United Voice v Academy Services Pty Ltd (No.2)
[2020] FCCA 1699
•26 June 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| UNITED VOICE v ACADEMY SERVICES PTY LTD (No.2) | [2020] FCCA 1699 |
| Catchwords: INDUSTRIAL LAW – Where finding at trial of contravention of workplace agreement – penalty phase – civil pecuniary penalty imposed. |
| Legislation: Fair Work Act 2009 (Cth), ss.50, 546(1) & 3(c) and 557(1) Workplace Relations Act 1996 (Cth) |
| Cases cited: United Voice v Academy Services [2019] FCCA 1620 Kelly v Fitzpatrick [2007] FCA 1080 |
| Applicant: | UNITED VOICE |
| Respondent: | ACADEMY SERVICES PTY LTD |
| File Number: | ADG 299 of 2016 |
| Judgment of: | Judge Heffernan |
| Hearing date: | 3 September 2019 |
| Date of Last Submission: | 3 September 2019 |
| Delivered at: | Adelaide |
| Delivered on: | 26 June 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr Dean |
| Solicitors for the Applicant: | United Voice |
| Counsel for the Respondent: | Mr Luke |
| Solicitors for the Respondent: | Thomson Geer |
ORDERS
Pursuant to subs 546(1) and (3)(c) of the Fair Work Act 2009 (Cth) the respondent do within 28 days pay a pecuniary penalty in the total amount of TWENTY FIVE THOUSAND AND TWO HUNDRED DOLLARS ($25,200) in equal parts to Mr Federico Salazar Arevalo, Ms Pooja Khadka and Ms Lady Salazar Perez.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 299 of 2016
| UNITED VOICE |
Applicant
And
| ACADEMY SERVICES PTY LTD |
Respondent
REASONS FOR JUDGMENT
I have previously made a declaration after trial that the respondent had contravened s 50 of the Fair Work Act 2009 (Cth) (‘the Act’) by failing to offer employment to existing staff of an outgoing contractor as required by a collective agreement which had been entered into between the respondent and the Liquor, Hospitality and Miscellaneous Union (‘LHMU’), now known as United Voice. My reasons for judgment in that matter have already been published.[1] That contravention affected three employees of ISS Facility Services (‘ISS’): Mr Federico Salazar Arevalo, Ms Pooja Khadka and Ms Lady Salazar Perez. Both the respondent and ISS are companies engaged in providing cleaning services in the Adelaide CBD. The three affected workers were all at the relevant times cleaners (‘the workers’).
[1] United Voice v Academy Services [2019] FCCA 1620.
This matter was listed for submissions as to the appropriate compensation to be paid to the workers and to determine the amount of any civil pecuniary penalty to be imposed on the respondent in light of the contravention. After I had published my reasons for judgment, and prior to the day for submissions, the respondent met with the applicant and agreed appropriate amounts to be paid to the workers by way of compensation. Those amounts were paid prior to the date for submissions and with respect to each of the workers were as follows:
a)Mr Federico Salazar Arevalo $3,212.30
b)Ms Pooja Khadka $17, 054.54
c)Ms Lady Salazar Perez $9,353.29
As a result, the only matter remaining for determination by me is that of pecuniary penalty. I have power pursuant to s 546(1) of the Act to impose a pecuniary penalty on a contravening party. Where the contravening party is a corporation it is liable for a maximum of five times the number of penalty units applicable for an individual. The maximum penalty for an individual is 60 penalty units and so in the case of the respondent, the maximum penalty is 300 penalty units. It is agreed between the parties that at the relevant time this equated to a maximum amount of $54,000 with respect to each worker or a total of $162,000.
The applicant concedes that in circumstances where contraventions are committed by the same person and arose out of a course of conduct, contraventions must be treated as a single contravention.[2] For that reason, I must consider any penalty against a maximum of $54,000.
[2] Section 557(1).
Both parties referred me to the frequently cited decision of Tracey J in Kelly v Fitzpatrick[3] which provides a helpful summary of some of the relevant considerations when imposing a penalty. Those considerations include:
[3] [2007] FCA 1080.
