AM2014/92, Transcript of Proceedings [2015] FWCTrans 174 (26 March 2015)

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VICE PRESIDENT HATCHER
SENIOR DEPUTY PRESIDENT HAMBERGER
DEPUTY PRESIDENT GOSTENCNIK
COMMISSIONER JOHNS

s.156 - Four yearly review of modern awards

Four yearly review of modern awards
(AM2014/92)
Timber Industry Award 2010

(ODN AM2008/58)
[MA000071 Print PR988930]]

PN1

VICE PRESIDENT HATCHER: Thank you, can I have appearances, please. Thank you.

PN2

MR R CALVER: If it please the Commission, Calver, initial R, Master Builders Australia.

PN3

VICE PRESIDENT HATCHER: Thank you.

PN4

MR M HARDING: If it please the Commission, Harding, initial M, and I seek permission to appear as counsel for the CFMEU.

PN5

VICE PRESIDENT HATCHER: Yes. All right.

PN6

MS J GHERJERTANI: Gherjertani, initial J. I appear for the Australian Workers Union.

PN7

VICE PRESIDENT HATCHER: Yes.

PN8

MR J MORIATY: Moriaty, initial J. I appear on behalf of the AMWU.

PN9

VICE PRESIDENT HATCHER: Yes.

PN10

MS G STARR: If it pleases the Commission, Starr, S-t-a-r-r, initial G. I appear on behalf of the ACTU.

PN11

VICE PRESIDENT HATCHER: Thank you. I think we’re informed that Ms Adler from the HIA wants to appear but is running late or something of that nature. To the extent there has been applications for permission for lawyers to appear, is there any opposition?

PN12

MR CALVER: No, your Honour.

PN13

VICE PRESIDENT HATCHER: Thank you. Mr Calver.

PN14

MR CALVER: May it please the Commission, it’s required by the directions dated 5 December 2015, that asked that we file a written submission in this matter; submission dated 18 January 2015. My understanding is it’s not the tradition now of the Commission to mark those submissions, given that they’re on the website. So I won’t seek for it to be marked unless you require that, your Honour.

PN15

VICE PRESIDENT HATCHER: No.

PN16

MR CALVER: Today’s oral argument which supplements that written submission is structured as follows. First I would like to discuss the question of the scope of today’s proceedings and our contention that the merit argument merges with the legal argument in considering the concept of fairness. Secondly, I will talk about characterisation. Thirdly, I will focus on the issue of judicial power and link that argument with the notion of characterisation, which finds us before the Full Bench. We do, however, primarily rely upon our written submission.

PN17

VICE PRESIDENT HATCHER: Can I try and clarify the issues with you. I understood that this listing was for the purpose of hearing a jurisdictional objection to – that is a strike-out point, in relation to the CFMEU’s claim on the basis that that would then not proceed with hearing on the merits, but also on the basis that the argument had implications for validity of a number of other clauses and other awards.

PN18

MR CALVER: It does, your Honour.

PN19

VICE PRESIDENT HATCHER: Is that the basis upon which it is run?

PN20

MR CALVER: Yes. Well, the shortform of it, if you like, your Honour, is that since Andrews v ANZ and Pacioco(?), which is under appeal, the notion that a penalty is inherently unconscionable in the form in which we say it appears in most modern awards that we listed in the prior submission, is unfair because it’s unconscionable. We link the notion of unconscionability on a policy basis emanating from those clauses with the exercise of equity by this tribunal.

PN21

VICE PRESIDENT HATCHER: That includes the jurisdictional objection or is it simply the merit argument?

PN22

MR CALVER: Well, I’ve never characterised it as such, your Honour. I’ve said that it’s arguments based on Andrews v the ANZ. That is, as I say, with notions of fairness, any legal argument must merge with the merits argument. Master Builders has never indicated that it can be – there can be a bright line characteristic which separates those legal arguments from the notions of unfairness, which might get mixed up with the merits.

PN23

VICE PRESIDENT HATCHER: But don’t you say it involves an issue of public policy? How can that be determined without hearing the CFMEU’s evidence? That is, issues of public policy classically involve dealing with a range of competing policy considerations.

PN24

MR CALVER: Yes.

PN25

VICE PRESIDENT HATCHER: No doubt we haven’t and we’re not going to hear the CFMEU’s evidence before this full bench.

PN26

MR CALVER: No.

PN27

VICE PRESIDENT HATCHER: No doubt the CFMEU will say that there’s various policy reasons why their application should be granted.

PN28

MR CALVER: Yes.

PN29

VICE PRESIDENT HATCHER: How can we strike out the application on the basis of your submissions, based on policy without knowing what the CFMEU’s case is in that case?

PN30

MR CALVER: I intend to take the full bench to that in some detail but, again, the short-form argument is that when you apply the test that the High Court has derived to the particular provision and contention – and I focused on that, although it does have wider ramifications – the categorisation of it is, a penalty invokes the notion of conscionability. The two are integrally linked and, therefore, the Commission should not, on the basis of its exercise of its jurisdiction in equity, proceed to introduce or to allow to remain in awards these matters which are per se unconscionable. We believe that’s a sustainable argument for the reasons that I intend to go to now, your Honour.

PN31

VICE PRESIDENT HATCHER: So, just to be clear, that involves, in the first place - sorry, the premise of that argument is that, in respect of this claim, but also in respect of the provisions in other awards that you’ve identified, that they are to be characterised in that way.

PN32

MR CALVER: Yes.

PN33

VICE PRESIDENT HATCHER: That would be the ones, for example, where they relate to a payment of wages by, for example, cash or cheque and the person is waiting at the workplace or not?

PN34

MR CALVER: Well, historically that was viewed as compensation for physically waiting. Now, to the extent that those provisions now might be construed as containing a penalty, that is not a proper pre-estimate of the damage that might otherwise flow from the application of that penalty. The point where there is a divergence between a provision which is identifiable as compensatory, as against one which is identifiable as a penalty, then yes, they are called in question by our argument.

PN35

VICE PRESIDENT HATCHER: In that case, why do you characterise them as penalty payments?

PN36

MR CALVER: Well, that is a matter I’d like to take you to in some detail. And that brings us back to that proposition that how the notion of characterisation arises in this context is critical.

PN37

VICE PRESIDENT HATCHER: All right. We’ll let you proceed, but I think we’ve put you on notice as to some of the issues that are running.

PN38

MR CALVER: Of course, your Honour, yes. I admit this is a robust argument.

PN39

COMMISSIONER JOHNS: Sorry, Mr Calver, just for certainty, if you’re right that the provision is a penalty provision and can be characterised as unconscionable, it’s not your argument, is it, that Andrews v ANZ means that the Commission cannot make awards with these clauses in it?

PN40

MR CALVER: It’s an argument that would evolve to that, in one sense, Commissioner, because of section 134. Section 134 says that you should construct a safety net that is fair. If you then identify provisions, through the process of applying Andrews v ANZ, that means they’re unconscionable then a provision of that kind cannot, lawfully, under section 134, be part of the fair safety net which you are required to construct because they are, per se, unconscionable. They’re not compensatory. So the argument leads us into those merit arguments of section 134 and the notion of fairness, which you’re required to maintain.

PN41

So that we are aware that, as his Honour the Vice President has indicted to me, that the matters raised in the submission, dated 16 January, are in contention for another Full Bench, with Watson SDP presiding, we acknowledge that, your Honour.

PN42

In that context, the Master Builders therefore today doesn’t press section 10 of our written submission, which goes into the detail of our criticisms of the written survey that the CFMEU undertook, other than to say that we believe that our criticism of the survey shows that to introduce a variation which imposes what we characterise as a proscribed penalty to ensure an alleged defect does not, in fact, exist. That defect is not present.

PN43

We note that in section 2 of its reply submission the CFMEU indicates that section 10 of our submission is related to industrial merit. We agree. Some aspects of the so-called industrial merit argument, though, cannot, we submit, be divorced from the characterisation of the provision currently in contention, for the reasons that I preliminary traversed with you, your Honour.

PN44

We say that because, in opposition, both the CFMEU, at paragraph 22 of its submission, and the ACTU, at paragraph 25 of their submission make the proposition that the character of the late payment clause, called in question in these proceedings, is about the penalty rate.

PN45

The ACTU says the provision is able to be about other matters in section 139 of the Fair Work Act or, in the alternative, the ACTU argue that section 142 permits the clause to be an incidental matter. Therefore, we say, arguments about merit are entangled with the characterisation.

PN46

Much of my oral argument today, and the reinforcement of the arguments made in the written submission, relate obviously then to characterisation.

PN47

So if I might first then deal with the question of whether or not the provision in question, that is, the one focused on the immediate context of the written submission, can be characterised as a penalty rate. That is the argument, principally in opposition - - -

PN48

DEPUTY PRESIDENT GOSTENCNIK: Mr Calver, can I just clarify one point? Do I take it from your submission that it’s inherent in your argument that even if a penalty of the kind we've discussed today, to use the term loosely, can be a matter that is an incidental term. It ought nevertheless not be included because, inherently, it’s unconscionable and consequently does not contribute to a fair safety net?

PN49

MR CALVER: A nice encapsulation, your Honour, if I might say so. Yes, because the - once the exercise of looking at it as a penalty rate invokes the notion of unconscionability it therefore invokes the notion of unfairness, which is a matter about which modern award provisions should not be established.

PN50

SENIOR DEPUTY PRESIDENT HAMBERGER: But there historically have been lots of provisions and awards that are designed to discourage certain behaviour. The mere fact that something is going to discourage a particular kind of conduct doesn’t make it unconscionable, does it?

PN51

MR CALVER: Well, your Honour, I think the matter, in the context of the sorts of penalties that are under scrutiny today, has been given some sharper clarity since Andrews v ANZ, as applied in Pacioco, to the extent that where I draw the analogies, and I go to those two cases soon, where I draw those analogies between the current clause under consideration and despite its historical derivation, you’ll see that clearly there is the notion of a penalty attached to that matter.

PN52

As to whether or not other award provisions that are designed to mould behaviour fit with the modern award objective I think is a matter that might be under consideration in the broader context of the 2014 review, because that has a different fundamental basis in some of the historical bases for establishing a safety net. Those historical bases, of course, being part of the artefacts of disputes, whereas now modern awards are instruments of the statute. I think that’s where the historical distinction involve prior safety net provisions and those capable of being part of a modern award can be examined in detail, that is, against the modern award objective.

PN53

VICE PRESIDENT HATCHER: Let’s be clear of our terminology here. When you were making your penalty argument, you’re talking about “penalty” in the sense of punishment for breach of a provision of the award?

PN54

MR CALVER: Or statute. And I say that section 323 must be, and I’ll come to this - this is where my oral argument leads to, section 323 is far from of assistance to the ACTU, but by the very fact of late payment of wages, it’s breach is invoked.

PN55

VICE PRESIDENT HATCHER: Now, when we’re talking about penalty rates, of course, we’re not talking about “penalty” in the sense we’ve just discussed we’re talking about penalties in the sense referred to by Hamberger SDP, that is, payments designed to discourage or serve as a disincentive for certain practices.

PN56

MR CALVER: That’s a distinction about which I’m just about to traverse your Honour. A penalty rate, as you say, is something which, under section 139(1) was able to be included in a modern award. A list of matters about which penalty rates might be included in modern awards is set out in section 139 and that’s indicative of what a penalty rate comprises. That’s not a punishment. It doesn’t flow from the breach because it’s about employees working unsocial, irregular or unpredictable hours. Employees working on weekends or public holidays and shift workers. ‘

PN57

The answer to the question of whether or not a payment which flows, following a breach of the award or the statute, a late payment of wages, which would otherwise be required to be paid on time, is a penalty rate is not, in our view, sustainable.

PN58

VICE PRESIDENT HATCHER: That’s assuming the provision can characterise it in that way.

PN59

MR CALVER: Well the ACTU and the CFMEU have characterised the provision in question as a penalty rate, your Honour, which is why I’m going to that argument.

PN60

VICE PRESIDENT HATCHER: Yes, but you just characterised it as if penalty rate, in that context, meant a punishment. I think we’re going around in circles here. Let me just finish the question.

PN61

MR CALVER: Your Honour, I’m trying to distinguish it from a punishment, with respect.

PN62

VICE PRESIDENT HATCHER: All right. I think it was put by the CFMEU is that the claim is permissible as a payment which it tends to, as you said, mould behaviour, or to use my language, serves as a disincentive to observe(?) proper conduct.

PN63

MR CALVER: Yes.

PN64

VICE PRESIDENT HATCHER: So if it’s characterised in that way, what’s wrong with that?

PN65

MR CALVER: The difference between a penalty rate that is permissible under section 139(1)(e) and something which flows from the breach of which I speak, is that one is to compensate for unsociable, irregular or unpredictable hours, vindicated by the statute, employees working on weekends or public holidays and shift workers, the deterrent that flows is clearly from the statutory vindicated level of compensation which the Commission is able to set, in a fair manner.

PN66

The distinction between that and the penalty in question here is that it is not something which the Commission is setting in a fair manner. It’s setting, by the terms of the provisions proposed, in a way which is unfair.

PN67

We say that there was no doubt that the basis of the penalty in question is calculated by reference to overtime rates, but the actual provision does not have the character of a penalty rate, as would be indicated, for example, under section 139(1)(e).

PN68

VICE PRESIDENT HATCHER: Can you just pause there. Would that be - you now appear for the HIA?

PN69

MS ADLER: Yes, thank you, your Honour. Apologies.

PN70

VICE PRESIDENT HATCHER: Yes, sorry, Mr Calver.

