Nicholas Mcwhirter & Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Endeavour Energy Network Management Pty Ltd
[2017] FWCFB 4493
•9 OCTOBER 2017
| [2017] FWCFB 4493 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.604—Appeal of decision
Nicholas Mcwhirter & Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
v
Endeavour Energy Network Management Pty Ltd
(C2017/3806)
| Vice President Catanzariti | SYDNEY, 9 OCTOBER 2017 |
Appeal against decision [2017] FWC 57 of Deputy President Dean at Sydney on 21 June 2017 in matter C2016/1631 – dispute over long service leave provision in enterprise agreement – whether interpretation correct – error in construction – appeal upheld.
Mr Nicholas McWhirter and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (“the Appellants”)[1] have lodged an appeal against a decision[2] issued by Deputy President Dean concerning the interpretation of long service leave provisions in the Endeavour Energy Enterprise Agreement 2012 (“the Agreement”).
The decision concerned an application made by the Appellants under the disputes procedure in clause 29.1 of the Agreement, by which the Appellants contended that Endeavour Energy Network Management Pty Ltd (“the Respondent”) had incorrectly applied clause 15 and Annexure D of the Agreement in calculating his long service leave entitlement.[3]
The Appellants sought a determination from the Commission that Mr McWhirter’s accrued long service leave be calculated in “weeks” not “hours” and that the correct amount of long service leave be calculated.[4]
There was some debate between the parties as to the question that the Deputy President should answer. The Deputy President concluded that answering the following questions would resolve the dispute between the parties:
“Is the period of long service leave of Mr McWhirter from 4 March 1986 (being his start date) to 21 January 2013 (being the date he moved from a 36 hour week to a 40 hour week), (the 36 hour week period), paid at:
a) long service weeks (being 52.9) x current weekly rate of pay (current as at the date of taking/being paid for the leave) OR
b) long service weeks (being 52.9) x current hourly rate of pay (current as at the date of taking/being paid for the leave) x 36”.[5]
The Deputy President decided that the answer to the question was (b), as contended by the Respondent.[6] The Appellants contended that the Deputy President’s interpretation of the Agreement was incorrect.
In their written submissions to the Full Bench, the Appellants submitted that the question posed for determination by the Deputy President did not address the matter in dispute.[7] However, the notice of appeal did not contend that the wrong question had been answered. In any event, based on our review of the materials, including the transcript of proceedings at first instance,[8] we consider that the question posed for determination by the Deputy President did address the dispute between the parties.
Background
Mr McWhirter commenced employment with Endeavour in 1986 and worked a 36 hour week. On 21 January 2013, he became a supervisor. Since that time he has worked a 40 hour week.
Mr McWhirter’s employment is covered by the Agreement. The Agreement provides for full-time employment based on either a 35 hour week or a 36 hour week. Appendix D to the Agreement lists a number of documents, including one entitled “IE Supervisory Employees Workplace Arrangement 2003” (the Workplace Arrangement).[9] This document sets out conditions applicable to supervisory employees. It provides that supervisors work a 40 hour week. We note that, although the Workplace Arrangement is not appended to the Agreement, the parties agreed that it forms part of the Agreement.[10]
Mr McWhirter continues to work a 40 hour week as a supervisor. He has not taken any long service leave and has been a full-time employee for the duration of his employment.[11]
It was not contested that the relevant provisions of the dispute resolution procedure in the Agreement had been followed, and that the Deputy President was authorised by the procedure to arbitrate the dispute.[12]
Terms of the Agreement
The dispute centres on the interpretation of two provisions in the Agreement that relate to long service leave.
Clause 15.1 of the Agreement makes provision for the quantum of long service leave in the following terms:
| BASIS OF ACCRUAL | QUANTUM | |
| After 10 years | 13 weeks | 455 hours or 468 hours |
| After 15 years | An extra 8.5 weeks | 297.5 hours or 306 hours |
| After 20 years | An extra 13.5 weeks | 472.5 hours or 486 hours |
| After each additional 5 years | An extra 13 weeks | 455 hours or 468 hours |
The hours in brackets in the right hand column correspond to the number of weeks in the middle column, expressed as hours, for employees working 35 and 36 hour weeks respectively. Thus, after 10 years, an employee has 13 weeks leave. For an employee working a 35 hour week, this will equate to 455 hours of leave. For an employee working a 36 hour week, it will equate to 468 hours of leave.
Clause 14 of the Workplace Arrangement deals with leave accruals of supervisors, who work a 40 hour week. It provides as follows:
“Leave accrued in relation to annual and long service leave, by Supervisory employees will be based on a 40 hour week.
Full time employees whose working hours increase as a result of appointment to this Arrangement will have their annual leave accrued balances adjusted to reflect their new working arrangements. Any subsequent reduction in working hours will result in the above adjustment (in hours) being reversed. There will be no further adjustments to any other leave types as a result of appointment to this arrangement.”
