Fair Work Ombudsman v Abdul Wahid and Sons Pty Ltd
[2019] FCCA 297
•15 February 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v ABDUL WAHID & SONS PTY LTD & ANOR | [2019] FCCA 297 |
| Catchwords: INDUSTRIAL LAW – Assessment of pecuniary penalties for admitted contraventions of civil remedy provisions of the Fair Work Act 2009 (Cth) and of the Fair Work Regulations 2009 (Cth) – pecuniary penalties imposed. |
| Legislation: Fair Work Act 2009 (Cth), ss.12, 436(1), 550, 535, 536, 539, 546, 557, 712 Fair Work Regulations 2009 (Cth), reg,3.33, 3.44, 3.46, 4.01A |
| Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The BKH Contractors Case) (No 2) [2018] FCA 1563 Kelly v Fitzpatrick [2007] FCA 1080 Maslen v Core Drilling Services Pty Ltd [2015] FCCA 290 Sayed v Construction, Forestry, Mining and Energy Union [2007] FMCA |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | ABDUL WAHID & SONS PTY LTD ACN 074 677 820 |
| Second Respondent: | ARIF RANA |
| File Number: | SYG 3886 of 2017 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 6 February 2019 |
| Date of Last Submission: | 6 February 2019 |
| Delivered at: | Sydney |
| Delivered on: | 15 February 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms V Bulut |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Solicitors for the Respondents: | Mr H Adams of Adams & Partners Lawyers |
THE COURT DECLARES THAT
The first respondent contravened the following civil remedy provisions:
(a)subregulation 3.44(1) of the Fair Work Regulations 2009 (Cth) (FW Regulations) by making and keeping employee records required to be kept by reg.3.33(2) of the FW Regulations in the period from 3 October 2016 to 30 October 2016 (Audit Period), being the hours worked by a casual employee, knowing that those records were false or misleading;
(b)subregulation 3.44(1) of the FW Regulations, by making and keeping employee records required to be kept by reg.3.33(3)(d) of the FW Regulations in the Audit Period, being the details of the penalty rate that an employee is entitled to, knowing that those records were false or misleading;
(c)subregulation 3.44(6) of the FW Regulations, by making use of entries in the employee records, by providing those records to the offices of the Applicant on 4 January 2017, knowing that those records were false or misleading;
(d)subregulation 3.44(6) of the FW Regulations, by making use of entries in the employee records, by providing those records to the offices of the Applicant on 5 January 2017, knowing that those records were false or misleading;
(e)subsection 536(1) of the Fair Work Act 2008 (Cth) (FW Act) by failing to give pay slips to its employees within one working day of payment prior to 1 October 2015; and
(f)subsection 536(2) of the FW Act by failing to ensure that pay slips that it gave to its employees included accurate information prescribed by the FW Regulations in the Audit Period.
The second respondent was involved, pursuant to s.550 of the FW Act, in each of the contraventions of the first respondent set out in paragraph 1 above.
THE COURT ORDERS THAT
The first respondent pay pecuniary penalties in the sum of $66,168 pursuant to s.546(1) of the FW Act for its contraventions set out in paragraph 1 above.
The second respondent pay pecuniary penalties in the sum of $11,540 pursuant to s.546(1) of the FW Act for his involvement in each of the first respondent’s contraventions set out in paragraph 1 above.
Pursuant to s.546(3)(a) of the FW Act the first respondent and the second respondent each pay the penalties referred to in paragraphs 3 and 4 to the Consolidated Revenue Fund of the Commonwealth by 15 March 2019.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3886 of 2017
| FAIR WORK OMBUDSMAN |
Applicant
And
| ABDUL WAHID & SONS PTY LTD ACN 074 677 820 |
First Respondent
| ARIF RANA |
Second Respondent
REASONS FOR JUDGMENT
Introduction
The applicant (FWO) applies under s.546 of the Fair Work Act 2019 (Cth) (FW Act) for orders that the respondents pay pecuniary penalties because of their admitted contraventions of provisions of the FW Act and of the Fair Work Regulations 2009 (Cth) (FW Regulations). The FWO also seeks declarations that reflect the respondents’ admitted contraventions of the FW Act and the FW Regulations.
I will begin by setting out the relevant admitted facts, the provisions of the FW Act and the FW Regulations the respondents admit they contravened, and the contraventions themselves.[1]
[1] These are contained in a document titled “Statement of Agreed Facts” (SAF) which I marked as exhibit “A”.
