FEDERAL COURT OF AUSTRALIA

INDUSTRIAL RELATIONS  - whether breach of award by underpayment of severance pay and long service leave entitlements - meaning of “weeks pay” - whether penalty should be imposed.

Australasian Meat Industry Employees’ Union v Australia Meat Holdings Pty Ltd

No QG 109 of 1997

Kiefel J

Brisbane

29 May 1998

THE COURT ORDERS THAT:

1.         The respondent pay to D McConnell the sums of $524.49 and $1318.62 being respectively, the balance sums due to him by way of severance pay and long service leave entitlements under the Australia Meat Holdings Pty Limited - Beaudesert, Beef City and Dinmore Abattoirs - Interim Award 1995on termination of his employment.

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

REASONS FOR JUDGMENT

The applicant seeks orders for payment of additional monies, by way of severance pay and long service leave, to a former employee of the respondent, Mr D McConnell, and orders for the imposition of penalties for breach of the award constituted by those underpayments.  The determinations necessary may affect a number of persons in a similar situation.

Severance Pay

Paragraph 8C(c) of the relevant award (the “Australia Meat Holdings Pty Limited - Beaudesert, Beef City and Dinmore Abattoirs - Interim Award 1995”) (“the Award”) provide for an entitlement to severance pay in the case of a regular daily employee whose employment is terminated for reasons set out in par 8C(a)(i).  It is not disputed that the provision has reference to Mr McConnell and it is accepted that his entitlement was to “8 weeks pay” as severance pay under that provision, since he had provided more than four years of continuous service.  It is the definition of “weeks pay” which is then provided in par (c) which is in dispute.  It provides:

“…      For the purposes of this subclause ‘weeks pay’ shall mean the average weekly wage received by the employee during the period actually worked within the twelve month period immediately preceding the giving of notice of termination or termination of an employee where notice is not practicable and shall include

(i)        Any amount paid for all tally completed, on any working day during the ordinary hours of work;

(ii)       any amount paid in accordance with this award in respect of work during a meal break or beyond eight hours on any day for the purpose of completing the dressing of stock or the boning and/or slicing of meat commenced within the ordinary hours or work, excluding the 50 per cent loading provided;  and

(iii)      any amount paid in respect of waiting time on an ordinary working day during ordinary hours of work;

but subject to the above shall not include overtime, penalty rates, disability allowances, shift allowances, special rates, fares and travelling time allowances, protective clothing allowances or any other extraneous payments of a like nature, provided however that in no case shall the actual rate of pay be less than the rate of pay prescribed for minimum tally per five days.

Provided that the severance payments shall not exceed the amount which the employee would have earned if employment with the employer had proceeded to the employee’s normal retirement date.”

(The emphasis is mine).

The date of termination is accepted as 15 May 1996.  An amount of $13980.81 was paid by way of wages for ordinary hours in the twelve months preceding that date.  The amount paid by way of severance payment to Mr McConnell by the respondent was $3424.80 and was arrived at by dividing the total sum paid, exclusive of the matters specifically listed as the proviso to subparagraph (iii), by the number of weeks in which work was available and had been offered to Mr McConnell, a total of thirty three weeks.  The figure arrived at however took the weekly average pay below the minimum tally rate for a boner under the Award and was therefore adjusted to the minimum rate to which the 8 weeks entitlement was then applied.  At the hearing the respondent abandoned this argument and sought to rely, instead, upon the number of weeks, in the twelve month period in question, in which an amount by way of pay had been received by Mr McConnell, as providing the relevant “period” for the purpose of par 8C(c).  This reduced the number of weeks to be applied to the total sum paid (excluding additional payments and allowances) to twenty nine and results in a figure of $3856.77 which, however, still exceeds the sum actually paid.  The respondent further submitted that there might be a further adjustment necessary, namely a deduction from the ordinary rates of pay of the ten per cent which the Award described as a loading.

The applicant submitted that the relevant “period” to be identified to enable an average to be calculated is to be taken as the days actually worked by an employee, which would be added together and then reduced to a number of 5 day weeks.  Such an approach would regard as irrelevant the amount actually paid to and received by the employee in pay weeks throughout the twelve month period and would reduce the number of weeks because there would be days within weeks where pay had been received which had not been worked for a number of reasons including the unavailability of work;  sick leave or annual leave;  days taken in strike action and days when the offer of work was not taken up.  The twelve month period here also includes a trial which involved four day weeks with longer working days, rather than five days.  On the applicant’s argument the result would be 24.4 weeks worked, giving an entitlement of $4583.84.

The essential difference in the approaches is that the respondent’s has regard to weekly earnings in the period and the applicant’s to the number of days worked to derive a weekly rate arithmetically.  Each argument was able to point to the possibility of inflating or deflating the average weekly wage, but the resolution to the question does not lie there.

