FEDERAL COURT OF AUSTRALIA

James Cook University v National Tertiary Education Union [2014] FCA 1213

THE COURT ORDERS THAT:

1.    The application for declaratory relief be dismissed.

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

REASONS FOR JUDGMENT

1    James Cook University (University) is at odds with the National Tertiary Education Union (Union) in relation to the true construction and application of the James Cook University Enterprise Agreement 2013 (the Agreement), particularly the redundancy payment clause, clause 52.6 in that Agreement. Thus, at the heart of the differences between the parties lies a question of law. The parties have endeavoured to resolve their differences by conciliation and other proceedings before the Fair Work Commission. Suffice it to say, it has not proved possible to resolve those differences.

2    The differences arise against the background of a managerial value judgment by the University to have the various cleaning service tasks within the University undertaken by external contractors, rather than by an employed cleaning staff. That, in turn, has generated a large number of redundancies within the University’s employed cleaning workforce. The redundancy clause is not confined in its application to employed cleaning staff. Rather, it extends generally across all layers in the hierarchy of the University’s employed workforce who are governed by the Agreement. That is a very large number of staff indeed.

3    Such managerial value judgments are, of course, part of the prerogative of an employer. That prerogative is not an unqualified one, in the sense that, as with many modern industrial agreements and awards, there is provision in the Agreement for consultation before the exercise of any such managerial value judgment. There is no contest in this case that the University engaged in the consultation envisaged by the Agreement prior to it making the value judgment. Indeed, one must necessarily infer that the value judgment was informed by that consultation process. Having made that value judgment though, there is a price to be paid for it under the Agreement. And that price is the payment, according to law, to those made redundant of the entitlements for which clause 52.6 provides.

4    Further detail as to the nature of the disagreement between the parties is given by a letter of 18 June 2014 directed to Mr Michael McNally, the industrial officer of the Union’s Queensland Division, by Ms Tricia Brand, the University’s Deputy Vice Chancellor, Services and Resources. The Deputy Vice Chancellor, very helpfully, encapsulates within that most considered letter the nature of the dispute and the competing contentions of the University, on the one hand, and the Union, on the other, as to the meaning of clause 52 in the Agreement and its application in given circumstances.

5    One particular given circumstance, and that addressed in some detail in the Deputy Vice Chancellor’s letter, is the application of clause 52.6 to the particular circumstances of one of the University’s employed cleaners made redundant by the value judgment to which I have referred, namely Ms Marie Zilke. In her letter, the Deputy Vice Chancellor records, with respect, accurately the contention made by the Union:

It appears that you have conflated or confused the reference to “service” in clause 52.6.3 with the references to “service” in section B in clause 52.6.1. Clause 52.6.3 works out equivalent service for the purpose of determining the final salary multiplier and has nothing to do with continuous service. Similarly, a staff member who has been working part time at the University for 10 years continuously has 10 years of continuous service, regardless of their fraction of employment.

6    The Deputy Vice Chancellor also records that the University does not agree with the Union’s interpretation of clause 52.6 in the Agreement stating:

It is not clear to us on what basis the NTEU suggests that clause 52.6 is limited to the interpretation it proposes, or why the NTEU suggests that the clause requires linkage between 52.6.2 and 52.6.3 and does not have regard to the express inclusion of the “equivalent years of service”.

7    In developing the University’s preferred construction of clause 52.6, the Deputy Vice Chancellor makes particular reference to clause 52.6.3, especially its opening phrase:

For staff who have worked a mix of full-time and part-time during their period of service, calculations will be based on the equivalent years of service …

8    She then opines:

Clause 52.6.3 applies to staff who have worked a mixture of full time and part time during their period of service at the University. This clause makes it clear that for staff who fall into this category then in calculating their continuous service regard will be had to their ‘equivalent years of service’. As fractional staff do not work (on hours) a complete year, it is appropriate to look at their equivalent years of service in determining their service for the purpose of the redundancy calculations.

This means the University will calculate how many years they have been employed by the University by reference to time actually worked, rather than the length of time that has elapsed. This means for example, if a person has worked:

•    5 years @ 50% fraction – 1 Jan 04 to 31 Dec 09; and

•    5 years @100% - 1 Jan 10 to 31 Dec 14

Their equivalent service for the purpose of Part B is 7.5 years and they would be entitled to 3 weeks for every year, which equates to 22.5 weeks paid at their current rate of pay (which is 100% or 50% or other fraction, whichever is applicable to the employee).

