UGL Operations and Maintenance Pty Ltd v The Australian Workers' Union

[2013] FWC 4279

[2013] FWC 4279

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

UGL Operations & Maintenance Pty Ltd
v
The Australian Workers’ Union; and
“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)
(C2013/3795)

Manufacturing and associated industries
COMMISSIONER BLAIR	MELBOURNE, 4 JULY 2013

Alleged dispute concerning overtime pay, severance benefits and meal breaks for casual employees.

[1] This decision relates to an application by UGL Operations & Maintenance Pty Ltd (the Applicant) pursuant to s.739 of the Fair Work Act 2009 (the Act) in relation to a dispute concerning overtime pay, severance benefits and meal breaks for casual employees. The respondents to the application are The Australian Workers’ Union (the AWU) and the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU) (together, the Respondents).

[2] The dispute concerns the application of the UGL Resources Pty Ltd Shell Geelong Refinery Enterprise Agreement 2011 [AE886392] (the Agreement), in particular clause 1.8.12, no industrial action for the term of the Agreement; clauses 3.1.3(vi) and 4.1.5, applicable pay for casuals on overtime; clause 3.9, applicable severance benefits for casuals, and clause 4.1.7, meal breaks.

[3] The Applicant seeks relief, by way of arbitration, that the Fair Work Commission (the Commission) declare that:

(i) casual loading is not included in the calculation of overtime under the Agreement;

(ii) casual employees are not entitled to severance payments under the Agreement;

(iii) employees do not receive a 20 minute paid meal break under the Agreement; and

(iv) the Commission affirms that no industrial action may be taken by the persons covered by the Agreement for the remainder of its term over these or any other issues.

[4] Before the application was made under s.739 of the Act, a number of private conferences were chaired by the Commission in order to try and resolve the issues between the parties. However, they proved to be unsuccessful; subsequently, an application under s.739 of the Act was made to have those matters arbitrated.

[5] The matter was set down for hearing on Wednesday 12 June 2013. At the commencement of the hearing, Mr C Gianatti sought permission to represent the Applicant and Mr S Moore sought permission to represent the Respondents. Both parties were given permission to appear. Once permission had been granted the Commission, at PN5 of transcript, made the following comment:

“COMMISSIONER: I have the submissions of both parties and witness statements and I’ve read the material. Just in regards to the submissions by the AMWU - on the part of the unions, sorry, point 34, “Meal break dispute”, it says, “The Respondents do not contest paragraphs 42, 43 of the UGL submissions dated 30 April 2013”. Does that mean they concede on the issue of the meal break?

MR MOORE: Can I have a moment, Commissioner? Yes, that’s the effect of what’s set out there, Commissioner.”

[6] As the Respondents have conceded that the employees are not entitled to receive a 20 minute paid meal break under the Agreement, the Commission does not need to determine that matter.

[7] The other issue that the Commission raised at the commencement of the proceedings goes to the fourth point of the application; that is, the Commission affirms that no industrial action may be taken by the persons covered by the Agreement for the remainder its term over these or any other issues. At PN7 of transcript, the Commission made the following comment:

“COMMISSIONER: ... So there’s really, as I see it, the three points then that’s left. One is whether overtime is paid on the casual loading for casuals, whether or not there is an entitlement to severance/redundancy pay for casuals and the third issue, which I’m still a bit confused about - it goes to the issue of industrial action that did occur on at least two occasions anyway that I’m aware of, and some enforcement of some endorsement by the Commission on the, I suppose, of the rights of the employees not to be able to take industrial action because they are not in a bargaining period and they can only take protected industrial action whilst in a bargaining period, and anything other than that is contrary to the Act and contrary to the Agreement. Is that about it Mr Gianatti?

MR GIANATTI: Yes, Commissioner, that is exactly the nub of the submission.”

[8] On that point, the Commission believes that it need not say any more given what it has said in transcript at PN7 and confirmed by Mr Gianatti, on behalf of the Applicant.

