Federal Court of Australia

Independent Education Union of Australia v Corporation of the Roman Catholic Diocese of Toowoomba (No 2) [2025] FCA 310

ORDERS

THE COURT DECLARES THAT:

1.    The first respondent contravened s 50 of the Fair Work Act 2009 (Cth) by contravening clause 4.2.1 of The Catholic Employing Authorities Single Enterprise Collective Agreement - Diocesan Schools of Queensland 2019-2023 by failing to pay the second applicant, Michael Murtagh, by the end of the first pay period after 2 December 2020 being no later than 16 December 2020 for work performed by him on and after 1 July 2019 in the sum of $1,595.39 for salary arrears and $151.56 for superannuation on the salary.

2.    The second respondent, Downlands College, contravened s 50 of the Fair Work Act 2009 (Cth) by contravening clause 4.2.1 of The Catholic Employing Authorities Single Enterprise Collective Agreement – Religious Institutes Schools of Queensland 2019-2023 by failing to pay the third applicant, Francis O’Mara, by the end of the first pay period after 2 December 2020 being no later than 16 December 2020 for work performed by him on and after 1 July 2019 in the sum of $387.43 for salary arrears and $36.81 for superannuation on the salary.

THE COURT ORDERS THAT:

3.    There will be no pecuniary penalties imposed upon the respondents.

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

REASONS FOR JUDGMENT

RANGIAH J:

1    In this proceeding, the applicants alleged that the respondents contravened s 50 of the Fair Work Act 2009 (Cth) (the FWA) by failing to pay the second and third applicants’ wages and superannuation to which they were entitled under applicable enterprise agreements.

2    On 7 February 2023 in Independent Education Union of Australia v Corporation of the Roman Catholic Diocese of Toowoomba [2023] FCA 64, a judge of the Court dismissed the proceeding. The applicants appealed.

3    On 30 October 2023, the Full Court set aside the order dismissing the proceeding and made the following declaration in Murtagh v Corporation of the Roman Catholic Diocese of Toowoomba [2023] FCAFC 172:

(a)    On the true construction of the Fair Work Act 2009 (Cth) (FWA) and The Catholic Employing Authorities Single Enterprise Collective Agreement - Diocesan Schools of Queensland 2019-2023, the [second applicant] is entitled to be paid the following by the first respondent in respect of work performed by him on and after 1 July 2019:

(i)     salary arrears - $1,595.39; and

(ii)     superannuation contribution arrears - $151.56.

Total - $1,746.95.

(b)     On the true construction of the FWA and The Catholic Employing Authorities Single Enterprise Collective Agreement – Religious Institutes Schools of Queensland 2019-2023, the [third applicant] is entitled to be paid the following by the second respondent in respect of work performed by him on and after 1 July 2019:

(i)     salary arrears - $387.43; and

(ii)     superannuation contribution arrears - $36.81.

Total: $424.24.

4    The Full Court also ordered that the proceedings be remitted to the Court’s original jurisdiction for the purpose of hearing and determination of the applicants’ application.

5    The respondents then applied to the High Court for special leave to appeal from the orders of the Full Court, but special leave was refused on 7 March 2024.

6    In the meantime, the primary judge retired from the Court. In these circumstances, it has become necessary for me to determine what further relief ought to be granted. The applicants seek additional declaratory orders and also seek the imposition of pecuniary penalties.

7    I propose to summarise the factual background and the Full Court’s findings before turning to consider the parties’ submissions.

Factual background and findings

8    The summary that follows should be read in light of the reasons of the Full Court. I will generally adopt the abbreviations used in those reasons.

9    The second applicant, Mr Murtagh, was employed as a teacher by the first respondent, the Corporation of the Roman Catholic Diocese of Toowoomba (Toowoomba Catholic Education), until his resignation took effect on 6 December 2019.

10    On 2 December 2020, an enterprise agreement known as the Catholic Employing Authorities Single Enterprise Collective Agreement - Diocesan Schools of Queensland 2019-2023 (2019-2023 Diocesan Schools Agreement) came into operation. It is common ground that up to and including the date of effect of his resignation, Mr Murtagh was covered by the 2019-2023 Diocesan Schools Agreement.

11    The third applicant, Mr O’Mara, was employed as a teacher by the second respondent, Downlands College, until his resignation took effect on 31 December 2019.

12    On 2 December 2020, the Catholic Employing Authorities Single Enterprise Collective Agreement – Religious Institutes Schools of Queensland 2019-2023 (2019-2023 Religious Institutes Schools Agreement) enterprise agreement came into operation. It is common ground that, up to and including the date of effect of his resignation, Mr O’Mara was covered by the 2019-2023 Religious Institutes Schools Agreement.

