s 739 - Dispute resolution

Construction, Forestry and Maritime Employees Union

Application to deal with a dispute - rates of pay for apprentices who were employed at the time of making the Agreement - percentages for apprentices should continue to be applied to the rate of pay initially determined to be the applicable trade rate.

• [1] The Construction, Forestry and Maritime Employees Union (the Applicant) has made an application to the Fair Work Commission (FWC) under s 739 of the Fair Work Act 2009 (Cth) (the Act) to have the FWC deal with an industrial dispute. Specifically, the Applicant is in disagreement with Austal Ships Pty Ltd (the Respondent) over the correct rates of pay for apprentices who were employed by the Respondent at the time of approval of the Austal (Australian Operations) Enterprise Agreement 2023 - 2027 (the Agreement).

• [2] The Applicant was represented by Ms S Sayed who is an employee of the Union and as such permission was not required. The Respondent sought leave to be represented and made submissions addressing s 596(2) of the Act. Given that the Applicant was represented by in-house counsel I accepted that in the interests of fairness the Respondent should be permitted to be represented, pursuant to s 596(2)(c).

• [3] It is not contested between the parties that during the process of bargaining for the Agreement, a proposed agreement was put to employees in November 2022. This proposal failed to secure a majority yes vote. Consequently, the Respondent improved the offer by virtue of including the three percent pay increase found in the first paragraph of clause 18.3 of the Agreement. The Agreement in its current form was then put to the employees and secured a majority yes vote. The Agreement was subsequently submitted to the FWC for approval and was approved by Commissioner Hunt on 20 April 2023.

• [4] As is often the case, the wording of the Agreement often lacks cohesion and precision. One of the issues that arose in early discussions between the parties was the correct rates of pay for employees who were employed at the time of approval versus employees who commenced employment after approval. However, this issue is no longer contested save for the issue of the correct rates for apprentices who move to the next level of pay under their apprenticeship. In terms of the correct rates, the Agreement provides, in clauses 18.2 and 18.3 as follows:

From the Commencement Date of employment, an Employee will be paid at least the minimum pay rate for their classification, as set out in Appendix 1.

Austal will ensure that the minimum pay rates in Appendix 1 meet the Federal Minimum Wage and any relevant Australian Pay Scale at all times during the term of this Agreement.

All current Employees will receive a 3% Increase at the approval of this agreement, backdated to the first business day after voting closes.

On the first pay week from 1 July each year, an Employee will receive an Annual Percentage Increase as below, or CPI, whichever is greater each year over the 4-year agreement; CPI will be calculated using Western Australia/Darwin averaged (March Qtr.)

At around the same time, Austal will further review the actual pay rate of individual Employees, and this review may consider matters including Austal's performance, changes in the economy and the labour market, and the individual Employee's performance. Further adjustment to the CPI increase that is made following this review, if any, is a matter solely within Austal's discretion.

Following each review, Austal will notify Employees of any adjustment that it has decided to make to the wage rates in Appendix 1 and/or their individual pay rates and the effective date of those adjustments."

• [5] Appendix 1 of the Agreement sets out the hourly rates of pay for the various employee classifications covered by the Agreement. However, these are the rates applicable at the commencement of the Agreement and are amended, in effect, by the wage increases provided in clause 18.3. Thus, to determine the actual current rate of pay for an employee it is necessary to begin with the rates in Appendix 1 and amend them according to the increases in cl 18.3.

• [6] The parties agree that what this then does, in practice, is create two sets of rates for each classification. The two sets of rates have been colloquially referred to as "Table 1" and "Table 2." Table 1 sets out the rates for employees who were current employees at the time of approval of the Agreement. As per the first paragraph of cl 18.3, such employees received a three percent increase on the rates in Appendix 1 at the time of approval. Subsequently, such employees then received - or will receive depending on timing - the increases set out in the second paragraph of cl 18.3.

