Industrial Court of New South Wales CITATION: Transport Workers' Union of New South Wales v Contract Courier Services Pty Ltd [2007] NSWIRComm 152 PROSECUTOR Transport Workers' Union of New South Wales PARTIES: DEFENDANT Contract Courier Services Pty Ltd FILE NUMBER(S): IRC 3328; IRC3329 of 2006 CORAM: Marks J CATCHWORDS: S357 breach of industrial instrument - guilty plea - failure to keep and maintain remuneration records as required by Contract Determination, specifically time of allocation and meal breaks - consequent underpayment of courier - mitigating factors including rectification of deficiencies causing breach of Contract Determination, no prior breach of industrial instrument, expression of contrition and remorse - undertakings given with respect to future conduct and adjustment of past breaches - objective assessment of the seriousness of the offences - deliberate steps taken by defendant knowing that the obligations under the Contract Determination would not be satisfied - deterrent effect of monetary penalty - monetary penalty imposed LEGISLATION CITED: Industrial Relations Act 1996 s357 Transport Industry - Courier and Taxi Truck Contract Determination 239 IG 248 cl10.1(d), 12.2 Age Co Limited v Automotive, Foods, Metals, Engineering, Printing and Kindred Industries Union (2000) 103 IR 148 Bluescope Steel v AWU (NSW) (2004) 136 IR 48 CASES CITED: Cotis v Pow Juice Pty Ltd [2007] FMCA 140 Distribution Pty Ltd [2006] NSWIRComm 192 Transport Workers' Union v Carey's Warehousing and HEARING DATES: 16 April 2007, 29 May 2007, 1 June 2007 DATE OF JUDGMENT: 28 June 2007 PROSECUTOR: Mr A Hatcher of counsel Mr D Tritton LEGAL REPRESENTATIVES: Transport Workers' Union of New South Wales DEFENDANT: Mr J Murphy of counsel JUDGMENT: INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Marks J Thursday 28 June 2007 Matter No IRC 3328 & 3329 of 2006 Transport Workers' Union of New South Wales v Contract Courier Services Pty Ltd Prosecutions and recovery of civil penalty under s 357 of the Industrial Relations Act 1996 JUDGMENT [2007] NSWIRComm 152 1 There is before the Court two summonses issued by the prosecutor, Transport Workers' Union of New South Wales, against the defendant, Contract Courier Services Pty Ltd, in which a civil penalty is sought consequent upon a breach by the defendant of the provisions of an industrial instrument. 2 The proceedings are brought under s 357 of the Industrial Relations Act 1996 ("the Act"). S 357 is in the following terms: 357 Civil penalty for breach of industrial instruments (1) If an industrial court is satisfied that a person has contravened a provision of an industrial instrument, it may order the person to pay a pecuniary penalty not exceeding $10,000 ( "a civil penalty"). Note: Section 21 of the Interpretation Act 1987 provides that the expression "contravene" in an Act includes a failure to comply. (2) Proceedings for a civil penalty may be instituted: (a) by an inspector or any other person authorised by this Act to institute proceedings for offences, or (b) by an employer bound by the industrial instrument concerned, or (c) by an industrial organisation concerned in the industry to which the proceedings relate. (3) Proceedings for a civil penalty may be instituted within 6 years after the contravention. (4) To avoid doubt, the rules of evidence apply to proceedings for a civil penalty. (5) Evidence given in proceedings for the recovery of money under Part 2 is not admissible in proceedings for a civil penalty. (6) In any proceedings for a civil penalty, the industrial court may award costs to either party and assess the amount of those costs. Costs cannot be awarded against the prosecutor except in the circumstances in which costs can be awarded against the prosecutor in criminal proceedings. (7) The following provisions apply to contraventions of industrial instruments and to proceedings for a civil penalty for such a contravention in the same way as they apply to criminal proceedings for an offence against this Act: (a) Sections 400–403. (b) The provisions of any Act relating to the recovery of penalties imposed for an offence. (c) Any provision of this or any other Act relating to criminal proceedings that is applied to this section by the regulations (whether with or without modification). 3 The defendant has pleaded guilty to each of the breaches alleged. Accordingly, this judgment is concerned substantially with the question of penalty, although it is necessary to refer to an ancillary matter, namely an application for an order for the payment of monies to a contract carrier engaged by the defendant. 4 The defendant was charged with breaches of clause 10.1(d) and clause 12.2 of the Transport Industry - Courier and Taxi Truck Contract Determination 239 IG 248. 5 Relevantly, clause 10.1(d) of that determination requires a principal contractor to keep and maintain certain remuneration records in one of two alternative forms referred to which include "the records required to calculate the daily safety net hours in accordance with subclause 12.2 or exclusive hire hours in accordance with clause 15." 