Industrial Relations Commission of New South Wales in Court Session CITATION : New South Wales Teachers Federation v Director General, Department of Education and Training. Application for declaratory relief under s 154 of the Industrial Relations Act 1996 [2002] NSWIRComm 56 APPLICANT: New South Wales Teachers Federation PARTIES : RESPONDENT: Director-General, Department of Education and Training FILE NUMBER: IRC 6752 of 2001 CORAM: Haylen J Industrial Relations Act 1996, s 154 - application for declaration - interpretation of provisions of industrial agreement - principles applicable - vacation leave accrued during "service" while teacher "on duty " - whether duty performed on same day as part day industrial stoppage "service" under terms of the agreement - declaration made confirming entitlement. CATCHWORDS : Industrial Relations Act 1996 s 143(1) - whether payment for leave accrued whilst on duty and when industrial stoppage occurred on same day is the payment of "any other financial benefit" and an offence. Conveyancing Act s 144(1) Industrial Relations Act 1996 s 143(1) s 154 LEGISLATION CITED : Annual Holidays Act 1944 s 3 s 4 s 4A s 5(1) s 5(1)(b) s 8 Teaching Service Act 1970 Australian Timber Workers Union v W Angliss & Co Pty Limited (1924) 19 CAR 172 Australian Workers' Union v Graziers' Association (NSW) (1939) 40 CAR 494 Beckwith v R (1976) 135 CLR 569 Bryce and anor v Apperley [1998] 82 IR 448 Cepus v Heggies Transport Pty Ltd [1993] 52 IR 123). City of Wanneroo v Holmes [1989] 30 IR 363 at 378 - 379 Clothing Trades Award (1950) 68 CAR 597 CASES CITED : Cole v Director-General of Youth and Community Services (1987) 7 NSWLR 541 at 546 Coleman v Shell Co of Aust. Pty Ltd (43) 5 SR (NSW) at 34 Crown Employees (Teachers, Department of Education) Award re deduction for strikes [1975] R 535 Geo A Bond & Co Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 530 Lidner Pty Ltd v Builders Licensing Board (1982) 1 NSWLR 613 NSW Teachers' Federation v Education Commission (NSW) [1987] 22 IR 35 Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales and the Department of Community Services [2002] NSWIRComm 33 Grayson DP 12 March 2002 Quinn v Leatham 1901 AC 495 at 506 State of Victoria v Australian Teachers' Union [1993] 47 IR 328 HEARING DATES: 03/12/2002 DATE OF JUDGMENT: 03/27/2002 APPLICANT: Mr S Crawshaw SC of counsel Instructed by: New South Wales Teachers Federation (Ms Brenda Seymour) LEGAL REPRESENTATIVES: RESPONDENT: Mr J V Murphy of counsel SOLICITOR: Adrian Murphy JUDGMENT: - 10 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: HAYLEN J 27 March 2002 Matter No. IRC 6752 of 2001 New South Wales Teachers' Federation v Director General, Department of Education and Training. Application for declaratory relief under s 154 of the Industrial Relations Act 1996. JUDGMENT [2002] NSWIRComm 56 1 A question has arisen as to the vacation pay entitlements of school teachers in circumstances where industrial action has been taken for less than a day. Both the New South Wales Teachers Federation and the Department of Education and Training submit that the entitlement to vacation pay is determined by the provisions of an industrial agreement made in 1986 which continues in force. The parties, however, differ as to the proper interpretation and application of that Agreement. 2 In order to have the matter determined the Federation has applied pursuant to s 154 of the Industrial Relations Act 1996 for declarations in the following terms: 1. That on a true interpretation of the industrial agreement between the Education Commission and the New South Wales Teachers' Federation (which is found in New South Wales Industrial Gazette Vol 248, p 893 - hereafter known as 'The Agreement') the respondent is not entitled to reduce the vacation pay entitlements of a teacher because of an absence from work by a teacher for part of the day when the teacher works the rest of that day. 2. That s 143(1) of the Industrial Relations Act 1996 does not require the respondent to reduce the vacation pay entitlements of a teacher because of an industrial stoppage. 3 The grounds and reasons stated in support of the Declarations concisely state the issues: 1. The Agreement provides that the number of days of service during the school year is a factor that determines the amount of payment for vacation pay of teachers. 2. The applicant contends that the legal effect of the Agreement is that, for the purposes of payment of vacation pay to teachers, a day on which a teacher does not work for part of a day but on which a teacher works for the rest of that day is a day of service. 3. For the purposes of payment of vacation pay to teachers, the respondent has been aggregating the time taken for certain absences, including industrial stoppages of less than one day and deducting that aggregated time from the number of days of service under the Agreement. 4. The respondent believes that this position for industrial stoppages is consistent with the provisions of the Industrial Relations Act 1996. 5. There is a dispute between the applicant and the respondent as to whether the respondent is entitled to reduce the vacation pay entitlements of a teacher on account of certain absences including an industrial stoppage that occurs for part of a day when the teacher works for the rest of the day. 4 The only evidence was that called in support of the application and was constituted by an affidavit sworn by Ms Brenda Seymour, the Assistant General Secretary, Research and Industrial, of the applicant Federation. The affidavit recorded that differences arose between the Federation and the Department on the application of the 1986 Agreement after various periods of industrial action took place in the last quarter of 1999. That industrial action was described as follows: For the last week of October and the first week of November - two hour rolling stoppages. 12 November - three hour 'Sky Channel' stoppage (apparently being a reference to a state-wide hook up). 18 November - 24 hour stoppage. 23 November - two hour state-wide stoppage. 25 November - two hour state-wide stoppage. 29 November - two hour state-wide stoppage. 1 December - two hour state-wide stoppage. 3 December - two hour state-wide stoppage. It was said that calculations made by the Department at the end of 1999 suggested that the salary loss for a teacher, for example on Step 13 of the scale, in regard to all of this industrial action was around $440. In addition, the Department had determined that pro rata deductions from vacation pay were to be made on the basis of a loss of 0.25 day's vacation pay for each one day of stoppage. There was some dissatisfaction expressed by the Department as to the manner in which Ms Seymour described the mechanisms for calculating the appropriate deduction but it appears common ground that, in addition to a loss of salary for the time involved in industrial action, there was also a pro rata adjustment to vacation pay in relation to the industrial action taken in the last quarter of 1999 which amounted to 0.75 day's vacation pay for any teacher who fully participated in the action referred to above. 5 Ms Seymour's affidavit contained the following paragraph, which was not challenged by the Department, and appears to be of some significance in determining the issue which has arisen between the parties: It is my understanding that the salaries' branch of the Department of Education and Training advised the Federation that before the advent of the computerised Leave Management System (LMS) the Department of Education and Training did not take into account part day stoppages in determining entitlement to vacation pay despite the fact that part day stoppages had occurred. In particular, Sky Channel (Federation) broadcasts of usually two hours' duration have been conducted since 1993 during which time part-day stoppages have occurred. In fact, the thrust of this paragraph was accepted by the respondent (see par [10] later). 