INTERPRETATION OF THE DEPARTMENT OF JUSTICE PRISON OFFICERS' INDUSTRIAL AGREEMENT 2020 AND THE MINIMUM CONDITIONS OF EMPLOYMENT ACT 1993

WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2023 WAIRC 00909

DELIVERED : MONDAy, 20 November 2023

FILE NO. : APPL 63 OF 2023

Applicant

AND

Western Australian Prison Officers' Union of Workers

Respondent

CatchWords : Industrial Law (WA) – s 46 – Interpretation of industrial agreement – Department of Justice Prison Officers’ Industrial Agreement 2020 – Terms implied by the Minimum Conditions of Employment Act 1993 – Whether the Commission can make a declaration about terms implied by statute under s 46 – Payment errors clause ambiguous – True meaning of ‘payment errors’ –  Effect of reference to "agreed'  on operation and recovery clause – Declaration issued

Legislation : Industrial Relations Act 1979 (WA)

Industrial Relations Commissions Regulations 2005 (WA)

Industrial Relations Legislation Amendment Act 2021 (WA)

Minimum Conditions of Employment Act 1993 (WA) 

Result : Declaration issued

Representation:

Counsel:

Applicant : Mr C Arnold of counsel

Respondent : Mr C Fordham of counsel

Solicitors:

Applicant : State Solicitor’s Office

Respondent : Slater and Gordon Lawyers

Case(s) referred to in reasons:

Breen v Williams (Medical Records Access case) [1996] HCA 57; (1996) 138 ALR 259

Director General, Department of Education v United Voice WA [2013] WASCA 287; (2014) 94 WAIG 1

Fedec v The Minister for Corrective Services [2017] WAIRC 00828; (2017) 97 WAIG 1595

Lamont v Keenan [2003] WASCA 82

Marshall v Director‑General, Department of Transport [2001] HCA 37; (2001) 205 CLR 603

McNamara v Consumer Trading and Tenancy Tribunal [2005] HCA 55; (2005) 221 CLR 646

Pooley v Commissioner of Police [2008] WAIRC 00216; (2008) 88 WAIG 310

Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 104 CLR 355

Re Harrison; Ex parte Hames [2015] WASC 247

The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch v Public Transport Authority of Western Australia [2017] WAIRC 00830; (2017) 97 WAIG 1689

The Australian Rail, Tram And Bus Industry Union Of Employees, West Australian Branch v Public Transport Authority of Western Australia [2015] WAIRC 00797; (2015) 95 WAIG 1503

Western Australian Prison Officers’ Union of Workers v Minister for Corrective Services [2023] WAIRC 00773; (2023) 103 WAIG 1777

WorkPac Pty Ltd v Skene [2018] FCAFC 131; (2018) 264 FCR 536

Reasons for Decision

1         The applicant, the Minister for Corrective Services, and the respondent Western Australian Prison Officers’ Union of Workers are parties to the Department of Justice Prison Officers’ Industrial Agreement 2020.

2         Clause 36 of the Industrial Agreement contains provisions about how payment errors are to be dealt with.

3         The Minister and the Union are in dispute about the way the payment errors clause is to be applied and how it interacts with the Minimum Conditions of Employment Act 1993 (WA) (MCEA)’s requirements as to pay.

4         In this application, made under s 46 of the Industrial Relations Act 1979 (WA) for a declaration as to the true interpretation of the payment errors clause, the Minister poses three questions for the Commission’s determination:

Question 1:

Does clause 36 of the Industrial Agreement apply to overpayments which were not the result of a “payment error” of the Employer (i.e. Officer Induced Overpayments)?

Question 2:

Does clause 36.4(b) of the Industrial Agreement allow an Officer to refuse to agree to a recovery rate entirely notwithstanding that the Applicant and Officer are not ordinarily entitled to agree to a recovery rate of less than $50 per week?

Question 3:

Do sections 17C and 17D of the MCE Act require an employer to make future payments in circumstances where an employee has already received payment in excess of their legal entitlements (including as a result of past Officer Induced Overpayment)?

5         Ultimately, the purpose of the application is to gain certainty about how the employer can lawfully recover overpayments.

6         The Minister says that:

(a) When clause 36 refers to ‘payment errors’ it means errors by the employer only. Accordingly, the clause does not operate to restrict or regulate the way overpayments induced by employee conduct can be recouped.

(b) Clause 36.4(b) allows the employer to recover overpayments at a rate of $50 a week in the absence of an Officer’s express agreement to any other amount.

(c) When the Industrial Agreement’s term implied by s 17D of the MCEA refers to ‘deduct’ and ‘deductions’ it means deductions that result in an employer not paying an employee in full. If an employee has been overpaid in previous pay cycles, and a deduction is limited to the amount of an overpayment, it is not a ‘deduction’ for the purpose of s 17D.

7         The Union, on the other hand, says that:

(a) ‘Payment errors’ in clause 36 refers to all types of overpayments and underpayments without distinction based on the cause of the error.

(b) When clause 36.4(b) refers to a ‘rate agreed in writing’, it means an amount that an employee has genuinely agreed so that if an employee has not agreed any amount, there can be no recovery under clause 36.4(b).

