Fair Work Ombudsman v Ans.Hl Trading Pty Ltd

[2021] FCCA 1163

FEDERAL CIRCUIT COURT OF AUSTRALIA

Fair Work Ombudsman v ANS.HL Trading Pty Ltd [2021] FCCA 1163

File number(s):

BRG 808 of 2019

Judgment of:

JUDGE JARRETT

Date of judgment:

28 May 2021

Catchwords:

INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – amount of penalty – course of conduct.

Legislation:

Corporations Act 2001 (Cth), s.440D

Crimes Act 1914 (Cth), s. 4AA

Dry Cleaning and Laundry Industry Award 2010, cll. 10.5(c), 14.1, 19.1, 20.2, 22.1, 22.5(a)(i)

Fair Work Act 2009 (Cth), ss. 45, 535(1), 536(1), 539(2)

546(2), 550(1), 550(2), 557(1)

Fair Work Regulations 2009 (Cth), regs. 3.32, 3.34, 3.40, 3.44(1), 3.44(6), 4.01(A)

Cases cited:

Australian Building and Construction Commissioner v CFMMEU [2020] FCA 549

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157

CFMMEU v ABCC (2018) 264 FCR 155

Commonwealth of Australia v Director of the FWBII (2015) 258 CLR 482

Number of paragraphs:

56

Date of last submission/s:

27 July, 2020

Date of hearing:

27 July, 2020

Place:

Brisbane

Counsel for the Applicant:

Mr Mackie

Solicitor for the Applicant:

Office of the Fair Work Ombudsman

Counsel for the Respondents:

Mr McKechnie

Solicitor for the Respondents:

HR Law

Table of Corrections
31 March 2023	In the Penalties for the First Respondent table in Annexure A, the total penalty in the column headed Penalty has been changed from $74,700 to $96,300
31 March 2023	At paragraph 53 the penalty amount referred to has been changed from $74,700 to $96,300.00

ORDERS

BRG 808 of 2019

BETWEEN:

FAIR WORK OMBUDSMAN

Applicant

AND:

ANS.HL TRADING PTY LTD

First Respondent

YUYIN LUO

Second Respondent

SHUJING HUO

Third Respondent

order made by:	JUDGE JARRETT
DATE OF ORDER:	28 May 2021 AMENDED 31 March 2023

BY CONSENT THE COURT DECLARES THAT:

1.The first respondent contravened the following civil remedy provisions:

(a)s.45 of the Fair Work Act2009 (Cth), by failing to pay Ms Jing Zhang minimum rates of pay prescribed by clause 14.1 of the Dry Cleaning and Laundry Industry Award 2010;

(b)s.45 of the Fair Work Act2009 (Cth), by failing to pay Ms Zhang casual loading as prescribed by clause 10.5(c) of the Dry Cleaning and Laundry Industry Award 2010;

(c)s.45 of the Fair Work Act2009 (Cth), by failing to pay Ms Zhang overtime rates as prescribed by clause 22.1 of the Dry Cleaning and Laundry Industry Award 2010;

(d)s.45 of the Fair Work Act2009 (Cth), by failing to pay Ms Zhang Saturday penalty rates as prescribed by clause 22.5(a)(i) of the Dry Cleaning and Laundry Industry Award 2010;

(e)s.45 by failing to pay Ms Zhang weekly or fortnightly as prescribed by clause 19.1 of the Dry Cleaning and Laundry Industry Award 2010;

(f)s.45 of the Fair Work Act2009 (Cth), by failing to pay superannuation contributions for Ms Zhang as prescribed by clause 20.2 of the Dry Cleaning and Laundry Industry Award 2010;

(g)s.535(1) of the Fair Work Act2009 (Cth), by failing to make and keep employee records in relation to Ms Zhang as prescribed by regulations 3.32, 3.34 and 3.40 of the Fair Work Regulations 2009 (Cth);

(h)regulation 3.44(1) of the Fair Work Regulations 2009 (Cth), by failing to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge;

(i)regulation 3.44(6) of the Fair Work Regulations 2009 (Cth), by knowingly making use of false or misleading entries in respect of records in relation to Ms Zhang; and

(j)s.536(1) of the Fair Work Act2009 (Cth), by failing to provide Ms Zhang with a pay slip within one working day of paying an amount to her in relation to the performance of work.

