Blandy v Coverdale NT Pty Ltd ACN 102 611 423 [2008] FCA 1533 | Case summary | Zoe

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Blandy v Coverdale NT Pty Ltd ACN 102 611 423

[2008] FCA 1533

Federal Court of Australia|2008-10-15|Before: Reeves J

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Court

Federal Court of Australia

Decision date

2008-10-15

Before

Reeves J

Source

Original judgment source is linked above.

Judgment (22 paragraphs)

[1]

INTRODUCTION 1 Coverdale NT Pty Ltd ('Coverdale') owns and operates an Eagle Boys pizza store and four Subway stores at various locations in Darwin in the Northern Territory. Between mid 2005 and mid 2007, it failed to pay six of its employees their various entitlements under the applicable industrial Award. 2 Sometime after these proceedings were issued on 9 August 2007, after initially refusing to accept responsibility, Coverdale reversed that position and paid the employees the underpaid amounts plus interest. Accordingly, the sole issue remaining for determination in this application is the appropriate penalty to be applied for Coverdale's breaches of the applicable industrial Award. 3 Five of the employees involved in these proceedings were young, ranging in age from 14 to 18 years. Coverdale's excuse for not paying them their proper Award entitlements was that they were all covered by Australian Workplace Agreements (AWA). Five of the six employees either denied ever signing an AWA, or could not recall having done so. When challenged to produce the duly signed AWAs, Coverdale was only able to produce one and even that one was not properly witnessed. This, and other of Coverdale's conduct detailed in these reasons, explains why I have decided to apply a significant penalty to Coverdale for its breaches.

[2]

FACTUAL BACKGROUND 4 Ms Sharon Maree Blandy, the applicant in these proceedings, is the State Director of the Northern Territory Office of the Workplace Ombudsman, previously known as the Office of Workplace Services. Ms Blandy was also an inspector appointed by the Minister pursuant to s 84(2) of the Workplace Relations Act 1996 ('the pervious WR Act'); and is a workplace inspector appointed by the Workplace Ombudsman pursuant to s 167(2) of the Workplace Relations Act 1996 as amended by the Workplace Relations Amendment (Work Choices) Act 2005 ('the Work Choices Act'). As a workplace inspector, Ms Blandy is able to bring these proceedings (see [14] below). 5 Mr Rodney Coverdale and Mrs Rita Coverdale are both directors of Coverdale and during the period to which these proceedings relate they both worked fulltime in Coverdale's Casuarina Subway store. Mr Coverdale attended to most of the paperwork for Coverdale's various stores and was responsible for making up and paying the wages of all its employees. 6 In February 2006, Ms Blandy's office began an investigation into various complaints that it had received that Coverdale had underpaid the wages of certain of its employees. The employees involved in those complaints were Ms Bourke, Ms Rety and Ms Davis. About three months after that investigation began, Mr Coverdale was asked to pay the underpayments. He initially stated he was uncertain whether he would and then, about a week later (in early June 2006), he stated that he had no intention of paying them. As a part of the investigation, Mr Coverdale was interviewed by Ms Lyn Grevsmuhl, a workplace inspector, on 9 November 2006. That interview was recorded and a transcript was subsequently prepared. 7 In about September 2007, Ms Blandy's office received a further series of complaints that Coverdale had underpaid the wages of another group of employees. Those complaints involved Ms McGough, Mr Maker and Mr Carcoba. They were each interviewed by Mr Paul O'Brien, a workplace inspector, and Mr O'Brien then conducted an interview with Mr Coverdale on 30 October 2007. That interview was also recorded and a transcript was subsequently prepared. 8 These proceedings were issued on 9 August 2007. In late January 2008, Coverdale's solicitors indicated to Ms Blandy's solicitors that it wished to admit the breaches and pay the employees the underpayments plus interest. Accordingly, on or about 8 April 2008, Coverdale's solicitors provided cheques payable to each of the six employees for the amounts of the underpayments due to them plus interest. At the same time, Coverdale submitted letters of apology addressed to each employee. The parties then prepared and filed an agreed statement of facts. At the hearing before me on 10 June 2008, the parties tendered that agreed statement of facts. 9 The six employees involved were all employed on a part time basis. Three of them worked at the Eagle Boys pizza store and the other three worked at one or other of the four Subway stores. The details of their names, ages, periods of employment and the amounts by which they were underpaid, are as follows: Employee: Age: Period of employment (total number of weeks employed): Amount paid by the respondent: Total amount of underpayment Rebecca Davis 14 20/8/05 - 31/12/05: (19) $2,672.66 $516.58 Elisca Rety 14 - 15 16/8/05 - 31/12/05: (19.5) $2,002.11 $842.22 Renee Bourke 18 1/8/05 - 25/1/06: (25.3) $12,592.17 $1,568.88 Nicole McGough 43 - 44 8/11/2006 - 30/5/07: (26) $9,700.07 $5,071.98 Francis Maker 15 23/2/2006 - 10/8/2006: (24) $3,253.21 $2,390.43 Victor Carcoba 16 - 17 29/5/07 - 9/7/2007: (6) $832.37 $812.42 Total: $11,202.51

