Health Services Union v Ballarat Health Services [2011] FCA 1256 | Case summary

Federal Court of Australia|2011-11-04|Before: Gray J

Y J DATE OF ORDER: 4 NOVEMBER 2011 WHERE MADE: MELBOURNE

THE COURT DECLARES THAT, pursuant to: (a) clauses 34.6 and 41.13 of the Ballarat Health Services Psychiatric Services Certified Agreement 1997; (b) clause 21.9 of the Victorian Psychiatric Services Certified Agreement 2000-2004; and (c) clause 21.9 of the Victorian Psychiatric Services Certified Agreement 2004-2007, the respondent is required to pay the shift allowances referred to in those clauses to its employees who are: (d) employees in receipt of the commuted allowance, within the meaning of cl 19.1 of the Ballarat Health Services Psychiatric Services Certified Agreement 1997; (e) employees entitled to continue to receive a commuted allowance, within the meaning of cl 21.8(a) of the Victorian Psychiatric Services Certified Agreement 2000-2004; and (f) employees entitled to continue to receive a commuted allowance within the meaning of cl 21.8(a) of the Victorian Psychiatric Services Certified Agreement 2004-2007, in respect of shifts worked by those employees on Saturdays, Sundays and public holidays. THE COURT ORDERS THAT:

The title to the proceeding be amended by deleting the words "of Australia" in the name of the applicant.
The application for the imposition of penalties on the respondent be dismissed.
Subject to any obligation the respondent may have to deduct from moneys owing to its employees in respect of remuneration amounts by way of taxation and to remit those amounts to the Commissioner of Taxation, the respondent pay to: (a) Charles Paschal McGowan the sum of $9,552.83; (b) Christopher Robin Boyce the sum of $3,153.70; (c) Christine Mary Cook the sum of $3,285.10; (d) Colin Maxwell Govan the sum of $3,763.80; (e) Elizabeth Jane McMurray the sum of $7,396.85; (f) Rosemarie Dryden the sum of $3,578.60; (g) Ian Krawec the sum of $3,782.80; (h) Lynette Sartori the sum of $2,011.61; (i) Jeffrey Phillip Woolf the sum of $2,399.60; (j) Gary Maria Zeegers the sum of $10,933.35; (k) Susan Jenkins the sum of $1,796.72; (l) Peter Allen Strachan the sum of $7,940.50; (m) Graeme Joseph Chubb the sum of $6,186.50; (n) Anne Collins the sum of $2,531.79; (o) Denis Greene the sum of $1,338.30; (p) Patricia Josephine Browne the sum of $12,219.50; (q) Geoffrey William Keene the sum of $3,606.10; (r) Petronella Therese Muzik the sum of $2,886.29; (s) Marcelle Lorraine Yeatman-Grant the sum of $916.30; (t) John Anthony De Vaan the sum of $6,879.05; (u) Gayle Reid the sum of $698.50; (v) Elisabeth Theodora Beckers the sum of $8,590.30; (w) John Britt the sum of $1,781.29; and (x) Heather Margaret Myles the sum of $7,447.75 by way of amounts unpaid pursuant to the obligations referred to in the declaration above.
The respondent pay interest on each of the sums referred to in para 3 above.
Unless otherwise agreed between the parties, interest be calculated in respect of so much of each of the amounts referred to in para 3 above as was due in respect of each pay period of the person concerned, from the date when payment for that pay period was otherwise made until the date of this order, at the rate from time to time prescribed in r 39.06 of the Federal Court Rules 2011.
There be no order as to the costs of the proceeding. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY FAIR WORK DIVISION VID 2 of 2010

JUDGE: GRAY J DATE: 4 NOVEMBER 2011 PLACE: MELBOURNE

The nature and history of the proceeding 1 The issue in this case concerns the ambit of a clause that has appeared in three successive collective agreements governing the terms and conditions of employment of employees of the respondents engaged in the field of mental health nursing. Historically, there has been a group of employees entitled to be paid what is called a "commuted allowance". Those employees are rostered to perform regular work on Saturdays and Sundays and public holidays. Employees who work Saturdays and Sundays and public holidays are entitled to payment at higher rates for doing so. The commuted allowance was introduced to increase the ordinary salaries of those employees, in lieu of the payment of additional rates for working on Saturdays and Sundays and public holidays. In each of the three collective agreements, there is also provision for shift allowances, which involve increased rates for employees whose shifts include work at night. The issue in the present case is whether employees in receipt of the commuted allowance, who work afternoon and night shifts on Saturdays, Sundays and public holidays, are entitled to the shift allowance in respect of those shifts, or whether the commuted allowance is to be regarded as compensation for their performance of work at weekends, irrespective of the times of performance of that work. 2 The employees concerned have not been receiving shift allowances in respect of weekend work for many years. The parties recognise that claims for underpayment can only be pursued to the extent permitted by the statutory limitation period, six years prior to the commencement of the proceeding on 5 January 2010. During that period, there have been three successive collective agreements in operation. So far as relevant, those agreements are in similar terms. There have also been a number of legislative changes, which impact on the process of enforcement of collective agreements. It is necessary to have regard to provisions of the Workplace Relations Act 1996 (Cth) ("the Workplace Relations Act"), to transitional provisions that accompanied amendments to the Workplace Relations Act effected by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ("the Work Choices Act") and to transitional provisions accompanying the Fair Work Act 2009 (Cth) ("the Fair Work Act"). 3 Although in the original application, the applicant sought the imposition of penalties on the respondent for the alleged contraventions of the terms of the three collective agreements, the applicant did not press any claim for any penalty. At the trial, counsel for the applicant handed up a minute of proposed orders in which the only orders sought were declarations as to the contraventions of the successive agreements, orders for the payment of the shift allowances to the employees and interest on those payments.

The agreed facts 4 The Court was assisted in the resolution of the proceeding by the parties tendering a statement of agreed facts. The following summary of the facts is taken mainly from that statement of agreed facts. 5 The applicant is an organisation of employees, formerly registered pursuant to the Workplace Relations Act, and now registered pursuant to the Fair Work (Registered Organisations) Act 2009 (Cth). When the application was filed, the applicant was named as "Health and Community Services Union". On 14 May 2010, I made an order by consent that changed the name of the applicant to "Health Services Union of Australia". The applicant's current name is "Health Services Union". As a consequence, the title to the proceeding should be amended by deleting the words "of Australia" in the name of the applicant. The respondent is a Public Health Service, established as a corporation by the Health Services Act 1988 (Vic). The proceeding concerns 24 employees of the respondent, each of whom commenced that employment in 1996. Each was employed either in the classification of Registered Psychiatric Nurse or in the classification of Psychiatric State Enrolled Nurse. Each is a member of the applicant. The names of the employees, and the amounts of their agreed entitlements if the applicant's claim succeeds are as follows: Charles Paschal McGowan $9,552.83 Christopher Robin Boyce $3,153.70 Christine Mary Cook $3,285.10 Colin Maxwell Govan $3,763.80 Elizabeth Jane McMurray $7,396.85 Rosemarie Dryden $3,578.60 Ian Krawec $3,782.80 Lynette Sartori $2,011.61 Jeffrey Phillip Woolf $2,399.60 Gary Maria Zeegers $10,933.35 Susan Jenkins $1,796.72 Peter Allen Strachan $7,940.50 Graeme Joseph Chubb $6,186.50 Anne Collins $2,531.79 Denis Greene $1,338.30 Patricia Josephine Browne $12,219.50 Geoffrey William Keene $3,606.10 Petronella Therese Muzik $2,886.29 Marcelle Lorraine Yeatman-Grant $916.30 John Anthony De Vaan $6,879.05 Gayle Reid $698.50 Elisabeth Theodora Beckers $8,590.30 John Britt $1,781.29 Heather Margaret Myles $7,447.75

