Bone v Mini Majhel Pty Ltd and Anor (No.2)
[2020] FCCA 2603
•16 September 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BONE v MINI MAJHEL PTY LTD & ANOR (No.2) | [2020] FCCA 2603 |
| Catchwords: INDUSTRIAL LAW – Appropriate civil penalties to be paid by the Respondents pursuant to section 546 of the Fair Work Act 2009 (Cth). |
| Legislation: Crimes Act1914 (Cth), s.4AA Fair Work Act 2009 (Cth), ss.12, 44(1), 45, 535, 545, 546, 550, 557 Fair Work Regulations 2009 (Cth), r.3.42 |
| Cases cited: Bone v Mini Majhel Pty Ltd & Anor [2020] FCCA 1483 Fair Work Ombudsman v NoBrace Centre Pty Ltd (In Liquidation) (ACN 121 556 447) & Ors (No.2) [2019] FCCA 2970 National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] FCA 451 Re Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 |
| Applicant: | BENJAMIN WILLIAM BONE |
| First Respondent: | MINI MAJHEL PTY LTD |
| Second Respondent: | HARPREET SINGH |
| File Number: | SYG 1652 of 2019 |
| Judgment of: | Judge Tonkin |
| Hearing date: | 11 June 2020 |
| Date of Last Submission: | 25 June 2020 |
| Delivered at: | Brisbane |
| Delivered on: | 16 September 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr Ford |
| Solicitors for the Applicant: | Mills Oakley Lawyers |
| No appearance by the First Respondent |
| No appearance by the Second Respondent |
ORDERS
Pursuant to section 546 of the Fair Work Act 2009 (Cth) within 42 days the First Respondent shall pay a pecuniary penalty of $70,200 for contraventions set out in the declarations made on 11 June 2020.
Pursuant to section 546 of the Fair Work Act 2009 (Cth) within 42 days the Second Respondent shall pay a penalty of $14,040 for contraventions set out in the declarations made on 11 June 2020.
Any amount paid personally by the Second Respondent in respect of the liability for the penalty of the First Respondent under Order (1) hereof is to be credited against the Second Respondent’s liability in Order 2.
Pursuant to subsections 546 (3) of the Fair Work Act 2009 (Cth) with respect to the penalties referred to in Orders (1) and (2) an amount of $39,376.82 shall be paid by the Respondents directly to the applicant with the remaining balance to be paid to the Consolidated Revenue Fund of the Commonwealth within 42 days of the date of this order.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
SYG 1652 of 2019
| BENJAMIN WILLIAM BONE |
Applicant
And
| MINI MAJHEL PTY LTD |
First Respondent
| HARPREET SINGH |
Second Respondent
REASONS FOR JUDGMENT
Introduction
In Bone v Mini Majhel Pty Ltd & Anor [2020] FCCA 1483 I delivered default judgment on 11 June 2020 and made declarations and orders for compensation with respect to contraventions of the Fair Work Act 2009 (Cth) (“the FW Act”) by the First and Second Respondents during the period the Applicant Mr Bone was employed as an apprentice hairdresser by the First Respondent.
I determined that Mini Majhel Pty Ltd (“Mini Majhel”) contravened the FW Act in failing to pay minimum rates, penalty rates and make superannuation contributions in accordance with the Hair and Beauty Industry Award 2010 (“the Award”), failing to pay untaken annual leave and failing to provide a Fair Work Information Statement as required under the FW Act. In addition Mini Majhel contravened the FW Act by failing to make available requested employee records for inspection and within the time frame prescribed by regulation 3.42 of the Fair Work Regulations 2009 (“the FW Regs”).
Further I made a declaration that the Second Respondent Mrs Harpreet Singh was involved in those contraventions pursuant to section 550 of the FW Act. I ordered that pursuant to section 545 of the FW Act Mini Majhel pay compensation to Mr Bone in the amount of $49,502.14 within 28 days and $1403 in lieu of interest within 28 days.
As neither Respondent participated in the proceedings I ordered that the parties file written submissions on the issue of pecuniary penalties.