Admitted facts and contraventions
The first respondent (AWS) operated two service stations under the name of “Caltex”, one at Dural (Caltex Dural), and one at Ermington (Caltex Ermington).[2] Between 3 and 30 October 2016 (Audit Period) AWS employed 15 persons (Employees) as console operators at the two service stations.[3] Some of the Employees were employed on a casual basis, and others as full-time or part-time employees.[4]
[2] SAF, [5]
[3] SAF, [8], [9]
[4] SAF, [9]
During the Audit Period the Vehicle Manufacturing, Repair Services and Retail Award 2010 (Award) covered and applied to AWS and the Employees in relation to their employment at the service stations.[5] Each of the Employees fell within the classification of a Vehicle Industry RS&R employee – level 4.[6]
[5] SAF, [11]
[6] SAF, [12]
AWS created pay slips using a payroll data management system known as “Xero” by calculating hours of work and amounts paid to match the fixed rates in Xero, rather than recording hours worked based on the actual hours worked by, and actual amounts owing, to the Employees.[7]
[7] SAF, [30]
The second respondent, Mr Rana, was a director, the sole secretary, and a shareholder of AWS. He was responsible for the overall direction, control, management, and supervision of AWS’s operations. Each of the Employees reported to Mr Rana; and Mr Rana was responsible for ensuring AWS complied with its obligations under the FW Act, including its obligations to its employees.[8]
[8] SAF, [6]
On 26 October 2016 and 5 November 2016 the FWO received separate anonymous reports from two individuals alleging underpayments and falsification of records while employed by AWS at Caltex Dural;[9] and on 26 October 2016 the FWO received a further anonymous report of underpayment and falsification at Caltex Ermington.[10]
[9] SAF, [13]
[10] SAF, [14]
As an employer AWS was subject to a number of obligations under the FW Act. One of these was the obligation or set of obligations provided for by s.535(1) of the FW Act, namely, that an “employer must make, and keep for 7 years, employee records of the kind prescribed by the regulations in relation to each of its employees”. Regulations have been prescribed, the relevant regulations being reg.3.33(2) and 3.33(3)(d) of the FW Regulations, which are as follows:
(2)If the employee is a casual or irregular part‑time employee who is guaranteed a rate of pay set by reference to a period of time worked, the record must set out the hours worked by the employee.
(3)If the employee is entitled to be paid:
. . .
(d)a penalty rate
the record must set out details of the payment, bonus, loading, rate, allowance or entitlement.
Also relevant is reg.3.44(1) and 3.44(6) of the FW Regulations which are as follows:
(1)An employer must ensure that a record that the employer is required to keep under the Act or these Regulations is not false or misleading to the employer’s knowledge.
. . . .
(6)A person must not make use of an entry in an employee record made and kept by an employer for this Subdivision if the person does so knowing that the entry is false or misleading.
Finally, there is s.536 of the FW Act which provides:
(1)An employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work.
(2)The pay slip must:
(a) if a form is prescribed by the regulations—be in that form; and
(b) include any information prescribed by the regulations.
The information that must be included in pay slips has been prescribed by reg.3.46 of the FW Regulations. Relevant to the proceeding before me is reg.3.46(3) of the Regulations, which provides:
If the employee is paid at an hourly rate of pay, the pay slip must also include:
(a) the rate of pay for the employee's ordinary hours (however described); and
(b) the number of hours in that period for which the employee was employed at that rate; and
c)the amount of the payment made at that rate.
Acting on the authority of s.712 of the FW Act, on 8 December 2016 Fair Work Inspector Mr Lam (FWI Lam), issued a notice to AWS to produce records or documents in relation to the Employees (December NTP).[11] On 4 January 2017 AWS responded to the December NTP by producing documents (January Response), and on 5 February 2017 AWS produced additional documents in response to the December NTP (February Response).
[11] SAF, [15]
Contraventions of reg.3.44(1) FW Regulations
As part of the January Response AWS produced documents that purported to describe the hours worked and the amounts paid to the Employees (Payroll Records) and, as part of the February Response, AWS produced documents purporting to record the hours worked by Employees on 5 February 2017 (Timesheets).[12]
[12] SAF, [28]
The Payroll Records and Timesheets produced by AWS did not accurately record the hours worked by the Employees because they were created in response to the December NTP and relied on inaccurate calculations of hours worked and amounts paid as recorded in Xero.[13]
[13] SAF, [31]
Because the Payroll Records and Timesheets produced by AWS did not accurately record the hours worked by the Employees the Payroll Records and Timesheets were false or misleading.[14] Further, when AWS made the Payroll Records and Timesheets, AWS knew they were false or misleading;[15] and AWS failed to ensure that each of the Payroll Records and Timesheets were not false or misleading to its knowledge.[16] AWS, therefore, contravened reg.3.44(1) of the FW Regulations.
[14] SAF, [32]
[15] SAF, [33]
[16] SAF, [34(a)]
Further, during the Audit Period the Employees were entitled under the Award to penalty rates for work performed on a Saturday, Sunday, or on a public holiday.[17] The Payroll Records record amounts AWS paid to the Employees for work performed on a Saturday, Sunday, or public holiday, but they did not accurately set out the details of the penalty rate to which the Employees were entitled to be paid.[18] For that reason the Payroll Records were false or misleading.[19] Further, when AWS made the Payroll Records, AWS knew they were false or misleading;[20] and AWS failed to ensure that each of the Payroll Records was not false or misleading to its knowledge.[21] AWS, therefore, also contravened reg.3.44(1) FW Regulations.
[17] SAF, [35]
[18] SAF, [38]
[19] SAF, [39]
[20] SAF, [40]
[21] SAF, [41(a)]
Contraventions of reg.3.44(6) of the FW Regulations
By producing to the FWO the Payroll Records as part of the January Response, AWS made use of an entry in an employee record,[22] and when AWS produced the Payroll Records as part of the January Response it knew the entry was false or misleading.[23] AWS, therefore, contravened reg.3.44(6) of the FW Regulations.
