[2018] FWCFB 6562

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.604 - Appeal of decisions

Illawarra Coal Holdings Pty Ltd t/a South32
v
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia
(C2018/4304)

VICE PRESIDENT HATCHER
DEPUTY PRESIDENT ASBURY
COMMISSIONER MCKENNA

SYDNEY, 31 OCTOBER 2018

Appeal against decision [2018] FWC 4340 of Senior Deputy President Hamberger on 24 July in matter C2018/1716 – proper interpretation of an enterprise agreement – payment of allowances when on long service leave – permission to appeal granted – appeal dismissed

Introduction and background

[1] Illawarra Coal Holdings Pty Ltd trading as South 32 (South 32) has lodged an appeal, for which permission to appeal is required, against a decision of Senior Deputy President Hamberger issued on 24 July 2018 1 (Decision). The Decision arose from the notification of a dispute by the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) under s 739 of the Fair Work Act 2009 (FW Act), and was made pursuant to dispute resolution powers conferred on the Commission by clause 28 of the Appin Colliery & West Cliff CPP Enterprise Agreement 2015 (Agreement). The dispute concerned whether a number of allowances provided for in the Agreement were payable to employees when taking long service leave. The Senior Deputy President determined that the allowances were payable, as contended by the CEPU. South 32 argues in its appeal that the Senior Deputy President erred in his interpretation of the Agreement.

[2] It is necessary to set out or summarise the provisions of the Agreement relevant to South 32’s appeal. Clause 8 of the Agreement provides that “The classification rates and allowances for Appin Colliery are set out in Appendix 1 – Rates of Pay & Allowances, and for the West Cliff CPP are set out in Appendix 5 – West Cliff CPP”. Clause 18 deals with long service leave. Clause 18.1 states that “The Coal Mining Industry Long Service Leave Scheme has been enacted in Commonwealth legislation; an Employee’s entitlement will derive from that Act”, and clauses 18.2 - 18.4 set out the period of leave which accrues, the definition of service which gives rise to an accrual entitlement, and the circumstances in which long service leave may be taken. Clause 18.5 provides that “Payment for Long Service Leave will be in accordance with Appendix 3 – Payment Rules”. Clause 25.7 relevantly provides that “Payment for Leave on Termination will be in accordance with Appendix 4 – Payments on Termination”.

[3] Appendix 1 to the Agreement, entitled “Rates of Pay & Allowances”, sets out hourly rates of pay for employees working at South 32’s Appin Colliery in a table in the following form:

Rates of Pay

Classification	Classification Definition	Rate per hour
Surface Operator/ Surface Trades	An Employee employed to work in surface based roles only and who does not possess the skills and experience to undertake underground roles.	$38.28
Underground Operator/ Underground Trades	An Employee who holds the experience and skills to work in both surface and underground roles.	$40.43
Specialist	An Employee, who in addition to being engaged in the operation and maintenance of mining infrastructure, must also be engaged in the advanced technical roles of a kind not within the normal scope of work expected of and performed by an Operator or Trades Employee.	$42.10

When determining the appropriate classification or rate of pay for an Employee, the provisions of Clause 8.2 Operation of the classifications also apply.

[4] Immediately after the above table, Appendix 1 then provides for the payment of a number of allowances in a second table:

Allowances

The following allowances are payable in addition to the base wage, and will remain the same for the life of the Agreement.

Allowance	Payment Rule	Rate per week
Occupational First Aid	Where an Employee is appointed as an Occupational First Aid Officer.	$28.40
First Aid Attendant	Where an Employee is appointed as a first aid attendant.	$15.60
Trades Allowance	An allowance payable to Underground and Surface Trades Employees.	$63.00
Meal	In accordance with Clause 15.2 Overtime Meals of this Agreement.	$14.80

[5] Appendix 5 to the Agreement sets out a range of provisions specifically applicable to employees at the West Cliff Coal Preparation Plant. Section 1 of Appendix 5, entitled “Rates of Pay and Allowances”, firstly sets out in a table the hourly rates of pay for employees in three specified classifications. The format of this table is relevantly the same as that of the first table in Appendix 1. Section 1 of Appendix 5 then provides immediately thereafter for the payment of a number of allowances in the following terms:

