Federal Court of Australia

Conroy’s Smallgoods v Australasian Meat Industry Employees Union [2023] FCAFC 59

ORDERS

THE COURT DECLARES THAT:

1.    Pursuant to s 113(1) of the Fair Work Act 2009 (Cth) there are applicable award-derived long service leave terms in relation to Mr Matthew Finch contained within the Federal Meat Industry (Smallgoods Award) 2000.

2.    Mr Finch’s entitlement to long service leave is nil.

THE COURT ORDERS THAT:

1.    The appeal is allowed and the decision of the South Australian Employment Tribunal is set aside.

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

REASONS FOR JUDGMENT

BROMBERG J:

1    Mr Finch was employed by Conroy’s Smallgoods Pty Ltd (Appellant) in the position of “boner” on a casual basis. Whilst so employed, Mr Finch was not provided with long service leave and he was not paid out any long service leave entitlements upon the termination of his employment in October 2018.

2    On his behalf, the respondent union (Respondent) instituted proceedings in the South Australian Employment Tribunal (Tribunal), seeking a declaration that Mr Finch was entitled to long service leave in accordance with the Long Service Leave Act 1987 (SA) (LSL Act (SA)). Like counter-part legislation which exists in each State and Territory (Long Service Leave Act 1976 (ACT); Long Service Leave Act 1955 (NSW); Long Service Leave Act 1981 (NT); Industrial Relations Act 2016 (Qld); Long Service Leave Act 1976 (Tas); Long Service Leave Act 2018 (Vic); Long Service Leave Act 1958 (WA)), the LSL Act (SA) relevantly provided long service leave entitlements to all employees, including casual employees, whose years of service qualified the employee for the entitlements. It is not in contest that, if Mr Finch was entitled to long service leave entitlements under the LSL Act (SA) (State-based LSL entitlement), he was entitled to 10.4 weeks of accrued long service leave equating to a payment upon termination of $9,950.23.

3    The Tribunal declared that Mr Finch was entitled to his State-based LSL entitlement. On this appeal, the declaration made by the Tribunal is supported by the respondent as well as two interveners — the Wage Inspectorate Victoria (WIV) and the State of New South Wales (NSW) (collectively, the Respondent/Interveners). The validity of the declaration is challenged by the Appellant and an intervener – the National Australia Bank (NAB) (collectively the Appellant/Intervener).

The legislation and competing contentions as to its construction

4    Broadly speaking, the Appellant/Intervener contended that Mr Finch’s State-based LSL entitlement was negated by the operation of the Fair Work Act 2009 (Cth) (FW Act).

5    To understand how that was put, it is necessary to appreciate how, relying principally on the operation of s 109 of the Commonwealth Constitution and the corresponding principles developed in relation to Territory laws, the FW Act deals with the interaction of that Act with State and Territory laws. It is relevant in that respect to note the principles in Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508 at [11] (French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ) that “[f]or the purposes of s 109, an industrial award, while not of itself a law of the Commonwealth, has the force and effect of such a law where so provided by the machinery of a Commonwealth statute”. Section 109 only applies to inconsistency between Commonwealth and State laws. It does not apply in relation to Territory laws. However, in University of Wollongong v Metwally (1984) 158 CLR 447, Mason J stated at 464 that “[i]t is significant that a conflict between a Commonwealth law and a Territory law, which is unaffected by the provisions of s 109, is resolved in favour of the primacy of the Commonwealth law by reference to the same doctrine of inconsistency”. The High Court has affirmed this principle in a number of other cases, including Northern Territory of Australia v GPAO (1999) 196 CLR 553 at [59], [80] (Gleeson CJ and Gummow J), [202], [219] (Kirby J).

6    The intended interaction of the FW Act with State and Territory laws is specifically addressed in Div 2 of Pt 1-3 headed “Interaction with State and Territory Laws”. Section 26(1) provides that the FW Act is “intended to apply to the exclusion of all State or Territory industrial laws so far as they would otherwise apply in relation to a national system employee or a national system employer”. The meaning of “national system employee” and “national system employer” is given by ss 13 and 14 of the FW Act, respectively, and it is not in issue that Mr Finch and the Appellant each fell within the applicable definition.

7    Section 27 identifies certain State and Territory laws that are not excluded by s 26. Relevantly, s 27(1)(c) provides that s 26 does not apply to a law of a State or Territory insofar as the law deals with “any non-excluded matters”. Section 27(2) then specifies the “non-excluded matters” and, relevantly, they include “long service leave, except in relation to an employee who is entitled under Div 9 of Pt 2-2 to long service leave” (s 27(2)(g)).

8    Part 2-2 of the FW Act contains the “National Employment Standards” (NES) which s 59 describes as the “minimum standards that apply to the employment of national system employees”. Section 61(2) lists each of the ten “minimum standards” and includes at subpara (g) “long service leave” which is the subject of Div 9 of Pt 2-2 of the Act (Div 9).

9    In Div 9, s 113(1) of the Act provides that (emphasis added):

(1)    If there are applicable award-derived long service leave terms (see subsection (3)) in relation to an employee, the employee is entitled to long service leave in accordance with those terms.

Note:    This Act does not exclude State and Territory laws that deal with long service leave, except in relation to employees who are entitled to long service leave under this Division (see paragraph 27(2)(g)), and except as provided in subsection 113A(3).

10    The current wording of s 113 is identical to the wording when the FW Act commenced on 1 January 2010, except that the references to the Fair Work Australia and Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) are now to the Fair Work Commission and Transitional Act (as defined in s 12).

11    Section 113(2) specifies certain circumstances in which s 113(1) does not apply and I will return to that provision.

12    Sections 113(3) and (3A) define the critical phrase “applicable award-derived long service leave terms” utilised in s 113(1) as follows (emphasis added):

(3)    Applicable award-derived long service leave terms, in relation to an employee, are:

(a)    terms of an award, or a State reference transitional award, that (disregarding the effect of any instrument of a kind referred to in subsection (2)):

(i)    would have applied to the employee at the test time (see subsection (3A)) if the employee had, at that time, been in his or her current circumstances of employment; and

(ii)    would have entitled the employee to long service leave; and

(b)    any terms of the award, or the State reference transitional award, that are ancillary or incidental to the terms referred to in paragraph (a).

(3A)    For the purpose of subparagraph (3)(a)(i), the test time is:

(a)    immediately before the commencement of this Part; or

(b)    if the employee is a Division 2B State reference employee (as defined in Schedule 2 to the Transitional Act)—immediately before the Division 2B referral commencement (as defined in that Schedule).

13    The appeal turns on the proper construction of the definition provided by s 113(3) which must be read into the terms of s 113(1). The primary question is whether “there are applicable award-derived long service leave terms” in relation to “an employee” (relevantly, Mr Finch) within the meaning of s 113(1). If there are such terms, then Mr Finch “is entitled to long service leave in accordance with those terms” with the effect that Mr Finch would be “an employee who is entitled under Division 9 of Pt 2-2 to long service leave” within the meaning of s 27(2)(g). Therefore, s 26 would apply to exclude the application of the LSL Act (SA) to Mr Finch’s employment and thus deny to him the State-based LSL entitlement. If, on the other hand, there are not “applicable award-derived long serve leave terms” in relation to Mr Finch, the FW Act would not exclude the operation of the LSL Act (SA) and the Tribunal was correct to have declared that Mr Finch was entitled to the State-based LSL entitlement.

14    The Appellant/Intervener relied upon an award known as the Federal Meat Industry (Smallgoods) Award 2000 (Award) as providing the “applicable award-derived long service leave terms” in relation to Mr Finch. The Award is an award made in 2001 under a predecessor of the FW Act, the Workplace Relations Act 1996 (Cth) (WR Act), some eight or nine years prior to the commencement of the FW Act. Awards of that kind are often referred to as “pre-modernised” awards in order to distinguish those awards from the “modern awards” made pursuant to Pt 2-3 of the FW Act. It is not in contest that the Appellant was bound by the Award and that the Award applied in relation to the employment of Mr Finch.

15    Nor is it in issue that the terms of the Award “applied” to Mr Finch “at the test time” within the requirements of the first condition (first condition) provided by subpara (a)(i) of the definition of “applicable award-derived long service leave terms” in s 113(3)(a). The satisfaction of the first condition is not otherwise in issue. What is at the heart of the contest between the parties is whether the terms of the Award, and relevantly cl 32 of the Award, satisfied the second condition (second condition) specified by s 113(3)(a)(ii), that the terms “would have entitled [Mr Finch] to long service leave”, in circumstances where it is accepted that cl 32 of the Award did not provide Mr Finch any entitlement to accrue and be paid long service leave whilst employed on a casual basis. That was because, as a casual employee whose employment terminated at the end of each engagement in accordance with cl 8.6.3(b) of the Award, Mr Finch could never satisfy the long service leave eligibility requirement in cl 32 of the Award that he complete 15 years of service “under an unbroken contract of employment”.

16    It was not in dispute that the second condition is satisfied where the employee in question would have had a right to long service leave under the terms of an award, irrespective of whether at that time the employee would have actually accrued long service leave. That was the holding of a Full Court of this Court in Maughan Thiem Auto Sales Pty Ltd v Cooper (2014) 222 FCR 1: see at [43] the reasons of Katzmann J with whom Greenwood and Besanko JJ agreed. The Full Court was not there concerned with the constructional issue raised in this appeal, although both the Appellant/Intervener and the Respondent/Interveners each sought to draw some comfort from that judgment.

17    The Appellant/Intervener contended that the phrase “entitled the employee to long service leave” in the second condition should not be construed in accordance with its ordinary or grammatical meaning. The ordinary meaning of “entitled … to long service leave” being that an employee has a right or benefit to long service leave. The Appellant/Intervener contended that, by reference to context, s 113(1) is to be read as intending to wholly preserve both the terms and the effect of long service leave terms in pre-modernised awards (including terms which provide to particular employees a nil entitlement to long service leave) pending the development of a national uniform scheme for long service leave. This conception of the purpose was, according to the Appellant, supported by Katzmann J’s observation in Maughan at [44] (Greenwood and Besanko JJ agreeing) that “113 is a transitional provision that is designed to preserve the effect of long service leave terms in awards as they stood before the commencement of the National Employment Standards”. The core of this contention was that Parliament intended that the status quo in relation to long service leave arrangements be preserved without alteration pending a national uniform scheme. The “mischief that Parliament aimed to remedy” was said to be avoiding the consequences of the status quo being disturbed. Those consequences being the increased financial burden on employers as well as the additional administrative burdens which employers would face if the status quo of arrangements were altered so as to provide long service leave under State or Territory legislation to employees who were not previously entitled to long service leave under federal industrial instruments.

18    For those reasons, the Appellant/Intervener say that the ordinary meaning of “entitled the employee to long service leave” is displaced by its legal meaning.

19    The legal meaning was essentially identified in terms of the operation of the second condition. The Appellant contended that the second condition is to be construed as being satisfied where the “applicable award-derived long serve leave terms” “applied to” the employee. The Appellant submitted that “Mr Finch had an ‘entitlement’ because the long service terms applied to him”. In the case of the NAB, it contended that the second condition is satisfied “[i]f an employee is covered by a pre-modernised award that provides for long service leave … irrespective of whether the employee is included or excluded from those provisions, [then] the employee is ‘entitled to’ long service leave in accordance with the award” (emphasis in original).

20    The Respondent did not dispute that the purpose or intent of s 113(1) of the FW Act is to preserve the application of terms of a pre-modernised award dealing with long service leave but said that the intended preservation is limited. The Respondent contended that s 113(1) “preserves the application of the terms of a pre-modernised award only in so far as they would have conferred an entitlement to long service leave on an employee”. That contention is consistent with the contentions put by NSW and WIV and also consistent with the approach taken by the Tribunal: see Australasian Meat Industry Employees Union v Conroy’s Smallgoods Pty Ltd [2021] SAET 234 at [52], [74]–[82] (DP Cole).

21    Broadly stated, the Respondent/Interveners submitted that the construction they contended for, including as to intent and purpose, arise from, and are unambiguously supported by, the text of s 113(1) of the FW Act and the text of its surrounding provisions. NSW and WIV also relied on the change made to s 113(1) as compared to its legislative predecessor to demonstrate that s 113(1) did not intend to fully preserve the status quo ante. They contended that, in so far as the extrinsic material was capable of assisting, it assisted their construction but that, in any event, neither the extrinsic material or the consequences for employers of their construction could displace the plain intention of s 113(1) as revealed by its text.

22    Although unnecessary to sustain their primary defence of the decision of the Tribunal, the Respondent/Interveners also contended that a purpose of the legislative scheme provided for by Div 9 is to provide for a minimum standard of long service leave for employees covered by the FW Act, such that the State and Territory long service leave laws act as a “de facto floor for the long service leave entitlements of national system employees”. In that respect, I understood them to suggest that the scheme had the effect of providing all employees covered by federal industrial instruments an entitlement to long service leave. For the reasons later given in relation to the operation of s 113(2), I do not accept that the purpose of the scheme was to ensure that all employees the subject of federal industrial instruments had access to a long service leave entitlement.

The applicable principles of statutory construction

23    The applicable principles for construing a statute were not in contest, although different emphasis was given to those principles. The Appellant/Intervener propounded a more purposive approach to construction than did the Respondent/Interveners. It is convenient now to set out an outline of the principles which need to be applied.

24    It is well settled that the literal meaning of the words in a statute “may be ascribed a different legal meaning after the process of construction is complete”: R v A2 (2019) 269 CLR 507 at [32] (Kiefel CJ and Keane J). See also CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ); Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [78] (McHugh, Gummow, Kirby and Hayne JJ).

25    This process of construction was explained by Bell and Gageler JJ in A2 where their Honours stated at [124] that “the court starts with consideration of the ordinary and grammatical meaning of the words taking into account both context and legislative purpose” (see also Kiefel CJ and Keane J at [32]–[33]). The “modern approach” to statutory construction emphasises that context and purpose are considered at the “first instance” of interpretation and not at some later stage, as suggested by s 15AB(1) of the Acts Interpretation Act 1901 (Cth) (AIA): Bankstown at 408 (Brennan CJ, Dawson, Toohey and Gummow JJ); Independent Commission Against Corruption v Cunneen (2015) 256 CLR 1 at [57] (French CJ, Hayne, Kiefel and Nettle JJ); SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362 at [14] (Kiefel CJ, Nettle and Gordon JJ), [35]–[36] (Gageler J). See also Sydney Seaplanes Pty Ltd v Page (2021) 362 FLR 1 at [41] (Bell J).

26    Context may encompass the structure of the Act, surrounding provisions, legislative history, extrinsic materials and the mischief towards which the Act, or a particular provision, is directed: AIA s 15AB(2); A2 at [37]–[44] (Kiefel CJ and Keane J), [162] (Edelman J). As Gageler said in SZTAL at [38], the context may point to a “constructional choice … between one meaning which can be characterised as the ordinary or grammatical meaning and another meaning which cannot be so characterised”. This constructional choice may be resolved by the discernment and application of statutory purpose (see SZTAL at [39]). In this way, context both informs the statutory purpose and “reinforces the need for purposive construction” (Sydney Seaplanes at [33] (Bell J)) — a need which is further reinforced by the requirement in s 15AA of the AIA that “the interpretation that would best achieve the purpose or object of the Act … is to be preferred to each other interpretation”.

27    It may be “entirely appropriate” for a court to depart from the literal, grammatical meaning of a provision when such a meaning is at odds with the statutory purpose: A2 at [37] (Kiefel CJ and Keane J). See also A2 at [124] (Bell and Gageler JJ); Project Blue Sky at [78] (McHugh, Gummow, Kirby and Hayne JJ).

28    However, the text of the statute remains important and the text itself, rather than “paraphrases of the statutory language in extrinsic materials”, is to be considered: A2 at [35] (Kiefel CJ and Keane J). A court’s ability to depart from the ordinary meaning of the statutory text is constrained as Kiefel CJ, Keane, Nettle and Edelman JJ explained in Esso Australia v Australian Workers Union (2017) 263 CLR 551 at [52]:

The Court’s ability to construe a statutory provision in a manner that departs from the natural and ordinary meaning of the terms of the provision in the context in which they appear is limited to construing the provision according to the meaning which, despite its terms, it is plain that Parliament intended it to have.

By reference to that observation as well as other longstanding authority, Kiefel CJ, Bell, Gageler, Keane, Nettle and Gordon JJ said in Masson v Parsons (2019) 266 CLR 554 at [26] that “a court will not construe a provision in a way that departs from its natural and ordinary meaning unless it is plain that Parliament intended it to have some different meaning”.

29    Quite obviously questions of degree will arise but as Edelman J stated in SAS Trustee Corporation v Miles (2018) 265 CLR 137 at [64] “the clearer the natural meaning [of the text] the more difficult it is to justify departing from it”: quoting Arnold v Britton [2015] AC 1619 at [18] (Lord Neuberger, with whom Lord Sumption and Lord Hughes JJSC agreed).

30    Further, as French CJ, Hayne, Kiefel and Bell JJ noted in Australia Education Union v Department of Education and Children’s Services (2012) 248 CLR 1 at [28] “it is not for a court to construct its own idea of a desirable policy, impute it to the legislature, and then characterise it as a statutory purpose”. See also Esso at [52] (Kiefel CJ, Keane, Nettle and Edelman JJ); Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378 at [40] (French CJ and Hayne J).

31    Justice Bell explained the difficulties of identifying statutory purpose in Sydney Seaplanes at [36], [39] (citations omitted):

It will not, however, always be easy to identify or discern the purpose of any given statute or statutory provision, and care must be taken against ascribing an overly broad purpose based upon a priori assumptions as to the legislation’s intended reach. Furthermore, a statute may have multiple purposes and, as enacted, may (and often will) give effect to political and policy compromises such that the legislative purpose, whatever may have been intended originally, is obscured.

….

The purpose of a statute or statutory provision, or the “mischief” which a statute is intended to address, may sometimes also be identified in an explanatory memorandum to a parliamentary bill or in the second reading speech although these sources of potential enlightenment, particularly the explanatory memorandum, are frequently of limited utility in this regard, often being little more than summaries or paraphrases of provisions of the bill. Although the occasions when such assistance will in fact be given have been said to be “rare”, they nevertheless sometimes present themselves.

32    A court similarly cannot ignore or displace the words of the statute by reference to a general purpose (that is otherwise clear): Victims Compensation Fund Corporation v Brown (2003) 201 ALR 260 at [33] (Heydon J); Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [51]–[53] (Hayne, Heydon, Crennan and Kiefel JJ); A2 at [34]–[36] (Kiefel CJ and Keane J). This is because the “general purpose” of a statute may say “nothing meaningful” about a particular provision. Rather, the text itself may be a better guide to legislative intention than some “general purpose” discerned by reference to extrinsic material such as an explanatory memorandum: A2 at [35] (Kiefel CJ and Keane J).

33    The foregoing discussion illustrates that if the purpose of a statute or statutory provision is to be discerned from a consideration of context, the assumed purpose must be plainly demonstrated and be capable of articulation with clarity and specificity to justify departing from the ordinary meaning of the statutory text in question. The clearer the natural meaning of the text the more difficult will be the task of demonstrating that “it is plain” that Parliament intended it to have some different meaning.

Deliberation

34    I should say at the outset that I am in no way disinclined to adopt an approach to statutory construction which takes into account all available indicators of statutory purpose. However, as the relevant principles demonstrate, a purposive approach to construction must never lose sight of the text being construed because ultimately the purpose of a provision must be found in the enactment itself.

35    In my view, this is a case where, having considered the context, the intended purpose of the provision in question is found in its text and structure, supported by both the surrounding text and by the legislative history of the scheme in which it sits. The purpose of s 113(1) is to preserve the operation of those “award-derived long service leave terms” which provide an employee with an entitlement to long service leave. The contrary purpose contended for by the Appellant/Intervener — that s 113(1) has an absolute preservation purpose rather than the more limited preservation purpose revealed by its text — is not made out, let alone plainly established (as it would need to be), by either the extrinsic material relied upon or the asserted “inconvenient and improbable” consequences for employers in relation to the construction which I prefer.