(c)               If it is wrong about the true meaning of clause 36.4(b), then the operation of the clause is subject to the MCEA, specifically, the effect of s 17E that nullifies a term of an industrial agreement to the extent that it permits a deduction from an amount that is payable in relation to the performance of work that is unreasonable in the circumstances.

8         The Union says that the Commission cannot declare the true interpretation of a provision of the MCEA under s 46 of the Act.

9         If it is wrong about this, it says the words ‘deduct’ and ‘deduction’ in s 17D of the MCEA simply mean when an amount of money is taken away from the pay that is made by the method described in s 17C of the MCEA.

10      I must decide:

(a) Whether the Commission can make a declaration as to the true interpretation or application of provisions of the MCEA under s 46 of the Act.

(b) If yes, should the Commission make such a declaration?

(c) If yes to both (a) and (b), what is the true interpretation of s 17D of the MCEA? Specifically, what does ‘deduct from an employee’s pay’ in s 17D mean? This in turn depends on what the meaning of ‘paid in full’ in s 17C is.

(d) What is the true interpretation of the phrase ‘payment error’ as it is used in the payment errors clause?

(e) What is the true interpretation of clause 36.4(b) of the payment errors clause.

Facts giving rise to the s 46 application

11      Regulation 52 of the Industrial Relations Commissions Regulations 2005 (WA) requires that an application for interpretation of an industrial agreement include a statement of the facts giving rise to the application. The relevant facts are as follows.

12      The Industrial Agreement was registered as an industrial agreement under s 41 of the Act on 18 December 2020. It replaced the Department of Justice Prison Officers’ Industrial Agreement 2018.

13      The Industrial Agreement is described as a comprehensive agreement consolidating all relevant award terms, and is intended to replace in full the Prison Officers’ Award: clause 6.2.

14      From time to time, the employer makes overpayments to its employees, including:

a) Overpayments due to conduct of the employer;

i. e.g. where the employer mistakenly pays an employee an allowance that the employee is not entitled to and has not requested.

b) Overpayments due to conduct of both the employer and employee;

i. e.g. where an employee applies for leave that they have not yet accrued and the employer mistakenly grants that leave; or

ii. e.g. where an employee is rostered on for annual leave, but does not submit their leave application until after they have returned from leave resulting in the payment of allowances during the leave period to which the employee was not entitled.

and;

c) Overpayments induced by the conduct of the relevant employee.

i. e.g. where an employee has been refused leave, but does not attend their shifts.

15      As a Government employer, the Minister has a duty to recover those overpayments. However, that duty to recover is to be fulfilled in a manner that is consistent with the Industrial Agreement.

16      Regardless of the circumstances of the overpayment, the employer’s current approach in respect of overpayments falling outside the circumstances of clause 73.1 of the Industrial Agreement is to:

(a) inform the employee of the overpayment and their right to dispute the overpayment in accordance with clause 179 of the Industrial Agreement;

(b) for overpayments that occurred in the immediately preceding pay period, the overpayment is recovered in the current pay period and the employee is informed of the pay adjustment; and

(c) for overpayments relating to other previous pay periods, the employer consults with the employee regarding the rate of repayment and unless written agreement has been obtained, the employer does not make pay adjustments in excess of $50/week.

17      In some instances, the relevant employee may refuse to agree to recovery at any rate. In those circumstances, the employer commences making adjustments from the employee’s salary at the rate of $50/week.

Does s 46 of the Act allow the Commission to declare the true interpretation of MCEA conditions implied into industrial agreements?

18      Section 46 provides:

46. Interpretation of awards and orders by Commission

(1) At any time while an award is in force under this Act the Commission may, on the application of any employer, organisation, or association bound by the award —

(a) declare the true interpretation of the award; and

(b) where that declaration so requires, by order vary any provision of the award for the purpose of remedying any defect in, or giving fuller effect to, the provision.

(2) A declaration under this section may be made in the Commission’s reasons for decision but must be made in the form of an order if, within 7 days of the handing down of the Commission’s reasons for decision, any organisation, association, or employer bound by the award so requests.

(3) Subject to this Act, a declaration made under this section is binding on all courts and all persons with respect to the matter the subject of the declaration.

(4) Section 35 does not apply to or in relation to this section unless an order is made under subsection (1)(b) or under subsection (2).

(5) In this section award includes an order, including a General Order, made by the Commission under any provision of this Act other than this section and an industrial agreement.

19      The section empowers the Commission to declare the true interpretation of an industrial agreement on the application of any employer, organisation or association that is bound by it, while it is in force.

20      Her Honour Acting President Smith (as she then was) summarised the nature and purpose of s 46 in The Australian Rail, Tram and Bus Industry Union of Employees, West Australian Branch v Public Transport Authority of Western Australia [2017] WAIRC 00830; (2017) 97 WAIG 1689 at [100]:

From the authorities referred to above and the express provisions of s 46 and s 83 of the Act, the following principles emerge in respect of an award as defined in s 46(5):

(a) The power to interpret the true meaning of an award, pursuant to the power conferred by s 46, is to enable a determination of whether ambiguity arises and to resolve it, if it does.

(b) If a provision in question is capable in the ordinary sense of not having an ambiguous meaning, then consideration of the expressed or supposed intention of the provision does not fall to be considered under s 46.