[9] In relation to the other two matters; that is, whether or not the casual employees are entitled to be paid overtime on the casual loading and whether or not the casual employees are entitled to redundancy pay, the Applicant provided the following background:

● The Applicant is engaged by Shell to provide maintenance services at its Geelong Refinery (Geelong Site).

● The Applicant currently engages approximately 100 employees to perform the work at the Geelong Site. Approximately 50 of those employees are engaged as casual employees.

● The Applicant was awarded the contact at the Geelong site in 2012. The contract was previously held by a different maintenance contractor called Fleur.

● Prior to tendering for the contract at the Geelong Site, the Applicant made the Agreement, which is a Greenfields agreement, with the AMWU and the AWU. The Agreement was negotiated against a prior agreement that had previously operated at the Site in respect of a prior undertaking, namely the United Group Resources Pty Ltd Shell Geelong Refinery Agreement (the Predecessor Agreement).

● The current Agreement (which forms the subject of the current matters in dispute), made substantial departures from previous provisions relating to the ‘casual loading on overtime’ issue and the ‘meal break’ issue. The Agreement subsequently came into operation on 1 July 2011 and has a nominal expiry date of 31 March 2014.

● The Applicant initially performed some shutdown work under the Agreement between May to September 2011.

● The Applicant subsequently commenced providing ongoing maintenance services to Shell at the Geelong Site in December 2012. The Applicant engaged many of the maintenance employees who had previously been engaged by Fleur at the Site. The Applicant decided to initially employ the workforce for the Geelong Site as casual employees so that it could assess the needs at the site and make appropriate decisions about its labour resources at the Site. Subsequently a number of employees have been made permanent.

● The Applicant’s maintenance employees engaged at the Geelong Site, including those who were previously engaged by Fleur, are engaged under the Agreement.

● Shortly after UGL commenced providing services at the Geelong Site employees, through their representatives, the AWU and the AMWU, raised concerns about the matters in dispute and a number of other concerns about terms and conditions.

● The parties have sought to resolve these issues through direct discussion and an informal conciliation, but the matters in dispute remain.

[10] There is no issue on the part of both parties that the Commission has jurisdiction to deal with matters pursuant to s.739 of the Act. They state that the principles regulating the interpretation of enterprise agreements have been the subject of much litigation over the years.

The Applicant’s Submissions

[11] In support of the argument regarding the principles of interpretation of enterprise agreement the Applicant provided the following:

“ Save in respect of one further significant development, the pronouncements found in the authorities distilled by VP Lawler in Kenneth Watson & Others v ACT Department of Disability Housing and Community Services [2008] AIRC 291 (Watson) provide the accepted approach to the Commission’s task in interpreting an enterprise agreement.

This summary expressly:

(a) includes and endorses the oft-cited passages by Madgwick J in Kucks v CSR Limited [1996] IRCA 166 (Kuck’s Case) and Burchett J in Short v FW Hercus Pty Limited [1993] FCA51 (Short v Hercus); and

(b) has itself been endorsed by Full Benches of the Tribunal in AWU - West Australia Branch v Co-Operative Bulk Handling Limited[2010] FWAFB 4801 (CBH) and Catholic Regional College Sydenham v IEU [2011] FWAFB 2784 (CRCS).

● The one further development since CBH and CRCS which the Commission must take account of arises out of Western Export Services Inc & Others v Jireh International Pty Ltd [2011] HCA 45 (Jireh) in which the High Court emphatically endorsed the “true rule” set out by Mason J in Codelfa Constructions Pty Ltd v State Rail Authority of NSW [1982] HCA 24 (Codelfa) ahead of other approaches which appeared to endorse an alternate view that extrinsic material could be used as an aid to construction in determining the ambiguity of an instrument under review.

● While this development is yet to be considered by a Full Bench of the Commission, the recent decision of Commission Williams in AWU v Alcoa World Alumina Australia Limited [2013] FWC 674 (Alcoa) correctly illustrates in our submission the developed approach to the interpretation of enterprise agreement in exercising its jurisdiction under s.739 of the Act and should be applied by the Commission as constituted in this matter to that end as well.”

