Connelly v BlueScope Steel (AIS) Pty Ltd (No.3)
[2020] FCCA 2902
•29 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CONNELLY v BLUESCOPE STEEL (AIS) PTY LTD (No.3) | [2020] FCCA 2902 |
| Catchwords: INDUSTRIAL LAW – Fair Work Act 2009 (Cth) – Assessment and award of compensation payable to Applicant under s.545 of the Fair Work Act 2009 (Cth) for Respondent’s breach of s.323 subsequent to the answers to the questions considered in Benge & Anor v Bluescope Steel (AIS) Pty Ltd (No. 2) [2020] FCCA 515 – consideration of the principle of mitigation of damages – assessment of any pecuniary penalty and payment of pecuniary penalty to the Applicant personally under s.546(3)(c) of the Fair Work Act 2009 (Cth). |
| Legislation: Fair Work Act 2009 (Cth), ss.323, 545, 546, 550 |
| Cases cited: Benge & Anor v Bluescope Steel (AIS) Pty Ltd (No. 2) [2020] FCCA 515 Construction, Forestry, Maritime, Mining and Energy Union v Melbourne Precast Concrete Nominees Pty Ltd (No 3) [2020] FCA 1309 Cubillo v Commonwealth (No.2) (2000) 103 FCR 1 Yetton v Eastwoods Froy Ltd [1967] 1 W.L.R. 104 |
| Applicant: | PETER CONNELLY |
| Respondent: | BLUESCOPE STEEL (AIS) PTY LTD |
| File Number: | SYG 2795 of 2016 |
| Judgment of: | Judge Dowdy |
| Hearing date: | 2 October 2020 |
| Delivered at: | Sydney |
| Delivered on: | 29 October 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr A. Howell of Counsel |
| Solicitors for the Applicant: | Crawford de Carne Lawyers |
| Counsel for the Respondent: | Mr I. Taylor S.C. with Mr K. Brotherson of Counsel |
| Solicitors for the Respondent: | Hall & Wilcox |
THE ORDERS OF THE COURT ARE AS FOLLOWS:
Grant leave to the Applicant to amend [65(c)] of the Further Amended Statement of Claim filed on 26 October 2018 to add a prayer for relief under s.545 of the Fair Work Act 2009 such that it reads as follows:
Orders pursuant to s.545 and / or alternatively s.543 of the Fair Work Act 2009 that the Respondent compensate each of the Applicants for all financial loss suffered as a result of the Respondent ceasing to pay their annualised salary between 10 January 2016 and the date of judgment;
Grant leave to the Applicant to amend [65(b)] of the Further Amended Statement of Claim filed on 26 October 2018 such that it reads as follows:
That pursuant to s.545 of the Fair Work Act, the Respondent immediately resume paying Mr Connelly the annualised salary to which he is entitled under the Connelly contract. Or in the alternative, the Respondent be restrained from further contravening s.323 of the Fair Work Act in relation to Mr Connelly.
The Parties are directed to bring in short minutes of order reflective of these Reasons for Judgment as soon as possible, but within 14 days.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2795 of 2016
| PETER CONNELLY |
Applicant
And
| BLUESCOPE STEEL (AIS) PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction & Background
This judgment follows upon the answers given to the questions under consideration in Benge & Anor v Bluescope Steel (AIS) Pty Ltd (No. 2) [2020] FCCA 515 (Benge No. 2). Since that judgment the First Applicant, Mr Benge, has settled his claims against Bluescope, and the only remaining Applicant is the Second Applicant, Mr Peter Connelly. This judgment should be read together with Benge No. 2 and the definitions therein are the same in this judgment.
At [86] of Benge No. 2 I noted that all issues relating to compensation and quantum were reserved for further argument. That argument occurred at a hearing on 2 October 2020 (compensation hearing) when Mr Howell of Counsel again appeared for Mr Connelly and Mr Ingmar Taylor S.C. leading Mr Brotherson of Counsel appeared for Bluescope.
I had restricted my finding at [86] of Benge No. 2 to a prima facie one, namely that Bluescope had breached s.323 of the FW Act. I now actually find and determine that Bluescope, in the circumstances set forth in Benge No. 2, caused a loss and detriment to Mr Connelly and contravened s.323 by not paying him in full his annualised salary after 9 January 2016 and thereby breached a civil remedy provision, which empowers the Court under s.545 to make “any order the court considers appropriate”, including under s.545(2)(b) of “awarding compensation for loss that a person has suffered because of the contravention”.
The width and scope of the power of the Court under s.545 of the FW Act was considered by Mortimer J in the Federal Court of Australia in Dafallah v Fair Work Commission (2014) 225 FCR 559 (Dafallah), where at 594 – 597 [146], [148] – [149] and [157] – [161] her Honour said as follows:
[146] Pursuant to s 545 of the FW Act, the Court may make any order it considers appropriate if satisfied that a person has contravened a civil remedy provision. By s 545(2)(b), this includes an order for compensation for loss the person has suffered because of the contravention.
[148] The language of s 545 is broad, allowing the Court to provide remedies which meet the circumstances of any given contravention, taking into account the range of parties who may have brought proceedings in relation to the contravention, and the actions which might in any given circumstance be required to remedy the contravention, or to ensure it does not occur again. Awarding compensation for loss is but one example and may not be appropriate, depending on what other action has been taken in respect of any losses. Each case will turn on its facts in that sense.
[149] Fixing compensation under s 545 is a statutory task, and the Court must not substitute that task with approaches derived from the general law: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at [44]; Qantas Airways Ltd v Gama (2008) 167 FCR 537 at [94] per French and Jacobson JJ.
[157] Further, the width of the power conferred by s 545(1) also allows for compensation which may not fully compensate a person for the loss suffered: see Gama at [94] per French and Jacobson JJ, where their Honours were considering similar statutory compensation provisions under s 46PO(4) of the Human Rights and Equal Opportunity Commission Act 1986 (Cth). In my opinion, that approach is available under s 545(1) because, as their Honours pointed out in Gama at [94], an award of compensation is discretionary. In s 545(1), the governing consideration is what the Court considers “appropriate”, and this in my opinion leaves room for a Court to find in a given case that less than full compensation might be appropriate.
[158] While by no means operating as a mandatory approach to a discretion such as that conferred by s 545(1), with respect I adopt the remarks of Lee J in Aitken v Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia (WA Branch) (1995) 63 IR 1, considering factors relevant to an award of compensation under s 170EE of the then Industrial Relations Act 1988 (Cth). His Honour said (at 9), that the Court will:
have regard to what is reasonable in the circumstances and will look at what would have been likely to occur had the Act not been contravened … The Court will consider the detriment occasioned to the employee by the employer’s contravention of the Act, and the extent to which it is reasonable to compensate the employee for such consequences.
[159] One of the principal tasks, if compensation is to be awarded, is to ensure that there is the appropriate causal connection between the contravention and the loss claimed: Australian Licenced Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd (2011) 193 FCR 526 at [423] per Barker J.
[160] The Full Court in Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 at 155 approved this approach. Some of the matters referred to by Lee J are similar to those set out as considerations in s 392(2). Although the power under s 545(1) is separate and independent, in my opinion, since the same statutory concept of compensation is involved, it is appropriate to consider factors similar to those set out in s 392(2).
[161] In considering causation, in the circumstances of a clearly fraught employment relationship as was the case between Ms Dafallah and Melbourne Health, it is appropriate in my opinion to consider that the employer would have in any event been entitled to exercise any power it had to bring the employment contract lawfully to an end in a way most beneficial to itself. The likelihood of an employer taking such a step will be fact dependent but, in contractual terms, it has been held to be relevant to the assessment of damages: see Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at 32. In my opinion, it is a factor which can also be taken into account for the purposes of determining what compensation is appropriate under s 545(1), where compensation is limited to the loss caused by the contravention.