(c) If a provision is found to be ambiguous, the Commission acting pursuant to s 46 can embark upon a fact‑finding exercise to determine the surrounding circumstances that existed when the award or industrial agreement was made. These surrounding circumstances can include ascertaining the object of the provision by:

(i) inquiring into the history of the award;

(ii) any established custom, practice or usage which led to the making of the award and any relevant established custom, usage and practice since the award was made.

(d) If ambiguity is found and after ascertaining the true meaning of the award and declaring its effect it is found the words in the provision in question are defective, in that the words do not put into effect or reflect that meaning or it is found that the words used require amendment to give fuller effect to the true meaning, the Commission is authorised to exercise arbitral power to amend the provision.

(e) The power to interpret an award or industrial agreement pursuant to s 46 of the Act is, except for the power to amend a provision in s 46(1)(b), merely declaratory and any declaration made cannot be made as an order to enforce a right.

(f) The determination of whether a particular employee has an entitlement pursuant to the provisions of an award is an enforcement matter in relation to which the Industrial Magistrate has exclusive jurisdiction to determine, pursuant to the power conferred by s 83 of the Act.

21      The minimum conditions of employment contained in the MCEA extend to and bind all employees and employers and are taken to be implied in an industrial instrument: s 5. For this purpose, a ‘minimum condition of employment’ includes ‘a requirement as to pay, other than a rate of pay’ prescribed by the MCEA: s 3.

22      It is uncontentious that the Industrial Agreement is an industrial instrument for the purpose of s 5 of the MCEA, and that ss 17C and 17D of the MCEA are requirements as to pay. The provisions of ss 17C and 17D are, therefore, terms of the Industrial Agreement implied by statute.

23      A term implied by statute gives effect to social and economic policies that the legislature thinks are necessary to protect or promote the rights of one party to that class of contract: Breen v Williams (Medical Records Access case) [1996] HCA 57; (1996) 138 ALR 259.

24      Construing the meaning of a term implied by statute involves the application of principles of statutory construction. Regard must be given to the text of the statute itself, with the primary object to construe the provision so that it is consistent with all of the statute’s language and provisions: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 104 CLR 355. Regard must also be given to the purpose and object of the text, to ascertain the intention of the legislature in making the law in question.

25      The approach and principles that apply to the task of statutory construction are not the same as the approach to construction of an industrial instrument. The relevant principles for construction of an industrial instrument were set out in Re Harrison; Ex parte Hames [2015] WASC 247 at [50] and Fedec v The Minister for Corrective Services [2017] WAIRC 00828; (2017) 97 WAIG 1595 at [21]‑[23]. The primary task is to determine the objective intention of the parties as expressed in the text of the instrument, having regard to its context. The industrial context may be relevant to construction.

26      Of course, in construing the terms of an Industrial Agreement, the Commission may be required to consider and determine the meaning of a statute, including the provisions of the MCEA, as relevant context and a step in the construction process: Western Australian Prison Officers’ Union of Workers v Minister for Corrective Services [2023] WAIRC 00773; (2023) 103 WAIG 1777 and The Australian Rail, Tram And Bus Industry Union Of Employees, West Australian Branch v Public Transport Authority of Western Australia [2015] WAIRC 00797; (2015) 95 WAIG 1503.

27      However, I do not consider s 46 is intended to enable the Commission to declare the true meaning of terms implied by statute. The following considerations lead me to this conclusion.

28      First, s 46 of the Act is directed at the Commission’s own instruments. This is made clear by subsection (5) which says:

In this section award includes an order, including a General Order, made by the Commission under any provision of this Act other than this section and an industrial agreement (emphasis added).

29      Subsection (1) also limits the Commission’s power to be exercised ‘while an award is in force under this Act’ (emphasis added).

30      There is a sound and obvious reason for the Commission to be given authority to declare the true meaning of instruments that it makes. On the other hand, there is no policy reason suggested as to why the Commission would be given authority to declare the true meaning of the MCEA, binding on all courts and all persons with respect to the matter the subject of the declaration, when the Commission neither has a hand in the MCEA, nor in enforcing it: s 7 MCEA, s 83 Act.

31      Second, the nature of the Commission’s powers in s 46 does not sit comfortably with terms implied by statute. Under s 46(1)(b), the Commission can vary any provision of an award to remedy any defect or give fuller effect to the provision. Because the Commission cannot vary terms implied by statute, this indicates that such terms are not intended to be within the scope of s 46.

32      Third, s 46(3) provides that a declaration made under the section is binding on all courts. This displaces to the common law position, which recognises that judicial decisions on the interpretation of legislation in other jurisdictions are not binding on courts that subsequently come to consider the meaning of a provision: D C Pearce and R S Geddes, Statutory Interpretation in Australia at [1.7] citing McNamara v Consumer Trading and Tenancy Tribunal [2005] HCA 55; (2005) 221 CLR 646 and Marshall v Director‑General, Department of Transport [2001] HCA 37; (2001) 205 CLR 603.

