McIver v Healey

Federal Court of Australia|2008-04-07|Before: Marshall J

REASONS FOR JUDGMENT 1 The issue for determination in this proceeding is the quantum of the penalty which should be imposed on an employer for multiple breaches of an industrial award. The proceeding is an application brought by a workplace inspector seeking the imposition by the Court of penalties on the employer for breaching the Hospitality Industry - Accommodation Hotels, Resorts and Gaming Award 1998 ("the award"). As the relevant time period during which the breaches occurred spans from 14 August 2000 to 9 November 2007, the application relies on s 178 (now repealed) of the Workplace Relations Act 1996 (Cth) ("the Act"), as it applied prior to 27 March 2006, and s 719 of the Act as it applied thereafter. 2 From 14 August 2000 until 9 November 2007, Mrs Healey carried on a business as a sole trader under the business name "Theatre Royal Hotel". The business included accommodation facilities, a restaurant and a café-bar. During that time persons employed by her were entitled to the benefit of the award. There were 41 employees of Mrs Healey who were engaged as casuals and who were paid below award rates and, in one case, not paid at all.

The award entitlements 3 Clause 15 of the award provides for three categories of employees: full-time, regular part-time and casual. Clause 15.2.2 provides: A casual employee shall be paid per hour at the rate of 1/38 of the weekly rate prescribed for the class of work performed, plus the appropriate undermentioned addition to that rate: … 4 The "undermentioned addition(s)" are provided by cls 15.2.2(a), (b), (c) and (d). Clause 15.2.2(a) provides certain allowances for work performed between 7 pm and midnight on week days and work performed between midnight and 7 am on those days. In addition, cl 15.2.2(a) provides for a Monday to Friday casual loading. Clause 15.2.2(b) provides for a Saturday casual loading. Clause 15.2.2(c) provides for a Sunday casual loading and cl 15.2.2(d) provides for a public holiday casual loading. 5 Clause 18.1 of the award sets the wage rate for the various classifications of employees covered by the award. Clause 15.5 of the award sets junior rates for those employees who are 19 years of age or younger. 6 The parties are agreed that Mrs Healey breached eight terms of the award. They are: 1. Clause 18, by failing to pay adult employees at the correct classification rate provided; 2. Clause 15.2.2(a), by failing to pay a 25% loading for work performed on week days; 3. Clause 15.2.2(a), by failing to pay an allowance for work performed between 7 pm and midnight during week days; 4. Clause 15.2.2(a), by failing to pay an allowance for work performed between midnight and 7 am on week days; 5. Clause 15.2.2(b), by failing to pay a 50% casual loading for work performed on Saturdays; 6. Clause 15.2.2(c), by failing to pay a 75% casual loading for work performed on Sundays; 7. Clause 15.2.2(d), by failing to pay a 175% casual loading for work performed on holidays prescribed in the award; and 8. Clause 15.5.1, by failing to pay junior employees at the correct classification rate.

