SafeWork SA v Adelaide Mobile Lunch Services Pty Ltd
[2018] SASCFC 64
•21 June 2018
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
SAFEWORK SA v ADELAIDE MOBILE LUNCH SERVICES PTY LTD
[2018] SASCFC 64
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice Lovell and The Honourable Justice Doyle)
21 June 2018
EMPLOYMENT LAW - EFFECT OF INDUSTRIAL AWARDS, AGREEMENTS OR LEGISLATION ON EMPLOYMENT CONTRACT - GENERALLY
STATUTES - ACTS OF PARLIAMENT - INTERPRETATION - GENERAL APPROACHES TO INTERPRETATION - PURPOSIVE APPROACH - PARTICULAR CASES
Appeal by SafeWork SA against a decision of the Full Bench of the South Australian Employment Tribunal (SAET) confirming the decision of an Industrial Magistrate to cancel a notice issued pursuant to s 12 of the Long Service Leave Act 1987 (SA) by a SafeWork SA inspector to the respondent.
Whether an employer can refuse to pay an entitlement under the LSL Act to an employee on the basis of a set-off against a liability of the employee to the employer.
Held, per Kourakis CJ (Lovell and Doyle JJ agreeing), allowing the appeal:
1. The power to cancel or modify a notice under s 12 of the Long Service Leave Act 1987 (SA) cannot be exercised for the purpose of setting off against the amount payable pursuant to the LSL Act an amount to which the employer is entitled (at [29]).
Long Service Leave Act 1987 (SA) s 5, s 12, s 13, s 7, s 8; South Australian Employment Tribunal Act 2014 (SA) s 30, s 26J; Fair Work Act 1994 (SA) s 14, s 219A; Statutes Amendment (South Australian Employment Tribunal) Act 2016 (SA) s 116(2), referred to.
Safework SA v Adelaide Mobile Lunch Service [2017] SAET 99, not followed.
Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249; Poletti v Ecob (No 2) (1989) 31 IR 321, considered.
WORDS AND PHRASES CONSIDERED/DEFINED
"Long Service Leave", "Continuous Service", "Leave"
SAFEWORK SA v ADELAIDE MOBILE LUNCH SERVICES PTY LTD
[2018] SASCFC 64Full Court: Kourakis CJ, Lovell and Doyle JJ
KOURAKIS CJ: This is an appeal by Safework SA against a decision of the Full Bench of the South Australian Employment Tribunal (SAET) confirming the decision of an Industrial Magistrate to cancel a notice issued by a Safework SA inspector to the respondent, Adelaide Mobile Lunch Services Pty Ltd (AMLS). The notice required AMLS to make a payment of long service leave to a former employee, E. Pursuant to s 12 of the Long Service Leave Act 1987 (SA) (the LSL Act) an inspector may issue a notice if he or she is satisfied that the ‘employer has improperly refused to grant a worker long service leave or to make a payment in lieu of long service leave to which the worker is entitled under this Act’. AMLS brought an application pursuant to s 12(2) of the LSL Act for a review of the notice. It was on that review that the Industrial Magistrate cancelled the notice.
AMLS accepted that E was entitled to a payment under the LSL Act but contended that it had properly refused to pay E because, in her capacity as a pay officer, she had overpaid herself by a sum which exceeded her entitlement. Safework SA contended that because the set-off was unconnected to E’s long service leave entitlements AMLS had improperly refused to make the payment. The Magistrate accepted AMLS’s contention, found that E had overpaid herself and cancelled the notice. Safework SA appealed against that order to the Full Bench of the SAET. The majority (Gilchrist and Farrell DPJJ) upheld the Industrial Magistrate’s decision and dismissed the appeal. Hannon DPJ would have allowed the appeal on the ground that the claimed set-off was not a proper ground to refuse to pay E her long service leave entitlements.
For the reasons given by Hannon DPJ, and for the reasons which follow, I would allow the appeal. An employer improperly refuses to grant long service leave, or make a payment in lieu thereof, if the employer refuses to grant a worker long service leave to which they are entitled:
· unreasonably exercises either of the two statutory discretions an employer has in respect of the grant of long service leave;[1] or
· refuses to make a payment in lieu of long service leave to which the worker is entitled.
