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T4287

 

TASMANIAN INDUSTRIAL COMMISSION

Industrial Relations Act 1984
s.23 application for award or variation of award

The State Public Services Federation Tasmania
(formerly The Tasmanian Public Service Association)
(T.4287 of 1993)

and

Minister administering the Tasmanian State Service Act 1984

GENERAL CONDITIONS OF SERVICE AWARD

 

DEPUTY PRESIDENT A ROBINSON

HOBART 25 July 1994

Award variation - provision for payment of wages clause

REASONS FOR DECISION

The Tasmanian Public Service Association (TPSA), since called The State Public Services Federation Tasmania, made application to vary the General Conditions of Service Award by the inclusion for the first time of a "payment of wages clause".

A number of threshold arguments were raised by the Minister administering the Tasmanian State Service Act (the Government) opposing this matter being heard other than by a Full bench of the Commission. These issues were addressed in detail in my "Reasons for Interim Decision" issued on 10 June 1993 and again in my "Reasons for Further Interim Decision" of 5 July 1993 when I decided to hear the claim on merit.

The terms of that claim were extensive and detailed and went to matters such as:

  • the frequency of payment

  • the method of payment

  • provision of written advice as to details of payment and deductions, etc

  • employees kept waiting for payment

  • payment of wages upon termination of services

The TPSA submitted that their claim for an award provision dealing with payment of wages was justified because of a history of problems in this regard which had directly affected their members who were covered by this award and employed in the Department of Education and the Arts.

Ms Strugnell said the problems included incidents of late payment or non payment of salaries; incorrect payments; non payment of increments; over payment and subsequent deductions being made in an arbitrary fashion which caused financial embarrassment - particularly when the individual employee was unaware of the initial overpayment. The Commission was reminded of the fact that a dispute occurred in 1993 concerning some of these issues.

The applicant's submission was that the award variation sought would provide a measure of equity and fairness and that employees should have a basic right to be paid correctly each pay day.

Ms Strugnell addressed the precise terms of the proposed new provisions (Exhibit TPSA.6) clause by clause and outlined the reasons for seeking their inclusion. She also argued that if there is an award provision in place then there is an added incentive for the planners responsible for the pay system to take the utmost care that correct wages are made available at the right time and full information is supplied.

It was also argued that the provision proposed was allowable within the requirements of the Commission's Wage Fixing Principles in that the cost implications would be negligible. Ms Strugnell added that because neither the economy of the State nor that of an agency would be adversely affected, the granting of the claim would not be against public interest.

Mr McCabe for the Minister for Public Sector Management said that the government had given the matter of payment of wages some considerable thought following the dispute involving the Department of Education and the Arts in matter T No 4270 of 1993.

It was acknowledged that the situation which arose at that time was not good, either for the employees affected or the department. As a consequence however in an attempt to address the overall question of how and when wages and salaries are paid to State employees, there were at the relevant time ongoing discussions involving a number of central government agencies.

He said that in this regard the government was attempting to draw up a set of procedures to be observed by all agencies to ensure that payments to State employees were properly processed and that the cash owing to them was available within a reasonable time of it being due. What was being finalised was a procedure addressing the problems which, he said, can and do arise in a system of wages payment developed to work in an electronic funds transfer (EFT) environment. Attention was drawn to the fact that the EFT system started with the "4% second tier agreement" in 1988 and the vast majority of payments made in the public sector was by this method, the transfer being made to the employee's bank or other financial institution accounts.

It was argued that the penalty provision contained in the TPSA proposal was designed to deal with the old procedure of paying employees in cash on pay day during working hours and when pay was generally collected from the pay office (and delays may have occurred in that traditional pay system).

Mr McCabe sought and was granted an adjournment to enable further discussions with the union on 15 July 1993. He also said that philosophically the government was not opposed to the notion of a payment of wages clause, whether it be contained in an award or by some other method.

Despite the opportunity given for further discussions through the granting of an adjournment the parties were not able to report any progress when the hearing resumed on 28 July, following which additional time was again given.

Finally on 29 July 1993 Mr McCabe registered the Government's fundamental concern at the proposed form of the TPSA's application and then proceeded to present arguments against the claim, based upon the alleged noncompliance with the Commission's Wage Fixing Principles of February 1992. In particular Mr McCabe quoted that part of the principles which provided that:

"CONDITIONS OF EMPLOYMENT1

Except for the flow-on of test case provisions, applications for changes in conditions other than those provided elsewhere in the principles will be considered in the light of their cost implication both directly and through flow-on. In respect of any application where the cost impact either directly or through flow-on is, prima facie, not negligible, that application must be processed in accordance with the Special Case principle."

