Federal Court of Australia

Parsons v Serco Citizen Services Pty Limited (No 2) [2024] FCA 1103

ORDERS

THE COURT ORDERS THAT:

1.    The respondent pay the applicant a pecuniary penalty of $25,000 for its contravention of s 340(1) of the Fair Work Act 2009 (Cth).

2.    The pecuniary penalty be paid within 28 days after the determination of the respondent’s application for an extension of time to seek leave to appeal and any consequent appeal, subject to any order of the Full Court.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DELIVERED EX TEMPORE AND REVISED FROM TRANSCRIPT

RANGIAH J:

1    The applicant, Christopher Parsons, commenced a proceeding alleging that the respondent (Serco) contravened s 340(1) of the Fair Work Act 2009 (Cth) (the FWA) by taking “adverse action” against him because he had exercised “workplace rights” by making certain complaints.

2    On 11 July 2024, I published reasons for judgment finding in favour of Mr Parsons in respect of one of his allegations: Parsons v Serco Citizen Services Pty Ltd [2024] FCA 754. I made a declaratory order that Serco took adverse action against Mr Parsons in contravention of s 340(1) of the FWA by terminating his employment because he had exercised a workplace right to make a complaint. I also ordered that Serco pay Mr Parsons compensation and interest.

3    There is one remaining matter to be determined, namely the amount of any pecuniary penalty that should be imposed upon Serco. I have now heard submissions upon that issue. These reasons deal with the appropriate pecuniary penalty.

4    These reasons generally assume familiarity with my previous reasons. However, I will briefly summarise the relevant facts.

5    One of Serco’s employees, Ms Linnell, made a complaint about Mr Parsons in August 2021. The complaint was investigated by Ms Powell, who was then Serco’s Operations Director. Ms Powell upheld the complaint and found that Mr Parsons’ conduct was inconsistent with the Serco Code of Conduct and issued him with a written warning.

6    Mr Parsons made a complaint in October 2021 against Ms Powell in respect of her investigation and decision. That complaint was found by Serco to be unsubstantiated.

7    In November 2021, Ms Linnell made a second complaint against Mr Parsons. On 9 March 2022, Ms Powell found Ms Linnell’s allegations to be substantiated and Mr Parsons’ conduct to constitute bullying and victimisation. On 6 May 2022, Ms Powell made a decision that Mr Parsons employment be terminated effective immediately.

8    In my reasons, I reached the following conclusions:

164    In my opinion, the reasons expressed by Ms Powell for her findings that Mr Parsons had engaged in retaliation and bullying of Ms Linnell because she had made a complaint against him are so lacking in objectivity and plausibility as to indicate they are not genuinely her reasons for those findings.

…

166    Ms Powell’s demeanour and answers under cross-examination add to my already considerable disquiet about the reasons she gave for the termination of Mr Parsons’ employment. In my opinion, it is quite implausible that she could have genuinely regarded Mr Parsons’ conduct towards Ms Linnell as amounting to “victimisation” and “bullying”, or, in fact, any other form of misconduct.

167    Ultimately, I am not satisfied that Ms Powell’s reasons for finding that the allegations were substantiated and, consequently, that Mr Parsons’ employment should be terminated did not include, as a substantial and operative reason, that Mr Parsons had made a complaint about Ms Powell’s investigation of Ms Linnell’s first complaint.

168    Serco has not discharged its onus under s 361 of the FWA. I find that a substantial and operative reason for the termination of Mr Parsons’ employment was that he had exercised his workplace right of making a complaint against Ms Powell.

169    Accordingly, I hold that Serco contravened s 340(1) of the FWA by taking adverse action against Mr Parsons by terminating his employment because he exercised a workplace right of making a complaint against Ms Powell.