The statutory obligation to make a payment in lieu of long service leave on termination of employment is not qualified by a privilege to withhold that payment by way of set‑off against a liability of the employee to the employer. Accordingly AMLS was statutorily bound to make the payment in lieu of long service leave, notwithstanding E’s indebtedness to it by reason of the overpayment. I elaborate on my reasons below.
[1] An employer has a discretion pursuant to s 7 of the Long Service Leave Act 1987 (SA) as to when the long service leave may be taken and a discretion pursuant to s 8(2) of the same act as to whether to make a payment in advance or on the ordinary pay days.
The legislation
Section 5 of the LSL Act provides that a worker who has 10 years or more of service is entitled to long service leave of 1.3 weeks leave in respect of each year of service. A worker who is terminated, other than for serious and wilful misconduct, is entitled to payment in lieu of long service leave after completing seven years’ service.[2]
[2] Long Service Leave Act 1987 (SA), ss 5(3) and (4). I note that the short period for accrual of a right for payment in lieu is an anti-evasion provision to guard against employers terminating employment shortly before becoming liable to pay long service leave after 10 years of service.
Section 7 of the LSL Act provides that an employer shall grant long service leave to a worker as soon as practicable after the worker becomes entitled to it and that it should be taken in one continuous period. Section 7(4) allows an employer and a worker to agree on the deferral of long service leave, the taking of long service leave in separate periods and the taking of long service leave in anticipation of the entitlement to the leave accruing to the worker. An employer’s decision as to when leave should be taken is the first of the discretions to which I earlier referred. If it is agreed that leave can be taken in anticipation of the entitlement accruing, s 7(6) of the LSL Act provides that the employer may deduct from any remuneration, payable to the worker on a subsequent termination of service, the difference between the amount paid to the worker in respect of the long service leave so taken and the amount of payment in lieu to which the worker would otherwise have been entitled. I observe, however, that such a deduction is not an extraneous offset but is intrinsic to the calculation of what is payable in lieu of leave.
Section 8(2) of the LSL Act provides that payment in lieu of long service leave must either be made in advance of the whole period of leave or on the same days as payment of wages would have been paid if the worker remained at work, or in some other way agreed with the worker. The employer’s decision in this respect is the second of the discretionary decisions left to an employer under the LSL Act.
Section 8(4) of the LSL Act provides:
(4)A payment in lieu of long service leave made under this Act on the termination of a worker's service—
(a) will be calculated at the worker's ordinary weekly rate of pay applicable immediately before the termination; and
(b) must be made to the worker immediately on the termination or, if the worker has died, to the personal representative of the worker on request.
Importantly, s 8(4) of the LSL Act does not simply confer a bare entitlement to an amount of money calculated in accordance with the provisions of the LSL Act and recoverable as a debt. Instead, the employer is required to make a payment of that amount ‘immediately on the termination’ of employment.
Section 12 of the LSL Act provided at the relevant time as follows:
12—Inspector may direct employer to grant leave or pay amount due
(1)If it appears to an inspector that an employer has improperly refused to grant a worker long service leave or to make a payment in lieu of long service leave to which the worker is entitled under this Act, the inspector may, by notice in writing, direct the employer to grant the long service leave or to make the payment within a period (not being less than 14 days) stated in the notice.
(2)An employer who receives a notice under subsection (1) may apply to the Industrial Relations Court for a review of the notice.
(3)An application under subsection (2) must be made within 14 days of the receipt of the notice by the employer.
(4)Pending the determination of an application for review, the operation of the notice to which the application relates is suspended.
(5)The Industrial Relations Court may, on an application for review—
(a)confirm the notice to which the review relates; or
(b)confirm the notice with such modifications as it thinks fit; or
(c)cancel the notice.
