[2014] FWC 7241 [Note: Appeals pursuant to s.604 (C2014/7606) were lodged against this decision - refer to Full Bench decision dated 11 May 2015 [[2015] FWCFB 2881] and 18 December 2015 [[2015] FWCFB 8554] for result of appeal.]
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009

s.240 - Application to deal with a bargaining dispute

Australian Municipal, Administrative, Clerical and Services Union
v
Royal Automobile Club of Victoria (RACV) Ltd
(B2013/1567)

COMMISSIONER ROE

MELBOURNE, 16 OCTOBER 2014

s. 739 dispute in respect to the RACV Roadside Assistance Centre Enterprise Agreement 2014-2017; annualised or averaged payment system.

[1] On 18 August 2014 I determined 1 that there was jurisdiction to arbitrate the dispute between the ASU and the RACV about the RACV proposal to alter the annualised or averaged payment system under the RACV Roadside Assistance Centre Enterprise Agreement 2014-2017 (the Agreement). The background to the dispute was set out in the earlier jurisdictional decision.

The Orders sought by the ASU

[2] The ASU seeks four types of order in respect to employees who work a shift roster under an averaging system:

[3] The main features of the 21 day shift roster cycle are:

[4] Currently shift and weekend penalties are averaged based upon 7.6 daily hours and the average is paid each week, including on periods of paid leave and on public holidays worked. The RACV proposes to pay shift and weekend and public holiday penalties for ordinary hours actually worked on each day and not to pay shift and weekend penalties on periods of paid leave or on public holidays.

[5] The RACV proposes to retain the system whereby ordinary weekly hours are averaged over the 21 day cycle and employees are paid 38 ordinary hours each week including when paid leave is taken.

[6] There are some aspects of the changes proposed by the RACV which the ASU has opposed but, following the jurisdictional decision, they no longer seek orders to stop the implementation of these changes. The ASU now seek orders to mitigate what they say are the adverse effects of these changes.

[7] I am satisfied the following matters which are now not contested are changes which are directly associated with the RACV decision to change the nature of the averaged payment system and the annualisation and averaging of penalty payments in particular:

a) RACV's proposal to remove the system where penalty payments are averaged over the cycle resulting in some fluctuation in weekly wages over the weekly cycle. Currently pay in each week of the cycle for ordinary hours worked is the same. Under the changed proposal it will vary from the weekly average in each week of the cycle (when leave is not taken and where a public holiday does not fall). The weekly variation in the cycle will be as follows: +$9, +$49, -$59 (to the nearest dollar).

b) RACV’s proposal that shift and weekend penalties should apply to all shift and weekend hours rostered not to just 7.6 hours of each shift. As a result, based on the RACV figures, the total earnings for the cycle will increase by $29.34 provided leave is not taken and a public holiday does not occur.

c) RACV’s proposal to pay public holiday penalties on the basis of the actual hours worked on the public holiday rather than on the basis of 7.6 hours. Under the RACV proposal earnings on a public holiday which falls on a weekday day shift will generally increase. Payment for a weekday afternoon shift public holiday worked will decrease due to the removal of the 15% afternoon shift penalty but this will be partly offset by the public holiday penalty payment being for actual hours worked. The ASU support the payment for actual hours worked but oppose the removal of the shift penalties and I will consider that matter later. (It appears from the RACV presentation of June 2014 that 50% penalty is paid for a public holiday on a Saturday in addition to the public holiday penalty on 7.6 hours. If this occurs it is not required by the Agreement following the removal of the averaging system and this is not disputed by the ASU).

[8] I am satisfied that the following matters which are now not contested are errors which the RACV is entitled or required to correct. These matters are not directly related to the averaged payment system.

a) An employee who takes leave without pay should have the actual ordinary rostered hours for that day deducted. In some cases only 7.6 hours is currently deducted.

b) There is a requirement to pay as a minimum 17.5% annual leave loading when on annual leave. Where the shift or weekend penalty for the roster which would otherwise have been worked is greater than 17.5%, under the Agreement the greater penalty should be paid. The current practice has been to pay the 17.5% annual leave loading but not to pay the shift and weekend penalties if this results in a greater amount. The RACV estimates that this will result in pay of about $250 extra where leave is taken over a typical roster. The amount will vary depending upon when in the roster cycle leave is taken.

[9] I will first consider the relationship between the contested matters and the averaged payment system and the implications of this.

[10] I will then consider the following contested matters which I am satisfied and it is accepted concern the proposal to change the averaged payment system:

[11] I will next consider the remaining contested matters which I find are not directly related to the averaged payment system:

[12] I will finally consider the mitigation proposals of the ASU.

The relationship between the contested matters and the annualised payment system.

[13] Clause 96 of the Agreement provides:

[14] The RACV presentation in October 2013 set out the changes they were seeking. Some of these matters are directly related to the averaged payment system whereas others are not. As I observed in the jurisdictional decision, “Clause 96 is about the annualised payment system and from the heading it is clear this includes leave accruals. Clause 27.1(d) is about averaging payments for ordinary hours. There is substantial overlap between the two subject matters but they are not identical.” 2

[15] Correspondence to employees and to the ASU in October 2013 advising them of the issue starts as follows:

[16] The correspondence then continued that:

It is noted that the focus is on payments and not on the rate of leave deductions.

[17] The RACV took notes of the bargaining meetings. These were not agreed minutes. Those notes record the following about the bargaining meeting of 28 November 2013:

[18] Mr McIntosh made clear that the RACV concern was that the current practices were a breach of the earlier agreements and of the current Agreement.

[19] The focus of the October 2013 presentation was on the issues which the RACV alleged resulted in underpayments and overpayments. The leave deduction issue is mentioned once in the list of the “problem” as follows:

[20] In the section on “how do we fix this?” it is said that:

The subject matter is how people are paid and there is no mention of the issue of deductions from leave balances.

