Wilmaridge Pty Ltd as Trustee For The O’Neill Family Trust
[2010] FWA 8314
•28 OCTOBER 2010
Note: An appeal pursuant to s.604 (C2010/5571) was lodged against this decision - refer to Full Bench decision dated 24 December 2010 [[2010] FWAFB 9985] for result of appeal.
[2010] FWA 8314 |
|
DECISION |
Fair Work Act 2009
s.185—Enterprise agreement
Wilmaridge Pty Ltd as Trustee For The O’Neill Family Trust
(AG2010/11709)
COMMISSIONER RYAN | MELBOURNE, 28 OCTOBER 2010 |
Direct Paper Supplies Enterprise Agreement 2010.
[1] An application has been made for approval of an enterprise agreement known as the Direct Paper Supplies Enterprise Agreement 2010 (the agreement). The application was made pursuant to s.185 of the Fair Work Act 2009 (the Act). It has been made by Wilmaridge Pty Ltd as Trustee for the O’Neill Family Trust trading as Direct Paper Supplies (Direct Paper Supplies). The agreement is a single-enterprise agreement.
[2] The application was filed with Fair Work Australia on 6 July 2010.
[3] A hearing on the application was held on 16 August 2010 at which I outlined a number of concerns I had in relation to the agreement. Direct Paper Supplies was represented at the hearing by its legal representative. Direct Paper Supplies was not required to respond to my concerns at the hearing and was given leave to respond, at a time of its choosing, after it had considered the issues raised at the hearing. I note that the agreement in this matter is in very similar terms to the Armacell Australia Enterprise Agreement 2010 which I considered in [2010] FWA 8283. The employers in both matters had the same legal representation.
[4] Direct Paper Supplies responded by letter dated 17 September 2010 in which it addressed the issues I raised. All but 2 of the issues were dealt with by way of Direct Paper Supplies offering 15 undertakings in relation to the operation of various clauses of the agreement. Each of the undertakings offered had also been the subject of a memo from Direct Paper Supplies to its employees. The undertakings offered addressed the concerns I had in relation to the various clauses.
[5] The 2 remaining issues concerned the provisions of the agreement permitting the cashing out of annual leave and long service leave. The relevant clauses of the agreement are as follows:
“27. ANNUAL LEAVE
27.1 Subject to Clause 27.7, Employees shall be entitled to 4 weeks’ paid annual leave in each year employment, to be taken at times agreed between the Employee and Direct Paper Supplies.
27.2 An Employee who regularly works hours for which a shift penalty rate is payable shall be entitled to be paid annual leave at the Wage Rate plus any shift penalties that would ordinarily be paid to the Employee. For the purposes of this Clause, an Employee shall be considered to regularly work hours for which a shift penalty rate is payable where the Employee has worked such hours for at least 3 months prior to the period of annual leave being taken.
27.3 Annual leave accrues on a pro-rata basis throughout the year, is cumulative and is paid out upon termination of employment.
27.4 Where practicable, any request for the taking of annual leave must be made at least 4 weeks in advance. Direct Paper Supplies may reasonably refuse a request for annual leave where the operational requirements of the business necessitate such a refusal.
27.5 Direct Paper Supplies prefers and encourages Employees to take all accrued annual leave within 12 months of accruing that annual leave.
27.6 No annual leave loading is payable under this Agreement.
27.7 Shiftworkers
(a) Shiftworkers shall be entitled to 5 weeks’ paid annual leave in each year of employment.
(b) For the purposes of this Clause, a shiftworker is defined as an Employee who:
(i) works in an area of Direct Paper Supplies’ business in which Shifts are continuously rostered 24 hours per day for 7 days a week; and
(ii) is regularly rostered to work those Shifts; and
(iii) regularly works on Sundays and public holidays.
27.8 Cashing in of Annual Leave
(a) An employee may elect, and Direct Paper Supplies may agree, to cash in a particular amount of the Employee’s accrued annual leave.
(b) Any agreement to cash in an amount of an Employee’s annual leave must be in writing.
(c) Direct Paper Supplies and the Employee must not agree to the Employee cashing in an amount of accrued annual leave if the agreement would result in the Employee’s remaining leave balance being less than 4 weeks.
(d) Any agreement to cash in an amount of an Employee’s annual leave must be in accordance with the Fair Work Act 2009.
27.9 Requirement to Take Annual Leave
Direct Paper Supplies may require an Employee to take a period of annual leave in particular circumstances, but only where such a request is reasonable, including, but not limited to, where the Employee has excessive accrued annual leave.
27.10 Annual Close Down
(a) Where Direct Paper Supplies intends to temporarily close (or reduce to essential staff only) the business, or any part of the business, for purposes including to allow employees concerned to take annual leave, Direct Paper Supplies will give 4 weeks’ notice in writing to all employees concerned that Direct Paper Supplies elects to apply the provisions of this Clause. For the purposes of this Clause, Direct Paper Supplies may provide such notice on a notice board accessible by all Employees.
