FEDERAL COURT OF AUSTRALIA

CPSU, The Community and Public Sector Union v Telstra

Corporation Limited

[2001] FCA 1364

INDUSTRIAL LAW –contraventions of s 298K of the Workplace Relations Act 1996 (Cth) – penalty to be imposed – factors to be taken into account – whether penalty should be paid to union

Workplace Relations Act 1996 (Cth) ss 298K(1), 298U, 347, 356

Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited [2001] FCA 383 - applied

Automotive, Food, Engineering, Printing and Kindred Industries Union v DMG Industries Pty Ltd (2000) 102 IR 175 – followed

CPSU, The Community and Public Sector Union v Telstra Corporation Limited (2000) 99 IR 238 – referred to

CPSU, The Community and Public Sector Union v Telstra Corporation Limited [2001] FCA 813 – referred to

Gibbs v The Major, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 – referred to

Maritime Union of Australia v Geraldton Port Authority (No 2) (2000) 94 IR 404 - followed

Municipal Officers Association of Australia v City of Bayswater (1987) 22 IR 45 - applied

R v Thompson (1975) 11 SASR 217 - applied

Seymour v Stawell Timber Industries Pty Ltd (1985) 13 IR 289 - applied

Telstra Corporation Limited v The Community and Public Sector Union (2001) 107 FCR 93 – referred to

CPSU, THE COMMUNITY AND PUBLIC SECTOR UNION, ASSOCIATION OF PROFESSIONAL ENGINEERS, SCIENTISTS AND MANAGERS, AUSTRALIA, COMMUNICATIONS, ELECTRICAL, ELECTRONIC, ENERGY, INFORMATION, POSTAL, PLUMBING AND ALLIED SERVICES UNION OF AUSTRALIA and PROFESSIONAL OFFICERS’ ASSOCIATION (VICTORIA) v TELSTRA CORPORATION LIMITED

V 194 of 2000

JUDGE:          FINKELSTEIN J

PLACE:          MELBOURNE

DATE:            26 SEPTEMBER 2001

THE COURT ORDERS THAT:

The Respondent pay a penalty of $1.70 for each of the 43,828 contraventions of s 298K of the Workplace Relations Act 1996 (Cth).

Note:  Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

REASONS FOR JUDGMENT

1                     On 29 June 2001 I delivered my reasons for holding that the respondent, Telstra Corporation Limited, had contravened s 298K(1) of the Workplace Relations Act 1996 (Cth).  The contravention results from an email sent by the managing director of Telstra’s Employee Relations Group to the managers and team leaders of the group.  Earlier I found that the email would be understood by many managers and team leaders to be an instruction that when deciding who should be made redundant, they should discriminate against those employees whose employment was governed by awards and certified agreements:  see my decision in CPSU, The Community and Public Sector Union v Telstra Corporation Limited (2000) 99 IR 238.  I also held that because this instruction had not been given effect, it did not alter the position of those employees to their prejudice, so that there was no contravention of s 298K(1).  Accordingly I dismissed the application.  The Full Court did not agree with my conclusion and allowed an appeal from my order of dismissal:  Telstra Corporation Limited v The Community and Public Sector Union (2001) 107 FCR 93.  In its reasons the Full Court said (at 101):

“The e-mail in its terms discriminated against each employee of Telstra who was employed under an award or a certified agreement … [That is] liability arises where the conduct is directed at a number of ascertainable employees as well as against a particular employee.”

I was directed to determine whether the email had been sent for a prohibited reason, and found that it had:  see CPSU, The Community and Public Sector Union v Telstra Corporation Limited [2001] FCA 813.  That then completed the findings that were necessary to establish that a contravention had occurred. 

2                     Now it is necessary to decide what penalty, if any, should be imposed.  In this regard it is necessary to deal with some preliminary matters.  The first issue concerns the number of contraventions that have occurred.  A single act, the sending of the email, caused the position of Telstra’s employees to be altered to their prejudice.  However, a number of employees were relevantly prejudiced.  Telstra says that there is but one contravention, and the unions submit to the contrary. 

