Fair Work Ombudsman v Andary
[2021] FedCFamC2G 296
•24 November 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Andary [2021] FedCFamC2G 296
File number(s): ADG 341 of 2020 Judgment of: JUDGE BROWN Date of judgment: 24 November 2021 Catchwords: INDUSTRIAL LAW – Fair work - underpayment of one employee – Compliance Notice – penalty hearing – where the respondent has not participated in proceedings - calculation of penalty – first time offender – 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 Court Rules 2001 (Cth) rr 13.03A, 13.03B.Cases cited: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8.
Blandy v Coverdale NT Pty Ltd [2008] FCA 1533.
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.Division: Division 2 General Federal Law Number of paragraphs: 82 Date of hearing: 25 October 2021 Place: Adelaide Counsel for the Applicant: Mr Simeon Solicitor for the Applicant: Office of the Fair Work Ombudsman Counsel for the Respondent: No Appearance Solicitor for the Respondent: No Appearance ORDERS
ADG 341 of 2020 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:
24 NOVEMBER 2021
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 25 May 2020.
THE COURT ORDERS THAT:
2.The first respondent pay a total penalty of $3,500.00 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, that 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 against Ziad Andary and Fida Ghamrawi on 29 October 2020. The proceedings are instituted pursuant to the provisions of the Fair Work Act 2009 (Cth).[2]
[1] Herein referred to as “the FWO” or “the Ombudsman”.
[2] Hereinafter referred to as “the FWA” or “the Act”.
At relevant times, the Respondents operated a take-away pizza business, in Nuriootpa, in rural South Australia. The business was known as The Valley Pizza. The partnership between the two Respondents was apparently dissolved on 23 June 2020.
In February 2020, Mr Zachary Roberts, a former employee of The Valley Pizza approached the office of the FWO alleging that he had been underpaid while he was a casual employee of The Valley Pizza. As a consequence, the FWO appointed a Fair Work Inspector, Natalie Roberts, to investigate Mr Roberts’ complaint of being underpaid.
Ultimately, Ms Roberts concluded that Mr Roberts was entitled to be paid pursuant to the provisions of the Fast Food Industry Award 2010,[3] and in particular, was entitled to be paid a casual loading; an evening penalty for working between 10.00pm and midnight; a penalty for working on Saturdays; and a penalty for working on Sundays.
[3] Hereinafter referred to as “the Award” or “the Restaurant Industry Award”.
As a consequence of her investigations, Ms Roberts issued a Compliance Notice dated 25 May 2020 to both Mr Andary and Ms Ghamrawi pursuant to the provisions of section 716(2) of the FWA. In broad terms, this Notice indicated that Mr Roberts had been a casual adult employee of the Respondents between 26 June 2019 and 5 February 2020 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 Roberts, as identified in the Notice, and provide written proof to the Ombudsman that this had been done by them prior to 17 July 2020.
As is apparent, the partnership between the Respondents was dissolved, whilst the Compliance Notice was in force and it is the position of the FWO that the business ceased operation around this time.[4]
[4] See Affidavit of Natalie Clare Roberts filed 1 September 2021 at [9].
It is Ms Roberts’ evidence, which I accept, that the relevant Compliance Notice was provided to the Respondents in both electronic form and by registered mail. It is further Ms Roberts’ evidence that the Respondents have not rectified the underpayments made to Mr Roberts or taken any concrete steps to otherwise comply with the Notice issued against them.
CONDUCT OF THE PROCEEDINGS
In its Amended Statement of Claim, filed on 1 July 2021, the FWO has elected not to proceed further against Ms Ghamrawi. This follows its discontinuance of two aspects of the original Statement of Claim referable to her on this date. Accordingly, the only respondent to the application is Mr Andary.[5]
[5] Hereinafter referred to as “the respondent” or “Mr Andary”.
The case first came before the court on 10 December 2020. A solicitor appeared on behalf of Ms Ghamrawi. There was no appearance for the respondent. An affidavit of service indicated that the respondent was personally served, at an address in suburban Adelaide, on 5 November 2020.
On 10 December, in Mr Andary’s absence, a mediation date of 20 April 2020 was appointed and he was directed to file a response and supporting affidavit by 9 April 2021. The case was adjourned until 2 June 2021.
Mr Andary did not comply with the order to file a response and has not filed an address for service. In fact, he has never appeared in court, in contrast to Ms Ghamrawi. Given the lack of cooperation from Mr Andary, it became apparent that the mediation would serve no useful purpose.
In these circumstances, the case was re-listed on 20 April 2020 and the Ombudsman agreed that it would not require a response from Ms Ghamrawi. At this stage, she indicated her intention to make admissions in respect of any salient matter alleged against her by the FWO.
On 2 June the respondent again failed to appear. In these circumstances, the FWO indicated that it would seek default judgment against Mr Andary and would reserve its position so far as Ms Ghamrawi was concerned. The default judgment application was fixed for 5 July 2021. Again, an affidavit has been provided indicating Mr Andary was personally served with the relevant order of the court on 26 May 2021 at another address in Adelaide.
Again relevant court documents, including the amended Statement of Claim were personally served on Mr Andary on 3 July 2021. At this stage, it was also apparent to me that the solicitor for the Ombudsman had made numerous attempts, both in written correspondence and through the telephone to engage the respondent in the proceedings.
In my view, there can be no doubt that he knows about 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.
At relevant times, prior to the amalgamation of the Federal Circuit Court and the Family Court, applications for default judgment were dealt with by the provisions of the Federal Circuit Court Rules 2001 (Cth). In particular, rule 13.03A(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 13.03B(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, 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 25 May 2020.