13    The nominal expiry date of the predecessor enterprise agreements, the Catholic Employing Authorities Single Enterprise Collective Agreement-Diocesan Schools of Queensland 2015-2019 (previously applicable to Mr Murtagh) and the Catholic Employing Authorities Single Enterprise Collective Agreement – Religious Institutes Schools Queensland 2015-2019 (previously applicable to Mr O’Mara) was 30 June 2019.

14    The 2019-2023 Diocesan Schools Agreement and the 2019-2023 Religious Institutes Schools Agreement (together the Enterprise Agreements) provided for staged salary increases for teachers including an increase of, “2.5% of the applicable salary rate operative as of the first full pay period on or after 1 July 2019”. The Enterprise Agreements also specified that a “4 Year Trained teacher classified Proficient 8” was entitled to be paid an hourly rate of $66.0933 from 1 July 2019, that rate being inclusive of the 2.5% increase.

15    The Enterprise Agreements also required Toowoomba Catholic Education and Downlands College to make superannuation contributions to a superannuation fund for the benefit of an employee at a rate equal to 9.5% of an employee’s ordinary pay (the superannuation contribution).

16    The Enterprise Agreements each contained a commencement clause which provided that where the enterprise agreement, “specifies an earlier operative date in relation to a particular provision, then that provision shall operate from that date for all applicable employees employed at that earlier date” (emphasis added).

17    Toowoomba Catholic Education did not pay the 1 July 2019 salary increase (and therefore did not pay the increased superannuation contribution) to any of its teachers, including Mr Murtagh, who were employed as at 1 July 2019 but resigned before the respective Enterprise Agreements came into operation and were no longer working at another Diocesan school. Similarly, Downlands College did not pay such increases to such teachers who were no longer working at another religious school, including Mr O’Mara.

18    On 3 December 2020, the applicants instituted proceedings against Toowoomba Catholic Education and Downlands College. That was the day after the Enterprise Agreements came into operation.

19    The applicants contended that, on the true construction of the FWA and the commencement clauses in the Enterprise Agreements, Mr Murtagh and Mr O’Mara were entitled to the arrears which each claimed. Toowoomba Catholic Education and Downlands College contended that the Enterprise Agreements did not apply to employees who resigned before those agreements came into operation, having regard to ss 52 and 54 of the FWA.

20    At the relevant times, ss 51–54 of the FWA provided, relevantly:

51    The significance of an enterprise agreement applying to a person

(1)    An enterprise agreement does not impose obligations on a person, and a person does not contravene a term of an enterprise agreement, unless the agreement applies to the person.

(2)    An enterprise agreement does not give a person an entitlement unless the agreement applies to the person.

52    When an enterprise agreement applies to an employer, employee or employee organisation

When an enterprise agreement applies to an employee, employer or organisation

(1)     An enterprise agreement applies to an employee, employer or employee organisation if:

(a)     the agreement is in operation; and

(b)     the agreement covers the employee, employer or organisation; and

(c)     no other provision of this Act provides, or has the effect, that the agreement does not apply to the employee, employer or organisation.

…

53    When an enterprise agreement covers an employer, employee or employee organisation

Employees and employers

(1)    An enterprise agreement covers an employee or employer if the agreement is expressed to cover (however described) the employee or the employer.

…

Enterprise agreements that have ceased to operate

(5)    Despite subsections (1), (2) and (3), an enterprise agreement that has ceased to operate does not cover an employee, employer or employee organisation.

…

54    When an enterprise agreement is in operation

(1)    An enterprise agreement approved by the FWC operates from:

(a)    7 days after the agreement is approved; or

(b)    if a later day is specified in the agreement—that later day.

(2)    An enterprise agreement ceases to operate on the earlier of the following days:

(a)    the day on which a termination of the agreement comes into operation under section 224 or 227;

(b)    the day on which section 58 first has the effect that there is no employee to whom the agreement applies.

Note:     Section 58 deals with when an enterprise agreement ceases to apply to an employee.

(3)    An enterprise agreement that has ceased to operate can never operate again.

21    Section 58 relevantly provided:

58    Only one enterprise agreement can apply to an employee

Only one enterprise agreement can apply to an employee

(1)    Only one enterprise agreement can apply to an employee at a particular time.

General rule—later agreement does not apply until earlier agreement passes its nominal expiry date

(2)    If:

(a)    an enterprise agreement (the earlier agreement) applies to an employee in relation to particular employment; and

(b)    another enterprise agreement (the later agreement) that covers the employee in relation to the same employment comes into operation; and

(c)    subsection (3) (which deals with a single-enterprise agreement replacing a multi-enterprise agreement) does not apply;

then:

…

(e)    if the earlier agreement has passed its nominal expiry date—the earlier agreement ceases to apply to the employee when the later agreement comes into operation, and can never so apply again.