36    Although the Appellant/Intervener has not misstated the applicable principles, they have very substantially misapplied them. It seems to me that the submissions of the Appellant/Intervener assume a legislative purpose that is not apparent, let alone clearly apparent, from either the text or context and have then worked backwards to re-engineer the meaning to be attributed to the text of s 113(1) and (3). The dangers of such an approach are well known. In Certain Lloyd’s, French CJ and Hayne J at [40] warned about the “dangers of reasoning from legislative ‘intention’ that is not based, as it must be, in the text of the relevant legislation”. Their Honours stated at [41]:

It is not legitimate to identify a legislative purpose not apparent from the text of the relevant provisions (or in this case even expressed in some extrinsic material), to examine extrinsic material and notice that there is nothing positively inconsistent with the identified purpose, and then to answer the question of construction by reference to the purpose that was initially assumed. That reasoning is not sound.

37    Their Honours also warned at [26] about the related danger of “identifying a statute’s purpose … [by] the making of some a priori assumption about its purpose. The purpose of legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provisions.” See further APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at [424] (Hayne J).

38    It is convenient to commence the detailed analysis here by restating the legal meanings contended for by the Appellant and by the NAB. The Appellant, in essence, seeks to have the ordinary meaning of the second condition — that the award terms “would have entitled the employee to long service leave” — displaced by a meaning that the award terms need only apply to the employee. The NAB contends that the ordinary meaning should be displaced by the meaning that the award terms “provide for”, in the sense of “deal with”, long service leave.

39    The first difficulty with the meanings contended for by the Appellant and by the NAB is a difficulty which those parties in essence acknowledge: the meaning they seek to have ascribed to the second condition is not its ordinary meaning.

40    I can well accept that the word “entitled” can mean different things in different contexts. The same may be said of the word “entitlement”. It is, for instance, grammatical to say that a person is entitled to nothing. However, what s 113(3)(a)(ii) is doing is identifying a characteristic of the award terms being defined. To say that award terms “would have entitled the employee to long service leave” is to characterise the award terms as providing an entitlement to something, namely, long service leave. Those words are not capable of being grammatically construed as referring to award terms that would have entitled the employee to no long service leave at all.

41    Once it is appreciated that an entitlement means a right to long service leave rather than accrued long service leave (see Maughan at [43] (Katzmann J)), the text of the second condition is clear and, on its face, seems unambiguous. I accept, in accordance with the principles I have set out already, that ambiguity may become apparent once context is taken into account. However, before considering context, namely the legislative history and the extrinsic material, there are other textual indications in Div 9, beyond the text of the second condition, which support the proposition that the purpose and intent of the second condition is to preserve the application of the terms of a pre-modernised award but only in so far as those terms would have conferred an entitlement to long service leave on an employee.

42    The word “entitled” (or a derivative thereof) is used on 10 occasions in Div 9. It is highly unlikely that the draftsperson would have intended the term to have other than a consistent meaning throughout (Tabcorp Holdings Ltd v Victoria (2016) 328 ALR 375 at [65] (French CJ, Kiefel, Bell, Keane and Gordon JJ) and it is only the ordinary meaning of the term that sensibly accords with each of those uses.

43    The word “entitled” is first used in Div 9 in s 113(1). Its meaning must have been intended to be the same as the meaning intended for the term when used in the second condition in s 113(3)(a)(ii), that condition being part of a definition to be read into s 113(1). Similarly, the term “entitled” when used for the second time in Div 9 in the Note to s 113(1) must have been intended to have the same meaning as its meaning in s 113(1). Further, the word “entitled” as used in the Note must have been intended to have a consistent meaning with its use in s 27(2)(g) to which the Note specifically refers.

44    On each of those occasions of its use, the ordinary meaning of “entitled”, as having a right or benefit to something, is grammatical and accords with the apparent purpose of the provision and the explanation for the provision provided for by the Note.

45    It is unlikely that a competent draftsperson would, in any of the contexts just illustrated or, indeed, on the other seven occasions in which the word “entitled” (or a derivative thereof) is used in Div 9, have adopted that word to say that the terms or instruments being there addressed need merely “apply to” an employee or “deal with” the subject of long service leave.

46    That is particularly so in circumstances where, when the draftsperson sought to address particular terms or instruments which “applied” or “applies” to an employee or which “deal with” long service leave, those words or phrases (and not the word “entitled”) were used to communicate that intent.

47    The word “entitled” or “entitles” appears in contra-distinction to “deals with” or “applied” or “applies” in the same provision of Div 9 on three occasions, including in s 113(3)(a) itself where “applied” is used in the first condition and “entitled” in the second condition.

48    Given that textual content, it is not open to conclude that the use of the word “entitled” in the second condition is the product of infelicitous drafting or that it was other than a deliberate use of the term. It is highly unlikely that the term would have been deliberately used to communicate a meaning other than its ordinary meaning. That conclusion is further reinforced by the terms of s 113A(1)(b) where the phrase “not entitled” is used in a similar way to the use of the word “entitled” in the second condition: to limit the applicability of an instrument by reference to whether or not the instrument provides a right or benefit to the employee in question.

49    Furthermore, I agree with the Respondent’s contention that the fact that “entitled” was intended to communicate its ordinary meaning is supported by its use in a scheme (Pt 2-2 — the National Employment Standards) the very objective of which is to provide employees with entitlements and because the focus of the provision is upon the particular employee.

50    Next, turning to the structure of s 113(3), the construction contended for by the Appellant/Intervener would give the second condition little or no work to do. In this respect, the Appellant/Intervener do not simply seek to displace the ordinary meaning of the second condition but, in essence, seek to displace its operation.

51    If the second condition was merely conditioned upon whether the “award-derived long service terms” would have “applied to” the employee, as the Appellant contended, the second condition would be superfluous. Whether the terms of the award “would have applied to the employee” is expressly the subject of the first condition.

52    Turning to the NAB’s asserted meaning, if the function of the second condition is to do no more than identify that the “award-derived long service leave terms” must be terms that “provide for”, in the sense of” “deal with”, long service leave, that requirement is otherwise fairly apparent from the terms of s 113(1) even before the definition provided by s 113(3) is read into s 113(1). That is because the notion of “award-derived long service leave terms” in s 113(1) (emphasis added) necessarily requires that any applicable award will have terms that deal with long service leave. I appreciate, however, that a careful and cautious draftsperson drafting a definition provision may have nevertheless wanted to put the position beyond doubt. On that view, there would be some work for the second condition to do if it was intended to have the meaning the NAB asserts it has. On that construction, s 113(3)(a)(i) merely concerns whether an award applied to the employee at the relevant time (not yet asking whether that award contained any clauses dealing with long service leave) and s 113(3)(a)(ii) concerns whether that award included terms that “deal with” long service leave (irrespective of whether they conferred an entitlement to long service leave on the employee in question). However, if I am to presume in favour of the NAB’s position that the second condition was carefully drafted, how can I accept that a careful and cautious draftsperson used “entitled” to communicate “deals with”?

53    I turn next to the legislative history. The legislative history of federal industrial laws dealing with long service leave is somewhat complex and need not be fully rehearsed. It is sufficient for present purposes to note that, following the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) (Work Choices Amendment Act), long service leave was no longer included as an “allowable award matter” under s 513 of the WR Act. This did not mean that award-covered employees switched to State or Territory long service leave legislation. That is because, first, pre-reform awards, which included terms relating to long service leave, continued to bind certain employers, employees and organisations pursuant to item 4 of sch 4 of the Work Choices Amendment Act. Second, s 520 of the WR Act allowed new awards to include “preserved award terms” which, as defined in s 527(1)–(2), extended to terms about long service leave. For those reasons, the WR Act contained a scheme for preserving “award-derived long service leave terms”. Accordingly, s 527 of the WR Act, though broader in its subject matter, may be regarded as the immediate predecessor provision to s 113(1) of the FW Act.

54    Immediately prior to the enactment of the FW Act, s 527 of the WR Act provided (emphasis added):

527 Preservation of certain award terms

(1)    A term, or more than one term, of an award is a preserved award term if:

(a)    the term or terms are about a matter referred to in subsection (2); and

(b)    the term or terms were in effect immediately before the reform commencement.

Note: Section 525, which provides for certain terms of awards to cease immediately after the reform commencement, does not affect the operation of preserved award terms—see subsection 525(2).

(2)     For the purposes of paragraph (1)(a), the matters are as follows:

(a)    annual leave;

(b)    personal/carer’s leave;

(c)    parental leave, including maternity and adoption leave;

(d)    long service leave;

(e)    notice of termination;

(f)    jury service;

(g)     superannuation.

(3)    If a term of an award referred to in subsection (1) is about both matters referred to in subsection (2) and other matters, it is taken to be a preserved award term only to the extent that it is about the matters referred to in subsection (2).

(4)    If more than one term of an award is about a matter referred to in subsection (2), then those terms, taken together, constitute the preserved award term of that award about that matter.

(6)     A preserved award term continues to have effect for the purposes of this Act.

Note: Preserved award terms may not be varied.

(7)     In this section:

personal/carer’s leave includes war service sick leave, infectious diseases sick leave and other like forms of sick leave.

(8)     The regulations may provide that for the purposes of subsection (2):

(a)    the matter referred to in paragraph (2)(c) does not include one or both of the following:

(i)    special maternity leave (within the meaning of section 265);

(ii)    the entitlement under section 268 to transfer to a safe job or to take paid leave; and

(b)    personal/carer’s leave does not include one or both of the following:

(i)    compassionate leave (within the meaning of section 257);

(ii)    unpaid carer’s leave (within the meaning of section 244).

Note: The effect of excluding a form of leave or an entitlement in relation to a matter is that the entitlement in relation to that form of leave or matter under the Australian Fair Pay and Conditions Standard will automatically apply.

(9)    Regulations under subsection (8) may be expressed to apply generally or in respect of employees engaged in specified types of employment, such as full-time employment, part-time employment, casual employment, regular part-time employment or shift work.

55    This provision, like s 113(1) of the FW Act, deals with the preservation of some of the terms of pre-modernised awards. It designates certain terms to be “preserved award terms” and then at s 527(6) provides that a preserved award term continues to have effect. Like s 113(3), it provides the criteria or the conditions which must be satisfied for the operation of a term to be preserved. That is done is subs (1) and subs (2). Relevantly, and in relation to long service leave, there are two conditions:

(1)    the term or terms “are about” long service leave; and

(2)    the term or terms were in effect immediately before the reform commencement.

56    The second condition is of no present significance. The first condition is. It requires that, to be preserved, the term must be “about”, or in other words “deal with” or “generally provide for”, long service leave. On the NAB’s construction, that requirement is the only requirement made by what I have described as the second condition in s 113(3) of the FW Act, in circumstances where the NAB say that the second condition and s 113(1) as a whole was intended to maintain the status quo without alteration and, as just demonstrated, the relevant status quo was s 527 of the WR Act.

57    Despite the NAB’s assertion of no intended change, intended change is manifest in relation to the preservation of the operation of long service leave terms in pre-modernised awards when one compares s 527 of the WR Act with s 113 of the FW Act. Relevantly, there is a change in focus from what is generally provided by the term (ie what it is “about”) to what is provided to “the employee” in particular and, by the use of the word “entitled”, it is evident that the focus from the general to the particular was concerned with whether the term provided a right or benefit to the employee. It can thus be readily seen that s 113(1) is an intended change from the status quo ante because it imposes an additional condition for the preservation of the operation of a long service leave term in respect of a particular employee, being that the term provide the employee with an entitlement to long service leave.

58    It is not in contest that, under the WR Act, Mr Finch was not entitled to any long service leave under the LSL Act (SA). It is informative, however, to demonstrate why that was so. Under the WR Act, a term of an award “about” long service leave which applied to Mr Finch’s employment was a preserved term within the meaning of s 527 and continued to have effect under the WR Act. That term (namely cl 32 of the Award) provided no entitlement to long service leave to Mr Finch. Section 17 of the WR Act relevantly provided that an award prevails over a law of a State or Territory to the extent of any inconsistency. Accordingly, any entitlement to long service leave under the LSL Act (SA) which Mr Finch may have had was displaced by reason of its inconsistency with cl 32 of the Award, which was preserved in its operation in relation to Mr Finch.

59    On the Respondent/Interveners construction of s 113(1) and the construction which I prefer, because of the change brought about by the enactment of ss 27(2)(g) and 113(1) and (3) of the FW Act, Mr Finch was no longer the subject of any inconsistency between cl 32 of the Award and the LSL Act (SA). That was primarily so because cl 32 did not “entitle [Mr Finch] to long service leave” within the meaning of the second condition and therefore did not constitute “an award-derived long service leave term”. Accordingly, as Mr Finch was not “entitled under Division 9 of Part 2-2 to long service leave” (s 27(2)(g)), cl 32 of the Award was no longer in conflict with the LSL Act (SA) in relation to Mr Finch’s entitlement to long service leave and did not displace it pursuant to s 26.

60    A comparison with its legislative predecessor shows that a change was made to the scheme for preserving “award-derived long service leave terms”. A scheme for preserving “award-derived long service leave terms” of the kind that the Appellant/Intervener says now exists, did exist but was discontinued. The changed language and structure confirms the deliberate nature of the alteration to the scheme, including that the second condition was intended to have its ordinary meaning. The text and legislative history are powerful indicators which, it seems to me, leave little room for doubt as to what it was that Parliament intended.

61    I turn then to other contextual considerations found in the enactment itself. It needs to be noticed that the preservation of the operation of “award-derived long service terms” effectuated by s 113(1) is constrained by s 113(2). That is so because s 113(2) provides that s 113(1) does not apply whilst certain industrial agreements exist (irrespective of whether they deal with long service leave) or whilst certain industrial agreements or other instruments exist and “deal … with long service leave”.

62    Section 113(2) provides:

(2)    However, subsection (1) does not apply if:

(a)    a workplace agreement, or an AWA, that came into operation before the commencement of this Part applies to the employee; or

(b)    one of the following kinds of instrument that came into operation before the commencement of this Part applies to the employee and expressly deals with long service leave:

(i)    an enterprise agreement;

(ii)    a preserved State agreement;

(iii)    a workplace determination;

(iv)    a pre-reform certified agreement;

(v)    a pre-reform AWA;

(vi)    a section 170MX award;

(vii)    an old IR agreement.

Note:    If there ceases to be any agreement or instrument of a kind referred to in paragraph (a) or (b) that applies to the employee, the employee will, at that time, become entitled under subsection (1) to long service leave in accordance with applicable award-derived long service leave terms.

63    Without here detailing the somewhat complex history and provenance of the kinds of agreements and other instruments specified by s 113(2) and without specifying the many and various provisions of relevance in the WR Act, as at 20 January 1997, 16 December 2005, 31 March 2006 and 6 January 2009, and the Industrial Relations Act 1988 (Cth), as at 30 April 1992, 6 November 1992 and 10 May 1996, it is necessary to appreciate that the kinds of agreements and instruments specified in s 113(2) all arise out of industrial bargaining processes rather than the purely arbitrated outcomes imposed by the former Australian Industrial Relations Commission under the WR Act through the making of an “award” of the kind addressed by s 113(1). In each case, the industrial instruments displaced the effect of the applicable award whilst they operated and prevailed over, and continue to prevail over by operation of cl 5A(1) of sch 3 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transition Act), the law of a State or Territory to the extent of any inconsistency.

64    It is true to say that, by reason of s 113(2), an agreement or instrument of the kind specified by s 113(2) which “applies” to a particular employee will, whilst it is in operation (see the Note to s 113(2)), dis-apply the operation of s 113(1) with the effect that there will not be an “award-derived long service leave term” in relation to the employee. Therefore, by the operation of ss 26, 27 and 30 of the FW Act and cl 5A(1) of sch 3 of the Transition Act, even if the particular instrument in s 113(2) does not provide the employee with an entitlement to long service leave, the instrument will nevertheless prevail over State or Territory long service leave laws provided the instrument exists (in the case of workplace agreements and AWAs) or exists and “deal[s] with long service leave” (in the case of all other instruments).

65    If the intended result of the operation of s 113(2) was that the employee would become entitled to State or Territory long service leave entitlements if the relevant industrial instrument did not provide an entitlement to long service leave, the construction contended for by the Appellant/Intervener may have been significantly enhanced. That is so because it seems unlikely that it was intended that an employee who had traded away his or her entitlement to long service leave through an industrial bargaining process, leading to the making of one or other of the instruments specified in s 113(2), would become entitled to State or Territory long service leave on the commencement of the FW Act. Such a result would have provided a windfall for the employee and have imposed unfairness on the employer now burdened with both the obligation to provide the additional benefit for which the long service leave benefit was traded away and also a long service leave benefit under State or Territory law.

66    That such a result was to be avoided reveals the very purpose of s 113(2). That purpose is confirmed by the extrinsic material, including the following paragraph of the Federal Department of Education, Employment and Workplace Relations’ Discussion Paper: National Employment Standards Exposure Draft (February 2008) (emphasis added):

Will every employee be entitled to long service leave under a pre-modernised award or NAPSA when the NES commence?

239.    No. To avoid interfering with bargained outcomes, the proposed provisions protecting long service leave will not apply to employees covered by certain agreements while they are in operation.

67    The avoidance of interference with bargained outcomes is achieved when it is recognised that, in the words of s 30 of the FW Act, s 113(2) is “intended to apply to the exclusion of, or prevail over, laws of the States and Territories”.

68    That intended displacement of State or Territory long service leave entitlements for an employee who does not have “applicable award-derived long service leave terms”, but for whom an instrument specified by s 113(2) applies, is also apparent from the Explanatory Memorandum at [446]. When read in the context of [444] and [445], it can be seen that the intended displacement effect of the s 113(2) instrument is addressed in the words in parenthesis which I have emphasised at the end of [446]:

444.    However, subclause 113(2) provides that an employee’s award-derived entitlement will not apply if:

•    a workplace agreement or AWA that came into operation before the commencement of the Bill continues to apply to the employee after commencement (whether or not that agreement deals with long service leave); or

•    one of a number of listed industrial instruments that came into operation before commencement applies to the employee and expressly deals with long service leave.

445.    The legislative note after this subclause makes clear if such an agreement or instrument ceases to apply, the employee will then be entitled to long service leave in accordance with any applicable award-derived long service leave terms.

446.     If an employee does not have applicable award-derived long service leave terms, any entitlement to long service leave will be derived from State or Territory long service leave legislation (subject to its modification or exclusion by certain industrial instruments).

69    The rationale of avoiding interference with bargaining outcomes, where long service leave entitlements might have been traded away, is also reflected in the scheme provided for by s 113A and, in particular, by the specific arrangements capable of being made for prior service not to count in respect of future entitlements to long service leave. That explains the different approach to what the NAB called the “transition” to State or Territory schemes between the arbitral outcomes which are dealt with under s 113(1) and the bargained outcomes which are dealt with in ss 113(2) and 113A. Therefore, the differentiation of treatment and the fact that a “transition” is not provided for in respect of the arbitral outcomes addressed by s 113(1) is not a basis for saying that the second condition was not intended to have its ordinary meaning.

70    It is informative to notice paragraph [446] of the Explanatory Memorandum for another reason. The terms of [446] succinctly set out the fundamental aspects of the scheme which is established on the construction of s 113(1) which I prefer. That paragraph spells out the two requirements which determine whether an employee will be entitled to long service leave derived from State or Territory long service leave legislation. The first requirement is that the employee not have “applicable award-derived long service leave terms”. The second requirement is that there are no applicable s 113(2) instruments which would displace the State or Territory laws. In relation to the first requirement, and consistently with the use in [446] of the ordinary meaning of the word “entitlement”, an employee does not have “applicable award-derived long service leave terms” where those terms do not provide the employee with an entitlement to long service leave. The rationale of the scheme, as confirmed by the Explanatory Memorandum at [446], is simple. Where the source of the employee’s entitlement to long service leave is not derived from the terms of an award, it will be derived from the applicable State or Territory long service leave legislation, unless that legislation has been displaced by the operation of s 113(2).

71    It should also be observed that the simple explanation of the fundamental aspects of the scheme given at [446] of the Explanatory Memorandum is repeated at [439] of the Explanatory Memorandum made in the following context (emphasis added):

436.     This Division sets out the entitlement to long service leave for national system employees.

437.     This entitlement is a transitional entitlement, pending development of a uniform, national long service leave standard with the States and Territories.

