Hansen Yuncken Pty Ltd v Andreas Costopoulos

Supreme Court Act 1970 s 94 LEGISLATION CITED : Industrial Relations Act 1996 s 106 s 107 s 188 Workplace Relations Act 1996 (Cth) s 52 s 170LZ Blackley v Devondale Cream (Vic) Pty Ltd (1968) 117 CLR 253 Burgess and Ors v Mount Thorley Operations Pty Ltd [2003] NSWIRComm 432 Costopoulos v Hansen Yuncken Pty Limited [2003] NSWIRComm 335 CASES CITED : Hudson v Qantas Airways Ltd (1985) 10 IR 331 Knowles v Anglican Property Church Trust (No 2) (1999) 95 IR 380 Metal Trades Industry Association of Australia v The Amalgamated Metal Workers' and Shipwrights' Union and Others (1983) 152 CLR 632 State Rail Authority Firefighters Award 2001 Re (2002) 122 IR 13 Telstra Corporation Limited v Worthing (1999) 197 CLR 61 HEARING DATES: 08/06/2004 DATE OF JUDGMENT: 08/31/2004

APPELLANT Mr A Britt of counsel Solicitor: Mr D Murray The Master Builders Association of NSW LEGAL REPRESENTATIVES: RESPONDENT Mr J H Pearce of counsel Solicitor: Ms R Mallia Construction Forestry Mining & Energy Union

JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION FULL BENCH CORAM: WRIGHT J, President BOLAND J STAFF J Tuesday 31 August 2004

HANSEN YUNCKEN PTY LTD v ANDREAS COSTOPOULOS Application by Hansen Yuncken Pty Ltd for leave to appeal and appeal against a judgment of Justice Kavanagh given on 6 November 2003 in matter no IRC 3868 of 2001 JUDGMENT OF THE COURT [2004] NSWIRComm 249

1 This is an application by Hansen Yuncken Pty Ltd ("the appellant") for leave to appeal and, if leave is granted, an appeal against the judgment and orders of Kavanagh J of 11 June 2003 in which her Honour found that the employment contract entered into between the appellant and a former employee, Mr Andreas Costopoulos ("the respondent"), had operated unfairly in circumstances where the employment of the respondent was terminated and appropriate notice was not given by the appellant: See Costopoulos v Hansen Yuncken Pty Limited [2003] NSWIRComm 335.

2 Pursuant to s 106 of the Industrial Relations Act 1996 Kavanagh J ordered that the contract of employment between the appellant and the respondent be varied and the appellant pay to the respondent 12 months' payment as to notice of termination calculated at the respondent's "full salary package rate" from 20 February 2001. Orders were also made in relation to interest and costs.

3 Mr Costopoulos had been employed by the appellant as a construction worker/builder's labourer for some 23 years. On 20 February 2001 his employment was terminated. The reason given for the termination was lack of work. Upon termination, the respondent was paid certain monies in relation to outstanding employment entitlements in the sum of $2,880. He was also paid $13,916.70 from a Redundancy Trust contributed to by his employer during his employment. At the time of the termination an enterprise agreement (the Hansen Yuncken Pty Ltd NSW/CFMEU Partnership Agreement - "the Agreement") certified by the Australian Industrial Relations Commission ("AIRC") and a federal award (the National Building and Construction Industry Award 1990 - "the Award") made by the AIRC applied to the respondent's employment. The Agreement and Award both contained extensive provisions relating to classifications and wages, redundancy and termination of employment. The Agreement provided that: 4.5 RELATIONSHIP TO THE AWARD

This agreement is to be read in conjunction with the parent Award: the National Building and Construction Industry Award (NBCIA) (December 1996). Where the agreement is silent on rates of pay and conditions, allowances and other matter pertaining to employment, the Award will apply. Where there is conflict between the agreement and the Award, the provisions of the agreement will apply to the extent of any inconsistency.

4 Subsequent to the termination of his employment the respondent sought relief pursuant to s 106 of the Act. The summons for relief pleaded unfairness on several bases including that "[t]he contract permitted termination of the contract without a period of notice which is reasonable and appropriate in the circumstances of the Applicant". The relief sought included a claim for an order varying the employment contract from commencement, or at some later date, by inserting a provision that: The contract shall not be terminated without the consent of the Applicant except for serious misconduct unless the Respondent gives the Applicant 12 months notice in writing or pays the Applicant an amount in lieu thereof equal to 12 months remuneration payable under the contract.

5 In her judgment Kavanagh J identified the following matters as being in issue: 1. Whether the contract of employment between the Applicant and the Respondent is an unfair contract pursuant to s106 of the Industrial Relations Act , 1996.

