Hitachi Rail STS Australia Pty Ltd v Schoof [2026] FCA 343

This was a Federal Court dispute about the meaning of an enterprise agreement, not a general ruling that applies automatically to every workplace. Hitachi Rail STS Australia Pty Ltd wanted declarations confirming that it had been calculating overtime and weekend penalty rates correctly under the Ansaldo STS Australia Pty Ltd Enterprise Agreement 2019. Its former employee, Mr Neville Schoof, said the company had been using the wrong rate.

The practical disagreement was simple to describe but important in dollar terms. Hitachi used the hourly rates listed in Schedule B of the agreement. Mr Schoof argued that the correct rate should be a larger figure made up of the Schedule B hourly rate plus allowances in Schedule C. If that argument succeeded, overtime and weekend penalty calculations would increase because the multiplier would be applied to a higher starting figure.

Mr Schoof had also raised a separate issue about a waiting time clause dealing with delayed payment of wages. By the hearing, he no longer pursued that claim. Hitachi still asked the Court to decide it, but the Court treated that issue differently from the main overtime and penalty dispute.

The Court's reasoning turned heavily on the internal structure of the agreement. Clause 3 dealt with ordinary hours of work. Ordinary hours could vary based on location and work requirements, and in general were 38 hours per week. The spread of hours could also vary by work location, so the agreement did not set a single fixed window for when ordinary hours had to be worked.

Part 4 was headed 'Wages and Classification'. It said wages were paid weekly, subject to receipt of a completed timesheet. Clause 4.2(a) said the hourly wage rates were contained in Schedule B. Schedule B itself was headed 'Ordinary Hourly Rates' and set out hourly rates for different classifications and years. Clause 4.2(b) also said those rates were inclusive of annual leave loadings when annual leave was taken.

Clause 4.10 dealt with Saturday and Sunday penalties for employees working on a roster with a normal spread of hours Monday to Sunday. It described the percentage penalties payable on normal hours worked on Saturday and Sunday, and expressly said Saturday and Sunday penalties were not payable on overtime.

Clause 4.11 dealt with overtime. It distinguished between employees working Monday to Friday and employees working on rosters and or projects. Clause 4.11.2(c) then said all overtime was calculated by reference to an employee's 'base hourly rate of pay'. Clause 4.11.2(d) said casual employees were paid overtime rates calculated on their 'base rate (excluding casual loading)'.

Allowances were dealt with separately in clause 5 and Schedule C. Clause 5 said various allowances were payable 'in addition to the hourly rate where applicable'. Schedule C listed allowances, some as an 'all purpose rate per hour' and others as a 'Flat rate per week'. That separation between hourly wage rates and allowances was central to the Court's analysis.

The main legal issue was one of construction. On the proper reading of this agreement, did the rate used for overtime and weekend penalty calculations include allowances, or was it limited to the applicable Schedule B hourly rate? The Court approached that question by applying established principles for interpreting enterprise agreements and by examining the text, context and structure of the instrument.

That distinction is important for business owners. The Court was not deciding a universal payroll principle that all allowances must be excluded from overtime or penalty calculations. It was deciding what this agreement meant. If another agreement uses different definitions, cross-references or drafting, the answer may be different.

The Court also had to consider whether it should grant declaratory relief on the waiting time clause. That issue had become secondary because Mr Schoof no longer pressed it, but Hitachi still wanted a declaration that the clause applied only to wages and not to allowances.

Colvin J accepted Hitachi's construction. The Court declared that, for clause 4.10 weekend penalties, the rate to be multiplied was the applicable hourly rate in Schedule B, excluding any allowances payable under clause 5.1. It also declared that, for overtime under clause 4.11.2(c), the 'base hourly rate of pay' was the applicable hourly rate in Schedule B, excluding allowances. For casual employees under clause 4.11.2(d), the 'base rate (excluding casual loading)' was also the applicable Schedule B hourly rate, excluding allowances.

The reasons were practical and textual. First, Schedule B expressly contained the hourly wage rates and was headed 'Ordinary Hourly Rates'. For Monday to Friday employees, overtime was calculated on hours worked beyond ordinary hours, and the rates for ordinary hours were in Schedule B. The Court said the phrase 'base hourly rate of pay' in clause 4.11.2(c) worked as a compendious expression covering both Monday to Friday workers and roster or project workers. It did not signal a new combined rate made up of wages plus allowances.

Second, the employee's construction would mean the overtime multiplier applied not only to the ordinary hourly rate but also to the allowances. The Court said there was no apparent industrial reason why allowances should be higher for overtime hours than for ordinary hours, and no convincing explanation was given for that result.

Third, some allowances in Schedule C were expressed as flat weekly rates. That sat awkwardly with the idea that all allowances should be folded into an hourly base for overtime calculations. The Court noted that if the agreement had really been structured that way, the use of weekly allowances would make little sense, and there was no coherent explanation for why some allowances would effectively be uplifted by overtime while others would not.

