Fair Work Ombudsman v Andary
[2022] FedCFamC2G 577
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Andary [2022] FedCFamC2G 577
File number(s): ADG 376 of 2021 Judgment of: JUDGE BROWN Date of judgment: 19 July 2022 Catchwords: INDUSTRIAL LAW – fair work - underpayment of one employee – Compliance Notice – penalty hearing – where the respondent has not participated in proceedings - calculation of penalty – second offence – intuitive synthesis Legislation: Crimes Act 1914 (Cth) s 4AA.
Fair Work Act 2009 (Cth) ss 3, 539, 546, 557, 682, 701, 706, 712, 716.
Fast Food Industry Act 2010.
Federal Circuit & Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 13.04, 13.05.
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA
Blandy v Coverdale NT Pty Ltd [2008] FCA 1533
Fair Work Ombudsman v Andary [2021] FedCFamC2G 296
Fair Work Ombudsman v Corporation Sun Pty Ltd [2020] FCCA 2849
Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709
Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579
Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151
Fair Work Ombudsman v Matcraft Pty Ltd & Ors [2021] FCCA 272
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Minister for Immigration & Citizenship v Li (2013) 249 CLR 332
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Veen v R (No 2) (1988) 164 CLR 465, 472
Division: Division 2 General Federal Law Number of paragraphs: 98 Date of hearing: 6 July 2022 Place: Adelaide Counsel for the Applicant: Ms Yazidjoglou Solicitor for the Applicant: The Australian Government Solicitor Solicitor for the Respondent: No Appearance ORDERS
ADG 376 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: ZIAD ANDARY
Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
19 JULY 2022
THE COURT FINDS THAT:
1.The respondent, Ziad Andary (hereinafter referred to as “the respondent”) has contravened section 716(5) of the Fair Work Act 2009 (Cth) (hereinafter referred to as “the Act”) by failing to comply with the Compliance Notice issued by the applicant, the Fair Work Ombudsman (hereinafter referred to as “the applicant”) on or about 17 July 2021.
THE COURT ORDERS THAT:
2.The first respondent pay a total pecuniary penalty of $4,620.00 pursuant to subsection 546(1) of the Act for his contraventions set out in order (1) above.
3.Pursuant to section 546(3) of the Act, the pecuniary penalty ordered to be paid by the respondent in order (2) above are paid to the Commonwealth within twenty-eight (28) days of the date of this order.
4.The applicant has liberty to apply.
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 BROWN:
INTRODUCTION
The Fair Work Ombudsman[1] commenced these proceedings[2] against Ziad Andary[3] on 17 December 2021. The proceedings are instituted pursuant to the provisions of the Fair Work Act 2009 (Cth).[4]
[1] Herein referred to as “the FWO” or “the Ombudsman” or “the applicant”.
[2] Hereinafter referred to as “the current proceedings”.
[3] Hereinafter referred to as “Mr Andary” or “the respondent”.
[4] Hereinafter referred to as “the FWA” or “the Act”.
A significant feature of the current proceedings is the fact that Mr Andary is previously known to both the court and the FWO for an earlier breach of the Act instigated by the Ombudsman in October of 2020, which related to the underpayment of one his employees – Mr Zachary Roberts – in breach of the relevant industrial award, which resulted in the issue of a Compliance Notice on 25 May 2020, which remained unsatisfied at the date of hearing.[5] The relevant fair work inspector for the case was Natalie Roberts.
[5] Hereinafter referred to as ‘the earlier proceedings”.
This resulted in the imposition of a monetary penalty on Mr Andary of $3,500.00, by the court, on 24 November 2021. The underpayment of Mr Roberts occurred between June 2019 and February 2020 and related to failures to pay penalties for evening and weekend work and for causal employment, relating to Mr Andary’s employment of Mr Roberts at his business The Valley Pizza.
As with the earlier proceedings, the current proceedings have proceeded on an undefended basis, with absolutely no input or cooperation from Mr Andary. At relevant times, the respondent operated a take-away pizza business, in Nuriootpa, in rural South Australia in partnership with Fida Ghamrawi. The business was known as The Valley Pizza. The partnership between the two was dissolved on 23 June 2020. The FWO does not seek to proceed against Ms Ghamrawi in the current proceedings.
During the period from approximately 26 November 2020 until 18 January 2021 – thus after the earlier proceedings had been completed, Fair Work Inspector Natalie Roberts was tasked by the FWO with investigating the respondent’s employment of Jordan Marschall, who at relevant times was in his early 20’s. He indicated to Ms Roberts that he was paid around $10.00 per hour for his services and was homeless at the time of his employment.
