Saluwadana v Coles Supermarkets
[2021] VMC 8
•14 July 2021
IN THE MAGISTRATES’ COURT OF VICTORIA
AT MELBOURNE
Case No. L12810463
| NAJ SALUWADANA (WAGE INSPECTORATE OF VICTORIA) | Prosecution |
| v | |
| COLES SUPERMARKETS AUSTRALIA PTY LTD (ACN 000 011 058) | Accused |
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MAGISTRATE: | Magistrate J.P. Foster |
WHERE HELD: | Melbourne (Online Magistrate’s Court) |
DATE OF HEARING: | 30 March 2021 (Further Submissions 20 April 2021) |
DATE OF DECISION: | 14 July 2021 |
CASE MAY BE CITED AS: | Saluwadana v Coles Supermarkets |
MEDIUM NEUTRAL CITATION: | [2021] VMC 008 |
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CATCHWORDS – Long Service Leave Act 2018 section 9(2) – Non-Payment of Entitlements – Maximum Penalty - Continuing Offence – Strict Liability Offence.
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APPEARANCES: | COUNSEL | SOLICITORS | |
For the Prosecution | Ms. D. Price | Victorian Government Solicitor’s Office | |
For the Accused | Mr. M. Minucci | Allens | |
JUDGMENT
24 underpayments amounting to $53,710.52 give rise to the charges before the court.
The 24 under payments have been rolled up into 7 charges for which sentence is being passed today.
Amended charge Roll up of charges Start date End date 1 N/A 28 October 2019 2 2, 3 4 November 2019 23 November 2019 4 4, 5, 6 9 December 2019 12 December 2019 7 N/A 6 January 2020 8 8, 9, 10, 11, 12, 13, 14, 15 2 February 2020 24 February 2020 16 16, 17, 18, 19, 20 13 March 2020 30 March 2020 21 21, 23, 24, 25[1] 24 April 2020 28 April 2020 [1] Charge 22 was withdrawn
I will have more to say about the rolling up of the charges later.
The purpose of the Long Service Leave Act 2018 (“LSL Act”), among other things, is to make provisions with respect to long service leave entitlements of certain employees, including public and private sector employees and police officers.
The LSL Act sets out arrangements for long service leave in Victoria. The LSL Act replaced the Long Service Leave Act 1992 (“1992 Act”) following a review that found the 1992 Act did not keep pace with community standards, for example in the way it treated parental leave, and was not easy to understand. The LSL Act was drafted to be easier to understand and to be fairer to people whose working circumstances change.
The LSL Act preserves an employee’s entitlements and rights in relation to long service leave provided certain requirements are met. The obligation is on the employer to meet its statutory obligations set out under the LSL Act, including to pay the employee the full amount of the employee’s long service leave entitlement at the date their employment ends.
Full payments of employees’ long service leave entitlements is inherently important. For many employees, payment of any entitlements at a time when their employment ends directly impacts their financial position, for example if they have not secured alternate employment and are unemployed or in the process of job hunting.
Coles failed to properly calculate long service leave entitlements for many employees over a period of seven months the subject of the charges. It was not an isolated instance, but a systematic failure to ensure former employees received their full entitlements under the LSL Act.
To give context to the offending, as a result of the Informant’s investigation, Coles advised that 4,096 former employees required additional payment, which in total amounted to $697,016.00.
The prosecution does not contend that the breaches of the LSL Act by Coles were deliberate. It instead arose as Coles failed to appreciate that terms of the Coles Supermarkets Enterprise Agreement 2017 about the accrual of long service leave during periods of unpaid leave, was inconsistent with the LSL Act and were therefore invalid.
It is trite to say the offences are difficult to detect.
Detection relies on:-
a.workers assuming the burden of checking their own leave entitlements upon severance, or
b.where the Inspectorate conducts an audit; or
c.an employer self-reporting.
This investigation commenced when a former employee of Coles contacted the Inspectorate.
This is not a matter where Coles itself identified the underpayment, and self-reported to the Inspectorate.
The audits subsequently undertaken by Coles, to ensure the repayment of former employees, including those not reflected within the charges, are a direct result of the investigation conducted by the Inspectorate.
General Deterrence
General deterrence carries paramount significance in sentencing for these offences.
A purpose of the LSL Act is to ensure proper provision for employees’ long service leave entitlements. It places the obligation upon the employer to meet their statutory obligation to pay the full amount of an employees’ long service leave entitlement at the date their employment ends.
It is difficult to detect when an employer fails to fulfil this statutory obligation. Moreover, the community is entitled to expect that employers will properly honour the long service leave entitlements of employees. General deterrence is therefore a significant factor when the LSL Act is breached. It is necessary to signal to other employers the importance of careful compliance with the LSL Act to ensure that employees receive their full entitlements, and to check that any enterprise agreement is consistent with the LSL Act.
Specific Deterrence
Specific deterrence also has some relevance.
Coles is a well-resourced company with a dedicated human resources and legal compliance team, with an ability to understand and keep abreast of its legal obligations regarding employee entitlements.
It has a very large number of employees, which underscores the importance of proper compliance as failure to do so would adversely affect a large number of employees. It would have been relatively easy for Coles to check that the Coles Supermarkets Enterprise Agreement 2017 complied with the LSL Act, and to identify that the LSL Act prevails in the event of an inconsistency.
Correct calculation of long service leave entitlements could have been achieved with little difficulty, as Coles calculates leave entitlements using computer programs rather than manually.
