Viva Energy Refining Pty Ltd v Australian Workers' Union

[2020] FWC 4781

[2020] FWC 4781

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Viva Energy Refining Pty Ltd
v
Australian Workers’ Union
(C2019/6701)

DEPUTY PRESIDENT COLMAN MELBOURNE, 7 SEPTEMBER 2020

Dispute arising under an enterprise agreement – dispute determined

[1] This decision relates to an application lodged by Viva Energy Refining Pty Ltd (company) under s 739 of the Fair Work Act 2009 (Act) and the dispute resolution procedure in clause 13 of the Viva Energy Refining Enterprise Agreement 2019 – Geelong Operator Employees (Agreement). The Agreement applies to the employment of operators at the company’s oil refinery at Corio near Geelong. The Australian Workers’ Union (AWU) is covered by the Agreement.

[2] The dispute is referred to the Commission by agreement of the parties pursuant to clause 13(g)(i) of the Agreement. It concerns the correct interpretation of the Agreement, and in particular of two provisions, clauses 28 and 32.2. These clauses are attached in their entirety as an appendix to this decision.

[3] Clause 28 of the Agreement obliges the company to maintain spare manning capacity. The first paragraph of the clause states that ‘for the purposes of covering annual leave and long service leave a sparing ratio of 1.17 operators per position will apply.’ The second paragraph states that overtime will be paid if it is ‘directly caused by the sparing ratio being less than 1.17’.

[4] Clause 32.2 establishes a ‘flexible hours allowance’ (FHA) which is described in the clause as a ‘flexibility payment for work performed beyond the standard 35-hour week’. Clause 32.2.1 states that ‘any absence (less than or equal to 8 consecutive shifts), as a result of leave from the policies listed below, will be covered by the FHA, regardless of manning’. The clause then lists jury service, defence training leave, religious leave, study leave, personal leave and parental leave.

[5] The dispute that has arisen between the parties is whether, in defined circumstances, additional hours worked by an operator attract the payment of overtime under the second paragraph of clause 28, or alternatively are covered by the FHA under clause 32. The defined circumstances are where an operator works additional hours because another operator is taking leave for one of the reasons outlined in clause 32.2.1 (a ‘clause 32.2.1 reason’), and this occurs at a time when the sparing ratio at the refinery has fallen below 1.17

[6] Viva Energy has previously paid overtime to operators who cover an absence of another operator due to a clause 32.2.1 reason. However, in November 2018, it ceased to do so. This precipitated the dispute. As part of the agreement to refer the present dispute to the Commission for determination, the company reinstated the payment of overtime to operators in the defined circumstances, pending the determination of the dispute.

[7] The agreed question for determination is the following:

“Where the sparing ratio falls below 1.17 (plus 1 spare in each of the Area South, Distillation and Movement areas) at the refinery, is Viva Energy required by clause 28 to pay an operator overtime if they are performing additional hours due to another operator’s absence for any of the reasons listed in clause 32.2.1?”

[8] The company says that the answer to the question is ‘no’. The union says that it is ‘yes’.

Submissions of the company

[9] The company submitted that the second paragraph of clause 28 requires overtime to be paid only if the overtime is ‘directly caused’ by the sparing ratio being less than 1.17, and that in the defined circumstances, this is not the case. It said that the purpose of the sparing ratio is to have ‘spares’ to cover annual and long service leave. Where operator numbers are below the sparing ratio, and an operator is required to cover an employee taking annual leave or long service leave because there is no spare, the company must pay overtime. The company said that in these circumstances, which involve planned absences, it is clear that the requirement for an operator to work overtime is directly caused by the sparing ratio falling below the required level, and the absence of an available spare. That is, had the sparing ratio been met, there would have been no need for another operator to work overtime, because a spare would have been available to cover the absence. Mr Glenn Lyons, the company’s refinery operations manager, described this in his evidence as a ‘structural gap’ in the shift. The company also pays overtime where an operator covers an employee who is absent for training at a time when the sparing ratio is below 1.17, because it is the company’s decision to require the training.

[10] The company contended that, where an operator needs to work additional hours to replace someone who has called in sick, or who is absent for any other clause 32.2.1 reason, another operator would need to be called in to cover the absence regardless of the sparing ratio. It said that, when sparing ratio requirements are met, operators who fill these shifts do so pursuant to the FHA, and that this shows that the sparing ratio is irrelevant to backfilling a clause 32.2.1 absence. If FHA is utilised to cover an absence for a clause 32.2.1 reason at a time when there are spares, then it must be the case that FHA is also used to cover such absences when there are no spares.

[11] The company submitted that, in the defined circumstances, there is no causative connection between the need for an operator to work overtime and the absence of an available spare. The reason that overtime is required is because an operator has required the relevant type of leave (for example because of illness) and needed to be replaced. The company said that this has nothing to do with the sparing ratio. The need to work is not directly or indirectly caused by the sparing ratio being less than 1.17.

