Riggs v IBM Australia Ltd
[2021] FedCFamC2G 235
•8 November 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
Riggs v IBM Australia Ltd [2021] FedCFamC2G 235
File number(s): MLG 3721 of 2020 Judgment of: JUDGE MCNAB Date of judgment: 8 November 2021 Catchwords: INDUSTRIAL LAW – interpretation of a redundancy clause – clause dealing with the transition of employees with more generous redundancy entitlements – correct rate of pay for the calculation of redundancy entitlements – application dismissed. Legislation: Fair Work Act 2009 (Cth) ss 50, 546(3)(c).
ISSCA/Telstra Transitional Arrangements Agreement 1997 cls 8.1, 10.
Cases cited: Treasury Wine Estates Vintners Ltd v Pearson [2019] FCAFC 21
Workpac v Skene Pty Ltd [2018] FCAFC 131
Division: Division 2 General Federal Law Number of paragraphs: 70 Date of last submission/s: 9 July 2021 Date of hearing: 11 June 2021, 9 July 2021 Place: Melbourne Counsel for the Applicant: Ms G Jardine Solicitor for the Applicant: Rubicon Compensation Lawyers Counsel for the Respondent: Ms F Leoncio Solicitor for the Respondent: Ashurst Australia
Table of Corrections 10 November 2021 In paragraph 56 the word “that” has been deleted as a repeated word. 10 November 2021 In paragraph 61 the word “the” has been inserted between the words “takes” and “matter”. 10 November 2021 In paragraph 62 the word “industry’s” has been replaced with the word “industrial” and the word “fundamental” has been replaced with the word “formulated”. ORDERS
MLG 3721 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: JULIE RIGGS
Applicant
AND: IBM AUSTRALIA
Respondent
ORDER MADE BY:
JUDGE MCNAB
DATE OF ORDER:
8 NOVEMBER 2021
THE COURT ORDERS THAT:
1.The Application filed on 19 October 2020 be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Amended pursuant to r 10.14(b) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) on 10 November 2021
Judge McNab
INTRODUCTION
This matter comes before the Court by way of an application filed on 19 October 2020 and an amended statement of claim filed on 18 January 2021 (“the ASOC”). By that application, the Applicant claims that the Respondent contravened s50 of the Fair Work Act 2009 (Cth) (“the FW Act”), by underpaying her entitlement to redundancy pay under the ISSCA/Telstra Transitional Arrangements Agreement 1997 (“the Agreement”).
The Applicant claims that, by reason of the contravention of s50 of the FW Act, she is entitled to compensation and that a pecuniary penalty should be imposed against the Respondent.
By its further amended defence filed on 21 April 2021 (“the FAD”), the Respondent denies the Applicant’s claim and says that, on the proper construction of the Agreement, the Applicant has been properly and fully paid her redundancy pay entitlement as prescribed by the Agreement.
On 10 December 2020, the parties attended a mediation with a Registrar of the Court. The matter did not resolve.
The matter ultimately came before the Court on 11 June 2021 for Final Hearing via Microsoft Teams, where both parties had Counsel appear on their behalf. The matter was adjourned part heard to 9 July 2021 so that parties could make oral closing submissions. At the conclusion of the hearing on 9 July 2021, which occurred in person, judgment was reserved.
BACKGROUND
The Court has the benefit of a statement of agreed facts filed on behalf of both parties by the Applicant on 22 March 2021. The Court has regard to that document in formulating these background facts.
On or about 8 July 1991, the Applicant commenced employment with Telstra.
In 1994, IBM and Lend Lease Corporations Australia Ltd formed a joint venture, Integrated Systems Solutions Corporation Australia Ltd (“ISSCA”), which delivered IT services to the finance industry and government sectors.
On 2 June 1997, the Australian Industrial Relations Commission certified the Agreement.
On 14 July 1997, Telstra and ISSCA executed an agreement for the outsourcing of certain IT functions of Telstra to ISSCA. On the same day, ISSCA changed its name to IBM Global Services Australia Ltd.
On 24 July 1997, the Applicant’s employment was transferred from Telstra to IBM Global Services Australia Ltd (“IBM Global”). She was employed as a Finance Officer.
On or about 5 January 2004, the Applicant became an employee of the Respondent, IBM Australia Ltd (“IBM” or “the Respondent”).
