[2018] FWC 4602
FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.739—Dispute resolution

McCain Foods (Aust) Pty Ltd
v
“Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)
(C2017/5127)

COMMISSIONER MCKINNON

MELBOURNE, 7 AUGUST 2018

Alleged dispute arising under an enterprise agreement – effect of redeployment on weekly wages – whether custom and practice.

Introduction

[1] At the request of the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU), McCain Foods (Aust) Pty Ltd (McCain) has applied to the Commission under section 739 of the Fair Work Act 2009 (Act) for assistance in relation to a dispute under the McCain Foods (Aust) Pty. Ltd. Ballarat Production Enterprise Agreement 2016 1 (the 2016 Agreement). The Agreement is a single enterprise agreement made by McCain and its production employees at Ballarat. The AMWU is covered by the Agreement.

[2] Section 739 of the Act empowers the Commission to deal with certain disputes under enterprise agreement dispute settlement terms. Clause 9 of the Agreement provides for conciliation of disputes. If conciliation fails to resolve the dispute, clause 9 requires the Commission to resolve disputes about the interpretation, application and/or implementation of terms of the Agreement by arbitration upon application by a party to the dispute. Conciliation in this matter failed to resolve the dispute and it is agreed that the Commission can deal with this dispute by arbitration under clause 9.

[3] The dispute is about the practice of ‘red circling’, where an employee who is transferred to a lower paying role has their current rate of pay maintained so that future wage increases are absorbed until the employees’ rate of pay is equivalent to the lower rate of pay for the new role.

[4] McCain and the AMWU have different views about the extent to which the Agreement permits ‘red circling’ of wages. The AMWU says that future wage rises apply to weekly wage rates that are preserved when an employee’s wage is ‘red circled’ following redeployment. McCain says that future wage increases are absorbed into the preserved weekly wage.

[5] The parties are also in dispute about whether ‘red circling’ is a custom and practice at McCain. The AMWU says there is no such custom and practice. McCain says that ‘red circling’ is a custom and practice preserved by clause 7.6 of the Agreement.

[6] The parties have agreed to the following questions for determination:

1. Under clause 12.1.10 of the 2016 Agreement, if an employee is redeployed following redundancy, is their weekly rate (award + over-award payment) maintained and subject to future wage increases under the Agreement or are those increases absorbed until the employee’s weekly rate is equal to the applicable Agreement weekly rate for the position?

2. What is the interaction of clause 12.1.10 and clause 7.6 of the 2016 Agreement?

3. Depending on the answer to 2 (above):

a. What is a custom and practice?

b. Is there a relevant custom and practice in relation to the ‘red circling’ of wages?

The Agreement and the incorporated award

[7] Clause 4.1 of the 2016 Agreement deals with the group of employees covered by its terms:

“4.1 The Agreement covers all permanent, part-time or casual hourly or weekly employees employed at McCain Foods (Australia) Pty Ltd's Ballarat site within the production areas, covered by the Food, Beverage and Tobacco Manufacturing Award 2010 whether they be members of the union or not.”

[8] Clause 7 of the 2016 Agreement deals with the interaction between the Agreement and the Food, Beverage and Tobacco Manufacturing Award 2010 2 (Award), which is incorporated in full, except to the extent of inconsistency with the Agreement:

“7.1 The terms of the Food, Beverage and Tobacco Manufacturing Award 2010 (as varied from time to time) or its successor Award/s, are incorporated into this Agreement, however the Company is committed to maintaining applicable Award and above-Award conditions enjoyed by the employees covered by this Agreement.

7.2 If an incorporated Award term (to the extent that the incorporated Award applies to a particular employee covered by this Agreement) is inconsistent with an express term of this Agreement, the express term of the Agreement shall prevail over the incorporated Award term, to the extent of the inconsistency.

7.3 Unless expressly provided for in this Agreement, any Facilitative Provisions (refer Clause 8 of the Award) or Award Flexibility terms (refer Clause 7 of the Award) shall not be used.

7.4 In this Agreement references to the Award shall mean ‘Award as incorporated into the Agreement' unless context requires otherwise.

