FEDERAL COURT OF AUSTRALIA

Association of Professional Engineers, Scientists and Managers Australia v Bulga Underground Operations Pty Ltd [2019] FCA 1960

ORDERS

THE COURT DECLARES THAT:

1.    The respondent, Bulga Underground Operations Pty Limited contravened s 323(1) of the Fair Work Act 2009 (Cth) by failing to pay to its employee, Mr John Mayhew, the full amount payable to him in relation to the performance of work, namely the full amount payable to him pursuant to s 39CB(2) of the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth) in respect of untaken long service leave upon the cessation of his employment due to redundancy.

2.    The respondent, Bulga Underground Operations Pty Limited contravened s 39CB(2) of the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth) by failing to pay Mr John Mayhew the full amount payable to him pursuant to that section in respect of long service leave upon the cessation of his employment due to redundancy.

THE COURT ORDERS THAT:

1.    The parties confer with a view to agreeing on and providing to the Court consent orders concerning the compensation payable by the respondent to the second applicant, including interest or an amount in lieu of interest, in respect of the respondent’s contraventions of s 323(1) of the Fair Work Act 2009 (Cth) and s 39CB(2) of the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth).

2.    The parties contact the Court within 14 days of this judgment to arrange for the matter to be listed for a further case management hearing on a date suitable to the Court and the parties for the purpose of making procedural orders for a further hearing, such further hearing to consider and determine:

(a)    any remaining controversy concerning the compensation, including interest, payable by the respondent to the second applicant in respect of the respondent’s contraventions of s 323(1) of the Fair Work Act 2009 (Cth) and s 39CB(2) of the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth); and

(b)    the penalty or penalties payable by the respondent in respect of the respondent’s contraventions of s 323(1) of the Fair Work Act 2009 (Cth) and s 39CB(2) of the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth) and to whom those penalties should be paid.

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

REASONS FOR JUDGMENT

WIGNEY J:

1    The main question raised by this matter is whether the respondent, Bulga Underground Operations Pty Limited, failed to pay its former employee, Mr John Mayhew, the full amount due to him in respect of untaken long service leave upon the termination of his employment and thereby breached s 323(1) of the Fair Work Act 2009 (Cth) and s 39CB(2) of the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth). The answer to that question depends on the correct calculation of Mr Mayhew’s “base rate of pay” during the period that he did not take leave having regard to the definition of that expression in s 16 of the Fair Work Act (as applied by s 4(1) of the Long Service Leave Act) and the terms of both the enterprise agreement that covered Bulga and Mr Mayhew and Mr Mayhew’s contract of employment.

2    Mr Mayhew and his trade union, the Association of Professional Engineers, Scientists and Managers Australia, claimed that Bulga did not correctly calculate the amount payable to Mr Mayhew in respect of untaken long service leave because it misconstrued or misapplied the statutory definition of “base rate of pay” to Mr Mayhew’s remuneration under his contract of employment and the applicable enterprise agreement. They sought declarations that Bulga had contravened s 323(1) of the Fair Work Act and s 39CB(2) of the Long Service Leave Act, compensation pursuant to s 545(3) of the Fair Work Act or s 39DB of the Long Service Leave Act, and an order under ss 546(1) and (3) of the Fair Work Act that Bulga pay the Association a penalty in respect of its contravention.

3    The Association also sought a declaration relating to the calculation of the base rate of pay of all of Bulga’s employees who are or were covered by the relevant enterprise agreement. There is an issue whether the Court can or should make any declaration concerning the base rate of pay in respect of other employees even if the Association’s contentions concerning the calculation of Mr Mayhew’s base rate of pay are accepted as correct.

Relevant Facts

4    The relevant facts were largely not in dispute.

5    Bulga was, and is, a coal mining company. It was formerly known as Beltana Highwall Mining Pty Limited.

6    Bulga employed certain employees in supervisory and administrative roles. Those employees, who are referred to generally as “staff employees”, are covered by the Black Coal Mining Industry Award 2010.

7    The Association is a trade union which has the right, pursuant to its Rules, to represent the industrial interests of certain workers, including the staff employees of Bulga.

Mr Mayhew’s employment with Bulga

8    Mr Mayhew was a staff employee of Bulga. He was first employed by Bulga in 2003.

9    Bulga was, and is, a party to an enterprise agreement known as Beltana No. 1 Salaried Staff Certified Agreement 2001. The Agreement was made in January 2001 under the legislation which preceded the Fair Work Act. It has not been terminated or replaced. The Agreement covered, and continues to cover, staff employees of Bulga.

10    In October 2002, Bulga and Mr Mayhew executed a document entitled “Offer of Employment & Salary Package Agreement”. For convenience, and to avoid confusion, the October 2002 agreement between Bulga and Mr Mayhew will be referred to as the Contract.

Relevant provisions of the Contract

11    Clause 1.1 of the Contract provides that it was subject to the terms and conditions of the Agreement.

12    Clause 1.3 of the Contract provides that Mr Mayhew was employed as a “salaried employee” and that “[a]ccordingly, the terms and conditions of [the Contract] fully compensate you [Mr Mayhew] for fulfilling all of the requirements of your position”. It also provided that Mr Mayhew agreed to release Bulga “from any liability or obligation arising under any industry or site award or agreement that would otherwise apply to [his] employment”.

13    Clause 3.1 provides as follows in relation to Mr Mayhew’s remuneration.

Your remuneration at commencement of this Agreement for the position stated in Clause 2, is set at One hundred and Eight Thousand Dollars ($108,000) per annum.

as detailed in Schedule A to this Agreement. This will be known as the Total Employment Compensation (TEC). The TEC is in lieu of all entitlements, Award, Agreement, over award or legislative. The TEC will be reviewed in December of each year. Any changes that may apply will take effect from 1 January the following year.

14    Clause 4.1 provides that a shift allowance as defined in the Agreement was detailed in Schedule A to the Contract.

15    Clause 5.1 provides that a “Notional Base Salary”, as defined in the Agreement, was detailed in Schedule A and that the Notional Base Salary “shall be used to compute payments on termination of employment”.

16    Schedule A to the Contract comprised a table which detailed Mr Mayhew’s remuneration. Consistent with cl 3.1 of the Contract, the table provided that Mr Mayhew’s “Total Employment Compensation” or “TEC” was $108,000. To that figure was added a shift allowance, as provided for in cl 4.1, of $7,776. There was then deducted sums totalling $6,582.08 in respect of superannuation. Mr Mayhew’s taxable salary was accordingly detailed in the table as being $109,193.92 per annum. The table also detailed Mr Mayhew’s “Notional Base Salary” or “NBS” as being $86,400.

Evidence concerning Mr Mayhew’s remuneration and hours

17    It may be inferred, as would be expected, that Mr Mayhew’s remuneration increased over time. It would appear from one of Mr Mayhew’s payslips and from a “Retrenchment Estimate” provided to Mr Mayhew when he was offered redundancy that his annual remuneration at the time of his retrenchment was $171,500, though that amount is referred to in the payslip and Retrenchment Estimate as his “TFR”. The acronym “TFR” was not explained in the evidence or submissions, though it appeared to be common ground that it represented Mr Mayhew’s salary package or Total Employment Compensation at the time.

18    Mr Mayhew’s evidence was that in the twelve months prior to his termination he was required to work dayshifts, afternoon shifts and nightshifts. The shifts were generally about eight and three quarter hours, but on weekdays they could extend to 10 hours. Some of Mr Mayhew’s duties or responsibilities required him to engage in work prior to the commencement of a shift and after the completion of the shift. He was not paid any additional remuneration in relation to the work he performed outside the hours of a shift. The only additional payments he received for work outside his usual hours were overtime payments he received when he filled in for another supervisor who was unwell or unable to fulfil their obligations. He was paid an additional hourly rate for that work.

Relevant provisions in the Agreement

19    As already noted, as a staff employee, Mr Mayhew was covered by the Agreement. The Contract specifically provided that it was subject to the terms and conditions of the Agreement.

20    Part 3 of the Agreement deals with remuneration. Clause 9 provides as follows:

When an Employee accepts a Company offer of a Salary Package the following will apply: -

9.1    The value of the Salary Package will be greater than the sum of what the Employee would have received if they remained on hourly wages (with hours of work averaged over the year) and were paid under the Staff Award and the LSL Award;

9.2    The salary package will be in lieu of all payments under the Staff Award, LSL Award and overaward statutory or other employment obligations.

21    The term “Salary Package” is defined in cl 2.9 as meaning “the annual Total Employment Compensation (TEC) paid monthly”.

