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Fiji Longshoremen and Staff Association v Fiji Ports Corporation Ltd [2013] FJET 2; ERT Dispute 6.2011 (11 February 2013)

IN THE STATUTORY TRIBUNAL, FIJI ISLANDS
SITTING AS THE EMPLOYMENT RELATIONS TRIBUNAL


ERT Dispute No 6 of 2011


BETWEEN:


FIJI LONGSHOREMEN & STAFF ASSOCIATION
Grievor


AND:


FIJI PORTS CORPORATION LIMITED
Employer


Counsel: Mr N Nawaikula, for the Grievor
Ms B Narayan, for the Employer


Date of Hearing: Monday 18 June 2012
Date of Judgment: Monday 11 February 2013


DECISION


CONTINUITY OF EMPLOYMENT – Section 61 Employment Relations Promulgation 2007; Accrued Entitlements; Long Service Leave; Performance Bonus Entitlements


Background:


  1. This is a matter that has been referred to the Tribunal in accordance with Section 194(5) of the Employment Relations Promulgation 2007, being an employment dispute that has not resolved at mediation.
  2. The employment dispute has been taken by the grievor association on behalf of Messrs Lepani Tule and Naibuka Seduadua, who had previously been engaged with the Employer, or one of its preceding entities for periods in excess of 29 years.
  3. In determining this matter, the relevant chronology of events set out within the Grievor's Written Submissions filed 10 August 2011 is of assistance.
  4. In the case of both workers, at the time of their commencement of employment they were engaged by the Ports Authority of Fiji, a government entity that had been established in 1975 under the Ports Authority of Fiji Act (Cap181).
  5. Consistent with the objectives of the Public Enterprise Act 1996 and as part of the reform to the industry in 1998, the Ports Authority was reorganised into two discrete entities, the Maritime & Ports Authority of Fiji (MPAF) and Ports Terminal Limited (PTL). The MPAF was charged with regulatory responsibility and ownership of the majority of the PAF assets and the PTL had commercial responsibility for the cargo handling of the ports. Both Messr Tule and Seduadua assumed roles within PTL.
  6. With the passing of the Sea Ports Management Act 2005, the Fiji Ports Corporation Limited company was established. In accordance with Section 10 of that Act, the PTL became a subsidiary entity of that company and the MPAF ceased to exist.
  7. Coinciding with these new arrangements, the employees were required to enter into fresh employment contracts with the 'Ports Corporation'.
  8. Both employees terminated their employment on 31 December 2009 and the issue in dispute is whether or not Messrs Tule and Seduadua were provided with their full entitlements owing at termination.

Impact of the Reorganisation and Engagement within Ports Terminal Limited


  1. The first key event to examine is the impact that the 1998 changes made to the employment arrangements.
  2. According to the submissions of the Grievor, the workers were offered at the time of this reorganisation, to either accept a redundancy arrangement or take up employment with PTL under the terms of a 3 year contract. Both men sought employment with the new entity and according to the submissions of the Grievor[1], renewed their respective contracts for a further three years. [2]
  3. At the expiration of their contracts and with the further reform within the industry in 2005, the workers were once again faced with a choice of what to do. That is whether to make application for a voluntary redundancy package or to enter into a further employment contract.
  4. And this is where the present issue really gathers some interest.

Fiji Ports Corporation Limited and 2005 Employment Contracts.


  1. In the case of both men, at the conclusion of 2003, it would appear that they had utilised all of their available long service leave credit. That entitlement having been incorporated by reference into their contracts of employment,[3] by virtue of the Partnership Agreement that apparently existed between the industrial parties at that time.
  2. To my mind, the first issue arising is whether or not the employees had any accrued leave entitlements for the period 2004-2005, that were carried over into their new employment contract.
  3. The Employer argues within the Response to Plaintiff's Submissions that

The Partnership Agreement took effect from 13.08.08. Hence the contention that the long service leave should be paid based on the prior employment history is unfounded. The period of five years is only effective under the existing employment contract of the employees from the time the Partnership Agreement came into force. The employees would have already been paid long service leave or their payments applicable under their previous employment contracts and cannot be unjustly enriched based on their previous employment history.


  1. I find this argument somewhat difficult to comprehend. The 2002 Contract of Mr Tulle for example, [4] makes clear that the

Contract of Employment is subject to these terms and conditions and the Partnership Agreement Terms and conditions.


