Pumpkin Patch Originals Limited
[2011] FWA 147
•28 JANUARY 2011
[2011] FWA 147 |
|
DECISION |
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Item 26 Sch. 3—Transitional instrument
Pumpkin Patch Originals Limited
(AG2010/13405)
COMMISSIONER SIMPSON | BRISBANE, 28 JANUARY 2011 |
Application to vary agreement to resolve uncertainty or difficulty - annual and personal leave entitlements for annualised part time employees.
[1] This decision concerns an Application lodged on 6 August 2010 by the National Retail Association on behalf of Pumpkin Patch Originals Limited (‘the Applicant’) pursuant to Item 26, Division 1 of Part 5 of Schedule 3 of the Fair Work (Transitional and Consequential Amendments) Act 2009 (Cth) (‘Transitional Act’).
[2] The Applicant seeks a determination by Fair Work Australia to resolve an uncertainty or difficulty regarding the interaction between the Pumpkin Patch Certified Agreement 2005 (‘the Agreement’) and the National Employment Standards (‘NES’) in regard to annual leave and personal leave for those employees of the applicant who are employed on an annualised part time basis.
BACKGROUND
[3] The Applicant’s retail employees are currently employed in accordance with the Pumpkin Patch Certified Agreement 2005 (‘the Agreement’). The Agreement is a pre-reform certified Agreement that was varied on 31 March 2009 in accordance with a decision of his Honour Senior Deputy President Richards relying on Clause 16A of Schedule 8 of the Workplace Relations Act 1996 (Cth) (AG2009/1173 - PR986394). The Agreements nominal expiry date is 31 March 2012.
[4] Within its terms the Agreement provides for part-time employees to be paid on a ‘non-annualised’ or an ‘annualised’ basis. It is the contention of the Applicant that part time employees engaged on an ‘annualised’ basis are paid their annual leave and personal leave in advance through a higher hourly rate of pay which includes recognition of those entitlements.
[5] The Applicant contends that annualised part time employees are then entitled to 10 days unpaid personal leave per year and four weeks unpaid annual leave on a pro-rate basis.
[6] I listed the matter for mention on 30 August 2010. Following the mention I issued directions requiring that the applicant serve the application on all of its employees by Friday 17 September 2010 and file submissions by Friday 22 October 2010. Any employee wishing to provide submissions or appear in the matter was invited to do so by Friday 5 November 2010.
[7] The applicant confirmed the application had been served on its employees through a sworn affidavit of Ms Johanne McDonald, the Human Resources Advisor for Pumpkin Patch Originals Ltd attesting to this. No submissions or response was subsequently received from any employee of the Applicant seeking to oppose the Application.
[8] I conducted a hearing on 12 November 2010 where the Applicant was represented by Mr John Dwyer of Counsel. At the conclusion of the hearing I requested that the Applicants file further material to address the following issues;
(a) The Applicant’s submission that annualised part time employees do not suffer a monetary detriment in regard to the payment of annual leave and personal leave entitlements. I requested that the Applicant’s provide an example to demonstrate this.
(b) A typographical error in the Agreement’s coverage clause which nominates Pumpkin Patch Pty Ltd and not Pumpkin Patch Originals Ltd as the employer to which the Agreement applies.
CONSIDERATION
[9] Schedule 3, Item 26 of the Transitional Act says as follows:
26 Resolving difficulties about application of this Division
(1) On application by a person covered by a transitional instrument, FWA may make a determination varying the transitional instrument:
(a) to resolve an uncertainty or difficulty relating to the interaction between the instrument and the National Employment Standards; or
(b) to make the instrument operate effectively with the National Employment Standards.
(2) A variation of a transitional instrument operates from the day specified in the determination, which may be a day before the determination is made.
[10] I am satisfied that the Agreement, being a pre-reform certified agreement is a transitional instrument within the meaning of Part 2 of Schedule 3 of the Transitional Act.
[11] It is the submission of the Applicant that at the time the Agreement was varied it was not subject to the Australian Fair Pay and Conditions Standard in regard to annual leave and personal leave as the Agreement dealt with those entitlements (Workplace Relations Act 1996 (Cth) clause 30, Part 7 of Schedule 7).
[12] The Applicant contends that the uncertainty or difficulty that arises in the case of the Agreement is that there is a potential for the NES in regard to annual leave and personal leave to apply to annualised part-time employees despite those employees being paid a higher hourly rate of pay to compensate them for payment of these entitlements.
[13] I requested that the Applicant address the question of whether there is a detriment to an employee under the Agreement in any respect when compared to the annual leave and personal leave entitlements under the National Employment Standard. The transitional act states as follows at clause 23(1) Division 1, Part 5 of Schedule 3:
23 The no detriment rule
(1) To the extent that a term of a transitional instrument is detrimental to an employee, in any respect, when compared to an entitlement of the employee under the National Employment Standards, the term of the transitional instrument is of no effect.