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 any similar previous conduct by the respondent;
e)the size of the business enterprise involved;
f)whether senior management was involved in the breaches;
g)whether the party committing the breach had expressed any remorse or contrition;
h)whether the party committing the breach had taken corrective action;
i)whether the party committing the breach had cooperated with the enforcement authorities;
j)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
k)the need for specific and general deterrence.
In the submission of the applicant, the conduct was repeated because it involved three workers and accordingly three successive decisions not to honour the obligations that were imposed on the respondent by the Academy Services and LHMU Clean Start Union Collective Agreement 2008 (‘Clean Start Agreement’). Counsel submitted that the conduct should be regarded as ongoing in its effect until such time as the compensation referred to above was paid. It was a relevant consideration that the Union had brought the respondent’s non-compliant behaviour to its attention and that even though it had done so, the respondent did not offer positions of employment to the workers or remedy the loss prior to the determination of these issues at trial.
The respondent submitted that it acknowledged and accepted the Court’s determination that it had failed to comply with the requirement under cl 48.5.1.2 of the Clean Start Agreement. It maintained however, that at the time of the contravention it did not believe that the above clause applied to the workers because of the fact that it contained prohibited content. That was the effect of the evidence of Mr Hoffman at trial. In my reasons for judgment I accepted that Mr Hoffman was not aware at all relevant times during the negotiations for the Clean Start Agreement of provisions of the Workplace Relations Act 1996 (Cth) relating to prohibited content in workplace agreements.[4] I did not accept his evidence that Mr Kennedy of the LHMU told him that the relevant clause could not be enforced.[5] I concluded that the unenforceability of the clause was a view that Mr Hoffman had reached in his own mind in the years following the agreement. The belief in the unenforceability of the clause may have been genuinely held by Mr Hoffman but it was held recklessly.
[4] United Voice v Academy Services, op cit [79].
[5] Ibid [127].
The respondent further submitted that its National Operations Manager believed that there was a valid basis on the merits for not offering employment to the three workers. That assertion is more difficult to accept, it was inconsistent with significant aspects of the evidence of the respondent’s Service Manager and I indicated in my reasons for judgment on the trial that I found the explanation to be far from compelling. On balance, I concluded that the reasons for not offering positions to the workers was in order to give preference to franchisees who were already on the books of the respondent.[6]
[6] Ibid [159].
In my view, the contraventions of the respondent amount to a limited course of conduct specific to the Adelaide Red Cross Blood Services CBD site. It was limited to the three workers the subject of these proceedings. There is no evidence before me which could lead me to conclude or suspect that these contraventions were part of a more extensive and uncharged course of conduct. Whilst it is perhaps understandable that the applicant has sought to characterise the course of conduct as one which was ongoing until such time as the compensation was paid, I have some reservations about that submission. The submission was made in part on the basis that the respondent had still not given preference to the workers by offering them ongoing employment at the Red Cross Blood Services CBD site. Whilst that observation was correct, in my view the proper approach to determining the length of the course of conduct is to find that it was concluded once the refusal of employment had been communicated. The jobs with respect to which preference should have been given had by then been filled by others. The submission made by the applicant in that regard is more relevant to the question of the quantum of loss sustained by the workers and any other impact that the contravention had upon them.
As to the circumstances of the contraventions, the respondent submitted that it did not deliberately disregard its obligations under the Clean Start Agreement.[7] I reject that submission. The submission of the applicant was that this was a deliberate contravention because the respondent had voluntarily undertaken to abide by that Agreement and profited from being a signatory to it. The applicant further submitted that the contraventions could not be said to have occurred in extenuating circumstances for example, by reason of financial difficulties. In my reasons for judgment on the trial, I found that the respondent had received a benefit by reason of having entered into the Clean Start Agreement.[8] The respondent was aware of its obligations under the Agreement and made a deliberate decision not to give preference to the workers. I do not regard it as a significantly mitigating factor that it operated under a misapprehension as to the unenforceability of cl 48.5.1.2. As I mentioned above, I found in my reasons that the relevant National Legal Officer for the LHMU did not tell the respondent during the course of negotiations for the Agreement that the relevant clause was unenforceable.[9] The respondent was not induced to enter the Agreement by any misrepresentation made by the LHMU. The respondent had an obligation to inform itself, and if necessary to obtain legal advice, as to the lawfulness or otherwise of the Agreement in whole or in part. It was reckless as to the question of enforceability but nonetheless made a conscious decision not to comply with the clause which required it to give preference to the workers and which it knew it had agreed to.
