United Voice v Valspar (WPC) Pty Ltd
[2015] FCCA 1139
•4 May 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| UNITED VOICE v VALSPAR (WPC) PTY LTD | [2015] FCCA 1139 |
| Catchwords: INDUSTRIAL LAW – Contravention of section 50 of Fair Work Act by an employer – alleged contravention concerns breach of enterprise agreement in respect of compulsory taking annual leave in the form of single days and periods less than a week in duration – alleged contravention also concerns whether settlement procedures arising under the agreement are properly invoked – original decision of this court subject to appeal – application of judgment of the Full Court – matters to be considered. |
| Legislation: Fair Work Act 2009 (Cth) ss.12, 50, 539, 545, 546, 557 Evidence Act 1995 (Cth) ss.191 |
| United Voice v Valspar (WPC) Pty Ltd [2014] FCAFC 34 United Voice v Valspar (WPC) Pty Ltd [2012] FMCA 1273 United Voice v Valspar (WPC) Pty Ltd [2013] FCCA 1437 Short v FW Hercus Pty Ltd (1993) 40 FCR 511 Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman [2014] FCAFC 62 Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 FWO v Ramsey Food Processing Pty Ltd (No 2) [2012] FCA 408 Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 Re State Public Services Federation; Ex parte Attorney-General (WA) (1993) 178 CLR 249 |
| Applicant: | UNITED VOICE |
| Respondent: | VALSPAR (WPC) PTY LTD |
| File Number: | ADG 82 of 2012 |
| Judgment of: | Judge Brown |
| Hearing date: | 9 April 2015 |
| Date of Last Submission: | 9 April 2015 |
| Delivered at: | Adelaide |
| Delivered on: | 4 May 2015 |
REPRESENTATION
| Counsel for the Applicant: | Ms Clarke |
| Solicitors for the Applicant: | Duncan Basheer Hannon |
| Counsel for the Respondent: | Mr Seck |
| Solicitors for the Respondent: | Thomson Geer |
ORDERS
On paragraph 5(b) of the Amended Application dated 25 March 2013 (“the Application”), the Court declares that the respondent contravened Section 50 of the Fair Work Act 2009 on four occasions by breaching clause 34 of the Wattyl Group Enterprise Agreement 2010 (“the Agreement”), in directing multiple employees to take annual and unpaid leave on multiple occasions.
On paragraph 5(e) of the Application, the Court declares that the respondent contravened Section 50 of the Act on one occasion by breaching clause 47 of the Agreement in that it failed to maintain the status quo pending resolution of the dispute between itself and the applicant regarding the directions referred to in paragraph 1 of these orders.
The question of penalty, compensation and costs being the relief sought in paragraph 1, 3, 4 and 6 of the final orders sought in the Application are adjourned to the hearing commencing 3 June 2015.
The Application is otherwise dismissed.
The parties file and serve a Statement of Agreed Facts relevant to the questions of penalty and compensation by 15 May 2015.
The Applicant file and serve affidavit evidence on which it intends to rely on by 22 May 2015.
The Respondent file and serve affidavit evidence on which it intends to rely on by 29 May 2015.
Liberty to re-list at short notice in respect of procedural directions.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 82 of 2012
| UNITED VOICE |
Applicant
And
| VALSPAR (WPC) PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
Valspar (WPC) Pty Ltd “Valspar” or “the company” is a privately owned company, which manufactures, distributes and sells paint and coating products under a variety of brand names, but predominantly Wattyl. It operates throughout Australia, where it has around 1,000 employees. Valspar took over the business of Wattyl, which manufactured paint under that name, in about September of 2010.
Valspar operates a paint factory at Kilburn, a suburb of Adelaide. It employs about 50 people at its Kilburn plant, which has the capacity to produce between 120,000 and 130,000 litres of paint per day. Approximately 60% of the paint, sold by Valspar, in Australia, is manufactured at the Kilburn plant.
The applicant, United Voice “the union”, is an employee organisation,[1] which has standing to seek relief, in this court, on behalf of its members for any contravention of the Fair Work Act 2009 (Cth) “the Act”.
[1] See section 12 of the Fair Work Act 2009 (Cth)
United Voice has 37 members employed at the Kilburn plant of Valspar. The terms and conditions of the employment of those individuals are covered by the Wattyl Group Enterprise Agreement 2010 “the Agreement”.
In March and April of 2012 and particularly afterwards, controversy has arisen between United Voice and Valspar regarding the annual leave entitlements of employees at the Kilburn plant and circumstances in which Valspar had required employees to take single days of annual leave, on a number of nominated days, depending on whether the employees concerned worked day, afternoon or night shifts.
In addition, all employees, regardless of shift, were required to take annual leave for three specified periods as follows:
a) between 1 July 2012 and 6 July 2012 (inclusive);[2]
b) between 20 August 2012 and 24 August 2012 (inclusive); and
c) between 24 December 2012 and 1 January 2013 (inclusive).
[2] 1 & 2 July in 2012 were a Saturday and Sunday respectively;
As is obvious, but needs to be emphasised anyway, as it stands at the nub of these proceedings, each of the single days and the block periods concerned, represented periods of annual leave, which were less than a fortnight in duration.
For reasons which will be outlined in these reasons, this is significant as a consequence of a decision of the Full Court of the Federal Court handed down on 27 March 2014, which remitted earlier proceedings between the parties for further hearing in this court.
The employees affected by the company’s direction to them, requiring them to take annual leave in this way, were and remain concerned at the implications, for their overall leave entitlements, of these directions. They and their union representatives content that these various directions constitute a breach of their entitlements under the Agreement.
From the company’s perspective, there were clear logistical and commercial reasons, which dictated that the Kilburn plant needed to be closed down for the periods during which the various employees were directed to take leave.
Mr Brett Golding is the manufacturing manager of Valspar for South Australia and is responsible for the management of the Kilburn plant. In February of 2012, he and other national managers of Valspar, in Australia and New Zealand, held a telephone conference to discuss levels of completed paint products being held at the Kilburn plant awaiting distribution.
It was Mr Golding’s view that the plant was approaching its capacity to hold paint supplies, for which demand was declining. In those circumstances, it was his view, which was shared by his colleagues that consideration needed to be given to how levels of production, at the Kilburn plant, could be reduced.
At the time, Valspar operated the Kilburn plant on the basis of a nine day fortnight, with paint being produced through three shifts per day. At the meeting, Mr Golding mooted the benefit of running the plant on an eight day per fortnight basis.
He further noted that there had been a significant drop in demand for paint throughout Australia and New Zealand. Accordingly the rationale for an eight day fortnight being that the company could reduce paint production and deal with logistical issues arising from its need to store stockpiles of paint but quickly respond to any possible spike in demand by reinstituting the nine day fortnight regime.
It is Mr Golding’s evidence that, at the time, Valspar stored paint at a warehouse adjacent to its production facility. This plant was close to full capacity. Mr Golding deposes that if a shutdown of the plant did not occur, 400,000 litres of paint would be produced in an eight week period, which was beyond the capacity of the warehouse to store. As such, it would be necessary for the paint to be stored offsite at considerable expense to Valspar.
On 29 March 2012, Mr Golding convened a meeting with employees at the Kilburn plant. The purpose of the meeting was to discuss possible voluntary redundancies, which are irrelevant to the matters before the court as well as the decision to reduce production, to an eight day fortnight for an eight week period, commencing 30 April 2012. A notice was placed, under Mr Golding’s hand, on a staff noticeboard, to this effect, the relevant portion of which reads as follows:
“I would like to announce that due to weaker than budgeted demand effective from Monday 30 April, the factory will be reducing production to an eight day fortnight for an eight week period (30/04-25/06), more details will follow on this.”[3]
[3] See annexure BG2 to the affidavit of Brett Golding filed 12 March 2013
Shortly prior to his meeting with employees, on 29 March 2012, Mr Golding sent an email to Boyd MacRae, who is a union organiser employed by United Voice. He is the principal organising official assigned to Valspar. The purpose of the email was to advise Mr MacRae of the company’s decision to offer voluntary redundancies and implement the plant shutdown on one day per fortnight.
Thereafter, Mr MacRae and Mr Golding met with one another on a number of occasions prior to 30 April 2012. Correspondence also passed between the union and the company. This correspondence is relevant to provisions of the Agreement, which deal with the obligations both Valspar and its employees to follow dispute settlement procedures specified in the Agreement.
There is no dispute between United Voice and Valspar that the eight day per fortnight roster was implemented from 30 April 2012, as mooted in Mr Golding’s staff notice. It is Mr Golding’s evidence that the demand for its products did not improve significantly during the remainder of 2012.
As a consequence, Valspar decided to extend the eight day fortnight regime, as well as to implement the three longer shutdowns, which took place in July, August and over the Christmas/New Year period of 2012.
Notices in respect of these further shutdowns were issued to Valspar’s employees, at the Kilburn plant, 24 May 2012;[4] 19 July 2012;[5] and 20 November 2012[6]. It is the contention of United Voice that each of these four directions to its members at the Kilburn plant constitutes a breach of annual leave entitlements arising under the Agreement. In addition, United Voice contends that Valspar did not follow the mandated dispute resolution processes also arising under the Agreement.
[4] See exhibit L to the statement of agreed facts filed 4 April 2013
[5] Ibid at exhibit M
[6] Ibid at exhibit N
As such, United Voice contends that it is entitled to seek redress from this court, on behalf of its members, for each of these contraventions and seek the imposition of a civil penalty on Valspar for doing so. These entitlements arise pursuant to the provisions of section 50 of the Act, which provides as follows:
50 Contravening an enterprise agreement
A person must not contravene a term of an enterprise agreement.
Note 1: This section is a civil remedy provision (see Part 4-1).
Note 2: A person does not contravene a term of an enterprise agreement unless the agreement applies to the person: see subsection 51(1).
Section 539(2) of the Act prescribes the maximum penalty for any such contravention. It is sixty penalty units. However, pursuant to section 546(2)(b) if the person who committed the offence is a body corporate the penalty is to be multiplied by five. At the time relevant to these proceedings – 2012 – a penalty unit was $110.00.
Accordingly, it is potentially of some financial moment, to Valspar, as to the number of offences to which it may be subject. However, notwithstanding how many actual contraventions arise under the Act, the court is required to apply the provisions contained in section 557(1), which reads as follows:
“(1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b)the contraventions arose out of a course of conduct by the person.”
There is no dispute between the parties that United Voice has standing to seek relief, pursuant to section 50, in respect of persons it represents, particularly its members at the Kilburn plant, whose leave entitlements are at issue in the present proceedings.[7]
[7] See section 540(2) of the Act
In addition, United Voice seeks that Valspar pay compensation, to each of its members, for loss said to have been suffered by these members, as a consequence of their being directed to take annual leave in the manner concerned in this case. This compensation is described as being potentially both economic and non-economic in nature. The court has authority to award such compensation pursuant to the provisions of section 545(2) of the Act.
Valspar does not accept that it is has breached the annual leave provisions of the agreement in any manner whatsoever. In the alternative, if the court does find that it has breached its employee’s annual leave entitlements, it asserts that it has only done so on one occasion, not on four separate occasions, as United Voice contends. For obvious reasons, the number of contraventions ultimately established may be relevant to the quantum of penalty to be imposed.
From Valspar’s perspective, its actions were directed by the down turn in the market for its products and the fact that it was expensive for it to store surplus production off site. By necessary implication, it is the company’s position that it was better for all concerned to implement a structured stand down rather than to lay off staff holus bolus.
