Employees in management categories A - E may voluntarily have their salary rates offset by the provision of non-award employment benefits agreed to in writing by the employer and the employee. The amount after the offset is the salary rate of the employee."
13 The respondent's argument was straightforward - as long as cl 34 applied to the managers, the calculation of the payment for unused long service leave was governed by cll 3 and 9. This result followed because cl 34-3.1 expressly stipulated that the rate of payment was to be "Full pay" and this expression was defined in the award in cl 3, relevantly by reference to the award rates set out in cl 9.
14 The Union, on the other hand, submitted that the construction of the award was altered by the introduction of TEC salary packaging.
15 The TEC salary packaging concept was made available for category C, D and E managers from 1 October 1994 and for category A and B managers from 1 October 1995. The components of a TEC salary package were:
1. Notional / superannuation salary.
2. Cash benefits (Cashtec).
3. Concessional lending.
4. Motor vehicle.
5. Petrol.
6. Superannuation.
16 Each of the components was valued and items 3 to 6 could be taken in kind or in cash. "Notional / superannuation" salary seems to have been set initially at the award rate then being paid, but was in due course to amount to 65% of the total package. The benefit of TEC salary packaging for the respondent was that it gave a fixed value to the cost of employment. The benefit to the managers was that it permitted the cashing out of unused benefits such as the provision of motor vehicles or concessional lending. Thus, managers who, for instance, were entitled to a concessional loan but did not utilise the benefit, before TEC salary packaging, simply forwent the value of it. Under TEC salary packaging that benefit was valued and could be taken either as a concessional loan or in cash.
17 The introduction of the new system involved an agreement between the Union and the respondent, a consent variation to the award, an individual written offer by the respondent to each manager and an individual written acceptance by each manager of the package applicable to that manager.
18 The agreement between the Union and the respondent was contained in a Memorandum of Understanding executed on 20 December 1994 by the respondent and on 21 December 1994 by the Union. It provided, so far as is relevant, as follows:
"1. INTRODUCTION
The purpose of this memorandum is to record the understandings reached between ANZ and the FSU about the introduction of Total Employment Cost (TEC) Remuneration Packaging for Managers, Category A to E, as the basis for an application to the Australian Industrial Relations Commission to vary by consent the ANZ Group Award, as set out in Attachment 1 to this memorandum.
2. AVAILABILITY OF TEC
TEC will be available for Managers Category C, D and E with effect from 1 October, 1994, and for Managers Category A and B from 1 October 1995.
…
6. PERSONNEL (DOMESTIC) POLICIES
ANZ and FSU note that a number of matters from which Managers Category A to E accepting TEC will be exempted by the operation of clause 48 Exemption, of the ANZ Group Award, will instead be subject to ANZ personnel (domestic) policies.
…
ANZ Personnel (Domestic) Policies will replace specific Award provisions for Managers accepting TEC as follows:
Clause 7. Graded salaries and job evaluation
…
Clause 9. Salary rates"
19 In consequence of the agreement reflected in the Memorandum of Understanding the award was varied by consent on 24 January 1995 with retrospective effect from 22 December 1994. The variation included the addition to cl 48 of the following:
"This award does not apply to employees who are designated Management Category A to E under this award, who sign a written acceptance of Total Employment Cost salary packages, except as to the provisions of clauses …34 - long service leave …"
20 The respondent produced a booklet designed as a guide to the TEC salary packaging system and, generally, distributed it to managers. Each manager was given a letter of offer in which the manager was invited to accept the TEC salary package. Those who desired to accept the TEC package were required to sign a letter of acceptance.
21 The guide was a thick booklet with about 60 pages and some fairly complex explanations, which were inevitable given the nature of the subject matter. The booklet explained the policy leading to the introduction of the system, set out the components of the package, and explained how to calculate the value of each component.
22 The guide seems to reflect a view of the respondent that unused long service leave would not be paid out at the rate of the full value of the TEC salary package. For example, in the guide for Group 4 managers dated October 1994, the use of the concept of notional / superannuation salary is explained. In the text of the explanation is a rectangle bounded by black lines containing the word "Important" in bold by way of a heading. Under the heading are several paragraphs which include the following:
"Retirement, resignation or redundancy benefits, including pay in lieu of annual leave, long service leave or retiring allowance, accrue only on the Notional / Superannuation Salary amount. They do not accrue on the TEC Package value or any amount of Cash Benefit which is paid in lieu of unused benefits."
