United Voice v Berkeley Challenge Pty Limited

INTRODUCTION 1 In March 2018, I delivered my judgment in relation to the liability aspects of this matter: United Voice v Berkeley Challenge Pty Limited [2018] FCA 224 (the liability judgment). These reasons concern the remaining penalty issues as follows: (a) the appropriate pecuniary penalties to be imposed on Berkeley Challenge Pty Limited for its contraventions of the Fair Work Act 2009 (Cth) (the FWA); and (b) whether an order should be made that any pecuniary penalties imposed be paid to United Voice.

THE FACTUAL BACKGROUND 2 The following is a brief review of the factual background to this matter taken largely from the liability judgment. In 1994, Berkeley began to provide various services (the contract services) to Lend Lease Property Management Pty Ltd at the Sunshine Coast Plaza Shopping Centre (Sunshine Plaza) on the Sunshine Coast in Queensland. 3 In 1999, Berkeley was acquired by the Spotless Group of Companies, the ultimate holding company of which is Spotless Group Holdings Ltd. From about that point forward, a company within that Group became the party that contracted with Lend Lease to provide the contract services. Nonetheless, Berkeley continued to employ the staff necessary to provide those services. 4 In or about January 2014, Lend Lease invited tenders for a new contract to provide the contract services. Spotless submitted a tender, however, it was unsuccessful. As a consequence, on or about 29 August 2014, Lend Lease gave notice to Spotless that it was required to exit the Sunshine Plaza by the close of business on 30 September 2014. This date was later extended to close of business on 7 October 2014. 5 In early October 2014, Berkeley terminated the employment of most of the employees it employed to provide the contract services (the affected employees). 6 United Voice commenced this proceeding on behalf of the affected employees, claiming that Berkeley did not provide valid notices of termination to them and that some of them were entitled to redundancy payments which Berkeley did not pay them.

THE LIABILITY JUDGMENT 7 In the liability judgment, I found, in summary: (a) at [33], that the notices of termination Berkeley gave to the affected employees were not valid notices under s 117(1) of the FWA and Berkeley had therefore contravened ss 117 and 44(1) of the FWA (the notice contraventions); (b) at [81]-[82], that Berkeley had failed to discharge its onus to establish that the exception in s 119(1)(a) of the FWA applied in the circumstances and it had therefore breached ss 119 and 44(1) of the FWA by not paying the affected employees their redundancy pay entitlements (the redundancy contraventions); and (c) at [34] and [82], that the affected employees were entitled to compensation under s 545(2) of the FWA. 8 Orders were made by myself on 13 April 2018 (and amended by Collier J on 18 May 2018) with respect to the issue of compensation for the affected employees. As noted above, two penalty issues remain to be resolved in this judgment.

SOME EVIDENTIARY ISSUES 9 It is convenient, first, to deal with some evidentiary issues that arose during the penalty hearing. They arose out of the finding at [7(b)] above concerning the redundancy contravention. As I stated in the liability judgment, that finding was largely based upon my conclusion that, while Spotless had adduced extensive evidence about its business activities and practices relating to job redundancies, there was very little evidence about how Berkeley approached such matters (see at [78]-[79] of the liability judgment). I considered that was critical because Berkeley was the particular employer that made the decision to make the jobs of the affected employees redundant. Having regard to that conclusion, I made rulings excluding as irrelevant certain affidavit evidence that both parties sought to tender in the penalty hearing. In broad terms, that evidence related to Spotless' business activities, including: (a) its role in the public debate surrounding the alleged exploitation of workers by labour hire companies; (b) the size and scope of its business activities, as distinct from those of Berkeley, the actual respondent in this matter; (c) whether it, or any of its subsidiaries, as distinct from Berkeley, had previously contravened the FWA; (d) any steps it, as distinct from Berkeley, had taken to address the rulings in the liability judgment; and (e) the reason why it, as distinct from Berkeley, had adopted a policy not to pay redundancy payments to its employees. 10 Consistent with these rulings, throughout these reasons I have focused on the size and scope of Berkeley's, not Spotless', business activities, relevant past history and conduct.

