The construction of an agreement, like that of a statute or an award, begins with a consideration of the ordinary meaning of its words. 51 I agree with the contention of the Respondent that the terms of Clause 16 are quite clear. The clause is headed “Wage Rates”. It then refers to the classification definitions in clauses 13.1 and 13.2 (which set out what is expected of a store worker or clerical classification at the various grade levels). There is then the table that sets out the hourly pay rate to be paid on or after 1 August in 2010, 2011 and 2012. The remainder of the clause deals with the means of calculating the rate for part time employees and casual employees.
[30] It is clear when reading the table, what the hourly rates of pay are for each grade of the two classifications. It indicates the minimum rate employees must be paid at each level on and from a particular date. Most relevant to this dispute, the third column of the table clearly shows the rates to be paid on or after 1 August 2012. The ordinary meaning of the clause must be that an employee is entitled to be paid at least that amount that is specified.
[31] I do not accept the submission of the Applicant that ambiguity arises because there are two possible interpretations (One, that the rates may be the minimum that are paid or secondly, they might be the maximum rates that are to be paid). There is no basis to the argument that the rates represent a maximum amount to be paid either from an ordinary reading of the words or from the context. I agree with the Respondent’s submission that the agreement provides minimum conditions of employment, and in the case of Clause 16, minimum wage rates, that must be met by the Respondent. To suggest otherwise would go against the usual industrial context and legislative background for enterprise agreements to act as a negotiated set of minimum entitlements that render employees better off overall than they would be under the relevant award entitlements.
[32] Further, there is no ambiguity in the clause about how “over agreement” rates should be dealt with. Simply put, the agreement does not deal with the issue of over agreement payments, how wage increases are to be applied to them or whether there is to be absorption of wage increases. None of these factors are dealt with at all. The fact that they are not dealt with, does not give rise to ambiguity. It means simply that the terms of the agreement do not deal with the matter.
[33] Irrespective, of the consideration of the ordinary meaning of the words, the clause must be read in context. The history of negotiations for the Agreement, as well as the configuration of wages clauses in earlier predecessor agreements is important.
[34] The fact that the Respondent has paid the first two increases payable under the Agreement to the over agreement rates of the employees in question is also a significant factor. Similarly, the fact that the same practice was applied in earlier agreements, including the 2007 agreement where the wording was identical, is a strong contextual consideration. The industrial reality is that there was a long standing practice, and therefore not unreasonably an expectation from the Applicant and its members, that the practice would continue. The words of the clause are not to be interpreted in a vacuum divorced from this industrial reality. 52 However, notwithstanding this past practice, evidence of the conduct of the parties subsequent to the making of the award cannot be relied upon to construe it.53
[35] One must also consider evidence on the history of the various wages clauses in previous agreements. The explicit protection of wage increases from absorption in the 1993 and 1995 agreements was removed from subsequent agreements. Also, the references to the percentage increases to be paid were removed over time. The most recent agreements, the 2007 and the Agreement before me, rely entirely on the table of rates to regulate wages and do not deal at all with matters of over agreement payments. In this context, I do not consider that the history of changes in the wages clause supports the construction urged on me by the Applicant. To the contrary, the history of the wages clause is such that, in earlier times, they did provide a right to non absorption as well as referring generally to the quantum of percentage increases to be applied. The clause in the Agreement before me does none of those things.
[36] Ms. Tebutt gave evidence as to the circumstances surrounding the changes to the wages clause in 2001, citing a strategy of Ms. Barnsby to deal with the impact of “compounding”. I make clear I have placed no reliance on this evidence as it relies on me accepting evidence from Ms. Tebutt as to what may or may not have been in the mind of Ms. Barnsby at the time. Mr. Barnsby was not a witness in the case. However, the fact remains that the wages clauses have objectively changed, whatever the circumstances may have been and the history of those changes do not support the construction of the Applicant.
[37] Ms. Tebutt and Mr. Tully gave evidence that they were always clear in their view they could “red circle” the wages of those on over agreement rates. However, this has to be weighed against the claim made by the Respondent for a “red-circling” clause in the bargaining negotiations which was then withdrawn. It is clear the “red-circling” claim was put in as a “throwaway” item. Such a practice is well known to experienced negotiators. However, it is odd that Ms. Tebutt chose to put in such a claim when it was the view of Ms. Tebutt that she had the right to do what the claim would give her the right to do. However, while it may be odd, it does not provide a basis for a determination that there was a mutual intent to continue the practice of applying wage increases to actual rates. The evidence of Ms. Tebutt and Mr. Tully was clear that they have always maintained the view that they had the right to end the practice. There is insufficient evidence to conclude that there was a mutual intent of the parties to the agreement to continue the practice.
