Kaal Australia Pty Ltd [2001] NSWIRComm 6 (6 February 2001)

Last Updated: 20 March 2001

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Kaal Australia Pty Ltd [2001] NSWIRComm 6

FILE NUMBER(S): IRC 3484

HEARING DATE(S): 04/12/2000

DECISION DATE: 06/02/2001

PARTIES:

APPLICANT

Kaal Australia Pty Limited

RESPONDENT

Federated Clerks' Union of Australia, New South Wales Branch

JUDGMENT OF: Hungerford J

LEGAL REPRESENTATIVES

APPLICANT

Mr S Billing

Australian Mines and Metals Association Inc

RESPONDENT

Ms F Hancock

Federated Clerks' Union of Australia, New South Wales Branch

CASES CITED: Jackson v Davids Pty Ltd [1963] AR (NSW) 258

Long Service Leave Exemption - A L Vincent & Coy Pty Ltd [1967] AR (NSW) 221

Smith v Craig Mostyn & Co Pty Ltd [1984] 2 NSWLR 393; [1984] AR (NSW) 565

Wire Fence (Other Than Barbed Wire) Makers and Tubular Gate Makers (State) Award [1952] AR (NSW) 91

LEGISLATION CITED: Industrial Arbitration Act 1940 (repealed) s 88C(4)

Long Service Leave Act 1955 s 4 s 4(8) s 5 s 5(1) s 5(2)(a) s 5(2)(b) s 5(3) s 5A s 7(1) s 7(2)

Long Service Leave Act 1992 (Vic) s 65 s 74

Workplace Relations Act 1996 (Cth)

JUDGMENT:

- 24 -

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

CORAM: HUNGERFORD J

Tuesday, 6 February 2001

Matter No IRC 3484 of 2000

KAAL AUSTRALIA PTY LIMITED

Application by Kaal Australia Pty Limited for an exemption from the operation of the Long Service Leave Act 1955.

DECISION

[2001] NSWIRComm 6

1    The Commission has before it an application by Kaal Australia Pty Limited under s 5(2)(a) of the Long Service Leave Act 1955 for exemption from the operation of the provisions of that Act relating to long service leave in respect of certain of its employees engaged in clerical, support staff and management positions.

2    The specific order sought by the applicant, in its final amended form, was in the following terms :

1. Pursuant to section 5 of the Long Service Leave Act 1955 Kaal Australia Pty Limited is exempted from complying with section 4 of the said Act with respect to its employees.

2. The order shall not apply to those employees covered by the following industrial instruments -

· The Aluminium Industry - Kaal Australia Pty Ltd - Production, Maintenance and Services Award 1998 (Print Q6210);

· The Kaal Australia Yennora Agreement 1998 (Print Q7775).

3. The order applies on the conditions that -

(i) the long service leave benefits available to the said employees remain in the same terms as set out in section 4 of the Act (excluding the prohibition on payment in lieu during employment pursuant to sub-section 4(8); and

(ii) if under the employer's scheme an employee is provided with a cash payment in lieu of long service leave the employee shall also be entitled to take the equivalent actual leave without payment at a future time during the employment.

4. The applicant will serve a copy of this order on each employee affected by this Order on or before 7 days after the date of this order and advise each said employee that pursuant to sub-section 5(2)(c) of the Act that if they do not wish this exemption to apply to them that they may advise the applicant in writing within 3 months of the date of this Order and the said exemption will not apply to them.

5. This Order shall apply on and from 2000.

3    The Long Service Leave Act deals with the question of exemptions from its provisions in s 5 thereof and s 5A deals with the review of exemptions so granted. To the extent presently relevant, ss 5 and 5A are in the following terms :

Exemptions

5. (1) ...

(2) (a) Subject to section 5A, the Industrial Relations Commission may, subject to such conditions as it thinks fit to impose, exempt any employer from the operation of the provisions of this Act relating to long service leave in respect of any workers in any case where it is satisfied that the workers are entitled to benefits in the nature of long service leave under any scheme conducted by or on behalf of the employer which are not less favourable than those specified in this Act and that it is in the best interests of the workers that the exemption should be granted.

(b) ...

(c) (i) Any exemption granted pursuant to paragraph (a) shall not apply to an employer in respect of any worker who, within a period of three months after the date from which the exemption takes effect, or the date of commencement of the worker's employment, as the case may require, has by notice in writing to the employer elected to be subject to the provisions of this Act relating to long service leave in lieu of those provided for in the scheme conducted by or on behalf of the employer.

(ii) ...