6 The charge in matter no IRC 3328 of 2006 is that from 4 April 2003 to 27 June 2006, the defendant breached clause 10.1(d) by failing to maintain true and correct records as required. In particular the charge relates to the operation of a courier business by the defendant and the engagement under a contract of carriage of Nelson Luna. Specifically, the charge alleges that a "significant number of hours worked by Nelson Luna in the period the subject of this charge are not accounted for either as daily safety net work hours in accordance with clause 12.2 or as exclusive hire hours in accordance with clause 15 in the defendant's records." 7 The charge in matter no IRC 3329 of 2006 is that the defendant breached clause 12.2 of the Contract Determination by underpaying Nelson Luna during the same period in accordance with a Daily Safety Net entitlement, which is referred to in the Contract Determination. 8 An agreed statement of facts became evidence in the proceedings. It elaborated on some of the matters contained in the charges, which I have described in brief terms. It is as follows: AGREED STATEMENT OF FACTS 1. Contract Courier Services Pty Ltd (ACN: 002 235 903) is the Defendant ("the Defendant") in matters 3228/06 & 3329/06 ("the proceedings"). 2. The Defendant was at all relevant times a principal contractor within the meaning of section 310 of the Industrial Relations Act 1996 and engages approximately 120 contract carriers to perform contracts of carriage pursuant to the Transport Industry – Courier and Taxi Truck Contract Determination ("the Determination"). 3. Nelson Luna was engaged by the Defendant as a courier to perform contracts of carriage subject to the Determination from on or about 1st April 2003 to on or about 21st June 2006. 4. The Defendant was at all relevant times bound to maintain records, pursuant to clauses 10.1(d) and 10.4 of the Determination, which would have enabled it to calculate safety net hours for its contract carriers. Specifically, the Defendant was, pursuant to clause 12.2 of the Determination, required to maintain records of safety net hours (by reference to which the relevant hourly rate of pay set out in schedule I was to be paid) which recorded: (a) the period of time on any working day after the first job had been allocated and the contact carrier commenced to travel in order to pick up the first job of the day until the time of delivery of the final completed job on that same day; or (b) should the working day commence with a contract carrier having to complete a delivery overnight by the contract carrier, the period of time commencing from the time the contract carrier commenced to travel to either effect the delivery held overnight or to effect the day's first allocated delivery (whichever was the earlier) until time of delivery of the final completed job on that same day. 5. The Defendant was at all relevant times entitled, under clause 12.2.3 of the Determination, to exclude from its record of safety net hours time spent by the contract carrier taking a meal or other break. Clause 3.2 of the Determination required that such a break (if any) be taken at times agreed between the contract carrier and the principal contractor. 6. The Defendant made an operational decision in about 1998 to use the time that its contract carriers made their first "pick up" of the day as the basis for calculating the daily commencement of safety net hours worked by its contract carriers (including Mr Luna). 7. The Defendant also made an operational decision to automatically deduct time notionally spent on a daily rest break of up to 30 minutes from its calculation of safety net hours for its contract carriers, irrespective of whether the contract carrier had agreed to take such a break. Specifically, in the case of Mr Luna, the Defendant recorded rest breaks which were not agreed and deducted these from the calculation of safety net hours, without knowledge of whether Mr Luna actually took the purported breaks. 8. The Defendant's safety net records in any event showed certain amounts owing to Mr Luna under the Determination. Those amounts were not paid to Mr Luna during his engagement with the Defendant or prior to the commencement of these proceedings. 9. The Defendant's conduct referred to in paragraphs 6, 7 and 8 above caused it to breach clause 10.1(d) and clause 12.2 of the Determination. 10. As a consequence of the conduct referred to in paragraphs 6, 7 and 8 above, the Defendant underpaid Mr Luna on safety net the amount of $21,769.00 (exclusive of GST). 11. On 23rd April 2007 the Defendant paid to Mr Luna the amount of $9,795.00 plus GST towards the underpayment identified in paragraph 10 above. 12. The Defendant has not been found to have contravened the Determination prior to these proceedings. 13. The Defendant provided the officers of the Transport Workers Union all records that were requested of it when requested. 