New Oakleigh Coal Pty Ltd
[2014] FWCA 3452
•23 MAY 2014
[2014] FWCA 3452 |
FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
New Oakleigh Coal Pty Ltd
(AG2014/658)
NEW OAKLEIGH COAL ENTERPRISE AGREEMENT 2014.
Coal industry | |
COMMISSIONER LEWIN | MELBOURNE, 23 MAY 2014 |
Application for approval of the New Oakleigh Coal Enterprise Agreement 2014.
Application for approval of the New Oakleigh Coal Enterprise Agreement 2014 - Long Service Leave - statutory considerations -- payment on termination - Individual Flexibility Agreements - interaction of Agreement with Federal Law - Accident Pay - better off overall test.
Introduction
[1] This decision concerns an application for approval of the New Oakleigh Coal Enterprise Agreement 2014 (the Agreement), made under s.185 of the Fair Work Act 2009 (the Act).
[2] The Agreement was made on 17 March 2014. The application for approval of the Agreement was made on 24 March 2014. On 7 April 2014, the Construction, Forestry, Mining and Energy Union (the CFMEU) filed a Form F18 in relation to the application, opposing the approval of the Agreement.
[3] On 12 May 2014, the Australian Manufacturing Workers’ Union (AMWU) filed a Form F18 supporting the approval of the Agreement. However, subsequently, the AMWU withdrew their support and filed a new Form F18 opposing approval of the Agreement.
[4] Both the CFMEU and the AMWU were bargaining representatives for the Agreement.
[5] The CFMEU raised three objections to the approval of the Agreement, all of which concern the operation of the terms of the Agreement. No issue concerning the pre-approval steps for the making of the Agreement were raised. The AMWU supported the CFMEU’s objections.
[6] The matter was originally allocated to Deputy President Asbury, however, the Deputy President could not deal with the application due to an absence of leave. On 14 April 2014, the matter was allocated to me and a hearing of the application and the objections of the CFMEU and the AMWU was held at Brisbane on 14 May 2014.
[7] Prior to the hearing the Commission issued directions for the filing of written submissions by the CFMEU and New Oakleigh Coal Pty Ltd (New Oakleigh).
[8] In the written submissions filed by the CFMEU, three issues were identified for consideration by the Commission. They concern the following:
1. The operation of the terms of the Agreement in relation to payments to be made to employees in respect of accrued long service leave at termination of employment.
2. The provisions for termination of Individual Flexibility Agreements provided for by the terms of the Agreement.
3. The level of entitlements to Accident Pay as prescribed by the Agreement and the relevant Modern Award for the purposes of the better off overall test prescribed by s 193 of the Act.
Individual Flexibility Agreements
[9] In the written submissions filed by New Oakleigh and at the hearing on 14 May 2014, New Oakleigh informed the Commission that it would provide an undertaking in relation to the issue raised concerning the termination of Individual Flexibility Agreements, made under Clause 11 - Flexibility, of the Agreement. The undertaking is in the following terms:
- Clause 19 of the Agreement should be read as referring to Schedule 2.3 of the Fair Work Regulations 2009; and
- Clause 14 of the Agreement will be applied consistent with s.87(2) of the Fair Work Act 2009.
New Oakleigh Coal Pty Ltd undertakes that:
[10] Clause 11 of the Agreement provides that Individual Flexibility Agreements may be terminated on not more than 13 weeks’ notice. New Oakleigh concedes that this provision is not compliant with the relevant provisions of the Act, whereby such agreements must be able to be terminated on notice, by either an employee or the employer giving notice of not more than 28 days. 1
[11] The undertaking of New Oakleigh remedies the deficiency in Clause 11 indentified by the CFMEU. As it will not cause any employee financial detriment or result in substantial changes to the terms of the Agreement, I accept the undertaking and it will become a term of the Agreement pursuant to s.191 of the Act.
Long Service Leave - Discussion
[12] The Agreement provides terms in relation to Long Service Leave entitlements of employees.
