FEDERAL COURT OF AUSTRALIA Meadley v Sort Worx Pty Ltd [2013] FCA 1012 Citation: Meadley v Sort Worx Pty Ltd [2013] FCA 1012 Parties: IRENE MEADLEY v SORT WORX PTY LTD File number: VID 454 of 2013 Judge: TRACEY J Date of judgment: 8 October 2013 Catchwords: INDUSTRIAL LAW – application seeking order for compliance with Fair Work Commissioner's orders – whether orders had been made ultra vires – whether orders frustrated by change in employer circumstances – orders enforced – civil penalty imposed Legislation: Crimes Act 1941 (Cth) s 4AA Fair Work Act 2009 (Cth) ss 539, 545, 546, 562, 570, 391, 394, 405 Cases cited: Australian Competition and Consumer Commission v IPM Operation and Maintenance Loy Yang Pty Ltd (No 2) [2007] FCA 11 - cited Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 - considered Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 - considered Finance Sector Union of Australia v Commonwealth Bank of Australia (2005) 224 ALR 467 - cited Kelly v Fitzpatrick (2007) 166 IR 14 - applied Date of hearing: 20 August 2013 and 19 September 2013 Date of last submissions: 17 September 2013 Place: Melbourne Division: FAIR WORK DIVISION Category: Catchwords Number of paragraphs: 49 Counsel for the Applicant: Mr J Hooper Solicitor for the Applicant: Simon Parsons & Co Counsel for the Respondent: Ms S Bailey Solicitor for the Respondent: Conlan Lawyers IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY FAIR WORK DIVISION VID 454 of 2013 BETWEEN: IRENE MEADLEY Applicant AND: SORT WORX PTY LTD Respondent JUDGE: TRACEY J DATE OF ORDER: 8 OCTOBER 2013 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The respondent pay the applicant the sum of $15,045.39 plus interest forthwith. 2. The respondent pay the sum of $385.71 plus interest to the applicant's account in the Hesta Superannuation Fund forthwith. 3. A civil penalty of $10,000 be imposed on the respondent, such penalty to be paid to the applicant. 4. There be a stay of three months on the operation of order 3. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY FAIR WORK DIVISION VID 454 of 2013 BETWEEN: IRENE MEADLEY Applicant AND: SORT WORX PTY LTD Respondent JUDGE: TRACEY J DATE: 8 OCTOBER 2013 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 Ms Irene Meadley has applied to the Court for orders that the respondent ("Gippsland Waste") comply with certain orders made by a Commissioner of the Fair Work Commission ("the Commission"). She also seeks certain related orders including an order that a penalty be imposed on Gippsland Waste for contravening the Commission's orders. While the hearing of the application was pending Gippsland Waste changed its name to "Sort Worx Pty Ltd". Although I ordered that the name of the respondent in the proceeding should be amended to reflect this change I will, in these reasons, continue to refer to the respondent as Gippsland Waste. THE BACKGROUND 2 Ms Meadley commenced employment with Gippsland Waste on 29 December 2008. The company dismissed her on 24 July 2012. 3 On 2 August 2012 Ms Meadley applied to the Commission for an unfair dismissal remedy: see s 394 of the Fair Work Act 2009 (Cth) ("the Act"). 4 The merits of the application were considered at a hearing before the Commission on 24 and 25 January 2013. Further hearings took place on 28 February and 15 March 2013. 5 On 4 April 2013 the Commissioner published a finding that Ms Meadley's termination was unfair because there had been no valid reason for it. He foreshadowed orders that Ms Meadley be re-instated and certain consequential orders. 6 The Commission conducted further hearings about the terms of the orders which should be made. Those hearings took place on 19 April and 2 May 2013. In the period between these two hearings correspondence passed between the representatives of the parties. Various proposals were advanced and discussed about the terms of orders which would give effect to the Commissioner's reasons for decision. Following this correspondence each party submitted a form of orders for consideration by the Commissioner. 7 On 2 May 2013 the Commissioner published a further decision and made orders. The orders were substantially similar to those proposed by the parties. The orders were promulgated in a document headed "ORDER". After formal headings the order contained some recitals. They read: "A. The Respondent terminated the Applicant's employment on 24 July 2012 (date of termination). B. The Applicant's employment is reinstated effective 30 April 2013 (date of reinstatement), with the period between the date of termination and date of reinstatement being 40 weeks. C. The Fair Work Commission orders as follows:" 8 The document continued: "Reinstatement 1. Pursuant to s.391(1) of the Fair Work Act 2009 (the Act), the Applicant's employment with the Respondent is reinstated in the following terms: a) into her employment with the Respondent; b) on the basis of working 5 out of 7 shifts as a weighbridge operator and 2 shifts out of 7 as an unload monitor per fortnight; c) at her previous classification at Level 3 under the Waste Management Award 2010; d) at the base rate of pay that she was on as at date of termination, with such base rate of pay being $1810.40 per fortnight; e) to be rostered 7 days per fortnight, and for not more than 61 paid hours of work in