Federal Court of Australia|2024-02-15|Before: Bromwich J

Background 10 CommSec is a wholly-owned subsidiary of CBA. They, and other subsidiary companies of CBA, comprise what is referred to as the CBA Group. CBA and CommSec are major providers of financial services in Australia in their capacity of being (or in case of CommSec, formerly and at all relevant times being) national system employers within s 14(1)(a) of the FWA (with their staff being national system employees) and, more specifically, employers within the banking, finance and insurance industry as defined in the Banking, Finance and Insurance Award 2010 and later the Banking, Finance and Insurance Award 2020 (BFI Award). It is not necessary to set out the full history of award coverage in these reasons. 11 As to enterprise agreements, CBA and CommSec and their employees were covered by: (a) in the period from 9 October 2014 to 1 December 2016, the Commonwealth Bank Group Enterprise Agreement 2014 (2014 EA); and (b) in the period from 2 December 2016 up to and including 26 August 2021, the Commonwealth Bank Group Enterprise Agreement 2016 (2016 EA), together, the Enterprise Agreements or EAs. 12 CBA and CommSec had shared human resources (HR) functions, including in relation to advising on enterprise agreement negotiations and implementation, determining remuneration ranges, conducting HR reform projects, compliance with and risk management of obligations under the FWA, applicable awards and enterprise agreements and overseeing the remuneration review process performed by individual teams of staff. These functions were carried out by what are referred to as Shared HR Staff divided between various HR teams, some of which aligned to what are referred to as HR Business Units, as well as central HR functions which were not aligned to any business unit. 13 The CBA Group is not just Australia's largest banking conglomerate, but is, by market capitalisation, the second largest corporate group listed on the Australian Securities Exchange. Its market capitalisation is about $190 billion. In the year ended 30 June 2022, the CBA Group made a net profit after tax of about $9.7 billion. During the period between 9 October 2015 and 31 January 2021, CBA had just over 5,000 employees and CommSec had just over 2,400 employees (noting CommSec is no longer an employer).

The contraventions and admissions 14 The contraventions are set out in considerable detail in the SAFA and in annexed schedules. Not all that detail needs be set out for the purposes of these reasons, although comprehending that detail was indispensable in properly understanding what took place and the context in which it occurred. The contraventions are mapped out in a summary way under the following four subheadings, and enlarged upon as necessary later in these reasons.

Clause 10 contraventions 15 The stated purpose of cl 10 of Division A of the Enterprise Agreements (which was identical across both EAs), headed "Better off over all test", was to "ensure that employees are better off overall under this Agreement than they would have been had the Award applied to them in place of the Agreement": cl 10(a). Clause 10(b) provided that at the end of each "Relevant Period", being each 12-month period from the commencement of each EA, subject to partial periods due to early cessation of an EA, the CBA Group, and thus each of CBA and CommSec, "shall determine whether an employee is eligible for a top-up payment calculated on the following basis: TP = A - E". The terms of that formula refer to the top-up payment (TP), the remuneration as defined that would have been paid for the relevant period had the Award applied (A) and the total remuneration received as defined under the EAs (E). Any top-up payment was required to be made within a month of the end of the relevant period and was subject to income tax deductions: cl 10(c). 16 Thus, there was an obligation imposed on CBA and CommSec by cl 10(b) to conduct a reconciliation in order to determine whether an employee or class of employees was eligible for a top-up payment; and a corresponding obligation imposed by cl 10(c) to make any such top-up payment within a month from the end of a month after the relevant period concluded. The SAFA addresses the contraventions and corresponding admissions in some detail. 17 Over just under four years, over five contiguous assessment periods between 9 October 2014 and 1 December 2018, neither CBA nor CommSec performed the necessary reconciliation as required across a number of categories of employees, and therefore did not make top up payments that were due. As a result, 1,926 CBA employees were paid about $2,660,435 less than they would have had the top up payments been made; and 2,366 CommSec employees were paid about $6,243,799 less than they would have had the top up payments been made. 18 The respondents also admit to similar conduct in the period from 30 September 2010 to 8 October 2014, prior to the period when pleaded contraventions took place, involving an identical clause to cl 10 in the EAs. That conduct is not advanced by the FWO as constituting contraventions, but rather as conduct of a like kind to establish that the cl 10 conduct that is pleaded as contraventions, and admitted as such, was part of a systematic pattern of conduct over about 10 years affecting a substantial number of employees. 19 During that earlier period, HR Business Units did not take steps to implement practices and processes to undertake BOOT reconciliations and make top up payments. Rather, they took the view that the predecessor to cl 10 was only "a comfort clause for Fair Work and the union" (apparently a reference to the Fair Work Commission), to be applied manually and on a case-by-case basis after the receipt of complaint or inquiry, and therefore oversaw and supervised high-level remuneration reviews performed by individual teams on a prospective basis; assumed the annual remuneration determined on this basis was sufficient; and did not perform reconciliations. Senior staff within the respondents, including staff at the executive level, were put on notice that CBA may not be complying with the cl 10 requirements from at least December 2015. Given other matters that are admitted to having been known by senior staff from as early as 2010, CBA and CommSec ought to have detected the circumstances indicating the contraventions earlier. 20 Despite this, during this period, the CBA Group repeatedly represented to employees, and in in documents filed with the Fair Work Commission (FWC) for the purpose of obtaining approval for those predecessor enterprise agreements, that reconciliation would take place and top up payments made. This conduct continued into the period of the EAs until 20 December 2018. Senior staff within CBA and CommSec were put on notice from December 2015 and through 2016 that CBA and CommSec may not be complying with the requirements of cl 10, by which both entities became aware that some employees may not have been receiving top up payments or were being paid lower than the award rates. 21 The contraventions that occurred from 15 September 2017 are "serious contraventions" under s 557A of the FWA, being "knowing" contraventions arising from a systemic pattern of conduct relating to one or more persons. These carry higher penalties than other contraventions. Under s 557B, conduct "expressly, tacitly or impliedly authorised" by a body corporate is deemed to be conduct done "knowingly" by it for the purposes of s 557A. As noted in the Explanatory Memorandum to the bill that inserted ss 557A and 557B, this reflects elements of Part 2.5 of the Criminal Code (Cth) in that it attempts to address the difficulty of proving knowledge of contraventions in diffuse corporate organisations. The respondents admit that they "expressly, tacitly or impliedly authorised" these contraventions and in that sense did so knowingly. 22 The respondents admit to the pleaded contraventions in relation to the conduct contrary to cl 10 of the EAs, the detail of which is not needed for these reasons, especially given the competing schedules of contravention and proposed penalties advanced by the FWO and the respondents.

