Clothing manufacturers warned that outworker breaches a 'serious matter'

Cases

Clothing manufacturers warned that outworker breaches a 'serious matter'

The Federal Court has fined a manufacturer $20,000 for 15 breaches of the outworker provisions of the Clothing Trades Award and warned other employers in the industry that future breaches of this kind were a serious matter and could result in substantial penalties.

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The Federal Court has fined a manufacturer $20,000 for 15 breaches of the outworker provisions of the Clothing Trades Award and warned other employers in the industry that future breaches of this kind were a serious matter and could result in substantial penalties.

Background

The Textile Clothing and Footwear Union of Australia (TCFUA) initiated proceedings for declaratory relief and for imposition of penalties for breaches by Lotus Cove Pty Ltd t/a Yambla Fashions of terms of the Clothing Trades Award 1999.

As a result of the repeated failure by Lotus Cove to comply with interlocutory orders of the Federal Court, the TCFUA sought a default or summary judgment in the proceeding.

The TCFUA alleged that Lotus Cove breached the award by having work performed away from its workshop or factory. A director of Lotus Cove admitted the company 'had work performed outside its workshop or factory premises' and that 'work was given out by Lotus Cove for contractors to make various products according to its specifications and design'.

Findings

Justice Merkel found that Lotus Cove’s conduct constituted breaches of 15 separate terms of the award. Under s178(4)(ii) the maximum penalty forthe15 breaches was $150,000. The TCFUA was seeking penalties in excess of $100,000.

Justice Merkel, however, said this was one of the cases referred to by Justice Gray in Gibbs v City of Altona in which 'different terms impose cumulative obligations or obligations that substantially overlap'. In those circumstances, he said, the appropriate course is to impose 'no penalty, or a nominal penalty, in respect of breaches of some terms, but a substantial penalty in respect of others.'

Justice Merkel said an appropriate approach in such a case was to determine penalties by reference to the 'totality' principle. 'The "totality" approach has the advantage of ensuring that separate penalties are not imposed in respect of overlapping obligations, where interrelated clauses have been breached by what is essentially the same conduct.'

The judge took into account several factors which he said favoured the imposition of a significant penalty. These included: the breaches were serious rather than technical; Lotus Cove had conducted its business in disregard of the relevant award requirements over 12-13 months; and, the company had shown no contrition or given any indication that it had taken or proposed to take steps to ensure future compliance with the award.

On the other hand, mitigating factors included the fact that there was no evidence that Lotus Cove’s conduct had led to the exploitation of outworkers nor was there any evidence that its conduct in breaching the award was for the purpose of making excessive profits. The judge also noted that Lotus Cove co-operated with TCFUA officers and did not attempt to conceal its breaches of the award from them.

Finally, he said, Lotus Cove was a small enterprise and the imposition of a large fine of the kind sought by the TCFUA was likely to be oppressive.

Taking all the factors into account, Justice Merkel concluded that an appropriate total penalty was $20,000. He said the total was apportioned on the following grounds:

  • Lotus Cove gave out work when it was not registered to do so and did not make any application for registration. This attracted a penalty of $6,000.
  • Lotus Cove gave out work without maintaining or giving out any or adequate written 'work records' in relation to the work given out. In the two cases in which no work records were produced at all, the conduct caused a breach of interrelated two clauses and warranted a single penalty of $4,000. In respect of the other cases, in which work records were maintained, but contained insufficient information, the judge imposed a fine of $400 for each of the six subclauses breached totalling $2,400.
  • Lotus Cove gave out work without keeping lists in relation to the work given out and without providing copies of lists to the Industrial Registrar and the TCFUA. Justice Merkel said a penalty of $1,200 in respect of each of the lists required to be kept was appropriate, totalling $3,600.
  • Lotus Cove gave out work to an outworker without providing them with the information contained in Schedule B of the award. Justice Merkel said this was a serious breach as it 'leaves those most vulnerable to abuse in the industry unaware of their rights under the award. For this breach a penalty of $4,000 is appropriate.'

Justice Merkel concluded by warning employers in the industry that future breaches of this kind were a serious matter and could result in substantial penalties.

'Employers should also be aware that the factors that I have taken into account in mitigation in the present case may be less compelling in the future if they are aware of their award obligations and continue to disregard them.'

See: Textile Clothing & Footwear Union of Australia v Lotus Cove Pty Ltd [2004] FCA 43 (2 February 2004).

 

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