[2024] FWC 1294 [Note: An appeal pursuant to s.604 (C2024/3727) was lodged against this decision.]

Fair Work Act 2009

s.739 - Dispute resolution

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia

"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU)

Alleged dispute about matters arising under the enterprise agreement - calculation of annual leave for shift workers

• [1] This decision is about how to calculate annual leave for shift workers under the Manildra Bomaderry Site Agreement 2022 (the Agreement).

• [2] Changes recently introduced by the Agreement with the aim of clarifying the position did not have the intended effect. Both the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) and the "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) have now applied for the Commission to deal with a dispute under clause 28 of the Agreement. The dispute is brought on behalf of electricians and fitters employed by Manildra Energy Australia Pty Ltd (Manildra) in Bomaderry, NSW.

• [3] The scope of the dispute was narrowed following an exchange of correspondence on 25 March 2024, including in relation to the meaning of "classified rate". For what remains of the dispute, the dispute resolution process has been followed. As the dispute was not resolved by conciliation in the Commission, I now have jurisdiction to deal with the dispute by arbitration.

• [4] The questions for determination, and my answers, are these:

Question 4(a): How is the rate of pay for annual leave calculated pursuant to clause 32.3.1(a) of the Agreement?

Answer: The rate of pay for annual leave in clause 32.3.1(a) of the Agreement is calculated by following these steps:

Step 1: Calculate gross annual earnings for the previous financial year and deduct any amounts paid as annual leave, cashed in RDOs, cashed in annual leave, sick leave bonus payments and any other "extraordinary payments".

Step 2: Deduct the number of weeks of annual leave taken by an employee in the previous financial year from 52.

Step 3: Divide the amount calculated in Step 1 by the number of weeks calculated in Step 2.

Step 4: Divide the amount calculated in Step 3 by 38. This gives an averaged gross hourly rate.

Step 5: Calculate the loaded classified rate in accordance with clause 32.3.1(b) (see answer to Question 4(c) below).

Step 6: Compare the hourly rates ascertained by Steps 4 and 5. The higher of the two is the hourly rate of pay for annual leave. Use this rate for single days of annual leave.

Step 7: Multiply the higher rate of pay (see Step 6) by 38 to obtain the weekly rate of pay for annual leave. Use this rate for one-week blocks of annual leave.

Question 4(b): How is the rate of pay for annual leave calculated pursuant to clause 32.3.2(a) of the Agreement?

Answer: The rate of pay for annual leave in clause 32.3.2(a) is calculated by following these steps:

Step 1: Add the amounts the employee would have been paid if they had worked during the period of their annual leave, including:

1. all‑purpose allowances,
2. loadings paid for all purposes of the Agreement,
3. penalties paid for all purposes of the Agreement,
4. first aid allowance, and
5. any other wages payable under the employee's contract of employment for work in the period of annual leave.

Step 2: From the amount calculated in Step 1, deduct any overtime that would have been worked in the same period (but do not deduct rostered overtime that forms part of the shift worker's ordinary 12‑hour shift roster).

Step 3: Compare the amount calculated in Step 2 with the rate calculated in accordance with clause 32.3.2(b) (classified rate multiplied by 128% multiplied by the number of rostered working hours in the annual leave period) (see answer to Question 4(d) below). The higher of the two amounts is payable for the annual leave period.

Question 4(c): How is the rate of pay for annual leave calculated pursuant to clause 32.3.1(b) of the Agreement?

Answer: Multiply the employee's "classified rate" by 128%. To enable an appropriate comparator with the rate of pay in clause 32.3.1(a), use the hourly "classified rate" for the employee.

Question 4(d): How is the rate of pay for annual leave calculated pursuant to clause 32.3.2(b) of the Agreement?

Answer: Multiply the employee's "classified rate" by 128%. To enable an appropriate comparator with the rate of pay in clause 32.3.2(a), use the classified rate that corresponds to the amount of leave taken. That is, for a single day of leave, use the hourly classified rate. For a one‑week block of leave, use the weekly classified rate.

