Re Vehicle Industry-Repair, Services and Retail-Award 1976 [1979] FCA 8; (1979) 38 FLR 267 (9 March 1979)

FEDERAL COURT OF AUSTRALIA

Re THE VEHICLE INDUSTRY-REPAIR, SERVICES AND RETAIL-AWARD 1976 (1979) 38 FLR
267
Conciliation and Arbitration

COURT

FEDERAL COURT OF AUSTRALIA
INDUSTRIAL DIVISION
Keely J.(1)

CATCHWORDS

Conciliation and Arbitration-Interpretation of award-Payment for time whilst employee taking annual leave-Whether entitled to over-award payment-Conciliation and Arbitration Act 1904 (Cth.), s. 110. The first sentence of cl.27(k) of The Vehicle Industry-Repair, Services and Retail-Award 1976 reads "wages he would have received in respect of the ordinary time he would have worked". The issue of interpretation arising from those words was whether or not an employee taking annual leave should receive the wages to which the employee would be entitled by reason of the award, plus the amount of any over-award payment which the employee would have received in respect of the ordinary time the employee would have worked had he not been on leave during the relevant period, or should the employee merely receive the wages to which he would be entitled by reason of the said award calculated by reference to pars. (a), (b) and (c) of c. 27(k)(i) only.

Held: (1) The ordinary and natural meaning of "wages the employee would have received in respect of the ordinary time the employee would have worked" include both the wages the employee would have received in accordance with the said award plus any over-award payment in respect of ordinary time.

(2) The history of c. 27(k) in the said award leads to the conclusion that the clause was intended to have the same meaning as that intended by the Full Bench in the Annual Leave Cases 1971-1972 (1972), 144 CAR 530, where it was clearly pronounced that in the general run of cases payment for annual leave should include over-award payments for ordinary hours of work.

HEARING

Melbourne, 1979, February 22; March 5, 6, 9. 9:3:1979
Maureen Hickey, for the applicant.

R. Spicer, for the respondent.

Cur. adv. vult.

Solicitors for the applicant: Holding Redlich & Co.

Solicitors for the respondent: W. Carew Hardham & Co.
S. G. COLLINS

DECISION

March 9.

The following judgment was delivered.
Keely J. This is an application by the Vehicle Builders Employees'

Federation of Australia (the federation) for an interpretation of cl. 27(k)(i) of the Vehicle Industry-Repair, Services and Retail-Award 1976 (the award). Miss Maureen Hickey of counsel appeared for the applicant and Mr. Spicer of counsel appeared for Heaths Motors Pty. Ltd. and the Victorian Automobile Chamber of Commerce (V.A.C.C.). There was no appearance for any other party bound by the award, although affidavits were filed as to service on the organizations of employers and organizations of employees. (at p268)

2. It was not disputed that: (1) The federation is an organization of employees registered under the provisions of the Conciliation and Arbitration Act 1904 (the Act); (2) The federation is bound by the award; (3) V.A.C.C. is an organization of employers registered under the Act and is bound by the award; (4) Heaths Motors Pty. Ltd. of Geelong is a member of the V.A.C.C. and is bound by the award; (5) The federation is in disagreement with Heaths Motors Pty. Ltd. and V.A.C.C. as to the correct interpretation of cl. 27 (k) (i) in determining the amount of wages which Heaths Motors Pty. Ltd. is obliged to pay to certain employees before going on leave. (at p268)

3. Clause 27 (k) reads as follows:

"PAYMENT FOR PERIOD OF LEAVE (at p268)

4. "(k) (i) Each employee before going on leave shall be paid the wages he would have received in respect of the ordinary time he would have worked had he not been on leave during the relevant period. (at p268)