Clause 12 contraventions 23 Clause 12 of Division A of the EAs (again, identical across the 2014 and 2016 EAs) permitted each of CBA or CommSec to enter into an individual arrangement by agreement with an employee, and permitted such an arrangement to vary the effect of any of the provisions of the EAs set out in a table to cl 12.2(e). Also, cl 12.2(d) imposed a mandatory BOOT requirement upon CBA and CommSec in relation to an individual arrangement as against the otherwise applicable EA. This had the practical effect of requiring CBA and CommSec to take into account any realistic possibilities of future events or contingencies occurring that would give rise to EA entitlements for employees (e.g. working overtime or receiving other applicable penalties or allowances) when settling an employee's individual arrangement entitlements. 24 During two relevant periods (the first between 9 October 2015 and 1 December 2016 for both CBA and CommSec; and the second between 2 December 2016 and 28 June 2019 for CBA, and between 2 December 2016 and 30 June 2017 for CommSec), both CBA and CommSec did not ensure that certain employees were better off overall than under the applicable EA. 25 Following a later assessment which compared the remuneration actually received by employees during the relevant periods and the equivalent amount that they would have received had they been paid only in accordance with the applicable EA rather than an individual arrangement, it was found that 256 CBA employees were paid approximately $440,392 less than they would have been if CBA had applied the cl 12.2(d) BOOT requirement, and six CommSec employees were paid approximately $3,088 less than they would have been paid if CommSec had applied the cl 12.2(d) BOOT requirement. Both CBA and CommSec admit that this conduct constituted contraventions of s 50 of the FWA. 26 From December 2015, senior staff in HR Business Units were put on notice that CBA may not be complying with the cl 12.2(d) BOOT requirements, and by May 2017, the CBA Group IR Business Unit had identified it as a compliance issue and assigned responsibility for investigation and remediation of this non-compliance to an HR Business Unit. Again, given matters known to senior staff from 2010, the non-compliance should have and could have been identified earlier. Eventually the problems were addressed, and full remediation took place in respect of both CBA and CommSec. 27 CBA additionally admits that the contraventions in the period from 15 September 2017 to 30 June 2020 and in respect of identified cohorts of employees (listed in schedules to the SAFA) were serious contraventions under s 557A of the FWA, on account of there being several identified cases of employees being underpaid by reference to the entitlements they would have had under 2010, 2011 or 2013 EAs (predecessor EAs), and senior staff being aware of these underpayments, forming a systematic pattern of conduct over approximately 10 years.

Individual arrangement contraventions 28 Under s 202 of the FWA, an individual flexibility arrangement (IFA), also referred to as an IA, is an arrangement between an employer and employee, entered into under a flexibility term in an EA and has effect only as a term of an EA. That is, the EA must first exist and apply to the employee and accordingly an IA can only be entered into with an existing employee. If the IA is not validly entered into, the provisions by which it can be rolled over into the new EA do not apply either. Thus, a single error as to when IAs could be deployed could have had two consequences, the first being the invalidity of the IA upon that basis in the first place, described as pre-employment invalidity, and the second being the inability to continue that arrangement over to a new EA, described as rollover invalidity. Both consequences applied in this case. 29 In the period between 9 October 2015 and 21 February 2019, CBA offered IAs to certain prospective employees, which were accepted before the commencement of their employment. CommSec did the same in the period between 9 October 2015 and 22 December 2018. Both CBA and CommSec admit that individual arrangements offered to prospective employees, which each of these employees accepted prior to commencement of their employment, were not IFAs within the meaning of s 202 of the FWA, and therefore did not vary the rights and obligations of the respondents and relevant employees under each of the applicable EAs. 30 Each of CBA and CommSec have assessed that by reason of the prospective employees being paid pursuant to the individual arrangements made prior to their employment, 2,614 employees of CBA were paid approximately $5,143,342 less than they would have been if they had been paid in accordance with the applicable EA, and 80 employees of CommSec were paid a total of about $105,013 less than they would have been paid in accordance with the applicable EA. CBA and CommSec admit that these contraventions constituted a contravention of s 50 of the FWA. 31 CBA and CommSec make further admissions that, as an individual flexibility arrangement made under one EA would cease to have effect when that EA ceases to operate, the deeming provision in cl 12 of the EA purporting to allow individual arrangements entered under one EA to continue under the succeeding EA could not be valid. Certain employees who had entered into an IA under one of the predecessor EAs had not agreed to a new IA under the 2014 EA when it came into effect. Similarly, when the 2016 EA commenced, certain CBA and CommSec employees who had entered into IAs made under one of the predecessor EAs or the 2014 EA had not agreed to a new IA under the 2016 EA. The respondents admit that the employees should have been paid pursuant to the applicable EA, with each of the contraventions constituting a further contravention of s 50 of the FWA. 32 The effect of both forms of invalidity was that a range of entitlements were not paid as required under the applicable EAs, namely the payment of: district allowances, higher duties allowances, meal allowances, on call allowances, relieving allowances, annual leave and annual leave loading, long service leave, payment in lieu of notice, incentive bonuses, ordinary hours, overtime, shift loading, Saturday loading, Sunday loading, annual leave on termination, redundancy and severance pay, cashing out annual leave, moving out day leave, parental leave, personal carer's leave, time off in lieu of overtime and public holiday shift loading. 33 CBA and CommSec have assessed that by reason of the prospective employees being paid pursuant to the original IAs that could not roll over, 663 CBA employees were paid about $1,463,732 less and nine CommSec employees were paid about $5,458 less than they would have been paid under the applicable EA.

False or misleading representations 34 CBA admits that between 1 July 2018 and 16 August 2019 it made representations in the individual arrangements offered to employees to the effect that they would be better off overall under the IA than if they were employed under the applicable EA (BOOT representations), and that the remuneration paid under the IA would satisfy any entitlements they had under the applicable EA (EA satisfaction representations). CBA admit that these were misrepresentations under s 345(1)(a) of the FWA and affected 22 CBA employees. 35 CBA further admit that, as at 1 July 2018, it had been applying the BOOT requirement in cl 12 in a reckless manner by applying it at the point of entry, without taking into account allowances, overtime and the employee's position grade, and in reliance of short-term incentive payments (STIs) under the IAs. This was not based on a correct interpretation or application of cl 12 of the 2016 EA, which resulted in underpayments of CBA employees. The responsible HR managers had disregarded or been indifferent to the risk that the individual arrangements were not meeting the employees' entitlements under the 2016 EA.

