FEDERAL COURT OF AUSTRALIA

Williams v MacMahon Mining Services Pty Ltd [2010] FCA 1321

THE COURT ORDERS THAT:

1.    The consolidated appeals from Williams v MacMahon Mining Services Pty Ltd [2009] FMCA 511, Williams v MacMahon Mining Services Pty Ltd (No 2) [2009] FMCA 763 and Williams v MacMahon Mining Services Pty Ltd (No 3) [2010] FMCA 49 be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

The decisions appealed from

1    There are four notices of appeal before me arising from three decisions of the Federal Magistrates Court.

2    The first decision is Williams v MacMahon Mining Services Pty Ltd [2009] FMCA 511 (delivered 28 May 2009) (Williams No 1). The second decision is Williams v MacMahon Mining Services Pty Ltd (No 2) [2009] FMCA 763 (delivered 14 August 2009) (Williams No 2). The third decision is Williams v MacMahon Mining Services Pty Ltd (No 3) [2010] FMCA 49 (delivered 29 January 2010) (Williams No 3).

3    Williams No 1 is the subject of a notice of appeal filed by Mr Williams on 18 June 2009 and an amended notice of cross appeal filed by MacMahon Mining Services Pty Ltd (MacMahon) on 2 March 2010. The appeal by Mr Williams fell away in light of the decision in Williams No 2. Williams No 2 is the subject of a notice of appeal filed by MacMahon on 4 September 2009. Williams No 3 is the subject of a notice of appeal filed by MacMahon on 19 February 2010.

4    While these appeals were commenced separately, by consent orders made 8 October 2009 and 8 March 2010, they were consolidated.

issues

5    The issue arising in Williams No 1 is:

    whether the Federal Magistrate erred in finding that Mr Williams was not a “casual employee” for the purposes of s 227 of the Workplace Relations Act 1996 (WR Act).

6    The appeal by Mr Williams raising the issue whether the Federal Magistrate erred in finding that MacMahon was entitled to set-off any sum of money appropriated from the casual loading paid to Mr Williams in lieu of annual leave against any entitlement Mr Williams had to annual leave payments for accrued annual leave on termination of employment in accordance with s 232 and s 235(2) of the WR Act, fell away after the decision was made in Williams No 2.

The issue arising in Williams No 2 is:

    whether the Federal Magistrate erred in finding that s 173 of the WR Act has the effect of making the provision in Mr Williams’ contract of employment expressly providing for payment of a loading in lieu of paid leave entitlements, to be of no effect.

The issue arising in Williams No 3 is:

    whether the Federal Magistrate erred in the exercise of his discretion in assessing penalty by taking into account extraneous or irrelevant matters, or mistaking facts in finding, as aggravating circumstances.

Facts

7    The parties do not dispute the Federal Magistrate’s summary of the relevant factual background outlined at [4] – [13] of Williams No 1. For context, I will repeat it largely verbatim here.

8    Mr Williams was employed as a miner by MacMahon from 9 November 2006 until 16 December 2007 at the Argyle Diamond mine site (Argyle) in the north-west of Western Australia under a letter of employment dated 16 November 2006. The letter of employment was signed by Mr Williams on 19 December 2006 (the Contract).

9    MacMahon paid Mr Williams a flat hourly rate of $40.00 per hour under the Contract, which provided that:

The rate of pay is all inclusive and takes into account all responsibilities, disabilities, allowances … and includes payment for all hours necessary to undertake your rostered duties, and as a casual employee, a loading in lieu of paid leave entitlements. The rate includes compensation for any necessary shift, public holiday and weekend work.

10    Mr Williams’ hours of work were set out in the Contract which included a requirement to work either a day or a night shift. Mr Williams was required to work 12 hour shifts on a two weeks on/one week off roster. The evidence before the Federal Magistrate was that Mr Williams worked seven consecutive day shifts, then seven consecutive night shifts, and then had seven days off for the entire period of his employment, save for the first three months where he worked only day shifts.

11    Mr Williams worked in one of three crews at Argyle. He was on “C” crew. For most of the time that he was employed he worked on mobile plant equipment. For the 2008 calendar year Mr Williams was provided with a “CRE 2008 C Crew Roster” which set out his crew’s night and day shifts and flight times for the charter flights to and from Argyle for that 12 month period. Mr Williams was flown to Argyle by charter flight from Perth and accommodated at Argyle in accommodation provided by MacMahon.

12    On 16 December 2007, MacMahon gave Mr Williams notice of termination of his employment under the Contract, a term of which relevantly provided:

Employment may be terminated by the provision of notice, being one hour in the case of a casual employee …

Mr Williams did not receive any payment for annual leave on termination of his employment.

the ‘casual employee’ question

13    MacMahon appeals against the first paragraph of the declarations made in Williams No 1, in which it was held that Mr Williams was not a “casual employee” for the purposes of s 227 of the WR Act.

14    The parties agree that casual employees are not entitled to payment for accrued annual leave pursuant to s 277 of the WR Act. The question on appeal is whether the Federal Magistrate erred in holding that Mr Williams was not a casual employee.

15    The Federal Magistrate reasoned that:

    Mr Williams was not employed as a casual employee as “traditionally defined” when he entered into the Contract (Williams No 1 at [41]-[42]).

