Probiotec Pharma Pty Ltd v United Workers' Union
[2024] FWCFB 443
•22 NOVEMBER 2024
| [2024] FWCFB 443 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.604—Appeal of decision
Probiotec Pharma Pty Ltd
v
United Workers’ Union
(C2024/6338)
| VICE PRESIDENT ASBURY | BRISBANE, 22 NOVEMBER 2024 |
Appeal from decision of Deputy President Masson on 20 August 2024 in C2024/2437 – interpretation of wage increase provision in enterprise agreement – correct conclusion – no error – appeal dismissed
Probiotec Pharma Pty Ltd (Probiotec) has lodged an appeal under s 604 of the Fair Work Act 2009 (Act) from a decision[1] of Deputy President Masson dated 20 August 2024. The decision determined a dispute between Probiotec and the United Workers’ Union (UWU) about the meaning of clause 15.2(e) of the Probiotec Pharma Pty Ltd Enterprise Agreement 2022 (2022 Agreement). The clause reads as follows:
‘On the first full pay period on or after 1 July 2023, 1 July 2024 and 1 July 2025 all Employees other than casual Employees will be guaranteed a minimum wage increase of the greater of 3%, or the amount set by the Fair Work Commission annual wage review on their standard hourly rate as of 30 June 2023, 30 June 2024, and 30 June 2025 (not the Award rate).’
The dispute concerned the alternative wage increase provided for in the second part of the clause. The UWU contended that ‘the amount set by the Fair Work Commission annual wage review’ means the percentage increase in award wages determined by the Commission in its annual wage review. Thus, as the Commission in its 2023 annual wage review had determined to increase award wages by 5.75% from 1 July 2023, employees’ standard hourly rate under the 2022 Agreement had to be increased by this percentage, rather than by 3%. Probiotec contended that ‘the amount set by the Fair Work Commission’ was a reference to the dollar increase in employees’ relevant classification rate under the Pharmaceutical Industry Award 2020 (Award). It submitted that an ‘amount’ was a particular sum and could not mean a percentage. It was only if the dollar amount of the increase in the award classification rate exceeded a 3% increase to the rate of pay under the 2022 Agreement that this was to be paid to employees instead of a 3% increase.
The parties submitted the following questions for determination by the Deputy President:
‘Does clause 15.2(e) of the Probiotec Pharma Pty Ltd Enterprise Agreement 2022 (Agreement) require the application of wage rate increases as:
(a) a percentage increase to the actual hourly rates of pay of the relevant employee equivalent to the percentage increase ordered in the Annual Wage Review; or
(b) a dollar amount applied to the actual hourly rate of the relevant employee equivalent to the Commission’s wage increases applied to the relevant classification of the employee as per the Pharmaceutical Industry Award 2020 (as based on the Annual Wage Review).’
The Deputy President concluded that the answer to the first question was ‘yes’, and that the answer to the second question was ‘no - in circumstances where the Commission orders a percentage increase in the annual wage review’ (at [86]). The questions are implicitly directed at the alternative wage increase provided for in the second part of clause 15.2(e). It is clear from the Deputy President’s answer to the second question that the answer to the first question is applicable in cases where the Commission has ordered a percentage increase to award rates in its annual wage review. It also follows from the answer to the second question that, if the Commission were to award a dollar increase to award wages, this would be the ‘amount’ for the purposes of the alternative wage increase in clause 15.2(e).
The Deputy President’s analysis of the provision is found at [48] to [85] of the decision. The Deputy President considered that the purpose of the wage increase mechanism in the clause was to maintain wage rate relativity to the minimum rates of pay in the Award (at [58]), and that the union’s contention that an ‘amount’ included a percentage was consistent with this purpose (at [61]). He found that the company’s interpretation was not to be preferred because it would result in different amounts being applied to employees’ wage rates depending on their award classification, whereas clause 15.2(e) spoke of an increase by the amount set by the Commission, not various ‘amounts’ (at [62]). The Deputy President further considered that Probiotec’s construction would require words to be read into clause 15.2(e) to the effect that the alternative increase was calculated by reference to the rate of pay under employees’ corresponding classification in the Award (at [63]). The Deputy President said that a further difficulty confronting the company’s argument was that the 2022 Agreement was silent on how its classifications aligned to those in the Award for the purpose of wage increases (at [64]). The Deputy President said that an important contextual consideration was the fact that since 2011, the approach of the Commission to increasing the national minimum wage and award rates of pay has been to specify a percentage rather than a particular dollar amount, with the only minor exception to this occurring in 2022 when the 4.6% wage increase was subject to a minimum $40 increase to adult award classifications. By contrast, from 2000 to 2011, increases to the national minimum wage and minimum award rates had been made in dollar figures or by ‘stepped’ dollar amounts (at [65] to [67]).
