Fair Work Ombudsman v Akasa WA Pty Ltd
[2022] FedCFamC2G 296
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Akasa WA Pty Ltd [2022] FedCFamC2G 296
File number(s): MLG 2764 of 2021 Judgment of: DEPUTY CHIEF JUDGE MERCURI Date of judgment: 28 April 2022 Catchwords: INDUSTRIAL LAW – FAIR WORK – parties by consent seek declaration of contravention of the Fair Work Act 2009 (Cth) – failure of the respondent to comply with compliance notice – dispute as to whether penalty should be imposed and level of penalty to be imposed –– consideration of nature and circumstance of the conduct – consideration of any contrition, corrective action and cooperation with enforcement authorities – the need for specific and general deterrence – penalty order made. Legislation: Clerks – Private Sector Award 2020
Fair Work Act 2009 (Cth), ss 545, 546, 547, 716
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] 262 CLR 157
Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] 258 CLR 482
Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557
Jordan v Mornington Inn Pty Ltd [2007] FCA 1384
Kelly v Fitzpatrick [2007] FCA 1080
Division: Division 2 General Federal Law Number of paragraphs: 43 Date of last submission/s: 1 April 2022 Date of hearing: 1 April 2022 Place: Melbourne Solicitors for the Applicant: Mr Zahara of Fair Work Ombudsman Solicitors for the Respondent: The Respondent appeared in person ORDERS
MLG 2764 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: AKASA WA PTY LTD
Respondent
ORDER MADE BY:
DEPUTY CHIEF JUDGE MERCURI
DATE OF ORDER:
28 APRIL 2022
Amended pursuant to rule 17.05(2)(h) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 on 6 May 2022
THE COURT DECLARES BY CONSENT THAT:
1.The respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (‘FW Act’) by failing to comply with the Compliance Notice.
THE COURT ORDERS BY CONSENT THAT:
Compliance Notice
2.Pursuant to section 545(1) of the FW Act, the respondent take the steps that were required by the Compliance Notice within 28 days of this order, by:
(a)calculating and paying to the applicant the outstanding entitlements that were required to be paid to the Employee under the Clerks – Private Sector Award 2020 (‘Clerks Award’);
(b)calculating and paying any additional superannuation contributions required by clause 20.2 of the Clerks Award to the employee’s nominated superannuation account; and
(c)preparing and producing evidence to the applicant that the outstanding entitlements, as set out in Order 2(a) above, have been rectified.
3.Pursuant to section 547(2) of the FW Act, the respondent pay interest calculated in accordance with the applicable pre-judgment interest rate prescribed by the Federal Court of Australia to:
(a)the applicant on the amounts owed pursuant to Order 2(a) above; and
(b)the employee’s nominated superannuation fund on any additional superannuation contributions required to be paid pursuant to Order 2(b) above;
within 28 days of this order.
4.The applicant distribute to the employee the amounts paid pursuant to Orders (2)(a) and 3(a) above within 90 days of the payment being made.
Penalty Order
5.Pursuant to section 546(1) of the FW Act, the respondent pay a pecuniary penalty to the Commonwealth with respect to the contravention by the respondent pleaded in Order 1 above within 60 days of the date of this order.
BY ORDER OF THE COURT:
6.The penalty amount for the purposes of order 5 is $14,000.
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
DEPUTY CHIEF JUDGE MERCURI:
INTRODUCTION
This is an application for the imposition of a penalty in respect of the respondent’s failure to comply with a compliance notice issued pursuant to section 716 of the Fair Work Act 2009 (Cth) (‘FW Act’).
The parties have filed an agreed statement of facts and have agreed to the bulk of the orders sought in this matter.[1] The respondent has admitted to contravening section 716(5) of the FW Act by failing to comply with a compliance notice issued on 9 July 2021.[2]
[1] Statement of Agreed Facts filed on 21 January 2022.
[2] Statement of Agreed Facts filed on 21 January 2022 at paragraph [1].
The only outstanding issue is whether a penalty should be imposed and if so, the size of the penalty.