2.The second respondent was involved in all of the contraventions by the first respondent set out in declaration 1 hereof for the purposes of s.550(1) of the Fair Work Act2009 (Cth).

3.The third respondent was involved in all of the contraventions by the first respondent set out in declaration 1 hereof for the purposes of s.550(1) of the Fair Work Act 2009 (Cth).

THE COURT ORDERS THAT:

4.The first respondent pay a total penalty of $74,700 $96,300 pursuant to s.546(1) of the Fair Work Act 2009 (Cth) for the contraventions set out in declaration 1 hereof such payment to be made by equal monthly instalments over six calendar months from the date of these orders.

5.The second respondent pay a total penalty of $18,860 pursuant to s.546(1) of the Fair Work Act 2009 (Cth) for her involvement in the contraventions set out in declaration 1 hereof such payment to be made by equal monthly instalments over three calendar months from the date of these orders;

6.The third respondent pay a total penalty of $18,860 pursuant to s.546(1) of the Fair Work Act 2009 (Cth) for her involvement in the contraventions set out in declaration 1 hereof such payment to be made by equal monthly instalments over three calendar months from the date of these orders;

BY CONSENT THE COURT FURTHER ORDERS THAT:

7.Pursuant to s.546(3) of the Fair Work Act 2009 (Cth) the first, second and third respondents to pay their respective penalty amounts to the Consolidated Revenue Fund of the Commonwealth. within 28 days of the Court’s order.

8.Pursuant to s.545(1) of the Fair Work Act 2009 (Cth) each of the first, second and third respondents:

(a)within a period of two months, register with the applicant’s “My Account” portal at and complete the profile including the Award options;

(b)within a further month, after the period in subparagraph 6(a) above, provide to the applicant their respective “My Account” registration number; and

(c)within a period of two months, register with the applicant’s Online Learning Centre at and complete all education courses designed for employers and provide the applicant with evidence of completion of those courses within a further month.

Notation: Order 4 has been amended pursuant to r.17.05(2)(e) Federal Circuit and Family Court (Division 2)(General Federal Law) Rules 2021 to show $96,300 in lieu of $74,700 and remove the reference at order 7 to payment within 28 days of the Court’s order.

These orders and reasons were prepared by Judge Jarrett but were published by Judge Vasta pursuant to s 210(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth).

REASONS FOR JUDGMENT

JUDGE JARRETT:

1. By this application the Fair Work Ombudsman seeks the imposition of pecuniary penalties on the first respondent for contraventions of the Fair Work Act 2009 (Cth) and upon the second respondents for their involvement in those contraventions. The applicant also seeks declarations identifying the contraventions of the first respondent and separate declarations against the second and the third respondents recording their involvement in the first respondent’s.

2. After the hearing of this application, the first respondent entered external administration. The proceedings against it were stayed and could not continue except with the administrator’s written consent or leave of the Court: s.440D of the Corporations Act 2001 (Cth). Soon afterwards, the Court was notified that the first respondent had executed a Deed of Company Arrangement which did not bind the applicant or concern the subject matter of these proceedings. The external administration of the first respondent ended with the execution of the DOCA and the impediment to these proceedings continuing removed.

3. The first respondent operates under the trading name “The Ironing Shop” and using that name, it operates four dry cleaning stores in Queensland.  The business operates as a franchisee pursuant to an agreement with The Ironing Shops (Franchising) Pty Ltd dated 19 July, 2010.  The first respondent’s business is a small business employing around 10 employees. 

4. The second and third respondents are Chinese nationals and are the sole directors of the first respondent. They are responsible for ensuring that the first respondent complies with its legal obligations under the Fair Work Act and Fair Work Regulations 2009 (Cth). The second respondent is responsible for the management of the business operations which includes engaging employees, including the employee relevant in this case, to perform work, managing those employees, setting rates of pay and hours of work and calculating and paying employees their wages. The third respondent has a role in the day-to-day management of the business and is responsible for engaging the employee relevant in this particular case, managing her, setting her rate of pay and hours of work, directing her work, calculating and paying wages, as well as performing payroll, accounting and bookkeeping duties for the first respondent more generally.