9 Additional documentary material also became evidence in these proceedings. This consisted of certain affidavit evidence of James Taylor, a director of the defendant. This additional evidence is to the effect that the defendant has been in business as a courier and taxi truck operator for some 47 years. Work is allocated to contract carriers of whom there are currently approximately 120. The allocation of work to these contract carriers is undertaken using a computer based transport management system. Contact is made between a communication centre operated by the defendant and contract carriers through a variety of equipment including radio, global positioning systems, and Mobile Data Units. 10 The principal source of remuneration for contract carriers under the Contract Determination is intended to be one of a number of incentive schemes based on the number and type of items carried and taking into account that a contract carrier may be carrying more than one item at any particular time. The safety net provisions contained within clause 12.2 of the Contract Determination are designed to ensure that a contract carrier is paid a minimum amount of remuneration calculated by reference to the "Daily Safety Net Hours". The commencement point for this calculation is, in general terms, when the first job is allocated on a particular day and the contract carrier commences to travel in order to pick up that first job. The relevant time finishes with the time of delivery of the final completed contract of carriage that same day. The requirement, therefore, is for principal contractors to keep such records as will reflect the commencement and finishing times of work each day to enable the daily safety net hours to be calculated. 11 It was the evidence of Mr Taylor that when this Contract Determination first commenced in force in 1998, the company used the time when a contract driver logged on to its system in order to record the start of the daily safety net hours. The company thought, incorrectly in my opinion, that it could not use the time of allocation because sometimes work was allocated on the evening before work commenced that day. Mr Taylor said the company worked with its IT experts to create a system which, eventually, calculated safety net hours as being the time of the first pick up of an item on the particular day. 12 As is clear, the time of first pick up will always be later than the time of the allocation coupled with a commencement to travel in order to pick up an item. Accordingly, at that stage, the defendant had built into its system the recording of information about daily safety net hours that did not allow it to comply with the provisions of the Contract Determination and thereby created the breach to which it has pleaded guilty. 13 Another difficulty, which caused the company to be in breach, was the fact that it arbitrarily allocated with respect to each contract driver a period of 30 minutes each day for a meal break. Meal breaks are not counted in calculating daily safety net hours. This arbitrary allocation of 30 minutes was incorrect in that some contract drivers, and Mr Luna in particular, did not necessarily take a 30-minute meal break. 14 It was the evidence of Mr Taylor that these deficiencies in the company's system, which caused it to be in breach of the Contract Determination, have now been rectified. In particular, the commencement of the safety net hours is recorded in the company's records as being the time of allocation of the first job, which may be earlier than the time when the contract carrier commences to travel in order to pick up the first job. Accordingly, the company has now proceeded on a conservative basis designed to ensure compliance. Furthermore, since 1 September 2006, the company does not deduct any time taken for any lunch or other personal breaks from its calculation of daily safety net hours. 15 During the course of submissions there was agreement between the parties that the Court could be informed that at one stage the matters raised by these proceedings were the subject of proceedings in the Industrial Relations Commission of New South Wales. Whilst those proceedings did not resolve the controversy between the parties, the defendant indicated that if it could be demonstrated that it owed Mr Luna money, it would pay those monies. 16 These proceedings were commenced on 20 October 2006. Mr Luna's engagement finished on about 21 June 2006. There can be no doubt that, at least, some time prior to 20 October 2006 the defendant was on notice of allegations that it had underpaid Mr Luna. In fact, Mr Luna was paid the sum of $9,795 plus GST by the defendant on 23 April 2007. As will be seen from [10] of the agreed statement of facts, the defendant has acknowledged a total underpayment to Mr Luna of $21,769 exclusive of GST. 17 Some more detailed explanation as to the failure to make payment to Mr Luna is contained in affidavit evidence of Mr James Taylor. In an affidavit sworn 27 April 2007 he said: "97. I am unable to say with precision why these payments were not made to Mr Luna when they were due. However, over the period of Mr Luna (sic) engagement with the company there were, on average, approximately 150 contract carriers, who were all paid bi-monthly pursuant to the Courier and Taxi Truck Determination…. 