6 It is appropriate at this point to set out the relevant provisions of the 1966 Agreement. The Agreement, referred to by the parties as the Pro Rata Vacation Leave for Teachers Agreement, was made in December 1996 and is published in Vol 248 of the New South Wales Industrial Gazette commencing at p 893. Under cl 1, Definitions, the following provisions are of relevance: 1. Definitions . . . "Leave Without Pay" means (a) approved leave without pay granted on any day, including leave granted to take up a temporary appointment at a CAE or University; (b) except as otherwise expressly provided for in the definition of "service", all forms of study leave; and (c) unauthorised absences without pay. Unless otherwise provided for in this Agreement where a teacher takes half pay leave including half pay extended leave one half of the total number of days on leave shall be deemed for the purpose of this Agreement only to be on leave without pay. "Ordinary Pay" means that rate of pay prescribed for the class of employee under an award, industrial agreement or determination of the Commission. "School Term" means that period from and including the first working day following a school vacation to and including the last working day preceding the next occurring school vacation. "School Vacation" means the total of the calendar days between the last day of each term and the first day of the next term occurring in a school year, inclusive of all public holidays occurring during those periods. "School Year" means that period from and including the first day of the first school term in any year to and including the last day of the next occurring mid-summer vacation. " Service" means: (a) Those working days on which a teacher is on duty; (b) Those working days on which a teacher is on approved leave on full ordinary pay; (c) The paid portion of any period of leave granted on half ordinary pay, expressed in the equivalents of full working days other than periods of: (i) half pay sick leave; (ii) no pay sick leave of up to 20 teaching days in any school year, and (iii) half pay maternity leave taken after the anticipated date of birth falling on working days, which shall be regarded as full days of service; (d) Those working days a teacher is absent on full or no pay workers' compensation; (e) Periods of study leave falling on working days granted on: (i) half pay to a teacher with at least five years continuous service to permit the teacher to complete the final year of a degree course; (ii) full pay for travelling time and attendance at lectures to a teacher who is undertaking a part-time University/CAE course; (iii) full pay to a teacher who is undertaking a part-time tertiary course to pursue course segments not available outside teaching hours; or (iv) full pay to a teacher undertaking a course which leads to an increase in status and/or salary, to travel to and attend compulsory residential schools and/or to meet other compulsory course requirements involving field excursions/work, case study, study visits, practical work, etc. (f) An equivalent of 5 days or less approved leave without pay during any school year. . . . "Teaching Days" means the number of teaching and pupil free days occurring in a school year during which a teacher is required to attend at a school or other place of employment. . . . "Working Days" means the ordinary working days, Monday to Friday inclusive, of a school term including any public holiday which falls on an ordinary working day. Clause 2 is headed "Pro Rata Vacation Leave" and, insofar as is relevant, provides as follows: (1) Subject to Clause 3 and subclause (2) of this clause and in lieu of the provisions of the Annual Holidays Act a teacher shall during a school year be paid for school vacation days proportional to service during the school year in accordance with the following formula: V = - S x C T Where: "V" is the number of paid vacation days the teacher has accrued at that time and not already taken; "S" is the number of days of service during the school year; "T" is the number of teaching days during the school year in the Eastern or Western Division as appropriate; "C" is the number of school vacation days in the Eastern or Western Division as appropriate. (2) Notwithstanding the provisions of Clause (1)-- (a) (i) Where, upon the occurrence of any school vacation, a teacher is, by reason of subclause (1) not entitled to be paid for the whole or any part of that vacation, the teacher's pay shall be adjusted accordingly. (ii) Where at the commencement of a school vacation a teacher has an accrued entitlement in accordance with subclause (1) in excess of the length of that school vacation the teacher shall be paid only for the length of that school vacation. (b) A teacher is not entitled to pay for a school vacation day when, on that day, the teacher is on full or half paid leave of any kind. Such leave shall be taken in lieu of any vacation entitlement and the teacher's accrued vacation leave entitlement calculated in terms of the formula in subclause (1) shall be reduced accordingly. Provided that payments on half pay leave may be made up to full pay from accrued vacation leave. (c) A teacher who is transferred - (i) from the Eastern Vacation Division to a school in the Western Vacation Division is entitled to be paid for the last week of the Western Vacation Division mid-summer vacation, regardless of whether the teacher otherwise has an entitlement to paid vacation for the mid-summer vacation; (ii) from the Western Vacation Division to a school in the Eastern Vacation Division is entitled to be paid for the mid-summer vacation as though that teacher had been appointed at all material times to a school in the Eastern Vacation division. (d) Upon the retirement or resignation of a teacher, or any other termination of that teacher's services, other than for wilful misconduct, the teacher shall be paid any entitlement under subclause (1) which has not already been paid to the teacher during that school year. In calculating this entitlement, the last day of service will be the date of resignation, retirement or termination. (e) Where a teacher is granted leave without pay during a school year and is absent from duty: (i) for part of the remainder of that school year then on return to duty the teacher's salary shall as necessary be adjusted in accordance with Clause 5(2), or (ii) for the balance of that school year the teacher shall be paid during the mid-summer vacation the balance of any paid vacation entitlement calculated in terms of subclause (1) of this clause. (f) All vacation periods without pay taken by a teacher pursuant to the operation of this Agreement shall, for the purpose of been this Agreement only, be deemed to have taken on leave without pay. (g) Where a teacher is absent during a school year on leave without pay any resultant vacation periods without pay following the teacher's return to duty shall count for the purpose of incremental progression. … 3. New Appointments Other Than at the Start of a School Year. (1) This Clause applies to a teacher in the first year of a service whether following first appointment or re-appointment at a time other than the start of a school year. (2) … 5. Salary Adjustments (1) This Agreement shall be subject to the parties entering a further agreement concurrently with this Agreement covering the recovery procedures that shall operate when salary is overpaid. … 7. Leave Reserved The following shall be leave in reserve: The effect of this Agreement on a teacher transferred to a position covered by administrative conditions of employment or an employee in the Education Teaching Service who is transferred from an administrative to a teaching position shall be the subject of further negotiation between the parties. Such negotiations to conclude on or before 30 November, 1986. 