PN71

MR CALVER: I welcome any support I can get, your Honour.

PN72

VICE PRESIDENT HATCHER: Sorry, Mr Calver to keep interrupting you. Do I understand your general proposition correctly that under no circumstances should an award contain a penalty which - sorry, a provision which requires an employer to pay an additional amount for late payment of wages, irrespective of the quantum of the amount?

PN73

MR CALVER: If it’s a breach. Those are the essential words.

PN74

VICE PRESIDENT HATCHER: Yes, if it’s a breach. So if the award says, “Payment shall be every Thursday” and it says, “If the payment is not on Thursday then there shall be an amount of X paid for every day late.” That’s a breach.

PN75

MR CALVER: Well, if the wages are paid on Thursday and the statute or the award otherwise make that a breach, yes.

PN76

VICE PRESIDENT HATCHER: What if it was the payment that said, “If my wages are paid late I’m to be paid a payment which is equal to the interest rate that I could have earned if I had received that money on time.”?

PN77

MR CALVER: Then that would be perfectly fair. That could be construed as compensation because it doesn’t have its origins in overtime at 15 minutes, no matter you were paid a few cents over. It doesn’t - but it cannot forgive, your Honour, section 323, which I’ll come to. So that there is still the position that a modern award cannot forgive a breach of the statute, which is why we came to the argument that the Fair Work Act contains its own secret and distinct provisions for enforcement of those breaches.

PN78

VICE PRESIDENT HATCHER: Doesn’t that analysis suggest that it’s not whether the claim is invalid, per se, it may be based on how much you reward?

PN79

MR CALVER: I don’t think that’s in contention, in relation to the provisions under scrutiny. What we’re looking at here is are the provisions which currently exist in modern awards or the one that the CFMEU propose, rather than something which is moulded to make it a proper and legitimate method of compensation.

PN80

VICE PRESIDENT HATCHER: The problem we have here, I think, is that, as you pointed out early on, award reviews don’t proceed as inter parte proceedings anymore, or resolution disputes, they’re regulatory instruments made by us, according to the Act.

PN81

MR CALVER: Yes.

PN82

VICE PRESIDENT HATCHER: Therefore, to stop a proceedings on the basis of a characterisation of a proposed variation advanced by someone, really doesn’t go the heart of the question because we’re not here in an inter parte proceeding where we strike out somebody’s claim. It's (inaudible) what we can do, if we turn our minds to the matter.

PN83

Now, it appears to me that you’ve conceded, in effect, that it would open to us to award some sort of payment, compensatory in nature, for the late payment of wages by EFT.

PN84

MR CALVER: No, I don’t make - sorry, to interrupt, no I don’t make that concession, your Honour.

PN85

VICE PRESIDENT HATCHER: Let me just finish.

PN86

MR CALVER: All right. Sorry.

PN87

VICE PRESIDENT HATCHER: Which suggests that it turns into a question of how much we award.

PN88

MR CALVER: No, I don’t make that question, your Honour, I do apologise for interrupting. I don’t make that concession. What I said, in response to the question, was that it could - that anything that flows from a breach cannot be (inaudible).

PN89

VICE PRESIDENT HATCHER: I understand that. By the same token, I thought you accepted that it may be open to us to award a payment, a compensatory payment, for late payment of wages.

PN90

MR CALVER: No. No, your Honour, because that would be an otherwise breach of section 123.

PN91

VICE PRESIDENT HATCHER: It’s not a question of breach, it’s a question of making sure the employees are fairly treated if their wages aren't paid(?).

PN92

MR CALVER: Master Builders does not want employees to be treated unfairly. Master Builders does not want employees to be treated unfairly, that’s not the basis of these proceedings. The basis of these proceedings is we’ve invoked a jurisdiction on the Commission that sought for it to consider this matter in the context of the clause that’s been promoted by way of the variation of the 2014 Modern Award Review.

PN93

In so doing, we’ve examined that provision and looked at its historical origins and said, “We do not believe that that particular provision before you is fair. We believe it’s unconscionable for the reasons we’ve set out, at length, in our written submission. Because of that, we think that a number of other provisions of the Commission that have been included historically and were included at the time of the formation of the modern awards, are of the same kind.”

PN94

Now, as to whether or not you might be able to mould - the Commission might be able to mould something which is compensatory, is in the realm of hypothetical in this current instance, because of the wording of the variation and because of the wording in the historical clauses.

PN95

We say that even if the Commission was minded to mould a provision based upon the notion of compensation, that could not be the case if it flowed from a breach, because only the courts can deal with breaches of modern awards and breaches of the statute.

PN96

DEPUTY PRESIDENT GOSTENCNIK: Can I put this to you, Mr Calver?

PN97

MR CALVER: Yes.

PN98

DEPUTY PRESIDENT GOSTENCNIK: On one view, pursuant to the clauses being inserted, the failure to pay on a Friday does not amount to a breach, unless following a payment on the Saturday by EFT the employer doesn’t pay its penalty. The provision permits late payment, subject to payment of the additional amount.

PN99

MR CALVER: Your Honour, part of my analysis that I intended to present today is to take you to section 323, which is the penalty - which is the civil remedy provision and despite the alleged permission given by the late payment provision, it would be a breach of statute in any event. We say it’s untreated as a breach of the payment of wages clause because in its own terms it refers to itself as a “penalty”. The very working out of the mouth of the CFMEU, in the terms of the clause is that it’s a penalty flowing from that late payment. Your Honour, that goes to the very nub of the characterisation which is in contention today.

PN100

We say that the distinction, going back to where I was in my oral argument, if I may, your Honour, and I’m happy to take questions at any time, penalty rates are, from the very quotation used by CFMEU’s counsel, at paragraph 25 of his submission, defined by reference to the performance of work. That’s the difference between a penalty rate and a penalty.

PN101

A penalty rate is defined by reference to the performance of work. And the quotation, from part of what the CFMEU have put in contention is:

PN102

A payment by way of a deterrent -

PN103

The point that his Honour Hatcher VP raised:

PN104

against calling employees to work in the circumstances in which the additional payment is required to be made.

PN105

So it’s an integument of work. It’s not something that flows from an otherwise breach of the award. That’s the difference between a penalty rate and a penalty. There is no question, in relation to the clause proposed by the CFMEU, that the employee is being called upon to work, no question whatsoever.

PN106

Whilst the quotation from the weekend penalty rates case in 1947, used by the CFMEU, does speak about deterrence and compensation and the notions that are in the mix today. Those concepts are used in a different sense to the deterrence which the CFMEU seeks. That is a deterrent from action or, more precisely, inaction in the current context, which is an otherwise breach of the award.

PN107

Further, the ACTU indicates that the underlying purpose of the provision goes to the modern awards objective. Paragraph 55 of its submission indicates its contention that the matter of the achievement of the modern awards objective is outside the scope of these proceedings. We say that cannot be so.

PN108

The examples of the manner in which we submit the provision will be unconscionable, especially as expressed at paragraph 8(5) of our written submission, underlying our argument about characterisation we say should, please, be considered by this Full Bench.

PN109

Unconscionable provisions cannot assist to meet the modern award objectives. They are incapable of creating fairness. Ipso facto they offend equity, they offend the idea of what is fair, as is firmly based in the principles of equity, and this Commission applies those principles.

PN110

As I indicated, the second area that links with the characterisation is about judicial power. Now, these are not easy arguments. The policy underlying the penalty doctrine, we say, ought to be observed by the Commission. This is because the proposed clause, and the reasons we give in section 5 of the written submission in particular, is unconscionable and out of all proportion to the loss.

PN111

The elements of that unconscionability are simply, firstly, there is no genuine pre-estimate of any damage that might flow from the late payment of wages and, secondly, a single sum would be payable by way of calculation, linked to overtime rates that are divorced from any rational pre-estimate of loss.

PN112

VICE PRESIDENT HATCHER: Well, won’t that depend upon what the evidence says about what (inaudible) from the pay rate?

PN113

MR CALVER: Historical evidence shows, your Honour, that this provision emanates from a worker waiting at the site to be paid and was viewed as an amount that would be acceptable to be paid to that worker when they were, to use the judge’s expression, loitering about waiting for their wages to be paid to them in cash. It’s not a concept that translates, in any notion of fairness, to a bank sending something electronically to the employee’s bank account.

PN114

So that what we say, by looking at the history of the matter, there is nothing in evidence that would show that it was a genuine pre-estimate because of the historical basis from which it has been derived.

PN115

VICE PRESIDENT HATCHER: We haven’t heard - without hearing what the evidence is, that is - and again I think you’ve perhaps stated that a provision which attempted to (inaudible) would be permissible.

PN116

COMMISSIONER JOHNS: (inaudible) to (inaudible) money is in the bank account. They can’t go and pay their rent, they can’t go and pay their mortgage, they’re still waiting around for money in order to be able to utilise it for their purposes.

PN117

MR CALVER: Commissioner, that is not to be fully advanced today. We’re not saying, in any sense, that late payment of wages is something which is acceptable, we’re not saying that. That is not a part of our argument. I’m not saying late payment of wages are acceptable at all. But what we are saying is that there are mechanisms that (inaudible) to deal with late payments. There is an entire part 4(1), which deals with breaches of the award, which deals with breaches of the legislation and to have a provision, by way of a penalty, in an award, which pre-judges that amount, not based on any notions that are fair, is a proscribed penalty and should not be permitted to remain.

PN118

I think the point your making is more a general policy point that it’s unacceptable for workers to have their wages paid late. That’s not in contention.

PN119

COMMISSIONER JOHNS: I can’t see the difference of waiting around at the factory for the cash to be handed over to you or waiting at home for the money to be deposited in your EFT bank account. I can’t see the difference. You’re still waiting around and you still can’t spend the money until it’s with you.

PN120

MR CALVER: One was an historical basis of an estimate of where, particularly in the building and construction industry, where that worker could have moved on to another site, daily hire engagement, and been paid properly, which is from whence the overtime rate came.

PN121

The other issue is that EFT payments, even if there are a few cents missing, would be in breach and would require these moneys to be paid otherwise.

PN122

VICE PRESIDENT HATCHER: That’s a merit argument, isn’t it?

PN123

MR CALVER: Yes. But that goes to the nature of the provision under question, your Honour. And its linked to the fact that it creates unfairness because if I haven’t had my wages paid by the indicated time the penalties invoked, despite the fact that I might have been underpaid by 50 cents, as opposed to my entire wages.

PN124

VICE PRESIDENT HATCHER: I understand that point as a merit point, I don’t understand it as a jurisdictional point, because it simply means the proposed clause can be modified in a way which removes that aspect of its unfairness.

PN125

MR CALVER: Well, those matters, we say, go to the notion of equity, it underpins the argument. We think that they can be touched upon in consideration of this issue.

PN126

DEPUTY PRESIDENT GOSTENCNIK: Mr Calver, is it possible to craft a provision which doesn’t rely upon there being a breach? For example, an employer may pay wages on a Wednesday or on a Thursday, plus 10 per cent, or on a Friday, plus 20 per cent, or on a Saturday, plus 30 per cent?

PN127

MR CALVER: Only if section 323 is changed in its substance, I would suggest.

PN128

DEPUTY PRESIDENT GOSTENCNIK: You say that’s not part of the method of payment?

PN129

MR CALVER: Well, that’s a question, it’s not a method. A method is a means, cash, EFT, cheque. The word “method” means the process by which its paid. So that would depend on your interpretation of section 323, but we say that it doesn’t help on that regard. And because of the way that the provision can be read down in respect of the involvement of modern awards, and I come to that towards the end of my oral argument, and I’m about - I’m one-third of the way through that oral argument, so I can proceed or keep taking questions if you like.

PN130

DEPUTY PRESIDENT GOSTENCNIK: So, to be clear, your proposition is put on two bases. Firstly, any provision which hangs off a breach shouldn’t be permitted. Secondly, any provision which requires an additional payment for wages is not a method and therefore not something in 232(sic)?

PN131

MR CALVER: Thank you for encapsulating my argument, your Honour, I much appreciate it, yes.

PN132

VICE PRESIDENT HATCHER: Let’s turn to 323?

PN133

MR CALVER: I’m not wishing to, in any way, be impertinent, but can we do that at the point in my oral argument where I go to that, Vice President?

PN134

VICE PRESIDENT HATCHER: All right. Yes.

PN135

MR CALVER: I’m in your hands, I can deal with it now, but perhaps - I think it builds into that, if you don’t mind me saying so.

PN136

VICE PRESIDENT HATCHER: All right. Go ahead.

PN137

MR CALVER: Thank you. The denotions that I just put, there is no genuine pre-estimate of any damage that might flow from the late payment of wages, and there’s a single sum which would be payable, by way of calculation, linked to overtime rates that are divorced from any rational means to estimate a loss are in play here.

PN138

Those matters, we submit, should overcome any reluctance to apply equitable doctrines that has its roots in contract jurisprudence but which seems to do fairness between the parties, fairness that we ask to be applied in the current context.

PN139

We say that by the very terms, these clauses demonstrate a level of disproportion to any anticipated loss to the employee, as articulated in Ringrow (?) in the case we cited in our written submission.

PN140

VICE PRESIDENT HATCHER: Just to be clear, when you say “these clauses” which clauses are you talking about?

PN141

MR CALVER: Well, your Honour, we’re talking about the clauses which form part of the variation because they focus the attention of our argument. We say the clauses that involve late payment of wages, which contain the characteristics which have been nicely summarised by Gostencnik DP, are in question.

PN142

VICE PRESIDENT HATCHER: By EFT or by any means?

