Fair Work Ombudsman v Adept Trolly Collection Services Pty Ltd
[2022] FedCFamC2G 757
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Adept Trolly Collection Services Pty Ltd [2022] FedCFamC2G 757
File number(s): PEG 198 of 2021 Judgment of: JUDGE LUCEV Date of judgment: 12 September 2022 Catchwords: INDUSTRIAL LAW – Fair Work – contravention of compliance notice – agreed statement of facts as to contravention and accessorial involvement – whether employees vulnerable to exploitation by reason of visa status – penalty hearing – factors for consideration as to penalty Legislation: Crimes Act 1914 (Cth) s 4AA
Cleaning Services Award 2010
Fair Work Act 2009 (Cth) ss 3, 12, 539, 545, 546, 550, 716
Migration Regulations1994 (Cth) Sch 2, cl 100.511
Cases cited: Ahmed v Al-Hussain Pty Ltd (t/as The Cheesecake Shop) (No 2) [2019] FCA 670
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union and Another [2018] HCA 3; (2018) 262 CLR 157; (2018) 92 ALJR 219; (2018) 273 IR 211; (2018) 351 ALR 190; (2018) 70 AILR 102-917
Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13; (2022) 96 ALJR 426; (2022) 314 IR 301; (2022) 399 ALR 599
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25; (2016) [2016] ATPR 42-530
AustralianOphthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; (2022) 96 ALJR 89; (2022) 312 IR 1
Cousins v Merringtons Pty Ltd (No 2) [2008] VSC 340
Dennington v Prescott & Anor [2008] FMCA 1105
Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354
Fair Work Ombudsman v ACN 156 455 828 Pty Ltd (t/as Trek North Tours) (No 2) [2015] FCCA 1801
Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128
Fair Work Ombudsman v ASGBRIS Pty Ltd [2020] FCCA 553
Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150
Fair Work Ombudsman v Extrados Solutions Pty Ltd [2014] FCCA 815
Fair Work Ombudsman v Hess [2021] FCCA 1883
Fair Work Ombudsman v Kleen Group Pty Ltd & Anor [2016] FCCA 278
Fair Work Ombudsman v Nobrace Centre Pty Ltd (No 2) [2019] FCCA 2144
Fair Work Ombudsman v NSH North Pty Ltd (t/as New Shanghai Charlestown) [2017] FCA 1301; (2017) 275 IR 148; (2017) 69 AILR 102-890
Fair Work Ombudsman v Rubee Enterprises Pty Ltd [2016] FCCA 3456
Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No 2) [2020] FCCA 2583
Fair Work Ombudsman v South Jin Pty Ltd (No 2) [2016] FCA 832
Fair Work Ombudsman v Syndicate Group Pty Ltd [2015] FCCA 2847
Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492
Fair Work Ombudsman v VS Investment Group Pty Ltd [2013] FCCA 208
Fair Work Ombudsman v Yogurberry World Square Ltd [2016] FCA 1290; (2016) 68 AILR 102-690
Hanssen Pty Ltd v Jones [2009] FCA 192; (2009) 179 IR 57
Jordan v Mornington Inn Pty Ltd [2007] FCA 1384; (2007) 166 IR 33; (2007) 60 AILR 100-744
Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14
Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357; (2005) 79 ALJR 1048; (2005) 215 ALR 213
Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383; (2008) 171 IR 455; (2008) 247 ALR 714; [2008] 60 AILR 100-883
Olsen v Sterling Crown Pty Ltd [2008] FMCA 1392; (2008) 177 IR 337
Parker and Others v Australian Building and Construction Commissioner [2019] FCAFC 56; (2019) 270 FCR 39; (2019) 286 IR 116; (2019) 365 ALR 402
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; (2007) 59 AILR 100-669
The Commonwealth of Australia v Director v Director, Fair Work Building Industry Inspectorate and Others [2015] HCA 46; (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494
Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076
Division: Division 2 General Federal Law Number of paragraphs: 74 Date of last submission/s: 2 June 2022 Date of hearing: 2 June 2022 Place: Perth Counsel for the Applicant: Ms R Karakinos via CISCO Webex Solicitor for the Applicant: HWL Ebsworth First Respondent: Ms A Osman (with leave to appear) Counsel for the Respondents: In person ORDERS
PEG 198 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: ADEPT TROLLY COLLECTION SERVICES PTY LTD (ACN 619 203 717)
First Respondent
AHLAM OSMAN
Second Respondent
order made by:
JUDGE LUCEV
DATE OF ORDER:
12 september 2022
THE COURT:
1.Declares that:
(a)the first respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with a compliance notice issued pursuant to s 716(2) of the Fair Work Act 2009 (Cth) on 7 May 2021;
(b)the second respondent was involved in, within the meaning of section 550(2)(c) of the Fair Work Act 2009 (Cth), the contravention of the first respondent and is taken, by section 550(1) to have contravened section 716(5) of the Fair Work Act 2009 (Cth).
2.Orders that:
(a)pursuant to section 545(1) of the Fair Work Act 2009 (Cth), the first respondent take the steps required by the compliance notice within 28 days of this order by:
(i)paying to the following persons (“Employees”) the outstanding amounts as follows:
A.Nicholas Hay – $1,012.97;
B.Ayaz Khan – $20,352.77;
C.Sandeep Narang – $5,492.60;
D.Abdul Kamal – $8,646.12; and
E.Joshua Pendeerrada – $6,997.64,
(b)calculating and paying to the Employees’ superannuation funds any additional superannuation contributions as required by clause 18.2 of the Cleaning Services Award 2010 in respect of the amounts referred to in paragraph 2(a) of this order;
(c)preparing and producing to the Fair Work Ombudsman, a schedule outlining its calculation of the additional superannuation contributions required to be paid to in paragraph 2(b) of this order;
(d)providing proof of payment of the amounts set out in paragraphs 2(a) and 2(b) above;
(e)pursuant to s 547(2) of the Fair Work Act 2009 (Cth), the first respondent pay to the Employees interest on the amounts owed to the Employees pursuant to paragraph 2(a) of this order within 28 days of the date of this order to the Employees’ bank accounts (such interest to be calculated at the Federal Court of Australia’s pre-judgment interest rate applying at the date of this order);
(f)pursuant to section 546(1) of the Fair Work Act 2009 (Cth):
(i)the first respondent pay a pecuniary penalty of $16,650 for its contravention of section 716(5) of the Fair Work Act 2009 (Cth); and
(ii)the second respondent pay a pecuniary penalty of $3,300 for her involvement in the contravention by Adept Trolly of section 716(5) of the Fair Work Act 2009 (Cth),
(g)pursuant to section 546(3)(a) of the Fair Work Act 2009 (Cth) any pecuniary penalties ordered to be paid by the first and second respondents be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days; and
(h)the Fair Work Ombudsman have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE LUCEV
Introduction
Before the Court is an application lodged by the Applicant, the Fair Work Ombudsman (“FWO”), on 28 September 2021 against the First Respondent, Adept Trolly Collection Services Pty Ltd (“Adept Trolly”), and the Second Respondent, Ms Ahlam Osman (“Ms Osman”) (together, “Respondents”). The application alleges that Adept Trolly has contravened s 716(5) of the Fair Work Act2009 (Cth) (“FW Act”) and that Ms Osman was involved in the contravention, within the meaning of s 550(2) of the FW Act.
On 3 March 2021 the parties entered into a Statement of Agreed Facts set out at [4] below. In the Statement of Agreed Facts Adept Trolly admits that it contravened s 716(5) of the FW Act by failing to comply with the Compliance Notice and Ms Osman admits that she was involved, within the meaning of s 550(2) of the FW Act, in the contravention by Adept Trolly, and the parties agreed to the Court making declarations to that effect, and for orders rectifying the non-compliance and the imposition of a penalty. As such the matter has come before the Court for a penalty hearing to determine the question of penalty.
