Quest Personnel Temping Pty Ltd and Commissioner of Taxation

[2001] AATA 124

DECISION AND REASONS FOR DECISION [2001] AATA 124

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  VT1999/438-439

TAXATION       APPEALS      DIVISION          )          
           Re      QUEST PERSONNEL TEMPING PTY LTD       
  Applicant
           And    COMMISSIONER OF TAXATION
  Respondent

DECISION

Tribunal       Mr B. H. Pascoe, Senior Member

Date20 February 2001

PlaceMelbourne

Decision      The Tribunal affirms the decision under review.

....…(Sgd) B. H. Pascoe............
  Senior Member
CATCHWORDS
SUPERANNUATION GUARANTEE CHARGE – employer of temporary employees – employees providing services to client under contract – employee contract specified minimum number of hours of work – actual hours in excess of minimum hours – whether ordinary hours of work
Superannuation Guarantee (Administration) Act 1992
Kezich v Leighton Contractors Pty Ltd (1974) 131 CLR 362
Catlow v Accident Compensation Commission (1989) 167 CLR 543

REASONS FOR DECISION

20 February 2001               Mr B. H. Pascoe, Senior Member

1. These applications are for the review of decisions of the respondent to disallow objections against assessments of Superannuation Guarantee Charge in respect of the years ended 30 June 1997 and 1998.  The principal issue was the calculation of ordinary times earnings of casual employees of the applicant.

2. At the hearing, the applicant was represented by Mr T. Murphy of counsel and the respondent by Mr I. Young of counsel.  Evidence was given by Mr P. Tribe, the former general manager of the applicant; Mr G. Young, Ms L. Limmer and Ms H. Pappas, account managers of the applicant; and Ms C. Hogger, an employee of the applicant.

3. The applicant, Quest Personnel Temping Pty Ltd ("Quest"), employed temporary employees to provide services to its clients with short term staff needs.  Each employee relevant to this application received a written offer of employment from Quest which specified the hours and days of work either as:

(a)"A minimum of three standard shifts each week as notified by Quest from time to time."

(b)"A minimum of five standard shifts each fortnight as notified by Quest from time to time."

(c)"7 hours 36 minutes per rostered day."

(d)"As notified by Quest from time to time."

(e)"8 am – 4 pm"

Superannuation contributions in relation to the employees were made by Quest pursuant to the Superannuation Guarantee (Administration) Act 1992 ("the Act") on the basis that the minimum standard shifts set out in the offer of employment or, where the wording was that in (c) to (e) above, either the minimum shifts under a prior offer of employment or the normal number of shifts worked by the employee constituted ordinary time earnings.  Pay for additional shifts was regarded as overtime.  The respondent had formed the view that superannuation contributions should have been made based on the number of hours actually worked by the employees and issued assessments on the basis that there was a superannuation guarantee shortfall in the relevant years.

1. Mr Tribe gave evidence that Quest was a successful tenderer in 1995 to provide skilled data entry operators to the Victorian Police Force ("VPF") to work in its Central Data Entry Bureau ("CDEB").  The tender required the provision of staff 24 hours per day 365 days per year with up to 18 to 20 operators per shift and an estimated 2025 hours per week.  Mr Tribe had estimated that a pool of between 75 and 85 operators working five shifts per fortnight was required to cover the contract.  An account manager was employed by Quest and was responsible for ensuring all shifts were fully staffed.  At the beginning of each month employees were asked which shifts they would prefer to work and a roster for the month was prepared.  The account manager maintained a list of employees who were prepared to work additional shifts over and above the minimum shifts stipulated in their offer of employment.  Such employees were offered additional shifts to cover any shortfalls on the roster or to replace a rostered employee who became unavailable.  It was accepted that some employees were unable to work additional shifts, some employees were anxious to work additional shifts, some preferred to work on weekends and some at night.  Mr Tribe maintained that additional shifts were voluntary and no operator was or could be compelled to work additional shifts beyond the minimum contracted.  No loading was paid on the standard rate for additional shifts worked but such additional shifts were treated as overtime by Quest and not ordinary time for the purpose of superannuation contributions.

2. Mr Tribe said that the reality of performing the CDEB contract had been different from the expectations.  The quantity of reports to be entered, the mix of reports and productivity varied from original estimates.  The number of operators in the pool varied from the high 60s to the high 80s.  On reflection, Mr Tribe believed that it was likely that 100 were needed in the pool to ensure adequate coverage of the contract.  Numbers below 75 resulted in problems in having enough operators to fill the required shifts.  He accepted that many employees worked more than the standard of five shifts per fortnight.  While Mr Tribe maintained that the VPF estimate of 2025 hours per week was not necessarily accurate and, frequently, less hours were required, he acknowledged that five shifts per fortnight by 75 to 85 operators could not generate those hours.  With each shift being seven and a half hours, 4050 hours per fortnight required 540 shifts and, at five per employee, needed 108 employees.  He accepted that many of the periods showed a pattern of a number of employees working regularly beyond the minimum number of shifts contracted for.

