Catlow v. Accident Compensation Commission

[1989] HCA 43
167 CLR 543

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(Judgment by: McHugh J)

Catlow
vAccident Compensation Commission

Court:

Judges: Brennan J
Deane J
Dawson J
Gaudron J

McHugh J

Subject References:
Workers' Compensation (Vict.)
Accident compensation
Amount of compensation
Rate of pay for 'normal number of hours per week'
Whether actual hours worked or core hours fixed by industrial agreement
Whether number of hours 'fixed' by agreement
Accident Compensation Act 1985 (Vict.), s. 95.

Legislative References:
Interpretation of Legislation Act 1984 (Vict.) - s 35

Hearing date: 2 May 1989
Judgment date: 5 October 1989

Victoria

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Judgment by:
McHugh J

In 1985, s.95(1) of the Accident Compensation Act 1985 (Vict.) ("the Act"), so far as was relevant, provided:

"In sections 93 and 94, 'the worker's pre-injury average weekly earnings' means - (a) the average weekly earnings during the 12 months preceding the relevant injury if the worker has been employed by the same employer for that period;

. . .

calculated at the worker's ordinary time rate of pay for the worker's normal number of hours per week."

2. The question in this appeal is whether, when a standard number of ordinary working hours has been fixed for a worker's employment, his "normal number of hours per week" for the purposes of the Act are those standard hours or the number of hours he usually worked.

3. The appeal is brought by Mr Gordon Catlow ("the appellant") against a judgment of the Full Court of the Supreme Court of Victoria. The Full Court held that, for the purpose of the calculation in s.95 of the Act, the worker's "normal number of hours per week" were the 36 "ordinary hours for a week's work" fixed under an unregistered industrial agreement which governed his employment with Australian Safeway Stores Pty. Ltd. The Full Court reversed the holding of the Accident Compensation Tribunal division that the "normal number of hours per week" of the appellant was the number of hours he usually worked including overtime hours.

4. When the appellant was appointed a warehouse supervisor in November 1982, he agreed with his employer that he would work such number of hours in any working week, additional to the 36 hours, as the employer required, that he would habitually commence his daily work earlier than the starting time of the general warehouse staff, that he would finish his daily work at such later hour as the employer or the circumstances required, that he would work on such of his rostered days off and Saturdays as the employer might require of him, and that he would be remunerated for hours of work in excess of the 36 hours per week at the rates prescribed for overtime in the unregistered agreement.

5. The appellant sustained injury on 26 October 1985. His ordinary time rate of pay for the 36-hour week was then $367.90. In October 1984 the rate was $357.00 per week; as from 13 April 1985 it was increased to $365.40 per week; and as from August 1985 it was increased to $367.90 per week. Thus, during the 12 months period before the appellant's injury, he had three ordinary time rates of pay.

6. The Accident Compensation Tribunal division found that in the 12 months prior to 26 October 1985 the appellant had worked a total of 1,963.5 hours of which 664.5 hours were overtime hours. He had been required to work and did work on 14 of his 23 rostered days off and on 27 Saturdays out of 38. In addition he had been totally incapacitated for work for 12 pay periods between October 1984 and January 1985 because of an earlier compensable injury. He had also had four weeks paid holidays.

The Calculation of Pre-injury Average Weekly Earnings

7. Section 82 of the Act provided that, if there was caused to a worker an injury arising out of or in the course of any employment, he was entitled to compensation in accordance with the Act. Section 93, so far as was relevant, provided:

"(1) If a worker's total incapacity for work results from or is materially contributed to by an injury which entitles the worker to compensation the compensation shall be in accordance with this section.

. . .

(4) Subject to this section, a weekly payment to a worker shall be an amount equivalent to -

(a)

80 per cent of the worker's pre-injury average weekly earnings; or

(b)

$400 - whichever is the lesser.

. . .

(7) A weekly payment to a worker who -

(a)

was not a full-time worker immediately prior to the injury;

(b)

at the time of the injury was seeking full-time employment; and

(c)

had been predominantly a full-time worker during the 18 months preceding the injury - shall be calculated as if the worker had been a full-time worker and as if the worker's pre-injury average weekly earnings were the average weekly earnings of the worker while employed in full-time employment during the 18 months preceding the injury."

8. Section 5(1) of the Act defined "full-time worker" to mean:

"a worker who is employed for at least the normal number of hours fixed in any industrial award applicable to the worker or if there is no applicable award the prescribed number of hours".