The Deputy President was not persuaded by Probiotec’s contention that a categorical distinction was to be drawn between an amount and a percentage. The Deputy President proceeded to identify numerous passages in the 2023 annual wage review decision where the Commission had employed the two terms interchangeably and concluded that this lent weight to the UWU’s argument that the term ‘amount’ did not refer exclusively to a dollar figure ([69] to [72]). The Deputy President considered that, read in context and having regard to purpose, the word ‘amount’ in clause 15.2(e) had a plain meaning that encompassed either to a dollar amount or a percentage increase and that in the circumstance of the 2023 annual wage review decision, which determined an increase in award wages of 5.75%, Probiotec was required to increase employees’ wages under the 2022 Agreement by that amount because it exceeded 3% (at [73]). The Deputy President stated that, as the clause had a plain and unambiguous meaning, it followed that evidence going to the surrounding circumstances could not be admitted to contradict that plain meaning, but that for the sake of completeness he would record various observations about the surrounding circumstances (at [74]).
Before the Deputy President, Probiotec had relied in support of its interpretation of clause 15.2(e) on analogous wage increase provisions in predecessor enterprise agreements that were made in 2009 and 2014. These had provided for an alternative wage increase in the amount of the increase to the federal minimum wage. The company had complied with this clause and afforded employees the wage increase specified in the enterprise agreement or the alternative increase if it was higher. The Deputy President found that this did not assist Probiotec because the language of these earlier agreements was different from that of the 2022 Agreement, and that even if there had at one time been a ‘notorious fact’, which the parties to the relevant agreements should be assumed to have known, it did not pertain to the wording of clause 15 of the 2022 Agreement (at [77]).
During the hearing before the Deputy President, Probiotec had led evidence from a Mr Stringer who said that at a bargaining meeting attended by the UWU on 9 September 2022, he had explained the company’s position on the operation of clause 15.2(e), which aligned with the construction for which Probiotec contended. A witness for the UWU, Mr Dudley, confirmed that a proposal had been raised for dollar increases but that the union rejected this. The Deputy President accepted Mr Dudley’s evidence on this point (at [78]) but said that what had not been satisfactorily explained by the UWU was why, if it opposed the draft clause provided to them by the company and the explanation of Mr Stringer on 9 September 2022, it had not sought amendments to the clause when it was later presented to the union again on 13 September 2022. The Deputy President said that this accounted for Probiotec’s belief that the clause had been accepted on the basis of Mr Stringer’s explanation at the meeting on 9 September 2022 (at [79]).
Probiotec had also led evidence about meetings that were held to explain the terms of the 2022 Agreement to employees. Mr Stringer said that he gave a worked example of how the alternative wage increase would operate, although he could not recall the actual figures that he used in this example. The Deputy President said that at its highest, the evidence showed that there was no detailed explanation to the effect that employees could expect to receive different dollar increases depending on their award classification, or how their classification under the 2022 Agreement aligned with their underpinning award classifications for the purpose of calculating these increases. The Deputy President said that the evidence revealed a wholly inadequate explanation of a new and significant term in the 2022 Agreement (at [81]). He concluded that Mr Stringer’s view of what was offered and accepted was no more than his subjective opinion and that it did not rise to the level of objective evidence of common intention (at [82]).
Probiotec’s sole ground of appeal was that the Deputy President had erred in his construction of clause 15.2(e) of the 2022 Agreement and reached the wrong answer to the questions that had been submitted for determination under the dispute resolution procedure. It submitted that the Full Bench should grant permission to appeal in the public interest or on general discretionary grounds, uphold the appeal, quash the decision, and refer the matter for redetermination by a member of the Full Bench.