From about 22 May 2017, the Applicant held the position of Director, Enterprise Licencing Software and Solutions, Asia Pacific, in a full-time capacity.
On 29 May 2020, the Applicant was advised that her position was to be made redundant, effective on 28 August 2020.
On 31 August 2020, the Respondent terminated the Applicant’s employment by way of redundancy. At the time of her termination, the Applicant was working for the Respondent in a full-time capacity. At all relevant times, the Respondent applied the Agreement to the Applicant’s employment.
On 14 September 2020, the Applicant was paid a redundancy payment in the gross sum of $304,388.40. The Applicant disputes the Respondent’s calculation of her redundancy payment. The Applicant claims that, on her construction of cl 10 of the Agreement she has been underpaid by $101,746.56. The Respondent claims that the Applicant has been paid her full entitlements in accordance with the relevant statutory requirements. Indeed, at [7] of an outline of submissions filed on 28 May 2021, the Respondent contends that the Applicant has been overpaid in the sum of $27,383.The Respondent does not seek repayment of any alleged over payment.
ORDERS SOUGHT
By way of the ASOC, the Applicant seeks orders as follows:
(1)a declaration that the Respondent contravened s50 of the FW Act;
(2)compensation for the breach of s50 of the FW Act;
(3)a pecuniary penalty be imposed as against the Respondent for its breach of s50 of the FW Act, and for that penalty to be paid to the Applicant pursuant to s546(3)(c) of the FW Act; and
(4)statutory interest.
The Respondent opposes the application and seeks orders that the application should be dismissed.
RELEVANT PROVISIONS OF THE AGREEMENT
Cl 10 of the Agreement sets out the calculation method of a redundancy payment for an employee to which the Agreement applies as follows:
10. Redundancy
For the first 2 years of employment with ISSCA the Telstra accumulation method of calculating redundancy payments will apply (4 weeks BBS [Benefit Base Salary] per completed years of service in the first 5 years and 3 weeks BBS per completed years of service thereafter to a cap of 80 weeks) unless ISSCA conditions are better in which case the ISSCA conditions apply.
Thereafter the ISSCA accumulation rate of 2 weeks BBS per year of completed service with a cap of 65 weeks will apply taking into account Telstra and ISSCA years of service.
Employees whose accumulated entitlements at the end of the 2 year period exceed the ISSCA cap retain their accumulated entitlements.
The relevant rate of pay for the purpose cl 10 is the Benefit Base Salary (“BBS”), which is defined in cl 8 of the Agreement. Cl 8 provides as follows:
8. Salary Packages
Employees shall be remunerated for their services under the ISSCA salary and benefits packing system consisting of a Benefit Base Salary (BBS) and a Flexible Benefits Package (FBP).
Cl 8.1 goes on to relevantly provide as follows:
…
8.1.1. Benefit Base Salary (BBS)
The BBS consists of:
8.1.1(a) Telstra Award Salary (TAS)
…
8.1.1(c) An additional 2% of TAS based upon additional base hours’ and
…
8.1.2. Flexible Benefit Package (FBP)
The FBP consists of:
8.1.2(a) 7% of BBS…
...
NOTE 3: FBP includes the ISSCA uncapped annual leave loading and compensation for alternative staff discounts, loss of Telstra excess travelling time (ETT), alternative Long Service Leave (LSL) accrual rate (except South Australia), alternative flexible working arrangements and alternative higher duties arrangements.
EVIDENCE
It is useful for the Respondent’s evidence be set out before the Applicant’s evidence as the Respondent’s evidence goes to the background circumstances in which the Agreement was certified.
Evidence given on behalf the Respondent
The following people gave evidence on behalf of the Respondent:
(1)Mr David Patton, now a Clinical Psychologist but previously a consultant in the human resource team of the Respondent business at the time the Agreement was certified, who relied on his affidavit filed on 20 April 2021; and
(2)Ms Shivaun Bromley, Talent and Transformation Leader for the Respondent, relying on her affidavit filed on 20 April 2021.