PN143

MR CALVER: First of all by EFT, but by any means. Thank you. We say it requires equity to intervene and we ask the Commission to act on the basis of the principles of equity.

PN144

The ACTU, in its submission at paragraph 16, we say, is calling on the notion of duck and a rooster, but we say that that doesn’t help in this context because, we say, the substance of the provision in question, the fact that they operate following breach, as Gostencnik DP has said, and would impose a penalty on those who have breached the award or the statute is plain, on the face of the provision. We are not seeking to call it other than by its on CFMEU label.

PN145

The actual provision says, in its terms, in 25E(c):

PN146

The employer shall not be liable to pay the penalties prescribed above.

PN147

Out of CFMEU’s own mouth. As such - - -

PN148

VICE PRESIDENT HATCHER: Sorry, what did you just read from?

PN149

MR CALVER: Pardon me, sir?

PN150

VICE PRESIDENT HATCHER: What did you just read from?

PN151

MR CALVER: The provision that is the - - -

PN152

VICE PRESIDENT HATCHER: The draft determination.

PN153

MR CALVER: - - - draft variation proposed, which is set out - sorry if I was going too fast there your Honour.

PN154

DEPUTY PRESIDENT GOSTENCNIK: It’s in paragraph 7.

PN155

MS ADLER: Yes, thank you, Deputy President.

PN156

MR CALVER: The redrafting which they’re asking you to consider contains its own label. In our written submission we make much of the fact that a similar provision was recognised by the Chief Industrial Magistrate as a penalty. If the decision in footnote 7 is referred to, in that case Johanna van Heken Whitely v SNP Security(?) the Chief Industrial Magistrate declined to make an order for interest because he recognised that the award acts, in effect, as a penalty clause.

PN157

The Chief Industrial Magistrate has identified it as such and declined to award interest and enforcing the provision, as the Full Bench will see, in an entirely trivial matter otherwise.

PN158

From that point I’d like to go to Andrews v ANZ and expand the propositions that I put about how the court has set out principles which identify unconscionability, by reference to the forensic interpretation of these kinds of provisions. We say that there are three central propositions that can be taken from Andrews, relevant to today.

PN159

First of all, that the doctrine of the relief against penalties is equitable. We’ve been quite open, in our written submission, that at some level there was an argument about that but it has come down to the application of equity.

PN160

Secondly, because the jurisdiction is equitable, relief does not depend upon a breach of contract having occurred which goes to extend this jurisprudence but which we say is not entirely relevant here because the penalty provision attends upon a breach.

PN161

Thirdly, it’s the substance and not the form of a clause that matters, which goes to the very point that the Vice President raised at the beginning that if substantively it can be seen as a penalty provision its ability to be labelled as something else, under the statute, should not be taken into account because something, by way of penalty, is, per se, unconscionable and therefore should not be part of the safety net.

PN162

The High Court setting of a fee, or other stipulation is out of proportion to the obligation that is sought to be secured, it is likely to be a penalty.

PN163

The formulation used by the High Court is unfortunately expressed in complex terms. The court held that:

PN164

A stipulation, on its face, imposes a penalty on one party, let’s call them the first part or the employer, where first, as a matter of substance, the stipulation is collateral to a primary stipulation, let’s call that the payment of wages, in favour of the other party, the employee.

PN165

A stipulation is collateral if its purpose is to force the first party, the employer, to satisfy the primary stipulation, the payment of wages, and that is the case here. The late payment penalty is palpably presented as a means by which payment of wages on time would be secured against the employer.

PN166

So we say that on the first examination of the matter arising from Andrews v ANZ there is a collateral stipulation of the kind identified by the High Court.

PN167

Secondly:

PN168

Upon the failure of the primary stipulation, that is, the wages not being paid on time, the collateral stipulation imposes upon the first party, the employer, an additional detriment, the penalty, to the benefit of the other party, the employee, who obtains the additional overtime payment, or payment based on overtime to be more exact.

PN169

Clearly that arises here. The employee gets a windfall at overtime rates, even if underpaid by a few cents. That goes to the issue that I had an exchange with the Commissioner about.

PN170

Thirdly:

PN171

The detriment is additional and hence a penalty that exceeds the compensation that is necessary to compensate the other party. What is necessary to compensate the other party has to be based on a genuine pre-estimate.

PN172

No penalty exists if the collateral stipulation is not capable of being quantified in monetary terms, it doesn’t apply here, or if the detriment, as I said, is a genuine pre-estimate of damage.

PN173

These matters are not genuine pre-estimates. From the very historical routes that are before you, no consideration has been made to that question. These are merely inherited clauses that come with all of the - laden with the history of what was appropriate for a person waiting around physically at that time, not translatable to EFT whatsoever.

PN174

Neither of these exceptions are new here - - -

PN175

VICE PRESIDENT HATCHER: That seems to equate the functions we exercise in making an award to the function a court exercises when it assesses - - -

PN176

MR CALVER: Sorry, your Honour, I can’t hear you, pardon me.

PN177

VICE PRESIDENT HATCHER: That submission implicitly equates the functions we exercise when we make an award to provide fair compensation to somebody with what a court does when it assesses compensation for breach of contract. They’re two completely different concepts.

PN178

MR CALVER: Well, your Honour, I’m saying that inserting these provisions into modern awards is, in fact, something that courts should do, not this tribunal, not this commission.

PN179

VICE PRESIDENT HATCHER: Well, that wasn’t my question. What I was putting to you is that you’re seeking to equate what we do with what a court does when it assesses compensation for breach of contract.

PN180

MR CALVER: What I’m seeking for this commission to do is recognising the analogy between a penalty provision, which arises in contract, and its, per se, unconscionability with a provision which is inserted in the modern award, which underpins, as a matter of law, all employment contracts. That is where those in opposition say that our argument is abridged too far. I say that the same notions of equity should be applied by this Commission. I think you’ve come to the nub of that argument, your Honour, with respect.

PN181

VICE PRESIDENT HATCHER: Well, if I could put it bluntly to you, in relation to the ANZ v Andrews proposition, I think the High Court would be surprised, speaking for myself, if the propositions - if it was held that the propositions in that case had some reference to the performance of the functions of a statutory tribunal. What do you say to that?

PN182

MR CALVER: Well, whether or not the High Court would be surprised or otherwise, your Honour, what I’m seeking to do is saying that there is an identification by the High Court of some - a provision or provisions which have been recognised as unconscionable. I’m asking this tribunal to consider that that notion, when transplanted into modern awards, should not be countenanced, because this tribunal is based upon the application of the principles of equity and the principles of fairness. And the High Court would not be surprised if this Commission exercised its functions, based upon the principles of equity and fairness.

PN183

VICE PRESIDENT HATCHER: I’m sure you’re aware when the High Court uses the word “unconscionable” in the context that we’re doing so, it wasn’t using the word in a general dictionary sense of the meaning of the word. "Unconscionability" is a legal doctrine which has a distinct meaning which applies in the common law context but you just simply can’t translate, as easily as you seem to do, to performance of our statutory functions. They’re just apples and oranges, aren’t they?

PN184

MR CALVER: Well, Vice President, I respectfully disagree with that proposition, on a number of bases. The first is that if it’s unconscionable in a private bargain, then it’s even more unconscionable when it’s imposed, as a minimum basis upon which that bargain for the engagement of labour would proceed. So they are eminently analogous because this Commission, in making modern awards, is making a safety net below which it is unlawful to engage a person. If that includes a provision which, in other contexts of contractual bargaining, would be unconscionable, I think that’s eminently translatable as an unfair proposition in the context of modern awards, for the reasons that I’ve gone through in relation to the fact that this provision would be invoked, merely if there was an underpayment of a few cents.

PN185

DEPUTY PRESIDENT GOSTENCNIK: But that proposition doesn’t rely upon us accepting that Andrews has any application, it’s simply a question of merit, is it not, that a provision that disproportionately compensates an employee for any loss cannot be viewed as a fair minimum safety net provision and therefore should not be permitted. It doesn’t require Andrews, does it?

PN186

MR CALVER: It doesn’t require Andrews, but it establishes that the highest court in this land has examined provisions of a similar kind and reached a conclusion, your Honour, and therefore, in our respectful submission, should be applied by this Commission. So whether or not it’s presaged on Andrews or that more generalised principle of fairness, which you’ve just articulated, is not a matter for me but it’s a matter which I’m putting to the tribunal in the context of a way in which jurisprudence, at equity, appears to have moved. This Commission is a commission which exercises the doctrines of equity and fairness, under its very statutory terms.

PN187

We say that it’s clear that the doctrine of penalties applies to contract clauses of the same character as the proposed variation in this instance and in relation to the extant clauses in modern awards.

PN188

Let me take it further by saying that the High Court decision in Andrews v Pacioco(?)cited at paragraph 11.7 in the written submission, helps us with the example. In that case the court found that late payment fees charged by ANZ were penalties at common law and, I emphasise, in equity.

PN189

Key considerations highlighted by the court, which appear to apply also to the proposed variation and to the extant provisions were the liability to pay the fee was contingent upon a breach of contract.

PN190

In the case of the proposed variation we submit the liability is contingent upon a breach of the modern award obligation to make payment by a specified time, something which cannot be modified by a modern award, as opposed to the statute, other than in timing, per se.

PN191

So if the statute says payment must be made at least monthly. Obviously it can be a lesser period.

PN192

VICE PRESIDENT HATCHER: You’re going to come back to that, are you?

PN193

MR CALVER: Yes, sir.

PN194

VICE PRESIDENT HATCHER: Because I want to ask you something about that. But you’ll some back to that?

PN195

MR CALVER: If I may?

PN196

VICE PRESIDENT HATCHER: Yes.

PN197

MR CALVER: Alternatively, the liability was collateral to the primary stipulation to make payment by particular date, imposing a detriment on the payee in the nature of a security for an (inaudible) of satisfaction of the primary stipulation.

PN198

In the case of the proposed variation, that is the stated purpose of the proposal from the evidence we’ve gone through in our written submission.

PN199

The same fee was payable, regardless of how late the payment was, or the amount overdue, going back to the exchange I had with the Commissioner. In this instance, the flat rate of payment, as proposed in the variation, regardless of how late the payment is or the amount overdue. That is a characteristic of the extant provisions as well.

PN200

As a result, there was necessarily a degree of disproportion between the stipulated sum and the loss likely to have been suffered. That is also the case in respect of the proposed variation in the extant clauses.

PN201

As I said, the notion that the current clause can be characterised as a proscribed penalty links with our argument about judicial power. In paragraph 48 of the CFMEU’s submission, a statement is made:

PN202

The inclusion of such a term -

PN203

That is the term under consideration:

PN204

in a modern award is an exercise in creating rights and not the determination of those rights. That involves no use of the judicial power of the Commonwealth.

PN205

That argument is taken further by the ACTU, at paragraphs 56 to 62 of its submission.

PN206

In response to those arguments we say that on breach a particular consequence flows, as was clear from the analysis just undertaken, in respect of Pacioco. The consequence, the application of the penalty, is only involved if there is a breach of the award or of the statute for section 322, a matter I will return to.

PN207

The Commission would be allowing the provision that had penalty-based consequences, which flowed from a breach of the award, or section 323, to be placed and remain in a modern award. This constitutes the illegitimate exercise of judicial power. This is because the constitution remits the judicial power of the Commonwealth that jurisdictional authority that determines whether or not a person has contravened the law, or a regulation of the Commonwealth or, we say, a modern award, given their characteristics now as regulatory instruments.

PN208

Modern awards are subordinate legislation akin to regulations made under a statute. They are clearly laws of the Commonwealth. It is entirely up to the courts to determine whether a subject has or has not contravened a law or regulation of the Commonwealth, we say including a modern award, and thereby giving courts the power to deal with the consequences.

PN209

In the current context that right is pre-determined by the terms of the provision. We cite Victorian Chamber of Manufacturers v Commonwealth Industrial Lighting Regulation (1943) 90 CLR 413 at 422, for proposition about the jurisdiction of the courts that I just made.

PN210

The fundamental character of the judicial power of the Commonwealth was recently set out by the High Court in TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia, a case which I indicated to the tribunal I would rely upon in rebuttal that was indicated to that effect, in an email, which has been posted and which I gave advance notice of to the solicitors for the CFMEU.

PN211

Paragraph 28 I think is instructive and if I might be indulged to read that paragraph, your Honour:

PN212

Underlying each of these dimensions of the judicial power of the Commonwealth is its fundamental character, as a sovereign or governmental power exercisable on application independently of the consent of those whose legal rights or legal obligations are determined by its exercise.

PN213

There is no independence in the way that the penalty provision is proposed.

PN214

That fundamental character of the judicial power of the Commonwealth is implicit in the frequently cited description of judicial power as the power which every sovereign authority must, of necessity, have to decide controversies between its subjects or between itself and its subjects, the exercise of which does not begin until some tribunal, which has the power to give a binding and authoritative decision, were the subject to appeal or not, is called upon to take action. Judicial power is conferred and exercised by law uncoercively, its decisions are made against the will of at least one side and when forced upon that side, in invitum. And it is not invoked by mutual agreement but exists to be resorted to by any party considering himself aggrieved. The employee, if aggrieved by the late payment of wages, should go to a court.

PN215

Those courts are indicated in part 4(1) of the Fair Work Act.

PN216

Underlying each of those dimensions of the judicial power of the Commonwealth is its fundamental character, as a sovereign or power, exercisable on application independently of the presumed consent of those who operate under a modern award.

PN217

We say that it is a fundamental character of judicial power, as opposed to arbitral power, that is exercisable on application, independently of the consent of those whose legal rights or legal obligations are determined by its exercise. Here those rights are not available. The consequence of the breach of the award and of the statute are predetermined without reference to the court.

