Dixon v Broadlex Cleaning Australia Pty Ltd

REASONS FOR JUDGMENT 1 The applicant, Robert Arthur Dixon, has brought this proceeding against his former employer, Broadlex Cleaning Australia Pty Limited ("Broadlex") (i) for the imposition of and recovery of a penalty for breach of a term of an award pursuant to s 178(5) of the Workplace Relations Act 1996 (Cth) ("the WR Act"); (ii) for the payment to him of sums in respect of recreation leave that were not paid to him and interest thereon under s 178(6), s 179 and s 179A of the WR Act; and (iii) in the accrued jurisdiction of this Court, for unpaid long service leave entitlements and for interest thereon under s 51A of the Federal Court of Australia Act 1976 (Cth). For practical purposes as I will later indicate it is only the recreation leave and long service leave claims that are of any moment in this proceeding. 2 I should also indicate at the outset that the proceeding is, in form, a representative one, the group members being former employees of Broadlex who (as with Mr Dixon) were employed as cleaners at the Russell Hill Offices of the Department of Defence in the Australian Capital Territory. 3 As a matter of convenience I will consider each of the claims separately, though I should preface that consideration with a brief factual narrative. Factual Setting I 4 Mr Dixon has worked as a cleaner at the Russell Hill Offices from 1974 to 30 June 1998. His employment, initially, was with a government department. When the cleaning work was contracted out in 1983 he then took employment with the then contractor referred to in this proceeding as Kennedy. On 1 February 1990 he began employment with Grassia's Investments Pty Ltd ("Grassia"), that company having been awarded the cleaning contract on the termination of Kennedy's. His employment with Grassia continued until 2 April 1995 when Grassia's contract terminated. On 3 April 1995 he commenced employment with Broadlex, it being the successor contractor to Grassia. That employment was terminated on 30 June 1998. Mr Dixon's claims arise from that termination. The Recreation Leave Claim 5 From the time of his employment with Kennedy until 27 February 1997, Mr Dixon was employed under the provisions of the Caretakers, Cleaners and Lift Drivers (ACT) Award 1982 ("the 1982 Award"). 6 Clause 23(a)(i) of that Award insofar as presently relevant provided: " CL23 - RECREATION LEAVE (a) (i) In addition to the public holidays specified in this award, an employee shall be entitled to leave of absence on full pay for a period equal to four working weeks for each continuous twelve months' service (less the period of recreation leave) with his or her employer. Employees on shift work, employees who are required to work in accordance with a roster on Sunday and holidays, and caretakers shall, on completion of each twelve months' service, be entitled to leave of absence on full pay for a period equal to five working weeks exclusive of public holidays. … 'Shift work' means a shift on which an employee is rostered to commence before 6.30am or rostered to finish after 8.00pm." It is conceded that Mr Dixon was a shift worker for the purposes of this award. 7 In 1996 the Cleaning (Building and Property Services) (ACT) Award was made ("the 1996 Award"). The award was declared to be the common rule operative from 27 February 1997. It was on that date, apparently, that Mr Dixon's employment became subject to its provisions. 8 Clause 6.5.1 of that Award provided a new definition of "shift work" that would not have applied to Mr Dixon's employment circumstances. He, as previously, commenced work at 6.00 am. The cl 6.5.1 definition provided (inter alia): "6.5.1(a) A full-time employee rostered for duty to start before 6.00 a.m. and/or finish work after 6.00 p.m. on any day, Monday to Friday inclusive, shall be paid the early morning or afternoon shift worker rate of pay as set out in Schedule A of this award. … 6.5.1(c) Afternoon shift shall mean a shift which finishes subsequent to 6.00 p.m. and at or before 1.00 a.m." 9 Though the 1996 Award superseded the 1982 Award it contained a savings provision for "existing employees". Clause 1.7.2(a) ("the savings clause") provided: "1.7.2(a) No employee previously engaged under the Caretakers, Cleaners and Lift Drivers (A.C.T.) Award 1982, (as amended) shall suffer a reduction in wages and/or conditions as a consequence of the introduction of this award. No employer shall constructively terminate an employee with a view to circumventing the application of this clause." 10 It is agreed that if, by virtue of the savings clause, Mr Dixon's employment was and remained subject to cl 23 of the 1982 Award, he was entitled to five weeks' recreation leave, but that if he could not invoke or continue to invoke the savings clause during his employment with Broadlex, he was only entitled to four weeks' recreation leave, this being the entitlement given by cl 7.1.1 of the 1996 Award. The parties are in dispute as to the operation of the savings clause. Conclusion 11 I mean no disrespect to counsel in not expressly outlining their submissions. The matter in issue is the construction to be given to the savings clause of the 1996 Award. In my view its meaning is clear and unambiguous and its manner of application to the present circumstances free from doubt. 