…

22    In the Full Court, Logan J (with whom Collier and Meagher JJ agreed) found that the predecessor enterprise agreements were “earlier agreements” within FWA s 58(2)(a) and that the 2019-2023 Diocesan Schools Agreement and the 2019-2023 Religious Institutes Schools Agreement were “later agreements” within s 58(2)(b). His Honour then held at [44]:

…In these circumstances, the effect of s 58(2)(e) is that, on 2 December 2020, the predecessor enterprise agreements forever ceased to have application. But, even before then, the 2019-2023 Diocesan Schools Agreement and the Religious Institutes Schools Agreement respectively covered Messrs Murtagh and O’Mara up to the times of their resignations. As soon as the 2019-2023 Diocesan Schools Agreement and the Religious Institutes Schools Agreement came into operation on 2 December 2020 following approval by the industrial commission, the whole of those enterprise agreements came into operation. Part of each whole was, in each enterprise agreement, a commencement date clause which provided for staged pay increases for “applicable employees” on and from 1 July 2019….

23    Justice Logan also held at [47] that, “it makes no sense to construe ‘applicable employee’ as meaning anything other than those employees covered by the agreement as at a given operative date, materially here 1 July 2019”.

24    The Full Court held at [49] that upon commencement of the Enterprise Agreements on 2 December 2020, Toowoomba Catholic Education and Downlands College came under an obligation to back pay Mr Murtagh and Mr O’Mara as they were “applicable employees” covered by the Enterprise Agreements and had performed work on and from 1 July 2019.

25    The applicants now seek the following orders:

(a)     Pursuant to s 545(1) of the FWA and s 21 of the FCAA, declarations of contravention by each of the Respondents.

(b)     An order pursuant to s 546(1) of the FWA that each Respondent pays a pecuniary penalty fixed in a sum in the order of 65% to 75% of the maximum.

(c)     An order pursuant to s 546(3) of the FWA that the pecuniary penalty ordered in each case be paid to the first applicant, Independent Education Union of Australia.

(d)     An order that the payment of pecuniary penalty be made within 28 days of the Court’s order.

Declaratory orders

26    The judgment of the Full Court makes it clear that Toowoomba Catholic Education and Downlands College contravened their respective Enterprise Agreement by failing to back pay Mr Murtagh and Mr O’Mara their salary and superannuation contribution entitlements. It follows that they also contravened s 50 of the FWA.

27    The parties propose that the Court make declarations of contraventions of s 50 of the FWA in terms of the draft orders provided to the Court.

28    In my opinion, such declaratory orders would serve to make clear that the respondents contravened s 50 of the FWA and the gravamen of their contraventions, and would also serve to vindicate the applicants’ claims of contravention: cf Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 at [93].

29    I consider it appropriate to make declarations substantially in the form agreed by the parties. It may be observed that the declarations are of a single contravention of s 50 of the FWA by each of Toowoomba Catholic Education and Downlands College.

30    The remaining issues concern whether any pecuniary penalty ought to be imposed and, if so, their quantification.

The applicants’ submissions on pecuniary penalty

31    The applicants contend that a penalty in the order of 65% to 75% of the maximum for each respondent is necessary, “to achieve the purpose of s 546 of the FWA to meet the public interest of deterrence of future contraventions of a like kind”.

32    The applicants submit that there is a public interest in ensuring that wages due are paid and that the, “undermining of protection of the remuneration attaching to the exertion of labour is to be abjured because it is inimical to the public interest”. The applicants submit that the contraventions were objectively serious and, that the respondents, “relied on an apostate approach to well-known principles of construction of industrial instruments and legislation”.

33    In addition, the applicants submit that Mr Murtagh and Mr O’Mara were vulnerable as they were, “no longer physically present at their schools to make their cases directly”, and employees chasing backpay under enterprise agreements are especially vulnerable with inevitable time lags between the nominal expiry date of one agreement and the coming into operation of the successor agreement. The applicants submit that the cumulative quantum of individual entitlements may be substantial and that the potential for mischief arises from the imbalance of resources because individual entitlements often are likely small, having regard to the commerciality of pursuing those entitlements.

34    The applicants submit that the need for specific and general deterrence calls for a significant penalty and point to following factors as relevant to the assessment of a penalty with the necessary deterrent character:

(a)    the contraventions were serious and the sums of money involved do not diminish their seriousness;

(b)    the respondents were not co-operative and instead prosecuted their argument to the point of applying for special leave to appeal;

(c)    the contraventions were deliberate, calculated, high-handed and there was no element of contrition;

(d)    the respondents were, “content to disregard the declarations made by the Full Court”, and took until 30 April 2024 for their solicitors to confirm that payment had been made;

(e)    the respondents are well-resourced employers who employ experienced and knowledgeable human resources practitioners;

(f)    there is no principle that refusing to pay entitlements based on a genuine and bona fide belief of an arguable case about the meaning of a clause or legislation is a different category calling for exceptionalism in the penalty process;

