The proper construction of the superannuation legislation
25 The Superannuation Guarantee Charge Act 1992 (Cth) (the SG Charge Act) and the SG Administration Act are pieces of legislation at the heart of the national economy, of the national arrangements for the financial welfare and financial security of Australian employees and retirees, and Australians generally. As referred to above, an employer in the position of the appellants is under no statutory obligation to make superannuation contributions for the benefit of any employee. The extent to which it does so will affect whether it pays a charge or tax, and if so in what amount. The position was explained by the plurality in Roy Morgan Research Pty Ltd v Commissioner of Taxation [2011] HCA 35; 244 CLR 97 at 101[3]:
Broadly speaking, the effect of the legislation under challenge is that if, as specified in the Administration Act, an employer fails to provide to all employees a prescribed minimum level of superannuation then any shortfall represented by failure to meet that minimum level in full, becomes the Charge. This impost is levied on the employer by the Charge Act. The amount of the Charge is a debt due to the Commonwealth and payable to the respondent, the Commissioner of Taxation: Taxation Administration Act 1953 (Cth), Sch 1, s 255-5. The Charge includes a component for interest and an administration cost. The result is to supply an incentive to employers to make contributions to superannuation for their employees without incurring a liability to the Commissioner for the Charge.
26 Under ss 5 and 6 of the SG Charge Act, a charge is imposed on any superannuation guarantee shortfall of an employer for a quarter (s 5) and the amount of that charge is an amount equal to the amount of the shortfall (s 6). To understand how this works one goes to the SG Administration Act which, by s 3 of the SG Charge Act, is incorporated into, and is to be read as one with, the SG Charge Act.
27 Sections 16 and 17 of the SG Administration Act provide for the charge imposed on the shortfall for the quarter to be payable by the employer and is the total of the individual shortfalls, plus interest, plus an administration component. Section 19 provides for the calculation of an employee's individual superannuation guarantee shortfall. Relevantly s 19(1) and (2) are in the following terms:
(1) An employer's individual superannuation guarantee shortfall for an employee for a quarter is the amount worked out using the formula:
where:
charge percentage, for an employer for a quarter, means:
(a) the number specified in subsection (2) for the quarter (unless paragraph (b) applies); or
(b) if the number specified in subsection (2) for the quarter is reduced in respect of the employee by either or both section 22 and 23 - the number as reduced.
(2) The charge percentage for a quarter in a year described in an item of the table is the number specified in column 2 of the item.
28 It is to be noted that the percentage of the charge is applied to "the total salary or wages paid by the employer to the employee for the quarter".
29 The charge percentage can be reduced in respect of the employee by various means, here, relevantly, by s 23. Under s 23, if an employer makes a contribution to a Retirement Savings Account (an RSA) there is a reduction in the charge percentage. Section 23(1) and (2) of the SG Administration Act are in the following terms:
23 Reduction of charge percentage if contribution made to RSA or to fund other than defined benefit superannuation scheme
(1) This section applies only in relation to RSAs and to superannuation funds other than defined benefit superannuation schemes.
Reduction of charge percentage where contributions are made by employer
(2) If, in a quarter, an employer contributes for the benefit of an employee to a complying superannuation fund or an RSA, then the charge percentage for the employer (as specified in subsection 19(2)) for the employee for the quarter is reduced by the number worked out using the formula:
where:
contribution is the number of dollars in the amount of the contribution.
ordinary time earnings is the number of dollars in the ordinary time earnings of the employee for the quarter in respect of the employer.
Example: If the contribution is $60 and the ordinary time earnings are $1,000 then the charge percentage is reduced by 6.
30 The phrase "ordinary time earnings" is defined in s 6 of the SG Administration Act, as follows:
6 Interpretation - general
(1) In this Act, unless the contrary intention appears:
ordinary time earnings, in relation to an employee, means:
(a) the total of:
(i) earnings in respect of ordinary hours of work other than earnings consisting of a lump sum payment of any of the following kinds made to the employee on the termination of his or her employment:
(A) a payment in lieu of unused sick leave;
(B) an unused annual leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997; and
(ii) earnings consisting of over-award payments, shift-loading or commission; or
(b) if the total ascertained in accordance with paragraph (a) would be greater than the maximum contribution base for the quarter - the maximum contribution base.
31 Thus, if the contribution divided by "ordinary time earnings" multiplied by 100 is the equivalent of, or more than, the charge percentage in column 2 in s 19(2), the charge percentage for s 19 and ss 16 and 17 will be zero.
