FEDERAL COURT OF AUSTRALIA Association of Professional Engineers, Scientists and Managers, Australia v Wollongong Coal Limited [2014] FCA 878 Citation: Association of Professional Engineers, Scientists and Managers, Australia v Wollongong Coal Limited [2014] FCA 878 Parties: ASSOCIATION OF PROFESSIONAL ENGINEERS, SCIENTISTS AND MANAGERS, AUSTRALIA v WOLLONGONG COAL LIMITED ABN 28 111 244 896 and WONGAWILLI COAL PTY LTD ABN 77 111 928 762 File number(s): NSD 642 of 2014 Judge(s): BUCHANAN J Date of judgment: 20 August 2014 Catchwords: INDUSTRIAL LAW – interlocutory application for summary judgment under s 31A of the Federal Court of Australia Act 1976 (Cth) and r 26.01 of the Federal Court Rules 2011 (Cth) – where claim brought for non-payment of a contractual bonus under s 323 of the Fair Work Act 2009 (Cth) – whether s 323 merely a "Truck Act" provision – whether s 323 also relates to non-payment of contractual bonuses – arguable case exists – application dismissed Legislation: Constitution, s 51(xxxv) Fair Work Act 2009 (Cth), ss 12, 44, 45, 50, 139, 323, 324, 539(2), 539(2) item 10, 540(2), 541, 542, 543, 545, 545(2)(b), 545(3) Federal Court of Australia Act 1976 (Cth), s 31A Federal Court Rules 2011 (Cth), r 26.01 Cases cited: Construction Forestry Mining & Energy Union v Mammoet Australia Pty Ltd (2013) 248 CLR 619 Murrihy v Betezy.com.au Pty Ltd [2013] FCA 908 Date of hearing: 7 August 2014 Place: Sydney Division: FAIR WORK DIVISION Category: Catchwords Number of paragraphs: 40 Counsel for the Applicant: Mr I Taylor SC with Mr WAD Edwards Solicitor for the Applicant: Slater & Gordon Counsel for the Respondents: Mr J Murdoch QC Solicitor for the Respondents: Corrs Chambers Westgarth IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY FAIR WORK DIVISION NSD 642 of 2014 BETWEEN: ASSOCIATION OF PROFESSIONAL ENGINEERS, SCIENTISTS AND MANAGERS, AUSTRALIA Applicant AND: WOLLONGONG COAL LIMITED ABN 28 111 244 896 First Respondent WONGAWILLI COAL PTY LTD ABN 77 111 928 762 Second Respondent JUDGE: BUCHANAN J DATE OF ORDER: 20 August 2014 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The interlocutory application filed on 1 August 2014 be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY FAIR WORK DIVISION NSD 642 of 2014 BETWEEN: ASSOCIATION OF PROFESSIONAL ENGINEERS, SCIENTISTS AND MANAGERS, AUSTRALIA Applicant AND: WOLLONGONG COAL LIMITED ABN 28 111 244 896 First Respondent WONGAWILLI COAL PTY LTD ABN 77 111 928 762 Second Respondent JUDGE: BUCHANAN J DATE: 20 August 2014 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The present proceedings were commenced on 25 June 2014. They seek declaratory and monetary relief. The applicant as representative 2 The applicant brings the proceedings: in a representative capacity, as an employee organisation within the meaning of sections 12, 539(2) and 540(2) of the Fair Work Act 2009 (Cth). 3 The respondents have formally admitted that the applicant is an employee organisation as defined by s 12 of the Fair Work Act 2009 (Cth) ("the FW Act"). Section 539(2) of the FW Act gives the applicant standing to apply for orders in relation to a contravention of a civil remedy provision. Section 540(2) restricts that right to representation of affected employees whose industrial interests the applicant is entitled to represent. 4 It should be noted that no claim is made, nor relief sought, by the originating application in any matter said to arise in the accrued jurisdiction of the Court. The claims and relief depend solely on the FW Act, and the representative capacity of the applicant to maintain them. The statutory basis for relief claimed 5 The declaratory relief sought depends on s 323 of the FW Act which provides: 323 Method and frequency of payment (1) An employer must pay an employee amounts payable to the employee in relation to the performance of work: (a) in full (except as provided by section 324); and (b) in money by one, or a combination, of the methods referred to in subsection (2); and (c) at least monthly. Note 1: This subsection is a civil remedy provision (see Part 4-1). Note 2: Amounts referred to in this subsection include the following if they become payable during a relevant period: (a) incentive-based payments and bonuses; (b) loadings; (c) monetary allowances; (d) overtime or penalty rates; (e) leave payments. (2) The methods are as follows: (a) cash; (b) cheque, money order, postal order or similar order, payable to the employee; (c) the use of an electronic funds transfer system to credit an account held by the employee; (d) a method authorised under a modern award or an enterprise agreement. (3) Despite paragraph (1)(b), if a modern award or an enterprise agreement specifies a particular method by which the money must be paid, then the employer must pay the money by that method. Note: This subsection is a civil remedy provision (see Part 4-1). (Emphasis added) 6 Section 324 will also be set out here for later reference. Section 324 provides: 324 Permitted deductions (1) An employer may deduct an amount from an amount payable to an employee in accordance with