When is a settlement fair and reasonable? (White v UGL)

Background

The applicant was employed by the respondent as a welder under an enterprise agreement. He was paid as a casual employee.

His rate of pay for ordinary hours was calculated based upon a rate specified in the enterprise agreement plus a 25% casual loading (loaded rate). The applicant was also paid for shift work and overtime.

Up until August 2016, the applicant was paid for shift work and overtime by applying the agreed penalties to the loaded rate. Around August 2016, the respondent ceased using the loaded rate as the basis for calculating payments for shift work and overtime for casual employees instead calculating based on the rate specified in the enterprise agreement, excluding the 25% casual loading.

The applicant commenced proceedings on his own and on behalf of other affected employees, alleging that the respondent contravened the?Fair Work Act 2009?(Cth) by failing to pay them in accordance with the enterprise agreement.

Following a mediation, the applicant and the respondent agreed upon the terms of a proposed settlement. The proposed terms involved the respondent paying $438,000 into a fund to be administered by the applicant’s lawyers for proportional distribution to the applicant and other group members who had not opted out.

There were 16 objections to the settlement. Of those, seven stated no basis for the objection. The remainder objected on the basis that they should receive 100% of their entitlements plus costs and interest but did not explain why a settlement at less than the full amount claimed was required in order for the settlement to be fair and reasonable.

Consideration

The Court was satisfied that the proposed settlement was fair and reasonable with two alterations:

• It is to be made clear that legal costs were not to exceed $110,000 inclusive of GST.
• It is to be made clear that the costs were to be allocated on a proportionate basis as between group members.

The court considered the settlement fair as:

• There was a real risk that the applicant would not have succeeded in their claim.
• The typical position in relation to legal costs of proceedings in which claims are brought under the?Fair Work Act 2009?(Cth) is that each party must bear its own costs.
• There was a risk that any further amount that might be recovered would be subsumed in the substantial legal fees to be incurred in the conduct of a contested hearing.
• There was no disparity between group members because the share of each group member had been calculated based upon the value of each individual claim.

Key Takeaways

When considering whether to approve a settlement of representative proceedings, a court will examine whether it is fair and reasonable even though the settlement may not be for the full amount claimed taking into account matters such as the applicants’ prospects of success and the legal costs to be incurred in proceeding to trial.

Read the full text of the Court’s judgment here:?White v UGL Operations and Maintenance Pty Ltd (No 2)?[2023] FCA 901

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