Fair Work Act 2009

s.739 - Dispute resolution

"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia

Application to deal with a dispute in accordance with a dispute settlement procedure

• [1] On 5 June 2024, the "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) and, on 6 June 2024, the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) filed applications under s 739 of the Fair Work Act 2009 (in this decision the AMWU and CEPU are collectively referred to as the Unions).

• [2] This dispute arose in regrettable circumstances. Lactalis Australia YD Pty Ltd ("Lactalis") operated a production facility on Denmark Road at Echuca. On 9 April 2024, employees were told a decision had been made to close the Echuca site. The first group of workers were retrenched on 21 June 2024. The remainder of the workers at the Echuca site were retrenched on 5 July 2024. On that date, the site was closed.

• [3] The terms and conditions of workers at the Echuca site were regulated by the Lactalis Australia YD Pty Ltd Echuca Agreement 2022 ("the Agreement"). The dispute concerns the rate at which accrued annual leave loading was to be paid out on termination for workers who worked an eight-hour rotating shift pattern.

• [4] The Agreement was preceded by the Lactalis Australia YD Pty Ltd Agreement 2019. The CEPU tendered an "Agreement Summary" as Exhibit A4, which I understand was forwarded to workers at Echuca to explain the terms of the [2022] Agreement. The Agreement can be described as a "roll over" which maintained most of the terms of the 2019 Agreement (including the terms which are in issue in this dispute). The only conditions which were changed were provisions relevant to wages, allowances and superannuation.

• [5] The hearing took place on 4 September 2024. The AMWU was represented by its industrial officer, Mr. Stephen Fodrocy, the CEPU by its in-house counsel Mr. Kelvin Reidy, and Lactalis was represented by Mr. Mitchell Brennan, a Senior Associate of Herbert Smith Freehills who appeared after leave was granted. Prior to the hearing, the parties had prepared an agreed statement of facts[1] and agreed questions the parties wish to be answered through the arbitration.

• [6] Late in the hearing, the Unions raised an alternative argument. It was agreed I would take further written submissions on that issue. On 13 September 2024, Lactalis filed a further outline of submissions. On 20 September 2024, the Unions filed further reply submissions.

• [7] The agreed questions are:[2]

In determining the amount of annual leave loading to be paid to an employee on termination for annual leave accrued but not taken pursuant to s.90(2) of the FW Act and cl.56 of the Agreement, incorporating cl.34 of the Manufacturing and Associated Industries and Occupations Award 2020 (General Manufacturing Award "GMA") and cl.25 of the Food, Beverage and Tobacco Manufacturing Award 2020 (Food Manufacturing Award "FMA") is an employee entitled to:

(i) A component equal to 17.5% of the wages prescribed by the Awards for periods of accrued leave which would have been worked on day shift if the employee had been at work; and

(ii) A component (or components) equal to the applicable shift loading(s) (including relevant weekend penalty rates) for periods of accrued leave which would have been worked on afternoon and/or night shift(s) if the employee had been at work; or

(i) An amount equal to 17.5% of wages prescribed by the Awards for the entire period of accrued leave; or

(ii) An amount equal to the applicable shift loading(s) (including relevant weekend penalty rates) calculated across the entire period of accrued leave for the shift(s) which would have been worked on afternoon and/or night shift(s) if the employee had been at work?

In determining the applicable shift loading(s) for the amounts in Question One, is the Respondent required to:

(a) average the employee's shift loadings calculated across the entirety of the roster cycle that applied to the employee at the time of termination of their employment.

(b) sum the employee's shift loadings according to a continuation of the roster cycle, as worked by the employee at the time of termination of their employment; or

• [8] For the following reasons my answers to those questions are:

The amount of annual leave loading to be paid to an employee on termination for annual leave accrued but not taken is an amount which is the greater of:

(i) An amount equal to 17.5% of wages prescribed by the Awards for the entire period of accrued leave; or

(ii) An amount equal to the applicable shift loading(s) (including relevant weekend penalty rates) calculated across the entire period of accrued leave for the shift(s) which would have been worked on afternoon and/or night shift(s) if the employee had been at work.

In determining the applicable shift loading(s) for the amounts in Question One, the Respondent required to average the employee's shift loadings calculated across the entirety of the roster cycle that applied to the employee at the time of termination of their employment.

The alternative argument based on clause 3.5 of the Agreement

• [9] On the alternative argument based on clause 3.5 of the Agreement, the Statements of Hay and Watson are, for the following reasons, insufficient to establish the payments made to employees for annual leave loading calculated on a shift-by-shift basis were "over award or agreement payments" under clause 3.5 of the Agreement. It follows this argument fails.

• [10] The statement of agreed facts filed in the proceeding was marked as "P1". It included the fact that the relevant former employees at the centre of this dispute "worked eight hour rotating shift patterns across two different roster patterns with two different start and finish times."[3]

• [11] I reproduce the tables and text from the Statement of Agreed facts dealing with the rotating shifts below:

11. Immediately before termination, the relevant employees at the Echuca Site worked 8 hour per shift rotating shift patterns across two different roster patterns with different start and finish times.

12. Roster 1 was worked by employees including Yoghurt Makers, Fill & Pack Operators and Trades (electrical and mechanical) staff at the Echuca Site.

13. The start and finish times for shifts worked by employees on Roster 1 were as follows:

14. The following 8 hour per shift rotating shift pattern was worked by Yoghurt Makers, Fill & Pack Operators and Trades (mechanical) staff under Roster 1:

15. The following 8 hour per shift rotating shift pattern was worked by Trades (electrical) staff under Roster 1:

16. Lactalis paid employees the following shift loadings when these employees worked on the applicable shift:

(a) no shift loading for all hours worked on day shift;

(b) a 20% shift loading for all hours worked on afternoon shift; and

(c) a 30% shift loading for all hours worked on night shift.

17. Roster 2 was worked by employees in Logistics positions at the Echuca Site.

18. The start and finish times for shifts worked by employees on Roster 2 were as follows:

19. Lactalis paid the following shift loadings when these employees worked on the applicable shift: (a) no shift loading for all hours worked on day shift; and

(b) a 20% shift loading for all hours worked on afternoon shift.

20. The following 8 hour per shift rotating shift pattern was worked by the relevant employees under Roster 2:

• [12] A critical fact in the determination of this arbitration is that Lactalis paid the following shift penalties to workers who worked either of these rosters:

• [13] The Unions filed two witness statements from former workers at the Echuca site:[4] one from Mr. Daniel Watson who was a maintenance fitter and machinist at the site and Mr. Ross Hay who was a maintenance electrician.[5] These statements are a point of controversy in the proceedings. The primary submission of Lactalis is they are irrelevant to the task of interpretation asked of me in this arbitration.

• [14] Each of the witnesses confirm during their employment, if they took annual leave Lactalis paid their annual leave loading according to the shifts they would have worked had they not taken leave. The annual leave loadings which were applied to the respective shifts were:

• an amount equal to 17.5% of wages for the shifts which would have been worked on day shift;

• an amount equal to 20% of wages for the shifts which would have been worked on afternoon shift; and

• an amount equal to 30% of wages for the shifts which would have been worked on night shift.

RELEVANT PROVISIONS OF THE ACT, THE AGREEMENT AND THE INCORPORATED AWARDS

Fair Work Act 2009 on annual leave payments

90 Payment for annual leave including on termination

(1) [Payment is at the base rate for ordinary hours of work]

If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee's base rate of pay for the employee's ordinary hours of work in the period.

(2) [Employer must pay untaken annual leave when employment ceases]

If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.

• [15] Clause 56 of the Agreement provides that in respect of annual leave "the provisions of the GMA and FMA apply to applicable employees".

• [16] Clause 3 of the Agreement incorporates the GMA and FMA into the Agreement on the following basis (in summary):

• Clause 3.1 The provisions of the GMA and FMA are incorporated into the Agreement with the GMA and FMA applying to the workers who would be covered by one or other of those awards.
• Clause 3.2: Detrimental variations to the GMA or FMA are not incorporated.
• Clause 3.4: The express provisions of the Agreement prevail over inconsistent provisions in the GMA or FMA to the extent of the inconsistency.
• Clause 3.6: The incorporated terms of the GMA or FMA are to be read as altered with appropriate changes "to make them" provisions of the Agreement "rather than provisions of an award."

34.1 Annual leave is provided for in the NES. Except as provided for in clause 48, annual leave does not apply to a casual employee.

For the purpose of the additional week of annual leave provided for in section 87(1)(b) of the Act, a shiftworker is a 7 day shiftworker who is regularly rostered to work on Sundays and public holidays.

NOTE: Where an employee is receiving over - award payments such that the employee's base rate of pay is higher than the rate specified under this award, the employee is entitled to receive the higher rate while on a period of paid annual leave (see sections 16 and 90 of the Act ).

(a) Instead of the base rate of pay as referred to in section 90(1) of the Act , an employee under this award, before going on annual leave, must be paid the wages they would have received in respect of the ordinary hours the employee would have worked had the employee not been on leave during the relevant period.

(b) Subject to clause 34.3(c), the wages to be paid must be worked out on the basis of what the employee would have been paid under this award for working ordinary hours during the period of annual leave, including allowances, loadings and penalties paid for all purposes of the award, first aid allowance and any other wages payable under the employee's contract of employment including any over - award payment.

(c) Subject to clause 34.4, the employee is not entitled to payments in respect of overtime, shift loading, weekend penalty rates, special rates or any other payment which might have been payable to the employee as a reimbursement for expenses incurred.

(a) During a period of annual leave an employee must also be paid a loading calculated on the wages prescribed in clause 34.3.

An employee who would have worked on day work only had they not been on leave must be paid a loading equal to 17.5% of the wages prescribed in clause 34.3 or the relevant weekend penalty rates, whichever is the greater but not both.

An employee who would have worked on shiftwork had they not been on leave must be paid a loading equal to 17.5% of the wages prescribed in clause 34.3 or the shift loading including relevant weekend penalty rates, whichever is the greater but not both.

25.1 Annual leave is provided for in the NES. Annual leave does not apply to a casual employee.

For the purpose of the additional week of annual leave provided for in section 87(1)(b) of the Act, a shiftworker is a 7 day shiftworker who is regularly rostered to work on Sundays and public holidays.

