Ecosway Pty Ltd v Fair Work Ombudsman

[2013] FCCA 1734

FEDERAL CIRCUIT COURT OF AUSTRALIA

ECOSWAY PTY LTD v FAIR WORK OMBUDSMAN [2013] FCCA 1734

Catchwords:
INDUSTRIAL LAW – Whether documents sent by Fair Work Ombudsman to applicant company and styled determinations of contravention were Compliance Notices pursuant to s.716 of the Fair Work Act – declaration to that effect sought by the applicant.

Legislation:  

Fair Work Act 2009, ss.357, 539, 546, 558, 570, 716, 701, 716, 717
Federal Circuit Court Act 1999, s.16
Acts Interpretation Act 1901, ss.15AB, 46
Fair Work Regulations2009, rr.5.04, 5.05
Legislative Instruments Act 2003 (Cth)

Morton v The Union Steamship Company of New Zealand Limited (1951) 83 CLR at 402

Applicant: ECOSWAY PTY LTD

Respondent: FAIR WORK OMBUDSMAN

File Number: ADG 182 of 2013

Judgment of: Judge Lindsay

Hearing date: 14 October 2013

Date of Last Submission: 14 October 2013

Delivered at: Adelaide

Delivered on: 14 October 2013

REPRESENTATION

Counsel for the Applicant: Mr Austin

Solicitors for the Applicant: Scales and Partners

Counsel for the Respondent: Ms F Knowles

Solicitors for the Respondent: Office of the Fair Work Ombudsman

ORDERS

1. The Application constituted by Paragraph 1 of the Final Order sought in the Application filed on 27 June 2013 is dismissed.

2. Further consideration of Paragraph 2 of the said application is adjourned to 28 October 2013 at 9.30am.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT ADELAIDE

ADG 182 of 2013

ECOSWAY PTY LTD

Applicant

And

FAIR WORK OMBUDSMAN

Respondent

REASONS FOR JUDGMENT

1. This is an application by Ecosway Pty Ltd for a declaration that two documents styled “Determination of Contraventions” (hereinafter referred to as the determination documents) dated 28 March 2013 and 24 May 2013 given by or on behalf of the respondent Fair Work Ombudsman to the applicant are invalid pursuant to s.716(3)(e) of the Fair Work Act2009. I think, also, it must be said that pursuant to s.716(3) the argument for invalidity also relates to the absence from the document of any reference to the matters set out in s.716(3)(d).

2. The application which is filed on 27 June 2013 also seeks a declaration that the applicant has not committed the contraventions set out in those documents which it describes as notices. Both applications for declaration are brought pursuant to s.717 of the Fair Work Act 2009 and I should indicate hereafter in these reasons that that Act will simply be referred to as “the Act”.

3. Section 717 provides that a person who has been given a notice under s.716 may apply to the Federal Court, the Federal Circuit Court or an eligible State or Territory Court for a review of the notice on either or both of the following grounds:

   a)The person has not committed the contravention set out in the notice;

   b)The notice does not comply with subsection 716(2) or (3). 

4. That is the sense in which the application for declarations must be understood; as being sought, in the light of the language of that section.  There is no application for a declaration of right, per se, pursuant to, for example, s.16 of the Federal Circuit Court Act 1999. 

5. Section 717 is headed Review of Compliance Notices. Compliance Notices is a heading that appears at the top of s.716. I will, without going through each of its provisions verbatim, summarise the effect of each of the provisions.

6. Section 716(1) provides that if an inspector of the Fair Work Ombudsman reasonably believes that a person has contravened one of the provisions that are then set out in subsections (a) to (f), ((a) to (f) are really compromised of what might be called entitlement provisions in relation to employment) then, pursuant to subsection (2), the inspector may give a person a notice requiring that person to do either or both of two things within a reasonable time. One is to take specified action to remedy the direct effects of the contravention referred to in the notice the other is to produce reasonable evidence of the person’s compliance with the notice.