[13] New Oakleigh and its employees are engaged in the industry of Black Coal Mining. The Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth) (the LSL Act) applies to New Oakleigh and its employees. The LSL Act includes terms regulating payment for long service leave taken and for accrued long service leave entitlements at cessation of eligible employee status under its provisions, which can arise at the termination of employment.
[14] The CFMEU and the AMWU submit that the term of the Agreement which prescribes payment for long service leave “on termination” provides that payment will be made at a rate which is inferior to what is required under the LSL Act.
[1] It is appropriate to set out the relevant terms of the Agreement.
14.2 LONG SERVICE LEAVE
Employees will accrue log service leave at the rate of 13 weeks after eight years of continuous service as recognised by the relevant fund within the coal mining industry. Employees are eligible to take long service leave after they have accrued 13 weeks and have the consent of New Oakleigh. Long Service Leave taken during employment will be paid at the Employee’s Total Salary rate.
The accrual, taking and payment for long service leave will be subject to approval by New Oakleigh and the Long Service Leave Corporation. Any payment required to be made on termination in accordance with the fund rules will be paid at the Employee’s Base Salary rate.
Where an Employee works a roster that does not require work on public holidays, no deduction from their long service leave balance will be made for a public holiday that occurs during the leave.
Where an Employee works a roster that does require work on public holidays, and compensation has been included in Total Salary, a deduction from their long service leave balance will be made for a public holiday that occurs during the leave. Compensation for working Christmas Day (25th December) and Boxing Day (26th December) have not been included in the Total Salaries listed in this Agreement.
[2] The written submissions of the CFMEU are not lengthy and may be conveniently reproduced:
LONG SERVICE LEAVE
2. Clause 14.2 of the proposed agreement provides for long service leave ("LSL") entitlements. The entitlement to LSL must be read with regard to the relevant Long Service Leave legislation. In this instance, the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth) ("the LSL Act") applies to employees covered by the proposed agreement.
3. Specifically s.39EB of the LSL Act states:
“This Part establishes minimum entitlements and rights in respect of long service leave for an eligible employee and is not intended to override entitlements or rights in respect of long service leave under an industrial instrument that covers the employee.”
4. Paragraph 1 of clause 14.2 of the proposed agreement allows employees who take LSL whilst employed to be paid at their "total salary rate."
5. However, paragraph 3 of the proposed agreement relates to LSL payments for employees upon termination of employment and states "any payment required to be made on termination in accordance with the fund rules will be paid at the employee's Base Salary Rate."
6. The Union submits that clause 14.2 paragraph 3 of the proposed agreement is inconsistent and unclear. This clause states that the employer will pay employees upon termination in accordance with the "fund rules" but then goes on to state that this payment will be at the base rate.
7. The Union refers to s.39C of the LSL Act which states, inter alia, that if an employer ceases to be an eligible employee, the employer must:
"...pay the employee no less than the amount that would have been payable to the employee under this Part had the employee taken that period of long service leave immediately before ceasing to be an eligible employee..."
8. The Union submits that the "fund rules," as per s.39C of LSL Act, clearly state thatpayments of LSL upon termination must be paid as if the employee had taken the leave "immediately before ceasing to be an eligible employee," ie at the employees total salary rate as per paragraph 1 of clause 14.2.
9. The Union submits that this clause is inconsistent and unclear as it appears to provide two different rates of pay (total salary rate or base salary rate) that LSL accruals must be paid at upon termination.
10. Whilst the LSL Act does not override provisions of an agreement, it does provide a minimum entitlement that must be met regarding the LSL standard for eligible employees and contains civil penalty provisions for people who contravene parts of the Act.
11. The Union submits that if the clause was read so that the employer was required to pay an ex-employee who was no longer an eligible employee LSL at their base rate, the employer would be paying an employee at a rate that is below the minimum entitlement in s.39C and would therefore be in contravention the LSL Act.