9. Section 95, so far as was relevant, provided:

"(1) In sections 93 and 94, 'the worker's pre-injury average weekly earnings' means - (a) the average weekly earnings during the 12 months preceding the relevant injury if the worker has been employed by the same employer for that period; or

(b)

the average weekly earnings for the period less than 12 months preceding the relevant injury for which the worker has been employed by the same employer - calculated at the worker's ordinary time rate of pay for the worker's normal number of hours per week.

. . .

(3) For the purposes of sub-section (1) -

. .

(b)

if an ordinary time rate of pay is not fixed for the worker's work under the terms of the worker's employment, the ordinary time rate of pay shall be deemed to be the average weekly rate earned by the worker during the relevant period under sub-section (1);

(c)

if a normal number of work hours per week is not fixed for the worker's work under the terms of the worker's employment, the normal weekly number of hours shall be deemed to be the average weekly number of hours worked by the worker during the relevant period under sub-section (1);

and

(d)

if the worker is employed by more than one employer at the time of the injury, the worker's average weekly earnings shall be calculated -

(i)

if the worker works for one employer for at least the normal number of hours per week fixed in any industrial award applicable to the worker, with reference to that work;

(ii)

if there is no applicable industrial award but the worker works for one employer for at least the prescribed number of hours per week, with reference to that work;

(iii)

if the worker works for more than one employer for at least the normal number of hours per week fixed in any industrial award applicable to the worker, with reference to the work which yields the higher ordinary time rate of pay;

(iv)

if the worker works for one employer for at least the normal number of hours per week fixed in any industrial award applicable to the worker and for another employer for at least the prescribed number of hours per week with reference to the work which yields the higher ordinary time rate of pay;

(v)

if there is no applicable industrial award but the worker works for more than one employer for at least the prescribed number of hours per week, with reference to the work which yields the higher ordinary time rate of pay; or

(vi)

in any other case, by obtaining the worker's average ordinary time rate of pay for all work carried out by the worker for all the employers and applying that rate to the prescribed number of hours per week or to the total of the worker's normal number of hours per week whichever is the lesser.

. . .

(6) Where a worker at the time of the injury was a full-time student, the worker's pre-injury average weekly earnings under section 93 or 94 -

(a)

until the time that the worker would have completed the course of studies in which the worker was a full-time student, shall be calculated in accordance with sub-section (1);

and

(b)

as from the time that the worker would have completed the course of studies in which the worker was a full-time student shall be -

(i)

the weekly earnings which the worker would have received upon being employed on the completion of the course of studies in which the worker was a full-time student; or

(ii)

$400 -

whichever is the lesser."

10. Although these sections have been amended since the appellant sustained his injury, it is convenient to speak of the relevant provisions in the present tense.

11. In this Court the appellant conceded that the phrase "the worker's ordinary time rate of pay" in s.95(1) does not include any overtime rate. He also conceded that, within the meaning of s.95(3)(b), an ordinary time rate of pay was fixed for his work under the terms of his employment. However, he contended that in s.95(1) the "normal number of hours per week" meant the number of hours usually worked by a worker and that they included any overtime hours usually worked during the week. Further, the appellant contended that, since he worked whatever hours were required of him, his hours were not "fixed" under the terms of his employment. Consequently, his "normal number of hours per week" had to be determined in accordance with s.95(3)(c). That is to say, his "normal number of hours per week" were deemed to be the "average weekly number of hours worked by the worker during the relevant period under sub-section (1)". This was the argument which the Tribunal division accepted, but which the Full Court rejected.

12. In construing the terms of s.95(1), it is helpful to bear in mind that the terms of employment of most workers are governed by industrial awards or agreements which provide for an ordinary time rate of pay for a standard or ordinary number of hours per week. Industrial awards and agreements usually state the number of ordinary working hours in each day and week and provide for the payment of overtime and penalty rates of pay for hours worked outside those ordinary hours: cf. Australian Labour Law Reporter, Vol.2, par.30-684; Leonard v. Auckland Electric-Power Board (1950) NZLR 534, at p 551; Basic Wage and Standard Hours Inquiry 1952-1953 (1953) 77 CAR 477 , at pp 504-505. Thus, in the present case the industrial agreement under which the appellant was employed provided that the ordinary hours of work should be an average of 36 per week which were to be worked in the manner specified "without payment of overtime": cl.3.

