The Australian Workers' Union v Fulton Hogan Industries Pty Ltd

[2017] FWC 818

[2017] FWC 818

FAIR WORK COMMISSION

DECISION

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

The Australian Workers' Union
v
Fulton Hogan Industries Pty Ltd
(C2016/5053)

Asphalt industry
COMMISSIONER SAUNDERS	NEWCASTLE, 10 FEBRUARY 2017

Application to deal with a dispute – proper construction of an enterprise agreement – payment under an enterprise agreement following a shift change.

[1] There is a dispute between the AWU and Fulton Hogan Industries Pty Ltd (Fulton Hogan) in relation to the payments that must be made to employees covered by the Fulton Hogan Industries Pty Ltd NSW State Collective Agreement 2015 (the Enterprise Agreement) in the event of a shift change part way through a working week (Dispute).

[2] The AWU filed an application to deal with the Dispute pursuant to s.739 of the Fair Work Act 2009 (Cth) (Act).

[3] There is no dispute between the parties and I am satisfied on the evidence that the Dispute is one which falls within the scope of disputes that may be dealt with in accordance with the dispute settlement procedure in clause 37 of the Enterprise Agreement. Clause 37(f) empowers the Fair Work Commission (Commission) to arbitrate a dispute in the event that the dispute is not resolved after conciliation by the Commission.

[4] The parties participated in conciliation of the Dispute before the Commission, but were unable to resolve the Dispute by agreement. Accordingly, the parties requested that I arbitrate the Dispute and make a “determination” in relation to it in accordance with clause 37(f) of the Enterprise Agreement.

[5] I heard the case on 7 February 2017. At the hearing the AWU adduced evidence from Mr Anthony Callinan, Assistant NSW Branch Secretary of the AWU. Fulton Hogan adduced evidence from Mr Richard Jenkins, Divisional Manager Metropolitan.

The Dispute

[6] Fulton Hogan conducts a road maintenance business. Its employees work in road crews laying asphalt, sealing roads, and doing related maintenance work. Road maintenance often needs to be done quickly and at night or on weekends. The work is both time sensitive and weather sensitive. It is essential that Fulton Hogan has flexibility in deploying its road crews at times when the road maintenance work can be carried out.

[7] It is sometimes necessary for employees to switch from night work to day work, or vice versa, during the course of a weekly roster cycle. Such a change may be necessary in the event of bad weather or as a consequence of a decision made by one of Fulton Hogan’s clients.

[8] When an employee is required to switch from night work to day work part way through a working week, the employee does not work on the day shift immediately following the conclusion of the night shift, but instead resumes work on the following day. For example, an employee who worked night shift on Sunday night, Monday night and Tuesday night (finishing Wednesday morning), and then switched from night shift to day shift would not work their next shift until day shift on Thursday morning (the Shift Change Example). The reason for the employee not working on the Wednesday is, obviously enough, because it would be unsafe for a road maintenance worker to finish Tuesday night shift on Wednesday morning and then work day shift on Wednesday.

[9] There is no dispute that during negotiations for the Enterprise Agreement the parties agreed that employees would be paid 8 hours ordinary pay on the “rest day” between the cessation of night shift and the commencement of day shift. In the Shift Change Example, that would be the Wednesday. Fulton Hogan has been paying the employees 8 hours’ ordinary pay on the “rest day” when there is a change of shift. There is a question as to whether the agreement reached between the parties in negotiations for the “rest day” to be a paid day (at ordinary rates) is reflected in the terms of the Enterprise Agreement. However, I have not been asked to decide that question in this arbitration.

[10] The Dispute concerns the payments that must be made to an employee who undertakes a shift change part way through the week and is then directed to work a fifth shift during the week. In the Shift Change Example, that would be the Friday day shift. A shift change of this type happens about 10 times a year, and gives rise to regular and ongoing disputes between the AWU, on behalf of its members, and Fulton Hogan.

[11] Fulton Hogan contends that work performed by an employee on the Friday is part of their ordinary hours of work, with the result that an employee can be required to work such hours and if they do they are entitled to be paid their ordinary rate of pay. The AWU contends that work performed on the Friday is overtime, with the result that an employee may refuse to work those hours if they are unreasonable, and if the hours are worked they must be paid as overtime.

[12] The table below summarises the Shift Change Example, together with the positions taken by each of the parties to the Dispute in relation to the payments they say must be made to an employee for working the day shift on Friday.