[21] In the section on “What does this mean for YOU?” it is said that:

The section goes on to advise of the results of the review of 22 staff and the level of underpayment and overpayment revealed. Again the subject matter is how people are paid and there is no mention of the issue of deductions from leave balances.

[22] In the final section of the October presentation “What about the past?” it is said that:

Again there is no reference to leave balances.

[23] When the proposed changes were foreshadowed in October 2013 the parties agree that it had a significant effect on the negotiations for the new Agreement. There is some disagreement between the parties about whether or not the matter was part of the agreement negotiations in 2013.

[24] Mr McIntosh, General Manager of the Member Contact Centers for the RACV gave the following evidence:

[25] Following a period of protected industrial action the outstanding bargaining issues including the annualised payment issues were the subject of conciliation before the Fair Work Commission. The parties agreed to Clause 96.

[26] I am satisfied that it was the mutual intention of the parties that the dispute over the changes advised in the October 2013 presentation be covered by Clause 96. I am also satisfied that it was the mutual intention of the parties not to change the provisions of the earlier agreements as they relate to the issues covered by Clause 96 and this dispute including: averaging of pay, rostering, hours of work, entitlement to penalties and the rate of deductions from paid leave. Clause 96 was a mechanism for resolving the dispute about the interpretation of the provisions in the earlier agreements which were retained in the new agreement. The focus was on the alleged underpayments and overpayments which the RACV alleged arose from practices which were inconsistent with the terms of the previous agreements. These terms were retained in the proposed new Agreement along with a provision which enable the dispute over these matters to be resolved.

[27] When the employees voted for the Agreement they did not vote for any change to these provisions. The RACV, its employees and the ASU did not bargain for any change to these provisions including to the paid leave provisions of the Agreement.

[28] In the jurisdictional decision I determined that, to the extent that the dispute about the change proposed is a dispute about Clause 27.1(d), I cannot order that the change not occur unless it is inconsistent with another provision of the Agreement or the NES.

[29] To the extent that the change proposed is not about Clause 27.1(d) then I can arbitrate a resolution to the dispute if it is a matter which is arising under the provisions of the Agreement, other than Clause 96. However, I cannot make a determination which is inconsistent with the terms of the Agreement.

[30] Following the hearing of this matter I requested the parties to comment on the following:

[31] The parties responded by agreeing with this approach although the ASU submits that the matters are not inextricably linked. I am satisfied that the proposed changes listed are directly related to the annualised or averaged payment system. To the extent that these matters are contested the dispute about the change is a dispute about Clause 27.1(d) and also a dispute about the proper application of other relevant conditions provisions of the Agreement. I cannot order that these changes not occur, as sought by the ASU, unless I find that the change is inconsistent with another provision of the Agreement or the NES.

[32] I also requested that the parties comment on the following:

[33] The RACV responded by agreeing that none of these matters is a dispute about clause 27.1(d) and that the first dot point is a dispute concerning the proper application of Clause 88, the second dot point is a dispute about the proper application of Clause 39 and the third dot point is a dispute about the proper application of Clauses 15, 16 and 26 of the Agreement. The ASU disagree and submit that these matters are directly related and the dispute about them is about both 27.1(d) and the nominated clauses.

[34] The evidence did not establish any linkage other than the fact that the practices have been in place for a similar period of time and that there is some linkage to the 21 day roster. The plain words of 27.1(d) do not include the matter of the amount of leave or deductions from leave. The current practice in respect to leave has nothing to do with averaging or annualizing. If it were about averaging of fluctuating shift lengths then the deduction would be 8.15 hours not 7.6 hours. The current practice has nothing to do with pay. This aspect of the RACV proposal does not change the payment for a given period of leave. Personal leave and annual leave entitlements in the Agreement are already expressed in hours as an annualised amount.

[35] I am satisfied that the proposed changes listed are not directly related to the averaged payment system. To the extent that these matters are contested the dispute about the change is not a dispute about Clause 27.1(d) but is a dispute about the proper application of other relevant conditions provisions of the Agreement. I can arbitrate a resolution to the dispute about the deduction from paid leave entitlements to the extent that it is a matter which is arising under the provisions of the Agreement other than Clause 96.

[36] I am satisfied that it was the mutual intention of the parties that the dispute about the proposal of the RACV to make changes to the way in which paid leave entitlements are deducted would be resolved in accordance with Clause 96.

Payment of shift and weekend penalties to employees who are on paid parental leave or paid personal leave.

[37] Currently when employees take such leave they are paid weekend and shift penalties. The ASU argues that the paid parental leave provisions in Clauses 17.3 and 17.4 do not refer to weekly wage but rather refer to full pay, half pay, and four weeks’ remuneration. The ASU argues that the paid personal leave provision in Clause 16 does not refer to the rate of pay and that the purpose of paid personal leave is to avoid loss of pay and therefore pay should be interpreted as inclusive of penalty payments.

[38] I accept that the paid parental leave and paid personal leave provisions of the Agreement do not specify the rate of pay for the periods of leave.

[39] I am satisfied that Clause 88 defines when shift and weekend penalties are paid and those provisions provide for payment when the employee works the unsociable hours. I accept the submission of the ASU that because Clause 88 is about the penalty payments applicable when shifts are worked it does not necessarily exclude payment during periods of paid leave. However, I note that where penalty payments are included for the purpose of annual leave the Agreement is explicit about the matter.

[40] The interpretation which is urged by the ASU is not the natural reading of the provisions in respect to paid parental leave and personal leave (Clauses 16, 17.3 and 17.4) considered in the context of the other provisions of the Agreement. When penalties are to be paid on periods of leave this would normally be specified or would be apparent from the context.

