Director Of the Fair Work Building Industry Inspectorate v Zion Tiling Pty Ltd and Anor (No.2)
[2013] FCCA 1288
•13 September 2013
0FEDERAL CIRCUIT COURT OF AUSTRALIA
| DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE v ZION TILING PTY LTD & ANOR (No.2) | [2013] FCCA 1288 |
| Catchwords: PRACTICE AND PROCEDURE – Extension of time for filing submissions – waiver of filing fee. |
| Legislation: Building and Construction General On-Site Award 2010, cll.31.3, 31.4, 33.1(a)(i), 37.1 Fair Work Act 2009 (Cth), ss.44(1), 45, 61, 87(1) and (2), 90, 535, 536, 541(2), 545(2), 557(2), 716 Federal Circuit Court Rules 2001 (Cth), rr.2.07A, 3.05, 9.04, 16.05(2)(e) |
| Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 Director of the Fair Work Building Industry Inspectorate v Zion Tiling Pty Ltd & Anor [2013] FCCA 769 Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258 Gibbs v The Mayor, Councillors and Citizens of The City of Altona (1992) 37 FCR 216 Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 Trinick & Piggott as Controlling Trustees of the Estate of Lam (2011) 8 ABC(NS) 610; [2011] FMCA 70 |
| Applicant: | DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE |
| First Respondent: | ZION TILING PTY LTD |
| Second Respondent: | TAE YOUNG YOON |
| File Number: | PEG 49 of 2013 |
| Judgment of: | Judge Lucev |
| Hearing date: | 6 September 2013 |
| Date of Last Submission: | 6 September 2013 |
| Delivered at: | Perth |
| Delivered on: | 13 September 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr J King |
| Solicitors for the Applicant: | Fair Work Building and Construction |
| For the First and Second Respondents: | No appearance |
ORDERS
That order 2(a) of the Court’s orders of 11 July 2013 be varied pursuant to r.16.05(2)(e) of the Federal Circuit Court Rules 2001 (Cth) by inserting the word “file” between the words “shall” and “and”.
That time for the filing of the Applicant’s written submissions be extended to the time of actual filing.
That the application fee for the filing of the Applicant’s application in a case filed 30 July 2013 be waived.
That the First Respondent pay penalties as follows:
(a)$6,600 for contravention of s.44(1) of the Fair Work Act 2009 (Cth) (“FW Act”) by contravening s.90 of the FW Act;
(b)$6,600 for contravention of s.45 of the FW Act by contravening cl.31.4 of the Building and Construction General On-Site Award 2010 (Cth) (“the Award”);
(c)$3,300 for contravention of s.535 of the FW Act; and
(d)$3,300 for contravention of s.716 of the FW Act.
That the Second Respondent pay penalties as follows:
(a)$1,320 for contravention of s.44(1) of the Fair Work Act 2009 (Cth) (“FW Act”) by contravening s.90 of the FW Act;
(b)$1,320 for contravention of s.45 of the FW Act by contravening cl.31.4 of the Building and Construction General On-Site Award 2010 (Cth) (“the Award”);
(c)$660 for contravention of s.535 of the FW Act; and
(d)$660 for contravention of s.716 of the FW Act.
The pecuniary penalties payable by the First Respondent and the Second Respondent be paid into the Consolidated Revenue Fund of the Commonwealth by 4 October 2013.
Pursuant to ss.541(2) and 545(2) of the FW Act the First Respondent and the Second Respondent pay, and be jointly and severally liable for, compensation to Mr Yeonghan Choi (“Mr Choi”) in the sum of $6,000, to be paid in 12 instalments of $500 on the first day of each month from October 2013 to September 2014 inclusive.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 49 of 2013
| DIRECTOR OF THE FAIR WORK BUILDING INDUSTRY INSPECTORATE |
Applicant
And
| ZION TILING PTY LTD |
First Respondent
| TAE YOUNG YOON |
Second Respondent
REASONS FOR JUDGMENT
Application
The application filed sought orders as set out in the Statement of Claim filed on 22 March 2013 by the Director of the Fair Work Building Industry Inspectorate.[1]
[1] “Director”.
Default judgment and declarations
On 11 July 2013 the Court entered default judgment against the respondents.[2] In Zion Tiling (No.1) the respondents, Zion Tiling Pty Ltd[3] and Tae Young Yoon,[4] were both found liable for the following contraventions of the Fair Work Act 2009 (Cth):[5]
a)section 44(1) of the FW Act by contravening s.90 of the FW Act;
b)section 45 of the FW Act by contravening cl.31.3 of the Building and Construction General On-Site Award 2010;[6]
c)section 45 of the FW Act by contravening cl.37.1 of the Award;
d)section 45 of the FW Act by contravening cl.31.4 of the Award;
e)section 45 of the FW Act by contravening cl.33.1(a)(i) of the Award;
f)section 536 of the FW Act; and
g)section 716 of the FW Act.[7]
The contraventions related to the employment of a single employee, Mr Yeonghwan Choi,[8] by Zion Tiling.
[2] Director of the Fair Work Building Industry Inspectorate v Zion Tiling Pty Ltd & Anor [2013] FCCA 769 (“Zion Tiling (No. 1)”).
[3] “Zion Tiling”.
[4] “Mr Yoon”.
[5] “FW Act”.
[6] “Award”.
[7] Zion Tiling (No. 1) at para.8 per Judge Lucev.