Note 1: A term of a transitional instrument that provides an entitlement that is at least as beneficial to an employee as a corresponding entitlement of the employee under the National Employment Standards will continue to have effect.
Note 2: Division 3 (which contains other general provisions about how the FW Act applies in relation to transitional instruments) is also relevant to how the National Employment Standards apply in relation to employees to whom transitional instruments apply.
Note 3: References to the National Employment Standards include a reference to the extended parental leave provisions and the extended notice of termination provisions (see sections 746 and 761 of the FW Act).
[14] The Applicant submits that under the Agreement no detriment exists as annualised part time employees are being paid in advance for annual leave and personal leave through the higher loaded rate of pay. It is the uncontested submission of the applicant that in practice annualised part time employees are able to and do take unpaid annual leave and personal leave calculated in accordance with clause 51 of the Agreement.
[15] Clause 51 provides for the taking of accrued leave on terms that are at least as beneficial as the NES.
[16] The custom and practice referred to above is important in that while the language of the agreement suggests annualised part time employees are not entitled to take leave in reality leave is applied for and taken just as occurs in the case of full time employees and part-time employees who are not engaged on annualised arrangements.
[17] I sought some further submissions from the Applicant to examine the claim and to be satisfied that no monetary detriment exists. The following example was provided by the Applicant.
Annual Leave
Tim is employed as a full time retail sales assistant in NSW. His base rate of pay under the agreement is currently $17.04 per hour. Tim is entitled to 4 weeks of paid annual leave under the Agreement and the National Employment Standard after 12 months continuous service. Annual leave is paid at Tim’s base hourly rate of pay of $17.04 per hour. In addition to the annual leave entitlement, Tim is also entitled to a 17.5% annual leave loading under the Agreement.
The calculation to determine the dollar value of Tim’s annual leave entitlement for a completed year of continuous service is outlined below:
1 week of annual leave = 38 hours
4 weeks x 38 hours = 152 hours of annual leave
152 hours x $17.04 = $2590.08
The dollar value of Tim’s annual leave loading entitlement is below:
$2590.08 x 17.5% = $453.26
Total annual leave payment for this employee is $2590.08 + $453.26 = $3043.34
The calculation to determine the monetary value of the annual leave entitlements (including annual leave loading) on an hourly basis is outlined below:
$3043.34/52 weeks/ 38 hours = $1.54 per hour
Personal Leave
Tim is employed as a full time retail sales assistant in NSW. His base rate of pay under the agreement is currently $17.04 per hour. Tim is entitled to 10 days of paid personal leave under the Agreement and the National Employment Standard after 12 months continuous service. Personal leave is paid at Tim’s base hourly rate of pay of $17.04 per hour.
The calculation to determine the dollar value of Tim’s personal leave entitlement for a completed year of continuous service is outlined below:
10 days personal leave at 7.6 hours per day = 76 hours per year
76 hours x $17.04 = $1295.04
The calculation to determine the monetary value of the personal leave entitlements on an hourly basis is outlined below:
$1295.04/52 weeks/ 38 hours = $0.65 per hour
Comparison with annualised part time rates
If Tim was employed on an annualised part time basis under the Agreement, his current hourly rate of pay would be $19.23 per hour.
The $19.23 per hour amount is calculated by taking the base hourly rate for a part time employee under the agreement and adding the hourly dollar value of both the annual leave and personal leave entitlements to the base hourly rate of pay. This calculation is outlined below:
$17.04 (base hourly rate) + $1.54 (dollar value of annual leave entitlements including annual leave loading) + $0.65 (dollar value of personal leave entitlements) = $19.23
Thus, Tim’s hourly rate incorporates the exact amount of the monetary value of the paid leave forgone. Moreover, the rate allows for payment of personal leave entitlements whether or not they are accessed by the employee.
[18] A central issue in this matter is whether the difficulty or uncertainty in clause 50 of the Agreement about the entitlements and their interaction with the NES can be resolved by a determination to amend the agreement in order to resolve that uncertainty or difficulty.
[19] Section 90(1) in Chapter 2, Part 2-2 of Division 6 of the Fair Work Act 2009 reads as follows:
90 Payment for annual leave
(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.
[20] Section 99 in Chapter 2, Part 2-2 of Division 7 of the Fair Work Act 2009 reads as follows:
99 Payment for paid personal/carer’s leave
If, in accordance with this Subdivision, an employee takes a period of paid personal/carer’s leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.
