Brobbel v Darrell Lea Chocolate Shops Pty Ltd
[2008] FMCA 714
•13 June 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BROBBEL v DARRELL LEA CHOCOLATE SHOPS PTY LTD | [2008] FMCA 714 |
| INDUSTRIAL LAW – Application for declarations and imposition of penalties – agreed statement of facts – declarations made as agreed by parties – consideration of matters relevant to penalty. |
| Workplace Relations Act 1996, ss.337, 337(2), 337(4), 400(5), 792(1) |
| Jones v Hanssen Pty Ltd [2008] FMCA 291 Mason v Harrington Corp Pty Ltdt/as Pangaea Restaurant & Bar [2007] FMCA 7 Kelly v Fitzpatrick (2007) 166 IR 14 Australian Ophthalmic Supplies Pty Ltdv McAlary‑Smith [2008] FCAFC 8 Canturi v Sita Coaches Pty Ltd (2002) 116 FCR 276 NW Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1996) 71 FCR 285 Jordan v Mornington Inn Pty Ltd [2007] FCA 1384 McIver v Healey [2008] FCA 425 Trade Practices Commission v TNT Australia Ltd (1995) ATPR 40-161 |
| Applicant: | INSPECTOR ANTHONY PETER BROBBEL |
| Respondent: | DARRELL LEA CHOCOLATE SHOPS PTY LTD (A.C.N. 000 498 386) |
| File number: | MLG 873 of 2007 |
| Judgment of: | Burchardt FM |
| Hearing date: | 11 April 2008 |
| Date of last submission: | 11 April 2008 |
| Delivered at: | Melbourne |
| Delivered on: | 13 June 2008 |
REPRESENTATION
| Counsel for the Applicant: | Ms Doyle |
| Solicitor for the Applicant: | Clayton Utz |
| Counsel for the Respondent: | Mr O'Grady |
| Solicitor for the Respondent: | Gadens Lawyers |
THE COURT DECLARES AND ORDERS:
A declaration that the Respondent has engaged in 12 contraventions of s.400(5) of the Work Place Relations Act 1996 (Cth) (“the WR Act”):
·
In or around January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of
Hannah Jovanovic;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Laura Kelly;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Amy Holley;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Natalie Alessio;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Sally Lugg;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Catherine Sell;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Genevieve Margetic;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Cathryn Andersen;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Heidi Kisso;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Desiree Horvath;
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Scott Toniazzo; and
·In or about January or February 2007 the Respondent contravened s.400(5) of the WR Act in respect of Julia Siomos.
Pursuant to s.407(1)(b) and s.407(2)(zi) of the WR Act the Respondent shall pay penalties of $10,000.00 in respect of each of the above 12 contraventions of s.400(5) of the WR Act, which penalties shall be paid to the consolidated revenue fund within 28 days from the date of this judgment.
A declaration that the Respondent engaged in 4 contraventions of s.792(1) of the WR Act in relation to each of the 4 award casuals:
·In or around February or March 2007 the Respondent contravened s.792(1) of the WR Act in respect of Hannah Jovanovic;
·In or around February or March 2007 the Respondent contravened s.792(1) of the WR Act in respect of Laura Kelly;
·In or around February or March 2007 the Respondent contravened s.792(1) of the WR Act in respect of Amy Holley; and
·In or around February or March 2007 the Respondent contravened s.792(1) of the WR Act in respect of Natalie Alessio.
A declaration that the Respondent engaged in 7 contraventions of s.337(9) of the WR Act in respect of failures to provide information statements:
·In or around January or February 2007 the Respondent contravened s.337(2) and 337(9) of the WR Act in respect of Sally Lugg;
·In or around January or February 2007 the Respondent contravened s.337(2) and 337(9) of the WR Act in respect of Catherine Sell;
·In or around January or February 2007 the Respondent contravened s.337(2) and 337(9) of the WR Act in respect of Genevieve Margetic;
·In or around January or February 2007 the Respondent contravened s.337(2) and 337(9) of the WR Act in respect of Cathryn Andersen;
·In or around January or February 2007 the Respondent contravened s.337(2) and 337(9) of the WR Act in respect of Heidi Kisso;
·In or around January or February 2007 the Respondent contravened s.337(2) and 337(9) of the WR Act in respect of Desiree Horvath; and
·In or around January or February 2007 the Respondent contravened s.337(2) and 337(9) of the WR Act in respect of Scott Toniazzo.