  1. Clause 12 of that same contract under the heading "Leave" provides:

12.1 You shall have the same entitlements as other Company employees with respect to leave, including recreation leave, sick leave, long service leave and special leave.


12.2 In the case of recreation leave, you shall be entitled to payment of any outstanding leave earned.


  1. Assuming that the Long Service Leave provision contained within that Agreement was in the same terms as those contained within the 2008 Agreement, then it is clear that after a continuous period of five years service, an employee would be entitled to such leave. That is a contractual term.
  2. What needs to be determined, is what would happen to any accrued entitlement, when the new Fiji Ports Corporation Limited was formed in 2005.

Were the Accrued Entitlements Paid Out within Gratuity Payment or Otherwise Lost?


  1. Both parties to this dispute have provided me with a copy of a Human Resources Circular 08/05, entitled Port Industry Reform Voluntary Severance of Employment Scheme Gratuity Payment, dated 18 April 2005.
  2. Relevantly that circular provides:

Employees of Ports Terminal Limited (PTL) may apply for positions in FPCL or PTL, which shall be advertised within the next two (02) weeks.


  1. In the case of both employees, it seems that they did so.
  2. As the circular shows, such employees reengaged, would be entitled to a gratuity payment of three weeks basic salary for each completed year of service with PAF and PTL.
  3. The focus of the inquiry really seems to be, what is the consequence of an employee accepting the gratuity payment and assuming work with a successor employer?
  4. Was the gratuity designed as an incentive for employees to remain with the new entity to ensure that it could continue operations or was there a deliberate endeavour of the successor employer to extinguish all previous contractual entitlements?
  5. Neither party's submissions have been particularly assisting in this regard. I would have thought at the time of transitioning and at the payout of the gratuity, a supporting letter to that effect would have been provided to the employees. Accrued annual leave entitlements, would have had to been calculated as part of that process one would have thought. So much seems the intention of the Clause 12.1 of the 2002 contracts, where it provides:

In the case of recreation leave, you shall be entitled to payment of an outstanding leave earned.


  1. In the absence of any better information, I can only presume that the gratuity served as some form of incentive payment to attract and retain employees who may otherwise be enticed to apply for a voluntary severance package. There is nothing before me at all to suggest that it was also intended to 'buy-out' the accrued long service leave entitlements of the employees.

Long Service Leave

  1. It is noted that the Employment Relations Promulgation 2007 makes no provision for long service leave entitlements, nor does the continuity of employment provision within the Promulgation have any application in the case of long service leave.
  2. The claim that is made by the Grievor, is that both workers are entitled to 4 ½ years accrued long service leave entitlement, in accordance with the terms of their employment contracts. On that basis, there seems to be an acceptance that there were no arrangements made by the Ports Corporation to recognise the prior service of its employees.
  3. In the case of Mr Tule, for example, he appeared to have accepted a position with the new Fiji Ports Corporation Limited.
  4. The acceptance of this new role, coincided with a letter of offer sent to him on that same date, stating among other things,

In accepting this offer, you are deemed to have terminated your previous contract with Ports Terminal Limited.


  1. If Mr Tule was "re-engaged" within PTL in ostensibly the same capacity or at a comparable skill level, then ordinarily one would have presumed his continuity of service would have remained intact and this would have had consequences for any of his accrued entitlements.[5]
  2. Often industrial statutes assist in the transitioning of such entitlements to the successor organisation. [6] Alternatively in a sale of business transfer,[7] the acquiring company would specifically include or exclude the liabilities of the current employer.
  3. In the present case, the written contract that came into effect on 1 July 2005, made no express reference to leave arrangements. Instead, the three year contract provided at Clause 4, that

Your employment is subject to the terms and conditions under the FPCL Partnership Agreement.


  1. As indicated earlier, the contract incorporates by reference the Partnership Agreement created between the Fiji Longshoremen & Staff Association and the Ports Corporation.
  2. While neither party sought to provide the Tribunal with a copy of the Agreement in place in 2005, I will presume for these purposes that it was structured in identical terms to Clause 5.3 of the 2008 agreement, that reads inter alia:

Long Service Leave


(a) After a period of five( 5) years of continuous service an employee will be entitled to two (2) weeks long service and two (2) weeks leave allowance):-
  1. In the 2009 contract entered into between Mr Tule and the Employer, a similar provision referring to the Partnership Agreement, was in place.
  2. There is nothing within the Partnership Agreement that makes provision for pro-rata accrued long service leave entitlements on termination.
  3. As a result, the case of the Grievor relies on an undated copy of the Fiji Ports Corporation Human Resources Policy, where various policies pertaining to the employment relationship are set out.
  4. It is worthwhile at this juncture, seeking to clarify the status of this policy.
  5. At the outset, it is not a policy (or a set of terms) that have been incorporated into the employment contract by reference. There is no mention of the policy at all either within the written contract or the Partnership Agreement. [8]
  6. What we appear to have is an internal corporate policy document that seeks to provide in a consolidated form, the various human resource policies of the company.
  7. The introduction to the booklet reads:

This manual deals with rules, procedures and instructions pertaining to Human Resources administration in the Fiji Ports Corporation Limited (FBCL) and Ports Terminal Limited (PTL), a subsidiary company. As such it embodies official rules, procedures and instructions of both companies relating to appointment, promotion, discipline, leave and the payment of allowances etc., including general directives relevant to the employment of all workers in Fiji Ports Corporation and Ports Terminal Limited.


The manual is an official document of both companies and shall not therefore be lent, shown or communicated to any outside person(s) or organisation(s) without the specific authority of the Chief Executive Officer.


The manual may be amended from time to time.. All changes should be advised and discussed with the workers representatives and all staff are required to be full conversant with such changes as soon as these are adopted.


  1. Policy No 11 within that manual deals with Leave.
  2. Paragraph (ix) of Policy No 11 – Leave and Passages specifically provides:

An officer whose employment is terminated for any reason is entitled to leave on a pro-rata basis provided he[9] has been employed by the Company for a period of one year or more.


  1. Had the Grievor sought to suggest that paragraph (ix) of Policy No 11 should be an inferred or implied term of employment[10], then it has gone to no effort at all to show why or how this is the case. I accept that the policy refers to entitlements paid out for pro-rata leave. It is certainly prescriptive and not aspirational. The language within that policy is quite clear. What is not so clear is how that claimed entitlement can be reconciled with the language of the 2008 Partnership Agreement.
  2. There is a clear inconsistency between the Partnership Agreement and the Human Resource Policy manual. It would have been very easy for the parties to the Partnership Agreement to have modified either or both Clauses 4.2 (Termination Payment) and 5.3 (Long Service Leave) to have allowed for the pay out of accrued leave on termination. For whatever reason they did not. Clause 4.2 deals with the entitlement to accrued pro-rata entitlements for annual leave, but makes no reference to the accrued pro-rata entitlements for long service leave.
  3. On the other hand, the way in which paragraph (ix) of Policy No 11 – Leave and Passages has been written, is nonetheless clear and unambiguous.
  4. Paragraph (ix) of the policy, comes after the various forms of leave entitlement (such as annual leave and sick leave) have been described. It would be very easy for the employer to have excluded the calculation of accrued long service leave entitlements as being captured by the provision. It did not do so.
  5. The Human Resource Manual appears a far more comprehensive set of employment entitlements and practices than those terms and conditions that are set out within the Partnership Agreement.
  6. Having said all of that, the onus is on the Grievor to illustrate how or why paragraph (ix) of Policy No 11 was imported into the employment contract. The term would be inferred into the contract of employment, if it could be illustrated that it represented the actual intention of the parties. That is somewhat difficult to achieve, where the parties are in disagreement over the meaning of the clause in any event.[11]
  7. As to whether or not it was an implied term, in Fai Insurance (Fiji) Ltd v Prasad's Nationwide Transport Express Courier Ltd[12], the Court of Appeal restated the test set out within BP Refinery (Westernport) Ptyv Shire oire of Hastings[13], as follows:

    8. For a tr a term to be implied (1) it must be reasonand equitable (2) it must be necessary to give business effi efficacy to the contract (3) it must be so obvious "it goes without sayin) it must be capable of clef clear expressions and (5) it must not contradict any express term of the contract


    1. I cannot accept that the policy if it was to be implied, would not contradict an express term of the contract. While on one view it could be argued to be an enhancement of the Partnership Agreement provision and not inconsistent with it, I am not satisfied based on the evidence that the intention of the parties was along those lines.
    2. Ordinarily this outcome would have been avoided, had there had been a statutory provision that compelled the recognition of prior service with an employer for all purposes, or at least where there was a domestic policy in place, that recognised the prior service for such things as long service leave and sick leave.
    3. As stated earlier, there is no mention of this fact. That should have been an inquiry made earlier. It should have been an issue that was factored into the relevant negotiations of the industrial parties at the time of the 2005 transition process. Again there is simply no evidence of that fact.
    4. Further, the 2008 Partnership Agreement makes no reference to any pro-rata entitlement and I regard that document as more representative of the state of mind of the industrial parties in relation to this matter. For these reasons and as unfair as the outcome appears to be in the case of persons who gave such long service to the industry, I cannot accept that the pro-rata long service leave entitlement is implied or inferred into the contract of employment of the employees. In the way it has been written, it is more than likely a drafting error, although without further evidence as to its origins,[14] I would not categorically say so.

