FEDERAL COURT OF AUSTRALIA

Telstra Corporation Ltd v Keen [2005] FCAFC 195

WORKER’S COMPENSATION – Safety, Rehabilitation and Compensation Act 1988 (Cth) – applicant entitled to payment of compensation for incapacity – redundancy – whether compensation payable to be reduced under s 33(1) of the Act – the nature of redundancy payments – whether “salary, wages or pay”

Safety, Rehabilitation and Compensation Act 1988 (Cth) ss 21, 33

Boncristiano v Lohmann [1998] 4 VR 82 cited

Termination, Change and Redundancy Case (1984) 8 IR 34 cited

Fryer v System Services Pty Ltd (1996) 137 ALR 321 referred to

TELSTRA CORPORATION LTD v LA-RAINE LESLEY KEEN

No NSD 527 of 2005

TAMBERLIN, FINN AND CONTI JJ

SYDNEY

9 SEPTEMBER 2005

THE COURT ORDERS THAT:

1.         The appeal be dismissed.

2.         The appellant pay the respondent’s costs of the appeal. 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The issue in this appeal is whether redundancy payments made to an employee of Telstra Corporation Ltd (“Telstra”) are properly to be characterised as amounts payable to that employee by way of salary, wages or pay for the purposes of s 33(1) of the Safety, Rehabilitation and Compensation Act 1988 (Cth) (“SR&C Act”), so reducing the amount of compensation for incapacity payable to the respondent, Ms Keen, under that Act.

Background setting

2                     On 29 December 1997 Ms Keen was made redundant and received a redundancy payment.  The quantification of that payment was in accordance with an “agreed benefit framework” prescribed in an industrial agreement (the AOTC Redundancy Agreement) and the benefit payable was calculated as a sum equivalent to 80 weeks of her ordinary pay.  The appellant received as well some other sums under the Agreement on termination. 

3                     Insofar as presently relevant, the AOTC Redundancy Agreement provided:

“1.2     In negotiating this Agreement, the parties have sought to achieve:

            …

(ii)               the provision of fair compensation for employees who leave AOTC through redundancy; [emphasis added]

…

7.         ENTITLEMENTS [The ‘agreed benefit framework’]

…

7.2             The agreed benefit framework is:

(i)                 four weeks pay for each completed year of continuous service up to five years, 

(ii)               three weeks pay for each completed year of continuous service thereafter, plus a pro-rata payment for each completed month of continuous service since the last completed year of continuous service,

(iii)             for employees over fifty years of age, four weeks pay for each year of service beyond fifty years of age, including pro-rata adjustment for each completed month of continuous service since the last completed year of continuous service,

(iv)             the minimum sum payable under these arrangements, including any payment in lieu of notice (four weeks), to be eight weeks salary and the maximum to be eighty-four weeks salary.

(v)               the sum payable to an employee under these arrangements not to exceed the sum of salary that would be payable were the employee to continue in employment until the maximum retiring age.”

4                     Ms Keen suffered a work related injury in 1991.  In late 2000, she sought compensation under the SR&C Act on the basis of that injury.  The Administrative Appeals Tribunal (“the Tribunal”) determined on 23 June 2003 that Ms Keen was entitled to payment of compensation for incapacity under that Act.  There has been a sequence of Telstra decisions and reviews and appeals to the Tribunal concerning the proper basis upon which her compensation claim should be calculated.  It is agreed for the purposes of this appeal that the calculation should be made under s 21 of the SR&C Act.  That section relevantly provides that:

“21      Compensation for injuries resulting in incapacity where employee is in receipt of a lump sum benefit

(1)       This section applies to an employee who, being incapacitated for work as a result of an injury retires voluntarily, or is compulsorily retired, from his or her employment at any time after the commencement of this section and, as a result of the retirement, receives a lump sum benefit under a superannuation scheme.

(2)       Comcare is liable to pay compensation to the employee, in respect of the injury, in accordance with this section for each week after the date of the retirement during which the employee is incapacitated.”

The section then prescribes how the compensation is to be calculated.

5                     The present question arises because Telstra has contended, unsuccessfully before the primary Judge and now on this appeal, that s 33 of the SR&C Act applies to reduce the amount of compensation payable to Ms Keen.  Section 33(1) provides:

“(1)     Where, in relation to a day in respect of which compensation is payable to an employee under section 19, 20, 21, 21A, 22 or 31, an amount or amounts are paid or payable to the employee by the Commonwealth or a licensed corporation by way of salary, wages or pay, the amount of compensation payable under that section in respect of that day shall be reduced by the amount, or the sum of the amounts, so paid or payable to the employee.

(2)       In this section, a reference to an amount paid or payable to an employee by the Commonwealth or a licensed corporation does not include a reference to:

            (a)        an amount by way of pay in respect of a period of leave of absence granted, or in lieu of the grant of a period of leave of absence, under section 16 or 17 of the Long Service Leave (Commonwealth Employees) Act 1976, section 73 or 74 of the Public Service Act 1922 as in force before 20 December 1976 or section 7 or 8 of the Commonwealth Employees’ Furlough Act 1943 as in force before that day; 

            (b)        an amount by way of pay in respect of a period of leave of absence granted, or in lieu of the grant of a period of leave of absence, under regulations in force under the Naval Defence Act 1910, the Defence Act 1903 or the Air Force Act 1923; 

            (ba)      an amount by way of pay in respect of a period of leave of absence, or in lieu of the grant of a period of leave of absence, in the nature of long service leave under a law of a State or Territory or an industrial award, determination, order or agreement; 

            (c)        any amount that the employee is able to earn in suitable employment or any amount of earnings payable to an employee, being an amount that has been taken into account for the purposes of calculating the amount of compensation payable to the employee under section 19;  or 

            (d)        an amount of deferred pay within the meaning of Part III of the Defence Forces Retirement Benefits Act 1959 or of any provision of that Part.” 