    The term “casual employee” in s 227 of the WR Act had the same meaning as the “traditional definition”, with the result that Mr Williams was not employed under the Contract as a casual employee and therefore had an entitlement to payment for accrued leave under s 235(2) of the WR Act (at [68]).

16    The Federal Magistrate noted, at [28] – [33], authority that emphasises that the description “casual worker” is not one of precision, but ultimately one of fact. In particular, he accepted that a feature of employment on a casual basis is that it may be characterised by informality, uncertainty and irregularity.

17    His Honour then turned to the facts and, having noted, at [35], that the description in the Contract of Mr Williams as a “casual employee” was not determinative of the issue, found there were a number of factors that suggested the description was in fact inappropriately used. In this regard he was expressly influenced by the following findings:

    At [36], that there was an expectation that Mr Williams would be available, on an ongoing basis, to perform the duties required of him, in accordance with the roster, until such time as the Contract came to an end. This was not a contract where the availability of work was the subject of significant fluctuation from one day, or one week, or one month, to the next so as to make the work, and hours of work, irregular and uncertain. Rather, there was a stable, organised and certain roster that governed work until the Contract was ended, either for some cause or because the head contract had come to an end.

    At [37], that there was mutual expectation of continuity of employment subject only to termination of employment for cause, or termination as a consequence of the head contract ending.

    At [38], that this was not a case of an employee working for short periods of time on an irregular basis.

    At [39], the fact that Mr Williams was paid a flat hourly rate, that purported to include a loading for various leave entitlements, including annual leave, was more indicative of a casual employment relationship than not.

    At [40], that Mr Williams was not regularly contacted and asked to work, rather the work was organised and he knew when and where he was required, and how he was to get there.

18    MacMahon complains however, that the Federal Magistrate failed to properly identify and interpret the contractual terms upon which Mr Williams was employed.

19    MacMahon contends that when the Contract is given a plain reading it is clear that the parties intended that Mr Williams was to be employed as a casual employee. MacMahon says that such a relationship was made an express part of the Contract. In particular, MacMahon submits that the following terms expressly described the nature of Mr Williams employment as a casual employee and properly reflect the understanding the parties had of that relationship:

    Mr Williams employment was to be in the position of a “casual miner”.

    The flat hourly rate payable to Mr Williams for all shifts that would be worked by him included a loading in lieu of paid leave entitlements, because he was employed “as a casual employee” (the payment term).

    The Contract “when read in conjunction with any site rules and regulations, including induction manuals, safety, all Company Policies and procedures forms the entire basis of the Contract of casual employment between the Company and the employee”.

    MacMahon also highlights, and places particular significance on, the termination clause in the Contract, which stated that:

Employment may be terminated by the provision of notice, being one hour in the case of a casual employee;

If there are outstanding monies owed to the Company on termination, these verified amounts will be deducted from any wages owing to the employee.

20    It is in effect these four terms of the Contract that MacMahon says the Federal Magistrate misconstrued in coming to the conclusion that Mr Williams was not a casual employee for the purposes of the WR Act. MacMahon refer to these four terms collectively as “the casual terms”. In respect of the payment term, MacMahon say that the inclusion of leave loading confirms that MacMahon was not prepared to commit to employment where Mr Williams could take paid leave and then return to his job under the Contract and further corroborates the absence of a firm advance commitment to permanent employment and the entitlements such a relationship entails.

21    MacMahon also draws attention to two further terms of the Contract, namely that concerning Mr Williams’ hours of work and roster (the roster provision), and the term dealing with Mr Williams’ travel to and from Argyle along with his accommodation there (the travel provision). MacMahon submits that while these two terms do not expressly refer to Mr Williams as a casual employee, they promote an understanding of the circumstances of Mr Williams employment as that of a casual employee. MacMahon submits that the termination term performs a similar role.

22    While the “casual provisions”, as MacMahon call them, expressly refer to Mr Williams as a casual employee, MacMahon does not suggest that this was a factor overlooked by the Federal Magistrate in his reasoning (see Williams No 1 at [35]). MacMahon accepts that merely describing the contractual relationship as one of casual employment is not determinative of the controversy. Rather, MacMahon’s submission is that these terms provide a substantive indication of the parties’ understanding of the nature of the relationship between them at the date of the execution of the Contract. In particular, MacMahon submits that these terms indicate that:

    There is no doubt that MacMahon and Mr Williams agreed as between themselves that Mr Williams would be employed, paid and treated as a casual employee as opposed to an employee to whom MacMahon was firmly committed as a member of its workforce otherwise;

    The terms of the Contract expressly reflected this agreement between the parties and, consistent with such agreement, did not provide for paid leave for Mr Williams but provided instead for payment of a loading in lieu of paid leave entitlements.

23    MacMahon submits that the description of the parties of the nature of Mr Williams’ employment as being that of a casual employee should be given effect to if it does not contradict the effect of the Contract as a whole: Personnel Contracting Pty Ltd t/as Tricord Personnel v The Construction, Forestry, Mining and Energy Union of Workers [2004] WASCA 312; (2004) 141 IR 31 (Tricord) (Industrial Appeal Court of Western Australia) at [24]-[25] per Steytler J (with whom Simmonds J agreed). MacMahon submits that in this case the terms of the Contract and the surrounding circumstances do not contradict the effect of the Contract as a whole and that the Federal Magistrate erred in failing to give effect to the parties’ agreement in this regard.

