The Director Of the Fair Work Building Industry Inspectorate v Robko Construction Pty Ltd and Anor (No.2)
[2015] FCCA 177
•4 February 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| THE DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE v ROBKO CONSTRUCTION PTY LTD & ANOR (No.2) | [2015] FCCA 177 |
| Catchwords: INDUSTRIAL LAW – Penalties for contraventions by the first respondent company of s.44 (failure to give employee proper notice of termination or pay in lieu) and s.538 (threatening to dismiss and dismissing an employee in order to re-engage the employee to perform the same, or substantially the same work as an independent contractor) of the Fair Work Act 2009 (Cth) (“the Act”) and the same contraventions of the Act by the second respondent individual who was managing director of the corporate respondent, on the basis that he was knowingly concerned within the meaning of s.550 of the Act, in the first respondent’s contravention – whether contraventions arose out of one course of conduct – consideration of factors relevant to calculation of penalty – total of penalties imposed on corporate respondent $33,000 – total of penalties imposed on individual respondent $6,600 – corporate respondent also ordered to pay compensation with interest totalling $1,164.14 to employee effected. |
| Legislation: Building and Construction General Onsite Award 2010, cl.31.4 Crimes Act 1914 (Cth), s.4AA Fair Work Act 2009 (Cth), ss.12, 44, 45, 117, 358, 539, 545, 546, 550 & 716 Federal Circuit Court of Australia Act 1999 (Cth), s.76 |
| The Director of the Fair Work Building Industry Inspectorate v Robko Constructions Pty Ltd & Anor [2014] FCCA 2257 Miller v Sunland Park Pty Ltd & Anor (No.2) [2014] FCCA 1414 Australian Building and Construction Commission v Construction, Forestry, Mining & Energy Union (CFMEU) (No.2) (2010) 199 IR 373 Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 Finance Sector Union of Australia v Commonwealth Bank of Australia (2005) 147 IR 462 Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357 Director of the Fair Work Building Industry Inspectorate v Robko Construction Pty Ltd & Anor [2014] FCCA 1017 |
| Applicant: | THE DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE |
| First Respondent: | ROBKO CONSTRUCTION PTY LTD (ACN 130 260 909) |
| Second Respondent: | EVERETTE GALE EBER ROBBINS |
| File Number: | ADG 294 of 2011 |
| Judgment of: | Judge Simpson |
| Hearing date: | 18 November 2014 |
| Date of Last Submission: | 18 November 2014 |
| Delivered at: | Adelaide |
| Delivered on: | 4 February 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr McDonald |
| Solicitors for the Applicant: | Piper Alderman |
| The First & Second Respondents: | Mr Robbins in person |
ORDERS
By way of penalty in relation to the first respondent’s contravention of s.44 of the Fair Work Act 2009 (Cth) (“the Act”) in failing to give an employee proper notice of termination or payment in lieu of notice, it is ordered that the first respondent pay a penalty pursuant to s.546(1) of the Act in sum of $16,500.
In relation to the first respondent’s contravention of s.358 of the Act in threatening to dismiss and dismissing an employee in order to re-engage her to perform the same, or substantially the same work as an independent contractor, it is ordered that the first respondent pay a penalty pursuant to s.546(1) of the Act in the sum of $16,500.
In relation to the second respondent’s contravention of s.44 of the Act by operation of s.550 of the Act, it is ordered that the second respondent pay a penalty pursuant to s.546(1) of the Act in the sum of $3,300.
In relation to the second respondent’s contravention of s.358 of the Act by operation of s.550 of the Act, it is ordered that the second respondent pay a penalty pursuant to s.546(1) of the Act in the sum of $3,300.
All penalties payable shall be paid to the Commonwealth of Australia.
Pursuant to s.546(1) of the Act, the first respondent shall pay Ms Simmons the sum of $1,164.14, which sum is inclusive of interest.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 294 of 2011
| THE DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE |
Applicant
And
| ROBKO CONSTRUCTION PTY LTD (ACN 130 260 909) |
First Respondent
| EVERETTE GALE EBER ROBBINS |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 3 October 2014 I made the following declarations:
1. The first respondent, Robko Construction Pty Ltd ACN 130 260 909, contravened:
a)s.44 of the Fair Work Act 2009 (Cth) (“the Act”); and
b)s.358 of the Act.
