Shop, Distributive and Allied Employees' Association v Target Australia Pty Ltd

1. For an employee going on annual leave, 'ordinary time earnings' in cl 7.2.10 of the Target Australia Retail Agreement 2012 (Agreement) includes: (a) payment for ordinary hours worked in accordance with the classification rates under cl 5.1 of the Agreement; and (b) payment of any applicable penalties in accordance with cl 6.1.3 of the Agreement.
2. For an employee going on annual leave, 'ordinary time earnings' in cl 7.2.10 of the Agreement does not include: (a) any allowances payable pursuant to cl 5.2 of the Agreement; and (b) any entitlements payable by reason of additional hours worked by way of overtime in accordance with cl 6.5 or in accordance with cl 4.2.4 of the Agreement. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BANKS-SMITH J: 1 The applicant (Association) brought an application on behalf of relevant retail employees seeking a declaration as to the construction of cl 7.2.10 in the Target Australia Retail Agreement 2012 (Agreement), and in particular the meaning of 'ordinary time earnings'. 2 I delivered reasons in Shop, Distributive and Allied Employees' Association v Target Australia Pty Ltd [2021] FCA 1038 (construction reasons) and invited the parties, absent agreement, to provide an appropriate form of declaration consistent with the reasons. I have received competing minutes and submissions in support. These reasons assume familiarity with the construction reasons, and adopt the same defined terms. 3 At [133] I concluded that: … for an employee going on annual leave, 'ordinary time earnings' in cl 7.2.10 includes pay at the classification rates under cl 5.1 for their ordinary hours including penalties payable for any such hours under cl 6.1.3. It does not include allowances under cl 5.2, or take into account additional hours worked by way of overtime or in accordance with cl 4.2.4. 4 The competing minutes raise two issues, only one of which requires supplementary attention. 5 The Association contends that 'over-award payments' are covered by 'ordinary time earnings'. 6 It points to the fact that by its originating application the declaration it sought as to an employee's payment relating to annual leave would also include over-award payments. So much can be accepted (see [10] of the construction reasons). However, apart from superficial references to that claim in the written and oral submissions, no substantive submission was made or developed explaining why as a matter of construction of the Agreement, such payments should be included. There was reference by footnote relevantly to Colour Craft Painting Service v Nightingale [1999] WASCA 167 at [25]-[29]: but that authority concerns the statutory meaning of 'weekly earnings' for the purpose of workers compensation obligations and in the context those words were clearly taken to comprehend earnings both by contract and under an award. The provision in question expressly contemplated the inclusion of amounts paid under any contract. The decision does not assist in this case. 7 The statement of agreed facts (summarised at [63] of the construction reasons) did not refer to any such payments. I do not know the terms of any agreements or other arrangements that may provide over-award payments to employees and I accept Target's submission that any such arrangements fall outside the scope of the Agreement. The terms of any such arrangement may well limit or qualify when or how those over-award payments apply. It remains for Target to consider what obligations might be owed separately under a contract or other arrangement, and the impact (if any) of those terms on its obligations under the Agreement. It is not a matter upon which the Court should speculate or make assumptions when asked to grant declaratory relief. 8 The approach in the construction reasons was to ascertain entitlements that are covered by cl 7.2.10. That task involved determining the meaning of the phrase 'ordinary time earnings' and the entitlements of Target employees covered by the Agreement that might fall within the ambit of that phrase. 9 In that context I had regard to cl 5.4.2, being the only provision in the Agreement that purports to define 'ordinary time earnings'. However, as explained, that definition is included for the purpose of ascertaining Target's superannuation obligations. 10 Insofar as the definition in cl 5.4.2 refers to classification rates, penalty rates and allowances that form part of the weekly rate of pay, such entitlements are provided for by the Agreement. For example, the Agreement itself provides for rates of pay and their classifications (cl 5.1), penalty rates (cl 6.1.3) and allowances (cl 5.2). In my view there was consistency in concluding that such amounts were also covered by the term 'ordinary time earnings' where used in cl 7.2.10, and there was no apparent reason to exclude them, taking into account the other principles of construction to which I had regard. 11 In contrast, the Agreement itself does not provide for over-award payments or adopt or expressly incorporate the terms of any separate agreement for payment of over-award payments. 12 The phrase 'over-award payments' does not appear in the Agreement, save for its inclusion in cl 5.4.2. 