(iii) Notwithstanding any provision of any scheme referred to in subparagraph (i) or (ii) where a worker has given notice in writing as aforesaid, the worker shall be entitled to such benefits under the scheme, other than long service leave, as the worker would have been entitled to receive had the worker voluntarily left the service of the employer upon the date on which the notice was given: Except as aforesaid upon the notice being given the rights of the worker to any benefits under the scheme and the obligations under the scheme of the employer and any persons charged with the administration of the scheme in respect of that worker and any person claiming under the worker or in respect of the worker's employment shall cease and determine.

(d) The Industrial Relations Commission may vary the terms of any exemption granted or deemed by paragraph (b) to have been granted pursuant to paragraph (a) or any condition subject to which the exemption was or was deemed to have been granted, and may revoke the exemption.

(3) As from the date of commencement of the Long Service Leave (Amendment) Act 1963 no exemption shall be granted pursuant to subsection (2) (a) to any employer, in respect of any scheme conducted by or on behalf of the employer, which does not provide for the granting of long service leave, as such, to the workers covered by such scheme.

(4) ...

Review of exemptions

5A. (1) In this section, "exemption'' means an exemption granted under section 5 (2) (a).

(2) Unless sooner revoked, an exemption granted after the commencement of this section remains in force for the period of 3 years from the date on which it is granted or for such shorter period as the Industrial Relations Commission specifies when granting it, but it may be extended by the Commission from time to time for a further period or further periods of 3 years or such shorter period or periods as the Commission specifies when extending it.

(3) The Industrial Relations Commission may review any exemption:

(a) of its own motion, after causing a notice to be served on such persons as appear to be appropriate in the circumstances stating that the Commission requires them to show cause why the exemption should not be varied or revoked on the ground that the benefits provided by this Act are more favourable than those then applying;

(b) on application by an industrial organisation within the meaning of the Industrial Relations Act 1996, or by an employer, affected by the exemption; or

(c) at the request of the Minister or following a report by the Industrial Registrar.

(4) After reviewing an exemption, the Industrial Relations Commission may confirm the exemption, vary the terms of the exemption or any condition subject to which the exemption was granted, or revoke the exemption.

4    It appeared from the unchallenged facts that the applicant was incorporated in 1995 as a joint venture between Alcoa Inc and Kobe Aluminium to produce aluminium rolled products at plants at Point Henry in Victoria and Yennora in this State where it operates an aluminium recycling and rolling mill. The applicant employs about 380 persons at its Yennora plant of whom there are 195 production operators, 62 mechanical tradespersons and 29 electrical tradespersons engaged pursuant to the Aluminium Industry - Kaal Australia Pty Ltd - Production, Maintenance and Services Award 1998 and the Kaal Australia Yennora Agreement 1998 made under the Workplace Relations Act 1996 (Cth); the remaining 90 employees comprise 2 administration officers, 25 support staff, 24 professionals, 33 engineers and 6 managers employed under either the Clerical and Administrative Employees (State) Award ([1997] 296 NSWIG 619) or common law contracts of employment being award-free, as the case may be. All employees, federal and State, are presently entitled to and are allowed long service leave benefits in accordance with the Long Service Leave Act. The applicant's proposal, to which the application seeks to give effect, is that the federal employees will continue to receive long service leave in accordance with that statute but the clerical and staff employees will be eligible, if permitted by the exemption, to elect to receive a payment equivalent to part or all of their accrued long service leave entitlement in lieu of actual leave subject to the condition that they will be entitled to take the equivalent leave without payment at a future time during employment.

5    In other words, each of the 90 clerical or staff employees will be offered the option to take leave in accordance with the Long Service Leave Act or to receive payment in lieu of accrued leave with the right to take an equivalent amount of unpaid leave during future employment.

6    The grounds and reasons, including particulars thereof, in support of the orders sought were contained in the application in the following terms :

E. Grounds and reasons:

1. The Applicant seeks exemption from the operation of the Long Service Leave Act 1955 pursuant to Section 5 of the Act.

2. The Applicant's workers are entitled to benefits in the nature of long service leave under a scheme conducted by the Applicant which is not less favourable than that which is specified in the Act.

3. It is in the best interests of the Applicant's workers that the exemption be granted.

F. Particulars:

1. The Applicant's workers in NSW are provided long service leave in accordance with the Long Service Leave Act 1955.

2. The Applicant seeks the exemption to enable it to offer its workers the ability to opt to receive a payment in lieu of long service leave.

3. The aforementioned scheme with the ability to opt for payment in lieu of leave operates with respect to workers at the workplaces of the Applicant and other employers with which it is aligned through corporate ownership arrangements including Portland Aluminium and Alcoa World Alumina Australia in the States of Western Australia and Victoria.

