Damages for employer not paying appropriate salary

The Fair Work Act, not surprisingly, provides that an employer must pay an employee his or her salary or wages in full; sec 323. Sec 545 of the Act provides, amongst other things, that “The Federal Court or the Federal Circuit Court may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision including under s.545(2)(b) of “awarding compensation for loss that a person has suffered because of the contravention”.

In a fascinating case, an employee has recovered compensation and penalties against an employer for breaches of sec 323 and not just the amount which should have been paid under the contract of employment with the Court expressing its task in the following terms

“As to that “in calculating economic compensation under s.545 of the FW Act the general approach of a Court is stated by Judge Jones in this Court in Heraud v Roy Morgan Research Ltd (No. 2) [2016] FCCA 1797 in the following terms:

Although the award of compensation under s.545(2)(b) of the Act is a statutory entitlement, the usual approach to the calculation of economic compensation under s.545(2)(b) of the Act is, so far as a monetary amount can achieve, to place the employee in the position he or she would have been in, if the employer had not contravened the Act. This reflects the settled principles identified in Haines v Bendall (1991) 172 CLR 60 regarding damages for actions in tort or contract. In simple terms, in circumstances where an employee has been terminated, this involves, having regard to the totality of the evidence, an assessment of how long the employee would have remained in that employment and the determination of the value of the likely income stream, followed by the application of the discount for contingencies and vicissitudes. The discounted income stream is then reduced by the employee’s mitigated loss (his or her actual earnings since the dismissal). The Court may consider whether the employee has taken appropriate steps to mitigate his or her loss. However, it is for the employer to establish the facts going to the employee’s alleged failure to mitigate his or her loss: Harding v Harding (1928) 29 SR (NSW) 96 at 106; Tasman Capital v Sinclair Pty Ltd 75 NSWLR 1 at [55]-[72] and Bagnall v National Tobacco Corporation of Australia Ltd (1934) 34 SR (NSW) 421 at 430.”

Here are some interesting passages from the judgment.

  1. I had restricted my finding at [86] of Benge No. 2 to a prima facie one, namely that Bluescope had breached s.323 of the FW Act. I now actually find and determine that Bluescope, in the circumstances set forth in Benge No. 2, caused a loss and detriment to Mr Connelly and contravened s.323 by not paying him in full his annualised salary after 9 January 2016 and thereby breached a civil remedy provision, which empowers the Court under s.545 to make “any order the court considers appropriate”, including under s.545(2)(b) of “awarding compensation for loss that a person has suffered because of the contravention”.
  2. The width and scope of the power of the Court under s.545 of the FW Act was considered by Mortimer J in the Federal Court of Australia in Dafallah v Fair Work Commission (2014) 225 FCR 559 (Dafallah), where at 594 – 597 [146], [148] – [149] and [157] – [161] her Honour said as follows:

[146] Pursuant to s 545 of the FW Act, the Court may make any order it considers appropriate if satisfied that a person has contravened a civil remedy provision. By s 545(2)(b), this includes an order for compensation for loss the person has suffered because of the contravention………………………….

[148] The language of s 545 is broad, allowing the Court to provide remedies which meet the circumstances of any given contravention, taking into account the range of parties who may have brought proceedings in relation to the contravention, and the actions which might in any given circumstance be required to remedy the contravention, or to ensure it does not occur again. Awarding compensation for loss is but one example and may not be appropriate, depending on what other action has been taken in respect of any losses. Each case will turn on its facts in that sense.

[149] Fixing compensation under s 545 is a statutory task, and the Court must not substitute that task with approaches derived from the general law: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at [44]; Qantas Airways Ltd v Gama (2008) 167 FCR 537 at [94] per French and Jacobson JJ.

[157] Further, the width of the power conferred by s 545(1) also allows for compensation which may not fully compensate a person for the loss suffered: see Gama at [94] per French and Jacobson JJ, where their Honours were considering similar statutory compensation provisions under s 46PO(4) of the Human Rights and Equal Opportunity Commission Act 1986 (Cth). In my opinion, that approach is available under s 545(1) because, as their Honours pointed out in Gama at [94], an award of compensation is discretionary. In s 545(1), the governing consideration is what the Court considers “appropriate”, and this in my opinion leaves room for a Court to find in a given case that less than full compensation might be appropriate.