24    MacMahon further submits that the Federal Magistrate erroneously relied on the question of whether the employment entered into was one characterised by informality, uncertainty or lack of regularity of engagement such as to give it the characteristics of being casual employment. MacMahon contends that it is apparent the Federal Magistrate in this regard drew particularly on the dictum of Moore J in Reed v Blue Line Cruises Ltd (1996) 73 IR 420 (Reed). MacMahon submit that the Federal Magistrate failed to recognise that Moore J in Reed did not lay down a definitive test of the nature of an employment relationship and so, in relying on Reed, fell into error.

25    MacMahon also contends that the roster provision and travel provision seem to underpin the findings relied upon by the Federal Magistrate for the conclusion that there was a lack of informality, uncertainty or lack of regularity such as to give Mr Williams’ employment under the Contract the characteristics of casual employment. MacMahon submits that such provisions cannot be read and relied upon in isolation from an understanding of the circumstances of the employment for which Mr Williams was engaged and other provisions of the Contract. MacMahon say that, once this is appreciated, it is apparent that the reason for the roster provision and travel provision is the fly-in/fly-out nature of Mr Williams’ employment. MacMahon say that even a person employed casually on this basis, as they say Mr Williams was, would require those provisions in his or her Contract to give it efficacy. MacMahon, in effect, say that these provisions exist out of practical necessity and are contrary to a mutual expectation of continuity of employment. MacMahon say the Federal Magistrate erred in holding otherwise.

26    MacMahon submits that the termination provision is an important factor supporting a characterisation of Mr Williams’ employment as that of a casual employee and that it was a term that was fundamentally misconstrued by the Federal Magistrate. MacMahon’s argument is, in this respect, developed in two ways:

    First, MacMahon say that a Contract which by its terms provides for termination by either party at any time and for any reason cannot found a conclusion that there is a firm advance commitment as to the duration of the employee’s employment.

    Secondly, MacMahon say that the Federal Magistrate erroneously found that there was a mutual expectation of continuity of employment subject only to termination of employment for cause, or termination as a consequence of the head contract ending (see Williams No 1 at [37]). Rather, the correct position, as MacMahon put it, is that the Contract could be terminated for any reason, at any time, and that this was a factor overlooked by the Federal Magistrate in construing the Contract as a whole.

27    In this second respect, MacMahon further submits that in misconstruing the termination clause the Federal Magistrate then erroneously proceeded to determine the proceeding on the basis that the work was performed on a stable, organised and certain roster, with certainty of working hours, ongoing until the Contract was terminated either for cause or because the head contract between Argyle and MacMahon had come to an end. In effect, MacMahon say that in overlooking the uncertainty imparted into the contractual relationship by the termination clause, the Federal Magistrate proceeded from an erroneous position and as a result came to an incorrect conclusion as to the true nature of Mr Williams’ employment.

28    Mr Williams submits in response that the suggestion that the Federal Magistrate misconstrued the termination provision, or that the Federal Magistrate erred in failing to find that there could not have been an advance commitment to the duration of the employment because of an entitlement to terminate the employment by notice of one hour, is “a distraction and without merit”. Mr Williams makes the point that permanent employment is capable of termination by notice and merely that because in this case the requisite period of notice is short does not properly lead to the conclusion that there is no expectation or commitment as to the duration or pattern of employment.

29    Mr Williams also submits that, while it appears that the Federal Magistrate did not specifically construe the termination provision in Williams No 1, his Honour made various references to it in his reasons which suggest the characterisation that was necessarily given. For example, at [36], his Honour noted that the Contract was ongoing until it was terminated “either for some cause or because the head contract had come to an end”. His Honour continued, at [36], to say that in this case, the Contract was terminated “for cause by MacMahon Mining”. At [37], his Honour contrasted this with the position of “any contract of employment” noting that all may be terminated for cause or may come to an end as a consequence of a contract or project concluding. At [41], the Federal Magistrate once more noted that Mr Williams’ employment continued until it was in fact, “terminated for cause”. His Honour noted, at [37], that this was one factor informing the Court’s view that there was a “mutual expectation of continuity of employment”.

30    Mr Williams rejects the proposition that the Contract may be terminated at any time for any reason, saying that it “cannot seriously be suggested that the parties expected that the employment would be terminated for no reason at all (even if that were legally permissible)”. Mr Williams further submits that the fact that the Contract designated a method of termination and specified a period of notice (albeit a short one) supports the proposition that the employment is not casual in nature. Casual employees, Mr Williams contends, are traditionally employed day to day whereas the period of engagement of a full-time or part-time employee is week to week as reflected in a formal period of notice for termination. Mr Williams cites Thompson v Big Bert Ltd t/as Charles Hotel [2007] FCA 1978; (2007) 168 IR 309 at [58] in support of this proposition.

31    The parties accept that the WR Act does not define the expression “casual employee” and so the expression should be given its ordinary common law meaning. In this regard, the parties generally accept – leaving aside for the moment what Moore J had to say in Reed – that the terms are imprecise in their meaning, as the Federal Magistrate noted: see Doyle v Sydney Steel Co Ltd [1936] HCA 66; (1936) 56 CLR 545 (Doyle) at 551, per Starke J and 555, per Dixon J.