Day	Shift	Hours worked	Loading 1	Paid for (FH)	Paid for (AWU)
Sunday 2	Night	8	200% 3	16	16
Monday 4	Night	8	150% 5	12	12
Tuesday 6	Night	8	150% 7	12	12
Wednesday	Rest day 8	0	Ordinary	8	8
Thursday	Day	8	Ordinary	8	8
Friday	Day	8	Ordinary (FH) Overtime (AWU)	8	15 9
Saturday	Off	0	-	0	0
Total	40	64	71

[13] It is apparent from this table that Fulton Hogan claims that an employee who works 40 hours in a week during which a shift change takes place is entitled to 64 hours’ pay, whereas the AWU contends that 71 hours’ pay must be made to the employee for their 40 hours’ work. The difference between the parties is in relation to the rate of pay which must be paid to an employee who works on the Friday.

[14] There is no doubt that a change in shift from night shift to day shift part way through a week would cause some disruption and difficulties for road maintenance employees. This provided a rational and logical basis for the parties to negotiate, as part of the bargaining for the Enterprise Agreement, some form of compensation to be paid to employees in this type of situation, particularly having regard to the fact that the prior enterprise agreement (approved on 4 September 2012) did not provide for a paid “rest day” or any higher loading in the event of a shift change part way through the week. However, the precise nature of the bargain struck by the parties to compensate the employees for such a shift change is to be discerned by undertaking an analysis of the relevant terms of the Enterprise Agreement in accordance with the applicable principles of construction, rather than by considering whether it would be fair or industrially just for employees to be paid 64 hours’ pay, as contended by Fulton Hogan, or 71 hours’ pay, as contended by the AWU, for working a 40 hour week, partly on night shift and partly on day shift.

Questions for arbitration

[15] The AWU posed the following two questions to be answered in the arbitration of the Dispute:

1. Is the 8 hours shift change (on Wednesday in the Shift Change Example) considered as time worked?

2. If so, using the Shift Change Example, are ordinary hours concluded (i.e. reach 38) at the end of the Thursday day shift?

Relevant provisions of the Enterprise Agreement

[16] The following provisions of the Enterprise Agreement are relevant to the Dispute:

“5 DEFINITIONS

The following definitions will apply throughout this Agreement except where an alternative definition for the same term is provided in a particular clause or section of this Agreement; in that case the alternative definition will apply.

…

"Ordinary hours of work" refers to the number of hours an employee would usually work during a specific period (a maximum of 38 hours per week).

…

6 RELATIONSHIP TO AWARD CONDITIONS & NATIONAL EMPLOYMENT STANDARDS

6.1 The terms of the Asphalt Industry Award 2010 [MA 000054], or the successor award, as varied from time to time, are incorporated into this Agreement. If an

incorporated Award term is inconsistent with an express term of this Agreement, the

express term in the Agreement prevails over the incorporated Award term to the extent of the inconsistency.

…

13 CATEGORIES OF EMPLOYMENT

Each employee will be engaged on the basis of one of the following categories:

13.1 "Full-time employment" -A full-time employee is an employee who is engaged

for an average of 38 hours per week where the averaging process is taken over a period of no more than four (4) weeks in accordance with the Fair Work Act 2009. A full-time employee will perform such work, including reasonable overtime and nightwork, as required.

…

14 PAYMENT OF WAGES

14.1 It is agreed that electronic funds transfer will be the method for weekly (Mon-Sun) payment of wages and benefits.

14.2 The pay week is as per the current weekly Fulton Hogan Industries (Minto)

payroll arrangements.

…

18 HOURS OF WORK AND OVERTIME

Due to the changing nature of customer requirements where a large proportion of works are maintenance or rehabilitation of heavily trafficked roads, with increasing night or weekend work, it is essential for the survival and competitiveness of the business that all employees are available for night/weekend work as required.

Notwithstanding this requirement, all parties shall be required to follow the company

guidelines and regulatory requirements in regards to the hours of work, as are set out

below:

18.1 The span of ordinary hours for day work is between 5:00am and 7.00pm

Monday to Friday.

18.2 A maximum of 8 ordinary hours per day may be worked within the span of

hours detailed in 18.1 above with 0.4 of one hour on each day worked accruing as an entitlement to take a rostered day off in each cycle as a day off paid for as though worked. Rostered days may be accumulated by agreement and paid out annually in December.

