General protections; who is liable?

When will a civil remedy provision be ordered to be paid by a person involved in a general protections’ contravention?

A breach by an employer covered by the Fair Work Act of any of the general protections is a contravention of the law, that it to say it is unlawful conduct for which “civil penalties” may be ordered to be paid. This is just another expression for a fine.

The court may direct that the “fine” be aid to the victim together with compensation for economic and non-economic loss.

The court may also order that a person involved in the contravention, say a manager of the employer company, may also be hit with a civil penalty, which is a reasonably scary prospect for HR managers.

In what circumstances can this occur? Here is an extract from a recent Federal Court case which looks at the principles at play.

“Mr Wright has been declared to have contravened the Fair Work Act in a number of respects by reason of his involvement in the contraventions of Goldbreak:  Veeraragoo v Goldbreak Holdings Pty Ltd [2018] FCA 1148. As I have noted, the declarations were made on the basis that he was a person involved in a contravention of a civil remedy provision. Such a person is taken to have contravened the provision: s 550(1). On the face of that provision, any order that may be made against a contravener of a civil remedy provision may be made against a person involved in the contravention because they are taken to be a contravener.

As to contraveners, the court may make any order it ‘considers appropriate’ if satisfied that a person has contravened a civil remedy provision: s 545(1). The power conferred under s 545(1) is broad and is conferred for the purposes of the Fair Work Act:  Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3 at [103]. Even so, ‘it is limited to making appropriate preventative, remedial and compensatory orders’: at [110].Section 545(2) states expressly that the orders may include an order awarding compensation for loss that a person has suffered because of the contravention. Those words import a requirement for a causative connection between the contravention and the loss to be compensated.

However, it is to be noted that s 545(1) provides that any order the court considers appropriate may be made if the court is satisfied that ‘a person’ has contravened the civil remedy provision. It does not, in terms, state that a person who is taken to have contravened a provision by operation of s 550(1) may be the subject of an order awarding compensation for loss suffered because of the contravention. In that respect it is to be contrasted with s 546(1) which provides that the court may order a person to pay a pecuniary penalty ‘if the court is satisfied that the person has contravened a civil remedy provision’ (emphasis added). Whereas penalty orders are to be imposed upon contraveners, s 545 requires the court to have formed the view that the particular order (relevantly a compensation order) is appropriate before it may be made. In any particular case, a view as to the appropriateness of ordering that a person involved in a contravention should pay compensation is to be formed having regard to the purposes of the Fair Work Act.

The nature and extent of the power to order an accessory to a contravention to pay compensation has been considered in a number of decisions in the Federal Circuit Court:  Scotto v Scala Bros Pty Ltd [2014] FCCA 2374; Sponza v Coalface Resources Pty Ltd [2015] FCCA 1140; Fairwork Ombudsman v Step Ahead Security Services Pty Ltd [2016] FCCA 1482; and Fair Work Ombudsman v Windaroo Medical Surgery Pty Ltd (No 2) [2016] FCCA 2505. In those decisions, reference has been made to the Explanatory Memorandum to the Fair Work Bill 2008 (Cth) which includes the following statement concerning s 550 of the Fair Work Act:

  1. The clause means that a pecuniary penalty for a contravention of a civil remedy provision can also be imposed on a person involved in a contravention.  For example, where a company contravenes a civil remedy provision, a pecuniary penalty can also be imposed on a director, manager, employee or agent of the company.
  2. However, while a penalty may be imposed on a person involved in a contravention, the clause does not result in a person involved in a contravention being personally liable to remedy the effects of the contravention.  For example, where a company has failed to pay, or has underpaid, an employee wages under a fair work instrument, the director is not personally liable to pay that amount to the employee.

In my view, the statement in para 2177 reflects the important distinction between the imposition of a penalty (which can be imposed in all cases upon a person who is taken to have contravened by being involved in a contravention:  see s 546) and compensatory orders (which can only be imposed upon a person involved in a contravention if the court forms the view that such an order is appropriate:  see s 545).  So, the mere fact that a penalty is imposed upon a person involved in a contravention does not mean that it is appropriate for that person also to be liable to pay compensation.  Rather, the court must be satisfied as to the appropriateness of such an order in the particular circumstances.

The task of statutory construction must begin with a consideration of the text and extrinsic materials cannot be relied upon to displace the clear meaning of the text:  Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 at [47]. Where the semantic breadth of a word is such that it needs to be understood in its statutory, historical or other context, then those matters may suggest some other meaning of the word which requires the ordinary meaning to be rejected: SZTAL v Minister for Immigration and Border Protection [2017] HCA 34 at [14]. However, the task remains one of statutory construction. It is the provisions in s 545, s 546 and s 550 that are to be construed, not the terms of the statement in para 2177 of the Explanatory Memorandum. In my view, having regard to the purposes of the Fair Work Act, the meaning of s 545 is that where the court has determined that there has been a contravention then before any person (including a person involved in the contravention) may be ordered to pay compensation, the court must have formed the view that such an order is appropriate in the particular circumstances……………………….

Orders of this kind are commonly made in such circumstances:  see for example Transport Workers’ Union of Australia, NSW Branch v No Fuss Liquid Waste Pty Ltd [2011] FCA 982; Fair Work Ombudsman v Wongtas Pty Ltd (No 2) [2012] FCA 30; and Fair Work Ombudsman v W.K.O Pty Ltd [2012] FCA 1129.

The principles to be applied in determining the quantum of compensation were summarised in Dafallah v Fair Work Commission [2014] FCA 328; (2014) 225 FCR 559 at [148]‑[161].”

 

 

Veeraragoo v Goldbreak Holdings Pty Ltd (No 2) [2018] FCA 1448 delivered 25 September 2018 per Colvin J