Fair Work Act 2009

s.739 - Application to deal with a dispute

Application to deal with a dispute - whether wages clause applies to employees of labour hire entities - construction of clause - provision not a 'site rates' clause

[1] This decision concerns an application made by the National Union of Workers (NUW) under s.739 of the Fair Work Act 2009 (Act) for the Commission to deal with a dispute in accordance with the dispute settlement procedure in clause 13 of the CHEP Altona (Vic) Service Centre Enterprise Agreement 2015 (Agreement).[1]

[2] CHEP Australia Limited (CHEP) operates a pallet service centre in Altona, Victoria. It employs employees whose employment is covered by the Agreement, and engages labour hire agencies to provide it with additional labour. The agencies send their own employees to undertake work for the company at the Altona site. The labour hire workers are typically casual employees of the relevant agency.

[3] The present dispute concerns whether clause 29.2(c) of the Agreement imposes an obligation on the company to ensure that employees of labour hire agencies receive the rates of pay afforded to employees of CHEP, namely the rates contained in Appendix B of the Agreement.

[4] The application was listed before me for conference, and thereafter for mediation, pursuant to the steps in the dispute resolution provision in clause 13 of the Agreement. The matter remained unresolved, and the NUW sought to have its application proceed to arbitration. CHEP initially foreshadowed jurisdictional objections to the Commission arbitrating the matter however these objections were ultimately not pressed. It was therefore common ground, and I agree, that the Commission is authorised to arbitrate the dispute under clause 13 of the Agreement.

[5] I issued directions for the filing and service of submissions and evidentiary material. The parties complied with these directions. They requested that I determine the matter on the papers, and after reviewing the materials filed, I considered that it was appropriate for me to do so.

[6] The parties agreed that the dispute could be resolved by the Commission determining the following question:

'Does clause 29.2(c) of the CHEP Altona (Vic) Service Centre Enterprise Agreement 2015 (the Agreement) impose an obligation on CHEP Australia Limited to ensure that labour hire workers who are engaged to perform work at 385-395 Grieve Parade, Altona North Victoria in accordance with the classification system of the Agreement, are paid the rates contained in Appendix B of the Agreement at a minimum?'

[7] Clause 29.2 of the Agreement provides as follows:

a) Base wages to be applied from the first full pay period on or after the date specified:

b) The wage rates set out in the table contained in Appendix B are inclusive of all allowances, except for the afternoon and night shift penalties, the first aid allowance, meal allowance and casual loading.

c) Unless otherwise provided for in another part of this Agreement the minimum rate that shall be applied to any person engaged to perform work in accordance with the classification system shall be as contained in Appendix B.'

[8] Appendix B sets out weekly and hourly rates of pay for each of six classifications, from Grade 1 through to Grade 5b. It also specifies the rate increases that apply on each of three dates during the nominal life of the Agreement.

[9] The essence of the dispute lies in the union's contention that an employee of a labour hire agency is a 'person engaged to perform work in accordance with the classification system' under clause 29.2(c). It says that the word 'person' refers to employees of CHEP and contractors alike. The company maintains that employees of labour hire firms are not covered by the classification system, and that properly construed, the reference to 'any person' in clause 29.2(c) means a CHEP employee, and does not include a labour hire worker.

[10] The union submits that clause 29.2(c) is a 'site rates' or 'jump up' clause which requires the wage structure in the Agreement to be applied to any person engaged to perform work in accordance with the classification structure, and that this includes employees of labour hire agencies. It advances a number of contentions.

[11] First, the union submits that the plain meaning of clause 29.2(c) is that any 'person' includes employees of CHEP and employees of a labour hire firm. It says that the use of the words 'any person' is a clear departure from the language utilised elsewhere in the Agreement and in particular the use of the word 'employee' in clauses where obligations relate exclusively to direct employees. The union submits that the inference to be drawn from this contrast is that clause 29.2(c), unlike other clauses in the Agreement, is intended to have a wider application, so as to capture employees of labour hire agencies.

[12] The union further contends that the Agreement contemplates a distinction between 'direct' and 'indirect' employees and how different clauses will affect them respectively. In this regard, clause 16.7(a) states that it 'applies only to Company employed casuals'. On the other hand, clause 16.8 institutes a separate 'casual conversion' process for 'indirect supplementary casual labour' who may apply for a 'direct casual vacancy'. Thus, the union says, where the Agreement provides for differing entitlements dependent on a person's direct or indirect employment status, it draws this distinction; the words 'any person' in clause 29.2(c) make no such distinction and therefore encompass workers regardless of their employment status, or their employer.