Relevant principles 36 The relevant civil penalty imposition principles are largely agreed in the otherwise competing written submissions and may be shortly summarised as follows. The primary, if not sole, purpose of a civil penalty is deterrence: Pattinson at [9] (Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). The Court is to identify the "appropriate" penalty necessary to deter future contraventions "of a like kind" by the contravener and others to achieve specific and general deterrence: Pattinson at [9]-[10]. This will require regard to be taken of the conduct giving rise to the contravention, the circumstances of the contravener, and factors indicating the risk of future contraventions: Pattinson at [58]-[60]. 37 Following Pattinson at [10] and [38]-[42], the power to impose a civil penalty in s 546 of the FWA is "not subject to constraints drawn from the criminal law and there is no place for a 'notion of proportionality' " of the kind identified for the purposes of criminal proceedings in Veen v The Queen [No 2] (1988) 164 CLR 465, namely a relationship between the seriousness of the conduct and the penalty imposed. Rather, what is required is that there be "some reasonable relationship between the theoretical maximum and the final penalty imposed": Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 at [156], quoted in Pattinson at [53]. That relationship is established where "the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others": Pattinson at [10]. 38 The concept of proportionality is confined to striking a reasonable balance between deterrence and oppressive severity, Pattinson approving in that context what was said in Reckitt Benckiser at [152]: If it costs more to obey the law than to breach it, a failure to sanction contraventions adequately de facto punishes all who do the right thing. It is therefore important that those who do comply see that those who do not are dealt with appropriately. This is, in a sense, the other side of deterrence, being a dimension of the general deterrence equation. This is not to give licence to impose a disproportionate or oppressive penalty, which cannot be done, but rather to recognise that proportionality of penalty is measured in the wider context of the demands of effective deterrence and encouraging the corresponding virtue of voluntary compliance. (Emphasis added in Pattinson at [41].) 39 Where a contravener has already taken steps to mitigate the risk of future contraventions, deterrence may be effective with a more modest penalty: Pattinson at [60]. Effective deterrence of a well-resourced contravener may require a larger penalty: Pattinson at [60]. However, as CBA and CommSec correctly observed, it does not follow that a profitable and large employer must, as a matter of course, attract the highest penalty. 40 Drawn from Trade Practices Commission v CSR Ltd [1991] ATPR ¶41-076 at 52,152 (French J), quoted in Pattinson at [18], relevant but non-exhaustive considerations in the assessment of the appropriate penalty may include: 1. The nature and extent of the contravening conduct. 2. The amount of loss or damage caused. 3. The circumstances in which the conduct took place. 4. The size of the contravening company. 5. The degree of power it has, as evidenced by its market share and ease of entry into the market. 6. The deliberateness of the contravention and the period over which it extended. 7. Whether the contravention arose out of the conduct of senior management or at a lower level. 8. Whether the company has a corporate culture conducive to compliance, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention. 9. Whether the company has shown a disposition to co-operate with the authorities responsible for enforcement of the Act in relation to contravention. 41 State of mind is also an issue in this penalty imposition exercise. As was pointed out by the Full Court in Reckitt Benckiser in relation to state of mind in relation to civil penalty contraventions generally at [131]: If a contravention does not involve any state of mind then it is for the party asserting any particular state of mind (be it a deliberate flouting of the law, recklessness, wilful blindness, "courting the risk", negligence, or innocence or any other characterisation of state of mind) to prove its assertion. If, in the event, neither party discharges its onus to establish any particular state of mind in relation to the contraventions, the Court determines penalty on no more than the fact of the proscribed nature of the conduct (see, by analogy see R v Olbrich (1999) 199 CLR 270; 166 ALR 330; [1999] HCA 54 (Olbrich) at [22]-[28]). However, if any degree of awareness of the actual or potential unlawfulness of the conduct is proved then, all other things being equal, the contravention is necessarily more serious. Such awareness may be able to be inferred from the very nature of the conduct or representations constituting the conduct. However absence of such proof does not establish a mitigatory state of mind (see, by analogy, R v Storey [1998] 1 VR 359 at 369, quoted with approval by the majority in Olbrich at [27]; see also [25]). It means only that the neutral state of mind required for liability has not been disturbed for the purposes of penalty. If a contravening party wishes to go beyond the neutral statutory state of mind for liability and positively assert a lack of consciousness of the character of the conduct for the purposes of penalty, that is a circumstance of mitigation which the contravening party must prove. 42 Moreover, as the majority judgment in Pattinson pointed out at [46]: A contravention may be a "one-off" result of inadvertence by the contravenor rather than the latest instance of the contravenor's pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law on the part of a [contravenor], or where the official responsible for a deliberate breach has been disciplined by the union. In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.

