Variation of certified agreement - accrual rate of redundancy payment.

[1] This matter was an application made by Natra Pty Ltd (Natra) pursuant to s.170MD(6) of the Workplace Relations Act 1996 (the Act) for an order to vary the Natra Pty Ltd Certified Agreement 2003 (the Agreement). The application sought to vary the Agreement by inserting an accrual rate calculation table in clause 11 Payment Calculations of Appendix 1 Redundancy Agreement, to have the clause read as follows;

(a) Pay rates in relation to all aspects of this agreement will be the rate used for calculation of overtime. In addition, employees who are on afternoon shift at the time of redundancy will have the appropriate shift allowance included in the calculations. Where an employee has been on afternoon shift over the past year their entitlements will be calculated on a pro-rata basis to reflect the proportion of time they were on the afternoon shift over the period of their employment with Natra Pty Ltd.

(b) The rate of accrual of annual, sick and long service leave entitlements will be as follows:

long service year: 24.7 hours per year to 31 December 1964

32.9 hours per year from 1 January 1965 to 31 March 1998

Nothing in this provision affects the criteria on which an employee's entitlement to annual, sick or long service leave is based."

[2] The variation is said on behalf of Natra to be necessary to overcome an ambiguity and uncertainty in relation to the accrual rate for calculating leave entitlements on redundancy.

[3] The matter has been the subject of industrial action leading to s.99 notification by the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) (C2004/3585), a s.99 notification by Natra (C2004/3839), a s.127(2) application to stop or prevent industrial action by Natra (C2004/3850) and now the instant application which is intended to resolve the issue.

[4] Mr P Hull appeared with leave on behalf of Natra.

[5] Mr M Addison appeared on behalf of the AMWU.

[6] The following witnesses gave sworn evidence during proceedings:

• Ms L Pope AMWU organiser
• Mr G Djalikian AMWU delegate
• Mr B Daley Finance Director Natra
• Mr D Alvis Operations Manager Natra (former)
• Mr M Parow CEO Natra Group, Group General Manager Natra Pty Ltd.

[7] Natra had outsourced payroll and the calculation of redundancy payments over a considerable period and as a result of an internal check determined that the rate of accrual applied was wrong and over-payments were being made. It determined to correct future redundancy payments and has agreed that no refunds will be sought and current redundancies in process will receive the previous calculations, but that after the current round of redundancies it is intended that any uncertainty in the calculation method will be clarified in the proposed variation and future payments will be made at the correct accrual rate.

[8] It was submitted that in the interests of the parties and in the public interest the uncertainties should be removed. Such removal will significantly lessen the chances of industrial action being taken with respect to differences over the correct means of calculating accrued entitlements for annual, sick and long service leave.

[9] It was further submitted that the variations set out are consistent with the provisions of the Metal, Engineering and Associated Industries Award, 1998 - Part I (the Metals award) and industry practice regarding the accrual of annual, sick and long service leave entitlements where the ordinary weekly hours of work are, on average, 38 per week.

[10] It was submitted that an ambiguity and uncertainty arises because of the construction of the redundancy agreement when read in conjunction with the underpinning parent award provisions.

[11] The evidence is that the company applies two periods. One period is the weekly rate divided by 40 (hours) and in certain circumstances (overtime) a weekly rate divided by 38 (hours). There are two rates of pay for each classification at the site. A lower rate for ordinary hours and a higher rate for overtime.

[12] Clause 6 of the redundancy agreement says annual leave accrual is recorded weekly (payslips Exhibit A1), an accrual of 160 hours over a twelve month period. Clause 7 deals with long service leave and refers back to clause 8.2 of the substantive agreement. The 40 hour accrual is unchallenged as the accrual rate for all purposes. Similarly clause 8 of the redundancy agreement refers to untaken sick leave and whether for administrative or other purposes the pay slips disclose an accrual rate based on a 40 hour week. Clause 11 of the redundancy agreement reiterates the rates in relation to the redundancy agreement applying as a separate agreement. There is therefore only one rate not two because in clause 11 the pay rates in relation to all aspects of the agreement will be the rate used for the calculation of overtime. That rate is the weekly rate divided by 38.

[13] The parties have accepted that accruals over at least 15 years operated based on a 40 hour week but also will be paid out in the expressed terms of the redundancy agreement i.e. the weekly rate divided by 38. So there is an ambiguity between the two agreements with a possibility of reading the clauses in two different ways. It is the AMWU submission that a straight forward approach leads to only one conclusion.

[14] AMWU submits that the agreement can be properly varied to reflect the true meaning of the agreement. AMWU is able to submit a draft reflecting its interpretation.

