Robjohn Enterprises Pty Ltd

[2013] FWCA 6685

[2013] FWCA 6685

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement

Robjohn Enterprises Pty Ltd
(AG2013/7455)

ROBJOHN ENTERPRISE AGREEMENT 2013

Fast food industry
COMMISSIONER BULL	SYDNEY, 5 SEPTEMBER 2013

Application for approval of the Robjohn Enterprise Agreement 2013 - loaded wage rate - advance payment of annual and personal leave - NES - undertakings provided.

[1] An application has been made for approval of an enterprise agreement known as the Robjohn Enterprise Agreement 2013 (the Agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). The Agreement is a single-enterprise agreement.

[2] On 7 August 2013, the Commission alerted the Applicant via their legal representative that it had a number of concerns with aspects of the Agreement. These issues concerned clause 15 - Hours of Work and Rosters; clause 18 - Overtime; clause 32 - Payment of Annual Leave and Personal Leave as Loaded Wage Rate and the rates of pay contained in the Agreement.

[3] Correspondence was received from the Applicant’s legal representative on 16 August 2013.

Annual/Personal Leave as a Loaded Rate

[4] The Agreement provides at clause 32 - Annual Leave and Personal Leave as Loaded Wage Rate payment of a loaded wage rate which includes a pro rata payment of the entitlement to annual and personal leave. The employee continues to accrue an entitlement to take annual and personal leave, however when such leave is taken it is unpaid.

[5] This arrangement is only to occur by agreement between the employer and employee. Clauses 30 - Annual Leave and 31 - Personal Leave provides for the standard NES entitlements to such leave, where the leave is taken and paid contemporaneously.

[6] The Applicant submits that in an industry where casual employment is widespread a loaded wage rate provides a financial incentive for casual employees to convert to permanent employment.

[7] Subclauses 30.7 - Cashing in of Annual Leave and 31.7 - Cashing in of Personal Leave allows an employee in agreement with the employer to “cash in” such leave in accordance with the “cashing out” provisions of the Act at s.94 and s.101 respectively.

[8] In view of the Full Bench decision in Mr Irving Warren; Hull-Moody Finishes Pty Ltd; Mr Romano Sidotti [2011] FWAFB 6709 (Hull-Moody) where a similar clause was found to be compliant with the Act and the Federal Court decision in Construction Forestry Mining and Energy Union v Jeld-Wen Glass Australia Pty Ltd [2012] FCA45 (Jeld-Wen) which has led some members of this Commission not to follow the Full Bench Hull Moody decision. I requested the Applicant to address this issue as part of the Agreement approval process.

[9] To that end the Applicant’s contention is that individual Commission members are bound to follow the Hull-Moody decision, being a binding Full Bench decision. The argument advanced was that the Jeld-Wen decision was not binding as it was not on point and the relevant comments were obiter.

[10] There was a degree of overlap in hearing dates between the two decisions. The Hull-Moody matter was heard on 28 September 2011 and the decision delivered on 29 November 2011. The Jeld-Wen matter was heard on 30 May 2011 and the decision of Gray J delivered on 6 February 2012.

[11] Since the Jeld-Wen decision some members of the Commission have continued to approve enterprise agreements where the payment for annual and personal leave is included in a loaded wage rate and the leave is then taken unpaid (see for example [2012] FWAA 3483, [2013] FWCA 4153 and [2013] FWCA 2249). No comment has been expressed by Commission members when approving agreements with these terms. Whereas other members have held such a term is contrary to the National Employment Standards (NES) 1 and given their reasons.2

[12] The payment of a loaded wage rate does not extinguish or reduce the amount payable for accrued annual and sick leave (leave) but allows for the prepayment of leave by agreement between the employee and employer with the entitlement to take the leave remaining. This is to be contrasted with the ability to “cash out” leave as provided under the NES where payment is received and the entitlement to take the leave is extinguished.

[13] When considering loadings paid in lieu of annual leave and personal leave contained in enterprise agreements section 199 of the Act specifically provides additional protections for school based apprentices and school based trainees. This section would appear to have no relevance as school based apprentices and school based trainees are not covered by this Agreement.