(a) Instead of the base rate of pay as referred to in section 90(1) of the Act, an employee under this award, before going on annual leave, must be paid the wages they would have received in respect of the ordinary hours the employee would have worked had the employee not been on leave during the relevant period.

(b) Subject to clause 25.4(c), the wages to be paid must be worked out on the basis of what the employee would have been paid under this award for working ordinary hours during the period of annual leave, including allowances, loadings and penalties paid for all purposes of the award, first aid allowance and any other wages payable under the employee's contract of employment including any over-award payment.

(c) Subject to clause 25.6, the employee is not entitled to payments in respect of overtime, shift rates, weekend penalty rates, special allowances or any other payment which might have been payable to the employee as a reimbursement for expenses incurred.

During a period of annual leave an employee must also be paid a loading calculated on the wages prescribed in clause 25.4. The loading must be as follows:

An employee who would have worked on day work only had they not been on leave must be paid a loading equal to 17.5% of the wages prescribed in clause 25.4 or the relevant weekend penalty rates, whichever is the greater but not both.

An employee who would have worked on shiftwork had they not been on leave must be paid a loading equal to 17.5% of the wages prescribed in clause 25.4 or the shift loading including relevant weekend penalty rates, whichever is the greater but not both.

• [19] The disposition of this case requires a textual analysis of the terms of s 90 of the Act, the provisions of the Agreement and the incorporated terms. This analysis is not possible without some exposition of the contending arguments. I will summarise those below.

• [20] In essence, the Unions claim on the termination of the employment of the Echuca workers, Lactalis was required to pay employees annual leave loading equal to 17.5% of the wages for the proportion of their leave balance that would have been worked on day shift, a loading of 20% for the proportion of their leave balance that would have been worked on afternoon shift and a loading of 30% for the proportion of their leave balance that would have been worked on night shift.

• [21] There is a dispute between the parties as to the method of interpretation I should apply to the incorporated terms of the Award. Should I interpret them according to the principles which apply for the interpretation of an agreement or according to the principles which apply for the interpretation of awards?

• [22] The Unions argue, as the incorporated awards are expressed to be part of the Agreement, I should construe the incorporated awards using principles of interpretation applied to agreements rather than those that have applied to awards. They argue I should apply the fifteen principles elaborated by the Full Bench in Berri:[6]

1. The construction of an enterprise agreement, like that of a statute or contract, begins with a consideration of the ordinary meaning of the relevant words. The resolution of a disputed construction of an agreement will turn on the language of the agreement having regard to its context and purpose. Context might appear from:

(i) the text of the agreement viewed as a whole;

(ii) the disputed provision's place and arrangement in the agreement;

(iii) the legislative context under which the agreement was made and in which it operates.

2. The task of interpreting an agreement does not involve rewriting the agreement to achieve what might be regarded as a fair or just outcome. The task is always one of interpreting the agreement produced by parties.

3. The common intention of the parties is sought to be identified objectively, that is by reference to that which a reasonable person would understand by the language the parties have used to express their agreement, without regard to the subjective intentions or expectations of the parties.

4. The fact that the instrument being construed is an enterprise agreement made pursuant to Part 2-4 of the FW Act is itself an important contextual consideration. It may be inferred that such agreements are intended to establish binding obligations.

5. The FW Act does not speak in terms of the 'parties' to enterprise agreements made pursuant to Part 2-4 agreements, rather it refers to the persons and organisations who are 'covered by' such agreements. Relevantly s.172(2)(a) provides that an employer may make an enterprise agreement 'with the employees who are employed at the time the agreement is made and who will be covered by the agreement'. Section 182(1) provides that an agreement is 'made' if the employees to be covered by the agreement 'have been asked to approve the agreement and a majority of those employees who cast a valid vote approve the agreement'. This is so because an enterprise agreement is 'made' when a majority of the employees asked to approve the agreement cast a valid vote to approve the agreement.

6. Enterprise agreements are not instruments to which the Acts Interpretation Act 1901 (Cth) applies, however the modes of textual analysis developed in the general law may assist in the interpretation of enterprise agreements. An overly technical approach to interpretation should be avoided and consequently some general principles of statutory construction may have less force in the context of construing an enterprise agreement.

7. In construing an enterprise agreement it is first necessary to determine whether an agreement has a plain meaning or it is ambiguous or susceptible of more than one meaning.

8. Regard may be had to evidence of surrounding circumstances to assist in determining whether an ambiguity exists.

9. If the agreement has a plain meaning, evidence of the surrounding circumstances will not be admitted to contradict the plain language of the agreement.

10. If the language of the agreement is ambiguous or susceptible of more than one meaning then evidence of the surrounding circumstance will be admissible to aide the interpretation of the agreement.

11. The admissibility of evidence of the surrounding circumstances is limited to evidence tending to establish objective background facts which were known to both parties which inform and the subject matter of the agreement. Evidence of such objective facts is to be distinguished from evidence of the subjective intentions of the parties, such as statements and actions of the parties which are reflective of their actual intentions and expectations.

12. Evidence of objective background facts will include:

(i) evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the agreement;

(ii) notorious facts of which knowledge is to be presumed; and

(iii) (iii) evidence of matters in common contemplation and constituting a common assumption.

13. The diversity of interests involved in the negotiation and making of enterprise agreements warrants the adoption of a cautious approach to the admission and reliance upon the evidence of prior negotiations and the positions advanced during the negotiation process. Evidence as to what the employees covered by the agreement were told (either during the course of the negotiations or pursuant to s.180(5) of the FW Act) may be of more assistance than evidence of the bargaining positions taken by the employer or a bargaining representative during the negotiation of the agreement.

14. Admissible extrinsic material may be used to aid the interpretation of a provision in an enterprise agreement with a disputed meaning, but it cannot be used to disregard or rewrite the provision in order to give effect to an externally derived conception of what the parties' intention or purpose was.

15. In the industrial context it has been accepted that, in some circumstances, subsequent conduct may be relevant to the interpretation of an industrial instrument. But such post-agreement conduct must be such as to show that there has been a meeting of minds, a consensus. Post agreement conduct which amounts to little more than the absence of a complaint or common inadvertence is insufficient to establish a common understanding.

• [23] The Unions argue these fifteen principles "apply with equal force" when interpreting the incorporated awards as they are part of the agreement. This is because clause 3 provides for the incorporation of the terms into the agreement and that those terms are to be read "as if altered with appropriate changes to make them provisions of the Agreement".[7] My task is to construe cl 34 of the GMA and cl 25 of the FMA as if they were Agreement terms.

• [24] The principles of interpretation relevant to interpreting agreements are different from those that apply to modern awards because evidence of surrounding circumstances may be used to assist the construction of an agreement but is limited to evidence "tending to establish objective facts".[8]

• [25] The Unions argue I should avoid an overly technical approach in construing the Agreement and consider the differing industrial context between the making of an agreement and the making of a modern award. Agreements are made under part 2-4 of the Act through bargaining between employers, employees and their unions and (mostly) apply to a single enterprise and their employees. This is to be contrasted with a modern award which is made under part 2-3 and applies to all workers within industries and occupations that the award is expressed to cover.

• [26] The caution to avoid an overly technical approach and to have regard to the different industrial context of award rather than agreement making is increased where there is no settled interpretation of an award provision.

• [27] The Unions note that in the award modernisation decision, the Full Bench of the AIRC considered it was "not practical to develop a single model clause for annual leave"[9] and that "depending on the circumstances of the industry and the existing award arrangements provision may be required for... annual leave loading".[10] The Unions also note the annual leave clauses in the GMA and FMA have remained essentially the same since December 2009.[11]

The meaning the Unions ascribe to the text of the Agreement and Awards

• [28] Clause 34.3 of the GMA provides instead of the base rate of pay "as referred to in section 90(1) of the Act" an employee must be paid wages they would have received in respect of ordinary hours the employee would have worked had they not been on leave during the relevant period. According to s 34.3(c), the wages must be worked out "on the basis of what the employee would have been paid...for working ordinary hours including loadings and penalties [under cl34.3(b)]".

• [29] The GMA requires an employer to pay any employee loading calculated on the wages prescribed in clause cl 34.3 during a period of annual leave. The leave loading must be:

• Day Work: For an employee who would have worked on day work a loading of 17.5%...or the relevant weekend penalty rates whichever is the greater but not both; and

• • Shift Work: For an employee who would have worked shiftwork, a loading equal to a loading of 17.5%...or the shift loading including relevant penalty rates whichever is the greater but not both.[12]

• [30] Section 90(2) of the Act provides when employment ends, the employer must pay the employee the amount that would have been payable to the employee had the employee taken a period of leave. The Explanatory Memorandum of the Fair Work Bill 2008 provides "guidance on the meaning" to this subsection.[13] It states, "the payment will be equivalent to the amount the employee would have been paid if the employee had not taken the annual leave."[14]

• [31] The purpose of cls 34.3 and 34.4 of the GMA and cls 25.4 and 25.6 of the FMA is to set out the rate of pay for periods of annual leave and payment for accrued but untaken annual leave which is more beneficial than the requirement of s 90. This is clear from the introductory words "instead of the base rate of pay as referred to in s 90(1) in cl 34.3(a) of the GMA and cl 25.4(a) of the FMA". The Unions argue I should "bear in mind" the "supplementary beneficial purpose of the clauses" in my construction of the relevant text in the Awards/Agreement.[15]

• [32] The text of s 90(2) provides when paying an employee for untaken annual leave, an employer must pay the appropriate rate in accordance with the awards. According to the Unions, the appropriate rate is conditional on two factors:

• whether the employee would have worked on day or shift work if they had not taken leave; and

• • whether the shift loading or relevant penalty rates are greater than an amount equal to 17.5%.[16]

The text of the incorporated awards requires a "notional assessment" of the shifts the worker would have worked

• [33] The Unions describe the steps it says an employer is required to take to calculate the correct rate of pay: The employer must ask whether the employee would have worked day work or shift work for the period of leave. The appropriate rate of pay is only worked out by reference to a notional assessment of what the employee would have worked.[17]

• [34] The relevant award term refers to wages an employee would have received in respect of ordinary hours the employee would have worked. The employer is required to make a notional assessment of what would have been worked if an employee had worked their ordinary hours for the period of leave (taken or accrued). If an employer does not make this notional assessment, it cannot accurately calculate what employee's wages "would have been paid" for the purposes of cl. 34.3 of the GMA and cl 25.4 of the FMA, nor can they work out the appropriate rate of pay for accrued annual leave on termination.

