FEDERAL COURT OF AUSTRALIA

Duck v Airservices Australia (No 2) [2019] FCA 1148

ORDERS

THE COURT ORDERS THAT:

1.    The answer to common question 1 in the further amended originating application, ordered on 24 August 2018 to be heard as a separate question under r 30.01 of the Federal Court Rules 2011 (Cth), and reproduced below, be “Yes”:

Common question 1/separate question

Did/does:

(1)    cl. 1.5.3 of the 2009 Agreement [Airservices Australia Collective Agreement 2009-2013]; or

(2)    cl. 1.4.3 of the 2013 Agreement [Airservices Australia Enterprise Agreement 2013-2017];

as the case may be, operate to the effect that the applicant and each group member was/is not covered by that agreement.

2.    The further amended originating application be dismissed.

3.    The respondent make any application for costs within 14 days, by way of an email to the associate to Justice Bromwich, together with proposed procedural orders.

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

REASONS FOR JUDGMENT

BROMWICH J:

Introduction

1    This is an adjudication of a separate question in an employment law class action concerning the application or otherwise of certain enterprise agreements to the benefits and entitlements of certain public sector employees with “individual” contracts of employment in the field of civil aviation services.

2    From 1 July 1988 until 5 July 1995, both civil aviation services and civil aviation safety in Australia were the responsibility of the Civil Aviation Authority (CAA), pursuant to the Civil Aviation Act 1988 (Cth). Thereafter, those two functions were split, with the services side being made the responsibility of the respondent, Airservices Australia, pursuant to the Air Services Act 1995 (Cth).

3    Ms Catherine Duck is the lead applicant in a class action against Airservices under Pt IVA of the Federal Court of Australia Act 1976 (Cth). The class action seeks to recover the difference between the benefits Ms Duck and other members of the group obtained under contracts of employment with Airservices and what they contend they were entitled to under one or both of the following two agreements:

(1)    the Airservices Australia Collective Agreement 2009-2013 (2009 Agreement), commencing 21 August 2009;

(2)    the Airservices Australia Enterprise Agreement 2013-2017 (2013 Agreement), commencing 4 September 2013,

together the Agreements.

4    Ms Duck first commenced work at Airservices on 5 January 2009. It is common ground that her employment upon commencement was covered by the Airservices Australia Certified Agreement 2005-2008 (2005 Agreement) and that she was covered by the 2009 Agreement from its commencement on 21 August 2009 up to 14 March 2010, being the day before she signed her first contract of employment in a management position on 15 March 2010. Thereafter the parties disagree as to whether the 2009 Agreement continued to apply to her, and as to whether the 2013 Agreement later applied to her.

5    Airservices contends that from 15 March 2010, Ms Duck was no longer covered by the 2009 Agreement, nor by the later 2013 Agreement, because of a specific term in each Agreement to that effect. Ms Duck contends that the term that Airservices relies upon did not have the effect of depriving her of coverage by either Agreement. Instead, she contends that she continued to be covered by the 2009 Agreement from 15 March 2010, including under a subsequent 13 March 2013 contract of employment in another management position. She similarly contends that she was covered by the 2013 Agreement when it commenced on 4 September 2013.

6    The starkest difference between the benefits that Ms Duck was entitled to under her contract of employment, compared to the Agreements (the 2013 Agreement being in force when she took a voluntary redundancy in 2016), was that cl 13.5(vi) of the contract capped redundancy payments at six months (26 weeks) salary, whereas the cap under the Agreements was 75 weeks (cl 7.6.6(a)(ii) of both Agreements).

7    Further, Ms Duck’s contract of employment did not count her prior service as an employee of the Australian Federal Police (AFP), whereas the Agreements did count that service. This difference directly affected the quantum of Ms Duck’ redundancy payment.

8    Replicated by like claims by all the group members, a significant amount of money is at stake.

9    The Court has before it affidavits from Ms Duck and from three witnesses for Airservices, none of whom were required for cross-examination. A total of five affidavits from those four witnesses were read, subject to certain objections to relevance which were mostly rejected. Those affidavits annexed a volume of material, supplemented by tender bundles from both sides. Some of that documentary material was not tendered.

10    Over 3,000 pages of material is before the Court, including detailed written submissions and transcript of oral submissions over two days. It is necessary to traverse a relatively small, but dense, selection of that material. All of the material in evidence is contained in a digital court book that was edited and re-filed after the hearing to contain only pleadings, written submissions and the admitted evidence (affidavits as read, annexures and tendered documents).

The separate question

11    In order for the class action to be able to succeed, one or both of the Agreements must be found to apply to each of the group members. In particular, the 2013 Agreement had to apply to Ms Duck for her to be entitled to the more generous redundancy provisions in that agreement. Airservices dispute either agreement applied to Ms Duck, or to any of the other group members, at the relevant times. If that contention is correct, the class action must fail, and the costs of litigating the balance of the case will be wasted on both sides. For that reason, the parties have agreed, and the Court has ordered, that this preliminary dispute be determined by way of the following separate question, drawn from the further amended originating application as follows:

Did/does:

(1)    cl. 1.5.3 of the 2009 Agreement; or

(2)    cl. 1.4.3 of the 2013 Agreement;

as the case may be, operate to the effect that the applicant and each group member was/is not covered by that agreement.

12    The key relevant point to note from cll 1.5.3 and 1.4.3, the full text of which is at [13] below, is that employees of Airservices who were “employed under an individual contract of employment” were not bound by the Agreements. The question that arises is whether Ms Duck, and by parity of reasoning the remaining group members, were so employed by reason of the contracts they had with Airservices. Ms Duck contends that they were not, and that the answer to the separate question should therefore be “no”. Airservices contends that Ms Duck and all of the other group members were so employed and that the answer to the separate question should be “yes”. If the answer is “no”, at the trial to follow Airservices will contend that Ms Duck was not in any event covered by either Agreement as a matter of job classification, but that is a separate trial question and is not affected by this separate question determination.

