FEDERAL COURT OF AUSTRALIA INDUSTRIAL LAW - termination of employment - prohibited reason - review of Judicial Registrar awards - compensation in lieu of notice - calculated by reference to ordinary hours - meaning of "ordinary hours" - penalty - maximum penalty - criteria for imposition - whether payable to employee - compensation for breach of Act - mitigation of loss - evidence as to contingent factors to reduce compensation. Workplace Relations Act 1996 (Cth) s 170CP, s 170CN(4), s 170CM, s 170CK, s 170CR s 356(b) Kezich v Leighton Contractors Pty Ltd (1974) 131 CLR 362, cited R v McMahon (1978) 19 ALR 448, cited Veen v R [No 2] (1988) 164 CLR 465, applied ANDREW JAMES FOX v ST BARBARA MINES LIMITED WAG 9 of 1998 FRENCH J PERTH 4 JUNE 1998 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIAN DISTRICT REGISTRY WAG 9 of 1998 B E T W E E N: ANDREW J FOX APPLICANT AND ST BARBARA MINES RESPONDENT JUDGE: FRENCH J DATE OF ORDER: 4 JUNE 1998 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The respondent pay to the applicant within fourteen days the sums of: (a) $4,785 pursuant to s 170CR(4) as compensation for the breach by the respondent of s 170CM of the Workplace Relations Act 1996 (Cth). (b) $28,000 pursuant to s 170CR(1) as compensation for the breach by the respondent of s 170CK; and (c) $9,000 pursuant to s 170CR(1) and s 356(b) as a penalty for the breach by the respondent of s 170CK. 2. That the respondent pay the applicant's costs of the application before the Judicial Registrar and the costs of this application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIAN DISTRICT REGISTRY WAG 9 of 1998 BETWEEN: ANDREW J FOX APPLICANT AND: ST BARBARA MINES RESPONDENT JUDGE: FRENCH J DATE: 4 JUNE 1998 PLACE: PERTH REASONS FOR JUDGMENT Introduction In January 1991 Andrew James Fox (Fox) commenced employment with St Barbara Mines Ltd as an exploration driller's offsider. He remained in the employ of the company occupying a number of positions until 16 November 1997 when his employment was terminated. On 21 January 1998 he filed an application in this Court under s 170CP of the Workplace Relations Act 1996 (Cth) claiming compensation for unlawful dismissal and for breach of the Act, the imposition of a penalty against the company and damages for breach of contract. His application was heard by Mr R.D. Farrell, a Judicial Registrar, on 24 March 1998 and on the same date Mr Farrell gave his decision. He ordered that the company pay Fox within fourteen days the sums of: (a) $5,045 pursuant to s 170CR(4) as compensation for the breach by the respondent of s 170CM of the Work Place Relations Act 1996; (b) $28,000 pursuant to s 170CR(1) as compensation for the breach by the respondent of s 170CK; and (c) $10,000 pursuant to s 170CR(1) and s 356(b) as a penalty for the breach by the respondent of s 170CK. He also ordered the company to pay Fox's costs of the application. On 15 April 1998 the company filed a motion seeking the discharge of the Judicial Registrar's order and the dismissal of Fox's original application. The motion came on for hearing on 2 June 1998. The order made by the Judicial Registrar was stayed until today. Factual History The essential findings of primary fact made by the Judicial Registrar for the most part were not contested. The history that follows is taken from his reasons for decision and the transcript of evidence and exhibits before him. On 12 December 1996, after five years working for the company, there was a change in Fox's employment arrangements with it. He signed an Individual Workplace Agreement on that date under the Workplace Relations Act. Both the company, as employer, and Fox, as employee, signed statements in the agreement document that they understood their rights and obligations, that they had freely entered into the agreement and that they wished to have it registered under the Act. The conditions of employment were set out in Schedule A to the agreement. The position accepted by Fox was that of Driller paid at a flat hourly rate of $21.75. The relevant work cycle for drilling and blasting was 8 to 12 hours on twelve consecutive days followed by two days unpaid rest and recreation leave, then twelve consecutive night shifts and again two days rest and recreation. This roster was to continue for six consecutive weeks followed by one week of unpaid rest and recreation leave. The Judicial Registrar found that Fox worked at least ten hours per day and thirteen days per fortnight, or one hundred and thirty hours per fortnight. His base rate earnings per fortnight were therefore usually about $2,827.50 gross. It was his practice to take the one week unpaid rest and recreation leave to which he was entitled after every six week roster in Perth where he and his wife lived. Fox's hours of work were prescribed in cl 3 of the agreement in the following terms: "3. Hours of Work (i) Ordinary hours of work are 40 hours per week, Monday to Friday paid at your normal hourly flat rate. (refer Section 1.1). (ii) All hours outside or in excess or (sic) your ordinary hours of work will be paid at your normal hourly