FEDERAL COURT OF AUSTRALIA

Australian Chamber of Commerce and Industry v Australian Council of Trade Unions [2015] FCAFC 131

THE COURT ORDERS THAT:

1.    The application be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

NORTH J:

1    I agree with Buchanan J that the application should be dismissed and I also agree with the reasons he gives for those orders.

Associate:

Dated:    14 September 2015

REASONS FOR JUDGMENT

Buchanan J:

2    By orders made on 7 May 2015, a Full Bench of the Fair Work Commission (“FWC”) added a term (“the Broken Hill term”) in four “modern awards” made under the Fair Work Act 2009 (Cth) (“the FW Act”), as follows:

Broken Hill

An employee in the County of Yancowinna in New South Wales (Broken Hill) will in addition to all other payments be paid an allowance for the exigencies of working in Broken Hill of 4.28% of the standard rate.

3    Before the orders were made a similar term had appeared in each of the four modern awards but was expressed to operate only until 31 December 2014. That earlier provision applied for five years from 1 January 2010 (when each of the four modern awards took effect), pursuant to s 154(2) of the FW Act which provides:

154    Terms that contain State-based differences

…

When State-based difference terms may be included

(2)    However, a modern award may include State-based difference terms if the terms were included in the award:

(a)    in the award modernisation process; or

(b)    in accordance with subsection (3);

but only for up to 5 years starting on the day on which the first modern award that included those terms came into operation.

4    Apparently, the view was taken at that time that the allowance in question was (or may have been) a “State-based difference term”. Whatever the reason then, it seems that the FWC does not now hold (or no longer holds) that view.

5    The general rule in s 154(1), to which s 154(2) provided a limited (five year) exception will be addressed in due course. Whether the Broken Hill term is a State-based difference term is the central matter to which the present proceedings are directed.

6    The “award modernisation process” commenced under the Workplace Relations Act 1996 (Cth), and has continued under the FW Act. Division 3 of Part 2-3 of Chapter 2 of the FW Act states a number of matters that must or may or must not be included in, or be the subject of, the terms of a modern award. Relevantly for the moment, s 136(1)(a) and (b), (2)(a) and s 137 provide:

136    What can be included in modern awards

Terms that may or must be included

(1)    A modern award must only include terms that are permitted or required by:

(a)    Subdivision B (which deals with terms that may be included in modern awards); or

(b)    Subdivision C (which deals with terms that must be included in modern awards); or

…

(Notes omitted.)

Terms that must not be included

(2)    A modern award must not include terms that contravene:

(a)    Subdivision D (which deals with terms that must not be included in modern awards); or

…

Note:    The provisions referred to in subsection (2) limit the terms that can be included in modern awards under the provisions referred to in subsection (1).

137    Terms that contravene section 136 have no effect

A term of a modern award has no effect to the extent that it contravenes section 136.

7    Section 154 is in Subdivision D of Division 3 of Part 2-3 of Chapter 2 of the FW Act. Section 154(1) (to which s 154(2) provides the exception set out above) provides:

154    Terms that contain State-based differences

General rule—State-based difference terms must not be included

(1)    A modern award must not include terms and conditions of employment (State-based difference terms) that:

(a)    are determined by reference to State or Territory boundaries; or

(b)    are expressed to operate in one or more, but not every, State and Territory.

(Emphasis in original.)

8    In the present proceedings, the Court has been asked to declare that the Broken Hill term falls within s 154(1)(b), and is therefore prohibited by s 136(2)(a) and has no effect by reason of s 137. Submissions were also made to the effect that the FWC exceeded its jurisdiction and powers when it prescribed the Broken Hill term, but it was accepted that this contention requires no separate attention if the primary submission is upheld or if the Court itself deals with the contested issue about the operation of s 154(1)(b).

