AM2014/92, Transcript of Proceedings [2015] FWCTrans 280 (14 May 2015)

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PN1829

SENIOR DEPUTY PRESIDENT WATSON: Yes. Who would like to start off?

PN1830

MR L IZZO: Your Honour, I believe I’ll be proceeding on behalf of ABI and the New South Wales Business Chamber, followed by Mr Ferguson, Mr Calver and then I understand Ms Adler is up in Sydney today.

PN1831

SENIOR DEPUTY PRESIDENT WATSON: Very well.

PN1832

MS B LIGHT: And also Ms LIGHT.

PN1833

MR IZZO: And Ms Light; apologies.

PN1834

SENIOR DEPUTY PRESIDENT WATSON: Yes. Very well.

PN1835

MR IZZO: Your Honours, before I commence, can I assume that your Honours have received the further documents that we filed in terms of oral submissions?

PN1836

SENIOR DEPUTY PRESIDENT WATSON: Yes. They’ve been received and placed on the website, and they’ve been read and understood.

PN1837

MR IZZO: Thank you. A very good start, your Honour.

PN1838

SENIOR DEPUTY PRESIDENT O'CALLAGHAN: We’re relying on you not reciting them for us, Mr Izzo.

PN1839

MR IZZO: I don’t intend to, your Honour. Can I hand up - I’ve got a bundle here of some cases that we want to take you to, which are referred to in submissions. There are certain cases that I do want to take you to so I’ve got three folders here.

PN1840

SENIOR DEPUTY PRESIDENT WATSON: What if we were to say “no”?

PN1841

MR IZZO: Well then, I wouldn’t be able to hand them up, your Honour, but it is intended to insist you.

PN1842

SENIOR DEPUTY PRESIDENT WATSON: Yes. Thank you. I’m sorry, I should indicate, on the last occasion I meant, and didn’t, mark the extract from the Australian Concise Oxford Dictionary. I’ll mark that exhibit CFMEU 12.

EXHIBIT #CFMEU 12 EXTRACT FROM AUSTRALIAN CONCISE OXFORD DICTIONARY

PN1843

MR IZZO: Your Honours, as you would be aware from the outline that we filed on Monday, we have two bases upon which we believe that the clause that’s been proposed by the CFMEU should not be included in the modern award. There’s a set of jurisdictional bases that we’ve outlined, and then merit-based considerations as well. That’s effectively what I’d like to address today.

PN1844

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN1845

MR IZZO: But before I do that, I want to make some introductory comments relating to the nature of the clause that’s being proposed. In its closing submissions, the CFMEU has very much indicated and painted the proposed clause as something which isn’t novel, as something which isn’t out of the ordinary in terms of what existed in the industry prior to 2010. It describes it as a clause that’s not revolutionary or without precedent.

PN1846

We strongly refute that position that’s been put. It is our view that the nature of the clause proposed is not only something that is novel to the industry, even if we look at what existed prior to 2010, but it’s actually quite novel to the modern award system; that is, the provisions in other modern awards. The reason for that is because the CFMEU is advocating an interpretation of the phrase “kept waiting” that stands in stark contrast to how that phrase has been interpreted in industrial history and in cases that interpret modern awards to date.

PN1847

That’s what I just wanted to start by identifying. In the folders that I just handed up, I just wanted to draw your attention to some of the cases that have considered this type of phrase, and if I could take your Honours firstly to tab 3 in the folders that you have? Tab 3 is called Darling Harbour Development Project Industrial Agreement. It’s a decision of the Conciliation Commission of New South Wales, it seems a Connor C. At page 2 in that tab, you’ll see - so it’s the second page of the judgment.

PN1848

At the top, Connor C considers subclause (e) of clause 7 which he titles, “Payment of wages”, and the relevant section, halfway through the quotation, he says:

PN1849

and if an employee is kept waiting for his wages on pay day after the usual time for ceasing work, he shall be paid at overtime rates for the period he is kept waiting.

PN1850

That’s the clause that’s been considered by the Commissioner. Now, further down, there’s a paragraph that starts, it’s about two-thirds of the way down the page, and the Commissioner starts talking about the purpose of subclause (e), and he says:

PN1851

It is not to impose a penalty on an employer for non‑payment or late payment of wages

PN1852

which in any event, would not be appropriate in this case:

PN1853

it is to provide some compensation to an employee whose departure from his place of employment is delayed because he is not paid his wages on time.

PN1854

And the Commissioner quotes a Commonwealth Works and Services Award case. Then, later on, he says:

PN1855

It follows that the company’s employees would only be entitled to waiting time in accordance with subclause (e) for any time during the period from 3.30 on Thursday to 7.30 am on Friday when they were actually present at their place of work and waiting for their wages.

PN1856

So in this context, considering the phrase about “kept waiting”, the Commissioner has formed a view that what that is talking about is kept waiting at the workplace. Now, if I could take your Honours to tab 5 in the folders that you have, and it’s a case called Wahlgren v Transfield Power Systems Manufacturing. For some reason, in the title of the case, “Power” is misspelt, but I think that’s meant to be Power with an “o”, but in any event, page in the folders that you have, and it’s a case called Wahlgren v Transfield Power Systems Manufacturing. For some reason, in the title of the case, “Power” is misspelt, but I think that’s meant to be Power with an “o”, but in any event, page 4 of that decision, again, this type of clause is considered.

PN1857

About two-fifths of the way down the page, the Industrial Relations Court of Australia in this case talks about a provision which says:

PN1858

Where the majority of employees in a particular establishment are not employed under the terms of this award, an employee kept waiting for his wages on pay day for more than six minutes after the usual time for ceasing work shall be paid at overtime rates after the six minutes. Mr Wahlgren has read this clause as setting out to impose condign penalties on an employer who has not in a timely way paid his employee all that is due. But that is not the purpose of the clause, as it seems to me the facts of this case and plain reading of the clause show.

PN1859

Then if I go down a bit further, another six or seven lines down, the court says:

PN1860

In any case, a plain reading of the clause indicates that it is concerned with the position where an employer negligently, foolishly, incompetently or arrogantly fails to pay an employee what the employer bona fide conceives to be due on the regular pay day and where the employee is consequently kept waiting at the workplace.

PN1861

Again, there’s the focus of waiting at the workplace. The third case, your Honours, that I wanted to take you to is behind tab 2.

PN1862

SENIOR DEPUTY PRESIDENT WATSON: I take it there is no cap in that case, given the claim was for a period from 1990 to 1996.

PN1863

MR IZZO: Yes, I’m not sure, your Honour, in relation to that. The third case is Les Schofield v Chubb Security Australia.

PN1864

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN1865

MR IZZO: It’s behind tab 2, and I wanted to take your Honours to page 2. Now, this clause is interesting. It starts at 14.2, you’ll see a clause that says “Pay Day”, and then there’s a clause 14.4, “Errors in Payment”. This clause actually doesn’t refer to “kept waiting”, it just says, at “Pay Day”:

PN1866

The employer shall specify the day upon which wages shall be paid ... and any employee who is not paid on such day shall be paid overtime rates for all time subsequently worked until payment is made.

PN1867

So in this case, it doesn’t even have the phrase “kept waiting”, it just says if you’re not paid, you’ll be paid overtime until you are paid. Then it talks, in clause 14.4, about errors in payment, and it says if there’s an error, it talks about the right to claim waiting time can be waived. The next paragraph down, the court considers the meaning of this award. Sorry, and I should note, this is a New South Wales Chief Industrial Magistrate’s court, so it would be the Chief Industrial Magistrate.

PN1868

What the Chief Industrial Magistrate says:

PN1869

Traditionally, “waiting time” suggests that the

PN1870

employee would be required to remain in attendance at the place of work and waiting for their wages.

PN1871

And the Chief Industrial Magistrate cites a number of cases in support of that, and ultimately goes on to conclude in the next paragraph that the employer is not liable to pay “waiting time” in this particular case. The final case, your Honours, is the case behind tab 1, and I’m going to come back to this later on, but the case behind tab 1, Peter Ogle v F&M Invernon, in this case, it’s effectively an underpayment case. An employee has brought an underpayment claim for a whole raft of issues; redundancy, public holidays, annual leave, rostered days off, super, and waiting time.

PN1872

What appears to have happened here is that the employee says they’ve been underpaid for a period of time, and because the employee said, “Well, I’ve been underpaid, therefore, I should also be paid for the fact that I’ve been kept waiting.” On page 3 at the very bottom, there’s a heading that says, “Waiting Time”:

PN1873

The applicant claims waiting time pursuant to clause 9 of the (State) Construction Award and clause 36 of the National Award in respect of the late payment -

PN1874

It seems that the reason that waiting time is claimed is because the employee is saying, “Well, I wasn’t paid the right amounts, therefore, I’m entitled to waiting time.” On page 4, the Chief Industrial Magistrate, again, says:

PN1875

Traditionally, “waiting time” suggests that the employee would be required to remain in attendance at the place of work and waiting for his wages.

PN1876

The effect of those decisions is, we say, that there is an established meaning of the phrase “kept waiting” and that when that phrase appears in awards in the timber industry, and when it appears in other awards in the modern award system, it refers to a very specific event, people kept waiting in the workplace. What the CFMEU is contending is for a clause that doesn’t apply to people kept waiting at the workplace. It doesn’t relate to being detained or working, but it relates to people who are paid when they are not working or not at the workplace.

PN1877

Now, we’re now going to deal with our jurisdictional objections and our merit-based objections, but the reason I raise this upfront is that I want the Commission to be conscious of the fact that we are talking about the clause which is very different to what has come before, because of the meaning that the CFMEU is trying to ascribe to the phrase “kept waiting”.

PN1878

COMMISSIONER CRIBB: But could that be because it’s 30 years or so since waiting time, since the decisions that you referred to, and people are paid in different ways?

PN1879

MR IZZO: That could well be the case why we’re now seeking to have a different meaning ascribed to the phrase by the CFMEU, but the reason I think this is important is that we’re now going to raise a number of reasons why we say, jurisdictionally, this clause is impermissible, and I don’t want the Bench to be under the impression that that means that all these other clauses might be jurisdictionally impermissible as well because what I’m saying is that what has been put here is somewhat different to the way in which we say the other clauses should be interpreted, and so you don’t need to be concerned about the fact that a finding of no jurisdiction to include the clause here has some kind of reverberation effect with respect to other provisions that may have occurred previously.

PN1880

SENIOR DEPUTY PRESIDENT WATSON: Blair C’s application on the waiting time provision to persons in the seat of EFT raises questions about the traditional concept of waiting time in relation to cash. I doubt whether the Commissioner would envisage people would check their bank accounts and then sit in, if you like, at the workplace until their pay was rectified.