13 Although I found that the definition of 'ordinary time earnings' in cl 5.2.4 is relevant to the construction of that phrase where used elsewhere in the Agreement and may operate consistently, I did not find that the definition can be adopted uncritically (see principles at [119]). For example, for the purpose of cl 7.2.10, at [129] I said: … There is no question that cl 5.4 applies to full-time and part-time employees. It is therefore relevant to ask whether it informs the scope of cl 7.2.10. Both clauses are relevant to part-time and full-time employees. There is value in having regard to both, for example in order to consider whether they may operate consistently. The definition in cl 5.4.2 does not apply completely in the context of cl 7.2.10, because its reference to 'casual loadings' in the context of cl 7.2.10 is otiose. But that does not mean that the expression does not or cannot otherwise operate consistently. 14 I did not intend by that statement to suggest that other than for the reference to 'casual loadings', the cl 5.4.2 definition may be adopted and transposed to cl 7.2.10, or otherwise be adopted throughout the Agreement, without any qualifications that the context may require. Rather, I intended to highlight that it is obvious from the reference to 'casual loadings' in cl 5.4.2 that the definition cannot simply be adopted in the case of cl 7.2.10. There must still be a critical analysis as to which elements of it may sensibly also fall within cl 7.2.10. I accept there was some infelicity in my drafting, which may have suggested otherwise. 15 I do not consider that cl 7.2.10 operates so that Target's obligation under the Agreement extends to incorporate whatever obligation it may have, arising by extrinsic and separate agreement with any particular employee, to pay over-award entitlements. In my view whether such entitlements impact obligations under cl 7.2.10 is to be considered on a case-by-case basis, having regard to the terms of the particular separate arrangement. For example, such an arrangement may provide that in the case of a particular employee, an over-award payment is taken to be part of a classification rate under the Agreement, or may be taken to be part of the ordinary time earnings for the purpose of assessing leave entitlements under the Agreement. But there is no evidence before the Court as to such matters. 16 Further, as is apparent from the construction reasons at [126], I consider that the meaning of 'wages' as used in cl 7.2.11 informs the meaning of 'ordinary time earnings' as used in cl 7.2.10 and that they are to be understood consistently. 'Wages', although not defined, are provided for by Part 5 of the Agreement, being 'Wages & Related Matters'. In my view 'wages' where used in cl 7.2.11 is a reference to remuneration entitlements provided for under the Agreement, rather than additional entitlements that might be provided for under any separate contractual agreement. Other uses of the word 'wages' in the Agreement do not direct a different result. Nor does the potential for Target's obligations in respect of superannuation obligations under cl 5.4.2 to be broader if an employee has a separate contractual entitlement to payment of itself direct that its obligation must similarly be broader with respect to annual leave entitlements provided for under the Agreement. 17 Accordingly, ordinary time earnings in cl 7.2.10 is to be understood as including the amounts described at [133] of the construction reasons. 18 Second, the Association submits that the declaration should expressly provide that an employee's entitlement under cl 7.2.10 includes an amount of 17.5% calculated by reference to the amounts that the Court determines are encompassed by the words 'ordinary time earnings'. I accept Target's submission that it is unnecessary to expressly provide for leave loading in that manner. Once the content of 'ordinary time earnings' is understood, cl 7.2.10 operates according to its terms, which includes the additional payment of the 17.5% leave loading. 19 Once the above differences in the proposed orders are addressed, there is largely agreement as to the content of the declarations that should be made. 20 Accordingly, and adopting the drafting in Target's minute with a minor amendment to refer to the relevant overtime provision, I consider the appropriate declarations to be as follows: 1. For an employee going on annual leave, 'ordinary time earnings' in cl 7.2.10 of the Target Australia Retail Agreement 2012 (Agreement) includes: (a) payment for ordinary hours worked in accordance with the classification rates under cl 5.1 of the Agreement; and (b) payment of any applicable penalties in accordance with cl 6.1.3 of the Agreement. 2. For an employee going on annual leave, 'ordinary time earnings' in cl 7.2.10 of the Agreement does not include: (a) any allowances payable pursuant to cl 5.2 of the Agreement; and (b) any entitlements payable by reason of additional hours worked by way of overtime [in accordance with cl 6.5] or in accordance with cl 4.2.4 of the Agreement. 21 The declaration will accordingly be made. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Banks-Smith.