[12] On the issue of casual loading on overtime, clause 4.1.5 of the Agreement deals with calculation of the rate of pay for overtime for all employees and provides that:

“The hourly rate, when computing overtime, is to be determined by dividing the appropriate weekly rate by 35.”

[13] The Applicant argues that, whilst a “weekly rate” is not specified by the Agreement, that rate can only be divined by reference to the rates set out in clause 5.1 of the Agreement.

[14] Clause 5.1 of the Agreement sets out the actual rate payable for all purposes for individual classification levels and no other clause in the Agreement can be sensibly drawn on to divine the weekly rate and, equally, no clause from the underpinning Modern Award can apply in respect of a matter already dealt with in the Agreement (see clause 1.6.3 of the Agreement).

[15] The Applicant argues that clause 5.1 cannot, on any construction of the Agreement, incorporate a casual loading because:

“(a) clause 5.1 is itself expressed to be “exclusive of casual loading”; and

(b) the casual loading, as provided by clause 3.1.3(vi) is expressed as needing to be “applied” to the rates tabled at clause 5.1.1 (and are not expressed forming part of or included in the rates tabled at clause 5.1.1).”

[16] They argue that the casual loading is in respect of a separate and distinct disability from overtime. The casual loading is provided by clause 3.1.3 (vi) as follows:

“A Casual Employee will be paid a twenty five (25) per cent casual loading for their classification. The casual loading will be applied to the wage rate as tabled in clause 5.1.1. The casual loading is paid in lieu of redundancy or severance payments and paid leave benefits other than long service leave.”

[17] They argue that where, on the construction of an agreement the casual loading is compensating for particular disabilities and does not expressly interact with another loading, then it is not taken to be “rolled up” for those other purposes.

[18] They argue that some sensible construction must be put on the term “weekly rate” in clause 4.1.5. Clause 4.1.5 states as follows:

“The hourly rate, when computing overtime, is to be determined by dividing the appropriate weekly rate by 35.”

[19] They argue that:

“(a) the concept of weekly employment within the Agreement is based on the standard 35 hour week (see clauses 4.1.1 and 4.1.2);

(b) a casual employee is a distinct and separate category of employment from a “weekly employee” (see clause 3.1.2(i)); and

(c) taken together, the only construction that can be given to a “weekly” rate is one which is a basic standard rate free of casual and other loadings.”

[20] They state that the plain words of the Agreement are clear and unambiguous on their face.

[21] They assert that the above construction on the plain words is only further supported by the industrial context and history objectively known to the parties as per Codelfa, Kuck’s Case and Short v Hercus.

[22] They state that the first step in understanding the historical context is that the default position industrially is that there are not to be “penalties on a penalty”. This principle was made plain again as it applies to the current state of the law by the Full Bench of the AIRC in Award Modernisation [2008] AIRCFB 1000 at [50].

[23] They refer to the Metals, Engineering and Associated Industries Award 1998 (Pre Reform Metals Award) which was expressly reflected in the Predecessor Agreement in the following way:

“(a) clause 3.1.3(v) of the Predecessor Agreement provided inter alia that “the casual loading is included in the wage rate for a Casual Employee in clause 5.1.1”;

(b) clause 5.1.1 of the Predecessor Agreement provided a table of specified rates that was inclusive of a set of rolled up rates that applied an employee’s casual loading (which as a cumulatively specified rate was then applied to the relevant overtime penalty); and

(c) clause 4.2.3(a) of the incorporated Pre Reform Metals Award remained incorporated in the Predecessor Agreement - see clause 1.6.3(iv) of the Predecessor Agreement.”

[24] They state that, significantly for present purposes, the Agreement specifically moved away from the terms of the instruments against which it was negotiated, namely the Predecessor Agreement and the Modern Award. In this regard, the Agreement restored the default position that there not be a “penalty on a penalty” insofar as:

“(a) clause 3.1.3(vi) and the table of rates in clause 5.1.1 of the current Agreement expressly remove the former language of clause 3.1.3(v) and the rolled up rate contained in clause 5.1.1 of the Predecessor Agreement respectively; and

(b) so far as the Modern Award was concerned, the parties expressly excluded part 3 of the Modern Award (and thereby also the relevant clause 14.1 regarding a casual employee’s “all purpose rate”) from forming part of or being incorporated into the Agreement - see clause 1.6.1 of the Agreement.”