18.3 Payment for work hours will be on a 38-hour week (which may be averaged

over a four week cycle) on the following basis:

a) After 8 ordinary hours of work or where hours are worked outside the span of ordinary hours referred to in 18.1 above overtime is paid at the rate of time and one half for the first 2 hours and then double time thereafter.

b) Penalty rates for work performed as either ordinary hours or overtime hours on Saturday, Sunday, Public holidays shall apply as follows:

Saturdays: Time and one half for the first 2 hours, double

time thereafter.

Sundays: Double time for all work performed.

Public Holidays: Double time and a half for all hours worked.

Minimum 4 hours payment if the public holiday is worked.

18.4 Employment starts and finishes at the depot.

18.5 Where an employee is required to work overtime on a Saturday, Sunday or a public holiday they will be paid a minimum of 4 hours at the appropriate rate.

18.6 When overtime is necessary, it shall be arranged so that employees have at least ten hours off duty between shifts. If an employee, on the instructions of the employer, resumes or continues work without having had the 10 consecutive hours off work, the employee must be paid at double time rates until released from duty for such period.

18.7 In the event that an employee is unable to complete five (5) consecutive eight hour shifts across a pay period due to a shift change, the employee shall be deemed to have completed a minimum 38 hours for that pay period, and be paid as if he/she has completed five (5) eight hour shifts within that pay period.

The employer shall provide notice of requirements to work at night as soon as practicable after becoming aware of the requirement for night work operations.

…

20 NIGHT WORK

20.1 The span of ordinary hours for night work is between 8pm and 6am Sunday to Thursday.

20.2 Where an employee is required to work at night, the employee will be entitled

to the following provisions will apply.

a) A loading of 30% shall apply to ordinary hours worked over five (5) consecutive nights. All overtime hours will be paid at double time and will not attract additional loading.

b) Where night work begins on a Friday, Saturday or Sunday, all rostered hours worked are paid at double time. No additional shift loading will apply.

20.3 Discontinuous Night Work

An employee who is required to work night work that does not continue for at

least five (5) consecutive nights, will be paid at the rate of time and a half and

all time worked in excess of eight hours will be paid at double time.”

Applicable principles of construction

[17] There is no dispute between the parties as to the principles that apply to the proper construction of an enterprise agreement. Those principles were summarised by the Full Bench in The Australasian Meat Industry Employees’ Union v Golden Cockrell Pty Limited: 10

“[41] From the foregoing, the following principles may be distilled:

1. The AI Act does not apply to the construction of an enterprise agreement made under the Act.
2. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or contains an ambiguity.
3. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.
4. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.
5. If the language of the agreement is ambiguous or susceptible to more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.
6. Admissible evidence of the surrounding circumstances is evidence of the objective framework of fact and will include:

(a) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;
(b) notorious facts of which knowledge is to be presumed;
(c) evidence of matters in common contemplation and constituting a common assumption.

7. The resolution of a disputed construction of an agreement will turn on the language of the Agreement understood having regard to its context and purpose.
8. Context might appear from:

(a) the text of the agreement viewed as a whole;
(b) the disputed provision’s place and arrangement in the agreement;
(c) the legislative context under which the agreement was made and in which it operates.

9. Where the common intention of the parties is sought to be identified, regard is not to be had to the subjective intentions or expectations of the parties. A common intention is identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement.
10. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.”

Submissions

AWU’s submissions

[18] Clause 18.7 is an important provision in the context of this Dispute. The AWU contends that the plain and ordinary meaning of clause 18.7 is that the eight hour paid “rest day” (Wednesday, in the Shift Change Example) forms part of an employee’s ordinary hours of work. It follows, according to the AWU’s argument, that an employee is deemed to have completed 40 ordinary hours of work at the end of the Thursday day shift (i.e. eight hours Sunday night shift, eight hours Monday night shift, eight hours Tuesday night shift, eight hours Wednesday “rest day” and eight hours Thursday day shift, less 0.4 hours accrued per day towards a RDO). Therefore, any hours worked on a Friday are additional hours and must be paid as overtime.

[19] As to some of the key expressions used in clause 18.7, the AWU submits that:

(a) a “pay period” is a period of five consecutive days. In support of this contention the AWU points to the fact that an employee can only work ordinary hours of day work between 5am and 7pm Monday to Friday, 11 and can only work ordinary hours of night work between 8pm and 6am Sunday to Thursday;12

(b) an “employee is unable to complete five consecutive eight hour shifts across a pay period due to a shift change” if the shift change causes the employee to be unable to work the next shift in a series of shifts of the same kind (e.g. night shift). By reference to the Shift Change Example, the shift change imposed on the employee causes the employee to be unable to complete five consecutive eight hour shifts because the employee is prevented from working a night shift commencing on Wednesday evening and finishing on Thursday morning; and

(c) “deemed” and “as if he\she has completed” are the key terms which properly denote that the paid “rest shift” following a shift change is considered time worked. “Deeming” is defined as “treating or regarding a thing, event, or proposition in a particular way that may differ from the ordinary usage and may even differ from actual fact”. 13

[20] The AWU contends that the obligation to pay overtime for ordinary hours worked in excess of 38 hours in a week arises from clauses 21.1 and 24.1 of the Asphalt Industry Award 2010 (the Award), which are not inconsistent with the overtime provisions in the Enterprise Agreement.

