s.739 - Dispute resolution

Construction, Forestry and Maritime Employees Union

Dispute arising under enterprise agreement - dispute determined

• [1] The Construction, Forestry and Maritime Employees Union (CFMEU) has made an application under s 739 of the Fair Work Act 2009 (Act) and the dispute resolution procedure in clause 9 of the Solaris Paper Pty Ltd Enterprise Agreement 2024-2027 (2024 Agreement). The application referred to the Commission a dispute that has arisen between the CFMEU and Solaris Paper Pty Ltd (Solaris) about the meaning and effect of certain provisions of the Agreement. Earlier this year I conducted a conciliation conference at which no agreed outcome was reached. I offered to express a view to the parties at a second conference and they agreed. My proposal was to effectuate an expeditious process whereby I would convey my view after receiving concise summaries of the parties' arguments. As it transpired, the parties proceeded to file rather extensive submissions, as well as evidence, more in keeping with a formal arbitration process. I nevertheless confined my role to the one originally contemplated, which was to convey a non-binding view, having considered the parties' materials.

• [2] On 25 June 2025, I issued a statement of some 5 pages, setting out my view on the competing interpretations of the parties. That view was that, for the reasons set out in my statement, the interpretation of Solaris was the preferrable one. My expectation was that by issuing the statement I would quell the dispute, but that did not occur. The CFMEU asked for the dispute to be arbitrated pursuant to clause 9 of the 2024 Agreement. The parties filed further submissions, substantially in alignment with their earlier submissions but raising certain additional matters. Further evidence was filed. I heard the matter on 21 November 2025. My decision in arbitration of the dispute is as follows.

• [3] The 2024 Agreement was approved by the Commission on 5 March 2025 and commenced operation on 12 March 2025. The dispute concerns the meaning and application of two clauses. One is clause 12.2.2(a), which provides for a wage increase that is stated to be effective from the first full pay period on or after 14 April 2024, and payable once the agreement is approved. The other is clause 13.5, which provides for a 'wage maintenance' allowance, formerly known as the 'cost of living allowance', together with a mechanism for that allowance to be phased out. Prior to the 2024 Agreement, the allowance was provided to employees on a discretionary basis. This resulted in employees receiving more pay than that which was prescribed by the previous enterprise agreement, the Solaris Paper Pty Ltd Enterprise Agreement 2021-2024 (2021 Agreement). The CFMEU contends that clause 12.2.2(a) requires Solaris to back pay employees a 3% wage increase in respect of the period from April 2024 to the commencement of the 2024 Agreement in March 2025. Solaris contends that employees have already been paid the wages prescribed by the 2024 Agreement for that period, because of the past payment of the allowance. The company further contends that the retrospective wage increase in clause 12.2.2(a) was a notional one only, and that the allowance phase out mechanism in clause 13.5 operates to absorb or offset that increase.

• [4] Clause 12.2 is headed 'Payments and Wage Increases'. Clause 12.2.1 concerns a one-off sign on bonus of $3000. Wage increases are dealt with in clause 2.2.2, which reads as follows:

a) A 3% wage increase effective from the first full pay period on or after 14 April 2024 but paid in the first full pay period on or after approval of this Agreement by the Fair Work Commission;

b) A 3% wage increase payable from the first full pay period on or after 14 April 2025;

c) A 3% wage increase payable from the first full pay period on or after 14 April 2026.

Refer to Appendix 1 and 2 - wage tables for the applicable rates for each classification level under this Agreement.'

• [5] Appendix 1 and Appendix 2 of the 2024 Agreement contain tables that set out the applicable hourly rates for each classification of employees. The rates appear in three columns under the headings '2024', '2025' and '2026'. Atop each column there appears the figure '3%'. Appendix 1 relates to classifications under the Timber Industry Award. Appendix 2 relates to classifications under the Manufacturing and Associated Industries Award. Before each of the two tables, the following words appear: 'A wage increase shall apply from the first pay period to commence on or after the anniversary of the Commencement Date as follows...'