13    Clause 1.5.3 of the 2009 Agreement and clause 1.4.3 of the 2013 Agreement each fall within a clause dealing with the overall topic of the scope of each agreement and the parties thereby bound. It is necessary to set out the entirety of each clause to fully appreciate the competing arguments:

(1)    Clause 1.5 of the 2009 Agreement was as follows:

1.5    SCOPE AND PARTIES BOUND

1.5.1    This Agreement is between:

(a)    Airservices;

(b)    The Unions; and

(c)    All employees in classifications under Attachment 1 of this Agreement and Schedules 1, 2 and 3 bound by this Agreement.

1.5.2    In this agreement, wherever conditions are expressed to apply to employees employed in a particular position, those conditions will be read to apply to the position by whatever name or title is given to it, provided the functions of the position are substantially similar.

1.5.3    Employees classified as Air Traffic Controllers, Simulator Support Officers, Flight Data Co-ordinators and Aviation Rescue Fire Fighters in an operational environment, or employed under an individual contract of employment or under an AWA are not bound by this Agreement.

(2)    Clause 1.4 of the 2013 Agreement was as follows:

1.4    SCOPE AND PARTIES BOUND

1.4.1    This Agreement is between:

(a)    Airservices;

(b)    The Union, if the FWC notes in its decision to approve the Agreement that the Agreement covers the Union; and

(c)    All employees in classifications set out in Attachment 1 of this Agreement and Schedules 1 and 2 of this Agreement.

1.4.2    In this Agreement, wherever conditions are expressed to apply to employees employed in a particular position, those conditions will be read to apply to the position by whatever name or title is given to it, provided the functions of the position are substantially similar.

1.4.3    Employees classified as Air Traffic Controllers, Simulator Support Officers, Flight Data Co-ordinators and Aviation Rescue Fire Fighters in an operational environment, or employed under an individual contract of employment or under an AWA are not bound by this Agreement.

Ms Duck’s employment history

14    On 2 December 2008, Airservices sent a letter to Ms Duck, advising that she had been recommended for engagement in the position of “Research Analyst (ASA7)”, with a commencement date of 5 January the next year. The letter advised that she would be employed under the Air Services Act, with terms and conditions under the 2005 Agreement. No other terms or conditions of her employment were referred to, apart from the requirement to become a member of the relevant superannuation fund and to complete a number of forms and tests. She accepted the offer by signing the offer letter on 4 December 2008.

15    On 5 January 2009, Ms Duck commenced work at Airservices. Up to that point, she had been employed by the Australian Federal Police (AFP) for five years and seven months.

16    The 2009 Agreement commenced on 21 August 2009.

17    During her time at Airservices, Ms Duck undertook higher duties over two periods and was twice promoted to higher substantive positions. Ms Duck’s first promotion was to the position of “Business Intelligence Services Manager”. The position description described this as a “Level 4 Manager” position. The contract for that position took effect on 15 March 2010 (2010 Contract). Ms Duck’s second promotion took effect on 6 March 2013 when she signed a written agreement with the title “Employment Contract – Strategic Support Manager” (2013 Contract). The position description also said this was a “Level 4 Manager” position.

18    The 2013 Agreement commenced on 4 September 2013.

19    On 5 August 2016, Ms Duck took a voluntary redundancy and was retrenched. She received a severance payment calculated on the basis of a service period of 7.6 years from 5 January 2009 to 5 August 2016 and an entitlement to four weeks’ pay per year of service, being 30.4 weeks’ pay, reduced to the six month (26 week) cap in the 2013 Contract. Certain other payments were made in accordance with that contract.

20    If Ms Duck was covered by the 2013 Agreement, severance pay was required to be calculated on the basis of a service period of 13 years and two months (7 years and 7 months at Airservices plus five years and seven months at the AFP), with an entitlement to four weeks’ pay per year of service for the first five years of service (20 weeks) and to three weeks per year of service for the subsequent eigtht years and two months of service (24.5 weeks), a total of 44.5 weeks’ pay, which was below the 75 week cap in the 2013 Agreement. Ms Duck also refers generally to certain other benefits under the 2009 Agreement and otherwise which would likely have affected the rate of salary by reference to which severance pay was to be quantified.

21    The “level 4” designation for the 2010 Contract and the 2013 Contract was used by both the CAA and Airservices to describe their management hierarchy. It is a designation used in the Airservices material discussed in some detail below. But it is not sourced in the Agreements or in any relevant statute and is not a formal job classification. Ms Duck contends that “level 4” equated to an ASA 7 to ASA 9 classification, which may or may not be correct, but does not need to be decided. Any such equivalence relates to coverage once the Agreements are otherwise capable of applying, rather than the present question of capacity to apply in the first place.

Overview of the competing arguments

22    Airservices’ primary contention is that once Ms Duck was “employed under an individual contract of employment”, there was no scope for any coverage by the Agreements and the benefits that might otherwise have been available under them were therefore irrelevant. Airservices contend that this phrase, especially the word “individual”, reflects a deliberate process, started over 30 years ago by the CAA, and continued by Airservices from over 20 years ago, by which senior and later middle management employees migrated from being covered by enterprise agreements in common with staff that were not at that level, to being individual management contract employees who were not so covered. Most of the rest of Airservices’ arguments, beyond explaining why “employed under an individual contract of employment” meant what it said as a matter of ordinary English, address the competing arguments advanced by Ms Duck.

23    Ms Duck advances four categories of argument, with some degree of overlap, as to why she was covered by the Agreements, as well as opposing Airservices’ arguments. The substance of her arguments is:

(1)    that each of the Agreements was expressed to be between Airservices and all employees in classifications set out in attachments to each agreement, that those classifications included positions designated as “ASA 1” to “ASA 9”, and that Ms Duck and each of the group members fell within those classifications (coverage argument);

(2)    that the words “employed under an individual contract of employment” cannot have their ordinary meaning because if they did, neither agreement would have any application to any employee of Airservices who, despite being covered by the Agreements, entered into what was in fact for each of them an individual contract of employment (utility argument);

(3)    since the 2009 Agreement and the 2013 Agreement omitted specific provisions present in the 1996, 1998, 2002 and 2005 Agreements allowing for contracting out of such agreements during their life, there was no capacity to contract out of either the 2009 Agreement or the 2013 Agreement once each agreement took effect and therefore the exclusion provision in cl 1.5.3 could only operate in respect of a contract brought into existence before the commencement of the 2009 Agreement on 21 August 2009, but she did not enter into the contract that Airservices rely upon until 15 March 2010 (no contracting out argument); and

(4)    Section 194(ba) of the Fair Work Act 2009 (Cth), in effect from 1 January 2013, rendered unlawful a term of an enterprise agreement that purported to enable an employee or employer to opt out of the agreement. This, according to Ms Duck, meant that once the 2013 Agreement came into effect on 4 September 2013, her 2013 Contract dated 16 March 2013 could not lawfully exclude her from this Agreement.

