The Australian Workers Union v De Costi Seafoods Pty Ltd (No 2)
[2023] FedCFamC2G 102
Federal Circuit and Family Court of Australia
(DIVISION 2)
The Australian Workers Union v De Costi Seafoods Pty Ltd (No 2) [2023] FedCFamC2G 102
File number(s): SYG 952 of 2020 Judgment of: JUDGE OBRADOVIC Date of judgment: 16 February 2023 Catchwords: INDUSTRIAL LAW – Penalty hearing – failing to pay overtime rates in accordance with award – contraventions of the Fair Work Act 2009 (Cth) – whether one contravention – deterrence - Seafood Processing Award 2010 - Seafood Processing Award 2020 Legislation: Fair Work Act 2009 (Cth) ss 45, 134, 546, 557
Seafood Processing Award 2010 cl 23.2(d)
Seafood Processing Award 2020 cl 13.2(g)
Cases cited: Australasian Meat Industry Employees Union v Dick Stone Pty Ltd (No 2) [2022] FCA 1263
Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union [2018] HCA 3
Australian Building and Constructions Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
Fair Work Ombudsman v Kentwood Industrial Pty Ltd (No.3) [2011] FCA 579
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301
Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7
Rocky Holdings Pty Ltd v Fair Work Ombudsman [2014] FCAFC 62
The Australian Workers Union v De Costi Seafoods Pty Ltd [2022] FedCFamC2G 179
Trade Practices Commission v CSR Ltd [1990] FCA 521
Division: Division 2 General Federal Law Number of paragraphs: 124 Date of hearing: 10 November 2022 Place: Parramatta Appearing for the Applicant: Mr Slevin Solicitors for the Applicant: The Australian Workers Union Appearing for the Respondent: Mr Chin SC with Mr Fuller of Counsel Solicitors for the Respondent: Edge Legal ORDERS
SYG 952 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: THE AUSTRALIAN WORKERS’ UNION
Applicant
AND: DE COSTI SEAFOODS PTY LTD (ACN 606 307 804)
Respondent
order made by:
JUDGE OBRADOVIC
DATE OF ORDER:
16 February 2023
THE COURT ORDERS THAT:
1.For contravening s.45 of the Fair Work Act 2009 (Cth) (“FWA”) by:
(a)failing to pay Ms Elisapeta Tuala in respect of hours worked before 6am in accordance with clause 23.2(d) of the Seafood Processing Award 2010 (before 4 February 2020) and clause 13.2(g) of the Seafood Processing Award 2020 (from 4 February 2020); and
(b)failing to pay Mr Suman Pokharel in respect of hours worked before 6am in accordance with clause 23.2(d) of the Seafood Processing Award 2010 (before 4 February 2020) and clause 13.2(g) of the Seafood Processing Award 2020 (from 4 February 2020).
the respondent pay a penalty of $60,000, with such penalty to be paid to the applicant pursuant to s.546(3)(b) FWA.
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 OBRADOVIC:
On 18 March 2022, the Court delivered its reasons for judgment in The Australian Workers Union v De Costi Seafoods Pty Ltd [2022] FedCFamC2G 179 (“liability judgment”).
These are reasons for judgment in respect of the penalty to be imposed on the respondent, De Costi Seafoods Pty Ltd (“De Costi Seafoods”), following the Court’s decision that it contravened s.45 Fair Work Act 2009 (Cth) (“FWA”) by failing to pay two employees overtime rates in accordance with the Seafood Processing Award 2010 (“2010 Award”) and the Seafood Processing Award 2020 (“2020 Award”).
Relevant Background
As noted in the liability judgment, De Costi Seafoods is a seafood processing company, and a wholly owned subsidiary of Tassal Group Limited (“Tassal”). It operates a processing facility at Lidcombe, New South Wales (“Lidcombe site”).
The Australian Workers’ Union (“AWU”) brought proceedings on behalf of two employees, Ms Elisapeta Tuala and Mr Suman Pokharel. Those proceedings were commenced by way of Originating Application filed on 20 April 2020. The liability judgment was published on 18 March 2022.
This judgment should be read together with the liability judgment.
Tassal acquired De Costi Seafoods in July 2015.
At the time of the acquisition of De Costi Seafoods by Tassal in July 2015, Ms Kaylene Little, Head of People and Communities at Tassal, requested its external industrial relations consultant, Mr Rodney Burles, to conduct a review of employment arrangements for the Lidcombe site.
Whilst Mr Burles is not employed by Tassal, he has been provided with a Tassal email address and title, and utilises those for the purposes of the work he does with Tassal. Mr Burles has worked with Tassal as an external consultant for approximately 8 years.
Mr Burles does not appear to have any legal qualifications, although he says he has been involved with industrial relations since 2002 when he was a delegate for the Communications, Electric and Plumbing Union (“CEPU”). He left the CEPU in 2012, and formed his own consultancy company. Mr Burles currently works with around 150 employer organisations.
