Fair Work Ombudsman v Althaus Homes Pty Ltd
[2021] FCCA 126
•29 January 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Fair Work Ombudsman v Althaus Homes Pty Ltd [2021] FCCA 126
File number(s): BRG 168 of 2020 Judgment of: JUDGE JARRETT Date of judgment: 29 January 2021 Catchwords: INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – amount of penalty – failure to comply with compliance notice. Legislation: Fair Work Act 2009 (Cth) ss 539(2), 546(2)(a), 716(2), 716(4A), 716(4B), 716(5) Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157
Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Fair Work Ombudsman v Extrados Solutions Pty Ltd [2014] FCCA 815
Fair Work Ombudsman v Skypac Group Pty Ltd & Ors [2020] FCCA 2332
Fair Work Ombudsman v Viper Industries Pty Ltd & Anor [2015] FCCA 492
Jordan v Mornington Inn Pty Ltd (2007) 166 IR 33
Number of paragraphs: 39 Date of last submission/s: 29 January 2021 Date of hearing: By written submission Place: Brisbane Solicitor for the Applicant: Office of the Fair Work Ombudsman Counsel for the Respondents: Mr Jeffery Solicitor for the Respondents: Ei Legal Pty Ltd ORDERS
BRG 168 of 2020 BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: ALTHAUS HOMES PTY LTD
First Respondent
RONALD ALEXANDER ALTHAUS
Second Respondent
ORDER MADE BY:
JUDGE JARRETT
DATE OF ORDER:
29 JANUARY 2021
THE COURT DECLARES THAT:
1.Althaus Homes Pty Ltd contravened s.716(5) of the Fair Work Act 2009 (Cth) by failing to comply with a notice issued pursuant to s.716(2) of the Fair Work Act 2009 (Cth) on 20 November, 2020;
2.Ronald Alexander Althaus was involved, within the meaning of s.550(1) of the Fair Work Act 2009 (Cth), in the first respondent’s contravention of s.716(5) of the Fair Work Act 2009 (Cth).
THE COURT ORDERS THAT:
3.Pursuant to s.546(1) of the Fair Work Act 2009 (Cth), Althaus Homes Pty Ltd pay a pecuniary penalty of $11,340.00 in respect of the contravention of s.716(5) of the Fair Work Act 2009 (Cth) the subject of declaration 1 hereof.
4.Pursuant to s.546(1) of the Fair Work Act 2009 (Cth), Ronald Alexander Althaus pay a pecuniary penalty of $2,268.00 in respect of his involvement in the contravention of s.716(5) of the Fair Work Act 2009 (Cth).
5.Pursuant to s.546(3)(a) of the Fair Work Act 2009 (Cth), the pecuniary penalties the subject of orders 3 and 4 hereof be paid into the Commonwealth Revenue Fund of the Commonwealth of Australia within 28 days of the date of these orders.
REASONS FOR JUDGMENT
JUDGE JARRETT:
The applicant seeks declarations, pecuniary penalties and other orders against Althaus Homes Pty Ltd and Ronald Alexander Althaus for a single contravention of the Fair Work Act 2009 (Cth).
I have the benefit of written submissions from each of the parties and written submissions in reply from the respondents.
It is uncontentious that:
(a)Althaus Homes contravened s.716(5) of the Fair Work Act by failing to comply with a notice issued pursuant to s.716(2) of the Act on 20 November, 2019; and
(b)Mr Althaus was involved in Althaus Homes’s contravention for the purposes of s.550(1) of the Fair Work Act.
The parties are agreed and all three submit that penalties in the following amounts are appropriate:
(a)Althaus Homes - $11,340, representing 40% of the maximum penalty of $31,500 with a further 10% discount on the penalty amount of $12,600 on account of co- operation and corrective action; and
(b)Mr Althaus - $2,268, representing 40% of the maximum penalty of $6,300 with a further 10% discount on the penalty amount of $2,520 on account of co-operation and corrective action.
The Court’s role when dealing with a civil penalty case where the parties have agreed on the penalty is not to simply “rubber stamp” that agreed penalty: Fair Work Ombudsman v Skypac Group Pty Ltd & Ors [2020] FCCA 2332 at [13]-[15]. That said, subject to the Court being satisfied that the proposed penalty is appropriate, it is accepted that it is “highly desirable in practice” for the Court to impose the proposed penalty: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [58].
