Robinson v K&S Freighters Pty Ltd

[2018] FCCA 2642

FEDERAL CIRCUIT COURT OF AUSTRALIA

ROBINSON v K&S FREIGHTERS PTY LTD [2018] FCCA 2642

Catchwords:
INDUSTRIAL LAW – Small claims – award modernisation – applicant claims underpayment of entitlements under Road Transport and Distribution Award 2010 – whether an Individual Flexibility Agreement applies such that its terms are taken to be a term of the Award – application dismissed.

Legislation:
Fair Work Act 2009 (Cth), Div 2 of Pt.4-1, ss.46, 144(2), 144(4), 145(2), 548
Road Transport and Distribution Award 2010, cls.7, 23

Cases cited:
Application by National Retail Association [2013] FWCFC 2170
Request from the Minister for Employment and Workplace Relations [2008] AIRCFB 550; PR062008

Applicant: MR CRAIG ROBINSON

Respondent: K&S FREIGHTERS PTY LTD

File number: MLG 2807 of 2017

Judgment of: Judge Mercuri

Hearing date: 5 June 2018

Date of last submission: 5 June 2018

Delivered at: Melbourne

Delivered on: 21 September 2018

REPRESENTATION

Advocate for the applicant: In person

Solicitors for the applicant: None

Advocate for the respondent: In person

Solicitors for the respondent: None

ORDERS

1. The applicant’s application filed 13 December 2017 be dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 2807 of 2017

CRAIG ROBINSON

Applicant

And

K&S FREIGHTERS PTY LTD

Respondent

REASONS FOR JUDGMENT

Introduction

1. This is an application brought by the applicant, Mr Robinson for unpaid entitlements arising from his employment with the respondent,

   
   

   K&S Freighters Pty Ltd (“K&S”).

2. Mr Robinson brought this application in the court’s small claims jurisdiction. Section 548 of the Fair Work Act 2009 (Cth)

   
   

   (“the FW Act”) permits certain matters to be dealt with under small claims proceedings, namely where an applicant seeks an order under Division 2 of Part 4-1 of the FW Act, other than a pecuniary penalty order under section 546 of the FW Act.

Facts

1. The facts in this matter are not substantially in dispute.

2. Mr Robinson was employed by K&S from 7 September 2015 until

   
   

   12 July 2017. For the period from 7 September 2015 until 10 July 2016, he worked as a transport driver to transport fuel on behalf of Caltex. From 11 July 2016 until his resignation on 12 July 2017, he worked as a driver with the Chemtrans Division of K&S. This claim relates to his work as a transport fuel driver in relation to K&S’ contract with the Caltex, not his work with the Chemtrans Division. 

3. Mr Robinson gave evidence that prior to his employment with K&S, he was employed within the oil industry as a fuel-tank driver for approximately 13 years. 

4. It is common ground that K&S was awarded a contract to transport Caltex products and had to commence providing services under that contract within a relatively short period of time thereafter. Given these time pressures, Mr Robinson stated that he was told that K&S intended to initially employ staff on an Individual Flexibility Agreement (“IFA”), and then work towards implementing an enterprise agreement in the medium to longer term. 

5. The relevant award which applied to Mr Robinson’s employment as a transport driver was the Road Transport and Distribution Award 2010 (“the Award”).[1] Mr Robinson was classified as a Transport Worker Grade 8 under the Award. It is also common ground that as an oil distribution worker, Mr Robinson was entitled to work a 35 hour week or 70 hour fortnight under clause 23 of the Award.[2]

   [1] Clause 4 of the Road Transport and Distribution Award 2010.

   [2] Clause 23.2 of the Road Transport and Distribution Award 2010.

6. Ms Evans, the Executive General Manager Human Resources for

   
   

   K&S Corporation Limited represented the respondent and gave evidence on behalf of K&S which was consistent with the circumstances in which the IFA came to be offered to Mr Robinson. Ms Evans stated in her affidavit of 4 June 2018:

   The provisions in the Award regarding hours of work, did not give K&S Freighters or the fuel tank drivers such as Mr Robinson the flexibility needed to appropriately provide the required services to Caltex.  Further, K&S wanted to make regular payments of wages of a consistent amount to each employee that was in excess of the Award requirements.