• [6] Clause 13.5 of the 2024 Agreement reads as follows:

(a) Initially called the Covid allowance and referred to as the Cost of Living allowance from 2023 onwards, it is hereon (sic) referred to as a 'Wage Maintenance'.

(b) The Wage Maintenance held a value of $350 AUD per week.

(c) This clause solely applies to employees covered under the previous Solaris Paper Pty Ltd Enterprise Agreement 2021-2024. This clause will not apply to employees who have joined Solaris Paper Pty Ltd from expiry of the Solaris Paper Pty Ltd Enterprise Agreement 2021-2024.

(d) The Wage Maintenance will first be absorbed through any changes in employee classification and annual increases in hourly rates as well as shift allowances. As an employee's classification is changed and the base and shift hourly rates increase, the Wage Maintenance will reduce first, until it ceases altogether.'

• [7] The CFMEU submitted that the plain words of clause 12.2.2(a) entitle employees to a 3% wage increase with effect from 14 April 2024, payable in the first full pay period after approval of the 2024 Agreement. It said that the clause imposes an obligation on Solaris to increase employees' wages by 3%, from 14 April 2024, which must connote an obligation to pay employees backpay. It contended that clause 13.5(d) provides no basis for Solaris to refuse to pay the backpay, because the clause states that the allowance will be absorbed by the wage increases; it does not state that the wage increases will be absorbed by the allowance. The CFMEU further contended that clause 13.5 provides for the payment of the wage maintenance allowance prospectively, not retrospectively, and there are no retrospective allowance payments that are capable of being 'absorbed' by the retrospective wage increase in clause 12.2.2(a).

• [8] Solaris submits that the retrospective wage increase in clause 12.2.2(a) is a notional increase because it is subject to the mechanism in clause 13.5 that absorbs or offsets the wage maintenance allowance. It contends that the clauses in dispute need to be read in context, which requires one to have regard to the surrounding circumstances. The wage maintenance allowance had previously been paid to employees on a discretionary basis. The 2024 Agreement then incorporated the allowance but provided for it to be phased out by absorption against the wage increases provided under the 2024 Agreement. These increases were 3% for each of 2024 (the previous year), 2025 and 2026. Solaris said that there was no reason why the retrospective wage increase should be excluded from the phase out arrangements in clause 13.5. The company further submitted that employees were paid at or above the prescribed rates of pay for 2024 that are set out in the Appendices to the 2024 Agreement as a consequence of being paid the cost of living allowance at that time. Solaris contended that in substance, the retrospective wage increase for 2024 was paid, and that it did not have to be paid twice.

• [9] Solaris further submitted that the payments that employees would receive under the new agreement were explained to them in individual letters prior to the making of the 2024 Agreement. The letters stated that the cost of living allowance had been implemented during a time of hardship in July 2022 for a 12 month period, but that the company had decided to continue these payments while the 2024 Agreement was being negotiated. The letters said that the allowance would be gradually 'absorbed through the change of classifications and annual increases to hourly rate and shift allowance', and that 'the table below outlines how this will work in your case.' The letters then set out individualised payment tables which showed the employee's current hourly rate and classification, their new classification, and their hourly rate for years 1, 2 and 3 of the agreement. The letter sent to Laz Glumac, for example, showed that for year 1 (2024), his hourly rate of pay would be $29.15. This is the rate prescribed by Appendix 1 of the 2024 Agreement. The tables also identified the fortnightly 'CoL Allowance' (cost of living allowance, i.e. the wage maintenance allowance), which reduces after each wage increase; the 'total fortnightly pay'; and the 'actual wage increase' after each of the 3 wage increases. In the case of Mr Glumac, and many other employees, the actual wage increase for 2024 was zero. The only reference to back pay in the letters appears in text beneath the wage tables, which states: 'When your hourly rate increases your overtime hourly rate and associated allowances will increase and be back paid where applicable'.

• [10] Solaris said that the CFMEU's interpretation of the 2024 Agreement ignored the context of clause 13.5, which addressed the history of the allowance, and overlooked the purpose of the phase out mechanism in clause 13.5(d), which was explained to employees in the letters. It said that the retrospective wage increase applied to the agreement rate of pay, and that employees had already received more than this amount for 2024, because of the discretionary allowance payments they received. Solaris submitted that the phase out mechanism in clause 13.5(d) operated not just prospectively but also retrospectively, because the clause states that the allowance will be absorbed through the annual wage increases, and one of these increases is retrospective.