12 Clause 23 of the 1982 Award was a "condition" of Mr Dixon's employment at the time of "the introduction of [the 1996] award". As a "consequence of the introduction" of that Award he would, but for the savings provision, have no longer been entitled to five weeks' recreation leave. His entitlement would have been only to four such weeks. This difference arose from the new basis upon which recreation leave was awarded under the 1996 Award. Mr Dixon in consequence "suffered a reduction in … conditions". And so the requirements of the savings clause were satisfied. That clause saved his 1982 Award cl 23 condition. 13 While seemingly now accepting that such was the case for the period until Mr Dixon actually became entitled to five weeks' leave after the 1996 Award took effect, the respondent submits that the savings clause did not operate thereafter. The submission, seemingly, is based on the proposition that, as cl 23 contains a condition precedent to an entitlement to an actual five week period accruing (ie completion of twelve months' service), the only possible entitlement the savings clause could work on was that that was being "earned" when the 1996 Award took effect. 14 The savings clause does not speak of "accrued entitlements". It speaks of "conditions". Clause 23 was a condition that Mr Dixon was entitled to have applied to him. That his actual enjoyment of recreation leave depended upon the satisfaction of a condition precedent is quite irrelevant. Clause 23 gave him the right to such leave as and when he satisfied its condition. For the purposes of the savings clause that was enough to attract its operation. 15 Mr Dixon is entitled to succeed in his application on this part of his claim. He is as well entitled to interest on whatever might prove to be the sum that is required to be paid by Broadlex to him. It is clear that Broadlex has already made some payment in partial satisfaction of its liability. The Long Service Leave Claim 16 Mr Dixon's claim here raises a question of construction of the Long Service Leave Act 1976 (ACT) ("the Act"). The original scheme of this Act required a private sector employer to grant long service leave to its employees who had served a qualifying period of continuous service with that employer. The Act did, though, accommodate two situations in which, notwithstanding a change of employment, an employee's service would be treated as if with one employer. 17 The first of these, s 10 of the Act, dealt with the transmission of a business. That section provided: "10. Where, before or after the date of commencement of this Act, a business is transmitted from 1 employer to another and a person who was, immediately before the transmission, an employee of the first employer becomes, immediately after the transmission, an employee of the second employer - (a) the period of service of the employee shall be deemed not to have been interrupted; and (b) the period of service of the employee with the first employer shall be deemed to be service with the second employer." I would merely note that this section did not purport to impose directly any liability on the second employer for long service leave. It simply aggregated times for the purpose of computing the employee's period of service, leaving it to the provisions of the Act to indicate whether any liability had arisen in respect of that period in a given instance. 18 The second situation related to employment in associated companies. Section 11 of the Act provided: "Service with associated companies 11. Where, over a continuous period, an employee has been employed by 2 or more companies each of which is an associated company, the employee is entitled to long service leave as if he or she had, during the whole of the period of service, been employed by the company by which he or she is employed at the date at which his or her long service leave accrues." Of this I would note the section is a liability imposing, and not merely a time aggregating, one. 19 In 1987 the Act was amended to include yet a third situation in which multiple employments would be treated as if with a single employer. The new s 10A - which is the provision in present dispute - provided: "10A. (1) Where - (a) a contract for the supply of services by 1 party to the contract (in this section called "the first contractor") on behalf of the other party to the contract (in this section called "the principal") has been discharged; (b) the principal enters into another contract with a person other than the first contractor for the supply of those services on its behalf by that other person (in this section called "the second contractor"); (c) that other contract imposes an obligation on the second contractor to the effect that, so far as practicable, the second contractor shall employ, in supplying those services, persons whose employment with the first contractor ceased because of the discharge of the first-mentioned contract; and (d) pursuant to that obligation the second contractor employs such a former employee of the first contractor; this section applies to that former employee. (2) Where this section applies to a person, the aggregate of the periods of service by the person for the first contractor and the second contractor shall, for the purposes of this Act, be taken to be 1 period of service for the second contractor." 