12. The Union submits that s.39C of the LSL Act is a civil remedy provision for which pecuniary penalties apply.
13. Therefore, if the employer was to pay an employee at their base rate and not their total salary rate under clause 14.2, they would be contravening s.39C of the LSL Act and could be ordered to pay a pecuniary penalty.
14. The Union refers to s.192(1) of the Act which states:
(1) If an application for the approval of an enterprise agreement is made under section 185, the FWC may refuse to approve the agreement if the FWC considers that compliance with the terms of the agreement may result in:
a. A person committing an offence against a law of the Commonwealth; or
b. A person being liable to pay a pecuniary penalty in relation to a contravention of a law of the Commonwealth.
15. Under such circumstances the Union submits that clause 14.2 paragraph 3 must be read in accordance with s.39C and pay employee their total salary rate because if it is read to pay employees their base rate then the employer would be in contravention of s.39C and could be ordered to pay a pecuniary penalty.
16. The Union submits that if employer submits that the clause is read to be paid at the base salary rate then, as per s.192 of the Act, the FWC can and should refuse to approve the agreement.
17. Alternatively, if the employer was to provide undertakings in relation to clause 14.2 stating that:
Upon termination, employees who request to be paid accrued LSL as per clause 14.2 of the agreement, shall be paid at their "total salary rate" and not their "base rate."
Then the Union would not press to have the agreement be refused approval by the FWC.
[3] In response, New Oakleigh submits as follows:
LONG SERVICE LEAVE
CFMEU Submission 2: New Oakleigh Coal agrees that Clause 14.2 of the proposed agreement provides for long service leave (“LSL”) entitlements and that the entitlement for LSL is contained in the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth) (“the LSL Act”). Furthermore, the minimum entitlement that can be applied is that as contained in the LSL Act.
CFMEU Submission 3: New Oakleigh agrees that s.39EB of the LSL Act establishes the minimum entitlements and rights in respect of long services leave for an eligible employee and it is not intended to override entitlements or rights in respect of long service leave under an industrial instrument that covers an employee.
CFMEU Submission 4: New Oakleigh agrees that paragraph 1 of Clause 14.2 of the proposed Agreement allows employees who take LSL whilst employed to be paid at their “total salary rate”.
CFMEU Submission 5: New Oakleigh does not agree that paragraph 3 of the proposed Agreement deals with the LSL payment to employees upon termination. Rather, New Oakleigh submits that paragraph 2 of the proposed Agreement deals with the LSL payment to employees upon termination and that payment will be paid at “base salary rate”.
CFMEU Submission 6: New Oakleigh submits that the CFMEU, as per CFMEU Submission 5 response above, is referring to paragraph 2 of the proposed Agreement and further submits that this paragraph is not unclear as the intent of the clause is to outline the payment rate on termination where an employee has met the minimum entitlement to payment “in accordance with the fund rules”. Clarification on the fund rules relating to the rate of payment is outline in New Oakleigh’s response to CFMEU submission 8.
CFMEU Submission 7: New Oakleigh agrees with the CFMEU’s submission in relation to s.39C of the LSL Act.
CFMEU Submission 8: New Oakleigh submits that s.39C of the LSL Act as contained in Part 5A deals with the payment of LSL on cessation of employment and provides that, if an employee qualifies for LSL, and makes a written request to their employer, the employer must:
“[...] pay the employee no less than the amount that would have been payable to the employee under this Part had the employee taken that period of long service leave immediately before ceasing to be an eligible employee [...]”. (emphasis added)
New Oakleigh submits that the meaning of “under this Part” in s.39C, is referring to the approach undertaken in s.39AC of Part 5A of the LSL Act.
Section 39AC of the LSL Act provides for payment of LSL at base rate which includes incentive-based payments and bonuses that are ordinarily payable to an employee on (at least) a monthly basis. New Oakleigh does not pay incentive-based payments and bonuses on a monthly basis or any sooner bases therefore the payment required to be made by New Oakleigh is base rate either during employment or on cessation of employment.