[22] SAF, [43]
[23] SAF, [44]
Further, by producing to the FWO the Timesheets as part of the February Response, AWS made use of an entry in an employee record,[24] and when AWS produced the Payroll Records as part of the February Response it knew the entry was false or misleading.[25] AWS, therefore, contravened reg.3.44(6) of the FW Regulations.
[24] SAF, [47]
[25] SAF, [48]
Contraventions of s.536(1) of the FW Act
On or about 1 April 2011 one of the Employees, Mr Rafique, commenced employment with AWS and on or about 1 July 2011 another of the Employees, Mr Bajwa, commenced employment with AWS. During their employment with AWS up to 1 October 2015 AWS did not provide Mr Rafique or Mr Bajwa any pay slips.[26] For these reasons, AWS contravened s.536(1) of the FW Act.
[26] SAF [51]-[52]
Contraventions of s.536(2) of the FW Act
During the Audit Period AWS provided to the Employees pay slips that were created using time and wage information contained in Xero.[27] The pay slips AWS provided to the Employees stated the rates of pay for each of the Employees’ ordinary hours. For reasons noted in paragraph 14 of these reasons, the pay slips AWS provided to the Employees inaccurately stated the number of hours in that period for which each Employee was paid, and inaccurately stated the amounts of the payments made at those rates.[28] Further, the pay slips provided to the Employees during the Audit Period did not contain information reg.3.46 of the FW Regulations required be included in pay slips (Required Information).[29] AWS, therefore, contravened s.536(2) of the FW Act.
[27] SF, [56]
[28] SAF, [55]
[29] SAF, [54]
Accessorial liability of Mr Rana
During the Audit Period Mr Rana was the person ultimately responsible for creating employee records, including the Payroll Records and the Timesheets, and he knew that the Payroll Records and the Timesheets were false or misleading.[30] Mr Rana was also the person ultimately responsible for AWS’s payroll practices, including the creating and giving of pay slips to the Employees.[31] Mr Rana knew that pay slips were not given to Mr Rafique before 1 October 2015,[32] and Mr Rana knew that pay slips given to the Employees during the Audit Period did not contain the Required Information.[33] For these reasons Mr Rana was involved in each of AWS’s contraventions of reg.3.44(1) and reg.3.44(6) of the FW Regulations, and of s.536(1) and s.536(2) of the FW Act.
[30] SAF, [58]
[31] SAF, [59(a)]
[32] SAF, [59(b)]
[33] SAF, [59(c)]
Statutory framework
Subsection 546(1) of the FW Act provides that this Court may, on application, order a person to pay a pecuniary penalty that the Court considers is appropriate if the Court is satisfied the person has contravened a “civil remedy provision”. That expression is defined in s.539 of the FW Act to include the provisions identified in column 1 of the table to s.539(2) of the Act. Sections 535 and 536 of the FW Act are provisions included in that column. In addition s.539(3) of the FW Act provides the regulations may provide that a provision set out in the regulations is a “civil remedy provision”. Regulation.4.01A of the FW Regulations has made such provision. Subregulation 4.01A(1) provides that the regulations identified in column 1 of the table to reg.4.01(2) of the FW Regulations is a “civil remedy provision”. Subregulation 4.01A(2) of the FW Regulations provides that the persons and courts identified, and the maximum penalties provided for, in the table in reg.4.01A(2) are to be treated as being included in the table in s.539(2) of the FW Act.
Subsection 546(2) of the FW Act provides that the pecuniary penalty the Court may impose must not, where the person is an individual, be more than “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2)” and, if the person is a body corporate, must not be more than five times “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2)”. The maximum penalty units for contraventions of s.535 and s.536 of the FW Act are 30 penalty units for an individual and 150 for a body corporate; and the maximum penalty units for contraventions of reg.3.44 of the FW Regulations is 20 penalty units for an individual, and 100 penalty units for a body corporate.
Finally, I need to refer to s.12 of the FW Act which provides that “penalty unit” has the meaning given by s.4AA of the Crimes Act 1914 (Cth). It is common ground that $180 was the “penalty unit” provided for by s.4AA for the period 31 July 2015 to 30 June 2017.
Principles
The parties agree that the approach for assessing penalties is that outlined by Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai:[34]
(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].
[34] [2017] FCA 1301, at [36]
In Fair Work Ombudsman v A To Z Catering Solution Pty Limited (No.3),[35] I noted that step 3 identified by Bromwich J in this passage (which I understand is intended to give effect to the “one transaction principle”) suggests that it is appropriate to further group contraventions after the application of s.557(1) of the FW Act. For the reasons I gave in A To Z Catering Solution,[36] the proper approach is to assess penalties for each contravention after the application of s.557(1) and then to consider:[37]
whether the conduct giving rise to separate contraventions was such that the separate imposition of penalties would be effectively imposing multiple penalties for either the same conduct or for overlapping parts of the same conduct which separately went to make out the separate contraventions; and
ensure that a person who has engaged in contravening conduct is not punished twice for the same conduct and to ensure that the total penalty imposed in respect to the contraventions is “just and appropriate” and not disproportionate.
[35] [2018] FCCA 3574, at [27]
[36] [2018] FCCA 3574, at [28]
[37] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The BKH Contractors Case) (No 2) [2018] FCA 1563, [59] (Flick J)
I propose to follow that approach.