subsection 323(1) if: (a) the deduction is authorised in writing by the employee and is principally for the employee's benefit; or (b) the deduction is authorised by the employee in accordance with an enterprise agreement; or (c) the deduction is authorised by or under a modern award or an FWC order; or (d) the deduction is authorised by or under a law of the Commonwealth, a State or a Territory, or an order of a court. Note 1: A deduction in accordance with a salary sacrifice or other arrangement, under which an employee chooses to: (a) forgo an amount payable to the employee in relation to the performance of work; but (b) receive some other form of benefit or remuneration; will be permitted if it is made in accordance with this section and the other provisions of this Division. Note 2: Certain terms of modern awards, enterprise agreements and contracts of employment relating to deductions have no effect (see section 326). A deduction made in accordance with such a term will not be authorised for the purposes of this section. (2) An authorisation for the purposes of paragraph (1)(a): (a) must specify the amount of the deduction; and (b) may be withdrawn in writing by the employee at any time. (3) Any variation in the amount of the deduction must be authorised in writing by the employee. 7 The monetary relief sought by the applicant depends on ss 545(2)(b) and/or 545(3) of the FW Act. Section 545 of the FW Act provides: 545 Orders that can be made by particular courts Federal Court and Federal Circuit Court (1) The Federal Court or the Federal Circuit Court may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision. Note 1: For the court's power to make pecuniary penalty orders, see section 546. Note 2: For limitations on orders in relation to costs, see section 570. Note 3: The Federal Court and the Federal Circuit Court may grant injunctions in relation to industrial action under subsections 417(3) and 421(3). Note 4: There are limitations on orders that can be made in relation to contraventions of subsection 65(5), 76(4), 463(1) or 463(2) (which deal with reasonable business grounds and protected action ballot orders) (see subsections 44(2), 463(3) and 745(2)). (2) Without limiting subsection (1), orders the Federal Court or Federal Circuit Court may make include the following: (a) an order granting an injunction, or interim injunction, to prevent, stop or remedy the effects of a contravention; (b) an order awarding compensation for loss that a person has suffered because of the contravention; (c) an order for reinstatement of a person. Eligible State or Territory courts (3) An eligible State or Territory court may order an employer to pay an amount to, or on behalf of, an employee of the employer if the court is satisfied that: (a) the employer was required to pay the amount under this Act or a fair work instrument; and (b) the employer has contravened a civil remedy provision by failing to pay the amount. Note 1: For the court's power to make pecuniary penalty orders, see section 546. Note 2: For limitations on orders in relation to costs, see section 570. (3A) An eligible State or Territory court may order an outworker entity to pay an amount to, or on behalf of, an outworker if the court is satisfied that: (a) the outworker entity was required to pay the amount under a modern award; and (b) the outworker entity has contravened a civil remedy provision by failing to pay the amount. Note 1: For the court's power to make pecuniary penalty orders, see section 546. Note 2: For limitations on orders in relation to costs, see section 570. When orders may be made (4) A court may make an order under this section: (a) on its own initiative, during proceedings before the court; or (b) on application. Time limit for orders in relation to underpayments (5) A court must not make an order under this section in relation to an underpayment that relates to a period that is more than 6 years before the proceedings concerned commenced. (Emphasis added) 8 Section 545(2)(b) is premised on a contravention of a civil remedy provision. The only civil remedy provision which is referred to in the originating application is s 323. There can be no reliance on s 545(3) of the FW Act in the current proceedings – it refers to an eligible State or Territory court. The basic facts 9 The statement of claim pleads the following basic facts (I summarise as follows): the employees upon whose behalf the monetary claims are made are members or eligible to be members of the applicant; the employees were variously entitled to one or more bonuses promised to them arising from production levels at their employer's coal mine in 2013 and/or 2014 and the commencement in operation of "Longwall 5"; those promises were contractual in nature; the events upon which the promised payment were to be made have occurred, but payment has not been made. 10 Based on those facts, the applicant claims that the employees have not been paid "in full" as required by s 323 and that the respondent has therefore contravened a civil remedy provision. The applicant claims "compensation" for the loss resulting from the failure to pay. An application to dismiss the proceedings 11 The respondents have applied, by interlocutory application, that the proceedings be dismissed pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) ("FC Act") and r 26.01 of the Federal Court Rules 2011 (Cth). Each of those provisions permits summary judgment to be given against the applicant if it is established that the applicant has no reasonable prospect of successfully prosecuting the proceeding. 