The proper construction of the 1998 Agreement
62 The construction of the relevant terms of the 1998 Agreement is a difficult exercise. A large part of the difficulty stems from the absence of any definition of certain crucial words and phrases used, giving rise to ambiguity as to their meaning. Of particular importance are the phrases "commuted allowance", used in cl 19, and "penalties as worked", used in cl 19.1.1. The phrase "commuted allowance" is nowhere defined in the 1998 Agreement. Nor is the word "penalties" defined. Indeed, the word "penalties" does not appear to be used in any other relevant provision.
63 Certain things are clear. The 1998 Agreement is intended to implement the Heads of Agreement. The terms of the 1998 Agreement require resort to the terms of the Heads of Agreement from time to time, in order to supply content. The specification of salary rates by reference to the schedule to the Heads of Agreement, in clauses such as 18.1 and 19.1 of the 1998 Agreement is a prime example. It is clear that, in construing the 1998 Agreement, it is permissible to have resort to the Heads of Agreement. The second point that is clear is that the aim of the Heads of Agreement, and consequently of the 1998 Agreement, was to take the two disparate sets of terms and conditions of employment found in the 1995 Award and the Nurses Award, and to mould them into a single set of terms and conditions of employment. As a consequence, it is certainly permissible, and in some instances necessary, to resort to the 1995 Award and the Nurses Award to aid in the construction of the 1998 Agreement.
64 There is no doubt that, in certain respects, the introduction of terms and conditions that had been in one of the 1995 Award or the Nurses Award to the 1998 Agreement resulted in the diminution of entitlements for some employees. For instance, cl 11.1(2)(c) of the 1995 Award entitled an employee (not in receipt of the commuted allowance) to be paid at double the ordinary rate in respect of rostered time of ordinary duty on a Sunday. By contrast, cl 56(a) of the Nurses Award provided for all rostered time of ordinary duty performed on Saturday and Sunday to be paid for at the rate of time and a half. In the process of amalgamation, in cl 34.5.1 of the 1998 Agreement, the provision from the Nurses Award was adopted. Employees (not in receipt of the commuted allowance) working rostered ordinary time on Sundays became entitled to receive only an extra half day's pay for that time. At the same time, notwithstanding that both cl 11.1(2)(d) of the 1995 Award and cl 58(b)(i) of the Nurses Award provided for payment for work on public holidays at double time and a half, cl 35.5.4 of the 1998 Agreement allowed only for double time, to be taken either as payment or half as payment and half as time off in lieu. By contrast, cl 11.1(2)(a) of the 1995 Award provided for additional payments for afternoon and night shifts only on Mondays to Fridays, excluding public holidays. Clause 24(e) of the Nurses Award entitled employees working afternoon and night shifts to an allowance on whatever day those shifts occurred. In the 1998 Agreement, it was in effect the provision from the Nurses Award that was adopted, so that employees whose entitlements had previously been prescribed by the 1995 Award and who were rostered to work afternoon and night shifts at weekends and on public holidays stood to gain. The question in this case is whether the commuted allowance is to be regarded as in substitution for that additional entitlement, as well as the entitlement to additional payments for Saturdays, Sundays and public holidays, which had been reduced.
65 Clause 19.1 of the 1998 Agreement speaks in terms of "employees in receipt of commuted allowance". In the absence of any definition of commuted allowance, either in the 1998 Agreement or in the Heads of Agreement, it is necessary to go further back in history to ascertain which employees were to be regarded as "employees in receipt of commuted allowance". The answer is provided by cl 11.5 of the 1995 Award. In substance, they were employees required to perform rostered time of ordinary duty on Saturdays, Sundays and public holidays. It is plain from cl 11.1 that the allowance fixed at 18% by cl 11.5 was to be payable in substitution for the additional payments for which cl 11.1(2)(b), (c) and (d) provided, namely the time and a half rate for ordinary duty on a Saturday, the double time rate for ordinary duty on a Sunday and the double time and a half rate for ordinary duty on a public holiday. Unlike the rates in cl 11.1(2)(a), those rates did not vary according to whether the shift worked on a Saturday, a Sunday or a public holiday was an afternoon shift, a night shift or an ordinary day shift. It is also important to note that cl 11.1 makes it clear that cl 11.5 was not intended to exclude any other allowances that might be payable to people working on Saturdays, Sundays and public holidays (as well as on other days), such as allowances for overtime, for meals and for travel.
