Industrial Relations Commission of New South Wales CITATION : Notification under s130 by Snack Brands Australia of a dispute with the National Union of Workers, NSW Branch & Anor re superannuation contributions [2000] NSWIRComm 243 NOTIFYER: Snack Brands Australia PARTIES : RESPONDENTS: National Union of Workers, NSW Branch Australian Workers' Union, NSW FILE NUMBER: IRC2996 of 2000 CORAM: Kavanagh J CATCHWORDS : Superannuation contribution withdrawn on notice - enterprise bargain struck - question of implied term of contract - crystallised custom - right of employer to change policy - must be implemented reasonably - not capriciously or unfairly - payment found to be term of present agreement - policy change to be negotiated with new enterprise bargain LEGISLATION CITED : Industrial Relations Act 1996 HEARING DATES: 11/07/2000 DATE OF JUDGMENT: 12/08/2000 Notifyer: Mr John Stanton Australian Business Lawyers Respondents: LEGAL REPRESENTATIVES: Mr Andrew Joseph National Union of Workers, NSW Branch Mr Richard Tripodi Australian Workers' Union, NSW JUDGMENT: - 9 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: KAVANAGH J Date: Fri 8 December 2000 IRC2996 of 2000 NOTIFICATION UNDER S130 BY SNACK BRANDS AUSTRALIA OF A DISPUTE WITH NATIONAL UNION OF WORKERS (NSW BRANCH) AND THE AUSTRALIAN WORKERS UNION (NSW BRANCH) RE SUPERANNUATION CONTRIBUTIONS DECISION & RECOMMENDATION 1 The employer, as the notifier, brought this matter before the Industrial Relations Commission of New South Wales in the following manner: the question, dispute or difficulty concerns the following industrial matter: (a) The amount of additional employer superannuation contributions in excess of contributions required to be paid by applicable industrial instruments; or (b) The superannuation guarantee legislation. 2 The matter was called before the Commission for hearing on 7 November 2000. By agreement between the parties, which agreement was confirmed on transcript, the parties requested the Commission to set the issue down for the hearing of evidence and noted any recommendation of the Commission would be complied with by both parties. 3 An order of the procedure was agreed to and evidence was filed by way of affidavit. Witnesses were made available for cross-examination and any associated documents were tendered. 4 In the Statement of Fact tendered, the employer, the notifier, argued: The contentious issue between the notifier on the one part and the 2 respondent unions on the other part is captured within the following question for consideration and determination by the Industrial Relations Commission of New South Wales; Is there a continuing entitlement to matching superannuation payment by the employer of 2.5%, for those employees of Snack Brands Australia:- who . are employed under the terms of the 'Snack Brands Australia Smithfield Operations and Logistics North Enterprise Bargaining Agreement January 2000;' and . commenced employment prior to 1 May 2000 and . have elected to make additional superannuation payments at a "basic contribution rate" of 2.5%. 5 The employer, Snack Brands Australia (SBA), submitted comprehensive documentation from the trustees of the superannuation fund, some correspondence related to corporate take overs of this company and information related to the way the various superannuation fund accounts operate. The employer also supplied the court with a significant number of authorities for which the court is grateful. 6 The two unions, the Australian Workers Union ("the AWU") and the National Union of Workers ("the NUW") relied upon the evidence and statements of two workers - one, Mr Peter Marsh has been employed at the Smithfield site for 18 years as a storeman and packer; the second, Mr Stephen Keelty who is a cook employed at the Smithfield site for some 15 years. 7 The Statement of Fact also puts the history of the superannuation payment to these workers into the appropriate context and it relevantly reads as follows: 1. In 1967 Arnotts Biscuits began selling a limited range of potato chips and cereal snacks. 2. In 1982 Arnotts Biscuits and Pepsi Co. Inc. agreed to a joint venture partnership creating Arnotts Snackfoods. 3. In 1986 Arnotts Snackfoods purchased Lips Chips, Red Seal, Siesta and Colvin Chip companies. 4. In 1991 Pepsi Co. acquired full ownership of that snackfood business and Fritolay Australia was established as a result of that acquisition. 5. In 1998 Pepsi Co. acquired the Smiths Snackfood Company. Due to ACC requirements Snackbrands Australia was created as a partnership between Snack Brand Industries Pty Limited (A.C.N 054 045 662) and SB Foods Pty Limited (A.C.N 079 719 716). General 6. Snack Brands Australia operates its principle manufacturing facility at Smithfield in New South Wales. At that site it employs approximately 214 production and distribution employees. The 'Snack Brands Australia Smithfield Operations and Logistics North Enterprise Bargaining Agreement January 2000' regulates the employment of those employees . History of Superannuation 7. The Arnotts Biscuits superannuation fund commenced as a defined benefit fund. With respect to employees engaged at Smithfield the member contributions were 2.5%. Employer contributions were based upon actuarial calculations of how much was required. Participants were required to have a specific length of service before joining. 