4. An exemption will enable the option of payment in lieu of long service leave scheme to be applied nationally to all of the Applicant's employees.

7    As to the applicant's employees at its Point Henry plant, on 5 July 2000 the Industrial Division of the Magistrates' Court of Victoria made an order exempting the applicant from complying with Div 6 - Long Service Leave of Pt 5 of the Long Service Leave Act 1992 (Vic) pursuant to s 65(2) of that Act. The exemption was amended by the Magistrates' Court on 14 August 2000 to exclude therefrom the applicant's production and trades employees covered by two federal industrial instruments being the Alcoa of Australia (Victoria) Award 1982 and the Kaal Australia (Point Henry) Agreement 1999/2000. Thus, the applicant's employees in Victoria subject to the exemption, corresponding to those in New South Wales sought to be covered by an exemption, are those engaged in clerical and staff positions; the order made the exemption applicable to them "on the condition that the long service leave benefits available to the said employees remain no less favourable than those long service leave benefits set out in the (Victorian) Act, as amended from time to time (excluding the prohibition on payment in lieu during employment)".

8    An affidavit sworn on 20 November 2000 by Keith Andrew Gover, the applicant's Employee Relations Consultant at the Yennora site, was read into evidence. The deponent set out in respect of the 90 employees potentially subject to the exemption details of their accrued long service leave entitlements, together with consultations held with them to explain the scheme and to obtain their response. Mr Gover said in his affidavit in that respect :

11. There is currently 90 employees who would be eligible to elect to receive a payment in lieu of some or all of their long service leave entitlement under the proposed scheme. Of this group only 63 have accrued at least one full entitlement to long service leave and would therefore actually be able to make such an election. Many of these employees have accrued and accumulated a large amount of long service and annual leave. Now shown to me at the time of swearing this my affidavit and marked "KAG2" (not reproduced) is a true copy of schedules setting out the amount of long service and annual leave respectively currently owing to these employees.

12. On 26 October and 1 November 2000 meetings were arranged for the aforementioned 90 employees at which I explained the Applicant's proposal to allow "staff" to elect to receive an equivalent payment in lieu of long service leave when they had a fully accrued entitlement. Now shown to me at the time of swearing this my affidavit and marked "KAG3" (see reference below) is a true copy of the presentation slides shown to employees who attended these meetings.

13. All relevant employees were notified of the meetings and authorised to attend during work time. The meetings were attended by 51 employees. Of those who attended 46 were employees who currently have an actual entitlement to long service leave. At the meeting I presented all information relevant to the proposal and gave employees an opportunity to ask questions during the meetings or following the meetings. At the conclusion of the meetings I provided a document to employees and asked them to sign this document and return it to me if they did not object to the proposal or to this Application. Now shown to me at the time of swearing this my affidavit and marked "KAG4" (not reproduced) is the said document signed by 50 of the employees who attended these meetings. Of this 50 employees 46 have a current actual entitlement to long service leave.

9    It is apparent, as Mr Gover indicated, that many of the employees concerned have indeed accrued and accumulated a large amount of annual and long service leave.

10    The document referred to in Mr Gover's affidavit and marked "KAG3" reproduced the presentation slides shown to employees who attended the meetings on 26 October and 1 November 2000 at which the proposed scheme of exemption was explained. It is convenient to set out below the information contained on the relevant slides :

Background

· Long Service Leave is a legislated entitlement for all employees of Kaal Australia.

· The current choice is to either :

- take your long service leave (or part thereof)

- redeem your leave entitlement upon termination of employment

· The company accrues for LSL based on current salaries

Increased Options

· Originally planned to be part of the EBA for 2000

· Seeking an avenue to give staff a similar choice

· Required to apply to the NSW Industrial Court - we are currently in the middle of this process

Increased Choice

· Currently your choice is to either :

- take your leave (or part thereof)

- redeem your leave entitlement upon termination of employment

· The successful application for exemption would allow you to convert some or all of your entitlement to a salary payment

Pros & Cons

Pros	Cons
· Allow access to your entitlement as a cash benefit whilst still employed	· Once redeemed it : - cannot be converted back - is gone
· Increased choice	· Paid at current rate of pay at time of redemption
	· Taxation implications

11    In the result, of the 51 employees who attended the meeting out of a total of 90 employees, 50 of them signed an acknowledgment which, omitting formal parts, was to the following effect :

I ... have been informed of an application by my employer Kaal Australia Pty Limited for an exemption from the NSW Long Service Leave Act. I understand this has been done to enable my employer to allow me to elect to receive a payment to the equivalent value instead of some or all of my accrued long service leave entitlement. I understand that this does not effect (sic) my entitlement to take the actual leave and can only occur at my request.