6 Each of these employees was originally a public servant, employed by the State of Victoria in its Department of Human Services, whose services were made available to the respondent in or about December 1997, when responsibility for mental health care was transferred to statutory authorities, of which the respondent is one. 7 Each of these employees was paid a commuted allowance throughout the period the subject of the claim. In the six-year period prior to the commencement of the proceeding, these employees worked: (a) shifts on Mondays, Tuesdays, Wednesdays, Thursdays and Fridays in which the rostered hours of ordinary duty finished between 6.00 pm and 8.00 am or commenced between 6.00 pm and 6.30 am; (b) rostered hours on Mondays, Tuesdays, Wednesdays, Thursdays and Fridays of ordinary duty which finished on the day after duty was commenced or commenced after midnight and before 5.00 am; (c) shifts on Saturdays, Sundays and public holidays, in which the rostered hours of ordinary duty finished between 6.00 pm and 8.00 am or commenced between 6.00 pm and 6.30 am; and (d) rostered hours on Saturdays, Sundays and public holidays of ordinary duty which finished on the day after commencing duty or commenced after midnight and before 5.00 am. 8 The first of the three collective agreements in issue in the present case was the Ballarat Health Services Psychiatric Services Certified Agreement 1997 ("the 1998 Agreement"), which was made pursuant to the Workplace Relations Act, certified by the Australian Industrial Relations Commission ("the AIRC") on 15 December 1998 (as shown by the certification decision tendered to the Court, not on 28 October 1998, as the statement of agreed facts suggests), is a "certified agreement" within the meaning of the Workplace Relations Act and was in operation from 15 December 1998 until 23 March 2004. The 1998 Agreement contains a reference to "the Heads of Agreement". This is a reference to an agreement dated 19 January 1998, known as the Victorian Psychiatric Services Agreement 1997. The parties to it were the Health Services Union of Australia (as the applicant was then called), the Australian Nursing Federation, the Victorian Hospitals Industrial Association, Mercy Health and Aged Care Inc, La Trobe Regional Hospital and the State of Victoria (Department of Human Services). 9 The Victorian Psychiatric Services Certified Agreement 2000-2004 ("the 2004 Agreement") was made pursuant to the Workplace Relations Act, certified by the AIRC on 26 March 2004, is a "certified agreement" within the meaning of the Workplace Relations Act and was in operation from 24 March 2004 until 18 January 2005. 10 The Victorian Psychiatric Services Certified Agreement 2004-2007 ("the 2005 Agreement") was made pursuant to the Workplace Relations Act, certified by the AIRC on 27 January 2005, is a "pre-reform certified agreement" within the meaning of the Workplace Relations Act as amended by the Work Choices Act, is a "collective agreement" within the meaning of the Fair Work Act, commenced operation on 19 January 2005 and continues in operation. 11 It is agreed that the applicant and the respondent were parties to and bound by the 1998 Agreement, the 2004 Agreement and the 2005 Agreement.