Allowance	Payment Rule	Rate applies for the life of the Agreement
Tool Allowance	An allowance payable weekly to all Trades Employees at the CHPP. Applies in lieu of the Trades Allowance in EA 2015.	$11.00
Shift Organisation Allowance	An allowance payable weekly to those Employees conducting shift organisation over a full week period or greater. This allowance will only be paid when appointed by the Company.	$110.00
CHPP Continuous Wash Payment	A payment will be made for up to 2 Employees per shift in the CHPP, provided that they maintain continuous CHPP production through change of shift and for working flexible crib arrangements.	$57.00
Higher Duties	An Employee seconded into the Production Team Leader position, in accordance with Clause 5.1 of this Appendix, paid per shift of secondment.	$111.35

[6] Appendix 3 to the Agreement, “Payment Rules”, relevantly provides:

Component	Payment Rule
Ordinary hours	Ordinary hours worked Monday to Friday inclusive are paid at the Employee’s Classification rate
	Ordinary hours worked on Saturday are paid at 1.5 times the Employee’s Classification rate for the first 4 hours and 2 times thereafter.
	Ordinary hours worked on Sunday are paid at 2 times the Employee’s Classification rate.
Rostered Overtime	All rostered overtime is paid at 2 times the Employee’s Classification rate.
Non Rostered Overtime weekday roster Employees	Non rostered overtime worked Monday to Saturday inclusive is paid at 1.5 times the Employee’s Classification rate for the first 3 hours and 2 times thereafter.
Non Rostered Overtime weekday roster Employees	Non rostered overtime worked on Sunday is paid at 2 times the Employee’s Classification rate.
Non-rostered overtime for Employees who work a weekend roster or a roster incorporating Saturday and Sunday	All non-rostered overtime is paid at 2 times the Employee’s Classification rate.
Afternoon Shift Allowance	15% for ordinary hours at the Employee’s Classification rate.
Night Shift Allowance	25% for ordinary hours at the Employee’s Classification rate.
Casual Loading	25% for hours worked at the Employee’s Classification rate.
No 10 Hour Break between work on successive days	Where an Employee works overtime, other than rostered overtime, and is required to have a 10 hour break between the end of that overtime and the start of the Employee’s ordinary hours of work on the next day there will be no loss of pay for ordinary hours of work which occur during this absence.
No 10 Hour Break between work on successive days	Where the Company instructs an Employee to resume work, not having had 10 consecutive hours off work, the Employee will be paid at 2 times the Classification rate during ordinary hours and thereafter until the Employee finishes work.
Public Holidays	An Employee who is not required to work during a Public Holiday will be paid for that Public Holiday at their Classification rate per hour for their normal rostered hours which fall during that Public Holiday. An Employee required to work during a Public Holiday will be paid 2 times the Classification rate for the hours worked up to the hours calculated above in addition to the payment provided in above. For hours worked in excess of the above, an Employee will be paid 3 times the Classification rate. An Employee who is not rostered to work during a Public Holiday shall be paid 7 hours at their Classification rate.
Annual Leave	Paid the greater of as if at work excluding any shift allowance; or the Employee’s Classification rate plus 20% leave loading for hours deducted.
Long Service Leave	For each week of leave paid 1 Ordinary weeks pay and the weekly bonus.
Personal/Carer’s Leave	Paid the hours the Employee would have worked at the Employee’s Classification rate.
Parental Leave Compassionate Leave	Paid what the Employee would have been paid if they had been on Personal/Carers Leave. Paid what the Employee would have received if they had attended work.
Community Services Leave	Paid what the Employee would have received if they had attended work less any amount they receive from the Court or the Service.

[7] Appendix 4, entitled “Payments on Termination”, provides in respect of long service leave that upon termination due to a fixed term, resignation, retirement, death or ill-health, dismissal or retrenchment, the employee is to be paid “…at ordinary weeks pay…” plus specified amounts of “Average Bonus”.