[38] In my view, what likely occurred was driven by the events referred to by Ms. Tebutt in August last year. There were redundancies and profit downgrades. There was a pursuit of cost savings. The wages agreement was closely examined by the company and there was an opportunity identified to limit the cost impact of the third wage increase by “red-circling” the wage increases on over agreement payments.
[39] In any case, whether I am correct in my assessment of the surrounding circumstances or not, it would not alter the correct interpretation of the clause. The clause is clear as to what it does and what it does not do. It is clear that it can be applied in the manner that the Respondent now seeks to apply it and the company could have applied the clause in that manner for the first two wage increases. The outcome of this construction will no doubt be considered by the Applicant to be unjust. However, “[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”. 54
[40] The union representatives involved in the negotiations had assumed that, in circumstances where the increases had always been applied to actual rates and the “red circling” claim was dropped, that the practice would continue, as it indeed did for the first two increases. However, while in the circumstances it was not fanciful for them to make that assumption, their understanding (regrettably no doubt from their point of view) does not align with the clear terms of the clause. Their assumption was misplaced. There is no fractured or illogical prose to be interpreted generously and liberally. Clause 16 is clear in its terms. As stated by French J in City of Wanneroo v Michael Lindsay Holmes 55;
“Awards, whether made by consent or otherwise, should make sense according to the basic conventions of the English language. They bind the parties on pain of pecuniary penalties.” 56
[41] It follows from the above reasoning that the answer to the question to be determined by me in this matter is NO.
Other matters: the No Extra Claims Clause
[42] The Applicant made the following written submission under the heading “Clause 7 No extra claims”;
“10. Quite apart from the approach to the meaning of clause 16 that should be adopted by the Tribunal, it is submitted that a failure to apply wage increases to the actual rates of pay of employees would be inconsistent with and a breach of clause 7 of the 2010 Agreement.
11. Generally, a no extra claims clause is designed to prohibit the making of claims for conditions outside of those already provided for by the relevant industrial instrument. By seeking to absorb wage increases into the actual rates of pay of employees, Warehouse Solutions is making a new, extra claim for a condition that it failed to negotiate an agreement for prior to the making of the 2010 Agreement.
12. Importantly, the terms of clause 7 are broad – the clause requires employees, the NUW and Warehouse Solutions not to “seek any changes to conditions of employment”. If it could be said that Warehouse Solutions is not pursuing an extra claim in the general sense (as outlined above), it is clear that it is pursuing a change to a condition of employment (that wage increases are applied to employees’ actual rates of pay). To permit this would be to permit a breach of clause 7 by Warehouse Solutions.” [Footnotes omitted]
[43] The no extra claims clause in the Agreement is at clause 7 and is reproduced below;
“7. NO EXTRA CLAIMS
It is agreed by the parties that for the duration of this agreement;
(a) the employees and the Union's covered will not pursue any extra wage claims, whether award or over award;
(b) the employees, the union and the employer will not seek any changes to conditions of employment;
(c) the agreement will cover all matters or claims regarding the employment of the employee, which could otherwise be the subject of protected actions pursuant to section 409 of the Fair Work Act 2009 (Cth); and
(d) neither the employees, nor any person covered by this agreement will engage in Industrial action including protected action to which section 409 of the Fair Work Act 2009 (Cth) could otherwise apply or any industrial action generally.”
