Ordinary time meaning; a history of the meaning

Many employee entitlements are dependent upon “ordinary time earnings”. But what does this expression mean?

Extract from

 

“Under the Agreement an employee’s rostered ordinary hours may routinely be worked across either or both of Span 1 and Span 2. Therefore, an employee may regularly be entitled to payment that includes the cl 6.1.2 ordinary hourly rate and the cl 6.1.3 hourly rate plus penalty. In my view, as a matter of objective common usage, the word ‘earnings’ may be construed more broadly than ‘ordinary hourly rate of pay’ such that it includes all pay for rostered hours, including cl 6.1.3 penalties. In determining whether such a construction is justified, it must be recognised that the meaning of expressions such as ‘ordinary hours of work’ has been considered by the courts in a number of different contexts, and those authorities provide some guidance in resolving these questions.

100    It can be accepted, as the Association submitted, that industrial law has long recognised a distinction between ordinary hours of work and overtime. As Allsop CJ observed in Bluescope Steel (AIS) Pty Ltd v Australian Workers Union [2019] FCAFC 84; (2019) 270 FCR 359:

[38]    The context is the payment of salaries and wages in the workplace. In that context, the word ‘ordinary’ and the phrase ‘ordinary hours’ have assumed different meanings depending on context and circumstance. There are circumstances and contexts where the word and phrase can be seen to refer to regular, normal, customary or usual hours; and there are circumstances or contexts where the word and phrase can be seen to refer to the hours of work referred to in applicable industrial instruments as standard hours to be paid at ordinary rates, as opposed to additional hours (even if required, usual, regular, normal or customary) and paid at a special or higher rate. As such, the word and phrase can be seen to reflect the long-recognised distinction between ordinary hours of work and overtime: cf Thompson v Roche Bros Pty Ltd [2004] WASCA 110 at [31].

[39]    The notion of standard or ordinary working hours has long had a place in the industrial relations landscape of Australia. The standard working week was once 48 hours (Australian Builders’ Labourers’ Federation v Archer (1913) 7 CAR 210); reduced to 44 hours during the 1920s (Amalgamated Engineering Union v J Alderdice & Company Pty Ltd (1927) 24 CAR 755 (the 44 Hour Week Case)); to 40 hours after the War (Standard Hours Inquiry (1947) 59 CAR 581); and to 38 hours in 1983 (National Wage Case (1983) 4 IR 429). The standard of 38 hours was not departed from by the Australian Industrial Relations Commission in 2002 (Re Working Hours Case July 2002 (2002) 114 IR 390). The standard of 38 hours has not been departed from in the award modernisation process. The notion of ‘ordinary hours of work’ remains a working integer of the modern award system: s 147 of the Fair Work Act.

101    Whilst bearing in mind that the present issue is not one of statutory construction, in order to understand the meaning of ‘ordinary time earnings’, it is instructive to recall that it is defined in cl 5.4 of the Agreement and that the introduction of cl 5.4 and its corresponding clauses in the industrial agreements to which the parties referred, being initially in the Target Australia Pty Ltd Retail Agreement 1997 and up to and including the Predecessor Agreements, followed chronologically after the enactment of the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act).

102    The history and interpretation of the phrase ‘ordinary time earnings’ as used in the SGA Act was addressed in detail by the Full Court in Bluescope. The relevant provision is s 6 of the SGA Act, which defined ‘ordinary time earnings’:

(1)    In this Act, unless the contrary intention appears:

‘ordinary time earnings’, in relation to an employee, means:

(a)    the total of:

(i)    earnings in respect of ordinary hours of work other than earnings consisting of a lump sum payment of any of the following kinds made to the employee on the termination of his or her employment:

(A)    a payment in lieu of unused sick leave;

(B)    an unused annual leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997; and

(ii)    earnings consisting of over-award payments, shift-loading or commission; or

(b)    if the total ascertained in accordance with paragraph (a) would be greater than the maximum contribution base for the quarter – the maximum contribution base.

103    Relevantly, it can be seen that the definition includes earnings in respect of ‘ordinary hours of work’ and earnings consisting of over-award payments and shift-loading.