7.5 Upon incorporating Award terms into the Agreement, the incorporated Award terms are to be read as altered with the appropriate changes, to make them provisions of the Agreement rather than provisions of the Award, e.g. the loading, penalties and allowances in the Award applies to the rates of pay due under the Agreement, not the Award rate.

7.6 Existing custom and practice payments and conditions of employment will continue to apply unless varied by this Agreement. Further, there will be no reduction in wages or conditions for the life of this Agreement.”

[9] Clause 7.6 is narrowed in scope by clause 19.13.6 of the 2016 Agreement, as follows:

“19.13.6 For the avoidance of doubt, the parties agree that 'pause breaks' and levels of labour resource in place at the time this Agreement is made, are not to be preserved or maintained under any 'custom and practice' claim.”

[10] Clause 20.1 of the Award sets out the classifications and minimum weekly and hourly wages for adult employees, with certain exceptions. The minimum weekly wage is an entitlement for employees performing 38 hours of work.

[11] Clause 11 of the 2016 Agreement deals with wage increases payable over the term of the 2016 Agreement and refers to the “Wage Rate Tables” in Schedule 1. Schedule 1 then sets out the classifications and wage rates for employees. The classifications are not defined in the 2016 Agreement. Instead, clause 38 of the 2016 Agreement provides that employees are to be classified according to the Award classification structure, with a transition to the corresponding Award classification level not to result in any resulting financial disadvantage to the employee concerned. In the same way as the Award, Schedule 1 contains six classification levels and “Level 5” is the ‘Standard Rate’:

[12] Clause 11.2.4 of the 2016 Agreement begins with the following sentence:

“In the event that an employee is underpaid, including overtime, allowances, loadings or penalties that should have been included within the pay week, the employee will notify the Company in writing.”

[13] The 2016 Agreement makes provision for overtime, shift loadings and penalties (clause 19). It does not deal generally with allowances and does not contain a leading hand allowance. Instead, Levels 4 and 5 each include a ‘leading hand’ role.

[14] Clause 26 of the Award contains a leading hand allowance for “a leading hand in charge of three or more people”. The allowance applies for all purposes of the Award and is as follows:

[15] Clause 12 deals with redundancy and at clause 12.1.10 provides as follows:

“12.1.10 Any such redeployment will be on the basis that the employee's weekly rate, comprising their award wage and over-award payment, will not be reduced as a result of that redeployment. Any Lead Hand Allowance (or equivalent) will however, be absorbed in any future wage rises.”

[16] For the purposes of superannuation, clause 22.2 of the 2016 Agreement defines “Ordinary Time earnings” as “an employee's award classification rate (Including supplementary payment where applicable), any over award payment, leading hand allowance, shift loading and Includes weekend and public holiday rates where the weekend day or public holiday is worked as part of the employee's ordinary hours of work.”

[17] Appendix 1 to the 2016 Agreement provides for a 7-day Continuous Shift Arrangement and Appendix 2 deals with a Prepared Foods Plant 3-Day Shift Arrangement. Relevant to those Appendices, clause 19.1.2 of the 2016 Agreement provides:

“All payments and conditions in the body of this Agreement apply to shift profile appendices unless in direct contradiction to a clause contained in the applicable shift profile Appendix.”

Agreed facts 4

[18] On 8 June 1994, the AMWU and McCain signed an agreement titled the McCain Foods (Aust) Ply Ltd Ballarat Retrenchment/Redundancy Agreement (the Redundancy Agreement). The Redundancy Agreement contained the following clause:

“9. Any such re-deployment will be in the basis that the employee's weekly rate, comprising their award wage and over-award payment, will not be reduced as a result of that re-deployment. Any Lead Hand Allowance will however, be absorbed in any future wage rises.

[19] The above clause was adopted as a term of Appendix 1 to the McCain Foods (Aust) Pty Ltd Union Collective Agreement 2007 5 (2007 Agreement). It has since been included in all subsequent enterprise agreements, namely the McCain Foods (Aust) Pty. Ltd., Ballarat Production Enterprise Agreement 20116 (2011 Agreement), the McCain Foods (Aust) Pty. Ltd. Ballarat Production Enterprise Agreement 20147 (2014 Agreement) and the 2016 Agreement.

