1
Fair Work Act 2009
s.185 - Application for approval of a single-enterprise agreement
Canavan Building Pty Ltd
(AG2013/10430)
JUSTICE ROSS, PRESIDENT
VICE PRESIDENT HATCHER
SENIOR DEPUTY PRESIDENT ACTON
COMMISSIONER CARGILL
COMMISSIONER WILSON MELBOURNE, 29 MAY 2014
Application for approval of the Canavan Building Pty Ltd Enterprise Agreement 2013.
Introduction
[1] Mr Irving Warren, a bargaining representative for Canavan Building Pty Ltd
(Canavan), an employer, has applied under s.185 of the Fair Work Act 2009 (the Act) for
approval of the Canavan Building Pty Ltd Enterprise Agreement 2013 (the Agreement). In
order for an enterprise agreement to be approved, the Fair Work Commission must be
satisfied of certain matters that are specified in the Act. One of those requirements is that
contained in s.186(2)(c) as follows:
Requirements relating to the safety net etc.
(2) The FWC must be satisfied that:
…
(c) the terms of the agreement do not contravene section 55 (which deals
with the interaction between the National Employment Standards and
enterprise agreements etc.);…
[2] Section 55 of the Act relevantly provides:
(1) A modern award or enterprise agreement must not exclude the National
Employment Standards or any provision of the National Employment
Standards.
...
(4) A modern award or enterprise agreement may also include the following kinds
of terms:
(a) terms that are ancillary or incidental to the operation of an entitlement
of an employee under the National Employment Standards;
[2014] FWCFB 3202
DECISION
E AUSTRALIA FairWork Commission
[2014] FWCFB 3202
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(b) terms that supplement the National Employment Standards;
but only to the extent that the effect of those terms is not detrimental to an
employee in any respect, when compared to the National Employment
Standards.
Note 1: Ancillary or incidental terms permitted by paragraph (a) include (for
example) terms:
(a) under which, instead of taking paid annual leave at the rate of pay
required by section 90, an employee may take twice as much leave at half that
rate of pay; or
(b) that specify when payment under section 90 for paid annual leave must
be made.
Note 2: Supplementary terms permitted by paragraph (b) include (for example)
terms:
(a) that increase the amount of paid annual leave to which an employee is
entitled beyond the number of weeks that applies under section 87; or
(b) that provide for an employee to be paid for taking a period of paid
annual leave or paid/personal carer's leave at a rate of pay that is higher than
the employee's base rate of pay (which is the rate required by sections 90 and
99).
Note 3: Terms that would not be permitted by paragraph (a) or (b) include (for
example) terms requiring an employee to give more notice of the taking of unpaid
parental leave than is required by section 74.
[3] An issue has arisen as to whether the Agreement contains provisions which exclude
those entitlements and provisions of the National Employment Standards (NES) which
concern paid annual leave. Because there have been conflicting decisions relevant to this
issue, including a decision of a Full Bench of this Commission and a judgment of the Federal
Court, Mr Warren’s application for approval of the Agreement was on 28 March 2014
referred by the President of the Commission to this Full Bench for determination pursuant to
ss.582 and 615 of the Act.
[4] Directions were issued which permitted the Commonwealth and any Peak Industry
Council (the ACCI, Ai Group and the ACTU) to file written submissions. The ACCI, Ai
Group and the ACTU availed themselves of this opportunity and filed written submissions.
The hearing of the application took place on 1 April 2014, and oral submissions were received
from Mr Warren, the ACCI, Ai Group and the ACTU. The Commonwealth did not make any
submissions and did not appear at the hearing.
Relevant provisions of the Agreement
[5] In broad terms, the Agreement provides that annual leave is to be paid for as a loading
upon or incorporated into the hourly rate of pay, so that rather than being paid for annual
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http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#unpaid_parental_leave
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#employee
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s99.html
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s90.html
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http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#paid_annual_leave
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http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#employee
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s87.html
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http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s90.html
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leave at the time that such leave is taken, annual leave is notionally paid for in advance as a
component of the payment made for work performed. The general concept is described in
clause 9.3 of the Agreement as follows:
“9.3 This agreement provides for workers to be engaged on a fixed hourly rate which
includes payment in advance for some entitlements arising under the National
Employment Standards.”
[6] Clause 41 deals with annual leave entitlements under the Agreement in the following
terms:
“41 Annual Leave
41.1 An employee other than a casual is entitled to annual leave in accordance with the
National Employment Standards. It is noted that payment for annual leave is made
progressively in advance and is incorporated into the wage rate prescribed by clause
35of this agreement, together with the annual leave loading prescribed by the award.
41.2 An employee is required to take at least two weeks annual leave each year.
Unless alternative arrangements are approved in advance, annual leave shall be taken
during the industry shut down over the Christmas/New Year period.
41.3 In the absence of agreement on a mutually convenient time for taking leave, the
employer may give at least fourteen days notice of the commencement of leave or part
of leave which is due to the employee.”
[7] Appendix B identifies the wage rates payable under the Agreement. As a general
concept, Appendix B establishes a single hourly rate for all employees which is intended to
incorporate payment for all entitlements arising under the relevant modern award (the
Building and Construction General On-site Award1) and the Act, including the base award
rate of pay, overtime, meal allowances, crib time, annual leave, redundancy, personal leave
and fares allowances. Clause 1 of Appendix B explains the general concept as follows:
“1.1 A total rate which does not disadvantage the employee when compared with the
benefits of the award and the Fair Pay Standard has been achieved by calculating
the gross annual benefits arising from the award and standard. That amount has
been divided by the nominal hours for which an employee would be paid in one
year. The nominal hours are 38 hours per week for 52 weeks plus the hours of
overtime typically worked in one year.”
[8] Clause 7.1 of Appendix B sets out the specific calculation of the “Annual Leave
Factor” in the hourly rate of pay:
“7.1 The 28 continuous days pay for annual leave, BCGOA clause 32.1, is already
included in the total hours worked, but because employees must fund any time
not worked an additional 4 weeks pay is included, plus the annual leave loading,
BCGOA clause 32.7:
1 MA000020
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4 weeks x 38 = 152 hours plus 4 x 38 x 17.5% = 26.6 hours 178.6 hours.”