• [35] The Unions argue this means the employer must pay employees an amount equal to 17.5% of the prescribed wages for the period of untaken leave which would have been worked on day shift and the applicable shift loadings for periods of untaken annual leave which would have been worked on afternoon and night shift (as they would have been greater than 17.5%).[18]

• [36] The Unions argue this construction accords with industrial reality,[19] custom and working conditions[20] and the post agreement conduct of the parties.[21] Relying on the Watson and Hay witness statements, they argue that Lactalis has "consistently paid employees" on annual leave consistent with the approach the Unions say is required by the Awards/Agreement. That is where employees have taken annual leave which included days on which they would have worked day work and shift work. Lactalis has paid an amount equal to 17.5% of wages for the days which would have been worked as day work and shift penalties for the days that would have been shift work.

• [37] The Unions' construction is "a necessary consequence of the plain meaning of the text in context and best supports the "supplementary beneficial purpose" of the Award provisions which they argue is to provide a greater benefit than under s 90 of the Act.

• [38] The text requires the employer to perform its assessment of the shift that an employee would have worked for the period of leave (taken or not) not at a fixed point but throughout the continuation of the period. This is because cl 25.6 of the FMA and cl 34.4 of the GMA both commence with the words "During a period of annual leave". The Unions argue the use of this preposition "directs attention to the period of leave as it continues, not a fixed point." The interpretation contended by the Unions is preferable because it requires an assessment of the employee's shift on particular days of leave rather than an average of the entire period.[22]

Bifurcation between "day work" and "shift work" in the Award provisions is significant

• [39] The Unions also argue the Awards give a context which supports their interpretation. The "relevant condition" of the Awards is whether the employee would have worked on day or shift work, for the period of leave. During a period of leave, if an employee had instead been at work, they would have likely worked a combination of day, afternoon and night shift. They argue "Comparing an average of shift penalties to a fixed percentage would fail to give effect to the requirement to consider whether an employee would have worked on day or shift work during the period of leave."[23]

• [40] Section 90 of the Act requires the employer to pay the employee the amount that would have been payable had the employee taken the leave. According to the Unions, "this requires the employer to calculate the leave loading by reference to what the employee would have received if they had taken the leave while employment".[24]

• [41] Consistent with the tenets of construction for agreements set out in Berri, the post agreement conduct evinced by the statements of Hay and Watson also accords with construction contended for by the Unions.[25]

• [42] The approach argued for by the Unions is consistent with the language of "a loading" or "the loading" in clause 34 of the GMA and 25 in the FMA. The loading payable is one amount comprised of components calculated according to Award (an amount equal to 17.5% for what would have been day work and an amount equal to the shift penalty for leave which would have been shift work). This is consistent with the plain meaning of loading. The loading is not the percentage itself but the monetary amount in addition to an employee's wages. This is clear from the relevant parts of the Award which refer to loadings "equal to a percentage of wages". The loading is relative to the percentages, but the loading is not the percentage itself.[26]

• [43] I refer to the Unions' arguments on question two below at paragraphs [153]-[158].

Alternative Argument on clause 3.5 of the Agreement

• [44] Late in the hearing of this matter, the Unions made an alternative argument which relies on clause 3.5 of the Agreement. It reads:

"Further, existing over award or agreement payments and conditions of employment shall continue to apply as if they were a term of this Agreement except where the terms of this Agreement expressly provide otherwise. This sub-clause shall not operate so as to reduce wages or conditions of employees."

• [45] The argument boils down to the proposition that the statements of Hay and Watson establish that during their employment, they were paid annual leave loading calculated on the shift-by-shift basis. In so far as this method of calculation for leave loading was beyond that required by the Agreement or the Awards, it was an "over award or agreement payment" or "condition of employment" under clause 3.5. It follows that method of calculation and payment will "continue to apply as if it was a term of the Agreement".[27]

• [46] The Statement of Daniel Watson filed in this proceeding is to the effect he was paid for annual leave with loading which was calculated on a shift-by-shift basis:

"When I took annual leave, my pay was calculated based on the shifts I would have worked according to the roster cycle. Lactalis paid me the following loading when I took annual leave...17.5% of wages for day shifts, 20% of wages for afternoon shifts; and. 30% of wages for night shifts.

For example between 13 and 17 March 2024, I took four days' annual leave. If I had been at work, I would have been on day shift for three days and on night shift for one day. Lactalis paid me $230.20 (equal to 17.5% of wages for three days) and $131.55 (equal to 30% of wages for one day)."[28]

• [47] The Statement of Ross Hay filed in the proceeding is to a similar effect:

"When I worked on afternoon shift, I was paid my normal rate of pay plus a shift loading of 20%. When I worked on night shift, I was paid my normal rate of pay plus a shift loading of 30%.

When I took annual leave Lactalis calculated my annual leave pay according to the shift I was rostered to work. When I took annual leave which coincided with me being rostered to work:...day shift, I was paid annual leave loading at the rate of 17.5%... afternoon shift, I was paid annual leave loading at the rate of 20%; night shift, I was paid annual leave loading at the rate of 30%."[29]

Disposition of the questions argued for by the Unions

• [48] The Unions argue I should find that the answers to the questions for arbitration are:

• [49] An employee is entitled to payment of an amount including both:

• A component equal to 17.5% of the wages prescribed by the Awards for periods of accrued leave which would have been worked on day shift if the employee had been at work; and
• A component (or components) equal to the applicable shift loading(s) (including relevant weekend penalty rates) for periods of accrued leave which would have been worked on afternoon and/or night shift(s) if the employee had been at work.

• [50] In determining the applicable shift loading(s) for the amounts in Question 1, Lactalis is required to add the employee's shift loadings (afternoon or night) according to a continuation of the roster cycle, as worked by the employee at the time of termination of their employment.

• [51] Lactalis summarise the effect of the incorporated award provisions as "The Awards prescribe that during a period of annual leave, an employee must be paid a loading[30]" calculated on the wages based on whether they work day work or shift work.

• [52] An employee who worked on day work only had they not been on leave must be paid a loading equal to:

• 17.5 % of the wages prescribed by cl 34 of the GMA and cl 25.4 of the FMA or the relevant weekend penalty rates, or

• • the relevant weekend penalty rates whichever is the greater but not both.[31]

• [53] An employee who worked on shiftwork had they not been on leave must be paid a loading equal to:

• 17.5 % of the wages prescribed by cl 34.3 of the GMA and cl 25.4 of the FMA; or

• • The shift loading including relevant penalty rates, whichever is the greater but not both.[32]

• [54] The awards prescribe that on termination of employment, an employee must be paid for annual leave that has accrued but has not been taken at the appropriate rate calculated according to cl 34.3 of the GMA and cl 25.4 of the FMA. Under s 90(2) of the NES in the Act this would include an amount of the annual leave loading that would have been payable to the employee had the employee taken the period of leave during their employment.[33]

The relevant principles of interpretation are those that apply to awards, not agreements

• [55] Lactalis argues I should interpret the incorporated terms as award terms applying the well settled principles of interpretation summarised by Rangiah J of the Federal Court in Swissport which I reproduce below without citations:[34]
  • The canons of construction found in the Acts Interpretation Act 1901 (Cth) apply to awards of the Commission.
  • The task of construction begins with the natural and ordinary meaning of the words used.
  • An award is to be interpreted in light of its industrial context and purpose.
  • An award is also to be interpreted in light of the commercial and legislative context in which it applies.
  • An award "must not be interpreted in a vacuum divorced from industrial realities."
  • The relevant "context" to be considered in interpreting an award extends to the origins of a particular clause. However, most often the immediate context, being the clause, section, or part of the award in which the words to be interpreted appear, will be the clearest guide.
  • The court should not make too much of infelicitous expression in the drafting of an award. Ultimately, as awards bind the parties on pain of pecuniary penalties, they should make sense according to the basic conventions of the English language: Narrow or pedantic approaches to the construction task are misplaced, but a court is not free to give effect to some anteriorly derived notion of what is fair or just regardless of what has been written in the award:
  • While context and purpose of an award will be relevant, ultimately the Court's task is to give effect to the meaning of the award as expressed in its words, objectively construed.

• [56] Lactalis argues I should not apply the principles for the interpretation of agreements set out in the decision of the Full Bench in Berri[35] when interpreting the relevant incorporated Award provisions. On this basis, it argues post agreement conduct is not relevant to the interpretation of the provisions. I should pay no regard to the witness statements of Mr. Hay or Watson or the F17 for the Agreement which had been filed by the Unions as a means of interpreting the relevant incorporated provisions.[36]

• [57] Lactalis argues:
  • • The Agreement "adds nothing to the content or context of the relevant incorporated provisions."[37]
  • • There is "no logical basis" to suggest how Lactalis may have applied the provision in one workplace, at a particular point in time had any bearing on the award interpretation exercise.[38]

• [58] It argues even if I apply Berri, the statements are not:

• evidence which establishes background facts which were known to Lactalis and employees covered by the Agreement which inform the interpretation of the operative terms or the Awards.
• evidence of prior negotiations to the extent that the negotiations tend to establish objective background facts known to all parties and the subject matter of the Agreement.
• notorious facts of which knowledge is to be presumed.
• evidence of matters in common contemplation and constituting a common assumption.

• [59] Lactalis argues the decision of Gray ACJ of the Federal Court in SDA v Woolworths emphasised the "great care" that must be taken when seeking to rely on post agreement conduct.[39] In that decision, Gray ACJ stated the need for great care is to "avoid infringing the general principle that conduct of the parties cannot be taken into account in construing an agreement". In order to depart from that general principle, "there must be clear evidence the parties have acted on a common understanding as to the meaning of the relevant provisions and not for other reasons, such as common inadvertence."[40]

• [60] According to Lactalis, the evidence in the witness statements "does not establish there was a meeting of the minds, or a consensus as to how the award terms were to be applied when the Agreement or its predecessors were made".[41] It follows that there is no evidence of a settled understanding before the Commission. I should therefore afford the evidence no weight in construing the award terms.