3                     The position is covered by authority.  The principal case is Maritime Union of Australia v Geraldton Port Authority (No 2) (2000) 94 IR 404.  There it was argued that where a single act has an impact on more than one employee in a manner proscribed by s 298K, the single act does not result in numerous contraventions of s 298K.  R D Nicholson J rejected this argument.  He said that an examination of the relevant provision showed that the proscribed conduct is not addressed to employees generally, but to the particular position of a particular employee.  Accordingly R D Nicholson J held there was a contravention in respect of each employee who was treated in a proscribed manner.  See also Automotive, Food, Engineering, Printing and Kindred Industries Union v DMG Industries Pty Ltd (2000) 102 IR 175, where Marshall J arrived at the same conclusion.

4                     This brings me to the second preliminary matter.  The Full Court held that the position of each employee under an award or a certified agreement had been prejudicially altered.  It follows that the number of contraventions must equal the number of such employees.  Unfortunately the evidence does not clearly establish that number. 

5                     What the evidence does show is that when the email was sent Telstra had “approximately” 52,840 employees, but the precise number is not provided.  The evidence also shows that many of these employees were employed under Federal awards or certified agreements.  The relevant evidence is that of Mr O’Connell, a senior employee of Telstra.  Mr O’Connell said:

“The breakdown of Telstra’s current staff numbers by level is approximately as follows:

Level 1                        10;

Level 2                        35;

Level 3                        238;

Level 4                        990;

Level 5                        4916 (of which approximately 4239 are covered by AWAs); and

Level 6                        46,651 (of which approximately 3300 are covered by AWAs).

Total               52,840 staff

Staff at Levels 1 to 4 and some staff at Level 5 are award free.  The remainder of the workforce is within the scope of applicable federal awards and certified agreements to which Telstra is a party.”

From this I can say with sufficient certainty (that is, after making the somewhat arbitrary adjustments of adding 100 to the AWA employees in Levels 5 and 6) that the number of employees under awards or certified agreements was at least 43,828.  For the purposes of recording contraventions, it is not possible to say with enough certainty that there was a greater number, although it is likely that there were more who were relevantly prejudiced.

6                     The third matter arises directly from the large number of contraventions.  The evidence is that Telstra intends to reduce its staff by making 10,000 employees redundant.  It necessarily follows that many employees in respect of whom a contravention has been established, were not at any significant risk of losing their employment, and probably a number were at no risk at all.  I note, of course, that the Full Court found that each employee under an award or certified agreement was prejudiced in a “real and substantial” way.  I am obliged to accept this view of the facts, but the true position must be that many employees were adversely effected at the bottom end of the “real and substantial” scale.  Thus I propose to proceed on the basis that a large but indeterminate number of employees were detrimentally affected in a significant way and that a lesser, though also large and indeterminate number, were not badly affected. 

7                     The next matter, which logically follows from the last, but is not properly described as a preliminary matter, is the totality principle.  The principle is that in imposing a penalty for a number of offences it is necessary to ensure that the penalties in aggregate are just and appropriate.  One way the totality principle can be given effect is to determine what is an appropriate total penalty and then divide that penalty by the number of offences to produce a penalty for each separate offence.  The problem with this approach is that it may result in quite inappropriate individual penalties.  In a criminal case when one is sentencing a person to a term of imprisonment, this problem can be avoided.  In that type of case the most appropriate method of sentencing for multiple offences and avoiding imposing inadequate sentences for each individual offence, is to arrive at the appropriate head sentence by cumulation or concurring orders.  This will ensure that the total sentence is not too high or crushing.  On the other hand, when the penalty is only pecuniary, the ability to manipulate individual sentences is not available.  Thus it will be necessary to resolve upon the appropriate total penalty, dividing that penalty by the number of individual contraventions and record that amount as the penalty for each contravention, whether or not the sum produced might be regarded as an inappropriate individual penalty.

8                     The next matter is to consider what other factors should be taken into account in deciding an appropriate penalty in a case such as this.  In another context I observed that the object of imposing pecuniary penalties may be either to punish, to deter, to rehabilitate or some combination of the three:  Australian Competition and Consumer Commission v ABB Transmission and Distribution Limited [2001] FCA 383.  In that case I also referred to the problems associated with determining the appropriate basis for imposing penalties on a corporation.  Laws are made for the protection of society.  In the case of an offending corporation in breach of legislation such as the Workplace Relations Act, the notion of retribution or punishment does not seem to have a significant role.  First, a contravention of this type of legislation does not excite notions of moral responsibility when compared with contraventions of the criminal law where the community has a just expectation that an offender should receive some measure of punishment so that there will be no loss of respect for the law.  Put differently, there will not be any real sense of grievance in the community at large if a corporation has not been dealt with in the same way as an offender who attacks individual liberties or freedoms.

