Transport Workers' Union of Australia v PFD Food Services Pty Ltd
[2020] FWC 515
•3 FEBRUARY 2020
| [2019] FWC 515 |
| FAIR WORK COMMISSION |
DECISION |
Fair Work Act 2009
Section 739 - Application to deal with a dispute
Transport Workers' Union of Australia
v
PFD Food Services Pty Ltd
(C2019/3322)
DEPUTY PRESIDENT ANDERSON | ADELAIDE, 3 FEBRUARY 2020 |
Dispute about matters arising under an enterprise agreement – reclassification of employees – jurisdiction - whether contractual rights can be determined in dispute resolution proceedings – agreement interpretation – savings provision – no further claims provision – dispute determined
[1] On 29 May 2019 the Transport Workers Union of Australia (SA Branch) (TWU, the Union or the Applicant) applied to the Fair Work Commission (the Commission) under section 739 of the Fair Work Act 2009 (the FW Act) to deal with a dispute.
[2] The dispute concerns the operation of the PFD Food Services (South Australia) Enterprise Agreement 2018 (the 2018 Agreement).
[3] The TWU contend that a decision by PFD Food Services Pty Ltd (PFD, the employer or the Respondent) in October 2018 to reclassify certain employees to a lower level under Appendix C (Classification Structure) of the 2018 Agreement 1 was contrary to their terms of employment and clauses 1.11 (Savings Provision), 1.12 (No Extra Claims) and Appendix A (Wage Rates). The TWU seeks an order preventing the relevant employees being reclassified.
Background
[4] Prior to making the application, the TWU invoked the dispute settlement provisions of the 2018 Agreement. Clause 2.2 provides as follows:
“2.2 DISPUTE RESOLUTION PROCEDURE
a) Any dispute or claim arising out of the terms of this Agreement or the NES shall be settled in the following manner:
(i) The matter shall first be discussed between the employee and their supervisor.
(ii) If the matter cannot be resolved with the employee’s supervisor, the matter shall be discussed with the branch manager and if necessary the General Manager SA or a member of the HR team.
(iii) If, after appropriate discussion with the employee’s supervisor, branch manager, General Manager or HR representative as the case requires, the matter is still not settled it may be submitted by the employee, the employee’s representative or the Company to a member of FWC, for mediation or conciliation and if the dispute cannot be resolved by mediation or conciliation, FWC may settle the dispute by arbitration.
(iv) At any stage during this process, employees may appoint a representative to act on their behalf. Employees should advise the Company of this in a timely manner.
b) Until the matter is determined, the status quo will prevail.
c) In order to facilitate the procedure above:
(i) the party with the grievance must notify the other party at the earliest opportunity of the problem;
(ii) throughout all stages of the procedure all relevant facts must be clearly identified and recorded; and
(iii) sensible time limits must be allowed for completion of the various stages of discussion. However, the parties must co-operate to ensure that the disputes resolution procedures are carried out as quickly as possible.
d) While the parties are attempting to resolve the matter the parties will continue to work in accordance with this Agreement and their contract of employment unless the employee has a reasonable concern about an imminent risk to his or her health and safety.”
[5] The parties to the dispute sought resolution at the workplace level. It did not resolve. It was then brought to the Commission for mediation, conciliation and arbitration.
[6] Proceedings occurred over a six month period (June to December 2019).
[7] I conciliated the dispute on 11 June 2019 with the parties reporting back on five occasions (13 June, 9 July, 19 August, 2 September and 27 September 2019). Conciliation did not resolve the dispute.
[8] At the request of the TWU I listed the matter for arbitration. I issued directions on 27 September 2019.
[9] I arbitrated the matter on 16 December 2019 in Adelaide. I reserved my decision, which I now deliver.
[10] Having conducted conciliation, parties were given the opportunity to raise any objection to me arbitrating. Neither objected. I did not consider that the conciliation undertaken inhibited my arbitral role under clause 2.2 of the 2018 Agreement or in performing my statutory responsibilities. 2
[11] At the arbitration the TWU was represented by its industrial officer Mr Boughey, assisted by a senior official Mr Lewis. PFD was represented by Mr McMahon with Ms Avey of the Australian Industry Group assisted by the employer’s National Employee Relations Manager Mr Cruse.
The Facts
[12] I heard evidence from four witnesses:
• Mr Justin Lewis (TWU);
• Mr Vince Faiello (truck driver, PFD);
• Mr Warwick Maddern (truck driver, PFD); and
• Mr Tony Heldberg (State Operations Manager SA/NT, PFD). 3
[13] I also received documentary material relating to the audit, and to historic and current employment arrangements pertaining to Mr Faiello and Mr Maddern.
[14] I make the following findings.
[15] PFD is a national food processing and distribution business with operations in South Australia and elsewhere.
PFD’s enterprise agreements
[16] PFD currently has approximately 21 enterprise agreements covering its operations.
[17] An Agreement (the PFD Food Services (South Australia) Enterprise Agreement 2015) was made between PFD and its employees in 2015. That Agreement was approved by the Commission (the 2015 Agreement). The TWU was a union covered by the Agreement as the Agreement covered, in part, truck drivers.
[18] A new Agreement (the PFD Food Services (South Australia) Enterprise Agreement 2018) was made in August 2018 and approved (with undertakings) on 20 December 2018. 4 It has operated since 27 December 2018. It has a nominal expiry date of 30 April 2021. The TWU (as well as the National Union of Workers, now UWU) is covered by the 2018 Agreement.
The 2018 audit
[19] In 2018 PFD undertook a national audit of compliance with its enterprise agreements. One such agreement was the 2015 Agreement. An aspect of the audit was to examine the duties of employees (including truck drivers) against Agreement classifications to ensure compliance with its terms.
[20] In South Australia, the audit was overseen by PFD’s State Operations Manager Mr Heldberg. It was completed in about October 2018. PFD concluded that nine employees under the 2015 Agreement were under-classified and twenty employees were over-classified.