5. "Subject to par. (ii) hereof, each employee shall, where applicable, have the amount of wages to be received for annual leave calculated by including the following where applicable: (a) The rate applicable to him as prescribed by cl. 8 - wage rates, adults; cl. 10 - minimum wage, adults; cl. 11 - other classes of work; cl. 13 - junior employees other than apprentices; cl. 14 - apprenticeship; cl. 42 - divisional and district allowance, Queensland; cl. 47 (i) - vehicle salesmen (Queensland); of this award. (b) The rate payable pursuant to cl. 25 - mixed functions calculated on a daily basis which the employee would have received for ordinary time during the relevant period whether on a shift roster or otherwise. (c) The rate prescribed for work in ordinary time by cl. 23 - shift work and rates therefor of the award according to the employee's roster or projected roster including Saturday and Sunday shifts. (at p268)

6. "(ii) During a period of annual leave an employee shall receive a loading calculated on the rate of wage prescribed by sub-cl. (i) of this clause, subject to the provisions of par. (b) hereof. The loading shall be as follows: (a) Day workers - an employee who would have worked on day work only had he not been on leave - a loading of 17 1/2 per cent. (b) Shift workers - an employee who would have worked on day work only had he not been on leave - a loading of 17 1/2 per cent. (b) Shift workers - an employee who would have worked on shift work had he not been on leave - a loading of 17 1/2 per cent. Provided that where the employee would have received shift loadings prescribed by cl. 23 - Shift work and rates therefor had he not been on leave during the relevant period and such loadings would have entitled him to a greater amount than the loading of 17 1/2 per cent, then the shift loading as prescribed in sub-cl. (k)(i)(c) of this clause shall be included in the rate of wage prescribed by sub-cl. (k)(i)(a) and (b) hereof in lieu of the 17 1/2 per cent loading. Provided further that if the shift loadings would have entitled him to a lesser amount than the loading of 17 1/2 per cent, then such loading of 17 1/2 per cent shall be added to the rate of wage prescribed by sub-cl. (k)(i)(a) and (b) hereof but not including sub-cl. (k)(i)(c)." (at p269)

7. Miss Hickey on behalf of the applicant submitted that on the proper construction of the first sentence of cl. 27(k), the words "wages he would have received in respect of the ordinary time he would have worked" mean all the wages the employee would have received for such work, that is to say it means an amount which includes the wages to which he would be entitled by reason of the award together with the amount of any over-award payment which "he would have received in respect of the ordinary time he would have worked had he not been on leave during the relevant period". (at p269)

8. Mr. Spicer submitted that the words under consideration entitle an employee only to the wage pursuant to the award calculated by reference to pars. (a), (b) and (c) of cl. 27(k)(i). In his submission the words in the first sentence of cl. 27(k)(i) do not require an employer to pay to an employee any over-award payment even if it is an amount "he would have received in respect of the ordinary time he would have worked had he not been on leave". (at p269)

9. Miss Hickey supported the applicant's contention by two arguments. First, that the meaning of the clause is clear and unambiguous and that the words used, construed in their ordinary and natural meaning, include all the wages the employee would in fact have received in respect of ordinary time and not merely the wages which he was entitled to receive by virtue of other clauses in the award. Secondly, that if, contrary to her first argument, the meaning of the clause is ambiguous then, having regard to the history of the clause and to a similar clause in a previous award superseded by the award, the clause should be construed as having the meaning for which the applicant contends. (at p269)

10. I accept Miss Hickey's first argument. In my view the words "wages he would have received in respect of the ordinary time he would have worked" mean the full amount of the wages the employee would in fact have received in respect of the ordinary time that he would have worked including both: (1) the amount he would have received in accordance with the award - as to which there are detailed provisions in cl. 27(k)(i) and (ii); and (2) the amount he would have received as an over-award payment in respect of ordinary time. In my opinion that is the ordinary and natural meaning of the words used. The first sentence in cl. 27(k)(i) does not limit the word "wages" in any way. The words used are simply "wages he would have received". The draftsman has not expressed any limitation upon the word "wages" as could have been done by words such as "wages in accordance with this award" or "wages pursuant to this award" or "wages to which he is entitled under this award". (at p270)