[158] While by no means operating as a mandatory approach to a discretion such as that conferred by s 545(1), with respect I adopt the remarks of Lee J in Aitken v Construction, Mining, Energy, Timberyards, Sawmills and Woodworkers Union of Australia (WA Branch) (1995) 63 IR 1, considering factors relevant to an award of compensation under s 170EE of the then Industrial Relations Act 1988 (Cth). His Honour said (at 9), that the Court will:

have regard to what is reasonable in the circumstances and will look at what would have been likely to occur had the Act not been contravened … The Court will consider the detriment occasioned to the employee by the employer’s contravention of the Act, and the extent to which it is reasonable to compensate the employee for such consequences.

[159] One of the principal tasks, if compensation is to be awarded, is to ensure that there is the appropriate causal connection between the contravention and the loss claimed: Australian Licenced Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd (2011) 193 FCR 526 at [423] per Barker J.

[160] The Full Court in Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 at 155 approved this approach. Some of the matters referred to by Lee J are similar to those set out as considerations in s 392(2). Although the power under s 545(1) is separate and independent, in my opinion, since the same statutory concept of compensation is involved, it is appropriate to consider factors similar to those set out in s 392(2).

[161] In considering causation, in the circumstances of a clearly fraught employment relationship as was the case between Ms Dafallah and Melbourne Health, it is appropriate in my opinion to consider that the employer would have in any event been entitled to exercise any power it had to bring the employment contract lawfully to an end in a way most beneficial to itself. The likelihood of  an employer taking such a step will be fact dependent but, in contractual terms, it has been held to be relevant to the assessment of damages: see Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at 32. In my opinion, it is a factor which can also be taken into account for the purposes of determining what compensation is appropriate under s 545(1), where compensation is limited to the loss caused by the contravention.

  1. Further, in Construction, Forestry, Maritime, Mining and Energy Union v Melbourne Precast Concrete Nominees Pty Ltd (No 3) [2020] FCA 1309 at [9] O’Callaghan J said as follows:

[9]            In determining whether to award compensation of the type sought by Mr Hes, it is necessary to ask whether there is an “appropriate causal connection” between the loss suffered and the relevant contraventions of the FW Act: Australian Licenced Aircraft Engineers Association v International Aviation Service Assistance Pty Ltd (2011) 193 FCR 526 at 592 [423]; Dafallah v Fair Work Commission (2014) 225 FCR 559 at 596 [15] (Mortimer J) (Dafallah). The assessment of compensation in this context is an “inherently imprecise” process: Fair Work Ombudsman v Maritime Union of Australia (No 2) [2015] FCA 814; 252 IR 101 at 113 [68] (Siopsis J). Where appropriate, an amount may be awarded that is less than what would be required to compensate the applicant fully for the loss suffered: Dafallah at 596 [157].

  1. Finally, in calculating economic compensation under s.545 of the FW Act the general approach of a Court is stated by Judge Jones in this Court in Heraud v Roy Morgan Research Ltd (No. 2) [2016] FCCA 1797 in the following terms:

[4]          Although the award of compensation under s.545(2)(b) of the Act is a statutory entitlement, the usual approach to the calculation of economic compensation under s.545(2)(b) of the Act is, so far as a monetary amount can achieve, to place the employee in the position he or she would have been in, if the employer had not contravened the Act. This reflects the settled principles identified in Haines v Bendall (1991) 172 CLR 60 regarding damages for actions in tort or contract. In simple terms, in circumstances where an employee has been terminated, this involves, having regard to the totality of the evidence, an assessment of how long the employee would have remained in that employment and the determination of the value of the likely income stream, followed by the application of the discount for contingencies and vicissitudes. The discounted income stream is then reduced by the employee’s mitigated loss (his or her actual earnings since the dismissal). The Court may consider whether the employee has taken appropriate steps to mitigate his or her loss. However, it is for the employer to establish the facts going to the employee’s alleged failure to mitigate his or her loss: Harding v Harding (1928) 29 SR (NSW) 96 at 106; Tasman Capital v Sinclair Pty Ltd 75 NSWLR 1 at [55]-[72] and Bagnall v National Tobacco Corporation of Australia Ltd (1934) 34 SR (NSW) 421 at 430.