9    The essence of the Union’s objection to that particular approach to the construction of clause 52.6, especially clause 52.6.3, is that it yields what one might term a fraction of a fraction outcome for a particular employee. This, it is said, is twice to diminish the amount of a redundancy payment in respect of someone who has worked part time, or a mix of part time and full time, whereas the true effect of the clause, so the Union contends, is that there should be but one diminution reflective of that less than full time employment status over a period.

10    Useful and disputed as between the parties further examples of the contended operation by the University of clause 52.6 are to be found in Exhibit 3.

11    Understandably against the background of a subsisting industrial dispute arising from a difference as to the true construction of an industrial agreement, the University determined that the best course for the resolution of the difference was to seek declaratory relief from this Court, directed to a judicial determination of the true construction of clause 52.6. The preceding narrative should serve to indicate that this is no academic or hypothetical question.

12    In Edwards v Santos Limited (2011) 242 CLR 421 (Edwards v Santos), the High Court emphasised the utility and place of a declaratory remedy in the exercise of federal jurisdiction in resolving controversies concerning a particular issue of law which had arisen between persons. This case is but an industrial example of the type of application for a declaratory remedy to which the High Court referred in Edwards v Santos, which can be apt to quell controversies in respect of issues of law.

13    That the Court has jurisdiction to entertain the proceeding is not a subject which was controversial between the parties. Nor, having regard to the conferral of jurisdiction by s 562 of the Fair Work Act 2009 (Cth) (Fair Work Act) in respect of any matter arising under that Act and what was said in Edwards v Santos, could there be any question as to a want of jurisdiction. A difference between persons as to the true construction of an agreement approved under the Fair Work Act is a matter arising under that Act.

14    Given that there is jurisdiction the Court, is able fully to exercise all of the powers vested in it in respect of a matter in which it has jurisdiction. Section 564 of the Fair Work Act serves to confirm that those powers include the general powers possessed by the Court in respect of any matter in which it has jurisdiction, as found in ss 21, 22 and 23 of the Federal Court of Australia Act 1976 (Cth), and those powers undoubtedly include a power to grant declaratory relief. The remedy is, of course, a discretionary one but it would be an unusual case, indeed, in respect of a subsisting industrial dispute, where great utility can be seen in the enunciation of the true meaning of an industrial instrument governing the parties in dispute, that as a matter of discretion, declaratory relief would be refused.

15    Against that background, it is now necessary to set out the terms of the redundancy payment clause:

52.6    Redundancy Payment

52.6.1    A redundancy payment will comprise (A) + (B) + (C) + (D), plus the remaining balance of notice period (if any), as prescribed in Table 1 of this Clause 52.6.1, provided that (A), + (B) will not exceed 70 weeks in total.

52.6.2    All payments will be calculated on the staff member’s weekly base rate of pay for his or her ordinary hours of work except where staff are regularly paid shift or penalty rates, where the salary used for calculation purposes will be based on the average of the staff member’s fortnightly salary calculated over the preceding twelve months (including superannuable shift and penalty payments), at the date of ceasing employment.

52.6.3    For staff who have worked a mix of full-time and part-time during their period of service, calculations will be based on the equivalent years of service at their employment fraction on the date of ceasing employment. For staff who have held casual appointments those will not be included in the calculation.

[emphasis in original]

16    There was no dispute between the parties as to the principles which ought to be applied by the Court in the construction of an industrial instrument such as this Agreement. A helpful starting point as to those principles is the observation, no less apt in this case than it was when made by Gleeson CJ and McHugh J in Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [2], that:

The resolution of the issue turns upon the language of the particular agreement, understood in the light of its industrial context and purpose, and the nature of the particular reorganisation.

Later, at [13] of their joint judgment, their Honours highlighted a need to measure particular constructions, if there be competing constructions, by whether the result was curious (both industrially and commercially).