The relevant legislative provisions 12 Each of the 1998 Agreement, the 2004 Agreement and the 2005 Agreement was made and certified prior to the amendments to the Workplace Relations Act made by the Work Choices Act. Each was therefore made pursuant to s 170LJ and certified pursuant to s 170LT of the Workplace Relations Act. Section 170LJ of the Workplace Relations Act was in Div 2 of Pt VIB and s 170LT was in Div 4 of Pt VIB. 13 Section 178 of the Workplace Relations Act then provided relevantly as follows: (1) Where an organisation or person bound by…a certified agreement breaches a term of the…agreement, a penalty may be imposed by the Court or by a court of competent jurisdiction. … (6) Where, in a proceeding against an employer under this section, it appears to the court concerned that an employee of the employer has not been paid an amount that the employer was required to pay under an award, order or agreement, the court may order the employer to pay to the employee the amount of the underpayment. … (7) An order shall not be made under subsection (6)…in relation to so much of an underpayment as relates to any period more than 6 years before the commencement of the proceeding. 14 Section 179A of the Workplace Relations Act provided: (1) In exercising its powers under subsection 178(6)…the Court or a court of competent jurisdiction must, upon application, unless good cause is shown to the contrary, either: (a) order that there be included in the sum for which an order is made or judgment given, interest at such rate as the Court or court of competent jurisdiction, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date on which the order is made or judgment entered; or (b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which an order is made or judgment given, a lump sum instead of any such interest. (2) Subsection (1) does not: (a) authorise the giving of interest upon interest or of a sum instead of such interest; or (b) apply in relation to any debt upon which interest is payable as of right whether by virtue of an agreement or otherwise; or (c) authorise the giving of interest, or a sum instead of interest, otherwise than by consent, upon any sum for which judgment is given by consent. 15 The word "Court" was defined in s 4(1) of the Workplace Relations Act to mean the Federal Court of Australia. 16 Following the amendments to the Workplace Relations Act by the Work Choices Act, the Workplace Relations Regulations 2006 (Cth) ("the Workplace Relations Regulations") were made, pursuant to the regulation-making power then found in s 846 of the Workplace Relations Act. Regulation 2.19 provided: (1) Unless the contrary intention appears in a provision of: (a) the Act; or (b) the Work Choices Act; or (c) regulations made under the Act or the Work Choices Act; the amendments made by the Work Choices Act do not affect the enforcement in a court of rights and obligations that arose under the pre-reform Act. (2) Subregulation (1) applies whether or not proceedings had been commenced in a court before the reform commencement. At that time, the word "Act" was defined in reg 1.3 to mean the Workplace Relations Act, other than Sch 1 or regulations made under Sch 1 (which is not relevant to the present proceeding). The expression "pre-reform Act" was defined to mean the Workplace Relations Act as in force just before the reform commencement. For the meaning of "reform commencement", it is necessary to go to s 4(1) of the Workplace Relations Act, which defines that expression to mean the commencement of Sch 1 to the Work Choices Act. The date of commencement of Sch 1 to the Work Choices Act was 27 March 2006. 17 The result of these legislative provisions is that, after 27 March 2006, a certified agreement could continue to be enforced pursuant to s 178 of the Workplace Relations Act as it stood before the amendments made by the Work Choices Act. 18 So far as the period between 27 March 2006 and 30 June 2009 is concerned, the enforcement provisions were found in Pt 14 of the Workplace Relations Act, as amended by the Work Choices Act. Section 717 contained definitions of the phrases "applicable provision" and "eligible court". By para (a)(iv) of the former definition, an applicable provision was a term of "a collective agreement" that applied to the relevant person. Section 4 of the Workplace Relations Act contained a definition of "collective agreement", one element of which (in (b)) was "a union collective agreement". Section 328 made provision for an employer to make an agreement with one or more organisations of employees which had at least one member whose employment would be subject to the agreement and which was entitled to represent the industrial interests of that member in relation to work the subject of the agreement. Item 6 of Sch 7 to the Workplace Relations Act, in para (d) provided that Pt 14 applied in relation to a pre-reform certified agreement as if it were a collective agreement. Item 1 of Sch 7 contained a definition of "pre-reform certified agreement" as an agreement made under Div 2 or 3 of Pt VIB of the Workplace Relations Act before the reform commencement and certified under Div 4 of Pt VIB before or after the reform commencement. By virtue of para (a) of the definition of "eligible court" in s 717 of the Workplace Relations Act, and the definition of "Court" in s 4(1), the Federal Court of Australia was an eligible court. 19 Section 718(1) of the Workplace Relations Act contained a table setting out the persons who may apply for a penalty or other remedy under Div 2 of Pt 14 in relation to a breach of an applicable provision. By item 4 of that table, among the persons entitled to apply in respect of a term of a collective agreement was "an organisation of employees (subject to subsection (6))". Section 718(6) provided, so far as relevant to the present proceeding: An organisation of employees must not apply for a penalty or other remedy under this Division in relation to a breach of an applicable provision that is: … (b) a term of a collective agreement; … unless: (f) a member of the organisation is employed by the respondent employer; and (g) the breach relates to, or affects, the member of the organisation or work carried on by the member for the employer. 20 Section 719 of the Workplace Relations Act provided, so far as relevant: (1) An eligible court may impose a penalty in accordance with this Division on a person if: (a) the person is bound by an applicable provision; and (b) the person breaches the provision. … (6) Where, in a proceeding against an employer under this section, it appears to the eligible court that an employee of the employer has not been paid an amount that the employer was required to pay under an applicable provision…the court may order the employer to pay to the employee the amount of the underpayment. … (9) An order must not be made under subsection (6)…in relation to so much of an underpayment as relates to any period more than 6 years before the commencement of the proceeding. 21 Section 722 of the Workplace Relations Act provided: (1) In exercising its powers under subsection 719…(6)…the eligible court must, upon application, unless good cause is shown to the contrary, either: (a) order that there be included in the sum for which an order is made or judgment given, interest at such rate as the eligible court thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date on which the order is made or judgment entered; or (b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which an order is made or judgment given, a lump sum instead of any such interest. (2) Subsection (1) does not: (a) authorise the giving of interest upon interest or of a sum instead of such interest; or (b) apply in relation to any debt upon which interest is payable as of right whether by virtue of an agreement or otherwise; or (c) authorise the giving of interest, or a sum instead of interest, otherwise than by consent, upon any sum for which judgment is given by consent. 22 The Fair Work Act came into operation on 1 July 2009. Subject to transitional provisions, it repealed the Workplace Relations Act. The transitional provisions were contained in the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) ("the Transitional Provisions Act"). In particular, the provisions are found in schedules, to which effect is given by s 3 of the Transitional Provisions Act. 23 Item 11(1) of Sch 2 to the Transitional Provisions Act provides as follows: The WR Act continues to apply, on and after the WR Act repeal day, in relation to conduct that occurred before the WR Act repeal day. Item 2 of Sch 2 contains a definition of "WR Act repeal day", which is the day on which the WR Act repeal commences. That date was 1 July 2009. Item 2 of Sch 2 also contains a definition of "WR Act", which refers to item 3. Item 3(1) of Sch 2 provides that "WR Act" means the Workplace Relations Act and, "unless the contrary intention appears, means that Act as in force immediately before the WR Act repeal day." Item 3(2) provides that, unless a contrary intention appears, a reference to the WR Act includes a reference to regulations made for the purposes of the WR Act. 24 These provisions are effective to permit the applicant to continue to enforce the 1998 Agreement, the 2004 Agreement and the 2005 Agreement by reference to the provisions of the Workplace Relations Act, as they stood prior to the coming into operation of the Fair Work Act. 25 As to contraventions alleged to have occurred since the coming into operation of the Fair Work Act, it is necessary to go to Sch 16 to the Transitional Provisions Act. Item 2(2) of Sch 16 provides "A person must not contravene a term of an agreement-based transitional instrument that applies to the person." The phrase "agreement-based transitional instrument" is defined in item 2 of Sch 2, by reference to item 2(5) of Sch 3. Item 2(1) of Sch 3 provides that each WR Act instrument that becomes a transitional instrument continues in existence in accordance with Sch 3, despite the WR Act repeal. By item 2(2)(g) of Sch 3, a WR Act instrument includes a pre-reform certified agreement. By item 2(3)(a), a WR Act instrument that was in operation immediately before the WR Act repeal day became a transitional instrument on that day. Item 2(5) classifies transitional instruments. It is sufficient for present purposes to say that the 1998 Agreement, the 2004 Agreement and the 2005 Agreement are agreement-based transitional instruments according to that classification. 26 Schedule 16 to the Transitional Provisions Act contains the scheme by which provisions of the Fair Work Act are made applicable to pre-existing instruments. 27 Item 16(1) of Sch 16 to the Transitional Provisions Act provides, so far as relevant to this proceeding: (1) Part 4-1 of the FW Act applies as if: … (b) the table in subsection 539(2) included the table below (with the references in column 1 of the table below to be read as references to provisions of this Schedule…; and (c) a reference to a fair work instrument in that Part included a reference to a transitional instrument…; and (d) the reference in subsection 540(3) to items 4, 7 and 14 in the table in subsection 539(2) included a reference to item 40 in the table below The table included in item 16(1) of Sch 16 to the Transitional Provisions Act has four columns. Column 1 is headed "Civil remedy provision"; Column 2 is headed "Persons"; Column 3 is headed "Courts"; and Column 4 is headed "Maximum penalty". In item 40 of the table, Column 1 contains the words: 2(2) (in relation to a contravention or proposed contravention of a collective agreement-based transitional instrument other than a contravention or proposed contravention of a term that would be an outworker term if it were included in an award-based transitional instrument) Among the persons listed in Column 2 is: (c) an employee organisation to which the collective agreement-based transitional instrument concerned applies Among the courts listed in Column 3 for item 40 in the table is "(a) the Federal Court". 28 Part 4-1 of the Fair Work Act contains s 539(1), which provides that a provision referred to in Column 1 of an item in the table in s 539(2) is a civil remedy provision. Section 539(2) provides: For each civil remedy provision, the persons referred to in column 2 of the item may, subject to sections 540 and 544 and Subdivision B, apply to the courts referred to in column 3 of the item for orders in relation to a contravention or proposed contravention of the provision, including the maximum penalty referred to in column 4 of the item. The only relevant limitation on this power for which s 540 provides is found in s 540(2): An employee organisation…may apply for an order under this Division, in relation to a contravention or proposed contravention of a civil remedy provision in relation to an employee, only if: (a) the employee is affected by the contravention, or will be affected by the proposed contravention; and (b) the organisation…is entitled to represent the industrial interests of the employee. It is agreed that the employees named in [5] above are members of the applicant. There was no suggestion that the applicant is not entitled to represent their industrial interests. 29 Section 544 of the Fair Work Act provides for a limitation period of six years in respect of an application in relation to a contravention of, among other things, a civil remedy provision. 30 Section 545(1) of the Fair Work Act provides relevantly that this Court "may make any order the court considers appropriate if the court is satisfied that a person has contravened…a civil remedy provision." Section 545(2) gives examples of orders that may be made. The examples include, in s 545(2)(b), "an order awarding compensation for loss that a person has suffered because of the contravention". Section 547 imposes an obligation to include an amount of interest in the sum ordered, where application is made for this and no good cause is shown to the contrary. In determining the amount of interest, the Court is required to take into account the period between the day the relevant cause of action arose and the day the order is made. 31 The effect of these complex provisions is to empower the applicant to sue the respondent in the present proceeding. The applicant has standing to seek a penalty or penalties against the respondent in respect of alleged contraventions of the 1998 Agreement, the 2004 Agreement and the 2005 Agreement, in respect of the entire period of six years preceding the commencement of the proceeding. The applicant also has power to seek orders that the respondent pay the amount of any underpayment to each of the employees in respect of whom the applicant brings the proceeding, and to pay interest on those amounts. There was no suggestion that, where the applicant has not pursued its claim for penalties, it is thereby disentitled to proceed in respect of payments to the employees concerned and interest. 32 Section 21(1) of the Federal Court of Australia Act 1976 (Cth) empowers the Court, in civil proceedings in relation to a matter in which it has original jurisdiction, to make binding declarations of right. The power is a discretionary one.

