Shop, Distributive & Allied Employees' Association v Aldi Foods Pty Ltd (No 2)
[2023] FedCFamC2G 190
•14 March 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Shop, Distributive & Allied Employees’ Association v Aldi Foods Pty Ltd (No 2) [2023] FedCFamC2G 190
File number: SYG 2219 of 2020 Judgment of: JUDGE D HUMPHREYS Date of judgment: 14 March 2023 Catchwords: INDUSTRIAL LAW – Fair Work – Determination of Pecuniary Penalties Legislation: Fair Work Act 2009 (Cth) ss 50, 323,
Federal Court Act 1976 (Cth)
Federal Court Rules 2011 (Cth)
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
Canturi v Sita Coaches Pty Ltd (2002) 116 FCR 276
Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied services Union of Australia v Telstra Corporation (2007) 168 IR 368
Fair Work Ombudsman v Nobrace Centre Pty Ltd (in Liquidation) [2019] FCCA 2979
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301
Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216
Kelly v Fitzpatrick [2007] FCA 1080
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383
Seven Network (Operations) Pty Ltd v Communications, Electrical, Electronic, Energy Information, Postal Plumbing and Allied Services Union of Australia (CEPU) (2001) 110 IR 372
Shop, Distributive and Allied Employees Association v Aldi Foods Pty Ltd [2022] FedCFamC2G 799
Division: Division 2 General Federal Law Number of paragraphs: 39 Date of last submission/s: 8 March 2023 Date of hearing: 8 March 2023 Place: Sydney Counsel for the Applicant: Mr Guy Solicitor for the Applicant: Mitchell Worsely Counsel for the Respondent: Ms Perigo Solicitor for the Respondent: Enterprise Law ORDERS
SYG 2119 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: SHOP, DISTRIBUTIVE & ALLIED EMPLOYEES' ASSOCIATION
Applicant
AND: ALDI FOODS PTY LTD ABN 086 210 139 ACTING AS GENERAL PARTNER OF ALDI STORED (A LIMITED PARTNERSHIP)
Respondent
order made by:
JUDGE D HUMPHREYS
DATE OF ORDER:
14 March 2023
THE COURT ORDERS THAT:
1.Pursuant to s 546 of the Fair Work Act 2009 (Cth) (“the Act”), the First Respondent is to pay a pecuniary penalty of $40,000.00 for contravening s 50 of the Act.
2.Pursuant to s 546 of the Act, the First Respondent is to pay a pecuniary penalty of $40,000.00 for contravening s 323 of the Act.
3.Pursuant to s 546(3) of the Act, the overall penalty of $80,000 for both contraventions be paid to the applicant.
4.The pecuniary penalties set out in 1 and 2 above, are to be paid within 21 days of the date of these orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE HUMPHREYS
INTRODUCTION
This judgement concerns the consideration of the appropriate penalty to be imposed on the respondent Aldi Foods Pty Ltd (“Aldi”), following the Court finding that Aldi committed two contraventions of the Fair Work Act 2009 (“the Act”) in Shop, Distributive and Allied Employees Association v Aldi Foods Pty Ltd [2022] FedCFamC2G 799.
Those contraventions involved s 50 of the Fair Work Act 2009 (Cth) (“the Act”) by contravening an Enterprise Agreement, in not paying warehouse workers for time worked and s 323 of the Act and not paying them in full for time worked.
As set out in the liability judgement, the Court found that Aldi required warehouse workers to perform 10 minutes of work at the beginning of each shift that was not paid.
It is common ground between the parties that Aldi has made payment in full to the affected workers in accordance with a formulae that was agreed between the parties. The Court notes evidence that each of the representative workers called on behalf of the plaintiff have been paid amounts ranging from $4,264.11 in the case of Mr Leole to $2,319.25 in the case of Mr Rastakhiz. The Court assumes that the average amount paid to each of the affected workers would be in the range of $3,000.00.
INTEREST PAYABLE
The Court notes that interest was claimed in respect of each of the amounts owed in the statement of claim. It was put to the Court that each of the named representative workers has been paid compensation that includes interest. It was thus not necessary to make any order in respect of interest. Further, as interest was not pleaded in respect of any other worker who might be eligible for compensation no order should be made. Noting that interest has been paid to the named representative workers, the Court declines to make any specific order for the payment of interest.
SERIOUS CONTRAVENTIONS AND MAXIMUM PENALTIES
The Court notes that the position of the parties is that the contraventions were not pleaded as serious contraventions. Accordingly, pursuant to s 539 of the Act, the current maximum penalty payable for each contravention of s 50 and s 323 of the Act is 60 penalty units or $66,600.00, based on a penalty unit of $220.00. It is to be noted that during the course of the proceedings, the maximum penalty increased from $63,000.00, due to an increase in the amount of each penalty unit from $210 to $220. For the purposes of consideration of penalty in this matter, the Court will consider the maximum payable to be in the range of $63,000.00 to $66,600.00 or $126,000.00 to $132,200.00 for both contraventions.