Evidence and submissions
The Applicant relied on the affidavits of Belle Sakrzewski-Hetherington affirmed 22 June 2020 and 25 June 2020, the affidavit of Anna Minh Phi sworn 25 June 2020 and paragraph 16 of the affidavit of Mrs Harpreet Singh sworn 22 November 2019, paragraph 18 of her affidavit sworn on 13 December 2019 and written submissions filed on 25 June 2020.
I am satisfied that pursuant to orders made on 11 June 2020 the First[1] and Second[2] Respondents have been served with my judgment and orders dated 11 June 2020. At the date of this judgment the First Respondent has failed to comply with the orders for payment of compensation[3] and the Respondents have taken no further part in these proceedings.
[1] Affidavit of Anna Minh Phi sworn 25 June 2020 deposed that a copy of the Judgment and Orders was served on the First Respondent by delivering the documents to the registered office and principal place of business of the First Respondent on 12 June 2020
[2] Affidavit of service filed by Belle Sakrzewski-Hetherington on 25 June 2020 deposed to the Second Respondent being served with the Judgment and Orders on 22 June 2020
[3] Affidavit filed by Belle Sakrzewski-Hetherington on 25 June 2020 at [4]
Approach to penalty
Civil remedies may be sought in relation to a contravention of a civil remedy provision. The FW Act sets out the maximum penalties that may be imposed by the Court for each contravention.[4] Section 12 of the FW Act provides that “penalty unit” has the same meaning as section 4AA of the Crimes Act1914 (Cth).
[4] Section 546(2) of the FW Act limits the maximum penalty amounts to the penalty units referred to in section 539(2), and provides that the maximum penalty payable by a body corporate will be five times the number of penalty units prescribed for an individual.
Maximum penalty
The issue of penalty was not argued before me save it was addressed by Counsel in written submissions. I do not accept that the submission on the quantum of penalty is accurate. In Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No 2) Buchanan J rejected the submission that the penalties imposed on one or other of the two respondents should be reduced to account for the connection between the actions of the two respondents. His Honour held at [8]:
“The present legislative scheme fixes quite different (and much lower) penalties for individuals than for corporations. The culpability of each respondent must be assessed individually and in the context set by the maximum penalty prescribed in each case. I reject the suggestion, if this was what was intended, that either or both respondents might have the benefit of any reduction in penalty because they were jointly, as well as individually, culpable.”
The declarations I made related to contraventions of sections 44 (1) and 45 of the FW Act occurring during the period from 23 August 2016 to 13 March 2019 and a breach of section 535 of the FW Act that occurred after 13 March 2019 by both Mini Majhel the corporate employer and Mrs Singh senior manager and director of Mini Majhel.
During the period the Applicant was employed by Mini Majhel the penalty unit rate increased from $180 to $210.[5] The maximum penalties applicable when the Applicant commenced employment on 23 August 2016 were as follows:
a)Contravening ss 44 (1) and 45 of the FW Act in the case of:
i)Mini Majhel: 300 penalty units x $180 = $54,000
ii)Mrs Singh: 60 penalty units x $180 = $10,800
[5] Section 4AA of the Crimes Act 1914 defined the penalty unit rate in July 2016 as $180 which was increased to $210 on 5 July 2017. In March 2019 the penalty unit rate remained at $210.
The maximum penalties applicable for the period 5 July 2017 to 13 March 2019 were as follows:
a)Contravening ss 44 (1) and 45 of the FW Act in the case of:
i)Mini Majhel: 300 penalty units x $210 = $63,000
ii)Mrs Singh: 60 penalty units x $210 = $12,600
With respect to section 535(1) of the FW Act the maximum penalty from 13 March 2019 was 60 penalty units. That contravention occurred sometime after 13 March 2019.
In Fair Work Ombudsman v NoBrace Centre Pty Ltd (In Liquidation) (ACN 121 556 447) & Ors (No.2) [2019] FCCA 2970 (22 October 2019) Judge Kelly when determining a matter where the quantum of a penalty unit differed across the period of the subject contraventions said as follows (citations omitted):
“[54] On orthodox principles, where contraventions occur before a penalty unit has increased upon an amending act becoming operative, the settled presumption against retrospectivity requires that the quantum of the applicable penalty should be determined at the pre-existing rate: see Murrihy v Betezy.com.au Pty Ltd (No.2). The position is, however, more complex, where the contravening conduct overlapped the date on which the quantum of a penalty was increased by amending legislation.
