CONTRACTUAL BENEFIT CLAIM

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2023 WAIRC 00205

DELIVERED : FRIDay, 14 April 2023

FILE NO. : B 78 OF 2022

Applicant

AND

The University Child Care Club Inc.

Respondent

CatchWords : Industrial Law (WA) – Denied Contractual Benefit Claim – Childcare Educator – Whether entitled to lump sum for pro rata long service leave – Long Service Leave Policy incorporated in contract – Construction of Policy – Meaning of ‘long service leave entitlement accrued’

Legislation : Industrial Relations Act 1979 (WA)

Long Service Leave Act 1958 (WA) 

Result : Application dismissed

Representation:

Applicant : Mr P Bergesio of counsel

Respondent : Ms D Hundzova and Mrs M Lucerne

Case(s) referred to in reasons:

Chevron (Tapl) Pty Ltd v Pilbara Iron Co (Services) Pty Ltd [2021] WASCA 193

Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union (AMWU) [2019] FCAFC 138; (2019) 289 IR 29

Rohan v S&DH Enterprises Pty Ltd [2023] WAIRC 00076; (2023) 103 WAIG 174

Spasojevic v Speaker of the Legislative Assembly [2023] WAIRC 00003; (2023) 103 WAIG 138

Reasons for Decision

1         This claim is about a narrow issue: whether the applicant, Ms Nivritee Ah Fong, had to complete a second period of continuous service to be entitled, on resignation, to a lump sum payment for pro rata long service.

2         The facts are agreed. In short:

(a) Ms Ah Fong worked for the University Child Care Club Inc (Unicare) as an early childhood educator before she resigned.

(b) Ms Ah Fong’s total period of continuous service with Unicare was 13 years and 264 days.

(c) Unicare has satisfied Ms Ah Fong’s entitlement to long service leave accrued for the first 10 years of her employment, by allowing her to take a portion of that long service leave, and paying out the value of the balance of the accrued leave when she resigned.

(d) Ms Ah Fong claims she is entitled to payment for pro rata long service leave for the period following her first 10 years of service, that is, the period from 20 June 2017 to 10 March 2021.

(e) In Ms Ah Fong’s final 3 years and 264 days of service (second period) she had a pro‑rata balance of 4.84 weeks or 138.77 hours of long service leave with a monetary value of $4,658.47.

3         The parties agreed that Unicare’s Long Service Leave Policy was incorporated as part of Ms Ah Fong’s employment contract. A copy of Ms Ah Fong’s written employment contract dated 6 February 2020 and a copy of the Policy were provided to the Commission as agreed documents.

4         The Policy states:

5         Unicare says that under the Policy, and therefore the employment contract, long service leave for the second period is only paid out if the ‘subsequent period’ referred to in the policy has occurred in full. That is, Ms Ah Fong only has an entitlement for the second period if she works for Unicare for another complete period of 10 years. It emphasises the use of the phrase ‘subsequent period’, submitting that this refers to a 10‑year term.

6         I observed in Spasojevic v Speaker of the Legislative Assembly [2023] WAIRC 00003; (2023) 103 WAIG 138 at [55], citing Mondelez v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union (AMWU) [2019] FCAFC 138; (2019) 289 IR 29 at [147], that paid leave entitlements generally involve two components: the entitlement to be absent from work and the entitlement to be paid in respect of such absence despite not rendering service. This case concerns a third component: the entitlement to be paid in lieu of taking leave.

7         There is no automatic entitlement to payment in lieu of leave accrued but not taken. Many common forms of paid leave provisions in employment contracts, industrial instruments and legislated minimum conditions do not include provisions for payment in lieu of taking the particular leave.

8         Ms Ah Fong’s claimed entitlement to payment in lieu of taking leave must be found in the terms of her employment contract, via the Policy.

9         Resolving this claim therefore involves determining the correct meaning of the Policy.

The nature of Commission’s jurisdiction

10      Ms Ah Fong made this claim under s 29(1)(b)(ii) (as it then was) of the Industrial Relations Act 1979 (WA) as a claim that she has been denied a contractual benefit.

11      There is no dispute that Ms Ah Fong’s claim is an industrial matter within s 29(1)(a) of the Act. It is a claim for a remedy for a denied contractual benefit within the terms of the employment of contract and sourced in the employment contract: Rohan v S&DH Enterprises Pty Ltd [2023] WAIRC 00076; (2023) 103 WAIG 174 at [70].