7. Subsection (3) then sets out what else the notice has to include and apart from the names of the person to whom the notice is given and of the inspector and brief details of the contravention, it provides, in subsection (d), that it must explain that a failure to comply with the notice may contravene a civil remedy provision and that picks up, in particular, item 33 of the Table of Provisions that is set out in s.539(2) of the Act. Then (e) explains that the person may apply to the Court, this Court, being one of the Courts for review of the notice, on either or both of the following grounds:

   a)That the person has not committed a contravention set out in the notice;

   b)That the notice does not comply with subsection (2), or in other words that it does not contain those particulars. 

8. Subsection (4) then goes on to indicate that the notice cannot be given if a person has given an undertaking, under s.715, which is an alternative compliance provision relating to the procuring of undertakings by a person. S.716(4A) then deals with the question of what happens in relation to proceedings for civil penalties and, essentially, prohibits the inspector from applying for an order for civil penalties in respect of contraventions of workplace entitlements if he has given a notice and the person has complied with it or, alternatively, there has been a review, such as the review that is presently before me, undertaken in relation to it.

9. Section 716(4B) is a provision that protects the person who complies with the notice in the sense that it makes clear that the compliance with it cannot be taken to be an admission in relation to a contravention or does not itself constitute a finding that the person has contravened the relevant civil penalties provision. Subsection (5) then says that a person must not fail to comply with the notice given under the section and that, in itself, becomes a civil remedy provision and subsection 6 then provides for a reasonable excuse in relation to that. I have already dealt with the provisions of s.717 that then follow.

10. Manifestly, I will only grant the relief sought pursuant to s.717 if I am satisfied that the determination documents identified are, indeed, Compliance Notices pursuant to s.716. The application before me was followed closely by an application by the Fair Work Ombudsman in which the applicant was known as “the Respondent”. That application constitutes a separate proceeding and that application is for a declaration that the applicant in these proceedings contravened s.357(1). It is an application inter alia for a declaration that the applicant in these proceedings contravened that section.

11. That section provides as follows:

    A person (the employer) that employs, or proposes to employ, an individual must not represent to the individual that the contract of employment under which the individual is, or would be, employed by the employer is a contract for services under which the individual performs, or would perform, work as an independent contractor.

12. It then notes at the bottom of that subsection that it is a civil remedy provision and subsection (2) then goes on to provide a defence.  It provides that subsection (1) does not apply if the employer proves that when the representation was made he did not know and was not reckless as to whether the contract was a contract of employment rather than a contract for services.

13. The application by the Fair Work Ombudsman then goes on, and as a function of the declaration sought pursuant to s.357, seeks declarations as to miscellaneous contraventions of the civil remedy provisions of Part 4-1 of the Act. If the determination documents are not Compliance Notices, the application before me must be dismissed. I should note, strictly speaking, that I do not have to determine what the documents are. If they are not Compliance Notices, I am under no obligation to do that. The respondent in these proceedings suggests what they may be and I will discuss that in a moment; I think I can say that the respondent says that in a rather coy fashion in the sense that the respondent does not contend that they are Notices pursuant to Regulation 5.05 of the Fair Work Regulations 2009 but rather that they may be.

14. I should also note, as a preliminary matter – and I am not suggesting that either counsel approached the matter in this way- but it is not a matter of looking at whether or not the document matches the requirements that are provided in s.716(3) of the Act to see whether or not the document is constitutive of a Compliance Notice. If we could determine that it was not a s.716 Compliance Notice because it did not contain a matter that it was required to contain by s.716(3) then, of course, s.717(1)(b) (insofar as there is a reference to s.716(3) in it) would have no work to do. That is, my task is to determine what the determination documents purport to be or what they may be taken to be but if they are documents that purport to be or may be taken to be a s.716 Compliance Notice, they may yet be Compliance Notices that do not comply with the requirements of s.716(3).