24    The structure of these reasons:

(1)    first consider Ms Duck’s coverage argument; and

(2)    then consider the history of individual contract arrangements in some detail, in order to address the balance of the competing arguments.

Ms Duck’s coverage argument

25    The problem with this aspect of Ms Duck’s argument is that, based on Airservices defence pleading to the enterprise agreement coverage aspect of her claim, it confuses the standard, broader approach to the question of whether the Agreements would provide coverage (a matter that may or may not be a matter in dispute at a trial if the separate question is resolved in her favour) with the anterior question of whether the Agreements did not cover Ms Duck (and did/do not cover the group members) in the first place by operation of the two individual contracts of employment relied upon by Airservices and the operation of cl 1.5.3 of the 2009 Agreement and cl 1.4.3 of the 2013 Agreement. It follows that the possibility of further consideration of coverage at trial, including by reference to classifications, does not have anything useful to contribute to the resolution of this preliminary dispute. It will therefore not be considered further in these reasons.

Aviation services industrial agreement and contract history

26    In addition to consideration of the text itself, the meaning of an industrial agreement may be derived from its context and purpose, and only if that does not suffice, then its history and any relevant past dealings: Transport Workers’ Union of Australia v Linfox Australia Pty Ltd [2014] FCA 829; 318 ALR 54 at [38]; Amcor Ltd v Construction, Forestry, Mining and Energy Union [2005] HCA 10; 222 CLR 241 at [2] and [13]; see also [30]. As will be seen, the part of the Agreements in dispute cannot properly be understood without recourse to history and relevant past dealings.

27    The history and terms of aviation services collective and enterprise agreements and individual contracts, including the context in which they were brought into existence and implemented, form the context for interpreting the meaning to be given to the phrase “employed under an individual contract of employment” in cl 1.5.3 in the 2009 Agreement and cl 1.4.2 of the 2013 Agreement in relation to the 2010 and 2013 contracts between Airservices and Ms Duck. As White J pointed out in Qube Ports Pty Ltd v Maritime Union of Australia [2018] FCAFC 72 (at [64]-[65], with the concurrence of the other two members of the Full Court):

There are well developed principles concerning the construction of industrial awards and agreements, which take account of the fact that they are commonly drafted by lay persons and lack the precision and clarity to be expected in commercial contracts.

The principles were reviewed recently by Tracey J in Transport Workers’ Union of Australia v Linfox Australia Pty Ltd [2014] FCA 829; (2014) 318 ALR 54 at [29]-[41]. It is not necessary to repeat the principles in detail in these reasons. It is sufficient to say that the Court will seek to identify, in an objective way, the meaning intended by the parties to the agreement having regard to the language they have used and, in doing so, avoid a narrow or pedantic approach. In particular, the Court takes account of the circumstance that the drafters of the agreement were likely of a “practical bent of mind” and likely to have been concerned with expressing their intentions in ways understood in the context of the relevant industry and industrial relations environment. As with commercial contracts, the Court will prefer a construction which gives effect to the presumed purpose of the parties.

28    In December 1988, the federal parliament passed legislation which had the effect of treating government business enterprises (GBEs) differently from the traditional public service, giving legislative force to administrative changes introduced from May 1988. How that approach developed and was implemented over time is important to this proceeding, not least because Airservices is an industry-funded GBE. That is, the revenue to operate Airservices and provide civil aviation services comes from fees and charges imposed upon, and paid by, participants in the aviation industry.

29    The 1988 changes initially resulted in the setting of the most senior executive remuneration in GBEs moving from the Remuneration Tribunal to the boards of those enterprises. The heads of those organisations were removed from coverage by the then Public Service Act 1922 (Cth), making them chief executive officers somewhat akin to the private sector, without traditional public service tenure. Boards took responsibility for determining Chief Executive Officer (CEO) remuneration in consultation with the Remuneration Tribunal. A year later, in December 1989, the federal government extended this approach to the next level down from CEOs, to those who report directly to the CEO, but on a voluntary basis and still by reference to Awards. At that stage, the government decided there was to be no further movement beyond that second level. The CAA identified the second level executives who would be covered by this new arrangement in correspondence.

30    The Civil Aviation Amendment Act 1990 (Cth) commenced in May 1990, amending the Civil Aviation Act. The amendments gave the Board of the CAA power to set the conditions of employment of the CEO, for executives and for non-executive staff. In particular, s 91 was amended so that it provided that CAA staff were to be “persons appointed or employed by the [CAA] on such terms and conditions as are determined by the Board in writing”. Section 91 was thus the overt source of the power and authority of the CAA to employee staff. Section 42 of the Air Services Act is in substantially the same terms, providing that Airservices “may employ persons on terms and conditions determined by the Board in writing”.

31    On 5 July 1990, the CAA Assistant General Manager, Human Resources, sent an internal memorandum on the topic of remuneration for “second level” positions at the CAA. It attached a letter dated 12 June 1990 from Senator Collins, then the Minister for Shipping and Aviation Support, to the Chairman of the CAA, Mr Dick Smith, and also an undated document titled “Executive Remuneration – Government Business Enterprises”. The burden of these three documents may be summarised as follows:

(1)    the undated Executive Remuneration – Government Business Enterprises document summarised the new remuneration arrangements for CEOs introduced in 1988, and the extension of those arrangements to the second level of senior executives in December 1989;

(2)    the 12 June 1990 letter from Senator Collins to Mr Smith referred to the Civil Aviation Amendment Act and elaborated on what had been contained in the explanatory memorandum and second reading speech as to the provisions giving the Board of the CAA the power to set conditions of employment for the CEO, other executive and non-executive staff, explaining that, in general, the second level of executives would comprise those directly reporting to the CEO, seeking early advice as to the second level positions envisaged being covered before implementation took place, and indicating that the Board would be free to manage its industrial relations within the broad scope of guidelines that were enclosed; and

(3)    the 5 July 1990 internal memorandum canvassed the specific second level positions that would be included in the new remuneration approach.