[55] In Fair Work Ombudsman v Grouped Property Services Pty Ltd (No.2), Katzmann J considered whether the higher penalty unit should apply in circumstances where contraventions occurred both before and after a penalty unit increase. Her Honour noted the observations of the Court of Criminal Appeal in R v White that there was no reason why, in a criminal context, a higher penalty should apply only where the conduct being penalised first occurred after an increase. Her Honour held that “by parity of reasoning the same principle applies to contraventions of the FW Act involving a course of conduct which began both before the amendment and continued after it came into effect” and so applied the increased penalty amount to each group of contraventions.
[56] In my view, it is not unimportant to recognise that Katzmann J was conscious that the unqualified application of sentencing principles from the criminal law to the determination of a civil penalty required some caution. In particular, it is of some assistance to appreciate that in R v White, the question arose whether the maximum penalty to be applied to a continuing conspiracy was that which applied at the commencement, or the end, of such conspiracy. Gleeson J (Hunt J agreeing), considered the question to be one of statutory construction and thus to be answered by reference to the intention of the Parliament. His Honour held that there was no reason to conclude the higher penalty was to be applied only in cases where the conspiracy had been entered into after the date on which the higher penalty became operative and observed:
‘In particular, I can see no reason for concluding that Parliament intended that conspiracies pursued following the amendment would be punished more severely if they were entered into after the amendment, and less severely if they were entered into prior to the amendment.’
…..
[58] Treating the issue as one of statutory construction, neither the reasoning in R v White nor Grouped Property Services requires the conclusion that a higher penalty is to be applied inflexibly to contraventions under the Act which occurred over a prolonged period and arose from conduct that was initiated at a time when a lower penalty was applicable. Contrastingly, it is settled that ‘the value of a penalty unit to be applied in formulating a civil penalty is that value at the time of the contravention’: Registered Organisations Commission v Transport Workers’ Union of Australia.”
I accept His Honour’s comments regarding the basis on which civil penalties are imposed. In addition I adopt the statement at [65]:
‘[65] An important distinction should also be drawn between the basis on which penalties are imposed under the criminal law and those to be imposed by way of civil penalty. This is necessary because, the purpose of a civil penalty is primarily, if not wholly, that of promoting the public interest in compliance with the laws that have been contravened and does not engage principles of retribution or rehabilitation.”
In this matter the Respondents increased the Applicant’s hourly rates of pay on two occasions prior to July 2017 and thereafter the Applicant was paid an hourly rate less than the minimum required under the Award. I am satisfied that it is appropriate to adopt the defined penalty unit rate of $180 being the rate applicable at the time the contraventions first occurred.
With respect to the contravention in failing to pay the Applicant’s annual leave entitlements at the end of his employment and failing to produce documents under section 535 of the FW Act the appropriate penalty unit rate is $210.
Legal principles
The Court has a broad discretion to assess the appropriate penalty. In Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 (24 May 2017) Katzmann J at [387] said:
“[387] Civil penalties, like sentences for criminal offences, are fixed by a process of “instinctive synthesis”, that is to say, after taking “due account” of all the relevant factors (which may pull in opposite directions), a court will conclude that a particular penalty should be imposed: See Wong v The Queen [2001] HCA 64; (2001) 207 CLR 584 at [76]; Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 at 374; TPG Internet Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 190; (2012) 210 FCR 277 at [145]. Relevant factors …. include: the nature and extent of the contravening conduct and the circumstances in which it took place, whether the conduct was deliberate, whether senior management was involved, whether the contraventions are truly distinct or arose out of the one course of conduct, the nature and extent of loss or damage, whether the contravener has previously engaged in similar conduct, the size of the business enterprise, and the existence and extent of any contrition, corrective action, and cooperation with the regulator: See, for example, Kelly v Fitzpatrick [2007] FCA 1080 (Tracey J) at [14].