[21] The AWU also submits that the proper construction of the Enterprise Agreement is that ordinary hours are a maximum of 38 hours per week (with the additional two hours worked accruing to a RDO each month), and ordinary hours cannot be averaged over a four week period. In the alternative, the AWU submits that if ordinary hours of work can be averaged over a four week period, work undertaken by an employee on the Friday (in the Shift Change Example) may be an ordinary time shift, depending on the other ordinary hours of work undertaken by the employee over the four week period.

[22] The AWU also seeks to rely on evidence adduced of communications, both oral and written, between the AWU, in its capacity as a bargaining representative for employees to be covered by the Enterprise Agreement, and senior managers of Fulton Hogan during bargaining negotiations for the Enterprise Agreement. It is submitted that this extrinsic evidence can and should be used to assist in the task of properly construing the Enterprise Agreement.

Fulton Hogan’s submissions

[23] Fulton Hogan submits that clause 18.7 of the Enterprise Agreement is not enlivened because:

(a) First, an employee is able to work five consecutive eight hour shifts in the Shift Change Example. In particular, the employee works night shift on Sunday night/Monday morning, Monday night/Tuesday morning and Tuesday night/Wednesday morning, and then proceeds to work day shift on Thursday and Friday. That is, the employee works each consecutive day from Sunday until Friday. Further, Fulton Hogan submits that the Thursday day shift is the next consecutive shift available “due to a shift change” after the Tuesday night/Wednesday morning night shift; and/or

(b) Secondly, the ordinary meaning of a “pay period” is determined by looking at the frequency of payment to employees. In the context of the Enterprise Agreement, a “pay period” is a period of one week (7 days) from Monday to Sunday. 14 Accordingly, clause 18.7 provides that where an employee is unable to complete five consecutive eight hour shifts during a week because of a shift change, the employee will be paid as if they had. Clause 18.7 does not provide that employees are deemed to have worked eight hours on the shift change day. Clause 18.7 is a safety net provision which ensures that each employee’s pay does not fall below 38 hours in each pay period as a result of a shift change.

[24] In the alternative, Fulton Hogan contends that an employee has no entitlement under the Enterprise Agreement to overtime if they work more than 38 ordinary hours in a week. Clause 18.3 of the Enterprise Agreement governs an employee’s right to overtime in particular circumstances which do not include working more than 38 ordinary hours a week. Clauses 21.1 and 24.1 of the Award do not apply because they are inconsistent with the overtime regime established by the Enterprise Agreement. Further, Fulton Hogan submits that it has the right under the Enterprise Agreement to average ordinary hours of work over a four week period, with the result that it would be necessary to have regard to other ordinary hours worked by an employee over that four week period before one could come to a view about whether an employee had an entitlement to overtime for working on the Friday.

[25] Fulton Hogan also submits that the construction of the Enterprise Agreement for which the AWU contends would give rise to extraordinary outcomes, namely, an employee working 40 hours in a week would be entitled to 71 hours’ pay and Fulton Hogan would not have the right to require its employees to work a fifth shift on the Friday, if such a shift were overtime, because employees could refuse to work the additional hours if they were unreasonable. 15 Fulton Hogan says that it needs to have the right to require employees to work a fifth shift during the week in order to remain competitive in the industry in which it operates.

Consideration

[26] The proper construction of clause 18.7 of the Enterprise Agreement is at the heart of the Dispute.

