A brothel and its sole director have been ordered to pay a former receptionist compensation of just under $100,000 and penalties of over $75,000 after subjecting the receptionist to unlawful adverse action and failing to pay award entitlements. The Federal Circuit Court accepted that the brothel’s sole director was knowingly involved in the breaches and ordered that he be jointly and severally liable for the compensation awarded as well as personally responsible for part of the penalty.

In Rosa v Daily Planet Australia Pty Ltd, Ms Rosa was employed as a receptionist to work four regular shifts per week. She received an hourly rate of pay which exceeded the minimum award rate and was paid in cash for one of her weekly shifts. Ms Rosa did not receive paid personal or annual leave and was not able to take breaks during her shifts. After around 3 years of employment, Ms Rosa was directed to sign an employment contract which provided that she was a casual employee. When she challenged the proposed contract terms, her shifts were changed and she was subsequently told there was no more work for her because she didn’t have a manager’s licence. It was a requirement under the relevant legislation that the business be supervised by an approved manager at all times and Ms Rosa was only a few months away from being eligible to obtain a licence.

Ms Rosa commenced proceedings against the brothel and its sole director alleging that:

the employer took adverse action by threatening to change the terms of employment and by dismissing her when she complained about those threats;
the employer failed to pay award entitlements applicable to permanent part time employees, including paid personal leave, paid annual leave and overtime;
the employer did not allow Ms Rosa to take breaks required under the award;
the employer failed to pay superannuation in relation to the weekly shift that was paid in cash; and
the sole director was involved in the above breaches for the purposes of the Fair Work Act and therefore taken to have also contravened the Act.

The Court found for Ms Rosa on all counts noting that the employer’s evidence that it terminated Ms Rosa because she didn’t have a manager’s licence did not have the “ring of truth about it”. The Court accepted that the employer took unlawful adverse action against Ms Rosa when it threatened to alter her employment arrangements and by dismissing her from her employment.

When determining the quantum of compensation to be awarded, the Court considered an amount equal to 6 months’ wages was appropriate and not the 3 week statutory minimum argued for by the employer. The Court also awarded compensation for the unpaid award entitlements and a further $10,000 in damages for hurt, humiliation and distress.

On the question of penalties, the Court accepted that the award breaches were not significant but found that the adverse action was a “deliberate attempt to ensure that the employee did not retain her workplace rights. It was serious and aimed at exploiting the employee”. The judge also noted that the director’s presentation in the witness box led him “to have no confidence that his conduct would be any different in the future”, and that deterrence is an important consideration when determining penalties. The judge ordered that the employer pay $62,700 and the director pay $12,540 to Ms Rosa personally, rather than to consolidated revenue, in recognition of the costs she would have incurred during the trial. It is notable that penalties have increased since Ms Rosa was dismissed and if this case was heard today, the penalties ordered would be significantly more.

This case is another reminder to employers of the importance of award compliance, managing adverse action risks and the personal and business costs of getting it wrong. Employers should take care to regularly review their employment practices and seek advice as necessary in order to minimise those risks.

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