PN218

Having regard to the fundamental principle about entitlement and the fact that the proposed variation and the extant provisions are, in their purpose and character, the imposition of a punishment and penalty for a civil wrong, be in breach of the modern award. Granting the CFMEU claim would involve the exercise, we say, of judicial power contrary to the terms of the constitution.

PN219

That determination and punishment has not been the subject of consent between the parties concerned, and that can be contrasted, for example, with the exercise of arbitrary power conferred by a dispute resolution clause that might be inserted.

PN220

The matter is a remedy for breach that would be imposed by the makers of the award, that is, this tribunal, and therefore would constitute an illegitimate exercise of judicial power. Again, that matter goes to characterisation. In this case, a remedy to be imposed, following a breach, would be inserted into the award and when examining the extent, clauses would be under challenge.

PN221

The ACTU, at paragraph 61 of their submissions say:

PN222

There is a clear distinction to be drawn between the power of a court to enforce a breach of a modern award and the powers of the Commission to create those rights and obligations contained in a modern award.

PN223

This is true even where those rights and obligations may overlap or supplement those rights which may be enforceable in a general court.

PN224

Now, we say that’s a concession of some magnitude because the notion of overlapping or supplementing the work of the courts is not something recognised in the constitution. It’s not a distinction that overcomes the problem of the exercise of judicial power. There is no remit for this Commission to supplement the work of the courts by exercising judicial power in providing a penalty which will be payable following a breach.

PN225

The provision imposes a penalty for what would otherwise be characterised as a civil wrong, that is, the fact that wages have been paid late. The ACTU cannot rely on its assertion that no breach of a term has occurred, because that breach is the very trigger for the operation of the provision sought, by its own drafting a penalty for what followed earlier in the notion of that provision.

PN226

The ACTU’s submission itself goes to that point. They say, at paragraph 23:

PN227

The late payment clause compensates workers for the inconvenience of disadvantages associated with the employer’s failure to make the payment at the time and upon the date which the payees have agreed to be paid.

PN228

Clearly, the prior agreement is - the breach of that prior agreement, encapsulated in the “payment required on a particular date” is the breach which triggers the penalty. This wording acknowledges that there is otherwise failure to make payment of wages in accordance with the terms of the modern award.

PN229

Let me take that a step further. At paragraph 54 of its submission the ACTU seeks to rely on section 323 of the Act.

PN230

COMMISSIONER 1: At what paragraph?

PN231

MR CALVER: Paragraph 54, your Honour. I’ll let you find that.

PN232

The ACTU states that:

PN233

There is a clear legislative intention that modern awards and enterprise agreements have a role to pay with respect to proscribing terms about the payment of wages to ensure that such clauses operate in a practical manner, having regard to the industry norms and individual enterprise needs.

PN234

We say that section 323 is of no assistance to the ACTU or those who oppose their arguments. We say section 323 is clear.

PN235

The only basis upon which a modern award or enterprise agreement has any operation is pursuant to section 323(3)where it specifies a particular method by which the money must be paid.

PN236

So it’s a method by which the money must be paid. It doesn’t talk about another amount that substitutes for the money that must be paid, it’s about the money that must be paid and therefore that is the only basis upon which a modern award, or enterprise agreement, despite paragraph (1)(b), which also relates to methods associated with subsection (2):

PN237

Cash, cheque, money order, use of electronic funds transfer.

PN238

Clearly the methods proposed. That’s the only basis upon which modern awards or enterprise agreements have a role.

PN239

VICE PRESIDENT HATCHER: Is that a convenient time to ask you a question about 323?

PN240

MR CALVER: Of course, your Honour. Of course, your Honour. Sorry it took me so long to get there. I’m nearly finished.

PN241

VICE PRESIDENT HATCHER: All right. While we’re there, if you turn to subsection (1) it requires, in paragraph (c), that wages be paid at least monthly.

PN242

MR CALVER: Yes.

PN243

VICE PRESIDENT HATCHER: In terms of late payment of wages, there would only be a breach of 323 if you failed to pay the wage at least monthly - - -

PN244

MR CALVER: On time.

PN245

VICE PRESIDENT HATCHER: - - - that is, presumably within a month after the work is performed?

PN246

MR CALVER: I don’t believe that proposition holds, your Honour, no. If the modern award says it’s got to be paid on the Thursday it has to be paid at least on the Thursday. That time period substitutes for monthly.

PN247

VICE PRESIDENT HATCHER: Just hold on a second?

PN248

MR CALVER: Yes. Sure.

PN249

VICE PRESIDENT HATCHER: I’m talking about - I’m not talking about modern awards now, I’m talking about 323 itself.

PN250

MR CALVER: Yes.

PN251

VICE PRESIDENT HATCHER: So 323(1)(c) says:

PN252

Payments must be made at least monthly.

PN253

MR CALVER: Yes.

PN254

VICE PRESIDENT HATCHER: So it’s only if they’re not made within the relevant month, that is, it goes beyond a month, that there would be a breach of 323(1)(c), is that right?

PN255

MR CALVER: 323(1) says “permissive” I grant you that, it’s permissive. However, if a period, in the modern award - - -

PN256

VICE PRESIDENT HATCHER: No, you’re jumping ahead, I just want to - - -

PN257

MR CALVER: - - - substitutes that - - -

PN258

VICE PRESIDENT HATCHER: I’ll come back to modern awards in second. But I just want to deal with the relationship between the CFMEU’s type of claim and 323 itself.

PN259

MR CALVER: Yes, I’m addressing that. Because if it’s “at least monthly” it’s permissive.

PN260

VICE PRESIDENT HATCHER: Right.

PN261

MR CALVER: And another period can be substituted for 323. It will still lead to its breach because the period, which has been substituted in respect of that permissive provision which would have been breached. So 323 would have been breached.

PN262

VICE PRESIDENT HATCHER: I’m just trying to break this up a step at a time. You accept that there’s power to put a provision in a modern award which may require wages be paid on a more frequent basis than monthly, for example weekly?

PN263

MR CALVER: Yes.

PN264

VICE PRESIDENT HATCHER: All right. So I want to return to the example that the Deputy President raised some time ago. If the provision said, “The employer may pay wages 7 days after the work is performed, or 8 days after the work is performed, plus 10 per cent, or 9 days after the work is performed, plus 20 per cent.” Why is that a penalty provision, on the way you’ve characterised it, in the sense that neither of those options involves a breach of 323(1)(c) because it’s not monthly? It’s not a - the 10 per cent is not imposed on the basis of a breach of requirement, but simply gives a requirement to pay more, depending on when you pay the wages.

PN265

MR CALVER: That’s now how these clauses are constructed.

PN266

VICE PRESIDENT HATCHER: I know that, but why would a provision of that nature not be permissible?

PN267

MR CALVER: I’d have to see the exact drafting of the working. That’s a hypothetical, your Honour. I’m not trying to ally from your question but - - -

PN268

VICE PRESIDENT HATCHER: It’s not hypothetical in a sense that it would be unrealistic to suggest that a claim to a change in an award could be determined on the basis that one simply looks at that claim and it’s in or it’s out. You know, as well as I do, that tribunals, more often than not, if they decide to accede to any sort of claim, will award something of a lesser amount or different or qualified. So it may well be the case, for example, that the CFMEU doesn’t get what it’s claiming, or anywhere near it, but it’s possible, and I only say possible, that the tribunal might award something different. So if that something different was what I’ve just described, what’s wrong with that?

PN269

MR CALVER: Something different isn’t in contention today, with respect. Secondly, - - -

PN270

VICE PRESIDENT HATCHER: But that, with respect - - -

PN271

MR CALVER: the way that you - sorry.

PN272

VICE PRESIDENT HATCHER: That, with respect, doesn’t deal with the proposition, because we may say, “Well, the CFMEU is claiming that form. It may not proceed but we’ll simply proceed with the hearing on the basis of something different.” Where does this get us at the end?

PN273

MR CALVER: Yes, but the something different is not in evidence. We’re addressing a variation that has been proposed, in the terms proposed, which emulates a very large number of other provisions that have historical integuments.

PN274

You could structure it in that way, perhaps. As I say, without being impertinent, I’d have to see the exact wording of it, but what you would be doing would be creating an administrative nightmare. If it’s on the eighth day, there’s another 10 per cent. If it’s on the ninth day, there’s another 20 per cent. It’s the same sort of administrative nightmare, going to the merit argument, that we’ve looked at in our written submission. It would be unfair to put that level of administration on employers, merely as a deterrent for what we say is a very small problem, late payment of wages.

PN275

VICE PRESIDENT HATCHER: That may well be perfectly correct, but we’re not dealing with issues of merit here, we’re dealing with issues of power.

PN276

MR CALVER: But, your Honour, your very hypothesis calls on questions of merit. In the current context I believe it devolves to the legal argument of what 323 means against those provisions. So, for me, I don’t believe - again not being impertinent, I don’t believe it’s fair to raise a hypothetical in that context without looking at the merits which would flow from it. Because the merits which flow from this are constrained, we say, by a different set of legal principles.

PN277

VICE PRESIDENT HATCHER: All right. Well, let me just ask you one different question, then again this relates to the proposition that provisions of the type complained about have in the nature of penalties for breach of 323. They would only, in terms of timing in payment, have that result if the payment - if the penalty payment operates upon a breach of a payment to pay monthly.

PN278

MR CALVER: No, because - - -

PN279

VICE PRESIDENT HATCHER: 323 only operates in reference to monthly payments.

PN280

MR CALVER: - - - 323 is permissive and it allows for another period to be substituted for “at least monthly”. So the word “at least weekly” or “at least fortnightly” and the manifestation for that permission in modern awards is clear that there is no latitude for them to specify otherwise than a stipulated time period. The only way that modern awards or enterprise agreements can alter that stipulation is in respect of the method of payment. So that reinforces the argument that that time period - a breach of that time period is a breach of the award, is a breach of 323.

PN281

COMMISSIONER JOHNS: Mr Calver, are you saying that if the award says, “You must be paid fortnightly” and the employee is not paid fortnightly that 323, item (c) there, is to be read as fortnightly?

PN282

MR CALVER: Because it’s permissive. It says “at least monthly”.

PN283

COMMISSIONER JOHNS: So the award term, you say, that is incorporated changes the wording of the Act?

PN284

MR CALVER: No. Because the Act is permissive it would allow that lesser period, but that lessor period is imposed by the terms of the modern award.

PN285

COMMISSIONER JOHNS: Mr Calver, it would be a breach of section 45, not just a breach of section 323.

PN286

MR CALVER: It would be a breach of section 45 as well as ‑ - -

PN287

COMMISSIONER JOHNS: Not 323, surely?

PN288

MR CALVER: I think both are penalty provisions, my point and yours, if either is invoked, but we say it’s arguable that’s the only way that that would have merit, as the permissible provision, would be by enforcing the lesser period agreed. You don’t think that’s - - -

PN289

DEPUTY PRESIDENT GOSTENCNIK: But it wouldn’t be a breach of the provision to pay at least monthly, because paying two days after a payment required within 7 days or weekly would still be at least monthly. So it would be a breach of the award, section 45.

PN290

MR CALVER: Yes. Well, I understand that proposition. But it would be a breach of the award, yes.

PN291

VICE PRESIDENT HATCHER: All right. So if we’re not talking about payment beyond monthly 323 is out of the picture. We’re talking about what the award provision says and that gets back to the question of what the award provision is crafted to do. For example, some provisions say, for example, that you can pay weekly but by agreement with the individual employee you can pay it for some longer period.

PN292

MR CALVER: Yes.

PN293

VICE PRESIDENT HATCHER: In that case what constitutes the breach depends upon what the term of the award provision actually says. And it follows from that that one could construct an award provision about timing of payment which has an additional payment required if wages are paid beyond a certain period and it doesn’t depend on any notion of breach of the award. It simply just says that depending upon when it’s paid, an additional amount might be payable.

PN294

MR CALVER: Be that as it may, the provisions under current contention are triggered as a penalty, by their own drafting, if there is a breach of a prior provision, a breach about timing. That is quite clear. But having said that, and this is not conceded, even if there were no breach, that provision has all the characteristics of a penalty provision. So that’s our subsidiary argument in that context.

PN295

VICE PRESIDENT HATCHER: I understand why you’re framing your arguments by reference to what the CFMEU has proposed.

PN296

MR CALVER: Yes.

PN297

VICE PRESIDENT HATCHER: The difficulty with dealing with that as a strike out point is that if we, say, acceded to your arguments and said, “Look, that provision, as proposed, can’t be made for X, Y and Z reason. For example, it allows penalty payment if you’re 5 cents late.” All that results in is that the CFMEU comes back tomorrow with a different proposal. It doesn’t dispose of the underlying matter for - - -

PN298

MR CALVER: That’s not a matter for Master Builders, your Honour, with respect, that’s a matter for the Commission. I can’t proceed on a - when matters cross my desk I can’t proceed on a hypothetical and I can’t proceed - I can’t go past the fact that these similar provisions are provisions of extant awards, which is why I alluded the Commission to that very notion. I mean certainly, sitting on the other side of tis room, that would be my primary concern. Standing where I’m standing, my primary concern is to say that this variation should be proscribed.

PN299

VICE PRESIDENT HATCHER: What I’m suggesting to you is that sort of analysis suggests it’s an error - I think I’ve said this already - to deal with this issue as if it’s an inter party proceeding in which one party can strike out the other's claim and that’s the end of the matter. That is, if we have a general jurisdiction that deals with payment of wages and the timing of payment of wages, and the party wishes to ventilate that issue, whether it’s you or the CFMEU, we deal with it and come to an outcome, we don’t deal with it on the basis that particular claims are struck out on it it’s somehow the end of the matter.