The parties agreed that, based on his length of service, Mr McWhirter had 61 weeks of long service leave.[13] However, Mr McWhirter’s long service leave “balance” indicated on his payslip is expressed in hours; when this is divided by 40, it equates only to 55.75 weeks long service leave. This reflects the Respondent’s position that long service leave accrues in hours, according to the number of hours the employee works at the relevant time. The Respondent contended that, in respect of the period when Mr McWhirter worked a 36 hour week (between 1986 and 2013), long service leave accrued on the basis of a 36 hour week. The Respondent submitted that only since Mr McWhirter became a supervisor in 2013 has his long service leave accrued on the basis of a 40 hour week.
The Appellants asserted that long service leave accrues in weeks. The Appellants contended that the hours in brackets in clause 15.1 are illustrative only, and are not intended to constitute the basis for payment during long service leave. On the Appellants’ interpretation, any and all long service leave Mr McWhirter takes now should be taken at his current rate of pay and reflect a 40 hour week.
The Respondent contended that clause 14 of the Workplace Arrangement provides a special arrangement for long service leave accruals for supervisors. The Respondent submitted that according to this provision, it is only leave accrued as a supervisor (working 40 hours per week) that will be based on 40 hours per week. Leave accrued prior to 21 January 2013, before he commenced working 40 hours a week, accrued on the basis of 36 hours per week.
Returning to the question framed by the Deputy President, it is evident that the parties agreed upon the basis of calculating Mr McWhirter’s long service leave entitlement in respect of the period since he has been working 40 hours a week. The question is whether his current 40 hour a week working arrangements mean that all of his long service leave is to be calculated on the basis of 40 hours a week.
Permission to Appeal
An appeal under s.604 of the Fair Work Act 2009 (Cth) (“the FW Act”) is an appeal by way of rehearing and the Commission’s powers on appeal are exercisable only if there is error on the part of the primary decision maker.[14] Unless an enterprise agreement provides otherwise, there is no right to appeal, and an appellant must seek the permission of the Commission.[15] Subsection 604(2) requires the Commission to grant permission to appeal if satisfied that it is “in the public interest to do so”. Permission to appeal may otherwise be granted on discretionary grounds.
The task of assessing whether the public interest test is met is a discretionary one involving a broad value judgment.[16] The public interest is not satisfied simply by the identification of error, or a preference for a different result.[17] In GlaxoSmithKline Australia Pty Ltd v Makin a Full Bench of the Commission identified some of the considerations that may attract the public interest:
“… the public interest might be attracted where a matter raises issues of importance and general application, or where there is a diversity of decisions at first instance so that guidance from an appellate court is required, or where the decision at first instance manifests an injustice, or the result is counter intuitive, or that the legal principles applied appear disharmonious when compared with other recent decisions dealing with similar matters …”[18]
Other than the special case in s.604(2), the grounds for granting permission to appeal are not specified. Considerations which have traditionally been treated as justifying the grant of permission to appeal include that the decision is attended with sufficient doubt to warrant its reconsideration and that substantial injustice may result if leave is refused.[19]
The notice of appeal contended that it was in the public interest for permission to appeal to be granted. A number of grounds were advanced in support of this contention, including that the appeal raises issues of importance and general application, and that the decision manifests an injustice.
However, clause 29.2 of the Agreement enables the parties to refer a dispute, at the relevant stage (“Tier 3”), to the Commission for arbitration, with the “rights of the parties to appeal being reserved”. The parties’ submissions briefly addressed the question as to whether this provision confers on the parties an appeal as of right under the Agreement, without the requirement to seek leave.[20]
The wording of clause 29.2 is similar to the provision that was considered by a Full Bench of the Commission in Silcar.[21] In that case, the Bench concluded that, where the parties have “conferred a ‘right’ of appeal, this language suggests an intention that the appeal be as of right (that is, without the need for permission to appeal) but otherwise in accordance with the appeal processes in the Act.” In the present case, the right of appeal is expressed as being “reserved”. On one view, this conveys that the right is one that already exists under the statute, rather than one created by the Agreement, and the parties have “reserved” the right. However, in our view, it is quite clear that s.604 does not create any right to appeal. It allows appeals only with permission. We, therefore, consider that clause 29.2 of the Agreement does confer a right of appeal in the sense contemplated by the Full Bench decision in Silcar, and that it is not necessary for the Appellants in this case to seek permission of the Commission to appeal under s.604.
In CEPU v Endeavour Energy,[22] a Full Bench granted permission to appeal from a decision made pursuant to clause 29.2 of the Agreement. There does not appear to have been any discussion about whether clause 29.2 afforded a separate right of appeal. In a subsequent application to a Full Court of the Federal Court,[23] it appears that this issue was raised[24] but not determined.
