[2015] FWCFB 2881

The attached document replaces the document previously issued with the above code on 11 May 2015.

Paragraph [88] has been corrected to reflect an entitlement to 190 hours annual leave under the Agreement and five weeks’ annual leave under the NES.

Associate to Vice President Hatcher

Dated 17 December 2015

[2015] FWCFB 2881
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.604 - Appeal of decisions

RACV Road Service Pty Ltd
v
Australian Municipal, Administrative, Clerical and Services Union
(C2014/7606)

VICE PRESIDENT HATCHER
DEPUTY PRESIDENT GOSTENCNIK
COMMISSIONER CRIBB



SYDNEY, 11 MAY 2015

Appeal against decision [[2014] FWC 7241] of Commissioner Roe at Melbourne on 16 October 2014 in matter number B2013/1567.

Introduction and background

[1] RACV Road Service Pty Ltd (RACV) seeks permission to appeal and appeals a decision of Commissioner Roe issued on 16 October 2014 (Decision) 1. The Decision was made as a result of the exercise of arbitration powers provided for in clause 95, Disputes Procedure, of the RACV Roadside Assistance Centre Enterprise Agreement 2014-2017 (Agreement).2 The Decision arose out of an application by the Australian Municipal, Administrative, Clerical and Services Union (ASU) for the Commission to arbitrate a number of issues in dispute concerning the operation of the Agreement consequent upon RACV’s 2013 review of its payment system and its decision to “de-annualise” the payment of penalty rates. One of those issues concerned the amount of hours which should be deducted from the accrued leave entitlement of a shiftworker working a 21-day shift roster for each day taken off work for annual leave or personal/carer’s leave. The Commissioner concluded in relation to that issue that 7.6 hours should be deducted from the entitlement, regardless of the length of time the shiftworker was rostered to work on the day taken as leave. The RACV contends that the Decision was in error in this respect. It seeks that permission to appeal be granted, the appeal be upheld and the relevant part of the Decision quashed, and that this Full Bench determine the dispute on the basis that the deduction from the accrued leave entitlement of the shift work should be equivalent to the duration of the shift or shifts from which leave is taken.

[2] The background to the dispute may be stated shortly. Under the roster system in question, employees work 14 days in a 21 day roster cycle, with 6 days off (including weekends) and 1 unpaid rostered day off (RDO). The length of the shifts on rostered working days varies, but are always in excess of 7.6 hours. The total number of ordinary working hours across the cycle totals 114 so that there is an average working week of 38 hours. Such a roster system is permitted by clause 87.2(a) of the Agreement, which relevantly provides:

[3] In relation to a shift roster of this nature involving working hours which may vary from week to week, clause 27.1(d) of the Agreement allows for the averaging of wages as follows:

[4] Clause 27.1(a) provides that employees may be paid weekly, fortnightly or monthly at the option of RACV, and we were informed that shiftworkers on the 21-day roster are in fact paid fortnightly. As a result of the application of clauses 27.1(a) and (d), shiftworkers on the 21-day roster receive the same pay each fortnight, in accordance with an average of 38 ordinary hours, regardless of how many hours are actually worked in the fortnight. When annual leave or personal/carer’s leave is taken, the payment system remains the same - that is, the employee receives his or her normal pay based on an average of 38 hours per week, regardless of how many hours the employee would actually have been required by the 21-day roster to work. In effect, that means that if an employee takes a single day of annual or personal/carer’s leave, the employee will be paid 7.6 hours pay for the day, regardless of how many hours the employee would have worked on that day had leave not been taken.

[5] The entitlement of shiftworkers to annual leave, and the method by which such leave accrues, is dealt with in clause 15.1 of the Agreement as follows:

[6] The entitlement to “personal leave”, and the method of accrual, is dealt with in clause 16.1(a)-(c) of the Agreement as follows:

[7] The concept of “personal leave” in the Agreement is somewhat confusingly expressed. In the first sentence of clause 16, personal leave is said to consist of sick leave, carer’s leave and compassionate leave. However notwithstanding that the entitlement set out in clause 16.1 is said to be for “personal leave”, clause 16.2(a) permits employees to use their accrued “sick leave” as “carer’s leave”. Additionally, clause 16.7 establishes separate entitlements to compassionate leave. Reading these provisions together we consider that, notwithstanding the definition of “personal leave”, the entitlement in clause 16.1 is only for leave of a type that is equivalent to personal/carer’s leave in the National Employment Standards (NES), and that compassionate leave is dealt with separately in clause 16.7. On that basis, we shall refer to clause 16.1 as dealing with personal/carer’s leave.

[8] It may be noted that the above entitlements are expressed in terms of hours rather than days or weeks per year of service. At the time of the hearing before the Commissioner, RACV’s practice had been for many years to deduct 7.6 hours from a 21-day shiftworker’s annual leave or personal/carer’s leave entitlement for each day of such leave that was taken, regardless of how many hours the person was rostered to work on the relevant day(s) on which the leave was taken. RACV formed the view that this practice was not consistent with the Agreement or the Fair Work Act 2009 (FW Act) and that there should be deducted from the leave entitlement for each day of leave taken, the number of hours which the employee would have worked on the roster for that day. This was resisted by the ASU.