• [7] By contrast, Table 2 sets out the rates for employees who commenced employment after the approval of the Agreement. Such employees are not entitled to the three percent increase in paragraph one of cl 18.3 by virtue of not having been a "current employee" at the time of approval. The rates of pay for these employees are derived from applying the relevant increases in the second paragraph of cl 18.3 to the rates in Appendix 1. The practical effect of these calculations is to create the following:

Table 1: For employees who were current employees of Austal as at 20 April 2023 (Current Employees)

Table 2: For employees who commenced employment with Austal on or after 21 April 2023

• [8] The question before the FWC is what happens to an apprentice who was an employee at the time of approval of the Agreement when that apprentice moves into the next level of their apprenticeship? To illustrate by way of example, a second-year junior apprentice who was employed at the time of approval of the Agreement would have received the three percent increase and moved to a rate of $22.09 per hour. Subsequent to this, the apprentice receives the increase from the first pay week after 1 July 2023 and is thus on $23.42 per hour.

• [9] The apprentice then enters the third year of their apprenticeship. The Respondent claims that the apprentice effectively moves to Table 2 and the third-year apprentice rate of $31.01 per hour. The Applicant claims that the apprentice effectively remains in Table 1 and thus moves to the third-year apprentice rate of $31.94 per hour.

• [10] The Applicant submitted that as existing employees, and to maintain the wage relativities established in clauses 19.3 and 19.5 - which are clauses dealing with the percentages of the applicable trade rate to which apprentices are entitled - apprentices who were current employees as at the time of approval should remain in Table 1 when they moved into a new year level.

• [11] The Applicant noted the principles of interpretation found in AMWU v Berri Pty Ltd [2017] FWCFB 3005 at [114], James Cook university v Ridd [2020] FCAFC 123 (Ridd) at [65] and WorkPac Pty Ltd v Skene [2018] FCAFC 131 at [197]. Drawing from a plain reading of the Agreement, the Applicant then submits that:

1. Apprentices are employees as per the description of an employee as being "employed in one of the classifications in Appendix 1" where Appendix 1 includes apprentices.
2. Clause 19.3 sets out pay rates for Apprentices, being percentages of the applicable trade listed in Appendix 1.
3. The practical effect of the prescribed pay increases on Appendix 1 is that they create the two tables of rates referred to as Table 1 and Table 2.
4. Where an apprentice is eligible for a wage progression as set out in cl 19.3 then if the apprentice is in Table 1 they should remain in Table 1 to ensure they retain the benefit of the three percent increase from paragraph one of cl 18.3 and to maintain their relativity to the applicable trade.

• [12] Witness evidence was provided for the Applicant by Mr William Tracey, Branch Secretary of the Maritime Union Division of the CFMEU in Western Australia. Mr Tracey was not cross-examined by the Respondent. Mr Tracey's evidence was essentially to the effect that apprentices are employed by the Respondent pursuant to the provisions of the Agreement, and that such apprentices as were employed at the time of the making of the Agreement participated in the vote for the Agreement.

• [13] In its submissions the Respondent conceded that apprentices are employees as defined in the Agreement. However, it noted the uncontroversial proposition that in interpreting an agreement, clauses with specific application will prevail over those with general application where there is inconsistency. In keeping with this, given that cl 19 does not deal with the application of the first paragraph of cl 18.3, primacy must be given to the terms of cl 19 in respect of apprentice pay rates.

• [14] The Respondent then provides an assessment of the effect of clause 18.3, specifically that it:

"...makes provision, in effect, for an "approval bonus" to be paid to employees who voted on the occasion when a majority of employees of employees voted in favour of the Agreement. It is plain from its text that Clause 18.3 only applies to employees who were "current employees" at the time of voting.