Clause 14.2 of the proposed Agreement makes provisions for long service leave on termination at base rate. Whilst New Oakliegh pays in excess of its obligations during service by paying LSL at Total Salary, the minimum obligation to be paid on termination of employment is base rate. Therefore Clause 14.2 of the proposed Agreement is in accordance with the minimum entitlements required to be paid under the LSL Act.
New Oakleigh submits that the words “under this Part” would not have been included in s.39C of the LSL Act if it was not meant to be read in conjunction with s29AC of Part 5A.
CFMEU Submission 9: New Oakleigh submits that Clause 14.2 is not inconsistent and unclear as the clause meets the minimum requirements of the LSL Act. Furthermore, the clause is very clear that one rate applies to LSL taken during service and one rate applies to LSL paid on termination.
CFMEU Submission 10: New Oakleigh agrees with the CFMEU’s submission.
CFMEU Submission 11: As contained in New Oakleigh’s response to the CFMEU Submission 8, New Oakleigh submits that it is not in contravention of s.39C of the LSL Act.
CFMEU Submission 12: New Oakleigh agrees with the CFMEU’s submission that s.39C of the LSL Act is a civil remedy provision.
CFMEU Submission 13: New Oakleigh submits that it does not agree that paying base rate for LSL on termination would contravene s.39C of the LSL Act as outlined in New Oakleigh’s response to CFMEU Submission 8.
CFMEU Submission 14: New Oakleigh agrees with the CFMEU’s position in relation to s.192(1) of the Act.
CFMEU Submission 15: New Oakleigh submits that it is not in contravention of s.39C of the LSL Act (refer CFMEU Submission 8 response) and therefore should not be ordered to pay a pecuniary penalty.
CFMEU Submission 16: New Oakleigh does not agree with the CFMEU’s submission and further submits that the FWC should approve the proposed Agreement because it is compliant with the LSL Act (refer CFMEU Submission 8 response).
CFMEU Submission 17: New Oakleigh Coal submits that it would not be willing to make an undertaking in relation to this matter.
Consideration - Long Service Leave
[4] No doubt an employee taking long service leave will be entitled, by the operation of Clause 14.2 of the Agreement, to payment at “the Employee’s Total Salary rate”, which is properly characterised as a higher rate than an employee’s “base rate” applicable when long service leave entitlements become payable on cessation.
[5] As submitted by New Oakleigh, the provisions of the LSL Act which prescribe the amount payable when an employee takes long service leave are prescribed by s.39AC of the Act as follows:
39AC Payment for long service leave
(1) If an eligible employee takes a period of long service leave, the employer must pay the employee for the long service leave no less than an amount that is equal to the base rate of pay (including incentive-based payments and bonuses) that would have been payable to the employee during the period had the employee not taken the leave.
(2) Subsection (1) is a civil penalty provision.
Note 1: Part 7A provides for pecuniary penalties for contraventions of civil penalty provisions.
Note 2: Division 4 of this Part provides other remedies for contraventions of civil penalty provisions.
(3) In this section:
(a) a reference to the base rate of pay payable to an employee is a reference to the employee’s base rate of pay before any amounts are deducted under a salary sacrifice arrangement; and
(b) a reference to an incentive-based payment in relation to an employee is a reference to a payment of that kind that is paid to the employee at least once a month; and
(c) a reference to a bonus in relation to an employee is a reference to a bonus that is paid to the employee at least once a month.
[6] The provisions of s. 39C of the Long Service Leave Act which provide for Long Service Leave payment “on cessation” are as follows:
39C Payment on cessation—general
Payment to employee
(1) If:
(a) an employee ceases to be an eligible employee (other than by death); and
(b) at the time of so ceasing, the employee has a period of untaken long service leave under this Part; and
(c) at any time after so ceasing, the employee requests the employer, in writing, to make a payment under this section;
the employer must, within 30 days after the request is made, pay the employee no less than the amount that would have been payable to the employee under this Part had the employee taken that period of long service leave immediately before ceasing to be an eligible employee, less any amount previously paid to the employee under this section.
