Rhodes v Firepower Pump Systems Pty Ltd Trading as Territory Fire Service and Training
[2020] FCCA 1649
•11 June 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| RHODES v FIREPOWER PUMP SYSTEMS PTY LTD TRADING AS TERRITORY FIRE SERVICE & TRAINING | [2020] FCCA 1649 |
| Catchwords: INDUSTRIAL LAW – Fair Work – proper interpretation of ‘redundancy’ in clause 18.2 of Plumbing and Fire Sprinklers Award 2010 – where ‘redundancy’ given a broad definition in Award as being ‘where an employee ceases to be employed by an employer’ – ‘redundancy’ as defined in Award includes resignation. INDUSTRIAL LAW – Fair Work – over-Award payments – amount due and owing for ‘redundancy’ – payments over-Award rates for ordinary hours do not satisfy redundancy or severance payment obligations under Award. |
| Legislation: Australian Workers’ Union Construction and Maintenance Award 1989 |
| Cases cited: 4 Yearly Review of Modern Awards – Construction Awards [2018] FWCFB 6019 4 Yearly Review of Modern Awards – Plain Language – Standard Clauses [2018] FWCFB 7449 Anthony R Van Der Heul v JC and SJ Van Der Heul (Ecoson Contractors) [1993] SAIRC 56 Construction, Forestry, Mining and Energy Union v Concrete Constructions (WA) Pty Ltd [2017] FWCFB 3912 Construction, Forestry, Mining and Energy Union and McCormick Civil Constructions Pty Ltd; National Building and Construction Industry Award 1990 [1993] CthArbRp 801; (1993) 7 CAR 111 Mc Innes v Aegis AC Pty Ltd [2020] FCCA 1142 R v Industrial Commission of South Australia; ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6 The Australian Workers’ Union – Re Redundancy – PR 964916 [2005] AIRC 974 Yirra Pty Ltd (t/as Richmond Demolition and Salvage) v Summerton [2009] FCAFC 50 Other: CR 2007/32, Income Tax: tax treatment of payments to members of the South Australian Building Industry Redundancy Scheme Trust, 1 July 2000 |
| Applicant: | DANIEL JAMES PETER RHODES |
| Respondent: | FIREPOWER PUMP SYSTEMS PTY LTD T/AS TERRITORY FIRE SERVICE & TRAINING |
| File Number: | LNG 20 of 2020 |
| Judgment of: | Judge Riethmuller |
| Hearing date: | 9 and 11 June 2020 |
| Date of Last Submission: | 11 June 2020 |
| Delivered at: | Hobart |
| Delivered on: | 11 June 2020 |
REPRESENTATION
| The Applicant appeared in person. |
| Mr Cromarty and Mr Tripp appeared as representatives of the Respondent. |
| Amicus Curiae | Ms Neal of the Fair Work Ombudsman |
ORDERS
The Respondent pay a total of $12,537.29 to the Applicant as follows:
(a)A first instalment of $4179.10 by 11 July 2020;
(b)A second instalment of $4179.10 by 11 August 2020; and
(c)A third and final instalment of $4179.09 by 11 September 2020.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT HOBART |
LNG 20 of 2020
| DANIEL JAMES PETER RHODES |
Applicant
And
| FIREPOWER PUMP SYSTEMS PTY LTD T/AS TERRITORY FIRE SERVICE & TRAINING |
Respondent
REASONS FOR JUDGMENT
(Delivered extempore)
The applicant in this small claim matter seeks payment of leave loading together with a redundancy payment, following his resignation from employment with the respondent. There is no dispute as to the facts, in that the calculations provided by the applicant are agreed. Three issues arise: the first is whether or not the applicant’s position falls within the Plumbing and Fire Sprinklers Award 2010 (‘Plumbing and Fire Award’), or is more appropriately covered by the Electrical, Electronic and Communications Contracting Award 2010 (‘Electrical Award’), or is, indeed, not squarely covered by an Award and would fall back to the statutory provisions of the Fair Work Act 2009 (Cth) (‘the Act’).
The second issue that arises (if the applicant is covered by the Plumbing and Fire Award) is what is the proper interpretation and operation of cl.18.2 of that Award in the circumstances of this case, that is, where the position was ongoing and the applicant chose to resign and leave his position, rather than the position coming to an end (either as a result of a lack of work or the employer no longer wishing to have that position continue).