33      The Minister submitted that any declaration made in s 46 proceedings will be binding only in respect of the Industrial Agreement. In other words, the Commission would not be issuing a binding declaration in respect of the meaning of the terms implied by the MCEA more generally, either for future agreements between the same parties, or for other awards or agreements, or as stand‑alone minimum conditions of employment.

34      This submission was made as an assurance that the Commission need not be cautious about declaring the true interpretation of implied terms that apply universally in the context of matter confined to a particular agreement between particular parties. Nevertheless, there must be a clear indication in the text of s 46 that it is intended to displace the common law position, even if it is confined to matters concerning the Industrial Agreement. I see no such indication.

35      Fourth, the Commission’s powers in s 46 could be said to be in aid of the Act’s object in s 6(c) ‘to provide for the observance and enforcement of agreements and awards made for the prevention or settlement of industrial disputes’. The statutory implied terms are, by their nature, universal protective standards. They are not made for the prevention or settlement of industrial disputes. The Commission’s role in interpreting them cannot be justified by reference to the Act’s object in s 6(c).

36      The Minister’s counsel submitted that the power in s 46 to clarify the meaning of an instrument exists to assist parties to prevent or settle disagreements. He said that to constrain the power to exclude interpretation of implied terms would undermine this purpose. Counsel did not point to any particular basis for characterising s 46’s purpose in this way.

37      While the power may have a role to play in preventing or settling disputes, that is not necessarily the primary purpose of the provision. Parties may be in agreement about the meaning of a provision but seek a declaration to provide certainty. I prefer the view that the section is in aid of the object in s 6(d) ‑ the observance and enforcement of agreements and awards ‑ not primarily for the prevention and settlement of industrial disputes. The prevention and settlement of industrial disputes is achieved through conciliation and arbitration, and the making of awards and industrial agreements: s 6(b), s 6(c), s 32 and s 44.

38      Fifth, because the task of construing the statute is different to the task of construing an industrial agreement, this could create inconsistent or conflicting processes and outcomes in construing the same agreement. That is unlikely to have been parliament’s intention. Such instances might be rare in practice, but this case demonstrates that it is nevertheless possible.

39      In this case, the Industrial Agreement was made before the enactment of certain provisions of the MCEA. The Industrial Agreement was made on or before 18 November 2020. Several provisions of ‘Part 3A – Other Requirements as to pay’ of the MCEA were amended or inserted by the Industrial Relations Legislation Amendment Act 2021 (WA), which commenced on 12 February 2022. The Industrial Agreement must be construed to glean the parties’ intention at the time the agreement was made, that is, in the context of a different statutory regime about the requirements as to pay.

40      The Minister says, that the Commission must interpret an industrial agreement as a whole and cannot fulfil this requirement if it cannot determine the meaning of implied terms. Determining the meaning of the implied terms is one thing. As I have said already, I accept that the Commission may be required to, and can, determine the meaning of the implied terms, being the statutory context, as part of the construction of express terms in an industrial agreement. Having power to make a declaration as to the found meaning is a different matter.

41      The Minister says that if s 46 is construed as excluding the power to declare the true meaning of implied terms, this would have the unintended consequence of incentivising parties to apply for the interpretation of ‘adjacent’ terms, not really in dispute, in the hope that the Commission might offer some commentary on the implied terms along the way.

42      This argument does not take the Minister very far. First, whether this consequence is an undesirable one or not is a matter about which there might be different views. Second, it must compete against the possible unintended consequences of the Minister’s alternative construction of s 46, including that it could encourage applications for interpretation where enforcement proceedings are on foot or foreshadowed.

43      The consequence the Minister has referred to is ultimately not sufficiently serious to cause me to alter my view of the scope of s 46. It does not create a choice between sense and nonsense: see Lamont v Keenan [2003] WASCA 82 per Miller J at [15] citing Jordan CJ in Hall v Jones (1942) 42 SR (NSW) 203.

44      Even if the Commission has the power to declare the true meaning of the implied terms, I would decline to exercise it, for the first, second and fifth reasons stated at [28], [31] and [38] above.

Is the phrase ‘payment error’ in the payment errors clause ambiguous?

45      When s 46 is invoked, the Commission must ascertain whether the agreement is ambiguous, and if it is, resolve the ambiguity, in other words, construe the agreement. As already indicated, the principles that apply to construction are well settled. I refer to Beech J’s summary in Re Harrison; Ex parte Hames [2015] WASC 247 at [50]:

(1) the primary duty of the court in construing an instrument is to endeavour to discover the intention of the parties as embodied in the words they have used in the instrument;

(2) it is the objectively ascertained intention of the parties, as it is expressed in the instrument, that matters; not the parties’ subjective intentions. The meaning of the terms of an instrument is to be determined by what a reasonable person would have understood the terms to mean;

(3) the objectively ascertained purpose and objective of the transaction that is the subject of a commercial instrument may be taken into account in construing that instrument. This may invite attention to the genesis of the transaction, its background and context;

(4) the apparent purpose or object of the relevant transaction can be inferred from the express and implied terms of the instrument, and from any admissible evidence of surrounding circumstances;

(5) an instrument should be construed so as to avoid it making commercial nonsense or giving rise to commercial inconvenience. However, it must be borne in mind that business common sense may be a topic on which minds may differ; and

(6) an instrument should be construed 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 so as to have some operation.