438.     This Division preserves long service leave entitlements in pre-modernised awards (referred to as applicable award-derived long service leave terms).

439.     If an employee does not have applicable award-derived long service leave terms, any entitlement to long service leave will be derived from State or Territory long service leave legislation (subject to its modification or exclusion by certain industrial instruments).

72    The reference to “transitional” at [437] of the Explanatory Memorandum and “preserves” at [438], and similar references elsewhere in the extrinsic material, was relied upon by the Appellant/Intervener in support of their construction. I will return to consider those submissions below. However, first it is convenient to refer to the indications found in s 113(2) and in the extrinsic material which, contrary to the case put by the Appellant/Intervener, tend to suggest that there was an intended disturbance of the status quo.

73    The operation of s 113(2) and the capacity of previously suspended award entitlements to become operative when a s 113(2) instrument ceases, of itself, shows that there was no intent to leave “the position in awards” entirely undisturbed. Furthermore, award-derived rights or benefits which had not simply been suspended but which were dispensed with, were revived. That is so because, under the version of the WR Act that was in force immediately prior to the commencement of the FW Act, an award had no effect in relation to an employee even if a workplace agreement covering their employment ceased operation (see s 399).

74    Furthermore, there is no reason to think that, if there was a never disturb intent in relation to award-derived entitlements, that intent would not have extended to entitlements however derived (ie agreement-derived entitlements). Yet, the scheme provided for significant other potential for disturbance to existing long service leave entitlements or arrangements, including by the regime created by s 113(4)–(6) and also that created by s 113A (which are both fully set out in the reasons of Raper J). Further, the Explanatory Memorandum reinforced the intended disturbance by advising that the Department of Education, Employment and Workplace Relations (Department) expected the provisions dealing with long service leave to have some (though minimal) “impact” upon the status quo ante.

75    The Explanatory Memorandum contained a section headed “Regulatory Analysis” which was prepared by the Department and “analyse[d] the regulatory implications of the key legislative proposals contained” in the Fair Work Bill 2008 (Cth). The analysis was said to state the regulatory implications of the legislative proposals in the Bill “compared with arrangements which existed under the legislative framework of the previous Government” (which must be taken to be a reference to the WR Act). The analysis contained a section dealing with the proposed NES. At [r.25] it was stated that the “Government’s key objective is to address public concern about the adequacy of the safety net under the current workplace relations system by providing a safety net which is fair for employers and employees and supports productive workplaces”. In a summary of “Proposed Changes” at [r.26], the analysis identified each of the ten “NES provisions” including long service leave, in relation to which it said this (emphasis added):

Long service leave: an entitlement to long service leave is currently provided by state and territory legislation, awards and agreements. Initially, the NES will draw on current state and territory arrangements for long service leave in providing this entitlement. Meanwhile, the Government is working with state and territory governments to develop nationally consistent long service leave entitlements.

76    In the following section headed “Impact Analysis”, the analysis considered the impact of the various proposed NES provisions including long service leave, in relation to which this was said (emphasis added):

Long Service Leave

r.76.    An entitlement to long service leave is currently provided by state and territory legislation, awards and agreements. The NES will preserve current arrangements for long service leave. Meanwhile, the Government is working with the states and territories to develop nationally consistent long service leave entitlements.

r.77.    Given that the overwhelming majority of employees currently have access to long service leave, the Department expects a minimal impact from this NES.

r.78.     The department is not aware of any data on the usage of long service leave. As noted above, there are divergent entitlements to long service leave in awards, agreements and state and territory legislation. However, an indication of the entitlement to long service leave is the number of employees with 10 years service or over. Table 2 displays ABS data that show an estimated 21.3 per cent of employees (2.2 million) were employed by their current employer/business for 10 years or more.

77    As seems to be apparent from the observations I have emphasised (particularly when read with [439] and [446] of the Explanatory Memorandum), the Explanatory Memorandum explained that, in providing the NES entitlement to long service leave, the NES would “draw on current state and territory arrangements for long service leave in providing this entitlement”. The impact of that was expected to be “minimal” because “the overwhelming majority of employees currently have access to long service leave”. In comparing the proposed position with the status quo under the WR Act (which, as explained above, must have been largely a comparison with what s 527 of the WR Act provided), the Department was saying here that, as the overwhelming majority of employees currently had access to long service leave (either under a relevant federal award or agreement, or under State or Territory law), there would be some employees, but only a very small minority, who were not entitled to long service leave under federal instruments and therefore, as a result of the change from the status quo, would become entitled to long service leave under State and Territory legislation.

78    It is evident that at least those persons who drafted the Explanatory Memorandum recognised that, although it was expected to be minimal, there would be some disturbance of the status quo in respect of long service leave entitlements.

79    I should add that, in my view, the Department could not have had in mind here award-free employees becoming entitled to long service leave because award-free employees would have already been entitled to long service leave under State and Territory legislation. That observation is further supported by the fact that where the Department did have in mind an impact being brought about by award-free employees becoming entitled to a NES entitlement, the Explanatory Memorandum said so expressly. For example, with respect to notice of termination and redundancy provisions, it stated that “the Department expects only a minor impact from extending notice of termination and redundancy provisions to currently award-free employees” ([r.86]). It follows that what the Department likely had in mind when drafting [r.76]–[r.77] were employees covered by federal awards or other federal industrial instruments who, like Mr Finch, had no entitlement to long service leave.

80    These observations made by the Explanatory Memorandum are, in my view, significant indicators against the Appellant/Intervener’s attempts to show that the legislative purpose of s 113(1) was to preserve the status quo ante in relation to long service leave conditions without any change or disturbance. That point is reinforced when it is realised that where, in relation to the introduction of an NES entitlement, the regulatory analysis in the Explanatory Memorandum apprehended that there would be no disturbance or no impact, it said so expressly. For example, the Explanatory Memorandum notes with respect to: annual leave — “[t]he NES will not change the coverage or quantum of the annual leave entitlement” ([r.57]); and, with respect to public holidays — “the Department does not expect an impact from this NES” ([r.81]).

81    To this point, I have set out those indications which, in my view, support the proposition that the second condition was intended to have its ordinary meaning and tend to deny that an ungrammatical meaning was intended because Parliament intended to avoid the “mischief” of creating any disturbance to long service leave entitlements for employees covered by federal awards. I turn then to further consider the mischief for which the Appellant/Intervener contended. The existence of that mischief was sought to be established, in part, by reference to what the extrinsic material said but, in far larger part, by what the extrinsic material did not say. The onerous nature of that task is evident: the Appellant/Intervener seek to deny what was apparently said by the statutory text, largely by reference to what was not said by the extrinsic material.

82    The NAB point to the absence of any express statements in the extrinsic material adverting to an intent to “provide additional benefits” to employees or that entitlements would be “uprooted” from their industrial instrument source and placed into State or Territory sources. I accept that no express statements to that effect appear in the extrinsic material. But before dealing with an available response, I will set out another submission made by the NAB which, I think, should ultimately be construed as a contention that the extrinsic material did not warn Parliament of the asserted serious consequences for employers whose employees would switch to State or Territory long service leave laws upon the commencement of Div 9.

83    In making what was perhaps its primary suggestion of an absurdity arising from the second condition being given its ordinary meaning, the NAB submitted that it could not be accepted that “Parliament would have created a statute that caused employers to move into a State or Territory long service leave scheme where they would be criminally liable for non-compliance without any warning”.

84    Read literally, the submission suggests that Parliament may have been expected to warn employers of the consequences for them of a law made. Parliament makes the law. It does not warn of its consequences. I do not think the contention was intended to be read in this way. Rather, I think the NAB was suggesting that the Executive might have been expected to warn employers about the consequences of the law. That submission would also go nowhere because the intent of Parliament cannot be discerned from any response the Executive makes (or fails to make) to the law Parliament has enacted.

85    If the NAB has any point to make in relation to Parliament’s awareness of the possible criminal liability of employers, it can only be made by reference to the extrinsic material which was before the Parliament. The only point that could be made (although I ultimately think it is without much merit) is that if the draftsperson of the Explanatory Memorandum was proceeding on the basis that s 113(1) would have the effect of providing some employees access to State and Territory long service leave entitlements and thus expose their employers to criminal liability if they failed to provide such entitlements, the Explanatory Memorandum might have been expected to warn Parliament of that possible impact. The absence of such a warning may then be said to suggest that the draftsperson did not proceed with that intent and that, consequently, neither did Parliament.

86    However, if that is the real point to be addressed, it ought to be done free of the exaggeration made in the NAB’s submission that the asserted consequence is that employers would “move into a State or Territory long service leave scheme where they would be criminally liable for non-compliance”. It is commonplace in Australia for an employer covered by a federal award or agreement to also be subject to one or other of the State or Territory long service leave schemes. That is so because generally at least some employees employed by an employer (managerial employees and others) will not have their employment regulated by federal instruments at all or because, if so regulated, those instruments do not deal with long service leave and therefore do not displace State and Territory long service leave legislation. The NAB’s assertion that giving the second condition its ordinary meaning would cause “employers to move into a State or Territory long service leave scheme”, as if for the first time, is an unhelpful exaggeration of the likely position.

87    That being so, the point really being made is that, if the draftsperson of the Explanatory Memorandum was proceeding on the basis that some employees of some employers would gain access to State or Territory long service leave entitlements, it might have been expected that Parliament would have been made aware by the Explanatory Memorandum that some employers may face some additional exposure to criminal liability to that which they already face, in respect of any failure to comply with State and Territory long service leave legislation.

88    There is little or no merit in that point. First, it is not the function of an explanatory memorandum to alert Parliament to that which is otherwise obvious, namely, that serious sanctions will likely be imposed upon those who fail to comply with the law. The fact that those consequences might be penalties imposed as criminal sanctions, rather than civil sanctions (which are more commonly imposed in relation to the contravention of industrial laws) is not so earth shattering as to suggest that the Explanatory Memorandum should have done here that, which, as a matter of common experience, explanatory memorandums do not generally do.

89    Second, and in any event, even if there was a failure to warn of the possibility in question and even if any such failure was inexplicable, that failure would only be an indicator of whether or not the draftsperson of the Explanatory Memorandum was or was not proceeding on the basis that no employee would gain access to State or Territory long service leave entitlements. The force of any such indication would need to be assessed against any contrary indicators, including that the Explanatory Memorandum has specifically addressed the impact or consequence of the provisions in question. As observed at [74]–[80] above, the Explanatory Memorandum recognised that some employees will become entitled to State or Territory long service leave entitlements, that change being the impact which it regarded as “minimal”.

90    Furthermore, the Explanatory Memorandum recognised that some employees would switch to State or Territory based entitlements at [446] (the terms of which are repeated at [439]). What is said at [446] is to be read in context by reference to the terms of s 113(1), including the terms of the second condition in s 113(3)(a)(ii). When read in that context — and applying the ordinary meaning of the language used in ss 113(1), (3)(a)(ii) and [r.26] and [446] of the Explanatory Memorandum — an explanation is there given that:

(1)    an employee covered by a federal award, the terms of which do not entitle the employee to long service leave, would not have “applicable award-derived long service leave terms”;

(2)    if (i) is the case, the employee’s “entitlement to long service leave will be derived from State or Territory long service leave legislation”; and

(3)    it follows that their employer will, in relation to those State or Territory based entitlements, be liable under the applicable State or Territory long service leave legislation.

91    Contrary to the NAB’s contentions, it is at least arguable that Parliament was told, and thus may be taken to be aware of the fact, that the employment of some employees covered by federal industrial instruments may, as a result of the enactment of s 113, move from federal to State or Territory regulation of long service leave. I accept, however, that the extrinsic material did not say that expressly and with the detail that the NAB contended was to be expected.

92    However, the issue here is not about what may have been done in a perfect world, but what would reasonably have been expected to be done by the Explanatory Memorandum in question. This was an Explanatory Memorandum which sought to explain a Bill which it described as implementing “major reforms” and, as it states and as was stated in the Second Reading Speech, created or built “a new workplace relations system” (page i).

93    The Explanatory Memorandum had much ground to cover which it sought to do over 429 pages and some 2849 numbered paragraphs (without counting the regulatory analysis section). Only eleven of those paragraphs were devoted to explaining the whole of Div 9 which contains the regime created by s 113(1)–(3A) dealing with “award-derived long service leave terms”, the regime created by s 113(4)–(6) dealing with “agreement-derived long service leave terms” and the regime in s 113A dealing with the replacement of certain agreements and whether, and in what circumstances, prior service will be counted for the purpose of an employee qualifying for long service leave. Each of those regimes may fairly be described as complex. The way in which each regime was dealt with by the Explanatory Memorandum may fairly be described as very brief. However, in the circumstances, the brevity of treatment, or what may be fairly described as the bare bones explanation given about the operation of s 113(1), can hardly provide a basis, let alone a sufficient basis, for displacing the ordinary meaning of the statutory text.

94    For many of the same reasons, I see no merit in the NAB’s contention that it would have been expected that “guidance” would have been given as to how employees would “transition” into State or Territory based regulation of long service leave. That is, how the prior service of an employee would be recognised for the purposes of eligibility for, and accrual of, long service leave. I would add the further observation that reliance upon the fact that “transition” was addressed in relation to the other NES entitlements to leave is misplaced. Of course it was, as it had to be, because those entitlements were entitlements directly conferred by the FW Act. But here, the Explanatory Memorandum and the Bill were not dealing with entitlements to be provided by the FW Act, but entitlements that may become available under State or Territory legislation upon the FW Act effectively “vacating the field”. It is understandable that the prior service of an employee in respect of a benefit provided by a State or Territory law, should be left to be dealt with by that law. I might add that it is also understandable, for the reasons given at [66]–[69] above, why the FW Act permitted parties to bargained instruments to determine how prior service of an employee in respect of a benefit provided by a State or Territory law would be counted once the instrument, which previously did not entitle certain employees to long service, ceased.

95    By the next aspect of its appeal to context, the Appellant/Intervener sought to suggest that the “literal construction” could not have been intended because it would impose financial burdens on employers and result in administrative difficulties, including difficulties arising from an increased lack of uniformity of treatment of long service leave for employers whose workforce extended beyond any particular State or Territory.

96    The NAB referred to these difficulties as results which were “inconvenient and improbable” relying upon what was said by Brennan CJ, Dawson, Toohey and Gummow JJ in Bankstown at 408 that “the inconvenience or improbability of a result may assist the court in preferring to the literal meaning an alternative construction, which by the steps identified above, is reasonably open and more closely conforms to the legislative intent”. For those observations their Honours cited the observations of Mason and Wilson JJ in Cooper Brookes Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320–321.

97    In Cooper Brookes, Mason and Wilson JJ prefaced the observation picked up at 408 of Bankstown by saying that “[g]enerally speaking, mere inconvenience of result in itself is not a ground for departing from the natural and ordinary sense of the language read in its context” (at 320). Their Honours went on to point out at 321 that the proprietary of departing from a literal interpretation is not confined to situations which raise absurdity or are capricious, irrational or the like but “extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions”. They continued:

Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended.

98    This is not a case where a construction which produces a more convenient operation is to be chosen. This is a case where one interpretation has a powerful advantage in ordinary meaning and grammatical sense and, in order for that meaning to be displaced, the consequences of its operation must be shown to be unintended.

99    As Campbell J observed at [36] in Ganter v Whalland (2001) 54 NSWLR 122, given the “strength of the language” used in the authorities, it is only a “very serious” anomalous result which would justify a departure from, what otherwise would seem, the correct construction of statutory text.

100    A financial burden will always be imposed upon employers by the statutory grant of an entitlement to their employees and, particularly where that entitlement is new rather than merely the extension of an existing benefit, the grant will likely be accompanied by some initial (if not ongoing) administrative burden. But inconvenience of that kind is the ordinary and expected consequence of the grant of an entitlement and, without more, is to be regarded as “mere inconvenience”. It is only where the scale and nature of the inconvenience is at least shown to be extraordinary that its likelihood may begin to become informative as to whether its source — the grant of the entitlement — was or was not intended.

101    In this case, the extent of any inconvenience or “impact” that Div 9 was likely to produce was specifically addressed by the Explanatory Memorandum. As discussed earlier, Parliament was essentially told that, by reason of the overwhelming majority of employees currently having access to long service leave, “the Department expect[ed] a minimal impact from this NES”.

102    There is therefore no basis for thinking that, if Parliament intended the second condition to have its ordinary meaning, Parliament had in mind anything other than that only a relatively small number of employees who were covered by pre-modernised awards without an entitlement to long service leave would gain access to long service leave entitlements and that, consequently, the impact of those new entitlements on employers would be anything other than “minimal”. In that context, an argument that Parliament could not have intended the second condition to have its ordinary meaning, because it must have both appreciated and sought to avoid extraordinary inconvenience or impact upon employers, is simply unsound.

103    In any event, the evidence relied upon by the NAB as to the scale and nature of the inconvenience it asserted, fell well short of establishing that the inconvenience would be extraordinary or very seriously anomalous. As a starting point in establishing the nature and scale of the asserted inconvenience, it would have been helpful to know how many employees would, as a result of the second condition having its ordinary meaning, have become entitled to long service leave under State or Territory legislation. However, the NAB did no more than speculate as to the number of employers and employees who may be covered by a pre-modernised award that applied to a cohort of employees, such as casuals, but excluded them from long service leave. Even in relation to its effort to identify the effect upon the NAB itself in respect of its own casual employees, the NAB’s evidence fell well short of providing much assistance. That was so because the NAB did not evaluate how many casual employees would, by reason of their years of service, ever likely qualify for long service leave under the State or Territory legislation.

104    Accordingly, the evidence did not enable any informative conclusion as to the scale of the asserted financial burden. Nor has the asserted administrative inconvenience, which may be caused by dis-uniformity of conditions between different long service leave schemes, been shown to be out of the ordinary. There is nothing extraordinary about dis-uniformity in conditions across an employer’s workforce with respect to long service leave, even where the employer operates in one State or Territory alone. That is so because there may be multiple awards or agreements which bind the employer, and employees whose terms and conditions are not covered by any industrial agreement will be entitled to State or Territory long service leave entitlements.

105    The fact that dis-uniformity of long service leave provisions is ordinarily experienced by employers with Australia-wide operations cannot be doubted. However, nor can it be doubted that Parliament must have recognised that dis-uniformity of that kind would persist, because the scheme in s 113(1) involved substantially maintaining the status quo. I accept that, in so far as the status quo was altered by s 113(1), a greater level of dis-uniformity may have come about, but to what extent? The extent needs to be known and understood, and it would need to be established (but has not been) that Parliament was aware of it, before the point being agitated by the NAB could begin to be informative, even if the underlying reasoning for this contention had been sound. However, in circumstances where Parliament was expressly told that the impact of s 113(1) would be “minimal”, the underlying reasoning is not sound.

106    Even if it had been proven that the second condition having its ordinary meaning produced very serious anomalous results, all that that would go to show is that the Department may have been wrong to advise Parliament that the impact of the change in question would be “minimal”. On that view, the asserted anomalous results may be no more than the unintended consequences of the intended operation of s 113(1). As Kiefel CJ, Keane, Nettle and Edelman JJ cautioned in Esso at [52]:

It is not the Court’s function to attempt to overcome unintended consequences of the intended operation of a provision by construing the provision as if it had a meaning that Parliament did not intend it to have. To do so would go beyond the judicial function of construing legislation according to established precepts of statutory construction and into the legislative realm of amending the Act by reference to what it may be supposed Parliament might have provided if it had considered the specific circumstances before the Court.

107    Justices Gageler and Keane similarly observed in Taylor v Owners — Strata Plan No 1 1564 (2014) 253 CLR 531 at [65] that “[t]he constructional task remains throughout to expound the meaning of the statutory text, not to divine unexpressed legislative intention or to remedy perceived legislative inattention. Construction is not speculation, and it is not repair.” Similarly, in H Lundbeck A/S v Sandoz Pty Ltd (2022) 399 ALR 184, Kiefel CJ, Gageler, Steward and Gleeson JJ observed at [63] that “[t]he province of statutory construction is the attribution of meaning to the enacted statutory text, not the remediation of perceived legislative oversight”.