total, as follows: i) Monday ii) Tuesday iii) Wednesday iv) Saturday v) Sunday vi) Monday vii) Thursday Continuity of Service 2. Pursuant to s.391(2)(a) and (b) of the Act the Respondent must ensure that the Applicant's continuity of service and period of continuous service are maintained. Restoration of Lost Pay 3. Pursuant to s.391(3) of the Act, the Respondent will restore to the Applicant lost remuneration for the period from termination of employment to reinstatement, with such calculation being made as follows: a) For the 12 months prior to termination the Applicant worked an average of 61 hours per fortnight thereby earning gross $1810.41 per fortnight or gross $905.20 per week; b) As at 30 April 2013 there will have been 40 weeks between the date of termination and reinstatement, which amounts to $36,208 in lost salary; c) Between the date of termination and reinstatement the Applicant received remuneration/benefits from third party employers to the gross amount of $12,064.36. The Respondent will therefore restore to the Applicant the sum of $24,143.64 (being $36,208 minus $12,064.36) in gross lost salary. d) The income tax on this gross payment is to be calculated as if the income was received on a fortnightly basis. e) For each week after 30 April 2013 until the effective reinstatement date the Respondent will pay to the Applicant the sum in sub-clause c ($24143.64) plus $905.20, less any remuneration earned by the Applicant during that same period. 4. In addition to lost salary, the Respondent will make superannuation guarantee payments of 9% on the gross amount of restored salary as required by superannuation guarantee legislation, with such superannuation payment being 9% of $24,143.64 which equals $2,172.93. a) For each week after 30 April 2013 until the effective reinstatement date the Respondent will pay to the Applicant, by way of superannuation guarantee payments the sum in clause 4 ($2172.93) plus 9% of any additional amount payable under clause 3e." "SGT" means Superannuation Guarantee Threshold. 9 Notably recital B and paragraphs 3e) and 4a) (apart from some quantum issues) were proposed by both parties. 10 On 24 April 2013 Gippsland Waste lodged an appeal to a Full Bench against the Commissioner's decision. The Full Bench fixed the hearing of the appeal for 26 June 2013. 11 On 7 May 2013 a Deputy President of the Commission refused to stay the Commissioner's orders pending the hearing and determination of Gippsland Waste's appeal. 12 By notice dated 29 May 2013 Gippsland Waste discontinued the appeal. 13 By 7 June 2013 Gippsland Waste had failed to comply with the Commission's orders. On that day the present application was made to this Court. 14 After the application was commenced Gippsland Waste belatedly complied with some parts of the Commission's order. On 5 July 2013 it paid Ms Meadley $24,143.64. This payment was made pursuant to paragraph 3c) of the Commissioner's order. Other parts of the order (including the reinstatement order) have not been complied with. 15 At the time at which Ms Meadley was working for Gippsland Waste it had contracts to provide waste management services to two local councils in Gippsland. On 22 May 2013 the East Gippsland Shire Council terminated its contract with Gippsland Waste with immediate effect. Gippsland Waste has also since lost a contract with the Wellington Shire Council under which it provided management services to the Council. The result has been that Gippsland Waste no longer has any contracts in Victoria. Although it has maintained a skeleton staff of six people based in Trafalgar, it has no position to which Ms Meadley can return. All of her work as an employee of Gippsland Waste related to the provision of services to the East Gippsland Council. 16 In the course of argument on the first day of the trial counsel for Ms Meadley advised the Court that, in the light of these developments, his client was no longer seeking to be reinstated as an employee of Gippsland Waste. The remedial orders which she sought were: "1. The Respondent pay the Applicant $6,190 in lost wages for the period 1 May 2013 to 20 August 2013. 2. The Respondent pay the Applicant $3,620.80 representing four weeks notice in accordance with the Waste Management Award 2010. 3. The Respondent pay the Applicant 8 weeks redundancy amounting to $7,241.60 in accordance with the Waste Management Award 2010. 4. The Respondent pay 9% SGT on item 1 above amounting to $557.12 to the Applicant's superannuation fund. 5. The Respondent pay 9% SGT on item 2 above amounting to $325.87 to the Applicant's super fund. 6. The Respondent pay the Applicant in lieu of 4 weeks annual leave accrued between July 2013 and August 2013, amounting to $3,620.86." She also sought orders that a penalty be imposed on Gippsland Waste for contravention of the Commissioner's order, an order that the penalty be paid to her and an order that Gippsland Waste pay her costs of the application on an indemnity basis. 