THE LAW IN RELATION TO THE CONSIDERATION OF PENALTIES UNDER THE ACT
The Court has a broad discretion as to penalty. In Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [71], it was stated that the Court should fix a penalty ‘it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions of the Act’. Further, at [10] and [12], the High Court stated that the penalty must not exceed what is ‘reasonably necessary to achieve the purpose of s 546 of the Act, the deterrence of future contraventions of a like kind by the contravener and others’.
In Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301 Bromwich J summarised how the discretion is to be approached at [36], as follows:
1. Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
2. Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
3. Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
4. Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
5. Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: (see; Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102]).
The purpose of a civil penalty is primarily, if not wholly, is promoting the public interest in compliance with the laws that have been contravened, and it does not engage principles of retribution or rehabilitation: (see; Fair Work Ombudsman v Nobrace Centre Pty Ltd (in Liquidation) [2019] FCCA 2979 (“NoBrace”) per Kelly J at [65]. As these principles of retribution or rehabilitation are not involved in the determination of a civil penalty, this intensifies the focus of a civil penalty determination on issues of specific and general deterrence: (see; Nobrace at [66]).
The Act does not set out any mandatory criteria, inclusive or exclusive, that the Court must consider when determining whether to impose a penalty or the amount of any penalty: (see; Canturi v Sita Coaches Pty Ltd (2002) 116 FCR 276 [88]). The choice of penalty must be guided by the “individual circumstances of a case, not by a line-by-line comparison with another case”: (see; Australian Ophthalmic Supplies Pty Ltd v McAlary‑Smith (2008) 165 FCR 560 at [12]). The process is an intuitive one by the Court and not an application of a scientific process: (see; Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [60]‑[63]).
In Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 (“Mason v Harrington”), Mobray FCM set out what is a now well accepted set of factors relevant in assessing a pecuniary penalty. They are as follows:
a.the nature and extent of the conduct which led to the breaches;
b.the circumstances in which the conduct took place;
c.the nature and extent of any loss sustained as a result of the breaches;
d.whether there has been similar previous conduct by the Respondents;
e.whether the breaches were properly distinct or arose out of one course of conduct;
f.the size of the business enterprise involved;
g.whether or not the breaches were deliberate;
h.whether senior management was involved in the breaches;
i.whether the party committing the breach had exhibited contrition;
j.whether the party committing the breach had taken corrective action;
k.whether the party committing the breach had cooperated with enforcement authorities;
l.the need to ensure compliance with minimum standards by provision of an effective means for the investigation and enforcement of employee entitlements; and
m.The need for specific and general deterrence.
Merkel J in Seven Network (Operations) Pty Ltd v Communications, Electrical, Electronic, Energy Information, Postal Plumbing and Allied Services Union of Australia (CEPU) (2001) 110 IR 372 set out some guiding considerations for the Court at [374]:
[374] Matters to be taken into account in determining the appropriate penalty include the cost of the contravention, deterrence, the flagrancy and deliberateness of the breach, the offender’s past record of behaviour and any contrition displayed by the offender.
EVIDENCE CALLED
Each of the applicant and the respondent provided Affidavit evidence in respect of penalty. The applicant relied on an Affidavit of Luke Worsley, an Industrial Officer with the applicant. A letter annexed correspondence with the respondent from March 2020 that set out the duties claimed by the applicant to be work that was required to be performed prior to the start of paid time. The letter sought the removal of this requirement and for that amount if required to be worked, be paid. Aldi’s response via their legal representatives denied that employees performed work prior to their rostered time
The respondent relied upon an Affidavit of Aaron Jolliffe, the Director of Warehouse Operations and Services at Aldi’s Prestons warehouse. Mr Jolliffe deposed that nationally, Aldi employs approximately 15,000 employees with 650 employed at the Prestons Distribution Centre. Of those 650 employees, approximately 140 work in the stock selection area. Mr Jolliffe deposed that over time, Aldi refined their processes, including the introduction of safety checks before and after using equipment, together with the use of checklists. Mr Jolliffe acknowledged that this process has become over time more intensive and time consuming. He denied any deliberate intent not to pay employees for time worked.
Following the first decision of the Court, Aldi’s processes have changed with no work being performed prior to the rostered start time. Equipment is only accessed after warm up exercises and a Toolbox Talk at the beginning of each shift.
Each of the representative employees has been paid compensation in a manner agreed with the applicant on 15 December 2022 plus applicable superannuation in January 2023. All other employees in the Stock Selection area were paid similar compensation, based on the agreed method in December 2022 and January 2023. Mr Jolliffe expressed regret at the failure found by the Court in paying for work performed, and on this basis corrective action was taken.