9    It should be noted that s 154(1)(a) and (b) contemplate different enquiries. Section 154(1)(a), for example, would extend to prohibit terms and conditions fixed differently, or fixed at different times, in different States or Territories. Before award modernisation it was common for federal awards to apply only in one, or only in some, States or Territories or to contain terms which were fixed in one, or some only, States or Territories at different times or in different award proceedings. Clearly enough, such differences, and differences in procedural treatment, were State-based in origin. This case is not concerned with such matters, or directly with s 154(1)(a), which now eliminates any determination of terms and conditions of employment by reference to State or Territory boundaries.

10    The terms of s 154(1)(b) are less clear than they might be. On one reading, s 154(1)(b) only applies to (and terms are only State-based terms if they are) terms that apply generally in a State or Territory and has nothing to say about terms which do not apply generally in the State or Territory. On this view, there would be considerable, but not complete, overlap with s 154(1)(a). The overlap would not extend, for example, to cases where terms were fixed at different times in different States or Territories. Such terms would fall under s 154(1)(a), but not necessarily s 154(1)(b).

11    On the other view, s 154(1)(b) requires that no terms should exist in a modern award which are not expressed to apply uniformly throughout Australia, regardless of local differences or conditions.

12    A Supplementary Explanatory Memorandum directed to the Fair Work Bill 2008 (Cth), when that Bill (after amendment) proposed the present terms now in s 154, said in [69]:

State-based differences

69.    Item 4 is designed to make clear that the requirement that terms of modern awards be expressed to operate in each State and Territory, does not necessarily mean that the terms will always have effect in each State or Territory because of circumstances specific to that State or Territory.

•    For example, a modern award could contain a provision that allowed for the payment of a remote location allowance or tropical allowance even if such a provision would not have effect in a particular State or Territory.

13    The Supplementary Explanatory Memorandum does not, in my view, cast any helpful light on the issue which arises for consideration in this case. It could be interpreted both ways. It is a distraction to attempt to resolve an ambiguity in extrinsic material. It is the terms of the statute which must be construed, not the extrinsic material.

14    Before the question of the preferable construction of s 154(1)(b) is addressed further, two matters which will be relevant to an assessment of that question on the facts of the present case may usefully be referred to. One is the general origins of clauses which, like the Broken Hill term, were addressed to the particular circumstances of working at unattractive or taxing locations. The other is the way in which such matters are referred to now in the FW Act.

15    District, locality, zone, isolation and climatic allowances have been features of the federal (and State) award landscape for a long time. They were variously justified as a means of compensation for additional difficulty or discomfort associated with particular work, or as a legitimate means of inducing employees to work in particular areas. In the present case, origins of that kind may also be seen in the language of the Broken Hill terms (“an allowance for the exigencies of working in Broken Hill”).

16    In 1932, Drake-Brockman J (sitting as the Commonwealth Court of Conciliation and Arbitration) referred to the second aspect (inducement) in connection with railway construction and development in Commonwealth Railways Commissioner v Australian Workers Union (1932) 31 CAR 815 at 820:

    … Zone, district, isolation or climatic allowances as they are variously called, have for many years been granted in Australia. Historically they appear to have been granted for the purpose of inducing labour to go to remote localities during the pioneering period. The tendency appears to have been for them to diminish in amount as the localities concerned became more settled and the social amenities increased and improved. These allowances being sums deemed sufficient to attract labour, they naturally have varied from time to time and from place to place. The only factor that has been consistent appears to have been, “ What amount will induce the required labour to go to the locality concerned?” This factor naturally varied with the condition of the labour market in different localities and times. The factor mentioned seems to have been the prevailing influence during the period of railway construction in determining the varying amounts of the allowances which in the main still exist.

17    Drake-Brockman J repeated this thesis seven years later when he observed in Australian Railways Union v Commissioner for Railways New South Wales (1939) 41 CAR 614 at 620:

The climatic allowance provided in the awards does, from the reading of the clauses, appear to be an allowance for disability of climate only—nothing else. However, from the evidence and argument in these proceedings, I think the word has been used loosely and a better one would have been “ inducement ”.