[12] The company contended that the plain words of clause 32.2.1 also support its construction. The provision states that ‘any absence’ that is less than or equal to 8 consecutive shifts, and which is the result of leave from the policies listed in clause 32.2.1, will be covered by the FHA, ‘regardless of manning’. The company said that this is a clear statement that FHA covers absences in the defined circumstances, as the sparing ratio is an aspect of ‘manning’.

[13] The company contended that its interpretation is consistent with the broader context of an agreement that provides for an annualised salary for all work performed under the Agreement (clause 31). The annualised salary includes a number of components including shift loading (clause 32.1), various allowances, and also the FHA (clause 32.2), which is described in clause 32.2 as a ‘flexibility payment for work performed beyond the standard 35-hour week’ and is to be calculated on the basis of 2.75 hours’ pay per week at double time. The company said that the principle behind the FHA is that every employee is paid the allowance and is therefore required to work flexible hours.

[14] The company noted that there are protections built into the Agreement to ensure that the FHA is not utilised disproportionately to the number of additional hours worked. The fourth paragraph of clause 6 of the Agreement states that, if it appears likely that over the course of a year, operators at the refinery as a whole will work more hours than those contemplated in the FHA, the company will ensure that the ‘actual hours worked are no more than those paid’. Further, clause 32.2.1 recognises that FHA is based on historical personal leave data. The Agreement recognises that if there is a significant increase in site-wide personal leave levels above the historical level, the AWU reserves the right to request the company to review the application of the FHA (see the final paragraph in clause 32.2.1).

Submissions of the AWU

[15] The AWU’s position is that the company is required by clause 28 to pay overtime if an operator is performing additional hours due to another operator’s absence for any reason, including those listed in clause 32.2.1, at a time when the sparing ratio is below 1.17.

[16] First, the AWU says that in such a situation, the direct cause of the overtime will be the fact that the sparing ratio is less than 1.17, as contemplated by the second paragraph in clause 28. The union says that it is quite simply the company’s failure to have spares in place, and latterly its practice of assigning spares to ‘day projects’, that is the cause of the need to have others work additional shifts. Had the manning levels been maintained, the overtime would not have been required, because a spare could have covered the shift.

[17] Secondly, the union contends that clause 32.2.1, which lists absences covered by FHA, must be interpreted in the context of clause 32.2 as a whole, and that clause 32.2.2(ii) states that the ‘FHA will not cover any of these absences as listed below’; the fourth listed item is ‘manning shortages directly caused as a result of the sparing ratio being below 1.17 across the Refinery’.

[18] Thirdly, the union says that the company’s interpretation creates a false distinctionby accepting that overtime is directly caused by the sparing ratio not being met in cases where an operator is required to cover annual or long service leave or training absences, but not where an operator works additional hours to cover a clause 32.2.1 absence. The union says that there is no difference between these situations and that in both cases, a spare could have covered the absence, had one been available as a result of the sparing ratio being met. It is still the case that the need to work the additional hours is ‘directly caused’by the sparing ratio not being met, and therefore overtime rates must be paid. The union said that in contrast, where the sparing ratio is being met and operators call in sick or take other leave covered by FHA in clause 32.2.1, there is no question of manning shortages having caused overtime, and extra hours are covered by FHA. In this situation, the overtime requirement in clause 28 has not been triggered, nor the exception to FHA in clause 32.2.2(ii) concerning manning shortages directly caused as a result of the refinery operating below the sparing ratio.

[19] The union notes that, although the fourth paragraph in clause 28 states that spares ‘were put in place to cover annual and long service leave’, it goes on to say that spares ‘can be used to cover other absences such as sick leave, if they are available…’ It says therefore that the sparing ratio is also concerned with covering absences for personal leave, and that this is part of the ratio’s purpose.

[20] The AWU submits that of particular importance in ascertaining the true meaning and correct application of the Agreement in this case is the industrial context, history, origins and purposes of the clauses in question, including the fact that the clauses have existed for many years in predecessor agreements, prior to the company’s acquisition of the refinery from Shell in 2014. The union relies on what it says are the objective background facts known to the parties during the negotiations for those prior agreements and for the current Agreement, which it says bear out its interpretation. It relies in this regard on the evidence of Mr Sam Wood, who has been an official of the Victorian branch of the union since 1990 and the union’s organiser at the refinery for many years. It also relies on the evidence of Mr Stephen Jones, operator and AWU delegate, and Mr Bruce Doherty, who has been employed at the refinery since 1990 and is also a union delegate. The company objected to the evidence of these witnesses concerning the historical understandings of, and practices associated with, the relevant provisions of the Agreement, primarily on the basis that the evidence constituted subjective understandings or opinions of the witnesses and was therefore not relevant because it did not concern any common understanding of the company and the union about the proper interpretation of the relevant provisions. I will address the relevance and significance of aspects of this evidence in the course of summarising prominent features of it below.