Following his review, Mr Burles advised Ms Little, that he had identified that “early starters were being paid ordinary time for their early work and were not being paid overtime or any other penalty rate”.[1]
[1] Affidavit of Kaylene Little filed 31 October 2022 at [9]
Ms Little then requested Mr Burles to take “a deeper look into the matter and provide advice as to whether this was consistent with the Award.”[2] Consequently, Mr Burles reviewed the wording of the award and formed the view that employees who started work prior to 6am were non-continuous shift workers and not subject to any shift allowance. Mr Burles suggested to Ms Little that “we should seek legal advice to confirm my view”.[3] Mr Burles then sought “verbal legal advice from our legal advisers at the time”.[4]
[2] Affidavit of Kaylene Little filed 31 October 2022 at [9]
[3] Affidavit of Rodney Burles filled 31 October 2022 at [8]
[4] Affidavit of Rodney Burles filled 31 October 2022 at [8]
It appears that the oral advice which was provided to Mr Burles was from Tassal’s solicitors at the time, although this is not abundantly clear.
In any event, it appears that the oral advice which Mr Burles received confirmed his view. Consequently, Tassal did not change the work patterns or payment arrangement for early starters after it acquired De Costi Seafoods, but rather continued to pay such employees in line with how they had been paid prior to Tassal’s acquisition.
Ms Tuala commenced employment with De Costi Seafoods on 31 October 2016. Ms Tuala usually commenced work at 4am or 5am, and on some occasions she was required to start at 3am.
Mr Pokharel commenced employment with De Costi Seafoods on 19 February 2018. Mr Pokharel usually commenced work at 3am or 4am, and on some occasions he was required to start at 2.30am.
In 2019, following visits to the Lidcombe site in attempts to organise the site, AWU identified that there were employees at De Costi Seafoods who habitually commenced work prior to 6am, but that such employees were not paid overtime rates.[5]
[5] Affidavit of Chris Donovan filed 12 August 2022 at [4] – [10]
As a consequence, AWU wrote to De Costi Seafoods on 9 September 2019, outlining in detail its position that a number of its members who are employed at the Lidcombe site as being employed under the relevant award and commencing work before 6am, are being underpaid. AWU requested that De Costi Seafoods correct the identified underpayments immediately, including back payments.[6]
[6] Affidavit of Chris Donovan filed 12 August 2022 at [11] and CD-1
A response to AWU’s request for the identified underpayments to be rectified came by way of an email, dated 9 September 2019 from Mr Burles. De Costi Seafoods’ position was thereby made clear, it considered the identified employees as “non-continuous shift workers” and not day workers,[7] a position it maintained throughout the liability proceedings in respect of Ms Tuala and Mr Pokharel. De Costi Seafoods refused to pay such employees any overtime for the hours they worked prior to 6am.
[7] Affidavit of Chris Donovan filed 12 August 2022 at [12] and CD-2
There were then a number of discussions and/or communications between AWU and De Costi Seafoods (through Mr Burles and otherwise) in respect of AWU’s claim. AWU, inter alia, explained the rationale for its position as there being no mention of “day shift” in the award, and that “the absence of this implies that all other workers who are not night shift or afternoon shift workers are day workers.”[8]
[8] Affidavit of Chris Donovan filed 12 August 2022 at [14] and CD-3
On 18 October 2019, De Costi Seafoods through its lawyers, responded rejecting AWU’s claim and argued that De Costi Seafoods was not liable for overtime.
The letter from De Costi Seafoods’ lawyers miscategorised[9] AWU’s claim as a position “that shiftworkers who work outside the span of hours for day workers… are entitled to be paid overtime rates…” [10] De Costi Seafoods, inter alia, took the position that the employees in question were on a “day shift” (which was not defined anywhere in the award) and that the absence of a reference to “day shift” did not mean that an employee cannot be a “shiftworker” unless they are on an afternoon or night shift as defined in the award.
[9] Said to be an “understanding” Affidavit of Chris Donovan filed 12 August 2022 at CD-4
[10] Affidavit of Chris Donovan filed 12 August 2022 at [15] and CD-4
On 31 October 2019, AWU lodged a dispute in the Fair Work Commission, outlining its position as follows:
1.The dispute relates to the interpretation of the provision of the Seafood Processing Award 2010 (the Seafood Award) dealing with shiftwork, day work and overtime and their application to a cohort of employees at the respondent’s worksite at Lidcombe NSW…
2. The relevant cohort of employees are those:
•Who commence work before 6:00am; and
•Who stop working after 8:00am.
3. …
4.These employees begin work before day work begins, as prescribed by cl 23.2… That clause provides that the ordinary hours of work for day workers must be between 6:00am and 6:00pm, unless varied by up to one hour at either end of the spread by agreement.
5. These employees also do not satisfy the ‘night shift’ definition in cl 24.1…
Union’s Position
6.… the relevant cohort are entitled to overtime as (a) they are not performing shiftwork within the meaning of cl 24… and (b) they are working outside the span of hours for day workers as defined in cl 23…
Company’s Position
7.… employees in the relevant cohort are performing shiftwork within the meaning of cl 24… and have no entitlement to overtime or any shift loading.[11]
[11] Affidavit of Chris Donovan filed 12 August 2022 at [16] and CD-5
The dispute was heard by the Fair Work Commission on 8 November 2019, and at a conference before the Commission it was agreed that the parties would exchange particulars.