The parties have reached their agreement against the following background.
Althaus Homes operated a contract carpentry business from Cleveland, Queensland which serviced residential building customers. Mr Althaus is Althaus Homes’ sole director.
Between October, 2019 and November, 2019 the applicant conducted an investigation into Althaus Homes following receipt of an enquiry from former employee, Benjamin Schifcofske. Mr Schifcofske’s enquiry concerned alleged unpaid accrued annual leave and personal leave arising from his employment with Althaus Homes. He was employed from 4 March, 2019 to 27 September, 2019.
On 20 November, 2019 a Fair Work Inspector issued a compliance notice to Althaus Homes pursuant to s.716(2) of the Fair Work Act. The compliance notice set out that:
(a)a Fair Work Inspector had formed a reasonable belief that Althaus Homes had contravened the following provisions of the Act with respect to Mr Schifcofske’s employment:
(i)s.90(2) of the Fair Work Act in respect of payment of accrued but untaken annual leave on termination;
(ii)s.99 of the Fair Work Act in respect of payment of paid personal leave;
(iii)clause 38.2(b) of the Building and Construction General On-site Award 2010 in respect of payment of annual leave loading payable on untaken accrued annual leave; and
(b)non-compliance might result in legal proceedings and the imposition of a pecuniary penalty of up to $31,500 for Althaus Homes and $6,300 for Mr Althaus.
The compliance notice required Althaus Homes to calculate the entitlements due to Mr Schifcofske and rectify any underpayment owed to Mr Schifcofske by 23 December, 2019. The compliance notice also required Althaus Homes to produce reasonable evidence of compliance with the notice by 2 January, 2020. Mr Althaus was aware of the compliance notice from the date it was issued.
If a person satisfies a compliance notice:
(a)proceedings in respect of the underlying contraventions cannot be taken by a Fair Work Inspector: s.716(4A) of the Act; and
(b)that person is not taken to have admitted to contravening, or to have been found to have contravened, the provisions the subject of the notice: s.716(4B) of the Act.
A person must not fail to comply with a notice given under s.716(2) of the Act: s.716(5) of the Act. Where a person fails to comply with a compliance notice, s.539(2) of the Fair Work Act permits a Fair Work Inspector to bring civil remedy proceedings against that person to seek orders to remedy the contravention and for pecuniary penalties pursuant to s.546 of the Fair Work Act.
Althaus Homes did not take the rectification action specified in the compliance notice by 23 December, 2019 or provide evidence of rectification to the applicant by 2 January, 2020. The respondents did not take any steps to engage with a Fair Work Inspector until after the date for compliance and only after a further communication from a Fair Work Inspector regarding the notice.
On 6 January, 2020 Mr Althaus sent an email to the Fair Work Inspector who issued the notice stating that the “necessary payment will be made to Ben in two weeks on the next scheduled pay run”.
On 9 January, 2020, the Fair Work Inspector sent an email to Mr Althaus warning him that non-compliance with the notice could result in legal proceedings being commenced.
On or about 14 January, 2020 Althaus Homes paid Mr Schifcofske an amount of $942.17 in respect of accrued but untaken annual leave. However, the Fair Work Inspector did not receive notification of this payment until Mr Schifcofske sent an email to her on 22 January, 2020 indicating the payment was made. The Fair Work Inspector then sent an email to Althaus Homes acknowledging the part-payment and again requested full compliance with the notice.
Nothing was forthcoming from the respondents and on 19 March, 2020 the applicant commenced this proceeding.
On about 9 July 2020, Althaus Homes provided to the applicant calculations of outstanding amounts to be paid to Mr Schifcofske and sought agreement from the applicant with its calculations.
On about 28 September, 2020 Althaus Homes provided to the applicant revised calculations of the outstanding amounts to be paid to Mr Schifcofske and sought agreement from the applicant with those revised calculations. The amount outstanding to Mr Schifcofske was agreed between the applicant and Althaus Homes.
On or about 30 September, 2020 Althaus Homes paid an amount of $637.73 to Mr Schifcofske in respect of outstanding amounts owing under the compliance notice together with an amount of $421.89 gross in respect of outstanding overtime payments, plus an amount of $60.58 to Mr Schifcofske’s superannuation fund in respect of additional superannuation contributions owed on those outstanding amounts. On 1 October, 2020 Althaus Homes provided proof that it had made those payments to Mr Schifcofske.
