FEDERAL COURT OF AUSTRALIA

Construction Forestry Mining and Energy Union v Jeld-Wen Glass Australia Pty Ltd [2012] FCA 45

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    There be no order as to the costs of the proceeding.

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

REASONS FOR JUDGMENT

The nature and history of the proceeding

1    The central question in this proceeding concerns the meaning of the phrases “cashed out” and “cashing out” in ss 100 and 101 of the Fair Work Act 2009 (Cth) (“the Fair Work Act”). Those phrases occur in the context of provisions that are part of the National Employment Standards, which came into force on 1 January 2010. The effect of ss 100 and 101 of the Fair Work Act was to prohibit paid personal/carer’s leave being cashed out except in accordance with terms of a modern award or an enterprise agreement complying with the standards set out in s 101. Paid personal/carer’s leave covers an employee’s unavailability for work because of illness or injury, or because the employee provides care for a member of his or her family or household, who is ill or injured, or affected by an emergency.

2    On 1 January 2010, there was still in operation a statutory individual agreement governing the terms and conditions of employment of Alfred de Thierry, an employee of the respondent, Jeld-Wen Glass Australia Pty Ltd (“Jeld-Wen”). That agreement provided for Mr de Thierry to receive an extra 1.5 hours’ pay each week. This additional pay was in lieu of any entitlement to payment for any of the ten days of sick leave to which Mr de Thierry was entitled, if he took such leave because of illness. The question, therefore, is whether the payment of an additional 1.5 hours’ pay each week amounted to cashing out of Mr de Thierry’s paid personal/carer’s leave.

3    The application was made pursuant to civil penalty provisions of the Fair Work Act, as modified by provisions of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (“the Transitional Act”). The applicant, the Construction, Forestry, Mining and Energy Union (“the CFMEU”), claims the imposition of penalties for contraventions of the provisions of the Transitional Act. It also seeks an order that the penalties be paid to the CFMEU, and declaratory relief.

4    The amended application, filed on 23 August 2010, also included claims for the imposition of penalties for alleged contraventions of ss 346 and 340 of the Fair Work Act. The CFMEU discontinued these claims on 4 March 2011.

The legislation

5    Among the provisions of the Fair Work Act comprising the National Employment Standards, which came into effect on 1 January 2010, were the provisions of Pt 2–2, which include the following:

61    The National Employment Standards are minimum standards applying to employment of employees

(1)    This Part sets minimum standards that apply to the employment of employees which cannot be displaced, even if an enterprise agreement includes terms of the kind referred to in subsection 55(5).

…

96    Entitlement to paid personal/carer’s leave

Amount of leave

(1)    For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer’s leave.

Accrual of leave

(2)    An employee’s entitlement to paid personal/carer’s leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.

97    Taking paid personal/carer’s leave

An employee may take paid personal/carer’s leave if the leave is taken:

(a)    because the employee is not fit for work because of a personal illness, or personal injury, affecting the employee; or

(b)    to provide care or support to a member of the employee’s immediate family, or a member of the employee’s household, who requires care or support because of:

(i)    a personal illness, or personal injury, affecting the member; or

(ii)    an unexpected emergency affecting the member.

…

99    Payment for paid personal/carer’s leave

If, in accordance with this Subdivision, an employee takes a period of paid personal/carer’s leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.

100    Paid personal/carer’s leave must not be cashed out except in accordance with permitted cashing out terms

Paid personal/carer’s leave must not be cashed out, except in accordance with cashing out terms included in a modern award or enterprise agreement under section 101.

101    Modern awards and enterprise agreements may include terms relating to cashing out paid personal/carer’s leave

(1)    A modern award or enterprise agreement may include terms providing for the cashing out of paid personal/carer’s leave by an employee.