5. The first respondent employed Ms Jing Zhang between 27 August, 2015 and 19 August, 2017 to perform duties which included ironing, customer service, receiving and dispatching orders and opening and closing the stores at which she worked.  Ms Zhang was paid $8 per hour for all hours of work between 27 August, 2015 and 20 September, 2015 and then $12 per hour from 21 September, 2015 to 19 August, 2017.

6. The applicant commenced its investigation in September, 2018 following a request for assistance from Ms Zhang.  On 5 June, 2019 a Fair Work Inspector sent a letter setting out findings of contravention to the first respondent, via the second and third respondents in their capacity as directors of the first respondent.  In total, the letter alleged that Ms Zhang was underpaid $28,404.35.  The letter demanded that the underpayment be rectified in full by 24 June, 2019.  On 25 June, 2019 the first respondent fully rectified the underpayment.

   THE CONTRAVENTIONS

7. The respondents admit that the first respondent failed to meet its obligations to Ms Zhang during her employment from 27 August, 2015 to 19 August, 2017.  In particular, it is not in dispute that the respondent contravened the following legislative provisions:

   (a)s.45 of the Fair Work Act by failing to pay Ms Zhang minimum rates of pay prescribed by clause 14.1 of the Dry Cleaning and Laundry Industry Award 2010  in the amount of $15,106.30;

   (b)s.45 of the Act by failing to pay Ms Zhang casual loading as prescribed by clause 10.5(c) of the award in the amount of $11,372.62;

   (c)s.45 of the Act by failing to pay Ms Zhang overtime rates as prescribed by clause 22.1 of the award in the amount of $1,491.44;

   (d)s.45 of the Act by failing to pay Ms Zhang Saturday penalty rates as prescribed by clause 22.5(a)(i) of the award in the amount of $433.99;

   (e)s.45 of the Act by failing to pay Ms Zhang weekly or fortnightly as prescribed by clause 19.1 of the award;

   (f)s.45 of the Act by failing to pay superannuation contributions for Ms Zhang as prescribed by clause 20.2 of the award;

   (g)s.535(1) of the Act by failing to make and keep employee records in relation to Ms Zhang as prescribed by regs. 3.32, 3.34 and 3.40 of the Fair Work Regulations;

   (h)reg.3.44(1) of the Regulations (as in force at the relevant time) by failing to ensure records required to be kept in relation to Ms Zhang were not false or misleading to their knowledge;

   (i)reg.3.44(6) of the Regulations by knowingly making use of false or misleading entries in respect of records in relation to Ms Zhang; and

   (j)s.536(1) of the Act by failing to provide Ms Zhang with a pay slip within one working day of paying an amount to her in relation to the performance of work.

8. The facts further demonstrate and the second and third respondents admit, that the second and third respondents were involved in the first respondent’s contraventions of the legislation pursuant to s.550(1) of the Act.

9. The first respondent’s conduct in relation to Ms Zhang’s employment covered the significant periods of time I have already described.  Over that time there were multiple contraventions of the various obligations to which the respondents now admit.  Collectively, the individual contraventions would run to the many hundreds.  However, s.557(1) of the Act provides that two or more contraventions of specified civil remedy provisions must be treated as a single contravention where those contraventions were committed by the same person and they arose from the same course of conduct. 

10. Here, the applicant accepts that the respondents are entitled to the benefit of s.557(1) of the Act in relation to the multiple contraventions of each separate obligation under the Dry Cleaning Award which in turn would result in separate breaches of s.45 of the Fair Work Act. The applicant makes a similar concession in respect of the multiple contraventions of each separate obligation under ss. 535(1) (record-keeping obligations) and 536(1) (failure to provide payslips obligation) of the Act.

11. Following the application of s.557(1), the following summary of the contraventions before the Court emerge:

    (a)six contraventions of s.45 of the Act;

    (b)one contravention of s.535(1) of the Act;

    (c)four contraventions of  reg.3.44(1) of the Regulations;

    (d)four contraventions of reg.3.44(6) of the Regulations; and

    (e)one contravention of s.536(1) of the Act.

