Fair Work Ombudsman v Lindsay F. Nelson Manufacturing Pty Limited & Anor
[2019] FCCA 2151
•22 August 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v LINDSAY F. NELSON MANUFACTURING PTY LIMITED & ANOR | [2019] FCCA 2151 |
| Catchwords: INDUSTRIAL LAW – Alleged underpayment of annual leave and award entitlements – whether employer entitled to set-off over-award payments – whether employer failed to comply with Notices to Produce and/or had reasonable excuse for non-compliance. |
| Legislation: Fair Work Act 2009 (Cth) |
| Cases cited: James Turner Roofing Pty Ltd v Peters [2003] WASCA 28 Linkhill Pty Ltd v Director, Office of the Fair Work Building Inspectorate [2015] FCAFC 99 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | LINDSAY F. NELSON MANUFACTURING PTY LIMITED |
| Second Respondent: | ERIC FREDERICK NELSON |
| File Number: | MLG 1088 of 2017 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 25 and 26 February 2019 |
| Date of Last Submission: | 26 March 2019 |
| Delivered at: | Dandenong |
| Delivered on: | 22 August 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Mckenna |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondents: | Ms Fitzgerald |
| Solicitors for the Respondents: | Robertson Hyett Solicitors |
ORDERS
There be liberty to apply to the parties.
The matter be adjourned to this Court for mention before Judge Burchardt on 1 October 2019 at 9.30am in Melbourne.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1088 of 2017
| FAIR WORK OMBUDSMAN |
Applicant
And
| LINDSAY F. NELSON MANUFACTURING PTY LIMITED |
First Respondent
| ERIC FREDERICK NELSON |
Second Respondent
REASONS FOR JUDGMENT
The Course of the Proceedings
It is not ordinary helpful to set out the procedural history of a matter. In this case, however, the court’s approach to the matters in issue before it is simply not going to be comprehensible without a brief background.
The originating application in this matter was filed on 25 May 2017. By 29 November 2018 the parties had advanced to a point where there was an amended statement of claim and not insignificant amounts of affidavit material had been filed. The matter was heard before Judge Wilson on 25 and 26 February 2019 and further written submissions were exchanged until 26 March 2019.
Thereafter, and before judgment could be delivered, Judge Wilson resigned from the Federal Circuit Court. The matter was then allocated to me for further consideration.
On 30 April 2019, Judge McNab made orders relevantly providing that:
The parties consent to the Court as constituted by Judge McNab determining the question of liability without rehearing the case, relying on the written and oral evidence and submissions of the parties as tendered before Judge Wilson instruction subject to the proviso that the Court may recall any witnesses and seek further submissions prior to judgment.
There were ancillary orders dealing with the taking of further evidence should it be required.
Judge McNab subsequently sought the consent of the parties for him to transfer the matter to me, and both parties have granted their consent to this course.
It was, I think, implicit in the parties’ positions that the court would endeavour to spare the parties further litigation if in any way possible, notwithstanding that there were certain disagreements between the parties in the evidence which would otherwise have called for resolution. Unless I have misunderstood the matter, the parties would wish the court to make decisions on the facts where the materials make it possible to do so.
That is what this decision seeks to do.
Introductory
This proceeding involves an alleged failure by the respondents to comply with three Notices to Produce. Those Notices to Produce arose in the context of requests for assistance from two former employees of the first respondent; a Mr Wells and a Mr Hector. As things now stand the applicant says that Mr Wells was underpaid $2365.94 of annual leave and Mr Hector was underpaid $3505.13 in respect of a number of award entitlements.
It is apparent from the very substantial scope of the materials provided to the Court, (closing submissions run to a combined total of some 40 pages in themselves) that this proceeding has developed elephantiasis. The very small amounts of money involved do not justify the enormous amounts of intellectual energy expended by counsel in their submissions, both during the proceeding and in closing, and the multiplicity of issues and sub-issues raised are out of all proportion to the matters in issue. The costs that the parties must have expended in running this proceeding are so grossly out of proportion to the conduct complained of that both sides deserve criticism, and I do not propose in these reasons for judgment to chase every rabbit down every burrow as they have done.