Submissions on the method for calculating annual leave loading

• [61] Lactalis argues the ordinary meaning of the words used in the operative terms of the Awards make it clear annual leave loading is a single payment for the duration of the leave, paid in advance of the leave. The value of that single loading is either:

• equal to 17.5% of the wages prescribed in cl.34.3 of the GMA or cl.25.4 of the FMA for the period of the leave; or

• • equal to the shift loading for the period of the leave, including relevant weekend penalty rates, whichever is greater, but not both.[42]

• [62] This is contrasted with the approach advocated by the Union which requires, rather than a single payment for the duration of the leave, "an hour-by-hour or shift-by-shift assessment" where the higher loading is "cherry-picked"[43] on each hour or shift.[44] According to Lactalis, "This would involve multiple payments of loadings in various different forms over the period of the leave. It may also involve paying a combination of the 17.5% loading, and the shift loading, during that period."

• [63] Lactalis argues the Unions' position is inconsistent with the ordinary meaning of the words used in the operative terms of the Awards and with the industrial purpose of annual leave loadings.

The Fast-Food Award Industry Award Review decisions

• [64] Lactalis, in support of its interpretation, relies heavily on a Full Bench decision in relation to the Fast Food Industry Award 2010 and a subsequent decision of Vice President Hatcher (as he then was) which arose from the plain English review of modern awards undertaken as part of the statutorily mandated four yearly review.

• [65] Lactalis argues the decision of the Full Bench in 4 yearly review of modern awards - Plain language re-drafting - Fast Food Industry Award 2010 [2022] FWCFB 48 (Ross J, VP Hatcher and Hunt C)[45], "clarified the natural and ordinary meaning of the words used in the operative terms of the Awards, in the context of the Fast-Food Industry Award 2010 (FFA). The terms of the FFA under review relevantly provided that:

(a) During a period of annual leave an employee will receive a loading calculated on the wage rate prescribed in clause 17 - Minimum weekly wages. Annual leave loading is payable on leave accrued.

Employees who would have worked on day work only had they not been on leave -

17.5% or the relevant weekend penalty rates, whichever is the greater but not both.

Employees who would have worked on shiftwork had they not been on leave - a loading of 17.5% or the shift loading (including relevant weekend penalty rates), whichever is the greater but not both.

The April 2022 Decision of the Full Bench in the FFA Review

• [66] The April 2022 Full Bench decision discussed the history and purpose of annual leave, and the contending submissions (and versions) of the SDA and AiGroup on a plain English exposure draft (PLED). Lactalis says this should inform my interpretation of the relevant incorporated terms. In the decision, the Full Bench made the following observations of the SDA and AiGroup position on the annual leave loading clause in the FFA:[46]

"Ai Group submits that clause 22.3 of the PLED deviates from the extant provision by prescribing the amounts payable pursuant to it as hourly rates and that the clause does not state that the amounts described at, for example, clause 22.3(b)(i) are to be calculated by reference to the amounts that would be payable to the employee for the entire duration of the leave. They submit that the clause appears to require an hour-by-hour comparison and calculation and that this amounts to a substantive variation to the terms of the award. Ai Group suggests that the PLED should be amended to make it clear that the amounts referenced at clause 22.3(b) are to be calculated by reference to the entire period of leave taken by an employee.

The SDA submits that Ai Group's further submissions deal with an understanding of annual leave loading as being judged in total at the end of the period. They submit that Ai Group's approach seems to presume that annual leave can only be taken as a specific period. They submit that that requirement does not appear in the current award or in the FW Act, which provides at s.88(1) that paid annual leave may be taken for a period agreed between the employee and the employer and at s.88(2) that the employer must not unreasonably refuse to agree to a request by the employee to take paid annual leave.

The SDA submits that the approach at s.88 of the FW Act is not novel, as s.236(2) of the Workplace Relations Act 1996 (Cth) provided: 'To avoid doubt, there is no maximum or minimum limit on the amount of annual leave that any employer may authorise an employee to take.' They state that annual leave may be taken in any period agreed between the employer and employee, with annual leave often being granted in hourly components. Consequently, any loadings should also accrue hourly."

• [67] The Full Bench also dealt with the history and purpose of annual leave loading provisions:[47]

The SDA submits that annual leave loading was initially conceived as a mechanism to ensure that employees did not suffer a financial detriment while on leave and, in this context, it becomes clear that the purpose of the provision providing that either the weekend penalty rates or the 17.5% loading applies is to ensure that employees do not suffer a detriment in respect of their weekend penalty rates. However, to exclude the 17.5% from other days or hours taken may result in an employee suffering a detriment on those days. They submit that, as such, the submissions of Ai Group, together with their proposed wording, should be rejected.

In relation to the period of leave and calculation of annual leave, we note that paid annual leave may be granted in hourly components and may be taken for a period agreed between the employee and employer. Prescribing amounts payable pursuant to clause 22.3(b) as hourly rates is consistent with the approach taken in other plain language awards and facilitates calculation of payment for period of leave less than a week. However, the draft clause is not consistent with other plain language awards or the current award in that it is not clear that the amounts referenced at clause 22.3(b) of the PLED are calculated by reference to the period of leave taken.

The rate of pay while on a period of annual leave was discussed in a Review decision dated 13 July 2015 (July 2015 decision). The Full Bench in that matter stated: '[76] Historically awards have provided that an employee will continue to receive their ordinary rate of pay while on leave. A Full Bench decision in 24 January 2006 stated: "[35] ... We refer in particular to the Commission's principles concerning holiday pay as formulated in the Annual Leave Cases 1971 [(1972) [1972] CthArbRp 713; 144 CAR 528.]. In an announcement made on 7 June 1972 the Commonwealth Conciliation and Arbitration Commission confirmed the view it had earlier expressed that "an employee taking annual leave...shall be paid the amount of wages (or salary) as he would have received in respect of the ordinary time he would have worked had he not been on leave" [Ibid].

In the July 2015 decision, the Full Bench noted that an employee's ordinary rate of pay may be higher than the base rate of pay provided for under the Act. The Full Bench decided to insert a note in the annual leave clause in all modern awards, satisfying sections 16, 55(4) and 90 of the Act, to explain that when an employee's base rate is higher than the rate specified in the award, the higher rate must be paid to an employee while on leave. In this award, rates are specified as minimum rates because the award does not contain all-purpose allowances. If an employee's base rate is higher than the minimum rate, the higher rate must be used when calculating annual leave. The note to that effect is at the beginning of clause 22 of the PLED."

• [68] The Full Bench reached a provisional view the provision of the PLED concerning annual leave loading should be amended to move away from the text that is like the operative provisions in this case in order that it might be expressed more clearly.[48] Lactalis argues that by amending the annual leave loading clause in the PLED, the Full Bench redesigned it so "that annual leave loading should be calculated by reference to the entire period of leave as distinct from an hour-by-hour comparison."[49]

The June Decision of Hatcher VP in the FFA Review

• [69] The task of making the final plain English amendments to the FFA (including the annual leave loading provision) fell to Vice President Hatcher (as he then was). In that decision, the Vice President was critical of the method of calculation for annual leave espoused by the SDA[50].

[18] Stripped of its rhetoric, the gravamen of the SDA's submission seems to be that the proposed redraft of clause 22.3 would introduce a new process of calculation, expressed in complex language, and thus unnecessarily departs from the position already established through the plain language process in clause 28.3 of the Retail Award. This is rejected. The method of calculation espoused by the SDA and referred to in paragraphs [191]-[195] of the April decision quoted above appears to be that the loading is to be calculated for each hour of leave taken, rather than by reference to the entire period of leave taken. Thus, if an hour of leave is one which, if it had been worked, no weekend penalty rate would be payable, the 17.5% loading is to be paid for that hour. Alternatively, if an hour of leave would have attracted a weekend penalty rate (of either 25% or 50% under clause 25.5 of the Fast Food Award) if worked, then the weekend penalty is payable.

[19] No textual or historical support for this novel method of calculation has been identified by the SDA in any of its submissions. It was rejected by the Full Bench in the April decision, which made it clear in paragraph [196] that the loading is calculated by reference to the entire period of leave taken, notwithstanding that the clause (as it was then worded) did not make that clear. The correct method of calculation is that, once the period of leave to be taken is identified, the higher of 17.5% of the employee's minimum hourly rate for all ordinary hours of work in that period, or the amount of the weekend penalty rates which would have been earned if the hours in the period of leave had been worked, is paid. This is a simple calculation which does not require the complex hour-by-hour approach espoused by the SDA.

[20] Contrary to the SDA's submissions, the annual leave loading clause in the Retail Award, which the SDA evidently prefers (except for its use of the term "additional payment" rather than "loading"), does not provide for the method of calculation it favours. The chapeau to clause 28.3(c) of the Retail Award makes it clear that the "greater of" comparison required involves a single calculation of a single "additional payment", not a calculation and comparison for every hour of leave to be taken. The 17.5% amount, or the alternative of penalty rates, are both expressed as referable to "all ordinary hours in the period [of paid annual leave]" (underlining added), not each individual hour in the period of leave. In this respect, it must be said that the Retail Award is expressed more clearly than redrafted of clause 22.3 of the PLED the subject of the provisional view in paragraph [207] of the April decision.

• [70] The resulting provision which the Vice President redrafted "to remove any doubt as to the method of calculation" was reproduced in an "Aide Memoire' which Mr. Brennan, for Lactalis, handed up and which was marked as R1 (with emphasis added):

(a) In clause 22.2 the relevant weekend penalty percentage amount is the applicable

penalty rate prescribed by clause 21 for working on weekends, less the minimum hourly

(b) During a period of accrued annual leave an employee will receive a loading

calculated for the period of leave on the employee's minimum hourly rate specified in

(c) The loading for a period of annual leave will be the greater of the following 2

(i) 17.5% of the employee's minimum hourly rate for all the ordinary hours the

employee would have worked if they were not on leave during the period, or

(ii) the relevant weekend penalty amounts payable to the employees for all ordinary hours they would have worked if they were not on leave during the period.

NOTE: Section 90(2) of the Act contains provisions relating to an employee's entitlement to payment for any untaken annual leave when employment ends.

• [71] Lactalis argues the interpretation of the Full Bench and Vice President Hatcher applies equally to the operative terms of the Awards. It argues the Unions' attempt to distinguish the cases, such as their argument based on textual differences between the FMA and GMA and the terms of the FFA and the Retail Award,[51] "is "misconceived". It argues the annual leave loading provision of the FFA which was varied during the PLED process "is materially the same as the equivalent terms of the GMA and FMA".