flat rate. (refer Section 1.1)." Clause 4 dealt with Employee Benefits and, relevantly for present purposes, cl 4.1 with the topic of Commuting as follows: "4.1 Commuting Bluebird Village residents - Company provided Fly in, Fly out of Perth. Meekatharra residents - Travel assistance of $200.00 paid into your Travel assistance account at every due Rest and Recreation week. Bluebird Village Residents domiciled in Geraldton - Travel assistance of $200 paid into your Travel assistance account at every due Rest and Recreation week. Travel assistance must be used in accordance with Company policy. The Company will determine which of travel assistance of fly in, fly out applies after considering your personal circumstances." Fox resided at the Bluebird Village mining camp during the six week roster periods in which he was working. He received the benefit of the fly in, fly out arrangement provided for in cl 4.1. It was not disputed that the company was bound by the agreement to provide this benefit to him. Clause 5 of the agreement, relating to tenure, provided for termination of the contract as follows: "Subject to you having successfully completed your probationary period your employment shall be by the week. You or the Company may terminate this contract of employment by providing, in writing one week's notice of intention to terminate or by the payment or forfeiture of the salary applicable to the period of notice as the case may be. This period may be varied to accommodate statutory obligations on the parties." There was provision in cl 5 for termination of the contract on lesser notice by agreement and the right of the company to terminate the contract summarily without notice on grounds of misconduct was expressly reserved. Clause 6 provided that on occasions Fox might be required to carry out duties which were not part of his normal work role. These would be within his skills and capabilities and he would be paid at his normal hourly flat rate for carrying out such functions. Dispute resolution procedures were set out in cl 11 of the agreement which was in the following terms: "11. Dispute resolution procedures On occasions an employee may disagree with decisions made by the Company. Should a grievance or dispute between the Company and yourself, the parties shall confer in good faith with a view to resolving the matter on site, in the following manner: (i) The matter should be brought to the attention of your immediate Supervisor/Manager who shall endeavour to resolve the matter for you, calling upon whatever assistance they require in order to do so. (ii) If not settled within a time frame agreed by the parties (or 48 hours), it may be brought to the attention of your Superintendent or Department Manager. (iii) Should the matter remain unresolved within the time frame agreed (or another 48 hours), it may be brought to the attention of the Group Operations Manager or the Human Resources Manager whichever is appropriate. (iv) Should there be no resolution of the matter within a further agreed time frame (or a further 48 hours), either party shall have the right to have the matter referred to an Independent Arbitrator agreed to by both parties. If agreement on the arbitrator cannot be reached the Arbitrator will be a person nominated by the Chief Commissioner (or authorised delegate) of the West Australian Industrial Relations Commission. The cost of arbitration will be determined by the Independent Arbitrator. (v) Both the Company and the employee undertake to accept the decision resulting from arbitration as final and binding for the purposes of this Agreement, subject to the appeal rights available under the Workplace Agreements Act 1993. It is a condition of this agreement that all work will continue as required whilst the issue is being resolved." Schedule B to the agreement set out the flat rate and classification structure. The rate for a Mine Driller DB Grade 11, the position occupied by Fox, was specified as $21.75 per hour. The agreement also indicated a Leading Hand Allowance of $10 per day. Fox was paid the Leading Hand Allowance for the pay period ended 2 November 1997. He had from time to time been given the opportunity to act as relieving leading hand when the usual occupant of that position was absent on leave. After he had acted as leading hand on an occasional basis for about three months, the usual leading hand resigned. Fox, who was acting in the position at the time, said he was asked by his immediate supervisor, Robin Byrne, to become the leading hand. The Judicial Registrar so found but the finding on that point is now challenged on the basis of additional affidavit evidence from Byrne who was not before the Judicial Registrar as a witness, either by affidavit or orally. In July 1997, Colin Ross Atkins become Executive Chairman of the company. He had established the company and been a director of it for seven years before becoming chairman. According to Atkins' evidence, the fly in, fly out arrangements were "very messy". There were something like 110 people taking advantage of them. He said in his evidence: "The