PN1881

MR IZZO: Yes, your Honour, and I suppose my response to that is that the decision of Blair C occurred in 2007. The jurisdictional objections that we have relate to the Act as it was introduced in 2010, so I’m not trying to say that what Blair C may have done or not done was impermissible, but certainly under this new regime that we’re about to take you to, we don’t see a head of power that enables the Commission to grant this type of clause under the Fair Work Act 2010. So, in that sense, we - and that’s why we lead to our jurisdictional objection.

PN1882

SENIOR DEPUTY PRESIDENT WATSON: Very well.

PN1883

MR IZZO: Your Honours, if I could take you to section 136 of the Fair Work Act? Section 136 sets out what terms may be included in modern awards. It talks about terms permitted or required by subdivision (b), permitted or required by subdivision (c), permitted or required by section 55, permitted or required by part 2-2 of the Fair Work Act. It is my understanding that the CFMEU and other parties that have filed submissions such as the ACTU, have only contended that the term that’s proposed to be included is permitted by subdivision (b). That is, they haven’t relied on any of the other grounds, and that’s because we see it as uncontroversial that the clause that’s being proposed does not relate to any of the matters dealt with by subdivision (c), section 55 or part 2-2.

PN1884

So what we say is that in order for the Commission to have jurisdiction to include this proposed clause into the award, the Commission must be satisfied that it’s a term permitted by subdivision (b). Now, if your Honours turn the page to section 139, that’s the beginning of subdivision (b), and - - -

PN1885

SENIOR DEPUTY PRESIDENT WATSON: I don’t have to turn the page on my version.

PN1886

MR IZZO: Well, it should be all the more clear, then, your Honour, the points that I’m about to make. Section 139 sets out the terms that may be permitted; it goes through various types of - if I can call them, for ease of reference, “heads of power”, if you like, the term about penalty rates, the terms about types of employment and so on and so forth. The next sections that follow, 140 and 141, we say are not relevant to the present proceedings and the CFMEU haven’t advocated that they are, and then we get to 142. 142 talks about terms that are incidental to another term that’s been included in a modern award, but are also essential for the inclusion.

PN1887

So if I could deal with 139, your Honours, in these proceedings, there’s actually five bases that have been advanced, but only one of them seems to be pressed. The first four that have been filed - and this is mainly by the ACTU who aren’t here - they said that the clause related to minimum wages, overtime, penalty rates, annualised wage arrangements and allowances. Of those five, the CFMEU has only pressed a case with respect to penalty rates, or section 142.

PN1888

So for the sake of brevity, and given that the ACTU is not here, I don’t propose to impose on the Commission’s time by dealing with minimum wages, overtime, annualised wage arrangements or allowances. I think our written submissions today have dealt with them, and unless the Commission has questions about those matters, we’re happy to rely on our written submissions in that regard. The only thing I’d note about allowances is that in the bundle of materials that I have handed up, the case behind tab 10, a decision of Harrison SDP, does have a conclusion there about the fact that this type of clause wouldn’t be an allowance. But broadly speaking, we’ll just rely on our written submissions on those four grounds and focus on what the CFMEU is now contending.

PN1889

So the CFMEU’s contention is that the proposed clause is a penalty rate. When we talk about it being a penalty rate, the Commission needs to be satisfied whether the term is a penalty rate within the meaning of that phrase as it appears in section 139. Now, I think it’s trite to say, but important to note, that the established approaches to statutory interpretation set down by Project Blue Sky v ABC is that when you come to interpret a provision such as this, the Commission is required to look at the text, the context and the purpose of the provision.

PN1890

We think that’s the approach that should be adopted and the approach that we will adopt to interpreting the phrase “penalty rates.” So if we start with the text, the term “penalty rates” is one that does have a natural and ordinary meaning in the sense that it is defined in the dictionary. Now, in the folder that has been handed up to you, there’s two definitions provided, the CFMEU’s definition which came from the Oxford Dictionary. That’s behind tab 7 of the folder provided. Behind tab 7, it says, “Penalty rate, increased rate of pay for overtime or in recognition of abnormal conditions.”

PN1891

What I’d like to draw your attention to is that the definition of “penalty rate” is distinguished from and different to the definition of “penalty” which appears above it, and penalty is talking about punishment for breaking a law, rule or contract and so on. The two terms have very different definitions there. If I could then ask your Honours to turn the page to tab 8, and under tab 8, the Macquarie Dictionary definition. Now, the Macquarie Dictionary definition is somewhat less advantageous to the CFMEU’s cause.

PN1892

It defines a penalty rate as: “A rate of pay determined by an award higher than the usual rate in compensation for working outside the normal spread of hours.” It’s noteworthy, again, that the term “penalty rate” is distinguished from the term “penalty”. Penalty is defined higher up. Again, is a punishment imposed or incurred for a violation of law or a rule. There’s two things that we’d like your Honours to draw from the dictionary definitions of the natural order in many of these terms.

PN1893

The first is a distinction or a distinguishment between the term “penalty” and “penalty rate”, and I’m going to come back to that later. The second is that even the Oxford Dictionary definition that the CFMEU relies upon, both it and the Macquarie Dictionary refer to the penalty rate as attaching to particular conditions associated with work performed. The focus is that the work is somehow performed in abnormal conditions or outside the normal spread of hours or in abnormal hours.

PN1894

What we say the dictionaries inherently assume is that the penalty rate is actually being applied to particular work. It’s not a fine being issued in the absence of work, it is inherently linked to the rate that’s paid for particular work. That’s where we have a departure with the CFMEU’s clause, because the CFMEU’s clause would see employees paid when they are not working and when they are not at the workplace. If I can then draw your Honours attention to section 139(e) which talks about penalty rates.

PN1895

We have the three examples listed. Now, the CFMEU is very quick to point out that the list of examples is not exhaustive, and we accept that it’s not an exhaustive list, but nonetheless, the nature of the examples given is somewhat informative. Employees working unsocial, irregular or unpredictable hours; employees working on weekends or public holidays; and shift workers.

PN1896

In all three of those categories, the penalty rate again attaches to particular work. The work is either in unpredictable or outside normal hours, or it’s on a public holiday or it’s shift work, but the conditions that give rise to the penalty rate arise from the work itself. The rate applies to the work. We say this is consistent with the dictionary definitions.

PN1897

The third matter I’d like to draw your Honours’ attention to is the industrial history that relates to the term “penalty rate”, and before we turn to the industrial history, I’d like to make a point that when the legislature made the Fair Work Act in 2010, it’s uncontroversial that the legislature was aware of a very long history of penalty rates existing in the award system and that background forms somewhat part of the context when one considers the meaning of the phrase. That is to say that the legislature was aware that in a large number of industries, penalty rates were paid.

PN1898

What I’d like to do is now take you to how these penalty rates operated. The first case I’d like to take your Honours to is the weekend penalty rates cases that the CFMEU referred to. That is behind tab 13 of your folders. It’s the Metal Trades Award 1947 decision. I’d like to take your Honours to page 615. At page 615, there is a subheading called “Penalty rates”, and under that subheading there is discussion about penalty rate not being a term of art, it’s used by those skilled in industrial law with widely divergent needs.

PN1899

But importantly, the judgment then goes on to say:

PN1900

Usually, an award provides for an ordinary rate of remuneration payable for the ordinary work of a standard period performed under normal conditions and for additional amounts to be paid where work is done under special conditions of time, place or circumstance.

PN1901

The reason we focus on that is that that latter part of the sentence, talking about additional amounts to be paid where work is done under special conditions of time, place or circumstance, is the penalty rate component that the court is referring to. It talks about it being, in one sense, the use of the term “penalty” is somewhat a misnomer, there’s no question about punishment, but in another sense it expresses accurately the operational requirement of additional payment.

PN1902

What is interesting about that passage is that the additional amounts are paid where work is done under special conditions. Again, just like the dictionary and just like the examples in the Act, the rate attaches to actual work being performed. That’s an important focus for our case. The next case I’d like to take your Honours to is the Modern Awards Review Decision in 2012 of the Full Bench in the penalty rates proceedings. That’s behind tab 11. The particular paragraph I’d like to take your Honours to - your Honours, it may be easier if I actually take you to the oral outline I’ve provided because I don’t have the paragraph number handy.

PN1903

In the oral outline I’ve provided are excerpts of the passage from this case. The passage talks about penalty rates and describes - and this is at paragraph 5.2 of the oral outline. It talks about:

PN1904

Although described in monologues as “penalty rates” they are in reality a loading which compensates for disabilities. In the modern award context, these loadings must recognise the disabilities of working at unsociable times -

PN1905

and the passage goes on, “and be sufficient to induce people to work”, et cetera. Again, the Full Bench there has described the penalty rate as a loading to recognise disabilities associated with working, and we say that this is consistent with the other cases because the loading attaches to the work performed. So where we finish up with the case law is that we have industrial case law history that talks about penalty rates attaching to particular work performed, we say that’s consistent with the dictionary definitions.

PN1906

We’ve also outlined in our oral outline - and I won’t take you to it - some academic literature at footnote 4 about penalty rates which talks about loadings for premiums or premiums for working extra and antisocial hours. All of this documentation, whether it’s the Act, the academic literature or the industrial cases, all point to the fact that the rates are inextricably linked to the work performed, and more so, to some kind of unsocial, undesirable working hours, is generally the theme.

PN1907

Bearing that in mind, we now look at what the CFMEU’s proposed clause does. The CFMEU’s proposed clause does two things that we say are just substantially inconsistent with the matters we have taken you to. The first is it grants payment after an employee has finished working. The employee may be at home, the employee may be attending to personal matters, collecting children from school. Whatever the employee is doing, they’re not at work and we say for that reason, it can’t be a penalty rate.

PN1908

But also, the clause entitles the employee to payment in the days that follow in their ordinary working hours. Now, the fact that employees are being paid an additional amount during their ordinary working hours sits uncomfortably with the notion of penalty rate in the documentation we have taken you to because penalty rate talks about abnormal working conditions or outside the scope of usual hours or some level of unsociable or undesirable hours. There’s nothing unsociable or undesirable about the work in the following days. It’s the employee’s normal, ordinary working hours.

PN1909

Equally, the conditions are not abnormal. The employee is not under any particular event that makes the work harder or in any way makes the work different to the work in the way it’s ordinarily performed. Now, for these reasons, we say the clause proposed can’t be treated as a penalty rate, and we say that this was recognised in respect of this very clause that’s proposed by the Full Bench that was presided over by Hatcher VP in separate proceedings arising from this modern award review.

PN1910

So your Honours may be aware that Master Builders had raised a particular jurisdictional objection relating to a proposed clause.

PN1911

SENIOR DEPUTY PRESIDENT O'CALLAGHAN: Yes, we had heard of it.