The court is not examining these issues at this stage of proceedings. They are likely to be controversial. From the union’s perspective, the shutdown implemented by the company was high-handed and imposed on the workforce without proper consultation or any genuine attempt, on the company’s part, to resolve its employees’ grievances.
In particular, a provision of the Agreement puts in place mechanisms which are intended to resolve disputes arising between employer and employees in a timely and efficient manner based on both sides approaching possible settlement in an open manner. Once the dispute resolution procedures have been invoked, the Agreement provides that the status quo, in term of existing employment arrangements will be maintained.
It is United Voice’s position that Valspar has also breached the dispute resolution provisions of the Agreement by standing down its employees whilst an unresolved dispute regarding the imposition of compulsory annual leave remained unresolved. In effect, it is the union’s position that the Agreement required the maintenance of the status quo until either the dispute was resolved in the workplace or, if necessary through the determination of Fair Work Australia.
Valspar denies that it has breached the dispute resolution provisions of the Agreement. It asserts that the union did not properly invoke these procedures and if it did so, it did not do so in a timely or reasonable fashion. Finally, it is Valspar’s position that the union waived its entitlement to have an arbitrated resolution of its dispute, with the company, when it instituted these proceedings.
These proceedings are directed firstly to ascertain, on the evidence available, whether there have been any breaches of the agreement in contravention of section 50 of the Fair Work Act. Lawyers refer, in shorthand, to this aspect of the case as a liability hearing.
If liability is established, it will then be necessary for the court to proceed to a penalty hearing. This, if liability is established, will focus on the appropriate penalty to be imposed on Valspar and what individual redress, if any, each employee affected by the breaches should receive.
This latter aspect may be complex given the employee’s concerned have been paid annual leave but may have lost the ability to take it in periods of a fortnight or longer, at the time of their own nomination. Complex issues are likely to arrive as to how this inchoate right should be compensated, given the idiosyncratic circumstances of each of the employees concerned.
The proceedings have proceeded in a bifurcated manner, relating to liability and possibly penalty, with the consent of both Valspar and United Voice. However, this liability hearing arises against a somewhat convoluted background.
The Agreement
It is necessary for me to set out the precise precisions of the Agreement relevant to these proceedings. Clause 34 deals with annual leave and provides as follows:
“34. ANNUAL LEAVE
All full time weekly hired employees will be entitled to 4 weeks of annual leave for each 12 months service. Annual leave will accrue progressively during the year of service according to the ordinary hours of work. Annual leave accumulates year to year. Annual leave will be paid for at the ordinary time rate of pay as prescribed by this Agreement for the employee’s classification.
Subject to sub clause (c) of this clause, annual leave will be given and taken at such times and in such periods as are required by Wattyl provided that other than by mutual consent, annual leave will be given in one continuous period of 4 weeks or not more than 2 periods one of which will be not less than 2 weeks in duration.
Colours and Chemicals: Notwithstanding any other provision is this agreement at Colours and Chemicals, Wattyl is entitled to direct employees to use 10 days of their annual leave per year to cover maintenance shutdown.
Further, employees are entitled to take 10 days annual leave per year at a time convenient to them. In addition, employees may elect to accrue the 10 days per year annual leave to be taken at a later date at a time convenient to them.
Where Wattyl intends temporarily to close (or reduce to nucleus) an establishment or a section thereof for the purposes (inter alia) of allowing annual leave to the employees concerned or a majority of them Wattyl may give in writing to such employees one month’s notice (or in the case of any employees engaged after giving of such notice, notice on the date of the employee’s engagement) that the employer elects to apply the provisions of this sub clause, and then:
(i) any such employee who at the date of closing is entitled to annual leave will be given such annual leave commencing on and from the date of closing and, in addition, will be paid holiday pay and annual leave loading for any period of employment after the accrual of his or her right to the annual leave and up to but excluding the date of closing;
(ii) any such employee who at the date of closing is not entitled to annual leave will be given leave without pay on and from the date of closing and will be paid holiday pay and annual leave loading for that period of employment since the date of commencement thereof or the accrual of his or her last annual holiday (whichever is the later) and up to but excluding the date of closing, together with pay for any public holiday during such leave for which the employee is entitled to payment; and
(iii) the next annual leave qualifying period of employment for every such employee will commence as on and from the date of closing.
In sub clause (c) “date of closing” in relation to each employee means the first day of annual leave or unpaid leave pursuant to sub clause (c).
Annual leave will be in addition to public holidays provided for in this Agreement.
An employee whose services are terminated will be entitled to all accrued leave or payment in lieu thereof.
A shift worker permanently engaged on continuous rostered shifts or engaged on permanent night shifts for the whole of the year in respect of which leave is granted, will be entitled to five weeks leave in lieu of four as provided in sub clause (a) above and pro rata for any period less than one year.
An employee will not accrue entitlement to an Allocated Day Off during Annual Leave.
In addition to the annual leave entitlements of this clause, employees in NSW will be granted 2 additional annual leave days per calendar year and employees in Queensland, South Australia, Victoria and Western Australia will be granted one additional annual leave day per calendar year. The additional annual leave day for employees located in Victoria is in lieu of the union picnic holiday.”
Clause 47 deals with dispute resolution and provides as follows:
“DISPUTES SETTLEMENT
47. DISPUTES SETTLEMENT PROCEDURE
The parties recognise that there is a need to put in place a procedure that will allow dispute issues to be dealt will [sic: with] in a timely and efficient manner. The parties further recognise that for any dispute resolution procedure to work the parties must approach settlement of the matter in issue in an open manner.
It is further recognised by the parties that once the dispute resolution procedure is invoked the status quo will remain until the dispute is settled. The status quo is defined as “the action giving rise to the dispute being withdrawn, and the situation immediately prior to the action giving rise to the dispute applying until the dispute is settled”.
At each stage of the dispute resolution procedure the parties involved will have the power to settle the dispute.
The following dispute settlement procedure will apply to any matter in issue between Wattyl, its employees covered by this Agreement and the Union and will also apply to disputes over the National Employment Standards.
An employee who is a party to the dispute may appoint a representative for the purposes of the procedures in this term.
(i) Where a dispute arises, discussions will first take place between the site Union Delegate and the relevant site Manager or their nominees;
(ii) If unresolved, discussions will then take place between a state union official and the Wattyl site Manager or their nominees;
(iii) If still unresolved, discussions will take place between a national union official or nominee and the Wattyl Employee Relations Manager or a nominated representative of Wattyl;
(iv) If still unresolved, the matter may be referred to Fair Work Australia for determination;
(v) Other than a dispute on a genuine safety issue the parties are committed to the resolution of all disputes without interruption to normal work.
Where the dispute arises over a summary dismissal, Wattyl will arrest the termination and place the employee concerned on paid suspension for up to 10 days while discussions will [sic: with] the Union occur, but only if there is no ban or stoppage of work at site. The employee will not attend the work site while suspended.”
Clause 34 has been described as “not easy to construe.”[8] Regardless of such difficulties, this clause and its meaning are at the centre of these proceedings.
[8] See United Voice v Valspar (WPC) Pty Ltd [2014] FCAFC 34 at [25] per Buchanan J
The history of the proceedings to date
As previously indicated, the eight day fortnight was scheduled to commence on 30 April 2012. On that day, the union commenced proceedings in what was then known as the Federal Magistrates Court. An urgent hearing was sought in order to obtain an injunction, pursuant to section 545(2)(a) of the Act to restrain Valspar from implementing the eight day roster by requiring United Voice members to take leave as directed.
This hearing was listed before Simpson FM (as he then was) on 3 May 2012. His Honour declined to grant the injunction on the basis that the union was unwilling to provide an undertaking as to damages.[9] United Voice’s substantive application was listed before Judge Simpson on 15 & 16 April 2013. Judgment was delivered on 27 September 2013.[10]
[9] See United Voice v Valspar (WPC) Pty Ltd [2012] FMCA 1273
[10] See United Voice v Valspar (WPC) Pty Ltd [2013] FCCA 1437
Judge Simpson dismissed the application. He found that the agreement permitted the employer to require employees to take leave as directed. In addition, he found that it was not possible for section 50 of the Act to be contravened as asserted by the union, as the section is a statement creating an obligation.[11]
[11] Ibid at [35]
This decision was subject to a notice of appeal to the Federal Court, with the Full Court delivering its decision on 27 March 2014.[12] The orders of the Full Court, (Marshall, Buchanan and Perry JJ) were as follows:
[12] United Voice v Valspar (WPC) Pty Ltd [2014] FCAFC 34
1. The appeal be upheld.
2. The matter be remitted to the Federal Circuit Court of Australia for further hearing in conformity with the reasons for judgment of the Full Court.
There is controversy between the parties as to the implication of these orders, particularly how this court is to implement them on further hearing. In particular, Mr Seck, counsel for Valspar, contends that the Full Court has made no specific finding that clause 34 of the Agreement has been contravened, by his client, in the manner asserted by the union. Ms Clarke, counsel for United Voice, contends otherwise.
In order to understand this controversy, it is necessary for the appeal decision to be considered in more detail. The leading judgment was delivered by Buchanan J. In a shorter joint judgment, Marshall and Perry JJ concurred that the appeal should be allowed and the matter remitted for hearing.
In particular, Marshall and Perry JJ agreed that Judge Simpson had erred in deciding that section 50 of the Act was incapable of being breached and agreed with Buchanan J’s “conclusions … concerning … the correct construction of clause 34 of the Enterprise Agreement in question based on its language ‘understood in the light of its industrial context and purpose’ …”[13]
[13] See appeal decision at [2]
In his judgment, Buchanan J tabulated the various single days each of the employees concerned had been required to take as annual leave between 30 April 2012 and 30 September 2012. These days varied between Monday, Friday and Sunday, depending on whether the employee concerned was on day, afternoon or night shift. The intended effect being that the rostered day off would allow a long weekend, for the employee concerned, each fortnight.
In the case of the day shift, there were twenty such single days, between 30 April and 24 September 2012. However, it should be noted that the day shift is split, with fifty percent having every odd Monday off and fifty percent having every even Monday off.
In the case of afternoon shift, employees were required to take off nine single days occurring between 4 May and 21 September 2012. In the case of night shift, employees were required to take off eleven single days of annual leave occurring between 13 May and 30 September 2012.
In addition, as previously indicated, all Valspar employees, at the Kilburn plant, were required to take three periods of leave, of approximately one week duration, in July, August and over the Christmas/New Year period of 2012/2013.
Buchanan J summarised the effect of this directed annual leave as follows:
“Total absences of this amount exceed the yearly entitlement of four weeks annual leave. Where annual leave was exhausted employees were required to take leave without pay or, if they wished to do so (and were able to) were allowed to take paid time off as long service leave.”[14]
[14] Ibid at [15]
In my view, this is a significant finding, which was made by Buchanan J. It arises as a consequence of His Honour’s analysis of the agreed facts in the matter.[15] It is also uncontroversial that annual leave accumulates to employees covered by the Agreement at the rate of four weeks every twelve months with leave balances being able to be carried over from year to year.
[15] See agreed facts at paragraph 31-36
Buchanan J disagreed with Judge Simpson’s view that section 50 of the Act could not be contravened. He characterised the section as a civil remedy provision, and noted that United Voice had standing to apply for the imposition of penalties, pursuant to section 539 of the Act, in respect of established contraventions of enterprise agreements, pursuant to the section. There is no controversy that the Wattyl Group Enterprise Agreement 2010 is such an enterprise agreement.