18    Whatever the pragmatic foundation for allowances of this kind, it became commonplace, in federal awards and in federal and State public sector employment, for some form of loading to be paid for climatic conditions or isolation. For very many years, for example, special arrangements were made for some employees in the Northern Territory (such as federal public servants) and in New South Wales it was common for a “western district” allowance to be paid (e.g. to New South Wales public servants, including teachers).

19    In the industrial and award history of New South Wales, the County of Yancowinna (i.e. Broken Hill, together with the neighbouring town of Silverton and their surrounds) was a special case. New South Wales awards usually excluded the County of Yancowinna from their coverage and operations altogether, leaving local arrangements to be negotiated directly with employers under the auspices of the Barrier Industrial Council. The County of Yancowinna is separated from the rest of New South Wales in time also, observing Australian Central Time (Standard or Daylight) rather than Australian Eastern Time.

20    Those special award arrangements no longer exist. The four modern awards at issue in the present case apply to the County of Yancowinna equally with the rest of Australia. It is unsurprising, however, that a clause like the Broken Hill term should have survived that transition. It has not been suggested in the present case that the term is meritless. That would be a question for the FWC, but retention of the clause tends against the proposition. Rather, the argument in the present case is that the clause (and the allowance it preserves) has been abolished by s 154(1)(b) in the interests of uniformity.

21    Against this contention, it appears to me that the FW Act continues, nevertheless, to recognise the historical and practical significance of disabilities based on location.

22    Section 139 (in Subdivision B of Division 3 of Part 2-3 of Chapter 2) of the FW Act states what kinds of award terms may be included in a modern award. Amongst the list of such matters set out in s 139(1)(a) to (j) appears s 139(1)(g), as follows:

139    Terms that may be included in modern awards—general

(1)    A modern award may include terms about any of the following matters:

…

(g)    allowances, including for any of the following:

(i)    expenses incurred in the course of employment;

(ii)    responsibilities or skills that are not taken into account in rates of pay;

(iii)    disabilities associated with the performance of particular tasks or work in particular conditions or locations;

…

23    Section 139(1)(g)(iii) is of particular interest. The reference to “particular … locations” raises an important question about the operation and effect of s 154(1)(b) in the present case if the Broken Hill term is properly described as a disability allowance.

24    Under the Acts Interpretation Act 1901 (Cth), s 23(b), “words in the plural number include the singular”. A reference to particular locations in s 139(1)(g)(iii), therefore, includes a reference to a particular location “unless the contrary intention appears”. I see no contrary intention in s 139 itself. The applicant’s answer was that s 154 did the necessary work of confining any terms of the kind referred to in s 139(1)(g)(iii) within the limit imposed by s 154(1)(b).

25    I shall return to this question. First, it is important to establish that it is not merely academic. Section 139(1)(g)(iii) can have no particular significance for the present case unless the Broken Hill term may first fairly be described as a disability allowance for a particular location. In my view, it may be so described.

26    It is not a disabling feature that the allowance provided is expressed as a percentage of some other amount, rather than as a money figure. Many traditional allowances are so expressed. In Mutual Acceptance Co Ltd v Federal Commissioner of Taxation (1944) 69 CLR 389, Latham CJ described the characteristics of an “allowance” as an incident of employment, as follows (at 396-397):

When the word is used in connection with the relation of employer and employee it means in my opinion a grant of something additional to ordinary wages for the purpose of meeting some particular requirement connected with the service rendered by the employee or as compensation for unusual conditions of that service. Expense allowances, travel allowances, and entertainment allowances are payments additional to ordinary wages made for the purpose of meeting certain requirements of service. Tropical allowances, overtime allowances, and extra pay by way of “dirt money” are allowances as compensation for unusual conditions of service.

So far as the FW Act itself is concerned, s 139(2) requires only:

139    Terms that may be included in modern awards—general

…

(2)    Any allowance included in a modern award must be separately and clearly identified in the award.