By his affidavit, Mr Patton sets out that a significant aspect of his responsibilities in his role with the Respondent was the negotiation with Telstra unions (and, in effect, with Telstra) of a transitional Greenfields industrial agreement, which would become the Agreement. Mr Patton states at [19] of his affidavit that:
19.The task was to have about 2000 Telstra employees agree to transition to ISSC Australia on IBM terms, plus another 1000 independent contractors come over under novated contracts. At that time, Telstra employees were covered by a large number of industrial awards, agreements and conditions, which were designed for the public sector telecommunications environment of Telstra and its past iterations. ISSC Australia and IBM Australia sought all of its employees to have uniform modern terms and conditions of employment designed for the emerging IT outsourcing services market in the commercial sector. ISSC Australia sought to offer attractive and fair terms that would maximise the take up rate of Telstra employees through voluntarily acceptance of job offers.
Mr Patton goes on to say that ISSCA was concerned with applying the redundancy pay calculation method that was applied by IBM Australia to transitioning Telstra employees.
Mr Patton sets out that ISSCA’s calculation method of the redundancy benefit was eight weeks of pay plus two weeks of pay for each year of service, with the benefit to be capped at 65 weeks of pay. So, for example, if a hypothetical employee was to be made redundant after two years of service, they would receive 12 weeks of pay pursuant to the calculation method. Mr Patton sets out that, in contrast, Telstra’s redundancy calculation method of the redundancy benefit at that time was to four weeks of pay for each of the first five years of service and three weeks of pay for each subsequent year of service, capped at 80 weeks. Mr Patton says that, based on those calculation methods, “the IBM system was more generous during the first few years after which the Telstra system became more generous”.
Mr Patton then states at [26] of his affidavit that:
26.My intention during the negotiations, which was accepted in the final terms, was to have the IBM Australia standard apply for all service but with a particular safety net for employees who:
(a) might be retrenched within the first two years after transferring; or
(b)who, after the first two years, had a potential entitlement to a redundancy pay benefit in excess of the IBM cap of 65 weeks - something which would occur as at July 1999 under the historical Telstra system after more than 21 years' service.
Mr Patton goes on to say that on or around 26 May 1997, an application was made to the Australian Industrial Relations Commission (“the AIRC”) for certification of the Agreement. Mr Patton reviewed the AIRC file in relation to the Agreement, which is annexure DMP-1 to his affidavit, and it includes a statutory declaration made by ISSCA in support of the certification application. Mr Patton relevantly sets out s7.5 of that declaration, which is a description of the redundancy clause of the Agreement and provides as follows:
Clause 10 – Redundancy
Transitional redundancy arrangements are set out, under which employees who may become redundant within the first two years of employment will receive the more beneficial redundancy entitlement under Telstra or ISSCA arrangements based on continuous service from the time of employment by Telstra. After two years the ISSCA arrangements will apply.
Mr Patton then goes on to set out an example from April 2001, when a dispute was lodged with the AIRC in relation to the proposed redundancy of a group of employees covered by the Agreement. A settlement was reached before Commissioner Smith on 27 April 2001 with terms that are said by Mr Patton to illustrate the mutual intention:
(1)to apply the IBM Australia calculation method; but
(2)to also give particular protection to an employee who, as at 24 July 1999, had a contingent entitlement in the range of 65 and 80 weeks of Benefit Base Salary, which is set out in detail below, were the previous Telstra calculation method to be applied to their redundancy.
Mr Patton was provided with a copy of the AIRC file in relation to the dispute, and that file is exhibit DMP-2 to his affidavit.
Mr Patton was provided with a copy of the AIRC file in relation to the dispute, and that file is exhibit DMP-2 to his affidavit.
Ms Bromley gave evidence by her affidavit sworn 20 April 2021 and she was cross-examined. By paragraphs [5] – [12] that evidence provided in relation to the rate of pay used in the redundancy calculation:
5.Telstra heritage employees, such as Ms Julie Riggs were employed under a compensation system which included both a Benefit Base Salary (BBS) and Flexible Benefits Package (FBP).
6.IBM Australia had a sophisticated compensation structure involving BBS, a flexible benefit, an Annual Total Package (ATP), leave loading, superannuation and insurance and other matters. BBS was a component relied upon to calculate certain benefits such as superannuation, shift penalties and redundancy pay.
7.From in or about 2003 IBM Australia began initiatives to simplify its compensation structure. It took the opportunity to do this with the dissolution of the IBM Global Services Australia Joint Venture and the transfer of its staff to IBM Australia. This transfer took effect from January 2004.