104    Having considered the text and context of the provision, including the notion of ‘ordinary hours’ (at [33]-[42]), and having noted the purpose of the legislation (at [43]), Allsop CJ considered the enactment history. In that context his Honour said that:

[44]    … the enactment history assists in understanding ‘ordinary time earnings’ as earnings referable to standard hours at ordinary rates of pay. It is not just the number of hours, but also their character as paid at an ordinary rate.

105    His Honour continued:

[54]    The definition of ‘ordinary time earnings’, including the expression ‘earnings in respect of ordinary hours of work’ was introduced in 1992, not long after the High Court decision in Catlow v Accident Compensation Commission (1989) 167 CLR 543 in which the majority of the Court considered that the phrase ‘ordinary time rate of pay’ meant ‘ordinary time rate of pay for the worker’s standard or ordinary hours per week as fixed by award, agreement or contract’: 167 CLR at 561. The construction of those cognate words by the High Court in a cognate industrial field is of some assistance in concluding that the legislature was intending to adopt language with a similar effect: see Ex parte Campbell; Re Cathcart (1870) LR 5 Ch App 703 at 706: …

[56]    The text, context, purpose and enactment history do not direct one to a meaning constituted solely by hours (factually) usually worked. They tend to a meaning that provides for an objective standard that aids in simplicity and lack of complexity. The use, from 1992, of the relevant phraseology in a context of industrial awards and instruments; the well-known conception contained within industrial awards and instruments of standards hours at ordinary rates of pay, and of overtime; the need for the phraseology to be practical, general and flexible to pick up all circumstances of employment; and the need for the task set for the employer to administer and the ATO to audit, quarter by quarter, individual by individual, to be as simple or non-complex as possible all direct one to a meaning that reflects those considerations. The meaning that best reflects these considerations and the text, context, purpose and history of the provision is earnings in respects of ordinary or standard hours of work at ordinary rates of pay as provided for in a relevant industrial instrument, or contract of employment, but if such does not exist (and there is no distinction between ordinary or standard hours and other hours by reference to rates of pay) earnings in respect of the hours that the employee has agreed to work or, if different, the hours usually or ordinarily worked.

[57]    This meaning adopts as central (to the extent that it is present) the distinction long familiar in the industrial and employment context, and widely understood, between earnings for ordinary time and earnings for an additional or greater number of hours beyond ordinary or standard hours. If in a particular context such distinction does not exist in the remuneration for the labour provided, the required comprehensiveness and flexibility of the meaning will fix upon the hours agreed to be worked, or the hours normally worked if different. This is not to give a variable meaning to the expression, it is to recognise that the context and particular circumstances will provide by way of factual application, the answer to the reach of the phrase which has a simple meaning by reference to real life.

[76]    It can be accepted that if the relevant distinction is not made, in the award or industrial instrument or contract of employment, between, on the one hand, standard or ordinary hours and ordinary rates of pay, and on the other, additional hours at higher rates of pay, then the ordinary hours will be the hours agreed to be worked, or the usual or normal hours worked, if they be different.

106    It is appropriate to refer briefly to some of the authorities addressed in detail by Allsop CJ in reaching this conclusion, a conclusion with which Rangiah J agreed (at [358]) and with which Collier J (writing separately) also concurred (at [297]-[314]).

107    Catlow v Accident Compensation Commission (1989) 167 CLR 543, delivered three years before the SGA Act regime was introduced, was concerned with whether, when a standard number of ordinary working hours has been fixed for a worker’s employment, their ‘normal number of hours per week’ for the purpose of the Accident Compensation Act 1985 (Vic) are those standard hours or the number of hours usually worked.

108    Catlow was decided after the previous High Court decision in Kezich v Leighton Contractors Pty Ltd (1974) 131 CLR 362, where Gibbs J at 365 held that the ‘ordinary hours he would have worked’ meant, in the statutory context of workers compensation, the hours the employee usually worked, such that ‘ordinary’ meant ‘regular, normal, customary, usual’.