Further communications occurred between the parties, but the dispute remained unresolved.
De Costi Seafoods refused to arbitrate the matter in the Fair Work Commission.
On 9 December 2019, AWU lodged a right of entry application under s.481 FWA (“Entry Notice”).
On 10 December 2019, De Costi Seafoods’ lawyers wrote to AWU stating they did not believe the Entry Notice complied with the FWA. It appears that while De Costi Seafoods was aware of the breadth of the dispute,[12] it was taking a pedantic approach to the Entry Notice.
[12] See letters dated 10 December 2019 from Edge Legal to AWU, being annexures KL7 to Affidavit of Kaylene Little filed 31 October 2022; See also letter dated 10 December 2019 from Edge Legal to AWU being annexure CD-9 to Affidavit of Chris Donovan filed 12 August 2022.
On 11 December 2019, Mr Skelton (of AWU) attempted to enter De Costi Seafoods’ premises but was denied access.
Further communications occurred between the parties about the documents sought by AWU and attempts were made to resolve the request for documents, but again that matter (as well as the main dispute of underpayments) remained unresolved. AWU has maintained that the entirety of the records which it sought from De Costi Seafoods have not been provided. It appears that this is correct.
Ultimately, after being provided with information in relation to the working hours of Ms Tuala and Mr Pokharel, and receiving their confirmation that such information accorded with their recollection, AWU decided to commence these proceedings in the Court. As noted earlier, proceedings were commenced on 20 April 2020.
Either at the same time or shortly thereafter, the parties commenced to negotiate an enterprise agreement being “The Tassal Lidcombe Processing Agreement 2020” in respect of the Lidcombe site. During the bargaining AWU submitted a log of claims.
Ultimately, the enterprise agreement was approved by the Fair Work Commission on 18 May 2021, with a new shift allowance being paid to those employees who commence work before 5am and with undertakings from De Costi Seafoods being given in respect of early morning shifts not to start before 3am.
These proceedings were listed for a hearing with respect to liability on 31 May 2021, following a number of procedural orders being made by the Court. Judgment was delivered on 18 March 2022.
In the liability judgment the Court made the following findings:
[80]In relation to Ms Tuala’s employment, De Costi Seafoods contravened the 2010 Award from 31 October 2016 to 3 February 2020 and the 2020 Award from 4 February 2020 onwards, by failing to pay Ms Tuala overtime for the hours she worked before 6am.
[81]In relation to Mr Pokharel’s employment, De Costi Seafoods contravened the 2010 Award from 19 February 2018 to 3 February 2020, and the 2020 Award from 4 February 2020 onwards, by failing to pay Mr Pokharel overtime for hours he worked before 6am.
[82]The respondent has therefore contravened s.45 of the Fair Work Act 2009 by failing to pay overtime payments to the employees in accordance with the relevant modern awards.
[83]De Costi Seafoods is to pay Ms Tuala and Mr Pokharel their unpaid overtime entitlements, including interest up to judgment, pursuant to ss.545(1) and 547 of the FWA.
[84]The matter will be listed to determine what penalty is to be imposed on De Costi Seafoods for contravening the relevant awards pursuant to s.546 of the FWA.
Further to the Court’s order of 18 March 2022, that the parties within 14 days provide to the Court a short minute of order to give effect to the reasons for judgment in the liability judgment, on 1 April 2022, the Court made orders as follows:
(1)The Court declares that the respondent contravened the following civil remedy provisions of the Fair Work Act 2009 (Cth) (“the Act”):
(a)section 45 by failing to pay overtime rates to Ms Elisapeta Tuala in respect of hours worked before 6am in accordance with clause 23.2(d) of the Seafood Processing Award 2010 (before 4 February 2020) and clause 13.2(g) of the Seafood Processing Award 2020 (from 4 February 2020); and
(b)section 45 by failing to pay overtime rates to Mr Suman Pokharel in respect of hours worked before 6am in accordance with clause 23.2(d) of the Seafood Processing Award 2010 (before 4 February 2020) and clause 13.2(g) of the Seafood Processing Award 2020 (from 4 February 2020).
(2)Pursuant to section 545(1) of the Act, the Court orders that within 28 days of these orders the respondent:
(a)Pay Ms Tuala $9,787.43 being the loss Ms Tuala suffered because of the contraventions referred to in order (1)(a); and
(b)Pay Mr Pokharel $12,154.91 being the loss Mr Pokharel suffered because of the contraventions referred to in orders (1)(b).
(3)Pursuant to section 547(2) of the Act, the Court orders that within 28 days of these orders the respondent pay interest to the employees on the amounts referred to in order (2) above.
By 29 April 2022, neither Ms Tuala nor Mr Pokharel had received payment from De Costi Seafoods in accordance with orders of this Court.
After checking with Ms Tuala and Mr Pokharel again on 2 May 2022 whether payment had been received, AWU wrote to the respondent’s legal representatives advising that time for payment had passed, and requesting payments to be made by close of business on 3 May 2022. No payment was made or received.