The employees 7 Mr Tom Friend is one of Mrs Healey's former employees. He commenced employment on 1 May 2004 and worked at the hotel until 6 November 2006. During Mr Tom Friend's employment he was underpaid by $221.25. Mrs Healey breached each of the eight terms of the award set out above in respect of Mr Tom Friend. Mr Tom Friend was originally engaged as a Level 2 Food and Beverage Attendant (Junior). Mrs Healey, as with all her other employees (except Ms Jodi Buck), employed him on a flat rate of hourly pay below the award rate. He later became entitled to adult rates. He was not paid any of the loadings set out in cl 15.2.2 when he qualified for them. Mrs Healey breached her obligation to pay him a weekday loading at award rates on 83 occasions. She likewise failed to pay him the Saturday loading (29 times), the Sunday loading (7 times) and the public holiday loading on one occasion. Sixty times, Mrs Healey failed to pay him the 7 pm to midnight allowance and, once, the midnight to 7 am allowance. 8 Ms Jodi Buck worked for Mrs Healey for two days, on Thursday 14 April 2005 and Friday 15 April 2005. She received no payment at all for that work. She did not receive the correct classification rate for an adult Level 2 Food and Beverage Attendant Grade 2 and she did not receive her Monday to Friday casual loading. For the total 9 hours worked on those two days, Ms Buck should have received $150.75. It was not until 4 June 2007 that Mrs Healey agreed that she had "underpaid" Ms Buck and undertook to make good that deficit. 9 Ms Debra Barker was employed by Mrs Healey from 2 March 2006 to 4 August 2006 as a Level 2 Food and Beverage Attendant Grade 2/Guest Services Officer Grade 2. She received a flat hourly rate of $17.85 for all work performed by her. Each of the eight obligations set out at [6] above, apart from the junior rate payment, were breached by Mrs Healey in respect of Ms Barker. There were 48 relevant underpayments. Twenty-five were referrable to failure to pay the correct Monday to Friday loading. Nineteen concerned the Saturday loading. Four were referrable to the Sunday loading. There were 23 breaches of the 7 pm to midnight allowance provision and one of the midnight to 7 am allowance provision. Ms Baker was underpaid $515.32 in total. She had to wait until 4 June 2007 before Mrs Healey agreed to make good the underpayments. 10 Ms Jessica Hodgson was employed as an Introductory/Level 2 Food and Beveridge Attendant (Junior). Her employment spanned from 16 May 2005 to 13 November 2006. On commencement, Mrs Healey paid her a flat hourly rate of $13.08. This reduced on 27 June 2005 to $12.50. It further reduced on 23 July to $11.72 and increased back to $12.50 on 27 February 2006. There were 173 underpayments in respect of Ms Hodgson. There were 100 breaches of the weekday casual loading provision. There were 56 breaches of the Saturday loading provision and 16 of the Sunday loading provision. One breach of the public holiday loading provision occurred. There were 90 breaches of the 7 pm to midnight allowance provision and four of the midnight to 7 am allowance provision. It was not until 13 August 2007 that Mrs Healey acknowledged that she had underpaid Ms Hodgson in the sum of $1,138.35. 