8. Area, Incidence and Duration This Agreement rescinds and replaces previous Determinations and variations thereof made or adopted by the Commission on the payment of vacation leave (including Commission Determinations No. 133 of 1984 and 162 of 1985 on Extended Leave and Vacation Entitlements) with the terms herein contained and shall apply to all teachers as defined herein. 7 The position for the Federation was simply stated. It was submitted that the effect of cl 2 of the Agreement is that pro rata vacation leave diminishes to the extent that days of "service" as defined are less than the number of teaching days. The submission centered on the fact that "service" was defined to include those working days on which a teacher is "on duty". In the case of a stoppage due to industrial action, pro rata vacation leave is diminished if the day on which the stoppage took place was not a "working day on which a teacher is on duty". "Working days" is defined as meaning "the ordinary working days, Monday to Friday inclusive, of a school term including any public holiday which falls on an ordinary working day". It was submitted that the legal effect of the Agreement was, for the purposes of payment of vacation leave, a day on which a teacher did not work for part of the day due to an industrial stoppage, but on which day the teacher worked for the rest of that day, was a day on which service was provided. There was no reference in the Agreement to a whole working day or a full working day as being a necessary prerequisite to paid vacation leave - a teacher is nonetheless on duty on a working day even if the teacher is not on duty for the whole of the working day due to a part day industrial stoppage. 8 To the extent that the Department had indicated that it relied upon the provisions of s 143 (1) of the Act, prohibiting the payment of any remuneration or other financial benefit in respect of time spent by an employee in engaging in industrial action, the Federation submitted that the sub-section merely prohibited payment to an employee in respect of time spent in engaging in industrial action and did not require reduction of payment to an employee in respect of vacation leave for a period of service in which an industrial stoppage had taken place. 9 For the respondent, it was submitted that the underlying principle of the Agreement was contained in cl 2(1) where it was stated: … a teacher shall during a school year be paid school vacation days proportional to service during the school year … The respondent maintained that any form of unauthorised absence, including where teachers participated in whole or part day industrial stoppages, did not fall within the term "service" as defined in the Agreement. It was the Department's practice to adjust a teacher's vacation entitlements by making a deduction of approximately a quarter of a day where there was a single full day industrial stoppage undertaken by a teacher. It was submitted that this practice was confirmed by Macken J in NSW Teachers Federation v Education Commission (NSW) [1987] 22 IR 35. It was also submitted that the Department had adopted a particular approach since the 1986 Agreement whereby stoppages occurring for part of a day were taken into account when determining a teacher's vacation entitlement. On the Department's approach, all periods of absence which fell outside the definition of service, including all time spent on industrial stoppages, were taken into account to adjust a teacher's vacation entitlement: for example, the approach was applied when a teacher applied for leave without pay in excess of five days. 10 The following paragraph of the Department's written submission is of some significance: The introduction of the computerised Leave Management System (LMS) in 1997, provided a facility by which it was possible to accurately calculate service for vacation purposes and to make deductions for all teachers who had participated in part day industrial stoppages. Prior to the introduction of the LMS, this was not feasible in terms of the resource implications as vacation deductions for all teachers would have required manual calculations. This statement is consistent with the experience and understanding of the Federation referred to in par 5 of this judgment. 11 For the Department, it was said that the Federation's approach to the definition of service would lead to anomalies and inequities. For instance, a teacher who had ten half-day unauthorised absences in a school term would, under the Federation's interpretation, not incur a reduction in vacation entitlement, but a teacher who had taken five full days of industrial stoppage would have their vacation entitlement reduced. In 1999, this would have equated to a vacation reduction of 2.25 days (query: whether this should be a reference to 1.25 days). The Department also clarified the application of the formula set out in cl 2(1) of the Agreement in that it did not result in the loss of 0.25 day's vacation pay for each one day of stoppage, but varied according to the number of teaching days and the number of vacation days occurring in each year. This was not a stable number, although it was conceded that as a general rule a one day strike equates to a 0.25 day adjustment to vacation pay, especially when only one day of unauthorised absence occurs in a school year. Vacation entitlements were rounded up by the Department to the nearest one-quarter day operating on the basis that a day comprised seven working hours. It was said, to the teacher's advantage, that the practice of rounding up to the next highest quarter day resulted in the full effect of the vacation adjustment not always being evidenced. The Department stated that its approach construed the Agreement in a manner which was sensible and fair and in accordance with its terms. The Federation's approach led to anomalous and absurd results and on the application of long accepted principles of construction would therefore not be adopted. 12 The Department also submitted that its approach was consistent with the provisions of s 143(1) of the Act. Paid vacation leave was said to be a financial entitlement which accrues to teachers on the basis of service provided during the school year. To provide this financial benefit in respect of time spent by teachers engaging in industrial action would constitute a breach of s 143(1) of the Act. 13 In oral argument, the Federation drew attention to two authorities as giving guidance to the approach to be taken in the present matter. In State of Victoria v Australian Teachers Union (1993) 47 IR 328, Gray J in the Federal Court, dealing with an application for interpretation of a redundancy award, stated: This is not a situation in which there are two competing constructions, one of which would lead to absurdity. Rather, it is a situation in which the first applicant seeks to avoid what it regards as inconvenience arising from the obvious meaning of the award. What is inconvenience to the first applicant might not be inconvenient to the respondent or its members. In my view, Clause 3(d) of the Award is very clear. It is to be construed in accordance with the interpretation which I pronounced on 28 April 1993 (at 335-6). The Federation submitted that no ambiguity arises in the present matter. All that is required is the identification of a period when a teacher is on duty even if that be for part of a day, then that is service "within the definition of service and is a period to be taken into account when calculating vacation pay". All that the Department has identified is some inconvenience, primarily arising from its own practice, which is not authorised by the clear terms of the Agreement. Secondly, attention was drawn to the judgment of Glass JA (speaking for the Court) in