The history of the relevant agreements 33 Both parties called in aid aspects of instruments by which the terms and conditions of employment of people employed to provide mental health services were regulated, or agreed upon, prior to the agreements the subject of this proceeding. Those instruments date from a time when mental health services were administered separately from other health services. At that time, employees providing mental health services were public servants employed by the State of Victoria, whose terms and conditions of employment were governed by legislation and by determinations of the Public Service Board of Victoria. Their terms and conditions were different from those applicable to nurses and other employees engaged in other forms of health services. It is the move to federal regulation, coupled with the merging of the different forms of terms and conditions of employment for employees in mental health services and employees in other health services that appear to have given rise to the dispute that manifests itself in this case. 34 The starting point for the history is a file note dated 23 April 1981, signed by F Honan, Director, Industrial Relations Division, for the Public Service Board of Victoria. The subject of the memorandum is given as: COMMUTED ALLOWANCES FOR NURSING STAFF, MENTAL HEALTH DIVISION, PENALTY PAYMENT FOR HOSPITAL STAFF FOR SUNDAY ROSTERED TIME ORDINARY DUTY, AND MONDAY TO FRIDAY NIGHT SHIFT PENALTY PAYMENT FOR MENTAL HEALTH AIDES AND WARD ASSISTANTS The file note records that, on 15 April 1981, the Board made a number of decisions, which are then summarised. For present purposes, the important summaries are as follows: (c) the miscellaneous group of nurses presently in receipt of allowances under Determination 85(1) (i.e. working less penalty time than staff working an 8 hour rotating roster) should continue to receive such payments in respect of all rostered time of ordinary duty on afternoon and night shifts, on Saturdays, Sundays and public holidays; that such allowances be frozen at their present money amount level; that the staff be given a once only option (to be exercised at any time) to transfer to the penalty payments prescribed in Determination 81 on an "as-worked" basis; and that the allowances in this form be restricted to those staff currently in receipt of them; (d) apart from those staff under (c) above, the commuted allowance be re-calculated to cover rostered time of ordinary duty on Saturdays, Sundays and public holidays on the bases of the penalty percentages prescribed in Determination 81 and the incidences of such rostered duty within the 2 days on, 2 days off roster, the 10 hour roster and the 8 hour rotating roster. The allowances, to be expressed in money amounts, were calculated as 18% of the salary rates for the various classifications - the derivation of the 18% is shown in Attachment 1. Payment for ordinary time rostered duty for afternoon or night shifts to be on an "as-worked" basis; As the summary in para (d) suggests, attached to the file note is a document containing a calculation, with a final figure of 18.1%, obviously rounded down to the 18% referred to in the summary. It is unnecessary to set out the whole of the calculation, the elements of which were different rosters involving work on Saturdays, Sundays and public holidays. 35 The dichotomy between employees receiving the commuted allowance in respect of their regular rostered work, and those paid penalty rates in respect of the shifts they worked was reflected in a Public Service Determination designated PSD24, first made in 1985 and thereafter amended from time to time. As it stood at 18 January 1993, PSD24 provided relevantly: 19.1 (1) Officers and employees― (a) other than those who are eligible to receive allowances pursuant to determinations 20.5 and 20.6 who are required to perform rostered time of ordinary duty on Saturdays, Sundays or holidays observed in accordance with the provisions of the Act; and, (b) other than those who are eligible to receive an allowance pursuant to determination 20.6 who are required to work afternoon or night shift duty, Monday to Friday; and … shall be paid allowances as provided in the following sub-determination. (2) Such officers and employees shall― (a) when required, on any day Monday to Friday inclusive (excluding a public holiday)― (i) to perform rostered time of ordinary duty on an afternoon or night shift―be paid an allowance at the rate of 15 per cent of the appropriate hourly rate for each hour of duty; and (ii) to perform rostered time of ordinary duty continuously for a period exceeding four weeks on a shift commencing before 8.00 p.m. and continuing beyond 6.00 a.m., falling wholly within the hours of 8.00 p.m. and 6.00 a.m., or commencing between 8.00 p.m. and midnight and lasting for at least eight hours―be paid an allowance at a rate of 15 per cent of the appropriate hourly rate, additional to the rate prescribed in sub-clause (a) (i), for each hour of duty; provided that this additional payment shall not apply where, but for mutual agreement, the officer or employee would be required to work rotating shift duty; (b) when required to perform rostered time of ordinary duty on a Saturday (excluding a public holiday)―be paid an allowance at the rate of 50 per cent of the appropriate hourly rate for each hour of duty; (c) when required to perform rostered time of ordinary duty on a Sunday (excluding a public holiday)―be paid an allowance at the rate of 100 per cent of the appropriate hourly rate for each hour of duty; and (d) when required to perform rostered time of ordinary duty on a public holiday―be paid an allowance at the rate of 150 per cent of the appropriate hourly rate for each hour of rostered time of ordinary duty performed 36 Clause 19(3)(a) and (b) contained definitions of "Afternoon Shift" and "Night Shift" respectively, for workers other than part-time workers. An afternoon shift commenced at or after 10.00 am and before 8.00 pm and a night shift commenced at or after 8.00 pm and before 6.00 am. 37 Subsequently, PSD24 provided as follows: Department of Health and Department of Community Services―commuted allowances 20.5 (1) Officers or employees employed in the Office of Psychiatric Services, the Alcohol and Drug Service Unit and the Department of Community Service Victoria occupying offices of the classifications set out in Part A of Table 11 of Appendix 'E' other than officers or employees with the designations of― (a) Directors or Assistant Directors of Nursing; and (b) Managers or Deputy Managers, Direct Care Services― who are required to perform rostered time of ordinary duty on Saturdays, Sundays and public holidays must be paid an annual allowance at the rates specified in Part A of Table 11 of Appendix 'E'. (2) An officer or employee who makes an election pursuant to sub-determination 3.12 (2) shall be paid an allowance at the rate indicated in 20.5 (1) for Psychiatric State Enrolled Nurse, Psychiatric Services Officer, Grade PSO-1 or Intellectual Disability Services Officer, Grade IDSO-1 as the case requires. … Department of Health and Department of Community Services―special provisions for staff employed at 4 April 1981. 20.6 (1) Subject to sub-determination (2) officers or employees who occupy offices of the classifications set out in Part B of Table 11 of Appendix 'E' (other than an office with the designation of Director or Assistant Director of Nursing) and who, as at 4 April 1981, were paid an allowance in accordance with the provisions of determination 20.5 in force at that date and who continue to work rostered time of ordinary duty on an eight hour rotating roster, must be paid an annual allowance at the rate indicated in Part B of Table 11 of Appendix 'E' in respect of all duty performed during rostered time of ordinary duty on afternoon and night shifts and on Saturdays, Sundays and public holidays. (2) Any such officer or employee may elect to be paid for rostered time of ordinary duty pursuant to the provisions of Part 19 in lieu of the provisions of this determination but such election shall terminate his or her eligibility under this determination. 38 The election to which cl 20.5(2) refers is an election by people in certain classifications to commence training in Psychiatric or Mental Retardation nursing. As those cll 20.5(1) and 20.6(1) suggest, Appendix E to PSD24 contained Table 11, in two parts, with various classifications and columns containing the amounts of the allowances for those classifications for different years of service. I understand it to be common ground that the amounts in that table represent 18% of the salary rates applicable to employees in those classifications with those years of service. 39 On 15 August 1994, the AIRC made the Health and Community Services (Nursing, Health Care and Associated Groups) Interim Award 1994 ("the Interim Award"). The relevant provisions of the Interim Award were: 2 - APPLICATION OF AWARD AND PARTIES BOUND This award is binding upon: (1) The Crown in Right of the State of Victoria in respect of all employees of the Department of Health and Community Services (Victoria) eligible to be members of the Health Services Union of Australia and the Australian Nursing Federation. ("the relevant employees"). (2) The Health Services Union of Australia ("the HSUA"). (3) The Australian Nursing Federation ("the ANF") in respect of Alcohol and Drug Services Nurses, General Nurses, Psychiatric State Enrolled Nurses, State Enrolled Nurses employed as Alcohol and Drug Services Aides, Registered Mental Retardation Nurses, Registered Psychiatric Nurses, Student Nurses, and Trainee State Enrolled Nurses. 3 - GENERAL TERMS AND CONDITIONS OF EMPLOYMENT (1) In this clause the preserved conditions of employment are: … (b) the Public Service Determinations 1985 (Vic) as in force on 27 October 1992; … (2) Subject to (3) hereof, the State of Victoria shall apply and relevant employees, the HSUA and the ANF shall be entitled to the benefit of the preserved conditions of employment. (3) Subclause (2) hereof does not apply to preserved conditions of employment which as at 27 October 1992 were not applicable to relevant employees, or the HSUA or the ANF in respect of relevant employees. 