Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2)

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FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2) [2014] FCA 55

Citation: Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2) [2014] FCA 55
Parties: FAIR WORK OMBUDSMAN v EASTERN COLOUR PTY LTD (ACN 001 852 071), SB EMPLOYMENTS PTY LTD (ACN 117 006 596), NB EMPLOYMENTS PTY LTD (ACN 117 059 319) and LOUISA BARONIO
File number: QUD 376 of 2010
Judge: COLLIER J
Date of judgment: 11 February 2014
Corrigendum: 18 February 2014
Catchwords: INDUSTRIAL LAW – first respondent operated fruit picking and packing business at farm – fourth respondent director of first respondent and manager of farm – second and third respondents purported to employ fruit pickers on documentation – sole directors of second and third respondents sons of fourth respondent – Notional Agreement Preserving State Awards – employees subject to Fruit and Vegetable Growing Industry Award – State 2002 (Qld) – legal obligation to pay employees who worked more than 40 hours per week overtime – s 182 Workplace Relations Act 1996 (Cth) – employees not paid overtime – arrangement at farm whereby employees worked up to 40 hours for second respondent and voluntarily worked extra hours for third respondent – whether employees employed by first respondent or second and third respondents – principles relevant to identifying employer – employees believed they worked for first respondent – employees wore shirts bearing logo of first respondent – employees had limited knowledge of second and third respondents except as payroll companies – no contracts of employment with second or third respondents – first respondent was employer – fourth respondent aware of legal obligation to pay overtime – purpose of creating second and third respondents was to avoid overtime obligations – s 728 Workplace Relations Act 1996 (Cth) – whether second to fourth respondents aided and abetted or were knowingly concerned in contravention by first respondent – knowledge of essential facts by second to fourth respondents
Legislation: Workplace Relations Act 1996 (Cth) ss 182, 182(1), 208(1), 717, 719, 728
Workplace Relations Amendment (Work Choices) Act 2005 (Cth) Sch 1
Fruit and Vegetable Growing Industry Award - State 2002 (Qld)
Cases cited: Damevski v Giudice (2003) 133 FCR 438 cited
Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (2011) 198 FCR 174 cited
Franks v Reuters Ltd [2003] IRLR 423 cited
Yorke v Lucas (1985) 158 CLR 661 cited
Date of hearing: 22-23 October and 8 November 2012
Place: Brisbane
Division: FAIR WORK DIVISION
Category: Catchwords
Number of paragraphs: 133
Counsel for the Applicant: Mr J Phillips SC with Mr C Murdoch
Solicitor for the Applicant: Fair Work Ombudsman
Counsel for the First, Second, Third and Fourth Respondents: Mr W Friend SC with Mr A Herbert and Mr MP Costello
Solicitor for the First, Second, Third and Fourth Respondents: McKays Solicitors

FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2) [2014] FCA 55

CORRIGENDUM

  1. On the cover sheet the appearances should read, Mr W Friend SC “with…

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Details
Case
[2014] FCA 55
Decision Date

CaseChat Overview and Summary

In the matter of Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2), the Federal Court was tasked with determining the identity of the employer of certain employees at the Eastern Colour farm and whether the other respondents were liable for contraventions of the Workplace Relations Act 1996 (Cth). The Fair Work Ombudsman (FWO) alleged that Eastern Colour Pty Ltd, along with SB Employments Pty Ltd, NB Employments Pty Ltd, and Louisa Baronio, had contravened provisions of the Act and certain clauses of the Notional Agreement Preserving State Awards. Specifically, the FWO claimed that employees who worked more than 40 hours per week were not paid the requisite overtime. The crux of the dispute lay in whether the employees were genuinely employed by SB and NB, or if Eastern Colour Pty Ltd was their true employer, thereby obligating it to pay the overtime.