7. I will return to these issues further below.

8. Mr Robinson gave evidence, which I accept, that he had been made redundant from his previous position and had been out of work for some 17 weeks prior to being offered employment with K&S. 

9. He also gave evidence that he went to an information session regarding the contract that K&S had obtained to provide services to Caltex and possible work which might be available as a result. He stated that he then received a call to attend a company medical which he passed. Mr Robinson was then given a letter of offer dated 24 August 2015.[3]  Relevantly, that letter contained the following:

   [3] This letter of offer was attachment 1 to the applicant’s affidavit sworn 14 May 2018.

   I am pleased to confirm your appointment as a Driver with K&S Freighters Pty Ltd under the following terms and conditions:

   …

   You are engaged on a Full-Time basis to support the requirements of K&S Freighters Pty Ltd.

   Your rate of pay and conditions of employment will be in accordance with the attached Individual Flexibility Agreement (IFA) details…

   Upon commencement your base wage will be $1,044.24 per week or $27.48 per hour, plus allowances if applicable will be paid weekly into your nominated bank account (emphasis in original).[4]

   [4] Attachment 1 of the applicant’s affidavit sworn and filed 14 May 2018.

10. The letter of offer also specified that the commencement date was

    
    

    7 September 2015 and that the employment was subject to a three month probation period, although K&S reserved the right to be able to extend that for a further three months.[5]

    [5] Attachment 1 of the applicant’s affidavit sworn and filed 14 May 2018.

11. With respect to hours of work, the letter of offer provided that the standard was 38 hours per week with an expectation that the employee would also perform reasonable overtime.[6]

    [6] Attachment 1 of the applicant’s affidavit sworn and filed 14 May 2018.

12. Attached to the letter of offer was a Full Time Driver Individual Flexibility Agreement, clause 1.1 of which stated:

    This individual flexibility agreement is made between K&S Freighters Pty Ltd (the Company) and the employee, Craig Robinson (you) in accordance with the award flexibility provision prescribed by the relevant modern award.[7]

    [7] Attachment 1 of the applicant’s affidavit sworn and filed 14 May 2018.

13. The IFAs operative date was stipulated to occur on the date it was signed by both parties. The IFA also contained the following relevant clauses:

    a)the minimum rate of pay was $1,044.24 per week or $27.48 per hour;

    b)the employee was entitled to a meal allowance where the employee works more than 10 hours of ordinary hours as per the Award, Monday to Friday;

    c)normal hours of work are 38 hours per week;

    d)night shift hours of work can be scheduled to commence between 4:00pm and 4:00am;

    e)day shift hours of work can be scheduled to commence between 3:00am and 3:00pm; and

    f)overtime penalties are paid in accordance with the Award based on the minimum rate specified in the IFA.

14. The parties agreed that the following terms of the Award were varied by the IFA:

    a)Clause 15 – minimum rates of pay;

    b)Clause 16 – allowances; and

    c)Clause 22 – ordinary hours of work and rostering.

    d)the IFA could be terminated by agreement in writing or by either party giving the other four weeks written notice:

    The termination of this individual flexibility agreement does not affect the operation of your contract of employment.[8]

    [8] Attachment 1 of the applicant’s affidavit sworn and filed 14 May 2018.

15. Ms Evans stated at paragraph 11 of her affidavit of 4 June 2018 that the offer of an IFA was made after Mr Robinson commenced employment, although she seemed to qualify this when giving her evidence before this court.

16. It is common ground that on commencement, Mr Robinson raised a concern about whether or not a dangerous goods allowance ought to be included in the IFA given the nature of the work to be performed. As a consequence, Mr Robinson was issued with a further letter of offer dated 7 September 2015 with an updated IFA which was in identical terms to the original one, although it also included a dangerous goods allowance of $17.13 per day ‘when you perform work associated with Dangerous Goods handling’.[9]

    [9] Attachment 2 of the applicant’s affidavit sworn and filed 14 May 2018.