(b) Any Employee given notice of annual close down pursuant to Clause 27.10(a), who at the date of closing is entitled to paid annual leave, shall be paid annual leave from the date of closing and concluding on the date of re-opening, or such other period as agreed between Direct Paper Supplies and the Employee.
(c) Any Employee given notice of annual close down pursuant to Clause 27.10a), who at the date of closing is not entitled to paid annual leave, shall be given leave without pay commencing on the date of closing, and concluding on the date of re-opening, or such period as agreed between Direct Paper Supplies and the Employee.
32. LONG SERVICE LEAVE
32.1 Accrued long service leave
If an Employee has completed at least 10 years of service with Direct Paper Supplies, the Employee will be entitled to take an amount of long service leave equal to 0.8667 weeks of long service leave for every 1 completed year of continuous service with Direct Paper Supplies.
32.2 Proportion to long service leave on termination of employment
(a) Subject to Clause 32.2(b), if an Employee’s employment ends after no less than 7 completed years of employment, the Employee will be entitled to payment of an amount of long service leave equal to 0.8667 weeks of long service leave for every 1 completed year of continuous service with Direct Paper Supplies.
(b) An Employee shall not be entitled to the payment of proportionate long service leave on termination where Direct Paper Supplies terminates the employment of the Employee because of the serious misconduct of the Employee in accordance with Clause 41.
32.3 Amount of long service leave
(a) for the purposes of this Clause, the number of hours the Employee is paid for each week of long service leave is taken to be:
(i) the average weekly number of hours worked by the Employee in the preceding 12 months; or
(ii) where an amount is paid to the Employee in lieu of taking long service leave - at the time the amount is paid to the Employee.
32.4 Continuous service
(a) For the purpose of this Clause, continuous service will be considered to have been broke where:
(i) the Employee resigns his or her employment (irrespective of the period between resignation and re-engagement);
(ii) in the case of Casual Employees, there is an absence of 3 months or more between engagements.
(b) The following types of absences do not break, but are not counted, as periods of continuous service;
(i) an absence from work other than an absence from work on leave taken in accordance with this Agreement or the National Employment Standards;
(ii) a period of time between termination and re-engagement of an Employee where the employment of the Employee is terminated by Direct Paper Supplies; or
(iii) any other period during which an Employee has been stood down on account of slackness of trade where an Employee is subsequently re-employed by Direct Paper Supplies.
32.5 Cashing in long service leave
An Employee who has been employed by Direct Paper Supplies for no less than 7 years may apply in writing to cash in their long service leave entitlement (or part thereof) in exchange for payment. Direct Paper Supplies may, in its discretion, grant this application.”
[6] Attached to the letter from Direct Paper Supplies dated 17 September 2010 was a submission in the following terms in relation to the two remaining issues.
“Background
1. On 5 July 2010, an application was made for the approval of the Direct Paper Supplies Australia Enterprise Agreement 2010 (‘the Agreement’) by the Applicant.
2. A hearing was conducted at Fair Work Australia (‘FWA’) on 16 August 2010 during which Commissioner Ryan sought submissions from the Applicant about matters relating to the approval of the Agreement, particular with respect to section 186(2) of the Fair Work Act 2010 (‘the Act’)( which prescribes that FWA must be satisfied that the agreement passes the better off overall test.
3. With respect to items raised by Commissioner Ryan, the Applicant makes further submissions as follows:
Submissions
4. The Applicant has, by way of a document titled ‘Undertakings of the Applicant’ made a number of undertakings in relation to the Agreement. As these undertakings, by and large, operate to confirm employee rights provided under the Agreement, it is submitted that these undertakings will not cause financial detriment to employee and will not result in substantial changes to the Agreement.
5. Further concerns have been raised in relation to the cashing in of annual leave and long service leave under the Agreement.
Provisions of the Fair Work Act
6. Section 92 and 93 of the Act provide:
“92 Paid annual leave must not be cashed out except in accordance with permitted cashing out terms
Paid annual leave must not be cashed out, except in accordance with:
(a) cashing out terms included in a modern award or enterprise agreement under section 93, or
(b) an agreement between an employer and an award/agreement free employee under subsection 94(1).
93 Modern awards and enterprise agreements may include terms relating to cashing out and taking paid annual leave
Terms about cashing out paid annual leave
(1) A modern award or enterprise agreement may include terms providing for the cashing out of paid annual leave by an employee.
(2) The terms must require that:
(a) paid annual leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid annual leave being less than 4 weeks; and
(b) each cashing out of a particular amount of paid annual leave must be by a separate agreement in writing between the employer and the employee; and
(c) the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.”