108    Furthermore, it is highly questionable that the inconvenience to employers asserted by the NAB, even if made out and even if it were shown to have been appreciated by Parliament, should necessarily be characterised as something that Parliament would have regarded as a very serious anomaly. Parliament may simply have regarded the inconvenience to employers as the acceptable cost of providing long service leave (one of only 10 entitlements which Parliament perceived to be so essential as to be included in the NES) to employees who were disentitled under awards for no justifiable reason. As Black CJ and Sundberg J stated in Esso Australia Resources Ltd v Federal Commissioner of Taxation (1998) 83 FCR 511 at 519:

Especially when different views can be held about whether the consequence is anomalous on the one hand or acceptable or understandable on the other, the Court should be particularly careful that arguments based on anomaly or incongruity are not allowed to obscure the real intention, and choice, of the Parliament.

109    I turn then to consider what was said in the extrinsic material upon which the Appellant/Intervener relied. I accept that the extrinsic material evinces a “transitional” intent as the NAB contended, but only in the sense that Div 9 was intended to provide a “transitional entitlement” (Explanatory Memorandum at [437]) as a first step towards an aspirational second step of providing for a “uniform, national leave standard” of long service leave entitlements. When the second step would occur was uncertain and the period in which the scheme would operate would not necessarily be temporary. It does not necessarily follow from that intent that Parliament must have intended to leave entirely undisturbed the “position in awards as they existed at 31 December 2009” as the NAB contended, especially given the uncertain intent as to duration. As the Respondent contended, “it is perfectly consistent to intend to change existing arrangements now, while holding an aspiration to change them further in the future” (emphasis in original). In the face of significant disturbance of the status quo which, as earlier indicated, is apparent from the text of ss 113–113A and the extrinsic materials, I do not consider that this consideration has much force.

110    I am mindful of the reliance made by the Appellant/Intervener on references made in the Explanatory Memorandum to the word “preserve” in support of its assertion that the status quo ante of long service leave arrangements were intended to be fully preserved. The second sentence of [r.76] — that “[t]he NES will preserve current arrangements for long service leave” — was relied upon by the Appellant in particular. It is the only occasion in which the phrase “preserve current arrangements” appears in the extrinsic material. Its use, however, is apt to be regarded as ambiguous. Read in context with the first sentence of the paragraph, the second sentence is arguably referring to the preservation of the current sources of long service leave entitlements. That is, that current arrangements, under which long service leave entitlements are “provided by state and territory legislation, awards and agreements”, will be preserved. Furthermore, the word “preserve” is apt to be understood as a characterisation of the general, rather than the absolute, effect of the NES long service leave provisions. That is particularly so here because in the next sentence ([r.77]), there is clearly contemplated some change or departure from the status quo because of the expectation of an “impact” from the enactment of Div 9. That expectation is at odds with the notion that absolutely everything is being preserved.

111    At [438] of the Explanatory Memorandum (also set out above) it is said that Div 9 “preserves long service leave entitlements in pre-modernised awards”. If “entitlement” is to be read according to its ordinary meaning, the paragraph supports rather than detracts from the proposition that the second condition was intended to have its ordinary meaning. Paragraph [439] which immediately follows is, for the reasons already explained, consistent with that conclusion.

112    The word “preserves” is also used at [441] of the Explanatory Memorandum, another paragraph relied upon by the Appellant. That paragraph and the paragraph that precedes it are in the following terms:

440.     An employee is entitled to long service leave under this Division in accordance with applicable award-derived long service leave terms (subclause 113(1)).

441.    This clause preserves the effect of long service leave terms in pre-modernised awards (i.e., awards as they stood immediately before commencement of the NES).

113    The word “preserves” as used in [441] is directed to the effect of “applicable award-derived long service leave terms” (as referred to expressly at [440]). Its use simply begs the question as to what terms were intended to fall within the description “applicable award-derived long service leave terms” and thus what was being preserved (ie the effect of all terms or only those that provide for an entitlement).

114    There was other material relied upon by the Appellant/Intervener, including that contained in a policy document of the Australian Labor Party made in 2007 when that party was in Opposition. That material must be regarded as of no relevance. Even if it were of some relevance, it would be of marginal utility. It is expressed at too high a level of abstraction and no “direct consideration” is there “given to the point which must now be decided”: Lehman Brothers Holdings Inc v City of Swann (2010) 240 CLR 509 at [49] (French CJ, Gummow, Hayne and Kiefel JJ).

115    What the NAB’s submission describes as “compelling countervailing factors against the literal interpretation” are simply not made out. No analogy may be drawn, as the NAB sought to do, with the rejection of a literal construction of the text in question in either of Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) (2020) 271 CLR 495 or Sydney Seaplanes, given the case-specific nature of the inquiry as to whether a legislative purpose at odds with the ordinary meaning of statutory text has been plainly demonstrated by the extrinsic material and other contextual considerations.

116    Lastly, the NAB sought to support its construction by reference to the object of the FW Act, stating that its construction aligns with the “fairness … certainty and suitability” invoked by the object of the FW Act. The general object of the FW Act, as set out in s 3, refers to fairness but not to either certainty or suitability. However, in Mondelez, Kiefel CJ, Nettle and Gordon JJ did say at [14] that “[t]he stated objects show that the Act is intended to provide fairness, flexibility, certainty and stability for employers and their employees. ‘Fairness’ necessarily has a number of aspects: fairness to employees, fairness between employees, fairness to employers, fairness between employers, and fairness between employees and employers.”

117    That which provides fairness, or even certainty or stability, is often in the eye of the beholder and that may well explain the NAB’s a priori assumption about the intention Parliament had. As the authorities set out at [27]–[33] above demonstrate, a court cannot ignore or displace the words of the statute by reference to a general purpose where the general purpose of a statute may say nothing meaningful about a particular provision. In my view, that is the case here.

118    As I have sought to explain, the text of the second condition is clear and its ordinary meaning, as principally communicated by the word “entitled”, is obviously deliberate rather than a product of infelicitous drafting. In the words of Mason and Wilson JJ in Cooper Brookes at 321, the literal construction “has a powerful advantage in ordinary meaning and grammatical sense”. The asserted legal meanings of the second condition largely displace that condition by denying it meaningful work to do and are clearly at odds with what the legislative history of s 113(1) reveals about its purpose. In so far as legislative purpose is revealed by the extrinsic material, what is revealed is more consistent with the legislative purpose apparent from the statutory text and legislative history than not. In any event, even if it were the case that the extrinsic material favours the Appellant/Intervener’s case more than that of the Respondent/Interveners’ case, taken alone or together with the “absurdities” relied upon by the Appellant/Intervener, those considerations do not demonstrate that “it is plain” that Parliament intended the second condition to have a meaning other than its ordinary meaning.

119    Accordingly, each of appeal grounds 1.2, 1.3 and 4, which essentially contend that the Tribunal misconstrued s 113(1), must be rejected.

Did clause 8.6.3(c) entitle Mr Finch to long service leave?

120    By its alternative submission, the Appellant contended that cl 8.6.3(c) of the Award is to be characterised as an “applicable award-derived long service leave term” because, in accordance with the second condition, it “would have entitled [Mr Finch] to long service leave”.

121    Clause 8.6.3 of the Award dealt with casual employment and para (c) thereof relevantly provided for a casual employee to be paid what is commonly known as a “casual loading” of 20% of the employees’ ordinary hourly rate. The paragraph then relevantly said:

The loading is in lieu of payment for annual leave, sick leave, public holidays, bereavement leave, special family leave, parental leave and long service leave (whether under any other federal or any state legislation).

122    The Appellant contended that, because making a payment in lieu of providing long service leave can be a “traditional means of discharging” an obligation to provide long service leave, cl 8.6.3(c), either on its own or in combination with cl 32, is to be characterised as a term of an award that would have “entitled [Mr Finch] to long service leave” within the meaning of the second condition.

123    This alternative case must be rejected. Neither alone or when read in combination with cl 32 does cl 8.6.3(c) meet the statutory description of an award term that “would have entitled the employee to long service leave”.

124    Like any form of paid leave, long service leave is a compound entitlement constituted by two elements. An entitlement to paid leave is “an entitlement of an employee to be absent from work for a period without loss of the remuneration that would ordinarily be earnt in that period”: WorkPac v Rossato (2020) 278 FCR 179 at [226] (Bromberg J). See also Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2019) 270 FCR 513 at [148] (Bromberg and Rangiah JJ). An essential characteristic of an entitlement to leave, including long service leave, is the entitlement to be absent from work.

125    Clause 8.6.3(c), whether read alone or in combination with cl 32 of the Award, is not an award term which provides an entitlement to be absent from work. To the contrary, the clause confirms that a casual employee has no entitlement to be absent from work and on leave. Rather, it purports to provide for a loading which can only be understood as being paid (in part) as compensation for the lack of an entitlement for the employee to be absent from work and on leave.

126    Just like a loading said to be provided “in lieu of sick and annual leave entitlements and public holidays”, the “loading is paid in substitution of those entitlements” or in other words “[t]he loading is paid because there is no such entitlement”: see the reasoning of Doyle CJ (Lander J agreeing) in TransAdelaide v Leddy (No 2) (1998) 71 SASR 413 at 419, as cited with apparent approval in Rossato by Bromberg J at [225] and [265], by White J at [853]–[855] and [917] and by Wheelahan J at [992]–[994] and [1020]. That some unspecified proportion of the 20% casual loading is paid because a casual employee has no entitlement to long service leave must be correct. If it were otherwise, a casual would receive a long service leave entitlement from day one of his or her employment whereas other employees would be ineligible to receive any long service leave benefit under the Award until they had completed 15 years of service.

127    It may well be the case that, like many provisions providing an entitlement to paid leave, a provision providing for long service leave will usually provide for untaken leave to be paid out upon the termination of the employment. However, as I sought to explain in Rossato at [228]–[229], such a payment is not paid as compensation for the employee not having an entitlement to take leave, but is a payment made because the employee has not had the benefit of fully exercising the entitlement to be absent on leave.

128    The fact that a payment of that kind may be made “in lieu” of long service leave being actually taken by the employee is not what characterises a term or provision providing for long service leave as a term or provision which entitles an employee to long service leave. A term or provision of that kind is properly characterised as such because it provides to the employee an entitlement to be absent from work on leave.

129    As that characteristic is not available in relation to cl 8.6.3(c), whether read alone or when read with cl 32 of the Award, the clause is not a term of an award that “would have entitled [Mr Finch] to long service leave”.

130    Accordingly, the Tribunal did not erroneously disregard or fail to consider that clause as the Appellant’s second ground of appeal contended. Nor did the Tribunal misunderstand the manner in which that clause conferred long service leave entitlements upon Mr Finch or the effect of that clause, as appeal grounds 1.1 and 3 contended.

Conclusion

131    For those reasons, the appeal should be dismissed.

Associate:

Dated:    19 April 2023

REASONS FOR JUDGMENT

O’SULLIVAN J:

132    I have had the advantage of reading the draft reasons for judgment of both Bromberg J and Raper J. I agree with Raper J’s conclusions and her Honour’s reasons for reaching those conclusions. Accordingly, I would allow the appeal.

133    I add the following.

134    This appeal concerns the proper construction of s 113(1) of the Fair Work Act 2009 (Cth). The issue is whether there are “applicable award-derived long service leave terms … in relation to an employee”.

135    Consideration of this issue starts with the proper construction of the award in question, which is the Federal Meat Industry (Smallgoods) Award 2000 (Cth).

The construction of awards

136    The principles applicable to the construction of awards are well-settled.

137    The Award is one made by the Australian Industrial Relations Commission and Fair Work Australia.

138    In Swissport Australia Pty Ltd v Australian Municipal Administrative Clerical and Services Union (No 3) [2019] FCA 37 at [52], (2019) 284 IR 97 (Rangiah J) summarised a number of principles applicable to the construction of awards:

(1)    The canons of construction found in the Acts Interpretation Act 1901 (Cth) apply to awards of the Commission: City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (2006) 153 IR 426 at [52]; Construction, Forestry, Mining and Energy Union (Construction and General Division) v Master Builders’ Group Training Scheme Inc (2007) 161 IR 86 at [33]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Excelior Pty Ltd [2013] FCA 638 at [29]; Sydney Night Patrol and Inquiry Company Limited trading as SNP Security v Pulleine [2014] FCA 385 at [26].

(2)    The task of construction begins with the natural and ordinary meaning of the words used: City of Wanneroo at [53]; Kucks v CSR Limited (1996) 66 IR 182 at 184; Australian Workers’ Union v Cleanevent Australia Pty Ltd [2015] FCA 1477 at [13].

(3)    An award is to be interpreted in light of its industrial context and purpose: City of Wanneroo at [53]; Zader v Truck Moves Australia Pty Ltd [2016] FCAFC 83 at [27]; Prestige Property Services Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2007) 161 FCR 95 at [56] and [109]; Soliman v University of Technology, Sydney (2008) 176 IR 183 at [82]

(4)    An award is also to be interpreted in light of the commercial and legislative context in which it applies: Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [2] and [13]; Construction, Forestry, Mining and Energy Union v John Holland Pty Ltd (2010) 186 FCR 88 at [90]; Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67 at [14]-[18]; Zader at [27].

(5)    An award “must not be interpreted in a vacuum divorced from industrial realities”: City of Wanneroo at [57]; Australian Workers’ Union v Cleanevent Australia Pty Ltd at [14].

(6)    The relevant “context” to be considered in interpreting an award extends to the origins of a particular clause. However, most often the immediate context, being the clause, section or part of the award in which the words to be interpreted appear, will be the clearest guide: Short v FW Hercus Pty Limited (1993) 40 FCR 511 at 517-519.

(7)    The Court should not make too much of infelicitous expression in the drafting of an award. Ultimately, as awards bind the parties on pain of pecuniary penalties, they should make sense according to the basic conventions of the English language: City of Wanneroo at [57]. Narrow or pedantic approaches to the construction task are misplaced, but a court is not free to give effect to some anteriorly derived notion of what is fair or just regardless of what has been written in the award: Kucks at 184; Excelior Pty Ltd at [30].

(8)    While context and purpose of an award will be relevant, ultimately the Court’s task is to give effect to the meaning of the award as expressed in its words, objectively construed: Amcor Limited at [70], [77] – [114].

139    The canons of construction in the Acts Interpretation Act 1901 (Cth) to which Rangiah J referred include s 15AA which provides that an interpretation which promotes the purpose or object underlying the Act should be preferred to one that does not, and s 15AB which addresses the use of extrinsic material.

The Award

140    Part 3 of the Award is titled “Employment Relationship”. Clause 8.6 deals with “Employment categories”. Mr Finch, the employee in question, was a casual employee to whom cl 8.6 applied. That clause provides in part:

8.6.3    Casual employment

8.6.3(a)    A casual employee is one who is engaged and paid as such and shall perform such work as the employer shall from time to time require during the period of engagement. The minimum period of engagement will be four hours each day or shift which may be comprised of hours within or outside the ordinary hours of work otherwise prescribed by 20.5 of this award.

8.6.3(b)     Employment of a casual will terminate at the end of each engagement. This shall not affect the right of an employer to dismiss a casual employee prior to the conclusion of the period of engagement for malingering, inefficiency, neglect of duty or misconduct, in which case wages shall be paid up to the time of dismissal only. A casual employee who terminates their employment prior to the end of the engagement will not be entitled to payment in respect of any time actually worked.

8.6.3(c)     Subject to clause 8.6.3(d) a casual employee will be paid for each hour employed at the ordinary hourly rate for the classification in which they are employed plus a loading of 20% based on that employee's ordinary hourly rate for each hour employed. The loading is in lieu of payment for annual leave, sick leave, public holidays, bereavement leave, special family leave, parental leave and long service leave (whether under any other federal award or any state legislation).

141    Clause 32 of the Award deals with long service leave with cl 32.1 providing that “An employee to whom this award applies shall be entitled to long service leave with pay in respect of service with an employer as provided for in this clause.”

142    Clause 32.2 of the Award clarifies that for the purposes of the clause, the “service of an employee with an employer” means a period of employment under an unbroken contract of employment.

143    Clauses 32.6 and 32.7 address the amount of long service leave to which an employee is entitled, depending on the length of service and the rate of pay for that leave respectively.

144    As Raper J has noted, the parties accepted that the effect of cl 8.6.3(c) is that cl 32 did not apply to casual employees. So much so is evident from the terms of cl 32.2 which identifies that for the purposes of the clause, the service of an employee with an employer means the period during which the employee has been employed by their employer under an “unbroken contract of employment”. It will be noted that cl 8.6.3(b) provides that employment of a casual employee terminates at the end of each engagement.

145    Clause 8.6 identifies four categories of employment: Full-time, Part-time, Casual and Apprentices/Trainees. Clause 8.6.3(c) identifies the remuneration for a casual employee in terms of an hourly rate plus a loading of 20% which is said to be “… in lieu of payment for … long service leave (whether under any other federal award or any state legislation).”

146    On the question of a payment “in lieu”, in TransAdelaide v Leddy (No 2) (1998) 71 SASR 413, the Full Court of the Supreme Court of South Australia dealt with the question of whether the employment status of a permanent part time employee changed to a full time employee within the meaning of an Enterprise Bargaining Agreement (EBA) reached in 1993.

147    The respondent in that matter had been treated as a full time employee as from 27 August 1995. The question was whether he had become a full time employee prior to that time.

148    The Full Court held that the respondent had become a full time employee approximately 12 months earlier.

149    In the period during which the Full Court found that the respondent should have been paid as a full time employee but had been paid as a permanent part time employee, the respondent had received a 20% loading on his part time hourly rate in lieu of sick and annual leave entitlements and public holidays. That loading was pursuant to the EBA.

150    The question the Full Court then addressed was whether the payments the respondent received for his 20% loading during that period could be set-off against his full time employment entitlements.

151    Doyle CJ at p 419 said that:

… Under the EBA Mr Leddy had no entitlement to sick leave, annual leave or to payment for public holidays. The 20 per cent loading is paid in substitution for those entitlements. In my opinion it cannot be said that it is a payment for public holidays, or for annual leave or for sick leave. It replaces the payments that would otherwise be made in that respect. The loading is paid because there is no such entitlement.

152    On that basis, since the respondent was a full-time employee, he was entitled to receive payment for at least 38 hours per week in each week worked, even if he did not work that many hours, and at the rate applicable to a full-time employee.

153    Since the respondent had already received a payment for the hours actually worked, Doyle CJ found at p 419 that there was:

… no reason why the payment actually received for the hours worked should not be off set against Mr Leddy’s yet to be determined monetary entitlement in respect of 38 hours for each week worked or, when the number was greater than 38, the number of hours actually worked.

154    His Honour referred to Ray v Radano [1967] AR (NSW) 471, 478 where Sheldon J held that if the whole or part of a payment made to an employee has been in respect of matters which are outside an award entitlement, the payment to that extent cannot be set off against the wages paid to that employee. His Honour noted that the statement of principle by Sheldon J was approved and adopted by the Full Court of this Court in Poletti v Ecob (No 2) [1989] FCA 779; (1989) 91 ALR 381.

155    On that basis, Doyle CJ considered that, in calculating the respondent’s entitlement to wages from the time he was in fact a full time employee, credit should be given against such entitlement for the wages paid to the respondent in respect of work performed by him during the relevant period, including the 20% loading paid under the EBA.

156    Olsson J, with whose conclusion Doyle CJ agreed, observed: at p 431 that Poletti v Ecob (No 2) illustrated what his Honour described as an:

… established industrial principle that, where outstanding award entitlements are owing to an employee and an employer pays a sum to that employee for purposes other than satisfaction of the award, the employer cannot afterwards claim to have met award obligations by reason of those payments.

157    Two matters may be observed about TransAdelaide. The first is that it does not deal with the same considerations as the subject of this appeal but an entirely different question. In particular, it applied the principle that where an award payment was made to an employee, the employer could offset those award payments against award entitlements.

158    To that extent, TransAdelaide may be distinguished.

159    The second matter is that the question for consideration on this appeal is whether for the purposes of s 113 of the Act, there are applicable award-derived long service leave terms which, amongst other things, would have entitled the employee to long service leave. That is an entirely different question from that which was considered in TransAdelaide.

160    It is for those two reasons that I do not consider TransAdelaide assists with the resolution of this appeal.

161    Clause 8.6(c) of the Award specifically contemplates a payment in lieu for, amongst other things, payment for long service leave, whether that payment be pursuant to any other federal award or any state legislation. There is no suggestion in the Award that a casual employee has to meet a threshold in any other federal award or state legislation before that casual employee becomes eligible to receive a payment in lieu of the suite of matters identified in the clause, including payment for long service leave.