[4]

RELEVANT LEGISLATIVE PROVISIONS 12 Between 1 August 2005 (the earliest date of employment of any of the employees) and 26 March 2006 (the date the previous WR Act ceased to have effect), s 178 of the previous WR Act relevantly provided: (1) Where an organisation or person bound by an award … breaches a term of the award … a penalty may be imposed by the Court … (2) Subject to subsection (3), where: (a) 2 or more breaches of a term of an award … are committed by the … person; and (b) The breaches arose out of a course of conduct by the … person; the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term. … (4) The maximum penalty that may be imposed under subsection (1) for a breach of a term of an award, order or agreement is: (a) where the penalty is imposed by the Court: … [It is common ground subsections (i) to (iib) are not applicable here] (ii) in any other case-300 penalty units for a body corporate or 60 penalty units in other cases; 13 Section 4 of the previous WR Act relevantly defined 'award' to mean: an award or order that had been reduced to writing under s 143 of that Act. The Award was such an award. Section 4 also defined 'Court' to mean the Federal Court of Australia. 14 Regulation 2.19 of Chapter 7 of the Workplace Relations Regulations 2006 provided that after the commencement of the Work Choices Act on 27 March 2006, the amendments made by the Work Choices Act did not affect the enforcement in a court of the rights and obligations that arose under the previous WR Act. Furthermore, regulation 2.14 provided that a work place inspector may institute any proceedings and conduct any prosecution in respect of an alleged breach of a matter under the previous WR Act. This provision includes the imposition of a penalty under s 178 of the previous WR Act. 15 These provisions (above) were the provisions that applied at the time of the breaches involving the employees Ms Davis, Ms Rety and Ms Bourke. 16 As from 27 March 2006, when the amendments made by the Work Choices Act came into effect, s 719 of that Act provided: (1) An eligible court may impose a penalty in accordance with this Division on a person if: (a) the person is bound by an applicable provision; and (b) the person breaches the provision. (2) Subject to subsection (3), where: (a) 2 or more breaches of an applicable provision are committed by the same person; and (b) the breaches arose out of a course of conduct by the person; the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term. … (4) The maximum penalty that may be imposed under subsection (1) for a breach of an applicable provision is: (a) 60 penalty units for an individual; or (b) 300 penalty units for a body corporate. 17 The expression 'eligible court' is defined by the combined effect of ss 717 and 4(1) of the Work Choices Act to mean the Federal Court of Australia. The expression: 'applicable provision' is defined in s 717 to include a term of an award, 'award' is relevantly defined in s 4(1) to mean a 'pre-reform award', and that expression is then defined in s 4(1) to mean: "An instrument that has effect after the reform commencement under item 4 of Schedule 4 to the Workplace Relations Amendment (Work Choices) Act 2005." Under item 4(3) of Schedule 4, the Award is specified to be such an instrument. The Award is therefore an applicable provision. 18 These provisions were the provisions that applied at the time of the breaches involving the employees Ms McGough and Mr Carcoba. In relation to the employee Mr Maker, his employment from 23 February 2006 to 26 March 2006 was covered by the previous WR Act and from 27 March 2006, it was covered by the Work Choices Act. 19 Section 4(1) of both the previous WR Act and of the Work Choices Act provided that the expression 'penalty unit' had the same meaning as in the Crimes Act 1914 (Cth). At all times relevant to these proceedings, s 4AA of the Crimes Act defined a 'penalty unit' to be $110.00. The maximum penalty that could therefore be imposed on a corporation under the applicable penalty provisions of both the previous WR Act and the Work Choices Act was $33,000.00 i.e. 300 x $110. 20 It will also be apparent from this review of the relevant legislative provisions that the provisions that create the offence relating to the breach of a term of an award or an applicable provision, including the provisions in relation to 'course of conduct' breaches under ss 178(2) and 719(2), are essentially the same under both the previous WR Act and the Work Choices Act.