(2)    The terms must require that:

(a)    paid personal/carer’s leave must not be cashed out if the cashing out would result in the employee’s remaining accrued entitlement to paid personal/carer’s leave being less than 15 days; and

(b)    each cashing out of a particular amount of paid personal/carer’s leave must be by a separate agreement in writing between the employer and the employee; and

(c)    the employee must be paid at least the full amount that would have been payable to the employee had the employee taken the leave that the employee has forgone.

The terms “modern award” and “enterprise agreement” are defined in s 12 of the Fair Work Act, by reference to other provisions of the Fair Work Act. It is unnecessary for the purposes of the present case to go into detail as to what a modern award or an enterprise agreement is. It is sufficient to say that the agreement between Jeld-Wen and Mr de Thierry was neither.

6    Section 539 of the Fair Work Act provides:

(1)    A provision referred to in column 1 of an item in the table in subsection (2) is a civil remedy provision.

(2)    For each civil remedy provision, the persons referred to in column 2 of the item may, subject to section 540 and 544 and Subdivision B, apply to the courts referred to in column 3 of the item for orders in relation to a contravention or proposed contravention of the provision, including the maximum penalty referred to in column 4 of the item.

The table to which those provisions refer follows. Section 545(1) of the Fair Work Act provides relevantly that this Court may make any order it considers appropriate if satisfied that a person has contravened a civil remedy provision. Section 546(1) provides relevantly that this Court may, on application, order a person to pay a pecuniary penalty that the Court considers is appropriate if the Court is satisfied that the person has contravened a civil remedy provision. Section 546(2) sets the maximum pecuniary penalty in the case of a body corporate at five times the maximum number of penalty units referred to in the relevant item in column 4 of the table in s 539(2). Section 546(3)(b) empowers the Court to order that the pecuniary penalty be paid to a particular organisation.

7    Section 3 of the Transitional Act gives effect to each item in a schedule to the Transitional Act. Item 2 of Sch 3 to the Transitional Act provides relevantly as follows:

(1)    Each WR Act instrument (see subitem (2)) that becomes a transitional instrument (see subitems (3) and (4)) continues in existence in accordance with this Schedule from when it becomes a transitional instrument, despite the WR Act repeal.

…

(2)    Each of the following instruments is a WR Act instrument:

…

(h)    a pre-reform AWA;

…

(3)    The following WR Act instruments become transitional instruments on the WR Act repeal day:

(a)    each WR Act instrument that was in operation immediately before the WR Act repeal day;

…

(5)    Transitional instruments are classified as follows:

…

(d)    agreement-based transitional instruments of the following kinds are individual agreement-based transitional instruments:

…

(iv)    pre-reform AWAs.

There are definitions in item 2 of Sch 2 to the Transitional Act of various terms, including “WR Act”, “WR Act repeal” and “WR Act repeal day”. It is unnecessary to go to the detail of those definitions.

8    Item 2(2) of Sch 16 to the Transitional Act provides, “A person must not contravene a term of an agreement-based transitional instrument that applies to the person.” Item 16 of Sch 16 to the Transitional Act provides, so far as relevant to this case:

(1)    Part 4-1 of the FW Act applies as if:

(a)    items 2…of this Schedule were provisions of the FW Act; and

(b)    the table in subsection 539(2) included the table below (with the references in column 1 of the table below to be read as references to provisions of this Schedule (being Schedule 16 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009)); and

(c)    a reference to a fair work instrument in that Part included a reference to a transitional instrument

9    In the table that follows item 16(1) of Sch 16 to the Transitional Act, there appears an item numbered 41. In column 1 of the table, that item reads, “2(2) (in relation to a contravention of an individual agreement-based transitional instrument)”. In column 2, among the persons is “(c) an employee organisation”. In column 3, among the courts listed is “(a) the Federal Court”. The maximum penalty in column 4 is “60 penalty units”. Section 4AA(1) of the Crimes Act 1914 (Cth) provides that, in a law of the Commonwealth, unless the contrary intention appears, “penalty unit” means $110.