12      The principles that apply in the interpretation of a contract were discussed in Chevron (Tapl) Pty Ltd v Pilbara Iron Co (Services) Pty Ltd [2021] WASCA 193. At [127], the Court of Appeal said (citations omitted):

The principles applicable to the construction of written contracts established by decisions of the High Court are well known. They were outlined in Black Box Control v TerraVision and in Sino Iron Pty Ltd v Mineralogy Pty Ltd. By way of summary:

(1) The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. The starting point for the proper construction of a clause is the language used in the clause. In particular, one starts by identifying the possible meanings that the words chosen by the parties can bear.

(2) Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract.

(3) The instrument must be read as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed to have some operation.

(4) The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation. Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense. This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement. However, it must also be borne in mind that business common sense may be a topic on which minds may differ.

13      An objective approach is to be adopted. The meaning of a term of the contract is to be assessed objectively, in terms of what a reasonable person would have understood it to mean in the context of the language used, the surrounding circumstances, and the common purpose or object of the contract.

What is the meaning of the Long Service Leave Policy?

14      The part of the Policy Ms Ah Fong relies upon is the fourth dot point of paragraph 6 which says:

An employee who resigns or whose appointment is terminated for any reason shall be paid the monetary equivalent of any long service leave entitlement accrued.

15      Ms Ah Fong submits that the meaning of this sub‑paragraph is not immediately apparent or clear on its own. She says it is ambiguous, that is, that it is capable of having more than one meaning.

16      The questions, then, are:

(a) What is meant by ‘long service leave entitlement accrued?’ and

(b) Did Ms Ah Fong have an entitlement, in accordance with the meaning of ‘long service leave entitlement accrued?’

17      In gleaning the meaning of the words ‘long service leave entitlement accrued’ in the fourth dot point, the Policy must be read as a whole.

18      The structure of the Policy is part of the relevant context to ascertain the Policy’s meaning. The Policy is structured in a way that deals with separate topics as follows:

(a) The amount of long service leave that can be taken: paragraphs 1 and 2.

(b) When long service leave can be taken: paragraph 3, 4 and 5.

(c) When a payment will be made in lieu of untaken long service leave: paragraph 6.

(d) An exclusion from long service leave entitlements: paragraph 7.

19      In relation to the amount of long service leave, there is no dispute that the entitlement is 13 weeks. It is also clear from paragraphs 1 and 2 that the period of continuous service required to qualify for this entitlement is 10 years. The amount of leave, and the qualifying period are the same for the first and each subsequent period of 10 years.

20      Accordingly, the entitlement to take 13 weeks of long service leave on full pay (and pro rata for part‑time employees) under the Policy is triggered only after an employee has completed a period of 10 years’ continuous service. There is no entitlement to take long service leave before a 10‑year qualifying period of continuous service is completed.

21      When dealing with when long service leave can be taken – paragraphs 3, 4 and 5 ‑ the Policy refers to ‘long service leave accrued’ and ‘accrued entitlement’. It is clear that when the Policy uses the word ‘accrued’ in these paragraphs it is referring to an entitlement to take leave that has become due upon the completion of 10 years’ continuous service, but has not yet been received. ‘Accrued’ is used with the words ‘leave’ and ‘entitlement’ as a noun. There is no scope on a fair reading of these clauses to read ‘accrued’ as including a pro rata balance of long service leave. The leave can only be taken when the full qualifying period has been served.

22      I note that the verb ‘accrue’ is used in paragraph 4. Paragraph 4 also contains the word ‘accrual’ used in the noun sense to mean the act or process of accruing.

23      The introductory words of paragraph 6 deal with two situations. The first is where there is a ‘long service leave entitlement accrued under this clause’. The second is ‘continuous service of a lesser period that that prescribed by this clause for a long service leave entitlement’. The use of the word ‘and’ between these two scenarios makes it clear that they are distinct and different concepts.

24      Consistent with paragraphs 3, 4 and 5, paragraph 6, also distinguishes between the situation where an entitlement has ‘accrued’ in the sense of there being an entitlement to take long service leave, and situations where an entitlement has not yet crystalised or ‘accrued’.

25      In the dot pointed sub‑paragraphs of paragraph 6, four circumstances are set out in which a lump sum is payable in lieu of leave being taken. The distinction between an accrual that has become an entitlement to take leave, and a pro rata balance short of an entitlement to take leave continues in these sub‑paragraphs:

(a) The first dot point deals with retirement at or over the age of 55 or on the grounds of ill health. The second sentence of this sub‑paragraph contains an exclusion. The exclusion relates to payment ‘for pro rata leave’. It requires an employee to have completed not less than 12 months’ continuous service before the date of retirement to be entitled to a lump sum for pro rata leave. The significance is that ‘pro rata leave’ is distinguished from ‘entitlement accrued’. There is, again, specific and consistent language used to refer to the distinct concept of pro rata leave short of an accrued entitlement.