    Performance Bonus Payment


    1. Clause 3.2 of the 2009 Employment Contract of Mr Seduadua, illustrates what it appears to be the standard wording of the performance bonus clause for employees. It reads:

    You are also eligible to receive a Performance Payment. Where such a payment is paid it will apply only after your Job Description and Performance Targets are set and agreed to between yourself and management in which it is awarded and will not form part of or affect your base salary.


    1. Further, Policy No 4 – Performance Pay, located within the undated Fiji Ports Corporation Limited Human Resource Policy, sets out at Clause 2.0

    A performance bonus scheme place (sic) shall be subject to Board approval for all Fiji Ports Corporation Limited and Ports Terminal Limited officers. This is a totally at risk payment. That is, the bonus payment will be earned and paid out only if the agreed performance targets are met by the individual officer.


    1. Putting aside the Policy No 4, the written employment contract that was effective from 1 January 2009 is quite clear. There is a contractual undertaking that the employees would be entitled to participate in a performance bonus scheme.
    2. From the documents provided to the Tribunal, Mr Tule appears to have been classified at the level of a Band 5 operative and Mr Seduadua, at the level of a Band 4.
    3. Within Table 2 of Policy No 4 of the Human Resources Policy manual, a Performance Bonus Weighting arrangement is set out. That table shows the specific weighting given to the organisational, functional, group and individual performance contributions. Even if it was the case that this formula is no longer relied on by the Employer in the calculation of the payment amounts, the last employment contract entered into between the parties, is quite clear, that any payment is contingent upon the parties setting performance targets and presumably from the language of those words, the employee meeting those targets.
    4. It is noted in the 'Further Discovery of Documents By The Defendant', filed on 13 December 2012, that those documents contain a paper prepared for the attention of the Fiji Ports Corporation Limited Board, clarifying the manner in which the bonus payment is made.
    5. It is clear from the additional documentation provided through discovery, that previous bonus payments made by the Employer, are based not only on company performance, but paid, subject to an employee's performance assessment.[15]
    6. In 2007 for example, the company's Board Paper reveals, that the bonus calculation for the financial year ending 31 December 2007, is based on "the year to date performance and achievement and the contributions from its employees". In November 2008, approval was sought to pay employees an advance payment of 50% of that bonus calculation prior to "assist (employees) for the Christmas festive season", with the remainder "paid out on following year when the Audited Accounts for previous year is finalized, and also subject to employee's performance assessment".
    7. It appears that the audited accounts are finalised in or around June of the following year.
    8. I note also that in Annexure 16 of the Grievor's Submissions filed on 10 August 2011 that it contains an extract from the minutes of the Employer's Finance and Audit Committee Meeting dated 13 December 2005, in which it is claimed by the Grievor that the Corporation sought to rely upon, as some rationale for refusing the 2009 bonus payment.
    9. The comments ostensibly attributed to one consulting firm, are:

    "It is normal practice that bonuses are paid only to staff or employees who are currently employed by the entity. Staff who have left the employment of the entity, either through redundancy or resignation, are not eligible to all or any part of a bonus that is payable after their departure from the entity because they have not completed all the requirements to earn the bonus e.g. Work for the full year to enable performance assessment."[16]


    1. Reliant on that and other advice, the Committee appears to have resolved at that time to recommend to the Board of the Corporation, that

    "no bonus be paid to employees who have since ceased employment and further resolved the bonus payment be paid out on a 50% payout before Christmas followed by the other 50% before school starts in January."


    1. I find it very hard to understand how this 2005 recommendation from this Committee could have been relied upon by the Corporation in defense of its position in relation to these two employees.
    2. Firstly and contrary to the apparent advice of the consulting firm in 2005, the employees in question did work the full 12 months in question. Their performance could have and more than likely was continuously assessed during that time.
    3. Further, on that occasion, the second 50% entitlement was suggested to be made in January. If it was, then it seems that there were no other unsatisfied conditions that were required to be met, before the payment could be made.
    4. In any event, the custom and practice of the corporation in this regard is what it is.
    5. The dispute was initiated by the Union on behalf of the former employees on 20 September 2010. Why it took over two years for documentation to be provided in relation to the actual workings of the bonus payments in earlier years, is quite hard to fathom.
    6. In the submissions prepared by the Employer's lawyers filed on 17 August 2012, they state:

    The bonus payment made in the year 2009 was not based on any individual performance assessments of the employees of the Defendant but on the corporate performance as a whole.