9    The Court’s power to impose penalties arises from s 546(1) of the FWA. The High Court has confirmed that the primary, if not sole, purpose of a pecuniary penalty is deterrence of further contraventions: Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450 (Pattinson) at [9]. Accordingly, the Court must do what it can to deter non-compliance with the legislation: Pattinson at [66].

10    The Court must determine a penalty that is “proportionate”, one that “strikes a reasonable balance between deterrence and oppressive severity”: Pattinson at [41]. This must be done by reference to all the relevant circumstances of the case: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 (Australian Ophthalmic Supplies) at [12] and [91]. Those circumstances can be categorised broadly as relating to the objective nature and seriousness of the offending conduct, and the particular circumstances of the contravener: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 at [102]; Pattinson at [19].

11    The maximum penalty is not to be treated as a “yardstick”, with the most “serious” conduct at one end and “minor” conduct at the other: Pattinson at [49]–[55]. Ordinarily there must be “some reasonable relationship between the theoretical maximum and the final penalty imposed” having regard to the objective seriousness of the contravention in question: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25; [2016] FCAFC 181 at [154]–[156]; Pattinson at [53].

12    It is necessary to determine what penalty is appropriate to provide effective deterrence in the circumstances of the case. Serco relies on the following passage from Pattinson at [46]:

It is important to recall that an “appropriate” penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a “one-off” result of inadvertence by the contravenor rather than the latest instance of the contravenor’s pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law on the part of a union official, or where the official responsible for a deliberate breach has been disciplined by the union. In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.

(Footnotes omitted.)

13    In Trade Practices Commission v CSR Ltd (1991) ATPR 41-076; [1990] FCA 521 at [42], French J (as his Honour was then) listed the following factors which may inform assessment of the appropriate penalty. These are:

1.    The nature and extent of the contravening conduct.

2.    The amount of loss or damage caused.

3.    The circumstances in which the conduct took place.

4.    The size of the contravening company.

5.    The degree of power it has, as evidenced by its market share and ease of entry into the market.

6.    The deliberateness of the contravention and the period over which it extended.

7.    Whether the contravention arose out of the conduct of senior management or at a lower level.

8.    Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.

9.    Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.

14    A similar list was set out in Australian Ophthalmic Supplies at [89]. Such lists are not a rigid or exhaustive catalogue: Australian Ophthalmic Supplies at [91].

15    The matters of particular relevance to determining the appropriate penalty in this case are as follows.

Number of contraventions and penalties

16    The respondent committed one contravention of s 340(1) of the FWA by dismissing Mr Parsons.

17    For a contravention of s 340(1), the maximum penalty is 300 penalty units for a body corporate: see s 539(2) (item 11) and s 546(2) of the FWA. At the time of the contravention (6 May 2022), one penalty unit was equal to $210: s 4AA of the Crimes Act 1914 (Cth). Accordingly, the maximum penalty is $63,000.

Nature and circumstances of the contravention and the need for specific and general deterrence

18    The contravening conduct of Serco must be regarded as serious. Ms Powell made a deliberate decision to terminate the employment of Mr Parsons because he exercised a workplace right of making a complaint against her. It is a serious matter to terminate the employment of any employee, let alone an employee of some 17 years standing, for an unlawful reason.

19    Serco submits that the contravention did not occur as part of some broader strategy or culture of non-compliance, but the individual decision-making process of Ms Powell. That can be accepted.

20    Serco submits that it has no interest in dismissing staff who complain, and that it was Serco’s eagerness to protect Ms Linnell from retribution for her own complaint which led to these proceedings. However, even accepting that Ms Linnell’s complaint provided part of the motivation for terminating Mr Parsons’ employment, Mr Parsons’ complaint against Ms Powell was a substantial and operative reason for the decision.