32    On 17 May 1991, the Board made a written determination under s 91 of the Civil Aviation Act:

DETERMINATION NO. 18

The Board of the Civil Aviation Authority, pursuant to section 91 of the Civil Aviation Act 1988 (the Act), as amended, HEREBY DETERMINES that:

(1)    Contracts of employment may be entered into between individuals and the Authority, and that

(2)    unless stated otherwise in the contract of employment the terms and conditions of employment otherwise determined by the Board of the Authority under Section 91 of the Act shall not apply.

The seal of the Civil Aviation Authority has been affixed in accordance with the directive of the Authority.

Dated:        17 May 1991

Signed:     [signature]

33    On 8 July 1991, the CEO of the CAA, Mr Frank Baldwin wrote to Senator Collins as the Minister for Shipping and Aviation Support, seeking approval to extend the same arrangement to third level positions, and to progressively advertise nationally and fill two lists of such positions attached to the letter. It is this level of position and the next level, level 4, which is important, because it is those two levels that arise for consideration in this proceeding. Although Ms Duck takes issue with the use of such descriptions rather than using the classifications in the Agreements, under the 2010 Contract and under the 2013 Contract she was expressly employed in what was described as a level 4 position. Later correspondence indicates that the Minister approved the proposal to extend the new arrangements to the third level.

34    Mr Baldwin sent an undated letter to Senator Collins in his position as Minister for Shipping and Aviation, referring to advice from Senator Collins provided in September 1991 as to the government’s agreement to proceed with the filling of level three positions under the new remuneration guidelines. The letter must have been sent between very late 1991/early 1992 and 27 May 1992 because Senator Collin’s ministerial title changed from Minister for Shipping and Aviation Support to the slightly differently described position of Minister for Shipping and Aviation on 27 December 1991, a position he then held until 27 May 1992. That letter advised that all but a small number of third level jobs had been filled under individual contract arrangements, and sought agreement to proceed with filling jobs at the next level of management – that is to say, level 4 – under the same arrangements. Mr Baldwin identified a number of reasons for seeking that agreement as follows:

I have several reasons for wishing to extend contract employment beyond the third level. First, it has become clear that the new employment arrangements for second and third level executives has been the catalyst for a profound change in the management ethos of the CAA. They have made it possible to introduce a commercial, client-centred culture which focuses the work of all members of the executive group, whether appointed from within the CAA or from outside, on the Authority’s core objectives. I believe that extending this culture to key middle management jobs, through changes to the employment arrangements, is critical to the long-term success of the CAA as a business enterprise.

The second reason is that the introduction of contracts at the fourth level gives us the opportunity to identify and provide a market competitive level of remuneration for those employees from whom the next generation of senior managers would most likely be selected. Development of middle managers for higher roles has been a problem issue for the CAA for many years, however contract employment now provides an opportunity to concentrate our development efforts and introduce succession planning amongst a highly committed and competitive group of managers.

Thirdly, contract employment represents, in itself, an encouragement to improved performance by the manager. Each of these managers will be accountable for a financial responsibility centre. This is the basic building block of resources management in the Authority, and I regard it as critical that the performance of responsibility centre managers be improved if we are to lock in the substantial gains being made through our restructure. The proposed arrangements represent a further step in implementing strict controls over the costs of the CAA and hence charges on the aviation industry. Contract employment permits the Authority to match the skills which are required for a particular task or function directly with the skills and abilities of an employee, from the widest possible field. It also means that the CAA can match employment contracts to particular tasks or functions, and not be bound to provide tenure of employment into the future. This is particularly important in a dynamic organisation with major project activities.

I am conscious that the industrial implications of the proposed change need to be carefully managed. I understand that in a number of cases a variation to the CAA Award will be required to remove contract employees from Award coverage. CAA unions are aware of our plans and detailed consultations will be undertaken shortly.

35    On 2 July 1993, the Civil Aviation Authority Enterprise Bargaining Agreement 1993 (1993 Agreement) commenced. Airservices’ position is that the 1993 Agreement was the starting point for the migration of level 4 (and level 5) staff to contracts in lieu of enterprise agreement coverage, a process it contends ultimately took place at Airservices starting in about 1996. In order to understand how Airservices was able to establish that this transition to individual contracts took place at level 4, within the enterprise agreement structure at that stage, it is necessary to descend into some of the detail of the 1993 Agreement.

36    Clause 4(a) of the 1993 Agreement provided that it applied to all employees who were members or eligible to be members of the staff organisations party to the agreement in respect of two lists of classifications, numbered (i) and (ii). Clause 4(b) provided, in relation to level 4, that:

The classifications listed in paragraph (a)(ii) of this Clause shall be considered as the Authority’s fourth level management/senior specialist group. Specific terms and conditions of employment for this group are outlined in Clause 13 of this Agreement. Individual positions within this group will be referred to by job specific title as defined by the Authority.

37    Clause 10(a)(viii) of the 1993 Agreement, as part of “agreed efficiency measures”, provided for the introduction of flexible salary arrangements for employees at or above the Senior Officer Grade C level, which was to embrace market level remuneration and performance appraisal as set out in cl 13. Clause 13(a), referring to management/senior specialist remuneration, provided that the conditions of employment of employees listed in cl 4(a)(ii) were to be as specified in the balance of cl 13, except if silent on a matter, in which case the rest of that agreement applied. Clause 13(c)(i) provided that the requirements of each position “will be evaluated and a salary range determined for the position based on market considerations”. Clause 13(f) provided that no employee under cl 13 would receive a salary less than what would have been payable if their position was not included under that clause, and made provision for an increase to be paid if that was breached at the time of their next salary review. Clause 13(h)(i) provided that existing employees described in cl 13(a) (that is to say, those listed in cl 4(a)(ii)) “shall translate with their jobs to these arrangements on the date of commencement of this Agreement.”