In addition, it was ordered that the respondent pay to Mr Roberts 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 25 October 2021 for a hearing in respect of what penalty should be imposed and whatever ancillary order should be made.
On 1 September 2021, the FWO filed an affidavit from Ms Taylor detailing her involvement with the investigation of the matter. Again, this affidavit and the relevant order fixing the penalty hearing were personally served on Mr Andary on 19 August 2021. Mr Andary did not appear on 25 October 2021 and has continued to be engaged in the proceedings.
Accordingly, it falls to the court to determine what is the appropriate penalty which should be imposed upon him and whatever order should be made given its formal finding that Mr Andary has contravened the provisions of section 716 of the Act.
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 682 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.
In turn, the FWO may appoint Fair Work Inspectors, who are authorised to utilise what are characterised as compliance powers.[6] 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.
[6] 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.[7]
[7] 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.[8]
[8] Ibid 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 is no controversy between the parties, in the current matter, 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 Roberts, at The Valley Pizza, between 26 June 2019 and 5 February 2020.[9] I am also satisfied that a Compliance Notice was issued to the respondent, by Ms Roberts, on 25 May 2020.[10]
[9] See Amended Statement of Claim filed 1 September 2021 at [7].
[10] Ibid at [8].
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’.[11] 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.
[11] 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.[12]
[12] Ibid 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[13] it was, in my view, clearly appropriate for the FWO to attempt to engage in correspondence with the respondent (as indeed it did with Ms Ghamrawi) in order to see whether the underpayment of Mr Roberts could be resolved between the parties without recourse to litigation.
[13] 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,[14] 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.[15]
[14] Fair Work Ombudsman v Matcraft Pty Ltd & Ors [2021] FCCA 272.
[15] Ibid 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 Roberts 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, 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.[16] Accordingly the maximum penalty liable to be imposed on the Respondent is one of $6,300.00.
[16] 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 60% and 70% of the maximum penalty, which would result in a penalty being imposed on Mr Andary of between $3,780.00 and $4,410.00.
The FWO concedes that Mr Andary is not previously known to it as a consequence of any past breaches of the industrial law. However, notwithstanding this circumstance, it seeks a significant penalty, when the maximum is considered, primarily on the following bases:
·The need for general deterrence;
·The nature of the loss sustained by Mr Roberts, 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 Roberts’ 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.[17] 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;
·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.[18]
[17] 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).
[18] 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. As indicated earlier, it has been characterised as a process of intuitive synthesis best summarised in the well-known line from The Mikado “the punishment must fit the crime.”
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.[19]
[19] Ibid 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.[20] The considerations are as follows:
[20] 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.[21]
[21] 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.[22]
[22] 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 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. As such, this is not a case in which many employees have been systematically underpaid. In this context, I have not been advised as to what is the quantum of the underpayment due to Mr Roberts.
However, I accept that, as noted above, this is 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.
Mr Roberts’ entitlements remain outstanding and have been so since at least 25 May 2020. Thus the institution of these proceedings is the only mechanism through which the FWO can recover the wages due to Mr Roberts 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]he Respondent’s continued failure to comply with the Compliance Notice and the Default Judgment Orders demonstrates that a penalty sufficiently high enough to safeguard the utility of compliance notices as a cost-effective and efficient enforcement tool available to the FWO.[23]
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 Roberts received his due entitlements expeditiously. Mr Andary entirely rebuffed her efforts, which exacerbates the seriousness of the offending conduct.
[23] See the Outline of Submissions of the Fair Work Ombudsman filed 1 September 2021 at [40].
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,[24] 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.
[24] 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 two employees 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.[25]
[25] 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 Roberts personally, other than he is twenty four years of age. Accordingly, he cannot be described as a vulnerable teenager but nor can he be characterised as an experienced employee, in the fast food industry, who would be able to stand up for his rights.
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 June 2020 of which 38% related to penalty rate issues. This led to the issue of 139 Compliance Notices, or 7.2% of all Compliance Notices issued by the FWO in this period. These figures emphasise the need for general deterrence, specifically in respect of the fast food industry, given the prevalence of complaints there.
Mr Andary ceased trading as The Valley Pizza shortly after the issue of the Compliance Notice allegedly became known to him. 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. In these circumstances, the need for specific deterrence does not loom large. However, the court must point out to Mr Andary its significant disapproval of his conduct to act as a personal deterrence from him being cavalier in respect of his obligations as an employer, if he ever considers resuming some form of similar enterprise in future.
Contrition, corrective action and cooperation with authorities
The most concrete manner in which Mr Andary could have expressed contrition for underpaying Mr Roberts would have been to pay his entitlements promptly. There has been no corrective action, or acknowledgement of the action before the court whatsoever. In addition, the evidence indicates that Mr Andary has tried to hinder rather than cooperate with the enforcement process. He dissolved the relevant partnership. He has changed address. He has never attended court.
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 it’s 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 have not been provided with any evidence regarding Mr Andary’s financial circumstances other than The Valley Pizza has ceased to trade. In addition, I do not know whether the business was impacted by the current 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 these circumstances, 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.[26]
[26] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27] (Driver FM).
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.
In my assessment, an appropriate penalty for the respondent is one of $3,500.00. This is a significant sum, in my view. I take into account that the respondent is a first offender. However there has been no cooperation with authorities and the case has been protracted as a consequence.
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 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 eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 24 November 2021
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