20 Turning to the present scheme of the Act, s 3 provides for an employee's long service leave entitlement in the following terms: "3. (1) An employee who has completed a period of 10 years of service with his or her employer is entitled to long service leave in respect of that period. (2) An employee is entitled to long service leave in respect of each consecutive period of 5 years of service completed by the employee after the expiration of the tenth year of service. (3) An employee's entitlement to long service leave in respect of a period of service accrues to the employee at the expiration of that period." 21 Section 6 deals with the employer's obligation once that entitlement accrues. Section 6(1) provides: "6. (1) Long service leave to which an employee is entitled under this Act shall be granted by the employer - (a) as soon as practicable after the leave has accrued, having regard to the needs of the employer's establishment; or (b) at such other time or times as are agreed by the employer and the employee. Penalty: (a) if the offender is a natural person - 50 penalty units; (b) if the offender is a body corporate - 250 penalty units." 22 Section 7 prescribes the rate of remuneration to be paid for long service leave. Section 11A permits an employee to take pay in lieu of long service leave where leave has accrued but has not been fully taken and the employment has ceased. It provides: "11A (1) For the purposes of this section, the long service leave credit of a person is the amount of long service leave that has accrued to the person less the amount of long service leave granted to the person. (2) Where - (a) a person's employment ceases for any reason; and (b) the person had a long service leave credit immediately before the employment ceased; the employer shall pay the amount ascertained in accordance with subsection (3) - (c) to the person; or (d) if the person is dead - to the legal personal representative of the deceased person. (3) The amount payable is an amount that is equal to the amount of ordinary remuneration that, but for the cessation of employment, would have been payable by the employer under section 7 to the person for a period of service equal to the period of the person's long service leave credit immediately before the cessation of employment. (4) For the purposes of subsection (1), long service leave is to be taken to have accrued in respect of any uncompleted period of 5 years service that commenced immediately after the expiration of the last period of service in respect of which long service leave accrued to the person in the same proportion as the number of years or months of service completed bears to 5 years." 23 Section 11C provides for pro rata payment on account of long service leave in certain circumstances. The section provides: "11C (1) Where - (a) a person's employment is terminated - (i) by the person because of illness or incapacity or a domestic or other pressing necessity of such a nature to justify the termination; (ii) by the person upon or after attaining the minimum retiring age; (iii) by the death of the person; or (iv) by the employer for a reason other than the person's serious and wilful misconduct; and (b) the person had completed a period of service in that employment of not less than 7 years but less than 10 years; the employer shall pay the amount ascertained in accordance with subsection (2) - (c) to the person; or (d) if the person is dead - to the legal personal representative of the deceased person. (2) The amount payable is an amount that is equal to the amount of ordinary remuneration that, but for the cessation of employment, would have been payable by the employer to the person for a period of service equal to the period that bears to 2 months the same proportion as the number of years or months of service completed by the person bears to 10 years." The point to be emphasised in this is that this provision deals with that period of service (ie up to 10 years) that gives rise to an employee's first entitlement to long service leave with an employer. Pro rata payments thereafter with that employer (subject to s 10, s 10A and s 11) are governed by s 11B. It provides: "11B (1) In this section - "period of ineligible service", in relation to a person, means a period of service of not less than 1 year but less than 5 years that commenced immediately after the expiration of the last period of service in respect of which long service leave accrued to the person. (2) Where - (a) a person's employment ceases for any reason; and (b) the