8. Industry Award contributions at 3% commenced from 1 January 1987. 9. From 1 January 1987 the Arnotts fund became an accumulation fund. 10. The Pepsi Co. Australia Superannuation Fund commenced in late June 1992 following the acquisition by Pepsi Co of the Arnotts Snackfood business. At the time of that acquisition the fund was an accumulation fund. 11. The Superannuation Guarantee Charge (the "SGC") commenced on 1 January 1992 at which time the employer contribution was 4%. Production and distribution employees at Smithfield were able to elect to make either a nil or 2.5% contribution which would be matched by the employer. 12. On 1 January 1993, the SGC increased to 5%. 13. On 1 July 1995 the SGC increased to 6%. 14. On 1 July 1998 the SGC increased to 7%. 15. On 1 July 2000 the SGC increased to 8%. Superannuation Changes 16. On 10 April 2000 the employer announced changes to the superannuation scheme within a memorandum of 10 Aril 2000 to All Eligible Employees. 17. In summary the changes to the operation of the Snack Brand Australia Superannuation are: 17.1 Freedom of choice for employee to choose between funds for the payment of the employer component of the matching contribution: Snack Foods Superannuation Fund, ASSET, LUCRF, APS (Australian Public superannuation Fund); 17.2 Reduction in the amount of voluntary employee payments required to attract additional employer payments in excess of the SGC i.e. matching of 1.5% ; 17.3 Comprehensive Insurance – choice available to fund members regarding insurance cover. 17.4 Immediate vesting of additional employer payments in excess of the SGC; 17.5 Fund member investor choice – allows choice between low risk, medium risk and higher risk growth options; 17.6 Administration costs - full costs recovered from fund; 17.7 Until 31 December 2000, employer to meet the exit fee from the SBA fund where employee elects to roll over their accumulated balance to an industry fund; 17.8 Voluntary superannuation contributions may be made on a before tax basis. 8 After Dollar Sweets Holdings Limited agreed to purchase Snack Brands Australia on 14 July 1998, they made an "FLA Staff Announcement". It is the employer's recollection that this announcement was read out by senior executives to the work force. Prepared was a question and answer session. The announcement was also placed on all notice boards. Relevantly it states: . . . DSH will acquire SBA in its entirety, which will include all current FLA employees with the exception of several colleagues who have exchanged positions with the two companies. This will enable the balance of all other FLA employees to continue their employment in the new snack company after the sale the next month. It will be necessary to sign a new contract of employment when the sale to Dollar Sweets is completed. Until the completion of the sale next month, all personnel will continue to be employees of PepsiCo. Dollar Sweets has also agreed to maintain for at least one year employment terms and conditions that are equal in total to the terms and conditions currently offered by Frito-lay, inclusive of service recognition in the event of any redundancies. Accrued holiday and long service leave entitlements will also remain in place and be recognised by Dollar Sweets. Existing superannuation arrangements will continue as well. (emphasis added) The announcement went on to note that an existing incentive plan would not continue but it would be replaced by an alternative incentive plan whose terms were outlined. 9 The company and the unions, in the ordinary conduct of industrial affairs, then struck a number of enterprise bargains. The last enterprise bargain was entitled "The Snack Brands Australia Smithfield Operations and Logistics North Enterprise Bargaining Agreement January 2000." This agreement came into effect on 1 January 2000 and has a life to 31 December 2000. The agreement was between the parties present before the court and at cl 2.2 states: Any provisions of the Storemen and Packers (State) Award or the Potato Chip Makers Award not specifically addressed by this agreement shall, for the purpose of maintaining this agreement, continue to apply where appropriate. Where a matter is not referred to in this agreement or the parent award it is understood that the appropriate legislative requirements apply e.g. long service leave, maternity leave, equal employment opportunity, etc. The parties informed the court that the Storemen and Packers Award acknowledges the superannuation guarantee payment in accordance with the legislative provisions and the Potato Chip Award is silent on the matter. 