11. As to the first argument, in my view Mr. Spicer's contention to the contrary cannot be accepted unless words of limitation are read into the clause. No such limiting words being expressed in the clause, Mr. Spicer has contended that they are implied from the context that the award fixes minimum rates of pay which are award rates as distinct from over-award rates. The obligation to pay over-award rates is purely contractual and does not stem from the award or the Act. He argued that the word "wages" in the first sentence of cl. 27(k)(i), read in the context of the remainder of cl. 27(k)(i) and (ii), means only that part of the wages which, by reason of the award provisions as to rates of pay, the employer would have been obliged to pay if the employee had worked instead of being on leave. He argued that it would be an absurd consequence if an employer was obliged by the clause to pay over-award rates to an employee whilst on annual leave and yet for the remaining forty-eight weeks of the year (forty-seven in the case of a seven-day shift worker) the employer's obligation under the award was only to pay the rates provided by the various clauses of the award. Such an absurd consequence in his submission required clear words. Mr. Spicer pointed out that this obligation in respect of over-award payments is only a contractual obligation and is to be distinguished from an obligation imposed by the award which is enforceable either by suit at the instance of the employee under s. 123 of the Act or by a proceeding under s. 119 of the Act seeking the imposition of a penalty for a breach of the award. (at p270)

12. That latter contention is of course correct in respect of weeks during which the employee actually performs his work under the award. If the opening sentence of cl. 27(k)(i) had simply used the words "his wages", instead of "the wages he would have received", then a strong argument could have been mounted for the view that in context those words meant by implication wages in accordance with the award. However, in my view, in using the words "the wages he would have received" - instead of inserting words of limitation qualifying the word "wages" - the draftsman showed a clear intention to move from the concept of a wage which the employer was obliged to pay as a matter of law by reason of the award to a different concept of the wages which the employee would have received as a matter of fact had he not been on leave. (at p270)

13. Mr. Spicer argued that if the draftsman of the provision had intended to confer on an employee a right in respect of his period of annual leave to the payment of an amount which may fairly be described as an "over-award payment", the matter could easily have been put beyond doubt. He pointed out that this result could have been achieved by referring to award wages and then adding "together with the employee's normal weekly over-award payment for work for the week in question if he had been performing his normal duties" (as appears in cl. 29(p)(i) of the award in defining "accident pay" for the purpose of cl. 29 which deals with "make up of workers' compensation payments"). Similarly, he pointed out that the draftsman could have used words such as those used in the clause dealing with payment for annual leave in the current Metal Industries Award. Clause 25(j) of that award commences with words in exactly the same terms as the first sentence of cl. 27(k)(i) of the award, namely: "Each employee before going on leave shall be paid the wages he would have received in respect of the ordinary time he would have worked had he not been on leave during the relevant period." (at p271)

14. However, cl. 25(j) of the Metal Industries Award then expressly includes the following: "Subject to sub-cl. (k) hereof each employee shall, where applicable, have the amount of wages to be received for annual leave calculated by including the following where applicable: (a) Time workers (other than piece workers) . . . (iv) Any other wage to which the employee is entitled in accordance with his contract of employment for ordinary hours of work; provided that . . ." Mr. Spicer submitted that the absence of similar words from cl. 27(k) of the award under consideration in these proceedings is significant and argued that the draftsman did not intend to include such over-award payments when using the words "wages he would have received". (at p271)

15. The addition of words such as those in cl. 29(p)(i) of the award or those used in cl. 27(j)(a)(iv) of the Metal Industries Award would put the matter beyond doubt. However, it does not follow from the existence of another way of drafting the provision that the draftsman did not intend to include over-award payments when he inserted the words "the wages he would have received" and in my opinion the intention was to include such payments. (at p271)

16. It is to be noted that the next sub-clause of the award (sub-cl. (1) of cl. 27) contains an express provision which has no parallel in cl. 27(k) of the award. It provides as follows: "For the purposes of this sub-clause, wages shall be at the rate prescribed by cll. 8, 10, 11, 13, 14, 42 and 47(i) of this award for the occupation in which the employee was ordinarily employed immediately prior to the termination of his employment." Had the intention been that "wages" in the first sentence of cl. 27(k) referred only to wages in accordance with the award then it would seem reasonable to expect the insertion of a similar express provision in cl. 27(k). The fact that those words do not appear in cl. 27(k) may be contrasted with the fact that they do appear in cl. 27(1) of the award. It may be further observed that the words in cl. 27(1) are expressly introduced by the words "for the purpose of this sub-clause" - not "this and the preceding sub-clause". (at p272)