THE RELEVANT LEGISLATIVE PROVISIONS AND APPLICABLE PRINCIPLES 11 Sections 117 and 119 of the FWA form part of the National Employment Standards. The role and importance of those Standards is described in the liability judgment (at [15]-[17]). In summary, those Standards are: … intended to advance one of the main objects of the FWA … [of] "ensuring a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders" … Accordingly, they set the "minimum standards that apply to the employment of employees which cannot be displaced" … 12 Section 44(1) provides that "[a]n employer must not contravene a provision of the National Employment Standards" and states that "[t]his subsection is a civil remedy provision". 13 Section 546(1) of the FWA confers a broad discretion on the Court to impose pecuniary penalties for contraventions of a civil remedy provision such as s 44(1) above. That discretion must, of course, be exercised judicially and not arbitrarily. Section 546(2) of the FWA prescribes how maximum civil remedy penalties are to be calculated as follows: The pecuniary penalty must not be more than: (a) if the person is an individual - the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2); or (b) if the person is a body corporate - 5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2). 14 The parties have agreed that, under s 546(2)(b) above, the maximum penalty this Court may impose on Berkeley for each contravention is $51,000. This maximum penalty is a significant factor in assessing an appropriate penalty: see Markarian v The Queen (2005) 228 CLR 357; [2005] HCA 25 at [31] per Gleeson CJ, Gummow, Hayne and Callinan JJ and Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 at [67]-[68] per Foster J. 15 Section 546(3) provides that the Court has a discretion upon whether a penalty is to be paid to: (a) the Commonwealth; or (b) a particular organisation; or (c) a particular person. 16 This is the provision to which the second issue above (at [1]) relates. Since it is a narrow issue, it is convenient to dispose of it at this point. The Full Court held in Sayed v Construction, Forestry, Mining and Energy Union (2016) 239 FCR 336; [2016] FCAFC 4 at [101], the "usual order" is that any penalty imposed on a respondent should be awarded to the successful applicant. Berkeley sought to avoid this "usual order" by contending that it would "facilitate the course of justice" and prevent United Voice from receiving a "windfall" if any penalties were ordered to be paid to the Commonwealth. Given the ruling in Sayed, the former contention plainly has no merit. As to the latter, in the course of its detailed consideration of this question in Sayed, the Court rejected as a "false notion" the proposition that the usual order would result in a windfall (at [99]-[100]). Accordingly, I propose to apply the ruling in Sayed and make the usual order awarding any penalties imposed on Berkeley to United Voice. 17 Finally, s 557(1) of the FWA provides: For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if: (a) the contraventions are committed by the same person; and (b) the contraventions arose out of a course of conduct by the person. 18 The parties have agreed that this provision applies in this matter. Specifically, they have agreed that the notice contravention which affected 21 employees, and the redundancy contravention which affected 14 employees, are each to be treated as one contravention of ss 44(1) and 117; and ss 44(1) and 119, respectively.

THE PRINCIPLES RELEVANT TO THE IMPOSITION OF CIVIL PENALTIES 19 The principles relevant to the imposition of civil remedy penalties under the FWA have been summarised on numerous occasions, of which there are too many to list. A relatively recent example is Director of The Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCA 353 at [66]-[73], where Tracey J conveniently summarised those principles as follows (citations omitted): (a) at [66], "[t]he task of the Court is to ensure that any penalty which is imposed is proportionate to the gravity of the contravening conduct"; (b) at [67], "[t]he penalty is to be determined by a process of 'instinctive synthesis' … This process involves the Court having regard to all relevant factors before fixing a penalty which brings them all into account"; (c) at [68], "[w]here multiple contraventions arise from a series of related events which constitute a course of conduct principles of proportionality and consistency come into play in determining the appropriateness of the penalty"; (d) at [69], "[t]he ultimate penalty 'must be proportionate to the offence and in accordance with the prevailing standards of punishment'"; (e) at [70], "[c]onsistency requires that '[l]ike cases should be treated in like manner' … [However, this] consistency principle does not require a detailed factual comparison between past cases and that presently under consideration with a view to fixing a higher or lower penalty depending on the outcome of the comparative analysis"; (f) at [71], "[i]t is also necessary to ensure that a respondent is not punished twice for the same conduct"; (g) at [72], the above principle "is to be applied separately from and anterior to the final check constituted by the application of the totality principle … It does not necessarily require the application of a single penalty for all of the contravening conduct"; (h) and finally at [73], "[t]he totality principle falls for consideration at the end of the process. It requires the Court to stand back and decide whether the aggregate of multiple penalties fixed by it is appropriate for the total contravening conduct involved … A consequence of the application of the principle is that the aggregate penalty may be reduced if it is considered to be too great". See also the list of considerations set out in the earlier decision of Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 at [14]. 20 It is also important to underscore the protective and deterrent purpose of a civil penalty. The High Court did that in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; [2015] HCA 46 (Commonwealth v Directorate) where it adopted (at [55]) the following observations of French J in Trade Practices Commission v CSR Limited (1991) ATPR ¶41-076 at 52,152 (at [40]): Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s.76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act. (Emphasis added) 21 Finally, pertinent to deterring those "who might be tempted to contravene", Tracey J, among others, has highlighted the need to fix a penalty which is not "regarded by [the] offender or others as an acceptable cost of doing business" (see Construction, Forestry, Mining and Energy Union v Decmil Engineering Pty Ltd (No 2) [2017] FCA 1237 at [38] and the cases there cited). 22 Before turning to consider these principles and the appropriate penalties that should be imposed on Berkeley for its contraventions, it is convenient, first, to deal with two separate issues that were raised in the submissions of the parties. They are the number of contraventions; and whether Berkeley has any prior contraventions.