I do not object to my employer offering this option for payment of long service leave to me and on that basis do not object to its application for exemption from the Long Service Leave Act.

12    At the hearing of the application, Ms F Hancock appeared for the Federated Clerks' Union of Australia, New South Wales Branch and opposed the application, as she submitted, "on the basis that the scheme does not provide for actual leave, as required by section 5(3) and on the basis that the provisions of the scheme do not pass both of the tests as outlined in section 5(2)(a) of the Act". However, after hearing the submissions put for the applicant by Mr S Billing of the Australian Mines and Metals Association Inc, and during which submissions Mr Billing amended the application to include the conditions on which the exemption should be granted as set out in para 3(ii) of the amended proposed order, Ms Hancock withdrew the opposition of the Clerks' Union and consented to the order sought. Principally, I think, that change in position arose once the applicant agreed, if an employee elected to receive a cash payment in lieu of long service leave, to allow the employee to take the equivalent amount of leave without payment at a future time. Nevertheless, it may be said that the helpful and detailed outline of submissions provided by Ms Hancock against the granting of the application, by reference to the relevant provisions of the Long Service Leave Act and to various cases, provided forceful reasoning against the application being allowed.

13    Even though the application for exemption was ultimately not contested, I am of the clear view that whether the application should be granted depends upon the legislative scheme in the Long Service Leave Act by which the Commission may exempt an employer from the operation of the provisions thereof, particularly having in mind s 7(1) which lays down that the statute "shall have effect notwithstanding any stipulation to the contrary" and s 7(2) which provides that "no contract or agreement made or entered into ... shall operate to annul or vary or exclude any of the provisions of this Act".

14    The legislative scheme established by the Long Service Leave Act entitling workers to long service leave benefits, including the exemption of any employer therefrom, may be shortly stated. The scheme so established is to be seen in the context of the short title to the statute which states that it is "An Act to make provisions entitling workers to long service leave; ... and for purposes connected therewith". The central and operative provision thereof is s 4 - Long service leave.

15    Every worker is entitled to long service leave on ordinary pay, except as otherwise provided by the statute, in respect of the service of the worker with an employer: s 4(1). The amount of leave and the various periods of service giving rise to the entitlement are based on a period of leave of 2 months in respect of 10 years of completed service and thereafter leave of 1 month for each completed 5 years of service, with certain provisions applicable where a worker's employment terminates after service of at least 5 years as an adult: s 4(2). Leave, once an entitlement exists but subject to an agreement to postpone it to an agreed date, shall be given to the worker by the employer and taken by the worker as soon as is practicable having regard to the needs of the employer's establishment: s 4(3)(a). The leave is to be taken in one continuous period and not otherwise, unless the worker and the employer agree that it be taken in two, three or four separate periods depending upon the amount of leave: s 4(3)(b). If there be agreement, a period of leave of not less than one month may be taken wholly or partly in advance: s 4(3A). Periods of leave are exclusive of annual holidays occurring during the taking of such leave: s 4(4). Where a public holiday occurs during any period of leave then the period shall be increased by one day in respect of that holiday: s 4(4A). Where the services of a worker are terminated otherwise than by death, and a period of leave has accrued to the worker but has not been taken, then "the worker shall ... be deemed to have entered upon the leave from the date of such termination and the employer shall forthwith pay to the worker in full the worker's ordinary pay for the leave less any amount already paid to the worker in respect of that leave": s 4(5)(a). Where a worker dies, accrued leave shall be the subject of payment in full to the worker's personal representative: s 4(5)(b). Leave taken in advance by a worker may be deducted by the employer from any remuneration due to the worker on the termination of the worker's services: s 4(5)(c).

16    Section 4, importantly for present purposes, provides in sub-s (8) as follows :

(8) Except as provided in subsection (5), payment shall not be made by an employer to a worker in lieu of any long service leave or part thereof to which the worker is entitled under this Act nor shall any such payment be accepted by the worker.

17    Mr Billing identified the purpose of the application as being to exempt the applicant from s 4 of the Long Service Leave Act, as he said, "to allow staff to 'cash out' part or all of their accrued long service leave". He immediately acknowledged the apparent difficulty which s 4(8) posed, in the absence of an exemption granted under s 5(2)(a), to the desire of the applicant to permit the employees concerned to be paid money in lieu of taking paid long service leave. The exemption was necessary to enable the proposed scheme to operate. Mr Billing submitted that the exemption may be allowed by the Commission "in the terms of s 5(2)(a), if it was satisfied, firstly, "that the workers are entitled to benefits in the nature of long service leave under [the] scheme"; and, secondly, if the benefits met the dual test of being "not less favourable than those specified in [the] Act" and that it was "in the best interests of the workers that the exemption should be granted". Mr Billing put that the unchallenged evidence in the case established the necessary tests to be met and, in that respect, he emphasised the consultations held with the employees who "support the issuing of the exemption and seek the ability to 'cash out' part or all of accrued long service leave benefits". It was said to be a benefit to the employees to receive a payment in lieu of leave should an individual employee elect to do so rather than taking the leave; he stressed that "a payment rather than leave is entirely at the election of the employee".