• [72] It argues the plain English redrafting of the FFA makes it "clear that a single loading is paid for the entirety of the period of annual leave, not a loading that is calculated on a shift by shift basis. According to Lactalis, "the intention of the PLED process was to make terms easier to understand without altering their legal effect".[52]

• [73] It also submits its interpretation "coheres with the industrial context and purpose of annual leave loading". Lactalis argues the "original purpose of annual leave loading was to compensate employees for the notional loss of overtime earnings during periods of annual leave".[53]

• [74] Lactalis argues that the "apparent contemporary industrial purpose" is to compensate employees for the notional loss of overtime earnings and any shift loading including relevant weekend penalty rates during the period of annual leave. The interpretation contended by the Unions is not consistent with the industrial purpose and context. The Unions' interpretation would not just compensate for loss of overtime and shift loading but would also result in employees receiving a financial windfall given they are not entitled to 17.5% loading on day shift.[54]

Submissions on what period of leave to be used to determine what leave loading would be paid[55]

• [75] Lactalis argues when assessing what a rotating shift worker would have been paid had the employee taken annual leave, the assessment is to be made across the entire roster cycle worked by the employee and then prorated against the period of leave to be paid out. The payment is not for a period of notice actually taken but "a single payment to acquit an accrued obligation which is not, in fact being taken as a period of leave".[56]

• [76] The use of the words "would have been paid" and "had the employee taken a period of leave" in s 90(2) are expressed in the past tense and assessed "when the employment of an employee ends". Lactalis argues these are textual indicators that the assessment required by s 90(2) is retrospective, notional and conducted at the point in time the employment terminates.

• [77] Those "textual indicators" weigh against the Unions interpretation that the assessment is to be conducted by reference to the period of time after the employment terminates. If the intent of s 90(2) and the relevant incorporated award terms were to require the employer to notionally treat the employees as taking accrued but untaken annual leave commencing on the first day they would otherwise have rostered to work after the day of termination it would have been necessary for the Act and the Awards to say so. Lactalis argues because the Awards and the Act do not say this, the only "logical way to apply s 90(2)" is to calculate what the employee would have been paid, based on the average rate that would have been payable according to their roster".

• [78] Lactalis argues its analysis is supported by the following:

• • The Explanatory Memorandum for the Fair Work Bill 2008 explains that s 90(2) provides that on termination: "The payment will be equivalent to the amount that the employee would have been paid if the employee had taken annual leave."[57]
• • The Full Court decision in Centennial where the Court stated, "The intention of the legislation is that untaken annual leave is payable at the rate at which it would have been paid had the employee taken it at the time the employee was eligible for it."[58]

• Lactalis argued the view of the Full Court is "telling" because employees have no entitlement to annual leave following the termination of their employment when the Unions contend the relevant assessment should be conducted.

The Unions' alternative argument based on clause 3.5 of the Agreement

• [79] In Lactalis' "further outline of submissions",[59] it made several arguments against the proposition that the fact that "Lactalis has calculated annual leave loading for periods of annual leave taken by two former employees is evidence of a practice that cannot be departed from pursuant to clause 3.5 of the Agreement when calculating the amount of annual leave loading to be paid to an employee on termination".

• [80] Lactalis concedes that clause 3.5 of the Agreement "must be given work to do", however there is a fundamental conceptual question as to the threshold that must be reached in order for clause 3.5 of the Agreement to be engaged as an enforceable term.[60] It mounts a series of arguments that the "threshold" in this case has not been reached.

• [81] It relies on a series of authorities in support of this proposition which I will not rehearse here. The gravamen of its argument is:

• The legislative requirements for making and approving an enterprise agreement and the natural supposition that parties engaging in this detailed process intend that the result should be a binding and enforceable agreement.

• • A particular activity or state of affairs must be something more than simply anything that has been done or is regularly done in order to engage the enforceable terms of cl. 3.5 of the Agreement. The particular activity or state of affairs must be something which is expressly acknowledged and understood by the parties in order to sensibly engage the binding and enforceable terms of cl. 3.5 of the Agreement.[61]
  • • It could not reasonably be determined that the objective intention, that is by reference to what a reasonable person would understand the parties to have intended, is such that cl. 3.5 of the Agreement is intended to capture practices explained by common inadvertence.[62] The activity or state of affairs could not, without more, sensibly be found to engage the enforceable terms of cl. 3.5 of the Agreement.[63]
  • • One would reasonably expect a degree of certainty, clarity and acknowledgement that particular above award or agreement payments were to be made for the practice to rise to the status of an enforceable term of the Agreement. Common inadvertence, however, is precisely what is reflected in the Union Statements.[64] The evidence contained in the Union Statements does not establish there was a meeting of the minds, a consensus, as to how annual leave loadings were to be calculated (whether for a period of annual leave taken or for the purpose of calculating the payment of accrued annual leave entitlements on termination).[65]

• [82] Lactalis argues I should find that the answers to the questions for arbitration are:

(a) Question One: in determining the amount of annual leave loading to be paid to an employee on termination for annual leave accrued but not taken pursuant to s.90(2) of the FW Act and cl.56 of the Agreement, incorporating cl.34 of the Manufacturing Award and cl.25 of the Food Manufacturing Award, an employee is entitled to payment of the greater of:

(i) An amount equal to 17.5% of wages prescribed by the Awards for the entire period of accrued leave; or

(ii) An amount equal to the applicable shift loading(s) (including relevant weekend penalty rates) calculated across the entire period of accrued leave for the shift(s) which would have been worked if the employee had been at work.

(b) Question Two: in determining the applicable shift loading(s), Lactalis is required to calculate the average the employee's shift loadings across the entirety of the roster cycle that applied to the employee at the time of termination of their employment

• [83] The terms of the GMA and FMA "as varied from time to time"

are incorporated into the Agreement and (if they are not detrimental terms) are to be "read as if altered with appropriate changes to make them provisions of the Agreement". This includes the operative terms in cl 34 of the GMA and cl 25 of the FMA. Further, the annual leave clause in clause 56.1 specifically affirms the provisions of the FMA and GMA "apply to the applicable employees". The Awards are "called up" into the Agreement. Consequently, where a term of the Award applies, it does so as a term of the Agreement (not as a term of the Award).[66]

• [84] There is commonality between the principles of interpretation applied to agreements and awards.[67] In recent times there has been some judicial support for the proposition that they are the same.[68] It is well settled that, unlike awards, the Acts Interpretation Act 1901 does not apply to the interpretation of an agreement.[69]

• [85] The Unions argue my task in determining the agreed questions is to "construe the Agreement to ascertain its meaning" and in doing so I should apply the relevant principles in Berri. The 15 principles the Full Bench articulated in Berri included principles of interpretation that derive from the nature of an enterprise agreement. The Bench in Berri said it was "an important contextual consideration" that the instrument being construed is an enterprise agreement made pursuant to Part 2-4 of the FW Act is itself."[70]

• [86] The method of interpretation for agreements differs from those for modern awards because of the bargained nature of an agreement. The final text of an agreement results from a negotiation. It follows where the terms of an agreement might have been the subject of a mutual understanding between the employer and the bargaining representatives, or if employees had a particular understanding of a term based on material provided by the employer prior to the vote, extraneous evidence might be used as an aid to interpret a provision in the face of an ambiguity in the text.

• [87] Berri makes it clear that extrinsic evidence may only be used to interpret a provision with a disputed meaning in limited circumstances. It cannot be used to disregard or rewrite a provision to give effect to an "externally derived conception of what the parties' intention or purpose was".[71]

• [88] In Berri, the Bench refers to four types of extrinsic evidence:

• • Evidence of surrounding circumstances to establish objective facts: If the language is ambiguous, evidence of the "surrounding circumstances are admissible as an aid to interpretation. The evidence of surrounding circumstances is limited to evidence "tending to establish objective background facts know to both parties." This is to be distinguished from evidence of "subjective intentions of the parties which are reflective of their actual intentions and expectations..."[72]

• • Evidence of Bargaining positions with caution: A cautious approach should be adopted for admission and reliance upon evidence of prior negotiations.[73]

• • Evidence of what the employees were told during negotiations or during the period where the employer has taken steps to explain the agreement under s180(5).[74]

• • **Post agreement conduct. "**In the industrial context subsequent conduct may be relevant to an interpretation of an industrial instrument. BUT ONLY if it shows there has been a meeting of the minds. Evidence of an absence of compliant or common inadvertence is insufficient to establish common understanding.[75]

• [89] Based on this last class of extrinsic evidence relating to post agreement conduct, the Unions argue I should use evidence of the conduct of Lactalis in the payment of annual leave loading in the Hay and Watson Statements to support its interpretation of the operative provisions of the incorporated Award.

• [90] Lactalis argues I will fall into error if I apply the principles in Berri on the following basis:
  • The Agreement merely confirms the provisions of the GMA and FMA relating to annual leave apply as terms of the Agreement.
  • The Agreement "adds nothing to the content or context of the Modern Awards".
  • "There is no logical basis to suggest that how Lactalis (one of the many thousands of employers covered by those Awards) may have applied those provisions in one particular workplace in relation to a handful of employees at a particular point in time could have any bearing on the interpretation of the incorporated Awards."

• [91] Lactalis argues I should apply the principles enunciated by Rangiah J in Swissport for the construction of Awards which I have reproduced above at paragraph [55].

• [92] The principles of interpretation developed in Berri, particularly those that relate to the acceptance of extrinsic evidence as a means of interpretation, derive from the nature of agreements "made" through the process prescribed in Part 2.4 of Division 4 of the Act.

• [93] This usually involves negotiation between the bargaining representatives, and compliance with the steps required for the agreement to be genuinely agreed including an explanation of the terms required by s 180(5). It is logical that, in the event of an ambiguity, evidence of the surrounding circumstances, bargaining positions (in limited circumstances), the understanding of the employees, and post-employment conduct might elucidate the meaning of the text. The method of interpretation follows from the means by which an enterprise agreement is made.