As previously indicated, Buchanan J indicated that clause 34 of the Agreement was difficult to construe. This arose because the clause was the successor of other industrial agreements concerning the paint industry, which had developed since the end of the Second World War and which arose against a background of changes in community standards concerning annual leave, particularly in its duration and its accumulation, including the ability to roll over accrued leave from year to year.
Clause 34(a) is the most recently inserted aspect of the annual leave agreement, being inserted only in 2010. It reflects that annual leave accumulates progressively, as soon as employment commences and can be accumulated year to year. Accordingly, Buchanan J noted that some annual leave, at least one day, would be accumulated after as little as three weeks employment by any employee of Valspar.
The main difficulty arising from the current case is how clause 34(b) is to be parsed with clause 34(c). The former allows the employer to direct, when holidays are to be taken, provided that such leave is in either one continuous period of four weeks or not more than two periods, one of which will not be less than two weeks in duration.
The latter provision authorises the employer to close its establishment upon the giving of a prescribed amount of minimum notice. It has not been suggested to me that the insertion of the proviso relating to colours and chemicals has any applicability to the current matter.
Buchanan J determined that in order to resolve any inherent contradictions between subclause (b) and (c) of clause 34, it was necessary to look at the various precursors to the subclauses in question.
In the course of his judgment, Buchanan J considered related industrial awards and conciliation and arbitration commission determinations from 1945 onwards. His Honour’s goal, which in my view His Honour eloquently and learnedly achieved, was to be place the current clause in its contextual history.
In conducting this exercise, His Honour regarded the observations of Burchett J in Short v FW Hercus Pty Ltd[16] as being apposite:
“Context may also include, in some cases, ideas that gave rise to an expression in a document from which it has been taken. When the expression was transplanted, it may have brought with it some of the soil in which it once grew, retaining a special strength and colour in its new environment. There is no inherent necessity to read it as uprooted and stripped of every trace of its former significance, standing bare in alien ground. True, sometimes it does stand as if alone. But that should not be just assumed, in the case of an expression with a known source, without looking at its creation, understanding its original meaning, and then seeing how it is now used. ...
Where the circumstances allow the court to conclude that a clause in an award is the product of a history, out of which it grew to be adopted in its present form, only a kind of wilful judicial blindness could lead the court to deny itself the light of that history, and to prefer to peer unaided at some obscurity in the language.”
[16] See Short v FW Hercus Pty Ltd (1993) 40 FCR 511 at 518
Buchanan J recorded that, in 1945, the standard amount of annual leave was two weeks per year, which an employer could not require to be taken in multiple periods. In the early 1960’s, three weeks annual leave became a general standard, at which time employers began to seek approval for such leave to be taken in more than one period. This was the general background to the Australian Paint Industry (Manufacturing) Agreement of 1975, which is the predecessor to the current Agreement.
It allowed four weeks annual leave on the completion of forty-eight weeks of standard working hours. Leave could not be accumulated from year to year. At this stage, subclause (b) was in the form, which it currently bears, other than for the insertion of a comma, in the current award and for the use of the verb will rather than shall.
Buchanan J said as follows, in respect of the 1975 annual leave provisions:
“A feature of cl 26(b) was, in my view, that the right to require when annual leave was taken was subject to an overriding proviso that annual leave might not be required to be taken in more than two periods, one of which must be not shorter than two weeks. That conformed to the general arbitrated standard at the time. There was no comma after the opening words (as there is now in cl 34(b) of the Agreement) upon which to base an argument for a different construction. In my respectful opinion, it is inconceivable that in 1975 the clause would not have been construed as I have suggested in order to reflect the general standard of protection of annual leave rights, as referred to below.”[17]
[17] Ibid at [31]
In this context, Buchanan J noted, that in the mid-1970s, clauses such as the one in question were used to facilitate an annual shutdown of factories to enable maintenance to occur, which it was convenient to coordinate with the December/January period of each year, when many Australians preferred to take their holidays to coincide with the long school vacation and summer weather.
In addition, such routine shutdowns were convenient for employers and avoided potential understaffing issues at times when significant numbers of employees wished to take leave. Accordingly, at this time in the award’s evolution, Buchanan J recognised that employers, in the paint industry, did have some control over when annual leave was required to be taken but that control was subject to a general proviso relating that it being taken in block periods.
That is to say, without mutual agreement, annual leave could not be directed to be taken in more than two periods, of which one was at least two weeks in duration. To adopt Burchett J’s metaphor, this was some of the soil, which in Buchanan J’s view, came into the 2010 Agreement from the earlier industrial agreements concerning annual leave.
More recent changes to the Agreement have encompassed the abandonment of a qualifying period of service for leave and the fact that leave may now be accrued and taken progressively. In Buchanan J’s view, these changes rendered much of clause 34(c) as having little ongoing operation.
However, His Honour cautioned that this did not mean that the clause was to be construed “…(in an effort to give it meaning and contemporary relevance) in a way that ignores or repudiates its earlier meaning and history.”[18]
[18] Ibid at [50]
As a consequence, it was Buchanan J’s view that on a proper construction of clause 34 of the Agreement, Valspar did not have the right to direct annual leave to be taken in the manner in which it did. Any right it had to direct when leave might be taken was subject to the overriding restriction preserving for employees at least one period of at least two weeks for an annual holiday, unless an individual employee agreed otherwise.
In these circumstances, Buchanan J considered Valspar’s various directions, arising in this case that its employees take nominated single days as annual leave and various shorter periods of time in a similar manner “overrode the individual rights of employees and destroyed that basic entitlement.”[19]
[19] Ibid at [51]
This led to Buchanan J reaching what I regard as a conclusion upon his consideration of the agreed facts in the case concerning the nomination by Valspar of days and periods on which its employees were required to take annual leave:
“Accordingly, in my respectful view, the appellant made out a case that the respondent contravened cl 34 the Agreement.”[20]
[20] Ibid at [52]
As a consequence, Buchanan J indicated that his analysis of the clause in question had led him to the view that United Voice had made out a clear case that section 50 of the Act had been breached because of a contravention of clause 34 of the Agreement with respect to Valspar’s requirement that its employees take annual leave as they had been directed to do.[21]
[21] Ibid at [65]
In my view, these various statements are more than an expression of a view on Buchanan J’s part. They arise from his analysis of the agreed facts. In this context, His Honour pointed out the consequences of section 191 of the Evidence Act 1995 (Cth) which indicates that agreed facts may not be later contradicted or qualified.
In my view, His Honour’s finding was clearly posited on such agreed facts and his own erudite analysis of the historical antecedence of the clause in question. It is also my view that the plurality obviously concurred in this finding.
As indicated earlier, for practical reasons, both before this court and Judge Simpson, the parties agreed on a bifurcation of the proceedings into a liability and penalty phase. As a consequence of this, it is apparent that Buchanan J realised that much more evidence needed to be considered and appropriate findings made before the union’s application could be concluded.
This was particulars so in respect of the controversy arising from the union’s assertion that the dispute resolution procedures contained in clause 47 of the Agreement had been breached. Judge Simpson found that that the clause in question could not be breached as:
“…parties to the Enterprise Agreement cannot be forced to settle their dispute. The parties are not expected to remain in negotiations forever in the event that settlement cannot be reached.”
Buchanan J did not consider that this summary accurately represented the situation which arose in the period immediately prior to the first shut down on 30 April 2012. Rather, His Honour was of the view that:
“Insufficient findings of fact have been made to determine whether, as the respondent claimed, cl 47 was not properly invoked or whether, as the appellant claimed, cl 47 was properly invoked and then breached by the respondent. Rather the primary judge appears to have regarded it as unnecessary to deal with the facts and has not done so.”[22]
[22] Ibid at [62]
Under the heading Summary of findings Buchanan J considered that Judge Simpson had misunderstood the operation of section 50 of the Act and has misconstrued the effect of clause 34 of the Agreement but more findings needed to be made before it could be established that clause 47 had been contravened.
In summary, Buchanan J said as follows:
“The result of the foregoing analysis is that in my view the appellant made out a clear case of breach of s 50 of the FW Act by establishing a contravention of cl 34 of the Agreement with respect to the requirement to take annual leave in the manner identified by the agreed facts.
…
It is not possible to say whether the appellant made out a case of breach of s 50 of the FW Act by reason of cl 47 of the Agreement.”[23]
[23] Ibid at [65] & [67]
As has previously been indicated, United Voice seek the imposition of penalties on Valspar for its breach of the Agreement regarding the direction to its employees that annual leave be taken in increments of single days and on three individual occasions in increments of less than fourteen days. In addition, compensation is sought for each employee concerned as a consequence of the loss of the entitlement to take annual leave in a block of time of a fortnight or longer.
Necessarily the circumstances of these employees will be idiosyncratic. Some may have accumulated significant periods of leave during the course of their employment with Valspar and so still be able to take a holiday of a fortnight. Other may not have been able to accumulate such leave or may have utilised it earlier. Accordingly, these employees may have been stood down without pay.
In addition, it is conceivable that some individuals may have relished the prospect of being able to have a four day long weekend every fortnight and may not have seen it as an arduous imposition upon them.
Again, at the risk of repetition, it seems to have been Valspar’s view that the eight day fortnight was a necessary evil given the commercial vicissitudes it was facing at the time.
On the other hand, United Voice considers that the arrangement was arbitrarily imposed without a proper level of consultation having occurred between staff and management regarding its implications.
I am unsure on the precise bases on which United Voice sought to appeal the judgement of Judge Simpson. However, both Ms Clarke and Mr Seck concede that the appeal was determined by the Full Court on grounds delineated by the Court itself during the running of the appeal.
Nonetheless it seems to me to be clear that the Full Court was satisfied and in effect found that the direction given by Valspar to its various employees that they were to take an eight day fortnight from 30 April 2012 onwards was in breach of the Agreement and so actionable under section 50 of the Act.
However, on appeal, the Full Court was of the view that it was not in a position to ascertain either the implications or extent of these breaches of clause 34. That is the function of this court and the reason why the matter has been remitted back to it.
The fundamental task for this court being to assess penalty and possible compensation for the employees concerned arising from the failure by Valspar to abide by the implicit condition of clause 34 to ensure that each employee was able to take at least one period of annual leave each year in a block of a fortnight. A further corollary of this will be for this court to determine the number of breaches of the Agreement which have occurred in this regard.
It is also necessary for this court to analysis the factual situation arising between the event of the workplace meeting of 29 March 2012 and the actual imposition of the eight day fortnight on 30 April 2012 to ascertain whether there has been a further breach of the dispute resolution provisions.
In this regard, in my view, Buchanan J formulated the task for this court in the following portion of his judgment:
“In my view there is not a proper or adequate foundation upon which this Court, on appeal, might satisfactorily assess the detailed facts to which the more general issues of law, discussed above, apply. The allegations of breach of cl 34 and 47 of the Agreement should be determined again, in the light of the reasons of this Court on the appeal.
There may need to be findings made in connection with the breach of cl 34, to permit the evaluation of outstanding entitlements. In the ordinary course it would be expected that the parties would attempt to co-operate about those matters, but if they do not those issues will require determination at first instance, perhaps on an individual basis.
Consideration also needs to be given to whether a penalty should be imposed for contravention of cl 34 of the Agreement.
Findings of fact must be made in connection with the alleged breach of cl 47, liability must be determined and, if appropriate, further relief about the issue might also arise for consideration.”[24]
[24] Ibid at [68] - [71]
However, in my view, it is clearly the case that the Full Court has determined that Valspar has breached clause 34 of the Agreement, in generic terms, by requiring its employees to take annual leave, in the manner in which it did, from 30 April onwards and this court is bound by that finding. It is however necessary for this court to delineate the extent of this breach, both in terms of how many such breaches have occurred and more significantly what consequences should attach to the breach.