(g)    the respondents, “went about making their point in an unsatisfactory way”, did not contact the applicants to advise them of their decision not to pay the entitlements, and, “forced the applicants to embark on this litigation purely to save the money of paying their employee entitlements”;

(h)    the Queensland Catholic education sector is sizable, embracing over 21,000 employees, including around 2000 employed by the respondents, and many individual employees might never have been aware of any underpayments;

(i)    former employees do not have the considerable resources to challenge a decision not to pass on backpay and would not do so on a rational cost-benefit assessment;

(j)    the respondents’ strategy was pursued for their “industrial and financial advantage” and, “based upon what was found to be flawed argument on the law and one that departed from, without warning, the interpretation that had been followed for some time previously”; and

(k)    the litigation came at a great cost to the Union and has impacted Mr Murtagh and Mr O’Mara by negatively affecting their attitude, relationship and connection to their school communities.

The respondents’ submissions on pecuniary penalty

35    The respondents contend that no pecuniary penalty should be imposed as the contraventions resulted from a genuine and reasonable but mistaken interpretation of law, such that there is no need for deterrence.

36    The respondents rely on Australian Rail, Tram and Bus Industry Union v Qube Logistics (Rail) Pty Ltd (2020) 300 IR 198; [2020] FCA 1520, where Flick J held at [50]:

But no order should be made for the imposition of any penalty. The competing constructions of cl 5 have not proved easy of resolution. The Union has advanced no submission nor adduced any evidence to suggest that Qube Rail pursued the course which it did without a genuine and bona fide belief that it was entitled to do so. In those cases, such as the present, where no question arises as to the need for general deterrence, let alone specific deterrence, an imposition of a penalty is not always required: cf. PIA Mortgage Services Pty Ltd v King (2020) 274 FCR 225; 292 IR 317 at [55] per Rangiah and Charlesworth JJ. The contraventions that did occur in the present case, as their Honours observed in that case, were “not deliberate, but result[ed] from an arguable but erroneous misconstruction of an industrial instrument …”.

37    The respondents also rely on National Tertiary Education Industry Union v University of Sydney (Relief) [2023] FCA 537, where Thawley J held at [49]–[50]:

Professor Garton acted at all times with balance, integrity and decency. He did not wilfully disregard any term of the enterprise agreements or any relevant policy. There was no element of blameworthy conduct of any description in connection with the contraventions. Professor Garton had defended Dr Anderson in the past and, as his evidence at trial made clear, plainly had the intellectual freedom of the University’s academics at the forefront of his concerns. It is true that, applying the reasoning of the Full Court in the Appeal Judgment, his actions were held in the Contravention Judgment to involve contraventions of the FW Act. The reasoning of the Full Court was not the only analysis reasonably open. The unlawful conduct arose out of an arguable but erroneous understanding of the rights and obligations under the relevant agreements and there was no flagrant or wilful disregard for the agreements…There is no sound basis for the imposition of a penalty on Professor Garton for reasons of specific deterrence.

Nor would the imposition of a financial penalty on Professor Garton further general deterrence. People in roles analogous to that which Professor Garton performed in this case, who conduct themselves reasonably, honestly and with integrity and who take proper account of the enterprise agreement but are reasonably mistaken about its operation, do not need deterrence.

38    In respect of the nature of the contraventions, the respondents submit that:

(a)    the respondents did not pay the entitlements because they held a genuine and bona fide belief that they were not owing;

(b)    the respondents’ conduct was not deliberate or high-handed and it cannot be said that the respondents knew, reasonably ought to have known, or were reckless in not accurately predicting what the ultimate finding would be;

(c)    the allegation that the respondents did not advise the applicants that they had decided not to pay the entitlements is unfounded as it assumes that the respondents believed that there was an entitlement, it is not common practice for employers to contact former employees about the non-existence of what is believed to be a non-entitlement, the respondents were in open and frank communications with the Union, and the proceeding was commenced before the entitlements were due;

(d)    the applicants were not vulnerable employees – they were English-speaking union members aware of their rights and entitlements;

(e)    the respondents are not responsible for what the Union considers to be a worthwhile use of its funds and should not be criticised for contesting the matter when the applicants’ success was not inevitable or certain;

(f)    the applicants suffered no harm from the delay in payment;

(g)    the applicants’ emphasis upon a purported departure from past practice is misplaced;

(h)    the respondents defended the proceeding because they reasonably believed that they were correct, not to embark on some cynical attempt to delay the inevitable payment of $2,171.19.

39    The respondents submit that, while they did not admit the contraventions, they co-operated to the greatest extent possible by proposing a statement of agreed facts and a question in case, avoiding the need for affidavits or an evidentiary hearing. They also point to the fact that payments were made to Mr Murtagh and Mr O’Mara in January 2024 and the timing of the payments was not contrary to any orders of the Court.

