The Australian Workers' Union v Fulton Hogan Industries Pty Ltd

[2013] FWC 1889

[2013] FWC 1889

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

The Australian Workers’ Union
v
Fulton Hogan Industries Pty Ltd
(C2012/5921)

COMMISSIONER BULL SYDNEY, 2 APRIL 2013

Alleged dispute about any matters arising under the enterprise agreement and the NES, interpretation of leave loading clause

[1] This dispute arises out of the interpretation of subclause 24.5 of the Fulton Hogan Industries Pty Ltd (54 000 538 689) NSW State Collective Agreement 2012 (the Enterprise Agreement).

[2] The Enterprise Agreement was approved by the Commission on 4 September 2012 to commence operation from 11 September 2012, for a period of three years. The Australian Workers’ Union (AWU), the Applicant in this dispute, is covered by the Enterprise Agreement having given the requisite notice under s.183 of the Fair Work Act 2009 (the Act).

Background

[3] In May 2009, the Respondent in this dispute, Fulton Hogan Industries Pty Ltd (Fulton Hogan), purchased 100% of the shares owned by Hanson Constructions Materials Pty Ltd in Pioneer Road Services Pty Ltd (Pioneer). This gave the Respondent a 50% ownership of Pioneer. In December 2009, Fulton Hogan purchased the remaining 50% of Pioneer from Shell Oil and thus Pioneer employees (approximately 25) became employees of Fulton Hogan with all their accrued leave entitlements transferring over.

[4] Pioneer had its own enterprise agreement the Pioneer Road Services - NSW Collective Workplace Agreement 2009 (the Pioneer Agreement) which had a nominal expiry date of 27 September 2010. The Pioneer Agreement provided that the wage rates were inclusive of annual leave loading which was absorbed into the hourly rate in 1995. Subclause 15.4 of the Pioneer Agreement stated:

15.4 All wage rates set out in this clause are inclusive of any annual leave loading entitlement, which was paid out and absorbed into hourly rates on an all purpose basis in 1995. An employee is not entitled to leave loading under this agreement.

[5] In accordance with the Transfer of Business provisions of the Act (Chapter 2, Part 2-8) the former Pioneer employees continued to be covered by the Pioneer Agreement. The accrued leave entitlements of the former Pioneer employees were recognised by Fulton Hogan. 1

[6] The new employer, Fulton Hogan, also had its own enterprise agreement known as the Fulton Hogan NSW State Collective Agreement 2008 (the Fulton Hogan 2008 Agreement). Subclause 23.5 of the Fulton Hogan 2008 Agreement provided that employees are to receive a leave loading of 17.5% when annual leave is taken. This agreement was to operate for a period of three years.

[7] In 2011 negotiations for a new agreement covering all Fulton Hogan employees including the former Pioneer employees commenced between Fulton Hogan and the AWU. In 2012 a new three year agreement was reached, the Fulton Hogan Industries Pty Ltd (54 000 538 689) NSW State Collective Agreement 2012.

[8] At subclause 24.5 of the Enterprise Agreement, the leave loading entitlement is stated as follows:

24.5 Annual leave attracts leave loading of 17.5% when taken.

[9] In October 2012, a number of former Pioneer employees who had embarked on annual leave did not receive any leave loading and noticed on their pay slips the following notation:

“annual leave taken- non loading”

[10] When this was queried, Fulton Hogan advised the employees that they did not intend to pay annual leave loading to the transferred Pioneer employees for annual leave they had accrued under the Pioneer Agreement.

[11] The AWU dispute Fulton Hogan’s application of subclause 24.5 of the Enterprise Agreement and have pursuant to clause 37 - Dispute Settlement Procedure of the Enterprise Agreement referred this matter to the Commission for arbitration. The jurisdiction of the Commission to determine this matter is not disputed by Fulton Hogan.

Submissions

The Australian Workers’ Union

[12] The AWU was represented by Mr Stephen Crawford an Industrial Officer with the AWU. Mr Crawford called three witnesses to support the Union’s position:

● Eddy O’Brien - AWU organiser responsible for Fulton Hogan enterprise negotiations.
● Robert Paterson - Fulton Hogan employee, former Pioneer Road Services employee and AWU delegate.
● Callum Duffey - Fulton Hogan employee, former Pioneer Road Services employee.

[13] All three witnesses testified that they were involved in the negotiations for the new Enterprise Agreement. The evidence of the three witnesses was that the issue of former Pioneer employees not receiving leave loading on annual leave accrued under the Pioneer Agreement was never raised. The AWU witnesses were not cross examined on their evidence.

