Fair Work Ombudsman v AJSJ Pty Ltd
[2016] FCCA 1902
•26 July 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v AJSJ PTY LTD & ANOR | [2016] FCCA 1902 |
| Catchwords: INDUSTRIAL LAW – Application for civil penalties ‑ consideration of range of penalty to be applied ‑ pecuniary penalty imposed upon Respondents. |
| Legislation: Workplace Relations Act 1996, ss.719(1), 719(2), 841(a) |
| Cases cited: Fair Work Ombudsman v AJSJ Pty Ltd & Anor [2014] FCCA 902 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | AJSJ PTY LTD |
| Second Respondent: | JASBIR KAUR GHAG |
| File Number: | BRG 1156 of 2011 |
| Judgment of: | Judge Baumann |
| Hearing date: | 27 February 2015 |
| Date of Last Submission: | 19 May 2015 |
| Delivered at: | Brisbane |
| Delivered on: | 26 July 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Prain |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Solicitors for the First Respondent: | Milner Lawyers |
| Solicitors for the Second Respondent: | Milner Lawyers |
ORDERS
Noting the Orders of the Court made 14 May 2014.
THE COURT ORDERS:
That the First Respondent pay a penalty of $13,200 pursuant to s.719(1) and s.719(2) of the Workplace Relations Act 1996 (Cth) for the conduct that amounted to two (2) contraventions found by the Court.
That the Second Respondent pay a penalty of $2,640 pursuant to s.719(1) and s.719(2) of the Workplace Relations Act 1996 (Cth) for the conduct that amounted to two (2) contraventions found by the Court.
That pursuant to s.841(a) of the Workplace Relations Act 1996 (Cth), that all penalties be paid into the Consolidated Revenue Fund of the Commonwealth within sixty (60) days of this Order.
That the Applicant has liberty to apply on seven (7) days’ notice for enforcement, if payment of the penalties is not made.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 1156 of 2011
| FAIR WORK OMBUDSMAN |
Applicant
And
| AJSJ PTY LTD |
First Respondent
| JASBIR KAUR GHAG |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 14 May 2014, in this matter Judge Burnett (as he then was) made orders and declarations as follows:
“THE COURT DECLARES THAT:
(1)The First Respondent contravened:
Clause 15, in conjunction with clause 17, of the Rue de Paris Collective Agreement 2006; and
Clause 6 of the Rue de Paris Collective Agreement 2006;
which are “applicable provisions” for the purposes of s.718 of the Workplace Relations Act 1996 (Cth).
(2)The Second Respondent was involved in the contraventions of the First Respondent referred to in Order 1 within the meaning of s.728 of the Workplace Relations Act 1996 (Cth).
These orders were consistent with Reasons for Judgment delivered by Judge Burnett on that date (see Fair Work Ombudsman v AJSJ Pty Ltd & Anor [2014] FCCA 902). I rely upon the findings made in that judgment, which I note was not the subject of Appeal.
With the resignation of Judge Burnett, subsequent to him delivering his judgment a penalty hearing had to be conducted by another Judge. No objection to such a course was raised by the parties.
On 27 February 2015 I heard oral submissions from Mr Prain on behalf of the Fair Work Ombudsman (“FWO”) and from Ms Milner for the Respondents. These oral submissions were supplementary to the following written submissions of the parties:
a)Submissions of the FWO filed 1 December 2014; and
b)Submissions of the Respondents filed 8 January 2015.
I have carefully read and considered these submissions and the fact that every submission is not referred to in these Reasons, should not infer that the submission was not considered.
In circumstances where I did not hear the evidence of the parties during the trial, some of the impressions gained from doing so, which may aid the exercise of the discretion on penalties, is simply not available to me.
Competing submissions
The FWO seeks a pecuniary penalty within the range of $39,600 to $46,200 against the First Respondent and a pecuniary penalty within the range of $7,920 to $9,240 against the Second Respondent for her involvement in those contraventions. As Annexure A to the Applicant’s submissions asserts, the range is 60% to 70% of the maximum penalty of $33,000 for failure to pay in accordance with the Collective Agreement, the minimum rates of pay (in accordance with clauses 15 and 17 of the Agreement) and further the failure to pay casual loading (in accordance with clause 6 of the Agreement).
