Nilsen (SA) Pty Ltd v CEPU
[2016] FWCFB 3119
•5 April 2016
| [2016] FWCFB 3119 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
s.604 - Appeal of decisions
v
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
(C2016/3535)
VICE PRESIDENT HATCHER |
|
Appeal against decision [2016] FWC 2095 of Senior Deputy President O'Callaghan at Adelaide on 5 April 2016 in matter number C2016/2523.
Introduction
[1] Nilsen (SA) Pty Ltd (Nilsen) has lodged an appeal against a decision of Senior Deputy President O’Callaghan issued on 5 April 2016 1 (Decision). The Decision was made arising out of an application made by the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) pursuant to s.739 of the Fair Work Act 2009 (FW Act) and clause 11 of the Nilsen (SA) Pty Ltd - Contracting Division Collective Agreement 2013 (Agreement) for the Commission to resolve a dispute concerning the interpretation of redundancy provisions contained in clause 41 of the Agreement. Clause 11 of the Agreement is a dispute settlement procedure which ultimately empowers the Commission to arbitrate and issue a binding determination in relation to disputes relating to matters arising under the Agreement or the National Employment Standards. Clause 11(5) contemplates that a decision made by the Commission under the clause is appealable in accordance with the provisions of the FW Act. Consequently permission is required for the appeal under s.604 of the FW Act.
[2] The dispute concerned whether there was an entitlement to pro rata redundancy payments for part-years of service under the Agreement. In that respect the relevant provisions of the Agreement were as follows:
“41.2 Pay
(a) In addition to the period of notice prescribed for ordinary termination, an employee whose employment is terminated by reason of redundancy, shall be entitled to the amount of redundancy pay in respect of a continuous period of service in accordance with the following table.
Employee's period of continuous service with employer on termination | Redundancy pay period |
At least 1 year but less than 2 years | 4 week's pay |
At least 2 years but less than 3 years | 6 week's pay |
At least 3 years but less than 4 years | 7 week's pay |
At least 4 years but less than 5 years | 8 week's pay |
At least 5 year but less than 6 years | 10 weeks |
At least 6 year but less than 7 years | 11 weeks |
At least 7 years but less than 8 years | 13 weeks |
At least 8 years but less than 9 years | 14 weeks |
At least 9 years but less than 10 years | 16 weeks |
At least 10 years | 12 weeks |
(b) Week's pay means the gross weekly base rate of pay, at the date of termination.
(c) An employee shall be entitled to a pro rata payment for any period of continuous service which is less than a full year at any of the year levels referred to above.
(d) Where an employee who is terminated receives a benefit from a severance pay scheme, he/she shall only receive the difference between the redundancy pay specified above and the amount of the severance benefit he or she receives which is attributable to employer contributions. If the severance benefit is greater than the amount under the table herein then he/she shall receive no payment under that table.
41.3 Exemption
Redundancy shall not apply:
• where termination of employment is a consequence of malingering, inefficiency, neglect of duty, misconduct or refusing duty, or conduct that justifies summary dismissal.
• to apprentices and trainees.
• to employees employed on a casual basis.
• to employees employed by employers who operate exclusively within the cottage sector of the housing industry.
• to employees engaged for a specific period of time for a specific task or tasks.
• where legislation provides that the employer is not required to pay redundancy.”
[3] The CEPU contended that the effect of clause 41.2(c) was that for any length of service, an employee was entitled to a pro rata entitlement to redundancy pay calculated in accordance with the payment scale in clause 41.2(a). Nilsen’s primary contention was that clause 41.2(c) was inconsistent with clause 41.2(a), had been included in the Agreement unintentionally, had no purpose and should be removed. Alternatively Nilsen contended that the pro rata requirement only commenced in relation to employees who had completed 12 months’ continuous service, so that (for example) employees who had at least 1 year but less than 2 years’ service would receive a pro rata payment in the range of 1-4 weeks’ pay.
[4] The Senior Deputy President’s conclusions in relation to these competing contentions were as follows:
“[12] Clause 41.2(c) provides for a pro rata payment arrangement. I am unable to regard this provision as ambiguous. On its plain words it appears to me to provide for recognition of periods of continuous service which are less than the full year specified in the table in clause 41.2(a). On this basis the table in clause 41.2(a) establishes a minimum requirement of one year’s continuous service to entitle an employee to four weeks’ redundancy pay [and] clause 41.2(c) provides that this four weeks’ pay is to be calculated on a pro rata basis over that first year. Once an employee has completed that first year of continuous service, the pro rata payment will then apply in the event of a redundancy situation calculated on the basis of the next increase in redundancy payment amounts. For example, an employee who has completed, say 1.5 years’ continuous service would receive five weeks redundancy pay and an employee who had completed 2.5 years’ continuous service would receive 6.5 weeks’ pay. In each case, continuous service which reflects the minimum entitlement for an amount of redundancy pay specified in clause 41.2(a) must qualify any employee for that payment and the pro rata amount will vary between that minimum and the next specified maximum payment. Once an employee has achieved 10 years’ continuous service the provisions of clause 41.2(c) have no further work to do as a maximum redundancy pay of 12 weeks is then specified. There is a potential issue associated with the calculation of pro rata amounts for an employee who has between nine and 10 years’ service. My preliminary view is that the 16 week payment cannot be reduced on a pro rata basis until the employee has achieved 10 years’ service because such a reduction would be inconsistent with the National Employment Standards. This matter has not, however, been argued to me.