The Chief Judge of this court directed that the matter come to me and it was listed before me initially on 4 July 2014. Given the tenor of Buchanan J’s comments regarding the utility of the parties co-operating with one another, particularly in regards to the evaluation of each individual employee’s claims for reimbursement of entitlements lost, I referred the parties to mediation. On 1 September, I was informed that this had proved to be unsuccessful.
Thereafter, counsel for Valspar submitted that a more appropriate course was for Judge Simpson to consider the matter in conformity with the findings of the Full Court and make any necessary finding of fact required. The rationale for this submission being that His Honour had taken evidence from both Mr MacRae and Mr Golding, as well as from Mr Enrico Garuccio, who was employed at Valspar at relevant times and so was seized of the matter.
On this basis, I transferred the matter to Judge Simpson for his consideration on 10 September. However, for reasons undisclosed to me, His Honour did not consider that he was so seized. He sent the case back to me.
Thereafter, in the light of my analysis of the findings of the Full Court outlined above, I determined that the major task for the court centred on the second or penalty phase of the hearing but that significant issues remained concerning the potential liability of Valspar, particularly in respect of the contention that there had been a breach of clause 47.
On this basis, I allocated a two day hearing scheduled for 16 & 17 December 2014 to be directed towards concluded the loose ends regarding potential liability, with a longer hearing of seven days to be directed to the more intricate issues centred on penalty and the evaluation of the lost entitlements of each employee. That longer hearing remains scheduled to commence on 3 June next.
The December hearing did not occur due to circumstances beyond the control of both the court and the parties themselves. Counsel for Valspar was unable to leave his chambers in Central Sydney to attend court in Adelaide due to the tragic Lindt Café Siege which took place at that time. On that basis the mooted liability aspect of the case was re-fixed to 9 April 2014.
The Material before this Court
The parties agreed that I could determine the issues relating to liability, which I have identified as remaining outstanding, as a consequence of the decision of the Full Court, on the basis of the evidence available to Judge Simpson. That evidence is as follows:
a) Statement of agreed facts;
b) Bundle of agreed documents, including employee leave records and correspondence passing between the parties, including directions to staff;
c) Transcript of proceedings before Judge Simpson;
d) Affidavit of Peter Tullgren, industrial officer filed 22 February 2013;
e) Affidavit of Carly Wildman, production worker at Valspar (and its predecessors) since November 2002, filed 18 February 2013;
f) Affidavit of Stuart Ashby, production worker at Valspar (and its predecessors) since 1993, filed 16 February 2013;
g) Affidavit of Zlatko Kolman, paint filler at Valspar (and its predecessors) since 1999, filed 18 February 2013;
h) Affidavit of Stephen Kosa, production worker and union delegate at Valspar (and its predecessors) since 2008 filed 18 February 2013;
i) Affidavit of David di Troia, branch secretary of United Voice, South Australia filed 18 February 2013;
j) Affidavit of Enrico Garuccio, production worker at Valspar (and its predecessors) since December 1999, filed 18 February 2013;
k) Affidavit of Boyd MacRae, United Voice organiser, filed 18 February 2013;
l) Further affidavit of Boyd MacRae, filed 25 March 2013;
m) Affidavit of Brett Golding, manufacturing manager of Valspar, filed 12 March 2013;
n) Affidavit of Richard Hein, production supervisor at Valspar, filed 13 March 2013;
o) Further affidavit of Brett Golding filed 13 March 2013.
Chronology
From these various documents, it is possible to elicit the following chronology and sequence of events, which do not appear controversial in respect of their occurrence but the implications of which are in significant disagreement, so far as the parties are concerned.
In the early morning of 29 March 2012, Mr MacRae received an email from Mr Golding. It attached what was said to be an internal communication, which Mr Golding would be delivering to production staff at Valspar later that day. It called for four voluntary redundancies from the day shift and saliently advised as follows:
“We are also planning to reduce our operations at the Kilburn plant from a 9 day fortnight to an 8 day fortnight for 8 weeks from May 2012.”[25]
[25] See annexure A to Mr MacRae’s affidavit
Mr Golding went on to indicate that he would be available to discuss the matter after he had communicated the relevant information to the production staff around 7.00 am that day. Mr MacRae made arrangements to attend the Kilburn plant as quickly as he could and arrived to find the meeting between Mr Golding and other Valspar management with production staff in progress in the staff lunch room.
At the meeting, Mr Golding circulated a document to production staff, which purported to outline the findings of the national management team of Valspar regarding the company’s operational situation. The document indicated that there had been 15% reduction in demand for Valspar’s products, which necessitated a need to reduce paint production by 2.9m litres in the period from April to December.
In this context, Mr Golding announced as follows:
“This weakened demand, together with improved production efficiencies on afternoon and evening shifts, has led to a review of operations of manning lists and production requirements for the remainder of the financial year.”[26]
[26] See Statement of Agreed Facts at Attachment A - “The first internal announcement”
The bulk of the communique deals with the process applicable to the mooted voluntary redundancies but also contained the short paragraph, outlined above, detailing the proposed 8 day fortnight to be implemented from 30 April onwards. No reference was made as to how this related to the applicable Enterprise Agreement and how it was to be implemented in practical terms.
At around 10.00 am on 29 March, Mr MacRae met with Mr Golding and other members of the Valspar management at the Kilburn plant. The issue of the proposed stand down was discussed. It was Mr Golding’s position that Valspar’s imperative to reduce its paint inventory dictated that some form of stand down had to take place. On the other hand, Mr MacRae indicated his view that the stand down was not capable of being implemented under the terms of the Agreement.
It is common ground that at relevant times, Valspar had 43 employees who were potentially affected by the 8 day fortnight of which 25 were employed on day shift; 14 on afternoon shift; and 4 on night shift. Following the meeting of 29 March, on 2 April, Mr Golding sent a further email to Mr MacRae detailing Valspar’s proposals as to how the shutdown would be implemented.[27]
[27] Ibid at Attachment B
At that stage Mr Golding indicated that ½ day shift took a split rostered day off “rdo” each Monday; the afternoon shift had an rdo each alternate Friday and the night shift an rdo each alternate Sunday. In order to implement the eight day fortnight it was proposed that the whole day shift take every Monday as an rdo or annual leave; the afternoon shift every Friday as an rdo or annual leave; and the night shift every Sunday as an rdo or annual leave. This arrangement was proposed to be implemented between 30 April and 25 June.
In this context, Mr Golding advised as follows:
“In the event of an employee not having sufficient rdo or annual leave hours to cover these f shift shutdowns, then the employee will need to approach their supervisor to discuss alternative options.
After the above leave options have been exhausted, further leave options may include the following:
·Single LSL[28] where the employee is qualified
·LWOP[29] - this is an option after the above has been exhausted, however, the Company does not want it’s (sic) employees to be financially embarrassed due to these shift shutdowns.”
[28] Long service leave
[29] Leave without pay
The contents of this email were effectively translated into a memorandum to staff dated 4 April 2012, which was posted on the Valspar staff notice board at the Kilburn plant.[30] Attached to the notice was a roster on which the relevant days for the day, afternoon and night shift were indicated in shading.
[30] See Statement of Agreed Facts at Attachment C
On 4 April, there was a meeting of the Valspar Joint Consultative Committee, which is made up of representative from both management and staff in equal numbers. Mr MacRae attended as United Voice’s organiser, together with a union delegate (Mr Kosa) and a rank and file member. Mr Hein, Valspar’s production supervisor and two others also attended from management. The proposed roster was circulated at this meeting.
Over the next few days, Mr MacRae consulted with United Voice membership at the Kilburn plant and a meeting was held on 12 April in the lunch room. As a consequence of this meeting, Mr MacRae was instructed to write to Valspar requesting further information about the proposed change to the nine day fortnight regime. The letter was under the hand of Mr Di Troia, the South Australian branch secretary of United Voice and was dated 18 April 2012.[31]
[31] See Statement of Agreed Facts at Attachment D
The purpose of the letter was to request information from the company as to the instrument Wattyl is relying on to enable this change. The union indicated that it welcomed further consultation with the company about the issue. However, the letter also states that consistent with clause 9(c) of the Wattyl Group Enterprise Agreement 2010, United Voice members have rejected the eight day fortnight proposal.
Clause 9 is headed Consultation and requires the parties to the Agreement to consult with one another in circumstances where Wattyl has made a decision to introduce changes in production, program, organisation, structure or technology that is likely to have significant effect effects on employees at a site.
The term significant event is defined to include the alteration of hours of work [and] the restructuring of jobs. Subclause (c) stipulates that the required consultation is to be genuine and encompass an exchange of views to such an extent that the Union is provided with a genuine opportunity to influence the decision being made prior to the final decisions being made or changes being introduced.
As a consequence of this letter, on 23 April 2012, Mr Golding forwarded an answering letter to United Voice, marked to the attention of Mr MacRae. The letter[32] indicated that the 8 day fortnight was not a proposal and did not represent any change to an employee’s terms and conditions of employment, as each such employee would still be paid their rate for a 35 hour week.
[32] See Statement of Agreed Facts at Attachment E
In the letter, Mr Golding refutes the assertion that the 8 day fortnight roster represents a change in production sufficient to trigger the application of clause 9. As such, he contends that it is not open to the union membership to either accept or reject the 8 day fortnight regime. This, no doubt, is the rationale for his assertion that the shutdown was not viewed as a proposal, from the perspective of Valspar.
The mechanics of the shutdown were elaborated as follows:
“What will occur is that pursuant to clause 34(c) of the Wattyl Group Enterprise Agreement 2010 (“the Enterprise Agreement”), the Company will temporarily close the Kilburn Site (see details below which have already been provided to you) during the period 30 April 2012 to 25 June 2012. The Company has already provided the employees with appropriate notices. This means that for each employee half of the days that their shift will be closed will be an RDO and for the other half, being 4 days, the employee will be required to take annual leave.”
However, notwithstanding his view that clause 9 of the Agreement had no application to company’s decision to implement the 8 day fortnight regime, Mr Golding indicated to Mr MacRae that he would be pleased to meet with him further to discuss the practicalities of the closures that will take place between 30 April and 25 June 2012.
During the early morning of 26 April a further meeting took place between Mr Golding and Mr MacRae. Following this meeting, Mr MacRae met with day shift production staff, who advised him that they wished to formally dispute the change to the roster. At this stage, the parties agree that Mr Golding indicated that United Voice should contact him formally in writing.[33]
[33] See Statement of Agreed Facts at paragraph 21
Later that day, Mr Di Troia sent a letter to Mr Golding via facsimile.[34] The letter contained the following paragraphs:
[34] See Statement of Agreed Facts at Attachment F
“…our members do not support the introduction of an eight day fortnight.
…
We are concerned that Wattyl is not giving us or our members a genuine opportunity to influence decisions prior to a decision being made, in accordance with clause 9(c) of the Wattyl Enterprise Agreement 2010.
…
We seek to invoke the disputes procedure pursuant to clause 47 of the agreement and we consider we are at clause 47(d)(iii) of the current agreement.
…
As Wattyl is aware, once the dispute procedure is invoke Status Quo must remain until the dispute is settled. Consistent with clause 47 (b) Status Quo, United Voice request any implementation of an eight day fortnight which was due to commence 30 April 2012, should be withdrawn until the dispute is settled.”