[13] Thirdly, the NUW says that its construction of clause 29.2(c) is supported by the way in which the company has applied the Agreement in the past. It says that the parties clearly understood the effect of clause 29.2(c) to be a 'jump up/site rates' clause requiring the company to ensure that both direct and indirect employees would be paid the rates in Appendix B. The union says that clause 29.2(c) was not the subject of any discussions during the negotiation of the Agreement, and that until recently the company ensured that any persons (including labour hire workers) engaged to perform work under the classification structure at the Altona site received the wages set out in Appendix B. The union says that this practice ceased only in late 2017, when labour-hire workers began receiving Award rates.

[14] Finally, the union contends that it is not apparent what work clause 29.2(c) has to do, other than to operate as a 'site rates' clause. It says that it is already clear that employees covered by the Agreement (i.e. CHEP employees) are paid in accordance with Appendix B, because clause 29.2(a) states that the base rate will be applied from the first full pay period on or after the date specified, and the wage table in Appendix B is clearly labelled 'Base rate of pay = ordinary day/weekly rate'. The union says that the company's construction of clause 29.2(c) renders it redundant.

[15] CHEP contends that clause 29.2(c) is not a site rates clause, and that it does not require the company to ensure that employees of labour hire agencies receive the rates in Appendix B of the Agreement.

[16] First, it says that the use of the words 'any person' rather than 'employee' is merely loose drafting, and that the proper meaning of the words is to be understood in the context of the clause and the Agreement as a whole.

[17] Secondly, CHEP submits that the words 'any person' also appear in clause 4.3 of the Agreement, which states that, to avoid doubt, the Agreement has no application to 'any person employed' in the position of Service Centre Manager or Service Centre Supervisor. CHEP says that the reference here to 'any person' means 'employee'. However, this is obviously the case, because the sentence in question uses the word 'employed'. The clause deals with the application of the Agreement, and is clearly referring to employment by the company. It does not inform the meaning of the words 'any person' in clause 29.2(c), where no use is made of the word 'employ'.

[18] Thirdly, the company contends that site rates clauses generally use explicit, rather than oblique or general language to establish the obligation of the employer to ensure that employees of contractors receive the rates applicable to its own employees. It submitted that such clauses are usually hotly contested, and that the Commission should be loath to infer the existence of such an obligation in the absence of clear words. To this the NUW says that there are clear words, namely the use of the words 'any person' in clause 29.2(c).

[19] Fourthly, CHEP contends that the history of clause 29.2, which has been found in enterprise agreements binding on CHEP dating back to 2009, supports its interpretation of the provision. It submitted that clause 29.2(c) first appeared in the CHEP Altona (Vic) Service Centre Enterprise Agreement 2009 (2009 Agreement). While the company historically did have arrangements whereby employees of contractors received site rates, these were of the company's choosing, rather than the product of any perceived legal obligation. The company asserted that it has made some 60 agreements since 2009, and has not agreed to a 'site rates' clause in any of them. CHEP also contended that the NUW made a claim for a site rates clause in its log of claims for the 2012 enterprise agreement, which the company says provides evidence that the union did not consider clause 29.2(c) (which was already in the relevant enterprise agreement) to be such a clause.

[20] The principles that apply to the interpretation of an enterprise agreement were summarised by a Full Bench of the Commission in AMWU v Berri Pty Ltd[2] (Berri), drawing on the earlier Full Bench decision in AMIEU v Golden Cockerel Pty Ltd.[3] The Full Bench in Berri affirmed that the interpretation of an enterprise agreement, like that of a statute or contract, begins with a consideration of the ordinary meaning of the relevant words. The resolution of a dispute over the interpretation of an enterprise agreement will turn on the language of the agreement, having regard to its context and purpose. Context might appear from the text of the agreement as a whole, the disputed provision's place and arrangement in the agreement, and the legislative framework under which the agreement was made.[4]

[21] The ordinary meaning of 'any person' in clause 29.2(c) clearly connotes both an employee of CHEP and an employee of a labour hire agency, as well as any other person. However, these words are not to be read in isolation. They appear in the last of three sub-paragraphs concerning wage rates, which appear as a group in clause 29.2 as the second of four sub-clauses relating to classification and wage rates.