18    Nevertheless, Mr Billing accepted, correctly in my view, that even if the applicant satisfied the Commission it had met the requirements of s 5(2)(a) the Commission could not grant the exemption by reason of s 5(3) unless the proposed scheme provided for "the granting of long service leave, as such". It was Mr Billing's submission, however, that that expression, whilst somewhat ambiguous, was "designed to prevent exemptions being granted to employers where the alternative offered does not deal with long service leave and provides for another benefit such as a pension or superannuation scheme"; it did not, he said, "prevent the payments out of accrued leave" and, in any event, the condition as part of the scheme for the taking of the equivalent amount of leave as unpaid leave during future employment satisfied s 5(3) by providing for long service leave as such. Reference was made by Mr Billing to support that proposition to the judgment of Watson J in Smith v Craig Mostyn & Co Pty Ltd [1984] 2 NSWLR 393 at pp 402-403; [1984] AR (NSW) 565 at p 573 and to the Minister's Second Reading Speech in moving the Long Service Leave (Amendment) Bill 1963 for the insertion of sub-s (3) into s 5.

19    In considering this matter it is necessary to trace the development of the operative provisions of the Long Service Leave Act. Prior to the enactment of the statute in 1955, s 88C of the former Industrial Arbitration Act 1940 provided for the grant of a specified amount of long service leave to employees by way of insertion in an award or industrial agreement made under the Industrial Arbitration Act upon application therefor. Sub-section (4) of s 88C permitted the exemption of an employer from such provisions in an award or industrial agreement subject to certain conditions. The legislative scheme established by s 88C was relevantly to the same effect as that now established under the Long Service Leave Act by ss 4(8) and 5(2)(a); indeed, s 5(2)(b) expressly deems any exemption granted to an employer under s 88C(4) of the Industrial Arbitration Act to have been granted pursuant to s 5(2)(a) of the Long Service Leave Act. As to the aspects relevant to the grant of an exemption under s 5(2)(a), therefore, one may have recourse to the way in which exemptions were considered under s 88C(4).

20    In Re Wire Fence (Other Than Barbed Wire) Makers and Tubular Gate Makers (State) Award [1952] AR (NSW) 91, a Full Bench of the former Industrial Commission held that the intention of s 88C was that employees should have either the statutory period of long service leave or something not less favourable, but not necessarily by way of leave. I interpose that there did not then exist any statutory provision comparable to s 5(3) of the Long Service Leave Act and which was not inserted therein until 1963. After finding in Wire Fence Makers and Tubular Gate Makers (at p 97) that "One of the objects of section 88C is to provide that employees as a reward for long service shall be entitled to leave on full pay", the Full Bench said (at pp 97-98) as to exemptions :

By subsection (4) the Commission may exempt an employer from any such provision in an award or industrial agreement, but first it must be satisfied that the employees of such employer are entitled to benefits in the nature of long service leave under any scheme conducted by or on behalf of an employer. If it is so satisfied the Commission must consider whether the benefits under the scheme are not less favourable than those specified in the award or industrial agreement and that it is in the best interests of the employees that such exemption should be granted.

It seems to us that the intention of the Legislature was to leave it to the Commission to decide whether employees would receive benefits not less favourable than the benefits conferred by the Act. The difficulty arises from the use of the expression "benefits in the nature of long service leave." Several submissions have been made in regard to the meaning of the phrase, advocates on behalf of some unions going so far as to suggest that an employer would not be entitled to exemption unless his employees were granted long service leave not less favourable and that monetary payment either under a superannuation scheme or where the monetary payments were secured by a policy of insurance would not fall within the ambit of the phrase.

The word "benefits" is of wide implication. Without straining its meaning, it can mean a pecuniary advantage, profit or gain (Oxford English Dictionary), but as used in the section the benefit must be in the nature of long service leave. Now the leave which is provided for in section 88C is granted as a reward for long service. In practice other benefits, too, can be conferred upon employees as a reward for long service. Such schemes have been in operation for many years and must have been well known to the Legislature, and it is an obvious conclusion to draw that where such schemes were not less favourable to employees, it was the intention of the Legislature to have them preserved for the advantage of all employees concerned. Only the employer himself can give the employee leave from his employment, but other benefits for long service with the employer can be provided under a scheme conducted for the employer by others, such as trustees or an insurance company. Clearly, such benefits could be something other than leave in the nature of long service leave.

