SCA Hygiene Australasia v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia

[2014] FWC 249

[2014] FWC 249

FAIR WORK COMMISSION

REASONS FOR DECISION

Fair Work Act 2009
s.739 - Application to deal with a dispute

SCA Hygiene Australasia
v
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia; “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)
(C2013/6292)

Construction, Forestry, Mining and Energy Union
(C2013/6293)

SENIOR DEPUTY PRESIDENT WATSON MELBOURNE, 10 JANUARY 2014

Alleged dispute concerning voluntary redundancies - reasons for decision.

[1] SCA Hygiene Australasia (SCA) has notified two related disputes about an agreement, pursuant to s.739 of the Fair Work Act 2009 (the Act):

● C2013/6292—a dispute with the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (the CEPU) and the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) (the AMWU) concerning the SCA Hygiene Australasia (Maintenance Employees) Personal Care, Springvale Site Agreement 2012 1 (the 2012 Maintenance Agreement); and

● C2013/6293—a dispute with the Construction, Forestry, Mining and Energy Union (CFMEU) concerning the SCA Hygiene Australasia Pty Limited Springvale Site (Production and Warehouse) Agreement 2012 2(the 2012 Production and Warehouse Agreement).

[2] The disputes arise out of involuntary redundancies planned by SCA and concern disagreement as to:

● Whether the redundancy provisions of the 2012 Maintenance Agreement and the 2012 Production and Warehouse Agreement (collectively the 2012 Agreements) apply in circumstances of involuntary redundancies (in which the employee’s function is redundant); and

● If they do, the basis within the 2012 Agreements for calculating the applicable redundancy payments.

[3] The disputes concern the same issues and will be referred to hereafter collectively as the dispute.

[4] On 19 December 2013, I issued an interim decision, 3 announcing answers to the questions for determination. These are my reasons for decision.

Brief Background

[5] SCA produces personal care products at its Springvale Site, with just over 100 employees. It operates four main departments that are covered by the 2012 Agreements:

1. Tampon production;
2. SAN-1 production;
3. Maintenance; and
4. Warehouse.

[6] The employees at the Springvale Site have ordinary hours of 35 hours per week.

[7] The shift structures vary across and within departments. In Production the Tampon department runs 24 hours per day six days per week (Monday to Saturday operation) and the SAN-1 department runs 24 hours per day three days per week (Monday to Wednesday) and 12 hours per day three days per week (Thursday to Saturday), with the predominant shift arrangements being 12 hour shifts on Monday to Saturday from 7.00 a.m. to 7.00 p.m. and from 7.00 p.m. to 7.00 a.m. in Tampons; and 12 hour shifts on Monday to Wednesday from 7.00 a.m. to 7.00 p.m. and from 7.00 p.m. to 7.00 a.m. and on Thursday to Saturday one 12 hour shift during the day only in SAN-1. In Maintenance, some shift patterns align with the 12 hour shifts for Production across six days per week, Monday to Saturday and other shift patterns are eight hour day shifts which are run across five days, Monday to Friday only. In the Warehouse department, in the raw materials store, employees work 12 hour shift patterns which align with the Production 12 hour day shifts, and in the finished goods Warehouse the employees work 8.75 hour day shifts, four days per week.

[8] Employees have never worked a 46 hour week at the Springvale Site.

[9] Employees working 3 x 12 hour shifts, work a 36 hour week and this includes one hour of overtime. Employees are paid a loaded weekly rate which is made up of a weekly base salary, a 25% “over award” payment and applicable shift penalties and allowances.

[10] Production employees are paid a loaded rate, comprising:

(a) base weekly rate;
(b) the relevant shift loading, being:

(i) no loading for day shift;

(ii) 5% loading for day shift –12 hour roster; and

(iii) 30% loading for night shift –12 hour roster; and

(c) a 25% “above award” amount.

[11] Maintenance employees are paid a loaded rate, comprising:

(a) a base salary;
(b) a 25% “above award” amount; and
(c) an amount with respect to allowances.

[12] In or about October 2012, SCA announced proposed structural changes at the Springvale Site involving a move from a Quality Control (QC) structure to a Quality Assurance (QA) structure. As a consequence of those changes it was proposed to reduce the number of QC positions by six through voluntary redundancies.

[13] In November 2012, SCA provided employees performing the QC role quotations regarding their proposed redundancy calculations. These quotations were based upon the calculation set out in the SCA Hygiene Australasia Pty Limited Springvale Site (Production and Warehouse) Agreement 2009 4 (2009 Production Agreement), being 46 hours x base hourly rate. The CFMEU disputed that this was the correct calculation stating that it should be calculated by applying the loaded hourly rate x 46 hours. It was ultimately agreed between SCA and the CFMEU that in the interest of progressing with the QC/QA transition SCA would calculate redundancies at the rate sought by the CFMEU. This was expressly done on the basis that SCA did not concede that this was the correct interpretation of the provisions of the 2009 Production Agreement, that the correct interpretation was as SCA had put and it was stated that the matter should be clarified in the enterprise bargaining negotiations.

[14] The issue regarding the redundancy calculation was discussed during the enterprise bargaining negotiations with the CFMEU as well as with the AMWU and the CEPU during the period December 2012 to approximately March 2013. No agreement was reached as to the meaning of the words in the relevant clauses of the 2012 Agreements. The 2012 Production and Warehouse Agreement was made with the same words as the 2009 Production Agreement. The 2009 and 2012 Production Agreements were also in the same terms, save that the word “involuntary” was removed from the introductory words of clause 45.8, of the 2012 Maintenance Agreement. Each Agreement was approved in July 2013.

[15] SCA recently undertook a review of its operations at the Springvale Site in light of market conditions. In September 2013, SCA decided to implement changes to the operations structure within Personal Care at the Springvale Site. The changes resulted in a total of 16 positions being made redundant, specifically:

● Under the 2012 Production and Warehouse Agreement: 10 in total—five redundancies in Tampons; five redundancies in SAN-1 and two redundancies in Warehouse; and

● Under the 2012 Maintenance Agreement—four redundancies in Maintenance.

[16] SCA proposed to give effect to the redundancies through voluntary redundancies. The number of redundancies under the 2012 Production and Warehouse Agreement has been reduced to eight employees as a result of one resignation and the death of another employee.

[17] SCA took steps to notify the relevant unions and employees of the changes and the redundancies in compliance with the major change provisions set out in the 2012 Agreements.

[18] The dispute has arisen in relation to the application of the redundancy provisions of the 2012 Agreements and the basis for calculating the applicable redundancy payments.

The relevant 2012 Agreement provisions

[19] The central 2012 Agreement provisions are as follows:

2012 Production and Warehouse Agreement	2012 Maintenance Agreement
“42.1 Should a position become redundant and as a consequence an employee is involuntarily retrenched, the employee will be entitled to the following payments: (a) All accumulated sick leave credits (b) All accumulated annual leave credits including annual leave loading, (c) Pro rata Song [sic] service leave, if the employee concerned has five or more years continuous service with the Company, and (d) Four weeks’ pay for each year calculated on the basis of 46 hours per week for each full year of service, and pro rata for part years.”	“45.8. Should a position become redundant and as a consequence an employee is retrenched, the employee will be entitled to the following payments: 45.8.1. Notice or payment in lieu in accordance with the Fair Work Act 45.8.2. All accumulated personal leave credits; 45.8.3. All accumulated annual leave credits including annual leave loading; 45.8.4. Pro-rata long service leave if the employee concerned has five or more year’s continuous service with the company, and 45.8.5. A redundancy payment of four weeks’ pay for each year calculated on the basis of 46 hours per week for each full year of service, and pro rata for part years.”
“42.2 The 46 hours is agreed to be an aggregate of ordinary time earnings, continuous operating penalties, 25% over award payment and shift penalties, for the purposes of this clause.”	“45.9. The 46 hours is agreed to be an aggregate of ordinary time earnings, continuous operating penalties, 25% over award payment and shift penalties, for the purposes of this clause.”