162    To that extent, the Award proceeds on an assumption that a casual employee has an entitlement to receive payment for the various matters identified, including long service leave, under federal award or state legislation. It seems to me that must be so, since it is axiomatic that to receive a payment in lieu of a payment for the various matters identified, there must be, if not an actual entitlement, an assumed entitlement. Were that not the case, the reference in cl 8.6.3(c) to any other federal award or any state legislation would be meaningless.

163    The reference in cl 8.6(1) to any other federal award or any state legislation reveals a recognition of at least a potential obligation on the employer to pay for the various matters identified in the clause. In my view, the natural and ordinary meaning of the words used when construed objectively and in light of the commercial and legislative context in which it applies as Raper J has identified, demonstrates that any issue concerning the potential obligation on the part of the employer to pay casual employees for the various matters identified, whether that potential obligation arises under any other federal award or state legislation, has been addressed by a loading on the hourly rate.

Section 113 of the Act

164    The relevant subsections of the Act are s 113(1) and (3) although the subsections must be read in the context of the whole of the provision.

165    Sections 113(1) and (3) provide:

113    Entitlement to long service leave

Entitlement in accordance with applicable award‑derived long service leave terms

(1)    If there are applicable award‑derived long service leave terms (see subsection (3)) in relation to an employee, the employee is entitled to long service leave in accordance with those terms.

Note:    This Act does not exclude State and Territory laws that deal with long service leave, except in relation to employees who are entitled to long service leave under this Division (see paragraph 27(2)(g)), and except as provided in subsection 113A(3).

(2) …

(3)    Applicable award‑derived long service leave terms, in relation to an employee, are:

(a)    terms of an award, or a State reference transitional award, that (disregarding the effect of any instrument of a kind referred to in subsection (2)):

(i)    would have applied to the employee at the test time (see subsection (3A)) if the employee had, at that time, been in his or her current circumstances of employment; and

(ii)    would have entitled the employee to long service leave; and

(b)    any terms of the award, or the State reference transitional award, that are ancillary or incidental to the terms referred to in paragraph (a).

(Emphasis added)

166    There is no issue that for the purposes of s 113(3) the Award applied to Mr Finch at the test time determined pursuant to s 113(3A). As such the requirement in s 113(3)(a)(i) is satisfied.

167    As to s 113(3)(a)(ii), in Maughan Thiem Auto Sales Pty Ltd v Cooper [2014] FCAFC 94; (2014) 222 FCR 1 at [42] Katzmann J (with whom Greenwood and Besanko JJ agreed), observed that the language of the section was awkward and the meaning ambiguous. Her Honour posed two possible interpretations, the first referring to terms that provide for an entitlement to long service leave, the alternative as referring to an entitlement that had actually accrued. Her Honour’s preferred construction was the first interpretation: at [43]. I agree with her Honour’s construction.

168    Raper J has set out an extensive analysis of s 113, considering the text, context and purpose of the section.

169    Her Honour identified that the Explanatory Memorandum reveals the purpose of the section and the mischief to which the section is intended to avoid as:

[238]    … the operation of many different State and Territory schemes when there were “current arrangements for long service leave” which were to be preserved pending the development of nationally consistent long service leave entitlements.; and

[277]    … a legislative scheme that seeks to maintain the status quo and specifically address the “mischief” as it may relate to employees becoming entitled to long service leave who had never had such entitlements previously.

170    I agree with Raper J’s observations at [258], that on a purposive reading, the expression “would have entitled” in s 113(1) includes the circumstance where in order to satisfy any other federal award or state legislation, the award assumes an entitlement to payment for (in this case) long service leave notwithstanding that under such other federal award or state legislation there is, in fact, a nil entitlement.

171    Bromberg J’s reference at [36] to the dangers of reasoning from legislative intention enunciated by French CJ and Hayne J in Certain Lloyd’s Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 at [40], [41] is apposite. However, the literal interpretation advanced by the Union and the State interveners has the result that the Award does not provide applicable award-derived long service leave terms. The consequences of such a construction advanced upon a literal interpretation not only provides casual employees with a double benefit, they having already been paid in lieu of a payment for, amongst other things, long service leave, but also brings about consequences which in view of the material to which Raper J has referred and her Honour’s analysis, results in unintended consequences which are both improbable and impractical.

172    I agree with Bromberg J: at [65] where when considering s 113(2) of the Act his Honour observed that it seemed unlikely that an employee who had traded away his or her entitlement to long service leave through an industrial bargaining process leading to the making of one or more of the instruments specified in s 113(2) would be entitled to State or Territory long service leave on commencement of the Act. His Honour observed that such a result would provide a windfall to the employee and impose unfairness on the employer now burdened with both the obligation to provide the additional benefit for which long service leave benefit was traded away and also long service leave benefit under a State or Territory law.

173    With respect to his Honour, the same considerations apply to an award which provides a loading in lieu of payment for long service leave.

174    I agree with Raper J at [258] that previous Full Court authority concerning leave entitlements, which comprise a compound entitlement to leave and payment for leave: WorkPac Pty Ltd v Rossato [2020] FCAFC 84; 278 FCR 179, [227]-[231] (Bromberg J), [319]-[322], [799]-[800], [913]-[914] (White J); [1012] (Wheelahan J), do not assist the respondent or the State Interveners.

175    Further, the Long Service Leave Act 1987 (SA) which would otherwise apply, expressly provides in s 5(6) that:

Where long service leave has been taken by a worker or a payment in lieu of long service leave has been made to a worker, the worker’s long service leave entitlement is reduced accordingly.

176    Clause 8.6.3(c) of the Award corresponds with the recognition under s 5(6) of the Long Service Leave Act 1987 (SA) that a long service leave “entitlement” could comprise not only a compound entitlement comprising an entitlement to leave and payment for that leave, but also either the taking of leave “or a payment in lieu of long service leave”, each of which could lead to a reduction in the “entitlement” (emphasis provided).

177    Applying Katzmann J’s construction of the operation of s 113 in Maughan and consistent with the purposive reading identified by Raper J at [258] to which I have referred above and with which I agree, on a proper construction of the Award and the application of that construction to the context and text of s 113, as at the test time, there existed applicable award-derived long service leave terms.

Conclusion

178    It is for these reasons and the reasons set out by Raper J that the appeal should be allowed.

Associate:

Dated:    19 April 2023

REASONS FOR JUDGMENT

RAPER J:

179    This is an appeal from a declaration made by the South Australian Employment Tribunal: Australasian Meat Industry Employees Union v Conroy’s Smallgoods Pty Ltd [2021] SAET 234 (TD). In that decision, the Deputy President accepted the claim of the respondent, the Australasian Meat Industry Employees Union (the Union), on behalf of its member, Mr Finch, and declared that Mr Finch was entitled to long service leave under the Long Service Leave Act 1987 (SA) (the SA LSL Act).

180    This appeal concerns whether the appellant, Conroy’s Smallgoods Pty Ltd (Conroy’s), is liable to pay this entitlement and is resolved by interpreting and applying s 113 of the Fair Work Act 2009 (Cth) (FW Act). The parties agree that if s 113 applies to Mr Finch then he has no entitlement under the SA LSL Act.

Facts and Background

181    The facts were agreed. Conroy’s, a national system employer (within the meaning of s 14 of the FW Act), operates a meat manufacturing business located in Bowden, South Australia and has done so since 1954. Immediately prior to the commencement of the FW Act on 1 July 2009, Conroy’s was a member of the National Meat Association of Australia and a party to the pre-modern Federal Meat Industry (Smallgoods) Award 2000 (the Award). Since the commencement of the FW Act, Conroy’s has not provided long service leave to its casual employees. Conroy’s decision not to provide long service leave to casual employees is consistent with the position of its employer association, the Australian Meat Industry Council.

182    While not agreed, it appears without dispute that the Award does not entitle casual employees to take long service leave, but rather entitles casual employees to a loaded rate of pay in lieu of certain entitlements including long service leave (cll 8.6.3(c) and 32 of the Award).

183    The proceeding below was brought by the Union, which is entitled to represent the industrial interests of Conroy’s employees including Mr Finch. Mr Finch was employed by Conroy’s as a boner on a casual basis between 6 July 2004 and 11 July 2008, and then for a further period between 16 March 2010 and his resignation on 24 October 2018. Conroy’s did not provide long service leave to Mr Finch during his employment and did not pay long service leave to Mr Finch upon the termination of his employment. The Union sought declarations that, for the purpose of s 113 of the FW Act, the Award did not contain an applicable award-derived long service leave term in relation to casual employees, that casual employees engaged by Conroy’s were entitled to long service leave under the SA LSL Act, and that Conroy’s had contravened s 323(1) of the FW Act by failing to pay Mr Finch long service leave pursuant to the SA LSL Act which constituted a “serious contravention” within the meaning of s 557A of the FW Act for which penalties were payable.

184    The quantum of Mr Finch’s compensatory claim, if entitled to long service leave in accordance with the SA LSL Act, is $9,950.23 gross. This is calculated on an average of 36.09 hours in the three years prior to 24 October 2018 at the hourly rate of pay of $26.51. Mr Finch therefore has 10.4 weeks of accrued long service leave.

185    On appeal, there are three interveners:

(a)    National Australia Bank (NAB), who intervened because the same construction issue concerning s 113 has arisen in proceedings initiated by NAB, currently on foot in the Federal Court of Australia, namely allegations of the non-payment or accrual of long service leave for temporary and casual employees and the proper construction of s 113;

(b)    the Wage Inspectorate Victoria (WIV), who intervened because it is the first respondent to the NAB proceedings, and as the regulator of long service leave entitlements in Victoria, it has a regulatory interest in the interpretation of s 113, including whether or not the Long Service Leave Act 2018 (Vic) prevails over the FW Act in respect of long service leave; and

(c)    the State of New South Wales, who intervened because it is the second respondent to the NAB proceedings and the Department of Premier and Cabinet, NSW Employee Relations, Compliance Branch has 31 investigations on foot into possible contraventions of the Long Service Leave Act 1955 (NSW) (NSW LSL Act).

186    Relevantly, as the Union pleads, and as is evident from the circumstances that give rise to the regulators intervening in this case, the Union’s case is that casual employees who had no entitlement to long service leave under their Federal Awards until 1 January 2010 (the commencement of s 113 of the FW Act) including in the case of Mr Finch, who had received a loading in lieu of that entitlement, suddenly became so entitled as of that date (counting service for the period prior to 1 January 2010), where there was no staggered transition, where employers had received no warning, and from that date, employers could be liable for civil penalties under the FW Act (as Mr Finch claims in his case) or criminally liable under State or Territory laws (as the WIV and State of NSW (State interveners) advocate).

187    For the reasons which follow, the phrase “would have entitled” in s 113(3)(a)(ii) should not be read literally so as to confine the operation of s 113(1) to only those award terms for which employees were eligible to accrue and receive long service leave under those provisions. A literal reading would produce the absurdity illustrated in the preceding paragraph. The provision is to be interpreted according to its purpose, which in this case was to preserve the long service leave arrangements in pre-modernised awards. Moreover, the mischief being avoided was the disturbing of long-standing bargained or arbitrated outcomes and employers being required to instantaneously apply multiple different long service leave schemes.

Relevant provisions of the Award

188    Part 3 of the Award contains general provisions including the “Employment categories”. Clause 8.6.3 prescribes those provisions as they relate to “Casual employment” which are extracted as follows (in part):

8.6.3     Casual employment

8.6.3(a)    A casual employee is one who is engaged and paid as such and shall perform such work as the employer shall from time to time require during the period of engagement. The minimum period of engagement will be four hours each day or shift which may be comprised of hours within or outside the ordinary hours of work otherwise prescribed by 20.5 of this award.

8.6.3(b)     Employment of a casual will terminate at the end of each engagement. This shall not affect the right of an employer to dismiss a casual employee prior to the conclusion of the period of engagement for malingering, inefficiency, neglect of duty or misconduct, in which case wages shall be paid up to the time of dismissal only. A casual employee who terminates their employment prior to the end of the engagement will not be entitled to payment in respect of anytime actually worked.

8.6.3(c)     Subject to clause 8.6.3(d) a casual employee will be paid for each hour employed at the ordinary hourly rate for the classification in which they are employed plus a loading of 20% based on that employee's ordinary hourly rate for each hour employed. The loading is in lieu of payment for annual leave, sick leave, public holidays, bereavement leave, special family leave, parental leave and long service leave (whether under any other federal award or any state legislation).

8.6.3(d)    The ordinary hours of a casual shall not exceed 38 per week. The span of daily ordinary hours shall be as prescribed in clause 20.5.2. Casuals working ordinary hours on a Saturday shall be only be paid in accordance with clause 20.5. For time worked in excess of the prescribed ordinary hours in anyone day or shift, casuals shall only be paid the ordinary overtime rates as defined.

(Emphasis added.)

189    Relevantly, the employment concludes at the end of each engagement (cl 8.6.3(b)) and the casual employee is paid a loading of 20% on top of what an employee who is not a casual employee would otherwise receive which is “in lieu of [among other things] … long service leave (whether under any other federal award or any state legislation)”.

190    Clause 32 deals with long service leave and is extracted (in part) as follows:

32.     LONG SERVICE LEAVE:

[32 inserted by PR928384 from 04Mar03]

32.1     An employee to whom this award applies shall be entitled to long service leave with pay in respect of service with an employer as provided for in this clause.

32.2     Service entitling to leave:

For the purposes of this clause the service of an employee with an employer means the period during which the employee has been employed by their employer under an unbroken contract of employment; provided that a contract of employment shall be deemed not to have been broken by reason only of an interruption or determination thereof if the interruption or determination:

32.2.1     has been made by the employer with the intention of avoiding any obligation imposed on him by this award or by State law dealing with long service leave; or

32.2.2     has arisen directly or indirectly from a dispute concerning industrial matters, if the employee returns to duty with the same employer in accordance with the terms of settlement of the said dispute; or

32.2.3     has been made redundant by the employer by reason of slackness of trade (including unavailability of stock for slaughter) if the employee is re-employed by the same employer within six months of such interruption or determination; or

32.2.4     has been made redundant by the employer for any reason other than those referred to in sub-clauses 32.2.1,32.2.2 and 32.2.3 hereto if the employee is re-employed by the same employer within two months of such interruption or determination.

Provided further that the period during which the employment has been so interrupted or determined shall not, except when due to the reasons referred to in paragraph 32.2.l hereof be taken into account in calculating the period of service.

32.3     Where an employee has entered or enters into a contract of employment with an employer within a period of twelve months after the completion of an apprenticeship or traineeship with the employer the period of the apprenticeship or traineeship shall be taken into account for the purpose of calculating the period of service with that employer under that contract of employment.

32.4     Any period of service as a member of the naval, military or air forces (other than as a member of the permanent forces) of the Commonwealth of Australia shall be deemed to be service with the employer by whom the employee concerned was last employed before he commenced to serve as such member.

191    The parties accepted, while not stating so explicitly in this clause, that the effect of the operation of cl 8.6.3(c) is such that cl 32 did not apply to casual employees.

192    The clause thereafter included detailed provisions regarding the amount of leave to which an employee was entitled, at cl 32.6, which is extracted as follows:

32.6     Amount of Leave

The Long service leave to which an employee is entitled shall be as follows:-

32.6.1     in the case of an employee who has completed at least fifteen years of service with an employer;

32.6.1.1     in respect of fifteen years service so completed; thirteen weeks;

32.6.1.2     in respect of each ten years service with the employer completed since he last became entitled to long service leave, eight and two thirds weeks; and

32.6.1.3     on the termination of the employees’ employment or his death, in respect of the number of years service with the last employer completed since he last became entitled to an amount of long service leave, a proportionate amount on the basis of thirteen weeks for fifteen years service;

32.6.2     in the case of an employee who has completed at least ten years but less than fifteen years service with an employer and whose employment is terminated;

32.6.2.1     by the employer for any cause other than serious and wilful misconduct; or

32.6.2.2     by the employee on account of illness incapacity or domestic or any other pressing necessity where such illness incapacity or necessity is of such nature as to justify such termination; or

32.6.2.3     by death of the employee;

a proportionate amount on the basis of thirteen weeks for fifteen years service.

32.6.3     in the case of an employee who has completed at least ten but less than fifteen years’ service with an employer and whose employment is terminated by the employee, other than as provided in sub-paragraphs 32.6.2.2 and 32.6.2.3, a proportionate amount on the basis of thirteen weeks for fifteen years’ service.

32.6.4     Such leave shall be granted and taken and, except as permitted by this award, payment in lieu thereof shall not be made or accepted.

193    The award contained provision for payment at cl 32.7, when leave could be taken including the requisite notice which was needed to be given (cl 32.8.3), granting leave in advance (cl 32.10) and payment upon termination (cl 32.9), as extracted as follows:

32.9     Payment on Termination for Leave not taken

32.9.1     Where the employment of an employee is terminated otherwise then [sic] by his death and any long service leave -

32.9.1.1 to which the employee was entitled has not been taken or;

32.9.1.2 accrues to the employee upon such termination; then

the employer shall forthwith pay to the employee in full the amount in respect of such leave calculated as at the date of termination in the manner set out in sub-clause 7, less any amount already paid to the employee in respect of that leave;

32.9.2     where an employee dies and any long service leave -

32.9.2.1 to which the employee was entitled has not been taken; or

32.9.2.2 accrues upon termination of the employment by reason of his death;

the employer shall upon request by the employee’s personal representative pay to the employee’s personal representative in full the amount in respect of such leave calculated as at the date of the death of the employee in the manner set out in sub-clause 32.7 of this clause less any amount already paid to the employee in respect of that leave.

Claim as before the Tribunal

194    The Union claimed that Mr Finch was entitled to long service leave pursuant to the SA LSL Act upon the termination of his employment by reason of the following particulars:

Particulars

Section 113 of the FW Act has the effect that a national system employee is covered by relevant State or Territory long service leave legislation, unless there is an “applicable award-derived long service leave term” in relation to the employee.

There is no applicable award-derived long service leave term within the meaning of s 113(3)(a) of the FW Act in relation to Finch and other casual employees engaged by Conroy’s. In particular:

a)     the pre-modern Federal Meat Industry (Smallgoods) Award 2000 (Smallgoods Award) would have applied to Finch and other casual employees engaged by Conroy’s pursuant s 113(3)(a)(i);

b)     however, in respect of casual employees, the Smallgoods Award does not “entitle the employee to long service leave” within the meaning of s 113(3)(a)(ii): see also Maughan Thiem Auto Sales v Cooper [2014] FCAFC 94.

Accordingly, Finch and other casual employees engaged by Conroy’s are entitled to long service leave in accordance with the LSL Act.

(Emphasis in original.)

195    Comparably, Conroy’s submitted, as part of its response to the application, that:

6.     The Smallgoods Award contains ‘applicable award-derived long service leave terms’ within the meaning of section 113(3) of the FW Act in relation to the Applicant because it:

6.1     contains terms that would have applied to the Applicant at the test time, being 31 December 2009, if the Applicant had been employed as a boner on that date; and

6.2     would have entitled the Applicant to long service leave because it contained long service leave terms which were applicable to all employees of the Respondent including the Applicant.

7.     The requirements of section 113(3)(a)(i) and (ii) are therefore satisfied.

8.     By virtue of clause 32.2 of the Smallgoods Award, the Applicant was unable to accrue long service leave as a true casual employee because qualifying service required to be service performed under an unbroken contract of employment.

9. The Applicant’s entitlement to long service leave is therefore nil.

The Tribunal’s reasons

196    The Union brought proceedings in the Tribunal seeking a declaration that Mr Finch was entitled to long service leave in accordance with the SA LSL Act. Mr Finch would only be so entitled if s 113 of the FW Act did not apply, that is to say, there was no applicable award-derived long service leave terms which would have entitled Mr Finch to long service leave. The Tribunal found that to be the case.

197    The Tribunal’s focus, given the parties accepted that the first condition of s 113(3)(a)(i) applied to Mr Finch (namely the Award applied), was whether the Award “would have entitled [Mr Finch] to long service leave” within the meaning of s 113(3)(a)(ii) of the FW Act.