• [11] In response, the CFMEU said that Solaris sent its letters to employees before a copy of the final 2024 Agreement had even been distributed to them and that therefore the letters were not relevant. It contended that although the letters and the payment tables made no reference to backpay of wages for the 2024 year, this had simply been an omission, and the letters did not purport to be a complete statement of all of the benefits that employees would receive under the new agreement. The CFMEU adduced statements from 7 employees who said that after receiving their letters, they expected to be provided with more information about how much backpay they would be receiving if the agreement were voted up.

• [12] The CFMEU further contended that the extrinsic material relied on by Solaris could not be used to displace the plain meaning of the words in clause 12.2.2, which were clear in their requirement that the company pay a wage increase of 3% with effect from 14 April 2024, which in turn required backpay to be made in the first pay period after the 2024 Agreement came into operation. The CFMEU said that the meaning of clauses 12.2.2 and 13.5 was not ambiguous and therefore there was no need to have recourse to extrinsic materials such as the individual letters to employees, but that in any event these materials did not assist Solaris, and that the Commission should conclude that employees are entitled to backpay of a 3% wage increase effective from 14 April 2024.

• [13] The CFMEU's interpretation is consistent with a literal reading of the text. Clause 12.2.2(a) provides for a 3% wage increase effective from 14 April 2024, and states that it will be paid in the first pay period after approval of the agreement. The 2024 Agreement commenced March 2025. On its face, the clause requires a retrospective wage increase that must be paid to employees. Further, clause 13.5(d) states that the wage maintenance allowance will be absorbed through wage increases. It does not state that wage increases will be absorbed by the wage maintenance allowance. The absorption mechanism therefore appears to work in the 'wrong direction' for the company's argument. And, read literally, clause 13.5 does not provide for any retrospective wage maintenance allowance payments that would be capable of being 'absorbed' by the retrospective wage increase in clause 12.2.2(a). On this reading, Solaris was required to pay the 2024 wage increase by way of backpay in the first pay period after commencement of the 2024 Agreement. But in my view, although this interpretation is perhaps the most immediately apparent one, a closer analysis of the context and surrounding circumstances leads to the conclusion that clause 12.2.2(a) does not entitle employees to backpay for wages in respect of 2024.

• [14] Clause 12.2.2(a) is a part of a provision that explains the increases to wage rates that employees will receive under the 2024 Agreement. The first of these is in respect of the past. A 3% increase is set for each year. But the actual payments that employees must receive are set out in the Appendices. The last paragraph in clause 12.2.2 advises the reader to refer to the Appendix 1 and 2 wage tables for the applicable rates of pay for each classification. It is not in dispute that from 14 April 2024 until the commencement of the 2024 Agreement, employees' pay reflected amounts that met or exceeded these hourly rates, because of the payment of the cost of living allowance. This is not only an undisputed fact, but a notorious one that is part of the background against which the 2024 Agreement was made. In my view, clause 12.2.2(a) should properly be understood as meaning that there is a 3% increase to hourly rates pay, as per the Appendices; that these rates have had practical effect from 14 April 2024, which was the nominal expiry date of the 2021 Agreement; and that these rates of pay will be payable under the 2024 Agreement (rather than on a discretionary basis) once it is approved. To my mind, this is the preferrable, and the industrially sensible, interpretation. It cannot be the case that employees who were in fact paid at or above the prescribed hourly rates for 2024 should now receive backpay in respect of those same prescribed amounts.

• [15] The CFMEU submitted that the payment of the cost of living allowance in 2024 could not count as wages under the 2024 Agreement because the allowance was a different type of payment, and that while in 2024 employees had been paid this special allowance, they had not yet received their new, higher wages. I do not accept this. The allowance was a top up to wages, the original rationale for which was a response to cost of living pressures. In my view, the 'allowance' was in the nature of wages. It was not a special payment appropriated to a particular incident of employment (see the summary of the principles of setoff in Four Yearly Review of Modern Awards [2015] FWCFB 6656 at [60]). The purpose of the allowance was evidently to provide higher take home pay. It was a payment that was in substance part of an employee's wages, even though it was called an allowance and paid on a discretionary basis.