40    The respondents state that for Downlands College, 71 affected employees were identified, and rectification has occurred. For Toowoomba Catholic Education, the process was more intensive, involving 245 employees and requiring the engagement of an external accounting firm, with a completion date of the last week of July 2024. The Enterprise Agreements have been amended such that the issue will not arise again.

41    The respondents submit that the circumstances of the case are such that deterrence is not a concern. They submit that the size of an organisation is only relevant if a penalty is deemed necessary to deter future contraventions and the significance is the available assets of the enterprise, not the number of staff. The respondents state that they employed approximately 1471 and 207 persons each and employee numbers are not a reliable measure of wealth. In addition, the respondents have been in operation for nearly 100 years and do not have any prior contraventions of the FWA.

Assessment of any pecuniary penalty

42    Under s 546 of the FWA, the Court may order that a person pay a pecuniary penalty that the Court considers is appropriate if the Court is satisfied that the person has contravened a civil remedy provision. The Court has a discretion both as to whether to order a contravener to pay a pecuniary penalty and as to the amount of any penalty: PIA Mortgage Services Pty Ltd v King [2020] FCAFC 15 at [54].

43    The maximum penalty for a contravention of s 50 of the FWA is 60 penalty units for an individual and 300 penalty units for a body corporate: ss 539 and 546(2) of the FWA. At the time of the contraventions, a penalty unit was $222: s 12 of the FWA and s 4AA of the Crimes Act 1914 (Cth), as adjusted by the Notice of Indexation of Penalty Unit Amount dated 14 May 2020.

44    As there was only a single contravention by each respondent, the maximum penalty which can be imposed on each respondent is $66,600.

45    The applicants contend that a penalty in the order of 65% to 75% of the maximum, or $43,290 to $49,950, should be imposed on each respondent. The respondents contend that no penalty should be imposed. The parties are agreed that any pecuniary penalty should be paid to the Union.

46    The question of whether any penalty should be imposed must be informed by the purpose of a pecuniary penalty.

47    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].

48    What is required is, “some reasonable relationship between the theoretical maximum and the final penalty imposed”: Pattinson at [10]. That relationship is established where the penalty does not exceed what is reasonably necessary to achieve deterrence of future contraventions of a like kind by the contravener and others: see Pattinson at [10]. A penalty must be “proportionate”, in the sense that it, “strikes a reasonable balance between deterrence and oppressive severity”: Pattinson at [41].

49    General deterrence must serve a purpose such that the penalty is not seen by others as just, “the cost of doing business”: Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 at [27]. Specific deterrence is directed to ensuring that a contravener is sufficiently discouraged from embarking upon engaging in the same kind of contravening conduct in the future: Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 at [50].

50    In Trade Practices Commission v CSR Ltd (1991) ATPR 41-076; [1990] FCA 521 at [42], French J listed the following factors which may inform assessment of the appropriate penalty:

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.

51    A similar list was set out in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 246 ALR 35; [2008] FCAFC 8 at [89]. Such lists are not a rigid or exhaustive catalogue: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith at [91].

52    The considerations listed in these cases are relevant, not only to the quantum of a pecuniary penalty, but also to the question of whether any pecuniary penalty ought to be imposed.

Was the respondents’ approach reasonable?

53    In the course of argument, it became clear that a central matter in dispute was whether it was reasonable for the respondents to dispute their liability to pay Mr Murtagh and Mr O’Mara the relevant entitlements under the Enterprise Agreements.

54    The applicants submit that it was unreasonable for the respondents to have taken and defended their view that there was no obligation to back pay employees who were not employed at the time the Enterprise Agreements commenced.

55    In respect of Toowoomba Catholic Education, the applicants referred to an affidavit of Patrick Coughlan, the Executive Director of Catholic Schools at the Diocese of Toowoomba Catholic Schools Office. Dr Coughlan deposed that in June 2020, he received advice from the Queensland Catholic Education Commission that former employees who were not employed at the time the Enterprise Agreements came into effect were not entitled to back pay. Dr Coughlan stated that he genuinely believed this advice to be correct and determined that, while there had been a custom to back pay employees who were no longer covered by a collective agreement, Toowoomba Catholic Education should cease that practice.

56    The applicants submit that it was unreasonable for Dr Coughlan to rely on advice of a workplace relations manager that had, “no detail or explanation…to put the applicants in the position that the only way that was available to them to deal with that stance was to bring these proceedings”. The applicants assert that Toowoomba Catholic Education did not obtain legal advice until after the proceeding commenced, and by that time, the parties were “locked in a dispute”.

57    The email dated 19 June 2020 containing the advice of the workplace relations manager of the Queensland Catholic Education Commission stated, relevantly:

My view is that there is no legal obligation to backpay former employees (ie. Those who are not employed at the time the EA comes into operation, which is 7 days after FWC approval).