12 Examination of that question requires attention to the requirements of s 323 of the FW Act, upon which foundation the whole of the applicant's case for declaratory relief and monetary relief depends. 13 The respondents have submitted that s 323 (read with s 324) of the FW Act reflects the former "Truck Act" provisions. They rely on a statement by the High Court in Construction Forestry Mining & Energy Union v Mammoet Australia Pty Ltd (2013) 248 CLR 619 ("Mammoet") at [45]: 45 … It is tolerably clear from the terms of s 323(3), and is confirmed by the Explanatory Memorandum which accompanied the Bill for the Fair Work Act 2009, that s 323(1) addresses the same mischief addressed by "Truck Acts" as they had by then come to exist in each State, that is, that an employee's entitlement to payment for work might be compromised by an employer requiring the employee to accept some form of payment in kind of less value than the payment of money forgone. … (Footnotes omitted) 14 Under "Truck Act" statutes, employers were obliged to pay their employees in full and in money, rather than "in kind" (e.g. at the company store). Section 323 also requires payment at least monthly and by one of the methods identified (cash, cheque etc, EFT or other authorised method). The respondents assert that the matters in issue (allegations of failure to pay promised bonuses of various kinds) are not ones to which s 323 of FW Act applies. The respondents also assert that the applicant does not have standing under s 539(2), item 10 of the FW Act. Insofar as the claims for relief are based on s 323 of the FW Act that latter contention is unsustainable. The applicant, as an employee organisation, has such standing under s 539(2), item 10. 15 In answer, the applicant points out that in Murrihy v Betezy.com.au Pty Ltd [2013] FCA 908 ("Murrihy") Jessup J upheld claims that s 323 of the FW Act had been breached by failure to pay commissions due under written commission agreements (see especially at [118]-[120]). I shall refer to Murrihy further hereunder. Safety net contractual entitlements 16 Before I deal more directly with the foundation for the interlocutory application, and the contention that s 323 does not relate to the asserted contractual entitlements referred to in the statement of claim, it is instructive to identify some respects in which federal industrial legislation (e.g. the FW Act) has moved into the area of contractual entitlements in a way unprecedented before the establishment of that legislation upon constitutional powers other than s 51(xxxv) (the conciliation and arbitration power) of the Constitution. 17 The entitlements claimed in the present case are for incentive-based payments and bonuses. I use those particular terms for reasons which will appear shortly. Entitlements of that kind seem to be a "safety net contractual entitlement" as defined by s 12 of the FW Act. Section 12 of the FW Act defines "safety net contractual entitlement" as follows: safety net contractual entitlement means an entitlement under a contract between an employee and an employer that relates to any of the subject matters described in: (a) subsection 61(2) (which deals with the National Employment Standards); or (b) subsection 139(1) (which deals with modern awards). 18 It is to be noted that this definition refers to an entitlement that relates to a subject matter described in s 61(2) or s 139. The subject matters described in s 61(2) are minimum standards identified as follows: 61 The National Employment Standards are minimum standards applying to employment of employees … (2) The minimum standards relate to the following matters: (a) maximum weekly hours (Division 3); (b) requests for flexible working arrangements (Division 4); (c) parental leave and related entitlements (Division 5); (d) annual leave (Division 6); (e) personal/carer's leave and compassionate leave (Division 7); (f) community service leave (Division 8); (g) long service leave (Division 9); (h) public holidays (Division 10); (i) notice of termination and redundancy pay (Division 11); (j) Fair Work Information Statement (Division 12). … 19 It is clear that the FW Act contemplates that there may be contractual entitlements not inconsistent with, but in addition to, the minimum standards about those matters. 