Fourth, the sequence of the agreement mattered. The allowance provisions came after the clauses dealing with ordinary hours, wage rates and overtime. There was no cross-reference in clause 4.11.2 directing the reader to include allowances. That structure suggested the overtime provisions were intended to operate without needing to import the allowance provisions.

Fifth, the Court rejected the idea that the words 'all purpose' in Schedule C changed the result. Those words did not appear in the substantive overtime clauses. The Court said they could simply indicate that the allowance descriptions applied generally and were not confined to particular classifications or duties. They did not show that the allowance rates formed part of the overtime calculation base.

The same reasoning carried across to weekend penalties. Clause 4.10 did not use 'base rate of pay' language at all. Once the Court rejected the employee's argument on overtime, there was no real footing for saying weekend penalties should be applied to Schedule B rates plus allowances.

This case is a good example of how similar payroll terms can do different work in an agreement. The 'ordinary hourly rate' was the language used in Schedule B, which set out the hourly wage rates for classifications. The Court treated those Schedule B rates as the rates paid for ordinary hours.

The phrase 'base hourly rate of pay' appeared in clause 4.11.2(c) for overtime. Mr Schoof argued that this phrase meant the ordinary hourly rate plus applicable allowances. The Court disagreed. It held that, in context, the phrase referred to the applicable Schedule B hourly rate. It was a convenient expression used across different categories of employees, not a signal that allowances had to be added in.

Allowances were separate entitlements under clause 5 and Schedule C. The agreement said they were payable 'in addition to the hourly rate where applicable'. That wording supported separation rather than combination. In other words, the employee might receive both the hourly rate and an allowance, but that did not mean the allowance became part of the rate to which overtime or weekend penalty multipliers were applied.

For payroll teams, this distinction matters. A payment can be made in addition to hourly wages without becoming part of the legal base for every other calculation. The answer depends on the instrument's wording, not on whether the allowance is paid hourly, weekly or regularly.

Clause 5.11 said that, unless an employee had been notified that payment would be delayed for reasons beyond the company's reasonable control, an employee kept waiting for his or her wages would be paid at overtime rates up to a maximum of one hour per day for each day of delay. There were also exceptions, including where timesheets were submitted late or the employee had not complied with the timesheet requirements.

Mr Schoof had earlier maintained that this clause applied to underpayments involving allowances. By the hearing, however, he no longer pressed that claim. Hitachi still wanted a declaration that the clause applied only to wages and not to allowances.

The Court accepted that there had been a justiciable controversy when the proceeding began, so jurisdiction was not the problem. The issue was discretion. The Court noted there was no continuing controversy between the parties on that point, no substantive opposing argument was being advanced, and the historical background of waiting time clauses would require detailed consideration before reaching a concluded view. Most importantly, once Mr Schoof failed on the main argument that overtime and penalty rates applied to allowances, there was no remaining practical scope for clause 5.11 to operate in the way he had alleged. The Court therefore saw no real utility in deciding the point and refused declaratory relief on that issue.

For businesses, that is a useful procedural reminder. Even if a court can decide a question, it may decline to do so if the dispute has effectively disappeared or the answer would be abstract. Litigation is not always the best way to obtain broad payroll guidance.

The safest reading of this case is not 'allowances never count'. The safer reading is 'the wording and structure of the industrial instrument control the result'. Here, the agreement separated hourly wage rates from allowances, and the Court gave that separation real effect.

If your business uses an enterprise agreement, especially one covering rostered work, project work, weekend work or multiple allowances, check how your payroll system has been configured. A common risk is that software or manual payroll practices treat every hourly payment as part of the overtime base. Another risk is the reverse: excluding an allowance that a different instrument says must be included. Both errors can create underpayment or overpayment issues, employee disputes and expensive remediation work.

A practical example shows the point. Suppose an agreement sets an ordinary hourly rate in one schedule and a separate site allowance in another. If payroll applies time-and-a-half to the combined amount without checking the legal text, the business may be paying more than the agreement requires. If the agreement instead says the allowance is all-purpose for overtime calculations and payroll ignores that, the business may be underpaying. The legal answer comes from the instrument, not from payroll habit.

This case also shows the value of keeping legal interpretation and payroll operations aligned. The agreement tells you what should happen. Payroll settings determine what actually happens every pay cycle. If those two things drift apart, the error can continue for years before anyone notices.

The judgment was delivered by Colvin J in the Federal Court of Australia on 27 March 2026. The hearing took place on 10 February 2026. The Court made declarations in Hitachi's favour on the overtime and weekend penalty construction issues and refused declaratory relief on the waiting time issue as a matter of discretion.

This page explains the decision as delivered. Businesses should still check whether there has been any appeal or later authority affecting the position before relying on the case in a live dispute.