109    The Court in Catlow considered the context of the legislation in Kezich and Catlow to be different, acknowledging that there may be two different ways of understanding words such as ‘usual’ or ‘ordinary’. In Catlow, it was held that unless the context otherwise requires, ‘ordinary time rate of pay’ means the rate of pay for the standard or ordinary hours of work as fixed by contract or agreement, in contrast to the overtime or penalty rates of pay for work other than those standard or ordinary hours.

110    Further examples confirm the approach and principles discussed in Catlow: Scott v Sun Alliance Australia Ltd (1993) 178 CLR 1 at 5-6 (following Catlow and indicating that if there is no ordinary time rate of pay or a formula for pay with no temporal element, it might be that compensation is payable by reference to average weekly earnings); and Quest Personnel Temping Pty Ltd v Commissioner of Taxation [2002] FCA 85; (2002) 116 FCR 338 at [19]-[20] (Gray J) (an example where only minimum hours were set and there was no pay differential for additional hours, such that reference to the actual hours worked was appropriate).

111    The Agreement in this case provides a mechanism for assessing ordinary hours and also provides a mechanism for assessing an ordinary rate. Therefore, assuming for argument’s sake that a Bluescope analysis is undertaken, the text of the Agreement supports an interpretation that ‘ordinary hours of work’ means the employee’s agreed ordinary hours (that is, the number of hours determined under cl 4.1.1 and 4.2.1) at the ordinary rate (calculated by reference relevantly to cl 4.1.3, cl 4.2.3 and cl 5.1).

112    Further, it is apparent from Bluescope that ‘ordinary time earnings’ for the purpose of s 6 is not limited to ‘earnings in respect of ordinary hours of work’, but is broader. Section 6(1)(a)(ii) operates to include within the term ‘ordinary time earnings’ those earnings consisting of over award payments, shift loading and commissions (but not overtime). Indeed, if ‘earnings in respect of ordinary hours of work’ included the particular shift allowances or penalties for hours actually worked, there would be no need to include s 6(1)(a)(ii) at all (as explained by Collier J at [302]).

113    This consideration of Bluescope, indicates that the expression ‘ordinary time earnings’ as defined in the SGA Act is consistent with the inclusive definition of ‘ordinary time earnings’ in cl 5.4.2 of the Agreement.

114    That meaning of ‘ordinary time earnings’ to recap, is:

‘Ordinary time earnings’ shall include the classification rate; any over-award payment; casual loadings; penalty rates; shift loadings and work related allowances that form part of the weekly rate of pay (for example, supervisory allowances).

‘Ordinary time earnings’ shall not include overtime; payment made to reimburse expenses (for example meal allowance or laundry allowance) or disability allowances.

115    It can be seen the definition of ‘ordinary time earnings’ in cl 5.4.2 includes the matters covered by s 6(1)(a) of the SGA Act as explained in Bluescope: that is, the ordinary weekly rate of pay or ‘classification’ rate plus penalty rates and shift loadings. It also includes amounts that by reason of cl 5.1 of the Agreement become part of the weekly rate of pay in accordance with the classification payment principles (for example, a ‘supervisor’s rate of pay’). It also expressly does not include payments for overtime and allowances, consistent with the scope of s 6(1)(a) as explained in Bluescope.

116    None of this necessarily determines how the expression ‘ordinary time earnings’ is to be understood in the Agreement other than where it is used in cl 5.4.2, such as in cl 7.2.10. However, I consider it is significant that:

(a)    the issue as to ‘standard’ or ‘actual’ hours was clearly identified by authorities such as Catlow prior to the enactment of the SGA Act in 1992 and well prior to the Agreement;

(b)    this issue was identified prior to the introduction of those predecessor Target industrial agreements referred to by the parties in the joint statement of agreed facts;

(c)    as to those agreements, the use of the phrase ‘ordinary time earnings’ with respect to annual leave entitlements first appears in the Target Australia Pty Ltd Retail Agreement 1997, so after the introduction of the SGA Act;

(d)    that particular phrase was utilised in relation to annual leave entitlements, as against any number of other phrases used elsewhere in the Agreement that might have been adopted to reflect a narrower scope, such as ‘ordinary rates of pay’; and

(e)    one of the earlier awards (Target Australia Pty Ltd Award 2002) does not refer to payment of ‘ordinary time earnings’ in the context of annual leave, but instead refers to payment of ‘the amount of wages they would have received’ – and ‘wages’ had historically been interpreted broadly, as discussed below.