The Decision

[9] In the Decision in relation to the issue the subject of this appeal, the Commissioner stated certain conclusions about the NES provisions concerning annual leave and personal/carer’s leave as follows:

[10] The Commissioner then turned to the applicable provisions of the Agreement and, relevantly, said:

[11] After dealing with some decisions on the question to which the parties had taken him and reciting the parties’ submissions, the Commissioner stated his conclusions about the issue. He firstly identified the practical effects on deductions from accruals that would follow from the parties’ respective positions:

[12] The Commissioner then found that the current practices concerning deductions from annual leave and personal/carer’s leave entitlements were “not inconsistent with the NES” 3 and also “not inconsistent with the Agreement”.4 He also found that the approach contended for by RACV with respect to annual leave was also not inconsistent with the NES5, but declined to make the same finding with respect to personal/carer’s leave. The Commissioner then said:

[13] The Commissioner then reached the following conclusion:

Submissions

[14] RACV submitted that the Decision was attended by error in three respects:

[15] RACV submitted that as a result of these errors, the Commissioner’s overall conclusion that the deduction of 7.6 hours for each day of leave was not inconsistent with the NES or the Agreement was in error, and the outcome determined by the Commissioner was not one permitted by s.739(5) because it was inconsistent with the FW Act and the Agreement.

[16] The ASU submitted that it was open to the Commissioner to find that the Agreement was uncertain on the question of deduction from leave entitlements, and that this finding permitted the Commissioner to exercise his discretion to preserve the status quo until the Agreement was replaced or varied. An uncertainty was established once the Commissioner was satisfied that rival contentions concerning the interpretation of the Agreement were advanced and were arguable. The lack of a challenge by RACV to the key finding of uncertainty meant that the appeal had to be dismissed. In any event, the ASU submitted, the Commissioner did not err in the three respects contended for by RACV, in that:

[17] The ASU submitted therefore, contrary to the RACV’s submissions, the Commissioner was entitled to make the discretionary decision which he did. In the alternative, the ASU submitted that should permission to appeal be granted and the appeal upheld, the matter should be referred back to the Commissioner for consideration as to whether to modify the steps which he had directed the RACV to take to mitigate the effects upon employees of the other changes which he had approved, given that he had stated in paragraph [121] of the Decision that “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.”

[18] During the course of the hearing of the appeal, a suggestion was raised from the bench in the course of argument that a deduction method which involved 38 hours being deducted from the leave entitlement in the Agreement for every week of leave taken, regardless of whether four or five days would have been worked in the week, was one which was consistent with the way shiftworkers were paid for leave taken under the Agreement and avoided anomalies and unfairness for any party. The parties were invited to lodge further written submissions on this proposition. Both parties filed further submissions in which they rejected this proposition. RACV submitted that this proposition was not consistent with the proper construction of the leave provisions of the Agreement and did not remove the inequities which occurred when individual days of leave were taken on days with longer rostered shifts. The ASU adhered to its primary submission that the existing practice of deducting 7.6 hours for each working day taken off leave was the correct approach.

Consideration

The issues

[19] The identification of the correct method under the Agreement for the deduction from accrued entitlements upon leave being accessed gives rise, we consider, to two issues. The first issue is simply one of interpreting the leave provisions of the Agreement itself. The second, more complex issue concerns the interaction between the leave provisions of the Agreement and the NES entitlements to annual leave and personal/carer’s leave. In relation to this second issue, s.55 of the FW Act provides:

[20] Section 56 provides that a term of a modern award or enterprise agreement has no effect to the extent that it contravenes s.55. An enterprise agreement may contravene s.55(1) by excluding a NES provision without necessarily doing so in express terms. In Canavan Building Pty Ltd 6 the Full Bench said:

[21] Therefore the second issue to be determined is whether any of the leave provisions of the Agreement, properly interpreted, would in their operation result in employees not receiving in full their entitlements to leave under the NES and thereby having no effect by virtue of ss.55 and 56. If that is the case, the method of deduction will necessarily be derived directly from the NES itself.

Permission to appeal

[22] The resolution of the second issue concerning the interaction between the relevant leave provisions of the Agreement and the NES requires the NES provisions themselves to be properly interpreted. Because the question of the correct interpretation of the NES provisions is a complex one and has implications beyond the scope of this particular appeal, we consider that permission to appeal should be granted in the public interest.

The NES entitlements

[23] It is convenient to commence our consideration of this matter with an analysis of the proper effect of the NES entitlements to annual leave and personal/carer’s leave established by the FW Act. The NES provisions concerning annual leave are contained in Division 6 of Part 2-2. The basic entitlement is provided for in s.87(1) as follows (excluding the statutory note):

[24] The method of accrual is set out in s.87(2) as follows:

[25] As to the taking of annual leave, s.88 provides that annual leave may be taken for a period agreed between an employee and his or her employer, but that the employer must not unreasonably refuse to agree to a request by the employee to take paid annual leave. No minimum period for the taking of annual leave is specified, but s.89(1) appears to contemplate that the period may include a part-day:

[26] In relation to payment for annual leave taken during employment, section 90(1) provides:

[27] The entitlement to personal/carer’s leave, and the method of accrual, are set out in s.96 of the FW Act as follows:

[28] Section 99 deals with payment for personal/carer’s leave:

[29] Section 100 prohibits the cashing out of personal/carer’s leave except in accordance with cashing out terms included in modern awards or enterprise agreements under s.101. Section 101(2) sets out the requirements which apply to any such terms, including that the cashing out must not result in the employee’s remaining accrued entitlement being “less than 15 days”.