[41] It is relevant to consider the provisions in their industrial context. Given that the practice of paying average penalties has been in place for several decades this might suggest, if the words of the Agreement allow such an interpretation, that the mutual intention of the parties was to maintain the status quo. It is part of the context within which the Agreement was made. In other words I accept that it may be reasonable to strain for the meaning sought by the ASU to avoid injustice if there is no other clear explanation for the long standing practice of paying penalties when on paid personal and parental leave. However, I am satisfied that the system of payment of shift penalties to employees when on paid parental leave or on paid personal leave is inextricably linked to the system of averaging of shift and weekend penalties over the working cycle and over the working year.

[42] I am satisfied that pursuant to the averaging provisions of Clause 27.1(d) the following system applies to averaging weekend and shift penalty payments:

[43] That is, these practices are not an error or a failure to implement the Agreement. As we have seen earlier the effect of paying penalties when working on the basis of only 7.6 ordinary hours is balanced by the effect of paying penalties when on paid personal and parental leave and employees are not generally disadvantaged overall. The system reflects the mutual intention of the parties as to the proper construction of Clause 27.1(d).

[44] The practice of payment of shift and weekend penalties during periods of paid leave is a practice which is part of the annualised payment system pursuant to Clause 27.1(d). I am satisfied that the practice is not linked to a particular mutual interpretation of the paid parental leave and paid personal leave provisions of the Agreement but rather to the annualised payment system and in particular the annualisation of shift and weekend penalties which includes the payment of penalties for ordinary time worked on the basis of 7.6 hours per day.

[45] The Agreement does not prevent the removal of the system of averaging shift and weekend penalties and it does not prevent the consequential changes to pay penalties for the unsociable hours actually worked on each shift and to cease payment of penalties on paid personal and parental leave.

[46] I am satisfied that following the implementation of the de-annualisation proposal, the RACV is not required to pay weekend and shift penalties when an employee is on a period of paid parental leave or paid personal leave.

Payment of shift penalties in addition to public holiday penalties when an employee works on a public holiday.

[47] Currently when shift workers are required to work on a public holiday they receive a penalty payment of 100% and they also receive the relevant shift penalty. The ASU point to Clause 88.1 which provides that “a shift worker who works an afternoon shift shall be paid 15 per cent more than his or her Applicable Hourly Rate/ Weekly Wage”. The ASU argue that this is not qualified and that there is nothing in the balance of the clause which qualifies this entitlement.

[48] Clause 88.3 provides as follows:

[49] Clause 88 is headed “Shift Allowances”. I am satisfied that the clause sets out the scheme for payment of shift allowances. The first sub-clause, 88.1, sets out the payment for afternoon shift, 88.2 sets out the payment for night shift and 88.3 sets out the payments for “shifts on Saturdays, Sundays and Public Holidays”. I am satisfied that Clause 88 is intended to comprehensively deal with the matter of shift allowances for ordinary time worked.

[50] The RACV argues that Clause 88.3 sets out the penalty payment for those shifts in full.

[51] It is relevant to consider the provision in its industrial context. Given that the practice has been in place for several decades this might suggest, if the words of the Agreement allow such an interpretation, that the mutual intention of the parties was to maintain the status quo.

[52] It is obvious that the wording of Clause 88.3 is shorthand. The words “public holidays - at the rate of 100%” means “public holidays - at the rate of 100% in addition to the Applicable hourly rate/weekly wage”. Unless the additional words are implied the rate of pay on a public holiday would be without penalty and the rate of pay on a Saturday or Sunday would be half of the ordinary rate of pay.

[53] I am not satisfied that Clause 88.1 and 88.2 have application to the shifts covered by Clause 88.3 despite the absence of any indication of that exception in Clause 88.1 and 88.2. I am reinforced in this construction by the context that the RACV and the ASU accept that it has been the custom and practice for an employee who works an afternoon shift on a Saturday to receive a 50% Saturday penalty and not to receive the 15% afternoon shift penalty.

[54] I am satisfied that pursuant to the averaging provisions of Clause 27.1(d) the following system applies to public holiday payments:

[55] I am satisfied that this practice is not an error or a failure to implement the Agreement. As we have seen earlier the effect of paying the averaged annual shift and weekend penalty on a public holiday is balanced by the effect of paying the public holiday penalty on the basis of 7.6 hours rather than on the basis of hours actually worked. The system reflects the mutual intention of the parties as to the proper construction of Clause 27.1(d).

[56] I am satisfied that the system of payment of shift and weekend penalties to employees working on a public holiday is inextricably linked to the system of averaging of shift and weekend penalties over the working cycle and over the working year. That is, it is a practice which is part of the averaged payment system which the RACV is changing. I am satisfied that the practice is not linked to a particular mutual interpretation of the public holiday penalty provision of the Agreement but rather to the averaged payment system and the annualisation and averaging of shift and weekend penalties in particular. The Agreement does not prevent the removal of the system of averaging shift and weekend penalties and it does not prevent this consequential change.

[57] I am satisfied that following the implementation of the de-annualisation proposal, the RACV is not required to pay shift allowances in addition to the public holiday penalty when an employee works on a public holiday.

Is the current practice (7.6 hours) or the proposed practice (the actual rostered ordinary hours) in respect to deduction from annual leave, long service leave and personal leave entitlements when a day’s leave is taken inconsistent with the Agreement or the NES?

[58] Currently when employees take a day of paid long service leave, annual leave or personal leave they have 7.6 hours deducted from their accrued entitlement. This has been the situation for a long time. It is the uncontested evidence of the ASU witnesses that it has been the situation for over 20 years.

