Penalties on employer considered

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Penalties on employer considered

A Full Court of the Federal Court has allowed an appeal by an employer that had been penalised $19,000 for underpaying an employee who had been made redundant.

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10/08

A Full Court of the Federal Court has allowed an appeal by an employer that had been penalised $19,000 for underpaying an employee who had been made redundant.

The Full Court set aside earlier penalty orders by an industrial magistrate and remitted the matter back for the penalties to be re-determined on the basis that the magistrate had approached the matter in an inappropriate manner.

Backgouund

This appeal was from orders made by an industrial magistrate, constituting the Industrial Relations Court of South Australia, imposing on the appellant employer (Plancor) penalties for breaches of a collective agreement, pursuant to the Workplace Relations Act 1996.

On 8 February 2008, the industrial magistrate ordered Plancor to pay penalties of $5500 for failing to pay accrued annual leave on termination of employment, $4000 for failing to pay the appropriate amount in lieu of notice of termination, and $9500 for failing to pay the appropriate amount of redundancy severance pay, to a former employee, Jacqueline Baker, whose employment it had terminated. The total of the penalties was $19,000.

The industrial magistrate ordered that this sum be paid as to $2000 to Ms Baker, as to $4000 to the respondent, the Liquor Hospitality and Miscellaneous Union, and as to $13,000 to the Consolidated Revenue Fund, within 28 days of the making of the orders.

The employer appealed to a Full Federal Court.

Employer’s appeal upheld - Branson and  Lander JJ

Branson and Lander JJ found for the employer, noting that the magistrate failed to take into account the ‘totality principle’:

‘… the difficulty in sustaining the penalties imposed by the Magistrate is that it is not apparent from his Honour's reasons for judgment that he had appropriate regard to the circumstances in which the contravention occurred or the need to sustain public confidence in the statutory regime which imposes the obligations …

While general guidance as to the appropriate level of penalty may be obtained by looking at the amounts of penalties imposed in comparable cases, it remains necessary in every case for the court to give careful consideration to the circumstances of the particular case, and where more than one penalty may be imposed, the totality principle …

On the issue of the appropriateness of ordering that all, or part, of any penalty be paid to the individual affected by the conduct so penalised when that individual is not the applicant, we endorse the remarks of Greenwood J in McIlwain v Ramsey Food Packaging that:

"... the imposition of a penalty under the Act is designed fundamentally to serve the public interest in acting as a deterrent to the particular Respondents and others generally from engaging in conduct of the kind the subject of the findings. In circumstances where an order has been made for compensation for both economic loss and a non-economic component concerning the disturbance, dislocation and loss of secure employment suffered by the individuals, there seems to be no good policy reason why the individuals should additionally have the benefit of an order for the payment to them of the penalty ..."

 ... In our view it is regrettably necessary for this matter to be remitted to the Industrial Relations Court of South Australia for the issue of the amount of the penalty or penalties to be imposed on the appellant to be determined afresh. In our view it would be appropriate for the Senior Judge of that court to give consideration to relisting the matter before a Magistrate other than the Magistrate whose decision is the subject of this appeal.'

Appeal upheld - Gray J

Justice Gray also allowed the appeal but found the industrial magistrate was in error in ordering that any part of the penalty be paid to the consolidated revenue fund. His honour said that all the penalty should have been paid to the union as the party initiating the proceedings. He also found the industrial magistrate fell into error in failing to apply the totality principle; and the magistrate did not consider the question of deterrence when setting penalties:

'…  It cannot be the case that, in choosing to increase the maximum penalty that can be imposed, Parliament intended to substitute a new rationale for the power to order payment of a penalty to a particular organisation or person.

The correct view is that the initiating party is normally the proper recipient of the penalty as part of a system of recognising particular interests in certain classes of persons … in upholding the integrity of awards and agreements the subject of penal proceedings. Where a public official vindicates the law by suing for and obtaining a penalty, it is appropriate that the penalty be paid to the Consolidated Revenue Fund. Otherwise, the general rule remains appropriate, that the penalty is to be paid to the party initiating the proceeding, with the Gibbs exception that the penalty may be ordered to be paid to the organisation on whose behalf the initiating party has acted.

… The notion that the penalty was designed to compensate for the costs of the proceeding has in turn led to the notion that the Court should avoid ordering a payment that would produce a "windfall" to the initiating party …'

Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union [2008] FCAFC 170 (8 October 2008)


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