[14] Mr Crawford argued that the Enterprise Agreement was a package deal where the transferring Pioneer employees lost a number of more beneficial provisions that existed under the Pioneer Agreement, in particular, benefits in relation to redundancy, compassionate leave and allowance rates.

[15] The AWU pointed to the clarity of the words used in the clause as being clear and unambiguous. Subclause 41.2 of the Enterprise Agreement was also relied on in that it stipulates that the Enterprise Agreement overrides any terms and conditions contained in any previous agreements.

[16] The AWU submitted that the Respondent is attempting to give effect to a meaning that the words of the subclause do not reflect.

Fulton Hogan

[17] Mr Diamond from the Workplace Advisory Group appeared for Fulton Hogan. No objection was taken to his appearance. Mr Diamond called three witnesses:

● Bryon Fitzgerald - Eastern Region Human Resources Manager.
● Richard Jenkins - Divisional Manager Metropolitan.
● Paul DeBritt - NSW General Manager for Fulton Hogan Asphalt and Spray Seal Businesses.

[18] All three witnesses represented Fulton Hogan during the negotiations for the Enterprise Agreement. A significant objective of the negotiations for Fulton Hogan was to have one set of terms and conditions for all employees. During the negotiations a table was produced by Fulton Hogan 2 to assist in establishing what classification level the former Pioneer employees would be allocated under the new agreement. The table refered to the existing Pioneer hourly rate minus the 17.5% loading for the purposes of the comparative wage level exercise.

[19] The Enterprise Agreement was drafted by the Workplace Advisory Group who was instructed to take the Fulton Hogan 2008 Agreement and make it compliant with the Act and address any issues that arose from the Pioneer Agreement. 3

[20] Mr Fitzgerald and Mr DeBritt stated that the cost of paying the disputed leave loading to the former Pioneer employees is approximately $30,000. 4

[21] Mr Jenkins stated that it was Fulton Hogan’s intention that leave loading would not apply to leave accrued while employees were engaged at Pioneer and that this was discussed at several meetings but Mr Jenkins could not recall the specific dates. 5

[22] Mr DeBritt’s evidence was that employees were advised that leave loading would not be paid on leave accrued under the Pioneer Agreement as the hourly rate incorporated the loading. 6

[23] Fulton Hogan argued that the payment of leave loading to employees who have already received the loading in their hourly rate is an opportunistic claim based on the wording of the subclause. The result being that some employees will receive payment of the loading twice and the legal principle against double recovery should act to prevent this occurring.

Consideration

[24] The resolution of this dispute requires the Commission to assess the parties competing interpretation of subclause 24.5 of the Enterprise Agreement.

[25] Fulton Hogan argued that the relevant employees will receive a windfall gain in the form of leave loading twice if their interpretation of the subclause is not upheld.

[26] The AWU argued that the leave loading payment to former Pioneer employees was part of the final agreement which included the loss of other superior Pioneer conditions and that the wording of the subclause reflects the understanding that the leave loading was to be paid on all accrued leave without exception.

[27] There is no shortage of authority on the manner in which the Commission is to interpret industrial instruments. My understanding of these authorities is that the interpretation of an industrial agreement begins with a consideration of the natural and ordinary meaning of the words in question. The words are to be read as a whole, and in context, ambiguity if any, may be resolved by a consideration of the history and subject matter of the agreement; seeFrench J as he then was in City of Wanneroo v Holmes 7.

[28] French J repeated these comments in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union 8:

It is of course necessary, in the construction of an award, to remember, as a contextual consideration, that it is an award under consideration. Its words must not be interpreted in a vacuum divorced from industrial realities — City of Wanneroo v Holmes (1989) 30 IR 362 at 378-379 and cases there cited. There is a long tradition of generous construction over a strictly literal approach where industrial awards are concerned — see eg George A Bond & Co Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 503-504 (Street J). It may be that this means no more than that courts and tribunals will not make too much of infelicitous expression in the drafting of an award nor be astute to discern absurdity or illogicality or apparent inconsistencies. But while fractured and illogical prose may be met by a generous and liberal approach to construction, I repeat what I said in City of Wanneroo v Holmes (at 380):

"Awards, whether made by consent or otherwise, should make sense according to the basic conventions of the English language. They bind the parties on pain of pecuniary penalties."

(My emphasis)

[29] Where the words themselves do not provide the complete answer to an interpretation question the language of the clause must be understood in the context of the agreement as a whole and its industrial context. In Amcor Limited v Construction, Forestry, Mining and Energy Union 9, Gleeson CJ and McHugh J stated that the issue of interpreting an agreement turned upon the ‘language of the particular agreement, understood in the light of its industrial context and purpose...’.

