Industrial Relations Commission of New South Wales in Court Session CITATION : TWU v Linfox Australia Pty Ltd [2003] NSWIRComm 97 APPLICANT Transport Workers' Union of New South Wales PARTIES : RESPONDENT Linfox Australia Pty Limited FILE NUMBER: IRC5974 of 2002 CORAM: Peterson J CATCHWORDS : Sick leave - Application for declaration of right - Interpretations of award - Whether sick leave accrues weekly on pro rata basis - Clause interpreted to the contrary - Declaration made. LEGISLATION CITED : Industrial Relations Act 1996 s154 Transport Industry (State) Award (2000) 315 IG 192 Transport Industry (State) Award (1984) 7 IR 359 Ford v SAS Trustee Corporation (2000) 98 IR 444 CASES CITED : Quill v Brunton (No 2) [1921] AR 44 Beard, Watson Ltd v Hickey [1924] AR 11 Bryce and anor v Apperley (1998) 82 IR 448 Australian Municipal, Administrative, Clerical and Services Union v the Treasurer (Cth) and Ors (1998) 80 IR 345 HEARING DATES: 02/27/2003 DATE OF JUDGMENT: 04/04/2003 APPLICANT Mr A A Hatcher of counsel UNION Transport Workers' Union of New South Wales RESPONDENT Mr M Baroni, solicitor SOLICITOR LEGAL REPRESENTATIVES: Clayton Utz SYDNEY. Mr R Grace New South Wales Road Transport Association Inc Mr G Moses Employers' First Ms R Brady Australian Business Industrial JUDGMENT: - 15 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: PETERSON J 4 APRIL 2003 Matter No. IRC5974 of 2002 TRANSPORT WORKERS' UNION OF NEW SOUTH WALES v LINFOX AUSTRALIA PTY LIMITED Application by Transport Workers' Union of New South Wales for declaration of right under s154 of the Industrial Relations Act 1996. JUDGMENT 1 The Transport Workers' Union of New South Wales Branch ('TWU') has applied to the Commission in Court Session for a declaration of right under s154 of the Industrial Relations Act 1996 ('the Act'). The application seeks a declaration in the following terms: 1. On its proper interpretation, clause 19, Sick Leave, of the Transport Industry (State) Award published 20 April 2000 (315 IG 192), entitles each employee other than a casual employee with not less than three months service in the industry covered by the award to: (i) five days sick leave in the first year of employment with an employer; and (ii) eight days sick leave in each subsequent year of employment with an employer on the basis that the full sick leave entitlement for each year of employment is available to be taken at any time during that year (subject to the employee suffering the requisite personal illness or injury). 2. On its proper interpretation, the said clause of the said award does not provide or require that the sick leave entitlement for each year of employment accrues during the course of that year so that there is no entitlement at the beginning of the year and the full entitlement is only accrued by the end of the year. 2 The application, while seeking a declaration of general application, has been sought as the result of an approach taken by Linfox Australia Pty Limited ('Linfox') to the accrual of sick leave for employees engaged under the Transport Industry (State) Award. Notice of the application was given to all parties to the Award and led to the appearance, apart from Linfox, of the New South Wales Road Transport Association Inc., Employers' First, and Australian Business Industrial. 3 The matter proceeded upon the basis of contentions of fact filed by both the TWU and Linfox and the affidavit of Peter Smith, the Regional Manager - Workplace Relations for Linfox. Save for an assertion by Mr Smith and in the written contentions filed by Linfox of employees having achieved a "negative sick leave balance", a concept which the TWU disputed was factual, the facts are agreed. The Award 4 The current Award was made by a Full Bench of the Industrial Relations Commission on 31 March 2000 (315 NSWIG 192). In broad terms, the Award provides, through cl.19, Sick Leave, for five days sick leave in the first year of employment and eight days in the second and subsequent years of continued employment. 5 The Sick Leave clause is as follows: 19.1 "Year" shall mean a period of twelve months measured for each employee from the date of commencement of the employee's current period of employment. 19.2 An employee, other than a casual employee, with not less than three months continuous service as such in the industry covered by this award, who is absent from work by reason of personal illness or injury not being illness or injury arising from the employee's misconduct or from an injury arising out of or in the course of employment, shall be entitled to leave of absence, without deduction of pay, subject to the following conditions and limitations: 19.2.1 He shall, unless it is not reasonably practicable so to do (proof whereof shall be on the employee), before the ordinary starting time on the first day of the employee's absence, and in any event within twenty-four hours, inform the employer of the employee's inability to attend for duty and, as far as practicable, state the nature of the illness and the estimated duration of the absence. 