BACKGROUND
By way of background, the Fair Work Ombudsman (‘FWO’) commenced an investigation into the respondent’s compliance with workplace laws in about May 2021.[3]
[3] Statement of Agreed Facts filed on 21 January 2022 at paragraph [5].
Following this investigation, the applicant formed a reasonable belief that the respondent had contravened the Clerks – Private Sector Award 2020 (‘Clerks Award’) by failing to pay its employee, Ms Shefali Walverkar, all of her award entitlements. Ms Walverkar was employed between 23 November 2020 and 12 March 2021. The alleged underpayments related to minimum wages, overtime and weekend and public holiday penalty rates.[4]
[4] Statement of Agreed Facts filed on 21 January 2022 at paragraph [7].
On the basis of this belief, the applicant gave a compliance notice to the respondent on 9 July 2021 which required the respondent to take certain steps to remedy the contraventions. Those steps included the requirement that the respondent calculate the amounts owing to the employee, make those payments to the employee by 9 August 2021 and produce evidence to the respondent of having done so by 16 August 2021.[5]
[5] Statement of Agreed Facts filed on 21 January 2022 at paragraphs [8] to [9].
As stated, it is common ground that the respondent failed to comply with the compliance notice and the respondent admits that it contravened section 716(5) of the FW Act.[6]
[6] Statement of Agreed Facts filed on 21 January 2022 at paragraph [13].
ISSUES FOR CONSIDERATION
The parties consent to the following declaration and orders being made:[7]
[7] Statement of Agreed Facts filed on 21 January 2022 at paragraphs [14] to [15].
(1)The applicant seeks a declaration that the respondent contravened section 716(5) of the FW Act by failing to comply with the Compliance Notice.
(2)Pursuant to section 545(1) of the FW Act, the respondent take the steps that were required by the Compliance Notice within 28 days of this order, by:
(a)calculating and paying to the applicant the outstanding entitlements that were required to be paid to the employee under the Clerks Award;
(b)calculating and paying any additional superannuation contributions required by clause 20.2 of the Clerks Award to the employee’s nominated superannuation account; and
(c)preparing and producing evidence to the applicant that the outstanding entitlements, as set out in paragraphs (2)(a) above, have been rectified.
(3)Pursuant to section 547(2) of the FW Act, the respondent pay interest calculated in accordance with the applicable pre-judgment interest rate prescribed by the Federal Court of Australia to:
(a)the applicant on the amounts owed pursuant to paragraph (2)(a) above; and
(b)the employee’s nominated superannuation fund on any additional superannuation contributions required to be paid pursuant to paragraph (2)(b) above;
within 28 days of this order.
(4)The applicant distribute to the employee the amounts paid pursuant to paragraphs (2)(a) and (3)(a) above within 90 days of the payment being made; and
(5)Pursuant to section 546(1) of the FW Act, the respondent pay a pecuniary penalty to the Commonwealth with respect to the contravention by the respondent pleaded in paragraph (1) above.
As stated, the only issue for determination for this court is the level of penalty to be applied.
SUBMISSIONS AND EVIDENCE ON PENALTY
Orders were made by consent on 9 December 2021 which provided a timetable for the parties to file and serve submissions and any evidence upon which they would seek to rely.
The applicant filed submissions and an affidavit of Emily Po Ying Si on 8 February 2022. The applicant filed a further affidavit of Timothy Allan Jaya Zahara on 31 March 2022.
Mr Anil appeared for the respondent at the hearing before me. The respondent did not file any written submissions or place before the court any evidence relevant to the question of penalty.
PENALTY
Compliance notice
Section 716(5) of the FW Act provides that a person must not fail to comply with a compliance notice properly given. That section is a civil remedy provision. The power to issue a compliance notice was introduced as an alternative process to deal with an employer’s failure to meet their minimum entitlement obligations without the need to commence litigation.
This court has previously recognised that compliance notices provide an efficient mechanism to rectify identified contraventions, including the underpayment of minimum entitlements to employees, without the need for costly and often time-consuming litigation.[8]
[8] See, eg, FWO v NoBrace Centre Pty Ltd & Anor (No 2) [2019] FCCA 2144 (Judge Blake) and the cases referred to in that decision.