38    On 13 December 1993, pay notification No 13 of 1994 took effect, providing for six salary ranges and noting that all classifications at or above Senior Officer Grade C were covered by the 1993 Agreement. The ASA 7 position in which Ms Duck was initially employed by Airservices is also referred to as a Senior Officer Grade C position. This was followed by an August 1994 draft middle management/senior specialist remuneration agreement, again referring to six salary ranges.

39    Airservices was established on 6 July 1995. The operation of the employment provision in s 42 of the Air Services Act has been affected by three awards and, until 2017, six industrial instruments by way of enterprise agreements commencing in 1996, 1998, 2002, 2005, 2009 and 2013.

40    On 16 December 1996, the Airservices Australia Corporate Enterprise Bargaining Agreement 1996 (1996 Agreement) commenced. Clauses 11.1-4 and 11.1-5 provided as follows:

Senior management group contract conditions will be offered to specified MM/SS [middle management/senior specialist] positions on a voluntary basis on and from 9th December 1996. Positions will be identified by Airservices based on criteria relating to level of financial and staffing responsibilities and management content of the position. The number of positions affected is expected to be no more than one hundred and fifty current positions within the current MM/SS [middle management/senior specialist] group. Positions will report to a Third Level Manager. Details of the positions are at Attachment Two.

During the life of the agreement, should any of those positions identified as contract positions fall vacant, and the successful applicant is already an Airservices employee, then that person would have the option of moving to a contract, ie. the election to accept a contract position will continue to be on a voluntary basis.

41    Thus the 1996 Agreement made provision for middle managers fitting particular criteria to move to contract employment, without explicitly excluding coverage by that agreement. Clause 18.14 of the Airservices Australia Air Traffic Services Enterprise Agreement 1996, headed “Contract Managers” contained a similar provision for the extension of contract arrangements to fourth level managers who would otherwise be covered by the terms and conditions of that agreement, but again did not explicitly exclude agreement coverage: “Senior management group contract conditions will be offered to the occupants of specified Fourth Level management positions on a voluntary basis”. It may be observed that while both cl 11.1-4 of the 1996 Agreement, and cl 18.14 of the Airservices Australia Air Traffic Services Enterprise Agreement 1996, indicates that contracts will be offered, neither clause suggests that this is the source of authority or power to enter into such a contract. Nor could they be so in light of s 42 of the Air Services Act being the express legislative source of that power and authority.

42    Between 1996 and 1998, fourth level managers who met the criteria referred to above were offered individual employment contracts, as described in a number of internal memoranda between January 1997 and June 1998. By 23 January 1997, there was a timetable in place, consistently with the indication given in the 1996 Agreement that “Senior management group contract conditions will be offered to specified MM/SS [middle management/senior specialist] positions on a voluntary basis on and from 9th December 1996”, with offers to issue progressively with a four week acceptance period and remuneration reviews. Those accepting a move to contract employment were required to resign from Airservices, but continuity would be preserved for all purposes other than sick and annual leave.

43    On 27 May 1998, an electronic memo was sent to all Airservices staff, attaching a draft of the 1998 Agreement, and advising (emphasis added):

The proposed new agreement, which would cover all employees other than the contract management group and Firefighting employees, would run until June 2001. It picks up, virtually unchanged, the existing agreements; effectively extending the provisions. Where the provisions have changed, the draft sets out the details.

44    Airservices also relies upon affidavit evidence, which I accept, to the effect that management employees, including level 4 managers, were and are routinely and collectively referred to as “contract managers”, the “contract management group” or the “management group”, with their contracts of employment being referred to as “individual contracts” and “management contracts”.

45    On 5 June 1998, a remuneration adviser sent a memorandum to Airservices’ General Manager, Corporate and Employee Relations, on the subject of contract management positions, as follows:

For your information, the table below shows the status of Airservices Contract Management positions.

In addition to the details above, it is my understanding that there are potentially 4 more positions to be offered contracts in the near future. These have not been included above as I do not have details of the necessary approvals and I am following up with Divisions concerned.

46    Thus, by 5 June 1998, all but 19 out of 162 eligible fourth level manager employees were on individual contracts. In the context of the foregoing, it is clear that those 143 employees were no longer covered by the 1996 Agreement. It is no surprise that, over 10 years later, when Ms Duck was offered the 2010 Contract, she was told that all level 4 employees were on individual contracts, as detailed below.

47    Airservices submit that enterprise agreements covering this “corporate” workforce have included similar language to cl 1.5.3 in the 2009 Agreement and cl 1.4.3 in the 2013 Agreement, excluding individual contracts of employment since 1998, a point ultimately not in dispute, but in any event addressed below by reproduction of the relevant clauses. Airservices points to an absence of any evidence to suggest that any change reversing the trend towards individual management contracts and away from enterprise agreement coverage for such employees, was in contemplation when the Agreements were being negotiated. Airservices therefore contends that the intention able to be objectively ascertained in relation to cll 1.5.3 and 1.4.3 was to confirm that members of the management cohort, historically employed by Airservices for over 20 years under individual contracts, would remain outside the Agreements. Thus, Airservices contends, the phrase “employed under an individual contract of employment” is clearly intended to refer to this distinct group of employees, and thus to Ms Duck and the other members of the class, such that the Agreements did not apply to them.

48    Ms Duck submits that the agreement history should be viewed very differently when close attention is paid to the precise text of the enterprise agreements over time. She relies on the presence of opt-out provisions in enterprise agreements at one point in time, and such provisions then no longer appearing. She submits that the effective disappearance of those opt-out provisions meant that this was no longer available during the life of either the 2009 Agreement or the 2013 Agreement. On this argument, only historic employment contracts entered into prior to the 2009 Agreement were to be recognised as excluded from coverage by either of the Agreements. Airservices’ counter-submission is that the opt-out provisions did not continue because they were no longer needed, and that there is no need to make express provision in an industrial agreement to a power or authority bestowed by statute upon Airservices to enter into a contract with one of its employees.