19.2.2 The employee shall furnish to the employer such evidence as the employer may reasonably desire that the employee was unable, by reason of such illness or injury, to attend for duty on the day or day for which the sick leave is claimed. 19.2.3 Except as hereinafter provided, the employee shall not be entitled in any year (as defined) to leave in excess of five days of ordinary time. Provided that: 19.2.3.1 If the employee's employment continues with the one employer after the first year, the sick leave entitlement shall increase to a maximum of eight days of ordinary working time at which figure it shall remain for each subsequent year of continued employment. 19.2.3.2 If the employment of an employee who has become entitled to leave in accordance with proviso (1) above is terminated for any reason, the employee shall not be entitled, in that year, to leave in excess of five days of ordinary working time. 19.3 For the purpose of administering clause 19.2.3 an employer, within one month of this award coming into operation or within two weeks of the employee entering employment, may require an employee to make a statutory declaration or other written statement as to what paid leave of absence the employee has had from any employer during the then current year and upon such statement the employer shall be entitled to reply and to act. 19.4 The rights under this clause shall accumulate from year to year, so long as the employment continues with the one employer, so that any part of the leave entitlement which has not been allowed in any one year may be claimed by the employee and shall be allowed by that employer, subject to the conditions prescribed by this clause, in a subsequent year of continued employment. 19.5 If an award holiday occurs during an employee's absence on sick leave then such award holiday shall not be counted as sick leave. 19.6 Service before the date of coming into force of this clause shall be counted as service for the purpose of assessing the sick leave entitlement in any year under clause 19.2.3, but shall not be taken into consideration in arriving at the period of accumulated leave. 19.7 Accumulated sick leave to the credit of an employee at the commencement of this award shall not be affected nor reduced by the operation of this clause. 19.8 Where an employee is sick or injured on the week day the employee is to take off in accordance with the provisions of clause 3.4, the employee shall not be entitled to sick pay nor will the sick pay entitlement be reduced as a result of sickness or injury on that day. 6 Save for one significant difference, the sick leave clause had continued in its present form since 1974-5, the earliest date to which the parties referred (see 196 NSWIG 1592 at 1610). The clause provided in a new award made at that time was effectively in the same terms as the pre-existing clause except for the definition of "Year", which had been defined to mean "the period from the 1st day of July to the 30th June next following". 7 The variation of the defined year from financial year to a year of employment, as now, was introduced by variation (236 NSWIG 487) made by a Full Bench of the commission in the context of an hours reduction from 40 to 38 per week. The Full Bench had, on 5 June 1984, stood over an application by the TWU for the introduction of a 38 hour week, requiring the parties to negotiate further in respect of cost offsets. The judgment in respect of that referral is published in (1984) 7 IR 359. On 18 July 1984 the Full Bench variation was made reducing the hours and making numerous alterations to award provisions, ostensibly by way of cost offsets. One such variation was the alteration to the defined year for the purposes of sick leave. I mention also another, presently irrelevant, variation to the clause which provided for days of absence on sick leave rather than hours, facilitating the 38 hour week. The Recent History 8 Until about 1 July 2002, Linfox adopted an approach to the accrual of sick leave which reflects the present contentions of the TWU. That approach was that upon the commencement of a year of service, whether the first or a subsequent year, the amount of sick leave applicable in respect of that year accrues due and is available to be accessed from the commencement of that particular year. It is the ability of an employee to take the year's sick leave at an early point in the year and later leave the employment, which has caused Linfox, in those circumstances, to view the result as producing a "negative sick leave balance". 9 From about 1 July 2002 Linfox introduced and commenced operating an upgraded SAP payroll system which provided a new Leave Management Module for all employees within Australia. Consequently, Linfox standardised the accrual and payment of sick leave for all employees employed in Australia except where employment terms and/or award provisions expressly required the alternative treatment of sick leave accrual. This new method calculates sick leave on an accrual basis at the rate of 1.16 hours per week of service. 