11 Mr Marcus Whitton worked for Mrs Healey only from 20 March 2006 until 27 March 2006 inclusive. He was engaged as a Level 3 Kitchen Attendant Grade 3. He received a flat rate of $17.91 for the Friday, $21.49 for the Saturday and $25.06 for the Sunday. He was underpaid by $4.57 in total. Mrs Healey acknowledged the underpayment on 4 June 2007. Mr Whitton's payments were close to the award rate. He is the only employee, the subject of this application, who was paid a different rate depending on what day of the week the work was performed. 12 Ms Sian Williams was employed from 2 April 2004 until 20 December 2004 as a Level 2 Food and Beverage Attendant Grade 2 (Junior). She received a flat hourly rate of $13.72. Mrs Healey underpaid Ms Williams in 103 respects. There were 50 breaches of the obligation to pay the weekday loading, 32 concerning the Saturday loading, 20 concerning the Sunday loading, 1 concerning the public holiday loading, 48 concerning the 7 pm to midnight allowance and 2 concerning the midnight to 7 am allowance. Ms Williams was underpaid $754.69. It was not until 4 June 2007 that the underpayment was acknowledged by Mrs Healey. 13 Mrs Healey underpaid various other employees. Below their names are set out. The numbers beside each name indicate the type of breaches by reference to the 8 set out at [6] above. The total underpayment in respect of the employee is also set out. · Hannah Bereznicki : 1, 2, 3, 4, 5, 7, 8 $326.47 · Kristy Blundell : 1, 2, 5, 6, 7 $1,160.92 · Luke Bowden : 1, 5, 8 $35.85 · Luke Buck : 1, 2, 3, 5 $96.32 · Sandra Buck : 1, 2, 5, 6, 7 $861.22 · Zoe Burton : 1, 2, 3, 4, 5 $284.70 · Jennifer Dalwood : 1, 6, 8 $23.05 · John de Little : 1, 2, 3, 4, 5, 6 $620.63 · Rebecca Denton : 1, 2, 5, 6, 7 $382.48 · Paul Direen : 1, 2, 3 $242.69 · Claire Fox : 1, 2, 3, 4, 5, 6 $421.21 · George Friend : 1, 2, 3, 4, 5, 6, 7 $543.67 · Meika Gale : 1, 2, 3, 4, 5, 6, 7 $1,447.26 · Tegan Gale : 1, 2, 3, 5, 6, 7, 8 $111.47 · Skye Gargan : 1, 2, 3, 4, 5, 6, 7 $1,779.34 · Marianne Goldsmith : 1, 5 $5.61 · Louise Healey : 1, 2, 3, 5, 6 $323.74 · Iain Hickman : 1, 2, 3, 5 $8.09 · Lesley Jackman : 1, 2, 5, 6 $3.53 · Felipa Jarzynka: 1, 6 $49.60 · Catherine Keygan : 1, 2, 3, 4, 5, 6 $224.86 · Jodi Locke : 1, 2, 3, 5, 6, 7 $246.71 · Glen Logan : 1, 2, 3, 4, 5, 6 $341.49 · Fiona McKenzie : 1, 5, 6, 7 $303.82 · John McManus: 1, 2, 3, 5, 6 $34.32 · Tracey Pearce : 1, 2, 3, 4, 5, 6 $2,825.10 It is noted that a complaint by Ms Pearce to the Office of Workplace Services (OWS) led to an investigation which resulted in this proceeding. Ms Pearce complained that she had been paid in accordance with "a purported AWA [Australian Workplace Agreement]", instead of at the award rate. · Gail Purcell : 1, 2, 5, 6, 7 $987.96 · Chani Rigby : 1, 2, 3, 5, 6, 8 $220.76 · Stephanie Semmens : 1, 5 $198.71 · Luke Sorrentino : 1, 2, 3, 4, 5, 7 $151.88 · James Stoessiger : 1, 2, 5, 6, 7 $83.37 · Christopher Thurlow : 1, 2, 3, 5, 6 $12.34 · Drew Underwood : 1, 2, 3, 5 $80.42 · Jessica Wade : 1, 2, 3, 4, 5, 6 $827.83 · Jessica Zache : 1, 2, 3, 5, 6 $362.40

