Fair Work Ombudsman v ACC Services (Aust) Pty Ltd T/As Rapid Pak
[2017] FCCA 516
•22 March 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v ACC SERVICES (AUST) PTY LTD T/AS RAPID PAK & ANOR | [2017] FCCA 516 |
| Catchwords: INDUSTRIAL LAW – Application under Fair Work Act – failure to pay entitlements under award – penalties imposed. |
| Legislation: Fair Work Act 2009, ss.44, 45, 545, 546. Federal Circuit Court of Australia Act 1999, s.13. |
| Cases cited: Kelly v Fitzpatrick [2007] FCA 1080 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | ACC SERVICES (AUST) PTY LTD T/AS RAPID PAK (ACN 099 677 424) |
| Second Respondent: | INGRID HSI |
| File Number: | MLG 1469 of 2015 |
| Judgment of: | Judge Riethmuller |
| Hearing date: | 2 November 2016 |
| Date of Last Submission: | 17 January 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 22 March 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Fetter |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondents: | Mr Russell |
| Solicitors for the Respondents: | Holman Webb Lawyers |
THE COURT DECLARES:
That the First Respondent contravened:
(a)Section 45 of the Fair Work Act 2009 (“the Act”) by failing to pay FW the required minimum hourly rates of pay for ordinary hours of work prescribed by cl.A.2.5 of the Schedule A of the Modern Award;
(b)Section 45 of the Act by failing to pay HS and HT the required minimum hourly rates of pay for ordinary hours of work prescribed by cl.15.1 of the Modern Award;
(c)Section 45 of the Act by failing to pay FW the applicable casual loading prescribed by sub-cl.11.4(b) and cl.A.6.4 of Schedule A of the Modern Award;
(d)Section 45 of the Act by failing to pay the employees Saturday penalty rates prescribed by sub-cl.24.5(a)(i) of the Modern Award;
(e)Section 45 of the Act by failing to pay FW Sunday penalty rates prescribed by sub-cl.24.5(b)(i) of the Modern Award;
(f)Section 45 of the Act by failing to pay FW public holiday penalty rates prescribed by sub-cl.24.5(c)(i) of the Modern Award;
(g)Section 45 of the Act by failing to pay the employees overtime rates of pay prescribed by cl.24.1 of the Modern Award; and
(h)Section 44 of the Act by failing to pay HS and HT accrued untaken annual leave and annual leave loading entitlements on termination of employment as prescribed by sub-s.90(2) of the Act.
That by reason of the Second Respondent’s involvement in the First Respondent’s failure to comply with the provisions set out in paragraphs (1)(i) to (1)(viii) above, the Second Respondent herself contravened these provisions, for the purposes of sub-s.550(1) of the Act.
THE COURT ORDERS THAT:
The First Respondent, its officers, agents or otherwise be and are hereby restrained by injunction from engaging in conduct that contravenes the Modern Award and/or the National Employment Standards.
The Second Respondent be restrained by injunction from:
(a)Aiding, abetting, counselling or procuring; or
(b)Being in any way directly or indirectly knowingly concerned in,
Conduct in respect of employees employed in the storage services and wholesale industry that contravenes the Modern Award and/or the National Employment Standards.
Pursuant to sub-s.545(1) of the Act, the First Respondent:
(a)Engage a suitable qualified compliance professional and/or legal practitioner with expertise in workplace relations law to conduct training on compliance with the Modern Award and the National Employment Standards for the Second Respondent and all persons engaged by the First Respondent who have managerial responsibility for decisions regarding wages and conditions, such training to occur within three months of the date of this order; and
(b)Notify the Applicant in writing, within seven days of the training, of the attendees and the name of the person who conducted the training.
Pursuant to sub-s.546(1) of the Act, the First Respondent pay a penalty of $184,800 into Commonwealth Revenue, within 28 days.
Pursuant to sub-s.546(1) of the Act, the Second Respondent pay a penalty of $36,960 into Commonwealth Revenue, within 28 days.
The Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders have not been complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1469 of 2015
| FAIR WORK OMBUDSMAN |
Applicant
And
| ACC SERVICES (AUST) PTY LTD T/AS RAPID PAK (ACN 099 677 424) |
First Respondent
| INGRID HSI |
Second Respondent
REASONS FOR JUDGMENT
The applicant seeks the imposition of pecuniary penalties on the first and second respondents as a result of contraventions of the Fair Work Act 2009 (“the Act”). The contraventions arose out of the employment of three employees of the first respondent, FW, HS, and HT. The latter two employees were only employed for a brief period from August 2014 to November 2014. The first mentioned employee was employed from June 2002 until August 2014. The period the subject of these proceedings, however, was only during January 2011 to August 2014.
The first employee was engaged to work on a causal basis packing confectionary and other items, and occasionally performing cleaning duties. The employee was paid a piece rate during the period, and on the basis of the assessments by the applicant, it is admitted that the employee was underpaid $14,792.26.
The second employee was engaged full time to work as a packer, and then from September 2014 as a cleaner on an hourly rate. When engaged as a packer, the second employee was paid on a piece rate basis. It is submitted that the second employee was underpaid the sum of $3,775.65 over three months.
The third employee was initially engaged full time as a forklift driver, and then performed cleaning duties between September 2014 and November 2014. He was paid an hourly rate during the time that he performed cleaning duties. From November 2014 he was employed as a packer on a piece rate basis. It is submitted that the third employee was underpaid the sum of $4,911.62.
I am persuaded that it is appropriate to make declarations with respect to the offending conduct, so that it is plain what conduct has been the subject of the penalties sought by the applicant. There is no dispute in this case that the conduct the subject of the declarations has been engaged in by the applicant. I therefore make declarations in the following terms:
(1)That the First Respondent contravened:
(a)Section 45 of the Act by failing to pay FW the required minimum hourly rates of pay for ordinary hours of work prescribed by cl.A.2.5 of the Schedule A of the Modern Award;
(b)Section 45 of the Act by failing to pay HS and HT the required minimum hourly rates of pay for ordinary hours of work prescribed by cl.15.1 of the Modern Award;
(c)Section 45 of the Act by failing to pay FW the applicable casual loading prescribed by sub-cl.11.4(b) and cl.A.6.4 of Schedule A of the Modern Award;
(d)Section 45 of the Act by failing to pay the employees Saturday penalty rates prescribed by sub-cl.24.5(a)(i) of the Modern Award;
(e)Section 45 of the Act by failing to pay FW Sunday penalty rates prescribed by sub-cl.24.5(b)(i) of the Modern Award;
(f)Section 45 of the Act by failing to pay FW public holiday penalty rates prescribed by sub-cl.24.5(c)(i) of the Modern Award;
(g)Section 45 of the Act by failing to pay the employees overtime rates of pay prescribed by cl.24.1 of the Modern Award; and
(h)Section 44 of the Act by failing to pay HS and HT accrued untaken annual leave and annual leave loading entitlements on termination of employment as prescribed by sub-s.90(2) of the Act.
(2)That by reason of the Second Respondent’s involvement in the First Respondent’s failure to comply with the provisions set out in paras.(1)(i) to (1)(viii) above, the Second Respondent herself contravened these provisions, for the purposes of sub-s.550(1) of the Act.
