2021 WAIRC 00165
WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES COURT


CITATION : 2021 WAIRC 00165

CORAM
: INDUSTRIAL MAGISTRATE J. HAWKINS

HEARD
:
WEDNESDAY, 28 APRIL 2021

DELIVERED : FRIDAY, 18 JUNE 2021

FILE NO. : M 92 OF 2020

BETWEEN
:
JAKUB PIOTR KURDZIEL
CLAIMANT

AND

POLARIS METALS PTY LTD
RESPONDENT

CatchWords : INDUSTRIAL LAW – Small claims procedure under the Fair Work Act 2009 (Cth) – Failure to pay untaken annual leave pursuant to s 90(2) of the Fair Work Act 2009 (Cth) – Effect of rostered days off on entitlement to annual leave
Legislation : Fair Work Act 2009 (Cth)
Industrial Relations Act 1979 (WA)
Case(s) referred
to in reasons: : Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining and Energy Union [2015] FCAFC 100
Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2015] FCA 136
Kentz (Australia) Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2016] FWCFB 2019
Mildren v Gabbusch [2014] SAIRC 15
Miller v Minister of Pensions [1947] 2 All ER 372
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
Result : The claim is dismissed
REPRESENTATION:

CLAIMANT : SELF-REPRESENTED
RESPONDENT : MS A. CASELLAS (OF COUNSEL) FROM CLAYTON UTZ

REASONS FOR DECISION
Introduction
1 The claimant, Mr Jakub Piotr Kurdziel (Mr Kurdziel), was employed as a mining geologist for Polaris Metals Pty Ltd, the respondent (Polaris). Mr Kurdziel was employed from 20 February 2018 to 1 April 2020.
2 Upon his resignation, Mr Kurdziel was paid his accrued entitlements, which included a final payment of $15,600.30 for 592.54 hours of accrued annual leave plus $3,120.06, being a 20% site allowance on each hour of annual leave, totalling $18,720.36.
3 Mr Kurdziel, in substance, alleges that Polaris contravened s 90(2) of the Fair Work Act 2009 (Cth) (FWA) by failing to pay him $10,400.20, being an amount that he alleges would have been payable to him had he taken his unpaid annual leave.
4 Mr Kurdziel alleges that if he had taken his annual leave, then he would also have been paid for the hours he was on rest and recreation leave (R&R), plus the site allowance of 20% (Allowance) for those periods.
5 Accordingly, he alleges that he should be paid for the component of R&R plus a site allowance made up as follows:
· $8,666.83 for R&R; and
· $1,733.37 for Allowance on R&R payments.
6 Polaris disputes Mr Kurdziel’s claim and submits that he has been paid all his entitlement under the FWA. Polaris maintains that the payment for R&R is a wholly separate entitlement to annual leave and that there is no crossover between payments.
7 Schedule 1 of these reasons for decision outline the jurisdiction, practice and procedure of the Western Australian Industrial Magistrates Court (IMC).
8 Mr Kurdziel relied upon his witness statement lodged on 1 April 2021 and an Outline of Submissions dated 23 April 2021. Mr Kurdziel was not subject to cross-examination.
9 Polaris relied upon the witness statement of Mr Damien Francis King, industrial relations manager. He was the subject of brief cross-examination at trial. Polaris also relied on the Outline of Submissions dated 14 April 2021.
10 The parties also agreed upon a statement of agreed facts annexed at sch 2 of these reasons. In summary, the agreed facts are as follows:
(a) Mr Kurdziel’s employment was pursuant to an initial written contract of employment dated 9 February 2018 and variations dated 22 March 2019 and 6 February 2020 (Contract of Employment).
(b) For the duration of Mr Kurdziel’s employment he:
i. ‘was employed on a full-time status’;
ii. ‘worked fly-in fly-out’; and
iii. ‘worked 12 hours per day on a nine (9) days on, five (5) days off (R&R) roster’.
c) Mr Kurdziel was initially employed on a base annual salary of $112,770 and he received an Allowance, around $22,544. He was paid on all R&R but not paid on periods of leave, including annual leave.
d) On 21 February 2019 Mr Kurdziel’s base salary was increased to $115,000 and his Allowance increased to $23,000.
e) On 8 February 2020 Mr Kurdziel’s ‘Allowance was varied so as to become payable during periods of paid annual leave, personal/carer’s leave, long service leave and community service leave’.
f) During Mr Kurdziel’s employment, and in accordance with his initial employment contract, he was entitled to annual leave in accordance with Mineral Resources Limited (MRL) leave procedure which provided that: As explained by Mr King, Polaris is a wholly owned subsidiary of MRL (Exhibit 2 – Witness Statement of Damien Francis King).