We would note that, even if the Agreement had not provided for a right of appeal, we would have granted permission to appeal on the basis that the decision is attended with sufficient doubt to warrant its reconsideration.
Grounds of Appeal
The approach of a Full Bench to the determination of an appeal depends on the nature of the decision below. In the present case, the Deputy President was resolving a dispute that involved the interpretation of an enterprise agreement. The task of determining the proper interpretation of the Agreement did not involve the exercise of discretion. Accordingly, the Full Bench must determine whether the interpretation of the Agreement adopted by the Deputy President was correct.[25]
There are five grounds set out in the notice of appeal. We deal with these in turn below.
First, it is contended that the Deputy President made a decision in regard to a matter that occurred prior to the commencement of the operation of the Agreement. In this regard, the question that the Deputy President set out to answer related to the period of Mr McWhirter’s employment between his commencement in March 1986 and his assumption of a supervisory role in January 2013. The Appellants submitted that the decision was outside the limits of the functions and powers conferred on it pursuant to s.739 of the FW Act to make a binding decision pursuant to the dispute resolution procedure in clause 29.3 in the Agreement, which commenced to operate only in May 2013.
We do not see any merit in this ground. The Agreement deals with employees’ entitlements to long service leave. It sets out a quantum of leave to which employees will be entitled after certain periods of service, including after 20 years and each additional 5 years. The dispute before the Deputy President related to Mr McWhirter’s entitlement to long service leave, which necessarily required consideration of his length of service. The Agreement itself made the period prior to its operation relevant to the resolution of the dispute in question. The first ground of appeal is rejected.
The second ground of appeal contended that it was legally unreasonable for the Deputy President to conclude that there was no dispute between the parties that long service leave accrued based on the number of weeks worked. The Appellants’ submissions on this ground of appeal refer to [24] of the decision,[26] where the Deputy President states that there was “no dispute between the parties that long service leave accrued based on a set number of weeks per period of service, as set out in clause 15.1 of the Agreement”.[27] The Appellants contended that the Deputy President failed to understand the crux of the dispute between the parties, namely, that the Respondent recognised long service leave accruals based on the number of hours an employee worked during a particular period of service.[28]
This ground of appeal cannot be sustained. In our view, the Deputy President’s statement at [24] simply paraphrases clause 15, as a prelude to an observation that there was no dispute over the number of weeks of long service leave accrued by Mr McWhirter. The Deputy President was clearly aware of the parties’ differing interpretations of the long service leave provisions in the Agreement and how they produced different results. She understood the crux of the dispute and addressed it in her decision.
The Appellants’ submissions on ground 2 also contested the Deputy President’s conclusion that there was agreement between the parties that Mr McWhirter had accrued 61 weeks of long service leave, in light of Mr McWhirter’s payslip and the Respondent’s evidence that Mr McWhirter could not take 61 weeks long service leave at his current rate of pay. It was submitted that, were Mr McWhirter to take his long service leave at his current rate of pay, he would only have 55.75 weeks of leave.[29]
However, in our view, the parties did agree that Mr McWhirter had accrued 61 weeks of long service leave. What they disagreed about was the question of what Mr McWhirter should be paid while on long service leave, a question which is affected by whether all of the accrued leave, or only leave accrued as a supervisor, is based on a 40 hour week. The Deputy President clearly understood the competing arguments: Mr McWhirter’s position was that he was entitled to take all of his long service leave at his current rate of pay (without loss of pay, based on a 40 hour week); the Respondent’s position was that the weeks of long service leave accrued during the ‘36 hour period’ (the time when Mr McWhirter worked 36 hours) should be paid at the 36 hour rate.
In our view, ground 2 does not bear out any error on the part of the Deputy President.
The third ground of appeal submitted that the Deputy President failed to respond to Mr McWhirter’s argument, did not engage with the matters in dispute, and accordingly denied the Mr McWhirter natural justice. The Appellants’ submissions on this ground asserted that the Deputy President failed to hear Mr McWhirter’s submissions as to what he asserted the dispute was about.
We do not identify any basis on which it could be concluded that there was a denial of procedural fairness in this case. The Deputy President engaged with the parties in the framing of the questions which required her determination, heard and considered their submissions on those questions, and addressed them in her decision.
In the notice of appeal, the Appellants did not articulate as a discrete ground of appeal a contention that the Deputy President’s construction of the Agreement was wrong. However, in our opinion, the substance of ground 3 is to this effect. It puts forward a contention that the Deputy President erred in not accepting Mr McWhirter’s construction of clause 15 of the Agreement and clause 14 of the Workplace Arrangement. This construction was that long service leave accrues based on length of service, and that the reference to hours expressed in brackets in clause 15 are indicative of the ordinary hours of work, but do not form part of the formula for calculating the accrual of long service leave.[30]
Grounds 4 and 5 of the notice of appeal also relate to the Deputy President’s interpretation of the Agreement. Ground 4 contended that the Deputy President incorrectly decided that the decision in Armacell Australia Pty Ltd[31] was not relevant to the proper construction of the Agreement. Ground 5 submitted that she failed to properly interpret the Agreement by not taking into account the relevant industrial relations environment including the operation of the Long Service Leave Act 1955 (NSW) (“the LSL Act”).[32]
We proceed now to consider the question of whether the Deputy President’s interpretation of clause 15 of the Agreement and clause 14 of the Workplace Arrangement were correct.