The penalty issues in dispute 43 The FWO annexed to its written submissions a detailed table of proposed penalties for CBA and for CommSec. Each part of that table is cross-referenced to the SAFA and the declarations sought. Each indicates the number of contraventions once the course of conduct provision in s 557 of the FWA is applied, the maximum penalty in dollar terms, the number of courses of conduct groupings when applicable, and the penalty proposed as a percentage of the applicable maximum penalty. For all the contraventions, the FWO propose that the penalty to be imposed should be either 90% or 100% of the maximum, and then a global discount of 20% for cooperation be applied. 44 CBA and CommSec annex to their joint written submissions a copy of most of the FWO's table, but replace the FWO's penalty proposals with a different range of percentages of the maximum ranging from 0% to 50%, then also applying a global discount of 20% for cooperation, and then a further adjustment reduction based upon an asserted need for a further downward adjustment for totality. With one notable exception, directed to the application of common law course of conduct principle to the CBA's misrepresentation contraventions, the respondents agree with and accept the proposed groupings of contraventions arrived identified in the FWO's written submissions as reflected in the FWO's table. I have considered the approach taken by FWO and agreed to by the respondents and I also agree. That dispenses with the need to analyse those contraventions in the manner that I identified in Fair Work Ombudsman v New Shanghai North t/a New Shanghai Charlestown [2017] FCA 1301; 275 IR 148 at [36], and allows the penalty assessment process to proceed upon the basis of the groupings contained in both the FWO's and the respondents' tables. 45 That leaves for resolution the dispute over application of common law course of conduct to the CBA's misrepresentation contraventions. The CBA contends that each contravention of satisfaction representation should be cumulatively treated as a single contravention, each carrying a maximum penalty of $63,000; that is, an overall maximum of $126,000 for the entirety of the misrepresentations that took place. The basis for this contention is that it arose from the same course of conduct, being the inclusion of those two representations in IAs offered to those employees in the period of just over 12 months, from 1 July 2018 to 16 August 2019. 46 The FWO does not agree that it is appropriate to apply common law course of conduct principles at all, noting that the statutory course of conduct provision in s 557 of the FWA does not apply to contraventions of s 345(1). The FWO's reasoning is that this would result in an inadequate deterrence response, contrary to Pattinson, and that each contravention by way of each of the two types of misrepresentation should be treated as separate contraventions, producing two lots of 22 contraventions, each with a maximum penalty of $63,000, and an overall maximum penalty of two times $1,386,000, being $2,772,000. The FWO also points out that each representation was a separate act by CBA, involving a discrete decision to make an offer to a different employee on particular terms which resulted in a discrete IA, albeit often with terms that were common to other offers; and that each time such a representation was made, there was a new opportunity to ensure that it was truthful and accurate, which it did not avail itself of. 47 The difference in the outcome proposed could not be more stark: an overall maximum penalty of $126,00 advanced by the respondents, versus an overall maximum penalty of almost $2.8 million advanced by the FWO. I am satisfied that the former is a grossly inadequate response and makes a mockery of deterrence, especially general deterrence. I am also satisfied that it ill behoves the CBA to rely upon the agreements being individual when it comes to commercial benefits, but collective when it comes to penalties for the misrepresentations made. However, the proposal by the FWO that the maximum penalties be applied in both cases, with a 20 percent reduction for cooperation, resulting in the imposition of an overall penalty of $2,217,600 goes beyond what is needed for general deterrence, especially given that most of the objectives of specific deterrence have been achieved by the remedial and preventative steps taken. That said, a condign sanction is still required to deter other would-be contraveners. There is a cost to compliance, and there must be no tacit encouragement to others not to meet that cost, applying the reasoning in Reckitt Benckiser at [152]. 48 I have concluded that the solution lies in the application of totality principles confined to the question of deterrence to the otherwise appropriate penalty. In my view, the otherwise appropriate penalty for each set of 22 contraventions would have been about $750,000, producing an overall total of about $1.5 million. Applying totality in relation to the level of penalty necessary to achieve deterrence, the appropriate penalty is $1,000,000. That is a sufficiently hefty sum to make sure that there is a strong incentive to ensure that such representations are truthful and accurate, advancing to a sufficient degree the objective of general deterrence, but also providing a measure of specific deterrence in relation to taking particular care in making representations that compliance is taking place, which may deter a recipient of such representations from making their own inquiries and checks instead of trusting the source. 49 The substantive remaining issues in dispute as to the quantum of penalty asserted to be appropriate turn on the competing arguments and rationales underpinning the differences in the percentages applied to the maximum applicable penalties. 50 The key aspects of the FWO's stance going beyond the detail of the contraventions can be summarised as follows: (a) the BOOT contraventions by both respondents resulting in the underpayments involved, over a long period of time, simply not checking and ensuring the employees were better off under the EAs than the applicable awards and paying any shortfalls, ensuring employees were better off under the IAs, and paying full EA entitlements to employees whose IAs were not valid IFAs under the FWA; (b) the BOOT contraventions for the contravening period after 15 September 2017 were serious contraventions for the purposes of s 557A of the FWA, forming part of a systematic decade-long pattern of conduct affecting a substantial number of employees, and occurred in circumstances in which senior managers knew enough to become aware that the respondents were not meeting obligations under the EAs, but took no adequate steps to address this for several years, noting the submission properly made by CBA and CommSec that events and knowledge prior to the contravening period are relevant but do not entitle a sanction to be imposed for non-contravening conduct; (c) both of the respondents were seeking to derive market advantages over competitors by the use of IAs with annualised salaries relying on performance-based payments and therefore did not prioritise compliance with FWA obligations and were reluctant and slow to address avoidable compliance issues; (d) the size, market position, profitability and number of employees for each of the respondents is significant, as were the resources at their disposal that could have been employed to ensure compliance, and it is necessary to impose stiff penalties to deter contraventions of a like kind recurring and to deter other large corporate employers, with the respondents' deficient culture meaning higher range penalties are appropriate; (e) the respondents should have had a greater awareness of their obligations under the EAs due to their part in drafting and negotiating its terms (to be contrasted with the more common cases of underpayments arising from the contraventions of award terms); (f) the nature of the contraventions made them difficult to detect for employees, the employees' union and the FWO, and therefore strict compliance was especially important (though it was accepted that this cut both ways, in that it suggested that the contraventions were difficult to detect for the respondents as well); (g) further, CBA misrepresented to employees the opposite of what was taking place, namely that they would be better off overall under the applicable EA and that the remuneration paid under an IA would satisfy EA entitlements, when neither statement was true; (h) CBA had previously committed contraventions of like provisions under predecessor legislation to the FWA, the Workplace Relations Act 1996 (Cth) (WR Act), which involved having its employees working in its premium financial services business employed under the inferior terms of a non-union EA applicable to CommSec rather than the otherwise applicable CBA EA: see Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; 224 ALR 467; penalties upheld on appeal in Commonwealth Bank of Australia v Finance Sector Union of Australia [2007] FCAFC 18; 157 FCR 329. 51 Subject to the submissions made by CBA and CommSec summarised below about the FWO's stance and aspects of its more detailed submissions, I generally accept the broad propositions summarised above. Aspects of the more granular submissions by the FWO are challenged by CBA and CommSec as considered below. 52 CBA and CommSec's submissions focus on aspects of the contravening conduct in order to support their contention that much lesser penalties are called for than are sought by the FWO, drawing on aspects of the non-exhaustive list of factors relevant to penalty imposition identified in CSR and summarised above at [40]. 53 As to the nature and extent of the contravening conduct and the circumstances in which it occurred, CBA and CommSec rely upon the absence of evidence that the cl 10 contravening conduct was deliberate or conscious and the need to distinguish this from flagrant conduct of that nature. They point to the lack of any evidence of any express direction or deliberate instructions to engage in contravening conduct, there being nothing to suggest that there was any strategy of non-compliance or to pay any penalty rather than comply, nor any suggestion of any economic calculus being in play, but rather systemic failures to ensure compliance, accompanied by error and misapprehension as to what was in fact taking place. 54 The earlier investigations that took place in December 2015 as a result of concerns being expressed internally about cl 10 compliance are characterised by the respondents as being inadequate to ensure compliance, but little more. The explanation cast as a reason for the non-compliance advanced by CBA and CommSec was the position taken by the CBA Group at the time that it was paying employees above market rates, with there being no evidence that this was not a genuine belief having regard to the basis for the erroneous understandings held as proven by Mr Culleton's affidavit. The process leading to the contraventions is therefore characterised as being affected by an incorrect understanding and thereby assumption as to what was taking place, rather than the payment of market rates being seen as an alternative to complying with legal obligations. 55 CBA and CommSec dispute the suggestion by the FWO that issues of non-compliance were known at that executive level close to that of the CEO, because the document relied to bring home awareness at that high level does not specifically identify compliance with either cl 10 or cl 12 as being a problem. I accept that the evidence does not establish that the precise nature of the problem in terms of particular clauses of the EAs was brought to the attention of those near the top of the executive level of the CBA Group, but this does not detract from the point that senior officers were made aware of there being issues in the administration of the EAs and related entitlements and failed to act in a timely or thorough enough manner. Moreover, at least one of the members of the Executive Steering Committee was provided with a copy of a presentation, it being attached an email sent on 8 December 2015, where failures to comply with BOOT requirements were described as high priority issues for which legal advice was being sought, yet a concern of sufficient moment to warrant obtaining legal advice does not appear to have been taken seriously enough. While that does not amount to any deliberate flouting of the law, nor was it wholly innocent: see the passage from Reckitt Benckiser at [131] reproduced above at [41]. 