I understand Ms Roberts’ investigation in the employment of Mr Marschall occurred following her previous investigation into the employment of Mr Roberts at The Valley Pizza, which resulted in the earlier proceedings and the imposition of the pecuniary penalty on Mr Andary. Reasons were provided in support of the quantum of the penalty imposed. [6]
[6] See Fair Work Ombudsman v Andary [2021] FedCFamC2G 296.
Ms Roberts concluded that Mr Marschall was, as was Mr Roberts before him, entitled to be paid pursuant to the provisions of the Fast Food Industry Award 2010,[7] for the period between, 2 December 2018 to 30 August 2019, which was largely prior to the underpayment of Mr Roberts.
[7] Hereinafter referred to as “the Award” or “the Restaurant Industry Award”.
In particular, Mr Marschall was entitled to be paid a casual loading; a weekday evening penalty for hours worked between 10.00pm and midnight, a penalty for working on Saturdays; and a penalty for working on Sundays.
As a consequence of her investigations, Ms Roberts issued a Compliance Notice dated 17 July 2021 to Mr Andary pursuant to the provisions of section 716(2) of the FWA. In broad terms, this Notice indicated that Mr Marschall had been a casual adult employee of the respondent between 2 December 2018 to 30 August 2019 and was entitled to be paid at level 1 pursuant to the Award.
Thereafter, in broad terms, the relevant Compliance Notice required the respondents to rectify the various underpayments due to Mr Marschall by 9 August 2021, as identified in the Notice, and provide written proof to the Ombudsman that this had been done by them prior to 16 August 2021.
It is Ms Roberts’ evidence, which I accept, that the relevant Compliance Notice was provided to the respondent by way of personal service by a process server on 19 July 2021. It is further Ms Roberts’ evidence that the respondent has not rectified the underpayments made to Mr Marschall nor taken any concrete steps to otherwise comply with the Notice issued against him.
THE ALLEGATIONS CONTAINED IN THE STATEMENT OF CLAIM
Ms Roberts conducted her investigation into Mr Marschall’s employment between November 2020 and January 2021. Mr Marschall ceased to be employed by The Valley Pizza on 30 August 2019. He worked regularly on Saturdays and Sundays and on Friday evenings after 10.00pm. He was paid a flat rate of $18.30 per hour.
Under the relevant award, he was entitled to loadings of 25% for casual Saturday, Sunday and evening work. Ms Roberts’ investigations indicated that Mr Marschall was not paid these loadings. This resulted in her issuing the relevant compliance notice to Mr Andary on 17 July 2021, which was approximately 14 months after the earlier compliance notice issued in respect of the underpayment of Mr Roberts.
The compliance notice required Mr Andary to do the following:
·Calculate the underpayments due to Mr Marschall and pay him his due entitlements on or before 9 August 2021;
·Pay to the relevant fund any superannuation contributions due to Mr Marschall on or before 9 August 2021;
·Prior to 16 February 2021 provide written proof to the FWO that these underpayments had been rectified.
CONDUCT OF THE PROCEEDINGS
The case first came before the court on 3 May 2022. An affidavit of service indicated that the respondent was personally served with the FWO’s initiating documents, at an address in suburban Adelaide, on 22 December 2021.[8]
[8] See Affidavit of Service of Matthew Stephens filed on 27 January 2022.
No responding documents have been filed by the respondent in the period since the initiating documents were served on him. Therefore, on 7 March 2022 the solicitor for the applicant sent a letter to the respondent by way of email and by express post to the respondent’s address. That letter was sent to advise the respondent that given there was no responding document filed nor any attempts by the respondent to progress the proceeding and it was the applicant’s intention to seek default judgment be made against him.[9]
[9] See Affidavit of Caitlin Yazidjoglou filed on 20 April 2022 at [11].
Subsequently, on 20 April 2022 the applicant filed an Application in a Proceeding and supporting documents outlining the default judgment orders it was seeking to be made by this court. These documents were emailed to the respondent and personally served on him on 28 April 2022.[10]
[10] See Affidavit of Service filed on 29 April 2022.
At this stage, it was apparent to me that the solicitor for the Ombudsman had made numerous attempts to engage the respondent in the proceedings. Mr Andary has rebuffed these attempts and has never responded to Ms Robert’s correspondence or voice and text messages. The only response of Mr Andary, to the involvement of the FWO in his business activities at The Valley Pizza, has been to close the business.