15. Perhaps another matter to note at the outset is that whatever the documents are, they are not compliance notices issued pursuant to s.558 and the supporting Regulation 5.04 and the reason I can say that is, of course, because the documents do not specify the penalties. They certainly purport to specify amounts that ought to be paid by the applicant to the particular employee concerned but they do not specify the penalties. The purpose of s.558 is a matter that is addressed in the Explanatory Memorandum to the Fair Work Bill (2008) and, of course, I am looking at the Explanatory Memorandum in the sense that I am authorised to do so by s.15AB of the ActsInterpretation Act 1901 which provides that I may look at material not forming part of the Act that is capable of assisting me in the ascertainment of the meaning of a provision and, in particular, subsection (2) provides that:

    Without limiting the generality of that primary provision, the material that may be considered in accordance with that subsection and the interpretation of a provision of an Act includes

    and then:

    (e) any explanatory memorandum relating to the Bill containing the provision, or any other relevant document, that was laid before, or furnished to the members of the Houses of Parliament before provision was enacted.

16. And I should say that resort to such material pursuant to subsection (1) is only to be had if it is capable of assisting in the ascertainment of the meaning of it, but it has to be either:

    to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision … when the provision is ambiguous or obscure; or –

    secondly:

    the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable.

17. I take the time to refer to that provision in the context of s.558 because I will also have resort to the Explanatory Memorandums as it relates to s.716 itself.

18. In relation to s.558, the Explanatory Memorandum has this to say at para 2194:

    The use of an infringement notice scheme is appropriate where the fault element does not have to be proven ie where it is only necessary to show that an act or omission occurred but where a mental element of, for example, intent or recklessness does not need to be established.  An infringement notice scheme provides another option for inspectors to deal with non-compliance rather than Court proceedings to enforce a contravention.  The scheme provides for a pecuniary penalty –

19. And, of course, the section provides that the penalty must not exceed one-tenth of the maximum penalty that could have been levied or can be levied by the Court at the conclusion of proceedings under s.546.

20. So that is what the Explanatory Memorandum purports to say about the use of s.558 and regulation 5.04. It is helpful as far as it goes. Where, in the text of s.558, there is a basis given for the view expressed in the Explanatory Memorandum or there is an expression of what is said to be the purpose or the raison d’etre of the section is another matter altogether, of course. But that is what the Explanatory Memorandum purports to say about that.

21. Insofar as s.716 is concerned, the Explanatory Memorandum simply says at para 2673 that clause 716 of the Bill which is now s.716 of the Act sets out a mechanism for an inspector to issue a Compliance Notice and that this provides inspectors with another option to deal with non-compliance instead of pursuing Court proceedings. So it is of the same nature as s.558 in the sense that it is another option but the memorandum does not support it with the same helpful rationale.

22. Speaking of alternative remedies to proceedings, under part 4-1, another remedy is s.715, that is where an inspector obtains enforceable undertakings.  I am satisfied that whatever else the inspector is doing in this case, he is not seeking to extract enforceable undertakings. 

23. Section 715 is expressed as an option that the Fair Work Ombudsman can undertake as distinct from the reference to the inspector in s.716.

24. The first of the two determination documents, the document dated 28 March, is authored by an inspector and the person who signs the document describes themself as an inspector but also indicates in the signing clause that it is done on behalf of the Fair Work Ombudsman. The second of the two letters, the May letter, is authored by someone described as an assistant director on behalf of the Fair Work Ombudsman and so the first question to ask in that context is “Is that person a Fair Work inspector?” and I think the answer to that is “Yes” and that is on account of s.701 of the Act which provides that the Fair Work Ombudsman is a Fair Work inspector by force of that section.

25. What the respondent suggests is that the two determination documents are Regulation 5.05 notices.  Regulation 5.05, under the heading “Division 3 – Office of the Fair Work Ombudsman”, then is sub‑headed “Powers and functions of inspectors – notification of failure to observe requirements” and goes on to provide:

    If an inspector is satisfied that a person has failed to observe a requirement imposed by or for the Act, these Regulations or a fair work instrument, the inspector may, by notice in writing:

    (a) inform the person of the failure; and

    (b) require the person to take the action specified in the notice, within the period specified in the notice, to rectify the failure; and

    (c) require the person to notify the inspector in accordance with the notice of any action taken to comply with the notice; and

    (d) advise the person of the actions the inspector may take if the person fails to comply with the notice.