[10]

The first three employees - Ms Davis, Ms Rety and Ms Bourke 29 Each of the first group of employees signed statutory declarations as a part of the investigation by Ms Blandy's office into the underpayment of their wages. In her statutory declaration, Ms Davis said Mr Coverdale provided her with an AWA to sign but she forgot to and Mr Coverdale did not mention it to her again. She said "I never read the AWA. I didn't comprehend it, I just read the title and other headings. I never returned the AWA and it's probably at home somewhere. Rod never mentioned anything about the AWA being lodged." 30 Ms Rety said in her statutory declaration that she was provided with an AWA to sign when she first started but she did not sign it and no one from Coverdale asked her about it. She added that "..[a]fter I was working for two months, there was a second AWA offered to me to sign by Rod. It was in a folder at work and he asked us to sign it but I didn't sign it. I just forgot about signing it." She said it was never mentioned to her that the AWA had been lodged. 31 Ms Bourke is in a somewhat different category. In her statutory declaration she said that she was given an AWA to sign and that she read it and was not happy with particular provisions of it. She described them as follows: "Things that I noticed was for my whole shift which ran from 7.00am to 3.30pm, there was only a half hour lunch break and no other breaks during the day. There were no rostered days off indicated in the AWA and I was under the impression that by working the 40 hour week that I would get a paid day off every 4 weeks however the AWA did not provide for this. The AWA also required that I had to work over 6 hours before I was entitled to a break. I was not able to make out the requirements for the sick leave as I found the information to be a bit hazy. It appeared to be a standard form and it did not indicate if I was full time, part time or casual." 32 As a result of these deficiencies, Ms Bourke said she decided not to sign the AWA. More significantly, she said that she put the AWA (unsigned) on a rack next to her bag at work and noticed it was missing. When she enquired of Leanne, the manageress at the store, she was told it had been collected. Ms Bourke said that she then told Leanne she had not signed it. She said she heard nothing further about the AWA and was not told it had been lodged. 33 Since none of these three employees had signed an AWA, it would be surprising if any had been lodged for them. Nonetheless, to put that beyond doubt, the evidence before me includes a letter from the Office of the Employment Advocate dated 26 October 2006, stating that no AWAs had been lodged with that office by Coverdale in relation to them. 34 As is noted above, Ms Blandy's office began its investigation into the complaints by these three employees in February 2006. From 28 March 2006 until early June 2006, the agreed facts record that there was a series of communications between Ms Blandy's office and Mr Coverdale about these complaints. It follows that from about this time Mr Coverdale must have become aware of the precise nature of the alleged breaches and must have been able to assess whether or not these three employees had signed an AWA. 35 About three months later, on 9 November 2006, Workplace Inspector Grevsmuhl conducted an interview with Mr Coverdale as a part of the investigation into the complaints. During that interview Ms Grevsmuhl asked Mr Coverdale some questions about a letter he had sent to Ms Blandy's office on 3 June 2006 complaining about the conclusions Ms Grevsmuhl had reached as a result of the investigation. That questioning proceeded as follows (emphasis added): Question: And firstly you, it states in the letter that you didn't agree with my findings, can you just tell me or explain a little bit why you didn't agree with my findings. Answer: Um, because the employee's were employed under an AWA, before they started employment they read and signed the AWA, they fully understood the conditions of employment under the AWA, and it wasn't until they had left the employment that they decided to bring this up. Question: Have you got copies of those AWA's Answer: Yes. Question: You have got copies, here now or. Answer: No. Question: Can you provide us with signed copies. Answer: Yes Question: You can. Um did include the rest of that paragraph of that letter where you stated they all signed documentation acknowledging the fact that they understood and agreed to the conditions of employment. Answer: That's right. 36 Mr Coverdale repeated this belief that all of the employees were covered by AWAs (see above) during his interview with Workplace Inspector O'Brien on 30 October 2007. At that interview he was offered a further opportunity to produce a copy of the signed AWAs for any of the six employees. As I have noted above, the only signed AWA that was ever produced was that for Ms McGough. 37 Based on the evidence set out above, I find that: none of these three employees signed an AWA; Coverdale did not validly (or at all) lodge an AWA for any of them; Coverdale could not reasonably have believed that any of them had signed an AWA, nor that it had lodged an AWA for any of them; and therefore, that Coverdale's claims that they had signed an AWA or that it had lodged an AWA for any of them were spurious. 38 To compound its conduct in making these spurious claims, I find that Coverdale's letter to Workplace Inspector Grevsmuhl on 24 August 2007, enclosing copies of unsigned AWAs for Ms Davis and Ms Bourke and asserting that those AWAs had been signed, to be quite deceptive.