I am satisfied that the respondent was aware of these proceedings and, for reasons about which I can only conjecture, has elected not to take part in them. The FWO, as a public office holder, is entitled to proceed with its application, and it is in the public interest that it does so. The application was listed to be heard on the first court date of this matter, being 3 May 2022.
Applications for default judgment are dealt with by the provisions of the Federal Circuit & Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth). In particular, rule 13.04(2) provided that a party is in default if he or she has failed to:
·Comply with an order of the court in the proceedings;
·Failed to provide an address for service;
·Produce a document as required; or
·Do any act required to be done by these Rules;
·Prosecute the proceedings with due diligence.
Thereafter, pursuant to the provisions of rule 13.05(2) the court is granted a discretion to enter judgment against a party in default or make any other necessary order. It is clearly the case that the respondent is in default, given his lack of compliance with the court’s procedural requirements and in the absence of any response from him.
As a consequence, on 3 May 2022 judgement in default was entered in favour of the FWO and against the respondent and it was formally declared that he had contravened the applicable provision of the FWA regarding non-compliance with the Notice issued to him by Ms Roberts on 17 July 2021.
In addition, it was ordered that the respondent pay to Mr Marschall the wages to which he was entitled pursuant to the Notice, together with interest and any compulsory superannuation contributions. The case was then adjourned to 6 July 2022 for a hearing in respect of what penalty should be imposed and whatever ancillary order should be made.
Accordingly, it falls to the court to calculate the appropriate penalty which should be imposed upon the respondent and whatever order should be made given its formal finding that Mr Andary has contravened the provisions of section 716 of the Act.
On 1 July 2022, the FWO filed an affidavit from Ms Roberts detailing her involvement with the investigation of the matter. On this date the applicant’s Outline of Submissions on Penalty was also filed. On 5 July 2022 I received a request by email from the applicant’s solicitor, which included the respondent into the email, that the penalty hearing listed for 6 July 2022 proceed on an undefended basis on the papers filed by the applicant. I was satisfied with this course of action and therefore orders were made in chambers on 6 July 2022 reflecting the penalty judgment would be delivered on a date and time to be fixed.
RELEVANT LEGISLATIVE PROVISIONS
The objects of the FWA are contained in section 3. They include the provision of an industrial safety net, for Australian employees, which is maintained through the enforcement of a system of minimum terms and conditions specified in the modern award system.
The Office of the Fair Work Ombudsman is created by section 681 of the FWA. One of the functions of the Ombudsman is to enforce compliance with the Act, including any workplace obligations residing on employers, as a consequence of relevant industrial awards, mandating rates of pay and conditions of employment.[11]
[11] See Fair Work Act 2009 (Cth) s 682.
In turn, the FWO may appoint Fair Work Inspectors[12], who are authorised to utilise what are characterised as compliance powers.[13] In general terms, inspectors are directed to investigate complaints in respect of breaches of the industrial law and are authorised to enter workplaces and determine whether an employer has contravened the law, including in respect of the application of any relevant modern award or otherwise failed to comply with the industrial safety net.
[12] See Fair Work Act 2009 (Cth) s 700.
[13] See Fair Work Act 2009 (Cth) s 706.
In addition, the FWO has a responsibility to educate, advise and assist, both employers and employees, in respect of their respective obligations, arising under the Act and, if necessary, commence proceedings, in appropriate courts, to enforce the provisions of the FWA.
Pursuant to section 701 of the Act, the FWO is also a Fair Work Inspector. The FWA empowers the Ombudsman to delegate its statutory responsibilities to Fair Work Inspectors. The Act confers upon such inspectors a number of powers in order to ensure compliance with provisions of the Act. Among other things, inspectors can enter the work place and require the production of employee records.[14]
[14] See Fair Work Act 2009 (Cth) s 712(1).
In addition, the FWO, as a consequence of its status as a Fair Work Inspector, has statutory authority to bring proceedings under the Act and seek the imposition of penalties, if breaches of the FWA are established.[15]
[15] Fair Work Act 2009 (Cth) s 539(2).
Section 716 of the Act provides that, if an inspector believes, on reasonable grounds, that a person has contravened a term of a modern award, the inspector concerned may issue that person with a ‘Compliance Notice’ requiring the person nominated to take action to remedy the contravention in question.
There can be no controversy that the Fast Food Industry Act 2010 was such a modern award and covered and applied to the respondent in respect of his employment of Mr Marschall, at The Valley Pizza, from 2 December 2018 to 30 August 2019.[16] I am also satisfied that a Compliance Notice was issued to the respondent, by Ms Roberts, on 17 July 2021.[17]
[16] See Statement of Claim filed 17 December 2021 at [8].