[20] In addition, the CFMEU, in support of its case that the 2012 Production and Warehouse Agreement redundancy payments applied in cases of involuntary redundancy, relied on the following provisions:

“9. Job Security

9.1 The parties agree that employees have the right to expect that their commitment to the objectives of this Agreement will deliver greater employment security and improved living standards.

9.2 Accordingly, subject to the provisions of this clause, the Company gives an undertaking that there will be no involuntary redundancies during the life of this Agreement, and that any future required labour reductions would therefore occur on the basis of natural attrition, and/or voluntary redundancy and/or transfers to alternative duties/locations.

9.3 However, should the above methods not meet the needs of the Company due to changed circumstances, the Company will consult with employees and the Union regarding the manning reductions required and the method and manner used to effect the number of reductions required.

9.4 In the absence of such agreement the parties agree to address the matter as per the disputes resolution procedure.

9.5 By agreement between the parties, the Company has the right to exclude any employee from the offer of retrenchment based on the need to retain skills.

. . .

42.11 Exclusion

. . .

(c) Voluntary Redundancy

Should a general redundancy offer be made by the SCA Hygiene Australasia, Springvale site, and an employee voluntarily elects to accept that offer (even though that employee’s function is not redundant) the provisions of the above ‘Redundancy’ clause will apply in respect of payments made.”

The questions for determination and the position of the parties

[21] In its written submission, 5 SCA identified the questions for determination as:

“(a) does clause 42.1 of the Production and Warehouse Agreement prescribe the severance payments to be made to an employee being made voluntarily redundant by SCA?

(b) does clause 45.8 of the Maintenance Agreement prescribe the severance payments to be made to an employee being made voluntarily redundant by SCA?

(c) if yes to (a) and/or (b) what rate is required to be paid for severance pay under clause 45 of the Maintenance Agreement and clause 42 of the Production and Warehouse Agreement.”

[22] Each of the unions accepted this to be an appropriate description of the questions to be addressed and answered. 6

[23] In relation to question (a):

● SCA submitted that clause 42.1 of the 2012 Production and Warehouse Agreement does not apply to regulate what can be offered by SCA in voluntary redundancies and is only binding in relation to involuntary redundancies;

● The CFMEU submitted that clause 42.1 of the 2012 Production and Warehouse Agreement does apply to the voluntary redundancies, by virtue of its interaction with clause 42.11(c) and having regard to clause 9.2;

● The AMWU supported the CFMEU position; and

● The CEPU made no submission.

[24] In relation to question (b):

● SCA submitted that clause 45.8 of the 2012 Maintenance Agreement does not apply to regulate what can be offered by SCA in voluntary redundancies and is only binding in relation to involuntary redundancies;

● The CEPU submitted that clause 45.8 of the 2012 Maintenance Agreement does apply to the voluntary redundancies;

● The AMWU supported the CEPU position; and

● The CFMEU made no submission.

[25] In relation to question (c):

● SCA submitted that if the Fair Work Commission (the Commission) finds that clause 42.1 of the 2012 Production and Warehouse Agreement and clause 45.8 of the 2012 Maintenance Agreement do apply, the Commission should determine that the severance payments required to be paid pursuant to clauses 45.8.5 and 42.1(d) respectively are:

(1) “4 weeks’ pay per year of service (pro rate for part years) calculated at 46 hours x base hourly rate”; or

(2) In the alternative and without prejudice to (1) “4 weeks’ pay per year of service (pro rate for part years) calculated at the weekly loaded rate actually paid to the employee for their ordinary hours per week”.

● The CFMEU submitted that severance payment is to be paid at 46 hours per week at the employee’s loaded rate (which includes the 25% over award payment and any relevant shift penalty);

● The CEPU submitted that the “historical formula” applies: Week’s pay in clause 45.8.5 = (base rate of pay) + (25% above base rate) + (allowances) + (shift loadings) x 46 hours; and

● The AMWU supported the positions of the CFMEU and the CEPU.

Jurisdiction

[26] Clause 39.3 of the 2012 Production and Warehouse Agreement provides a procedure for the resolution of “a dispute arises about this agreement, the NES (including subsections 65(5) or 76(4)), Occupational Health and Safety, or legislation”. It provides in clause 39.6 for reference of the dispute to the Commission (following earlier local steps) and, in clause 39.7 empowers the Commission to “exercise such powers in relation to conciliation and arbitration as are necessary to make the conciliation or arbitration effective including all of the powers given to Fair Work Commission by the Fair Work Act 2009”.

[27] The dispute resolution procedure in clause 43.2 of the 2012 Maintenance Agreement is directed to “the settlement of such grievance or dispute which may be raised by an employee or the Company, including disputes over the application of the National Employment Standards”. Clause 43.2.4 provides that if the dispute “is unable to be resolved at the workplace” either party may refer the matter to the Commission (or an agreed specialist Independent Arbitrator) which may resolve the dispute by arbitration if conciliation is unsuccessful.

[28] It has not been suggested that there is a jurisdictional impediment to the Commission arbitrating the dispute before me. I am satisfied that the 2012 Agreements authorise the Commission to determine the dispute by arbitration.

Principles governing the construction of industrial agreements

[29] The dispute, as characterised by the questions for determination, concerns an interpretation of the redundancy provisions of the 2012 Agreements.

[30] In determining such a dispute about an enterprise agreement, the Commission is not at large to impose its own view as to what might be an appropriate or fair and reasonable outcome upon the parties. Section 739(5) of the Act provides that, in arbitrating such a dispute, the Commission “must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties”. As noted by Madgwick J in Kucks v CSR Limited (Kucks):

“. . . the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award.” 7

[31] There are well established principles under the general law for the construction of contracts, which are generally applicable in the construction of certified agreements. In Telstra Corporation Limited 8 (Telstra) a Full Bench of the Australian Industrial Relations Commission summarised the principles governing the resolution of ambiguity in a certified agreement.

[32] The judgment of the High Court in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales 9 (Codelfa) established widely accepted principles for resolving ambiguity in contracts. In that case Mason J stated the rule thus:

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.” 10

[33] In BP Australia Pty Ltd v Nyran Pty Ltd and Others, 11 Nicholson J distilled, by reference to Codelfa, the following points of principle for resolving ambiguity in contracts:

● “It is necessary firstly to determine whether the contract has a plain meaning or contains an ambiguity”;

● “If the contract has a plain meaning, evidence of ‘surrounding circumstances’ will not be admissible to contradict the language of the contract”;

● “If the language of the contract is ‘ambiguous or susceptible of more than one meaning’ evidence of ‘surrounding circumstances’ is admissible to assist in the interpretation of the contract”;

● “The concept of ‘surrounding circumstances’ is to be understood to be a reference to ‘the objective framework of facts’. It will include evidence of prior negotiations so far as they tend to establish objective background facts known to both parties and the subject matter of the contract . . . facts so notorious that knowledge of them is to be presumed . . . evidence of a matter in common contemplation and constituting a common assumption.”

