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'Windfall' no bar to awarding applicants penalties: Full Court - Workforce Daily

By Alan J. McDonald


A Full Federal Court has reaffirmed a long standing principal of successful applicants under the Fair Work Act receiving any penalties. McDonald Murholme managing director Alan McDonald comments on this decision, reiterating that whether such payments represented a ‘windfall’ was not relevant to the courts’ consideration.

See below article for further details.

‘Windfall’ no bar to awarding applicants penalties: Full Court

A Full Federal Court has reaffirmed the right of successful applicants under the Fair Work Act to receive any penalties, ruling that whether such payments represented a ‘windfall’ was not relevant to the courts’ consideration.

Ex-union organiser Muhammad Ali Sayed had successfully argued that the Construction Forestry Mining Energy Union (CFMEU) mining division took unlawful adverse action against him when it sacked him because he was a Trotsykist.

But Justice Debbie Mortimer ordered $45k in penalties should go to the Commonwealth as Sayed was already receiving $40k compensation and the Fair Work Act (FW Act) set out that each party bore their legal costs (WF 17/4/15).

To order that penalties be paid to Sayed would “deliver to him a windfall” and he would receive more from the penalty than the compensation, she said. Considering Sayed’s appeal of that finding, the Full Court – Justices Richard Tracey, Michael Barker and Anna Katzmann – held Justice Mortimer had erred.

It noted that awarding penalties to the successful applicant, whether union or individual, as per s546(3) had been part of the IR framework since the 1904 Conciliation and Arbitration Act.

However, since at least 2001 judges had questioned the justification behind the “usual order” and considered that penalties should ordinarily be paid to the Commonwealth.

But the Full Court agreed with Justice Peter Gray in Plancor v LHMU [2008], where he said the question of “profit” did not arise in directing penalties and the notion that paying them to the initiating party could produce a windfall was a false notion.

“If the true purpose of such an order is taken into account, and the order is not regarded as compensatory in any way, any notion of a windfall disappears,” he said.

‘Time, trouble and lost opportunity’ also costs The Sayed Full Court judges held that given the legislative history and supporting explanatory memorandum, “the power conveyed by s546(3) is ordinarily to be exercised by awarding any penalty to the successful applicant”.

Whether the applicant was no longer “out of pocket” did not support the view that they were only entitled to such an order if they could:

  • demonstrate they had incurred costs, outside of legal costs within s570 of the FW Act;
  • show that if the penalty was paid to them they would not receive a “windfall”.

“The fact that a compensation order has also been made should not control the exercise of the s546(3) power with respect to the payment of the penalty,” the judges said.

“Nor is there any necessary relationship between the s570 limitation on the recovery of legal costs in proceedings under the FW Act”, they said. The judges considered that if Sayed had not pursued the action, “it is unlikely that it would have been pursued”.

“[T]he principle adopted by [Justice Mortimer] would have the effect of stultifying civil penalty proceedings by persons affected by a contravention who are not backed by industrial power of one sort or another.”

In any case, the judges said it was not clear on the evidence that directing penalties to Sayed would have resulted in a “windfall”.

Even accepting that legal costs should not be taken into account, the judges said there could be “no doubt” Sayed “incurred considerable time, trouble and lost opportunity, not to mention the real risk to his career” in running the proceeding.

The court allowed the appeal and ordered the penalties be paid to Sayed. (Sayed v Construction, Forestry, Mining and Energy Union [2016], FCAFC 4, 22/01/2016)

Decision shows need for specialist IR division Alan McDonald, Managing Director of McDonald Murholme, which represented Sayed in the primary proceeding, said the Full Court had reaffirmed a long-standing principle accepted by both political parties.

“It has been a long established convention that it is a sound principal for the applicant who takes on the role of prosecutor for the government (which would normally uphold the law) to receive the penalty,” he said.

“Justice Mortimer departed from the usual order and status quo and the Full Court overruled her.” He noted the court had relied heavily on the reasoning of industrial law judges in its decision, including Justices Ray Northrop, Michael Moore, Murray Wilcox and Gray.

“[I]t may be that the decision illustrates the importance of industrial and employment law having its own division in the Federal Court where industrial division judges determine the matters,” McDonald said.

He noted the Vic Supreme Court had this year established an industrial and employment division headed by Justice Michael McDonald with other employment law experienced judges.

Reference: ‘Windfall’ no bar to awarding applicants penalties: Full Court, Workforce Daily, 28th January 2016