The Respondent contends for the reasons submitted, that the Court in deciding penalty, should accept that the multiple contraventions and multiple breaches arose out of a single or common course of conduct as the underpayments arose out of the Respondent’s interpretation of the Collective Agreement. On this basis, it is submitted that “…the Court may impose no penalty or a penalty which is calculated as a fraction of a penalty as if a single breach occurred…”. If the Court imposes a penalty, it should be up to 10% of the total being $3,300 for the First Respondent and $660 for the Second Respondent.
Principles to be applied
The Respondent adopts the Applicant’s statement of principles relevant to determining penalty set out at paragraphs 21 to 26 of the Applicant’s submissions and, for completeness, they are adopted as a correct statement:
“21.The Applicant submits based on the authorities that the following principles should be taken into account in determining the question of appropriate penalties to impose upon the Respondents.
22.Firstly, each of the separation contraventions should be identified. Each breach of each separate obligation found in the Collective Agreement in relation to Ms Sagi is a separate contravention of a term of an applicable provision for the purposes of section 719.
23.Secondly, the Court should consider whether the contraventions arising in the first step constitute a course of conduct.
24.Thirdly, to the extent that two or more contraventions have common elements, this should be taken into account in considering what is an appropriate penalty in all the circumstances for each contravention. The Respondents should not be penalised more than once for the same conduct. The penalties imposed by the Court should be an appropriate response to what the Respondents did. This task is distinct from, and in addition to, the final application of the ‘totality principle’.
25.Fourthly, consideration should be given to an appropriate penalty to impose in respect of each course of conduct, having regard to all of the circumstances of the case.
26.Finally, having fixed an appropriate penalty for each group of contraventions or course of conduct, consideration should be given to the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the breaches. In determining whether the aggregate penalty is appropriate, regard is to be had for the ‘totality principle’.”
Section 719(2) of the Workplace Relations Act 1996 (Cth) (“WR Act”) provides as follows:
“(2) Subject to subsection (3), where:
(a) 2 or more breaches of an applicable provision are committed by the same person; and
(b) the breaches arose out of a course of conduct by the person;
the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term.”
As the Reasons of Judge Burnett make clear, His Honour found two breaches of the Collective Agreement occurred. However at paragraph 18 of his Reasons, Judge Burnett says:
“Multiple contraventions are alleged by the Applicant. However, each contravention has its genesis in the Employer’s classification of the employee, Ms Sagi. Although two or more breaches are alleged, arguably they appear to arise out of a common course of conduct, and accordingly for the purposes of s.719(2) WR Act it could be taken to constitute a single breach of the term. That follows as all underpayments, irrespective of how they may be calculated, have their genesis in the Respondents’ interpretation of the award and the determination to pay Ms Sagi the rate of $9.50 per hour as opposed to the appropriate rate applicable under the Collective Agreement, as is determined hereunder.”
As His Honour was not determining penalty at that stage, his remarks could not be construed as a “finding” which binds this Court, however it is my view on the evidence that considering the nature of the breaches; the fact that they do arise from a misinterpretation of the Agreement; that only one employee is involved it is appropriate in this case to treat the two distinct breaches as arising out of a “course of conduct” and to therefore be taken to constitute one single breach for the purposes of penalty. I accept this is a separate issue to application of the “totality principle”, although it comes into focus because there are only two breaches found by the Court, and finding they constitute one breach under s.719(2), has obvious consequences.
Factors relevant to penalty
The often quoted factors identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 and adopted and approved by Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 and other authorities, which arose from a number of decisions of the Federal Court of Australia, which “non-exhaustive” were as follows:
a)The nature and extent of the conduct which led to the breaches;
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 breaches;
d)Whether the breaches were properly distinct or arose out of the one course of conduct;
e)The size of the business enterprise involved;
f)Whether senior management was involved in the breaches;
g)Whether the party committing the breach had exhibited contrition;
h)Whether the party committing the breach had cooperated with the enforcement authorities;
i)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
j)The need for specific and general deterrence.
It was accepted by the parties that these factors should guide the exercise of my discretion when determining penalties.