It was submitted by Mr McCabe that there was clearly no evidence of a "test case" having been conducted but that there did exist the potential for the clause sought to be significantly costly if circumstances arose where pay could not be made available on time to significant numbers of departmental employees. There was also claimed to be the potential for escalation of costs associated with the union's demand for additional pay slip information to be included. Accordingly it was submitted that in the absence of any "special case" declaration, the application was not consistent with the Wage Fixing Principles.

In the alternative however the Government presented a proposal which it said was in response to:

(a) the need to put in place certain checks and balances and safeguards to ensure that various pay systems which exist to pay state employees work efficiently; and

(b) to put into place mechanisms which are designed to work with pay systems which pay employees, in the vast majority of cases, by direct deposit of their pay into nominated accounts by electronic funds transfer.

He said the Government's response to the TPSA's claim was that while it may have some valid points, a major feature of their claim was the penalty payment which applied if any employee was not paid and was kept waiting for more than a quarter of an hour after the normal time for ceasing work on pay day.

Next Mr McCabe made the Commission aware of how public sector pay is organised by presenting a number of exhibits which detailed some of the legislation and regulations by which the pay systems must operate. Such exhibits included extracts from the Financial Management and Audit Act together with instructions issued by the Treasurer. In this regard it is interesting to note that Section 23(i) of the Financial Management and Audit Act provides that:

"The Treasurer shall issue instructions with respect to the principles, practices and procedures to be observed in the financial management of all Agencies, and those instructions shall have effect unless they are inconsistent with this Act or any other written law".

And Section 23(5) provides that:

"Treasurer's Instructions are not statutory rules within the meaning of the Rules Publication Act 1953."

Reference was also made to the PAYSTAT system and after explaining how this system works Mr McCabe said that once pay information passes from Treasury to the Reserve Bank then the Government, as employer, has no further control over the process of making employee entitlements available to the individuals concerned. However, it was acknowledged that whilst the employer may at a certain point have lost control of payment of wages it still had a responsibility, if for instance, there was a failure in the PAYSTAT computer system and pays were not able to be calculated and information could not be supplied to the Reserve Bank. This was further explained by a statement made at page 137 of the transcript on 10 August 1993 by Mr McCabe:

"MR McCABE: So, just to dwell on that line of argument a little further, there - the processes of payment into an employee's account by electronic funds transfer is one of the calculated risks that employees have to accept in agreeing to the electronic fund transfer process. That is, the government having provided the pay information and funds to the Reserve Bank cannot guarantee that the money will be in a particular account when the employee ceases work on pay day. On most pay days the money will be there and is usually accessible sometime during pay day well before 5 pm. Occasionally it may be there before pay day."

and later at page 140 of the same transcript:

"So, in our view, the unions cannot now expect to have the best of both worlds. They cannot expect to agree to the direct deposit of wages and still maintain the protection and penalty clauses which were intended to work only with a system of cash payment to employees in person on pay day."

Mr McCabe also said that Clause (e)(i) of the TPSA "payment of wages" clause was strongly opposed by the Government because it was considered to be incompatible with the EFT system. This particular clause provides as follows (inter alia):

"(e)(i) Except in circumstances beyond the control of the employer and subject to subclause (e)(ii), an employee kept waiting for payment of wages for more than a quarter of an hour after the usual time for ceasing work on the normal pay day shall be paid waiting time at the rate of time and one half after that quarter of an hour with a minimum payment of a quarter of an hour and payment shall continue on that day until advised that payment will not be made on that day.

Further such payment at the rate of time and one half shall continue during all ordinary hours of work on each succeeding day or days, up to a maximum of 6 hours per day, until such time as payment is made.

(ii) Subject to subclause (e)(iii) the provisions of subclause (e)(i) shall not apply in circumstances whereby payment of wages is not made on pay day but the employer and employee agree to an alternative arrangement for payment."

Mr McCabe used a hypothetical case to illustrate that clause (c)(i) was designed to suit a situation where employees attended the pay office and may have been kept waiting. He emphasised that under such a scenario the employer would not be liable for more than one quarter of an hours pay at time and one half if he told the employee that pay would not be available on that day. However, if the employee was denied payment by the bank at say 5.00 pm that day the employer would arguably be liable for at least 6

hours pay at time and one half and possibly much more because business had closed and the same response could not be made by the employer under present day circumstances.