The Claims in Respect of Mr Wells
It is true to say, as the parties’ written submissions do, that perhaps the first issue in this matter is the question of Mr Wells’ initial employment. The applicant asserts that Mr Wells commenced employment on 23 July 2012 and was thereafter at all times entitled to accrue annual leave. The respondents say that Mr Wells was a casual employee until 20 September 2012 and that his annual leave, therefore, did not accrue during that period.
There are factual disputes as to what was said or not said at the commencement of employment that it is not possible for me to deal with as I have not seen the witnesses give their evidence. The transcript suggests that each side stuck to the version of events for which they contended and were not greatly moved, if at all, in cross-examination. This does not, however, mean that the court is unable to determine the matter properly.
Exhibit JKO14 to the affidavit of John Kevin O’Leary, filed 6 April 2018, includes Mr Wells’ payslips. During this period of contested allegedly casual employment he was paid, at least during the pay period ending 26 July 2012, a flat rate of $27 per hour. He was also, from time to time, paid overtime (see period 26 July 2012 to 8 August 2012). After no later than 6 September 2012 he was paid tool allowance in addition. True it is that from 21 September 2012 the pay periods purport to show allocated entitlements in respect of holiday leave and sick leave, although no additional funds were actually paid towards these “entitlements”. What did not change, however, was that the annual salary remained fixed.
In my opinion, the notion of casual employment is extremely well-embedded in Australian Industrial Law and practice. It involves a payment loading, often 20 per cent, where the employee is given an additional sum on top of their wage to compensate for the lack of such benefits as sick leave and annual leave. It is plain from the documents filed that no such loading was paid in this instance. Furthermore, and after the first pay period which was plainly introductory, the hours worked, while not uniform, were very substantial and reflective on their face of a 38-hour-week plus overtime. This, in my opinion, is not properly characterised as casual employment.
Accordingly, in my view, the evidence is sufficiently clear to determine that the employment of Mr Wells was not casual in the period from July to September 2012.
Are the Respondents Entitled to Set Off Sums Allegedly Overpaid to Mr Wells
For these purposes I am prepared to accept that the first respondent paid Mr Wells in excess of award entitlements in respect of basic wages. The respondent submits that since nothing was said one way or the other as to what the rage rate was designed to satisfy the matter comes squarely within the ambit of the decision of the Western Australia Industrial Appeal Court in James Turner Roofing Pty Ltd v Peters [2003] WASCA 28. The judgment of Presiding Judge Anderson, at [45], relevantly stated:
The payment of an amount as wages for hours worked in a period can be relied on by the employer in satisfaction of an award obligation to pay wages for that period whether in relation to wages for ordinary time, overtime, weekend penalty rates, holidays worked or any other like monetary entitlement under the award. This is so, whether the payment of the wages is made in contemplation of the obligations arising under the award or without regard for the award. However, if a payment is made expressly or impliedly to cover a particular obligation (whether for ordinary time, overtime, weekend penalty rates, fares, clothing or any other entitlement whether arising under the award or pursuant to the contract of employment) the payment cannot be claimed as a set off against monies payable to cover some other incident of employment. A payment made on account of say ordinary time worked cannot be used in discharge of an obligation arising on some other account such as a claim for overtime. Whether or not the payment was for a particular incident of employment will be a question of fact in every case.
Those remarks were the subject of consideration by a Full Court of the Federal Court in Linkhill Pty Ltd v Director, Office of the Fair Work Building Inspectorate [2015] FCAFC 99. At [96] the Full Court said:
However, James Turner Roofing did not hold that all payments could be set-off in these circumstances. As explained earlier in these reasons for judgment, in James Turner Roofing the rate was expressed as “all in”. The industrial magistrate held that no set-off could be applied. This was because the parties did not have the award in mind at all when setting the rate. The purpose of the arrangement was to act outside the award. The Court rejected that reasoning, and said that merely because an “all in” rate was agreed to exclude the application of the award did not mean that some of the elements comprised in the rate were not for the same purpose as entitlements under the award.