[59] The entitlement in the Agreement to long service leave is expressed in weeks, consistent with the long service leave legislation. The Agreement provides that the initial period of long service leave may be taken in two or three separate periods. The entitlement to annual leave is expressed as being 190 hours for shift workers. This contrasts with the NES entitlement which is expressed as five weeks. It is not in contention that the employees covered by the dispute are shift workers who meet the conditions for the additional week of leave. The Agreement provides for personal leave of 76 hours per year in the first two years and 91.2 hours in each subsequent year. This contrasts with the NES entitlement which is expressed as 10 days.

[60] Consistent with the legislation the Agreement operates in conjunction with the NES as follows:

[61] The parties accept that annual leave and personal leave under the NES and under the Agreement accrues according to the “employee’s ordinary hours of work”.

[62] Clause 87.2 provides that the “ordinary hours of shift workers shall average 38 per week inclusive of meal breaks averaged over a complete cycle of the roster.” The roster can include the 114 hour, 21 day roster and the daily shift may be up to 10 hours. Under the Agreement the ordinary working week is 38. The “applicable hourly rate” is defined as the weekly wage “divided by the the number of hours which constitute the ordinary working week”. 8

[63] The Agreement also includes the following definitions:

[64] I am satisfied that annual leave and personal leave accumulate for a full time employee on the 21 day shift roster on the basis of the average ordinary hours of 38 per week. The NES provides that annual leave and personal leave entitlement accrues progressively during a year of service according to the employee’s ordinary hours of work. Given that the ordinary hours are 38, the accruing of the entitlement at the rate of 190 hours per year for annual leave and 76 hours per year for personal leave as specified in the Agreement is not inconsistent with the NES.

[65] Under a typical RDO system the daily ordinary hours are 7.6 and the weekly ordinary hours each week are 38. The actual hours worked each day are greater than 7.6 and the weekly hours in the weeks when the RDO does not fall are greater than 38. The additional hours rostered each day are credited to the RDO. Under an RDO system, as is common in the construction and manufacturing industries and specified under the applicable modern awards, when paid leave is taken there is no effect on the entitlement to be paid 38 hours in the week when the RDO falls. 10 There was no reduction in the number of days which an employee could take off as paid sick leave when the RDO systems were introduced in the 1980s.

[66] The RDO system is a particular form of averaging of wages. If the 21 day roster was an RDO system then I would find that the current system of leave deduction was consistent with the paid leave provisions of the Agreement. However, the ASU and the RACV agree that although wages for ordinary weekly hours are averaged in the 21 day roster system, the system is not a typical RDO system for averaging of wages. That is, the additional hours worked on the 14 working days in the cycle are not credits towards the 15th day off.

[67] Under a roster system where the daily hours are extended, such as a 12 hour shift system, the accumulation of leave and its deduction when taken can be controversial. Collective agreements deal with this situation in a variety of ways. In some agreements the number of hours of personal leave and annual leave to which 12 hour shift workers are entitled is higher than would be applicable under a 7.6 hour day. In some agreements the entitlement is reduced by 12 hours for each shift taken as paid leave, whilst different arrangements apply in other agreements.

[68] I am satisfied that under the NES leave accumulates in accordance with the ordinary hours of work. In the case of those who work longer daily shifts, their ordinary hours of work are still 38 per week and annual leave and personal leave still accumulates on this basis. Under the NES the total annual entitlement does not increase because the daily ordinary hours increase provided the ordinary weekly hours or the average ordinary weekly hours remain unchanged.

[69] The NES does not generally deal with the rate at which annual leave and personal leave is deducted when taken. The NES does not require that the rate at which the leave is accumulated and the rate at which it is deducted when used must be the same. The NES does specify that an employee shall be paid at the rate of pay for the employee’s ordinary hours of work in the period when they take paid annual leave and personal leave.

[70] Clause 16 of the Agreement in respect to personal leave does not specify how an employee should be paid during a period of paid personal leave. Clause 15.2 does specify how an employee shall be paid when on paid annual leave. Clause 26.2 does specify how an employee shall be paid when on paid long service leave. I am satisfied, and it was not contested, that employees are entitled under the Agreement to take personal leave, annual leave and long service leave without loss of pay. That is for the period of paid leave they should be paid at the applicable hourly/weekly rate to which they would otherwise have been entitled for their ordinary hours. (Compensation for shift and weekend penalties may also apply when on annual leave).

[71] There are several references to “day” and “ordinary day” in Clause 16 Personal leave. However, the entitlement to accumulate and accrue personal leave is expressed in hours. There is no provision about the rate of pay or the rate of deduction of personal leave. The provisions about required evidence relate to days of personal leave taken.

[72] I am satisfied that the Agreement is silent about the number of hours which should be deducted from the accrued leave entitlement when an employee takes a day of annual leave, personal leave or long service leave.

[73] The parties referred me to a number of decisions of the Australian Industrial Relations Commission and the Fair Work Commission. In most cases these decisions deal with circumstances which are distinguishable from the present circumstances. They do not generally deal with the rate of deduction of leave in circumstances where the agreement is silent about the rate of deduction, where the entitlement is expressed in hours, and where there is not an RDO system.