That view is strengthened by the use of the phrase "under any scheme conducted by or on behalf of their employer," for these words suggest that the Legislature recognised that monetary payments have been made to employees after a period of service, either from trust funds or under policies of insurance, or from some similar source.

21    The scheme considered in that case, and found to have satisfied the requirements of s 88C(4) for an exemption, provided under a provident (superannuation fund or insurance policy) type fund for the payment to an employee of a cash sum on retirement from the service of the employer or to the employee's personal representatives or dependants on death. Importantly for present purposes, their Honours contrasted the meaning of the phrase "benefits in the nature of long service leave" with the phrase "leave in the nature of long service leave", phrases and concepts to a like effect appearing respectively in the present s 5(2)(a), in the former case, and in ss 4(2)(b) and 5(1) and (3), in the latter case, and observed as follows (at p 98) :

It is to be noted also that the words used in subsection (4) are "benefits in the nature of long service leave" while in subsection (3)(a) and (5) the phrase used is "leave in the nature of long service leave," which leads to the inevitable conclusion that the word "benefits" is to be given a wider meaning than the word "leave". Benefits may accrue in many ways and from many sources but, we think, the benefits must, like the leave provided for in the section, be related to long service.

22    In the result, their Honours said (at pp 98-99) :

We think an employer, in a proper case, may have an exemption from the provisions of the award relating to long service leave in so far as those provisions affect his employees who are entitled to benefits in the nature of long service leave under a particular scheme. Otherwise it could happen that any employer who was compelled by award to give all employees, including those under the scheme, the leave secured to them by the Act might find it expedient to withdraw the benefits conferred by the scheme upon some of his employees and so deprive them of more favourable conditions incidental to their employment. Any construction of the section which might have that effect would, we think, be contrary to the spirit and intention of the section. It seems clear that the expressed intention of the Legislature was that employees should have either the statutory period of long service leave, or something not less favourable, but not necessarily by way of leave.

23    Thus, absent s 5(3) of the Long Service Leave Act, there would seem to be no statutory impediment to the granting of an exemption in the terms sought here as involving the payment of a monetary amount in lieu of taking accrued leave plus an equivalent amount of leave without pay, provided that the three conditions specified in s 5(2)(a) are satisfied - that is, (i) the benefits under the proposed scheme are in the nature of long service leave, (ii) such benefits are not less favourable than those specified in the Long Service Leave Act and (iii) it is in the best interests of the employees that the exemption should be granted. In the present case, in light of the conclusion to which I have otherwise come as to the effect of s 5(3) in preventing the exemption being allowed, it is strictly unnecessary to attend to those three conditions. However, in deference to the detailed arguments put in the proceedings in those respects I think it only proper to make some observations, but not necessarily as concluded views, in relation to them.

24    As to condition (i) concerning the monetary benefit being in the nature of long service leave, on the authority of Wire Fence Makers and Tubular Gate Makers this is clearly satisfied. However, for myself, and with all respect to the reasoning of their Honours in that case, I have difficulty in accepting that a monetary or cash payment can be "in the nature of long service leave". True it is that such a payment may be a benefit in the nature of long service, but, it seems to me, it stretches the language to regard it as a benefit in the nature of (long service) leave as the condition requires. Put another way, I find difficulty in accepting a cash payment as being in the nature of leave. After all, the ordinary meaning (see Shorter Oxford English Dictionary) of the word "nature" is referable to the "essential qualities" of something. The Macquarie Dictionary (2nd ed, 1991) relevantly defines the word as "the particular combination of qualities belonging to a ... thing by ... constitution; ... inherent character; ... character, kind, or sort ..."; indeed, that same authority describes the phrase "in the nature of" as "having the qualities of". I would incline to the view that the essential quality or characteristic of a monetary payment is conceptually different from that of a period of leave, particularly a period of paid leave as the Long Service Leave Act provides. Therefore, in my opinion, the conclusion reached by the former Industrial Commission in Wire Fence Makers and Tubular Gate Makers may be doubted and should, I think, be reconsidered by this Commission in an appropriate case.

25    As to condition (ii) concerning whether the benefit of a cash payment is not less favourable than the benefits specified in the Long Service Leave Act, I have similar doubts for the same reasons as expressed in relation to condition (i) - it would be difficult to comparatively relate benefits of a distinct and different nature to determine whether one is truly "not less favourable" than the other. At most, it seems to me, it may be said that they are simply different and so different as to defy meaningful comparison.