22    Clause 10 contains further provisions in relation to salary packages or arrangements. Clauses 10.1, 10.2 and 10.3 provide as follows:

The Employees Salary Package Offer will consist of the following:

10.1    Total Employment Compensation (TEC)

The Employee’s remuneration will be known as the Total Employment Compensation (TEC). The TEC is in lieu of all entitlements, Award, Agreement, over award or legislative. The TEC will be reviewed in December of each year, with any changes applying from 1 January the following year.

10.2    Shift/Roster Allowance

If the Employee is required to work shiftwork or rosters outside the normal Monday-Friday working week the Employee will be paid an additional Shift/Roster Allowance. This allowance is paid during actual working time where specified in this Agreement that payment is as if at work, or without loss of pay. Shift/Roster Allowance is not payable on payments made on termination of employment.

10.3    Notional Base Salary

The Notional Base Salary (NBS) shall be 80% of the Employee’s TEC. The NBS shall be used to compute payments on termination of employment.

23    The Agreement does not contain a definition of the word “Award” as used in cl 10.1. Clause 2.5 of the Agreement defines “Staff Award” as the Coal Mining Industry (Supervision and Administration) Consent Award 1999 (the 1999 Award), as varied, or “such other industrial instrument that supersedes that Award”. The Agreement also defines “LSL Award” in cl 2.7 as meaning the Coal Mining Industry (Staff) Long Service Leave Award 1991, as varied, or “such other industrial instrument that supercedes that Award”. Finally, it defines “Other Award” in cl 2.8 as meaning “an award of the Commission [Australian Industrial Relations Commission] (other than the Staff Award and LSL Award), an award of the New South Wales Industrial Relations Commission, and/or an Act of the New South Wales Parliament”.

24    It should perhaps also be noted, in this context, that there was some evidence that the 1999 Award was the “underlying award” at the time the Agreement was certified. The 1999 Award provided for certain entitlements, including disability payments and allowances, annual leave loading and overtime payments. There was also evidence concerning the Black Coal Mining Industry Award 2010 (the 2010 Award) which was said to “cover Mr Mayhew during his employment”. The 2010 Award also provided for certain entitlements including overtime payments and annual leave loading.

25    Clause 10.4 provides that employees have the option of some pre-tax deductions from their Total Employment Compensation, including “a motor vehicle under a novated lease”.

26    Clause 6.8.1 provides as follows in relation to payments on termination of employment:

On termination of employment (other than by dismissal for serious misconduct) the Employee shall be paid for untaken Annual Leave and Long Service Leave (if applicable), at the NBS at the time of termination of employment.

27    Clause 13 of the Agreement deals with the hours of work and shifts. It provides as follows:

The TEC recognises and reflects the requirement for Employees to work on different shifts and rosters:

13.1    Employees will be required to work such hours as may be necessary to fully perform all the requirements of the position and to contribute to the efficiency and productivity of the Company.

13.2    Employees may be required to work shifts of up to 12 ½ hours duration. Unless otherwise agreed, Employees will not be required to work more than three consecutive 12 ½ hour shifts as part of a normal roster cycle.

13.3    The Company may carry out all operations 24 hours per day on any day of the week and implement roster systems that meet the needs of the site and takes into account health and safety needs of Employees. Prior to the introduction of any new roster system, the Company will consult with the Employees directly affected. The Company will give prompt consideration to any matter raised by the Employees.

13.4    Employees may be required to change over on the job for communication and work continuity.

13.5    The Company may require an employee to change shift or roster. Employees will be given as much notice as possible of any such change. Generally notice shall be not less than one (1) week.

Mr Mayhew’s previous employment

28    There were some agreed facts and evidence concerning Mr Mayhew’s previous employment with companies related to Bulga. The terms of Mr Mayhew’s previous employment were said by Bulga to provide some context to the terms of his employment with it. Mr Mayhew and the Association ultimately submitted that the facts concerning Mr Mayhew’s previous employment were of little or no relevance or utility in resolving the issues raised by the proceeding.

29    Mr Mayhew had previously been employed by a related body corporate called Bulga Coal Management Pty Limited. During his employment with Bulga Coal Management, Mr Mayhew was covered by an enterprise agreement known as the South Bulga Underground Coal Mine Certified Agreement 1996 (the 1996 Agreement). Mr Mayhew was paid overtime and shift allowances under the 1996 Agreement. He was not provided with a company vehicle, or paid a vehicle or telephone allowance. The 1996 Agreement made no provision for the provision or payment of any such entitlements.

Mr Mayhew’s retrenchment

30    Mr Mayhew was retrenched by Bulga in September 2016.

31    The long service leave entitlements of some employees in the black coal mining industry are determined by the Long Service Leave Act. The employees who are covered by the Long Service Leave Act are those that meet the definition of “eligible employee” in s 4(1) of the Long Service Leave Act. Mr Mayhew and other staff employees of Bulga fell, or fall, within that definition and therefore were, and are, covered by the Long Service Leave Act. The relevant provisions of the Long Service Leave Act are set out later.

32    At the date of his retrenchment, Mr Mayhew had accrued 833.75 hours of long service leave. Upon his retrenchment, Mr Mayhew requested Bulga to pay his accrued long service leave.

33    In September 2016, Bulga paid Mr Mayhew $62,848.08 less tax in respect of his long service leave entitlements. That amount was calculated on the basis that Mr Mayhew’s base rate of pay for the purposes of the Long Service Leave Act was his Notional Base Salary or NBS as defined in the Agreement and Contract, being 80% of his Total Employment Compensation or TEC of $171,500.

Other Bulga employees

34    There were some agreed facts and some evidence concerning the previous employment of some other employees of Bulga. Those facts were said by Bulga to provide some contextual background to the Agreement.

35    Prior to 1999, some employees of Bulga were paid a salary and, in addition, either a vehicle or vehicle allowance, a telephone allowance, telephone costs and an operational allowance. After 1999, some of those employees transitioned to an arrangement in which they were paid a higher salary but were not provided with a vehicle or any of the previous allowances. The difference between the previous salary and the increased salary did not correspond to the value of the vehicle or vehicle allowance, but the new salary was at least 20% higher than the previous salary.

36    Mr Mayhew and the Association ultimately submitted that the facts and evidence concerning the transition of some employees to salary arrangements after 1999 had little or no relevance or utility in determining Mr Mayhew’s “base rate of pay” for the purposes of the Long Service Leave Act.

37    There were also some agreed facts and evidence concerning some other specific employees of Bulga, other than Mr Mayhew, and the basis upon which Bulga calculated their long service leave entitlements upon their retrenchment. The Association contended, and Bulga disputed, that the facts and evidence concerning the other employees provided a proper basis for the making of the declaration sought by the Association concerning the proper calculation of the long service leave entitlements of all employees, not just Mr Mayhew.

38    Mr Barry Hand, Mr Garry Russell and Mr Gregory Short were first employed by Bulga in 2002. Each of them signed an Offer of Employment & Salary Package Agreement which was in relevantly the same terms as the Contract. Each of them was covered by the Agreement during their employment with Bulga.

39    Like Mr Mayhew, before being employed by Bulga, each of Messrs Hand, Russell and Short was employed by Bulga Coal Management and, in that context, each was covered by the 1996 Agreement. They were each paid overtime and shift allowances under the 1996 Agreement, but were not provided with a vehicle, or paid a vehicle or telephone allowance.

40    Mr David Martin was first employed by Bulga in 2009. He was not previously employed by Bulga Coal Management. Mr Martin signed an Offer of Employment & Salary Package Agreement which was in relevantly the same terms as the Contract and was covered by the Agreement during his employment with Bulga.

41    The employment of each of Messrs Hand, Russell, Short and Martin was terminated in 2018. As was the case with Mr Mayhew, the accrued long service leave entitlements of each of Messrs Hand, Russell, Short and Martin was calculated on the basis that their base rate of pay for the purposes of the Long Service Leave Act was their Notional Base Salary as specified in the contracts signed by them, as opposed to their Total Employment Compensation or TEC less superannuation deductions. Each of Messrs Hand, Russell, Short and Martin gave affidavit evidence asserting that they were dissatisfied with the calculation of their long service leave entitlements. That evidence was objected to. Their evidence that they were dissatisfied was relevant to the declaratory relief sought by the Association and was not objectionable as to form. The balance of their evidence in respect of that issue, however, was inadmissible because it amounted to little more than argument or submission. It may be taken to have been rejected and read only as a submission.