12. In addition to s.557(1) of the Act, where the contraventions contain common elements or can be said to overlap with each other, it is open to the Court to group separate contraventions together and determine how penalties should be applied across the group so as to ensure that the respondents are not punished twice for the same offending conduct.  The application of this approach to the four contraventions of reg.3.44(1) and the four contraventions of reg.3.44(6) is in issue between the parties.  The applicant contends that I should treat those multiple contraventions as two contraventions – one each of reg.3.44(1) and reg.3.44(6).  The respondents contended that I should treat all of them as a single contravention of reg.3.44(1).  To resolve this controversy, it is necessary to understand precisely what it is that has been admitted by the respondents.

13. By the statement of agreed facts, the respondents admit that:

    (a)pursuant to reg.3.44(1) of the Regulations, it was required to ensure that a record it was required to keep under the Act or the Regulations was not false or misleading to its knowledge; and

    (b)pursuant to reg.3.44(6) of the Regulations, it was required to not make use of an entry in an employee record made and kept by it for the purposes of, relevantly reg3.44(1), if it did so knowing that the entry was false or misleading.

14. The respondents agree that the first respondent was required by the Regulations to make and keep a record in relation to the rate of remuneration paid to Ms Zhang, the gross and net amounts paid to her and the amount of superannuation contributions made on her behalf.  They also agree that in about March, 2016, April, 2016, July, 2016 and October, 2016 the second respondent created and emailed to the first respondent’s then accountants, Mazars (QLD) Pty Ltd, payroll summaries that purported to record that information in respect of Ms Zhang for the periods covered by each payroll summary.

15. The respondents agree that each of them knew that each payroll summary was false or misleading because:

    (a)they recorded incorrect rates of remuneration for Ms Zhang;

    (b)save for the July payroll summary, each recorded false or misleading information in relation to the gross and net amounts paid by the first respondent to Ms Zhang; and

    (c)save for the October payroll summary, each recorded false or misleading information in relation to the super and superannuation contributions being made for the benefit of Ms Zhang.

16. Thus, in respect of each payroll summary that was created by the second respondent, there was at least one contravention of reg. 3.44(1) of the Regulations - four in total. 

17. Further, the respondents agree that by providing those payroll summaries to the first respondent’s former accountants, the first respondent made use of the incorrect entries in those payroll summaries.  Each payroll summary was provided to the accountants soon after it was created.  The respondents agree that at the time the payroll summaries were produced to the accountants they knew that the entries in those payroll summaries were false or misleading because they did not accurately record the details in relation to Ms Zhang’s payments.

18. Thus, in respect of the provision of each payroll summary to the first respondent’s former accountants, there was at least one contravention of reg.3.44(6) of the Regulations – four contraventions in total.

19. Viewed in that way, there are eight contraventions – four contraventions of reg.3.44(1) and four contraventions of reg.3.44(6).  Subsection 557(1) does not apply to these contraventions and so there is no statutory mandate to treat multiple contraventions of either regulation as a single contravention.

20. The applicant argues that, having regard to the common elements of the multiple contraventions it is appropriate to group the four contraventions of reg.3.44(1) and separately the four contraventions of reg. 3.44(6) such that there is a single contravention of each of regs. 3.44(1) and 3.44(6).  The respondents argue that I should treat the eight contraventions as one because they rely upon a single action engaged in by the first respondent as a single transaction, namely the provision to the accountants of documents that contained an incorrect rate of pay.  The respondents submit that the applicant does not allege that the first respondent created and relied upon the record as two separate events and they argue that this is not a case where the corporate entity created a false set of records that it later relied upon when dealing with third parties.

21. I cannot accept the submissions of either the applicant or the respondents on this issue.  What is alleged is that on four separate occasions the second respondent created a document – the payroll summary – which was false and misleading in relevant particulars.  The four occasions are temporally distinct.  No doubt a decision was made by the second respondent to create the false entries each time a payroll summary was created.  I do not accept that the payroll summaries were created as part of a course of conduct because each time a false payroll summary was created, the second respondent must have turned his mind to whether or not the payroll summary should be accurate or inaccurate.