[21] I have had regard to the decision of his Honour Deputy President Hamilton in Banyule City Council v Australian Municipal, Administrative, Clerical and Services Union; Australian Nursing Federation 1where he said as follows at paragraph 19;
“However, on the submissions before me I am unable to conclude that a 25 percent loading in lieu of such entitlement means that the relevant provisions in the agreement are not ‘at least as beneficial’ to an employee as the corresponding entitlement in the National Employment Standards, as submitted by Banyule. I am unable on the material before me to find that those provisions are therefore of no effect by operation of Item 23, and that an amendment is required by Item 26.”
[22] I have adopted the reasoning of his Honour regarding the words “at least as beneficial” as they are found in item 23 of Schedule 3 of the TPCA to support my view that the loaded rate of pay for an annualised part time employee in the Agreement is at least as beneficial as the monetary value of the annual leave and personal leave entitlements in the NES. I have arrived at this view on the basis of the calculations provided by the applicant comparing non-annualised and annualised monetary entitlements under the Agreement.
[23] The question remaining within the terms of the Agreement is whether a difficulty or uncertainty exists regarding the entitlement of annualised part time employees to the non-monetary value of leave, being the entitlement to the time off work. I accept that the Agreement does not provide to annualised part time employees a clear entitlement to take annual leave and personal leave. I raised this concern with the applicant during the hearing on 12 November 2010. 2
[24] It is the Applicants contention as stated that in practice annualised part time employees apply for and are granted the non-monetary benefit of leave in exactly the same manner as all other employees. 3
[25] In light of my view expressed above regarding the respective monetary entitlements under the agreement and the NES, if the non-monetary entitlement under the terms of the agreement are at least as beneficial as the non-monetary entitlement in the NES then it follows logically that overall the annual leave and personal leave entitlements set out in clause 50 and 51 of the Agreement would not cause a detriment to annualised part time employees that would give rise to those clauses being of no effect due to the operation of item 23 Schedule 3 of the TPCA.
[26] As outlined in the affidavit of Ms Johanne McDonald the Applicant currently employs 1364 employees of which 697 are employed on an annualised part time basis. If the difficulty or uncertainty raised by the Applicant is not resolved by an order and if it were the case that the NES entitlements were to apply to annualised part time employees in conjunction with the higher rates this unexpected cost would be prohibitive for the business.
[27] The language found in item 23(1) of Schedule 3, and particularly Note 1 where the words “at least as beneficial” are included, are intended to operate to avoid a situation where an employer would be required to pay an entitlement in accordance with the NES when an existing entitlement can be shown to be at least as beneficial.
[28] I also agree with the submission of the Applicant that a distinction can be drawn between circumstances involving inconsistency with the terms of the NES when considering the approval of a new enterprise agreement, and the question of whether a transitional instrument is detrimental to an employee in any respect under the NES.
[29] The terms of the amendments to the Agreement as sought will make clear that annualised part time employees have an entitlement to both the monetary and non-monetary benefit of annual and personal leave on a basis that is “at least as beneficial” as the NES.
[30] The terms of the proposed amendments also seek to clarify uncertainty regarding requests to cash out annual leave and the relationship between that entitlements and section 93 and section 101 of the Fair Work Act 2009. The amendment as sought seeks to make clear that cashing out does not apply to annualised part time employees in order to make the transitional instrument operate effectively with the NES.
[31] With regard to the issue of a typographical error in the Agreement’s coverage clause which nominates Pumpkin Patch Pty Ltd and not Pumpkin Patch Originals Ltd as the employer to which the Agreement applies I accept the submission of the applicant that this was an inadvertent error at the time of the making of the application for approval of the agreement and does not prevent me from considering the application currently before me.
[32] I am satisfied that I have jurisdiction to deal with the application to vary the agreement by reference to both Items 26(1)(a) and (b) within Schedule 3. I accept that a difficulty has arisen that falls within the category of an unanticipated consequence of the kind found to exist in AMWU v OneSteel Wire Pty Ltd 4 and Banyule City Council v Australian Municipal, Administrative, Clerical and Services Union; Australian Nursing Federation.5
[33] I have had regard to the proposed amendments provided to me by the applicant in submissions. I have decided to make an order in similar but slightly amended terms to the words as proposed by the applicant to amend clause 50 of the Agreement which I believe more effectively resolve the uncertainty or difficulty relating to the interaction between the transitional instrument and the NES. The order PR506246 will reflect the wordings as proposed by the Applicant with regard to clause 51, 53,55,56,57 and 58 of the Agreement.
[34] I have decided that the variation should commence operation at the same time as the safety net provisions in Chapter 2, Part 2-2 Division 6 and 7 of the Fair Work Act 2009, that being 1 January 2010. I am entitled to make such an order in accordance with item 26(2) Schedule 3 of the TPCA Act.
COMMISSIONER
1 [2010] FWA 4520
2 Transcript PN 13 - 14
3 Transcript PN 16
4 [2010] FWAFB 4017
5 [2010] FWA 4520
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