The Association’s dispute with Bulga concerning long service leave entitlements

42    The Association, representing the interests of staff employees, queried Bulga management concerning the basis upon which long service leave entitlements had been calculated in the case of various staff employees. In an email dated 15 January 2018 from a Bulga operations manager to an industrial officer at the Association, the operations manager responded to issues that had been raised by the industrial officer and stated:

…

3.    You believe Long Service Leave should be paid out at 100% on termination. Bulga Underground Operations P/L intends to pay in accordance with the Certified Agreement applicable to staff at Bulga Underground Mine. This Agreement defines Base Rate as 80% of TFR for calculation of benefits on termination of employment. The approach to LSL payment is compliant with law. While service rules have been amended to ‘qualifying’ rather than ‘continuous’ service application, Payment provisions in the Coal LSL Act are unchanged for over 25 years.4.    You believe retrenchment payments should be paid at 100%. As point 3 above, we intend to pay in accordance with the Certified Agreement applicable to staff at Bulga Underground Mine. This Agreement defines Base Rate as 80% of TFR for calculation of benefits on termination of employment.

…

43    The opposing positions taken by the parties in relation to the calculation of long service leave entitlements on termination due to redundancy was confirmed in subsequent correspondence, in particular a letter from the Association to Bulga dated 16 March 2018 and a letter from Bulga to the Association dated 23 March 2018. The Association maintained that an employee’s base rate of pay for the purposes of the Long Service Leave Act was 90.5% of the employee’s Total Employment Compensation, being the employee’s Total Employment Compensation less the superannuation component of 9.5%. Bulga maintained that an employee’s base rate of pay was 80% of the employee’s Total Employment Compensation.

44    On 17 April 2018, the Association notified a dispute under the Agreement concerning the calculation of long service leave entitlements of staff employees upon termination of their employment.

45    An officer of the Association gave affidavit evidence which addressed, or purported to address, the number of staff employees who had been made, or who were likely to be made, redundant by Bulga and whose long service leave entitlements upon termination were, or were likely to be, the subject of the dispute. Bulga objected to that evidence on the basis that it was hearsay or objectionable as to form.

46    There was merit in that objection. The paragraphs of that affidavit which were the subject of objection (paragraphs 10, 11 and 12) were inadmissible and may be taken to have been rejected. It may nevertheless be inferred that there were a number of staff employees of Bulga, in addition to Messrs Mayhew, Hand, Russell, Short and Martin, who had been, or were likely in the near future to be, made redundant. It may also be inferred, particularly based on the statements made in the email dated 15 January 2018 and Bulga’s letter to the Association dated 23 March 2018, that Bulga had, or intended to, calculate the long service leave entitlements of all its staff employees who had been, or were to be, made redundant on the same basis that it had calculated Mr Mayhew’s long service leave entitlements. In particular, it may be inferred that Bulga has and will continue to calculate amounts payable to its staff employees who are made redundant on the basis that their base rate of pay is 80% of their Total Employment Compensation.

47    It should finally be noted, in this context, that the correspondence between the Association and Bulga quantified the superannuation component of staff employee’s remuneration as 9.5% of their Total Employment Compensation. That figure also appears in the Association and Mr Mayhew’s concise statement and was referred to in the submissions. Bulga did not dispute that an employee’s Total Employment Compensation included a superannuation component. Nor did it appear at any point to take issue with the assertion that the superannuation component of Mr Mayhew’s salary or Total Employment Compensation was 9.5%, though the precise percentage amount of the superannuation component was not addressed anywhere, at least in clear terms, in either the evidence or agreed facts.

The Long Service Leave Act

48    Section 3 of the Long Service Leave Act provides that the main object of the Act is to “make provision in relation to long service leave in the black coal mining industry” by, amongst other things, “providing minimum entitlements and rights in respect of long service leave for eligible employees”.

49    As has already been noted, there is no dispute that staff employees of Bulga, including Mr Mayhew, fall or fell within the definition of “eligible employee” in s 4(1) of the Long Service Leave Act.

50    Part 5A of the Long Service Leave Act contains provisions relating to the entitlement to long service leave. Section 39AC of the Long Service Leave Act deals with payment for long service leave in circumstances where the leave is taken. It provides as follows:

(1)    If an eligible employee takes a period of long service leave, the employer must pay the employee for the long service leave no less than an amount that is equal to the base rate of pay (including incentive-based payments and bonuses) that would have been payable to the employee during the period had the employee not taken the leave.

  (2)    Subsection (1) is a civil penalty provision.

Note 1:    Part 7A provides for pecuniary penalties for contraventions of civil penalty provisions.

Note 2:    Division 4 of this Part provides other remedies for contraventions of civil penalty provisions.

  (3)    In this section:

(a)    a reference to the base rate of pay payable to an employee is a reference to the employee’s base rate of pay before any amounts are deducted under a salary sacrifice arrangement; and

(b)    a reference to an incentive-based program in relation to an employee is a reference to a payment of that kind that is paid to the employee at least once a month; and

(c)    a reference to a bonus in relation to an employee is a reference to a bonus that is paid to the employee at least once a month.

51    It can be seen that the key element in determining the amount of the payment for long service leave is the employee’s “base rate of pay”. No issue arises in this matter concerning the inclusion of “incentive-based payments and bonuses” as those expressions are explained in s 39AC(3)(b) and (c) of the Long Service Leave Act. Nor does any issue arise in relation to amounts deducted under any “salary sacrifice arrangement”.

52    Section 4(1) of the Long Service Leave Act provides that the expression “base rate of pay” has the same meaning as in the Fair Work Act.

53    Section 16(1) of the Fair Work Act defines an employee’s “base rate of pay” in the following terms:

The base rate of pay of a national system employee is the rate of pay payable to the employee for his or her ordinary hours of work, but not including any of the following:

(a)    incentive-based payments and bonuses;

(b)    loadings;

(c)    monetary allowances;

(d)    overtime or penalty rates;

(e)    any other separately identifiable amounts.

54    It can be seen that the Fair Work Act definition of “base rate of pay” excludes “incentive-based payments and bonuses”. Curiously, however, while the Long Service Leave Act picks up the Fair Work Act definition of “base rate of pay”, it specifically provides that an eligible employee’s base rate of pay includes incentive-based payments and bonuses.

55    It is perhaps relevant to note in this context that, in contrast to an employee’s “base rate of pay”, s 18(1) of the Fair Work Act contains the following definition of an employee’s “full rate of pay”:

The full rate of pay of a national system employee is the rate of pay payable to the employee, including all the following:

(a)    incentive-based payments and bonuses;

(b)    loadings;

(c)    monetary allowances;

(d)    overtime or penalty rates;

(e)    any other separately identifiable amounts.

56    It can be seen that there are two key elements to the definition of “base rate of pay”. The first element is that it consists of the “rate of pay payable to the employee for his or her ordinary hours of work”. The second element is that the base rate of pay does not include certain payments, being incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates and “any other separately identifiable amounts”. As already noted, the effect of s 39AC of the Long Service Leave Act is to effectively reinstate, as it were, “incentive-based payments and bonuses” as part of an employee’s base rate of pay for the purposes of the Long Service Leave Act.

57    Section 4(1) of the Long Service Leave Act defines the expression “ordinary hours of work” of an eligible employee as follows:

(a)    if an industrial instrument that covers the employee specifies, or provides for the determination of, the ordinary hours of work of the employee – those hours; or

(b)    otherwise – the hours agreed by the employee and his or her employer as the employee’s ordinary hours of work;

regardless of the number of hours actually worked by the employee.

58    The Long Service Leave Act does not include any definitions of “loadings”, “monetary allowances” or “overtime or penalty rates”.

59    Part 5A of the Long Service Leave Act also includes provisions relating to the payments in respect of long service leave where an employee ceases to be an eligible employee. Section 39C(1) of the Long Service Leave Act provides that if an employee ceases to be an eligible employee (other than by death) and at the time of so ceasing the employee has a period of untaken long service leave, the employer must, within 30 days of being requested to do so, pay the employee “no less than the amount that would have been payable to the employee under this Part had the employee taken that period of long service leave immediately before ceasing to be an eligible employee, less any amount previously paid to the employee under this section”.

60    Section 39CB of the Long Service Leave Act provides for payment upon cessation by reason of redundancy. It provides as follows:

  (1)    This section applies if:

(a)    an employee ceases to be an eligible employee because he or she is made redundant; and

(b)    at the time of so ceasing, the employee has completed a period, or periods, of qualifying service (being a period that is, or periods that add up to, at least 6 years) in respect of which the employee is not entitled to long service leave under this Part; and

(c)    at any time after so ceasing, the employee requests the employer, in writing, to make a payment under this section.