It is also plain from the text that Clause 18.3 is applied once - on the first business day after voting closes."[1]

• [15] The Respondent further submits that if the FWC was to look at extrinsic evidence with respect to the interpretation of cl 18.3 it could look to the evidence of Mr Mathew Preedy regarding the three percent being solely to attract a positive vote and thus for current employees only. The Respondent also noted the evidence in the powerpoint presentation made by the Respondent to employees as part of the explanation of the Agreement, wherein it claims it was made clear that the three percent would only apply for the first year.

• [16] The Respondent further concedes in its submissions that there are legitimate questions to be considered with respect to the interpretation of cl 18.3, such as the effect of a break in service of a "current employee." It also notes that the clause does not deal expressly with the effect of a change in an employee's - presumably "current employee" - role or classification during the life of the Agreement. Given this, it proposed that such issues as arise from this should be dealt with by applying the principles of construction and noted the principles in Ridd.

• [17] The Respondent submits that applying a purposive approach favours limiting the application of clause 18.3 - I am assuming the reference here is to the first paragraph of that clause - to "current employees" as the intention was to encourage them to vote in favour of the Agreement. The Respondent further submitted that such an approach suggested that a "current employee" who left employment but later returned under a new contract of employment should not receive the benefit of the three percent.

• [18] The Respondent then goes on to deal with the issue of apprentices. It submits that the purpose of the three percent increase was to promote a positive vote. Given this, it should apply to current employees in respect of their employment as it stood at the time of voting. As such, any change to the employee's employment - such as a change in role or classification - would mean the three percent is no longer relevant. Such a change is part of an apprentice's progression through the levels in the apprenticeship which are achieved via either reaching an annual milestone or displaying competencies. It is also conceivable that the apprentice may reach the age of 21 during the course of the apprenticeship, meaning that their percentages change from those in cl 19.3 to those in cl 19.5.

• [19] The Respondent also postulates the scenario where an apprentice concludes their fixed term employment as an apprentice and is then offered a new position with the Respondent under a new contract of employment. It submits that all of the scenarios canvassed are removed from the purpose of clause 18.3 and its application at the time of voting. In addition, it submits that the approach for which it contends has the effect of more rapidly harmonizing the rates of pay for all apprentices, which it submits is a favourable outcome.

• [20] Witness evidence for the Respondent was provided by Mr Mathew Preedy - Head of Production for the Respondent. Mr Preedy was not cross-examined by the Applicant. Mr Preedy's evidence went mainly to his recollections and subjective intentions regarding the three percent increase provided by paragraph one of cl 18.3. Some of this evidence went to the notion that the three percent was a "one off" and a bonus of sorts. It is unclear as to exactly how Mr Preedy saw the three percent applying after the first year.

• [21] However, the parties have agreed that the three percent forms part of the rates in Table 1 and so this issue is no longer relevant in the broad sense. With respect to how the three percent would apply in the case of an employee moving between roles / classifications, Mr Preedy says that the Respondent did not model or calculate how it would apply in those circumstances.[2]

• [22] At hearing, the Applicant submitted that apprentices who were employees at the time of approval of the Agreement are entitled to the same benefits of other employees - such as tradespersons - who were also employed at that time. This was submitted to be the case notwithstanding that apprentices might be regarded as fixed term as opposed to ongoing employees. The Applicant says that the three percent increase provided for in paragraph one of cl 18.3 does not distinguish between permanent and fixed term employees and has equal application to both.

• [23] The Applicant noted there was some lack of orthodoxy in that the wording of the Agreement had resulted in the two tables being created out of the single set of rates in Appendix 1. However, it submitted that there was no consequence to this because it occurs as a result of the proper interpretation of cl 18.3.

• [24] In response to my questioning about why an apprentice who was a "current employee" had a wage progression should not move in effect from Table 1 to table 2, the Applicant submitted that the apprentice in question was part of a cohort of employees, being those paid under Table 1. As such, the apprentice would be receiving a percentage of the rate of the appropriate tradesperson in Table 1, rather than the same tradesperson in Table 2. Given this, the "applicable trade" for the purposes of cl 19.3 has been established, and it is the applicable trade rate in Table 1. This was so even though cl 19.3 refers to the applicable trade in Appendix 1 because in practice and effect Appendix 1 splits into two tables.