The Commission was advised by Mr McCabe that the Government had examined what happens in the current pay system and the direct deposit of wages into an employee's account and had subsequently developed further instructions and directions to departments which will supplement the existing requirements. He said these will alleviate, as far as possible, the problems which can occur in the pay processes and at the same time provide safeguards to employees. Whilst the administrative instructions (Exhibit Government 5) are comprehensive it was conceded they did not address what should happen when an employee's pay is either late, short, or not received at all.

Accordingly the earlier instruction had been augmented by a Treasurer's instruction which sets out the rules and requirements of departments under circumstances where pay errors of the kind mentioned occur. Another aspect of the instruction addressed the requirement to provide a pay slip giving a dissection of an employee's pay. This new instruction (Number 30) was issued by the Minister for Public Sector Management on 29 July, 1993.

The submission was that the latest administrative instruction addresses the concerns of the unions and the TPSA's claim in relation to both the using of pay slips and ensuring that immediate action is taken to rectify any deficiencies in paying employees.

Mr McCabe then called into aid a further exhibit (Government 10) which was an extract from a publication titled "Federal Industrial Laws", fourth edition, by Mills and Sorrell which dealt with the subject matter of "payment of wages". The editors quoted common award provisions in this regard and referred to a number of authoritative cases, including an interpretation given by the Commonwealth Industrial Court in which Joske and Eggleston J.J. said:

"The obligation of the employer is that an employee is paid each pay day. There must be a physical act of payment and there must be payment in a real sense. A colourable payment is not a real payment. The obligation of the employer ... is not satisfied by the making of a token payment, nor does the employer satisfy it by making an evasive payment. A payment is a real payment when the employer has bona fide endeavoured to pay the full amount which is believed to be due to the employee at the time of the payment. It may be that the amount paid is not the full amount because of an error by someone in the pay office, or because the circumstances under which a special rate or some other benefit was earned have not come to the knowledge of the employer or that the employer is not reasonably satisfied, without investigation which he has not had sufficient opportunity to make, that it was earned or that the employer bona fide disputes a particular item claimed. If under such or similar circumstances the employer pays the employee the full amount which is believed to be payable, although it may turn out to be less than the full amount due, there has been a real payment and the employee has been "paid" within the meaning of ... the award": Re Commonwealth Works and Service (Northern Territory) Award, 1 F.L.R. 336, at p.342; 15 I.I.B. 760; 1960 O.I.L.R. Rep 222."

The Government's submission emphasised that in its view the authority quoted supports its contention that if the employer acts in good faith and provides a payment on pay day which, to the best of the employer's knowledge, is the full amount due, then that constitutes a real payment and the employee has been paid and no penalty applies.

Mr McCabe put forward an alternative award clause considered to be suitable for inclusion in the General Conditions of Service Award (Exhibit Government 11) which provided as follows:

"PAYMENT OF WAGES

(a)   (i)  All salaries and wages shall be paid by direct deposit into the employee's nominated financial institution.

(ii) The usual method of payment may be altered at any time either by mu tual consent, or following the giving of reasonable notice by the controlling authority to the employee(s) concerned.

(b)   (i)  Salaries and wages shall be paid to an employee not later than the usual time the employee ceases work on the same day of each fortnight. Except where such day falls on a public holiday in which case payment shall be made on the previous working day but no later than the day after the normal pay day.

(ii)  An employee shall be given details of gross and net pay due, together with details of hours, allowances, overtime and any deductions made by the employer.

(c) Where the provisions of subclause (b)(i) have not been met an employee shall notify the pay office of his or her Department or Agency as soon as is practicable.

(d)    (i)  Where employment is terminated, all salary and wages due shall, where practicable, be paid to the employee on the day of termination.

(ii) If payment on the day of termination is not practicable, the controlling authority shall, as soon as practicable, forward all salary and wages due to the employee to the employee's recorded home address, or any other arrangement for payment as may be agreed between the controlling authority and the employee."

The Government's alternative award clause was explained clause by clause and compared to the TPSA claim. At the same time Mr McCabe detailed to the Commission a number of customs and practices which applied in the State Service and which were comprehended in Exhibit Government 11. One such custom was, for instance, that some employees have traditionally been paid on every second Thursday as opposed to Wednesday. Particular emphasis was given to the fact that there was presently a physical limit to how much detail could be included on a standard pay slip and that essential information was already included. If employees have the need for more precise information in this regard they can easily obtain it through a simple inquiry.