[25] They further assert that the terms of the Agreement are clear in evincing the industrial intention to adopt the default position as a change from the Predecessor Agreement. They state that, had the parties wished otherwise, having regard to the Predecessor Agreement they could and would have done so.

[26] The Applicant finally assert that, in these circumstances, the history, context and industrial intent of the Agreement only support the plain words of the Agreement: that the hourly rate for the computation of overtime under the Agreement is not inclusive of the casual loading for a casual employee.

The Respondents’ Submissions

[27] The Respondents’ submissions in regard to casual loading state that the submission from the Applicant proceeds from an erroneous construction of the relevant provisions of the Agreement considered in the context in which that Agreement was made.

[28] The Respondents refer to clause 4.2 of the Agreement, which is entitled “Overtime”. Clause 4.2.1 states as follows:

“The Company may require an Employee to work reasonable overtime at overtime rates and such Employee shall work overtime in accordance with such requirement.”

[29] The Respondents state that the wide definition of “Employee” in clause 1.5 of the Agreement means employees employed on a casual bass may be required to work reasonable overtime in accordance with clause 4.2.1. In that circumstance, they are entitled to be paid “overtime rates”.

[30] They assert that the phrase “overtime rates” is not defined in the Agreement. However, that subject matter is dealt with by clause 4.1.5, which provides as follows:

“The hourly rate, when computing overtime, is to be determined by dividing the appropriate weekly rate by 35.”

[31] They state that the Agreement does not expressly prescribe weekly rates of pay. Instead, they assert, the table contained in clause 5.1.1 sets out the “hourly wage rate of pay” for each of the classifications. Those rates of pay are referred to in clause 5.1.1 as the “Ordinary Hour Wage Rate of Pay applicable to the appropriate level”. The heading to clause 5.1 identifies that those rates of pay are “Exclusive of Casual Loading”. Clause 5.1.3 states as follows:

“Except as specifically provided for in this Agreement the Ordinary Hourly Wage Rates of Pay as specified reflect the total wage rate of pay, that is, the actual rate payable for all purposes for individual classification levels.”

[32] They state that, having regard to the above provisions and, in particular, clause 5.1.3, notwithstanding the absence of prescribed weekly rates of pay in the Agreement, it is evident that, in the case of employees employed on a weekly basis 9clause 3.1.2), the hourly rates to be utilised in determining the “appropriate” overtime rate are the “Ordinary Hourly Wage Rates of Pay” set out in the table in clause 5.1.1.

[33] They assert that the determination in this way of the “appropriate” hourly rate for “computing overtime” is, however, subject to the qualification set out in the opening words of clause 5.1.3 which the Applicant ignores and does not extract in its submission: “Except as specifically provided for in this Agreement”.

[34] They assert that it is readily apparent that the Agreement does make different specific provision in respect of the “Ordinary Hourly Wage Rates of Pay” for employees employed on a casual basis. Clause 3.1.3(vi), dealing with the subject matter of “casual employment”, states:

“A Casual Employee will be paid a twenty five (25) per cent casual loading for their classification. The casual loading will be applied to the wage rate as tabled in clause 5.1.1. The casual loading is paid in lieu of redundancy or severance payments and paid leave benefits other than long service leave.”

[35] They assert that the plain and ordinary meaning of the directive that the “casual loading will be applied to the wage rate as tabled in clause 5.1.1” is that, in the language of clause 5.1.3, the “Ordinary Hourly Wage Rates of Pay” for casual employees are the hourly wage rates prescribed by 5.1.1 in respect of each classification level plus the 25% loading.

[36] They further assert that, just as the hourly rates prescribed in clause 5.1.1 for weekly employees are the “hourly rate [to be used] when computing overtime” as required by clause 4.1.5, those same rates plus the casual loading of 25% must be taken to be the “hourly rate [to be used] when computing overtime” for casual employees.