46      Additionally:

The words of a clause in a written agreement are to be given the most appropriate meaning which they can legitimately bear. A court must have regard to all of the provisions of the agreement with a view to achieving harmony among them. See Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109‑110 (Gibbs J). These propositions are applicable to instruments generally, subject to any particular rules of construction which have been developed in relation to a particular kind of provision or instrument.

Director General, Department of Education v United Voice WA [2013] WASCA 287; (2014) 94 WAIG 1 per Buss J at [83].

47      Where the particular kind of instrument being construed is an industrial agreement:

The starting point for interpretation of an enterprise agreement is the ordinary meaning of the words, read as a whole and in context: City of Wanneroo v Holmes [1989] FCA 369; (1989) 30 IR 362 at 378 (French J). The interpretation “... turns on the language of the particular agreement, understood in the light of its industrial context and purpose ...”: Amcor Limited v Construction, Forestry, Mining and Energy Union [2005] HCA 10; (2005) 222 CLR 241 at [2] (Gleeson CJ and McHugh J). The words are not to be interpreted in a vacuum divorced from industrial realities (Holmes at 378); rather, industrial agreements are made for various industries in the light of the customs and working conditions of each, and they are frequently couched in terms intelligible to the parties but without the careful attention to form and draftsmanship that one expects to find in an Act of Parliament (Holmes at 378‑9, citing Geo A Bond & Co Ltd (in liq) v McKenzie [1929] AR(NSW) 498 at 503 (Street J)). To similar effect, it has been said that the framers of such documents were likely of a ‘practical bent of mind’ and may well have been more concerned with expressing an intention in a way likely to be understood in the relevant industry rather than with legal niceties and jargon, so that a purposive approach to interpretation is appropriate and a narrow or pedantic approach is misplaced: see Kucks v CSR Limited [1996] IRCA 166; (1996) 66 IR 182 at 184 (Madgwick J); Shop Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67 at [16] (Marshall, Tracey and Flick JJ); Amcor at [96] (Kirby J).

WorkPac Pty Ltd v Skene [2018] FCAFC 131; (2018) 264 FCR 536 at [197].

48      Clause 36 says:

36. Payment Errors

36.1 The parties agree that Officers should inform the Employer's Payroll Branch of any suspected payment error as soon as practicable after the error is identified.

36.2 Underpayments of the Fortnightly Annualised Rate of Pay will be corrected in the next available ad hoc payment, provided that the Officer informs the Employer's Payroll Branch of the error by the close of business on the Tuesday prior to Pay Day. Other underpayments will be corrected in the following Pay Period.

36.3 Where an Officer proves that they have incurred financial cost (such as overdraft fees, dishonoured cheque fees or dishonour fees in relation to routine deductions from the bank account into which the Officer is paid) as a direct result of an underpayment of their ordinary salary, the Employer shall reimburse the Officer those financial costs in the next Pay Period.

36.4 Where an Officer is overpaid, the Employer will provide the Officer with the written details of the overpayment and notify the Officer of their intent to recover the overpayment. The Employer is entitled to adjust subsequent payments to the Officer as follows:

(a) One‑off overpayments may be deducted by the Employer in the Pay Period immediately following the Pay Period in which the overpayment was made.

(b) Other overpayments may be deducted by the Employer after consultation with the Officer at a rate agreed in writing between the Employer and the Officer, provided that the rate at which the overpayment is recovered is not less than the rate at which it was overpaid or $50 per week, whichever is the lesser amount per Pay Period.

(c) Any amounts still outstanding as at cessation of employment may be deducted by the Employer from the Officer's termination payment.

36.5 Other arrangements regarding payroll errors may be agreed between the Employer and the Officer in exceptional circumstances.

49      The Union concedes that the term ‘payment error’ is ambiguous. I accept that it is. It is not defined in the Industrial Agreement. The Macquarie Dictionary definition of the word ‘error’ contains at least four relevant meanings with nuanced but potentially significant differences:

(a) deviation from accuracy or correctness; a mistake, as in action, speech, etc;

(b) belief in something untrue, the holding of mistaken opinions;

(c) the condition of believing what is not true; and

(d) a moral offence; wrongdoing.

50      The term ‘payment error’ only occurs in the heading to the clause, and in subclause 36.1. Subclause 36.5 refers to ‘payroll error’ and other clauses use the language of overpayment, underpayment, and error.

51      The parties concur that the use of different terminology is of no real consequence for the construction of the clause, and that the terms ‘payment error,’ ‘payroll error’ and ‘errors’ have the same meaning and are interchangeable. I agree. There is no indication in the text of the clause that the different phrases are intended to refer to different things. There is no indication that the words ‘payroll error’ or ‘error’ might bear a different meaning to ‘payment error’. The different wording likely reflects the fact that industrial agreements are not usually drafted with careful attention to form or legal technicalities.

52      The Minister contends that ‘payment error’ means an error by the employer in paying an employee, or ‘a situation where the employee is paid an amount other than the amount to which they are entitled due to an error of the [employer]’ (emphasis added).

53      It says this qualification of the words is supported by:

(a) The fact that clause 73.1 of the Industrial Agreement provides a different mechanism for dealing with overpayments, indicating an intention to delineate between overpayments that arise due to the employer’s error and overpayments that are not due to the employer’s error.