The court had to address whether Eastern Colour Pty Ltd was the employer of the workers in question and if SB, NB, and Louisa Baronio were complicit in the contraventions. The court meticulously examined the evidence, including affidavits, timesheets, and the practices at the farm, to determine the employer-employee relationship. The employees had been led to believe they worked for Eastern Colour Pty Ltd, wore shirts with its logo, and had limited knowledge of SB and NB beyond their roles as payroll companies. There were no written contracts of employment with SB or NB, and the employees’ timesheets were managed by Adela Caruso, who indicated that the first 40 hours worked were for SB, with any additional hours counted towards NB. The court found that the arrangement was designed to avoid the legal obligation to pay overtime, and thus Eastern Colour Pty Ltd was the true employer. Additionally, the second to fourth respondents were found to have aided and abetted or been knowingly concerned in the contraventions due to their knowledge of the essential facts.

The court concluded that Eastern Colour Pty Ltd was the employer of the relevant employees, and the second to fourth respondents were accessorially liable for the contraventions of the Act. The decision mandated the preparation of minutes of orders to reflect these findings, and the court scheduled a future date for submissions on penalties.

Orders

Orders of the court

1. At a date to be fixed, Counsel bring in signed minutes of orders to give effect to the reasons in this judgment.

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

Background

Background to the litigation

In my view the FWO has substantiated its case against the respondents. I am satisfied that the first respondent was the true employer of the employees identified in the FWO’s claims, and that the second, third and fourth respondents were accessorially liable within the meaning of s 728 of the Act. I have reached this view in light of the evidence before the Court and for reasons to which I will shortly turn.BACKGROUND Determination of this case, and the key question of the identity of the employer of relevant employees, is very much dependent on the facts. The parties have made extensive submissions based on those facts. It is appropriate to recount the facts in some detail before examining the case before the Court.The parties Antonio Baronio and the fourth respondent, Louisa Baronio, have been married since 1972. They have four adult children: Stephen Baronio, Nathan Baronio, Karen Baronio and Angela Baronio. Mr and Mrs Baronio are the sole directors and shareholders of Eastern Colour. Eastern Colour is the trustee of the Eastern Colour Family Trust, which is effectively a family trust established for the benefit of the Baronio family. The beneficiaries of the trust are Mr and Mrs Baronio’s children, their children’s spouses, and their grandchildren. In its capacity as trustee for the Eastern Colour Family Trust, Eastern Colour conducts the business of the Eastern Colour farm (“the farm”) at 244 Aerodrome Road, Applethorpe, Queensland. Since their marriage, Mr and Mrs Baronio have continued to operate the farm. At material times the farm grew and sold capsicums, stone fruit and apples. Stephen Baronio is the sole shareholder and director of the second respondent, SB Employments Pty Ltd (“SB”). Nathan Baronio is the sole shareholder and director of the third respondent, NB Employments Pty Ltd (“NB”). The FWO discontinued the proceedings against the fifth respondent, Mr Catanzaro, on 4 October 2012. In 2008 the following former casual workers of the farm made complaints to the FWO (formerly the Workplace Ombudsman) in relation to overtime and penalty rates on public holidays:·Gordon Falconer;·Lachlan Falconer (Gordon Falconer’s son);·Sandra Di Betta; and·Joanne Donges.(For convenience throughout this judgment I will refer to these employees collectively as “the relevant employees”.) The hours worked by each employee are not in dispute. The respondents acknowledge that the Falconers and Ms Di Betta worked more than 40 hours at the farm during some weeks and that all four employees worked on at least one public holiday. The issue is whether the employees were employed by the first respondent. If so, they were entitled to overtime and penalty rates, and the first respondent has contravened the Act and cll 6.4.2, 7.6.1, 7.6.2 and 7.6.3 of the NAPSA.Material relied upon by the parties The FWO relied on the following material:·Affidavit of Melissa Maree King sworn 2 May 2012 (exhibit 1(A)).·Affidavit of Annaliese Jackson affirmed 31 August 2012 (exhibit 2(A)).·Affidavit of Jennifer Anne Crook sworn 2 May 2012 (exhibit 3(A)).·Supplementary affidavit of Jennifer Anne Crook sworn 31 August 2012 (exhibit 4(A)).·Affidavit of Gordon Peter Falconer sworn 2 May 2012 (exhibit 5(A)).·Supplementary affidavit of Gordon Peter Falconer sworn 31 August 2012 (exhibit 6(A)).·Two shirts (exhibit 7(A)).·Affidavit of Lachlan Eric Falconer affirmed 18 May 2012 (exhibit 8(A)).·Supplementary affidavit of Lachlan Eric Falconer affirmed 29 August 2012 (exhibit 9(A)).·Affidavit of Sandra Di Betta affirmed 3 May 2012 (exhibit 10(A)).·Supplementary affidavit of Sandra Di Betta affirmed 31 August 2012 (exhibit 11(A)).·A roll of stickers (exhibit 13(A)).·Affidavit of Joanne Kathleen Donges sworn 4 May 2012 (exhibit 14(A)).·Supplementary affidavit of Joanne Kathleen Donges affirmed 30 August 2012 (exhibit 15(A)).·Two colour photographs displaying “Eastern Colour Pty Ltd” (exhibit 18(A)).·Four aerial photographs of 244 Aerodrome Rd, Applethorpe (exhibit 19(A)).·Electronic lodgement declaration forms being tax declarations of Louisa Baronio (exhibit 20(A)).·Tax returns and associated financial statements for Eastern Colour and the Eastern Colour Family Trust for the years ending 30 June 2006 to 30 June 2011 (exhibit 26(A)).