Brief factual matrix
No useful purposes, for these parties, is served by reciting all the facts as found by Judge Burnett as they are well known to them. Some brief chronology is helpful, namely:
a)Ms Akiko Sagi, a Japanese citizen, came to Australia in 2002 at the age of 29 and in the period from then she had completed a number of courses in Business, Hospitality Management, and, as a stream in the Advanced Diploma in Hospitality Management (which would enable her to attain qualifications under the Australian Qualifications Framework), Ms Sagi chose cookery;
b)Ms Sagi in August 2007 was granted a bridging visa pending the outcome of an application for a subclass 880 visa (Skilled Independent Student), and she informed the Court that she was informed by her Migration Agent that she needed to complete another 500 hours of work as a commercial cook to support her visa application;
c)Ms Sagi was employed by the First Respondent at its restaurant “Rue de Paris” in Brisbane from 24 October 2007 until 5 April 2008 and shortly after completing the necessary 500 hours with the Respondent she resigned. Completion of those hours, together with her compliance with other visa requirements, enabled Ms Sagi to obtain her permanent residency in Australia in May 2008;
d)In October 2010, two and a half years after she resigned from the Respondents’ employment, Ms Sagi made a complaint to the FWO that she had been underpaid and the underpayment was rectified, with the full amount calculated correctly at the higher classification, paid to the employee on or about 23 June 2011. The amount paid was $5,355 approximately;
e)On 22 December 2011, the FWO instituted proceedings for penalty asserting contravention by the First and Second Respondents. The proceedings were heard by Judge Burnett on 22, 23 and 26 July 2013 with judgment delivered on 14 May 2014. The delays in this Court finalising this matter are not as a result of any actions by the parties, however it is now over 8 years since the employee worked for the First Respondent;
f)On 9 March 2012 the Applicant caused a Media Release to be issued confirming it had “launched a prosecution against the operator of a Brisbane restaurant for allegedly underpaying a foreign worker more than $5,000.” The Respondents’ restaurant was named as was the Second Respondent;
g)I accept that Judge Burnett, in a number of instances did not accept the evidence of the Second Respondent, Ms Ghag. I am bound by those findings, which in their totality dismissed the defence raised by the Respondents (see paragraphs 53 to 76). It is neither proper or appropriate for me to “revisit” or seek to go “behind” those factual findings;
h)Although the Respondent asserts that “central to this matter was the classification of Ms Sagi under the Agreement and the dispute about the meaning of the Rue de Paris Collective Agreement”, which is correct, a thorough reading of the Reasons reveals that Ms Ghag did not rely on information from a Mr Schumann; that the decision to pay the rates she set was her own and “that the contravention occurred because she misconstrued or ignored the Collective Agreement.”
Discussions
Nature and extent of the conduct which led to the breaches
The Applicant says that Ms Sagi as a foreign national who’s first language is not English, should be considered a “vulnerable employee”. I, of course, have not had the advantage of seeing the employee under cross examination, and cannot, as a result, assess her capacity to speak and understand English. However she had been a student in Australia completing a number of courses for the six years prior to her employment commencing. I am not satisfied she was a “vulnerable employee” – particularly in the circumstances where she had determined (with advice from her migration agent) that she had to complete 500 hours of work and secured employment long enough to achieve her goal. Nonetheless, I accept that Ms Ghag was responsible for setting the rate – a rate found to be incorrect by Judge Burnett.
Circumstances in which the conduct took place
Judge Burnett at paragraph 81 rejected the defence raised by the Second Respondent that Ms Sagi never told her of her qualifications which led to the employee being employed as some form of “trainee” and found specifically that Ms Ghag “had sufficient knowledge of Ms Sagi’s qualifications and experience such to know” she was paying her less than she was entitled to under the Collective Agreement. The “honest but mistaken belief” defence raised was also rejected by His Honour (see paragraph 83). On the basis of these findings, I agree that the conduct of the Respondents was intentional.
Nature and extent of any loss or damage
Although the total underpayment over the period of employment was a modest sum of $5,355 (gross), I accept for a student the loss of income at the time would have had an effect. The Applicant says the difference in real weekly terms was a non-payment between 50% and 37% of her total entitlement. Although the loss of the use of the funds extended for over three years until payment, the underpayment was not brought to the attention of the Respondents for two and a half years post resignation. The Respondents then paid the monies within six months – and before the prosecution in this Court began and the publicity was activated.
Similar previous conduct
There is no evidence of any previous contravention proceedings for similar conduct and no suggestion that any other employees have been underpaid. I regard this as an important factor.
Whether breaches arose out of the course of conduct
I have already found that, in my view, they do – namely a misapplication of the terms of the Collective Agreement to this one employee.