8. By around 2003, the FBP component became known as “Other Cash”.
9.From October 2005 payslips were simplified so that “Salary” equalled BBS and Other Cash. This replaced a system involving an ATP comprising BBS, Other Cash, and superannuation and insurance, each of which were calculated by reference to BBS.
10.As from early 2006, Other Cash was frozen and compensation elements were to be calculated on Salary.
11.As from December 2009, BBS was aligned with “Annual Salary” and was dispensed with as a reference, except for specific cohorts such as Telstra heritage employees where there was a necessity to retain the pre-existing system. In the case of Telstra heritage employees, there continues to be a BBS and Other Cash component, the latter being the current name for FBP.
12.However, terms such as “Salary”, “Annual Reference Salary” (ARS) and “Annual Salary” (in addition to the term “Base Salary” for executive compensation purposes) have tended to be used interchangeably or imprecisely over the past two decades across the various HR management systems.
I accept that the Other Cash component was frozen at $24,551 (see annexure SB to 2 Bromley affidavit at page [24]) and the Applicant’s letter of offer dated 22 January 2008 which refers to the Other Cash amount as $24,551.
The Applicant’s Evidence
During the hearing, the Applicant gave evidence relying on her first affidavit filed on
1 April 2021 (“the first affidavit”) and her second affidavit filed on 30 April 2021 (“the second affidavit”). The second affidavit is responsive to evidence given by the Respondent’s witnesses.
By way of the first affidavit, the Applicant sets out that her base salary was $257,000 and her Additional Incentive Target (“ACI”) (35% of her base salary) was $89,900. The Applicant states that in September 2016, she received a pay increase of $24,551 per year in addition to her base salary (“Additional Base Salary” or “ABS”). She claims that the pay increase was not received until 31 March 2017 when she was ‘back paid’6 x $2,045.91 (with $2,045.91 equating to the months payment of the annual income increase of $24,551).
The Applicant then sets out that, on 1 June 2017, her salary structure was changed so that her base salary became $248,000 and her ACI (now 60% of her base salary) became $148,800.
Her ABS remained as $24,551.
The Applicant says the Respondent paid her ABS each month, but on 14 December 2017, the Respondent reversed 7 payments, and the Applicant was made to repay $14,321.37. Following an enquiry from the Applicant, the Respondent informed the Applicant on 14 March 2018 that a system error had occurred and that the $14,321.37 that was deducted would be refunded in the following pay cycle. On 22 March 2018, the Respondent received 10 payments of her ABS, which were owed.
The Applicant says from 1 April 2018, the Respondent paid her the base salary and ABS.
Annexed as JR4 to the first affidavit is a compilation of all information contained in the Applicant’s payslips which record the payments made to her by the Respondent over the last five years of her employment.
The Applicant then refers to a document provided to her by the Respondent which purports to set out how the Respondent calculated her redundancy payments: see annexure JR5 of the first affidavit. In respect of that document, the Applicant alleges that there are two errors in the Respondent’s calculations, those being:
The number of weeks I should receive. On my termination date I had completed 29 years of service. This is not in dispute. However, to calculate my redundancy entitlement in accordance with cl 5 of the Telstra/ISSCA Agreement service for 29 years of service:
Cl (a) allows me to have 5 years of service x 4 weeks+ 3 years of service x 3 weeks= total 29 weeks' pay; and
For the additional 21 years of service, cl (b) applies: 21 x 2 weeks= 42 weeks' pay,
TOTAL owed 29 + 42 = 71 weeks.
The definition of BBS. Paragraph 8 of the ISSCA/Telstra Agreement (referred to in paragraph 9 of the Telstra/ISSCA Agreement) states as follows:
SALARY PACKAGES
Employees shall be remunerated for their services under the ISSCA salary and benefits packaging system consisting of a Benefits Based Salary (BBS) and a Flexible Benefits Package (FBP).
The Applicant states that:
The Base Salary and the Additional Base Salary formed my Benefits Based Salary. As discussed above, the combination of the 2 formed the basis upon which my benefits such as annual leave, long service leave and personal leave were calculated from 1 September 2016. Therefore the calculation of my entitlement to a redundancy package is 71 weeks. One week's pay is my annual BBS/52 = $297, 451/52 = $5720.21.
Therefore my redundancy entitlement is $5720.21 x 71 = $406,134.91.[1]
[1] Applicant’s Second Affidavit at [19].