[8] Two expressions used in the above provisions are defined in clause 2. Firstly, “As if at work” is defined to mean “The sum of the Employee’s Classification rate, Bonus, Rostered overtime, and if applicable, Weekend penalties and Shift Allowance.” Secondly, “Ordinary Weeks Pay” is defined as “35 hours pay that is paid at the Employee’s Classification rate.”

[9] There was evidence adduced before the Senior Deputy President concerning background circumstances that were said to bear upon the interpretation of the contested provisions of the Agreement. Firstly, Mr Mark Toole, who was employed under the Agreement until he was made redundant on 6 April 2018, gave evidence that prior to the 2015 Agreement and until November 2017, he had been paid the trades allowance and the first aid allowance whenever he had taken leave.

[10] Secondly, two documents sent to employees of South 32 on or about 24 November 2015 shortly before they voted to approve the Agreement were admitted into evidence. It may be inferred that these documents were prepared by South 32 in order to discharge its obligation under s 180(5) of the FW Act to take all reasonable steps to ensure that the terms of an agreement to be voted upon, and the effect of those terms, are explained to relevant employees in an appropriate manner. The first document, entitled “Appin Colliery & West Cliff CPP Enterprise Agreement 2015 - Summary of Changes and Key Features”, did not identify that there would be any change to the payment arrangements when leave entitlements were taken or paid out. The second, entitled “Questions and Answers”, included the following question and answer (underlining added):

“Q: As a tradesperson at West Cliff, when this EA is approved, my hourly rate will reduce. How am I being compensated?

A: The Appin Colliery EA and West Cliff EA approach the payment of tradespersons in different ways. At West Cliff, trades employees are paid at a higher rate than operator employees and also paid a small trades allowance. At Appin, the trades rate is the same as the operator, but a larger trades allowance is paid.

The trades allowance is paid when you are on leave and is included in the calculation of your superannuation contribution.”

[11] Immediately following this in the document was a table which modelled an employee’s pay for day shift and night shift weekday work at Appin Colliery and the West Cliff Coal Preparation Plant. Importantly, the scenarios modelled included one hour of rostered overtime per week in addition to 35 ordinary hours. For the Appin Colliery, an amount of $63.00 for the trades allowance was included per week, and for the West Cliff CPP an amount of $11.00 per week for the “trades allowance” (which was presumably the same thing as the “Tool Allowance” provided for in Section 1 of Appendix 5) was included. Thus, according to this modelling, the allowances were payable on a flat weekly basis and were not treated as all-purpose payments to be included in the payment of overtime.

The Decision

[12] In the Decision, the Senior Deputy President’s reasoning commenced with the conclusion that the Agreement lacked a plain meaning with regard to whether allowances are payable when long service leave, or other types of leave, are taken or paid out on termination of employment. 2 Reference was made to South 32’s submission that the payment rule for long service leave in Appendix 3 required (relevantly) the payment of the “Ordinary weeks pay”, that the definition of “Ordinary Weeks pay” in clause 2 stated that this consisted of “35 hours pay that is paid at the Employee’s Classification rate”, and that the “Employee’s Classification rate” referred to the hourly rates specified in Appendix 1 (and Section 1 of Appendix 5) for each classification, and did not include allowances.3 Reference was also made to the CEPU’s submission that the “Employee’s Classification rate” included the entirety of the rate paid to the employee, inclusive of allowances.4

[13] In relation to the CEPU’s submission, the Senior Deputy President observed that it suffered from the difficulty that clause 8 implied that the classification rate and allowances were two different things. 5 In response to South 32’s submission, the Senior Deputy President said:

“[28] As a literal reading this has a certain attraction. However it is noteworthy that nowhere in Appendix 3 is there ever provision for payment of any allowances. For example, Appendix 3 provides that ordinary hours worked Monday to Friday inclusive are paid at the employee’s Classification rate. Similar to the provision for long service leave (and indeed other forms of leave), there is no reference to the payment of allowances. Following the respondent’s line of reasoning even employees working ordinary hours are not entitled to be paid any of the allowances provided for in Appendix 1. This is clearly an absurdity.”