Question 5: In determining the amount to be paid to a shift worker under each of the clauses referred to above for annual leave taken, does clause 32.6 require the rate payable to be multiplied by 54 or 38?

Answer: Neither. Clause 32.6 does not contain a relevant multiplier. The rate of pay for annual leave is prescribed by clause 32.3.

• [6] The Agreement is a comprehensive single enterprise agreement approved by the Commission on 5 May 2023. The Agreement covers Manildra Energy Australia Pty Ltd (Manildra), its employees at the Bomaderry site in New South Wales, and four unions: the CEPU, the AMWU, the Australian Worker's Union and the Australian Rail, Tram and Bus Industry Union. It has a nominal expiry date of 30 March 2025.

• [7] The Agreement is read and interpreted wholly in conjunction with the Manufacturing and Associated Industries and Occupations Award 2020, the Food Beverage and Tobacco Manufacturing Award 2020, the Rail Industry Award 2020 and the National Employment Standards ("NES"). To the extent that there is an inconsistency between the Agreement and the Awards, the Agreement prevails. To the extent that there is an inconsistency between the Agreement and the NES, the NES prevails.

• [8] Clauses 32.3 and 32.6 of the Agreement are the terms at issue in this proceeding. It is useful to set out clause 32 (annual leave) in full:

32.1 Day work employees shall be entitled to 152 hours annual leave.

32.2 Twelve (12) hour shift employees shall be entitled to 190 hours annual leave.

Where a shift worker is rostered off during a public holiday, that employee shall receive one extra day's annual leave or payment in lieu thereof. This shall not attract annual leave loading in sub clause 32.3.

32.3.1 who is an existing employee as at 1 January 2012, upon taking of annual leave, shall be paid an averaged rate equal to the last financial year's (1 July - 30 June) gross earnings;

(a) For the avoidance of doubt, the annual leave rate is worked out using the following formula:

1. Gross earnings excluding annual leave payments and extra ordinary payments;
2. The number of weeks of annual leave taken by an employee subtracted from 52;
3. Gross dollar figure from step l divided by the nett weeks remaining from step 2;

Extraordinary payments include, but are not limited, to cashed in RDO's, cashed in annual leave, bonus payments for sick leave; or,

(b) paid in addition to their classified rate a 28% loading.

Provided that the employee shall be paid at the highest rate above, but not both.

32.3.2 who is employed after 1 January 2012, upon taking of annual leave, shall be paid, excluding overtime;

(a) the wages worked out on the basis of what the employee would have been paid under this agreement for working the hours during the period of annual leave, including allowances, loadings and penalties paid for all purposes of the agreement, first aid allowance and any other wages payable under the employees contract of employment; or

(b) paid in addition to their classified rate a 28% loading.

Provide that the employee shall be paid at the highest rate above, but not both.

32.4 Annual leave shall be given and taken in accordance with the Annual Holidays Act 1944 (NSW), provided that this results in a better outcome than under the Fair Work Act 2009 (Cth) as amended, otherwise the Fair Work Act provisions apply.

32.5 A day work employee who works ordinary hours on Sundays and Public Holidays as part of a continuous roster shall be allowed an additional 38 hours of annual leave, provided the employee works the continuous roster for the entire year. An employee who works on a continuous roster for part of the year and on a non continuous roster for the remainder of the year shall be allowed additional leave calculated as a pro rata of 38 hours on the basis of the proportion of the year spent working the continuous roster to one year.

32.6 Taking of annual leave for shift workers - shift workers will take annual leave in periods of one shift rotation within one pay week ('Block'). Annual leave taken in a Block will be deducted at 38 hours and paid at 54 hours at the rate of pay set out in clause 32.3 above. If annual leave is taken for a period of less than a Block, it must be taken on a shift by shift basis and can not be less than 12 hours per shift.