Relevantly, section 716(4B) of the FW Act provides:
A person who complies with a notice in relation to a contravention of a civil remedy provision is not taken:
(a)to have admitted to contravening the provision; or
(b)to have been found to have contravened the provision.
Had the respondent complied with the compliance notice, these proceedings would not have been necessary, and moreover, there would have been no finding of a contravention or the capacity to impose a penalty on the respondent.
Whilst the respondent has cooperated with the applicant and has remedied the underpayments in part, this has not been done within the time frame specified in the compliance notice and indeed, as at the date of the hearing before me, the respondent had still not provided the necessary evidence to the applicant to establish that all outstanding payments have been made.
Penalty range sought
Applicant’s submissions
The applicant seeks penalties be imposed in the range of $14,152.50 to $16,983.00. This is in the context of the maximum penalty which could be imposed for a contravention of section 716(5) of the FW Act of $33,300 for a body corporate.
Respondent’s submissions
The respondent, through Mr Anil, submitted that no penalty ought to be imposed. In very brief submissions to the court, Mr Anil said that this was the first time that he had engaged in this type of business, that he was not aware of any underpayment and that he wishes to rectify the underpayment. Mr Anil also referred to the difficulties that the respondent had experienced as a result of the COVID-19 pandemic.
Factors relevant to penalty
As noted in the applicant’s submissions, the primary purpose of civil penalty provisions such as those under consideration in this matter is to promote the public interest in compliance and to impose a price on contravention at a level which is sufficiently high that it is likely to have an effect on both specific and general deterrence.[9]
[9] See, eg, Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] 258 CLR 482 at [55] and [110].
Similarly, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] 262 CLR 157 at [116], the High Court recently considered the purpose and intent of the court’s powers under the FW Act to order the imposition of civil penalties. Keane, Nettle and Gordon JJ relevantly stated:
[116]As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty’s general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d’etre of its imposition.
It is well recognised that in determining whether, and if so, what penalty ought to be imposed in a particular matter, the court is required to have regard to a range of factors.[10] That list, whilst convenient, does not prescribe or limit the relevant matters to which a court must or may have regard.
[10] See, eg, Kelly v Fitzpatrick [2007] FCA 1080 at [14].
Nature and circumstance of the conduct
As noted above, the compliance notice regime was introduced as a means to quickly and inexpensively resolve underpayment claims. Had the respondent complied with the compliance notice within the time frame specified, this litigation would have been avoided.
Moreover, and notwithstanding having been provided with ample time to comply with the compliance notice, the respondent had still not fully complied as at the date of the hearing.
In addition, the underpayments to which the compliance notice was directed amounted to over $6,000 incurred over a period of four months. This is a significant amount of money owing to the employee concerned which was accrued over a relatively short period of employment.
Size of the business and capacity to pay
As noted, in oral submissions for the respondent, Mr Anil stated that no penalty should be applied. Although the respondent had not filed any material in this matter, I have considered the email correspondence from the respondent annexed to the two affidavits filed by and relied upon by the applicant.[11] Relevantly at EPYS-4 is annexed an email from Mr Anil to the applicant dated 19 January 2022 in which Mr Anil states:
… I certainly wanted to resolve the matter, it is just that I have been out of business because of ill health.
[11] Affidavit of Emily Po Ying Si filed 8 February 2022 and Affidavit of Timothy Allan Jaya Zahara filed on 31 March 2022.
In addition, in a further email dated 29 March 2022 from Mr Anil and annexed to the affidavit of Mr Zahara at TZ-6, Mr Anil stated:
We hope you will appreciate that we are trying everything possible within our reach to resolve the issues, even though the business is not operating anymore and I am stuck in India. The initial plans of expanding got impacted by COVID-19 and then the shortage of labor, at this stage is really tough for the business. And going by the same we have not involved any legal representation for court hearing, as we will not be in the position to pay their bills.
This is the extent of the evidence about the respondent’s financial position. No financial statements have been filed. Moreover, the evidence before the court is that the respondent remains registered.