In cross examination Mr Jolliffe conceded that Aldi has not apologised to its workers for the underpayment. Further, it has not been able to pay some affected workers where they have left Aldi’s employment. No public statement has been issued advising past employees to contact Aldi to ascertain if they might be eligible for compensation.
The Court was advised that the total compensation paid to employees to date was $423,362.73 plus $44,453.09 in superannuation totalling $467,815.82. Payment was made to employees who worked in Selection during the period 1 August 2018 to 31 October 2022. There were 190 employees who received a payment.
The Court sought information as to the profit of Aldi after tax in 2021 and 2022 but was advised that as Aldi is a private, not public company, and therefore, this information was not publically available and was commercial in confidence. The Court could however, proceed on the basis that Aldi was a large, multi-national profitable company.
THE APPLICANT’S SUBMISSIONS
On behalf of the applicant, it was submitted that the breaches were as a consequence of Aldi’s requirement that the employees be ready at the commencement of the shift. The breaches were consistent and extensive, affecting every employee, every shift they worked. A failure to be ready for work in advance of shift start could result in negative “records of interview” and/or disciplinary action.
The affected employees suffered loss or damage as a consequence of the breaches which arose out of a consistent and deliberate course of conduct. Senior management were involved in the breaches. The only reason the breaches were ceased, is because the applicant prosecuted the matter in this Court. It was submitted that the Court should make a finding and impose a penalty towards the upper end of the maximum penalty amount.
It was conceded that compensation has been paid to each of the affected employees prior to the penalty hearing. This amount included 10.5% in respect of applicable superannuation payments. The payments were made and the methodology arrived at, was done in conjunction with the applicant. Whilst it was conceded that compensation has been paid, it was noted that the payments were owed to employees years ago, and should have been paid then. Payment only came about because of defended litigation bought by the applicant and but for such litigation, the employees would not have received their entitlements.
It was submitted that the Court should not take into account any suggestion that the agreed and prompt payment of compensation to the affected employees is a factor that weighs in favour of reducing the quantum of the penalty to be imposed.
In terms of the suggestion put to the Court by Aldi that the Court should not impose a penalty, or if minded to do so, impose a penalty at the lower end of the scale, this should be rejected. It was submitted the requirement for employees to be present and have completed pre-shift work without remuneration was deliberate, considered and presented negative consequences for employees if they did not comply. The decision to enact this system of work was done with proper thought and malice and with real consequences for employees for non-compliance. This conduct should be considered as a factor that weighs in favour of making an order for a penalty at the upper end of the maximum penalty amount that may be awarded.
Secondly, it was submitted on behalf of Aldi that there was no intention not to pay employees for the work performed and there was no element of a wilful or deliberate non-compliance by the respondent. This submission should be rejected.
As early as March 2020, following the applicant writing to Aldi, they were on notice as to the issues resulting in this litigation. It was necessary for the applicant to commence action in September 2020. The matter was further subject to an unsuccessful mediation in March 2021 and then a three-day hearing in August 2022. This approach is hardly one of a party that is merely conducting themselves in an “erroneous” manner without any intent or will not to comply with their legal obligations. Aldi put the applicant to proof, and only now that the case has been run and won, has the respondent for the first time, taken corrective action on the matter.
It was submitted on behalf of the applicant that the appropriate penalty range was $40,000.00-$45,000.00 for each contravention or $80,000.00-$90,000.00 on an aggregated basis.
THE RESPONDENT’S SUBMISSIONS
It should be first noted, that payment to the four named employees was made by Aldi on 15 December 2022, such payment including interest.
It was submitted that in the current case, there were two contraventions which arose out of substantially the same conduct, being conduct that imposed cumulative obligations or obligations that substantially overlapped: (see; Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at [223]).
It was submitted, that the tasks which were required to be performed prior to commencing work, changed over time and with more sophisticated safety checks. The time taken to perform the tasks increased. It was submitted the contravention arose out of erroneous construction of the agreement in that Aldi generally held the view that the tasks were not work. These contraventions can be traced that single source, the pattern of work by Aldi being viewed as tasks to be performed so the employee was ready and able to start work at the rostered time. It was submitted that was not the intention of Aldi to underpay workers.
In addition to the four named workers who have been paid compensation, all other affected employees have also been paid compensation, including interest and superannuation. Further, the arrangements for recording attendance have changed and employees are not required to perform any work tasks until the commencement of the rostered start time.
It was submitted that Aldi has expressed contrition and put in place mechanisms which are designed to ensure that there will be no repetition of the contraventions which led to these proceedings. Accordingly, no specific deterrence is relevant. It was submitted that where the contravention resulted from an erroneous construction of a relevant term in an Enterprise Agreement, where it is not a flagrant or wilful disregard for the agreement, the legislative purpose of general deterrence will not be further enhanced by the imposition of a penalty: (see; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied services Union of Australia v Telstra Corporation (2007) 168 IR 368 at [18]). On this basis, it was open to the Court to impose no penalty or a penalty at the lower end of the scale. If a penalty was to be imposed it was submitted it should be in the range of $10,000.00 to $12,500.00 individually or $20,000.00 to $25,000.00 on an aggregated basis.