[74] The decision of Deputy President Bartel in Australian Rail, Tram and Bus Industry Union & Australian Municipal, Administrative, Clerical and Services Union v Australian Rail Track Corporation 11 relates to an RDO system although, as in the present case, the rate of deduction of leave entitlements was proposed to be changed by the employer from 7.6 hours for each day taken to the rostered shift length. Deputy President Bartel considered the custom and practice and the potential injustice arising from the proposed change to be important considerations in deciding that the 7.6 hour rate of deduction should be retained. I consider that the approach taken by Commissioner Bartel is relevant to the circumstances of this case. The decision of Commissioner Asbury in The Australian Workers' Union v BP Refinery (Bulwer Island) Pty Ltd12 was about whether or not the entitlement expressed in hours was consistent with the NES in a situation where employees worked a 12 hour shift roster. The agreement in that case expressly provided that the sick leave balance be reduced by the ordinary hours the employee would have otherwise worked. The decision of Commissioner Wilson in Australian Municipal, Administrative, Clerical and Services Union v Hobson's Bay City Council13 related to whether personal leave for those who work a nine day fortnight arrangement should accrue on the basis of 7.6 hours per day or on the basis of the actual ordinary hours worked in a working day. The agreement in that case provided for leave of absence without loss of pay.

[75] Commissioner Lee in Australian Rail, Tram and Bus Industry Union and Australian Federated Union of Locomotive Employees v QR Limited T/A QR National 14 dealt with a dispute about the rate of deduction from paid annual leave and personal leave entitlements. As in this case the total entitlement was expressed in the Agreement in hours, however, the QR situation can be distinguished from this case as the QR Agreement contained provisions which specified the rate of deduction although the meaning of those clauses was in contention.

[76] Commissioner Lee observed as follows:

[77] The Full Bench in the Hobson’s Bay City Council case (Australian Municipal, Administrative, Clerical and Services Union v Hobson’s Bay City Council16 considered these observations:

[78] The Full Bench by agreeing with Commissioner Lee’s observation about the meaning of “day” in respect to the NES appears to lend support for the analysis that the comments in the Explanatory Memorandum must be treated with caution and that a shift worker is entitled under the NES to 10 days of personal leave and five weeks of annual leave even if they work more than 38 ordinary hours in a particular week of a roster or more than 7.6 ordinary hours on a particular day of a roster.

[79] Commissioner Lee in the QR case referred to the following finding from the AIRC Full Bench decision in Transport Workers’ Union of Australia v Airport Fuel Services Pty Ltd and others, 18 which dealt with a similar issue, although with the 5 week leave provision as an award entitlement rather than a legislated entitlement.

[80] Commissioner Lee concluded:

[81] The Full Bench in the Hobson’s Bay City Council case also makes the following observation:

[82] In the Hobson’s Bay situation the leave entitlement was expressed in ordinary days whilst the entitlement in the present case is expressed in hours. However, the Full Bench decision is confirmation that the rate at which personal leave accrues may be different from the rate at which it is deducted when taken. It also lends support to the concept that, unless the particular situation suggests otherwise, the concept of paid leave will generally mean that the hours paid should be the hours deducted from the entitlement.

[83] The ASU submit that reading the annual leave, long service leave, personal leave (Clauses 15, 16, 26 and 4 of the Agreement) and the NES provisions together and in context, the Agreement confers an entitlement to 13 weeks long service leave after 15 years, 10 days personal leave in the first two years and 12 days subsequently and 5 weeks annual leave. If the hours deducted from the employee’s personal leave entitlement for each day taken in the 21 day cycle exceeds 7.6, that employee cannot receive the number of paid personal leave days required by the NES under the RACV proposal in the first two years of employment. It is also possible that employees will not receive the number of weeks of annual leave or long service leave required by the NES and long service leave legislation under the RACV proposal. The construction favoured by the RACV would be contrary to the NES and therefore the provisions would be void by operation of Section 56 of the Act. It should be assumed that the mutual intention of the parties was that the provisions of the Agreement should be valid and hence the ASU submit that their construction should be preferred.

[84] The ASU submit that the current arrangement has been in place for some 20 years and this suggests that the mutual intention of the parties has been that the annual leave, long service leave and personal leave entitlements in the Agreement should be read as providing for 7.6 hours deduction so as to ensure that the 190 hour annual leave entitlement results in at least five weeks’ leave, that the 76 hour personal leave entitlement results in at least 10 days personal leave and that the 13 week entitlement for long service leave is achieved.

[85] The RACV refer to an example given in the Explanatory Memorandum to the Fair Work Bill 2008 21 where an employee works different hours each day according to an arrangement for averaging ordinary hours over a four week period. In that example the employee, Sudhakhar, accumulates 10 days or 76 hours of personal leave in a year and if he takes a day of sick leave then he will be paid the number of ordinary hours he was rostered to work on that day. The RACV submits that this demonstrates that their proposal is consistent with the NES.

[86] The RACV submits that the difference between personal leave for an employee under the 21 day roster system and other employees is only the rate at which the entitlement accrues, not the total amount of the entitlement. The RACV submit that there is no requirement that paid personal leave should be taken at the rate it accrues and therefore no legal barrier to rostered employees being deducted the hours that they would have worked on that day.

[87] The RACV submit that if 7.6 hours is deducted there is no basis to pay the employee for the additional ordinary hours that would otherwise have been worked and that in effect the employee would be receiving 81.5 hours leave in the first year of employment rather than the entitlement of 76 hours under the Agreement and the NES. The RACV submit that there is no source of authority in the Agreement for the payment of the additional 5.5 hours if 10 days of leave are taken. A similar argument applies in respect to annual leave.

[88] The RACV submit that it is consistent with both the Explanatory Memorandum and the passage from the Full Bench decision in Hobson’s Bay quoted earlier, that the hours of leave deducted should equate to the hours which would otherwise have been worked and which are being paid.

[89] The RACV also submit that the current practice produces inequitable outcomes. Those on the 21 day shift roster will receive more hours of personal leave and annual leave than those on a 38 hour shift roster. This makes the interpretation contended for by the ASU illogical.