32 It is thus critical to understand the meaning of the phrases "ordinary time earnings" and the otherwise undefined phrase "ordinary hours of work" used in the definition of the former phrase.
33 One can begin this enquiry, as the primary judge did at [55]-[58] and [106]-[113], by considering authorities dealing with the phrase "ordinary hours of work" in various contexts. That enquiry may bring one to the conclusion, as it did the primary judge, that there was a choice between a meaning referrable to standard hours to be paid at ordinary rates, and a meaning referrable to the regular, customary, normal or usual hours worked by each individual employee. That was, in significant part, the field of debate on appeal. Whilst those considerations and the cases epitomising them need to be examined, it is best to recall that the task involves a consideration of the text, context, purpose and history of the legislation: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at 381-382 [69]-[71]; and Thiess v Collector of Customs [2014] HCA 12; 250 CLR 664 at 671-672 [22]-[23].
34 First, the text: The definition turns on the expression "earnings in respect of ordinary hours of work", not merely the word "ordinary" or the phrase "ordinary hours of work". It is earnings that are the focus (in the phrase being defined: "ordinary time earnings" and in the terms of the definition ("earnings in respect of ordinary hours of work"). The exclusion of the matters in (i)(A) and (B) and the inclusion of the matters in (ii) tend to indicate that "ordinary hours of work" is something referrable to an objective standard, and not an individual factual enquiry about hours ordinarily or usually worked. If "ordinary hours" meant hours customarily or typically worked the matters in (ii) would likely be covered without need for separate mention. Whereas they would not be if the phrase referred to an objective standard that concerned standard hours and ordinary rates of pay.
35 The language of the definition is to be contrasted with the language of ss 11(1)(ba) and 12(3) as to salary and wages. This language is used in s 19 to calculate the shortfall: "Total salary or wages paid by the employer to the employee for the quarter." Total salary or wages is an all-encompassing expression concerned with hours actually worked that founds the tax - the superannuation guarantee charge, which is intended to be the incentive that encourages the making of contributions. Thus "total salary or wages" can be seen as a likely higher sum than "earnings in respect of ordinary hours of work".
36 None of the language leads one, necessarily, as a matter of meaning or logic to hours usually or ordinarily worked.
37 Secondly, the context: This is not a provision directed to compensating an individual for the time of his or her labour, or for loss sustained in not being able to work his or her normal hours; rather it is part of a regime implemented by legislation using the taxation power to encourage and facilitate national savings.
38 The context is the payment of salaries and wages in the workplace. In that context, the word "ordinary" and the phrase "ordinary hours" have assumed different meanings depending on context and circumstance. There are circumstances and contexts where the word and phrase can be seen to refer to regular, normal, customary or usual hours; and there are circumstances or contexts where the word and phrase can be seen to refer to the hours of work referred to in applicable industrial instruments as standard hours to be paid at ordinary rates, as opposed to additional hours (even if required, usual, regular, normal or customary) and paid at a special or higher rate. As such, the word and phrase can be seen to reflect the long-recognised distinction between ordinary hours of work and overtime: cf Thompson v Roche Bros Pty Ltd [2004] WASCA 110 at [31].
39 The notion of standard or ordinary working hours has long had a place in the industrial relations landscape of Australia. The standard working week was once 48 hours (Australian Builders' Labourers' Federation v Archer (1913) 7 CAR 210); reduced to 44 hours during the 1920s (Amalgamated Engineering Union v J Alderdice & Co Pty Ltd (1927) 24 CAR 755 (the 44 Hour Week Case)); to 40 hours after the War (Standard Hours Inquiry (1947) 59 CAR 581; and to 38 hours in 1983 (National Wage Case (1983) 4 IR 429). The standard of 38 hours was not departed from by the Australian Industrial Relations Commission in 2002 (Re Working Hours Case July 2002 (2002) 114 IR 390. The standard of 38 hours has not been departed from in the award modernisation process. The notion of "ordinary hours of work" remains a working integer of the modern award system: s 147 of the Fair Work Act.
40 By s 62 of the Fair Work Act, 38 hours remains the maximum number of hours that an employer can request or require of a full time employee, unless the "additional hours" are reasonable. Ordinary hours or some means of determining ordinary hours is a necessary part of an award or enterprise agreement for the better off overall test. Section 20 of the Fair Work Act deals with the meaning of "ordinary hours of work" for "award/agreement free employees":
20 Meaning of ordinary hours of work for award/agreement free employees
Agreed ordinary hours of work
(1) The ordinary hours of work of an award/agreement free employee are the hours agreed by the employee and his or her national system employer as the employee's ordinary hours of work.