workplace agreements allowed for some people to fly-in fly-out and for some people to get $200 cash. That didn't suit me because when I was taking over as Executive Chairman I was given a mandate to clean the mine up. The mine in 1996 lost $20 million, and we were losing money at the rate of $2 million a month when I took over. I was given a mandate to clean it up and the day I took over was 9 July 1997 and I went to the site on the afternoon of 10 July. I had a meeting with all my supervisors and said the first thing that goes is the fly-in fly-out because we are a local company and we were discriminating against a lot of our own, good people." On 21 October 1997, a memorandum was sent to all managers in the company by Miss J. Sattin in the following terms: "Ross Atkins, Executive Chairman, has today advised that the last charter flights using National Jet Systems will take place on Thursday, 30 October 1997. Employees are advised to make their own private arrangements for visits to Perth after that date. Please also note that SBM will not be chartering an aircraft to transport employees to/from Perth for the Christmas break." Fox regarded this as a unilateral breach by the company of its obligations. He invoked the dispute resolution procedure set out in cl 11 of the agreement and sent memoranda to his immediate supervisor, Byrne, and subsequently, in accordance with cl 11, to Mr Tooher, a superintendent or department manager and to Mr George Hendrix, the group operations manager. The memorandum sent to Byrne was as follows: "SUBJECT; DISPUTE RESOLUTION PROCEDURE WORKPLACE AGREEMENT FLY IN\FLY OUT AND TRAVEL ASSISTANCE ALLOWANCE I wish to bring to your attention a dispute between myself and St. Barbara Mines over the cancellation of fly in\fly out as stated in my Workplace Agreement. In doing this I am following the Dispute Resolution Procedure as laid out in my copy of the St. Barbara Mines Individual Workplace Agreement. On the 21st of October 1997 I received a memorandum signed by the Executive Chairman of St. Barbara Mines, Mr Ross Atkins, stating that from the 30th of October the charter flight using National Jet Systems will be cancelled and that the other option of a travel allowance has also been cancelled. The memorandum also stated that employees should make their own private travel arrangements for trips to and from Perth. This memorandum in my opinion contravenes my workplace agreement contract and I would like to have it rectified." Other employees also complained about the change. All in all there were about twenty five complaints. Although it seems there may have been some conversation between Atkins and Fox following Fox's first memorandum to Byrne, there was no attempt to settle the dispute. On or about 1 November 1997 Fox wrote to the Chief Commissioner of the Western Australian Industrial Relations Commission seeking the help of the Commission to resolve the dispute. A similar letter was sent to the Chief Commissioner of the Department of Workplace Agreements. On 4 November 1997 Atkins telephoned Fox from Perth and said the following words, or words to this effect: "Since you are the instigator there is no f....ing way you will be leading hand." He told Fox that if he pursued his action about the fly in, fly out conditions into the Industrial Relations Commission he should "distance himself" from St Barbara Mines. Fox took this as a request for him to resign which he declined. Atkins replied that if Fox continued he would have to close the mine down or close down particular departments and three hundred and fifty jobs would be on the line. Following this telephone conversation Fox went to Perth for his rest and recreation leave. While there he phoned Atkins and asked him to reconsider his attitude to Fox being the leading hand. But when Atkins phoned Fox back he said, inter alia: "What are you doing to me? I've got the f...ing. ABC and the f..ing. Guardian on my back." The Guardian is a Geraldton based newspaper. Again, Fox asked him to reconsider his attitude on the leading hand position and Atkins said, quite abruptly "No". Fox asked him if he still had a job. Atkins replied: "Yes, but I might have to reconsider my position next week." On 11 November 1997 the Registrar of the Western Australian Industrial Relations Commission held a meeting of the parties, being Atkins, the company secretary, Brian Gardiner, Fox and his wife and Fox's solicitor. The Registrar had been authorised under cl 11(iv) of Schedule A of the Workplace Agreement to deal with the matter as the Chief Commissioner's delegate. The Registrar noted that the company accepted that cl 4.1 of the agreement entitled Fox to the "fly in, fly out" option but that it was adamant that this option had ceased forever and would not be reinstated. The Registrar noted the company's view that if there was to be a fly in, fly out arrangement at the company's expense, there would be no option but to close the mine site and lay off all employees. He went on to say: "Atkins made it quite clear that his view was that this workplace agreement was negotiated by earlier management