(6) If an employer—
(a) fails to comply with a notice under subsection (1) (the employer not having made an application for review under subsection (2)); or
(b) having made an application for review under subsection (2), fails to comply with a notice confirmed by the Industrial Relations Court within a period specified by the Court,
the employer is guilty of an offence.
Maximum penalty: $5 000.
(7)It is a defence to a charge of an offence under subsection (6)(a) to prove that the worker is not entitled to the long service leave or the payment to which the notice relates.
A number of observations can be made about the nature and operation of that provision.
First, it can be accepted that s 12 of the LSL Act is ultimately penal in character. It does not provide a summary civil procedure for the worker to obtain a judgment for the amount unpaid, or to obtain an order in the nature of a mandatory injunction to have the leave itself granted. The worker does not issue the notice and is not a party to any review of the notice in the Industrial Relations Court. The worker cannot dictate to Safework SA how the review is conducted. If collateral set-offs could be raised by an employer, Safework SA would be entitled to defend the set-off, or not, as it saw fit. Indeed, a worker is not relevantly affected by the issue of a notice unless the employer complies with it.
Nonetheless, the primary purpose of s 12 of the LSL Act is beneficial. The issue of the notice is calculated to ensure prompt compliance by the employer with its obligations under the LSL Act for the benefit of workers, and of particular relevance to this matter, to make a payment, which was not made immediately on termination, within a further specified period.
Hannon DPJ, in his dissenting judgment, correctly elucidated how the beneficial purpose of the LSL Act informs the proper construction of s 12(5) of the LSL Act in the following passages:
[75]The words “improperly refused” are reasonably open to more than one construction, and therefore the construction of those words which promotes the purpose or object of the LSL Act must be preferred. In my view the narrow construction for which the appellant contends is preferable.
[76]The clearly and simply stated purpose of the LSL Act is for the granting of long service leave to workers. The provisions directed towards achieving that purpose identify the circumstances in which an entitlement arises, and provide for means of obtaining orders for the granting or payment of any entitlement. It would not promote the stated purpose to construe the s 12(5) review process as encompassing counterclaims or set-offs which do not relate to the existence or quantum of the claimed LSL Act entitlement. Parliament, in my view, must be taken to have intended, subject to the undertaking of a review with the limited scope described, that payment or granting of the entitlement must be made under pain of penalty, and that any counter claims or set-offs related to matters outside the LSL Act be pursued elsewhere.
[77]If the respondent has a sound basis for claiming a set-off, as the Magistrate has found, an interpretation which prevents it from raising those matters on a s 12 review, and which requires it to abide by the s 12 notice to avoid the commission of an offence, may seem to produce a rather harsh outcome in this case. However, this is only one case. There may be other cases where spurious set-off claims are raised. Parliament must be taken to have intended that the preferable statutory framework was that established entitlements under the LSL Act be satisfied when due and that claims extraneous to the LSL Act be pursued separately.
In the construction of s 12 of the LSL Act, both the penal consequence on a non-complying employer, and its protection of workers, must be taken into account. Moreover, the notice which serves as the factum on which the penal provision operates is subject to the right of review allowed to the employer by s 12(5) of the LSL Act. Accordingly, s 12 of the LSL Act should not be construed by reference to a strong presumption, either for or against employers, but its construction should, instead, be informed by its dual purpose and effect.[3]
[3] Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249.
It should also be noted that the power to engage s 12 of the LSL Act by issuing a notice lies with an inspector. An inspector is defined to mean a person who is an inspector appointed under the provisions of the Fair Work Act 1994 (SA) (the Fair Work Act).[4] However, the powers of inspection for the purposes of the LSL Act are prescribed by s 11 of the LSL Act. In effect, they are limited to entering premises and requiring the production of records, or the answering of questions relating to the administration and enforcement of the LSL Act. It should also be noted that a person is not required to answer a question under s 11 of the LSL Act if the answer would tend to incriminate him or her.[5]
[4] Fair Work Act 1994 (SA), s 219A.
[5] Long Service Leave Act 1987 (SA), s 11(4).