17. Mr Robinson and K&S signed the IFA and the letter of offer on

    
    

    7 September 2015, the same day on which he commenced employment.

18. Mr Robinson gave evidence which was not challenged and I accept that for the first three weeks or so of his employment, he assisted K&S to train new drivers and assist them in preparation for the commencement of the Caltex contract on 1 October 2015. A new division, K&S Energy was established for this purpose. During this time, I accept his evidence that he was working day shift hours. 

19. Mr Robinson also gave evidence that once K&S commenced providing transport services to Caltex, he was working two shifts. He stated and I accept that just before 1 October 2015, one of the schedulers resigned and he was asked if he could come in early for a few weeks to “help out the one and only scheduler/supervisor that K&S Energy had.”[10] During this time, Mr Robinson stated that he commenced work at approximately 2:00pm and spent the first two or three hours resolving any scheduling and loading issues before then commencing his work as a tanker driver. 

    [10] Transcript page 7 at lines 5 to 6.

20. Mr Robinson stated that it was also during this time that he realised that whilst he had been working between 50 and 60 hours per week, he was having a 30 minute break deducted from his hours each day. When he queried this, K&S explained that they do not pay for the 30 minute break.

21. Mr Robinson gave uncontested evidence which I accept that when he was offered employment, he understood that the offer of employment was made conditional upon his acceptance of the IFA. As he put it, his understanding of the offer and the IFA was “you must sign (the IFA) or you don’t have a job.”[11]

    [11] Transcript page 11 at line 39.

22. He also gave evidence that he needed the job as he had been out of work for some time and, given that his employment was subject to a three month probationary period, he did not wish to ‘rock the boat’ by raising too many concerns about the terms of his employment before he had completed his probation period.[12] Mr Robinson stated that after the end of his probationary period, he did write to the company raising a number of concerns about the terms of his employment and sent that letter to

    
    

    Ms Evans. The key issues raised in that correspondence related to concerns about the 35 hour week, the shift loading and paid breaks. Mr Robinson tendered a copy of this and two follow up letters during the hearing.[13] 

    [12] Transcript page 12 at lines 1 to 9.

    [13] Exhibit A.

23. These issues were not resolved and ultimately in July 2016, Mr Robinson transferred to another division within K&S and continued to work albeit under different terms and conditions of employment. As stated above, this claim does not relate to that further period of employment with K&S.

Applicable legal principles

1. An award under the FW Act provides minimum entitlements in respect of those employees who are covered by its terms. It is well settled that whilst it is possible for an employer to agree to pay an amount over and above the minimum specified in an award, it is not possible for an employer and an employee to contract out of any award entitlements at common law. That is, other than as permitted by the FW Act, it is not otherwise open to an employer and an employee to ‘trade off’ certain monetary award entitlements for a higher hourly rate of pay.

2. The FW Act regulates the circumstances and manner in which an employer and employee may reach an agreement which alters minimum award entitlements. An IFA is one such mechanism.

3. Where an employer fails to comply with the terms of an applicable award, section 539 of the FW Act sets out a range of civil remedy provisions and identifies the individuals or organisations who can apply to courts, including this court, in relation to an alleged breach of such provisions.

4. Relevantly for present purposes, section 539 of the FW Act provides that an employee can bring proceedings in this court in respect of an alleged breach of section 45 of the FW Act. Relevantly, section 45 provides that ‘a person must not contravene a term of a modern award’.

5. Section 46 of the FW Act goes on to state:

   (1)A modern award does not impose obligations on a person, and a person does not contravene a term of a modern award, unless the award applies to the person.

   (2)A modern award does not give a person an entitlement unless the award applies to the person.[14]

   [14] Fair Work Act 2009 (Cth), section 46.

6. Section 47 of the FW Act provides that a modern award ‘applies’ to an employee if:

   a)the modern award covers the employee, employer, organisation or outworker entity;

   b)the modern award is in operation; and

   c)no other provision of the FW Act provides or has the effect that the modern award does not apply to the employee, employer, organisation or outworker entity.