It is important that Coles keeps of abreast of its legal obligations and properly renumerates its many employees in the future, meaning that specific deterrence remains relevant in the sentencing exercise.
Plea Submissions:
Coles has:-
a.no prior convictions;
b.remedied all relevant underpayments; and
c.has previously been a good corporate citizen, having contributed significantly to the Australian and Victorian community.
These matters stand to the credit of Coles and will be given appropriate weight.
Coles further contends that:-
a.its contravention is at the lower end of the scale of seriousness.
b.as identified in the agreed summary, the contraventions arose as a result of a miscalculation of Coles’ long service leave entitlements by reference to the Coles Supermarkets Enterprise Agreement 2017 (The Enterprise Agreement). The WIV does not allege that this was intentional.
c.the miscalculation arose from a misconstruction of the relevant terms of the Enterprise Agreement (and predecessor agreements), and a failure to correct the consequences of that historical misconstruction in the payroll settings following the commencement of the LSL Act.
d.there was nothing deliberate about Coles’ conduct at all.
e.it did not, at any stage, set out to deprive its employees of any entitlements, or act in a dishonest or improper way.
f.there is also no evidence that the circumstances giving rise to the contraventions of section 9 of the LSL Act is demonstrative of a pattern of behaviour whereby obligations to pay employees appropriately were disregarded.
Consideration of Plea Submissions:
To my mind the “mere error” excuse put forward by Coles, is a poor excuse.
The offences, to my mind, are strict liability offences.
A mens rea element (i.e. a guilty mind) is not required to be established, to make out the offences for which Coles is charged.
This much is clear when one applies the principles laid down in He Kaw Teh v The Queen[2].
[2] He Kaw Tehv The Queen (1985) 157 CLR 523
There, Gibbs CJ cited with approval the principles stated in Sherras v De Rutzen[3]:
There is a presumption that mens rea, an evil intention, or a knowledge of the wrongfulness of the act, is an essential ingredient in every offence; but that presumption is liable to be displaced either by the words of the statute creating the offence or by the subject-matter with which it deals, and both must be considered.[4]
[3] [1895] 1 QB 918.
[4] At 528.
However, a Proudman v Dayman[5] defence of honest and reasonable mistake of fact might be open to Coles.
[5] (1941) 67 CLR 536
Despite Coles protestations of this being a “mere error”, a defence of honest and reasonable mistake of fact was not put by Coles, and nor could such a defence have been made out, because:-
a.no proper auditing procedures had been put in place by Coles to catch the error; and
b.Coles did not pay sufficient attention to paying its employees their proper entitlements.
Only when Coles properly turned its attention to the matter of the correct payment of its employees’ entitlements was the true extent of the problem readily revealed.
It goes without saying, in my view, that it was incumbent upon Coles to take the type of care, as it took with its later audit, before any problems with the payment of employee entitlements arose.
Maximum Penalty
When one looks at maximum available penalty that could have been imposed, compared to the maximum penalty that can be imposed by the Courts this day, one cannot help but think of how fortunate Coles are, at this stage of the prosecution.
As mentioned earlier, the agreed facts reveal that Coles underpaid $697,016.00 to 4,096 employees.
Charges were brought in respect of 24 employees.
These matters have been rolled up into 7 charges.
The explanatory memorandum to the Long Service Leave Bill 2017 states that the section pursuant to which present charges are brought are “continuing offences” with a prescribed maximum penalty of 60 penalty units for each day the offence continues.
I reject the contention put by Coles, that a charge under section 9(2) is not a continuing offence, for the reasons set out in considerable detail in paragraphs 20 to 49 of the supplementary prosecution submissions, which I accept.
When one looks at the table contained at paragraph 15 of the agreed summary it is evident that many of the employees were not paid their entitlements for many months.
To take but one example, the unamended charge 1 reveals a period of 249 days during which the offence continued - namely between dates of 28 October 2019 when the entitlement arose and 3 July 2020 when the entitlement was paid.
At present 60 penalty units equates to $9,913.20
249 days x $9,913.20 = $2,468,386.80
If one was to extrapolate such calculations in respect of each of the 24 employees where charges were brought, it is apparent that the maximum penalty that Coles could have faced (on the agreed facts) runs to many millions of dollars.
Even if the matters were to have proceeded on the 24 individual charges the maximum penalty available would be 24 x $9,913.20 = $237,916.80
That potential penalty, to my mind, is where parliament was directing its attention when legislating this provision.
However, I have received and accept submissions put by the prosecution that because the charges have been pleaded and particularised as non-continuing offences this court is bound to impose maximum penalty of no more than 7 x $9,913.20 = $69,392.40.
Despite receiving submissions of the importance of general and specific deterrence, it is hard to imagine that a financial penalty of such a paltry nature can achieve those sentencing objectives, in respect of Coles whose profits run to many millions of dollars each year.
Perhaps the public humiliation of these proceedings better achieves those sentencing objectives.
The fine given today is determined with these aforementioned limitations present and does not, to my mind, properly reflect the seriousness of the matters set out in the agreed statements of facts.
I have concerns with the poor precedent this penalty will set. However, I am bound to sentence according to law.
Taking into account each of the foregoing matters and taking into accounts the discount that Coles must be given for its early plea, Coles, without conviction, will be fined the aggregate sum of $50,000 and it is ordered to pay costs in the sum of $15,000, as agreed.
A stay of 3 months is granted in respect of both sums.
MAGISTRATE J.P FOSTER
14 JULY 2021
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