An inspector is not bound to investigate any complaint made to him or her by a worker and is not bound to issue a notice even after conducting an investigation. In that sense, inspectors exercise an administrative discretion. Many factors may properly influence a decision by an inspector to issue a notice or not. There may be a dispute about matters affecting the claimed entitlement to long service leave which the inspector is not in a position to determine. An inspector may take the view that claim and counter-claim with respect to an entitlement to long service leave should be determined by judicial proceedings taken in the ordinary way. Examples includes disputes about the length of service, the hours of work and whether a termination after seven, but before 10, years of service is justified on the ground of serious and wilful misconduct. An inspector may also, in his or her discretion in a case such as this, decline to issue a notice if an employer claims that it is entitled to an off-setting amount by reason of the employee’s breach of a statutory or contractual condition of his or her employment, which could never be practically enforced if the employer were required to make the payment. Even though an inspector has no mandatory powers to investigate such a claim, for the reasons given by Hannon DPJ in [59]-[62] below, sufficient information may be volunteered or admitted to justify the inspector declining to issue a notice.
Next I observe that s 12(2) of the LSL Act entitles an employer who receives a notice to ‘apply … for a review of the notice’. A question arises as to whether a review of the notice includes a review of the decision to issue the notice. The powers of the Industrial Relations Court are framed in terms of confirming, varying or cancelling ‘the notice’ which suggests that the review is confined to the correctness of the matters stated in the notice and not to the decision of the inspector to issue a notice at all. The review appears limited to whether the requirements of the notice accord with the LSL Act and does not extend to a review of the decision to issue the notice.[6]
[6] I observe however that s 12(5) of the Long Service Leave Act 1987 (SA) has, since the relevant time for the purposes of these proceedings, been repealed. See Statutes Amendment (South Australian Employment Tribunal) Act2016 (SA) s 116(2). It appears that Parliament has proceeded on the basis that Part 3, Division 1 of the South Australian Employment Tribunal Act 2014 (SA) gives the tribunal the jurisdiction to hear a review initiated pursuant to s 12(2) of the Act. Section 30 of the South Australian Employment Tribunal Act 2014 (SA) empowers the tribunal on a review to affirm, vary or set aside ‘the decision being reviewed’. Section 26J gives the tribunal jurisdiction in that the Tribunal would be dealing with a review pursuant to s 12(2) of the Long Service Leave Act 1987 (SA) as a review of a decision made under the same Act. See s 26J(1)(a) of the Long Service Leave Act 1987 (SA).
Finally I observe that the operation of s 12(1) of the LSL Act critically hinges on the phrase ‘has improperly refused to grant a worker long service leave or to make a payment in lieu of long service leave’.
With these considerations in mind I turn to a textual construction of the provision. The verb ‘refused’ plainly governs both the grant of long service leave itself, and the making of a payment in lieu thereof. Grammatically the adverb ‘improperly’ therefore governs the way in which both are refused. However, in the context of the preceding sections of the LSL Act, the better view is that the adverb ‘improperly’ refers to the way in which an employer might exercise its statutory discretions around the grant of long service leave. That is, it allows a notice to be issued if an employer has improperly exercised his or her discretion as to the timing of long service leave or the method of payment of remuneration for the period of leave. The adverb does not apply to the making of a payment in lieu of leave because the provisions to which I have referred mandate the making of a payment in unqualified and unconditional terms. There can be no proper reason to refuse to comply with the statutory obligations to make a payment in lieu at the specified time. Put in another way, it may be accepted that the adverb ‘improperly’ grammatically applies to both the grant of long service leave and to the making of a payment in lieu thereof, but it only has work to do in the former case.
Moreover, an employer who refuses to make a payment to which a worker is entitled improperly refuses it, even if the employer genuinely believes that a lesser, or no, amount is payable. If it is contended that the notice misstates an employee’s entitlement, an employer may challenge the notice pursuant to s 12(5) or may defend a prosecution in accordance with s 12(7) of the LSL Act. If an employer fails on the review, and/or in its defence, it follows that the employer will have refused (improperly) to make a payment to which the worker is entitled. If it were otherwise, the summary procedure calculated to ensure the prompt delivery of the long service leave entitlements of workers would easily be frustrated.