The facts

10    The CFMEU is an organisation of employees, registered under the provisions now found in the Fair Work (Registered Organisations) Act 2009 (Cth). Jeld-Wen is a corporation, carrying on the business of manufacturing glass products in a factory in Rowville. Since March 2006, Jeld-Wen has employed Mr de Thierry, who performs work manufacturing glass products in its factory at Rowville. In March 2006, Jeld-Wen and Mr de Thierry made an Australian Workplace Agreement (“AWA”), pursuant to s 170VF of the Workplace Relations Act 1996 (Cth) (“the WR Act”) (“the individual agreement”). It is common ground that, following amendments to the WR Act that came into operation on 27 March 2006, the individual agreement became a pre-reform AWA, pursuant to Pt 3 of Sch 7 of the WR Act. It is also common ground that the individual agreement was in operation immediately before the WR Act repeal day (1 July 2009).

11    The individual agreement contained a clause numbered 13.5 and headed “Sick leave”. So far as relevant to this case, that clause provides:

(b)    Employees are entitled [sic] 10 days of 7.6 hours each sick leave per year.

(c)    Sick leave will be paid as a weekly allowance of 1.50 hours at the base rate specified in Appendix 1. This means that in each year the employee receives the full entitlement but absences will be without pay as the payment is made each week.

12    Jeld-Wen paid Mr de Thierry the additional 1.5 hours’ pay per week on a regular basis, whenever it paid him. This practice continued after 1 January 2010. On each weekly pay day, Mr de Thierry was paid a sum representing 1.5 hours at the base rate specified in Appendix 1 of the individual agreement. At the time when it made each of those payments, Jeld-Wen did not enter into a separate agreement in writing with Mr de Thierry in respect of the additional payment. Throughout the period from 1 January 2010 to 20 July 2010, Mr de Thierry did not take any sick leave. Jeld-Wen therefore did not deny him payment for sick leave and did not reduce his entitlement to sick leave.

13    By letter dated 4 March 2010, an organiser of the CFMEU’s Victorian FFTS Branch wrote to Mike Murray, the General Manager of Jeld-Wen, as follows:

CFMEU members are employed by Jeld-Wen at the Rowville factory.

I have been told that you do not give your workers paid sick leave but pay employees a weekly allowance of 1.5 hours base pay per week in lieu of paid sick leave.

I know that employees have raised the issue with you before but that you have refused to provide sick leave.

The Union believes that Jeld-Wen’s practice of paying an allowance and not giving workers paid sick leave is not consistent with the employment standards in the Act. I believe that Jeld-Wen must provide employees with paid sick leave.

I request that you confirm in writing within 7 days that Jeld-Wen will provide employees with paid sick leave as in the Act including accrued leave entitlements.

The CFMEU reserves its rights about this issue.

14    On 9 March 2010, Mr Murray wrote to the organiser in reply to that letter, as follows:

I refer to your letter dated 4th March 2010.

The employees engaged on the Rowville site are employed under either a Collective Agreement or Australian Workplace Agreements.

Under both these forms of agreements workers are entitled to 10 days sick leave/family leave per year.

Sick Leave/Family Leave is paid via a weekly allowance of 1.50 hours. This means that in each year the employee receives the full entitlement regardless of whether they take the leave or not. At the time of the absence it is taken without pay as the payment is made on a weekly basis.

As a result the business does provide paid sick leave of 10 days with payment being in advance.

15    This proceeding was commenced on 15 July 2010. Shortly after that, Jeld-Wen distributed to its employees a document headed “IMPORTANT INFORMATION BULLETIN”, addressed to all employees from Adrian Tate, Jeld-Wen’s Senior Vice-President. The Bulletin read as follows:

As you may be aware, a new set of “National Employment Standards” (NES) became law under the Fair Work Act.

Because you are covered by a collective agreement or Australian Workplace Agreement (AWA) that was made before the Fair Work Act started, the NES apply in a slightly different way to you. These changes are complex and there is no simple answer to how they apply to you.