98. Whilst I cannot say with certainty, it is possible that I failed to check the driver safety net summary sheets for Mr Luna because I was aware that, from an early stage of his engagement with the company, he worked on regular runs for which he was paid by the hour at the safety net hourly rate. Since preparing this affidavit I have taken steps and forwarded to Mr Luna a cheque for $9795.44 (plus GST)." 18 The evidence in the proceedings is also indicative of the following matters: 1) This is the first occasion known to the prosecutor where this defendant has breached any industrial instrument. 2) The defendant has taken steps designed to avoid any future problems in this area. 3) The company has expressed contrition and remorse for what has occurred. 4) There is evidence that the company is "a good corporate citizen" in that it supports a number of charities. 5) The company co-operated with the prosector in making available its records for inspection by the prosecutor's personnel. 6) The defendant had been audited by the Department of Industrial Relations in 1999 and in 2003 and had been the subject of several audits by TWU officials. No other breach of an industrial instrument has been detected. 7) The defendant has taken an active interest in the Australian Courier and Taxi Truck Operators' Association and the Courier and Taxi Truck Association, being the industry associations. 8) The defendant has given a written undertaking to the Court to the effect that, effective from 1 June 2007, it will calculate safety net hours from the actual time of first allocation of work to the contract carrier each working day, that it will not deduct from the calculation of safety net hours times taken for lunch or other breaks (with certain specified exceptions), all safety net payments will be paid strictly within 14 days of the end of each period and that it will keep accurate records in accordance with the relevant provisions of the Contract Determination and provide contract carriers with accurate summary sheets as required. 9) During the course of submissions, the defendant's counsel, Mr J Murphy, said that the defendant would examine the basis of past payments to current carrier contractors and would make good any underpayments identified pursuant to the provisions of the Contract Determination. It was submitted that this was a considerable task that would involve consideration of a large number of documents. 10) The defendant has submitted to orders, which I made during the course of the hearing on 1 June 2007, to the payment in total to Mr Luna of $21,769 plus GST (subject to offset of monies already paid) and to the payment to the prosecutor of its costs for the proceedings as agreed or assessed. Assessment of penalty 19 It may be stated as uncontroversial that these proceedings, which seek the imposition of a civil penalty for breach of an industrial instrument, are not criminal proceedings. Nevertheless, the courts have approached the assessment of the appropriate level of penalty in a fashion analogous to that of the imposition of a penalty in a criminal proceeding. Again, because this is an uncontroversial area, it is not necessary for me to deal in any detail with the relevant authorities. There are authorities of this Court that have adopted this approach. See, for example, Bluescope Steel v AWU (NSW) (2004) 136 IR 48 (Boland J) and Transport Workers' Union v Carey's Warehousing and Distribution Pty Ltd [2006] NSWIRComm 192 (Marks J). There were parallel provisions in the corresponding Federal legislation (I have not been referred to, nor have I checked for this purpose, the current Workchoices legislation). In the Federal context, I refer to the decision of Finkelstein J in the Federal Court of Australia in Age Co Limited v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2000) 103 IR 148 at [19] to [22] cited by Boland J in Bluescope. I refer also to the comprehensive discussion of the relevant authorities contained within the judgment of Lloyd-Jones FM in Cotis v Pow Juice Pty Ltd [2007] FMCA 140. I will proceed to deal with these matters accordingly. 20 I commence by observing that industrial instruments serve an important and integral part in the orderly regulation of relationships between employers and employees and principals and independent contractors. They have the force of law and sanctions are imposed for breach. The commencement point of the determination of penalty in these proceedings is an objective assessment of the seriousness of the offences. It is quite clear from the evidence of Mr Taylor that at all times the company was aware that it had chosen to record through its sophisticated computer system the commencement time for the calculation of the daily safety net hours a point of time which did not comply exactly with that which was required under the Contract Determination. Whatever the rationalisation or justification, the conduct of the defendant cannot be characterised as something that was unintended. It took a deliberate step that it knew would not satisfy completely its obligations under the Contract Determination. In making these observations I should not, however, be seen to have concluded that the defendant had a contumelious disregard for its obligations. I would assess the defendant's conduct as one designed to secure some practical advantage in the context of its operational requirements. Nevertheless, it disregarded its obligations under the Contract Determination and thereby seriously prejudiced Mr Luna, who was underpaid a substantial amount of money over a period slightly in excess of three years. Indeed, the breach in terms of the failure to keep appropriate records involved, to adopt the prosecutor's submissions, a systemic failure. 