and was not sustainable in the present economic circumstances of the mine. At one stage Atkins took the view that the continued employment of the 350 employees rested on my decision. He said he was quite prepared to close the mine." The Registrar, however, saw his role as limited to deciding the meaning and effect of the agreement not extending to its amendment. He concluded: "After hearing further from the parties jointly, I formed the view that the workplace agreement did have a provision requiring the company to provide a "fly in fly out" service from the Bluebird mine site to and from Perth at company expense. I formerly (sic) advised the parties that my decision was that the meaning and effect of clause 4.1 Commuting in the workplace agreement, was that the company should provide, at their expense, a "fly in fly out" arrangement." Atkins told Fox in the course of the proceedings in the Commission that he would be reviewing the employment of the twenty five employees who had complained about the proposed alterations and also advised Fox that he would need to see him when he returned to work at the site. Atkins also recalled telling Fox at some point: "I am not going to make your bed and feed you 21 times a week when I am fighting you in court." Fox and his wife travelled back to the mine site on 12 November 1997 and he resumed work on 13 November. He saw Atkins on Sunday, 16 November when he attended a meeting arranged by Atkins in the company's board room at Meekatharra. During that meeting Atkins terminated Fox's employment. The Judicial Registrar found that in the course of the meeting Atkins terminated Fox's employment, told him that he wanted him out of the camp that night, offered him a seat on his aircraft, which was leaving that night, and discussed the practical aspects of organising Fox's termination pay that day. Atkins indicated that this would not be practical and that the termination pay would be available in due course. The Registrar took the view that Fox was entitled to regard himself as having been summarily dismissed and that there were no grounds for such a summary dismissal. The pay in lieu of notice to which Fox had then become entitled under s 170CN(4) of the Act depended upon the substantive position he occupied at the time of his dismissal. The Registrar was of the opinion that Fox had validly been appointed to the position of a leading hand, entitling him to an extra $10 a day allowance. Upon Fox's dismissal he was given forty hours pay in lieu of notice. However in the Registrar's view he was entitled, under s 170CM, to four weeks pay in lieu of notice. On the basis that he would have worked at least ten hours per day and thirteen days per fortnight over the next four weeks he would, in the Registrar's opinion, have been expected to work two hundred and sixty hours at $21.75 per hour, a total figure of $5,655. The Judicial Registrar's Findings The Judicial Registrar found, as I have already observed, that Fox was entitled to additional pay in lieu of notice of $5,045. This was on the basis that Fox occupied the leading hand position and was working "ordinary hours" of sixty five hours per week. The Judicial Registrar found that Fox made considerable effort to mitigate the loss which he had sustained as a result of the termination of his employment. He applied for numerous jobs following his termination and did not begin to receive unemployment benefits until January 1998. He made a record of his attempts to seek employment thereafter, making some eighty five applications between the beginning of January and his eventual employment at the beginning of February. The employment he eventually obtained was casual employment. It did not offer accrued entitlements such as sick leave and annual leave which his permanent employment with St. Barbara Mines then provided. The rate of pay in his current employment is about $500 a fortnight less than what he was earning at the company. The company suggested that Fox could have applied for work as a chef of which he had had experience with catering firms contracting to mining companies before being employed by St Barbara Mines. He did not do so. The Judicial Registrar was not satisfied that a job in those circumstances would be more remunerative than the job that Fox actually succeeded in obtaining. He did not regard his not having applied for a job as a chef as relevant to or as amounting to a failure to mitigate. He also concluded that because of the relative lack of security in his new job and its lower remuneration it was fair to say that Fox would be likely to suffer a continuing loss after the date of the hearing. Fox also suffered distress and stress as a result of the termination which, according to the Judicial Registrar, manifested in a medical condition of a digestive nature. Fox used the term "reflux" to describe it in his evidence. The Judicial Registrar concluded on the question of compensation: "In assessing compensation I have also had regard to what would have happened had there not been an unlawful termination. Mr Fox had a long and settled history