FEDERAL COURT OF AUSTRALIA

Construction, Forestry, Mining and Energy Union v Hay Point Services [2018] FCA 417

ORDERS

THE COURT ORDERS THAT:

The application filed 6 October 2016 be dismissed.

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

REASONS FOR JUDGMENT

COLLIER J:

Introduction

1    The applicant union (CFMEU) seeks declarations of contravention, together with pecuniary penalties, against the respondent, Hay Point Services Pty Ltd (HPS), pursuant to s 50 of the Fair Work Act 2009 (Cth) (the Act). Section 50 provides:

50    Contravening an enterprise agreement

A person must not contravene a term of an enterprise agreement.

Note 1:        This section is a civil remedy provision (see Part 4-1).

Note 2:    A person does not contravene a term of an enterprise agreement unless the agreement applies to the person: see subsection 51(1).

2    The CFMEU alleges that HPS contravened cl 34.1 of the Hay Point Services Pty Ltd Enterprise Agreement 2013 (2013 Enterprise Agreement) by imposing rostering arrangements in May 2016 which required HPS employees to work overtime hours that were not reasonable. Clause 34.1 provided that HPS:

May require an employee to work reasonable overtime and the employee shall work such overtime as required.

3    In summary, the CFMEU claims that HPS:

    required its employees to work overtime hours in excess of the reasonable overtime hours provided for by the 2013 Enterprise Agreement; and

    contravened, and continues to contravene, cl 34 of the 2013 Enterprise Agreement

4    The first issue in this proceeding is whether cl 34.1 of the 2013 Enterprise Agreement is a provision capable of being contravened within the meaning of s 50 of the Act.

5    The second issue concerns the proper construction of the term “reasonable overtime” as used in cl 34.1; and the third issue is whether the overtime hours that HPS required its employees to work were “reasonable overtime” in accordance with the proper construction of the 2013 Enterprise Agreement or constituted a contravention of cl 34.1 of the 2013 Enterprise Agreement and, therefore, s 50 of the Act.

6    HPS submits that a finding in its favour on the first issue would determine the case. In my view this is correct – in the absence of a contravened provision there is no work for s 50 to do. The CFMEU acknowledges this point to the extent of accepting that the Court is required to determine whether cl 34.1, read with cl 5 of the 2013 Enterprise Agreement, creates an obligation, and the principle that, in the absence of an obligation, there can be no breach.

7    Before turning to the issues in question it is first convenient to examine the background facts.

Background

8    HPS employs persons at its business operating at the Hay Point Coal Terminal (HPCT) in Queensland. Prior to May 2016, HPS’s employees worked a roster described as the “five panel roster”, which involved crews working over five different shifts. Crews were required to work two days, followed by two nights, followed by a six day break.

9    Under the five panel roster, HPS’s employees were required to work 35 ordinary hours per week.

10    In May 2016, HPS decided to change its rostering arrangements from a “five panel roster” to a “four panel roster”, referred to as the “New Roster”. The New Roster commenced at HPCT on 16 July 2016. Under the New Roster, crews worked over four shifts and the employees were required to work as follows:

    two consecutive day shifts, followed by two consecutive night shifts, followed by a five-day break; then

    two consecutive night shifts, followed by three consecutive night shifts, followed by a four-day break; then

    three consecutive day shifts followed by two consecutive night shifts, followed by a five-day break.

11    According to the CFMEU, the New Roster required employees to work 35 ordinary hours per week, with 8.75 hours of rostered overtime per week, meaning the New Roster required employees to work 455 hours of overtime per year.

12    HPS does not take issue with the CFMEU’s calculation of overtime hours, but noted that employees were also entitled to six weeks’ annual leave. HPS claims that the effect of employees actually taking that annual leave, assuming that they did so, would be that their overtime hours would be 402.5 hours per year.

The 2013 Enterprise Agreement

13    The 2013 Enterprise Agreement commenced on 24 January 2014. It is an enterprise agreement within the meaning of s 50 of the Act. There is no dispute that the CFMEU and HPS were covered by the 2013 Enterprise Agreement at all material times. Relevant provisions include the following:

    Clause 6.1 provides that full-time employees are engaged for a maximum of 35 ordinary hours per week, averaged over the work cycle of the area concerned.

    Clause 34.1 provides: “HPS may require an employee to work reasonable overtime and the employee shall work such overtime as required.”

    Clause 34.2 relates to the previous factored overtime scheme and its phasing out. It provides that employees who work overtime hours exceeding the designated amount of 104 hours will be paid the appropriate excess overtime rate.

