Skene v WorkPac Pty Ltd (No.2)
[2017] FCCA 525
•20 March 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SKENE v WORKPAC PTY LTD (No.2) | [2017] FCCA 525 |
| Catchwords: INDUSTRIAL LAW – Assessment of penalty for failure to pay accrued annual leave entitlements upon termination of employment – where both partiers intended employment to be casual. WORDS AND PHRASES – base rate of pay. WORDS AND PHRASES – ordinary hours of work. |
| Legislation: Fair Work Act 2009 (Cth), ss.16, 18, 44, 81(2), 87, 90, 99, 106, 111(2), 116, 117(2)(b), 119(2), 206, 546(3), 547, Div. 6, Part 2-2 |
| Cases cited: Automotive, Food, Metals Engineering, Printing and Kindred Industries Union v Mechanical Engineering Services Pty Ltd (No.2) (2008) 175 IR 351 Catlow v Accident Compensation Commission (1989)167 CLR 543 Centennial Northern Mining Services Pty Ltd v CFMEU (2015) 231 FCR 298 CEPU of Australia v CJ Manfield Pty Ltd (2011) 63 AILR 101-370 |
| Applicant: | PAUL ALEXANDER SKENE |
| Respondent: | WORKPAC PTY LTD |
| File Number: | BRG 457 of 2014 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 17 March 2017 |
| Date of Last Submission: | 17 March 2017 |
| Delivered at: | Brisbane |
| Delivered on: | 20 March 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Reed |
| Solicitors for the Applicant: | Slater & Gordon Lawyers |
| Counsel for the Respondent: | Mr Wood of Queens Counsel with Mr Haddrick |
| Solicitors for the Respondent: | Clarkekann Lawyers |
ORDERS
Within 28 days of the date of these orders, the respondent pay to the applicant $27,789.72 comprising:
(a)$21,054.69 by way of compensation; and
(b)$6,735.03 by way of interest on that compensation calculated to the date of these orders.
Otherwise, all outstanding applications are dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 457 of 2014
| PAUL ALEXANDER SKENE |
Applicant
And
| WORKPAC PTY LTD |
Respondent
REASONS FOR JUDGMENT
On 24 November, 2016 I delivered reasons for determining that Mr Skene, although employed pursuant to a contract of employment in a nominated capacity as a “casual”, was nonetheless entitled to be paid annual leave because he was not a casual employee for the purposes of s.87 of the Fair Work Act2009 (Cth): Skene v Workpac Pty Ltd [2016] FCCA 3035.
Mr Skene had been employed with WorkPac at Rio Tino’s Clermont Mine from 20 July, 2010 to 23 April, 2012. During that time he did not take any paid annual leave and he was not paid anything in respect of untaken paid annual leave upon the termination of his employment. Because of the way in which Mr Skene was engaged by WorkPac, Mr Skene did not expect to be able to take paid annual leave while working for WorkPac. Nonetheless, after his employment came to an end, Mr Skene pursued a claim against WorkPac to the effect that he was entitled to accrue annual leave and to be a sum in respect of that accrued but untaken entitlement upon the termination of his employment.
I found Mr Skene’s case established. Although his employment contract nominated that he was a casual employee and he was not entitled to annual leave according to its terms, I found that he was “other than a casual employee” for the purposes of Div. 6 Part 2-2 of the Fair Work Act 2009 (Cth). WorkPac’s failure to make payment in respect of untaken paid annual leave that had accrued pursuant to s.87 of the Fair Work Act upon termination of Mr Skene’s employment was a breach of s.44 of the Act.
Following my determination that Mr Skene was entitled to paid annual leave or payment in lieu thereof upon termination of his employment, I made directions for the parties to file written submissions relating to:
a)the amount of compensation to which Mr Skene was entitled by reason of WorkPac’s contravention of the Fair Work Act;
b)interest on that compensation;
c)the pecuniary penalty, if any, that ought to be imposed upon WorkPac for contravening s.44 of the Fair Work Act; and
d)to whom the pecuniary penalty should be paid in accordance with s.546(3) of the Fair Work Act.
Compensation
The parties agree that the compensation to which Mr Skene is entitled under my earlier reasons is equivalent to the amount that he ought to have been paid by way of untaken paid annual leave at the time his employment was terminated.