10 It appears that 1.16 hours reflects the equivalent of eight days per year and thus pays no regard to the lower entitlement of 5 days in respect of the first year. Under the new system an employee's full entitlement to sick leave would accrue only 12 months' after the commencing date and each anniversary date. It can be seen readily that the altered system phases in sick leave over the course of a year would have the effect of disentitling an employee to an amount of sick leave in excess of the amount thus accrued to a particular point in the year when compared with the approach which affords the full entitlement at the beginning of the year. 11 It is accepted by the parties that the case is one in which the principles applicable to the grant of a declaration are satisfied. Essentially, the matter exhibits a real dispute between the parties as to award rights and entitlements. There has been a change in the sick leave accrual method, in this case by Linfox, since 1 July 2002 and that change has introduced an effect or detriment to employees' rights. There has also been, apart from the element of a real dispute, a true contradictor in relation to the application. (See Ford v SAS Trustee Corporation (2000) 98 IR 444 at 450.9). Sick Leave 12 Mr Hatcher addressed the history of the entitlement to be absent due to illness in employment relationships governed by the common law. It was submitted that at common law there is implied into a contract of employment a term which entitled an employee absent from work due to illness to continue to receive payment without limit under his contract, subject to any express term or any custom or usage in the particular field of employment. 13 He referred to Quill v Brunton (No 2) [1921] AR 44, where Rolin J said: Of the Common Law there is no doubt that a man employed on a weekly engagement, or on any engagement for a period, does not put an end to that engagement by falling ill. His absence from work on account of sickness does not terminate his employment; and further, in the absence of any other agreement express or implied, he is entitled to be paid for the time he is away sick, although he is not there to go on with his work. That may be very hard on the employer, but that I take to be the law. 14 In Beard, Watson Ltd v Hickey [1924] AR 11 at 13, Edmunds J, after setting out a list of decisions of the court referred to by counsel for the parties, including Quill v Brunton (No 2), said: The authority of the decided cases was not questioned, and, as I think, it was common ground in the cases of both parties that the following propositions should be applied ( inter alia ) in the decision of this appeal:- (a) When an award provides for an employee a service for a week or longer period at a weekly wage, such employee if absent through illness a portion of any week is, nevertheless, entitled to his full weekly wage, and a refusal by the employer to so pay is a breach of the award. (b) When under the circumstances of absence through illness above set out, the inability continues beyond a short time and a substitute is required for the absent employee, the master will be discharged from his obligation to pay the said wages. (c) When a custom or usage is proved to exist in the industry, locally or generally, not to pay wages in the said cases of absence through illness, such usage is a good defence to a suit for the said wages. 15 In Quill v Brunton (No 2) the claim was for payment for a period of absence due to illness. The award provided that the engagement of all employees shall be weekly. Under the common law such a claim could be satisfied, however, evidence in that case demonstrated the existence of a usage not to pay sick leave. In Beard, Watson Ltd v Hickey, which was an appeal from the decision of a court of petty sessions, the matter turned upon the magistrate's rejection of three witnesses asserting a custom or usage not to pay sick leave and found for the applicant. While the court on appeal was not able to interfere with that determination based upon the evidence and dismissed the appeal, its utility lies in the exportation, consistently with Quill v Brunton (No 2), of the common law position. 16 In these circumstances, it was submitted that the introduction of amounts of sick leave in award sick leave clauses needs to be understood as imposing a limit or restraint upon the amount of leave to which an employee would be otherwise entitled at common law in the case of an absence due to illness. 17 In construing the clause it was submitted that the approach adopted by the majority (Hungerford, Schmidt JJ) in Bryce and anor v Apperley (1998) 82 IR 448 ought be adopted. In that matter the majority expressed the approach to interpretation this way: In our view, in construing the true meaning of an industrial award, like any other instrument with legal force, the task requires an approach according to the actual words used and their plain, ordinary English meaning. As was said by Kelleher J in Re Dispute between Broken Hill Pty Co Ltd and the Federated Ship Painters and Dockers' Union of Australia, New South Wales Branch, Re Tank Tops [1961] AR (NSW) 312 at 314: "The meaning is to be ascertained primarily from a consideration of the words actually used and, while it is proper to pay regard to the surrounding circumstances and the purposes for which the provision was