• [25] At hearing the Respondent clarified its position to be that the starting point for determining the rate of pay for an apprentice is the provisions of clauses 19.3 and 19.5. Despite there being slightly different wording with regard to the trades rate, the Respondent submitted that the two clauses have the same effect. Specifically, and consistent with long-established principle, the apprentice rate is a percentage of a tradesperson rate.

• [26] In the case of the Agreement, the Respondent submits that it is the tradesperson rate in Appendix 1 that must be used, as per the wording of cl 19.3 and the logical operation of cl 19.5. However, as per paragraph three of cl 18.3, the actual rate of pay of tradespersons doing the same role could potentially vary. For clarity, the provisions of that paragraph are as follows:

"At around the same time, Austal will further review the actual pay rate of individual Employees, and this review may consider matters including Austal's performance, changes in the economy and the labour market and the individual Employee's performance. Further adjustment to the CPI increase that is made following this review, if any, is a matter solely within Austal's discretion."

• [27] Given this potential disparity in rates, the Respondent says that the clauses 19.3 and 19.5 can only be taken to be referring to the tradesperson rate in Appendix 1. The Respondent concedes that the parties have agreed that the effect of the operation of cl.18.3 is that the rates as set out in Appendix 1 have been increased and that there are in fact two sets of rates, being Table 1 and Table 2 as set out in [7] above.

• [28] However, the Respondent submits that the three percent increase in paragraph one of clause 18.3 does not amend the stated rates of pay in Appendix 1 of the Agreement. It says that is because the three percent increase does not apply to all employees. What it did instead was to increase the individual rates of pay for those employees who were employed at the time of approval. I questioned the Respondent on this assertion and it submitted that the increases in July of each year do amend Appendix 1 because they apply to all employees. However, because the three percent increase in paragraph one of cl 18.3 does not apply to all employees, it does not apply to Appendix 1.

• [29] The Respondent seeks to buttress this submission by drawing upon the final paragraph of cl 18.3, which states as follows:

"Following each review, Austal will notify Employees of any adjustment that it has decided to make to the wage rates in Appendix 1 and/or their individual pay rates and the effective date of those adjustments."

• [30] The Respondent submits that this suggests that the amendment of Appendix 1 is thus to the general pay rates or the individual pay rates. As such, when an apprentice moves up a level it is to the amended rates in Appendix 1 - which in this case means the rates in Table 2. In effect, the Respondent submits that the rates in Table 1 are individual rates, and thus not relevant other than to the individuals concerned and then only in the role they held at the time of approval.

• [31] The Respondent went on to submit that in fact the three percent increase in paragraph one of cl 18.3 did not change what it called the "architecture of the Agreement" - which I take to be Appendix 1 - because that provision was added into the Agreement after the first vote failed to secure a majority. Given this, it does not impact the general pay rates in the Agreement albeit that it may impact individual employees' rates.

• [32] I questioned the Respondent on this issue as it appeared to me that the distinction it was drawing between paragraphs one and two of cl 18.3 was potentially artificial. The Respondent drew again upon the provisions of paragraphs three and four of cl 18.3 to suggest that the July reviews were distinguishable from the three percent in paragraph one of cl 18.3 and that those reviews impacted upon Appendix 1 as per paragraph four. The Respondent also submitted that the notion of "current employees" receiving the three percent when they change levels was never contemplated by the Agreement because the three percent was included to secure a majority yes vote and the wording of the Agreement was not otherwise amended to deal with situations such as apprentices being entitled to a wage progression.

• [33] In its oral reply submissions the Applicant rejected the notion that the increases in paragraph two of cl 18.3 amended Appendix 1 but the increase in paragraph one of the clause did not. The Applicant submitted that the three percent in paragraph one of cl 18.3 was payable to employees who were employed at the time of approval and that three percent remained part of the payrate thereafter, there being no mechanism in the Agreement to remove it.