13. Against the industrial background of awards and agreements fixing a number of ordinary hours per week, it seems natural to read the expression "calculated at the worker's ordinary time rate of pay for the worker's normal number of hours per week" as a reference to the ordinary time rate of pay for the worker's standard or ordinary hours per week as fixed by award, agreement or contract. While it is true that on any view the "pre-injury average weekly earnings" calculated under s.95 is a notional and not an actual figure, it would indeed be surprising if the legislature intended that those earnings are to be calculated by multiplying the ordinary time rate by overtime as well as ordinary hours worked. If "normal number of hours" included overtime hours, some other formula to include the overtime rate would surely have been used.

14. Judicial decisions on similar expressions in comparable statutes support the view that the "normal number of hours per week" in s.95(1) means the ordinary hours fixed by award, agreement or the terms of the employment. In John A. Gilbert Pty. Ltd. v. Irving (1962) AR 307, the Industrial Commission of New South Wales held that in s.2(1) of the Annual Holidays Act 1944 (N.S.W.), which defined "ordinary pay" to mean "remuneration for the worker's normal weekly number of hours of work calculated at the ordinary time rate of pay", "normal weekly number of hours" meant the hours fixed by the employment. Section 2(2)(a) and (b) of that Act broadly corresponded to the provisions of s.95(3)(b) and (c) of the Act. The Commission said (at p 318):

"The word 'normal' in its ordinary sense may mean regular or usual, or it may mean conforming to standard. We are of the opinion that, in the definition, a worker's normal weekly number of hours is that number of hours which is fixed by the terms of the worker's employment as the standard of ordinary hours, as distinct from overtime hours, which are to be worked in a week. If 'normal' meant regular or usual, a determination of what was regular or usual would depend on the facts of each case in relation to a period of employment long enough to permit an ascertainment of what was regular or usual, but the language of s.2(2) suggests that terms of employment may fix in advance the weekly hours which are to be normal."

15. In Goodyear Tyre & Rubber Co. (Aust.) Ltd. v. Robinson (1961) AR 127, the Industrial Commission had also considered the meaning of the expression "the worker's normal weekly number of hours of work" for the purposes of the Long Service Leave Act 1955 (N.S.W.). The expression appeared in a definition of ordinary pay and was in the same terms as the definition of ordinary pay in s.2 of the Annual Holidays Act. McKeon J., with whose judgment Taylor P. and Beattie J. agreed, said (at pp 137-138): "Overtime hours are not hours within a worker's normal weekly number of hours of work; they are hours worked over and above his normal weekly number of hours of work, and a payment which is made for overtime hours cannot, in any sense, be said to be remuneration for one's normal weekly number of hours of work."

16. There seems to be no relevant difference between the phrase "normal number of hours per week" in s.95(1) and the phrase "normal weekly number of hours" in the New South Wales legislation. Indeed s.95(3)(c) uses the two phrases interchangeably. The two decisions of the Industrial Commission, therefore, strongly support the conclusion of the Full Court in the present case.

17. Further support for the proposition that "the normal number of hours per week" means the ordinary hours fixed by the terms of employment arises from various provisions of the Act which assume that the "normal number" of hours per week will be fixed by the industrial award or agreement. Thus, "full-time worker" is defined by s.5 to mean a worker employed for at least "the normal number of hours fixed in any industrial award applicable". Section 95(3)(c) provides that where "a normal number of work hours per week is not fixed for the worker's work under the terms of the worker's employment", the "normal weekly number of hours" is deemed to be the average weekly hours worked. Section 95(3)(d)(i), (iii) and (iv) refers to "the normal number of hours per week fixed in any industrial award applicable to the worker". These provisions indicate that the legislature understood the phrase "normal number of hours per week" in s.95(1) as the hours fixed under the terms of the worker's employment and not the hours actually worked.

18. Moreover, the terms of s.95(3)(d)(vi) indicate that the general policy of the legislation is that hours actually worked are not to be taken into account if they exceed the prescribed number of hours which is 35 hours per week (reg.5). It is true that the terms of s.95(3)(c) might suggest the opposite conclusion. But since the terms of employment fix the ordinary hours of work for most full-time employees, it seems likely that s.95(3)(c) was intended to operate in respect of casual workers, and most casual workers work less than the 35-40 hours per week which in recent years have constituted the norm for ordinary hours of work. Section 95(3)(c) should therefore be seen as an exception to and not a denial of the policy inherent in s.95(3)(d)(vi).