32    It is worth noting that in Doyle, at 555, Dixon J observed that wharf labouring (remembering that this was 1936) was typical casual work. Even so, his Honour added that unfortunately what is casual work is “ill defined”. His Honour observed:

Indeed it is scarcely too much to say that it seems open to a tribunal of fact to treat most forms of intermittent or irregular work as casual. Where the employment involves a contract of service lasting some weeks followed by a long interval of idleness and then another such contract of service and so on, more difficulty arises, if the view is taken that the employee is a casual worker.

It should also be recalled that the observations of Dixon J and Starke J to which reference is often made were in the context of a decision about the computation of weekly earnings under workers’ compensation legislation and their comments about the expression “casual worker” arose in that context.

33    Nonetheless, the concept of a casual worker being involved in work which is discontinuous – intermittent or irregular – remains relevant and helpful in understanding the concept today. In Reed, Moore J, at IR 425, by reference to those and other well known authorities, observed:

A characteristic of engagement on a casual basis is, in my opinion, that the employer can elect to offer employment on a particular day or days and when offered, the employee can elect to work. Another characteristic is that there is no certainty about the period over which employment of this type will be offered. It is the informality, uncertainty and irregularity of the engagement that gives it the characteristic of being casual.

34    I do not consider that these observations by Moore J should be read other than as general observations concerning the concept of casual employment. Certainly, they were not, in my view, intended to be observations about employment on a casual basis under any particularly statutory or regulatory regime. They are a helpful commentary on what the early authorities, such as Doyle, have to say on the topic of what casual employment is under the general law today.

35    This in my view is confirmed by what the Full Federal Court said in Hamzy v Tricon International Restaurants [2001] FCA 1589; (2001) 115 FCR 78 (Hamzy), at [38]; namely, that “casual employee” embraces “an employee who works only on demand by the employer” and that “the essence of casualness is the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work”.

36    Similarly, the Western Australian Industrial Appeals Court in Melrose Farm Pty Ltd t/as Miles Away Tours v Milward [2008] WASCA 175; (2008) 175 IR 455 (Le Miere J with Steytler and Pullin JJ agreeing) whilst acknowledging there is no definitive test, adopted this approach, that “the essence of casual employment is the absence of a firm advance commitment as to the duration of the employee’s employment or the days (or hours) the employee will work”.

37    MacMahon seeks to overturn the Federal Magistrate’s finding that on the application of these traditional formulae Mr Williams was not a casual employee. In my view, it was entirely open to his Honour to come to that conclusion on the evidence before him.

38    To the extent that the parties by the Contract described their relationship as employer and “casual employee” it is well understood that the descriptions supplied by such an instrument will not override the true legal relationship that arises from a full consideration of the circumstances: Tricord at [24]–[25].

39    A particular attack was mounted by senior counsel for MacMahon during oral submissions on the failure or omission of the Federal Magistrate explicitly to regard the provision of the Contract that entitled MacMahon to terminate the Contract on one hour’s notice. This was said to illustrate that his Honour failed properly to regard the terms in finding that the Contract was expected to have a longer life than a shorter, intermittent one. However, in my view, while his Honour did not spend time directly analysing the relevance of the contractual term, it is apparent from a reading of the whole of his judgment that he fully appreciated the term. In [12] of the reasons the termination clause was in fact set out.

40    The submission on behalf of the MacMahon, that the Federal Magistrate’s focus on the Contract coming to an end for cause or termination of the head contract betrayed his failure to give any or proper regard to the termination clause, does not survive a fair reading of his Honour’s reasons, for example at [36]–[37]. All the Federal Magistrate was saying in those passages was that, having regard to the terms of the Contract as a whole, and (by inference) notwithstanding its more precise provision, the expectation of the parties was that the Contract would only be terminated for cause or upon the head contract coming to an end. This view of the Contract buttressed the Federal Magistrate’s view that work provided for was not intermittent or irregular. Accordingly, the Federal Magistrate’s focus was on expectation derived from the terms of the Contract overall, not just the particular right of termination included in it.

41    The fact that the Contract may be terminated on one hour’s notice was something of which the Federal Magistrate was plainly aware, but, having regard to the other terms, had a reduced significance for him in determining whether or not Mr Williams should be found to have the status of a casual employee for the purposes of the WR Act. Such a view was open in light of the various factors identified by his Honour, including the relative permanency of the employment relationship overall under the Contract.

42    In my view, all of the remaining named factors identified by the Federal Magistrate, which I have alluded to earlier, point squarely to the employee not being in casual employment. While it is plainly relevant to have regard to the fact the Contract could be terminated on one hour’s notice, when one has regard to the Contract overall, it was open to the Federal Magistrate to find that Mr Williams was not a “casual employee” under the general law and therefore for the purposes of the WR Act. His engagement was not for the performance of work on an intermittent or irregular basis. The future was provided for. The nature of the work required of the employee was stipulated. A roster was in place which made clear the regularity of the employment. Travel arrangements were organised to facilitate it. All this suggests that this was an employment arrangement far beyond that of casual employment. That the Contract may be terminated on an hour’s notice may be said, as I consider it is, a countervailing relevant factor. In the event, that Federal Magistrate did not, on a proper reading of his judgment, consider this to be a determinative factor. It was open to him so to find. No error is revealed.

43    The appeal therefore fails on this ground.

the set off issue

44    In Williams No 2, the Federal Magistrate held that MacMahon was not entitled to off set any part of the loading prescribed in the Contract made between MacMahon and Mr Williams as being included in the flat hourly rate that was paid to Mr Williams under the Contract in satisfaction of annual leave entitlements.

