[2010] FWAFB 9986 [2010] FWAFB 9986 Download Word Document FAIR WORK AUSTRALIA DECISION Fair Work Act 2009 s.604 - Appeal of decisions Fonterra Brands Australia (P&B) Pty Ltd v Transport Workers' Union of Australia and another (C2010/4281) SENIOR DEPUTY PRESIDENT ACTON SENIOR DEPUTY PRESIDENT RICHARDS COMMISSIONER CARGILL MELBOURNE, 24 DECEMBER 2010 Appeal against decision [[2010] FWA 4538] of Commissioner Williams at Perth on 23 June 2010 in matter number DR2009/10007 and DR2009/10009. Introduction [1] Fonterra Brands Australia (P & B) Pty Ltd (Fonterra) has issued a notice of appeal against a decision 1 of Commissioner Williams concerning disputes about clause 22 of the Fonterra Brands Australia (P & B) Pty Ltd Balcatta Operations Union Collective Agreement 2008-2011 (the Fonterra Agreement). 2 The Fonterra Agreement came into operation on 11 March 2009. [2] The dispute applications were made by the Transport Workers’ Union of Australia (TWU) 3 and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU). 4 They were made under s.709 of the Workplace Relations Act 2009 (Cth) (WR Act). [3] Schedule 19 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) provides that the WR Act continues to apply to such disputes. However, such disputes are dealt with by Fair Work Australia. [4] The dispute settlement procedure in the Fonterra Agreement provides as follows: “21.2 Any dispute or matter (‘Matter’) raised by Fonterra arising from this Agreement, an employee or a group of employees shall be settled in accordance with the following procedures: ... (c) If the Matter remains unresolved any party to the dispute (and where requested by an employee or employees, the Union workplace representative or other representative) may refer it for conciliation and/or arbitration by the Australian Industrial Relations Commission (‘Commission’). (d) If arbitration is necessary the Commission shall have the power to do all such things as are necessary for the just resolution or determination of the Matter. This includes exercising of procedural powers in relation to hearings, witnesses, evidence and submissions which are necessary to make the arbitration effective. (e) The parties to the dispute will abide by the decision of the Commission, subject to any party to the dispute exercising a right of appeal against the decision to a Full Bench of the Commission.” [5] The disputes related to “the rate at which Fonterra is required to pay severance pay in accordance with clause 22 “INTRODUCTION OF CHANGE AND REDUNDANCY” of the Agreement” 5 and, in particular, “[w]hat is a ‘weeks pay’ for an employee receiving an annualised salary?” 6 [6] Clause 22 of the Fonterra Agreement is as follows: “ 22. INTRODUCTION OF CHANGE AND REDUNDANCY (a) Where Fonterra has made a definite decision to introduce major changes in production, program, organisation, structure or technology which are likely to have significant effects on employees, Fonterra will notify the employees who may be affected by the proposed changes any employee nominated representative, which may be a union. (b) Fonterra will discuss with the employees affected and any employee nominated representative, which may be a union, the introduction of the changes, the effects the changes are likely to have on employees, measures to avert or mitigate the adverse effects of those changes on employees and will give prompt consideration to matters raised by the employees and their Union in relation to the changes. (c) For the purposes of this discussion, Fonterra will provide the employees concerned in writing: (i) all relevant information about the changes including the nature of the changes proposed; (ii) the expected effect of the changes on employees; and (iii) any other matters likely to affect employees provided that Fonterra will not be required to disclose confidential information the disclosure of which would be contrary to Fonterra’s interests. (d) Redundancy Discussions Before Redundancies Where an employer has made a definite decision that the employer no longer wishes job the employee has been doing is not to be done by anyone and it is not due to the ordinary and customary turnover of labour, and that decision may lead to termination of employment, the employer must hold discussions with the employees directly affected and any employee nominated representative which may be a union. Transfer to Lower Paid Duties Where an employee is transferred to lower paid duties for reasons set out above the employee will be entitled to the same period of transfer as they would have been entitled to if their employment had been terminated. Fonterra may make payment in lieu of an amount equal to the difference between the former ordinary time rate of pay and the new lower ordinary time rates for the number of weeks notice still owing. Severance Pay In lieu of the notice prescribed for ordinary termination in Clause 5 - Contract of Employment an employee whose employment is terminated for reasons set out in this subclause (d) will be entitled to: (i) Four weeks’ notice or payment in lieu thereof; (ii) Four weeks’ pay for each year of completed service to a maximum of 104 weeks; (iii) An employee aged 45 years or more at the time the employee’s employment is terminated by reason of redundancy will be paid one additional week’s severance pay; and (iv) ‘weeks pay’ means the ordinary base weekly rate of wage for the employee concerned. For the purpose of this clause, continuity of service will not be broken on account of: (i) Any interruption or termination of the employment by Fonterra if that interruption or termination has been made merely with the intention of avoiding obligations under this Agreement in respect of leave of absence; (ii) Any