[8] “Mr Choi”.
There are presently three matters for the Court to determine:
a)an application in a case by the Director for:
i)an extension of time in which to file the Director’s written submissions on penalty and compensation;[9] and
ii)the waiver of the application fee for the application in a case pursuant to reg.2.03(1) of the Federal Court and Federal Circuit Court Regulations 2012 (Cth)[10] in respect of the application in a case; and
b)the determination of penalty for the contraventions found in Zion Tiling (No.1).
Application in a case
[9] “Penalty Submissions”.
[10] “FC & FCC Regulations”.
Extension of time
An affidavit of Jeremy King, sworn 29 July 2013, who is a senior lawyer within the office of the Fair Work Building Inspectorate, was filed in support of the application in a case.[11] Mr King’s July 2013 Affidavit avers that:
a)on 11 July 2013 the Court ordered the Director to “file written submissions and any further affidavits on penalty and compensation by 26 July 2013”;[12]
b)on 23 July 2013 Mr King sent an email to the Chambers of the presiding Judge[13] attaching the Penalty Submissions “in an attempt to file the submission with the Court in accordance with the order” of 11 July 2013;[14]
c)a copy of the Penalty Submissions was sent electronically to Mr Oh at Logos Lawyers, the solicitors on the record for the first and second respondents, Zion Tiling and Mr Yoon, and were posted by express post to Zion Tiling and Mr Yoon at 45 Nashville Loop, Currambine, WA, 6028, being the address each provided to the Court, on 23 July 2013;[15]
d)on 29 July 2013 Mr King says that he received an email from Chambers informing him that his email of 23 July 2013 did not constitute the filing of the Penalty Submissions at the Court registry before 26 July 2013, the date ordered by the Court for filing the Penalty Submissions;[16] and
e)an extension of time would not cause either Zion Tiling or Mr Yoon any detriment because they were both served with a copy of the Penalty Submissions, which have not been amended, before 26 July 2013, and in any event, neither Zion Tiling nor Mr Yoon have filed or served written submissions or any affidavits on penalty and compensation.[17]
[11] “Mr King’s July 2013 Affidavit”.
[12] Mr King’s July 2013 Affidavit, para.5.
[13] “Chambers”.
[14] Mr King’s July 2013 Affidavit, para.6.
[15] Mr King’s July 2013 Affidavit, para.7.
[16] Mr King’s July 2013 Affidavit, para.8.
[17] Mr King’s July 2013 Affidavit, paras.9 and 10.
The Court notes that Notices of Withdrawal as Lawyer have been received from Logos Lawyers in respect of both Zion Tiling and Mr Yoon, and appear on the Court file. Thus, it would appear that Zion Tiling is not presently represented, as, being a corporation, it cannot be represented other than by a lawyer without leave of the Court, which has not been obtained.[18] Mr Yoon has filed a Notice of Address for Service indicating that he is acting in person. Neither Zion Tiling nor Mr Yoon appeared at the penalty hearing.
[18] Federal Circuit Court Rules 2001 (Cth), r.9.04 (“FCC Rules”); Zion Tiling (No. 1) at para.3 per Judge Lucev.
The Court’s formal sealed orders of 11 July 2013 sent to the parties by the Court following the pronouncement of orders and publication of reasons for judgment, included the following:
2.The Court orders that:
(b)The Director shall and serve written submissions and any further affidavits on penalty and compensation by 26 July 2013;
(c)Zion Tiling and Mr Yoon shall file and serve written submissions and any affidavits on penalty and compensation by 9 August 2013.
Examining order 2(b) in isolation it is obvious that a word has been left out between “shall” and “and”, and, given the normal wording of such orders, it is obvious that that word is “file”. That the word “file” has been omitted would certainly be obvious to most lawyers. When order (2)(b) is juxtaposed against order 2(c) it is obvious that “file” has been unintentionally omitted.
The Court’s orders as formally pronounced, and as contained in the published Reasons for Judgment in Zion Tiling (No.1), indicate that order 2(b) was pronounced in the ex tempore Reasons for Judgment as “shall file and serve”. Thus, the order that the lawyer of the Director present in Court (which was Mr King) would have heard contained the word “file”, which was for some reason mistakenly omitted from the Court’s formal sealed orders of 11 July 2013.
At the penalty hearing, the Director argued that because the word “file” had been omitted the Director did not consider that it was necessary that the Penalty Submissions be filed in the normal course, and therefore sent them to Chambers. That submission sits very oddly with the assertions in Mr King’s July 2013 Affidavit that:
a)the Court ordered the Director to “file written submissions”, that is, the Penalty Submissions; and
b)the Penalty Submissions were sent by email to Chambers “in an attempt to file” them.[19]
It is also at odds with the usual requirements with respect to such an order, particularly when the form of the orders with respect to Penalty Submissions and affidavits, are juxtaposed as set out above. It is also difficult to apprehend how that misconception arose when regard is had to the provisions of r.2.07A of the FCC Rules dealing with filing by electronic communication. That rule expressly sets out that filing by electronic communication must be, amongst other things, sent using the Commonwealth Court’s portal at and in an electronic format approved for the registry, and if a document in an existing proceeding, must be sent to the registry that is the appropriate place for the proceedings by using either the Commonwealth Court’s portal or the Court’s internet home page. It was in fact this means of filing that was used on 30 July 2013 to “file” the Penalty Submissions. Nonetheless, it does appear that the Director originally misconceived how it was that the Penalty Submissions were to be filed, and the Court accepts that there was such a misconception.