[37] In relation to broader contextual and extrinsic considerations, the Respondents state that in the interpretation of the provision of the Agreement as requiring the applicable overtime rate for casual employees to be determined by reference to the casual loading is consistent with evidence as to industry practice and the context in which the Agreement was negotiated.

[38] In regards to industry practice, the standard provision made by clause 14.1 of the Manufacturing and Associated Industries Award 2010 is that the overtime rate for employees in calculated by reference to a wage rate inclusive of the casual loading. They state that the minimum provision is reflected and maintained across various industries including the petrochemical industry. That practice also applied to employees of the Applicant prior to the commencement of the operation of the Agreement at which time the Predecessor Agreement applied.

[39] They state that in relation to the context in which the Agreement negotiated, the evidence of the AMWU witness, Peter Douglas, is that during those negotiations, the Applicant never made a claim to reduce existing employee entitlements including in particular in relation to the then existing practice under the Predecessor Agreement that overtime rates were calculated by reference to the casual loading. Any such claim, they assert, would have constituted a major claim given the number of employees engaged as casuals ad the necessity for overtime work. Substantial negotiations in relation to any such claim would have ensued. The assert that the evidence is clear: that there was no claim, no negotiations and no agreement in relation to altering the pre-existing practice for the payment of overtime by reference to the casual loading.

[40] The Respondents state that the Applicant does not assert that there was such a claim. Instead it suggests that any changes to the Agreement relating to payment of overtime by reference to the casual loading were obvious. They assert that such a submission cannot be accepted. They state that the Applicant is asking the Commission to accept that both parties manifested an intention to remove an existing important entitlement, without ever having debated or referred to the issue in negotiations. They state that the uncommunicated subjective intentions of the Applicant in negotiating the Agreement are irrelevant and inadmissible on the Agreement’s proper construction. They state that there was nothing in either party’s conduct in those negotiations which objectively conveyed an intention to remove a casual employee’s entitlements to be paid overtime by reference to the casual loading.

[41] Having considered the arguments of the parties in regards to the issue of whether overtime is to be paid on the casual loading, the Commission rejects that part of the argument that references the Manufacturing and Associated Industries Award 2010 by the Respondents, as that Award is specifically excluded at clause 1.6, Relationship to Award, of the Agreement, which states at clause 1.6.1:

“The terms of the Award are Incorporated Award Terms and form part of this Agreement with the exception that the following terms of the Award do not form part of the Agreement:

...

Part 3 Types of Employment and Termination of Employment

...”

[42] Clause 3.1.3(iv), Casual Employment, of the Agreement states:

“On each occasion a Casual employee is required to attend work the Employee is entitled to payment at the ordinary rate for a minimum of one (1) day’s ordinary hours unless employment is terminated in accordance with Sub-clause (vii).”

[43] Clause 4.1.1, Hours of Work, of the Agreement states:

“The ordinary hours of work shall comprise an average of thirty-five (35) hours per week in any fortnight (for example 38.915 hours one week and 31.132 hours the other week / 9 day fortnight).”

[44] Clause 4.1.5 states:

“The hourly rate, when computing overtime, is to be determined by dividing the appropriate weekly rate by 35.”

[45] The appropriate weekly rate is set out in clause 5.1, Classification Structure and Ordinary Rates of Pay Exclusive of Casual Loading, of the Agreement.

[46] Clause 5.1.1 states:

“An Employee who has the skills set out hereunder, who is qualified for the position available and at the request of the Company utilises such skills shall be entitled to be paid at the Ordinary Hourly Wage Rate of Pay applicable to the appropriate level as follows:”

The clause then sets out the categories and the hourly rates of pay for those categories.

[47] Therefore, it cannot be said that when looking at clause 4.1.5 of the Agreement, that the hourly rate when computing overtime is determined by dividing the appropriate rate by 35, includes the casual loading when clause 5.1 specifically says “exclusive of casual loading” in the clause heading.

[48] To include the casual loading in determining the overtime penalty rates is to pay a penalty upon a penalty.

[49] The Commission accepts the Applicant’s argument where they state:

“the inescapable difficulty for the Respondents is that the Agreement does not transplant the Modern Award or the Predecessor Agreement into this Agreement.”