On 4 May 2022, AWU again checked with Ms Tuala and Mr Pokharel whether they had been paid the judgment amount, and received confirmation that they had not been so paid. An email was sent by AWU to De Costi Seafoods’ solicitors chasing payment again. Later that day, a solicitor from the firm retained by De Costi Seafoods telephoned AWU and advised that payments had now been made.
On 22 April 2022, De Costi Seafoods published a bulletin to its employees which read:
As you may be aware, the interpretation of the payment of wages prior to the 6am commencement in the Seafood Processing Award has been determined by the NSW Federal Circuit Court in its decision handed down on the 18 March 2022. In summary, the decision was an alternate interpretation to the one we had been operating under.
Our objective is always to be transparent and operate in good faith with our people. We believed we had done that in the interpretation we had applied in this instance – particularly as we had inherited this position from the previous owner … However, the Court in this instance has taken an alternate position in the interpretation. We respect the Court’s decision and believe it is important to act quickly to rectify the situation and make any necessary adjustments. We will play by the umpire’s decision as it is the right thing to do.
…
We will review any hours worked for current or previous employees between 18th March 2022 and 18th March 2016. The aim is to determine if you worked any hours prior to 6am and if correct payments have been made.[13]
[13] Affidavit of Kaylene Little filed 31 October 2022 at annexure KL1
On 24 May 2022, De Costi Seafoods provided letters to its current employees who were affected by the decision, and included calculations of what each employee was owed. Payments to current employees who were identified as being affected by the Court’s decision (i.e. payments to employees who were identified as not being paid overtime in accordance with the applicable award) were made on 27 May 2022, plus interest of 4.1% per annum to the date of payment.
From the week commencing 15 August 2022, De Costi Seafoods notified its former employees of their underpayments and provided them with calculations as to what they were owed. Payments to former employees who confirmed bank details were made thereafter. The letters sent to the former employees were in similar terms to the bulletin sent to current employees, and included the following:
Recently the NSW Federal Circuit Court handed down a decision, on 18 March 2022, regarding the interpretation of the payment of wages prior to the 6am commencement in the Seafood Processing Award. In summary, the decision was an alternate interpretation to the one we had been operating under.
… We wish to confirm that you are entitled to an adjustment…[14]
[14] Affidavit of Kaylene Little filed 31 October 2022 at annexure KL3
As at 6 October 2022, De Costi Seafoods has paid a total of $1,589,694.10 to 159 of its current employees as well as 71 former employees, being payments due to such employees under the terms of the relevant awards at overtime rates for hours worked prior to 6am.[15]
[15] Affidavit of Kaylene Little filed 14 October 2022 at [26]
The matter was then listed for penalty hearing on 10 November 2022, once again following the making of procedural orders.
Parties’ Submissions
In respect of penalty, AWU submits that the contravention by De Costi Seafoods is in all of the circumstances serious, and that there is a need for both general and specific deterrence. As such, AWU submits that the penalty should reflect the seriousness of the conduct.
De Costi Seafoods opposes AWU’s position and argues that the most appropriate penalty in the circumstance is 10% of the maximum for one contravention, being $6,600.
AWU submits that any penalty imposed by the Court should be paid directly to it, and De Costi Seafoods does not oppose this.
Consideration
Principles Relevant to the Determination of Penalty
The primary purpose of a pecuniary penalty is to promote the public interest in compliance. It is “to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act”.[16] The “price” must be such that it is not regarded by the contravener as an “acceptable cost of doing business”.[17]
[16] Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 (“FW Building Industry Inspectorate”) at [55], citing Trade Practices Commission v CSR Ltd [1990] FCA 521
[17] FW Building Industry Inspectorate at [55] and [59]
The greater the impact of the penalty on the contravener, the more potent will be the example that the penalty sets for other potential contraveners. Likewise, it will be more likely that the contravener will seek to avoid the risk of subjection to further penalties and be deterred from further contravention.[18]
[18] Australian Building and Construction Commission v Construction, Forestry, Mining and Energy Union [2018] HCA 3 at [116]
Penalties should however be just and appropriate,[19] and a penalty should not be oppressive or crushing.[20]
[19] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 (“McAlary-Smith”) at [23]-[25]
[20] Kelly v Fitzpatrick [2007] FCA 1080 (“Kelly”) at [30]
An appropriate method to determine the question of penalty may be summarised as follows:
(a)identify the separate contraventions;
(b)consider whether each separate contravention should be dealt with independently or whether separate contraventions constitute a single course of conduct within the meaning of s.557(1) FWA;
(c)consider whether the contraventions should be further grouped;
(d)consider an appropriate penalty as to each contravention (i.e. each final individual group of contraventions, taken in isolation); and
(e)review the aggregate penalty by application of the “totality principle”.[21]
[21] Fair Work Ombudsman v Kentwood Industrial Pty Ltd (No.3) [2011] FCA 579 at [10]; Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 (“NSH North”) at [36]
Factors Relevant to Penalty
The relevant factors going to penalty have been identified as follows:
(a)The nature and extent of the conduct which led to the breaches;
(b)The circumstances in which that conduct took place;
(c)The nature and extent of any loss or damage sustained as a result of the breaches;
(d)Whether there had been similar previous conduct by the respondent;
(e)Whether the breaches were properly distinct or arose out of the 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 the enforcement authorities;
(l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
(m)The need for specific and general deterrence.[22]
[22] Kelly at [14] adopting Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[59]. See also Australasian Meat Industry Employees Union v Dick Stone Pty Ltd (No 2) [2022] FCA 1263 at [32] (“Dick Stone”)
Consideration of the well-known penalty factors is to be undertaken within the overarching consideration of what penalty will achieve the principal object of deterrence, both specific and general. These factors are well-settled, but not a “rigid catalogue of matters for attention”.[23]
[23] McAlary-Smith at [88]-[91]
The identified factors, while a convenient checklist, do not restrict the Court in the exercise of its discretion.
