Fair Work Ombudsman v RFJCO Pty Ltd - [2012] FMCA 836

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v RFJCO PTY LTD & ORS

[2012] FMCA 836

INDUSTRIAL LAW – Penalties – deterrence – whether breaches of Fair Work Act were deliberate – application of factors going to penalty.

Fair Work Act 2009 (Cth), ss.45, 340(1)

Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Kelly v Fitzpatrick (2007) 166 IR 14
Sharpe v Dogma Enterprises Pty Limited [2007] FCA 1550
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543
David Cousins v Merringtons Pty Ltd (No 2) [2008] VSC 340
Fair Work Ombudsman v Cleaners New South Wales Pty Ltd [2009] FMCA 683
Trade Practices Commission v Cue Design Pty Ltd and Cue and Co Pty Ltd

Applicant:

FAIR WORK OMBUDSMAN

First Respondent:

RFJCO PTY LTD

ACN 125 108 803

Second Respondent:

ROY LUSTRI

Third Respondent:

JOHN LUSTRI

File Number:

SYG 713 of 2012

Judgment of:

Raphael FM

Hearing date:

29 August 2012

Date of Last Submission:

29 August 2012

Delivered at:

Sydney

Delivered on:

29 August 2012

REPRESENTATION

For the Applicant:

Fair Work Ombudsman

Solicitor for the Respondents:

David Lander & Associates

THE COURT ORDERS THAT:

Pursuant to section 545 of the FW Act, the first respondent pay Mr Graham the amount of $2099.88 as compensation for economic loss suffered by Mr Graham as a result of the first respondent’s contravention of subsection 340(1) of the FW Act.
Pursuant to subsection 546(1) of the FW Act, a penalty of $14,300.00 be imposed on the first respondent for breaching:
(a)subsection 340(1) of the FW Act;
(b)and section 45 of the FW Act.
Pursuant to subsection 546(1) of the FW Act, a penalty of $2,200.00 be imposed on the second respondent for his involvement in the first respondent’s contravention of subsection 340(1) of the FW Act.
Pursuant to subsection 546(1) of the FW Act, a penalty of $2,200.00 be imposed on the third respondent for his involvement in the first respondent’s contravention of subsection 340(1) of the FW Act.
Pursuant to subsection 546(3) of the FW Act, all pecuniary penalties imposed be paid to the Commonwealth of Australia.
That the payment required to be paid to Mr Graham by the first respondent which is referred to in Order 1 above be paid within a period of 28 days.
That the penalty required to be paid by the first respondent which is referred to in Order 2 above be paid within a period of 56 days.
That the penalty required to be paid by the second respondent which is referred to in Order 3 above be paid within a period of 56 days.
That the penalty required to be paid by the third respondent which is referred to in Order 4 above be paid within a period of 56 days.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 713 of 2012