[21] Mr Wood said that before 1999, operator numbers at the refinery were set at the discretion of the employer, Shell, and all additional hours worked by operators to cover absences were paid at overtime rates. The Shell Geelong Refinery Enterprise Agreement 1999 – Operation Employees (1999 Agreement) introduced annualised salaries, together with the FHA and a sparing ratio. So much is not in dispute. Mr Wood said that Shell’s reason for wanting the FHA was because it believed operators were taking excessive personal leave in order to generate overtime opportunities, and that the FHA would stop this practice, because overtime would no longer be paid to operators covering personal leave absence. Mr Doherty gave evidence that this was also his understanding of the purpose of the FHA. I accept that this is Mr Wood’s opinion, and Mr Doherty’s understanding, about Shell’s motivations for introducing the FHA, but this evidence does not establish that this was in fact Shell’s reason, or that it was the mutual intention of the AWU and Shell that the FHA serve this purpose.

[22] Mr Wood said that, in response to Shell’s proposal to introduce the FHA into the 1999 Agreement, the union sought the inclusion of the sparing ratio, because it was concerned that Shell would reduce operator numbers and then require operators to work excessive additional hours under the FHA. He said that the union believed that the sparing ratio created a disincentive for Shell to do this, because if the ratio was not maintained, the company would need to pay overtime to operators for extra shifts. I accept Mr Wood’s evidence about the union’s stance on the sparing ratio in 1999 and the reasons that underpinned it. Mr Wood also said that the union and Shell agreed that overtime would be payable if operators had to work any extra shift at a time when the ratio was not met. However Mr Wood did not provide any detail of this agreed position. He did not say who from Shell conveyed agreement to this interpretation, or when, or in what words. No document is referred to that bears out this agreement. In my opinion, this is Mr Wood’s genuine opinion about what was agreed between the union and Shell. But a bare statement from one party to an agreement that a particular interpretation was jointly held by both parties is not sufficient to establish that fact.

[23] Mr Wood’s evidence was that in the lead up to the vote on the 1999 Agreement, Shell confirmed to operators in an explanatory document that additional hours worked when the refinery was below the sparing level would be paid outside the FHA. The document was appended to Mr Wood’s witness statement. Mr Wood noted that, among other things, the document stated that if manning levels drop below the ratio, ‘those additional hours caused by being under the trigger will be paid outside of the FHA’. Mr Wood also noted that the provisions in the 1999 Agreement that gave effect to these arrangements differed only slightly from clauses 28 and 32.2 in the current Agreement. However, the explanatory document is compatible with the interpretations of both parties to the dispute. It states that additional hours caused by the company being under the trigger will be outside the FHA. It does not address the question that is central to the present dispute, namely when an absence should be considered to be caused by a deficient ratio.

[24] Mr Wood said that, in its negotiations with Shell for a new enterprise agreement in 2004, the union rejected the company’s claim to remove the requirement to pay overtime for extra hours worked by operators when the refinery was operating below the ratio. The relevant provisions from the 1999 Agreement were retained. The union suggested that Shell’s apparent abandonment of its claim confirms the interpretation for which it contends, but this is not the case. First, it is not established that the 1999 Agreement carried the meaning contended for by the union. Secondly, as discussed below in relation to Viva’s decision not to press a particular bargaining claim, it is difficult to draw any safe inference from the fact alone that a bargaining claim is raised or dropped.

[25] Mr Doherty gave evidence that he was involved in negotiations for the 2008, 2011, 2014, and 2018 enterprise agreements. He said that after each of these agreements was concluded, the FHA and sparing ratio clauses continued to operate to prevent the use of FHA when the company had caused the overtime by running below the minimum number of operators, and to require overtime for all extra work. This is Doherty’s own opinion about the correct interpretation of the clauses in question. However it says nothing about the understanding of Shell or Viva as to the meaning of the clauses.

[26] Mr Wood’s evidence was that following the making of the 1999 Agreement and until late 2018, there was no change in the practice at the refinery, that is, overtime would be paid for any extra work performed when the refinery was not meeting the sparing ratio. However, Mr Wood also gave evidence that, while Viva had dropped below the sparing ratio on various occasions since taking over the refinery in 2014, he could not remember a time when Shell had ever done so. Mr Doherty and Mr Jones gave evidence to the same effect. If Shell never dropped below the ratio, then clearly there was no ‘practice’ whatsoever of paying overtime for all additional shifts during such periods. From 1999 to 2014, the question that is at issue in the present dispute simply never arose.

[27] Mr Jones gave evidence about certain occasions when the company had paid overtime to cover ‘FHA absences’ at times when the number of operators was below the sparing ratio. He said that one such occasion was in early 2016. In an email to supervisors dated 23 March 2016, which was copied to operators and the union, Mr Lyons said that there was a current disagreement about whether ‘FHA should be worked as FHA or alternatively overtime while we are at current low operator numbers’. He said that he believed that the Agreement did not require overtime to be paid for ‘genuine FHA, irrespective of operators numbers’. However, he said that, ‘given it is a relatively short term issue’, he authorised supervisors to use their discretion to pay overtime to ‘cover FHA’ until the end of May or until the matter was resolved with the union. Mr Jones said that on 18 May 2017, Mr Lyons sent an email to operators stating that effective immediately ‘FHA returns to normal interpretation in Operations’, as operator manning levels again exceeded the minimum levels.