PN1912

MR IZZO: That was dealt with by a separate Full Bench and that Full Bench delivered a judgment which is located behind tab 15, your Honours, of the bundle I gave you. At paragraph 29 of that judgment, which appears on page 6 of tab 15, the Full Bench discusses some of the CFMEU’s submissions and identifies that the CFMEU has stated that the proposed term - that the Commission has the power to include the proposed term because it’s about penalty rates:

PN1913

As the power is expressed in an inclusive, non-exhaustive way, the proposal term falls squarely and directly within the power conferred on the Commission by section 139.

PN1914

That was the position put by the CFMEU. The MEA contested that and the Bench went on to say:

PN1915

Because of our conclusions expressed above, it is unnecessary for us to express a view about the correctness of the CFMEU’s submission, although we think the proposed term does not sit comfortably being described as a penalty rate. It seems to us more likely the power to include the term contained within the CFMEU proposal must, if it exists, be found in 142.

PN1916

We say obviously that’s not a ruling by the Commission, they’ve just expressed an opinion there, but we say the reason that it doesn’t sit comfortably is for all the reasons that we’ve identified today, and that is because penalty rates are primarily focused on some kind of unsocial, undesirability about the working hours. Your Honours, what I’d like to next do is respond to some of the arguments that the CFMEU has put as to why the proposed clause is a penalty rate - or, sorry, is about a penalty rate.

PN1917

The CFMEU relied on a number of cases in which it says that, effectively, there’s precedent to tell us that a late payment of wages clause or imposing a penalty for late payment constitutes a penalty rate, but if we actually look at the language of the cases, if we actually forensically look at the language of the cases used, it becomes very apparent that what the CFMEU has done is conflate the notion of a penalty with the notion of a penalty rate.

PN1918

We say that the proposed clause is a penalty. It penalises an employer for breaching the award, but it is not a penalty rate. Now, if I could take your Honours back to the Weekend Penalty Rates case, that is at tab 13 of the bundle, and if I could take your Honours to page 616 of that case. Page 616 is dealing with the phrase “penalty rates”, it follows on from the passage we looked at earlier, and about halfway down the page, the court starts talking about whether it’s possible to determine objectively rather than subjectively the provision that they were looking at. They say:

PN1919

But such a method must fail in the absence of some general test to determine what is and what is not a penalty rate and if a test is capable of formulation, its application may be found to involve no inquiry other than an examination of the terms of the award or determination itself.

PN1920

Then they go on to say:

PN1921

Such a test and a satisfactory one may, we think, be found.

PN1922

Then they go on to say:

PN1923

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

PN1924

Now, if we just stop there, your Honours, what that passage is saying is that if there are prescribed conditions, whether they be ordinary hours or some conditions about the way work is to be performed, and work is performed outside those circumstances and there’s an extra amount for it, that’s a penalty rate. But then the court goes on to talk about a different circumstance:

PN1925

There are then both the express 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.

PN1926

This second category, the court describes as a penalty, and what it’s talking about is where there is a normal course of conduct prescribed and there is a fine imposed for infringing that what has been prescribed by the award. That, we say, that latter category, is really what the CFMEU is trying to do here. They are trying to say, you must do A, B and C, that’s what the award sets out, and if you don’t do it, a fine is imposed upon you. That is a penalty. It is not a penalty rate, and that’s a distinction that we say was drawn in the Weekend Penalty Rates case.

PN1927

The other two cases referred to by CFMEU seem to align with this distinction. The CFMEU relied on Emmerton v Terry. Now, that’s behind tab 9 of the materials that have been provided to you. It’s the second-last page of tab 9. In this case, the Supreme Court of Tasmania was considering a clause which said:

PN1928

If an employer fails to make payment to an employee as prescribed on payday he shall pay to each such employee $6.75 for each and every day thereof(sic)

PN1929

What the court then went on to find is:

PN1930

It will be noted at once that unlike the other provisions of the Award which have been referred to above, this provision is directly penal in nature. It is not a provision relating to remuneration properly so called. It is simply a penalty for “waiting time”.

PN1931

Now, the CFMEU said, well, this proves that it’s a penalty rate; it’s not. It’s a penalty, and that’s the extent to which the court proceeded in this case. The same appears in the TWU case which is behind tab 10 of your materials. This was also relied upon by the CFMEU and at page 3 of this case, Harrison SDP makes a couple of conclusions, the first which I will briefly take you to, which is the last sentence of one of the large paragraphs in the middle of the document. I apologise, I can’t describe it any better than that. Her Honour says:

PN1932

I am not, however, inclined to the view that, consistent with wage fixation principles, the provisions in question are allowances which constitute a reimbursement of expenses.

PN1933

That’s the reference I was taking you to about these late payment time provisions not being allowances, but just above that, her Honour does say:

PN1934

I understand and see merit in the position of some form of penalty upon an employer in the event that the award obligations are not met.

PN1935

Again, the clause is characterised as a “penalty”. The CFMEU says, again, this is proof of the late payment type clauses being penalty rates. It’s not. It’s proof of their characterisation as a penalty. Your Honours, that is all I propose to say on the question of penalty rates. For the reasons that we’ve advanced, we say that the proposed course does not fall within the penalty rate under 139 and therefore, there is no other head of power under 139 that the CFMEU has pressed; no other ones are available.

PN1936

The CFMEU therefore needs to rely on section 142 of the Act to establish why the clause should be included. My understanding is that other employer parties will address 142 in substance, so I don’t propose to deal with it in any great level of detail, other than to say this: for the Commission to include in an award a term pursuant to 142, the Commission must not only be satisfied that the term is incidental to other terms that are included, but the term must be essential for the award to operate in a practical way.

PN1937

What we say that means is that without the term, the award cannot operate practically. For reasons that will become evident, we say the evidence falls markedly short of demonstrating this very high hurdle. Your Honours, before moving to the merit basis for the variation, there’s one last thing I wanted to address on jurisdiction, and that relates to an annexure that has been filed with the CFMEU closing submissions. It’s called annexure A to their submissions, and it talks about clauses that the CFMEU say are similar to or analogous to the clause that they’re seeking in current modern awards, as some kind of basis to give the Commission comfort that the clause being sought has jurisdictional grounding.

PN1938

We’d just quickly like to point out the first two types of those clauses. One is about a failure to allow a meal break. In those circumstances, we have employees who (a) have not had a break for a period of time, they may be therefore fatigued or tired, they also may be hungry because they haven’t been given their meal break. In those circumstances, the provision of additional amounts is very distinguishable from what we’re talking about here because the conditions under which the work is being performed have changed.

PN1939

Equally, the reference to a failure to provide notice is a very different circumstance because that category of award provisions that the CFMEU has drawn attention to relates to shift-workers who are ordinarily subject to certain rostering arrangements regarding how their work is performed, and those rostering arrangements are not complied with, that they are notified about work in such a manner that the hours are no longer perhaps socially desirable because the employees may not have the notice they need, employees may be inconvenienced, and again, the conditions under which the work is being performed are accordingly different.

PN1940

They are very different to what is being sought here, where employees are not in fact working, or are simply working ordinary hours. Then finally, the CFMEU refer to nine awards which talk about late payment of wages. Seven of these nine have the phrase “kept waiting” in them, and refer to employees kept waiting, and we say that given the industrial way, the history, in a way, in which this clause has been interpreted, those cases, by and large, talk about people being kept at the workplace. So the vast majority of the examples listed by the CFMEU are distinguishable.

PN1941

Your Honours, if there’s no further questions on jurisdiction, I’ll move to the merit basis for the variation. I’d like to start with the survey, and we have dealt with the survey in some detail in the oral outline provided. The starting point for the survey with relation to our position is this; there are five key problems that we have identified with the survey which we say makes it entirely unreliable. Now, those five key problems are outlined in our outline and I will attempt not to repeat things, but just add where I can.

PN1942

The first fundamental problem relates to the sample or the selection of participants chosen. We heard, under cross‑examination from Ms Calvert that there were five to 6,000 members of the Forestry Division of the CFMEU, or the FFD division, I can’t recall the full name, and we were told it’s five to 6,000 members, but only 1,300 were called, and that’s at PN874 of the transcript. There has, therefore, been a selection process undertaken as to who gets called. When Ms Calvert was asked about who selected who should be called, Ms Calvert said that she selected the people, in addition with another union official.

PN1943

She was asked by Mr Calver whether the process was random; she did not say that the process was random, under cross‑examination. Rather, under cross-examination in response to myself, at PN879, she stated that there was no rhyme or reason to her process. When we actually look at who was selected, a supplementary spreadsheet was handed up at the last hearing which actually identified the employers. I counted up the employer numbers; 296 employees were surveyed from Carter Holt Harvey. That’s 296 of 430 that participated. 60 came from Gunns, which is now Timberland. That means a total of 356 of the 430 participants came from two employers only.

PN1944

We say that that fundamentally affects the reliability of the sample size because we’re only talking in a large part about the experience of two employer sites, or I shouldn’t say sites, two employer businesses. The evidence we then heard from Mr Patty and Mr Coates was that the vast majority of employees in the industry are actually employed by small to medium-sized employers, and that can be found at PN1373 of the transcript and PN1267 to 1268.

PN1945

So we have the union evidence saying that the vast majority are small to medium employers, but the actual people surveyed mainly came from these larger two employer businesses. That’s all we say on the selection, and we say that, fundamentally, it’s not a representative sample and therefore, its reliability is weakened, and that’s not to mention we haven’t actually taken issue with the fact that the only people surveyed are union members, let alone the total population, which is another point in and of itself.

PN1946

The second issue, and we say this is a fundamental one, is one of the main employers surveyed was an employer that the CFMEU knew had late payment problems. The vast majority of the witness statements talk about Gunns having a significant late payment event at Christmas in 2009, it had substantial ramifications because of the timing over the Christmas break. Numerous statements talk about it. Ms Calvert gave evidence under cross-examination that she was aware of the underpayment at Gunns, and yet, 60 employees from Gunns are selected.

PN1947

Now, we say that the effect that that is going to have is to skew the results in favour of a higher prevalence of incidents of late payment because one of the main employer site businesses chosen is one which we know to have a late payment problem. The third issue relates to the number of days that the payment is late. Now, if I could actually take your Honours in this regard to - I’m not sure if you’ve got it there, but the statement of Ms Calvert, the original statement, which had the survey attached? I believe it’s attachment C to Ms Calvert’s statement.