The Court has before it the following materials:
(a)the Originating Application and Statement of Claim filed 28 September 2021;
(b)the Defence filed 17 November 2021;
(c)the Response filed 9 December 2021;
(d)the Statement of Agreed Facts filed 3 March 2022;
(e)the FWO’s Outline of Submissions on Penalty filed 22 April 2022 (“FWO’s Submissions”);
(f)the Respondents’ Outline of Submissions on Penalty filed 6 May 2022 (“Respondents’ Submissions”);
(g)the affidavit of Benjamin Arthur Abey affirmed 18 March 2022 (“Abey Affidavit);
(h)the affidavit of Ms Osman affirmed 4 April 2022 (“First Osman Affidavit”); and
(i)the affidavit of Ms Osman affirmed 18 May 2022 (“Second Osman Affidavit”).
Agreed Facts
The Statement of Agreed Facts provides as follows (original emphasis):
A. THE APPLICATION
1.On 28 September 2021, the Applicant, the Fair Work Ombudsman, filed an Application and Statement of Claim in this Court against the Respondents in respect of the First Respondent's contravention (“Contravention”) of s 716(5) of the Fair Work Act 2009 (Cth) (FW Act) and the Second Respondent's involvement in the Contravention as an accessory pursuant to s 550 of the FW Act.
B. ADMITTED CONTRAVENTIONS
2.On the basis of the facts set out below, the First Respondent admits to contravening the following civil remedy provision of the FW Act: s 716(5) of the FW Act, by failing without reasonable excuse to comply with a Compliance Notice issued by Fair Work Inspector Benjamin Abey (“FWI Abey”) as a result of FWI Abey forming a reasonable belief that the Respondent contravened terms of the Cleaning Services Award 2010 (“the Award”) and the National Employment Standards.
3.On the basis of the facts set out below, the Second Respondent admits that she was involved in the Contravention of s 716(5) of the FW Act within the meaning of s 550(2)(c) of the FW Act, and pursuant to s 550(1) of the FW Act, is taken to have contravened s 716(5) of the FW Act.
C PARTIES
The Applicant
4.The Applicant, is and was at all relevant times:
(a)a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to s 687(1) of the FW Act;
(b) a Fair Work Inspector (“FWI”) pursuant to s 701 of the FW Act; and
(c)a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions pursuant to s 539(2) of the FW Act.
5.FWI Abey is and was at all relevant times a FWI appointed by the Applicant under s 700 of the FW Act.
The First Respondent
6.The First Respondent, Adept Trolly Collection Services Pty Ltd (ACN 619 203 717) (Adept Trolly), is and was at all relevant times:
(a)a company incorporated under the Corporations Act 2001 (Cth) and registered since 19 May 2017;
(b)a “constitutional corporation” within the meaning of s 12 of the FW Act;
(c)a “national system employer” within the meaning of s 14 of the FW Act;
(d)based in Western Australia with a registered office located at 16 Egretta Drive, Waterford, in the State of Western Australia (Registered Office); and
(e)an entity to which the FW Act applied in respect of its employees
7.Adept Trolly was, at all relevant times, the operator of a trolley collection service located at Kmart sites in Launceston, Burnie and Devonport, in the State of Tasmania (“the Business”).
The Second Respondent
8.The Second Respondent, Ms Ahlam Osman (Ms Osman), is and was at all relevant times:
(a) a natural person capable of being sued;
(b)the sole director and company secretary of Adept Trolly since 19 May 2017;
(c) a person who was:
i.responsible for the overall operation, management and control of Adept Trolly; and
ii.responsible for ensuring Adept Trolly complied with its legal obligations under the FW Act; and
(d)a person whose conduct (engaged in on behalf of Adept Trolly and within the scope of her actual or apparent authority) is taken to be that of Adept Trolly under s 793(1) of the FW Act.
D.ADMITTED FAILURE TO COMPLY WITH A COMPLIANCE NOTICE IN CONTRAVENTION OF SECTION 716(5) OF THE FW ACT
The Investigation
9.Following a request for assistance made to the Applicant by Mr Abdul Kamal in November 2017, FWI Abey commenced an investigation into Adept Trolly, in December 2018 (“Investigation”).
10.As a result of the Investigation, FWI Abey formed a belief that, at all relevant times between 5 June 2017 and 8 April 2018 (“the Relevant Period”):
(a) Adept Trolly employed 5 employees to work at the Business, namely:
i. Sandeep Narang (full-time cleaning employee);
ii. Ayaz Khan (full-time cleaning employee);
iii. Nicholas Hay (part-time cleaning employee);
iv. Abdul Kamal (part-time cleaning employee); and
v.Joshua Pendeerada (part-time cleaning employee) (collectively, the Employees).
(b)the Award, a modern award under the FW Act, covered and applied to Adept Trolly in respect of the Employees;
(c)the Employees were not paid all of their minimum entitlements under the Award during the Relevant Period.
11.By reason of the matters admitted in paragraph 10 above, FWI Abey formed a reasonable belief within the meaning of s 716(1)(b) of the FW Act that Adept Trolly, during the Relevant Period in respect of one or more of the Employees:
(a) contravened the following terms of the Award:
i. Clause 16.1 – minimum wages;
ii. Clause 16.2 – junior rates;
iii. Clause 12.4(b)(iii) – part-time allowance;
iv. Clause 27.1(a) – shift work penalty rate;
v. Clause 27.2(a) – Saturday penalty rate;
vi. Clause 27.2(b) – Sunday penalty rate;
vii. Clause 27.3 – public holiday penalty rate;
viii.Clause 28.2 – overtime worked from midnight Sunday to midnight on Saturday;
ix. Clause 28.3 – overtime on Sunday; and
(b)contravened the following provision of the National Employment Standards:
i. s 116 of the FW Act - payment for absence on public holiday;
(together, the Admitted Contraventions).
The Compliance Notice
12.On 13 May 2021, at 11:16am, an agent of AAC Process Servers & Investigations (ABN 30 431 977 102) on behalf of FWI Abey, gave Adept Trolly a compliance notice in respect of the Admitted Contraventions pursuant to s 716(2) of the FW Act (“Compliance Notice”), by personally serving the Compliance Notice on Ms Osman at the Registered Office.
13.Pursuant to s 716(2) of the FW Act, the Compliance Notice required Adept Trolly to:
(a)take action by 2 July 2021 to remedy the direct effects of the Admitted Contraventions in respect of the Employees, by (Specified Action):
i.making a payment to each of the Employees of the following outstanding amounts:
1. Nicholas Hay – $1,012.97;
2. Ayaz Khan – $20,352.77;
3. Sandeep Narang – $5,492.60;
4. Abdul Kamal – $8,646.12; and
5. Joshua Pendeerrada – $6,997.64.
ii.calculating and paying to the Employees’ superannuation funds any additional superannuation contributions required to be paid by clause 18.2 of the Cleaning Services Award 2020 in respect of the amounts referred to in paragraph 10(a)(i);
iii.making a schedule that set out the additional superannuation contributions referred to in paragraph 10(a)(ii) above (Schedule); and
(b)produce reasonable evidence to the Applicant of its compliance with the Compliance Notice by 9 July 2021, by producing the Schedule and proof that full payment has been made to the Employees of the payments required to be made at paragraphs 10(a)(i) and (ii).
14. The Compliance Notice met the requirements of s 716(3) of the FW Act.
Failure to comply with the Compliance Notice
15. Adept Trolly admits that it did not:
(a) take the Specified Action by 2 July 2021, or at all; and
(b)produce to the Applicant reasonable evidence of compliance with the Compliance Notice by 9 July 2021, or at all.
16.Adept Trolly admits that by reason of the matters admitted in paragraph 15 above, it failed without reasonable excuse to comply with the Compliance Notice and thereby contravened s 716(5) of the FW Act.
E. ACCESSORIAL LIABILITY OF MS OSMAN
17.By reason of the matters admitted in paragraph 8 above, at all material times Ms Osman was responsible for ensuring that Adept Trolly complied with the Compliance Notice.