[20] The clause, which became clause 12.1.10 of the 2016 Agreement, was amended in the 2014 Agreement to include the words “(or equivalent)” after the words “Lead Hand Allowance”. Clause 12.1.10 reads as follows:

“Any such redeployment will be in the basis that the employee's weekly rate, comprising their award wage and over-award payment, will not be reduced as a result of that redeployment. Any Lead Hand Allowance (or equivalent) will however, be absorbed in any future wage rises.”

[21] The wording of clause 12.1.10 has otherwise remained unchanged since it was first agreed in 1994.

[22] On 2 November 2011 , the AMWU notified the Commission of an alleged dispute with McCain in the following terms (with references to ‘the respondent’ as references to McCain):

“The respondent has ceased to operate the afternoon shift of the dinner line. Employees on the afternoon shift line will now be required to work on the day shift. This will entail a drop in wages for the effected workers. Further, many of the effected workers have special rates of pay associated with undertaking certain roles on the afternoon shift, for example, those workers who take on supervisory roles. The AMWU is advised that the transferring workers will not have their skill level and associate pay rate maintained.

Under clause 10 of the agreement the respondent is obliged to fulfil certain requirements when it makes a decision to introduce changes that are likely to have significant effects on employees. Clause 10(d) provides that the alteration of working hours is a change of this type. The respondent is therefore required to inter alia have discussions with the employees and their union concerning the introduction of the change, the effect of the introduction is likely to have on employees and measures to avert or mitigate the adverse effects of the change. The applicant is advised that these discussions have not taken place.”

[23] The 2011 dispute was settled in conciliation. The terms on which the dispute was settled included that the wages of 6 employees who were to be redeployed to lower paid positions would be “red-circled”.

[24] On commencement of negotiations for the 2016 Agreement, McCain included the following in its log of claims:

“Subclause 12.1.10 - change to provide for red-circling”

[25] The claim was discussed during bargaining meetings but was subsequently withdrawn by McCain.

[26] Thirteen employees are affected by the current dispute: Judith Ritchie, Judith Wren, Kim Powell, Vincent Cauchi, Grant Gillespie, Vicki Polkinghorne, Susan McInerney, Stephen Sutton, Ashley Phillips, David Pinder, Wayne Morgan, Phillip Devereux and Lucas Jenkins. Of these, the first six named employees have had their wages ‘red circled’. The remaining employees are subject to a proposal to ‘red circle’ their wages which at the time of hearing had not been implemented.

Consideration

[27] In The Australian Meat Industry Employees Union v Golden Cockerel Pty Limited 8, a Full Bench of this Commission set out the relevant principles to be applied in the construction of enterprise agreements. These principles were revised in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) v Berri Pty Limited.9 I adopt those principles for the purposes of this decision.

[28] The starting point is to consider the ordinary meaning of the words used, having regard to their context and evident purpose. The search is for the objective common intention of the makers of the enterprise agreement, having regard to the language used to give effect to their agreement.

[29] As will become evident, I consider the terms in dispute in this matter to have a plain meaning. Accordingly, I have not had regard to evidence of the surrounding circumstances as an aide to the interpretation of the Agreement in determining the dispute, except insofar as it is relevant to the question of whether a ‘custom and practice’ exists as discussed further below.

The effect of redeployment on an employee’s weekly rate

[30] Clause 12.1.10 is one of a series of rules regulating McCain’s ability to reduce the size of its Ballarat production workforce under the 2016 Agreement. The steps can be summarised as follows:

1. Attempt firstly to achieve the reduction through natural attrition (that is, not replacing employees who leave of their own accord and redeployment).

2. Identify the number of positions affected and consult with the union and employees, including by providing written information.

3. Provide for voluntary redundancies by calling for volunteers from the ‘department most affected by the proposed reduction’ and if there are not enough volunteers, expand the call ‘across the site’. If there are still not enough volunteers, ‘site wide’ seniority determines who is affected. If there are too many volunteers (either initially or after the call is expanded), selection of individuals for retrenchment is undertaken by McCain based on specified selection criteria including, but not limited to, seniority.

