Fair Work Ombudsman v ACN 052 182 180 Pty Ltd & Anor

[2013] FCCA 688

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v ACN 052 182 180 PTY LTD & ANOR [2013] FCCA 688

Catchwords:
INDUSTRIAL LAW – Contravention of Fair Work Act 2009 and Workplace Relations Act1996 – non payment of accrued annual leave – failure to provide payslips and to keep records – matters relevant to penalty – payment of penalty to employee – insolvency is no defence.

Legislation:
Crimes Act 1914, s.4AA(1).
Fair Work Act 2009, ss.3(b), 44(1), 535, 536, 539(2), 546, 557.
Federal Circuit Court Rules2001, r.13.03C(1)(e).
Workplace Relations Act1996, ss.235(2), 814, 846.

Cases cited:
Cotis v McPherson [2007] FMCA 2060
Fair Work Ombudsman v Garfield Berry Farm Pty Ltd & Anor [2012] FMCA 103
Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557
Fair Work Ombudsman v Orwill Pty Ltd & Ors [2011] FMCA 730
Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258
FWO v Promoting U Pty Ltd & Anor [2012] FMCA 58
Kelly v Fitzpatrick [2007] FCA 1080.
Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543
Re Trade Practices Commission v CSR Limited (1991) 13 ATPR 41-076
Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550
Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38

Applicant: FAIR WORK OMBUDSMAN

First Respondent: ACN 052 182 180 PTY LTD

Second Respondent URI BURKE

File Number: MLG 914 of 2011

Judgment of: Judge F. Turner

Hearing date: 20 June 2013

Date of Last Submission: 20 June 2013

Delivered at: Melbourne

Delivered on: 4 July 2013

REPRESENTATION

Solicitors for the Applicant: Office of the Fair Work Ombudsman

The First Respondent did not appear

The Second Respondent did not appear

ORDERS

1. Pursuant to reg.14.4 of the Workplace Relations Regulations 2006 (Cth) (the “WRR”) and s.546(1) of the Fair Work Act 2009 (Cth) (the “FWA”) the second respondent pay an aggregate penalty of $11,220.00 in respect of the contraventions referred to in the declarations and orders made by this Court on 6 December 2012 (Default Orders).

2. Pursuant to s.841 of the Workplace Relations Act 1996 (the “WRA”) and s.546(3) of the FWA the second respondent pay the penalties ordered against him pursuant to Order 1 above in the following manner:

   (a)$5,000.00, plus interest of $1,422.00 on that amount (the Total Liability), be paid to Mr Aaron Dixon, pursuant to s.841(b) of the WRA and s.546(3)(c) of the FWA; and

   (b)That $6,220.00 is to be paid into the Consolidated Revenue Fund of the Commonwealth, pursuant to s.841(a) of the WRA and s.(3)(a) of the FWA.

3. The payment of the amounts referred to in Order 2 above be made within 60 days of these orders.

4. Payment of the amounts referred to in Order 2 above be paid by bank cheques made out to Mr Aaron Dixon or the Consolidated Revenue Fund of the Commonwealth respectively, and delivered to the applicant.

5. The applicant is to serve a copy of these orders on the respondent in accordance with the orders for substituted service made by this Court on 10 October 2012.

6. All extant applications are dismissed and the matter is removed from the list of pending cases.

FEDERAL CIRCUIT COURT OF AUSTRALIA
AT MELBOURNE

MLG 914 of 2011

FAIR WORK OMBUDSMAN

Applicant

And

ACN 052 182 180 PTY LTD

First Respondent

URI BURKE

Second Respondent

REASONS FOR JUDGMENT

1. On 6 December 2012, the Court made declarations that the second respondent contravened various provisions of the Fair Work Act2009 (the “FWA”) and the Workplace Relations Regulations2006 (the “WRR”). By order that day, the matter was adjourned to 10am on 19 June 2013 for a penalty hearing.