27    This requirement is clearly met. Indeed, the clause itself was described by the FWC as the Broken Hill allowance, and it describes the payment for which it provides as an allowance. Is it, however, a disability allowance? The fact that there may, at some stage, have been an element of inducement in allowances of this kind does not signify that they do not compensate for real disabilities or disadvantages.

28    In my view, a reference to the “exigencies” of working in Broken Hill, for which an extra amount is payable, is adequate and apt to convey that, in substance, the allowance is a disability allowance for work in a particular location. A more classical reference to dictionary definitions would suggest that it was compensation for the demands of working in Broken Hill but that neither adds to or detracts from the plain meaning in the present context.

29    The earlier history to which I referred of additional rates having an inducement element does not overcome the circumstance that the present allowance is expressed unarguably as a form of compensation for a burden on employees, rather than as an aid to employers to recruit and attract labour.

30    I therefore have no difficulty in concluding that the Broken Hill term is a disability allowance for a particular location within the meaning of s 139(1)(g)(iii) and is, accordingly, a term which may, prima facie at least, be included in a modern award.

31    The next question, returning to the matters upon which the parties concentrated, is whether s 154(1)(b) nevertheless directs that it must no longer be included in a modern award. In that debate, the fact that the term appears to be expressly authorised by s 139 is not a neutral circumstance. At the very least, it introduces the circumstance that competing legislative priorities and purposes may need to be assessed.

32    In Carr v Western Australia (2007) 232 CLR 138, Gleeson CJ said (at [5]) (in a passage adopted and cited by the unanimous judgment of the High Court in Construction Forestry Mining & Energy Union v Mammoet Australia Pty Ltd (2013) 248 CLR 619 at [40]):

… That general rule of interpretation, however, may be of little assistance where a statutory provision strikes a balance between competing interests, and the problem of interpretation is that there is uncertainty as to how far the provision goes in seeking to achieve the underlying purpose or object of the Act. Legislation rarely pursues a single purpose at all costs. Where the problem is one of doubt about the extent to which the legislation pursues a purpose, stating the purpose is unlikely to solve the problem. …

(Emphasis added.)

33    The applicant’s thesis was that s 154(1)(b) prevents any modern award terms that are expressed to operate in (even if not throughout) only one or some States or Territories and ensures that such a term must operate in every State or Territory. Indeed, the language of the Broken Hill term (“in the County of Yancowinna in New South Wales”) was said to identify the particular vice to which s 154(1)(b) was directed, because the term clearly only operated in one State. The applicant also appealed to the idea that s 154(1)(b) should be given a meaning which was not co-extensive with s 154(1)(a) to support this construction.

34    The construction of s 154(1)(b) urged by the applicant in the present case would render impermissible any disability allowance expressed by reference to a location, or locations, in a State or Territory or in a number of States or Territories unless the language (even if not the substance) of a term did not exclude any State or Territory (i.e. it included every State or Territory). This test would be satisfied by naming eight locations to which a particular allowance applied (i.e. at least one in each State or Territory) but not any lesser number.

35    The suggestion appeared to be that the proper way to comply with s 154(1)(b) would be to describe locations by their features or accompanying circumstances (heat, cold, isolation, etc.), rather than identify them geographically or individually. In the case of a tropical allowance, the fact that the allowance would never be paid in Tasmania should be ignored if that geographical reality was not expressed in the term itself. Similarly, an allowance for working in snow could be regarded as applicable (in the interests of uniformity) in the Northern Territory if employees working there were not expressly excluded from the entitlement.

36    That approach suggests that the drafters of the FW Act set out to elevate form over substance. I find the suggested approach to be so artificial that I do not accept that it can have been intended. Section 134(1)(g) of the FW Act states a particular objective.

134    The modern awards objective

What is the modern awards objective?