45    The issues raised by the appeal are:

    The meaning of s 173 of the WR Act and whether that provision rendered to no effect the term of the flat hourly rate clause in the Contract that provides for payment of a loading in lieu of paid leave entitlements.

    Whether payment to Mr Williams of the loading satisfied any entitlement of Mr Williams which may have accrued under s 235(2) of the WR Act to payment for untaken annual leave.

46    Section 173 of the WR Act provides that:

A term of a workplace agreement or a contract has no effect to the extent to which it purports to exclude the Australian Fair Pay and Conditions Standard [AFPCS] or any part of it.

47    If one takes the view that the Contract, by providing that “the rate of pay is all inclusive and takes into account … a loading in lieu of paid leave entitlements …” purports to exclude the entitlement to annual leave, then s 173, on the face of it has been contravened. If, however, one takes the view that the Contract provides, on its proper construction, for the advanced payment of such entitlements, then arguably s 173 is not infringed.

48    MacMahon submit that a distinction is to be drawn between a contract which purports to exclude the AFPCS and one which seeks to satisfy the obligations it creates, by a particular means or form of payment and submits the Contract here falls into the latter category. It thereby attacks the Federal Magistrate’s finding that s 173 meant the term of the flat hourly rate clause that provides for payment of the loading is a term of no effect.

49    The Federal Magistrate found, at [87] of Williams No 2, as follows:

However, in the Court’s view, the loading is not specifically a casual loading, and it does not identify particular paid leave entitlements which it is said to be in lieu of. Furthermore, it was not set at a specified amount. It is therefore not possible to accurately quantify the amount of the loading or the leave entitlements it was said to be in lieu of. The evidence therefore does not establish the essential building blocks for the claimed set-off.

50    At [88], the Federal Magistrate accepted that s 173 has the effect of making the provision purporting to pay a loading in lieu of annual leave entitlements to be of no effect. The Court considered a similar conclusion must follow in so far as the loading purports to be in lieu of sick leave entitlements.

51    The Federal Magistrate, at [89], also considered it correct to say that a casual loading is compensation for the loss of a basket of amenities and entitlements, not limited to leave, but including, for example, termination and redundancy benefits. In those circumstances it is not open to MacMahon to allocate a notional 20% casual loading solely against annual leave, sick leave and public holidays.

52    In arguing for a different outcome, MacMahon seeks to emphasise the following scheme of the WR Act. Section 171(3) provides that the provisions of Div 2 to 6 of Pt 7 constitute the AFPCS. Section 235(2) is contained in Div 2 of Pt 7, and so is part of the AFPCS, and provides as follows:

If the employment of an employee who has not taken an amount of accrued annual leave ends at a particular time, the employee must be paid a rate for each hour (pro rated for part hours) of the employee’s untaken accrued annual leave that is no less than the rate that, immediately before that time, is the employee’s basic periodic rate of pay (expressed as an hourly rate).

53    MacMahon says the AFPCS are minimum entitlements of employment: s 171(1). The intention as evinced in s 173 is that parties to a contract cannot agree a term that has the effect of excluding such minimum entitlements. As such it operates as an “antiavoidance” provision. Parties cannot contract out of the application of the AFPCS in contracts of employment.

54    MacMahon says, in its terms, s 173 is unqualified in respect of the work place agreements and contracts to which it applies. However, by reason of s 227, s 173 does not apply to a contract of employment for a casual employee.

55    MacMahon then says that though the Federal Magistrate did not expressly state the basis for his finding as to whether the term of a flat hourly rate in the Contract purports to exclude s 235(2), it is implicit that he held that properly construed the relevant term purports to exclude s 235(2).

56    MacMahon then focus on the relevant term of the Contract for the purpose of examining whether s 173 has application.

For all rostered shifts under this Agreement you will be paid a flat hourly rate of $40 per hour.

The rate of pay is all inclusive and takes into account all responsibilities, allowances and other factors associated with the work, location and environmental factors and includes payment for all hours necessary to undertake your rostered duties and as a casual employee, a loading in lieu of paid leave entitlements.

57    MacMahon says the reference to “paid leave entitlements” must have been intended to include any paid annual leave entitlements. The Contract is itself silent on what those entitlements are. Therefore, the only source of such entitlements that could have been within the parties’ contemplation is those that arose by reason of the AFPCS, something that the Federal Magistrate recognised, at [77], of Williams No 1.

58    MacMahon then contend that, on a plain reading of s 173, taking into account its purpose, the phrase “purports to exclude” requires an examination of whether the contractual term in question in its terms, professes or intends to exclude s 235(2).

59    MacMahon argues that the relevant term of the Contract evidences a contractual promise by MacMahon to pay the loading to Mr Williams on the basis that he was employed as a casual employee. The loading was expressed to be in lieu of paid leave entitlements. Although it does not allocate a specific amount to any particular one of the leave entitlements referred to in the term, it is clear that the relevant term is intended to satisfy and not exclude any entitlement arising under the AFPCS.

60    MacMahon argue that the effect of the provision was therefore that Mr Williams would be paid any entitlement due to him for annual leave as part of its flat hourly rate, and that on termination there would be no monies payable for leave accrued and not taken.