• [16] A further indicator that no backpay is contemplated for the 2024 year is the statement in the Appendices that 'a wage increase shall apply from the first pay period to commence on or after the anniversary of the Commencement Date'. No increase is stated to occur on commencement of the agreement's operation. Here the reference is evidently to an actual wage increase, rather than the notional increase that is found in clause 12.2.2(a). The CFMEU said that, unless backpay was intended by clause 12.2.2(a), no useful work could be given to the words 'paid in the first full pay period on or after the approval of this Agreement'. But in my view, read in the context of the Appendices and the surrounding circumstances, including the fact that employees actually received the higher pay required by the Appendices, these words mean that the higher hourly rates that were previously afforded to employees on a discretionary basis are now considered to be the agreement rate of pay. Future increases will build upon them. Further, if certain employees had not already received pay that met the prescribed hourly rates in the Appendices for 2024, they would have a claim to it under clause 12.2.2(a).

• [17] If the 3% 'retrospective' wage increase was a nominal one, as the company contends and I accept, why refer to it at all? Because the discretionary cost of living allowance (now called the wage maintenance allowance) was to be imported into the 2024 Agreement and thereby regularised. The CFMEU's log of claim had sought that the allowance be incorporated into the base rate of pay at each classification level. One beneficial effect of this was that it filled what would otherwise have been a gap in the wage structure of the 2024 Agreement. The last wage increase under the 2021 Agreement had occurred in April 2023. The 2024 Agreement would not be approved until March 2025. By having an agreement rate of pay for 2024, the rates of pay for 2025 could be applied to that rate, rather than the 2023 rate of pay under the 2021 Agreement. Employees thereby gained something tangible. While the discretionary allowance was paid, it would not affect future wage increases. But under clause 12.2.2(c), the past increase for 2024 was built into the wage structure.

• [18] If the 3% increase in wages for 2024 had already been made, why did the text of the Agreement not explicitly say so? It would have been preferable to do so. But it was not necessary, because the simple fact remains that the wage tables prescribed the pay rates for 2024, and employees were paid at or above these rates.

• [19] Much of the debate between the parties focused on the meaning and effect of clause 13.5. In my view, Solaris has complied with obligations under clause 12.2.2(a). It does not need to rely on the wage maintenance phaseout provision in clause 13.5. Nevertheless, in my view that provision confirms that the 2024 wage increase was a notional one. Clause 13.5 explains the history of the allowance (clause 13.5(a)), its past value (clause 13.5(b)), and the fact that the continuing significance of the allowance, pursuant to clause 13.5, is confined to employees who were employed under the 2021 Agreement. Clause 13.5(d) then states that the wage maintenance will be 'absorbed' through changes in employee classification (some employees were to be reclassified) and annual increases in hourly rates and shift allowances; and that as an employee's classification and hourly rate increases, the wage maintenance will reduce until it ceases altogether. Clause 13.5(d) interacts with all of the wage increases in clause 12.2.2, including the notional, 'retrospective' one for 2024. For that year, the 'wage maintenance allowance' that has already been paid will be 'absorbed' by the notional increase for 2024. For 2025 and 2026, the wage maintenance will be absorbed by future increases to wage rates. The language is clumsy. It would be more natural to say that the 2024 wage increase will be offset against the allowances payments that were made that year, and that the increase for 2025 and 2026 would absorb the wage maintenance. But this in my view is what the clause means. Incorporating the cost of living allowance into the base rate of pay for the new agreement, as the CFMEU had sought, would entail regularising the 2024 payments as a retrospective increase in the base rate, which would then be the reference point for wage increases for 2025 and 2026. The fact remains that in 2024 employees were paid more than the 'total fortnightly pay' shown in the individual letters that were sent to employees, which reflected the rates prescribed by Appendices 1 and 2 of the 2024 Agreement.