In the alternative, the Applicant states, if the Court is satisfied that cl 10(b) of the Agreement has the effect of placing a limit on the Applicant’s redundancy entitlement at 65 weeks, then she calculates her redundancy package to be $371,813.65.
The Applicant then says she received her final payment on 4 September 2020, where she was paid $304,388.40 as a redundancy payment. The Applicant notes that the payslip, which is annexure JR7, records the pay period as finishing on 14 September 2020, when the Applicant was instead paid on 4 September 2020.
By way of the second affidavit, the Applicant states that, in the time she was an employee of the Respondent, she had no contact or interaction with Ms Bromley. The Applicant alleges that she often found the Respondent’s pay roll team to be “lacking in competence”. The Applicant states that there was never a suggestion from anyone in the payroll team, or indeed her managers, that she was paid incorrectly whilst an Executive in the Respondent business between 2014 and 2020.
The Applicant then says that, when she took on the Executive role on 1 September 2014, she was told that her compensation elements would be calculated in accordance with the Annual Incentive Plan and structure. The Applicant states that:
(1)
her payslips from November 2014 made reference to only ‘Annual Salary’ which was aligned to her base salary in her Executive Compensation Summary of $235,000.
The Applicant states, in contrast, when she was in a non-Executive role with the Respondent, her payslip would reference her Benefits Base Salary and Annual Salary in the summary page;
(2)in May 2016, the payslip format changed and ‘Benefits Based’ started to appear in the heading on her payslip without explanation. The Applicant states her Benefits Based Salary and annual salary were both $246,840 at that time; and
(3)
in March 2017, her payslip started to reflect the Benefits Based Salary of $257,000, aligned to her base salary on her Executive Summary and an Annual Salary amount of $281,551 which included six months of back pay for her salary increase effective
1 September 2016.
In respect of paragraph [21] and [24] of Ms Bromley’s affidavit, where Ms Bromley states that the Applicant should be been paid a Benefits Base Salary of $234,449, the Applicant claims that she does not recognise that amount, it was never communicated to her, nor was it suggested to her that she was being paid incorrectly. The Applicant points to a ‘screenshot’ from the Respondent’s IT payroll system, confirming her pay increase of $24,551 effective on
1 September 2015: see the second affidavit, annexure JR8. The Applicant then goes on at [11] of her affidavit to state:
11.[…] The screenshot also shows that the Applicant’s annual remuneration of $509,571.86 is made of:
$272,900 + $163,700 + $24,551 (subtotal = $461,151) + $48,420.86 (Life insurance + Super calaculated on Sub Total) = $509,571.86
This is consistent with my pay.
The Applicant goes on to refers to [29] – [30] of Ms Bromley’s affidavit where, in summary, it states upon termination of her employment, the Applicant’s correct salary related figures should have been:
(1)Benefits Base Salary in the amount of $248,349;
(2)Other Cash in the amount of $24,551; and
(3)Annual Reference Salary in the amount of $272,900.
In response to the evidence of Ms Bromley at [30] that the Applicant’s redundancy pay was erroneously calculated by reference to the Annual Reference Salary amount and not the Benefits Base Salary amount. The Applicant alleges she does not recognise the Benefits Base Salary amount, and that this amount was never communicated to her. The Applicant says that the Other Cash amount “has always been incremental to the $272,900 and confirmed to be the case in my discussions with Human Resources when finalising my annual leave and Long Service Leave entitlements”.
The Applicant then makes reference to [31] of Ms Bromley’s affidavit, where she refers to annexure SB4 of that affidavit, which is a spreadsheet “exemplifying the operation of the Respondent’s Telstra Redundancy Credit Calculator in the case of the Applicant.” Mr Bromley states that the calculator is used by the Respondent to determine where a ‘Telstra heritage employee’ is entitled to an additional credit on top of the IBM cap of 64 weeks based on service as at 24 July 1999. In respect of this paragraph of Ms Bromley’s affidavit, the Applicant briefly states that the calculator “makes no sense”.