For any approved leave taken by an employee the calculation is as follows:

32.7 Employees will not accrue flexi-time whilst on annual leave."

• [9] Clauses 10 and 12 of the Agreement are also relevant. Clause 10 provides for employment under the Agreement to be "by the week" except for employees engaged specifically as casual employees. Clause 12 deals with ordinary hours of work. In relation to shift workers, clause 12.2 says:

(a) The twelve (12) hour shift roster comprises an eight week cycle of twenty eight twelve hour shifts, as detailed below:

(b) The remuneration to an employee shall be averaged over the eight week cycle so that an employee receives payment of 56 hours per week. The average weekly pay is calculated as follows from an eight (8) week cycle:

• Hours at single time 240 ordinary hours/ 8 = 30 hours/week.

• Weekend Hours at double time 80 x 2 / 8 = 20 hours/week

• Single time hours for the two 21st shifts 16/8 = 2 hours/week.

(c) Twelve (12) Hour Shift Workers shall be entitled to a rostered day off in accordance with clause 37.2 of this Agreement."

• [10] Clause 37.2 then deals with rostered days off for shift workers:

"(a) It is understood between the parties that for employees working twelve (12) hour shifts eight (8) rostered days off per year, at twelve (12) hours per day shall be accrued.

(b) In the case of termination the balance of all such accrued hours shall be paid to the employee.

(c) The accrued rostered days off prescribed in clause 37.2 (a) shall be taken as a paid day off provided that the day may be worked where that is required by the Company and such work is necessary to allow other employees to be employed productively or to carry out maintenance outside ordinary working hours because of unforeseen delays to a particular project or a section of it or for other reasons arising from unforeseen or emergency circumstances on a project in which case another day shall be substituted for the rostered day off."

• [11] The principles to be applied in the interpretation of enterprise agreements are well established and were recently summarised by a Full Bench of the Commission in Construction, Forestry, Mining and Energy Union & Ors v Svitzer Australia Pty Limited.[1] It is not necessary to set these principles out in full. In short, the first question is whether the disputed agreement terms have a plain meaning or are instead ambiguous or susceptible to more than one meaning, starting with the ordinary meaning of the words read as a whole and in context. The language of disputed terms is to be construed objectively, having regard to both context and purpose. A narrow or pedantic approach to interpretation is to be avoided. All words of the text should be given some work to do. Where ambiguity is found, evidence of the surrounding circumstances can be admitted, but only to establish objective background facts as they relate to the meaning of the disputed terms. In this regard, post‑agreement conduct may be relevant where it shows a meeting of the minds.

• [12] As is commonly the case for enterprise agreement terms, clause 32 of the Agreement could benefit from clearer drafting. But when read as a whole, and in the broader context of the Agreement, it is not ambiguous or susceptible to more than one meaning.

• [13] Clause 32.1 prescribes the annual leave entitlement of 152 hours for day workers. As day workers work an average of 38 hours per week under the Agreement (clause 12.1), their entitlement is equivalent to 4 weeks annual leave, consistent with the NES (Act, section 87(1)(a)).

• [14] Clause 32.2 prescribes the annual leave entitlement of 190 hours for shift workers. This supplements the day worker's entitlement to 4 weeks annual leave by an additional nominal 38‑hour week of leave so that shift workers benefit from a total of 5 weeks leave each year. Again, this is consistent with the NES (Act, section 87(1)(b)).

• [15] Clause 32.3 sets out how payment for annual leave is to be calculated. It operates in place of what might be described as the standard approach to annual leave loading, such as that found in two of the three underlying modern awards. The interrelationship between annual leave loading and clause 32.3 is both apparent on its terms and from the last sentence of clause 32.2 immediately above.

• [16] To ameliorate the potential for lost earnings during annual leave, clause 32.3 sets the agreed methods for calculating an employee's rate of pay for the purpose of annual leave depending on their circumstances. At a minimum, employees are to be paid at their "classified rate" plus a 28% loading. However, an employee might be entitled to a higher amount if the agreed calculation method works in their favour.