56 Much the same submissions in substance are made in relation to the cl 12 contraventions. As for the cl 10 contraventions, being characterised as arising from a misapprehension within the CBA Group as to remuneration rates above minimum EA rates based on market surveys and higher STIs paid such that employees would be better off compared to EA pay levels. The respondents submit this may have contributed to the erroneous view that it was likely that the employees of each were better off overall under an IA than under the relevant EA. The CBA Group had applied a set of rules since 2016 to gross up EA remuneration to include other entitlements, but this proved to be inadequate to ensure compliance. CBA and CommSec submit that there was nothing inherently wrong with the use of IAs, a self-evident proposition as far as it goes. They also submit that the evidence establishes IAs were offered because they were seen to allow: (a) greater flexibility with respect to rostering because overtime and allowances were included in the IA base salary such that rostering for up to 40 days per week did not give rise the right of a rostered day off; (b) greater flexibility with respect to pay increases and bonuses because they could be based on individual circumstances rather than the more structured approach required by the EAs, which helped with the recruitment and retention of talented staff; and (c) higher fixed base rates of pay compared to EAs, and greater scope of increased earning capacity and bonuses to attract talented staff. 57 While correct as far as it goes, that submission is of limited assistance to the respondents as it explains why they chose to deploy this basis for employment as being advantageous for the conduct of their respective businesses, when the live issue concerns their failure to adhere to the legal obligations accompanying this choice. 58 CBA and CommSec then turn to addressing the FWO's case regarding characterisation, submitting that this means of seeking to obtain talented staff who were also sought by their competitors did not deserve the pejorative use of the term "competitive advantage", there was nothing underhand in what had taken place, that nothing worse took place than erroneous beliefs being held leading to the contraventions, being beliefs that should have been tested with greater rigour, not toleration of the risk of non-compliance. I consider that this unduly downplays the significance of what took place, involving relatively rudimentary errors and misconceptions. They carry the practical danger of elevating complacency to a virtue instead of a vice. 59 The respondents also emphasised that the failures to pay certain EA entitlements all arose from the same misapprehension as to the validity of the IAs. For that reason, the proposed penalties for these contraventions were at the lowest end of those submitted. I was referred to the observation of Jackman J in Australian Competition and Consumer Commission v Dell (No 2) [2023] FCA 983 at [12], to the effect that where an interrelationship between legal and fact pattern exists, care must be taken so that a person is not sanctioned more than once for the same conduct. However, that observation was made in the explanation of the principle of totality, and the respondents agreed that the failure to pay each entitlement was, following Rocky Holdings Pty Limited v Fair Work Ombudsman [2014] FCAFC 62; 221 FCR 1153, a distinct contravention of the applicable EA. While this is a factor to consider, it therefore does not carry much weight. It indicates that the erroneous understanding was allowed to continue over a sustained period of time, due to inadequate systems and processes. Viewed in that way, there is a continued sanction for continued conduct, rather than double sanctioning the same conduct. 60 The respondents similarly characterise the misrepresentation contraventions as automatically flowing from the failure to discharge the BOOT obligations under cl 12. The latter is characterised as a catalyst rather than there being any separate and distinct act unique to the misrepresentations. While that context is correct, I do not accept that CBA doing the wrong thing, and misrepresenting that it was doing the right thing was something so lightly brushed aside. The significance for the 22 employees to whom the misrepresentations were made was to give a false assurance that they were better off overall under the IAs and that their EA entitlements were met, lessening the possibility that they would identify the shortcomings of the IAs themselves. If CBA was to assert that it was meeting its legal obligations, it had an additional reason for caution and a check being made that this was so. Any contrary approach or attitude needs strong specific deterrence. 61 Overall, I do not find compelling the efforts of CBA and CommSec to downplay the significance of the nature or extent of the contravening conduct, beyond pointing out the lack of aggravation by reason of not actually knowing that contraventions were taking place at the time. However, this does not go so far as to establish that the conduct was innocent and therefore that the state of mind attending the conduct was mitigatory as opposed to aggravating circumstances being absent. However, following Pattinson, state of mind is not relevant by reason of ordinary proportionality reasoning in relation to the seriousness of the conduct, which is not permitted, but rather because it is relevant in relation to the extent of the need for specific deterrence. 62 As to loss or damage, CBA and CommSec correctly rely upon the full remediation of the affected employees. They also point to the population of the affected employees for the cl 12 contraventions being 16 per cent of the "total assessment population" and 0.09 per cent of the "IA Earnings Criteria". The point of this is to submit that the FWO's reliance on the number of contraventions and number of employees affected needs to be tempered by the fact that the vast majority of employees were unaffected and were remunerated in accordance with the CBA Group's legal obligations. They also submit that while what occurred was unacceptable, and may have caused distress, there is no evidence of employees being unable to meet their debts. These submissions may be accepted as far as they go, largely in relation to the need for specific deterrence, but this does not materially detract from there being a substantial number of employees affected, substantial underpayments having taken place (albeit fully remediated) and a large number of contraventions, all of which remain highly relevant to general deterrence. The respondents also note that the EA contraventions arising from IA invalidity did not give rise to any separate or additional loss because that was encompassed within the losses occasioned by the cl 10 and cl 12 contraventions, so give rise to the same loss by a different pathway. I take this into account, but as the respondents correctly submitted, this was not a big point. 63 As to the size, power and resources of CBA and CommSec, while it is acknowledged that each are major providers of financial services and substantial corporations in their own right, they submit that their size is not of itself a justification for imposing a higher penalty than would otherwise be appropriate, citing Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2015] FCA 330; 327 ALR 540 at [89]-[92]; and that there is nothing to suggest that any sanction imposed for the contravening conduct was seen as merely a cost of doing business. Rather, they point to the very substantial resources that have already been deployed to ensure full remediation and to ensure that similar conduct will not recur. 64 The nature and extent of the investigation and remediation is addressed in considerable detail in the respondents' written submissions, referencing detailed affidavit and exhibited documentary evidence as to what has taken place to address corporate culture and corrective measures, using complex models to identify, quantify and remediate contraventions. Billions of data points were reviewed, and some 550,000 hours of work were involved. Self-disclosure took place. Extensive steps have been taken to correct errors and prevent recurrence. This has included addressing governance and its effectiveness, including quality assurance, accountability and addressing adherence to the meeting of legal obligations. Communications and training have been improved for managers and employees, and new and better systems deployed. Ongoing monitoring has been put in place. 65 These submissions relevantly go to the extent of a need for specific deterrence. Though the respondents correctly submit that a larger organisation with greater resources does not necessarily require the highest penalty, following Pattinson at [60], all things being equal, such an organisation will require a greater penalty to deter. Indeed, the above-quoted reasoning from Coles was qualified by the observation that the scale of a contravener will be relevant to whether a penalty is seen as sufficiently significant to achieve general deterrence, and to the question of whether the penalty is so great as to be oppressive: see [92]. However, the extensive steps the CBA Group have taken to remediate and to prevent recurrence are important considerations going to the extent of the need for specific deterrence. To a lesser extent, they also go to general deterrence insofar as these reasons indicate that extensive and expensive remedial and preventive action has been taken, and will indicate that it is not just the prospect of penalties that should deter others, but also that costly investigation, remediation and prevention may be required. In no way will either CBA or CommSec be seen to have got away with anything, but rather have already paid a significant price for what has taken place. These are important considerations in assessing the appropriate penalty and in particular the size of the penalties necessary to address adequately the need for deterrence, especially general deterrence. 66 CBA and CommSec point to the nature and extent of their cooperation exceeding what was sought by the FWO and described as exemplary and somewhat unprecedented, and to their contrition and remorse, which I accept is substantial. They dispute the FWO's argument that engagement should have been earlier and quicker. I tend to accept this interpretation over that advanced by the FWO in a more critical way, but note that not much turns on this as it is agreed that there should be a discount of 20 per cent on account of cooperation, with CBA and CommSec suggesting even more could be justified. I am of the view that in all the circumstances a 20 per cent discount for cooperation, read widely to include voluntary remediation, is justified. 67 It is common ground that there are no prior contraventions of the FWA - though I note previous contraventions of a like kind of the WR Act by CBA. Additionally, in August 2019, the CBA Group ceased offering IAs except as required by s 202 of the FWA, such that there is no practical risk of further cl 12 contraventions and therefore no need for specific deterrence from engaging in that specific type of conduct. Further, from February 2023, CommSec ceased being an employing entity, so that it has no practical risk of any further contraventions of this kind, and accordingly no need for specific deterrence. 68 CBA and CommSec adjust downward the penalties they submit are appropriate by reference to totality. This approach is somewhat misconceived, at least in the manner advanced. Totality is not a deduction to be made as part of the process of arriving at an appropriate penalty, but rather a final check on the penalty that has been arrived at to ensure that the combined effect of numerous penalties is not excessive: see Parker v Australian Building and Construction Commissioner [2019] FCAFC 56; 270 FCR 39 at [296] citing Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [102]. In the post-Pattinson context, the remaining role for totality is to ensure that the overall penalties are not oppressive or in excess of what is necessary to deter; it is no longer addressing proportionality in the traditional sense. That is what has taken place in resolving at [48] above the dispute as to penalty for false or misleading representations.