17. Mr. Spicer sought to place some reliance upon the effect of the express provision in cl. 27(1) which is set out above. He pointed out that as a result of that provision an employee lawfully leaving his employment (or whose employment is lawfully terminated by the employer through no fault of the employee) is not entitled to payment of an over-award payment in respect of his proportionate annual leave. He submitted that that supported the interpretation of cl. 27(k) for which he was contending. Miss Hickey suggested a possible explanation as to why an arbitrator - or the parties by consent - might differentiate between the two situations and accord a higher rate of pay (i.e. one including an over-award payment) to employees actually taking annual leave than the rate for the payment in lieu of leave to employees whose services had been terminated. It is not for this Court to speculate as to the possible explanation for such a differentiation let alone give any consideration as to its desirability. It may be noted, however, that in the Annual Leave Cases 1971-1972 (1972) 144 CAR 530, at p 545 the Full Bench expressly contemplated that pro rata leave was "a matter which may have to be tailored for individual awards" - despite the general principle that it "should be paid on the same basis". For the foregoing reasons I accept Miss Hickey's first argument that the words under consideration are clear and unambiguous and the word "wages" includes an over-award payment in respect of ordinary time. (at p272)

18. However, as Miss Hickey's second argument has been fully discussed by counsel on both sides, and Mr. Spicer expressly contended that the clause is ambiguous, I should add that if, contrary to my view, the words used are ambiguous then in my opinion a consideration of the past history of the clause supports the applicant's contention that the clause was intended to require an employer to pay to an employee taking annual leave the wages he would have received had he not been on leave, i.e. including any over-award payment in respect of ordinary time. (at p272)

19. The award was made in 1976 and superseded both the 1970 award and the 1974 award subject to the usual reservation of accrued rights. The 1970 award had been varied by consent by Coldham J. on 28th October, 1974. The 1974 variation inserted a new cl. 27(k) the first sentence of which was identical with the first sentence of cl. 27(k)(i) of the 1976 award which is presently before the court. For present purposes the 1974 variation was significant in two ways. In substituting a new sub-clause re "payment for period of leave" the variation: (1) deleted the definition of wages appearing in cl. 27(k)(iii) in its previous form which made clear the meaning of "wages" in cl. 27(k)(i); and (2) at the same time introduced the concept of paying an employee what he would have received had he not been on leave. The words used in introducing that concept in that consent variation in 1974 were: "(k)(i) Each employee before going on leave shall be paid the wages he would have received in respect of the ordinary time he would have worked had he not been on leave during the relevant period . . .". Those words are significant when regard is had to decisions of a Full Bench in the Annual Leave Cases 1971-1972 (1972) 144 CAR 530 . The Full Bench decisions in turn are significant because both at the time of the 1974 variation and at the present time the Act contained the following provision: (at p273)

20. "31. (1) The power of the Commission to make an award, or to certify, under section 28, an agreement - . . . (at p273)

21. (3) making provision for or in relation to, or altering a provision for or in relation to, annual leave with pay or long service leave with pay, except where the provision or alteration gives effect to matters, or is in accordance with principles, determined by a Full Bench, is exercisable by a Full Bench, and not otherwise." (at p273)

22. In 1971 applications had been made by a number of unions for variations of the terms of annual leave clauses in existing federal awards. The then president of the commission granted the applications by certain employers that those union applications in respect of annual leave should in the public interest be dealt with by a Full Bench. On 7th December, 1971, the Full Bench gave an unanimous decision which included the following passages: "At present, many employees under Federal awards and determinations are paid when they go on leave their award or determination rate without the addition of any overaward payments, shift allowances, etc. which they may regularly receive when they are at work. (at p273)

23. "The theme of the argument against the present situation is its inequity" (1972) 144 CAR, at p 532 . (at p273)