[31] An employee faced with the prospect of retrenchment who is instead redeployed because an alternative position has been created by the natural attrition and/or voluntary redundancy process set out above is covered by clause 12.1.10. The evident intention of clause 12.1.10 is to ensure that redeployment in those circumstances does not result in a reduction in an employee’s weekly rate of pay under the 2016 Agreement (their ‘pre-redeployment’ rate), with one caveat to which I will return shortly.

[32] The meaning of “weekly rate (award + over-award payment) is a reference to the 2016 Agreement rate of pay for the employee’s classification in Schedule 1 to the 2016 Agreement. That is clear from the fact that all employees under the 2016 Agreement are paid weekly at a rate that is over the Award, as the following table shows:

[33] The one exception to the requirement that wages not be reduced on redeployment under clause 12.1.10 is that any “Lead Hand Allowance (or equivalent)” is to be absorbed in future wage rises. The use of the word ‘however’ in this part of clause 12.1.10 emphasises the nature of the rule as an exception. For it to operate in a meaningful way, the starting point must be that any such payment or allowance paid prior to redeployment is also preserved as part of the employee’s weekly rate. That interpretation is consistent with the nature of a leading hand allowance as an ‘all purpose’ allowance. The purpose of the exception is that future wage increase adjustments are applied in a more limited way than would be otherwise be the case.

[34] It seems to me that the intention of the exception is to quarantine payments made in compensation for supervisory duties that will either no longer undertaken or are already compensated for in the weekly rate that applies to employee’s classification upon redeployment. The words ‘or equivalent’ should be taken to mean duties that are essentially the same as leading hand duties, such as team leader or supervisory duties.

[35] Seen in that context, clause 12.1.10 is clear on its terms. An employee’s weekly rate under the 2016 Agreement is to be maintained upon redeployment to a lower paid role. Future wage rises are to be calculated on the pre-redeployment rate. If, prior to redeployment, an employee is also paid an amount on account of leading hand or supervisory duties, that payment is also maintained. However, it is not included in the calculation of future wage rises for the employee until their actual weekly rate of pay aligns with the 2016 Agreement rate for their post-redeployment classification.

[36] The difficulty lies in determining the value of the amount attributable to “Lead Hand Allowance (or equivalent) duties”, remembering that the words “or equivalent” must be given some work to do.

[37] One obvious possibility is that it is the leading hand allowance in clause 26 of the Award. The Agreement does not exclude the leading hand allowance under the Award entirely. Indeed, it contemplates that there will be circumstances where leading hand allowance is payable, for example in clause 22. That would lead to an outcome as follows (based on current Agreement rates of pay, and assuming a further 2.5% increase):

Redeployment from Level 5a to Level 3a

A Level 5a employee was formerly classified as leading hand in charge of 11-20 employees. The relevant Award leading hand allowance is $54.75 per week.

Preserved Level 5a weekly rate $1243.51

Less leading hand allowance $54.75

Subtotal $1188.76

Level 3a weekly rate $1177.72

2.5% wage increase applied to

$1188.76 $29.72 (an effective 2.37% increase)

[38] However, the Wage Rate Tables in Schedule 1 to the 2016 Agreement (including classification titles prior to 1 July 2014) indicate that certain employees at least at Level 4a, 5a and 5b are required to undertake leading hand or equivalent duties for which they are compensated in the weekly rate of pay. They are not separately paid a “leading hand” allowance, because the 2016 Agreement prevails over incorporated Award terms to the extent of inconsistency and such an inconsistency is evidence in Schedule 1. 10 That said, there is no indication in Schedule 1 that any such duties are required of Level 3 employees or below under the 2016 Agreement and for those employees, no relevant inconsistency arises.