This view takes into account ss 51, 52 and 54 of the Fair Work Act and clause 1.2.3 of the proposed EA.

Employers are welcome to seek their own legal advice if they wish. One employer has done so, which confirmed the above view.

58    The applicants submit that the advice did not, “provide an intellectual basis for taking a stance to contradict entitlements claimed by employees”, which had historically been paid.

59    In respect of Downlands College, the applicants referred to an affidavit sworn by Stephen Koch, the Principal, on 17 June 2024. Mr Koch deposes that on 17 November 2020, he received a letter of demand from the third respondent (the Union) asserting that Mr O'Mara was owed back pay pursuant to the 2019-2023 Religious Institutes Schools Agreement. Mr Koch spoke to the Director of Human Resources at the Diocese of Toowoomba Catholic Schools Office, who advised him of advice received from the Queensland Catholic Education Commission that former employees not employed at the time the Enterprise Agreements commenced were not entitled to be back paid. Mr Koch states that he formed the genuine and honest belief that employees not employed at the time the Enterprise Agreements commenced were not entitled to back pay as they would not be “applicable employees”. On 24 November 2024, Mr Koch caused a letter to be sent informing the Union that the back payment would not be made.

60    The applicants also refer to an email sent by Mr Koch to Mr O’Mara on 24 August 2024 advising him that:

There is no entitlement under the Fair Work Act 2009 for an individual, whose employment concluded prior to the approval of a new enterprise bargaining agreement, to receive payment under the new enterprise agreement.

I note that EB9 is yet to be approved by the Fair Work Commission. As your employment ended on 31 December 2019, there is no eligibility for back payment.

61    The applicants do not contend that Mr Koch’s belief as to the back payment of employees was not genuinely held, but say that it is “curious” that Mr Koch’s genuine belief arose after his conversation with the Director of Human Resources in December 2020. The applicants submit that Mr Koch must be taken to have “exercised no analysis” in forming his view that relevant entitlements were not required to be back paid to former employees who were no longer employed at the time Enterprise Agreements came into effect.

62    Neither Dr Coughlan nor Mr Koch were cross-examined. I accept their evidence. I accept that, with the benefit of the advice from the workplace relations manager of the Queensland Catholic Education Commission and the assurance that one employer had sought legal advice which confirmed the manager’s view, each of Dr Coughlan and Mr Koch had a genuine belief that there was no obligation to back pay employees who were not employed at the time the Enterprise Agreements commenced. I also consider that it was reasonable for them to rely on the manager’s view, as: he was in a senior position; his advice concerned the interpretation of the Enterprise Agreements, an area in which he could be expected to have experience and expertise; and his advice was apparently supported by legal advice. I also observe that the manager’s view was itself reasonable for reasons that I will discuss later.

63    The applicants also contend that the respondents acted unreasonably by “forcing” the employees and the Union to litigate. The applicants submit that the respondents ought to have, for example, sought a declaration as to the proper construction of the relevant clauses or engaged the dispute resolution process under the enterprise agreement or another process.

64    It may be noted, however, that there may have been an argument as to whether the applicants, who were no longer employees at the time the dispute arose, would have access to the relevant dispute resolution provisions. In addition, the applicants commenced the proceeding on 3 December 2020, a day after the commencement of the Enterprise Agreements and before any back payment under those agreements was due. The applicants evidently commenced their litigation because they were aware that there was a dispute as to whether any amounts were payable to Mr Murtagh and Mr O’Mara. In circumstances where the applicants had already commenced the present proceedings, there was no need for the respondents to commence proceedings to seek a declaration as to the proper construction of the relevant clauses.

65    The applicants further contend that the respondents acted unreasonably by prosecuting their case as their argument was an “adventurous test case”, based on “really unsatisfactory and thin analysis”, and while the primary judge accepted their argument at first instance, that should not point to the reasonableness of their argument, as the judgment was later set aside by the Full Court. The applicants seem to suggest – but do not go so far as to submit – that the judgment of the primary judge was unreasonable.

66    In response to the applicants’ contentions, the respondents submit that their position on liability involved issues about the proper construction of various provisions of the FWA and the interpretation of the term “applicable employees” in the Enterprise Agreements. The respondents submit that their position had been shared by various commissioners of the Fair Work Commission (in Vendrig v Ausgrid Pty Ltd [2012] FWCFB 370, Australian Workers’ Union v TAD Pty Ltd [2016] FWC 1794 and Battye v John Holland Pty Ltd [2019] FWCFB 8678), as well as the primary judge. Further, the Full Court did not find that the applicants’ position was flawed or idiosyncratic, nor that the primary judgment should be set aside on the basis that it was unreasonable. Rather, the Full Court noted that the provisions were ambiguous and ultimately disagreed with the conclusion reached by the primary judge.