Payment to legal personal representative
(2) If:
(a) the employee dies without making a request under subsection (1) in respect of a period of untaken long service leave; and
(b) at any time after the employee’s death, the employee’s legal personal representative requests the employer, in writing, to make a payment under this section;
the employer must, within 30 days after the request is made, pay the employee’s legal personal representative no less than the amount that would have been payable to the employee under subsection (1) as if the employee had made a request under that subsection in respect of all the untaken long service leave.
(3) Subsections (1) and (2) are civil penalty provisions.
Note 1: Part 7A provides for pecuniary penalties for contraventions of civil penalty provisions.
Note 2: Division 4 of this Part provides other remedies for contraventions of civil penalty provisions.
[7] It seems to me that the CFMEU and the AMWU should be understood to submit that, because Clause 14.2 of the Agreement provides a higher rate than an employee’s base rate, when LSL is taken, (i.e. the Employees Total Salary rate) the effect of s.39C of the LSL Act overrides the provisions of s39AC thereof so as to confer upon employees of New Oakleigh, who are entitled to long service leave payment at cessation of their employment, the right to be paid at “the Employee’s Total Salary rate” as prescribed by Clause 14.2 of the Agreement.
[8] In my view this submitted interaction between the terms of the LSL Act and the Agreement is misconceived.
[9] In my view, the proper construction of s39C of the LSL Act is that at cessation it prescribes that an employee be paid no less than the amount prescribed by s39AC thereof, the employees base rate, in respect of accrued long service leave, and in accordance with relevant other provisions of the LSL Act.
[10] The provisions of Clause 14.2 of the Agreement in relation to the right of employees who take long service leave while in employment to be paid at “the Employee’s Total Salary rate” is an additional and more favourable entitlement prescribed by the Agreement, above the minimum entitlement prescribed by s.39AC of the LSL Act.
[11] S39C makes it clear, by the use of the words “under this Part” that the entitlement to payment on cessation is the entitlement to be paid for accrued long service leave at the rate prescribed by s.39AC. Both section 39C and 39AC appear in Part 5A of the LSL Act.
(emphasis added)
[12] The LSL Act also makes clear from its Object and its provisions in relation to other laws and industrial instruments, that the benefits it provides are minimum entitlements and rights in respect of long service leave.
[13] S 3 of the LSL Act is set out below:
3 Object
The main object of this Act is to make provision in relation to long service leave in the black coal mining industry by:
(a) establishing a Coal Mining Industry (Long Service Leave Funding) Corporation; and
(ab) providing minimum entitlements and rights in respect of long service leave for eligible employees; and
(b) requiring the Corporation to establish and maintain a Coal Mining Industry (Long Service Leave) Fund and to make payments out of the Fund to employers in the industry to reimburse them for payments made in respect of long service leave; and
(c) appropriating money for the purposes of the Fund in respect of the amounts of payroll levy paid by employers under the Coal Mining Industry (Long Service Leave) Payroll Levy Collection Act 1992.
[1] Division 5 of Part 5A of the LSL Act is as follows:
Division 5—Relationship with other laws and industrial instruments
39E Relationship with the National Employment Standards
Despite section 61 of the Fair Work Act 2009, this Part applies in relation to eligible employees and their employers to the exclusion of Division 9 of Part 2-2 of that Act.
39EA Relationship with State and Territory long service leave laws
This Part applies in relation to eligible employees and their employers to the exclusion of a State or Territory law that deals with long service leave.
39EB Relationship with industrial instruments
This Part establishes minimum entitlements and rights in respect of long service leave for an eligible employee and is not intended to override entitlements or rights in respect of long service leave under an industrial instrument that covers the employee.