Size of the business
There is little evidence to assist the Court in this regard. It would have been possible, for example, for the Respondent to place evidence before the Court about the turnover of the business and number of staff, as an example. All the Respondent submits is that “the First Respondent is a small business and does not employ dedicated human resource professionals”. The Applicant refers to an interview with FWI Menzies on 3 November 2011 when Ms Ghag indicated that the First Respondent employed approximately 13 staff at the time. It is reasonable to infer, considering the nature of the business, that chefs, waiters, waitresses, kitchen hands and other hospitality staff are likely to be employed.
Small businesses, just as large corporate employers, must meet their obligations to employees and size alone (although the impact of penalties might cause more financial pain) is not the sole determinate.
Whether the breaches were deliberate
Judge Burnett found that they were, although arising in part from a misapplication of the terms of the Collective Agreement. I am bound by that finding.
Involvement of Senior Management
Ms Ghag was a director and shareholder in the corporate owner of the business (the First Respondent) and responsible for the day to day management including hiring of staff (such as Ms Sagi). She was as “senior” as you could get for this business.
Contrition, collective action and cooperation with authorities
The Applicant acknowledges that the Respondents “did co-operate with the inspector during the investigation and the Second Respondent participated in a record of interview, and provided documents when requested”. The underpayment, as already noted, was paid to the employee within six months of receiving the complaint via the FWO.
The Respondents continued to assert their interpretation of the Collective Agreement so far as this employee was concerned, was correct. It took a three day hearing and a well-considered judicial determination for the Respondents to be told, they were incorrect. It is reasonable to infer, their costs of defending the contravention would have been significantly greater than the underpayment of $5,355.
I find some discount for contrition and cooperation is justified, although I note that the Applicant contends that by seeking a penalty in the range of 60% to 70% of the maximum, it “already takes into consideration the Respondents’ collective action and cooperation”.
Ensuring compliance with minimum standards
As has been noted by higher authority, one of the principal objects of the Act is the maintenance of a safety net of minimum terms and conditions of employment and effective enforcement of the obligations imposed by awards and other industrial instruments (see Kelly v Fitzpatrick at [27]). If the statutory obligations of agencies like the Applicant are not, in cases where breaches are found to exist, capable of achieving a remedy of enforcement, it is likely that community standards of compliance will drop. This is not the clear intention of the Parliament who has from time to time increased penalties.
Deterrence
The Respondents, although maintaining their interpretation of the Collective Agreement was correct, are aware of their error. I do not regard, in the facts as found in this case, that specific deterrence is a significant factor or weight as to the appropriate penalty. To this extent, I do not accept the Applicant’s submission that the need for specific deterrence is high. I accept that the principles for general deterrence as articulated, as paragraphs 73 to 76 of the Applicant’s submissions are correct.
The press release
At paragraphs 72 to 83 of the Respondent’s submissions, the Respondents take strong issue with the conduct of the Applicant releasing to the Press details of their action – and in particular using the term “prosecute”. Sitting in Appeal as a Single Judge, Collier J in NewImage Photographics Pty Ltd v Fair Work Ombudsman [2013] FCA 1385 accepted that it is misleading to suggest a Respondent is charged with an offence of criminal activity, usually associated with the word “prosecute”. Collier J agreed with the first instance Judge (Judge Jarrett), that in that case the “misleading” media statement by the FWO was a factor that could be taken into account in mitigation of penalty.
I agree that by the time of the media release on 9 March 2012, as a result of the investigations to that date, the FWO knew that the employee had been repaid and that the Respondents were asserting a different interpretation of the Collective Agreement. I agree that the Media Release, which at the time of submissions before me, was said to still be on the FWO website, could have been more balanced and is likely, by its mere publication, to have caused some embarrassment to the Respondents. I take these finding into account – but I do not regard it as substantial considering the findings ultimately made by Judge Burnett.
Conclusion
Taking into consideration the matters set out above, and in the context of my findings that the two separate breaches should be seen as in the same course of conduct, I consider that the appropriate penalty is as follows:
a)As against the First Respondent, a penalty at 40% of the maximum, or $13,200; and
b)As against the Second Respondent, a penalty at 40% of the maximum or $2,640.
In view of the findings made by Judge Burnett about the involvement of the Second Respondent, there is no reasonable basis to excuse her from a penalty being imposed.
I will direct that pursuant to s.841(a) of the WR Act, all penalties be paid into the Consolidated Revenue Fund of the Commonwealth within 60 days of the Court’s order.
I will give the Applicant liberty to apply for enforcement.
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Judge Baumann.
Date: 26 July 2016
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