26. Ms Latz, who was the author of letter 1 but not letter 2, says in her affidavit that the documents are what they describe themselves to be, that is “Determinations of Contravention”.  She herself does not say in her letter or her determination that it is a Regulation 5.05 notice.  That was a proposition, or rather a suggestion, that was advanced by the respondent’s counsel before me.  “Determinations of Contravention” are not a species of notice or other document described in the Fair Work Act 2009.

27. Section 716 is found in subdivision (d) of Division 3 of Part 5-2 of Chapter 5 of the Act headed “Functions and Powers of Fair Work Inspectors”. And as I have already noted, regulation 5.05 is found in the same division of the Regulations, save that the heading is “Office of the Fair Work Ombudsman”.

28. Turning to a brief summary of the contents of each of the letters, the first determination of contravention in the March determination document details the investigation of the Fair Work Ombudsman’s office in relation to the employee, Ms Wardale. It says that she is an employee of the applicant and therefore that s.357(1) of the Act, the so-called sham contracting provisions – described by the Act as such – have been contravened. The letter goes on to say why it is the case that Ms Latz has formed that view and says so at some length in terms of a description of various indices which indicate an employment rather than a contractual relationship. The letter then goes on to detail the consequences of that determination by her in terms of that entailing, she says, that there have been miscellaneous breaches of the civil remedy provisions.

29. The determination letter then requires, (top of page 16 of the letter), that those miscellaneous breaches be remedied by a payment to Ms Wardale in the amount of $31,877.61.  The determination letter then goes on to detail what will happen if civil remedy proceedings are brought.  It then requires that an answer in writing be provided and that is something that is set out at the bottom of page 16 in bold print to wit:

    You must advise me in writing of the action you have taken to comply by 12 April 2013.

30. The March determination letter does not comply, manifestly, with s. 716(3)(d) or (e). I think there was some argument advanced on behalf of the applicant that in some way that a reference to subsection (d) can be ascertained in the letter but I find that is not the position. Subsection (d) requires that:

    The notice must explain that a failure to comply with the notice may contravene a civil remedy provision.

31. And that is picking up s.716(5). Whatever else it does in relation to its reference to the civil remedy provisions, it does not specify that a failure to comply with the notice itself may be a contravention of a civil remedy provision.

32. The applicant in this case, of course, is in the invidious position of, on the one hand pointing to the absence of s.716(3) material in the letter as matters justifying review, but the absence itself, of course, is a matter that undercuts the opportunity of fortifying the submission that it is in fact a s.716 Compliance Notice.

33. The March determination letter implicitly says that s.357(1) has been contravened but does not use the word “contravention.” That can be found at page 9 about point 7 on the page, where it says, or the heading is:

    Matters determined by Fair Work inspector in relation to subsection 357(1). 

34. The Fair Work Ombudsman has found that the arrangements that the company represented to Ms Wardale as being contract for service, were in fact a contract of employment.

35. The second of the letters, that is the May determination letter, confirms that in the period between the two documents, nothing has been put by the applicant in response to the first document that has altered the view that the respondent has in relation to s.357 of the Act, that is the view it takes in relation to it being a contract for service.

36. It recalibrates, in a minor way, the details of the miscellaneous civil remedy provision breaches in ways that both disadvantage and advantage the applicant, although the bottom line as it were, is that the requirement – and I will come back to that expression in a moment – for a rectification is in an amount slightly in excess of that in the first letter, this time, an amount of $32,116.80.

37. It says that litigation will be brought if that sum is not paid, unlike letter 1, which only indicated what would happen if proceedings were brought.  It is the bottom of page 3 of the letter, under the heading, “Action required” it says:

    Ecosway is required to rectify the underpayment contraventions identified above.

38. Once again, the letter implicitly says that s.357 has been contravened. That arises on page 2 of the letter, where in the second paragraph it refers to the matters put in the applicant’s solicitor’s correspondence but then says it has found that:

    These matters do not alter the Fair Work Ombudsman’s determination that Ms Wardale was an employee of ecosway, and the Fair Work Ombudsman’s determination of ecosway’s associated contraventions as previously notified.