PN300

MR CALVER: Well, I don’t, with respect again, accept the analogy with an application to strike out. What we’re doing is pointing out that the provision that is being proffered to you and which remains in modern awards fails the test of fairness, based upon the test that we’ve put to you. Looking at the terms of 323(3), you have a permissive provision in 323(1)(c) which allows you to come up to a date that substitutes for monthly, but it doesn’t give you latitude to substitute a sequential period and the method by which the employer must pay the money, by a method, is what the Act countenances as the role of modern awards and enterprise agreements. It goes not beyond that.

PN301

So I would say that the part of the rationale for putting these matters to the Commission is to point out those limitations in 323, as much as anything else.

PN302

We say that clearly, in making a payment of wages late, an employer would be in breach of the award obligation because the employer must pay the employee the amounts, in relation to performance of work at the time stipulated in the modern award. There is no way to ameliorate that effect.

PN303

We say that those breaches are comprehensively dealt with, in terms of part 4(1), not by a self-referencing punishment or penalty set out in a modern award. That is not a legitimate exercise of the Commission’s function.

PN304

The nub of Master Builders submissions then is that the payment that the CFMEU seeks, as a prescribed penalty, and there are many provisions of the award which contain a prescribed penalty, and exercising its statutory duty to act in accordance with equity, as set out, in particular, in section 578(b), we urge the Commission to make the findings that are set out in section 11 of our submission. We urge the Commission to allow equity to prevail and not to exercise judicial power. If it please the Commission.

PN305

VICE PRESIDENT HATCHER: Sorry, just before you sit down?

PN306

MR CALVER: Of course, sir.

PN307

VICE PRESIDENT HATCHER: I’m not entirely clear about the position, with respect to the other awards - - -

PN308

MR CALVER: Sorry, sir, I can’t quite hear you.

PN309

VICE PRESIDENT HATCHER: In your submission of - - -

PN310

MR CALVER: 16 January?

PN311

VICE PRESIDENT HATCHER: No, the 5 November submission.

PN312

MR CALVER: Yes. Yes?

PN313

VICE PRESIDENT HATCHER: You had a schedule which sets out various clauses, it’s attachment A, do you have that with you?

PN314

MR CALVER: Yes, I’ll find it. Yes.

PN315

VICE PRESIDENT HATCHER: The first example’s, attachment A sets out a number of awards and for example, the first one is the Aluminium Industry Award.

PN316

MR CALVER: Yes.

PN317

VICE PRESIDENT HATCHER: You’ve set out the clause and you’ve got “Applies to EFT - No.” So this is a payment made - there’s not been argument about this, but on the space, presumably for waiting at the workplace for a cash payment.

PN318

MR CALVER: Attachment A was designed to assist the Commission in a number of respects. First of all, to identify where waiting time exists because of the notions that we put in our written submission about its antediluvian characteristic, and, secondly, whether or not it had been extended to EFT to go closer to the nub of what was being proposed by the CFMEU. Does that help explain it?

PN319

VICE PRESIDENT HATCHER: So my question is, insofar as you say there may be other award provisions which are not permissible, on whatever grounds, by reason of the submission you’ve just made, are they only the ones in this schedule which says “Yes applies to EFT” or is it all of them?

PN320

MR CALVER: No, no. No, your Honour. It depends on the extent to which either this Full Bench or the next Full Bench accepts my submissions.

PN321

VICE PRESIDENT HATCHER: Assuming we accept it, I’m just trying to clarify which provisions you say would fall, as a result?

PN322

MR CALVER: Well, all of the provisions identified that had waiting periods in them where there’s a penalty.

PN323

VICE PRESIDENT HATCHER: So even if it’s a payment for waiting at the workplace for a cash payment, you say that’s a penalty which can’t be in a modern award?

PN324

MR CALVER: Which shouldn’t be in a modern award.

PN325

VICE PRESIDENT HATCHER: Can be but shouldn’t be, or can’t be?

PN326

MR CALVER: Well, that comes back to the very point about whether or not, as Johns C said, the compensatory feature of the historical provision can be translated to the modern context.

PN327

VICE PRESIDENT HATCHER: Well, I’m asking you, Aluminium Industry Award, is that provision, on your submission, invalidated or not?

PN328

MR CALVER: We believe it’s not a provision that - my instructions are that these provisions are not suitable to be in the modern awards. Waiting time is antediluvian and not something indicated by fairness.

PN329

VICE PRESIDENT HATCHER: All right. That’s a merit submission.

PN330

MR CALVER: Yes.

PN331

VICE PRESIDENT HATCHER: Is there any jurisdictional impediment, just staying with the Aluminium Industry Award, for having that clause in a modern award?

PN332

MR CALVER: The ones with EFT are directly analogous to the variation in question. So it’s the ones - they go specifically to my arguments today. The other ones go the broader proposition that I put.

PN333

VICE PRESIDENT HATCHER: All right. So the ones where it says, “Applies to EFT - Yes” you say that the Commission has no power to keep those provisions in a modern award?

PN334

MR CALVER: Well, I’m saying this exercise is unacceptable. The exercise with judicial power and/or on the merits associated with unconscionability attached to those provision as a penalty and they should not be there. So it’s both a matter about the legitimate exercise of your power in a merits argument.

PN335

VICE PRESIDENT HATCHER: Thank you.

PN336

MR CALVER: If the Commissioner pleases.

PN337

VICE PRESIDENT HATCHER: Ms Adler, do you want to make a submission?

PN338

MS ADLER: Thank you, your Honour, just very briefly, and I apologise again for my delay appreciate you accept my appearance.

PN339

We haven’t made any written submissions in relation to this particular - - -

PN340

VICE PRESIDENT HATCHER: Sorry, Ms Adler, because we’re recording you’ll need to come to the front where you can be picked up on the microphone.

PN341

MS ADLER: Sorry, your Honour, thank you. Again, I apologise for my delay. HRA hasn’t made any written submissions in relation to this matter before this Full Bench and I simply rise to oppose the CFMEU's variation and to support the MBA's submission to that extent. That’s all I have to say.

PN342

VICE PRESIDENT HATCHER: Thank you. Mr Harding, are you next?

PN343

MR HARDING: I think I am, yes, your Honour. Perhaps if by way of some housekeeping matters, we have some folders of the cases that we’ve referred to in submissions to assist the Commission, so if I could hand those up at the outset?

PN344

There is some overlap as between the cases referred to by Mr Calver. I’m not entirely sure whether those cases have been made available to the Commission, so we thought we should do it.

PN345

MR CALVER: Can I rise? Sorry to interrupt, all of my authorities were provided electronically, if it please the Commission.

PN346

MR HARDING: Okay. Understand. Just, again by way of housekeeping, you’ll see, your Honours and Commissioner, that tab 16, 17 and 18 of that folder contain the historical clauses. In fact, they’ve just been extracted from the submissions, but they do derive from awards for which we have sourced the original copy and we’re in a position to provide them and have them copied and provided to the Commission at a later time. But for the purposes of today, at least you have the (inaudible), but they are reproduced in our submissions in any event.

PN347

Your Honours and Commissioner, I’m still a bit confused about what’s been put against us, in relation to whether this is a jurisdictional point or whether it’s a merits case or what it is really. We have proceeded on the basis that it is contended, by the Master Builders, that it’s beyond power to include a provision in the modern award along the lines proposed by the CFMEU.

PN348

VICE PRESIDENT HATCHER: I think at least it’s been contended that, to the extent that we only have power to provide a fair and relevant minimum safety net of terms, the fairness requirement can’t possibly be satisfied, with respect to these provisions, by reason of them constituting an unconscionable penalty payment. As I understand it, it at least extends to that degree as being a submission about the exercise of power.

PN349

MR HARDING: Probably also judicial power as well.

PN350

MR CALVER: And judicial power.

PN351

VICE PRESIDENT HATCHER: And invalid as a recorded exercise of judicial power for breach of either 323 or the modern award itself.

PN352

MR HARDING: I suspect that - - -

PN353

VICE PRESIDENT HATCHER: Is that a reasonable encapsulation, Mr Calver?

PN354

MR CALVER: Thank you, your Honour. There’s slightly more to it than that, but an encapsulation, your Honour, yes.

PN355

VICE PRESIDENT HATCHER: I’ll have another go. I suspect the first point it still, in essence, a merits point, because it involves an assessment by the Commission whether or not the proposal bears that character as unconscionable, and whether, on the evidence at some point presented, it could satisfy the legal concept of an unconscionable payment, which, in the Andrews sense, appears to be linked quite firmly to the conceptions that the courts have developed around what is an appropriate measure of compensation for breach of contract.

PN356

DEPUTY PRESIDENT GOSTENCNIK: Mr Harding, can I put this proposition to you? Given that section 323 allows the employer to make payment of wages at least monthly, why isn’t a provision which requires - in an award which requires an employer to pay weekly or fortnightly and then on failure to pay on a specified day requires that employer to pay an additional amount, inherently unfair, because it, effectively, penalises the employer for that which is permitted by the statute?

PN357

MR HARDING: Well, the answer to that, your Honour, is that section 323 sets up its own measure and doesn’t impede, in any way, the Commission’s function in relation to the terms and conditions that it might set in a modern award. If, upon consideration of the evidence before the Commission in relation to that modern award, the Commission is satisfied that it is fair to include a provision along the lines suggested, 323 doesn’t stand against it. But 323 might be one of the things that the Commission might take into account in assessing any proposal that is put by a party for a modern award, along the lines suggested by the CFMEU, or anyone else for that matter. It could only be a factor, your Honour, it couldn’t possibly be determinative one way or another.

PN358

On the point about 323, it’s clear from 323(2)(d) that the Act comprehends the possibility of a method of payment, prescribed or authorised under a modern award.

PN359

To some extent, your Honours and Commissioner, I submission that the fallacy that underlies the MBA’s submission is this concept of breach, which underlies everything that they say in terms of criticising what’s been put by the CFMEU. That’s not an appropriate characterisation of the term, or any of the terms in the modern award. What those provisions do is to simply say, “You’ve got to pay wages in a certain way and then there’s an additional payment prescribed for late payment.” The concept of breach of the award is an irrelevant concept for the purposes of this argument and conflates the processes prescribed by the Act with those that are engaged in by the Commissioning in determining what’s a fair condition of employment.

PN360

It sort of reverses the order of analysis, in my submission, because it assumes that the Commission has to have, in its mind, a parore, if you like, the notion that there’s some breach involved by an employer and that in those circumstances the remedy for that breach is the additional payment. But that’s not the way in which these clauses have been traditionally constructed. They have been constructed based on an assessment of what is an appropriate level of compensation for waiting time, or what might be an appropriate deterrent. Those concepts, in one particular context, the compensation object may outweigh the deterrent object or it might be reverse or it might be that both are relevant.

PN361

No concept of breach of the instrument is involved in that analysis. It’s an assessment by the Commission about what is an appropriate way of regulating work under the instrument and the conditions affecting work under the instrument.

PN362

You don’t need recourse to section 45 in order to undertake that analysis and you shouldn’t. You don’t need recourse to part 4(1) in order to assess that, nor should you. Likewise, its - - -

PN363

VICE PRESIDENT HATCHER: In terms of award provisions which set a more frequent requirement for payment than monthly, is the source of power to do that simply as incidental and essential terms?

PN364

MR HARDING: Yes, it might be. In relation to as it hangs off the minimum wages power.

PN365

VICE PRESIDENT HATCHER: Yes. Does it follow then that an additional payment required for late payment must also bear the same character?

PN366

MR HARDING: No. We say it’s a penalty rate and falls squarely within the power under 139 for that reason.

PN367

VICE PRESIDENT HATCHER: It would be - - -

PN368

DEPUTY PRESIDENT HAMBERGER: Or alternatively you would submit that it would be.

PN369

MR HARDING: Yes. It could be conceived in that way. I mean, I’m not ruling it out, but what I’m saying is that you can have – section 39 simply says the Commission may make terms about certain subject matters, and then it can add incidental terms.

PN370

VICE PRESIDENT HATCHER: It would be - - -

PN371

MR HARDING: This could be a term of – sorry, your Honour.

PN372

VICE PRESIDENT HATCHER: Isn’t a bit odd that you – the power as to timing of wages only gets in as incidental or essential term but then an additional payment for late payment of wages gets in directly under penalty rates. There’s something odd about that, isn’t there?

PN373

MR HARDING: Not necessarily, your Honour. I can’t see why that’s so. That’s simply just a different subject.

PN374

VICE PRESIDENT HATCHER: It maybe that the phrase “penalty rates” has a traditional understanding which doesn’t really encompass this sort of payment. I think Mr Calver says penalty rate is to be understood as a payment for work not - - -

PN375

MR HARDING: He does say that but perhaps if I can I take you to a case that might help you on that.

PN376

VICE PRESIDENT HATCHER: Yes.

PN377

MR HARDING: Which is the weekend penalties case which is in tab 2, I think, of the materials. You’ll see, your Honours, if you go to page 616 of the report, in the judgment and reasons of Drake-Brockman ACJ and Sugarman J, and I’ve extracted, about half-way down the page, the section that starts:

PN378

Those skilled in industrial law.

PN379

Do you see that your Honours and Commissioner?

PN380

VICE PRESIDENT HATCHER: What page, 616?

PN381

MR HARDING: 615, I apologise.

PN382

VICE PRESIDENT HATCHER: 615.