117    The fact that the expression ‘ordinary time earnings’ is defined within the Agreement is important. The Agreement does not have a definitions section or dictionary, and it is not surprising that some terms are defined within the body of its parts. Nothing in cl 5.4 expressly limits the operation of the definition to cl 5.4.2. It sits within the part of the Agreement that deals with ‘Wages & Related Matters’ and, apart from one occasion, all other uses of that phrase appear after the definition. Nothing in the organisation of the terms of the Agreement therefore appears to confine its application to cl 5.4.2.

118    The provenance of the expression ‘ordinary time earnings’ in provisions relating to superannuation may be accepted: so much is apparent from its use in s 6 of the SGA Act, the Coles Myer Occupational Superannuation Award 1992 (extracts in the Schedule) and the fact that predecessor agreements expressly referred to the SGA Act: see the extracts from the Target Australia Pty Ltd Award 1994, the Target Australia Pty Ltd Retail Agreement 1997 and the Target Australia Pty Ltd Award 2002, as set out in the Schedule. However, the drafters have also used that expression elsewhere in the Agreement and in other clauses related to leave, and not only with respect to superannuation.

119    It may be accepted that although consistency in the use of terminology throughout a contract or agreement aids in interpretation, words may have a different meaning depending upon where they appear in a document: Shop Distributive and Allied Employees’ Association v Woolworths Limited [2006] FCA 616; (2006) 151 FCR 513 at [26] (Gray ACJ). Any presumption as to consistent meaning might be displaced by context.

120    I also note for completeness that there is one example among the Predecessor Agreements where the drafters have purported to confine the operation of the definition of ‘ordinary time earnings’ to the clause dealing with superannuation: Target Country North Queensland Retail Agreement 2006 (included in the Schedule). That drafting is not seen in any of the other awards or agreements, and no explanation was offered as to why its terms differed.

121    However, recalling that the Agreement is to be understood by reference to a ‘practical bent of mind’, an examination of the use of the expression ‘ordinary time earnings’ elsewhere in the Agreement does not direct a conclusion that it should have any different meaning to that in cl 5.4.2, nor any conclusion that it must be understood narrowly.

122    In each of cl 7.3.6 (personal or carer’s leave), cl 7.3.11 (paid carer’s leave) and cl 7.6.8 (compassionate leave), the Agreement provides that an employee is to be paid ‘at the team members’ ordinary time earnings for the hours normally rostered to work, excluding any penalties’. It is to be recalled that an employee might normally be rostered during Span 1 or Span 2 (with its penalties) or both. The fact that penalties are expressly excluded for such hours normally rostered is consistent with an understanding that such penalties are otherwise included in ‘ordinary time earnings’.

123    In cl 7.13.8 (when a store does not open on a public holiday) an employee otherwise rostered to work on the public holiday shall be entitled to payment for the day ‘based upon their ordinary time earnings (including penalties as appropriate)’. Again, this use of the expression is consistent with the cl 5.4.2 definition. The words might perhaps be unnecessary, but they are not inconsistent. If the cl 6.1.3 penalties were an additional entitlement, one would have expected the drafter to have said ‘ordinary time earnings and penalties as appropriate’.

124    The expression is used elsewhere without relevant additional words: cl 4.6.5 (withholding of termination payments); cl 7.2.17 (cashing out annual leave); cl 7.9.2 (defence force service leave); cl 7.11.1 (natural disaster leave); cl 17.13.18(e) (Easter Sunday pay where rostered but store closed); and cl 8.1.2 (transport home). Its use in the context of those entitlements does not provide any particular assistance either way as to the parties’ divergent contentions. But nor do they tell against the aggregate interpretation propounded by the Association. No relevant inconsistency arises.