absence from work on account of personal sickness or accident for which an employee is entitled to claim personal pay as prescribed by this Agreement or on account of leave lawfully granted by Fonterra; or (iii) Any absence which the employee can prove with reasonable cause provided that in the calculation of continuous service under this subclause, any time which an employee is absent from work except time which an employee is entitled to claim annual leave, sick leave, LSL and Public Holidays as prescribed by this Agreement will not count as time worked; (iv) Where Fonterra is transmitted to another employer and the employee’s service is deemed continuous in accordance with the LSL provisions will also constitute continuous service for the purpose of this clause. Employee Leaving During Notice An employee whose employment is terminated for reasons set out in this subclause (d) may terminate their employment during the period of notice. The employee will be entitled to the same benefits and payments under this clause had they remained with the employer until the expiry of that notice. In such circumstances the employee will not be entitled to payment in lieu of notice. Alternative Employment This subclause (d) will not apply if Fonterra obtains acceptable alternative employment for an employee. Any dispute arising from the application of this provision will be dealt with in accordance with Clause 21 - Disputes Settlement Procedure. Time Off During Notice Period During the period of notice of termination, given by Fonterra, an employee will be allowed up to one day off without loss of pay during each week of notice for the purpose of seeking other employment. If the employee has been allowed paid leave for more than one day during the notice period to seek other employment, the employee will, at the request of Fonterra, be required to produce proof of attendance at an interview or they will not receive payment for the time. A statutory declaration will be sufficient. Employees with Less than One Year’s Service This subclause (d) does not apply to employees with less than one year’s continuous service and the general obligation of Fonterra should be no more than to give relevant employees an indication of the impending redundancy at the first reasonable opportunity, and to take such steps as may be reasonable to facilitate the employee obtaining suitable alternative employment. Employees Exempted This clause does not apply where employment is terminated as a consequence of conduct that justifies instant dismissal, including, but not limited, to malingering, inefficiency or neglect of duty. This clause also does not apply in the case of casual employees, seasonal employees and temporary employees. Incapacity to Pay Fonterra may make application to the Australian Industrial Relations Commission to have the general severance pay prescription varied on the basis of Fonterra’s incapacity to pay.” (Underlining to clause 22(d)(iv) added) [7] The Commissioner considered the disputes required him to decide on the meaning of the term “ordinary base weekly rate of wage” in clause 22(d)(iv) of the Fonterra Agreement. [8] In his decision on the disputes, the Commissioner concluded as follows: “ [103] My conclusion then is that the meaning of the phrase ordinary base weekly rate of wage for employees receiving an annualised salary is capable of being interpreted, as the applicant argues it should be, to mean the usual or regular weekly payment derived from the applicable annualised salary in the Agreement... [160] I find that the meaning of the words “ordinary base weekly rate of wage” in Clause 22. INTRODUCTION OF CHANGE AND REDUNDANCY (d) Redundancy for employees receiving an annualised salary is to be interpreted, as the applicants argue it should be, to mean the weekly rate of wage derived from the applicable annualised salary rate for the particular employee concerned.” [9] Having regard to the decision of the Full Bench in Victoria Police Force v Police Federation of Australia 7 and the terms of clause 21.2(e) in the dispute settlement procedure in the Fonterra Agreement, we are satisfied clause 21.2(e) provides a foundation for us to deal with Fonterra’s appeal. Background to the disputes [10] The background to the disputes was set out in the Commissioner’s decision as follows: “ [4] Fonterra manufactures and exports dairy products with operations in Australia and New Zealand. In Western Australia, Fonterra operates from sites in Balcatta, Brunswick, Bunbury and O’Connor. At the Balcatta site, Fonterra produces white milk, flavoured milk, yoghurt, cream, orange juice and sundae mixes. Fonterra had also produced ice cream at its Balcatta site. [5] In April 2009 Fonterra announced the sale of its Ice Cream operations and as a result 132 of the employees became redundant at Fonterra’s Balcatta site over the period July to September 2009. No employees from the Chiller Distribution Centre (CDC) or the Laboratory were made redundant. The majority of the employees made redundant were on annualised salaries or averaged weekly rates of pay... [7] Within the operations of Fonterra, there were members of each of the Applicants employed who receive an annualised salary under the terms of the Agreement. [8] Fonterra generally calculated a weeks pay for the purposes of the severance pay using a base hourly rate of pay and multiplying this by 38.” [11] The base hourly rate of pay multiplied by 38 which was used by Fonterra to calculate the severance pay of the employees was considerably less than their annualised salary on a weekly basis. The unions maintained each employee’s annualised salary on a weekly basis should have been used to calculate their severance