Mr McCabe submitted that the PAYSTAT system which applies to much of the Service was being reviewed to achieve improvements, but if any additional demands are placed on this system through the imposition of an award clause as proposed by the TPSA it would be very costly and against public interest - even if 12 months grace was granted.

It was argued by Mr McCabe that the Government's alternative proposal for an award clause presented a practical and workable solution which had been developed to work in conjunction with the existing State Service Regulations, Financial Management and Audit Act and Regulations and Administrative Instruction No 30. He said the clause sought by the TPSA cannot work effectively in the EFT environment and does not sit comfortably with the other instruments.

In exercising the TPSA's right of reply Ms Strugnell said that whilst the Government had asserted that a penalty provision in the award was unsustainable because of cost implications, it had failed to take advantage of the opportunity given to it by the Commission to illustrate its point through production of evidence relating to this question in areas where other award provisions already existed for some time and applied in the State Service.

Ms Strugnell was critical of the Government's attempt to absolve itself from any responsibility for payment of employees' wages to the extent that it claimed there must be a point where the employer can no longer be in control of the process (through EFT) which determines when an employee's pay as credited to an employee's nominated account and is available for use. She said a responsible employer should ensure that every priority was given to fulfilling what was essentially a contractual arrangement between the employer and the employee.

The TPSA alleged that the Administrative Instruction (Government 9) was reactionary to the TPSA claim and was issued at a time when the present case was part heard. Ms Strugnell said the disturbing thing about Treasury and Administrative instructions was that they can change at any time and quite often without notification to any of the parties affected and for this reason award protection was needed.

Decision

The claim for a payment of wages clause to be inserted in the General Conditions of Service Award was made the subject of an application by the TPSA at approximately the time when pay errors had been most evident. It is clear therefore that the insertion of an award clause was seen as being needed to address this particular problem.

It would appear that in the intervening period the incidence of pay errors, which adversely affect State servants, have either diminished in number or have been better handled internally because no disputes in this regard have come to official notice. The experience of the recent past then tends to support the Government's contention that measures which were specifically designed to address what was acknowledged as a problem area previously have been effectively instituted. In my view it would be unrealistic to expect that no errors will occur in this regard in the future although one would hope and expect that the incidence would be minimal and that if they did occur they would be handled in such a way as to not cause employee inconvenience or embarrassment.

Whilst the experiences of the past may be regarded as one factor to be taken into consideration either in support of a provision in the General Conditions of Service Award or not I believe that the question of principle warrants the inclusion in this award of what after all is a common provision in awards already, including some other Public Sector awards of this Commission. That principle, simply stated, is that it is fundamental to the contractual arrangement entered into between an employer and an employee that there be "consideration" payable by the employer to the employee at some properly designated time and at regular intervals in respect of services diligently rendered by an employee to that employer. This principle was well enunciated by Joske and Eggleston J.J. in the case Re: Commonwealth Works and Service (Northern Territory) Award submitted as evidences in Exhibit Government 10, earlier quoted. The learned judges said, inter alia:

"The obligation of the employer is that an employee is paid each pay day ... "

A further influencing factor in the case before me is that the Government itself was not opposed to the inclusion of a payment of wages clause in the General Conditions of Service Award although it opposed the particular proposal claimed by the TPSA.

For all of these reasons I decide that a case exists for the award to include for the first time a payment of wages clause.

The Government's expressed concerns included two fundamental issues, i.e.:

(a) That part of the claim which went to the requirement to provide additional information on pay slips, and

(b) The inclusion in the TPSA claim of a punitive clause requiring the payment of waiting time.

I agree with the Government's view that on all of the evidence available State servants are already provided with a good array of essential detail on pay slips and that it must be recognised that there are practical limits as to how much fine detail can be included. Furthermore it was never denied that there is any impediment to employees receiving a further explanation of the make-up of their pay and the various authorised deductions thereto. Accordingly the clause I have decided upon is considered to be wholly consistent with my comments in this regard.

The somewhat more vexed question concerned the justification of inserting a punitive provision in the award to cover instances where an employee was kept waiting for payment of wages after the usual time for ceasing work on the normal pay day, except in circumstances beyond the control of the employer or where alternative arrangements have been agreed to by the employer and an employee.