66 If confirmation be needed that the commuted allowance for which cl 11.5 of the 1995 Award provided was intended only to replace payments that compensated for ordinary time worked on Saturdays, Sundays and public holidays, it is provided by reference to the calculation attached to Mr Honan's file note in 1981. That calculation, which resulted in the choice of 18% as the figure for the commuted allowance, was made entirely by reference to the time and a half, double time, and double time and a half payments in respect of Saturdays, Sundays and public holidays respectively, and not by reference to any other allowances that might have been payable to employees working on Saturdays, Sundays and public holidays.
67 The effect of the inclusion of cl 34.6.1 in the 1998 Agreement was to add to the list of allowances to which employees could be entitled when working on Saturdays, Sundays and public holidays allowances that depended on the shifts those employees worked. In the absence of any redefinition of the phrase "commuted allowance", it is difficult to see how the addition of that further entitlement could have altered the meaning of the phrase. In other words, whatever was to be added to the list of allowances that could be earned by people working on Saturdays, Sundays and public holidays, the commuted allowance remained an allowance that replaced only the amounts that compensated for the inconvenience of working on those days.
68 This view receives some support from the opening words of cl 34.6.1 of the 1998 Agreement, "In addition to any other rates prescribed elsewhere in this agreement". Taken at face value, those words make it clear that at least the shift allowances prescribed by cl 34.6.1 are to be additional to other rates prescribed. Counsel for the respondent put two arguments designed to reduce or remove the effect of those words. The first was that the commuted allowance was not a rate "prescribed elsewhere in this agreement" (ie the 1998 Agreement), because the rates of the commuted allowance were found in Column C of the Schedule to the Heads of Agreement. This argument cannot be accepted. It is clear that the rate of pay to which "employees in receipt of commuted allowance" were entitled was prescribed by cl 19.1 of the 1998 Agreement, which in turn referred to Column C of Sch 2 to the Heads of Agreement. The second argument involved pointing to the absence from cl 34.6.2 (which prescribes the allowance for night shift work) of any equivalent to the opening words to cl 34.6.1. The argument was that it would be strange if only part of the shift allowance was additional to any other rates prescribed, but not the part that related to night shifts. Indeed, such a result would be strange. There is an explanation for the unusual wording, however. A comparison between cl 34.6 of the 1998 Agreement and cl 24(e) of the Nurses Award indicates that cl 34.6.1 has been adapted from cl 24(e)(i), which commences with the words "In addition to any other rates prescribed elsewhere in this Part of this Award". Clause 34.6.2 of the 1998 Agreement has been adapted from cl 24(e)(ii) of the Nurses Award, which commences with the words "Provided that", which have been omitted from cl 34.6.2. The clear intention of the provision in the Nurses Award was that the opening words of cl 24(e)(i) were to govern all of the provisions relating to shift allowances. Clumsy drafting of the equivalent clause in the 1998 Agreement ought not to be regarded as changing the meaning.
69 Although cl 11.1(1) of the 1995 Award appears to be written on the assumption that the commuted allowance offered an advantage to an employee who received it (by the use of the words "eligible to receive" when referring to cl 11.5), the effect of cl 11.5 is to impose the commuted allowance, not to offer the commuted allowance to employees as an option they could choose to take up or reject. The extent to which the commuted allowance would result in a particular employee receiving more pay than if the commuted allowance had not been applicable would depend upon the actual amount of Saturday, Sunday and public holiday time worked by the employee. The commuted allowance was calculated by Mr Honan as an average. There can be no doubt that, once the allowances for work on Sundays and public holidays were reduced by the 1998 Agreement, the chances that the commuted allowance would benefit an employee over a year were increased. Employees in receipt of the commuted allowance were insulated from the effects of the reductions. The Heads of Agreement and the provisions of the 1998 Agreement make it clear, however, that agreement was reached to maintain the commuted allowance, subject to the right of an employee receiving it to elect not to continue receiving it, pursuant to cl 19.1.1 of the 1998 Agreement. (It appears to me that that right to elect is still available to each of the employees referred to in [5] above. The right is to elect not to continue to receive the commuted allowance, so its exercise is not foreclosed by the election of each of the employees, on accepting the offer of employment by the respondent, to continue to receive the commuted allowance. The intention of cl 19.1.1 of the 1998 Agreement is to permit opting out, not opting in or opting back in once the election has been exercised.)