THE NUMBER OF CONTRAVENTIONS 23 Whilst the parties have agreed that there has been one notice contravention and one redundancy contravention (see at [18] above), Berkeley contended that there was an overlap between the factual and legal elements of those two contraventions such that they should be treated as a single contravention. It contended that this overlap arose because "the loss of [Spotless'] contract and chain of conduct stemming from that loss" resulted in both the notice and redundancy contraventions as "[a]n employee cannot receive redundancy pay unless there is also, inter alia, a termination of employment". 24 In response, United Voice submitted that the two contraventions would need to share "a commonality in their legal and factual elements" to be grouped into one, and that in this case "[t]he legal and factual circumstances connected with the failure to give proper notice of termination were quite distinct from the considerations which led to [Berkeley's] failure to extend proper redundancy entitlements", relying on Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1; [2010] FCAFC 39 at [41]. 25 In my view, Berkeley's contention is not sustainable. That is so because its notice contravention concerned the content of the notice that it served on the affected employees, whereas its redundancy contravention related to whether it had established that the exception in s 119(1)(a) of the FWA applied to relieve it of its obligation to pay some of the affected employees their redundancy pay. The factual and legal elements of each of these contraventions are, therefore, quite separate and distinct. No relevant overlap arose from the fact that each contravention applied to the same core group of employees and each occurred in the same broad factual circumstances. Accordingly, I consider Berkeley committed two distinct contraventions.

PRIOR CONTRAVENTIONS 26 United Voice accepted that Berkeley, itself, had not committed any prior contraventions of the FWA. However, it contended that Spotless' prior conduct should be taken into account. That conduct, it claimed, included it being "the subject of sustained attention" from the regulator over time. Berkeley submitted that, as the actual respondent in this proceeding, it had no prior contraventions and it was therefore entitled to be treated as a "first time contravener". 27 For the reasons briefly stated at [9]-[10] above, I do not accept United Voice's contention on this aspect. Berkeley is the respondent in this matter, not Spotless. Since Berkeley has no prior contraventions, it should be treated as a first time contravener.