PN383

MR HARDING: I misdirected you.

PN384

VICE PRESIDENT HATCHER: Where is it?

PN385

MR HARDING: About half-way down the page, and there’s a set of words “the dominance of either”.

PN386

VICE PRESIDENT HATCHER: Yes. Yes.

PN387

MR HARDING: And then it starts:

PN388

Those skilled in –

PN389

and it says:

PN390

Those skilled in industrial law use the term penalty rates in senses ranging from that which includes all such forms of additional remuneration to that which includes only those in which the element of deterrence appears to the exclusion or almost to the exclusion of the element of compensation.

PN391

So it is clear, their Honours have a very wide conception of what a penalty rate might consist of, and that’s apparent from the opening words of the paragraph, which is the second paragraph under the heading “Penalty Rates”, where they say:

PN392

A penalty is not a term of art, it is used by those skilled in industrial law in widely divergent meanings.

PN393

Then they set out what might be a usual meaning. Then if I - - -

PN394

VICE PRESIDENT HATCHER: Is that the contemporary meaning, though?

PN395

MR HARDING: I’m going to take you to that, your Honour. If I can just draw your attention to 616. Again, about three-quarters of the way down the page, starting with the words of the paragraph:

PN396

Such a test.

PN397

They go on to say:

PN398

Such a test and a satisfactory one may be we think we found if an award –

PN399

They’re talking about the concept of a penalty rate –

PN400

if an award contains a prescription of conditions to be observed by the parties and goes on to provide the payments higher than normal to be made for work done outside the prescribed conditions. Those payments may properly be regarded as a penalty rate.

PN401

Then there is this:

PN402

There are then both the expressed prescription of a normal course of conduct and the provision of a deterrent against infringing that prescription which, apart from special usages, are ordinarily involved in the idea of a penalty.

PN403

So we have here - - -

PN404

THE SENIOR DEPUTY PRESIDENT: Is there a difference? I mean, with the late payment of wages, in your proposal, would it still be the case that if you paid the wages late, as well as having to meet this penalty rate, it would also be a breach of the award? See, there’s a bit of a difference, isn’t there, between saying, well, normally you work Monday to Friday, but if you work at the weekends, you get paid more money. But it’s not a breach of the award to get someone to work at the weekends.

PN405

Is it a breach, if you don’t pay the person by the due date, you have to give them this penalty rate, up until the point you pay them, but is it also a breach of the award that you haven’t paid them on time?

PN406

MR HARDING: The answer to that, your Honour, is that it might be, depending on how the provision is framed.

PN407

THE SENIOR DEPUTY PRESIDENT: So it was. That’s a bit of a difference, isn’t it?

PN408

MR HARDING: No.

PN409

THE SENIOR DEPUTY PRESIDENT: Why not?

PN410

MR HARDING: Because, your Honour, that’s purely consequential. In my submission, it’s not inherent in the mischief to which the term is directed. It’s not the basis for which the term is included in the award. The concept of a breach inherently conjures up a notion of the exercise of judicial power in punishing someone for breaking the law. That’s not what we’re dealing with here.

PN411

THE SENIOR DEPUTY PRESIDENT: Yes. I’m not quite making that point. Maybe it’s an issue of fairness where it’s not necessarily a jurisdictional issue, but there seems to be a distinction between, you know, where something is a breach of an award, and there is already a penalty in the Act for that, but also imposing an additional payment in the form of what you described as a penalty payment, that it’s actually kind of a form of double jeopardy. It’s a fairness issue rather than necessarily saying you couldn’t do it as a matter of jurisdiction.

PN412

MR HARDING: It’s definitely a fairness issue rather than a jurisdictional one, your Honour, but even, taking your example on its face, it’s not really a double jeopardy point, I think, because they’re not facing two penalties. What they’re facing is an additional form of remuneration that’s prescribed by the award for its own purposes.

PN413

It might be that that factor, in the civil penalties regime of the Fair Work Act, may be decisive in, depending on the form in which the penalty proposal is put, and in other circumstances it may not be, but it would be, in my submission, wrong to conflate the two purposes of penalising breaches of the law, on the one hand, and setting conditions of work, on the other, which provide incentives and disincentives for an employer in the way they’re organising the award.

PN414

THE SENIOR DEPUTY PRESIDENT: It’s about payment for work, it’s not about the work.

PN415

MR HARDING: Well payment for work, but bear in mind, of course, under the traditional waiting times provisions, it’s been conceived as a compensation.

PN416

THE SENIOR DEPUTY PRESIDENT: For the hanging around.

PN417

MR HARDING: For the hanging around, but of course the CFMEU proposal would encompass such a scenario. It’s not exclusive of it. But even in the circumstance where you’re hanging around, I think, Johns C put it correctly, you are still being disadvantaged by not getting your money on time.

PN418

THE SENIOR DEPUTY PRESIDENT: Sure. The Act provides penalties for that.

PN419

MR HARDING: No. No, it doesn’t.

PN420

THE SENIOR DEPUTY PRESIDENT: Doesn’t it? It doesn’t?

PN421

MR HARDING: No. It provides a penalty for the contravention. It doesn’t compensate someone for the disadvantage.

PN422

THE SENIOR DEPUTY PRESIDENT: No, it’s not compensation. That’s right.

PN423

DEPUTY PRESIDENT HAMBERGER: Mr Harding, do you say that if I, as the employer, make a payment by EFT under your proposed variation and that lands in the employee’s bank account on the Saturday, and I make the additional payment, that I’ve breached the award?

PN424

MR HARDING: If there was a strict obligation to pay on Saturday which is - - -

PN425

DEPUTY PRESIDENT HAMBERGER: No, your term requires a payment by no later than Friday.

PN426

MR HARDING: Yes.

PN427

DEPUTY PRESIDENT HAMBERGER: If it’s late then there’s an additional payment.

PN428

MR HARDING: Yes.

PN429

DEPUTY PRESIDENT HAMBERGER: So I make the payment late, I make it on a Saturday, and make an additional payment.

PN430

MR HARDING: I’d have to concede that.

PN431

DEPUTY PRESIDENT HAMBERGER: Is there a breach of the award?

PN432

MR HARDING: Yes.

PN433

DEPUTY PRESIDENT HAMBERGER: Because I haven’t paid on the Friday?

PN434

MR HARDING: Yes.

PN435

THE SENIOR DEPUTY PRESIDENT: See, I mean, that is different, isn’t it, from your traditional penalty rate notion where you’re not doing something where there’s a breach of the award, and you also have to pay extra money as compensation. So, I mean, the other one would be – I’m not sure if I’m right about this, but it’s that clause which says you’ve got to give somebody a meal break after five hours, but if they don’t get it they get paid overtime rates until they have a break. Would that be – I mean, I might be going against myself, in that case, wouldn’t that be a breach of the award and also penalty rates?

PN436

MR HARDING: Yes.

PN437

THE SENIOR DEPUTY PRESIDENT: I think that’s a better (11:39:15).

PN438

MR HARDING: Yes. It might be both. I can’t deny that it’s a matter of analysis. But it certainly doesn’t bear on the question of power.

PN439

THE SENIOR DEPUTY PRESIDENT: No, I’m just looking at this as a jurisdictional - - -

PN440

MR HARDING: As a - - -

PN441

THE SENIOR DEPUTY PRESIDENT: I’m just trying to get a distinction between the typical penalty rate as described in this decision, this judgment, and the kind of clause you’re proposing. I mean, there is that distinction between one – these are not, in general anyway, these are not such arrangements where there’s actually a breach of the award that’s - - -

PN442

MR HARDING: There still might be. In the scenario you’ve just given me, your Honour, that’s precisely what it is. But you could construct it in such a way that the breach might not necessarily be – even on the scenario where, I suppose, you are required to pay by a certain date and then there’s an escalation rate if it’s not paid by a certain amount, for instance, the example Your Honour Hatcher VP gave; failure to pay on their prescribed first date may technically be a breach of the obligation, but, as I said, that confuses, in my submission, the purposes of a penalty rate, on the one hand, and the purposes of the Act, in guarding against breakages of the law, on the other. The Commission has always taken the view that penalty rates have a purpose in compensating and deterring. Compensation inherently is different in its character from deterring, but, in any event, both have a function in terms of how the conduct of an employer or an employee is regulated under the terms and conditions of that employment.

PN443

The Act has a different purpose. The Act says that people must comply with these instruments, be it, an award, an agreement, be it an award or an agreement, and to not do so renders them liable to sanction, under the terms of the Act. But it has, as its core, punishment and retribution as well as deterrence. I accept that. That’s what the authorities tell us. But it has more purposes. The other thing the authorities tell us, and that’s apparent from the decision in Puncio, which is in the materials, in a decision of Lander J, at tab 11 in the materials.

PN444

VICE PRESIDENT HATCHER: Sorry, before you move on to – I just want to study this weekend penalty rates decision.

PN445

MR HARDING: Yes.

PN446

VICE PRESIDENT HATCHER: On 616, if you read on to the bottom of the page, it deals with shiftwork and I think it makes clear that, at that time, shiftwork loadings were not considered to be penalty rates.

PN447

MR HARDING: Yes.

PN448

VICE PRESIDENT HATCHER: But if you look at 139(1)(e) payments for shiftworkers is encompassed in the notional penalty rates. Does that suggest that what the legislature understood what penalty rates when it made 139(1)(e) is a different conception to what was dealt with in the case you’ve taken us to, that is, penalty rates, in the modern concept has moved a bit beyond this deterrence concept and embraces payments which are really more in the nature of compensatory, that is, we’re long past the day when Sunday rates are meant to deter the performance of Sunday work, they’re more commonly definitive as proper compensation for Sunday work. That’s going a bit off probably dealing - - -

PN449

MR HARDING: Yes. I’m not sure that’s so, your Honour, because the first thing to note about (e), of course, is that it’s expressly inclusive terms, so it doesn’t necessarily mean that you are limited to the examples that are provided. Obviously that’s inherent in the notion of it being inclusive, insofar as that might suggest a construction. In my submission, it doesn’t otherwise the legislature might have expressed it in exclusive terms.

PN450

COMMISSIONER JOHNS: But if you have a look at - - -

PN451

MR HARDING: In relation to the modern award object, your Honour, in relation to those examples that the statute gives it, in 134(d)(a) refers to the need to provide additional remuneration for those things. Now, it doesn’t say compensation, it says additional remuneration, and that’s precisely what the weekend penalty rates decision stands for. It describes the penalty rate as additional remuneration, an additional amount, so I don’t think you could assume, as a matter of construction, that the legislature was adopting a particular, an exclusive notion of penalty rates when they framed that power, and there’s no indication in the statute that would, in my submission, support that more limited construction.

PN452

COMMISSIONER JOHNS: But Mr Harding, if you look at the language there at 139(e) I agree that the use of the word “precluding” is there, but if you look at each of the subparagraphs, “employees working”, “employees working”, “shiftworkers”.

PN453

MR HARDING: Yes.

PN454

COMMISSIONER JOHNS: It does seem to support Mr Calver’s submission that a penalty rate is required for the performance of work, that the Parliament had that class of visions in their mind.

PN455

VICE PRESIDENT HATCHER: That is turning to 134(1)(d) – (a), it’s a remunerative concept, that is, payments for the performance of work not payments of a different character.

PN456

MR HARDING: That’s true. It is for the performance of work. It does limit itself, in those examples, to work. But if that were so you might ask the question why did the legislature express it in inclusive terms rather than exclusive terms? You can’t ignore the words “including”. Can I refer your Honours to a decision of the High Court on that respect which is - - -

PN457

VICE PRESIDENT HATCHER: I don’t think there’s any doubt about the force of the word “including”, but it’s really whether the examples given inform an understanding of what the expression “penalty rate” means.

PN458

MR HARDING: Yes. I understand that, your Honour, but the problem about that analysis is that it reads up from the inclusive examples a more limited conception of penalty rates that are not expressed in those terms in the statute. It might be the better way of reading it is to say, in relation to the specific examples in (i) through to (iii) when looked at the modern award objective, compensation is plainly what was in the mind of the legislature. It’s still casted in terms of additional remuneration, I might add, rather than compensation, and in so doing it leaves open the question about how one is to remunerate for performance of work.

PN459

But, in my submission, it would be an unduly narrow reading to say that that necessarily, by using the examples referred to in the modern award, which refer to additional remuneration for the performance of work, and are specific to the categories identified in (i) through to (iii) in 1(e), and then say – and that governs the whole content of the concept of a penalty rate for the purposes of the power. It is a power, of course, that you are construing rather than a definition as such, and it’s governed by how the Commission interprets the modern award objective which, at its core, simply says in exercising the power, and that’s the way we construe statutes, one has to have regard to its objects.

PN460

The principal object of the modern award objective is to set fair and reasonable conditions of employment. It’s that, in my submission, that has more work to do in construing the non-inclusive component of the power expressed in (e), because otherwise you would get into a situation in which you were deriving content from other circumstances to regulate and limit a concept which is not expressed to be so limited.

PN461

In terms of the modern usages, your Honour, which is the point I think you asked, in our materials we’ve included, at tab 2, a decision of the South Australian Commission and - -

PN462

VICE PRESIDENT HATCHER: At tab 3.

PN463

MR HARDING: Tab 3. I apologise. In the Retail Industry South Australia award variation. At paragraph 194, this is in the context of Sunday work, I accept, but they deal with the concept of a penalty rate. They start by introducing that subject and then at 195:

PN464

Consistent with the contingent of ARA and SRA that overtime provisions represent both a deterrent to employers from engaging their employees in hours deemed overtime as well as means of compensating employees for the disability and disruption of working hours.