PN1948

If I could ask your Honours to turn to the spreadsheet that begins at attachment C. Before I take you to the spreadsheet, we’ve counted, and at least 42 respondents in this survey indicate that they’ve been paid late on two or more occasions. However, the actual data taken from them about the number of days that they have been paid late only lists a single instance. Now, the best way to demonstrate this is if I can just take you to an example. It’s at page 3 of that spreadsheet. There is the pay-sheet that begins with “Member number 1-10” - - -

PN1949

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN1950

MR IZZO: And, your Honours, if I could take you to member number 1-13. If we look at 1-13, we see the employer number is 26. The employee is asked if wages are ever late. The employee says “Yes.” “How often?” “Once or twice a year.” “Before or after 2010?” “All after 2010.” “Number of days late?” “Five.” So, there’s two inferences we can draw there. We’ve got an employee who gets paid late once or twice in a year, so quite regular, it seems, yet the number of days late is just stated as “five”. Now, that either means they’re paid late every single time just five days, which seems very coincidental, or we’ve only captured one date.

PN1951

We don’t know why it’s that one particular five days that’s been chosen, but we only capture one instance of the late payment and how late it was. The same can be said if I take your Honours to member number 139, which is later on down the page, employer 8. The employee is asked, “Wages ever late?” “Yes.” “How often?” “A couple of times.” “Before or after 2010?” “All before.” “Number of days late?” “Two.” Again, does that mean that each time the employee has been paid late, it’s two days late, or are we only capturing one of the instances?

PN1952

Now, I’ve gone through and in the outline of oral submissions, I just want to point out that at paragraph 10(c) of that outline of oral submissions, we list each and every member exampled for the Bench’s benefit, and each time there has been double, more than one occasion, there’s only one entry. What we say is it can’t be a coincidence. It must be that we’re not capturing the data about on each occasion how many days it’s late. We don’t know why a particular number of days has been chosen. Is it an average? Is it just for the last occasion? We just simply don’t know.

PN1953

But this problem is actually made worse by what the union officials who conducted the survey have then done to the numbers that they were given. The next section of our outline of oral submissions identifies half a dozen to a dozen instances where it’s clear that the union officials have actually rounded up the number of days paid late, and the best way to exemplify this is to actually take you to the spreadsheet again.

PN1954

If I can take your Honours to member number 224, which is a couple of pages on from where we were in the spreadsheet. Now, member number 224, “Wages ever late?” “Yes.” “How often?” “Only really once.” “Before or after 2010?” “All before.” Then it says, “Number of days late - three.” But then if we look at the notes, it says it was around two to three days. So that’s obviously what the employee said, “Around two to three days”, but what’s been entered is three, for the purposes of the survey. This repeats again further down the page at member 238.

PN1955

SENIOR DEPUTY PRESIDENT WATSON: I don’t think we need to go to a further example.

PN1956

MR IZZO: Certainly.

PN1957

SENIOR DEPUTY PRESIDENT WATSON: We understand your point.

PN1958

MR IZZO: Now, your Honours, I must say, I’m not saying this as a result of any intentional approach by the union to arrive at a misleading outcome or there’s in any element any dishonest or bad faith in the way they’ve conducted their survey. I don’t seek to criticise their intent. But what I do seek to criticise is that there has been a just complete lack of any intellectual rigour that’s been applied to how the survey was created, how it was formed, and because of that, we now have results that are misleading, and that’s the point that we seek to make.

PN1959

The last problem we have relates to the incidents of late payments both before and after 2010. Now, in his closing submissions, Mr Harding stated that, “Well, the survey shows us that the prevalence of late payments has increased after 2010.” We dispute that for a couple of reasons, mainly because the union’s own lay witnesses gave contrary evidence, but before we get to that, there’s a fundamental problem with relying on the survey when we compare incidents of late payment.

PN1960

The reason for that is we don’t know how many of the 456 respondents were employed in the industry after 2010. When these questions were put to Ms Calvert, we had an exchange which is outlined in the oral outline at the last section in paragraph 10, where I asked:

PN1961

You don’t know, though, do you, how many of the members who were surveyed started in the industry after 2010, do you?

PN1962

Her response was, “No.” “No one started work in the industry”, I said, “after 2010, yes?” She said, “No, I don’t.” And then I went on to say:

PN1963

It’s impossible to say, isn’t it, based on the survey, how many of the members started after 2010 and how many started before? It’s impossible to say?

PN1964

Ms Calvert responded:

PN1965

On this chart, yes.

PN1966

Now, after that cross-examination, the union filed a further spreadsheet which actually indicated when the members joined the CFMEU, and it is now apparent that 128 of the 424 people surveyed joined the CFMEU after 1 January 2010. Now, it’s entirely possible that the reason they’re joining the CFMEU after 1 January 2010 is because they may well have joined the industry after 1 January 2010. The answer is, we just don’t know, and if we don’t know, we can’t rely on the survey to compare pre and post-2010 incidents of late payment.

PN1967

SENIOR DEPUTY PRESIDENT WATSON: So your point here is was there - in the order of 10 respondents said it occurred both before and after, around three, before only, and nine after only. We don’t know whether, in respect of the “after only” category whether that’s because the person wasn’t in the industry before or not? Yes.

PN1968

MR IZZO: Precisely, your Honour.

PN1969

SENIOR DEPUTY PRESIDENT WATSON: We understand the point, thank you.

PN1970

MR IZZO: Your Honours, if I can then turn to the other evidence filed, because it actually points to the fact that there hasn’t been any change in the incidents of late payment. Both Mr Joe Patty and Mr Bradley Coates were asked under cross-examination about their experience of late payments. Both employees had significant length of service in the industry as union officers and both gave evidence that their experience of the incidents of late payment was consistent throughout their time. That is, for one of them, Mr Coates who had been there 17 years, the experience had been the same the whole time. One or two late payments the whole time, the whole way through. That is at PN1410 to 1413.

PN1971

Equally, Mr Patty gave similar evidence about late payments that arose in his different roles as officials - as an official throughout his time in the union, and that’s at PN1300 to 1313. Their evidence is that the incidents of late payment did not increase from 1 January 2010. The problem that presents for the union is that as the union is very eager to point out, late payment provisions were common in the awards in this industry before 2010. Now, what we’re hearing from their own officials is that, clearly, these provisions haven’t had much of a deterrent effect because the incidents haven’t changed when the provisions have dropped out of the modern award.

PN1972

If that is the case, then the CFMEU’s argument that the late payment provision operates as a deterrent is clearly not sustainable. Its own employees are saying that the incidents are regular whether the clause is in the awards or it’s not. This is further evidence by the incident at Gunns. There’s a large late payment issue that occurs at Gunns in December 2009 when Gunns is subject to an award that had a provision entitling employees to a penalty when they’re paid late. So the late payment at Gunns occurred notwithstanding the award provisions.

PN1973

Then Mr Coates, at PN1417, and Mr Scott McLean at PN1190, both gave evidence that since 2010, there haven’t been any late payment issues at Gunns. So the late payment occurred when there was an award disincentivising late payment, but has never happened when the provision has come out of the award. Again, this is inconsistent with an argument that demonstrates that the late payment provisions operate as a deterrent. The reason for that is simple, and that is because we had heard, on transcript from the witnesses, that late payments are not planned and they’re not periodic.

PN1974

Mr McLean was one of the employees who said this at PN1212. The point of that is if it’s not planned, it’s not periodic, you can’t deter the conduct. The point of a deterrent is to stop employers from doing something that they intend to do. If they don’t intend to pay an employee late, it’s very difficult to deter that behaviour, and that’s why we say that the late payment provision, the actual evidence indicates that incidents of late payment hasn’t changed when the award provision is included or when it’s not.

PN1975

SENIOR DEPUTY PRESIDENT WATSON: Except to the extent that they might put in safeguards to minimise the potential for one of those sporadic unplanned events.

PN1976

MR IZZO: I think I have to concede that’s a possibility, your Honour, yes.

PN1977

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN1978

MR IZZO: That some employers who know of the provision could put in safeguards.

PN1979

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN1980

MR IZZO: I think I have to accept that, but I think the question becomes, well, how many of these employers actually would? They don’t actually think they’re going to be paying late anyway. It’s not something they plan. Perhaps a very, very careful employer might; it’s a possibility, but as a general position, we think the deterrent value is weakened for that reason.

PN1981

SENIOR DEPUTY PRESIDENT WATSON: Yes. An example might be a second check that the button has been pressed, given people going off to Christmas lunches and forgetting to press the button.

PN1982

MR IZZO: Certainly those steps could be taken - - -

PN1983

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN1984

MR IZZO: - - - to try and avoid that in future, yes. But I think the difficulty we have, and this came out under the cross-examination of Ms Calvert when it came to bargaining enterprise agreements, and I think the examination-in-chief, she talked about the fact that it was difficult to get these provisions into enterprise agreements because employers don’t think they’re going to pay late, and I think that for that very reason, it may be that they don’t go and put the safeguards in place either because they just - they don’t think they’re going to do the wrong thing. It just happens from time to time during extraneous circumstances.

PN1985

Your Honours, there’s just a couple of final matters I wanted to deal with. The first relates to section 323 of the Act. Now, I understand - - -

PN1986

SENIOR DEPUTY PRESIDENT WATSON: I have to turn the pages to find that one.

PN1987

MR IZZO: I don’t know if I necessarily need to take your Honours to the actual provision - - -

PN1988

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN1989

MR IZZO: But it operates as a requirement for employees to be paid in full at least monthly. If employees are not paid in full at least monthly, there’s a number of matters that can arise. You might end up with a prosecution for breach of section 323; alternatively, you might just end up with a prosecution for breach of the award provision itself, and the ability to do that arises from section 45, which allows an employee or union to prosecute an employer. So we already have 45 and 323 which are both civil penalty provisions which can act as deterrents to enable prosecution if someone is not paid.

PN1990

We think these are sufficient deterrents and there’s no need for anything further, but an additional complication arises if you do actually insert a further provision, as the CFMEU has sought. The best way I can exemplify this comes from the Peter Ogle case that’s referred to behind tab 1 in the bundle I provided. Now, it’s a little difficult to understand what occurred because we have a four-page judgment and it doesn’t give the full history, but this is a Chief Industrial Magistrate’s court case, where the applicant alleges non-payment of certain entitlements between 3 July 1997 and 14 October 1997.

PN1991

Now, the case isn’t actually brought until 2000, and as I mentioned earlier, the claim is for redundancy, public holidays, annual leave, rostered days off, super and waiting time. So it appears the employer has not paid entitlements that were due. It’s not too clear why that was, that they didn’t understand the award provisions, or they just didn’t, but at the end of the day, there were award provisions that weren’t paid, but what the employee has tacked on to this is a waiting time.

PN1992

So the employee is effectively asking for overtime rates almost for an indefinite period in respect of each time the employee wasn’t paid in the pay period. That would lead to a rather absurd result because it would end up with a windfall gain to the employee, where pretty much all their hours would end up being overtime hours because of the fact that they weren’t paid the full amount that they were entitled to at the time. I think that’s why the Chief Industrial Magistrate had some reluctance in awarding the claim for waiting time.