The third issue is whether or not the over-the-Award payments that have been made by the employer to the employee through the period of the contract of employment, can be taken into account in determining what amount is due and owing.
Issue One
Which Award, if any, covered the applicant’s position?
I turn first then to the question of Award coverage. The applicant’s duties are conveniently set out in summary form in the annexure to his employment contract, which provided as follows:
POSITION SUMMARY:
Perform servicing of fire assets.
RESPONSIBILITIES:
· Service and install fire extinguishers.
· Service hose reels, Fire Hydrants booster systems and fire pumps.
· Maintain exit lights and fire indicator panels.
· Maintain Fire blankets
· Be conversant with the fire code requirements for fire doors
· Fill in basic forms and work sheets and have an eye for detail.
· Ensure run sheets etc. are correctly filled out first time every time.
· Ensure that all of your work is up to Australian standards.
The ‘coverage’ provisions of the Plumbing and Fire Award can be seen in cls.4.1(a) and (b) and 4.7, which provide as follows:
4.1 This industry and occupational award covers:
(a) employers throughout Australia in the industry of the provision of plumbing and/or fire sprinkler fitting services by contract and their employees in the classifications listed in Schedule B—Classification Definitions; and
(b) employers throughout Australia with respect to their employees engaged in the occupations of plumbing and/or fire sprinkler fitting classifications within Schedule B—Classification Definitions, and to those employees.
[…]
4.7 For the purpose of clause 4.1:
(a) plumbing means plumbing, gasfitting ,roof plumbing, lead burning, ship plumbing, heating, air conditioning or ventilation plumbing, irrigation installation, pipe-fitting or domestic engineering work, whether prefabricated or not, engaged on-site or in construction work or any work in or in connection with:
(i) sheet lead, galvanised iron or other classes of sheet metal or any other materials which supersede the materials usually fixed by plumbers;
(ii) lead, wrought, cast or sheet iron, copper, brass or other classes of pipework;
(iii) water (hot or cold),steam, gas, air, vacuum, heating or ventilating appliances, fittings, services or installations; or
(iv) house, ship, sanitary, chemical or general plumbing or drainage and irrigation.
[4.7(b) substituted by PR536408 ppc 13Jun13]
(b) fire sprinkler fitting means the erection, fitting, fixing, altering, inspecting, testing, maintaining, retrofitting, overhauling or repairing of apparatus, pipes and/or fittings in and/or outside of buildings, ships or other structures for the extinguishment of fire by automatic sprinklers and/or other fire protection systems.
The Award has definitions for ‘inspection and testing’, which provides:
inspection and testing means
(a) to inspect by visual examination the components of fire protection systems or equipment to establish correct settings, physical condition or fitness for purpose under AS 1851;and
(b) to test, after inspecting, by the confirmation of correct function or performance of a component or system under AS 1851
Together with a definition for a ‘fire technician’, which is:
fire technician means an employee who undertakes the inspection and testing functions on fire protection systems as detailed in the Australian Standard (AS 1851) following commissioning of the fire protection system after construction
The term ‘fire technician’ is used in the categories of different levels of employee in the Plumbing and Fire Award. Whilst the Plumbing and Fire Award, at first blush, appears to be focused upon the construction industry, it also seems clear from cl.4.7(b) that it includes, ‘fixing, altering, inspecting, testing, maintaining’ and so forth, various pieces of equipment involved in fire protection.
The respondent points out that fire protection is also covered under the Electrical Award. This Award provides the following coverage:
4.1 This industry award covers employers throughout Australia in the industry of electrical services provided by electrical, electronics and communications contractors and their employees in the classifications within Schedule B—Classification Definitions to the exclusion of any other modern award.
4.2 Without limiting the generality of that exclusion, the award does not cover:
(a) employers who are manufacturers or vendors of plant or equipment in high or low tension power stations; and/or substations for the generation and/or transmission of electric power in respect of the manufacturing section of the business or their employees engaged in that section; or
(b) employers operating a business, the primary purpose of which is the manufacture and/or vending of plant and equipment in respect of those parts or divisions of the business which predominantly engage in the manufacture and/or vending of plant and equipment or the installation, assembly, refurbishment and maintenance of that plant and equipment or their employees engaged in that part or division.