• [20] It is important to note that Solaris did in fact provide certain backpay to some employees, for 2024, in respect of overtime and shift allowances, as foreshadowed in the letters that were sent to employees. The CFMEU contended that this fact sat uneasily with Solaris's insistence that clause 12.2.2(a) was not intended to provide for backpay. It is not clear to me on what basis the company made these payments. Perhaps it believed that the payments were required by clause 12.2.2(a), because they had not already been paid, and because they were not part of the phase out arrangements in clause 13.5(d). However in my view clause 12.2.2(a) does not require backpay. It required wages reflecting a 3% increase in the agreement hourly rate to be paid with effect from 14 April 2024. And they were. Had these rates not been paid, then Solaris would have been obligated to rectify this.

• [21] The interpretation of an enterprise agreement requires consideration of context and purpose. A critical point of context in this matter is that prior to the making of the 2024 Agreement, employees were being paid more than that which was required by the rates of pay in the 2021 Agreement. Their wages under the 2021 Agreement had been topped up by the discretionary wage maintenance allowance. An evident purpose of the 2024 Agreement was to incorporate the allowance into the new agreement, but also to gradually phase out the allowance, while at the same time increasing the wages that would be payable pursuant to the terms of the 2024 Agreement. How this would work was explained to employees in the letters that were sent to them before the vote. These letters identified the hourly rate for year 1 (2024), year 2 and year 3, and distinguished this from the 'actual wage increase' that employees would receive. The letters explained that the company had been generous in continuing to pay the wage maintenance allowance beyond the 12 month period originally envisaged, and that for current employees the allowance would be absorbed through increases to the hourly rate under the 2024 Agreement. Neither the 2024 Agreement nor the explanatory letters make any reference to backpay for wages in respect of 2024. Solaris's construction of the disputed provisions is in keeping with the letters which were sent to employees.

• [22] The CFMEU contends that the letters were simply silent on backpay of wages, but I find this to be improbable. This would have been a major benefit, and a real incentive for employees to vote in favour of the agreement. Further, the language of the letters suggest that they provide a comprehensive summary of the proposed new agreement. The letters state that they 'outline the changes that Solaris Paper is proposing' to the 2021 Agreement. They are intended to identify, if not all the benefits, then at least the key benefits, and reasons why employees should vote for the company's proposed agreement. Backpay would be a substantial additional benefit. But there is no mention of backpay for wages in respect of 2024. The only mention of backpay is in respect of overtime and associated allowances where applicable. The explanatory letters that Solaris sent to employees were clear about what payments they would receive under the new agreement. The tables in the letters distinguished between hourly rates of pay for each year of the agreement, including the past year, and the 'actual wage increase' that employees would receive in each year. For many employees there would be no actual increases. All employees would however receive the $3000 payment, in two instalments.

• [23] I note the CFMEU's contention that the individual letters was sent to employees before they received a copy of the 2024 Agreement. The letters could therefore not be regarded as part of the explanatory processes required of the employer by s 180(5) of the Act. But they are in my view nevertheless relevant to the consideration of the surrounding context. They explained to employees the terms of the employer's proposed offer. They were sent in the context of long-running bargaining where an earlier agreement had been voted down and management had met with employees to discuss the terms of a revised offer.

• [24] The CFMEU contended that an earlier draft agreement that was rejected by vote of employees contained a version of clause 13.5(d) which had the phase out arrangements in the 'correct direction' for the company, that is, the clause stated that Solaris could set off wage increases under the agreement against the wage maintenance. The CFMEU said that Solaris was attempting to resurrect a version of clause 13.5(d) that had been rejected by the workforce. I disagree. The previous version of clause 13.5(d) was also ambiguous. For one matter, it did not spell out that the retrospective wage increase could be set off against past payments of the wage maintenance allowance.

• [25] The disputed provisions are poorly drafted. However, the Appendices in the 2024 Agreement are clear about the rates of pay to which employees were entitled for 2024. Employees were paid amounts that met or exceeded those rates. I do not consider that clause 12.2.2(a) requires Solaris to backpay employees for wages in respect of this period.

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