FAIR WORK OMBUDSMAN

Applicant

And

RFJCO PTY LTD

ACN 125 108 803

First Respondent

ROY LUSTRI

Second Respondent

JOHN LUSTRI

Third Respondent

REASONS FOR JUDGMENT

The Fair Work Ombudsman brings these proceedings against an employer and two of its directors for contraventions of ss.340(1) and 45 of the Fair Work Act 2009, (Cth)[1] on behalf of Mr Gary Graham. Mr Graham was employed by RFJCO Pty Ltd as a caravan technician where he performed maintenance and repair works on caravans for the first respondent. In late December 2010 Mr Graham’s mother was required to go into surgery in Sydney. Mr Graham took leave in order to travel to Sydney and be with her. On 20 December 2010 he returned to work and worked until 24 December 2010 when the company shut down until 3 January. On 2 January Mr Graham’s mother, Mrs Hall, contracted an infection and was re-admitted to hospital. Mr Graham travelled again to Sydney to care for her and advised his employers. Between 4 and 7 January Mr Graham took four days of personal carer’s leave to remain in Sydney and care for his mother. He returned to work on 10 January and worked until the 11 January when his mother had a major stroke and fell into a coma. Mr Graham then returned to Sydney advising his employers of the situation with regard to his mother. On arrival in Sydney he was told that it was unlikely that his mother would survive. He remained with her until 18 January utilising standard sick leave entitlements that he had.
[1] “Act”
After 18 January he reverted to annual leave entitlements and he remained with his mother until 22 January when she died. Mr Graham took off a further four days of annual leave between 24 and 28 January in order to assist with funeral arrangements.
He returned to Queanbeyan and reported for duty when there was a discussion between the two directors, who are second and third respondents to these proceedings, and they determined that they would dismiss Mr Graham. They handed him a letter dated 27 January which purported to terminate his employment on the basis of unspecified performance criteria indicating the termination was immediate upon his receipt of that letter. Following Mr Graham’s termination he was unable to obtain work for approximately three weeks. He was very upset by the conduct of his employers and he reported the matter to the Fair Work Ombudsman.
The Fair Work Ombudsman took matters up on behalf of Mr Graham. It was discovered that, although he had been paid for various types of leave during his absence, he had not been paid correctly and that is the basis for the breach of s.45 of the Act, which is a contravention by virtue of the company failing to pay Mr Graham his entitlement to compassionate leave pursuant to subclause 42.1 of the modern award.
The Fair Work Ombudsman asserted, and it has now been agreed, that both the company and the individual directors took adverse action against Mr Graham by dismissing him for reasons which included that he exercised his workplace rights to carer’s, compassionate and annual leave. These are the contraventions of s.340(1) of the Act that are brought against all three respondents.
The respondents have admitted the contraventions and this matter now comes before me for a penalty hearing. I have been greatly assisted by the filing of a statement of agreed facts and by outlines of submissions made on behalf of both the applicant and the respondents through their respective legal advisers.
The essential dispute that remains between the parties is where in the scale of penalties these matters lie. In order to come to a conclusion about that it is necessary to consider the factors relevant to determining penalties. This court has now had considerable experience of doing this and, like the members of the Federal Court, have been assisted by the considerations adumbrated in cases such as Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 where Mowbray FM listed a number of matters to be taken into consideration. That summary was adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14. The court acknowledges that the summary is a useful checklist but it does not prescribe or restrict the matters which may be taken into account; Sharpe v Dogma Enterprises Pty Limited [2007] FCA 1550. Another case of importance is Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8.
I have outlined the nature and extent of the conduct which led to the breaches. This is not a case where Mr Graham took leave to which he was not entitled and it is not a case where Mr Graham did not inform his employers of what was occurring. Whilst the court recognises that the leave was taken at what might be considered to be an inconvenient time that is not an appropriate consideration. The very nature of sick leave or carer’s leave or bereavement leave is such that it could be required at any time. The conduct took place in circumstances which were regrettable and Mr Graham returned to work. He had not seen the letter that was placed in a pigeon hole for him. He was dismissed on the spot for an unspecified performance issue at a time when he was vulnerable as a result of the loss of his mother. The actions could be considered by some to be heartless.
Mr Graham suffered loss and damage as a result of the occurrence by being out of work for three weeks and suffering the usual depression and anxiety that comes from being dismissed without notice and without a proper explanation. This conduct alleged of the defendants has not been seen before. I am not aware of how long the business has existed but there is no suggestion that this is some form of systematic disregard of the law.
The parties have agreed that the nature of the alleged offences is such that they are separate and should be treated as such. The business enterprise is a medium-size one. It employs 20 persons, 15 of whom are permanent, two are part-time permanents and three are casuals. There are three directors of the company one of whom is not involved in the day to day management of it.
There is a diversion between the parties’ attitude to whether or not the breaches were deliberate. The Fair Work Ombudsman says that they were because the applicant was exercising rights that the company and its directors knew he had and yet they dismissed him. The respondents say that Mr Graham was dismissed partly because of the taking of leave but it was not intended as a slap in the face to the legislation. They did not consider the legislation. They say they were unadvised and unknowing. Against this the Fair Work Ombudsman naturally puts that persons should not be excused by ignorance of the law.