7. The Applicant submits that the provisions dealing with casing in of annual leave under Clause 27.8 of the Agreement are consistent with these sections of the Act.
8. The explanatory memorandum for section 93 of the Act prescribes that section 93 was constructed to ensure that protections existed “[in] recognition of the importance of employees taking leave for the purpose of rest and recreation.”
9. Further explanatory memorandum for section 93 of the Act prescribes that:
The general protections provisions in Part3-1 of the Bill will apply to entering into a cashing out arrangement under this clause (see, in particular, clause 344, which prohibits the exertion of undue influence or undue pressure on an employee to agree to cash out the leave).
10. It is accordingly submitted that parliament identified that, where a request to cash in annual leave was made at the initiative of the employee, with no undue influence or undue pressure, that this would be for the benefit for an employee. The protections prescribed, that an employee must not cash in annual leave that would see their balance fall below 4 weeks, provides a safety net to ensure that employees do not exercise this benefit to their detriment.
FWA Decisions
11. Fair Work Australia has approved a number of enterprise agreements with the inclusion of provisions for cashing in of annual leave consistent with section 93 of the Act. Please see attached as Appendix 1, a list of some such enterprise agreements.
12. On 19 December 2008, the full bench of the AIRC considered the question of the cashing in of annual leave under modern awards [[2008] AIRCFB 1000]. This decision provided at paragraph 100:
“It has also been suggested that if awards do not provide for cashing out of annual leave it will not be legally permissible to make workplace agreements which provide for cashing out. In our opinion cashing out arrangements are an appropriate matter for bargaining. If, when the legislative regime is settled, it is apparent that workplace agreements cannot provide for cashing out of annual leave unless there is a relevant provision in a modern award it may be necessary to revisit the question.”
13. It is accordingly submitted that the full bench identified that the parties to an enterprise agreement were free to include provisions for the cashing in of annual leave within the parameters of the Act.
Cashing out of long service leave under state legislation
14. It is submitted that the arguments in favour of the cashing in of annual leave apply to the cashing in of long service leave.
15. Under the Agreement, employees may only cash in long service leave at their own initiative and accordingly where the employee has identified the cashing in of leave to be in their own benefit.
16. Please see attached as Appendix 2, a list of some enterprise agreements approved by Fair Work Australia which included provisions.
Leave practices in place at the workplace of the Applicant
17. Please see attached as Appendix 3, a summary of annual leave accrued and taken in the workplace of the Applicant.
18. Please see attached as Appendix 4, a summary of long service leave accrued and taken in the workplace of the Applicant.
19. As contemplated under 27.10 of the Agreement, the business of the Applicant will typically close down over the Christmas period. During this period, employees would typically be required to take between 5 and 10 days of annual leave.
20. The Applicant accordingly submits that the employees will be required to take a period of annual leave each year, and will not be in a situation where they work the full year without the taking of any leave.
Conclusion
21. The Agreement, with the provision of undertakings, was made in satisfaction of s.186 of the Act.”
[7] The submission from Direct Paper Supplies included 4 appendices. Two of the appendices were lists of agreements approved by Fair Work Australia which contained provisions permitting the cashing out of annual leave and/or long service leave. I have not found these appendices to be of any value in my consideration of this agreement. The mere fact that other agreements contain provisions permitting the cashing out of annual leave or long service leave is of no assistance in the absence of any reasons for the decisions.
[8] The other 2 appendices identified the use of annual leave and long service leave over the preceding 6 years. These appendices were provided to the Tribunal in response to a direct request from the Tribunal at the hearing on 17 September 2010. These latter 2 appendices did assist me in my consideration of the two remaining issues.
[9] I note that the submission of Direct Paper Supplies was in the same terms as the submission made by Armacell in relation to the same issues considered in [2010] FWA 8283.
The History of Annual Leave and the Modern Approach to Annual Leave
[10] In my decision in relation to the Armacell Australia Enterprise Agreement 2010 1 I considered at paragraphs 9 to 32 inclusive the history of the development of annual leave entitlements in awards and in legislation. I adopt what I said in that matter and apply it to this matter.
Consideration of the Submissions from Direct Paper Supplies
[11] The written submissions of Direct Paper Supplies are in the same terms as those of Armacell Australia P/L which I considered in [2010] FWA 8283. What I said in that decision at paragraphs 33 to 49 inclusive I adopt and apply to this matter.
[12] Whilst Direct Paper Supplies did not, in their written submission, draw attention to clause 27.8 of the agreement I have taken this provision into account.
[13] Clause 27.8 is a statement of principle that “Direct Paper Supplies prefers and encourages Employees to take all accrued annual leave within 12 months of accruing that annual leave.” This statement of principle is laudatory and is consistent with the social purpose behind the annual leave entitlement in the NES. If this statement of principle was implemented then the possible utilisation of the cashing out of annual leave provision of the agreement would be rare.