[19] See para.4(a) and (b) above.
The principles ordinarily applied by courts in determining whether to extend time are as follows:
a)that relevant time limits ought not be lightly ignored;
b)the length of the delay and whether there is an acceptable reason for the delay;
c)the merit of the substantive matter; and
d)whether there is prejudice suffered by an affected party.[20]
[20] Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-349 per Wilcox J; Trinick & Piggott as Controlling Trustees of the Estate of Lam (2011) 8 ABC(NS) 610 at 615-616 per Lucev FM; [2011] FMCA 70 at para.9 per Lucev FM.
In this case, the Director did not ignore the time limit, lightly or otherwise, as the Penalty Submissions were sent to Chambers within the time limit, but due to the misconception referred to above, the Director did not file the Penalty Submissions in the Court registry on time. Once apprised of the failure to properly file the Penalty Submissions it would appear immediate steps were taken by the Director to file the Penalty Submissions at the Court registry, and they were filed electronically the next day, 30 July 2013. In the circumstances, there was, as a matter of practical reality, no ignoring of the relevant time limit.
The length of the delay is absolutely minimal, and in the circumstances set out above, the reason for the delay is acceptable.
As to the merit of the substantive matter it is clear that the substantive matter has merit, it already being the subject of the default judgment in Zion Tiling (No.1). As to any prejudice attending the proposed extension of time, Zion Tiling and Mr Yoon were in receipt of a copy of the Penalty Submissions prior to the date prescribed in the Court’s order of 11 July 2013. Further, neither Zion Tiling nor Mr Yoon has filed submissions or affidavits in opposition to the Penalty Submissions, and neither has appeared at the penalty hearing. In the circumstances, no prejudice attaches to Zion Tiling or Mr Yoon if the time for the filing of the Penalty Submissions is extended.
In the circumstances, the time for filing of the Penalty Submissions will be extended, under r.3.05 of the FCC Rules, to the time of actual filing. There will also be an order under the slip rule, r.16.05(2)(e) of the FCC Rules, varying order 2(a) of the Court’s orders of 11 July 2013 to insert the word “file” between the words “shall” and “and”.
Waiver of fee
The Director also seeks a waiver of any application fee in relation to the application is a case, that waiver being sought under reg.2.03(1) of the FC & FCC Regulations which provides as follows:
(1) A fee in relation to a proceeding is payable as set out in this section, unless the relevant court for a proceeding, or a Judge or Registrar of that court, directs otherwise.
In circumstances where:
a)there was an error in order 2(a) of the Court’s orders of 11 July 2013;
b)there has been a misconception by the Director as to the filing requirements for the Penalty Submissions; and
c)the Court has determined that time for filing of the Penalty Submissions ought to be extended,
the Court is of the view that, in the peculiar circumstances of this case, it is appropriate to order that the application fee for the Director’s application in a case filed 30 July 2013 be waived.
Penalty
Default judgment
In Zion Tiling (No.1) the Court made the declarations set out at para.2 above.
Principles relevant to determining penalty
The following principles are to be taken into account when determining the appropriate penalty, if any, to be imposed:
a)firstly, the Court must identify the separate contraventions. Each contravention of each separate obligation found in the FW Act and the Award is a separate contravention;[21]
b)secondly, the Court must consider whether the contraventions constitute a single course of conduct. Where the same person commits two or more contraventions of a civil remedy provision set out in s.557(2) of the FW Act, and the contraventions arise out of the same course of conduct by that person, the contraventions are to be taken to constitute a single breach of the applicable civil remedy provision;[22]
c)thirdly, where two or more contraventions have common elements, this must be taken into account in considering an appropriate penalty in all the circumstances for each contravention, and the penalties may be grouped so that the same conduct is not penalised twice.[23] This task is distinct from and in addition to the final application of the “totality principle”;[24]
d)fourthly, determine an appropriate penalty to impose in respect of each contravention (whether a single contravention alone or taken to be so as part of a course of conduct or group), having regard to all of the relevant circumstances of the case; and
e)finally, having fixed an appropriate penalty for each group of contraventions or course of conduct, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the contraventions.[25] The Court should apply an “instinctive synthesis” in making this assessment.[26] This is known as an application of the “totality principle”.
[21] Gibbs v The Mayor, Councillors and Citizens of The City of Altona (1992) 37 FCR 216 at 223 per Gray J; McIver v Healey [2008] FCA 425 at para.16 per Marshall J.
[22] FW Act, s.557(1).
[23] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 571 per Graham J; [2008] FCAFC 8 at para.46 per Graham J (“Australian Ophthalmic Supplies”).
[24] Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at 396-396 per Stone and Buchanan JJ; [2008] FCAFC 70 at paras.41-46 per Stone and Buchanan JJ.
[25] See Kelly v Fitzpatrick (2007) 166 IR 14 at 21-22 per Tracey J; [2007] FCA 1080 at para.30 per Tracey J; Australian Ophthalmic Supplies FCR at 567 per Gray J, 576 per Graham J and 583 per Buchanan J; FCAFC at paras.23 per Gray J, para.71 per Graham J and para.102 per Buchanan J.
