Textile Clothing and Footwear Union of Australia v Rocklea Spinning Mills Pty Ltd
[1997] FCA 1228
•2 SEPTEMBER 1997
FEDERAL COURT OF AUSTRALIA
INDUSTRIAL LAW - Breach of Certified Agreements - Failure to pay wages due under certified agreement - Interpretation of certified agreement - Whether increases in Award payable under certified agreements - whether ‘absorbed against’ excludes employees from increases in the Award - Effect of statutory framework on interpretation of Certified Agreements - whether CPI increase based on actual wage rate payable or wage rate otherwise provided for under the Certified Agreements.
WORDS AND PHRASES - “absorbed against”
Workplace Relations Act 1996 (Cth) ss 178, 179, 179A
Industrial Relations Act 1988 (Cth) s 170MK(1)
TEXTILE CLOTHING AND FOOTWEAR UNION OF AUSTRALIA & OTHERS v ROCKLEA SPINNING MILLS PTY LTD
VI 1313 of 1997
JUDGE: NORTH J
PLACE: MELBOURNE
DATE: 2 SEPTEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1313 of 1997
BETWEEN:
THE TEXTILE CLOTHING AND FOOTWEAR UNION OF AUSTRALIA
FIRST APPLICANTRITA BORG
SECOND APPLICANTJAMIE CLEGG
THIRD APPLICANTHEATHER FREDNO
FOURTH APPLICANTHEATHER HANMER
FIFTH APPLICANTKAREN HODGENS
SIXTH APPLICANTJENNY KRUSCHELL
SEVENTH APPLICANTJOE NASH
EIGHTH APPLICANTAND:
ROCKLEA SPINNING MILLS PTY LTD
(ACN 000 070 824)
RESPONDENTJUDGE(S):
NORTH J
DATE OF ORDER:
2 SEPTEMBER 1997
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
The Respondent is ordered, pursuant to ss 178(6) and 179 of the Workplace Relations Act 1996 (Cth), to pay to each of the Second, Third, Fourth, Fifth, Sixth, Seventh and Eighth Applicants the following amounts:
Second applicant $156.12
Third Applicant $127.45
Fourth Applicant $168.21
Fifth Applicant $137.37
Sixth Applicant $89.14
Seventh Applicant $138.37
Eighth Applicant $136.61
The Respondent is ordered, pursuant to s 179A of the Workplace Relations Act 1996 (Cth), to pay to each of the Second, Third, Fourth, Fifth, Sixth, Seventh and Eighth Applicants the following amounts:
Second applicant $35.76
Third Applicant $29.20
Fourth Applicant $38.53
Fifth Applicant $31.47
Sixth Applicant $20.42
Seventh Applicant $31.70
Eighth Applicant $31.29The Respondent is ordered, pursuant to s 178(6A) of the Workplace Relations Act 1996 (Cth), to make payments to the Australian Retirement Fund in respect of each of the Second, Third, Fourth, Fifth, Sixth, Seventh and Eighth Applicants of the following amounts:
Second applicant $8.67
Third Applicant $7.47
Fourth Applicant $7.65
Fifth Applicant $7.61
Sixth Applicant $4.73
Seventh Applicant $7.65
Eighth Applicant $7.65The Respondent is ordered, pursuant to ss 178(4) and 178(5A) of the Workplace Relations Act 1996 (Cth), to pay a penalty of $750.00 to the First Applicant.
The Respondent is ordered to make each of the payments required by orders 1, 2, 3 and 4 above on or before 26 September 1997.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1313 of 1997
BETWEEN:
THE TEXTILE CLOTHING AND FOOTWEAR UNION OF AUSTRALIA
FIRST APPLICANTRITA BORG
SECOND APPLICANTJAMIE CLEGG
THIRD APPLICANTHEATHER FREDNO
FOURTH APPLICANTHEATHER HANMER
FIFTH APPLICANTKAREN HODGENS
SIXTH APPLICANTJENNY KRUSCHELL
SEVENTH APPLICANTJOE NASH
EIGHTH APPLICANTAND:
ROCKLEA SPINNING MILLS PTY LTD
(ACN 000 070 824)
RESPONDENT
JUDGE(S):
NORTH J
DATE:
2 SEPTEMBER 1997
PLACE:
MELBOURNE
EX TEMPORE REASONS FOR JUDGMENT
HIS HONOUR: This is an application under ss 178 and 179 of the Workplace Relations Act 1996 (Cth) (the Act). The first named applicant is an organisation of employees registered under the Act. The second to eighth applicants are employees of the respondent. The respondent is bound by the Textile Industry Award 1994 (the Award), an Award for the purposes of section 178 of the Act and by the Rocklea Spinning Mills, Moe, Part A Enterprise Agreement 1994 and the Rocklea Spinning Mills, Moe, Part B Enterprise Agreement 1994 (the Agreements), each of which are certified agreements for the purposes of s 178 of the Act. The agreements were registered on 8 August 1994.