9                     On the other hand, the basic objective of punishment should be to enhance social welfare by minimising the net social cost of wrongdoing.  This is achieved by deterrence.  Here I speak not only of specific deterrence but also general deterrence.  In a case such as the present, that may be of some importance.  The reason is that Telstra submits that there is no need to impose any penalty because it will not offend again.  That may be true.  But even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law’s disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct:  R v Thompson (1975) 11 SASR 217.  It is also important to remember that proscribed conduct is often engaged in because it is profitable, or will enhance the profitability of the company.  To deter conduct engaged in with that purpose, any penalty imposed must have the potential to render the conduct unprofitable.  The achievement of that object is subject to the limitations placed upon the court’s power by the legislation in question.  For example, the maximum penalty for a single contravention of the Workplace Relations Act is $10,000: s 298U(a).  This may not be sufficient to achieve deterrence in all cases. 

10                  So far I have been concerned with general issues.  My task, however, is to deal with a specific case.  For that purpose I must now identify the specific features of this case that are relevant to the determination of the appropriate penalty, if any, that is to be imposed. 

11                  First there is the sheer number of contraventions that have occurred.  On the evidence there are at least 43,828 contraventions, and there may be more. 

12                  Second, the instruction to the Employee Relations Group had the potential to cause harm to many employees.  It must be remembered that Telstra intends to make approximately 10,000 employees redundant. 

13                  Third, and this is the other side of the second proposition, while the Full Court found that the position of Telstra’s employees had been altered to their prejudice, it is not suggested that there has in fact been discrimination in the selection of employees for redundancy.  Perhaps one reason for this is the unions’ early and public exposure of the contravention, leading to an acknowledgment by Telstra that it would abide by the Workplace Relations Act and a retraction by it of the instruction contained in the email. 

14                  Fourth, while I found that the email was sent for a prohibited reason, that did not result from a positive finding that the author had set out to contravene s 298K, but from the failure by Telstra to discharge the onus imposed on it by s 298V.  While it is true that the court must take the legislation as it finds it, I think it is relevant that in this case Telstra could not be said to have deliberately embarked on a course of conduct designed to avoid s 298K.

15                  Fifth, Telstra has in place a fair procedure for selecting staff for redundancy.  That procedure has been described in earlier proceedings.  The process requires employees to be rated on the basis of merit.  Five criteria are involved.  They are:  customer focus, effectiveness, team work, skills and knowledge, and safety.  It is to be assumed that this procedure will be followed.

16                  Sixth, Telstra has not previously contravened any of the provision in Part XA of the Workplace Relations Act.  It goes without saying that previous contraventions would have a direct bearing on the determination of penalties, especially when specific deterrence is under consideration.

17                  Seventh, Telstra clarified its position shortly after the original email was exposed, making it plain to all employees that it would abide by the law.  Telstra sent an email to its employees which read in part:

“‘Telstra understands that it is against the law (Workplace Relations Act) to discriminate against people based on their model of employment.  Once again, I assure you that the redundancy process is based on whether a position is surplus to the company and whether the individuals filling such positions have the skills that the company requires.  It has nothing to do with whether you are employed under an Award or an individual contract.  If you feel you are being treated otherwise, I would take this very seriously indeed and you should contact the General Manager-Employee Relations for your business unit.”

18                  This review of the relevant factors (both general and particular) shows that I need not be overly concerned with specific deterrence.  Put another way, I am satisfied that there is little likelihood that in the process of selection for redundancy, Telstra will discriminate against employees who are on awards or certified agreements. 

19                  Nevertheless, there are a number of features of this case that suggest that a penalty should be imposed.  The most important of these features is the number of contraventions that have occurred, albeit they arose from one event, the sending of the email.  The second is the real risk that many employees could have suffered serious harm.  The imposition of a penalty in those circumstances will achieve two objectives.  It will ensure that Telstra’s directors will take steps to deter senior staff from committing further wrongdoings.  It will also act as a general deterrent.