[30] The words “week” and “day” as used in the provisions concerning annual leave and personal/carer’s leave or elsewhere in the FW Act are not given any special definition by the FW Act. That immediately suggests that the words should be given their ordinary meaning unless the context dictates otherwise. The ordinary meaning of “week”, as stated in the Macquarie Dictionary 7, is relevantly as follows:

[31] The word “day”, as defined in the Macquarie Dictionary 8, has a number of alternate meanings, some of which are astronomical in nature. The relevant meanings appear to us to be as follows:

[32] Having regard to the immediate context in which the words are used - namely in relation to leave from work - we consider that a “week” of leave is to be understood as meaning an authorised absence from the working days falling in a seven day period, and a “day” of leave is an authorised absence from the working time in a 24 hour period. The immediate context does not suggest that “week” and “day” are used as special constructs to refer to a given number of paid ordinary working hours, as suggested by RACV.

[33] Looking at the broader context of the FW Act as a whole, both words are used in a variety of different contexts throughout the FW Act. For example, “week” is used in the following provisions:

[34] Similarly the word “day” is used in different contexts throughout the FW Act, for example:

[35] It is apparent from the examples above, and from the other provisions of the FW Act in which the words appear, that “week” and “day” are often used in contexts where they have no connection to any entitlement to payment. The inference one draws from such provisions is that “week” and “day” where used in the FW Act bear their ordinary meaning as descriptions of a calendar period of time. It is a principle of statutory interpretation that words and expressions in an Act are presumed to have the same meaning throughout the Act. 9 Therefore, unless there is a specific implication arising from the narrower context of the NES provisions concerning annual leave or personal/carer’s leave which dictates otherwise, “week” and “day” should be given their ordinary meaning where used within those provisions.

[36] RACV submitted that it was a necessary implication from the requirement, under ss.87(2) and 96(2) respectively, that annual leave and personal/carer’s leave accrue progressively during a year of service according to the employee’s ordinary hours of work, and that the quantum of the entitlement was necessarily to be understood as reduced, when used, by reference to the ordinary hours of work for which the employee is absent on leave. We do not consider however that that conclusion follows from the accrual provisions in ss.87(2) and 96(2). In the case of annual leave for example, the entitlement for employees who are not shiftworkers is expressed to be “4 weeks of annual leave”. The fact that the entitlement, so expressed, accumulates during the year according to the employee’s ordinary hours of work says nothing about the quantum of the entitlement itself. For example, a full-time employee who works 38 ordinary hours per week for four weeks will accrue one thirteenth of the annual entitlement of 4 weeks of leave. If the same employee works the 38-hour week on the basis that, in each 4 week period, the employee works 40 hours per week in the first 3 weeks and 32 hours in the 4th week, then under s.87(2) the weekly rate of accrual will be higher in the first 3 weeks than in the 4th week because of the greater number of ordinary hours worked. However the total accrual over the 4 week period will be the same. There is no logical reason to infer from this methodology that the entitlement itself is to be read, contrary to the ordinary meaning of the words actually used, as being constituted by a number of ordinary hours of work.

[37] As earlier stated, the Commissioner concluded in the Decision that the NES annual leave and personal/carer’s leave provisions did not deal with the rate at which annual leave and personal/carer’s leave is deducted when taken, and also that the NES did 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. While these propositions are, strictly speaking, correct in that the FW Act does not contain express provisions of the nature described, it does not follow that there is any lack of clarity in the statutory scheme. No such provisions are necessary because, when “week” and “day” are assigned their ordinary meanings, the position is entirely clear. The accrued entitlement is simply reduced by the amount of leave taken, so that if a week of leave is taken, the accrual of leave is reduced by a week, and if a day is taken, the accrual is reduced by a day. If, as RACV contends, the reduction in an employee’s accrued NES entitlement to annual leave or personal/carer’s leave when the employee takes a day off work will vary depending upon the number of ordinary hours that would have been worked that day, then one would expect the FW Act to contain provisions specifying this. The absence of any such provision tells against the construction of the NES provision propounded by RACV.

[38] The expression of the annual leave and personal/carer’s leave entitlements in the FW Act is distinctly different to that in the preceding Workplace Relations Act 1996 as it was immediately before the enactment of the FW Act. The Workplace Relations Act was amended by the Workplace Relations Amendment (Work Choices) Act 2005 to, among other things, establish for the first time a federal legislative annual leave prescription of general application. Section 232 of the Workplace Relations Act 1996, as so amended, expressed the entitlement to annual leave which was established in terms of hours. In relation to non-shiftworkers, the entitlement was expressed in s.232(2) as follows:

[39] The quantum of the entitlement to personal/carer’s leave in the Workplace Relations Act 1996 (as amended) was stated in subsections (1) and (2) of s.246 as follows:

[40] In neither case was the entitlement expressed as an annual entitlement or expressed in weeks or days, but rather as an entitlement reckoned in hours accruing with each four week period of leave. The position is thus distinctly different to that in the FW Act, and suggests a deliberate policy decision to abandon this mode of expressing the entitlements. At least with respect to annual leave, this intention is confirmed in the Explanatory Memorandum to the Fair Work Bill 2009. Paragraph 57 of the Explanatory Memorandum states:

[41] Whilst the intention to change the pre-existing system is clearly stated in the above passage, RACV sought to derive support for its submission from the reference to annual leave being “taken” as well as accrued on the basis of an employee’s ordinary hours of work. It is not entirely clear how this reference is to be understood, although it may be accepted that on one view it is consistent with RACV’s construction of the annual leave provisions. However, although under s.15AB(1) of the Acts Interpretation Act 1901 (Cth) the use of extrinsic material such as explanatory memoranda may be used “to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act” or to determine the meaning of a provision when it is “ambiguous or obscure” or where the ordinary meaning “leads to a result that is manifestly absurd or is unreasonable”, it may not be used as a substitute for or supplement to the text of the Act. 10 The NES statutory provisions do not express the annual leave entitlement in terms of an employee’s hours of work, and do not provide that annual leave when taken is to be debited by reference to ordinary hours of work. The provisions cannot be read as if altered by the Explanatory Memorandum. In this respect, we agree with the following analysis of Commissioner Lee in Australian Rail, Tram and Bus Industry Union and Australian Federated Union of Locomotive Employees v QR Limited T/A QR National11 concerning the above passage in the Explanatory Memorandum:

[42] The analysis of the NES annual leave provisions in paragraph [86] of the above decision was accepted as correct in the Full Bench decision in Australian Municipal, Administrative, Clerical and Services Union v Hobson’s Bay City Council 13 at least insofar as personal/carer’s leave is concerned.

