St Marys Rugby League Club Ltd

[2010] FWA 9314

[2010] FWA 9314

FAIR WORK AUSTRALIA

DECISION

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

St Marys Rugby League Club Ltd
(AG2010/13676)

COMMISSIONER MCKENNA SYDNEY, 3 DECEMBER 2010

St Marys Rugby League Club Ltd Employees Enterprise Agreement.

[1] On 12 November 2010, I issued a statement ([2010] FWA 8300) concerning the long service leave provisions of the St Marys Rugby League Club Ltd Enterprise Agreement (“the Agreement”). I expressed certain preliminary views in the statement and invited further submissions concerning cashing-out of long service leave under the Agreement. Having heard further submissions and further considered the matter for myself, I have concluded some of my initial assessments in the statement were incorrect. However, the end result concerning the Agreement is much the same, because, in my assessment, the Long Service Leave Act 1955 (NSW) applies, in any event, to the employees who would be covered by the Agreement albeit by a different legislative route.

[2] It appears the Long Service Leave Act applies, of its own force, to the employees who would be covered by the Agreement, rather than, as I earlier opined, applying as a National Employment Standard under Ch 2, Pt 2-2, Div 9 of the Fair Work Act 2009 (Cth) via the operation of a clause in the notional agreement preserving a State award, namely, the Club Employees (State) Award AN120136 - which had referenced the employees’ long service leave entitlements to the Long Service Leave Act. The employees’ long service leave appears to be determined by reference to the Long Service Leave Act simpliciter, given the employees did not have an award-derived 1 long service leave entitlement within the meaning of s.113(1) of the Fair Work Act.2

[3] The Agreement includes a provision for the cashing-out of long service leave entitlements. Under the Long Service Leave Act, payment in lieu of long service leave is prohibited, except on termination of employment. That is, s.4(8) of the Long Service Leave Act provides that payment shall not be made by an employer to a worker in lieu of any long service leave or part thereof to which the worker is entitled under the Long Service Leave Act, nor shall any payment be accepted by the worker. Further, s.7 provides that that no “contracting-out” agreement operates to annul, vary or exclude the Long Service Leave Act. Section 10 of the Long Service Leave Act stipulates the penalty and offence provisions for contraventions and compliance failures.

[4] Cashing-out of long service leave under the Long Service Leave Act was considered in Kaal Australia Pty Ltd [2001] NSWIRComm 6; (2001) 103 IR 344 (“Kaal”). In that matter, the applicant company had made an application to the Industrial Relations Commission of New South Wales (being the tribunal empowered by the Long Service Leave Act to grant exemptions from that statute) seeking an exemption from the Long Service Leave Act to allow cashing-out of employees’ long service leave entitlements. In declining to grant the application on the basis that cashing-out was statute-barred, Hungerford J analysed the history of long service leave in the New South Wales jurisdiction, commenting at para 24: “ ... I would incline to the view that the essential quality or characteristic of a monetary payment is conceptually different from that of a period of leave, particularly a period of paid leave as the Long Service Leave Act provides.” His Honour further commented at para 25: “... it would be difficult to comparatively relate benefits of a distinct and different nature to determine whether one is truly ‘not less favourable’ than the other. At most, it seems to me, it may be said that they are simply different and so different as to defy meaningful comparison.” As to the legislative history, Hungerford J noted:

“26    ... A review of the scheme established by the Long Service Leave Act, as summarised earlier herein, discloses, in my view, that it is concerned with allowing employees paid leave after completing specified qualifying periods of service with an employer. The only provision in the statute for the payment of money in lieu of allowing paid leave as such is that in s 4(2)(a) in the case of an employee whose services with an employer are terminated: see sub-paras (i)(C), (ii) and (iii) thereof. Given the social and beneficial nature of a period of paid leave, I would hesitate to be satisfied, but as was submitted by [the company’s advocate], that in the generality it would be in the best interests of the employees concerned to receive a cash payment in lieu of a period of paid leave on completing the qualifying service period. I accept that the employees here have expressed no objection to having the option for paid leave or payment in lieu thereof, with the latter situation allowing unpaid leave at some time in the future during their employment, but the exercise of such an option by an individual employee may well be driven by exigencies contrary to the fundamental and inherent purpose of the Long Service Leave Act, that is, a period of paid leave for long service.