(1)    The FWC must ensure that modern awards, together with the National Employment Standards, provide a fair and relevant minimum safety net of terms and conditions, taking into account:

…

(g)    the need to ensure a simple, easy to understand, stable and sustainable modern award system for Australia that avoids unnecessary overlap of modern awards; and

…

37    Provisions in the one statute are to be construed harmoniously if possible but it is not a rule of construction that provisions must be read as though mutually exclusive or as though they have “some wholly distinct and separate field of operation” (Independent Commission Against Corruption v Cunneen [2015] HCA 14; 89 ALJR 475 at [31], [39]-[40]).

38    In my view, both limbs of s 154(1) are directed to the same general objective, although they address that question by reference to different possibilities which they are intended to exclude. The objective is to prohibit differences between entitlements in States or Territories as such – i.e. to eliminate “State-based” differences. The two elements of s 154(1) address different matters. Section 154(1)(a) addresses the manner of determination of such terms, including the possibility that entitlements applying in one State (or more than one) might be fixed differently from others – e.g. at different times, in different amounts, subject to different qualifying conditions, etc. Section 154(1)(b) prevents the possibility that terms and conditions might apply (i.e. as a matter of general application) in one or some but not every State or Territory, thereby discriminating (facially at least) against employees in those States or Territories which are excluded.

39    More particularly, the proposition that all modern award terms must operate uniformly throughout Australia is, in my view, impossible to reconcile with s 139(1)(g)(iii). Although the note to s 136 indicates that s 136(2) (which incorporates the limits imposed by s 154) prevails over any permissive or mandatory provisions referred to in s 136(1), the conflict between the obvious intent of s 139(1)(g)(iii) and the construction of s 154(1)(b) urged by the applicant is too stark not to take into account. It can only be resolved by finding against the applicant’s construction of s 154(1)(b). Otherwise, s 139(1)(g)(iii) would have no useful work to do unless that was achieved by contrivance and artifice.

40    Section 154, in my view, does not prohibit disability allowances for particular locations, or for a particular location. Any restriction upon an award of compensation for such matters is found only in the limitations expressed by s 139 – that the allowance is for disabilities, that it applies at a particular location or locations and that it is separately and clearly expressed in the modern award.

41    In my view, s 154(1) does not apply to prevent or prohibit the Broken Hill term. I would dismiss the application.

Associate:

Dated:    14 September 2015

REASONS FOR JUDGMENT

FLICK J:

42    Section 154(1)(b) of the Fair Work Act 2009 (Cth) (the “Fair Work Act”) does not preclude the making of an award including a term providing for “an allowance for the exigencies of working in Broken Hill of 4.28% of the standard rate” (“Broken Hill allowance”).

43    Section 154(1) provides as follows:

Terms that contain State-based differences

General rule—State-based difference terms must not be included

(1)    A modern award must not include terms and conditions of employment (State-based difference terms) that:

(a)    are determined by reference to State or Territory boundaries; or

(b)    are expressed to operate in one or more, but not every, State and Territory.

It is s 154(1)(b) upon which the Applicant presently relies. If that provision stood alone, there may have been considerable force in the Applicant’s argument as to the invalidity of a Broken Hill allowance. In that case there would be much force in an argument that terms providing for the payment of a Broken Hill allowance are all terms “expressed to operate in one … State”.

44    But s 154(1)(b) must also be construed having regard to s 139 of the Fair Work Act. That section provides in relevant part as follows:

Terms that may be included in modern awards—general

(1)    A modern award may include terms about any of the following matters:

…

(g)    allowances, including for any of the following:

(i)    expenses incurred in the course of employment;

(ii)    responsibilities or skills that are not taken into account in rates of pay;

(iii)    disabilities associated with the performance of particular tasks or work in particular conditions or locations;

…

45    Although s 154 may readily be seen as a legislative commitment to preclude terms and conditions the operation of which are “determined by reference to State or Territory boundaries” or are “expressed to operate in one or more, but not every State and Territory”, s 139(1)(g)(iii) expressly allows for a term providing an allowance for “disabilities associated with the performance of particular functions or work in particular … locations”.

46    To the limited extent that s 139(1)(g)(iii) expressly provides for such allowances to be paid, that provision is to be construed as either providing an exception to the otherwise general operation of s 154(1) or as a specific statutory provision dealing with a question not sought to be addressed in that section.