[21] With respect to the under-classified employees, PFD promptly reclassified the employees, placing them on a higher classification level and adjusting their wage rate upwards.
[22] Four of the overclassified employees were drivers; two of whom were Mr Faiello and Mr Maddern (‘the relevant employees’)
[23] By letter dated 29 October 2018 PFD wrote to the overclassified drivers in the following terms:
“Re: EBA Classification adjustment
As discussed on 23rd October 2018, due to a recent audit of the PFD Food Service (South Australia) Enterprise Agreement 2015, it was found that you have been incorrectly classified. At present, you are being paid and classified as Driver Level 6. This is not correct, and your correct classification should be that of a Driver Level 4 based on the duties you are performing.
So what does this mean?
This will mean that as at 29 October 2018, you will be correctly classified as a Driver Level 4. Your current hourly rate of $24.74 will be frozen until 1st July 2019, where it will then be increased to $25.45 per hour as proposed by the PFD Food Service (South Australia) Enterprise Agreement 2018 (New Agreement). All applicable allowances will be increased in accordance with the proposed New Agreement that is currently awaiting approval from the Fair Work Commission.
If you have any questions regarding anything contained in this letter, please don’t hesitate to contact me at the branch.
Yours sincerely,
Tony Heldberg
State Operations Manager SA/NT”
[24] The letter included a notation at the bottom:
[25] Neither Mr Faiello nor Mr Maddern agreed to PFD’s proposal. They did not sign the notation. Since that date they, and the TWU on their behalf, have been in dispute with PFD. 5
[26] Over the following six months the dispute was the subject of discussion at the workplace level. When unresolved, on 29 May 2019 the TWU filed these proceedings.
[27] For the purposes of these proceedings it is agreed that:
• at the time of the audit, the 2015 Agreement covered the relevant employees;
• at the time of the dispute being notified to the Commission, the 2018 Agreement covered the relevant employees;
• the Savings Provision in clause 1.11 of the 2018 Agreement was the same as in the 2015 Agreement;
• the No Extra Claims Provision in clause 1.12 of the 2018 Agreement was the same as in the 2015 Agreement;
• the Wage Rates in Appendix A of the 2018 Agreement were the same as in the 2015 Agreement save for the dollar amounts;
• the Classification Structure in Appendix C of the 2018 Agreement and in particular the terms of the section ‘Customer Service Drivers Structure’ in the 2018 Agreement was the same as in the 2015 Agreement;
• neither the 2015 nor the 2018 Agreement contain a Grade 6 classification (or definition) for a Grade 6 Driver. Both Agreements provide classifications and definitions for Grades 1 to Grade 5 only;
• however, both the 2015 and the 2018 Agreement provide a wage rate for a Level 6 Driver (indeed for Level 1 to Level 6 inclusive). 6 The Level 6 Driver wage rate in the 2018 Agreement is separately identified and is increased according to agreed dates for increases to the other Driver Levels 1 to 5.
Mr Faiello
[28] It is necessary to make findings of fact as to how Mr Faiello and Mr Maddern came to be employed, classified and paid.
[29] In July 2001 Mr Faiello commenced employment as a casual delivery driver under the relevant “site agreement”. 7 In August 2003 Mr Faiello accepted an offer of full time employment. Under his written contract he was employed as a “Delivery Driver Grade IV”.8
[30] In May 2005 Mr Faiello was offered a job by a rival food business. In order to keep Mr Faiello at PFD, the employer offered to increase his classification and rate of pay from Grade 4 to Grade 6. 9 Mr Faiello agreed. He declined the job offer by the rival business and remained at PFD on that basis.
[31] On 25 May 2005 the terms of the agreement with Mr Faiello were reduced to writing on a PFD form entitled “Change to Employee terms. It relevantly provided: 10
[32] Mr Faiello was not required to perform the duties of a Grade 6 driver; nor did he perform any supervisory duties. After the change, he continued to perform the same duties he had been undertaking save that he was classified and paid as a Grade 6 Driver.
[33] Mr Faiello continued to be classified and paid as a Grade 6 Driver for the following fourteen years until the post-audit reclassification in 2018. Throughout this period, he received wage increases to the hourly rate for a Grade 6 Driver as provided for in enterprise agreements made between PFD and the Union.
[34] When given PFD’s letter of 29 October 2018 Mr Faiello advised PFD that he did not agree to the proposed change in classification and proposed wage rate from 1 July 2019. 11
[35] Although it reclassified Mr Faiello from Level 6 to Level 4, PFD did not reduce Mr Faiello’s rate of pay. It froze his rate of pay until such time as the Level 4 rate in Appendix A of the 2018 Agreement would exceed his actual rate of pay.
[36] Since 1 July 2019 Mr Faiello has been paid at the rate of a Level 4 Driver, not a Level 6 Driver.
Mr Maddern
[37] Mr Maddern first commenced work with PFD in 2000 and accepted an offer of full time employment as a “Delivery Driver” on 7 February 2003.
[38] Between 2003 and 2008 he was paid at a rate that equated to no more than Delivery Driver Grade 4 in the relevant enterprise agreement.
[39] In April 2008 Mr Maddern was called to PFD’s administration office by the then Transport Manager and advised that for reasons of loyalty and customer service he would be reclassified and paid as a Grade 6 Delivery Driver and receive certain allowances. Mr Maddern agreed.
[40] On 4 April 2008 the terms of the agreement with Mr Maddern were reduced to writing on a PFD form entitled “Change to Employee terms. It relevantly provided: 12
[41] This change to wage rate and allowances did not require Mr Maddern to perform the duties of a Grade 6 driver or any different duties. However, from time to time until 2017 he performed some supervisory duties and (until 2012) he occasionally drove larger trucks.
[42] Mr Maddern has been continuously classified and paid as a Grade 6 Driver since April 2008 until the post-audit reclassification in 2018. Throughout this period, he received wage increases to the hourly rate for a Grade 6 Driver as provided for in enterprise agreements made between PFD and the Union.