[9] Clause 9.1 of Appendix B deals with the “Personal Leave Factor” in a similar way:
“9.1 The BCGOA clause 39 provides for personal leave comprising sick leave,
bereavement leave and carer’s leave. Because the employee must fund absences
from work the maximum annual benefit of 12 days leave has been included: 12 x
7.6 = 91.2 hours”
[10] The actual rates payable under the Agreement on the basis of the above methodology
are set out in clause 14 of Appendix B:
“14 Wages Schedule NB for apprentices see clause 39
Canavan
Level
Base Rate
$ per hour
Safety
Allowance
Canavan
Building
Allowance
Total Rate
Per Hour
1 $26.35 $0.50 $1.00 $27.85
2 $27.40 $0.50 $1.00 $28.90
3 $29.75 $0.50 $1.00 $31.25
4 $29.75 $0.50 $2.00 $32.25
5* $29.75 $0.50 $4.00 $34.25
6* $29.75 $0.50 $5.00 $35.25
* Includes an allowance for leading hand duties”
[11] Clause 16 of Appendix B identifies how wage increases are payable under the
Agreement:
“16 Wage Increases
To ensure that wages retain their relativity to the award, the base rate shall be
reviewed on each anniversary of the approval of this agreement and the total rate
increased by $0.50 (fifty cents) per hour or the same hourly amount as any increase
which has occurred in the award rate for the relevant classifications, whichever is the
greater.”
[12] Finally, clause 19.2 of Appendix B confirms the incorporation of a payment in
advance for annual leave in the hourly rate as follows:
“19.2 The hourly rate incorporates payment in advance for annual leave, which shall
be taken in accordance with clause 40 of this agreement.”
NES annual leave provisions
[13] The scheme of provisions which establishes the statutory entitlement to annual leave is
set out in Division 6 of Part 2-2 of the Act. Section 87(1) identifies the basic entitlement in
the following terms:
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Amount of leave
(1) For each year of service with his or her employer, an employee is entitled to:
(a) 4 weeks of paid annual leave; or
(b) 5 weeks of paid annual leave, if:
(i) a modern award applies to the employee and defines or
describes the employee as a shiftworker for the purposes of the National
Employment Standards; or
(ii) an enterprise agreement applies to the employee and defines or
describes the employee as a shiftworker for the purposes of the National
Employment Standards; or
(iii) the employee qualifies for the shiftworker annual leave
entitlement under subsection (3) (this relates to award/agreement free
employees).
[14] Section 87(2) identifies the method of accrual of the annual leave entitlement:
(2) An employee's entitlement to paid annual leave accrues progressively during a
year of service according to the employee's ordinary hours of work, and
accumulates from year to year.
[15] The expression “paid annual leave” as used in s.87 (and elsewhere in Division 6 of
Part 2-2) is defined, not particularly helpfully, in s.12 as follows:
"paid annual leave" means paid annual leave to which a national system employee is
entitled under section 87.
[16] Section 88 specifies the circumstances in which annual leave may be taken by an
employee:
Taking paid annual leave
(1) Paid annual leave may be taken for a period agreed between an employee
and his or her employer.
(2) The employer must not unreasonably refuse to agree to a request by
the employee to take paid annual leave.
[17] Section 89, which it is not necessary to set out in full, provides that an employee is
taken “not to be on paid annual leave” if “the period during which an employee takes paid
annual leave” includes a public holiday, a period of any other leave, or an absence from
employment under Division 8 of the Act. Section 90 then deals with payment for annual leave
as follows:
Payment for annual leave
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http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s87.html
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#national_system_employee
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http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#modern_award
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(1) If, in accordance with this Division, an employee takes a period of paid annual
leave, the employer must pay the employee at the employee's base rate of
pay for the employee's ordinary hours of work in the period.
(2) If, when the employment of an employee ends, the employee has a period of
untaken paid annual leave, the employer must pay the employee the amount
that would have been payable to the employee had the employee taken that
period of leave.
[18] Sections 92-94 set out the circumstances in which paid annual leave may be cashed
out. Section 92 prohibits cashing out of annual leave except in prescribed circumstances:
Section 92 Paid annual leave must not be cashed out except in accordance
with permitted cashing out terms
Paid annual leave must not be cashed out, except in accordance with:
(a) cashing out terms included in a modern award or enterprise
agreement under section 93, or
(b) an agreement between an employer and an award/agreement
free employee under subsection 94(1).
[19] Section 93, for the purposes of s.92(a), identifies the circumstances in which modern
awards and enterprise agreements may include cashing out terms for the purposes of s.92(a).
It provides:
Section 93 Modern awards and enterprise agreements may include terms
relating to cashing out and taking paid annual leave
Terms about cashing out paid annual leave
(1) A modern award or enterprise agreement may include terms providing for the
cashing out of paid annual leave by an employee.
(2) The terms must require that:
(a) paid annual leave must not be cashed out if the cashing out would
result in the employee's remaining accrued entitlement to paid annual leave
being less than 4 weeks; and
(b) each cashing out of a particular amount of paid annual leave must be by
a separate agreement in writing between the employer and the employee; and
(c) the employee must be paid at least the full amount that would have
been payable to the employee had the employee taken the leave that the
employee has forgone.
Terms about requirements to take paid annual leave
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(3) A modern award or enterprise agreement may include terms requiring
an employee, or allowing for an employee to be required, to take paid annual
leave in particular circumstances, but only if the requirement is reasonable.
Terms about taking paid annual leave
(4) A modern award or enterprise agreement may include terms otherwise dealing
with the taking of paid annual leave.
[20] Section 94 specifies the circumstances in which award/agreement free employees may
cash out paid annual leave.
[21] Section 323 deals with the method and frequency of payment of certain employment
entitlements. Section 323(1), which contains the prescription as to frequency, provides:
(1) An employer must pay an employee amounts payable to the employee in
relation to the performance of work:
(a) in full (except as provided by section 324); and
(b) in money by one, or a combination, of the methods referred to in
subsection (2); and
(c) at least monthly.
Note 1: This subsection is a civil remedy provision (see Part 4-1).
Note 2: Amounts referred to in this subsection include the following if they
become payable during a relevant period:
(a) incentive-based payments and bonuses;
(b) loadings;
(c) monetary allowances;
(d) overtime or penalty rates;
(e) leave payments.
The conflicting decisions
[22] In Hull-Moody Finishes Pty Ltd2 Fair Work Australia (O’Callaghan SDP) was
required to consider whether the Hull-Moody Finishes Pty Ltd Enterprise Agreement 2011
was capable of approval under the Act. That agreement was, with respect to the system for the
payment of annual leave, the same in all essential respects as the Agreement here, in that it
2 [2011] FWA 5618
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provided for the payment of annual leave “progressively in advance” by way of an amount
incorporated into the total hourly rate to be paid to employees for work performed, with the
total rate of pay also encompassing a range of other entitlements including overtime. The
Senior Deputy President identified two issues as arising with respect to the agreement’s
annual leave provisions - the first being what the base rate of pay in the agreement was for the
purpose of the entitlement in s.90(1) to payment for annual leave “at the employee’s base rate
of pay”, and the second being whether the agreement provided for cashing out of annual leave
in a manner not permitted by s.93.3 In respect of the first issue, the Senior Deputy President
determined that the base rate of pay for the purpose of the annual leave entitlement was the
hourly rate specified in the agreement because, although it was loaded to include overtime, it
was payable for the employee’s ordinary hours of work.4 The implication of this conclusion,
although not expressly stated by the Senior Deputy President, was that because the agreement
calculated the annual leave amount incorporated into the hourly rate by reference to award
rates of pay, it ousted the NES entitlement under s.90(1) to annual leave paid at the hourly
rate in the agreement.