20                  The more difficult question is to decide upon the appropriate penalty.  The parties have made submissions on what they regard that sum to be.  The unions say that $1,000,000 is the appropriate penalty.  Telstra argues for no penalty or, if there should be any penalty, they say it should be less than $1,000.  These disparate submissions may indicate the difficulties at hand.  More likely, however, they reflect the parties’ attitudes in litigation such as this, which seems to be regarded as part of the struggle between labour and capital.  Consequently there may be little use in courts inviting parties to suggest penalties.  However, the parties have made helpful submissions on other matters, such as the factors that should be taken into account in determining the penalty, and should be encouraged to do so in the future. 

21                  All in all, and recognising that there is no science whatever involved in the task, the penalty that suggests itself to me to be “just and appropriate” is $75,000.  That would result in individual penalties (to the nearest cent) of $1.71.  However, as any penalty should be in a sum which is capable of being paid in cash (although 1c and 2c coins are still legal tender, they are no longer in circulation), each individual penalty should be rounded to $1.70, resulting in a total penalty of $74,507.60.

22                  The unions ask for what is sometimes referred to as “the usual order”, namely that the penalty be paid to them:  Gibbs v The Major, Councillors and Citizens of the City of Altona (1992) 37 FCR 216, 223.  The power to make such an order is to be found in s 356 of the Workplace Relations Act, which provides that where a penalty is imposed it may be ordered to be paid into the Consolidated Revenue Fund or to a particular organisation or person. 

23                  There is nothing new in a statute that provides for the payment of a penalty to a person other than the Crown.  English criminal law has long drawn a distinction between informations that could only be brought in the name of the Crown and those that could be brought by a subject.  The latter class of action was usually referred to as a “popular action”: Blackstones Commentaries vol 3 at 160.  The person who was entitled to bring a “popular action” was known as a “common informer”. 

24                  By the time of Henry VIII the number of statutes conferring upon informers the right of action to recover penalties had become very large.  In fact they gave rise to a ruthless group of persons aiming to make easy profits.  The statutes became very unpopular.  The courts of equity reacted against them by refusing to order discovery or require the defendants to give evidence.  Eventually the number of actions by informers became so numerous it was necessary to place some restraint upon them.  First, time limitations were fixed for the bringing of certain classes of action under penal statutes.  Then the Common Informers Act 1951 abolished most common informer actions in England.

25                  It cannot be doubted that employer and employee organisations play a legitimate and important role in seeing that there is compliance with the provisions of the Workplace Relations Act.  For example, an individual employee will rarely have the ability to fund a proceeding for a contravention.  If unions do not bring such proceedings, contraventions will go unpunished.

26                  Perhaps the “usual” order is to be explained on the basis that often an industrial organisation brings proceedings for a contravention of the Workplace Relations Act to protect the legitimate interests of its individual members.  In such a case it is appropriate for the organisation to receive the penalty, to defray its actual costs and to provide some compensation for the time lost by its staff.  In this regard it should be noted that, apart from exceptional cases, a party to a proceeding in a matter arising under the Workplace Relations Act is not entitled to recover costs:  see s 347.

27                  However, there is no reason to make “the usual order”, if that will result in a windfall to an organisation.  Proceedings for pecuniary penalties are not to be used for profit:  cf Municipal Officers Association of Australia v City of Bayswater (1987) 22 IR 45, 51;  Seymour v Stawell Timber Industries Pty Ltd (1985) 13 IR 289, 311.

28                  An appropriate order (if there be enough funds) would allow the unions a sufficient sum to meet their costs and expenses, including the expense of staff time.  The balance (if any) should be paid into the Consolidated Revenue Fund.  I will hear argument on the proper amount to be paid to the unions.  It will also be necessary to order that if the amount in question is not paid within a stipulated period, say fourteen days, the Registrar should bring enforcement proceedings.  I will also hear submissions on what those orders should be.

29                  Finally, the unions ask for other relief, in particular an order requiring Telstra to publish a notice to its employees advising of the outcome of this case and giving an assurance that there will be no discrimination in the redundancy process.  Nothing would be achieved by such an order.  Most employees will know the outcome of the case.  Telstra has already retracted the instruction and advised employees that there will be no discrimination in the redundancy process.

Associate:

Dated:              26 September 2001