intended, this cannot justify a meaning being given to the words or expressions, having a special trade significance, however, may need to be construed in that light." Indeed, after referring with approval to what was said by Street J in Geo A Bond & Co Ltd (In Liq) , as recited earlier, French J cautioned as follows in City of Wanneroo v Holmes (1989) 30 IR 362 at 379: "It is 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 - Australian Workers Union v Graziers Association (NSW) (1939) 40 CAR 494. Indeed it has been said that a tribunal interpreting an award must attribute to the words used their true meaning even if satisfied that so construed they would not carry out the intention of the award making authority - Re Health Administration Corporation; Re Public Hospital Nurses (State) Award (1985) 12 IR 122; Rogers Meat Co Pty Ltd v Howarth [1960] AR (NSW) 291; Re Government Railways and Tramways (Engineers etc) Award [1928] AR 53 at 58 (Cantor J)." In light of those comments as to the proper approach, one may see the difficulty with that urged by the appellants in that they sought to put aside the apparent, and perhaps obvious, meaning of the Dairyman classification definition, as adopted by the Chief Industrial Magistrate, because it involved a too literal construction which could not be so when one had in mind what were said to be the unacceptable and even absurd results. As senior counsel said during argument - "We accept the literal construction, we simply say that that can't be right and when one looks at a number of aids you can see that that isn't right". Given the assertion against the literal meaning, senior counsel then constructed a meaning by the use of various contextual considerations. However, we have to say, we do not think the results of the literal interpretation of the Awards to be necessarily unacceptable or absurd. Further, we are of the view that the contextual considerations relied upon are as applicable to the meaning of the award provision concerned adopted by the Chief Industrial Magistrate as they are to that contended for the appellants. The seeming dilemma and rationale for the proper approach to the construction of an industrial award was, with respect, cogently dealt with by Olney J in Norwest Beef Industries Ltd v Australian Meat Industry Employees Union of Workers (WA Branch) (1984) 12 IR 314 at 331 in this way: "If it be the case that the correct approach to the interpretation of an industrial award is to read the document itself and give to the words used their ordinary commonsense English meaning (see Jackson J in United Furniture Trades Industrial Union v Dale Manufacturing Co Pty Ltd , 30 WAIG 539, at 540) then the first task in every case will be to determine whether the words used are capable in their ordinary sense of having an unambiguous meaning. If that question is answered in the affirmative then the further consideration of the expressed or supposed intention of the award making tribunal does not fall to be considered. The majority of the Full Bench in this case took that view when they said: 'It is now trite law that when the meaning of language read in its ordinary and natural sense is obtained it is not necessary or indeed permissible to look to the intention of the parties'. In my opinion the majority of the Full Bench has correctly stated the basic principle to be applied in the interpretation of industrial awards. Any other conclusion would lead to industrial anarchy. If the contrary were the case every employer, union official and indeed each employee would need to have available to him the expressed views of the award making tribunal whether they be expressed before or after the making of the award in order to determine the intention of the tribunal whilst the award itself would be rendered meaningless." The approach there stated, with which we agree, is consistent with that applied to the construction of instruments generally, such as in statutory construction. For instance, in Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) (1981) 147 CLR 297 Mason J, as he then was, and Wilson J made the following comment at 321: "Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended." Gibbs CJ similarly referred in that case to the object in interpreting a statute as being "to see what is the intention expressed by the words used" (at 304) and then his Honour said (at 305): "However, if the language of a statutory provision is clear and unambiguous, and is consistent and harmonious with the other provisions of the enactment, and can be intelligibly applied to the subject matter with which it deals, it must be given its ordinary and grammatical meaning, even if it leads to a result that may seen inconvenient or unjust. To say this is not to insist on too literal an interpretation, or to deny that the court should seek the real intention of the legislature. The danger that lies in departing from the ordinary meaning of unambiguous provisions is that 'it may degrade into mere judicial criticism of the propriety of the acts of the Legislature', as Lord Moulton said in Vacher & Sons Ltd v London Society of Compositors ([1913] AC 107, at 130); it