In respect of Mr Patton’s affidavit filed on 20 April 2021, the Applicant states that she was a member of the Telstra engagement team for the Agreement between Telstra and ISSCA, and says she was responsible for all of the financial modelling associated with Telstra’s business case for the It Operations Services component of the Agreement. She states that, although she was not involved in the human resources negotiations, her understanding was “we (being employees being transferred from Telstra to ISSCA) would always maintain our beneficial redundancy entitlements from Telstra. My understanding is consistent with the final agreement was written.” The Applicant did not refer to the substance of Mr Patton’s evidence.
The Applicant then states on 14 October 1996, she was provided with a document entitled ‘Information Technology Group Telstra/ISSCA Due Diligence Update’: see annexure JR9.
The Applicant asserts that this document, amongst other things, confirms the arrangements in relation to how redundancy payments were to be calculated and that it confirms that the redundancy clause was written out in full to avoid any misunderstanding.
CONSIDERATION
The principles of interpreting industrial instruments are well settled. The starting point is the words of the industrial instrument read as a whole in light of its industrial context and purpose. As stated by the Full Court (Tracey, Bromberg and Rangiah JJ) in Workpac v Skene Pty Ltd [2018] FCAFC 131 (“Skene”) at [197]:[2]
197. The starting point for interpretation of an enterprise agreement is the ordinary meaning of the words, read as a whole and in context: City of Wanneroo v Holmes (1989) 30 IR 362 at 378 (French J). The interpretation “… turns on the language of the particular agreement, understood in the light of its industrial context and purpose …”: Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [2] (Gleeson CJ and McHugh J). The words are not to be interpreted in a vacuum divorced from industrial realities (Holmes at 378); rather, industrial agreements are made for various industries in the light of the customs and working conditions of each, and they are frequently couched in terms intelligible to the parties but without the careful attention to form and draftsmanship that one expects to find in an Act of Parliament (Holmes at 378–9, citing Geo A Bond & Co Ltd (in liq) v McKenzie [1929] AR(NSW) 498 at 503 (Street J)). To similar effect, it has been said that the framers of such documents were likely of a “practical bent of mind” and may well have been more concerned with expressing an intention in a way likely to be understood in the relevant industry rather than with legal niceties and jargon, so that a purposive approach to interpretation is appropriate and a narrow or pedantic approach is misplaced: see Kucks v CSR Limited (1996) 66 IR 182 at 184 (Madgwick J); Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67 at [16] (Marshall, Tracey and Flick JJ); Amcor at [96] (Kirby J).
[2] See also Amcor Ltd v Construction, Forestry, Mining and Energy Union [2005] HCA 10.
In construing the words of the industrial instrument, the Court is to have regard to the industrial purpose of the Agreement, and the commercial and legislative context in which it applies.
In considering its commercial purpose, the Court should give attention to the background, context and market in which the parties were operating, as known to both parties: see, for example, Treasury Wine Estates Vintners Ltd v Pearson [2019] FCAFC 21 (per Rares, Perry and Charlesworth JJ) (“Pearson”).
In this matter, the Court must determine how the Applicant’s redundancy entitlement is to be calculated pursuant to the Agreement and the relevant rate to which the calculation method is to be applied. In doing so, the Court must determine the proper construction of cl 10 of the Agreement, which makes reference to cl 8, as set out above.
The evidence of Mr Patton was not challenged in regards to the statutory declarations filed in support of the certification of the agreement in the AIRC. Having regard to this evidence, the industrial purpose of the relevant clause was to ensure that employees transferring from Telstra to ISSCA were not disadvantaged if they were made redundant within two years of the transfer.
The reference to “for the first two years of employment with ISSCA” should be read against that background and I accept that this is a reference to those employees who are made redundant within the first two years of employment with ISSCA.
I also find that it follows on from the clear words of the second paragraph of cl 10 that the clause applies to employees who are made redundant after the first two years of service with ISSCA/IBM. If that occurs, the IBM/ISSCA rate of two weeks BSS per year of service applies (taking into account the years of service with Telstra and ISSCA).
The effect of the third paragraph is to preserve accumulated entitlements at the end of the two-year period. If a transferring Telstra employee had accumulated entitlements at the end of the two-year period that exceeded 65 weeks, then they are entitled to retain those benefits up to a cap of 80 weeks.