The section goes on to exempt specific payments, e.g. a payment in respect of a period of leave of absence or deferred pay, from the operation of s 33(1). 

THE DECISIONS OF THE AAT AND THE PRIMARY JUDGE

6                     The decision of the Tribunal which gave rise to the present proceeding was that Ms Keen’s redundancy payment was an amount paid by Telstra to her, for labour or personal services and was made pursuant to an agreement between Telstra and Ms Keen (i.e. the AOTC Redundancy Agreement).  Hence it was “salary, wages or pay” within s 33 of the SR&C Act and the redundancy payment was paid for the 80 weeks period from Ms Keen’s redundancy.  The amount of compensation payable to her under s 21 of the SR&C Act was, in consequence, to be reduced in the manner prescribed in s 33(1). 

7                     In setting aside the Tribunal’s decision, the primary Judge concluded that s 33(1) was inapplicable to Ms Keen’s circumstance for the reason that, even if the manner in which a redundancy payment was calculated was by reference to a number of weeks pay for a number of years service, the payment itself was not properly to be described as pay for particular weeks of employment.  Rather, it was “compensation for the loss of a job”. 

8                     It is this conclusion that is challenged in this appeal. 

THE APPEAL

9                     Telstra’s submissions are that (i) the plain words of the SR&C Act when applied to the words of the redundancy agreement required s 33 of the Act to be applied;  and (ii) given that the purpose behind s 33 is to avoid double compensation, it should be given a construction which gives full effect to that purpose.  The primary judge, it is said, erred in failing to use the general “rule against double compensation”:  cf Boncristiano v Lohmann [1998] 4 VR 82 at 88-90;  as the guiding principle in construing the SR&C Act. 

10                  There is, in our view, a short answer to these submissions.  The methodology employed in the AOTC Redundancy Agreement to quantify the benefit payable to an employee on redundancy, uses specified “weeks of pay” (usually as one multiplier) to provide the monetary unit of measure in any of the cl 7 calculations required to be made.  However, that methodology does not of itself dictate how the payment so calculated is to be characterised.  That characterisation involves other considerations.

11                  The AOTC Redundancy Agreement characterises one of its objects as providing “fair compensation for employees who leave AOTC through redundancy”:  cl 1.2(ii).  That compensation is multifaceted and contains a number of distinct components.  One grouping of these is the bundle of what are commonly described as “non-transferable credits”, for example, annual, long service and sick leave, that have been built up through length of service:  cll 8 and 10 and see cl 12 and see Termination, Change and Redundancy Case (1984) 8 IR 34 at 72.  The clause 7 “agreed benefit framework” in turn provides a compensation scheme for what, in our view, are the well-recognised components in redundancy payments of inconvenience and hardship imposed by the termination through no fault of the employee.  These include “the disruption to an employee’s routine and social contacts and the competitive disability to long term employees arising from opportunities foregone in the continuous service of the employer”:  Fryar v System Services Pty Ltd (1996) 137 ALR 321 at 331. 

12                  Unsurprisingly, the compensation scheme takes account, inter alia, both of length of service:  cl 7.2(i) and (ii);  and of age (for employees over 50):  cl 7.2(iii).  We would add that though the cl 7 payment may in fact provide income maintenance during a period of unemployment consequent upon termination, the payment itself cannot properly be characterised as providing income maintenance as such let alone for any particular period.  The payment is to be made whether or not unemployment ensues in a given case.

13                  Ms Keen’s cl 7 payment was made under the industrial agreement.  But it was not a payment for labour and services as such.  Its purpose was otherwise.  Put shortly, as the primary judge characterised it, the payment was for loss of a job.  The manner of its calculation did not affect this.  The use of specified “weeks pay” in the various possible cl 7 calculations provided intelligible objective standards that could yield appropriate monetary outcomes in respect of the calculations envisaged by cl 7.  This, though, did not transform the resultant monetary sums arrived at in applying cl 7, into payments that were “by way of salary, wages or pay”, let alone payments “in relation to a day in respect of which compensation [was] payable under section … 21”:  s 33(1).

14                  Further, though the various cl 7 calculations were temporally tied in various ways – e.g. to the employee’s period of service, the employee’s age and service (if over 50), and the minimum sum payable expressed in weeks – the cl 7 payment, as calculated, was not one made for and on account of any notional post-termination period of time at all.

15                  Ms Keen’s redundancy payment did not possess either of the attributes required to attract the operation of s 33(1) of the SR&C Act.  It was not a payment by way of salary, wages or pay;  and it was not made in respect of actual or notional post-termination days.  While it may be the case that s 33(1) reflects a legislative purpose of preventing over compensation, it can only do so within its proper province.  Ms Keen’s redundancy payment did not fall within that province.

16                  We order that the appeal be dismissed with costs. 

Associate:

Dated:              9 September 2005