[388] In contrast to the criminal law, however, where, in sentencing, retribution and rehabilitation are also relevant, the primary, if not the only, purpose of a civil penalty is to promote the public interest in compliance with the law. This is achieved by imposing penalties that are sufficiently high to deter the wrongdoer from engaging in similar conduct in the future (specific deterrence) and to deter others who might be tempted to contravene (general deterrence). The penalty for each contravention or course of conduct is to be no more and no less than is necessary for that purpose: See Commonwealth v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate [2015] HCA 46, (2015) 90 ALJR 113, 255 IR 87, 326 ALR 476 (Commonwealth v FWBII) at [55] (French CJ, Kiefel, Bell, Nettle and Gordon JJ).”
In Fair Work Ombudsman v NSH North Pty Ltd [2017] FCA 1301 at [36], Bromwich J summarised the approach to be taken when determining an appropriate penalty:
(1) Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2) Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3) Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4) Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5) Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: See Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].”
The First Respondent contravened section 45 of FW Act during the period from 23 August 2016 and 13 March 2019 by:
a)Failing to pay Benjamin Bone minimum rates of pay in accordance with clauses 17 and 19 of the Hair and Beauty Industry Award 2010 (“the Award”); and
b)Failing to pay Benjamin Bone penalty rates for work performed on a Saturday in accordance with clause 31.2 (c ) of the Award; and
c)Failing to make superannuation contributions for the benefit of Benjamin Bone as required by clause 24.2 of the Award.
In addition the First Respondent contravened section 44 (1) of the FW Act by failing to pay Benjamin Bone untaken paid annual leave at the end of his employment period and failing to give Benjamin Bone a Fair Work Information Statement as required.
Further the First Respondent contravened section 535 (3) of the FW Act and regulation 3.42 of the FW Regs by failing to make available requested employee records for inspection and copying or post the requested employee records within the time frames prescribed or at all. The Second Respondent was involved in all of the above contraventions.
I am satisfied that there is some degree of aggregation for the breaches of section 45 of the FW Act given that those breaches have common elements and arose out of a course of conduct by the Respondents in failing to pay the Applicant his minimum entitlements during the course of his employment regarding which Mrs Singh was directly involved as manager of the salon. I note that pursuant to section 557 of the FW Act two or more contraventions of a given civil remedy provision may be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person. I intend to take that approach with respect to the contraventions under section 45 of the FW Act.
In addition I consider that there is some overlap between the contraventions of section 45 of the FW Act and breaches of subsection 44 (1) of the FW Act. I regard the breach of section 535 of the FW Act as a separate and distinct contravention.
In Carr v CEPU [2007] FMCA 1526 though the matter concerned circumstances where the parties agreed on penalty the Court said at [6]:
(a) the Court bears the ultimate responsibility for penalty, is not bound by the parties agreement and must consider for itself what constitutes an appropriate penalty;
(b) determining the quantum of an appropriate penalty is not an exact science and within a permissible range a particular figure is not necessarily more appropriate than another figure;
……
…….
(e ) in determining an appropriate penalty the Court will examine all the circumstances including an agreed statement of facts and if appropriate may act on that statement; and
(f) …….
Applicant’s submissions
Counsel for the Applicant submitted that during the course of his employment the Applicant was paid significantly below the appropriate Award rates. By the end of his employment, the underpayments of wages were close to 40% of his actual wage entitlements. No superannuation was paid and he did not receive any accrued annual leave. He submitted that the proportion of underpayments compared to actual entitlements, and the amount underpaid being $49,502.14 plus interest, were substantial by any standard.
Counsel submitted that given the large amount and the lengthy duration of the Award underpayments, the Court should be satisfied that the Respondents breaches were serious and part of a wider course of conduct involving multiple contraventions of the FW Act. He submitted that the Court could be satisfied, on balance that the Respondents largely disregarded the safety net provided for the Applicant by the Act and Award.
Further he submitted that the Applicant incurred substantial costs in the amount of $39,376.82 as a consequence of bringing these proceedings in a jurisdiction where the Applicant is unable to obtain his costs. He argued that while a pecuniary penalty is not intended to be a substitute for costs it is clear that even if the Applicant receives payment in compensation for his loss taking into account the legal costs he has incurred he will not receive a windfall or profit from pursuing compensation for wages he was entitled to.