18.By reason of the matters admitted in paragraphs 8, 12, 15 and 17 above, Ms Osman:
(a)had actual knowledge of the Compliance Notice that was given to Adept Trolly;
(b)had actual knowledge that Adept Trolly failed to comply with the Compliance Notice; and
(c)was an intentional participant in Adept Trolly’s failure to comply with the Compliance Notice.
19. By reason of the matters admitted in paragraphs 17 and 18 above, Ms Osman:
(a)was involved, within the meaning of s 550(2)(c) of the FW Act, in the contravention of Adept Trolly admitted in paragraph 16 above; and
(b)pursuant to s 550(1) of the FW Act, she is taken to have committed that contravention.
Submissions
FWO Submissions
In relation to the principles governing the determination of penalty the FWO submitted that:
(a)section 546(1) of the FW Act enables the Court to impose a penalty in respect of a contravention of a civil remedy provision;
(b)each Respondent has admitted to one contravention of a civil remedy provision, s 716(5) of the FW Act;
(c)the purpose of civil penalties is to promote the public interest in compliance and to attempt to put a price on a contravention that is sufficiently high to deter repetition by the contravener and by others who are in a position to contravene legislation: The Commonwealth of Australia v Director v Director, Fair Work Building Industry Inspectorate and Others [2015] HCA 46; (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494 (“Agreed Penalties Case”) at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ, citing Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076 (“CSR”) at [40] per French J; see also Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union and Another [2018] HCA 3; (2018) 262 CLR 157; (2018) 92 ALJR 219; (2018) 273 IR 211; (2018) 351 ALR 190; (2018) 70 AILR 102-917 (“ABCC v CFMEU”) at [116] per Keane, Nettle and Gordon JJ;
(d)to achieve this end, the Court should fix a penalty that “it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions”: Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13; (2022) 96 ALJR 426; (2022) 314 IR 301; (2022) 399 ALR 599 (“Pattinson”) at [71] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ; and
(e)the appropriate deterrent value of a penalty may be assessed by reference to the non-exhaustive list of the factors identified in CSR at [42] per French J; see also Pattinson at [18] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ. This list is well-settled but not a “rigid catalogue of matters for attention”: AustralianOphthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809 (“Australian Ophthalmic Supplies”) at [91] per Buchanan J. It includes matters relevant to both the character of the contravening conduct and of the contravener: Pattinson at [19] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ.
In relation to maximum penalty the FWO submitted that:
(a)pursuant to ss 539(2) and 545(2) of the FW Act, the maximum penalty that the Court may impose on Adept Trolly for its contravention of s 716(5) of the FW Act is $33,300 and, in respect of Ms Osman, $6,660. This amount is calculated based on the penalty unit amount of $222 which applied at the time of the contravention, being as at 9 July 2021. Section 12 of the FW Act provides that penalty unit has the same meaning as s 4AA of the Crimes Act 1914 (Cth) (“Crimes Act”) ; and
(b)the maximum penalty is a relevant consideration but “does not constrain the exercise of the discretion under s 546 … beyond requiring ‘some reasonable relationship between the theoretical maximum and the final penalty imposed’”: Pattinson at [55] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ, citing Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181; (2016) 340 ALR 25; (2016) [2016] ATPR 42-530 at [155]-[156] per Jagot, Yates and Bromwich JJ. The “reasonable relationship” should be considered by reference to the need for deterrence: Pattinson at [55] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ.
In relation to general deterrence the FWO submitted that:
(a)general deterrence must serve a purpose such that the penalty is not seen by others as just “the cost of doing business”: Fair Work Ombudsman v Yogurberry World Square Ltd [2016] FCA 1290; (2016) 68 AILR 102-690 at [27] per Flick J. In order to be useful as a general deterrent, a penalty “should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by likeminded persons or organisations”: Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; (2007) 59 AILR 100-669 at [93] per Lander J;
(b)the efficacy of statutory notices such as compliance notices will be hindered if recipients perceive that a failure to comply carries no meaningful consequences. Given the importance of the power to issue a compliance notice as a tool of Fair Work Inspectors, and that compliance with such notices avoids the need for litigation or the imposition of any penalties: Fair Work Ombudsman v Syndicate Group Pty Ltd [2015] FCCA 2847 at [27] per Judge Hartnett; cited in Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150 at [29] per Judge Smith, penalties for non-compliance should be set at a level which demonstrates there are serious consequences for failing to comply with a compliance notice. In doing so, the Court will deter other parties from failing to comply with compliance notices;
(c)Adept Trolly operates within the building and other industrial cleaning services industry (“Industry”), which has a high workplace dispute rate. As set out in the FWO’s Industry Profile for the Industry for the period July 2015 to December 2021: Abey Affidavit, Annexure BA-9:
(i)approximately 18% of all disputes received by the FWO relating to visa holders were received in relation to the Industry; and
(ii)of all the disputes raised in the Industry to the FWO, approximately 19% related to non-payment of time worked, and approximately 14% related to an underpayment of hourly rates; and
(d)there is a need to send a message to all employers in the Industry that failure to comply with a compliance notice will not be tolerated by the FWO, the community or the courts, having particular regard to the number of disputes related to “vulnerable” workers such as visa holders.
In relation to specific deterrence the FWO submitted that:
(a)specific deterrence is directed at ensuring that a contravener is not prepared to embark upon the risk of engaging in the same contravening conduct in the future: Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 at [50] per Gilmour J;
(b)there is a particular need to deter Adept Trolly from engaging in the same contravening conduct in future, given that the Adept Trolly is still registered: Abey Affidavit at [18] Annexure BA-8, and the Respondents have demonstrated a disregard for Adept Trolly’s obligations under the FW Act by failing to comply with the Compliance Notice. Further, Adept Trolly has shown a disregard for its part in the failure to pay wages to its employees, by seeking to blame the company it provided the sub-contracted work to: Abey Affidavit at [12] Annexure BA-4;
(c)a penalty should accordingly be fixed at a level which specifically deters the Respondents from engaging in further contravening conduct;
(d)on behalf of the Respondents, Ms Osman has stated that the media release published by the FWO “destroyed its reputation… making it difficult for the company to gain any further contracts before this case is closed”: First Osman Affidavit at [3]; and
(e)the Courts have previously recognised that use of media releases can form part of the FWO’s role as a regulator in educating the public and deterring future misconduct: Fair Work Ombudsman v South Jin Pty Ltd (No 2) [2016] FCA 832 at [82]-[83] per White J, and further that publicity and embarrassment resulting from a media release are the “mere and foreseeable consequences of the conduct engaged in” and therefore not relevant in mitigating the penalty to be imposed: Cousins v Merringtons Pty Ltd (No 2) [2008] VSC 340 at [59]-[64] per Hansen J.