[27] The first issue of construction concerns the concept of “consecutive eight hour shifts” in clause 18.7 and whether an employee is, in the Shift Change Example, unable to “complete five consecutive shifts … due to a shift change”. It is important to note that the clause directs attention to whether the shifts are consecutive, not whether they are worked on consecutive days. Accordingly, it does not matter that the employee will work on part of each day of the week from Sunday until Friday in the Shift Change Example. In my view, “consecutive eight hour shifts” within the meaning of clause 18.7 are shifts of the same kind (e.g. night shift) which take place on consecutive days. By reference to the Shift Change Example, a night shift commencing on Wednesday night and finishing on Thursday morning would be a “consecutive eight hour shift” to the night shift commencing on Tuesday night and finishing on Wednesday morning. The shift change imposed on the employee causes the employee to be unable to work the night shift commencing on Wednesday night and finishing on Thursday morning because that shift is not available to be worked. Further, given that the employee only worked three consecutive shifts (Sunday, Monday and Tuesday night shift) before the shift change, the requirement that “an employee is unable to complete five consecutive eight hour shifts across a pay period due to a shift change” is satisfied in the Shift Change Example.

[28] The second issue of construction relates to the expression “pay period” in clause 18.7 of the Enterprise Agreement. The ordinary meaning of that expression is the period of time at which an employer looks to determine the earnings of the employee in that period. Ordinarily that will be a period of one week, a fortnight or a month. The employer then pays the employee their earnings in respect of the pay period.

[29] Further, the expression “pay period” in clause 18.7 must be construed in context. Part of the relevant context includes other provisions of the Enterprise Agreement. One such relevant provision is clause 14, which governs the payment of wages to employees. It is clear from clauses 14.1 and 14.2 of the Enterprise Agreement that Fulton Hogan looks at the earnings of its employees each week and then pays the employees their earnings from that period. It follows that a “pay period” within the meaning of clause 18.7 of the Enterprise Agreement is a week.

[30] Clause 14.1 refers to a weekly period from Monday to Sunday. Clause 14.2 refers to a “pay week … as per the current weekly Fulton Hogan Industries (Minto) payroll arrangements”. Mr Jenkins gave unchallenged evidence, which I accept, to the effect that Fulton Hogan’s “payroll arrangements”, both now and at the time the Enterprise Agreement was made, operate on a weekly basis from Monday to Sunday each week, and a Sunday night shift (finishing on Monday morning) is treated as a Monday shift for payroll purposes. I am satisfied that these are objective background facts known to all parties, with the result that they may be used as an aid to the proper construction of the Enterprise Agreement.

[31] For the reasons set out in the previous three paragraphs, I am satisfied that the proper construction of the expression “pay period” in clause 18.7 of the Enterprise Agreement is a week commencing on Monday and finishing on Sunday, and includes a night shift commencing on Sunday night and finishing on Monday morning, being the first day of the “pay period”.

[32] The next issue of construction relates to the way in which the “deeming” provision within clause 18.7 of the Enterprise Agreement operates. The word “deemed” may be used in a number of different senses. It is sometimes used as a device “for the purpose of extending the meaning of some term to a subject matter which it does not properly designate.” 16 In other instances, the word “deem” has the meaning in ordinary parlance of “judge” or “conclude”. For example, Hunter Douglas Australia Pty Ltd v Perma Blinds17concerned a section of the Trade Marks Act that provided “… a trade mark shall be registered as of the date of the lodging of the application for registration and that date shall be deemed … to be the date of registration”. Justice Windeyer held that the section did no more than designate what the date should be.

[33] The word “deemed” may also be used in a definition to extend its meaning not in a fictional sense but to include matters that might or might not fall within the scope of the word defined. By way of a recent example, the Full Bench considered a provision in a modern award in which an employee was “deemed to have abandoned their employment” in Bienias v Iplex Pipelines Australia Pty Ltd. 18 The Full Bench held, in that context, that the effect of the deeming provision was to deem “that a thing, act or event having particular characteristics but which may or may not also be another thing, act or event, to be that other thing, act or event.”19

[34] It is necessary to have regard to the text, context and purpose of a “deeming” provision in an Enterprise Agreement in order to properly construe it. Clause 18.7 does not provide that employees are “deemed” to have worked eight hours on the “rest day”. It refers to an employee being “deemed”, in particular circumstances, to have “completed a minimum of 38 hours” for that week and being paid as if they had. In my view, the reference to the “pay period”, being a week, is significant. If the clause had “deemed” an employee to have “completed a minimum of 38 hours” in a five day period, rather than a week, that would have been a strong point in the AWU’s favour. However, the fact that the clause focuses on a period of one week and the completion of a minimum of 38 hours in that period suggests that the parties objectively intended for clause 18.7 to operate as a safety net provision, the purpose of which is to ensure that each employee’s pay in a week in which a shift change takes place does not fall below 38 hours. Viewed in that way, the “deeming” provision in clause 18.7 will not have any work to do if in fact the employee has worked at least 38 hours in the week, whereas it will operate to protect the employee and ensure he or she is paid at least 38 hours for a week in which the employee is subjected (through no control of their own) to a shift change and they do not, in fact, work at least 38 hours in the week.