[39] An alternative construction is that the value of “Lead Hand Allowance (or equivalent)” is the difference between the 2016 Agreement rate paid in recognition of leading hand duties and the 2016 Agreement rate for the same role without leading hand duties. That would encompass both ‘lead hand allowance’ and its equivalent, but not necessarily at the value of the leading hand allowance in the Award. As to the actual value of that amount, the 2016 Agreement does not contain classification descriptions. Schedule B of the incorporated Award contains classification descriptions that roughly correspond with Levels 1 to 6 in the 2016 Agreement, but without distinguishing between Level (a) and (b) in each of Levels 2 to 6. Neither the 2016 Agreement nor the Award identifies the type of work that will be done by leading hands and their subordinates. Evidence in the matter supports the conclusion that such a distinction exists at least for some classifications, with employees having been redeployed from supervisory roles to similar roles without those duties. 11

[40] A third construction is that it is the difference between the weekly rate of pay for the classification that attracts leading hand or equivalent duties and the 2016 Agreement classification immediately below it. However, that construction does not account for the various other reasons an employee might be classified at a higher level, including the nature of their work and the degree of skill or experience required. It is not a construction I prefer.

[41] In my view, the answer lies in a combination of the first two possibilities described above. That is, for employees employed in roles that do not require supervisory duties, including those at Level 3 or below, it is any leading hand allowance that was payable immediately prior to redeployment under clause 26 of the Award. For Level 4a, 5a and 5b employees in a ‘leading hand role’ (and for Level 4b and 6 employees with supervisory duties) it is the difference between the 2016 Agreement rate for their classification and the 2016 Agreement rate for the same role without leading hand or equivalent duties.

[42] The result leads to what I consider the parties objectively intended to be the outcome of clause 12.1.10. That is, an employee’s weekly rate under the 2016 Agreement is maintained upon redeployment to a lower paid role, including any compensation for leading hand or equivalent duties. Future wage rises are calculated on the pre-redeployment rate of pay, adjusted in recognition that leading hand or equivalent duties will either no longer be undertaken or are already compensated for in the post-redeployment rate.

[43] As noted earlier, clause 12.1.10 applies to an employee faced with the prospect of retrenchment who is instead redeployed because an alternative position has been created by the natural attrition and/or voluntary redundancy process related to a reduction in the size of the Ballarat production workforce.

[44] I find that an employee who is redeployed under clause 12.1.10 is entitled to have their ‘pre-redeployment rate’ of pay under the 2016 Agreement maintained, including any leading hand allowance or equivalent payment then payable. Future wage increases are calculated on the ‘pre-redeployment’ rate of pay, excluding any part of that rate that is attributable to leading hand or equivalent duties, as follows:

1. For level 3 employees and below, the value attributable to leading hand duties is the leading hand allowance payable for their pre-redeployment role in accordance with clause 26 of the Award.

2. For Level 4a, 5a and 5b employees, it is the difference between the Level 4a, 5a or 5b weekly rate under the 2016 Agreement and the rate of pay for the same role without leading hand or equivalent duties. For example, the difference between the rate payable under the 2016 Agreement for a Senior Controller and a Process Controller.

3. For other employees, it depends on whether their Agreement classification contemplates the performance of leading hand or equivalent duties. If it does, the value is calculated as set out in (2) above. If not, it is the value of any leading hand allowance that was payable under the Award in addition to the employee’s ‘pre-redeployment rate’ immediately prior to redeployment.

The practice of ‘red circling’

[45] Clause 7.6 is also clear on its terms. It preserves existing custom and practice payments and conditions of employment “unless varied by the Agreement”. It is in those words that the interaction between clause 7.6 and other terms of the 2016 Agreement is revealed. If the 2016 Agreement deals directly with what might otherwise be described as a custom and practice payment or condition of employment, the express words of the 2016 Agreement prevail. Whether that is to the exclusion of the particular custom and practice or to the extent of inconsistency is a matter of interpretation, having regard to the nature of particular custom and practice and the words of the 2016 Agreement as a whole.

[46] To properly understand the interaction of clause 7.6 and clause 12.1.10, it is necessary to consider the meaning of ‘custom and practice’ in the context of the 2016 Agreement.

