Dorsch v HEAD Oceania Pty Ltd (Penalty)

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FEDERAL COURT OF AUSTRALIA

Dorsch v HEAD Oceania Pty Ltd (Penalty) [2024] FCA 484

File number: NSD 271 of 2022
Judgment of: RAPER J
Date of judgment: 9 May 2024
Catchwords: INDUSTRIAL LAW – pecuniary penalty – determination of the appropriate penalty under s 545(6) of the Fair Work Act 2009 (Cth) – where the respondent failed to pay the applicant the amount payable with respect to his accrued but untaken annual leave upon the employment ending in contravention of s 90(2) of the FW Act – where the respondent subsequently paid the amount owing three months later
INDUSTRIAL LAW – consideration of principles for fixing appropriate penalties – consideration of spectral nature of the concept of deliberateness in the context of a failure to take adequate steps to verify the basis for the refusal and to seek legal advice as its obligations under the FW Act – penalty imposed
Legislation: Fair Work Act 2009 (Cth) ss 44, 62, 90(2), 340, 539(2), 546(1)
Cases cited:

Australasian Meat Industry Employees' Union v Australia Meat Holdings Pty Ltd [1998] FCA 664; 82 IR 76

Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; 274 CLR 450

Australian Competition and Consumer Commission v ABB Transmission & Distribution Ltd [2001] FCA 383; ATPR 41-815

Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) [2005] FCA 265; 215 ALR 301

Australian Securities & Investments Commission v AMP Financial Planning Pty Ltd (No 2) [2020] FCA 69; 377 ALR 55

Australian Securities and Investments Commission v BT Funds Management Limited [2021] FCA 844

Australian Securities and Investments Commission v MLC Nominees Pty Ltd [2020] FCA 1306; 147 ACSR 266

Australian Securities and Investments Commission v Westpac Securities Administration Limited [2021] FCA 1008; 156 ACSR 614

Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Telstra Corporation Ltd [2007] FCA 1607; 168 IR 368

Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25

Dorsch v HEAD Oceania Pty Ltd [2024] FCA 162

Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151

Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; 260 FCR 68

Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; 287 ALR 249

Trade Practices Commission v CSR Ltd [1990] FCA 521; [1991] ATPR ¶41-076

Williams v MacMahon Mining Services Pty Ltd [2010] FCA 1321; 201 IR 123
Division: Fair Work Division
Registry: New South Wales
National Practice Area: Employment and Industrial Relations
Number of paragraphs: 39
Dates of hearing: 1 May 2024
Counsel for the Applicant: Mr A Britt
Solicitors for the Applicant: Harmers Workplace Lawyers
Counsel for the Respondent: Mr S Meehan SC
Solicitors for the Respondent: Hall & Wilcox

ORDERS

NSD 271 of 2022
BETWEEN:

MATTHIAS DORSCH

Applicant
AND:

HEAD OCEANIA PTY LTD

Respondent

ORDER MADE BY:

RAPER J

DATE…

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Details
Case
[2024] FCA 484
Decision Date

CaseChat Overview and Summary

Dorsch v HEAD Oceania Pty Ltd involved a dispute over the failure to pay accrued annual leave upon termination of employment, with the Fair Work Act 2009 (Cth) providing the statutory backdrop. The respondent, HEAD Oceania, was found to have contravened section 90(2) of the Fair Work Act by not paying Mr Dorsch the amount payable for his accrued but untaken annual leave upon the employment ending, and subsequently paid the amount owing three months later. The court was required to determine the appropriate pecuniary penalty under section 545(6) of the Fair Work Act.

The court considered the deliberateness of the contravention, the need for specific and general deterrence, and the effect of the delay on Mr Dorsch. Mr Dorsch argued for a penalty of 40–55% of the maximum, considering his loss and the need for deterrence. HEAD Oceania argued for a penalty in the lower range, citing factors such as unfamiliarity with Australian law, relatively modest loss, and contrition. The court found that while the contravention was deliberate, the penalty should reflect the mitigating factors and the need for deterrence. Consequently, the court determined that the appropriate penalty was $17,000, which is approximately 25% of the maximum penalty.

The court awarded Mr Dorsch $10,000 in compensation for the distress he suffered from the delay in making the payment. The court considered the limited evidence of distress and financial strain resulting from the delay. The penalty decision balanced the need for deterrence with the mitigating factors presented by HEAD Oceania. The court concluded that a penalty of $17,000 appropriately served the objectives of deterrence and compensation.