70 On the question whether the commuted allowance is a benefit overall, the 1998 Agreement and the Heads of Agreement are ambivalent. The provisions of cl 23.1 of the 1998 Agreement, which reflect the provisions of cl 5.4 of the Heads of Agreement, are mysterious. They appear to be based on the assumption that an employee receiving the commuted allowance will be more highly paid than an employee of the same classification level working a similar roster pattern but not in receipt of the commuted allowance, but that the latter employee will eventually catch up with the employee in receipt of the commuted allowance. If the initial assumption is correct, it is difficult to see how the catching up could occur, when all of the relevant calculations are in percentage terms. The application of the same percentage to a higher sum and a lower sum will always result in the higher sum being higher than the lower sum. To compound the mystery, cl 23.1 makes no provision for what is to occur when the commuted allowance is no longer to be maintained, because the comparator employee has caught up with the employee on the commuted allowance. Perhaps the assumption is that, in that event, the employee receiving the commuted allowance will exercise the election no longer to receive it. In that way, it may have been hoped that the commuted allowance would wither and eventually disappear.
71 In contrast, the provisions of cl 24.4.2, relating to superannuation, seemed to be based on the assumption that the commuted allowance employee will be receiving less pay than a similar employee with a similar roster pattern not in receipt of a commuted allowance. If superannuation contributions are based on rates of pay that take no account of any allowances, it is difficult to see that there would be any difference.
72 Whatever may be the outcome of the application of cl 23.1 and cl 24.4.2, they do not offer a reliable clue to the outcome of the issue at the heart of the present case. Whether it be the case that an employee in receipt of commuted allowance is thereby advantaged or disadvantaged when compared with another employee, there is no occasion for reducing any such advantage, or for increasing any such disadvantage, by treating the commuted allowance as payable in respect of the shift allowances for which the 1998 Agreement provides, as well as for the inconvenience of working on Saturdays and Sundays and public holidays. The allowances for working on Saturdays and Sundays and public holidays are designed to compensate employees for the inconvenience of having to work on days when, in general, other persons in the community, including in some cases family members and friends, are not working. Shift penalties are paid to compensate for the inconvenience of working outside the hours when, in general, most members of the community work. Employees working on Saturdays, Sundays and public holidays do not have access to events that occur on those days in the way that others do. Employees working non-standard hours may not have access to forms of entertainment that are available outside what might be regarded as standard working hours. Since the respective allowances are designed to compensate for different disadvantages, there is no need to regard the shift allowances as compensated for by the commuted allowance, which was designed only to compensate for the disadvantage of working on weekends and public holidays.
73 For similar reasons, the entitlement to additional leave for employees receiving the commuted allowance (seven weeks and one day for employees on the commuted allowance, by cl 24.3, compared with five weeks for other employees, by cl 35.1.1) does not constitute a reason for depriving the employees on the commuted allowance of entitlements to shift allowances for shifts they work on weekends and public holidays. Again, the purpose of the additional leave is to compensate for the inconvenience of working at weekends and on public holidays, whereas the purpose of the shift allowances is to compensate for inconvenience of a different kind. The fact that an employee receiving the commuted allowance might be thereby advantaged as against a comparable employee not receiving the commuted allowance constitutes no ground for undermining the advantage by depriving the employees receiving the commuted allowance of what would otherwise be their entitlement to shift allowances for shifts worked on Saturdays, Sundays and public holidays.
74 For these reasons, I am of the view that the words "penalties as worked" in cl 19.1.1 of the 1998 Agreement are to be construed only as referring to the allowances for the absence of which the commuted allowance was designed to compensate, namely the allowances for working on Saturdays, Sundays and public holidays. The words "penalties as worked" are not intended to refer to shift allowances, to which the employees in receipt of commuted allowance became entitled on the coming into operation of the 1998 Agreement.
75 It is clear that the terms of the letter of offer of employment made to the relevant employees in November 1998, and the terms of their acceptances of that offer, cannot influence the construction of provisions of the 1998 Agreement. Once it came into operation on its certification on 15 December 1998, the 1998 Agreement prevailed over any contract between an individual employee and the respondent that conflicted with the terms of the 1998 Agreement. The 1998 Agreement acquired statutory force and gave statutory entitlements to employees whose work was covered by it. In any event, the terms of each of the letters of offer made it clear that the contract was to be subject to the 1998 Agreement. The letters did not suggest that they were in any way varying the terms of the 1998 Agreement.