with the Company, having been employed since 1991. There is no reason to believe that his employment would not have continued had he not complained. Indeed, he made reference in his evidence to his intention with his wife to move to Meekatharra permanently in the foreseeable future had he not been dismissed...." The Judicial Registrar awarded compensation for breach of s 170CK in the amount of $28,000. This appears to have been a global assessment. The Judicial Registrar calculated the maximum compensation recoverable which came to $31,506. On that basis the sum of $28,000 actually awarded was within the calculated limit available. In relation to penalty, the Judicial Registrar was satisfied that Atkins had, at a minimum, recklessly disregarded the possibility that he was in breach of his statutory obligations. His decision to terminate Fox's employment, according to the Judicial Registrar, was based upon a calculation that in spite of any such breach it was to his tactical advantage for the purposes of the management of the company to make an example of Fox. The Judicial Registrar went on: "Mr Atkins was of the view that the ends justified the means, notwithstanding that there were other appropriate and lawful means by which he could have reached those same ends, such as entering into negotiations with the employees with a view to renegotiating the entitlements previously negotiated in different and better times." He concluded that the Court could not condone such apparent contempt for the statutory restraints upon employers. The maximum penalty available for breach of s 170CK is $10,000. the Registrar said: "That Penalty is relatively small in the context of the considerations taken into account by Mr Atkins. No doubt that was a factor in his calculations. In the circumstances of this case I see no reason not to order the maximum penalty." Having regard to his power under s 356(b) of the Act to order that the penalty be paid to a particular person, the Judicial Registrar said: "In this case I propose to order that the penalty be paid to the benefit of Mr Fox to do what can be done to ameliorate the disadvantageous effects upon him of his being made an example of by Mr Atkins for the benefit of the Company." In addition the Judicial Registrar ordered that the costs of the matter be paid by the company. Statutory Framework Part VIIA of the Workplace Relations Act 1996 (Cth) deals with the Minimum Entitlements of Employees. Division 2 of that Part provides, in s 170BA, for the object of the Division which is to give effect or further effect to: (a) the Anti-Discrimination Conventions; and (b) the Equal Remuneration Recommendation, 1951 which the General Conference of the International Labour Organisation adopted on 29 June 1951 and is also known as Recommendation No 90; and (c) the Discrimination (Employment and Occupation) Recommendation, 1958, which the General Conference of the International Labour Organisation adopted on 25 June 1958 and is also known as Recommendation No 111. Subdivision C relates to unlawful termination of employment by an employer. Section 170CK sets out various prohibited grounds for the termination of employment and in the relevant parts provides as follows: "170CK(1) In addition to the principal object of this Division set out in section 170CA, the additional object of this section is to make provisions that are intended to assist in giving effect to: (a) the Convention concerning Discrimination in respect of Employment and Occupation, a copy of the English text of which is set out in Schedule 1 to the Human Rights and Equal Opportunity Commission Act 1986; and (b) the Family Responsibilities Convention. (2) Except as provided by subsection (3) or (4), an employer must not terminate an employee's employment for any one or more of the following reasons, or for reasons including any one or more of the following reasons: . . . (e) the filing of a complaint, or the participation in proceedings, against an employer involving alleged violation of laws or regulations or recourse to competent administrative authorities;" Section 170CM provides for notice of termination and for compensation in lieu of notice in the following terms: "170CM(1) Subject to subsection (8), an employer must not terminate an employee's employment unless: (a) the employee has been given the required period of notice (see subsections (2) and (3)); or (b) the employee has been paid the required amount of compensation instead of notice (see subsections (4) and (5));" Subparagraph (c) relates to serious misconduct and is not relevant. Section 170CM(2) provides a table for the calculation of the required period of notice which in the case of an employee of more than five years is at least four weeks. The remaining two subsections of importance are subsections 170CM(4) and (5): 170CM(4) The required amount of compensation instead of notice must equal or exceed the total of all amounts that, if the employee's employment had continued until the end of the required period of notice, the employer would have become liable to pay to the employee because of the employment continuing during that period. 