The Act provides the power for the court to impose a pecuniary penalty under s.546. The maximum penalties have been calculated by the applicant and are not in dispute. They are as follows in this case:
| Contravention | Number of penalty units | Maximum penalty individual | Maximum penalty body corporate |
| Failure to pay the required minimum hourly rates of pay for ordinary hours of work (s.45 of the Act, cls.15.1 and A.2.5 of Sch.A of the Modern Award) | 60 | $10,200 | $51,000 |
| Failure to pay the applicable casual loading (s.45 of the Act, sub-cl.11.4(b) and cl.A.6.4 of Sch.A Of the Modern Award) | 60 | $10,200 | $51,000 |
| Failure to pay Saturday penalty rates (s.45 of the Act, sub-cl.24.5(a)(i) of the Modern Award) | 60 | $10,200 | $51,000 |
| Failure to pay Sunday penalty rates (s.45 of the Act, sub-cl.24.5(b)(i) of the Modern Award) | 60 | $10,200 | $51,000 |
| Failure to pay public holiday penalty rates (s.45 of the Act, sub-cl.24.5(c)(i) of the Modern Award) | 60 | $6,600 | $33,000 |
| Failure to pay overtime rates (s.45 of the Act, cl.24.1 of the Modern Award) | 60 | $10,200 | $51,000 |
| Failure to pay accrued and untaken annual leave and leave loading entitlements on termination of employment (s.44 of the Act, sub-s.90(2) of the Act) | 60 | $10,200 | $51,000 |
The contraventions set out above each represent a course of conduct by the first respondent in failing to make payments in accordance with the relevant award on numerous occasions as a result of the ongoing nature of the employment. As the contraventions arise out of the course of conduct, it is appropriate to group them when considering penalty. It was submitted by the respondents that the various breaches should be grouped according to the clause of the modern award that was breached. That is, all of the failures to pay weekend or public holiday penalty rates would be grouped as one course of conduct rather than three separate courses of conduct, depending upon whether the day was a Saturday, Sunday or public holiday.
There is some attraction to such an approach, dealing with the matter on the basis that the fundamental nature of the breach was a failure to pay penalty rates for special days as listed in sub-cl.24.5 of the Modern Award. However, that would also lead to a substantially similar outcome to that when an employer simply fails to pay public holiday penalty rates, but has been paying Saturday and Sunday penalty rates; of course not nearly so serious as the conduct engaged in by the first respondent. Having regard to the circumstances of this particular case, I am not persuaded that the groupings provided for by the first respondent, are appropriate.
I note that during the course of conduct with respect to the employee, FW, the amount of each penalty unit increased. I adopt the approach taken by Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 and bearing this matter in mind in setting the penalty in this particular case. Fortunately, in the context of this case, the increases in penalties were modest, unlike the substantial increases in issue in Kelly’s case.
I note that the factors relevant to the imposition of the penalty vary from case to case depending upon the circumstances of the particular respondents and the conduct engaged in. However, it is well accepted that a useful guide is the list enumerated by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at 26. This summary was adopted by Tracey J in Kelly’s case.
The nature and extent of the conduct.
In this case the employees are all from non-English speaking backgrounds and required an interpreter to assist them in completing complaint forms. FW and HS also required interpreters for their records of interview. FW was unaware of her rights under Australian workplace law and the other two employees were the subject of subclass 417 working holiday visas. As a result, it is clear that all three employees were vulnerable as a result of their limited English language skills and limited knowledge of Australian workplace law.
I note that, remarkably, the applicant has chosen not to investigate or pursue the respondents with respect to any of the staff other than the three employees named in these proceedings. It was said that this was on the basis that other employees had not made a complaint, although this seems to be an inadequate explanation given the reliance in these proceedings upon the vulnerabilities of the three employees.
Nature and extent of any loss or damage
The amounts of the underpayments represented high amounts in comparison with the overall earning rates of the three employees in question.
As discussed below there were many other employees about whose payments these facts would give rise to suspicion. However suspicions are not a basis for assessing penalties, only facts and circumstances. I therefore take no account of suspicion with respect to other employees.
Similar previous conduct and deliberateness of the breaches
The first respondent had engaged in similar conduct in the past, underpaying employees on the basis of paying a flat rate of $10 per hour when the award was a minimum of $17.10 and $16.00 per hour (with respect to employees). The employees also received no overtime on weekends. These matters were resolved after the intervention of the regulator and did not result in court proceedings. In the circumstances of this case it is difficult not to conclude that the course of conduct of the respondents was a deliberate one, not merely an oversight about the terms of the award and not a genuine dispute to the terms of applicability of the award.