The penalty should be no more and no less than is necessary to achieve the purpose to deter the wrongdoer from engaging in contraventions of a like kind and to deter others who might be tempted to contravene. The penalty should be no more than might be considered to be reasonably necessary to deter further contraventions of a like kind.[24]
[24] Dick Stone at [25], citations omitted
The imposition of the maximum penalty is appropriate where it is considered necessary for the purpose of deterrence even if the nature of the conduct does not fall into the most serious category of wrongdoing.[25]
[25] Dick Stone at [29] citing Australian Building and Constructions Commissioner v Pattinson [2022] HCA 13
The Contraventions
Following its liability judgment, the Court declared that the respondent contravened s.45 FWA being a civil remedy provisions by:
(a)failing to pay overtime rates to Ms Tuala in respect of hours worked before 6am in accordance with clause 23.2(d) of the Seafood Processing Award 2010 (before 4 February 2020) and clause 13.2(g) of the Seafood Processing Award 2020 (from 4 February 2020); and
(b)by failing to pay overtime rates to Mr Pokharel in respect of hours worked before 6am in accordance with clause 23.2(d) of the Seafood Processing Award 2010 (before 4 February 2020) and clause 13.2(g) of the Seafood Processing Award 2020 (from 4 February 2020).[26]
[26] Order by Judge Obradovic dated 1 April 2022
For the purposes of the current contraventions, s.557 FWA provides that unless a court has previously imposed a pecuniary penalty for an earlier contravention of s.45, then 2 or more contraventions of a civil remedy provision, are taken to constitute a single contravention if the contraventions are committed by the same person, and the contraventions arose out of a course of conduct by that person.
Furthermore, s.557 FWA operates to group together contraventions of the same term of a modern award.[27]
[27] Rocky Holdings Pty Ltd v Fair Work Ombudsman [2014] FCAFC 62 at [26]
It is common ground between the parties that the 2020 Award was not a new industrial instrument, but rather an amendment of the 2010 Award.
As such, it is common ground between the parties that the contraventions of the same civil remedy provision are taken as a single contravention and that given the amendments to the award, that there was one contravention of a civil remedy provision for the purposes of penalty.
The maximum pecuniary penalty that may be imposed for a contravention of s.45 FWA is 300 penalty units: s.546(2)(b) FWA. During the period of the contravention the maximum penalty increased from $54,000 to $66,600 (across the time period of the 2010 Award and the 2020 Award).
Where a contravention of the FWA involves a course of conduct which begins before an amendment which increases the amount of penal units and continues after the increase comes into effect, the Court may take into account the increase in fixing the appropriate penalty.[28]
[28] Dick Stone at [21] citing Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 at [396]-[398]
It is common ground that the maximum penalty is therefore $54,000 to $66,600.
Appropriate penalty
Nature and extent and circumstances of the conduct
The relevant facts have been set out at [3]-[43] earlier in these Reasons for Judgment.
The conduct engaged in by De Costi Seafoods was long-standing and it affected low-paid and unskilled employees. The employees were paid under a modern award, which provides minimum terms and conditions.
Both Ms Tuala and Mr Pokharel worked hours from very early in the morning, which may be properly described as unsociable hours. The awards pursuant to which they were paid provided penalty rates (by way of overtime) to employees who were required to work these unsociable hours.
De Costi Seafoods submits that its erroneous interpretation of the award was in all of the circumstances reasonable, and points to some of the Court’s findings in the liability judgment in support of this submission, in particular paragraphs [31], [49] and [51]. However, the Court’s Reasons for Judgment in respect of liability should be read as a whole. When read as a whole, it is clear that the respondent is cherry picking phrases and sentences to support its position.
The Court made it clear in the liability judgment that the focus in the awards in on ordinary hours, overtime rates and shift allowances, and their application to employees who are day workers and shift workers.[29]
[29] Liability judgment at [30]
The Court simply noted the arguments that were raised by the parties, and the “conundrum” that is referred to was in a specific context.
There was nothing in the Court’s decision which suggested that De Costi Seafoods’ misconceived interpretation of its obligation to pay its workers their minimum entitlements was in any way justified. Indeed, the Court pointed out that the respondent’s focus and interpretation of the award was unwarranted on the plain reading of the awards.