That reading of the clause is consistent with the industrial purpose of the clause for which I accept was to provide a means of transitioning employees from Telstra to IBM, where employees had been entitled to the more generous redundancy terms. The clause addressed concerns that the employees may lose the benefit of those terms if retrenchments occurred shortly after the transition. The clause protected those employees who are retrenched within the first two years of employment with IBM and protects entitlements that had accrued in excess of the IBM limit of 65 weeks. That reading is also consistent with the statutory declaration filed with the AIRC which was declared by both parties to the agreement:
Clause 10 – Redundancy
Transitional redundancy arrangements are set out, under which employees who may become redundant within the first two years of employment will receive the more beneficial redundancy entitlement under Telstra or ISSCA arrangements based on continuous service from the time of employment by Telstra. After two years the ISSCA arrangements will apply.
In circumstances where the Applicant was made redundant after the two-year period, she is entitled to be paid for the ISSCA/IBM accumulation rate of two weeks BPS per year of service, with the years of service calculated taking into account her years of service with both Telstra and IBM. That is, 29 years of service multiplied by two years equals 58 weeks.
The Applicant’s reference to and reliance on an Employee Information Bulletin sent to employees including the Applicant on 14 October 1996 (being annexure JR9 of the second affidavit of the Applicant) takes the matter no further, as it is simply includes a reinstatement of the redundancy clause.
The Applicant’s interpretation of the clause is inconsistent with its text and the industrial purpose for which it was formulated. The clause preserves the Telstra entitlements of the terminations to occur within the first two years of employment with ISSCA.
Rate of Pay
The calculation of the rate pay has been complicated somewhat by the fact that IBM has admitted that in the course of the Applicant’s employment there have been errors in applying the rate of pay.
The redundancy clause refers to the rate of pay for the purposes of calculating is the BBS.
(a)Cl 8.1 relevantly provides:
Benefit Base Salary (BBS)
The BBS consists of:
8.1.1(a) Telstra Award Salary (TAS)
…
8.1.1(c) An additional 2% of TAS based upon additional base hours;
…
Flexible Benefit Package (FBP)
The FBP consists of:
8.1.2(a) 7% of BBS…
NOTE 3: FBP includes the ISSCA uncapped annual leave loading and compensation for alternative staff discounts, loss of Telstra excess travelling time (ETT), alternative Long Service Leave (LSL) accrual rate (except South Australia), alternative flexible working arrangements and alternative higher duties arrangements.
BBS is separate and distinct from FBS and that much is made clear from the terms of cl 8.
The distinction is also made in the letter of offer of employment from ISSCA to the Applicant dated 10 June 1997: see Bromley affidavit annexure SP1. The distinction was accepted by the Applicant at trial: see transcript P 92.35.
In relation to the claim that the Applicant was awarded a pay increase of $24,551 in September 2016, I do not accept that is the case. The Applicant was appointed to an executive/managerial role in February 2008 when she was promoted to the role of Chief Financial Officer in New Zealand. She occupied managerial roles until her redundancy. The evidence relied upon by the Applicant to support the proposition that she was awarded a pay increase in September 2016 is in annexure JR 1 to her affidavit sworn 1 April 2021. This is a circular letter dated
5 August 2016 that was distributed by the remuneration services of the Respondent to managers. It refers to a rewards program being rolled out to employees and includes advice as to how the program would be applied to employees by managers. It is plainly not correct to characterise that as advice that the managers implementing the scheme would be receiving pay increases as part of the scheme. Ms Bromley gave evidence that the Executive Review Program in 2016 that applied to Ms Riggs was effective from 1 July 2016: see Bromley affidavit [23]. That evidence is not challenged.
As I noted above, errors in record keeping/payslips have complicated this matter. However, I accept the explanation given by the Respondent in relation to those errors. The source of those errors are set out at [24] and [25] of Ms Bromley’s affidavit and in summary those errors arose through the implementation of the then new Human Resource management system.
I accept the evidence of the Respondent that at the time of the redundancy, Ms Riggs was entitled to a redundancy payment calculated by reference to her BBS only, which at that time was $248,349. Ms Riggs received a payment which was erroneously calculated by reference to her BBS and other cash which sum total $272,900.
On this basis the Applicant has been overpaid. If I am wrong about the calculation of salary and accept the Applicant’s submission that the correct rate for the calculation of redundancy pay was $272,900, the Applicant has been paid all her entitlements due in accordance with that rate.
For these reasons, this application shall be dismissed.
I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment of Judge McNab. Associate:
Dated: 8 November 2021
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