In his dissenting judgment, Hannon DPJ explained why ss (6) and (7) of s 12 support a narrow construction of the grounds on which an employer can refuse to make or grant long service leave or make a payment in lieu as follows:
[64]Furthermore, the provisions of subsections (6) and (7) of s 12 expressly indicate that the inquiry should be limited to the question of whether or not there was an entitlement under the LSL Act. Section 12(6) creates an offence if an employer fails to comply with a notice under subsection (1), or with a notice confirmed by the IR Court following an application for review. Section 12(7) provides that it is a defence to a charge of such an offence for the employer to prove “that the worker is not entitled to the long service leave or the payment to which the notice relates”. In my view the word “entitled” has limited meaning, as that word must link back to s 12(1) and to the limited concept of the improper refusal to grant leave or make a payment in lieu of leave “to which the worker is entitled under this Act”. The provision does not contemplate that a defence to a charge of an offence under subsection (6) arises if the employer, although obliged under the LSL Act to grant long service leave or make payment in lieu, has a claim for moneys due to it by the employee on account of matters extraneous to the LSL Act.
[65]None of the above suggests that an employer may not raise, in the context of a s 12 review, a set-off issue if it is limited to the question of the proper leave entitlement under the LSL Act. For example, if an employee claims leave, and the employer disputes the existence of or the amount of the claimed entitlement on the basis that it has already made payments in relation to that leave, the IR Court on a s 12 review would be entitled to make findings as to the nature and purpose of those payments to determine whether or not they may properly be set-off against the claimed long service leave entitlement. That would be an example of the proper operation of the principles deriving from the Poletti v Ecob (No 2)[7] line of cases.[8]
[7] (1989) 31 IR 321.
[8] Per Hannon DPJ: "It is to be noted that the same restriction would now apply upon a review under Part 3 Division 1 of the SAET Act, where the Tribunal does not discharge its functions as the South Australian Employment Court to which the additional provisions relating to jurisdiction now apply in accordance under Part 2 Division 6 of the SAET Act."
The essential reasons of the majority for holding that the notice was properly cancelled on the ground that it was offset by the overpayment were:
[25]Section 12 of the LSL Act is a penal provision that enables the force of the State to be used to punish an employer who has failed to comply with a notice. The conferral of jurisdiction on the Court by s 12 of the LSL Act contains no stated limitation as to what the Court can take into account in determining an application for review of the notice. On the Crown’s argument such a limitation would have to be inferred. It submits that it can be having regard to the limited the powers [sic] conferred upon inspectors under s 11 of the LSL Act. That section authorises an inspector to enter an employer’s premises and require the production of and copies of records relating to long service leave inspect and the answers to questions relevant to the administration or enforcement of this Act. It argued that in light of the limited investigative powers of inspectors it should be inferred that the scope of the review is limited to matters concerning long service leave.
[26]This submission ignores the fact that the inspectors are also inspectors for the purposes of the FW Act 1994 (SA), and under that Act inspectors are given extensive powers of investigation in connection with employment matters generally.
[27]Clearly the scope of the review must be confined to issues related to the employment. But, given that the issuing of a notice can involve criminal sanctions, we can see no warrant in inferring that the matters to be taken into account on a review of a notice, should be limited effectively to matters of arithmetic in connection with the calculation of the entitlement. If an employer contends that there are legitimate reasons connected with the employee’s employment with it as to why it should not be subject to a notice that could lead to a prosecution, we can see no warrant to deny the employer the right to put that forward to the Court as a ground to cancel or modify the notice. It should be able to agitate those issues in connection with the review of a notice under the LSL Act.[9]
[9] Safework SA v Adelaide Mobile Lunch Service [2017] SAET 99 [24]-[27].