    Clause 5 provides the following in respect of “Reasonable Overtime”:

for the purposes of the 2013 Enterprise Agreement, 104 hours overtime in a year is generally considered reasonable. This does not infer that 104 hours will be available to every employee, nor does it infer that each employee must work 104 hours of overtime.

History of the 2013 Enterprise Agreement

14    A considerable volume of evidence and submissions concerns the history of the 2013 Enterprise Agreement.

15    Relevantly, prior to the implementation of the 2007 Enterprise Agreement between the parties, the applicable enterprise agreements included “factored overtime”, at least in the agreements of 1998, 2001 and 2004. Those agreements contained the following features:

(1)    Each employee was designated an amount of factored overtime. Most shift workers had 104 hours of designated factored overtime, although some could have less if they were found without proper excuse not to have worked enough of their designated factored overtime in the previous year.

(2)    Employees had a “responsibility”, stipulated under the enterprise agreement and described as such, to work their designated factored overtime.

(3)    Each employee’s aggregate wage included their base rate of pay; amounts on account of various allowances, increments and penalties; and an amount on account of their designated factored overtime.

(4)    The last-mentioned amount, and therefore the total amount of each employee’s aggregate wage, went up and down according to the number of the employee’s designated factored overtime hours.

(5)    The result of (2), (3) and (4) was that HPS effectively “pre-purchased” each employee’s designated factored overtime, and in return was assured that in the usual course it would have the benefit of each employee’s designated factored overtime.

(6)    Employees could, and regularly did, work more overtime than their designated factored overtime. The mechanism by which that happened under each of the 1998, 2001 and 2004 Enterprise Agreements was a provision in each of the those agreements in materially the same terms as cl 34 of the 2013 Enterprise Agreement. For all overtime in excess of their designated factored overtime, employees were paid at what each of the enterprise agreements called “the appropriate excess overtime rate”.

16    From 2004, the applicable enterprise agreement allowed employees to elect, in some limited circumstances, to reduce their designated factored overtime to zero hours. The concept of ‘reasonable overtime’ was first inserted into the 2007 Enterprise Agreement. The reason for its insertion related to the removal of factored overtime in lieu of a pay rise of four per cent, which corresponded to the calculated and agreed value of the factored overtime scheme to employees.

17    HPS submitted that part of the reason for the CFMEU’s support for changing the scheme was to avoid complaints that some employees had not worked enough of their designated factored overtime.

18    The factored overtime scheme was “grandfathered” into the 2007 Enterprise Agreement, such that continuing employees could elect to remain on that scheme but new employees could not, and gradually phased out in the subsequent agreements. The terms of the 2010 and 2013 Enterprise Agreements replicated the relevant terms that appeared in the 2007 Enterprise Agreement.

The 2007 Enterprise Agreement Negotiations

19    Evidence relating to the negotiations leading to the 2007 Enterprise Agreement is set out in the affidavit of Mr Barry Spillman filed 20 December 2016 (Exhibit 2(A)). Mr Spillman was employed by HPS for 21 years, and held union positions as Secretary from 1996 and Treasurer from 2001 of the Hay Point Lodge of the Queensland District Branch of the Mining and Energy Division of the CFMEU. Mr Spillman was present at the negotiations for the 1998, 2001, 2004, 2007, 2010 and 2013 Enterprise Agreements. Much of Mr Spillman’s evidence is uncontested.

20    During the 2007 negotiations, HPS made it clear that it wanted to retain the ability to require employees to work reasonable overtime notwithstanding the phasing out of factored overtime. This was accepted by the CFMEU. At a meeting on 23 May 2007, Mr Philip Randall of HPS said words to the effect that HPS wanted some form of quantification of reasonable overtime in the enterprise agreement to achieve certainty. Mr Spillman suggested an average of two hours per week, or 104 hours per year, as that was the number of hours previously worked by employees under the factored overtime scheme. This definition of reasonable overtime by reference to 104 hours was accepted by the parties.

21    During those negotiations, Mr Randall and other HPS representatives also stated that the definition in cl 5 did not guarantee that everyone would get 104 hours of overtime and Mr Spillman stated on behalf of the CFMEU that the workers did not want all employees to be required to work 104 hours overtime. In line with this, the cl 5 definition of “reasonable overtime” was inserted into the 2007 Enterprise Agreement in the same terms as the 2010 and 2013 Enterprise Agreements. Mr Spillman gave evidence that the definition of “reasonable overtime” was not discussed after the 2007 negotiations.

Issue 1: can cl 34.1 be “contravened” for the purposes of s 50?