[50] In regards to the Respondents’ argument at point 21 of their submissions, where they state:

“... The evidence is clear: there was no claim, no negotiations and no agreement in relation to altering the pre-existing practice for the payment of overtime by reference to the casual loading.”

The Commission’s view is that this does not provide any assistance to the Respondents in their argument. It is what is in the contract itself that is of importance and must be the guiding principles by which the Commission must come to its conclusion; that is, that the Agreement does not provide for the payment of overtime rates to be paid on the casual loading.

[51] Therefore, in line with relief sought by the Applicant, as stated at paragraph [3] of this decision, the Commission declares that the casual loading is not included in the calculation of overtime under the Agreement.

Severance Pay

[52] In regards to severance pay, clause 3.1.3(vi) of the Agreement provides for a casual loading for casual employees and expressly states that the casual loading is paid in lieu of redundancy or severance payments and paid leave benefits other than long service leave.

[53] The Respondents states that clause 3.9.1 of the Agreement states:

“An Employee is entitled to be paid redundancy pay by the Company if the employee’s employment is terminated at the Company’s initiative because the Company no longer requires the job done by the Employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour.”

[54] The Respondents’ argue that the entitlement “to be paid redundancy pay” provided by clause 3.9.1 is an entitlement expressed to apply to an “Employee”. That term is defined to mean “an Employee of UGL Resources Pty Ltd to whom the Agreement applies” (clause 1.5).

[55] In the Commission’s view, clause 3.1.3, Casual Employment, is a distinct clause relating to a casual employee, quite apart from clause 3.9.1, Redundancy. It is the Commission’s view that the term “Employee” in clause 3.9.1 relates to employees other than casual employees given that the casual employee clause is quite specific in terms of the employment relationship between a casual employee and the Applicant. Those provisions do not relate at all to clause 3.9.1 and in particular clause 3.9.6, Redundancy Pay. The term “redundancy” has the same meaning whether applied to clause 3.9.6 or clause 3.1.3(vi). One cannot have an argument for redundancy pay under one provision of the Agreement when another provision of the Agreement specifically excludes redundancy pay.

[56] At PN346 of transcript, the following discussion occurred:

“THE COMMISSIONER: So you’re trying to convince me, are you that the negotiators of this agreement are so naive that they didn’t understand that there is a subtle difference or they didn’t see the picture that a payment to Incolink is a redundancy payment as opposed to the use of the term “redundancy or severance payments”, a lump sum payment, week per year of service? Are you trying to argue that that is different?

MR MOORE: Yes, I’ve garnered your attention, Commission, but that’s the submission as I’ve put it.

THE COMMISSIONER: Well, I’ve got to say it’s a beauty.

MR MOORE: Yes, that’s how we put it, Commissioner, and we rely upon what was said about the difference in terminology between something called “redundancy pay” and “redundancy and severance payments”.

THE COMMISSIONER: So let’s just - if you take your argument to its fullest, that very fine distinction, could it be then that if the company decides to make employees, not casual employees but permanent employees, redundant, one might get a bush lawyer and says, “well the payment into Incolink is different to me getting a lump payment that one would normally traditionally get - that is, two/three weeks per year of service, so therefore I have another entitlement to severance payments as well as any payments that the company has made into Incolink.

MR MOORE: That may follow, that may follow.

THE COMMISSIONER: That’s the logical end of your argument.

MR MOORE: That may follow. I concede that.

THE COMMISSIONER: Well.

MR MOORE: That’s what we say about the test of the agreement, Commissioner”

[57] The argument put forward by the Respondents in that exchange between the Commission and the Respondents’ representative makes no sense at all.

[58] Clause 3.1.3(vi) of the Agreement is quite specific. There is no ambiguity in that clause at all and any argument that relies on redefining the terms as identified in clause 3.9 of the Agreement to cover casuals has no merit at all.

[59] Therefore, the Commission would declare that, given that clause 3.1.3(vi) of the Agreement has no ambiguity at all, casual employees are not entitled to severance payments under the Agreement.

COMMISSIONER

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