United Voice v MDBR123 Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY FAIR WORK DIVISION QUD 498 of 2013

JUDGE: RANGIAH J DATE: 4 FEBRUARY 2015 PLACE: BRISBANE

REASONS FOR JUDGMENT 1 On 11 December 2014, I delivered reasons for judgment in which I found that each of the respondents had contravened s 340 and s 346 of the Fair Work Act 2009 (Cth) ("the Act"). I found that the first respondent had contravened those provisions by terminating the employment of Ms Margaret Smith, and that the second respondent had counselled the contravention of those provisions. I then set the matter down for a further hearing on the questions of compensation and penalty. The parties have now made written and oral submissions upon those issues. 2 I will deal first with compensation. Section 545 of the Act provides, relevantly: 545 Orders that can be made by particular courts Federal Court and Federal Circuit Court (1) The Federal Court or the Federal Circuit Court may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision. … (2) Without limiting subsection (1), orders the Federal Court or Federal Circuit Court may make include the following: … (b) an order awarding compensation for loss that a person has suffered because of the contravention; … 3 The applicant contends that Ms Smith should be awarded the following compensation for loss she has suffered: (a) $5,412 for her loss of earnings between the date of her dismissal and the commencement of the trial; (b) interest on that amount in the sum of $458; (c) $3,000 for loss of enjoyment of paid annual leave; and (d) loss of earnings since the commencement of the trial and into the future. 4 There is little dispute about the first component. The applicant's approach is to deduct Ms Smith's gross average weekly earnings since her dismissal from the weekly amount that she would have earned in employment with the first respondent, an amount of $123 per week; and then take that amount for 44 weeks to the commencement of the trial, a total of $5,412. The respondents contend that the amount should be some $118 less in total, but I prefer the applicant's methodology and calculation. 5 I will award $5,412 as the amount of Ms Smith's loss of earnings to the commencement of the trial. I will award interest on that amount in the sum of $458. 6 The applicant contends that Ms Smith should be awarded an amount to reflect her loss of earnings since the date of the trial and into the future based on the probability that she would have continued to be employed by the first respondent if her employment had not been unlawfully terminated. There is no evidence as to what Ms Smith would have done if her employment had not been terminated. In light of the two warnings she had received from her employer, it is possible that her employment may eventually have come to an end for other reasons. Taking into account all of the vicissitudes, I conclude that Ms Smith should be awarded an amount of $1,000 for her loss of earnings since the date of the trial and into the future. 7 The applicant submits that Ms Smith should be awarded an amount for loss of enjoyment of paid annual leave resulting from the termination of her employment. Ms Smith was employed by the first respondent on a permanent part-time basis, but she is now employed on a casual basis. She would have been entitled to paid annual leave if she had remained employed with the first respondent but has no such entitlement in her present employment. The applicant contends that an amount should be awarded to reflect the loss of her enjoyment of paid holidays. I accept that it is open to the Court to make an award for loss of this kind. However, I do not propose to make such an award in the present case because Ms Smith works fewer hours in her present employment at a higher rate of pay than she received with the first respondent. The lower number of hours means that she has more recreational time to enjoy. 8 I will award Ms Smith a total amount of $6,870 by way of compensation. 9 I turn to the question of penalty. The factors relevant to the assessment of the appropriate penalty include: the circumstances of the contravention; the flagrancy and deliberateness of the breach; the need for deterrence; the past record of the offender; and any contrition displayed by the offender: Seven Network (Operations) Pty Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (No 2) (2001) 110 IR 372 at [4], Kelly v Fitzpatrick (2007) 166 IR 14 at [14]. 10 The maximum penalty for a single contravention by a company of s 340 and s 346 is $51,000: ss 539 and 546(2)(b) of the Act. The maximum penalty for an individual is $10,200: ss 539 and 546(2)(a) of the Act. The appropriate penalty must be considered against those maximum penalties. 11 The totality principle should also be applied: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 567, 575-576, 581-582 and 583. In this case, there were contraventions of two provisions of the Act by each of the respondents. The contraventions arose from the same action, namely the termination of Ms Smith's employment. In this circumstance, I consider that only one penalty should be imposed on each of the respondents. 12 The primary reason for Ms Smith's dismissal was that she had attempted to recruit fellow employees as members of the applicant union ("the Union"). The respondents were concerned at the prospect of a significant portion of their staff becoming members of the Union and the Union then becoming involved in the workplace. They sought to avoid that result by dismissing Ms Smith from her employment. This was a deliberate and flagrant breach of the Act. It resulted in adverse financial and, no doubt, emotional and personal consequences for Ms Smith. 13 The deliberateness of the contraventions is shown by the respondents' attempts to hide the primary reason for the termination by only giving other reasons in the letter terminating Ms Smith's employment and in the evidence of Mr Hinton, Ms Brown and Ms Matchett. The deliberateness and flagrancy of the conduct calls for a penalty that will be an adequate deterrent against such conduct in the future. 14 However, the conduct of the respondents is not at the higher end of the spectrum of seriousness of contraventions of s 340 and s 346 of the Act. That is because there were other reasons not proscribed by the Act which also influenced the termination of Ms Smith's employment. Those factors were: the respondents' concerns that Ms Smith had made a false representation to Ms Clignett about the necessity for 60 per cent of staff members to be members of the Union in order to obtain a wage rise; complaints made by two parents about Ms Smith in the past; and concerns about the conduct of Ms Smith as reported by Ms Clignett. The presence of other genuine reasons that contributed to the dismissal is a factor that reduces the amount of the penalty I would otherwise have ordered. 