Jeld-Wen Decision

[14] The decision of Gray J related to whether the effect of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Transitional Act) was to incorporate the NES into an Australian Workplace Agreement (AWA). If so, was the term in the relevant AWA for the employee to receive an additional 1.5 hours pay each week in lieu of an entitlement to payment for any of the 10 days sick leave if such leave was taken, “cashing out”. His Honour held that this arrangement amounted to “cashing out” of paid personal/carer’s leave.

[15] The application before the Court was brought by the Construction Forestry Mining and Energy Union (CFMEU) and was made pursuant to the civil penalty provisions of the Act as modified by the Transitional Act. The CFMEU sought the imposition of penalties for contraventions of provisions of the Transitional Act.

[16] As is evident, the decision did not concern the approval of an enterprise agreement or the operation of s.186 of the Act. There was no determination as to whether an enterprise agreement containing a loaded wage rate providing for pre-payment of leave, with the leave being available (without pay) to be taken at some time in the future, could be approved under s.186 of the Act.

[17] Justice Gray took the view that the term in the AWA was contrary to s.100 of the Act which provides that such leave may not be “cashed out” except in accordance with the cashing out terms in a modern award or enterprise agreement. If leave is taken, there is an obligation to pay the employee at the appropriate rate, payment in advance is payment in substitution for the entitlement or cashing out. As there was no modern award or enterprise agreement permitting cashing out, a monetary payment could not be substituted in weekly amounts or otherwise. 3

[18] These observations were however obiter as they were not necessary for the determination of the application. The application for penalties was dismissed on the basis there was no contravention as no leave was taken during the relevant period so no occasions for payment at the time leave was taken arose.

[19] Despite the decision not dealing with the approval of an enterprise agreement under s.186 of the Act, the obiter comments of Gray J are persuasive and should be applied by the Commission in the absence of other binding authority.

Hull Moody Decision

[20] The decision in Hull Moody 4 deals directly with the ability of the Commission to approve an enterprise agreement under s.186 of the Act where the agreement contains a loaded wage rate, where leave is paid in advance and when taken no further payment is made.

[21] The majority prefaced their reasons by decision in stating that due to the previous difficulties that Commission members had raised with similar clauses in enterprise agreements it was necessary to provide some certainty to the issue.

[22] The majority decision held that:

● “Cashing out” paid leave involves making a payment in lieu of recognising an entitlement to paid leave. When leave is cashed out the leave is reduced by the amount compensated for by the payment. 5

● There is no obligation in the NES to make payment for leave simultaneously with the taking of leave although a delayed payment may not meet the NES obligations. 6

● Payment in advance via a loaded wage rate, of leave available to be taken at a later date is not “cashing out” because the entitlement to take the leave is not extinguished. 7

[23] By applying the ratio of the Hull Moody decision, the terms in this Agreement that provide by agreement for the payment in advance of annual leave and personal leave with such leave still accruing and available to be taken in the future (albeit without further payment) are not in breach of the NES provisions and thus does not provide a hurdle for the approval of the Agreement.

Applicable Authority

[24] Irrespective of my views as I consider the relevant comments of Gray J in Jeld Wen to be obiter I am bound by the majority decision in Hull Moody (see VP Lawler’s comments in New Acland). 8

[25] In the Full Bench decision of Pacific Access Pty Limited v Community and Public Sector Union 9 the Full Bench stated:

“The Commissioner decided not to follow a Full Bench authority which he regarded as binding. That was a fundamental error which deprived Pacific Access of the success which it was entitled to in accordance with binding authority. Whilst the Commissioner made it clear he thought the decision was wrong, he was nevertheless under a clear duty to follow it. His failure to follow an authoritative Full Bench decision was a serious error of principle which attracts the public interest. This alone is reason to grant leave to appeal and to quash the directions.”

[26] In Cetin v Ripon Pty Ltd (t/as Parkview Hotel) 10 (Cetin) the Full Bench stated:

“Although the Commission is not, as a non-judicial body, bound by principles of stare decisis, as a matter of policy and sound administration it has generally followed previous Full Bench decisions relating to the issue to be determined, in the absence of cogent reasons for not doing so.” 11

[27] In Re Dalrymple Bay Coat Terminal Pty Ltd 12 a Full Bench summarised the position in relation to single members sitting at first instance as follows:

“There is not a developed system of stare decisis in this jurisdiction. However it is clearly desirable for members of the Commission sitting alone to adhere to Full Bench decisions which are relevant to the matter being determined. Such a policy aids consistent decision making which in turn provides the parties to Commission proceedings with greater certainty.”