20 Section 139 of the FW Act provides: 139 Terms that may be included in modern awards—general (1) A modern award may include terms about any of the following matters: (a) minimum wages (including wage rates for junior employees, employees with a disability and employees to whom training arrangements apply), and: (i) skill-based classifications and career structures; and (ii) incentive-based payments, piece rates and bonuses; (b) type of employment, such as full-time employment, casual employment, regular part-time employment and shift work, and the facilitation of flexible working arrangements, particularly for employees with family responsibilities; (c) arrangements for when work is performed, including hours of work, rostering, notice periods, rest breaks and variations to working hours; (d) overtime rates; (e) penalty rates, including for any of the following: (i) employees working unsocial, irregular or unpredictable hours; (ii) employees working on weekends or public holidays; (iii) shift workers; (f) annualised wage arrangements that: (i) have regard to the patterns of work in an occupation, industry or enterprise; and (ii) provide an alternative to the separate payment of wages and other monetary entitlements; and (iii) include appropriate safeguards to ensure that individual employees are not disadvantaged; (g) allowances, including for any of the following: (i) expenses incurred in the course of employment; (ii) responsibilities or skills that are not taken into account in rates of pay; (iii) disabilities associated with the performance of particular tasks or work in particular conditions or locations; (h) leave, leave loadings and arrangements for taking leave; (i) superannuation; (j) procedures for consultation, representation and dispute settlement. (2) Any allowance included in a modern award must be separately and clearly identified in the award. (Emphasis added) 21 Again, it is clear that the FW Act contemplates that there may be contractual entitlements not inconsistent with, but in addition to, the terms of any modern award about those subject matters. 22 However, neither the particular terms of a minimum standard, nor the necessity to engage the terms of a particular modern award, are necessary to the existence of the statutory obligation which now exists to observe the terms of a safety net contractual obligation. 23 A safety net contractual entitlement may be enforced under specific provisions in the FW Act, but it should here be noted that breach of a safety net contractual provision is not a circumstance constituting breach of a civil remedy provision. 24 Sections 541, 542 and 543 of the FW Act provide: 541 Applications for orders in relation to safety net contractual entitlements (1) This section applies if an inspector applies to a court for an order under this Division, in relation to an employer's contravention or proposed contravention of a provision or term referred to in subsection (3) in relation to an employee. (2) The inspector may also apply to the court, on behalf of the employee, for an order in relation to the employer's contravention, or proposed contravention, of a safety net contractual entitlement of the employee. (3) The provisions and terms are the following: (a) a provision of the National Employment Standards; (b) a term of a modern award; (c) a term of an enterprise agreement; (d) a term of a workplace determination; (e) a term of a national minimum wage order; (f) a term of an equal remuneration order. 542 Entitlements under contracts (1) For the purposes of this Part, a safety net contractual entitlement of a national system employer or a national system employee, as in force from time to time, also has effect as an entitlement of the employer or employee under this Act. (2) The entitlement has effect under this Act subject to any modifications, by a law of the Commonwealth (including this Act or a fair work instrument), a State or a Territory, of the safety net contractual entitlement. 543 Applications for orders in relation to statutory entitlements derived from contracts A national system employer or a national system employee may apply to the Federal Court or the Federal Circuit Court to enforce an entitlement of the employer or employee arising under subsection 542(1). 25 It may be noted that under s 541 an inspector may seek an order in relation to a safety net contractual entitlement if, at the same time, the inspector is seeking to enforce a statutory or statute-based obligation, but otherwise the remedy for breach of a safety net contractual entitlement is only available to a national system employer or a national system employee. 26 In the present case the applicant asserts, in argument, that the entitlements which it claims are safety net contractual obligations but accepts that it has no standing to enforce them in that guise and that the present proceedings do not extend to the enforcement of them in that way. Section 323 and legislative intent 27 There is, however, a further significance to the existence of the provisions for enforcement of safety net contractual obligations, and the provisions for the direct enforcement of modern awards, enterprise agreements and National Employment Standards in ss 44, 45 and 50 respectively of the FW Act (each of which three sections is a civil remedy provision). The respondents rely on those statutory modes of enforcement to argue that a legislative intent is discernible that monetary claims (whether under award, enterprise agreement or contract) are not enforceable under s 323. 