[23] As to the second issue, the Senior Deputy President said:
“[24] The provisions of s.90 require that employees be paid for annual leave periods at
that base rate for the employee’s ordinary hours during that time. The Annual Leave
National Employment Standard does not provide the capacity for employees to be paid
an amount of money in lieu of the entitlements to paid annual leave unless that leave is
cashed out consistent with s.93(2). The provisions of s.93(2) limit the extent to which
money could be given to an employee in lieu of that entitlement so as to ensure that
employees must retain at least four weeks paid annual leave. I note that there is
nothing in the relevant modern awards which details an inherently different approach.
[25] Consequently, even if a lesser amount than the hourly rate specified in the
agreement is taken to be the employee’s base rate of pay, such as the amount specified
in clause 33.2, the agreement excludes employees from receiving payment for their
ordinary hours of work whilst they are on annual leave. The agreement provisions are
not ancillary or incidental to the National Employment Standard. They simply provide
for a payment arrangement which excludes employees from payment at the base rate
of pay for ordinary hours over the period of annual leave. To the extent that the
agreement is argued to cash out annual leave, those cashing out arrangements
contradict the limitations incorporated in the National Employment Standard. Finally,
to the extent that s.55 could be argued to permit inclusion of payment for annual leave
in the hourly rate, I consider the agreement provisions to be detrimental to employees
and hence prohibited by s.55(4).
[26] The agreement provisions are not supplementary to the National Employment
Standards; they deny employees payment over periods of annual leave, including the
mandatory Christmas closedown.”
[24] The Senior Deputy President also found that, insofar as the agreement also loaded the
NES entitlements to paid personal/carer’s leave into the hourly rate, the agreement was
3 Ibid at [21]
4 Ibid at [23]
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inconsistent with the NES entitlement to paid personal/carer’s leave in s.99 of the Act and
permitted cashing out of that entitlement in a manner not permitted by s.100.5 The Senior
Deputy President rejected an undertaking proffered by the employer on the basis that it did
not resolve the problems he had identified, and refused to approve the agreement.
[25] This decision was appealed by the employer and the bargaining representatives of the
employer and the employees. In Mr Irving Warren; Hull-Moody Finishes Pty Ltd; Mr
Romano Sidotti6 a Full Bench of Fair Work Australia decided by majority to uphold the
appeal. The majority (Vice President Watson and Hamberger SDP) firstly determined that the
total hourly rate of pay specified in the agreement was not the base rate of pay for the purpose
of s.90(1) because, having regard to the definition of “base rate of pay” in s.16(1), it included
overtime and annual leave payments. In respect of the issue as to whether, by paying for
annual leave in advance, the agreement excluded the NES annual leave entitlement, the
majority said:
“[38] In our view the concept of cashing out an entitlement to annual leave involves the
making of a payment instead of recognising an entitlement to paid leave. The payment
is made in substitution of the leave entitlement. When leave is cashed out, the
entitlement to take leave is reduced by the amount compensated for by the alternative
payment.
[39] In order to determine whether the terms of the agreement contravene s 55 or any
term of the NES the nature of the benefits under the agreement must be identified and
compared to the entitlements under the NES. Under the Agreement in this matter
employees do not lose an entitlement to take leave. Nor are they deprived of payment
with respect of leave that they take or that is untaken on termination of their
employment. Indeed they receive payment with respect of their leave entitlements at
the time the entitlement arises. Because they have already been paid for leave at the
time it accrues, they do not receive any payment at the time they take the leave.
[40] Employees under the Agreement can take leave as provided for in the NES. They
are obliged to take at least two weeks per year. If they do not take leave it will accrue
until they subsequently take it. On termination of employment employees are entitled
to receive payment for untaken leave. Under the Agreement they have already
received payment of this entitlement in advance.
[41] The real difference between the conventional operation of the NES and the
arrangement under this Agreement is the timing of payments. In our view there is no
obligation in the NES to make a payment for annual leave at a particular time,
although a delay in payment may be in a different category. Even if there was an
obligation to pay for leave at the time it is taken, we do not believe that payment in
advance amounts to the exclusion of the entitlement to payment. The Senior Deputy
President placed some importance on payment being made at the time of taking leave.
We cannot see any basis for this in the NES. In our view each of the benefits conferred
by the NES are provided for by the Agreement.
5 Ibid at [28]-[31]
6 [2011] FWAFB 6709
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[42] We do not agree that the arrangement involves the cashing out of annual leave
because the payment incorporated into wages does not extinguish the entitlement to
leave. In our view it is not permissible to speculate as to how employees will conduct
their leave arrangements under the Agreement or consider whether the arrangement
encourages them to adopt one approach or another.
[43] In determining this matter the focus must be on whether the benefits provided by
the NES are retained or removed by operation of the payment arrangements. As the
amount of leave available to be taken is equivalent to that provided for in the NES,
and the Agreement provides for payment with respect to annual leave at the level
required by s 90, we do not believe that the arrangement is inconsistent with the NES.
It is unnecessary to consider the prohibition of cashing out or the conditions in the Act
with regard to cashing out as the arrangement cannot properly be described as cashing
out.
[44] We find that the payment arrangement in the Agreement does not exclude the
NES because the NES is expressly adopted, each of the annual leave benefits in the
NES are reflected in the Agreement and the payment arrangement does not amount to
cashing out of annual leave.”
[26] Commissioner Cambridge dissented. The gravamen of his reasoning was contained in
the following part of his decision:
“[49] The Appellants and the majority, have contended that the period of the leave is a
period of paid leave because the hourly rate has included payment made in recognition
for the leave, in effect, payment made incrementally in advance. The majority see no
legislative basis for there to be any particular connection between time of payment and
time of taking leave. Additionally, the leave is said not to have been cashed out
because the leave remains available to be taken.
[50] The issues of contest can be summarised by the following two questions. Does
the Act, Division 6 of Part 2-2 in particular, contemplate that a period of paid annual
leave might involve payment incrementally in advance and therefore no payment
would be made at around the commencement of or during the period of absence on the
leave? If payment is made incrementally in advance does this amount to the cashing
out of paid annual leave? These questions essentially involve an exercise of statutory
interpretation.