[26] Australian Ophthalmic Supplies FCR at 567-567 per Gray J, 572-573 and 577 per Graham J; FCAFC at para.27 per Gray J and paras.55 and 78 per Graham J.
General factors relevant to determining penalty
A non-exhaustive list of factors relevant to the imposition of a penalty under the FW Act appears in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar.[27] Those factors include:
[27] [2007] FMCA 7 (“Mason”).
a)the nature and extent of the conduct which led to the contraventions;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the contraventions;
d)whether there had been similar previous conduct by the respondent;
e)whether the contraventions were properly distinct or arose out of the one course of conduct;
f)the size of the business enterprise involved;
g)whether or not the contraventions were deliberate;
h)whether senior management were involved in the contraventions;
i)whether the party committing the contravention had exhibited contrition;
j)whether the party committing the contravention had taken corrective action;
k)whether the party committing the contravention had cooperated with the enforcement authorities;
l)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
m)the need for specific and general deterrence.[28]
[28] Mason at paras.26-59 per Mowbray FM.
Proposed penalties
The Director proposed that, when coupled with the proposed compensation order, a penalty of 20% for each declared contravention of the FW Act is an appropriate level of penalty. Having regard for the declarations made by the Court in the 11 July 2013 orders, the Director seeks that penalties be imposed as follows:
a)on Zion Tiling Pty Ltd:
i)$6,600 for contravention of s.44(1) of the FW Act by contravening s.90 of the FW Act;
ii)$6,600 for contravention of s.45 of the FW Act by contravening cl.31.4 of the Award;
iii)$3,300 for contravention of s.535 of the FW Act; and
iv)$3,300 for contravention of s.716 of the FW Act; and
b)on Mr Yoon of:
i)$1,320 for contravention of s.44(1) of the FW Act by contravening s.90 of the FW Act;
ii)$1,320 for contravention of s.45 of the FW Act by contravening cl.31.4 of the Award;
iii)$660 for contravention of s.535 of the FW Act; and
iv)$660 for contravention of s.716 of the FW Act.
Maximum penalty
The maximum penalties for a contravention of:
a)sections 44(1) and 45 of the FW Act are $33,000 for Zion Tiling and $6,600 for Mr Yoon; and
b)sections 535, 536 and 717 of the FW Act are $16,500 for Zion Tiling and $3,300 for Mr Yoon.
Contraventions for which a penalty is sought to be imposed
Having regard to principles in relation to course of conduct provisions in relation to multiple contraventions, and principles in relation to contraventions with common elements, the Director presses for four contraventions only against Zion Tiling and Mr Yoon, namely, contraventions of ss.44(1), 45, 535 and 716 of the FW Act. The rationale for limiting the number of contraventions to four for each of Zion Tiling and Mr Yoon appears hereunder.[29]
[29] See paras.24, 30, 33 and 34.
Nature and extent of the conduct
Section 44(1) of the FW Act
Section 44(1) of the FW Act provides that an employer must not contravene a provision of the National Employment Standards.[30] Section 87(1) of the FW Act provides that each year of service with an employer entitles an employee to four weeks of annual paid leave. Section 87(2) of the FW Act provides that an employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year. Section 90(2) of the FW Act provides that if, when the employment of an employee ends, and the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.
[30] “NES”. The NES are constituted by Divisions 3-12 of Part 2-2 of the FW Act: see FW Act, s.61.
Upon the termination of Mr Choi’s employment with Zion Tiling it did not pay him $608.22 for untaken annual leave, comprising $538.55 accrued annual leave and $69.60 annual leave loading. Consequently, Zion Tiling contravened s.44(1) of the FW Act.
Section 45 of the FW Act
Section 45 of the FW Act provides that a person must not contravene a term of a modern award. The Award is a modern award. Zion Tiling and Mr Choi were bound by the Award.
Clause 31.3 of the Award provides that payments must be paid and available to the employee not later than the end of ordinary hours of work on Thursday of each working week. Zion Tiling failed to pay Mr Choi’s wages and allowances of $4,580.52 for the period 20 February 2012 to 30 March 2012.
Clause 37.1 of the Award provides that overtime worked on a Saturday must be paid at the rate of time and half for the first two hours and double time thereafter, provided that all overtime worked after 12.00noon on a Saturday must be paid for at the rate of double time. Zion Tiling failed to pay Mr Choi at the relevant overtime rates for the work he performed on a Saturday. The value of this work performed by Mr Choi, but unpaid by Zion Tiling, amounted to $904.05.
Clause 31.4 of the Award provides that when notice is given, all monies due to the employee must be paid at the time of termination of employment. Zion Tiling failed to pay Mr Choi the sum of $6,092.79, comprising ordinary wages of $4,580.52, overtime of $904.05 and accrued untaken annual leave of $608.22.
Clause 33.1(a)(i) of the Award provides that the twentieth day of a working cycle shall be known as a “rostered day off”.[31] Zion Tiling failed to provide Mr Choi with a RDO on the twentieth day of each 20 day four week cycle. The loss suffered by Mr Choi as a result amounted to $281.26.
[31] “RDO”.
Zion Tiling therefore contravened s.45 of the FW Act by virtue of several breaches of the Award. In the circumstances, the Director seeks only to have a penalty imposed against Zion Tiling and Mr Yoon for one contravention of s.45 of the FW Act, namely the contravention of cl.31.4 of the Award. In the circumstances, this is appropriate because the course of conduct is a failure to pay Mr Choi monies, including monies outstanding on termination, and there are common elements in relation to non-payment and non-payment on termination of employment, which can be subsumed within the ambit of cl.31.4 of the Award.