[…]
4.8 For the purposes of clause 4.1, electrical services includes:
(a) the maintenance of electric power distribution lines and all associated work; and/or
(b) the installation of electric light and power, all classes of assembly, wiring, repair and maintenance of electrical installations and appliances including, without in any way limiting the generality of the foregoing, the assembling, installing, diagnosing, servicing and rectifying of faults in any of the following:
· electronic products (e.g. television receivers, video cassette recorders, audio equipment/systems, home computers, etc) and any combination of these products together with ancillary devices and/or equipment;
· television and radio transmitting devices including: LF (low frequency);HF (high frequency);VHF (very high frequency);UHF (ultra high frequency);and CB radios;
· telemetry systems and ancillary equipment;
· multiple access television distribution systems;
· computers and their peripherals;
· microwave and associated equipment;
· electrically operated refrigeration and air conditioning plant and/or equipment;
· telephone communication devices;
· fibre optic transmission lines and associated equipment;
· public address systems;
· domestic satellite television receivers;
· maritime electronic equipment (including depth sounders, radar, etc);
· security alarm systems;
· fire alarm systems;
· superconductivity systems and associated equipment;
· electromagnetic devices;
· instrumentation; and
· all work incidental to the above.
Importantly, in cl.4.8, the Electrical Award covers the installation of light and power as well as repair and maintenance of fire alarm systems. The term ‘fire alarm systems’ is given an extended definition in the Award, as follows:
fire alarm systems means the industry and trades which are concerned with the installation, repair, modification, maintenance, testing and servicing of fire alarms, detectors, fire-suppression signs, bells and associated equipment
It seems to me that when one reads both Awards as a whole, in a sense, they can be conveniently distinguished on the basis that whilst the Electrical Award definitely covers the electronic systems and electric systems for lights and bells for fire protection, once one moves to the more holistic arrangement for fire systems (which involves water, sprinklers and other devices), the systems as a whole are more appropriately covered by the Plumbing and Fire Award, rather than the Electrical Award.
The nature and style of the work appears to generally fall within the intended coverage of the Plumbing and Fire Award: importantly, the applicant was servicing hose reels, hydrants, boosters and pumps, as well as fire alarms and panels and then other devices, such as fire blankets and extinguishers. It seems to me that the nature of the work is within the coverage of the Plumbing and Fire Award, and it is clear that that Award should apply to the applicant and not the Electrical Award. It does not seem to me that the nature of the work is outside of the Plumbing and Fire Award to the extent that one would conclude that the Award did not apply at all. I, therefore, find on the first issue that the appropriate award is the Plumbing and Fire Award.
Issue Two
Does ‘redundancy’ as defined in Clause 18.2 of the Plumbing and Fire Award include resignation?
On the second issue in this matter, whether or not the applicant’s resignation falls within the award definition of ‘redundancy’, the relevant clause of the Plumbing and Fire Award is cl.18.2, which states:
18.2 Definition
For the purposes of this clause, redundancy means a situation where an employee ceases to be employed by an employer other than for reasons of misconduct or refusal of duty. Redundant has a corresponding meaning.
This is a curious clause in that the ordinary meaning of the word ‘redundancy’ would not, it seems to me, include a situation where an employee chooses to resign and leave ongoing employment. It also seems that an extended definition of ‘redundancy’ could easily be accommodated on the basis that in various industries with different corporate structures and the like, more technical definitions of redundancy could miss cases where on a practical level people have been made redundant in the ordinary, common sense use of the term, but not formally by a particular employer terminating employment. In this sense, it initially appears that the applicant is outside the breadth of the idea of redundancy. However, the clause itself provides an extended meaning to cover any cessation of employment that does not involve misconduct or refusal of duty. A more literal reading of the clause gives redundancy a meaning well beyond the ordinary use of the word.