In ABCC v CFMEU the Full Federal Court provided the following guidance to assessing penalties:[38]
The fixing of a pecuniary penalty involves the identification and balancing of all the factors relevant to the contravention and the circumstances of the defendant, and making a value judgment as to what is the appropriate penalty in light of the protective and deterrent purpose of a pecuniary penalty.
In general terms, the factors that may be relevant when fixing a pecuniary penalty may conveniently be categorised according to whether they relate to the objective nature and seriousness of the offending conduct, or concern the particular circumstances of the defendant in question.
The factors relating to the objective seriousness of the contravention include: the extent to which the contravention was the result of deliberate, covert or reckless conduct, as opposed to negligence or carelessness; whether the contravention comprised isolated conduct, or was systematic or occurred over a period of time; if the defendant is a corporation, the seniority of the officers responsible for the contravention; the existence, within the corporation, of compliance systems and whether there was a culture of compliance at the corporation; the impact or consequences of the contravention on the market or innocent third parties; and the extent of any profit or benefit derived as a result of the contravention.
The factors that concern the particular circumstances of the defendant, particularly where the defendant is a corporation, generally include: the size and financial position of the contravening company; whether the company has been found to have engaged in similar conduct in the past; whether the company has improved or modified its compliance systems since the contravention; whether the company (through its senior officers) has demonstrated contrition and remorse; whether the company had disgorged any profit or benefit received as a result of the contravention, or made reparation; whether the company has cooperated with and assisted the relevant regulatory authority in the investigation and prosecution of the contravention; and whether the company has suffered any extra-curial punishment or detriment arising from the finding that it had contravened the law.
[38] [2017] FCAFC 113, [100]-[104]
It would also be useful to refer to what the Full Federal Court said in the context of assessing pecuniary penalties for contraventions of the Trade Practices Act 1974 (Cth) in Flight Centre Ltd v Australian Competition and Consumer Commission (No 2):[39]
[T]he task is one that is evaluative, taking into account all the circumstances of the case, not to be reached mechanically or by some illusory process of exactitude, but rather by evaluation that is articulated to a point (but no further) that is useful and meaningful. One starts the process by giving proper weight to the statutory maximum as referable to the most serious kind of contravention.
[39] [2018] FCAFC 53, at [55]
The parties have proceeded on the common assumption that the non-exhaustive considerations Tracey J identified in Kelly v Fitzpatrick,[40] which his Honour adopted from the judgment of Mowbray FM in Mason v Harrington Corporation Pty Ltd,[41] are relevant to assessing the amount of penalties. Those considerations are:
[40] [2007] FCA 1080, [14]
[41] [2007] FMCA 7
a)the nature and extent of the conduct which led to the breaches;
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 breaches;
d)whether there had been similar previous conduct by the respondent;
e)whether the breaches 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 breaches were deliberate;
h)whether senior management was involved in the breaches;
i)whether the party committing the breach had exhibited contrition;
j)whether the party committing the breach had taken corrective action;
k)whether the party committing the breach 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.
Also relevant is the maximum penalty for the contravention provided for by the FW Act; and here I need only refer to the following passage from the judgment of Flick J in The BKH Contractors Case (No 2):[42]
In undertaking the task of assessing and quantifying the penalties to be imposed, the maximum penalty prescribed by the Commonwealth legislature for a specific contravention serves as a “yardstick” against which the assessment of penalties is generally to proceed . . . .
[42] [2018] FCA 1563, [19]
Grouping
The parties agree there are seven contraventions. These are:
a)Contrary to reg.3.44(1) of the FW Regulations, AWS failed to ensure that the record of the hours worked by a casual employee as recorded in the Payroll Records was not false or misleading to its knowledge (Contravention 1).
b)Contrary to reg.3.44(1) of the FW Regulations, AWS failed to ensure that the record of the hours worked by a casual employee as recorded in the Timesheets was not false or misleading to its knowledge (Contravention 2).
c)Contrary to reg.3.44(1) of the FW Regulations, AWS failed to ensure that the record concerning the penalty rates to which the Employees were entitled as recorded in the Payroll Records was not false or misleading to its knowledge (Contravention 3).
d)Contrary to reg.3.44(6) of the FW Regulations, AWS made use of an entry in an employee record made and kept under the FW Act by producing the Payroll Records to the FWO in January 2017 knowing that the entry was false or misleading (Contravention 4).
e)Contrary to reg.3.44(6) of the FW Regulations, AWS made use of an entry in an employee record made and kept under the FW Act by producing the Timesheets to the FWO in February 2017 knowing that the entry was false or misleading (Contravention 5).
f)Contrary to s.536(1) of the FW Act, AWS failed to provide pay slips within one working day to Mr Bajwa and Mr Rafique during their employment (Contravention 6).
g)Contrary to s.536(2) of the FW Act, AWS failed to provide pay slips with the Required Information (Contravention 7).
The parties further agree that that the first two contraventions should be grouped into one contravention. The parties disagree, however, about the application of s.557(1) of the FW Act to Contraventions 4 and 5. Subsection 557(1) provides as follows:
For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection(2) are, subject to subsection(3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
Subsection 557(2) includes s.535 and s.536 of the FW Act, and also includes “any other civil remedy provisions prescribed by the regulations”. Regulation 3.44 of the FW Regulations has been prescribed by reg.4.03A for the purposes of s.557 of the FW Act.