Sections 535 and 536 of the FW Act
Section 535 provides that Zion Tiling was required to make and keep employee records for seven years. Zion Tiling however failed to make or keep annual leave records, including leave accrued and taken, or any records relating to hours worked and payment of entitlements, in contravention of s.535 of the FW Act.
Section 536 obliged Zion Tiling to give payslips to its employees within one working day of paying an amount to them in relation to the performance of their work. Throughout the period of Mr Choi’s employment Zion Tiling failed to provide him with payslips in contravention of s.536 of the FW Act.
The Director presses for a penalty to be imposed against Zion Tiling and Mr Yoon for the contravention in respect of s.535 of the FW Act only. In the circumstances, the failure to give payslips to Mr Choi arises from the failure to make records, and the former can therefore be subsumed within the latter as part of one course of conduct.
Section 716 of the FW Act
Section 716 provides that an Inspector, who reasonably believes that a person has contravened certain provisions of the FW Act, can give the person notice requiring them to take such action as is specified in the notice to remedy the effects of alleged breaches. On 11 September 2012 the Fair Work Building Industry Inspectorate issued a compliance notice to Zion Tiling requiring payment of Mr Choi’s outstanding wages and entitlements within 21 days. Zion Tiling failed to comply with the notice, thereby contravening s.716 of the FW Act.
Generally
Each of the provisions which has been contravened is a provision which directly, or indirectly (in the case for example of records), sets a standard or imposes a requirement with respect to the payment or recording of entitlements of employees, which are not to be contravened.
The nature of the contraventions is therefore serious insofar as they contravene minimum standards and minimum requirements with respect to entitlements and record keeping.
The requirement to comply with minimum standards for entitlements is fundamental to the integrity of Australia’s workplace laws.[32]
[32] See paras.55-56 below.
The Court has observed as follows:
(a)Whilst the record keeping obligation with respect to pay slips only appears in the Regulations, its central importance in industrial matters cannot be underestimated. Proper pay slips allow employees to understand how their pay is calculated and therefore easily obtain advice. Pay slips provide the most practical check on false record keeping and underpayments, and allow for genuine mistakes or misunderstandings to quickly be identified. Without proper pay slips employees are significantly disempowered, creating a structure within which breaches of the industrial laws can easily be perpetrated.[33]
(b)Manifestly, failure to make and maintain records in relation to employee entitlements … undermines the utility and effectiveness of workplace inspectors, and their ability to determine whether or not there has been compliance with minimum standards and industrial instruments, and the provision of effective means for investigation and enforcement of employee entitlements.[34]
[33] Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258 at para.67 per Riethmuller FM (“Taj Palace”).
[34] Fair Work Ombudsman v Orwill Pty Ltd & Ors [2011] FMCA 730 at para.21 per Lucev FM (“Orwill”).
There is little to be added to the Court’s observations in Taj Palace and Orwill cited above with respect to the failure to keep payslips and the effect upon the means for investigation and enforcement of employee entitlements. The failure to keep payslips makes the task of the Director, as regulator, more difficult in relation to the investigation and enforcement of employee entitlements. That difficulty is compounded where an employee is at some kind of disadvantage, which might make them vulnerable to some form of exploitation by their employer. In any event, the failure to maintain records must attract a significantly appropriate penalty.
The extent of the conduct is perhaps an ameliorating factor, as Mr Choi was only employed with Zion Tiling for a period of just over six weeks. Thus, while the nature of the contraventions is serious, the extent is limited to a single employee for a relatively short period of time.
Circumstances in which the conduct took place
The Director asserts that Mr Choi was a vulnerable employee, being a Korean national working in Australia on a spousal student visa, who did not speak fluent English and was not familiar with Australian workplace laws. That combination of circumstances, together with the fact of his being underpaid, might be sufficient to characterise Mr Choi as a vulnerable employee.[35] It is not possible in this case to determine whether the employee was in fact vulnerable, and consequently expressly exploited, and therefore suffered a detriment of a greater and different character than a non-vulnerable employee, as there is no affidavit evidence to establish the comparative detriment,[36] and the Statement of Claim makes no relevant averment of fact which could be accepted as a consequence of the default judgment.[37] As the judgments of the Federal Court in Hanssen and this Court in ACN 146 435 118 make plain, mere vulnerability is not sufficient to constitute an aggravating circumstance for the purposes of penalty: there must be some evidence of exploitation of the vulnerable employee vis-à-vis a non-vulnerable employee.[38] The necessity to lead evidence in penalty proceedings to establish relevant facts is a matter which has been previously commented upon by this Court and the Federal Court.[39]
[35] See Fair Work Ombudsman v ACN 146 435 118 Pty Ltd & Anor (No. 2) [2013] FCCA 1270 at paras.42-49 and 53 per Judge Lucev (“ACN 146 435 118”) regarding the characteristics which the authorities indicate are necessary to make an employee vulnerable.
[36] See Hanssen Pty Ltd v Jones (2009) 179 IR 57 at 67-68 per Siopis J; [2009] FCA 192 at paras.57-62 per Siopis J (“Hanssen”).
