Sometimes Settling Early is the Best Course

Cai v Tiy Loy & Co Ltd (No. 3) [2016] FCCA 675 (31 March 2016)

If ever the adage ‘a bird in the hand is worth two in the bush’ had any resonance, it would be with a case where an employer rebuffed an offer to settle and the court hit him with over five times the amount in compensation and penalties.

The employee had brought various underpayment, non-payment and adverse action claims against his employer, primarily based on overtime, weekend penalties and then shifting the employee from full time to part time, almost certainly because of a workers’ compensation claim.

As the matter progressed, it became clear that it was complex and would be costly for the employee to prosecute. So he made an offer to settle all his outstanding matters. The employer rejected it, twice.

As the case progressed further, the court found multiple breaches of the awards that had applied to the employee going back to 2007, through to 2012. Once these breaches were identified, the court assessed the interest damages as well (which were set at $35.81 per day), which added significantly to the overall burden imposed on the employer.

The total compensation for underpayment and non-payment, including interest, came to $415,000. The court also applied pecuniary penalties amounting to nearly $50,000 which were to be paid to the applicant, bringing the total bill to around $460,000. The employee had offered the employer the opportunity to settle everything for $90,000.

The case is a spectacular demonstration of the risks involved in court cases. The employer avoided paying the employee’s costs (despite the rejection of what turned out to be a very reasonable offer to settle), but of course had to face its own costs. Negotiation will almost always trump litigation, and cutting a deal a lot sooner would have been in this employer’s best interests.