Interpretation of the Agreement
The principles that apply to the interpretation of an enterprise agreement were addressed by a Full Bench of the Commission in Berri[33] and Golden Cockerel.[34] We do not repeat them, other than to note that the construction begins with a consideration of the ordinary meaning of the words, having regard to its context and purpose.[35] However, it will be necessary to return to certain of these principles later in this decision.
The Deputy President found that the plain meaning of clause 15 of the Agreement, combined with clause 14 of the Workplace Arrangement, led to the interpretation contended for by the Respondent.[36] She found that the words of the Agreement were clear and unambiguous, and that there was no need to have regard to evidence of surrounding circumstance. The reasons for her conclusions were as follows:
“[67] First, the wording in clause 14 of the WA is clearly prospective in its application. The clause provides that leave accrued in relation to supervisory employees will be based on a 40 hour week.
[68] Second, Clause 14 of the WA is also clear in that only annual leave balances for employees who move to a 40 hour week will be adjusted to reflect the new working arrangement, and ‘no further adjustments to any other leave type will be made’. In my view, the parties would understand that the reference to other leave types to include long service leave. This is particularly so where a reference to long service leave appears in the first sentence of this clause.
[69] Third, the effect of Mr McWhirter’s contention is that Endeavour would be required to provide a long service leave entitlement as if the whole of his employment had been worked at 40 hours per week. This contention cannot be correct, and in my view does not accord with the plain meaning of the language used in this clause.
[70] Fourth, I reject the argument of Mr McWhirter that the reference to hours in clause 15 of the Agreement is only reference to an administrative arrangement relating to Endeavour’s payroll system. The hours referred to in clause 15 relate to the quantum of the entitlement for employees working a 35 or 36 hour week. It is evident that the intention of the parties by including hours was to distinguish the long service leave entitlement of the different types of full time employees.
[71] Fifth, in my view it is clear that the reference to hours relate to the basis for payment of the weeks of long service leave accrued, not the accrual of long service leave itself. In this regard I accept the submissions of Endeavour to the effect that the reference to hours demonstrates a clear recognition that payment for long service leave will be different depending on the status of an employee as a 35 or 36 hour per week employee. This is notwithstanding that each employee still accrues the same number of weeks of long service leave.
[72] I find that the interaction between clause 15 of the Agreement and the WA provides an outcome in which Mr McWhirter’s long service leave balance for the 36 hour week period (ending on 21 January 2013) remains as it had been accrued in accordance with clause 15 of the Agreement as at that date. I accept the submissions of Endeavour on the effect of clause 14 of the WA, in that the WA leaves untouched the accrued bank of long service leave which existed immediately prior to Mr McWhirter’s appointment under the supervisors arrangement (ie the WA).
[73] There is no doubt that the applicant’s entitlement to long service leave changed after 21 January 2013 when he moved to a supervisory position and a 40 hour week, however this change was prospective and did not affect any entitlement he had already accrued whilst working a 36 hour week. In my view, this is the clear intention of clause 14 of the WA, and I so find.
[74] For the reasons set out above, I find that the answer to the question I am required to determine is (b) - the payment for the 36 hour per week period is to be paid at 52.9 weeks x the applicable hourly rate of pay x 36. The dispute is determined accordingly.”
We make some preliminary observations about the construction of clause 15.1 of the Agreement, which deals with long service leave.
Clause 15.1 contains a table. There are two columns, headed “basis of accrual” and “quantum”. The “basis of accrual” is a specified number of “years”. We read this to be a reference to years of continuous service; no party contended otherwise. The “quantum” that an employee accrues is a certain number of weeks, evidently of leave. In brackets, following the weeks indicated, are a certain number of hours. Two sets of hours are provided, in the alternative. They reflect either 35 hours or 36 hours, multiplied by the number of weeks.
According to the table, after ten years an employee is entitled to the following: “13 weeks (455 hours or 468 hours)”. Thus, an employee working 35 hours per week takes 455 hours, because this is the number of hours the employee works in a 13 week period. An employee working 36 hours per week takes 468 hours, corresponding to the number of hours required to take 13 weeks leave.
The table appears to us to require a calculation at the point in time when the leave is taken, after the requisite amount of service. After ten years, an employee has 13 weeks leave. Before this time, the employee does not have any leave. There is no provision in clause 15.1 for the accrual of long service leave progressively within the periods indicated in the left hand column.