[34] After referring to the foregoing points of principle Nicholson J continued as follows:

“From the evidence of that setting the parties’ presumed intention may be taken into account in determining which of two or more possible meanings is to be given to a contractual provision. What cannot be taken into account is evidence of statements and actions of the parties which are reflective of their actual intentions and expectations. Objective background facts can include statements and actions of the parties which reflect their mutual actual intentions. That is, evidence of the mutual subjective intention of the parties to a contract may be part of the objective framework of facts within which the contract came into existence. It is the mutuality which makes the evidence admissible.” 12

[35] The Full Bench in Telstra also observed that:

“Generally speaking, it is well established that the subsequent conduct of the parties to a contract is not admissible as an aid to construction of a contract. A contrary view was expressed by Santow J in Spunwell Pty Ltd v BAB Pty Ltd. However, even on the Spunwell approach subsequent conduct will only be relevant to the limited extent that the ‘conduct evidences a clear and mutual subjective intention as to what the contract originally meant.’” 13 [Footnotes omitted]

[36] In Kucks, in the context of construing an award,Madgwick J held:

“It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.

But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.”  14

[37] Madgwick J’s approach has been adopted in relation to the construction of certified agreements. In Australasian Meat Industry Employees Union v Coles Supermarkets Australia Pty Ltd Northrop J observed:

“The increase in the number of certified agreements gives rise to an area of possibly greater dispute as to the construction of provisions contained in the agreements. The parties may adopt a multitude of different structures and methods of terminology. No common pattern may develop. Nevertheless certified agreements are to be construed adopting the same methodology as that used in construing awards. In Kucks v CSR Ltd (1996) 66 IR 182 Madgwick J, sitting as a judge of the Industrial Relations Court of Australia, at 184 expressed his opinion on the legal principles to be applied in construing awards under the Act. I agree with that statement of principles. They have even stronger application to certified agreements.” 15

[38] In Short v F W Hercus Pty Limited, (Short) Burchett J made the following observations about the legitimacy of considering the history of an award provision when construing its meaning:

“No one doubts you must read any expression in its context. And if, for example, an expression was first created by a particularly respected draftsman for the purpose of stating the substance of a suggested term of an award, was then adopted in a number of subsequent clauses of awards dealing with the same general subject, and finally was adopted as a clause dealing with that same general subject in the award to be construed, the circumstances of the origin and use of the clause are plainly relevant to an understanding of what is likely to have been intended by its use. It is in those circumstances that the author of the award has inserted this particular clause into it, and they may fairly be regarded as having shaped his decision to do so. The rules of construction, Mason and Wilson JJ said in Cooper Brookes (Wollongong) Proprietary Limited v Commissioner of Taxation (Cth) (1981) 147 CLR 297 at 320, are really rules of common sense. Common sense would be much offended by a refusal to look at the facts I have summarised. As Isaacs J said in Australian Agricultural Co Ltd v Federated Engine-drivers’ and Firemen’s Association of Australasia (1913) 17 CLR 261 at 272, citing Lord Halsbury LC: ‘The time when, and the circumstances under which, an instrument is made, supply the best and surest mode of expounding it.’

The context of an expression may thus be much more than the words that are its immediate neighbours. Context may extend to the entire document of which it is a part, or to other documents with which there is an association. Context may also include, in some cases, ideas that gave rise to an expression in a document from which it has been taken. When the expression was transplanted, it may have brought with it some of the soil in which it once grew, retaining a special strength and colour in its new environment. There is no inherent necessity to read it as uprooted and stripped of every trace of its former significance, standing bare in alien ground. True, sometimes it does stand as if alone. But that should not be just assumed, in the case of an expression with a known source, without looking at its creation, understanding its original meaning, and then seeing how it is now used. Very frequently, perhaps most often, the immediate context is the clearest guide, but the court should not deny itself all other guidance in those cases where it can be seen that more is needed. In literature, Milton and Joyce could not be read in ignorance of the source of their language, nor should a legal document, including an award, be so read.

. . . Where the circumstances allow the court to conclude that a clause in an award is the product of a history, out of which it grew to be adopted in its present form, only a kind of wilful judicial blindness could lead the court to deny itself the light of that history, and to prefer to peer unaided at some obscurity in the language. ‘Sometimes’, McHugh J said in Saraswati v The Queen (1991) 172 CLR 1 at 21, the purpose of legislation ‘can be discerned only by reference to the history of the legislation and the state of the law when it was enacted’. Awards must be in the same position.” 16

[39] In relation to the specific role of custom and practice in interpreting agreements, in Health Services Union v Ballarat Health Services Gray J held that:

“. . . There have been cases in which it has been held that a common understanding of a term used in an industrial agreement can be used to aid in the interpretation of that term. In those cases, the parties to such agreements have acted on a common understanding as to the meaning of terms in those agreements, and the terms have been repeated in successive instruments, so that it can be said that the parties have entered into the successive agreements on the basis of their common understanding of those terms. Care is needed in approaching any suggestion of a common understanding as to terms used. In the first place, there must be positive evidence of a common understanding. Ordinarily, a failure to advance an argument as to the effect of a particular provision will not constitute such evidence. A failure to advance an argument is consistent with inadvertence, and common inadvertence is not common understanding.”  17

Evidence

[40] Evidence was given by the following witnesses:

SCA:

● Mr D Griss, Executive General Manager Human Resources SCA; and

● Mr P Honey, General Manager Operations Personal Care SCA, previously General Manager Operations for Australian Office (part of Australian Paper).

CFMEU:

● Mr G Gasperotti, CFMEU PPW District Melbourne Sub-branch Secretary, based at and employed by SCA - Senior Delegate on site;

● Mr A Millar, CFMEU-FFPD, PPW District; and

● Mr T Lobo, CFMEU Shop Steward based at and employed by SCA as a machine operator.

[41] Neither the CEPU nor the AMWU brought any evidence.

Submissions

SCA

[42] SCA submitted that the matter is to be primarily determined by construing the text of the relevant provisions of the 2012 Agreements in context.

[43] SCA further submitted that the prescriptions in clauses 45.8 and 42.1 of the Maintenance and Production 2012 Agreements respectively apply only in the situation where an employee is involuntarily retrenched.

[44] With respect to clause 42.1 of the 2012 Production and Warehouse Agreement, SCA submitted that this limited application of the redundancy benefits is explicit in the text of the clause. It submitted that if it extended to all voluntary redundancies clause 42.1 would state that and it would have appeared as part of the clause which actually provided the payment.

[45] SCA also submitted that what is explicit in the 2012 Production and Warehouse Agreement is implicit in the text and structure of clause 45 in the 2012 Maintenance Agreement: clause 45.8 of the 2012 Maintenance Agreement follows the prescription in clause 45.7 with clauses 45.6 and 45.7 conferring upon SCA a limited right to retrench a particular employee involuntarily and defining the subject being dealt with at that point as involuntary redundancy. SCA contended that the natural reading of the clause that follows those clauses is that it is directed to the entitlements of an employee involuntarily retrenched pursuant to those limited rights. It submitted that the language employed in clause 45.8 is consistent with that conclusion: it refers to the situation where “a position” becomes redundant and the consequence of “an employee” being retrenched and stipulates that “the employee” will be entitled to the payments set out.

[46] SCA further submitted that, if those textual and contextual considerations are not regarded as supporting the conclusion, matters going to the history of the making of both 2012 Agreements do. SCA submitted that whilst, it is true that it is the 2012 Maintenance Agreement which does not contain the explicit qualifier “involuntarily” before the word “retrenched” in the relevant clause, this is not surprising having regard to the fact that clauses 45.6 and 45.7 of the 2012 Production and Warehouse Agreement operate to define the subject being dealt with at that point of clause 45 as involuntary redundancy. That nexus in terms of subject matter is reinforced when it is noticed that clause 45.7 uses the word “retrenched” and clause 45.8 prescribes the entitlements of an employee who has been “retrenched”.

[47] SCA further submitted that the presence of clause 42.11(c) in the 2012 Maintenance Agreement and its equivalent in the 2012 Production and Warehouse Agreement do not detract from SCA’s contention in this respect because they are directed to a different set of circumstances to those presented here. SCA contended that they are concerned only with the situation where a “redundancy” offer is made to employees generally across the business including in relation to areas where there are no redundant positions and hence where an offer may be accepted by employees whose function/position is not redundant.