2. Whether the contract was unfair for reasons that could have been addressed in an unfair dismissal application and therefore whether the application should be dismissed under s109A.

3. Whether the contract incorporated and/or was based upon the Hansen Yuncken Pty Ltd and Construction, Forestry, Mining and Energy Union (CFMEU) Partnership Certified Agreement 1998/2000. Further, or in the alternative, whether the contract incorporated the terms of the National Building and Construction Industry Award.

And if s106 of the Industrial Relations Act 1996 (NSW) is applicable: 4. Whether the contract of employment be declared void in whole or in parts (except as to money and other benefits already paid or due varied) in terms set out in the contract.

5. Further, or in the alternative to 4, whether the Contract should be varied in accordance with Clause 3 of the Summons for relief. 6. Whether the Respondent should pay the Applicant such sums of money in connection with the contract as the Commission considers just in the circumstances of the case. 7. Whether there be payment of interest on sums of money ordered to be paid by the Commission. 30 A further issue was identified, not specifically referred to in the pleadings of the respondent until amendment was granted, namely: whether the orders sought in the application under s106 of the Industrial Relations Act 1996 (NSW) would create an inconsistency under s109 of the Australian Constitution in that a relevant Federal Award and Certified Enterprise Agreement govern the set of rights as to Notice and Redundancy for this labourer in the construction industry.

6 In relation to the question of whether the Agreement and Award had been incorporated into the respondent's employment contract and the issue of inconsistency, her Honour found at [37] and [42]: 37 From the authorities and facts before me, I accept there is a Federal Award and a Certified Enterprise Partnership Agreement which covers the employment of labourers working on construction sites. I accept the relevant Award and Certified Enterprise Partnership Agreement have a statutory force and statutory remedies are available in the breach. I further accept the contract of employment operates separately from the Award and Certified Agreement and their terms are not automatically inferred into the contract of employment as the implication of their terms is not necessary for the efficient operation of the Award and Agreement. There was no evidence of the parties' intention to expressly incorporate any term of the Award and Agreement into the contract of employment. … 42 For there to be an inconsistency between the Certified Enterprise Partnership Agreement read with the Federal Award and any orders under s106 of the State Act the court must therefore determine precisely what matters the Federal law deals with exhaustively. The obligations under a contract of employment ultimately are derived from State law. The question to be determined is does the relevant Agreement or Award "supplement or modify rather than supplant State law".

7 Kavanagh J also found that whilst the Award and Agreement applied to the respondent's employment, "The facts reveal he was categorised by the employer as a permanent employee and as a term of his employment, that is, as part of his employment contract, he was paid a higher rate of pay than a labourer." Her Honour found, therefore, that the Award and Agreement did not "cover the field as to this employee's contract of employment " and, consequently "Orders under s106 would not therefore create an inconsistency if such orders related to the terms of his contract of employment."

8 The issue of the nature of respondent's engagement was an important one in the proceedings below. The evidence relating to the categorisation of the respondent as a "permanent employee" arose out of the cross examination of Mr J G Wilson, the appellant's construction manager: Q: I think you already said Mr Costopoulos is not a daily hire employee, was he? A: He was weekly hire.

Q: Permanent? A: And that was as a result of weekly hire being introduced through the enterprise agreement process.

Q: No. He was a permanent employee, wasn't he? A: Yes.

Q: And for many years you considered him as such? A: Yes.

Q: Long before the enterprise agreement? A: He was a permanent employee.

Her Honour: You've headed his termination "permanent", didn't you? A: Absolutely. I don't deny that, your Honour.

9 Earlier in Mr Wilson's evidence the following exchange occurred between her Honour and Mr Wilson: Her Honour: When I asked that question very early in the piece, was it your perception that he [Mr Costopoulos] was a permanent employee?

A: Yes without question. Q: And permanent employees are hired or employed from your point of view under the weekly hire clauses of the award?

10 Later, in cross examination Mr Wilson was asked by counsel for the respondent: Q: And he [Mr Costopoulos] would be employed on a casual basis? A: I absolutely deny that. Not only do I deny that, but the award of course wouldn't allow that to occur. The award is quite clear, that casuals can only be employed for a maximum of four days at which point employment becomes permanent.

11 Kavanagh J also questioned Mr D Murray appearing for the appellant below as to the classification of the respondent as follows: HER HONOUR: This was a permanent employee. He was there 22 years. Do you accept he was a permanent employee? There is no point in stepping aside from issues. He was there 22 years. Surely the company acknowledges he was a permanent employee. Perhaps you would like to take instructions from your client.