If there is no agreement
(2) If there is no agreement about ordinary hours of work for an award/agreement free employee, the ordinary hours of work of the employee in a week are:
(a) for a full-time employee - 38 hours; or
(b) for an employee who is not a full-time employee - the lesser of:
(i) 38 hours; and
(ii) the employee's usual weekly hours of work.
If the agreed hours are less than usual weekly hours
(3) If, for an award/agreement free employee who is not a full-time employee, there is an agreement under subsection (1) between the employee and his or her national system employer, but the agreed ordinary hours of work are less than the employee's usual weekly hours of work, the ordinary hours of work of the employee in a week are the lesser of:
(a) 38 hours; and
(b) the employee's usual weekly hours of work.
41 By [234]-[235] of the Explanatory Memorandum to the Fair Work Bill 2008 the importance of ordinary hours of work to the National Employment Standards was explained:
234 There are a number of concepts that are used regularly in Part 2-2. These are explained below.
235 Various employee entitlements under the NES are based on the employee's ordinary hours of work.
• The ordinary hours of work for an employee to whom a modern award applies will be the ordinary hours set out in the modern award (all awards are required to provide ordinary hours, or a means of determining ordinary hours) (see clause 147).
• The ordinary hours of work for an employee to whom an enterprise agreement applies will be the hours identified in the enterprise agreement. (An agreement should identify ordinary hours, or a means of determining ordinary hours, in order for the agreement to pass the better off overall test.)
• The ordinary hours of work for an award/agreement free employee (as defined in clause 12) are calculated in the manner set out in clause 20.
42 Whilst not all of the above can be seen as part of the immediate context of the passing of the superannuation legislation, it illuminates the historical and contemporaneous importance of the phrase "ordinary hours of work". This assists in understanding the use of the phrase in the definition in 1992, in its continuing utilisation in the legislation, and also in the interpretation of the various relevant industrial agreements here.
43 Thirdly, the purpose: The statutory purpose of the superannuation legislation was to secure for workers a minimum level of superannuation by the incentive of the charge, through an efficient mechanism based on self-assessment by employers and administration by employers and the Australian Tax Office. That simplicity and efficiency of administration is threatened if the necessary calculation for each employee, for each quarter is based on an individual factual enquiry and is not calculated by reference to the standard hours at ordinary rates in relevant industrial instruments. Usual or ordinary hours may well vary from employee to employee, and, over time, for the same employee. What is customary or usual would be a factual assessment over the relevant period (each quarter), referable to individuals, and open to factual and individual debate. The statutory purpose of simplicity and efficiency for a minimum level of superannuation would be undermined by the need to find, factually, usual or normal hours for each employee in each quarter; the purpose would, on the other hand, be supported by an interpretation that looked to the relevant industrial instrument for standard hours at ordinary rates of pay. It is, with respect, overly simplistic to say that the legislation was intended to benefit employees therefore should be construed beneficially in their favour: cf Quest Personnel Temping Pty Ltd v Commissioner of Taxation [2002] FCA 85; 116 FCR 338 at 343 [21]. The legislation has a broader social and economic purpose, and whilst for the benefit of Australian employees generally, should be construed with a view to practical efficiency and overall fairness.
44 Fourthly, the enactment history assists in understanding "ordinary time earnings" as earnings referable to standard hours at ordinary rates of pay. It is not just the number of hours, but also their character as paid at an ordinary rate.
45 The enactment history can be seen as part of the context of the legislation in its widest sense: see CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; 187 CLR 384 at 408 [88] and Federal Commissioner of Taxation v Jayasinghe [2016] FCAFC 79; 247 FCR 40 at 43 [6]-[7].
46 The regime of the legislation was introduced against the background of industrial awards and was to be integrated into that system. The Information Paper published by the then Treasurer, the Honourable John Kerin (and referred to in the Second Reading Speech), stated at [3.25]:
"The SGLA will operate independently of, but in conjunction with, the award system."