170CM(5) That total must be worked out on the basis of: (a) the employee's ordinary hours of work (even if they are not standard hours); and (b) the amounts ordinarily payable to the employee in respect of those hours, including (for example) allowances, loading and penalties; and (c) any other amounts payable under the employee's contract of employment." The relief available is set out in s 170CR in the following terms: "170CR(1) If the Court is satisfied that an employer has contravened section 170CK or 170CN in relation to the termination of employment of an employee, the Court may make one or more of the following orders: (a) an order imposing on the employer a penalty of not more than $10,000; (b) an order requiring the employer to reinstate the employee; (c) subject to subsection (2), an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate; (d) any other order that the Court thinks necessary to remedy the effect of such a termination; (e) any other consequential orders." . . . 170CR(4) Subject to subsection (5), if a court to which an application is made under subsection 170CP(2) or (3) is satisfied that an employer has contravened section 170CM in relation to the termination of the employment of an employee, that court may make an order requiring the employer to pay to the employee an amount of damages equal to the amount which, if it had been paid by the employer to the employee when the employment was terminated, would have resulted in the employer not contravening that section." Section 356 of the Act provides for the application of penalties as follows: "356 A court that imposes a monetary penalty under this Act (other than a penalty for an offence) may order that the penalty, or a party of the penalty, be paid: (a) into the Consolidated Revenue Fund; or (b) to a particular organisation or person." The Challenge to the Judicial Registrar's Decision Subject to the question whether Fox was a leading hand at the time of his dismissal, the company did not seek to controvert the Judicial Registrar's findings of fact. This does not mean that the Court, in reviewing the decision, is carrying out a judicial review exercise with the constraints which that imposes. It may, for example, substitute its own view of the appropriate exercise of a discretion for that of the Judicial Registrar. The contentions advanced by the company in support of its motion to discharge the Judicial Registrar's decision were as follows: 1. The appropriate compensation in lieu of notice under section 170CN(4) and (5), payment of which was ordered by the Judicial Registrar under section 170CR(4) should have been calculated on the bases that: (i) Fox was not a leading hand at the time of his termination; (ii) Fox's ordinary hours of work were 40 hours per week instead of 65 hours per week as adopted by the Judicial Registrar. 2. The case was not one which justified the imposition of the maximum penalty of $10,000 under section 170CR(1)(a) and the penalty should be paid to Consolidated Revenue under section 356(a) rather than to Fox under section 356(b). 3. The compensation of $28,000 awarded for breach of section 170CK should have been reduced to take account of the opportunities available to Fox for more remunerative work after leaving the company than he has actually secured. Payment in Lieu of Notice There was evidence before me which was not before the Judicial Registrar on the question whether Fox had validly been appointed to the position of a leading hand. This was the affidavit of the drilling supervisor, Robin Byrne. His affidavit was to the effect that Fox had told him on 4 November 1997 that Atkins was going to direct that Fox not be appointed a leading hand. Byrne recalled a conversation that he had with Atkins on the same day in which Atkins confirmed that Fox was not to be appointed as permanent leading hand. Byrne said he then offered that position to another worker, Campbell. He went on to say that at no time was Fox appointed as the permanent leading hand of Byrne's drilling crew. The permanent leading hand was David Durtnall until the day he finished at the mine site. He was then replaced by Phil Campbell. Andrew Fox, he said, would have been paid an additional amount for leading hand only when he was being trained by Durtnall in the leading hand position. Counsel for Fox argued that Atkins' evidence at the hearing was that no-one but him had the authority to appoint anyone as leading hand and that he had not given any direction for Fox to be so appointed. Fox's evidence was that Byrne had asked him whether he wanted to be the permanent leading hand and that he had said yes. Byrne's affidavit did not address that conversation. On the other hand, it may be observed that Byrne says in his affidavit that he had in mind choosing between Fox and Campbell. It is therefore likely that there would have been a conversation of the kind of which Fox gave evidence. Byrne's evidence that Atkins had told him that Fox was not to be appointed the permanent leading hand and had so directed him on 4 November 1997, is