Declarations and orders that the AWAs that applied to each of the following employees be declared void ab initio:
·Sally Lugg;
·Genevieve Margetic;
·Cathryn Andersen;
·Heidi Kisso; and
·Scott Toniazzo.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 873 of 2007
| INSPECTOR ANTHONY PETER BROBBEL |
Applicant
And
| DARRELL LEA CHOCOLATE SHOPS PTY LTD (A.C.N. 008 498 386) |
Respondent
REASONS FOR JUDGMENT
The primary issue the Court is required to deal with in this case is how much Darrell Lea Chocolate Shops Pty Ltd ("Darrell Lea") should be penalised for 12 admitted contraventions of s.400(5) of the Workplace Relations Act 1996 ("the WR Act").
For the reasons that follow, I have concluded that Darrell Lea should pay a fine of $10,000.00 per contravention, being a total of $120,000.00.
Darrell Lea the company
Darrell Lea is a family-owned company. It has been in existence since 1927 and is not listed on the stock exchange. According to the affidavit of its chief executive officer, Mr Tolmie, which was not the subject of challenge, it is the largest privately-owned confectionary manufacturer and retailer in Australia.
In its retail division, Darrell Lea operates over 80 retail stores and services large numbers of franchise and licence operations, and supplies a very considerable number of smaller outlets. From submissions made in open court it is apparent that its turnover is in many tens of millions and, in addition to between 350 and 500 casuals at any given time, it has a very substantial number of permanent employees.
Notwithstanding this substantial scope of operations, the company operates on what Mr O'Grady, counsel for Darrell Lea, submitted is a minimalist management structure. I accept that description. Beneath Mr Tolmie there are seven managers, of whom one, Mr Hearne, is the group human resources manager.
Although Darrell Lea is a big company, it is surprisingly unsophisticated when it comes to human resource matters. That this is so is apparent from the materials in this case, including most particularly the statement of agreed facts provided by the parties.
The facts in this case
There is no issue in this case about what might be described as the formal matters, such as the incorporation of the Respondent, the appointment of the Applicant Inspector Brobbel and his powers to properly bring these proceedings and the like.
In setting out the facts, I have in large part either paraphrased or quoted directly from the statement of agreed facts. I will not make direct attribution because to do so would be unnecessarily time-consuming and unwieldy. If anyone wishes to do so, they can compare this judgment with the statement of agreed facts, but I make it plain that I have drawn very heavily on that document in this account.
Darrell Lea products are sold in a number of locations throughout Australia, including about eighty company-owned retail stores. Darrell Lea employs store managers and sales assistants to perform duties in those stores throughout Australia. Some of the employees are full‑time, some are part-time and many are casuals.
At all relevant times, Darrell Lea was bound by a number of notional agreements preserving state awards ("NAPSAs") and federal awards. Those awards are set out in the statement of agreed facts, and each of them afforded casual sales assistants of Darrell Lea penalty rates for work on the weekends and holidays.
Twelve casual sales assistants were employed in Darrell Lea-owned retail stores around Australia who are the subject of these proceedings:
i)Hannah Jovanovic;
ii)Laura Kelly;
iii)Amy Holley;
iv)Natalie Alessio;
v)Sally Lugg;
vi)Catherine Sell;
vii)Genevieve Margetic;
viii)Cathryn Andersen;
ix)Heidi Kisso;
x)Desiree Horvath;
xi)Scott Toniazzo; and
xii)Julia Siomos.
In about August or September 2006, Mr Hearne of Darrell Lea decided to prepare a slideshow which he showed first to the leadership team, and ultimately it was shown to store and area managers.
Mr Hearne has sworn an affidavit which sets out his responsibilities and duties as a group human resources manager in some detail. Somewhat surprisingly, however, he has no employees directly reporting to him in relation to any of his various responsibilities. He has only one national payroll manager, Narelle Worrad, who is apparently the pay mistress.
In about July 2006, on Ms Worrad's advice, Mr Hearne had Darrell Lea subscribe to a package made available by Australian Business Ltd (“ABL”), which is part it would seem of the New South Wales Business Chamber. ABL provides legal advice on industrial relations and related matters.