15 I must take into account the need for both general and specific deterrence of such conduct in the future. As to specific deterrence there was little evidence concerning the size and financial position of the first respondent. The first respondent employs some 30 staff in a labour intensive business, predominately on a part-time basis. I accept that it is appropriately classified as a small business. I consider that the respondents are unlikely to repeat their conduct. It was evident to me from my observation of Ms Brown and Ms Matchett in the witness box that these proceedings have taken a personal and emotional toll on them. There is also the financial burden of having to engage lawyers in the proceedings. Nevertheless, the penalty imposed must be adequate to deter the respondents and other employers from similar conduct. 16 There is no allegation that either of the respondents has engaged in similar conduct in the past. 17 Ms Matchett and Ms Brown are the directors and shareholders of the first respondent, so their conduct was at the highest levels of management of the first respondent. This is a relevant factor. 18 The respondents submit that they have shown contrition by making an offer to settle the proceeding at a relatively early stage on 17 February 2014. The offer was to pay the applicant $35,000 inclusive of costs in settlement of the proceeding. The offer was made on an open basis. It was made with a denial of liability. It was made on the basis that Ms Smith was misled or deceived by the applicant and so made misleading or deceptive representations to her colleagues. That accords with my findings, except that I found that Ms Smith had made a misleading representation to only one of her colleagues. 19 The applicant submits that the offer is not an indication of contrition but was merely an attempt to gain an advantage in terms of costs. It submits that the absence of contrition is demonstrated by the respondents' denial of liability and their reference to the offer being made on the basis that Ms Smith had made misleading representations to colleagues. The applicant also submits that the absence of contrition may be seen in the evidence given by Ms Brown, Ms Matchett and Mr Hinton, which I decided was not credible in important aspects. I accept those submissions. 20 However, I consider that the offer made by the respondents may still be taken into account in mitigation of the penalty. The monetary amount of the offer was a reasonable one. Taking into account the amount that might feasibly have been awarded to Ms Smith by way of compensation, the offer would represent total penalties in excess of $25,000. There is generally no entitlement to costs under the Act so it was reasonable not to make an offer to pay the applicant's costs. If accepted, the offer could have saved five days of trial as well as the costs involved in preparation for the trial. There would have been a considerable advantage to the applicant in accepting the offer, as well as a saving in terms of the resources of the Court. 21 I consider that the willingness of the respondents to cooperate with the applicant and the Court by offering to settle the proceeding is a significant factor in assessing the penalty. That factor would have been more significant if the offer was not accompanied by a denial of liability and if the respondents had informed the Court at the outset that they accepted they had breached the Act instead of running the trial. However, it is still a factor that operates to reduce the penalty that I would otherwise have imposed. 22 I take into account that it was the second respondent, Mr Hinton, who was the primary force in the termination of Ms Smith's employment and the contraventions of the Act. Although Ms Brown and Ms Matchett effected the dismissal, it was Mr Hinton who was the guiding force behind the decision. In these circumstances, I consider that the imposition of a penalty against each of the respondents is warranted. 23 I will order that the first respondent pay a penalty of $6,000 and that the second respondent pay a penalty of $4,000. 24 Section 546(3) of the Act allows the Court to order that a pecuniary penalty, or part of a pecuniary penalty, be paid to the Commonwealth or a particular organisation or a particular person. The applicant submits that the pecuniary penalty should be paid to it, while the respondents submit that the whole or part of the penalty should be paid to the Commonwealth. It is well established that the "usual order" is that a pecuniary penalty is paid to the applicant in a proceeding for breach of provisions such as s 340 and s 346 of the Act: National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] FCA 451 at [146]; Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 5) [2013] FCA 1384 at [25]; Woodside Burrup Pty Ltd v Construction, Forestry, Mining and Energy Union [2011] FCA 949 at [148]; Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 at 223; Seven Network (Operations) Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (No 2) (2001) 110 IR 372; [2001] FCA 672 at [8] and Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357 at [44] and [65]. This recognises the trouble, risk and expense of bringing proceedings which are in the public interest which advance the objects of the legislation and which benefit the wider community: Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (No 5) [2013] FCA 1384 at [26]. 25 The respondents point to the applicant's role in providing Ms Smith with false information about the need for 60 per cent of staff to be union members in order to obtain the wage rise which resulted in Ms Smith making a misleading statement to Ms Clignett and which contributed to the termination of Ms Smith's employment. The respondents submit that this should disqualify the applicant from receiving the whole of the pecuniary penalty and that at least a part should be paid to the Commonwealth. 26 I have taken into account that one of the reasons for Ms Smith's dismissal was the misleading information she gave to Ms Clignett when considering the appropriate amount of the penalty. I have imposed a lower penalty than I would otherwise have imposed because of that factor. It should not be taken into account a second time by ordering that only a part of the pecuniary penalty should be paid to the applicant. I order that the whole of the pecuniary penalty be paid to the applicant. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah.