The calculation of overtime - Grounds 1 & 1A
24 The central question to be resolved in respect to Grounds 1 and 1A is whether or not Mr Connelly should have accepted the overtime offered to him.
25 Any analysis necessarily starts with the terms of Mr Connelly's contract of employment and whether BlueScope unilaterally repudiated that contract.
26 The contract of employment is found in a letter to him dated 9 November 2011. In relevant part, that letter states as follows:
Your Annualised Salary includes payment for shift allowance, annual leave loading, public holidays for shift workers, weekend penalties and an additional 6. hours overtime paid at penalty rates. You will be required to work these additional hours when requested by the department.
Salary and other payments (where applicable), less income tax instalments and other authorised deductions, will be paid directly into your designated bank account fortnightly. You will receive your payslips electronically via Employee Self Service.
27 In very summary form, the difficulties giving rise to the present litigation emerged in mid-2015 when BlueScope, according to the primary Judge, "was in a dire and perilous financial position and there was a substantial risk of the necessity to close the [Port Kembla Steel Works] and the consequent loss of employment by its employees": BlueScope (No. 2) [2020] FCCA 515 at [20]. One response of BlueScope was to announce that "all… departmental agreements, involving pre-payment of overtime are abolished": [2020] FCCA 515 at [35]. Not surprisingly, there was concern expressed by the employees. In respect to wage employees, the Fair Work Commission approved a new enterprise agreement in November 2015: [2020] FCCA 515 at [43]. This new agreement, however, did not extend to employees such as Messrs Benge and Connelly. BlueScope nevertheless wrote to Messrs Benge and Connelly in November and December 2015 advising them that it would "cease the current annualised salary agreement, and in its place implement an aggregate salary arrangement effective as of the pay period commencing on 10 January 2016": [2020] FCCA 515 at [44] to [48]. This was found by the primary Judge to be a "repudiation of the employment contracts, because the contractual remuneration provided by the employment contracts was a fundamental term": [2020] FCCA 515 at [67]. Messrs Benge and Connelly continued to be employed by BlueScope after 10 January 2016 but their conduct in doing so was found not to "evince or constitute any consent to the removal of pre-paid overtime from their employment contracts": [2020] FCCA 515 at [71]. Mr Connelly continued to work some overtime, for which he was paid, and declined to accept offers to work other available overtime.
28 So much was common ground for the purposes of the present appeal. None of these findings or conclusions of the primary Judge were sought to be challenged.
29 Nor was there any challenge on appeal to the conclusion of the primary Judge that BlueScope contravened s 323 of the Fair Work Act: BlueScope (No. 2) [2020] FCCA 515 at [86]; BlueScope (No. 3) [2020] FCCA 2902 at [3].
30 What was put in issue was the manner in which "compensation" was calculated for the purposes of s 545 of the Fair Work Act. Whether this process of calculation was a House v The King error can be left to one side.
31 If attention is confined simply to the amount of money paid to Mr Connelly during the period from 10 January 2016 through to June 2020, the fact is that had Mr Connelly continued to receive his "annualised salary" calculated by reference to a fortnightly payment of $5,596.76 he would have received:
$643,627.40
But he was in fact paid an "aggregate salary" calculated by reference to a fortnightly payment starting at $4,677.56 and increasing incrementally over the period to $4,990.51, which for the same period totalled:
$550,169.23
In addition to this "aggregate salary" he also received in total:
$26,957.68 for overtime worked; and
$735.96 for shift allowances,
totalling $27,693.64.
It may also be presently noted that for the same period he was offered and rejected overtime which, had he worked the overtime offered, he would have received a further:
$71,862.22
The primary Judge thus concluded that had Mr Connelly been paid his "annualised salary" he would have received $643,627.40: [2020] FCCA 2902 at [19].
32 If attention is focussed on this sum of $27,693.64, the facts were that for thirteen of the fortnights in the 2016-2020 period, Mr Connelly did receive an amount of money totalling $22,382.98, that amount falling into two categories, namely:
$11,101.92, being the total amount of overtime paid to Mr Connelly which had the effect of satisfying the required fortnightly payments of $5,596.76 under the annualised salary; and
$11,281.06, being the total amount for overtime paid which exceeded the required fortnightly payments of $5,596.76.
33 What divided the parties was the extent to which the sum of $27,693.68 (or any part of that sum) should be taken into account when assessing "compensation".
34 BlueScope's position was that the entirety of the $27,693.64 should be deducted from the compensation otherwise payable to Mr Connelly. By way of contrast, Mr Connelly accepted that the payments for overtime which "had the effect of satisfying the required fortnightly payments of $5,596.76 under the annualised salary" (together with a further sum of $5,310.66) should reduce the "compensation" payable, but otherwise denied that the excess amount of $11,281.06 should also reduce the amount of "compensation".
35 When considering what constituted the "contravention" of s 323 the primary Judge in BlueScope (No. 3) noted the competing submissions as to how "compensation" should be calculated and further concluded as follows that each failure to pay the fortnightly "annualised salary" of $5,596.76 constituted a "discrete and separate contravention":
[24] On the one hand Bluescope contends, on the basis that the annualised salary was expressed in annual terms, that the assessment of compensation should be on an annualised basis and that this total of $27,693.64 ought to be deducted from any compensation to which Mr Connelly is otherwise entitled. On the other hand Mr Connelly points to the fact that the annualised salary was payable and to be discharged by fortnightly payments and contends that each fortnight that he was underpaid constituted a discrete and separate contravention of s.323 of the FW Act.