This clause has had a long history and it took some time to identify some authoritative statements about the operation of the Plumbing and Fire Award. In the 4 Yearly Review of Modern Awards – Construction Awards [2018] FWCFB 6019, the Commission said (at paragraph [82]):
[82] In respect of the claim to alter the definition of redundancy, it may be accepted that the definition adopted in the form of the 1990 variation did not apparently match the intention of Commissioner Palmer that the scheme only apply to employer-initiated terminations of employment. However that may be, the definition is a foundational element of the industry-scheme which itself, as the Award Modernisation Full Bench found in 2009, has become an established feature of the building and construction industry. Moreover it is part of the broader application of the scheme which the Full Bench found it necessary to take into account in order to reach the conclusion that the scheme was not less beneficial than the NES provisions. That is a matter relevant to the requirement for fairness in the modern awards objective. Changing the definition would, we consider, alter the industrial balance of the scheme and its historic industry-specific character. The same conclusion may be reached in respect of the proposed exemption of small employers, as proposed in different forms by the HIA and the MBA. Further, as already stated, it has not been demonstrated that the rationale for not excluding small employers does not remain as valid in today’s circumstances as it was found to be in 1990.
This paragraph seems to acknowledge that the initial intention of Commissioner Palmer, when this type of clause was initially used, was that it would not extend to resignations. However, it has come to have the extended meaning and been used as such for some time. This position was, again, noted and not departed from in the 4 Yearly Review of Modern Awards – Plain Language – Standard Clauses [2018] FWCFB 7449 (at paragraph [19]):
[19] We note that the industry-specific redundancy schemes in the Building and Construction General On-site Award 2010 (Building Award) and the Plumbing and Fire Sprinklers Award 2010 (Plumbing and Fire Award) were recently considered by the Construction Full Bench in the Award Stage of the Review and that no changes were made to these provisions. [FN: [2018] FWCFB 6019 at [83]-[84]]. In that matter, the Housing Industry Association (HIA) sought to remove the industry-specific redundancy scheme in the Building Award, or in the alternative, to amend the definition of redundancy. A similar claim was made by the Master Plumbers Group (MPG) in relation to the Plumbing and Fire Award. The Full Bench rejected these claims and concluded:
‘[83] As was found to be the case in the Transitional Review, we consider that the cases advanced by the HIA, the MBA and the CCF amount to little more than a re-agitation of the issues heard and determined by the Award Modernisation Full Bench. No cogent reasons have been advanced to depart from the conclusions reached by the Full Bench, and the evidence has not demonstrated any relevant change in circumstances. We do not consider that any variation to clause 17 is necessary in order for the Building Award to meet the modern awards objective, or that the variations proposed by the claimants would necessarily achieve the objective. The claims to vary clause 17 of the Building Award are therefore rejected.
[84] With respect to the Plumbing and Fire Award, we consider the same conclusions apply for the same reasons, and the MPG claims are rejected.’ [FN: Ibid at [83]–[84]].
There has been little judicial consideration of the operation of clauses in terms of cl.18.2 or similar, even though they do appear in quite a large number of Awards and have done so for many years now. In Anthony R. Van Der Heul v J.C. and S.J. Van Der Heul (Ecoson Contractors) [1993] SAIRC 56, an Industrial Magistrate found that an equivalent clause covered the resignation of an employee. Other cases concluded that it covered a situation that involved wrongful dismissal, rather than redundancy: see Inspector Jonathan Andrews v Tomlinson’s Concrete Pty Ltd [2000] NSWCIMC 24 and Construction, Forestry, Mining and Energy Union and McCormick Civil Constructions Pty Ltd; National Building and Construction Industry Award 1990 [1993] CthArbRp 801; (1993) 7 CAR 111.
When the Australian Workers’ Union Construction and Maintenance Award 1989 was ‘simplified’ in 2002, a redundancy clause in similar terms was altered to change the definition back to the more limited common meaning of ‘redundant’. However, this clause was, again, altered in 2005 on the basis that the agreement to the change by The Australian Workers’ Union was in error: see The Australian Workers’ Union – Re Redundancy – PR 964916 [2005] AIRC 974.