[11]

The second three employees - Mr Maker, Ms McGough and Mr Carcoba 39 Each of the second group of employees has sworn an affidavit in these proceedings annexing the records of their interviews that were conducted as a part of the investigation by Ms Blandy's office into the underpayment of their wages. I will set out their evidence about the signing of AWAs first and then the evidence about the lodgement of AWAs. 40 Mr Maker said he was given an AWA by Mr Coverdale but that he could not remember whether or not he signed one. He said that he may have signed it and returned it to Coverdale. His mother likewise, was not sure whether or not she had been asked to sign her son's AWA. Against this evidence, no copy of Mr Maker's signed AWA was ever produced by Mr Coverdale. 41 Ms McGough said she might have signed her AWA and returned it to Coverdale. Her husband recalled having seen her sign a document which may have been the AWA. In fact, her signed AWA was the only signed AWA produced by Mr Coverdale for the six employees. Whilst that document is not in evidence before me, it appears from the discussion about it during the interview between Workplace Inspector O'Brien and Mr Coverdale that it was not properly witnessed. 42 For his part, Mr Carcoba was adamant that he had not signed an AWA and his mother was similarly certain that she had not read or signed one on his behalf. 43 The evidence of Mr Maker's mother and Mr Carcoba's mother was relevant because by the time they came to sign an AWA, s 340(1) of the Work Choices Act provided that: An AWA is approved if: (a) the AWA is signed and dated by the employee and the employer; and (b) those signatures are witnessed; and (c) if the employee is under the age of 18 years: (i) the AWA is signed and dated by an appropriate person (such as a parent or guardian of the employee, but not the employer) on behalf of the employee, for the purpose of indicating that person's consent to the employee making the AWA; and (ii) that person is aged at least 18 years; and (iii) that person's signature is witnessed. 44 Based on the evidence set out above, I find that no AWA had been approved in accordance with s 340 of the Work Choices Act for any of these employees. In the case of Mr Carcoba, I find that is so because I accept the evidence that neither he, nor his mother, signed an AWA. In the case of Mr Maker, I find that is so because Coverdale has not, despite offering to do so, ever produced a signed AWA for him. In the case of Ms McGough, I find that whilst she probably did sign an AWA, her signature on it was not properly witnessed as required by s 340. 45 Then there is the curious evidence about the lodgement of the AWAs for these three employees. 46 Coverdale purported to lodge, online, an AWA for each of these employees with the Office of the Employment Advocate on the following dates: · Mr Maker 19 April 2006 · Ms McGough 15 December 2006 · Mr Carcoba 9 August 2007 47 In my view, there was a number of serious irregularities in these purported lodgements. First, in each case, Coverdale declared in the online lodgement form that an AWA had been approved before lodgement, under s 340 of the Work Choices Act. I have already found that this was not so in relation to any of these employees. 48 Secondly, in each of the online lodgement forms Coverdale declared that the AWA was being lodged within 14 days of its approval. This is a requirement of s 342(1) of the Work Choices Act. As I have already found that no AWA had been approved in accordance with s 340 for any of these employees, it follows that I find these statements were not true. If this statement were true in relation to Mr Carcoba's AWA, it would result in the following absurd consequence. In his case, where Coverdale purported to lodge his AWA on 9 August 2007, his AWA would have been approved about two to four weeks after he left his employment with Coverdale on 9 July 2007. 49 Thirdly, in each of the online lodgement forms, Coverdale gave as the contact address and telephone number for the employees, its own post office box and its own telephone number. As a consequence, the letters from the Office of the Employment Advocate addressed to each employee acknowledging the lodgement of these AWAs were all sent to Coverdale's address. If the employees had received these letters, they would have learnt from reading them that Coverdale had declared in the online lodgement form that each of them had signed an AWA. 50 In his interview with Workplace Inspector O'Brien on 30 October 2007, Mr Coverdale claimed that he sent these letters from the Office of the Employment Advocate onto each of the employees after he received them. In their interviews with Workplace Inspector O'Brien, each of the employees denied ever having received such a letter. In the absence of some evidence to support Coverdale's claim, I find that it did not send these letters onto the employees. Accordingly, I find that Coverdale used its own contact details on the online lodgement forms to avoid these employees becoming aware of its duplicity. 51 In summary, based upon the evidence above, I find that in relation to the employees Ms Davis, Ms Rety, Ms Bourke, Mr Maker and Mr Carcoba, first, none of them signed an AWA. Secondly, no AWA was properly lodged in relation to any of them (nor Ms McGough). Thirdly, Mr Coverdale could not reasonably have believed that any of them had duly signed an AWA, nor that he had properly lodged an AWA for any of them. Fourthly, Mr Coverdale must have been aware that there was no basis, in fact, for him to make the statements that he did to Workplace Inspector Grevsmuhl on 9 November 2006 and Workplace Inspector O'Brien on 30 October 2007 that these employees had signed an AWA. It follows that I find that Mr Coverdale's conduct in not paying these employees in accordance with the Award was deliberate because he knew or must have known that his excuse for doing so i.e. they had all signed an AWA, was spurious.