PN465

Then they refer and rely on what Drake-Brockman ACJ and Sugarman J said in the weekend penalties case, and also a South Australian case, Milk Processing and Cheese, at paragraph 197. Both of them – it’s clear from there, your Honour, what the Full Bench is saying is that they accept the underlining rationale for a penalty rate in the terms expressed in the weekend penalties case and then re-articulated in the Milk Processing and Cheese case.

PN466

There is also a decision of the former Federal Commission, which I’ll hand up to you, which is Shop Distributive and Allied Employees Association v Two Dollar at Nundah. It’s a decision involving the President Giudice J and Watson SDP Raffaelli C. First could I start with the dissenting judgment of Giudice J. At paragraph 27 his Honour specifically cites the weekend penalties case, and you can see, from the structure of his reasoning, that he’s accepting the purpose and rationale emerging from that case, and then assessing whether or not one limb of it predominates over another in the context of the evidence before the Commission, at that time. That is also true in the majority judgment of Watson SDP and Raffaelli C, which is set out at paragraph 91. He goes on to say:

PN467

In deciding the appropriate penalty rate in roping-in award for the working of ordinary hours on a Sunday with capacity for employees to work such work at that time it is necessary to consider the appropriate rationale for the penalty. Historically penalty rates for unsociable hours have involved consideration of additional compensation of employees in respect of disabilities and/or deterrents at work at such time.

PN468

Of course, they are talking about the unsociable hours emanation of the penalty rate, but they reference the weekend penalties case as the source of that jurisprudence, and then go on to assess it.

PN469

VICE PRESIDENT HATCHER: But I think what the paragraph says, it clearly brings in the concept of penalty rates payment which is entirely compensatory.

PN470

MR HARDING: Yes.

PN471

VICE PRESIDENT HATCHER: Without a deterrent element.

PN472

MR HARDING: Yes.

PN473

VICE PRESIDENT HATCHER: That’s what I’m talking about being the modern conception.

PN474

MR HARDING: But, your Honour, you’ve got to look at this case in the context of the facts. They were holding that as so in the facts of that particular industry, on the evidence before them. They were making a general rule that deterrent has no role to play. If that was so you’d expect them to reference that when dealing with the authority of the weekend penalties case, and that’s not what they did.

PN475

VICE PRESIDENT HATCHER: Is there any case you can take us to that has the concept of penalty rates being applied to a situation where it’s not a payment for work performed?

PN476

MR HARDING: I don’t have that authority. I can’t take you - - -

PN477

VICE PRESIDENT HATCHER: Sure. I mean, another example similar to the one that the Senior Deputy President raises over the award clauses which say that you have a 10 hour break between shifts.

PN478

MR HARDING: Yes.

PN479

VICE PRESIDENT HATCHER: If you don’t get the full 10 hours you’ll be paid at some rate as if you were at work until the break has occurred. I mean is that a penalty rate?

PN480

MR HARDING: Yes, on my analysis it is a penalty rate. It still has the function of deterrence, and it probably has a function of compensation for not being able to eat at the time that the award prescribes.

PN481

DEPUTY PRESIDENT HAMBERGER: Those provisions generally provide for penalty while working and compensation for not having the time off so that there’s a payment for working albeit at a higher rate.

PN482

MR HARDING: Yes, but they’re not exclusively expressed in that way.

PN483

THE SENIOR DEPUTY PRESIDENT: I mean, to go back to that penalty rates decision, actually they come up with a specific text, didn’t they? I don’t think that the clause you’re talking about doesn’t meet that text, does it? It says:

PN484

If an award contains prescription conditions to be observed by the parties –

PN485

and goes on to provide that –

PN486

payments other than normal to be made for work done outside the prescribed conditions those payments may properly be regarded as penalty rates.

PN487

Isn’t that the text?

PN488

MR HARDING: Then there’s the next sentence.

PN489

THE SENIOR DEPUTY PRESIDENT: Yes. But how do you come to read the next sentence without reading that sentence?

PN490

MR HARDING: Well, I say they’re two things. There’s two conceptions contained in that.

PN491

THE SENIOR DEPUTY PRESIDENT: If there are then, though - what they’re saying there is, well, you know, because they’ve then gone, you’ve got to read the whole paragraph, and they’re saying well, it is just a situation where there’s just lots of different ways of working, and some get paid more than others.

PN492

MR HARDING: Yes.

PN493

THE SENIOR DEPUTY PRESIDENT: Then that’s not penalty rates. Penalty rates has to be there’s this normal system and then something different.

PN494

MR HARDING: There’s an abnormal. There’s an abnormality.

PN495

THE SENIOR DEPUTY PRESIDENT: Yes, something that’s not normal. Yes.

PN496

MR HARDING: Yes.

PN497

THE SENIOR DEPUTY PRESIDENT: But that doesn’t mean it’s not anything – it’s about payments outside normal to be made for work to be done outside the prescribed conditions.

PN498

MR HARDING: In my submission, what they’re saying about that category of penalty rate, but they don’t confine themselves.

PN499

THE SENIOR DEPUTY PRESIDENT: You think it’s an extra category?

PN500

MR HARDING: It is. It’s plainly – there are then both the expressed prescriptions of a normal course of conduct and a provision of a deterrent.

PN501

THE SENIOR DEPUTY PRESIDENT: Okay. That’s not how I read it.

PN502

VICE PRESIDENT HATCHER: I think the point is that it was being considered in a context of a payment for work and that they simply weren’t turning their mind to this sort of scenario we’re in here.

PN503

MR HARDING: They plainly weren’t, and I’m not suggesting that that was so, but what they make clear is in the beginning of their judgment, and this is on page 611, again, about three-quarters of the way down, it says:

PN504

This Full Court has been assembled at the instance of single Judges.

PN505

and then it goes on to say:

PN506

It is not proposed at present to do more than lay down general principles for the guidance of the Judges or Commissioner to ultimately be concerned with the application of those principles in the making of variation of individual awards.

PN507

It’s clear what their Honours were trying to do was come up with a notion of conception, a satisfactory conception of a penalty rate, which it could then be utilised in the variety of circumstances that might confront Judges and Commissioners of the old Commission. They expressly said that they weren’t intending to construe a particular award, or a particular provision, but to lay down general principles, and that’s apparent in the paragraph on 615, which starts with:

PN508

Penalty rate is not a term of art. It is used by those skilled in industrial law in widely divergent meanings.

PN509

Then they set out some of those meanings. It would be, in my submission, a wrong reading of the case, to say that they were confining their attention solely to the conception of work. If it - - -

PN510

VICE PRESIDENT HATCHER: The legislature use the phrase necessarily as a term of art because otherwise the alternative is to say that the phrase has no fixed meaning.

PN511

MR HARDING: It doesn’t. It has a meaning, it has an industrial meaning. It has an ordinary meaning too, and I can hand that up, it might assist.

PN512

VICE PRESIDENT HATCHER: Look, I think we’re getting a bit off topic here. I mean, the only relevance of this is whether the CFMEU’s provision is defensible under 139(1)(e) or whether it would need to be defended as an incidental and necessary term, but - - -

PN513

MR HARDING: Yes. I realise that, but I anticipated that you might ask me some questions about (e) and accordingly I’ve taken some time to try and explain that. I’ve also included the Alcan decision behind the first tab, which is, of course, the leading authority on how you construe the statute, and the first thing it states is, you look to the text of the statute and then it’s context and purpose. The ordinary meaning of a penalty rate, as defined in the dictionary, the meaning that I’m handing up, is, you can see, in penalty rate:

PN514

An increased rate of pay for overtime or in recognition of abnormal conditions.

PN515

That’s the ordinary meaning of a penalty rate defined by this dictionary. The industrial meaning, in my submission, emanates from the weekend penalties case, and has been adopted, in modern authorities when they have turned their mind to the concept of a penalty rate.

PN516

It might be that the prescription proposed by the CFMEU is defendable on other grounds under other powers, and this is not, in my submission, the occasion to consider that, because that’s ultimately a question of merit in relation to the issues raised by the Master Builders’ Association. It’s not submitted, as I apprehend their case, that the penalty rate proposed by the CFMEU is not a penalty. That is their case. We say it’s a penalty rate within the power conferred by the statute. They seek to say that it has some other species or other quality relying on Andrews for that proposition. We say you just don’t need to go there, to Andrews. That’s the essential point, it has absolutely nothing at all to say on how you construe (e) in section 139. Nothing at all.

PN517

The concept of a penalty rate there being discussed by the High Court took no account of the industrial meaning of the penalty rate, as it has traditionally been developed. It took no account of the Fair Work Act. It was specifically confined to an equitable doctrine which is concerning Common Law relations between individuals. The point, I think, has already been made that the essential difference between the scenario considered here, and that is that the modern award is an instrument of regulation that applies to multiple employers operating under different contractual conditions. It doesn’t take account of any particular contractual condition, and it couldn’t be said, in advance of assessing particular circumstances, that the rate is unconscionable. Inherently the whole basis of the equitable jurisdiction is to assess whether, in the circumstances of a particular contractual relation, it would be unconscionable for one person to impose a penalty on another, absent or in addition, to the particular terms of the contract itself, and even in circumstances where there hasn’t been a breach of that contract.

PN518

It is confusing the particularity, on the one hand, of a contract with the generality of a regulatory instrument such as the modern award. There is absolutely no connection between the two, and our written submissions point to a number of cases that have identified why there is no real analogy between the world of contract, on the one hand, and the world of industrial instruments, on another, and the latest of those is the MARA which we put in the materials and that, of course, concerns enterprise agreements.

PN519

Bear with me for a moment, your Honours. I don’t propose to rehearse all that’s set out in the written submissions, other than to say that we rely on them in terms of the issues that they identify. A couple of matters that I think are important to draw attention to by way of reply: it was suggested by my learned friend that the distinction between a penalty rate is one where it is a penalty rate on the other hand, and a penalty is one that’s inherently unfair. It’s a, sort of, elusory distinction so far as I can see. I can’t really understand the criteria by which one would measure one against the other. I think the essence of a contractual penalty is that it’s unconscionable. The essence of a penalty rate, in an award or an agreement is, in my submission, the jurisprudence emanating out of the weekend penalties case, and it is clear that the two things are different.

PN520

My learned friend said that the modern award was, in itself, a law of the Commonwealth. We have included in the materials a decision of the High Court in Milosevic. It’s tab 12 of the materials. I don’t propose to go there specifically, but I do want to draw your attention, your Honours and Commissioner to the decision of the High Court in Byrne and Australian Airlines, which is tab 4, for a number of purposes, and if I could take you to that now. Unfortunately I haven’t marked that spot but suffice to say McHugh and Gummow JJ held, at page 445, on my notes, that an award is not a law of the Commonwealth.

PN521

VICE PRESIDENT HATCHER: That’s been established in the context of section 109 in consistency, isn’t it?

PN522

MR HARDING: That’s precisely so. I mean, Gummow J, in the Milosevic case that I’ve referred you to says precisely that. Points to the phrase, the law of the Commonwealth, in section 109 and says, well, a law of the Commonwealth is one made by the Commonwealth Parliament, and that’s, of course, not something made here.

PN523

DEPUTY PRESIDENT HAMBERGER: Mojsilovic. That isn’t part of the law of the Commonwealth.

PN524

MR HARDING: I’m sorry, your Honour?

PN525

DEPUTY PRESIDENT HAMBERGER: Mojsilovic rather than what you’re calling Milosevic.

PN526

MR HARDING: Yes, your Honour. Should have got that correct, shouldn’t I? My Serbian pronunciation is defective by a long stretch.

PN527

There was a discussion about the concept of juridical power and my learned friend took you to a case about that. We’ve included, in our materials at tab 13, Re Ranger Uranium Mines and Ex Parte Federated of Miscellaneous Workers Union of Australia that says creation of new rights is not judicial power, and, I think, in that context, the Court was considering a jurisdiction whereby the Commission could declare whether a termination was harsh, unjust or unreasonable and held that that wasn’t itself infringing.

PN528

But in Byrne and Frew the majority, at 421, draw on what was said by the High Court in Josephson and Walker, and this is about half-way down?

PN529

VICE PRESIDENT HATCHER: What page? 421?

PN530

MR HARDING: 421 of the judgment. Refers to a claim in an award. They cite Josephson and Walker with approval and extract from that an aspect of the reasons of Windeyer J, where he makes it clear that an award right is a new right. The same case is adopted and the same point is made by McHugh and Gummow JJ at 461 of the judgment.

PN531

In many respects, your Honours and Commissioner, the analysis engaged in by my learned friend about the concept of judicial power raises the misconception inherent in the concept of breach that is relied on to impugn the CFMEU proposal. When it’s understood that what the Commission’s function is, is to create a new right in an award to an additional sum, it is plain that it is not exercising judicial power. The authorities say that’s so.

PN532

It’s also clear that it’s not thereby concerned with the concept of breach, because the right that is being created is a right that the Commission must have adjudged is a fair condition of work or associated with work. My learned friend, I suspect, brings in the concept of judicial power as a way of saying to the Commission, well, there’s another reason why you can’t do what the CFMEU proposes because to do so would involve the Commission exercising judicial power, as if it was concerned with the concept of breach at the forefront of the reasons why it would put that term in a modern award, when it’s realised that that’s not what’s going on here because we’re creating a new right. It is apparent that the concept of breach falls away entirely, in any aspect of the functions that are being performed under 139. That being so, so does the objection to the CFMEU proposal, as a term of the modern award.