[14] The Senior Deputy President went on to advance an alternative interpretation as follows:

“An alternative reading – and arguably a more plausible one – would be that there is no need to spell out in Appendix 3 when allowances get paid quite simply because the payment rule for allowances is set out in Appendix 1. In other words they are always paid (on a weekly basis) if the employee meets the appropriate test – whatever the hours the employee is working or whether or not the employee is on leave.” 6

[15] The Senior Deputy President considered that clause 18.1 did not assist in the resolution of the issue, and considered in the circumstances that he was entitled to have regard to evidence concerning the circumstances surrounding the making of the Agreement in accordance with the principles of interpretation of enterprise agreements stated in Australian Manufacturing Workers Union v Berri Pty Limited, 7 and considered that the evidence of Mr Toole and the documents sent to employees to explain the effect of the Agreement prior to it being voted upon supported the conclusion that allowances were payable when leave was taken.8 The following conclusion was then stated:

“[33] Having regard to the text of the 2015 agreement and the relevant surrounding circumstances I find that employees under the 2015 agreement should be paid the Trades and First Aid Allowances (that they are qualified to receive in accordance with the relevant table in Appendix 1) when they take – or are paid out – long service leave. While it was not strictly the subject of the dispute, I would also observe that these allowances should also be paid when employees are on other forms of approved leave.”

Submissions

[16] South 32 submitted in support of its appeal that:

● the payment rules in Appendix 3 made it clear that an employee was entitled to be paid his or her “Ordinary weeks pay” when taking long service leave, and under the definition of this expression in clause 2 this consisted of the “Employee’s Classification rate”;

● clause 8 and the tables in Appendix 1 and Appendix 5 identified the “Employee’s Classification rate” as an hourly rate concept which was distinguishable from allowances;

● on the plain terms of the Agreement, allowances were therefore not payable when long service leave was taken;

● the payment rules for long service leave could have used the broader expression “as if at work”, which was used in Appendix 3 in relation to other entitlements, but did not;

● the was no proper basis for the Senior Deputy President’s conclusion that the meaning of the relevant provisions was unclear, since they had a plain meaning;

● the Senior Deputy President erred in using evidence of surrounding circumstances to contradict the plain meaning of the Agreement; and

● there was no evidence of a mutual common intention in relation to the relevant obligations under the Agreement.

[17] Permission to appeal should be granted, it was submitted, because the appeal raised important questions about the proper approach to construing an enterprise agreement, the questions of construction raised were arguable and demonstrative of the Decision being attended by sufficient doubt, and there would be a substantial injustice to South 32 if permission was not granted given the broad application of the decision to leave entitlements for the entire workforce. South 32 submitted that the Decision should be quashed and replaced with a determination that the obligation to pay long service leave entitlements in clauses 18.5 and 25.7 of the Agreement does not extend to the allowances provided for in Appendix 1 or 5.

[18] The CEPU submitted that:

● the dispute between the parties was about the meaning of the phrase “Ordinary Weeks Pay”;

● the expression “Employee’s Classification rate” was used in the definition of both “Ordinary Weeks Pay” and “As if at work”, and bore the same meaning in both;

● an “Employee’s Classification rate” was a wage rate that was individualised by reason of being different for every employee depending on their eligibility for one or more of the allowances, which were included in the rate;

● while the Trades Allowance and the First Aid Allowance were expressed as weekly amounts, that did not prevent them from being calculated on an hourly basis and were thus not excluded from the “Employee’s Classification rate”;

● interpreting the phrase “Ordinary Weeks Pay” as the normal or customary weekly pay of the employee, inclusive of allowances, was consistent with the context of the Agreement having regard to the use of expressions such as “As if at work” and “base rate”;

● this meaning was also consistent with the industrial purpose of long service leave, which was that employees were to enjoy a period of leave paid at the level the employee would usually receive while at work;

● the Trades Allowances and First Aid Allowance were skill related and generally included in the calculation of ordinary pay; and

● the Senior Deputy President was entitled to rely on the evidence of surrounding circumstances to aid the interpretation of the Agreement.

[19] The CEPU submitted that permission to appeal should be refused because there was no arguable case of appealable error or, alternatively, the appeal should be dismissed.