The meaning of ‘custom and practice’

[47] A Full Bench of the Commission recently considered the meaning of ‘custom and practice’ in Paull and Ors v Linfox Australia Pty Ltd. 12 The Full Bench confirmed that there is no set meaning for ‘custom and practice’, which will invariably depend on the use of the term in the context in which it is found and the nature of the dispute in question. It is not enough that something has been regularly done (or not done) in the past. In an industrial setting, it will often be something that emerged from an industrial arrangement or settlement that is acknowledged by those who were party to it. It might arise within a particular workgroup, which need not necessarily be the whole of the relevant workforce. What employees voting for an enterprise agreement understood to be embraced by any reference to ‘custom and practice’ in that agreement is a relevant consideration, including whether it can be said to be notorious among them. In the context of successive enterprise agreements, it may also be relevant to consider the development of the said ‘custom and practice’ and how it survived in the context of each agreement.

[48] The principles enunciated by the High Court in Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd 13 (Con-Stan) are to be applied in disputes over whether a ‘custom and practice’ has led to implied terms in employees’ contracts of employment. Where the dispute is over an industrial custom and practice, not connected to any contractual controversy, it will be inappropriate to apply the principles in Con-Stan without modification to the interpretation of an enterprise agreement.

[49] In the present case, the reference to ‘custom and practice’ is found in clause 7.6 of the 2016 Agreement, which was first adopted by the parties in clause 5.5 of the 2011 Agreement signed by McCain and the AMWU on 30 November 2011. That was immediately after the 2011 dispute about ‘red circling’ was settled in conciliation on 29 November 2011. 14

[50] Clause 7.6 of the 2016 Agreement, which first appeared in its present form in the 2014 Agreement, is located in the part of the agreement dealing with the relationship between the 2016 Agreement, the Award and other “Instruments”. “Instruments” is not defined in the 2016 Agreement but the concept has a well-established meaning in workplace relations. In the Act a “workplace instrument” is an instrument that is made under, or recognised by, a workplace law concerning the relationships between employers and employees. 15 In clause 7 of the 2016 Agreement, it would include “successor Award/s” referred to in clause 7.1.

[51] Clause 7.6 preserves certain “existing custom and practice payments and conditions of employment” although it does cover pause breaks or manning levels at the time the 2016 Agreement was made, as clause 19.13.6 makes clear. A custom and practice payment or condition of employment that did not exist at the time the 2016 Agreement was made is not covered by clause 7.6. Similarly, clause 7.6 does not cover a custom and practice that is not also a “payment or condition of employment”.

Is there a relevant custom and practice in relation to the ‘red circling’ of wages?

[52] For the purposes of this dispute, ‘red circling’ means that an employee who is transferred to a lower paying role has their current rate of pay maintained with future wage increases absorbed until the employees’ rate of pay is equivalent to the new, lower rate of pay. It is important to note from the outset that this definition could apply in a range of circumstances that includes, but is not limited to, redeployment following redundancy under clause 12.1.10. It might, for example, include a change of shift arrangements under clause 19 and Appendixes 1 or 2 of the 2016 Agreement.

[53] To be a custom and practice covered by clause 7.6, ‘red circling’ must have existed at the time the 2016 Agreement was made, and it must involve a “payment or condition of employment”. It is clear that ‘red circling’ involves payment of an above Agreement rate of pay for a period in certain circumstances. It can properly be described as dealing with a payment or condition of employment.

[54] I am satisfied on the evidence that McCain had adopted a practice of red circling prior to the 2016 Agreement. So much is clear from the letters to employees after the 2011 dispute 16 and then again in June 2015.17 This practice emerged from the settlement of the 2011 dispute between McCain and the AMWU, who are also the parties to this dispute. The 2011 dispute was about a proposal to transfer employees from afternoon to day shift, involving a change in working hours and for some employees, loss of pay associated with loss of supervisory duties.18 The outcome of the 2011 dispute was an agreement that McCain could ‘red circle’ the wages of affected employees.19 Importantly, the 2011 dispute was not about redundancies resulting from a reduction in the size of the Ballarat workforce. It was not about the matters dealt with in Appendix 1 of the 2011 Agreement, which contained the then equivalent to clause 12 of the 2016 Agreement.