26    As to condition (iii) concerning whether the proposed exemption is in the best interests of the employees concerned, I similarly have doubts it has been satisfied here. A review of the scheme established by the Long Service Leave Act, as summarised earlier herein, discloses, in my view, that it is concerned with allowing employees paid leave after completing specified qualifying periods of service with an employer. The only provision in the statute for the payment of money in lieu of allowing paid leave as such is that in s 4(2)(a) in the case of an employee whose services with an employer are terminated: see sub-paras (i)(C), (ii) and (iii) thereof. Given the social and beneficial nature of a period of paid leave, I would hesitate to be satisfied, but as was submitted by Mr Billing, that in the generality it would be in the best interests of the employees concerned to receive a cash payment in lieu of a period of paid leave on completing the qualifying service period. I accept that the employees here have expressed no objection to having the option for paid leave or payment in lieu thereof, with the latter situation allowing unpaid leave at some time in the future during their employment, but the exercise of such an option by an individual employee may well be driven by exigencies contrary to the fundamental and inherent purpose of the Long Service Leave Act, that is, a period of paid leave for long service.

27    The essence of the applicant's proposal is for a scheme to enable its obligations under the Long Service Leave Act to allow employees a period of paid leave to be satisfied, in whole or in part, by the payment of money equivalent to the amount of leave due should an employee so elect. For the reasons expressed above, I have serious doubts that the three necessary conditions for such an exemption to be granted have been met. In any case, I have reached the conclusion that s 5(3) of the Long Service Leave Act operates as a statutory bar to the exemption being granted. I turn now to that issue.

28    In Re Long Service Leave Exemption - A L Vincent & Coy Pty Ltd [1967] AR (NSW) 221, Sheldon J dismissed an application by the employer to continue an exemption, albeit in an amended form, from the operation of the Long Service Leave Act as to employees who were or became members of the employer's superannuation scheme and provident fund. Of course, the application fell to be considered in light of the insertion in 1963 into the statute of s 5(3). After noting (at p 223) that the employer's scheme "was a typical Staff Superannuation and Provident Fund" under which a member employee on death or retirement received the proceeds of an endowment policy on the life of the member with certain lesser payments on termination of employment, his Honour recorded (at p 223) that "The scheme did not provide for leave as such but such schemes were construed benevolently as conferring benefits 'in the nature of long service leave'". In reasoning the effect of s 5(3), his Honour said (at pp 223-224) :

But the passage of time has brought a change in legislative policy. In 1963, s 5(3) was introduced into the Act and this proscribes the granting of exemptions unless the scheme provides for an actual grant of long service leave. This scheme, of course, does not (see Jackson v. Davids [1963] AR at p.261). ... The Act provides that workers must receive leave whether it be by force of s.4 or through an exempted scheme under s.5. No substitute, however princely, is permitted and no past benefit can be used to derogate from the grant unless it is actual leave (s.4(2)(b)). Nor can the right to leave be bartered in order to receive, or avoid losing, other benefits (s.7). Thus a social policy without loopholes has been made operative. It would be wrong, in my opinion, for the Commission to frustrate that policy by excluding workers within its scope.

29    With respect, I adopt as correct the views expressed by Sheldon J as to the change in legislative policy effected in 1963 by the enactment of s 5(3). It has, in my view, direct application to the case presently before me and requires the application for exemption being refused.

30    Mr Billing sought to overcome the effect of the decision in Vincent by submitting that s 5(3) operated only where monetary benefits in lieu of leave were provided under pension or superannuation schemes. For that purpose, Mr Billing relied upon the following extract from the judgment of Watson J in Smith v Craig Mostyn ([1984] 2 NSWLR at p 403; [1984] AR at p 573) :

The Long Service Leave Act 1955, treats superannuation benefits and long service leave as two distinct subject matters. An exemption cannot be obtained from the Long Service Leave Act based on superannuation benefits as the Act now stands. The Long Service Leave Act, s 5(3), provides as follows :

"(3) As from the date of commencement of the Long Service Leave (Amendment) Act, 1963, no exemption shall be granted pursuant to subsection 2(a) to any employer, which does not provide for the granting of long service leave, as such, to the workers covered by such scheme."

Prior to this amendment the Commission had held that benefits in the nature of long service leave, relevant to the obtaining of an exemption from the Act, included monetary payments under superannuation or insurance schemes: Re Wire Fence (Other Than Barbed Wire) Makers and Tubular Gate Makers (State) and Other Awards [1952] AR (NSW) 91.