Determining the appropriate penalty
In Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union[6] at [57] per Branson and Lander JJ the Court set out a non-exhaustive list of factors relevant to the imposition of penalty as follows:
[6] [2008] FCAFC 170
a)the nature and extent of the conduct that led to the breach;
b)the circumstances in which the relevant conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the breach;
d)previous contraventions of industrial legislation;
e)whether the breach was distinct or arose out of one course of conduct;
f)the size of the business enterprise involved;
g)whether the breach was deliberate;
h)whether senior management was involved in the breach;
i)whether the party committing the breach exhibited contrition;
j)whether the party committing the breach took corrective action;
k)whether the party committing the breach cooperated with enforcement authorities; and
l)the need for specific and general deterrence.
Consideration
I rely on my reasons for decision on liability.[7] I accept that the contraventions in this matter represent a failure by the First and Second Respondent to provide an employee his basic entitlements under workplace relations legislation. I agree with Jarrett J who said in Fair Work Ombudsman v Bedington [2012] FMCA 1133 at [70] that “the purpose of the legislation is to provide a safety net which ensures adequate minimum entitlements to employees particularly those who are vulnerable or on low income roles. The legislation is designed to provide an even playing field for all employers with regard to employment costs….the contraventions of fundamental entitlements undermine the workplace relations regime as a whole and demonstrate a disregard for (the employers) statutory obligations…”
[7] Bone v Mini Majhel Pty Ltd & Anor [2020] FCCA 1483
I accept that the Respondents conduct was serious. The loss of entitlements to someone in the Applicant’s position was significant. During the entire course of the Applicant’s employment from 23 August 2016 to 12 March 2019 a little short of 2 years and seven months he was underpaid. For example in March 2017 he was paid $9.05 per hour for ordinary hours and $10.00 per hour for penalty rates when the Award rate for ordinary hours was $19.44 per hour and for penalty rates $25.86 per hour. By the end of his employment the Applicant was underpaid by about 40% of his actual wage entitlements. He did not receive accrued annual leave and superannuation contributions despite the Second Respondent apparently liaising with the Australian Tax Office about doing so. The amount underpaid was substantial being $49,502.14 plus interest.
The Second Respondent was the sole director and controlling mind of the First Respondent. She was responsible for hiring and paying the Applicant. She was aware that there was an Award under which the Applicant was to be paid and implemented a system to pay the Applicant at a rate other than required by the Award. She classified the Applicant as a “Junior Stylist” a classification that does not exist under the Award. The Applicant was a newly qualified hairdresser and a junior employee within the industry and was vulnerable to exploitation.
The Applicant was not provided with a Fair Work Information Statement when he commenced employment on 23 August 2016 or at any other time as required by the FW Act. The provision of the Fair Work Information Statement would have ensured that the Applicant was informed regarding how to protect his rights and ensure he received his minimum entitlements during his period of employment. Further he did not regularly or promptly receive payslips against which he may have reviewed his entitlements.
In Director, Fair Work Building Industry Inspectorate v Foxville Projects Group Pty Ltd [2015] FCA 492 (21 May 2015) Flick J at [43] observed:
“[43] The requirement imposed by s 125 of the Fair Work Act to provide such a Statement to an employee, it is respectfully considered, is an important means to ensure employees are informed of their rights. This may be seen as assuming even greater importance where the work-force consists of many persons not fluent in English. The provision of such Statements, translated into different languages, at least provides some measure of assurance that they are made aware of their rights. A failure to be made aware of one’s rights places an almost insurmountable obstacle in the path of those who may need to exercise those rights.”
With respect to the size of the business enterprise other than the evidence that the Respondents operated two hair salons and according to the Second Respondent the business had “multiple employees’ there is little information regarding the financial circumstances of the Respondents having elected not to participate in the hearing.
The Respondents were aware there was an Award which set the minimum rate at which the Applicant (and other employees) were to be paid. Senior management was involved in that the Second Respondent managed and operated two salons. The Respondents offered no evidence with respect to their intention as it related to underpayments and contraventions under the FW Act. There is no evidence that the failure to pay the minimum rates or entitlements under the Act was an innocent mistake or mere inadvertence. In particular the Respondents were aware of the requirement to make superannuation contributions for employees noting that the Second Respondent contacted the ATO in this regard and admitted a failure to make those contributions. On balance I am satisfied that the Second Respondent deliberately implemented a system for the Applicant by which he was underpaid and failed to pay superannuation contributions and leave entitlements according to law. Further I am satisfied that the Second Respondent knew the Applicant was entitled to and had later requested employee records maintained by the First Respondent and failed to provide those records. I do not accept the Second Respondent’s explanation for the failure to provide a Fair Work Information Statement.