(2)    The employer must, within 30 days after the request is made, pay the employee no less than the amount that would have been payable to the employee under this Part had the employee:

(a)    been entitled to long service leave for the period, or periods, of qualifying service; and

(b)    taken that long service leave immediately before ceasing to be an eligible employee;

less any amount previously paid to the employee under this section.

  (3)    Subsection (2) is a civil penalty provision.

Note 1:    Part 7A provides for pecuniary penalties for contraventions of civil penalty provisions.

Note 2:    Division 4 of this Part provides other remedies for contraventions of civil penalty provisions.

61    The reference in ss 39C and 39CB(2) to “the amount that would have been payable to the employee under this Part” is a reference to the amount that would otherwise have been payable under s 39AC(1) of the Long Service Leave Act. As has been seen, the calculation of that amount hinges on the determination of the employee’s “base rate of pay” as defined in s 4(1) of the Long Service Leave Act and s 16 of the Fair Work Act.

62    Division 5 of Pt 5A of the Long Service Leave Act deals with the relationship between Pt 5A and other laws and industrial instruments. Section 39E of the Long Service Leave Act provides that Pt 5A applies to eligible employees and their employers to the exclusion of Div 9 of Pt 2-2 of the Fair Work Act and s 39EA provides that Pt 5A applies in relation to eligible employees and their employers to the exclusion of a State or Territory law that deals with long service leave. Section 39EB, which deals with the relationship between Pt 5A and industrial instruments, such as the Agreement, provides as follows:

This Part establishes minimum entitlements and rights in respect of long service leave for an eligible employee and is not intended to override entitlements or rights in respect of long service leave under an industrial instrument that covers the employee.

The CENTRAL ISSUE

63    The central issue for determination, at least in relation to Mr Mayhew’s case, is whether his “base rate of pay”, for the purpose of the calculation of his long service leave payment under s 39CB of the Long Service Leave Act, is the amount referred to in the Contract and Agreement as his “Total Employment Compensation” less the applicable superannuation component, or 80% of his Total Employment Compensation, being what is referred to or defined in the Contract and the Agreement as the “Notional Base Salary”?

64    The Association and Mr Mayhew contended that Mr Mayhew’s base rate of pay was his Total Employment Compensation, which at the date of his termination was $171,500, less the 9.5% superannuation component deducted from his salary. In their submission, putting the superannuation component to one side, Mr Mayhew’s Total Employment Compensation of $171,500 was his annual salary for performing his job, irrespective of the number of hours he worked or when he performed that work. It did not include any identified or identifiable loading, allowance, overtime or penalty rate, or any other separately identifiable amount. To the extent that Mr Mayhew was paid a shift allowance, or received any payments for overtime, those payments were not part of his Total Employment Compensation. The Association and Mr Mayhew did not contend that any payments for shift allowance or overtime should be included in calculating Mr Mayhew’s base rate of pay.

65    Bulga contended that Mr Mayhew’s Total Employment Compensation was not his base rate of pay for the purposes of the Long Service Leave Act because it included compensation for loadings, overtime, allowances and other separately identifiable amounts. The main basis of that contention was that cl 10.1 of the Agreement provides that the Total Employment Compensation is “in lieu of all entitlements, Award, Agreement, over award or legislative”. A provision to the same effect was included in cll 1.3 and 3.1 of the Contract. It was submitted, on that basis, that Mr Mayhew’s Total Employment Compensation subsumed such separately identifiable amounts that otherwise were payable under any industrial instrument or legislation. It was, in Bulga’s submission, an “all-up” payment in consideration for, and in lieu of, all other payments and benefits. In that regard, Bulga relied, presumably as a contextual consideration, on the fact that in the years preceding the certification of the Agreement, some employees had transitioned to salary-based arrangements which subsumed the payment of vehicle and other allowances.

66    Bulga also relied on the definition of “full rate of pay” in the Fair Work Act. It contended that an employee’s “base rate of pay” is necessarily less than his or her “full rate of pay”, which was an “all-up” payment. In Bulga’s submission, it would have been open to Parliament to provide that an employee’s long service leave entitlements were to be calculated by reference to his or her “full rate of pay” as defined in the Fair Work Act, but Parliament did not “utilise that mechanism”. Bulga also pointed out, in that context, that other minimum entitlements in the Fair Work Act are calculated by reference to an employee’s base rate of pay, including annual leave (s 90(1) of the Fair Work Act), personal or carer’s leave (s 99 of the Fair Work Act), compassionate leave (s 106 of the Fair Work Act) and jury service (s 111(2) of the Fair Work Act).

67    Bulga’s case was that Mr Mayhew’s base rate of pay for the purposes of the Long Service Leave Act was his Notional Base Salary, as defined in cll 2.10 and 10.3 of the Agreement and as referred to in cl 5.1 and Schedule A of the Contract. In essence, it contended that 80% of an employee’s Total Employment Compensation was paid for the employee’s ordinary hours of work, and that 20% represented a “separately identifiable amount” referable to additional benefits or entitlements. In Bulga’s submission, the effect of cll 2.10 and 10.3 was to prescribe the base rate of pay for the purposes of the Long Service Leave Act.

the proper determination of Mr Mayhew’s base rate of pay

68    The better view is that Mr Mayhew’s base rate of pay at the time of the termination of his employment was, as he and the Association contended, his annual salary of $171,500 less the superannuation component of that salary. That was the “rate of pay payable to [Mr Mayhew] for his … ordinary hours of work”. It did not include any loadings, monetary allowances, overtime or penalty rates or any other “separately identifiable amounts”.

69    The combined effect of the relevant provisions in the Agreement and the Contract make it clear that Mr Mayhew was paid a yearly salary, which was $108,000 at commencement and $171,500 at termination. The Contract provided that the yearly salary would “fully compensate” Mr Mayhew for “fulfilling all of the requirements of [his] position”: cl 1.3 of the Contract. The Agreement provided that staff employees covered by the Agreement, including Mr Mayhew, were required to work on “different shifts and rosters” and to work “such hours as may be necessary” for him to “fully perform all the requirements of the position”: cll 13 and 13.1 of the Agreement. It follows that Mr Mayhew was paid his salary or Total Employment Compensation irrespective of the number of hours that he had to work to fully perform the requirements of his position and irrespective of the particular circumstances in which he performed that work. There were no circumstances in which Mr Mayhew could be paid less than his salary or Total Employment Compensation. In particular, there were no circumstances in which he could be paid 80% of his Total Employment Compensation, being the Notional Base Salary.

70    The only allowance that was payable to Mr Mayhew under the terms of the Agreement and Contract was a “Shift/Roster Allowance”: cl 10.2 of the Agreement; cl 4.1 of the Contract. That allowance was an additional payment that was a supplement to, and not included in, Mr Mayhew’s salary or Total Employment Compensation. It accordingly could not be included in, or considered part of, Mr Mayhew’s base rate of pay for the purposes of calculating his long service leave entitlements. The Association and Mr Mayhew did not contend that the Shift/Roster Allowance was part of Mr Mayhew’s base rate of pay. Otherwise, the Agreement and Contract did not provide for Mr Mayhew to be paid any other incentive-based payments and bonuses, loading, allowance or overtime or penalty rates for working any particular shift, or working on any particular day, for example a weekend or public holiday, or for working more than a particular number of hours on any particular day or days.

71    Aside from the Shift/Roster Allowance, under the terms of the Agreement and Contract there was no circumstance in which Mr Mayhew was entitled to receive remuneration exceeding the Total Employment Compensation. While it appears that Mr Mayhew did receive some additional overtime payments, those payments were only made when he filled in for other employees who were unable for some reason to perform their duties. He presumably received extra remuneration for that work because it was work which was additional to the work necessary to fulfil the requirements of his position. In any event, neither Mr Mayhew nor the Association contended that any additional overtime payments Mr Mayhew received were part of his base rate of pay.

72    The considerations just referred to support the proposition that the salary or Total Employment Compensation payable to Mr Mayhew under the terms of the Agreement and Contract was the “rate of pay payable to [Mr Mayhew] for his … ordinary hours of work” for the purposes of s 39AC of the Long Services Leave Act..