49    Applying the principles summarised in Qube Ports, reproduced above at [27], to the history and textual detail reproduced above, I find that the intention of the parties to the 1996 Agreement was that management level employees who voluntarily entered into individual agreements would no longer be covered by that agreement. As will be seen, that implicit intention was subsequently made explicit.

50    On 29 June 1998, the Airservices Australia Enterprise Bargaining Agreement 1998-2001 (1998 Agreement) commenced. By cl 7.1, it was expressed to include a number of pre-existing enterprise agreements, including the 1996 Agreement, which was reproduced as part of the 1998 Agreement as Schedule A. Clause 2 of the body of the 1998 Agreement provided as follows (emphasis added):

PARTIES BOUND

The persons bound by this Agreement are:

Airservices Australia and its successor organisations;

and the

Association of Professional Engineers, Scientists and Managers Australia;

Civil Air Operations Officers’ Association of Australia;

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia;

Community and Public Sector Union;

Media Entertainment and Arts Alliance; and the

National Union of Workers

and

All employees of Airservices Australia other than those employed under an individual contract of employment and those employed in any classification listed in Schedule 7 of the Airservices Australia (Consolidated) Award 1996 (the Award).

51    This was the first appearance of a provision explicitly excluding coverage by an enterprise agreement by reason of employment under an individual contract of employment. As before, through cll 11.1-4 and 11.1-5 of the 1996 Agreement (reproduced above at [40]) and carried forward as part of the 1998 Agreement, the 1998 Agreement made reference to senior management group contract conditions being offered to specified middle management and senior specialist positions on a voluntary basis. Again, cl 11.1-4 of the 1996 Agreement, as part of the 1998 Agreement, does not suggest that it is the source of power or authority to enter into such contracts.

52    Ms Duck submits that the conclusions to be drawn from the provisions in the 1996 Agreement and the 1998 Agreement dealing with individual contracts are as follows:

(1)    the 1996 Agreement provisions allowing for contracting out were intended to operate during its currency as an authority to make contracts that might avoid any requirement to comply with that agreement;

(2)    those provisions expired with the expiry of the 1996 Agreement itself, and did not provide any authority to contract out of the 1998 Agreement;

(3)    provisions in the 1998 Agreement for contracting out required the express authority to do so to be repeated, as had been provided for in the 1996 Agreement; and

(4)    after the cessation of the 1996 Agreement, the preservation of the operation of “Middle Manager contracts” made pursuant to the 1996 Agreement to exclude the employees with whom they were made from being covered by the 1998 Agreement required their express exclusion from coverage under the 1998 Agreement.

53    There are a number of reasons why the above submissions by Ms Duck cannot be accepted. First and foremost, neither the 1996 Agreement, nor the carry over provisions made a part of the 1998 Agreement, were cast in terms of giving authority or power to enter into a contract, as opposed to acknowledging that this could occur, and thereby indicating a departure from each Agreement. As already noted, the source of the power and authority for Airservices to enter into such contracts was s 42 of the Air Services Act. How that source of power and authority affects other aspects of Ms Duck’s argument is considered in more detail below.

54    Further, in a practical sense, the 1996 Agreement did not come to an end when the 1998 Agreement commenced, because it was expressly included in the 1998 Agreement, both by reference and by being attached as Schedule A to, and expressly forming part of, that later Agreement. Thus, recognition of the capacity to voluntarily contract out of the 1996 Agreement and thence the 1998 Agreement continued without interruption. In those circumstances, there was no need for any separate express reference to contracting out to be in the 1998 Agreement.

55    As there was no practical cessation of the 1996 Agreement, as opposed to it being supplemented by the additional terms of the 1998 Agreement, there was, strictly speaking, no need to preserve the operation of contracts that had already been entered into as provided for by cl 11.1-4 of the 1996 Agreement. Such contracts would continue in their own terms and for the duration that they were made for. However, the effect of the new cl 2 of the 1998 Agreement was to make explicit what had previously been implicit, namely that an employee who had entered into such a contract was not covered by the 1998 Agreement (including the 1996 Agreement).

56    On 5 August 2002, the Airservices Australia Certified Agreement 2002-2005 commenced (2002 Agreement). Relevantly:

(1)    Clause 2 provided (emphasis added to the exclusion provision):

PARTIES BOUND

The persons bound by this Agreement are:

Airservices Australia and its successor organisations, including any subsidiaries established under Clause 36 of this Agreement;

and the

Association of Professional Engineers, Scientists and Managers Australia;

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia;

Community and Public Sector Union;

National Union of Workers; and

United Firefighters Union of Australia;

and

All employees of Airservices Australia, except employees classified as ATCs, TFDCs, TGOs and ADSOs in the ATC operational environment or employees under an individual contract of employment.

(2)    Clause 15 provided:

CONTRACT POSITIONS

15.1    An individual contract of employment may only be offered for positions whose minimum salary is equal to or greater than the minimum salary of the ASA7 classification.

15.2    During the life of the agreement, should a contract position fall vacant, and the successful applicant is already an Airservices employee, then that person would have the option of moving to a contract or remaining under the terms of this agreement.

15.3    Within ISS, no more than 40% of employees at the PO/TO MM/SS classification (and any replacement classifications) may be offered an individual contract of employment.

57    Clause 15.1 of the 2002 Agreement reproduced above reflects an agreed limit on who may be offered an individual contract of employment, necessarily in the exercise of the power or authority in s 42 of the Air Services Act, rather than being expressed as an independent source of authority or power to do so. Clause 15.2 makes it clear that employees of the ASA 7 classification and above had a choice, if offered, during the life of that agreement, between moving to a contract or remaining under the terms of the 2002 Agreement. The two were therefore expressly mutually exclusive, although that would have been a strong inference in any event. That view is reinforced by cl 14.1, by which a separate agreement for middle management and senior specialist positions was discontinued and those staff still within the 2002 Agreement were brought back into the ASA 7 to ASA 9 general classification, whose duties were then not managerial, even if there was some commonality as to salary. All managers were to be on individual contracts.