22. The provision of the payroll summaries to the accountants once created, however, was part of one transaction or course of conduct that was engaged in by the first respondent, namely the creation and provision of the false document to the accountants.  It seems tolerably clear from the material that the purpose in creating the false payroll summary was so that it could be provided to the accountants.  Thus, in my view it is appropriate to treat the contravention of reg.3.44(1) and reg.3.44(6) that occurred on each occasion a payroll summary was created and supplied to the accountants as two halves of one transaction or course of conduct.  The respective actions of creation and supply should be viewed together as a single transaction.  On that view, there are four “groups” of contraventions with which to deal.

23. There should be no further “grouping” of the contraventions because, as I have indicated, they each occurred in a way in which they were temporally disconnected from each other.

    ASSESSMENT OF PENALTY

1. Deterrence, both specific and general, is the “principal and indeed only” objective of pecuniary penalties under the Fair Work Act: Commonwealth of Australia v Director of the FWBII (2015) 258 CLR 482 at 506 [55]; CFMMEU v ABCC (2018) 264 FCR 155 at 167 [19]; Australian Building and Construction Commissioner v CFMMEU [2020] FCA 549 at [26]. Retribution, denunciation and rehabilitation have no part to play.

2. The penalties in this case must be set at a level such that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons.  It must have the necessary “sting or burden” to secure “the specific and general deterrent effects that are the raison d’être of its imposition”: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [116].

3. Subsections 539(2) and 546(2) of the Act, along with reg.4.01(A) of the Regulations, prescribe maximum penalties that may be imposed for contraventions of civil remedy provisions, by reference to penalty units within the meaning of s.4AA of the Crimes Act 1914 (Cth). During the period in which the contravening conduct occurred, the value of a penalty unit was:

   (a)$180.00 prior to 1 July, 2017; and

   (b)$210.00 on and after 1 July, 2017.

4. Almost all of the contraventions here took place in the period prior to 1 July, 2017.  Ms Zhang’s employment ran from 27 August, 2015 to 19 August, 2017, which means that the higher penalty unit only applied for approximately one month of the two-year period of employment.

5. Whilst generally speaking where multiple contraventions span a change in the value of a penalty unit, the later (higher) penalty unit value is usually applied but with the Court taking into account that the lower amount applied for part of the period.  I do not accept that this is the approach the Court should adopt in this matter however, such that for all contraventions, apart from those of regs. 3.44(1) and 3.44(6), the higher penalty unit of $210 applies.  Rather, I think I should adopt the lower penalty rate but give some consideration to the fact that for a small number of the contraventions (rolled up into the contraventions I have identified) the applicable penalty was the higher rate.  There is no immutable rule to the contrary.

6. Having regard to the contraventions as I have found them to be and my approach to the applicable rate of a penalty unit, the total maximum penalties that could be imposed in this case are $477,000 with respect to the first respondent and $95,400 with respect to each of the second and third respondents.

7. The contraventions occurred over a period of two years and resulted in an underpayment of $28,404.35 –a not insignificant sum. The underpayment resulted from the failure to comply with six distinct obligations under the Dry Cleaning Award and the payment of low flat rates of pay for all hours worked. At the relevant times, Ms Zhang was entitled to be paid $57,915.35 but instead was paid just over half of this amount. It was a significant underpayment over a prolonged period. To compound matters, the first respondent failed to keep the records required by the Fair Work Regulations. During the course of the investigation, the second respondent told a Fair Work Inspector that the first respondent did not keep records for a long time and usually texted its workers with relevant details. Every Saturday he made a roster and then threw it out each week.