47 Until changes made to s 23(2), that took effect in July 2008, to which I refer below, the charge percentage was able to be reduced in a number of ways, including through contribution by employers in accordance with industrial awards and set by reference to an employee's "notional earnings base". The way the system operated before the amendments made by Act No 82 of 2005 (that took effect in July 2008), was described in the Explanatory Memorandum to the Superannuation Laws Amendment (2004 Measures No. 2) Bill 2004 (the 2004 EM). The desired simplification was described on pp 5-6 of the 2004 EM as follows:
Schedule 1 to this bill will also amend the Superannuation Guarantee (Administration) Act 1992 to simplify the earnings base of an employee for superannuation guarantee (SG) purposes. Specifically, the amendments will:
• remove provisions which currently allow earnings bases that existed prior to 21 August 1991 to be used to calculate an employer's SG obligation in respect of an employee;
• remove provisions which currently specify an earnings base for employers to calculate their SG obligation in relation to employee members of the Seafarers' Retirement Fund;
• remove provisions which currently specify an earnings base for employers to calculate their SG obligation in relation to employee members of the Aberfoyle Award Superannuation Fund;
• remove provisions which allow earnings bases specified in industrial awards, superannuation schemes, occupational superannuation arrangements or a law of the Commonwealth, State or Territory to be used for SG purposes; and
• require all employers to calculate their SG liability against an employee's ordinary time earnings.
48 The context of the amendments was described in the 2004 EM at pp 21-22 as follows:
4.2 The Treasurer announced in Press Release No. 011 of 25 February 2004 changes to provide a more flexible and adaptable retirement income system. The announcement included the Government's decision to simplify the earnings base provisions of the SGAA 1992 by removing earnings bases that existed before 21 August 1991.
4.3 The SG arrangements currently require employers to provide a prescribed minimum level of superannuation contributions for their eligible employees. The required minimum rate of superannuation contributions is 9% of an employee's notional earnings base.
4.4 The SGAA 1992 was developed in the context of the occupational superannuation arrangements that existed in the early 1990s. To minimise the impact on business at that time, the SGAA 1992 recognised earnings base provisions that existed prior to 21 August 1991 and allowed these to be used as the basis for determining an employer's SG obligation.
4.5 Employers who contribute for the benefit of employees without a pre-21 August 1991 earnings base are subject to different rules. Employees without a pre-21 August 1991 earnings base will generally have an minimum earnings base equal to their ordinary time earnings.
4.6 As pre-21 August 1991 earnings bases are generally less than ordinary time earnings, some employers are currently able to pay lower superannuation contributions for their employees than other employers in the same industry.
49 The new law was explained in the 2004 EM at pp 22, 23 and 26 as follows:
4.7 The amendments will remove the current earnings base provisions from the SGAA 1992. The effect of these changes is that the amount against which an employer calculates the contribution necessary to meet their SG obligations in respect of an employee is standardised to ordinary time earnings for all employees. Employers could continue to use notional earnings bases specified in legislation or industrial agreements where these are above an employee's ordinary time earnings; however, any liability to pay the SG charge would only be assessed against ordinary time earnings.
4.8 Standardising the earnings base used to determine SG obligations to ordinary time earnings extends to the removal of references to industrial agreements, laws of the Commonwealth, State or Territory, an applicable superannuation scheme or retirement savings account from the provisions relating to earnings bases. These instruments currently prescribe notional earnings bases for SG purposes.
…
…
Policy objective
4.21 The policy objective is to remove the complexity and inequity present in the current SG notional earnings base arrangements under the SGAA 1992. The basic principle underpinning this objective is that persons on similar overall levels of remuneration should receive similar levels of compulsory employer superannuation contributions.
Implementation options
Retain the current arrangements
4.22 There would be no change to the existing arrangements. That is, some employers could continue to use pre-21 August 1991 earnings bases in respect of their employees. Under the current provisions of the SGAA 1992, employers could potentially reduce their compulsory superannuation contributions through the use of workplace agreements.
Adopting ordinary time earnings as a standardised earnings base
4.23 Remove all references to industrial awards and statutes from the SGAA 1992 and adopt ordinary time earnings as the standard notional earnings base. This option proposes that the minimum notional earnings base of an employee be their ordinary time earnings.
Adopting salary and wages as a standardised earnings base
4.24 Remove all references to industrial awards and statutes from the SGAA 1992 and adopt salary or wages as the standard notional earnings base. This option proposes that the minimum notional earnings base of an employee be the total of their salary and/or wages.