[55] It is less clear what employees understood to be the position in relation to ‘red circling’. Grant Gillespie gave evidence that he did not know what it was before he was told about it in 2015, although the available inference is that the union delegate he asked about it did. 20 Susan McInerney referred to the “track record” of McCain not red circling other wages,21 suggesting at least a familiarity with the concept prior to 2015. Vicki Polkinghorne did not remember ‘red circling’ being mentioned when she was called into a meeting in 2015 and told of her redeployment22, while Vincent Cauchi did remember ‘red circling’ being discussed in what appear to be the same series of meetings at that time.23 John Letcher referred to an even earlier dispute about ‘red circling’ approximately 10 years ago, although no other evidence of that dispute was before me.24 Letters to some of those employees confirm that ‘red circling’ was in fact advised to them between 1 and 19 June 2015.25 When asked in the hearing about what they understood ‘red circling’ mean, employees were able to give a concise description of the concept without assistance.26

[56] Of course, it is not necessary to show that employees accepted such a custom and practice or that they actually had knowledge of it. If that were so, one could easily defeat a claim reliant on custom and practice by denying its existence. A better guide is how well known the said custom and practice is. There is no doubt that after 2011, McCain considered ‘red circling’ to have been agreed with the AMWU and thus a matter that was generally understood and accepted for and on behalf of its employees. While Angela McCarthy of the AMWU did not recall the 2011 dispute, I am satisfied that she was involved in the settlement of that dispute 27 and that she was aware of ‘red circling’ having been adopted as a practice by McCains at least from that time. As she conceded, “when someone transferred of their own volition, red circling happened”.28 I also accept Mr Neylon’s evidence that when red circling occurred in 2015, it was done with the agreement of the AMWU.29

[57] It is relevant that clause 7.6 was retained when the 2016 Agreement was made, as were relevant terms of the 2011 Agreement dealing with shift transfers (clause 19) and redundancy (with Appendix 1 consolidated into clause 12 from 2014 onward).

[58] On balance, I consider that both the AMWU and employees at McCain were acquainted with the concept under the 2011 Agreement, including that it occurred from time to time when relevant circumstances arose, and notwithstanding that some of the affected employees were (and/or are) unhappy about its effect on them individually.

[59] Those circumstances were, in 2011, a decision to cease afternoon shift on the Dinner Line and in 2015, decisions to reduce pizza production and to change resourcing in the grading room. 30 In the latter case, 8 fixed term contracts were terminated and other affected employees were transferred from afternoon to day shift, with some being assigned to different roles. In 2015, employees were reallocated to different roles and shifts. I am satisfied on the evidence that employees knew about the practice of ‘red circling’ at the time the 2016 Agreement was made.

[60] I find that ‘red circling’ in connection with shift transfers and reallocation of duties is a custom and practice payment or condition of employment within the definition of clause 7.6 of the Agreement.

How does clause 12.1.10 affect the custom and practice of ‘red circling’?

[61] Clause 12.1.10 provides for ‘red circling’ in a more limited way than the custom and practice adopted by McCain and the AMWU in 2011. That is, it provides only for the absorption of leading hand or equivalent payments, in the manner described above. It provides for absorption only in the circumstances described in clause 12, where a need to reduce the size of the Ballarat workforce triggers a process resulting in redeployment.

[62] To the extent that ‘red circling’ occurs because McCain is required to reduce the size of the Ballarat workforce, and the conditions in clause 12 are met, clause 12.1.10 applies and prevails to the extent of inconsistency. In that scenario, red circling can occur but only in the more limited way described.

[63] In circumstances where ‘red circling’ does not result from the scenario contemplated by clause 12, clause 12.1.10 has no work to do and does not limit the extent to which future wage increases can be absorbed. That would be the case, for example, if employees agreed to move to a 7 day continuous shift roster under Appendix 1 to the 2016 Agreement, which expressly deals with the procedure to be adopted and places a prohibition on redundancies. 31

Conclusion

[64] Under clause 12.1.10 of the 2016 Agreement, if an employee is redeployed following redundancy in the circumstances described in clause 12, future wage increases are payable on their ‘pre-redeployment rate’, calculated as the relevant 2016 Agreement weekly rate less the value of any leading hand allowance or equivalent payment, calculated in the manner described above.