Thus, by 1 October, 2020 Althaus Homes met the requirements of the compliance notice.
Had Althaus Homes complied with the compliance notice by the time initially specified for compliance:
(a)the applicant would have been prevented from bringing civil remedy proceedings against it in respect of the underlying contraventions; and
(b)Althaus Homes would not have been taken to have admitted or to have been found to have committed the underlying contraventions in the compliance notice.
This proceeding would have been avoided altogether.
CONSIDERATION
The Court may impose penalties pursuant to s.546 of the Fair Work Act if it is satisfied that a person has contravened a civil remedy provision. Subsection 716(5) of the Fair Work Act is a civil remedy provision. Pursuant to ss.539(2) and 546(2)(a) of the Fair Work Act, the maximum penalty that the Court may impose for a contravention of s.716(5) of the Fair Work Act is:
(a)$31,500 on Althaus Homes; and
(b)$6,300 on Mr Althaus.
Specific and general deterrence is the primary objective for the imposition of civil penalties: Commonwealth v Director, Fair Work Building Industry Inspectorate (above) at 506, [55]; 513, [79]. The “principal object” of deterrence is achieved where a penalty has the necessary “sting or burden” to secure the specific and general deterrent effects that are the raison d’etre of its imposition: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [116].
The compliance notice here was issued by a Fair Work Inspector following an investigation during which she made various attempts to engage with the respondents on the issues raised by Mr Schifcofske, including:
(a)attempting to call Mr Althaus on his mobile phone and leaving a voice message on 7 November, 2019; and
(b)sending an email to Mr Althaus and attempting to call Mr Althaus and leaving a voice message on 11 November, 2019.
The conduct of Althaus Homes and Mr Althaus in failing to respond in a timely manner to reasonable requests for information from the applicant’s inspector and failing to properly engage and comply with the notice prevented the applicant from resolving the underpayments owing to Mr Schifcofske expeditiously. Further, the conduct of Althaus Homes and Mr Althaus in failing to comply with the compliance notice left the applicant with no other option than to institute these proceedings at the public’s expense in order to recover the outstanding amounts owing to Mr Schifcofske.
Mr Althaus’s evidence is that whilst he recalls reading the compliance notice when he received it, he “found it somewhat confusing and did not clearly understand what steps I was required to take”.
The notice contained, on its first page, the following:
Rights and obligations under this Compliance Notice
1. Failure to comply with this Compliance Notice may contravene section 716(5) of the FW Act and render you liable for a civil penalty (unless you have a reasonable excuse).
2. You may be liable to a civil remedy if you give false or misleading information or produce false or misleading documents. It is also a serious offence under the Criminal Code (Cth).
3. If you do not comply with this Compliance Notice the Fair Work Ombudsman may, without further notice, commence legal action against you and/or individuals involved in your failure to comply with this Compliance Notice to recover any outstanding monies which this Compliance Notice requires you to pay and to seek civil penalties.
4. Complying with the Compliance Notice is not an admission that you contravened, or have been found to have contravened, the Award or the FW Act.
5. You may apply to the Federal Court, Federal Circuit Court or eligible State or Territory Court for a review of this Compliance Notice on either or both of the following grounds:
(a) you did not commit the contraventions set out in this Compliance Notice;
(b) this Compliance Notice does not comply with sections 716(2) or 716(3) of the FW Act
It is difficult to accept Mr Althaus’s evidence that he found the notice “somewhat” confusing and did not “clearly understand” what steps he was required to take. Mr Althaus operates his own business and has done so since at least 2016. He has six employees. The terms of the notice in evidence are clear and precise. Mr Althaus swears that he “put it aside to deal with at a later time”. His evidence is that the business then became busy leading into Christmas “and all of my attention was focused on ensuring completion of work required to be done before the industry shutdown for the Christmas public holiday period commencing on 24 December 2019”. I find it difficult to accept, however, that it was not until sometime in August, 2020 (as Mr Althaus swears in his affidavit filed on 21 August, 2020) that “I now understand that I was required to take certain steps under the Compliance Notice by 23 December 2019 however I did not clearly understand this at the time, nor did I fully grasp the consequences of failing to comply”. These self-serving assertions by Mr Althaus are difficult to accept because they are clearly spelled out in the terms of the notice that Mr Althaus swore that he read.
