THE Federal Court of Australia recently dismissed the case of Fair Work Ombudsman v Transpetrol, an application by the Fair Work Ombudsman for civil pecuniary penalties regarding contravention of the Fair Work Act 2009 (Cth) by the employer of a foreign crew. However the case highlights the complexity and potentially serious implications of a contravention of the Fair Work Act 2009 (Cth) for employers of foreign crews engaged on vessels operating on the Australian coast pursuant to temporary licenses issued under Coastal Trading (Revitalising Australian Shipping) Act 2012 (Cth) (Coastal Trading Act), and the Fair Work Ombudsman’s intent to enforce strict compliance with employer’s payment obligations under the regime.

The facts
Transpetrol was the employer of an international crew on the Panamanian flagged tanker Turmoil which performed several Australian coastal voyages between 2013 and 2015 pursuant to temporary licences that were issued to its charterers. As a consequence, Transpetrol became liable to pay the crew additional wages in accordance with the Fair Work Act 2009. It was not disputed that Transpetrol did not have any knowledge of the existence of the temporary licences or its liability to pay higher wages pursuant to the Fair Work Act. Further, Transpetrol paid the crew wages that were higher than those required under the applicable collective bargaining and employment agreements and, in accordance with at least the minimum requirements of the Maritime Labour Convention. In addition, Transpetrol voluntarily “topped up” the payments to the crew “to ensure that all crew members received the same wage for same rank and work, regardless of the relevant national laws, that by applying a uniform wage scale”.

The total of the “top up” amount for the relevant voyages was $122,000. Nonetheless, the wages fell short of the amount that the crew were entitled to under the Fair Work Act. The Fair Work Ombudsman determined there had been an underpayment of $255,042 in respect of 10 voyages which did allow any credit for the “top up” amount of about $122,000. Transpetrol paid the crew $255,042 without admission of liability. Notwithstanding Transpetrol’s payment and full cooperation during the investigation, the Fair Work Ombudsman commenced proceedings against Transpetrol in the Federal Court for orders that it pay civil pecuniary penalties in the range of $81,680 to $93,840 for the contraventions pursuant to s 546(1) of the Fair Work Act.

In dismissing the proceeding against Transpetrol, his Honour Justice Rares found,

“In my opinion, the Ombudsman has not made good her claims for relief. Indeed, I think that she overreached in initially seeking total penalties in the range of $81,680 to $93,840 for the three contraventions. Nothing in the facts merited penalties being sought in such significant amounts”.

When does the Fair Work Act apply?
Notwithstanding that the Fair Work Act has applied to foreign crews employed on vessels operating under temporary licences since 21 August 2012 there remains a degree of uncertainty in the maritime community regarding at what point the crew’s entitlements are triggered and the matters that are to be taken into account when calculating the amount to paid to the crew. This was particularly the case for voyages performed between 2013 and 2015.  

One area that has been clarified by the Transpetrol decision concerns the payments that are to be taken account of when calculating any shortfall. In this regard, Justice Rares found

“… the gross total payment that Transpetrol made (before the Ombudsman’s investigation) to each crew member is the relevant one for the purposes of assessing its liabilities under the Fair Work Act”.

In other words, the “top up” amount of $122,000 should have been taken account of by the Fair Work Ombudsman and the refusal to do so resulted in an overpayment by Transpetrol to the crew of that amount. This was taken into account by Justice Rares in dismissing the proceeding:

“… Transpetrol paid the affected employees the full sum that the Ombudsman claimed that it had underpaid, which is about twice as much as I have found to have been due after allowing for the set off.  That overpayment is well in excess of the total amount of the civil pecuniary penalties that the Ombudsman now seeks or ever sought.”

Some guidance on the scope of application of the Fair Work Act payments may also be taken from his Honour’s finding that:

“Once Turmoil proceeded on a voyage authorised by a temporary licence [emphasis added], after having commenced at least two other voyages authorised by a temporary licence within 12 months beforehand, she was a “temporary licensed ship” within the meaning of reg 1.15B of the Fair Work Regulations. Accordingly, s 33(3) of the Fair Work Act and reg 1.15E(1)(c) of the Fair Work Regulations extended the operation of the Fair Work Act to her during the ten voyages.” 

This arguably adds support for the construction that the Fair Work Act only applies to the period that a foreign crewed vessel is actually performing a voyage under a temporary licence. It is to be noted that this approach has not always been accepted by the Fair Work Ombudsmen when calculating the Fair Work Act payment for foreign crews.

Prosecution of Transpetrol
Despite Transpetrol’s full cooperation during the Fair Work Ombudsman’s investigation, including rectifying the underpayment (which was subsequently found to be an overpayment), the Fair Work Ombudsman elected to issue proceedings against Transpetrol and sought the imposition of pecuniary penalties on the basis that it would operate as a general deterrent to other employers in the industry.

Justice Rares determined on the facts there wasn’t any “need for specific deterrence of Transpetrol” and in dismissing the proceeding, took account of the facts (i) there was no suggestion Transpetrol had acted deliberately or to make profits from the contravention; (ii) it had exceeded its wage obligations to its crew members under the laws of Panama, the Maritime Labour Convention, and the other relevant national laws of India and the Philippines; (iii) had no contractual entitlement to recoup from any sub-charterer (or, in particular, the holder of the relevant temporary licence) the liability to make payments to its employees under the Fair Work Act and; (iv) got no benefit at all from any contravention.

His Honour also noted that the effect of a vessel owner as the employer of a foreign crew becoming subject to the operation of the Fair Work Act and Fair Work Regulations as a consequence as being

 “… a highly unusual situation in international maritime law and not contemplated in the Maritime Labour Convention”.

Taking account of these facts, it is somewhat surprising that the Fair Work Ombudsman considered this to be an appropriate ‘test’ case in which to pursue pecuniary penalties.

Key lessons
Notwithstanding the outcome in the Transpetrol case, a lack of awareness of the scope of application of the Fair Work Act to voyages performed under temporary licences is now unlikely to amount to a mitigating factor in the event of a contravention. Further, the facts in the Transpetrol case are likely to be relatively unique and confined to the time when the voyages were performed. For example, apart from there being a greater awareness of the Fair Work Act regime in the international maritime sector generally, it has become commonplace for charter parties in respect of Australian coastal voyages to include clauses making the charterers responsible for obtaining temporary licences and reimbursing owners for any additional crew wages that become due under the Fair Work Act.

Nonetheless, the Transpetrol decision provides several valuable pointers including:

  • highlighting the Fair Work Ombudsman’s determination to ensure strict compliance by the employers of foreign crews engaged on vessels operating on the Australian coast pursuant to temporary licenses;
  • the absence of the mitigating factors that Transpetrol was able to establish seem likely to result in a successful prosecution by the Fair Work Ombudsman and the levying of a penalty on the contravening employer;
  • it is highly unlikely that ignorance of contraventions of the Fair Work Act will dissuade the Fair Work Ombudsman from prosecuting, nor is it now likely to be a mitigating factor of any substance;
  • the “gross total payment” for wages made by the employer of a foreign crew should be taken account of when calculating any underpayment under the Fair Work Act;
  • the period for which Fair Work Act payments apply is the period that a foreign crewed vessel is actually performing a voyage under a temporary licence; and
  • Marine Order 11, which gives effect to the Maritime Labour Convention in Australia, does not operate to create any wider or different obligations on the employer of a foreign crew than exist under the laws of the ship’s flag state or the Fair Work Act and Regulations.

* Brendan Milne is a partner at law firm HFW. Gavin Vallely is a partner at law firm HFW

This article appeared in the July 2019 edition of DCN Magazine