[17] See Statement of Claim filed 17 December 2021 at [9].
Pursuant to the applicable legislation, any Compliance Notice must provide particulars of the contraventions of the Act alleged and outline any rights of review that arise under the Act. There is no issue in the present case about whether that the Compliance Notice in question complies with the provisions contained in sections 716(2) and (3) of the FWA.
Section 716(1) and (2) of the Act delineates the criteria, which must be satisfied before an inspector may issue a Compliance Notice. Firstly, the power itself is a discretionary one and like all administrative decisions must be exercised reasonably.
Whether a discretion, conferred by statute, is exercised in a legally reasonably manner, it must be determined by reference to the statute itself, particularly its ‘subject-matter, scope and purpose’.[18] In this particular case, as indicated above, one of the purposes of the FWO is to provide an industrial safety net, for workers, so far as the application of industrial awards is concerned, as well as to educate employers in regard to their industrial responsibilities.
[18] See Minister for Immigration & Citizenship v Li (2013) 249 CLR 332, 370-1 [90] (Gageler J).
Secondly, the discretion may be exercised only once a reasonable belief is formed by the relevant inspector. The discretion must be exercised appropriately and not in an arbitrary, illogical or capricious manner. The exercise of the relevant discretion cannot be disproportionate to the issue raised. To be exercised reasonably, it must be possible to glean from the relevant decision record ‘an evident and intelligible justification’ for the pertinent decision.[19]
[19] See Minister for Immigration & Citizenship v Li (2013) 249 CLR 332, 370-1 at [76] (Hayne, Kiefel & Bell JJ).
Again, in the current matter there is no issue regarding the reasonableness of Ms Robert’s belief that the respondent had breached provisions of the relevant Award and she was therefore entitled to issue the Compliance Notice, which she did.
In addition, in the light of its educative role and obligation to promote cooperative workplace relations[20] it was, in my view, clearly appropriate for the FWO to attempt to engage in correspondence with the respondent in order to see whether the underpayment of Mr Marschall could be resolved between the parties without recourse to litigation.
[20] See Fair Work Act 2009 (Cth) s 682(1)(a)
In this context, the application of a Compliance Notice issued under section 716 must be considered. In Fair Work Ombudsman v Matcraft Pty Ltd & Ors,[21] Judge Kendall explained the legislative intention of a Compliance Notice, as an alternative to litigation, in the following terms:
As explained in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), the purpose of s 716 of the Act is to provide an alternative to litigation. Section 716 is an informal mechanism whereby the applicant can identify potential contraventions of the Act and seek rectification without an employer having to admit liability.
One of the objects of the Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms. Section 716 encapsulates this objective by allowing employees to make a request for assistance which the applicant can then resolve through the use of s 716.[22]
[21] Fair Work Ombudsman v Matcraft Pty Ltd & Ors [2021] FCCA 272.
[22] Fair Work Ombudsman v Matcraft Pty Ltd & Ors [2021] FCCA 272 at [34]-[35] (Kendall J).
It is the central submission of the FWO that, in the present case, there has been a singular and significant failure on Mr Andary’s part to engage with the Compliance Notice procedure, which has resulted in Mr Marschall being deprived of his entitlements for a significant period of time and the public purse being put to the expense of having to pursue this litigation.
As such, the provisions of section 716 of the Act, which is potentially helpful to both errant employers and the industrial regulator, have been entirely circumvented and therefore the court should 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.
As a consequence of the default judgment entered against the respondent, it has been formally found that the Compliance Notice in question was legally valid and properly issued and it has not been complied with because Mr Andary:
·failed to take the specified action by the date and time specified in it; and
·did not produce to Ms Roberts or the FWO reasonable evidence of his compliance with the Notice by the date and time specified.
Accordingly, it has been established that the relevant provision of the FWA relating to non-compliance with the relevant Notice have been contravened and therefore attracts a penalty pursuant to the Act. These reasons for judgment relate to the calculation of that penalty and what are the relevant factors which should inform it.
This contravention engages the provisions of section 716(5) of the Act, which renders it a civil remedy provision if a person fails to comply with a Compliance Notice.
Pursuant to section 539(2) of the FWA, a breach of section 716(5) potentially attracts a fine of up to 30 penalty units. At relevant times, a penalty unit amounted to $210.00.[23] Accordingly the maximum penalty liable to be imposed on the respondent is one of $6,300.00.
[23] See Crimes Act 1914 (Cth) s 4AA.