[15] Natra is bound by the Certified Agreement and is entitled to bring the application.

[16] Section 170MD(6) of the Act empowers the Commission to vary the Agreement if it is satisfied there exists an ambiguity or uncertainty in its terms. The relevant words of the Act read:

"(6) The Commission may, on application by any person bound by a certified agreement, by order vary the certified agreement:

(a) for the purpose of removing ambiguity or uncertainty; or...."

[17] The power in this section is to be used to remove the ambiguity or uncertainty and may not be used to rewrite an agreement to install something that was not inherent to the agreement when it was made (CFMEU v Linfox Transport (Australia) Pty Ltd Munro J, 30 June 1998 [Print Q2603))

[18] The uncertainty arises in my view because clause 11 of Appendix 1 of the agreement is silent as to the accrual rate and requires referral to the Metals award and is compounded by a past practice of incorrect calculation on behalf of Natra. The uncertainty is manifest in the industrial action which has occurred.

[19] The agreed terms of settlement in submitting this application were read on to transcript on 20 May 2004 during proceedings for the s.127 application and were as follows;

1. A joint application will be made to vary the certified agreement under s.170MD(6) to remove uncertainty regarding accrual of payment of leave entitlements on redundancy.

2. The parties agree that there is an uncertainty in the certified agreement with respect to these entitlements.

3. The employer will submit a table to the effect that:

(a) the applicable hourly rate to be used is the weekly rate divided by 38;

(b) accruals for annual leave, sick leave and long service leave are to be in accordance with the Metals Award, that is:

4. The employees currently being made redundant will be paid their entitlements based on past practice following the certified agreement being varied to incorporate the above table."

[20] The first step in the process of determining whether or not an ambiguity or uncertainty exists involves an objective assessment (Re Victorian Public Transport Enterprise Agreement 1994 (Ross VP, Polites SDP and Grimshaw C (7 June 1995) [Print M2454]) at pp. 3-4 quoted with approval in Beltana Highwall Mining Pty Ltd by Marsh SDP (3 June 2003) [PR917548].

[21] In Re Tenix the Full Bench asserted that;

"The Commission will generally err on the side of finding an ambiguity or uncertainty where there are rival contentions advanced and an arguable case is made out for more than one contention."

[22] Whether or not the parties agree that an ambiguity or uncertainty exists is not determinative of a jurisdictional fact.

[23] In this matter in my view the method of calculation said in evidence on behalf of the AMWU to be conceded in 2000 negotiations is challenged by Natra and uncorroborated by the AMWU. In any event it was said by AMWU in submissions, its case is supported by an objective reading. I am not persuaded so, although the evidence of union representatives and the industrial action of employees suggests there is at the very least uncertainty.

[24] The terms as expressed in the variation sought by Natra are consistent, in my view, with one reading of the clause in conjunction with the relevant underpinning Metals award. For the reasons expressed above and my knowledge of the position of employees expressed during conferences, I find that an uncertainty objectively exists because the intention is not clearly expressed.

[25] In Re Tenix the Full Bench went on to say;

"Once an ambiguity or uncertainty has been identified it is a matter of discretion as to whether or not the agreement should be varied to remove the ambiguity or uncertainty. In exercising such a discretion the Commission is to have regard to the mutual intention of the parties at the time the agreement was made." (at para 32)

[26] I am not persuaded on the evidence that Natra entered into any verbal agreement with AMWU to pay a higher accumulation rate nor gave a concession to continue such a practice by asserting it either existed or would continue to exist (transcript PN 81 Ms Pope).

[27] On all that was before me I am satisfied that had the parties intended another form of calculation at the time of agreement in 2000 or employees at that time believed that such was the case and should continue, clause 11 would have precisely expressed such alternative accrual rate. I am confident that the Agreement expressed in the form now sought in this application was what was supported by the valid majority and had it been the case no uncertainty would have arisen.

[28] The industrial action and uncertainty arises in response to the change from past practice and the absence of a table for guidance. The change occurred due to outsourcing of the payroll and an incorrect calculation by Options Services and the confusion emanated from the company's desire to rectify the matter.

[29] I am satisfied that I should exercise the discretion available to the Commission and the variation as sought should be approved to make the entitlements clear and to remove the potential for further industrial action, notwithstanding the statements in conference on behalf of Natra that further redundancies within the terms of the current agreement are not planned at this time.

[30] The order shall come into force from the beginning of the first full pay period commencing on or after 2 June 2004 and shall remain in force for the term of operation of the Agreement.

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