The applicants allege that the respondent acted in breach of the Agreements by failing to pay the wage rates due under them. The applicants seek the imposition of a penalty on the respondent and orders under s 178(6) or s 179, for the payment of the correct amount of wages, and under s 178(6A), for superannuation which should have been paid.
Whether the respondent acted in breach of the Agreements depends on the construction of clause 8 of each of the Agreements and its application to the events which occurred. The terms of the part A and part B agreements relevant to this case are identical. The part A agreement lasted for two years. The part B agreement was to last for five years. The provision of wage rates for the first two years was the same in both parts. For the short period beyond the two year life of the part A agreement, the applicants relied on the effect of the part B agreement. Clause 8 of the Agreements, so far as is relevant, provides:
“All hourly paid employees at Rocklea Spinning Mills, Moe will be entitled to (based on Award pay rates as at 1/12/93):
(a)3 per cent increase on the Award Rate, corresponding to each persons recorded Skill Level, effective from the date of registration of this agreement;
(b)CPI increase (based on the previous 12 months CPI ending March 31, 1995) effective 12 months from the date of registration;
(c)CPI increase (based on the 6 months CPI from April 1, 1995 to September 30, 1995) effective 18 months from the date of registration.
Increases in rates of pay arising from a National Wage Case or Textile Industry Award variation during the life of this agreement shall be absorbed against the increases detailed above (Sect. 8(a), (b) and (c)).”
The second to eighth applicants were skill level 3 employees for the purposes of the Award on 8 August 1994. The Award rate for these employees as at 1 December 1993 was $361.40 per week or $9.51 per hour. By operation of clause 8(a) of the Agreements, upon registration of the Agreements the wage rate for these employees was increased by 3 per cent to $372.02 per week or $9.79 per hour. Consequently, at this point, the wage rate under the Agreements exceeded the Award rate. On 1 December 1994, the Award rate was increased to $369.40 or $9.72 per hour. The respondent continued to pay the employee applicants $9.79 per hour in accordance with the terms of the Agreements. As the wage rate under the Agreements continued to exceed the Award rate, both parties agreed that the increase in the Award rate on 1 December 1994 had no effect on the wage rate paid under the Agreements.
The first contentious period in this case was the approximately 19 week period from 28 March 1995 until 8 August 1995. In this period there were two Award rate increases. On 28 March 1995, the Award rate was increased by $8 per week to $377.40, or $9.93 per hour. On 1 June 1995, the rate was further increased to $380.60 per week or $10.01 per hour. The respondent continued to pay the employee applicants at the rate of $9.79 per hour.
Mr Lawrence, who appeared as counsel for the respondent, explained that the respondent took this approach in reliance on the final sentence of clause 8. He contended that this provision excludes employees from any Award increases and confines them to the wage increases stipulated in clause 8(a) to (c) of the Agreements. When the Agreements refer to the Award increases being “absorbed” they mean, he contended, that the increases under the Agreements stand in place of the increases under the Award.
Ms Doyle, who appeared as counsel for the applicants, contended that the last sentence of clause 8 ensured that the employees were to receive Award increases, but that increases provided in the Agreements were to be offset against such Award increases. She argued that, when the Award increased above the rate set by the operation of clause 8(a), (b) or (c), the last sentence operated to ensure that the rate set by the Award was payable under the Agreements. Thus, on 28 March 1995, the rate payable under clause 8(a) was $9.79 per hour. The Award rate increased from $9.72 per hour to $9.93 per hour. The applicants contended that, as the Award rate was then higher then the rate under clause 8(a), the award rate should apply. The increase in the Award was to be absorbed against the increase already provided under clause 8(a), so that the employees were entitled to be paid $9.93 per hour and not $9.79 per hour. Similarly, on 1 June 1995, when the Award rate increased to $380.60 per week or $10.01 per hour, the applicants were entitled to the new higher rate payable under the award, or $10.01 per hour.
I agree with the applicant's argument in relation to the first contentious period. The meaning of the final sentence of clause 8 is that Award rate changes will be passed on to the employees but that increases otherwise granted by the Agreements are to be taken into account. Therefore, the employees were entitled to be paid at whichever was the higher of the rates provided for by clause 8(a) or the Award. If the Agreements had intended to deny the employees any benefit at all from the Award increases, clause 8 would have said so in clear terms. Mr Lawrence argued that the background to the making of the Agreements involved a displacement of the terms of the Award. He relied upon the statutory framework in Division 2 of Part 6(b) of the Industrial Relations Act 1988 (Cth) under which the Agreements were made. In particular section 170MK(1)(a) provided:
“While a certified agreement is in force:
(a) ... the terms of the agreement prevail over the terms of an award or order of the Commission; ...