7. Relevantly, section 144 of the FW Act deals with IFAs and provides that a modern award must include a flexibility term which permits an employer and employee entering into an arrangement which varies the effect of an award in relation to that employee and employer. Section 144(2) of the FW Act relevantly provides:

   If an employee and employer agree to an individual flexibility arrangement under a flexibility term in a modern award:

   (a)the modern award has effect in relation to the employee and the employer as if it were varied by the flexibility arrangement; and

   (b)the arrangement is taken, for the purposes of this Act, to be a term of the modern award.[15]

   [15] Fair Work Act 2009 (Cth), section 144(2).

8. Section 144(4) of the FW Act then sets out various requirements for a flexibility term, one of which is that it must require that an employer and employee ‘genuinely agree to any individual flexibility arrangement’.[16]

   [16] Fair Work Act 2009 (Cth), section 144(4).

9. In this case, the Award contains a flexibility term at clause 7 which permits an employee and an employer to vary various terms of the award by agreement. Clause 7.2 states:

   The employer and the individual employee must have genuinely made the agreement without coercion or duress. An agreement under this clause can only be entered into after the individual employee has commenced employment with the employer.[17]

   [17] Clause 7.2 of the Road Transport and Distribution Award 2010.

10. Section 145 of the FW Act goes on to provide that if an employer and employee agree to an arrangement which purports to be an individual flexibility arrangement under a flexibility term in a modern award and the arrangement does not meet a requirement set out in section 144,

    
    

    “the arrangement has effect as if it were an individual flexibility arrangement”.[18]  

    [18] Fair Work Act 2009 (Cth), section 145(2). As this claim was dealt with in the court’s small claims jurisdiction, neither party was legally represented. As such, not surprisingly, neither party referred to any authority on the issues raised. I have not been able to find any case in which a similar issue was considered.

Issues in dispute

1. The fundamental issue which arises for determination in this case is whether the IFA applied such that its terms were taken to be a term of the Award. If so, the factual issue arises as to whether Mr Robinson was paid in accordance with the Award (as varied by the IFA).

2. On the evidence before me, I find that the IFA was not entered into after Mr Robinson was employed. Although there was one variation made to the IFA on the day that his employment commenced, it is clear from the correspondence provided on 24 August 2015 that the offer of employment was conditional upon his acceptance of the IFA. There is nothing in that correspondence that suggests that Mr Robinson could still accept employment but choose to be employed under the Award. Although Ms Evans suggested that this was in fact the case, it is clear from her evidence more broadly that K&S formed the view that employing staff under the Award provisions would not enable it to provide the services to Caltex that it had been contracted to provide. 

3. In order to understand the impact of this finding on the operation of the IFA, it is important to set out some of the background to section 144 of the FW Act and clause 7.2 of the Award.

4. Individual Flexibility Agreements were introduced in 2009 as part of the amendments to the FW Act which also created a process which has become known as ‘award modernisation’.

5. To facilitate that process, the FW Act provided a mechanism by which the Minister could request that the Fair Work Commission undertake a review of all federal awards. As part of this review, the

   
   

   Fair Work Commission was requested to:

   …prepare a model flexibility clause to enable an employer and an individual employee to agree on arrangements to meet the genuine individual needs of the employer and the employee.[19]

   [19] Request from the Minister for Employment and Workplace Relations [2008] AIRCFB 550; PR062008 at 155.

6. Importantly, that request went on to state:

   The Commission must ensure that the flexibility clause cannot be used to disadvantage the individual employee.[20]

   [20] Request from the Minister for Employment and Workplace Relations [2008] AIRCFB 550; PR062008 at 155.

7. In its decision of 20 June 2008, the Full Bench of the

   
   

   Fair Work Commission made the following observations:

   It is evident from the scheme of the legislation that award terms prescribing wages and conditions are to operate as minimum entitlement of employees. It follows that there is no statutory restriction on employers and employees agreeing to increase those minimum entitlements and an individual flexibility provision is unnecessary for agreements of that kind. The purpose of a model flexibility provision is to permit a reduction in one or more minimum award entitlements as part of an agreement which meets the genuine individual needs of the employer and the employee without disadvantaging the individual employee.[21]

   [21] Request from the Minister for Employment and Workplace Relations [2008] AIRCFB 550; PR062008 at 163.

8. It is in that context that clause 7 of the Award was framed, noting that it is in substantially the same terms as the model clause adopted by the

   
   

   Fair Work Commission. 