Section 87 of the Fair Work Act deals with the entitlement to and accrual of annual leave. That is generally speaking, four weeks in every year but five for certain shiftworkers. The parties now agree that Mr Skene was a shiftworker that attracted an entitlement to five weeks annual leave per year. The entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work and accumulates from year to year: s.87(2) of the Fair Work Act.
Whilst s.87 of the Fair Work Act deals with the accrual of annual leave entitlements, s.90 deals with payment in respect of that entitlement. Section 90 of the Fair Work Act provides:
Payment for annual leave
(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.
(2) If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave
As senior counsel for WorkPac submits, a consideration of ss.87 and 90 of the Act reveals that there are four elements to the calculation that needs to be undertaken in this case. They are:
a)Mr Skene’s base rate of pay;
b)Mr Skene’s ordinary hours of work per week;
c)Mr Skene’s entitlement to either four or five weeks per year of annual leave; and
d)the period of time in which annual leave entitlement was not taken (expressed as a number of years).
The parties agree that Mr Skene’s annual entitlement was five weeks per year and the relevant period of time over which annual leave entitlement was not taken (expressed as a number of years) is 1.75 years. The parties remain in dispute as to the first and second of the elements set out above.
Mr Skene’s base rate of pay
Subsection 90(1) of the Act establishes the minimum amount to which an employee who has accrued an entitlement to annual leave should be paid for that leave – the employee must be paid at the employee’s base rate of pay for the employee’s ordinary hours of work in the period.
The phrase base rate of pay is defined in s.16 of the Fair Work Act as follows:
16. Meaning of base rate of pay
General meaning
(1) the base rate of pay of a national system employee is the rate of pay payable to the employee for his or her ordinary hours of work, but not including any of the following:
a) incentive based payments of bonuses;
b) loading;
c) monetary allowances;
d) overtime or penalty rates;
e) any other identifiable amounts.
….
Subsection 90(2) of the Act makes provision for what is to occur if there is unpaid but accrued annual leave at the time an employee’s employment comes to an end. Arguably, the phrase the amount that would have been payable to the employee had the employee taken that period of leave in s.90(2) means an amount calculated by reference to the amount prescribed in s.90(1) of the Act – the employee’s base rate of pay.
However, that interpretation was rejected by the Full Court of the Federal Court of Australia in Centennial Northern Mining Services Pty Ltd v CFMEU (2015) 231 FCR 298. In that case, the Full Court endorsed the judgment of the primary judge who determined that s.90(1) of the Act is a statement of minimal obligation and that s.90(2) to return to an employee a sum which is higher than the minimum provided for in s.90(1). At [38] the Full Court (Tracey, Flick and Katzmann JJ) said:
It is undoubtedly true that the National Employment Standards are minimum standards. Centennial was also right when it argued that s 90 must be read as a whole and in the context of the National Employment Standards. But there is no reason to conclude that the primary judge did not do this. Nor does it necessarily advance Centennial’s case to read the section in this way. Section 90(1) creates the minimum standard: payment at the base rate for ordinary hours worked. The effect of s 90(2) is that if that is the rate at which the employee is paid when he or she takes annual leave, then that is the minimum amount that must be paid for any accrued untaken annual leave. If, on the other hand, there is a modern award or enterprise agreement which provides for payment at a higher rate for annual leave that is taken, then s 90(2) stipulates that that is the rate which is payable where annual leave has accrued but has not been taken. This is the natural way to read the section and there is nothing in the legislative context which would require a different interpretation.
Mr Skene’s claim is based upon s.90(2) of the Act. He argues that upon the termination of his employment, he was entitled to the amount that would have been payable to him had he taken the leave to which he became entitled pursuant to s.87(1) of the Act. He acknowledges that there is nothing in his contract of employment, or the industrial instrument which applied to his employment – the Workpac Pty Ltd (Coal) Industry Workplace Agreement 2007 – which gave him an entitlement to paid annual leave. In those circumstances, he argues that his entitlement must be calculated by reference to the minimum standard – the minimum to which he was entitled by reason of s.90(1) of the Act. That is to say a payment calculated according to his base rate of pay.
WorkPac approaches the task in the same way. The parties differ on the identification of the source of the base rate of pay and the amount.