There is also no mechanism to apportion the number of hours’ leave to be taken on long service leave by reference to the amount of time worked on 35 and 36 hour weeks respectively. After ten years’ service there is only 13 weeks (either 455 hours or 468 hours, not some combination of both). Leave is simply taken based on either 35 or 36 hours, depending on what the employee is working at the time.
Accordingly, if after ten years, an employee is working 36 hours, she or he takes 13 weeks leave based on a 36 hour week, equating to 468 hours’ leave. This is so, even if the employee worked 9 years at 35 hours a week and then worked the tenth year at 36 hours. Endeavour acknowledged that clause 15 would operate in this way.[37]
On one interpretation of the table in clause 15.1, leave might accrue progressively as between the periods of service in the left hand column. On this reading, after ten years, an employee would bank either 455 or 468 hours, depending on what they were working at the time; after 15 years, they would bank a further 297.5 or 306 hours, depending on their working arrangements at the 15 year mark; and so on. However, the fact that leave does not accrue progressively within the accrual periods, and the absence of an apportionment mechanism, tell against an accrual system that is based on a bank of hours. In our view, clause 15.1 entitles employees to weeks of leave, after the requisite period of service, that are paid based on their current working arrangements (35 or 36 hours a week).
Mr McWhirter, who commenced employment in March 1986, has 61 weeks long service leave. During all of his employment, he has worked at least 36 hours a week; and since March 2013, 40 hours a week.
Next we must consider the meaning of clause 14 of the Workplace Arrangement, and how this interacts with clause 15 of the Agreement.
As noted above, the Workplace Arrangement sets out conditions applicable to supervisory employees. It provides that supervisors work a 40 hour week. Clause 14 states that “leave accrued in relation to annual and long service leave, by Supervisory employees will be based on a 40 hour week.”
It is convenient at this point to return to the Deputy President’s reasons for her conclusions as to the proper interpretation of the Agreement, set out above. First, at [67], she concludes that the wording in clause 14 is prospective in application, emphasising the provision’s use of the future tense: leave accrued in relation to supervisory employees will be based on a 40 hour week. But in what sense is the wording prospective? On the Deputy President’s reading, it is the leave accrued in the future by a supervisory employee (as a supervisory employee) that will be based on a 40 hour week. However, the provision can also be read as meaning that all leave accrued by a person who is now a supervisory employee “will be” based on a 40 hour week, at the time they take leave. On this reading, the prospective nature of the clause is directed at how long service leave will be treated henceforth. In our opinion, this interpretation is to be preferred. It is compatible with the accrual arrangements established by clause 15.1 as we have interpreted them above, namely, that an employee is entitled to a certain number of weeks leave after a particular period of service, and takes leave based on the hours the employee is working at the time leave is taken.
The Deputy President then considered the interpretation of the second paragraph of clause 14 of the Workplace Arrangement. The Respondent placed particular reliance on this provision to support their interpretation of the Agreement. It provides that employees appointed as supervisors “will have their annual leave accrued balances adjusted to reflect their new working arrangements”. No mention is made of long service leave. The last sentence of the second paragraph states clearly that there will be “no further adjustments to any other leave types”. The Deputy President concluded that the parties would understand the reference to “other leave types” to include long service leave, and that it was, therefore, excluded from any “adjustment” to balances.[38]
However, this conclusion is only valid to the extent that Mr McWhirter’s interpretation of the Agreement would require an “adjustment” to be made to his long service leave balance. In our view, this is not the case. As we noted above, clause 15.1 provides an entitlement to a certain number of weeks’ leave after the relevant period of service. There is no bank of hours that requires adjustment; there is only service (“basis of accrual”), and “quantum” (weeks of leave). For a supervisor taking long service leave, clause 14 of the Workplace Arrangement provides that “leave accrued … will be based on a 40 hour week.” The consequence of this is that the supervisor is able to take all long service leave based on the number of hours she or he is working at the time, as would be the case in respect of an employee working a 35 or 36 hour week.
It is necessary then to consider how this interpretation affects the work that is done by the second paragraph in clause 14 of the Workplace Arrangement. Annual leave is dealt with in clause 12 of the Agreement. Clause 12.3 contains a table setting out the number of weeks leave to which an employee is entitled “after each year of service”. In this regard, the annual leave provisions in the Agreement are similar to those relating to long service leave.[39] Therefore, the first paragraph of clause 14 of the Workplace Arrangement could have the same effect on annual leave as we have found it to have on long service leave, mandating that accrued leave be based on 40 hours. If this is correct, then the second paragraph in clause 14 of the Workplace Arrangement would appear to be unnecessary. We were not addressed on the question of the annual leave arrangements that applied to employees in the year in which the Workplace Arrangement was made, 2003. The Workplace Arrangement itself does not otherwise deal with annual leave.