2. The second respondent, Everette Gale Eber Robbins, by operation of s.550 of the Act contravened:
a)s.44 of the Act; and
b)s.358 of the Act.
The circumstances of these contraventions are detailed in my earlier reasons[1]. Briefly, the respondents’ contraventions of s.44 of the Act relate to Robko’s failure to comply with s.117 of the Act by failing to provide Robko’s former employee, Rebecca Lorraine Simmons, with one week’s notice of termination or pay in lieu of notice upon her dismissal. The respondents’ contraventions of s.358 of the Act relate to Robko’s conduct in threatening to dismiss and actually dismissing Ms Simmons in order to re-engage her to perform the same or substantially the same work but as an independent contractor.
[1] The Director of the Fair Work Building Industry Inspectorate v Robko Constructions Pty Ltd & Anor [2014] FCCA 2257.
Orders sought
The applicant seeks orders pursuant to s.546(1) of the Act imposing pecuniary penalties on the respondents for each of the declared contraventions and that any pecuniary penalties be paid to the Commonwealth pursuant to s.546(3) of the Act. The applicant further seeks an order pursuant to s.545(2)(b) of the Act that Robko pay to Ms Simmons the sum of $900, being the loss suffered by Ms Simmons as a result of Robko’s contravention of s.44 of the Act. Ms Simmons is also entitled to pre-judgment interest on that sum.
Background
The dismissal occurred on the afternoon of 22 February 2011. Ms Simmons was required to be paid one weeks’ pay in lieu of notice on termination. She was told by Robko that she would be paid only one days’ pay. It appears that she was in fact paid an amount equivalent to 8 hours pay. This was recorded by Robko as a payment for 8 hours of pre-arranged ‘carer’s leave’ relating to 23 February 2011. It follows that Ms Simmons was underpaid $900 gross, being the remainder of the period of her notice, namely 30 hours at $30 per hour.
The applicant seeks an order that Robko pay interest on the unpaid monies as is provided for in s.547 of the Act. No submissions on the interest issue have been put to me by the respondents. I am not satisfied that good cause has been shown for not making an order for interest under s.76 of the Federal Circuit Court of Australia Act 1999 (Cth) Act (“FCC Act”). I therefore propose to make an order for interest as sought.
The interest should be calculated from 22 February 2011 to the date of the Court’s order. Interest should also be made payable in accordance with s.76 of the FCC Act.
In Miller v Sunland Park Pty Ltd & Anor (No.2)[2], I commented on the question of pre-judgment interest as it applied in this Court. I do not propose to repeat what I said there. Suffice it to say that I propose to allow pre-judgment interest for the period 23 February 2011 until the date of the judgment which will be 4 February 2015, at a rate of 4% above the cash rate published from time to time by the Reserve Bank of Australia.
[2] [2014] FCCA 1414 at paras 10 – 24.
The amount of interest payable by the applicant is therefore calculated as follows:
Period
Applicable Rate
Total
23 February to 30 June 2011
8.75%
$27.62
1 July to 30 December 2011
8.75%
$39.70
1 January to 30 June 2012
8.25%
$36.82
1 July to 30 December 2012
7.50%
$34.03
1 January to 30 June 2013
7.00%
$31.24
1 July to 30 December 2013
6.75%
$30.62
1 January to 30 June 2014
6.50%
$29.01
30 June to 30 December 2014
6.50%
$29.49
1 January to 4 February 2015
6.50%
$5.61
TOTAL
$264.14
On this basis, the total sum payable to Ms Simmons inclusive of interest is $1,164.14.
Penalties
Section 12 of the Act provides that a ‘penalty unit’ has the meaning given by s.4AA of the Crimes Act 1914 (Cth). At the time that the respondents’ contraventions were committed, s.4AA defined a penalty unit to mean $110.
Pursuant to ss.539 and 546 of the Act the maximum penalty available for each of the contraventions by Robko, as a body corporate, is $33,000 (ie. 300 penalty units). Therefore the maximum penalties that the Court can impose on Robko for the totality of the declared contravention is $66,000 (2 x $33,000).