As I pointed out in my earlier reasons, the rights and obligations enjoyed by Mr Skene and WorkPac in their employment relationship are sourced in:
a)the document entitled “Casual or Fixed Term Employee – Terms and Conditions of Employment (Version 1.2)”;
b)the Notice of Offer of Casual Employment signed by Mr Skene on 16 July, 2010;
c)the Workpac Pty Ltd (Coal) Industry Workplace Agreement 2007; and
d)the Fair Work Act.
Mr Skene’s employment contract provided for an hourly rate of $50.00. That was expressed to be a flat rate. But the terms and conditions of his employment did not specify what was included in that rate or how it was composed. On 11 April, 2012 his rate was increased to $55.00 per hour.
Mr Skene argues that his base rate of pay for the purposes of s.90(1) and consequently s.90(2) is $55.00 per hour. That is the amount he was paid pursuant to his contract. He says that whilst the rate might have included some allowances, the allowances are not identifiable, either as to type or amount. In those circumstances, his base rate of pay ought to be seen as $55.00 per hour.
WorkPac argues that it is appropriate to calculate the base rate of pay by reference to the standard rate of pay fixed by the WorkPac Agreement for casual workers of Mr Skene’s classification and not by way of the hourly rate set by Mr Skene’s employment contract.
WorkPac argues that authority supports its submission. A number of cases were drawn to my attention in which a calculation such as that under consideration had to be made by reference to the phrase ordinary time rate of pay. However, that phrase has never been used in the Fair Work Act. The phrase base rate of pay is found where in previous industrial legislation one might have expected to see the phrase ordinary time rate of pay. That Parliament has chosen to move away from a phrase with a well-accepted and well understood meaning (as WorkPac suggests) indicates that Parliament intended the phrase base rate of pay should have a different meaning to the phrase ordinary time rate of pay.
As to the phrase ordinary time rate of pay, Finkelstein J in Automotive, Food, Metals Engineering, Printing and Kindred Industries Union v Mechanical Engineering Services Pty Ltd (No.2) (2008) 175 IR 351 referred to the consideration given to the meaning of that phrase in Catlow v Accident Compensation Commission (1989)167 CLR 543 at 560 and Scott v Sun Alliance Australia Ltd (1994) 178 CLR 1 at 5. In the latter case the High Court observed that by reason of usage, the phrase has come to mean the standard rate of pay as fixed by the relevant legislative instrument, award or agreement. The Court was concerned with the meaning of that phrase as used in Workers Compensation Act 1988 (Tas.). The Court held:
However, the critical question for present purposes is whether the legislature, in using the expression “ordinary time rate of pay (as expressed by reference to a week)”, intended that it should apply to rates of pay fixed by individual contracts as well as industrial awards or agreements. In our opinion, the better conclusion is that the term was intended to apply only to rates of pay fixed by industrial awards or agreements.
Katzmann J’s reasons in Maughan Thiem Auto Sales Pty Ltd v Cooper (2014) 22 FCR 1 which were argued by WorkPac to be supportive of the proposition that “one looks to standard hours, not actual hours”. However, I consider that Maughan Thiem Auto Sales Pty Ltd supports Mr Skene’s argument rather than that of WorkPac. At issue in that case was the rate of pay to be used to calculate a redundancy payment claimed by the applicant in that case. His rate of pay specified in his employment contract included an 18% shift premium for permanent afternoon shift work. The applicant argued that the 18% should be included in his base rate of pay for the purposes of calculating his redundancy pay. However, after referring to the definition of base rate of pay set out in s.16 of the Fair Work Act and the applicant’s argument, Katzmann J (with whom Greenwood and Besanko JJ agreed) said:
24. I reject these submissions. The contract provided for a separately identifiable “penalty rate” for working the afternoon shift. In that respect it reflected the terms of the award. Presumably, that was its intention. I accept that merely because it is described as a “penalty rate” does not mean that it is. It might equally have been called a shift loading or allowance. But whatever it is called, it is a “separately identifiable” amount. Contrary to Mr Cooper’s argument, it does not matter that the salary is stated in the contract to be inclusive of the 18% “penalty rate”; what matters is that the rate falls within the terms of s 16(1) of the FW Act. The position would doubtless be different if the contract had been silent as to a shift allowance or had simply stated that the remuneration was inclusive of any or all penalties or allowances. The argument that s 16(1) was designed only to exclude award-derived penalty rates does not withstand scrutiny. There is no reason to read the section down in this way. On the contrary, the section is broad in its scope and, as Mr Cooper conceded, bonus payments, which are also mentioned in the subsection, are not typically creatures of awards.