The respondents submit that Contraventions 4 and 5 should be treated as one contravention. They submit that the production of documents by means of the January Response and the February Response was made in response to the one notice to produce and, for that reason, the legal and factual elements that led to the two contraventions are not sufficiently separate to warrant their being treated separately.[43] The FWO, on the other hand, submits that the conduct constituting the two contraventions is distinct.
[43] First & Second Respondents’ Written Submissions as to Penalty [3.8(b)]
The resolution of the competing submissions turns, at least in substantial part, on the extent to which the elements of each contravention overlap. A contravention of reg.3.44(6) of the FW Regulations consists of making use of an entry in an employee record made and kept by an employer if the person does so knowing the entry is false or misleading. On the admitted facts AWS used entries in an employee record that it knew were false or misleading on two occasions, once by making the January Response, and once by making the February Response. The two uses are separated by time; and the entries contain different information. To some extent the two uses can be attributed to the one cause, the December NTP. But matters additional to the December NTP induced the February Response. AWS made the February Response after Mr Rana had two telephone conversations with Fair Work Inspector Ranieri on 31 January 2017,[44] and after Fair Work Inspector Ranieri sent an email to Mr Rana on 1 February 2017.[45]
[44] Affidavit of J L Irwin, page 178
[45] Affidavit of J L Irwin, pages 179-181
In my opinion, the two contraventions of reg.3.44(6) of the FW Regulations do not arise out of the same course of conduct for the purposes of s.557(1) of the FW Act and, for that reason, they are not to be treated as one contravention. The end result, then, is that Contraventions 1 and 2 are to be treated as one contravention, and each of the remaining five contraventions is to be treated as a separate contravention.
Relevant considerations
I now consider the factors relevant to the assessment of penalties.
Nature, extent, and circumstances of contravening conduct
The FWO refers to a number of matters. One is that the contraventions were made in relation to vulnerable employees. They were employed in an industry requiring unskilled labour, and most, if not all, of the Employees were from migrant backgrounds.[46] The FWO submits that without proper pay slips the Employees were significantly disempowered, and created “a structure within which breaches of the industrial laws can easily be perpetrated”.[47] The FWO also refers to the period for which AWS had not provided pay slips. As for the contraventions of reg.3.44(1) and reg.3.44(6) the FW Regulations refers to the fact that the use of the false or misleading information consisted of communicating it to a regulator of the Commonwealth. All these matters weigh in favour of imposing penalties for contraventions of s.536(1) and s.536(2) of the FW Act and reg.3.44(1) and reg.3.44(6) of the FW Regulations at the higher end of the scale.
[46] Applicant’s Penalty Submissions, [43]
[47] Applicant’s Penalty Submissions, [45]. The quote is from the judgment of Riethnuller FM (as his Honour then was) in Fair Work Ombudsman v Taj Palace Tandoori India restaurant Pty Ltd [2012] FMCA 258, [67].
The respondents accept the contraventions are serious. They submit, however, that the contraventions arose “from a clear mismanagement of the payroll process”. They submit AWS is a “small [to] medium” enterprise and lacked the controls and processes necessary to ensure compliance with the payroll and employee obligations under the FW Act and the FW Regulations.[48] The respondents rely on evidence given by Mr Rana about AWS’s method for paying and calculating wages.[49] The method consisted of recording the numbers of hours employees worked each week, and the employees being paid an amount calculated by multiplying each employee’s hourly rate by the number of hours the employee worked.
[48] First & Second Respondents’ Written Submissions as to Penalty [3.10]
[49] Affidavit of M A Rana, [6], [7]
It is difficult to give any weight to this evidence. It appears to describe the record keeping practices of AWS in general. The contraventions of reg.3.44(2) and reg.3.44(6) of the FW Regulations, however, relate to documents it is admitted AWS created after it received the December NTP. These documents were not created solely by causing them to be reproduced from information that had been recorded electronically. Much of the information AWS produced to the FWO was recorded by hand.[50] If, as AWS submits, it had inadequate systems to accurately or easily record the hours its employees work, and the rates to which they were entitled to be paid, such shortcomings would have been apparent by the time AWS comprehended the December NTP.
[50] See Affidavit of J L Irwin, pages 19-22; 183-205
The respondents also submit there is no evidence of deliberate intention to exploit its employees,[51] and that Mr Rana himself is of Pakistani heritage who employed immigrating nationals from Pakistan and “the Sub-Continent to assist in the provision of work experience and skill acquisition”.[52] It is difficult to make sense of the notion of an absence of an intention to exploit. AWS had admitted it had made use of entries in employee records it knew were false or misleading. That AWS may not have done this with any intention to exploit the vulnerability of the Employees does not lessen the nature of AWS’s admitted contraventions. And it is difficult to give any credit to the notion that the respondents assisted the Employees with work experience and the opportunity to gain skills in circumstances where AWS failed to ensure it complied with its obligations under s.535 and s.536 of the FW Act in relation to the Employees.