[51] The definition of “paid annual leave” in s.12 of the Act refers to s.87. Section 87
does not include any mention of the time when payment of annual leave must be made
so as to satisfy the terminology “paid annual leave”. In addition, the absence of any
definition of “cashing out” and the use of such terminology does provide for
ambiguity, uncertainty and a potential result that was manifestly unreasonable and thus
permits the interpretation to involve the use of extrinsic materials via application of
section 15AB of the Acts Interpretation Act 1901.
[52] The words in Division 6 need to be approached having cognisance of the context
in which they appear. The terms form part of national legislative minimum
entitlements which provide basic benefits to employees. The statutory interpretation
exercise therefore involves provisions which operate as a safety net. Inherently there
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are issues involving the preservation and protection of minimum employment
conditions. In this particular analysis the protected benefit is of four weeks paid annual
leave and the impact on that benefit by arrangements described as cashing out.
[53] In my view the approach adopted by the majority has not, with respect, had
sufficient regard for the beneficial, protective context of the provisions under
examination. In particular there has not been proper appreciation and weight given to
the indisputable fact that “... the matters in s.93 (2) are in the nature of protections for
employees and could be described as safeguards.”
[54] When properly considered as underlying safeguards, the words of subsection
93(2) (a) of the Act should be construed in the context of the purpose for which the
Standards prescribed by Division 6 of Part 2-2 are made. Division 6 establishes
various minimum terms for paid annual leave such that subsection 93(2) is a safeguard
which intends that no terms in a modern award or enterprise agreement which deal
with payments made in connection with annual leave, however described or
configured, are to create an arrangement whereby it “...would result in the employee’s
remaining accrued entitlement to paid annual leave being less than 4 weeks.”
[emphasis added]
[55] The fundamental notion of paid annual leave is defeated if at around the
commencement of or during the period of actual leave, there is no payment provided
in respect of the period of absence from work. The redirection of the payment into an
hourly rate creates such disconnection with the period of absence from work so as to
effectively make the period of absence a period of unpaid leave. The obvious practical
outcome is to establish financial disincentive for the taking of the period of leave.
Thus the rationale for the establishment of paid annual leave involving annual rest and
recuperation away from work is impugned and the protected benefits and safeguards
intended by Division 6 are violated.”
[27] The Commissioner also noted that the appeal had been conducted without the benefit
of a contradictor7, and said:
“[76] In my view the absence of any carefully developed and articulated argument
against approval of the Agreement should introduce a level of caution towards
upholding an Appeal which has broad ramifications including potentially undermining
a legislative safety net provision.”
[28] In Construction, Forestry, Mining and Energy Union v Jeld-Wen Glass Australia Pty
Ltd8 the Federal Court (Gray J) considered an application for civil penalties to be imposed
under the Act in respect of an employer which, in accordance with the provisions of an
Australian Workplace Agreement (AWA) entered into under the Workplace Relations Act
1996 and remaining in effect by virtue of the Fair Work (Transitional Provisions and
Consequential Amendments) Act 2009, had paid an employee an extra 1.5 hours’ pay each
week in lieu of any entitlement to payment when the employee utilised any of his ten days’
sick leave entitlement. The application alleged that this method of payment contravened
7 Ibid at [75]
8 [2012] FCA 45; (2012) 213 FCR 549
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ss.100 and 101 of the Act, which prohibited the cashing out of personal/carer’s leave except in
accordance with terms of a modern award or an enterprise agreement complying with the
standards set out in s.101.
[29] The Court determined that the sick leave provisions contained in the AWA provided in
effect for the cashing out of sick leave in a manner not permitted by s.101 of the Act, and
were therefore unenforceable because otherwise they would displace the NES personal/carer’s
leave provisions in s.101. The Court’s reasoning was as follows:
“[18] The online edition of the Macquarie Dictionary defines “cash out” as meaning “to
take in monetary form”. It gives as an example “to cash out one’s annual leave.” It is
interesting that there is also a definition of “cash in”, which means “to obtain cash
for”. The example given is “to cash in an insurance policy.” The use of prepositions
that are antonyms, in conjunction with the word “cash” as a verb, gives rise to two
expressions that are highly similar, if not identical, in meaning. There is nothing to
indicate that the phrases “cashed out” and “cashing out”, used in ss 100 and 101 of the
Fair Work Act, have anything other than their ordinary meaning, which in this case
corresponds with the dictionary meaning. In other words, s 100 provides that paid
personal/carer’s leave must not be taken in monetary form (as distinct from in the form
of leave), otherwise than in accordance with terms included in a modern award or
enterprise agreement, which comply with the standards in s 101(2) and provide for
such leave to be taken in monetary form.
[19] It is clear that it is the entitlement to take paid personal/carer’s leave that is
capable of being cashed out, rather than the leave itself. If leave is taken, there is an
obligation on the employer to pay the employee at the appropriate rate, pursuant to s
99 of the Fair Work Act (or, in this case, pursuant to cl 13.5(b) of the individual
agreement). It is only untaken leave entitlements for which a monetary payment could
substitute. Once this conclusion is reached, it becomes clear that the leave to which cl
13.5(b) of the individual agreement entitled Mr de Thierry was required to be paid
leave on and after 1 January 2010, when the National Employment Standards came
into operation. Reference to s 97(a) of the Fair Work Act makes it clear that the sick
leave to which Mr de Thierry was entitled is paid personal/carer’s leave for the
purposes of the National Employment Standards. If cl 13.5(b) does not of itself
provide that entitlement, the entitlement arises from s 96(1) in conjunction with s
61(1) of the Fair Work Act, by setting a standard of 10 days of paid personal/carer’s
leave for each year of service with the employer, which cannot be displaced.
[20] To understand this is to understand that one argument put on behalf of Jeld-Wen
cannot be accepted. That argument is that the prohibition on leave being cashed out for
which s 100 of the Fair Work Act provides is limited to entitlements that have accrued.
The prohibition is equally capable of application to entitlements yet to be accrued as it
is to entitlements already accrued. The mere fact that money was paid in advance
would not render the payment any less a payment in substitution for the entitlement
than if the payment were made after the entitlement had accrued. In any event, cl
13.5(c) of the individual agreement did not provide for payment in advance. Clause
13.5(b) gave rise to an immediate entitlement, at the beginning of each year of service,
to be taken at any time during the year in the event of the occasion for leave arising.