23 The guide explains the role of the award under the TEC salary packaging system as follows:
"Award Clauses and domestic policies for TEC Packaging are as follows:
ANZ Group Award
You will be covered by the following clauses detailed in Clause 48 (Exemption) of the ANZ Group Award if you accept TEC Packaging:
…
· Clause 34 Long service leave
…
Domestic Policies
Personnel domestic policies will replace the following ANZ Group Award clauses. ANZ and FSU have agreed that these policies will not fall below the minimum set in the ANZ Group Award:
· Clause 7 Graded salaries and job evaluation
…
· Clause 9 Salary rates
…"
24 The letter of acceptance form contained an acknowledgment that the signatory had read the relevant guide booklet and the letter continued, relevantly, as follows:
"I further acknowledge and understand that:
· I will forgo my entitlement to Rostered Days Off, overtime, incentive payments (as defined in clause 6.3 of the ANZ Enterprise Agreement 1994-95) and other ANZ Group Award provisions as detailed in Clause 48 (Exemption) of the ANZ Group Award.
· Domestic personnel policies will replace a number of Award provisions as specified in the Memorandum of Understanding on the Introduction of Total Employment Cost Packaging for Managers, Category A to E.
· Retirement, resignation and termination benefits will accrue on my Notional / Superannuation Salary amount, and any Cash Benefit I receive is in lieu of unutilised benefits."
25 In the light of this description of events it is convenient to return to the arguments of the parties.
26 The respondent contends that the variation of cl 48 did not render cll 3, 7 or 9 inapplicable. Because cl 48 preserved cl 34 for managers who accepted TEC salary packaging, cll 3, 7 and 9 continued to have an operation as a result of the reference to them in cl 34-3.1. In the result, the award provision for payment of unused long service leave was to be calculated at the award rates set out in cl 9. By reason of the contractual arrangements between the respondent and individual managers who accepted the TEC salary package, the respondent was obliged to pay out unused long service leave calculated at the rate of notional / superannuation salary. But payment of this rate was not an award entitlement.
27 The Union contends that cl 9 became irrelevant under TEC salary packaging and was not intended by the parties to have any function. The notion of a salary rate was replaced by the value of a TEC salary package. Clause 34 was retained. But it was retained for a specific and limited purpose. It governed the entitlement to take long service leave during employment, and also the entitlement to be paid out on termination for any unused part. The meaning of "Full pay" in cl 34-3.1 was pay at the rate of the full value of the TEC salary package. To link the calculation of "Full pay" to the award rate would be to return to the system which had been discarded by the TEC salary packaging concept.
28 In my view the correct construction of the award is the construction contended for by the Union.
29 The form of the consent variation to cl 48 is significant. It makes the entire award inapplicable to the specified employees and then proceeds to stipulate particular savings. That form of expression had the effect of rendering cll 3, 7 and 9 inapplicable to these managers and left the meaning of "Full pay" to be determined by reference to the circumstances in which the managers were remunerated, namely, by reference to the value of the TEC salary package.
30 This construction also reflects the Memorandum of Understanding which recorded the basis upon which the award variation was to be made by consent. The Memorandum of Understanding stated that cll 7 and 9 of the award would be replaced for managers accepting the TEC salary packages. That result was to be achieved by the form of award variation which was annexed to the Memorandum of Understanding and which became the variation made by the Australian Industrial Relations Commission in January 1995. The Memorandum of Understanding contemplated that the Personnel (Domestic) Policies would replace cl 9. In fact, the quantum of each managers remuneration was governed by the applicable letter of acceptance. There was no relevant change made to the policy document. The lack of any change is, however, immaterial. The significant factor was that the Memorandum of Understanding envisaged that cl 9 would no longer apply.
31 In arriving at this view I have taken into account the fact that some officers of the respondent responsible for producing the guide apparently had a view that the value of the TEC salary package was not prescribed by the award as the basis for calculation of the termination payment for unused long service leave. But, however they arrived at their view, a more reliable indication of the meaning of the award as varied by consent is the direct expression of the intentions of the parties to the agreement to vary the award, which intentions are expressed in the Memorandum of Understanding.
32 The respondent argued that cl 48 could not have a literal operation. The award would not work if, for instance, the definitions in cl 3 did not apply. There would be no explanation of who was referred to by the word "Employer" or "Union" or "Commission" in the award. Yet, on the Union's argument, cl 3 does not apply because it was not expressly saved in cl 48.
33 In my view cl 3 did not have any operation in relation to the managers. The definitions contained in cl 3 are not necessary for the proper understanding of the award provisions which are saved by cl 48. The terms "Employer", "Employee", "Union" and "Commission" had a meaning in the context of the Memorandum of Understanding which did not depend upon a specific definition in the award. On the other hand the parties intended that the definition of "Full pay" in cl 3 was to have no application to managers. For these reasons it was not the intention of the parties to preserve cl 3 in relation to managers.
34 Even if this approach is wrong, and cl 3 was preserved, it is clear that the parties intended that cl 9 would have no application to managers. Consequently, the reference in the definition of "Full pay" to cl 9 was not intended to apply to managers.