[43] When given PFD’s letter of 29 October 2018 Mr Maddern advised PFD that he did not agree to the proposed change in classification and proposed wage rate from 1 July 2019. 13
[44] Although it reclassified Mr Maddern from Level 6 to Level 4, PFD did not reduce Mr Maddern’s rate of pay. It froze his rate of pay until such time as the Level 4 rate in Appendix A of the 2018 Agreement would exceed his actual rate of pay.
[45] Since 1 July 2019 Mr Maddern has been paid at the rate of a Level 4 Driver, not a Level 6 Driver.
Mr Faiello and Mr Maddern
[46] On the evidence before me, I find that neither Mr Faiello nor Mr Maddern were, at the time of the audit (or since) performing work which fell beyond the definition of a Grade 4 Driver under the 2015 or 2018 Agreement. Neither were driving a rigid vehicle of the dimensions that encompassed the description of a Grade 5 Driver. This is plainly apparent on the evidence of each and the evidence of Mr Heldberg that such larger rigid vehicles are no longer part of PFD’s fleet in South Australia.
[47] Further, there is no evidence before me that either of the relevant employees were at the time of the audit (or since) taking on “additional leading hand or supervisory responsibilities” within the meaning of Appendix A so as to establish the circumstance whereby a Grade 4 Driver may be classified as a Grade 5 Driver notwithstanding the size of vehicle they are driving.
[48] It is therefore not seriously in dispute, and I find, that the work conducted by the relevant employees at the time of the audit and since fell within the Grade 4 definition in the 2015 and 2018 Agreements and not at a grade beyond that definition.
[49] It is also not in dispute that at the time of the audit each of the relevant employees was paid and classified as Driver Grade 6. Mr Heldberg’s letter of 29 October 2018 said as follows: 14
“At present you are being paid and classified as Driver Level 6.”
Submissions
[50] The TWU do not contest the right of PFD to have undertaken the reclassification audit. It has not contested the decision to reclassify (upwards) the under-classified employees. However, the TWU submit that PFD’s decision to reclassify the relevant employees to a lower classification (from Grade 6 to Grade 4) is:
• contrary to the Savings Provision in clause 1.11 of the 2018 Agreement;
• contrary to the No Extra Claims Provision in clause 1.12 of the 2018 Agreement; and
• unlawful as it seeks to unilaterally vary a term of employment of the relevant employees.
[51] PFD says that it, as employer, has the right to classify or reclassify the relevant employees under the terms of the 2015 and 2018 Agreements, has an obligation to do so correctly within the terms of the Agreements and that its conduct was not unlawful.
[52] PFD raise jurisdictional issues concerning the dispute as notified by the TWU and the Commission’s jurisdiction to arbitrate the dispute and grant the order sought.
Characterising the dispute
[53] The TWU dispute notification of 29 May 2019 is in the following terms: 15
“2.1 What is the dispute about?
Using numbered paragraphs, set out a description of what the dispute is about, including by reference to the clauses set out above. Attach additional pages if necessary.
1. The Applicant submits that the Respondent’s reclassification of employees is not permitted by Clauses 1.11 and 1.12 of the PFD Food Service (South Australia) Enterprise Agreement 2018 (‘the Agreement’).
2. Affected employees were notified by the Respondent that following the outcome of an internal audit, they had been ‘incorrectly classified’.
3. The employees were notified that their current hourly rate would be frozen until such a time their current rate reached their newly classified rate through the wage table at Appendix A of the Agreement.
4. The Applicant submits that the current classification of employees is based on an agreement between the employees and the Respondent with the intention of recognising performance.
5. The Applicant submits that this agreement was formalised in writing and signed by the parties on an individual basis (see exemplar attached at Annexure 2).
6. The Applicant submits that there is no clause within the Agreement which expressly authorises the reclassification of existing employees.
7. The Applicant notes that affected employees have communicated in writing that they do not agree to the reclassification.
8. Clause 1.11 of the Agreement provides that ‘no employee…shall suffer any overall loss of existing wages or other agreement related benefits prior to the date of this Agreement coming into operation, except where such a change arises from the effect and commencement of this Agreement.’
9. Clause 1.12 of the Agreement provides that ‘it is expressly agreed that for the duration of this Agreement there will be no retrospective or further claims or demands whatsoever made by one party against the other.’
10. The Applicant submits that the ordinary meaning of Clauses 1.11 and 1.12 of the Agreement plainly prevents the unilateral variation of the employment contract as proposed by the reclassification.
11. The affected employees will suffer a real wage loss and the pay freeze will vary their contractual right to pay increases per Appendix A of the Agreement.
12. The Applicant submits that the reclassification amounts to the Respondent advancing ‘to the other party the need to make some presumptively advantageous alteration to the existing state of affairs.’
13. The Applicant submits that the reclassification amounts to an extra claim in respect of the rights and obligations of the Respondent under the agreement.
14. The Applicant notes that Clause 1.12 prevents such claims for the duration of the Agreement. The nominal expiry date of the Agreement is 30 April 2021.
15. In the alternative, if an ambiguity exists, the Commission may have reference to the surrounding circumstances of the Agreement.
16. The Applicant submits that the intent of the parties in drafting the clauses was to ensure that no employee would be worse off with the operation of the new Agreement and to ensure stability and predictability in the employment relationship.
17. The Applicant submits that in all the circumstances, the proposed reclassification is prohibited by the operation of Clauses 1.11 and 1.12 of the Agreement.”
[54] In order to determine a dispute it is necessary for the Commission to properly characterise the dispute, and satisfy itself that the dispute as notified falls within jurisdiction. 16
[55] It is apparent from the TWU’s dispute notification that the character of this dispute is a dispute over the reclassification of certain drivers employed by PFD from a Level 6 wage to a Level 4 wage and classification as set out in the 2018 Agreement. The drivers, through their union the TWU, assert that the employer’s reclassification was impermissible. This proposition is advanced on three grounds:
• Not permitted by clause 1.11 of the 2018 Agreement (paragraphs 1, 8, 10, 15, 16 and 17 as pleaded) (referred to in this decision as ground 1);
• Not permitted by clause 1.12 of the 2018 Agreement (paragraphs 1, 9, 10, 12, 13, 14, 15, 16 and 17 as pleaded) (referred to in this decision as ground 2); and
• Not permitted as it would unilaterally vary agreed terms of employment (paragraphs 4, 5, 6, 7 and 11 as pleaded) (referred to in this decision as ground 3).