The effect of cl 13.5(c) was to spread the payment over the entire year, so that it would
be made whether or not the leave had actually been taken. (The question whether s
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96(2) of the Fair Work Act has the effect of converting the entitlement to one that
accrues progressively during a year of service remains to be determined on a future
occasion.)
[21] The effect of cl 13.5(c) of the individual agreement is to provide that paid
personal/carer’s leave is cashed out. There is no suggestion of the existence of any
modern award or enterprise agreement, containing terms providing for the cashing out
of paid personal/carer’s leave, complying with s 101(2) of the Fair Work Act, so as to
permit Jeld-Wen to cash out the leave entitlement. Because cl 13.5(c) provides for
cashing out, it must be unenforceable, by virtue of s 61(1) of the Fair Work Act. If this
were not so, cl 13.5(c) would operate to displace the standard for which s 100
provides. From 1 January 2010, therefore, Jeld-Wen had an obligation to provide Mr
de Thierry with 10 days of paid personal/carer’s leave each year. Jeld-Wen could not
substitute a monetary payment, whether in weekly parts or otherwise, for that
entitlement.”
[30] Although Jeld-Wen is concerned with the NES personal carer’s leave entitlements
rather than annual leave, it is nonetheless clear that its reasoning is inconsistent with that of
the Full Bench majority in Hull-Moody. The decision in Jeld-Wen was delivered on 6
February 2012, but the hearing in the matter took place on 30 May 2011, well before the Hull-
Moody appeal decision was delivered on 29 November 2011, so that it is likely that the
Court’s attention was not drawn to Hull-Moody. It is certainly not mentioned by the Court in
its decision. In Jeld-Wen, the Court founded its conclusion on two propositions. The first was
that the requirement for payment for personal/carer’s leave under s.99 of the Act was a
requirement which applied at the time the leave is taken. The second was that when the Act,
in ss.100 and 101, referred to “cashing out”, it was referring to the cashing out of paid
personal carer’s leave, not the leave itself. The decision of the Full Bench majority in Hull-
Moody adopted conclusions which were directly contrary to these propositions in respect of
annual leave provisions which are, for relevant purposes, difficult to distinguish from the
personal/carer’s leave provisions.
[31] The conflict in reasoning between the majority decision in Hull-Moody and Jeld-Wen
has led to inconsistency in single-member decisions in this Commission. In BM & KA Group
as trustee for BM & KA Group Unit Trust9 the Commission (Cribb C) determined that an
agreement which provided for the “pre-payment” of annual leave and personal/carer’s leave
through a loaded wage rate contravened s.55 of the Act by excluding the NES leave
entitlements. That decision was based upon a preference for the treatment in Jeld-Wen of the
expression “paid personal carer’s leave” as a composite term over the majority reasoning in
Hull-Moody in which the treatment of the expression “paid annual leave” as a composite
expression was not considered.10 However in Robjohn Enterprises Pty Ltd11 an agreement
which provided for the payment in advance of annual leave and personal leave by way of a
loaded wage rate was approved by the Commission (Bull C) on the basis that the majority
decision in Hull-Moody was binding.12
9 [2013] FWC 3654
10 Ibid at [25]-[29]
11 [2013] FWCA 6685
12 Ibid at [24]-[29]
[2014] FWCFB 3202
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Submissions
[32] Mr Warren submitted that the Agreement should be approved consistent with the
majority decision in Hull-Moody, which was correctly decided. He submitted that the use of
the word “paid” in the expression “paid annual leave” as it appears throughout Division 6 of
Part 2-2 of the Act was only for the purpose of distinguishing annual leave from leave without
pay; “paid annual leave” was otherwise not intended to have a meaning distinct from “annual
leave”. The Act, by the use of that expression or otherwise, did not require that annual leave
be paid for during or immediately before the period it was taken. The time at which payment
for annual leave could be made was a matter that could be dealt with in an enterprise
agreement as a term ancillary or incidental to the operation of the NES annual leave
entitlement pursuant to s.55(4)(a). Awards such as the Building and Construction General
On-site Award 2010 (which was the relevant award for Canavan) which required payment for
annual leave to be made in advance did not constrain payment for annual leave being made at
any time before the leave was taken, either in a single payment or progressively.13
[33] Ai Group and the ACCI made submissions which generally accorded with the
interpretation of the relevant provisions of the Act advanced by Mr Warren, without
necessarily endorsing the precise payment methodology in the Agreement. We will not recite
their submissions where they were in substance the same as those of Mr Warren. Ai Group
submitted that the annual leave provisions such as those found in the Agreement did not
contravene s.55(1) in that they did not contain any express exclusion of the NES or an
exclusion of the effect or benefit of the NES. Such agreement terms instead adopted and
provided to employees the full annual leave benefits of the NES, with its provision for
payment in advance being a term ancillary or incidental to the operation of the NES
entitlement authorised by s.55(4). Ai Group in that connection made reference to the statutory
note that accompanies s.55(4) and identifies that such an ancillary or incidental term may, as
an example, include a term that specified when payment under s.90 for paid annual leave must
be paid. It submitted that a term that allows for payment of annual leave in advance, as in the
Agreement, does not result in any detriment to employees but rather a benefit, since
employees would have early use of the money. The AIG sought to distinguish the decision in
Jeld-Wen on the basis that it did not concern the approval of an enterprise agreement,
involved a different NES entitlement and different provisions of the Act, and dealt with a
payment system for personal/carer’s leave that was quite different to the payment system in
the Agreement.
[34] The ACCI submitted that neither s.87 nor s.90 contained any affirmative statement
about when an employee is to be paid when they take annual leave. There is nothing unusual
about payment being made for annual leave in advance, and the ACCI pointed in this respect
to modern award provisions requiring this, as well as statutory provisions such as s.3(6)(b) of
the Annual Holidays Act 1944 (NSW). The law relating to the set-off of award entitlements,
established in cases such as Poletti v Ecob14, Ray v Radano15, Otis Elevator Company Pty Ltd
13 Clause 38.2(a) of the Building and Construction General On-site Award 2010 provides: “Instead of the base rate of pay as
referred to in s.90(1) of the Act, an employee under this award, before going on annual leave, must be paid, in advance, the
amount which they would have received for working ordinary time hours if they had not been on leave.”
14 [1989] FCA 492, (1989) 30 IR 343
15 [1967] AR (NSW) 471
[2014] FWCFB 3202
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v Logan16 and Maslen v Core Drilling Services Pty Ltd17, demonstrates that employees may
be paid an entitlement by way of aggregated remuneration rather than directly provided that
the employer makes clear to the employee that a particular payment is being made in lieu of
another entitlement. The type of payment in advance system contained in the Agreement did
not amount to cashing out, the ACCI submitted, because, consistent with the reasoning of the
majority in Hull-Moody, the fact that an employee has been paid in advance for a period of
leave does not render a period of leave taken at a later date without further payment as
“unpaid” leave.