50 The choice of option 2 was recommended for the following reasons explained in the 2004 EM at p 31:
4.48 The preferred option is option 2, which removes all references to industrial awards and statutes from the SGAA 1992 and adopts ordinary time earnings as the standard notional earnings base.
4.49 This option would remove the complexity and inequity present in the current arrangements without imposing the same level of cost on employers and Government as an earnings base, based on total salary and wages' would.
51 The notion of "ordinary time earnings" existed from the beginning of the operation of the legislation, but it operated in provisions such as s 14(3) of the original SG Administration Act as a floor of a minimum base. The phrase was originally defined in s 6(1) as follows:
"ordinary time earnings", in relation to an employee, means:
(a) the total of:
(i) earnings in respect of ordinary hours of work; and
(ii) earnings consisting of over-award payments, shift-loading or commission; or
(b) if the total ascertained in accordance with paragraph (a) would be greater than the maximum contribution base for the contribution period-the maximum contribution base;
52 The phrase "ordinary hours of work" was not expressly linked to industrial awards in 1992. But an understanding of the phrase can be seen in the Explanatory Memorandum to the Taxation Laws Amendment Bill (No 4) 1993 at [13.8]-[13.12] (the Explanatory Memorandum to the Bill for the amendment to the definition of "ordinary time earnings" in s 6(1) that inserted the exclusion in (i) from the words, "other than earnings consisting of" to the end of the paragraph now represented by (i)(B)), in an explanation of the definition of "ordinary time earnings" in s 6(1):
13.8 Under the SGAA an employer's contributions are measured against the employee's notional earnings base. The expression notional earnings base is the earnings of the employee by reference to which the employer's superannuation contribution is calculated. Several earnings bases are available for an employer to use, such as the base set out in the superannuation fund deed, industrial award or an agreement with the employee.
13.9 If there is no acceptable earnings base relevant to a particular employee, then the employee's ordinary time earnings are used. The principal reason for adopting ordinary time earnings as a default base was to achieve consistency with the award superannuation system.
13.10 Subsection 6(1) of the SGAA provides that ordinary time earnings, in relation to an employee, means:
(a) the total of:
• earnings in respect of ordinary hours of work; and
• earnings consisting of over-award payments, shift loading or commission; or
(b) if the total ascertained in accordance with paragraph (a) would be greater than the maximum contribution base for the contribution period - the maximum contribution base. The maximum contribution base, which is increased annually by an indexation factor based on movements in Average Weekly Ordinary Time Earnings, is $20 160 per quarter for the 1993-94 income year.
13.11 Ordinary hours of work, as stated above, may be specified in a statute or under an industrial award. If an employee is not covered by an award but has agreed to work a certain number of hours, those hours are the employee's ordinary hours of work. However, if there is no specific agreement, the ordinary hours of work will be the hours actually worked and any hours of paid leave.
13.12 Lump sum payments on termination of employment in respect of accrued long service leave, accrued sick leave and accrued recreation leave are currently included in the definition of ordinary time earnings.
…
13.13
…
• lump sum payments in lieu of unused sick leave;
• lump sum payments in lieu of unused annual leave, within the meaning of subsection 26AC(l) of the Income Tax Assessment Act 1936 (ITAA); and
lump sum payments in lieu of unused long service leave, within the meaning of subsection 26AD(l) of the ITAA.
53 The above material reveals that the removal of "notional earnings base" leaving "ordinary time earnings" as the single measure was for the purposes of removing complexity and securing consistency.
54 The definition of "ordinary time earnings", including the expression "earnings in respect of ordinary hours of work" was introduced in 1992, not long after the High Court decision in Catlow v Accident Compensation Commission [1989] HCA 43; 167 CLR 543 in which the majority of the Court considered that the phrase "ordinary time rate of pay" meant "ordinary time rate of pay for the worker's standard or ordinary hours per week as fixed by award, agreement or contract": 167 CLR at 561. The construction of those cognate words by the High Court in a cognate industrial field is of some assistance in concluding that the legislature was intending to adopt language with a similar effect: see Ex parte Campbell (1870) LR 5 Ch App 703 at 706:
Where once certain words in an Act of Parliament have received a judicial construction in one of the Superior Courts, and the Legislature has repeated them without any alteration in a subsequent statute, I conceive that the Legislature must be taken to have used them according to the meaning which a Court of competent jurisdiction has given them.