17 Before the second day of the hearing counsel for Ms Meadley submitted a revised form of orders which would have extended the period covered by proposed orders 1 and 6 to that day. These extended periods resulted in larger amounts being sought and consequential increases to the superannuation payments provided for in the proposed orders. LEGISLATION 18 The Commissioner's orders were expressed to be made under s 391 of the Act. Relevantly, it provided: "(1) An order for a person's reinstatement must be an order that the person's employer at the time of the dismissal reinstate the person by: (a) reappointing the person to the position in which the person was employed immediately before the dismissal; or (b) appointing the person to another position on terms and conditions no less favourable than those on which the person was employed immediately before the dismissal. (1A) … (2) If the FWC makes an order under subsection (1) and considers it appropriate to do so, the FWC may also make any order that the FWC considers appropriate to maintain the following: (a) the continuity of the person's employment; (b) the period of the person's continuous service with the employer, or (if subsection (1A) applies) the associated entity. (3) If the FWC makes an order under subsection (1) and considers it appropriate to do so, the FWC may also make any order that the FWC considers appropriate to cause the employer to pay to the person an amount for the remuneration lost, or likely to have been lost, by the person because of the dismissal." 19 By s 405 it is provided that a person to whom the Part of the Act in which s 391applies must not contravene a term of an order made by the Commission. Section 405 is prescribed by s 539 to be a "civil remedy provision". 20 Section 562 of the Act confers jurisdiction on this Court "in relation to any matter (whether civil or criminal) arising under [the] Act." 21 Section 545(1) of the Act confers a broad remedial power on the Court. It "may make any order the court considers appropriate if the court is satisfied that a person has contravened … a civil remedy provision." By s 545(2)(b) the Court has power to order the payment of compensation for loss that a person has suffered "because of" a contravention. 22 By s 546 the Court is empowered to order that a person pay a pecuniary penalty for contravention of the civil remedy provision. The maximum penalty which may be imposed on a corporation for a contravention of s 405 is 300 penalty units: see s 546(2)(b). This presently corresponds with a maximum monetary penalty of $51,000: see s 4AA Crimes Act 1914 (Cth)("the Crimes Act"). Amendments to the Crimes Act increased a penalty unit from $110 to $170 effective as of 28 December 2012. The Court may order that any pecuniary penalty which it imposes be paid to the Commonwealth, a particular organisation or a particular person. Section 546(5) provides that a pecuniary penalty may be imposed in addition to any orders made pursuant to s 545. CONSIDERATION Liability 23 Gippsland Waste opposed the making of any of the orders sought by Ms Meadley. It contended that the Commissioner's order has been made ultra vires and that the changes in circumstances had frustrated its ability to comply with the order for reinstatement. 24 It would have been possible for these grounds to be relied on by Gippsland Waste on an appeal to the Full Bench. Despite this no attempt was made by Gippsland Waste to amend its notice of appeal to raise these grounds. In the event the appeal was discontinued. 25 Although no foundation for doing so was established in argument, I am prepared to assume, in Gippsland Waste's favour, that it is able to rely on these grounds in defending the present proceeding and, in doing so, effectively mount a collateral attack on the Commissioner's order notwithstanding its failure to pursue an appeal from that order. 26 The ultra vires argument is founded on the terms of recital B of the Commissioner's order. In that recital he recorded that Ms Meadley's "employment is reinstated effective 30 April 2013 (dated of reinstatement) …" Because the order was made on 2 May 2013, Gippsland Waste objected that it was a retrospective order which the Commission was not empowered to make. This, so it was contended, rendered order 1 ultra vires in its entirety. Given that order 1 relied on s 391(1) of the Act, the orders made in paragraphs 2 and 3 were also rendered ultra vires, so it was contended, because they had been made, respectively, under sub-sections 391(2) and (3), and could only be made if there was, in existence, a valid order under s 391(1). 27 The obligation imposed on Gippsland Waste by s 405 of the Act was that it not contravene a term of the Commission's order. A contravention of a term cannot occur unless the term imposes an obligation on a person. Recital B imposed no such obligation on Gippsland Waste. It did not oblige Gippsland Waste to do or refrain from doing anything. Rather, the Recital served the purpose of providing a definition of the "date of reinstatement" which was picked up in one of the later orders (order 3) to assist in the calculation of certain monetary payments. It will be necessary to return to the operation of order 3 later in these reasons. 