The company’s written submissions advanced ten contentions of alleged error that were said to have caused or contributed to the Deputy President’s conclusion. We address these in the course of our analysis of clause 15.2(e) and its proper construction.
Consideration
The decision under appeal concerned the proper construction of a term in an enterprise agreement. The correctness standard applies. The question for the Full Bench to determine is whether the Deputy President reached the correct conclusion. The principles that apply to the interpretation of enterprise agreements are well-settled and we do not recite them. The task is to ascertain the objective meaning of the relevant provision having regard to the text, context, and any objectively manifested common intention or purpose.
In our opinion, the words ‘the amount set by the Fair Work Commission annual wage review’ refer to the quantum of the outcome of the Commission’s annual wage review, irrespective of whether this is a percentage increase to award rates or a dollar amount. We reject the company’s contention that the word ‘amount’, as it appears in clause 15.2(e), cannot mean ‘percentage’. Probiotec is right to say that these are different concepts, and that the latter has a specific meaning of ‘rate’ or ‘proportion’. But it is wrong to say that the two concepts cannot overlap. ‘Amount’ is a much more general word, one that carries a broad range of semantic possibility, depending on the context in which it is used. This is clear from the extract of the Macquarie Dictionary cited in the company’s written submissions, which lists among the various meanings those of ‘quantity’ and ‘value’. Both of these meanings comfortably embrace the percentage increase in award wages ordered by the Commission in an annual wage review. Moreover, the use of a general, omnibus term in the wages provision in clause 15.2(e) is in keeping with the relevant subject matter, which is the outcome of the Commission’s annual wage review. While the Commission’s recent practice in annual wage reviews has been to increase award rates by a percentage, it has historically also awarded increases in dollar amounts.
It is clearly within the ambit of ordinary industrial usage to refer to the ‘amount’ of the annual wage review when speaking of the headline percentage increase. So much is clear from the extracts of the Commission’s 2023 annual wage review decision that appear in the Deputy President’s decision. Reading the clause in this way permits a simple comparison between the 3% increase guaranteed by the clause and the quantum of the increase awarded by the Commission. If the amount of the increase in award wages determined by the Commission is more than 3%, as it was in 2023 when an increase of 5.75% was awarded, this is the increase that employees will receive. Otherwise, employees receive the 3% increase provided for in the clause. On the other hand, if the Commission’s annual wage review were to revert to the earlier practice of awarding dollar increases, clause 15.2(e) would then require employees’ wages to be increased by this ‘amount’, if it exceeded a 3% increase to the agreement rates of pay.
The company’s second contention was that the Deputy President had concluded that the word ‘amount’ had two different meanings and that this produced uncertainty and was conceptually unstable. We disagree. There is nothing uncertain or unusual about a word having multiple meanings, particularly general words. A ‘benefit’, for example, can mean a salary, or an allowance, or leave, or time off. We reject what is perhaps implicit in the contention which is that the two meanings, dollar amount and percentage, are inherently or contextually mutually exclusive. They are not. The simple fact is that the word ‘amount’ is sufficiently broad that it can embrace either a percentage or a flat dollar amount. This was the point made by the Deputy President at [73]. The alternative wage increase provision has work to do irrespective of whether the Commission’s annual wage review decision determines an increase in award wages expressed as a percentage or as a dollar amount. Probiotec contended that this construction was improbable because to apply the clause in these two situations would involve different processes of calculation at the first step, prior to the comparison with the 3% increase. We fail to see why this is significant. If the Commission awards a percentage increase, one multiplies. If it awards a dollar increase, one adds.