21 In assessing penalty I shall also take into account the deterrent effect of a monetary penalty on others who engage contract carriers within the transport industry. Arguably more significant than the amount of the monetary penalty is the time, trouble and distraction that is created by an investigation and audit process undertaken by the prosecutor and by the necessity to produce, peruse and analyse a great deal of documentary material. This is in addition to an order for the payment of costs. All of these matters, in the aggregate, far outweigh the amount of any monetary penalty. 22 In terms of deterrence, it is also necessary to have regard to the specific deterrent effect of a monetary penalty on this defendant. I do not take this into account in any significant way because, firstly, the defendant has clearly taken steps to avoid breaches of this kind in the future and, secondly, any impact on a resultant monetary penalty, given the maximum which is available, will be minimal. 23 In considering the imposition of penalty, it is also necessary to have regard to the principle of totality. The prosecutor submitted that whilst it is clear that both charges arose out of the one course of conduct, the penalties should not be substantially reduced by applying the principle of totality because there was a significant time lapse between the defendant becoming aware of the failure to properly keep records in accordance with the Contract Determination and the defendant adjusting the underpayment to Mr Luna. Indeed, as at the date of hearing on 1 June 2007, the balance of the underpayment does not appear to have been made. 24 Although it is clear that the one course of conduct, namely the failure to keep proper records, has given rise to the underpayment, I accept the submissions of the prosecutor that the delay that has occurred in adjusting the underpayment from some time, which at the latest was shortly before 20 October 2006, and this date should temper the application of the totality principle, which might otherwise apply. 25 The defendant is entitled to the benefit of a number of subjective mitigating factors. It has pleaded guilty, albeit on the first day of four days of hearing set aside for that purpose, there are no prior contraventions known to the prosecutor, it has expressed contrition and remorse for what occurred, undertakings have been given with respect to future conduct and to adjust past breaches with respect to contract carriers who are currently engaged, it is otherwise a good corporate citizen, it has co-operated with the prosecutor and it has taken positive steps to improve and remedy matters of compliance with the provisions of the Contract Determination. 26 In the course of submissions, it was said on behalf of the defendant that there were difficulties in strict compliance with the provisions of the Contract Determination because of its complexity. The complexity, however, derives in a pragmatic sense from the manner in which courier and taxi truck companies operate and the necessity to deploy drivers in the most efficient and cost-effective way using such technology as is available for this purpose. I disagree that, given the sophisticated nature of the defendant's operations and given that it is clearly a substantial player in the industry, some leniency should be afforded it in this regard. Otherwise, I intend having regard to the other subjective mitigating factors to which I have referred. 27 The maximum penalty that may be imposed with respect to each breach is the sum of $10,000. Having regard to the matters to which I have referred, I intend imposing a penalty in each case of $3,250. 28 The prosecutor sought an order that any penalty paid should in turn be paid out to it under the provisions of s 403(1) of the Act. The prosecutions arose out of conduct undertaken solely by the prosecutor including an extensive investigation process. No other entity or instrumentality was involved. In these circumstances, it is appropriate, in my opinion, that the penalty be paid to the Industrial Registrar for ultimate payment to the prosecutor, being an industrial organisation of the kind referred to in s 403(1) of the Act. 29 As I have already indicated, the defendant has submitted to an order for the payment of costs and to an order for the payment of monies to Mr Luna. Orders 30 I make the following orders: 1) The defendant is found guilty of each of the offences charged in each of the summonses. 2) I impose a monetary penalty of $3,250 for each offence. 3) Such penalty shall be paid to the Industrial Registrar to be paid out to the prosecutor. 4) For abundant caution, I grant liberty to apply with respect to the assessment of costs. 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