55 See the discussion in the cases referred to in Pearce DC and Geddes RS, Statutory Interpretation in Australia (8th ed, Butterworths, 2014) at [3.44] pp 138-139. See in particular Re Alcan Australia Ltd; Ex parte Federation of Industrial, Manufacturing and Engineering Employees [1994] HCA 34; 181 CLR 96 at 106. The strength of the presumption will depend on the circumstances. Here, it provides some support for a conclusion otherwise reached as to meaning.
56 The text, context, purpose and enactment history do not direct one to a meaning constituted solely by hours (factually) usually worked. They tend to a meaning that provides for an objective standard that aids in simplicity and lack of complexity. The use, from 1992, of the relevant phraseology in a context of industrial awards and instruments; the well-known conception contained within industrial awards and instruments of standards hours at ordinary rates of pay, and of overtime; the need for the phraseology to be practical, general and flexible to pick up all circumstances of employment; and the need for the task set for the employer to administer and the ATO to audit, quarter by quarter, individual by individual, to be as simple or non-complex as possible all direct one to a meaning that reflects those considerations. The meaning that best reflects these considerations and the text, context, purpose and history of the provision is earnings in respects of ordinary or standard hours of work at ordinary rates of pay as provided for in a relevant industrial instrument, or contract of employment, but if such does not exist (and there is no distinction between ordinary or standard hours and other hours by reference to rates of pay) earnings in respect of the hours that the employee has agreed to work or, if different, the hours usually or ordinarily worked.
57 This meaning adopts as central (to the extent that it is present) the distinction long familiar in the industrial and employment context, and widely understood, between earnings for ordinary time and earnings for an additional or greater number of hours beyond ordinary or standard hours. If in a particular context such distinction does not exist in the remuneration for the labour provided, the required comprehensiveness and flexibility of the meaning will fix upon the hours agreed to be worked, or the hours normally worked if different. This is not to give a variable meaning to the expression, it is to recognise that the context and particular circumstances will provide by way of factual application, the answer to the reach of the phrase which has a simple meaning by reference to real life.
58 The cases support this interpretation.
59 Catlow 167 CLR 543 was decided three years before the superannuation regime was introduced. The case concerned the construction of s 95(1) of the Accident Compensation Act 1985 (Vic), which relevantly provided:
In sections 93 and 94, 'the worker's pre-injury average weekly earnings' means -
(a) the average weekly earnings during the 12 months preceding the relevant injury if the worker has been employed by the same employer for that period;
…
calculated at the worker's ordinary time rate of pay for the worker's normal number of hours per week.
60 The question before the Court was framed in the leading judgment of McHugh J at 557:
whether, when a standard number of ordinary working hours has been fixed for a worker's employment, his "normal number of hours per week" for the purposes of the Act are those standard hours or the number of hours he usually worked.
61 The Full Court of the Victorian Supreme Court had overturned the decision of the Accident Compensation Tribunal which had found the phrase "normal number of hours per week" to be the number of hours he usually worked including overtime.
62 McHugh J at 560 made the point (equally relevant to understanding the 1992 superannuation legislation) that terms of employment of most workers are governed by industrial awards or agreement that provide for ordinary time rates of pay for standard hours. His Honour said at 560-561:
Against the industrial background of awards and agreements fixing a number of ordinary hours per week, it seems natural to read the expression "calculated at the worker's ordinary time rate of pay for the worker's normal number of hours per week" as a reference to the ordinary time rate of pay for the worker's standard or ordinary hours per week as fixed by award, agreement or contract. While it is true that on any view the "pre-injury average weekly earnings" calculated under s. 95 is a notional and not an actual figure, it would indeed be surprising if the legislature intended that those earnings are to be calculated by multiplying the ordinary time rate by overtime as well as ordinary hours worked. If "normal number of hours" included overtime hours, some other formula to include the overtime rate would surely have been used.
63 McHugh J then examined three decisions: two of the Industrial Commission of New South Wales, and one of the High Court, heavily relied on by the primary judge and the respondent.
64 The two Industrial Commission cases, John A Gilbert Pty Ltd v Irving [1962] AR 307 and Goodyear Tyre & Rubber Co (Aust) Ltd v Robinson [1961] AR 127 dealt with the phrase "normal weekly number of hours" in the Annual Holidays Act 1944 (NSW) and the Long Service Leave Act 1955 (NSW), respectively. The Commission said in John A Gilbert [1962] AR at 318:
The word 'normal' in its ordinary sense may mean regular or usual, or it may mean conforming to standard. We are of the opinion that, in the definition, a worker's normal weekly number of hours is that number of hours which is fixed by the terms of the worker's employment as the standard of ordinary hours, as distinct from overtime hours, which are to be worked in a week. If 'normal' meant regular or usual, a determination of what was regular or usual would depend on the facts of each case in relation to a period of employment long enough to permit an ascertainment of what was regular or usual, but the language of s. 2(2) suggests that terms of employment may fix in advance the weekly hours which are to be normal.