person had completed a period of ineligible service in that employment; the employer shall pay the amount ascertained in accordance with subsection (3) - (c) to the person; or (d) if the person is dead - to the legal personal representative of the deceased person. (3) The amount payable is an amount that is equal to the amount of ordinary remuneration that, but for the cessation of employment, would have been payable by the employer to the person for a period of service equal to the period that is ascertained by multiplying 1/5 of a month's leave by the number of years or months of service completed by the person in the period of ineligible service referred to in paragraph (2)(b)." Factual Setting II 24 I have referred already to Mr Dixon's employment, first with Kennedy, then with Grassia, and finally with Broadlex. 25 A version of the Broadlex contract (sufficient for present purposes) has been put in evidence. It was a composite of three parts. These are (i) a request for tender ("the RFT"); (ii) Special Conditions of Contract - Part A; and (iii) General Conditions of Contract. 26 Clause 26 of the RFT information stated, in part, that: "Tenderers should be aware that the Australian Liquor, Hospitality and Miscellaneous Workers' Union has a policy of endeavouring to protect job continuity for its members employed by contract cleaners. Prospective tenderers should consider consultation with the Union as to intentions in regard to employment levels." 27 Clause 22 of the General Conditions of Contract, in language redolent of s 10A(a) of the Act, provided: "(a) If: (i) the services supplied under this contract are the same as those supplied under a contract ("the first contract") which has been discharged; and (ii) the parties to the first contract were the Commonwealth and a person ("the outgoing contractor") other than the Contractor; then (iii) within three days of being notified in writing it is the successful tenderer, the Contractor must inform all persons employed under "the first contract" of that fact; and if (iv) any person, whose employment with the outgoing Contractor will cease because of the discharge of the first contract, notifies the Contractor in writing within 7 days after the date referred to in paragraph (iii) that he or she wishes to be employed by the Contractor; the Contractor must, subject to sub-clause (b), employ any such person. (b) Where the Contractor: (i) has, at the date it is notified that it is the successful tenderer, surplus cleaning staff or supervisors with spare capacity to perform all or any of the work tendered for; or (ii) requires less persons to perform the Contract than were previously employed under the first contract, the Contractor will only be required to employ that number of persons falling within paragraph (a) iv as are necessary to perform the Contract and of that number only that many persons that are required in the event of the Contractor, having surplus cleaning staff or supervision. (c) In the event that sub-clause (b) applies such that all or any of the persons referred to in paragraph (a) iv are not to be employed, those persons will be notified of that fact within three days of the Contractor so deciding. (d) In observing the provisions of this clause the Contractor is not acting as an agent of the Commonwealth." 28 I would note in passing that it is conceded that the services supplied under the Broadlex contract were the same as those supplied under the Grassia contract. Broadlex, though, does not concede that the provisions of s 10A of the Act are otherwise satisfied by the terms of the Broadlex contract. 29 Part of the Grassia contract was put in evidence by the respondent Broadlex. This consisted, first, of the Commonwealth's letter of acceptance of Grassia's tender. This letter stated (inter alia): "This acceptance is subject to terms and conditions contained herein and attached hereto and also to the General Conditions of Contracts for Performance of Cleaning Services to the Department of Administrative Services (Contract form 'B')." The other contractual documents tendered were again incomplete, with notably the General Condition of Contracts etc referred to in the letter being missing. Nonetheless, of the documents tendered one set of "Special Conditions" made reference to "Continuity of Employment". In language anticipating that of the Broadlex contract, it stated: "7 CONTINUITY OF EMPLOYMENT: The Federated Miscellaneous Workers' Union has a policy of endeavouring to protect job continuity for its members employed by contract cleaners. Contractors should consider consultation with the Union as to intentions in regard to employment." 