Whether a penalty should be imposed and, if so, in what amount
21 As I noted at [53] of the principal judgment, the maximum applicable penalty for a breach of s 119, read with s 44(1) is, relevantly, $51,000 in respect of Vemco.
22 In summary, based on the reasons for judgment in the principal judgment at [282] and [287], the applicant submitted Vemco knew of the applicant's redundancy on and from 30 May 2014 and at the very latest in August 2014. Notwithstanding this, no redundancy payment was made and Vemco maintained through its solicitors there was no entitlement to any such payment. This conduct should be characterised as deliberate.
23 Vemco submits that any penalty imposed for a contravention of s 119(1) should be imposed on the basis that there has been a single contravention of the Fair Work Act, and that in this case the nature and seriousness of the contravention warrants the imposition of a minimal penalty at the lower end of the available range. Vemco submits its conduct was not deliberate but could be described as "an error of understanding" and that it has had no previous contraventions of the Fair Work Act. Vemco relies on the fact it has been placed in administration as meaning that there is little or no utility in specific deterrence.
24 Vemco also made a number of submissions about the likely outcome of its administration, and the applicant's status as a creditor should Vemco be placed into liquidation. I have taken into account the fact Vemco is under administration. I have no evidence of what might occur although as I have said, one possibility is that it may be placed in liquidation. Those are not matters about which the Court should speculate, particularly in the absence of admissible evidence.
25 I summarised the approach I consider should be taken to the determination of appropriate penalties for contraventions of the Fair Work Act in Sayed v Construction, Forestry, Mining and Energy Union [2015] FCA 338 at [73]-[88] and I adopt the same approach in this proceeding, subject to one matter to which I refer at [40]-[45] below.
26 Both parties referred the Court to the factors set out by Tracey J in Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [14], although it was recognised by his Honour, as it has been in other matters, that care needs to be taken so that no 'inflexible checklist' approach develops: see the observations of Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [91], which I would respectfully adopt.
27 The contravention occurred in the context of long running difficulties in relation to the applicant's ongoing employment, including as to the conditions under which he was expected to work, the security of the position he occupied, and the attitude of Mr Barry towards him. The difficulties began not long after the applicant commenced in his bid manager position in November 2012 and continued until he went on sick leave in May 2014. The working relationship he had with Mr Barry and his co-workers was, as I found in the principal judgment, fraught. In late 2013 and early 2014, Vemco deliberately decided to restructure the bid management and tender aspects of its business. Conscious choices were made about this structure, which involved the applicant's position being removed from the business structure and replaced with two distinct positions. This was announced generally by Mr Barry in January 2014 at a meeting of all relevant staff. As I found at [185] of the principal judgment, Mr Barry's evidence was that reporting lines changed in about March 2014.
28 This was no accidental or unplanned decision. Mr Milardovic was clearly told by Mr Barry and Ms Finnigan that he would be "made redundant" if he did not apply for either of the new positions, or if he applied and was unsuccessful in being appointed to either of them. In early April 2014 Vemco was proceeding on the basis that "[e]ffectively [the applicant's] current role does not exist going forward and he is welcome to apply for either or both of the newly created roles": see principal judgment at [186]. At [193] I set out Ms Finnigan's evidence of what the applicant was told at a meeting on 7 May 2014:
And should he not take up either role, then the option was redundancy.
29 There are similar findings about Vemco's clear intention that the applicant's position be redundant at [278]. At [209], based on Mr Barry's evidence, I found the two new roles were filled in July or August 2014. At [279]-[280] I refer to the gaps in the evidence, and the lack of evidence, about why Vemco did not terminate the applicant's employment before November 2014.
30 For the purposes of penalty, I do not consider that those evidentiary gaps assist Vemco. They do not lead me to characterise its conduct as based on some kind of "error of understanding". It well knew and understood that the applicant's position was to become redundant, indeed that was the very proposal in January 2014, which was acted on and implemented in the first half of 2014.
31 In my opinion, Vemco should have made a redundancy payment to the applicant well before November 2014, when it was clear he had not applied for either of the two positions and indeed they had been filled by two new appointments by August 2014. At the very least, a redundancy payment should have been made to the applicant on termination of his employment in November 2014. However, in my opinion Vemco knew by May 2014 that Mr Milardovic's position was in fact redundant, and by July or August when it appointed two people to the new positions, it should have understood it was obliged to pay Mr Milardovic a redundancy entitlement.
32 It is difficult to separate out the damage caused to Mr Milardovic by this contravention as opposed to the other behaviour engaged in by Mr Barry as agent for or on behalf of Vemco. As I found in the principal judgment at [77], Mr Barry was the main actor in all of Vemco's decisions and its conduct in respect of Mr Milardovic. His personal attitude to Mr Milardovic also caused a great deal of distress to Mr Milardovic, although I found he was not involved in any adverse action against Mr Milardovic. Had Mr Milardovic been treated as he should have been in relation to redundancy, I am satisfied his distress and confusion would have been considerably lessened because he would at least have clearly understood what the position was regarding his employment. He was given no such clarity.
33 I accept Vemco's submission that the contravention is properly seen as one course of conduct. The applicant did not dispute this characterisation. Therefore one penalty is appropriate. I accept also that this is Vemco's first contravention of the Fair Work Act.