73    It may be accepted that the point or purpose of the salary arrangement reflected in the Agreement and Contract would appear to have been to provide for a single sum to remunerate the employee for performing his or her duties and responsibilities and to move away from previous remuneration packages that involved remuneration based on hourly wages together with provision for the payment of loadings, allowances or penalty rates for working on particular shifts, or at particular times, or in particular circumstances. It does not follow, however, that when calculating an employee’s base rate of pay for the purposes of the Long Service Leave Act, the employee’s single salary package should be taken to relevantly include any loading, allowance or penalty rate that may otherwise have been paid or payable to the employee under the previous arrangements. The salary may have been intended to compensate the employee for what, under other arrangements, may have been compensated by the payment of additional loadings, allowances or rates, but that does not mean that the salary relevantly includes any such identified or identifiable loadings, allowances or rates. While the salary may have been “in lieu of” entitlements that may have been payable under other arrangements, it did not relevantly “include” any such entitlements.

74    The definition of “base rate of pay” in s 16(1) of the Fair Work Act makes it clear that the relevant incentive-based payments and bonuses, loadings, monetary allowances, overtime or penalty rates or other amounts that are excluded from the determination of the base rate of pay are those that are not otherwise part of, or are payable in addition to, the rate of pay payable to the employee for his or her ordinary hours of work. That is particularly apparent from the use of the words “separately identifiable amounts” in paragraph (e). That indicates that the incentive-based payments and bonuses, loadings, allowances and overtime or penalty rates that are referred to in paragraphs (a), (b), (c) and (d) must also be separately identifiable; that they are identified or identifiable as payments separate to, or in addition to, the rate of pay payable to the employee for his or her ordinary hours of work.

75    There is also much to be said for the proposition that the general words “separately identifiable amounts” in paragraph (e) should be read ejusdem generis with the specific types of payments or amounts referred to in paragraphs (a) to (d). It would follow that, to fall within paragraph (e), the separately identifiable amounts must be of the same genus or have the same character as the payments or amounts referred to in (a) to (d). That genus would appear to be payments or amounts payable to an employee to compensate them for working beyond or outside the ordinary hours of work, or to compensate them for working in specific circumstances, or for achieving specific outcomes, that otherwise warrant additional compensation or allowance. It would not include payments to an employee for performing his or her ordinary hours of work or ordinary duties.

76    Aside from the Shift/Roster Allowance payable to Mr Mayhew under the terms of the Contract and Agreement, Bulga was unable to point to any specific or separately identifiable loading, monetary allowance, overtime or penalty rate or other relevant amount that was paid or payable to Mr Mayhew in addition to, or as part of, his salary or Total Employment Compensation.

77    It appeared to be implicit, if not explicit, in Bulga’s submissions concerning the Notional Base Salary, as defined in the Agreement, that 20% of Mr Mayhew’s Total Employment Compensation could properly be characterised as constituting or comprising some form of loading, allowance, overtime or penalty rate or other separately identifiable amount for the purposes of the definition of “base rate of pay”. There is, however, no proper basis for any such submission.

78    The payments and amounts which s 16(1) of the Fair Work Act excludes from the determination of an employee’s base rate of pay are actual identifiable amounts which are paid or payable to an employee and which are separate from, or payable in addition to, the rate of pay payable to the employee for his or her ordinary hours of work. They are not notional amounts or contractual constructs. Nothing in the Agreement or Contract suggests that Mr Mayhew was ever paid or entitled to be paid a separately identifiable amount comprising 20% of his salary or Total Employment Compensation. Rather, the proper construction of the Agreement and Contract was that Mr Mayhew was to be paid a total or single amount to fully compensate him for fulfilling all of the requirements of his position. Other than the separately identified Shift/Roster Allowance, he was to receive no other payment or amount separate to his pay for his ordinary hours of work. The “Notional Base Salary” as defined in the Agreement and Contract was a construct to be used to compute payments on termination of employment. It was not reflective of the actual payments made to Mr Mayhew for the ordinary hours of his work.

79    It may perhaps be accepted that the genesis of the Notional Base Salary construct was that the salary package or Total Employment Compensation payable to employees covered by the Agreement was higher than the amount that employees had or may previously have received when, under different contractual or industrial arrangements, an employee’s remuneration was calculated on the basis of hourly wages together with other entitlements under then applicable awards: see cl 9.1 of the Agreement. It may also be accepted that the salary package or Total Employment Compensation was in lieu of any entitlements that may have been payable to an employee under previous arrangements: see cll 9.2 and 10.1 of the Agreement and, in Mr Mayhew’s case, cl 3.1 of the Contract. It does not follow, however, that the 20% difference between the Total Employment Compensation and the Notional Base Salary can be said to be a loading, monetary allowance, an overtime or penalty rate or some other “separately identifiable amount” for the purposes of the s 16 Fair Work Act definition of “base rate of pay”. Neither the Agreement nor, in Mr Mayhew’s case, the Contract so provide.

80    There is also no basis for Bulga’s contention that the Agreement “prescribes” the Notional Base Salary as the base rate of pay for the purposes of the Long Service Leave Act. It may be accepted that the interpretation of an enterprise “turns upon the language of the particular agreement, understood in the light of its industrial context and purpose”: Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [2] (per Gleeson CJ and McHugh J). Even so, neither the Agreement nor the Contract can properly be construed as providing that Mr Mayhew was to be paid the Notional Base Salary for his ordinary hours of work, and then entitled to receive, in certain circumstances, an additional separately identifiable amount, or additional separately identifiable amounts, for or representing loadings, monetary allowances, overtime or penalty rates, or any other form of additional compensation or allowance. There were no circumstances, under the terms of the Agreement and Contract, in which Mr Mayhew could be paid only the Notional Base Salary.

81    The Notional Base Salary was, and is, an entirely notional amount which was defined and provided for in the Agreement and Contract for the purpose of calculating entitlements. It did not reflect, in any way, the rate of pay actually payable to Mr Mayhew for his ordinary hours of work. The question whether the provisions in the Agreement and Contract concerning the calculation of entitlements based on the Notional Base Salary are overridden by the relevant provisions in the Long Service Leave Act is considered later in the context of an alternative argument that was advanced by Bulga.

82    It should also be noted, in the context of Bulga’s contentions concerning the Notional Base Salary, that the Agreement was made and certified well before the relevant provisions in Pt 5A Div 3 of the Long Service Leave Act in their present form were inserted into the Act by the Coal Mining Industry (Long Service Leave) Legislation Amendment Act 2011 (Cth). Indeed, the Agreement was made and certified before the passing of the Fair Work Act. In those circumstances, Bulga’s contention that the provision in the Agreement concerning the Notional Base Salary in effect prescribed, or was intended to prescribe, the base salary for the purposes of either the Fair Work Act or the Long Service Leave Act is plainly untenable.

83    Bulga’s submissions based on the definition of “full rate of pay” in the Fair Work Act also have no merit. It may be accepted that in many cases an employee’s “base rate of pay” will be less than his or her “full rate of pay” as defined in the Fair Work Act. But that will only be the case where the employee receives incentive-based payments or bonuses, or loadings, or monetary allowances, or overtime or penalty rates or any other separately identifiable amounts in addition to the rate of pay payable to the employee for his or her ordinary hours of work. That was the situation in Mr Mayhew’s case because he received a shift or roster allowance and, it appears, some overtime payments, in addition to his salary or Total Employment Compensation. Neither Mr Mayhew nor the Association contended that the shift or roster allowance and overtime payments should be included in his base rate of pay. Indeed, they submitted that they should not.

84    In any event, the fact that an employee’s base rate of pay is ordinarily less than their full rate of pay, is essentially immaterial. The proposition that Parliament could have, but did not, provide that certain entitlements, including long service leave, were to be calculated by reference to an employee’s “full rate of pay” as defined in the Fair Work Act does not assist in construing the relevant provisions, or in determining what an employee’s base rate of pay is in all the circumstances.

85    It is also incorrect to characterise the “full rate of pay” as defined in the Fair Work Act as an “all-up” payment. An employee’s full rate of pay is the total amount paid or payable to the employee for his or her ordinary hours of work, plus any amount paid or payable to the employee in respect of incentive-based payments and bonuses, loadings, monetary allowance, overtime or penalty rates or other separately identifiable amounts. It is therefore incorrect to characterise Mr Mayhew’s Total Employment Compensation as his full rate of pay as defined in the Fair Work Act. To the extent that it is relevant, Mr Mayhew’s full rate of pay was his Total Employment Compensation, plus the Shift/Roster Allowance, plus any amount actually received by him as overtime for filling in for other employees.

86    There is very little authority in relation to the statutory definition of “base rate of pay”. Such authority as there is tends to support the proposition that Mr Mayhew’s base rate of pay was his salary or Total Employment Compensation (less the superannuation component) and not the Notional Base Salary referred to in the Agreement and Contract.