It is the submission of the FWO that the respondent’s admitted conduct warrants a penalty in the range of between 75% and 85% of the maximum penalty, which would result in a penalty being imposed on Mr Andary of in between $4,995.00 to $5,661.00.[24] In the earlier proceedings, a fine of $3,500.00 was imposed, which equates to 53% of the maximum plenty.
[24] See Outline of Submissions by the Applicant filed 1 July 2022 at [5].
The FWO contends that this is the second instance in which proceedings have been brought against Mr Andary in respect of the same business, involving the same type of breaches of the applicable award. In each case the applicant has disregarded both the relevant compliance notice; failed to take part in the subsequent proceedings; and most significantly make good the underpayment to the employee concerned.
It is the submission of the FWO that these factors indicate a complete disregard, by Mr Andary, of his obligations, as an employer, under the FWA, the authority of the court and the authority of it, as the industrial regulator. As such, it seeks the imposition of a significant penalty. It also points to the fact that The Valley Pizza has been de-registered.
The FWO founds this submission primarily on the following bases:
·The need for general deterrence;
·The nature of the loss sustained by Mr Marschall, who is to be characterised as a vulnerable employee working in an industry with the potential to be rife with employee exploitation by unscrupulous employers;
·The lack of cooperation demonstrated by Mr Andary, which is most forcefully demonstrated by the fact that Mr Marschall’s entitlements still remain outstanding some eighteen months or so after they were brought to his attention.
LEGAL PRINCIPLES APPLICABLE TO PENALTY HEARINGS
The approach, which the court is required to take, in respect of these contravention proceedings, has been delineated in a number of decisions of the Federal Court.[25] The process can be summarised as follows:
·The court should identify each separate contravention, arising from a breach of either the applicable award or the FWA itself. Pursuant to section 539(2) each such contravention is a distinct incident for penalty purposes;
·The court should determine whether any of these incidents arise in a single course of conduct, within the terms envisaged by section 557(1);
·Then give consideration as to whether any of these contraventions contain elements and factor this into considering what is an appropriate penalty, in all the circumstances, for each contravention;
·Thereafter, the court should fix an appropriate penalty for each single or group contravention, taking into account all relevant circumstances; and
·Finally, the court should apply the totality principle. This final step constitutes a review of the aggregate penalty calculated, and envisages a consideration of whether such a penalty is an appropriate response to the conduct, which lead to the various contraventions in question. This case has been described as a process of intuitive synthesis.[26]
[25] See Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42] (Mansfield J), citing Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579 at [10] (McKerracher J).
[26] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [55] (Graham J).
The totality principle arises when a court is called upon to sentence an individual, as here, in respect of a number of identifiable offences. It is directed to review the penalties imposed, in total, in respect of individual offences to determine whether those penalties, in aggregate, constitute a just and appropriate penalty, in all the circumstances arising.
Gray J in Australian Ophthalmic Supplies Pty Ltd said as follows:
What is required is to determine an appropriate level of penalty for each contravention, as if it were a separate offence, and then look at the aggregate of those penalties in the light of the overall conduct of the [offender], to form a view as to whether that aggregate [is] out of proportion to that overall conduct.[27]
[27] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at at [23] (Gray J).
Regardless of these considerations, the fundamental task, for the court, is to determine, from all the factual circumstances arising, the gravity or seriousness of the offending, which it is called upon to penalise. Again there is general agreement between the parties as to the considerations relevant to this task, which has been delineated in a number of decisions of both this court and the Federal Court.[28] The considerations are as follows:
[28] See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] FCA 1080 at [14]. (Tracey J); Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [23] (Reeves J).
·The nature and extent of the conduct which led to the breaches;
·The circumstances in which the conduct took place;
·The nature and extent of any loss or damage sustained as a result of the breaches;
·Whether there has been similar previous conduct by the respondent;
·Whether the breaches were properly distinct or arose out of the one course of conduct;
·The size of the business enterprise involved;
·Whether or not the breaches were deliberate;
·Whether senior management was involved in the breaches;
·Whether the party committing the breaches has exhibited contrition;
·Whether the party committing the breaches has taken corrective action;
·Whether the party committing the breaches has cooperated with the enforcement authorities;
·The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
·The need for specific and general deterrence.
The court needs to be careful not to apply a formulaic approach to the imposition of penalties or attempt to extrapolate the penalties imposed in one case to the circumstances of another. Each case involving the imposition of a civil penalty warrants an idiosyncratic approach and a careful analysis of all relevant circumstances. As was stated in Australian Ophthalmic Supplies:
Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.[29]
[29] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J).