Darrell Lea made a loss in the financial year ending in June 2006, and after that Mr Hearne made a decision to put a presentation together for the company's leadership team. As I have said, this took place in about August or September 2006.
Mr Hearne has deposed at paragraph 23 of his affidavit that in preparing his PowerPoint slide presentation, he called the Office of Employment Advocate (“OEA”), as it was then called, and received certain advice. This matter is set out at paragraph 23 of his affidavit and was the subject of strong objection by counsel for Mr Brobbel.
I made it plain that I would give little if any weight to the matters set out in that paragraph, some of which were plainly hearsay. Counsel for Darrell Lea did not strenuously oppose that conclusion.
The most I am prepared to find is that Mr Hearne made a call to OEA and received certain advice. It is more probable than otherwise to me that the advice he was given would be correct, as the OEA is a specialist office dealing, insofar as Mr Hearne was concerned, with areas within its expertise. To the extent that Mr Hearne may have formed any false impression of the state of the law or otherwise as a result of that phone call, I suspect that is because of his own lack of familiarity with the field.
The slides that were shown at the PowerPoint presentation form part of the statement of agreed facts. It is not hard to see where things went wrong.
The slide headed “AWA Changes Summary” shows that Mr Hearne thought that Australian Workplace Agreements (“AWAs”) replaced state award conditions, that allowances could be immediately excluded from AWAs and that penalties could be immediately excluded from AWAs. Leaving aside issues of timing, those appreciations by and large were correct. These changes had the obvious potential benefit for Darrell Lea of substantial savings in wages at a time when the company's profitability was under challenge.
Under a heading on a slide, “Changes are Mandated”, the following text was displayed:
Irrespective of whether the employee is happy to stay on his or her existing terms and conditions of employment, the WorkChoices reforms are mandated by law and at some point his or her terms and conditions of employment will change.
The obvious risk is that significant changes to terms and conditions of employment may lead to a large number of resignations.
Darrell Lea management obviously thought that any loss of employees was less important than saving money. Following PowerPoint slideshows for area managers, the company wrote to its casual sales assistants on 19 January 2006. The letter is set out in full at paragraph 10 of the statement of agreed facts. It purported to offer AWAs to all casuals and stated:
Your store manager will give you the AWA to read and consider. You have seven days to decide on whether to accept the terms and conditions of your AWA.
Minors were told to consult their parents before returning it. The letter went on to say:
It is the policy of Darrell Lea that we will gradually and sensitively move towards 100 per cent AWA terms and conditions of employment for all casual team members.
The net effect of the proposed AWA was that it had no payments for penalty rates for hours worked on weekends or holidays, although in fact an additional rate was paid on public holidays that ranged between time and a half and double time of ordinary hourly rate. What casuals mainly lost was weekend penalty rates.
The AWAs were not accompanied by information statements when first provided. This contravened the requirements of s.337(2) and s.337(4) of the WR Act. The said documentation would have included, if it had been sent, an explicit statement to the effect that employees may "choose to sign or not to sign" an Australian Workplace Agreement. This omission has always been admitted since Darrell Lea filed its defence.
I accept the submissions of the Applicant that there were four flaws in the way in which the AWA was offered to employees:
a)The covering letter supplied with the AWA created the impression that the AWA would in the future be the only industrial instrument regulating terms and conditions of employment at Darrell Lea.
b)No information statement was provided. This is a significant matter: see Jones v Hanssen Pty Ltd [2008] FMCA 291 at [21].
c)Some casual sales assistants were subjected to pressure to sign the AWA quickly and were given the impression that they were required to sign quickly.
d)Some casual sales assistants were told or given the impression that if they did not sign the AWA they would no longer be rostered to perform shifts on weekends or holidays because they would be more expensive than the employees who had signed an AWA.
The precise details of the pressure brought to bear on each employee are set out in the statement of agreed facts at paragraph 17. It is not necessary to traverse all of those facts in detail.
I note that a number of the employees concerned were very young, in the case of some as young as 16; that a number of them were deprived shifts they would have otherwise been rostered to because they would not sign the AWA; and that at least one, Ms Sell, was strongly angered by the treatment of her. So much is apparent from her outraged letter to the company on 26 February 2007, which constitutes exhibit TH4 to Mr Hearne's affidavit.