[43] RACV also submitted that the following passage in the Explanatory Memorandum (following paragraph 386) concerning the NES annual leave entitlement supported the proposition that the entitlement was “translatable into hours”:

[44] We do not consider that the above passage supports the construction of the relevant NES provisions contended for by RACV. It is concerned with the accrual of and payment for annual leave. We have earlier discussed the accrual method in s.87(2), and there is nothing in the passage which is contrary to our analysis. In relation to payment for leave, there was no issue in the proceedings that s.90 requires an employee to be paid at the base rate for the ordinary working hours falling in the period of annual leave that is taken, and nothing in the above passage suggests otherwise. The reference in the passage, in the first example, to 2 weeks’ leave being equivalent to 76 hours and, in the second example, to 2 weeks’ leave being equivalent to 24 hours arises from the fact that in each example the same number of hours is worked each week. In cannot be extrapolated from this that if the number of hours worked each week varies according to a shift roster, a “week” of leave is to be read as meaning, not the actual working days falling within a given seven-day period during which leave is taken, but to a notional number of working hours derived from the employee’s average hours. The provisions in the FW Act do not say that this is the case, and neither does the Explanatory Memorandum.

[45] In relation to personal/carer’s leave, the Explanatory Memorandum (following paragraph 396) contains the following statement:

[46] The above passage confirms our analysis as to how accrual of personal/carer’s leave based on ordinary hours in s.96(2) operates. It also confirms the expression of the entitlement as being 10 days per annum (or two weeks), which does not vary regardless of the pattern or number of working hours in particular weeks. However the subsequent reference to “76 hours” creates some confusion, and was relied upon by RACV. It is best explained by reference to the example used, namely an employee who works 38 hours per week, but in any event it cannot operate to displace the expression of the personal/carer’s leave entitlement in s.96(1) as being in days. The reference to the payment method is simply a restatement of s.99.

[47] Following the above passage in the Explanatory Memorandum, three examples are provided to illustrate the intended operation of the “accrual and payment provisions” in respect of personal/carer’s leave:

[48] These examples are, again, consistent with our earlier analysis of the accrual methodology in s.96(2). The example of Sudhakar is instructive. His ordinary working hours vary from day to day. If he takes sick leave on any given day, the Explanatory Memorandum confirms that under s.99 he is entitled to be paid for the day he is absent for the number of ordinary hours he was rostered to work for that day. However, there is no suggestion in the example that the amount of his accrued entitlement that he has used in taking personal/carer’s leave for that day may vary depending upon the rostered ordinary hours of work for that day. Indeed it appears to be implicit in the example that, by taking one day off, he has used one day of his ten days’ entitlement. That is consistent with the ordinary and natural meaning of the expression of the personal/carer’s leave entitlement in s.96(1).

[49] The conclusion we draw from the NES provisions themselves, read in their statutory context, is that the words “week” and “day” as used in respect of annual leave and personal/carer’s leave entitlements bear the ordinary meanings to which we have earlier referred.

[50] In Canavan Building Pty Ltd 14 the Full Bench, in considering the meaning of the expression “paid annual leave” as it appeared in s.87(1) and the other NES annual leave provisions of the FW Act, took the view that it was entitled to have regard to the historical context of the development of annual leave as an employment entitlement in Australia as an aid to construction, consistent with the High Court decision in Construction Forestry Mining & Energy Union v Mammoet Australia Pty Ltd.15 The Full Bench said:

[51] We likewise consider that this same historical context may serve as a legitimate aid to answering the question of what constitutes a week of paid annual leave under s.87(1) and a day of personal/carer’s leave under s.96(1).

[52] In relation to annual leave, the foundational arbitral decisions of the Commonwealth Court of Conciliation and Arbitration expressed the prescription of annual leave as a number of days or weeks. In the 1936 decision of Printing and Allied Trades Employers Federation of Australia v Printing Industry Employees Union of Australia 16, the Court (Dethridge CJ) gave consideration to a claim that “each employee, including a piece-worker, shall be entitled to and be allowed two weeks’ leave on full pay in respect of each completed period of twelve calendar months service”.17 In considering the claim, the Court made reference to international standards as disclosed in a 1935 publication of the International Labour Office entitled “Holidays with Pay” and, somewhat curiously, gave particular focus to annual leave entitlements in the Labour Code of the Union of Soviet Socialist Republics. The Court said (underlining added):

[53] Notwithstanding the Court’s apparent assumption that workers under Stalin’s regime actually received any entitlements purportedly afforded by the Labour Code, this passage is useful because it clearly demonstrates that the Court equated a “fortnight’s leave” with two working weeks (of six days each) together with the Sundays that would normally be allowed off in any event. The Court went on, in the Commercial Printers Award which it made, to award an entitlement which it described in its decision as “annual leave for a week with full pay” (subject to a prospective and conditional date of effect) 18. The actual award provision ultimately made (as clause 9 of the award) expressed the entitlement, described as “Constant Service Leave or Bonus”, as follows (in subclause 9(a)):

