Industrial Relations Bureau v Hassan

[1982] FCA 158

Re: INDUSTRIAL RELATIONS BUREAU
And: ISMAIL HASSAN (1982) 62 FLR 169
No. V25 of 1982
Industrial Law - Conciliation and Arbitration
2 IR 151

COURT

IN THE FEDERAL COURT OF AUSTRALIA

INDUSTRIAL DIVISION
VICTORIA DISTRICT REGISTRY
Keely J.(1)

CATCHWORDS

Industrial Law - breaches of award - underpayment of wages - whether employee who is not a member of union is "entitled under an order or award" to amounts prescribed by award - whether underpayments arose out of "a course of conduct".

S.119(1A) and (3) Conciliation and Arbitration Act 1904

Conciliation and Arbitration - Breaches of award by employer - Proceedings for recovery of pecuniary penalty - Whether breaches arose out of course of conduct - Whether employee entitled to amount under award - Payment of penalty to employee - Conciliation and Arbitration Act 1904 (Cth), ss. 119(1), (1A), (3), 120, 123.

HEADNOTE

The applicant sought the imposition of penalties upon the respondent for alleged breaches of the Vehicle - Repair, Services and Retail - Award 1976. Five breaches of the award were proved relating to an employer's: obligation to keep records of an employee, time of payment of wages, underpayment of salary, required notice upon termination of employment and failure to pay pro rata leave.

Upon the question of penalty,

Held: (1) Although the breach involving underpayment of wages related to events occurring on a number of separate occasions, breaches had arisen out of a course of conduct by the respondent within s. 119(1A) of the Conciliation and Arbitration Act.

Quinn v. Martin (1977) 31 FLR 25, applied.

(2)(a) As the employee affected by the breaches of the award was not a member of an organization of employees bound by the award, the court could not order pursuant to s. 119(3) of the Act that the respondent pay to him the amount of the underpayment. Leontiades v. F.T. Manfield Pty. Ltd. (1980) 43 FLR 193, applied. (b) However, it was an appropriate case to make an order under s. 120 of the Act that the penalty imposed upon the respondent be paid to the employee.

HEARING

Melbourne, 1982, July 26-27, 29. #DATE 29:7:1982

APPLICATION

The applicant sought the imposition of a penalty upon the respondent pursuant to s. 119 of the Conciliation and Arbitration Act 1904 for alleged breaches of the Vehicle - Repair, Services and Retail - Award 1976.

N.J. Young, for the applicant.

M.J. Stiffe, for the respondent.

Solicitor for the applicant: B.J. O'Donovan, Commonwealth Crown Solicitor.

Solicitors for the respondent: MacDonald Splatt & Co.

T.J. GINNANE

JUDGE1

The applicant seeks the imposition of penalties under section 119 of the Conciliation and Arbitration Act 1904 (which I shall call the Act) upon the respondent for alleged breaches of The Vehicle Industry - Repair, Services and Retail - Award, 1976. The breaches fall into five groups all of which occured between 1 August 1977 and 14 January 1978 and related to Mr Bryan Patrick McConnell, an employee of the respondent.

The application also set out five groups of failures to observe the award. They were precisely the same matters as those alleged to be breaches of the award and were not intended to be pursued if the breaches were established. Section 4 of the Act defines breach as including a non-observance of the term of the award. Accordingly, no question arises of making separate findings in relation to the alleged failures to observe the terms of the award.

The alleged breaches were described in the application, as amended without objection at the hearing as being breaches in that the respondent, being" bound by the terms of The Vehicle Industry - Repair, Services and Retail - Award 1976",

(1) "did fail to keep a record from which can be readily ascertained the name of Bryan Patrick McConnell, his occupation, the hours worked each day by him and the wages and allowances paid each week to him in respect of his employment by the respondent during the period 1st August 1977 to 14th January 1978, as required by clause 38 of the award".