Evidence

Evidence Before The Court

As at 10 July 2012, all employees at the farm were employed by Stanap Services Pty Ltd pursuant to an enterprise agreement approved by Fair Work Australia on 16 May 2010. All employees had taken up the option in the enterprise agreement to work voluntary additional hours at their ordinary rates of pay.Evidence of Adela Caruso Adela Caruso immigrated to Australia from El Salvador on 13 July 1990. Both of her parents have worked at the farm. After 1999 Ms Caruso accepted work in the farm office. In her affidavit sworn 10 July 2012 Ms Caruso deposed that her responsibilities included the following:·providing commencement forms and explaining employment arrangements to new employees;·collecting the commencement forms and tax file number declaration forms from new employees;·preparing each employee’s timesheet for each company based on their weekly run sheets;·ensuring that each employee checked and signed their timesheets, and understood the pay arrangements. Ms Caruso deposed that if there was insufficient work in the office, she would perform packing duties in the packing shed. Ms Caruso ceased performing any payroll or roster duties in June 2007. She has not worked at the farm since June 2008.Practice in relation to informing new employees of their employment arrangements In early 2006 Louisa Baronio convened a meeting of all of the farm’s workers in the packing shed. At that meeting, Mrs Baronio advised the workers (in summary):·the two existing labour hire companies were being wound up;·two new companies, SB and NB, would be incorporated and responsible for employing all of the workers on the farm;·the workers were invited to accept employment with SB and NB on the same arrangement as with the two previous companies;·the workers would work their first 40 hours of work each week for SB. Any subsequent work would be for NB;·if the workers did not wish to work more than 40 hours per week, they could accept employment solely with SB. Ms Caruso deposed that subsequently her general practice was to explain to new employees that they would be employed by both SB and NB. If a new employee wished to work more than 40 hours per week, they would need to accept employment with both companies. They would work their first 40 hours for SB and any additional hours for NB. Ms Caruso made it clear that if an employee accepted employment with both SB and NB, they would not be paid overtime. Ms Caruso would provide an employee who accepted these conditions with a set of white commencement forms for SB, and a set of green commencement forms for employment with NB. If instead a supervisor had given the forms to a new employee, Ms Caruso would ensure that she took the time to explain the employment arrangements to them when the employee returned the forms to her.Timesheets Each work crew at the farm had a run sheet listing all of the employees in that crew. At the end of each day, each worker recorded the total hours they had worked for that day. As a general practice Ms Caruso took the run sheets and created weekly timesheets of work performed by each worker for SB and NB. Ms Caruso would record up to 40 hours of work by a worker for SB and any remainder for NB.