19. The history of the Act also supports the view that overtime hours usually worked are not to be taken into account in determining the worker's "normal number of hours". Before the passing of the Act, Victorian legislation dealing with workers' compensation expressly required that, in determining the average weekly earnings of a worker, amounts paid by way of overtime were to be included: see Workers' Compensation Act 1928, s.5(1), Second Sched., par.2; Workers Compensation Act 1951, s.5(1), cl.4(a); Workers Compensation Act 1958, s.5(1), cl.4(a). The omission of any specific reference to overtime payments in calculating the "pre-injury weekly earnings" in this Act is significant. Moreover, the explanatory notes on the draft proposal for an Accident Compensation Bill had provided that, for the purpose of calculating pre-injury ordinary time average weekly earnings, overtime payments were to be excluded altogether. However, when the Bill, which became the Accident Compensation Act, was introduced into the Legislative Assembly, s.95(2) provided:

"If a worker received payment for overtime worked by the worker and the average weekly earnings calculated under sub-section (1) are less than the amount calculated under section 93(5), 93(7), 94(6) or 94(7) (whichever is applicable) the value of overtime payments shall be taken into account but not so as to exceed the amount calculated under those sections."

Section 95(2), therefore, made it clear that a worker was not to be given any credit for hours worked as overtime for the purpose of calculating his pre-injury average weekly earnings except for the limited purposes set out in that sub-section. At the Committee stage, further benefits were given to the worker when cl.95(2) of the Bill was amended by omitting "overtime payments" and inserting "any other payments to the worker by the employer". However, "overtime payments" are obviously included within the wider expression "any other payments". Thus, the history of the Bill shows that hours usually worked as overtime were intended to be excluded from the calculation of pre-injury earnings except in the limited circumstances provided for in s.95(2).

20. Accordingly, the ordinary meaning of the phrase "normal number of hours per week" read in its context, the industrial background of the legislation, the judicial exposition of similar phrases, and the history of the legislation all point to the phrase meaning the ordinary or standard hours fixed by the terms of employment. The appellant contended, however, that this interpretation gave rise to at least three anomalies. He pointed out that it led to the situation where a worker gets the benefit of hours actually worked if no ordinary hours of work were fixed under the terms of his employment (s.95(3)(c)), but not if they were fixed. Secondly, if a worker was not a full-time worker at the time of his injury but was then seeking full-time employment, his actual average weekly earnings for the previous 18 months are treated as his "pre-injury" average weekly earnings": s.93(7). Thirdly, where a worker was a full-time student when he was injured, his pre-injury average weekly earnings are calculated from the time he would have completed his studies by reference to the "weekly earnings which the worker would have received upon being employed on the completion of the course of studies": s.95(6).

21. That the construction which the Full Court placed on s.95(1) leads to anomalies must be conceded. But the construction for which the appellant contends does not avoid the anomalies under ss.93(7) and 95(6) which occur in the case of a person who was not a full-time worker but was seeking full-time work or in the case of a worker who was a full-time student when he was injured. Those two sub-sections require pre-injury average weekly earnings to be calculated by reference to the wages earned or to be earned. The appellant's construction of s.95(1) accepts, however, that only the ordinary time rate of pay can be used to calculate pre-injury average weekly earnings even if overtime hours are part of the "normal number of hours per week". Thus, even on the appellant's construction of s.95(1), pre-injury average weekly earnings calculated under that sub-section are different from the actual or potential earnings calculated under ss.93(7) and 95(6). Moreover, so far as the anomaly produced by s.95(3)(c) is concerned, it is unlikely that there will be many cases of full-time employment where the ordinary hours of work are not fixed by the terms of employment. Cases falling within s.95(3)(c), therefore, will usually be those of casual workers whose total working hours will be less than the ordinary hours fixed by industrial awards or legislation. If, as appears to be the case, the policy of s.95 is to ensure that pre-injury average weekly earnings are to be determined primarily by reference to the ordinary hours of employment, nothing in s.95(3)(c) cuts across that policy in the case where that paragraph will usually be applied. That in some situations concerning non-casual employees s.95(3)(c) has an operation inconsistent with the general policy of s.95(1) is not a sufficient reason for construing "normal" in s.95 as meaning "usual".