CONTENTIONS ON THE MAIN PRINCIPLES 28 I now turn to summarise the submissions of the parties on the main principles outlined above affecting the appropriate penalties to be imposed. In this summary, I have not sought to include all of the issues raised by each party. It will be apparent that there is a degree of overlapping between many of the concepts addressed in these contentions. 29 First, on the question of deliberateness, Berkeley contended that its contraventions were not deliberate and that should be a mitigating factor in assessing the penalty to be imposed on it. In particular, it contended it did not deliberately draft a notice of termination which would subsequently be deemed invalid and it did not deliberately decide not to pay to the affected employees their redundancy pay entitlements because it genuinely believed it could rely on the exception in s 119(1)(a) of the FWA. In making these contentions, Berkeley relied on the observations of Gordon J in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Telstra Corporation Ltd (2007) 168 IR 368; [2007] FCA 1607 (CEPU v Telstra) at [18] as follows: … Where the unlawful conduct arises out of an arguable but erroneous construction of a relevant term, and the subsequent breach cannot be characterised as demonstrating a flagrant or wilful disregard for the agreement, this legislative purpose is not furthered by imposition of a penalty. In these circumstances, neither general nor specific deterrence is a significant factor weighing in favour of imposing a penalty … 30 In response, United Voice submitted that deliberateness was a wider concept encompassing, for example, negligence, recklessness and wilful blindness, and it therefore did not matter that Berkeley had not intended to contravene the FWA as its conduct fell within these other parts of the spectrum. It also submitted that in any event, "an absence of proven 'deliberateness' is not a 'mitigatory factor'." It relied upon the following observation of the Full Court in Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25; [2016] FCAFC 181 (Reckitt Benckiser) at [131] as follows: 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. (Emphasis added) 31 Next, on the question of deterrence, while it acknowledged that deterrence was a relevant factor in assessing the appropriate penalty to be imposed, Berkeley contended that it was not necessary to reflect general deterrence in the penalties in this matter because there was no "[blatant] deliberate conduct which justifie[d] public denouncement" of its conduct. It added that this was particularly so where it was acting under a mistaken but genuine belief about the application of the s 119(1)(a) exception. Berkeley also submitted that it was not necessary to reflect specific deterrence in the penalties to be imposed as it had taken corrective steps to ensure the same harm would not be caused again, relying on Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; [2008] FCAFC 170 at [37] per Gray J as follows: There is one issue of principle that requires consideration in every case. That is the issue of deterrence, both specific and general. Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur … 32 Berkeley outlined the various corrective steps it claimed it had taken as including: (a) paying compensation and interest to the affected employees in accordance with the orders made on 13 April 2018 and amended on 18 May 2018; (b) conducting a complete review of Spotless' Human Resources processes and documentation for loss of contract situations; and (c) drafting a new termination letter which complies with s 117 of the FWA to be used in similar situations in the future. 33 In response, United Voice contended that Berkeley had confused the concept of "general deterrence" with that of "denunciation", and claimed that taking some corrective action did not negate the importance of "putting a price on contraventions". Further, United Voice claimed that any corrective action which had been taken by Berkeley was only aimed at the notice contravention and that no steps had been taken to ensure the redundancy contravention did not re-occur. 34 On the important matter of the nature and seriousness of the offending, Berkeley sought to adopt the opposite position to that outlined above (at [26]). It contended that the nature of its offending was insignificant when account was taken of the fact that Spotless employed a total of 2,013 employees. For the reasons expressed at [9]-[10] above, this contention can be rejected immediately. Otherwise, on this question, Berkeley contended that the notice contravention only concerned 21 employees and the redundancy contravention only concerned 14 employees. Finally, it contended it took steps to notify the affected employees of the termination and it claimed it was "clear" to those employees that they may become unemployed as of 7 October 2014 if they did not obtain new employment. 35 United Voice contended that the nature and extent of the contraventions was significant when considered from the perspective of the affected employees. It claimed that Berkeley did not make it clear to the affected employees that their employment would end on 7 October 2014. To demonstrate this lack of clarity, it cited a number of witness statements which evidenced the uncertainty Berkeley had created, including: [Statement of Noelle Bebe Ferris dated 18 October 2016] 13. I was not advised and did not understand that [Berkeley] losing the contract would mean my employment would be terminated as of 7 October 2016. I was not advised of what my termination date would be. [Statement of Terrence Pomeroy dated 18 October 2016] 23. I cannot recall being given any notice my employment would end on 7 October 2014. [Statement of Steven Frank Woods dated 18 October 2016] 16. In late September 2014 Ms Fleming said to me that [Berkeley's] contract had been extended until 7 October 2014. It was not explained to me that this meant my employment with [Berkeley] would finish on 7 October 2014. … 19. I never signed an employment termination form, and was never advised in writing that my employment with [Berkeley] would end on 7 October 2014. [Statement of Laurie Preo dated 14 October 2016] 18. Sometime in September 2014 I was told by one of the managers of the incoming contractor, Securecorp, that [Berkeley's] contract had been extended until 7 October 2014. I was not given any notice by [Berkeley] verbally or in writing that my employment would end and the date of any ending. 36 Finally, as to the quantum of the penalties to be imposed, United Voice contended that, given the seriousness of Berkeley's conduct and the importance of deterrence, an appropriate penalty for each of the two contraventions would be $45,000. For its part, Berkeley contended that a nominal or low level penalty not exceeding $5,100 was appropriate for the notice contravention as the conduct was at the lower end of the scale of offending. It also submitted that no penalty should be imposed for the redundancy contravention as it had acted under the mistaken, but genuine, belief that the exception in s 119(1)(a) applied, relying on CEPU v Telstra (see at [29] above).