In my view the failure of Althaus Homes to comply with the compliance notice by the due date, not provide calculations until 9 July, 2020 and not rectify the underpayments owing to Mr Schifcofske in full until 30 September, 2020 over 6 months after the due date and 3 months after these proceedings were commenced, clearly demonstrates a reckless disregard for its obligations under the Fair Work Act and the authority of the applicant as a regulator of Commonwealth workplace laws. Mr Althaus’s evidence is unconvincing and notwithstanding that he was not cross-examined about it, it seems entirely implausible that he would disregard such an important notice expressed in such clear language unless he did so either not caring about it terms or deliberately ignoring them. I do not need to choose between the two alternatives.
The respondents have admitted to the contravention at an early opportunity and facilitated these proceedings moving quickly to a penalty hearing, thereby saving the applicant and the Court the expense and time of a contested liability hearing. Mr Althaus has sworn to his regret that his inaction has led to these proceedings and to inconvenience for the applicant. The respondents have engaged consultants to undertake a review of workplace practices to ensure compliance with the award and workplace laws. A discount for co-operation and the regret and remorse expressed by the respondents is appropriate in those circumstances.
The amounts ultimately found to be owing to Mr Schifcofske were relatively small, being $1,579.90 in respect of accrued but untaken and unpaid annual leave, annual leave loading and personal leave and $60.58 in respect of additional superannuation contributions on those amounts. As a result of the failure to comply with the compliance notice until 1 October, 2020 Mr Schifcofske was deprived of the timely benefit of those entitlements.
Although the amounts owing to Mr Schifcofske were relatively small, the failure to comply with a statutory notice also occasions a more public loss, which underscores the seriousness with which the failure to respond to such a notice is viewed. As described by Judge Emmett in Fair Work Ombudsman v Viper Industries Pty Ltd & Anor [2015] FCCA 492 at [7]:
…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” the Fair Work 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.
Althaus Homes is a small business. However, as was noted in Fair Work Ombudsman v Extrados Solutions Pty Ltd [2014] FCCA 815 at [10]:
The obligation to comply with the Fair Work Act … falls just as heavily on small corporations and small businesses – and individuals, for that matter – as it does on large employers or businesses. Put shortly, one cannot shirk one's responsibilities imposed by law simply because one might be described as a "small business" or because the business has a particular size. It is incumbent on all employers to comply with the requirements of the Fair Work Act.
While the size and financial circumstances of a respondent does not exculpate a respondent who contravenes the Act, it is a relevant consideration when determining the appropriate penalty. The Court needs to weigh the size of the contravener and its enterprise against the need for general deterrence. But in considering the size of a penalty, capacity to pay is of less relevance than the objective of general deterrence: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 2) (2005) 215 ALR 281 at [9]; Jordan v Mornington Inn Pty Ltd (2007) 166 IR 33 at [99].
Mr Althaus was significantly involved in the offending conduct in this matter. He is the sole director of Althaus Homes. He received the compliance notice and read it when it was issued. He received all of the correspondence from the Fair Work Inspector. Mr Althaus delayed in seeking assistance to comply with the compliance notice until after proceedings were commenced.
The respondents have no relevant history of contravening the Fair Work Act.
Specific deterrence focuses on the party upon whom the penalty is to be imposed and the likelihood of them being involved in a similar breach. I accept that the need for specific deterrence is clear in this case. Althaus Homes is still registered and Mr Althaus continues to be the director of Althaus Homes. He continues to have responsibility for employing people or overseeing employees’ entitlements. Both Althaus Homes and Mr Althaus have demonstrated a disregard for their obligations under the Fair Work Act by failing to comply with the compliance notice until well after these proceedings commenced and only intermittently engaging with the applicant during the investigation and these proceedings.
CONCLUSION
The parties submit that penalties of $11,340 for Althaus Homes and $2,268 for Mr Althaus are appropriate. I agree. I am persuaded as to the accuracy of the parties' agreement as to facts and the consequences that flow therefrom. I am persuaded that the penalty which the parties propose is an appropriate remedy in the circumstances. There will be orders in the terms proposed by the parties.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Jarrett delivered on 29 January, 2021. Associate:
Dated: 29 January 2021
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