[51] First & Second Respondents’ Written Submissions as to Penalty [3.11]
[52] First & Second Respondents’ Written Submissions as to Penalty [3.12]
Nature and extent of loss
The FWO submits that AWS’s failure to keep accurate records means the FWO was unable to calculate the true entitlements of the Employees and, for that reason, the extent of any loss suffered by the Employees is unknown. The FWO invites me to draw an inference based on the evidence before me that the Employees were in fact underpaid.[53] The respondents, on the other hand, submit the respondents have not received any claim from an Employee claiming underpayment.[54] That submission, however, must be assessed by reference to paragraph 41 of the respondents’ response where it is alleged that “Mr Rafique and Mr Bajwa claimed underpayments and they were paid by [AWS] in or about December 2016”.[55]
[53] Applicant’s Penalty Submissions, [49]-[55]
[54] First & Second Respondents’ Written Submissions as to Penalty [3.14], relying on Affidavit of M A Rana, [16]
[55] Response, [41]
The means by which contraventions of s.535 and s.536 of the FW Act and reg.3.44(1) and reg.3.44(6) of the FW Regulations can lead to loss is if the employee in relation to whom the appropriate records had not been kept requires access to the records the employer ought to have kept to calculate his or her entitlement. It is not apparent from the evidence before me whether the Employees have records by reference to which they can calculate their entitlements and, to the extent they do not, whether AWS has records that could assist them to calculate their loss. For these reasons, I am not satisfied that the contraventions resulted of will result in any loss to the Employees, and I therefore give this consideration little weight.
Similar previous conduct
The respondents have not been found to have, and they have not admitted to having, contravened any provision of the FW Act or the FW Regulations other than the provisions they now admit they have contravened. The respondents submit they are therefore entitled to be “treated as first time contraveners for penalty purposes”.[56] The respondents rely on the judgment of Lucev J in Maslen v Core Drilling Services Pty Ltd, where his Honour said that “subject to proper consideration of other factors, being first time contraveners ought to entitle them to a significant discount on penalty”.[57] His Honour relied on a number of authorities including the judgment of North J in Automotive, Foods, Metals, Engineering, Printing and Kindred Industries Union v Thornton Engineering Australia Pty Ltd.[58]
[56] First & Second Respondents’ Written Submissions as to Penalty [3.15]
[57] [2015] FCCA 290, [46]
[58] [2009] FCA 1584, [22]: “In this case, the major factor in mitigation is the clean record of the respondent. It has not been involved in contraventions of the Act before. That factor warrants a significant discount from the maximum penalty.”
What was said in Maslen and Thornton Engineering Australia must be considered in light of the following passage from the judgment of Mortimer J in Sayed v Construction, Forestry, Mining and Energy Union:[59]
The absence of any evidence of previous contraventions by the respondent means, as Jessup J pointed out in Murrihy (No 2), that the respondent’s conduct must be measured in and of itself, without reference to previous conduct. I do not consider this as some kind of positive factor in the respondent’s favour, which seemed to be the implication from the respondent’s submissions. Especially in relation to unlawful discrimination, where the true reasons for conduct are often difficult to uncover, one cannot simply infer, as the respondent seemed to suggest the Court might, that this kind of conduct has not occurred before within the CFMEU. Nor can one infer it has. Rather, the conduct stands to be assessed for what it has been found by the Court to be. In my opinion absence of evidence about prior contraventions that have been litigated and determined simply means there is no evidence of that nature which might otherwise have contributed to an increase in the penalty to be imposed.
[59] [2015] FCA 338, [51]
That a person has not been found to have previously contravened any provision of the FW Act or of the FW Regulations does not necessarily mean the person has not contravened any such provision. The nature of the admitted contravention, however, may be relevant to assessing the extent to which the absence of any previous contravention may be a basis for inferring that the person has not previously contravened a provision of the FW Act or the FW Regulations. That is illustrated by two of the admitted contraventions in the case before me. One is the respondents’ admission that they provided no pay slips to Mr Rafique and Mr Bajwa since they commenced employment in 2011, and their admissions that during the Audit Period they had not provided to the Employees pay slips that contained the Required Information. Given the period over which the contraventions occurred, and the recurring nature of the contraventions, an available inference is that the AWS had never complied with its obligations under s.536 of the FW Act. The same can be said of AWS’s admitted contraventions based on its failure to maintain accurate records. I do not rely on these matters to draw the inference that AWS contravened s.536 of the FW Act or reg.3.44(1) of the FW Regulations in a manner that extends beyond what the respondents have admitted. I do rely on them, however, as matters that prevent me from positively finding that AWS has not previously contravened s.536 of the FW Act or reg.3.44(1) of the FW Regulations.
The contraventions based on making use of false or misleading entries require a different consideration. There is no suggestion that AWS previously provided information to the FWO that was false or misleading. Thus, some discount should be given to AWS’s admitted contraventions of reg.3.44(6) of the FW Regulations based on the use of misleading records to take into account the absence of AWS having previously contravened this subregulation.