2. The first respondent went into liquidation on 28 September 2011. The second respondent has been declared bankrupt.

3. The respondents were not present or represented at the hearing on

   
   

   6 December 2012. A copy of the orders of 6 December 2012 was served on the second respondent (Affidavit of Ashley Kate Hurrell affirmed 13 June 2013 at p.29). A copy of a letter from the Fair Work Ombudsman (“FWO”) to the second respondent dated 11 June 2013 was also served on the second respondent (Ibid p.4). That letter included advice that the penalty hearing would occur at 10am on 19 June 2013.

4. Neither respondent was present or represented at the hearing on 19 June 2013. The FWO was represented by Ms Nicholas.

5. The FWO filed written submissions on penalty on 11 June 2013 (“ASOP”). A copy of those were served on the second respondent (Ibid p.6). Nothing was filed by the respondents contesting the written submissions of the applicant. The Court proceeded with the hearing on 19 June 2013 in the absence of the respondents (r.13.03C(1)(e) of the Federal Circuit Court Rules 2001), and accepts the ASOP as factual.

6. The Court finds the ASOP to be accurate and persuasive and accepts them as follows:

   ·The contraventions arise from the second respondent’s involvement in the first respondent’s failure to pay its former employee (Mr Aaron Dixon) for accrued annual leave on termination of his employment. $5,000.00 was not paid and remains unpaid (ASOP at [5]). They also arise from the second respondent’s failure to provide pay slips and keep records.

   ·That the second respondent was at all relevant times the sole director and shareholder of the first respondent and was responsible for the employment and payment of employees of the first respondent, and for ensuring that records were kept in relation to those employees.

   ·Mr Dixon was employed by the first respondent between 1 June 2007 and 20 February 2010 and on termination of his employment had 37 days of accrued annual leave, only 12 days of which were paid out.

   ·The underpayment has not been rectified, and it appears likely that Mr Dixon will not be paid for his entitlement.

   ·The applicant seeks that a “high range penalty” be imposed on the second respondent of 70% to 90% of the maximum penalty “post grouping of $13,200.00”, being a penalty of between $9,900.00 and $11,220.00 (Annexure A to the ASOP), a copy of which is attached hereto [as Annexure A (“the Schedule”)].

7. The Court finds that a penalty in that range is appropriate having regard to the following:

   ·The respondents appeared in the Magistrates’ Court of Victoria on 15 February 2010, being in the same week that Mr Dixon was not paid, and had penalties imposed for breaches, including a failure to pay for accrued annual leave on termination of employment in breach of s.235(2) of the Workplace Relations Act1996 (the “WRA”). Those proceedings were against Tovek Pty Ltd ( a predecessor of the first respondent here), and the second respondent (ASOP [12(a)] and Annexure “AH-9” to the Affidavit of Ashley Kate Hurrell affirmed 11 June 2013).

   ·There was almost a complete absence of cooperation, contrition or corrective action by the second respondent here.

8. Having regard to those factors, there is a need for specific deterrence.

9. There is a need for general deterrence in the retail industry given frequent proceedings for contraventions in that industry in recent years (ASOP [12(e)] and [96], [97] and [111]).

10. The Court has a discretion as to whether to impose penalties for the contraventions and as to the level of those penalties [s.546 of the FWA and s.846 of the WRA.

11. Section 539(2) of the FWA prescribes the following maximum penalties that may be imposed on an individual for contraventions of that Act:

    a)60 penalty units for a contravention of s.44(1); and

    b)30 penalty units for a contravention of s.535 or 536.

    A penalty unit is $110.00 (s.4AA(1) of the Crimes Act1914).

12. The maximum penalties that can be imposed by the Court here are:

    ·$6,600.00 for the contraventions of s.44(1) of the FWA for non-payment of accrued annual leave upon termination; and

    ·$3,300.00 for contraventions of s.535 or 536 of the FWA (failure to keep records and payslips); and

    ·$1,100.00 for contraventions of the WRR (for the failure to keep records and payslips)

13. Multiple breaches of specified provisions may be treated as a single contravention if the contraventions are committed by the same person, and if they arose out of a course of conduct by the person (s.557 of the FWA and similar provisions of the WRR).

14. The contraventions are identified in the attached Schedule.

15. The Court finds the three groupings proposed in the Schedule to be appropriate. The Court finds that the higher percentage of the maximum penalty proposed for each group is appropriate. The Court considers an aggregate penalty of $11,220.00 is the “appropriate response to the conduct that led to the breaches”: Kelly v Fitzpatrick [2007] FCA 1080 at [30].