17    A consideration of the industrial context and purpose of clause 52.6 necessarily commences with the recollection that compensation for redundancies in a workforce is a relatively new subject for provision by award or agreement. The origins of such provision may be traced to a decision of a Full Bench of what was then known as the Australian Conciliation and Arbitration Commission in the Termination, Change and Redundancy Case [1984] 8 IR 34 (Termination, Change and Redundancy Case). What is apparent from the decision of the Full Bench in that case is that the Commission was persuaded of the industrial need in modern times for provision beyond a particular notice period where termination of employment was occasioned by redundancy. Particularly persuasive was the appreciation by the Full Bench that at page 73:

… it would be misleading to assume that success in obtaining a new job indicated that an individual made redundant had managed to recovery the security built up over years of service in the redundant job and we are prepared to grant severance pay, in addition to the measures we have awarded to assist employees to find alternative employment.

18    At page 76, the Full Bench recorded being persuaded to decide that an employee whose employment is terminated due to redundancy should be entitled to severance payments in addition to the extended period of termination based on length of service, with particular prescriptions then of weekly pay made in respect of particular lengths of service, weekly pay meaning, in that case, the ordinary time rate of pay for the employee concerned.

19    Since the Termination, Change and Redundancy Case, there has been further refinement of thinking on the part of the Commission and those negotiating industrial agreements of one sort or another and also, for that matter, on the part of the Parliament, such that a component in many redundancy compensation clauses, apart from length of service, is also compensation relative to age.

20    Each of these features is present in clause 52.6. Component A is an age-based compensatory amount and component B is one in respect of completed years of continuous service.

21    It is component B that has occasioned the particular difficulties between the parties.

22    An industrial agreement is a particular species of contract. Recalling that is useful because it highlights that evidence which would not be admissible in construing another type of contract should not be admitted or relied upon in construing an industrial agreement. Just such a point was made by North J in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v Qantas Airways Ltd (2001) 106 IR 307, particularly at [56].

23    By reference to the approach stated by Mason J (as his Honour then was), with the agreement of Stephen, Aickin and Wilson JJ, in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352, North J emphasised that, in construing an industrial agreement, one was no more than generally entitled to take into account evidence which reflected a belief or actual intention of an agent of a party in seeking to resolve an ambiguity in an agreement. His Honour further emphasised that subsequent conduct is generally inadmissible.

24    The recollection of that particular authority informed my upholding at the outset of proceedings an objection by the University to a good deal of evidence in the Union’s affidavit material.

25    A case which is frequently cited for the assistance it provides in relation to the construction of industrial instruments is Kucks v CSR Ltd (1996) 66 IR 182 at 184, where Justice Madgwick stated:

It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. …

But the task remains one of interpreting a document produced by another or others. A court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award. Deciding what an existing award means is a process quite different from deciding, as an arbitral body does, what might fairly be put into an award. So, for example, ordinary or well-understood words are in general to be accorded their ordinary or usual meaning.

26    More recently, in Australian Nursing and Midwifery Federation v Eastern Health [2013] FCAFC 137 at [11], a Full Court of this Court summarised the principles relevant to the interpretation of industrial instruments in this way:

•    construction begins with a consideration of the ordinary meaning of the words used;

•    regard should be had to the industrial purpose sought to be achieved; and

•    to determine context and general purpose, it is appropriate to have regard to the history of the relevant provision by examining its antecedents.

27    Turning to the latter of these considerations, regard to the history of provision anterior to the Agreement in respect to the University’s employed staff so far as redundancy is concerned takes one back both to earlier agreements and overarching award provision. Between 1997 and 1999 the University paid redundancy payments based on an employee staff member’s length of service only. That type of provision reflects the historic rationale for redundancy payments, as highlighted in the termination change and redundancy case.

28    That earlier provision did not address apportionment of benefits where a staff member had worked a combination of fulltime and part-time work during their period of employed service with the University. In 2000, one finds for the first time an age-based component, as well as length of service, intruding into the calculation of a redundancy payment for a member of the University’s employed staff. That was in an enterprise agreement made in 2000. The enterprise agreement included a provision in respect of redundancy payment which closely resembles that found in clause 52.6 but which includes, underneath the text of the clause, an example in these terms:

For example: Where a staff member has served for ten years during which time the staff member was employed for eight years full-time and finally two years at 50 %part time, the actual service equivalent would be 18 years. Therefore the staff members calculation would be based on 18 years of service at the actual salary on the date of ceasing work. Where a staff member had served ten years at 40% part-time the calculation would be based on 10 years service at the actual salary on the date of ceasing work.