3. Mr Young, Ms Limmer and Ms Pappas were account managers employed by Quest and responsible for the VPF contract during the relevant period.  Each gave similar evidence and confirmed the arrangements outlined by Mr Tribe.  They confirmed that the standard offer of employment for the CDEB contract showed five shifts per fortnight even where an employee asked for and worked five shifts per week on a regular basis.  They said that the need to cover absences and provide sufficient employees on each shift was a constant problem and they were aware of employees who were anxious to work extra shifts or, although not anxious, were prepared to do extra shifts if asked.  However, they believed that no one was compelled to work extra shifts beyond the five per fortnight and there were no consequences of not doing so.  Some employees worked extra shifts regularly, some occasionally and some none at all.  However, each account manager believed that there was no promise or guarantee of work beyond the standard five shifts per fortnight.

4. Subsequent to the CDEB contract, Quest was invited to provide data entry operators in the Firearms Registry and the Criminal Records branch of the VPF.  The time requirements were less than for CDEB.  Similar arrangements were made but, at the hearing, the applicant confirmed that it was not pursuing the objection relevant to the Firearms Registry employees as that section involved consistent and regular shifts by those employees.  From 1 July 1996, Quest commenced a contract with Westpac Banking Corporation ("Westpac") for the provision of tellers.  A pool of employees was recruited and, again, some of those employees worked extra time beyond the minimum contracted for to replace another unavailable employee or to meet additional requirements.  Any such additional time was treated as overtime for superannuation purposes.  From June 1997, Westpac changed its requirements and covered absences with its own employees so that no extra time was required by Quest employees.

5. Section 16 of the Act imposes a superannuation guarantee charge on an employer's superannuation guarantee shortfall for a year. Section 19 provides that a superannuation guarantee shortfall is the prescribed percentage for that year of the total salary or wages paid to an employee. Under section 23(5), where an employer contributes to a complying superannuation fund, the charge percentage is reduced by "the percentage figure that expressed the contribution to the fund … as a proportion of the total amount of the employee's ordinary times earnings". It was common ground in this case that, if the applicant's contention of what constitutes "ordinary time earnings" is correct, then there was no shortfall. Section 6 defines "ordinary times earnings" as "the total of … earnings in respect of ordinary hours of work…".

6. For the applicant it was submitted that the ordinary hours of work for the relevant employees were the minimum hours that the employee had agreed to work under the contract with the employer.  It was said that if the legislators had intended to mean actual hours worked it could have easily said so.  Mr Murphy argued that the legislation clearly excludes overtime payments.  In this case each employee had agreed to work a particular number of hours and the applicant could not compel such employee to work longer hours.

7. For the respondent it was submitted that the agreement with each employee specified the minimum number of hours to be worked but that the actual hours worked by the employees in dispute regularly, as a matter of course, exceeded those minimum hours.  It was argued that such actual hours represented "ordinary hours of work" and payment therefor represented "ordinary times earnings".  Mr Young maintained that the facts showed that the applicant could not have performed the CDEB contract with its pool of employees unless, as a matter of course, the employees worked more than the five shifts per fortnight.  It was said that a study of the payroll records showed that many employees regularly worked more than five shifts per fortnight.  An example of a Ms Moiler was given who had been referred to by Mr Tribe as one who "from time to time accepted and worked additional shifts".  Payroll records showed that she, in the 1997 year, worked either four or five standard shifts per week in 44 weeks.  It was argued that the expression "ordinary hours of work" meant hours of work that were normal, regular or customary.  Mr Young submitted that the hours in the employee agreements were not specified or stated with precision, detail or particularity but simply a minimum number of hours which were less than those ordinarily worked.

8. Both parties referred to a respondent's ruling SGR94/4.  This ruling sets out the respondent's understanding of the meaning of "ordinary hours of work".  Paragraphs 7 to 10 of the ruling state:

   "Ordinary hours of work
   7.  The ordinary hours of work may be specified in a statute or under an industrial award.  If so, the ordinary hours specified are also the ordinary hours of work under the SGAA.
   8.  If an employee is not covered by an award, but has agreed to work a certain number of hours, those hours are the employee's ordinary hours of work.  The hours agreed will be determined in the light of all the circumstances (for example, hours actually worked, the industry norm, or what is contained in any written agreement).
   9.  If the ordinary hours of work are not specified or agreed, the ordinary hours of work will be the hours actually worked and any hours of paid leave.
   10.  Ordinary hours of work are not limited to hours between 9am to 5pm, Monday to Friday.  They could include night and weekend shifts."