1. So again, there is an implicit finding of contravention, but the determination letter falls short of specifying that there has been a contravention as such. And I mention that matter because it may be a matter of significance given the language of s.717(1)(a) which provides that the first ground for review is that the person has not committed:

   a contravention set out in the notice.

2. The inspector, of course, cannot include in his s.716 notice, if he wants to use that remedy, reference to breaches of the Act. The only matters he can include in his Compliance Notice are failures to adhere to, what can, I think, properly be described as “entitlement provisions.” So it is the failure by the employer to adhere to what might be called “entitlement provisions” that are the only matters that can be the subject of the Compliance Notice.

3. Section 357(1) of the Act of course, raises the issue of a breach of the Act itself, not a failure to accord entitlement provisions. True it is, that all of the breaches the notice does address, all of the failures to satisfy entitlement provisions that the notice does address, are contingent on Ms Wardale being an employee and not a contractor but that issue itself cannot be the subject of something that describes itself as a Compliance Notice or that must be taken to be a Compliance Notice.

4. The inspector has compliance powers but not of course, adjudicative powers. I could not conduct a review pursuant to s.717 as to the matter addressed in (a) (that is whether a person has committed a contravention set out in the notice) without determining whether s.357(1) had been breached and the corollary of that, whether the defence set out in s.357(2) had or had not been made out.

5. So if it a Compliance Notice, I would be determining that issue in circumstances where there is nothing to prevent the Fair Work Inspector, during the course of the review proceedings, for applying for an order under s.539 for the breach of s.357 and indeed, even if the Fair Work Inspector did not do that, it is something that an individual or an industrial association can do and that is something that can be done now.

6. More significantly, this is because the s.357(1) contravention is not a contravention set out in the notice as provided by section 717(1)(a). This is unsurprising, of course. It is not something that is set out in the notice because it is not an entitlement not provided by the employer leading to a request that he comply with that failure by remedying the direct effects of the failure.

7. The predominant subject matter of the first determination letter is the contravention of the statute, something that itself cannot be remedied by compliance with the entitlement provisions and not something that can be the subject matter of the s.716 notice. The remedies that are identified in the letter and that the employer is required to make or to give, follow on only if the contention that the statute has been contravened is assumed or conceded by the employer.

8. I have been focusing on determination letter 1. Determination letter 2 is really an adjunct to determination letter 1. Letter 2 is based on the same pre-requisite, that is all of the requirements relating to compliance only arise upon the assumption or concession by the employer that s.357 of the Act has been breached and differs from the first letter only in that the ancillary matters or the consequential matters arising from that assumption or concession are discussed in less detail and are somewhat different.

9. There is a tweaking, as it were, of the consequential compliance difficulties which that assumption or concession is said to give rise to.  And the other way in which letter 2 differs is that there is a less detailed discussion of the grounds for the Fair Work Ombudsman’s view that Ms Wardale was an employee and not a contractor. 

10. Those circumstances, the primary subject matter of the letter itself and the inability of the notice to deal with that primary subject matter in the way that I have detailed, indicates to me that the description of the determination letters as s.716 notices is inappropriate.

11. The determination letters do not identify themselves as s.716 notices, that is a factor. It is far from being a determinative factor itself, but it is a factor to be taken into account and essentially, I am not prepared to find that they are such s.716 notice by another name or a s.716 notice without a name.

12. That is so, despite some reservations that arise in relation to that finding on account of a number of matters put by the applicant.  The first of them was that the applicant had lost the chance, if I may use the expression “to put things right” before civil proceedings were instituted which, in a sense, is the raison d’être of the provision. 

13. That submission was put in support of the argument that the Fair Work Ombudsman should be held to account for sending a document that, for reasons I will discuss in a moment, could so easily be taken to be a s.716 notice. Assuaging my concerns though about that lost opportunity on the part of the applicant, are the following matters.

14. Firstly, whether or not it was described as a s.716 notice would not prevent or have any bearing upon the institution of proceedings about the s.357 breach. It never could do that. And secondly, that a chance to comply, if it be that, with the notice was already given to the company by the first letter, and not taken up adequately by the time of the second letter.