[28] The AWU relied on this evidence in support of its contention that the company had acted in accordance with the union’s interpretation, which reflected a common understanding or an accepted custom or practice. But it is clear from Mr Lyons’ message that the company disputed the union’s interpretation. It agreed to pay overtime as the union expected, but it did not accept the correctness of the union’s interpretation.

[29] Mr Jones said that from 2 January 2018 the refinery was again operating below the sparing ratio. The union brought its concern about this to the attention of the company. On 18 January 2018 Mr Lyons sent an email to Mr Jones stating that, although the company’s previous ‘custom’ had been to ‘pay short term absence of rostered personnel as overtime instead of treating it as FHA’, this was ‘not in fact correct’. Mr Jones disagreed and conveyed to Mr Lyons the union’s interpretation. On 22 January 2018, Mr Lyons replied, stating that the absences then in question, which were due to personal leave, were not directly caused by manning levels. On 19 February 2018, Ms Linda Craven, the company’s human resources director, sent a message to Mr Jones and other delegates and operators stating that it looked like the company had indeed dropped below the sparing ratio (this question had also been in dispute), and that ‘if this is the case we will pay for January’, and the dispute would be resolved. The following day, the company confirmed that it would pay overtime for the relevant shifts in the month of January. Mr Jones said that the resolution of this dispute was consistent with his understanding of the operation of the FHA and sparing ratio, namely that when the company is under the ratio, any additional shifts worked to cover any absences are paid at overtime rates.

[30] Contrary to the union’s contention, I do not consider this episode to evidence an agreement or the adoption or acknowledgement of a common position about the proper interpretation of the Agreement. Nor do I consider that the position of the company expressed by Ms Craven was different to the position advanced by Mr Lyons. The company had a different view from the union about the meaning of the relevant provisions. It did not abandon its interpretation. It simply acceded to the union’s demand that it pay overtime in the manner consistent with the union’s interpretation. Ms Craven said that ‘we will pay for January’. She did not say that the company’s interpretation was wrong, or otherwise suggest that there was any agreed understanding of the meaning of the provisions.

[31] Mr Doherty gave evidence that on 18 April 2018, during negotiations for a new enterprise agreement, the company submitted a bargaining claim that sought to ‘remove the suspension of FHA once the sparing ratio falls below 1.17’. The AWU rejected the claim and clauses 28 and 32.2 remained in the new agreement, the Viva Energy Refining Enterprise Agreement 2018 – Geelong Operator Employees (2018 Agreement). The union submitted that, if the company had believed its interpretation of clauses 28 and 32.2 to be correct, there would have been no need for it to make such a claim. It also said that the company did not make a similar claim in negotiations for the 2019 Agreement and suggested that this reflected an acceptance by the company of the union’s interpretation carried over from the 2018 Agreement. I do not accept this contention. It is based on an inference that is no more safely drawn from the circumstances than other possible inferences, such as that the company abandoned the claim because it concluded that it did not need to change the provision because its interpretation was correct, or that it made the claim simply to remove the interpretative disagreement that had previously arisen about the clause. In this regard, the union’s interpretation was effectively that FHA is ‘suspended’ when the ratio is below 1.17, and it may be for this reason that the one-line claim in the company’s log was framed accordingly. However, the evidence shows that the company had a different interpretation of the provision.

[32] Mr Doherty’s evidence was that from early 2018, the company began seconding existing operators into vacant positions, for example ‘day project operators’, rather than filling positions with new permanent employees. He said that in November 2018, the company again fell below the sparing ratio, which caused a need for overtime hours to be worked by operators. On 18 December 2018, Mr Lyons advised delegates and the union that the data indicated that the company was not in fact below the minimum number of operators to meet the ratio, and that in any event clause 28 of the Agreement only required the payment of overtime if the absence was the direct result of a sparing ratio below 1.17, which did not cover FHA absences. The AWU disagreed and notified a dispute under the 2018 Agreement. That dispute was the precursor to the present dispute under the Agreement.

[33] The union submitted that from 1999 until November 2018, the sparing ratio and FHA provisions were consistently applied in a manner that reflects the union’s interpretation of the Agreement and that only in late 2018 did the company seek to depart from this long standing practice. But that submission is insupportable, because on the union’s own evidence, the sparing ratio did not drop below the required level from 1999 to 2014. And on several occasions Viva has resisted making the payments based on its different interpretation of the provisions.

[34] The union nevertheless submitted that the longstanding presence of the relevant clauses in these enterprise agreements was accompanied by a common understanding of their application which reflected the union’s interpretation. It relied on the decision of the Federal Court in Shop Distributive and Allied Employees’ Association v Woolworths Limited (SDA) 1 in which Gray J stated:

“There is authority that, if a provision has appeared in a series of agreements between the same parties, and if they can be shown to have conducted themselves according to a common understanding of the meaning of that provision, then it can be taken that they have agreed that the term should continue to have the commonly understood meaning in the current agreement…” 2

[35] The union said that this common understanding was consistent with the ordinary meaning of clauses 28 and 32.2, understood in the light of their industrial context and purpose. It said that the words and concepts have a specific history and purpose and were introduced to address particular concerns expressed and understood by Shell and the AWU. At all times until November 2018, Viva ultimately paid employees overtime rates for all extra worked when the sparing ratio was below 1.17, regardless of whether those hours were worked because an employee took FHA-related leave.