PN1993

Now, unfortunately, we don’t see the full reasoning, but the Chief Industrial Magistrate was quick to point out that waiting time is about being held back at the workplace, because otherwise, we’d have had a situation that not only would there have been an underpayment for pretty much every hour claimed, there would have also been in overtime hour because of the irregularity of the underpayment. That’s the situation that will arise. If the late payment clause in included and there is an underpayment claim brought retrospectively, an employer may not only be looking at underpayment obligations to be rectified, but all ordinary hours being converted into overtime hours by virtue of a clause like this.

PN1994

That, we say, would be an unfortunate outcome, an overly-onerous one and one that will present a windfall gain to the employee. Your Honours, that all I sought to say. I’ve identified in writing some practical considerations in addition to what I’ve said, but I’ll let them speak for themselves. Unless there are any further questions, that’s all I wish to add.

PN1995

SENIOR DEPUTY PRESIDENT WATSON: Thank you, Mr Izzo. Yes, Mr Ferguson.

PN1996

MR FERGUSON: Thank you. The AI Group has obviously filed a series of written submissions. I’ve taken the very strong hope that you don’t want us to repeat those in part, and I won't.

PN1997

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN1998

MR FERGUSON: I’ll deal firstly with this issue of overpayment, and I just want to make some brief comments, go over a couple of points and clarify our submissions in that respect. Now, firstly, I just want to touch upon the history of the award modernisation process and the history of the modern award in particular. We’ve dealt with this in particular at pages 11 and 12 of our written submissions, but we know from preliminary jurisdictional issue decisions, that that history is obviously relevant to this review.

PN1999

The point we want to make is that the underlying issue before this Bench in relation to this matter has been agitated multiple times by the CFMEU. In the award modernisation process, they did prepare a draft which we’ll call it the payment of penalties for late payment of wages, regardless of the method. Now, notwithstanding that, the Bench released an exposure draft dealing with this issue in the current terms of the award, and not providing for that late payment.

PN2000

What we know from the decision accompanying that exposure draft is that in certain respects, there was a positive decision made to base the terms of this award on the terms of the Manufacturing Award, if I can just call it that in short. That was dealt with at paragraph 211 of that decision accompanying the exposure draft, and the references are all set out in our written submissions, but they said:

PN2001

In relation to many conditions of employment, we have adopted provisions from the Manufacturing Award. In the absence of consensus, we regard these conditions as constituting an appropriate safety net, given their widespread application to similar industries.

PN2002

So there’s clearly been a decision made about where the terms of this award come from, and the fact that they’re an appropriate safety net. Subsequent to that, the union did raise further submissions, again agitating for a different approach to be taken in relation to late payment of wages, but the Bench didn’t change its course in this regard. It retained the existing features. Now, I must say, there isn’t a specific reference that we’ve identified in the decisions of the Full Bench saying - or going to the issue of payment of wages and specifically articulating its reasoning about that clause, but that shouldn’t trouble this Bench or in any way suggest to it that these matters weren’t considered in detail.

PN2003

The reality is that that’s typical of the approach that was taken in the award modernisation process, given the nature of the task for that Full Bench. It just wasn’t possible, and I believe there’s some indication in other decisions of that effect. It wasn’t possible to speak in detail about the reasoning for every particular provision of every modern award, but nonetheless, what is clear is that there’s a sound basis that was adopted by the Full Bench as to being confident that the terms - or determining that the terms of the modern award are an appropriate safety net, given their basis in the Manufacturing Award.

PN2004

Now, we say that given the approach taken in the jurisdictional issues decision, the union would need to establish that there are cogent reasons for departing from that position that was adopted, and that otherwise, this Full Bench should follow that approach. Of course, we also say that that element of the modern award’s objective that speaks to the need for a stable modern award system reinforces the discretionary consideration, the need to depart from that decision unless - and to alter the awards unless there are very compelling reasons to do so, such as a change in circumstances, and we’d say nothing has been led to establish that that is the case.

PN2005

Of course, that’s consistent with the approach Gooley DP took in the context of the 2012 review, where similar issues were again agitated and similar arguments, from my recollection, were made during those proceedings, and we’ve dealt with that, again, in our written submissions so I won’t go through all of that.

PN2006

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2007

MR FERGUSON: What I want to next turn to are the issues about power and interpretation of section 139(1) in the first instance. We’ve dealt with that in our written submissions, and my friend, Mr Izzo, has gone through it in detail. I endorse what he said and I don’t want to repeat any of that. One issue that I did want to raise is that obviously the provisions - the wording in section 139(1) is very similar to the wording - almost identical - of the old 89A of the Workplace Relations Act 1996. There are some differences in relation to the incidental power which is now dealt with in section 142, that that is a material difference, but other than that, it’s very similar.

PN2008

Now, a decision dealing with the approach to interpreting that, a previous Full Bench decision of the AIRC, dealing with the appropriate approach to interpreting that matter was brought to my attention just this morning. Regrettably, I was already in transit on my way to Melbourne, so I don’t have copies to advance to the Bench but there’s only one point from that that I want to draw the Bench’s attention to. It was a decision of the Award Simplification decision, P7-500, where referenced a decision of a different Full Bench of the AIRC, being the Commonwealth Bank of Australia Officers Award 1997 75 IR 446, and I can provide the Bench - - -

PN2009

SENIOR DEPUTY PRESIDENT WATSON: Seven, what?

PN2010

MR FERGUSON: 74 IR 446.

PN2011

SENIOR DEPUTY PRESIDENT WATSON: IR 450.

PN2012

MR FERGUSON: 446.

PN2013

SENIOR DEPUTY PRESIDENT WATSON: Sorry, 440?

PN2014

MR FERGUSON: 4-4-6.

PN2015

COMMISSIONER CRIBB: 446.

PN2016

SENIOR DEPUTY PRESIDENT WATSON: Sorry.

PN2017

MR FERGUSON: I can provide the Bench the proper reference after this and a copy of the decision. But all I wanted to make was the point that in that decision, the Full Bench said:

PN2018

Section 89A is not a provision for which there is a need for either a restrictive or generous construction. The terms in it are to be given their ordinary meaning in regard to industrial relations usage.

PN2019

Of course, that’s the central contention that we’re advancing here, is that the term “penalty rates” has a particular meaning in an industrial relations context, and we’ve spoken today a submission to that as being connected to performed work at particular times or where there is particular disability, of such disadvantage, and it’s in that context that the Parliament obviously has adopted the wording of section 139, and that’s the interpretation of penalty rates that should be advanced.

PN2020

On that basis, we say the clause advanced by the union is not consistent with that traditional approach to interpreting what is meant by penalty rates, and as such, can’t be included in awards. Now, the next element is the power of section 142, and we’ve dealt with that in some detail in our submissions, which I don’t want to repeat, but I do want to correct an error in the way we’ve dealt with them. We’ve made the point in the submissions that section 142 is very narrow in its scope. It’s much narrower than it was, or the comparable provisions of section 89 was.

PN2021

Section 142(1) provides that a modern award may include terms that are incidental to a term that is permitted or required to be in a modern award, and (b) essential for the purpose of making a particular term operate in a practical way. Now, in our submissions, I think we contended that the union was suggesting that their proposal was incidental to clause 25 of the award which deals with payment of wages. I think a review of transcripts and a closer review of their submissions, they’re saying it’s incidental to clause 17, which is the clause in the award which sets out what the actual minimum wages are.

PN2022

Regardless of that, our comments in relation to the narrow nature of section 142 still stand, and we’ve directed the Bench’s attention to some consideration of this by the Full Bench in the Apprentices Case, and that goes to the fact that they need to be absolutely indispensable or necessary. Now, we don’t see how the clause setting out a new penalty to be payable in circumstances where wages are not paid on time could possibly be regarded as absolutely indispensable or necessary. It clearly builds on and creates a different entitlement, rather than dealing with merely the practical operation of the term.

PN2023

That does raise the question of the existing provisions within the award relating to late payment of wages where it’s by cash, and it’s not essentially incumbent upon us to establish that they are validly included in the award, but one could say that there’s clearly a difference in the two situations. Where you’re dealing with a cash payment, of course there is, by necessity or practicality, if you will, going to be a requirement that a person be at site there to receive it, and there might be a greater need to regulate how that actually operates for the cash to change hands.

PN2024

That is quite different from a clause dealing with a situation where the wages can be paid by EFT, and the obligations in relation to the provision of minimum wage is discharged, but where the clause then goes on to set some sort of penalty to create, you know, different entitlements about compensation or a disincentive to late payment. It’s not incidental; the two matters are different and we’d say that, certainly, there would be no case made out under 142 for the union’s proposal. It’s just not essential to the operation of the minimum wages provisions of the award, and that’s why it’s not - or similar clauses aren’t included in many awards.

PN2025

They’re extremely rare, and so it’s very hard to sustain any sort of argument that they be essential for the operation of awards, or else we’d be looking at significant changes to the award system, and that’s certainly a task I suspect none of us want to face. That’s all I wanted to say in relation to the late payment of wages issue. We did go to some lengths to be comprehensive in the time constraints - - -

PN2026

SENIOR DEPUTY PRESIDENT WATSON: We appreciate that, Mr Ferguson.

PN2027

MR FERGUSON: Yes. I do want to come back, then, to this difficult around hours of work and so forth. This is in relation to the union’s proposal, the very clause 27.2.

PN2028

SENIOR DEPUTY PRESIDENT WATSON: It’s still difficult, is it?

PN2029

MR FERGUSON: It is still difficult, and that was, I suppose, where we left off. We haven’t made progress, and the parties amongst themselves probably can’t, although my learned friend will address the Bench on this. There’s probably a difference between us in that I suspect the union genuinely believes our proposal is to remove some sort of entitlement, whereas we don’t see it that way. We think we’re attending to some anomalous, if you will, or problematic wording in relation to the overtime provisions, and cleaning that up without changing anything, whereas we’d say that the union’s proposal would be to sort of radically alter the current arrangements in relation to ordinary hours of work.

PN2030

Of course, there’s been not a scrap of evidence to support a significant change of that nature, and on that basis alone, we say it should fail, but more broadly, the proposal will cause problems. The proposal is a sort of a default option that says we’ll average the ordinary hours out by a number of hours of the awards, by a number of days. Well, the first problem is, it assumes that the same number of ordinary hours are going to be worked on every day, and we know that there’s great flexibility under the existing provisions for employers, either by agreement or potentially as a matter of prerogative, to determine the method of arranging ordinary hours.