The CFMEU’s submissions

22    The CFMEU contends that cll 5 and 34.1, and the background to those provisions, were agreed between the parties to impose restrictions on HPS. In large part, the CFMEU seeks to rely on the evidence of the negotiations leading to the 2007 Enterprise Agreement. It contends that doing so accords with the principle that the agreement must be construed to give effect to its industrial purposes and the industrial context in which it applied. The CFMEU further submitted that its proposed construction could also be supported by the text of the agreement.

23    Specifically, the CFMEU submits that the reason for the insertion of the clauses was that HSP wanted certainty as to what constituted reasonable overtime and the number of hours that it could require its employees to work, since it could no longer rely on the previous factored overtime scheme which enabled it to essentially pre-purchase overtime hours. The CFMEU contends that this history makes it clear that the parties agreed to impose an additional restriction on the number of overtime hours that could be directed by the HPS, which therefore makes it clear that there was an agreement to impose a restriction.

24    The CFMEU further states that the use of the word “may” in cl 34.1 does not detract from its argument since there has not been adopted a rule that ‘shall’ suggests an obligation and ‘may’ indicates discretion. Instead, the clauses still need to be construed in accordance with ordinary principles. This includes reading the clauses so as to give effect to their evident purpose, which the CFMEU submits is to impose a restriction on the amount of overtime that employees could be required to work.

HPS’s submissions

25    HPS relies on the use of the word “may” in cl 34.1, which provides that HPS may require an employee to work reasonable overtime. HPS submitted that, by its ordinary and natural meaning, “may” is used to express permission or the absence of prohibitive conditions. In support, HPS referred to the Macquarie Dictionary, which relevantly defines “may” as “to have permission to” or “to be possible”. HPS contrasted this with what is understood by the use of the word ‘shall’, which is generally understood to be mandatory, in reference to the employees of whom the requirement to work reasonable overtime could be made. In essence, cl 34.1 allows HPS to require an employee to work overtime, which the employee is required to work if and to the extent that the overtime is reasonable. If or to the extent that the required overtime is not reasonable, the employee’s responsibility to work overtime simply is not triggered and the employee would be lawfully excused from working the overtime.

26    HPS rejected the CFMEU’s interpretation of cl 34.1, stating that it would require the Court to interpret cl 34.1 as though it reads “HPS may not require an employee to work overtime unless that overtime is reasonable”. In HPS’s submission, that requires significant reading in and cannot be achieved by the usual process of construction.

27    HPS further contended that the protection that the CFMEU seeks to read into cl 34.1 by this implication is found in s 62 of the Act, which limits the hours that a full-time employee can be required and effectively acts as a ‘safety net’ that cannot be displaced by the terms of the 2013 Enterprise Agreement. However, the CFMEU has not alleged a contravention of s 62 of the Act.

Consideration

28    The principles of construction applicable to enterprise agreements are not in dispute. They include:

    It is necessary to discern the objective meaning of the words used in the enterprise agreement, bearing in mind the context in which they appear and the purpose they are intended to serve (Transport Workers’ Union of Australia v Coles Supermarkets Australia Pty Ltd [2014] FCAFC 148; (2014) 245 IR 449 at [22], Amcor Limited v Construction Forestry Mining and Energy Union [2005] HCA 10; (2005) 222 CLR 241 at [66], [30]).

    Enterprise agreements are solely creatures of statute, in the interpretation of which there is no scope for private law concepts of contract or equity (ACTEW Corporation Ltd v Pangallo [2002] FCAFC 325; (2002) 127 FCR 1 at [33]). It follows that it is doubtful whether terms may be implied into enterprise agreements (Australian Nursing and Midwifery Federation v Bupa Aged Care Australia Pty Ltd [2017] FCA 1246 at [500]).

    Evidence of negotiations may be used to determine the “background facts”, known to both parties, however such evidence may not be adduced if it goes only to intentions or expectations (Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v ALS Industrial Australia Pty Ltd [2015] FCAFC 123; (2015) 235 FCR 305 at [120]).

29    Upon examining cl 34.1 in light of these principles, I am not satisfied that it is a provision which can be “contravened” for the purposes of founding a breach of s 50 of the Act.

30    First, turning to the language of cl 34.1, it is plain that the word “may” in that clause means no more than “has permission to”. In other words, cl 34.1 provides that HPS has permission to require an employee to work reasonable overtime. Certainly the word “may” does not mean “must” or “shall”, such that HPS is obliged to require an employee or employees to work reasonable overtime. The use of the word “may” in respect of HPS can be juxtaposed with the statement that employees “shall” work such overtime “as required”. The clause grants an entitlement to HPS to require employees to work reasonable overtime – the obligation is on employees to work such overtime as is reasonable by reference to cl 5.