[90] The RACV contends that if the interpretation of the Agreement is that personal leave is deducted at a rate of 7.6 hours a day regardless of how many hours of work are missed then there is no capacity to handle part day absences. This submission is based on a misconception of the ASU’s interpretation. As I understand it the ASU submit that the entitlement in Clause 16 of the Agreement should be read to ensure an employee has 10 days personal leave a year. When a day of personal leave is taken no more than 7.6 hours should therefore be deducted. If a part day is taken then, consistent with current practice, the actual hours taken should be deducted.

Conclusion in respect to annual leave and personal leave.

[91] During a five week period on the 21 day roster a worker will be rostered for 23 or 24 shifts depending upon the point in the cycle when they go on annual leave. If only 7.6 hours is deducted for each rostered shift which would otherwise be worked during that annual leave period, then either 174.8 or 182.4 hours of the 190 hour entitlement would be utilised in a year. If the actual hours rostered for each shift is deducted then between 187 and 196 hours would be utilised. In the unlikely event that an employee only took annual leave in the weeks when only four shifts are rostered then the amount of deduction would be 163 hours if actual rostered hours are deducted, and 152 hours if only 7.6 hours are deducted. At the other extreme if an employee took annual leave only in the weeks when five shifts are rostered the amount of deduction would be 205 hours if actual rostered hours are deducted and 190 hours if only 7.6 hours are deducted.

[92] I am satisfied that the current practice in respect to deductions from annual leave entitlement is not inconsistent with the NES as it maintains an entitlement of 190 hours and a capacity to take five weeks annual leave in circumstances where the NES is silent about how deductions occur.

[93] The taking of annual leave is for a period agreed between the employer and the employee (Section 88 of the Act). Awards and Agreements may include terms about the taking of annual leave (Section 93 of the Act). In a roster system where shift lengths vary and where to some extent employees can choose when annual leave is taken and have the flexibility to take annual leave in more than one period, including up to five single days, it would be impractical to ensure that every employee takes exactly five weeks annual leave in a year. I am satisfied that the arrangements for deduction of annual leave proposed by the RACV are not inconsistent with the NES entitlement. The concept of annual leave is about a block of time off each year. The taking of annual leave in a number of shorter periods is a flexibility which is provided for, within limits, in Awards and Agreements and is not inconsistent with the NES.

[94] If the RACV directed an employee to take annual leave at a time which would prevent that employee from enjoying their entitlement to five weeks’ annual leave, this may be inconsistent with the NES. The decision of Commissioner Lee which was, in this respect, generally supported by the Full Bench in Hobson’s Bay, lends support to this conclusion. However, this would give rise to a different dispute under the Agreement and the NES. It is not the issue which is before me.

[95] Workers on the 21 day roster cannot achieve 10 days of personal leave if the rate of deduction from the 76 hour entitlement is based upon the rostered daily ordinary hours. This is because the rostered hours on each day worked in the 21 day cycle is greater than 7.6 hours. On average an employee on the 21 day roster will only achieve 9.33 days of personal leave in a year if the RACV proposal is implemented. It is common for periods of personal leave to be a matter of days rather than a matter of weeks.

[96] I am satisfied that the current practice in respect to deductions from personal leave entitlement is not inconsistent with the NES.

[97] Based upon the observations of the Full Bench in Hobson’s Bay concerning the decision of Commissioner Lee, I have some doubts about whether the RACV proposal for deduction from personal leave entitlements is consistent with the NES given that it will mean that employees may not be able to take 10 days of personal leave in the first two years of their employment. However, regard should also be had to the Sudhakhar example in the Explanatory Memorandum as an indicator of the legislative intention. General consideration of the conflict between the 10 day NES entitlement and the rate of deduction based upon ordinary hours worked, except in an RDO situation, is a matter which may be the subject of future consideration by a Full Bench of the Fair Work Commission. It is not necessary for me to make a decision about this matter given the findings I make subsequently about the proper interpretation of the Agreement. The dispute I am being asked to settle concerns the traditional meaning of the leave provisions of the Agreement and those provisions were generally developed prior to the NES.

[98] Given that the Agreement is silent about the rate of deduction, the arrangement under the Agreement whereby only 7.6 hours is deducted for each day taken is not inconsistent with the Agreement.

[99] Employees are understandably aggrieved at a change which will reduce the annual leave available to them in the future by an average of one or two days per year and reduce personal leave by the best part of a day each year. It is appropriate to prefer an interpretation of the annual leave and personal leave provisions of the Agreement which would “avoid inconvenience or injustice”. It is possible that it was the mutual intention of the parties that the annual leave provision of the Agreement operate so as to ensure that an employee can never receive less than five weeks annual leave and ten days personal leave. This would ensure that there was no possible disadvantage in respect to the period of leave when working the 21 day shift roster as compared to a 38 hour week roster. As demonstrated earlier this can only be achieved by deducting 7.6 hours when a whole day of leave is taken.

[100] The employees under the Agreement have not received an amount of annual leave and personal leave in excess of their entitlement under the Agreement. There has been no breach of the Agreement in respect to the amount of annual leave and personal leave allocated to the employees. The practice in respect to the rate of deduction from annual leave and personal leave entitlements has been in place for many years. When employees negotiated and voted on the annual leave and personal leave clauses in the Agreement and past agreements it was reasonable for them to assume that they were voting to maintain the current practices in respect to leave allocation and deduction.

[101] I accept that this is not the natural reading of the Agreement. The Full Bench decision in Hobson’s Bay suggests that the natural reading, unless the context suggests otherwise, is that the hours paid are the hours deducted or the average hours paid are the hours deducted. If this were not the case then one would expect to find some authority for the additional paid hours in the Agreement. That is, if only 7.6 hours is deducted the Agreement is silent as to the source of payment for the time between 7.6 hours and the actual rostered ordinary hours.