65 The Commission said in Goodyear [1961] AR at 137-138:
Overtime hours are not hours within a worker's normal weekly number of hours of work; they are hours worked over and above his normal weekly number of hours of work, and a payment which is made for overtime hours cannot, in any sense, be said to be remuneration for one's normal weekly number of hours of work.
66 The previous decision of the High Court in Kezich v Leighton Contractors Pty Ltd [1974] HCA 50; 131 CLR 362 was examined and distinguished by McHugh J. The context was a workers compensation statute. The relevant provision was:
For the purposes of this Act, 'weekly earnings' means the amount of the ordinary wage or salary (including any over award payment) the worker would have received for the ordinary hours he would have worked, if he were not incapacitated for work as a result of the injury.
67 The Court (Gibbs J delivering the leading judgment) held that "the ordinary hours he would have worked" meant the hours which he usually worked. Gibbs J said at 131 CLR at 365:
The word 'ordinary' means 'regular, normal, customary, usual'. A man's 'ordinary hours' of work are the hours during which it is usual for him to work. There is nothing in the expression 'ordinary hours' that connotes payment at any particular rate, and to understand the words as meaning 'hours during which work is done for which overtime is not paid' would be to place upon them a meaning which they simply do not bear. The expression 'the ordinary hours he would have worked' in my opinion means the same as 'the hours he would ordinarily have worked' ...
68 McHugh J recognised the force of this approach (and of the similar approach of Mason J in the same case at 131 CLR at 376) but saw the contexts and provisions as different, saying at 167 CLR at 566:
Indeed, the different context and history of the phrase "normal number of hours per week" in s. 95(1) dictate that it be interpreted as meaning the ordinary or standard number of hours worked and not the usual number of hours worked.
Accordingly, in my opinion, in s. 95 "normal number of hours per week" means the ordinary or standard hours fixed by the terms of the employment. The appellant's "pre-injury average weekly earnings" in this case had to be calculated by determining what were his total weekly earnings calculated by reference to the ordinary time rate of pay for the ordinary hours for the relevant period and then obtaining a weekly average of that sum. As the appellant had more than one ordinary time rate of pay during the twelve months period, his earnings for each of the three periods had to be grossed in accordance with that formula and then averaged over the relevant period.
69 Catlow recognised the two different ways of understanding words such as "usual", "ordinary" or "normal" in the industrial context. In any particular statute, the terms, context, purpose and enactment history will determine the meaning to be ascribed as that intended by Parliament.
70 In Scott v Sun Alliance Australia Ltd [1993] HCA 46; 178 CLR 1 the High Court was concerned with s 69(1) of the Workers Compensation Act 1988 (Tas) that included the phrase "ordinary time rate of pay". The Court said the following at 5-6:
The expression "ordinary time rate of pay" is well known in the industrial relations field in Australia and New Zealand. It and similar terms have long been used in legislation (See, e.g., Annual Holidays Act (N.S.W.) 1944, s. 2(1); Workers' Compensation Act 1956 (N.Z), s. 15(1) (now repealed); Accident Compensation Act 1985 (Vict.), s. 95(1) (now repealed)). Unless the context otherwise requires, "ordinary time rate of pay'' means the rate of pay for the standard or ordinary hours of work in contrast to the overtime or penalty rate of pay for hours of work other than the standard or ordinary hours (Catlow v. Accident Compensation Commission (1989), 167 C.LR. 543, at pp. 555-556, 560). When expressed by reference to a week, it refers to the product of multiplying that hourly rate by the standard thirty-five, thirty-eight or forty hour week, as the case may be, fixed by legislation, industrial award or agreement.
The terms of s. 69(1)(a) indicate that the legislature assumed that there is always an ordinary time rate of pay for the worker for the work on which he or she is engaged. No doubt in most cases this is true because when the 1988 Act was enacted the rates of pay of most workers were covered by industrial awards or agreements.