(3) "did fail to pay Bryan Patrick McConnell in the respondent's time not later than Thursday in each pay week between 1st August 1977 and 14th January 1978 as required by clause 7(c) of the award".

(5) "did fail to pay to Bryan Patrick McConnell the full amount to which he was entitled as an adult employee motor mechanic, alternatively, as an adult employee driveway attendant, in respect of wages for ordinary time and overtime worked in each of the pay weeks commencing 4th August 1977 through to and including 12th January 1978 as required by clauses 8, 20, 21, 22 and 24 of the award".

(7) "did on 14th January 1978 terminate the employment of Bryan Patrick McConnell without giving him a week's notice or payment of a week's wages in lieu of notice, as required by clause 6(d) (i) of the award".

(9) "did on or after 14th January 1978 fail to pay to Bryan Patrick McConnell, an employee who had worked for more than one week's continuous service in his first qualifying twelve months and whose employment was lawfully terminated by the respondent through no fault of the employee, his ordinary rate of wage for 3.08 hours of each five ordinary working days worked and in respect of which leave had not been granted, as required by clause 27 (L) (i) (A) of the award".

For convenience of identification I shall use the numbers appearing in the application in referring to the alleged breaches.

The evidence established that the respondent was bound by the award at all times material in respect of his employment of Bryan Patrick McConnell as a driveway attendant from 1 August 1977 until 14 January 1978. There was a conflict of evidence between the respondent on the one hand and Mr and Mrs McConnell on the other. Mr Stiffe of counsel on behalf of the respondent said that it was, "difficult to reach any other conclusion than that one side is lying". I agree.

It is not necessary to refer to the evidence in great detail. On the evidence I accept that, for most of the five and a half months in question, Mr McConnell worked very long hours for the respondent including working generally in the evenings and at weekends. However, I am not satisfied that his hours of work were quite as many per week during the last one or two months of his employment. On his own evidence, during that time he was complaining to the respondent about the number of hours and seeking a reduction of hours.

I accept his evidence that he had a key to the respondent's premises; that he used it whenever necessary to open the premises at 7 a.m.; and that he was paid only $150 per week throughout the period of his employment. His evidence was corroborated on a number of crucial aspects by his wife, including the amounts of $150 paid each week, the fact that Mr McConnell did not give to the respondent, before receiving his pay, a list of the hours that he had worked and the fact that Mr McConnell had a key to the premises. She gave her evidence in a most convincing manner and I accept her as being both a truthful and a careful witness. The impression given by the respondent in the witness box was very much the opposite and I reject his evidence on all important matters of conflict of evidence in this case. Some of his statements may have been incorrect by reason of an understandable difficulty of remembering details of events which occurred four years ago. However, on the fundamental issues I was forced to the conclusion that he was deliberately seeking to mislead the court.

I am satisfied that the respondent paid to Mr McConnell only $150 per week, an amount very substantially less than the amount prescribed by the award as being payable to a driveway attendant. The evidence failed to establish that Mr McConnell was employed as a motor mechanic, although he did work in the workshop. Accordingly, breach number five, in the alternative form set out earlier, has been established on the evidence. In final submissions the respondent did not dispute that the breaches numbered 1, 3, 7 and 9 had been established by the evidence and I accordingly find that those breaches of the award have also been established.

In considering what penalties are appropriate for the breaches, I have taken into account the matters referred to by the respondent's counsel and also the fact that it has not been suggested that the respondent has previously breached any award. In determining each penalty I have also taken into account, by way of mitigation, that overall the respondent will have to pay five penalties, not merely one. In that connection I consider that the total amount of the penalties imposed is appropriate for the five breaches of the award found to have been committed by the respondent. It has not been suggested that any of the breaches was due to any accident. No material has been offered to explain the respondent's conduct - other than his evidence which I have rejected. Section 119(1A) provides as follows:
". . . . . . where a Court finds that two or more breaches by the same organisation or person of a term of an order or award have been committed and those breaches appear to that court to have arisen out of a course of conduct by that organisation or person, those breaches shall, for the purposes of this section be treated as constituting a single breach of that term."