Treatment of the various breaches 14 The above details concerning the relevant employees are not in dispute and are extracted from an agreed statement of facts document filed by the parties. The parties also agree that the eight award obligations set out at [6] above are the applicable provisions that have been breached for the purposes of s 719(2) of the Act and s 178(2) of the Act as it applied prior to the Workplace Relations Amendment (Work Choices) Act 2005 (Cth). However, counsel for the applicant workplace inspector conceded that the eight categories of breach may be grouped into three main categories being: · breach of the obligation to pay a casual loading depending on when work is performed; · breach of an obligation to pay correct adult rates of pay; and · breach of an obligation to pay correct junior rates of pay. 15 As seen from the discussion of the circumstances of some employees and a summary of the balance of them, there were 41 employees affected by various numbers of breaches of the relevant provisions. In total there were 254 breaches of the eight relevant terms of the award. Some 186 breaches occurred prior to 27 March 2006 and 68 breaches occurred after that date. The total gross underpayment figure is $18,405.71.

Course of conduct 16 Under s 719(2) of the Act, and s 178(2) of the Act as it stood prior to 27 March 2006, where multiple breaches of an award provision arose out of a course of conduct by one person, those breaches, for the purposes of the section, constitute one breach. In Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223, Gray J held that each separate obligation found in an award should be regarded as a term for the purposes of s 178. The same would now apply to s 719. Gray J went on to say at 233: The ascertainment of what is a term should not depend on matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out. 17 His Honour then said that he considered each separate obligation imposed by an award to be a "term" for the purposes of s 178. Importantly, he then said at 233: If the different terms impose cumulative obligations or obligations that substantially overlap, it is possible to take into account the substance of the matter by imposing no penalty, or a nominal penalty, in respect of breaches of some terms, but a substantial penalty in respect of others. 18 I agree, with respect, with the approach of Gray J to the question of "course of conduct" under s 719(2) and the former s 178(2). Tracey J applied the same approach in Kelly v Fitzpatrick [2007] 166 IR 14 at 17. I therefore reject the submission of counsel for Mrs Healey, Mr Green, that there was one single course of conduct which was constituted by Mrs Healey paying a flat rate of pay to her employees instead of the award rate plus loadings and allowances.

Quantum 19 Counsel for the applicant, Mr Zeeman, contended that the Court should impose mid-range to high penalties for the award breaches. Mr Green submitted that 70% of the maximum was an appropriate figure. In reply, Mr Zeeman did not take issue with that percentage. He submitted that a mid to high range penalty is appropriate for many of the breaches of the relevant terms of the award. The agreement of counsel is an important factor in the assessment of penalty. However, ultimately the assessment is a matter for the Court. 20 The "30% discount" conceded by Mrs Healey's counsel in my view does not sufficiently take into account the following ameliorating circumstances: · She has no prior history of breaching the Act; · She fully co-operated with the OWS investigation and provided the OWS with all her business records when requested to do so; and · She has paid all the amounts owing in respect of the award breaches. 21 Despite her counsel's concession, I consider the appropriate assessment of the penalties to be applied to be 50% of maximum allowable. 22 In accordance with the approach of Gray J in Gibbs, I consider it appropriate to examine the circumstances of each relevant employee and assess an appropriate penalty for each breach. This may mean that in many instances no penalty will be imposed for breaches. 23 Apart from Mr Whitton and Ms Jodi Buck, Mrs Healey employed the affected employees on a flat casual rate in breach of the award. In each of those 39 cases the critical offending conduct was the setting of a rate below the award rate. The failure to pay appropriate loadings and allowances flowed from the setting of the incorrect rates of pay for the relevant classifications. The 50% figure referred to above should apply to the maximum penalty available for all breaches of cl 18 of the award which is applicable, as at their commencement date, to all but seven employees. Those seven commenced as juniors. Clause 15.5.2 was breached in respect of them. In other words, depending on the time of commencement of the employee a fine of 50% of the maximum should be imposed 41 times. In seven of those cases the relevant breach will be that of cl 15.5.1 because seven of the 41 employees commenced as junior employees. 24 As set out by Tracey J in Kelly v Fitzpatrick at 16-17, prior to 10 August 2004, the maximum penalty for breach of s 178 was $2,200 for an individual. Since that time it has been $6,600 for breach of s 178 and, on and after 27 March 2006, s 719. 25 The following 20 former employees of Mrs Healey commenced employment with her prior to 10 August 2004: · Hannah Bereznicki (junior on commencement) · Luke Buck · Sandra Buck · John de Little · Rebecca Denton · George Friend · Tom Friend (junior on commencement) · Meika Gale · Skye Gargan · Iain Hickman · Felipa Jarzynka · Catherine Keygan · Glen Logan · Fiona McKenzie · Chani Rigby (junior on commencement) · Stephanie Semmens · Luke Sorrentino · James Stoessiger · Drew Underwood, and · Sian Williams (junior on commencement). 26 The balance commenced after 10 August 2004. Three of them commenced as juniors. They were: · Jennifer Dalwood; · Tegan Gale, and · Jessica Hodgson. 27 Fifty per cent of $2,200 is $1,100. $1,100 multiplied by 20 equals $22,000. A penalty of $1,100 will be imposed on Mrs Healey in respect of each of the 20 persons named at [25] above. A sub-total of those penalties is $22,000. 28 Fifty per cent of $6,600 is $3,300. $3,300 multiplied by 21 is $69,300. The number 21 is referrable to the balance of the 41 employees who were first engaged by Mrs Healey after 10 August 2004. A penalty of $3,300 will be imposed in respect of each such employee. A sub-total of those penalties is $69,300. 29 The total penalties for breaches of cls 15.5.1 (in respect of juniors) and 18 (in respect of adults) amount to $91,300. Putting to one side the non-payment of Ms Jodi Buck, the major transgression was the setting of a flat rate for all purposes for every employee, except Mr Whitton. Even Mr Whitton was not paid the amount due under the award. Accordingly, seven penalties will be imposed for breach of cl 15.5.2 and 34 for breach of cl 18. The failure to pay the correct casual loadings and allowances in breach of cl 15.2.2 involved Mrs Healey in a failure to comply with obligations which "substantially overlap" (in the words of Gray J in Gibbs at 233) with the obligation to set the appropriate adult or junior rate for the relevant classification as required by cls 15.5.1 and 18. Consequently, I impose no penalty for breaches of cl 15.5.2 of the award. I also impose no penalties for additional breaches of cls 15.5.1 and 18 in respect of payments made to employees in the weeks subsequent to the commencement.