i. ‘annual leave accrued progressively and accumulated from year to year’; and
ii. ‘where an employee’s contract of employment did not specify an annual leave entitlement, the employee’ would receive annual entitlements as per the National Employment Standards (NES).
g) In line with the NES Mr Kurdziel ‘accumulated four weeks paid annual leave each year of service with’ Polaris.
11 Mr Kurdziel’s small claims states that the ground of his claim is that Polaris ‘[f]ailed to comply with an award, agreement, instrument or order’. However, Mr Kurdziel has not made any claim for payment pursuant to an award or industrial agreement. Rather, it appears that his claim relates to not being paid in full his annual leave entitlements pursuant to s 90(2) and s 323(1) of FWA.
12 Section 545(3) of the FWA enables an eligible state court (which the IMC is an eligible state court) to:
… order an employer to pay an amount to, or on behalf of, an employee of the employer if the court is satisfied that:
(a) the employer was required to pay the amount under this Act or a fair work instrument; and
(b) the employer has contravened a civil remedy provision by failing to pay the amount (emphasis added)
13 There are three pre-conditions for the IMC to make an order under s 545(3) of the FWA:
(a) An amount payable by the employer to the employee;
(b) A requirement to pay the amount by reference to an obligation under the FWA or a fair work instrument; and
(c) The failure to pay constitutes a civil remedy provision under s 539(1) and s 539(2) of the FWA.
14 Mr Kurdziel elected the small claims procedure pursuant to s 548 of the FWA. Thus the amount referred to in s 548(1)(a) and s 548(1A)(a) of the FWA refers to:
an amount that an employer was required to pay to … an employee:
(i) under [FWA] or a fair work instrument; or
(ii) because of a safety net contractual entitlement; or
(iii) because of an entitlement of the employee arising under subsection 542(1) [ of the FWA].
15 Section 12 of the FWA defines ‘safety net contractual entitlement’ to mean:
An entitlement under a contract between an employee and an employer that relates to any of the subject matters described in:
(a) subsection 61(2) (which deals with the National Employment Standards); or
(b) subsection 139(1) (which deals with modern awards).
16 I have understood Mr Kurdziel’s claim therefore to be made pursuant to the provisions of s 548 of FWA by reference to the NES. I have therefore limited my consideration and determination of Mr Kurdziel’s claim for payment under the FWA, pursuant to s 61(2), s 90(2), s 323(1), s 542 and s 548 of the FWA.
17 The central contention of Mr Kurdziel is that where taking a period of annual leave would result in payment for the R&R period rostered between his periods of ordinary work, he must also receive payment for that R&R period in his annual leave payment on termination.
Was Mr Kurdziel’s Entitled Upon Termination To Payment Of Unused Annual Leave And Payment For R&R In His Annual Leave Payment?
18 There is no dispute that during the entirety of Mr Kurdziel’s employment he only took 108 hours of annual leave.
19 At the time of resignation Mr Kurdziel was on a base salary of $138,000 (being $115,000 base salary and Allowance applied to all working hours, being $23,000).
20 Polaris paid Mr Kurdziel by a ‘smoothing method’ at a rate of $31.59 per hour. This was not disputed by Mr Kurdziel.
21 Nor did Mr Kurdziel dispute that at the date of resignation his accrued annual leave amounted to 592.54 hours, having accrued 700.5386 hours less 108 hours of annual leave that he took during the course of his employment.
22 Pursuant to Polaris’ annual leave accrual method, Mr Kurdziel accrued annual leave during periods of R&R, but annual leave was not deducted during any periods of R&R that fell during Mr Kurdziel’s time away from work. Accordingly, Mr Kurdziel was only deemed to be on annual leave when the period of leave fell during his ordinary rostered work hours, not when he was on R&R. Exhibit 2 – Witness Statement of Damien Francis King [12] - [25].