[7] Respondent’s written submissions (‘RWS’) [10].
[8] Ibid [140].
[9] Ibid [127].
With respect to the nature and extent of loss suffered by each of the workers, the applicant made the proper submission that it had the immediate effect of depriving each worker of a livelihood. As I have already noted, the nature and extent of the financial loss with respect to each worker has been agreed and compensation has been paid. Nonetheless, with respect to each worker the relevant contravention had an impact which went beyond financial considerations.
The respondent submits that the effect of the contraventions did not extend to depriving the workers of a livelihood. It points out that each of the three workers continued in employment with ISS at alternative sites either immediately or very soon after the contravention. It acknowledges that whilst each of the workers was still earning an income it was often less than that which each worker had been earning prior to the contravention. It points out that Mr Arevalo and Ms Perez found alternative employment in higher paying positions soon after the contravention. Two observations can be made about that submission. Firstly, it is a matter of happenstance that the workers were able to continue in employment with ISS. Secondly, that fact does not alter the immediate impact on them of having lost the opportunity to continue working in a workplace with which they were familiar and in hours to which they were accustomed.
In her circumstances, Ms Perez had no alternative but to accept work with ISS at the University of Adelaide. She worked 20 hours a week from Monday to Friday on four-hour shifts between 3.00am and 7.00am. Her previous work at the Red Cross CBD site had required her to work Monday to Friday from 8.00pm to 11.00pm and on Saturday afternoons from 2.30pm to 5.00pm. This made things difficult for her and she felt vulnerable having to attend work at that time of the morning.[10] Her hours were later reduced by ISS when the University reduced the amount of services it required. Her hours would also be reduced by ISS whenever the University went on holidays.[11] She ultimately resigned from ISS, an employer with whom she had worked for about five years, because the hours were very inconvenient for her.
[10] Ibid [25].
[11] Affidavit, Ms Perez dated 22/7/19 [3].
Mr Arevalo says that he struggled after the contravention. One of the jobs he was required to perform for ISS was a two-hour shift at Hilton every day between Monday and Friday. It took him longer to get to work. At the relevant time Mr Arevalo was also working for another cleaning company. When he needed further hours from ISS he was informed that they had a position available cleaning a shopping centre. This presented a difficulty for him because that position would require him to finish at 1.00am. His employment with the other cleaner commenced at 3.30am which created obvious problems. He ended up forgoing his employment with the other cleaning company because of the clash between the two shifts but also because his circumstances had made him consider getting a different job. Ultimately he moved on to other employment, which as the respondent has pointed out was financially more advantageous to him.
Ms Khadka was given employment by ISS at the Families SA site in St Marys. She was earning about half what she was making at the Red Cross site. ISS was not able to provide her with extra hours. Ultimately, she resigned from ISS because she and her partner moved to Goolwa.
I make the above observations because it is clear that the impact on these workers, and no doubt any workers who find themselves out of employment, can be varied and significant. In this case, it was not limited to a question of financial embarrassment. There was also considerable inconvenience and uncertainty for three low paid workers who worked in an industry in which job security can be inherently tenuous. It was exactly that lack of job security that the Clean Start Agreement was designed to address. I give these matters significant weight.
I accept that the respondent has not previously committed contraventions of the Clean Start Agreement or the Act. That is a matter to which I give weight. I also take into account that the respondent is a relatively large employer with operations in several States. It was in a good position to properly inform itself of its obligations and given the size of its operations, preferment of these three workers would have been unlikely to have had a significant impact on it.
In terms of the deliberateness of the contraventions, I accept the submission of the applicant that they cannot be explained as simply an oversight or an error. It was a deliberate course of conduct and involved a disavowal of voluntarily undertaken obligations. It is of limited significance that it believed the obligations to be unenforceable. It knew what it was doing. It must have known that the contraventions would have an effect on the three workers. It must have known because of the very nature of its business, of the inherent lack of security of employment for people working as cleaners. It cannot have been lost on it that one of the main purposes of the Clean Start Agreement was to address that issue. Whether it believed that if ‘push came to shove’, the relevant clause would be legally unenforceable, does not detract from the fact that it knowingly and deliberately abandoned an obligation to which it had agreed under an Agreement which had given it a benefit.