Consideration

[36] The principles applicable to the interpretation of enterprise agreements are well settled and were summarised by the Full Court of the Federal Court in WorkPac Pty Ltd v Skene. 3 The starting point is the ordinary meaning of the words, read as a whole and in context.4 The language of the agreement is to be understood in the light of its industrial context and purpose, not in a vacuum or divorced from industrial realities. A purposive approach to interpretation is appropriate, not a narrow or pedantic approach.

[37] I will begin at the starting point. The first paragraph of clause 28 states that ‘for the purposes of covering annual leave and long service leave a sparing ratio of 1:17 operators per position will apply.’ The second paragraph provides that overtime will be paid if it is ‘directly caused by the sparing ratio being less than 1:17.’

[38] In order to understand whether overtime has been directly caused by a deficient sparing ratio, one must first understand what the sparing ratio actually is. The first paragraph makes clear that there will be 1.17 operators for each actual position. But it also states that the ratio has a purpose. It is ‘for the purposes of covering annual leave and long service leave’ that the sparing ratio will apply. The ratio is not established for general purposes. It is not established to cover all absences or forms of leave. The reference to ‘covering annual and long service leave’ in the first paragraph of clause 28 is not an example, or part of an inclusive definition.

[39] The first and second paragraphs of clause 28 must be read in the context of the clause and Agreement as a whole. The focus on spares covering annual and long service leave absences is found again in the third paragraph of clause 28, which states that the ‘spare ratio of 1.17 does not allow for coverage for the purpose of training’, but that spares ‘can be used for training or coverage for training only if they have not been allocated for Annual or Long Service Leave coverage consistent with clause 53.1’.

[40] The union contends that the purpose of the ratio extends beyond covering annual and long service leave. It says that the purpose is informed by the fourth paragraph of clause 28, which states that spares ‘were put in place to cover absences due to annual and long service leave’, but that they ‘can be used to cover other absences such as sick leave, if they are available, and they are not required for annual and long service leave, project work, training.’ In my opinion this paragraph in fact emphasises that the purpose of the ratio is to cover annual and long service leave. It confirms that it was to cover such absences that spares have been put in place. The fact that the clause permits spares to be put to other uses does not detract from their identified purpose.

[41] The conclusion that the sparing ratio is directed at covering absences for annual and long service leave is supported by the quantum of the ratio itself, or, as Mr Lyons put it, ‘the maths’. Mr Lyons said that on a five shift roster, there are 146 shifts to be filled each year, and that each employee is entitled to 200 hours of annual leave under the Agreement and accrues 1.3 weeks of long service leave each year. This annual and long service leave equates to 21 shifts. When one deducts this leave from the 146 shifts per year, there remain 125 shifts. If one multiplies 125 shifts by 1.17, the result is 146.25 shifts. Mr Lyons said that approximately 17% of operators are absent on annual or long service leave at any one time. He said that spares are almost always used to cover such leave, and that there is rarely a ‘spare spare’. The spare capacity covers what Mr Lyons described as the structural gap. In my view, the ‘maths’ is a contextual consideration that supports the company’s interpretation. The quantum of the ratio is no accident. It reflects the annual and long service leave that can be taken by employees each year.

[42] In my opinion, it is also logical, and industrially sensible, that a spare crewing capacity ratio would take into account predictable absences, rather than unpredictable ones. Mr Lyons’ evidence was that the leave calendar is planned each year. The company knows what absences are sought to be taken. Mr Doherty said that the leave calendar is not always filled. And employees might not take their leave as planned. But in planning for absences, one cannot anticipate every possible contingency. One would reasonably anticipate that the framework would cater for the prospect of all leave being taken. The sparing ratio requires the company to maintain numbers to cover predictable leave. If it does not maintain the ratio, and then deploys an operator to cover an absence for annual or long service leave, this is, so to speak, the company’s ‘fault’. The absence of spares, and the need for operators to cover the absences, was foreseeable. In such a case, the ‘FHA’ does not cover this work. Overtime is payable because the ratio would have ensured that there were spares available to cover annual and long service leave absences. But the ratio was not met, there were no spares, and the absences needed to be covered by another operator instead. That overtime was ‘directly caused by the ratio being less than 1.7.’