30 In the absence of the General Conditions, Broadlex called Ms Warren who, as Contract Manager for the Australian Property Group, let the Broadlex contract to tender. She took up her position while the Grassia contract was on foot in 1993. It was her evidence that the General Conditions were in a standard form; had been in use for quite some time prior to her taking up her position in 1993; and were subject only to minute amendment over time. 31 Finally it was Mr Dixon's evidence that, on the termination of his service with Kennedy, he was paid out on account of long service leave. Conclusion 32 Again I can be relatively brief. The respondent's submissions are twofold. The first challenge to its liability to pay on account of long service leave is that the Broadlex contract was not a s 10A contract in that it did not impose on Broadlex an obligation, "so far as practicable", to employ Grassia employees whose employment ceased because of the discharge of the Grassia contract. The second and alternative challenge was that the Kennedy contract no less than the Grassia contract was a s 10A one; that Grassia had in consequence an obligation to pay Mr Dixon long service leave on termination of his employment, he by then having about 12 years' service with Grassia by virtue of s 10A (ie 7 years with Kennedy and 5 years with Grassia); and that the Act did not transmit that obligation to Broadlex. In other words, Grassia alone was liable to pay what under s 11C (sic) and/or s 11B of the Act it was obliged to pay on the termination of Mr Dixon's employment. Broadlex accepted responsibility to pay Mr Dixon for such pro rata entitlement as he had for his 3 years' actual service with it. Broadlex was not responsible for the period for which Grassia was liable to pay. 33 As to the s 10A submission, I am of the view that it lacks substance. It is, in essence, a claim that, to the extent that cl 22(b)(ii) reserves to Broadlex a double discretion (ie (i) to determine the number necessary to perform the contract; and (ii) to determine the number of Grassia ex-employees it needs, given its own surplus cleaning employees), it does not impose an obligation "so far as is practicable" to employ Grassia employees. 34 Practicability for s 10A purposes involves at least a consideration of (a) the state of, and use to be made of, Broadlex's own workforce; and (b) the requirements of the contract and its efficient and economical performance. The statutory provision does not require Broadlex simply to sacrifice itself or its own employees. Considered in this light, I am unable to see the vice in cl 22(b)(ii) pointed to by Broadlex. In exercising the discretions given by the provisions Broadlex is, in all probability, obliged to act in good faith: cf Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349; Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903. I would add that no argument was addressed to me suggesting in any way that the provisions of cl 22(b) were invalid for any reason. 35 The concessions made in cl 22 to Broadlex to consult its own interests in the matter of engaging Grassia staff are so circumscribed and are so adapted to the intendment of s 10A of the Act, as to allow cl 22 properly to be characterised as a provision falling within the requirements of s 10(1)(c) of the Act. As I have previously noted the parties agree that the contract provides for the same services as the Grassia contract. I conclude then that s 10A of the Act applies so as to allow an employee's period of service with Grassia to be aggregated with that with Broadlex. 36 The second submission, which is founded on Grassia's alleged liability to Mr Dixon, has a superficial attraction. But it is one that cannot survive the language of the Act itself. 37 Section 10A deals only with determining periods of service. It does not deal directly with the liability either for long service leave or to make pro rata payment for such leave. It is the terms of the Act as they apply to the circumstances of a given case that do that. 38 Broadlex's case is that the Grassia contract, no less than the Broadlex contract, was one that attracted s 10A. I am for present purposes prepared to assume such was the case. The consequences of that assumption are first that, applying s 10A, Mr Dixon's employment with Grassia for long service leave entitlement purposes was about 12 years; and, secondly, that on Grassia's termination of Mr Dixon's employment Grassia was obliged to make payments to Mr Dixon under s 11A (for the unpaid 3 years of the first 10 years) and s 11B of the Act (for the 2 year balance). I am further prepared to assume that s 10A can be applied cumulatively where there is, as in the assumption I am making, a sequence of contracts. If, of course, either of these assumptions is incorrect then s 11C applies to make Broadlex liable for the period of Mr Dixon's actual service with Grassia and Broadlex. 39 The short question is whether that obligation on Grassia in any way affected Broadlex when Broadlex terminated Mr Dixon's employment. Mr Dixon's case is that his period of actual service with Grassia was 5 years, and that with Broadlex 3 years. For that 8 year period of service, s 11C provides an entitlement to pro rata payment. The period of employment with Kennedy is irrelevant as it has been paid for. In any event, it is said that even if Grassia had the obligation to Mr Dixon that Broadlex contends for, that is irrelevant to the scheme of the Act. Section 10A merely aids in the determination of periods of service. Sections 11C and 11B determine an employer's liability for the period of service. Neither section contemplates or admits of apportionment in the manner Broadlex suggests. 