Consideration 69 Following Pattinson, more than ever the dominant if not sole consideration is deterrence, unfettered by conventional concepts of proportionality to the seriousness of the conduct involved. As outlined above, a particularly important development was that the High Court held there is no longer any concern that the penalty imposed be proportionate to the seriousness of the contravening conduct, although the more serious the contravention the greater may be the need for deterrence. Understanding what has taken place is therefore important, but issues of mitigation have a limited role to play when the need for general deterrence is plain, as it is in this case, and the need for specific deterrence has been substantially addressed. Apart from CBA and CommSec endeavouring to retain a residue of proportionality in the assessment of penalty, which I consider is no longer permissible, the applicable principles are not in dispute as summarised above. 70 As noted above, I largely accept the broad submissions advanced by the FWO summarised above, without necessarily agreeing to all of the more granular detail advanced, such as the level to which the warnings about the existence of possible or potential compliance issues had risen, or whether the prospect of competitive advantage could be seen to have detracted from a necessary level of focus on legal obligations. The simple fact is that the obligations were readily able to be complied with, and proper checks to ensure that was taking place were not hard to implement. That did not happen, and the message needs to be loud and clear that this is not good enough and will not be tolerated, most significantly for other would-be contraveners, but also as an ongoing warning for CBA and therefore the CBA Group of which it is the dominant member. 71 These were substantial and prolonged contraventions by large and wealthy financial institutions who were amply able to prevent anything of this nature occurring in the first place, let alone over such a substantial period of time. An absence of deliberate wrongdoing is generally going to be very important when there are live issues of proportionality between the culpability of the conduct and the sanction to be imposed. But that is an approach borrowed from the criminal law that is no longer available. Deterrence to ensure compliance is the key. What needs to be deterred is a system being left in place that allows for basic errors to be made without an adequate system of checking or detection and thereby correction, and as a result erroneous assumptions made and untenable beliefs held with serious consequences for a large number, if not proportion, of employees. 72 The focus must be on the level of sanction necessary to deter both the instant contravener, of lesser moment in this case, and other potential contraveners in a like position, which remains the most important consideration, barely addressed by the respondents. While no penalty within the available range is likely to materially hurt either CBA or CommSec given their size, wealth and resources, nor is a substantial penalty likely to be ignored. Any other lesser institution, especially finance sector institution, who becomes aware, even in relatively general terms, of the nature of the contravening conduct and of a substantial and even disproportionate-to-culpability sanction being imposed is likely to be deterred. The outcome will also likely become known to the legal and other professional advisers to such companies, magnifying its deterrent effect. It will be more likely that close attention will be given not just to compliance itself, but to the adequacy of systems for checking for compliance. 73 The problem with the arguments advanced by CBA and CommSec is that they focus in key parts on the nature of the errors and misunderstandings that led to the contraventions taking place, rather than focussing on the systems and processes that allowed that situation to arise in the first place, and the apparent lack of audit and other checking systems to ensure compliance on an ongoing basis. It is that lack of adequate systems that allowed the contraventions to take place and to continue for so long. While an absence of a culpable state of mind accompanying the contraventions means that the FWO cannot establish such a culpable state of mind as aggravation, that is not what the FWO seeks to achieve. Rather, the nature of the FWO argument is that the quest for and focus upon competitive advantage in terms of employee benefits meant that there were wholly inadequate systems in place and serious failures to ensure compliance with the relatively simple and explicit legal obligations attending upon the choice to depart from the default of an award and the EA, and FWA obligations arising upon that departure. 74 I am satisfied that while specific deterrence has been rendered almost (but not entirely) a nullity, the misrepresentation letters remain a concern and the attendant penalties still have a specific deterrence aspect. Remedial and preventative steps taken have otherwise largely addressed the need for an elevation of the appropriate penalties to achieve specific deterrence. It follows that the primary focus must be on general deterrence, which remains a substantial concern. Other employers, and especially large employers in the financial services sector, must be made aware that it is simply not worth the candle to have inadequate compliance systems in place. The only way to achieve this is by way of still substantial penalties being imposed, but being less than would have been necessary in the absence of cooperation (which is to be encouraged and rewarded), which also encompasses remediation for the past and extensive prevention steps and strategies for the future. 75 Annexed to these reasons is a reworked version of the FWO's table which has added into it the CBA and CommSec proposed penalties, and also the penalty figures I have settled upon. It is not simply a mathematical exercise, although arithmetic is inevitably involved. The extent to which the penalty imposed is less than the maximum reflects not just cooperation as a single composite concept, but rather a number of important constituent components which should all be acknowledged, namely: (a) the objective seriousness of the contraventions, noting the limited role this can play in the face of a substantial need for specific and general deterrence in this case, and noting that the need for that is lessened more by the features in the following subparagraphs than by any issue of proportionality, which is greatly circumscribed following Pattinson in such a case, given also that there is little or no scope for any penalty to be oppressive in relation to either CBA or CommSec; (b) the voluntary reporting to the FWO, the self-investigation and the remediation of the contraventions; (c) the admission of liability to the Court and entering into the SAFA; (d) the previous similar contraventions of the WR Act by the CBA; and (e) the contrition and the utilitarian advancement of the interests of justice in relation to saving the FWO's resources and the resources of the Court. 76 I have considered the figures arrived at by the above process, and considered totality, including separately for the false or misleading representations. In all the circumstances, I am satisfied that no further adjustment is required or even permitted once due recognition is given to the substantial need for general deterrence.