In relation to the nature, circumstances and deliberateness of the contravening conduct the FWO submitted that:
(a)the contravention of s 716(5) of the FW Act took place against a background where:
(i)the Respondents were on notice from as early as 13 May 2021:
(A)of the due date for compliance with the Compliance Notice: Abey Affidavit, Annexures BA-4, BA-6, BA-7; and
(B)that failure to comply with the Compliance Notice may lead to the FWO commencing proceedings seeking civil penalties and orders for compliance: Abey Affidavit, Annexures BA-4, BA-6, BA-7;
(ii)Adept Trolly admits it did not have a reasonable excuse for non-compliance with the Compliance Notice: Statement of Agreed Facts at [16];
(iii)Adept Trolly did not take the steps required to comply with the Compliance Notice by 30 June 2021 or at all: Abey Affidavit at [14] to [16], Annexure BA-7; and
(iv)Adept Trolly has still not paid the Underpayment Amount to the Employees: Abey Affidavit at [16];
(b)prior to the FWO commencing these proceedings on 28 September 2021, Adept Trolly had a substantial opportunity over a period of more than five months to rectify its non-compliance with the Compliance Notice. In that period, the FWO attempted to engage with Ms Osman, and Mr Yousif Osman (“Mr Osman”), operations manager of Adept Trolly, on numerous occasions and clearly informed Ms Osman that failure to comply with the Compliance Notice may lead to the FWO commencing proceedings: Abey Affidavit, Annexures BA-4, BA-6, BA-7;
(c)as a result of Adept Trolly’s failure to comply with the Compliance Notice, the FWO was required to bring proceedings seeking orders to remedy the contravention;
(d)Adept Trolly’s conduct in failing to comply with the Compliance Notice demonstrates a deliberate disregard for its obligations under the FW Act and the authority of the FWO as a regulator of Commonwealth workplace laws; and
(e)in addition, two of the Employees were vulnerable foreign nationals working in Australia pursuant to visas. Mr Narang was on a subclass 010 visa (bridging visa), and Mr Khan was on a subclass 100 visa (partner visa): Abey Affidavit, Annexures BA-2. The courts have previously recognised that visa workers are generally a vulnerable category of employee, and the FWO submits that such categorisation applies to the Employees in this matter: Ahmed v Al-Hussain Pty Ltd (t/as The Cheesecake Shop) (No 2) [2019] FCA 670 (“The Cheesecake Shop) (No 2)”) at [68] per Rares J.
In relation to the nature and extent of loss the FWO submitted that:
(a)the Employees have been directly impacted by Adept Trolly’s failure to comply with the Compliance Notice and suffered substantial loss. As a result of Adept Trolly’s failure to comply with the Compliance Notice, the Employees collectively did not receive $42,502.10;
(b)the Underpayment Amount was owed to the Employees arising from their collective employment periods between 5 June 2017 and 8 April 2018, and the Employees are still awaiting the Underpayment Amount to be paid to them, together with any superannuation contributions, some four years after their employment with Adept Trolly ceased;
(c)the delay in the Employees receiving their entitlements is a relevant loss flowing from the failure to comply with the Compliance Notice: Fair Work Ombudsman v Hess [2021] FCCA 1883 at [35] per Judge Jarrett;
(d)the failure to comply with a statutory notice also occasions a more public loss. As the Court explained in Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No 2) [2020] FCCA 2583 (“Soma Kitchen”) at [39] per Judge Kendall:
the purpose of s.716 is to provide an alternative to litigation. That is, it is designed to prevent litigation. Litigation is timely and expensive. It is also not controversial that Court resources are limited and this Court actively promotes alternative resolution methods in order to reduce unnecessary expenditure. Here, that purpose has been systematically undermined.
(e)the Respondents’ failure to comply with the Compliance Notice undermines the utility of compliance notices as an effective mechanism for the efficient and cost-effective rectification of identified contraventions of the FW Act; and
(f)the legislature has set penalties for non-compliance with a compliance notice because a failure to comply will cause (as it has done in these proceedings) the FWO (and the Court) to spend time and public funds dealing with civil remedy proceedings which would not have been required had compliance occurred: Fair Work Ombudsman v Nobrace Centre Pty Ltd (No 2) [2019] FCCA 2144 (“Nobrace”) at [19] per Judge Blake; Fair Work Ombudsman v ASGBRIS Pty Ltd [2020] FCCA 553 at [36] per Judge Tonkin.
In relation to compliance with minimum standards the FWO submitted that:
(a)one of the principal purposes of the FW Act is to provide a guaranteed safety net of fair, relevant, and enforceable minimum terms and conditions for all employees: FW Act, s 3(b). To be able to enforce these terms, FWIs must be able to exercise their compliance powers effectively. The purpose of the powers conferred on FWIs is to provide the FWO with an effective means of investigating and enforcing compliance with minimum standards and industrial instruments;
(b)Adept Trolly’s failure to comply with the Compliance Notice undermines the FW Act’s enforcement framework and the safety net of entitlements it is designed to protect: Fair Work Ombudsman v ACN 156 455 828 Pty Ltd (t/as Trek North Tours) (No 2) [2015] FCCA 1801 at [21]-[22] per Judge Jarrett, and reflects a prioritisation of the Respondents’ own interests at the expense of the Employee’s minimum entitlements; and
(c)the failure to comply with a statutory notice properly issued by the FWO is serious: Fair Work Ombudsman v VS Investment Group Pty Ltd [2013] FCCA 208 (“VS Investment Group”) at [51] per Judge Jarrett. The efficacy of statutory notices such as compliance notices will be hindered or made redundant if recipients perceive that a failure to comply carries no meaningful consequences: Nobrace at [40] per Judge Blake.
In relation to the size of the business the FWO submitted that:
(a)the Respondents have sought to rely on taxation summaries for Adept Trolly and Ms Osman for the 2020-2021 financial year to demonstrate that Adept Trolly has no financial capacity to pay the amounts claimed: First Osman Affidavit at [4]-[5], Annexures 1 and 2; and
(b)it is well established that the size and financial circumstances of an employer do not exculpate contraventions of workplace laws and that capacity to pay a penalty will be of less relevance than the objective of general deterrence: Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 (“Kelly”) at [28] per Tracey J; Jordan v Mornington Inn Pty Ltd [2007] FCA 1384; (2007) 166 IR 33; (2007) 60 AILR 100-744 at [99] per Heerey J, described on appeal as “unimpeachable” in Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383; (2008) 171 IR 455; (2008) 247 ALR 714; [2008] 60 AILR 100-883 (“Mornington Inn”) at [69] per Stone and Buchanan JJ. Regardless of the size of the business or its financial position, an employer cannot be absolved of its obligations to comply with Commonwealth workplace laws: Fair Work Ombudsman v Extrados Solutions Pty Ltd [2014] FCCA 815 at [10] per Judge Jarrett.
In relation to corrective action, cooperation with the FWO and contrition the FWO submitted that:
(a)where a respondent cooperates and makes admissions early in the course of an investigation or soon after the commencement of proceedings, it may be appropriate to allow a discount on penalty. In Mornington Inn the Full Court of the Federal Court observed at [76] per Stone and Buchannan JJ that:
76.A discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.
(b)this Court has placed more weight on cooperation which is meaningful, active or early; and
(c)the FWO accepts that, by admitting the contraventions, the Respondents have reduced the cost and complexity of the proceedings, however, despite admitting the contraventions, Ms Osman has expressed no contrition or remorse and Adept Trolly has yet to correct their wronging by paying the Underpayment Amount to the Employees. Further, at no stage has there been any suggestion as to when or if the Underpayment Amount will be paid.
In relation to discount and penalty recommendation the FWO submitted that:
(a)a 10% discount is appropriate in all the circumstances; and
(b)based on the penalty factors outlined above, that the following penalty ranges are appropriate:
Respondent
Maximum penalty
Recommended penalty range 80%-90%
Plus 10% discount
Adept Trolly
$33,300
$26,640 - $29,970
$23,976 - $26,973
Ms Osman
$6,600
$5,328 - $5,994
$4,262 - $5,395
(c)this penalty range reflects an appropriate and proportionate response to the admitted contraventions and is relative to the conduct in this case: Fair Work Ombudsman v Rubee Enterprises Pty Ltd [2016] FCCA 3456 at [120] per Judge Altobelli; Parker and Others v Australian Building and Construction Commissioner [2019] FCAFC 56; (2019) 270 FCR 39; (2019) 286 IR 116; (2019) 365 ALR 402 at [289]-[307] per Besanko and Bromwich JJ; Kelly at [30] per Tracey J.
Respondents’ evidence and submissions
The Respondents submitted that:
(a)they have admitted to the contraventions outlined in the Statement of Agreed Facts;
(b)they are in this situation today due to a number of unfortunate circumstances and events taking place during the FWO's investigation and in particular a lack of on-site supervision; and
(c)they request a reduction of penalty and to make payments over time due to the financial circumstances explained in the First Osman Affidavit filed in this Court on 4 April 2022.