Probiotec’s third contention was that the Deputy President was wrong to place weight on the absence of award classification mapping in the Agreement, because the Agreement classifications and the Award classifications are virtually the same. It also noted that, on the Deputy President’s own construction, the clause was capable of application in cases where the Commission awarded a dollar increase in award wages, and that this must mean that it would indeed be possible to align agreement and award classifications. That is not necessarily so, of course, because a uniform dollar increase to all award rates would not require one to have any regard to particular award classifications. To our mind, the absence of classification mapping in the Agreement is not of any great interpretative significance; it is rather the absence in clause 15.2(e) of any reference to award classifications that tells strongly against the company’s interpretation. The only mention of the Award in the clause appears in parenthesis at the end of the provision, purely to emphasise what in our view was already clear, namely that increases to wage rates are applied to the rate of pay in the 2022 Agreement, not the Award.
Probiotec’s fourth contention was that if the framers of the Agreement had intended to link the alternative wage increase in clause 15.2(e) to percentage increases in the award rates, or more generally to movements in the award rates, they would have employed the language that is found in clause 15.1 in respect of casual employees’ wages. This states that wages ‘will increase in accordance with the Fair Work Commission’s annual national wage review …’. But in our view, this would simply have been a different way for the parties to express the same meaning as the one that we have found to reside in clause 15.2(e). Contrary to the company’s contention, the use of two different formulations does not suggest that different meanings must have been intended. In construing a legal document, one is alert to patterns, similarities and differences in language, as these may be relevant to the objective meaning of a disputed provision. But the use of different words does not compel a conclusion that different meanings are intended (for example: start, begin, commence; regarding, concerning, pertaining to). Whether there is any significance in the use of different language will depend on context. Here, we find there to be none. Increases ‘in accordance with’ the Award or in ‘amounts set by’ the Commission in the annual wage review are both general formulations that describe the same thing. We reject the company’s fifth contention for a similar reason. The fact that clause 15.2, which sets a 4.6% increase for the first year of the Agreement, shows that part of the meaning in clause 15.2(e) could have been expressed in a different way, had it been intended to refer only to a percentage. But as we have said, it is not confined to this meaning. It has a broader one that can apply both to dollar and percentage increases.
Probiotec’s sixth to ninth contentions criticised the Deputy President statement at [62] that the company’s interpretation produced multiple amounts rather than one amount; contested his view that Probiotec’s interpretation required words to be read into the clause; disputed the weight that the Deputy President was said to have given to the Commission’s historical practice of awarding both dollar increases and percentage ones; and alleged that the Deputy President had erred in having regard to ‘post-agreement conduct of a third party’, namely the Commission’s interchangeable usage of ‘amount’ and ‘percentage’ in its 2023 annual wage review decision. We reject these contentions.
First, it seems improbable to us that the alternative wage increase mechanism would have been intended to produce different amounts for different employees, unless the Commission’s annual wage review adopted this unusual course by increasing different award rates by different amounts. One would expect such a curious process to have been expressly provided for in the Agreement. Secondly, we agree with the Deputy President that the company's construction requires words to be read into the clause. Since at least 2000, the Commission has awarded either percentage increases or dollar increases. These are the ‘amounts’ it ‘sets’. This is what is to be applied to the agreement rate of pay under the alternative wage increase provision in clause 15.2(c). The company’s construction entails something; it takes a percentage increase awarded by the Commission, calculates the increase to the award rate that this percentage produces, then applies this amount to the agreement rate. It thereby interposes an additional step that is not referred to in the clause. In doing so, it reduces the value of the percentage increase, because it is applied first to the award rate, which is lower than the agreement rate. Thirdly, the Deputy President was right to have regard to the Commission’s historical practice in increasing award rates of pay, in order to ensure that his interpretation was compatible with industrial reality, which plainly it was. Similarly, there was no error in the Deputy President’s consideration of the Commission’s interchangeable use of the words ‘amount’ and ‘percentage’ in its 2023 annual wage review decision. This was not irrelevant ‘post-agreement conduct’. It was illustrative of the ordinary industrial usage of the disputed words.