23 Polaris contends that the reason for this is that during that period Mr Kurdziel was paid for the period of R&R and not annual leave, and that there was no crossover between payments for R&R and annual leave. This was evidenced by the period of annual leave taken by Mr Kurdziel during the course of his employment in June/July 2018. Mr Kurdziel requested 14 days annual leave to cover a full work cycle of nine days’ ordinary work and five days of R&R. Fourteen days of leave equated to 168 hours, being 12 hours per day. However, Mr Kurdziel was paid 108 hours of annual leave and the remaining 60 hours were paid in the form of R&R hours. Accordingly, despite being away from work for 168 hours, Mr Kurdziel’s annual leave entitlements were only deducted 108 hours from Mr Kurdziel’s annual leave balance. Exhibit 2 – Witness Statement of Damien Francis King, attachment G.

24 At the conclusion of Mr Kurdziel’s employment, having accrued 592.54 hours of annual leave Mr Kurdziel was paid at the rate of $31.59 per hour, being a total of $18,720.36, inclusive of Allowance.
25 Rather, Mr Kurdziel contends that he was underpaid $10,400.20. He contends that he should receive $8,666.83 in ‘R&R paid with annual leave’, being five days of R&R for every nine days of annual leave, plus $1,733.37 based on the Allowance paid on all additional R&R hours. Mr Kurdziel’s small claims, attachment H.

26 In effect, Mr Kurdziel maintains that his entitlement to unpaid annual leave must include entitlement to payment of R&R and Allowance that would have been paid had Mr Kurdziel taken leave during the course of his employment.
27 The effect of Mr Kurdziel’s contention is that his entitlement to payment of R&R forms part of his entitlement to payment for annual leave.
28 Polaris rejects this contention and maintains that the FWA or the Contract of Employment does not allow for the accrual of R&R. Polaris maintains that the payment of R&R is wholly separate to the entitlement to annual leave payment and there is no cross over between payments for R&R and payments for annual leave. Transcript, 23 – 24.