16. In reaching those conclusions as to penalty, the Court has taken into account the following factors set out in the decision of Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59] as follows:

    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 defendant;

    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.

17. That list is not restrictive of the matters that may be considered: Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at [11].

(a) – The nature and extent of the conduct which led to the breaches

1. Mr Dixon was not given payslips for the duration of his employment (ASOP [48]). He was therefore deprived of the opportunity to check if his pay was correct: Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258 at [67]. The FWA and WRR’s provide that payslips must be provided, and records must be kept. The failure to comply with the provisions is limited to one employee, as was the failure to pay for accrued annual leave on termination of employment. However, the second respondent and the predecessor of the current first respondent were found to have committed similar underpayment of accrued annual leave in the week before the non-payment for accrued annual leave occurred here. This factor is highly relevant also to (b) “the circumstances in which that conduct took place”.

(b) – The circumstances in which that conduct took place

1. In the circumstances, the respondents are taken to have known their obligations, but chose to avoid them. The penalties imposed 5 days before obviously were not sufficient deterrent. The failure to pay Mr Dixon for accrued annual leave was not an isolated incident.

2. The requirement for an employer to keeps records is fundamental to the ability to check that correct payments and entitlements are accorded to employees. The fact that the respondents may have been suffering financial difficulties at the time is not a defence (post). The fact that within five days of a penalty for a similar offence being imposed on the respondents by the Magistrates’ Court of Victoria (penalties imposed 15 February 2010, non payment of Mr Dixon 20 February 2010) and that the respondents then committed the same contraventions is a matter of great significance.

3. Even if the first respondent was suffering financial difficulty at that time, it is not a matter which ought operate to mitigate penalty in this matter. In Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503 it is stated at p.508:

   “…it is important that the respondent – and other employers bound by the award or by other awards under the Act – understand the importance of complying with an award and it follows that any decision taken by them which is regarded as affecting their obligations to comply with particular provisions of the award or the award generally should only be taken after careful consideration. They must not be left under the impression that in times of financial difficulty they can breach an award made under the Act either with impunity or in the belief that no substantial penalty will be imposed in respect of a breach found by a court to have been committed.”

4. The Court also notes the comments in FWO v Promoting U Pty Ltd & Anor [2012] FMCA 58 at [41], in which it was accepted that the respondents’ conduct in continuing to employ and underpay employees in the face of financial difficulty, and subsequently to elect to pay business expenses rather than the employees’ minimum entitlements, was deliberate, and warranted a significant penalty.

5. And at [57]:

   “…the Respondents cannot hope to have their conduct in effect exonerated by the Court merely because they are impecunious. Parliament has set significant penalties for the sort of contraventions that the Respondents engaged in and I do not think it is appropriate for the totality principle to operate simply to ensure that penalties are imposed in suitably insignificant amounts to meet the Respondents’ capacity to pay.

6. The Court notes that penalties are not characterised as provable debts, and hence survive bankruptcy. This was acknowledged by the Court in Cotis v McPherson [2007] FMCA 2060, where the Court recognised the seriousness of contraventions which showed a disregard for the respondent’s statutory obligations, particularly in light of his ‘significant business experience’ and failure to pay the entitlements either before or after the closure of the business, and stated at [12]:

   “… it is… important to make the point that employers should not and cannot regard insolvency, either personal or corporate, as a refuge from their responsibilities under the Workplace Relations Act. The mere fact that a business fails and that its premises close is not an excuse for a failure to pay entitlements due to employees…”.

7. In that case the Court imposed penalties on the bankrupt respondent of $18,750.00, in acknowledgement of the seriousness of the matter. That decision emphasises that a Court should not be deterred from imposing significant or high range penalties on bankrupt respondents where it considers that it is appropriate and necessary to do so, to reflect the need for specific and general deterrence. The second respondent’s bankruptcy in this case is but one matter which must be weighed in the balance of all the objective and subjective circumstances of the matter to determine the appropriate penalty.