[102] I am satisfied that a plain reading of the words of the Agreement does not lead to a conclusion as to what the clause means in respect to the rate of deduction from annual leave and personal leave entitlements when leave is taken. I am satisfied that there is uncertainty about what the rate of deduction should be given that the Agreement is silent about this matter. I am satisfied that when the context is considered there are two competing interpretations which influence the proper construction of the Agreement:

[103] Neither approach is fanciful or implausible. As discussed earlier the dispute is one about what the provisions in respect to leave have traditionally meant. The evidence provided by the parties was insufficient for me to draw conclusions about the mutual intention of the parties when the annual leave and personal leave clauses were first introduced substantially in their present form. I am satisfied that it was the mutual intention of the parties not to change those entitlements when the clause was replicated in subsequent agreements including the Agreement.

[104] I am satisfied that it is uncertain what the rate of deduction should be under the Agreement.

[105] In summary I have not made a finding that the current practice and the proposed practices are inconsistent with the NES. The current practice is not in breach of the Agreement. As the clause is uncertain as to the rate of deduction I am unable to determine if the current practice is required by the Agreement and if the proposed practice would be inconsistent with the Agreement.

Conclusion in respect to long service leave.

[106] The situation in respect to long service leave must be considered separately. The entitlement in the Agreement is expressed in weeks whereas the entitlement to annual leave and personal leave are expressed in hours. The NES does not directly specify the long service leave entitlement in the way in which it does for annual leave and personal leave.

[107] Both the legislation and the Agreement envisage that long service leave is generally taken in periods of weeks not days. Clause 26.1(b) provides that the initial period of 13 weeks’ long service leave may be taken in two or three separate periods. This means that most of the long service leave will be taken in a period or in periods which exceed four weeks in duration. The Agreement also deals with a situation of an employee whose hours of work have changed or varied from week to week and provides for an averaging approach. If an employee takes long service leave in a block then the hours deducted for each week will average 38 whether or not the roster or the average weekly ordinary hours are utilized. I am satisfied that the taking of a short period of long service leave is a flexibility provision. The timing of when an employee takes personal leave is generally determined by external circumstance not employee preference. To some extent this can also apply to annual leave. However, an employee is not compelled to take their long service leave in shorter periods. For this reason I am satisfied that if the actual hours of absence on long service leave is deducted from the long service leave entitlement it does not generally conflict with the concept of 13 weeks long service leave. An employee can take their long service leave in a manner that will ensure that they receive 13 weeks after 15 years service.

[108] There is nothing inherently in breach of the NES and long service leave legislation for the deduction to reflect the ordinary hours taken off.

[109] I agree with the RACV that if only 7.6 hours is deducted in respect to each shift worked then this would result in 463.6 hours being deducted in a 13 week period of leave. The long service leave entitlement for a 13 week period of leave is 494 hours. Long service leave is paid for at the rate of an average of 38 hours per week when taken. The payment for the block of long service leave would be payment for 494 hours but only 463.6 hours would be deducted from the entitlement.

[110] Given that the Agreement is silent about the rate of deduction, the arrangement under the Agreement whereby only 7.6 hours is deducted for each day taken is not inconsistent with the NES. It is not a breach of the Agreement. The ASU submit that it was the mutual intention of the parties that the long service leave provision of the Agreement operate so as to ensure that an employee can never receive less than 13 weeks after 15 years service.

[111] The long service leave entitlement is expressed in weeks, there are severe limitations on the number of periods during which long service leave can be taken and unlike the situation with personal leave and to some extent annual leave the timing of the taking of long service leave is a matter for the employee. However, there are scenarios in which an employee will take long service leave in a manner which will result in them not achieving 13 weeks of long service leave under the RACV proposal. For the reasons discussed these scenarios will be less common than the common and likely scenarios which will mean that the 21 day shift worker will not achieve 5 weeks annual leave or 10 days personal leave under the RACV proposal.

[112] For the reasons discussed earlier the deduction of 7.6 hours for a whole day is a reasonable way to guarantee that employees receive five weeks of annual leave and 10 days of personal leave. In the worst case scenario by deducting 7.6 hours an employee will receive no more than five weeks of annual leave and 10 days of personal leave. As long service leave can only be taken in three periods it is not possible for long service leave to be exclusively taken in the weeks when only four shifts are rostered. In the worst case scenario only seven of the 13 weeks can be in such weeks. This would result in a total of approximately 483 hours being deducted rather than the entitlement of 494 hours. Therefore even in the worst case scenario the deduction of only 7.6 hours will result in the employee receiving an entitlement greater than 13 weeks of long service leave.

[113] I am not satisfied that it is reasonable to infer that the practice of deducting 7.6 hours is linked to reading the long service leave clause as requiring 13 weeks long service leave regardless of how the leave is taken. Such an approach will always result in the employee receiving more than 13 weeks long service leave and that is in direct conflict with the plain words of the Agreement.

[114] The meaning proposed by the ASU would be straining for an interpretation which goes beyond what the words are capable of sustaining.

[115] In summary the current practice is not inconsistent with the NES and is not a breach of the Agreement. The proposed practice is not inconsistent with the NES and the Agreement. It is not consistent with the proper interpretation of the long service leave clause of the Agreement to read it as requiring that only 7.6 hours be deducted for each day of long service leave taken.

How should the dispute arising under the Agreement about the matter of the rate of deduction from annual leave and personal leave entitlements be resolved?

[116] There are options available to the parties to deal with the uncertainty I have found exists about the rate of deduction of paid annual and personal leave under the Agreement. However, without limiting the rights of the parties to pursue those options under the Act, I consider that they are not the best way to resolve the dispute. In my view it is important for the uncertainty for both the employees and the RACV to be resolved without further delay.