Lidner Pty Ltd v Builders Licensing Board (1982) 1 NSWLR 613, where his Honour stated: It seems to me that once one arrives at that general conclusion about the purpose of the Act, it is, as Cross J., viz Builders Licensing Board v B J Lidner Pty Ltd [1982] 1 NSWLR 561, described it, a piece of social legislation designed to provide benefits for a category of the workforce. That being the case, it is entitled to beneficial construction rather than to a strictly literal one, this being the approach applied to legislation of similar purpose in cases such a State Government Insurance Office (Queensland) v Crittenden (1966) 117 CLR 412, and in earlier cases in the High Court, which are usually collected together in para 162, at pp 105,106 of Mr Pearce's book on Statutory Interpretation in Australia (1974). (at 163, E) The Federation submitted that the purpose of the 1986 Agreement was to calculate vacation leave and vacation pay and did not address the issue of denying paid leave to teachers who had participated in industrial action for less than a day. 14 Mention was made by both parties to the decision of Macken J in New South Wales Teachers Federation v Education Commission (NSW) (1987) 22 IR 35: the Federation submitted that the interpretation it contended for was conceptually supported by the decision, while the Department stated that the finding that deductions could be made from vacation pay because of a one day stoppage was not in issue in the present proceedings. In that case, the Federation had applied for a declaration that the employer was only entitled to deduct salary at the rate of one-fourteenth of a fortnight's pay for each day of strike action and was entitled to make no further deductions on account of such days of strike action. The Federation's argument seemed to be that a deduction could be made from pay for the day on which the strike took place but that there was no basis to make any deduction from vacation pay calculated in relation to that same period of stoppage. It became clear in the course of the proceedings that no party was calling into question the judgment of Dey J in Re Crown Employees (Teachers, Department of Education) Award; re deduction for strikes (1975) AR 535, where his Honour ruled that a full day's stoppage would result in a deduction from pay of one-fourteenth of the fortnightly remuneration of a teacher, and not one-tenth of the fortnightly remuneration as had been applied by the employer. In light of the fact that there was no issue about the amount of deduction, Macken J concluded that no declaratory order was necessary to ensure that deductions for strike action were not to exceed one-fourteenth of a fortnight's pay for each day of strike action; the real issue was identified by his Honour as to whether a strike constitutes "service" for the purposes of the 1986 Agreement, being the same Agreement under consideration in the present proceedings. Based on submissions made by the Federation and responded to by the Department, Macken J treated the issue as being governed by whether or not a teacher on strike was treated more or less favourably than a person on leave without pay or on some other absence dealt with by the Agreement. Approached in this way, his Honour accepted that the definitions contained in the Agreement made it clear that a teacher on strike is treated no more or less favourably than anyone else who was on leave without pay under the terms of the Agreement. His Honour concluded: "Service" is defined in such a way that a strike does not constitute "service" within the meaning of the industrial Agreement because it is not a working day, nor is it a sick day (whether covered by workers compensation or not) nor is it a period of study leave, nor leave without pay which has been "approved", as in par (f) of the definition. It is leave without pay because it is "unauthorised absence without pay", as in the definition of leave without pay. Accordingly, a day spent on strike will have an effect on vacation leave so as to reduce in proportion to service during a school year. The number of days of "service" as defined would be reduced by the number of days spent on strike. This interpretation means that any teacher who goes on strike will not be advantaged in terms of his vacation leave over a teacher who has been granted leave without pay for some purpose. The fear evinced by Mr Rennie that a person going on strike would be treated less favourably for a day's strike action than someone who is on leave without pay would also be without foundation. A strike is leave without pay that is not "approved" by the Department and is quite different to the concession of five days or less of leave without pay which may be approved by the Department during any school year. (at p 38). 15 I am unable to accept that the decision of Macken J in that case assists in the determination of the matters in issue in the present case. On one view of it, Macken J was dealing only with strike action occupying a whole day and the ability of the Department to reduce vacation pay under the 1986 Agreement proportionally because of the strike action taken by the teacher. The case does not deal with the issue as to whether part of a day can be deducted from vacation entitlements. Nor does it logically follow that, because deduction can be made for a whole day, then a deduction from vacation pay can be made because of industrial action taken on part of a day. The position was succinctly expressed by Lord Halsbury in Quinn v Leatham 1901 AC 495 at 506: A case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all. This approach was later approved by Jordan CJ in Coleman v Shell Co of Aust. Ltd (1943) 45 SR (NSW) at 34. 16 As the issue with which I have to deal is a distinct and separate issue to that dealt with by Macken J, it is unnecessary for me to reach a final conclusion on the correctness of his Honour's approach or to determine that I should not follow it because I am convinced that it is wrong. The decision does raise some doubts in my mind because it appears that his Honour decided the issue on the basis that the real point was whether persons on leave without pay would be treated more or less favourably than those on strike under the terms of the 1986 Agreement in relation to their vacation leave. His Honour expressed the view that an unauthorised absence was "leave without pay" and therefore a strike that took place on a particular day was not service because such a day was not a "working day". Approached in this way, the definition of "working days", meaning the "ordinary working days, Monday to Friday inclusive, of a school term including any public holiday which falls on an ordinary working day", is ignored. Although his Honour spoke of a strike not being a "working day", it may well have been his view that a day on strike was not "on duty" even though it was a working day as defined: but his Honour did not, in terms, approach the issue this way. A teacher requires "service" to accrue vacation leave, and one means of accruing service is being on duty on working days. It is perhaps a telling point that, in the definition of "service" in sub-par (a), the parties did not exclude unauthorised absences but chose to express their agreement as being that "service" meant those working days on which a teacher is on duty and did so without qualification beyond what is specified in sub-pars (b) - (f) of the definition of "service". Despite these differences, it appears to me that the issue raised on this application is a distinct and separate issue to that dealt with by Macken J and that I should approach the application for a declaration on that basis. 