[12]

Coverdale kept the uniform deposits 52 Coverdale has now admitted it breached clause 16.1 of the Award. This breach relates to Coverdale's failure to repay deposits that three of the employees (Ms Davis, Ms Rety and Ms McGough) agreed to pay to Coverdale, to secure the refund of the uniforms Coverdale provided to them. These deposits were made on the basis that they would be refunded once the uniforms were returned. That would have been so whether or not clause 16.1 of the Award provided for it. However, by admitting the breaches of clause 16.1 of the Award, it necessarily follows that each of the employees involved was correct in her claim that she did return her uniform soon after she left her employment with Coverdale. These breaches therefore involved a failure by Coverdale to repay monies that rightly belonged to these employees. Put in this way, in my view, these breaches are similar to a failure to repay monies held in trust. In my view, these breaches were deliberate and they are particularly serious. They should therefore attract a substantial penalty. 53 The seriousness of these breaches is compounded, in my view, by the spurious excuse Mr Coverdale gave for failing to repay these deposits. He obviously could not claim that the deposits had been withheld because the employees had not returned their uniforms. Clearly they had. Instead, he told them that he did not have to refund these deposits because they had not given sufficient notice of their intention to leave their employment with Coverdale and they therefore owed Coverdale money. It is inconceivable, in my view, that any employer employing up to 70 people, as Coverdale was, could seriously believe this claim justified its failure to repay these deposits. This conduct, in my view, compounds the particularly serious nature of these breaches. ANY LOSS OR DAMAGE SUSTAINED 54 Since Coverdale eventually paid each employee the underpayments plus interest, none of them has suffered any monetary loss. The only damage they have each sustained is in being kept out of their money for periods ranging up to approximately two and a half years. THE ONE COURSE OF CONDUCT 55 Sections 178(2) of the previous WR Act and 719(2) of the Work Choices Act provide in similar terms that where two or more of breaches of a term of an award, or applicable provision, arise out of the same course of conduct is to be treated as a single breach. 56 In Gibbs v City of Altona (1992) 37 FCR 216 ('Gibbs') at 223, Gray J made a number of observations about the operation of s 178(2), which I consider apply equally to the similar provisions of s 719(2). First, each separate obligation found in an award is to be regarded as a separate "term"; secondly, whether a separate obligation is a separate term is determined by whether it is in substance a different obligation; and thirdly, where different terms impose cumulative obligations or obligations that substantially overlap, that may be taken into account by imposing a nominal (or no) penalty for some breaches and a substantial penalty for others. 57 It is common ground between the parties that Coverdale's breaches of the Award constituted one course of conduct under these provisions. That course of conduct was described by Ms Blandy's counsel as 'purporting to employ the employees under Australian Workplace Agreements ('AWA') and paying them as such, without ensuring the AWA's were signed and registered.' 58 It also appears to be common ground between the parties that the course of conduct in these proceedings involved breaches of a number of separate terms of the Award. While Ms Blandy has placed the 24 breaches of the Award into seven categories (see [11] above), there were in fact nine separate terms of the Award that were breached. 59 Coverdale submitted that in assessing the appropriate penalty for these breaches of the particular terms of the award, I should be careful to avoid overlaps between the same conduct which amounts to a breach of another term. As well, Coverdale submitted I should take into account the relative gravity of the offending because some of the breaches involved only one or two of the employees and others involved relatively smaller amounts of money. 60 I consider the approach submitted by Coverdale is generally consistent with that outlined by Gray J in Gibbs and I propose to apply it in assessing the appropriate penalties in these proceedings. On this approach, I consider I should apply a penalty for each of the nine separate terms of the Award that were breached. Further, those nine separate terms should be graded as to their relative seriousness, as follows: a) The breaches of clauses 10.2, 14.3 and 22 of the Award re: failing to pay the minimum hourly wage rates - these should be regarded as the more serious breaches because they involve all of the employees and the largest proportion of the total amount of underpayments. b) The breaches of clause 16.1 re: the failures to refund the uniform deposits - for the reasons already given above, these breaches are quite separate from the other breaches and involve, what I regard as, particularly serious misconduct. c) The breaches of clause 14.7.1 re: the payment of overtime, clause 14.9 re: Sunday duty payment, clause 21 re: district allowance, clause 34.9 re: annual leave and clause 33 re: public holidays - all of these breaches involve either a failure to pay additional allowances, or a failure to pay additional loadings to the minimum hourly wage rates, that are, in my opinion, secondary to the main and most serious breaches (above). Furthermore, because these allowances and loadings are additional to the minimum hourly wage rates, they necessarily overlap, to some extent (but not completely), with the breaches in a) above. 61 Further, in relation to the breaches included in c) above, I consider they should be further subdivided as to their relative seriousness taking into account the number of employees and the amounts of the underpayments involved. On this basis I would therefore broadly grade those various breaches, as to their relative seriousness, as follows: a) The most serious - the breach of clause 21 which involved all six employees. b) The middle ranking in terms of seriousness - the breaches of clauses 14.9, 16.1 and 33 which involved three or four employees each. c) The least serious - the breaches of clauses 14.7.1 and 34.9 which involved one employee each. THE SIZE OF THE BUSINESS AND WHETHER SENIOR MANAGEMENT WERE INVOLVED 62 Coverdale is a family business. As noted above, it operates five separate stores at various locations around Darwin. At the time of these breaches it employed up to 70 employees. In the Darwin context, it would be regarded as a medium sized small business. 63 Mr Coverdale attended to most of the paperwork for Coverdale's various stores and made up all of the pays for all of Coverdale's employees. While the expression "senior management" is not particularly apt for a family business, it is clear that Mr Coverdale, as the governing mind and will of Coverdale, was directly involved in, and responsible for, all of the breaches.

[13]