broadly consistent with Atkins' contention that no-one but him had the authority to appoint anyone as the leading hand. Moreover, it is certainly consistent with the evidence of Atkins' telephone conversation with Fox on 4 November 1997. In my view Fox did not occupy the position of leading hand at the time of his termination. This, however, only has a very minor impact upon the compensation payable to him in lieu of notice. It requires a deduction of $260 from the amount awarded. The other question relevant to the amount of compensation payable in lieu of notice is what were the "ordinary hours" upon which it should have been calculated for the purposes of s 170CN(4) and (5). The company argues that in an industrial relations context "ordinary" hours connotes the ordinary hours of work under an award or industrial agreement such as thirty eight or forty hours per week and can be contrasted with overtime hours which are those worked in excess of ordinary hours. The company then refers to cl 3(1) of the Workplace Agreement which sets out the "ordinary" hours of work as forty per week Monday to Friday paid at the normal hourly flat rate. It also notes that all hours outside or in excess or "ordinary" hours are to be paid at the normal hourly flat rate. The question here is, what is the meaning of "ordinary hours" for the purposes of the Act? Counsel for Fox argues that the proper construction of the words "ordinary hours" is the hours ordinarily worked by an employee whether they include penalties or were normally overtime hours. That, it is said, is made clear by the distinction drawn in s 170CM(5)(a) between ordinary hours of work and standard hours. In my opinion the purpose of payment in lieu of notice is to ensure that an employee is not suddenly and arbitrarily subjected to a loss of employment through no fault of his or her own without the security of a payment which will allow reasonable time to arrange his or her affairs, including securing new employment. It is, in effect, a short extension of the employee's financial status quo. The quantum of it properly depends upon the employee's length of service. It is appropriate therefore that when an employee is regularly working in excess of the standard hours for which the award or agreement provides the obligation to pay compensation in lieu of notice has regard to the reality of the employment and not to the artificial distinction between the base and actual hours worked. If the employee ordinarily works a sixty five hour week then he is entitled to treat that as ordinary hours for the purpose of the entitlement to compensation in lieu of notice. A reasonable test whether the actual hours worked are ordinary hours is whether the employee would be expected to work those hours if given the requisite notice of termination instead of compensation in lieu of notice. There is no reason to believe that in this case the hours worked by Fox had he been given notice, would have been less than sixty five hours per week. While every statute must be construed according to its own terms and context this construction is consistent with that adopted by the High Court in respect of the Workers Compensation Act 1912 (WA) in Kezich v Leighton Contractors Pty Ltd (1974) 131 CLR 362 at 365. In respect therefore of the compensation awarded in lieu of notice by the Judicial Registrar, I intend to allow a deduction of $260 on the basis that Fox was not a leading hand at the time of his termination, but otherwise not to disturb the award. Maximum Penalty The Judicial Registrar imposed on the company the maximum penalty of $10,000. In so doing he had regard to elements of recklessness and calculation in the company's conduct as evidence by that of Atkins. Atkins had calculated, on the Judicial Registrar's finding, that it was to his tactical advantage to make an example of Fox. In the Judicial Registrar's opinion, Atkins was of the view that the ends justified the means notwithstanding that there were other appropriate and lawful means by which he could have reached his goals such as entering into negotiations with the employees with a view to renegotiating the entitlements. The Judicial Registrar said: "The Court cannot condone such apparent contempt for the statutory restraints upon employers. The maximum penalty available for breach of section 170CK is $10,000. That penalty is relatively small in the context of the considerations taken into account by Mr Atkins. No doubt that was a factor in his calculations. In the circumstances of this case I see no reason not to order the maximum penalty." The last sentence I think indicates an error in approach to the fixing of the penalty. Ordinarily when a judge takes the unusual step of imposing a statutory maximum he or she should point out expressly the circumstances that justify that course - R v McMahon (1978) 19 ALR 448 at 451. There is ample authority in the area of criminal law for the proposition that the maximum penalty is reserved for the worst type of cases. But, as was pointed out in Veen v R [No 2] (1988) 164 CLR 465, this does not mean that a lesser penalty