Clearly the check-list, as enumerated above, is useful. However, it is not to be regarded as an exhaustive list of factors to be considered. The ultimate control on any sentence is that it must be proportionate to the offence committed. A court is not permitted to impose a sentence greater than is warranted by the objective circumstances of the offending.[30]
[30] See Veen v R (No 2) (1988) 164 CLR 465, 472 (Mason CJ, Brennan, Dawson, and Toohey JJ).
However, in the context of the significant interest the public has in ensuring that employees are paid their proper entitlements and are accorded the protection of the industrial safety net envisaged by the legislature, the court cannot lose sight of the importance of deterrence, both in a specific and general sense.
Penalties have to be fixed at a meaningful level, not set at a level at which their imposition, on an errant employer, can be seen as an acceptable cost of doing business for the employer. In short, penalties must hurt so that others who are considering cutting corners, so far as the payment and protection of their employees are concerned, will be deterred from doing so.
This is particularly important for vulnerable employees, who work in small scale industries, which demand basic entry level skills, such as the fast food industry.
In the recent case of Australian Building and Construction Commissioner v Pattinson[31] the High Court discussed the inherent problems likely to arise when principles of retributive sentencing, relevant to the criminal law, are applied in civil penalty proceedings. In this context, the High Court rejected the principle of proportionality being applied to the calculation of penalties in the civil sphere. Essentially, the High Court indicated the principle that the maximum penalty should be reserved only for the worst or most egregious examples of the applicable offence did not apply in civil penalty proceedings.
[31] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13.
In addition, the High Court indicated that the primacy of deterrence is the objective of any civil penalty regime. As such a sentencing court, in a civil penalty matter, is required to impose a penalty which is proportionate in the sense that it strikes a reasonable balance between deterrence and what is described as oppressive severity.[32]
[32] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [41].
In this context, concepts also applicable in criminal sentencing, such as totality, parity and course of conduct remained relevant. As such, a court sentencing in respect of a civil penalty provision matter retained a discretion. As with all discretions, it is one which must be exercised fairly and reasonably given the subject matter, scope and purpose of the legislation being applied. The aim being to arrive at a penalty which is appropriate.
In this context the High Court[33] indicated as follows:
…[I]t is important to recall that an "appropriate" penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a "one‑off" result of inadvertence by the contravenor rather than the latest instance of the contravenor's pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law … In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors … [such as] where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
It is not necessary to multiply examples further. It is sufficient to say that a court empowered by s 546 to impose an "appropriate" penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.
[33] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [46] – [48].
In addition, in this context, the essential purpose of Compliance Notices must be considered. Prompt compliance with their terms can result in a win/win situation for all concerned. The industrial regulator and the public purse is not put to the expense of a hearing; an underpaid employee can be reimbursed promptly; and an errant employer is spared the bother and embarrassment of public prosecution, and is given an opportunity to learn about and rectify past failings for the good of all concerned.
DISCUSSION
Nature and extent of the conduct leading to the breaches
It is a significant matter that only one employee was the subject of the relevant Compliance Notice. However, this is a case in which an employee has been systematically underpaid through a failure to pay relevant loadings for work provided outside of conventional hours of work. In my view, it represents a significant failure of one aspect of the national employment standards.
However, in this context, I note that I have not been advised as to what is the exact quantum of the underpayment due to Mr Marschall. This is as a consequence of Mr Andary failing to undertake the calculations required of him and rectifying in any manner whatsoever what was due to Mr Marschall. The most significant aspect of the case is the wholesale failure, on Mr Andary’s part, to engage with the breach of award and make good his omissions.
As such, I regard this to be a case in which there has been a wholesale failure of the Compliance Notice scheme, through which the function of the relevant Fair Work Inspector has been essentially frustrated. The general public has an interest in ensuring prompt and effective compliance with any breach of the industrial regime when it comes to light. The main objective being workers get paid what they are due pursuant to any applicable award.
Mr Marschall’ entitlements remain outstanding and have been so since at least 30 August 2019. Thus the institution of these proceedings is the only mechanism through which the FWO can recover the wages due to Mr Marschall on his behalf. In these circumstances, the relevant contravention must be regarded as a serious one, regardless of the fact that only one employee is involved and the amount of wages due is not known to me.