[48] SCA submitted that its position as to the quantum of redundancy pay is supported by:

(a) the language in the clauses:

“[T]he clauses refer to a ‘weeks pay calculated on the basis of 46 hours per week’ and then explain why there is the reference to the 4 weeks’ pay being calculated on the basis of 46 hours per week:- ‘46 hours is agreed to be an aggregate of ordinary time earnings, continuous operating penalties, 25% over award payment and shift penalties . . .’ Accordingly, based on the plain meaning of the words of the relevant clauses it is clear that the reference to 46 hours is an agreed approximate aggregation of ordinary time earnings, continuous operating penalties, over award payment and shift penalties.”

(b) the language, when interpreted in the context of the relevant agreement as a whole:

“. . . Applying the plain language of the clause in a common sense way and in the context of the agreements and the operations at the Springvale Site further supports SCA’s interpretation. Employees do not work a 46 hour week, they work a 35/36 hour week and are paid a loaded weekly rate based on such hours. The loaded rate includes base salary plus a 25% ‘over award’ payment plus certain allowances and shift penalties as provided for in the Schedules to the respective agreements.

. . . The reference to ‘46 hours’ in the relevant clauses of the agreements approximates the equivalent number of hours at base rate that would need to be worked to achieve the loaded rate (i.e. 46/35 = 1.31) . . . If the figure of 46 were then multiplied by the loaded hourly rate (which includes the things described) this would clearly involve double counting . . .”

SCA’s alternative position, was that “rather than the reference to ‘46 hours’ being an approximation for the loaded rate it is a description of a loaded weekly rate i.e. employees receive a weeks redundancy pay calculated on the weekly loaded rate actually received by the employee (which includes ordinary time earnings, over-award payments and applicable allowances and shift penalties) for working the 35 hour week”, with “the words ‘weeks pay to be calculated on the basis of 46 hours per week’ with the reference to ‘on the basis of 46 hours’ being a short hand reference to this weekly loaded rate.”

(c) the history of the clauses:

The wording in the 1998 Redundancy Agreement 18 and the Sancella Pty Limited Springvale Manufacturing Site Enterprise Agreement 200019(2000 Sancella EBA) refers to “severance pay being calculated at the employee’s ‘average weekly rate’ and then defines ‘average weekly rate’ as ‘ordinary time earnings, continuous operating penalties, 25% over award payment and shift allowances (46 hours)’ . . . These words were rearranged slightly in moving from the 2000 to 2003 Production and Warehouse EBA, whilst preserving the substance of the position.”

“. . . These documents speak for themselves and clearly demonstrate that the reference to 46 was never intended to be a multiplier applied to the rate it was describing.”

(d) the circumstance that SCA’s interpretation leads to a practical and sensible outcome and avoids an absurd and unreasonable outcome:

“. . . SCA’s position (and its alternative position) is not only supported by the plain language of the agreements and the history of those clauses but it is also fair and reasonable and it is practical common sense industrial application.”

(e) the circumstance that the unions’ position:

“(i) involves clear double counting;

(ii) does not reflect any weeks pay (whether it be weekly base pay or weekly loaded rate) paid to the employees; and

(iii) would result in all redundancy payments being 31.4% higher than the fully loaded weekly pay received by the employees . . . which ‘neither reflects the actual weekly base rate of pay or the actual weekly loaded rate of pay or an approximation of such a rate’.”

[49] In respect of the CEPU submissions, SCA submitted that in deciding the dispute, the Commission should focus on the objective matters known to both parties at the time of agreeing to the wording in the 2012 Agreements and ascribe limited relevance and weight of the historical material. SCA submitted that the CEPU submission that the SCA submission is based upon “what willdeliver it the most cost effective outcome”, relying upon the absence of an explicit reference in the clause to “base hourly rate”:

“(a) is not supported by any evidence or other material (and was specifically rejected by Mr Griss in cross examination);

(b) misrepresents or misunderstands the Applicant’s submission about the construction of the clause; and

(c) fails to take into account the entirety of the clause, its clear language and its construction.”

[50] SCA submitted that clauses 45.8.5 and 45.9 of the 2012 Maintenance Agreement “must be interpreted together and when this is done the provisions clearly and unambiguously identify what the reference to 46 hours is in clause 45.8.5 and why it appears; that is, it ‘is agreed to be an aggregate . . .’ of certain entitlements”. On that basis, it submitted, “the pay rate to which it is applied must be the base rate and could not reasonably be interpreted to be required to be multiplied by the same matters that it is defined to represent”. SCA submitted that “[t]here is a fundamental difference between ‘46 hours is agreed to be an aggregate’ . . . and ‘46 hours is agreed to be multiplied by an aggregate . . .’” (the meaning supported by the CEPU).

[51] SCA further submitted that:

● “Surrounding circumstances and historical objective facts are at best an aid to interpretation”;

● “There was no evidence as to the basis for agreeing the same wording in 2003”;

● “While there was evidence of the fact that the 6 redundancies in 2009 and 1 in 2010 were paid at a particular rate, there was no evidence before the Tribunal” that entitlements in 2009 and 2010 were paid pursuant to the SCA Hygiene Australasia Pty Limited (Production and Warehouse) Personal Care, Springvale Site Agreement 2006 20 (2006 Production Agreement) and SCA Hygiene Australasia Pty Limited Springvale Site (Production and Warehouse) Agreement 200921(2009 Production Agreement) respectively. The only evidence about why such payments were made, being Mr Miller’s evidence, “was to the effect that such payments were paid that way notwithstanding the provisions in the enterprise agreements in force at that time, rather than applying those provisions”;

● “There was no evidence of a common understanding as to what the previous clauses required”;

● “Even if there was a practice, in the absence of it clearly being established that it was pursuant to a mutual understanding as to the meaning of and applying the relevant clause itself, rather than for some other reason, including simply reflecting a previous approach, such ‘conduct’ and alleged ‘custom and practice’ are of no admissible assistance in interpreting wording agreed to be included in the 2012 agreements”; and

● “Further and in any event, due to the matters known (and not known) to both parties when the 2012 EBA negotiations were occurring and the intervening QC/QA redundancies in late 2012, . . . there was clearly also no such ‘common understanding’ between the parties at the time that the 2012 Maintenance Agreement was negotiated.”

THE CFMEU

[52] In relation to the dispute as to the application of clause 42.1 of the 2012 Production and Warehouse Agreement to the proposed 2014 voluntary redundancies, the CFMEU submitted that clause 42.11(c) applies to the proposed redundancies, which are the subject of the current dispute. Clause 42.11(c) is in the following terms:

“(c) Voluntary Redundancy

Should a general redundancy offer be made by the SCA Hygiene Australasia, Springvale site, and an employee voluntarily elects to accept that offer (even though that employee’s function is not redundant) the provisions of the above ‘Redundancy’ clause will apply in respect of payments made.”

[53] The CFMEU submitted that “it is possible to make a redundancy offer generally to a part of the business and there is no need for a redundancy offer to be open to all employees subject to the Agreement in order for it to be a general offer”. It cited, as an example, SCA seeking to “reduce the number of employees on a particular shift, the offer of redundancy may be made generally to all employees on that shift even though only some of the positions on the shift will be redundant”. The CFMEU submitted that “an employee who volunteers in that situation, would clearly be within the intended application of clause 42.11(c) and would be entitled to the severance payments set out in clause 42.1” of the 2012 Production and Warehouse Agreement. The CFMEU submitted that an “interpretation of the word ‘general’, in clause 42.11(c), as being capable of applying to redundancy offers made generally to parts of the site as well as the whole site, is preferable having regard to the context of the clause in the Agreement as a whole” and, in particular, the preference against involuntary redundancies, at clause 9.2 of the 2012 Production and Warehouse Agreement in which SCA gives an “undertaking that there will be no involuntary redundancies and that reductions in workforce size will be achieved by natural attrition or voluntary redundancy”. It also submitted that SCA’s proposed meaning of the word “general” is “improbable having regard to the history of redundancies on the site, wherein the clause has been applied to all voluntary redundancies since its insertion, none of which were offered on a site wide basis”.