61    The appellant also relies on authority it says is supportive of its view: James Turning Roofing Pty Ltd v Peters [2003] WASCA 28, (2003) 132 IR 122 at [21], as well as the Explanatory Memorandum to the Workplace Relations Amendment (Work Choices) Bill 2005 (Cth).

62    Mr Williams, however, seeks to emphasise the following framework of the WR Act in relation to leave accrual. Section 232 entitled an employee to accrue a period of annual leave during his or her employment. Section 236 entitled the employee to take a period of annual leave, if authorised, and prohibited the employer from unreasonably refusing leave. Section 235(2) arose only if an employee had a period of accrued leave when the employment ended and entitled the employee to payment in that event.

63    The WR Act therefore did not permit the payment of an amount of money in lieu of a period of time off work on pay. Accordingly, a provision which seeks to substitute a payment in place of actual leave excludes that entitlement. Mr Williams submits that this is made clear by s 233 which permitted, subject to strict limitations, the cashing out of annual leave. An employee could forego a period of annual leave if he or she elected in writing to do so. A workplace agreement applying to the employment permitted an employee to forego annual leave. The employee was then entitled to pay in lieu of the annual leave of at least his or her basic periodic rate of pay for the period foregone and the maximum amount of leave foregone was two weeks in any 12 month period. Those restrictions would be for no purpose if, consistent with the AFPCS, an employer could simply nominate a rate of pay said to include payment and wherewithal paid annual leave.

64    Accordingly, Mr Williams submits that s 173 renders as having “no effect” any provision to the extent that it purports to exclude any part of the AFPCS. The section does not require that a contract that expressly seeks to exclude the AFPCS or even be intended to have that effect, although in this case the intention to exclude is clear. The ultimate question is whether the contractual provision is inconsistent with the statute.

65    I accept the respondent’s submissions.

66    In my view, there is a real inconsistency between the contractual term and the entitlement that s 173 seeks to preserve. I accept the framework of the scheme of the WR Act provisions contended for on behalf of Mr Williams. Section 173 reflects a parliamentary intention that a person cannot, by one means or the other, contract out of their entitlement to be paid out annual leave and other leave entitlements at the end of a employment period, save for the particular provisions allowing for the sacrifice of annual leave.

67    In any event, as the Federal Magistrate found, the Contract does not attempt to make any particular allocation between different types of leave, which it contends have been provided for in advance. It simply asserts the hourly rate is inclusive. In doing so it simply purports to justify the payment of a more generous hourly rate by asserting it is inclusive of any of the nominated benefits. This is a plain attempt to contract out of the payment of those benefits without regard to whether or not they are actually payable at the time of payment of the hourly rate.

68    The intent of the statute is that there will be entitlements in accordance with the AFPCS. If it were open to an employer to make a contract of employment that included terms such as that the subject of consideration here, such a process could no doubt have a real impact on bargaining rights. While it may be correct to say that some attempt has been made in the contract here to pay an additional sum allocated to potential leave entitlements, the effect of such a contractual provision is, in fact, to exclude an entitlement to be paid annual leave and other forms of leave under the Act at the termination of the employment. In those circumstances, s 173 of the WR Act applies to render such a contractual provision of no effect.

69    For that reason, in my view, the Federal Magistrate was correct in the decision he came to and no error is revealed.

70    The appeal therefore fails on this ground.

the question of penalty

71    In Williams No 3, the Federal Magistrate determined what penalty, if any, ought to be imposed upon MacMahon and whether any penalty ought to be paid to Mr Williams. There was also a minor issue concerning the payment of interest on a sum previously ordered to be paid to Mr Williams.

72    The Federal Magistrate set out, at [12], of Williams No 3 the general considerations governing the consideration of penalty in terms with which, generally speaking, MacMahon does not take exception. They included, for present purposes:

    the size and financial resources of the contravener.

73    The Federal Magistrate was careful to note, at [13], that the list of considerations he provided was not an exhaustive one.

74    In the event, the Federal Magistrate imposed a penalty of $14,850 mainly for contravention of s 232 and s 235(2) of the WR Act.

75    The Federal Magistrate, at [16], noted that the circumstances in which the Contract was made, disclosed:

    there were no findings that the Contract was a sham, nor that MacMahon had an ulterior motive in making the Contract;

    both parties were fully aware of the terms of the Contract at the time of entry and had the same understanding of those terms;

    Mr Williams was not a vulnerable employee;

    MacMahon did not act in deliberate disregard of the WR Act on termination of Mr Williams, as it believed that it was terminating his employment in accordance with the terms of the Contract; and

    up until the time of termination, both parties believed they were giving and receiving the correct entitlements as provided for in the Contract.

76    At [17], the Federal Magistrate noted that the nature and extent of the conduct which led to the breach could be described as “an unknowing breach” of the WR Act for the commercial advantage of employing casual staff, as shown by the following evidence:

    the course of conduct was not deliberate;

    the systems in place prior to Mr Williams’ entry into the Contract were inadequate for a large company with a dedicated human resources team that should have provided the correct advice on their legal obligations to the employees, did not do so, but seemingly did not do so deliberately, as opposed to carelessly or unknowingly; and

    MacMahon was unaware of its liability to pay unpaid accrued annual leave as at the date of termination of Mr Williams’ employment.