[37] See para.3 of the Statement of Claim which deals with Mr Choi’s status as an employee, but makes no claims as to the vulnerability now claimed.
[38] Hanssen IR at 67-68 per Siopis J; FCA at paras.57-62 per Siopis J; ACN 146 435 118 at paras.42-49 and 53 per Judge Lucev.
[39] See Olsen v Sterling Crown Pty Ltd (2008) 177 IR 337 at 343-344 per Lucev FM; [2008] FMCA 1392 at para.25 per Lucev FM (“Olsen”), and the Federal Court judgments there cited.
Prior contraventions
There is no evidence of prior contraventions by either Zion Tiling or Mr Yoon, and they do not therefore have a record of prior contraventions under the FW Act, or its predecessors. They are, therefore, entitled to be considered to be, and are to be treated as, first time contraveners for penalty purposes. Subject to proper consideration of other factors, that is a matter entitling them to a significant discount on penalty.
Whether the breaches were distinct or arose out of one course of conduct
These matters are considered at paragraphs 22, 24, 30, 33 and 34 above.
Size of business
The Director concedes that Zion Tiling can be characterised as a small tiling firm operating only within the greater Perth area of Western Australia.[40] The Statement of Claim contains no specific averments with respect to the size of the business of Zion Tiling, but it is noted that Mr Yoon is “the Director” and “the sole shareholder” of Zion Tiling, and the person responsible for day-to-day management of operations, and matters relating to employee terms, conditions and payments.[41] From that information, taken to be admitted as a consequence of the default judgment, it can be inferred that Zion Tiling is a relatively small business. There is no affidavit evidence as to the size of Zion Tiling, and no corporate searches of Zion Tiling in evidence. There is therefore very limited evidence of the current financial position of Zion Tiling, or any financial hardship which might be suffered by Zion Tiling as a consequence of the making of orders imposing a penalty. It is likewise with respect to Mr Yoon. The Director does however appear to concede that there is some limit to the financial capacity of Zion Tiling and Mr Yoon, insofar as the Director has conceded that payment of the amount of compensation to Mr Choi ought not be equal to the total amount of underpayment, and can be paid in 12 payments of $500.[42]
[40] Penalty Submissions, second para.44 (after para.45).
[41] Statement of Claim, para.3.
[42] Penalty Submissions, paras.51-52.
In this case, there is no evidence of incapacity to pay on the part of either Zion Tiling or Mr Yoon, save for the Director’s concession with respect to the issue of payment of the compensation. Further, there is nothing in the size of the business which mitigates the failure to pay entitlements, or to keep records, as required by the FW Act. Overall, there is nothing in the materials before the Court which indicates that the size of Zion Tiling, or the capacity to pay of either Zion Tiling or Mr Yoon, is a factor which warrants any reduction in the penalty which might otherwise be imposed.[43]
[43] As to capacity to pay being a possible mitigating factor in relation to penalty see the summary contained in ACN 146 435 118 at para.63 per Judge Lucev, and the more extensive treatment of the issue in Olsen IR at 352-356 per Lucev FM; FMCA at paras.58-76 per Lucev FM, and the various authorities referred to therein, including Federal Court authorities on penalties in trade practices and workplace relations cases.
Deliberateness of the contraventions
The Director made no submissions as to whether or not the contraventions were deliberate. The Statement of Claim upon which default judgment was issued does not assist further in this regard, and it would be surprising, in any event, if a statement of claim descended to the necessary detail to draw an inference of deliberateness. The Director has submitted no evidence which deals directly with the issue of whether or not the contraventions are deliberate. There is, however, attached to an affidavit sworn by Mr King on 4 June 2013[44] an email from Mr Yoon to Mr King and another person, and which reads in part as follows:
As I have said, I do apologise for the inconvenience caused to you and others. I am terribly sorry for what I’ve done.
I know I have to pay the compensation amount and penalty, but would you please consider my current financial situation. I have very serious financial problems now and I am looking for a job.
Can you please email me what you require me to do to resolve this matter because I did not fully understand what was said over the telephone call. I have very limited English. My friend helped me write this email.[45]
[44] “Mr King’s June 2013 Affidavit”.
[45] Mr King’s June 2013 Affidavit, annexure JK-9 (“Yoon Email”).
An inference might be drawn from Mr Yoon’s email that because of his very limited English the contraventions could not have been deliberate, and may well have been made in ignorance of Australian workplace relations law. It is, however, probably unnecessary to go that far given that the Director has not established that the contraventions were deliberate. The fact that contraventions may not have been deliberate tends towards a lessening of the penalty to be imposed.
Involvement of senior management
Mr Yoon was the director and the sole shareholder of Zion Tiling, and the person who was responsible for all matters related to the management of employment terms and conditions and remuneration of employees of Zion Tiling. As such, there can be no doubt that senior management were involved in the contraventions. As such, that is a factor which weighs against any mitigation of penalty.
Contrition, corrective action and cooperation with authorities
The Director concedes that Zion Tiling and Mr Yoon have largely cooperated with the Director in the investigation, at least by agreeing to provide an interview. The Director asserts that there has been less cooperation in the conduct of these proceedings, and that a failure to respond to proceedings does not equate to cooperation, admission or contrition. There is no evidence of the asserted cooperation, but the concession was made in the Penalty Submissions, and the Court can therefore have regard to it, it being a concession, properly made, but otherwise adverse to the Director’s case.