28 For present purposes, however, it is important to note that the operative order under s 391(1) of the Act is to be found, not in Recital B, but in order 1. This order required Gippsland Waste to reinstate Ms Meadley's employment on certain terms. The order did not refer to the defined reinstatement date. Order 1 was not, therefore, ultra vires. It follows, that to the extent that orders 2 and 3 were said to have been ultra vires by reason of the order made under s 391(1) of the Act being invalid, Gippsland Waste's argument must fail. 29 Order 3, as has already been mentioned, was concerned with the calculation of certain "lost pay" which occurred because of Ms Meadley's dismissal. Those calculations, in part, were to be made by reference to periods which either concluded or commenced on 30 April 2013 or the "date of … reinstatement." 30 Order 3 was made pursuant to s 391(3) of the Act. Under this provision the Commission was empowered to order Gippsland Waste to pay Ms Meadley "an amount for the remuneration lost, or likely to have been lost, by the person because of the dismissal." 31 In exercising this power the Commission calculated the various sums that would have been payable to Ms Meadley or on her behalf had she remained employed from the time of her dismissal until 30 April 2013. This was a period which expired two days before the Commission's order was made. The order may thus have resulted in Ms Meadley receiving less than the total remuneration which she had lost as a result of her dismissal. Nonetheless, the orders were clearly designed to provide for payment to her of a significant proportion of her losses. Such orders plainly fell within the range of orders available to the Commission under s 391(3). 32 For these reasons I reject Gippsland Waste's challenge to the validity of the Commission's orders. Relief 33 It remains to consider what, if any, relief should be granted by the Court. Section 545 of the Act confers on the Court broad powers to grant relief to persons who have suffered as a result of a contravention of a civil penalty provision. Such powers must, of course, be exercised judicially having regard to all of the circumstances of any particular case. 34 The section clearly contemplates the existence of a link between the relevant contravention and any harm or damage suffered by an applicant for relief under the section. 35 Had Ms Meadley been reinstated in accordance with the Commission's orders she would have resumed her employment on or shortly after 2 May 2013. She would have held her former position on 22 May 2013 when Gippsland Waste lost its contract with the council. At that point she would have been eligible for redundancy payments and payment in lieu of notice under the relevant award. She would also have been entitled to wages during this period, to superannuation contributions being paid on her behalf and to accrued entitlements. 36 Had the Commission's orders been complied with Ms Meadley's employment would have ceased on 22 May 2013. She would have been entitled to the payments which I have just outlined. She was deprived of them because of Gippsland Waste's failure to comply with the Commission's order. She should have those sums. 37 I do not, however, consider that she should be treated, as the orders sought by her propose, as remaining employed and entitled to wages until 19 September 2013, the second day of the trial. She cannot be entitled to both redundancy and associated entitlements on the basis that her employment would have ceased on 22 May 2013 and wages on the basis that she remained an ongoing employee of the company. Moreover, double counting would be involved because payment in lieu of notice and redundancy payments are made in order to compensate for loss of income following termination. Ms Meadley ought not to be paid twice in respect of the same period. 38 The parties agreed that Ms Meadley would have been entitled to the following payments on 22 May 2013 upon her position becoming redundant: Wages of $664.90 plus a superannuation contribution of $59.84 payable to Ms Meadley's nominated fund – Hesta Superannuation Fund. Four weeks pay in lieu of notice pursuant to the Waste Management Award 2010 - $3,620.80 plus a superannuation contribution of $325.87 payable to Ms Meadley's nominated fund. Eight weeks redundancy pay pursuant to the award - $7,241.60. Accrued annual leave entitlement - $2,994.12 plus $523.97 by way of a 17.5% leave loading pursuant to the award. 39 Ms Meadley lost these sums because of Gippsland Waste's contravention of a civil remedy provision. Gippsland Waste will be ordered to pay $15,045.39 plus interest to her. It will also be ordered to pay $385.71 plus interest to her account in the Hesta Superannuation Fund. PENALTY 40 Ms Meadley has sought the imposition of a pecuniary penalty on Gippsland Waste because of its failure to comply with the Commissioner's orders. The Court has power to impose such a penalty under ss 405 and 546 of the Act. 41 In exercising this power the Court is required "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": see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 580 (per Buchanan J). 