77    In this regard, at [17], the Federal Magistrate noted that whilst MacMahon was ignorant of its obligation to pay Mr Williams his unpaid accrued annual leave on termination of his employment, and although ignorance of the law is no excuse, the Court accepted that there was no deliberate intention to deprive Mr Williams of his legal entitlements.

78    The Federal Magistrate went on, at [18], to note that, in the circumstances identified, the conduct which led to the contravention should have a “neutral impact” on the size of the penalty imposed.

79    At [19], the Federal Magistrate noted that the Court was satisfied that MacMahon should be treated as a “first time contravener” in relation to this contravention.

80    The Federal Magistrate then went on to consider the consequences of the contravening conduct and, at [23], noted that, viewed in a broad sense, the consequences were “serious because the conduct undermines the utility and effectiveness of the fundamental objects and purposes of the WR Act”. His Honour went on to note, however, that viewed in a narrow sense “proper appreciation” of the consequences of the conduct required recognition that:

    although not paid his statutory entitlement there was some element of his overall payment which was intended to be in lieu of that payment;

    Mr Williams was not an employee in the “vulnerable” low income category, although his Honour went on to note “there may be a power disparity or inequality of bargaining power between an employer offering employment and an employee considering employment which favours the employer and makes it more likely that an employee will accept employment on the terms offered” when employees are engaged as casuals;

    Mr Williams appeared to be the only employee who had complained about the “casual” terms of employment at MacMahon.

81    At [24], the Federal Magistrate confirmed that the consequences of the conduct were primarily conduct undermining the utility and effectiveness of a principal object of the WR Act and the nonpayment of an entitlement of a not insignificant sum of money to an individual, in circumstances where the seriousness of that conduct is lessened, to some degree, by the parties’ contractual agreement.

82    The Federal Magistrate then quite properly went on to deal with the question of deterrence, both general and specific. He noted, at [35], there was no need for specific deterrence. However, at [36] he noted there was a significant need for general deterrence. In this regard, at [41], the Federal Magistrate stated that the case did not involve a deliberate contravention and went on to repeat that it was concerned with the utility and effectiveness of the WR Act.

83    The size and financial resources of MacMahon were then considered. At [43], the Federal Magistrate noted that the evidence established that:

    MacMahon is one of a group of companies the parent of which is a public company; and

    MacMahon has specialist human resource management personnel and ready access to expert legal advice as to its legal obligations to employees.

84    At [45], the Federal Magistrate noted the size and financial resources of MacMahon Mining (as opposed to the MacMahon Group) and particularly its access to specialist and expertise is a “relevant factor” in the assessment of penalty. The Federal Magistrate explained that this was because the designation of the employment arrangements as “casual”, if they had been reviewed, were so obviously open to doubt that any specialist human resources advisor ought to have advised that it was an arrangement, at the very least, that was open to doubt. The Federal Magistrate noted, at [45], that there was no actual evidence of any such review having been undertaken. His Honour considered that this was a task that was within the remit of MacMahon’s human resources management group. In the circumstances, the Federal Magistrate considered the size and financial resources of MacMahon and particularly its access to specialist advice and expertise was an aggravating factor in the assessment of penalty.

85    In the notice of appeal dealing with this penalty decision, the first ground takes issue with what the Federal Magistrate said in [45], on the basis that:

    there is no or no sufficient evidence to support such findings; and

    the employment arrangements were not obviously open to doubt.

86    As to the evidence relied upon, MacMahon note that, in [45], reference is made to transcript of the hearing on 5 November 2008, at pages 16–17 and 18 in footnotes 64, 65 and 66 respectively. MacMahon says that the evidence in question is that adduced in crossexamination of Mr Ihlein and includes the following:

    At the time of termination of Mr Williams’ employment by MacMahon, MacMahon was contracted to another company within the MacMahon Group, MacMahon contractors (Transcript 16).

    At about the time that Mr Williams was employed there were about 3,000 employees across the whole MacMahon Group in Australia and overseas (Transcript 16).

    The company (meaning the MacMahon Group) employed persons who specialise in ensuring that the industrial relations and the management of human resources is conducted properly and expertly (Transcript 16).

    In general terms, the specialist group of people (i.e. those employed by the MacMahon Group) is employed to ensure that the employees and other arrangements are lawful and suitable to the needs of the MacMahon Group (Transcript 16).

    From time to time the company would take legal advice on various employment issues that may arise (which in the context of the preceding questions was a reference to the company, meaning the MacMahon Group) (Transcript 17).

    In relation to the question whether the various industrial relations and HR specialist employees the company employs might be expected to take legal advice in relation to employment issues in their discretion, if they felt it was necessary to do so, the answer was provided that they would be expected to ask appropriate questions, either internally or externally of the company (which the appellant submits was an answer given in the context of the issue or question mentioned, and referred to the company, meaning MacMahon Group) (Transcript 17).

    Mr Ihlein (who was being crossexamined) did not know where the template compiled for MacMahon contractors, upon which Mr Williams’ Contract was written, came from or whether it pre-dated his commencement with the company (Transcript 18).

    Mr Ihlein had not reviewed the template before the proceedings and was unaware that it was done by anybody else (Transcript 18).

87    MacMahon says that “aggravating factors” are understood to be those which increase the culpability or blameworthiness of an offender.

88    MacMahon then submits that the circumstances underpinning the Federal Magistrate’s findings complained of, are that:

    At the time of the entry of Mr Williams into the Contract, MacMahon had access to specialist human resources advisors.