It also appears that issues around the operation of this type of clause was in the government’s mind back in the mid-2000’s, as they made mention of it in the explanatory memorandum to the Workplace Relations Amendment (Work Choices) Act 2005 (‘Workplace Relations Act’), where (at paragraph [1609]), the government said:
1609. Some current awards define redundancy as occurring when an employee ceases to be employed by an employer in any situation, other than for reasons of misconduct or refusal of duty. This broad definition of redundancy may lead to redundancy payments being paid in some circumstances where termination of employment was not at the initiative of the employer and on the grounds of operational requirements. This includes, for example, to the estate of an employee that has died while still employed. Award terms providing for redundancy payments in ordinary resignation situations are also not to be treated as a redundancy.
This led to legislation that required clauses of this type to be categorised either as a genuine redundancy or an allowable incentive-based payment under s.513 of the Workplace Relations Act in order for those clauses to be valid. This in turn led to litigation. A State Magistrate in South Australia found in favour of an employee who resigned on the basis of such a clause in an Award: see Summerton v Yirra Pty Ltd t/as Richmond Demolition and Salvage [2008] SAIRC 43.
This decision was appealed to the Federal Court of Australia: see Yirra Pty Ltd (t/as Richmond Demolition and Salvage) v Summerton [2009] FCAFC 50 (‘Yirra’s case’). In Yirra’s case, Spender ACJ, although in the minority on the outcome, noted that at common law ‘redundancy’ had its usual meaning, referring to a situation where an employer no longer wished to have anyone doing a particular job: see paragraph [30] where his Honour referred to Bray CJ’s comments in R v Industrial Commission of South Australia; ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6 at paragraph [8]. Spender ACJ, went on (at paragraph [39]) to state that the clause:
39. …contemplates payments in all cases where the employee resigns, and in all cases where the employer has terminated the employment other than on the grounds of operational requirements or where the employer is insolvent (regardless of the number of employees the employer has), excepting only where the employer has terminated the employment for misconduct or refusal of duty.
The majority judges, Graham and Tracey JJ, took the same view as to the interpretation of the clause itself, saying (at paragraph [110]):
110. It is clear that, but for the operation of certain statutory provisions, the employee would have an entitlement to redundancy pay under the award.
More recently, in Construction, Forestry, Mining and Energy Union v Concrete Constructions (WA) Pty Ltd [2017] FWCFB 3912, the Commission noted (at paragraph [13]) that:
13. This clause does not require a dismissal and so would apply when the employment of an employee engaged for a fixed term or a specified task comes to an end.
The effect of the clause is that a payment made under the clause may, in some cases be such as to fall within the common law understanding of a redundancy payment, but in other cases would be what the common law would categorise as a termination or severance payment. Under these clauses, the term ‘redundant’ has been given quite an extended meaning, taking it outside of its normal, everyday meaning and certainly well-beyond the common law meaning that would be ascribed to that term.
This difference between the Award definition and the ordinary definition of ‘redundancy’ can now be seen in other areas. For example, in an Australian Tax Office Class Ruling on whether a payment was within the definition of an ‘eligible termination payment’, when made under this clause through a trust fund, the Commissioner found that such a payment could only be assessed as a potential ‘bona fide redundancy’ payment on a case-by-case basis; and said ‘this can include resignation, age retirement, permanent disability and death as well as bona fide redundancy’: see CR 2007/32, Income Tax: tax treatment of payments to members of the South Australian Building Industry Redundancy Scheme Trust, 1 July 2000 at paragraph [60].
Considering the authorities that I have been able to locate on this difficult issue, I have come to the view that the proper interpretation of the clause is that it does cover a situation where an employee resigns. In this regard, it also seems to me that I am bound by the Full Court of the Federal Court’s decision in Yirra’s case and that the remaining other authorities and treatments of the clause are consistent with that interpretation.
I, therefore, find that the clause does cover the situation in this case where the applicant resigned.
Issue Three
Does payment of Over-Award rates satisfy the redundancy obligation?