40 On 6 February 1996, the AIRC made the Victorian Health and Community Services (Psychiatric, Disability and Alcohol & Drug Services) Award 1995 ("the 1995 Award"). Clause 11.1 of the 1995 Award reflected cl 19 of PSD24 in the following terms: (1) Employees other than those who are eligible to receive allowances pursuant to sub clause [sic] 11.5 who are required to perform rostered time of ordinary duty on Saturdays, Sundays or public holidays or other employees whose salary exceeds $42,110 and then exceeds $42,527 from 17 September 1995 shall be paid allowances as provided in sub-clause 11.1(2) below. (2) Such employees shall - (a) when required, on any day Monday to Friday inclusive (excluding a public holiday) - (i) to perform rostered time of ordinary duty on an afternoon or night shift - to be paid an allowance at the rate of 15 per cent of the appropriate hourly rate for each hour of duty; and (ii) to perform rostered time of ordinary duty continuously for a period exceeding four weeks on a shift commencing before 8.00pm and continuing beyond 6.00am, falling wholly within the hours of 8.00pm and 6.00am, or commencing between 8.00pm and midnight and lasting for at least 8 hours - to be paid an allowance at a rate of 15 per cent of the appropriate hourly rate, additional to the rate prescribed in sub-clause 11.1(2)(a)(i), for each hour of duty; provided that this additional payment shall not apply where, but for mutual agreement, the employee would be required to work rotating shift duty; (b) when required to perform rostered time of ordinary duty on a Saturday (excluding a public holiday) - be paid an allowance at the rate of 50 per cent of the appropriate hourly rate for each hour of duty; (c) when required to perform rostered time of ordinary duty on a Sunday (excluding a public holiday) - be paid an allowance at the rate of 100 per cent of the appropriate hourly rate for each hour of duty; and (d) when required to perform rostered time of ordinary duty on a public holiday - to be paid an allowance at the rate of 150 per cent of the appropriate hourly rate for each hour of rostered time of ordinary duty performed Definitions of "Afternoon Shift" and "Night Shift" appear in cll 11.1(5)(a) and (b) respectively and are in the same terms as the equivalent definitions in PSD24. 41 Clause 11.5 of the 1995 Award is headed "Commuted allowances" and provides: (1) Employees occupying positions of the classifications set out in sub-clause 9.3 of this award other than Health Welfare Officer employees with the designation of Director or Assistant Director of Nursing, and Manager or Deputy Manager, Direct Care Services, and those employees subject to subclause [sic] 11.5(2),who [sic] are required to perform rostered time of ordinary duty on Saturdays, Sundays and public holidays shall be paid an annual allowance at a rate equivalent to eighteen per cent (18%) of the employee's annual salary. … (3) An employee to whom sub-clause 10.5 applies shall be paid an allowance at the rate indicated in sub-clause 11.5 (1) above for the position he or she held prior to his or her transfer to a Student Nurse position. Clause 10.5 reflects cl 3.12(2) of PSD24. 42 It should be noted that, under the 1995 Award, shift allowances were applicable to shifts worked on weekdays only, and not to shifts worked on Saturdays, Sundays and public holidays. This was not the case in respect of nurses employed in health services other than mental health. The Nurses (Victorian Health Services) Award 1992 ("the Nurses Award"), in cl 24(e), provided relevantly as follows: (i) In addition to any other rates prescribed elsewhere in this Part of this Award an employee whose rostered hours of ordinary duty finish between 6.00 p.m. and 8.00 a.m. or commence between 6.00 p.m. and 6.30 a.m. shall be paid an amount equal to 2 1/2 percent of the rate for Registered Nurse Grade 1 in paragraph 6(a) (iv) per rostered period of duty. (ii) Provided that in the case of an employee working on any rostered hours of ordinary duty, finishing on the day after commencing duty or commencing after midnight and before 5.00 a.m [sic] he or she shall be paid an amount equal to 4 per cent of the rate for Registered Nurse Grade 1 in paragraph 6(a) (iv) for any such period of duty and provided further that in the case of an employee permanently working on any such rostered hours of ordinary duty shall [sic] be paid an amount equal to 5 per cent of the rate for Registered Nurse Grade 1 in paragraph 6(a) (iv) for any such period of duty. "Permanently working" shall mean working for any period in excess of four consecutive weeks. Clause 63(a)(ii) contained similar provisions for seven day shift allowances for State Enrolled Nurses. In addition, cll 20 and 22 of the Nurses Award provided for penalty rates for Registered Nurses in respect of Saturday and Sunday work, and work on public holidays, respectively. Clauses 56 and 58 contained similar provisions in the entitlements of State Enrolled Nurses. 43 The final step towards the first of the three agreements the subject of this case was the Heads of Agreement (see [8] above). Clause 2 of the Heads of Agreement provided as follows: 2.1 This agreement is between and binding upon the Health Services Union of Australia (the HSUA) with respect to all employees, the Australian Nursing Federation (the ANF) with respect to Registered Psychiatric Nurses and Psychiatric State Enrolled Nurses, the Victorian Hospitals Industrial Association (the VHIA), Mercy Health and Aged Care Inc, LaTrobe Regional Hospital and State of Victoria (the Department). 2.2 This agreement shall apply to the employment of all employees who are eligible to be members of the HSUA (Victorian No 2 branch) and/or ANF (Victorian Branch), (including temporary employees, part time [sic] employees and casual employees), engaged solely or substantially in the provision of psychiatric and/or mental health services in Victoria. Clause 3.2 provided: The parties agree that upon completion of the steps in clause 3.1 they will take whatever steps are necessary to have this agreement drawn up into certified agreements (hereinafter referred to as "the agreements") with each employer referred to in schedule 7 pursuant to Part VIB of the Workplace Relations Act 1996 who will each jointly apply to have the agreements certified. The list of employer parties to be bound by certified agreements appearing in Sch 7 of the Heads of Agreement includes "Ballarat Health Services", the respondent in this proceeding. 44 Clause 4.1 of the Heads of Agreement provided: The certified agreements giving effect to this agreement shall be between and binding upon the Health Services Union of Australia (the HSUA) with respect to all employees, the Australian Nursing Federation (the ANF) with respect to Registered Psychiatric Nurses and Psychiatric State Enrolled Nurses, and the Hospital/Network employer. 45 Clause 5 of the Heads of Agreement contained provisions with respect to increases to wages and allowances. Of particular relevance to this case are cll 5.2.3 and 5.4. The former provides: 5.2.3 Section 97 employees in receipt of commuted allowance who accept an offer of employment under clause 18 of this agreement will receive the relevant salary in column C of schedule 2 as outlined. 5.2.3(a) Such employees may make a once only election at any time during the term of the agreement to convert to being paid penalties as worked in lieu of commuted allowance and then translate to column B in schedule 2 Clause 5.4 provides: Employees: 5.4.1 who as at 19 December 1997 were employees of the Department and in receipt of commuted allowance at that date; and 5.4.2 who are translated to grades and salary points in accordance with schedule 2; and 5.4.3 where after all adjustments to salaries and commuted allowance referred to in clause 5.1.1 are in receipt of a total amount of salary and commuted allowance that is greater than employees of the same classification level who work similar roster patterns but not in receipt of commuted allowance ("specific employees"): 5.4.4 that total amount will be maintained ("maintenance provisions") until the total amount of salary and weekend and public holiday rates of "specific employees" reaches the total amount of salaries and commuted allowance of employees under the "maintenance provisions". 46 Clause 6 of the Heads of Agreement dealt with terms and conditions. So far as relevant to this proceeding, cl 6 provided as follows: 6.1 Subject to details below, consistent with clause 4 the parties agree to develop certified agreements specific to that part of the businesses providing psychiatric and or mental health services in the following terms: 6.1.1 save where varied by clauses 5, 6.1.2, 6.1.3, 6.1.4, 6.2, 7 - 17 inclusive, and 19 - 24 inclusive below, adapt the terms and conditions of the Nurses (Victorian Health Services) Award 1992 with respect to Nursing and Direct Care employees, and the Health and Allied Services - Public Sector Victorian Consolidated Award with respect to Non Direct Care Employees. 47 The Heads of Agreement made special provision for the commuted allowance in cl 14: 14.1 The parties agree to apply the increases as prescribed in clause 5.1.1 to commuted allowances. 14.2 The employer and the union parties agree to conduct a review over the life of the agreement concerning the extension of commuted allowance beyond the life of the agreement and, if so, the appropriate rate/s that should apply, and/or the application of annualised allowances. 14.3 In the event that the parties are unable to reach agreement, the maintenance provisions as referred to in clause 5.4 shall apply. 14.4 Nothing in this agreement shall preclude the parties from implementing any agreed outcomes of the reviews. 48 Clause 18 of the Heads of Agreement made further reference to what were called "Section 97 staff": 18.1 Section 97 staff shall access the provisions of this agreement on acceptance of an offer to become a direct employee of the Hospital/Network. 18.2 In view of clause 18.1 above: 18.2.1 All section 97 employees will be encouraged to become direct employees of the Hospital/Network; 18.2.2 All section 97 employees will be made an offer of ongoing employment by the employer with whom they are currently working; 18.2.3 The terms and conditions of the offer will be governed wholly by the terms and conditions of this agreement and the subsequent certified agreements; 18.2.4 The offer and acceptance of offer will be made in the form of the attached schedules 5 and 6 respectively, or as mutually agreed by the parties; 18.2.5 The parties agree that an agreed joint statement will be made encouraging employees to accept the offer References to "Section 97 staff" are to be understood as referring to public servants who had been made available to "a person, association or organization providing mental health services", pursuant to s 97 of the Mental Health Act 1986 (Vic), once the provision of mental health services had been transferred from the public service to statutory bodies. 49 Schedule 2 to the Heads of Agreement set out rates of pay for various classifications, including rates of pay incorporating the overall percentage increase agreed in the Heads of Agreement. Column C of the table in Sch 2 set out both weekly salary rates and weekly commuted rates, as well as yearly salary rates and yearly commuted rates. In each case, the commuted rates are calculated at 18% of the salary rates.