(b) Its construction achieves an appropriate balance between the competing considerations behind the payment errors clause, namely:

• That an employee should not unfairly bear the burden of a payment error;

• That a government employer has a duty to recover overpayments;

• Correction of overpayments and underpayments should occur in a commercially sensible manner; and

• An employee should not be able to take advantage of clause 36 where the employee has induced an overpayment.

54      It is the case that the Industrial Agreement distinguishes between different types of payment errors, and how to fix those errors. However, this does not advance the Minister’s construction. Rather, as the Union says, this fact is against the Minister’s construction, which adds further distinctions not made by the text itself.

55      Clause 36 itself distinguishes between different types of payment errors. It distinguishes between overpayments and underpayments.

56      Underpayments are further broken down into underpayment of the ‘Fortnightly Annualised Rate of Pay’ and ‘Other underpayments’. Underpayments of the ‘Fortnightly Annualised Rate of Pay’ must be corrected in the next available ad hoc payment. Other underpayments must be corrected in the following pay period. Both kinds of underpayments must be corrected promptly.

57      Overpayments are also broken down into two types of overpayments: one‑off overpayments, and other overpayments. Correcting one‑off overpayments can be done in a single pay period immediately following the pay period in which the overpayment was made. Other overpayments can be corrected in accordance with clause 36.4(b). Both kinds of overpayments can be recovered from an officer’s termination pay on termination of employment.

58      Within the Industrial Agreement there are further express provisions enabling repayment of amounts paid to officers.

59      Clause 57.12 provides that the employer may provide removal assistance to an officer in an amount exceeding the entitlement under the Industrial Agreement. The clause also says:

The Employer may require the Officer to repay such additional removal assistance on a pro rata basis where the Officer elects to leave the position on a permanent basis within 12 months. This repayment can be deducted from any monies due to the Officer.

60      Clause 73, headed ‘Application for Personal Leave,’ requires that any application for personal leave be lodged in a prescribed manner and at a particular time. It then says:

…The Officer’s pay will be adjusted accordingly if the application for personal leave is not lodged within this period.

61      The structure of the Industrial Agreement, and its inclusion of defined categories of payment errors, indicates that those categories are exhaustive. It cannot have been intended that there be further distinctions or further categories that are not expressly dealt with.

62      Nor am I persuaded that the Minister’s construction is the only construction which achieves a commercially sensible balance between the competing considerations in dealing with underpayments. The scheme provided for by clause 36 achieves the commercially sensible result without the need to carve out employee‑induced underpayments.

63      This last observation rests on my conclusion as to the construction of clause 36.4(b), as discussed below. If I am wrong about the correct construction of clause 36.4(b), then the commercial sensibility of clause 36 is somewhat diminished.

64      A further factor against the Minister’s construction is that it would create a gap in dealing with the recovery of underpayments. It would mean that the Industrial Agreement provided no regulation about how to recover underpayments which were not the result of error on the employer’s part. No reason was advanced as to why the parties would have intended such a result. The Industrial Agreement is expressed to be ‘a comprehensive agreement’. It was made under s 41 of the Act, the purpose of which is to prevent or resolve disputes, disagreements or questions relating to industrial matters: Pooley v Commissioner of Police [2008] WAIRC 00216; (2008) 88 WAIG 310 at [49] and [57]. This industrial and legislative context does not comfortably permit a conclusion that the parties intended to leave unfenced some part of the ‘payment errors’ field.

65      The Minister’s contended for meaning incorporates the ordinary and natural meaning of ‘payment error’ and adds to it a limitation. These words of limitation stretch beyond what the words the parties chose to use can properly bear.

66      Finally, the Minister’s contended for meaning is itself ambiguous. It appears to be an attempt to create a causative link between the conduct of the employer and the payment error. However, what is meant by the words ‘by the employer’ or ‘due to an error by the employer’ is notoriously both metaphysical and contestable. Is this invoking a ‘but for’ test of causation? A material contribution test? Does it require an element of culpability? What if the cause cannot be easily determined or determined at all? Exactly what relationship is required before it can be concluded that an overpayment is caused by the employer?

67      My answer to the question posed by the Minister:

Does cl 36 of the Industrial Agreement apply to overpayments which were not the result of a "payment error" of the Employer (i.e. Officer Induced Overpayments)?

is ‘yes’.

What is the meaning of clause 36.4(b)?

68      The Union took aim at the Question 2 posed in the application, as set out in paragraph [4] above, saying it is unsuitable for resolving the dispute about meaning. It notes that clause 36 must give way to the requirements of the MCEA, including s 17E’s requirement that the payment errors clause not permit a deduction that is unreasonable in the circumstances. Accordingly, the Commission cannot answer whether an employee has a right to refuse to agree a particular rate of recovery by reference only to the Industrial Agreement.

69      I agree that Question 2 is not able to be answered by resolving the ambiguity in clause 36.4(b). The ambiguity can be resolved, without supplying a yes or no answer to Question 2. The real question concerns the effect of the references to “a rate agreed” and “the rate at which it was overpaid or $50 per week” in clause 36.4(b).