17 A question did arise during argument as to the effect of the Annual Holidays Act 1944 and how its provisions might affect the construction of the 1986 Agreement. The issue arose in this way: Section 5(1) of the Annual Holidays Act permits an award, agreement or contract of employment to provide for a benefit that is more favourable to the worker than benefits provided under s 3, s 4 or s 4A of the Act, in which case that section is not to apply; but, where the benefit is not more favourable than that provided under the nominated sections of the Act, the sections are to apply; s 5(1)(b) appears to be another way to give effect to s 8 of the Act, prohibiting the contracting out of provisions made by the Act. The parties were unable to point to any provision of the Annual Holidays Act which had the effect of reducing annual leave because of strike action taken during the period of employment. Significantly, the Annual Holidays Act operates on the concept of "employment", whereas the 1986 Agreement operates on the concept of "service" as defined, but both instruments deal with entitlement to annual leave. Clause 2(1) of the Agreement acknowledges that pro rata vacation leave under the Agreement is in lieu of the provisions of the Annual Holidays Act. It may be, as suggested by the Department, that the period of approximately ten weeks' leave available to teachers would not be in conflict with the provisions of the Annual Holidays Act by the deduction of vacation leave until such time as the deductions reduced the leave below four weeks. Whether this be so or not, it is surprising that, in the absence of the Annual Holidays Act making provision for the reduction of holidays because of industrial action taken during the period of employment, the parties would agree to such deductions being made under the Agreement. The concept of the benefit of the Annual Holidays Act may encompass not only leave and the standard of leave available but also the lack of a statutory basis for reducing that leave because of time taken during the employment as industrial action. Perhaps the more appropriate way to express this approach is to note that the Court would expect a clear and unambiguous indication of this intention to depart from the position that normally applies under the Annual Holidays Act. I can see no such clear and unambiguous indication in the terms adopted by the parties in their 1986 Agreement. 18 In the course of argument, counsel for the Department acknowledged that, indeed, there may be a gap in the provisions of the Agreement and that the Agreement does not directly address strike days and what effect flows from the taking of industrial action but, in concentrating on the concept of "service", the deductions made by the Department were consistent with the provisions of the Agreement. During argument, it was accepted that the Department's approach treats teachers as working normally seven hours per day, although it was further accepted that there were no fixed hours and that there was some preparation and work performed outside of school hours. Again, this matter is not without its significance because, on the Department's approach, the deduction from vacation leave is based upon what must be a notional seven hour working day with actual time engaged on the strike deducted from that notional seven hours in order to calculate the entitlement to vacation pay. In passing, it should be noted that none of these concepts are relevant to the operation of the Annual Holidays Act. 19 The issue of the hours worked by teachers also arose in the 1975 dispute dealt with by Dey J. In that case, the Federation pointed out that teachers' hours of work were not limited to their school hours and quoted passages from the Crown Teachers Award and the Teachers, Technical Education, Overtime Case to indicate that very many teachers find it essential to devote a substantial number of hours outside school hours to do their work. Under a regulation made pursuant to the Teaching Service Act 1970, teachers were required to be on duty at their schools half an hour before school work began in the morning and could be required to be present if thought necessary by the teacher in charge for half an hour after the dismissal of school in the afternoon. The regulation also recognised that special circumstances might arise which, in the interests of the school, necessitated attendance beyond these hours. (See 1975 AR at 537). In dealing with a submission for the employer that it was due to an historical accident that some concessions had been made treating teachers' salaries as accruing over seven days of the week, when in fact they were only working on five days of the week, his Honour stated: The Act authorises an award to fix the rates of wages payable to employees and obviously they can be fixed on an annual basis. I do not consider that there is anything incongruous in allowing the salary to accrue due on a calendar day basis where no ordinary hours of work are fixed in the normal industrial manner … (Mr Macken) claimed that there was "conceptionally a world of difference" between an employer allowing leave without pay on a basis which involved a concession, and employees who had gone on strike claiming the benefit of similar generosity. However, the real issue in this instance is not whether the employer has the right to decline to pay for work not performed, by reason of the strike, but the basis upon which salary accrues for the purpose of ascertaining what is a day's pay, which has been forfeited by the striking employee. The fact that the action was illegal does not confer the right on the employer to impose its own penalty by making a greater deduction than it was otherwise entitled to do. The question of how the award and the regulations operate as a matter of interpretation is not capable of a simple clear cut answer because none of the provisions deal directly with the fundamental issues. The situation has just "grown up" over the years. Indeed, as Mr Macken suggested, the approach to salary accrual for teachers, no doubt pre dates the concept of standard hours of work or a five day a week for public servants. (at 540 - 541). 20 Dey J was able to conclude that the appropriate division was one- fourteenth of a fortnightly salary, in part because such an approach appeared to be sanctioned by s 144 of the Conveyancing Act. At the time, s 144(1) of the Conveyancing Act provided: All rents, annuities, dividends, and other periodical payments in the nature of income (whether reserved or made payable under an instrument in writing or otherwise) shall, like interest on money, be considered as accruing from day to day and shall be apportionable in respect of time accordingly. Section 142 of the Conveyancing Act defined "annuities" as including salaries and pensions. 21 In oral argument, senior counsel for the Federation noted that in the whole of the Agreement there was no provision for a quarter day's leave, authorised or unauthorised, or provisions to calculate leave by the hour. There was nothing in the material before the Court to suggest that the parties turned their minds to the issue of dealing with portions of a day below half a day and there was nothing in the Agreement itself which suggested that such an approach was contemplated. There was nothing ambiguous about the terms of the Agreement. 22 Counsel for the Department accepted that this may be an example of an agreement found to have a gap in its terms. The Agreement needed to be approached in a commonsense way to produce a proper industrial outcome rather than absurd results unintended by the parties. It was also accepted that part of the object of the 1986 Agreement was to make a provision more beneficial than the Annual Holidays Act. It was noted that, in the definition of "service", sub cl (c) dealt with the notion of a "paid portion" - this was an indication that the drafters of the Agreement had turned their minds to the issue of portions of days, including leave on half or ordinary pay and how that should be dealt with. It was also accepted by counsel for the Department that the 1986 Agreement did not specifically address what to do with strike days: the Agreement centred on the concept of "service" and that meant going to work and teaching. 