(emphasis added)

……………………………………………………………..Mitigation

  1. Whilst I am fixing compensation under s.545 of the FW Act as a statutory task, I am also considering a contract of employment. It is appropriate for the purposes of the assessment of compensation under s.545 of the FW Act that Mr Connelly should have taken reasonable steps after 9 January 2016 to mitigate his loss. The onus of establishing that he failed to do so lies upon Bluescope. As Hope JA, with the agreement of Priestley and Meagher JJA, stated in TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 158:

The important point of principle in relation to mitigation is that the onus is on the defendant. The plaintiff does not have to show that he has fulfilled his duty; the onus is on the defendant to show that he has not, and to show the extent to which he has not done so. The evidence shows that, after the repudiation of the agreements, Productions made a very large number of attempts to develop Productions to replace what they had been doing previously. Save in relation to the ABC agreement to which I shall refer later, these attempts were unsuccessful. Assuming, as I do, that, although the recruiting by Channel 9 of most of Productions’ staff used in the Midday Show would have adversely affected but not necessarily precluded Productions’ attempts to mitigate, the evidence positively establishes that Productions took all reasonable steps to try to mitigate its damages. That statement however involves a reversal of the onus. Putting the onus on the right party, I am not satisfied that the defendant has established that Productions failed to take reasonable steps to mitigate its damages. Perhaps I should add that Channel 9 relied, in aid of it submission as to mitigation, on an offer which it made to both Enterprises and Productions which was conditional on that company’s releasing any claim arising out of Channel 9’s repudiation. In my opinion it was not unreasonable for this offer to be rejected.

  1. Further, whether or not Mr Connelly failed to mitigate his loss is a question of fact, not law, and the Court can have regard to personal factors affecting Mr Connelly in all of the circumstances. In Yetton v Eastwoods Froy Ltd [1967] 1 W.L.R. 104 (Yetton) at 118 Blain J said as follows:

As I see the matter, it is a plain question of fact for the court in any particular case, whether any particular refusal to accept alternative employment which would reduce a plaintiff’s loss is a reasonable or an unreasonable refusal, and factually, even if not as a strict matter of law, personal factors clearly are more likely to be of weight or are likely to be of greater weight in cases of personal services than in (for want of a better word) what I call soulless cases of sale of goods contracts where money may often be the only important factor. Certainly personal factors do not have to be ignored in the making up of a dismissed servant’s mind when he comes to make a decision reasonable or unreasonable.

  1. To similar effect O’Loughlin J in Cubillo v Commonwealth (No. 2) (2000) 103 FCR 1 at 472 [1522] said as follows:

[1522] The applicants’ duty is to take all reasonable steps to mitigate his or her loss. An applicant will not recover damages for any loss which he or she could have avoided; nor will damages be recoverable if an applicant could have avoided a loss and has failed, through unreasonable action to avoid it. An objective test is to be applied to the personal circumstances of the applicant; that is, due and proper regard must be had to the applicant with all his or her abilities and disabilities when determining whether his or her conduct was reasonable. The appropriate test is whether a reasonable person, in the circumstances as they existed for the applicant, and subject to various factors such as the applicant’s medical history and his or her psychiatric condition would have returned to their families sooner. Whether an applicant has acted reasonably or unreasonably in not taking steps which would operate to decrease his or her loss is a question of fact, not law, depending on the circumstances of their individual cases: British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Company Ltd [1912] AC 673 at 688-689; Payzu Ltd v Saunders [1919] 2 KB 581 and Sotiros Shipping Inc v Schmeiet Solholt [1983] 1 Lloyd’s Rep 605.