In the liability judgment the Court held:
[58] Clauses 23.2(d) and 13.2(g) of the 2010 Award and the 2020 Award respectively, specifically contemplate for dayworkers commencing work prior to 6am. This speaks against defining a dayworker by reference to someone who ordinarily works only between 6am and 6pm.
…
[63]The fixing of ordinary hours to between 6am and 6pm for dayworkers is not to be understood as limiting what a day worker is, but is to be understood as directing the rate of pay for hours which are not within the ordinary hours. It is not that day workers must ordinarily work those hours, it is that the span of hours between 6am and 6pm is to be paid at the ordinary rate, not at penalty rates.
…
[65]The crux of the respondent’s argument is focused on differentiating between day workers and shift workers by reference to what the employee’s ordinary hours of work might be, a focus which is unwarranted on a plain reading of the awards.
[66]On a reading of the awards as a whole, it is clear that “ordinary hours of work” for dayworkers are those hours which are not subject to overtime rates. This is the purpose of the term “ordinary hours of work”; it is to differentiate between the ordinary rate of pay and the overtime rates which are applicable to hours worked outside the “ordinary hours of work”. It is not to say that in order to be a day worker, an employee must ordinarily work between 6am and 6pm.
[67]If all of the relevant award clauses are read together, that is to inform one another, taking into consideration that the award also provides for continuous and non-continuous shifts, that is that for plants that operate for 24 hours non-stop and those that do not, it is clear that a day worker can and does include an employee who habitually commences work prior to 6am.
…
[70]Both the 2010 Award and the 2020 Award when read properly, make clear that any work performed outside the ordinary spread of hours by day workers is to be paid at overtime rates. [30]
(emphasis added)
[30] Liability judgment at [58], [63], [65]-[67], and [70]. This is particularly so when considering the specific wording in the 2020 award at cl.13.2(g), which makes it clear that “any work performed by an employee prior to the spread of hours which is continuous with ordinary hours for the purpose, for example, of getting the plant in a state of readiness for production work is to be regarded as part of the 38 ordinary hours of work but still paid at overtime rates.” (emphasis added).
The fact that the respondent was satisfied to rely on the advice of an external consultant given to it in 2015, was a matter for the respondent. It chose not to obtain its own written legal advice. In hearing from its external consultant, the respondent was aware that there might be an issue with its employees not being paid their minimum entitlements.
Despite these employees being subject to minimum pay, De Costi Seafoods chose not to pay them overtime rates for the unsociable hours they were working, even though it knew that it might have an obligation to do so. De Costi Seafoods chose to pay its employees in accordance with an erroneous interpretation of the award that was to its benefit, and not to the benefit of its low-paid employees.
It was a position that De Costi Seafoods stuck to despite these very matters being raised by AWU in late 2019. De Costi Seafoods obtained legal advice in 2019 which is not before the Court, although Ms Little discloses that she “read and received this advice which supported De Costi’s position that penalty rates were not payable to the early starters”. De Costi Seafoods chose to litigate.
The repercussions of the Court’s decision (i.e. the payments by De Costi Seafoods totalling $1,589,694 to 230 current and former employees) show just how widely De Costi Seafoods’ employees were affected by De Costi Seafoods’ actions in holding to an interpretation of the award that was clearly wrong.
The nature and extent of any loss or damage sustained as a result of the breaches and whether there has been similar previous conduct by the respondent
The relevant facts have been set out at [3]-[43] earlier in these Reasons for Judgment.
The losses suffered by Ms Tuala and Mr Pokharel as a result of the breaches are not insignificant, noting that they are low-paid workers, subject to award rates. They have respectively been paid $9,787 and $12,155[31] plus interest.
[31] Rounded to nearest dollar
Furthermore, following the Court’s liability judgment, De Costi Seafoods has paid an additional $1,589,694.10 to 159 current employees as well as 71 former employees.[32] The circumstances leading to such payments were no the subject of the dispute before this Court and were not the subject of any Court order.
[32] Affidavit of Kaylene Little filed 14 October 2022 at [26]
Were the breaches deliberate and was senior management involved?
The respondent submits that the breaches were not deliberate as De Costi Seafoods had received and acted upon advice as to its obligations under the award.
The conduct which De Costi Seafoods engaged in was deliberate, and senior management was involved. On the evidence of Ms Little, it was conduct that was carefully weighed and considered; it was conduct which was intentional. The respondent did not engage in the conduct knowing it was a breach of the awards, but it did engage in the conduct deliberately. This was done after De Costi Seafoods received advice from Mr Burles as to his “view” and after Mr Burles sought and received “verbal legal advice” which “supported” his position, which led him to “believe…” that his view of the award “was correct”, that view being that the employees were shift workers but not subject to any shift allowance. This was done after Mr Burles had identified that employees covered by the award who started work early in the morning (before 6am) were receiving ordinary time rate of pay for their early work without overtime or any other penalty rate.
Co-Operation and Assistance
AWU first approached De Costi Seafoods in September 2019 to rectify its contravention of the award, and made further efforts to December 2019 to have it do so. De Costi Seafoods declined on the basis of what it submits was “a reasonable interpretation of ambiguous awards provisions, underpinned by legal advice”. These submissions have already dealt with.