58    The records of Airservices must be approached with some care as being any basis for inferring permissible objective intent, rather than impermissible subjective intent, going to the meaning of an enterprise agreement. However, this does not preclude having regard to information as to the designation of employees in managerial positions and their numbers. An Airservices Board Remuneration Committee Paper, bearing the name of the acting CEO and the date of March 2005, describes the “Management Group” at that time as comprising of approximately 320 managers and senior specialists, being all other managers and specialists who were employed via individual employment contracts, excluding the CEO, Executive Managers, CEO’s direct reports, and Senior Management Group comprising 35 or so positions.

59    It is apparent that by April 2005, few, if any, level 4 employees were not on individual contracts. This is indicated by a memorandum from the Acting CEO of Airservices to the Board, which included the following on the topic of future management remuneration:

Within the next few months, it is proposed that the corporation moves away from a ‘one size fits all’ approach to ‘at risk’ components in Management Group remuneration. It is intended that for new Management Group employees there will be some variability in the ‘at risk’ components depending upon level, nature of the role, market practice for similar types of positions and the position’s ability to impact the business. This will ensure that the system is better aligned to current market practice, is logical, defensible, equitable and that costs are reduced.

The transition process applied to individuals when they commence contract employment has recently been reviewed. As a result, this process will no longer [be] used in a formal sense. This is primarily due to the majority of new Management Group employees coming from external sources, with their remuneration and conditions appropriately aligned with market practice from the commencement of each individual’s employment. Cessation of the transition process would not impact the corporation’s strategies to align remuneration to Market Reference Points where this is appropriate.

60    On 10 November 2005, the Airservices Australia Certified Agreement 2005-2008 commenced (2005 Agreement). Relevantly:

(1)    Clause 1.5 provided (emphasis added to the exclusion provision):

SCOPE AND PARTIES BOUND

1.5.1    This Agreement is between:

(a)    Airservices and its subsidiaries;

(b)    The Unions; and

(c)    All employees bound by this Agreement.

1.5.2    Employees classified as ATCs, TFDCs, TGOs and ADSOs in an operational environment, or employed under an individual contract of employment or under an AWA are not bound by this Agreement.

(2)    Clause 1.6 provided (emphasis added to the opt-out provision):

RELATIONSHIP TO THE AWARD, AWAs AND INDIVIDUAL CONTRACTS OF EMPLOYMENT

1.6.1    This Agreement is comprehensive and operates to the exclusion of the Award.

1.6.2    If during the consolidation of Award and Determination 73 entitlements an Award entitlement was inadvertently omitted from this Agreement, the parties will meet to discuss the matter. If agreement cannot be reached, the matter will be progressed in accordance with the disputes avoidance and settlement procedure (refer [to] Clause 3.3).

1.6.3    AWAs may be entered into at either your or our initiative. AWAs may either operate to the exclusion of this Agreement, or incorporate the terms of this Agreement but prevail over such terms to the extent of any inconsistency, as specified in each AWA.

1.6.4    Individual contracts of employment may be entered into at our initiative and operate to the exclusion of this Agreement. An individual contract of employment will only be offered to you if the salary of your position is equal to or greater than the minimum salary of the ASA7 classification.

61    Airservices submit, and I accept, that cl 1.5.2 was plainly directed to existing contracts, whereas cl 1.6.4 was directed to further agreements that could be entered into during the life of the 2005 Agreement, albeit that it was more likely to be with persons coming in from outside, but also to cover promotions to management ranks (whereupon cl 1.5.2 would apply to them as well).

62    As already noted:

(1)    on 21 August 2009, the 2009 Agreement commenced, with cl 1.5.3; and

(2)    on 4 September 2013, the 2013 Agreement commenced, with cl 1.4.3.

63    It was common ground that there are now some 190 managers in the range from level 1 to level 4, out of a total Airservices workforce of about 3,500 staff.

Ms Duck’s no contracting out argument

64    Ms Duck places considerable reliance upon there being no express contracting out provision in the 2009 Agreement or the 2013 Agreement akin to cl 15 of the 2002 Agreement or cl 1.6.4 of the 2005 Agreement, and also cl 11.1-4 in the 1996 Agreement, also carried forward in the 1998 agreement. Upon that basis, she contends that cl 1.5.3 of the 2009 Agreement and cl 1.4.3 of the 2013 Agreement do not exclude the operation of those agreements in relation to contracts entered into during the life of those agreements, but only exclude the operation of contracts entered into at an earlier time when there was an express power or authority to enter into such a contract. She also submits that any such contracting out was in any event illegal by reason of ss 50 and 194(ba) of the Fair Work Act. This argument, in each part and as a whole, cannot be accepted for the following reasons.

65    First, Ms Duck’s argument contains and relies upon an incorrect presumption and assertion that the source of Airservices’ power or authority to enter into a contract of employment with an employee in the period from 8 July 2009 to the end of the 2013 Agreement, and therefore the power or authority to enter into the 2010 Contract and the 2013 Contract with Ms Duck, could and did come from the Agreements. That is incorrect. There can be no doubt that the power or authority for Airservices to enter into a contract of employment is not derived from an industrial instrument, even if such an agreement refers to that taking place, and may even impose some agreed restrictions on how that power or authority is to be exercised. The power and authority expressly comes from s 42 of the Air Services Act.

66    Secondly, by the time the 2009 Agreement was in force, there were no level 4 managers who were not already on individual contracts. That meant that there was no need for contracting out provisions in the 2009 Agreement or the 2013 Agreement as there were, by then, no level 4 employees who were not already on contracts and who therefore needed any opting out process to be acknowledged in those agreements. That is put beyond doubt by Ms Duck’s affidavit evidence. She deposes to a promotion vacancy being advertised on the staff intranet, and to her applying for it in February 2010. Her direct supervisor-to-be, Mr Paul Logan said to her in March 2010 (emphasis added):

Kate, you were successful in your job application and we are happy to offer you the Business Intelligence Services role. We need you to start this role immediately.

The remuneration for this role is proposed to be a total remuneration of $124,400.

It is a condition of this job that you enter into a management contract, which is a standard form of contract that everyone in the Level 4 Management Group is engaged under.

These contracts are none [sic] negotiable, other than in relation to remuneration and the at-risk component. However, Airservices is removing at-risk bonuses and therefore we can’t negotiate on that component with you.