[35] The ACTU submitted that the Agreement was incapable of approval under the Act
because it contravened s.55(1). It pointed to s.90(1) as establishing a requirement that
payment for annual leave was to occur only if an employee took a period of paid annual leave.
The effect of clause 41 of the Agreement was to exclude s.90(1) by providing a different
contingency for the payment of annual leave than that provided for by s.90(1). Clause 41 was
not saved by s.55(4) because it was not ancillary, incidental or supplementary to the operation
of the NES entitlement in s.90(1), but rather provided for a completely different entitlement to
payment which was unconditioned by anything apart from turning up to work. Additionally,
the expression “paid annual leave” connoted leave for which payment was made at the time
the leave was taken. This interpretation of the expression is supported by the origins of the
paid annual leave entitlement and universally accepted norms. The method of payment
provided for in the Agreement constituted the cashing out of annual leave contrary to s.92,
because on receipt of the loaded rate the employee forwent an entitlement to paid annual
leave, retaining only an entitlement to take unpaid annual leave. Hull-Moody was wrongly
decided and should not be followed.
Consideration
[36] Section 55(1) of the Act relevantly provides that an enterprise agreement “must not
exclude” the NES or any provision thereof. It is not necessary that an exclusion for the
purpose of s.55(1) must be constituted by a provision in the agreement ousting the operation
of an NES provision in express terms. On the ordinary meaning of the language used in
s.55(1), we consider that if the provisions of an agreement would in their operation result in
an outcome whereby employees do not receive (in full or at all) a benefit provided for by the
NES, that constitutes a prohibited exclusion of the NES. That was the approach taken by the
Full Bench in Hull-Moody.18 The correctness of that approach is also confirmed by the
Explanatory Memorandum for the Fair Work Bill 2009 as follows:
“209. This prohibition extends both to statements that purport to exclude the operation
of the NES or a part of it, and to provisions that purport to provide lesser entitlements
than those provided by the NES. For example, a clause in an enterprise agreement that
purported to provide three weeks' annual leave would be contrary to subclause 55(1).
Such a clause would be inoperative (clause 56).”
[37] We will consider whether the Agreement excludes the NES provisions concerning
annual leave on this basis.
16 S119/1999 [2000] HCATrans 84 (10 March 2000)
17 [2013] FCCA 460
18 At [26]; see also Re Armacell Australia Pty Ltd (2010) 202 IR 38 at [18]-[19]
[2014] FWCFB 3202
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[38] There is an immediate reason why the Agreement cannot be approved in its current
form, irrespective of whether the Act allows for the payment of annual leave in advance or
whether the Agreement provides for the cashing out of annual leave in a manner not permitted
by the Act. The obligation for payment for annual leave in s.90(1) requires that the payment
be made at the employee’s base rate as it is at the time the leave is taken. This is made clear
by the words “must pay the employees at the employee’s base rate of pay for the employee’s
ordinary hours of work in the period” (underlining added), the “period” being the “period of
paid annual leave” taken by the employee. The ACCI and Ai Group accepted this was the
case, and no party submitted otherwise. Because the Agreement provides for payment for
annual leave on a progressive basis in advance rather than when annual leave is taken, and
also provides for increases in the rates of pay during the life of the Agreement, it permits
annual leave to be paid for, at least in part, at an earlier and lower rate of pay rather than the
rate of pay applicable at the time that leave is taken. Therefore compliance with the terms of
the Agreement does not require compliance with the payment obligation in s.90(1), and may
result in that obligation not being complied with. To that extent, the NES provision in s.90(1)
is excluded, contrary to s.55(1) of the Act.
[39] The same conclusion would apply to the agreement considered and approved by the
Full Bench majority in Hull-Moody, which as earlier observed was the same in all relevant
respects as the Agreement here. Due to the lack of a contradictor in the Hull-Moody appeal,
this issue does not appear to have been raised or considered. It nonetheless follows that the
Full Bench majority in Hull-Moody was in error in approving the agreement under
consideration in that matter.
[40] However, because it is possible that this impediment to approval could be overcome
by an undertaking in appropriate terms, it remains necessary for us to consider whether the
“pre-payment” or “self-funded” system for annual leave contained in the Agreement
contravenes s.55(1) even if a mechanism could be developed to ensure that payment is made
at the base rate applicable when the employee takes leave.
[41] The starting point for our consideration is to identify the meaning of the expression
“paid annual leave” as used in Division 6 of Part 2-2 of the Act. The Division consistently
uses the expression “paid annual leave”, not merely annual leave, in its prescription of the
annual leave entitlement. The quantum of the entitlement as prescribed in s.87(1) is for the
specified number of weeks of “paid annual leave”. Section 88 prescribes when “paid annual
leave” may be taken. Section 89 specifies certain times at which an employee may be taken
not to be on “paid annual leave”. Section 90(1) identifies the requirement for payment of
annual leave when an employee takes a period of “paid annual leave”. And, critically, ss.92-
94, in dealing with cashing out, refer to the cashing out of “paid annual leave”. The consistent
use of the expression strongly suggests its fundamental significance to the nature of the
entitlement established by the Division.
[42] The definition of the expression in s.12 is of little utility except insofar as it repeats
within the definition the whole of the expression itself, again emphasising that “paid annual
leave” is to be treated as the basal concept in the scheme. We consider that it should be treated
as a composite expression, in which payment for the leave is inextricably linked to the leave
itself. As a matter of the ordinary understanding of that composite expression, and consistent
with the approach taken by Gray J in Jeld-Wen, we consider that “paid annual leave” means
annual leave with pay, in the sense that the pay is provided together with the leave.
[2014] FWCFB 3202
17
[43] Both the internal and the historical contexts of the Act support this approach.
Internally, s.90, which deals with payment for annual leave, is the critical provision.
Interpreted in accordance with its ordinary meaning, s.90(1) by the use at its commencement
of the word “If” identifies a condition or contingency upon the satisfaction or occurrence of
which a specified requirement applies. The condition or contingency is that “an employee
takes a period of paid annual leave”. The requirement is that “the employer must pay the
employee’s base rate of pay for the employee’s ordinary hours of work in the period”. It is
therefore clear that the requirement to make payment in respect of paid annual leave arises
when the employee actually takes the annual leave. It may also be noted, although not directly
relevant here, that s.90(2) is constructed in a similar way: with respect to untaken paid annual
leave; the condition or contingency is “when the employment of an employee ends”, and the
requirement is that “the employer must pay the employee the amount that would have been
payable to the employee had the employee taken that period of leave”. Thus, upon termination
of employment, untaken annual leave must be paid out.