PN2031

They may not adopt that option; they could have a short day in their week, you know, eight hours, four eight-hour days and a six-hour day at the end. This would disturb those arrangements, and it’s not something that should be lightly done. There simply is no prescriptive specification of a set number of daily hours, ordinary hours, in the provisions of the award dealing with ordinary hours of work, and we think it’s a very problematic step to simply drop one in, absent any consideration of what actually happens in practice in the industry.

PN2032

It’s not one that should be taken. Rather, we say our wording should be adopted and just clarify the way in which the overtime works without disturbing the ordinary hours at all, and we think that that’s because there’s really just a problem with the wording, not an actual problem about substantive provisions. I probably can’t take that much further than I have. Again, that issue was dealt with in our previous written submissions in some detail.

PN2033

Unless there are any questions about any of the material, I’ll leave it there.

PN2034

SENIOR DEPUTY PRESIDENT WATSON: Thank you, Mr Ferguson. Mr Calver?

PN2035

MR CALVER: If it please the Commission. In the Master Builders’ submission, the CFMEU seeks a penalty provision in the Timber Industry Award. It is a unique provision, so far as a penalty is concerned, because it has consequences for employers even where the fault of late payment is at the hands of a third party; the banks and those that control the mechanisms for electronic funds transfer. As Mr Izzo has taken you to and as is resonant in the Master Builders’ submissions in this matter, there is a very real distinction between a penalty at law, and a penalty rate.

PN2036

The nature of what is proposed, the characterisation of the proposed variation, is not and cannot be about a penalty rate. It is a penalty. These arguments have been made at length by Master Builders in our submissions dated 16 January 2015 which was considered in part by the prior Full Bench. They have been made on transcripts on 20 February before that Full Bench. They’ve been made again and reinforced with regard to the evidence on 20 April.

PN2037

The other Full Bench transcript, we particularly note the exchange at PN64 to 67 of the transcript, where the distinction about what is permissible in workplace relations law, and using Hatcher VP’s words, “moulding conduct” and a penalty is explicated. We also deal again with this matter at some length in our 20 April submission, which is, with attachments, 21 pages long. In the same context, we support and adopt the submissions of ABL and AIG.

PN2038

The statute has provisions which operate where there is a breach of section 323, noting that it is a civil remedy provision, and/or section 45 where clause 25.1 of the award would be breached. Those provisions can be prosecuted and compensation for the loss that a person has suffered be awarded. Master Builders has reinforced, in our cross-examination and in our written submissions, that the union has never sought to prosecute the conduct which it now seeks this clause to remedy.

PN2039

Section 545(2)(b) allows a court to make an order, “Awarding compensation for loss that a person has suffered because of the contravention.” A penalty contains a pre‑estimate that is not based on the notion of compensation of an amount that flows from a breach, and that is entirely what the CFMEU seek to insert. This is admitted inferentially by the CFMEU in paragraph 6 of the documents that it filed in response to the question of the Full Bench.

PN2040

The CFMEU says the court looks to past events for its assessment of particular conduct, and then seeks to contrast the current provision. It says, “The CFMEU speaks to employers generally and seeks to deter at the threshold and so avoid the conduct of the interests of employees who the evidence shows suffer particular disadvantage in this industry when wages are paid late.” That is impermissible use of modern award provisions. The deterrence at the threshold is not indicated. The remedy occurs following a breach of section 25(1), the late payment.

PN2041

The CFMEU, in the same clause, then go on to say, “The object is not to punish after the fact” - but indeed, that is how the provision operates - “but to deter employers so that intentional or avoidable late payment does not occur.” The clause is not directed to intentional or avoidable late payment, it is directed where there has been a mistake, even, for example the third party EFT provider failing to credit the employee’s account.

PN2042

In that regard, the statements of the CFMEU do not match with the drafting of the somewhat obtuse clause which has that effect. The CFMEU’s evidence as factored in cross-examination is that in over 23 years of the term of Mr Patty, they sought to prosecute once. They sought to prosecute once, and what happened? At PN1325 through to PN1334, we see as soon as that application to prosecute was lodged, Mr Patty says that it was resolved in favour of the employee once that application was lodged.

PN2043

There is a mechanism in the statute for dealing with breaches of the award and breaches of section 323. Awards should not, for the reasons set out comprehensively in all of the written material, have a self-executing remedy based on a penalty. If it please the Commission.

PN2044

SENIOR DEPUTY PRESIDENT WATSON: Thank you, Mr Calver. Ms Light, or Ms Adler?

PN2045

MS ADLER: Thank you, your Honour. I’ll be brief. We made written submissions in this matter dated 6 February, and I would also support the submissions made by my colleagues this morning. Clearly, we oppose the variation and the amended variation that was filed on 9 April. We submit that the CFMEU has provided no cogent evidence to substantiate the variation is necessary to meet the modern award’s objectives. While I largely rely on the written submissions I referred to, there are just a couple of matters that I would seek to highlight.

PN2046

Firstly, in relation to the evidence. In our written submissions at paragraph 3.3.13, we highlight the repetitive nature of those witness statements, that they refer largely to the same incidents. At paragraph 3.3.18 of our submissions, we point to a number of examples that we say actually indicates a low incidence of late payment of wages in the timber industry, and others this morning have addressed the survey evidence, so I won’t say anything further on that.

PN2047

Further, and as outlined in our written submissions, we say that any reliance placed on the prevalence of these late payment wages penalty provisions in pre-modern awards is over-stated, and AIG has dealt with that this morning. Our written submissions also address the two occasions during the award modernisation process that dealt with the Timber Industry Award and matters relating to what is to be included in that modern award, and I won’t say anything further on that, I think it’s already been addressed.

PN2048

In our written submissions, we also respond to the reliance placed by the CFMEU on the decision of Blair C in C2005/251, and we say that that decision dealt with an ambiguity or an uncertainty and nothing more, and we’re currently now in a different statutory framework, so the matters to be considered by this Commission are different from that which was before Blair C during that decision.

PN2049

The final matter that I just would like to emphasise is that the evidence provided under cross-examination by Mr Coates and Mr Patty, which has already been dealt with by my friends this morning, which clearly shows that there has been no change in the incidents of late payments regardless of whether or not the award contains the provision that’s currently being sought. There was never any compensation sought and as Mr Calver has put, rarely a prosecution in relation to the provision.

PN2050

That’s all I wish to say, your Honours. Thank you.

PN2051

SENIOR DEPUTY PRESIDENT WATSON: Yes. Thank you, Ms Adler. Ms Light?

PN2052

MS LIGHT: Your Honours, AFEI has filed written submissions in this matter on 27 February 2015. We do largely intend to rely upon this submission, but I would like to make some brief comment on a number of other matters that are not particularly addressed in those submissions. I’ll begin with the CFMEU’s construction of the definition of a penalty rate, and I do note that we have addressed this in written submissions, but we do want to highlight that in AFEI’s view, the CFMEU have incorrectly construed the meaning of “penalty rate” in the Full Court decision, the Weekend Penalty Rates decision. In our view, a penalty rate is not an increased rate of pay for overtime or in recognition of abnormal circumstances, but rather, as the Full Court has said, it’s a deterrent against calling upon employees to work in the circumstances in which additional payment is required to be made.

PN2053

So in our view, it is incredibly important that there is a requirement to perform work, and I think that Mr Izzo has correctly characterised that as a penalty rate as opposed to a penalty for work performed. Also turning to the CFMEU’s view that there is power to introduce such a clause by virtue of this being a term incidental to the minimum wages provision, AFEI does not agree that the CFMEU’s proposed provision meets the self-evidently high threshold as being essential for the purpose of making the minimum wages provision operate in a practical way in accordance with section 142(1)(b).

PN2054

On this point, AFEI agrees with the meaning of the term “essential” as outlined in the submission of ABI and the New South Wales Business Chamber dated 13 February. We’re of the view that the CFMEU’s evidence does not demonstrate the award cannot operate effectively without the proposed term. Finally, I’d just like to address the CFMEU response to the question posed by the Full Bench. The CFMEU appears to have identified the role of section 323 and associated civil penalty provisions as providing a punishment, and a deterrent. In particular, at paragraph 6 of their response to the Full Bench, the CFMEU said that their proposal seeks to import(?) employers generally and seeks to deter the threshold and so avoid the conduct in the interests of employees through being able to show have suffered particular disadvantage in this industry when wages are paid late.

PN2055

In the CFMEU’s view, the object is not to punish after the fact, but to deter employers so that intentional or avoidable late payments does not occur. In AFEI’s submission, effectively a deterrent has been left out, so not only does section 323 provide for general deterrence, there are other mechanisms of general deterrence contained in the Act, such as under section 45. So clause 25.1 of the award is clearly an award obligation to pay wages at least weekly or fortnightly. This provision, if offended, may invoke the penalty provisions associated with section 45 of the Act, which states that a person must not contravene a term of a modern award.

PN2056

There are, as such, two other means by which an employer may be liable for late payment, and in our submission, it cannot therefore be said that there are insufficient deterrents of a general nature against breaches of the payment provisions contained in the award. In any event, it is AFEI’s view that the CFMEU has not adduced an elementary case warranting the variations that they have sought, and our friends at ABI and the New South Wales Business Chamber have certainly indicated several deficiencies in the evidence that the CFMEU has led.

PN2057

Unless the Commission has any questions, those are our submissions.

PN2058

SENIOR DEPUTY PRESIDENT WATSON: No. Thank you, Ms Light. Very well, Mr Harding?

PN2059

MR HARDING: Is it my turn, your Honour, did you say?

PN2060

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2061

MR HARDING: Your Honours, we have been confronted with three submissions, three written submissions from the Master Builders, the AIG and the ABI. We’ve heard from their representatives today, as well as employer submissions. Now, what I’ve sought to do in order to deal with the specific issues that have been raised in the written materials is to prepare a document to try and shorten what I might say, and I’ll provide those to you now.

PN2062

SENIOR DEPUTY PRESIDENT WATSON: Very well.

PN2063

MR HARDING: As well as to my friends.

PN2064

SENIOR DEPUTY PRESIDENT WATSON: We’ll mark the further written submissions in reply as exhibit CFMEU 13 and that will be posted to the website.

EXHIBIT #CFMEU 13 FURTHER WRITTEN SUBMISSIONS IN REPLY

PN2065

MR HARDING: Thank you, your Honour. This deals with only those people who have responded in writing.

PN2066

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2067

MR HARDING: Now, what I proposed to do today is to respond principally to a number of issues raised by Mr Izzo. I don’t propose to take the Commission any further on the issue of 142. We’ve said what we said about it, we’ve said it in writing, we’ve said it orally. There’s no point in us taking the matter further, other than obviously to say we think that that basis is plainly available. In relation to - can I perhaps start with the written submissions that were filed in answer to the Full Bench’s question which has been quoted today, on the 20th, and a number of the employers have pointed to the words in paragraph 6, where it says the proposal seeks to deter at the threshold and so avoid the conduct in the interests of the employees.