Pursuant to ss.539 and 546 of the Act, the maximum penalty available for each of the contraventions by Mr Robbins, as an individual, is $6,600 (60 penalty units), therefore the maximum penalties that the Court can impose on the second respondent for the totality of the declared contraventions is $13,200 (2 x $6,600).
The overriding principle when fixing a penalty is to ensure that it is proportionate to the gravity of the contravening conduct.[3] The authorities have recognised that the purposes to be served by the imposition of penalties are three-fold: firstly, punishment, which must be proportionate to the offence and in accordance with prevailing standards; secondly, deterrence, both specific and personal, aimed at deterring the respondents from re-offending and general (a deterrence to others who might be likely to offend); and, finally, rehabilitation.
[3] Australian Building and Construction Commission v Construction, Foresty, Mining & Energy Union (CFMEU) (No.2) (2010) 199 IR 373 at 376.
The Court is required to take into account all relevant factors and arrive at a single result which takes due account of them all. In Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith[4], Buchanan J stated that:
“… at the end of the day, the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations.”
[4] (2008) 165 FCR 560.
In Finance Sector Union of Australia v Commonwealth Bank of Australia[5] Merkel J observed:
“The legislature has over time also moved to increase the penalties that may be imposed in respect of unlawful industrial conduct. In my view, any light handed approach that might have been taken in the past to serious, wilful and ongoing breaches of the industrial laws should no longer be applicable.”
[5] (2005) 147 IR 462 at 483.
It is fair to say that the courts now regard far more seriously any contravention of industrial laws than was generally the case in the past.
These comments by Merkel J were endorsed by the Full Court of the Federal Court in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union[6]. The Court must also take into account the totality principle in determining the appropriate level of penalty. This principle requires that, after determining an appropriate penalty for each contravention, the Court must stand back and consider whether the combined total of the penalties is appropriate for the total contravening conduct.
[6] (2008) 171 FCR 357 per Branson and Lander JJ.
The Court’s exercising industrial jurisdiction have identified a range of factors which may or may not be relevant to the circumstances of a particular case when assessing an appropriate penalty. The Courts have, however, warned against the mechanical use of checklists because they give rise to the risk of transforming the process of instinctive synthesis into the application of a rigid catalogue of matters for attention by the judge. Further, the Courts have also warned against comparing the case the subject of the assessment with any other particular case so as to derive from it the amount of penalty to be fixed.
Bearing in mind these warnings, the authorities have recognised certain factors as potentially relevant to the imposition of a pecuniary penalty in industrial regulatory context. I propose to address certain factors raised by the cases in so far as they are relevant to the penalty assessments in this matter.
The nature and extent of the conduct which lead to the breaches and the circumstances in which the relevant conduct took place
The nature and extent of the contravening conduct and the circumstances in which it occurred are set out extensively in my earlier judgment. Briefly, the respondents threatened to dismiss and then actually dismissed Robko’s employee, Ms Simmons, in order to re-engage her to perform the same work but as an independent contractor. Ms Simmons had been employed by Robko on a full time basis to carry out work as an excavator operator. Robko dismissed Ms Simmons with one days’ notice and in doing so Robko failed to give Ms Simmons seven days’ notice or to make payment in lieu of notice as is required by s.117 of the Act. The second respondent, Mr Robbins, the guiding mind and Director of the first respondent company, was knowingly concerned in Robko’s conduct. Mr Robbins, and he alone, made the decision to dismiss Ms Simmons on behalf of Robko.
Prior to finding work with Robko, Ms Simmons had struggled to find full time work as an excavator operator working no more than 40 hours per week. She required this flexibility as she had the care of a young child.
When Mr Robbins interviewed Ms Simmons prior to offering her employment, he attempted to convince her to accept an engagement with Robko as an independent contractor. Ms Simmons told Mr Robbins that she “would only consider taking up a position as a full time employee” as she “needed regular work”.
The respondents’ threat to dismiss Ms Simmons and her actual dismissal occurred the day before Ms Simmons was due to start a period of carer’s leave as her son was having surgery. Mr Robbins was fully aware of this fact.