• [17] For employees employed on or before 1 January 2012, the calculation is made by reference to average gross earnings over the last financial year.

• [18] For employees employed after 1 January 2012, the calculation is made by reference to what the employee would have earned during the period of leave excluding unrostered overtime. This concept is reflected in the text of clause 32.3.2 and is referred to in the business as "pay as if you were here". Although denied by witnesses for the CEPU and the AMWU, I am satisfied that the concept is one used by management to communicate with employees about calculating annual leave pay. In this regard, I prefer the evidence of witnesses for Manildra over the evidence of witnesses for the AMWU. Manildra's evidence is also corroborated by notes of bargaining meetings held before the dispute arose where express reference to the concept can be found.

• [19] Clause 32.4 deals with the 'giving' and 'taking' of annual leave by employees. Clause 32.4 seeks to reverse the position in the Act whereby the operation of the Annual Holidays Act 1944 (NSW) is expressly excluded (Act, ss.27-29). It aims to preserve more beneficial aspects of the excluded state legislation for employees covered by the Agreement. What constitutes a "better outcome" for this purpose will generally need to be determined on a case‑by‑case basis if indeed the clause has any operative effect (Act, s.29 and s.109 of the Constitution).

• [20] Clause 32.5 of the Agreement extends eligibility for the 5-week shift worker annual leave entitlement to day workers who work ordinary hours on Sundays and public holidays as part of a continuous roster. Although the ordinary hours of day workers are limited to hours worked between Monday and Friday, clause 12.1(d) of the Agreement envisages that day workers might perform "shift relief work". It is for these employees that clause 32.5 has apparent work to do.

• [21] Dealing then with clause 32.7 before turning to clause 32.6, it is clear on its terms. Under the Agreement, employees do not accrue flexi‑time while they are on annual leave.

• [22] Finally, clause 32.6 is about how shift workers take annual leave. Generally, shift workers are to take annual leave in one-week blocks. When they do, they are to be paid the rate of pay prescribed by clause 32.3 above. Each week of leave reduces their annual leave entitlement by 38 hours. If a shift worker takes annual leave of less than one week, a minimum of 12 hours is both to be taken and deducted from the employee's accrued annual leave balance.

• [23] The following sentence of clause 32.6, and the table at the bottom of the clause, lie at the heart of this dispute. The sentence in dispute says:

"Annual leave taken in a Block will be deducted at 38 hours and paid at 54 hours at the rate of pay set out in clause 32.3 above."

• [24] The disputed table seeks to clarify the position by drawing a distinction between the rate of deduction and the rate of pay for annual leave. Unlike the rate of deduction, the rate at which annual leave is to be paid for shift workers does not rely on the concept of a 38‑hour week and looks instead to what employees work and earn on the shift work roster. The rate of deduction is mostly a practical matter about how leave will be deducted in a way that complies with the NES and the Agreement. This is necessary because, unlike most provisions of the Agreement relating to shift workers, the entitlement to annual leave is expressed in hours and is based on a nominal 38-hour week.

• [25] The CEPU and the AMWU submit that the words "paid at" in clause 32.6 should be read as "multiplied by". However, the phrase "paid at" is used multiple times throughout the Agreement, in clauses 12.1(d), 14.3.2, 19.1, 19.3(b), 20, 21.1(a), 21.2(h), 30.2, 32.3, 32.6, 41.2, 41.3 and 42. In each case, the phrase is used to set a rate of pay for an entitlement, either a specified rate ("the classified rate") or a penalty rate ("double time").

• [26] The meaning of "paid at 54 hours" becomes apparent when regard is had to the roster cycle for shift workers set out in clause 12.2 of the Agreement. In short, for each week in the roster cycle, shift workers are paid an amount equivalent to 54 hours at single time. They separately accrue 2 hours per week toward a rostered day off (clause 37.2), giving a total reward for each week of the roster cycle equivalent to 56 hours' pay.