[117] The changes which I have found are not prevented by the Agreement were the main focus of the presentation in October 2013. As discussed earlier the proposed changes to the rates of paid leave deduction were not the main focus and it was not specifically suggested that these matters would be the subject of change or retrospective adjustment. This contrasts with the other changes which the RACV foreshadowed may occur. It was understood that those matters may be subject to change. A clause was included in the Agreement under which the RACV could not be prevented from changing the matters which were directly linked to the averaging of wages under Clause 27.1(d) of the Agreement unless they were inconsistent with other provisions of the Agreement.

[118] The Agreement considered as a whole is comprehensive. It is more than 100 pages. It is reasonable to assume that it purports to cover all the main conditions of employment. Of course there are matters of policy and procedure which are not covered by the Agreement. However, I consider that the parties when reaching the Agreement and its predecessors considered that they were agreeing on the main conditions of employment including the paid leave entitlements. It is reasonable to assume that a significant change to paid leave would be the subject of bargaining.

[119] As shown earlier the change to paid leave entitlements for 21 day shift workers was not a major focus of the October 2013 presentation. The RACV took the position that the changes proposed were not the subject of detailed bargaining as they were simply a matter of the proper interpretation of the existing provisions of the Agreement. I am satisfied that employees would not have understood that the current leave deduction arrangements were something that lay outside of the sphere of the collective agreement. In other words they would have assumed that the leave provisions in the Agreement and its predecessors reflected their current entitlements. On the other hand the employees were aware that the annualised or averaged payment arrangements were subject to dispute and possible change. These are the matters which I have found the RACV is able to alter.

[120] I am satisfied that the most equitable resolution to the dispute about this matter is to determine that the status quo as to the deduction from paid annual leave and personal leave entitlements when employees on the 21 day roster take paid annual leave and/or personal leave be maintained until or unless the Agreement is replaced or varied. I so determine.

Mitigation.

[121] The impact on employees of the RACV proposal is reduced by my decision in respect to deduction when annual leave and personal leave is taken.

[122] The witnesses for the ASU have a number of concerns. One of the concerns relates to the possibility that they may be pursued in respect to alleged overpayments and/or that their existing accumulated leave entitlements might be changed. Some aspects of my decision may assist in the resolution of that matter.

[123] I am satisfied of the following in respect to the impact on employees of the proposed RACV changes which I have found to be consistent with the Agreement:

[124] The way in which payments will generally fluctuate from week to week is known and can be communicated to employees. I am satisfied by the modeling provided by the RACV that the only 21 day shift roster employees who will be worse off in respect to their annual income are those who take significant amounts of paid personal leave in a given year. This is not predictable. Therefore I cannot see the benefit of the proposed audit material unless the RACV is dealing with underpayment and/or overpayment issues. Calculations of how the changes would have impacted on the income of an employee in the previous year are not of any great assistance given that the key determinant of the extent to which an employee will be financially advantaged or disadvantaged by the change is the amount of paid personal leave that an employee may take. I am not satisfied that the amount of personal leave taken in one year is a good predictor of the amount which is likely to be taken in a subsequent year. I am satisfied that the best way to illustrate the likely impacts is through representative case studies of the sort which were included in the June 2014 presentation.

[125] I have found that the RACV can make the changes that they have sought with the exception of the alteration to paid annual and personal leave deductions. The changes which I have determined are not prevented by the Agreement will cause significant disruption and anxiety for employees. It is a significant change from the practice of 20 years. Employees’ pay will now fluctuate from week to week. This will affect regular deductions from bank accounts to pay bills and given that the employees are not highly paid it will affect budgeting for life’s necessities.

[126] I am satisfied that the variation in weekly payments will cause some difficulties for employees. Employees may be assisted by some general financial advice to enhance their capacity to handle this situation. However, I consider that the most important requirement is adequate notice and clear communication about the nature of the changes and their likely impacts.

[127] I am not persuaded that it is appropriate to make the orders sought by the ASU in respect to mitigation. However, I do consider it appropriate, as part of the resolution of the dispute, to determine that the following occur:

[128] I am satisfied that this decision is consistent with the parameters determined in the jurisdictional decision. These are also all matters which, in the circumstances, are consistent with the proper implementation of the consultation provision of the Agreement.

[129] I also recommend that the parties seek to resolve the approach to be taken to alleged underpayments and overpayments prior to the introduction of the changes. This would significantly decrease the level of anxiety in the lead up to any changes. The Fair Work Commission is available to assist the parties in respect to that matter if requested.

COMMISSIONER

Appearances:

Mr Y Bakri appeared for the ASU.

Mr D Trindade appeared for the RACV.

Hearing details:

2014

Melbourne

September 26 and 29

 1   [2014] FWC 5652.

 2   [2014] FWC 5652, at [54].

 3   Exhibit RACV 2, Attachments AM 2 and AM 4.

 4   Exhibit RACV 2 Attachments AM 2 and AM 4.

 5   Exhibit RACV 2 Attachment AM 6.

 6   PN362.

 7   Clause 4 of the Agreement.

 8   Clause 6 of the Agreement.

 9   Clause 6 of the Agreement.

 10   See for example Clause 34.6 of the Manufacturing and Associated Industries and Occupations Award 2010 and Clause 33.1(a)(iv) of the Building and Construction General On-site Award 2010.

 11   [2013] FWC 6861.

 12   [2012] FWA 1197.

 13   [2013] FWC 10161.

 14   [2012] FWA 3730.

 15   [2012] FWA 3730, at [85] and [86].

 16   [2014] FWCFB 2823.

 17   [2014] FWCFB 2823, at [39].

 18   Print M3222.

 19   [2012] FWA 3730, at [93].

 20   [2014] FWCFB 2823, at [41].

 21   Sudhakhar at page 65.

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