There is no evidence of any contrition or corrective action by either Respondents. In fact, the evidence is to the contrary in that the First Respondent has, to date, not paid the compensation pursuant to the orders of 11 June 2020. The Second Respondent appears to lay responsibility for any underpayment upon the Applicant. The failure of the Respondents to participate in the hearing demonstrates a lack of cooperation. I am not aware of any previous findings by a Court against the Respondents.
General deterrence
There appears to be a prevalence of employee underpayments as reflected in the various decisions of this Court. The hair dressing industry is one of the lower paid industries. As such there is a need for general deterrence to ensure compliance with minimum standards and enforcement of employee entitlements. In my view in this matter it is necessary to send a message to others that a significant pecuniary penalty will be imposed for non – compliance.
Specific deterrence
The First Respondent continues to operate at least one of the hairdressing salons on the evidence before me. The Second Respondent as director is the individual responsible for the ongoing management and operation of the salon including ensuring employees are paid in accordance with their proper entitlements under the FW Act and the Award. There is a proper basis for the Court to be concerned whether the Respondents will in future continue to ignore the legal requirement for minimum rates of pay under the Act and the Award. No action has been taken nor is there any evidence before me to demonstrate that the Respondents have taken any steps to avoid such contraventions in the future.
In Re Trade Practices Commission v CSR Ltd (1991) ATPR 41-076, French CJ discussed deterrence as the primary purpose of civil penalties as follows:
"The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act." [8]
[8] Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Anor [2015] HCA 46 (Commonwealth v FWBII) at [55] citing Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076 at 52,152; [1990] FCA 521 at [40].
Counsel submitted and I accept that the difference in the factual circumstances of each case makes it difficult to rely upon other cases as a guide for determining penalty.[9] It is preferable to have regard to the facts and circumstances and fix a penalty accordingly. Counsel contends that the appropriate penalty is 75% of the maximum penalty applicable. The Court is required to have regard to the totality principle and ensure that the penalty is not oppressive, but commensurate with the seriousness of the conduct. Furthermore the penalties must not be reduced to simply reflect the “costs of doing business” in contravention of the FW Act.
[9]Fair Work Ombudsman v Naomi-Jayne Alfred [2016] FCCA 220 at [28].
Conclusion on penalty
The breach of the FW Act continued for a significant period (two years and seven months) and for the duration of the Applicant’s employment. The failure to provide a Fair Work Information Sheet failed to ensure the Applicant was made aware of his rights and entitlements under the FW Act and the Award. The loss to the Applicant in monetary terms was substantial ($49,502.14). Further he has incurred significant additional costs in an attempt to obtain his legal entitlement.
In Fair Work Ombudsman v Jetstar Airways Ltd at [28] Buchanan J said “ultimately the Court’s task is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations.”
Having regard to the whole of the evidence as discussed I am satisfied that the appropriate penalty to be imposed with respect to the three contraventions pursuant to section 45 of the FW Act is an amount which equates to 60% of the maximum penalty available. In that regard having determined that the relevant penalty unit rate is $180 and the maximum penalty is 60 penalty units I impose a pecuniary penalty on the First Respondent of $32,400 and on the Second Respondent of $6480 respectively.
With respect to the two breaches of section 44 (1) of the FW Act I am satisfied that the appropriate penalty to be imposed is an amount which equates to 35% of the maximum penalty available. Having determined that the relevant penalty unit rate is $210 and the maximum penalty is 60 penalty units I impose a pecuniary penalty on the First Respondent of $22,050 and on the Second Respondent of $4410 respectively.
With respect to the breach of section 535 of the FW Act I am satisfied that the appropriate penalty to be imposed is an amount which equates to 25% of the maximum penalty available. Having determined that the relevant penalty unit rate is $210 and the maximum penalty is 60 penalty units I impose a pecuniary penalty on the First Respondent of $15,750 and on the Second Respondent of $3150 respectively.