40 For my own part I reach the same conclusion as that submitted by Mr Dixon, though not for the same reasons. For the purposes of s 11A a person who through 10 years' service has accrued 2 months' long service leave, but who has not taken all of that leave, must give credit for the leave taken when being paid by the employer on cessation of employment on account of his or her remaining credit: s 11A(3); and see Explanatory Statement, Long Service Leave (Amendment) Ordinance 1987, re s 7. Where that 10 years results from service aggregated via s 10A and where in respect of some part of that service (as in the present case) a pro rata payment has been made on account of long service leave: s 11C; then consistently with the intendment of s 11A, that payment must be brought into account, when the employer is required to make payment under s 11A on account of accrued long service leave. 41 The bases on which pro rata payments are to be made when a long service leave entitlement has not accrued: cf s 3 of the Act; are prescribed in s 11C and s 11B and these are related to periods of service (including such periods as result from the application of the provisions of s 10 and s 10A of the Act). In the setting of the Act it is clear that the "periods of service" referred to in these sections for which payment is to be made are periods for which the employee has not already been awarded his or her long service leave entitlement or has not received pro rata payment in respect of long service leave: cf the language of s 11A(1). It would be startling if it were otherwise. In other words Mr Dixon must give credit for payment received on account of his service with Kennedy irrespective of whether he is being paid under s 11A, s 11B or s 11C. 42 Applied to the assumption I have made, while the aggregate of Mr Dixon's service applying s 10A to the Grassia and Broadlex contracts is about 15 years, the unpaid period is 8 years being the period of actual service with Grassia and Broadlex. As I have indicated, Mr Dixon's evidence which I accept is that he received payment from Kennedy for long service leave on account of his service with that company. For the remaining 8 year period Broadlex is, by virtue of s 11A (for 10 years but giving credit for 7 years) and s 11B (for almost 5 years), liable to pay Mr Dixon. 43 Neither section (or for that matter s 11C) admits of the apportionment of the liability to pay between different employers. Rather the one employer is made liable for the employee's period of service for which payment is to be made. Having said this, it probably is the case (on the assumption I am making) that Grassia was obliged to make s 11A and s 11B payments to Mr Dixon on termination of his employment and that Mr Dixon could have sought recovery from him. Whether Broadlex would be entitled in such circumstances to seek contribution from Grassia, given its own liability under the Act for the Grassia period, is a matter on which I refrain from expressing any view. The question does not arise in this application. No application was made to join Grassia. 44 The above conclusion is sufficient to dispose of this claim. For that reason I refrain from making a positive finding on whether the Grassia contract attracted the operation of s 10A. On the view I take, whether or not s 10A applies to that contract, Broadlex is obliged to make a pro rata payment to Mr Dixon for the period of actual service with Grassia and Broadlex. Interest 45 Section 179A of the WR Act and s 51A of the Federal Court of Australia Act 1976 are relevantly identical in the power given to award interest up to judgment. Although a discretion is given under each Act as to the rate of interest to be applied, the usual practice of this Court in applying s 51A(1) is to adopt the rates of interest applied by the Supreme Court of the State or Territory in which this Court is dealing with the matter: see generally H K Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795. In the present circumstances I would adopt that practice in relation to interest on the long service leave entitlement money found to be due. As a matter of convenience and consistency, I would apply the like rates to the recreation leave claim money found to be due. The Penalties Claim 46 Though claimed in the application, no evidence was directed towards this particular claim, nor were oral or written submissions made in relation to it. Subject to such submissions being made in relation to this claim on my making orders in relation to the other claims - I have given the parties the opportunity to address the matter - I foreshadow that the penalties claim will be dismissed. Orders 47 I direct the parties to bring in minutes of order giving effect to these reasons and to any order made in relation to the penalties claim. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.