    1. The Tribunal had previously issued a direction to the Employer to provide the bonus assessment records, including the identification of performance targets and all relevant correspondence at the time of termination pertaining to the financial or calendar year period immediately prior to that termination.
    2. That information was slow coming and still incomplete when provided. I would have thought for a large organisation, the relevant corporate files relating to this payment would have been easy to access. [17]
    3. In any event, I am satisfied that the calculation of the performance entitlement related to the financial year's performance of the calendar year. As the employees were employed for that full year, their contribution to that performance must be recognised. To use the words of Mr Tuberi in 2007, the bonus calculation is based on "the year to date performance and achievement and the contributions from its employees". There is no evidence before this Tribunal that the company has departed from that approach. In the financial year 2009, the bonus payments were calculated and it would appear 50% of that calculation paid to the employees in advance of the auditing of the company accounts. If that is the only rationale for withholding the remaining 50% of the employee's contractual entitlement, then once the audit is completed and the accounts finalised, the condition would appear satisfied so as to qualify employees who had contributed to the performance, to the remaining bonus entitlement.
    4. In the case of an employment contract that is written for a 12 month duration, no other reasonable conclusion can be drawn.[18] It is a performance payment coinciding with the financial performance of the company for a calendar year.
    5. The employees worked that entire calendar year period and based on previous years, that satisfactory contribution was the basis and recognition for the performance payment.

    Conclusions


    1. In relation to the outstanding bonus entitlements, I find that Mr Seduadua is entitled under the terms of his employment contract to the remaining amount of $1,802.50.
    2. That amount was provisioned for and he is entitled to it. In the case of Mr Tule, he too is entitled to the amount of $3,669.38.
    3. The claim for the payment of pro-rata long service leave fails for the reasons already articulated.
    4. While it would appear that both parties have had to incur reasonable costs in relation to this matter, given that the Grievor was successful in only half of its claim, I believe that the fairest outcome would be that each party meet its own costs.

    Decision


    It is the decision of this Tribunal that:


    (i) The Employer pay to the Grievor on behalf of the employees, the outstanding sum of $5,471.88 within 21 days.

    2013-02-11%20ERT%20Dispute%206.2011%20Fiji%20Longshoremen%20and%20Staff%20Association%20v%20Fiji%20Ports%20Corporation%20Ltd00.png


    Mr Andrew J See
    Resident Magistrate

    [1] As filed on 10 August 2011

    [2] No party has provided any submissions in relation to what happened to the accrued entitlements on that occasion.

    [3] An issue I will address in more detail further on.

    [4] As contained within the Submission of the Grievor dated 10 August 2011.

    [5] For example, it may have been the case that the acquiring entity was prepared to take on the accrued liability for an employee’s sick leave entitlement or annual leave. Though it does not appear to be the case on this occasion.

    [6] See PP Consultants Pty Ltd v Finance Sector Union [2000] HCA 59

    [7] Or even in the incorporation of a government entity.

    [8] I presume for these purposes that the Partnership Agreement in 2008, was in the same form as any earlier one in place in 2005, though it is not clear whether that Agreement was a registered instrument for the purposes of Fijian Industrial law.

    [9] And hopefully she.

    [10] See Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889 (4 July 2000)

    [11] The Employer argues that it only relates to the payment for untaken annual leave.

    [12] [2008] FJCA 101
    [13] (1977) 180 CLR 266 at 282>


    [14] Information that should have been provided by the Employer to the Tribunal.

    [15] See Paragraph 2.0 of 0 of the memorandum requested by the Board on 28 November 2008.

    [16] My impression of that advice is that it is likely not relevant to the present facts.

    [17] Even an affidavit from a Human Resource Manager, setting out the history to the payment would have sufficed.

    [18] It would be very easy for the Employer to clarify the terms of how its performance bonus scheme was to operate in the future, by clear language. If it did not wish an employee to receive any further entitlement to the bonus once they have terminated their employment, then it would be a simple exercise to draft the policy and preferably the terms of the employment contract accordingly.

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