23 Both parties appeared to accept the proposition that the Agreement needed to provide more beneficial provisions than the Annual Holidays Act in order to set aside the provisions and the approach of that Act. Counsel for the Department accepted for the purposes of argument that it appeared that the Annual Holidays Act made no provision to reduce the amount of holidays available during employment in any year where strike action was taken. For the purposes of the argument, counsel also accepted that that result may appear to be absurd but that there were special considerations concerning the amenity dealt with by the Annual Holidays Act which might bring about that particular result. Counsel also noted that there were known to be anomalies whereby persons on workers' compensation were paid and at the same time accrued leave, and were paid twice for that period of accrued leave. These were simply examples of legislative schemes where the anomaly or the absurdity had been created by the legislative provisions. Those results were said to have no particular relevance for the present issue under consideration. 24 In relation to the Department's practice of making deductions from vacation pay because of time taken on strike, it was confirmed that the Department treated teachers' normal hours as being seven hours per day although it was recognised that that period did not represent the "sum total of a teacher's exertion". It was also accepted by the Department that there was no relevant industrial instrument which restricted the number of hours or the span of hours worked by teachers. So far as is relevant, I am content to dealt with this matter on that basis. 25 In reply, senior counsel for the Federation submitted that the Department's practice had no basis in the Agreement and had no other status. It was pointed out that in relation to industrial stoppages there were no deductions for part-day stoppages where teachers worked on that day until relatively recently. From the written submissions provided by both parties, this capacity to calculate periods of less than half a day appears to have arisen because of computer programmes which became available a decade after the Agreement was signed in 1986. DELIBERATION 26 It has been long been accepted that the interpretation of an industrial instrument such as an award or agreement begins with a consideration of the natural and ordinary meaning of its words (re Clothing Trades Award (1950) 68 CAR 597): the words are to be read as a whole and in context (Australian Timber Workers Union v W Angliss & Co Pty Limited (1924) 19 CAR 172. In City of Wanneroo v Holmes, [1989] 30 IR 363 at 378 - 379, French J, dealing with an application for interpretation of an award in the Federal Court, noted that the words used in an industrial instrument must not "… be interpreted in a vacuum divorced from industrial realities", citing the famous passage from Street J in Geo A Bond & Co Ltd (in liq.) v McKenzie [1929] AR (NSW) 498 at 530. His Honour went on to state that it was of course no part of the court's task to assign a meaning in order that the award may provide what the court thinks is appropriate, citing Australian Workers' Union v Graziers' Association (NSW) (1939) 40 CAR 494. These expressions are consistent with what was said by the Full Court of the previous Industrial Court in Cepus v Heggies Transport Pty Ltd [1993] 52 IR 123 and by the Commission in Court Session in Bryce and anor v Apperley [1998] 82 IR 448. It is therefore appropriate to commence with a consideration of the terms chosen by the parties to constitute their agreement. I note the following matters: (a) In the definition "Leave without Pay" and in cl 2(2)(b), cl 4(b) and cl 4(c) reference is made to half pay or half ordinary pay and appears to be the only portion of a full day by reference to pay with which the Agreement deals; (b) The definition of "service" involves six or more specified and different periods, none of which in turn deals with a whole day on strike or a proportion of a day on strike; (c) The definition of "working days", contrary to a submission made for the Department, is extended to include public holidays which fall on any ordinary working day; (d) Clause 2, which provides the formula for the calculation of pro rata vacation leave and the entitlement to payment during that leave is subject to sub cl 2(2) and cl 3 of the Agreement. Clause 2(2) is extensive and deals with a variety of circumstances where a teacher will be entitled or not entitled to have particular periods counted for the purpose of calculating vacation leave and vacation pay. Clause 3 makes a special provision for new appointments that occur other than at the start of a school year and provides another formula for calculating entitlement to vacation pay. These extensive provisions, where the parties have turned their minds to all kinds of exceptions, exclusions and particular circumstances, make no reference to what is to occur when a day is spent on strike or part of a day is spent on strike; (e) Clause 7 deals with the matters in relation to which leave is reserved but there is no mention of reserving the issue of the treatment of days or parts of a day on strike for the purposes of qualifying for paid vacation leave; (f) Clause 8, the Incidence clause, makes it clear that the Agreement rescinds and replaces previous determinations and variations made or adopted by the previous Education Commission relating to the payment of vacation leave and replaces them with the terms of this Agreement which "… shall apply to all teachers as defined herein". It appears that the parties intended that all previous approaches and practices would be replaced by the regime implemented by the Agreement; (g) Clause 5(1) provides that the Agreement is "subject to the parties entering a further Agreement concurrently with this Agreement covering the recovery procedures that shall operate when salary is over paid". This clause gives some appreciation of the industrial context in which the Agreement was reached and, importantly, records that there were considerations beyond the scheme of payment for vacation leave which were the subject of bargaining between the parties and permitted this Agreement to be entered into. Caution needs to be exercised when the Court is asked to read into the Agreement provisions which do not, in terms, appear in the Agreement and when there is a background of bargaining about other matters. The parties may have been content not to attempt to determine or lay down provisions for all of the circumstances which might arise or be taken into account in calculating the entitlement to paid vacation leave but to permit such matters to be dealt with "in the broad". In this regard it is worth recalling what was said by Gummow J (as a member of a Full Court of the Federal Court) concerning the related subject of statutory construction: However, as Posner also points out … and with reference to abundance of United States literature, statutes are often the result of a compromise between contending factions or interest groups and of accommodations which, whilst properly reached as an appropriate part of the legislative process, involved terms and understandings which cannot readily be made apparent to a Court. The "purposive" school of statutory interpretation thus encounters the difficulty that it cannot accommodate the notion of "factual matrix" as understood in modern authorities dealing with contractual interpretation. …Posner asks … whether a "purposive" interpretation may not undo a compromise. Further, what appears to a court as an omission or obscurity to be resolved by search for a particular purpose which should not be left to miscarry, in truth may reflect the legislative compromise that the matter be left to the Court. There is a long history of what one might call deliberate obscurities being entrusted for resolution by the Courts: J M Landis "Statutes and the Sources of Law" in Harvard Legal Essays written in honor of J H Beale and S Williston (Pound ed. 1934) at p 214 - 215. … In the end, the function of the Court in construing a Statute is to give effect to what apparently is "the will of the legislature" as expressed therein. This is so even though as a result of oversight or inadvertence, what extrinsic material show to have been the clear "intention" of the legislature has not been translated into the text of the law; re Bolton; ex parte Beane (1987) 162 CLR 514 at 518. ((1994) 50 FCR 555 at 573 - 575). 