[54] The CFMEU submitted that clause 42 of the 2012 Production and Warehouse Agreement is “clearly of uncertain application such that relevant extrinsic materials and conduct must be considered together with the written text . . . in order to ascertain its intended meaning”. It submitted that the uncertainty as to the meaning of the relevant clauses is evidenced by various statements made by SCA representatives during the course of the negotiations for the 2012 Production and Warehouse Agreement to the effect that “the terms of the Agreement were ambiguous”. There was no mutual understanding between the parties as to the meaning of the redundancy clause during the course of the 2012 Production and Warehouse Agreement negotiations.

[55] The CFMEU submitted that that the Commission generally adopts the principle set by Burchett J in Short, that extrinsic evidence is admissible both to raise and resolve an ambiguity in a collective agreement. 22 Burchett J noted that ambiguity and uncertainty may not be evident from the face of the document and “may appear only when the wider context from which an expression first sprang is brought to notice”.23

[56] The CFMEU submitted that “extrinsic materials must play a significant role in a case like the present where the Company acknowledges that there was no mutual understanding as to the role of the disputed term at the time of making the current Agreement”.

[57] The CFMEU submitted that “the question of the reasonable expectations of the employees as to the meaning of the disputed term should be determinative of the meaning of the term”. It submitted that the only “other alternative being that the Commission must consider whether the Agreement is genuinely approved at all, having regard to the lack of consensus at the critical time”.

[58] The CFMEU further submitted that the agreement “term in question has been included in successive instruments” and “[i]t cannot be said that it has been the subject of inadvertence . . . it has been applied as necessary in redundancy situations”. It submitted that “the Commission should be slow to accept that payments of the magnitude of those in question, paid over many years, could have been made inadvertently, in error or as the result of an oversight”.

[59] The CFMEU also submitted that the context of the redundancy provisions set out in clauses 42.1 and 42.11 of the 2012 Production and Warehouse Agreement “must include their history and their derivation from industry agreements negotiated by the Union in 1998 and their continued application in agreements” applying to SCA, including its SCA Hygiene Australasia Pty Ltd 2013 Box Hill Site Agreement 24 throughout the subsequent period.

[60] The CFMEU submitted that that the principle in Kucks 25is particularly relevant in the present case as SCA in part base their submission on the view that the CFMEU’s:

“[P]referred interpretation is in some way unconventional or lacking in common sense, or would result in a rate of payment which the Company submit is was not intended simply because it is generous to employees. In this respect the Company appear to be asking the Commission to apply an anteriorly derived notice of fairness, which fails to take into account the manifest intention of the framers of the clause as demonstrated by its historical application. In addition, in making this submission the Company ask[s] the Commission to ignore the industry context in favour of some externally derived notion of what is common sense in relation to entitlements of this kind, which the Union submits is not an appropriate interpretative approach.”

[61] As to custom and practice, the CFMEU submitted that there is an existing custom and practice which is adequately evidenced by the redundancy situations occurring at the site prior to the 2012 redundancies. It submitted that the 2012 redundancies “were the first iteration of the current dispute and . . . although, in resolution of that situation the Company agreed to pay those redundancies in a manner consistent with the custom and practice” the CFMEU accepts that “those 2012 redundancies are, at best, circumstantial evidence of the established custom and practice . . . In the case of both the 2002 and the 2009 redundancies payment estimates given to employees demonstrate that employees were paid their severance pay at their loaded rate at 46 hours per week”.

[62] The CFMEU submitted that “the terms of the 1998 Redundancy Agreement signed by the Union and Carter Holt Harvey in November 1998 are relevant to the interpretation of the redundancy provisions of the current Springvale Agreement”. They were “inserted verbatim into the next Enterprise Agreement made at Springvale”. 26 The CFMEU submitted that the “relevant calculation under the 1998 Redundancy Agreement was to find the sum of the hourly ordinary time rate of pay, the 25% over award loading, the shift and continuous operating penalties in order to obtain a monetary amount, this monetary amount would then be multiplied by 46 in order to obtain an average weekly rate of pay”.

[63] The CFMEU submitted that the “1998 Redundancy Agreement specified the rate of 46 hours per week as being the relevant rate across all three sites. This was the case even though at that time Springvale worked a different shift pattern than Box Hill and Myrtleford” and at the time there were employees at Box Hill “who were not subject to the roster which formed the basis of the 46 hours calculation, and those employees were also entitled to payment at the 46 hour rate”. It submitted that this is “indicative that the role of the 46 hour component was not tied to hours actually worked at each site, or by any particular roster, but was an agreed benefit for all sites”.

[64] The CFMEU submitted that the 1998 Redundancy Agreement was given effect in the Carter Holt Harvey Tissue Australia Limited 2001 Box Hill Site Agreement 27(2001 Box Hill Agreement) and the “ongoing method of its application at Box Hill, as is documented in detail in the Box Hill Agreement is indicative of the agreed intention of the 1998 Redundancy Agreement”. The CFMEU submitted that the “loaded rate at Box Hill incorporated the same factors as are incorporated into the loaded rate at Springvale”. The relevant terms of the 2001 Box Hill Agreement state:

“43. Redundancy

. . .

● Three weeks pay at the employee’s average weekly rate for each full year of service and pro rata for part years of service. The average weekly rate is achieved by multiplying the hourly rate used to calculate overtime payments by 46.

. . .

Appendix A

. . .

‘Hourly All Purpose Rate’ – this is the hourly rate for the classification. As applicable, it includes shift and first aid allowance. This rate is adjusted in line with any agreed % increases to wages. It is the rate used to calculate overtime payments.

. . .

Impact on Redundancy Payments

Each week of severance payment is calculated by multiplying by 46 the hourly all purpose rate used to calculate overtime. All other entitlements are paid as per their accrual.”

[65] The CFMEU also submitted that the 2012 Production and Warehouse Agreement also incorporated redundancy entitlements based on the 1998 Redundancy Agreement. Initially, in the 2000 Sancella EBA “these terms were incorporated in identical terms to the 1998 Redundancy Agreement, including the reference to continuous operating penalty notwithstanding that at that time the site did not have continuous operations (although the Agreement continues to provide an 8% continuous operating penalty)”. The CFMEU submitted that this “wholesale incorporation of the provisions indicates that they were intended to have the same meaning and effect as the provisions in the 1998 Redundancy Agreement”.

[66] The CFMEU noted changes in the text of the redundancy provision in the 2012 Production and Warehouse Agreement between 2003 and 2006 but submitted that it “did not materially alter the meaning of the clause and was not intended to do so”. It also submitted that:

“[R]egardless of the intention in rearranging the clause, which it is now not possible to ascertain . . . in order to ensure consistency with the prior custom and practice, from which there was no agreement to deviate, the clause should be read as follows:

‘41.2 The 46 hours is agreed to be PAID AT an aggregate of ordinary time earnings, continuous operating penalties, 25% over award payment and shift penalties, for the purposes of this clause. (underlined text inferred)’”

[67] The CFMEU sought an order varying the 2012 Production and Warehouse Agreement in those terms.