The total amount imposed for contravening the FW Act on the First and Second Respondents is $70,040 and $14,040 respectively. I am satisfied that the penalties are not oppressive and are appropriate and proportionate to the conduct of the Respondents viewed as a whole making adjustments where necessary.
Payment of penalty to a person
Counsel for the Applicant argued that aside from the direct loss suffered by the Applicant in not being paid his proper entitlements under the Award, he has been required to “fight” this claim incurring significant legal costs in the amount of $39,376.82. He has done so in circumstances where no restitution was attempted by the Respondents and they initially sought to defend the proceedings filing a Defence. The Respondents have throughout refused to accept responsibility for failing to pay the Applicant as required by the Award and sought in some way to justify that conduct by making allegations about the Applicant’s conduct none of which has been established.
Counsel argued that although a pecuniary penalty is not intended to be a substitute for costs particularly in a “no cost” jurisdiction it is apparent that the Applicant may suffer significant hardship having suffered the loss of wages of $49,502.14 in addition to incurring legal costs of $39,376.82. Should an order be made that a proportionate amount of the penalty imposed be paid directly to the Applicant it could not be said that the Applicant has made a profit or received a windfall.
In Sayed v Construction, Forestry, Mining and Energy Union [2015] FCA 338 (13 April 2015) Mortimer J considered the issue whether the penalty should or should not be payable to the Applicant. She concluded in the circumstances of that particular case at [93] that “to order that the sums of money imposed by way of penalty on the respondent be paid to the applicant would to be to deliver to him a windfall which would not be appropriate in the circumstances, and would not serve the interests of the administration of justice. He would receive more in real terms through the penalty payment than I determined he was entitled to by way of compensation……. The inherent requirement in the compensation provisions of the Fair Work Act that a person seeking compensation prove the loss he or she alleges he or she has suffered, and otherwise prove to the satisfaction of the Court the entitlement to the remedy sought (e.g., reinstatement) would be undermined, as would the legislative policy behind s 570(1)”.
The decision in Sayed (supra) is instructive on whether the Court should in the particular circumstances of the case make an order that from the penalties imposed an amount be paid directly to the Applicant.
In Sayed (supra) Her Honour referred to the decision of Gray J in NTEU v RMIT[10] at [146] where His Honour described the effect of s 546(3) as follows:
“The scheme under which the enforcing party is the recipient of the penalty is designed to encourage the enforcement of provisions of the Fair Work Act and of agreements and other instruments made under it.”
[10] National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] FCA 451 (16 May 2013)
Mortimer J said at [74]
“Those observations had particular force in a case of the kind with which his Honour was then dealing, where a union had brought proceedings on behalf of one of its members, thus shouldering for itself the burden of the conduct of what was obviously a substantial piece of litigation, in circumstances where that litigation had as one of its aims the securing of individual financial benefits for the union member by way of compensation, but also of marking out, from the perspective of the protection of the rights of all relevant workers, the boundaries of alleged unlawful conduct by RMIT.”
She said at [76]:
I dealt with the authorities about payment of penalties, and the underlying rationales concerning common informers, in Dafallah v Fair Work Commission (2014) 225 FCR 559; [2014] FCA 328 at [139]- [143], and I need not repeat those passages. In those paragraphs, amongst other observations, I respectfully agreed with the remarks of Greenwood J in McIlwain v Ramsey Food Packaging Pty Ltd (No 4) (2006) 158 IR 181; [2006] FCA 1302 at [108] (endorsed by Branson and Lander JJ in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; [2008] FCAFC 170 at [70]):
‘the imposition of a penalty under the Act is designed fundamentally to serve the public interest in acting as a deterrent to the particular Respondents and others generally from engaging in conduct of the kind the subject of the findings. In circumstances where an order has been made for compensation for both economic loss and a non-economic component concerning the disturbance, dislocation and loss of secure employment suffered by the individuals, there seems to be no good policy reason why the individuals should additionally have the benefit of an order for the payment to them of the penalty.’”