MURRAY: My instructions are he was permanent. There had been lengthy discussions as we have heard from the applicant himself from about October 2000. Coming back to the award --

HER HONOUR: What clause acknowledges permanent employees? To assist you I have looked at the index. What category would you say it falls into?

MURRAY: The category he falls into is described at 13.2 of the award. HER HONOUR: Daily hire?

MURRAY: That he is a labourer under this award and this award prescribes one day's notice of termination of employment.

HER HONOUR: Does this award really cover permanent employees in the construction industry?

MURRAY: This award covers a labourer in this industry.

HER HONOUR: And he gets one day's notice. Was he paid as a daily hired labourer?

MURRAY: The agreement which is superimposed over this award provides that the period of notice be a week.

HER HONOUR: Show me the agreement. (Handed up) What clause of the agreement is notice?

HER HONOUR: What clause of the agreement is notice?

HER HONOUR: If you read that, it says "For employees on weekly hire after four weeks." This man worked longer than four weeks so one would have to assume he was a weekly hire and not daily hire as you said.

HER HONOUR: So he should have been paid one week's notice under the agreement.

12 Kavanagh J in her judgment subsequently found that:

· The respondent did not have any terms or conditions covering his termination procedures other than that which arose under the Agreement and Award.

· It was not for the Court to determine whether the Federal Scheme before it, as defined through the Agreement and Award as to the selection for termination and the payment of redundancy, was inherently unfair in its terms or in its conduct. Once the terms and conditions of the statutory scheme by force of the Award and Certified Enterprise Partnership Agreement cover the applicant, orders made under s106 would lead to an inconsistency under s109 of the Constitution.

· As the Award and Agreement follow a scheme which links the category of employment to appropriate notice, and following the finding that the respondent's category of employment was a term of his contract of employment, it followed the provision as to notice should also be seen as part of the respondent's contract of employment and could, therefore, be varied under the provisions of s106 of the Act if unfair in its terms or its conduct.

· The failure to pay the respondent a notice payment and the decision to characterise an accrued right to holiday pay as a notice payment was an unfairness in the conduct of the respondent's employment contract.

· Section 106 requires a further consideration as to whether such unfairness should reflect in an order for just compensation. Having found it unfair that a permanent employee with 23 years skilled service received no notice payment, this was an appropriate matter for orders of just compensation. The contract of employment should be varied to add an additional clause reflecting the payment of notice to the respondent for 12 months.

· As to the claim for redundancy such rights are dictated in accordance with the Enterprise Agreement and Award and are of statutory force. The respondent had been paid in accordance with those statutory rights through the Redundancy Trust. Any claim under s106 of the Act related to the redundancy payment was rejected.

· The relief sought was directed to the unfairness arising from a term of, and the conduct of, the employment contract. The alternative submission of the applicant that s109A of the Act precluded the claim was rejected.

· Interest was payable on the amount ordered from the date of termination, namely, 20 February 2001, in accordance with s 94 of the Supreme Court Act 1970 as amended.

13 It may be seen that the essence of what her Honour decided in favour of the respondent was that he was engaged other than in accordance with types of engagements prescribed by the Award and Agreement (daily hire, weekly hire, new employee) and was paid at a rate higher than that provided in the Award and Agreement because of his length of service and "associated skills". This overaward arrangement, her Honour concluded, became part of the respondent's employment contract. Therefore, her Honour considered any unfairness arising from the respondent's employment contract was amenable to relief under s 106 of the Act and any orders in these respects (classification and rate of pay) would not give rise to a constitutional inconsistency.

14 Her Honour went further, however, and held that: 73 As the Award and Certified Enterprise Partnership Agreement follow a scheme which links the category of employment to appropriate notice, and following the finding this employee's category of employment is a term of his contract of employment, it follows the provision as to Notice should also be seen as part of the employee's contract of employment and can therefore be varied under the provisions of s106 of the Act if unfair in its terms or its conduct.

15 From the terms of this paragraph it seems that as her Honour considered the respondent's engagement as a permanent employee was a term of his contract of employment (and not a type of engagement derived from the Award or Agreement), and because the Award and Agreement linked the category of employment to appropriate notice, it followed that the provision of notice should be seen as part of the employee's contract of employment.

16 Her Honour found at [74] that the failure to pay the respondent a payment in lieu of notice and the decision to characterise an accrued right to holiday pay as a notice payment (matters she found as fact) was "an unfairness in the conduct of the applicant's employment contract." Kavanagh J then indicated the contract of employment should be varied to add a provision "reflecting the payment of Notice to the applicant for 12 months."