10 On 10 April 2000 all employees of Snack Brands received the following communication from Mr Simon Rowell, managing director, Snack Brands Australia. This communication came from the head office of the corporation in Pymble: Superannuation Changes: Over the last year or two the company has been reviewing the superannuation scheme in conjunction with its superannuation advisers. In order to more closely align the company's superannuation contributions with common industry practice, some changes are being made to the Snack Brands Australia Superannuation Fund (SBASF) by the company as Principal Employer. These changes are: . New Fund Name: The name of the fund will be changed to the Snack Foods Superannuation Fund. This is because many of the employees are now employed by Players Biscuits or other companies within the Snack Foods Limited Group. . New Employees: For all new weekly paid employees who commence employment from 1 May 2000 the company will continue to offer membership to category A of the fund which includes a 2.5 per cent matching contribution offer. Company contributions will be capped at a maximum of 9.5 per cent. After 1 July 2000 when SGC rates go up to eight per cent the matching contribution will be 1.5 per cent and employees can choose to reduce their contribution to 1.5 per cent. Members will also be able to contribute additional amounts voluntarily from their pre-tax or post-tax salary. . Existing Fund Members: For all current members the amount the company currently contributes will be capped at this contribution level, that is if the company currently contributes 9.5 per cent (7 per cent SGC and 2.5 matching). This contribution will be capped - future SG increases will not increase the total percentage contributed. Members will be able to reduce their matching contribution if they choose, in line with the company additional contribution over SGC. . Administrative Costs: The company currently pays part of the costs of running the fund e.g. administration fees, legal fees etc. From 1 May 2000 the full cost of running the fund will be paid by the fund, and charged to members by way of a deduction from individual members fund accounts. The costs will be divided equally between all members. . Insurance: Currently, members have no choice as to death and total permanent disablement insurance which is taken out on their behalf. From 1 July 2000 members will be offered a choice of how much insurance cover they wish to take out (from set options). The charge for the insurance cover selected will be charged to the individual members fund account. Currently the company pays the cost of insurance, but it will cease to do so from 1 May 2000. . Investment Choice: The trustees of the fund have informed me they will be introducing member investment choice to the fund from 1 July 2000. This will allow members to make a choice of investment option for their member accounts. 11 The unions on behalf of the employees immediately objected to this notice as the withdrawal of a worker's entitlement. Some correspondence was entertained between the parties and it is clear the Australian Workers Union agreed that their individual members would accept, if they could elect which fund they could belong to, the charge of administrative costs against them as members of the fund they nominated. The National Union of Workers submitted they did not agree to the above proposition. Mr Noble, on behalf of the company in correspondence with one of the unions referred to the "Company's changes to its superannuation policy" and "The company's decision to cap the current level of contributions". 12 The two witnesses who gave evidence were able to confirm, as does the documentation, and as does the Arnotts Biscuits Superannuation Fund booklet, that as far back as 1981 a worker could contributed 2.5% of his basic salary to a superannuation fund and the company would make contributions equal to 2.5%. It is agreed the document also endorses that it was the company who paid the insurance cover costs and the administration costs of the Funds. This situation continued unchallenged until the Notice of 10 April 2000. 13 The unions submit this 2.5% employer contribution to the superannuation fund was a benefit to the employees which benefit has never been an issue between the parties. They submit it is an implied term of the employment contract that the company pay a 2.5% contribution to the individual's superannuation fund above the superannuation guaranteed surcharge brought in by the Government in 1987 (as adjusted). It is agreed between the parties that that is what has occurred until May 2000. 14 I find the employer, Snack Brands, by written agreement to its workers on 14 July 1998 contracted to continue to pay a 2.5% contribution when it wrote "Existing superannuation arrangements will continue as well". I reject the employer submissions that this was only a commitment for one year. 15 It is a statement of fact the employer contribution did continue and, as far as the Smithfield operation was concerned, this payment was not even put on the table as an issue by the employer when the present enterprise agreement was struck to have effect from 1 January 2000. The workers are still working under the terms of this enterprise agreement. There is no evidence that Snack Brands Australia put the issue on the table when it struck other associated enterprise agreements. All of the workers of Snack Brands Australia have been of the view, and it has certainly been a custom and practice, that they have the benefit of both a superannuation guaranteed charge benefit from 1987 as well as a 2.5% top up benefit from Snack Brands Australia to be paid into their superannuation fund if they contributed 2.5% of their salary to superannuation. 