Consideration
Principles relevant to determination of penalty
The appropriate steps to be considered in fixing an appropriate penalty were summarised in Fair Work Ombudsman v NSH North Pty Ltd (t/as New Shanghai Charlestown) [2017] FCA 1301; (2017) 275 IR 148; (2017) 69 AILR 102-890 (“New Shanghai Charlestown”) at [36] per Bromwich J, citing Agreed Penalties Case at [64] per French CJ, Kiefel, Bell, Nettle and Gordon JJ; Kelly at [30] per Tracey J and Australian Ophthalmic Supplies at [23] per Gray J, [71] per Graham J and [102] per Buchanan J. In this matter, where there is only a single contravention of a civil remedy provision by each Respondent, not all of the steps relating to the course of conduct or common elements referred to in the above judgments apply and, consequently, the appropriate steps in this matter are:
(a)first, to identify each separate contravention involved. A contravention of each separate obligation imposed by the FW Act is a separate contravention of a civil remedy provision for purposes of s 539(2) of the FW Act;
(b)second, to consider the appropriate penalty in respect of each contravention; and
(c)third, to consider the overall penalties arrived at and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to their conduct viewed as a whole, making such adjustments as are necessary.
Contravention
In this case there is a single contravention of s 716(5) of the FW Act by Adept Trolly, and Ms Osman is taken to have also committed that contravention by reason of her involvement therein: FW Act, s 550(1) and (2)(c).
Maximum penalties
Section 539 of the FW Act sets out the maximum penalties that may be imposed for contraventions of civil penalty provisions by reference to penalty units.
Section 4AA of the Crimes Act defined a “penalty unit” as $222 at the time the Respondents failed to comply with the Compliance Notice. Penalty units are defined by s 12 of the FW Act to have the same meaning as in s 4AA of the Crimes Act.
Section 546(2)(a) of the FW Act provides that the maximum penalty for an individual is the maximum number of penalty units referred to in the relevant item in column 4 of the table in section 539(2) of the FW Act. Item 33 relates to s 716(5) of the FW Act, providing in column 4 that the maximum penalty is 30 penalty units. Accordingly, the maximum penalty for Ms Osman is $6,660.
Section 546(2)(b) of the FW Act provides that the maximum penalty for a body corporate is five times the maximum number of penalty units referred to in the relevant item in column 4 of the table in s 539(2) of the FW Act or 150 penalty units. Accordingly, the maximum penalty for Adept Trolly is $33,300.
Maximum penalties are set by Parliament as a reflection of the worst possible case, which can be evaluated against the case presently before the Court: Australian Ophthalmic Supplies at [108] per Buchanan J, applying Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357; (2005) 79 ALJR 1048; (2005) 215 ALR 213 at [31] per Gleeson CJ, Gummow, Hayne and Callinan JJ. It is appropriate for the Court to have regard to the maximum penalties that could be imposed on each Respondent as an indication of the legislature’s view of the conduct and as part of the comparative exercise of determining the severity of the admitted contraventions: Australian Ophthalmic Supplies at [108] per Buchanan J.
Factors relevant to penalty
The High Court has explained the primary purpose of the imposition of civil penalties. In Agreed Penalties Case at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ the High Court stated “… whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance …”. More recently the High Court has further explained, in ABCC v CFMEU at [116] per Keane, Nettle and Gordon JJ that the “principal object” of deterrence depends on a penalty having the necessary “sting or burden” to secure the specific and general deterrent effects that are the raison d’etre of its imposition.
Civil penalty provisions have as their primary purpose the promotion of the public interest in compliance with the relevant law: CSR at [55]-[59] per French J; Agreed Penalties Case at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. That purpose has been reinforced by the High Court in Pattinson at [71] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ, the purpose of the civil remedy regime in the FW Act was described by the majority as being the promotion of the public interest in compliance with the provisions of the FW Act by way of deterrence of further contravention. In Pattinson at [66] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ, where the High Court expressed the view that s 546 of the FW Act had, as its underlying theory, the notion that the financial disincentive imposed by way of pecuniary penalty will be such as to encourage compliance with the law by ensuring that contraventions are viewed by the contravener, and others, “as an economically irrational choice”.
In determining what penalty to impose the Court must assess the seriousness of the offending the subject of the alleged contravention in the context of all the factual circumstances that arise. In that regard the Court has long had regard to a series of considerations, which are not fixed and which are not a check-list: Pattinson at [18] and [68] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ; Kelly at [14] per Tracey J; Australian Ophthalmic Supplies at [91] per Buchanan JJ. Those consideration are as follows:
(a)the nature and extent of the conduct which led to the breach;
(b)the circumstances in which the conduct took place;
(c)the nature and extent of any loss or damage sustained as a result of the breach;
(d)whether there has been similar previous conduct by the alleged contravener;
(e)whether the breach was properly distinct or arose out of one course of conduct;
(f)the size of the business enterprise involved;
(g)whether or not the breach was deliberate;
(h)the involvement of senior management in the breach;
(i)whether the party committing the breach had shown contrition;
(j)whether the party committing the breach has taken corrective action;
(k)whether the alleged contravener committing the breach has cooperated with enforcement authorities;
(l)the need to ensure compliance with minimum standards by the provision of an effective means for investigation and enforcement of employee entitlements; and
(m)the need for specific and general deterrence.
Consideration of factors
Nature and extent of the conduct which led to the breach and circumstances in which the conduct took place
The nature of the conduct leading to the contravention is a failure to comply with the Compliance Notice issued to the Respondents. It is a single contravention by each of Adept Trolly and Ms Osman. The contravention took place in circumstances where the Respondents were afforded the opportunity, over approximately five months (from May to September 2021), to comply with the Compliance Notice, but they failed to do so.
The Compliance Notice relates to underpayments to five employees in varying amounts ranging from just over $1,000 for one employee, to over $5,000, $6,000 and $8,000 for three other employees, and to over $20,000 for another employee. The underpayments occurred over a period of approximately 10 months between June 2017 and April 2018, and total $42, 502.10. It is fair to observe that for the employees concerned the amounts range from a relatively small underpayment to a very significant underpayment, and that they occurred over a moderately, but not inordinately long period.
The Second Osman Affidavit (upon which the FWO did not seek to cross-examine Ms Osman) annexes medical certificates which indicate that Ms Osman had a prematurely born child (at 30 weeks) in September 2020, and Mr Osman had a frozen shoulder from 2017 which was resistant to physiotherapy and steroid injections and, consequently, he went on a course of narcotics for three years. Further, Mr Osman’s university aged daughter suffered hallucinations and had to be treated for them in 2017, and his son-in-law was involuntarily admitted to a psychiatric hospital on three occasions during the period 2018 to 2020. It is relevant to observe that the birth of the child was at King Edward Memorial Hospital, Western Australia’s main public maternity hospital, and the medical certificate concerning Mr Osman, his daughter and son-in-law was provided by a medical practitioner from Perth’s southern suburbs. Whilst each of these events must have in their own way been disruptive, there is nothing in the evidence which suggests how it is that these events precluded Adept Trolly from complying with a Compliance Notice which was not issued until 13 May 2021, or paying the outstanding entitlements to the employees who were employed in Tasmania.
The Court notes that two of the employees were foreign nationals working in Australia pursuant to the visas, one on a bridging visa and the other on a partner visa. The FWO submits that these two employees were vulnerable foreign nationals, and that the courts have previously recognised that visa workers are generally a vulnerable category of employee: FWO’s Submissions at [32], citing The Cheesecake Shop (No 2) at [68] per Rares J. That is not a submission which ought to be accepted without examination. What was actually said by the Federal Court in The Cheesecake Shop (No 2) at [68] per Rares J was as follows:
I have had regard to the fact that both Mr Zahid and Mr Bhatti knew that Mr Ahmed (and any person in Mr Ahmed’s position) was vulnerable to exploitation, by reason of his immigration status as a sponsored worker whose livelihood they could terminate and thereby bring into peril the continuation of his visa to remain in Australia. Mr Ahmed was the more vulnerable, as Mr Zahid and Mr Bhatti were aware, because he had brought his family out to Australia.