On 15 July 2010, a case was decided in Fair Work Australia considering the NES and pre-payment of personal leave. In that decision, the Tribunal held that the NES requires payment for taking personal leave at the time an employee uses personal leave.

That decision has for the first time made it clear that under the new law and NES the company should now align payment of personal leave with taking personal leave. The practice of pre-paying personal leave will need to stop.

As a company we must ensure that we comply with the new laws. This means that the company will:

•    credit you the amount of sick leave that you would have been entitled to under the NES from 1 January 2010.

•    stop pre-paying sick leave from the next pay period after today.

The company will not require you to pay back the pre-payments already made to you because that would not be fair. You will receive paid personal leave credits for that period as well. In effect, this means that you will receive the bonus of payment as well as the leave entitlement.

I understand some of you prefer the pre-payment of personal leave. Unfortunately, the practice cannot continue under the current law.

If you have any questions about this change, please contact Mark Grundy, Group HR Manager, JELD-WEN Australia, email markgrundy@jeld-wen.com.au.

The issues

16    There is no issue as to the standing of the CFMEU to sue in this proceeding, pursuant to para (c) in column 2 of item 41 of the table in item 16(1) of Sch 16 to the Transitional Act. Nor is there any issue as to the binding effect on Jeld-Wen of the individual agreement or its application to Mr de Thierry. Clause 13.5(b) and 13.5(c) are therefore terms of an agreement-based transitional instrument that apply to Jeld-Wen. On the face of it, Jeld-Wen is obliged by item 2(2) of Sch 16 to the Transitional Act not to contravene those terms.

17    The real question in the case is as to the impact on that obligation of the National Employment Standards, particularly ss 100 and 101 of the Fair Work Act, in light of the provision in s 61(1) of the Fair Work Act that the National Employment Standards “apply to the employment of employees” and “cannot be displaced”. This issue manifests itself in two ways. First, it is necessary to determine whether cl 13.5(c) of the individual agreement is a provision that results in paid personal/carer’s leave being “cashed out”. If so, the question arises whether there has been any contravention of the individual agreement, so as to give rise to a contravention of item 2(2) of Sch 16 to the Transitional Act.

“Cashed out” and “Cashing out”

18    The online edition of the Macquarie Dictionary defines “cash out” as meaning “to take in monetary form”. It gives as an example “to cash out one’s annual leave.” It is interesting that there is also a definition of “cash in”, which means “to obtain cash for”. The example given is “to cash in an insurance policy.” The use of prepositions that are antonyms, in conjunction with the word “cash” as a verb, gives rise to two expressions that are highly similar, if not identical, in meaning. There is nothing to indicate that the phrases “cashed out” and “cashing out”, used in ss 100 and 101 of the Fair Work Act, have anything other than their ordinary meaning, which in this case corresponds with the dictionary meaning. In other words, s 100 provides that paid personal/carer’s leave must not be taken in monetary form (as distinct from in the form of leave), otherwise than in accordance with terms included in a modern award or enterprise agreement, which comply with the standards in s 101(2) and provide for such leave to be taken in monetary form.

19    It is clear that it is the entitlement to take paid personal/carer’s leave that is capable of being cashed out, rather than the leave itself. If leave is taken, there is an obligation on the employer to pay the employee at the appropriate rate, pursuant to s 99 of the Fair Work Act (or, in this case, pursuant to cl 13.5(b) of the individual agreement). It is only untaken leave entitlements for which a monetary payment could substitute. Once this conclusion is reached, it becomes clear that the leave to which cl 13.5(b) of the individual agreement entitled Mr de Thierry was required to be paid leave on and after 1 January 2010, when the National Employment Standards came into operation. Reference to s 97(a) of the Fair Work Act makes it clear that the sick leave to which Mr de Thierry was entitled is paid personal/carer’s leave for the purposes of the National Employment Standards. If cl 13.5(b) does not of itself provide that entitlement, the entitlement arises from s 96(1) in conjunction with s 61(1) of the Fair Work Act, by setting a standard of 10 days of paid personal/carer’s leave for each year of service with the employer, which cannot be displaced.