29 There is no clause within Mr Kurdziel’s Contract of Employment that provides that entitlements to R&R accrues in the same way as annual leave. This is not a case where the parties disagree as to the interpretation of a term of Mr Kurdziel’s Contract of Employment.
30 Rather, Mr Kurdziel relies entirely upon s 90(2) of the FWA which states:
If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.
31 The leading authority in respect to s 90(2) of the FWA is Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining and Energy Union [2015] FCAFC 100 (Centennial).
32 Polaris accepts that Centennial stands for the proposition that the rate of pay for annual leave paid out on termination must be the same as the employee would have received had they taken annual leave whilst still employed.
33 In Centennial, the Federal Court was concerned with a clause in an enterprise agreement that referred to the payment of annual leave on termination ‘plus average bonuses’. In Centennial, the employer argued that their employees were only entitled to payment of their average bonuses upon termination. This was in contrast to what had happened when annual leave was taken during the employee’s employment where they were paid a component for rostered overtime, shift allowances, weekend penalty rates or leave loadings and not an average of those amounts.
34 The Court, at first instance, held that the explanatory memorandum to the Fair Work Bill 2008 (Cth), lent support to the argument that:
… s 90(2) (unlike s 90(1)) is not confined to a statement of a minimum obligation, but is a statement to the effect that an employee should not suffer a reduction in the value of unpaid annual leave if employment comes to an end while paid annual leave remains untaken. Centennial [15].
(emphasis added)
35 On appeal, the Full Court agreed and stated:
Section 90(1) creates the minimum standard: payment at the base rate for ordinary hours worked. The effect of s 90(2) is that … the rate at which the employee is paid when he or she takes annual leave, then that is the minimum amount that must be paid for any accrued untaken annual leave. If, on the other hand, there is a modern award or enterprise agreement which provides for payment at a higher rate for annual leave that is taken, then s 90(2) stipulates that that is the rate which is payable where annual leave has accrued but has not been taken.
36 As such, Centennial held that s 90(2) of the FWA operated to incorporate rostered overtime, shift allowances, weekend penalty rates and bonuses that ‘would have been payable’ during a period of annual leave into the calculation for accrued annual leave.
37 Polaris however maintains that such payments were variable payments and were all components arising within the period of annual leave. In contrast, Polaris says that the R&R payment does not occur simultaneous to any period of annual leave and R&R payment is an adjacent entitlement. Accordingly, Polaris argues that s 90(2) of the FWA does not extend to incorporate such incidental or adjacent entitlements to annual leave entitlements. In its outline of submissions Polaris submits:
… Centennial canvasses the full extent of subsection 90(2) of the [FWA], and does not contemplate payments for hours that sit outside hours of annual leave.
Based on the application of Centennial, subsection 90(2) of the [FWA] does not operate to include adjacent periods of employment within a period of annual leave. It merely ensures that elements such as the Site Allowance (that would be paid to an employee when they take annual leave during their employment) must also be paid to the employee for all hours of annual leave that are paid out on termination.
38 Mr Kurdziel provided no submissions in respect to the effect of the decision of Centennial.
39 I have been unable to find any authority to suggest that payment for R&R equates to payment of overtime rates, shift allowances, penalty rates or bonuses as discussed in Centennial.
40 The central issue in the first instance decision of Centennial was:
…whether payment for the periods of annual leave on termination of employment must include payment of ‘annual leave loading’ or, alternatively, rostered overtime, shift and weekend penalty payments as it does when payment is made with respect to periods of annual leave actually taken during employment. Centennial Northern Mining Services Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2015] FCA 136 [20].

41 Accordingly, the payments referred to in Centennial related to payments that ordinarily were paid during the hours actually worked by an employee. In this case, the payment of R&R was not an allowance, rate of pay or bonus that related to Mr Kurdziel’s ordinary hours of work.
42 Rather, beneficially for Mr Kurdziel, if annual leave was taken then the period of leave that fell within a period of R&R would not result in a deduction of accrued annual leave.
43 Accordingly, the method of accrual of annual leave used by Polaris was more beneficial to Mr Kurdziel. If Mr Kurdziel contentions were accepted, then based on this alternative method, Mr Kurdziel’s annual leave entitlements would have decreased to allow for the time he was allocated accrued annual leave during R&R. Exhibit 2 – Witness Statement of Damien Francis King [12] - [16], [17] - [20], [28] - [32].

44 There have been numerous decisions that have dealt with the characterisation of R&R. Many turn on the construction of the relevant instruments that govern the employment relationship.
45 In Kentz (Australia) Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2016] FWCFB 2019 (Kentz) the Full Bench of Fair Work Commission considered whether a period of R&R formed part of the notice period upon termination of employment. The Full Bench considered that R&R could not be equated with annual leave, as an employee taking a form of leave was no longer participating in the work cycle. Rather, the Full Bench characterised R&R as a block of authorised non-work time which formed an integral part of the work cycle being a block of authorised non-work time where leisure is taken. It found that payment in lieu, in respect to a R&R period, would require payment only in respect to the ‘hours the employee would have worked had the employment continued until the end of the minimum period of notice’.
46 In Kentz the employees were not paid during their R&R. Whereas, in this matter, Mr Kurdziel was paid an annualized salary, which was ‘smoothed’ by allocating pay for periods worked and for the periods of R&R at the same rate of pay.
47 However, this was simply a method to allow employees to receive regular similar payments. In my view, it does not form a basis to distinguish Kentz.
48 Accordingly, the decision of Kentz lends weight to the demarcation of entitlements relating to hours worked and authorised non-work time, such as R&R.
49 I am satisfied therefore that it was only as a result of the ‘smoothing’ method of payment that Mr Kurdziel became entitled to payment during his period of R&R. Otherwise, he would not have been paid for this period. R&R did not constitute hours worked. As stated by the Full Court in Centennial, s 90(1) of the FWA creates a minimum standard for the payment of ordinary hours worked and s 90(2) requires there be no reduction of that minimum standard for payment of leave accrued but untaken. It is still however referable to ordinary hours worked. Reliant on Kentz, R&R although part of a work cycle, is not an entitlement for hours worked.
50 For the reasons outlined above, therefore, I am not satisfied Mr Kurdziel has proven Polaris breached s 90(2) of the FWA.
Order
51 The claim is dismissed.