may lead judges to put their own ideas of justice or social policy in place of the words of the statute. On the other hand, if two constructions are open, the court will obviously prefer that which will avoid what it considers to be inconvenience or injustice. Since language, read in its context, very often proves to be ambiguous, this last mentioned rule is one that not infrequently falls to be applied." Whilst it may, we think, be undoubted that an industrial award is made to prescribe just and reasonable wages for work done, how and in what form that purpose is to be achieved is a matter for the award-making tribunal according to a value judgment of the competing merits. Where, as here, an award is made by consent of the parties the position is even clearer. Of course, if a particular provision be found in practice to be in some way unfair or inappropriate then the award is capable of being varied or re-made. Thus, the claimed unacceptable and absurd results, a description we do not adopt and prefer to categorise as allegedly unfair or inappropriate by one party, may be avoided by an award variation. But, in our view, not by a judicial construction of the Awards which would affect the meaning of the plain, ordinary meaning of the words used so as to disturb retrospectively the rights and liabilities of the parties. 18 Applying those considerations it was submitted for the TWU that the provisions of the sick leave clause in the award are unambiguous and afford a right to sick leave "in any year" of either five or eight days. There is no provision contained in the clause to provide for a pro rata. Alternatively, it was submitted that if the court was of the view that the clause was ambiguous, then it would be appropriate, consistently with the approach set out above, to favour a construction which would give a more fair and convenient result. 19 On the other side of the case, Mr Baroni, solicitor, for Linfox, emphasised the final paragraph set out above in the quotation from Bryce v Apperley to the effect that a judicial construction ought not be employed for the purpose of seeking to overcome what might appear to be an unfair or inappropriate result of that construction if the construction was fairly available upon the terms of the award. 20 Linfox also referred to the judgment of Marhsall J in the Federal Court in Australian Municipal, Administrative, Clerical and Services Union v the Treasurer (Cth) and Ors (1998) 80 IR 345 where in the context of resolving a point of construction over a federal award, his Honour expressed the view that "the overwhelming weight of authority, supports the proposition that it is impermissible to have regard to . . . . subsequent conduct". This referred to the conduct of the parties subsequent to the making of the award. 21 Accordingly, Mr Baroni submitted that the court could not have regard to the conduct of Linfox between the making of the Award in 2000 and the introduction of the computer-based accrual of sick leave in July 2002. 22 It was submitted for Linfox that the definition of "year" as a period of 12 months means that "the year becomes ripe, mature, once 12 months have elapsed and not before". It was then submitted that the effect of clause 19.2.3 was that an employee was not entitled in any year to leave in excess of five days "once a year has matured. After that year as defined it is at that point the full entitlement to sick leave becomes apparent". It was also submitted that the increase from 5 days to a maximum of 8 days suggests a "flavour of accrual" through the concept of an increase - "on one view it connotes sick leave accruing over the course of that year". 23 I note that the New South Wales Road Transport Association and Employers' First appeared to support the submission advanced on behalf of Linfox. They tendered no evidence and made no extended submissions. Australian Business Industrial, on the other hand, submitted that it had surveyed its membership on this issue and found that the membership does not have a difficulty with the approach adopted by the TWU. It was ABI's view that the construction contended for by the TWU is open on the terms of the award. 24 In the course of argument it was virtually agreed between the parties that any form of order made responsively to paragraph 1 of the application should operate so as to ensure it did not run contrary to the provisions of clause 19.2.3. Conclusions 25 In this matter I conclude that the TWU is entitled to succeed. I am unable to conclude that the sick leave clause, at least in respect of the primary point that arises in this matter, is in any way ambiguous. In my opinion, it does not entitle an employer to limit the rate of accrual of sick leave to a monthly proportion of the annual entitlement. 