PN533

I don’t exclude that from that that as a matter of merit there may be factors relating to what the Act does, on the one hand, and what is proposed for the award on the other that may bear on what term, and what measure, if any, the Commission may adopt, if it was minded to include a term in the modern award, but it has no bearing whatsoever on whether it can. Unless there’s any questions, that’s the submissions for the CFMEU save for a reply.

PN534

VICE PRESIDENT HATCHER: All right. Thank you. Who would like to go next? Ms Starr, would you like to go next? Yes, I think we need to turn on the microphone. We’re just turning on the microphone, Ms Starr, so just bear with us for a second. Ms Starr, it should be working now. Can you say something so we can hear.

PN535

MS STARR: Yes. Is that okay?

PN536

VICE PRESIDENT HATCHER: Yes. If it’s easier to sit, just please do so.

PN537

MS STARR: Thank you, your Honour. I’m not going to – I think – I don’t wish to repeat anything that the CFMEU has already said, and as we note, in our submissions, we support those submissions, which have been made both in their written submissions and what’s been said this morning.

PN538

I think I will just make one, and I think, one comment, and I apologise if it’s an obvious point to make, but just in respect to section 323 of the Act; section 323 sits in part 29 of the Act which deals with other terms and conditions of employment, and those terms and conditions are those that apply to all national system employees, not just those who are covered by a modern award or by an enterprise agreement, and in that sense, we say that we support the CFMEU that that provision, 323, does not, in any way, restrict what is or is not an allowable matter for the purpose of modern award content.

PN539

We say that that criteria is already comprehensively dealt with in division 3 and part 23 of the Act, that is, it sets out clearly what is, what is not, and what may be included in a modern award, and that has led into some debate already this morning about whether or not late payment, as a subset of a payment of wages clause, is or is not an allowable matter for reasons among and including whether or not it satisfies the requirements of section 139 and/or 142.

PN540

Those arguments are going to be, and we assume, will be ventilated in front of the other Full Bench proceedings which deal with the substantive matters in relation to the Timber Industry Award. But once you – and assuming that we get past the criteria in respect to 139 and 142 really we need to remember that this leads to the ultimate question of what the Commission is empowered to do as part of the four yearly review and that is whether or not the variation which is proposed by the CFMEU is necessary to achieve the modern awards objection, and I emphasise the word “necessary”.

PN541

We say that that’s where the MBA objections – that’s where the objections are more appropriately aired. They go to this question of merit, as you might call it, this question of merit goes to whether or not: (a) the late payment provision should be – sorry whether or not there should be an additional payment where wages are paid late; and then second to that, and if so, then what is the manner in which or what is the amount in which somebody should be, either compensated, or can an employer be deterred, in terms of how that provision might operate.

PN542

I don’t think - I think there’s little more that we need to say, in relation to any questions of jurisdiction, other than to say that we say there’s little support which is based in either the MBA’s written submissions or what they put this morning, to support that the Fair Work Commission is, in any way, jurisdictionally barred from including such provisions in the modern award.

PN543

Other than that, your Honours, we have nothing further to add, unless there are any questions.

PN544

VICE PRESIDENT HATCHER: Thank you, Ms Starr. Mr Moriaty?

PN545

MR MORIATY: I would rely on our written submissions and those of the ACTU and the CFMEU.

PN546

VICE PRESIDENT HATCHER: Ms Gherjertani?

PN547

MS GHERJERTANI: Your Honour, the AWU also supports the submissions of the ACTU and CFMEU, apart from that we do not have anything additional to add today.

PN548

VICE PRESIDENT HATCHER: Anything in reply, Mr Calver?

PN549

MR HARDING: Before Mr Calver rises, there is one case I just needed to hand up to you. I think it might be of assistance and I neglected to refer to it. It’s the decision of the High Court in Grey ex parte Marsh & Anor. It’s on the issue about the words “includes” in (e) of section 139(1) and I draw your attention to what Gibbs CJ says, at page 365. It’s in the context of the definition of irregularity, but that definition was expressed to be inclusive terms and his Honour goes on to say something about how that were to be understood at the top of the page, 365.

PN550

It says (inaudible) what it was, but we have a list of examples that can also indicate that the remaining examples are of the same class.

PN551

It’s the words his Honour uses, was intended to comprehend such things as the word would ordinarily mean, as well as those specifically included. I think my submission has been where ordinary meaning penalty rates, a meaning we’ve been discussing, there are then some other things that it specifically (inaudible).

PN552

VICE PRESIDENT HATCHER: Mr Calver?

PN553

MR CALVER: I think Ms Adler has something to put (inaudible).

PN554

VICE PRESIDENT HATCHER: I’m not sure she has a right to reply. Ms Adler, is there something deeply pertinent you have to say that can’t be said by Mr Calver?

PN555

MR CALVER: Well, no, Ms Adler kindly found an authority directly on point and I seek the indulgence to make the point, given that she is electronically aided and my electronic aids are in my luggage.

PN556

VICE PRESIDENT HATCHER: All right. Come forward with that.

PN557

MS ADLER: It simply goes to the characterisation of the provision in question that might assist the Bench. There was a matter, Simpson Personnel (2010) FWA - - -

PN558

VICE PRESIDENT HATCHER: I’m sorry, Simpson Personnel, yes?

PN559

MS ADLER: (2010) FWA 2894 and those proceedings related to clause 31 of the Building and Construction General onsite award, which is the payment of wages provision. That was an application by Simpson Personnel to vary clause 31 to provide payments on a fortnightly or more regular basis. The current provision provides weekly payments only.

PN560

While the applicant was unsuccessful - it was made under section 157 of the Act. The application was unsuccessful but of relevance is paragraph 20 of the decision, and I’ll read it for convenience. It goes to CFMEU’s objection to the proposed variation made by the applicant and it says:

PN561

The CFMEU addressed each ground in the application submitting that the if the applicant currently paid its employees on a fortnightly basis it would appear to be in breach of the award for any employees covered by the 2010 Modern Award and the pre-existing National Building and Construction Industry Award, and in any case that practice appears to be an unilateral decision of the employer and not an arrangement (inaudible).

PN562

So the point I’m just going to is that in those submissions of the CFMEU they characterise the payment fortnightly as a breach of the award which prescribes a weekly payment (inaudible).

PN563

MR CALVER: Thank you, your Honour. I’m going to be brief. The points that you raised in respect to my learned friend is the rule of statutory interpretations, which I was going to take the Bench and that is that if there is a list of classes which immediately follow from the notion of something that is inclusive, then the inclusions are defined by reference to that class, and that is a boilerplate method of statutory interpretation.

PN564

VICE PRESIDENT HATCHER: I think it’s (inaudible), depending on the context.

PN565

MR CALVER: Yes. That completely links with all of the authorities so that there was not one authority that my learned friend proposed to you today that showed a label of a penalty rate on a matter where there had not been performance at work. That, we say, conflated the idea of a penalty imposed as a punishment and that which is vindicated by the statute to meet the modern award objective, in section 141(d)(a), which now - - -

PN566

VICE PRESIDENT HATCHER: Why isn’t it open for the Commission to include that payment to act as a deterrent for certain conduct is necessary to meet the modern award objective? That is, if one starts - I’m saying this is not a definitive conclusion but one open to be drawn, if one starts from the premise that payment of wages in time is necessary to meet the modern award objective as a matter of fairness, why isn’t it - why couldn’t I obtain the (inaudible) to deter employers from paying late, it would be characterised as something usefully achieved in the modern award objective and fair in that context?

PN567

MR CALVER: The generalised proposition is one that would require that particular provision to be firmly within the terms of which the Commission has power to insert. If it was of the nature of a punishment following a breach for payment of those wages, as is currently under consideration, it would be proscribed.

PN568

VICE PRESIDENT HATCHER: Yes, but it’s not an actual punishment for breach, it’s a deterrence for certain (inaudible).

PN569

MR CALVER: Well the two may or may not be necessarily co-located, depending upon the wording that is used to reach that end. As presently structured, it’s clearly a punishment or a penalty. I go back to the finding of the Chief Magistrate of the New South Wales court, in so looking at that matter, the authority which I have in front of me, where it emulates the way in which many current award provisions are expressed.

PN570

Any employee who is not paid on such day shall be paid overtime rates for time subsequently worked until payment is made.

PN571

Was considered by the Chief Industrial Magistrate as clearly a penalty and therefore he declined to make an order for interest. There was a breach of that provision categorically belaboured, that the Master Builders brought forward today was applied to it and he sought to ameliorate the statutory consequences.

PN572

VICE PRESIDENT HATCHER: That underlines the terminological problem, in that we know the penalty rates and awards, and that includes the word “penalty”. So “penalty” means different things in different contexts. You’re right in saying a penalty may be a word to describe a monetary amount imposed by a court for breach of a legal obligation, that’s one context in which the word “penalty” can be used.

PN573

MR CALVER: Yes.

PN574

VICE PRESIDENT HATCHER: But another context is in the concept of penalty rates, which is permissible under the Act. That is, a rate designed to, among other things, deter certain types of conduct which are seen as unfair and (inaudible).

PN575

MR CALVER: The notion of deterrence is not one that underlines the modern award objective, we would say. And in instances where deterrence is unfair, or unconscionable, we say it should be proscribed. The statutory interpretive point that should mean that penalty rates are confined to their application, following the performance of work, as I say, we would submit is vindicated by the notion, in section 134(1)(d)(a), where it says:

PN576

The need to provide additional remuneration for employees working overtime, employees working unsocial, irregular or unpredictable hours -

PN577

The very phrase used in the 1947 decision that my learned friend took you to:

PN578

employees working on weekends or employees working shifts.

PN579

Penalty rates, as required to meet the modern award objectives all relate to the performance of work. So it’s quite distinguishable the sort of penalty, by the very label that the CFMEU seeks to promote, or the label that was used in the context of the High Court is different from the penalty rate, quite categoric. That would be our submission.

PN580

My learned friend said that we sought illegitimately to the principles established in contract law, that’s why we mentioned the notion of equity. He said that the provisions that flow from contracts should be assessed in all the circumstances of that contract, and that cannot be the case where a modern award is at issue.

PN581

We say it has a worse effect than a modern award because it’s not an instrument that can be then mutually agreed about. It can’t be free bargained. It can’t be entered into in the same manner as a contract. Therefore the principles of equity, which we isolated, obtain even greater importance. So we don’t concede that point.

PN582

We don’t concede, and I have to be very careful how I say this, the case Mojsilovic, it doesn’t assist. The case that my learned friend put in, it doesn’t assist at all. Clearly there have been cases - a case, indeed, where his Honour Hamberger SDP sat on the Full Bench, under the name of our association, Master Builders Australia, where section 109 of the constitution was in contention in relation to matters in the modern award, dealing with occupational health and safety.

PN583

Moderns are clearly instrument of the Commonwealth and made under a statute. The whole purpose of section 26 and following of the Fair Work Act is to resolve any inconsistency that might arise by the application of section 109 of the constitution to matters that are dealt with in modern awards and other instruments made legitimately under the Fair Work Act are lawless.

PN584

VICE PRESIDENT HATCHER: I think 109 operates by reference to awards, mainly because section 29 says so but is absent a provision like section 29, awards are not laws of the Commonwealth to which section 109 will apply. I’m not sure what the relevance of that is, but it’s a legal proposition. That’s the position.

PN585

MR CALVER: Well, I mean, in a highly technical sense, your Honour, I think we could probably come to some - have quite a nice debate about that. But for the present purposes I don’t think it matters, I don’t think it matters at all. It seems to be an irrelevant consideration.

PN586

The final point in reply is that what my friend from the ACTU said, that section 323 is not confining of what modern awards can do. Well, that defies the very terms of section 323. Parliament wouldn’t have departed from the provisions of 323 to indicate what a modern award and an enterprise agreement could do if it was otherwise vindicated to change those provisions, because parliament would not have bothered to carve out that exception. As a rule of statutory interpretation but parliament indicates that a limited matter is permitted then a broader matter cannot be so permitted.

PN587

VICE PRESIDENT HATCHER: Section 323 is not the source of power to make modern awards. That's (inaudible).

PN588

MR CALVER: No, but it can confine the powers that the Commission can exercise, in respect of modern awards or the (inaudible) which enterprise agreements can contain and if a modern award or an enterprise agreement specifies a particular method by which the money must be paid, then the employer must pay the money by that method. It says, “Despite paragraph 1(b).” So this is the only occasion where the modern award or enterprise agreement, having regard to section 323, can differ from its terms and the only reason that fortnightly or weekly wages are permissible is because 323(1)(c) is permissive.

PN589

VICE PRESIDENT HATCHER: What’s the relevance of that proposition?

PN590

MR CALVER: I’m just countering what he ACTU put to you, that there was no constraints in the modern award powers by terms of section 323. That’s the proposition which I’m countering. Those are our submissions in reply, if it please the Commission.

PN591

VICE PRESIDENT HATCHER: Do you want to say something?

PN592

MR HARDING: I know I haven’t got a right of reply, but I did misdirect the Commission on the question of law of the Commonwealth in Burne, and I wanted to correct that. It’s page 455 of Burne and it refers to an award and says:

PN593

Of itself the award could not answer the description of a law of the Commonwealth.

PN594

Beyond its emanation in section 109, this case stands for that proposition.

PN595

MR CALVER: But it’s an award of a different kind, it’s not a modern award.

PN596

VICE PRESIDENT HATCHER: All right. We thank the parties for their submissions. We propose to reserve our decision. We now adjourn.

ADJOURNED INDEFINITELY [12.30 PM]

Fair Work Commission Transcripts

AM2014/92, Transcript of Proceedings [2015] FWCTrans 174 (26 March 2015)