21    Serco initially submitted that there is no need for specific deterrence. In oral argument, Serco accepted that there was some need for specific deterrence, although that need was “limited”. The concession was correctly made. Even in a case where systems have been put in place to prevent further contraventions, specific deterrence has a role as a reminder of the consequences of the admitted contraventions: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Registered Organisations Commissioner (2020) 283 FCR 404. In addition, there is no evidence that any systems, such as training or warnings, have been put in place to prevent further contraventions

22    The matters relied on by Serco in support of its argument that there is only a limited need for specific deterrence are:

(a)    Serco already has a culture in which staff can and will be dismissed for taking “adverse action” against a person because they have made a complaint;

(b)    if Ms Powell’s actions were improperly motivated, then they were in her personal interests and not in the respondent’s interests.

(c)    the complaint that the Court found to have motivated the dismissal was a personal one concerning Ms Powell’s ability to provide procedural fairness, not a general one regarding (for example) work health and safety, underpayment of wages or some other compliance issue; and

(d)    a primary causative factor to the contravention in this case was the non-alignment between Ms Sfitskis’ proper motive and Ms Powell’s improper motive as determined by the Court; and Ms Powell is no longer employed by the respondent.

23    I do not accept the first point to be demonstrated. Although Ms Powell no longer works for Serco, there is no evidence that she was dismissed for taking adverse action against Mr Parsons.

24    I accept the second point.

25    I do not accept the third point. Mr Parsons’ complaint about Ms Powell was not just about procedural fairness and extended to bias and to the outcome of the investigation. In any event, what is of particular importance is that the adverse action was taken because Mr Parsons’ made a complaint against Ms Powell, not the particular nature of the complaint he made.

26    The fourth point does not carry much weight. Ms Powell was the decision-maker, not Ms Sfitskis. Accordingly, whether Ms Sfitskis had a “proper motive” for her recommendation is beside the point.

27    There is no evidence of any prior contraventions of the FWA by Serco. Although there have been contraventions on two occasions by two apparently related companies, I will not take them into account in the absence of any evidence as to the nature of the connection between the companies.

28    I accept that the contravention in this case can appropriately be regarded as an isolated incident and that the need for specific deterrence is not as substantial as might otherwise have been the case.

29    Serco submits that there is a limited need for general deterrence in view of what are said to be the peculiar facts of this case. The peculiarity is said to be that Ms Sfitskis acted honestly, while Ms Powell did not. I do not accept that the circumstances are peculiar or unusual. This was simply a case of an employee making a complaint about their manager who then decided to terminate the employee’s employment for reasons including, as a substantial and operative reason, the making of the complaint.

30    In Pattinson, the plurality at [10] described the purpose of s 546 of the FWA as, “the deterrence of future contraventions of a like kind by the contravenor and by others”. In my opinion, the expression “of a like kind”, means, in the circumstances of the case, that general deterrence requires that what must be deterred are contraventions of s 340(1) of the FWA by an employer taking adverse action against an employee for reasons including, as a substantial and operative reason, the making of a complaint. There is a substantial need for the penalty to deter such contraventions by employers generally.

The size of the contravening company

31    Serco accepts that it is not a small business. The limited evidence available indicated that it is a business of substantial size, since it has sites in at least Queensland, Victoria and Tasmania and a considerable number of employees.

Whether the contravention arose out of the conduct of senior management

32    Ms Powell was not at the top level of management at the time of the contravention, but was in a senior position.

Conclusion

33    My assessment is that the appropriate penalty is $25,000.

34    I will make the usual order that Serco pay the pecuniary penalty to Mr Parsons: see Sayed v Construction, Forestry, Mining and Energy Union (2016) 239 FCR 336 at [96]–[101]; Construction, Forestry, Maritime, Mining and Energy Union v Fair Work Ombudsman (Botany Cranes Case) (2023) 297 FCR 438 at [235]–[239].

35    As Serco has filed an application for an extension of time to seek leave to appeal against the orders made on 11 July 2024, I will order that the pecuniary penalty be paid within 28 days after the determination of any appeal, subject to any order of the Full Court.

Associate:    

Dated:    27 September 2024