Consideration

[20] It is not pellucidly clear from the Decision whether the “alternative reading” of the relevant provisions of the Agreement referred to by the Senior Deputy President in paragraph [28] was the one ultimately adopted by him, or whether the conclusion stated in the Decision was reached upon some other basis. That position has arisen largely because the parties’ submissions before the Senior Deputy President, as well as before us, focused predominantly on the question of whether the expression “Employee’s Classification rate” used in the definition of “Ordinary weeks pay” in clause 2 included the allowances provided for in Appendix 1 and Section 1 of Appendix 5. That question arises because the payment rule for long service leave in Appendix 3 refers to the employee being paid one “Ordinary weeks pay” for each week of long service leave (as well as the Weekly Bonus). However, for reasons we develop below, there is an alternate basis upon which the same outcome as that determined by the Senior Deputy President can be reached. Because there is some doubt about what the preferred construction of the Agreement in the Decision actually was, we consider that permission to appeal should be granted in order to clarify the position.

[21] We consider that South 32’s submission that “Employee’s Classification rate” does not include the allowances is correct, for a number of reasons. First, in the absence of any special definition, we consider the expression on its ordinary meaning connotes the rate of pay applicable to an employee’s classification. Read in the context of the Agreement as a whole, the expression therefore naturally relates to the rates of pay for each specified classification in the first table in Appendix 1 and in the first table in Section 1 of Appendix 5. The expression is not apt to describe or to be read as inclusive of allowances, which may or may not be payable to employees on a basis independent of the classification to which they are assigned.

[22] Second, the definition of “Ordinary weeks pay” in clause 2 refers to “35 hours pay” at the “Employee’s Classification rate”. This compels the conclusion that the “Employee’s Classification rate” is an hourly rate of pay. The rates of pay for the specific classifications in the first tables in Appendix 1 and Section 1 of Appendix 5 are hourly rates of pay. However the allowances provided in the second tables in Appendix 1 and Section 1 of Appendix 5 are weekly amounts. The definition cannot therefore sensibly relate to them.

[23] Third, as observed by the Senior Deputy President, the reference in clause 8 to the “classification rates and allowances” for Appin Colliery employees and West Cliff CPP employees as being set out in Appendix 1 and Appendix 5 respectively strongly suggests that allowances are distinct from classification rates. The expression “Employee’s Classification rate” used in the definition of “Ordinary weeks pay” in clause 2 may naturally be read as the “classification rate” applicable to an individual employee. This means that the definition may be read harmoniously with clause 8, and guides one to the rates specified for each classification in the first tables in Appendix 1 and Section 1 of Appendix 5.

[24] Fourth, the proposition advanced by the CEPU that the allowances are included in the “Employee’s Classification rate” leads to the result that allowances are payable not only in relation to leave entitlements but also in respect of overtime and shift allowances as if they are all-purpose allowances. This is unlikely to be correct. The allowances are, as earlier noted, expressed as weekly rather than hourly amounts and there is nothing in the text of the Agreement to support the proposition that they are all-purpose allowances. That these allowances are flat weekly payments rather than all-purpose in nature is supported by the extrinsic evidence adduced by the CEPU at the hearing before the Senior Deputy President. The modelling of employees’ pay in the “Questions and Answers” document, as earlier outlined, demonstrates that it was not understood or conveyed by the authors of the document that the trades allowance was to be an all-purpose payment applicable to overtime, since it was calculated as a flat weekly payment notwithstanding that rostered overtime was a feature of the work scenarios being modelled. We consider that the “Questions and Answers” document was admissible to aid the interpretation of the disputed provisions of the Agreement. As was stated in the Full Bench decision in Australian Manufacturing Workers Union v Berri Pty Ltd, 9 evidence as to what employees to be covered by an enterprise agreement were told pursuant to s 180(5) of the FW Act is likely to be admissible as evidence of objective background facts and to provide assistance in the interpretation of that agreement.10