• [94] The nature of the GMA and the FMA, and the creation of the text of the incorporated terms, could not be more remote from Lactalis and its former employees at Echuca. Those awards were created through a process commenced under Part 10A of the Transition Act,[76] and completed under Part 2-3 of the Act. Modern Awards are creatures of the Commission and not

"made" by a vote. It is an infamous fact that Modern Awards (unlike their predecessors) do not have party principals. They apply to workers and employers within their coverage. The FMA covers employers and employees in the in the "food**,** beverage and tobacco manufacturing industry".[77] The GMA covers employers and employees in the Manufacturing and Associated Industries and Occupations who are covered by the classifications contained in the GMA.[78]

• [95] I have no evidence the employees turned their minds to the annual leave provisions of the Awards in the making of the Agreement. The employees at Echuca agreed they would incorporate the terms of the GMA and the FMA into the Agreement with the limitations and variations prescribed in clause 3 of the Agreement. They also agreed that provision of the GMA and FMA with respect to annual leave apply through clause 56.1.

• [96] The terms of the incorporated Award apply as if they were terms of the Agreement, but it does not follow that the incorporated terms should be interpreted as provisions of the Agreement. The agreement making process did not impact on the contested text. I have no evidence before me that meaning was ascribed to the incorporated terms of the Awards through the agreement making process. The specific texts of the GMA and FMA in issue here were determined through the Modern Award process not the Agreement making process. It follows the relevant parts of the GMA and FMA should be interpreted as text from a Modern Award rather than as text of an agreement.

• [97] Based on this reasoning, I will apply the method of interpretation for Modern Awards from Swissport to the incorporated terms. I will not rely on the evidence of post agreement conduct from the statements of Hay and Watson to assist in interpreting the incorporated terms.

• [98] Section 90 provides the provides the NES requirement for annual leave. Section 90(1) provides that where an employee takes annual leave, the employer must pay the base rate of pay for ordinary hours of work for the period.

• [99] Section 90(2) is relevant here because an employee's employment ends, and the employee has a period of untaken leave. The employer must pay the employee the amount that would have been payable to the employee "had the employee taken leave".

• [100] The operation of s 90 is explained by the Full Court in Centennial:[79]

"Section 90(1) creates the minimum standard, payment at the base rate for ordinary hours worked. The effect of s 90(2) is that if that is the rate at which the employee is paid when he or she takes annual leave, then that is the minimum amount that must be paid for any accrued annual leave. If on the other hand a modern award or enterprise agreement which provides for payment at a higher rate for annual leave that is taken, then s 90(2) stipulates that that is the rate which is payable where annual leave has accrued but not been taken."

"The intention of the legislation is that untaken annual leave is payable at the rate at which it would have been paid had the employee taken it at the time the employee was eligible for it".[80]

• [102] This forms the context in which the contested Award provisions must be interpreted. It is to supplement the NES provisions which provide, on cessation of employment, the employee is required to be paid "at the rate they would have been paid had the employee had taken leave when s/he was eligible for it".

THE GMA AND FMA PROVISIONS FOR THE PAYMENT OF ANNUAL LEAVE

• [103] Clause 34.3(a) of the GMA and 25.4(a) of the FMA provide that instead of the base rate of pay referred to in s 90, the "wages they would have received in respect of the ordinary hours the employee would have worked had the employee not been on leave at the relevant period".

• [104] Clause 34.3(b) of the GMA and 25.4(b) of the FMA provide that wages to be paid must be based on what the employee would have been paid under the award for working ordinary hours during the period of annual leave, including "allowances loadings and penalties paid for all purposes of the award, first aid allowance and any other wages payable under the employee's contract of employment including any over award payment".

• [105] The plain words of cls 34.3(a) of the GMA and 25.4(a) of the FMA mean that while a worker is on annual leave under the Awards, they "must be paid" the wages they would have been paid as if they worked ordinary hours during the period of leave.

• [106] The plain meaning of cls 34.3(b) of the GMA and 25.4(b) of the FMA is that wages for ordinary hours during the period of annual leave are to be "worked out on the basis" that those wages include allowances, loadings and penalties, first aid allowances and any over award payments paid under a worker's contract of employment. Employees on leave are to be paid as if they had worked ordinary hours.

THE CALCULATION OF ANNUAL LEAVE LOADING UNDER THE GMA AND FMA

• [107] Both the text of the chapeau of cl 25.6 of the FMA and 34.3 of the GMA provide that during the period of annual leave, an employee must be paid "a loading" calculated on the ordinary time wages described in cl 34.3 of the GMA or cl 25.4 of the FMA (emphasis added).

• [108] Clause 34.4 and clause 25.6 then goes on to prescribe "the loading" that must be paid for day work or shift work.

• [109] The loading for day work is provided in GMA cl 34.4(a)(i) and FMA cl 25.6(a). Those sub-clauses provide that an employee who would have worked day work if they had not been on leave must be paid a loading equal to 17.5% or the relevant weekend penalty rates, whichever is the greater but not both.

• [110] Workers must be paid the greater of the weekend penalty rates or 17.5%, whichever is the greater but not both. It is not contested that this provision does not apply to the relevant workers at the Echuca site because they were rotating shift workers and not only day workers.

• [111] The loading for shift workers on annual leave is dealt with in GMA cl 34.4(b)(ii) and FMA clause 25.6(b). Those clauses provide that a shift worker who would have worked shift work had they not been on leave must be paid a loading equal to 17.5% of the ordinary time wages [prescribed by cl 34.3 of the GMA and clause 25.4 of the FMA] or the shift loading including the relevant weekend penalty rates, whichever is the greater but not both.

• [112] The Unions contend the purpose of these provisions is to put the employees in the position they would have been had they worked instead of taking leave. As these workers were working rotating day, afternoon and night shift, the calculation of the loading requires an assessment based on projecting out the period of the leave, and then, to work out what the appropriate loading would have been paid if they had worked the day shift during the leave period, the loading they would have been paid for afternoon shift during the leave period, and the loading they would have been paid on night shift during the leave period.

• [113] The Unions argue the requirement to pay 17.5% or the shift loading "whichever is the greater but not both" means that, as there is no shift loading for day work, Lactalis is required to pay the 17.5% loading for the projected period of day work, a loading of 20% for the projected period of afternoon shift and a loading of 30% for the projected period of night shift as if they had worked those shifts during the leave period.

• [114] Lactalis argues the natural and ordinary meaning of cl 34.4(b)(ii) of the GMA and clause 25.6(b) of FMA requires a single payment either the 17.5% loading or the shift loading above 17.5% calculated over the entire period of leave. According to Lactalis, it is either obliged to pay the 17.5% or "a" single loading which is calculated on the shift loading for all ordinary hours over the entire period of leave.

• [115] Lactalis relies on the April 2022 decision of the Full Bench and the June 2022 decision of Hatcher VP (as he then was) in the plain English drafting review of the FFA.

• [116] Before the Full Bench, the SDA argued the predecessor to s 90 in the Workplace Relations Act 1996 (with the 2006 amendments) required that "if any employee takes annual leave, they must be paid a rate for each hour (pro-rated for part hours) of annual leave that is no less the rate that, immediately before the period begins, in the employee's basic periodic rate of pay (expressed as an hourly rate)."[81] That is, the calculation required an hour by hour comparison.

• [117] Essentially, the Full Bench reached a provisional view the draft proposed by the SDA "was not consistent with other plain English awards or the current awards as it is not clear that the amounts referenced at clause 22.3(b) [in relation to leave loading] are calculated by reference to the period of leave taken".[82]

• [118] The finalisation of the PLED for the FFA was left to Hatcher VP as he then was. He fulsomely rejected the concept of the hour-by-hour method (with emphasis added):[83]

...The method of calculation espoused by the SDA and referred to in paragraphs [191]-[195] of the April decision ... appears to be that the loading is to be calculated for each hour of leave taken, rather than by reference to the entire period of leave taken. Thus, if an hour of leave is one which, if it had been worked, no weekend penalty rate would be payable, the 17.5% loading is to be paid for that hour. Alternatively, if an hour of leave would have attracted a weekend penalty rate (of either 25% or 50% under clause 25.5 of the Fast Food Award) if worked, then the weekend penalty is payable.

No textual or historical support for this novel method of calculation has been identified by the SDA in any of its submissions. It was rejected by the Full Bench in the April decision, which made it clear in paragraph [196] that the loading is calculated by reference to the entire period of leave taken, notwithstanding that the clause (as it was then worded) did not make that clear. The correct method of calculation is that, once the period of leave to be taken is identified, the higher of 17.5% of the employee's minimum hourly rate for all ordinary hours of work in that period, or the amount of the weekend penalty rates which would have been earned if the hours in the period of leave had been worked, is paid. This is a simple calculation which does not require the complex hour-by-hour approach espoused by the SDA.

Contrary to the SDA's submissions, the annual leave loading clause in the Retail Award, which the SDA evidently prefers (except for its use of the term "additional payment" rather than "loading"), does not provide for the method of calculation it favours. The chapeau to clause 28.3(c) of the Retail Award makes it clear that the "greater of" comparison required involves a single calculation of a single "additional payment", not a calculation and comparison for every hour of leave to be taken. The 17.5% amount, or the alternative of penalty rates, are both expressed as referable to "all ordinary hours in the period [of paid annual leave]" (underlining added), not each individual hour in the period of leave. In this respect, it must be said that the Retail Award is expressed more clearly than redrafted of clause 22.3 of the PLED the subject of the provisional view in paragraph [207] of the April decision. For that reason, my provisional view is that I should depart from the Full Bench's provisional view and modify the redraft of clause 22.3."

• [119] Based on these decisions, Lactalis argues I should reject the Unions' shift by shift approach which Lactalis says is analogous to the "hour by hour" approach provisionally rejected by the Full Bench and then by Hatcher VP. I should instead apply the single loading calculated over the entire period of leave.

• [120] The Unions argue they do not invite an hour by hour comparison for the calculation of leave loading. They seek to have the relevant annual leave loading paid "on all hours of leave which their members have accrued".[84]

• [121] The Unions argue the Fast-Food Industry Review stands alone and is not binding on the Agreement. The Full Bench endorsed an "award by award" approach.[85] The decision of Hatcher VP is confined to the FFA.[86]

• [122] The Unions also argue a comparison of the annual leave loading provisions in the FFA and the GMA and the FMA is inapposite. The absence of shift loadings or provisions regulating shift work is a "material difference" because the FFA did not then, and does not now, contain substantive shift work provisions which prescribe shift penalties or provisions regulating shift work. The absence of shift loadings in the FFA explains "why they are absent from the annual leave loading clause of that award.[87]"

• [123] The method for calculating the wages received for working ordinary hours is prescribed in GMA 34.3(b) and FMA 25.6(b). That calculation is to include "allowances, loadings, and penalties paid for all purposes of the award, first aid allowance, and any other wages by way of over award payment".