42 In Kelly v Fitzpatrick (2007) 166 IR 14 at [14] I identified a number of factors which were potentially relevant and applicable in determining an appropriate penalty. These factors were: "• The nature and extent of the conduct which led to the breaches. • The circumstances in which that conduct took place. • The nature and extent of any loss or damage sustained as a result of the breaches. • Whether there had been similar previous conduct by the respondent. • Whether the breaches were properly distinct or arose out of the one course of conduct. • The size of the business enterprise involved. • Whether or not the breaches were deliberate. • Whether senior management was involved in the breaches. • Whether the party committing the breach had exhibited contrition. • Whether the party committing the breach had taken corrective action. • … • The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and • The need for specific and general deterrence." Each of these considerations, to varying degrees, bear on the determination of a penalty in the present case. 43 The Commissioner's orders were made on 2 May 2013. Gippsland Waste was tardy in complying with some of the orders and has wholly failed to comply with others. Gippsland Waste was well aware that it was required to comply with the orders. At the hearing of its application for a stay of the orders pending appeal which was held on 7 May 2013 the Deputy President specifically said that, "at the moment there's an order and it ought be complied with." He refused the application for a stay. Despite this and, despite advice from the employer association of which Gippsland Waste was a member, Gippsland Waste determined "not to reinstate or pay the ordered amounts until the appeal process had been run." The company's decision not to comply with the Commission's orders was made before it lost the Gippsland East Shire Council contract. This was a deliberate decision taken by Mr Greg Petrie, the then General Manager of the company. That loss, as has already been seen, had implications for Ms Meadley's reinstatement. By 22 May 2013 when the contract was terminated it became impossible for Gippsland Waste to reinstate her. 44 Gippsland Waste did, belatedly, comply with order 1 made by the Commission and paid Ms Meadley the amounts which she had lost to 30 April 2013 as a result of her wrongful dismissal. No previous contraventions of civil remedy provisions of the Act or its predecessors were alleged against Gippsland Waste. It is a small company which, at the moment employs only six people. It is in a precarious financial position with outgoings exceeding income. It has debts which it submitted were unserviceable in the circumstances which it presently confronts. The company advised the Court that it was sorry for any inconvenience its failure to comply with the Commission's order it occasioned Ms Meadley. It apologised for its conduct. 45 I am inclined to accept Gippsland Waste's submission that there is little likelihood of it reoffending. There remains, however, a significant issue relating to general deterrence. The Commission is charged with the responsibility of ensuring that employees are accorded the protection from proscribed adverse action to which they are entitled under the Act. When the Commission finds that an employee has been unfairly dismissed and makes remedial orders those orders must be complied with unless a stay is granted pending appeal. An employer is not entitled unilaterally to determine to ignore an order made by the Commission. This was not a case in which the employer was unable to meet its obligations; it simply chose not to do so. This was a serious contravention and the need for general deterrence weighs as a heavy consideration in fixing penalty. Penalties must be imposed at a meaningful level if they are to serve as a general deterrent to others who may be disposed to engage in similar misconduct: see, for example, Australian Competition and Consumer Commission v IPM Operation and Maintenance Loy Yang Pty Ltd (No 2) [2007] FCA 11 at [66]; Finance Sector Union of Australia v Commonwealth Bank of Australia (2005) 224 ALR 467 at [41]. As Finkelstein J said in Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at 230-1; "even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct …". This is such a case. 46 Ms Meadley contended that the Court should find that three separate contraventions had occurred, they being contraventions of each of orders 1, 2 and 3 made by the Commission. I do not accept this submission. Gippsland Waste's failure to comply with any of the Commission's orders, until its belated compliance with order 1, can be traced to a single decision. That decision was that the company would not comply with any part of the Commission's order pending the outcome of the appeal notwithstanding the refusal of a stay. A penalty should be imposed on the basis that a single contravention of a penalty provision occurred. 47 In all of the circumstances I consider that a penalty of $10,000 should be imposed on Gippsland Waste. Having regard to its parlous financial position I consider that a stay of three months is warranted. 48 Ms Meadley instructed solicitors to bring the proceeding in this Court on her behalf. She has borne the financial risk and the unavoidable strain of litigation in an effort to assert her rights. She has also upheld the authority of the Commission. I consider that an order should be made under s 546 of the Act that the penalty imposed on Gippsland Waste should be paid to her. COSTS 49 Somewhat tentatively, Ms Meadley also sought an order for costs. No order for costs should be made because none of the criteria prescribed by s 570(2) of the Act have been shown to have been satisfied. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. Associate: Dated: 8 October 2013