It is not the case that the Federal Court in The Cheesecake Shop (No 2) concluded that visa workers are generally a vulnerable category of employee. Rather, the Federal Court said that the employees concerned were vulnerable to exploitation by reason of their immigration status as sponsored workers whose livelihoods and stays in Australia were dependent upon that immigration status. It is concerning that the FWO, who ought to conduct itself as a model litigant, can so mischaracterise what the Federal Court said in The Cheesecake Shop (No 2).
The Court also notes what was said by the Federal Court in Hanssen Pty Ltd v Jones [2009] FCA 192; (2009) 179 IR 57 (“Hanssen”) at [59] per Siopis J, as follows:
59.In my view, in making a finding that there was exploitation by the appellant of vulnerable workers, and in treating that finding as an adverse circumstance affecting penalty, it was incumbent upon the Federal Magistrate to make specific findings in relation to the detrimental impact, if any, on the employees affected. This is because that finding and the treatment of that finding as an adverse factor, carried the implication that there had been such a detrimental effect. In any event, for the reasons expressed below, it was a relevant consideration in relation to any finding that there was exploitation of the employees’ vulnerability.
It is therefore necessary to pay attention to the evidence, and to consider whether that evidence establishes, or is evidence from which it may be inferred, that an employee is vulnerable. The evidence in relation to the visa status of each of the two employees is limited to a single page visa entitlement verification online entitlement check (“VEVO”) valid as at 16 October 2017.
In relation to Mr Narang, the employee on a bridging visa, the relevant VEVO indicates that the bridging visa was granted on 12 June 2017 and that Mr Narang had unlimited work rights, but only for a period of three months, and that if a prospective employer wished to employ him then his visa status had to be checked every three months. It may be theoretically arguable that Mr Narang was vulnerable to an unscrupulous employer by reason of the three month limitation and necessity to check the visa status before employing the employee for more than three months, but there is no evidence that Adept Trolly sought to exploit Mr Narang by reason of his visa status.
In relation to Mr Khan the VEVO indicates that he was granted a subclass 100 partner visa on 29 August 2013 with an unlimited right to work in Australia. A subclass 100 partner visa is a visa entitling the holder, who must be the de facto partner or spouse of an Australian citizen, an Australian permanent resident or eligible New Zealand citizen, to live permanently in Australia for a period of five years from the date of the grant: Migration Regulations 1994 (Cth), Sch 2, cl 100.511. On that basis it is difficult to understand how FWO submits that Mr Khan was vulnerable to exploitation by reason of his visa status, but, in any event, there is no evidence that Adept Trolly sought to exploit Mr Khan by reason of his visa status.
Overall, it is clear that the nature and extent of conduct engaged in by the Respondents, and the circumstances in which that conduct took place are such as to engage the pecuniary penalty regime under the FW Act, and although the conduct does not extend to evidence of exploitation by the Respondents, as suggested by the FWO, there is otherwise nothing in the nature and extent of conduct or the circumstances in which the conduct took place which ameliorates the Respondents’ conduct.
Nature and extent of loss and damage sustained
As observed at [27] above the underpayments to the five employees range from a relatively small underpayment to a very significant underpayment. Although there is no evidence as to the amounts payable to the employees concerned it is self-evident that underpayments exceeding $5,000 for four of the five employees, who were employed as part and full time cleaning employees range from being quite to very significant underpayments. The loss to the majority of the individual employees is therefore, on its face, substantial. The employees have also suffered further, not having been paid their superannuation contributions. The loss to the individual employees continues because Adept Trolly has still not rectified the underpayments to the employees.
The compliance notice is intended to be a mechanism which avoids the institution of proceedings for contraventions of the FW Act: Soma Kitchen at [39] per Judge Kendall; Nobrace at [19] per Judge Blake. The failure to comply with the Compliance Notice also results in loss: it being necessary for the Commonwealth (thus, the ordinary taxpayer) to fund the proceedings instituted by the FWO and the time and resources expended by this Court in hearing and determining these proceedings. Compliance with the Compliance Notice by the Respondents would have obviated those losses.
In short, the Respondents have done nothing to alleviate the losses suffered as a consequence of their contravening conduct.
Whether or not the breach was deliberate
The Respondents were given a number of months to participate in the investigation and comply with the Compliance Notice, however they failed to do so. Consequently, these proceedings were initiated by the FWO. In Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492 at [42] per Judge Emmett this Court observed as follows:
42.… intentional failure to comply with a mandatory notice issued by the workplace regulator is “conduct ... [which] undermines the utility and effectiveness of a fundamental object” [of] the FW Act. The failure to comply undermines and frustrates the powers conferred on Fair Work Inspectors, which are conferred for the purposes of providing an effective means of enforcing compliance with lawful minimum entitlements. There is a significant cost to the public by reason of the need to bring this matter before the court to enforce compliance.
The Court notes that an offer to pay $1,000 per month was made by Adept Trolly on 16 April 2021, but that offer was rejected by the FWO on 19 April 2021, and the Compliance Notice was issued shortly thereafter: Abey Affidavit, Annexure BA-7 (the Court also notes that a previous Compliance Notice had issued in March 2021 but had been withdrawn: Abey Affidavit, Annexure BA-5).
No steps of any kind have been taken by the Respondents to facilitate compliance with the Compliance Notice, including, for example, the preparation of the requested schedule of outstanding unpaid superannuation contributions for the employees. And, notwithstanding the apparent capacity to pay $1,000 per month in April 2021, less than one month before the Compliance Notice issued in May 2021, no payments, including part or progress payments, of any kind, have been made by Adept Trolly to any of the employees concerned.
The evidence, such as it is, in the First Osman Affidavit (affirmed 4 April 2022, and upon which the FWO did not seek to cross-examine Ms Osman), does indicate that Adept Trolly:
(a)made a small loss ($33,262) in the 2021 company tax return year;
(b)had a small excess ($17,453) of liabilities over assets;
(c)had current assets of $44,161 and total assets of $346,758;
(d)paid $220,524 in salary and wages for the company tax return year (to whom the salary and wages were paid it is not entirely clear, save that it was not Ms Osman: see First Osman Affidavit, Annexure 1);
(e)had been “in a difficult financial position since the start of the pandemic in 2019” [sic – 2020]; and
(f)now had no income, having lost its contracts as a result of the FWO’s media release on 26 October 2021 “about this case going to court”.
The Court notes, however, that Adept Trolly remained registered as at 11 March 20022: Abey Affidavit, Annexure BA-8, and seemingly continues to trade, and there is no evidence as such that it is trading whilst insolvent, or that steps are being taken to put it into external administration. Further, the evidence indicates that the loss of contracts, and hence income from those contracts, did not occur until 26 October 2021, more than three months after the 2 July 2021 deadline for compliance with the Compliance Notice.
The above evidence does not establish that Adept Trolly was not able to make the payments required by the Compliance Notice in July 2021 (either in whole or part), whether from income from its still extant contracts at that time, from existing assets or the sale thereof, or by borrowing the required money.
As indicated at [28] above the evidence in the Second Osman Affidavit is such that there is nothing in that evidence which suggests how the events described therein precluded Adept Trolly from complying with a Compliance Notice which was not issued until 13 May 2021, or paying the outstanding entitlements to the employees concerned.
In all the above circumstances, the better view is that the conduct constituting the contravention of the Compliance Notice was deliberate.
Minimum standards, cooperation and contrition
Issuing compliance notices forms a part of the legislative scheme for the purpose of promoting compliance with relevant provisions of the FW Act. A compliance notice informs employers of obligations and entitlements owed to employees, and gives them the opportunity to rectify any alleged non-compliance with a Modern Award or the NES, or to challenge by way of review the basis for the FWI’s belief. The compliance notice mechanism is an essential component of the legislative mechanism which seeks to resolve contraventions of the FW Act cost effectively, expeditiously and without the need for legal proceedings: FW Act, s 682(1); Soma Kitchen at [39] per Judge Kendall; Nobrace at [19] per Judge Blake. No application for review was made in this case.