• [34] In the first instance, I will address what I regard as some inaccuracies in the Respondent's submissions. At [14] above I have outlined the Respondent's assessment of the operation of cl 18.3. I note that the Respondent speaks of "employees who voted" as being eligible for the three percent increase provided for in paragraph one of cl 18.3. I do not believe this is correct. The wording of the clause speaks of current employees at the approval of the Agreement receiving the three percent. It is entirely possible that an employee commenced employment after the vote but prior to approval of the Agreement. In my view such an employee would be entitled to the three percent increase.

• [35] Turning to [15] I note that the Respondent claims that the material provided in the powerpoint presentation makes it clear that the three percent increase was "only for the first year." The actual wording of the slide in question is as follows:

"1. All receive 3% increase and CPI for the first year.

2. CPI (WA and Darwin averaged) or whichever is greater, as below:

• [36] I am not convinced that this wording when considered as a whole can be said to suggest that the 3% was only for the first year and as such could disappear thereafter, which I took to be the point of the Respondent's submission. I am inclined to the view that it should be taken to mean that the additional three percent applied only in the first year. As such in that year the employee gets CPI or the agreed minimum plus the three percent. In subsequent years it would only be CPI or the agreed minimum.

• [37] Having dealt with those two points, I now turn to the heart of the matter before me. In considering the submissions put by the parties, I think it is likely that the framers of the Agreement document did not turn their minds to the issue before me with any great level of diligence. That may well have been as a consequence of the three percent provided for in paragraph one of cl 18.3 only appearing at the very end of the negotiation process. However, I do not regard that three percent increase as having any less standing than any other provision in the Agreement by virtue of its late inclusion. I did raise this issue with the Respondent at hearing because it appeared to me that some of its submissions might be said to be seeking to downplay the three percent provision. However, the Respondent indicated that this was not the case.

• [38] I am then left to consider the fate of the three percent for apprentices who have a wage progression. In doing so I have paid particular attention to the wording of the Agreement as there is little relevant extrinsic material available to assist. I find that Respondent is correct to say that the rate for apprentices is derived from the applicable trade rate in Appendix 1. This is clear from the wording of clauses 19.3 and 19.5. I should add at this point that I concur with the Respondent that despite the different wording, those two clauses should be regarded as having the same intent with respect to Appendix 1.

• [39] However, Appendix 1 does not - as agreed between the parties - set out the actual rates payable to employees, other than in one case which I will deal with below. Instead - again as agreed between the parties - there are two sets of rates created by the practical effect of cl.18.3. These two sets of rates are represented by Table 1 and Table 2 as seen at [7] above. It is at this point that the parties diverge on the nature of the Tables. The Applicant's position is that there are two clear tables created from Appendix 1, both of equivalent standing, and an employee who is in Table 1 should remain in that table even if their classification changes.

• [40] The Respondent says that in effect Table 1 does not amend Appendix 1 because the increases do not have general effect but rather apply only to a select group of employees, being those defined as "current employees". However, Table 2 should be regarded as an amendment to Appendix 1 that has general effect because this is consistent with the wording of the third and fourth paragraphs of cl 18.3. Table 1 is thus aimed at individuals and the three percent increase provided for in paragraph one of cl 18.3 should be regarded as an individual increase. Given this, where an apprentice who was a "current employee" has a wage progression, the Agreement directs that the rate will be the applicable trade rate in Appendix 1 which should be regarded as the rate in Table 2 as this is the only generally applicable rate table created by the operation of cl 18.3.