[43] The union submitted, correctly in my view, that causation in a legal setting is purposive and accordingly contextual. Given that the clear purpose of the sparing ratio is to cover annual and long service leave absences, I find it difficult to see how overtime could be ‘directly caused’ by the sparing ratio being less than 1.17 when the absence is not because of annual or long service leave. In my view, it does not make sense to say that the state of the sparing ratio is the direct cause of something which is not related to the ratio’s purpose. It is not the purpose of the sparing ratio to create a pool of available operators to cover absences at large, but instead to create a reserve of operators to cover annual and long service leave. The union contends that, if the sparing ratio were met, there would be additional operators who could be deployed to cover an absence for a clause 32.2.1 reason, such as sick leave. A spare operator might, depending on the circumstances, have been deployed to cover such an absence, and clause 28 contemplates this possibility, provided of course that there is no annual or long service leave absence requiring coverage by a spare. There may in this sense be a connection between the deficient ratio and the overtime, but the former is not a ‘direct cause’ of the latter. Overtime might have been required even if there had been spares available, because the spare might have been otherwise deployed. By contrast, if the ratio is not met, and an employee takes annual or long service leave with no spare available to cover the shift, another operator must work overtime, and this is directly caused by the absence of a spare. If the ratio had been met, there would have been a spare to cover the shift.

[44] In my view the company’s interpretation of clause 28 is consistent with clause 32.2, the first paragraph of which establishes the FHA ‘as a flexibility payment for work performed beyond the 35-hour week’. Clause 32.2.1 states that ‘any absence (less than or equal to 8 consecutive shifts) as a result of leave from the policies listed below, will be covered by the FHA, regardless of manning’, and then lists six policies, including ‘personal (sick/family/carer’s/compassionate) leave’. The provision is clear. If there is an absence as a result of sick leave, for example, it will be covered by FHA, regardless of manning. The sparing ratio is obviously a manifestation of manning. The union contends that this must be read down, so that it is understood to mean that relevant absences are covered by FHA, regardless of manning above the ratio. But the clause does not say this and I do not see any textual or contextual basis to read the clause in this way.

[45] The union points to clause 32.2.2(ii), which states that FHA ‘will not cover any of these absences as listed below’, including shutdown, fire training, company training events, and ‘manning shortages directly caused as a result of the sparing ratio being below 1.17 across the refinery’. It says that a failure to meet the ratio is treated by the Agreement as the cause of a manning shortfall that engages clause 32.2.2(ii), and that an absence for sick leave at a time when employee numbers are below the ratio is such a manning shortage. However, clause 32.2.2 does not refer to any manning shortage. It is concerned with shortages ‘directly caused as a result’ of the sparing ratio being below 1.17. This then gives rise to essentially the same argument as the one discussed above about the meaning of ‘directly caused’ in clause 28.

[46] In my view, the fourth bullet point in clause 32.2.2(ii) simply states the corollary of clause 28. Clause 28 states that overtime is paid if directly caused by the ratio being below 1.17. Where overtime is paid, it is not covered by FHA. Clause 32.2.2(ii) lists the various situations where FHA will not cover an absence. One of these is where overtime (the manning shortage) is directly caused by the ratio being below 1.17. The fourth bullet point in clause 32.2.2(ii) restates the effect of clause 28, presumably so that the list of circumstances where FHA does not cover an absence is complete. In this context, the repetition of what is already clear from clause 28 is simply for ease of reference. I would note that this is not the only respect in which clause 32.2.2 repeats elements of clause 28 – compare the second last paragraph of clause 32.2.2 with the fourth paragraph of clause 28.

[47] I consider that the company’s interpretation makes sense in the context of the Agreement as a whole. There is an annualised salary framework, of which the FHA is part. It identifies which work is covered by the annualised arrangements and which work is not. There are provisions that protect against employees being required to work beyond the value of their annualised pay. Clause 6 is one such provision. The sparing ratio in clause 28 is another. The Agreement appears to acknowledge that recruiting for positions at an oil refinery is not necessarily a simple task, and that there may be fluctuations in employee numbers from time to time. Clause 28(a) recognises this by requiring the company to recruit operators when numbers fall below certain levels in particular areas, rather than categorically prescribing particular manning levels at all times. The sparing ratio establishes a reserve of operators. The quantum of the reserve is not a random number or an approximation or a guess. It is a number which reflects the additional manning required to cover annual and long service leave absences. It reflects the rostering ‘maths’ explained by Mr Lyons. It is logical that the ratio would establish a margin that reflects predictable needs, such as annual and long service leave which are planned in advance and put in the calendar each year. By contrast, a ratio that sought to establish a staffing reserve for general purposes, to cover any and all absences, would be a speculative exercise. And presumably, if the purpose had been to cover sick leave also, a higher ratio would have been needed. Clause 28 does not establish a sparing ratio for general purposes. It establishes a sparing ratio ‘for the purposes of covering annual and long service leave’.

[48] Even leaving the purpose of the sparing ratio and its relevance to the analysis of causation to one side, I consider that the union’s interpretation does not explain how clause 32.2.1 absences can be said to be ‘directly’ caused by a deficient sparing ratio. Clearly, clause 28 contemplates that there are some indirect causes of overtime that will not attract overtime payments. The union was not able to say what, on its interpretation, such indirect causes would be. On one view of the union’s interpretation, it ignores the concept of causation altogether and reads clause 28 as simply requiring overtime to be paid to cover absence at any time when the sparing ratio is less than 1.17, regardless of the cause. I appreciate that the union considers that the cause is the deficient ratio. But if that were the case, there would be no need for the clause to distinguish between direct and indirect causes, or even refer to causation at all. The trigger for overtime payments under clause 28 would not be linked to the cause of the overtime, but to a very easily verifiable temporal fact – that overtime was required at a time when the ratio was below 1.17.