[68] The CFMEU submitted that “the custom and practice of payment of 46 hours at the loaded rate is not double counting because the 46 hours and the loaded rate are not compensation for the same thing but are historically derived compensation for different components of the Box Hill shift pattern, which were agreed to be applicable at all three” Carter Holt Harvey sites in 1998. The CFMEU’s interpretation of the redundancy pay entitlement only appears to “involve double counting if the Company applies irrelevant external standards that apply outside of the particular industrial context of this workplace”. The conventionalism of the CFMEU’s method of calculation is “not relevant to the considerations before the Commission, when considering the outcomes of enterprise bargaining, in circumstances where the existing custom and practice is consistent with the industrial history supports an interpretation which maintains that practice”.

[69] The CFMEU submitted that the SCA submission that “the figure of 46 hours is intended to approximate the equivalent number of hours at base rate that would need to be worked to achieve the loaded rate . . . fails to take into account the full nature of the loaded rates applicable at the site”. The loaded rate includes:

“[B]oth the 25% over award loading and any relevant shift penalties, including an Afternoon Shift penalty of 15% and a Night Shift penalty of 30%. On the company’s method of calculation ‘45/35 = 1.31’ the loaded rate would only be worth 31%. However, it is clear that for an employee getting a 15% or 30% Afternoon or Night Shift penalty in addition to the 25% Over Award payment the loaded rate must be at least 40% or 55% respectively, which require an employee to be paid either 49 hours or 54.25 hours for the Company’s method of calculation to avoid underpayment”.

[70] The CFMEU also submitted that SCA has “created a situation in which the Commission now arbitrates a matter which should have been the subject of bargaining . . . seeking an arbitration of the interests of the parties although it is clear that the Fair Work Act does not promote interest based arbitration either in bargaining or during the life of agreements and that the Company could not have obtained an interest based arbitral resolution of the redundancy terms of the agreement under the Act as a part of the bargaining process without the Union’s consent”.

The CEPU

[71] The CEPU submitted that when SCA reached a decision in September 2013 that it would make maintenance employees at the Springvale plant redundant, it provided maintenance employees with redundancy quotations based on the SCA’s primary position in the arbitration. During the course of the disputes procedure to discuss this use of the SCA formula, the CEPU advised SCA that the SCA’s interpretation of clause 45—Redundany of the 2012 Maintenance Agreement was disputed and that the correct formula was that provided for by the historical formula:

Week’s Pay in clause 45.8.5 = (base rate of pay) + (25% above base rate) + (allowances) + (shift loadings) x 46 hours

[72] The CEPU submitted that in relation to the application of the 2012 Maintenance Agreement redundancy payments to a case of voluntary redundancy, SCA failed to develop this argument beyond the status of a baseless assertion. It submitted that the interpretation sought by SCA is an extremely narrow and pedantic legal approach, divorced from the practical purpose of the clause.

[73] The CEPU submitted that:

● Clause 45 of the 2012 Maintenance Agreement provides for a range of steps leading to an employee being made redundant;

● There are only two criteria which need to be met for an employee to be entitled to the redundancy payment in clause 45:

“a. A position must have been made redundant; and

b. As a consequent of that position being made redundant an employee is retrenched.”

[74] The CEPU submitted that the words are clear and there is no basis for the proposition that the entitlements are restricted to involuntary redundancies.

[75] The CEPU submitted that the entitlement in clauses 45.8.5 and 45.9 of the 2012 Maintenance Agreement is ambiguous in that the clauses are “missing a crucial piece of information which is essential to it operating” as intended by its drafters. It submitted that clause 45.8.5 clearly states that that the entitlement is “fours [sic] weeks’ pay per year of service and that a week’s pay should be calculated on the basis of 46 hours per week”, but the drafting of clause 45.9 fails to clearly state the pay rate to be used for the 46 hour multiplier.

[76] The CEPU submitted that clauses 45.8.5 and 45.9 at no point reference the base rate. It submitted that the SCA’s submission “is one premised on what will deliver it the most cost effective outcome” which relied on the absence of an explicit reference in the clause to “base hourly rate”.

[77] The CEPU submitted that the correct interpretation of clause 45.9 is that ordinary time earnings; continuous operating penalties; the 25% over award payment; and shift penalties, calculated together (aggregated) to form the total figure against which 46 hours must be multiplied.

[78] The CEPU submitted that given the ambiguity recourse is required to the surrounding circumstances as an aid to interpretation and those circumstances are:

● The clause has been in operation since 1998;
● Since that time the CFMEU has had members made redundant by SCA;
● These redundancies occurred in 2002, November 2009 and 2012;
● Each employee was paid at the historical formula;
● In the course of the negotiations for the SCA Hygiene Australasia (Maintenance Employees) Personal Care, Springvale Site Agreement 2009 28(2009 Maintenance Agreement), the CEPU and SCA agreed to add the same clause used by the CFMEU, and included in the 2009 Production Agreement into the 2009 Maintenance Agreement;

There was a common understanding between the CEPU and SCA that “the historical formula was the formula to be used to calculate redundancy”; and

● In the alternative, knowledge of the historical formula and its use was so notorious, that the Commission is in a position to deem that the SCA “had full knowledge of it at the time it was included” in the 2009 Maintenance Agreement.

[79] The CEPU submitted that “redundancies were calculated as the CFMEU expected them to be paid for the period prior to 2012” and that the objective facts characterise a situation where there was a common understanding between the CFMEU and SCA “about the application of the clause at the time the 2009 Agreements were negotiated which was the time that the redundancy entitlement was copied from the CFMEU agreement and inserted into the Maintenance agreement”.

The AMWU

[80] The AMWU supported the submissions of the CFMEU and the CEPU in relation to each of the 2012 Agreements.

[81] The AMWU submitted that:

● The severance pay rate calculation in the 2012 Production and Warehouse Agreement should apply equally for the 2012 Maintenance Agreement, having regard to:

• “the identical wording of the relevant clauses”;



• “Mr Griss’s testimony on this point in my cross-examination of him”;



• “the evidence of negotiations on the rate computation terms where the end result for both agreements was to have the matter clarified in an arbitration”;



• There is a sufficient basis to “resort to extrinsic evidence and that the evidence points to the agreements’ literal terms carrying a meaning beyond what the text alone yields”.

[82] The AMWU departed from the CFMEU’s position in that it did not seek a variation of the 2012 Maintenance Agreement. It held the view “that such could only occur on an application under the Fair Work Act 2009, s 217, and there is no such application properly before the Commission in the maintenance matter”. Nonetheless, it submitted, “a decision of the Commission could effectively dispose of the maintenance case”.

Consideration

The 2012 Agreements and the predecessor agreements

[83] The “[p]revious versions of the these clauses are contained in the various historical agreements that applied at the Springvale Site and the original wording of those clauses have clearly derived from similar provisions contained in a Redundancy Agreement which applied at the Springvale Site from approximately November 1998”. 29

[84] The 2012 Agreements were made in the context of previous agreements in 2000, 2003, 2006 and 2009. Similar provisions are also contained in the 1998 Redundancy Agreement, not certified or approved under the relevant Act, which applied at the Springvale Site from late 1998.

The 1998 Redundancy Agreement

[85] The 1998 Redundancy Agreement was applicable to “those employees employed under the Pulp & Paper Industry (Production) Award and/or the Pulp & Paper Industry (Maintenance & Services) Agreement employed by Carter Holt Harvey – Tissue Australia, Box Hill site and Myrtleford site and Sancella Pty. Limited” 30 applying to the current SCA sites at Box Hill and Springvale.

[86] The 1998 Redundancy Agreement, in clause 1 sets out an entitlement to various payments in the event of “a position [becoming] redundant and as a consequence an employee is involuntarily retrenched”. The entitlements prescribed were included in clause 1(d) as follows:

“Three weeks pay at the employee’s average weekly rate for each full year of service and pro rata for part years”. [Subject to minimum payment of three and six weeks for up to one years and up to two years service respectively].