The conduct represented a significant resistance by the second respondent, as controller of the first respondent, to accepting that the Modern Award applied to the business. There was correspondence and telephone calls in 2008, 2009 and 2012, however the respondents refused or resisted accepting advice. Despite a number of interactions with the Applicant’s office and the investigator in this case, the respondents persisted with the position that piece rates were appropriate and legal. The Fair Work inspector deposes to the Second Respondent having informed him that the First Respondent had been paying packing staff piece rates for 12 years. This reflects a long term course of conduct with respect to a large number of staff.
Size of the company
The business involved in this case is significant, with a turnover of over $4 million per annum, showing profits to the business owners (the Second Respondent and her related entities as controlled by herself and her son) of around $1 million. The reality is that the business was highly profitable. It made deliberate decisions to make significant underpayments to these employees. Whilst the amounts, with respect to these particular employees, were significant for the employees (as they represented a significant proportion of the income that they were earning), the amounts involved were not significant to the very large overall profit that the First Respondent was generating for the Second Respondent, her family and related entities.
This is not a case where the business was marginal, or even where a business owner was earning less than one would expect from the owner of a business of this size and type. Given the disparity between the amount that the employees were underpaid and the profitability of the business, the conduct represents appalling greed and a considerable lack of empathy on the part of the Second Respondent.
Involvement of senior management
In this case there is no doubt that the senior management of the company were involved in the breaches. This is not a case where middle managers have caused the breach in circumstances where the ultimate controllers of the company are unaware of the conduct.
Corporation’s contrition, corrective action and cooperation with the enforcement authorities
Corrective action has been taken in this case, both in making arrangements to pay the underpayments so that the three named employees are not left without the monies they were to have received, and engaging external human resources consultants to conduct an audit with respect of recent times to ensure future compliance with the Act.
The Respondents cooperated with the investigating authorities, facilitating an efficient investigation and have admitted liability in these proceedings. However, the Second Respondent represented to the Fair Work inspectors that there had never been any previous contact with the Applicant, although this was false.
The Respondents say that they have expressed remorse and they have expressed an apology in the affidavit material. The Respondents say that the impact of adverse publicity has been that at least one major customer has ceased to use the business. It appears to me that, whether or not the customers of the First Respondent were named in the media release, it is likely that upon learning of the conduct, customers would be likely to terminate their relationship with the First Respondent.
Whilst I accept the willingness of the Respondents to facilitate the course of justice, and their acceptance of wrongdoing and mitigating factors, I am not satisfied that they have expressed remorse or contrition in the context of this case.
Ensuring compliance with minimum standards by providing effective means for investigation and enforcement of employee entitlements and deterrence
The penalty should take into account the importance of deterring such conduct in the future and thereby ensuring compliance.
There is significant philosophical dispute between the Applicant and the Respondents as to whether or not an appropriate method of paying staff is a piece rate for packing items into containers or other packages, or an hourly rate for the period of time performing of the work. There are obvious policy arguments both for and against the different payment calculation methods provided for in the Award and contended for by the Respondents. The place for debates of this type is in proceedings before the Industrial Relations Commission where it is making policy determinations as to the nature and coverage of relevant Awards. Once Awards have been determined by the Commission and have become a part of Australian law, they reflect policy determinations of government and must be complied with. I also note that this Award would not present significant difficulty for employers who wish to reward employees for working efficiently by providing a bonus calculated on a piece rate over and above any minimum rate set by the Award. Once one reaches this point of reasoning, it is apparent that the position of the Respondents is in substance grounded in avarice rather than a philosophical position as to methodology of payment. I do not accept that this argument is a mitigating factor in this case.
Other matters
The Second Respondent sets out, in some detail, the shock and shame she felt at the media release. However, to some extent, this impact was heightened by the conduct of the Second Respondent in her resistance to earlier advices with respect to the appropriate Award and Award rates.