[56] In its submission, the TWU suggest the following question for determination: 17
“Do Clauses 1.11 and/or 1.12 of the PFD Food Services (South Australia) Enterprise Agreement 2018 prohibit the unilateral reclassification of employees from Driver Grade 6 to Driver Level 4 and the subsequent payment of Driver Level 4 rates?”
[57] PFD submit that the question should be as follows: 18
“Does the Respondent have the ability to classify employees pursuant to Appendix C: Classification Structure (Customer Service Drivers Structure) of the 2018 Agreement?”
[58] Neither question as framed adequately characterises the dispute as notified or as heard by me. Each, for different reasons, is too narrowly framed. The TWU’s question deals only with clauses 1.11 and 1.12 of the 2018 Agreement whereas its dispute notification (as well as the case it advances) deals, in addition, with issues raised by paragraphs 4, 5, 6, 7 and 11 of the dispute notification (that is, ground 3).
[59] PFD’s question asks an abstract question about its “ability” to classify employees under the 2018 Agreement without defining “ability’ or engaging the specific grounds contended by the TWU.
[60] The purpose of arbitration under clause 2.2 of the 2018 Agreement is to “settle” the dispute as notified. Settlement is a word that connotes a determination that brings or is likely to bring a dispute to an end.
[61] A yes or no answer to either question would not necessarily settle the dispute as notified as it may leave ground three undetermined and leave competing propositions about the reclassification in the context of allegedly agreed terms of employment unresolved.
[62] Whilst I will have regard to the questions posed by both parties, I will determine the dispute according to its terms as notified, provided the dispute falls within jurisdiction. Subject to my conclusion on jurisdiction, the determination will deal with each ground advanced by the TWU. This course is the most efficient given that those in dispute have agreed the status quo will prevail until the matter is determined by the Commission (clause 2.2(b)).
[63] I observe that the documentary and oral evidence before me as well as written and oral submissions advanced by both the TWU and PFD engaged directly with each of the three grounds, noting though that PFD submit that dealing with ground three would exceed the Commission’s jurisdiction.
[64] I now turn to that question.
Jurisdiction
[65] It is agreed that the TWU was covered by the 2015 and 2018 Agreements, that the relevant employees were employed under the Agreements, that the TWU is able to notify a dispute under the dispute settlement clause of the 2018 Agreement and that the Union satisfied the obligations of clause 2.2 prior to bringing the dispute to the Commission. 19
[66] It is trite to observe that the Commission only has power specifically conferred on it by the FW Act. It has no inherent jurisdiction. Parliament, by virtue of sections 738 and 739 of the FW Act, has determined it is appropriate for the Commission to exercise private arbitration powers over certain industrial disputes of private parties where those parties intend it to do so.
[67] Sections 738 and 739 of the FW Act provide as follows:
“738 Application of this Division
This Division applies if:
(a) a modern award includes a term that provides a procedure for dealing with disputes, including a term in accordance with section 146; or
(b) an enterprise agreement includes a term that provides a procedure for dealing with disputes, including a term referred to in subsection 186(6); or
(c) a contract of employment or other written agreement includes a term that provides a procedure for dealing with disputes between the employer and the employee, to the extent that the dispute is about any matters in relation to the National Employment Standards or a safety net contractual entitlement; or
(d) a determination under the Public Service Act 1999 includes a term that provides a procedure for dealing with disputes arising under the determination or in relation to the National Employment Standards.”
“739 Disputes dealt with by the FWC
(1) This section applies if a term referred to in section 738 requires or allows the FWC to deal with a dispute.
(2) The FWC must not deal with a dispute to the extent that the dispute is about whether an employer had reasonable business grounds under subsection 65(5) or 76(4), unless:
(a) the parties have agreed in a contract of employment, enterprise agreement or other written agreement to the FWC dealing with the matter; or
(b) a determination under the Public Service Act 1999 authorises the FWC to deal with the matter.
Note: This does not prevent the FWC from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effect as subsection 65(5) or 76(4) (see also subsection 55(5)).
(3) In dealing with a dispute, the FWC must not exercise any powers limited by the term.
(4) If, in accordance with the term, the parties have agreed that the FWC may arbitrate (however described) the dispute, the FWC may do so.
Note: The FWC may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).
(5) Despite subsection (4), the FWC must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.
(6) The FWC may deal with a dispute only on application by a party to the dispute.”
Private arbitration of this dispute
[68] It is well established that proceedings of this type are of a private nature. The Commission is exercising jurisdiction conferred on it by the enterprise agreement itself: 20
“Thus it is well established that “arbitration” by FWC pursuant to a term in an enterprise agreement is a private arbitration, based upon the consent of the parties, and not upon the coercive authority of the Australian state.”
[69] In a leading case on private arbitration, the High Court said: 21
“Where parties agree to submit their differences for decision by a third party, the decision maker does not exercise judicial power, but a power of private arbitration. Of its nature, judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought and results in a judgement or order that is binding of its own force. In the case of private arbitration, however, the arbitrator’s powers depend on the agreement of the parties, usually embodied in a contract, and the arbitrator’s award is not binding of its own force. Rather, its effect, if any, depends on the law which operates with respect to it.”
[70] However, the Commission’s private arbitration jurisdiction is not unconstrained:
• it needs to be a jurisdiction founded on the authority of sections 738 and 739 of the FW Act and exercised within the limits set by those provisions; and
• it needs to be a jurisdiction sourced from the terms of the relevant industrial instrument and exercised in a manner contemplated by that instrument (or, within the limits of section 738(c), a contract of employment); and
• it needs to be a jurisdiction exercised with respect to the industrial dispute as notified.