This agreement means that you won’t receive any entitlements or benefits under the enterprise agreement that you are currently engaged under.

67    Thirdly, and in any event, even if, contrary to what Mr Logan had told Ms Duck, there had been someone at level 4 who was not yet on an individual contract during the life of the 2009 Agreement or during the life of the 2013 Agreement, both of those agreements expressly contemplate that such contracts may be entered into, and both provide that an employee who enters into such a contract is not covered by the respective agreement. There is no proper or logical basis for reading down the references in cl 1.5.3 of the 2009 Agreement or cl 1.4.3 of the 2013 Agreement to exclude contracts entered into during the life of those agreements.

68    Fourthly, Ms Duck relies upon s 194(ba) of the Fair Work Act, introduced with effect from 1 January 2013, which rendered unlawful a term of an enterprise agreement that provided a method by which an employee or employer could elect not to be covered by that agreement, whether unilaterally or otherwise. She asserts that this meant that cl 1.4.3 of the 2013 Agreement was not legally effective to exclude her from coverage, and more generally that it was not a term that provided a legally effective means for either her or Airservices to elect not to be covered by that agreement. However, this point fails to engage with the purpose and express terms of s 194(ba).

69    Section 194(ba) was considered in CPB Contractors Pty Limited v Construction, Forestry, Maritime, Mining and Energy Union [2019] FCAFC 70, where the Full Court found that the Full Bench of the Fair Work Commission had erred in its understanding of its scope to render a clause of an enterprise agreement unlawful. O’Callaghan and Wheelahan JJ (with whom Flick J agreed) considered the legislative history and purpose of s 194(ba), and the mischief to which it was addressed at [62]-[67]. In short, the provision was designed to address the problem with “opt-out” clauses which allowed employees to vote on an enterprise agreement and then elect not to be covered by it on an individual basis, as had been approved by the Full Bench in Newlands Coal Pty Ltd v Construction, Forestry, Mining and Energy Union [2011] FWAFB 7325. An advisory panel recommended that such clauses be prohibited, stating (as reproduced by their Honours at [64]):

Opt-out clauses are relatively novel, and we are unaware that they have been a feature of more than a small number of agreements. However, we are concerned that as a result of Newlands Coal they may become more common. In the view of the Panel these clauses undermine the collective nature of an enterprise agreement. The Panel is concerned by the potential for opt-out clauses to be used to manipulate agreement making by allowing a range of employees to approve an agreement, only to have a number of them opt out at a later stage. Likewise, operational agreements could be displaced by employees opting out, possibly reopening bargaining. Also concerning is the potential for new and existing employees to feel pressured to opt out of such agreements, thereby relinquishing legitimate rights and entitlements.

70    The legislative response to the problem was therefore focused and deliberate. As O’Callaghan and Wheelahan JJ observed in CPB Contractors (at [66]-[67]):

There are a number of ways in which an employee might conceivably cease to be covered by an enterprise agreement, including by a change in the employee’s particular employment. That might occur if an employee transfers from one geographically, operationally, or organisationally distinct area of an employer’s business to another, in circumstances where there are different enterprise agreements in place which cover different employment: cf s 186(3A) of the FW Act. To cease coverage in this way would not need to depend upon any method of election provided for in an enterprise agreement.

Focussing on the text of s 194(ba) in the context of the mischief to which it was directed, and in the context of other provisions of the FW Act, we consider that the provision is directed to a term of an agreement which itself provides the method by which an employee or employer may elect (unilaterally or otherwise) not to be covered by the agreement. The election must be by an employee or the employer. Newlands Coal provides an illustration, where the method provided for by the opt-out clauses in the agreement was an election in writing. In our view, it is essential to engage s 194(ba) that the term itself provide the method by which the employer or employee can make an effective election (unilaterally or otherwise) not to be covered by the agreement. Section 194(ba) is not engaged if there is no method of election provided for by a term of the agreement.

71    The purpose of s 194(ba) was therefore not to prevent employees who were covered by an enterprise agreement moving to another category of employment in which they were not covered, but rather to prevent those who were squarely covered opting out by way of the limited device of an opting out mechanism contained in that enterprise agreement. Applying CPB Contractors, cl 1.4.3 of the 2013 Agreement did not provide the method by which Ms Duck could enter an individual contract, but merely provided that a person who had entered into an individual contract was not covered by that agreement. As the quote from Ms Duck’s affidavit at [66] above makes clear, her promotion involved a change in her particular employment, and she knew before accepting the position that the promotion she was being offered resulted in no longer being covered by the relevant enterprise agreement. Sections 50 and 194(ba) of the Fair Work Act therefore have no application.

Ms Duck’s utility argument

72    Ms Duck’s utility argument is similarly of no assistance to her. It depends upon the proposition that all employees of Airservices are on “individual” contracts as contemplated by the phrase “employed under an individual contract of employment” in cl 1.5.3 of the 2009 Agreement and in cl 1.4.3 of the 2013 Agreement. Although not expressed as follows, the substance of the argument seems to be that every Airservices employee is an individual, and has a contract of employment, so it must follow that they are all employed under an individual contract of employment. That cannot be accepted. As Ms Duck’s original employment offer made in December 2008 made clear, she was to be employed under the Air Services Act with terms and conditions as described in the 2005 Agreement, subject to security and medical checks, a probationary period of three months, and a requirement to join the Airservices Super Fund. Beyond these requirements, there were no separate contractual terms. She was not initially employed under an individual contract of employment. However, that changed when she entered into the 2010 Contract, which was an individual contract of employment; as was her subsequent 2013 Contract. Both of those contracts fell squarely within the exclusion phrase “employed under an individual contract of employment” in cl 1.5.3 of the 2009 Agreement and in cl 1.4.3 of the 2013 Agreement. Neither agreement therefore applied to her.

Conclusion

73    The answer to the separate question is “Yes”. It follows that Ms Duck was not covered by either the 2009 Agreement or the 2013 Agreement. As that answer is fatal to the success of this proceeding, the proceeding must be dismissed.

Associate:

Dated:    26 July 2019