76 Nor do the letters of offer provide any support to the respondent's argument that there was a common understanding as to the meaning of the terms of the 1998 Agreement. The fact that shift allowances are mentioned in the first paragraph of the letter and commuted allowance is mentioned in the second paragraph cannot be taken to suggest that the shift allowances are to become subsumed within the commuted allowance, when they relate to shifts worked on weekends or public holidays.
77 Aside from this conclusion, the common understanding argument of the respondent cannot be accepted. An industrial instrument that has a consensual basis, such as an agreement negotiated between a trade union and an employer, is in that sense subject to the normal rule that the subjective understandings or intentions of the parties at the time they entered into the agreement cannot be used thereafter to aid in the construction of the terms of the agreement. Similarly, the conduct of the parties subsequent to the making of the agreement cannot be used as a guide to the construction of its terms. There have been cases in which it has been held that a common understanding of a term used in an industrial agreement can be used to aid in the interpretation of that term. In those cases, the parties to such agreements have acted on a common understanding as to the meaning of terms in those agreements, and the terms have been repeated in successive instruments, so that it can be said that the parties have entered into the successive agreements on the basis of their common understanding of those terms. Care is needed in approaching any suggestion of a common understanding as to terms used. In the first place, there must be positive evidence of a common understanding. Ordinarily, a failure to advance an argument as to the effect of a particular provision will not constitute such evidence. A failure to advance an argument is consistent with inadvertence, and common inadvertence is not common understanding. See Australian Liquor, Hospitality and Miscellaneous Workers Union v Prestige Property Services Pty Ltd [2006] FCA 11 (2006) 149 FCR 209 at [44]-[46] and Shop Distributive and Allied Employees' Association v Woolworths Ltd [2006] FCA 616 (2006) 151 FCR 513 at [31]-[32].
78 In the present case, the relevant terms of the 1998 Agreement can only have been taken to have come into operation in that agreement or, at best for the respondent, in the Heads of Agreement. There is no evidence that could give rise to the proposition that there was a common understanding that the commuted allowance should be regarded as being paid in substitution for an entirely new entitlement, shift allowances for afternoon and night shifts worked at weekends and on public holidays. Nor is there any evidence that, before the 2004 and the 2005 Agreements came into being, such a common understanding developed. Any failure of the respondent to appreciate its obligation to pay shift allowances to all employees working shifts at weekends and on public holidays is just as likely to have been due to inadvertence to the issue as to have been due to any understanding of the meaning of any term in any of the 1998 Agreement, the 2004 Agreement or the 2005 Agreement. Similarly, any failure by the applicant, or by anybody else, to make a claim for payment of shift allowances for weekend and public holiday work to those in receipt of the commuted allowance until this case arose is at least as consistent with inadvertence as it is with any understanding that such a claim could not be made.
79 The second need for care arises in the context of the manner in which industrial instruments are now created. In the days when an award might be negotiated between a union and an employer, and made by consent, the existence of a common understanding between the union and the employer as to the meaning of terms might have had some role to play in their construction. Whatever were the terms of such an agreement, and whatever was their meaning, those terms were imposed upon the employees who became bound by the award. In the current era, most industrial instruments are required to be put to a vote of the employees whose work will be covered by them, before they can be certified or approved so as to become enforceable by statute. The union and the employer who negotiated the terms might have had a common understanding of the meaning of them, but that understanding might not have been shared by all or some of the employees who voted for the operation of the agreement. They may have been entirely ignorant of the common understanding. In those circumstances, the occasions on which it can be said that a party to an agreement who entered into it on a common understanding should not be allowed to resile from that understanding will be rarer than they have been in the past.
80 For these reasons, the failure of the applicant's officers to make mention of the issue that has now surfaced in this case, when the terms of the agreement were being negotiated or voted on by employees, or thereafter, is of no significance in relation to the construction of the terms of any of the 1998 Agreement, the 2004 Agreement or the 2005 Agreement.
81 In the result, the employees referred to in [5] above are entitled to receive payments of shift allowances in respect of shifts worked by them on weekends and public holidays, to the extent to which the limitation periods in the relevant legislation permit.