[71] In exercising this jurisdiction, the Commission is bound by rules that govern the operation of administrative tribunals, including rules of procedural fairness to be applied in the context of the terms and procedures (if any) agreed by the parties.
[72] Sections 738 and 739 of the FW Act, coupled with the dispute resolution procedure in clause 2.2 of the 2018 Agreement are relied upon by the TWU as the source of authority for the Commission to deal with this dispute.
[73] Clause 2.2(a)(iii) provides for a dispute to be submitted to the Commission “for mediation or conciliation and if the dispute cannot be resolved by mediation or conciliation, FWC may settle the dispute by arbitration.”
[74] I am satisfied that the Commission has before it a lawfully made application under section 739 of the FW Act which purports to confer on the Commission a jurisdiction of private arbitration to determine the dispute as notified by the TWU.
[75] I am also satisfied that the parties have complied with the required steps of the procedure in clause 2.2 of the Agreement in advance of arbitration by the Commission.
Private arbitration where facts arose under predecessor agreement
[76] I note that the dispute was notified under the 2018 Agreement but that the reclassification of the relevant employees occurred under a predecessor agreement (the 2015 Agreement). Although no jurisdictional issue was raised by PFD on that ground, I need to satisfy myself that all jurisdictional prerequisites exist.
[77] These Commission proceedings were wholly commenced and then conciliated and arbitrated under the 2018 Agreement. I consider there to be no impediment to the exercise of jurisdiction in those circumstances notwithstanding that the factual basis of the dispute commenced prior to the commencement of the current agreement and has continued into the life of the current Agreement. 22
[78] Thus, on the face of the TWU’s application, I am lawfully vested with jurisdiction and power to privately arbitrate the dispute notwithstanding that relevant facts arose during the life of a pre-existing Agreement.
Private arbitration and contractual rights
[79] PFD contend that the dispute as notified and the order sought fall outside the Commission’s jurisdiction because they require the Commission “to determine a contractual dispute masquerading as an enterprise agreement dispute”. 23
[80] I do not agree.
[81] Being an arbitral body, the Commission cannot, for constitutional reasons, make orders in the exercise of its general statutory jurisdiction that involve the exercise of the Commonwealth’s judicial power; that is, make orders that ascertain, declare or enforce existing legal rights. 24
[82] However, when exercising private arbitration powers the Commission is not simply exercising a statutory jurisdiction. As the High Court said in the Private Arbitration Case “different considerations apply if the parties have agreed to submit disputes as to their legal rights and liabilities for resolution by a particular person or body and to accept the decision of that person as binding on them.” 25 The Full Federal Court has put it this way:26
“The effect of the High Court’s decision in Gordonstone and that in TCL, is that an arbitrator’s power to resolve a dispute arises out of the agreement to arbitrate. It follows that to the extent that FWC exercises power derived from such an agreement, it is not exercising government powers and so is not susceptible to the issue of the constitutional writs.”
[83] It is the terms of the particular dispute settlement provision in an enterprise agreement which ultimately determines the jurisdictional scope (if any) for private arbitration.
[84] Subject to those terms, it would be an artifice not apparent on the face of either section 738 or 739 of the FW Act to conclude that private arbitration of a dispute arising under an enterprise agreement can only determine the meaning or application of that instrument without reference to the terms of employment of a particular employee or employees.
[85] Leaving aside the potential for private arbitration powers to be broader than statutory dispute resolution powers under an industrial award, I so conclude for three reasons:
1. The subject of dispute notifications under section 739 can be individual employees. Notifications are not limited to collective disputes or matters simply concerning the interpretation of instruments. Provided an employer and employee are as described by section 736 of the FW Act they can be the subject of a dispute notification under Part 6-2;
2. No industrial instrument under the FW Act covers an employee or group of employees in the abstract. A dispute over the application of an instrument may involve a consideration of how that instrument applies in the context of terms and conditions of employment of an employee or employees. An instrument sits over the employment relationship and operates in tandem with it. An enterprise agreement has the effect of importing into the employment relationship terms and conditions, as minimum or mandatory terms. 27 It is the agreement of an employer and employee which creates the contract of employment upon which the instrument operates, not the instrument itself. It follows that settling a dispute arising under an enterprise agreement may (subject to the dispute resolution provision of that agreement) involve consideration of employment terms, not just the terms of the agreement.
3. The objects of the FW Act include “providing accessible and effective procedures to resolve grievances and disputes”. 28 In the absence of a clear indication to the contrary on either the face of the statute or the relevant industrial instrument, limiting arbitration of disputes to the terms of an industrial instrument would be inconsistent with providing an accessible and effective scheme of dispute settlement.
[86] As noted by a full bench of the Commission: 29
“To seek to dissect the dispute into several components is highly artificial and, in our view, untenable. Given that the dispute, or at least part of it, relates to a matter arising under the Agreement, the disputes resolution process in clause 22 is enlivened.”
[87] I do not accept PFD’s submission that the distinction drawn in section 738(b) and 738(c) between enterprise agreements and contracts of employment preclude issues relating to a particular employee’s contract of employment being considered in private arbitration proceedings conducted under an enterprise agreement. Section 738(c) concerns itself with the circumstance where an employee is employed solely under a contract of employment and is in dispute over an NES or other statutory safety net entitlement. That section is designed to limit workplace disputes that may be notified by such persons, being persons who are not employed under a modern award or enterprise agreement. Section 738(c) is not concerned with the scope of disputes that may be notified by an employee employed under a modern award or an enterprise agreement. It says nothing about the nature of disputes that can be settled under those instruments.
[88] This construction is supported by the Explanatory Memorandum to the Fair Work Bill 2008: 30
“2734. This Division also applies where a contract of employment includes a term providing a procedure for dealing with disputes, but only to the extent that the term relates to either the NES or a safety net contractual entitlement (as defined in clause 12). The Bill does not require contracts of employment to include a term that provides a procedure for dealing with disputes. Employers and employees can choose to include such terms but, despite anything to the contrary in the contract, this Division only applies to the limited extent described in paragraph 738(c), and does not apply to general workplace disputes.”