125    It is also appropriate to consider the use of the term ‘wages’ in the Agreement. This follows in particular from the fact that cl 7.2.11 of the leave provision, which immediately follows the central cl 7.2.10, refers not to payment of ‘ordinary time earnings’ but to payment of ‘wages’. The question arises as to how those clauses are to be read consistently and if that exercise informs the construction question. ‘Wages’ is not defined in the Agreement. Target accepts that it has a potentially broad meaning, but contends that it must be limited in the case of cl 7.2.11 to those amounts payable under cl 7.2.10. That may be so, but it does not answer the question. If ‘wages’ may be construed broadly, it may be read consistently with the Association’s contended meaning of ‘ordinary time earnings’. However, if wages is limited to the weekly wage calculated only on the basis of cl 4.1.3 and cl 5.1 and without regard to penalties for rostered hours, then a desirable consistency between cl 7.2.10 and cl 7.2.11 might support Target’s argument as to a narrow meaning of ‘ordinary time earnings’.

126    In the end I am not satisfied that ‘wages’ must be construed narrowly. Clause 5.3 refers to ‘Payment of Wages’. It provides the mechanism for payment of entitlements. It is expressed generally and must encompass all remuneration to which an employee is entitled to be paid for the relevant pay cycle. Otherwise, nothing in the Agreement sets out how or when an employee is paid their entitlements, whatever they may be. If it were not open to interpret ‘wages’ to include penalties, there would be no process provided for payment to employees of any penalty or other entitlements. To my mind, cl 7.2.11 provides a mechanism by which the employee can alter that arrangement to facilitate payment in advance of leave so that they may access those funds during their leave. ‘Wages’ may be understood where used in cl 7.2.11 to encompass ‘ordinary time earnings’, including where that expression is understood to include penalties payable under cl 6.1.3.

127    I note that the Association also referred to Construction Forestry Mining & Energy Union v Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd [2003] FCA 787; (2003) 132 FCR 1 (Wilcox J) (reference to ‘earnings’) and Glover v Tip Top Bakeries (1984) 8 IR 308, (reference to ‘full pay’) in support of its submission that ‘earnings’ is to be given a broad meaning, but I have not found those cases useful. Their context is particular.

128    There are a number of further points relied upon by Target that should be noted. First, it was said that had the drafters intended the definition in cl 5.4.2 to apply more broadly to the agreement they could have said so. That argument is met by the fact that it can similarly be said that had the drafters intended the definition apply only to cl 5.4, they could have said so. And indeed in other parts of the Agreement, definitions are said to apply only to certain clauses: for example, cl 5.6.1 (supported wage) introduces certain definitions with the words ‘in the context of this clause …’. Similarly, Target submitted that there would have been no need to include the cl 5.4.2 definition if the words were understood to have that meaning in any event. But similarly it could be said that if those words were intended to have a different meaning to that referred to in cl 5.4.2, the drafters could have so provided.

129    Second, Target relies on the general application of cl 5.4 to all employees, including casuals, to seek to limit its value in construing cl 7.2.10. Clause 7 does not apply to casuals. It is not apparent how this submission assists. There is no question that cl 5.4 applies to full-time and part-time employees. It is therefore relevant to ask whether it informs the scope of cl 7.2.10. Both clauses are relevant to part-time and full-time employees. There is value in having regard to both, for example in order to consider whether they may operate consistently. The definition in cl 5.4.2 does not apply completely in the context of cl 7.2.10, because its reference to ‘casual loadings’ in the context of cl 7.2.10 is otiose. But that does not mean that the expression does not or cannot otherwise operate consistently.

130    Third, Target referred to the provisions relating to annual leave in the National Employment Standards in the FW Act, submitting that the effect of the Agreement is to provide for that standard and supplement it with a 17.5% loading. It says that in the absence of a clear intention to depart from that position, the Agreement should be read conformably with ‘base rate of pay’ in s 90(1), which relevantly excludes monetary allowances, penalty rates and any other separately identifiable amounts. But if the parties intended to incorporate the terminology and content of ‘base rate of pay’ from the National Employment Standards, then they could have done so. Having regard to the different language used, and the different context of an enterprise agreement, it does not follow that the drafters intended to adopt the ‘base rate of pay’, and such an inference cannot readily be drawn.