Size of the business
Relying on the judgment of Lucev FM (as his Honour then was) in Fair Work Ombudsman v MMP Management Services Pty Ltd,[60] the respondents submit that the size and financial resources of a contravener are factors to be considered when assessing a penalty.[61] The respondents further submit that AWS has a limited capacity to pay a penalty.[62] The respondents rely on evidence which I am satisfied shows that AWS operated the service stations at Caltex Dural and Caltex Ermington under a franchise agreement with Caltex Australia Petroleum Pty Ltd (Caltex),[63] that on 20 April 2017 Caltex terminated the franchise agreement,[64] and that as a consequence AWS ceased operating the service stations.[65]
[60] [2012] FMCA 207
[61] First & Second Respondents’ Written Submissions as to Penalty [3.19]
[62] First & Second Respondents’ Written Submissions as to Penalty [3.20]
[63] Affidavit of M A Rana, [10]
[64] Affidavit of M A Rana, [30]
[65] Affidavit of M A Rana, [31]
The FWO relies on the following passage from the judgment of Tracey J in Kelly v Fitzpatrick:[66]
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level”: see Australian Competition and Consumer Commission v ABB Transmission and Distribution Ltd [2001] FCA 383; [2001] ATPR 41-815 at [13]
[66] [2007] FCA 1080, [28]
The financial circumstances of an employer may, in some circumstances, be relevant to the assessment of penalty, but not to the point where they would lead the Court to impose a penalty below a meaningful level, having regard to the nature and extent of the contravening conduct. The evidence before me, however, does not suggest that the financial position of AWS is a factor that should weigh in favour of assessing a penalty at the lower end of the scale. Although, as I have found, AWS has ceased trading, there is in evidence the balance sheet of AWS for the period ended 30 June 2018 that shows it has net current assets of $175,326.98.
Cooperation and contrition
The FWO accepts a discount should be given to the respondents’ having admitted their contraventions. The FWO submits that a discount of nothing higher than 15% should be given to reflect the admissions. The FWO relies on the respondents’ not having made their admissions before the FWO commenced proceedings as a reason for not allowing a discount greater than 15%.
The respondents, on the other hand, submit AWS has taken corrective action in the form of updating its practices for recording payroll information, sending an employee to attend training on how to better use the Xero accounting and payroll system, and their co-operation with the FWO, including attending a mediation in the course of this proceeding resulting in the respondents making admissions.[67] The respondents expressed contrition to the Court through Mr Adams at the hearing before me. In these circumstances the respondents submit they should be given a 25% discount.
[67] Affidavit of M A Rana, [26]-[28]
In the circumstances of this case, I agree that a discount should be given for AWS admitting the contraventions; and in my opinion, 20% is an adequate reflection of the admissions they made, and the time at which they made the admissions.
Compliance with minimum standards
The FWO submits that the failure to keep accurate records, and issue pay slips is a loss to, or subversion of, the statutory objects of the FW Act;[68] and that when an employer does not make and keep records in relation to employees, an effective safety net for the employees is difficult to maintain and results in those employees being more vulnerable to exploitation.[69] For these reasons, the FWO submits significant weight should be given to the respondents’ failure to maintain accurate records.[70] The respondents do not gainsay the FWO’s submissions but “accept that the record keeping and payroll system employed prior to the Notice to produce audit process was incomplete and defective”.[71]
[68] Applicant’s Penalty Submissions, [63], relying on Fair Work Ombudsman v Dosanjih [2016] FCCA, [36]
[69] Applicant’s Penalty Submissions, [63], relying on Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623, [114]-[115]
[70] Applicant’s Penalty Submissions, [66]
[71] First & Second Respondents’ Written Submissions as to Penalty [3.31]
I agree with the FWO’s submissions that these matters weigh in favour of assessing penalties at the higher end of the scale.
Specific and general deterrence
There is no evidence that suggests AWS will resume any business, or that Mr Rana himself will enter any new business. It is reasonable to expect that Mr Rana will intend to pursue a new business. Whether or not Mr Rana does engage in a new business, however, there is no need for the penalty to reflect any element for specific deterrence. I am satisfied that this proceeding has sufficiently deterred Mr Rana from undertaking any business without acquainting himself with an employer’s obligations under the FW Act or the FW Regulations.
General deterrence, however, raises different considerations. The FWO submits there is a need for penalties to be sufficiently high for the purposes of general deterrence; penalties should be set at a level that sends a message to employers and the community at large that employees must be provided with their correct legal entitlements and that accurate employee records and pay slips are not optional features of operating a business. The FWO refers specifically to the need for general deterrence in the franchise industry in general and the petrol retailing sector of that industry in particular. The FWO also refers to the outcome of investigations of the Caltex franchise network which showed high levels of non-compliance.
In my opinion, the penalties that are set should reflect a significant element for general deterrence. That would be so even if the FWO had not relied on the results of its investigation of the Caltex franchise network.