[54] The one week’s leave referred to in the decision was thus expressed as one day of leave accruing for each two months of service, making a total of six days per year - equivalent to the then six-day working week. Subclause 9(b) allowed the employer to fix the time when the leave was given, provided that the leave was to be given in one continuous period within 15 months of the beginning of the period of service for which leave had accrued. Subclause 9(b) went on to provide:

[55] Subclause 9(c) referred to in the above provision operated to extend a period of annual leave by one day when any of the days in the period coincided with the paid public holidays provided for in clause 8 of the award. Thus, subject to this public holiday proviso, the above provision made it clear that a calendar period without work of one week counted as six days’ leave. This again aligns the concept of one week’s leave with the six-day working week.

[56] The six-day working week under clause 13 of the Commercial Printers Award 21 consisted of five 8-hour days, Monday to Friday, and a half or 4-hour day on Saturdays. However because the award provision only contemplated the leave entitlement being taken in one continuous period, no provision was required to specify the payment required to be paid for single days off. The leave was “on full pay”, meaning that the prescribed weekly wage was required to be paid.

[57] The Commercial Printers Award Case was regarded as establishing the principle of providing for paid annual leave in awards. In the Metal Trades Award Case of 1940 22 the Court (O’Mara J) followed the Commercial Printers Award Case in awarding the first paid annual leave provisions for the metal industry.23 However, the provision awarded was expressed in a different fashion. Both in the interim award that was then made, and in clause 20(a) of the Metal Trades Award made in 194124, the entitlement was expressed as follows:

[58] It may be noted that although the 1941 Metal Trades Award, like the Commercial Printers Award, provided for a 44 hour working week, clause 10(a) of the award gave the option of working those hours in five days, Monday-Friday, as well as six days, Monday-Saturday. That meant that the system in the Commercial Printers Award whereby leave was expressed as six working days, accruing at the rate of a day every two months, could not operate in the Metal Trades Award because it would effectively give more leave to a five day worker than a six day worker. That is the likely explanation for why the entitlement was differently expressed.

[59] The entitlement to seven days’ annual leave was standardised in a decision of the Full Court of the Court of Conciliation and Arbitration (Beeby CJ, Drake-Brockman J, Piper J and O’Mara J) in the Storemen and Packers Case. 25 In a brief judgment, the Court expressed the new standard entitlement in the following way:

[60] It is clear that the new standard broadly followed the Metal Trades Award prescription.

[61] In the Metal Trades Annual Leave Case 27 of 1945, the Court of Conciliation and Arbitration considered a claim to vary the Metal Trades Award and a number of other awards for “an extension of the present period of seven days’ annual leave to one of fourteen days”.28 The Full Court (constituted by Piper CJ, Drake-Brockman J, O’Mara J, Kelly J and Foster J) granted the claim, and made a statement setting out the principles to be applied “in all applications for an extension of the annual leave period from seven to fourteen days”.29 The statement set out a standard prescription for annual leave, the first three paragraphs of which provided as follows30:

[62] It is apparent from the above prescription that the quantum of leave is referring to consecutive calendar days, including days not normally worked, and not to working days.

[63] At about this time, some States introduced statutory entitlements to annual leave. The entitlement provided by the Annual Holidays Act 1944 (NSW) was expressed as being “an annual holiday of two weeks on ordinary pay”. The word “week” was defined in s.2(1) of that Act as follows: “‘Week’, in relation to any worker, means the worker’s ordinary working week.” Section 3(2) required the holiday to be given and taken “in two consecutive weeks or, if the worker and the employer so agree, in two separate periods and not otherwise”. Section 10A(2) of the Industrial Conciliation and Arbitration Act 1932-1945 (Qld) as amended by s.4 of the Industrial Conciliation and Arbitration Acts Amendment Act 1946 (Qld) provided for “an annual holiday on full pay” of “Not less than three weeks” in the case of seven-day shiftworkers (subject to a court decision otherwise) and “two weeks” in any other case. There was no definition of “week”. Both of these Acts appear to us to be based on the conception that a week’s annual holiday was constituted by leave from the working period required in a calendar week. That was, in substance, no different from the entitlement as expressed in the standard established by the Metal Trades Annual Leave Case.

[64] The Annual Holidays Act 1944 (NSW) was amended in 1958 to increase the entitlement to three weeks, without any change to the way in which the entitlement was expressed. The Metal Trades Award entitlement was increased to “twenty-one consecutive days leave” in 1963. 31 The increase to the current level of entitlement occurred for the most part in the early 1970s. The NSW Act was amended that year to increase the entitlement to 4 weeks (again, without changing the way in which the entitlement was expressed), and federally 4 weeks was adopted as the standard. This standard was expressed in clause 25 of the Metal Industry Award 1984 with respect to employees other than seven-day shiftworkers in the following way:

[65] Occasional difficulties emerged in the practical operation of this standard in the 1970s, 1980s and 1990s as a result of the reduction in weekly working hours to 38 or 35, the consequent introduction of variable daily working hours and rostered days off to accommodate these reduced hours, and the development of more complex rosters for shiftworkers. For example in Amalgamated Metal Workers' Union and others and Altona Petro-Chemical Company Limited and others 32 the Australian Conciliation and Arbitration Commission (Moore J, President, Robinson J and Mansini C) was required to clarify the annual leave entitlement for seven-day shiftworkers for whom, together with other employees employed by the employer, the introduction of a 35-hour week had been negotiated. The difficulty arose because the 35-hour week had been agreed to be implemented, not by the introduction of a standard 7-hour day, but rather across a roster cycle in which shifts were in excess of 7 hours on each working day but which included rostered days off so that weekly hours across the roster cycle averaged 35. The union contended that the shiftworkers remained entitled to 25 days off work as annual leave (that is, five working weeks’ leave including the extra week to which seven-day shiftworkers were entitled) not including any rostered days off. The employer contended that the shiftworkers should only be entitled to 22 days off work (being, we would infer from the decision, a mathematical outcome calculated to ensure that the total number of hours of leave would remain the same despite the rostered working days being in excess of 7). The Commission favoured the union’s position, concluding33:

[66] The effect of the above decision was that a day off work for annual leave was treated as a single day for the purpose of the entitlement regardless of the hours that the employee was rostered to work on that day.

[67] A similar result pertained in the 1993 Full Bench decision of the Industrial Relations Commission of New South Wales (Cahill VP, Maidment J and Buckley CC) in Health Administration Corporation v Public Service Association of New South Wales. 34 That matter concerned a reduction in working hours from 40 to 38, and the consequent introduction of a four week working cycle containing 19 working days of 8 hours each and a rostered day off. Salaries were paid as an equal amount every fortnight even though the number of working hours in each fortnight was not the same. The employer had adopted the administrative measure of counting leave in terms of hours rather than weeks or days, so that an employee who took as annual leave the 19 working days in the four week cycle was counted as having used the entire annual entitlement of 152 hours leave and a single day’s leave was counted as 8 hours off the entitlement. The Full Bench determined that this system was inconsistent with the leave entitlement conferred by the Annual Holidays Act 1944, saying35:

[68] It is clear that in the above passage the Full Bench understood “week” and “day” in their ordinary, calendar sense and not as terms of art signifying a particular number of working hours.

[69] In some cases during this period, however, award entitlements to annual leave were altered to express the entitlement either partly or wholly in terms of hours. For example in Re Electricity Commission (General Salaried Staff and Administrative Staff) Award 36 the Industrial Commission of New South Wales in Court Session approved a consent award variation to change the annual leave entitlement to an amount of hours consequent upon the introduction of a 35 hour week. The Commission described the variation which it approved as follows37:

[70] In the same decision, the Commission went on to consider a contested issue concerning a proposal which it described in the following terms 38:

[71] In relation to this issue, the Commission said (underlining added) 39:

[72] The Commission rejected the employer’s application and made an alternative award variation which confirmed the existing position as it had described above.

[73] In Transport Workers’ Union of Australia v Airport Fuel Services Pty Ltd 40, a Full Bench of the Australian Industrial Relations Commission (AIRC) dealt with an appeal from a decision to vary the Transport Workers' (Oil Companies) Award 1992 to change the expression of the annual leave entitlement of seven day shiftworkers from “five weeks” to “175 rostered ordinary hours” (reflecting the working of an average 35-hour week). The relevant union objected to the variation on the basis that the current five week prescription entitled employees under the award to 25 rostered shifts on leave per year, and that the conversion to hours meant that, in the context of variable shift lengths, it would have the result that some employees would receive less than 25 shifts on leave per year, and thus there would be a reduction to the safety net entitlement to annual leave. In dealing with the appeal, the Full Bench referred to the 1970 Full Bench decision (Electrical Trades Union of Australia v Altona Petrochemical Co. Pty. Ltd.41) in which the current entitlement of four weeks annual leave (and five weeks for seven day shiftworkers) was established. The Full Bench regarded this entitlement as requiring an actual five weeks off work as a minimum, but treated that for administrative purposes as equivalent to 175 hours, saying (underlining added)42:

[74] The Full Bench ultimately decided to vary the award to reflect annual leave provisions to be found in the Hydrocarbons and Gas Maintenance Employees Award 1988 which the Full Bench said “appear to us to deal equitably with this problem by providing an entitlement to five weeks annual leave but also providing for the operation of a banking system by way of administering that leave” 43.

[75] Another example of a dual system was that inserted by consent of all the parties in the Metal, Engineering and Associated Industries Award 1998 44:

[76] The above provision preserved the long-established position whereby the entitlement was expressed in terms of days, but offered the alternative of converting the entitlement to hours by agreement. The fact that this alternative facility required agreement involved a recognition by the parties that the primary entitlement could not automatically be converted to an hours entitlement and might not in all circumstances amount to the same thing.

[77] In 1993 in Western Australia, legislative change created a statutory entitlement to annual leave expressed in hours for the first time. Section 23(1) of the Minimum Conditions of Employment Act 1993 (WA) provided:

[78] The above provision was amended in 2002 to change the maximum number of hours to 152, to reflect a 38-hour week. However no change of this nature was made to the statutory entitlements to annual leave established in other States, which continued to express the entitlement in terms of weeks. As earlier stated, the next major development was when the Workplace Relations Act was amended to establish a federal statutory entitlement to annual leave that was expressed in hours rather than days or weeks.

[79] The history which we have described demonstrates that, historically, annual leave entitlements have been traditionally expressed in terms of weeks or days, and that this has been understood to mean calendar weeks, and individual working days within a calendar week. Such expressions have not been treated as aggregations of a fixed number of working hours. The interpretation of the FW Act provisions which we have preferred is consistent with this historical context.