[28] More recently in Construction, Forestry, Mining and Energy Union v Queensland Bulk Handling Pty Ltd 13 the Full Bench confirmed the approach taken in Cetin.

[29] Based on the above, I accept the position as put by the employer that I am bound to apply the Full Bench decision in Hull Moody.

[30] In this Agreement the employer argues that the ability to agree to a loaded wage rate incorporating pre-payment of annual leave and sick leave will provide an incentive for its casual workforce to convert to permanent employment where they can receive the additional benefit of the guarantee of regular and ongoing employment.

[31] While it can be argued that a loaded wage rate encourages employees not to take annual leave I note that the provision for and taking of four weeks annual leave is no longer an immutable concept. The Act via the NES provisions allows annual leave to be cashed out indefinitely, provided a four week accrual balance is maintained. That is, an employee may after 10 years service have taken no annual leave and have a balance of only four weeks annual leave through the regular cashing out of the accruing entitlement allowed by the Act.

[32] In respect of annual leave, I observe that many contemporary working arrangements may also negate the attraction for some employees to take annual leave as a form of rest and recreation. The working of an even time roster where a day off is accrued for each day worked, flexible working arrangements or the multiplicity of rostered day off arrangements are some examples where time off in addition to annual leave is now available in the workplace.

[33] The, ancillary and supplementary terms in respect of the NES entitlements which may be included in enterprise agreements 14, includes an example where an employee may take double their entitlement to annual leave at half their rate of pay. A further term that may be included can specify when payment for annual leave must be made, indicating the payment may not necessarily need to be contemporaneous with the taking of the leave.

Undertakings

[34] With respect to clause 15 - Hours of work and rosters, and in particular, sub clause 15.4, the Commission notes that the sub clause allows an employee to work less than three hours per shift, but no less than one hour per shift. The Award provides that an employer is required to roster an employee for a minimum of three hours. The Applicant has provided an undertaking that this subclause of the Agreement will not be applied and has no operation.

[35] With respect to clause 18 - Overtime, the clause did not appear to provide overtime payments for part time employees unless they worked in excess of 38 hours per week or more than 11 hours on any day. The Fast Food Industry Award 2010 (the Award) being the relevant modern award for the purpose of the better off overall test, provides at the time of being employed, part time employees will agree on a regular pattern of work specifying the number of hours, days, start and finish times, with overtime payments for hours in excess of the agreed hours. An undertaking has been provided by the Applicant to insert a new sub clause 18.2(c) that provides overtime hours for part time employees as hours worked outside the employee’s rostered hours of work.

[36] With respect to the minimum wage schedule of the Agreement, following concerns from the Commission in relation to the rates of pay, the Applicant has provided an analysis of wage options modelling a number of indicative rosters to show that employees are better off overall. In addition to the modelling the Applicant has provided an undertaking that increases all of the minimum wage rates in the Agreement. This schedule of wage rates replaces the existing schedule in the Agreement.

[37] The undertakings are not so substantial that if asked to vote again the employees would not approve the Agreement. I am satisfied that the undertakings do not result in substantial change to the Agreement as per s.190(3)(b) of the Act.

[38] All undertakings are taken to be terms of the Agreement. A copy of the undertakings is attached at Annexure A.

[39] I am satisfied that each of the requirements of ss.186, 187 and 188 as are relevant to this application for approval have been met.

[40] The Agreement is approved. In accordance with s.54(1) the Agreement will operate from 12 September 2013. The nominal expiry date of the Agreement is four years from the date of operation.

COMMISSIONER

Annexure A

 1   s.55 of the Act

 2   [2013] FWC 3654 and [2013] FWC 3789

 3  At [17-21]

 4   By majority

 5  At [38]

 6  At [41]

 7   At [42]

 8   New Acland Coal Pty Ltd re New Acland Coal Enterprise Agreement 2011 [2011] FWA 9075

 9 (1998) 83 IR 323

 10 (2003) 127 IR 205 at [48]

 11   Also see Re Furnishing Industry Association of Australia (Queensland) Ltd Union of Employers [1998]Print Q9115,

 12   (1996) (unreported, AIRC (FB), N0224, 20 March 1996)

 13   [2012] FWAFB 7551 at [22]

 14   s.55(4) of the Act

Printed by authority of the Commonwealth Government Printer

<Price code G, AE403834  PR541426>