Assessment having regard to factors before considering further adjustment
Applying these considerations I assess the penalties for AWS’s contraventions as follows:
Contravention
Maximum penalty
Maximum penalty after 20% discount
Penalty
Contraventions 1 and 2: reg.3.44(1); keeping false or misleading records
$18,000
$14,400
$10,080
(70%)
Contravention 3: reg.3.44(1); keeping false or misleading penalty records
$18,000
$14,400
$10,080
(70%)
Contravention 4: reg.3.44(6) making use of false or misleading records – payroll records
$18,000
$14,400
$9,360
(65%)
Contravention 5: reg.3.44(6) making use of false or misleading records – Timesheets
$18,000
$14,400
$9,360
(65%)
Contravention 6: s.536(1) of FW Act; failure to provide pay slips within one working day
$27,000
$21,600
$15,120 (70%)
Contravention 7: s.536(2) of FW Act; failure to provide pay slips with Required Information
$27,000
$21,600
$15,120 (70%)
TOTAL
$69,120
I assess penalties for Mr Rana’s involvement in AWS’s contraventions as follows:
Contravention
Maximum penalty
Maximum penalty after 20% discount
Penalty
Contraventions 1 and 2: reg.3.44(1); keeping false or misleading records
$3,600
$2,880
$2,016
(70%)
Contravention 3: reg.3.44(1); keeping false or misleading penalty records
$3,600
$2,880
$2,016
(70%)
Contravention 4: reg.3.44(6) making use of false or misleading records – payroll records
$3,600
$2,880
$1,872
(65%)
Contravention 5: reg.3.44(6) making use of false or misleading records – Timesheets
$3,600
$2,880
$1,872
(65%)
Contravention 6: s.536(1) of FW Act; failure to provide pay slips within one working day
$5,400
$4,320
$2,592
(60%)[72]
Contravention 7: s.536(2) of FW Act; failure to provide pay slips with Required Information
$5,400
$4,320
$3,024 (70%)
TOTAL
$13,392
[72] This reflects Mr Rana having admitted his involvement in AWS’s failure to provide a payslip to only Mr Rafique (SAF, [59(b)]), whereas AWS admits not having provided pay slips to Mr Rafique and Mr Bajwa.
Adjustments
I now consider whether there is room for the operation of what I have described as the “one transaction principle”. That is, I need to consider whether there are common elements between any of the Contraventions sufficient to require a downward adjustment of the penalties I have so far assessed to take into account those common elements. In broad terms there are common elements to all the Contraventions of reg.3.44(1) and reg.3.44(6) of the FW Regulations, being Contraventions 1 and 2 (which are to be treated as one contravention) and Contraventions 3, 4, and 5. These relate to the failure to record correct information or to record information AWS was required to record. In my opinion, it would be appropriate to reduce the penalties I have assessed for Contraventions 1 and 2 (being a single contravention) and Contraventions 3 by 10%, and Contraventions 4 and 5 by 5% to reflect these common elements. So adjusted, the penalties are as follows:
In the case of AWS –
Contravention
Penalty as assessed above
Penalty after further adjustment
Contraventions 1 and 2: reg.3.44(1); keeping false or misleading records
$10,080
$9,072 (10%)
Contravention 3: reg.3.44(1); keeping false or misleading penalty records
$10,080
$9,072 (10%)
Contravention 4: reg.3.44(6) making use of false or misleading records – payroll records
$9,360
$8,892 (5%)
Contravention 5: reg.3.44(6) making use of false or misleading records – Timesheets
$9,360
$8,892 (5%)
Contravention 6: s.536(1) of FW Act; failure to provide pay slips within one working day
$15,120
$15,120
Contravention 7: s.536(2) of FW Act; failure to provide pay slips with Required Information
$15,120
$15,120
TOTAL
$66,168
In the case of Mr Rana -
Contravention
Penalty as assessed above
Penalty after further adjustment
Contraventions 1 and 2: reg.3.44(1); keeping false or misleading records
$2,016
$1,184 (10%)
Contravention 3: reg.3.44(1); keeping false or misleading penalty records
$2,016
$1,184 (10%)
Contravention 4: reg.3.44(6) making use of false or misleading records – payroll records
$1,872
$1,778 (5%)
Contravention 5: reg.3.44(6) making use of false or misleading records – Timesheets
$1,872
$1,778 (5%)
Contravention 6: s.536(1) of FW Act; failure to provide pay slips within one working day
$2,592
592
Contravention 7: s.536(2) of FW Act; failure to provide pay slips with Required Information
$3,024
$3,024
TOTAL
$11,540
The final matter to consider is whether the totality principle has any operation. That is, I must consider whether the penalties I have assessed viewed as a whole are appropriate and proportionate to the contravening conduct also viewed as a whole. I am satisfied the penalties are appropriate and proportionate.
Declarations
The FWO submits I should make declarations to reflect the respondents’ admitted contraventions. The FWO submits there is a public interest to be served by the Court making declarations because it helps to educate employers about their obligations to employees, it warns employers of the consequences of failing to comply with Commonwealth workplace laws, it assists in achieving general deterrence, it marks the Court’s disapproval of the contravening conduct, and it explains the basis for the penalties the Court imposes.[73] This submission is supported by the authorities on which the FWO relies, and it is unnecessary to refer to them. I am satisfied it is appropriate to make declarations to the effect sought by the FWO.
[73] Applicant’s Penalty Submissions, [20]
Disposition
I propose to make declarations substantially in the form set out in paragraphs 1 and 2 of annexure “B” to the FWO’s written submissions. I also propose to order that AWS pay pecuniary penalties in the sum of $66,168, that Mr Rana pay pecuniary penalties in the sum of $11,540, and that, under s.546(3)(a) of the FW Act, AWS and Mr Rana pay the pecuniary penalties to the Consolidated Revenue Fund of the Commonwealth by 15 March 2019.
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 15 February 2019
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