31    Second, while the CFMEU places considerable reliance in its arguments on the intentions of the framers of the relevant enterprise agreement and the history of enterprise agreements between the parties, I am not persuaded that this history or HPS’s desire for certainty in identifying “reasonable” overtime results in restriction being imposed on HPS. In closing submissions the CFMEU summarised the evidence of Mr Spillman as:

(1)    During the course of negotiations for the 2007 Enterprise Agreement the representatives of HPS made it clear that under the proposed new arrangement it had the ability to require people to work reasonable overtime despite the phasing out of the factored overtime scheme, and the CFMEU accepted that position; and

(2)    During the negotiations Mr Randall said words to the effect that “the company wanted some form of quantification of reasonable overtime in the enterprise agreement so as to achieve certainty, following the decision to phase out the factored overtime scheme”, and in response to that request Mr Spillman suggested two hours per week or 104 hours per annum because that was the same number that had previously been worked by the operational staff under the factored overtime scheme.

32    The CFMEU submits that this evidence supports and is entirely consistent with the construction it advances. However in my view this is not the case. Mr Spillman’s evidence is actually supportive of the construction contended by HPS, namely that the cl 34.1, together with cl 5, provides certainty to HPS by entitling it to require an employee to work reasonable overtime in the amount of 104 hours per annum. It is clear that cl 34.1 is for the benefit of HPS. In this regard I also consider of little moment the failure of HPS to call Mr Randall to give evidence in this proceeding.

33    The CFMEU drew an analogy between the present circumstances, and the relevant clause considered by the Full Court in National Tertiary Education v Latrobe University [2015] FCAFC 142; (2015) 254 IR 238. In that case the Full Court considered the following words in an enterprise agreement:

The University is committed to job security. Wherever possible redundancies are to be avoided and compulsory retrenchment used as a last resort…

34    In particular, the CFMEU relied on the observations of White J in Latrobe University at [108]-[110] to the effect that it is the very nature of enterprise agreements made pursuant to the Act that they are intended to establish binding obligations, and the clause in that case was expressed in the language of obligation as evidenced by the use of such terms as “are to be avoided and … used as a last resort”.

35    In this case however, and particularly in light of the observations of the Full Court in Construction, Forestry, Mining and Energy Union v Hail Creek Coal Pty Ltd [2015] FCAFC 149 at [56]-[59], the Court should be cautious of accepting evidence of the alleged intentions of the parties in framing cl 34.1. Objectively, such evidence as is before the Court indicates that cl 34.1 was framed against a background where the factored overtime scheme had ceased and where 104 overtime hours was generally accepted by the parties as “reasonable” overtime. There is nothing to support the proposition that any other amount of overtime would, by reason of the terms of either cll 5 or 34.1, be unreasonable. Indeed, previous agreements provided for circumstances in which employees could work overtime additional to their factored overtime of 104 hours.

36    Further, I do not consider that it is either possible or appropriate to purport to substitute cl 34.1 for the clause considered by the Full Court in the Latrobe University case, and apply the reasoning of their Honours to the clause in dispute in this proceeding. The context and language of the two clauses are completely different. The Court in Latrobe University was satisfied that the relevant clause was framed in terms of obligation. This is not surprising given such terms as “are to be avoided”, which is the language of obligation. I am not persuaded that this is the case in respect of cl 34.1. Further, while the CFMEU also urges the Court to avoid unnecessary focus on words such as “will”, “shall” and “may”, it is clearly necessary for the Court to examine the plain and ordinary language of cl 34.1 in discerning the objective meaning of the words used. To that extent the fact that the parties to the 2013 Enterprise Agreement agreed on the use of the word “may” in the context of cl 34.1 is important in identifying the entitlements and obligations conferred by that clause, and where such entitlements and obligations lie.

37    Finally, cl 34.1 does not provide that HPS “may not” require an employee to work overtime unless that overtime is reasonable. The submission of HPS that the CFMEU’s reading of the clause turns the clause “on its head” is correct. It does not follow from the existence of a mere entitlement to require employees to work reasonable overtime that there is a prohibition on requiring employees to work overtime that is at variance with the relevant standard. Those two points do not logically nor necessarily correlate.

Conclusion

38    Detailed submissions have been advanced by each party in respect of the second and third issues in this litigation. However, in light of my finding that cl 34.1 is not a term which can be contravened by HPS within the meaning of s 50 of the Act, it is not necessary for me to consider these issues further.

39    The appropriate order is to dismiss the application.

Associate:

Dated:    28 March 2018