    The designation of the employment arrangements as “casual” had not been reviewed by specialist human resources advisors.

    The employment arrangements under which Mr Williams was employed as a “casual” was an arrangement at the very least was open to doubt.

    Upon review any specialist human resources advisor ought to have advised that they were open to doubt and to obtain further legal advice about them.

    If legal advice had been sought, it would have been that employment arrangements which Mr Williams was employed under as a “casual” was, at the very least, open to doubt.

89    MacMahon submit that the evidence relied upon for this finding was insufficient to support it in the following respects:

    The fact that there was no evidence of a review of the arrangements did not inevitably lead to the conclusion implicit in the reasons of the Federal Magistrate that there had not been a review.

    Taking into account the terms of the Contract and the circumstances of the employment, and for the reasons submitted in relation to the first appeal:

(a)    The employment arrangements were not obviously open to doubt.

(b)    It was not beyond doubt whether any specialist human resources advisers, if they had reviewed the designation, ought to have advised that they were and would have obtained legal advice.

(c)    It is not beyond doubt that any legal advice would have confirmed that they were open to doubt.

90    In those circumstances MacMahon contend the finding should be set aside and should not have been relied upon as an aggravating factor in the determination of penalty.

91    Further, and alternatively, MacMahon submit that the nature of the first finding, even if supported by evidence, did not mean that the size and financial resources of MacMahon, particularly its access to specialist advice and expertise, was an aggravating factor. It is submitted that even if the employment arrangements were not reviewed and this was because the systems in place were not adequate, the absence of any such review was only relevant to the finding, properly made by the Federal Magistrate, that the breach by MacMahon was an unknowing breach, that had a “neutral impact” on the size of the penalty. There was no basis for concluding that MacMahon was careless.

92    The second limb of the appeal mentioned above, concerns the finding by the Federal Magistrate that the systems in place were inadequate for a large company with a dedicated human resources group and it should have provided correct advice and did not do so, although seemingly it did not do so deliberately as opposed to carelessly or unknowingly.

93    MacMahon submits that the Federal Magistrate separately held that it was a matter that meant that the nature and circumstances of the conduct had a “neutral impact” on the size of the penalty imposed on MacMahon. Nonetheless, it was a matter that was taken into account in the exercise of discretion. Unlike in relation to the first finding complained of, MacMahon submit there is no evidence referenced by the Federal Magistrate in the reasons for the decision in support of the second finding complained of, insofar as it suggests carelessness on the part of MacMahon. There is no basis to conclude that there was carelessness and so the sentencing discretion clearly miscarried.

94    Dealing with the second limb of the appeal ground first, in my view, MacMahon have over analysed the Federal Magistrate’s reasons in relation to his Honour’s finding of carelessness. As the respondent points out, all that the Federal Magistrate did in this aspect of his penalty decision was recognise that MacMahon had not acted deliberately. The expression that his Honour then used, at [17], that MacMahon had acted “carelessly or unknowingly”, was a form of words that, in my view, highlighted the nature of this beneficial finding. His Honour emphasised that all of these circumstances would have a “neutral impact” on the size of the penalty. In my view, MacMahon has nothing to complain about in this regard and I would dismiss the appeal based on that limb of the ground of appeal.

95    As to the more substantive first limb argument of the appellant, it seems to me that the Federal Magistrate was reasonably entitled to regard the evidence noted above to the effect that the appellant is an organisation within a larger group that has the capacity to take human resources advice and legal advice as to the legality of employment arrangements that it wishes to put in place. Large, wellresourced organisations are expected not only to be capable of ascertaining legal requirements governing industrial matters, but also to comply with the law. If they fail to do so, their failure may be regarded in the penalty process. Nothing in the evidence suggested that there had in fact been any review of the contravening contract in this case.

96    While the Federal Magistrate found that the contravention by MacMahon was “unknowing” and so, in that sense, the circumstances giving rise to the contravention were a “neutral factor”, plainly the Federal Magistrate additionally considered that an organisation of the size of the appellant and with the resources available to it (whether on its own or as part of the group of companies) ought to have taken advice. It was reasonably open to the Federal Magistrate, even if the matter had been the subject of consideration in Williams No 1, to take the view that doubt would have been raised about the arrangement if it had done so.

97    What the Federal Magistrate has sought to do in the penalty decision is remind organisations, like MacMahon, of a certain size and with the financial resources to properly explore in advance the legal implications of their proposed actions, to closely consider the legality of the employment arrangements they propose to put in place before doing so. In effect, the Federal Magistrate found that the respondent should have known better than to proceed with an arrangement it would have found was questionable if it had inquired further, and that the penalty should reflect the Court’s admonition of its failure to do so. In this, the Federal Magistrate was obviously concerned to impose a penalty designed to deter other, similar organisations, from engaging in like conduct.

98    The concerns expressed by the Federal Magistrate in this regard are and were, in my view, relevant to the question of penalty and within the discretion of the Federal Magistrate when he imposed the penalty. As a result, there was, in my view, no miscarriage of the discretion exercised by the Federal Magistrate.

99    The appeal therefore fails on this ground.

conclusion and orders

100    For the reasons above, I would dismiss the appeals. I will hear from counsel as to the final orders.

Associate:

Dated:    30 November 2010