The certified agreements 50 The parties focused their attention on the terms of the 1998 Agreement. It was common ground that the relevant provisions of the 2004 Agreement and the 2005 Agreement are the same, or to the same effect, as the relevant provisions of the 1998 Agreement. Counsel for the applicant made specific reference to the relevant terms of the 2004 Agreement and the 2005 Agreement in a minute of orders sought by the applicant. 51 The 1998 Agreement contains a preamble, which includes the following provisions: 1.2.1 This agreement recognises the special nature of psychiatric and/or mental health services and as such acknowledges the need to have a separate, specialist instrument to regulate the terms and conditions of employment and the type of work performed by employees in psychiatric services and/or mental health services. 1.2.2. The agreement provides a mechanism for all employees engaged in or in connection with the provision of psychiatric and/or mental health services to be employed pursuant to a single code of employment governing that employment. The agreement will cover all employees of the Department upon their acceptance of an offer of employment with the employer in accordance with the agreement, and those employees who are or become directly employed by the employer. 1.2.3 The agreement provides for the transfer of employees who are employees of the Department to become direct employees of the employer. In doing so certain conditions of employment of those employees are preserved and certain conditions of those employees who were employees of the department at certain dates as prescribed by the agreement are re-instated. [sic] Clause 7.1.11 of the 1998 Agreement contains a definition of "Heads of Agreement", which refers to the Heads of Agreement. The terms of the Heads of Agreement relating to section 97 employees are reflected in the terms of cl 17.1, relevantly as follows: 17.1 Offer of employment Section 97 employees shall access the provisions of this agreement on acceptance of an offer to become a direct employee of the employer. Accordingly, 17.1.1. All section 97 employees will be encouraged to become direct employees of the employer; 17.1.2 All section 97 employees will be made an offer of ongoing employment by the employer with whom they are currently working; 17.1.3 The terms and conditions of the offer will be governed wholly by the terms and conditions of this agreement and the Heads of Agreement. [sic] 17.1.4 The offer and acceptance of offer will be made in the form of the attached schedules five and six of the Heads of Agreement respectively, or as mutually agreed by the parties; 17.1.5 The parties agree that an agreed joint statement will be made encouraging employees to accept the offer There is a definition of the term "Section 97 employee" in cl 7.1.17. That term means "a person who is an employee of the Department and whose services have been made available by the Department to employer [sic] under the terms of Section 97 of the Mental Health Act 1986." 52 The aim of the Heads of Agreement, to merge the two streams represented by the 1995 Award and the Nurses Award are reflected in cl 18 of the 1998 Agreement. In substance, that clause is designed to bring into alignment the salary structures and rates of pay from the Nurses Award and the 1995 Award. 53 Clause 19 of the 1998 Agreement deals with the commuted allowance and provides as follows: 19.1 Section 97 employees in receipt of commuted allowance who accept an offer of employment under clause 17.1 of this agreement will receive the relevant salary in column C of schedule two of the Heads of Agreement as outlined. 19.1.1 Such employees may make a once only election at any time during the term of the agreement to convert to being paid penalties as worked in lieu of commuted allowance and then translate to column B in schedule two of the Heads of Agreement [sic] 19.1.2 Section 97 employees not in receipt of commuted allowance who accept an offer of employment under clause 17.1 of this agreement will translate to the salary point in column B of schedule two of the Heads of Agreement. 19.2 The parties agree to apply the increases as prescribed in clause 22.1.1 to commuted allowances. 54 Clause 23.1 of the 1998 Agreement is intended to reflect cl 5.4 of the Heads of Agreement and provides: 23.1 Employees in receipt of commuted allowance 23.1.1 Employees who as at 19 December 1997 were employees of the Department and in receipt of commuted allowance at that date; and 23.1.2 who are translated to grades and salary points in accordance with schedule 2 of the Heads of Agreement; and 23.1.3 where after all adjustments to salaries and commuted allowance referred to in clause 22.1.1 are in receipt of a total amount of salary and commuted allowance that is greater than employees of the same classification level who work similar roster patterns but not in receipt of commuted allowance ("specific employees"); 23.1.4 that total amount will be maintained ("maintenance provisions") until the total amount of salary and weekend and public holiday rates of "specific employees" reaches the total amount of salaries and commuted allowance of employees under the "maintenance provisions". 55 Clause 24 of the 1998 Agreement contains provisions about the maintenance of conditions. Clause 24.3 provides: 24.3 Substituted leave 24.3.1 Any employee who has an entitlement to the payment of commuted allowance (while they maintain such an election), or is otherwise in receipt of substituted leave will continue to receive the same amount of leave per year as an employee of the employer that they would have received had they remained an employee of the department. 24.1.1 That entitlement continues to be seven weeks and one day of leave per year. For employees not in receipt of the commuted allowance, the effect of cl 35.1.1 of the 1998 Agreement is to provide for five weeks' annual leave. 56 The 1998 Agreement contains separate sets of provisions dealing with Registered Psychiatric Nurses (Pt 4) and Psychiatric State Enrolled Nurses and Psychiatric Services Officers (Pt 5). For present purposes, the relevant provisions are in substance the same. Clause 34 (relating to Registered Psychiatric Nurses) contains provisions for allowances. They include a higher duties allowance (cl 34.1), a meal allowance (cl 34.2), a uniform and laundry allowance (cl 34.7) and a vehicle allowance where an employee is required to provide his or her own mode of conveyance in connection with his or her duties (cl 34.8). Of particular importance for present purposes are the following provisions of cl 34: 34.5 Saturday and Sunday work 34.5.1 Payment for all ordinary work performed between midnight Friday and midnight Sunday (inclusive) shall be paid for at the rate of time and one half. 34.5.2 If the Saturday or Sunday work involves duty in excess of the prescribed ordinary rostered hours the excess period shall be paid at the rate of double time. … 34.6 Shift allowances 34.6.1 Morning and afternoon shifts In addition to any other rates prescribed elsewhere in this agreement employees whose rostered hours of ordinary duty finish between 6.00 pm. and 8.00 am. or commence between 6.00 pm. and 6.30 am. shall be paid an amount equal to 2 1/2 per cent of the rate of the allowance rate as prescribed in clause 7.1.2(a) per rostered period of duty per rostered period of duty [sic]. 34.6.2. Night shift In the case of an employee working on any rostered hours of ordinary duty, finishing on the day after commencing duty or commencing after midnight and before 5.00 am he or she shall be paid an amount equal to 4 per cent of the allowance rate as prescribed in clause 7.1.2(a) for any such period of duty and provided further that in the case of an employee permanently working on any such rostered hours of ordinary duty shall be paid an amount equal to 5 per cent of the allowance rate as prescribed in clause 7.1.2(a). 34.6.3 Provided that the shift allowance shall be calculated to the nearest 10 cents, an exact amount of 5 cents in the result going to the higher figure. 34.6.4 Permanently working shall mean working for any period in excess of four consecutive weeks. 57 It is also necessary to take account of cl 35.5, which deals with public holidays. In substance, cl 35.5.4 provides for an entitlement of an employee on duty on certain public holidays to another half day in lieu of that day, an additional half day's ordinary pay and an additional sum equal to a day's ordinary pay for that day. 58 The relevant provisions of Pt 5 of the 1998 Agreement are in cl 41.12 (Saturdays and Sundays), 41.13 (shift allowances) and 42.2.4 relating to public holidays, for which the rate is double time and a half. 59 In the 2004 Agreement and the 2005 Agreement, there is a single set of provisions relating to both Registered Psychiatric Nurses and Psychiatric State Enrolled Nurses as well as other employees.