The Court continued at [98]:
As the correctness of James Turner Roofing was in contest, it is necessary that we make some further observations. The substance of the conclusion there reached is highlighted at [66] above. That conclusion was based upon principle 1 set out at [21] of the judgment of Anderson J as follows:
If no more appears than that (a) work was done; (b) the work was covered by an award; (c) a wage was paid for that work; then the whole of the amount paid can be credited against the award entitlement for the work whether it arises as ordinary time, overtime, weekend penalty rates or any other monetary entitlement under the award.
If principle 1 (and it would follow, principle 4 also set out at [21]) was intended by the Court to mean that any monetary payment for work done could be set off against monetary entitlements provided in an award, then those principles so stated would be inconsistent with the approach taken in Poletti v Ecob and ANZ v FSU. In considering whether the purpose of a contractual payment correlated with the purpose of an award entitlement, the Full Court in ANZ v FSU at [52] emphasised that “there must be a close correlation between the nature of the contractual obligation and the nature of the award obligation. But it is not necessary that the same label be used”. That statement indicates that what is required is a close correlation between the award obligation and the contractual obligation in respect of which the payment was made. It is not the monetary nature of the payment made under the contract that must correlate with the award. It is the subject matter of the contractual obligations for which the payment was made that must be examined and be found to closely correlate with the obligations in the award said to be discharged by the payment.
Despite making these remarks the court did observe at [100] that the proper interpretation of James Turner Roofing, and the question of the application of the principles established in Poletti v Ecob and ANZ v FSU might be left for another day.
Bearing these authorities in mind in my view there are two things to be said. First, payment of wages for work done, whether by way of ordinary hours or overtime, is a radically different matter to annual leave. Annual leave is not related with work done as such but rather with length of employment. It is a discrete entitlement underpinned by statute. An examination of JKO14 shows that at least from 27 June 2013 onwards the pay of $27 an hour and overtime of $31.40 and, indeed, tool allowance of $24 were paid as discrete items and the holiday leave accrued as an entitlement separately. The parties may not have discussed the matter in terms but the respondent’s treatment of this entitlement shows that it was plainly regarded as a separate matter. I do not think, most particularly in the light of the observations of the Full Court in Linkhill, that is open to the respondents to set off any award over payments against Mr Wells’ entitlement to annual leave.
It follows that Mr Wells is entitled to the $2365.94 of annual leave that he claims.
The Underpayments to Mr Hector in respect of 13, 16 and 23 May 2016.
I would observe in parenthesis that disputes at this level of particularity are unworthy of all concerned.
Despite the controversy about this matter, in my view, the evidence is clear. At paragraph 48 of his affidavit Mr Nelson deposed that he denied that Mr Hector worked on these days on the basis that the first respondent had no record of it. Relevantly, he said, “Annexed hereto and marked EFN4 are copies of the time records that the first respondent has for Hector.”
When one looks at EFN4 (CB 536-537) it shows entries for 12, 13, 16 and 23 May 2016, all of which show that Mr Hector worked on those days. Plainly that issue must be resolved in Mr Hector’s favour.
Set off Claim
The respondents say that they can set off $2819.79 overpaid to Mr Hector pertaining to hours spent by him as a passenger during his employment with Nelson Manufacturing.
It appears to be common cause that there was no award obligation to pay Mr Hector for this return work and it is also clear that Mr Hector was in fact paid for it.