17 Section 188 of the Industrial Relations Act provides, inter alia, that an appeal may be made only with the leave of the Full Bench and that leave to appeal is to be granted if, in the opinion of the Full Bench, the matter is of such importance that, in the public interest, leave should be granted.

18 Leave to appeal will not, as a general rule, be granted unless the appellant demonstrates that the appeal proceedings "raises substantial issues of principle or law or has wider implications for the jurisprudence of this Commission, including whether the decision has widespread practical application"(see Knowles v Anglican Property Church Trust (No 2) (1999) 95 IR 380 at 382).

19 Mr A Britt of counsel for the appellant submitted that leave should be granted since the appeal raised a number of fundamental questions, these being: (a) The relationship between Awards or Agreements made pursuant to the Workplace Relations Act 1996 and the scope of the jurisdiction of the Commission to set aside or vary contracts of employment or arrangements relating to the performance of work in an industry in New South Wales; (b) The interpretation of s152 and/or s170LZ of the Workplace Relations Act 1996, and in particular the question of whether in relation a claim for additional notice or payment in lieu of notice under s106 is within the contemplation of those provisions; and (c) The meaning of inconsistency for the purposes of s109 of the Constitution and/or s152 and/or s170LZ of the Workplace Relations Act and s106 of the Act.

20 It was further submitted by Mr Britt that: (a) There is a clearly arguable case that Her Honour had exceeded her jurisdiction and this consideration supports the grant of leave to appeal (see Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380).

(b) The Appeal has application beyond the parties to the litigation, in particular it raises the issue as to whether other employees employed under the National Building and Construction Industry Award in New South Wales, may commence proceedings under s106 of the Act in relation to the issue of notice under a contract of employment.

(c) The Full Bench should have regard to the fact that the questions raised by the appeal are narrow and any appeal hearing would be brief.

(d) Her Honour's decision is in error and the Full Bench in correcting such an error serves the public interest.

21 Mr J Pearce of counsel for the respondent opposed leave being granted essentially on the basis that the approach Kavanagh J took in the matter was in all relevant respects consistent with the authorities including Burgess v Mt Thorley Operations Pty Ltd [2003] NSWIRComm 432 and Hudson v Qantas Airways Ltd (1985) 10 IR 331. It was further submitted that the appeal raised no substantial issues of principle or law and did not have wider implications for the jurisdiction of the Commission.

22 The appeal raises substantial issues as to the relationship between awards or agreements made pursuant to the Workplace Relations Act and the scope of the jurisdiction of the Commission in Court Session to set aside or vary contracts of employment or arrangements relating to the performance of work in an industry in New South Wales. It is appropriate to grant leave to appeal and we do so.

23 The position taken by counsel for the respondent on appeal was that although Mr Costopoulos was an employee classified under cl 19 of the Award and cl 9 of the Agreement as a "construction worker level 4" (or CW4), he was not subject to: (a) The terms of cl 13.2.1 of the Award relating to notice of termination of employment because that provision only applied to the classifications of employment contained in 18.1.1 and 18.1.2 of the Award and not to the classifications in cl 19 which included CW4; (b) Clause 10.1 and 10.2 of the Agreement relating to terms of engagement and notice of termination of employment because he was not a new employee, nor was he an employee engaged on weekly hire.

24 It was the respondent's contention that he was engaged in the classification of CW4 as a "permanent employee". As neither the Award nor Agreement provided for engagement on a permanent basis, the nature of the respondent's engagement, it was submitted, derived from his contract of employment and not the Award or Agreement. That being the case, it was submitted, no inconsistency arose of the nature countenanced in ss 152 and 170LZ of the Workplace Relations Act 1996 between any instrument made under State law, in this case orders under s 106 of Industrial Relations Act, and an award or agreement made under Commonwealth law.

25 It is apparent from her judgment that Kavanagh J largely accepted these contentions. In doing so, we consider her Honour erred. The adjective "permanent" was used, as it often is in industry, only in the sense of distinguishing the nature of the respondent's employment from that of casual employment as prescribed in cl 13.1.2 of the Award. It did not create a new type of engagement separate from that provided for in the Award and Agreement.

26 We consider the respondent was employed on a weekly hire basis pursuant to cl 10.1(e) of the Agreement. That is, Mr Costopoulos occupied "an ongoing position" with the appellant and thereby had become entitled, under cl 10.2(a) of the Agreement, to one week's notice of termination of employment. As Mr Murray agreed in answer to a question from her Honour, the respondent was a "permanent on weekly hire" and, further, in answer to a question from her Honour, "And permanent employees are hired or employed from your point of view under the weekly hire clauses of the award?" Mr Wilson's reply was, "Yes".