[87] Clause 1(d) also provided:

“The average weekly rate is defined as ordinary time earnings, continuous operating penalties, 25% overaward payment and shift allowances (46 hours).”

[88] Clause 8 (which is separate from clause 7 - Exclusions) provided:

“VOLUNTARY REDUNDANCY

Should a general redundancy offer be made by the Company, and an employee voluntarily elects to accept that offer, (even though that employee’s function is not redundant), the provisions of clause 1 above will apply in respect of payments made.”

[89] The only evidence as to the making of the 1998 Redundancy Agreement came from Mr Millar, who has been involved in enterprise bargaining negotiations for Springvale as well as for Box Hill for 11 agreements, since the early 1990’s. 31

[90] Mr Millar did not personally negotiate the 1998 Redundancy Agreement. 32 His evidence in relation to the 1998 Redundancy Agreement was based on his recollection from meetings at Box Hill about the agreement through report back meetings and members meetings.33 His evidence is that the 1998 Redundancy Agreement was “calculated using the shift work conditions at Box Hill as the basis for the calculations”, which were “then used to create agreed outcomes that applied equally to all employees” covered by the 1998 Redundancy Agreement irrespective of the shift patterns applicable at other sites.34

[91] Mr Millar understood the basis of the 46 hours to be the average weekly hours worked by an employee at Box Hill in 1998 on a 35 hour week with continuous shifts, calculated by summing the annual ordinary hours, weekend hours and “extra hours attributable to the 21st shift which is necessary to ensure continuous production on the 5 shift roster” worked and averaging them over the number of working weeks in a year. 35

[92] Mr Millar’s evidence is that:

● The 1998 Redundancy Agreement intended redundancy pay to be calculated on the basis of an employee’s ordinary time hourly rate of pay, to which the 25% over award loading, the 8% continuous operation penalty and any shift allowance relevant to the employee was added to derive the total loaded rate which was the average hours worked of 46 hours per week; 36 and

● “This method of calculation of redundancy entitlements remains common in the industry at sites which have been operating since 1998.” 37

[93] The 46 hour concept is based on the average hours paid based on shift workers on the Box Hill continuous 24/7 shift pattern. 38 The 46 hours figure is determined by converting payments for weekend hours (with weekend penalties) to ordinary hours to provide an estimate of the number of ordinary hours paid for - resulting in the 46 hours per week. The 46 hour calculation does not represent the actual hours worked but the equivalent number of ordinary hours paid for under those shift arrangements. It incorporates weekend penalties but not shift penalties and the 25% over award payment which forms part of the loaded rate in the 2012 Agreements is applied to ordinary time earnings. As such the 46 hours does not double count for shift penalties and the 25% over award payment. The formulation does not mean “week’s pay” is equated to the same thing that the 46 hours is said to be. The 46 x loaded rate does result in employees, who do not work the Box Hill working arrangements on which the 1998 Redundancy Agreement pay formulation was based, receiving more for a week of redundancy pay than they would have received had they worked that week, applying what the CFMEU described as a “highest common denominator approach”.39 However, on the words of the 1998 Redundancy Agreement and the evidence of Mr Millar, such an outcome was intended.

[178] The evidence as to relevant custom and practice is limited.

[179] For the reasons discussed above no relevant guidance arises from the late 2012/early 2013 (QC/QA) redundancies or the current round of redundancies.

[180] In relation to the 2002/2003 and the 2009/2010 redundancies, I find that the payments were made on the basis of the CFMEU’s interpretation of the effect of the redundancy provisions of the 2012 Production and Warehouse Agreement. There is no evidence as to the basis upon which SCA made the payments calculated by this method. This provides some limited support for the CFMEU’s position.

[181] Mr Gasperotti’s evidence concerning Mr Rowland is of no additional assistance in determining custom and practice. In circumstances where the only evidence of any redundancies prior to 2012 were those in 2002/2003 and 2009/2010, Mr Rowland’s statement that as far as he was concerned the redundancies for the QC positions should be calculated the way they had always been, on the loaded rate, is clearly informed by the 2002/2003 and 2009/2010 redundancies and does not shed light on custom and practice beyond them. It does, however, support Mr Millar’s evidence that the 2002/2003 and 2009/2010 redundancy payments were calculated in that way.

[182] SCA argued that the CFMEU’s interpretation of the relevant clauses produces a result by which employees are paid more per week for redundancy payment than the employees would earn at work, which SCA contends does not reflect any week’s pay (whether it be weekly base pay or weekly loaded rate) paid to the employees and would result in all redundancy payments being 31.4% higher than the fully loaded weekly pay received by the employees. Whilst the redundancy payments arising from the CFMEU’s interpretation are extremely generous and in excess of common industrial standards, they are not untenable when considered in the context of the industrial terms and conditions applying more generally in the 2012 Agreements and the industry as a whole. Relevantly, this is evident in the 1998 Redundancy Agreement which made provision in clear terms for the payment of the loaded rate paid over a 46 hour week.

[183] Clause 42.1(d)/45.8.5 provides for a payment of four weeks pay for each year of service, calculated on the basis of 46 hours per week, with a week’s pay to be calculated on the basis of a 46 hour week. However, the term “week’s pay” is not defined in clause 42.1(d)/45.8.5.

[184] Clause 42.2/45.9 makes little sense. Clause 42.1(d)/45.8.5 describes the 46 hours per week multiplier found in clause 42.1(d)/45.8.5 by reference to an agreed aggregation of specified payments. An aggregation of various components of pay cannot sensibly determine a quantum of hours to be applied for the purposes of determining redundancy pay in the manner clearly stated in clause 42.1(d)/45.8.5. I am not persuaded that the purpose of clause 42.2/45.9 is to explainwhy there is the reference to the four weeks pay being calculated on the basis of 46 hours per week. The better explanation of the purpose of clause 42.2/45.9 is to specify the basis of a “week’s pay” in clause 42.1(d)/45.8.5 which is otherwise not found in the redundancy provision as a whole.

[185] That interpretation is supported by the terms of the 1998 Redundancy Agreement, which was the genesis of the redundancy provisions within the 2012 Agreements, the terms of the 2000 Sancella EBA which incorporated the 1998 Redundancy Agreement and the evidence as to the origin of the 46 hour concept within the 1998 Redundancy Agreement. The basis of redundancy payments made under the 2000 Sancella EBA in respect of the 2002/2003 redundancies and under the 2006 Production Agreement in respect of the 2009/2010 redundancies provides further limited support to that interpretation. Further, some limited support for that interpretation also arises from the wage maintenance provision within the redundancy clause of the 2012 Agreements.

[186] I find that the rate is required to be paid for severance pay under clause 45 of the Maintenance Agreement and clause 42 of the Production and Warehouse Agreement is four weeks pay (calculated as an aggregate of ordinary time earnings, continuous operating penalties, 25% over award payment and shift penalties) for each year calculated on the basis of 46 hours per week for each full year of service, and pro rata for part years.

Conclusion

[187] The questions for determination are answered as follows:

(a) “does clause 42.1 of the Production and Warehouse Agreement prescribe the severance payments to be made to an employee being made voluntarily redundant by SCA?”

Yes, clause 42.1 of the 2012 Production and Warehouse Agreement does prescribe the severance payments to be made to an employee being made voluntarily redundant by SCA.

(b) “does clause 45.8 of the Maintenance Agreement prescribe the severance payments to be made to an employee being made voluntarily redundant by SCA?”

Yes, clause 45.8 of the 2012 Maintenance Agreement, does prescribe the severance payments to be made to an employee being made voluntarily redundant by SCA.

(c) “what rate is required to be paid for severance pay under clause 45 of the Maintenance Agreement and clause 42 of the Production and Warehouse Agreement”?