[22] Clause 29.1 states that Appendix A contains the classification structure. The Appendix in turn sets out five classifications, and detailed descriptors. The classification structure is replete with references to 'employees'. It is quite clear that these are references to employees of CHEP. Clause 4.2 states that the Agreement applies to the company and 'the employees'; this can only mean employees of CHEP. Under the Act, an enterprise agreement can only apply to an employee who is covered by it (s.52(1)). An agreement covers employees if it is expressed to cover them (s.53(1)). The Act makes clear that a reference to an enterprise agreement covering an employee is a reference to coverage in relation to particular employment (see s.53(6)). That 'employment' must be employment with the employer who is covered by the Agreement (see ss.172(1) and (2)). An enterprise agreement cannot cover the employment of employees who are not employed by that employer. By contrast, an agreement can impose an obligation on an employer to observe a site rates clause, such that it must ensure that employees of contractors are afforded rates that are no less generous than those paid to its own employees. Employees of contractors may benefit indirectly from such a clause, but they are not covered by the clause or by the agreement more generally, nor does the relevant enterprise agreement 'apply' to employees of a third party.

[23] Next, clause 29.2(a) states: 'Base wages to be applied from the first full pay period on or after the date specified: Refer: Appendix B'. Appendix B sets wage rates for the various classifications in the usual way. Clause 29.2(b) then says that the wage rates in Appendix B are inclusive of various allowances. Nothing to this point is suggestive of the clause having implications for persons who are not employees of CHEP, nor has there been an express statement that the wages in the Appendix must be paid to employees of CHEP.

[24] Then comes clause 29.2(c): 'Unless otherwise provided for in another part of this Agreement the minimum rate that shall be applied to any person engaged to perform work in accordance with the classification system shall be as contained in Appendix B.' It does not appear that the Agreement has 'otherwise provided' for a departure from the rates in Appendix B. Perhaps, as the company contended, clause 4.3 could be an example of such a departure; however this provision is really directed at the scope of the Agreement, and excluding certain types of employees from it, rather than other arrangements for wages.

[25] Clause 29.2(c) says that the rates in Appendix B 'shall be applied to any person engaged to perform work in accordance with the classification system.' Potential support for the union's interpretation comes both from the words 'person' and 'engaged'. The former could include a person who is an employee of a contractor; and it would be meaningful to speak of such a person being 'engaged'. However, the company does not 'engage' the agency worker; it engages the agency, which provides its employees to CHEP. The clause does not say it applies to any person engaged in work in accordance with the classification structure, but rather any person engaged to work. This means engaged to work by CHEP.

[26] Another difficulty confronting the NUW's interpretation of clause 29.2(c) is that the provision is framed with reference to work performed 'in accordance with the classification system'. In my view, an agency worker does not perform work 'in accordance with the classification system'. The words 'in accordance with' can mean either 'in compliance with' or 'in conformity with'. The latter meaning, but not the former, might on one view be broad enough to accommodate the union's construction. But it seems to me that this would involve some straining of the ordinary meaning of the words. As a matter of ordinary industrial parlance, only CHEP employees work 'in accordance with the classification system' in the Agreement. Some adaptation of the classification structure would be required to have it meaningfully apply to persons who are not employees of CHEP. Labour hire workers might perform precisely the same work as CHEP employees, but their engagement would not 'comply with' or 'conform to' the classification structure. Rather, their working arrangements would correspond to or mirror or reflect the classification system.

[27] In my view, although the word 'person' could include an agency worker, subparagraph (c) as a whole tells against this construction. The union's interpretation would have the provision mean that the wages in Appendix B apply to any person (including agency workers) engaged (by the agency, which is engaged by the company; or perhaps by engaged the company through the agency) to perform work in accordance with (meaning work equivalent or corresponding to, rather than in compliance or conformity with) the classification system.

[28] I have considered whether the word 'applied' might assist the union's construction. On one view, it would be consistent with common English usage to 'apply' a minimum rate of pay for company employees to other persons such as agency workers; but this would presuppose that the text of the Agreement otherwise established that the rates were binding on the company in respect of its own employees. However, clause 29.2 does not otherwise explicitly state that the rates are to be applied to CHEP employees; clause 29.2(a) contains only the phrase 'base wages to be applied from the first full pay period on or after the date specified'. This concerns the timing of the payment, not the question of to whom they must be paid. Further, as a matter of ordinary language one would refer to a minimum rate being 'applied' also to company employees.

[29] The union contended that if clause 29.2(c) does not apply to agency workers it is redundant. That is not correct. No other provision states that employees are to be paid the rates in Appendix B. Perhaps so much is clear from the mere presence of rates of pay in the Appendix next to various classifications. But there is nothing unusual about the inclusion of a substantive provision in an enterprise agreement specifically stating that wage rates in an appendix must be paid to employees. Clause 29.2(c) serves this purpose.