27 Notwithstanding the confusion on the part of her Honour and Mr Wilson about weekly hire being provided for in the Award (only the Agreement provided for weekly hire), we consider it was the Agreement that provided for Mr Costopoulos to be engaged on the basis of weekly hire.

28 There was sufficient evidence to satisfy us that Mr Costopoulos was employed as a builder's labourer/construction worker. Indeed, the agreed facts were that he was employed as such. However, because of his long experience in the industry Mr Costopoulos was classified for the purpose of pay at a trade level, namely CW4, notwithstanding that he did not possess a trade certificate and had not been assessed as having the necessary skills to be formally classified equivalent to trade level.

29 That Mr Costopoulos had been classified at a level higher than his skills might warrant in order to be paid a higher rate of pay was not unusual. It is a common feature of many industries that employees are paid in excess of or above the rate prescribed by an award or enterprise agreement for their particular skill level in order to recognise, for instance, their long service, the quality of their work or some other attribute. It is also not uncommon for employees to be classified at a higher level in the award or agreement than what would otherwise be warranted because the award or agreement provides a convenient benchmark for pay purposes. This "overaward" arrangement, however, does not mean that the award or agreement has no application to an employee's classification. In any event, the respondent did not contend otherwise and accepted that Mr Costopoulos was classified at CW4. The approach taken at first instance is at odds with the usual beneficial approach taken to the construction of awards and other industrial instruments: see, for example the discussion in Re State Rail Authority Firefighters Award 2001 (2002) 122 IR 13 at 17 to 21.

30 We consider that the Award and Agreement applied to the respondent's employment including to the extent of determining the nature of his engagement, his employment classification and in determining the notice to be given upon termination of the employment. There is no basis for considering that notice of termination was to be derived from the respondent's contract of employment as opposed to the Agreement. That Agreement prescribed the notice to be given in unambiguous terms in cl 10.2. There was no evidence of any overaward arrangement in relation to the giving of notice (other than what was prescribed in the Agreement) that could lead to the conclusion that notice was an element of the respondent's employment contract as distinct from a term of the Agreement and, therefore, amenable to relief under s 106 of the Act.

31 Clause 10.2(a) of the Agreement provided that: (a) For employment periods of up to four weeks, one days notice of termination of employment shall be given on either side or one days pay shall be paid or forfeited. For employees on weekly hire (after four weeks) one week's notice of termination of employment shall be given on either side or one week's pay shall be paid or forfeited. The Company reserves the right to withhold payment for failing to follow these requirements.

32 An order under s 106(5) of the Act requiring payment in relation to notice in excess of or above that provided for in the Agreement would be in direct collision with the terms of the Agreement and, therefore, invalid: Blackley v Devondale Cream (Vic) Pty Ltd (1968) 117 CLR 253; Telstra Corporation Limited v Worthing (1999) 197 CLR 61; Burgess and Ors v Mount Thorley Operations Pty Ltd [2003] NSWIRComm 432; See also Metal Trades Industry Association of Australia v The Amalgamated Metal Workers' and Shipwrights' Union and Others (1983) 152 CLR 632. The order Kavanagh J made pursuant to s 106(5) of the Act requiring the appellant to pay to the respondent 12 months' payment as to notice of termination calculated at the respondent's "full salary package rate" was inconsistent with the provisions of cl 10.2(a) of the Agreement. We find that Kavanagh J erred in finding that there was no inconsistency between the Agreement on the one hand and orders under s 106 of the Act on the other relating to notice.

33 In light of this finding it is unnecessary to decide whether her Honour erred in finding that the failure to pay the respondent a payment in relation to notice was unfair within the meaning of ss105 and 106 of the Act. It is also unnecessary to decide the issue arising from her Honour's other finding that because notice given to Mr Costopoulos ran concurrent with an accrued right to holiday pay, such a situation gave rise to unfairness within the meaning of s 106 of the Act.

34 We make the following orders: 1 Leave to appeal is granted. 2 The appeal is upheld. 3 The judgment of Kavanagh J in Matter No IRC 3868 of 2001 made on 6 November 2003 is set aside and the orders made by her Honour on 19 February 2004 are quashed. 4 The parties have liberty to file short minutes of consent orders in respect of the stay granted of the orders of Kavanagh J and, in the absence of agreement, to have the matter listed before a member of the Full Bench for determination. 5 Costs are reserved. Any application for costs shall be accompanied by written submissions on the question of costs and be filed within 14 days.

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