As counsel for the FWO points out in its written submissions:
[T]his is the second time the Applicant has been required to commence proceedings at the public expense against the Respondent to seek to recover outstanding amounts owed to a former employee.[34]
I am satisfied that Ms Roberts made every reasonable effort to explain the purposes of the Notice to Mr Andary with a view to ensuring Mr Marschall received his due entitlements expeditiously. Mr Andary entirely rebuffed her efforts, which exacerbates the seriousness of the offending conduct.
[34] See the Outline of Submissions of the Fair Work Ombudsman filed 1 September 2021 at [40].
Contrition, corrective action and cooperation with authorities
For reasons I can only speculate the respondent has not elected to pay the sum to Mr Marschall. The most concrete manner in which Mr Andary could have expressed contrition for underpaying Mr Marschall would have been to pay his entitlements promptly. There is no evidence of corrective action, or acknowledgement of the action before the court whatsoever.
In these circumstances, it was necessary for the FWO to seek a default judgment, leading to a public authority incurring more expense in the furtherance of its compliance role. In these circumstances, it is not tenable for the court to consider any discount on the penalty to be imposed on account of the respondent’s cooperation.
Size of business and capacity to pay
I know nothing about the financial circumstances of Mr Andary other than The Valley Pizza has ceased to trade. In addition, I do not know whether the business was impacted by the pandemic crisis. On balance, it is more likely than not the respondent operated a small business which had limited cash flow.
However, it is well established that is no excuse for an offender to rely on the fact that they are the operator of a small business. To the contrary, the court must bear in mind that small businesses, of one form or another, represent a large component of employers in this country.
Such small businesses, in areas like the fast food industry, very often employ, members of the community who must be considered vulnerable, such as a young people with limited skills, sometimes from a non-English speaking backgrounds.
In this regard, I adopt the comments of Driver FM in Rajagopalan v BM Sydney Building Materials Pty Ltd as follows:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.[35]
[35] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27] (Driver FM).
Deterrence
As I have already observed deterrence has two aspects – general deterrence directed towards the community as a whole, and specific deterrence directed towards the individual concerned whose conduct is to be sanctioned.
In Fair Work Ombudsman v Darna Pty Ltd,[36] Judge Hartnett said as follows in respect of the importance of the Compliance Notice process in the industrial regulatory system in this county:
The Explanatory Memorandum to the Fair Work Bill 2008 (Cth) provides that compliance notices were designed to be another option to deal with non-compliance instead of pursuing court proceedings. It was to be a less costly and less time consuming procedure. Section 716 of the FW Act allows a person to whom a compliance notice is issued an opportunity to rectify an under payment without being subject to civil remedy provisions. The First Respondent’s failure to comply with the Compliance Notice issued has, in these proceedings, caused the Applicant and the Court to spend time and public funds in dealing with civil remedy proceedings which would not have been necessary had compliance occurred.
[36] Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709.
As I have already observed, so far as the current matter is concerned, the Compliance Notice procedure has been an abject failure in bringing about a prompt restitution to the employee concerned and the saving imposition on the public purse. One of the central purposes of the modern award system and the related enforcement procedures is to ensure all employees have the benefit of the industrial safety net provided by relevant awards.
To be able to enforce the terms of modern awards, Fair Work Inspectors must be able to exercise their compliance powers effectively through investigation and then rectification. When there has been a concerted non-compliance with a Notice issued by a Fair Work Inspector, the court needs to indicate that such non-compliance will be regarded as a serious matter by reference to the quantum of any penalty imposed.
The central tenet of the enforcement regime is to deter other employers from taking similar action. The ultimate public good being pursed being that all employees, whether to be regarded as vulnerable or otherwise, receive the benefits and protections incumbent in the industrial safety net.
I accept that the failure to comply with a Compliance Notice has the potential to undermine the entire purpose of the relevant statutory regime. If an employer does not accept the contents of any Notice served upon it, the regime provides formal mechanisms of review.[37]
[37] See Fair Work Ombudsman v Corporation Sun Pty Ltd [2020] FCCA 2849 at [63] (Kendall J).
The fast food industry is a significant employer in Australia. Employers in the industry range from multi-national corporations providing standardised food over multiple outlets, to small business employing a few individual staff members. Necessarily, the nature of the industry requires food to be available to customers outside of standard hours and on weekends.
In addition, the industry accommodates entry level skills, and not necessarily extensive work resumes. For these reasons, many employees in the fast food industry are young or come from non-English speaking backgrounds. Such employees, due to their age and backgrounds, have the potential to be vulnerable to exploitation. It is important to point out to the community, as a whole, that the court cannot countenance such employees, because of their vulnerability, from being deprived of the benefits of the industrial safety net to which they are legally entitled.