In any event, it is well established that the size and financial circumstances of a respondent does not excuse breaches of employment laws. Any concerns about the respondent’s capacity to pay must be weighed against the objective of general deterrence. As noted by his Honour Justice Heerey in Jordan v Mornington Inn Pty Ltd [2007] FCA 1384 at [99]:
As to the respondent’s own financial position, however, in considering the size of a penalty, capacity to pay is of less relevance than the objective of general deterrence … In any event, to the extent that financial hardship might mitigate what would otherwise be an appropriate penalty, such an argument would need to be based on evidence.
In this case, save for the two references in emails from Mr Anil to officers of the applicant set out above, there is no evidence about the respondent’s financial position or capacity to pay. In any event, as stated, even if there were evidence to support the submission as to the respondent’s capacity to pay , that consideration must be balanced against the need for penalties to be set at a rate which has the effect of general deterrence.
Corrective action, cooperation and contrition
The applicant concedes that the respondent has cooperated in so far as it has conceded the contravention and agreed to the statement of agreed facts, thereby limiting the respondent’s and the court’s time and resources in preparing for and determining a contested factual hearing. The applicant concedes that that cooperation ought to be taken into account in the setting of a penalty in this matter.
Moreover, the applicant concedes that there has been partial rectification of the underpayments in respect of which the compliance notice was issued. However, at the date of the hearing, the full amount of the underpayment claimed had not yet been rectified and evidence of the rectification made had not yet fully been provided to the applicant.
In terms of contrition, there is much force to the applicant’s submission that in the context of a corporation’s failure to comply with a compliance notice, the best evidence of contrition is ultimate rectification. In this case, as stated, whilst there has been some rectification, the compliance notice had not yet been fully complied with at the time of the hearing.
The applicant submits that a discount of 15% ought to be applied to reflect the respondent’s cooperation and corrective action.
Compliance with minimum standards
It was submitted for the applicant that for the statutory purpose to which compliance notices are directed to be effective, there must be meaningful consequences for a failure to comply with such notices. It is further submitted that in failing to comply with the compliance notice, the respondent prioritised its interests ahead of those of the employee affected who did not receive her minimum entitlements.
There is much force to this submission. Moreover, if compliance notices are to be an effective enforcement mechanism with the benefit of avoiding additional costs and delay associated with litigation, a breach of such notices must result in a penalty at a sufficient level which would deter others from simply ignoring such notices or otherwise failing to comply with them.
Deterrence
Penalties must be set at a level which has a deterrent effect. This applies to both specific and general deterrence. In relation to specific deterrence, it is noted that notwithstanding the emails referred to above and the reference to the business no longer being in operation, the respondent remains registered and there is no evidence before the court about its activities and in particular that it is not employing any staff. As such, a penalty needs to be imposed at a level which would dissuade the respondent from engaging in similar breaches in future.
In addition, penalties ought to be set at an appropriate level to dissuade other employers from engaging in similar conduct and this cannot be understated.[12]
[12] Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29].
CONSIDERATION
Having regard to the above factors I find that it is appropriate for a penalty of $14,000 to be imposed. This is just over 42% of the maximum penalty for the contravention.
A penalty in this amount recognises the seriousness of the contravention, will have a deterrent effect, both specific and general, and is set at a level which imposes a significant consequence for a failure to comply with a compliance notice. It also takes into account the respondent’s cooperation with the applicant at an early stage, although recognising that the respondent had not yet fully complied with the compliance notice even at the date of the hearing.
I have also had regard to the fact that the compliance notice related to an underpayment of over $6,000 which had accrued over a relatively short period of time of some four months. This is a significant sum of money which the employee did not (and in part still has not) had the benefit of as a result of the employer’s failure to comply with the compliance notice.
On balance, I find that a penalty in this amount properly balances the range of factors to which the court must have regard.
CONCLUSION
I therefore make the orders set out at the commencement of these reasons, noting that other than the amount of the penalty, the remaining orders are by consent of the parties.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of Deputy Chief Judge Mercuri. Deputy Associate:
Dated: 28 April 2022
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