15. The other matter that causes me significant reservation was that the attempt to cloak the determination letters with the authority of Regulation 5.05 was less than wholly convincing.  It certainly appears that there is substance in the submission of the applicant that the Act and the regulations set up parallel compliance by notice procedures. 

16. I am not ignoring the other opportunities that are given by Regulation 5.04 and the seeking of undertakings, but insofar as the Fair Work Ombudsman or the inspector purports to seek compliance by notice, there certainly appears to be a parallel procedure.  Both require compliance, and indeed, the Regulation covers a broader field of matters that can be addressed in the notice. The Regulation dispenses with the protections provided by s.716(4)(b). It gives no opportunity for review. It does not operate as a stay of proceedings. It is, in my view, a legislative instrument as defined by the Legislative Instruments Act2003 (Cth). Even if it were not, it would be a provision that was covered by s.46 of the Acts Interpretation Act 1901, and, in my view, the Regulation cannot be read down so as to provide those protections and benefits which are provided by the legislative procedure of s.716. It would simply be inoperative.

17. It is a matter of identifying the way in which s.716 purports to regulate and moderate and modify the use of the compliance procedure. That consideration is a consideration that was taken into account by the High Court in Morton v The Union Steamship Company of New Zealand Limited (1951) 83 CLR at 402, when the High Court came to the conclusion that the Regulation in that case was invalid. The expression the High Court uses, which would be apposite to a consideration of the use of the Regulation for the purposes which the legislation indicates s.716 is put – the reason in my view it would be held to be inoperative ‑ is on account of what we can tell from the legislative provision about the conditions upon which the compliance notice procedure was intended to operate.

18. As the High Court say in Morton at page 410:

    The ambit of the power must be ascertained by the character of the statute and the nature of the provisions it contains.  An important consideration is the degree to which the legislature has disclosed an intention of dealing with the subject with which the statute is concerned. 

19. So I would have had considerable difficulty in characterising the determination letters as Regulation 5.05 notices. But I have already said that I do not, in my view, have to define what the determination letters are, or can be described as, so long as I am satisfied what they are not. But it must be observed that the determination letters have much in common with a s.716 notice, and those matters were described by counsel, and I do not propose to repeat them.

20. The fact remains though that if it is not a s.716 notice and was not intended to be, it should say so. If it is going to address matters and be set out as it is and use the quasi-coercive language that it does, and if it is to so closely resemble s.716 notice, but is not one, it should say that it is not, and it certainly should not describe itself in quasi-official terminology closely aligned to the function of the s.716 notice as “determination of contraventions”. If it is a letter before action, for example, it should simply be able to speak for itself as such.

21. One of the other matters that caused me some reservations in coming to the conclusion I have, that the document does not purport to be, and should not be taken to be, a s.716 notice, is that one of the consequences of the first letter, one of the things it sought and that were provided, were documents which have been, or will be, useful or relevant to the Fair Work Ombudsman in his prosecution of the civil remedy provisions, and I have taken that into account, but I am not satisfied that they were not documents that would have otherwise been readily obtainable by the inspector pursuant to uncontroversial provisions of the legislation in any event.

22. Notwithstanding my principal finding, I have now taken some time to identify those matters that went to my reservations. I have done that firstly, in discharge of my obligations to give reasons and to address the very comprehensive matters that were put on behalf of the applicant; but secondly, to ground this remark: that these matters would obviously have a bearing on any application by the Fair Work Ombudsman reliant upon s.570(2)(a) of the Act, should the Fair Work Ombudsman consider it appropriate to apply for an order for costs. The reservations I have mentioned are likely to be matters to which I would have regard if there were to be any application by the Fair Work Ombudsman in that regard.

23. I make no comment though about any application by the unsuccessful applicant for costs if that were to be a matter that was sought in reliance upon the provisions of section 570(2)(b).

24. I order accordingly.

I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for judgment of Judge Lindsay

Associate: 

Date:  1 November 2013