An important part of the context in this matter is that an enterprise agreement made in 2013 has apparently incorporated an unregistered agreement made 9 years earlier. The mode of incorporation was simply to list the earlier document, among a number of others, in an appendix to the Agreement. There are no apparent words of incorporation, merely a heading “Appendix D”, with a number of dot points beneath it listing various documents. As is often the case when material is incorporated into an enterprise agreement, it is not apparent that there has been an attempt to ensure consistent and appropriate interaction between the Agreement and the various documents listed in the Appendix. It would not be surprising if some aspects of “incorporated” documents did not interact neatly with the Agreement itself.
Whatever the reason for the Workplace Arrangement making provision for supervisors’ annual leave balances to be adjusted, we consider that no such adjustment is necessary in order for Mr McWhirter to take long service leave based on a 40 hour week.
Accordingly, we disagree with the Deputy President’s conclusion that the “WA leaves untouched the accrued bank of long service leave which existed immediately prior to Mr McWhirter’s appointment under the supervisors arrangement”.[40] In our opinion, there is no bank of leave in hours, only an entitlement to take a certain number of weeks’ leave after a particular period of service. We disagree with the Deputy President’s conclusion that such an outcome cannot be correct.[41] The effect of the first paragraph of the Workplace Arrangement is simply to apply to supervisors working 40 hours a week the arrangements that apply to employees working 35 or 36 hours a week; they take leave based on the number of hours they are working at the time.
The 2003 letter
Material was placed before the Commission at first instance regarding the genesis of the Workplace Arrangement and in particular the arrangements concerning supervisors working a 40 hour week, and their annual and long service leave entitlements. The Respondent submitted that there was an agreement with staff and their unions not to adjust the accrued long service leave of employees who became supervisors, and that this predated the commencement of the Workplace Arrangement in 2003.[42]
Attachment 3 to the Respondent’s submissions at first instance is a letter dated 5 May 2003 (“2003 letter”) from the Respondent to the ETU containing an annual leave clause similar in terms to paragraph 2 in clause 14 of the Workplace Arrangement concerning annual leave balances for supervisors. It also contains a long service leave clause, which states:
“Full time employees whose working hours are increased [in connection with the 40 hour week] will have their long service leave accrued balances adjusted to reflect their new working arrangements … The above will be extended from July 2001 to December 31 2002, at which time no further increases in balances will be made as a result of increasing hours of work.”
The letter goes on to state that there will be “no adjustment to the accrued balances of other forms of leave, including sick leave, leave in lieu, award special leave, RDOs, as a result of changes to working hours.” The letter appears to be something of a prototype of clause 14 of the Workplace Arrangement. Unlike clause 14 of the Workplace Arrangement, however, it makes clear that long service leave “balances” will be adjusted. The “extended” period referred to appears to relate to employees who commence working 40 hours within that period. The implication from this letter is that, from 31 December 2002, supervisors’ long service leave “balances” will not be adjusted to reflect a 40 hour week.
We were not addressed on this history in the course of the appeal, nor does it feature in the decision of the Deputy President. The parties both contended that the wording of the Agreement was clear, and supported their respective interpretations. However, the 2003 letter was included in the appeal book and we consider it appropriate to make some observations concerning it.
Had the provisions in the 2003 letter been included in the Agreement, they may have supported the Respondent’s interpretation of the long service leave provisions. They also potentially offer an explanation as to how the second paragraph of clause 14 of the Workplace Arrangement was to operate: that it was considered necessary to adjust leave balances for supervisors, and that, whilst adjustments would continue to be made to the annual leave balances of supervisors, no adjustments would be made to long service leave balances after 31 December 2002.
However, the wording of the 2003 letter was not included in the Agreement or the Workplace Arrangement. There is no evidence as to the position of the ETU, or other unions, in relation to what was said in the 2003 letter. More importantly, there is no evidence that the 2003 letter had any bearing on the making of the Agreement in 2013. It is helpful to recall certain principles pertaining to the interpretation of enterprise agreements that were summarised by the Full Bench in Berri.[43]
First, if an agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.[44] In our view, the operation of clause 15 of the Agreement and clause 14 of the Workplace Arrangement, as it relates to long service leave, does have a plain meaning. In any event, there is real doubt as to whether a letter from one party to another, written some ten years prior to the agreement, would be evidence of surrounding circumstances of the agreement.
The admissibility of evidence of the surrounding circumstances of an agreement is limited to evidence tending to establish objective background facts which were known to both parties and which inform the subject matter of the agreement.[45] As the Full Bench noted in Berri, and consistent with a long line of authority, evidence of such objective facts is to be distinguished from evidence of the subjective intentions of the parties, such as statements and actions of the parties which are reflective of their intentions and expectations.