The evidence makes it clear that in the main Mr Hector drove substantial distances in his pilot driving work and this would have come to an end at a considerable distance in many instances from the respondent’s own base. As a matter of ordinary common sense, it could not have been within the reasonable contemplation of the parties that each specific engagement came to an end at the point farthest from the home base with Mr Hector, who as I understand it was driving a vehicle actually owned by the first respondent, to make his own way back in his own time and at his own expense. Small wonder that the respondent did indeed pay him. Equally, it is small wonder that, as a matter of common sense, it was common practice to put the vehicle that Mr Hector had driven out to the point of final arrival back on the tray on the silo-carrying vehicle, thus saving the first respondent’s vehicle from wear and tear and petrol costs.
In these circumstances, the payments made to Mr Hector, which were plainly made pursuant to contract for what both parties clearly regarded as work actually performed, cannot possibly be set off against award entitlements. I refer to and repeat by reference my discussion above of the effect of James Turner Roofing in this regard. In my view, the claims made by Mr Hector in respect of his minimum driving rate and minimum casual loading for driving work must therefore succeed.
The loading and unloading work is not able to be proven or not proven because, as both sides’ written submissions correctly assert, it turns on evidentiary disputes that I am not in a position to determine. In my view, the likely amounts of money involved are so trifling that the parties would do well to compromise this aspect of the claim. To do so would save everybody a lot of time and money.
The Failure to Comply With the Notices to Produce – Background
The first respondent is not an enormous corporation. It is a small country-based family business. The evidence establishes that it has two administrative staff who work four days per week. David Whitehead, who goes as close to being the office manager as makes no difference, and is one of the employees concerned, took “a lot of time off work during 2016” and has “had serious health issues since early March 2017, when I was diagnosed with bowel cancer.”
He was away from work from March 2017 until October 2017.
The second respondent, Mr Nelson, apparently is incapable of using a computer. The business runs off an MYOB system.
The First Notice to Produce
The first Notice to Produce was given to Mr Nelson in Mr Whitehead’s presence by Mr O’Leary on 19 May 2016. It required production (see JKO3) of up to six classes of documents in respect of the employment of Mr Wells and Mr Hector by 3 June 2016. This was followed by an email on 23 May 2016 (JKO5) which reminded the respondents of the 3 June 2016 date. It was followed again by an email on 6 June 2016 in which, inter alia, Mr O’Leary noted that the documents had not been produced within the reasonable time and “please advise us, within seven days if you have a reasonable excuse for not complying with the notice.”
On 9 June 2016 Mr Whitehead responded (JKO7). He asserted relevantly:
John, on the matter of Gary Hector I started to go through by trip by trip as you requested. However, on checking the truck driver’s logbook and hours paid to him, I have found a major discrepancy in that Gary Hector’s hours always exceed the number of hours the truck driver has for each trip. This is not possible as they work together. I am compiling a spreadsheet trip by trip trying to work out where they have been, the and the hours together with truck driver’s logbook sheets. As you can imagine there are many gaps in the information but I am trying to correlate it all ASAP.
On 17 July 2006 Mr O’Leary telephoned Mr Nelson and raised the non-compliance both in respect of the Notice and the Infringement Notice already issued. The relevant file note is JKO9 which asserts, “I raised with Eric that the company has not produced the records requested in our NTP, nor paid the IN issued by our office.
Eric advised me that David Whitehead is working on providing the records requested.
Eric made the comment he has no money to pay the IN. Eric advised that he will ensure a response is provided to our office on Monday 20 June 2016.
On 28 June 2016 Mr Whitehead sent Mr O’Leary an email (JKO10) which said:
John, please find attached destination, hours and kms for Gary Hector’s trips as we discussed. Note that the kms are only one way as he returns as a passenger in the truck with the utility on the back. Also Gary was not a qualified pilot, so, he could only be used on small loads.
Accompanying that email was a detailed one-page schedule showing the kilometres allegedly travelled by Mr Hector, doubtless compiled from other records. On 19 July Mr O’Leary sent another email to Mr Nelson and Mr Whitehead again explaining the failure to produce records was a serious matter. On 20 July 2016 Mr Whitehead responded (JKO12) with Jeff Wells’ holiday calculations.