87    In Maughan Thiem Auto Sales Pty Ltd v Cooper [2014] FCAFC 94; 222 FCR 1, an employee who had originally worked for five days a week commencing at 8.00 am agreed to work pursuant to a new arrangement whereby he worked on a longer afternoon shift four days a week. His employment contract which included the new arrangement recorded his annual salary and noted that it included an 18% “penalty rate” for the afternoon shift. The employer subsequently decided to do away with the afternoon shift and the employee was offered to work on the dayshift at a salary which was reduced by the removal of the penalty rate. The employee refused that offer and considered himself to have been made redundant. An industrial magistrate subsequently held that the employee’s base rate of pay for the purposes of calculating his redundancy pay under s 119(2) of the Fair Work Act was his salary upon termination, which included the 18% penalty rate. That finding was overturned on appeal to the Full Court.

88    Katzmann J, with whom Greenwood and Besanko JJ agreed, found that the employee’s base rate of pay was his salary less the amount referred to in his employment contract as the 18% penalty rate. Her Honour concluded that this amount was a “separately identifiable amount” and therefore fell within the terms of s 16(1) of the Fair Work Act. Her Honour no doubt meant that the 18% penalty rate fell within s 16(1)(e) of the definition and was therefore excluded from the calculation of the base rate of pay. Her Honour reasoned as follows (at [23]-[24]):

Mr Cooper submitted that the 18% referred to in his contract was not a premium (or penalty). Rather, he said it was part of the agreed variation to the contract that occurred in 2008 and he was entitled to the increase “for all purposes”. He contended that it was illogical to exclude the 18% from the calculation of the base rate of pay. As he became redundant at the time he was working the afternoon shift and his pay at that point included the 18%, he submitted that it was the inclusive amount that represented his base rate. He also submitted, in effect, that because the 18% was included in his contract and was not paid pursuant to the award it could be ignored because the definition of “base rate of pay” in s 16(1) of the FW Act only excluded penalty rates fixed by an award.

I reject these submissions. The contract provided for a separately identifiable “penalty rate” for working the afternoon shift. In that respect it reflected the terms of the award. Presumably, that was its intention. I accept that merely because it is described as a “penalty rate” does not mean that it is. It might equally have been called a shift loading or allowance. But whatever it is called, it is a “separately identifiable” amount. Contrary to Mr Cooper’s argument, it does not matter that the salary is stated in the contract to be inclusive of the 18% “penalty rate”; what matters is that the rate falls within the terms of s 16(1) of the FW Act. The position would doubtless be different if the contract had been silent as to a shift allowance or had simply stated that the remuneration was inclusive of any or all penalties or allowances. The argument that s 16(1) was designed only to exclude award-derived penalty rates does not withstand scrutiny. There is no reason to read the section down in this way. On the contrary, the section is broad in its scope and, as Mr Cooper conceded, bonus payments, which are also mentioned in the subsection, are not typically creatures of awards.

89    It may be noted that Katzmann J acknowledged that the position would doubtless have been different if the contract had simply stated that the remuneration was inclusive of any or all penalties or allowances. That is essentially what the Agreement and Contract provided in Mr Mayhew’s case. Unlike the contract in Maughan, neither the Agreement nor the Contract provided that the salary or Total Employment Compensation payable to Mr Mayhew was inclusive of a separately identifiable amount, either in percentage or dollar terms. While the defined Notional Base Salary was 20% less than the Total Employment Compensation, it does not follow that the Agreement or Contract can, or should, be construed as providing that the Total Employment Compensation included a separately identifiable amount of 20%, let alone that any such amount was, or was akin to, a loading, monetary allowance or overtime or penalty rate.

90    The circumstances in Maughan are also distinguishable from Mr Mayhew’s case. In Maughan, it was clear that, if the employee was not required to work the longer afternoon shift, he would not have received the 18% penalty rate. In Mr Mayhew’s case, he was entitled, under the terms of the Contract and Agreement, to receive the Total Employment Compensation notwithstanding the hours he worked, or the shifts he was required to work on, or the circumstances in which he was required to perform his work. There was no circumstance in which he would only receive the Notional Base Salary or only 80% of the Total Employment Compensation.

Bulga’s alternative submission and the operation of s 39EB

91    In the alternative to its primary submissions concerning Mr Mayhew’s base rate of pay, Bulga contended that even if the Notional Base Salary was not Mr Mayhew’s base rate of pay for the purposes of the Long Service Leave Act, cl 6.8.1 of the Agreement nevertheless provided that the Notional Base Salary was to be used to calculate long service leave entitlements upon termination. Clause 5.1 of the Contract was to the same effect. In that context, Bulga submitted that the effect of s 39EB of the Long Service Leave Act was that the Agreement prevailed over the Long Service Leave Act provisions.

92    That submission has no merit and is rejected.

93    There can be little doubt that the Agreement and Contract expressly provided that Mr Mayhew’s defined Notional Base Salary was to be used to compute payments on termination of employment. The difficulty for Bulga, however, is that the proper construction of s 39EB is that Pt 5A of the Long Service Leave Act will not override entitlements or rights in respect of long service leave under an industrial instrument, such as the Agreement, if those entitlements or rights are more beneficial than those provided under the Act. The Long Service Leave Act will, however, override entitlements or rights in respect of long service leave in an industrial instrument if those entitlements or rights are less favourable than those provided for in the Act. That is clear from the statement in s 39EB that “[t]his Part [Pt 5A] establishes minimum entitlements and rights”. Those words must also be read in the context of, and are in any event consistent with, the statement in s 3(ab) of the Long Service Leave Act that the “main object” of the Act is to “make provision in relation to long service leave in the black coal mining industry by … providing minimum entitlements and rights in respect of long service leave for eligible employees”.

94    To the extent that there is any uncertainty or ambiguity in relation to the meaning of s 39EB, that uncertainty or ambiguity is removed by the terms of the Explanatory Memorandum to the Coal Mining Industry (Long Service Leave) Legislation Amendment Bill 2011, which inserted Pt 5A into the Long Service Leave Act. The Memorandum provides as follows in relation to cl 39EB of the Bill:

Clause 39EB makes it clear that this Part establishes minimum entitlements and rights in respect of long service leave for eligible employees and does not override more beneficial entitlements or rights arising from an industrial instrument that covers the employee.

95    Mr Mayhew’s rights and entitlements in respect of long service leave arising from the Agreement and Contract are not more beneficial than those provided for in the Long Service Leave Act. It follows that his entitlements and rights under the Long Service Leave Act are minimum rights and entitlements which override the provisions in the Agreement and Contract.

Declaratory Relief

96    The Association and Mr Mayhew sought the following three declarations:

1.    A declaration that for the purposes of the Coal Mining Industry (Long Service Leave) Administration Act 1992 (Cth) (LSL Act), the base rate of pay of employees of the respondent who are covered by the Beltana No. 1 Salaried Staff Certified Agreement 2001 is 90.5% of their Total Employment Compensation.

2.    A declaration that the respondent breached section 323(1) of the Fair Work Act 2009 (Cth) by failing to pay [the] second applicant amounts due in respect of the performance of work (namely, amounts due in respect of long service leave).

3.    A declaration that the respondent breached section 39CB(2) of the LSL Act by failing to pay [the] second applicant amounts due in respect of long service leave in full.

97    The Court has a wide discretionary power to make declarations under s 21 of the Federal Court of Australia Act 1976 (Cth): Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-438 (per Gibbs J, citing Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448); Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99 (per Sheppard J). Before making a declaration, the Court should be satisfied that the question is real, not hypothetical or theoretical, that the declaration is directed to the determination of legal controversies, that the applicant has a real interest in raising the issue, and that there is a proper contradictor: Re Judiciary and Navigation Acts (1921) 29 CLR 257; Forster at 437-438; Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406 at 414.

98    Declarations relating to contraventions of legislative provisions are likely to be appropriate where they serve to record the Court’s disapproval of the contravening conduct, vindicate a regulator’s claim that the respondent contravened the provisions, assist a regulator to carry out its duties, and deter other persons from contravening the provisions: Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2006] FCA 1730; (2007) ATPR 42-140 at [6], and the cases there cited; Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [95]. It is difficult to see why that principle would not apply equally where, as here, one of the applicants is an industrial association which represents employees: Construction, Forestry, Mining and Energy Union v De Martin & Gasparini Pty Limited (No 3) [2018] FCA 1395 at [76].

Declaration concerning the base rate of pay of employees generally

99    The first declaration sought by the Association and Mr Mayhew concerns the calculation of the base rate of pay for all of Bulga’s employees who are covered by the Agreement. The declaration is not limited to the calculation of Mr Mayhew’s base rate of pay. Nor is it limited to the calculation of the base rate of pay of Messrs Hand, Russell, Short and Martin, the other employees or former employees of Bulga about whose terms of employment there was some specific evidence.