PN2068

I think it is important to point out that, as we submitted in the CFMEU’s oral submissions and in writing in other documents, the purpose is both to avoid, but also to ensure that if there is a late payment, the problem is fixed quickly, and we heard evidence from Mr Patty and Mr McLean about how they would be able to fix a problem by pointing to the late payment clause in the pre-modern award. So we say that it has that effect, and it certainly has that purpose.

PN2069

Also, as your Honour, Watson SDP, pointed out, to encourage safeguards being in place - put in place by employers to avoid the problem. Can I say that a neat encapsulation of the purpose of the CFMEU proposal is contained in the case that was relied on by my learned friend, Mr Izzo, at tab 5, which is the decision of Madgwick J in the Wahlgren v Transfield Power matter. Like lots of cases on the internet from the Industrial Relations Court of Australia, it’s an extremely difficult case to actually read, but on page 4 of the document that’s been handed up, what his Honour says, about halfway down, with the words:

PN2070

In any case a plain reading of the clause indicates that it is concerned with the position where an employer negligently, foolishly, incompetently or arrogantly fails to pay.

PN2071

A very neat, very apt description. What I seek to do in reply is first to deal with the issues about the practicality of the clause. It’s a very short point on this issue. Mr Izzo has referred to, I think Mr Ferguson has referred to it, and they say - and I think the Master Builders also say - that there are some practical problems that would be posed by this clause if it was put into practice. A characteristic of all the submissions levelled against the CFMEU’s clause is an inability to deal with the actual terms of the proposal itself.

PN2072

We have heard about abstract concepts of “kept waiting”, I’ll deal with that in a minute; we’ve heard about the horrible consequences that would befall the industry if the clause was to be made. There are safeguards in the text of the clause and they are apparent, I don’t need to repeat them. It’s important to note that in relation to two of them, there’s a maximum of three hours if payment is not paid on the day it’s due, and a maximum of 38 ordinary hours if paid on the day thereafter, but only in relation to ordinary working hours worked.

PN2073

The whole assumption of the clause is the worker is at work. That’s what ordinary working hours implies. That’s what it means. They’re at work. There’s an opportunity available, as the clause implies, for the employee to fix the problem when the worker is there.

PN2074

SENIOR DEPUTY PRESIDENT WATSON: But the payment due doesn’t relate to the work, does it?

PN2075

MR HARDING: The payment due relates to the work that has been performed, and has not been paid. Then what the clause then says is if you’re kept waiting to be paid for the work that you’ve already performed, for the work that has already earned the income, the remuneration, then the overtime rate will apply if not paid on the usual pay date. So in that sense, no, your Honour, it doesn’t relate to the specific work that has earned the remuneration, but it would be incorrect to say that it doesn’t relate to work because a condition under which the work is performed and to which the clause is directed is that you have worked for your remuneration, you’re owed it, and it hasn’t been paid.

PN2076

Now, the circumstance, the condition that creates the trigger for the rate is the circumstance of work; the fact that you’ve earned the money and it hasn’t been paid. That is a circumstance relating to performance of work by these employees. But in relation to the practicality, not one single witness was called by the employers to prove any of their claims about practicality. The CFMEU had the secretary of the union in the witness box and two officials. It called a number of individual employees, they weren’t cross-examined, but their witness statements are available.

PN2077

Mr Izzo didn’t get into the box, Mr Calvert didn’t get into the box, Mr Ferguson didn’t get into the box, and despite the fact that there are agreements with a clause that replicates what Blair C did, they didn’t call one employer with those agreements and that clause to say, “There has been practical problems in the application of this clause to ourselves.” Nor did they call a single employer that could at least give that evidence during the period when the award was in force generally, during the time that it was in the pre-modern award. I’ll deal with some of the specific issues that Mr Izzo referred to in the evidence at a later time, but just if I could deal with the issue that is of some burning urgency about power and the distinction that has been sought to be created between a penalty on the one hand and a penalty rate on the other.

PN2078

I won’t deal with everything that I’ve said in response, but it’s sufficient to go to, firstly, the Weekend Penalties Case, the Metal Trades Award, which is in the - for ease of reference, it’s in the material handed up by Mr Izzo at - - -

PN2079

SENIOR DEPUTY PRESIDENT WATSON: Tab 13, is it?

PN2080

MR HARDING: Tab 13, yes.

PN2081

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2082

MR HARDING: I’ve also relied on it in the materials we handed up earlier.

PN2083

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2084

MR HARDING: I’m going to use that version because I’ve got that one marked up.

PN2085

SENIOR DEPUTY PRESIDENT WATSON: Certainly. The page numbering will be the same, presumably.

PN2086

MR HARDING: Yes. Precisely so. It’s not always the case.

PN2087

SENIOR DEPUTY PRESIDENT WATSON: It’s only in the timber industry where the parties each hand up the same documents.

PN2088

MR HARDING: Yes. It’s a work promotion scheme. It’s important not to take this case out of context. It’s really important to read the whole case, and in particular, what their Honours were seeking to do back in 1947. They say what they’re seeking to do on page 611 of the reasons. About three-quarters of the way down, there’s a paragraph that says:

PN2089

This Full Court has been assembled at the instance of single judges who have claims of the above nature before them to consider the matters that they refer to. It is not proposed at present to more than lay down general principles for the guidance of the Commissioners and Judges who are concerned with the application of those principles.

PN2090

So they then go on to say they’re not actually concerned with the specific provisions of particular awards, they’re just dealing with a concept, and as we’ve already taken you to, it’s page 615, they say the penalty rates meaning is of live import, and the last paragraph on page 615, there’s reference to “a similar diversity of usage of the phrase is to be found in the awards of this court.” Mr Izzo took you to page 616 of the judgment, and some attempt was made by him to contrast what was being said by their Honours in the paragraph that starts, “Such a test, and a satisfactory one, with a situation of a penalty on the one hand with a penalty rate on the other.”

PN2091

Well, that is a complete misreading of what their Honours are saying. What they’re seeking to do is provide an example in the sentence that precedes it, in order to then explain the concept that they have in mind. So they say, “Payments higher than normal to be made for work done outside the prescribed conditions. Those payments may be properly described as penalty rates”, and then they say:

PN2092

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

PN2093

So what they’re grappling with is the concept of a penalty that imposes an additional rate beyond ordinary rates of pay. That is, the ordinary rate of pay for work performed. They’re saying, what is this additional thing? How is it to be characterised in concept, because it’s clearly not remuneration for the work that’s been performed. That’s the job of ordinary rates. There’s something else that it does. What else does it do? How else can it be characterised? So they say, in the example given, that in relation to work performed, it can be if it’s an additional amount.

PN2094

The phrase “there are then both” is emblematic of what their Honours are seeking to then capture in the concept. They give an example and then they say that example corresponds with what we have in mind when describing a penalty, a penalty rate of pay for which the Commissioners and Judges who are then to make awards with such rates in them would insert those awards. That’s the purpose of it, and then, you can see later on in that paragraph what they then do is contrast a penalty rate with, really, what we now know is an allowance.

PN2095

So the examples they give of an allowance are work done in the wet or great heat or great cold or confined spaces. Now, they are, as we know from industrial usage, circumstances that will justify an additional sum to deal with the particular disability that applies to that particular kind of work in those circumstances. That’s an allowance. Mr Izzo took you to the dictionary definition of the Macquarie and can I just point out that that definition is inadequate. It wouldn’t address the two examples, the second and the third examples, of a penalty rate that is given by the Fair Work Act.

PN2096

SENIOR DEPUTY PRESIDENT WATSON: In fact, it seems to describe the clause 27/clause 30 problem in that it’s restricted only to the spread of hours.

PN2097

MR HARDING: Yes. I’m sorry, your Honour, I didn’t follow that?

PN2098

SENIOR DEPUTY PRESIDENT WATSON: It seems to raise the clause 27/31.

PN2099

MR HARDING: Yes, yes.

PN2100

SENIOR DEPUTY PRESIDENT WATSON: The issue in that the Macquarie Dictionary reference is only related to the spread of hours.

PN2101

MR HARDING: Yes. Well, indeed, that’s right. Exactly.

PN2102

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2103

MR HARDING: It doesn’t deal, of course, with weekends.

PN2104

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2105

MR HARDING: For example. Completely outside the concept that Macquarie is referring to. So the definition is obviously inadequate, as I think I’ve made an earlier point, when you look at what their Honours, Drake-Brockman and Sugerman were referring to by the words, “There are then both the”, there are clearly echoes of what their Honours were saying in the definition that I handed up. A normal course and an abnormal course. Now, that normal course and abnormal course will have different - will emanate in different ways, depending on what’s being considered in the context of that consideration, and my learned friend - - -

PN2106

SENIOR DEPUTY PRESIDENT WATSON: But both of those iterations relate expressly to the work done which is stated by Drake-Brockman ACJ and Sugerman J on both the pages you’ve taken us to.

PN2107

MR HARDING: They certainly - well, they certainly, in relation to the example that’s given in the sentence that immediately precedes the words, “There are then both the express prescription”, that’s certainly concerned with work performed, and I can’t deny the fact that that was the example that they had in mind.

PN2108

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2109

MR HARDING: I still say that all that was doing was to provide an example that answered the concept that they were articulating. On the page on 615, where they speak about, in the sentence headed, “‘Penalty rate’ is not a term of art”, they say:

PN2110

Usually, an award provides for an ordinary rate of remuneration payable for the ordinary work at a standard period performed under normal conditions, and for an additional amount to be paid where work is done under special conditions of time, place or circumstance.

PN2111

Now, “work is done” is the phrase that is used. I mean, there’s no suggestion in the clause that’s being proposed by the CFMEU that a penalty rate is to be shorn off from work. What we say is that a circumstance attending this work, on the evidence, is that there are circumstances in which the employees are paid late for work done. The rate, then, the additional remuneration, is hinged on that circumstance. That is a circumstance attaching to the work that has been done. When you look at the terms of the clause, you can readily see a situation in which, to take the narrow example that Mr Izzo relied on, you could be at work and find that you haven’t been paid, and you’re at work, and then you’re entitled to the overtime rate whilst you’re being delayed at work. That’s the narrow example.

PN2112

You could also be called back into work to come and collect your cash or your cheque. You might be at home and then you’ve got to come back in again. Or in a circumstance where you’re being paid by electronic funds transfer. You may have to spend time on the phone, ringing the boss, to find out why you haven’t been paid and trying to sort that out. That’s intimately connected to the work done by the employees. In relation to electronic funds transfer, you may still have to come into work to sort out why it is you haven’t been paid.