131    Fourth, Target appeared to suggest by some of its submissions that it would be administratively difficult to assess annual leave on anything other than a base rate calculation, and that such difficulty tells against the Association’s position. There was no evidence as to any such perceived difficulty. The rostering principles are designed to ensure consistency where possible – rosters shall ‘be set on a regular weekly basis’ and ‘not be subject to frequent variations’ (cl 6.2.14 – cl 6.2.15). They may not be changed to avoid penalties or loadings (cl 6.2.17). In any event, steps put in place to promote flexibility, as referred to in the Objectives in cl 1.5, should not be diminished in value by a focus on additional administrative steps they might entail. There is no doubt that administration of an industrial agreement should be as non-complex as possible, for employees, employers and the Australian Tax Office as appropriate: Bluescope at [56]. Focus on administrative difficulties has been described elsewhere as a ‘furphy’: Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining and Energy Union [2015] FCAFC 100 at [42]. In this case, it seems to me that the presence of cl 5.4.2 and Target’s responsibilities in that regard lead to an obligation on its part to record the break down in all remuneration entitlements of an employee in any event. I do not consider that an alleged layer of administrative difficulties directs a narrow construction of the relevant expression. I infer that there are likely to be accounting tools and programs in place to facilitate Target in meeting its superannuation obligations, and that Target is likely to be in a position to utilise tools of that nature to ameliorate any difficulties, including by reference to averaging (for example) across different rosters worked by an employee where applicable, if it is necessary to anticipate leave entitlements.

132    Finally as to the text, I note that Target did not point to any authorities that supported a finding that ‘ordinary time earnings’ has a well-understood contrasting meaning, a meaning which on its case arises independently and without regard to how the expression is understood in the context of superannuation obligations. In an Agreement with a number of references to ordinary time, ordinary time rates and ordinary hours of work, it is noteworthy that the drafters have used the expression ‘ordinary time earnings’ when it comes to leave entitlements. I am not persuaded that the words have a different meaning where used elsewhere in the Agreement to that encompassed by cl 5.4.2. In any event, even without regard to the definition in cl 5.4.2, in my view the expression is broad enough, having regard to [121]-[124] above, to sensibly include the relevant cl 5.1 rates and cl 6.1.3 penalty payments.

133    Taking into account all of the above matters, I consider the text of the Agreement supports the following construction: that for an employee going on annual leave, ‘ordinary time earnings’ in cl 7.2.10 includes pay at the classification rates under cl 5.1 for their ordinary hours including penalties payable for any such hours under cl 6.1.3. It does not include allowances under cl 5.2, or take into account additional hours worked by way of overtime or in accordance with cl 4.2.4.

134    This construction permits regard to all of cl 5.1 (‘Rates of Pay and Classifications’) for the purpose of ascertaining the classification rate of pay. It is also consistent with Target’s practice, referred to in the joint statement of agreed facts, of paying Offsite Reserve or Multi Offsite Reserve employee certain allowances for a period of annual leave, as they are notably referred to within cl 5.1 (in cl 5.1.4) of the Agreement. I was not persuaded by the Association’s submission that ‘ordinary time earnings’ is to be read so as to include some of the allowances provided for in cl 5.2 (‘Allowances’). Those allowances are notably provided separately to cl 5.1 and can generally be seen to have the purpose of compensating for particular expenses.

135    It is necessary to turn to other matters of context to understand whether this conclusion can be supported.

136    In particular, it is appropriate to consider the historical industrial landscape; the iterations of the provisions in the Target awards and identified agreements and the conduct of the parties.”

 

Shop, Distributive and Allied Employees’ Association v Target Australia Pty Ltd [2021] FCA 1038 delivered 31 August 2021 per Bank-Smith J