24. "The unions also relied on the position in the States. In New South Wales, employees when on leave continue to receive overaward payments, bonuses and other incentive earnings and the cash value of board and lodging. In Victoria, generally speaking, employees continue to receive overaward payments and the cash value of board and lodging. In Queensland they continue to receive overaward payments. In South Australia and Western Australia the position is broadly the same as under Federal awards. In Tasmania there is a clause said to be common in wages board determinations which is in the following form: 'Each employee before going on leave shall be paid the amount of wages he would have received in respect of the ordinary time which he would have worked had he not been on leave during the relevant period'" (1972) 144 CAR, at p 533 . (at p274)

25. "The real issue is whether the present amount paid to an employee when he is on annual leave and therefore not working should be his minimum award wage or something more . . . . We are in agreement that the present situation which may result in people going on leave at a rate less than their normal rate when at work could produce hardship and if it is economically feasible prima facie we should take some steps to improve that situation. (at p274)

26. "In view, however, of the economic position and as a National Wage case has now been launched, we propose to defer our decision on this part of the claims until after the National Wage case has concluded. We think it proper, however, to indicate now our view on certain aspects" (1972) 144 CAR, at p 534 . (at p274)

27. "If, after the present National Wage case, we decide to make an order, we would be inclined, as at present advised, to use as a guide a provision already set out which has been inserted in some Tasmanian determinations, that is, that an employee taking annual leave before going on leave shall be paid the amount of wages (or salary) he would have received in respect of the ordinary time which he would have worked had he not been on leave during the relevant period. (at p274)

28. "We point out that the provision quoted excludes overtime" (1972) 144 CAR, at pp 534-535 . (at p274)

29. "We have already indicated that we propose to defer our decision about the alteration in the award amounts to be paid to employees when on annual leave until after the conclusion of the National Wage case and we have dismissed the claim for a bonus" (1972) 144 CAR, at p 543 . (at p274)

30. On 7th June, 1972, the Full Bench made the following announcement: "We have considered this submission put to us in the context of our prima facie expressed view that 'an employee taking annual leave before going on leave shall be paid the amount of wages (or salary) he would have received in respect of the ordinary time which he would have worked had he not been on leave during the relevant period' . . . . (at p274)

31. "3. The items which we think should in the general run of cases be included in payment for Annual Leave are as follows: (Individual situations may require in particular awards the exclusion or modification of them or the addition of other items.) (at p274)

32. "Over Award Payments for ordinary hours of work. (at p274)

33. "We think that to include over award payments in private industry would, apart from its inherent industrial justice, give effect to the view which we stated in our December decision that employees in the public and private sectors should as far as possible be treated alike. Because of method of assessment of their salaries many employees in the Commonwealth Public Service already receive when they go on leave what would be an over award payment if they were in private industry" (1972) 144 CAR, at p 544 . The commission then listed six "matters which we think should in the general run of cases be excluded from payment for Annual Leave" (1972) 144 CAR, at p 545 . (at p275)

34. It will be noted that the following words from cl. 27(k)(i) of the award (which words were originally inserted into the 1970 award by consent in October 1974) are identical with the words used by the Full Bench in the Annual Leave Cases 1971-1972: " . . . employee . . . before going on leave shall be paid . . . wages he would have received in respect of the ordinary time (which) he would have worked had he not been on leave during the relevant period." (at p275)

35. In my view a consideration of the history of cl. 27(k) and of the 1974 variation of the 1970 award leads to the conclusion that the clause was intended to have the same meaning as that intended by the Full Bench in the Annual Leave Cases 1971-1972. A reading of the Full Bench decision of December 1971 and the subsequent pronouncement of June 1972 makes it quite clear that, although "in individual awards special circumstances may require some departure from the norm", the intention was that "in the general run of cases" payment for annual leave should include "over award payments for ordinary hours of work". (at p275)

36. Accordingly, if there be any ambiguity as to the meaning of cl. 27(k), then in my view the history of the matter leads to the conclusion that the clause was intended to oblige an employer to pay wages including over-award payments for ordinary time. (at p275)

ORDER

Order accordingly.