As I have already observed, I did not accept at trial the explanation that the respondent believed there were valid operational reasons for not offering employment to the three workers. In particular, the failure to offer a position to Mr Arevalo in light of the view taken by the Service Manager who had conducted the interview with him is inexplicable except as an incident of a decision to offer the relevant positions to cleaners who were already on the respondent’s books. The assertion that the respondent believed it had a valid basis for not offering employment to the three workers was repeated by the respondent in its written outline of submissions by reference to the affidavit evidence of the National Operations Manager.[12] To be clear, I rejected the evidence of the Service Manager to the extent that it was inconsistent with the workers.[13] That included a rejection that any of them had a particular difficulty in communicating, that they were untidily or inappropriately dressed, that they had difficulty understanding the interview process or the forms which they were required to complete, or that any of them was malodorous.
[12] RWS [8].
[13] Ibid [112].
The respondent properly accepts that members of senior management were involved in the contraventions. It submits that given the nature of the course of conduct, that matter should not have any impact on the penalty. I do not accept that submission. It was the senior management of the respondent who ultimately had responsibility for ensuring that the obligations under the Clean Start Agreement were met.
I turn to the question of contrition. The respondent submitted that it had been proactive in seeking to make amends for the contravention.[14] That is a submission which cannot be accepted without significant qualification. The respondent did not do anything to make amends for the contraventions until after the trial in this matter when it had been found liable for them. It then entered discussions to negotiate an agreed figure for the appropriate amount of compensation and to its credit had paid those amounts to the workers by the date of submissions on penalty. Whilst I give that matter some weight, the applicant was not relieved of the necessity to run these allegations to trial and the witnesses were not relieved of the obligation, inconvenience, and no doubt stress, of having to give evidence. The respondent was only proactive once it became apparent to it that orders for compensation were inevitable. The payment of compensation prior to penalty submissions is limited evidence of contrition.
[14] Ibid [20].
I accept that the General Manager of the respondent met with a representative of the applicant prior to penalty submissions to express its’ remorse and to advise of its commitment to comply with the relevant clause of the Clean Start Agreement in future. I accept that it intends to do so.
The respondent also sent letters of apology dated 30 July 2019 to each of the three workers. The letter to each worker was in identical terms and it is appropriate to reproduce the wording:
“Dear (name omitted)
Re Federal Court [sic] Decision
Academy Services have been awaiting the Federal Court [sic] decision that was handed down on 14 June 2019, which as you know relates to a change of contract provision in our “Clean Start Collective Agreement”.
We have considered and accept the decision of Judge Heffernan. Academy did not deliberately contravene the Fair Work Act 2009, however irrespectively, I am writing to sincerely and unreservedly apologise to you for the conduct of our organisation and the impact it may have had on you and your family.
We are sincerely remorseful, and to demonstrate such, we would be happy to consider you for any future employment opportunities that may arise in the future.
Please contact myself or our Operations Manager (name omitted) if you wish to be considered for any future employment with Academy.”
The weight that can be given to an apology which comes after a trial and three years after the contraventions is very limited. The weight that can be given to an apology couched in the above terms, even more so. The first sentence of the letter is somewhat disingenuous in the context of the asserted sincere remorse. The respondent was waiting for the outcome of the trial before it said or did anything that might be seen to acknowledge its’ responsibility for the contraventions. The respondent was not constrained, which is what the first sentence seems to imply, to wait until judgment to acknowledge its liability for the contraventions and to express remorse. It could have done so when the dispute was first raised with it by the applicant and taken prompt remedial action, or at any point prior to judgment. Further, the letter makes the same assertion with respect to the nature of the conduct that I have referred to above. The respondent may not have knowingly contravened the Act, but it deliberately committed the conduct that formed the basis of the contravention. The letter does not acknowledge that, which was one of the findings it claims to have considered and accepted. In any event, I give limited weight to the apology.
Having said that, the difficulty in attributing remorse to a corporation has been the subject of judicial comment:
“It is not clear to me how an artificial construct such as a corporation can experience the complex human emotion of contrition made up, as it is, of an amalgam of distinctly human emotions such as regret, shame and sympathy. I do not doubt that a corporation may exhibit signs of regret but it is too much to expect that such an artificial construct can be meaningfully contrite.