67    Relevantly, the Full Court stated at [18] that:

Behind these relatively modest amounts of alleged arrears lurks an industrial law issue concerning entitlement, if any, to back pay after enterprise agreements come into operation of considerable systemic importance and related difficulty. The observation (at [58]) of the learned primary judge that the provision in each commencement clause for earlier operation “could have been more clearly expressed” is, with respect, accurate and a model of understatement. Indeed, as will be seen, that observation is just as applicable to ss 51 – 54 of the FWA, which concern the application and coverage of an enterprise agreement and when such an agreement comes into operation.

68    While the applicants did not submit that the primary judgment was unreasonable, their inability to make that submission also reveals a central deficiency in their argument. That the respondents’ position was accepted at first instance cannot be ignored as a matter going to the reasonableness of their position. The acceptance of the argument at first instance by a judge of this Court, of which no criticism as to reasonableness was made by the Full Court, indicates that the respondents’ position was reasonably open. The dispute was a genuine contest about the proper construction of the commencement clauses and the relevant provisions of the FWA. The respondent’s position was not unreasonable.

Nature and circumstances of the contravening conduct

69    The applicants’ contention that the respondents’ conduct was “deliberate” and “calculated” is simply not borne out on the evidence before me. The respondents did not deliberately contravene the Enterprise Agreements. Their conduct arose out of a reasonable, but ultimately erroneous, construction of the FWA and the Enterprise Agreements.

70    The respondents’ approach to dealing with the disputed construction of the Enterprise Agreements cannot be described as “high-handed”, “unreasonable” or a strategy that was, “pursued for [their] industrial and financial advantage”, against vulnerable former employees. The affidavit of Paul Giles, the Assistant Secretary/Treasurer of the Union indicates that parties began exchanging correspondence about the issue of back pay for former employees in August 2020, setting out their respective positions. The parties continued to exchange correspondence and on 2 December 2020, the Enterprise Agreements came into operation. On the following day, the applicants commenced the proceeding against the respondents. In defending the proceeding, the respondents acted honestly and in accordance with their genuinely held view that they did not have any obligation to back pay the applicants.

71    It may also be observed that the issue of construction was contributed to by the Union. The Union took part in the negotiation of the relevant clauses of the Enterprise Agreements, the drafting of which was criticised by the Full Court for its lack of clarity. Accordingly, the ensuing dispute cannot be attributed solely to the respondents.

Amount of loss or damage caused

72    The contraventions concerned sums of $1,746.95 in respect of Mr Murtagh and $424.24 in respect of Mr O’Mara, for work performed on and from 1 July 2019, up until their resignations in December 2019. The back payment was due to be paid about a year later, on or before 16 December 2020, as part of the first payment cycle following the commencement of the Enterprise Agreements on 2 December 2020.

73    The amounts of back pay owed to the applicants are relatively small, in the sense that their non-payment would, ordinarily, be unlikely to be productive of financial distress. The affidavits affirmed by Mr Murtagh and Mr O’Mara do not cite any financial hardship caused by the contravening conduct, and instead describe feelings of disillusionment and disappointment resulting from the dispute generally. Mr O’Mara also describes the amount owed to him as a “very small amount of money”.

74    The applicants submit that the Court should take into account, “the impact on 314 other employees, a total underpayment likely over quarter of $1 million”. This is said to be a matter relevant to the seriousness of the contravening conduct. The applicant submits that the discretion under s 546(1) is effectively “at large”, subject to the general objects of the FWA and the maximum penalties prescribed, and that imposing a penalty for contravening conduct requires consideration of, “all factors that can rationally go to its gravity and seriousness, bearing in mind that the object of the imposition is deterrence”: Pattinson v Australian Building and Construction Commissioner (2020) 282 FCR 580 at [191].

75    The applicant refers to several authorities in support of their assertion that, “the courts have routinely treated contravening conduct not pleaded as relevant to penalty”. The applicant relies upon examples including: taking account of ten previous settled complaints to the Fair Work Ombudsman over a six-year period: Fair Work Ombudsman v Cuts Only The Original Barber Pty Ltd [2014] FCCA 2381 at [158], [174]; and evidence of prior admitted contraventions resulting in an enforceable undertaking: Fair Work Ombudsman v 85 Degrees Coffee Australia Pty Ltd [2024] FCA 576. These are examples of the Court taking into account prior conduct in the context of considering the need for specific deterrence. They are not cases that support the applicants’ submission, which is that the seriousness of the respondents’ contraventions should be judged by reference, not only to the amounts involved in the pleaded contraventions, but also the amounts involved in other alleged contraventions that were not the subject of the proceeding.