The rate that is required to be paid for severance pay under clause 45 of the Maintenance Agreement and clause 42 of the 2012 Production and Warehouse Agreement is four weeks pay (calculated as an aggregate of ordinary time earnings, continuous operating penalties, 25% over award payment and shift penalties) for each year calculated on the basis of 46 hours per week for each full year of service, and pro rata for part years.

SENIOR DEPUTY PRESIDENT

Appearances:

S Pill for SCA Hygiene Australasia.

R Reid for the Construction, Forestry, Mining and Energy Union.

B Terzic for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU).

K Reidy for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia.

Hearing details:

2013.

Melbourne:

December 10 and 11.

<Price code G, PR546667>

 1   AE402493 PR539120.

 2   AE402223 PR538630.

 3   [2013] FWC 9992.

 4   AE878676 PR998672.

 5   Exhibit SCA 1, at para 2.1.

 6   Transcript at para15–16.

 7 (1996) 66 IR 182 at 184.

 8   PR954989, Ross VP, Lacy SDP and Smith C.

 9 (1982) 149 CLR 337.

 10   ibid at 352.

 11 (2003) 198 ALR 442 at paras 33–34.

 12   ibid at para 34. The decision was subject to appeal in which the Full Court quoted Nicholson J’s characterisation of the “surrounding circumstances” without dissent—see BP Australia Ltd v Nyran Pty Ltd [2004] FCAFC 163 (24 June 2004), at para 18.

 13   PR954989 at para 42.

 14 (1996) 66 IR 182 at 184.

 15 (1998) 80 IR 208 at 212. This view was approved by the Full Court of the Federal Court in Ansett Australia Ltd v Australian Licensed Aircraft Engineers’ Association, [2003] FCAFC 209 (Wilcox, Conti, Jacobson JJ) at para 8.

 16 (1993) 40 FCR 511 at 517–518.

 17 [2011] FCA 1256 at para 77.

 18   Exhibit SCA 4 at Tab 4.

 19   AG806862 PR903167.

 20 AC305396.

 21   AE878676 PR998672.

 22 (1993) 40 FCR 511 at 519. See also Ulan Coal Mines Limited [2010] FWAFB 3488 and in The Australian Workers’ Union - West Australia Branch [2010] FWAFB 4801.

 23   ibid at para 518.

 24   AE403387 PR540705.

 25 (1996) 66 IR 182.

 26   See clause 42—Redundancy, Sancella Pty Limited Springvale Manufacturing Site Enterprise Agreement 2000 [AG806862].

 27   AG808312 PR904982.

 28   AE884416 PR507189.

 29   Exhibit SCA 1, at para 5.3.

 30   Tab 30 of the volume of CFMEU documents provided and Exhibit SCA 4 at Tab 4.

 31   Exhibit CFMEU 2, at para 6.

 32   Transcript at para 702.

 33   Transcript at para 709.

 34   Exhibit CFMEU 2, at para 10.

 35   Exhibit CFMEU 2, at paras 16–18.

 36   Exhibit CFMEU 2, at para 19.

 37   Exhibit CFMEU 2, at para 20.

 38   Transcript at paras 850 and 856.

 39   Transcript at para 1578.

 40   AG806862 PR903167.

 41   AG808470 PR905353.

 42   Clause 45.1(d) of the Sancella Pty Limited Springvale Manufacturing (Maintenance Employees) Site Enterprise Agreement 1998 [AG798446 Print S1922].

 43   Sancella Pty Limited (Production and Warehouse) Springvale Site Agreement 2003 [AG833786 PR946151], at clause 41.

 44   Exhibit CFMEU 2, at paras 30–31.

 45   Exhibit CFMEU 2, at para 33.

 46   Exhibit CFMEU 2, at para 34.

 47   Transcript at para 763.

 48   The Sancella (Maintenance Employees) Site Enterprise Agreement 2003 [AG835185 PR948695], at clause 44.

 49   SCA Hygiene Australasia Pty Limited (Production and Warehouse) Personal Care, Springvale Site Agreement 2006 [AC305396], clause 39.

 50   SCA Hygiene Australasia Pty Ltd Personal Care Springvale (Maintenance Employees) Site Agreement 2006 [AC308697], clause 41.

 51   SCA Hygiene Australasia Pty Limited Springvale Site (Production and Warehouse) Agreement 2009 [AE878676 PR998672], clause 40.

 52   SCA Hygiene Australasia (Maintenance Employees) Personal Care, Springvale Site Agreement 2009 [AE884416 PR507189], clause 47.

 53   AE402493 PR539120.

 54   AE402223 PR538630.

 55   Mr Millar – Exhibit CFMEU 2, at paras 36–40 and 43; Mr Gasperotti – Exhibit CFMEU 4, at paras 7–12; Mr Griss –Exhibit SCA 2, at paras 23–29; and Mr Honey – Exhibit SCA 3, at paras 13–17.

 56   Exhibit SCA 2, at paras 30–35.

 57   Exhibit SCA 4, at Tab 24.

 58   Exhibit SCA 5.

 59   Exhibit CFMEU 2, at para 25 and Attachment K.

 60   Exhibits CFMEU 3, 5 and 6.

 61   Transcript at para 430.

 62   Exhibit SCA 4, at Tab 19.

 63   Exhibit SCA 4, at Tabs 16–19.

 64   Exhibit CFMEU 4, at para 6.

 65   Transcript at paras 425–426.

 66   Exhibit CFMEU 2, at para 26.

 67   Exhibit SCA 3, at para 40.

 68   Exhibit SCA 3, at para 39.

 69   Exhibit SCA 4, in Tab 34 and Exhibit SCA 3, at para 27.

 70   Exhibit SCA 4, at Tabs 18 and 19.

 71 See s.119(1) of the Fair Work Act 2009.

 72   Clause 9.2 of the SCA Hygiene Australasia Pty Limited Springvale Site (Production and Warehouse) Agreement 2012.

 73   Clause 9.3 of the SCA Hygiene Australasia Pty Limited Springvale Site (Production and Warehouse) Agreement 2012.

 74   Clause 9.5 of the SCA Hygiene Australasia Pty Limited Springvale Site (Production and Warehouse) Agreement 2012.

 75   In Exhibit SCA 4, at Tab 27.

 76   Transcript, at para 287–289.

 77   Exhibit CFEMU 2, at paras 15–22.

 78   Exhibit SCA 2, at paras 30–34 and Transcript at para 283.

 79   Transcript at para 594.

 80   Exhibit SCA 1, at para 5.3.

 81   Exhibit CFMEU 1, at para 31.

 82   Exhibit CFMEU 2 at para 10.

 83   Carter Holt Harvey Tissue Australia Limited 2001 Box Hill Site Agreement [AG808312 PR904982].

 84   See clause 43 (hourly rate used to calculate overtime payments x 46) and Appendix A (definition of “Hourly All Purpose Rate” and subclause dealing with Impact on Redundancy Payments).

 85   The Sancella Pty Limited Springvale Manufacturing Site Enterprise Agreement 2000 [AG806862 PR903167].

 86   Sancella Pty Limited (Production and Warehouse) Springvale Site Agreement 2003 [AG833786 PR946151], at clause 41.

 87   In clauses 42.2 and 45.8 respectively of the 2012 Production and Warehouse and the 2012 Maintenance Agreements.

 88   Exhibit CFMEU 2, at paras 30–31.

 89   Exhibit CFMEU 2, at para 34.

 90   SCA Hygiene Australasia Pty Limited Springvale Site (Production and Warehouse) Agreement 2009 [AE878676 PR998672], clause 40.

 91   SCA Hygiene Australasia (Maintenance Employees) Personal Care, Springvale Site Agreement 2009 [AE884416 PR507189], clause 47.

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