Following a visit by FWI O’Leary and FWI Kelly to the respondent’s premises in Rochester on 21 July, the subject of disputed assertions as to what was said between the parties, Ms Francis, the other administrative person employed by the first respondent forwarded payslips in relation to Mr Wells and Mr Hector to the applicant on 21 July 2016 (exhibit JKO14).
On 4 August 2016 FWI O’Leary responded (JKO15) noting relevantly “you have failed to fully comply with the Notice which includes the production of both employees’ original time sheet records”. This email was not the subject of response and on 24 August 2015 Mr O’Leary wrote to the respondents again (JKO16) again seeking the original timesheet records, by 31 August 2016. On 7 October 2016 Mr O'Leary emailed the second respondent, Mr Nelson, copying it to Mr Whitehead (JKO17) and on 25 October 2016 the respondents replied (JKO18). Mr Nelson’s email disputed certain of the findings of contravention dated 7 October 2016. It is clear that from the terms of the email that at the least Mr Hector must have provided timesheets and it is equally clear that the timesheets were not forwarded.
A further response from Mr O'Leary on 28 October 2016 (JKO19) does not in terms deal with the failure to comply with the Notice but deals with the response in relation to the contravention findings. Further correspondence did not produce any further documentation from the the respondents.
It should be noted that the matter in controversy on the pleadings is as follows: paragraph 32 of the amended statement of claim asserts that
As at the date of their Statement of Claim the First Respondent has not:(a)with the exception of the payslips provided by way of the 21 July 2016 email, produced any documents or records in response to the May 2016 NTP; or
(b)provided a reasonable excuse for failing to comply.
The defence asserts relevantly, “The First and Second Respondents deny the content of paragraph 32 of the claim and the subsequent paragraphs subjoined thereto. The First and Second Respondents say that further information was provided by the Third Respondent on behalf of the First Respondent to the Applicant undercover of emails dated 9 June 2016, 28 June 2016 and 20 July 2016”.
I have traversed the contents of those emails above. Given that the emails, in part at least, refer to time slips lodged by Mr Hector, and given that those time slips were plainly on any view of the matter never forwarded to the applicant, in my view the infraction of the Notice to Produce is made out. The failure to respond to the Notice to Produce within 14 days was, of itself in my view, not unreasonable given the size and scope of the first respondent’s operations. However, the failure to the provide the timesheets is not in anyway justified. To this extent, therefore, the contravention is made out.
It should be noted that the respondent’s written submissions have much to say about all three Notices to Produce, much of the tenor of which is revealed by paragraphs 19-20 of the written submissions filed 27 September 2018 as follows:
The Respondents submit that the underlying aspects of the above statement are overly broad and ambiguous, such that it is not reasonably possibly to ascertain with any precision what the power is being used for, and whether it is being used for past or current contraventions (noting that the 30 November 2016 notice sought information from the date of 19 May 2016 notice onwards in relation to employees who are not employed as at that date and that the 30 January 2017 notice sought information in relation to a third employee all together). Amongst the broad breaches alleged there are perhaps hundreds of potential non-compliances being referred to (in light of the number of NES and award provisions that could potentially apply).
The Respondents submit that all three notices are void and of no effect, which ought reasonably excuse non-compliance with them.
Section 712 of the Act is relevantly in these terms:
(1) An inspector may require a person, by notice, to produce a record or document to the inspector.
(2) The notice must:
(a) be in writing; and
(b) be served on the person; and
(c) require the person to produce the record or document at a specified place within a specified period of at least 14 days.
(3) A person who is served with a notice to produce must not fail to comply with the notice.
(4) Subsection (3) does not apply if the person has a reasonable excuse.
It is therefore apparent in my view that the requirements for such a Notice are relatively straightforward and simple. The highly technical approach that the respondents seek to bring to their validity or otherwise of the Notices is, in my view, misconceived. All three Notices complied with the terms of s 712.