Further, in Construction, Forestry, Maritime, Mining and Energy Union v Melbourne Precast Concrete Nominees Pty Ltd (No 3) [2020] FCA 1309 at [9] O’Callaghan J said as follows:
[9] In determining whether to award compensation of the type sought by Mr Hes, it is necessary to ask whether there is an “appropriate causal connection” between the loss suffered and the relevant contraventions of the FW Act: Australian Licenced Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd (2011) 193 FCR 526 at 592 [423]; Dafallah v Fair Work Commission (2014) 225 FCR 559 at 596 [15] (Mortimer J) (Dafallah). The assessment of compensation in this context is an “inherently imprecise” process: Fair Work Ombudsman v Maritime Union of Australia (No 2) [2015] FCA 814; 252 IR 101 at 113 [68] (Siopsis J). Where appropriate, an amount may be awarded that is less than what would be required to compensate the applicant fully for the loss suffered: Dafallah at 596 [157].
Finally, in calculating economic compensation under s.545 of the FW Act the general approach of a Court is stated by Judge Jones in this Court in Heraud v Roy Morgan Research Ltd (No. 2) [2016] FCCA 1797 in the following terms:
[4]Although the award of compensation under s.545(2)(b) of the Act is a statutory entitlement, the usual approach to the calculation of economic compensation under s.545(2)(b) of the Act is, so far as a monetary amount can achieve, to place the employee in the position he or she would have been in, if the employer had not contravened the Act. This reflects the settled principles identified in Haines v Bendall (1991) 172 CLR 60 regarding damages for actions in tort or contract. In simple terms, in circumstances where an employee has been terminated, this involves, having regard to the totality of the evidence, an assessment of how long the employee would have remained in that employment and the determination of the value of the likely income stream, followed by the application of the discount for contingencies and vicissitudes. The discounted income stream is then reduced by the employee’s mitigated loss (his or her actual earnings since the dismissal). The Court may consider whether the employee has taken appropriate steps to mitigate his or her loss. However, it is for the employer to establish the facts going to the employee’s alleged failure to mitigate his or her loss: Harding v Harding (1928) 29 SR (NSW) 96 at 106; Tasman Capital v Sinclair Pty Ltd 75 NSWLR 1 at [55]-[72] and Bagnall v National Tobacco Corporation of Australia Ltd (1934) 34 SR (NSW) 421 at 430.
(emphasis added)
Agreed Document
The parties have jointly tendered as evidence in the case a document entitled “Agreed document setting out financial metrics” which contains two tables of relevant figures relating to the assessment of any compensation payable to Mr Connelly up to 10 June 2020 (Agreed Document).
With reference to the annualised salary paid up to 9 January 2016, the first five pages of the Agreed Document appear under the heading of “Figures without annual increases”, comprise what I will refer to as Table 1 and is espoused by Bluescope. Pages six to ten appear under the heading of “Figures including [assumed] annual increases”, will be referred to as Table 2 and is espoused by Mr Connelly.
With reference to the aggregate salary paid from 10 January 2016, it is agreed that it has increased incrementally from time to time and these increases are recorded in both Table 1 and Table 2 in the columns labelled “Aggregate salary paid”, as follows:
a)1% increase to its base salary component on 6 September 2017;
b)3% increase to its base salary component on 5 September 2018;
c)$7.26 increase to its shift component on 29 May 2019; and
d)2.5% increase to its base salary component on 18 September 2019.
The first matter of difference between the parties is whether or not these increases to the aggregate salary should be regarded as applicable to the annualised salary and is reflected in the differences in the figures comprising Table 1 and Table 2. Table 1 in the “Pay had annualised salary continued” column maintains as continuing until 10 June 2020 the fortnightly rate of pay payable to Mr Connelly under his annualised salary in the same amount as it was at 9 January 2016, being $5,596.76 (as pleaded at [38] of the Further Amended Statement of Claim and admitted at [60] of the Amended Defence), whereas Table 2 applies to the annualised salary the same increases to the aggregate salary paid to Mr Connelly recorded in the margin of Table 2 at the dates given in [9] above.
I note and foreshadow that the other differences between the parties which are thrown up for determination by the Agreed Document relate to overtime worked and not worked by Mr Connelly during the period after 9 January 2016 and whether or not, as submitted by Bluescope, three bonuses paid to Mr Connelly subsequent to 9 January 2016 under a new Profit Share Arrangement (PSP) should be deducted from any compensation otherwise found to be payable to him.
It is further agreed by both parties that the total of the aggregate salary paid to Mr Connelly between 10 January 2016 and 10 June 2020 was $550,169.23.
I have found in Benge No. 2 that in paying the aggregate salary to Mr Connelly after 9 January 2016 Bluescope was underpaying the annualised salary to which Mr Connelly continued to be entitled. I recorded at [3(b)] in Benge No. 2 that Mr Connelly was claiming a weekly underpayment of his annualised salary from 10 January 2016 of $459.61.
First Matter for Determination – Amendment Application to Plead that the Increases to the Aggregate Salary are to be Regarded as Applicable to the Annualised Salary
Mr Connelly’s claim for loss as made in the Further Amended Statement of Claim at [52(b)], [59(b)] and [63(b)] was that as and from 10 January 2016 he had been underpaid $459.61 per week.
Nevertheless Mr Connelly, as late as his Reply Submissions filed on 21 September 2020, sought to amend the Further Amended Statement of Claim to seek to apply the increases to the aggregate salary paid to him after 9 January 2016 to his annualised salary, which would have meant that he ought to have been paid more than $5,596.76 fortnightly, in the following terms:
[39]a. A new paragraph 38A:
On and from the first pay period after 1 September 2017, Connelly’s Base Salary was increased to $90,067.12. If the same formula was applied to calculate the annualised salary as was applied prior to 10 January 2016, the increase in base salary would have given rise to a fortnightly payment of $5,650.68.
b. A new paragraph 38B:
On and from the first pay period after 1 September 2018, Connelly’s Base Salary was increased to $92,769.04. If the same formula was applied to calculate the annualised salary as was applied prior to 10 January 2016, the increase in base salary would have given rise to a fortnightly payment of $5813.96.
c. A new paragraph 38C:
On and from the first pay period after 1 September 2019, Connelly’s Base Salary was increased to $95,088.24. If the same formula was applied to calculate the annualised salary as was applied prior to 10 January 2016, the increase in base salary would have given rise to a fortnightly payment of $5962.40.
(emphasis added)
Mr Connelly also sought consequential amendments to [52(b)], [59(b)] and [63(b)] of the Further Amended Statement of Claim.
Bluescope opposed the grant of leave to amend and at the compensation hearing I refused to grant such leave. The reasons for that refusal were as follows:
a)as recorded at [72] of Benge No. 2 I had confirmed to the parties on a number of occasions that this matter would be decided on the pleadings, meaning the pleadings as they stood from time to time;
b)Mr Connelly led no evidence, admissible or otherwise, explaining why the proposed amendment was not sought earlier but rather so late;
c)the subject matter of the proposed amendment had been raised in exchanges between Mr Howell and myself on each of the second day of hearing on 3 April 2019 and the fourth day of hearing on 5 April 2019. The exchange on this topic between Mr Howell and myself on 3 April 2019 had ended with me saying:
HIS HONOUR: Well, I’ve approached the case and am approaching the case, let me tell you, on the basis that, for each of the periods of time since 10 January 2016 that, the amount is the amount [Mr Benge and Mr Connelly] were being paid for the first contract as of that date. You do with that as you please.
MR HOWELL: May it please.
Neither of the exchanges between the Court and Counsel on 3 April 2019 or 5 April 2019 led to any application to amend being made until, as I have recorded, in the Reply Submissions filed on 21 September 2020;
d)there was a further opportunity to seek the amendment when the parties submitted consent orders which I made on 13 August 2020 to prepare for the compensation hearing;
e)in the circumstances I infer that a deliberate forensic decision was made on behalf of Mr Connelly not to seek the proposed amendment prior to the conclusion of the hearing of the evidence on 5 April 2019 or the hearing of submissions on 26 and 28 August 2019; and
f)Bluescope would likely have been able to lead further evidence bearing on the subject matter of the proposed amendment. I have already found in Benge No. 2 at [20] that the PKSW faced an existential threat during 2015. The AWU and Bluescope were working constructively on a cost saving plan to save the PKSW and to ensure that any reduction in costs should be distributed fairly between management and workers (Benge No. 2 at [29]) and the MOA resulted in the abolition of pre-payment of overtime (Benge No. 2 at [35]). If the proposed amendment had been made in a timely way Bluescope would have been in a position to call evidence on its likely attitude to granting to Mr Connelly the same increases as it was prepared to grant to those employees who had been moved onto aggregate salaries. Such evidence could have been given, for example, by Directors of the Board of Bluescope or other senior management figures.
For these reasons I did not consider it to be fair and in the interests of justice that leave be granted to Mr Connelly to make the amendments sought at such a late stage of the proceeding.
Accordingly, consistently with Table 1 of the Agreed Document, I find that had Mr Connelly’s annualised salary been paid to him over the period from 10 January 2016 to 10 June 2020 it would have been in the fortnightly amount of $5,596.76 and that he would have been paid a total of $643,627.40.
Second Matter for Determination – Any Impact of Overtime Worked or Not Worked by Mr Connelly
First, there is some agreement between the parties in the Agreed Document in relation to the overtime performed by Mr Connelly in the period after 9 January 2016.
I have already found at [2(e)] of Benge No. 2 that prior to 10 January 2016 the annualised salary of Mr Connelly included a component of weekly pre-paid overtime of six hours, whether actually worked or not. The relevant condition of his employment contract dated 9 November 2011 in this connection read as follows:
Your Annualised Salary includes payment for shift allowance, annual leave loading, public holidays for shift workers, weekend penalties and an additional 6 hours overtime paid at penalty rates. You will be required to work these additional hours when requested by the department.
The reference to ‘penalty rates’ equates to slightly less than double pay: see [15] of Bluescope’s Submissions on Remedy dated 4 September 2020. I find on the uncontested evidence of Mr Lorenc that Mr Connelly, under his annualised salary prior to 10 January 2016, was generally paid no more when he worked in excess of the pre-paid overtime component of six hours.
However, employees in the position of Mr Connelly under the aggregate salary after 9 January 2016 were given an option and offer to work overtime, without any element of compulsion, sanction or criticism for failure to accept such offer.
Overtime Worked by Mr Connelly after January 2016
In the event, subsequent to 9 January 2016 Mr Connelly accepted offers to work overtime and was paid a total of $27,693.64 for that overtime work, including any accompanying overtime shift allowance.
On the one hand Bluescope contends, on the basis that the annualised salary was expressed in annual terms, that the assessment of compensation should be on an annualised basis and that this total of $27,693.64 ought to be deducted from any compensation to which Mr Connelly is otherwise entitled. On the other hand Mr Connelly points to the fact that the annualised salary was payable and to be discharged by fortnightly payments and contends that each fortnight that he was underpaid constituted a discrete and separate contravention of s.323 of the FW Act.
In my view Mr Connelly is entitled to claim compensation based on Bluescope’s failure to make in full the fortnightly payments of $5,596.76 required by his annualised salary. All salaries in Australia are expressed initially by reference to a total annualised figure, but are not paid in one annual amount. Rather they are paid at recurrent intervals by either weekly, fortnightly or monthly instalments. Section 323(1)(c) of the FW Act requires that amounts payable to an employee for the performance of work are to be paid “at least monthly”. In both a practical and legal sense Mr Connelly suffered a loss each fortnight that he was paid less than $5,596.76. In my view each fortnightly underpayment by Bluescope of the annualised salary to which Mr Connelly continued to be entitled was a discrete and separate contravention of s.323. He is entitled to an order awarding compensation under s.545(2)(b) for the loss each fortnight after 9 January 2016 during which he was not paid in accordance with his annualised salary arrangement.
In the first instance, Mr Connelly submits that in the circumstances the force and effect of moneys received by him for overtime worked after 9 January 2016 should be to satisfy, and be regarded as paying, the fortnightly amount of $5,596.76 to which he was entitled under the annualised salary arrangement. In other words, the effect of amounts received for overtime in those fortnights in which he was paid more than $5,596.76 simply had the effect that he was not underpaid for them, thereby reducing to nil the loss suffered by him in those fortnights. There are 13 such fortnights recorded in Table 1 of the Agreed Document, being:
a)fortnight ending 18 May 2016 - $4,677.56 + $1,037.97 + $28.73 exceeds $5,596.76 by $147.50;
b)fortnight ending 16 November 2016 - $4,677.56 + $2,075.93 + $57.46 exceeds $5,596.76 by $1,214.19;
c)fortnight ending 14 December 2016 - $4,677.56 + $2,527.22 + $70.63 exceeds $5,596.76 by $1,678.65;
d)fortnight ending 8 February 2017 - $4,677.56 + $2,467.43 + $59.07 exceeds $5,596.76 by $1,607.30;
e)fortnight ending 3 May 2017 - $4,677.56 + $2,075.93 + $57.46 exceeds $5,596.76 by $1,214.19;
f)fortnight ending 26 July 2017 - $4,677.56 + $1,037.97 + $28.73 exceeds $5,596.76 by $147.50;
g)fortnight ending 15 November 2017 - $4,722.54 + $1,048.35 + $28.73 exceeds $5,596.76 by $202.86;
h)fortnight ending 10 January 2018 - $4,722.54 + $2,096.70 + $57.46 exceeds $5,596.76 by $1,279.94;
i)fortnight ending 11 July 2018 - $4,722.54 + $1,048.35 + $28.73 exceeds $5,596.76 by $202.86;
j)fortnight ending 25 July 2018 - $4,722.54 + $2,096.70 + $57.46 exceeds $5,596.76 by $1,279.94;
k)fortnight ending 17 October 2018 - $4,858.75 + $1,079.80 + $28.73 exceeds $5,596.76 by $370.53;
l)fortnight ending 9 January 2019 - $4,858.75 + $2,488.24 + $57.46 exceeds $5,596.76 by $1,807.69; and
m)fortnight ending 11 December 2019 - $4,982.93 + $721.82 + $19.92 exceeds $5,596.76 by $127.91.
(payments for overtime emphasised)
These 13 payments of overtime noted above total $22,382.98. This figure is comprised of two components:
a)$11,101.92 being the total amount of overtime paid to Mr Connelly which had the effect of satisfying the required fortnightly payments of $5,596.76 under the annualised salary; and
b)$11,281.06 being the total amount for overtime paid which exceeded the required fortnightly payments of $5,596.76.
Bluescope’s position, as I have said, is simply that the whole of the amount paid to Mr Connelly of $27,693.64 for overtime should reduce any compensation, including this amount of $11,281.06. Mr Connelly submits that the amount of $11,281.06 should be ignored.
In the second instance Mr Connelly concedes that the amounts received by him in the other fortnights for overtime recorded in Table 1 of the Agreed Document that were not sufficient to satisfy his fortnightly entitlements under the annualised salary arrangement and totalling $5,310.66 should reduce his compensation. These amounts are to be taken into account in calculating and reducing Mr Connelly’s loss suffered in these fortnights.
Accordingly, to sum up the respective positions, Mr Connelly accepts that for the 13 fortnightly periods particularised in [26] above he was paid his fortnightly salary of $5,596.76 and that the further amount of $5,310.66 for overtime worked is to reduce his compensation, whereas Bluescope submits that the total amount of $27,693.64 is to reduce his compensation.
First, as agreed by Mr Connelly, I find that no compensation is to be payable to him for those 13 fortnights when he did accept and perform overtime work and thereby received more than $5,596.76, as recorded in Table 1 of the Agreed Document and particularised at [26] above. This is because in those fortnights he did not suffer any loss due to any contravention. Further, I find that the amount of $5,310.66 for overtime otherwise worked is to reduce any compensation payable to him.
Second, I am of the view, consistent with Mr Howell’s submission, that the amount of $11,281.06 over and above the amounts for overtime necessary to have the effect of paying him his annualised salary of $5,596.76 for the 13 fortnights is to be disregarded. As far as Bluescope was concerned the amount of $11,281.06 was paid under the aggregate salary arrangement to Mr Connelly for overtime work accepted and actually performed by him. The amounts for overtime worked by Mr Connelly totalling $11,281.06 did not have the effect, and should not be regarded as having the effect, of reducing the loss suffered by him for any fortnightly contravention of the amounts payable to him under his annualised salary. In my view it would be neither fair nor appropriate for that amount to be thrown in reduction of any compensation payable to Mr Connelly under s.545 of the FW Act for Bluescope’s failure to pay to him the required fortnightly payments under the annualised salary arrangement.
The above deals with how the amount of $27,683.64 paid to Mr Connelly for overtime work performed subsequent to 9 January 2016 is to be applied in the context of this case. In short, the result is that the 13 fortnights in which Mr Connelly was paid more than the annualised salary will be disregarded when calculating his loss, and the amount of $5,310.66 for overtime worked by him after 9 January 2016 in the fortnights not listed at [26] above will reduce any compensation otherwise payable to him.
Accordingly, after the stripping out and exclusion of the amounts from Table 1 of the Agreed Document for the 13 fortnightly periods particularised at [26] above, I consider that the loss and the compensation payable to Mr Connelly prior to the determination of the further matters dealt with below is the amount of $77,045.58, comprised as follows:
a)total amount had annualised salary continued: $570,869.52;
b)less the total aggregate salary paid: $488,513.28; and
c)less overtime worked and conceded: $5,310.66 (see [29] above).
Overtime Rejected by Mr Connelly after January 2016
The parties in the Agreed Document agree that subsequent to 9 January 2016 Mr Connelly was offered overtime (including shift allowance) which he rejected, equating to a total of $73,809.15.
Bluescope submits that Mr Connelly should have accepted all the overtime offered to him by Bluescope after 9 January 2016 and in not doing so failed to mitigate his loss and that therefore the amount of $73,809.15 should be applied in reduction of any compensation otherwise payable to him. Thus the issue of mitigation requires consideration.
Mitigation
Whilst I am fixing compensation under s.545 of the FW Act as a statutory task, I am also considering a contract of employment. It is appropriate for the purposes of the assessment of compensation under s.545 of the FW Act that Mr Connelly should have taken reasonable steps after 9 January 2016 to mitigate his loss. The onus of establishing that he failed to do so lies upon Bluescope. As Hope JA, with the agreement of Priestley and Meagher JJA, stated in TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 158:
The important point of principle in relation to mitigation is that the onus is on the defendant. The plaintiff does not have to show that he has fulfilled his duty; the onus is on the defendant to show that he has not, and to show the extent to which he has not done so. The evidence shows that, after the repudiation of the agreements, Productions made a very large number of attempts to develop Productions to replace what they had been doing previously. Save in relation to the ABC agreement to which I shall refer later, these attempts were unsuccessful. Assuming, as I do, that, although the recruiting by Channel 9 of most of Productions' staff used in the Midday Show would have adversely affected but not necessarily precluded Productions' attempts to mitigate, the evidence positively establishes that Productions took all reasonable steps to try to mitigate its damages. That statement however involves a reversal of the onus. Putting the onus on the right party, I am not satisfied that the defendant has established that Productions failed to take reasonable steps to mitigate its damages. Perhaps I should add that Channel 9 relied, in aid of it submission as to mitigation, on an offer which it made to both Enterprises and Productions which was conditional on that company's releasing any claim arising out of Channel 9's repudiation. In my opinion it was not unreasonable for this offer to be rejected.
Further, whether or not Mr Connelly failed to mitigate his loss is a question of fact, not law, and the Court can have regard to personal factors affecting Mr Connelly in all of the circumstances. In Yetton v Eastwoods Froy Ltd [1967] 1 W.L.R. 104 (Yetton) at 118 Blain J said as follows:
As I see the matter, it is a plain question of fact for the court in any particular case, whether any particular refusal to accept alternative employment which would reduce a plaintiff's loss is a reasonable or an unreasonable refusal, and factually, even if not as a strict matter of law, personal factors clearly are more likely to be of weight or are likely to be of greater weight in cases of personal services than in (for want of a better word) what I call soulless cases of sale of goods contracts where money may often be the only important factor. Certainly personal factors do not have to be ignored in the making up of a dismissed servant's mind when he comes to make a decision reasonable or unreasonable.
To similar effect O’Loughlin J in Cubillo v Commonwealth (No. 2) (2000) 103 FCR 1 at 472 [1522] said as follows:
[1522] The applicants’ duty is to take all reasonable steps to mitigate his or her loss. An applicant will not recover damages for any loss which he or she could have avoided; nor will damages be recoverable if an applicant could have avoided a loss and has failed, through unreasonable action to avoid it. An objective test is to be applied to the personal circumstances of the applicant; that is, due and proper regard must be had to the applicant with all his or her abilities and disabilities when determining whether his or her conduct was reasonable. The appropriate test is whether a reasonable person, in the circumstances as they existed for the applicant, and subject to various factors such as the applicant’s medical history and his or her psychiatric condition would have returned to their families sooner. Whether an applicant has acted reasonably or unreasonably in not taking steps which would operate to decrease his or her loss is a question of fact, not law, depending on the circumstances of their individual cases: British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Company Ltd [1912] AC 673 at 688-689; Payzu Ltd v Saunders [1919] 2 KB 581 and Sotiros Shipping Inc v Schmeiet Solholt [1983] 1 Lloyd’s Rep 605.
In my view, in the circumstances Mr Connelly faced he was not bound to mitigate his loss by accepting all overtime offered by Bluescope after 9 January 2016 for at least the following reasons.
First, Bluescope’s position was emphatically to the effect that it had terminated Mr Connelly’s annualised salary arrangement and in its place implemented the aggregate salary arrangement and reduced his salary by the significant annual amount of $23,899.76, or approximately 16.4% of his hitherto paid annualised salary: see [2(i)], [44] and [48] of Benge No. 2. Prior to the imposition of the aggregate salary, Mr Connelly had moderately but firmly opposed the legality of its foreshadowed imposition. Mr Benge had sought legal advice from Kells Lawyers on the foreshadowed imposition which affected him (and Mr Connelly) and that legal advice was, consistent with my findings in Benge No. 2, correct. In response, Bluescope merely condescended to state that it was “satisfied it is acting lawfully in adjusting the current approach for staff to the identified aggregate salary arrangement”: see [38] – [40] of Benge No. 2.
Accordingly, in the circumstances Mr Connelly was, and was entitled to be, aggrieved by Bluescope’s repudiation of his annualised salary in the circumstances found in Benge No. 2, including the unilateral termination of pre-paid overtime. That personal aggrievement and Mr Connelly’s state of mind are factors which may be taken into account in a case involving a contract of employment for personal services in assessing whether or not it was reasonable to expect him to accept offers of overtime after 9 January 2016: see Payzu, Limited v Saunders (1919) 2 K.B. 581 at 586 per McCardie J; Schindler v Northern Raincoat Co Ltd [1960] 1 W.L.R. 1038 at 1048 – 1049 per Diplock J (as he then was); Yetton at 116 – 118.
Second, Mr Connelly was objectively faced with the possibility that any acceptance by him of the imposed terms and conditions of the aggregate salary arrangement after 9 January 2016, including the acceptance of offers of overtime, might be asserted by Bluescope to evidence and evince an acceptance by him of the imposition of the aggregate salary arrangements. That is in fact exactly what Bluescope has done in this case, because at [39] of its Amended Defence it pleads in part that Mr Connelly “… did not express interest in redundancy… and continued after the adjustment to pay arrangements on 10 January 2016 to work in their employment … in doing so confirmed their consent to the change.”. In other words, Bluescope pleads in effect at [39] of its Amended Defence that Mr Connelly consented to the removal of pre-paid overtime subsequent to 9 January 2016 by continuing to work at the PKSW.
Further in this connection, Mr Connelly and Bluescope were in litigation with each other in this proceeding which commenced by the filing of the original Statement of Claim on 12 October 2016, with the original Defence of Bluescope having been filed on 18 November 2016, where at [36] it pleaded Mr Connelly’s consent to the imposition of the aggregate salary by continuing to work after 9 January 2016 in the same terms as [39] of the Amended Defence.
Third, all the offers to Mr Connelly after 9 January 2016 to work overtime were made by Bluescope under the imposed aggregate salary arrangement, and not under the previous annualised salary arrangement. Bluescope’s position was that the annualised salary arrangement had ended. In a practical sense Mr Connelly was made by Bluescope to work as if he was under the aggregate salary arrangement. It was not in his power to force Bluescope to comply with the six hour standby term of his annualised salary arrangement. There has never been any suggestion that the offers of overtime after 9 January 2016 were made or regarded as having been made under the annualised salary arrangement. In my view it is illegitimate and inappropriate to regard the offers of overtime made to Mr Connelly subsequent to 9 January 2016 as retrospectively referable to the annualised salary arrangement when Bluescope’s position was that the annualised salary arrangement had ended as of that date.
Fourth, after 9 January 2016 the offers of overtime made by Bluescope to Mr Connelly included no element of compulsion. Under the aggregate salary arrangement the working of overtime was completely voluntary and there is no evidence that it was ever suggested to Mr Connelly by Bluescope that he was bound to work overtime after 9 January 2016, either generally or with reference to the condition of his annualised salary arrangement that he work six hours of pre-paid overtime.
Accordingly, having regard cumulatively to the above matters, Mr Connelly did not fail to mitigate his loss by not always accepting the overtime offered to him by Bluescope after 9 January 2016. It is neither fair nor appropriate that Mr Connelly’s rejection of offers of overtime after 9 January 2016 should reduce any compensation payable to him.
Third Issue for Determination – Should Three Bonuses Paid to Mr Connelly After 9 January 2016 Under the PSP be Deducted From Any Compensation?
Under Mr Connelly’s annualised employment contract of 9 November 2011 the following was provided:
Short Term Incentive Scheme
In this role you are eligible to join either the BII or the PK Employee Incentive Scheme and have the option to choose between two incentive schemes. A summary of each scheme is below.
If you do not choose to join the PK Employee Incentive scheme you will automatically be covered by the Business Improvement Incentive Program (BII).
Business Improvement Incentive Program (BII) (or the Short Term Incentive Plan)
You will be eligible to participate in the Short Term Incentive Plan; which operates to provide discretionary cash incentive payments according to the success of the Company, the performance of the participants and their respective departments towards the achievement of predetermined goals.
The notional incentive target applicable for your position is 15% of base salary. The Plan is designed to provide the potential to earn up to 150% of the notional incentive target for excellent performance.
(emphasis added)
It is evident that Mr Connelly was under the Short Term Incentive Scheme (STI).
By letter dated 7 September 2012 Mr Connelly was advised by Mr Lorenc relevantly as follows:
To acknowledge the hard work and commitment you have shown, I am pleased to advise that you will be awarded a payment of $6,883 under the STI Plan (a 60% performance rating of your target STI). This payment will be made to you in September.
By letter dated 6 September 2013 Mr Connelly was advised by Mr Lorenc relevantly as follows:
In addition, to acknowledge the hard work and commitment you have shown, I am pleased to advise that you will be awarded a payment of $13,918 under the STI Plan. This payment will be made to you in September.
By letter dated 1 September 2014 Mr Connelly was advised by Mr Lorenc relevantly as follows:
In addition, to acknowledge the hard work and commitment you have shown, I am pleased to advise that you will be awarded a payment of $15,809 under the STI Plan. This payment will be made to you on 24 September.
By letter dated 1 September 2015 Mr Connelly was advised by Mr Lorenc relevantly as follows:
To acknowledge the hard work and commitment you have shown, I am pleased to advise that you will be awarded a payment of $8,180 under the STI Plan. This payment will be made to you on 23 September.
The KMB Announcement by Bluescope of 11 August 2015 suspended the STI (see [23] of Benge No. 2). At [12] – [16] of his affidavit affirmed on 4 September 2020 Mr David Bell, who now holds the position of General Manager of Australian Steel Products for Bluescope, sets forth the circumstances of the new PSP announced by Bluescope on or about 24 June 2016:
[12]On or about 24 June 2016, Mr Vasella issued a written communication, including to all staff employees at the Steelworks, that confirmed the suspension of bonus schemes for financial year 2016, but announced the introduction of a new profit share arrangement (PSP) commencing from financial year 2017. That announcement also referenced the reintroduction of a bonus due to improved financial performance which was attributed to "the significant progress made in the delivery of our business turnaround strategy". The PSP was to be "linked to business performance and our capacity to pay". A copy of the written announcement made by Mr Vasella on or about 24 June 2016 is annexed and marked DB20.
[13]Commencing in about August 2016 the Respondent made presentations to all staff employees at the Steelworks about the PSP, including the philosophy and background to the scheme, and how it would operate. As a profit based scheme, the presentation identified that earnings of the Respondent influence the available pool, and earnings in turn are impacted by being able to control costs. A copy of that presentation is annexed and marked DB21.
[14]In my role, I understood that the intention of the PSP was that bonus would only in the future be paid where the company was profitable. That required ongoing focus on containing costs, and as I also understood the PSP was being implemented on the basis that the cost saving measures achieved in 2015 were taken as a given as being in place and continuing, including the cessation of arrangements for prepaid overtime. Any adverse impact on costs would reduce the amount that would be available in assessment of the PSP pool. The cost saving measures in 2015 always had the aim of positioning the Respondent to be cash breakeven at the bottom of the business cycle. This continues to be the financial cost driver for the Respondent's business.
[15]On or about 30 August 2017, Bluescope through another written communication from Mr Vasella, announced to all employees at the Steelworks that salary reviews for staff would be reinstated for the 2017 financial year, and that there would be a one-off payment to employees covered by the enterprise agreement. This changed approach was stated to be due to an improved financial performance at that time, and in recognition of the cost initiatives that had been implemented and continued efforts around costs. Those costs initiatives had included the things arising from the MOA, including the ending of arrangements providing for pre-paid overtime. A copy of the written announcement made by Mr Vasella on 30 August 2017 is annexed and marked DB22.
[16]Prior to the introduction of the PSP, the Second Applicant was a participant of the earlier discretionary bonus arrangement. From my knowledge of the criteria under the earlier bonus arrangement, the Second Applicant would have received less under the previous scheme had it continued, than the respective PSP payments he received for the financial years 2017 to 2019, (being $18,678, $23,684 and $18,721), if any payment was to be made under the earlier arrangement at all.
By letter dated 1 September 2017 Mr Connelly was advised by Mr Lorenc relevantly as follows:
In addition, to acknowledge the hard work and commitment you have shown, I am pleased to advise that you will be awarded a payment of $18,678 under the PSP Plan. This payment will be made to you on 6th September.
By letter dated 1 September 2018 Mr Connelly was advised by Mr Lorenc relevantly as follows:
In addition, to acknowledge the work and commitment you have shown and the results we have achieved, I am pleased to advise that you will be awarded a payment of $23,684 under the PSP Plan. This payment will be made to you on 5 September.
At the compensation hearing it was agreed that on 18 September 2019 Mr Connelly was awarded a payment of $18,721 under the PSP.
By letter dated 4 September 2020 Mr Connelly was advised by Mr David Scott of Bluescope relevantly as follows:
As you know, under your contract of employment BlueScope reviews your salary annually in the context of factors such as your individual performance, the company performance and market conditions. These factors go to whether BlueScope adjusts your salary upwards, leaves it as is or adjusts it down.
This year, BlueScope has decided to delay your salary review until the pay period ending 19 December 2020. This decision is not limited to you. The decision does not mean that you will not receive a salary review for 2020, It will just be three months later than usual. Any increase will be backdated to 1 September 2020 however any decreases will only be operative from the review date.
One factor in making this decision is BlueScope's desire to ascertain the final outcome of your proceedings currently before the Federal Circuit Court. Without prejudice discussions over recent months have not resolved the issue of your ongoing claim to an annualised salary, in circumstances where BlueScope has made clear it does not wish to have such arrangements in place.
In these circumstances, effective 1 September 2020, and pending the finalisation of your case and the annual salary review, the following arrangements will apply for you:
1. Without prejudice to its position in the Federal Circuit Court proceedings, BlueScope will pay to you in each fortnight, such amount additional to your current aggregate salary, as necessary to ensure fortnightly gross earnings equivalent to your annualised salary as at 9 January 2016 i.e. $5,596.76 per fortnight;
2. You will, in accordance with the terms of the contract providing for the annualised salary you rely on, be required to work overtime of up to 6 hours per week when requested; and
3. Without prejudice to its position in the Federal Circuit Court proceedings, BlueScope will retain your current base salary of $95,088.24 even though that is higher than the terms of your contract as at 9 January 2016 as claimed in those proceedings.
With respect to BlueScope’s Incentive plan, you will be awarded a payment of $7,269 under the PSP Plan. This payment will be made to you on 29 September.
Consistent with BlueScope’s position already before the Federal Circuit Court, BlueScope reserves the right to attribute this payment under the PSP plan to if necessary, offset any amount of compensation that you may be awarded in those proceedings.
(emphasis added)
Further, in Mr Bell’s affidavit of 4 September 2020 in this connection he deposed at [17] – [20] as follows:
[17] To the best of my knowledge, the Respondent has not previously been found to have contravened the Fair Work Act 2009, or previous legislation.
[18]Since the decision of the Court in this matter on 13 March 2020, I am aware that there have been unsuccessful without prejudice discussions between the Respondent and the Second Applicant through the respective lawyers about the possible resolution of the matter, and the Second Applicant's claim for an ongoing annualised salary. For the Respondent, any resolution cannot involve a continuation of an annualised salary arrangement for the Second Applicant, or any other employee. Given the circumstances of 2015 and 2016, and having removed such arrangements from wages employees, the Respondent is concerned at unrest among those employees.
[19]In the absence of any agreement with the Second Applicant at this point, the Respondent has determined to defer his salary review for this year until December 2020, and on a without prejudice basis, effective as of 1 September 2020, it will in each fortnight pay the Second Applicant such additional amount as necessary to ensure his fortnightly gross earnings are equivalent to his annualised salary as at 9 January 2016 i.e. $5,596.76 per fortnight. In return the Second Applicant will be required to work overtime when requested. A copy of the Respondent's letter to the Second Applicant of 4 September 2020 setting out the details of the Respondent's position is annexed and marked DB23.
[20]The salary review deferral applies to all remaining fortnightly staff who were on an annualised salary prior to 10 January 2016, but the without prejudice arrangement applies only to the Second Applicant.
In these circumstances Bluescope submits that the amount of $61,083, being the total of the PSP payments made to Mr Connelly of $18,678, $23,684 and $18,721 in September of each of 2017, 2018 and 2019, should be deducted from any compensation otherwise payable to him. Mr Taylor and Mr Howell agreed at the compensation hearing that these payments were made in relation to the performance of work by Mr Connelly, but Mr Howell qualified his agreement by reference correctly to the fundamental discretionary nature of the payments.
In short, Bluescope submits that Mr Connelly had no contractual entitlement to these payments in addition to the annualised salary to which he at all times maintained that he was entitled and that accordingly these payments should be applied, on an annual basis and not a fortnightly basis, when determining whether he was paid less than his contractual entitlements under his annualised salary arrangement. Bluescope submits that it should be accepted that it would not have exercised its discretion to make the payments to Mr Connelly had it understood that in reality Mr Connelly was still entitled to his annualised salary arrangement, as he has always asserted.
I reject this submission. The fact of the matter is that the amounts paid prior to 10 January 2016 under the STI and the payments made from 10 January 2016 under the PSP were discretionary payments which took into account the success of Bluescope and the overall performance of individual employees and their contribution to Bluescope’s success and performance. In other words, they were payments of substantially the same type and nature.
Whilst after 9 January 2016 Mr Connelly and Bluescope were in dispute about whether his annualised salary arrangement had ended or continued, the fact of the matter is that he continued to work at the PKSW as a valued employee and the payments to him under the PSP were referable to that work. Discretionary payments to him under the PSP bear no relevant or sufficient connection with Bluescope’s underpayment of Mr Connelly’s fortnightly payments under his annualised salary arrangement such as to make it fair, reasonable or appropriate to apply and set-off the total of the PSP payments in the amount of $61,083 in reduction of any compensation otherwise payable to him for underpayment of his annualised salary. Mr Connelly worked for Bluscope at the PKSW up to 9 January 2016 and was awarded discretionary bonuses and he worked there after 9 January 2016 and was awarded discretionary bonuses. It is not appropriate that the bonuses paid after 9 January 2016 reduce the compensation payable to him for the loss arising out of Bluescope’s failure to make the fortnightly payments to him in accordance with Table 1 of the Agreed Document.
Fourth Matter for Determination - Should a Mandatory Injunction Issue?
In his Outline of Submissions filed on 29 July 2020 Mr Howell sought for the first time that the Court grant a mandatory injunction under s.545 of the FW Act in the following terms:
[66] e. An Order under s 545 of the FW Act that:
i. Within 28 days of judgment BlueScope conduct an audit the wage records for all of the 144 employees (or potentially now former employees) referred to in the BlueScope Concise statement (referred to at Benge & Ors v BlueScope (No.2) at [8]) and:
ii.Calculate what the fortnightly pay would have been for each such employee had the annualised salary been paid in accordance with the relevant contract of employment for each fortnightly pay period on and after 10 January 2016;
iii.Calculate the difference between what each such employee was actually paid in each fortnightly pay period as against what they would have been paid had the annualised salary continued; and
iv. Provide each such employee a spreadsheet, in a form reflecting the Agreed Schedule, recording those calculations.
No such injunction had earlier been sought in the proceeding.
At the compensation hearing Mr Howell sought leave to amend the Further Amended Statement of Claim to seek the proposed injunctive relief. Mr Taylor opposed leave being granted and I refused leave. My reasons for doing so included the following considerations:
a)the application for the injunction was made very late, and I was not satisfied that Bluescope may not have been able to lead evidence in opposition to the grant of the injunction going to the potential burden, oppresiveness and costs of the work which would need to be performed by Bluescope if the injunction was granted;
b)there was no explanation proffered as to why the injunction had not been sought earlier;
c)the case has always proceeded on the basis that Mr Benge and Mr Connelly were bringing their own personal legal proceeding for the payment of moneys which ought to have, but had not, been paid to them. Whilst Mr Connelly might perhaps have a general predisposition to advance the interests of the 144 employees in supposedly like plight to him, I could not perceive that he had any legitimate legal interest in moving for the injunction;
d)it was likely that the true proponent of the proposed injunction was the AWU. However, Mr Connelly had opposed Bluescope’s application to join the AWU as a Cross-Respondent to the proceeding for the purpose of claiming against the AWU that it had induced a breach of the employment contract between Mr Connelly and Bluescope, for which the AWU was claimed to be accessorily liable under s.550 of the FW Act: see Benge & Ors v Bluescope Steel (AIS) Pty Ltd [2018] FCCA 2831. Mr Connelly had agreed to amend his Amended Statement of Claim filed on 17 March 2017 by deleting any reference to the AWU; and
e)I did not consider that it would be proper or justifiable to grant such an injunction in favour of 144 persons who were unidentified. There was not a scintilla of evidence that they had in fact cases of like nature to that of Mr Connelly against Bluescope. A general rule of law is that a person cannot sue to vindicate the private right of another person, even of a company of which they might be a member. There has been no determination or testing of whether or not these 144 persons had legal rights against Bluescope which would entitle them to an interlocutory injunction of the type for which the amendment was sought. No prima facie case had been established which would have entitled them to interlocutory relief. No one offered an undertaking as to damages as the price of the grant of the proposed injunction.
Accordingly, I was of the view that it would neither be fair nor in the interests of justice to allow the amendment sought.
Fifth Matter for Determination – Should a Different Injunction Issue?
At the compensation hearing I granted leave to Mr Connelly to amend the Further Amended Statement of Claim to substitute for [65(b)] the following paragraph:
That pursuant to s.545 of the Fair Work Act, the Respondent immediately resume paying Mr Connelly the annualised salary to which he is entitled under the Connelly contract. Or in the alternative, the Respondent be restrained from further contravening s.323 of the Fair Work Act in relation to Mr Connelly.
I note that under s.545(2)(a) of the FW Act the Court may make an order granting an injunction to “prevent, stop or remedy the effects of a contravention”. This statutory power to grant an injunction to restrain conduct “does not depend upon the Court reaching a finding that the respondents intended to engage in conduct of that kind in the immediate or distant future”: McKerracher J in United Group Resources Pty Ltd v Calabro (No. 7) (2012) 203 FCR 247 at 270 [48].
It will be an occasion for granting an injunction where in the words of s.545(1) of the FW Act, “a person… proposes to contravene… a civil remedy provision” such as s.323: see Katzmann J in Shizas v Commissioner of Police (2017) 268 IR 71 at 111 [208]. An injunction may be granted to prevent further contraventions of the same or a similar kind and they may have the benefit of deterring a respondent from engaging in further contravening conduct.
In my discretion I decline to grant the injunction. It will be seen from Mr Scott’s letter of 4 September 2020 extracted at [57] above that Bluescope has been paying to Mr Connelly since 1 September 2020 the equivalent of his annualised salary as at 9 January 2016, namely $5,596.76 per fortnight, pending the finalisation of the present case and his annual salary review to take place on or about 19 December 2020, with any increase backdated to 1 September 2020. Bluescope knows as a result of my judgment in Benge No. 2 that it acted in breach of its contract of employment with Mr Connelly and I have no reason to believe that, having now had its legal rights vis a vis Mr Connelly determined, it will not now comply with its legal obligations. As I discuss below when considering penalty, the circumstances of this case are almost unique. Bluescope faced an existential position in 2015 and it would seem that it only survived and kept the PKSW open because of the willingness of the wages employees to forego pre-paid overtime, together with assistance from the NSW Government.
I am not satisfied that Bluescope will in the foreseeable future cease to pay to Mr Connelly the annualised salary to which he is entitled, unless it otherwise takes steps legally available to it to end, amend or qualify that contract of employment. I do not believe that in the foreseeable future Bluescope will further contravene s.323 of the FW Act in relation to Mr Connelly. Whilst these considerations are not decisive against the issue of an injunction, in my discretion I take them into account in refusing to grant the injunction sought in the circumstances of this case.
Sixth Matter for Determination – Whether or Not Mr Connelly Suffered No Loss Because the PKSW Would Have Shut Down
Bluescope submitted that Mr Connelly was not entitled to any compensation for loss because, but for the removal of pre-paid overtime for all employees at the PKSW including himself, Bluescope would have ceased operations and shut the PKSW down and that accordingly Mr Connelly has suffered no loss compared to what would have occurred if the pre-paid overtime had continued to be paid to him.
I reject this submission. I found in Benge No. 2 at [20] that in mid-2015 Bluescope was in a dire and perilous financial position and that there was a substantial risk that it would be necessary for it to close the PKSW. However, by the MOA of 8 October 2015 Bluescope had succeeded in obtaining the abolition of pre-payment of overtime for wages employees: see [35] of Benge No. 2. That led, on 26 October 2015, to Bluescope publishing an ASX Release advising that it had decided to continue to make steel at the PKSW following commitments by employees, unions and the NSW Government. So by that date the continuation of the operation of the PKSW was secured for the foreseeable future. It was two months later on 9 December 2015 that Mr Connelly was handed a letter dated 3 December 2015 which purported to confirm the cessation of his annualised salary arrangement and the imposition of an aggregate salary arrangement to become effective, as it did, on 10 January 2016: see [44] and [48] of Benge No. 2.
In other words, Bluescope purported to terminate Mr Connelly’s annualised salary arrangement only after it had already decided to continue operations at the PKSW. It is public knowledge that those operations have continued with some success. Mr Connelly has continued to be employed at the PKSW. Bluescope decided to continue to operate the PKSW even though it knew that Mr Connelly had at all material times resolutely rejected the removal of the pre-paid overtime component of his annualised salary: see [62] of Benge No. 2.
In my view Bluescope’s submission in this regard fails in establishing that Mr Connelly suffered no loss or damage.
Seventh Matter for Determination – Penalty?
Principles
Mr Connelly seeks an order that Bluescope pay to him personally a pecuniary penalty pursuant to s.546(3)(c) of the FW Act because of its contraventions of s.323. Counsel for the parties have helpfully provided for use in assessing any penalty an agreed Joint Aide Memoire, in the following terms:
1. The Court has found that the Respondent prima facie contravened s323 of the FW Act by paying to the Second Applicant amounts payable to the Second Applicant in relation to the performance of work that were not “in full”, due to the non-payment of a pre-paid overtime component from 10 January 2016.
2. Section 546 of the FW Act confers on the Court the discretionary power on application to require a person to pay the pecuniary penalty that the Court considers appropriate if the Court is satisfied that the person has contravened a civil penalty provision.
3. Section 323 of the FW Act is a civil penalty provision.
4. The parties agree that the effect of s 557 of the FW Act is that the Respondent’s contravention of s 323 of the FW Act from 10 January 2016 is to be taken as a single contravention.
5. The relevant maximum penalty for that contravention is $63,000.00.
6. The imposition of any penalty, including its quantum (subject to the maximum), is at the discretion of the Court.
7. The principles to be applied to the determination of penalties under the FW Act are well established. A principal purpose of a penalty is deterrence, and a penalty should be proportionate to the gravity of the contravening conduct. Determination of a penalty requires an identification and balancing of all relevant factors.
8. The Second Applicant’s Remedy Submissions at [45] refer to PIA Mortgage Services Pty Ltd v King [2020] FCAFC 15: (2020) 292 IR 317 which contains a checklist of factors that Courts usually consider in determining penalty, including:
(1) the nature and importance of the project where the conduct was undertaken (in a building case);
(2) the nature and extent of the conduct which led to the breaches;
(3) the circumstances in which the conduct took place;
(4) the nature and extent of any loss or damage sustained as a result of the breaches;
(5) whether there had been similar previous conduct by the respondents;
(6) whether the breaches were properly distinct or arose out of one course of conduct;
(7) the size of the business enterprise involved;
(8) whether or not the breaches were deliberate;
(9) whether senior management was involved in the breaches;
(10) whether the party committing the breach exhibited contrition;
(11) whether the party committing the breach has taken corrective action;
(12) whether the party committing the breach cooperated with the enforcement authorities;
(13) the need for specific and general deterrence.
9. Such checklists are recognised as neither prescriptive nor exhaustive…
Mr Howell submits that an appropriate penalty would be in the range of $31,500 – $47,250, being between 50% – 75% of the maximum possible penalty of $63,000. On the other hand Mr Taylor for Bluescope submits that in the particular circumstances of the matter there should be no imposition of a penalty or otherwise the imposition of only a minimal penalty, being no more than 10% of the maximum penalty, namely $6,300.
I note that when an individual in their own right prosecutes a claim for the contravention of a civil remedy provision the “usual order” is that any penalty be paid to that person. Nevertheless, in Dafallah at 593 – 594 [139] – [142] Mortimer J decided not to impose a penalty on the respondent, but expressed the concern she would otherwise have had at making any penalty personally payable to Ms Dafallah, in the following terms:
Remedy
Penalties
[139] In cases where a person (other than an inspector) is prosecuting a claim and succeeds with respect to an order for penalties, it has been said that the “usual order” is that the penalties are paid to that person: see Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 at 245-246; 13 IR 289 at 291-292 per Northrop J; Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223-224; 42 IR 255 at 262 per Gray J; Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; 177 IR 243 at [41]-[46] per Gray J; National Tertiary Education Union v Royal Melbourne Institute of Technology (2013) 234 IR 139 at [146] per Gray J. Whether such an order is always appropriate was discussed by Finkelstein J in Community and Public Sector Union v Telstra Corp Ltd (2001) 108 IR 228 at [22]-[28], although his Honour’s view that payment of a penalty to an organisation should not be made if it results in a windfall has been the subject of some disagreement: see Finance Sector Union of Australia v Australia and New Zealand Banking Group Ltd [2002] FCA 1035 per Wilcox J. There are references in the last two decisions, and in Gibbs (1992) 37 FCR 216; 42 IR 255, to the origins of the power to direct payment outside consolidated revenue as lying in the ability of “common informers” to bring certain kinds of criminal prosecutions, and the policy consideration of encouraging such informers, or persons with an interest, in upholding the integrity of industrial agreements and assisting to facilitate adherence to their terms.
[140] Further, a direction to pay a penalty to a person is not to be seen as compensation for the costs that person has incurred in bringing a proceeding, especially where the statutory scheme exhibits a legislative choice that, as a general rule, costs should not be available: see Gray J in Plancor (2008) 171 FCR 357; 177 IR 243 at [41]-[43].
[141]Whether the payment of a penalty should otherwise be viewed as capable of performing a compensatory function if paid to a person nominated by the legislative scheme remains a matter of debate. However, I respectfully agree with the remarks of Greenwood J in McIlwain v Ramsey Food Packaging Pty Ltd (No 4) (2006) 158 IR 181 at [108] (endorsed by Branson and Lander JJ in Plancor (2008) 171 FCR 357; 177 IR 243 at [70]):
the imposition of a penalty under the Act is designed fundamentally to serve the public interest in acting as a deterrent to the particular Respondents and others generally from engaging in conduct of the kind the subject of the findings. In circumstances where an order has been made for compensation for both economic loss and a non-economic component concerning the disturbance, dislocation and loss of secure employment suffered by the individuals, there seems to be no good policy reason why the individuals should additionally have the benefit of an order for the payment to them of the penalty.
[142] In the circumstances of this case, given that I have decided it is appropriate to order Melbourne Health to pay compensation to Ms Dafallah in respect of the contravention of cl 38, I do not consider it appropriate to impose a penalty payable to her. That is the only penalty order sought by Ms Dafallah.
Subsequently in Sayed v Construction, Forestry, Mining and Energy Union [2015] FCA 338 Mortimer J again refused to order that a penalty be paid to the applicant, but rather held that it be made payable to the Commonwealth pursuant to s.546(3)(a) of the FW Act, and considered at [72] – [94] the tension between the Court exercising a power under s.546(3)(c) to impose a penalty payable to the applicant and the fact that the Court has already made an appropriate order for compensation in relation to the alleged contravention and the possibility of an inappropriate windfall for an applicant.
Consideration of Penalty
Mr Howell fairly and properly accepted that the contraventions in this case by Bluescope were not of the worst category.
In considering the fixing of any penalty I have had regard to all of the relevant conduct of the parties.
In my view, the circumstances facing Bluescope in 2015 were almost unique. It is of course the case that the fact that an employer is facing difficult financial circumstances, even existential financial circumstances, cannot excuse or justify the breach of employment contracts with its employees. However in 2015, because of the size and scope of the PKSW, very great damage would have been occasioned by its closure, not only to Bluescope’s business and financial position, but to the hundreds of its employees and their families.
The uniqueness of the problems faced by Bluescope was clearly recognised by not only the NSW Government, which agreed to defer $60,000,000 of payroll tax payments over the ensuing three years as well as reducing other charges, but also by the relevant trade unions and the wages employees who, in an effort to reduce the costs of the operation of the PKSW, agreed to the MOA and thereby gave up pre-payment of overtime.
In other words Bluescope’s breach of Mr Connelly’s annualised contract, whilst motivated by a desire to reduce costs, could not be regarded as a selfish attempt motivated by pure greed to advantage itself and no others. Rather, I accept that Bluescope was acting with good intentions and for the overall collective good and Mr Connelly was not singled out as an individual, but rather was merely one of many who had previously been entitled to pre-paid overtime which Bluescope in good faith believed it was necessary to end. It is clear that the number of wages employees of the PKSW outweighed the number of staff employees and it was the agreement of the wages employees under the MOA to give up pre-paid overtime that was the decisive influence on Bluescope deciding to continue the operation of the PKSW. In my view the industrial circumstances at the PKSW are a very significant mitigating factor in favour of Bluescope in determining any penalty.
I also accept Mr Taylor’s submission that this is not a case involving the underpayment of a vulnerable employee on minimum award rates of pay by an exploitative employer, but a claim arising out of a contract of employment of a reasonably well remunerated staff employee against a complex backdrop of business survival and industrial relations pressures that required Bluescope to attempt to treat all of its employees at the PKSW in the same manner with respect to termination of pre-paid overtime.
From a personal point of view it is clear that neither Mr Connelly nor Bluescope saw the dispute between them from January 2016 as requiring termination of the relationship of employer and employee. I infer that Mr Connelly wanted to continue to work at the PKSW and that from Bluescope’s point of view he was, and remains, a valued employee. It appears that they implicitly agreed that their dispute would be resolved by the Court in this proceeding, whilst the relationship of employer and employee continued. In the result Mr Connelly has won the case and will be awarded proper compensation. I consider that these personal factors should also mitigate any penalty.
I further take into account that there has been no similar conduct prior to January 2016 by Bluescope and that the contraventions of Mr Connelly’s employment contract arose out of one course of conduct and, now that Mr Connelly’s legal rights have been vindicated, there is no particular pressing need for specific or general deterrence.
Nevertheless, notwithstanding the above mitigating circumstances, there are other factors which point to the appropriateness of the imposition of a modest, but not minimal, penalty.
First, Bluescope’s conduct was very deliberate, with decisions made up as high as its Board of Directors. The existential position in 2015 of Bluescope explains the deliberate breach of Mr Connelly’s contract of employment, but does not legally excuse or justify, over his objection, its failure to continue to pay him the pre-paid overtime component to which he was entitled under his annualised salary. Whilst it is true that many other employees of the PKSW accepted the removal of pre-paid overtime, Mr Connelly was entirely within his rights to refuse to do so, and was entitled to stand upon the terms of his contract. Notwithstanding, he did in fact attempt to reasonably engage with Bluescope to see whether any other compromise between them was possible, but to no avail. Further, whilst the relationship of employer and employee continued after January 2016, during 2015 and subsequent to January 2016 Mr Connelly obviously must have suffered personal stress and pressure as a result of the events recited in Benge No. 2.
Accordingly, in the result I consider that it is appropriate to order a penalty of 20% of the maximum penalty, namely in the amount of $12,600.
Bluescope makes no submission as to whether any penalty should be paid personally to Mr Connelly under s.546(3)(c) of the FW Act. I consider that it is appropriate in all of the circumstances that he obtain the benefit of a personal order as sought, and I do not consider that in the circumstances he is improperly or unreasonably receiving a windfall.
Conclusion
The amount of compensation and penalty to be payable to Mr Connelly should be clear from these reasons. However, I consider that Mr Connelly is entitled to reasonable interest as the price of the moneys withheld from him and that needs to be calculated. Further, the Agreed Document only deals with the period up to the fortnight ending 10 June 2020. It was agreed at the compensation hearing that the parties would bring in a full set of orders reflecting and giving statutory effect to these reasons after delivery, and final orders will accordingly abide receipt of those draft orders.
However I do need to note, in compliance with Mr Taylor’s unopposed request at the compensation hearing to do so, that to facilitate the parties agreeing on a set of orders I should record my view in the following connection. I consider that the PSP payment of $7,269 advised to Mr Connelly by Bluescope’s letter dated 4 September 2020 (see [57] above) was in a different position from the three earlier PSP payments made to him because it was made subject to the express reservation of right that it could be attributed to any amount of compensation that he might be awarded in this proceeding. The PSP payments were discretionary and in my view Bluescope was legally entitled to award the payment to Mr Connelly subject to this reservation of right, which on the evidence it had not sought to apply to the three earlier bonus payments.
I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for judgment of Judge Dowdy
Associate:
Date: 29 October 2020
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