It is also critical to remember that the instrument that is the subject of the disputed interpretation is an enterprise agreement made under Part 2-4 of the FW Act. Unlike the position under earlier legislation, there are no “parties” to such agreement. Rather, enterprise agreements are “made” when a majority of the employees who are asked to approve the agreement cast a valid vote to approve it. Evidence as to employees’ understanding of the effect and meaning of the proposed agreement may be of more relevance than the stance taken by bargaining representatives.[46]
In our opinion, there is no proper basis for us to have regard to the 2003 letter in considering the correct interpretation of the Agreement.
The Long Service Leave Act; s.113 of the FW Act
As was noted by the Full Bench in Golden Cockerel and in Berri, the legislative context in which an enterprise agreement was made and in which it operates is relevant to the consideration of how the agreement is to be interpreted.
Before the Deputy President, Mr McWhirter contended that the interpretation of the Agreement should be informed by the LSL Act, which he said applied to his employment because of the effect of s.27(2)(g) of the FW Act. The Respondent contended that it was only necessary to consider and interpret the Agreement and the Workplace Arrangement. It further contended that, in any event, the LSL Act did not apply to Mr McWhirter because of the effect of s.113 of the Act, through which award-derived long service leave terms applied to him, instead of the LSL Act. The Deputy President accepted the Respondent’s submission that s.113 excluded the operation of the LSL Act in relation to Mr McWhirter.[47]
By ground 5 of the notice of appeal, the Appellants challenged this conclusion, and contended that the Deputy failed to properly interpret the Agreement by not taking into account the operation of the Long Service Leave Act 1955 (NSW).[48] We reject this ground of appeal. We do not reproduce the Deputy President’s analysis of the significance of s.113 to the present dispute.[49] It suffices for us to note that, in our view, this analysis is correct.
In the course of considering the parties’ arguments concerning the LSL Act and s.113, the Deputy President also considered the decision of the Full Bench in Armacell Australia Pty Ltd.[50] She rejected Mr McWhirter’s argument that the decision stood for a general proposition that, where an enterprise agreement is inconsistent with a term of State long service leave legislation, that provision was of no effect.[51] Ground 4 in the notice of appeal challenged this conclusion, however, the contention was not developed in submissions or before the Full Bench. In our view, the Deputy President was correct to reject this general proposition. Armacell dealt separately with enterprise agreements being inconsistent with State long service leave legislation, on the one hand,[52] and award derived long service leave terms on the other,[53] and the different implications this has for approving agreements.
Our rejection of grounds 4 and 5 in the notice of appeal does not affect our interpretation of the relevant provisions of the Agreement as set out above. The Respondent’s position was that s.113 of the FW Act operated to preserve the Integral Energy Award 2008 long service leave provisions as an entitlement under the National Employment Standards (“NES”).[54] Accordingly, it said, the construction of the Agreement could be undertaken without regard to the LSL Act.[55] The Respondent did not contend that the application of the award-derived long service leave terms had a bearing on the way in which the Agreement’s long service leave provisions should be interpreted, other than to exclude the application of the LSL Act, which the Appellants had contended was relevant.
Finally, we would agree with the Deputy President that there is no basis for the Respondent’s leave policy to be considered for the purposes of interpreting the Agreement and determining this dispute. The Leave Policy does not form part of the Agreement and, in our view, there is no proper basis for it to inform the interpretation of the Agreement in the present case.[56]
Conclusion and Orders
We have concluded that the Appellants have demonstrated error in relation to the Deputy President’s interpretation of the long service leave provisions in the Agreement. Accordingly, we uphold the appeal and quash the decision.
In our opinion, the appropriate course is for us to make a further decision in relation to the matter, pursuant to s.607(3)(b). In light of our reasoning above, we determine that the answer to the question the Commission was required to determine was (a), namely that the payment for the “36 hour per week period” is to be paid at the applicable weekly rate of pay, being a 40 hour week.
We order as follows:
- The appeal is upheld.
- The decision is quashed.
- The answer to the question posed for the Commission’s determination be answered:
(a) The payment for the 36 hour per week period is to be paid at 52.9 weeks x the applicable weekly rate of pay (this being a 40 hour week).
VICE PRESIDENT
Appearances:
L. Andelman for the Appellants.
G. Phillips for the Respondent.
Hearing details:
2017
Sydney:
22 August.
[1] The CEPU was not a party to the proceedings at first instance, however, we are satisfied that it is a person aggrieved by a decision for the purposes of s.604 of the Fair Work Act 2009 (Cth). The Respondent did not contest this point.
[2] [2017] FWC 57.
[3] On 18 July 2017, the Respondent’s representative wrote to the Commission to confirm that employees of Endeavour Energy (ABN 59 253 130) had transferred to Endeavour Energy Network Management Pty Ltd, and that the latter is the proper respondent to the current proceedings.