[89] I conclude that there is no jurisdictional barrier to considering, when conducting private arbitration under a dispute resolution clause in an enterprise agreement, a particular employee’s contract of employment provided arbitration of that type falls within the terms of the relevant dispute resolution provision.
Private arbitration and contractual rights of the relevant employees
[90] It remains to consider whether in this matter clause 2.2 of the 2018 Agreement confers jurisdiction on the Commission or contains words of limitation that constrain the jurisdiction.
[91] Clause 2.2(a) of the 2018 Agreement refers to “any dispute or claim arising out of the terms of the Agreement or the NES”.
[92] If the dispute as notified by the TWU in this matter “arises out of the terms of the Agreement” then the Commission has jurisdiction and power to privately arbitrate rights of the relevant employees under the dispute resolution procedure.
[93] PFD submits that determining whether its action in reclassifying the relevant employees was permissible under their contracts of employment is not a dispute or claim “arising out of the terms of the Agreement”. 31 It says that the dispute, at least insofar as ground 3 is concerned, is contractual in nature.
[94] PFD correctly point to the fact that the TWU rely, in support of ground 3, on historical private arrangements made individually with Mr Faiello and Mr Maddern which resulted in the relevant employees being employed at the Grade 6 rate of pay, and not the terms of the 2015 or 2018 Agreements or their predecessors.
[95] I agree that the mere fact an employee is covered by an enterprise agreement does not mean that any disagreement between that employee and their employer about contractual terms is a dispute “arising out of the terms of the Agreement”. What is required, in my view, is a sufficient link between a term or terms of the Agreement and the disagreement.
[96] In this matter, that sufficient link exists.
[97] At the time the relevant employees were reclassified by PFD the employees were being paid at the Grade 6 rate. The 2015 and 2018 Agreements provided wage rates for Grade 6 and Grade 4 employees (Appendix A) and included a defined classification for a Grade 4 employee (Appendix C) but notably not a Grade 6 definition.
[98] I have characterised this dispute as a dispute concerning the employer’s act of reclassification. The reference point PFD used when reclassifying was the Level 4 definition and wage rates of the 2015 and 2018 Agreements. Its proposed new classification and lesser rate of pay were sourced exclusively from those Agreements. The dispute involves an act of reclassification purportedly made to adhere to the terms of those Agreements. The subject of the reclassification were employees covered by those Agreements. Given this, it cannot be said that private arbitration of this dispute is purely contractual in nature. It is clearly a dispute that arises out of the terms of the Agreements.
[99] For these reasons I am satisfied that the Commission has jurisdiction to determine the dispute as notified.
Consideration
[100] The principles applicable to the proper construction of an enterprise agreement are not in dispute. They were canvassed at length in Australasian Meat Industry Employees Union v Golden Cockerel Pty Limited 32and Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers’ Union (AMWU) v Berri Pty Ltd.33 There is no need to repeat them here.
[101] The starting point to construing the relevant provisions is the text of the clauses. That begins with an examination of the ordinary meaning of the words, having regard to the context and evident purpose of the provisions being construed.
Was PFD’s reclassification consistent with the terms of Appendix A (Wage Rates) and Appendix C (Classification Structure) of the 2018 Agreement having regard to the work performed by the relevant employees?
[102] The answer to this question is yes.
[103] I have found that even though the relevant employees were paid the Level 6 rate at the time of the 2018 audit, the work they conducted then and since fell within the Grade 4 definition of the 2015 and 2018 Agreements and not at a grade beyond that definition.
[104] On a pure assessment of work duties against classifications in the 2015 and 2018 Agreements, PFD correctly classified the relevant employees from 29 October 2018 at Level 4 and correctly paid the relevant employees that classification rate from 1 July 2019.
[105] Having made this finding and conclusion it is unnecessary to deal further with the fact that the 2015 and the 2018 Agreements contain a wage rate but no classification definition for Level 6 whereas both Agreements contain wage rates and classification definitions for Levels 1 to Level 5 (inclusive). It is a reasonable inference from the evidence that the Level 6 rate was retained by PFD in the 2015 and 2018 Agreements because some persons in its employ were paid as Level 6 Drivers. However, there is force in PFD’s submission, 34 given the cascading nature of the five defined classification levels and the cascading nature of the corresponding wage rates, that an employee not able to meet the requirements of a Level 5 Driver would not, on the application of the terms of the Agreement, be entitled (by operation of the Agreement) to be classified as a Level 6 Driver.
Was PFD’s reclassification contrary to clause 1.11 (Savings Provision) of the 2018 Agreement?
[106] Clause 1.11 of the 2018 Agreement provides as follows:
“1.11 SAVINGS PROVISION
No employee, as a result of the making of this Agreement, shall suffer any overall loss of existing wages or other agreement related benefits prior to the date of this Agreement coming into operation, except where such a change arises from the effect and commencement of this Agreement.”
[107] The TWU submit that the practical effect of the reclassification is a loss of wages for the relevant employees and that the savings provision in clause 1.11 acts to prevent such an occurrence. 35
[108] PFD submit that the classification and wage rate applicable to the relevant employees is not an “agreement related benefit” within the meaning of clause 1.11. PFD also submit that the retention of the existing Level 6 rate of pay from 29 October 2018 until 1 July 2019 means that the employees suffered no “overall loss of existing wages”. PFD also rely on the exception in clause 1.11. 36
[109] I agree with the TWU that the Level 6 classification and the consequent payment of the Level 6 wage rate to the relevant employees was, at the date of the 2018 Agreement commencing, an “existing wages or other agreement related benefit”, within the meaning of clause 1.11.
[110] However, I do not consider that the savings provision in clause 1.11 preserved either the classification of the relevant employees or their Level 6 wage rate.