27 The entitlement to pro rata vacation leave requires, pursuant to cl 2(1) of the Agreement, "…service during the school year". As earlier indicated, the word "service" is defined to pick up or exclude six or more specific periods which are used for the calculation of the entitlements. The first class is specified as: "(a) those working days on which a teacher is on duty". As already indicated, "working days" is defined to mean the ordinary working days Monday to Friday inclusive of a school term including any public holiday which falls on an ordinary working day. There is no separate definition of what amounts to being "on duty" although there is a definition of "teaching days" which does not take the matter further for present purposes. The industrial action that took place in 1999 took place on "working days"; except for the 24 hour stoppage, the other stoppages involved two or three hours' absence from work and a return to duty. On the plain meaning of the first definition of "service" in par (a), it appears to me that the teachers who participated in the part day stoppages in 1999 and who returned to work nevertheless provided "service" on those working days when they returned to duty. The question then arises: do any of the remaining provisions of the Agreement alter this position? Sub-clause (b) of the definition counts as "service" those working days in which a teacher is on approved leave "on full ordinary pay" - even though absent from duty, this period is counted as service for the purposes of paid vacation leave. Sub-clause (c) of the definition of "service" gives credit for only that part of a period of leave taken on half ordinary pay which is "the paid portion" but includes half pay sick leave, no pay sick leave of up to 20 teaching days in any school year and half pay maternity leave taken after the anticipated date of birth falling on working days which are to be regarded as full days of service. It can be seen that this provision does not detract from what I have said about the entitlement under sub-cl (a) of the definition of "Service". Sub-clause (d) permits the counting of absences on full or no pay workers compensation and therefore is not directly relevant to present considerations. Sub-clause (e) of the definition of "service" deals with periods of study leave falling on working days and allows four particular circumstances of study leave to be treated as "service" and again is not directly relevant to present considerations. Sub-clause (f) of the definition of "service" permits up to five days of approved leave without pay during any school year to be counted as service, but no more. Again, this provision is not directly relevant for present purposes. This analysis, however, demonstrates the error in the Department's submission that, to be eligible for paid vacation leave, requires service which is the necessity to work and perform duties as a teacher. The definition of "service" clearly contemplates circumstances where work is not performed but where the period involved will be regarded as "service" for the purposes of calculating pro rata vacation pay. 28 Clause 2, apart from requiring "service" to qualify for paid vacation leave, also makes the entitlement subject to cl 2(2) and cl 3 of the Agreement. As indicated earlier, cl 2(2) deals with: periods where there is no entitlement to leave, or an excess entitlement; refers to an absence of entitlement when a teacher is on full or half paid leave while on school vacation days; deals with transfers in certain divisions; makes provision for retirement and resignation; refers to a teacher being granted leave without pay during a school year and being absent from duties; and also deals with periods of extended leave. Nothing in cl 2(2) applies to the teachers who in 1999 participated in part day stoppages of work but otherwise remained on duty - their eligibility for paid vacation leave is not affected by any of these provisions. Similarly, the provisions of cl 3, dealing with new appointments other than at the start of the school year, do not affect teachers who have participated in a part day stoppage and returned to duty or who performed duty prior to the stoppage on a working day. 29 On the above analysis alone, I am satisfied that a teacher who participates in a part day stoppage and returns to duty on a working day thereby satisfies the definition of "service" in the Agreement and is eligible for pro rata paid vacation leave for such a day. 30 The conclusion I have reached as stated above is supported by the fact, agreed to by both parties, that, at the time of signing the 1986 Agreement, there was no practical mechanism for calculating paid vacation leave for periods of less than half a day. It was not until the introduction of the LMS computerised system 11 years later that such a facility became available. It could therefore not have been in the contemplation of the parties when they entered the 1986 Agreement that periods of less than half a day of absence would be deducted from vacation pay because there was no practical way to make the calculations required. This fact also explains why the Agreement only refers to proportions of half a day and makes no mention of absences of an hour or two or any other proportion of a day. 31 I am not persuaded that there is any absurdity which flows from the conclusion that I have reached. First: it accords with the plain terms of the Agreement which I find are not ambiguous. Second: it is consistent with the operation of the Annual Holidays Act which I regard as a telling point against the Department's approach. Third: as Dey J found in the 1975 dispute, there is nothing odd about treating pay as accruing on each day of the week, even though the work is performed only on five days a week. Similarly, there is nothing odd about service being regarded as satisfied when there is attendance at work, even if it be for less than a full day. Indeed, the Agreement recognises absences when no work is performed and treats them as service in specified circumstances. Fourth: the Agreement replaces all previous practices and does so by making a number of detailed exclusions which do not exclude part day stoppages. Fifth: the industrial context shown in cl 5(1) is indicative of the parties reaching a compromise. Sixth: there is force in the Federation's submissions based upon Gray J's approach in State of Victoria v Australian Teachers Union (1993) 47 IR 328. The Department's real problem appears to lie with the inconvenience of the clear terms of the Agreement, especially since the capacity to calculate part day absences only arose for the first time in 1997. Seventh: consistent with what Dey J said in the 1975 Dispute, the fact that the part day industrial action was illegal does not confer the right on the employer to impose its own penalty by making a greater deduction than it was otherwise entitled to do. Eighth: there is no gap in the Agreement, as suggested by the Department, which requires a term to be implied to give effect to its provisions. This is not a case where terms need to be implied in order to give business efficacy to the Agreement These matters confirm the conclusion that I have already reached on the plain words of the Agreement. 