Following De Costi Seafoods’ refusal to rectify the contraventions, AWU referred the dispute to the Fair Work Commission pursuant to the award resolution procedure. De Costi Seafoods declined to participate in an arbitration in the Fair Work Commission.
AWU also proceeded to investigate the contraventions by seeking pay records of its members. De Costi Seafoods was not entirely cooperative in providing those records. When officers of AWU attempted to exercise rights of entry, De Costi Seafoods refused AWU officers entry to its premises for the purpose of investigating the contraventions. This was done on the basis of a defective Entry Notice.
Senior members of De Costi Seafoods’ management were aware of and involved in the efforts of AWU to address the contraventions.
The circumstances of the contravener
De Costi Seafoods is a wholly owned subsidiary of a publicly listed company. The size of its enterprise is not the subject of any evidence. There are however a suite of internal policies and procedures dealing with all aspects of the employment relationship, supported by a team of 21 people whose role is to monitor and maintain those policies and procedures.[33]
[33] Affidavit of Kaylene Little filed 31 October 2022 at [37]-[39]
Clearly the system which monitors De Costi Seafoods’ compliance with its legal obligations in this instance failed.
It cannot be said that De Costi Seafoods has a culture of compliance. If it did, it would have rectified the contraventions in 2019 when the matters were brought to its attention by AWU. Had De Costi Seafoods had a culture of compliance it would not have been so overly pedantic in respect of the Entry Notice, particularly as there was already a dispute before the Fair Work Commission at the time and the relevant issues had been identified before the Commission.
The Court accepts that Tassal and De Costi Seafoods are good corporate citizens, and that they have not previously been the subject of any proceedings concerning a contravention of any industrial instrument or laws.
Contrition and Corrective Action
In the liability judgment, the Court held that De Costi Seafoods failed to pay Ms Tuala overtime rates, from the commencement of her employment in October 2016, in respect of the hours she worked before 6am in accordance with the 2010 Award and the 2020 Award.
De Costi Seafoods’ failures in respect of Ms Tuala occurred over a period of about 4 and a half years.
Ms Tuala was ultimately paid $9,787.43, plus interest, being the loss she suffered as a result of De Costi Seafoods’ contravention of the FWA.
The Court also held that De Costi Seafoods failed to pay Mr Pokharel overtime rates, from the commencement of his employment in February 2019, in respect of the hours he worked before 6am in accordance with the 2010 Award and the 2020 Award.
De Costi Seafoods’ failures in respect of Mr Pokharel occurred over a period of about 3 years and 3 months.
Mr Pokharel was ultimately paid $12,154.19, plus interest, being the loss he suffered as a result of De Costi Seafoods’ contravention of the FWA.
De Costi Seafoods was ordered to pay Ms Tuala and Mr Pokharel their underpayments plus interest within 28 days of 1 April 2022. It did not do so.
Ms Tuala and Mr Pokharel were paid the amount ordered on 4 May 2022 and only after De Costi Seafoods was prompted through its solicitors to do so by AWU on two separate occasions.
De Costi Seafoods explains that the failure to comply with Court orders was an administrative oversight, and Ms Little on behalf of Tassal and De Costi Seafoods, apologises to the Court and to Ms Tuala and Mr Pokharel for this.
In circumstances where orders were made after the parties were directed to provide to the Court a minute of order reflecting the court’s reasons in respect of liability, and De Costi Seafoods was well aware of its obligations pursuant to Court orders as it took part in calculating the amounts to be paid to Ms Tuala and Mr Pokharel, there can be no excuse for such a failure; including that it was trying to make arrangements for the payment of all employees affected by its wrongful conduct.
As noted at [39]-[41] above, a number of communications were made by De Costi Seafoods to its current and former employees advising of the Court’s liability judgment and the flow on effect of that judgment. It is worthwhile reproducing here the relevant parts of the first of such communications.
On 22 April 2022, De Costi Seafoods published a bulletin to its employees which read:
As you may be aware, the interpretation of the payment of wages prior to the 6am commencement in the Seafood Processing Award has been determined by the NSW Federal Circuit Court in its decision handed down on the 18 March 2022. In summary, the decision was an alternate interpretation to the one we had been operating under.
Our objective is always to be transparent and operate in good faith with our people. We believed we had done that in the interpretation we had applied in this instance – particularly as we had inherited this position from the previous owner … However, the Court in this instance has taken an alternate position in the interpretation. We respect the Court’s decision and believe it is important to act quickly to rectify the situation and make any necessary adjustments. We will play by the umpire’s decision as it is the right thing to do.
…
We will review any hours worked for current or previous employees between 18th March 2022 and 18th March 2016. The aim is to determine if you worked any hours prior to 6am and if correct payments have been made.[34]
(emphasis added)
[34] Affidavit of Kaylene Little filed 31 October 2022 at annexure KL1
Playing “by the umpire’s decision” was not only the right thing to do, it was the only thing for De Costi Seafoods to do. The Court’s decision was not the subject of any appeal nor was any stay sought. De Costi Seafoods had a legal obligation to comply with Court orders, not because it was the “right” thing to do, but because it was required by law to do so. It also had and continues to have a legal obligation to comply with the terms of any industrial instrument that is applicable to its employees, importantly for present purposes the 2010 Award and the 2020 Award.