27    The essence of the applicant's proposal is for a scheme to enable its obligations under the Long Service Leave Act to allow employees a period of paid leave to be satisfied, in whole or in part, by the payment of money equivalent to the amount of leave due should an employee so elect. For the reasons expressed above, I have serious doubts that the three necessary conditions for such an exemption to be granted have been met. In any case, I have reached the conclusion that s 5(3) of the Long Service LeaveAct operates as a statutory bar to the exemption being granted. I turn now to that issue.”

[5] In giving reasons why s.5(3) of the Long Service Leave Act operated as a bar to granting an exemption so as to allow cashing-out of long service leave entitlements, Hungerford J referred, among other matters, to Hansard (Legislative Assembly, 20 March 1963 at pp 3567-3570) as well as to Re Long Service Leave Exemption - A L Vincent & Coy Pty Ltd [1967] AR (NSW) 221 (“Vincent”). In Vincent, Sheldon J said this (at pp 223-224):

“But the passage of time has brought a change in legislative policy. In 1963, s 5(3) was introduced into the Act and this proscribes the granting of exemptions unless the scheme provides for an actual grant of long service leave. This scheme, of course, does not (see Jackson v. Davids [1963] AR at p.261). … The Act provides that workers must receive leave whether it be by force of s.4 or through an exempted scheme under s.5. No substitute, however princely, is permitted and no past benefit can be used to derogate from the grant unless it is actual leave (s.4(2)(b)). Nor can the right to leave be bartered in order to receive, or avoid losing, other benefits (s.7). Thus a social policy without loopholes has been made operative. It would be wrong, in my opinion, for the Commission to frustrate that policy by excluding workers within its scope.” [My underlining]

[6] Hence, it is clear that cashing-out of long service leave is not available under the Long Service Leave Act given the operation of s.4(8) and nor could an exemption be granted by the Industrial Relations Commission of New South Wales under s.5(3) unless long service leave, as such, is provided. Further, the exemption provision in s.5(1)(b) of the Long Service Leave Act concerning long service leave provided by or under another Act does not appear to arise in such a way as to permit cashing-out under the Agreement, because the Fair Work Act itself provides that the Long Service Leave Act is not, subject to specified exceptions, excluded and that its terms prevail to the extent of any inconsistency in relation to an enterprise agreement.

[7] While the National Employment Standards deal with long service leave arrangements for certain classes of employees as provided in Ch 2, Pt 2-2, Div 9, a legislative note indicates as follows: “This Act does not exclude State and Territory laws that deal with long service leave, except in relation to employees who are entitled to long service leave under this Division (see paragraph 27(2)(g)) and except as provided in subsection 113A(3).” The employees who would be covered by the Agreement are not employees whose entitlement to long service leave arises under Ch 2, Pt 2-2, Div 9 of the Fair Work Act. The long service leave for the employees who would be covered by the Agreement thereby falls to be considered in the context of the Long Service Leave Act.

[8] Schedule 7, Pt 3, Div 4, item 17 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 provided that an enterprise agreement made during the bridging period prevailed over a law of State or Territory, to the extent of any inconsistency, so far as that law dealt with long service leave. The Agreement was not made during the bridging period. As observed by Professors Breen Creighton and Andrew Stewart in Labour Law (5th ed, The Federation Press) at p.403, while is possible, subject to certain limitations, to deal with long service leave in an enterprise agreement, it is “no longer permissible to make an enterprise agreement which derogates from long service leave entitlements under State and Territory laws” given the operation of s.27(1)(d)(iii), s.27(2)(g) and s.29(2)(b) of the Fair Work Act. Item 149 of the Explanatory Memorandum elaborated the legislative intent in this respect:

“149. However, subclause 29(2) provides that a modern award or enterprise agreement is subject to any of the State or Territory laws that are saved by clause 27, as well as any State or Territory laws prescribed by the regulations. This means that a modern award or enterprise agreement cannot diminish, but may supplement, rights and obligations under these laws.” [My underlining]

[9] The Supplementary Explanatory Memorandum, in the summary following item 55, also noted:

“Where an enterprise agreement is made after commencement of the NES:

• the agreement cannot exclude the [long service leave] NES, but may supplement the NES subject to the requirement that such terms not cause any detriment to an employee (see clause 55 of the Bill);

• for employees without an award or agreement-derived entitlement, enterprise agreements will operate subject to State/Territory [long service leave] laws (see clauses 27 and 29 of the Bill).” [My underlining]

[10] The Supplementary Explanatory Memorandum further commented:

“46. The effect of clauses 27 and 29 of the Bill, in relation to long service leave, is that new enterprise agreements must comply with legislation in any State or Territory in which the agreement applies. This is a new requirement. Currently, long service leave can be dealt with in agreements in a way that is inconsistent with such legislation and the terms in the agreement prevail over the State/Territory legislation. ....” [My underlining]

[11] Thus, while an enterprise agreement may contain long service leave provisions for relevant classes of New South Wales employees at least equal to, or better than, the Long Service Leave Act, an enterprise agreement may not provide long service leave conditions that derogate in any way from the legislated minima and nor could an enterprise agreement deal with long service leave in such as way as otherwise would be legislatively proscribed. The purported ouster in an enterprise agreement of a statutory prohibition under non-excluded legislation on cashing-out long service leave could not, on any reasonable construction, be considered, as per item 99 of the Explanatory Memorandum, to “supplement” rights and obligations under such legislation.

[12] In enacting the Fair Work Act and its arrangements concerning long service leave, the Commonwealth Parliament may be presumed, as an ordinarily-understood approach to statutory interpretation, to have legislated with knowledge of the prohibition on cashing-out of long service leave under the Long Service Leave Act, and of the judgments in Vincent and Kaal. While Chapter 2 of the Fair Work Act specifically contemplates certain cashing-out arrangements for annual leave entitlements and personal/carer’s leave entitlements under an enterprise agreement, there are, in notably-different legislative contrast, no equivalent provisions allowing the cashing-out of long service leave entitlements nor any of the accompanying safety net stipulations that apply to the cashing-out of annual and personal/carer’s leave. If the Commonwealth Parliament had intended to displace the prohibition on cashing-out of long service leave entitlements under the Long Service Leave Act for enterprise agreements, it may be accepted, again applying ordinary tenets of statutory interpretation, the Fair Work Act would have so provided. Absent any provision in the Fair Work Act dealing with the cashing-out of long service leave, consideration of the cashing-out of long service leave under an enterprise agreement will, it seems, be determined by the State or Territory long service leave statute as may be applicable to relevant classes of employees.

[13] Although long service leave is a permitted matter for the purposes of inclusion in an enterprise agreement, it further seems to me that terms of an enterprise agreement concerning long service leave will be permitted matters only to the extent such terms would be legally permitted by the relevant State or Territory statute where such statutes apply to the class of employees proposed to be covered by an enterprise agreement. I do not consider that cl.34.3 of the Agreement, concerning cashing-out, here could be characterised as a permitted matter so far as these employees are concerned, given the interaction of the Fair Work Act and the Long Service Leave Act. It seems to me the terms in the Agreement purporting to allow the applicant and the employees to agree to cash-out long service leave entitlements, even if the Agreement were approved with those provisions, would not, thereby, have any effect. The cashing-out clause in the Agreement would not displace the prohibition on cashing-out in the Long Service Leave Act; or the provision that no contracting-out agreement operates to annul, vary or exclude any provisions of the Long Service Leave Act; or the penalty and offence provisions. It may be noted the prohibition and offence provisions concerning cashing-out apply equally to employers and employees; and where a conviction concerns a body corporate, every person who at the time of the commission of the offence was a director or officer of the body corporate shall be deemed to have committed the like offence and be liable to the penalty, subject to the availability of certain defences.