Nonsensical etc results

[35] To the extent that more than one construction is available on the text of an enterprise agreement, a construction which produces nonsensical, capricious or arbitrary results is to be avoided. However, the task of interpretation does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the enterprise agreement produced by the parties. A tribunal or court is not free to give effect to some anteriorly derived notion of what would be fair or just. 20

[36] In my view, neither the construction proffered by the AWU nor Fulton Hogan of the Enterprise Agreement would produce nonsensical, capricious or arbitrary results. While it is true to say that 71 hours’ pay for 40 hours work is generous, it is only 7 hours more pay than Fulton Hogan pays (64 hours’ pay) to the employees for working such a week. Either outcome is one the parties could have achieved in bargaining. Similarly, it may inconvenience and potentially damage Fulton Hogan if an employee to whom it gave a direction in the Shift Change Example to work day shift on the Friday could refuse such a shift if the additional hours were unreasonable, with the result that the shift may have to be cancelled for all employees on that crew. However, Fulton Hogan would be able to put in place measures to ameliorate against such risks. I would not classify such an outcome as nonsensical, capricious or arbitrary.

Evidence of bargaining negotiations

[37] It is apparent from my analysis above of the relevant provisions of the Enterprise Agreement concerning the payment to be made to an employee for a fifth shift worked in a week in which a shift change takes place (Friday in the Shift Change Example) that the language of the Enterprise Agreement is ambiguous or susceptible to more than one meaning. Accordingly, evidence of the surrounding circumstances is admissible to aid in the interpretation of the Enterprise Agreement.

[38] A significant amount of evidence was adduced of communications, both oral and written, between the AWU and Fulton Hogan during bargaining negotiations for the Enterprise Agreement. Evidence of prior negotiations, to the extent that such evidence establishes objective background facts known to all parties and the subject matter of the agreement, is admissible. Justice Mason considered this issue in some detail in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales: 21

“…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.

It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.” 

[39] In BP Australia Pty Limited v Nyran Pty Limited, 22 Justice Nicholson considered the principles articulated by Justice Mason in Codelfa. In that case, his Honour made the following important observations in relation to evidence of mutual subjective intentions:

“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. It will also include facts so notorious that knowledge of them is to be presumed. Additionally it will include evidence of a matter in common contemplation and constituting a common assumption. 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.”

[40] Accordingly, evidence of the subjective intention of a particular party is inadmissible unless it constitutes, or forms a part of, evidence of the mutual subjective intention of the parties.

[41] In the present case, the vast majority of the evidence adduced by the parties of the bargaining negotiations is in the nature of evidence of the actual intentions and expectations of a particular party to the negotiations. For example, both Mr Jenkins and Mr Callinan gave evidence, which I accept, to the effect that there was no discussion during the bargaining negotiations of whether overtime would be payable for a fifth shift worked during a week in which a shift change took place, but they each had different intentions and expectations in relation to that issue. I accept that Mr Callinan genuinely intended and expected that employees covered by the Enterprise Agreement would be entitled under the terms of the Enterprise Agreement negotiated by the parties for employees to be paid overtime if they worked a fifth shift in a week in which a shift change took place (Friday in the Shift Change Example). Similarly, Mr Jenkins gave evidence, which I accept, that he did not intend or expect that employees covered by the Enterprise Agreement would be entitled under the terms of the Enterprise Agreement negotiated by the parties for employees to be paid overtime if they worked a fifth shift in a week in which a shift change took place. In fact, Mr Jenkins gave evidence that Fulton Hogan would not have agreed to the Enterprise Agreement had it contained such a provision. 23 In Mr Jenkins’ view, Fulton Hogan had already agreed in the bargaining negotiations to compensate employees for a shift change by paying them for the “rest day” and a higher loading for discontinuous night shifts,24 and it was not prepared to pay employees at overtime rates for a fifth shift worked in a week. Evidence of these actual intentions and expectations on the part of each of Mr Callinan and Mr Jenkins was not admissible and cannot be used as an aid to construe the Enterprise Agreement.