As previously indicated, it is the company’s position that only at this stage (26 April 2012) did the union invoke the dispute resolution clause of the Agreement. From the company’s perspective, this invocation was not done in either a timely or reasonable manner.
In this context, Mr Seck relies on a portion of Mr MacRae’s affidavit evidence in which he deposes that as follows:
“After the meeting (held on 26 April 2012) I met with Mr Golding and advised him that I had been instructed to commence a formal dispute, I reminded him that the Enterprise Agreement contained a ‘status quo’ provision that required Wattyl to hold off on the proposed changes until the dispute was resolved.”[35]
[35] See affidavit of Mr MacRae filed 1 May 2012 in the context of the injunction application of 3 May 2012
The union asserts that the company was put on notice verbally by Mr MacRae on 29 March 2012 that a dispute had arisen between United Voice and Valspar, which was the date on which it is asserted the provisions of clause 47 were triggered. In this context, Ms Clarke submits that the purpose of Mr Di Troia’s letter was to provide a formal notice of the dispute, which had been initiated on 29 March.
Mr Golding responded to Mr Di Troia’s letter of 26 April the following day. He wrote as follows:
“The proposed shutdown at Kilburn is in accordance with Clause 34(c) of the Wattyl Group Enterprise Agreement 2010 (“the Enterprise Agreement”). You have provided no reason indicating why the Company cannot invoke this clause.
The employees and the union have been aware of the shutdown since late March 2012. It is an abuse of the provisions of the Enterprise Agreement for the union to now assert that the parties are in dispute. Clearly, the purpose of the union trying to instigate a dispute is merely to delay the shutdown that has been notified especially considering that reference to a dispute was first raised in your 26 April letter. Your attempt to initiate a dispute is not genuine but is an improper use of the provisions of the Enterprise Agreement.
The decision taken by the Company to shutdown the Kilburn site will not have any significant effects on employees at the site. This means that the consultation provisions under the Enterprise Agreement are not triggered. We have indicated this to you in our previous correspondence and you have failed to provide any particulars of what significant effects, as defined by the Enterprise Agreement, the employees will sustain.
The issue at hand is not whether you or your members support the shutdown. The Company is acting in accordance with the Enterprise Agreement and so it is able to do as it has indicated. You cannot interfere with managerial prerogative.
You assert that the Company has altered its position after consultation with the employees. This is not correct. The Company has not agreed to an alternative to the shutdown and has not, as you alleged, altered its position.
The union and the employees have provided no genuine reasons why the shutdown should not proceed. Accordingly, the shutdown will take place as notified.”[36]
[36] See Statement of Agreed Facts at Attachment G
On 27 April, Mr Gray, the assistant branch secretary of United Voice replied to this letter.[37] The thrust of the letter was that the workforce at the Kilburn plant had indicated from 29 March onwards their opposition to the implementation of the eight day fortnight. Mr Gray asserted that this opposition had been restated following another staff meeting on12 April and again in the union’s letter of 18 April. In this context, it was asserted as follows:
“Given the foregoing, your assertions to the effect that Wattyl has only recently become aware of the position of United Voice members in relation to the proposed roster restructure is without foundation. United Voice has advised Wattyl on numerous occasions both verbally and in written correspondence that members are opposed to the roster restructure.”
[37] See Statement of Agreed Facts at Attachment H
It was further asserted that the union’s letter of 26 April had explicitly…disputed the roster variation. In this context, Mr Gray referred to the status quo provisions contained in clause 47(b) of the Agreement. He wrote as follows:
“The fact that Wattyl may disagree with members of United Voice in relation to the lawfulness of Wattyl’s roster restructure in no way abrogates or diminishes the obligations on Wattyl to comply with the provisions of clause 47(b), indeed it is only in the context of a dispute that the status quo provision becomes operative.”
On 2 May 2012, a further meeting of the Joint Consultative Committee took place, which was attended by Mr Hein, Mr MacRae and others. Mr Golding did not attend. The eight day fortnight was discussed. Mr Hein indicated that the arrangement was to conclude on 25 June 2012.[38]
[38] See affidavit of Richard Hein filed 13 March 2013
On 24 May 2012, Mr Golding issued a further Internal Announcement to production staff at the Kilburn plant.[39] In this document, he indicated that, from the company’s perspective, demand for its products continued to be weak and there further voluntary redundancies would be sought and the 8 day fortnight arrangement continued from the week beginning 8 July until the week beginning 31 August 2012.
[39] See Statement of Agreed Facts at Attachment L
In addition, Mr Golding indicated that the plant would shut down from 1 July until 6 July 2012. In the announcement, Mr Golding characterised these arrangement as being shutdowns justified by the provisions of clause 34(c) of the Agreement.
A notice in similar terms was disseminated on 19 July 2012 announcing a shutdown being 20 August and 24 August 2012 and that the eight day fortnight would continue between 2 September and 30 September.[40]
[40] See Statement of Agreed Facts at Attachment M
Finally, on 20 November 2012, Mr Golding disseminated the final internal announcement of relevance in these proceedings, which was headed Christmas/New Year Manufacturing & Operations Closure at Kilburn SA.[41] This announced the plant would be closed between 24 December 2012 and 1 January 2013. Staff members were advised to put in their annual leave requests by 30 November and of when their wages were to be paid.
[41] See Statement of Agreed Facts at Attachment N
From the perspective of United Voice, the directions contained in the announcements of 29 March; 24 May; 19 July; and 20 November 2012 are separate contraventions of clause 34 of the Agreement.
The announcements of 29 March; 24 May; and 19 July 2012 followed meetings of the Valspar Operation Team, held by tele-conference and related to overproduction concerns relating to falling demand for paint products.[42] On each of these occasions, in his evidence, Mr Golding concedes that he relied on clause 34(c) to direct the employees to take leave.[43]
[42] See affidavit of Brett Golding filed 13 March 2013 at paragraph 16, 29 & 32
[43] See transcript of proceedings at page 42
There is some uncertainty about the situation regarding the Christmas shutdown. The transcript of Mr Golding’s evidence, in cross-examination before Judge Simpson is as follows:
“Well, towards the end of last year over what might colloquially called the Christmas period, 34(c) was purported to be relied on again, hasn’t it? --- In relation to specific time?
Well, yes. We were actually approached by the employees and a site consultative committee and they asked us several times leading into the October period about – are we shutting down at Christmas? And I said we would look at what production was, and I would get back to them, which we subsequently said, yes, we will shut down for the period between Christmas and New Year.
And that was for production purposes again, reducing production? ---It was for – well, it was actually for the benefits of the employees. It wasn’t actually for production in terms of that, because they approached us.
And asked you whether you were closing down. The employees ---? ---Are we – are we closing down.
Right? ---Are we, collectively, not.
And you made the decision to close down over Christmas? ---After I – after discussed with my – with my, I guess production team: Could we shut down for those three days so that the employees could have that break between Christmas and New Year? And the answer was: Yes, we could.”[44]
[44] Ibid at 42-43
As Buchanan J has discussed, an annual shutdown, particularly over the Christmas/New Year period was historically viewed as being advantageous for both employers and employees. It is the thrust of Mr Golding’s evidence that the staff at Valspar were desirous of taking some portion of annual leave, presumably if sufficient leave balances were available to them, at this time.
From Valspar’s perspective, if there has been contravention of the Agreement, which it disputes, there has only been one such contravention.
Regardless of this controversy, in practical terms, it is agreed between the parties that day shift staff were required to take annual leave (subject to their leave balances) on the following Mondays between 30 April and 24 September 2012:
(a)30 April;
(b)7 May;
(c)14 May;
(d)21 May;
(e)28 May;
(f)4 June;
(g)12 June;
(h)18 June;
(i)25 June;
(j)9 July;
(k)16 July;
(l)23 July;
(m)30 July;
(n)6 August;
(o)13 August;
(p)27 August;
(q)3 September;
(r)10 September;
(s)17 September; and
(t)24 September.
It should be noted that the day shift is split with half taking a rdo in one week and annual leave in the other week of the relevant fortnight and vice versa so far as the other half of the day shift is concerned. Accordingly, each member of the day shift potentially took ten days of annual leave in increments of a single day, depending on their respective leave entitlements.
It is also agreed that members of the afternoon shift were required take the following Fridays, in 2012, as annual leave:
(a)4 May;
(b)18 May;
(c)1 June;
(d)15 June;
(e)13 July;
(f)27 July;
(g)10 August;
(h)7 September; and
(i)21 September.
In respect of the night shift, it is agreed that its members were directed to take annual leave, in increments of a single day on the following Sundays of 2012:
(a)13 May;
(b)27 May;
(c)10 June;
(d)24 June;
(e)8 July;
(f)22 July;
(g)5 August;
(h)19 August;
(i)2 September;
(j)16 September; and
(k)30 September.
Accordingly, on my calculations, the afternoon shift took annual leave in increments of nine single days and the night shift in eleven such single days. When these days are added to the other longer compulsory shutdowns in July, August and December/January and given that each employee is entitled to four weeks annual leave each year, it seems incontrovertible that at least some of the employees concerned were precluded from having an annual holiday of at least two weeks in duration during 2012.
Has there been a breach of clause 34 of the Agreement?
The Full Court (the Plurality) has indicated that clause 34 is to be interpreted in the light of its industrial context and purpose. Buchanan J, in his detailed and learned judgement, has provided that industrial context, since at least 1975 in respect of the evolution of annual leave entitlements in the paint manufacturing industry.
In particular, Buchanan J has considered the extent to which employers, in the industry, are entitled to direct employees to take annual leave and the restrictions which apply to such entitlements. In essence, Buchanan J concluded that employers do have an entitlement to direct employees to take annual leave at specified times, according to the needs of the business concerned.
This practice arose particularly in the context of annual plant shutdowns, over the Christmas period, which were viewed as being generally advantageous to both employer and workforce, as it allowed annual maintenance to be undertaken and for staff to take holidays at the time of the year traditionally earmarked for them.
However, the evolution of annual leave entitlements arose against a background of employees gaining the right to take extended periods of time, as leave, from their employment, at the time of their preference.
In the post war period annual leave entitlements have increased from two weeks to three week and to the current entitlement of four weeks, along with which has developed a practise of employers having a greater degree of control in respect of when such leave was to be taken, subject to some preservation of employees’ right to take leave in extended periods.
The relevant award provisions arose in the context of the desirability of balancing the financial and operational needs of business, on the one hand, with the social benefits of employees being able to take holidays, in extended periods. In this context, as Buchanan J observed “the amenity of at least two weeks continuous leave (which had a long history) was generally preserved.”[45]
[45] United Voice v Valspar (WPC) Pty Ltd [2014] FCAFC 34 at [35]
This observation ultimately led Buchanan J to the conclusion that the provisions of clause 34 of the Agreement, which did authorise the company to direct its workforce to take annual leave but subject “to an overriding restriction preserving for employees at least one period of at least two weeks for an annual holiday…”[46]
[46] Ibid at [51]
I acknowledge that sub-clause (b) and sub-clause (c) do not sit comfortably together, as they are directed to the competing interests of employer on one hand to be able to direct when a shutdown will occur and the reservation to employees of the entitlement to take a continuous period of annual leave of not less than 2 weeks in duration.