[30] The foregoing analysis of clause 29.2 supports the company's interpretation. So too does consideration of other provisions in the Agreement.

[31] Clause 16.8 is entitled 'flexible labour arrangements' and deals variously with employees of contractors. Clause 16.8(a) provides that, where 'workers' have been engaged for at least six months as 'indirect supplementary casual labour' at the site, and the company determines that a full-time permanent vacancy exists, the worker will have an opportunity to apply for the vacancy. Clause 16.8(b) concerns the company making offers of 'direct casual employment', evidently to indirect supplementary casuals. Clause 16.8(d) states that 'nothing in this clause prevents the company from exercising its prerogative to manage business practice or arrangements with any third party provider.'

[32] Clause 16.8 would have been the logical place to include a site rates provision. I take note of the union's contention that clause 16.8 is part of a provision dealing with types of employment, and that wages are dealt with in clause 29. But clause 16.8 is the only provision that deals explicitly with contract labour, and one would expect some reference to a site rates undertaking (even a cross reference), had one been intended, particularly in light of clause 16.8(d).

[33] The prerogative of the company under clause 16.8(d) to 'manage arrangements' with third party providers is cast in broad and general terms. The union submits that the introductory words in clause 16.8(d) state only that 'nothing in this clause' prevents the company from exercising this prerogative, but that a different clause, namely clause 29.2, does affect that prerogative. However, in my view, the words 'nothing in this clause' reflect the fact that it is only clause 16.8 that deals explicitly with contractor arrangements.

[34] The union's reply submissions contended that clause 16.8(d) should be read in the context of the case law relating to permitted and non-permitted matters. Whereas site rates clauses have been found to pertain to the employment relationship between an employer and employees, clauses which prevent employers from engaging third parties altogether do not so pertain, and are therefore not permitted matters. Clauses requiring an employer to offer labour hire workers permanent employment or cease engaging them were recently held to be non-permitted matters, as they went beyond the nexus with employees' job security. Rather, such clauses imposed a non-permitted limitation on the employer's managerial prerogative to engage contractors or supplementary labour hire.[5] The union contended that the purpose of clause 16.8(d) is to ensure that clause 16.8 remains valid by disavowing any intention to curtail the employer's right to engage contractors.

[35] I accept the union's submission that clause 16.8(d) may be concerned with the validity of clause 16.8 (note that if the relevant provisions were non-permitted matters, they would have no effect by virtue of s.253). I also agree with the union's submission that clause 16.8(d) would not prevent clause 29.2(c) from enhancing the job security of direct employees covered by the Agreement by ensuring that supplementary labour hire cannot be engaged on terms that undercut the Agreement, if that is what clause 29.2(c) actually does. But in my opinion, clause 29.2(c), properly construed, does not word in this way. Further, although clause 16.8(d) might be concerned with the validity of clause 16.8, it still means what it says: the company is not prevented from exercising its prerogative to manage business practice or arrangements with any third party provider, such as by engaging the labour hire provider on the basis of rates of pay that it considers appropriate. Again, had clause 29.2(c) really been intended as a site rates clause, it is likely that the framers of the document would have taken care specifically to preserve it from the effect of clause 16.8.

[36] Clause 16.8 deals with agency workers in resplendent clarity. By contrast, if the union's interpretation of clause 29.2(c) is accepted, the framers of the document, and those who voted on it, were content to have general language (in particular, the words 'any person') bind the company to a site rates obligation. In my view, it is improbable that explicit language would not have been used to establish such an obligation.

[37] Further, with reference to the observation in Berri that a provision's 'place and arrangement' in an agreement may be contextually relevant,[6] I note that it would be unusual for a site rates clause to form part of a wages provision, setting rates of pay that apply to employees of the company and contractors alike. There is a substantive legal reason for this. A valid site rates clause is directed at the job security of employees of the employer that is covered by the agreement, by ensuring that, if the employer uses labour hire workers, those workers will not receive rates that undercut the wages of employees. According to the case law, this is a permissible limitation on the employer's use of contractors, being one that pertains to the employer's relationship with its own employees, and hence to the employment relationship (see s.172(1)(a)). To the extent that a provision set actual rates of pay for employees of contractors, it would be of a different character, pertaining rather to the relationship between the employer and third parties. It is difficult to see how such a provision could be a permitted matter.