For civil penalty cases involving corporations it would be more coherent to ask only whether the corporation has changed its behaviour. Nothing more can be expected; a person who does not literally or physically exist may not wear sackcloth.”[15]
[15] ACE Insurance Ltd v Trifunovski (No 2)[2012] FCA 793 [113] - [114].
I take the view that, on the whole, the respondent has demonstrated some remorse and contrition. This is based predominantly on the fact that I accept the assurance it has given to the applicant that it will comply with the Agreement in the future and it has offered to consider the workers for future employment. Any organisation is entitled to contest charges or allegations made against it, deny liability, and decline to take remedial action unless the need to do so is proven against it and made enforceable by a Court. One of the costs of doing so, in the event that it is unsuccessful at trial, is that such a course of action is entirely inconsistent with remorse and contrition. A later submission of sincere regret will always ring a little hollow.
The above observations apply to a significant extent to the question of corrective action and cooperation. Such actions, as it has taken, have come after the reasons for judgment were delivered. Its’ actions can be seen to have been reactive rather than proactive.
With respect to the joint questions of enforcing compliance with minimum standards and deterrence, both of these factors have a role to play on the facts of this matter. I do not accept the submission of the applicant that there is a particular need in this matter for specific deterrence. The respondent has no prior history of contraventions. Specific or personal deterrence represents an aspect of penalty which requires added emphasis when the party to be penalised has demonstrated either a significant history of prior offending behaviour or a failure to heed warnings from a court about similar conduct or to be deterred by past punishments. No such added emphasis is required here. The penalty I impose will act as deterrent enough to the respondent.[16] I have accepted that the respondent has expressed its’ commitment to not contravening in this way again. There is, however, a need for general deterrence in order to dissuade other employers within the cleaning industry who might be tempted to ignore similar clauses in Clean Start Agreements entered into with the applicant. The respondent acknowledges that the cleaning industry is susceptible to breaches of workplace laws and contains vulnerable workers. Whilst I accept the submission of the respondent that this type of contravention is not, in the cleaning industry, the most common form of contravention against the Act, an element of deterrence is still called for. The primary role of deterrence in imposing penalties under the Act is well-established.[17] Civil penalties have been described as having a protective role in promoting the public interest in compliance. In incorporating general deterrence, I have placed significant weight on the fact that conduct of this type has the inherent tendency to undermine the security of employment which the agreement was designed to secure.
[16] Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 171 FCR 357 [37].
[17] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 53 [90].
I do not accept the submission of the applicant that in determining penalty I should be guided by penalties imposed in unlawful dismissal cases. The circumstances in which unlawful dismissal can occur are so varied that a comparison of cases even within that category can be difficult. This conduct is different in nature and any penalty must reflect the specific nature of the conduct and be proportionate to it. A comparison of sentences imposed in other matters is in any event of limited assistance and at best can be a guide only. The process of arriving at the appropriate penalty is one of instinctive synthesis, after all appropriate matters have been taken into account.[18]
[18] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2006) 165 FCR 560 [55].
These contraventions arose from a single course of conduct by one person and it is necessary to impose a single penalty.[19] The applicant has submitted that a penalty of approximately 80% of the maximum be imposed. The respondent has submitted that a penalty less than 50% of the maximum would be appropriate in the circumstances. At the relevant time a single penalty unit was set at $180. Accordingly, 300 penalty units would produce a maximum penalty of $54,000. In all of the circumstances of this matter I am satisfied that it is appropriate to impose a pecuniary penalty of 140 penalty units which amounts to $25,200 or just over 45% of the maximum. It is appropriate that I order, pursuant to s 546(3) of the Act, that this amount be paid to the three workers in equal proportions. As I am required to impose a single penalty, strict considerations of totality do not apply. That is because the effect of s 557(1) is to subsume the three contraventions into one. Had each contravention been separately subject to a penalty, the combined total of the maximum penalties would have been $162,000, in which case considerations of totality would have an obvious role to play. Having said that, I am satisfied that the penalty I have imposed is proportionate, and appropriate to the conduct with respect to these three workers.
[19] Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151.
I make the orders to be found at the beginning of these reasons.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Judge Heffernan
Associate:
Date: 26 June 2020
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