100    Bulga contended that, even if the question concerning Mr Mayhew’s base rate of pay was determined adversely to it, the declaration sought by the Association and Mr Mayhew concerning the calculation of the base rate of pay of all employees governed by the Agreement nevertheless could not or should not be made. That was because there was no justiciable controversy between Bulga and any of its employees or former employees other than Mr Mayhew. In Bulga’s submission, the issue concerning the calculation of the base rate of pay for employees other than Mr Mayhew was hypothetical. It also submitted that the declaration concerning other employees sought by the Association and Mr Mayhew was not supported by any admissible evidence.

101    The Association contended that it had standing to seek the declaration on behalf of all Bulga employees covered by the Agreement and that, in all the circumstances, the declaration was not hypothetical. In relation to standing, the Association relied on the fact that there was no dispute on the pleadings that it was an organisation registered under the Fair Work Act and had standing to bring the proceeding, that it was entitled to represent the industrial interests of all staff employees and that it is covered and bound by the Agreement. As for Bulga’s contention that the declaration addressed only a hypothetical issue, the Association submitted that there was evidence from which it could be concluded or inferred that Bulga proposed to calculate payments in lieu of long service leave for all staff employees who had been or would, in the future, be retrenched, on the same basis as it had calculated Mr Mayhew’s entitlements.

102    While there is some merit in some of the Association’s contentions and submissions concerning the declaration relating to all staff employees, there are nevertheless some problems with that relief. Those problems relate to both standing and the sufficiency of the evidence concerning the circumstances of all employees.

103    There was no dispute that the Association is an organisation registered under the Fair Work Act and is entitled to represent the industrial interests of its members. It is equally clear that the Association is bound by the Agreement. It does not necessarily follow, however, that the Association had standing, or had a sufficient interest, to apply for or obtain the broad declaration it sought relating to all employees covered by the Agreement.

104    The Association did not point to any specific provision of the Fair Work Act which gave it standing to seek the declaratory relief relating to all employees covered by the Agreement. Section 539 of the Fair Work Act relevantly provides that certain persons may apply to this Court for orders in relation to a contravention or proposed contravention of certain civil remedy provisions. Item 10 of s 539 provides that an employee organisation may apply for such an order or orders in relation to a contravention or proposed contravention of s 323 of the Fair Work Act. Section 539 is subject to, relevantly, s 540, which specifies certain limitations in respect of who may apply for such orders. Subsection 540(2) provides that a registered employee association may only apply for an order in relation to a contravention or proposed contravention of a civil remedy provision in relation to an employee if the association is entitled to represent the industrial interests of the employee.

105    As already indicated, there was no dispute that the Association is an employee association and is entitled to represent the industrial interests of its employees. It follows that the Association had standing to apply for orders in relation to the alleged contravention by Bulga of s 323 of the Fair Work Act. It should be noted, however, that the orders sought by the Association in relation to the contravention of s 323 of the Fair Work Act related to the contravention concerning the amount paid or payable to Mr Mayhew. The Association did not allege, or seek any orders, concerning contraventions of s 323 of the Fair Work Act in the case of any other employee it represented.

106    The difficulty for the Association is that the declaration sought by it in respect of all staff employees could not readily be said to be an order in relation to a contravention or proposed contravention of s 323 of the Fair Work Act. True it may be that the subject matter of the declaration is the calculation of the amount of money Bulga must pay to its staff employees in respect of long service leave entitlements upon termination and that s 323 of the Fair Work Act is a civil remedy provision which relates to that subject matter. It does not follow, however, that the declaration sought by the Association in relation to all employees covered by the Agreement is an order in relation to a contravention or proposed contravention of s 323 of the Fair Work Act. As already noted, the Association did not allege or seek any relief in relation to any contravention of s 323 in respect of any employee other than Mr Mayhew. In those circumstances, it cannot be concluded, as the Association contended, that the Fair Work Act gives it standing to seek or obtain the declaratory relief it sought in relation to all employees.

107    Even putting the issue concerning the Association’s standing to seek the declaration concerning all employees covered by the Agreement to one side, it would not, in any event, be appropriate to make that declaration. That is not because, as contended by Bulga, there is no real controversy between Bulga and the Association concerning the calculation of entitlements of any employees other than Mr Mayhew. Rather, it is because there is insufficient evidence concerning the individual circumstances and individual employment arrangements of all Bulga employees covered by the Agreement to warrant or justify the making of the declaration.

108    It may be accepted, as contended by the Association, that there is a real and not hypothetical controversy between the Association and Bulga concerning the calculation of payments upon termination in lieu of long service leave in respect of staff employees covered by the Agreement. While Bulga did not, on the pleadings, admit that it proposed to calculate payments in lieu of long service leave for staff employees retrenched in the future on the same basis that it had calculated Mr Mayhew’s entitlements, there was sufficient evidence to demonstrate that it intended to do just that. As discussed in detail earlier, the correspondence between the Association and Bulga, in particular an email from an officer of Bulga which was sent to the Association on 15 January 2018 and a letter from Bulga to the Association dated 23 March 2018, made it abundantly clear that Bulga had and would continue to calculate amounts payable to staff employees who were made redundant on the basis that their base rate of pay was the Notional Base Salary as defined in the Agreement, which was 80% of the employees’ Total Employment Compensation. The Association, on behalf of the employees whose industrial interests it was entitled to represent, disputed the way in which Bulga proposed to calculate the employees’ long service leave entitlements.

109    The real difficulty for the Association in respect of the declaration it sought in relation to all staff employees is that the determination or calculation of the amount payable to staff employees in lieu of long service leave upon their termination does not depend entirely on the terms of the Agreement. As the earlier consideration of Mr Mayhew’s circumstances revealed, some consideration must be given to the terms of each employee’s contract of employment with Bulga. Mr Mayhew’s contract of employment was expressed to be subject to the terms of the Agreement. It also provided that Mr Mayhew was to be paid a salary which was an amount which fully compensated him for fulfilling all of the requirements of his position and to be in lieu of all “entitlements, Award, Agreement, over award or legislative”. The contracts of employment of Messrs Hand, Russell, Short and Martin were in relevantly the same or similar terms.

110    There was virtually no evidence concerning staff employees other than Messrs Mayhew, Hand, Russell, Short and Martin. Indeed, it is entirely unclear from the evidence how many staff employees there were at the relevant time, when they commenced employment and when they were retrenched or may be retrenched or made redundant. Most significantly, it cannot be concluded or inferred from the evidence that the contracts of employment of all other staff employees were, or are, in relevantly the same or similar terms to the contracts entered into by Messrs Mayhew, Hand, Russell, Short and Martin. It is not entirely inconceivable that the contracts of employment of at least some staff employees may contain provisions in relation to the employees’ remuneration that differ in some material respects from the provisions of the Contract. That may mean that the approach to calculating those employees’ base salary may differ from the approach that has been found to be appropriate in Mr Mayhew’s case. That is the case despite the fact that the contracts of employment of other staff employees are, or are likely to be, subject to the terms of the Agreement.

111    It should also be noted, in this context, that the declaration sought by the Association is premised on, or assumes that, the superannuation component of each staff employee’s total Employment Compensation was 9.5%. There was no evidence concerning that fact. It is not inconceivable, and cannot be excluded, that some staff employees may have had arrangements involving superannuation deductions exceeding 9.5%.

112    In all circumstances, it would not be appropriate to make any declaration concerning the determination of the base rate of pay of all employees covered by the Agreement, let alone the declaration in the terms sought by the Association. The evidence adduced by the Association is insufficient to properly support the making of such a declaration.

113    While there was specific evidence concerning the terms and conditions of the employment of Messrs Hand, Russell, Short and Martin and the payments that were made to them when they were made redundant, the originating application filed by the Association and Mr Mayhew did not seek a declaration concerning the calculation of the payments made to them in lieu of long service leave when they were made redundant. Nor did the concise statement filed by the Association and Mr Mayhew contain any allegations or contentions concerning those employees or the payments made to them when their employment with Bulga ceased. They were not parties to the proceedings and the Association did not seek leave to amend the originating application or concise statement or seek leave to join them as parties. In all the circumstances, it would not be appropriate to make a declaration concerning the calculation of the base rate of pay of Messrs Hand, Russell, Short and Martin or the correctness of the amounts paid to them in respect of long service leave when their employment ceased.