• [124] The FFA contains no similar provisions. The text of these relevant provisions of the GMA and FMA make it clear the calculation of pay for ordinary working hours are intended to be comprehensive. They are to include all applicable allowances, loadings and penalties and contractual over award payments. The plural of the word "loadings" is significant.

• [125] The meaning of the terms "allowances, loadings and penalties" is derived from other provisions in the Awards. Both the GMA and the FMA prescribe specific conditions for working continuous shifts (GMA cl 17.3 and FMA cl 12.3). Both Awards contain different rates for shift workers on afternoon and night shift and for day work:

• • GMA: Schedule C - Summary of Hourly Rates) which contains a "summary of penalty rates".[88]

• FMA: Contains Schedule B - Summary of Hours Rates of Pay which contains sub

schedule B.1.5 Full time and part time shiftworkers - ordinary and shift work rates.[89]

• [126] The use of the word "loadings" as part of the calculation of pay for ordinary working hours would require such an assessment to include the different loadings prescribed within the award for day (where there are no loadings), afternoon and night shifts.

• [127] It is evident there is ambiguity in the meaning of the annual leave loading provisions of the Awards. The reference to: "a loading" in GMA cl 34.4(a) and in the chapeau in FMA cl 25.6; to the components which form part of the calculation of ordinary hour wages to include "allowances, loadings, and penalties" under GMA 34.3(b) and FMA cl 25.4(b); and the reference to "the loading" in GMA clause 34.4(b) and FMA 25.6 could support either the interpretation contended for by Lactalis or the Unions.

• [128] Lactalis contend the "before PLED" annual leave loading provision that was clause 28.3 is "materially the same" as the terms of the clauses in issue in this proceeding. The "before PLED" provision read:

(a) During a period of annual leave an employee will receive a loading calculated on the wage rate prescribed in clause 17 - Minimum weekly wages, Annual leave loading is payable on leave accrued

Employees who would have worked on day work only had they not been on leave - 17.5% or the relevant weekend penalty rates, whichever is the greater but not both

Employees who would have worked on shift work had they not been on leave - a loading of 17.5% or the shift loading (including relevant weekend penalty rates) whichever is the greater but not both

• [129] The Full Bench in the April 2022 decision criticises the SDA's hour-by-hour approach and prefers a method calculated "by reference to the period of leave taken". At paragraph [196], the Full Bench states as follows:

"[196] In relation to the period of leave and calculation of annual leave, we note that paid annual leave may be granted in hourly components and may be taken for a period agreed between the employee and employer. Prescribing amounts payable pursuant to clause 22.3(b) as hourly rates is consistent with the approach taken in other plain language awards and facilitates calculation of payment for period of leave less than a week. However, the draft clause is not consistent with other plain language awards or the current award in that it is not clear that the amounts referenced at clause 22.3(b) of the PLED are calculated by reference to the period of leave taken."

• [130] Hatcher VP (as he then was) describes the hour-by-hour approach contended by the SDA in paragraph 18 of his decision:

"...Thus, if an hour of leave is one which, if it had been worked, no weekend penalty rate would be payable, the 17.5% loading is to be paid for that hour. Alternatively, if an hour of leave would have attracted a weekend penalty rate (of either 25% or 50% under clause 25.5 of the Fast Food Award) if worked, then the weekend penalty is payable."[90]

• [131] As we have seen, the Vice President categorically rejects that approach. He went on to amend the PLED to "remove any doubt as to the correct method of calculation required" so that after his amendments it read (with emphasis added):[91]

(a) In clause 22.3 the relevant weekend penalty percentage amount is the applicable penalty rate prescribed by clause 21 for working on weekends, less the minimum hourly rate

(b) During a period of accrued annual leave an employee will receive a loading calculated for the period of leave on the employee's minimum hourly rate specified in clause 15 - Minimum rates.

(c) The loading for a period of annual leave will be the greater of the following 2 amounts:

(i) 17.5% of the employee's minimum hourly rate for all the ordinary hours the employee would have worked if they were not on leave during the period, or

(ii) the relevant weekend penalty amounts payable to the employee for all ordinary hours they would have worked on a weekend if they were not on leave during the period.

• [132] The text of the annual leave provision in the FFA that was the subject of the PLED process is different from the annual leave provisions of the Awards here:

• The FFA did not, at the time it was the subject of the PLED process, "contain any substantive shiftwork provisions", which is unlike the GMA and FMA both of which contain shift work provisions.
• The method of calculating the wages "on which a loading must be paid" in the FFA was merely by reference to the "minimum weekly wages" provisions. The GMA and FMA provide that it is to be calculated on wages paid for ordinary hours including allowances, loadings, and penalties for the purposes of the Award, first aid allowance and wages paid under an employee's contract of employment.

• [133] The principles of interpretation for Awards enunciated by Rangiah J in Swissport include that "an award is to be interpreted in light of its industrial context and purpose" and "must not interpreted in a vacuum divorced from industrial realities".[92]

• [134] I have some sympathy for the proposition the markedly different industrial context of an award for fast food workers compared to awards for manufacturing, where workers often work continuous shifts, might be used as an interpretive tool to differentiate an analysis of the provisions on annual leave and leave loading entitlements in the FFA with that in the GMA and FMA.

• [135] However, I am bound by the words of caution of Rangiah J that in the interpretation of an award:

• • The immediate context being the clause, section, or part of the award in which the words interpreted appear will be the clearest guide;[93] and

• While context and purpose of the award will be relevant, ultimately the Court's task is to give effect to the meaning of the award as expressed in words, objectively construed.

• [136] It might be argued the comprehensive list of components in the calculation of wages on which the loading is based (which includes references to "loadings"), and the existence of the shift and shift penalty provisions in the GMA and FMA impacts the way the annual leave loading clause is interpreted. It could be those textual differences in the Awards might be significant enough to disregard the interpretation of the FFA made by the Full Bench and the Vice President of the annual leave loading provision in that Award.

• [137] I accept the shift by shift approach advocated by the Unions here is less complex than the hour by hour position argued for and rejected by the Full Bench and Hatcher VP in the Fast Food Award Review decisions, however, the logic of the "over the entire period" calculation and the rejection of a segmented approach applies equally to an hour by hour calculation as it does to a shift by shift calculation.

• [138] The actual text of the "before PLED" clause 28.3 is equivalent text within cl 34.4 of the GMA and cl 25.6 of the FMA:

"Employees who would have worked on shift work had they not been on leave - a loading of 17.5% or the shift loading (including relevant weekend penalty rates), whichever is the greater but not both."

• [139] The text of cl 34.4(b)(ii) of the GMA reads:

"An employee who would have worked on shiftwork had they not been on leave must be paid a loading equal to 17.5% of the wages prescribed in clause 34.3 or the shift loading including relevant weekend penalty rates, whichever is the greater but not both."

• [140] The text of cl 25.6(b) of the FMA reads:

"An employee who would have worked on shiftwork had they not been on leave must be paid a loading equal to 17.5% of the wages prescribed in clause 25.4 or the shift loading including relevant weekend penalty rates, whichever is the greater but not both."

• [141] I am confronted with a decision of the Full Bench of this Commission concerning a provision in similar terms that rejected the SDA hour by hour approach to the calculation of leave loading and approved an approach calculated by reference to "the entire period of leave taken".

• [142] I also have the subsequent decision of the Vice President (now President) to the effect that the "correct method of calculation" was "once the period of leave to be taken is identified, the higher of 17.5% of the minimum hour rate for all ordinary hours worked in that period or ... penalty rates which would have been earned if the hours in the period of leave had been worked, is paid."[94]

• [143] The decision of the Vice President was that the comparison in the calculation of the loading was against the higher of the 17.5% or a single loading calculated on the penalties rates that would have been earned over the entire period of the leave.

• [144] The textual differences in the annual leave provisions in the FMA and GMA compared to the FFA do not affect the application of this interpretation to those Awards. The existence of different elements that make up the calculation of the penalties for the purposes of the loading calculation [which in the case of the GMA and FMA includes provisions in relation to shifts and different shift loadings for day, afternoon and night shift] does not change the interpretation accepted by the Vice President that a similar clause in the FFA should be interpreted to require the payment of the higher of the 17.5% or the payment of a single loading that takes into account the penalties that would have been earned over the entire period of leave.

• [145] Given the warnings adopted by Rangiah J in his principles for the interpretation of Awards on the reliance on industrial context in Swissport, I am reluctant to find the

stark difference in the patterns of working hours in the fast food industry compared to the manufacturing industry has a bearing on the interpretation of a clause that is materially the same as the provisions I must interpret here.

• [146] As a matter of policy and sound administration, the Commission has generally followed previous decisions relating to the issue to be determined, in the absence of cogent reasons for not doing so.[95] On this basis, I should follow an interpretation given to a materially similar award clause provisionally accepted by the Full Bench and adopted by a Presidential member of the Commission.

• [147] I must therefore apply the interpretation for the calculation of annual leave loading applied by the Full Bench and then Vice President. It follows that I accept the interpretation given of the operative terms of the Award argued by Lactalis in answer to question one.

QUESTION 2 - WHAT PERIOD OF LEAVE IS TO BE USED TO DETERMINE THE LEAVE LOADING THAT "WOULD HAVE BEEN PAID"

• [148] Lactalis argues:[96]
  • When assessing what a rotating shift worker would have been paid had the employee taken annual leave, the assessment is to be made across the entire roster cycle worked by the employee and then pro rated against the period of leave to be paid out.
  • The use of the words "would have been paid" and "had the employee taken a period of leave" in s 90(2) are expressed in the past tense and assessed "when the employment of an employee ends".
  • Textual indicators support the argument that the assessment required by the s 90(2) is retrospective and notional conducted at the point in time the employment terminates, the "textual indicators" weigh against the Unions interpretation that the assessment is to be conducted by reference to the period of time after the employment terminates.
  • If the intent of s 90(2) and the relevant incorporated award terms were to require the employer to notionally treat the employees as taking accrued but untaken annual leave commencing on the first day they would otherwise have rostered to work after the day of termination it would have been necessary for the Act and the Awards to say so. Lactalis argues because the Awards and the Act do not say this the only "logical way to apply s 90(2)" is to calculate what the employee would have been paid, based on the average rate that would have been payable according to their roster".