[65] Clause 12.1.10 varies clause 7.6 to the extent of inconsistency. In practical terms, clause 7.6 has no work to do where clause 12.1.10 applies because the express terms of clause 12.1.10 vary what is otherwise an accepted custom and practice when an employee is redeployed as a result of a reduction in the size of the workforce.

[66] There is no set meaning of ‘custom and practice’. Rather, the meaning depends on the context in which the term is found and the nature of the particular dispute. In this case, there is a relevant custom and practice in relation to ‘red circling’ of wages under the 2016 Agreement. That custom and practice applies except in the circumstances described in clause 12.1.10.

[67] The dispute is determined accordingly.


COMMISSIONER

Appearances:

A Dalton for McCain Foods (Aust) Pty Ltd

K Johnston for the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union” known as the Australian Manufacturing Workers’ Union (AMWU)

Hearing details:

2018.

Melbourne:

April 28, May 20.

Printed by authority of the Commonwealth Government Printer

<PR609719>

 1   AE423477

 2   MA000073

 3   Award Allowances Sheet, ma000073 Republished 29 June 2018

 4   Statement of Agreement Facts, 30 May 2018

 5   AG830054

 6   AE889842

 7   AE412101

 8   [2014] FWCFB 7447

 9   [2017] FWCFB 3005

 10   2016 Agreement, clause 7

 11   Exhibit 6, Statement of Phillip Devereux; Exhibit 11, Statement of Susan McInerney; Exhibit 16, Statement of David Pinder, Attachment DP-3

 12   [2018] FWCFB 1563

 13   (1986) 160 CLR 226

 14   Exhibit 8, Outline of McCain’s Submissions, Attachment DA-2

 15   Fair Work Act 2009 (Cth), s.12

 16   Exhibit 8, Outline of McCain’s Submissions, Attachment DA-2 (dated 14 December 2011)

 17   Exhibit 8, Outline of McCain’s Submissions, Attachment RC-1 (dated 2 June 2015)

 18   Exhibit 8, Outline of McCain’s Submissions, Attachment DA-1 (dated 2 November 2011)

 19   Exhibit 8, Outline of McCain’s Submissions, Attachment DA-2 (dated 14 December 2011)

 20   Exhibit 19, Statement of Grant Gillespie at [7]

 21   Exhibit 11, Statement of Susan McInerney

 22   Exhibit 13, Statement of Vicki Polkinghorne at [9]

 23   Exhibit 2, Statement of Ross Kenna at [9]

 24   Audio recording of hearing on 28 April 2018

 25   Exhibit 19, Statement of Grant Gillespie, Attachment GG-1 (dated 1 June 2015); Exhibit 13, Statement of Vicki Polkinghorne, Attachment VP-2 (dated 19 June 2015); Exhibit 12, Statement of Vincent Cauchi, Attachment VC-1 (dated 1 June 2015); Exhibit 17, Statement of Judith Ritchie, Attachment JR-1 (1 June 2015); Exhibit 20, Statement of Judith Wren, Attachment JW-1 (dated 1 June 2015); Exhibit 18, Statement of Kim Powell, Attachment KP-1 (dated 1 June 2015); Exhibit 8, Outline of McCain’s Submissions, Attachment RC-1 (dated 2 June 2015)

 26   Audio recording of hearing on 28 April 2018 (Evidence of John Letcher, Gayle Cavanagh and Phillip Deveraux)

 27   Exhibit 8, Outline of McCain’s Submissions, Attachment DA-3

 28   Audio recording of hearing on 28 April 2018

 29   Exhibit 7, Statement of Brian Neylon

 30   Exhibit 8, Outline of McCain’s Submissions, Attachment RW-1; Exhibit 7, Statement of Brian Neylon

 31   2016 Agreement, Appendix 1, clause 17.3.12