26 I consider the TWU's argument based on the common law position is correct, at least historically. Whether the position would remain the same if an award existed but, for example, did not prescribe sick leave and thereby no limitation on the right to be absent on the basis of the argument, is a moot point. See for instance the discussion in chapter 4, Performance of the Contract of Services and the cases there cited, in The Law of Employment, (Macken, O'Grady, Sappideen and Warburton, Fifth Edition, 2002, The Law Book Company) regarding the question whether the right to receive wages is dependent on the worker performing, or at least being ready, willing and able to perform, the contracted work. 27 In any event, here the award prescribes a right to leave in a limited amount, but without any express prescription as to the time of its availability other than the three months qualifying period, in the industry, provided by clause 19.2. In the absence of any specific provision identifying the rate of accrual of sick leave as a monthly or weekly one, the availability of sick leave must be determined on the language employed in the clause. 28 Applying the approach to interpretation propounded in Bryce v Apperley, in my view the result here is driven by the combination of the definition of "year" contained in clause 19.1 of the clause and the limitation imposed by the clause of 5 days leave (or 8 as the case may be) "in any year". The preposition "in" is employed in the phrase "in any year" in the sense (and I think it could not possibly be otherwise to the contrary) used in the second definition provided for "in" in the Macquarie Dictionary (2nd Edition) as "inclusion within, or occurrence during the course of or at the expiry of, a period of time". The examples of usage given are "in ancient times, to do a task in an hour, return in ten minutes". 29 Here "in any year" can only have the meaning as in the first example, that is "within any year". This view is commended by the inclusion in the phrase of "any", which the Linfox approach would render nugatory. If the view was that sick leave would "mature" over twelve months, it could never be available "in any year" to which it relates. 30 Similarly, the provision of an increase in the maximum allowable leave from 5 days to 8 days does not, in my opinion, convey any suggestion that the intention is that the leave should accrue on a pro-rata basis. 31 Accordingly I would construe the award, according to its terms in the manner sought by the TWU. However, that construction also accords with the industrial realities of the situation. The approach of Linfox overlooks what seems to me to be an unavoidable feature of industrial awards and that is the fact that they generally have operated over a period of years, or indeed decades, in which their basic terms have either been repeated from award to award or amplified and extended by way of new award or variation. 32 Here, the Commission's records in the form of the Industrial Gazettes, set out that history with precision. They show that, now for many years, the Award has provided sick leave of five days per annum and, more latterly, five and eight days as set out above. 33 In my experience the concept of having sick leave accrue on a pro-rata, per week basis, is novel. While express evidence was not adduced about the operation of the Award in those earlier times, I am prepared to take judicial notice, if that be necessary, that the virtually universal application of sick leave clauses, including that in the Transport Industry (State) Award, has been upon the basis that sick leave accrues due at the beginning of a relevant sick leave year, subject to any qualifying provisions. This understanding is confirmed by the circumstances in which this application arises, where Linfox has changed its practices from this conventional position to a phased - in accrual. The conventional position was not confined to the period since the last award was made in 2000, but I would infer for a period of very many years before that. 34 In coming to this conclusion I have paid some regard to what appears to me to be an inconsistency in cl.19, introduced by the variation in 1984 to the defined year for sick leave purposes. Clause 19.3 permits an employer to require an employee to declare or state in writing what paid sick leave the employee has had from any employer during the "then current year". This had a relevance in the award when the sick leave year was defined as a financial year, the reasonably obvious intention being to ensure that an employee did not obtain more sick leave in that year than that provided by the award. However, it seems to me that the transition to a year of employment for sick leave purposes removes any utility of cl.19.3. While this appeared a somewhat perplexing problem in the course of argument, I did not understand any submission to be made that this bore upon the problem at hand. It has not affected the interpretation I have placed upon the presently relevant provisions of the award. I would commend the parties to give further consideration to the operation of these provisions and their continuance or alteration as necessary in the future. 35 I conclude that the approach taken by Linfox since July 2002 is contrary to the requirements of the Award. In those circumstances, the TWU is entitled to a declaration in terms of the application with the addition of the words, to the phrase in parenthesis, "and subject to the provisions of clause 19.2.3". 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.