28 I referred earlier to reliance by the respondents on statements by the High Court in Mammoet. It is certainly apparent, as the respondents contend, that ss 323 and 324 of the FW Act are intended to provide for matters dealt with in the Truck Acts – i.e. payment in money (not in kind), without unauthorised deductions, and with specific and reasonable periodicity. 29 However, that conclusion does not suffice to exclude the possibility that s 323 of the FW Act has an additional role to play. 30 The ordinary language of s 323 is apt to identify, and provide for the enforcement of, an obligation to pay amounts which have become payable, as well as the more specific obligation to pay such amounts in full, in money and at least monthly (subject to the statutory exemptions which accompany the obligation). It does so by permitting the imposition of a civil penalty for contravention of the obligation. 31 The applicant does not rely on s 323 as a foundation for recovery of any underpayment. It relies on s 323 to establish breach of a civil remedy provision. Recovery of unpaid amounts is sought on a different statutory footing under s 545 of the FW Act, namely compensation for loss suffered as a result of contravention of a civil remedy provision. 32 The applicant's construction of s 323 has direct support in the judgment of Jessup J in Murrihy. 33 Although the construction of s 323 argued by the applicant appears not to have been contested in Murrihy, it appears clear that Jessup J also subscribed to it. Thus, his Honour said (at [119]): 119 It was not suggested by the respondents that their failure to pay the applicant's commission entitlements did not involve a contravention of s 323(1). It clearly was such a contravention. … and (at [142]): 142 … A significant innovation introduced by the FW Act was the imposition of an obligation upon a "national system employer" (such as each of the respondents was) to pay its employees amounts payable to them in relation to the performance of work in full at least monthly: s 323(1) of the FW Act. Thus the legislation picks up, amongst other things, entitlements arising under contracts of employment and gives statutory consequences to an employer's failure to make good on them. In this respect, s 323(1) is a civil remedy provision. There is – and there would have been at the time of the introduction of this provision – no reason to assume that the employees for whose benefit s 323(1) was enacted would be confined to those in unionised sectors and occupations. Perhaps more than ever before, it must realistically be accepted that individual employees, without the benefit of union representation, will often need to seek their own advice and representation in relation to rights arising under federal industrial legislation. (Emphasis added) and (at [163]): BONUSES 163 Under the terms of her contract of employment with Betezy, the applicant was to be paid a bonus of 5% of the first deposit made by a client introduced by agents working under her control. The bonuses were to be paid on a monthly basis. In her Further Amended Statement of Claim, the applicant alleged that bonuses fell due between 1 January 2011 and 18 January 2012, but were not paid. The applicant's evidence (based on the respondents' discovery) demonstrated that, in each of the months between (and including) January and November 2011, excluding June, at least one such first deposit was made. At the end of each such month, the 5% bonus should have been paid. It is common ground that no bonus was paid at the time (or at any time thereabouts). There was, in the circumstances, a contravention by Betezy of s 323 of the FW Act in respect of each such month. … 34 These matters are significant for the present interlocutory application in two ways. 35 First, in my view it may not be said that the applicant has no reasonable prospects of success such that the proceedings should be dismissed under s 31A of the FC Act. 36 Secondly, it seems to me that I should approach the question of construction of s 323 in conformity with the views expressed by Jessup J. I should do so as a matter of comity in any event, but I also regard the language of s 323 as sufficiently wide to accommodate the present proceedings. I do not accept the more confined construction advanced by the respondents. Conclusions 37 I accept that the applicant has standing to bring the proceedings and to seek a finding that there have been breaches of s 323 through failure to pay contractually obligated amounts (I say nothing about whether such a case will be made out factually). 38 In the event that breach of s 323 is established, the Court will have power to order compensation to employees. 39 It therefore appears to me that the proceedings are on a sound footing and should go to trial. Order 40 The interlocutory application will, accordingly, be dismissed. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan. Associate: Dated: 20 August 2014