(emphasis added)
[2] As employees would be entitled under the term of Clause 14.2 of the Agreement to be paid no less than the minimum provisions of the LSL Act at termination, I do not consider that New Oakleigh would be committing an offence against the LSL Act when complying with the terms of Clause 14.2 of the LSL Act, and therefore be liable to pay a pecuniary penalty in relation to a law of the Commonwealth, as submitted by the CFMEU and the AMWU. Consequently, in my view, the discretionary power to refuse approval of the Agreement under s.192, as submitted by the CFMEU and the AMWU, does not arise.
Conclusion - Long Service Leave
[3] For the same reasons as set out above, I conclude that the Agreement prescribes long service leave entitlements that are more beneficial than those which would apply if the employment of the employees, whose employment would be covered by the Agreement, were subject to the application of the Black Coal Mining Industry Award 2010 (the Award).
[4] The Award does not provide for long service leave. However, if the Agreement did not apply to the relevant employees and the Modern Award did apply, so too would the LSL Act. This is a broad view of the provisions of s.193 of the Act and the operation of the better off overall test. Notwithstanding, either on a narrow or a broad view of that test, the long service leave provisions of the Agreement are more beneficial than those of the two statutory instruments which would operate if the Modern Award applied to the relevant employees.
Accident Pay - better off overall test
[5] I have considered the submissions of the AMIEU in relation to the Accident Pay provisions of the Agreement.
[6] Analysis of the effect of relevant terms of the Agreement was conducted by the Commission’s Enterprise Agreement Unit. That analysis was provided to the parties and an opportunity to make submissions in relation to the analysis was allowed. Neither party sought to make such submissions. The analysis indicated that an injured employee would be better off under the terms the Agreement than if the Award applied.
[7] In my view, the accident pay benefit prescribed by the Agreement must be considered as part of a global assessment of the application of the terms of the Agreement to the circumstances of an employee whose employment is covered by its terms and compared to the circumstances which would arise if the Award applied.
[8] The Agreement provides significantly higher rates of pay than the Award and prescribes other additional benefits. In my judgement, the likely negative impact of the terms of the Agreement prescribing accident pay is marginal, if any and would be significantly offset, to an employee’s advantage, by other terms of the Agreement if there were any deficit in specifically comparable circumstances where Accident Pay was payable to an employee.
[9] Additionally to the analysis referred to, I am of the view that an employee injured on day one of the operation of the Agreement would receive more by way of income from the combination of workers compensation entitlements and accident pay if the Agreement applied, than if the Award applied over the 78 week period of entitlement to accident pay prescribed by the Award.
[10] Having considered all of the terms of the Agreement and using the modelling provided to the parties in relation to the operation of the Accident Pay provisions of the Award, I am satisfied that the Agreement passes the better off overall test.
[11] The CFMEU and the AMWU gave notice in the F18 pursuant to s183 of the Act that they want to be covered by the Agreement if it is approved.
[12] The Agreement was made in accordance with the requirements of the statute and employees whose employment will be covered by the Agreement will be better off overall than if the Award applied. Accordingly, the Agreement with the undertaking appended hereto is approved. In accordance with s.54 of the Act, the Agreement will operate from 7 days from date of signing. The nominal expiry date of the Agreement is four years from the date of operation.
COMMISSIONER
APPENDIX A
Re: AG2014/658 – New Oakleigh Coal Pty Ltd Undertakings
New Oakleigh Coal Pty Ltd undertakes that:
• Clause 19 of the Agreement should be read as referring to Schedule 2.3 of the Fair Work
Regulations 2009; and
• Clause 14 of the Agreement will be applied consistent with s.87(2) of the Fair Work Act
2009.
Should you require any clarification of these undertakings, please do not hesitate to contact Mrs
Karen Janz, Senior HR Advisor, on telephone (07) 3418 0500.
Yours faithfully,
NEW OAKLEIGH COAL PTY LTD
Aaron Athorn
Senior HR Advisor
1 s.145 Fair Work Act 2009 (Cth).
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