As early as 13 February 2007, the Office of Workplace Services ("OWS") issued a notice to produce documents to Mr Hearne, and by 21 February 2007 Darrell Lea issued a policy directive to all store managers and area managers. This document is set out in full at paragraph 13 of the statement of agreed facts and it made it plain that coercion of employees was not permissible to seek to have them sign an AWA.
By April of 2007, Darrell Lea management had determined to cease offering AWAs and it did so by a policy direction on 20 April 2007.
In that document, which was issued to all concerned, including the employees the subject of this proceeding, an opportunity was offered to effectively cease their AWA and go back onto the NAPSA. A number of those concerned did so. Seven of the twelve employees with whom we are concerned still work for Darrell Lea.
It is common cause that the twelve workers with whom we are concerned have been paid an amount of money agreed between Darrell Lea and Mr Brobbel, to recompense them for any loss of pay that has arisen as a result either of being paid directly under the AWA and/or as a result of losing shift work that they would otherwise have received.
It is also common cause that although the proceeding was initially the subject of an extensive defence, the Respondent has at all times cooperated properly and promptly with the Applicant, and that it deserves credit for this.
It is agreed that although the conduct of the Respondent involved not only the twelve contraventions of s.400(5) to which I have referred, the four further contraventions of s.792(1) of the WR Act (conduct for a prohibited reason) and seven further contraventions of s.337 of the WR Act (failure to provide the information statements) do not require separate orders. The parties have agreed that penalties should be imposed for the contraventions of s.400(5), attended by declarations of breach of that section. All that is sought in relation to the other matters is a declaration that the four contraventions of s.792 of the WR Act have taken place, a declaration that the seven contraventions of s.337 have taken place, together with declarations and orders that the AWAs that applied to each of Ms Lugg, Ms Margetic, Ms Andersen, Ms Kisso and Mr Toniazzio are declared void ab initio. The parties also agree that the penalty I impose should be paid into consolidated revenue.
The issues that the Court is required to consider
In Mason v Harrington Corp Pty Ltdt/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[55], Mowbray FM set out a number of factors which are relevant for consideration in cases such as these. Those indicia were adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14.
While no-one that I am aware of has yet asserted that the matters set out by Mowbray FM and adopted by Tracey J are inappropriate, I bear in mind the qualification stated by Buchanan J in Australian Ophthalmic Supplies Pty Ltdv McAlary‑Smith [2008] FCAFC 8 (“Ophthalmic Supplies”) at [91] to this effect:
“Checklists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations.”
Here the circumstances that I regard as particularly important, although I have borne in mind all the submissions made by the parties, are:
a)This is a large business which ought to have been able to get competent advice about the introduction of AWAs from ABL but failed to do so.
b)This failure caused Darrell Lea to advance on what was plainly a wrong understanding of the state of the law, both as to the provision of information statements and as to the mandatory nature of the introduction of AWAs disclosed in the slide.
c)Darrell Lea failed to take appropriate steps to monitor the introduction of AWAs, and as a result store managers put undue pressure upon casual employees to sign them, as shown in the statement of agreed facts in respect of each individual employee.
d)A number of the employees were very young, and as casual employees they were in any event disadvantaged in terms of any negotiating position.
e)The conduct that was engaged in (by Mr Hearne) and acquiesced in (by the leadership group) by senior managers of Darrell Lea.
f)The actions of Darrell Lea cost poorly-paid employees amounts of money which, whilst small in themselves, were doubtless significant to the workers.
g)Darrell Lea has been fully cooperative with the Applicant.
h)The cooperation of the Respondent has obviated the necessity for a much lengthier hearing, involving as it would have done cross‑examination of some very youthful witnesses.
i)Counsel for Inspector Brobbel expressly conceded that this was not a case in which there is much necessity for emphasis upon specific deterrence.
Having set out the above matters, which form significant considerations in my deliberations, I note that general deterrence is of course still a significant consideration. The retail industry generally, and it would appear particularly those parts of it dealing with the selling of food and drink, seems to attract a relatively high proportion of both casual and/or youthful workers. This is reflected in decisions both of this Court and more particularly the Federal Court. In considering the penalty I should impose, I have borne this consideration well in mind.