31    It is clear that both Vincent and Smith v Craig Mostyn were concerned with superannuation schemes. However, I do not understand the views expressed in those cases to be so confined. It is plain, in my view, that the change in legislative policy from the position as it had been accepted in Wire Fence Makers and Tubular Gate Makers was, as s 5(3) says and as Sheldon J emphasised in Vincent, to "proscribe the granting of exemptions unless the scheme provides for an actual grant of long service leave". That s 5(3) extended beyond superannuation schemes is plain, I think, by the clear expression of Sheldon J that "No substitute, however princely, is permitted": cf Jackson v Davids Pty Ltd [1963] AR (NSW) 258 at p 261.

32    Mr Billing readily accepted that s 5(3) meant the alternative scheme supporting an exemption would have, in the words of the sub-section, to "provide for the granting of long service leave, as such"; in the present case, he said that that was satisfied because if an employee elected to receive the cash payment in lieu of leave he could also take a period of an equivalent amount of leave in the future without payment. It is trite, of course, that an employer and an employee may agree at any time to vary or suspend a contract of employment by allowing a period of leave without pay. Nevertheless, in my opinion, such a course being used to justify an exemption from the operation of the provisions of the Long Service Leave Act would be to derogate from what I see to be the plain intent of s 5(3), namely, to prevent any exemption being granted pursuant to s 5(2)(a) unless the scheme provided for the grant of leave, as such, and where the leave be paid. If it were otherwise, then, in my view, the statutory purpose of s 5(3) would be readily negated and, contrary to the approach of Sheldon J in Vincent (at p 224), would provide a loophole to frustrate the social policy evinced by the sub-section. Like his Honour, I consider it would be wrong for the Commission to frustrate that policy by permitting an employee to "cash out" part or all of accrued long service leave. It is only obvious to point out that the proposed scheme of the applicant here, in any event, in no way guarantees or ensures that a period of unpaid leave in the future would be taken and there is enormous scope for such a "benefit" to be simply lost. To the extent there may be some ambiguity, but I do not think there is, in the terms of s 5(3), Mr Billing relied upon the Minister's Second Reading Speech (Hansard, Legislative Assembly, 20 March 1963 at pp 3567-3570) in moving to incorporate the sub-section into the Long Service Leave Act, as follows (at p 3570) :

The next proposal in the bill concerns the granting of exemptions from the provisions of the Act to employers where the commission is satisfied that workers are entitled to benefits in the nature of long-service leave under any scheme conducted by the employer which contains benefits for the worker at least as favourable as those contained in the Act. Unfortunately this has resulted in hardship for many employees despite the admitted fact that the workers had the right of election to remain under the Act or be covered by the employer's scheme. Perhaps a lack of understanding on the part of the workers of the details of employers' schemes, many of which are exceedingly complex, had led to this position. The fact remains that, particularly in cases where termination of employment is involved, the workers may not get long service leave.

To provide against such happenings the bill proposes to amend section 5 of the Act so that no exemption may be granted to employers unless the employer's scheme specifically provides - quite possibly among other benefits - for long-service leave. The remaining parts of the bill contain machinery provisions. They include provisions for the amendment of awards where necessary after the passing of this bill, the preservation of existing accrued entitlements and safeguards to ensure that double benefits cannot be obtained. The humane benefits to be conferred by this proposed legislation will, I feel sure, meet with the general approval of all sections of our community.

33    I do not apprehend any limitation in what the Minister said to the sub-section being directed only against superannuation schemes in supporting an exemption but rather was referrable to "any scheme conducted by the employer". Further, by the Minister noting that the proposed amendment was to remedy the situation where "the workers may not get long service leave", I think the speech is against the construction urged by Mr Billing and only supportive of that expressed earlier in these reasons.

34    Finally, I refer to the exemption granted to the applicant from the Long Service Leave Act (Vic) in respect of its employees at its Point Henry plant in Victoria. It is sufficient to say that that exemption in itself, in my view, cannot be used to support the present application because not only was it allowed by consent but no reasons were given. Also, and where the Victorian statute contains provisions in s 65 permitting an exemption and in s 74 forbidding payments in lieu of leave in similar terms to those in the New South Wales statute respectively in s 5(2)(a) and s 4(8), no provision exists in the Victorian statute corresponding to s 5(3) as applicable in this State.

35    Accordingly, I conclude that the present application for exemption from the Long Service Leave Act pursuant to s 5(2)(a) thereof cannot be granted by reason of the terms of s 5(3) because the scheme proposed by the applicant does not provide for the granting of long service leave, as such, to the employees concerned.

36    The application is dismissed.

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LAST UPDATED: 12/02/2001