20    To understand this is to understand that one argument put on behalf of Jeld-Wen cannot be accepted. That argument is that the prohibition on leave being cashed out for which s 100 of the Fair Work Act provides is limited to entitlements that have accrued. The prohibition is equally capable of application to entitlements yet to be accrued as it is to entitlements already accrued. The mere fact that money was paid in advance would not render the payment any less a payment in substitution for the entitlement than if the payment were made after the entitlement had accrued. In any event, cl 13.5(c) of the individual agreement did not provide for payment in advance. Clause 13.5(b) gave rise to an immediate entitlement, at the beginning of each year of service, to be taken at any time during the year in the event of the occasion for leave arising. The effect of cl 13.5(c) was to spread the payment over the entire year, so that it would be made whether or not the leave had actually been taken. (The question whether s 96(2) of the Fair Work Act has the effect of converting the entitlement to one that accrues progressively during a year of service remains to be determined on a future occasion.)

21    The effect of cl 13.5(c) of the individual agreement is to provide that paid personal/carer’s leave is cashed out. There is no suggestion of the existence of any modern award or enterprise agreement, containing terms providing for the cashing out of paid personal/carer’s leave, complying with s 101(2) of the Fair Work Act, so as to permit Jeld-Wen to cash out the leave entitlement. Because cl 13.5(c) provides for cashing out, it must be unenforceable, by virtue of s 61(1) of the Fair Work Act. If this were not so, cl 13.5(c) would operate to displace the standard for which s 100 provides. From 1 January 2010, therefore, Jeld-Wen had an obligation to provide Mr de Thierry with 10 days of paid personal/carer’s leave each year. Jeld-Wen could not substitute a monetary payment, whether in weekly parts or otherwise, for that entitlement.

The question of contravention

22    The CFMEU sought penalties for two alleged contraventions. The first was that each weekly payment that was a cashing out of Mr de Thierry’s entitlement to paid leave left him with less than 15 days of paid leave. This alleged contravention was based on the proposition that the requirement in s 101(2)(a) of the Fair Work Act formed part of the agreement-based transitional instrument that the individual agreement became after the coming into operation of the Fair Work Act. The second alleged contravention was that each instance of monetary payment in lieu of an entitlement to paid leave was not made pursuant to a separate agreement in writing between Jeld-Wen and Mr de Thierry. This allegation was based on the assumption that the requirement of s 101(2)(b) for a separate agreement in writing for each cashing out became part of the agreement-based transitional instrument that the individual agreement became on the coming into operation of the Fair Work Act.

23    These assumptions cannot be accepted. The provisions of s 101(2) of the Fair Work Act do not lay down any requirements. They are not themselves operative provisions to impose on an employer any obligation or to confer on an employee any benefit. Rather, those provisions set down standards against which the validity of terms that might be found in certain specified instruments is to be assessed. The instruments concerned are modern awards and enterprise agreements. The individual agreement is neither a modern award nor an enterprise agreement. The validity of s 13.5(c) is not required to be assessed by reference to s 101(2) of the Fair Work Act.

24    As I have said already, s 100 of the Fair Work Act, in conjunction with s 61(1), had the effect of overriding cl 13.5(c) of the individual agreement. The result was either to leave cl 13.5(b) as the source of an obligation to provide paid personal/carer’s leave, or to cause that obligation to arise directly from s 96 of the Fair Work Act. The only entitlement Mr de Thierry had was to 10 days of paid personal/carer’s leave in accordance with ss 96-99 of the Fair Work Act. He had no entitlement to receive any monetary payment in substitution for that entitlement, no entitlement to retain at least 15 days of accrued leave after any such monetary payment, and no entitlement to a separate agreement in respect of each such monetary payment. Nor did Jeld-Wen have any obligation to cash out Mr de Thierry’s entitlement to paid personal/carer’s leave, or any obligation to allow Mr de Thierry to retain at least 15 days of accrued leave after any cashing out, or any obligation to enter into a separate agreement in writing with Mr de Thierry in respect of any such cashing out. Entitlements and obligations of those kinds could only arise if Jeld-Wen were to become bound to comply with a modern award, or an enterprise agreement, that contained clauses complying with the standards in s 101(2) of the Fair Work Act. There is no suggestion that any such modern award or enterprise agreement existed.