[4] [2017] FWC 57, [3].
[5] Ibid [5].
[6] Ibid [8] and [74].
[7] Submissions of the Appellants in Reply, [13] and following. See also AB41 and 42.
[8] See in particular the transcript of proceedings before DP Dean, PN90-94.
[9] The parties agreed that the WA forms part of the Agreement, although it is not it is not attached to the Agreement.
[10] Transcript at PN25.
[11] [2017] FWC 57, [16].
[12] Endeavour Energy Enterprise Agreement 2012, cl 29.2 (Tier 3).
[13] [2017] FWC 57, [22] and [23].
[14] Coal and Allied Operations Pty Ltd v AIRC (2000) 203 CLR 194 at [17] per Gleeson CJ, Gaudron and Hayne JJ.
[15] It was not contended that the enterprise agreements conferred any independent right to appeal, nor does there appear to be any basis for such an argument.
[16] O’Sullivan v Farrer (1989) 168 CLR 210 per Mason CJ, Brennan, Dawson and Gaudron JJ; applied in Hogan v Hinch (2011) 85 ALJR 398 at [69] per Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ; Coal & Allied Mining Services PtyLtd v Lawler and others (2011) 192 FCR 78 at [44] - [46].
[17] GlaxoSmithKline Australia Pty Ltd v Makin[2010] FWAFB 5343 at [26]-[27], 197 IR 266; Lawrence v Coal & Allied Mining Services Pty Ltd t/as Mt Thorley Operations/Warkworth[2010] FWAFB 10089 at [28], 202 IR 388, affirmed on judicial review in Coal & Allied Mining Services Pty Ltd v Lawler (2011) 192 FCR 78; NSW Bar Association v Brett McAuliffe; Commonwealth of Australia represented by the Australian Taxation Office[2014] FWCFB 1663 at [28]
[18] [2010] FWAFB 5343, 197 IR 266 at [24] – [27].
[19] Also see CFMEU v AIRC (1998) 89 FCR 200; and Wan v AIRC (2001) 116 FCR 481.
[20] See Submissions of the Respondent, [2.3] and Submissions of the Appellants in Reply, [2]-[4].
[21] Australian Manufacturing Workers’ Union v Silcar Pty Ltd (2011) 208 IR 33.
[22] [2015] FWCFB 6750.
[23] Endeavour Energy v CEPU [2016] FCAFC 82.
[24] [2017] FWC 57, [7].
[25] Pawel v AIRC [1999] FCA 1660; Automotive, Food, Metal, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union (AMWU) v Berri Pty Limited, [2017] FWCFB 3005 at 35; Australian Municipal, Administrative, Clerical and Service Union v Australia Tax Office, [2013] FWCFB 4752, at 13.
[26] Submissions of the Appellants, [13].
[27] [2017] FWC 57, [24].
[28] Submissions of the Appellants, [14].
[29] Submissions of the Appellant, [16]; Submissions for the Respondent before Deputy President Dean, [47], at AB 102.
[30] Submissions of the appellant, [23].
[31] [2010] FWAFB 9985.
[32] Ground 4 and 5 refer to clause 19 of the Agreement, however the references are evidently intended to be to clause 15 of the Agreement, which is reproduced in [19] of the decision.
[33] Automotive, Food, Metal, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union (AMWU) v Berri Pty Limited[2017] FWCFB 3005.
[34] Australian Mean Industry Employees Union v Golden Cockerel Pty Limited[2014] FWCFB 7447.
[35] [2017] FWCFB 3005, [114] (see principle 1).
[36] [2017] FWC 57, [66].
[37] Transcript at PN69.
[38] [2017] FWC 57, [68].
[39] Note: Although under the heading ‘annual leave’, clause 12.1 states that the accrual of annual and long service leave will be the basis of either a 35 or 36 hour week. In our view this does not more than make clear that for a 36 hour week employee, one day of annual or long service leave is a day of 7.2 hours.
[40] [2017] FWC 57, [72].
[41] Ibid [69].
[42] Respondent’s submissions before Dean DP, [33].
[43] [2017] FWCFB 3005, [114].
[44] Ibid (see item 9).
[45] Ibid (see item 11).
[46] Ibid (see item 13).
[47] [2017] FWC 57, [60] and [61].
[48] Ground 4 and 5 refer to clause 19 of the Agreement, however, the references are evidently intended to be to clause 15 of the Agreement, which is reproduced in [19] of the decision.
[49] [2017] FWC 57, [60]-[63].
[50] [2010] FWAFB 9985.
[51] [2017] FWC 57, [43]-[45].
[52] Ibid [30] and [31].
[53] Ibid [34].
[54] Submissions of the Respondent, paragraph 3.44.
[55] Submissions of the Respondent, paragraph 3.46.
[56] [2017] FWC 57, [64].
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