198    The Tribunal considered three authorities: Maughan Thiem Auto Sales Pty Ltd v Cooper [2014] FCAFC 94; 222 FCR 1; Epona Pty Ltd Enterprise Agreement 2015 [2015] FWCA 5890; and Gould, Robinson & Boxshall (Civil Dispute) v Effective People [2019] ACAT 124.

199    The Tribunal:

(a)    found it was challenging to conceive of an employee having an “entitlement” within the meaning of s 113 when the employee did not meet the required criteria and therefore was not eligible to receive the leave (at TD[62]);

(b)    interpreted Justice Katzmann’s reasoning in Maughan with respect to s 113(3)(a) to mean that there was a distinction between having an entitlement and meeting the criteria for the entitlement to be paid (namely the accrual) (at TD[63]);

(c)    was of the view that Maughan is not to be read as authority for the proposition that s 113 has the effect that, where an award-covered employee is ineligible for the award leave entitlement, it “oust[s] relevant State long service leave legislation” (at TD[64]);

(d)    did not follow the Epona and Effective People decisions on the basis that those decisions had “misunderstood” Katzmann J’s reasoning in Maughan (at TD[65]–[69]); and

(e)    distinguished the current facts from those in Maughan, noting that in Maughan, Mr Cooper was a permanent full-time employee who, under the terms of the Award, could accrue long service leave upon completing the requisite years of service (which he had not done), whereas the present case involved an “employee who is … excluded under a relevant award from ever being paid for long service leave” (at TD[70]–[71]);

(f)    found the Court in Maughan interpreted the word “entitled” in s 113 (at TD[74]):

… to mean a right to payment or benefit upon meeting the necessary requirements. A person with a right to be paid long service leave is entitled within the meaning of s 113 of the FWA, even though the necessary requirements to be paid have not been met at the time of claim.

(g)    consequently, the Tribunal found at TD[75]–[76]:

75.     In this case, the applicant was not entitled to long service leave in accordance with the applicable award-derived long service leave terms, because the terms of the award are such that casual employees are precluded entirely from long service leave. The award long service leave terms would not have entitled the applicant to long service leave within the meaning of s 113.

76.     It follows that the LSL Act applies to the applicant.

(h)    in response to the reliance by the Union on the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), at TD[77]–[82], made three points:

(i)    the Explanatory Memorandum is not to be used to displace the clear meaning of the statutory text;

(ii)    if s 113 was meant to preserve the long service leave terms of pre-modernised awards, it would have been straightforward for the legislation to say so and it did not; and

(iii)    the Explanatory Memorandum is not in itself clear and uses inconsistent expressions, namely “long service leave entitlements” in para [438] and “long service leave terms” in para [441].

Brief summary of the submissions of the parties and interveners

The grounds of appeal and Conroy’s submissions

200    It is appropriate to briefly summarise the grounds of appeal and submissions of the parties and interveners. Rather than being a comprehensive record of every submission put before the Court, I have summarised only those salient arguments and broader themes that were advanced by the parties and interveners, noting that there is some overlap between the submissions advanced and the positions contended for.

201    The five grounds of appeal were refined by Conroy’s in their written submissions to encompass four distinct points. Relevantly, Conroy’s submits that Mr Finch is not entitled to long service leave under the SA LSL Act by reason of the operation of s 113(1) of the FW Act and claims the Tribunal:

(1)    wrongly disregarded or failed to have proper regard to the purpose, context and objectives of s 113 of the FW Act;

(2)    erred in interpreting s 113(3)(a)(ii) of the FW Act and should have found that “applicable award-derived long service leave terms” means terms in a pre-modern award which would have conferred upon the employee in question long service leave entitlements;

(3)    erred by disregarding cl 8.6.3(c) of the Award entirely and failed to have any, or any sufficient regard to, the meaning and effect of cl 32 of the Award, which both, either individually or when read together, should have been found to be “applicable award-derived long service leave terms”; and

(4)    wrongly declared that a casual employee receiving payment on account of long service leave under the pre-modern award conditions, would “switch” to the State legislation to become entitled to a different payment in respect of the same matter.

NAB’s submissions

202    NAB contends that there are two competing constructions of s 113 that are available where an employee is covered by a pre-modernised award that provides for long service and that where that employee is “entitled to” long service leave in accordance with the award:

(1)    the employee is “entitled” to long service leave regardless of whether that employee is included or excluded from those provisions (coined the legal interpretation in NAB’s submissions); or

(2)    the employee is “entitled to” long service leave only if the employee is eligible to accrue and receive long service leave under those provisions (coined the literal interpretation in NAB’s submissions).

203    In essence, NAB’s contention is that the legal interpretation avoids the “mischief” that Parliament intended to remedy by creating certainty, stability and by being cost neutral as opposed to the literal interpretation. NAB submits the legal interpretation “crystallises the mischief”. NAB contends that the legal interpretation can be made out on the words alone, or at least when considering the context of s 113, which it submits is to be considered in the first instance.

The Union’s submissions

204    The Union contends that there are two issues that arise in this appeal:

(1)    whether s 113 preserves, for an employee, the entitlement to long service leave provided for by a pre-modernised award, or whether it also preserves the exclusion from entitlement also provided for by the award; and

(2)    whether the Award would have entitled the employee to long service leave within s 113(3)(a)(ii) of the FW Act.

205    With respect to the first issue and in particular whether the award preserves an exclusion from entitlement, the Union submits that the phrase “would have entitled the employee” to long service leave in s 113(3)(a)(ii) means terms which, in respect of an employee, would have entitled them to long service leave by conferring a right or claim to long service leave. It says that this interpretation is consistent with:

(1)    the natural and ordinary meaning of the word “entitled”;

(2)    the focus upon the particular employee;

(3)    the contrast in language utilised in s 113(2);

(4)    the conferral by s 113(1) of an employee’s entitlement to access applicable award-derived long service leave terms (as opposed to the application of those terms to an employee);

(5)    the note appearing immediately after s 113(1); and

(6)    the language of s 27(2)(g).

206    As such, the Union contends that when considering the text and context, the phrase “would have entitled the employee” cannot encompass terms that would have excluded the employee from such an entitlement.

207    With respect to the context surrounding s 113, being an aspiration at the time of its enactment to reach a nationally consistent scheme for long service leave (which it says is evident from the extrinsic material), the Union argues that the aspiration is “perfectly consistent” with the text and structure of the legislative scheme, which appears to create a set of minimum standards for long service leave for all employees using the relevant State and Territory law in circumstances where a relevant pre-modernised award does not provide an entitlement. Put in another way, the Union contends that the intention for the scheme was to change existing arrangements with respect to long service leave now, while holding an aspiration to change them further in the future. This is as opposed to preserving the status quo in respect of long service leave, as it existed for employers and employees alike bound by pre-modernised awards making provision for long service leave, until such time as a national scheme were developed (the latter contention being the effect of Conroy’s and NAB’s submissions).

208    Further, the Union asserts that, even if there were an aspiration to achieve a nationally consistent scheme in the future, it is not absurd or incongruous for the legislature to have imposed an obligation for employers to provide long service leave to employees where no obligation had previously existed.

209    With respect to the second issue, which concerns whether the Award would have entitled Mr Finch to long service leave, the Union contends that since s 113(1) only applies to employees to whom a relevant term of a pre-modernised award would have applied (and which would have entitled them to long service leave by providing a right or claim to long service leave), the Award in the present case would not have entitled Mr Finch to long service leave had he been in his current circumstances immediately before the commencement of the FW Act. Given the Award would not have entitled Mr Finch to long service leave, the Union submits that there was no applicable “award derived long service leave term” and therefore, Mr Finch’s right to long service leave is governed by State long service leave laws.

The Wage Inspectorate Victoria’s submissions

210    Broadly speaking, the WIV submits that both Conroy’s and NAB’s construction of s 113 is not supported by the text, the statutory context, the legislative history (including the different language used), authority and the provision’s purpose. Further, the WIV submits that there is an overreliance on extrinsic materials which detract from the meaning of the text and structure of the FW Act.

211    Notably, the WIV submits that the word “entitlement” is based on the ordinary meaning of that word, which means to give the employee the right to leave. In oral submissions, the WIV clarified that to the extent it says that the word “entitlement” gives the employee a “right”, it does not mean to create rights to State based benefits. Rather, it simply identifies the rights that it creates by reference to dead instruments, that is, “[permit] access to those rights rather than [create] them”. Put in another way, the WIV accepted that what s 113 does is un-suppress rights that had been suppressed because of the supremacy of Federal law.

The State of NSW’s submissions

212    The State of NSW submits that the terms of an award only entitles an employee to long service leave if the employee is eligible to accrue such leave under the award.

213    The State contends that Conroy’s and NAB’s construction of s 113 is not supported by authority, the interpretation of the South Australia Employment Tribunal, the dictionary meaning, and the extrinsic materials.

Consideration and disposition of the grounds of appeal

214    For the reasons that follow, I conclude that the Deputy President erred by disregarding or failing to have proper regard to the purpose, context and objectives of s 113 of the FW Act; erred in interpreting s 113(3)(a)(ii) of the FW Act, and should have found that “applicable award-derived long service leave terms” means terms in a pre-modern award which provided for long service leave, irrespective of whether the employee is included or excluded from those provisions. In these circumstances, there is no need to go further and resolve the other two issues identified at [201] above.

Section 113 of the FW Act

215    This appeal concerns the construction of s 113 of the FW Act.

216    While there was a certain concentration by the parties on ss 113(1) and (3)(a)(ii), as will become evident below, the whole of the provision and s 113A must be considered.

217    Section 113 provided (as at 1 January 2010):

113     Entitlement to long service leave

Entitlement in accordance with applicable award‑derived long service leave terms

(1)     If there are applicable award‑derived long service leave terms (see subsection (3)) in relation to an employee, the employee is entitled to long service leave in accordance with those terms.

Note:    This Act does not exclude State and Territory laws that deal with long service leave, except in relation to employees who are entitled to long service leave under this Division (see paragraph 27(2)(g)), and except as provided in subsection 113A(3).

(2)     However, subsection (1) does not apply if:

(a)     a workplace agreement, or an AWA, that came into operation before the commencement of this Part applies to the employee; or

(b)     one of the following kinds of instrument that came into operation before the commencement of this Part applies to the employee and expressly deals with long service leave:

(i)     an enterprise agreement;

(ii)     a preserved State agreement;

(iii)     a workplace determination;

(iv)     a pre‑reform certified agreement;

(v)     a pre‑reform AWA;

(vi)     a section 170MX award;

(vii)     an old IR agreement.

Note:     If there ceases to be any agreement or instrument of a kind referred to in paragraph (a) or (b) that applies to the employee, the employee will, at that time, become entitled under subsection (1) to long service leave in accordance with applicable award‑derived long service leave terms.

(3)     Applicable award‑derived long service leave terms, in relation to an employee, are:

(a)     terms of an award, or a State reference transitional award, that (disregarding the effect of any instrument of a kind referred to in subsection (2)):

(i)     would have applied to the employee at the test time (see subsection (3A)) if the employee had, at that time, been in his or her current circumstances of employment; and

(ii)     would have entitled the employee to long service leave; and

(b)    any terms of the award, or the State reference transitional award, that are ancillary or incidental to the terms referred to in paragraph (a).

(3A)     For the purpose of subparagraph (3)(a)(i), the test time is:

(a)     immediately before the commencement of this Part; or

(b)     if the employee is a Division 2B State reference employee (as defined in Schedule 2 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009)—immediately before the Division 2B referral commencement (as defined in that Schedule).

Entitlement in accordance with applicable agreement‑derived long service leave terms

(4)     If there are applicable agreement‑derived long service leave terms (see subsection (5)) in relation to an employee, the employee is entitled to long service leave in accordance with those terms.

(5)     There are applicable agreement‑derived long service leave terms, in relation to an employee if:

(a)     an order under subsection (6) is in operation in relation to terms of an instrument; and

(b)     those terms of the instrument would have applied to the employee immediately before the commencement of this Part if the employee had, at that time, been in his or her current circumstances of employment; and

(c)     there are no applicable award‑derived long service leave terms in relation to the employee.

(6)     If FWA is satisfied that:

(a)     any of the following instruments that was in operation immediately before the commencement of this Part contained terms entitling employees to long service leave:

(i)     an enterprise agreement;

(ii)     a collective agreement;

(iii)     a pre‑reform certified agreement;

(iv)     an old IR agreement; and

(b)     those terms constituted a long service leave scheme that was applying in more than one State or Territory; and

(c)     the scheme, considered on an overall basis, is no less beneficial to the employees than the long service leave entitlements that would otherwise apply in relation to the employees under State and Territory laws;

FWA may, on application by, or on behalf of, a person to whom the instrument applies, make an order that those terms of the instrument (and any terms that are ancillary or incidental to those terms) are applicable agreement‑derived long service leave terms.

References to instruments

(7)     References in this section to a kind of instrument (other than an enterprise agreement) are references to a transitional instrument of that kind, as continued in existence by Schedule 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009.

218    The wording of s 113 as at 1 January 2010 is, for all practical purposes, identical to the wording of s 113 at present, although the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) is now defined as the “Transitional Act” in s 12, and Fair Work Australia (which appears as “FWA” in the wording above) has been renamed the Fair Work Commission (FWC).

219    Section 113A provided (as at 1 January 2010):

113A    Enterprise agreements may contain terms discounting service under prior agreements etc. in certain circumstances

(1)     This section applies if:

(a)     an instrument (the first instrument) of one of the following kinds that came into operation before the commencement of this Part applies to an employee on or after the commencement of this Part:

(i)     an enterprise agreement;

(ii)     a workplace agreement;

(iii)     a workplace determination;

(iv)     a preserved State agreement;

(v)     an AWA;

(vi)     a pre‑reform certified agreement;

(vii)     a pre‑reform AWA;

(viii)     an old IR agreement;

(ix)     a section 170MX award; and

(b)     the instrument states that the employee is not entitled to long service leave; and

(c)     the instrument ceases, for whatever reason, to apply to the employee; and

(d)     immediately after the first instrument ceases to apply, an enterprise agreement (the replacement agreement) starts to apply to the employee.

(2)     The replacement agreement may include terms to the effect that an employee’s service with the employer during a specified period (the excluded period) (being some or all of the period when the first instrument applied to the employee) does not count as service for the purpose of determining whether the employee is qualified for long service leave, or the amount of long service leave to which the employee is entitled, under this Division or under a law of a State or Territory.

(3)     If the replacement agreement includes terms as permitted by subsection (2), the excluded period does not count, and never again counts, as service for the purpose of determining whether the employee is qualified for long service leave, or the amount of long service leave to which the employee is entitled, under this Division or under a law of a State or Territory, unless a later agreement provides otherwise. This subsection has effect despite sections 27 and 29.

(4)     References in this section to a kind of instrument (other than an enterprise agreement) are references to a transitional instrument of that kind, as continued in existence by Schedule 3 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009.

220    It is necessary to construe s 113 and in particular the expression “would have entitled the employee to long service leave” in the context of the FW Act as a whole, in particular by reference to the provisions below: Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation [1981] HCA 26; 147 CLR 297 at 320. The expression may also be construed in light of the relevant extrinsic materials and the legislative history: Acts Interpretation Act 1901 (Cth) s 15AB; CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; 187 CLR 384 at 408; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [69]; R v A2 [2019] HCA 35; 269 CLR 507 at [33], [37] (per Kiefel CJ and Keane J) and [124] (per Bell and Gageler JJ).

221    At first blush, there is an attractiveness to the Union’s submission that, when one reads s 113(3)(a)(i) in isolation, the provision “preserves the application of the terms of a pre-modernised award only insofar as they would have conferred an entitlement to long service leave on an employee” (emphasis added). That attractiveness is fortified by the use of the term “entitled”. However, for the reasons which follow, the Tribunal’s myopic focus on that phrase was erroneous and belies the mischief the provision was intended to overcome.

222    The extrinsic materials and the history reveal that it is critical to consider the status of awards and entitlements to long service leave before the inception of the FW Act and to examine what the purpose of the National Employment Standards (NES) were upon inception thereafter, including whether the effect of s 113 truly created a standard of the kind otherwise within Part 2-2 or sought to preserve the status quo and if so, what the status quo comprised. Put in another way, the question is whether Parliament intended to preserve a long service leave entitlement under the Award to those employees to whom the provision was applicable or whether it sought to preserve the provision as it applied to all employees, whether they could claim access to long service leave or not.

The historical context

223    Historically, the regulation of long service leave in Australia has arisen from State and Territory laws or under Federal awards. From 1955, each State and Territory introduced their own schemes, each of which varied from one another: Long Service Leave Act 1955 (NSW) s 4; Long Service Leave Act 1956 (Tas) s 8 (repealed); Long Service Leave Act 1957 (SA) s 6 (repealed); Long Service Leave Act 1958 (WA) s 8; Long Service Leave Act 1967 (SA) s 4 (repealed); Long Service Leave Act 1976 (ACT) s 3; Long Service Leave Act 1976 (Tas) s 7A; Long Service Leave Act 1981 (NT) s 8; Long Service Leave Act 1987 (SA) s 5; Industrial Relations Act 1990 (Qld) s 240 (repealed); Long Service Leave Act 1992 (Vic) ss 56 – 58 (repealed); Workplace Relations Act 1997 (Qld) s 193 (repealed); Industrial Relations Act 1999 (Qld) s 43 (repealed); Industrial Relations Act 2016 (Qld) s 95; Long Service Leave Act 2018 (Vic) s 6.

224    At roughly the same time as the inception of the State laws, industrial parties started to bring claims before the former Commonwealth Conciliation and Arbitration Commission seeking the inclusion of long service leave provisions in Federal awards, which were different from those at the State and Territory level. This occurred because of the mischief – the initially uniform State and Territory laws had changed over time removing any national uniformity. As a result, employers who operated across State and Territory borders had become answerable (absent Federal regulation) to multiple complex schemes. By way of illustration, after amendments were made to the NSW laws, with the inception of the Long Service Leave (Amendment) Act 1963 (NSW), such that they did not conform with other State laws, applications were made by employers in the Metal Trades and Printing industries for the insertion in the Federal Metal Trades and Graphic Arts Awards provisions regarding long service leave, in effect maintaining the status quo which had existed before the NSW amendments: see Decisions – Graphic Arts and Metal Trades (re Long Service Leave) (1964) 106 CAR 412.

225    The Commission, in the Graphic Arts case, recognised the need for there to be Federal intervention on this issue so as to ensure uniformity across States, as they stated at page 442:

The Commission considered that this was an area of industrial relations in which problems might arise unless both subject matters were controlled by the Commission and that it is more desirable for the Commission to regulate long service leave by its awards than it is to maintain a situation in which there is uniformity within each State but not between States, especially since the 1963 New South Wales Act.

Our awards will, to the extent to which they have operation, create a code having uniform operation wherever they run, and that uniformity will not stop at State boundaries. To adopt any other attitude would result in uniformity within each State but not within the industries governed by Federal award [sic].

(Emphasis added.)

226    Hence, as in this case, thereafter, many employees’ entitlements to long service leave (and exclusions from entitlement) arose from the operation of Federal awards, to the exclusion of any State or Territory entitlement. Furthermore, an employee engaged on a casual basis was traditionally not entitled to long service leave, since each period of employment was a separate engagement, as observed by Jessup J in Compass Group (Australia) Pty Ltd v Bartram [2007] FCAFC 26; 239 ALR 262 at [19].

227    Thereafter, Federal awards routinely contained long service leave provisions (including the exclusion of casuals).

228    The enactment of the Workplace Relations Act 1996 (Cth) led to a reduction in the matters which could be included in awards to only those prescribed to be “allowable award matters”. While initially long service leave was an allowable award matter under s 89A(2)(f) of that Act, the Workplace Relations Amendment (Work Choices) Act 2005 (Cth), which commenced on 27 March 2006, reduced further the “allowable award matters” and “long service leave” was no longer included: Workplace Relations Act s 513. Not much can be read into this change given it did not have the effect that employees covered by Federal Awards became covered by the State or Territory laws relating to long service leave. This was because the Workplace Relations Act recognised the continued existence of certain “preserved award terms” (s 527) which were no longer “allowable award matters”. Those “preserved award terms” included, inter alia, long service leave terms (s 527(2)(d)). Further, if a rationalised award was made, a “preserved award term” was taken to be included in the new award: s 528(2). The WIV submitted that this was the first time the word “entitlement” was used to describe “long service leave” but appeared to accept that the “preserved award entitlement’ included both employees with and without entitlements which on its terms is correct: see ss 527(2)(d) and (3).