25    As Mr de Thierry did not avail himself of any entitlement to personal/carer’s leave during the period between 1 January and 20 July 2010, no occasion arose for Jeld-Wen to make any payment to him in respect of such leave. There has therefore been no contravention by Jeld-Wen of any obligation it owed to Mr de Thierry in respect of such leave. The applications for penalties must therefore be dismissed.

Declaratory relief

26    In the amended application, the CFMEU sought declarations that Jeld-Wen has contravened the agreement-based transitional instrument between Jeld-Wen and Mr de Thierry, and thereby item 2(2) of Sch 16 to the Transitional Act, as alleged in the amended statement of claim. It also sought a declaration that, from 1 January 2010, the agreement-based transitional agreement between Jeld-Wen and Mr de Thierry included the terms set out in s 101(2) of the Fair Work Act. Declarations in these terms cannot be made. There has been no contravention of the individual agreement, because Mr de Thierry did not take any of the paid personal/carer’s leave to which he was entitled during the relevant period, so no occasion arose for making any payment to him. The terms set out in s 101(2) of the Fair Work Act are not terms of the individual agreement. They could only be terms of a modern award or an enterprise agreement, if such an award or agreement were to be made.

27    There is a question whether I should make appropriate declaratory relief, recording the conclusions I have reached about the interaction between the National Employment Standards and the individual agreement. Any such declaration would be a means of establishing the respective obligations and entitlements of the parties, so that Jeld-Wen would be enabled to comply with its obligations, and the CFMEU would be able to ascertain whether there had been such compliance, in respect of Mr deThierry.

28    But for the bulletin distributed by Jeld-Wen in July 2010, to which I have referred in [15] above, I should have been disposed to try and formulate such a declaration. That bulletin reveals that Jeld-Wen is now conscious of its obligations with respect to paid personal/carer’s leave under the National Employment Standards, and is intending to conduct itself in accordance with those obligations. In the circumstances, declaratory relief is unnecessary.

Costs

29    The proceeding is one in which the Court exercises jurisdiction under the Fair Work Act, within the meaning of s 570(1) of the Fair Work Act. Accordingly, a party may be ordered to pay costs only if the circumstances referred to in s 570(2) have occurred. In the present case, costs could only be ordered if the Court was satisfied that the CFMEU instituted the proceeding vexatiously or without reasonable cause, pursuant to s 570(2)(a). Although the CFMEU will not be granted any of the relief it sought in the proceeding, it is not possible to say that it instituted the proceeding vexatiously or without reasonable cause. At the time when the proceeding was instituted, the correspondence to which I have referred at [13]-[14] above revealed that there was a difference of view between the CFMEU and Jeld-Wen as to Jeld-Wen’s obligations under the National Employment Standards with respect to paid personal/carer’s leave. The CFMEU’s view was the correct one. Jeld-Wen did not change its view until after the proceeding commenced. The CFMEU has succeeded to the extent that it has established that cl 13.5(c) of the individual agreement was a provision relating to cashing out of paid personal/carer’s leave and was invalidated by the National Employment Standards. The failure of the CFMEU to obtain the relief it sought was partly due to its failure to establish that any actual contravention occurred and partly due to Jeld-Wen’s change of mind, which rendered declaratory relief unnecessary. In these circumstances, there can be no order as to costs in the proceeding.

Conclusion

30    In the absence of any entitlement of the CFMEU to the relief sought, the application must be dismissed. There will be no order as to the costs of the proceeding.

Associate:

Dated:    6 February 2012