32 Having reached a conclusion favourable to the applicant Federation on the proper construction of the 1986 Agreement, it then becomes necessary to consider whether that position is altered by the provisions of s 143(1) of the Industrial Relations Act 1996. That section, which carries the sub-heading "Strike Pay Prohibited", provides as follows: An employer who pays any remuneration or provides any other financial benefit to an employee in respect of time spent by the employee in engaging in industrial action is guilty of an offence. Although providing a penalty, the recent approach of the courts is to construe such provisions according to their terms. It has been said that the most frequently quoted statement of the principle is that of Gibbs J in Beckwith v R (1976) 135 CLR 569 at 576, as follows: The rule, formerly accepted, that statutes creating offences are to be strictly construed, has lost much of its importance in modern times. In determining the meaning of a penal statute, the ordinary rules for construction must be applied but if the language of the statute remains ambiguous or doubtful the ambiguity or doubt may be resolved in favour of the subject by refusing to extend the category of criminal offences; see R v Adams (1935) 53 CLR 563 at 567 - 568; Craies on Statute Law, 7th ed (1971), pp 529 - 534. The rule is perhaps one of last resort. 33 I think that the subject matter and purpose of the section is clear: although expressed in ample terms and designed to catch payments that may be made otherwise than as salary, in my view the provision is directed, in essence, to prohibiting payment for a strike. In the present case, the teachers who took strike action have not been paid for the time they were so engaged. The subject matter of the 1986 Agreement is paid vacation leave: that appears to be a different matter, even viewed in the overall context of the industrial action taken, and therefore does not come within the prohibition of s 143(1). If vacation leave falls within the expression "… any other financial benefit …" in s 143(1) (which I doubt), it is nevertheless payment made in relation to time spent by a teacher "on duty" as defined in the 1986 Agreement and is therefore not "in respect of time spent by the employee in engaging in industrial action". 34 It is also an unlikely result that employers who do not deduct time spent in industrial action from annual leave accrued under the provisions of the Annual Holidays Act would now fall foul of the provisions of s 143(1) and be guilty of an offence. It is highly unlikely that the enactment of s 143(1) and its predecessor under the 1991 Act effected a type of pro tanto repeal or amendment of the Annual Holidays Act. The Court is entitled to expect that such a result would be brought about by quite clear and specific language rather than by such an indirect route. Further, on the Department's approach, there should be a reduction in any other entitlement which is based on providing service in order to qualify for a benefit, e.g. long service leave and sick leave. Recently, the Commission has declined to apply the provisions of s 143(1) of the Act to the flexible working hours system operating in the Public Service, deciding that the section does not oblige an employer to reduce a striking employee's pay where time (other than time spent engaging in industrial action) has been worked by the employee in sufficient quantity to satisfy the contract hours requirements of the flexible working hours system. ( Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales and the Department of Community Services [2002] NSWIRComm 33, Grayson DP, 12 March 2002). The number and variety of unintended consequences flowing from the Department's approach highlights the difficulty with its adoption. 35 It has been said that it is open to a court to test a construction by reference to its consequences: Cole v Director-General of Youth and Community Services (1987) 7 NSWLR 541 at 546; the construction contended for by the respondent Department has such unlikely consequences for the operation of the Annual Holidays Act and other similar benefits as to cast grave doubt upon whether that approach is a proper reflection of the statutory intention. I am satisfied that it is not and that s 143(1) does not have the effect contended for by the respondent. ORDER 36 In light of the views I have formed on the matters raised by the parties, I do not believe that it is necessary to make the second declaration sought by the Federation. It is clear from what I have said that I do not regard s 143(1) of the Act as operating to reduce the amount of paid vacation leave accruing to a teacher under the Agreement where that teacher participates in a part day stoppage but otherwise remains on duty on that day. In order to clearly state my views, the terms of the first declaration sought by the Federation will be slightly amended. In the circumstances, I make the following declaration and order: That on a true interpretation of the Industrial Agreement between the Education Commission of New South Wales and the New South Wales Teachers Federation (published in the New South Wales Industrial Gazette Vol. 248, page 893), the Director General, New South Wales Department of Education and Training is not entitled to reduce the vacation pay entitlements of a teacher because of an absence from duty by that teacher for part of a working day while engaged in an industrial stoppage when that teacher remains on duty for the rest of that day. oo00oo TEACHERS Industrial Relations Act 1996, s 154 - application for declaration - interpretation of provisions of industrial agreement - principles applicable - vacation leave accrued during "service" while teacher "on duty " - whether duty performed on same day as part day industrial stoppage "service" under terms of the agreement - declaration made confirming entitlement. Industrial Relations Act 1996 s 143(1) - whether payment for leave accrued whilst on duty and when industrial stoppage occurred on same day is the payment of "any other financial benefit" and an offence. List of cases Australian Timber Workers Union v W Angliss & Co Pty Limited (1924) 19 CAR 172 Australian Workers' Union v Graziers' Association (NSW) (1939) 40 CAR 494 Beckwith v R (1976) 135 CLR 569 Bryce and anor v Apperley [1998] 82 IR 448 Cepus v Heggies Transport Pty Ltd [1993] 52 IR 123). City of Wanneroo v Holmes [1989] 30 IR 363 at 378 - 379 Clothing Trades Award (1950) 68 CAR 597 Cole v Director-General of Youth and Community Services (1987) 7 NSWLR 541 at 546 Coleman v Shell Co of Aust. Pty Ltd (43) 5 SR (NSW) at 34 Crown Employees (Teachers, Department of Education) Award re deduction for strikes [1975] R 535 Geo A Bond & Co Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 530 Lidner Pty Ltd v Builders Licensing Board (1982) 1 NSWLR 613 NSW Teachers' Federation v Education Commission (NSW) [1987] 22 IR 35 Public Service Association and Professional Officers' Association Amalgamated Union of New South Wales and the Department of Community Services [2002] NSWIRComm 33 Grayson DP 12 March 2002 Quinn v Leatham 1901 AC 495 at 506 State of Victoria v Australian Teachers' Union [1993] 47 IR 328 Legislation Conveyancing Act s 144(1) Industrial Relations Act 1996 s 143(1) s 154 Annual Holidays Act, 1944 s 3 s 4 s 4A s 5(1) s 5(1)(b) s 8 Teaching Service Act 1970 37 Hearing date: 13 March 2002 APPLICANT: Mr S Crawshaw SC of counsel Ms Brenda Seymour Assistant General Secretary, NSW Teachers Federation Mr J V Murphy of counsel DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.