I turn then to the final issue that arises in this case, which is whether or not the over-Award payments made under the contract could otherwise be relied upon by the employer as showing that a sufficient amount has been paid over the course of the contract to satisfy the totality of the minimum requirements under the Award. This area of the law is also difficult, as is apparent from the many of the cases in the past. I recently reviewed this area of law in Mc Innes v Aegis AC Pty Ltd [2020] FCCA 1142, where I summarised the law (at paragraphs [37] to [40]) as follows:
37. The interactions between often-simplistic contracts entered into between employers and employees, and the complexity of the minimum payment requirements imposed by the many and varied modern Awards present many difficulties. Disputes commonly arise with respect to relatively simple contracts (such as those in this case) when the employer has in mind a simple flat rate and the employee assumes that the rate set is only the base rate and that the other entitlements under an Award will also be payable (such as time and a half for over-time): for example, see Kent v Tal & Ors [2018] FCCA 3218 where the contract made no mention of overtime or weekend work and Fair Work Ombudsman v Lindsay F. Nelson Manufacturing Pty Limited & Anor [2019] FCCA 2151 where there was no discussion of annual leave. Here, it is fair to say that the applicant probably did not consider the terms of the Award at all at the time of contracting, whereas the respondent appears to have had in mind that the flat rate would be a payment applicable to all Award entitlements.
38. As the purpose of the statutory scheme regulating wages is to impose a minimum rate of payments, the courts have been reticent to assume that simple agreements setting an hourly rate (even if at a rate higher than the relevant Award minimum) also meet the employer’s obligation to pay additional allowances in modern Awards: see, for example, Ray v Radano [1967] AR (NSW) 471; Lynch v Buckley Sawmills Pty Ltd [1984] FCA 306; 3 FCR 503 (194) 9 IR 469; Poletti v Ecob (No.2) [1989] FCA 779; (1989) 31 IR 321; Logan v Otis Elevator Co Pty Ltd [1999] IRCA 4; (1999) 94 IR 218; Textile, Clothing and Footwear Union of Australia v Givoni Pty Ltd [2002] FCA 1406. It is, of course, possible for a term to be placed in the employment contract which would ensure that both parties understood the terms of the engagement and whether the rate was intended to cover all Award entitlements (a so called ‘all in’ rate). However, such a clause needs to be drafted with particular care (see, for example, Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate [2015] FCAFC 99), although it is not impossible: see, for example, Fair Work Ombudsman v Transpetrol TM AS [2019] FCA 400.
39. In this case the terms of the employment contracts do not set out that the hourly rate is intended to also discharge other entitlements under the award. As a result the law prevents the above Award payments for ordinary hours being relied upon for the purpose of showing that the other Award entitlements have, in substance, been paid.
40. The respondent also made payments to employees, including the applicant, by way of a bonus based upon a profit sharing plan. In Pacific Publications Pty Ltd v Cantlon [1983] AR (NSW) 423; (1983) 4 IR 415 a journalist was paid a ‘special gratuity’ of $4,000 when retrenched. It later transpired that the retrenchment pay was wrongly calculated, however the court did not permit the employer to rely upon the gratuity to show that sufficient had been paid to meet the retrenchment obligation. The same conclusions were reached in Wall v Kingbuilt Homes Pty Ltd & Anor [2019] FCCA 2355 with respect to a payment made as a ‘goodwill gesture’. These cases appear to proceed on the basis that the categorisation by the employer of the payment prevents it from being relied upon as a discharge of an Award entitlement, although this explanation does not sit easily with James Turner Roofing Pty Ltd v Peters [2003] WASCA 28. In the present proceedings, however, it appears that the profit share payment is best described as an incentive to employees, not dissimilar to the way in which a Christmas bonus is given in modern times. As such, the bonus payment is clearly not intended to be part of the payments to employees to meet their Award entitlements. As a result I must find that the respondent cannot rely upon this payment as a partial discharge of the Award obligations.
In this case, there is no provision in the contract of employment that provides that over-Award payments for some categories of payments (such as the regular hourly rate), are to be taken to also satisfy other obligations that may be payable under the Award. In these circumstances, the nature of the payments made to the employee that were over-Award payments were payments for day-to-day duties and hourly rates and were not in the nature of payments for termination, redundancy or severance pay.
As the over-Award payments were not in the nature of severance payments or redundancy payments, and there is no provision in the contract to treat them as also satisfying other categories of Award entitlements, they cannot be utilised or relied upon to show that the Award entitlements, with respect to redundancy (as it is defined under the Award), have been met by the over-Award payments that have been made under the contract.
I will therefore enter judgment for the applicant in the sum claimed.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller
Associate:
Date: 19 June 2020
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