[14] At the request of Fair Work Australia Direct Paper Supplies provided details of the annual leave accruals and annual leave usage over the last 6 years.
[15] The attached table identifies the leave records for existing employees. This information has been taken from the data supplied by Direct Paper Supplies but with the names of employees deleted.
[16] Direct Paper Supplies did not offer any explanation about the accruals or usage of annual leave.
[17] What is evident from the data supplied by Direct Paper Supplies is that whilst the principle enunciated in clause 27.8 of the agreement has not yet been met nevertheless Direct Paper Supplies has managed annual leave so that no employee has an excessive amount of unused accrued annual leave.
[18] The issue then arising in relation to this agreement is whether employees will be better off overall if employed under the terms of an agreement which permits them to cash out annual leave to the maximum allowed under the Act as against being employed under the modern award where cashing out does not occur.
Long Service Leave
[19] I have not sought to canvass the history around the provision of long service leave entitlements which has traditionally been dealt with primarily by way of State and Territory laws rather than by way of awards. However much of the social argument as to the provision of periods of paid leave from work apply equally to long service leave as they do to annual leave. The Long Service Leave Act (Victoria) emphasises the value placed upon the provision of paid leave from work through 2 of its provisions. Firstly, s.74 prohibits the cashing out of long service leave. Secondly, s.78 prohibits employees from working whilst on long service leave.
[20] The agreement permits employees to apply to cash out long service leave even before they become entitled to take long service leave under the Victorian Act. Whilst Direct Paper Supplies reserves to itself the right to grant or not grant a request to cash out long service leave there is nothing in clause 37 which provides any parameters as to how Direct Paper Supplies will exercise its discretion.
[21] Given that the agreement does not entitle an employee to take a period of long service leave until they have at least 10 years of service it would appear that the very structure of the agreement will encourage employees to cash out long service leave prior to reaching 10 years of service with Direct Paper Supplies.
[22] A modern award must not contain terms dealing with long service leave. Thus long service leave entitlements of employees are found in either the NES or in the relevant State long service leave legislation. In considering whether or not the agreement passes the BOOT I have, in relation to long service leave, considered the fact that if the employees are employed under the terms of the modern award and the NES then cashing out of long service leave would not be permitted, due to the operation of the relevant State legislation.
[23] The data supplied by Direct paper Supplies indicates that only 1 employee would have an entitlement to take long service leave as only 1 employee has reached 10 years of service.
Conclusion
[24] The combined effect of clauses 27.8 and 32.5 is that Direct Paper Supplies have constructed an agreement with their employees which permits the employees to cash out all of their long service leave and accrued annual leave up to the statutory limit.
[25] The agreement appears to promote a change in the existing practices and culture of having employees take all or most of their annual leave entitlements each year. Whilst the agreement contains a clear statement of the preference of Direct Paper Supplies in relation to the use of annual leave, this is and remains merely a preference. Clause 27.8 does not qualify or limit the making of or granting of requests to cash out annual leave. I also note that clause 27.9 give Direct Paper Supplies the right to require an employee to take annual leave where such a request is reasonable. Again this provision does not qualify or limit the making of or granting of requests to cash out annual leave. The absence of limits, other than the minimum statutory limits, on the making of requests to cash out leave and the granting of the requests leads me to draw the conclusion that the agreement is not about providing real and tangible benefits to employees which enhance their leave entitlements but is simply about converting annual leave accruals into cash payments to the extent permitted by the Act. I also draw the conclusion that in relation to long service leave the agreement is more about providing an opportunity to cash out long service before it is able to be taken rather than promoting the taking of long service leave.
[26] Section 186(2) of the Act requires that I must be satisfied that the enterprise agreement passes the BOOT before the enterprise agreement can be approved under s.186(1). I am not satisfied that the Direct Paper Supplies Australia Enterprise Agreement 2010 passes the BOOT under s193 of the Act.
[27] Section 190 of the Act permits Fair Work Australia to approve an agreement if it is satisfied that an undertaking offered by the employer and which addresses the concerns of Fair Work Australia that the agreement does not meet the requirements set out in s186 and s187.
[28] In this matter I have given Direct Paper Supplies the opportunity of offering undertakings to address my concerns that the agreement does not meet the requirements set out in s186 and s187.
[29] The undertakings offered in relation to the agreement meet my concerns in relation to the matters addressed in the undertakings. However no undertakings were offered in relation to clause 27 or clause 32.
[30] The application for approval is refused.
COMMISSIONER
Appearances:
Ms K. Sweatman for the Applicant
Hearing details:
2010
Melbourne
16 August
1 [2010] FWA 8283 {PR503134]
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<Price code C, PR503171>
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