It is clear to me that the right of Valspar to direct when leave is to be taken is subject to the clear proviso, stipulated in clause 34(b) that annual leave is to be taken, unless the parties agree otherwise, in one continuous period of 4 weeks or not more than 2 periods of one of which will not be less than 2weeks in duration. The evidence is clear that the company directed leave be taken other than in conformity with this proviso. In my view, given the analysis of Buchanan J sub-clause (c) cannot over-ride this proviso, given the historical precursors of the provision.
Mr Seck submits that this industrial context has altered significantly over time; principally by the fact that leave is now immediately accrued from the commencement of employment and can be carried over from year to year.
Essentially there is no longer a requirement on employees to use or loose holiday in each calendar year. Accordingly, Mr Seck submits that the direction of Valspar does not amount to a wholesale denial of the entitlement to have a two week holiday but rather its possible defrayal.
On this basis, it is argued, I think, that the company’s various directions, in this case, have not necessarily overridden the individual rights of employees to have a two week annual holiday, to utilise the terminology adopted by Buchanan J.
I acknowledge that hypothetically an employee of Valspar could have had a leave balance well in excess of four weeks as at 30 April 2012. As such, even if he or she did take the periods of annual leave, in the increments directed by Valspar – as individual days and in the three other longer periods – it still remained theoretically possible for such an employee to take a two week holiday at some stage in 2012 and certainly in subsequent years. In addition, it is conceivable that some employees took a two week holiday, during the early part of 2012, prior to the inauguration of the 30 April shutdown.
I do not accept this submission, which in my view is more relevant to the question of penalty. In my view, it is not helpful to conceptualise around an employee who has such a bank of leave accumulated. Buchanan J described the entitlement to be a basic one. This basic entitlement is to take a two week holiday each year. Ipso facto the directions of the company interfered with this entitlement.
I agree with that formulation and consider myself to be bound by it. In my view, the various directions of Valspar, which required individual days of leave to be taken of between 9 and 11 days and three individual periods of between 4 and 6 days did destroy the employees’ basic right to have at least one period of annual leave of fourteen days in duration each year and as such represented a breach of clause 34 of the Agreement.
Necessarily the situation of each individual employee will be different and so the personal consequences of the breach of the Agreement idiosyncratic for each of them. Necessarily, individuals with large leave balances are likely to face less serious consequences than individuals who have no leave accumulated, either through choice or because their employment is recent.
By way of example, Ms Wildman complains that she did not have enough annual leave accumulated to get through the shutdown periods and utilised long service leave entitlements. She is aggrieved that she may be prevented from having an extended holiday at some time in the future, so took unpaid leave instead.[47]
[47] See affidavit of Ms Wildman at paragraphs 18 - 29
Mr Ashby deposes that he usually takes his annual leave in blocks of either one week or two weeks to coincide with the holidays of his partner. During 2012, he deposes that he was not able to coordinate his leave in this way because of Valspar’s directions. He also complains that the company’s directions interfered with how he wished to utilise his long service leave in 2013.[48]
[48] See affidavit of Mr Ashby at paragraphs 34 - 36
Mr Kosa also complains that the directions interfered with his leave balance and plans to take a month long holiday in September/October 2012.[49] None of these witnesses has been cross-examined and accordingly I cannot accurately gauge their respective situations at this juncture and no evidence in regards to the vast majority of employees affected by the stand down.
[49] See affidavit of Mr Kosa at paragraphs 65 - 69
In addition, it may be the case that there are some individuals whose affairs were not greatly disrupted by the directions and indeed some who found them advantageous. In my view, considerations of this type go to penalty and the gravity of the offending not liability per se. In addition, such considerations are likely to be relevant to the issue of compensation.
It is the thrust of Mr Seck’s submissions that, due to the significant changes of the industrial context, in which the Agreement currently resides, particularly in terms of the accrual and accumulation of annual leave from year to year, there can have been no breach of the Agreement.
For the reasons given, I do not believe it can be said that there has been no such breach. However, I accept that it is likely that there has been some change in the overall industrial context of the Agreement. Again these are matters which are likely to go to penalty.
The parties agree that, in the past, there have been week long shutdowns at the Kilburn plant, which have occurred without complaint from the workforce. In addition, the plant has previously closed down over the Christmas/New Year period and there is the suggestion, in Mr Golding’s evidence, that such a close down occurred in 2012/2013, at the instigation of staff. Again, in my view, these are matters relevant to penalty, as they are likely to affect the gravity of the overall contravention of the Agreement.
In addition, it is the underpinning of Valspar’s case that its financial circumstances dictated the eight day fortnight, which was the lesser evil, so far as its staff were concerned, particularly as, in the main, they were paid for the days on which they were directed to take annual leave. Again, this may be so. Such matters may be highly relevant to the gravity of the overall breach of the award but they arise for consideration, when the question of penalty is to be determined not at the liability stage.
The next question to consider is how many contraventions of clause 34 of the Agreement have arisen. The union contends for four as a consequence of the four separate directions made by Valspar to its employees to take annual leave over four distinct periods, as the company’s trading situation failed to improve over the course of 2012.
On the other hand, the company contends that there has been only one course of conduct, on its part, which has involved a single breach of the relevant clause. I also anticipate that the company will contend that it genuinely believed that it was entitled to do as it did as a consequence of its interpretation of clause 34(c) and its state of mind did not change over the course of the period in question.
The difficulty with each contention it that both ignore that what occurred at the Kilburn plant, between 30 April 2012 and 3 January 2013, involved numerous employees, who were each directed to take annual leave on multiple occasions. Accordingly, in my view, there is some degree of artificiality in both considering whether there has been one contravention or four.
In determining the number of contraventions, in my view, it is necessary to consider the application of section 557 of the Act. The nature of the section has recently been closely considered by the Full Court of the Federal Court in Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman.[50]
[50] Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman [2014] FCAFC 62
The case concerned a situation in which an employer had breached the terms of an applicable modern award by failing to pay penalty rates for such things as employment on public holidays and weekends. In that sense there had been numerous individual breaches of obligations to the employees concerned but a commonality in the nature of the behaviour of the employer.
In Rocky Holdings the Full Court rejected the submission that there had been one course of conduct engaged in by the employer and therefore there should be only one contravention of the Act penalised. It provided a number of reasons which led it to this view, which I summarise as follows:
· The key legislative intent of the FWA is to ensure, through an effective penalty regime, compliance with the minimum terms of relevant modern awards, not to reduce the number of contraventions of civil penalty provisions; see [12].
· It is the provision of the Act, set out in subsection 557 (2), which is relevant to the course of conduct delineated in subsection (1); see [13].
· Subsections (1) and (2) are ambiguous. They are capable of referring to the existence of the identified provision or the substance of the identified provision. As such, it is acceptable to have regard to the relevant Explanatory Memorandum, in resolving the ambiguity.[51]
· The object and purpose of section 557 is to ensure that an offender is not punished twice for what is essentially the same criminality. What is or is not the same criminality is an exercise requiring close consideration. However bare identity of motive is seldom sufficient to establish the same criminality in separate and distinct acts of offending; see [18].
· It is wrong to characterise the various contraventions of the modern award in question as being merely particulars of an overall breach of section 45; see [24].
· It potentially confusing to apply principles dealing with the punishment and sentencing of criminal offences to the application of civil penalties; see [25].
· Such an analysis has the prospect of leading to arbitrary and capricious outcomes. By way of example an employer who had contravened a wide range of award provisions, leading to widespread underpayment of a number of employees would be subject to the same maximum penalty as an employer who had contravened one award provision, in respect of one employee on one occasion. This is counter-intuitive; see [26].
[51] See Acts Interpretation Act (1901) (Cth) at section 15AB(1)(b)
The court must beware of groupings of offences, which lead to capricious or artificial outcomes, bearing in mind that each contravention relates to a separate and distinct breach of a term of the Act.
In any event, no matter how various counts are ultimately cut and diced, the court’s fundamental obligation is to impose a penalty in keeping with the overall seriousness of the offending in question.
In this context, what was said by Reeves J in Blandy v Coverdale NT Pty Ltd is relevant:
“In Gibbs v City of Altona Gray J made a number of observation about the operation of section 178(2), which I consider apply equally to the similar provisions of section 719(2). First, each separate obligation found in an award is to be regarded as a separate ‘term’; secondly, whether, whether a separate obligation is a separate term is determined by whether it is in substance a different obligation; and thirdly, where different terms impose cumulative obligations or obligations that substantially overlap, that may be taken into account by imposing a nominal (or no) penalty for some breaches and a substantial penalty for others…” (Citations removed)[52]
[52] Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [56]
The court is required to give recognition to the distinct legal nature of each breach arising under section 50 of the Act. Section 557 operates to allow groupings of contraventions of the same obligation or term of an industrial instrument, not the entire range of terms breached under that one instrument.
In FWO v Ramsey Food Processing Pty Ltd (No 2) Buchanan J considered the application of section 719(2) of the Workplace Relations Act, the legislative predecessor of section 557. He said as follows:
“On one view, the failure to make any of the required payments arose from a single course of conduct. They all arose from a determination by the respondents that no payment would be made upon the termination of employment of any of the employees, or the employees as a group. However, this approach gives insufficient attention to the separate legal character of the three forms of obligation earlier identified. I am satisfied that each of those forms of obligation requires separate recognition. I am not, however, satisfied that each individual example of defiance of an obligation is permitted separate recognition. In my view the individual examples, constituted by the failure to make payments to particular individual employees, arise out of a course of conduct in each of the three instances. Any penalty must be assessed taking that into account.”[53]
[53] FWO v Ramsey Food Processing Pty Ltd (No 2) [2012] FCA 408 at [2] The passage was approved by the Full Court in Rocky Holdings (supra) at [18]
In its various directives to employees concerning the stand down arrangements, the company stressed that it was responding to adverse trading conditions, particular a fall in demand for its products, which amounted to many thousands of litres of paint. In these circumstances, it was at pains not to unduly prolong the eight day roster but to be in a position to respond quickly and improve production if the market improved.
For this reason, on each occasion the eight day roster was stipulated to apply for a finite period of time. The regime was extended, during the remainder of 2012, due to the failure of trading conditions to improve over time, as had been hoped.
In this sense, although the company made four separate decisions to impose annual leave, the decision in each case was identical and influenced by the same factors in each case, namely the continuing poor terms of trade and the company’s view that it was authorised to do what it was doing by clause 34(c).
In doing what it did, the company was hoping to be able to return to normal trading and employment conditions as soon as possible and to be able to respond rapidly to any upturn in paint demand, by increasing production, which would mutually benefit both it and its employees. In making four separate decisions, regarding the continuation of the eight day roster, it does not appear to me to have acted capriciously.
However, that is not the end of the matter as the company also took three other decisions, albeit in tandem with the decisions to continue the eight day fortnight, to impose longer shut downs throughout 2012.
On one view of the facts, the company thus made forty three directions, in the four relevant notices, requiring around fifty employees to take annual leave in increments of single days and blocks of less than a week, over an eight month period, with different implications for each of the employees concerned.
However, in each case, the motivation of the company for issuing the directive was the same – it wished to reduce its paint stockpile because of a fall in demand for its products and the costs likely to be incurred relating to the storage of excess paint. From the company’s perspective, the only reasonable mechanism to attain this objective was to stand down production staff, in the manner in which it did.
However, in each case the substance of each term of the Agreement so breached was the obligation to provide at least a two week holiday each year to employees. In practical terms, the implications of each breach intensified incrementally, as each individual employee’s leave balance eroded, with the passing of 2012 and the opportunity was gradually lost to them to take a two week holiday. In essence, the effect of the various directions was cumulative until a tipping point was reached and the ability to take a fortnight’s leave was lost.