(my emphasis)
Three points emerge from the emphasised portion of Katzmann J’s reasons. The first point, made out by the last sentence in the extract above, is that the text of s.16(1) of the Fair Work Act is against confining the identification of a base rate of pay to a rate specified in an industrial instrument such as the WorkPac agreement or some underlying award. The reference in s.16(1) to payments which are “not typically creatures of awards” means that an enquiry as to an employee’s base rate of pay must venture beyond an examination of any underlying industrial instrument.
The second point is that the Full Court plainly considered that the appropriate rate to be considered was that specified in the employment contract rather than in any industrial instrument that might have applied to the employment. WorkPac argues that it is plain that the Full Court was not taken to the decisions of the High Court in Scott and Catlow, but I do not think that that detracts from the weight to be attached to the decision. Were it the case that the base rate of pay was to be found in the relevant industrial instrument, discussion about the applicant’s contract rate and what was included within it having regard to the terms of the contract, would have been unnecessary.
The third point is that the Full Court expressly recognised that the position would “doubtless be different if the contract had been silent as to a shift allowance or had simply stated that the remuneration was inclusive of any or all kinds of penalties or allowances”. That is to say, without specification of separately identifiable amounts, s.16(1) had no work to do and in those circumstances the rate by which Mr Cooper’s redundancy payment would have been calculated would have been his entire contract rate.
There are some cases to the contrary. In Higgins v Australian Commercial Catering Pty Ltd [2015] FCCA 346 a judge of the Federal Circuit Court, in a case not unlike Maugham Thiem Motors Pty Ltd, equated the phrase ordinary time rate of pay with the phrase base rate of pay under the Fair Work Act relying upon Sun Alliance. The Court was seemingly not referred to Maugham Thiem Motors Pty Ltd.
The same approach was taken by another judge of the Federal Circuit Court in the earlier decision in CEPU of Australia v CJ Manfield Pty Ltd (2011) 63 AILR 101-370, a decision made before Maugham Thiem Motors Pty Ltd.
I am persuaded that by use of the phrase base rate of pay, Parliament did not intend that phrase to have the same meaning as ordinary time rate of pay as it had historically been used in many other State and Federal statutes. More than a difference in language, however, the text of s.16(1) makes it plain that the focus of the definition is beyond what might ordinarily be provided for in an award or some other industrial instrument. As Katmann J suggested, the section is apt to cover not only award-derived payments but also payments not usually found in awards or industrial instruments. That approach is also consistent with the Fair Work Act’s application to all national system employees, not just those covered by industrial instruments.
The rate at which Mr Skene was paid did not include any separately identifiable amounts unlike the contract in Maugham Thiem Pty Ltd. Mr Skene’s contract was silent as to any allowances or loadings that were included in his rate of pay.
That the expression base rate of pay is used in various parts and divisions of the Fair Work Act and is to be contrasted with the expression full rate of pay (as defined in s.18 of the Act) does not advance WorkPac’s argument. The expression ordinary time rate of pay, is not used at all in the Fair Work Act. WorkPac points out that the expression base rate of pay:
a)is used throughout the provisions relating to the National Employment Standards, being annual leave: s.90(1); unsafe job leave: s.81(2); personal or carer’s leave: s.99; compassionate leave: s.106; community service leave: s.111(2); public holiday absences: s.116 and redundancy pay: s.119(2);
b)is used in s.206 of the Act which commends that the base rate of pay under an enterprise agreement “must not be less than the award rate applied to the employee”, that is, it infers that there is always a base rate of pay under an agreement, and that rate is to be compared against the base rate set under the relevant award; and
c)is not used in s.117(2)(b) for the purposes of calculating the payment to be made to an employee on termination, where the requirement is that the calculation be based on the “full rate of pay for the hours the employee would have worked had the employment continued …”. The inference being that the Parliament intended the contractual entitlement, therefore, the Parliament used a more expansive phrase than base rate of pay to describe the payment required to be made.