There is no evidence of payment of Mr Choi by Zion Tiling in respect of the underpayments found by reason of the default judgment in Zion Tiling (No.1).
The Yoon Email might arguably be said to evidence some contrition, in that Mr Yoon has indicated that he is “terribly sorry” for what he has done. The Director suggests that little weight should be given to this apology in light of the fact that the underpayments to Mr Choi have not been remedied, in circumstances where Zion Tiling is still trading. Once again, however, there is no evidence that Zion Tiling is still trading.
The Yoon Email does, in the Court’s view, evince some contrition, in that:
a)Mr Yoon is “terribly sorry for what I have done”;
b)it recognises that Mr Yoon knows he has to pay compensation and penalty; and
c)it requests an email as to what is required to resolve the matter (in circumstances where Mr Yoon says he did not fully comprehend what was said to him in a telephone call from the Director’s representative, because of his limited English).[46]
[46] Mr King’s June 2013 Affidavit, annexure JK-9.
The Yoon Email apart there is no particular evidence that either Zion Tiling or Mr Yoon is contrite, or has cooperated further with the authorities, or taken any corrective action.
In all the circumstances, although it would appear that there has been some cooperation with the Director during the course of the investigation, that cooperation must be balanced against a lack of evidence of corrective action, and a minimal expression of contrition. More particularly, there is a lack of evidence of cooperation, contrition and corrective action subsequent to the Yoon Email. In the circumstances, whilst some credit must be given for the expression of contrition, and recognition of fault and request for advice, in the Yoon Email, it is not a matter for significant credit in the overall circumstances, and having regard to the circumstances since the Yoon Email.
Ensuring compliance with minimum standards
A fundamental object of the FW Act is to provide a guaranteed safety net of adequate minimum entitlements for employees.[47] This object has particular force for those employees who are vulnerable or in low income roles, and in providing an “even playing field” for all employers with regard to employment costs.
[47] FW Act. s.3(b).
The importance of ensuring compliance with Australia’s workplace laws should not be underestimated, and is to be given appropriate weight in considering what penalties should be imposed for the contraventions. In Fair Work Ombudsman v Kentwood Industries Pty Ltd (No.3)[48] the Federal Court said:
In imposing a penalty against the respondents, it is necessary for the court to set the penalty in a range that reinforces the fundamental importance of compliance with the employment standards enshrined in Commonwealth workplace laws.[49]
[48] [2011] FCA 579 (“Kentwood Industries (No. 3)”).
[49] Kentwood Industries (No. 3) at para.36 per McKerracher J.
The Penalty Submissions reflected the fact that ss.44(1) and 45 of the FW Act provided protections for employees which were regarded as important by reason of the Parliament having sought to protect minimum employment standards by providing for significant civil penalties to be imposed in cases of non-compliance. Likewise, the Penalty Submissions recognise the importance of record-keeping to ensure compliance with an employer’s obligations, and to assist employees to receive their correct entitlements.[50]
[50] Penalty Submissions, paras.15-36.
This case involves a single instance over a relatively short period of non-payment of minimum entitlements to an employee. On the evidence, it is not possible to say that the employee was necessarily a vulnerable employee, nor is it possible to say that if he was a vulnerable employee that he was exploited in his employment by Zion Tiling or Mr Yoon.
The case is one of a serious non-compliance with minimum standards, but one which is limited in its extent.
Deterrence
In this case, specific deterrence is not particularly pressed by the Director, unlike general deterrence, upon which the Director placed some stress. The Director submits that penalties in this case should be imposed at a meaningful level so as to deter other small to medium business operators from committing similar contraventions. That submission is made in the context of a further submission alleging widespread practices of non-payment of NES and Award entitlements. There is no specific objective evidence in relation to these alleged practices, but the Court can take judicial notice that there are now significant numbers of cases being determined in the federal courts in relation to alleged FW Act contraventions, and the penalties to be imposed for them.
The role of general deterrence in determining the appropriate penalty was dealt with by the Full Court of the Federal Court in Ponzio v B & P Caelli Constructions Pty Ltd & Ors:[51]
In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by likeminded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217.[52]
[51] (2007) 158 FCR 543; [2007] FCAFC 65 (“Caelli Constructions”).
[52] Caelli Constructions FCR at 559-560 per Lander J; FCAFC at para.93 per Lander J.
Recently, the Federal Court observed:
It is important to ensure that the protections provided by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected.[53]
[53] Fair Work Ombudsman v Maclean Bay Pty Ltd (No. 2) [2012] FCA 557 at para.29 per Marshall J.
The Court considers that there ought to be an appropriate measure of general deterrence as a part of the penalty to be imposed in this case. It will serve as yet another reminder to small and medium business operators that minimum standards, whether established by the NES or pursuant to a modern award, are not to be ignored, and that if they are ignored then penalty consequences are likely to follow. The penalty must be at an appropriate level to deter others within the relevant industry, and other industries, from committing similar breaches.
Consideration of penalty for each contravention
The Director submits that the Court should impose penalties of 20% of the maximum penalty upon Zion Tiling and Mr Yoon for each of the four contraventions, as set out above.[54]
[54] See para.20 above.