[44] The Respondent in written submissions responded to the Applicant’s submissions on the application of the no extra claims clause as follows:
“54. With respect, there is no merit to this claim. If [the Commission] finds that the Respondent is entitled to "red-circle" wages for the reasons outlined above, then the corollary of this is that it is not pursuing an extra claim: it is simply doing what it is entitled to do. In such a circumstance, it would be the NUW that is seeking an extra claim and therefore it which is in breach of the 2010 Agreement. If [the Commission] finds that the Respondent is not entitled to "red-circle" wages then the terms of clause 7 will be irrelevant because the matter will have been determined.” 57
[45] During the Hearing, the Applicant clarified its submission to be that theno extra claims clause “prevents the employer from seeking to absorb certain over-agreement payments where individuals have an entitlement either contractual or under the agreement to those over agreement payments”. 58 In support of that submission the Applicant referred me to a number of decisions, “... that refer to what a no extra claims clause is, does and what it’s designed to do”.59 Those decisions were Melbourne Fire and Emergency Services Board v United Firefighter’s Union of Australia60; Electrolux Home Products Pty Ltd - Cooking Plant Dudley Park v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union61and Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Transfield Services (Australia) Pty Ltd.62
[46] The Applicant ultimately made it clear during the hearing that the application of the “No Extra Claims” clause revolves around three employees and relates specifically to the circumstances of those three employees and not the broader group. 63 Those three employees are Mr. Emery, Ms. Papergeorgiou and Ms Medancic. The reasoning for this claim relating to three employees only is that there is insufficient evidence before the Commission in relation to the other affected employees, to say that they have conditions of employment that are sought to be changed. However, for the three named above, it is said that there is sufficient evidence to make that finding.64
[47] In the case of Mr. Emery, the Applicant refers to the evidence that he is in receipt of a letter of offer which refers to an above award component of $15 per week non absorbable. Ms. Papageourgiou has a letter of offer with a reference to an above award payment of $50 per week. Ms Medancic was not receiving an over award or over agreement payment. The evidence, the Applicant submits, is that Ms. Medancic, as well as Ms. Papergeorgiou has a contractual entitlement to be a grade 5 store worker. 65
[48] The Respondent submits that in order for the Applicant to succeed with his argument on this point, he needs to at least prove that it was a term and condition of employment that the employees each receive each percentage wage increase on their actual rates of pay. The Respondent submits that;
“That has to be the term and condition that he’s saying to not be changed because that is what has changed and he doesn’t get past first base Commissioner, because there is no evidence of that in this case.” 66
[49] Mr. Proeitto on behalf of the Respondent provided a summary of the evidence on this point in respect of the three employees on transcript. 67 There is no need for me to reproduce that here.
[50] The Respondent, as well as submitting that there is no legal merit to the argument made by the Applicant, raises a broader point about whether the no extra claims clauses are really entitled to have the effect contended for by the Applicant.
[51] Having considered the submissions and evidence on the matter of the “No Extra Claims” provision, I am attracted to the submission of the Respondent that there is a real question as to whether the “No Extra Claims” clause has the effect contended for by the Applicant. In saying this I note that “No Extra Claim” clauses are commonplace in agreements and are not homogenous. Therefore, the effect of no extra claims clauses will of course vary depending on their terms. In the cases referred to above, the no extra claims clauses were all materially different. In the Melbourne Fire and Emergency Services Board v United Firefighter’s Union of Australia 68, the Commissioner considered the meaning of the no extra claims clause in that case in the context of the agreement as a whole.
[52] In the decision of Senior Deputy President O’Callaghan in Electrolux Home Products Pty Ltd - Cooking Plant Dudley Park v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union 69, when considering that particular no extra claims clause he stated, in applying an approach consistent with that of the Full Court of the Federal Court in Australian Industry Group v Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union70;
“It would be illogical to interpret these provisions such that they prohibited any change during the life of the agreement, where those changes are consistent with the specific entitlements and nominated conditions of employment and relate to management practices associated with the administration of these entitlements or conditions.” 71
[53] I agree with the approach of his Honour on this question. In this case, I have found that clause 16 enables pay increases to be applied in the manner contended by the Respondent. Therefore, it cannot be construed as an extra claim from the Respondent. It falls within the category of a management practice associated with the administration of the conditions.
[54] However, even if I am wrong on this point, the Respondent is correct that, in order for the Applicant to be successful with this argument, that there needs to be evidence that it was a term and condition of employment that the employees each receive percentage wage increases on their actual rates of pay. The summary of the evidence by Mr. Proeitto on behalf of the Respondent on this point 72was in my view accurate in respect to all three employees. The evidence shows that there may well be contractual entitlements of a slightly different character for all three employees. However, there is no evidence that it was a term and condition of employment that any of the three employees receive percentage wage increases on their actual rates of pay.