[13] With respect to the secondary Nilsen position, there is nothing in the Agreement which would limit the pro rata payment mechanism to situations where an employee has completed one year’s service.”
[5] On appeal, Nilsen has only challenged one aspect of the Decision, namely the conclusion that clause 41.2(c) provides for pro rata redundancy payments for employees with less than 12 months’ continuous service. It contended that this conclusion was incorrect, and pointed to the last item in the list of exemptions specified in clause 41.3, and to s.121(1)(a) of the FW Act, which provides that employees with less than 12 months’ continuous service are excluded from the benefit of the minimum redundancy pay benefits provided for in s.119. The relevant effect of clause 41.3, Nilsen submitted, was that clause 41.2(c) did not apply to any employees with less than 12 months’ service when they were made redundant, and consequently no pro rata benefit was payable to them.
Consideration
[6] We consider that Nilsen’s argument on appeal is correct. Clause 41.2 of the Agreement specifies the redundancy payments required to be made by Nilsen when the employment of any employee is terminated by reason of redundancy. It has three elements:
(1) Clause 41.2(a) provides for a scale of payments based on completed years of continuous service. Clause 41.2(b) is an ancillary provision which defines the term “week’s pay” when used in clause 41.2(a).
(2) Clause 41.2(c) provides for pro rata benefits for part-years of service.
(3) Clause 41.2(d) provides that where the employee receives a benefit under an industry severance pay scheme, Nilsen is only required to pay any difference between such a severance payment and the redundancy payment otherwise specified by clause 41.2.
[7] It is apparent from the heading and chapeau in clause 41.3 that the clause has the purpose of specifying categories of employees in relation to whom Nilsen is exempted from paying the redundancy payments specified in clause 41.2. The sixth category of exemption refers to “where legislation provides that the employer is not required to pay redundancy”. Although there might be room for debate about the scope of the term “legislation”, it would at least include the FW Act, being the statute under which the Agreement was made and which establishes the National Employment Standard for redundancy entitlements. Therefore any general exemption from a requirement to pay redundancy entitlements in the FW Act would be picked up by clause 41.3 of the Agreement and be applicable to clause 41.2.
[8] Section 119 of the FW Act sets out the minimum redundancy payments required as part of the National Employment Standards. The section provides:
119 Redundancy pay
Entitlement to redundancy pay
(1) An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:
(a) at the employer’s initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or
(b) because of the insolvency or bankruptcy of the employer.
Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.
Amount of redundancy pay
(2) The amount of the redundancy pay equals the total amount payable to the employee for the redundancy pay period worked out using the following table at the employee’s base rate of pay for his or her ordinary hours of work:
Redundancy pay period | ||
Employee’s period of continuous service with the employer on termination | Redundancy pay period | |
1 | At least 1 year but less than 2 years | 4 weeks |
2 | At least 2 years but less than 3 years | 6 weeks |
3 | At least 3 years but less than 4 years | 7 weeks |
4 | At least 4 years but less than 5 years | 8 weeks |
5 | At least 5 years but less than 6 years | 10 weeks |
6 | At least 6 years but less than 7 years | 11 weeks |
7 | At least 7 years but less than 8 years | 13 weeks |
8 | At least 8 years but less than 9 years | 14 weeks |
9 | At least 9 years but less than 10 years | 16 weeks |
10 | At least 10 years | 12 weeks |
[9] As the note to s.119(1) explains, sections 121, 122 and 123 set out circumstances in which the entitlements provided for by s.119 are not required to be paid by the employer. Relevantly, s.121(1)(a) provides:
121 Exclusions from obligation to pay redundancy pay
(1) Section 119 does not apply to the termination of an employee’s employment if, immediately before the time of the termination, or at the time when the person was given notice of the termination as described in subsection 117(1) (whichever happened first):
(a) the employee’s period of continuous service with the employer is less than 12 months; or
…
[10] On one view s.121(1)(a) is otiose except for the situation where an employee has not reached 12 month’s service at the date he or she is given notice but has done so at the actual date of termination of employment, because the scale of redundancy payments in s.119(2) does not provide for any payment to an employee who at the date of termination does not have 12 months’ continuous service. Be that as it may, s.121(1) clearly describes a category of employees to whom an employer is not required to pay redundancy entitlements. It is clearly an exemption of the type referred to in the last item in clause 41.3 of the Agreement, and it therefore operates with respect to the redundancy entitlements specified in clause 41.2.
