Director, Fair Work Building Inspectorate v J Hutchinson Pty Ltd

[2016] FCCA 2175

FEDERAL CIRCUIT COURT OF AUSTRALIA

DIRECTOR, FAIR WORK BUILDING INSPECTORATE v J HUTCHINSON PTY LTD & ORS [2016] FCCA 2175

Catchwords:

INDUSTRIAL LAW – Discrimination because company did not have an EBA with CFMEU – Pecuniary penalties – Utility of making declarations.

Legislation:

Fair Work Act 2009 (Cth):s.340, 354, 546, 557,567

ACCC v Yellow Page Marketing BV No.2 [2011] FCA 352

Applicant: DIRECTOR, FAIR WORK BUILDING INSPECTORATE

First Respondent: J HUTCHINSON PTY LTD ACN 009 778 330

Second Respondent: EDAN HAWLEY

Third Respondent: JOHN BERLESE

File Number: BRG 152 of 2016

Judgment of: Judge Vasta

Hearing date: 9 August 2016

Date of Last Submission: 9 August 2016

Delivered at: Brisbane

Delivered on: 9 August 2016

REPRESENTATION

Counsel for the Applicant: Mr S.A. Mackie

Solicitors for the Applicant: K & L Gates

Solicitors for the First, Second and Third Respondents: Franklin Athanasellis Cullen

ORDERS

IT IS DECLARED THAT:

1. Pursuant to s.567(c) of the Fair Work Act 2009 (Cth) (“the FW Act”) the First Respondent breached ss.340 and 354 of the FW Act.

2. Pursuant to s.567(c) of the FW Act the Second and Third Respondent breached ss.340 and 354 of the FW Act in respect of their involvement in the First Respondent’s abovementioned contraventions of ss.340 and 354 of the FW Act.

THE COURT ORDERS THAT:

1. Pursuant to s.546(1) of the FW Act the First Respondent is to pay the sum of $25,575.00 by way of pecuniary penalty in relation to its breach of ss.340 and 354 of the FW Act.

2. Pursuant to s.546(1) of the FW Act the Second Respondent is to pay the sum of $1,800.00 by way of pecuniary penalty in relation to his breach of ss.340 and 354 of the FW Act.

3. Pursuant to s.546(1) of the FW Act the Third Respondent is to pay the sum of $1,800.00 by way of pecuniary penalty in relation to his breach of ss.340 and 354 of the FW Act.

4. Pursuant to s.546(3) of the FW Act the pecuniary penalties imposed on the First, Second and Third Respondents are to be paid to the Commonwealth within 28 days of the date of this order.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 152 of 2016

DIRECTOR, FAIR WORK BUILDING INSPECTORATE

Applicant

And

J HUTCHINSON PTY LTD ACN 009 778 330

First Respondent

EDAN HAWLEY

Second Respondent

JOHN BERLESE

Third Respondent

REASONS FOR JUDGMENT

(Ex tempore)

1. This is a penalty hearing where the Fair Work Building Inspector seeks declarations against the respondents and the imposition of pecuniary penalties for breaches of the Fair Work Act 2009 (Cth) (“the FW Act”).

2. In short compass, the First Respondent is a construction company that, at the relevant time, was responsible for the construction of a residential project known as Circa One at the Nundah Village shopping centre.  The Second Respondent, Mr Hawley, was a contracts administrator or manager employed by the First Respondent.  He reported to the Third Respondent, Mr Berlese, who was the team leader. 

3. As part of the project, the First Respondent, it seems, was about to put out a tender for a contract for tiling, but was, in effect, the subject of an unsolicited phone call from the tiling company C & K Tiling Pty Ltd (“C & K”).  That company did perform tiling works, the sort of works that the First Respondent would have subcontracted out for this particular project. 

4. C & K had its own Enterprise Bargaining Agreement (“EBA”) that was registered with the Fair Work Commission.  That agreement was not an agreement that was compiled in conjunction with the Construction, Forestry, Mining and Energy Union (“CFMEU”). 

5. Now, it seems that on or around Monday, 8 October 2012 the principal of C & K made a phone call to Mr Hawley offering to provide a quote to the First Respondent to provide tiling services on the project.  At 4.30 pm that day he sent an email to Mr Hawley containing a quote for $307,337.50 for the works. 

6. At 4.36 pm, an email was sent to the principal at C & K attaching a series of drawings relating to the works and requesting the indicative budget pricing.  Mr Hawley was copied into that email  At 4.52 pm Mr Hawley replied to the 4.36 pm email stating, as part of it:

   “Ellie, if you are confident that you can resource the project, I think we are fairly close to being able to award the package to C & K Tiling.  Are you available to meet on site tomorrow?”

7. C & K received a phone call from Mr Hawley.  There is no agreement as to the conversation, but it seems that C & K believe that there was a conversation where Mr Hawley asked C & K words to the effect of “whether they had an EBA”. C & K replied with words to the effect that they “did have an EBA” and nothing more was said about the EBA in that conversation. 

8. On 9 October, C & K and Mr Hawley exchanged emails clarifying both the quote and the works and organising the meeting from 12 pm to 12.30 pm at the site on Wednesday, 10 October 2012.  On that date, two persons involved with C & K attended the site and met Mr Hawley and a person called Cassidy who seemed to be the foreman for the First Respondent.

9. During that meeting the representatives agreed on the final price of the works of $307,337.50 and it seems that C & K would start the works on the week commencing 22 October 2012.  There is some conflict as to whether that date was actually agreed upon, but nothing much comes of it in any event. 

10. At 1.37 pm on 15 October, a week before that time, C & K received an email from the Third Respondent, Mr Berlese.  This email was copied to Mr Hawley and read:

    “Jason, as discussed, can you provide a company profile and reference.  Also can you provide a copy of your current EBA with Fair Work Australia and what projects the EBA covers?  Also can you confirm your availability for a meeting on Friday with the CFMEU at Nundah at a time to be confirmed?”

11. At 3.55 pm on the 15 October 2012, so just over two hours later, C & K replied to Mr Berlese’s email, copying in themselves. The email had a copy of the C & K agreement attached and also stated in the body of the email:

    “I am unclear as to why you are requesting me to meet up with the CFMEU.  As I advised previously by phone, our EBA is current and I pay all the employee entitlements under this EBA.  If Hutchinson Builders have an agreement with the CFMEU to only award works to companies with a current EBA, then there should be no issues as our EBA is current.  However, if the CFMEU and Hutchinson Builders are referring to an EBA with the union, that is a different story and I would question the legitimacy of this agreement in place.”

12. On Monday, 22 October 2012, C & K emailed Mr Berlese, copying in themselves and Mr Hawley.  The email stated:

    “Good afternoon, John.  As to our meeting with Mr Hawley and your site foreman on Wednesday, 10 October 2012, we were advised that we were meant to commence works on the Circa One project this week.  I have designated my crew of workers allocated and ready to commence as previously discussed.  However, I have not had a response back to my previous email regarding the direction given by Andrew Sutherland of the CFMEU to avoid using us due to C & K Tiling not having a current EBA with the union.  If there is any issue relating to the EBA we currently hold, please let me know as soon as possible.”

13. Two days later, Mr Hawley replied by email, copying in the people from C & K and Mr Berlese, the Third Respondent, stating:

    “Jason, thank you for your time invested in the project.  Unfortunately, without a union-endorsed EBA, we will not be able to engage C & K Tiling.  When Cassidy and I met with you on site it was on the premise that your company had such an EBA in place as you had discussed over the phone.”

14. The three respondents in this action have breached s.340 of the FW Act in that they have engaged in adverse action against C & K. They have done so because C & K had a workplace right. That is, they were entitled to the benefit of their agreement and they were, or should have been able, to initiate or participate in a process or proceedings under a workplace law by making such an agreement.

15. Depending upon the view one takes of the facts, the first respondent and C & K had either entered into a contract or the first respondent had proposed to enter into a contract with C & K.  What the true situation is in law does not matter for these purposes.

16. What the First Respondent did was to either terminate the contract or, depending on that view of the facts, refuse to engage C & K.  The First Respondent, in terminating the contract, has done so because C & K had a workplace right; that is, to enjoy the benefit of their agreement and they had not exercised a workplace right, being the right to make an enterprise agreement, because it already had in place an enterprise agreement that did not cover the CFMEU. 

17. The three respondents admitted that they have breached s.340.

18. Section 354 of the FW Act prohibits a person from discriminating against an employer because employees of the employer are covered or not covered by a particular type of workplace instrument.

19. In this case, the three respondents have discriminated against C & K because they did not have an enterprise agreement that covered the CFMEU.  It is clear that if C & K had an enterprise agreement that did cover the CFMEU, then the first respondent would not have terminated the contract or refuse to award the contract to C & K. 

20. The three respondents have admitted that they have breached s.354.

21. The Court now has to decide what is the proper penalty.  Most of this hearing revolved around the level of seriousness of these two breaches.  At the time of these contraventions, the value of the penalty unit was $110.  This means that the maximum penalty available to the Court for a contravention is $33,000.00 in respect of the First Respondent and $6,600.00 in respect of each of the Second and Third Respondents.

22. Even though there are two contraventions, I have acceded to the submission that the two contraventions really arose out of the one course of conduct. In those circumstances, even though s.557 of the FW Act does not apply to these contraventions, there should still only be one penalty that applies.

23. I have had regard to the general principles in relation to the imposing of pecuniary penalties. In particular, I am mindful that my task is to ensure that the penalty imposed is proportionate to the gravity of the contravening conduct. I have to take into account such factors as punishment, deterrence and rehabilitation. I am also mindful of the state of industrial relations in this company and that any action that breaches the balance struck by the FW Act ought to be viewed with particular seriousness.

24. I have also had regard to the non-exhaustive list of factors compiled by (then) Mowbray FM.  I am also mindful that such a list ought not be approached in a “tick the box” manner.  I am also mindful that while past decisions might be a useful guide, close comparisons with other decided cases so as to arrive at a penalty through an almost mathematical approach should be deprecated. 

25. In this case, it seems to me that there is a blatant case of discrimination against C & K because they did not have an EBA that included the CFMEU.  It is clear on the way that the facts have been presented by both parties that if C & K did have an agreement with the CFMEU, then they would have completed the contract for the tiling at Circa One.

26. Such conduct strikes at the heart of freedom of association.  For subcontractors, such as C & K, a major pathway to growing their business is to be awarded contracts from large construction companies like the first respondent.  If the only way in which they can break into those circles is to have made an agreement with the CFMEU, then the whole fabric of our industrial relations system will disintegrate. 

27. It is instructive to note that s.354 has survived the previous legislation. That is a sign to the Courts that the Parliament views discrimination of this sort very seriously. Therefore, deterrence, especially general deterrence, must be a paramount consideration in this case.

28. Whilst it is pleasing that Mr Quinn testified that C & K have been subsequently awarded contracts by the First Respondent, it is not known whether C & K succumbed to striking a new EBA that included the CFMEU. 

29. As Mr Mackie of Counsel pointed out, there are many decisions of this Court and the Federal Court that have decried the actions and attitudes of the CFMEU.  However, this hearing is not about the perceived evils of the CFMEU.  It is, instead, about the infringing upon the right of an organisation to elect with whom they will enter into a proper bargaining agreement. 

30. Mr Pratt, the solicitor appearing for the three respondents, submitted that the First Respondent does not have a policy that would mean that “if you don’t have a union EBA, you don’t get any work”.  Mr Quinn gave evidence that the First Respondent does use subcontractors that do not have union-based EBAs.  Though, he did point out that in projects over $40 million in value, about 75 per cent of the subcontractors have EBAs with the CFMEU. 

31. Mr Quinn properly conceded that industrial harmony was one of a number of factors that were brought to bear when deciding to whom the first respondent would award a contract. 

32. The problem with such an approach is that companies, in the position of the First Respondent, may still feel that there is a risk of industrial action affecting their project.  It can become extremely easy for decision-makers within a company, such as the First Respondent, to pass on that risk to subcontractors and limit that risk by insisting the subcontractors conform to union demands or have a union-affiliated EBA. 

33. While I have no doubt that the First Respondent does what it can to be ethical in its dealings with all parties, it is obvious, having regard to the evidence of Mr Quinn, that there is great potential for improper practices to creep in that disadvantage subcontractors who simply want to earn an honest living.  And that is what has happened in this case. 

34. I have had regard to all the matters that both Mr Pratt and Mr Mackie have put before me. Having regard to the relevant positions of C & K and the First Respondent, for the First Respondent to discriminate against C & K in the way that it did, to my mind, constitutes a breach of s.354 that would fit into the worst category.

35. That means that I would normally impose the maximum penalty. 

36. However, in this case there has been a great deal of cooperation.  There has been no evidence filed and the matter was not prepared for trial.  Even where there were factual disputes of a small nature, the respondents have conceded those matters in the spirit of cooperation.  Such cooperation has extended to the very frank evidence given before me today by the managing director, Mr Quinn.  There is an element of contrition in those actions as well. 

37. For those reasons, I am reducing the penalty by a figure of twenty-two and a half per cent.  This then equates to a sum of $25,575.00. 

38. Having regard to the positions of the Second and Third respondents, I do not believe that there should be proportionality between the penalty imposed upon the First Respondent and that to be imposed upon the Second and Third Respondents.  I do see very little reason to differentiate between the two. 

39. I think that their actions speak more of a desire to do the best thing for their employer than any personal animosity they had towards C & K or any “disregard” towards the law.  If I have correctly “read between the lines” of the emails sent, there is some regret in doing what they felt had to be done.

40. Still, what they have done is serious and must be met with condign punishment.  In all of the circumstances, I will impose a pecuniary penalty of $1,800.00 on each of the Second and Third respondents. 

41. The most contentious aspect of the hearing was in regard to whether the Court ought make the declarations sought.  Mr Pratt referred me to the decision of Her Honour Gordon J in ACCC v Yellow Page Marketing BV No.2 [2011] FCA 352 at [67-68] (when Her Honour was a member of the Federal Court), who said:

    “…the considerations being upon the exercise of the discretion to grant or refuse declarations include whether the declaration would have any utility, whether the proceedings involved the matter of public interest, whether the circumstances called for the Court’s disapproval of the contravening conduct, and whether the declarations contained appropriate and adequate particulars of how and why the conduct in question is a contravention of the relevant legislation.”

42. Mr Pratt submitted that there was no utility in making the declarations.  In this case there was no evidence led and the Respondents admitted the contraventions that had been alleged.  I have paid particular attention to the authorities that Mr Pratt has handed to me. 

43. However, I am of the view that there is great utility in making the declarations. The declarations will be a formal record that the First Respondent did act in such a way that contravened the FW Act. In doing this, the Court and, therefore, the community denounces the conduct of the First Respondent.

44. Such a declaration will have a deterrent effect above and beyond the penalty that I have already imposed.  Therefore, I make these orders.

I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date:31 August 2016