Donut King Franchisee Fined $60,000

The Federal Magistrates Court recently fined Primrose Development Pty Ltd (“Primrose”), a Donut King franchisee, $60,000 for pressuring its employees into signing AWAs. There are lessons to be learnt from this decision, despite the fact that AWAs have now been abolished. In particular, this decision illustrates:

  • The attitude of the Courts towards prosecuting employers, both big and small, for breaching workplace laws
  • The need for employers to be very careful when imposing conditions on employees that could amount to coercion or duress

Primrose had held meetings with its employees in March 2007 for the purpose of encouraging them to sign an AWA. The proposed AWAs would have had the effect of displacing its employees’ award entitlements to penalty rates. Primrose admitted that during the course of these meetings it told employees that if the AWAs were not signed the employees would not get any further shifts, and that Primrose had a ‘stack of resumes’ at home of people who would be prepared to sign the AWA. An action was brought against Primrose by the Workplace Ombudsman (now the Fair Work Ombudsman). Primrose was ultimately found to have committed 29 individual breaches of the Workplace Relations Act 1996 (“Act”). Specifically, Primrose was guilty of:

  • Applying duress in connection with the offer of an AWA
  • Threatening to injure each of the affected employees in their employment for the reason that the employee was entitled to the benefit of an award
  • Threatening to alter the position of each of the affected employees to their prejudice for the reason that the employee was entitled to the benefit of an award

The Court stated that the following contradictory matters were of particular significant in determining the amount of the fine in these circumstances:

  • The employees were all young casual employees
  • The conduct engaged in by Primrose was contrary to the process of free and fair bargaining established by the Act
  • The conduct was engaged in by senior management
  • Primrose had cooperated fully with the investigation and had apologised for their conduct
  • Primrose did not have a history of breaching the Act
  • A large fine would negatively impact on Primrose’s business

While AWAs are no longer part of the legislative framework under the Fair Work Act 2009 (“FWA”), this decision remains relevant for two reasons.

First, this case establishes a precedent for courts to follow in cases where it is alleged that employees are unfairly using their strong bargaining position in negotiations with workers, and more broadly shows how the courts will calculate penalties to impose when it finds breaches of the FWA have occurred.

Secondly, this decision provides a clear illustration of the need for businesses to understand their obligations and responsibilities under industrial laws in general. To this end it is worth noting that:

  • The new “general protections” provisions in the FWA would provide employees with similar protection against the kind of conduct engaged in by Primrose
  • Employers who negotiate enterprise agreements are now obliged to provide employees with a “notice of employee representational rights” which informs employees of their right to appoint a bargaining agent no later than 14 days after bargaining for the agreement commences.

Author: Laughlin Nicholls