47    Although the term “disabilities” in the present proceeding may not have been embraced by all parties as being properly characterised as an “allowance” for “disabilities associated with” working at Broken Hill, that is how the term in the award properly should be characterised.

48    The terms “disability” and “disabilities” have an accepted meaning when employed in human rights legislation and, indeed, are terms used with that same meaning in some provisions of the Fair Work Act: e.g., s 284(1)(e).

49    But when the term “disabilities” is employed in s 139(1)(g)(iii) it is a term which has to be construed (most immediately) within the context of s 139 itself and (more broadly) against an accepted meaning of that term in the industrial relations context.

50    Both the terms of s 139 and s 139(1)(g)(iii) support a conclusion that the term is to be construed as a reference to the “disabilities” confronting any particular worker by reason of either the nature of the work being undertaken or the peculiar difficulties confronting workers in “particular conditions or locations.”

51    The subject matter of s 139 is the general prescription of terms that may be included in a modern award, ranging from minimum wages, overtime rates and penalty rates, through to allowances, leave and superannuation. There is to be distilled from s 139 no legislative intent to employ the words used in any other manner than that in which they have come to be commonly employed in the industrial relations context. The use of the phrase “conditions or locations” in s 139(1)(g)(iii) is a reference to “disabilities” confronting any worker employed to work in particular “conditions” or those “locations”. Although it does some dis-service to the statutory language actually employed, s 139(1)(g)(iii) is to be construed as referring to a “disability allowance”. The Macquarie Dictionary (3rd ed., 2002) defines this phrase as “an amount of money paid for working under certain unpleasant conditions”.

52    The payment of such allowances for those workers confronted with “disabilities associated with” particular work being undertaken has long been recognised: e.g., Australian Builders’ Labourers’ Federated Union of Workers v Transfield Construction Pty Ltd (1994) 74 WAIG 667; Civil Service Association of Western Australia Inc v Public Service Commission (1994) 74 WAIG 901; Australian Workers’ Union (WA Branch) v Western Mining Corporation Ltd (1995) 75 WAIG 167. Section 139(1)(g)(iii) had its counterpart in s 354(4)(f)(iii) of the now-repealed Workplace Relations Act 1996 (Cth). In the industrial relations context, the term “disability” has often been employed as referring to particular difficulties confronting a worker due to the inherent nature of his work. Thus, in Chief Commissioner of Police v Kerley [2008] FCAFC 41 at [16], (2008) 171 IR 420 at 427 Moore J referred to a “duty allowance payable … to compensate for a disability and that disability is that the officer is standing by available for resumption of duty”. See also: Manildra Flour Mills (Manufacturing) Pty Ltd v National Union of Workers [2012] FCA 1010 at [69] per Cowdroy J.

53    So construed, s 139(1)(g)(iii) does not run counter to the legislative objective to be discerned from s 154(1). The general prohibition in s 154 remains. It is no part of the function of s 154(1) to address terms in modern awards that deal with payments for “disabilities” confronted by working in “particular conditions or locations”. If it can be established that there are in fact “disabilities associated with the performance of particular tasks or work in particular conditions or locations”, s 139(1)(g)(iii) permits an allowance to be paid in recognition of the “disabilities” under which a worker is employed. Section 139(1)(g)(iii) expressly permits the inclusion of a term in a modern award with respect to the payment of an “allowance” for work “in particular conditions or locations”. The fact that a term defines the entitlement by reference to a “location”, being a “location” within a State or Territory, does not take it outside the scope of the power conferred by s 139(1)(g)(iii). Indeed, it would be difficult to identify a particular “location” which is not within a State or Territory. That which takes such a term outside the general operation of s 154(1) is the fact that the allowance is paid for “disabilities associated with the performance of particular tasks or work …”.

54    Concurrence is expressed with the orders which Buchanan J proposes.

Associate:

Dated:    14 September 2015