An appropriate penalty in this case must acknowledge the legislative intention underlying the power to issue compliance notices, and that the issuance of a Compliance Notice is primarily directed to providing an alleged contravener with an opportunity to remedy an alleged contravention, thereby ensuring compliance with relevant, including minimum, standards, and obviating the need for litigation in relation to the alleged contravention, or for the alleged contravener to seek review (which did not occur here) a course which, if successful, obviates the need for determination of the alleged contravention.
It is fair to observe that, save for the failure to comply and to determine and pay entitlements to the employees concerned, there has not been a course, or any overt incidents, of a failure to cooperate with the FWO by the Respondents. There was an offer to pay the outstanding payments by instalments (rejected by the FWO): see [40] above, which, notwithstanding the relatively paltry monthly amount of the proposed repayments, and that it would have meant that all outstanding payments would not have been made to the employees concerned until close to the end of 2025, is some evidence of an attempt at cooperation. So too the willingness to enter into a Statement of Agreed Facts is some evidence of cooperation with the FWO, but a willingness which the FWO characterised as late in coming, and lacking in contrition or remorse whether manifested by an apology, or more practically by payments to the employees concerned.
Cooperation which is half-hearted or late is not necessarily enough to mitigate penalty. As was observed in Olsen v Sterling Crown Pty Ltd [2008] FMCA 1392; 177 IR 337 at [78]-[79] per Lucev FM (footnotes omitted):
78.The mere fact that the contravention has been admitted and a consequent court hearing averted, does not of itself warrant a penalty reduction. More is required, namely:
a)an indication of an acceptance of wrongdoing and a suitable and credible expression of regret; and/or
b) an indication of a willingness to facilitate the course of justice.
79.It must not be forgotten that dependent upon the stage at which the contravention is admitted the primary saving may be to the respondent in respect of the unnecessary cost of a contested hearing in circumstances where the applicant has already incurred much of the cost involved in preparation for a hearing, particularly where, as here, in civil proceedings the matter proceeds (or would proceed) on affidavit.
In this case there is still no expression of regret or remorse by the Respondents, and no conduct, for example by way of the making of the outstanding payments in whole or part to any of the employees concerned, which manifests regret or remorse. Furthermore, even in Adept Trolly’s Submissions there was an unexplained attempt, unsupported by any admissible evidence, to blame the contravention “in particular [on a] lack of on-site supervision”. That submission does little to assist the Respondents given that the right to exercise direction or supervision is typically a hallmark responsibility of an employer in an employment relationship: Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; (2022) 96 ALJR 89; (2022) 312 IR 1 at [72], [75] and [76] per Kiefel CJ, Keane and Edelman JJ, [122], [152] and [158] per Gageler and Gleeson JJ, and [174] per Gordon J. Furthermore, there is little indication that what was done by the Respondents was by way of facilitating the course of justice, but more a recognition of the inevitable outcome: Dennington v Prescott & Anor [2008] FMCA 1105 at [34] per O’Sullivan FM.
In the circumstances, an appropriate penalty must be fixed recognising that there has been a small degree of cooperation but no discernible contrition by the Respondents.
Size of business
The size of a business does not excuse a business from any required compliance under the FW Act: Kelly at [28] per Tracey J, but properly evidenced, and for proper reasons, incapacity to pay may afford some relief by way of mitigation of penalty. In this regard the Court repeats what was said in Sterling Crown at [65]-[76] per Lucev FM (footnotes omitted):
65.In Kelly the Federal Court did not disavow size as a factor to be considered in relation to penalty. What the Federal Court there said was:
a)regardless of size, corporate employers are obliged to meet minimum employment standards;
b)when corporate employers do not meet minimum employment standards it will be normal to impose an “appropriate” monetary sanction; and
c) the sanction must be at a meaningful level.
66.The size of the employer is relevant to a consideration of what the “appropriate” sanction is, and whether that sanction is at a meaningful level. Whether any reduction ought to be afforded to an employer by reason of the size of the corporation concerned is a matter for consideration having regard to the particular circumstances of each case. In ACCC v ABB Transmission and Distribution Limited (No.2) the Federal Court in imposing penalties in relation to contraventions of ss.45 and 45A of the Trade Practices Act 1976 (Cth) specifically took account of:
a)the difference in size and scale of the operations of the offending corporations;
b)the fact that shares were tightly held in two of the companies which were private, whilst the third was a subsidiary of a large international public company; and
c) the size of the parent company of the subsidiary company,
in determining the penalties to be imposed.
67. In ABB Transmission (No.2) the Federal Court went on to expressly find that:
“In determining the appropriate penalty it is also necessary to have regard to the capacity of the parties to bear the penalty.”
68.The Federal Court also took into account in setting penalty a concern that the size of the penalty would not affect one corporation’s ability to trade, observing that it would “be incongruous if a penalty for an anti-trust violation had an anti-competitive effect.”
69.It might be said that these were considerations within the case in relation to the so called “parity principle”. But in ABB Transmission (No.2) the Federal Court expressly found that the parity principle “should not prevent the court from carefully assessing the significance of a particular penalty for a particular corporation.” It might also be said that those considerations are particular to contraventions of trade practices legislation involving abuse of market power where the size of the corporation might be of particular relevance. But questions of power, and the power disparity between an employer and an employee, are relevant in this case. They are relevant because the purpose for maintaining employment records is to allow their inspection by workplace inspectors so as to facilitate compliance with industrial instruments and minimum employment standards. The power disparity between an employer and an employee, possibly arising from the size and financial resources of the employer, has been recognised as a factor which may impact upon the negotiation of terms and conditions of employment. If the size and financial resources of a corporation in relation to an abuse of market power are relevant, then the size and financial resources of an employer might also be relevant to an abuse of employment power which might be revealed by an inspection of employment records. Therefore the size and financial resources of the employer are relevant factors for consideration in this case.
70.In ASC v Forem-Freeway Enterprises Pty Ltd & Ors the Federal Court in a corporations matter was dealing with an application for a pecuniary penalty in relation to a failure to keep accounting records. The Federal Court took into account whether or not the individual concerned had the capacity to pay a substantial penalty. The individual concerned was bankrupt, but any penalty would survive the bankruptcy, and the Federal Court observed that the bankrupt would emerge from the bankruptcy indebted to the Commonwealth, and that if he had no capacity to pay, the infliction of such a debt by way of penalty was “a somewhat pointless exercise.” The Federal Court however took account of the fact that the individual concerned might come into funds in the future and might be able to pay a penalty at a future time, and therefore ordered that there be liberty to apply in relation to the imposition of a penalty.
71. This Court has previously said that:
“There is an established principle in setting penalties for both individuals and corporations that regard is had to their financial position, and more particularly their capacity to pay.”
72.There is nothing new in the size and financial resources of the employer (be it a corporation or otherwise) being considered in setting penalties in industrial law matters. In PKIU v Vista Paper Products Pty Ltd the then Chief Justice of the Industrial Relations Court of Australia said:
“In determining what monetary penalty to impose on an offender it is usual for a court to take into account the offender’s capacity to pay. A monetary sum that would constitute a reasonable penalty to a person of average income might be unduly oppressive if imposed on an impecunious person.”
73.In Textile Clothing and Footwear Union of Australia v Lotus Cove Pty Ltd the Federal Court as a factor in mitigation of penalty had regard to the fact that the employer respondent was a small enterprise upon whom the imposition of a large fine was likely to be oppressive.