Forward with fairness

229    When in opposition Labor created an industrial relations policy platform entitled “Forward with Fairness” (Forward with Fairness – Labor’s plan for fairer and more productive Australian workplaces – April 2007). Forward with Fairness planned to create 10 national standards. Page 9, which concerns long service leave, states:

10.     Long Service Leave

As part of its commitment to national industrial relations laws, Labor will work with the States to develop nationally consistent long service leave entitlements.

In the transitional period, Labor’s guaranteed entitlement to long service leave will reflect the long service leave arrangements currently contained in State laws or federal awards and federal agreements.

Under Labor, long service leave entitlements accrued under these arrangements will be protected in the transition to nationally consistent long service leave entitlements so Australian employees are not disadvantaged.

230    Once elected in 2007, the government enacted the Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 (Cth) (Transition to Forward with Fairness Act) which comprised amendments to the existing legislation to transition to the new workplace relations system. In particular, the amendments phased out the previous individual Australian Workplace Agreements, created new Individual Transitional Employment Agreements (ITEAs) to be available only for limited use, created a new “no-disadvantage test” for future workplace agreements, and empowered the Australian Industrial Relations Commission to undertake the process of modernising industrial awards. As part of the amendments, the legislature included consideration of the interaction between the proposed NES (the 10 standards, including long service leave, which had been foreshadowed in the Forward with Fairness plan) and modern awards. Modern awards were only able to include certain terms (s 576J) which did not include “long service leave”. The Explanatory Memorandum to the Workplace Relations Amendment (Transition to Forward with Fairness) Bill 2008 (Cth) described the interaction in this way (at page 80):

28.     A modern award cannot exclude a term of the proposed NES or operate inconsistently with a term of the proposed NES.

29.     Subject to paragraph 32 below, a modern award may include industry-specific detail about matters in the proposed NES.

30.     Subject to paragraph 32 below, a modern award may build on entitlements in the proposed NES where the Commission considers it necessary to do so to ensure the maintenance of a fair minimum safety net for employees covered by the modern award, having regard to existing award entitlements for those employees.

…

32.     In relation to long service leave, the Australian Government will, in co-operation with state governments, develop a national long service leave entitlement under the NES. In doing so, the Australian Government will also consult with major employer and employee representative bodies. Until then, long service leave entitlements derived from various sources will be protected. So as to not pre-empt the development of a nationally consistent approach, the Commission must not include a provision of any kind in a modern award that deals with long service leave.

(Emphasis added.)

231    Following the introduction of the Transition to Forward with Fairness Act, an Exposure Draft of the NES was released, again heralding the Government’s intention to “work co-operatively with the states and territories to develop a uniform minimum long service standard” (at [233]). The Exposure Draft recognised the current difficulties arising from long service leave entitlements being “predominantly contained in state and territory laws and federal awards and agreements” which are “often complex and highly prescriptive, differing considerably in operation and level of entitlement between jurisdictions”: at [234]. It noted, at [235]:

This situation can create difficulties for businesses operating across jurisdictions. An employer may be required to maintain different long service leave standards for different sections of their workforce divided along state and territory lines. Confusion and complexity arises where employees move between jurisdictions while working for the one employer. A national system will help to remove any confusion and reduce the administrative burden on employers.

232    Thereafter, it described the “Outline of entitlement” to be:

236.    Until a uniform long service leave NES is developed, long service leave entitlements in pre-modernised awards, NAPSAs or state or territory laws will be preserved to ensure they cannot be bargained away.

237.     An employee currently covered by a workplace agreement will retain the long service leave entitlement (if any) in that agreement while it remains in operation. Under the proposed NES, an employee’s long service leave entitlement in a pre-modernised award or NAPSA will apply unless:

•    a workplace agreement or an AWA applies

•    another specified instrument (e.g. a pre-reform certified agreement) that deals with the matter of long service leave applies (even if it provides that the employee is not entitled to long service leave).

238.     When an existing workplace agreement, AWA or specified instrument ceases to operate, an employee will be entitled to the long service leave entitlement in a pre-modernised award or NAPSA. If no underlying award or NAPSA applies, the employee will be entitled to long service leave under an applicable state or territory law.

Will every employee be entitled to long service leave under a pre-modernised award or NAPSA when the NES commence?

239.     No. To avoid interfering with bargained outcomes, the proposed provisions protecting long service leave will not apply to employees covered by certain agreements while they are in operation.

Can state and territory long service leave laws continue to apply to federal system employees?

240.     Yes. The proposed long service leave NES does not override state or territory long service leave laws. It is envisaged that the interaction with state and territory laws will generally be dealt with as part of the Government’s substantive workplace relations amendments to be introduced into Parliament later this year.

Can long service leave entitlements be bargained away?

241.     No. The proposed long service leave NES ensures that long service leave entitlements in pre-modernised awards and NAPSAs cannot be bargained away. The intention is that workplace agreements will not be able to override state and territory long service leave laws.

Possible issues for discussion

Simplifying long service leave entitlements

242.    The proposed long service leave NES preserves all machinery and application rules associated with long service leave in a pre-modernised award or NAPSA. In some cases, these rules may be detailed or prescriptive. The Government is aware of the need to minimise this complexity. However, this must be balanced against the need to ensure that long service leave entitlements cannot be bargained away while a minimum uniform long service leave standard is formulated.

(Emphasis added.)

The inception of the FW Act

233    The object of the FW Act is to “provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians”. This is achieved, in part, by:

3     Object of this Act

…

(b)     ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders; …

234    From the inception of the FW Act, the terms and conditions of the employment of national system employees were governed by, among other things:

(a)    the NES (s 5(3)) and as contained in Part 2-2 of the FW Act);

(b)    the newly created “modern awards” (s 5(4) and as contained in Part 2-3);

(c)    enterprise agreements (s 5(5) and as contained in Part 2-4); and

(d)    workplace determinations (s 5(6) and as contained in Part 2-5).

235    The NES comprised “minimum standards” that apply to the employment of employees: s 61(1). Specifically, they “relate[d]” at inception to the following matters as set out in s 61(2):

(a)    maximum weekly hours (Division 3);

(b)    requests for flexible working arrangements (Division 4);

(c)    parental leave and related entitlements (Division 5);

(d)    annual leave (Division 6);

(e)    personal/carer’s leave and compassionate leave (Division 7);

(f)    community service leave (Division 8);

(g)    long service leave (Division 9);

(h)    public holidays (Division 10);

(i)    notice of termination and redundancy pay (Division 11);

(j)    Fair Work Information Statement (Division 12).

236    The NES were largely framed so as to provide for a general rule of application together with specific exclusions. On two occasions, they prescribe how they interact with State and Territory laws: see ss 66, 112.

237    As has been indicated earlier in these reasons, context will point away from a literal meaning of words if that meaning would produce improbable, impracticable, inexplicable or absurd results: A2 at [32]–[37] (per Kiefel CJ and Keane J) and [148] (Nettle and Gordon JJ agreeing); Independent Commission Against Corruption v Cunneen [2015] HCA 14; 256 CLR 1 at [46], [53]–[54]; Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2020] HCA 29; 271 CLR 495 at [3].

The mischief

238    Paragraphs [r.76]–[r.78] and [437]–[439] of the Explanatory Memorandum reveal the mischief s 113 was intended to avoid – the operation of many different State and Territory schemes when there were “current arrangements for long service leave” which were to be preserved pending the development of nationally consistent long service leave entitlements. The relevant portions of the Explanatory Memorandum are as follows.

239    Paragraphs [r.76]–[r.78] state:

Long Service Leave

r.76.    An entitlement to long service leave is currently provided by state and territory legislation, awards and agreements. The NES will preserve current arrangements for long service leave. Meanwhile, the Government is working with the states and territories to develop nationally consistent long service leave entitlements.

r.77.    Given that the overwhelming majority of employees currently have access to long service leave, the Department [of Education, Employment and Workplace Relations] expects a minimal impact from this NES.

ABS data

r.78.    The department is not aware of any data on the usage of long service leave. As noted above, there are divergent entitlements to long service leave in awards, agreements and state and territory legislation. However, an indication of the entitlement to long service leave is the number of employees with 10 years’ (sic) service or over. Table 2 displays ABS data that show an estimated 21.3 per cent of employees (2.2 million) were employed by their current employer/business for 10 years or more.

(Emphasis added.)

240    When specifically addressing what is to be contained in Division 9, the Explanatory Memorandum, at paras [436]–[439] states:

Division 9 – Long service leave

436.    This Division sets out the entitlement to long service leave for national system employees.

437.    This entitlement is a transitional entitlement, pending development of a uniform, national long service leave standard with the States and Territories.

438.    This Division preserves long service leave entitlements in pre-modernised awards (referred to as applicable award-derived long service leave terms).

439.    If an employee does not have applicable award-derived long service leave terms, any entitlement to long service leave will be derived from State or Territory long service leave legislation (subject to its modification or exclusion by certain industrial instruments).

(Emphasis added.)

241    The Explanatory Memorandum reveals a number of things. It variously acknowledges the existence of different sources of entitlement to long service leave under the State or Territory systems or as they arise under industrial instruments. It repeatedly refers to the intention to create a “national standard” and that s 113 seeks to “preserve current arrangements”. It gives no indication that it intends to bow out of the field of regulation of long service leave and leave it to the States and Territories nor that it is, in fact, creating a “standard” when it is not. Furthermore, to the extent that the Explanatory Memorandum suggests that the “impact” will be “minimal”, it seems to me that this assists the argument of Conroy’s, not the Union. Critically, it does not, in any way, herald the instantaneous effect (on the Union and State interveners’ submission) that employers could become criminally liable for non-compliance with the eight State and Territory schemes instantly with respect to employees who had previously had no entitlement to long service leave and were now so entitled.

242    Despite what the Explanatory Memorandum reveals, the Union contends that any “aspiration [as contained in the Explanatory Memorandum] does not lead to the further purpose asserted by [Conroy’s] and NAB” because it “is perfectly consistent to intend to change existing arrangements now, while holding an aspiration to change them further in the future” (emphasis in original). This submission is not persuasive for the following five reasons. First, there is nothing in the text of s 113 which supports the proposition that there was an intention to “change existing arrangements” and for them to have the marked effect that employees previously covered by Federal Awards, which excluded them from entitlements, would now switch to a new regime. Second, the “aspiration” was for a uniform system and to alleviate the current mischief, namely compliance with the very different long service leave regimes operating throughout Australia. Third, the effect of such a change would not be “minimal” (particularly given the advent of criminal liability). Fourth, it is contrary to the manner in which the other subsections in s 113 operate for there to be an instant effect without any transitional arrangements: see ss 113(2), 113(4)–(6) and 113A. Fifth, it is contrary to Full Court authority of this Court which has held that s 113 is a transitional provision designed to preserve the effect of long service leave terms and awards as they stood before the commencement of the NES: Maughan at [44] (Katzmann J, Greenwood and Besanko JJ agreeing).

The improbable and impractical results arising from the literal interpretation

243    The Tribunal’s literal construction of s 113(3)(a)(ii) would, by “side-wind”, produce improbable and impractical results. Contrary to the intended preservation of existing arrangements, there would be a cohort of employers who had no obligation to pay long service leave under a pre-modernised award at the relevant test time who, as of 1 January 2010, would have moved to a State or Territory scheme that provides for long service leave. NAB submitted that there are 5,996 individual employers listed as being subject to one of the 130 pre-modernised awards in this cohort, although it contends that the true number of employers affected “could be many tens of thousands”. At least in terms of its own organisation, NAB says that there are over 1,000 current casual and former employees who would be affected by the decision.

244    I accept, in part, the submission of the Union and WIV, that NAB’s evidence does not reveal, in precise terms, whether in fact these individual employers have been affected. It is not known whether NAB employed casuals or if they have, whether those casuals would have remained in employment for the requisite period in order to be eligible for any entitlement under the State or Territory schemes. Further, I accept that NAB has not itself put on evidence of the precise numbers of casuals who fall in this category, although this is unsurprising given that NAB is the subject of a WIV investigation for which it is currently the subject of six criminal charges. Nonetheless, the position of WIV and the State of NSW seeking to downplay the effect of the change is at odds with their respective bases for seeking leave to intervene, given that the WIV claimed that the resolution of this question will have “broad application” and referred to casual employees comprising 21.21% of employees in Victoria. The State of NSW put in evidence that there are 31 investigations regarding possible contraventions of the NSW LSL Act in the financial, universities and aged care sectors of which employers, other than NAB, have argued positions similar to that of NAB. Further, the issue of the correct construction of s 113 is not to be determined by the number of employers affected, although that may be a relevant consideration, but what the effect of the construction advanced is. In that sense, considerations of context and purpose are also important considerations. It seems improbable the legislature in enacting a transitional provision such as s 113 intended to create a mischief rather than avoid one.

245    When considering the effect of the change, in particular, it is important to have regard to the cost of moving into the State or Territory schemes and employees within the cohort with the necessary minimum service would have transitioned from having no long service leave accrued on 31 December 2009 to having accrued long service leave on the next day on 1 January 2010. There is an obvious improbable and impracticable effect – employers ordinarily have made provision on their books to ensure that when leave is accruing, there will be money to pay for it when the entitlement is realised. Accordingly, to a literal interpretation, employers would not have made such a provision because prior to 1 January 2010, there was no obligation to accrue or pay long service leave. The cost burden could be significant depending on the size of the company.

246    Related to this, it seems to me that it would be absurd for Parliament to have created a statute that caused employers to move into a State or Territory long service leave scheme where they would be criminally liable for non-compliance with a long service leave scheme without any warning and without any guidance. This demonstrates that there is no satisfactory answer to the real and foreseeable problems that Parliament would have been expected to address had the literal interpretation been its purpose.

247    In addition, it is evident that the equilibrium in a pre-modernised award that may have granted benefits to casual employees would have been upset. This is because a literal interpretation would mean that on 1 January 2010, all prior service as a casual employee was to be recognised for long service leave purposes. That is, a casual employee would gain an instant entitlement to long service leave. There is no indication in the legislation or any extrinsic material that points one way or another to this being Parliament’s intention. If Parliament had in fact intended a literal interpretation, it would be reasonable to expect there to have been some direction on this issue. There is no statement, either regulatory or public, that more people were to become entitled to long service leave after s 113 came into effect. Such a construction would run counter to s 113 being a transitional provision.

248    A literal interpretation would require employers to administer multiple long service leave schemes to employees in the same and different States, each of which have differing quantum and conditions of leave. This creates the problem where employers are instantly required to grapple with different features of eight different schemes with respect to, among others, qualifying periods of service, long service leave entitlements and pro rata payments on termination. To my mind, this goes against the very mischief the Federal system had sought to avoid from the 1960s (as evident at [224]–[225] above) and also as recognised throughout the transition of the legislation up until this point, as considered at [224]–[232] and [239]–[240] above.

249    An additional complexity arises where employees move back and forth between the pre-modernised award and the State or Territory scheme depending on their employment status. This might happen because, under the literal interpretation, a casual employee working for an affected employer might fall within the State or Territory schemes. A part time or permanent employee, however, would fall within the award scheme because that individual would have “applicable award-derived long service leave terms” and therefore fall within s 113(1). To the extent it is said that the additional complexity is overstated, NAB submits that one only needs to look to how State and Territory Acts define “ordinary pay” to understand that it is confusing and difficult.

250    In addition, there is the cost, inconvenience and administrative burden of moving the affected cohort of employees into the new uniform national scheme. Under a literal interpretation, employers and employees would be moved, first, from the pre-modernised awards, secondly, to the State and Territory scheme, and then thirdly, to the uniform national scheme. Given that such movement would have to occur over a short period of time, NAB submits that is inherently unlikely to have been intended.

251    With respect to what NAB contends are “inconvenient” or “improbable” results that arise from the Union’s construction of s 113, the Union maintains that such results are overstated, involve assumptions that are not reflected in the text or structure of the provision, and in any event, were anticipated by the legislative scheme. The Union advances three reasons to support this contention.

252    First, with respect to the argument that its construction may impose financial burdens on employers, the Union argues that the legislature must have intended for the imposition of the NES to impose additional costs on some employers. That is to say, there can be no rationale why certain employers, with respect to long service leave, should be exempted from the imposition of a standard. For the reasons set out below, at [261]–[263], I do not accept that a “standard” was in fact imposed at all and the Union’s and interveners’ repeated reliance on this proposition is misconceived.

253    Secondly, with respect to the “administrative difficulties” in dealing with different legislative systems in different jurisdictions, the Union contends that the FW Act expressly contemplated circumstances where employers from different jurisdictions would be subject to differing laws of different jurisdictions. This includes, for example, ss 27(1A), (1) and (2) of the FW Act with respect to equal opportunity or anti-discrimination, superannuation and worker’s compensation. Therefore, in its submission, given the FW Act expressly contemplates that multi-jurisdictional employers of all employees who are not entitled under s 113 to long service leave will need to deal with differing legislative regimes of different jurisdictions, the Union argues that there is no rationale as to why some employers should be exempted from that arrangement with respect to employees not entitled to long service leave under s 113. For the reasons set out below, I do not accept that this was Parliament’s intention at all with respect to long service leave. This is apparent from the way that s 113 sought to maintain the existing regime with respect to multiple kinds of industrial instruments. Similarly, it is clear from the staggered transition both on the terms of s 113 and 113A and as contained in the transitional legislation. Furthermore, s 113A and the transitional legislation recognised that where there was a new entitlement, past service (prior to the inception of the FW Act) would not apply.

254    Thirdly, with respect to complications involving converting casual employees to permanent employees (or vice versa), the Union submits that it was intended by Parliament for such conversion to give rise to different consequences and entitlements. Therefore, it says that any complications with respect to long service leave consequences arising from such a conversion can be neither lesser nor greater than many other consequences that will arise. Contrary to this submission, it seems to me that there is nothing in s 113 which accounts for this conversion and such an effect would be contrary to what the Federal system had been seeking to avoid since the 1960s as set out above.

255    I should note, for completeness, that there was a distinct failure by the Union and the State interveners to grapple at all with the fact that instant criminal liability would result for failure to grant leave to an employee who had never had any such entitlement. To suggest that this was a consequence of the operation of the State or Territory rather than the Federal system is no answer and in any event, this is not entirely the position on the Union’s case. The Union sought in its application before the Deputy President civil penalties under the FW Act by reason of the purported breaches. Accordingly, on the Union’s case, there would be potentially criminal liability not only under the State system but also liability for civil penalties at the Federal level.

The purported “clear meaning of the text”

256    The Union and State interveners contend that the meaning of the section is “clear” and while recourse may be had in determining the purpose of a provision to extrinsic materials, in addition to the text and structure of the provision, the purpose of the statute resides in its text and structure. So much may be accepted when identifying the purpose of a provision. However, I do not accept that the section is “clear” in the manner submitted by the Union for the reasons that follow.

257    As stated above, there is an attractiveness to the Union’s submission that when one reads s 113(3)(a)(i) in isolation that the provision “preserves the application of the terms of a pre-modernised award only insofar as they would have conferred an entitlement to long service leave on an employee” (emphasis added). That attractiveness is fortified by the use of the term “entitled” and how it is difficult to say entitlement includes “nil entitlement”. However, for the reasons which follow, a myopic focus on that phrase alone is erroneous and belies the mischief the provision was intended to overcome.

258    Furthermore, there appears to be a superficial attraction to the argument that s 113 contains different notions, contrasting the use of the phrase “entitled to” (in s 113(1)) and “entitled” (in s 113(3)(a)(ii) to “expressly deals with” (in s 113(2)(b)) or the absence of any reference to entitlement or long service leave itself in s 113(5), implicit from the nomenclature of the term. However, a consideration of the operation of the entirety of the scheme reveals that these arguments cannot be deployed in this way. Read in context, the phrase “would have entitled” is sufficiently broad to contemplate a position where the particular employee is, at that point ineligible for long service leave by reason of insufficient accrual of leave or because at that point he or she is ineligible because of his or her current employment status as a casual employee. It does, in terms, on a purposive reading, include a nil entitlement. Reliance on previous Full Court authority regarding leave entitlements comprising a compound entitlement to and payment for leave is misguided: WorkPac Pty Ltd v Rossato [2020] FCAFC 84; 278 FCR 179 at [227]–[231] (Bromberg J), [319]–[322], [799]–[800], [913]–[914] (White J); [1012] (Wheelahan J). This reasoning arose in a different context, where there must be like for like consideration of the entitlement and payment in “set off” circumstances. It provides no answer for how one interprets what “entitled” means in this case.