[25] In my view Mr Connelly is entitled to claim compensation based on Bluescope's failure to make in full the fortnightly payments of $5,596.76 required by his annualised salary. All salaries in Australia are expressed initially by reference to a total annualised figure, but are not paid in one annual amount. Rather they are paid at recurrent intervals by either weekly, fortnightly or monthly instalments. Section 323(1)(c) of the FW Act requires that amounts payable to an employee for the performance of work are to be paid "at least monthly". In both a practical and legal sense Mr Connelly suffered a loss each fortnight that he was paid less than $5,596.76. In my view each fortnightly underpayment by Bluescope of the annualised salary to which Mr Connelly continued to be entitled was a discrete and separate contravention of s.323. He is entitled to an order awarding compensation under s.545(2)(b) for the loss each fortnight after 9 January 2016 during which he was not paid in accordance with his annualised salary arrangement.
When calculating the quantum of "compensation" the primary Judge concluded as follows that the sum of $11,281.06 should be disregarded:
[31] …I find that no compensation is to be payable to him for those 13 fortnights when he did accept and perform overtime work and thereby received more than $5,596.76, as recorded in Table 1 of the Agreed Document and particularised at [26] above. This is because in those fortnights he did not suffer any loss due to any contravention. Further, I find that the amount of $5,310.66 for overtime otherwise worked is to reduce any compensation payable to him.
[32] Second, I am of the view, consistent with [Counsel for Mr Connelly's] submission, that the amount of $11,281.06 over and above the amounts for overtime necessary to have the effect of paying him his annualised salary of $5,596.76 for the 13 fortnights is to be disregarded. As far as Bluescope was concerned the amount of $11,281.06 was paid under the aggregate salary arrangement to Mr Connelly for overtime work accepted and actually performed by him. The amounts for overtime worked by Mr Connelly totalling $11,281.06 did not have the effect, and should not be regarded as having the effect, of reducing the loss suffered by him for any fortnightly contravention of the amounts payable to him under his annualised salary. In my view it would be neither fair nor appropriate for that amount to be thrown in reduction of any compensation payable to Mr Connelly under s.545 of the FW Act for Bluescope's failure to pay to him the required fortnightly payments under the annualised salary arrangement.
36 No error, it is respectfully concluded, is disclosed in these conclusions. The method of the primary Judge was simply to approach the task of assessing what "compensation" was "appropriate" by reference to:
his finding that the failure to pay $5,596.76 in each fortnight constituted a "discrete and separate" contravention;
the necessity to consider whether for each of those fortnightly contraventions Mr Connelly had suffered any "loss",
and thereafter concluding that:
for those 13 fortnights when he in fact received a sum greater than $5,596.76, there was no "loss".
For those 13 fortnights, Mr Connelly had received $11,281.06 in excess of what he was otherwise entitled to had BlueScope not repudiated its contract with him and adhered to its contractual obligation. On the approach of the primary Judge, that was an amount to be "disregarded". And it was to be disregarded because those payments were made under the "aggregate salary arrangement" ([2020] FCCA 2902 at [32]).
37 There is no inconsistency in the approach of the primary Judge separately concluding that:
there was no "loss" suffered by Mr Connelly for those 13 fortnights - even though the fortnightly payments were also being made under the "aggregate salary arrangement", the monies being paid removing any "loss" which could otherwise have been suffered ([2020] FCCA 2902 at [31]); and
disregarding the amounts paid in excess of the "annualised salary", namely the sum of $11,281.06, an amount also paid pursuant to the "aggregate salary arrangement" ([2020] FCCA 2902 at [32]).
The issue being addressed and resolved by the primary Judge was directed to whether for any of those 13 fortnights Mr Connelly had suffered any "loss" by reason of each of the contraventions not to pay the annualised fortnightly payments. Irrespective of the basis upon which monies were paid for any of those fortnights - be it pursuant to the "annualised" contractual entitlement or the "aggregate" basis - no "loss" had been suffered.
38 If Ground 1 to the Notice of Appeal be confined to whether any error of the kind described in House v The King had been established, any such argument - it is respectfully considered - would be doomed to failure. Given the width of the power conferred by s 545(1) (cf. Dafallah, at [146] to [159]; Australian Licenced Engineers at [441] to [450]) and the evaluative judgment called for when making an order considered to be "appropriate", any challenge to an exercise of that power undoubtedly confronts difficulties. The Appellant has failed, with respect, to prove that the manner in which the primary Judge approached his tasked and exercised that power involved any error of principle or any failure to take into account that which was relevant.
39 Rejected is the submission of BlueScope that the primary Judge had failed "to make a finding in respect of [BlueScope's] submission that all overtime paid to [Mr Connelly] in the period should be taken into account, including the overtime paid in excess of his annualised salary in the 13 fortnightly periods where there was no contravention of s323 of the FW Act". That was the very subject matter of the conclusions expressed by the primary Judge at paras [31] and [32] of the reasons for decision. To dismiss the primary Judge's conclusion at para [32] as merely the expression of a "view" that the reduction of compensation by the amount of the payments was "neither fair nor appropriate" is to strip the Judge's decision of the very task entrusted to him by s 545(1) and (2). In paragraphs [31] and [32] the primary Judge was expressing the application of those statutory provisions to the facts previously set forth, including the finding (expressed at para [25]) that "Mr Connelly suffered a loss each fortnight that he was paid less than $5,596.76".
40 Even if the principles set forth in House v The King be placed to one side, it is similarly concluded that the findings made by the primary Judge as to the "appropriate" order to be made were findings made well within the powers conferred by s 545. Albeit not expressed in these terms, if Ground 1A be construed as embracing an error (for example) in the construction of the term "compensation", or the term "loss", or the phrase "because of the contravention" as employed in s 545(2)(b) of the Fair Work Act, any such argument would be rejected.