It was argued by the Government that the inclusion in the award of waiting time at penalty rates would be potentially costly and therefore inconsistent with wage fixing principles relating to changes to conditions of employment.

However, the lack of evidence relating to costs having been incurred in this regard in the past where award clauses already apply did not support this contention. Furthermore revised pay procedures now in place mitigate against costly delays in pay occurring in the future. Accordingly I do not accept that the claim should be rejected as being inconsistent with relevant wage fixing principles.

The Government also relied upon a decision of the Industrial Court (already quoted) in which Joske and Eggleston J.J. dealt with a matter concerning payment of wages as it related to the Commonwealth Work and Services (Northern Territory) Award. My reading of the learned judges' comments and its context, as well as the published extract taken as a whole from "Federal Industrial Laws", Mills and Sorrell 4th Edition, do not lead me to the same conclusions as were argued on behalf of the Government.

The editors of the publication concerned made the following commentary at page 213 (paragraph 239):

"(239) Payment of wages - This clause generally provides that (a) payment shall be made on a specified day; (b) an employer shall not keep more than a specified amount, e.g. two days' pay in hand; (c) upon determination of his employment, an employee shall be paid moneys due to him on the day of such determination or forwarded to him by post the following day; (d) "all wages shall be paid during working hours"; or "an employee kept waiting for his wages on pay day for more than a specified time, e.g. five minutes or fifteen minutes shall be paid at overtime rates after such specified period" See Cranford-Webster v McFarlane, (1947) S.A.S.R. 162"

Clearly this quote does not support the argument put on the Government's behalf when opposing a waiting time clause.

Similarly I believe the Government advocate came to the wrong conclusion after reading the judgement of Joske and Eggleston J.J. in Exhibit Government 10. To my mind it is important to have proper regard for the fact that in the case quoted and relied upon the Commonwealth Industrial Court was being asked to interpret a particular award provision contained in the Commonwealth Works and Service (Northern Territory) Award which provided as follows:

"If an employee who is not absent from work is not paid on the regular pay day, he shall be paid waiting time at the ordinary rate of pay from the close of business on pay day until time of actual payment provided that not more than 8 hours' pay shall accrue in respect of each 24 hours of waiting. Provided always that if the delay is caused by circumstances outside the control of the employer, this subclause shall not apply."

Without again repeating the whole of the extract of judgement earlier quoted it is clear to me that the two judges were simply saying that a payment is a real payment when the employer has bona fide endeavoured to pay the full amount which is due to an employee at the time of payment and that if at some later time a special rate or other benefit earned is discovered to have been also due, this does not detract from the integrity of the "real payment" and, does not invoke the payment of waiting time - a logical and sensible conclusion of course.

This is entirely a different case to a situation where an employee has not in fact been paid.

Interestingly this judgement provides a phrase which does bear repeating in that it says:

"The obligation of the employer is that an employee is paid each pay day. There must be a physical act of payment and there must be payment in a real sense"

Even though EFT now often forms part of the payment process in modern day society, and banks and similar financial institutions act as the employer's agent in this regard, I believe that the primary responsibility to ensure that payment is made within time remains with the employer.

Finally it was argued that it was inappropriate to create a new award provision different to the Government's proposal on the ground that to do so would be inconsistent with other statutory and associated provisions relating to the payment of wages in the State Service.

I have examined the relevant provisions earlier quoted and am satisfied that they are concerned with administrative arrangements as opposed to the settling of industrial conditions of employment and in this and all other respects there will be created no inconsistencies by the award clause decided upon.

For these reasons I have decided to insert a new provision in the award dealing with payment of wages but in terms which are considered more appropriate than those submitted by either party.

Operative Date

This decision shall have effect on and from 3 August 1994.

Order is attached.

 

A Robinson
DEPUTY PRESIDENT

Appearances:
Ms S Strugnell on behalf of The State Public Services Federation Tasmania (formerly The Tasmanian Public Service Association)
Mr D Holden with Mr G Philp on behalf of the Australian Education Union, Tasmanian Branch (formerly the Tasmanian TAFE Staff Society and the Tasmanian Teachers Federation respectively)
Mr J McCabe on behalf of the Minister administering the Tasmanian State Service Act 1984.

Date and Place of Hearing:
1993
Hobart
March 15

June 23, 29
August 10
October 22

1 T No 3584 of 1991