[30] This approach was also applied in the Federal Court decisions of Kucks v CSR Ltd 10 and Short v FW Hercus Pty Ltd11 where it was held that extrinsic evidence as to the context in which the instrument was made, including the statutory and historical context, will be admissible to demonstrate the existence of ambiguity and or to resolve ambiguity.

[31] In this dispute the words of subclause 24.5 could not be clearer.

[32] There is no ambiguity in the manner in which they are to be read, annual leave is to attract leave loading of 17.5% when taken. There appears no other provision in the Enterprise Agreement that would detract from or alter this meaning. The Enterprise Agreement provides at clause 41 - Intention of Parties, the following:

41.2 The parties agree that this agreement covers all the terms and conditions of the employment, and override any terms and conditions contained in any previous certified agreement that would otherwise be applicable.

[33] There is no ability for the Commission to read into subclause 24.5 that leave loading is not paid on leave accrued by employees when working with Pioneer. It may have been Fulton Hogan’s intent that leave loading was not to be paid on leave accrued in these circumstances but the agreed and Commission approved Enterprise Agreement does not reflect this position. The Commission is unable under the guise of interpretation to alter the plain and unambiguous meaning of the Enterprise Agreement; see Fisher v Bell. 12 Nor is the Commission able to attempt to apply what might otherwise be fair and just, contrary to what is written in an agreement.13

[34] In any event both parties have a different understanding and gave differing evidence as to what was conveyed to and understood by employees in respect of leave loading on leave accrued while working at Pioneer.

[35] Fulton Hogan relied on a merit argument, stating that Courts and Tribunals do not support the principle of double recovery and cited (without reference to any particular passage) the High Court Decision of Baltic Shipping Co v Dillon 14. I have not found this decision to be relevant in applying the establishing principles of industrial agreement/award interpretation. The concept of unjust enrichment, if it applies in this case, does not allow the Commission to remedy an unjust enrichment by giving the words an interpretation that the plain English meaning does not.

[36] If the intention of the employer was not to provide a loading on annual leave when accrued by employees when working at Pioneer, the subclause fails to reflect this, unlike the clear words found in the Pioneer Agreement at subclause 15.4 extracted above.

[37] The Full Bench decision in CJ Manfield Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal Plumbing and Allied Services Union of Australia 15stated that the employer bears a responsibility to ensure that its agreement reflects its intentions:

[53]... An employer who wishes to propose an agreement to its employees has a responsibility to ensure that the agreement reflects its intentions. If it proposes an agreement which contains a mistake of one type or another then we think it must take responsibility for that situation. We do not believe that the employer can subsequently say that the document it distributed to employees and requested its employees to approve is not something it agreed to. By its very actions it was.

(My emphasis)

[38] Applying the principles of interpretation and deciding what an existing agreement clause means may well produce a different outcome from the role undertaken by an arbitrator when taking into account the equity, good conscience and substantial merits of a matter when determining what entitlement a clause should provide.

[39] In this case the Commission must apply the ordinary and usual meaning attributed to the words used (see Full Bench decision in The Australian Workers’ Union - Victoria Branch v Fosterville Gold Mine Pty Ltd 16) unless ambiguity or other language of the enterprise agreement suggests another meaning. These circumstances do not exist in this case.

[40] The dispute reference is determined by accepting the interpretation of the AWU that subclause 24.5 of the Enterprise Agreement requires the employer to pay a 17.5% loading on all annual leave when taken.

COMMISSIONER

Appearances:

S Crawford for the Applicant.

M Diamond for the Respondent.

Hearing details:

2013.

Sydney:

18 March.

 1   Transcript at PN555

 2 BR1 of Mr Fitzgerald’s witness statement R1

 3   Transcript at PN99

 4   Transcript at PN223 and PN520

 5   Transcript at PN407

 6   Transcript at PN519

 7 30 IR 362 at [378] Federal Court Industrial Division

 8 (2006) 153 IR 426 at [57]

 9 (2005) 222 CLR 2413 at [246]

 10 66 IR 182 (1996) Industrial Relations Court per Madgwick J at [18]

 11 40 FCR 511Burchett J at pp 518-520 (1993)

 12 [1961] 1 QB 394 Lord Parker CJ at [399] quoting Lord Simonds

 13   Kucks v CSR Ltd Madgwick J at p184

 14 (1993)176 CLR 344

 15   [2012] FWAFB 3534

 16   [2011] FWAFB 2386

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