74.In Australian Nursing Federation v Alcheringa Hostel the Federal Court had regard to the following:
“Alcheringa is a community-based non-profit organisation that has been in difficult financial straits for the last few years. It did not seek to reduce labour costs so as to increase the wealth of itself or any shareholders. Rather, it acted on a perception, real or otherwise, that it was essential for its financial survival for medication to be administered by persons other than Division 1 nurses. I have also borne in mind that a heavy financial penalty will divert already scarce resources from Alcheringa’s residents and the community it serves.”
75.As with cases under the trade practices legislation where the financial resources of a contravener are considered to ensure that the penalty does not have an anti-competitive affect by removing potential competitors from the market, so in industrial law proceedings the financial resources of a contravener must also be considered. There would be a none too subtle irony in the imposition of a penalty which caused an employer to close a business, resulting in:
a)unemployment, a circumstance potentially contrary to two of the principal objects of the WR Act, namely:
i) “encouraging the pursuit of high employment”; and
ii)“protecting the competitive position of young people” and “promoting youth employment”; or
b) non-payment of entitlements.
76.It therefore appears that the size and financial resources of a contravener are factors to be considered, and the impact of those factors upon the setting of penalty is in each case a matter for consideration of the particular circumstances of the size and financial resources of the contravener, plus the other factors which are relevant.
Recognising any possible incapacity to pay a penalty is also consistent with that aspect of the totality principle which requires that the Court have regard to the principle that a penalty not be “crushing”: Kelly at [30] per Tracey J, see also Australian Ophthalmic Supplies at [66] per Graham J.
According to Adept Trolly’s 2021 company tax return:
(a)its status was that of a “small business entity”;
(b)neither its assets nor its liabilities exceeded $400,000 in the tax year; and
(c)its total salaries and wages expenses for the tax year was $220,524.
The evidence is sufficient to establish that at or about the time of the contravention Adept Trolly was a small business with a small number of full time (or full time equivalent) employees. But beyond those bare facts and that somewhat obvious conclusion, there is little evidence, save for Ms Osman’s bare statements in the First Osman Affidavit, on which she was not cross-examined, that the company has no income and has no financial capacity to pay any of the amounts claimed (as underpayments). In the Court’s view those statements must be balanced against the fact that Adept Trolly seemingly continues to trade, and there is no evidence that Adept Trolly is trading whilst insolvent or that it is in, or has been sought to be placed in, external administration, or that the imposition of an appropriate penalty would render it insolvent or force it into external administration.
The Court notes that there is no evidence that any penalty might not be able to paid by Adept Trolly from the sale of assets or borrowings.
Ms Osman also gave evidence in the First Osman Affidavit that her personal income for the 2020-2021 tax year was less than $30,000 (in fact, $29,042), and that she had “limited financial capacity”, but did not claim to have no capacity to pay.
In the circumstances the Court will having regard to the evidence, albeit limited and a little sketchy, of Adept Trolly and Ms Osman’s limited capacity to pay when setting a penalty.
Involvement of senior management in the breach
As the sole director and company secretary Ms Osman was the senior managing officer of Adept Trolly. Mr Osman was the operations manager. Although there is some suggestion that there was a lack of on-site supervision which caused the underpayments to the employees (as to which see [51] above), it is plain that the contravention arising from the failure to comply with the Compliance Notice was one in which only Ms Osman and Mr Osman as senior management were involved. In the circumstances this factor is not one which warrants any mitigation of the penalty to be imposed.
Deterrence
Deterrence is the predominant purpose of civil pecuniary penalties: Agreed Penalties Case at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. There are two dimensions to deterrence, the first being general deterrence directed at the community as a whole, and the second being specific deterrence directed at the contravener the subject of the particular proceedings: Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354 (“3 Rundle Mall”) at [99] per Judge Brown. Both general and specific deterrence are important aspects of the imposition of civil pecuniary penalties under the FW Act: New Shanghai Charlestown at [98] per Bromwich J.
General deterrence
The failure to comply with a compliance notice effectively undermines the FWO’s power as a regulatory and enforcement authority, thereby reinforcing the need for general deterrence: Fair Work Ombudsman v Kleen Group Pty Ltd & Anor [2016] FCCA 278 at [25] per Judge Emmett. The effectiveness of general deterrence requires an amount of penalty sufficient to send a message that contraventions of this type are serious and not acceptable and that the penalty must be more than a mere expense of doing business: CSR at [43] per French J.
In 3 Rundle Mall at [56] per Judge Brown this Court explained that s 716 of the FW Act ought to be of assistance to an errant employer, and therefore when dealing with persons who have contravened s 716 of the FW Act it is necessary for the Court to “consider a significant penalty as a matter of both general and specific deterrence, given the interest the community has in ensuring that there is compliance with relevant legislation, and protecting the rights of employees to be paid what they are entitled”.
It suffices to observe that the penalty to be set will need to be set at a level which, having regard to the importance and relevance of general deterrence as a consideration, acts as a warning to other employers generally, and in the relevant industry particularly, not to engage in the conduct of contravening compliance notices.
Specific deterrence
Ensuring that a contravener does not reengage in the same contravening conduct at some future point requires an appropriate measure of specific deterrence: AJR Nominees (No 2) at [50] per Gilmour J.
In circumstances where it appears that Adept Trolly remains in business and Ms Osman remains its sole director and company secretary specific deterrence is required in this case because:
(a)the contravention was deliberate;
(b)no contrition has been exhibited;
(c)no payments have been made to the employees concerned; and
(d)there is no evidence that systems are in place to prevent a repeat of the contravention or to prevent a recurrence of similar underpayments to current or future employees.
In the above circumstances a not insignificant measure of specific deterrence is appropriate by way of penalty.
Whether prior contraventions
There was no evidence that either of the Respondents had a record of prior contraventions. If they did have a record of prior contraventions the FWO, as a Commonwealth model litigant, would no doubt have informed the Court of that fact as it is relevant to any penalty to be imposed. In the circumstances the Court will treat the Respondents as first time contraveners and assess penalty accordingly.
Accessorial liability of Ms Osman
By reason of the matters admitted in [8] of the Statement of Agreed Facts set out at [4] above, at all material times Ms Osman was responsible for ensuring that Adept Trolly complied with the Compliance Notice.
By reason of the matters admitted in [8], [12], [15] and [17] of the Statement of Agreed Facts above, Ms Osman:
(a)had actual knowledge of the Compliance Notice that was given to Adept Trolly;
(b)had actual knowledge that Adept Trolly failed to comply with the Compliance Notice; and
(c)was an intentional participant in Adept Trolly’s failure to comply with the Compliance Notice.
By reason of the matters admitted: see [69] and [70] above, Ms Osman:
(a)was involved, within the meaning of s 550(2)(c) of the FW Act, in the contravention of Adept Trolly admitted in [16] of the Statement of Agreed Facts above; and
(b)pursuant to s 550(1) of the FW Act, she is taken to have committed that contravention.
Penalty
The FWO seeks a penalty in the range of 80 to 90% of the maximum for each Respondent with 10% for cooperation and contrition arising from the willingness to enter into the Statement of Agreed Facts.
Having particular regard for the need for deterrence, both specific and general, and bearing in mind the lack of contrition and limited, and somewhat inevitable, cooperation, this is nevertheless not a case in which a high range penalty of the order sought by the FWO is appropriate. Further, and in any event, the Respondents are entitled to some discount by reason of their agreement to facilitate the Statement of Agreed Facts, their not unlimited capacity to pay (and in the application of the totality principle ensuring that any penalty is not crushing), and their status as first time contraveners. In all the circumstances, the Court is of the view that an appropriate deterrent penalty is one to be set at 50% of the maximum penalty for each of the Respondents. The penalty to be imposed upon:
(a)Adept Trolly will be $16,650; and
(b)Ms Osman will be $3,300.
Conclusion And Orders
The Court has concluded that there ought to be declarations and orders essentially in the terms set out in Annexure A to the FWO’s Submissions, with the appropriate penalties being as set out at [73] above.
I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Lucev. Associate:
Dated: 12 September 2022
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