The Federal Circuit Court has fined an employer $27,000 for failing to pay workers their full entitlements when making them redundant from an immigration detention centre in 2016. The court found the situation presented a “real unfairness” given the difficulties that have arisen in locating and paying the money owed to redundant workers.

The main issue in proceedings was the proper construction of the relevant enterprise agreement which covered 300 to 400 staff employed at the Wickham Point detention centre near Darwin. The employer operated immigration detention centres in Australia and Christmas Island on behalf of the Commonwealth Government.

The enterprise agreement provided that employees covered by it were to be paid a remote district allowance. The remote district allowance had been paid to employees while on annual leave up until about June 2016.

On 7 June 2016, the employer was directed to close the Wickham Point facility which resulted in the termination of employees. The payments made to employees for accrued annual leave on termination did not include the remote district allowance.

The employer argued that on proper construction the enterprise agreement did not oblige it to pay the remote allowance and that previous payments of the allowance during periods of annual leave were gratuitous. The court found the employer’s argument about the construction of the enterprise agreement was not successful.

The court said, “whether the employer’s decision to apply its preferred construction of the enterprise agreement until the end of the employees’ employment was the result of cynicism or coincidence or some other factor is unknown”.

The court found “there was no evidence that in belatedly adopting a construction of the agreement that it had not previously adopted, one that was advantageous to it and disadvantageous to its employees, that the employer was deliberately avoiding any potential for inconvenient responses from a disgruntled workforce”.

Further the court found there was no evidence one way or another about the employer’s subjective beliefs or intentions about its decision not to pay the remote district allowance on termination.

Despite the lack of evidence of the employer’s subjective beliefs or intentions, the court found that it ought to have known that its conduct risked contravening the FW Act.

The court found the employer had contravened a provision of the National Employment Standards by failing to pay the remote district allowance to employees in accordance with the enterprise agreement as required by s.90(2) of the FW Act.

Real unfairness in providing redress

In determining the penalties, the court said it was satisfied that the employer was pursuing commercial purposes and ought to have known that acting on its construction of agreement risked being in contravention of the FW Act.

It further noted the employer had no prior contraventions and there was no evidence of “flagrant or wilful disregard for the enterprise agreement”.

However, the consequence of the employer not paying employees the remote district allowance on termination is the difficulty that arose in locating and paying the former employees who are owed money.

Neither party had current contact details for the 173 employees who have been underpaid, adding to the difficulty in providing redress.

The union proposed the money owed be deposited into the employees’ last known bank accounts along with a letter explaining the circumstances of the payment to their last known address to which the employer did not object. The court said whether this would result in employees being compensated is unknown.

In referring to the object of the Act the court said, “there is real unfairness resulting from the way that the employer conducted itself which requires both specific and general deterrence to discourage repetition of such conduct”.

The court imposed a penalty of 50% of the maximum penalty and made an order in relation to the payment and notification of the unpaid employees as proposed by the union.

Implications

It is important to consider the implications for adopting a construction of an enterprise agreement or other industrial instruments which varies from what has been or is being done in practice. This is particularly relevant when undergoing major change in the workplace and what effect more generous employment practices have on this process.

Although employers have the discretion to vary or amend some workplace arrangements from time to time, employers should be careful not to preclude any entitlement to employees in accordance with the National Employment Standards.

The decision reaffirms the statutory requirement that dismissed employees are entitled to have allowances, penalty rates, overtime and leave loading as part of their annual leave payout.

It is also a timely reminder to encourage employees to ensure their personal details are up to date including current phone and address details and emergency contacts and where possible request forwarding addresses for employees when exiting the workplace.

For advice on any of the themes or matters in this decision, contact a workplace relations consultant at your local AMMA office.