[14] Despite the submissions the employees would be better off overall with cashing-out under the Agreement, cashing-out of long service leave is, simply put, not allowed under the Long Service Leave Act; it is against the law. On no view of matters could it be accepted by Fair Work Australia that employees will be benefitted or better off overall by breaching the law if acting under what the Agreement purports to allow. The New South Wales Parliament has determined that the industrial purpose and benefit of its long service leave statute is best served by leave actually being given and taken, and has legislated accordingly. The Commonwealth Parliament has not displaced the intention of the New South Wales Parliament so as specifically to allow cashing-out of long service leave and, otherwise, has treated long service leave legislation as a non-excluded matter (subject to the exceptions identified in the Fair Work Act) and, further, provided that the Long Service Leave Act is not overridden in enterprise agreements where there is inconsistency. Given the provisions of the Long Service Leave Act as considered by Sheldon J in Vincent and Hungerford J in Kaal, employees could not, more broadly, be considered to be benefitted by cashing-out long service leave entitlements referable to the Long Service Leave Act. While there are divergent approaches to cashing-out under State and Territory long service leave laws, in New South Wales the prohibition under the Long Service Leave Act is plain on the cashing-out of long service leave entitlements.

[15] Certain undertakings had been filed earlier in the proceedings in relation to matters other than long service leave. An undertaking having the effect of removing the cashing-out clause was, appropriately in my view, also subsequently filed on the applicant’s behalf on 29 November 2010. The applicant was further considering whether to provide an undertaking concerning a clause in the Agreement which appeared to diminish statutorily-available flexibilities concerning the timing of the taking of long service leave. The submissions on 29 November 2010 for the applicant and the union, as bargaining agent, indicated the parties wished to have the Agreement approved and submitted that undertakings should be accepted. I requested a final, consolidated version of signed undertakings proposed by the applicant; and the matter had been listed for 6 December 2010 to hear any further submissions the parties may have wished to make. However, I subsequently received advice from the applicant’s representative that, with the consent of the union, the applicant wished to withdraw the application for the approval of the Agreement and vacate the further listing.

[16] A notice of discontinuance has since been filed. In the circumstances, I have determined to vacate the listing that had been scheduled for 6 December 2010. The proceedings are now concluded.

COMMISSIONER

Appearances:

G.K. Bennett of counsel/H. Carayannis, Registered Clubs Association of New South Wales t/as ClubsNSW, for St Marys Rugby League Club Ltd.

M. Dusevic for the Liquor and Hospitality Division, Liquor Hospitality and Miscellaneous Union, New South Wales Branch.

Hearing details:

Sydney

2010

October 26,

November 29.

 1 Contrary to my preliminary view in the statement, it appears that applicable award-derived long service leave terms in s.113 of the Fair Work Act refer to terms in pre-modern federal awards, rather than also in notional agreements preserving State awards. See definitions provided by the Fair Work (Transitional and Consequential Amendments) Act; the differences between Ch 2, Pt 2-2, Div 9 of the Fair Work Act and the exposure draft of the long service leave NES (Discussion Paper - National Employment Standards Exposure Draft, Australian Government 2008; Appendix - Draft Provisions at p.xvi); and the explanatory memoranda. (But note also Award Modernisation - Division 2B State Awards [2010] FWAFB 8558 at [55] and the written submissions (available on Fair Work Australia’s website) concerning long service leave, including those of the ACTU, the NSW Government and the AIG.)

 2   The long service leave entitlements for a number of the applicant’s employees are presently determined by Australian workplace agreements, which exclude the operation of the Long Service Leave Act and confer their own arrangements.

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