The Court’s decision in respect of whether Ms Tuala and Mr Pokharel were entitled to overtime rates in respect of the hours they worked prior to 6am was not an “alternative interpretation”.
The position taken by De Costi Seafoods during its dispute with AWU and during the hearing, was to argue an alternative interpretation of the relevant clauses of the 2010 Award and the 2020 Award. It was De Costi Seafoods who argued that these employees were not “day workers” but rather an undefined sub-category of “non-continuous shift workers” who were not the subject of any shift allowance, namely being shiftworkers who worked an “early morning shift”.[35] It was De Costi Seafoods who was unsuccessful.
[35] See Respondent’s Outline of Submissions on liability filed 7 May 2021 at [2](a) – (c)
Despite Tassal acquiring De Costi Seafoods in July 2015, the review of payments to current and former employees is only for a period of 6 years from the date of the Court’s liability judgment, not from the time of its acquisition of the company. The reason for that decision was not explained in any of the evidence relied upon by De Costi Seafoods at the penalty hearing. Presumably such a decision was taken due to limitation periods.
There is no acknowledgment by De Costi Seafoods in any of the correspondence to its employees and former employees of its wrongdoing.
De Costi Seafoods infers in the letter dated 22 April 2022, that the previous owner is in part to blame for De Costi Seafoods not paying its employees in accordance with the award, as De Costi Seafoods inherited such a position.
Indeed, De Costi Seafoods considers that it acted in good faith at all times, it submitted as much to the Court, albeit it now accepts that its interpretation of the relevant awards was incorrect.[36] De Costi Seafoods says that it was bona fide in its attempts at complying with the awards.
[36] Affidavit of Kaylene Little filed 31 October 2022 at [5]
However, and as noted earlier in these reasons, it is clear that as early as July 2015, Tassal, and as such De Costi Seafoods, was aware that there was an issue with the payment of overtime in respect of employees who commenced work prior to 6am, as it had been alerted to this through its external consultant.
De Costi Seafoods did not decide to act in the interests of its employees by paying them overtime for work they performed prior to 6am even though it was aware that this may be its obligation under the award. It did not decide to “interpret” the award in a manner that was beneficial to such employees.
De Costi Seafoods did not seek any legal advice of its own. The oral advice received by Mr Burles in mid-2015 is not before the Court, simply Mr Burles’ opinion as to what it entailed. De Costi Seafoods relied on an opinion of a legal advice received by a third party as to its obligations to pay its employees their minimum entitlements.
As at 6 October 2022, De Costi Seafoods has paid a total of $1,589,694.10 to 159 of its current employees as well as 71 former employees, being payments due to such employees under the terms of the relevant awards.[37]
[37] Affidavit of Kaylene Little filed 14 October 2022 at [26]
The Court does not find that De Costi Seafoods has displayed any contrition. The apologies it offered though Ms Little are no more than bare apologies. What it has done since the liability judgment to now is to comply with its legal obligations, and even then it failed to comply with Court orders in the time required. No less than compliance with the law is expected of a company, particularly one that is a wholly owned subsidiary of a publicly listed company.
The need for specific and general deterrence.
The terms and conditions of employees at the Lidcombe site are now covered by an enterprise agreement, which addresses the issue of compensation for work performed before 6am. As long as the enterprise agreements remain in place, there can be no issue of compliance with the terms of any applicable modern award.
This however, does not mean that specific deterrence is not warranted.
While De Costi Seafoods has a clean record, it even now seeks to excuse and minimise its culpability. The communication to the employees about the Court taking an “alternate interpretation” speaks strongly of a lack of insight and acknowledgment into the respondent’s wrongdoing.
While the Court accepts that De Costi Seafoods received some advice from Mr Burles (and that he in turn sought oral legal advice), the course which De Costi Seafoods took was not to pay overtime rates in accordance with the Award.
The need for general deterrence is readily apparent. The terms of the award provide for minimum standards, they protect vulnerable and low-paid workers.
Determination of appropriate Penalty
The contravention concerned contravention of minimum standards.
The objective of the modern award is to “provide a fair and relevant minimum safety net of terms and conditions”.[38]
[38] S.134(1) FWA and Dick Stone at [37]
Generally speaking, contravening a term of a modern award will almost always be a serious matter, particularly if it is part of a pattern of conduct.[39]
[39] Dick Stone at [38]
Taking all of the relevant considerations into account, the Court finds that the contravention was serious and warrants a penalty which reflects the seriousness of the conduct.
A penalty of $60,000 will be imposed.
The penalty will be paid to AWU in accordance with s.546(3)(b) FWA.
For all of those reasons, orders as set out at the forefront of these Reasons for Judgment will be made.
I certify that the preceding one hundred and twenty-four (124) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Obradovic. Associate:
Dated: 16 February 2023
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