Probiotec’s tenth contention was that the Deputy President was wrong to conclude that the clause had a plain meaning, and that he wrongly disregarded the company’s evidence of surrounding circumstances. We reject this. The clause does have a plain meaning. Despite this the Deputy President considered the surrounding circumstances and concluded that they did not assist the company. We agree. First, Probiotec said that the Deputy President failed to appreciate the point of its evidence concerning the wage increase clauses in the 2009 and 2014 agreements, which was to demonstrate that the term ‘amount’ in those instruments had been applied by the company in a manner consistent with its interpretation of clause 15.2(e) in the 2022 Agreement. In our view the Deputy President did understand the point and rightly rejected it. Those provisions are different from clause 15.2(e). More fundamentally, as the Deputy President noted elsewhere in his decision, the 2018 agreement saw the removal of the alternative wage increase provision and its replacement with a clause providing for a percentage increase of 2.25% in each year of the Agreement’s nominal life. This caused a gap of several years between Probiotec’s practice in applying the word ‘amount’ in the two old agreements and its current practice in respect of the word ‘amount’ in clause 15.2(e) of the 2022 Agreement. Any custom and practice that might arguably have been associated with the approach to the word ‘amount’ in the two old agreements plainly ended with the making of the 2018 agreement. It cannot seriously be contended that the practice skipped an agreement was then revived in the subsequent one.
Probiotec submitted that there was error in the Deputy President’s conclusion that the company’s understanding of the meaning of clause 15.2(e) was merely subjective. This conclusion was said to be incompatible with the Deputy President’s observation at [79] that the UWU had not explained why it did not seek amendments to clause 15.2(e) after Mr Stringer explained the company’s understanding of it to the union. We disagree. There was no onus on the UWU to seek amendments to the clause. The fact that the union did not seek a change to the clause did not mean that it agreed with the company’s interpretation of it. Its conduct was consistent with the union simply having a different interpretation, which it believed to be correct. We agree with the Deputy President that the evidence of surrounding circumstances goes no higher than to demonstrate Probiotec’s own subjective understanding as to the meaning of the clause. It does not establish the existence of any mutual intention as to that meaning.
Further, any argument that there was a mutually intended meaning of the word ‘amount’ in clause 15.2(e) would need to engage with the question of how that meaning was conveyed to employees. Under the current legislation, there are no formal ‘parties’ to non-greenfields enterprise agreements. Rather, an enterprise agreement is made when it is approved by a majority of employees who vote to approve it (s 182). What then were employees told about the meaning of clause 15.2(e)? They were told that they would receive the ‘greater of 3% (guaranteed) or the Fair Work Commission National Wage Case decision’, and that this was the ‘best of both worlds for the employees as you have a strong guaranteed increase and protection if wage inflation exceeds 3% via the Fair Work Commission National Wage Case decision’. These passages, which were noted by the Deputy President at [27], do not explain that the alternative wage increase is the dollar amount of the annual wage review applied to the award rate of pay. Further, even if Mr Stringer did explain and illustrate the company’s interpretation to employees at a meeting, this was not consistent with the written explanatory materials that Probiotec gave to employees, which said that employees would get the ‘best of both worlds’. In our view, the company’s interpretation of clause 15.2(e) does not give employees the best of both worlds. We would add that there is no evidence that all employees attended the meeting with Mr Stringer.
Probiotec said that the construction of the clause should not be strained simply for the sake of producing a simpler meaning. We agree. But the Deputy President’s construction does not strain the language. In our view, it is Probiotec’s construction that strains the language. It insists that the ‘amount’ set by the Commission must always be a dollar increase against the Award classification rate, even when the Commission has not ‘set’ any such dollar amount, and despite the clause not referring to employees’ Award classifications. The company’s construction advances a narrow meaning of the word ‘amount’, but a very generous reading of the words that follow it. The Deputy President was right to reject it. His construction of clause 15.2(e) of the 2022 Agreement was correct, as were his answers to the questions posed for determination in resolution of the dispute.
Conclusion
We grant permission to appeal because aspects of the appeal entail a degree of complexity and warranted further examination before a conclusion could be reached as to whether they disclosed an arguable case of error. Having examined all of the appeal grounds, we find them to be without merit. The Deputy President reached the correct conclusion. The decision is free from appealable error. The appeal is dismissed.
VICE PRESIDENT
Hearing details:
2024
Melbourne
11 November
Appearances:
A. Pollock of counsel for Probiotec Pharma Pty Ltd
N. Pefanis for the UWU
[1] [2024] FWC 2210.
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