In respect of the first paragraph of the majority’s reasons, the limitation on the Court’s powers on a review is not ‘inferred’. Rather, it is inherent in the text of s 12 of the LSL Act. The Court will confirm, vary or cancel a notice according to whether or not it conforms with the worker’s rights under the LSL Act. The reasoning in [25] also discloses that the majority have failed to construe s 12 of the LSL Act by reference to its dual purpose.
In respect of [26] of the majority’s reasons, whatever other duties inspectors have, their duties, positions and powers for the purpose of the LSL Act cannot exceed those conferred by s 11. It would also be an abuse of a power conferred by and for the purpose of another Act to use it for the purposes of the LSL Act. More fundamentally, an investigation of the broad range of counter-claims an employer may make cannot practically be determined by an inspector empowered to investigate and enforce long service leave entitlements.
In respect of [27] of the majority’s reasons, it is difficult to see why, if extraneous matters may be considered, they should be limited to employment matters. Why not, for example, extend the scope of the review to a personal loan made by the employer to the worker? More fundamentally, the criminal sanction only operates if the long service leave is not granted or a payment in lieu is not made. Finally I observe that even though the facts of this case concern the failure to make a payment in lieu of long service leave, the majority’s reasoning would apply equally to a notice requiring an employer to grant long service leave. It is difficult to see how the refusal of leave itself could be justified by reason of a collateral set-off having regard to the primary purpose of the LSL Act, which is to allow workers leave of absence after accumulating 10 years of service.
If a notice is not issued, or is successfully challenged, the controversy between the worker and his or her employer is determined by s 13 of the LSL Act which provides:
13—Failure to grant leave
(1) Subject to this section, where—
(a) a worker is not granted long service leave in accordance with this Act; or
(b) a worker, or the personal representative of a deceased worker, does not receive a payment to which he or she is entitled under this Act,
the Industrial Relations Court may, on application under this section, order the employer (or former employer) of the worker to grant the leave or make the payment.
(2) An application under subsection (1) may be made by—
(a) the worker; or
(b) if the worker is dead—the worker's personal representative; or
(c) with the consent of the worker—a registered association of which the worker is a member; or
(d) if the employer has been found guilty of failing to comply with the notice of an inspector directing that leave be granted or a payment be made—the complainant in those proceedings or a person appearing on behalf of the complainant.
…
(5)The Fair Work Act 1994 applies in relation to an application under this section in the same way as to any monetary claim to the Industrial Relations Court under that Act.
Section 13 does not expressly provide that a claim by a worker may be dismissed by the Industrial Relations Court, in part or in whole, by reason of an extraneous set-off. However, at the relevant time s 14 of the Fair Work Act empowered the Industrial Relations Court to hear and determine monetary claims, including a claim for a sum due to an employer from an employee under the Act, an award, enterprise agreement or contract of employment. Plainly then, an offsetting claim could be brought by an employer pursuant to s 14 of the Fair Work Act by way of a counterclaim to a claim brought by a worker pursuant to s 13 of the LSL Act.
Be that as it may, there is no reason to construe the word improperly, or the powers of the Court on a review brought pursuant to s 12(5) by reference to claims heard pursuant to s 13 of the LSL Act. Section 12 of the LSL Act enacts a regulatory offence, the administration of which by an inspector is reviewable. Section 13 of the LSL Act on the other hand confers a civil remedy on a worker. The parties to each proceeding are necessarily different. There is no textual basis on which a review of the contents of a notice issued pursuant to s 12 of the LSL Act can be extended to a determination of controversy between an employer and an employee who is not a party and has no control over the conduct of the review.
It is not for this, or any, Court, to construe legislation in accordance with its opinion on matters of policy. On a proper construction of the text of s 12 of the LSL Act, having regard to its context and legislative purpose, the power to cancel or modify a notice cannot be exercised for the purpose of setting off against the amount payable pursuant to the LSL Act an amount to which the employer is entitled.
I would allow the appeal. I would set aside the order of the Full Bench. I would order instead that the appeal from the Industrial Magistrate be allowed and the notice confirmed.
LOVELL J: I agree with the Chief Justice.
DOYLE J: I agree with the reasons of the Chief Justice and with the orders he has proposed.
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