Decision

Reasons for decision

It is clear from the material before the Court that these three respondents aided and abetted the contravention, and/or were knowingly concerned in the contravention, in that:·The second and third respondents were party to the arrangements whereby the relevant employees were allegedly employed by one of them for up to 40 hours per week and then by another respondent for additional hours.·Each of the second and third respondents made payments to the relevant employees which were in breach of the provisions of the Act.·The second and third respondents had knowledge of the essential facts constituting the contravention of the Act by the first respondent.·The fourth respondent, who had detailed knowledge of the arrangements, had knowledge of the essential facts constituting the contravention of the Act by the first respondent.CONCLUSION I will ask the parties to prepare a minute of order to reflect these findings. Further, I note that the applicant seeks the imposition of penalties for contravention of the Act. In the circumstances I will make timetabling orders for the matter to return to Court for the parties to make appropriate submissions on penalty.

Ratio Decidendi

Legal Principle Established

Counsel for the FWO cross-examined Louisa Baronio, Antonio Giovanni Baronio, Adela Caruso and Vincenzo Cateno Catanzaro.GENERAL OPERATIONS AT THE FARMEvidence of Louisa BaronioThe farming business The farm sells most of its produce to major Australian supermarket chains including Coles and Woolworths. These chains have high standards in respect of the shape, size, colour, imperfections and sugar content of the fruit that they will accept. Mrs Baronio deposed that the Eastern Colour business is a “price taker” because it has no capacity to negotiate the supermarket chains as there are no substitute purchasers. As a result the farm runs on small margins. Her evidence was that the ongoing viability of the business depended on the farm producing sufficient volumes and quality of produce to ensure the supermarket chains will purchase the goods. The vast majority of the work available at the farm is seasonal. This high-volume work involves picking and packing particular produce during the few months each year when it is ripe. The farm requires few permanent staff, but during peak periods a large volume of work is required to be performed at the farm. During these peak periods, the workforce comprises backpackers, itinerant workers and unskilled local residents. The backpackers and itinerant workers generally seek as much work as possible to finance their travel or holidays. The local workers tend to work only in the fruit picking and packing industry, so they aim to work long hours during the peak season to support themselves through the rest of the year when there are few local employment opportunities. At paragraph 16 of her affidavit sworn 10 July 2012, Mrs Baronio deposed:The workers engaged at the farm would regularly say that they wanted to work more than 40 hours per week. The workers were always extremely disappointed when I told them that we could not offer them more than 40 hours per week. Almost all of the workers I spoke [sic] stated that they were prepared to forego their entitlement to over time if we could provide them with further hours. I would always explain to the workers that the we [sic] could not offer them more than 40 hours per week. Mrs Baronio deposed that given its small profit margin, the farm would not be commercially viable if it had to pay overtime during the picking season because the wages costs would exceed the prices that the supermarkets paid. Mrs Baronio was not aware of any other farms which paid overtime rates to their picking and packing staff. Generally Mrs Baronio was responsible for the farming operations in the packing shed and Mr Baronio was responsible for farming operations in the field. In 2006 the farm engaged Mr Corrado Rizzato as shed manager. Mrs Baronio shared the role with him for 12 months so he could learn how to allocate work to employees and how to determine how many workers would be required each day.Historical practices in engaging workers at the farm Mrs Baronio deposed that historically the farm engaged workers as casuals for a maximum of 40 hours per week. As a general rule once that group of workers had exceeded 40 hours, the farm employed another group of workers, who would also only be permitted to work up to 40 hours each week at the farm. Those additional workers were recruited from labour hire companies as well as being workers who had already worked 40 hours at other local farms.