Orders

Orders of the court

1. Pursuant to s 546(1) of the Fair Work Act 2009 (Cth), the respondent pay to the applicant a pecuniary penalty of $17,000 within 28 days of the date of this order, by reason of its contravention of s 90(2) of the FW Act, in which the respondent failed to pay the applicant the amount that would have been payable for his accrued untaken paid annual leave when the employment ended on 9 December 2021, in the sum of $8,022.82, and did not pay that amount until 30 March 2022.

2. Any party wishing to make an application for costs must, within seven days of the date of this judgment, file any application, any evidence in support of that application and written submissions (not exceeding two pages in length) which address the reasons for why a costs order can and should be made.

3. Any party opposing such an application must, within 14 days of the date of this judgment, file and serve any evidence and written submissions (not exceeding two pages in length) which address why a costs order cannot and should not be made.

4. The parties are then to confer and provide mutually agreed times and dates upon which the short argument regarding costs can be listed for hearing with a time estimate.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

For the reasons which follow, I am of the view that the appropriate penalty to be fixed for HEAD Oceania to pay to Mr Dorsch is $17,000 (which comprises approximately 25% of the maximum).Evidence and submissions The organising principles governing the fixing of an appropriate penalty for proven contraventions of the FW Act are not in dispute. To the extent that there is divergence, it relates to the application of those principles. Mr Dorsch submits that HEAD Oceania deliberately failed to pay his annual leave upon termination and was recklessly indifferent to the question of payment given no steps were taken to verify the purported basis upon which the payment was refused. Mr Dorsch also submitted that by reason of the contravention and three-month delay in receiving his entitlement he suffered loss. As found at [453] of the liability judgment:453By reason of the evident distress Mr Dorsch suffered in the immediate aftermath of his termination and the fact of him suffering financial strain, I am able to infer that Mr Dorsch suffered some distress by reason of the delay in paying the payment. In the circumstances, it is my view that HEAD Oceania should be ordered to pay Mr Dorsch a modest amount of general damages to compensate him for the unlawful delay in paying his accrued annual leave entitlement. I have taken into account the limited probative general evidence as the distress he suffered as a result of his financial circumstances after the termination of his employment. I award the sum of $10,000 as compensation for the distress he suffered from the delay in making the payment. Mr Dorsch submits that a penalty in the nature of 40–55% of the maximum is appropriate given considerations of the loss he suffered and the need for specific and general deterrence. In relation to specific deterrence Mr Dorsch submitted there to be a need to specifically deter HEAD Oceania given that it still employs persons in Australia. As for general deterrence, the Court should fix a penalty that deters other employers from failing to pay an employee’s accrued leave on termination. HEAD Oceania submits that 40–55% of the maximum is greater than necessary to achieve the object of deterrence and a penalty in the lower range is appropriate given:(a)Mr Skrobanek was unfamiliar with Australian law;(b)Mr Dorsch’s loss and damage was relatively modest;(c)though Mr Skrobanek deliberately decided not to pay Mr Dorsch he did not deliberately contravene the law;(d)HEAD Oceania showed contrition by admitting its contravention in its defence; and(e)to the best of Mr Skrobanek’s knowledge and belief, it has not previously contravened the FW Act. By affidavit, affirmed 27 March 2024, Mr Skrobanek concedes to have made a deliberate decision not to pay Mr Dorsch’s accrued entitlements at the time of termination, but deposed that he did so because he was unfamiliar with Australian law and had concerns about the accuracy of Mr Dorsch’s leave records. Applicable Principles