In the circumstances, the employer’s actions on 22 February 2011 in dismissing Ms Simmons were deplorable. Ms Simmons had been a reliable, highly capable and well liked employee and deserved better treatment.
The nature and extent of any loss or damage sustained as a result of the breaches
As a result of the respondents’ contravention of s.44 of the Act, Ms Simmons suffered a financial loss of $900, being the balance owing should Robko have paid her wages in lieu of notice. The applicant has still not paid this sum to her.
As a result of the respondents’ contraventions of s.358 of the Act, Ms Simmons was unemployed and had to seek work. She found it difficult to find stable employment that gave her the financial security and flexibility that she required as the carer of a young child.
Previous contraventions of industrial legislation by the respondent or respondents
The respondents have previously been found to have contravened the Act. In Director of the Fair Work Building Industry Inspectorate v Robko Construction Pty Ltd & Anor[7], Judge Raphael found that the respondents had contravened the following sections of the Act:
·s.45 by failing to pay termination benefits to a former employee, Mr Pawlak, and thereby breaching cl.31.4 of the Building and Construction General Onsite Award 2010; and
·s.716(5) of the Act by failing to comply with a Compliance Notice given by an inspector.
This was a case where Robko had attempted to utilise the services of Mr Pawlak as an independent contractor and required him to obtain an ABN and to submit invoices.
[7] [2014] FCCA 1017.
I note that the conduct, the subject of the contraventions dealt with by Judge Raphael, occurred in April 2012 and therefore later in time than the conduct the subject of the present contraventions. I should not therefore approach the imposition of penalties in the current matter on the basis that the respondents engaged in unlawful conduct after having been dealt with by the Court for previous contraventions. The multiplicity of contraventions of the Act is, in my view, a relevant consideration in that it demonstrates the need for specific deterrence. Further, it disentitles the respondents to be penalised on the basis that the present contraventions were merely isolated occurrences.
Whether the breaches were properly distinct or arose out of the one course of conduct
Although the respondents’ contraventions of ss.44 and 358 of the Act both arose in relation to the termination of Ms Simmons’ employment. The contraventions are, in my view, for the reasons that follow, nevertheless distinct. The applicant points out that it would have been quite possible for the respondents to commit one contravention without committing the other. They submit that the imposition of cumulative penalties in this case is warranted. I agree with the applicant’s submission in this regard.
The contraventions relate to two separate acts by the respondents in the course of their conduct leading to Ms Simmons’ dismissal. The first act involved the threat to dismiss, followed by the actual dismissal of Ms Simmons in order to re-engage her as an independent contractor. The second act was the failure to provide notice of termination or payment in lieu of notice. The two provisions which the respondents have contravened impose quite different requirements. Firstly, there is a positive requirement on Robko to make payment upon termination of employment. Secondly, Robko is prohibited from dismissing an employee for certain proscribed reasons.
It is submitted on behalf of the applicant that it would be open to the Court to find that the failure by Robko to give Ms Simmons adequate notice or payment in lieu was deliberately calculated by Mr Robbins to apply pressure and thereby to influence Ms Simmons to accept the offer of engagement as an independent contractor. On the untested material that is before me, I do not propose to make that finding.
The size of the business enterprise involved
Robko is a small to medium sized construction company operating only in South Australia. It had the capacity to undertake quite substantial contracts. In light of Robko’s propensity to engage most of its workers ostensibly as independent contractors, the evidence that Robko had only five employees (including Ms Simmons) in late 2010 and early 2011, is not a true indication of the size of the business. The evidence at trial discloses that at least Mr Peters and Mr Cheney were engaged as independent contractors, although working for Robko essentially on a full time basis. Mr May also worked for Robko intermittently as an independent contractor.
Whether or not the breaches were deliberate
In my opinion, it is quite clear that the respondents deliberately engaged in the conduct which gave rise to the contraventions. Mr Robbins’ sole reason for dismissing Ms Simmons was in order to engage her as an independent contractor to perform the same work that she had been performing under her contract for services.
Contrary to Mr Robbins’ sworn evidence, I find that at the time of Ms Simmons’ dismissal, Robko had excavator work to be done and Ms Simmons was a good excavator operator to perform the work. She had not refused to comply with reasonable directions to perform other duties. Moreover, Robko’s offer to pay Ms Simmons a higher hourly rate ($40 per hour, rather than $35 per hour) if she was “willing to incorporate a company”, and its expressed preference for her to work “as an incorporated company”, is suggestive of an appreciation of the doubtful legality of the subcontractor engagement that was being offered.