[80] The position with respect to personal/carer’s leave (originating from sick leave) is somewhat more complex. Because the common law implied a contractual term for weekly employees that they were entitled to be paid during an absence from work due to illness 45, award prescriptions for sick leave were initially expressed as limitations on this implied term rather than as entitlements. The first federal prescription, awarded in 1922 in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd46 provided that “No employee shall be entitled to payment for non-attendance on the ground of personal ill-health for more than six days in each year” (noting that, as earlier observed, the standard working week at this time consisted of 6 days).

[81] Later award provisions began to express sick leave as an entitlement, but the mode of expression of that entitlement has historically been somewhat diverse. The various awards applying to the metal industry have always expressed sick leave, and subsequently “personal leave”, in terms of hours rather than days. 47 Other awards, particularly State awards, expressed the entitlement in terms of days. However, generally speaking, even where the entitlement was expressed in hours, the underlying intention appears to have been to guarantee a given number of days off work in the case of illness of the employee (and subsequently of a family member). For example, clause 7.2.2 of the Metal, Engineering and Associated Industries Award 199848 provided that, after the first year of service, an employee was entitled to 60.8 hours of paid personal leave, but in the case of an employee working the 38 hour week on the basis of working days of 8 hours or more with a rostered day(s) off in the work cycle, the equivalent entitlement was 64 hours - apparently in order to ensure that the employee was entitled to 8 actual days of personal leave per year. In the 2005 Family Provisions Case49 the model personal leave award clause approved by the Full Bench expressed the entitlement to use personal leave to care for sick family members in the following way: “An employee is entitled to use up to 10 days personal leave, including accrued leave, each year to care for members of their immediate family or household who are sick and require care and support or who require care due to an unexpected emergency, subject to the conditions set out in this clause” (underlining added).50 The historical context provides no support for the proposition that a personal/carer’s leave or sick leave entitlement expressed in days was to be understood as bearing a special meaning, namely a given number of working hours.

[82] Accordingly we conclude that in the NES provisions of the FW Act, a “week” of annual leave is an authorised absence from work during the working days falling in a seven day period, and a “day” of leave (whether of annual or personal/carer’s leave) is an authorised absence from the working time in a 24 hour period. We reject RACV’s submission that “week” and “day” are to be read as terms of art referring to a specific number of working hours that may not constitute an actual week or day in a given case. We further conclude that the amount of leave deducted from an employee’s leave balance necessarily correlates with the amount of leave taken, so that if a week’s annual leave is taken, a week is deducted from the employee’s accrued annual leave balance, and if a day of annual leave or personal/carer’s leave is taken, a day is deducted from the employee’s accrued annual leave or personal/carer’s leave balance.

Interpretation of the Agreement

[83] We have earlier set out the provisions of the Agreement which concern entitlements to annual leave and personal/carer’s leave. Unlike the NES, those entitlements are expressed in terms of “hours”. There is no special definition given to that expression in the Agreement, but read in the context of the leave provisions and having regard to the purpose of those provisions, we consider that it can only sensibly be understood as referring to ordinary hours of work from which an employee absents himself or herself when taking annual or personal/carer’s leave.

[84] The Commissioner concluded in the Decision, as stated above, that the Agreement did not contain any provision identifying what the deduction from accrued entitlements should be when leave was taken, and was therefore uncertain as to the issue. We do not, with respect, agree. As we stated in respect of the NES, the lack of any express provision concerning the deduction method does not mean that there is any uncertainty or lack of clarity on this issue. The inescapable inference must be that where accrued leave entitlements are utilised, the accrued amount of leave is reduced by the amount of leave taken. Where, as in clause 15.1(c) and clause 16.1, the quantum of the entitlement is expressed in terms of ordinary hours of work, it is self-evident that an employee’s accrued hours of leave will be reduced by the amount of ordinary hours of work during which the employee is absent on leave. Thus, if an employee is absent on a day on which he or she was rostered to work (say) 8 ordinary hours, the amount of the employee’s leave entitlement will be reduced by the amount of leave taken - that is, 8 hours. This is not to be confused with the issue of payment for the leave, which because of the averaging system of payment under the Agreement means that an employee will always be paid 7.6 hours for each working day’s absence on annual leave or personal/carer’s leave.

[85] It follows therefore that the practice of deducting 7.6 hours from an employee’s leave accrual balance for each day of absence, regardless of the amount of ordinary hours the employee was rostered to work on that day, is inconsistent with the Agreement. That conclusion is a function of the fact that the entitlements to annual leave and personal/carer’s leave in the Agreement are quantified by reference to hours rather than weeks or days. The interpretation of the Agreement advanced by RACV was correct, and the Commissioner erred in concluding otherwise.

Interaction between the NES and the Agreement

[86] However that is not the end of the matter because, as we have earlier indicated, it is necessary to consider the interaction between the NES and the Agreement - in particular, whether the leave entitlements in the Agreement, expressed as they are in terms of hours, operate to exclude the NES leave entitlements expressed in weeks and days.