J. HAWKINS
INDUSTRIAL MAGISTRATE




Schedule 1 – The Jurisdiction, Practice And Procedure Of The Western Australian Industrial Magistrates Court
Jurisdiction and burden of proof
[1] An employee, an employee organization or an inspector may apply to an eligible State or Territory court for orders regarding a contravention of the civil penalty provisions identified in s 539(2) of the FWA.
[2] The IMC, being a court constituted by an industrial magistrate, is an ‘eligible State or Territory court’: FWA s 12 (see definitions of ‘eligible State or Territory court’ and ‘magistrates court’); Industrial Relations Act 1979 (WA) s 81, s 81B.
[3] The application to the IMC must be made within six years after the day on which the contravention of the civil penalty provision occurred: FWA s 544.
[4] The civil penalty provisions identified in s 539 of the FWA include contravening a term of the NES and failing to pay in full an amount owed under the FWA: FWA s 44(1), s 323 respectively.
[5] An obligation upon an ‘employer’ is an obligation upon a ‘national system employer’ and that term, relevantly, is defined to include ‘a corporation to which paragraph 51(xx) of the Constitution applies’: FWA s 12, s 14, s 42, s 47. A NES entitlement of an employee is an entitlement of an ‘employee’ who is a ‘national system employee’ and that term, relevantly, is defined to include ‘an individual so far as he or she is employed … by a national system employer’: FWA s 13, s 42, s 47.
Contravention
[6] Where the IMC is satisfied that there has been a contravention of a civil penalty provision, the court may make orders for ‘an employer to pay [to an employee] an amount … that the employer was required to pay’ under the modern award (emphasis added): FWA s 545(3)(a).
[7] The civil penalty provisions identified in s 539 of the FWA includes:
· The Core provisions (including s 44(1) and s 45) set out in pt 2 - 1 of the FWA: FWA s 61(2), s 539.
[8] Where the IMC is satisfied that there has been a contravention of a civil penalty provision, the court may make orders for:
· An employer to pay to an employee an amount that the employer was required to pay under the FWA: FWA s 545(3).
[9] In contrast to the powers of the Federal Court and the Federal Circuit Court, an eligible State or Territory court has no power to order payment by an entity other than the employer of amounts that the employer was required to pay under the FWA. For example, the IMC has no power to order that the director of an employer company make payments of amounts payable under the FWA: Mildren v Gabbusch [2014] SAIRC 15.
Burden and standard of proof
[10] In an application under the FWA, the party making an allegation to enforce a legal right or to relieve the party of a legal obligation carries the burden of proving the allegation. The standard of proof required to discharge the burden is proof ‘on the balance of probabilities’. In Miller v Minister of Pensions [1947] 2 All ER 372, 374, Lord Denning explained the standard in the following terms:
It must carry a reasonable degree of probability but not so high as is required in a criminal case. If the evidence is such that the tribunal can say ‘we think it more probable than not’ the burden is discharged, but if the probabilities are equal it is not.
[11] In the context of an allegation of the breach of a civil penalty provision of the FWA it is also relevant to recall the observation of Dixon J said in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336:
The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences [362].

Schedule 2 – Statement Of Agreed Facts