Conclusion on penalty 77 The appropriate penalties in all the circumstances are: (a) a pecuniary penalty of $7,310,000 to be paid by CBA; and (b) a pecuniary penalty of $3,030,000 to be paid by CommSec, each penalty to be paid within 60 days. 78 As this is a proceeding under the FWA, and s 570 of that Act renders this as ordinarily a no-costs jurisdiction, there will be no order as to costs. I certify that the preceding seventy-eight (78) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bromwich.

Table 1. Legend penalties and contraventions tables Term Meaning in tables FWO Fair Work Ombudsman R The respondents, Commonwealth Bank of Australia (CBA) and Commonwealth Securities Ltd (CommSec). (tot) Penalty after applying the common law principle of totality as relevant to deterrence. Failure to ensure BOOT was met Failure to comply with obligations to ensure employees were better off overall on individual arrangements (IAs) compared to the applicable enterprise agreement (EA) (i.e. applying a "better off overall test" or BOOT).

post s 557 The number of contraventions after the application of s 557 of the Fair Work Act 2009 (Cth) (FWA).

courses of conduct The number of courses of conduct after application of the common law course of conduct principle.

Max. penalty The maximum penalty applicable Serious contraventions Serious contraventions within the meaning of s 557A of the Fair Work Act 2009 (Cth). Standard contraventions Contraventions other than serious contraventions. Penalty proposed after 20% discount Penalty proposed by the respective parties after applying the agreed 20% discount for cooperation BOOT representations Representation to employees that they would be better off overall under an individual agreement (IA) than if they were employed under the applicable enterprise agreement (EA). EA satisfaction representations Representation to employees that their IA would satisfy any entitlements they had under the applicable EA. Period 1 9 October 2014 to 8 October 2015 Period 2 9 October 2015 to 8 October 2016 Period 3 9 October 2016 to 1 December 2016 Period 4 2 December 2016 to 1 December 2017 Period 5 2 December 2017 to 1 December 2018 Period 6 2 December 2018 to 1 December 2019 Period 7 2 December 2019 to 31 December 2020 Period 8 9 October 2015 to 1 December 2016 Period 9 2 December 2016 to 14 September 2017 Period 10 15 September 2017 to 30 June 2020

Table 2. CBA - Penalties and contraventions Contravention # post s 557 # courses of conduct Max. penalty Penalty proposed after 20% discount Penalty imposed Clause 10 contraventions - Failure to perform reconciliations and make top-up payments 2014 EA (commencing in periods 1-3; all standard contraventions) Annual Periods (end of period 1) 2 1 $54,000 FWO: $43,200 $40,000 R: $21,600 Annual Periods (end of period 2) 2 1 $54,000 FWO: $43,200 $40,000 R: $21,600 Annual Periods (end of period 3) 2 1 $54,000 FWO: $43,200 $40,000 R: $21,600 2016 EA (periods 4-7; all serious contraventions) Annual Periods (end of period 4) 2 1 $630,000 FWO: $504,000 $440,000 R: $252,000 Annual Periods (end of period 5) 2 1 $630,000 FWO: $504,000 $440,000 R: $252,000 Cessation Periods (period 5) 2 1 $666,000 FWO: $532,800 $460,000 R: $266,400 Cessation Periods (period 6) 2 1 $666,000 FWO: $532,800 $460,000 R: $266,400 Cessation Periods (period 7) 2 1 $666,000 FWO: $532,800 $460,000 R: $266,400 Clause 12 contraventions 2014 EA (period 8; all standard contraventions) Failure to ensure BOOT was met 1 N/A $54,000 FWO: $43,200 $40,000 R: $21,600 2016 EA (periods 9 and 10) Failure to ensure BOOT was met (period 9; standard contraventions) 1 N/A $63,000 FWO: $50,400 $45,000 R: $0 Failure to ensure BOOT was met (period 10; serious contraventions) 1 N/A $630,000 FWO: $504,000 $440,000 R: $252,000 Individual arrangement contraventions - Pre-employment invalidity 2014 EA (9 October 2015 - 1 December 2016) District allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Higher duties allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Meal allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 On call allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Relieving allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Annual leave and annual leave loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Long service leave 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Payment in lieu of notice 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Incentive bonus 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Ordinary hours 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Overtime 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Shift loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Saturday loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Sunday loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Annual leave on termination 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Redundancy and severance pay 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Cashing out annual leave 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Moving day leave 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Parental leave 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Personal carer's leave 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Time off in lieu of overtime 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 Public holiday shift loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $12,960 2016 EA (2 December 2016 - 30 June 2020) District allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Higher duties allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Meal allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 On call allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Relieving allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Annual leave & annual leave loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Long service leave 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Payment in lieu of notice 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Incentive bonus 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Ordinary hours 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Overtime 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Shift loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Saturday loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Sunday loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Annual leave on termination 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Redundancy and severance pay 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Cashing out annual leave 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Moving day leave 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Parental leave 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Personal carer's leave 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Time off in lieu of overtime 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Public holiday shift loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $15,120 Individual arrangement contraventions - Rollover invalidity 2014 EA (1 July 2015 - 1 December 2016) District allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Higher duties allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Meal allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Relieving allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Annual leave & annual leave loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Long service leave 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Payment in lieu of notice 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Incentive bonus 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Ordinary hours 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Overtime 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Shift loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Saturday loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Sunday loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Annual leave on termination 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Parental leave 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Personal carer's leave 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Time off in lieu of overtime 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Public holiday shift loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Severance pay 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 Shift phase out 1 N/A $54,000 FWO: $38,880 $35,000 R: $4,320 2016 EA (2 December 2016 - 30 June 2020) District allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Higher duties allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Meal allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 On call allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Relieving allowance 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Annual leave & annual leave loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Long service leave 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Payment in lieu of notice 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Incentive bonus 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Ordinary hours 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Overtime 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Shift loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Saturday loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Sunday loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Annual leave on termination 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Parental leave 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Personal carer's leave 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Time off in lieu of overtime 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Public holiday shift loading 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Severance pay 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Shift phase out 1 N/A $63,000 FWO: $45,360 $45,000 R: $5,040 Reckless misrepresentations (1 July 2018 - 16 August 2019) BOOT representation 22 FWO: N/A $63,000 FWO: $1,108,800* $500,000 (tot) R: 1 R: $25,200 EA satisfaction representation 22 FWO: N/A $63,000 FWO: $1,108,800* $500,000 (tot) R: 1 R: $25,200 Total: FWO: $9,134,640 $7,310,000 R: $2,502,000 R (tot): $2,100,000