The terms of engagement of the employees 60 In November 1998, each of the employees named in [5] above received from the respondent a letter of offer of employment by the respondent, signed by the respondent's Executive Director of Human Resources. The letter was in standard form, with such variations as were required to take account of the individual classifications and levels of experience of the particular employee. An example of the terms is provided by the letter dated 25 November 1998, addressed to Charles McGowan: I am pleased to offer you direct employment with Ballarat Health Services as a full time Psychiatric Clinic Nurse Specialist at the hourly rate of $21.44. In addition, penalty rates and shift allowances will be paid for weekend and/or shiftwork when worked. In the event that you elect to retain your current commuted allowance your revised hourly base rate will be $19.85, plus your commuted allowance of $135.77 gross per week. If you accept this offer your direct employment with Ballarat Health Services will take effect from the first full pay period following notification of acceptance. The terms and conditions of your employment will be as per the Ballarat Health Services Psychiatric Services Certified Agreement 1997. A copy of the Agreement is available for your perusal through your Manager. … To indicate your acceptance of this direct offer of employment with Ballarat Health Services please sign and date both copies of this letter, returning one copy to the Human Resources Department no later than Monday, 30th November, 1998. At the foot of the letter, each of the relevant employees was asked to sign under two statements. The first was: I agree to the cessation of my employment with the Department of Human Services effective from the first full pay period following my acceptance of Ballarat Health Services direct offer of employment under the terms and conditions of the Ballarat Health Services Agreement, 1997, and as detailed in this letter. The second statement was: I do/do not (delete as appropriate) wish to retain my commuted allowance. Each of the relevant employees signed in both places. All of them indicated their choice to retain the commuted allowance. A number of them deleted the word "direct" in the four places in which it appeared, and wrote the word "ONGOING" in its stead. It appears that they took this step because an organiser of the applicant's Victoria No. 2 Branch had taken the view that the standard form letter sent by the respondent did not conform to the terms of the draft letter in the relevant schedule to the Heads of Agreement. On 23 November 1998, that organiser wrote a letter to the respondent requesting that the letters be withdrawn because of that disconformity, requesting that the letter of offer include the words "ongoing employment", in accordance with the schedule to the Heads of Agreement, and expressing concern that the respondent did not accept that certain "backpayments" should apply. 61 In addition, the respondent put in evidence two documents in which the applicant was apparently reporting to its members in relation to issues of the terms of their employment and the 1998 Agreement. One document, bearing the name of the State Secretary of the Victoria No. 2 Branch of the applicant, is dated 13 October 1997. The other is a newsletter, bearing the name of an organiser, and dated 27 April 1999. The significance of these documents is said to be that, among the issues dealt with, there is no mention of the issue of shift allowances for those entitled to the commuted allowance.