  1. In my view, in the circumstances Mr Connelly faced he was not bound to mitigate his loss by accepting all overtime offered by Bluescope after 9 January 2016 for at least the following reasons.
  2. First, Bluescope’s position was emphatically to the effect that it had terminated Mr Connelly’s annualised salary arrangement and in its place implemented the aggregate salary arrangement and reduced his salary by the significant annual amount of $23,899.76, or approximately 16.4% of his hitherto paid annualised salary: see [2(i)], [44] and [48] of Benge No. 2. Prior to the imposition of the aggregate salary, Mr Connelly had moderately but firmly opposed the legality of its foreshadowed imposition. Mr Benge had sought legal advice from Kells Lawyers on the foreshadowed imposition which affected him (and Mr Connelly) and that legal advice was, consistent with my findings in Benge No. 2, correct. In response, Bluescope merely condescended to state that it was “satisfied it is acting lawfully in adjusting the current approach for staff to the identified aggregate salary arrangement”: see [38] – [40] of Benge No. 2.
  3. Accordingly, in the circumstances Mr Connelly was, and was entitled to be, aggrieved by Bluescope’s repudiation of his annualised salary in the circumstances found in Benge No. 2, including the unilateral termination of pre-paid overtime. That personal aggrievement and Mr Connelly’s state of mind are factors which may be taken into account in a case involving a contract of employment for personal services in assessing whether or not it was reasonable to expect him to accept offers of overtime after 9 January 2016: see Payzu, Limited v Saunders (1919) 2 K.B. 581 at 586 per McCardie J; Schindler v Northern Raincoat Co Ltd [1960] 1 W.L.R. 1038 at 1048 – 1049 per Diplock J (as he then was); Yetton at 116 – 118.
  4. Second, Mr Connelly was objectively faced with the possibility that any acceptance by him of the imposed terms and conditions of the aggregate salary arrangement after 9 January 2016, including the acceptance of offers of overtime, might be asserted by Bluescope to evidence and evince an acceptance by him of the imposition of the aggregate salary arrangements. That is in fact exactly what Bluescope has done in this case, because at [39] of its Amended Defence it pleads in part that Mr Connelly “… did not express interest in redundancy… and continued after the adjustment to pay arrangements on 10 January 2016 to work in their employment … in doing so confirmed their consent to the change.”. In other words, Bluescope pleads in effect at [39] of its Amended Defence that Mr Connelly consented to the removal of pre-paid overtime subsequent to 9 January 2016 by continuing to work at the PKSW.
  5. Further in this connection, Mr Connelly and Bluescope were in litigation with each other in this proceeding which commenced by the filing of the original Statement of Claim on 12 October 2016, with the original Defence of Bluescope having been filed on 18 November 2016, where at [36] it pleaded Mr Connelly’s consent to the imposition of the aggregate salary by continuing to work after 9 January 2016 in the same terms as [39] of the Amended Defence.
  6. Third, all the offers to Mr Connelly after 9 January 2016 to work overtime were made by Bluescope under the imposed aggregate salary arrangement, and not under the previous annualised salary arrangement. Bluescope’s position was that the annualised salary arrangement had ended. In a practical sense Mr Connelly was made by Bluescope to work as if he was under the aggregate salary arrangement. It was not in his power to force Bluescope to comply with the six hour standby term of his annualised salary arrangement. There has never been any suggestion that the offers of overtime after 9 January 2016 were made or regarded as having been made under the annualised salary arrangement. In my view it is illegitimate and inappropriate to regard the offers of overtime  made to Mr Connelly subsequent to 9 January 2016 as retrospectively referable to the annualised salary arrangement when Bluescope’s position was that the annualised salary arrangement had ended as of that date.
  7. Fourth, after 9 January 2016 the offers of overtime made by Bluescope to Mr Connelly included no element of compulsion. Under the aggregate salary arrangement the working of overtime was completely voluntary and there is no evidence that it was ever suggested to Mr Connelly by Bluescope that he was bound to work overtime after 9 January 2016, either generally or with reference to the condition of his annualised salary arrangement that he work six hours of pre-paid overtime.
  8. Accordingly, having regard cumulatively to the above matters, Mr Connelly did not fail to mitigate his loss by not always accepting the overtime offered to him by Bluescope after 9 January 2016. It is neither fair nor appropriate that Mr Connelly’s rejection of offers of overtime after 9 January 2016 should reduce any compensation payable to him.

……………………………………….Conclusion

  1. The amount of compensation and penalty to be payable to Mr Connelly should be clear from these reasons. However, I consider that Mr Connelly is entitled to reasonable interest as the price of the moneys withheld from him and that needs to be calculated. Further, the Agreed Document only deals with the period up to the fortnight ending 10 June 2020. It was agreed at the compensation hearing that the parties would bring in a full set of orders reflecting and giving statutory effect to these reasons after delivery, and final orders will accordingly abide receipt of those draft orders.
  2. However I do need to note, in compliance with Mr Taylor’s unopposed request at the compensation hearing to do so, that to facilitate the parties agreeing on a set of orders I should record my view in the following connection. I consider that the PSP payment of $7,269 advised to Mr Connelly by Bluescope’s  letter dated 4 September 2020 (see [57] above) was in a different position from the three earlier PSP payments made to him because it was made subject to the express reservation of right that it could be attributed to any amount of compensation that he might be awarded in this proceeding. The PSP payments were discretionary and in my view Bluescope was legally entitled to award the payment to Mr Connelly subject to this reservation of right, which on the evidence it had not sought to apply to the three earlier bonus payments.”

CONNELLY v BLUESCOPE STEEL (AIS) PTY LTD (No.3) [2020] FCCA 2902 delivered 29 October 2020 per Dowdy J