[42] Some of the evidence of bargaining negotiations between the parties potentially falls into the category of evidence of the mutual subjective intention of the parties. In particular, the following unchallenged evidence given by Mr Callinan of his discussions with Mr Paul De Britt, Fulton Hogan’s General Manager – Eastern (NSW), in bargaining negotiations requires some consideration:

“During the 20 October negotiation meeting, there was a discussion between me and Mr De Britt to the following effect:

TC: When employees in the Hunter Region changed from night work to day work, the day of the shift change is counted as a day off so employees have to work their ordinary hours over six days of the week. The day when the shift change happens is not a day off and it should be paid so that employees don’t work ordinary hours over six days of the week.

PDB: We would not make our employees work their ordinary hours over six days of the week.

TC: Well I know you are in the Hunter Region.

[43] On 20 November 2015, Mr Callinan sent an email to Fulton Hogan in which he identified the issue of an employee working night shift and then being moved to day shift during the week. 25 Mr Callinan presented the following options in his email to address this situation:

“… But even that doesn’t deal with the previous example used when an employee does a couple of nights and then moves to days. A paid stand down/shift change day is the only real way to deal with it or state at 18.9 that ordinary hours will be worked across a maximum of 5 consecutive days.” [emphasis added]

[44] Mr Callinan gave the following unchallenged evidence in relation to what was said during the bargaining meeting on 23 November 2015:

“One of the key items discussed during the 23 November meeting was how the Agreement was going to deal with a change from night work to day work.

During the meeting there was a discussion regarding shift change. I said words to the following effect that ‘employees must not work their 38 ordinary hours of work for the week over six days of the week. A paid shift on the day of the shift change would fix this issue as employees will have completed their 38 ordinary hours of work over five consecutive shifts, so the last shift would be the Thursday shift.

I then said to Mr Mackaway and Mr Neale [AWU delegates] ‘can you tell Paul if you have had to work your ordinary hours across six days of the week’.

Mr Neale said to [sic] the following effect:

‘Yes, this happens to us when we start out on Sunday nights but are moved to days during the week. We aren’t paid for the day we can’t work because of the change in shifts so we have to work Friday day shift. Workers in the Hunter would not vote up an agreement unless they were paid for the change in shift so they work their ordinary hours over five days straight.’

Mr De Britt asked for five minutes in private. The Fulton Hogan officers then left the room to have a private discussion.

When the Fulton Hogan officers returned, Mr De Britt said to [sic] the following effect:

‘We agree that employees will be paid for the day when the shift change happens so that they will not have to work their ordinary hours over six days of the week. I give you my word that it will not happen again.’”

[45] I accept that this unchallenged evidence given by Mr Callinan is a truthful and reliable account of what was said in these bargaining meetings.

[46] Mr Callinan attended these meetings in his capacity as the lead negotiator on behalf of the AWU, which was the bargaining representative for its members employed by Fulton Hogan. Two AWU delegates also attended the bargaining meetings, Mr Neale and Mr Mackaway. Fulton Hogan has two asphalt crews based in the Hunter Region. One of the AWU delegates works on each of those crews. Having regard to those matters, I am satisfied that the views expressed and claims made by Mr Callinan in the bargaining meetings with Fulton Hogan should be taken to represent the intentions and expectations of the AWU employees covered by the Enterprise Agreement.

[47] Given Mr De Britt’s role as the General Manager – Eastern (NSW) of Fulton Hogan, I am satisfied that the views expressed and claims made by Mr De Britt in the bargaining meetings should be taken to represent the intentions and expectations of Fulton Hogan. 26

[48] Mr De Britt’s statement that “we agree that employees will be paid for the day when the shift change happens” is clear and unequivocal. Further, given the views expressed by Mr Callinan that employees should be paid for the “rest day”, this first part of Mr De Britt’s statement is evidence of the mutual subjective intention of the parties.

[49] In contrast, the second part of Mr De Britt’s statement (“so that they will not have to work ordinary hours over six days of the week”) is capable of more than one meaning. By making such a statement Mr De Britt may have intended that (i) employees would not have to work on the Friday (in the Shift Change Example) in order to be paid 38 ordinary hours in a week, because the payment for the “rest day” (Wednesday in the Shift Change Example) would ensure their earnings would not fall below 38 ordinary hours for the week, (ii) employees would not have to work their ordinary hours over six days of the week because, even if the employees worked on the Friday (in the Shift Change Example), the “rest day” (Wednesday in the Shift Change Example) would ensure they only worked five ordinary shifts over five days (assuming a night shift is considered to be work on one day), or (iii) employees would not have to work ordinary hours on the Friday (in the Shift Change Example) because any work on that day would be overtime.