Valspar did not elect to close its plant or reduce its staff to a nucleus for a period in excess of fourteen days, during 2012 in order to achieve its objective of reducing its paints stocks. Its obligation under clause 34(b) is to provide a continuous period of 4 weeks [annual leave] or not more than 2 periods one which will not be less than two weeks in duration.
Why it did not do so is unclear to me. This may be relevant during the penalty phase of the proceedings. During 2012, each employee concerned was directed to take around eighteen days leave in a combination of single days and blocks of three to four days, including in the period between Christmas and New Year.
In theoretical terms, at least, it would seem to be the case that the company could have directed its workforce to take two periods of leave, each of a fortnight’s duration, provided proper notice was given, without offending the substance of clause 34(b), as identified by Buchanan J – the entitlement to have at least one period of annual leave of a fortnight’s duration each year.
Accordingly, at this liability phase of the proceedings, it is very difficult to ascertain the overall gravity of the offending and how the various breaches of the term of the Agreement, enshrined in clause 37, are to be grouped, if at all, according to the principles contained in section 557.
It is not controversial that the conduct which contravened the Agreement was committed by the one person and its various directions affected the employees concerned in varying ways at different times. Given the rolling nature of the directions, it is more difficult to ascertain whether these directions constituted one course of conduct, even if the motivation of the company was the same for each such direction.
In my view, what was said by the Full Court of the Federal Court in Construction, Forestry, Mining and Energy Union v Cahill[54] is relevant:
“…a "course of conduct" or the "one transaction principle" is not a concept peculiar to the industrial context. It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is "the same criminality" and that is necessarily a factually specific enquiry. Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions.”
[54] Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 at [39]
I am satisfied that Valspar has breached clause 34 of the Agreement and thus is liable to a penalty pursuant to section 50 of the Act and related provisions. The gravamen of its offence is that it deprived its employees of their entitlement to have at least one period of 14 consecutive days leave.
The consequences of the four separate directions made by Valspar to its staff were cumulative in their effect. With each such direction, the implications for the staff members affected became more significant, as their idiosyncratic leave balances eroded and the opportunity to take a 14 day holiday diminished or was extinguished.
Given this factor, I am satisfied that it is appropriate for the court to record four separate breaches of the relevant clause, in order to give appropriate recognition to the cumulative effects of the company’s conduct for the employees concerned.
However, the real moment of assessing the overall gravity of these breaches will come with submissions on mitigation. As previously indicated, from the company’s perspective, it was keen to get back to normal operation hours sooner rather than later and its decision to impose the eight day roster was the least bad option for all concerned.
In this context, it revisited the shutdown proposal on a number of occasions during 2012, as it monitored the trading situation, which it faced. Underpinning its position is its assertion that it had no alternative other than to stand down its workforce and, in good faith, it believed it had the authority to do so. This occurs against a background where it is axiomatic that clause 34 is difficult to construe, given the significant changes to the industrial context since it was initially promulgated.
From the union’s perspective, each of its members has suffered adverse consequences of varying significance. It believes that there were better ways in which to deal with the trading difficulties facing Valspar, which would not have had such deleterious consequences for its members, including possibly a longer shut down rather than the individual days initially imposed. This will be a matter for evidence.
Has there been a breach of clause 47 of the Agreement?
It is Mr Golding’s evidence that as Valspar is part of multinational consortium, it makes its financial report on 30 September each year. Accordingly, in January of 2012, the Australian/New Zealand management of Valspar was in a position to review the company’s first quarter budget and sales performance.
As such, it is his evidence that it was in February of 2012 that it first became apparent to the Operations Team that sales figures were under those budgeted for in the coming financial year and thus production levels needed to be reviewed.
Mr Golding also deposes that the company feared, from the beginning of March 2012, that if its inventory was not reduced, it would be forced to reduce staff; potentially faced prohibitive storage costs for its products; and was at risk of running at a loss. It seems axiomatic that the manner in which all of these issues played out had implications for both the company and its production staff.
As is clear, the company elected to respond to those issues by imposing the eight day fortnight on its production staff. It is Mr Golding’s evidence that the company considered that this, together with voluntary redundancies, was the best way to respond to the budgetary and marketing issues facing Valspar.
At least initially, the union’s major complaint about the company’s proposed manner of responding to the adverse trading conditions was that it was not consulted about it and this constituted a breach of clause 9(c) of the Agreement.
Essentially the union and its membership were aggrieved that the company had determined that its only option, in all the circumstances, was the eight day fortnight and it was not for turning in this regard nor was it open to at least considering other options or proposals to deal with the fall in demand for Valspar products, which affected both the company and staff.
As Buchanan J has eloquently demonstrated, clause 34 is not an easy provision to construe, as it attempts to deal with the demands of both employer and employee, in respect of annual leave requirements. These demands, as is the case here, are not always complementary. In addition, the clause has developed as the industrial context has changed over time. In this context, it also appears clear that the need to amend the provision in question has not kept up with these developments.
Historically, employers did retain the entitlement to shut down production facilities temporarily or reduce staff levels to a nucleus. This was to facilitate such things as annual maintenance and recognised that in large production facilities it is easier, for an employer, if all staff take leave at the same time. Clause 34(c) is directed to such considerations.
Whilst employers have retained the entitlement to direct when leave is to be taken, over time, annual leave entitlements for employees have evolved. The major developments being an increase of leave entitlement to four weeks per annum; the right to accrue leave from recruitment; and the ability to accumulate leave balances from year to year.
Accordingly annual leave entitlements have become both more extensive and more flexible and so not so amenable to being subject to direction or mutual agreement. In addition, as Buchanan J has demonstrated, the relevant Agreement has reflected the desirability of employees being able to take an extended minimum period of fourteen days leave each year, by necessary implication at the time of their preference, so long as it is suitable to the employer. Thus the entitlement of employers to stand down employees is subject to the proviso that an annual holiday period of at least two weeks in duration is reserved, unless the parties agree otherwise.
As is clear from the manner in which the dispute between the company and the union has played out, the union was concerned that it had not been consulted about the issue of over-production at the Kilburn plant and its implications for both the company and production staff but rather had been presented with a fait accompli, in the form of Mr Golding’s first Internal Announcement dated 29 March 2012, that the eight day roster would be introduced from 30 April onwards.
In so doing, no consideration had been given to the interests of the production staff, including their rights under sub-clauses (a) & (b) of clause 34. In fact, the announcement made no reference to any specific provision of the Agreement whatsoever.
Mr MacRae came promptly to the Kilburn plant, as soon as he learned of the eight day roster initiative. It is his evidence that he indicated to Mr Golding, at this stage, his view that the Agreement did not authorise a shutdown of the kind proposed. It is also his evidence that, in discussions with him, production staff had also indicated that they did not agree to the arrangement.
Mr Golding sent an email to Mr MacRae on 2 April, which is headed Shutdown at Kilburn. It refers to questions asked of him at the meeting which had occurred on 29 March, particularly “the impact of changes taking place at Kilburn on our employees and your union’s members”. The email also contains the following:
“I have passed your request for confirmation of regarding Valspar’s intent to recognise and follow the current 2010 Wattyl EA agreement onto group HR and my Manager.”[55]
[55] See Annexure D to the affidavit of Mr MacRae
In cross-examination before Judge Simpson, Mr Golding accepted that this paragraph related to Mr MacRae raising with him the issue of the status quo.[56] At any event, it is clear to me that both management and union were aware, from early April onwards, that they were in dispute about issues arising under the Agreement.
[56] See transcript at page 46
Clause 47 of the Agreement is triggered when a dispute arises in the workplace. Its raison d’être being the resolution of such disputes in a timely and efficient manner, with openness on both sides. At this early stage, it seems clear to me that there was a dispute between management and staff regarding the imposition of the eight day roster.
The issue was discussed at the Joint Consultative Committee on 4 April; Mr MacRae met with staff again on 12 April; and Mr Di Troia wrote to Valspar on 18 April, indicating the union members at the Kilburn plant had rejected the eight day fortnight but were open to further consultation. From this chronology, it is clear to me that both sides were aware that the eight day roster was controversial and no consensus had been reached about its imminent implementation.
It is clear from what was said by the High Court in Re State Public Services Federation; Ex parte Attorney-General (WA) [57] that all that is necessary to constitute an industrial dispute is “disagreement as to the terms and conditions that should, in fact, apply as between employer and employee.”
[57] Re State Public Services Federation; Ex parte Attorney-General (WA) (1993) 178 CLR 249 at 267
Accordingly it seems to me to be the case that the controversy between plant staff and Valspar management, regarding the institution of the eight day fortnight, is the sort of workplace dispute, to which it was envisaged clause 47 would apply.
In particular, subclause 47(d) indicates that the clause and the dispute resolution processes in envisages, “will apply to any matter in issue between Wattyl; its employees covered by this Agreement and the Union.” The specific use of the word “will” is indicative of the mandatory application of multi-stepped dispute resolution procedure.
Mr Seck places significant emphasis on the use of the word “invoked” in subclause (d). It is his submission that the requirement that the industrial status quo be maintained is subject to the satisfaction of an essential pre-condition, namely the invocation of the dispute resolution procedure. Necessarily, this is a process of some formality.
In support of his submission, Mr Seck relies on a number of dictionary definitions, including the Macquarie: “to call for with earnest desire; to call on; to appeal to, as for confirmation; and to call forth” and the Oxford: “to call on; to appeal to; to summons; and particularly, in respect of draft additions put forward in 1993 “to call for (a law, procedure, etc.) to be applied or observed” which is said to have originated in the United States.
On this basis, Mr Seck contends that, although clearly from March 29 onwards, the parties were in disagreement with one another about the roster changes, what passed between was in the nature of informal discussions, which did not formally enliven or invoke the procedures contained in clause 47.
In this context, Mr Seck submits the contents of Mr Di Troia’s letter of 26 April is highly significant, for in this letter, it is clearly the case that the union does invoke, with some degree of formality, the dispute resolution procedures, a corollary of which is the preservation of the status quo. In Mr Seck’s terminology, it was only at this stage that the dispute resolution procedure was called on or brought into application to the controversy arising between the parties.
At an earlier stage, as a consequence of his letter of 18 April, it is clear that Mr MacRae indicated to Mr Golding that union members had rejected the eight day fortnight. It is also clear that there was some uncertainty, in Mr MacRae’s mind, as to the basis on which the company considered it could implement the change. This uncertainty was resolved by Mr Golding’s letter of 23 April, which made specific reference to the shutdown provisions contained in clause 34(c) of the Agreement.
However, in my view, it would have been naïve for Valspar to consider that it was not in dispute with the union about its proposal to shut down the Kilburn plant on one additional day per fortnight and how this could be legally done pursuant to the Agreement from early April onwards.
I also accept that Mr MacRae, at the very least tacitly, suggested to Mr Golding that the union would rely on any entitlements, which it believed it held under the Agreement, including by necessary implication, the application of formal dispute resolution mechanisms, from the early stages of the dispute.
In my view, there is some illogicality in asserting that the dispute resolution mechanisms needed to be formally invoked in some way in all the circumstances, which prevailed in this case. That suggests that the preceding dispute between the parties was not in some way a formal dispute.
On my estimation, what had occurred being the union and management from 29 March onwards was significant and both sides knew it had some moment and necessarily some degree of formality. Regrettably, however, the parties were at cross purposes as to what clause 34 meant and how the annual leave and shut down procedures contained in it were to be reconciled.