80% of the maximum penalty for each of the 22 persons to whom the representation was made ($50,400 x 22). Table 3. CommSec - Penalties and contraventions Contravention # post s 557 # courses of conduct Max. penalty Penalty proposed after 20% discount Penalty imposed Clause 10 contraventions - Failure to perform reconciliations and make top-up payments 2014 EA (periods 1-3; all standard contraventions) Annual Periods (end of period 1) 2 1 $54,000 FWO: $43,200 $35,000 R: $17,280 Annual Periods (end of period 2) 2 1 $54,000 FWO: $43,200 $35,000 R: $17,280 Annual Periods (end of period 3) 2 1 $54,000 FWO: $43,200 $35,000 R: $17,280 2016 EA (periods 4-7; all serious contraventions) Annual Periods (end of period 4) 2 1 $630,000 FWO: $504,000 $410,000 R: $201,600 Annual Periods (end of period 5) 2 1 $630,000 FWO: $504,000 $410,000 R: $201,600 Cessation Periods (period 5) 2 1 $666,000 FWO: $532,800 $430,000 R: $213,120 Cessation Periods (period 6) 2 1 $666,000 FWO: $532,800 $430,000 R: $213,120 Cessation Periods (period 7) 2 1 $666,000 FWO: $532,800 $430,000 R: $213,120 Clause 12 contraventions 2014 EA (9 October 2015 - 1 December 2016; all standard contraventions) Failure to ensure BOOT was met 1 N/A $54,000 FWO: $43,200 $35,000 R: $17,280 2016 EA (2 December 2016 - 30 June 2017; all standard contraventions) Failure to ensure BOOT was met 1 N/A $63,000 FWO: $50,400 $45,000 R: $20,160 Individual arrangement contraventions - Pre-employment invalidity 2014 EA (1 July 2015 - 1 December 2016) Meal allowance 1 N/A $54,000 FWO: $38,880 $35,000 R: $10,800 Annual leave and annual leave loading 1 N/A $54,000 FWO: $38,880 $35,000 R: $10,800 Ordinary hours 1 N/A $54,000 FWO: $38,880 $35,000 R: $10,800 Overtime 1 N/A $54,000 FWO: $38,880 $35,000 R: $10,800 Personal carer's leave 1 N/A $54,000 FWO: $38,880 $35,000 R: $10,800 2016 EA (2 December 2016 - 30 June 2020) Meal allowance 1 N/A $63,000 FWO: $45,360 $40,000 R: $12,600 Payment in lieu of notice 1 N/A $63,000 FWO: $45,360 $40,000 R: $12,600 Annual leave & annual leave loading 1 N/A $63,000 FWO: $45,360 $40,000 R: $12,600 Ordinary hours 1 N/A $63,000 FWO: $45,360 $40,000 R: $12,600 Overtime 1 N/A $63,000 FWO: $45,360 $40,000 R: $12,600 Annual leave on termination 1 N/A $63,000 FWO: $45,360 $40,000 R: $12,600 Personal carer's leave 1 N/A $63,000 FWO: $45,360 $40,000 R: $12,600 Saturday loading 1 N/A $63,000 FWO: $45,360 $40,000 R: $12,600 Sunday loading 1 N/A $63,000 FWO: $45,360 $40,000 R: $12,600 Individual arrangement contraventions - Rollover invalidity 2016 EA (2 December 2016 - 30 June 2020) Meal allowance 1 N/A $63,000 FWO: $45,360 $40,000 R: $5,040 Payment in lieu of notice 1 N/A $63,000 FWO: $45,360 $40,000 R: $5,040 Annual leave loading 1 N/A $63,000 FWO: $45,360 $40,000 R: $5,040 Overtime 1 N/A $63,000 FWO: $45,360 $40,000 R: $5,040 Annual leave on termination 1 N/A $63,000 FWO: $45,360 $40,000 R: $5,040 Total: FWO: $3,659,040 $3,030,000 R: $1,324,440 R (tot): $800,000

Workplace Relations Act 1996(Cth)

FWA, the Workplace Relations Act 1996(Cth)

Fair Work Act 2009(Cth)ss 12, 202, 345, 557, 557A, 557B, 570

BROMWICH J: 1 These are the reasons for pecuniary civil penalties imposed upon the Commonwealth Bank of Australia (CBA) and Commonwealth Securities Limited (CommSec) for admitted contraventions of the Fair Work Act 2009 (Cth) (FWA) which took place in a period of just over five years from early October 2015 to late January 2021. The proceeding was commenced by the workplace regulator, the Fair Work Ombudsman (FWO), by way of an originating application (later amended) and concise statement filed in October 2021, following voluntary disclosure of the contraventions. After lengthy negotiations between the opposing parties over a considerable period of time, liability was admitted by the respondents, obviating any need for a liability hearing. A contested penalty hearing took place. 2 The first set of contraventions are in two categories detailed further below, arising from what may be described in a summary way as the failure to comply with obligations to ensure that employees were better off overall in the payment of entitlements under individual agreements (IAs) as compared to the applicable enterprise agreements (EAs), and under the applicable EAs as compared to the industrial award that otherwise applied (a "better off overall test" or BOOT), resulting in substantial underpayments totalling some $16 million to over 7,400 employees. 3 The BOOT contraventions that occurred from 15 September 2017, just under halfway through the overall contravention period, were in a newly legislated category of "serious contraventions" under s 557A of the FWA, forming part of a systematic pattern of conduct over about 10 years and affecting a substantial number of employees. This occurred in circumstances in which senior staff of both respondents knew facts that should have sounded a warning that they were not meeting EA obligations but took no steps to address these failures for a number of years. 4 The third category of contraventions concern failures to pay certain employees' full entitlements under applicable EAs. These entitlements applied to employees who had entered IAs that were not valid "individual flexibility arrangements" (IFAs) for the purposes of the FWA. 5 CBA also admits to a fourth category of contraventions of misrepresenting to employees that they would be better off overall under an IA than under the applicable EA and that remuneration paid would satisfy their EA entitlements, when neither was true. 6 There is no dispute that there has been substantial cooperation by both the CBA and by CommSec. All of the contraventions have been rectified and all entitlements have been paid to the affected employees. 7 For the purposes of penalty imposition, and for the purposes of this proceeding only, facts were agreed to, and admissions made by CBA and CommSec. This was done by way of lengthy and detailed amended statement of agreed facts and admissions (SAFA). This document was initially dated 10 March 2023, but in final amended form was dated 29 August 2023 and signed on behalf of each side. The respondents also reply upon a 28 June 2023 affidavit from Mr Andrew Culleton, the CBA's Executive General Manager, Group People Services, exhibiting a large bundle of documents, deposing to detailed aspects of the contraventions and what has been done about them, and apologising for the conduct. 8 Most of what took place is agreed between the FWO and the respondents, with the main differences being as to characterisation. There is a substantial dispute as to the appropriate quantum of penalties, with the respondents contending that much lower penalties are appropriate than those sought by the FWO: (a) the FWO seeks penalties against the CBA totalling more than $9 million ($9,134,640), while the respondents submit an overall penalty of $2.1 million is adequate and appropriate; (b) the FWO seeks penalties against CommSec totalling almost $3.7 million ($3,659,040), while the respondents submit an overall penalty of $800,000 is adequate and appropriate. This dispute was addressed in detailed written submissions, and further addressed in a day-long penalty hearing. 9 I have not fully accepted the stance of either side as to the appropriate penalties to be imposed, although the FWO was closer to the mark in identifying what the appropriate level of penalties should be, largely because CBA and CommSec emphasised that the characterisation of the objective seriousness of the contraventions to a degree that is no longer permissible following the decision of the High Court in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; 274 CLR 450. As addressed in more detail below, Pattinson requires an almost exclusive focus to be on deterrence, in this case both general deterrence and to a lesser extent specific deterrence. Instead, for the reasons that follow, I have determined that the appropriate penalties in all the circumstances are: (a) a pecuniary penalty of $7,310,000 to be paid by CBA; and (b) a pecuniary penalty of $3,030,000 to be paid by CommSec, each penalty to be paid within 60 days.

Fair Work Ombudsman v Commonwealth Bank of Australia

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (13 paragraphs)

post s 557 The number of contraventions after the application of s 557 of the Fair Work Act 2009 (Cth) (FWA).

courses of conduct The number of courses of conduct after application of the common law course of conduct principle.

Parties

Legislation Cited (3)

Cases Cited (13)

Cited By (4)