must be imposed if it be possible to envisage a worse case. Ingenuity can always imagine a case of greater heinousness. A sentence which imposes a maximum penalty offends the principle only if the case is recognisably outside the worst category. Broadly speaking the same approach can be applied to the imposition of penalties under the Workplace Relations Act. Whether paid to the Consolidated Revenue or to the employee, they are punitive in character and must be assessed having regard, inter alia, to the gravity of the conduct complained of, the existence of mitigating circumstances and the need to deter repetition of the conduct whether by the employer in question or generally. I regard the breach committed by the company, through its Executive Chairman, Atkins, as serious. While there was, no doubt, a pressing economic imperative for dispensing with the fly in, fly out and travel assistance benefits, the company was legally bound to honour its agreements unless and until they were varied. The economic necessity and the potentially adverse consequences of continuing with the travel benefits is a matter which could rationally have been explained to the company's workforce as an element of negotiation rather than statement of a fait accompli. It should perhaps be noted on the evidence that Atkins had been a director of the company for seven years prior to assuming the Executive Chairmanship. He did not come to the position as a stranger engaged externally to repair the damage caused by the neglect of others in entering into excessively generous agreements. The dismissal of Fox for pursuing as he did his lawful entitlement to seek resolution of the dispute about the benefits was a calculated and contemptuous disregard of the law and the rights of a long standing employee. It was a piece of industrial relations work on the part of Atkins that belongs in the Stone Age. It should not be countenanced by the Court or other employers. It is always possible to imagine a worse case of oppressive treatment of an employee and disregard of his legal rights, but the conduct in this case is at the higher end of the range of seriousness. In my opinion, the penalty imposed should reflect that view. I respect the principle that the statutory maximum should rarely be imposed. I think having regard to the factors which I have mentioned and my view of the conduct the appropriate penalty is at the higher end and I would substitute an order for payment of $9,000. As to the direction of the payment, I think having regard to Atkins' contempt for his employee's personal legal rights and the calculated way in which he dealt with them, it is appropriate that the penalty be paid to the employee rather than to the Consolidated Revenue over and above the compensatory award to which he is entitled. Mitigation of Compensation In relation to the figure of $28,000 awarded by the Judicial Registrar, pursuant to s 170CR(1) as compensation for the breach by the respondent of s 170CK, the only attack made upon the quantum of that award was based upon a mitigation of loss argument. As Counsel for the company put it before me Fox had not only the skills that he employed in his job with the company but also was trained as a chef and while he had given evidence and answered questions reasonably satisfactorily on the issue of attempts to find work within the mining sphere, he had not been so satisfactory in the alternative employment prospects available to him as a chef. This was said to be of importance because one of the matters the Judicial Registrar had taken into account in making his decision as to damages was the nature of the work that Fox had been able to find since his termination which was in fact casual employment. The company's submission was that a reasonable person mitigating his loss would have looked to work opportunities for which he was qualified outside the mining sphere. When Counsel was asked how the Court would quantify the difference between what was awarded and what the company said should have been awarded if alternative opportunities were properly taken into account, the submission was put that absent evidence on award rates and the like this was a matter which should be assessed as a contingency. In my opinion this is the kind of matter which ought to have been the subject of evidence to provide some basis for assessment of a contingency based reduction in the amount of compensation awarded. No such basis having been established, I do not propose to interfere with the Judicial Registrar's award in this regard. I should add that in the circumstances I regard the order as to costs as appropriate and will also order that the company pay the costs of these proceedings. I certify that this and the preceding nineteen (19) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice French Associate: Dated: 4 June 1998 Counsel for the Applicant: Ms W.F. Buckley and Ms J.N. Stevens Solicitor for the Applicant: Marks Healy Sands Counsel for the Respondent: Mr T.H. Offer Solicitor for the Respondent: Clayton Utz Date of Hearing: 2 June 1998 Date of Judgment: 4 June 1998