SIMILAR PREVIOUS CONDUCT, CONTRITION AND COOPERATION 64 Coverdale points to a number of extenuating circumstances which it submits should be taken into account in assessing the appropriate penalty for its breaches. First, it says it has not been involved in any similar conduct in the past. Secondly, it says it has paid the employees the full amount of the underpayments plus interest. Thirdly, it says it has shown contrition by sending letters of apology to each of the employees. Fourthly, it says it has accepted that it committed the various breaches of the Award and it has cooperated with the applicant in preparing and filing the agreed facts. Finally, it says it provided cooperation during the course of the two investigations conducted by Ms Blandy's office. 65 In my view it is necessary to balance these extenuating circumstances against Coverdale's conduct before it reversed its position and admitted its breaches in late January 2008. Some of that conduct has already been set out above in considering whether the breaches were deliberate. I do not propose to repeat that here, but I do consider it is relevant to this issue. In addition to that, I take into account the following conduct. 66 As recorded in the agreed facts, on 2, 5 and 8 May 2006, as part of the first investigation by Ms Blandy's office, Coverdale was asked to make good the underpayments in relation to the employees; Ms Bourke, Ms Rety and Ms Davis. Mr Coverdale initially stated he would consider the matter and then, on 6 June 2006, he stated that he had no intention of paying the underpayments. Coverdale maintained that position for the next 20 months (approximately) and in late January 2008 admitted the breaches and eventually paid the underpayments in April 2008. In the end result, the underpayments were finally paid just under two years after Coverdale was first asked to pay them. 67 In August 2006, Mr Maker was dismissed from his employment with Coverdale. The agreed facts record that his dismissal happened in this way: "He wrote a note on the whiteboard for Mr Rodney Coverdale requesting Mr Rodney Coverdale check his pay believing that he had been underpaid. [He] states that in response Mr Rodney Coverdale wrote on the whiteboard that [he] had been dismissed." Whilst Mr Coverdale denied these events in his interview with Inspector O'Brien, I find that Mr Maker has given an accurate account of them. I base that mainly on the fact Coverdale has now admitted all of the breaches. In the end result, Mr Maker was underpaid $2,390. That is an average of about $100 per week during his employment with Coverdale. Mr Maker was finally paid what he was due approximately one year and nine months after he first asked for his proper wages and was dismissed for doing so. 68 For a six week period during June and July 2007 (up to 9 July) Mr Carcoba was employed by Coverdale. Coverdale has now admitted he was underpaid $812 during that time which equates to an average underpayment of $135 per week. He had to wait nine months to be paid his proper wages. 69 Then in mid July 2007, Ms McGough left her employment with Coverdale. The agreed facts record that "Following termination of her employment, [she] wrote two letters to [Coverdale] seeking to recover her underpayments. She received a telephone call from Mr Rodney Coverdale advising that she had been paid all she was entitled to and in fact she owed him some money." The brazenness of Mr Coverdale's claim that Ms McGough "in fact owed him some money" is demonstrated by the fact that about six months later Coverdale was finally willing to admit that it had underpaid her more than $5,000 during the 26 weeks she was employed with Coverdale - an average of almost $200 per week. 70 Coverdale therefore kept the employees out of their proper wages for up to two and a half years - Ms Bourke was affected for the longest period since her employment commenced on 1 August 