[50] It is important to bear in mind that the AWU was presenting a concern on behalf of its members to Mr De Britt in relation to the impact of a shift change during the week. In order to “fix this issue” Mr Callinan:

(a) initially, in his 20 November 2015 email, proposed two alternative solutions, namely “a paid stand down/shift change day or “that ordinary hours will be worked across a maximum of 5 consecutive days”; and

(b) later, at the 23 November 2015 meeting, proposed a solution, namely “a paid shift on the day of the shift”.

[51] Mr De Britt plainly agreed to the solution proposed by Mr Callinan at the bargaining meeting on 23 November 2015 for a payment to be made on the “rest day”. Fulton Hogan has been honouring that agreement since the Enterprise Agreement was approved. However, in circumstances where the specific issue of overtime for work undertaken on a fifth shift for the week (Friday in the Shift Change Example) was not discussed by the parties during bargaining and the words spoken by Mr De Britt are capable of more than one meaning, I am not prepared to, and do not, find that Mr De Britt intended that employees would be paid overtime for working on Friday (in the Shift Change Example). I am also satisfied that a reasonable person with knowledge of the relevant background facts would not understand by the words spoken by Mr Britt that an agreement had been reached for overtime to be paid for time worked on a fifth shift during the week (Friday in the Shift Change Example).

[52] For the reasons set out above, I find that the communications between the AWU and Mr De Britt in bargaining meetings do not constitute evidence of a mutual subjective intention on the part of the parties that work undertaken on a fifth shift for the week (Friday in the Shift Change Example) would be paid as overtime or treated as additional hours. Accordingly, evidence of the bargaining negotiations is not an admissible aid in the interpretation of the provisions of the Enterprise Agreement that are relevant to the Dispute.

Conclusion as to the proper construction of the Enterprise Agreement

[53] In the present case, an employee in the Shift Change Example does in fact work 40 hours in the week. It follows, in accordance with the way in which I have construed the Enterprise Agreement, that the employee does not work “additional hours” on Friday and is entitled to be paid their ordinary rate of pay for the hours worked on Friday.

[54] In light of my conclusion as to the proper construction of clause 18.7 of the Enterprise Agreement, I do not need to consider whether an employee who works more than 38 ordinary hours in a week is entitled to overtime under the Enterprise Agreement, or whether Fulton Hogan may average an employee’s ordinary hours over a period of four weeks.

Determination of Dispute

[55] For the reasons set out above, I answer the two questions posed by the AWU, as set out in paragraph [15] above, as follows:

1. No.

2. No.

[56] I therefore decline to grant any of the relief sought by the AWU and dismiss the application made pursuant to s.739 of the Act.

COMMISSIONER

Appearances:

Mr A Gounis, Industrial Relations Officer from the AWU, on behalf of the applicant.

Mr O Fagir, Counsel on behalf of the respondent.

Hearing details:

2016.

Newcastle:

February, 7

 1   The applicable loadings are agreed between the parties, apart from for the Friday day shift.

 2   Commencing Sunday night and finishing Monday morning

 3   Sunday loading (clauses 18.3(b) and 22.2(b))

 4   Commencing Monday night and finishing Tuesday morning

 5   Discontinuance of night shift (clause 20.3)

 6   Commencing Tuesday night and finishing Wednesday morning

 7   Ibid

 8   The employee finishes night shift on Wednesday morning and does not work for the balance of Wednesday. The employee’s next shift is day shift on Thursday.

 9   Because the AWU alleges this is an overtime shift, they claim the employee should be paid for 15 hours (ie time and a half for the first two hours (2 x 1.5 = 3) and double time for the remaining 6 hours (6 x 2 = 12) (3 + 12 = 15 hours’ pay))

 10   [2014] FWCFB 7447 at [41]

 11   Clause 18.1 of the Enterprise Agreement

 12   Clause 20.1 of the Enterprise Agreement

 13   Australian Law Dictionary, Oxford University Press Australia and New Zealand (2010) – General Editor Mann, Trischa, p.172

 14   Clause 14 of the Enterprise Agreement

 15   Section 62(2) of the Act

 16   Muller v Dalgety & Co Ltd (1909) 9 CLR 693 at 696

 17 (1970) 122 CLR 49 at 65

 18   [2017] FWCFB 38 at [15]

 19   Ibid at [39]

 20   Kucks v CSR Limited (1996) 66 IR 182 at 184

 21 (1982) 149 CLR 337

 22 [2003] FCA 520

 23   Exhibit R2 at [11]

 24   See clause 20.3 of the Enterprise Agreement

 25   Ex R1 at p.83

 26   s.793 of the Act

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