(b) The second dot point deals with an employee who does not resign but is ‘retired’ for any other cause. Again, the clause expresses an exception to the entitlement to a lump sum payment for ‘pro rata leave’ unless the employee has completed not less than 3 years’ continuous service. No exception applies where there is an accrued entitlement.

(c) The third dot point is about the situation of an employee’s death. Like the first dot point, ‘pro rata leave’ is exempt if the employee has not completed 12 months’ continuous service. No exception applies where there is an accrued entitlement.

(d) The fourth dot point concerns an employee who resigns or whose appointment is terminated for any reason. In this case the employee ‘shall be paid the monetary equivalent of any long service leave entitlement accrued’ (emphasis added). Pro rata leave is not mentioned at all.

(e) The fifth dot point is about how the amount of the payment in lieu is to be calculated. Again, it refers to, and distinguishes between, the two situations being ‘long service leave accrued’ and ‘pro rata long service leave’. Ms Ah Fong’s counsel argued that the reference to both concepts in this sub‑paragraph, and the use of the word ‘and’ between them, indicates that a lump sum is payable for both under the preceding dot points.

26      The Policy is consistent in its use of the terms ‘long service leave accrued’, ‘long service leave entitlement accrued’ and ‘accrued entitlement’. Where these terms are used, it is implicit that they exclude pro rata leave short of an entitlement to take leave.

27      Similarly, the phrase ‘pro rata long service leave’ is used consistently, to refer to accruals short of an entitlement to take leave: something that is in the process of becoming an entitlement but is not yet a due entitlement.

28      On this basis, the reference in the fourth dot point paragraph to ‘long service leave entitlement accrued’ must, consistent with the meaning of that phrase in the balance of the policy, mean an entitlement to take long service leave, or long service leave due, by virtue of having served the relevant qualifying period.

29      I do not accept Ms Ah Fong’s argument that the reference to both long service leave accrued and pro rata long service leave in the opening sentence and the fifth dot point of paragraph 6 means both situations are part of the entitlement in the fourth dot point. The construction Ms Ah Fong contends for would result in an obvious anomaly. If, as she submits, the fourth dot point includes pro rata long service leave, then an employee who resigns from their employment would be entitled to a lump sum payment in lieu regardless of their length of service. However, an employee who retires, is retired, or who dies, is excluded from a lump sum payment unless they have completed either 12 months or 3 years of continuous service. It cannot have been the intention that a more generous entitlement apply to employees who resign from their employment, compared with employees whose employment ends for reasons beyond their control. The contented for construction is not available if the Policy is read as a whole.

30      Finally, Ms Ah Fong submits that the commercial purpose of the Policy is to create an entitlement that is greater than that provided in the Long Service Leave Act 1958 (WA) for periods of service less than a full accrual. I am not convinced this is correct.

31      Ms Ah Fong did not clearly identify why I should conclude that it is a commercial purpose of the Policy to provide greater ‘in lieu’ entitlements than under the Long Service Leave Act. I can readily accept that it is a purpose of the Policy that it provides more generous entitlements in a general sense compared with the Long Service Leave Act. It clearly does that because it provides 13 weeks’ leave on ordinary pay in respect of 10 years’ continuous service compared with 8 2/3rd weeks under the Long Service leave Act. This does not necessitate a conclusion that the commercial purpose of the Policy is to provide even more generous entitlements for payments in lieu where the qualifying period for taking leave is not served.

32      In any event, the nature and historical evolution of long service leave as an employee entitlement is that it is a concept that places importance on long and continuous service. Long service leave involves ‘the concept of receiving paid leave from work as a reward for an extended period of continuous service’: Creighton B and Stewart A, Labour Law, (5th ed, 2010) at [13.128]‑[13.129].

33      The idea of an entitlement to a lump sum in lieu of long service leave regardless of the length of service prior to resignation is actually at odds with the generally understood commercial and industrial purpose of long service leave, not to mention the name the Policy gives to the leave it deals with.

Disposition and Orders

34      Accordingly, I would answer the questions:

(a) What is meant by ‘long service leave entitlement accrued?’

‘long service leave entitlement accrued’ means an entitlement to take long service leave that is due because the 10‑year qualifying period of continuous service has been met.

(b) Did Ms Ah Fong have an accrued long service leave entitlement, in accordance with the meaning of ‘long service leave entitlement accrued?’

No: Ms Ah Fong’s second period of service of 3 years and 264 days, being less than 10 years’ continuous service, was insufficient to qualify her to an entitlement to take long service leave. She did not have a long service leave entitlement accrued.

35      These conclusions mean that the applicant has not been denied an entitlement under her contract of employment.

36      I dismiss the claim.