ASSESSING THE APPROPRIATE PENALTIES 37 In assessing the appropriate penalties to be imposed on Berkeley, I will begin with the question of deliberateness above, then consider deterrence and finally turn to the nature of the offending. First, on the issue of deliberateness, I accept that Berkeley did not deliberately set out to provide an invalid notice in contravention of ss 117 and 44(1), nor did it intentionally contravene ss 119 and 44(1) by denying redundancy payments in circumstances where it genuinely believed the s 119(1)(a) exception applied. Nonetheless, since I did not understand United Voice to be asserting that Berkeley's contraventions involved any particular state of mind element and I did not understand Berkeley to be positively asserting a lack of consciousness of its conduct, I will determine the penalties on the basis of the proscribed nature of the conduct concerned (see Reckitt Benckiser at [30] above). 38 Turning next to deterrence, I also accept Berkeley's contention that this is not a case which calls for a significant element of specific deterrence in the penalties. In coming to this conclusion, I have taken account of the facts it has committed no prior contraventions and it has taken corrective steps in relation to the notice contravention. I also presume it will follow the ruling in relation to the redundancy contravention, even if no corrective action has been taken yet. That said, I do consider there is a need to reflect a moderate degree of general deterrence as discussed in Commonwealth v Directorate at [55] (set out at [20] above). That is required to convey to all labour hire firms similar to Berkeley the importance of complying with the notice and redundancy requirements in ss 117 and 119 of the FWA. That need is heightened by the fact that those provisions form an important part of the National Employment Standards which, as has been highlighted above (at [11]), were included in the FWA to provide "a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions" for employees. I should add that, in the circumstances, insofar as the redundancy contravention is concerned, I do not accept Berkeley's contention that its mistaken but genuine belief about the construction of the exception (see [31] above) disposes of the need for general deterrence to be reflected in the penalties. 39 In assessing the nature and seriousness of the offending, it is convenient to analyse each contravention separately. The notice contravention affected 21 employees and involved a single event uncompounded by any element of repetition or duration. It arose as a result of a notice which had been poorly drafted and it left those 21 employees in a state of uncertainty as to their employment future. On this aspect, I consider it is clear from the witness statements set out at [35] above that, contrary to Berkeley's contentions, it did not make it clear to the employees that their employment would end on 7 October 2014. To the contrary, I consider that the vagueness of its notice added to the stress that they would inevitably have felt on being faced with the prospect of becoming unemployed. 40 The redundancy contravention affected 14 employees and also involved a single event uncompounded by any element of repetition or duration. This contravention was based upon an arguable, albeit self-serving, construction of the exception in s 119(1)(a) of the FWA. In this respect, I have had regard to the principles raised in CEPU v Telstra (see at [29] above). I have also had regard to the observations of Rangiah J in the recent decision of Construction, Forestry, Mining and Energy Union v Hail Creek Coal Pty Ltd (No 2) [2018] FCA 480 (at [15]) to the effect that such principles are a "powerful factor" affecting the exercise of the discretion to decline to impose a penalty, but each case must turn on its own circumstances. 41 In the circumstances of this case, I consider it is appropriate to impose a penalty for the redundancy contravention. Berkeley's decision - which ultimately proved to be misconceived - to attempt to rely on the exception in s 119(1)(a) must have significantly added to the stress and uncertainty that confronted the affected employees. They were about to cease receiving any pay and, because of Berkeley's decision, the "guaranteed safety net" that had been provided for under the National Employment Standards to assist them to deal with the financial disaster frequently associated with a loss of employment was unilaterally removed. In this respect, it is worth noting that the affected employees were unskilled and generally middle aged or older, with the oldest being 64. They were therefore in that section of the workforce that is particularly vulnerable to losing their jobs.

CONCLUSION 42 Having considered the submissions made by the parties, including those which I have not specifically mentioned in these reasons but which I have considered, and all of the matters discussed above, I consider that the two contraventions are not at the higher scale of contraventions as contended for by United Voice, but they are also not at the lowest end of the scale as contended for by Berkeley. Instead, I consider that they sit at the lower end of the scale of contraventions. I also consider I should differentiate between the two contraventions to reflect the fact Berkeley had a genuine, but mistaken, view about the construction of the exception in s 119(1). Accordingly, having regard to the quantum of the penalties proposed by the parties above, I consider the appropriate penalties for Berkeley's contraventions to be $9,000 for the notice contravention and $4,500 for the redundancy contravention. The orders will be that Berkeley is to pay to United Voice:

1. $9,000 for its contraventions of ss 44(1) and 117 of the FWA; and
2. $4,500 for its contraventions of ss 44(1) and 119 of the FWA. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.