[111] I accept that a savings provision has the intention of preserving legacy enterprise agreements that applied immediately prior so as to ensure as far as possible that no employee is worse off as a consequence of the making of the new enterprise agreement.
[112] Clause 1.11, as with all clauses of the 2018 Agreement, is to be construed having regard to the relevant text, and in context. Clause 1.11 is expressed to save wages and benefits that may otherwise be lost or reduced “as a result of the making of this Agreement”. In circumstances where the 2015 Agreement and the 2018 Agreement provided the same wage and classification structure (save for wage levels) it cannot be said that the commencement of the 2018 Agreement caused, in any direct or indirect sense, the reduction in the classification of employees from Level 6 to Level 4. That reduction was caused by an audit by the employer conducted well into the life of the 2015 Agreement, not by virtue of the commencement of either Agreement.
[113] For similar reasons, PFD’s submission that the change “arises from the effect and commencement of the Agreement” (the exception in clause 1.11) cannot be accepted.
[114] The answer to this question is no. PFD’s reclassification was not contrary to the savings provision in clause 1.11. This ground (ground 1) of the TWU claim is not made out.
Was PFD’s reclassification contrary to Clause 1.12 (No Extra Claims) of the 2018 Agreement?
[115] Clause 1.12 of the 2018 Agreement provides as follows:
“1.12 NO FURTHER CLAIMS
It is expressly agreed that for the duration of this Agreement there will be no retrospective or further claims or demands whatsoever made by one party against the other.”
[116] The TWU submit that the no extra claims provision was integral to the bargain reached because it provided, to both employer and employees, a measure of stability and certainty to employment conditions during the life of the 2018 Agreement. 37
[117] PFD submit that the no extra claims clause was designed to ensure that parties did not pursue matters outside the scope of the 2018 Agreement, and that the reclassification undertaken was directly concerned with compliance with the terms of the Agreement, and not of an extraneous character. 38
[118] Clause 1.12 of the 2018 Agreement precludes the employer or employees making “retrospective or further claims or demands whatsoever” against the other.
[119] I do not consider PFD’s action to have breached the no extra claims provision, for two reasons.
[120] Firstly, I do not consider that a decision by an employer to prospectively reclassify an employee within the terms of a relevant Agreement is an extra claim or demand.
[121] In the context of this matter, PFD made no claim or demand for a new classification definition or rate, or new classification level to be included in the Agreement. It acted to downwards reclassify certain employees who it considered overclassified and in so doing had regard to the terms of the Agreement. Its action had consequence for those employees but it was not an extra claim or demand.
[122] Secondly, and somewhat curiously, clause 1.12 refers to claims or demands made “by one party against the other” even though enterprise agreements under the FW Act do not, in a strict sense, bind parties. 39
[123] Words in an agreement need, wherever possible, to be given purpose. 40 An interpretation that makes each word “useful and pertinent” is to be preferred to one which disregards certain words as “superfluous, void, or insignificant”.41
[124] An enterprise agreement under the FW Act is an agreement between an employer and employees collectively in the sense that it is an agreement negotiated and voted up collectively (by majority) and applied collectively, including to employees who did not vote in favour of it. 42 In this context the proper construction of clause 1.12 is to apply it in the context of claims or demands of a similar character – that is claims or demands that have, or are intended to have, collective effect.
[125] In the context of the 2018 Agreement, the proper construction of the reference to “parties” in clause 1.12 is a reference, on the one hand, to the employer (PFD) and, on the other, to those employees collectively to whom the agreement applies.
[126] So construed, clause 1.12 applies to collective claims and demands, not to action taken by an employer against an individual employee.
[127] The answer to this question is no. PFD’s reclassification was not contrary to the no extra claims provision in clause 1.12. This ground (ground 2) of the TWU claim is not made out.
Was PFD able to unilaterally reclassify and pay Mr Faiello or Mr Maddern from Level 6 to Level 4 under Appendix C and Appendix A of the 2018 Agreement?
[128] The TWU submit that the right of the relevant employees to be paid as a Level 6 Driver under the 2018 Agreement had been incorporated by joint agreement as a term of the employment of both Mr Faiello and Mr Maddern, and that PFD as employer could not unilaterally vary that term. 43
[129] PFD submit that it acted in full compliance with the terms of the 2015 and 2018 Agreements. It says that as an employer it carries liability in its own right for compliance, and thus has both the right and obligation to unilaterally bring its employment practices and contracts into a state of compliance. 44
[130] As an employer, PFD is required to classify and pay employees in accordance with its legal obligations. This includes requirements arising from legislation (such as the NES under the FW Act), industrial instruments (such as modern awards or enterprise agreements) and contracts of employment.
[131] I have concluded that on a pure assessment of work duties against classifications, PFD correctly classified the relevant employees under the relevant industrial instrument to which it is currently bound (the 2018 Agreement).
[132] However, it is trite to observe that an employer’s obligation to comply with terms of an industrial instrument (in this case, an enterprise agreement) is to comply with those terms as minimum mandated provisions. There is no obligation on an employer to classify an employee only at the level provided for in a modern award or agreement and no higher. It is no breach of a modern award or enterprise agreement to pay an employee above the rate of pay for their classification or some higher classification.
[133] Taking this into account it cannot be said that the fact that Mr Faiello or Mr Maddern were classified or paid at a level higher than that which they were entitled to under the terms of Appendix A or Appendix C of the 2015 or 2018 Agreements gave rise to a right or obligation on the part of PFD to unilaterally vary their contracts of employment by reducing their classification level.
[134] Put another way, with respect to Mr Faiello and Mr Maddern PFD was in compliance with the 2015 and 2018 Agreements at the time of the 2018 audit because neither Mr Faiello nor Mr Maddern were classified below the level required by the Agreements nor paid a wage below the levels specified.
[135] As the act of unilateral variation was not based on the need to bring itself into compliance with its legal obligations, PFD had no basis on which to unilaterally implement the reclassification as it related to Mr Faiello or Mr Maddern.