To the same effect, he relied on clause 4 of the Agreements, which provided as follows:
“This agreement shall be read and interpreted in conjunction with the Textile Industry Award 1981, however, the terms of this agreement shall prevail over any inconsistency between that Award and this agreement.”
In my view, the statutory context and clause 4 of the Agreements allow for the parties to agree, as they have, for the particular terms of an Award to play some role under the terms of a certified agreement. Not only did this occur in relation to wage rates, but also in relation to, for instance, the work of the consultative committee (clause 14), redundancy (clause 11) and the grievance procedure (clause 13). These clauses do not give the Award an independent role but a role deriving from the terms of the Agreements.
Similarly, no assistance can be derived by the respondent from the proposition that the Agreements were the result of trade‑offs by both parties and, consequently, the applicants must be taken to have accepted the possibility that employees may fall behind the Award rate at times. No doubt the Agreements resulted from hard bargaining but the intent of the last sentence is clear from its terms. The short evidence that was given did not go to matters bearing upon the terms of the agreement. Minutes of the meetings of the consultative committee which undertook negotiations for the Agreements were available to the applicants and the respondents. Neither side tendered these minutes. This confirms my view that nothing in the negotiations elucidates the meaning of the terms of the Agreements.
In the result, the respondent should have paid the applicant employees $9.93 per hour from 28 March 1995 to 1 June 1995, and $10.01 from 1 June 1995 until 8 August 1995, instead of the $9.79 actually paid. The failure to pay the wage rates due under the Award during these periods which exceeded the rates payable under clause 8(a) was a breach of the Agreements.
The second contentious period is from 8 August 1995 until a new agreement was registered on 20 December 1996. In this period the Award rate changed on one occasion, in March 1996, from $10.01 per hour to $10.22 per hour, reflecting a third $8 safety net adjustment. On 8 August 1995, the CPI increase under clause 8(b) became payable and, on 8 February 1996, the CPI increase under clause 8(c) became payable. The applicant argued that the CPI increases were to be applied to whatever was the existing rate payable under the Agreements at the time of the CPI increases. Therefore, as I have found the rate payable under the Agreements on 8 August was the rate payable under the Award at that time, namely, $10.01 per hour, the CPI percentage increase should have been applied to this figure.
An alternative argument was put in reply whereby the CPI percentage increase was to be ascertained by reference to the relevant rate of pay due under clause 8(a) or (b), and then that amount was to be added to the $10.01 per hour due from the 1 June 1997 or the actual amount payable under the Agreement. In fact, the respondent paid the CPI increases under clause 8(b) and (c) based upon the rate established under clause 8(a), namely, $9.79 per hour, without taking into account the increases in the actual amount payable due to the award increases. It paid the applicant employees at the rate of $10.17 per hour from 8 August 1995 to 7 February 1996 and at the rate of $10.43 from 8 February 1996 until 20 December 1996.
In my view, the respondent adopted the correct approach in the second contentious period. Clause 8(a) to (c) deals with a discrete subject, namely, the escalating wage rates payable under the Agreements. Each rise is built on the former wage level set under the clause. The structure of the clause indicates that the final sentence of the clause only comes into operation upon the determination of the increases fixed under clause 8(a) to (c). The subject of the final clause is absorption rather than the fixing of a wage rate. Consequently, in my view, the respondent was not in breach of the agreement in the second contentious period.
The parties have agreed to bring in short minutes of the terms of the orders for payment to each of the employee applicants of the amounts underpaid. The matter will be stood over for this to occur. The orders should include provision under s 178(6A) of the Act for the payment of so much of superannuation as was underpaid and for interest under s 179A of the Act. I now turn to the question of the appropriate penalty.
The applicant sought the imposition of a penalty but suggested that the breaches should be regarded as a course of conduct under s 178(2) of the Act, and that the breaches were the result of the constructions of the Agreements which, although wrong, were reasonably open to the respondent. The maximum penalty prescribed in these circumstances, under s 178(4)(a)(iia) of the Act, is $10,000. In my view, this case is at the lower end of seriousness. This derives from the fact that the amount ultimately shown to be involved in the breach was in the region of about $1000, and that the breaches can properly be seen as the result of a construction of the Agreements which was not wholly untenable. In those circumstances, in my view, the proper penalty is in the sum of $750, and I intend to make an order to that effect. It is appropriate, in the circumstances, that the penalty be paid to the first applicant.
I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice North
Associate:
Dated: 21 October 1997
Counsel for the Applicant: Ms R Doyle Solicitor for the Applicant: Textile Clothing and Footwear Union of Australia Counsel for the Respondent: Mr B R Lawrence Solicitor for the Respondent: Phillips Fox Date of Hearing: 1 & 2 September 1997 Date of Judgment: 2 September 1997
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