70      I am satisfied that subclause 36.4(b) contains ambiguity. The reference in the clause to a ‘may be deducted” could be understood to mean that there is only one possible amount and timing of recovery of overpayments, that is, an amount and timing that is agreed in writing. Alternatively, the rate agreed could be an alternative quantum of recovery to a default quantum of ‘the rate at which it was overpaid or $50 per week, whichever is the lesser amount’. There is a third and fourth alternative, which is that the word ‘rate’ is a reference to an amount only or timing only, although neither party advanced such a construction.

71      The Minister contended that the second of these possible constructions is the correct one.

72      The Union was somewhat equivocal. The Union’s counsel conceded during the hearing of this matter that there was some contextual support for the Minister’s contended for construction, but also submitted that there is linguistic support in the use of the word ‘agreed’ for the conclusion that there must be a ‘shared view with the employer as to the rate of recovery, failing which, the power to recover a payment error under clause 36.4(b) is not enlivened’.

73      The Union’s point about the meaning of the word ‘agreed’ fails to tackle the true issue. It is uncontroversial that to agree requires a meeting of minds about a subject. The contentious issue is whether such an agreement is the only mechanism for recovery or whether it is an optional alternative mechanism. It does not follow from the ordinary and natural meaning of the word ‘agreed’ that no mechanisms other than agreement are provided for in subclause 36.4(b).

74      The Union’s counsel also submitted that at a practical level, whatever construction is adopted was not of great importance, because the MCEA has the effect that the term of the Industrial Agreement has no effect to the extent that it permits the employer to make a deduction from an amount that is payable to an employee in relation to the performance of work if the deduction is unreasonable in the circumstances: s 17E(1)(b). This means that regardless of the ‘floor’ amount referred to in clause 36.4(b), the employer must not deduct that amount if it is unreasonable to do so in the individual circumstances. The lack of agreement from an employee may be relevant in assessing reasonableness.

75      In answer to this, what the terms of an industrial agreement provide about when and how an employer can recover overpayments will likely also be a factor in assessing reasonableness for the purpose of s 17E of the MCEA, if that section applies.

76      By way of relevant context, the Union drew the Commission’s attention to clause 28 of the Prison Officers Award. It submitted that clause 36.4 appears to be modelled on clauses 28.4 to 28.7 of the Award. Clause 28 says:

28. ‑ PAYROLL ERRORS

28.1 The Employer shall pay an Officer his or her full normal fortnightly pay no later than the close of business on each payday and for all overtime worked no later than the pay period following that within which the overtime is worked.

28.2 Where an Officer, after consulting his or her on‑line payslip, advises the Human Resources Directorate by the close of business on the Monday prior to the payday that any proportion of his or her normal base wage is not going to be paid on the payday to which that payslip relates the underpayment will be corrected so as to reach the Officer’s bank account via the next available ad‑hoc payment.

28.3 Ad‑hoc payments will not be used to back pay payments such as higher duties or other allowances or salary increments; these will be paid in the next available pay.

28.4 Where an Officer is paid for work not subsequently performed or is overpaid in any other manner, the Employer is entitled to make adjustment to the subsequent wages of the Officer in accordance with the formulas below. The Employer will notify the Officer of its intention to recoup the overpayment and consult with the Officer as to the appropriate recovery rate.

28.5 One‑off overpayments may be recovered by the Employer in the pay period immediately following the pay period in which the overpayment was made, or in the period immediately following the pay period in which it was discovered that overpayment had occurred.

28.6 Cumulative overpayments may be recovered by the Employer at a rate agreed in writing between the Employer and Officer, provided that the rate at which the overpayment is recovered is not less than the rate at which it was overpaid or $50.00 per week, whichever is the lesser amount per pay period.

28.7 Officers who have overpayments outstanding or who are required to repay monies owing to the Department shall repay any outstanding amounts prior to cessation of employment. Failing this the Department may deduct all monies owing from the final termination payment to the Officer.

28.8 In exceptional circumstances, other arrangements regarding underpayments and overpayments may be agreed between the Employer and the Officer.

28.9 The Employer shall pay an Officer all allowances provided in this Award except property, transfer and removal allowances no later than the pay period after the claim for the allowance made by the Officer is received at the Prison administration.

28.10 The Employer shall pay an Officer all property, transfer and removal allowances provided in this Award within one month of the claim for the allowance lodged by the Officer being received at the Prison administration.

77      The only relevant difference in wording between clause 28.6 of the Award and clause 36.4(b) of the Industrial Agreement is the Award’s mention of ‘cumulative’ overpayments. I do not consider this is significant for the present construction exercise. The omission of this word supports the view that clause 36 was intended to exhaustively define the categories of overpayments the clause deals with. It delineates the difference in treatment between one‑off overpayments and overpayments that are not ‘one‑off’.

78      As an aside, I note that, unlike clause 28.5 of the Award, clause 36 of the Industrial Agreement does not appear to provide a mechanism for recovery of one‑off overpayments that are not discovered within the pay period during which the overpayment was made, except in accordance with clause 36.4(c) or clause 36.5.