Mr Neil Young of counsel on behalf of the applicant conceded that that sub-section applied to breach No.1 and breach No.3. I observe parenthetically that it has no application to breach No. 7 or breach No. 9 - each of which is concerned with a specific single breach on a particular day. However, Mr Young submitted that section 119(1A) did not operate so as to require the court to treat as a single breach of the award, the breaches consisting of the underpayment of wages on each pay day throughout the period of the employment. He submitted that those underpayments could not be said, "to have arisen out of a course of conduct by" the respondent because each week the respondent was required to assess the amount of wages payable to Mr McConnell under the award and that each week, in deciding to pay less than the amount prescribed by the award, the respondent committed a separate breach. Such breaches, in his submission, could not be fairly said to arise, "out of a course of conduct" by the respondent except in the sense that it might be said that he had decided not to comply with the award.

If the matter were free from authority I would see much merit in Mr Young's argument. However, Mr Stiffe on behalf of the respondent relied upon a decision of this court in Quinn v Martin (1977) 31 FLR 25 dealing with an employer who had failed to pay to employees over various periods wages, overtime and special allowances prescribed by an award under the Act and accordingly had committed breaches of the award.

In that case, the court held (at pages 30 and 33) that those breaches of the award had all arisen, "out of the same course of conduct by the respondent" and accordingly were to be treated as constituting a single breach of the award by reason of the provisions of section 119 (1A) of the Act. In my opinion, consistently with Quinn v Martin, I am obliged to treat all breaches referred to in the alleged breach number 5 in the application as constituting a single breach of the terms of the award. It is however a very serious breach of the award. Having regard to the fact that the amounts paid, $150 per week, were very substantially less than the amounts fixed by the award, that the conduct continued for more than five months and that there is so little material before the court in mitigation, I impose a penalty of $750 in respect of breach number 5.

Breach number 1 - the failure to keep records - is also to be treated as one breach by reason of section 119(1A). It is a serious breach because the award requirement that records be kept is a very important provision and is central to the enforcement of awards. The breach of that clause continued throughout the period of the employment. On the other hand, on the evidence the respondent kept records in respect of his other employees, and I take that fact into account. I impose a penalty for breach number 1 of $500.

Breach number 3 - the failure to pay Mr McConnell no later than Thursday in each pay week - must also be treated as one breach by reason of section 119(1A). It is less serious than breach number 5 and breach number 1, but it is nonetheless a failure to comply with a clause in the award which is doubtless of some importance to the employees. I impose a penalty for breach number 3 of $100.

Breach number 7 - terminating Mr McConnell's employment without giving a week's notice or payment in lieu of notice - is also quite a serious breach of the award. The purpose of the clause is doubtless to assist the employee during the time when he is seeking other employment by reason of having had employment terminated. The amount which should have been paid is $121.30, but in my opinion a penalty of that amount would be inadequate as the respondent would be merely paying now the amount which he was required to pay at the time. I impose a penalty for breach number 7 of $250.

Breach number 9 - failing to pay pro rata annual leave - is in my opinion a breach similar to breach number 7 and should attract the same penalty. In each case it is a failure to pay to a dismissed employee an amount which the award requires the employer to pay - an amount which the employee had earned by his service over the months. I impose a penalty for breach number 9 of $250.

The total amount of the penalties imposed is $1,850. In my opinion the penalties are necessary having regard to the nature of the breaches. The respondent and other employers must understand the importance of complying with the provisions of an award.

Mr Young, on behalf of the applicant, submitted that, if the court found that the respondent had paid Mr McConnell less than the amounts prescribed by the award, then it had power to make an order under section 119(3) of the Act that the respondent pay to Mr McConnell the amount of the underpayments. The court's power exists where "it appears to the court that an employee of that employer has not been paid an amount to which he is entitled under an order or award" and accordingly in the present case it is dependent upon it being shown that Mr McConnell "has not been paid an amount to which he is entitled" under the award.