114    While it is not appropriate in the circumstances to make the declaration sought by the Association concerning the calculation of long service leave entitlements upon termination of all employees covered by the Agreement, Bulga will no doubt be mindful that it will almost certainly be problematic for it continue to maintain that the long service leave entitlements of staff employees who are in relevantly the same position as Mr Mayhew can or should be calculated on the basis that their base rate of pay for the purposes of Pt 5A of the Long Service Leave Act was their Notional Base Salary as defined in cl 10.3 of the Agreement. For the reasons already given, the basis upon which Bulga calculated Mr Mayhew’s long service leave entitlements upon termination was erroneous and resulted in Bulga paying Mr Mayhew less than the amount that was properly due to him pursuant to the Long Service Leave Act. If the same approach is taken to the calculation of the entitlements of other staff employees whose contracts of employment were or are in essentially the same terms as Mr Mayhew’s contract of employment, that is likely to result in underpayments in respect of those employees. That may in turn lead to further proceedings and the granting of relief similar to the relief which will be granted in this proceeding.

Declarations concerning contraventions by Bulga

115    Mr Mayhew and the Association sought declarations that Bulga breached s 323(1) of the Fair Work Act and s 39CB(2) of the Long Service Leave Act by failing to pay Mr Mayhew the full or correct amount payable to him in respect of long service leave upon termination.

116    Section 323(1) of the Fair Work Act relevantly provides that an employer must pay an employee amounts payable to the employee in relation to the performance of work “in full”. While Bulga initially submitted that s 323 did not apply to underpayments on termination under the Long Service Leave Act, it ultimately did not press that submission and appeared to concede that amounts payable to an employee upon termination under the Long Service Leave Act were “amounts payable to [an] employee in relation to the performance of work” for the purposes of s 323 of the Fair Work Act. It certainly did not submit otherwise.

117    That apparent concession by Bulga was properly made. The amounts payable to an employee referred to in s 323(1) include leave payments. In Stratton Finance Pty Ltd v Webb [2014] FCAFC 110; 314 ALR 166, the Full Court effectively approved declarations of contravention of s 323 of the Fair Work Act that related to the failure by an employer to pay the full amount due to an employee in respect of accrued but untaken annual leave on termination of employment. There is no reason to suppose that amounts payable to an employee under the Long Service Leave Act in respect of accrued but untaken long service leave would not also be covered by s 323(1). Bulga did not submit otherwise.

118    As noted earlier, s 39CB(2) of the Long Service Leave Act specifically provides for the amounts payable to an employee in respect of untaken long service leave when the employee’s employment ceases by reason of redundancy.

119    For the reasons already given, Bulga failed to pay the amount properly due to Mr Mayhew in respect of long service leave upon the termination of his employment. It accordingly contravened both s 323(1) of the Fair Work Act and s 39CB(2) of the Long Service Leave Act.

120    In all the circumstances, it would be appropriate to make declarations concerning Bulga’s contravention of s 323(1) of the Fair Work Act and s 39CB(2) of the Long Service Leave Act. The legal controversy between Mr Mayhew and the Association, on the one hand, and Bulga, on the other, in relation to the calculation of Mr Mayhew’s entitlements in respect of long service leave was a real, not hypothetical or theoretical controversy. The proposed declarations of contravention were directed to the determination of that controversy and Mr Mayhew and the Association had a real interest in raising the issue. Declarations of contravention would also vindicate Mr Mayhew’s and the Association’s claim that Bulga had contravened the relevant provisions of the Fair Work Act and the Long Service Leave Act. Bulga did not contend that, if the Court found that it had not paid Mr Mayhew’s entitlements in respect of long service leave in full, it would not be appropriate to make declarations that it had contravened the relevant provisions.

compensation

121    Mr Mayhew and the Association sought an order, pursuant to either s 545(3) of the Fair Work Act or s 39DB of the Long Service Leave Act, that the respondent pay Mr Mayhew compensation of $8,253.16 in respect of long service leave entitlements due under the Long Service Leave Act but not paid in full. Section 545(1) of the Fair Work Act provides that the Court may make “any order the [C]ourt considers appropriate if the court is satisfied that a person has contravened … a civil remedy provision”. Section 545(2)(b) provides that, without limiting s 545(1), the Court may make “an order awarding compensation for loss that a person has suffered because of the contravention”. Section 39DB(a) of the Long Service Leave Act similarly provides that the Court may, on an application under s 39DA, make certain orders in relation to a person who has contravened a civil penalty provision of Pt 5A, including “an order awarding compensation for loss that a person has suffered because of the contravention”.

122    Bulga did not submit that the Court should not make a compensation order under either s 545 of the Fair Work Act or s 39DB of the Long Service Leave Act if the Court found that it had contravened either s 323(1) of the Fair Work Act or s 39CB(2) of the Long Service Leave Act by reason of it failing to pay in full Mr Mayhew’s long service leave entitlements. In all the circumstances, such an order is appropriate.

123    Mr Mayhew and the Association also sought an order pursuant to either s 545(1) or s 547(2) of the Fair Work Act, or s 39DB of the Long Service Leave Act, that Bulga “pay interest on the compensation awarded”.

124    Section 547(2) of the Fair Work Act provides that, where an order is made, or is to be made, in relation to an amount that a person is required to pay another under the Fair Work Act, the order “must, on application, include an amount of interest in the sum ordered, unless good cause is shown to the contrary”. Section 547(3) of the Fair Work Act provides that in determining the amount of interest, the Court must “take into account the period between the day the relevant cause of action arose and the day the order is made”. Section 39DB(c) of the Long Service Leave Act is a more general provision which provides that the Court may, on an application under s 39DA, make certain orders in relation to a person who has contravened a civil penalty provision of Pt 5A, including “any other order that the [C]ourt considers necessary to stop, or rectify the effects of, the contravention”.

125    While Mr Mayhew and the Association did not refer to it, s 51A of the Federal Court of Australia Act 1976 (Cth) also makes provision, in the case of proceedings for the recovery of any money, for the awarding of interest on the whole or any part of the money for the whole or part of the period between the date when the cause of action arose and the date as of which judgment is entered. Provision is also made for an order that there be included in the sum for which judgment is given a lump sum in lieu of interest.

126    Bulga did not submit that if the Court determined that compensation was payable to Mr Mayhew that there should be no provision for interest on the compensation amount up to the date of judgment. It certainly did not endeavour to demonstrate that there was “good cause” why interest should not be awarded. In all the circumstances, it would be appropriate to make provision for interest in the compensation order.

127    In the absence of any submissions concerning the appropriate interest rate and the relevant date on which the cause of action arose, the appropriate course would be to defer the making of a compensation order and direct the parties to confer with a view to agreeing on the amount of interest to be included in the compensation order. If agreement can be reached, a consent order can then be made. In the unlikely (and undesirable) event that the parties are unable to agree on the interest calculation, that issue can be resolved at the further hearing that will be necessary for the purpose of determining the appropriate penalty.

Penalty

128    Section 323 of the Fair Work Act is a civil remedy provision: s 539(1) item 10 of the Fair Work Act. Section 39CB(2) of the Long Service Leave Act is a civil penalty provision contravention which attracts a penalty of 60 penalty units.

129    Mr Mayhew and the Association sought an order under s 546(1) of the Fair Work Act that Bulga pay a pecuniary penalty. A pecuniary penalty order under s 546(1) of the Fair Work Act can only be made in respect of Bulga’s contravention of s 323(1) of the Fair Work Act. Mr Mayhew and the Association did not directly or explicitly seek an order imposing a penalty in respect of Bulga’s contravention of s 39CB of the Long Service Leave Act. That is, however, an issue that may need to be clarified.

130    While Mr Mayhew and the Association made brief written submissions concerning the appropriate penalty, Bulga submitted that it would be appropriate for the penalty issue to be determined separately once the issue of liability had been determined. It was implicit in Bulga’s submissions that it wanted the opportunity to consider the liability judgment before making any submissions in relation to penalty. It may also be the case that Bulga would wish to rely on further evidence in relation to penalty. Ultimately, Mr Mayhew and the Association appeared to accept that a further hearing in relation to penalty would be appropriate. In those circumstances, the determination of the appropriate penalty will be deferred. The matter will be listed for a penalty hearing on a date convenient to the Court and the parties.

131    The Association also applied for an order that any penalty imposed on Bulga be paid to it pursuant to s 546(3) of the Fair Work Act. Bulga did not submit that, if a penalty was imposed on it, it was not appropriate for that penalty to be paid to the Association. The appropriateness of such an order is, nevertheless, best considered at the penalty hearing.

Associate:

Dated:    22 November 2019