79      The word ‘rate’ is capable of different meanings. The Macquarie Dictionary gives it the following relevant definitions:

1. a certain quantity or amount of one thing considered in relation to a unit of another thing and used as a standard or measure: at the rate of 60 kilometres an hour.

2. a fixed charge per unit quantity: a rate of 10 cents in the dollar.

3. the amount of a charge or payment with reference to some basis of calculation: the rate of interest.

4. price: to cut rates.

5. degree of speed, of travelling, working, etc.: to work at a rapid rate.

…

80      The parties have not clearly indicated by their submissions which meaning they have given to the word ‘rate’.

81      There is no indication from the text that the word ‘rate’ means degree of speed only. The closing words of the clause are ‘per Pay Period’. ‘Pay Period’ is defined in clause 7 as meaning a 14‑day period starting on a Friday and ending on a Thursday. The clause therefore deals with the degree of speed, and there is no need for a methodology to determine speed or timing.

82      There are some indications in the text that the word ‘rate’ means an amount relative to speed and timing:

(a) The amount referred to, $50, is followed by the words ‘per week’.

(b) Where the word ‘rate’ appears for the third time ‑ ‘the rate at which it was overpaid’ ‑ it more naturally invokes the relative meaning in the context of an overpayment that occurred over multiple Pay Periods.

83      There are also indications in the text that the word ‘rate’ is intended to refer to the amount of each repayment, not its timing, that is, the second Macquarie definition: a fixed amount per Pay Period. This is indicated because:

(a) The words ‘not less than’ before ‘the rate’ can be applied to an amount, but not to an amount considered in relation to speed or timing. The same can be said about the use of the word ‘lesser’.

(b) The closing words of the clause: ‘per Pay Period’, mean that speed and timing are specified at the end of the subclause, and there is no need for a methodology to determine speed and timing.

(c) The structure of the clause also shows that speed and timing are prescribed, and need not be determined except by reference to the express terms of the clause. The clause contains several points of reference for determining the point in time when recovery can occur:

(i) Clause 36.1 ‑ ‘as soon as practicable after the error is identified’.

(ii) Clause 36.2 ‑ ‘in the next available ad hoc payment’ and ‘the following Pay Period’.

(iii) Clause 36.3 ‑ in ‘the next Pay Period’.

(iv) Clause 36.4 ‑ subsequent to the provision of written details of the overpayment.

(v) Clause 36.4(a) ‑ the Pay Period immediately following the Pay Period in which the overpayment was made.

(vi) Clause 36.4 (b) ‑ after consultation with the officer.

(vii) Clause 36.4(c) ‑ termination payment.

84      The textual indications for the latter construction are stronger. The clause deals comprehensively with the timing of the steps to be taken in rectifying errors. This indicates that the parties’ intention was to ensure payment errors were rectified in a timely way. There is no question that ultimately, the parties intended for clause 36 to operate so that the error be rectified in the full amount.

85      If ‘rate’ is a reference to amount only, this leaves subclause 36.4(b) with only one purpose: to provide a method for determining the amount which the employer may deduct per Pay Period.

86      It is, then, also implicit that an amount may be deducted per Pay Period after consultation with the Officer referred to in clause 36.4(b) has occurred.

87      This, in turn, is an indication that the parties intended clause 36.4(b) to provide a methodology for fixing an amount of money. It was not intended that the clause contain a process that might come to nothing, or which would not enable an amount to be deducted per Pay Period.

88      The inclusion in the subclause of a requirement to consult with the employee is also relevant to the intended operation of the clause. If the subclause was intended to operate so that the employer can only recover underpayments if agreement is reached, then there is no need for a requirement to consult. Agreement could be achieved with or without consultation. It would be in the employer’s interests to do whatever it takes to achieve an agreement, and consultation need not be prescribed. The reason for including a requirement to consult is to ensure the opportunity to reach agreement is created, and to import some element of fairness to the employee, in circumstances where the employer has a right of recovery at a fixed rate in the absence of agreement.

89      I agree with the Minister’s submissions that in order for the clause to operate in a commercially sensible way, it is necessary to construe reference to “may be deducted” as establishing the Officer’s written agreement as an optional or alternative quantum of recovery to the default quantum. The Union’s construction means that an employee could refuse to agree on any amount, and therefore, there would be no timely mechanism for correcting the payment error. The alternative construction is contrary to the evident purpose of clause 36. It effectively renders the subclause inoperative, and is therefore inconsistent with the principle that an industrial agreement should be construed to give its terms effect.

90      While I am not inclined to answer the precise question posed by the Minister in his application, I would declare that on a true interpretation of subclause 36.4(b), it is not a precondition to deduction of overpayments that there be a rate agreed in writing between the Employer and the Officer.

Disposition and Orders

91      I have, in the course of these reasons, answered Question 1 affirmatively.

92      Clause 36.4(b) is ambiguous. However, I decline to answer Question 2, on the basis that it cannot be answered by reference to the correct construction of the Industrial Agreement on its own, and in any event an answer to the question does not resolve the ambiguity in clause 36.4(b). I propose instead to issue a declaration in the terms set out in paragraph [90] above.

93      I decline to answer Question 3 or to declare the true interpretation of s 17C and s 17D of the MCEA on the basis that the Commission lacks the power under s 46 of the Act to do so.