[87] The problem may be illustrated by reference to the following common example of a roster which was referred to in both parties’ written submissions 51:

Week 1

Week 2

Week 3

TOTAL

Day

Hours

Day

Hours

Day

Hours

  

Sunday

Day off

Sunday

8.09

Sunday

7.84

  

Monday

Day off

Monday

8.34

Monday

8.09

  

Tuesday

8.09

Tuesday

8.34

Tuesday

Day off

  

Wednesday

8.09

Wednesday

Day off

Wednesday

8.34

  

Thursday

8.09

Thursday

Day off

Thursday

8.34

  

Friday

Day off

Friday

8.09

Friday

8.34

  

Saturday

8.09

Saturday

7.84

Saturday

Day off

  

TOTAL

32.36

  

40.7

  

40.95

114.1

[88] With respect to annual leave, all shiftworkers on this roster will be entitled, under the Agreement, to 190 hours of annual leave per year. However, depending on when the leave is taken, this may not amount to 5 weeks of annual leave as required by the NES for shift workers. For example, an employee who has accrued the full entitlement of 190 hours after a year of service cannot take 5 weeks of leave consisting of weeks 2, 3, 1, 2 and 3 of the roster because this would amount to over 195 hours of leave, which would be in excess of the entitlement. If leave is taken in shorter periods including single days (noting that clause 15.9 of the Agreement allows up to 5 single day periods of annual leave), a similar problem will arise because in all cases each rostered working day contains in excess of 7.6 hours.

[89] In relation to personal/carer’s leave, an employee in the first two years of employment who is, under the Agreement, entitled to 76 hours of personal/carer’s leave per year will never be able to access the full NES entitlement of 10 days per year. That is again because all working days are in excess of 7.6 hours. The problem does not, on this roster, arise with respect to employees who have more than two years’ service, because the Agreement allows for 91.2 hours of personal/carer’s leave per year for such employees. This will, in all cases, be in excess of 10 days under the above roster. However, that cannot be assumed to be the case for every type of shift work roster permitted by the Agreement. Clause 14(vi) of the Agreement permits up to 10 ordinary hours to be worked in a day. If a roster was constructed containing longer working days than the above roster, it may be the case, depending on when personal/carer’s leave needs to be accessed, that 91.2 hours is not sufficient to permit 10 days leave to be taken.

[90] The potential consequence of our analysis is that clause 15.1(a)-(c) and clause 16.1(a)-(b) of the Agreement, properly construed, exclude the provisions of the NES concerning annual leave and personal/carer’s leave entitlements contrary to s.55(1) of the FW Act, and therefore have no effect by virtue of s.56. The further potential consequence is that the issue which the Commissioner was required to determine, namely the deduction from an employee’s accrued leave balance that is to occur when annual or personal/carer’s leave is taken, is to be resolved by reference to our interpretation of the NES provisions. However because these issues did not arise in the submissions of the parties or during the hearing, we will not express any final conclusion about them at this stage. We have decided to give the parties an opportunity to make further submissions on this issue in the light of the conclusions concerning the proper interpretation of the NES provisions and the Agreement which we have stated. If the parties however consider that further conciliation of the matter would be appropriate at this stage before the appeal proceeds further, we will make a member of the Full Bench available for that purpose.

Conclusion

[91] We order and direct as follows:

al of the Fair Work Commission with the memeber's signature.

VICE PRESIDENT

Appearances:

B. Mueller and R. Thevathasan for RACV Road Service Pty Ltd.

Y. Bakri of counsel with F. Rothville for the Australian Municipal, Administrative, Clerical and Services Union.

Hearing details:

2015.

Melbourne:

10 March.

 1   [2014] FWC 7241

 2   In an earlier decision, [2014] FWC 5652, the Commissioner had found that clause 95 of the Agreement, when read with clause 96, provided for a power for the Commission to arbitrate. This decision was not appealed and was not challenged in the current appeal.

 3   Decision at [92], [96]

 4   Decision at [98]

 5   Decision at [93]

 6   [2014] FWCFB 3202

 7   Macquarie Online Dictionary

 8   Ibid

 9   See Qantas Airways Ltd v Transport Workers' Union of Australia (2011) 280 ALR 503; 211 IR 1 at [380] and the cases cited there.

 10   Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518 per Mason CJ and Wilson and Dawson JJ; Nominal Defendant v GLG Australia Pty Ltd (2006) 225 ALR 643 at [22] per Gleeson CJ, Gummow, Hayne and Heydon JJ and [82] per Kirby J.

 11   [2012] FWA 3730

 12   (2008) 235 CLR 619 at [99] per Crennan J

 13   [2014] FWCFB 2823 at [39]

 14   [2014] FWCFB 3202

 15   [2013] HCA 36 at [45], [52]-[59]

 16   (1936) 36 CAR 738

 17   Ibid at 746

 18   Ibid at 747

 19   Ibid at 760

 20   Ibid at 761

 21   Ibid at 762

 22   (1940) 43 CAR 406

 23   Ibid at 409

 24   (1941) 45 CAR 751 at 775

 25   (1941) 44 CAR 178

 26   Ibid at 179

 27   (1945) 55 CAR 595

 28   Ibid at 597

 29   Ibid at 597

 30   Ibid at 600

 31   (1963) 102 CAR 787

 32   (1975) 168 CAR 85

 33   Ibid at 87

 34   (1993) 49 IR 242

 35   Ibid at 249-250

 36   (1989) 27 IR 294

 37   Ibid at 296

 38   Ibid at 296

 39   Ibid at 297

 40   Print M3222, (1995) 60 IR 357

 41   25 IIB 2022

 42   (1995) 60 IR 357 at 362

 43   Ibid at 362

 44   Metal Industry Decision Print P9311 (11 March 1998) at p.61

 45   Cuckson v Stones (1858) 120 ER 902; Quill v Brunton (No 2) (1921) AR 44

 46   (1922) 16 CAR 231 at 285

 47   See e.g. (1941) 45 CAR 751 at 775

 48   M1913

 49   [2005] AIRC 692

 50   Ibid at Appendix 2, Attachment A, cl X.4.1

 51   The roster shows paid hours (i.e. excluding unpaid breaks), and is expressed in decimal proportion of hours.

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