8. The second respondent is not entitled to a lower penalty for a deliberate contravention, on the basis that he had financial difficulties at the time.

(c) – The nature and extent of any loss or damage sustained as a result of the breaches

1. Mr Dixon lost $5,000.00 as a result of the non-payment for accrued annual leave, and has been deprived of that amount since his employment was terminated on 20 February 2010.

(d) – Whether there had been similar previous conduct by the defendant

1. Reference has been made (supra) to similar previous conduct which the second respondent was found to have committed, by a decision in the week before payment to Mr Dixon was denied. Therefore, that similar conduct must have been previous to the non-payment of Mr Dixon. The respondents are therefore repeat offenders. The proceedings against the second respondent by the FWO in the Magistrates Court of Victoria included non-payment of accrued annual leave on termination to two former employees totalling $6,941.00. As the second respondent was a defendant in that matter (ASOP [65]-[66]), he knew of industrial laws requiring the payment of accrued annual leave upon termination of employment, but chose not to pay out Mr Dixon, within five days of the case.

(e) – Whether the breaches were properly distinct or arose out of the one course of conduct

1. The Court has found that the breaches fall into three groups (see attached Schedule).

(f) – The size of the business enterprise involved

1. The business of the first respondent employed 15 to 20 employees during the employment of Mr Dixon (ASOP [72]).

2. In Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38 at [26]-[30] Simpson FM (as he then was) decided:

   The first respondent is a small company and, I infer, has very few if any assets.  However as Justice Tracey said in Kelly v Fitzpatrick (supra):

   “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.”

   In Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at paras.27 to 29 it was said:

   “Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to a Court’s consideration of penalty.”

3. The Court accepts that the size of the business or the financial circumstances provide no excuse for non-compliance.

(g) – Whether or not the breaches were deliberate

1. Having been found guilty of the same offence relating to other employees within five days before these contraventions occurred, the Court finds that the underpayment was deliberate and warrants a high end penalty, as do the failure to provide pay slips and keep records. However the latter will be at a lower level (see attached Schedule).

(h) – Whether senior management was involved in the breaches

1. The second respondent was the sole director and shareholder and responsible for the management of the first respondent and it’s employees at the relevant times.

(i) – Whether the party committing the breach had exhibited contrition;

(j) – Whether the party committing the breach had taken corrective action; and

(k) – Whether the party committing the breach had cooperated with the enforcement authorities;

1. The Court finds no evidence of contrition by the second respondent. Corrective action has not been taken, and the second respondent cooperated very little with the FWO. The second respondent has failed to participate in the proceedings. Applications for substituted service and default judgment were necessitated by the inability of the FWO to contact the second respondent (ASOP [89]). The second respondent did not file a defence or make admissions (ASOP [89]). The second respondent’s conduct has not facilitated the resolution of this matter.

2. The first respondent went into liquidation on 28 September 2011 and was therefore trading for 15 months after the non-payment to Mr Dixon for accrued annual leave. No attempt was made to rectify that underpayment during that period. The second respondent was the person then conducting the business.

(l) – The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements

1. A fundamental object of the FWA is to provide a guaranteed safety net of minimum terms and conditions for employees. Significant penalties are prescribed for non-compliance. Central to the ability to investigate and enforce are the requirements to provide payslips and keep records. This was specifically acknowledged in Fair Work Ombudsman v Orwill Pty Ltd & Ors [2011] FMCA 730 at [21]:

   “The statutory purpose of the WR Regulations ties in with the purposes for which the powers of workplace inspectors can be exercised under s.169 of the WR Act, those purposes including determination of whether various industrial instruments and minimum standards and entitlements, and the requirements of the WR Act and WR Regulations themselves, are being observed.[1] Manifestly, failure to make and maintain records in relation to employee entitlements, undermines the utility and effectiveness of workplace inspectors, and their ability to determine whether or not there has been compliance with minimum standards and industrial instruments, and the provision of effective means for investigation and enforcement of employee entitlements.[2]”

   [1] WR Act, s.169(1).

   [2] Sterling Crown IR at 350-351 per Lucev FM; FMCA at paras.51-52 per Lucev FM.