[11] That means that the effect of clause 41.3 is that an employee with less than 12 months’ service at the date when notice of termination for employment for reason of redundancy is given or at the date when any such termination takes effect is not entitled to any redundancy payment under the Agreement. That conclusion must apply irrespective of how clause 41.2(c), taken in isolation, is interpreted. However, there is good reason to think that clause 41.2(c) has been drafted in terms such as to give it an operation consistent with the last item in clause 41.3. The pro rata entitlements for which clause 41.2(c) provides only apply in respect of employees “at any of the year levels referred to above”. This is clearly a reference to the scale of redundancy benefits set out in clause 41.2(a). The scale sets out “year levels” at which various amounts of redundancy pay are to apply. The first or lowest “year level” is “At least 1 year but less than 2 years”, and the last or highest is “At least 10 years”. It would be at least arguable that employees with less than 12 months’ service fall below the minimum level of service required to come within the first “year level” and therefore are not “at any of the year levels referred to above”, with the result that clause 41.2(c) does not apply to them. However it is unnecessary to express a final view about this, noting that the point was not argued before us.
[12] The argument which Nilsen has advanced on appeal was not properly articulated before the Senior Deputy President (who decided the matter on the basis of the parties’ written submissions only). The issue concerning employees with less than 12 months’ service was subsumed into the larger alternative argument put forward by Nilsen (an argument which it did not repeat in the appeal). Further, although Nilsen referred to clause 41.3 in its submissions at first instance, it never drew the Senior Deputy President’s attention to s.121(1)(a) of the FW Act upon which the relevant effect of the clause was necessarily founded. The Senior Deputy President therefore did not receive the assistance in Nilsen’s submissions to which he was entitled and, as a result, interpreted clause 41.2 of the Agreement in a way which was, in one respect, in error.
[13] The usual principle is that a party should not be permitted to argue a case on appeal which it did not raise at first instance, and that permission to appeal would not be granted to permit this to occur. 2 As was stated by the High Court in Coulton v Holcombe:3
“To say that an appeal is by way of rehearing does not mean that the issues and the evidence to be considered are at large. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish.”
[14] However where the new argument raised by an appellant raises a pure question of law the determination of which could not possibly have been affected by any evidence the other party may have wished to adduce at first instance had the point then been raised, an appellate court or tribunal may allow the argument to be advanced and determined. In O'Brien v Komesaroff 4 the High Court said:
“In some cases when a question of law is raised for the first time in an ultimate court of appeal, as for example upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is expedient in the interests of justice that the question should be argued and decided …”.
[15] The above passage was quoted with approval in Coulton v Holcombe, with the Court making it clear that the operation of the principle was not confined to an ultimate court of appeal. 5
[16] Because Nilsen’s argument here was indubitably correct and concerned the proper interpretation of a provision of an enterprise agreement which specified the redundancy entitlements Nilsen is required to pay its employees, we consider it appropriate to grant permission to appeal. Nilsen is bound under clause 11 of the Agreement to comply with any arbitral decision of the Commission made pursuant to that clause in resolution of a dispute. 6 It would be manifestly unjust to refuse permission to appeal where the result would be that Nilsen would be bound to make redundancy payments to employees who, under the terms of clause 41 of the Agreement, are not entitled to them.
[17] The appropriate remedy in the appeal is to vary the Decision pursuant to s.607(3)(a) of the FW Act to make it clear that redundant employees with less than 12 months’ service are not entitled to pro rata redundancy payments under clause 41.2(c).
[18] Finally, out of abundant caution we make the following observation. It was raised in the submissions before us that clause 15.6 of the Electrical, Electronic and Communications Contracting Award 2010 7is in the same terms as clause 41.2(c) of the Agreement. However the context of clause 15 of the Award in its entirety, which concerns redundancy, is quite different to clause 41 of the Agreement. In particular, the Award contains no equivalent to clause 41.3 of the Agreement. Nothing in this Decision is intended to be understood as expressing any view, directly or indirectly, about the proper interpretation of clause 15.6 of the Award.
Orders
[19] We order as follows:
(1) Permission to appeal is granted.
(2) The appeal is upheld.
(3) The Decision is varied to state that a redundant employee is not entitled to pro rata redundancy payments under clause 41.2(c) of the Agreement if, immediately before the time of the employee’s termination, or at the time when the employee was given notice of the termination, the employee’s period of continuous service is less than 12 months.
VICE PRESIDENT
Appearances:
B. Duggan solicitor for Nilsen (SA) Pty Ltd.
J. Rogers and G. Noble for Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia.
Hearing details:
2016.
Melbourne:
18 May.
1 [2016] FWC 2095
2 See ASU v Yarra Valley Water Corporation [2013] FWCFB 7453, (2013) 232 IR 440 at [23]-[24]
3 (1986) 162 CLR 1 at 7
4 (1982) 150 CLR 310 at 319
5 (1986) 162 CLR 1 at 8
6 Linfox Australia Pty Ltd v Transport Workers Union of Australia [2013] FCA 659, (2013) 213 FCR 479 at [18]-[33]
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