Paragraph 19 stated that overtime payments were excluded as being paid for work outside ordinary hours of work.  For the applicant, it was argued that any payments for work in excess of that agreed with the employee in the offer of employment were indistinguishable from overtime payments.  For the respondent, it was argued that the offer of employment simply specified a minimum hours of work and it was the actual hours of work ordinarily performed by the employee which constituted what the employee had agreed to do as ordinary hours of work.  Mr Young suggested that an offer of employment could have provided for a minimum of one hour per week but, if the working pattern was 30 hours per week, it was not logical to regard the additional 29 hours as not ordinary hours of work.

1. In Kezich v Leighton Contractors Pty Ltd (1974) 131 CLR 362, the High Court was concerned with an entitlement to compensation for injury under the Workers' Compensation Act 1912-1973 (W.A.).  This provided for compensation of an amount equal to the weekly earnings of the worker being "the amount of ordinary wage or salary (including any over award payment) the worker would have received for the ordinary hours he would have worked".  Gibbs J said (at pages 364-365):

   "What has to be determined is the meaning that those words have in the Act and since the words 'ordinary hours' are common English words they should, in accordance with established principles of statutory construction, be understood in their natural meaning unless the context otherwise requires.
   The word 'ordinary' means 'regular, normal, customary, usual'.  A man's 'ordinary hours' of work are the hours during which it is usual for him to work.  There is nothing in the expression 'ordinary hours' that connotes payment at any particular rate, and to understand the words as meaning 'hours during which work is done for which overtime is not paid' would be to place upon them a meaning which they simply do not bear.  The expression 'the ordinary hours he would have worked' in my opinion means the same as 'the hours he would ordinarily have worked'…
   The clause is not concerned with the question whether the 'ordinary wage' included something extra for overtime, but solely with the question what was ordinary for the particular worker concerned."

In Catlow v Accident Compensation Commission (1989) 167 CLR 543, the High Court was concerned with the expression "normal number of hours per week" in the Victorian Accident Compensation Act 1985.  Dawson J said (at page 556):

"…that if there is to be an ordinary time rate of pay it must be ordinary in relation to something.  Clearly the thing selected is the normal or standard number of hours worked per week.  It cannot include overtime hours because they are extraordinary and incompatible with an ordinary time rate of pay."

McHugh J (at page 566) said:

"Accordingly, in my opinion, in s.95 'normal number of hours per week' means the ordinary or standard hours fixed by the terms of the employment."

1. In this case it is difficult to say that the ordinary hours of work were fixed by the terms of the employment agreement.  Clearly, those employees whose agreement specified "7 hours 36 minutes per rostered day" or "8 am – 4 pm" or "as notified by Quest from time to time" could not be said to have ordinary hours of work, in the sense of number of hours per week or fortnight, fixed by agreement.  Those employees whose agreement stated "a minimum of three standard shifts each week" or "a minimum of five standard shifts each fortnight" or "as notified by Quest from time to time" had agreed to a minimum number of hours of work but, if it was normal, regular, customary or usual for the employee to work more than that minimum number of shifts, it is difficult to see that those actual hours worked were not "ordinary hours of work".  In one sense, the meaning of ordinary can be considered as the opposite of extraordinary.  If the additional shifts worked on a normal or regular basis could not be said to be extraordinary, being other than ordinary or unusual, it is difficult to see that they are not ordinary hours of work.

2. It is relevant to consider the circumstances under which these employees were employed.  They were described as temporary employees employed to meet temporary need of clients of Quest.  In particular, Quest had to meet the needs of its contract with VPF.  I am satisfied that Quest could not meet the requirements of the CDEB contract if all the employees in the relevant pool worked no more than five standard shifts per fortnight.  Therefore, it was and had to be normal, usual, regular for additional shifts to be worked.  Some employees clearly sought to work more and some were prepared to do so if requested.  I am unable to see that the hours actually worked, in the context of the employment arrangements entered into here, were not the ordinary hours of work.

3. It is possible that, in relation to some individual employees, an occasional shift beyond the minimum specified in their agreement was seen by both the employee and Quest as helping out in an emergency and extraordinary and unusual.  However, no evidence was led to allow me to find which, if any, employees could come within this category.

4. It follows that, in my view, the actual hours of work of the relevant employees in this case were the ordinary hours of work, their earnings were ordinary times earnings and Quest is liable for a superannuation guarantee charge in respect of the shortfall in the relevant years.  The decision under review should be affirmed.

   I certify that the sixteen (16) preceding paragraphs are a true copy of the reasons for the decision herein of

   Mr B. H. Pascoe, Senior Member

   Signed:         .....................................................................................
     Personal Assistant

   Date/s of Hearing  4 September and 16 October 2000
   Date of Decision  20 February 2001
   Counsel for the Applicant        Mr T. Murphy
   Solicitor for the Applicant         Rigby Cooke
   Counsel for the Respondent    Mr I. Young
   Solicitor for the Respondent    Australian Taxation Office Legal Practice