Could the High Court’s decision impact WHS sentencing?

WHO SHOULD READ THIS

• All Persons Conducting a Business or Undertaking, and their workers and officers.

THINGS YOU NEED TO KNOW

• The High Court has condoned a Judge’s order that his Union cannot pick up the bill for a penalty arising from a statutory breach.

WHAT YOU NEED TO DO

• Understand that as an individual you may be liable to personally pay penalties for breaches of the Fair Work Act 2009 (Cth) (FW Act), and potentially the Model Work Health and Safety laws.

The High Court has recently ordered that penalties for breaches of the FW Act must be paid personally by individuals, upholding a Federal Court Judge’s order that the Union must not pay the penalty on the individual’s behalf.

In this Focus, we consider whether or not such an order could be made against a ‘worker’ or an ‘officer’ under the Model Work Health and Safety laws, effectively preventing an employer or insurer from picking up the tab for a WHS fine.

Background

A majority of the High Court has held that where the Federal Court orders an individual to pay a pecuniary penalty under the FW Act, it may also order that the penalty be paid personally by the individual without indemnification from their employer or union.

The case arose after CFMEU official organised and participated in the obstruction of the entrance to a building site. The blockade, which resulted in the cancellation of work, was done in support of a demand by the CFMEU that a CFMEU delegate be appointed on the site.

The Australian Building and Construction Commissioner brought proceedings against the CFMEU and the official for contraventions of section 348 of the FW Act, which prohibits the coercion of a person to engage in industrial activity.

First Instance Decision

At first instance the CFMEU and the union official admitted the breaches, so that the question before the Federal Court was limited to the appropriate penalty.

The Federal Court imposed pecuniary penalties on both the CFMEU and the official. In considering the penalty to be imposed, Justice Mortimer considered the history of contraventions by the CFMEU and the official. Having regard to their prior conduct and the principal of general and specific deterrence, her Honour ordered the CFMEU to pay a pecuniary penalty of $60,000 and the official to pay a pecuniary penalty of $18,000, in addition to ordering that the CFMEU not directly or indirectly indemnify their official for the penalty. Her Honour said the non-indemnification order was appropriate because it would advance the purposes of deterrence by depriving the official of the ‘comfort and convenience’ of union money.

High Court Decision

In handing down its decision, the High Court examined the principal purpose of such penalties, including the issues of specific deterrence towards the contravener and a general deterrence towards other potential contraveners. On this basis, the Court held that the FW Act contained an implied power to ensure a contravener received the full ‘sting or burden’ of a penalty.

Potential impact on Work Health and Safety laws

This decision affirms that courts can impose orders on some individuals to pay fines personally, rather than have an employer pay the penalty on their behalf. The FW Act contains a broader sentencing power than the Model WHS Laws, nevertheless, there is some potential scope for such orders to be made against any party wishing to seek or accept indemnity from other sources.
In our view, the express power of the federal courts under the FW Act is broader than the powers for sentencing under the Model WHS Law. That said, the issues of general and specific deterrence are just as important, if not more important, in the context of breaches of the WHS Law, particularly where workers or other persons are killed or seriously injured.

Without an express power, it remains unclear as to whether a court would have the power to make a non-indemnification order where an individual engages in unlawful conduct exposing them to criminal penalties under the Model WHS Laws. However, the High Court’s decision, along with a general increase in penalties in all Australian jurisdictions for WHS breaches, could see Prosecutors and Regulators consider the appropriateness of non-indemnification orders.

If you would like further information on this matter please contact a member of the Employment Relations and Safety team. With the expansion of our Employment Relations and Safety practice into Sydney, we would like to introduce you to Partner Scarlet Reid and her specialist team, including Senior Associates Tom Reaburn and Nathan Roberts. Find out more about the Employment Relations and Safety team here.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.