[25] However it does not follow from our conclusion in this respect that South 32 is entitled to succeed in its appeal. The premise of South 32’s case is that the “Payment Rules” set out in Appendix 3 of the Agreement constitute an exhaustive statement of the payments required to be made to employees in the identified scenarios, so that the exclusion of any reference to allowances in the payment rule for long service leave in the Appendix necessarily means that the allowances are not payable when long service leave is taken or paid out upon termination of employment. We do not accept that the identified premise is correct. As was pointed out by the Senior Deputy President, Appendix 3 nowhere identifies any circumstance whatsoever in which allowances are payable, even during ordinary-time working hours. It would clearly be absurd to read the Agreement as not requiring the payment in any circumstance of the allowances for which the Agreement specifically provides. It cannot therefore logically be the case that Appendix 3 contains the payment rules applicable to the allowances. Those payment rules must be found elsewhere in the Agreement.

[26] There is no real difficulty in identifying the payment rules for the allowances in the Agreement. They are expressly set out in the second column of each of the allowance tables in Appendix 1 and Section 1 of Appendix 5 under the heading “Payment Rule”. In Appendix 1, the payment rule for the Meal Allowance cross-refers to clause 15.2, which specifies when the meal allowance is payable. It is sufficient to say that it is clear from clause 15.2 that the Meal Allowance is not payable when leave is taken, and the CEPU did not contend otherwise. However the position is different with respect to the other allowances provided for in Appendix 1. The weekly Occupational First Aid Allowance is payable “Where an Employee is appointed as an Occupational First Aid Officer”. That is, appointment to the office qualifies an employee to receive the allowance. On its ordinary meaning, the payment rule is to be construed as requiring payment of the allowance whilesoever the employee holds the office. It attaches to the holding of the office, not to the performance of any particular work. There is no basis to conclude that the holding of the office of Occupational First Aid Officer ceases or is suspended when leave is taken. It is clear therefore that the Occupational First Aid Allowance is payable when leave, including long service leave is taken. It would also follow, we consider, that the payment upon termination of leave entitlements, including long service leave entitlements, that have accrued while an employee has held the office of Occupational First Aid Officer would also include the Occupational First Aid Allowance. The payment rule for the First Aid Attendant Allowance is expressed in the same way, and the same conclusions would therefore apply.

[27] The payment rule for the Trades Allowance is simply that it is “payable to Underground and Surface Trades Employees”. Any employee who meets that description is entitled to the allowance. There is no basis to conclude that an underground or surface trades employee ceases to be such an employee when taking leave. Accordingly we consider that the Trades Allowance remains payable when leave, including long service leave, is taken. It also is payable for leave paid out on termination, including long service leave, which has accrued while the employee has been an underground or surface trades employee.

[28] In relation to the payment rules for the allowances applicable to West Cliff CHPP employees in Section 1 of Appendix 5, the Tool Allowance is payable “weekly to all Trades Employees at the CHPP”. As with the Trades Allowance in Appendix 1, we consider that according to its ordinary meaning the payment rule for the Tool Allowance requires it to be paid to any person who meets the description of being a trades employee at the West Cliff CHPP, and nothing in the text supports the proposition that it ceases to be payable when the employee takes leave, including long service leave. It would also be payable when leave accrued while an employees is a trades employee at the CHPP is paid out on termination of employment. The other allowances in Section 1 of Appendix 5 are described as payable when performing particular duties or working particular shifts. Accordingly these allowances are not payable when leave is taken or paid out, and the CEPU did not contend otherwise.

[29] Our construction of the payment rules of the Agreement which we have set out above is based on the text of those provisions, read in the context of the Agreement as a whole. It is also consistent with the statement in the “Questions and Answers” document, which we have earlier set out, that the trades allowance is payable when an employee takes leave, as well as the pay modelling contained in that document.

[30] We consider therefore that the conclusion reached by the Senior Deputy President in determination of the dispute was correct. We note that the construction we prefer is essentially the same as the “alternative reading” of the Agreement posited by the Senior Deputy President in paragraph [28] of the Decision. Accordingly the appeal must be dismissed.

Orders

[31] We order as follows:

(1) Permission to appeal is granted.

(2) The appeal is dismissed.

scription: Seal of the Fair Work Commission with the member's signature.