• [41] For the reasons set out below, I do not accept the Respondent's characterisation. Firstly, I am not convinced that there should be a distinction of the kind envisaged by the Respondent drawn between the effect of paragraph one of cl 18.3 and the effect of paragraph two. In the first instance, the wording of both clauses directs that the increases will apply to employees. It does not direct that the increases will apply to the rates in Appendix 1. I note that neither does it refer to Tables 1 and 2 but this is not significant as those tables are creations of the operation of the Agreement rather than provisions of it. However, I am not convinced that the Respondent's assertion about some increases applying to the Appendix and another not applying by virtue of one being individual increases, and the other group increases, finds any support in the wording of the first two paragraphs.

• [42] Nor does it find support in paragraphs three and four. It is clear from the wording of those paragraphs that they are directed to pay reviews that the Respondent might make independently of the obligations it has to make the increases in paragraphs one and two. The outcome of these reviews is stated to amend Appendix 1 - as per the wording in paragraph four - however this amendment is only with respect to the reviews conducted. It does not direct the Respondent to amend Appendix 1 to reflect the increases in paragraphs one and two but merely the reviews (if any) conducted pursuant to paragraph three of cl 18.1.

• [43] I am also not persuaded by the Respondent's argument that the rates in Table 1 do not have general application whereas the rates in Table 2 do have such application. I think that the notion of general application is in fact misleading. When the Agreement was approved, the reality is that it immediately created the effect of the two tables. An employee who was a "current employee" would be entitled to one rate (which includes the three percent) and an employee who commenced employment the day after approval would be entitled to a different rate. This different rate would have been the actual rate stated in Appendix 1 until such time as that rate was amended by the operation of the 1 July 2023 wage increase.

• [44] As such there were two rates applying effectively from day one. I do not see how the second rate - being Table 2 - can be said to be the only one to have general operation when it clearly does not apply to any employee entitled to the benefits of Table 1. Table 2 does not have general application but rather application only to a certain group of employees, who would in all likelihood still be very much in the minority today. For the above reasons I am not satisfied that the Respondent's argument about the practical effect of Table 1 and Table 2 is correct.

• [45] However, I have further cause to reject the Respondent's view on how an apprentice with a wage progression should be treated. Specifically, I am persuaded by the Applicant's notion that an apprentice is entitled to a percentage of the applicable trade rate, consistent with the wording of both clauses 19.3 and 19.5 (noting again my comments on cl 19.5 at [38] above). For an apprentice who was a "current employee", the applicable trade rate was established at the approval of the Agreement to be the trade rate found in Table 1. Having determined the applicable trade rate, I can find nothing in the Agreement that suggests that this applicable trade rate should change for any reason. In fact, it would be in my view somewhat unorthodox to have a scenario where an apprentice - absent any specific provision to the contrary - continues in the same trade, but the trade rate that had been established to be the applicable rate to which the apprenticeship percentages were applied is changed.

• [46] Given the above, I am satisfied that the operation of the Agreement works to create Table 1 and Table 2. Both tables should be accorded equal standing as setting minimum rates payable to the two relevant groups of employees. An apprentice who has had their applicable trade rate determined to be a rate in Table 1 should continue to have their apprenticeship percentages applied to that rate.

• [47] I should note two observations arising from the consideration above. In the first instance I note I have not relied upon the notion that the three percent, once granted, cannot be removed. Having found as I have above with respect to apprentices, I do not need to address this contention. However, it may be that it has some relevance in other matters, such as an employee moving classifications from - for example - a storeperson to a senior storeperson. My findings in this matter do not seek to provide any guidance with respect to such a scenario. Secondly, they do not address a scenario where an employee who was a "current employee" leaves their employment but subsequently returns.

• [48] As a consequence of my findings above, I am satisfied that an apprentice who was a "current employee" was entitled to be paid a percentage of the applicable trade rate in Table 1 upon approval of the Agreement. Having established this as the applicable trade rate for the purposes of clauses 19.3 and 19.5, where such an apprentice has a wage progression, the Respondent must continue to apply the relevant apprenticeship percentage to this applicable trade rate in Table 1.

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[1] See Respondent submissions page 2 paragraphs 6-7.

[2] See witness statement of M Preedy page 2 paragraph 16.

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