The amount of the penalty
While there is an increasing body of case law to inform the Court as to the approach it should take, I am keenly conscious that one should approach any assertions as to where a range might be said to operate with care. Both counsel made submissions as to what I should regard as the parameters of the lowest end of the range of offences of this sort and as to the mid range.
I think it is inappropriate to do anything more than note that parliament has set a scale of penalties, ranging from $33,000.00 at the highest to zero dollars at the lowest. I accept Mr O'Grady's submission that one must infer that there may be some cases where a penalty of zero dollars would be appropriate.
That being said, the importance of avoiding duress in relation to AWAs, and the other offences which are admitted but not pressed on the penalty point, is significant. I respectfully adopt and repeat what was said by Ryan J in Canturi v Sita Coaches Pty Ltd (2002) 116 FCR 276 at [88]:
“The application of duress strikes fundamentally at what the Full Court in Schanka in the passage quoted at [40] above, discerned to be the policy underlying Pt VID of the Act that "AWAs should be negotiated openly and freely at arm's length." The requisite openness and freedom is lost if one party to an existing relationship in a position of great economic superiority uses that advantage to apply illegitimate or unconscionable pressure to induce the other party to enter into an AWA.”
What it seems to me the Court is required to do, is to consider the particular circumstances of each case - including obviously this one - and to arrive at an appropriate penalty bearing in mind all relevant considerations.
In Ophthalmic Supplies, Buchanan J quoted from the judgment of Burchett and Kiefel JJ in NW Frozen Foods Pty Ltd v Australian Competition & Consumer Commission (1996) 71 FCR 285 at [295]:
“The facts of the instant case should not be compared with a particular reported case in order to derive therefrom the amount of the penalty to be fixed. Cases are authorities for matters of principle; but the penalty found to be appropriate, as a matter of fact, in the circumstances of one case cannot dictate the appropriate penalty in the different circumstances of another case.”
In Jordan v Mornington Inn Pty Ltd [2007] FCA 1384, Heerey J approached the case on the footing that he should fix a quantum of penalty and reduce that by a discount to give effect to the various mitigating factors present (which were few). In a subsequent decision in McIver v Healey [2008] FCA 425, Marshall J does not appear to have adopted this approach.
Each case falls to be determined in the light of its own particular circumstances, and in my view what I should do here, is not to artificially select a figure and then produce a discount for mitigation, as counsel for Inspector Brobbel submitted; rather I think I should produce a figure which bears in mind all of these relevant considerations.
The authorities show that the quantification of penalty in cases such as this is very much in the ultimate a matter of judgment and impression. In Trade Practices Commission v TNT Australia Ltd (1995) ATPR 40-161 at 40-165 Burchett J said:
“It cannot be denied that the fixing of the quantum of penalty is not an exact science. It is not done by the application of a formula and within a certain range. Courts have always recognised that one precise figure cannot be incontestably said to be preferable to another.”
Bearing in mind all the competing considerations that I have outlined above, I have come to the conclusion that $10,000.00 per offence is an appropriate outcome.
Consideration of the totality principle
The decision of the Full Court of the Federal Court in Ophthalmic Supplies has given guidance about the application of the totality principle. It involves in a sense taking a step back at the end of the proceeding to see whether the result imposed will be proportional to the overall conduct of the Respondent (per Gray J at [23]) or ensures that a figure provides an appropriate response to the conduct which led to the breaches (per Graham J at [71]) or is not in all the circumstances excessive (per Buchanan J at [102]).
Notwithstanding that this is a first offence by a company that has been in existence for over 80 years, my instinctive view is that an overall penalty of $120,000.00 is appropriate.
Whilst Darrell Lea deserves every credit for its cooperation and its rectification of the underpayments, and for its conduct going to its contrition generally, including a clear expression of regret which I accept by its chief executive officer, the fact is that this was a big company that should have done better.
Its conduct led to a series of pressures being placed upon a disadvantaged group of casual employees, some of whom at least were very young. This should not have occurred, and while the conduct was of short duration, with the AWAs being first offered in January and removed altogether by April, the penalties I am imposing seem to me, taking both individually and cumulatively, to be instinctively correct.
Accordingly, there will be declarations as agreed between the parties and an order that Darrell Lea pay the sum of $120,000.00 into the consolidated revenue.
I will hear the parties as to the question of time for payment.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Associate: Brooke Evans
Date: 13 June 2008
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