Decision

Reasons for decision

On 29 February 2024, I delivered my reasons for judgment in Dorsch v HEAD Oceania Pty Ltd [2024] FCA 162 (liability judgment or LJ). In that proceeding Mr Dorsch alleged, among other things, that he had been dismissed by the respondent, HEADOceania, because he had exercised a number of “workplace rights”; that he had been unreasonably requested or required to work an unreasonable number of hours; and that he had not been paid out his accrued entitlements on termination. Mr Dorsch alleged each of these species of conduct contravened ss 340, 62 and 90(2) of the FW Act respectively. The relevant contravening conduct, as found in the liability judgment, was that HEAD Oceania failed to pay Mr Dorsch the amount that would have been payable to him had he taken his accrued but untaken annual leave, when his employment ended on 9 December 2021, but rather did not pay him the relevant amount of $8,022.82, until 30 March 2021. This conduct was in breach of s 90(2) of the FW Act. On 13 March 2024, I declared that HEAD Oceania, in failing to pay out Mr Dorsch’s accrued annual leave in full on termination, contravened s 90(2) of the FW Act. Section 90(2) forms part of the National Employment Standards which must not be contravened: s 44. Where a contravention of the NES occurs, a Court is empowered to “order a person to pay a pecuniary penalty that the Court considers appropriate if the Court is satisfied that the person has contravened a civil remedy provision”: ss 539(2) and 546(1). It was agreed that at the time of the contravening conduct the maximum applicable penalty was $66,000. The penalty to be imposed in respect of HEAD Oceania’s contravention of the FW Act remains to be determined. For the reasons which follow, I am of the view that the appropriate penalty to be fixed for HEAD Oceania to pay to Mr Dorsch is $17,000 (which comprises approximately 25% of the maximum).Evidence and submissions The organising principles governing the fixing of an appropriate penalty for proven contraventions of the FW Act are not in dispute. To the extent that there is divergence, it relates to the application of those principles. Mr Dorsch submits that HEAD Oceania deliberately failed to pay his annual leave upon termination and was recklessly indifferent to the question of payment given no steps were taken to verify the purported basis upon which the payment was refused. Mr Dorsch also submitted that by reason of the contravention and three-month delay in receiving his entitlement he suffered loss. As found at [453] of the liability judgment:453By reason of the evident distress Mr Dorsch suffered in the immediate aftermath of his termination and the fact of him suffering financial strain, I am able to infer that Mr Dorsch suffered some distress by reason of the delay in paying the payment. In the circumstances, it is my view that HEAD Oceania should be ordered to pay Mr Dorsch a modest amount of general damages to compensate him for the unlawful delay in paying his accrued annual leave entitlement. I have taken into account the limited probative general evidence as the distress he suffered as a result of his financial circumstances after the termination of his employment. I award the sum of $10,000 as compensation for the distress he suffered from the delay in making the payment.

Ratio Decidendi

Legal Principle Established

As is evident from the above, the deliberateness of a contravention is a factor indicating an increased need for specific deterrence. The concept of deliberateness in the civil penalty context is spectral: Assessing deliberateness involves consideration of the contravener’s state of mind and intention. A contravention may be deliberate where it is engaged in with the knowledge of the essential facts giving rise to the contravention. However, the concept may also include additional aggravating features such as deliberately flouting the law, being reckless, wilfully blind, “courting the risk” or otherwise being negligent. It is for the party asserting the relevant state of mind to prove it: Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; 340 ALR 25 at [131].Consideration The undisputed evidence reveals, as found, that HEAD Oceania breached s 90(2) of the FW Act by failing to pay Mr Dorsch the amount that would have been payable had Mr Dorsch taken annual leave when his employment ended. The conduct and statutory objective An entitlement to payment of annual leave upon termination falls within the suite of NES which provide minimum employee protections under Part 2-2 of the FW Act. Any breach of the NES is objectively serious. The purpose of the s 90(2) entitlement is obvious. An employee is entitled to accrue and take annual leave. In circumstances where an employee’s employment is terminated, invariably she or he will have accrued leave entitlements for which she or he is entitled to be paid in lieu of her or his capacity to take that outstanding leave. The intended mischief the provision is seeking to confront is to ensure that an employer cannot avoid providing the employee with the entitlement by ending the employment or merely because the employment comes to an end at the employee’s instigation. Whilst the purpose of the payment (to compensate for the loss of the ability to take the leave) is different from the requirement to give actual or pay in lieu of notice upon termination, often the payment in lieu of the ability of an employee to take accrued annual leave invariably provides a financial buffer in the wake of the termination of an employee’s employment and loss of ongoing wages. Here, however, it is not a case of a complete failure to pay the accrued entitlement but rather a delay in making the payment of three months. The entitlement, in the amount of $8,022.82, was payable upon 9 December 2021 but was eventually paid, approximately three months later, on 30 March 2022. This Court has already found that the delay did have a material effect on Mr Dorsch: Mr Dorsch suffered evident distress as a result of the financial strain placed upon him as a result of the termination, some of which was caused by the delay in making the annual leave payment: LJ at [453]. In addition, I note that the effect of the delay in receipt of the entitlement is evident from the fact that the unpaid amount was not insignificant, it comprised approximately 10% of the annual salary Mr Dorsch received from HEAD Oceania.