The applicant’s submissions rested largely upon the special features of this Award, and the Award which it replicates.  The employment of workers subject to it is regarded as terminated at the end of each day or shift, although their engagement continues and they are employed again when work is next offered and taken up (see Clause 4).  It is in that sense concerned with work from day to day, although it may be observed that rates of pay are calculated on the basis of a five day week and employees are in fact paid on that basis.

In ascertaining the intention of par 8C(c) of the Award little assistance is gleaned from the word “period” in the phrase “during the periods actually worked”.  The Award provision already refers to one period, of 12 months, as that extent of time in which the average weekly wage is to be found.  That is of course essentially what it is concerned with.  The other “period” referred to as taking place within the 12 month period is that “actually worked”.  In ordinary language a period is a course of or extent of time that has a beginning and an end and is continuous as does the 12 month period referred to in the paragraph.  In the case of work, under this Award, the period “actually worked” is unlikely to be unbroken, whichever view one takes of what “the period” refers to.

In my view, the only meaning which can be given to the words “during the period actually worked”  consistent with the apparent intention of the provision is one which regards the “periods” as those times when weekly pay is received.  This would be so regardless of the days worked or whether pay was received whilst an entitlement, such as that to leave, was being exercised.  It would leave out of the calculation weeks where no pay was received.  The intent of the provision is to provide the employee made redundant with compensatory sums based upon what would have been received on average as weekly pay, excluding additional payments.  The period of 12 months was chosen no doubt because it was thought to give a likely fair picture of what such a sum would have been.  The view I have taken of the matter allows the meaning initially given to “week’s pay”, namely “the average weekly wage” to control the words which follow.  The construction contended for by the applicant does not address that requirement.

I turn then to the respondent’s submission as to the deduction of ordinary rates from the calculation.  In my view it must be rejected.

In Clause 4 (“Contract of Employment”) it is explained (pars 4(d) and (e)) that “the ordinary rates per week prescribed by this part have been fixed on the basis that they include a loading of 10%”.  The respondent’s argument seeks to equate the loading in the ordinary rate to the rates and allowances referred to in the proviso to paragraph (c) of Clause 8C and as “extraneous payment of a like nature”.

Clause 6 “Wage Rates” refers to the ordinary rates of pay under the Award for workers other than time workers, by reference to a “minimum tally rate per five days” (and by reference to the class of work).  If, as appears to be the case, the ordinary rate has built into it a factor of ten per cent, it is nevertheless the rate which forms the usual basis of payment to workers.  It cannot in my view then be said that part of it is “extra” as paragraph (c) contemplates, whatever the reason for the loading.   Clause 8C(c) is concerned, as discussed above, with the average week’s pay received, by reference to ordinary rates of pay.

There was a underpayment to Mr McConnell, with respect to severance pay, of $431.97.  The view originally taken as to the meaning of Clause 8C was arguable.  It has not been shown that it was not a view the respondent held.  Its later submissions proved correct.  In these circumstances I do not consider a penalty to be appropriate.  The payment to Mr McConnell ought also include interest at the rate fixed by the rule of Court, 10.5% for a period of 2.04 years, a sum of $92.52 (total $524.49)

Long Service Leave

Par 40(a) of the Award provides that all employees covered by it shall be subject to the provisions of the Federal Meat Industry (Long Service Leave) Award 1996 as varied.  Mr McConnell was paid $8686.17 in lieu of long service leave on termination, on the same basis as referred to above with respect to the amount of severance pay, that is to say, it was calculated by reference to weeks when work was offered, not when pay was necessarily received.

Clause 7 of the Long Service Leave Award provides for payment with respect to the period of leave to which the worker was entitled by a rate of payment by the “actual rate of pay of the employee”.  It went on:

“For the purpose of this sub-clause, the average weekly wage shall be the average of the amounts received by the employee during the period actually worked under the terms of his employment and shall include:

(a)       …

(b)       …

(c)        …

but subject to the above, shall not include overtime, penalty rates, disability allowances, shift allowances, special rates, fares and travelling time allowances, protective clothing allowances, or any other extraneous payments of a like nature;  provided however, that in no case shall the actual rate of pay be less than the rate of pay prescribed for minimum tally per five days.”

The words of this provision are, in relevant respects, the same as par 8C(c) discussed above and the parties accepted that the construction of it would also govern this provision.

On the same basis, namely that the calculation take account of all weeks when pay was received, the underpayment was $1086.00 to which interest of $232.62 needs be added (total $1318.62).  The parties have agreed this calculation.

Associate:

Dated:              29 May 1998