259    Contrary to the Union’s position, the section is not “clear” and is markedly different from the other standards contained in Part 2-2 of the Act. Contrary to the submission of the WIV, the enacted provisions do support a construction that concerns the preservation of an existing regime that was “transitional” pending a national scheme.

260    Contrary to the submission of the Union and the State interveners, s 113 neither intended nor created “a set of minimum standards for long service leave for all employees, using the relevant state and territory law as a de facto floor where a relevant pre-modernised award does not provide an entitlement” (emphasis added).

No standard is created

261    Contrary to the Union and State interveners’ submission, s 113 does not create a right to long service leave. Rather, it preserves the existence of “award-derived” or “agreement-derived” long service leave entitlements. The fact that s 113 was seeking to preserve an existing state of affairs is evident from its identification, recognition and preservation of the different forms of extant arrangements: see ss 113(2)–(6). There is no basis to assert, as the WIV suggests, that “[i]t was a transition from the old scheme to the new enacted eternal scheme”. No so-called “inversion of the inquiry”, as the WIV suggests, is necessary, given the same may be gleaned from a reading of the entire scheme without resort to the extrinsic material. Nonetheless, the extrinsic material, as identified at [238]–[241] above, reinforces the same. Further, the construction I have adopted is consistent with Maughan, to which I have referred to above.

The so-called standard in s 113 is anomalous to the other “Standards”

262    The same is revealed by the fact that s 113 is anomalous when compared with the rest of Part 2-2. Unlike the rest of the standards, no “standard” comprising a consistent set of terms is created. Section 113, on its terms, recognises the existence of a myriad of different arrangements which are preserved in different ways for different periods. It goes no way to establishing a “standard”.

263    The Union’s and State interveners’ purported long service leave “standard” has no application or “guarantee” with respect to a person covered by a “workplace agreement” or an “AWA” whilst it was in operation: s 113(2)(a). Furthermore, if an employee is covered by the kinds of instruments referred to in s 113(2)(b) and the agreement “expressly deals with long service leave”, that instrument regulates any entitlement (or exclusion from entitlement). The incongruity in this argument is revealed by the comparative operation of s 113(2) to s 113(1). If the Union and State interveners’ interpretation were correct, s 113(2) allows an employee to have no long service leave entitlement for a transitional period (while their agreements are in operation), and for them to instantly switch into the State or Territory system. By stark contrast, on the Union’s and State interveners’ submission, no transition applies to employees covered by Federal award terms at all.

264    Part 2-2 states expressly that the following provisions do not apply to casual employees: parental leave (s 67); annual leave (s 86); personal/carer’s leave (s 95); and notice and redundancy (s 123(1)(c)). Accordingly, it is telling that there is no reference either way in the text of s 113 nor in the extrinsic material to the position of casuals and how, in stark contrast to these other “standards” which are service-related, casuals are instantly so entitled. If it was truly the intention of Parliament to make State or Territory laws the “de facto floor” and create instantly entitlements for employees who had never had such entitlements (and for which suddenly there could be civil or criminal liability at the Federal or State level respectively), it seems to me that it would be absurd for the legislation not to make this clear nor for any of the explanatory material to refer to it.

Ambiguous on its terms

265    The meaning of “would have entitled the employee to long service leave” is ambiguous given long service leave is an accrual-based entitlement. This Court has recognised this ambiguity already in Maughan. That case concerned an appeal with respect to a decision of the Industrial Relations Court of South Australia (Cooper v Maughan Thiem Auto Sales Pty Ltd [2012] SAIRC 51), in which the industrial magistrate found Mr Cooper, a motor mechanic employed by Maughan, was entitled to pro-rata long service leave payments under the SA LSL Act because s 113 did not apply. No orders were made in relation to this finding by the industrial magistrate, however, Maughan appealed this finding (Maughan at [1]–[4]), and in a decision of the Full Federal Court, Katzmann J (with whom Greenwood and Besanko JJ agreed) allowed the appeal.

266    Justice Katzmann identified two questions in determining whether s 113(3)(a) of the FW Act applied to Mr Cooper: first, whether there was an award containing terms which would have applied to Mr Cooper immediately before Pt 2–2 of the FW Act; and secondly, whether the terms of that award would have entitled him to long service leave: Maughan at [29].

267    In the case before Katzmann J, Maughan argued that the Vehicle Industry — Repair, Services and Retail — (Long Service Leave) Award 1977 (Vehicle Industry LSL Award) applied to Mr Cooper and therefore, the SA LSL Act did not govern the claim. Its primary challenge was with respect to the industrial magistrate’s conclusion (Cooper v Maughan at [47]), being the magistrates’ finding that for there to be “applicable award-derived long service leave terms”, there must be “an actual entitlement to take long service leave or to pro-rata long service leave at [the test time]”, and that Mr Cooper had no such entitlement in this case because he had worked an insufficient number of years to accrue long service leave under the Vehicle Industry LSL Award.

268    Maughan submitted before the Full Federal Court that given the transitional nature of s 113, and the intent manifested by the section to maintain schemes for provision of long service leave as supported by the Explanatory Memorandum (at [441]), s 113(3) must continue the application of provisions that confer long service leave entitlements, both to employees already bound by such awards, and extending the effect. As such, limiting the continuity of long service leave entitlements to entitlements actually accrued, as the industrial magistrate had done, would have the “reverse effect” by disrupting expectations of employers and employees alike: Maughan at [32]–[33].

269    Noting that the language of s 113(3)(a) was “awkward” and the meaning “ambiguous”, Katzmann J determined that there were two possible interpretations of the phrase “would have entitled the employee to long service leave”, the first being that it simply refers to terms that provide for an entitlement to long service leave, and the second being that it refers to “an entitlement that would have actually accrued”: Maughan at [42]. Katzmann J preferred the first interpretation for the following reasons:

(1)    Having regard to the legislative context and purpose, it cannot have been Parliament’s intention that, from the point at which an employee had worked sufficient years to accrue long service leave under the relevant award, the award would govern the employee’s long service leave, but before that point, long service leave would be governed by the State or Territory Act. Instead, the transitional nature of s 113 makes it evident that its purpose is to “preserve the effect of long service leave terms in awards as they stood before the commencement of the [NES]”: Maughan at [44].

(2)    Although the industrial magistrate had concluded at [47] that the first interpretation makes s 113(3)(a)(ii) “a superfluous restatement of s 113(3)(a)(i)”, her Honour disagreed, given that paragraph (a)(i) says nothing about long service leave. Her Honour continued that paragraph (a)(i) concerns whether an award that was in place at the relevant time applied to the employee whereas paragraph (a)(ii) concerns whether the award includes an entitlement to long service leave. The two paragraphs must be read together: Maughan at [45].

(3)    Contrary to the industrial magistrate’s conclusion that the Vehicle Industry LSL Award must be considered against the individual employee’s circumstances on the basis that it only covered permanent full-time employees (citing cl 16), whereas casual and part-time employees in South Australia were covered by the SA LSL Act, that conclusion should be rejected, given that the Vehicle Industry LSL Award was intended to apply to all employees in the relevant industries, and Mr Cooper remained a permanent full-time employee upon being transferred to the afternoon shift: Maughan at [46]–[50].

270    Consequently, Katzmann J concluded that there was, in that case, “applicable award-derived long service leave terms” and that Mr Cooper’s entitlement to long service leave was governed by the terms of that award, and not by the terms of the SA LSL Act. Therefore, Mr Cooper was not entitled to long service leave: Maughan at [52].

271    One needs to be careful not to overstate the applicability of Maughan to this case. Clearly, the reasoning in Maughan is relevant. Her Honour’s reasoning correctly disavows Mr Cooper’s overly narrow interpretation of s 113 and rightly identifies the legislative purpose to “preserve the effect of long service leave terms in awards as they stood before the commencement of the [NES]”: Maughan at [44]. Accordingly, Conroy’s argument in this case is not inconsistent with her Honour’s reasoning, although I accept that her Honour was not called on to consider a claim of Mr Finch’s kind.

272    Contrary to the submission of the Union, nothing much can be made of the fact that s 113(3) is phrased to be with respect to the particular employee rather than generally to employees. This is so because one has to identify whether a particular employee was entitled to be covered by the Award at a particular point in time (s 113(3)(a)(i)). It necessarily follows that s 113(3)(a)(ii) would be crafted in complementary terms.

The provision codifies staggered transition

273    Subsections 113(1) and 113(3)(a)(ii) must be read within the context of the whole provision which, on each of its terms, is concerned with the maintenance of various arrangements according to a staggered scheme by which entitlements may change: see ss 113(2), 113(4) and 113A. Accordingly, the incongruity of a literal interpretation is revealed when considering these provisions and the purported instant change of circumstance for employees covered by pre-modernised award terms.

274    Section 113(6) contains a mechanism by which the Fair Work Commission (or FWA as it was named at the time of the commencement of the section), on application, could make an order that those terms of the instrument comprise “applicable agreement-derived long service leave terms” where the scheme (applying to more than one State or Territory) is “considered on an overall basis” to be “no less beneficial to the employees” than would otherwise apply in relation to employees under State and Territory laws.

275    The legislative scheme specifically recognises that there may be employees that become entitled to long service leave who have never been so entitled before, under s 113A, but makes express allowance for a mechanism by which such employees will not instantly become so entitled. Section 113A notably allows for new enterprise agreements which cover employees who under former agreements, AWAs or other prescribed instruments were not entitled to long service leave, to contain terms which do not “count” as service the prior service of the employee under the former agreement. If the Union, the WIV and the State of NSW’s argument were correct, it would go against what is evidently the “mischief” upon which s 113A has sought to avoid with employers covered by enterprise agreements and there is nothing to suggest that employers operating with respect to award-derived terms should be treated so markedly differently.

276    To the extent that the WIV makes much of the fact that the former entitlement could be displaced through enterprise bargaining and could not be now, care must be taken to consider the entirety of the transitional scheme as it made provision for. This submission is no answer to the fact that the effect of the WIV’s submission is that there was no warning or transitional scheme created by which, over time, casual employees under Federal award-derived instruments who, up until that point, had not been entitled to long service leave would suddenly have an entitlement. Future enterprise bargaining allowed for all previous service to not be counted in any future right (as per s 113A). Therefore, to suggest that “now it cannot be bargained away or displaced”, as the WIV contends, misstates the true circumstances.

277    Again, this provision reveals a legislative scheme that seeks to maintain the status quo and specifically address the “mischief” as it may relate to employees becoming entitled to long service leave who had never had such entitlements previously. The Union and State interveners provided no cogent argument as to why the legislature would have sought to address such a mischief with respect to agreements but not with respect to employees covered by pre-modernised awards.

A literal reading would go against the operation of the transitional scheme

278    A literal reading of s 113, which allows for the instant operation of State and Territory laws with respect to a class of employees who were not formally entitled to long service leave, is entirely inconsistent with the labyrinthine transitional arrangements which came into play to deal with all of the extant arrangements under the Workplace Relations Act and how they would remain under the FW Act: see the Transitional Act.

279    Contrary to the submission of the WIV and the State of NSW, a consideration of these arrangements reveal why their interpretation of s 113 is out of step with the whole of the legislative scheme at the time. Contrary to the oral submission of the WIV, the Transitional Act did not set out “in relation to all NES long service leave and other NES entitlements, how service [was] to be counted”. Rather, the Transitional Act deals with the staggering of all other NES entitlements save for long service leave: see Schedule 4, Part 3. It states the “General Rule” in item 5, that an “an employee’s service with an employer before the FW (safety net provisions) commencement day counts as service of the employee with the employer for the purpose of determining the employee’s entitlements under the [NES], other than entitlements to: (a) paid annual leave; and (b) paid personal/carer’s leave”. However, it thereafter excludes from the “General Rule” redundancy pay (Item 5(4)) if “the terms and conditions of employment that applied to the employee’s employment by the employer immediately before the FW (safety net provisions) commencement day did not provide for an entitlement to redundancy pay” (emphasis added).

280    The Schedule then thereafter specifically deals with the “accrual of entitlements” in relation to paid annual leave or paid personal/carer’s leave (Item 6), community service leave (Item 8), notice of termination (Item 9), redundancy pay (Item 10), recognised emergency management bodies (Item 12) and the Fair Work Information Statement (Item 13) but does not deal at all with long service leave. This omission is entirely consistent with Parliament’s intention that the current long service leave arrangements would remain and there would not be suddenly a new cohort of employees that would become entitled to long service leave who had not previously been so entitled. The Transitional Act, by operation of these terms, ensures a new regime whereby employees do not suddenly become entitled to an accrual-based entitlement for which they had not previously been entitled. Furthermore, consistent with the operation of ss 113(2), (4), (6) and 113A, the Transitional Act ensures a staggered transition.

There was such change of the same magnitude with respect to the other entitlements

281    The creation of the other standards within Part 2-2 did not have the effect of the kind that the Union contends s 113 had. The Union submitted there was nothing “absurd, or incongruous” about enacting a new standard because it occurred as part of “the enactment of 10 minimum, irreplaceable, standards,” in circumstances “where no such obligation had previously existed”. This submission assumes erroneously that the other nine standards created new obligations which had not previously existed.

282    There were already five basic “standards” contained in the Australian Fair Pay and Conditions Standard, prior to the inception of the FW Act, including basic rates of pay and casual loadings, maximum ordinary hours of work and minimum entitlements to annual leave, personal leave and parental leave. The previous Workplace Relations Act (as it existed prior to the inception of the FW Act) contained notice provisions and the introduction of a new entitlement to redundancy pay in the NES contained various safeguards to ensure that there was not an immediate right to “redundancy” which had not existed before. This standard did not apply to small businesses and modern awards were able to include industry specific redundancy entitlements.

283    To the extent that the WIV submits that “[a]ll of the NES in Part 2-2… impose financial burdens on employers”, it is relevant to note the limited change the NES brought about and to note specifically how the Explanatory Memorandum considered each of the proposed 10 standards and analysed the potential impact arising from them. By way of example, with respect to:

(a)    “maximum weekly hours” – “a negligible impact” (r.44, page xiv);

(b)    “parental leave” – “a more generous provision than currently provided” – no impact section provided (r.56, page xvii);

(c)    “annual leave” – “[t]he NES will not change the coverage or quantum of the annual leave entitlement” (r.57, page xvii);

(d)    “personal/carer’s leave” – “[p]ersonal/carer’s leave is also a common entitlement in federal collective agreements – 92.9 per cent of current agreements provide for paid personal leave” (r.65, page xviii);

(e)    “community service leave” – “net additional cost to employers Australia-wide is $7,793,524” (r.70, page xix);

(f)    “emergency services leave” – “given… unpaid…the Department expects a minimal impact” (r.75, page xxi);

(g)    “public holidays” – “the Department does not expect an impact [because employees already receive this entitlement]” (r.81, page xxiv); and

(h)    “notice of termination and redundancy provisions” – “the Department expects only a minor impact from extending notice of termination and redundancy provisions to currently award-free employees” (r.86, page xxiv).

284    Notably this reveals, first, contrary to the submission of the Union, there was no suite of new measures that created new entitlements which did not otherwise exist either in the former Workplace Relations Act or under industrial awards; and secondly, this brings into stark relief the anomalous effect the Union asserts as arising from its interpretation of s 113. Contrary to the submission of the WIV, the argument advanced by Conroy’s and NAB was not to render the State and Territory laws as “ineffective” where “one of 1000s of pre-reform awards applied, if those awards contained a clause that provided for [long service leave] for non-casuals”. Rather, it was to continue the extant system by which Federal awards had, for 50 years, been able to provide for long service leave (including people excluded by it) until a new system could come into operation.

285    This is particularly so when one notes the “impact” as anticipated by the Department of Education, Employment and Workplace Relations, which predicts that the impacts will be “minimal” because they preserve current arrangements: see [r.76] –[r.78] of the Explanatory Memorandum extracted above at [239].

What if anything can be made of the amendments to the interaction provisions in the FW Act as to the purpose of s 113?

286    Both the WIV and the State of NSW contend that a literal reading of s 113 is supported by a consideration of the provisions relating to the “Interaction with State and Territory Laws” (Part 1-3, Div 2) and how those provisions differ from the predecessor provisions under the Workplace Relations Act. That Act was intended to apply to the exclusion of State and Territory laws to the extent of any inconsistency (s 16(1)), albeit for a small number of matters that were explicitly “carved out” or “non-excluded”: ss 16(2)(c) and (3)(a)–(m). Awards, agreements and Commission orders were also intended to prevail over State and Territory laws: s 17. The FW Act subsequently introduced, to a significant extent, parallel provisions, notwithstanding a number of changes as outlined below.

287    Section 26 states that the FW Act is intended to apply to the exclusion of all State or Territory industrial laws so far as they would otherwise apply in relation to a national system employee or a national system employer: s 26(1). Section 27 of the FW Act (similar to its predecessor, s 16(2)–(3) of the Workplace Relations Act) sets out an expanded list of matters that are “carved out” or “non-excluded” by s 26: ss 27(1)(c) and (2)(a)–(p).

288    Two differences are seized upon by the WIV and the State of NSW. First, s 27, unlike its predecessor, states long service leave as a “non-excluded” matter under s 27(2)(g), except in relation to an employee who is entitled under Division 9 of Part 2–2 to long service leave. Secondly, similar to s 17 of the Workplace Relations Act, s 29(1) of the FW Act states that a term of a modern award or enterprise agreement prevails over a State or Territory law to the extent of any inconsistency. Unlike its predecessor, s 29 explicitly states that the operation of s 29(1) is subject to the “carve outs” or “non-excluded matters” set out in s 27: s 29(2)(b).

289    Both the WIV and the State of NSW contend that the amendments to ss 26, 27 and 29 reveal an intention that “the state provisions dominate unless there’s an entitlement under the federal instruments”.

290    More specifically, with respect to the change between ss 17 and 29, the WIV submits that the proposition that the status quo was maintained is therefore contradicted by the terms of the legislation itself. I do not accept that a consideration of ss 26 to 29 can be used to constitute a “deliberate redrawing of the boundary” between the operation of State law and Federal law for the following reasons.

291    Since the enactment of the Work Choices Act, “long service leave” had been a “non-excluded matter” (thus, the Workplace Relations Act did not prevail over State long service leave laws): s 16(3)(f) of the Workplace Relations Act. Accordingly, before the inception of the FW Act, there had already been the recognition of State laws of this kind in the Federal field.

292    However, there was the ability, by operation of s 17 of the Workplace Relations Act, for long service leave provisions in awards or agreements to prevail over State laws dealing with the same subject matter. The issue is whether, by the omission from the equivalent provision to s 17 of the Workplace Relations Act, s 29(2) of the FW Act tells against Conroy’s construction of s 113. In particular, that raises the question of whether it reveals what the WIV submits is the “deliberate redrawing” of boundaries, with the consequence being that employees who had never had access to State-based long service leave benefits became instantly entitled. It seems to me that this argument is circular because it requires one to return to the phrase in s 27(2)(g) “long service leave, except in relation to an employee who is entitled under Division 9 of Part 2-2 to long service leave”, namely s 113. If Conroy’s and NAB’s construction of s 113 is correct, the combined effect of ss 27 and 29 is the same as the predecessor provisions s 16 and 17 of the Workplace Relations Act. The provisions reveal nothing more than to point to the transition and the continued operation of the preserved terms.

Conclusion

293    For the foregoing reasons, the appeal should be allowed and orders be made that the decision of the Tribunal be set aside and declarations made that pursuant to s 113(1) of the FW Act there are applicable award-derived long service leave terms in relation to Mr Matthew Finch contained within the Award and Mr Finch’s entitlement to long service leave is nil.

Associate:

Dated:    19 April 2023