2005. Significantly, Coverdale did not admit its breaches and makeup the underpayments at the first opportunity. Instead, Mr Coverdale persisted with the spurious claims that the employees had all signed AWAs and they had been duly lodged. In doing so, Mr Coverdale was effectively asserting that it was the employees themselves who were not telling the truth. He compounded that by making the very specific statement to Workplace Inspector Grevsmuhl that "they read and signed the AWA, they fully understood the conditions of employment under the AWA". One consequence of these assertions was that the employees were then forced to make complaints to Ms Blandy's office, to persevere with those complaints, to make statutory declarations, to swear affidavits and to support these proceedings, all to establish their rightful entitlements and , coincidentally, that they were telling the truth throughout. 71 Furthermore, to this day, Coverdale persists in characterising its breaches as its lax administration of the AWAs rather than frankly acknowledging that with at least five of the six employees, there was no AWA to administer, since none had been signed. Indeed, Coverdale's persistence with this false characterisation of its breaches is even reflected in its letter of apology to the employees, where it states it is apologising for " … our failure to properly administer our Australian Workplace Agreements whilst you were in our employment." In my view, this detracts from the apologies as a genuine act of contrition on Coverdale's part. It has even made a similar claim in the agreed facts under the heading 'Respondent's Version', where it states "All staff were employed on AWAs". 72 In my view, all this conduct significantly detracts from the extenuating effect of Coverdale's eventual admission of the breaches, paying the underpayments and giving letters of apology. 73 In a criminal case the maximum discount for a plea of guilty made at the first reasonable opportunity is said to be 25%: see Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 at [75] per Stone and Buchanan JJ. Taking into account Coverdale's conduct before its late admission of the breaches as set out above, I consider that the discount for its plea of guilty and other extenuating circumstances should only be 10%. CORRECTIVE ACTION 74 Coverdale submits it has taken corrective action by negotiating and entering into a Collective Agreement with its employees in September 2007. In my view, this submission must be rejected. I fail to see how replacing one system it failed to comply with, with a new and different system corrects Coverdale's actions in failing to comply with the first system. This is particularly so where Coverdale demonstrates a complete lack of insight of the true nature of its failings with the first system i.e. that it had not in fact entered into an AWA with most, if not all, of these employees. 75 To show that it had taken some genuine and relevant corrective action, I would have expected Coverdale to produce evidence that it had implemented a system to properly inform its new employees, particularly young employees, about their employment conditions; to explain the terms of their employment agreement to them, so that they are fully aware of their rights and responsibilities under it; to ensure, in the case of young employees, that an independent person, such as a parent or guardian, was involved so that they were able to obtain independent advice on their employment agreement; and finally to ensure that any employment agreement, whether it be an AWA, or some other form of agreement, was properly signed by the employee and/or a parent or guardian, where the employee was a young employee. The fact that Coverdale has not produced any evidence to this effect, also has a bearing upon whether an element of specific deterrence should be included in the penalties to be applied for Coverdale's breaches (see below).