• [27] Although they are paid for 54 hours of work each week, shift workers are rostered to work average of 42 hours per week. The difference results from the application of penalty rates to some of the hours that fall within the roster cycle.

• [28] Over an 8-week roster cycle, shift workers work 336 rostered hours, accrue 16 hours toward rostered days off and are paid for 432 ordinary hours. The calculation goes thus:

1. Of the 336 hours worked by employees on the roster cycle, 240 are treated as ordinary hours and 96 are treated as double time (rostered weekend work and overtime).
2. 96 hours at double time is the equivalent of 192 hours at ordinary time.
3. Adding 240 ordinary hours to the nominal 192 hours results in a total of 432 hours to be paid at the ordinary rate for each 8-week roster cycle.
4. Dividing 432 by 8 arrives at a weekly average of 54 hours' pay over the roster cycle.
5. Dividing 336 by 8 arrives at a weekly average of 42 hours' work over the roster cycle.

• [29] When the terms of the Agreement are read as a whole, the phrase "paid at 54 hours" in clause 32.6 of the Agreement is simply a reference to the 'rolled up' average weekly rate of pay for shift workers which factors for 54 hours at single time. Or put another way, it is the '54‑hour rate'. Clause 32.6 does not require any independent multiplication of rates of pay for annual leave. Although the 54-hour rate underpins the calculation of annual leave for shift workers, their rate of pay for annual leave is calculated using the relevant formula in clause 32.3 of the Agreement.

• [30] Apart from not being consonant with the text of the Agreement, reading "paid at 54 hours" as "multiplied by 54" is inconsistent with the settled approach to interpretation of enterprise agreements. It leads to the unlikely result that despite having gone to some lengths to prescribe the formula for calculating annual leave rates of pay in clause 32.3 of the Agreement, rates derived from applying those formulas are only the starting point and are then to be multiplied again.

• [31] There is also no apparent rationale for reading into the Agreement a second 54‑hour multiplier on rates of pay already loaded to compensate for work of up to 54 hours per week. Such an approach could have the absurd result (at least in relation to clause 32.3.2(a)) that an employee would be entitled to be paid 54 times their average weekly rate of pay for each week of annual leave.

• [32] In reply submissions, the CEPU and the AMWU put forward an alternative construction of clause 32.6; one that also posits that "paid at 54 hours" requires some multiplication of a rate by 54. However, as explained above, I do not agree that clause 32.6 contains a relevant multiplier.

• [33] Clause 32.6 does not prescribe a rate of pay for annual leave. It does not need to, because that is the purpose of clause 32.3. The purpose of clause 32.6 is to preference the taking of annual leave in one‑week blocks, and to explain the different treatment of annual leave when taken in shift blocks as opposed to individual shifts. It does this by:
  1. providing for the taking of annual leave in one‑week blocks as the default position (shift workers "will take" annual leave in periods of one shift rotation),
  2. confirming the rate of deduction of annual leave from an employee's annual leave balance when leave is taken,
  3. cross-referencing clause 32.3 in relation to how the rate of pay for annual leave for shift workers is to be calculated and confirming that the calculations are underpinned by the average weekly '54 hour' rate of pay, and
  4. in the table at the end of clause 32.6, describing the different (single time) rates of payment and deduction that apply to annual leave depending on when the leave is taken. For leave taken in one‑week blocks, employees are paid the average weekly '54 hour' rate, although only 38 hours is deducted from their annual leave balance. For leave taken in individual shifts, employees are paid according to the value of their shift (for 12, 18 or 24 hours depending on whether the leave falls on a weekday or weekend) and the equivalent rate of deduction is 12 hours (as a minimum, in relation to weekend shifts).

• [34] The dispute is determined by the answers given above.

A Aghazarian for the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU).

J Gordon for the "Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU).

A Moses SC with R Gall of Counsel for the respondent.

[1] [2023] FWCFB 259.

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