[38] Finally, I draw attention to clause 16.7, which deals with casual employment. Clause 16.7(a) states that the clause applies 'only to company employed casuals.' Clause 16.7(d) provides that a casual employee 'shall be paid per hour 1/38th of the weekly rate of the relevant classification for the work performed', plus a loading of 25%. Clause 16.8(c) says that where an offer of direct employment is made to an agency worker and that offer is accepted, 'the employee will automatically be known as a casual for the purpose of clause 16.7 and be subject to all relevant terms and conditions.' Such a person (now an employee of CHEP) will then be entitled to the benefit of clause 16.7(d) and the wages in Appendix B. Otherwise, as an employee of a labour hire agency, the rates in Appendix B have no application to that person.

The parties' conduct and the history of the instrument

[39] An analysis of the text of the Agreement is sufficient to determine the present matter. However, I wish to address briefly the parties' submissions concerning their past conduct and the history of the Agreement.

[40] The NUW contended that throughout the life of the Agreement, the company had ensured that all workers (including labour hire workers) received the wages set out in Appendix B, and that this reflected the common understanding of the parties.

[41] For its part, the company contended that during the negotiations for the immediate predecessor of the Agreement, the CHEP Altona (Vic) Service Centre Enterprise Agreement 2012, the NUW made a claim for that agreement to include a term that provided for equal rates of pay for labour hire workers and company employees alike.[7] The company contends that the union would not have made a claim for rate parity for labour hire workers in connection with the negotiations for the 2012 Agreement, if it had already achieved this in the 2009 Agreement (which contained the same wording as clause 29.2(c) of the Agreement).

[42] As explained in Berri, in some cases it will be appropriate to have recourse to the surrounding circumstances in considering the construction of an enterprise agreement. And conduct subsequent to the making of an agreement may in some circumstances be relevant to the interpretation of the agreement.[8] However, such conduct must concern a common understanding of the provision in question. There are evidentiary difficulties confronting a party that seeks to identify the other party's understanding of the provision by ascribing motivations to its conduct. Thus, the union's 2012 claim for a site rates clause does not demonstrate that it must have considered there to be a need for such a clause (i.e. that clause 29.2(c) was not such a clause). The union may have sought simply to clarify the matter in order to avoid disputes such as the present one. Or the claim may simply have been part of a template log of claims. It is difficult for one side to establish the motivations of the other.

[43] Further, gleaning interpretative significance from the historical motivations and conduct of the employer and the union in connection with an agreement should be approached with some caution. Under the Act, an enterprise agreement is made when employees vote to approve it. There are no 'parties' to an enterprise agreement, unlike under earlier legislation. There is no reason to think that the understanding of the employer or the union (even if a mutual understanding) is necessarily determinative of a question of interpretation. Of course, an employer and a bargaining agent such as a union may play a special role in facilitating communications with employees. What the employer and the union have relayed to employees about the terms of the Agreement, whether through the pre-approval processes in s.180 of the Act or otherwise, may be very relevant. However, the interpretation of an agreement must take account of the central relevance of employees in the agreement-making framework of the Act.

[44] In the present matter, I consider that clause 29.2(c) has a plain meaning. It is not ambiguous. The mere fact that two parties present respectable but conflicting interpretations does not mean that the provisions concerned must be ambiguous. The etymology of the word reflects Latin roots meaning to drive both ways. In this case, there are contentions in favour of the union interpretation. But in my opinion the company's interpretation is the correct one.

[45] Taking into account the ordinary meaning of clause 29.2(c), in the context of clause 29 and the Agreement as a whole, it is clear that the provision is not a site rates clause. Although it uses the word 'person' rather than 'employee,' it connotes an employee of CHEP. An employee of a labour hire firm is not a person engaged to perform work 'in accordance with the classification system' in the CHEP Agreement. Clause 29.2 is not concerned with arrangements affecting contractors and their employees.

[46] For the above reasons, the answer to the question posed by the parties for determination by the Commission is 'no': clause 29.2(c) does not impose an obligation on CHEP to ensure that labour hire workers who are engaged to perform work at the Altona site are paid the rates contained in Appendix B of the Agreement.

National Union of Workers further submissions: 15 June 2018

[2] [2017] FWCFB 3005

[3] [2014] FWCFB 7447

[4] See point 1 in paragraph 114 of Berri; and point 8 of paragraph 41 of Golden Cockerel

[5] AMWU v Visy Board Pty Ltd [2018] FWCFB 8

[6] Berri, above, at [114], principle 1(ii)

[7] Statement of Bidisha Raychaudhuri at [14]

[8] Berri, above, at [114], principle 15

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