I note the general principle with respect to not taking account of publicity set out by Driver FM (as his Honour then was), in Fair Work Ombudsman v Cleaners New South Wales [2009] FMCA 683, where his Honour said:
[25] … I do not accept the criticisms made by the company of the Fair Work Ombudsman’s litigation policy. Actions taken by the Fair Work Ombudsman to enforce compliance with the Workplace Relations Act are taken in part to create publicity in order to achieve a normative effect upon the behaviour of employers. That is appropriate. That publicity is no doubt an embarrassment to the company and that embarrassment is a penalty in itself. The bringing of proceedings in the Court, and the publicity attending those proceedings, are part of a general process for deterring contraventions of the Workplace Relations Act. So is the imposition of an appropriate penalty in each case.
In this case, I take into account that the result of the publicity has been a significant financial impact upon the business. To ignore this financial impact, would effectively be to treat the businesses that are not the subject of public interest differently to those which attract greater public interest, even though they may have committed the exact same offences at the same level of seriousness. To impose the same penalty on such different businesses would result in an outcome where the business within the public eye suffered far greater consequences than the business that was not of interest to the media.
Overall penalty
In the circumstances of this case, it appears to me that the appropriate penalty is 60% of the maximum penalties currently provided in the Act, for the First Respondent. In regard to the conduct involved in by the Second Respondent and the conduct engaged in, I am satisfied that a penalty of around 60% of the maximum is appropriate with respect to the majority of the offences. With respect to the public holiday’s penalty rates and annual leave contributions, I set the penalty at 50% for these offences. I find the range of penalties is appropriate as the substantial breach is the failure to apply the Award, which is reflected in the penalties for the ordinary hours pay rates.
Application for non-publication order
This case has also had a significant impact upon the customers of Rapid Pak. On the material before me, it seemed most unfair to the customers of Rapid Pak that they were named due to the damage that this would cause them in their own businesses, as on the material placed before the Court it would not be reasonable to expect that the customers would have been aware that the First Respondent was engaging in this conduct or even on notice that they ought to make inquiry: the profitability of the First Respondent shows that the customers were paying reasonable prices set at a level for the work that it allowed the Respondents to make a very significant profit.
The regulator claims that as a result of its remit to seek compliance with Australian workplace laws by all participants in the industry, the media release naming the customers was a part of a general process aimed at deterring contraventions of workplace laws in the “supply chain in which the First Respondent operates”. Such a bold statement appears to me to be simplistic and reflecting a view narrowly confined to the regulator’s interests. The argument overlooks other aspects of business relationships and in particular the extent of knowledge that may be reasonably available to those in a “supply chain”. If a customer is paying a reasonable price (as appears to be the case here), to a business in Australia (that is subject to regulation by the Applicant) it is difficult to see they should be expected to make any further enquiries.
Given that there has been criticism in the press of the manufacturers that were customers of the First Respondent, I note two important factors. First, on the evidence the manufacturers appear to have been paying rates high enough to enable the First Respondent to pay proper entitlements and still make a profit, but the Second Respondent chose instead to make a million dollar profit at the expense of entitlements of workers. Thus, on the material before me it does not appear to be open to argue that the manufacturers must have some form of imputed knowledge of the breaches as a result of the contract rates (unlike cases where payments to suppliers are so low that it is apparent that workers must be being underpaid or the business making a loss). Secondly, whilst shifting a degree of responsibility for supervision of employee entitlements to contracting parties would relieve the Applicant of some of its workload and further the goals of the Applicant in the narrow field of employee entitlements, it also has the potential to cause significant adverse impacts upon small business. If small businesses are routinely expected to open their books to major customers with respect to payrolls, this gives major customers even greater market place power to drive hard bargains against small businesses. A whole separate arm of government is established to ensure competitive structures and arrangements are in place, yet such disclosures are further likely to weaken the bargaining positions of small businesses.