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.

The appropriate orders 82 As I have said, counsel for the applicant submitted a minute of the orders sought by the applicant, in the event that it was successful. Those orders include several declarations to the effect that the respondent has "breached" legislative provisions by failing to pay the employees named in the amended statement of claim the shift allowances payable to them under the 1998 Agreement, the 2004 Agreement and the 2005 Agreement. Declarations that record contraventions are of limited value. They are not true declarations of right. In the present case, it is appropriate to make a declaration of right, to the effect that the respondent has an obligation to pay to employees in receipt of the commuted allowance shift allowances in respect of work performed by them on Saturdays, Sundays and public holidays. 83 As the applicant has expressly abandoned its claims for penalties, those claims should be formally dismissed. 84 The proposed orders also included orders for payment to the named employees, expressed in general terms. As there has been agreement between the parties as to the identities of the employees and the amounts owing to them, an order should be made in specific terms, requiring the appropriate payment to be made to each employee, subject to any obligation falling on the respondent to deduct amounts by way of taxation and to remit those amounts to the Commissioner of Taxation. 85 The proposed orders also include an order for the payment of interest, in terms that do not specify the rate or rates of interest, or how interest is to be calculated. The calculation of interest potentially raises substantial difficulties. There is not a single sum owing to any employee from a particular date. Rather, there are shift allowances unpaid in respect of various pay periods, for which payment has otherwise been made on particular days. It will be necessary for interest to be calculated on each unpaid amount, from the day when that amount ought to have been paid, with the interest calculation being made progressively as the total accumulates. So far as the rate is concerned, I have chosen the rate now prescribed by r 39.06 of the Federal Court Rules 2011. In the order, however, I have left it open to the parties to agree on interest. If the time and expense involved in making the precise calculation can be avoided, this would be desirable. 86 Finally, this is a case in which no order for costs can be made, because of s 347 of the Workplace Relations Act (as it stood before the amendments made by the Work Choices Act), s 824 of the Workplace Relations Act (as it stood after those amendments) and s 570 of the Fair Work Act. Accordingly, there will be no order as to the costs of the proceeding. I certify that the preceding eighty-six (86) numbered paragraphs are a true copy of the reasons for judgment herein of the Honourable Justice Gray.

Workplace Relations Act 1996(Cth)ss 4, 4(1), 170LJ, 170LT, 178(1), 178(6)-(7), 179A, 328, 347, 717, 717(a), 717(a)(iv), 718(1), 718(6), 719(1), 719(6), 719(9), 722, 824, 846

Workplace Relations Amendment (Work Choices) Act 2005(Cth)

Mental Health Act 1986(Vic)s 97

Work Choices Act, the Workplace Relations Regulations 2006(Cth)

Health Services Union v Ballarat Health Services

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