29    That example, as part of a clause otherwise materially similar to the present clause 52.6, was replicated in the 2004 enterprise agreement applicable to the University’s employed staff. A successor industrial agreement, the 2006 enterprise agreement, contained a clause of similar wording but notably deleted the example. The current clause 52.6 also contains no example. Nonetheless, the construction evident in the earlier examples informed the Union’s position as to what was the true construction of the present clause 52.6.

30    I have already referred to the University’s competing construction of the clause. A further way of summarizing the University’s position is to set out the text of the declaratory relief sought by the University:

1.    A declaration pursuant to section 21 of the Federal Court of Australia Act 1975 (Cth) (sic) that under clause 52.6 of the James Cook University Enterprise Agreement 2013:

a.    the weekly rates at which a redundancy payment is calculated under clause 52.6.2 are as follows:

i.    the weekly base rate of page for ordinary hours of work at termination; or

ii.    for staff who at the time of termination are regularly paid shift rates or penalty rates, their fortnightly salary averaged over a period of 12 months divided by two.

b.    in calculating continuous service for Part B of clause 52.6.1, where the staff member has worked a mixture of full time and part time, or part time only, during their period of service, the calculations must be based on clause 52.6.3.

2.    A declaration that the correct calculation for determining Part B of the redundancy payment in clause 52.6.1 where the staff member has worked a mixture of full time and part time, or part time only, is as follows:

Number of full time equivalent years of continuous service applied to weeks in Part B of table 1 x salary at date of cessation calculated as per 52.6.2 = Part B.

In the alternative to paragraph 2:

3.    A declaration that the correct calculation for determining Part B of the redundancy payment in clause 52.6.1 where the staff member has worked a mixture of full time and part time, or part time only, is as follows:

Weeks calculated in accordance with Part B of Table 1 based on years of completed continuous service x employment fraction over employment x salary at date of cessation calculated as per clause 52.6.2 = Part B.

31    Clause 52.6 must be read not only as a whole, but also in the context of the Agreement as a whole, and with the recollection of its purpose. Reading the clause piece meal is apt to mislead as to its meaning when read as a whole.

32    What do I mean by that? Clause 52.6.2 makes no reference at all to whether a person is in full time or part time employment. The term “staff members’ weekly base rate of pay” in respect of “his or her ordinary hours of work” is used. Reading clause 52.6.2 in isolation and without the recollection that it is part of a redundancy clause that applies both to full time and part time employees could lead one to the view that the weekly base rate of pay was that which was applicable a full week’s work at ordinary hours.

33    There is no definition in the Agreement of base rate of pay. Instead, one finds in clause 27.2 the statement that the salary rates for University staff are as detailed in schedule 1. Schedule 1 does not differentiate in the various salary rates as between full time and part time employment. Clause 27.1 makes provision for annualized percentage increases in salary over the life of the Agreement.

34    Part time employment is one of the modes of employment envisaged by clause 18 of the Agreement. Thus, clause 18.2.2 provides that part time employment means:

… hours of work that are less than a full time staff member, for whom entitlements are paid on a pro-rata basis to the hours worked.

Full time employment is defined by clause 18.2.1 to mean:

… hours of work that are not less than the normal weekly ordinary hours of 36.25 hours per week.

35    The pooling then for which clause 52.6.2 provides is directed to both full time and part time staff and that part-time staff are to be paid a pro-rata of that applicable to full time staff.

36    It becomes tolerably clear, in my view, that base rate of pay will be the rate of pay applicable either to a full time staff member on a weekly basis, or that pro-rata amount of the full time weekly base rate for ordinary hours which is paid to a part time staff member. In other words, base rate of pay is not to be equated with the full time, ordinary hours of work, ordinary pay for all persons governed by clause 52.6.2.

37    The amount of the weekly base rate of pay will depend on whether the employee concerned is either a full time or a part time staff member. There is a component for which clause 52.6.2 also provides in circumstances where staff are regularly paid shift or penalty rates. This particular component will also vary according to whether the employee is full time or part time, and indeed, whether they work such shift or penalty rate work regularly.