However, Maugham Thiem Motors Pty Ltd, demonstrates that s.16(1) (and by extension s.18(1) of the Act) is not concerned with identifying the source of an employee’s remuneration – that is to say, whether it is a contractual entitlement or an entitlement arising under an industrial instrument of some description. It is concerned at identifying a rate of pay, described as the base rate of pay, which is revealed by taking the employee’s rate of pay and shearing it of all other identifiable payments meeting the description in the subparagraphs of s.16(1). In my view, s.16(1) is not concerned with identification of any underlying industrial instrument and then discerning a rate of pay from that instrument which meets the relevant description. If that was its object, there would be no need for references to payments not ordinarily associated with award remuneration. In my view, the object of s.16(1) is to identify the real base rate of pay received by an employee having regard to the contractual arrangements, or where there is no contractual stipulation dealing with that issue any operative industrial instrument, between the employer and the employee as Maugham Thiem Motors Pty Ltd demonstrates.
WorkPac argues that matters of history inform the construction of the expression base rate of pay. It points out, by its counsels’ submissions that the entitlement to annual leave was not a matter of Commonwealth legislation prior to the enactment of the Work Choices legislation: Workplace Relations Amendment (Work Choices) Act 2005 (Cth), Sch.1, s.92D(2). Previously, it was a matter left to the States. The Work Choices legislation’s expression basic periodic rate of pay was replaced in the Fair Work Act with base rate of pay.
However, despite WorkPac’s submissions to the contrary, in my view ordinary time rate of pay is not a “correlative term” to the phrase base rate of pay. If that is what Parliament intended, then it could easily have used the former phrase rather than the later. That is especially so given that it is found in other Commonwealth legislation: e.g., Safety, Rehabilitation and Compensation Act 1988 (Cth), s 8; and Military Rehabilitation and Compensation Act 2004 (Cth), s 171.
I am satisfied that Mr Skene’s base rate of pay for the purposes of s.90(1) of the Fair Work Act was, at the time his employment was terminated, $55.00 per hour. His claim for compensation ought to be calculated on that amount.
Ordinary hours of work
When his employment was terminated, Mr Skene was covered by a transitional instrument for the purposes of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth). Item 33 of Schedule 3 of the Transitional Act applied to him. That provision was in the following terms:
33 Employee’s ordinary hours of work
Item applies for purpose of determining employee’s ordinary hours of work for the FW Act.
(1) For the purposes of the FW Act, the ordinary hours of work of an employee to whom a transitional instrument applies are to be determined in accordance with this item.
Ordinary hours as specified in transitional instrument
(2) If a transitional instrument that applies to the employee specifies, or provides for the determination of, the employee’s ordinary hours of work, the employee’s ordinary hours of work are as specified in, or determined in accordance with, that instrument.
If subitem (2) does not apply and there is agreement
(3) If subitem (2) does not apply, the employee’s ordinary hours of work are the hours agreed by the employee and his or her employer as the employee’s ordinary hours of work.
If subitem (2) does not apply and there is no agreement
(4) If subitem (2) does not apply but there is no agreement under subitem (3), the ordinary hours of work of the employee in a week are:
(a) if the employee is a full time employee - 38 hours; or
(b) if the employee is not a full-time employee - the lesser of:
(i) 38 hours; and
…
(ii) the employee’s usual weekly hours of work.
If subitem (2) does not apply: agreed hours are less than usual weekly hours
(5) If:
(a) subitem (2) does not apply; and
(b) the employee is not a full-time employee; and
(c) there is an agreement under subitem (3) between the employee and his or her employer, but the agreed ordinary hours of work are less than the employee’s usual weekly hours of work;
the ordinary hours of work of the employee in a week are the lesser of:
(d) 38 hours; and
(e) the employee’s usual weekly hours of work.
Regulations may prescribe usual weekly hours
(6) For an employee who is not a full-time employee and who does not have usual weekly hours of work, the regulations may prescribe, or provide for the determination of, hours that are taken to be the employee’s usual weekly hours of work for the purposes of subitems (4) and (5).
Mr Skene worked a roster of seven 12.5 hour shifts, followed by seven days off, with the pattern repeated continuously. In other words, he worked, and was paid for, 87.5 hours in each 14 day period for an average of 43.75 hours per week throughout the course of his employment at the mine. The hours of work were set by Rio Tinto, the operator of the Clermont Mine, in accordance with fixed rosters provided 12 months in advance.