For these reasons, I do not include the names of the manufacturers in this judgment, as on the evidence before me I see no basis for any criticism of their dealings with the Respondents prior to the investigations of the Applicant being made public. However, the circumstances of this case do highlight issues upon which public debate could usefully be addressed. The importance of courts remaining open to scrutiny by the public is well known. The Federal Circuit Court of Australia Act 1999 requires proceedings to be heard in open court unless it is contrary to the interests of justice: s.13, and see generally Re Chief Commissioner of Police (Vic) [2005] HCA 18. Ultimately I am not persuaded that the importance of open justice is outweighed by other interests so as to warrant a non-publication order or other restrictions upon publication or debate of this case or the issues that it raises in the media. I therefore refuse to make a non-publication order.
Should there be an order for an audit of past conduct of the respondent?
In this matter the First Respondent employs around 143 different people during the year (many for shorter periods as the work is seasonal packaging of specialty packs of confectionary). The Applicant only investigated the payments to the three employees that made a complaint to the Applicant. The Applicant’s counsel advised that the other employee payments were not investigated as those employees had not made a complaint. Having regard to the fact that in this case a large proportion of the employees are migrants with poor English skills, and that the work is unskilled and not permanent, it is apparent that there would be concerns as to the availability of future work if a complaint was made by an ongoing employee.
The reasons for the Applicant being unwilling to investigate the payments to the other employees, despite circumstances where there could well be a reluctance to complain, is a mystery. The circumstances are such that I sought submissions as to whether it was open to the court to order that there be an audit of employee payments, pursuant to s.545 of the Act, effectively to overcome the Applicant’s failure to investigate.
Section 545 of the Act provides the court with a broad power to ‘make any order the court considers appropriate’. Whilst the section has been described as conferring the ‘broadest of discretions on the Court’ (Construction, Forestry, Mining & Energy Union v Pilbara Iron Company (Services) Pty Ltd (No 3) [2012] FCA 697 at [186]) the discretion is not completely open-ended. Like all discretions it is bounded by limits (as Dworkin famously described it, the discretion is the hole in the donut). It is appropriate to determine the boundaries for this discretion, as it may bear upon the power of the court to order an audit, before exercising the discretion.
The power is to make orders as a consequence of an actual or threatened contravention of the Act. That is, it must be rationally linked to addressing the breaches of the Act that have been established. As Allsop CJ (North J agreeing) said in Construction, Forestry, Mining and Energy Union v Australian Building and Construction Commissioner [2016] FCAFC 184:
[5] Section 545(1) … requires the consideration and making of a choice of what is “appropriate” in the exercise of judicial power upon the satisfaction of relevant matters: that someone has contravened or proposes to contravene a civil remedy provision. That consideration and choice must have limits. Such limitation comes from the requirement that the order is capable of properly being seen as appropriate to be made if there has been or is threatened to be a contravention. Such a judgment, and any restrictions or limitations on the choice, will be derived from the text and context of the statute, the nature of judicial power and inhering considerations of legal legitimacy.
[6] The object of the imposition of a penalty under s 546 is deterrence (specific and general). As French CJ, Kiefel, Bell, Nettle and Gordon JJ said in Commonwealth v Director, Fair Work Building Inspectorate [2015] HCA 46; 326 ALR 476 (the Agreed Penalties Case) at 490 [55], citing French J in Trade Practices Commission v CSR Limited [1990] FCA 762; (1991) ATPR ¶41-076 at 52,152:
The principal, and...probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.
[7] Thus, the first restriction upon, or informing consideration for the making of, any order under s 545(1) (at least insofar as it is directed to supplementing an order for a penalty) would be that the order be capable of being seen as relevant to deterrence. That may be a necessary consideration, but it does not follow that it is sufficient to make the order one for which the Court has power. Another, and obvious, restriction or limitation on s 545(1) is that it does not authorise the Court to impose a monetary penalty, independently of the source of power in s 546. That conclusion arises naturally from the dealing with the subject by express words in s 546.