1. In Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557, Marshall J observed at [29]:

   “It is important to ensure that the protections provided by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected.”

(m) – The need for specific and general deterrence

1. The Court accepts that the most fundamental purpose of a civil penalty is to ensure compliance with the law. The object of a penalty is 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”: see Re Trade Practices Commission v CSR Limited (1991) 13 ATPR 41-076.

Specific Deterrence

1. The Court finds a clear need for specific deterrence of the second respondent. The second respondent had received penalties for similar conduct within five days before the non-payment of Mr Dixon. Those penalties did not deter the second respondent. Although the second respondent is no longer employed by the first respondent, it is possible that he will re-engage in a similar role in the future. He must be deterred from engaging in similar conduct.

2. In Cotis v McPherson (supra), the Court noted that although there was no prior history of similar conduct, there was an absence of contrition, no attempt to pay the employees and little participation in the proceedings. On that basis, it was said at [19] that “although the business has closed there is nothing to indicate that if Mr McPherson conducted another business when he is discharged from bankruptcy, similar problems would not occur”: See also Fair Work Ombudsman v Garfield Berry Farm Pty Ltd & Anor [2012] FMCA 103 at [41].

General Deterrence

1. The role of general deterrence in determining the appropriate penalty is illustrated by the comments of Lander J in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [93]:

   “In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts(1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson(1975) 11 SASR 217. In some cases, although hardly in this type of contravention, rehabilitation is an important factor.”

2. The Court finds a total penalty of $11,220.00 on the second respondent is an appropriate response to the contraventions. There is no evidence that it is oppressive or will be crushing. The second respondent has withheld $5,000.00 from Mr Dixon since 20 February 2010. The second respondent’s current financial capacity does not mean that a lower total penalty should be imposed. The total penalty results from reducing individual penalties to between 70% and 90% (see attached Schedule).

3. In the circumstances where the amount of $5,000.00 has been owing to Mr Dixon since 20 February 2010, and where the first respondent is in liquidation and the second respondent is an undischarged bankrupt, the Court orders pursuant to s.546(3) of the FWA and s.841(b) of the WRA that part of the total penalty (being $5,000.00) be paid to Mr Dixon in satisfaction of the underpayment amount of $5,000.00 plus interest of

   
   

   $1,422.00, with the residue to be paid into the Consolidated Revenue Fund of the Commonwealth.

4. In the circumstances of the respondents, it is unlikely that Mr Dixon will receive any “windfall” payment from either of the respondents.

5. The Court makes orders in terms similar to those proposed by the FWO.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Judge F. Turner

Associate: 

Date:  4 July 2013

ANNEXURE A
Contravention	Nature of contraventions		Maximum possible penalty	Grouping to a/c for common elements	Max. possible penalty (post grouping)	Proposed Penalty %	Proposed Penalty Range ($)
								Section 44(1) of the FW Act (Section 90(2) of the FW Act)	Annual leave on termination		$         6,600.00	None	$        6,600.00	80%	$            5,280.00
														90%	$            5,940.00
Regulation 19.4(1) of the WR Regulations	Make records		$         1,100.00	Record keeping	$        3,300.00	70%	$            2,310.00
								Regulation 19.4(2) of the WR Regulations	Keep records		$         1,100.00
Regulation 19.12(1) of the WR Regulations	Annual leave records		$         1,100.00
								80%	$            2,640.00
Section 535(1) of the FW Act [FW Regulations 3.36(1)]	Make and keep records		$         3,300.00
						Section 535(2) of the FW Act [FW Regulations 3.36(1)]	Annual leave records			$         3,300.00
Regulation 19.20(1) of the WR Regulations	Payslips - issue to employee		$         1,100.00								Payslips	$        3,300.00	70%	$            2,310.00
						Regulation 19.20(2)(a) of the WR Regulations	Payslips - issue within 1 day			$         1,100.00
80%	$            2,640.00
		Section 536(1) of the FW Act	Payslips - issue to employee within 1 day			$         3,300.00
					MAXIMUM PENALTY			$        22,000.00	$       13,200.00
PROPOSED PENALTY RANGE						Min.	$            9,900.00
						Max	$          11,220.00