76    The applicant also relies on Australasian Meat Industry Employees Union v Dick Stone Pty Ltd (No 2) [2022] FCA 1263, where Katzman J stated at [47]:

Moreover, the conduct relates to one employee only and the extent of his financial loss is limited to the amount he has now been paid. Still, the evidence indicates that some of the contravening conduct was not confined to Mr Boateng but applied to production workers in general.

77    The observations made by Katzmann J were in the context of considering the seriousness of the contravening conduct. However, her Honour went on to say at [55], “I also take into account in [the respondent’s] favour that the conduct in question only concerns one employee”. Accordingly, it does not appear that her Honour ultimately regarded the conduct in respect of the one employee as being more serious because similar conduct also occurred in respect of other employees.

78    In my view, the contraventions against Mr Murtagh and Mr O’Mara cannot be regarded as more serious on the basis that there were other asserted contraventions against other persons that were not the subject of the proceeding. It would have been open to the third respondent to plead that the respondents committed contraventions of s 50 of the FWA in respect of the other 312 employees it claims were also the subject of contraventions of the Enterprise Agreements. But the third respondent did not take that course. That there may have been other contraventions involving other employees cannot affect the seriousness of the contraventions that were pleaded and proved in the present case.

79    Even if it were open to take into account conduct in respect of other employees when assessing the seriousness of the respondent’s conduct against Mr Murtagh and Mr O’Mara, it would be procedurally unfair to penalise the respondents on the basis of allegations of contraventions that were never pleaded in the liability phase of the proceeding.

80    Further, even if I were to take into account the total amount of back pay that was not paid to other employees, it would not make any difference to my decision. That is because there was a single error of construction which led to consequences for a number of employees. I would not regard the present contraventions as being more serious on that account.

Prior contraventions, co-operation and rectification

81    The respondents have each been operating for nearly 100 years and neither have had any prior contraventions of the FWA.

82    The respondents co-operated with the applicants in the conduct of the proceeding at first instance, including by proposing a statement of agreed facts and the hearing of a separate question, thereby limiting the scope of the hearing.

83    Dr Coughlan and Mr Koch have expressed regret over any hardship experienced by former staff arising out of the dispute process. The respondents paid the applicants in January 2024, two or three months after the Full Court delivered its judgment on 30 October 2023. I do not consider that the delay in payment has been demonstrated to indicate an absence of contrition.

84    There have been two subsequent enterprise agreements entered by the respondents. Those new enterprise agreements contain clauses which clarify that former employees who are not employed at the time the agreements commence are not entitled to back payments. Accordingly, the same contraventions will not recur.

Any need for deterrence?

85    In cases where the contravening conduct arises out of an arguable but erroneous construction of an enterprise agreement, a need for deterrence may not necessarily arise. In Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Telstra Corporation Ltd [2007] FCA 1607, Gordon J observed at [18]:

…the breaches arose out of a disputed and disputable construction of the 2005 Enterprise Agreement and the TRA. Neither breach was flagrant, wilful or deliberate. Amendments to the WR Act increasing the penalty for breaches of industrial instruments arising out of unlawful industrial conduct indicate a legislative desire to deter and discourage such conduct. These changes in industrial law have led to general deterrence being referred to as the “most significant factor” in determining the applicable penalty: see Finance Sector Union v Commonwealth Bank of Australia (2005) 224 ALR 467 at [60], [72]. Where the unlawful conduct arises out of an arguable but erroneous construction of a relevant term, and the subsequent breach cannot be characterised as demonstrating a flagrant or wilful disregard for the agreement, this legislative purpose is not furthered by imposition of a penalty….

86    While an arguable but erroneous construction is a powerful factor favouring the exercise of the discretion to decline to impose any penalty, or to limit the amount of any penalty imposed, each case must turn upon its own circumstances: Construction, Forestry, Mining and Energy Union v Hail Creek Coal Pty Ltd (No 2) [2018] FCA 480 at [15].

87    In the present case, the contravening conduct arose out of an honest and reasonable but erroneous view about the interpretation of the commencement clauses and the relevant provisions of the FWA. The reasonableness of their interpretation was demonstrated by their success before the primary judge and the Full Court’s criticism of the lack of clarity of the relevant clauses. That lack of clarity was not entirely the fault of the respondents since the drafting was agreed to by the Union.

88    There was no realistic prior opportunity for the respondents to seek a declaration from the Court because the Union commenced proceedings immediately after the Enterprise Agreements commenced operation. The respondents had legal advice supporting their construction. The amounts of money involved in the contraventions were not such as to create financial distress or hardship. The contraventions will not recur and the respondents have expressed their regret.

89    In these circumstances, there is no need for deterrence and imposition of a penalty is not warranted.

Conclusion

90    I am satisfied that it is appropriate to grant the declaratory relief substantially in the terms agreed by the parties.

91    I am satisfied that no pecuniary penalty should be imposed on the respondents.

Associate:    

Dated:    7 April 2025