CONSIDERATION
The Court notes that there are two contraventions identified, they being pursuant to s 50 and
s 323 of the Act.
The Court is reasonably satisfied that the contraventions should be dealt with a degree of aggregation as they arise out of the same course of conduct and that it is appropriate that no double penalty be imposed.
The Court notes that the current maximum penalty payable in respect of each contravention is $66,000.00 or a total of $132,000.00 for both contraventions. This maximum has increased over the course of the litigation as set out above. The Court takes this into account in setting the appropriate penalty noting that the Court does not propose to impose the maximum penalty.
In terms of the cited factors relevant in assessing a pecuniary penalty as set out in Kelly v Fitzpatrick (2007) 166 IR 14 at [14] the Court finds as follows:
a.The contraventions arose out of a deliberate policy by management at the Aldi Prestons warehouse which required workers to undertake a range of activities prior to their rostered commencement time so as to ensure they were ready to work at the rostered commencement time. The contraventions affected every worker within the warehouse engaged in stock selection. The contraventions extended over a significant period of time.
b.The Court is satisfied that the explanations given by Aldi that this was an inadvertent breach which was a result of a change to work practices in terms of the use of electronic timekeeping is unimpressive and simply seeks to explain away a deliberate decision by management to have workers perform necessary safety checks prior to the commencement of their rostered time. The Court does not accept that the practice grew organically and was unintended.
c.The Court is satisfied that the average loss to which employee was in the region of $3000, admittedly over an extended period, but a significant loss to a group of employees who are modestly remunerated.
d.No evidence has been provided to the Court of similar previous conduct by Aldi and this is the first time a contravention of the Act has been found.
e.The Court is satisfied that there is a degree of overlap between the contraventions which arise out of a single course of conduct.
f.Aldi is a significant employer, employing approximately 15,000 employees across Australia with 650 employees in the Prestons Distribution Centre, of which 140 employees work in stock selection.
g.The Court is satisfied that first, while there may have been a degree of genuine inadvertence initially, once the issue was brought to the attention of Senior Management within Aldi, there was a deliberate decision to litigate the matter in circumstances where, it should have been clear upon an independent appraisal of the factual circumstances, that the activities carried on by the employees would be classified as work-related. This is a matter of some aggravation. Further there has been no apology by Aldi to the affected workers. The lack of an apology also mitigates to some extent leniency based on remorse and contrition.
h.In the circumstances described above, the Court cannot other than find that Senior Management were involved in the contraventions to the extent that a defended hearing was necessary to resolve the issues. The Court does not accept that Senior Management would not have been involved in the decision to litigate.
i.The Court accepts that Aldi had paid compensation within a reasonable timeframe after the Court’s decision on liability and that the compensation that has been made has been calculated using a methodology arrived at in conjunction with the applicant.
j.The Court is satisfied that subsequent to the liability judgement, corrective action has been taken by Aldi, such that there will be no further like issues.
k.There has been no involvement of the Fair Work Ombudsman or other enforcement authorities.
l.The Court is of the view there is a need to ensure that there is a compliance with minimum standards employee remuneration and that it was only as a result of the applicant’s actions that this matter resulted in a positive outcome for the employees.
m.In terms of the need for specific and general deterrence, the Court notes that Aldi is a significant employer with access to specialised industrial relations advice. The Court has difficulty in understanding had that proper legal advice been sought, it would have quickly resulted in the error that is been identified by the Court being understood by senior management of Aldi. Whilst the Court notes that the total amount of compensation that has been paid may be significant in terms of its dollar value, that for an enterprise such as Aldi, it will not have the same impact as it might have on a smaller employer. The same can be said of any penalty that might be imposed, given the significant financial resources of Aldi.
CONCLUSION
Taking into account all of the above factors, the Court is of the view that is appropriate to impose a penalty that is sufficient to ensure that there is a degree of general deterrence for large employers who engage in systemic underpayment of employees. The Court is been mindful of the maximum penalty of $132,000.00, but that this has increased during the course of the litigation. The Court has taken into account that compensation has been paid relatively quickly.
Noting that there is a degree of aggregation in the contraventions, the Court is of the view that a penalty of $40,000.00 for each contravention is appropriate with an overall penalty of $80,000.00 for both contraventions.
Pursuant to s 546(3) of the Act this penalty is to be paid to the applicant. The penalty should be paid within 21 days of the date of this judgement.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Humphreys. Associate:
Dated: 14 March 2023
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