PN2113

That is a circumstance attending the work that has been done. Now, my learned friends will say, I suppose, well now, hang on a minute. The additional payment has to itself involve a performance of work, and I hear them going, “Yes, yes, yes”, in uniform over there, but I don’t think that is what the industrial meaning as articulated in the Weekend Penalties Case is saying. It’s certainly not confined to that situation, and why would it be where you have, as their Honours have made clear, a very wide variety of circumstances in which penalty rates are used.

PN2114

And so it is today, because the current clause 25, on their reasoning, would have no connection to work actually performed. You were detained at work after you finished it and the rate is attached to the time you spent waiting around after you’ve done your job, after you’ve finished for the day. It is simply too narrow a reading and moreover, it doesn’t take into account - that’s the submission that’s been put against us - the contemporary circumstances that apply in this industry, and like many other industries, where you now have, through technology which wasn’t available in 1947, the capacity to pay electronically and for the money to be popped into someone’s bank account and then for it to be made available.

PN2115

Just lastly on that point, I think Emmerton v Terry has also been cited for the contrary proposition that we relied on before. What Wright J is referring to as directly penal in nature is the imposition of an additional amount; clearly, paying for the terms of the clause he is construing. It is a rate of pay, it’s a rate of pay, as is - although it’s expressed in terms of an amount of $6.75, that’s in the Emmerton v Terry decision, it’s still a rate of pay. On any account, the clause proposed by the CFMEU is a rate of pay. It’s an overtime rate of pay. So as a fact, that’s what it is seeking to achieve.

PN2116

I don’t think there’s anything further I can add on the issue of power. I do want to spend a little time with the concept of “kept waiting” that’s been cited against us in the various cases that you have been taken to. In my submission, Cribb C was correct when the Commissioner posed the question to Mr Izzo about how those cases were to be construed in terms of the historical connotation, but of great significance is that the cases that my learned friend, Mr Izzo, was referring to were cases that were construing an existing term.

PN2117

That task is completely different from the task that this Full Bench is concerned with. Your task is to make a term and the difference between those two functions is plain from what Madgwick J said in the famous case of Kucks v CSR. I have the case, but I don’t think I need take you to it. I’ve extracted the relevant provision out in paragraph 7 of the document that I have handed up.

PN2118

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2119

MR HARDING: It’s only there in order to clearly identify the distinction between the two functions that are being performed. The difference and what turns on the difference is that where a court is construing a clause, it has to do so in accordance with presumed intention and the materials around intention are to be derived from context, purpose, the terms and text of the language, and sometimes, the negotiations that have preceded an agreement, if there is one, or decisions of the Commission if the Commission is the maker of the instrument, which it is here.

PN2120

So any confusion, if there be any, can be completely cleared up by the reasons this Commission gives for why it would insert the clause in the modern award. That way, there is a statement of both the text and the intention. Can I also say to fix on, as my opponents have done, some abstract concept of the words “kept waiting” shorn from the actual text of what’s proposed, is an impermissible and erroneous way of dealing with the issue. What the text says in, say, 1(a), is if the employee is kept waiting to be paid; to be paid.

PN2121

It’s clear, the ordinary language of “kept waiting” is waiting to be paid, waiting to get your money. In (b), the clause speaks about if payment is made by electronic funds transfer and an employee’s wages are not available in the account. Clearly, the text of the clause is directed to an absence of the money that you have earned. Now, why would you then construe it as in the way it’s being suggested by the employers? Further, why would you limit yourselves to a phrase that has been construed to deal with different circumstances and different clauses in different instruments?

PN2122

You wouldn’t, and that would be an impermissible approach. Moreover, it would also be impermissible because what the employers are seeking to do is to call upon the Full Bench to ignore the evidence of the problem and confine itself to a box that was designed for different times and now is, in my submission, far too small to accommodate the circumstances that originally gave rise to the old “kept waiting” clauses. I mean, the fact that we’re paid by electronic funds transfer now is enough reason to prove that point.

PN2123

The approach that ought to be taken is the one that was adopted in a case that’s been referred to in a number of the cases that have been handed up, and which is in fact referred to by Wright J in Emmerton v Terry, and that is the Full Court’s decision in Re: Commonwealth Works and Services (Northern Territory) Award, and I’ve got copies of that case now. This is one of the few decisions of an appellate court that has had to construe the phrase. In fact, I think it’s only one that I’ve managed to find.

PN2124

Their Honours were construing an award term, a “kept waiting” award term. They did so in an orthodox fashion, and in my submission, in the correct way, not by looking at the words in their abstract way, but looking at the terms of the award clause itself. An illustration of that is in Spicer CJ’s reasons on page 338, where at the very top of the page:

PN2125

If the clause were designed to impose a penalty for mere non-payment or late payment, it is strange that its operation is limited to the case of an employee who is not absent from work. It is in this case, however, I find it unnecessary to define precisely what may be comprised in the conception of “waiting” as used in the clause.

PN2126

He goes on to say what he says, it seizes the purpose of the clause. The clause, the text of it, is identified in the majority’s decision at the bottom of that page, in C, if you can see about three-quarters of the way down, there’s a line that starts, “Able prior to 12 noon on the next succeeding working day”, and then C:

PN2127

If an employee who is not absent from work is not paid on a regular pay day, he shall be paid waiting time at the ordinary rates on the close of business.

PN2128

As can be seen, what their Honours did was to look at the words of the clause and then construe its purpose by reference to the language. In the case of the Chief Justice, it was the absence from work that was telling, in his view, that “kept waiting” was to be limited to waiting at work. Then on page 340 of the majority’s reasons, it starts with:

PN2129

It also appeared from the evidence before the court that payment of wages to employees working in the main centres are normally made in cash on a regular pay day by Paycor.

PN2130

It’s clear what their Honours are looking at, is the evidence of how payment is actually made. The evidence here is that payment is rarely made by cash, mainly by EFT. All I say about this case is that it is proof of the fact that you construe the clause in the terms that it is, rather than by reference to some historical concept of “kept waiting”, a shorn-off context or evidence. If there be any doubt about it, the CFMEU’s clause is not directed and limited to the scenario that was referred to by Mr Izzo, and should not be.

PN2131

Mr Izzo took you to issues of merit and we’ve dealt with many of the criticisms that have been levelled against us by the ABI and also the AIG. I don’t need to repeat them, really, other than to say that we ourselves have done a short analysis of the survey and we can hand that up. I won’t take the Bench to it in any greater detail. It says what it says.

PN2132

SENIOR DEPUTY PRESIDENT WATSON: We’ll mark the written material in response to submissions about the survey as exhibit CFMEU 14.

EXHIBIT #CFMEU 14 WRITTEN MATERIAL IN RESPONSE TO SUBMISSIONS REGARDING SURVEY

PN2133

MR HARDING: There are some slight differences, I think, between us in terms of the numbers.

PN2134

SENIOR DEPUTY PRESIDENT WATSON: I think there always will be with a document with typescript of that size, Mr Harding.

PN2135

MR HARDING: Well, indeed. Indeed, your Honour. The principal point that’s made against the use of the survey is that it’s selective, it’s said, and also that inferences can be drawn about its credit based on what’s been said in the document. Well, the Commission has the survey, it can make of it what it will. I think it was made clear that the survey was an indication of what the issue was. We’ve made some submissions about what should be made of it in the document that was relied on, on the last occasion we were here.

PN2136

I think it important to note that Mr Izzo’s selection of the evidence is very selective. He’s cherry-picked the bits that he likes, ignored the bits he doesn’t, and we sought to remedy that in the document that I’ve handed up by reference to actually what was said.

PN2137

SENIOR DEPUTY PRESIDENT WATSON: Yes.

PN2138

MR HARDING: The last thing I wish to say, subject to any questions, is the point that was made about the survey not being an accurate representation of what was pre-2010 as opposed to post-2010. It is accepted that the survey, in terms, does not provide a good, an authoritative indication, of when employees started in the industry so we’ve provided you with a document that has membership start dates. That gives some indication, I suppose, but it was conceded in evidence by Ms Calvert, that it can’t possibly be relied on as an indication, an authoritative indication, of when employees started in the industry, but what you do have is what the employees actually said.

PN2139

There are some employees who said that they were paid before 2010, and some employees that said they were late paid after 2010, and the survey sums up the numbers of what the employees said was the situation. Now, the assessment of that evidence is, I accept, limited by the fact that there is no authoritative way that one can check how long the employees have been in the industry. A large number of employees have been in the industry a long time, and look at the start dates of the CFMEU membership.

PN2140

But in the absence of getting every single survey participant and putting them in the witness box and asking them these questions, then the survey is what it is and says what it says, and we say that at least what was said by the employees can be relied on for what it says and no more than that. In relation to what was said about the evidence given by witnesses, in which it was said that the individual witnesses conceded that there was a regularity of late payment and that it didn’t support the greater number of late payments post-2010 as opposed to those before 2010, well, the cross-examination of those witnesses did not put that question in terms.

PN2141

It is completely unfair for Mr Izzo to now make a submission without asking the witnesses. The best he gets is at PN1310, where he asks, I think of Mr Patty, at PN1310:

PN2142

In a bad year, is that relatively consistent from basically the 2000s to today?

PN2143

That’s the best it gets. Now, he now comes along and makes a very particular submission that that is evidence that supports the proposition that what the survey says about the larger number post-2010 as against pre-2010, is to be completely discarded and not relied upon. If he had that submission to make, he ought to have asked the witnesses.

PN2144

Unless there are any questions, I have no further submission.

PN2145

SENIOR DEPUTY PRESIDENT WATSON: Very well. We intend to adjourn. The Bench will consider the submissions and evidence and reach and publish a decision in due course. For my own part, I’ll consider whether Mr Ferguson’s actions in constantly reminding me of the award modernisation process and it has preoccupied much of life over the period 2008 to 2009 constitutes an offence relating to the Fair Work Commission, punishable by 12 months’ gaol. My preliminary view is it does not, but I won’t give it away.

PN2146

We will now adjourn and publish a decision in due course.

ADJOURNED INDEFINITELY [12.16 PM]

LIST OF WITNESSES, EXHIBITS AND MFIs

EXHIBIT #CFMEU 12 EXTRACT FROM AUSTRALIAN CONCISE OXFORD DICTIONARY............................................................................................................................... PN1842

EXHIBIT #CFMEU 13 FURTHER WRITTEN SUBMISSIONS IN REPLY PN2064

EXHIBIT #CFMEU 14 WRITTEN MATERIAL IN RESPONSE TO SUBMISSIONS REGARDING SURVEY.............................................................................................................. PN2132

Fair Work Commission Transcripts

AM2014/92, Transcript of Proceedings [2015] FWCTrans 280 (14 May 2015)