pay. [12] It was not suggested that the annualised salaries in the Fonterra Agreement already included compensation for the severance pay in clause 22. Ordinary base weekly rate of wage [13] We think several factors suggest the term “ordinary base weekly rate of wage” in clause 22 does not mean the annualised salary of employees on an annualised salary. [14] This is because appendices to the Fonterra Agreement set out “ordinary base hourly rates of pay” and “base rates of pay” per hour or per week for classifications covered by the Fonterra Agreement. If the ordinary base hourly rates of pay in the appendices are multiplied by 38, being the ordinary hours of work per week for a full-time employee provided by clause 9 of the Fonterra Agreement, they in effect become ordinary base weekly rates of pay for full-time employees. Similarly, if the base rates of pay in the appendices are multiplied by or applied to the 38 ordinary hours, they become ordinary base weekly rates of pay for full-time employees. In our view, there is no significance to be attached to the use of the word “wage” in the term in clause 22 and the use of the word “pay” in the terms in the appendices. [15] While clause 9 of the Fonterra Agreement states it does not apply to employees receiving an annualised salary, it nonetheless indicates that the terms of clause 9 have been used to develop the annualised salaries. So, for example, the annualised salaries for maintenance and engineering employees in clause 4 of Appendix 3 of the Fonterra Agreement include compensation for overtime worked, 8 being hours worked “beyond the designated ordinary hours of work”. 9 Further, while clause 9 applies in respect of full-time employees, clause 5 of the Fonterra Agreement indicates it is the foundation for the ordinary hours of work per week for part-time employees. Clause 5.1(b) of the Fonterra Agreement provides that a part-time employee may be engaged to work regular weekly hours up to a maximum of 38 ordinary hours per week, exclusive of overtime, with a minimum of four ordinary hours per day and 780 hours per annum and no more than five separate attendances per week. [16] In addition, further clauses in the appendices to the Fonterra Agreement, such as clause 4 of Appendix 3, provide for employees on an annualised salary to be paid for certain hours worked at their non-annualised hourly rate. This makes it apparent the annualised salaries in the appendices to the Fonterra Agreement are amenable to reverse engineering to ascertain their ordinary base weekly rate of wage. [17] Moreover, other clauses in the Fonterra Agreement specifically state when an employee’s annualised salary is to be used as the rate at which the entitlement covered by the clause is to be paid. For example, clause 15 provides that employees receiving an annualised salary rate are to be paid annual leave at their annualised salary rate whereas other employees, excluding casual employees, are to be paid annual leave at their rate of pay for ordinary hours or their ordinary rate of pay. [18] In our view, these contextual guides to the meaning of the term “ordinary base weekly rate of wage” in clause 22 of the Fonterra Agreement are persuasive as to the meaning of the term, giving it the meaning attributed to it by Fonterra. They are a more persuasive guide than the evidence given in the course of the proceedings before the Commissioner by those involved in the negotiation of predecessor agreements as to their recollection of the entitlements that were to be paid at the annualised salaries’ rate. Commissioner’s decision [19] The Commissioner came to the conclusion that the term “ordinary base weekly rate of wage” in clause 22 of the Fonterra Agreement means the weekly rate of the annualised salary for an employee on an annualised salary. 10 He so concluded because he considered the word “ordinary” in the term should be given the meaning of “regular, normal, customary or usual” 11 and the phrase “base... rate” in the term means the annualised salary of an employee on an annualised salary. 12 [20] We consider the Commissioner erred in so concluding. His error was caused by his failure to have proper regard to the other clauses in the Fonterra Agreement which, as we have shown, give specific meaning to the words in the term “ordinary base weekly rate of wage”. Conclusion [21] In light of the Commissioner’s error, we grant leave to appeal, uphold the appeal and quash the Commissioner’s decision of 23 June 2010 13 in matters DR2009/10007 and DR2009/10009. SENIOR DEPUTY PRESIDENT Appearances : R. Hooker , of counsel, for Fonterra Brands Australia (P&B) Pty Ltd. N. Ireland for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia. S. Millman , solicitor, for the Transport Workers’ Union of Australia. Hearing details: 2010. Perth: October, 12 Endnotes : 1 Transport Workers’ Union of Australia and another v Fonterra Brands Australia (P&B) Pty Ltd , [2010] FWA 4538. 2 AC316935. 3 Transport Workers’ Union of Australia v Fonterra , DR2009/10007. 4 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Fonterra , DR2009/10009. 5 Transport Workers’ Union of Australia and another v Fonterra Brands Australia (P&B) Pty Ltd , [2010] FWA 4538 at paragraph 2. 6 Ibid at paragraph 9. 7 [2009] AIRCFB 146 at paragraphs 11-13. 8 Fonterra Brands Australia (P & B) Pty Ltd Balcatta Operations Union Collective Agreement 2008-2011 at clause 4(b) of Appendix 3. 9 Ibid at clause 11. 10 Transport Workers’ Union of Australia and another v Fonterra Brands Australia (P&B) Pty Ltd , [2010] FWA 4538 at paragraphs 103 and 160. 11 Ibid at paragraph 93. 12 Ibid at paragraph 101. 13 Ibid. Printed by authority of the Commonwealth Government Printer <Price code C, PR505464>