The Director submits that this level of penalty is appropriate, even though at the lower end of the spectrum, when considered in conjunction with the compensation order sought. The Court agrees that the penalties sought are at the lower end of the spectrum. Having regard to the nature of the contraventions, the involvement of senior management and the relative lack of contrition, cooperation and corrective action, a higher penalty might arguably have been sought and justified. That said, some of the matters submitted by the Director were not proven, in particular, the characteristics which would have given rise, had there been evidence of them, to a finding that the employee, Mr Choi, was a vulnerable employee. Further, it is not possible in the circumstances on the basis of the evidence before the Court to determine whether the contraventions were deliberate, or simply the result of ignorance on the part of a small company with a sole shareholder and, seemingly, sole director. Also, a significant factor in mitigation is that Zion Tiling and Mr Yoon are first time contraveners. Notwithstanding those issues, however, there is also a need for a proper, and robust measure, of general deterrence.
In all of the above circumstances, the Court is of the view that a penalty of 20% of the maximum penalty for each contravention is an appropriate penalty for each of the four contraventions by Zion Tiling and the four contraventions by Mr Yoon. There will be orders accordingly.
Mr Yoon’s liability
It is unnecessary for the purposes of these Reasons for Judgement to deal with the factors resulting in Mr Yoon being found liable for Zion Tiling’s contraventions under s.550 of the FW Act because, by reason of the default judgment in Zion Tiling (No.1), liability has been established. If it were necessary for the matter to be considered, it suffices to observe that the Court agrees generally with the Penalty Submissions insofar as they deal with the issue of whether Mr Yoon was knowingly concerned in, a party to, or aided, abetted, counselled or procured, the declared contraventions.[55]
[55] See Penalty Submissions at paras.40-44.
Totality principle
Having fixed an appropriate penalty for each contravention, the Court should then consider the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the contraventions, and is not oppressive or crushing.[56]
[56] Kelly IR at 21-22 per Tracey J; FCA 1080 at para.30 per Tracey J; Australian Ophthalmic Supplies FCR at 567 per Gray J, 576 per Graham J and 583 per Buchanan J; FCAFC at paras.23 per Gray J, 71 per Graham J and 102 per Buchanan J.
There is no evidence to demonstrate that the penalties proposed would be oppressive or crushing. Neither Zion Tiling nor Mr Yoon have put evidence of their financial circumstances before the Court. It is, nevertheless, evident that the Director accepts that there is some financial difficulty in Zion Tiling and Mr Yoon’s circumstances, and as a consequence has proposed, and the Court has agreed, that compensation to Mr Choi ought to be paid over a period of 12 months.[57] No such staggered payment of the penalties to be imposed is sought, and in the absence of any particular evidence as to the financial position of Zion Tiling and Mr Yoon, the Court does not propose to order a staggered or periodic regime of penalty payments. Likewise, the Court does not have before it evidence which would satisfy it that, having regard to all of the circumstances, penalties which total $19,800 for Zion Tiling and $3,960 for Mr Yoon are oppressive or crushing, and, of themselves, the penalties could not, in the Court’s view be said to be so. There will therefore be no adjustment of the penalties having regard to the totality principle.
[57] See paras.70 and 71 below.
Compensation
The Director seeks a compensation order limited to $6,000 and payable by way of twelve monthly instalments of $500 directly to Mr Choi, from Zion Tiling and Mr Yoon (to be jointly and severally liable), to compensate for unpaid entitlements. This is less than the sum of $6,374.05 which the Director has calculated remains outstanding to Mr Choi for unpaid leave entitlements, but the sum is intended to be compensatory, and as such need not be a total repayment of underpaid entitlements.
In the Court’s view compensation orders, in the sum of $6,000, with time to pay in twelve monthly instalments of $500, are appropriate.
Conclusion and orders
The Court has concluded that:
a)order 2(a) of the Court’s orders of 11 July 2013 ought to be varied under r.16.05(2)(e) of the FCC Rules by inserting the word “file” between the words “shall” and “and”;
b)time is to be extended for filing of the Penalty Submissions, to the time of actual filing;
c)the application fee for the Directors application in a case filed 30 July 2013 is to be waived;
d)Zion Tiling ought to pay penalties of:
i)$6,600 for contravention of s.44(1) of the FW Act by contravening s.90 of the FW Act;
ii)$6,600 for contravention of s.45 of the FW Act by contravening cl.31.4 of the Award;
iii)$3,300 for contravention of s.535 of the FW Act; and
iv)$3,300 for contravention of s.716 of the FW Act;
e)Mr Yoon ought to pay penalties of:
i)$1,320 for contravention of s.44(1) of the FW Act by contravening s.90 of the FW Act;
ii)$1,320 for contravention of s.45 of the FW Act by contravening cl.31.4 of the Award;
iii)$660 for contravention of s.535 of the FW Act; and
iv)$660 for contravention of s.716 of the FW Act; and
f)Zion Tiling and Mr Yoon are to pay, and be jointly and severally liable for, compensation to Mr Choi in the sum of $6,000, to be paid in twelve instalments of $500.
The penalties must be paid to the Commonwealth Consolidated Revenue Fund by 4 October 2013. No order is sought as to costs. There will be orders accordingly.
I certify that the preceding seventy-three (73) paragraphs are a true copy of the reasons for judgment of Judge Lucev
Associate:
Date: 13 September 2013
Key Legal Topics
Areas of Law
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Employment Law
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Civil Procedure
Legal Concepts
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Penalty
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Statutory Construction
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Costs
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Procedural Fairness
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