22. Moreover, the construction for which the appellant contends gives rise to anomalies with respect to s.95(3)(d). Many workers with more than one employer are engaged in work in respect of which an industrial award fixes the normal number of hours per week. Section 95(3)(d) requires that those workers have their pre-injury average weekly earnings calculated by reference to the ordinary hours fixed by their industrial awards even if the appellant's construction of s.95(1) is accepted as correct.

23. The appellant also contended that the decision of this Court in Kezich v. Leighton Contractors Pty. Ltd. [1974] HCA 50; (1974) 131 CLR 362 supported the proposition that the "normal number of hours" was the number of hours usually worked and could include hours worked at overtime rates. In Kezich, the Court had to construe the expression "ordinary hours" in a workers' compensation statute which provided:

"For the purposes of this Act, 'weekly earnings' means the amount of the ordinary wage or salary (including any over award payment) the worker would have received for the ordinary hours he would have worked, if he were not incapacitated for work as a result of the injury."

The Court held that the phrase "for the ordinary hours he would have worked" meant the hours which he usually worked - which was 60 hours per week - as opposed to the 40 ordinary working hours fixed by an industrial award. Gibbs J. said (at p 365):

"The word 'ordinary' means 'regular, normal, customary, usual'. A man's 'ordinary hours' of work are the hours during which it is usual for him to work. There is nothing in the expression 'ordinary hours' that connotes payment at any particular rate, and to understand the words as meaning 'hours during which work is done for which overtime is not paid' would be to place upon them a meaning which they simply do not bear. The expression 'the ordinary hours he would have worked' in my opinion means the same as 'the hours he would ordinarily have worked' . . ."

24. But the question in the present case is what is meant by the phrase "normal number of hours per week" in a context where the pre-injury earnings are to be calculated by multiplying those hours by the ordinary time rate of pay and where the context shows that the legislature assumed that the normal number of hours per week was fixed by industrial awards. It is true that both Gibbs J. (at p 364) and Mason J. (at p 367) also said that the worker in Kezich "would normally work sixty hours per week". But, as the Industrial Commission of New South Wales pointed out in John A. Gilbert Pty. Ltd. v. Irving, at p 318, "normal" may mean "regular or usual, or it may mean conforming to standard". Thus, while it was accurate in Kezich to speak of the worker's usual hours as his normal hours, it does not follow that in s.95(1) "normal number" means "usual number". Indeed, the different context and history of the phrase "normal number of hours per week" in s.95(1) dictate that it be interpreted as meaning the ordinary or standard number of hours worked and not the usual number of hours worked.

25. Accordingly, in my opinion, in s.95 "normal number of hours per week" means the ordinary or standard hours fixed by the terms of the employment. The appellant's "pre-injury average weekly earnings" in this case had to be calculated by determining what were his total weekly earnings calculated by reference to the ordinary time rate of pay for the ordinary hours for the relevant period and then obtaining a weekly average of that sum. As the appellant had more than one ordinary time rate of pay during the 12 months period, his earnings for each of the three periods had to be grossed in accordance with that formula and then averaged over the relevant period.

The Period to be Taken into Account in Determining the Average Weekly Earnings

26. The Tribunal division held that what s.95 contemplated was "the aggregation of hours worked during 12 months and its division by 52 to give an average weekly number". The approach of the Tribunal division resulted in an average figure of $381.00 per week. This was arrived at by adding the three ordinary time rates and dividing by three, then dividing that average ordinary time rate by 36 hours per week to obtain an hourly rate, and then multiplying that hourly rate by the 1,963.5 hours worked. The product was then divided by 52 to obtain "the pre-injury average weekly earnings".

27. For the reasons already given, s.95(1), contrary to the opinion of the Tribunal division, did not require an aggregation of the hours actually worked during the 12 months period. Moreover, the Tribunal division was in error in assuming that what s.95(1) required was a "simple" average weekly rate and that the divisor was always to be 52. A simple average would lead to unfairness in many cases. The correct approach is to obtain a weighted average after deducting periods where the worker was off work on compensation.

28. In the present case the pre-injury average weekly earnings were $363.50. This figure was calculated as follows:

$357.00 x 12 weeks (excluding 12 weeks on compensation) = $4,284.00


$365.40 x 18 weeks (as from 13 April 1985) = $6,577.20


$367.90 x 10 weeks (as from August 1985) = $3,679.00


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$14,540.20


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Total earnings divided by 40 weeks = $363.50


29. The appeal should be dismissed with costs.