38    What that means in the context of the clause as a whole is that a pro-rata or fractionalising effect occurs by virtue of the ordinary meaning and application of clause 52.6.2 to a particular employee’s circumstances.

39    Recalling this is of assistance when one comes to construe clause 52.6.3 in the context of the clause, and in turn, the Agreement as a whole. That clause is directed to those who have worked a mix of full time and part time work during their period of service. The clause has nothing to say in respect of those who, for example, have worked exclusively full time work, or as the case may be, exclusively part time work. Those who have exclusively worked part time work will be subjected to a fractionalising effect by virtue of the ordinary meaning to which I have referred of clause 52.6.2. The role played by clause 52.6.3 is as is suggested by the use of the term “equivalent years of service”, which is to try and bring equivalence to the position of those who have worked a combination of fulltime and part-time work with those who have worked exclusively either fulltime or part-time. By “equivalence” I mean a position which is industrially equitable such that they will receive neither more nor less than an equivalence, having regard to their particular combination of service.

40    When one recalls that clause 52.6.3 is directed to achieving such equivalence, what at first blush seems a rather odd construction exemplified by the example gives one, at the very least, further pause for thought as to whether it is, indeed, reflective of a true construction of clause 52.6.3. For a person who works 50 per cent part-time and who has nine years of continuous service, that person would have to work 18 years in order to have the equivalent of nine years of fulltime service. That is so even though they would have been in continuous employment for nine years, but that nine years of continuous employment would, in terms of the reward for that service, be at but a 50 per cent rate pro rata amount of pay. To achieve the same amount of pay as someone working fulltime over that length of continuous service, the employee would have to work 18 years part-time. It is here that the recollection of the original purpose, also still evident in clause 52.6, of a redundancy payment is of assistance. What I mean by that is that, from the Termination, Change and Redundancy Case passages to which I have referred, an original purpose and a still evident purpose of this redundancy clause is to compensate in respect of the loss of a job in which one has served over a particular length of time. The way in which industrial equity is done as between someone whose job has entailed fulltime and part-time service with those whose job has entailed either exclusively fulltime or part-time service is to extrapolate from the particular percentage of their part-time service how long, in terms of a number of years it would take, for that employee to work the equivalent fulltime.

41    The example, in my view, exactly sets out how the clause operates. I should emphasise that the construction that I prefer coincides with, rather than is dictated by, that example. A process of reasoning just by reference to the language and purpose of the clause leads to a result which happens to be coincident with the example. In other words, once one appreciates that a fractionalising is already occurring by virtue of the operation of clause 52.6.2, further to fractionalise by reference to the meaning of clause 56.6.3 promoted by the University would penalise and diminish and “make no industrial or commercial sense”. All of the fractionalising work is undertaken at clause 52.6.2, with clause 52.6.3 being directed to achieving equivalence where fractionalising has already occurred in respect of those who have worked a combination of fulltime and part-time employment.

42    It follows from the foregoing that whilst, for the reasons given, there is jurisdiction to entertain the application and, further, there would be utility in the making of a declaration at the behest of the University, the particular construction which, in my view, is preferable is such that the declarations sought by the University should not be granted.

43    Everything which might truly be said in favour of the University’s suggested construction was put on its behalf by Mr Murdoch of Counsel. It is just that, upon construing the clause as a whole, that particular construction is one which, in my view, led to an odd result. Instead, that promoted by the Union, whose submissions helpfully were made by two of its officers, is the one which I prefer. The Union, I should add, did not make a cross-application for declaratory relief. Nonetheless, it should be apparent from these reasons as to how clause 52.6 must be construed. That being so, I should hope and expect that the existing controversy will now be quelled. It should now be possible, given the Court’s construction of the clause, for the parties to apply that to particular workers’ facts of the kind posited by way of example in Exhibit 3.

44    The role played by the example is, perhaps, moot. It does not have a current presence. All it has done for me is to provoke pause for thought in terms of the meaning of the language of clause 52, having regard to its purpose. I have made nothing more of the example than that.

45    It follows from the above that the application for declaratory relief should be dismissed.

Associate:

Dated:    12 November 2014