[136] I also reject PFD’s submission that the ‘Change to Employee Terms’ document between PFD and Mr Faiello and Mr Maddern respectively had purely administrative but no contractual effect. The evidence of each employee was that the form reflected the understanding they had reached with PFD. Moreover, in each instance, the form specifically refers to a contract of employment:
“This form is to be used when an employee has a current contract however changes shift, salary, level, allowances or changes from one branch to another.”
[137] The changes recorded by the form constituted a contractual variation which thereafter became a term of each employee’s contract of employment.
[138] The answer to this question is no. This ground (ground 3) advanced by the TWU is made out.
Conclusion
[139] I conclude that in the absence of any contrary obligation, the reclassification of the relevant employees by PFD was not inconsistent with the terms of the 2015 or 2018 Agreements.
[140] I further conclude that a term of employment of the relevant employees that they be paid the Level 6 rate prescribed by the 2015 Agreement existed at the time of the reclassification, and that in the absence of agreement to vary that term PFD’s reclassification was neither required by the 2015 or subsequent 2018 Agreement nor consistent with the employees’ then existing terms of employment.
[141] I determine the dispute in accordance with this decision.
[142] The TWU seek an order that “the Respondent comply with clauses 1.11 and 1.12 of the Agreement and prevents the Respondent reclassifying the affected drivers.” 45
[143] I do not consider it necessary, at this stage, to make an order. The Commission’s arbitrated determination has been made for the purpose of settling the dispute as notified.
[144] I note that the Federal Court has observed: 46
“that persons who refer their dispute for resolution or determination by a private arbitrator must obviously intend to be bound by the outcome”.
[145] If this determination does not in fact settle the dispute, both parties have liberty to call the matter back on at short but reasonable notice for the purposes of seeking orders giving effect to the determination.
DEPUTY PRESIDENT
Appearances:
J. Boughey with J. Lewis, for the Transport Workers’ Union of Australia
R. McMahon, of the Australian Industry Group, with W. Cruse, for PFD Food Services Pty Ltd
Hearing details:
2019.
Adelaide;
16 December.
Printed by authority of the Commonwealth Government Printer
<PR 716331>
1 The reclassification occurred in October 2018 under comparable terms of the 2015 Agreement
2 Directions 27 September 2019 at [7]; Audio transcript 10:04am
3 Messrs Lewis, Faiello and Maddern were called by the TWU; Mr Heldberg was called by PFD
4 [2018] FWCA 7694 Platt C
5 A5 Letter TWU to PFD 29 November 2018; A6 PFD response by email 29 November 2018
6 The expression “Grade” and “Level” are used interchangeably in the 2015 and 2018 Agreements; no relevant distinction exists for present purposes
7 TH1(b)
8 TH1(a)
9 A9 paragraph 15
10 A2
11 A4
12 R1
13 A10 paragraph 24
14 TH5
15 F10 at 2.1
16 “it is necessary for the Commission, in each case where it is asked to deal with a matter arising under the dispute settling procedure in an agreement, to ascertain the character of the dispute that is before it in order determine whether the matter is a dispute over the application of the agreement”: Qantas Airways Limited v Australian Municipal, Administrative, Clerical and Services Union, Print T0301 at [24]
17 TWU Outline of Submissions paragraph 13
18 PFD Submissions paragraph 11
19 PFD Submissions paragraph 3
20 Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd (2015) 235 FCR 305 at [35] cited by Bromberg J with approval in Energy Australia Yallourn Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2017] FCA 1245 at [64]
21 Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2001) 203 CLR 645 at [31]
22 Battye v John Holland Pty Ltd (JHPL) t/as Territoria Civil[2019] FWCFB 8678 is distinguishable on the ground that in this matter the TWU has sought to invoke the arbitration power in the same term as the 2018 Agreement. Nor, in this matter, has there been bifurcation of the conciliation and arbitration functions
23 Audio transcript 12:10am
24 CFMEU v BHP Billiton Nickel West Pty Ltd [2017] FWCFB 217 citing R v Kirby; Ex parte Boilermakers' Society of Australia [1956] HCA 10; 94 CLR 254
25 CFMEU v AIRC (2001) 203 CLR 645 at [30]
26 Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd (2015) FCAFC 123 at [85]
27 Section 51, Fair Work Act 2009
28 Section 3(e)
29 Hay Point Services Pty Ltd v Construction, Forestry, Mining and Energy Union[2012] FWAFB 9173 at [12]
30 Fair Work Bill 2008 Explanatory Memorandum at 2734
31 2018 Agreement clause 2.2 (a)
32 [2014] FWCFB 7447 at [19]-[41]
33 [2017] FWCFB 3005 at [114]
34 PFD Written Submission paragraph 17
35 TWU Written Submissions paragraphs 26 to 34
36 PFD Written Submission paragraphs 21 to 26
37 TWU Written Submissions paragraphs 56 to 59
38 PFD Written Submission paragraphs 27 to 32
39 The legislation refers to parties being ‘covered’, or an enterprise agreement ‘applying’ to them, see for example sections 50-53, Fair Work Act 2009; See also Berri, above n 29 at [114], 5.
40 Project Blue Sky Inc and Ors v Australian Broadcasting Corporation “Project Blue Sky” (1998) 153 ALR 490, 510 [71]; City of Wanneroo v Holmes (1989) 30 IR 362 at 378, as cited with approval in WorkPac Pty Ltd v Skene (2018) 362 ALR 311, at [197]
41 Commonwealth v Baume (1905) 2 CLR 405, 414, quoted in Project Blue Sky (above)
42 Australian International Air Pilots Association v Qantas Airways Limited [2017] FCA 346 at [29] and Health Services Union v Ballarat Health Services [2011] FCA 1256 at [79], as quoted in Berri, (above) at [88].
43 TWU Written Submissions paragraphs 27, 34 and 36
44 PFD Written Submission paragraphs 13 to 17, and 33
45 F10 at 3.1
46 Energy Australia Yallourn Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2017] FCA 1245 at [115]
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