[14]

SPECIFIC AND GENERAL DETERRENCE 76 The authorities are clear that I need to consider both specific and general deterrence in determining the appropriate penalty to be applied: see Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65 at [93] to [94] per Lander J and Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 ('McAlary-Smith'). In this case, I consider there is a need to include a component for both specific and general deterrence. 77 In relation to specific deterrence, I consider that it arises for a number of reasons. First, to mark the Court's disapproval of Coverdale's treatment of these six employees. In my view, Coverdale acted with a high-handed disregard for the rights of these employees by rejecting their rightful claims for a long period of time with spurious allegations which were both insulting and humiliating. Secondly, Coverdale continues to demonstrate a lack of insight for, and therefore genuine acceptance of, its misconduct. It did this even after it admitted the breaches in the apology letters and the agreed facts by characterising the problem as one of lax administration of AWAs rather than a fundamental neglect of its obligations when it was negotiating and entering into employment agreements with its employees. Consistent with this lack of insight, Coverdale has not taken any corrective action to address the true underlying problem by implementing a fair and proper process for negotiating and entering into employment agreements with its employees. Finally, I consider it is necessary to mark the Court's particular disapproval of the way in which Coverdale dealt with these young employees. They are in a group within the workforce which is likely to be unsophisticated and lacking in knowledge about the terms and conditions of employment agreements, a group which is likely to be vulnerable to exploitation as a result and, more often than not, a group which is likely to be powerless to take any action to address that exploitation when it occurs. 78 Further, I consider there is a need to include a component for general deterrence in this penalty to alert all employers to the fact that the courts treat seriously their obligations to deal fairly with their employees when negotiating employment agreements, to pay their employees their proper wages and other entitlements in accordance with those employment agreements and/or the relevant legislation and to be particularly scrupulous in their dealings with young employees, to treat them fairly and to avoid exploiting their lack of sophistication and vulnerability mentioned above.

[19]

THIRD CATEGORY - various breaches - ranked by seriousness Most serious Clause 21 - district allowance - 6 breaches - $ 6,000 Mid level of seriousness Clause 14.9 - Sunday duty - 4 breaches $ 2,000 Clause 33 - public holidays - 3 breaches $ 1,500 Least serious Clause 14.7.1 - overtime - 1 breach $ 250 Clause 34.9 - annual leave - 1 breach $ 250 Total $50,000 Less 10% for extenuating circumstances $45,000 81 In assessing the fair and appropriate penalties to be applied in this case, thus far I have obviously taken the orthodox approach. That is, I have first assessed the appropriate penalty for each breach and having done so, I should now assess whether the aggregate total amount of the penalty is an appropriate response to the conduct involved: see Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at [53] per Goldberg J, Kelly at [30] per Tracey J, and McAlray-Smith at [23] per Gray J, at [71] per Graham J and at [97] per Buchanan J, contra The Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at [7] per Finkelstein J. I will not repeat what I have said above about the seriousness with which I regard Coverdale's conduct. It will suffice to say that the aggregate total figure of $45,000 is much higher than the range of $15,000 to $20,000 proffered by Coverdale. In general terms this is so because I have taken a much more grave view of the nature of the conduct involved than Coverdale has submitted I should. On the other hand, the aggregate total figure of $50,000 is below the lower end of the range proffered by Ms Blandy of $50,000 to $60,000. 82 The final step is to assess whether the aggregate total figure of $45,000 is an appropriate response to the misconduct involved. There is obviously no particular science involved in this process, nor some simple formula I can follow. However, on balance, I consider the final aggregate total figure of $45,000 is an appropriate penalty for Coverdale's serious breaches. 83 For these reasons I order that Coverdale be penalised the aggregate total amount of $45,000. I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.

Blandy v Coverdale NT Pty Ltd ACN 102 611 423

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