Several meetings of staff had occurred. The issue of the roster had been raised at the Joint Consultative Committee and correspondence had passed been the union and Valspar. As such, it is apparent that the issues arising from Mr Golding’s internal announcement of 29 March obviously had some gravamen, both for the union and the company. In this context, Mr MacRae had sought the assurance of Mr Golding that Valspar would abide by the provisions of the Agreement.
It is also clear that the company considered that it was on firm ground, so far at its interpretation of clause 34(c), was concerned. Mr Golding said as much in his letter to Mr Di Troia of 23 April. Mr Golding also asserted his view that it was not open to union members to either reject or accept the proposal as clause 9 of the Agreement – the consultation provision – did not apply.
In effect, Mr Golding asserted that, although the parties were in disagreement about the issue, the shutdown was both justified by the Agreement and incapable of being the subject of any further review pursuant to it. As such, it was going to be implemented regardless of the opposition of the union to it. In regards to the former, as Buchanan J has concluded, Mr Golding was mistaken.
It is in this context that Mr Di Troia’s letter of 26 April 2012 must be examined. The company had made it clear that regardless of the union’s clear objections, reiterated from early April onwards, the eight day roster would be implemented from 30 April, with staff stood down and required to take annual leave.
Valspar had also made it clear that, despite the union’s contrary view, it was not for reconsidering the issue and further its actions were authorised by the Agreement. Essentially Valspar’s position was that its view of the dispute was incontrovertible and the union was tilting at windmills.
Although Valspar might have thought the union’s opposition to its proposals to be baseless, neither Mr MacRae nor Mr Di Troia considered the views of their members to be quixotic in respect of the eight day roster.
To the contrary, it was their perception that the views of their members had been largely unheeded by the company and at least the spirit of the enterprise agreement, as embodied in clauses 9 and 47 of the Agreement, disregarded by Valspar.
In my view, the import of Mr Di Troia’s letter of 26 April was an attempt to disabuse Valspar of its view that it was on firm ground, with its proposal to proceed with the shutdown, in the face of union opposition and an attempt to bring the focus back to a possible consensual resolution of the matter, which was mutually advantageous to both sides. It was an attempt to remind Valspar that there remained a dispute between the parties concerned, to which clause 47 applied.
Valspar obviously knew that the union disagreed with the course it proposed. It thought it could proceed with impunity. For that reason, it disregarded Mr Di Troia’s letter. It continued to have a significantly different view, to the union, of what was a reasonable course of action for it to take, given the difficult trading conditions it faced.
The tone of Mr Golding’s responding letter of 27 April was brusque. He attacked the bona fides of the union and asserted that its attempt to instigate a dispute were not genuine. He asserted his view that the shutdown would not have any significant effects on production staff at the Kilburn plant. He reiterated his view that the shutdown was authorised by the Agreement and asserted that the actions of the union were an interference with managerial prerogative.
The import of the letter was clear. The shutdown would proceed. In these circumstances, it seems somewhat cynical for the company to be critical that the union did not initiate any action to advance the steps in dispute resolution envisaged by clause 47(d). In no uncertain terms, Valspar had indicated that this would be pointless.
That the parties were in dispute, from early April onwards, appears incontrovertible to me. However, the parties also had a fundamentally different view of that dispute. The company regarding itself as being in the right and, as such, there being no issue, which was properly amenable to dispute resolution.
The union took a different view, which has ultimately been vindicated, both in the Full Federal Court and this court. As matters have transpired, the company took some risks in deciding its view of clause 34 was beyond challenge.
In my assessment, it was the company’s actions, rather than those of the union, which pre-empted the dispute resolution provisions of clause 47. Valspar was of the view that there was, in effect, no issue to be arbitrated, as it was in the right. Accordingly, it was never committed to the status quo provisions.
In my view, the company indicated unequivocally that it was not interested in attempting a consensual resolution of the dispute because it was convinced it was justified in the course to which it was committed. As such the dispute did not proceed to either a discussion between a national union official and a senior manager at Valspar or to a referral to Fair Work Australia.
The parties agree that there was a without prejudice conference held on 2 May, which did not resolve the dispute. This does not change my view of the matter. It does not appear to me to be the case that the union’s actions, from 26 April onwards, can be characterised as being cynical or lacking in bona fides or that the dispute resolution provisions were engaged too late.
In all these circumstances, I consider that the union has established that the company breach clause 47 of the Agreement by failing to maintain the status quo. I am fortified in this view when I consider the objectives and principles of the clause concerned, which envisions the relevant parties approaching the stipulated dispute resolution processes in an open manner.
An essential corollary of this objective is the avoidance of prejudice to the parties, to any such dispute, through the maintenance of the prevailing status quo, until the dispute is resolved, including through a process of industrial determination.
Again clause 47 is not an easy clause to construe. I accept that a dispute had arisen at the Kilburn plant and both parties were well aware of this. At least the first step envisaged by clause 47(d) had taken place. The obligation was on the parties to commit to a process which envisaged an efficient and open resolution of the dispute between them, which did not prejudice the position of the other.
I acknowledge that the timeframe was tight. Valspar obviously felt compelled to move to the eight day roster sooner rather than later. Necessarily, it is likely to have felt prejudiced, if its proposed roster was held up for a protracted period, by the dispute resolution process, as this had the potential to cause it financial detriment, whilst its trading position worsened.
From the union’s perspective, potential prejudice also arose if its members were stood down, pending resolution of the dispute. This tight timeframe also acted as an impediment to the matter proceeding through the four steps envisaged by clause 47(d) expeditiously.
However, notwithstanding these logistical factors, which may be relevant to any penalty to be imposed, in my view, whilst the dispute remained unresolved, there was an obligation on Valspar to maintain the status quo, until the referral of the matter to Fair Work Australia. This is the import of clause 47. Disputes are to be resolved against a background of business as usual.
It was only when it became clear that Valspar was not willing to maintain or revert to status quo that the union commenced proceedings, seeking injunctive relief, in this court. It is the submission of Mr Seck that, through this action, the union effectively abandoned its rights arising under clause 47(d), which remained alive to it, notwithstanding that the status quo had not been maintained.
In particular, Mr Seck submits that it was open to the union to seek an interim decision from the Fair Work Commission pursuant to section 589 of the Act and that it did not do indicate an effective abandonment of the dispute resolution processes arising from clause 47(d). The union’s rights to seek orders, including injunction, in the Fair Work Commission, remained regardless of the maintenance of the status quo or otherwise.
In essence, Mr Seck asserts that the union has exhibited something of a double standard for itself, on the one hand and his client, on the other, as one of the essential underpinnings of clause 47 is the desirability of resolving disputes without recourse to litigation, something which has not occurred in the current matter because of the initiation of these proceedings by the union.
I am not persuaded as to the constructive waiver argument. In my view, it was the actions of the company which precipitated the court proceedings, when it indicated that it was unwilling to negotiate further. As indicated above, it is my view that the tenor of all the company’s communications with the union was that the eight day roster would be imposed on 30 April come what may. True it is that the union could have also commenced proceedings in the Fair Work Commission, but this of itself did not abrogate the company’s obligation to adhere to the status quo.
Conclusions
I have found that the company has breached several of the provisions of the relevant agreement. These breaches have occurred in respect of an agreement, which is difficult to construe, against a background of some urgency, so far as Valspar was concerned. These are matters likely to be relevant to the mitigation of any penalty to be imposed.
From the company’s perspective, it appears to have considered that it had the entitlement to stand down its workforce, from time to time, as it had done in the past, particularly in circumstances when it was facing difficult trading conditions.
Valspar also considered that a shortening of the working week, until at least its trading conditions had ameliorated, was the most equitable way to approach its difficulties. It seems to have thought that this was the least deleterious way, for its employees, to deal with the drop in demand for its products.
On the other hand, United Voice, on behalf of its members, was concerned that the company had not thought through the implications of its directives. As Buchanan J has found, the right of Valspar to stand down its workforce, at the time of its choosing, is subject to the preservation of the entitlement of its staff to have a fourteen day annual holiday.
Holidays are important. The entitlement to take a long recuperative and recreational break is one which has developed, in this country, during the second half of the Twentieth Century. In my view, such a period of annual leave is qualitatively different to a four or five day break from work, not least because a longer period of leave enables longer periods of travel and a greater variety of holiday.
This entitlement is a long standing one, although one which has suffered significant permutations as a consequence of changes to how leave is accrued and accumulated from year to year. The actual implications of the various directions given to individual employees of Valspar, during 2012, are unclear to me.
As a result of the directions, from time to time, all staff members had longer weekends; all had periods of extended annual leave, but possibly not of up to fourteen days in duration. Some used up their leave entitlements and had to take leave without pay. Others had to curtail holiday plans already made, including plans to travel overseas.
Some individuals, at the Kilburn plant, may have relished the prospects of having a regular long weekend and felt insulated from its financial implications by large leave balances. Others may have considered it more convenient to have a longer period of compulsory shut down, with a long period of notice, to enable them to make plans of their individual preference.
From the company’s perspective, it stated that it wished to minimise financial embarrassment to its employees, as a consequence of its directives, which it asserts were foisted upon it by the down turn in its business and which were not intended to harm its staff.
As such, it refutes any suggestion that it has been cavalier in its attitude towards its workforce. No doubt, Valspar will submit that its intention, in implementing the eight roster and the later longer periods of shutdown, was to ensure that its employees continued to receive the same level of remuneration as previously and possible disruption to the lives and employment, including forced redundancy, was minimised.
These are likely to be difficult matters to reconcile in proceedings such as these. They may also be costly and time consuming to resolve. Buchanan J urged the parties to co-operate about these issues. I repeat that exhortation.
Over two years have passed since the directions were made in 2012, requiring the taking of annual leave in daily increments, which potentially lost employees the entitlement to have a two week holiday during that year and possibly subsequent ones. Nothing can be done, in actual terms, about leave so lost in 2012 and afterwards.
However, creative solutions may provide some equitable form of recompense for holidays yet to come and compensation for past holidays which were disrupted. I do not know. It is the case, I think, that in dollar terms, no employee was underpaid or deprived of any actual days of leave, which he or she had accrued, although some were perhaps compelled to take leave without pay.
The complaint is about the form and duration of annual leave, which arose in a context in which Valspar did have some form of entitlement to stand down its workforce. I appreciate that the time of the penalty hearing is fast approaching. Such a hearing will provide an opportunity to Valspar to put material in mitigation and any necessary explanation, which it may wish to put to explain why it felt compelled to take the actions which it took.
It will also provide the union with the opportunity to provide information regarding the circumstances of each individual employee and his/her leave situation. As Buchanan J indicated, the court has an expectation that the parties would at least attempt to co-operate about these matters.
I will make directions in respect of the parties formulating a statement of agreed facts, in respect of the issues of penalty and compensation by 15 May with the applicant’s further affidavit evidence to be filed by 22 May and the respondent’s evidence to be filed by 29 May.
I appreciate this is a tight timeframe. For reasons beyond mine and the parties’ control, the December 2014 hearing could not proceed. Again, for reasons beyond my control, the initial hearing of the matter in this court miscarried and the Full Court of the Federal Court, in its judgement, raised issues which appear to have been novel, so far as the parties were concerned.
If the timeframe is too tight, from the parties’ perspective, I am alive to the fact that the penalty hearing may have to be re-scheduled. The parties may also wish to see if there are any realistic prospects of the issues arising between them being narrowed, particularly in terms of appropriate compensation orders.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding two hundred and seventy (270) paragraphs are a true copy of the reasons for judgment of Judge Brown
Associate:
Date: 4 May 2015
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