16 Any term to be "implied" in a contract is based upon the presumed or implied intention of the parties. The majority in Byrne v Australian Airlines Limited; Frew v Australian Airlines Limited (1995) 61 IR 32 (at 36) relied upon the remarks of the majority in the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1997) 180 CLR 266 (at 283) where it was said: (1) [the implication] must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract. and Deane J remarks in Hawkins v Clayton (1988) 164 CLR 539 (at 573): . . . a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties. 17 For the reasonable and effective operation of this contract of employment I find the superannuation agreement is an implied term of the contract of employment as represented through the enterprise agreement. 18 In accordance with all the relevant authorities, I find also the payment of the 2.5% top up payment embodies a "crystallised custom" for its workers (Byrne v Australian Airlines Limited; Frew v Australian Airlines Limited (1995) 61 IR 32). As to a crystallised custom the court held in Byrne (at 37-38): The existence of a custom or usage that will justify the implication of a term into a contract is a question of fact and there must be evidence of its acceptance such that it is 'reasonable to assume that the parties contracted on the basis of the custom, and that it is therefore reasonable to import such a term into the contract.' (Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance Australia Ltd (1986) 160 CLR 226 at 227) 19 I find the employees' right to the 2.5% employer contribution to their superannuation fund is twofold - it was both an implied term of the agreement between the parties and the payment embodied a "crystallised custom" in the company, and for that reason it became a term of the contract. 20 Relevantly also, I find that each time the snack food business changed hands over the long period of employment, all employees were told they would continue to be employed on the same terms and conditions and, in particular, they were informed by Snack Brands that the company's superannuation contributions would stay the same. 21 What becomes clear is in April 2000 Snack Brands Australia changed its policy. However, the employer changed its policy midway through the life of an enterprise agreement whereby "custom and practice" and by "an implied term" of the employment contract there was an agreement to pay a superannuation surcharge in accordance with the statutory rate and a 2.5% superannuation top up to its employees. 22 The effect of this announced policy change is workers will not continue to receive the benefits that had been agreed to and were received under the company's prior policy. Workers are contractually bound to comply with the company policy changes that may be introduced from time to time. There is no doubt a company has the power to change its policies and to introduce new policies from time to time. However, such a power is constrained by an implied term that a company would act with due regard to the contract of employment (see Riverwood International Pty Limited v Gary McCormick, Federal Court of Australia, Victorian Registry V718/99 decision of Mansfield, Lindgren and North JJ, 4 July 2000). 23 The evidence satisfies the court all parties making the contract can reasonably be presumed to have acquiesced in importing the terms embodying the payment of 2.5% top up superannuation into the employment contract. Snack Brands Australia must be bound by the custom and implied term and importantly had knowledge of it. I find no expressed term in the agreement against this implied term. 24 The statement of 10 April 2000 was, in my view, an announcement of a policy change by the company. However, a company cannot act capriciously nor unfairly towards an employee in making such policy changes. The power to recommend changes to the superannuation fund by an employer must, by implication, be exercised reasonably having regard to the nature of the employment contract and the entitlements which exist under it. The employees must accept that there has been a policy change by the company. However, while the statement of 10 April 2000 puts the employees on notice of a policy change, a company cannot simply withdraw the contributions from an announced date. 25 I have held this 2.5% superannuation contribution payment is an implied term of the employment contract. Therefore, when there are negotiations for the next enterprise bargain and the employment contract is being negotiated, the employees should note the employer has given notice it intends to withdraw a 2.5% contribution to employees' superannuation funds. 26 Accordingly I make the following Recommendations: (1) The company acknowledge it is part of the employment contract that it pay a 2.5% superannuation top up as well as the Superannuation Guarantee Surcharge to employees under the terms of the 1 January 2000 Enterprise Agreement. (2) In accordance with its announced policy change the company negotiate with its employees, through their associated unions, to incorporate this policy change into any future enterprise bargain or award negotiated at the time each agreement or award is due for re-negotiation. (3) Given the agreement of the company to allow the employees to elect which fund they wish to contribute to, the employees meet the administration and insurances costs for the fund in which they retain membership. 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.