[44] Section 90(1) therefore confirms that the statutory scheme is founded on there being a
temporal connection between the taking of annual leave and the payment for such leave.
Section 323(1)(c), which deals with the frequency of payment for amounts payable to
employees in relation to the performance of work - including, as the accompanying statutory
note indicates, leave payments - further confirms this, in that such payments must be made “at
least monthly”. In relation to annual leave, this provision only makes sense if read as a
requirement for employers to pay for annual leave within the pay cycle that the leave is taken,
such pay cycle being at least monthly in frequency. Paragraph 1283 of the Explanatory
Memorandum for the Fair Work Bill supports s.323(1)(c) together with the statutory note
being read in this way (underlining added):
“The legislative note after this subclause makes clear that the payment rule covers a
wide range of payments, where they fall due during the relevant payment period -
including incentive-based payments and bonuses, loadings, monetary allowances,
overtime or penalty rates and leave payments.”
[45] On the contrary approach taken by the majority in Hull-Moody and advanced in this
appeal, namely that Division 6 of Part 2-2 establishes no connection between the taking of
and payment for annual leave, no practical work can be assigned to s.323(1)(c) in respect of
annual leave, because there is never any time at which payment for annual leave falls due, and
therefore any part of the amount may be paid at any time. We note in this connection that the
majority in Hull-Moody recognised a difficulty in this approach in that while they said that
“there is no obligation in the NES to make a payment for annual leave at a particular time”,
they went on to say that “a delay in payment may be in a different category” without
identifying why that would be the case. In fact, on the Hull-Moody majority’s approach, there
would be no statutory impediment to payment for annual leave being made at any time before
or after the taking of annual leave. The detrimental consequences of that result are obvious
and are strongly suggestive of fallacy in that approach. The interpretation of the expression
“paid annual leave” in Division 6 of Part 2-2 and of ss.90(1) and 323(1)(c), which we favour,
avoids that result.
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#employee
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#employee
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#employee
http://www.austlii.edu.au/au/legis/cth/consol_act/fwa2009114/s12.html#employer
[2014] FWCFB 3202
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[46] The historical context is of significant assistance in understanding the provisions of
Division 6 of Part 2-2.19 The enactment by the legislature of a NES entitlement to paid annual
leave in the Act did not occur in a vacuum, but rather against the lengthy historical
background of the development and establishment of paid annual leave as a standard
industrial entitlement through decisions and awards of industrial tribunals and earlier State
and federal statutory provisions. We consider that we are entitled, under s.15AB(1)(a) of the
Acts Interpretation Act 1901 (Cth), to have regard to that historical context in order to confirm
that the meaning of “paid annual leave” and s.90 “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”.
[47] Foundational arbitral decisions concerning annual leave referred to an entitlement to
“annual leave on full pay”20, “an adequate period of respite, without loss of income” and “a
minimum annual holiday of two continuous weeks, with pay”21. The earliest statutory
provisions for annual leave expressed the entitlement in a similar way: for example, s.3(1) of
the Annual Holidays Act 1944 (NSW) provided for an entitlement to “an annual holiday of
two weeks on ordinary pay”, and s.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”. The NSW statute
(s.3(6)(b)) required the employer to “pay each worker in advance before the commencement
of the worker’s annual holiday, his ordinary pay for the holiday period”, and the Queensland
statute (s.10A(3)) similarly required that the annual holiday “be paid for in advance at the
ordinary rate payable to the employee immediately prior to such annual holiday”. The
standard award provision for annual leave established by the Metal Trades Annual Leave
Case22 in 1946 and the NSW statute (s.3(5)) both contained prohibitions against the making
and acceptance of payment in lieu of the annual leave entitlement. It is clear, we consider, that
the development of the entitlement of annual leave by industrial tribunals and legislatures did
not contemplate anything other than that annual leave would be taken by employees and paid
for at the time it was to be taken (except in respect of the payment of untaken accrued annual
leave upon termination of employment). References to payment for annual leave in advance
in that context are to be read, we consider, as payment before the period of leave commenced
but once the decision to provide, and take, the leave had been made - not at some
indeterminate earlier period.
[48] That position remained unchanged for many decades. In 1987, a Full Bench of the
NSW Industrial Relations Commission in Bakers (Cumberland) Conciliation Committee23
rejected a consent application to vary an award which permitted the cashing out of an
additional leave entitlement as contrary to established industrial principles24, and indeed
Cahill VP went so far as to refer to “industrial morality” in his rejection of the claim.25
19 See Construction Forestry Mining & Energy Union v Mammoet Australia Pty Ltd [2013] HCA 36 at [45], [52]-[59] for an
example of the way in which historical context may be used as an aid to statutory interpretation.
20 Printing and Allied Trades Employers Federation of Australia v Printing Industry Employees Union of Australia (1936) 36
CAR 738 at 746
21 Metal Trades Annual Leave Case (1945) 55 CAR 595 at 597
22 Ibid at p.601, cl.7.
23 (1987) 20 IR 152
24 Ibid at 166 and 181.
25 Ibid at 181.
[2014] FWCFB 3202
19
Similarly in 1994, the Australian Industrial Relations Commission (Watson DP) declined to
approve an enterprise flexibility agreement under the provisions of the Industrial Relations
Act 1988 (Cth) because it contained provisions permitting the cashing out of annual leave
which were considered to be contrary to the public interest in that they involved the
diminution of an entitlement in the nature of a community standard.26
[49] The well-established position concerning the industrial standard for annual leave
began to be altered when specific legislative provision began to be made for the cashing out
of annual leave. The first example of this appears to have been s.8 of the Minimum Conditions
of Employment Act 1993 (WA), which permitted an employer and employee to agree in
writing that the employee forgo his or her annual leave entitlement if the employee was given
“an equivalent benefit in lieu of the entitlement”. Section 8 operated as an exception to the
general entitlement conferred by s.23 to “paid annual leave”, payment for a period of which
was, under s.24(1), to be made “in the normal course of employment” unless the employee
requested in writing to be paid before the period of leave commenced.
[50] In the federal sphere, cashing out of annual leave was first permitted under the
Workplace Relations Act 1996 (Cth) as amended by the Workplace Relations (Work Choices)
Amendment Act 2005 (Cth). The Workplace Relations Act as amended by the Work Choices
legislation established for the first time a federal legislative annual leave prescription of
general application, as part of the “Australian Fair Pay and Conditions Standard”. The
entitlement “guarantee” in s.232 of the amended Workplace Relations Act was expressed in
terms of “paid annual leave” (not defined). Section 235(1) set out the “payment rules”
applicable upon the taking of annual leave as follows:
(1) If an employee takes annual leave during a period, the employee must be paid
a rate for each hour (pro-rated for part hours) of annual leave taken that is no
less than the rate that, immediately before the period begins, is the employee's
basic periodic rate of pay (expressed as an hourly rate).