Mr Robbins instructed Mr Peters to terminate Ms Simmons’ employment on only one days’ notice. Mr Robbins had personally engaged Ms Simmons to work an average of 38 hours per week. His trial evidence, to the effect that he believed that she was a daily hire employee, is not credible and is not accepted by me as truthful.
Whether senior management was involved in the breaches
Mr Robbins is the Managing Director of Robko and was responsible for the management and overseeing of the company. Senior management was therefore directly involved in the contravention.
Whether the party committing the breach had exhibited contrition or taken corrective action
The respondents have shown no contrition and have not taken any corrective action in relation to their conduct. The respondents strongly defended the action. Mr Robbins went so far as to manufacture reasons on oath to justify his behaviour rather than to accept responsibility for it.
Whether the party committing the breach had co-operated with the enforcement authorities
Mr Robbins did co-operate with enforcement authorities to a certain extent in that he participated in a voluntary interview with inspectors from the Office of the Australian Building and Construction Commissioner on 17 May 2011. Apart from that interview, the respondents have not demonstrated any particular co-operation, or lack of co-operation with enforcement authorities.
The need for specific and general deterrence
Sections 44 and 358 of the Act create important protections for employees. It is therefore important that the penalties imposed reflect the objective seriousness of breaching these important protections and that they act as a deterrent to others who might be likely to engage in similar conduct.
Section 44 of the Act prevents employers from contravening the National Employment Standards, which are the minimum standards governing almost all employment relationships in Australia. Relevantly, the National Employment Standards require employers to provide notice of termination of employment or a payment in lieu of notice. Notice of termination is an important entitlement which gives employees time to process their termination and to make arrangements to find new employment. This entitlement assumes particular importance in the circumstances of Ms Simmons who, to the knowledge of Mr Robbins, had a child who was to undergo surgery on 23 February 2011 (the day after her dismissal) and had already pre-arranged to take paid carer’s leave for the next three days.
It is put on behalf of the applicant, and is a matter upon which I agree, that it is important that the penalties in relation to the respondents’ contraventions of s.44 are substantial enough to act as a general deterrent to other employers who would seek to unlawfully avoid their obligation to provide notice of termination.
Section 358 of the Act is one of several provisions prohibiting conduct which is commonly referred to as ‘sham contracting’. The legislature has prohibited the practice of sham contracting because it undermines the protections afforded to employees by Australian industrial relations laws and instruments. Sham contracting arrangements, if not revealed, enable employers to avoid legal obligations such as payment of payroll task, workers compensation premiums, employee entitlements and superannuation contributions. Sham contracting by its nature provides a company with an unfair advantage over its competitors in that the company’s operating expenses are unlawfully reduced making it more competitive against its rivals and/or providing increased company revenue. A finding of an unlawful sham contract arrangement is a serious matter and the penalties imposed for contraventions of s.358 should reflect that seriousness. The penalty should act as a deterrent to others who might be tempted to introduce sham arrangements into the management of their businesses.
Specific deterrence is also relevant in this case. The penalties must be sufficient to deter the respondents from engaging in further unlawful conduct of this kind. The evidence at trial concerning the manner in which the full-time workers, Mr Cheney and Mr Peters, were engaged as well as the separate contravention involving Mr Pawlak (who was, as the Court accepted in this case, an employee who was engaged on the basis that he was an independent contractor) suggests that considerations of specific deterrence are very necessary in this case.
Conclusions
I consider that taking into account all relevant circumstances in combination, these contraventions can be regarded as being in the middle to upper range of seriousness for contraventions of this kind. In my view, a penalty of 50% of the maximum penalties is called for. There will be penalties of $16,500 for each of the contraventions by Robko, and penalties of $3,300 for each of the contraventions by Mr Robbins. The total of the penalties for both respondents is therefore $39,600.
I make the orders to be found at the beginning of these reasons.
I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Judge Simpson
Associate:
Date: 4 February 2015
7
5