[55] I further note that it is possible that there is a contractual right for Ms Medanci and Mr Papageorgiou to continue to be paid at the specified rate in the Agreement on the basis of undertakings that the Respondent has made. Similarly, it is possible that Mr. Riches and Mr. Cunnigham have a contractual right to maintain their historical relativities. However, I agree with the submissions of the Respondent that determination of contractual entitlements is outside of the jurisdiction of this arbitration. 73
[56] In conclusion, for the above reasons I reject the contention of the Applicant that the “No Extra Claims” clause has the effect of providing a right to payment of pay increases to the three named employees actual rates of pay.
COMMISSIONER
Appearances:
D Mujkic on behalf of the National Union of Workers
D Proietto solicitor on behalf of the Respondent
Hearing details:
2013
Melbourne:
January 31
1 PN360-361
2 [2012] FWAFB 3994
3 Cape Australia Holdings Pty Ltd T/A Total Corrosion Control Pty Ltd v Construction, Forestry, Mining and Energy Union[2012] FWAFB 3994, [7] - [9]
4 [2012] FWAFB 3994
5 [2006] 153 IR 426
6 PN1200
7 [2012] FWAFB 3994
8 PN1208-1224
9 [2008] AIRC 291
10 Watson v ACT Department of Disability Housing and Community Services, [2008] AIRC 291, [15]
11 [2010] FWAFB 4801
12 The Australian Workers’ Union v Co-operative Bulk Handling Limited, [2010] FWAFB 4801, [14]
13 (1998) 80 IR 345
14 Australian Municipal, Administrative, Clerical and Services Union v The Treasurer (Cth) and others, (1998) 80 IR 345 at 347
15 (1993) 40 FCR 511
16 Short v FW Hercus Pty Limited (1993) 40 FCR 511 at 518
17 PN1074
18 (1993) 40 FCR 511
19 (1998) 80 IR 345
20 [2012] FWAFB 3994
21 (2005) 139 IR 141
22 Community and Public Sector Union v Telstra Corporation Ltd, (2005) 139 IR 141, [42]
23 (1998) 80 IR 345
24 Australian Municipal, Administrative, Clerical and Services Union v The Treasurer (Cth) and others (1998) 80 IR 345 at 347
25 Respondent’s outline of Submissions, filed 21 December 2012, [6] - [7]
26 PN740 - 741
27 PN 955
28 PN956
29 PN1013
30 PN125
31 PN611
32 Witness Statement of Gary Stutz, [6]
33 PN591
34 Witness Statement of Mr Gary Stutz, [10]
35 PN572
36 PN233
37 PN569
38 Witness Statement of Louise Tebbutt, [16]
39 PN362 - 365
40 PN111
41 Witness statement of Ian Emery, [13]
42 PN169
43 Witness Statement of Louise Tebutt,, [22]
44 PN233
45 PN227
46 PN228
47 Witness Statement of Mr Gary Stutz, [16]
48 Statement of Louise Tebutt, [23]
49 PN105 - 106
50 PN188
51 City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union, [2006] 153 IR 426, [53]
52 Re City of Wanneroo v Michael Lindsay Holmes [1989] FCA 369, [43]
53 Re City of Wanneroo v Michael Lindsay Holmes [1989] FCA 369, [43]
54 Kucks v CSR Limited (1996) 66 IR 182 at 184
55 [1989] FCA 369
56 Re City of Wanneroo v Michael Lindsay Holmes, [1989] FCA 369, [47]
57 Respondent’s outline of submissions, [54]
58 PN940
59 PN929
60 PR956379, 10 March 2005, Ross VP, Hamilton DP, Tolley C.
61 PR945299, 5 April 2001, SDP O’Callaghan
62 [2012] FWA 1585
63 PN1169 - 1170
64 PN1174
65 PN940-952
66 PN1151
67 PN1154-1159
68 PR956379, 10 March 2005, Ross VP, Hamilton DP, Tolley C.
69 PR945299, 5 April 2001, SDP O’Callaghan
70 [2003] FCAFC 183
71 Electrolux Home Products Pty Ltd - Cooking Plant Dudley Park v Automotive, Food, Metals , Engineering, Printing and Kindred Industries Union, PR945299, 5 April 2004, SDP O’Callaghan, [52]
72 PN1153-1159
73 Respondent’s outline of submissions, [3], [49]-52],
Printed by authority of the Commonwealth Government Printer
<Price code C, AE879696 PR537358>
0