[51] Section 233 entitled an employee to elect to forgo an annual leave entitlement credited
to the employee (subject to a limit of half the entitlement accrued each year) with the
authorisation of the employer, provided that an applicable workplace agreement provided for
such an entitlement on the basis that the employee would receive payment at the employee’s
base rate for any leave so forgone. The section did not actually use the expression “cashing
out”, but instead referred to an entitlement to “forgo” annual leave. However, the explanatory
memorandum for the Work Choices legislation27 repeatedly referred to the provision as being
concerned with an entitlement to cash out annual leave.
[52] The position that emerges from the historical context at the time the Act was enacted
is therefore that annual leave was an entitlement which involved payment at the employee’s
ordinary rate of pay, with such payment being made during the taking of the leave in
accordance with normal pay arrangements or immediately before the leave was taken.
However, a specific exception to this entitlement was created by statutory provisions
permitting the cashing out of annual leave in prescribed and limited circumstances. That
26 Arrowcrest Group Pty Ltd [1994] AIRC 1054, Print L4310
27 At paragraphs 511-516
http://www.austlii.edu.au/au/legis/cth/repealed_act/wra1996220/s918.html#hourly_rate
http://www.austlii.edu.au/au/legis/cth/repealed_act/wra1996220/s240.html#basic_periodic_rate_of_pay
http://www.austlii.edu.au/au/legis/cth/repealed_act/wra1996220/s240.html#basic_periodic_rate_of_pay
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http://www.austlii.edu.au/au/legis/cth/repealed_act/wra1996220/s240.html#employee
http://www.austlii.edu.au/au/legis/cth/repealed_act/wra1996220/s240.html#employee
[2014] FWCFB 3202
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historical context confirms that “paid annual leave” in Division 6 of Part 2-2, and s.90, are to
be interpreted in the way earlier identified.
[53] It follows that we cannot accept the submission that the provisions in the Agreement
concerning “pre-payment” for annual leave can be characterised as provisions merely
ancillary or incidental to the operation of the NES annual leave entitlement and are thus
authorised by s.55(4) of the Act. For the reasons we have set out, the scheme of self-funded or
pre-paid annual leave provided for by the Agreement does not constitute “paid annual leave”
as contemplated by the Act at all. To the extent, as indicated by the accompanying statutory
note, that an enterprise agreement may under s.55(4) contain ancillary or incidental provisions
concerning when payment for annual leave is to be made, such provisions would necessarily
have to be consistent with the concept of “paid annual leave” as we have earlier described it.
Provisions which require payment immediately before the leave is taken, or at identified
intervals during the period of leave, or in accordance with the normal pay cycle at the time
leave is taken, are the type of provisions in this respect which would be authorised by s.55(4).
Modern award provisions concerning payment for annual leave, such as that in the Building
and Construction General On-site Award 2010 referred to by Mr Warren, are to be
understood in this way: they provide for payment in advance for an actual period of annual
leave which has been arranged to be taken, not a payment made in respect of any future
annual leave entitlement whenever it is taken or whether taken at all.
[54] The interpretation of relevant provisions of the Act advanced by Mr Warren and the
various employer groups (and as stated in Hull-Moody) would in application have
consequences which are entirely improbable. For example (and as was conceded by the
ACCI), if pre-payment of annual leave was permissible under the Act, that would include the
capacity to pre-pay for annual leave for any number of years in the future at the
commencement of employment or at some other time, regardless of whether such leave was
ever taken or not. It would further follow that, in connection with bargaining for an enterprise
agreement, it would be available for employees to take protected industrial action in support
of a claim that annual leave entitlements over the life of the proposed agreement be paid to
employees “in advance” by way of a single payment regardless of whether such annual leave
is ever actually taken or not. Such a consequence is so far removed from the ordinarily-
understood concept of “paid annual leave” that it cannot have been intended by the
legislature, and constitutes a further reason why that interpretation cannot be accepted.28 The
requirement for payment in s.90(1), as we have earlier interpreted it, avoids such
consequences in a way which provides mutual protection for employers and employees.
[55] We therefore conclude that the Agreement, in providing in clause 7.1 of Annexure B
that employees are required to fund any time taken off work by way of annual leave, excludes
the NES provisions for annual leave contrary to s.55(1) of the Act in two inter-related
respects:
(1) it excludes the entitlement to “paid annual leave” in s.87(1); and
(2) it excludes the requirement for payment in respect of annual leave in s.90(1).
28 See Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 321 per Mason
and Wilson JJ
[2014] FWCFB 3202
21
[56] Additionally we consider that the scheme of “pre-payment” of annual leave in the
Agreement constitutes cashing out of annual leave in a manner inconsistent with s.93, with
the result that the prohibition in s.92 is excluded. Once it is understood that “paid annual
leave” means annual leave accompanied by pay when it is taken, then the prohibition in s.92
must be understood as prohibiting the making of a payment which would lead to the
employee forgoing his or her entitlement to later take annual leave with pay (unless such
cashing out is authorised by s.93 or s.94). This is what the Agreement if approved would do.
Mr Warren did not contend that the annual leave payment provisions in the Act constituted a
cashing out provision in an enterprise agreement which complied with s.93, and it is clear that
it does not because the Agreement does not contain any provision which would ensure a
minimum accrual of four weeks’ paid leave would remain in place, and does not require a
written separate agreement between the employer and the employee in order for the cashing
out to occur.
[57] It would probably follow from our reasoning and the decision of Gray J in Jeld-Wen
that the provisions in the Agreement concerning “pre-payment” for personal/carers leave also
offend s.55(1) of the Act. However because this issue was not properly argued before us, and
because it is unnecessary for us to do so, we will not express a final view about this issue at
this point.
[58] The Agreement as it currently stands cannot be approved, because we cannot be
satisfied for the purpose of s.186(2)(c) that the terms of the Agreement do not contravene
s.55. However we will give Canavan an opportunity to proffer undertakings which might
allow the Agreement to be approved under s.190. In deciding whether and how it might avail
itself of this opportunity, Canavan should give consideration to the issue of personal/carer’s
leave as well as annual leave.
PRESIDENT
Appearances:
I. Warren for Canavan Building Pty Ltd
N. Ward for the ACCI
B. Ferguson for Ai Group
R. Reitano of counsel for the ACTU
Hearing details:
2014.
Melbourne:
1 April.
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