Mr Skene argues that he was employed as a “Flat Rate FTM” in accordance with clauses 5.5.5 and 8.1.1 of the WorkPac agreement. But I am not sure that is the case. Clause 8.1.1 of the WorkPac agreement provides that an FTM will be paid in one of two ways – either as a Base Rate FTM or a Flat Rate FTM – at the election of WorkPac. A flat rate FTM is paid the flat rate of pay “as prescribed in Schedules 3 and 4” to the WorkPac agreement for each classification: cl. 8.1.1(b) of the agreement. Mr Skene, however, was paid at a rate which is much greater than any of the prescribed rates in schedules 3 or 4 to the agreement. Arguably in the absence of being paid the prescribed rate Mr Skene was not a flat rate FTM for the purposes of the agreement. However, both parties have proceeded on the basis that Mr Skene was a flat rate FTM and so I shall also proceed on that basis.
Clause 13.2 of the WorkPac agreement provided that the ordinary hours of work for flat rate FTMs was a standard work week plus reasonable additional hours prescribed in Schedules 3 and 4 averaged over the particular work cycle being worked.
I am satisfied that Mr Skene’s ordinary hours of work, pursuant to the WorkPac agreement were those consistently worked by him and were an average of 43.75 hours per week.
I accept Mr Skene’s alternative argument that if sub-item 33(2) of Schedule 3 to the Transitional Act did not apply, then sub-item 33(3) did. A proper analysis of the contractual arrangement between Mr Skene and WorkPac was to the effect that he would be placed at the Clermont Mine and would work the hours nominated by Rio Tinto for the fixed wage rate stipulated by WorkPac. In those circumstances, the continuous fixed hours nominated by Rio Tinto must be taken to have been the subject of agreement between the applicant and the respondent. Those hours were described uniformly and thus the ordinary hours of work were 87.5 hours in each 14 day period.
Conclusion on compensation
In light of those findings, I assess Mr Skene’s compensation at $21,054.69. That is calculated as five weeks x 1.75 years x 43.75 hours x $55.00.
Interest on compensation
Section 547 of the Fair Work Act requires the Court to award interest on the amount of compensation unless good cause is shown to the contrary. No good cause has been shown not to make an award of interest.
WorkPac accepts the interest rates contended for by Mr Skene. Accordingly I assess interest as $6,735.03 calculated as follows:
| Period | Cash rate | Interest rate to be applied | Amount of interest |
| 24.04.12 - 30.06.12 (68 days) | 4.25% | 8.25% | $322.72 |
| 01.07.12 - 31.12.12 (0.5 years) | 4% | 8% | $789.55 |
| 01.01.13 - 30.06.13 (0.5 years) | 3.00% | 7.00% | $736.91 |
| 01.07.13 - 31.12.13 (0.5 years) | 2.75% | 6.75% | $710.60 |
| 01.01.14 - 30.06.14 (0.5 years) | 2.50% | 6.50% | $684.28 |
| 01.07.14 - 30.12.14 (0.5 years) | 2.50% | 6.50% | $684.28 |
| 01.01.15 - 30.06.15 (0.5 years) | 3% | 7% | $684.28 |
| 01.07.15 - 31.12.15 (0.5 years) | 2% | 6% | $631.64 |
| 01.01.16 - 30.06.16 (0.5 years) | 2.00% | 6.00% | $631.64 |
| 01.07.16 - 31.12.16 (0.5 years) | 1.75% | 5.75% | $605.32 |
| 01.01.17-21.03.17 (80 days) | 1.50% | 5.50% | $253.81 |
| TOTAL INTEREST | $6,735.03 | ||
Penalty
The power to order a pecuniary penalty is set out in s.546 of the Fair Work Act. That section provides that the Court may order a person to pay the pecuniary penalty that the Court considers appropriate.
For the purposes of the contravention found by me in this case, the relevant point in time is April, 2012 when Mr Skene’s employment was terminated. WorkPac agrees that the maximum penalty that can be imposed for the contravention is $33,000.00. WorkPac has not been found to have contravened the Fair Work Act before.
Mr Skene argues that an appropriate pecuniary penalty in this case “would be in the order of $15,000.00”. Three particular matters are said to be relevant to the imposition of the penalty of that order.