9. The statutory and award context in which IFAs can be entered into seek to balance a number of competing considerations. On the one hand, there is a recognition that in some circumstances an employer and individual employees may wish to negotiate variations to certain conditions specified in an award which better suit their individual needs. On the other hand is the need to protect employees from being pressured into signing an IFA and eroding their award terms and conditions which are determined by the Fair Work Commission and operate, together with the National Employment Standards (“NES”), as minimum entitlements.

10. The statutory and award provisions relating to IFAs effect this balance by:

    a)limiting the matters which can be the subject of an IFA;

    b)providing that an IFA must meet the ‘Better Off Overall Test’ (“BOOT”) when compared to the award conditions;[22]

    c)requiring that an employer and employee must genuinely enter into an IFA, which I take to include a requirement that an employer cannot make an IFA a condition of employment; and

    d)perhaps most importantly, providing a mechanism for an employee to terminate the IFA unilaterally upon the giving of the requisite period of notice.

    [22] Application by National Retail Association [2013] FWCFC 2170 at 134.

1. Mr Robinson’s claim seems to rely upon the following propositions:

   a)the IFA was entered in breach of clause 7.2 insofar as it was a condition of his employment and he felt under duress to accept the terms contained in the IFA and therefore it ought not apply and rather, his entitlements should be calculated by reference to the Award; and

   b)

   the rate of pay for calculating his entitlements under the Award should be the rate of $27.48 per hour or $1,044.24 per week as specified in the letter of offer he received, initially on

   
   

   24 August 2015 and accepted on 7 September 2015.

2. I accept Mr Robinson’s argument that K&S offered him an over Award rate of pay and that on his acceptance of employment, he was entitled as a matter of contract to that higher rate of pay. Contrary to the assertion by K&S, there is nothing in the letter of offer which makes it clear that the higher rate of pay offered was conditional upon Mr Robinson agreeing to enter into the IFA, and importantly, that if he did not accept the IFA, he would be paid at the Award rate.

3. Having said that however, the facts are that Mr Robinson did enter into the IFA and at no stage during his employment did Mr Robinson seek to exercise his right to terminate the IFA. 

4. Whilst as stated above, the IFA did not technically comply with the terms of clause 7 of the Award and arguably did not meet all of the requirements of section 144(4)(c) of the FW Act, section 145 of the

   
   

   FW Act provides that if an employer and employee agree to an arrangement which purports to be an individual flexibility arrangement under a flexibility term in a modern award and the arrangement does not meet a requirement set out in section 144 (which for the reasons set out above, I am satisfied this IFA did not), nonetheless, “the arrangement has effect as if it were an individual flexibility arrangement”.[23]   

   [23] Fair Work Act 2009 (Cth), section 145(2).

5. Moreover, as stated above, the effect of section 144(2) of the FW Act is that where parties enter into an IFA:

   (a)The modern award has effect in relation to the employee and the employer as if it were varied by the flexibility arrangement; and

   (b)The arrangement is taken, for the purposes of this Act, to be a term of the modern award.

6. The effect of section 145 of the FW Act when read together with section 144(2) is that, notwithstanding the defects in the IFA, the Award applies in relation to Mr Robinson as if it were varied by the terms of the IFA and the IFA is taken for the purposes of the FW Act, to be a term of the modern award.

7. Having come to this conclusion, the factual issue arises as to whether

   
   

   Mr Robinson received his award entitlements, as amended by the terms of the IFA. Mr Robinson submitted calculations which he says evidence the underpayment claim. These calculations are based on an hourly rate of $27.48 for a day shift, $32.29 for an afternoon shift and $35.72 for a night shift. He has then applied these rates into a 35 hour week as prescribed by the Award.

8. For the reasons set out above, the Award as it applied to Mr Robinson by virtue of the IFA, permitted him to work a 38 hour week. As such,

   
   

   Mr Robinson has not established that he has in fact been underpaid.

9. For these reasons, Mr Robinson’s claim for unpaid entitlements must fail and I order that Mr Robinson’s application be dismissed.

I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Judge Mercuri.

Date:     21 September 2018