I do not know a great deal about Mr Marschall personally, other than he was 22 and 23 years of age at time of employment, he told Ms Roberts he believes he was paid just under $10.00 an hour. Ms Roberts attempted to clarify issues regarding Mr Marschall’s payment directly with Mr Andary, but he was uncooperative and Mr Marschall himself did not have a complete records of payslips. The evidence indicates a complete lack of cooperation on Mr Andary’s part.
Occasionally, as he had been kicked out of his previous accommodation, Mr Marschall would stay overnight at the business, in a backroom, due to him being largely homeless, otherwise, he was couch surfing.[38] In these circumstances, I consider him to be a vulnerable employee and certainly not one who can he be characterised as an experienced employee, in the fast food industry, who would be able to stand up for his rights.
[38] See affidavit of Natalie Roberts filed 1 July 2022 at [13].
Of more relevance, in my view, in this context, is the statistical evidence provided by the FWO, which indicates that the FWO received over 2000 complaints from employees in the fast food industry between July 2017 and December 2021 of which 16% related to underpayment of minimum hourly rates of pay, while 54.4% of investigations involve young workers aged 15 to 25 years of age.. This led to the issue of 283 Compliance Notices, or 5.6% of all Compliance Notices issued by the FWO in this period.[39] In my view, these figures emphasise the need for general deterrence, specifically in respect of the fast food industry, given the prevalence of complaints there.
[39] See Affidavit of Natalie Roberts filed 1 July 2022 at [30].
Mr Andary ceased trading as The Valley Pizza shortly after the issue of the first Compliance Notice allegedly became known to him, which led to my judgment in the earlier proceedings. Given that he has taken no part in the subsequent proceedings, it is unknown to me whether he has any plans to return to business in the fast food industry.
However, regardless of what Mr Andary does or does not plan to do regarding returning the fast food industry, the court must point out to him its significant disapproval of his conduct to act as a personal deterrence from him being cavalier in respect of any future obligations as an employer, if he ever considers resuming some form of similar enterprise in future.
CONCLUSIONS
It has been said that the task of sentencing is one of the hardest judicial tasks, as it requires the synthesis of competing considerations to arrive at a penalty, which is just and appropriate. Necessarily it is a process of intuitive synthesis. It is useful to think of it in terms of percentages, but sentencing is not a purely arithmetical process.
The penalty to be imposed must be proportionate to the gravity of the offending. This provides a high water mark in respect of the range of the penalty to be imposed before turning to any subjective factors which tend to mitigate the objective assessment of the offending.
The earlier proceedings have had no salutary effect on Mr Andary whatsoever. He has not paid the penalty imposed. More significantly, both Mr Roberts and Mr Marschall remain without recompense for their wage and penalty entitlements. Mr Andary has ceased his business and it seems the FWO will struggle to enforce any judgment granted in its favour.
The most significant factor in these current proceedings must be the fact that Mr Andary is, in effect, thumbing his nose, at the FWO and its legislatively justified attempts to ensure that an employee, employed in an industry which is rife with exploitation through underpayment, receives his just entitlements.
More significantly, earlier attempts directed towards emphasising to Mr Andary the error of his ways, have been an abject failure, resulting only in the response of Mr Andary ceasing to trade. In my view, these factors distinguish between these current proceedings and the earlier ones and justify a more severe penalty.
In my assessment, an appropriate penalty for the respondent is one of 70% of the maximum penalty, which equates to a sum of $4,620.00. This is a significant sum, in my view. However there has been no cooperation with authorities and the case has been protracted leading to the protraction of these proceedings, which represents a significant impost on the public purse.
At the same time, the breach represents a failure of the Compliance Notice system to achieve its objectives. As such, a message must be sent to small cottage-type industries of the importance of prompt and complete rectification of any breaches of the industrial safety net. The penalty imposed, in my view, is of sufficient moment to achieve the desired degree of general deterrence required.
This will render the respondent liable to a penalty slightly less than that sought by the FWO, but the penalty in question cannot be regarded, in my view, as being either token or trivial, albeit I have very limited information about the respondent’s financial circumstances. Importantly, as indicated above, I consider the penalty to be of sufficient magnitude to provide general deterrence.
Pursuant to section 546(3) of the Act, the court may order the payment of any penalty imposed to be paid to the Commonwealth; a particular organisation; or a particular person. In this case, the FWO seeks that the penalties be paid to the Commonwealth. Given the prosecution has been funded by the FWO, it is obviously appropriate that this course should be adopted.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 19 July 2022
0
14
0