Mr McConnell was not at the material time a member of an organization of employees bound by the award. In Leontiades v F.T. Manfield Pty Limited (1980) 43 FLR 193 the Court, dealing with a prosecution under section 5 of the Act, decided that an employee who was not a member of the appropriate union obtained no rights under the award. At page 196 it said that the award:
". . . did not confer any rights upon the informant and the duty imposed by the award upon the defendant in respect of the informant was not a duty owed to the informant who was not a party to the dispute. In my opinion the informant, as an employee to whom no duty was owed by the employer - although there was a duty owed to the union in respect of him - and as an employee who obtained no rights under the award, was not 'an employee . . .
entitled to the benefit of' the award within the meaning of section 5(1) (b) of the Act.

In my opinion the words 'entitled to the benefit of' an award mean 'entitled' as matter of legal right".
Mr Young did not submit that Leontiades' case was wrongly decided and should not be followed. He conceded that Mr McConnell was not "an employee entitled to the benefit of an award" within the meaning of section 123 of the Act. However, he submitted that Leontiades' case should be distinguished, relying upon the fact that section 119(3) uses the words "An employee . . . has not been paid an amount to which he is entitled under an . . . award" whereas in Leontiades' case the court was dealing with the words ". . . is entitled to the benefit of an award" in section 5(1)(b) of the Act. He submitted that the words: ". . . an amount to which he is entitled under an . . . award" in section 119(3) should be read as meaning, "an amount which the employee has a right to be paid, which amount is calculated in accordance with an award". In this connection he referred to the following passage from Mallinson v Scottish Australian Investment Company Limited (1920) 28 CLR 66 at 73:
"Apart from the Commonwealth (Conciliation and Arbitration) Act the right to receive wages sprang from the existence of the relationship of master and servant and the performance of services therein, and notwithstanding the Act it is still the existence of this relationship and the performance of services therein which confers on the employee the right to remuneration - all that the Act has done in this respect is to substitute another method of determining the amount of the remuneration."
He also relied upon section 2(d) of the Act which states that one of the chief objects of the Act is
"to provide for the observance and enforcement of . . . awards made for the prevention or settlement of industrial disputes."

It may appear illogical to provide under section 119(1) that an employer can be found by the court to have breached a term of an award by the under payment of a non-member of a union bound by an award on the one hand and yet, under section 119(3), to fail to give to the court the power to order "that the employer shall pay to the employee the amount of the under payment" where the employee is such a non-member.

However, the two sub-sections are dealing with different matters. Section 119(1) is dealing with the question of duty, that is a breach of duty by an employer, whereas section 119(3) is dealing with the question of rights, that is the rights of an employee under an award. The employer's duty is owed to the union - not to the employee - and a non-member of a union has no rights under the award in my opinion for the reasons given in Leontiades' case.

In addition, it may be that the draftsman saw possible constitutional difficulties in a statute, based upon the conciliation and arbitration power, authorizing orders that an employer pay amounts to a person who was not a party to the dispute upon which the award was based and was not otherwise connected in any way with that dispute, for example, by membership of a union which was a party to that dispute.

Notwithstanding the ably presented argument of Mr Young, I am unable to hold that the court has power under section 119(3) to make an order that the respondent pay to a non-member, Mr McConnell, the amount of the under payment found to have occurred. In my opinion to so hold would involve reading section 119(3) as if it said "that an employer has not paid an amount which he is required to pay under an order or award", instead of the words there appearing, namely, "that an employee has not been paid an amount to which he is entitled under an order or award."

Accordingly in my opinion the court has no power to make the order sought under section 119(3). As an alternative to that application, Mr Young asked that the court order under section 120 of the Act that the penalties imposed be paid to Mr. McConnell. In my opinion this is an appropriate case to do so and accordingly I order that each of the penalties which I have imposed be paid by the respondent, Ismail Hassan, to Bryan Patrick McConnell within fourteen days from today.