The parties have identified five cases in which orders have been made for employment audits. In Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 Katzman J ordered an audit as sought by the Fair Word Ombudsman, saying that:
[1136] In the light of GPS’s flagrant disregard for the law in the face of numerous attempts by the Ombudsman to bring its legal obligations to its attention, these orders are eminently sensible.
Of course, Katzman J was not suggesting that the power be limited to cases of flagrant breaches, simply that the flagrant breaches in that case justified the orders: see Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 at [58] per Flick J:
[58] … An order requiring an audit to be undertaken may also be made where, for example, the full extent of the contraventions committed by a respondent may be unknown or where an audit is required to identify the deficiencies of a respondent which need to be remedied.
In Fair Work Ombudsman v The Hub @ Mermaid Pty Ltd v Anor [2015] FCCA 306 Jarrett J, in a case where the respondent did not cooperate during the investigation (see [93]), ordered an audit by consent (at [120]). In Fair Work Ombudsman v Mamak Pty Ltd & Ors [2016] FCCA 2104 Smith J made orders for an audit specifically to ‘ensure future compliance’, and for that reason limited the audit to a period of nine months after the alleged contraventions (see [68]). Smith J pointed out that the audit sought by the Fair Work Ombudsman (which covered substantial past periods) would ‘go well beyond what is necessary to achieve’ the objective of ‘future compliance’.
As counsel for the Respondents points out, most of the decisions were cases where the audit order was made by consent. This point (although not developed at length) is pregnant with the proposition that some care should be taken when relying upon cases where the order was made by consent, as opposed to decisions following contested hearings, if only because arguments are often not raised or pressed that tell against an order that is sought by consent.
Counsel for the Respondents points out that each case concerned issues of false record keeping or a failure to produce records to the Fair Work Ombudsman, effectively frustrating investigation. In this case, the only contraventions the subject of investigation by the Applicant were with respect to three employees, not the other 140 employees.
The Applicant is the relevant investigatory body. Prima facie it is not appropriate for a court to embark upon an inquisitorial process even when the government body charged with carrying out such investigations and bringing the claims, chooses not to do so. This is a significant difference from the cases above where the investigation was hampered by the respondents failing to or refusing to cooperate: in substance, the exercise of the power to order an audit was in aid of the Fair Work Ombudsman carrying out its functions (not the court carrying out an investigation that the Fair Work Ombudsman chose not to pursue) or to ensure future compliance.
In this case there is no evidence of a need to audit during the period following the breaches, as the evidence is to the effect that active steps have been taken to ensure future compliance. Thus, the rationale for the orders relied upon by Smith J in Mamak’s case does not apply on the facts of this case.
The facts as proven give rise to real suspicions as to whether the other employees have been paid minimum entitlements (and are likely to be in a position that makes it unlikely that they would feel they can complain). It is the role of the Applicant to undertake investigations not that of a federal court whose role is the adjudication of disputes. Whilst the distinction appears stark in the abstract, as the cases above demonstrate the distinction is more nuanced when applying s.545 of the Act in the context of employment cases. In this case it is difficult to argue that the purpose of an audit would be to ensure future compliance (as other processes are already in place), punish for these particular breaches (as the audit would be investigating other employees’ payments), or aid an investigatory process (as the Applicant has chosen not to investigate despite cooperation by the Respondents).
As a result, I find that it is not appropriate that an order for an audit be made as one of the orders consequential upon the breaches proved in this case. It is not lost on me that there is some irony in this, given that the Applicant named the manufacturers purchasing the First Respondent’s services suggesting a moral obligation upon them to ensure the Respondent’s compliance, yet the Applicant chooses not to investigate the First Respondent further. However, the Court must take care to remain within the bounds of the exercise of judicial power and not seek to become both investigator and decision maker.
Conclusion
I therefore make declarations as to the breaches and impose penalties as indicated in these reasons.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller
Date: 22 March 2017
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