[49] In its final submissions, the union contended that the Commission should not apply a ‘lawyer’s mind’ to the analysis but consider that those who framed the provisions likely had a practical and industrial perspective. However, there is no reason to think that the approach of the framers would not also be logical. The search is for objectively manifested meaning, and the apparent logic, or lack of logic, in a particular construction is relevant to whether a particular meaning is born out.

[50] I have some sympathy with the position of the AWU and the operators. The union considered that the agreements it struck with Shell in 1999 and in subsequent years had a particular meaning, and that the enterprise agreements it later made with Viva in similar terms carried over from those agreements both the text and, to use the words of Drummond J in Short v Hercus, 5 the ‘soil in which it once grew’. But the evidence in the present case is largely of soil tilled only by one party. It relates to the union’s genuine, long-standing but fundamentally subjective belief as to the proper meaning of the provisions. I note that in Short v Hercus, Drummond J went on to say that ‘very frequently, perhaps most often, the immediate context is the clearest guide’ to meaning. It was the immediate context that was determinative in that case. So it is in the present matter.

[51] After taking over the refinery in 2014, and until late 2018, the company paid overtime in accordance with the union’s interpretation of the clauses. The provisions in question have remained unchanged in a series of enterprise agreements binding on Viva and the union. The AWU contends, in reliance on the decision of Gray J in SDA, 6 that where a provision has appeared in successive enterprise agreements binding on the same parties, and the parties have acted in accordance with a common understanding of that provision, then a conclusion may be available that the parties have agreed that the provision shall continue to have the commonly understood meaning. However, there must be clear evidence that the parties in fact possessed and acted upon a common understanding, and not for some other reason.

[52] In SDA, Gray J concluded that in the case before him, there was no evidence to indicate that there had been any common understanding between the applicant union and the respondent employer about the meaning of the relevant clauses in preceding agreements. Instead, all that had been established in that case was that the respondent had had a practice of paying employees entitled to long service leave at a rate of pay that included applicable penalties and shift loadings. His Honour said that there was no evidence as to why it had done his, and that the reason might have been ‘inadvertence on the part of those responsible for making the payments’, or an ‘act of generosity on the part of the respondent, from which it has now resiled.’ There was ‘no evidence of a settled interpretation, of which the parties had a common understanding’. 7

[53] I have reached a similar conclusion in this case. I do not consider that the evidence establishes any commonly understood meaning of the relevant provisions, either at the time the parties made their first enterprise agreement, the 2018 Agreement, or the Agreement. There is no evidence that the company considered itself to be legally obligated to pay overtime in the defined circumstances. There is evidence only of a practice, not of a common interpretation, let alone an interpretation reflecting mutual intention. In fact, the evidence shows that the company had a different interpretation, one raised on several occasions by Mr Lyons. It was not an interpretation upon which the company insisted, until it changed its practice in late 2018. But the company’s acquiescence and decision to pay in accordance with the union’s interpretation does not bind it legally to that interpretation.

[54] At least from the time when the company raised its own contrary interpretation with the union in 2016, its payment of overtime in the defined circumstances was not inadvertent, because there was debate between the company and the union about the correct interpretation. Although it is not necessary for me to determine the company’s motivations, it seems to me that the company made the payments to avoid disputation. It was, as the company contended, a pragmatic decision to make the payments, not a statement about legal obligations or a recognition of any common understanding about the proper interpretation of the Agreement. I would note that in my experience, it is not uncommon for divergent interpretations about a provision to span several generations of an enterprise agreement. There is sometimes a deliberate decision not to resolve such matters in bargaining and to leave the issue to be resolved at a later time by the Commission under the disputes procedure, or by a court.

[55] The Full Bench in Berri 8 noted that in the industrial context it has been accepted that, in some circumstances, subsequent conduct may be relevant to the interpretation of an industrial instrument. However such post-agreement conduct must show that there has been a meeting of minds, a consensus. That has not been established in this case.

[56] The union submitted that the agreement of the company in February 2018 to pay overtime in accordance with the union’s position served as a communication to employees that the union’s interpretation was correct and that work performed to cover any absence at a time when the sparing ratio was not met would continue to be paid for at overtime rates. The union said that there is no evidence that the company’s interpretation of the clauses was explained to employees. As noted in Berri, evidence of what employees were told during the course of the negotiations or pursuant to s 180(5) of the Act may be relevant to the interpretation of an enterprise agreement. 9 But there is no evidence of what if anything was said to employees about the clauses presently in dispute. The details of the manner in which the company complied with the pre-approval requirement in s 180(5) are not in evidence. I do not accept that the company’s past practice of payment forms part of the explanation. If it is the union’s contention that employees are presumed to endorse an agreement on the basis that it will continue to be applied as it has been applied in the past, I would not accept it. I find no basis in principle or in the Act for such a proposition. It is the enterprise agreement that determines the rights and obligations of the parties. If a practice or custom is sought to be reflected or preserved in an enterprise agreement, it can be included in the written terms. Many agreements contain provisions of this kind. I am at pains to point out to parties in bargaining-related and other disputes that it is prudent for historical practices to be written into agreements if they are to be binding, particularly if those practices have been contentious.