The November 2016 NTP
By paragraph 34 of the amended statement of claim it is pleaded that on 30 November 2016 FWI O’Leary required the first respondent to provide specified documents relating to the employment of Mr Wells and Mr Hector pursuant to s 712 of the Act. It is conceded that this was served on the first respondent on 30 November 2016. It is conceded that no such documents were produced and have not been at any time.
The defence to this matter is that set out in s 30 of the defence. Relevantly, it asserts, “The First and Second Respondents further say that they considered that the relevant records had already been provided to the Applicant and that, on the basis of discussions between the Second and Third Respondents and FWI O’Leary regarding the Absorption Clause, there could be no reasonable belief on the part of FWI O’Leary that a safety net contractual entitlement had been contravened.”
This defence, as I have already noted above, turns on the disputed facts between the parties which the court cannot resolve. Nonetheless, as with the May NTP, it is apparent that the respondents had in their possession timesheets relating to Mr Hector, if nothing else, which were not produced.
I note that by 14 November 2016 (JKO22) the respondents were asserting that both Mr Wells and Mr Hector had been paid out in full, “as per our original calculations”. That correspondence was met by an email from Mr O'Leary (JKO23) on 14 November 2016 which relevantly asserts:
Despite requests to do so you have failed to provide our office with any evidence to support that you have taken action to rectify the contraventions detailed in Appendix A of our Contravention Letter dated 7 October 2016.
JKO24 attaches the Notice to Produce records or documents. These are at CB 278 and following. The documents requested, inter alia, payslips and any record or documents that related or record the payment of monetary amounts to Mr Wells or Mr Hector after 19 May 2016. In my opinion it should have been apparent to the respondents that they were required to produce documents. They plainly did not do so. This, however, puts to one side the extant evidentiary dispute, to which I will return below.
The January 2017 NTP
The respondents admit that the January NTP was served on 2 February 2017. The defence, however, is that the January 2017 NTP was invalid (as is the case in relation to the November 2016 NTP). The defence is that it was invalid because it fails to show on its face that the particular production required was within the authority of the inspector to require and that, in the alternative, there was as reasonable excuse for non-compliance and that the respondents considered that the relevant records had been provided, they referred to the discussions already referred to between Mr O'Leary and the second and third respondents and that the time for production was unduly onerous.
To take the last matter first, there is no meaningful evidence to suggest that the respondents had any intention of complying with the NTP and therefore the time limit provided for production did not operate on the matter at all.
So far as the discussions between the parties are concerned the court is unable to make a finding. So far as the technical point about the validity of the NTP is concerned, JKO26 plainly was written by Mr O'Leary in his capacity as a Fair Work Inspector. The Notice says so in terms. It requires the production of documents in relation to an employee; Bruce White, within a period from 1 January 2016 to 31 May 2016. The Notice, in my view, complies with the broadly expressed terms of s 712. It was not invalid. The point taken by way of defence is, in my view, without merit.
Conclusion on the Notices to Produce
It will be noted that I have observed in relation to both the second and third Notices to Produce that the court is faced with an evidentiary dispute that is not susceptible of being resolved. It would be a travesty of justice to require further hearing with associated time and expense to resolve the evidentiary conflict between the parties. The clear picture that emerges to me from the materials taken overall is that the respondents simply refused to cooperate with the inspectorate but that impression is qualified by the fact that I have not seen the primary players in the witness box and am not in a position to make any definitive conclusions about it. In the circumstances, I am minded to dismiss the alleged contraventions based on the second and third Notices to Produce. This sorry saga has gone on quite long enough and it is time it was brought to a conclusion.
Conclusion
It will be apparent that I have upheld the contraventions in relation to Mr Wells and Mr Hector. I have upheld the contravention application insofar as it deals with the first Notice to Produce. I will give the parties an opportunity to study these reasons for judgment and hear them further as to how the matter should proceed.
I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Date: 22 August 2019
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