Her Honour said following a review of the Explanatory Memorandum to the Fair Work Bill 2008 at [80]:
“The proposition that both compensation and penalties might be ordered by the Court is straightforward. The proposition that they might both be ordered to be paid to the same person is more complex. In addition to McIlwain and Plancor, there are two cases which do discuss the complexity, at least by reference to the concept of avoiding ‘windfalls’.
Following a discussion of relevant authorities at [81] to [84] her Honour said at [85]:
“ [85] At least part of the explanation for what Gray J describes in Gibbs v The Mayor, Councillors and Citizens of City of Altona [1992] FCA 374; (1992) 37 FCR 216 at 223-224 as the “usual” order that penalties be payable to the person who brought the proceeding appears to be the public interest in providing recompense for costs and expenses incurred in bringing the proceeding, so as to encourage (or, at least, not discourage) the exposure of allegations of unlawful conduct. His Honour said:
‘The usual order, when the proceeding is not brought by an inspector appointed under the Act, is for payment to the person or organisation applying for the penalty. ... In the present case, the applicant has brought the proceeding on behalf of the Union, to enforce the Award for the benefit of the Union and its members. Had the applicant brought the proceeding in his personal capacity, and at his own expense, it would have been appropriate to order that the penalties be paid to him. It is unlikely that the applicant has become responsible personally for the costs of the proceeding and more likely that those costs will be met by the Union. In the circumstances, it is appropriate that the Union should be the recipient of the penalties.
[86] It is to be noted here that, just as Finkelstein J did in CPSU v Telstra, his Honour appears to refer to expenses and costs in a broader sense than simply legal costs.
[87] The current legislative policy manifested in the Fair Work Act by s 570(1) is that parties to proceedings such as the present are, subject to s 570(2), or ss 569 or 569A, to bear their own legal costs. This adds a further tension in the appropriate approach when considering whether to order that penalties be payable to a person in the applicant’s situation.”
Conclusion as to payment of penalty
The imposition of a penalty under the FW Act is designed fundamentally to serve the public interest in acting as a deterrent to employers such as the Respondents in this matter from engaging in conduct of the kind subject to my findings.
In this particular matter I adopt what was said by Gray J in Gibbs v The Mayor, Councillors and Citizens of City of Altona [1992] FCA 374; (1992) 37 FCR 216 at 223-224 that penalties be payable to the person who brought the proceeding appears to be the public interest in providing recompense for costs and expenses incurred in bringing the proceeding, so as to encourage (or, at least, not discourage) the exposure of allegations of unlawful conduct.
His Honour said:
“The ‘usual order,’ when the proceeding is not brought by an inspector appointed under the Act, is for payment to the person or organisation applying for the penalty. ... In the present case, the applicant has brought the proceeding on behalf of the Union, to enforce the Award for the benefit of the Union and its members. Had the applicant brought the proceeding in his personal capacity, and at his own expense, it would have been appropriate to order that the penalties be paid to him. …..”
Finkelstein J in CPSU, The Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364 at [25]- [28] said:
“it cannot be doubted that employer and employee organisations play a legitimate and important role in seeing that there is compliance with the provisions of the Workplace Relations Act…an individual employee will rarely have the ability to fund a proceeding for a contravention. If unions do not bring such proceedings, contraventions will go unpunished.”
It was clearly in the public interest for the Applicant to bring these proceedings for contravention of the FW Act to protect the legitimate interests of individual employees and to ensure employers such as the Respondents complied with the legislative requirements designed to ensure employees receive their rightful entitlements under the FW Act and Award. Had the Applicant not brought these proceedings it is likely the Respondents would have gone unpunished. The ability of an individual to bring proceedings in circumstances where an employee has been significantly underpaid acts as a deterrent to employers contemplating ignoring the requirements of the FW Act and applicable Awards and a reminder that should they fail to comply with the FW Act they risk incurring a pecuniary penalty.
I am satisfied that the Applicant has incurred a significant expense in bringing these proceedings, an expense that he is unable to recover. Further I am satisfied that in making an order that from the penalties imposed on the Respondents the amount of $39,376.82 be paid to the Applicant he will not receive a windfall nor will he profit from the proceedings. I make orders accordingly.
I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Judge Tonkin
Date: 16 September 2020
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