The totality principle 30 Having determined an appropriate level of penalty for each of the contraventions of the award, I must now look at the aggregate of those penalties ($91,300) to form a view whether that figure is out of proportion to the overall conduct of Mrs Healey; see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [23] per Gray J. This exercise may also be described as did Graham J in Australian Ophthalmic Supplies at [71] as ensuring that the figure provides an appropriate response to the conduct which led to their breaches. 31 The application of the totality principle does not mean that the figure arrived at before its consideration must be reduced. However, the Court must engage in what Gray J described in Australian Ophthalmic Supplies at [27] as an "instinctive synthesis" and arrive at a figure which Graham J said at [73] should be "just and appropriate". 32 The conduct which led to the breaches occurred over seven years. The only evidence before the Court to explain it is found in the agreed statement of facts at paragraphs 8 and 9 where reference is made to OWS receiving a complaint from Ms Tracey Pearce. At paragraph 9 the following is said: In her claim to OWS, Ms Pearce stated that during the course of her employment at the Theatre Royal Hotel, she was paid pursuant to wage rates contained in a purported AWA, and as a consequence believed that she had not been paid her correct rate of pay. 33 It is open to be inferred that, at least in the case of Ms Pearce, Mrs Healey attempted to apply an AWA which was inoperative for some reason relating to lack of compliance with legislative provisions concerning AWAs. There is no other evidence with respect to AWAs in which Mrs Healey is the employer. Even if the rates set were struck in accordance with incomplete AWAs, there is no evidence that any employee agreed to their terms. In any event, this does not explain other strange features of this matter such as the non-payment of Ms Jodi Buck, the downward adjustments in the rate applicable to Ms Hodgson and the attempt to give some loading to the rate of Mr Whitton but to no-one else. 34 The evidence is consistent with Mrs Healey paying wages as she saw fit, in ignorance, defiance of, or with recklessness as to the application of, the award. The widespread nature of the breaches and their long duration would ordinarily call for a high penalty. Indeed, a salient feature of this matter is the lack of evidence from Mrs Healey explaining the underpayments. The only ameliorating factors are Mrs Healey's lack of prior transgression, her co-operation with OWS and her payment of the underpayments. However, in the latter respect, some employees were not paid their correct entitlements until August 2007. Of course, the need for general deterrence cannot be understated. 35 Considering all of the factors set out in the preceding paragraph and in particular the absence of Mrs Healey's prior breaches of the Act and the total level of underpayments my "instinctive synthesis" of the facts and circumstances to arrive at a "just and appropriate" figure leads me to reduce the $91,300 figure to $70,000. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall.

Workplace Relations Act 1996(Cth)ss 178

Workplace Relations Amendment (Work Choices) Act 2005(Cth)

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