First, Mr Skene argues that the contravention had a substantial effect on him, depriving him of annual leave entitlements for the period of his employment and for a significant time after the termination of employment. However, in my view, the contravention (which was a failure to pay annual leave entitlements upon the termination of his employment and not a failure to permit him to take annual leave) did not have the effect of depriving him of his annual leave entitlements for the period of his employment. As WorkPac points out both Mr Skene and WorkPac’s representatives understood and intended that Mr Skene be engaged as a casual employee and their understanding about that did not change. Indeed, in my primary reasons I found that “both Mr Skene and the respondent’s witness Ms Gray gave evidence that they considered the employment to be casual employment … [and that Mr Skene] considered that his employment was casual…. Mr Skene gave evidence that he was never notified that his employment status changed.”
Second, Mr Skene argues that there is a strong need for general deterrence, WorkPac being a large labour hire company supplying labour to the coal mining industry. However, I reject that submission. The evidence does not demonstrate any systematic, wilful or deliberate contravention of the Fair Work Act. The evidence demonstrates that WorkPac attempted to achieve a particular outcome in terms of its employment relationship with Mr Skene. Mr Skene was not misled in any way and indeed by accepting the offer of employment made to him on the basis that it was offered by WorkPac, represented to WorkPac that he was accepting casual employment. WorkPac’s contravention of the Act was not reckless. It was “unknowing”.
Third, Mr Skene argues that there is a strong need for specific deterrence in circumstances where WorkPac employs other employees on similar terms and conditions to that under which it employed the applicant. I reject that submission also. The evidence reveals that WorkPac was mistaken about the legal effect of the employment arrangements having regard to the Fair Work Act. There is nothing in the evidence to suggest that the action taken by WorkPac was taken with a view to avoiding, using illegitimate means, its obligations under the Fair Work Act. There is nothing to suggest that WorkPac will not amend its practices accordingly.
Mr Skene referred me to the decision of Barker J in MacMahon Mining Services Pty Ltd v Williams (2010) 201 IR at [74], [96]-[97] where his Honour dismissed an appeal against a pecuniary penalty of $14,850.00 imposed by the Federal Magistrates Court for a similar type of contravention.
In that case his Honour held that, apart from deterrence, the Federal Magistrate (as the Federal Circuit Court Judge then was) had correctly noted as relevant factors that the employer in that case was a large well-resourced company with the capacity to take human resources advice and legal advice as to the legality of its employment arrangements and that such large well-resourced companies should comply with the law. Mr Skene submits that those factors apply with equal force to the respondent in this case.
I accept that they do. WorkPac is a large well-resourced company. There is no evidence that it took legal advice on the proposed employment arrangements with Mr Skene or any other WorkPac employee. The taking of that advice might have brought the decision in MacMahon Mining to the attention of Mr Howard Powell, the National Employee Relations Manager for WorkPac. Mr Powell gave evidence at the penalty hearing. He has considerable experience in employee and industrial relations. He gave advice to WorkPac.
WorkPac submits that no penalty should be imposed by the Court because:
a)both parties thought that Mr Skene was a casual employee;
b)WorkPac had an employed industrial relations advisor upon whose advice it acted;
c)WorkPac has never been found to have breached s.44 (or any other provision in relation to legislative minimum conditions of employment, including in relation to the National Employment Standards) of the Fair Work Act previously. WorkPac has a good track record.
In my view, the imposition of a penalty is not warranted in the circumstances of this case. I am cognizant of the words of Barker J in MacMahon Mining, that a penalty was warranted in that case to “remind organisations, like MacMahon, of a certain size and with the financial resources to properly explore in advance the legal implications of their proposed actions, to closely consider the legality of the employment arrangements they propose to put in place before doing so”.
However, factually this case is different to MacMahon Mining in that here WorkPac has taken the advice of its employed National Employee Relations Manager. And, to an extent the approach taken by WorkPac to characterise Mr Skene’s employment as casual pursuant to his contract was not incorrect. Mr Skene was not entitled to annual leave under his employment contract. The difficulty for WorkPac has arisen because of the incongruity between the contractual position and the position pursuant to the Fair Work Act, something which was absent in MacMahon Mining. In MacMahon Mining the applicant was found to be a casual employee for the purposes of his contract a finding which distinguishes it from the present case.
Conclusions
WorkPac must pay Mr Skene the following sums:
a)$21,054.69 by way of compensation; and
b)$6,735.03 by way of interest on that compensation.
Accordingly, I make the orders set out at the commencement of these reasons.
I certify that the preceding fifty-seven (57) paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Associate:
Date: 21 March 2017
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