• [149] Lactalis argues its analysis is supported by the following:

• • The Explanatory Memorandum for the Fair Work Bill 2008 explains that s 90(2) provides that on termination: The payment will be equivalent to the amount that the employee would have been paid if the employee had taken annual leave.[97]
• • The Full Court decision in Centennial where the Court stated, "The intention of the legislation is that untaken annual leave is payable at the rate at which it would have been paid had the employee taken it at the time the employee was eligible for it."[98] The view of the Full Court is "telling" because employees have no entitlement to annual leave following the termination of their employment when the Unions contend the relevant assessment should be conducted.

The Unions' submissions on Question 2 made in their joint reply

• [150] The Unions identify two issues in response to question 2.[99]
  • First: whether the calculation is made notionally as if the employee takes a period of leave (worked out prospectively or retrospectively) or in abstract by reference to the shift roster which is applied immediately before the termination.
  • Second: whether to compare an average of the shift loadings in the period with 17.5% or compare the sum of the shift loadings over the period with 17.5%.

• [151] The Union's neither concede nor reject either:
  • Lactalis' submissions on s 90(2) or the Full Court decision in Centennial "as to whether the notional period of lave is prospective (after termination), retrospective (before termination) or in the abstract"; nor
  • On averaging the employee's shift loadings calculated across the roster cycle that applied, calculated across the entirety of the roster cycle that applied to the employee at the time of the termination of the employee.

• [152] The Unions also make submissions on the practical application of the calculation of loading should I adopt the Lactalis position on question one. The Unions submit the average of the penalties over the shift cycle would amount to 16.67% which under the relevant provisions would mean that 17.5% loading would be the higher loading.[100]

• [153] Part of the reason the Vice President gave for his interpretation of the calculation of annual leave in the FFA was the virtue of simplicity of a "simple calculation which does not require the complex hour by hour approach".

• [154] The averaging approach of the employee's shift loadings across the entire roster cycle also has the virtue of simplicity. The acceptance of this approach is the logical consequence of finding against the shift by shift approach advocated by the Unions in answer to question one.

• [155] It follows the answer to question two is in determining the appropriate shift loading Lactalis is required to calculate the average of the shift loadings across the entirety of the roster cycle that applied to the employee at the time of the termination of their employment.

• [156] The concept of over award payments has a venerable history in the industrial regulation of Australia. During the conciliation and arbitration period, over award payments were often informal arrangements negotiated between an employer, employees and their unions that certain additional payments would be made. I do not, however, consider the plain words of clause 3.5 in relation to "over award or agreement payments" are limited to these consensus arrangements. Keely J of the Federal Court in re Vehicle Industry RSR Award rejected an argument that "over award wages" could be limited to payments that were "purely contractual".[101]

• [157] I accept the argument of Lactalis the requirements for the making of Agreements requires that an "over award or agreement payment" must meet a threshold of significance such that the payment should result in a binding and enforceable term.

• [158] For the purposes of this arbitration, I do not intend to traverse all the payments which might meet that threshold. The payment need not be contractual. It might be sufficient if it has been paid over a significant period, or that it had been negotiated between the employer and the employees or paid as a gratuity over a period of time.

• [159] If, for example, there was evidence given by an organiser that over award payments of annual leave loading were paid to all or most employees over an extended period, it may have reached the significance threshold required for making out an "over award or agreement payment" under the Agreement.

• [160] At best, all the evidence establishes is that two men, Mr. Hay and Mr. Watson, "when they took annual leave", were paid an annual leave loading calculated on the shift-by-shift basis. There is no evidence before me as to whether this practice was usual, common or rare. On my assessment, the threshold of making out an "over award or agreement payment" has not been reached.

• [161] If the argument of the Unions is correct, payments made to two workers in excess of those prescribed by the Agreement or the Awards for any reason (including error, inadvertence or otherwise) would be locked in by virtue of clause 3.5 as an enforceable payment on an ongoing basis. Given the "detailed prescription"[102] required for the making of agreements to establish binding obligations, this argument cannot be sustained.

• [162] It follows I reject the alternative argument of the Unions that the evidence of Hay and Watson establishes that the mode of calculation for annual leave proposed by them in answer to questions in issue in this arbitration are "over award or agreement payments" or "conditions of employment" under clause 3.5 of the Agreement.

• [163] Based on the reasons I have given; I answer the Questions as follows:

The amount of annual leave loading to be paid to an employee on termination for annual leave accrued but not taken is an amount which is the greater of:

(i) An amount equal to 17.5% of wages prescribed by the Awards for the entire period of accrued leave; or

(ii) An amount equal to the applicable shift loading(s) (including relevant weekend penalty rates) calculated across the entire period of accrued leave for the shift(s) which would have been worked on afternoon and/or night shift(s) if the employee had been at work.

In determining the applicable shift loading(s) for the amounts in Question One, Lactalis is required to average the employee's shift loadings calculated across the entirety of the roster cycle that applied to the employee at the time of termination of their employment.

The alternative argument based on clause 3.5 of the Agreement

• [164] On the alternative argument based on clause 3.5 of the Agreement, the Statements of Hay and Watson are insufficient to establish the payments made to employees for annual leave loading calculated on a shift-by-shift basis were "over award or agreement payments" under clause 3.5 of the Agreement. It follows this argument fails.

• [165] The dispute is therefore determined accordingly.

Mr. Stephen Fodrocy for the "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union.

Mr. Kelvin Reidy for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia.

[2] This text is slightly amended to take in the complete names of the Awards.

[4] Digital Court Book (DCB) at 57-59 and 60-61: the Statement of Daniel Watson with attached pay slips (a signed version was received into evidence as A2) and the Statement of Ross Hay respectively.

[6] AMWU v Berri Pty. Ltd [2017] FWCFB 3005 at paragraph [114]. A Full Bench composed of Ross J, Gooley DP and Hunt C.

[9] Award modernisation [2008] FWCFB 3005, [30].

[12] Clause 25 of the FMA is in substantially the same terms.

[14] Ex Mem of the Fair Work Bill 2008, page 60 at paragraph 372.

[19] Consistent with Programmed [2024] FWCFB 100 at [22].

[20] Consistent with WorkPac [2018] FCAFC 131 at [197].

[21] Consistent with Berri [2017] FWCFB 3005 at [114-15].

[27] This argument would only arise if I am against the Unions on their primary argument that the shift by shift method of calculating leave loading was required by the agreement and the awards. If it is not prescribed by the awards or agreement, it might be an "over award or agreement payment".

[30] DCB at 71, Lactalis' Outline of Submissions. The emphasis is added in the Lactalis' submissions.

[34] Swissport Australia Pty Ltd v Australian Municipal Administrative Clerical and Services Union (No 3) [2019] FCA 37; (2019) 284 IR 97, [52].

[35] AMWU v. Berri [2017] FWCFB 3005.

[39] Shop Distributive and Allied Employees' Association v Woolworths Ltd [2006] FCA 616; (2006) 151 FCR 513

[43] A less loaded metaphor might have been more helpful here.

[45] 4 yearly review of modern awards - plain English re-drafting- Fast Food Industry Award 2010 [2022] FWCFB 48, from here on referred to as the "April 2022 Full Bench Decision".

[50] 4 yearly review of modern awards - plain English redrafting - Fast Food Industry Award 2010 [2022] FWC 144, [18]-[19]. From here on the June 2022 decision.

[55] DCB at 78-79. Lactalis Outline of submissions deals with this issue at Part C2 of its outline.

[56] Centennial Northern Mining Services Pty Ltd v. CFMEU (No 2) (2015) 247 IR 350, a decision on Buchanan J of the Federal Court at paragraph [22].

[57] At paragraph 372 on page 60 of the Explanatory Memorandum. This was reproduced by Buchanan J in his judgement in Centennial (ibid) at paragraph [33].

[58] A decision of Tracey, Flick and Katzmann JJ in Centennial Northern Mining Services Pty Ltd v. CFMEU (2015) 231 FCR 2998 at [42].

[59] Filed after the hearing dated 13 September 2024.

[60] Lactalis' Further outline of submissions at paragraph 11.

[62] It should be noted there is no evidence before me that it was inadvertence.

[63] Lactalis further outline at paragraph 11

[64] The assertion of inadvertence is made without evidence.

[66] See the decision of Catanzariti VP, Clancy DP and Johns C in Glen Cameron Nominees Pty Ltd T/A Glen Cameron Trucking v Transport Workers' Union of Australia - [2018] FWCFB 3744 at paragraph [3].

[67] Herzfeld and Prince, Interpretation, (Thomson Reuters, 3rd edition, 2024) at p. 613-615.

[68] One Key Workforce Pty Ltd v. CFMEU [2018] FCAFC 77; (2018) 262 FCR 527, [189] and Australian Licensed Aircraft Engineers Association v. Qantas Airways Ltd [2022] FCAFC 50; (2022) 291 FCR 531 [27]-[28] (Besanko J with Wheelan J agreeing and Bromberg J generally agreeing).

[69] Berri [2017] FWCFB 3005, [144] Principle 6, and AMIEU v. Golden Cockerel Pty Ltd [2014] FWCFB 7447, [31].

[70] Berri [2017] FWCFB 3005, [47].

[76] Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008.

[79] [2015] FCAFC 100; 231 FCR 298, 305 [38].

[81] April 2022 Full Bench decision [194].

[92] Swissport paragraph 52, principles (4) and (5).

[94] [2022] FWC 1444, [19].

[95] Cetin v Ripon Pty Ltd (2003) 127 IR 205, [48]-[49].

[97] At paragraph 372 on page 60 of the Explanatory Memorandum. This was reproduced by Buchanan J in his judgement in Centennial at paragraph [33].

[98] A decision of Tracey, Flick and Katzmann JJ in Centennial Northern Mining Services Pty Ltd v. CFMEU (2015) 231 FCR 2998, [42].

[101] [1979] FCA 8; (1979) 38 FLR 267.

[102] To use the phrase of White J in NTEU v. La Trobe University (2015) IR 238, [108].

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