34 Vemco ran a sizeable business in the preparation and conduct of bid management and tender projects. The only evidence about the size of the business was that across the whole group of companies (of which Vemco was a part) there were 400-500 employees. However the general tenor of Mr Barry's evidence was that Vemco was a significant player in the bid management industry, and that is also apparent from the evidence given about the size and nature of the bids in which Mr Milardovic was involved. It was certainly a sizeable enough company to have in place proper systems for advice about its legal obligations to its employees, and for its human resources personnel (such as Ms Finnigan) to understand what those obligations were and how they needed to be acted upon. In contrast, the evidence leaves me with the impression that aspects of Vemco's obligations to its employees were handled poorly, informally and haphazardly. It seems to me Mr Barry bears some responsibility for this, and a good example of poor handling was the evidence (and the findings I made) about the incomplete, unfair and generally poor management of Mr Milardovic's performance review process.
35 Since Vemco is under administration there is no evidence of any corrective action taken by the company, nor is any likely to be taken. I have no evidence about the reasons it was placed under administration and cannot draw any inferences whether the kind of poor management which was plain in the evidence before me featured in those reasons.
36 Ensuring employees are paid appropriate redundancy entitlements is a critical element of securing to employees their lawful employment entitlements. The restructure by corporations of their business operations to suit changing needs and requirements is a fundamental aspect of most employment situations. Employers must be astute to ensure that employees' entitlements in such circumstances are not overlooked, nor given less priority than they should be. Here, Vemco looked to its own business needs without any particular attention being given to Mr Milardovic's interests, including his right to be told, clearly and at an appropriate time, what had happened to his position at Vemco. As I found at [188] and [253], Vemco (through Mr Barry) pursued its restructure without keeping Mr Milardovic clearly informed in relation to the consequences for his position.
37 This is a circumstance which calls for some meaningful general deterrence. I accept the question of specific deterrence for Vemco is less clear. However, those individuals who have been the principal actors on behalf of Vemco can and should also learn from these experiences. A corporation acts through natural persons who guide, control and determine conduct taken on behalf of a corporation: see, in a different context, Fencott v Muller [1983] HCA 12; 152 CLR 570 at 583 (Gibbs CJ), 588-9 (Mason, Murphy, Brennan and Deane JJ), 611 (Wilson J), and 618 (Dawson J).
38 I accept the applicant's submissions that the fact of Vemco's administration on and from October 2015 should not affect my determination of what I otherwise consider to be an appropriate penalty to be imposed for its conduct in 2014. Heerey J took a similar approach in Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltd (Administrators Appointed) [2004] FCA 376; ATPR 41-983 at [20]-[25], concluding that the administration of the respondent was not relevant to the determination of an appropriate penalty. I have taken Vemco's status as being under administration into account but for the reasons I have set out I consider that a penalty should nevertheless be imposed.
39 Taking all the circumstances into account, I find an appropriate penalty is $10,000. It is a meaningful and not token sum, which nevertheless reflects the fact that Vemco's conduct is not at the high end of contravening conduct in its nature, quality or duration.
40 Were I free to do so, I would, in the exercise of the Court's discretion under s 546(3), order that the penalty be payable to the Commonwealth rather than to Mr Milardovic. However that course is not open to me following the Full Court's decision in Sayed v Construction, Forestry, Mining and Energy Union [2016] FCAFC 4. The Full Court's decision requires the Court to make an order that Vemco pay the penalty the Court has imposed on it to Mr Milardovic.
41 That the Full Court's decision in Sayed requires me to make such an order arises from several aspects of the Full Court's reasons. First, at [72] their Honours identified "a certain symmetry between the person or entity authorised to prosecute an enforcement proceeding and the person or entity to whom the penalty, if imposed, might be paid".
42 Second, at [101] the Full Court held:
Given the legislative history of ss 539(2) and 546(3) of the FW Act, since the enactment of ss 44 and 45 in the pioneering 1904 Act, and the manner in which the "usual order" was articulated in such early cases as the Vehicle Builders' Employees' Federation case and Seymour, which is reflected in the Explanatory Memorandum, we consider that the power conveyed by s 546(3) is ordinarily to be exercised by awarding any penalty to the successful applicant. We accept that there may be cases (of which this is not one) where the penalty, or a part of the penalty, should be paid to another person in the circumstances described by Gray J in Plancor at [44] (as set out at [96] above).
[My emphasis.]
43 The reference to Gray J in Plancor is a reference to the following passage of his Honour's reasons in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union [2008] FCAFC 170; 171 FCR 357 at [44]:
The correct view is that the initiating party is normally the proper recipient of the penalty as part of a system of recognising particular interests in certain classes of persons … in upholding the integrity of awards and agreements the subject of penal proceedings. Where a public official vindicates the law by suing for and obtaining a penalty, it is appropriate that the penalty be paid to the Consolidated Revenue Fund. Otherwise, the general rule remains appropriate, that the penalty is to be paid to the party initiating the proceeding, with the Gibbs … exception that the penalty may be ordered to be paid to the organisation on whose behalf the initiating party has acted.
44 Subject then to the "Gibbs exception" (Gibbs v The Mayor, Councillors and Citizens of City of Altona [1992] FCA 553; 37 FCR 216 at 223-4), the Full Court's decision in Sayed is authority for the proposition that where a proceeding is brought by an applicant on his or her own behalf, the discretion in s 546(3) is to be exercised to make any penalty the Court orders payable to that applicant. Aside from the identity of the person who brings the proceedings, and taking into account the "Gibbs exception", the Full Court's judgment does not appear to provide for any other basis upon which a penalty should be made payable to another person or entity set out in s 546(3). Plainly, the "Gibbs exception" does not apply to Mr Milardovic's circumstances.
45 Accordingly, I consider I am bound to make an order pursuant to s 546(3) of the Fair Work Act that the penalty I have imposed is payable to the applicant.