[57] The union submitted that the company’s interpretation would have absurd outcomes, because it would allow the company to absorb the benefit of additional work being performed by employees without paying compensation. It referred to Mr Doherty’s evidence about the importance of the sparing ratio to the maintenance of the working hours contained in the Agreement. But this ignores the effect of clause 6, the other safeguard mentioned earlier concerning the performance of additional work that is covered by the annualised salary arrangements. The union said that it was absurd to give an instrument a meaning that was inconsistent with the past practice of the employer. However, Gray J in SDA saw nothing absurd in this and neither do I, because as his Honour explained, there may be a variety of explanations for the employer’s conduct.

[58] I appreciate that the union and operators are aggrieved at the company’s change of practice. The company has acted in accordance with the union’s interpretation of clause 28 and 32, but the evidence does not establish that it considered itself bound to do so, and the evidence of Mr Lyons, and the union witnesses, is that the company disputed this interpretation on several occasions. Viva acquired the site from Shell and put in place enterprise agreements with provisions that were relevantly the same or substantially similar to those that had long applied at the site. But it has not been established that there was a common understanding of the relevant provisions between the union and Shell, or between the union and Viva.

[59] The AWU referred to the well-known passage in Kucks v CSR Limited, 10 in which Madgwick J said that when interpreting an award, meanings which avoid injustice may reasonably be strained for. However, in the next paragraph, his Honour went on to say that the task remained one of interpreting a document produced by others, and that the court was ‘not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award.’ 

[60] My role in these proceedings is not to determine what is just or fair or appropriate. My role is to answer the question submitted for determination by the parties. That requires me to interpret and give effect to the terms of Agreement. I consider that the meaning of the words of the Agreement is clear and unambiguous. I have had regard to the surrounding circumstances and the industrial history at the site and taken this into account in interpreting the Agreement. For the reasons given above, I consider that the answer to the question posed for determination is ‘no’.

[61] The union asked the Commission to answer the question in respect of disputes both under the 2018 Agreement and the Agreement. It said that the Commission has jurisdiction to determine the question in respect of the 2018 Agreement because there is a dispute about the application of that agreement which has effectively been preserved by the disputes procedure in clause 13(g) of the Agreement. The company contends that the Commission should apply its determination to the Agreement only, because it was under clause 13 of the Agreement that the company lodged its application pursuant to s 739 of the Act.

[62] My authority to determine the present dispute derives from clause 13 of the Agreement. The 2018 Agreement is no longer a source of authority for the Commission to deal with a dispute. Given the scope of the Agreement and the 2018 Agreement is the same, the 2018 Agreement was wholly superseded by the Agreement and ceased to operate when the Agreement came into operation (see s 54(2) of the Act). This meant that under s 52(1), the 2018 Agreement could no longer apply to anyone. If an agreement does not apply to anyone, it cannot impose any obligation or confer any entitlement (s 51). Even if clause 13(g) of the Agreement allows the Commission to deal with a dispute about the 2018 Agreement, the dispute described in the company’s application dated 17 February 2020 is nonetheless one that relates to how clause 28 of the Agreement should be applied in the future. I consider that this is the dispute presently before me. My determination of that dispute is made under, and relates to the correct interpretation of, the Agreement.

Conclusion

[63] The answer to the question posed for determination and referred to in [7] above is ‘no’.

DEPUTY PRESIDENT

Appearances:

B. Avallone of counsel for Viva Energy Refining Pty Ltd
M. Harding S.C. for the AWU

Hearing details:

2020
Melbourne
24 and 25 August

Printed by authority of the Commonwealth Government Printer

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Appendix

 1 [2006] FCA 616; (2006) 151 FCR 513

 2   At 520

 3 [2018] FCAFC 131, at [197]

 4   Note: context is to be considered as part of the first stage: SZAL v Minister for Immigration and Border Protection [2017] 262 CLR 362 at [14] per Kiefel CJ, Nettle and Gordon JJ

 5 (1993) 40 FCR 511 at 523

 6   Shop Distributive and Allied Employees’ Association v Woolworths Ltd (2006) 151 FCR 513 at [31], noted with approval in Australian Nursing and Midwifery Federation v Eastern Health [2013] FCAFC 137 (ANMF), [7] to [10].

 7   At [32]

 8   AMWU v Berri Pty Limited[2017] FWCFB 3005 at [114]

 9   Berri, above, at [114], principle 13

 10 (1996) 66 IR 182 at 184