[Reference was made to the judgment of McHugh J in Catlow]
However, it is not always the case that a worker will have an ordinary time rate of pay. There may be no industrial award or agreement regulating his or her employment, and his or her contract of employment may not distinguish between ordinary and other time rates of pay or may provide for remuneration by a formula which has no temporal element - for example, piece work or commission (See, e.g., Goodyear Tyre & Rubber Co. (Australia) Ltd v. Robinson, [1961] AR (N.S.W.) 127, at p. 137.). If the worker has no "ordinary time rate of pay'', the compensation payable to him or her pursuant to s. 69(1)(a) must be calculated by reference to his or her average weekly earnings.
71 Little assistance is given by Australian Communication Exchange Ltd v Deputy Commissioner of Taxation [2003] HCA 55; 201 ALR 271. The case concerned the operation of s 23 of the SG Administration Act before the amendments removing the concept of "notional earnings base" in 2005. It turned, however, upon the specific wording of an award and the relationship between provisions dealing with full time and casual employees and a somewhat extended definition of "ordinary time earnings" and "ordinary hours of work".
72 Quest Personnel Temping Pty Ltd v Commissioner of Taxation [2002] FCA 85; 116 FCR 338 was concerned with the meaning of "ordinary hours of work" in ss 6 and 23 of the SG Administration Act. The Court (Gray J) dismissed a challenge to a decision of the Administrative Appeals Tribunal that had agreed with the Commissioner's assessment of the company's superannuation guarantee shortfall based on "ordinary hours of work" being the normal, regular, customary or usual hours worked by that employee. That conclusion is not contrary to the meaning which I have posited above. The case concerned data entry operators supplied to the Victorian Police. The standard offer of employment referred to a minimum of five standard shifts each fortnight as notified. The pay for all hours worked was at a standard hourly rate with no loading. Some employees worked more than the minimum. There was a variety of requirements on different employees.
73 Gray J rejected the argument that the minimum hours were the ordinary hours of work and that the additional hours were overtime. That rejection (at 342) was in part based on the lack of any higher rates of pay for additional work. His Honour said at 342-343 [19]-[20]:
19 …The offers of employment specified the minimum hours for which an employee could be called upon to work. The clear import of the word "minimum" was that an employee could be expected to be asked to work more than five standard shifts in a fortnight. An industrial award or agreement usually expresses the maximum hours that an employee may be required to work. It is true that provision is often made for work beyond such standard hours, but it is usual for the award or agreement to provide that such additional work is to attract a higher level of remuneration. This is what marks it out as work performed outside ordinary hours.
20 The phrase "ordinary hours of work" in s 6 of the Act must be construed in the context of the Act and in a way which best promotes the underlying object or purpose of the Act. It is plain from the definition of "ordinary time earnings'' in s 6 that, at least in some cases, ordinary hours of work are to be distinguished from actual hours worked. The Act does not require that the relevant percentage of an employee's total earnings for all hours worked must be paid to a superannuation fund in order to avoid the levy. On the other hand, there will be some cases in which the ordinary hours worked by an employee will be the actual hours worked, because no ground will exist for distinction between the two concepts. An example would be an employee whose terms and conditions of employment are covered by an award and who works the maximum standard hours but no overtime.
(Emphasis added.)
74 I respectfully agree. In Quest, there was no distinction between ordinary hours and ordinary rates of pay and additional hours at a higher rate. All hours were at the same rate. There were minimum hours, but possible or likely additional hours, all to be paid at one rate. In such a case there is no ground to distinguish between different hours, and the only way a notion of "ordinary hours" could be understood was by what usually or ordinarily happened.
75 After referring to Kezich and Catlow, Gray J said at 344 [26]:
The distinction between these two cases appears to rest upon the proposition that the fixing by collective means of standard hours of work, coupled with a provision for remuneration at a higher rate of hours worked beyond those standard hours, will usually lead to the conclusion that the standard hours fixed are to be considered as "normal hours" or, perhaps, "ordinary hours". As I have said, that is not the present case. The offers of employment accepted by the employees in the present case did not purport to fix standard hours, with remuneration at a higher rate for hours in excess of them. They fixed only minimum hours, with hours worked beyond the minimum paid at the same rate as those worked within it.
(Emphasis added.)
76 It can be accepted that if the relevant distinction is not made, in the award or industrial instrument or contract of employment, between, on the one hand, standard or ordinary hours and ordinary rates of pay, and on the other, additional hours at higher rates of pay, then the ordinary hours will be the hours agreed to be worked, or the usual or normal hours worked, if they be different.