I am satisfied that, once these matters were made known to the company and its directors they exhibited appropriate contrition and cooperated with the enforcement authority. They have paid the underpayments. They have acknowledged that Mr Graham is entitled to compensation of $2,099.88, being three weeks wages for the time that he was out of work. They actually offered Mr Graham his job back. This action was taken by the Fair Work Ombudsman to indicate acceptance of the non-existence of the disciplinary grounds for dismissing him. It was an offer that was declined by Mr Graham, not unnaturally. The respondents say it is indicative of their wish to put the past behind them and to re-engage in a positive way with Mr Graham. It is perhaps unfortunate that the respondents have not paid the $2,099.88, although I am sure that they will do so within the time afforded by me. The directors say that they have taken corrective action but it is not specified. I am, however, satisfied from the affidavits and from the submissions made that they fully appreciate the situation and it is unlikely that they will offend again in this way.
It cannot be disputed that there is a need to ensure the compliance with the minimum standards found in the legislation nor that what the respondents did was such a breach. It is only by the existence of an authority such as the Fair Work Ombudsman that the act can be enforced and so the bringing of these civil penalty claims is an important part of ensuring that those minimum standards are complied with.
The question of deterrence is a very relevant one. The penalty should be such that other parties looking upon the decision would be discouraged from taking the same type of action as was taken by these respondents. The penalty must reflect the seriousness of the offence but is not intended to make any particular respondent a scapegoat: Ponzio v B & P Caelli Constructions Ptd Ltd (2007) 158 FCR 543 per Lander J. When considering the question of specific deterrence one should take into account any views that the court has come to as to the likelihood of reoccurrence. The respondents have brought to the court’s attention in an affidavit from their directors some conduct indicating goodwill that they held towards Mr Graham. They have also noted that the business was the subject of a media release dated 7 August 2012 in which the facts of the matter were set out and the allegations of breaches of the workplace laws and the date of the hearing were mentioned. They say that this publicity was embarrassing to them, as it was no doubt intended to be.
The question of how much account the court should take of the fact that these admitted contraventions have been publicised has been the subject of some consideration by the courts. I have been referred to three helpful decisions: David Cousins v Merringtons Pty Ltd (No 2) [2008] VSC 340; Fair Work Ombudsman v Cleaners New South Wales Pty Ltd [2009] FMCA 683; and Trade Practices Commission v Cue Design Pty Ltd and Cue and Co Pty Ltd, a decision of O’Loughlin J in the Federal Court on 22 March 1996. In that case his Honour said:
“In assessing appropriate punishment for a crime the court is required to have in mind not only the nature and the extent of the offence itself but also a wide variety of associated circumstances. Such circumstances constitute a context in which to view the penalty. Adverse publicity is often one of the inevitable consequences of wrongdoing and in most cases is without influence in the assessment of the appropriate penalty.
But adverse publicity initiated by the prosecuting authority itself requires special consideration. If the matter is publicised ahead of the trial, and widely, and in terms likely to induce public censure of the parties concerned and those parties are in day-to-day business relationships with the public, then there is obvious danger of injury to the lawful business of the parties which from a practical point of view may have the effect of effectuating a cumulative punishment …. In such cases an element has been injected into the situation which subjects the parties to more than the natural and probable consequences of mere publication of the fact that they are being prosecuted for named offences. In my view this is a case in which, by reason of the press release of the prosecuting authority, the danger of cumulative punishment along these lines is real and it should be treated as part of the background against which the penalty should be assessed. And I have so treated it.”
I think there is much to be said for the attitude taken by O’Loughlin J in respect of publicity initiated by the prosecuting authority especially when that publicity is initiated prior to the hearing. I can understand the wish for publicity of a decision of a court, especially when it is unlikely that there will be any members of the press at the hearing, but publicising a contravention before the hearing is, to my mind, something which does add to the punishment element and should be taken into account.
The applicant has suggested that as against the first respondent the appropriate penalty for the breach of s.340(1) being the dismissal of the applicant for reasons including his taking of leave, to which he was entitled, should be in the mid to high range. The applicant makes the same submission in respect of the two directors. I do not agree.
This is not because the contravention is not serious, it is. People should have the right to exercise their leave entitlements without fear that they could be dismissed. But I place weight on the fact that this is not something that has occurred previously, that the parties are clearly contrite, that I do not believe the offence will occur again, and that it is the first offence. I have taken all these matters into account when coming to the view that the appropriate penalty against the first respondent for breach of s.340(1), the maximum for which is $33,000.00, should be $11,000.00. In respect of the second and third respondents the maximum penalty is $6,600.00 and I am of the view that the appropriate penalty in their case is the sum of $2,200.00 each.
The applicant suggests that in respect of the breach of s.45, being the underpayment section where maximum penalty against the first respondent is $33,000,00 the penalty should be in the midrange. My understanding of the facts is that when the underpayment was discovered it was remedied speedily, it was not huge. I am of the view that the appropriate penalty in this regard should be $3,300.00 against the first respondent. No penalty is sought against the second and third respondent in regard to that contravention. The applicant has kindly provided the Court with some draft minutes of order which I make.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: 12 September 2012