8. Payslips were not provided to Ms Zhang and the failure to provide any pay slips throughout the entire period of her employment is significant.  I accept that the failure to provide payslips limits the ability of an employee to check their lawful entitlements as it did in this case with Ms Zhang.  It also limits and hinders the applicant’s ability to investigate complaints of non-compliance by employees. The respondents, however, submit that this is not to the point in the absence of any evidence that the respondent’s poor record-keeping did in fact limit the ability of Ms Zhang to check her lawful entitlements or for the applicant to in fact investigate any breaches of workplace laws.  The respondents’ submissions, however, pay insufficient attention to the deterrent aspect of the pecuniary penalty regime.  Whilst it is relevant to take into account the effect of the contraventions upon the ability of Ms Zhang to check her lawful entitlements or upon the ability of the applicant to properly investigate Ms Zhang’s complaints, it is necessary to be careful not to afford those matters too much weight because to do so runs the risk of diluting the message that the relevant provisions must be properly observed.

9. The applicant submits that the seriousness of the contraventions is compounded by what is submitted to be Ms Zhang’s vulnerability arising from her presence in Australia on temporary visas.  However, I do not accept that characterisation simply on the basis of Ms Zhang being present in Australia on a temporary visa.  Whilst that might be one of the matters that tends to suggest that a particular employee has a particular vulnerability, any assumed vulnerability may be ameliorated by other matters.  Here, Ms Zhang held a higher education sector visa (subclass 573) from 7 April, 2014 to 1 September, 2016; a bridging visa A (subclass 010) from 20 August, 2016 to 14 October, 2016 and a temporary graduate (subclass 485) visa from 14 October, 2016.  She was clearly an intelligent person capable of undertaking tertiary study.  She is a Chinese national and so it is unremarkable that the first respondent recruited Ms Zhang by advertising the role through a Chinese website or that Ms Zhang communicated in Chinese, mostly with the third respondent, via WeChat in relation to her work.

10. The applicant invites me to infer that Ms Zhang was less familiar than she might have otherwise been with Australian workplace laws and that her vulnerability arising from her visa status was exploited by the respondents.  I declined that invitation.

11. The applicant contends that I ought to conclude that the contraventions in this case were deliberate.  The respondents contend that I should not make such a finding and rather determine that the contraventions occurred through inadvertence or ignorance.

12. Just as the applicant submits that Ms Zhang’s Chinese background and communication in Chinese means that “it is open to the Court to infer that Ms Zhang was less familiar than she might have otherwise been with Australian workplace laws”, so too the respondents submit that for the same reasons, the Court should infer a similar level of unfamiliarity with workplace laws on their part.  The evidence from the second and third respondents demonstrates that they too, are from China and prior to conducting the present business they had worked in Australia and earnt between $8.00 and $12.00 per hour whilst students.  Each swears that they did not know that those pay rates were unlawful.  Before causing the first respondent to conduct the business relevant in these proceedings, neither the second nor third respondents had operated a business nor been responsible for the employment of others.  They purchased the business as a going concern from a third party and they continued to operate the business in the fashion in which it passed to them (or the first respondent).   They were not given any assistance from the franchisor in this respect.  There is no suggestion that they asked for any such assistance or sought it out and it was rejected.

13. I reject the respondents’ submissions.  The matters relied upon by the respondents do not lead inexorably to the conclusion that the respondents were under some disadvantage or vulnerability contended for by Ms Zhang.  The respondents submit that it is hardly surprising that two young people with no business experience would purchase a small business and keep it running in its already existing fashion.  However, in my view it is very surprising that they would do so without understanding the nature of the obligations cast upon them in the business.  To accept the respondents’ submissions at face value would mean that they were at best reckless in the conduct of the business.

14. In any event, the evidence demonstrates that the first respondent was sent information on a number of occasions regarding the minimum entitlements of its employees, including information regarding the Dry Cleaning Award, as follows:

    (a)an email from Mazars to the second respondent on 6 March, 2014 containing a link to the applicant’s website and in particular as it relates to the Dry Cleaning Award, to calculate minimum wages for employees;

    (b)an email from Mazars sent to the second and third respondents on 24 August, 2016 which included a link to the applicant’s website; and

    (c)documents, including the Dry Cleaning Award, sent from the Franchisor each year by mail to the first respondent’s registered office between 21 May, 2015 to 20 May, 2018.

15. The respondents swear that they did not read those emails and they were not challenged on that evidence.  But the evidence demonstrates that the second and third respondents do not deny receiving the emails.  The information was plainly available to them and no explanation is given as to why they did not read them.  The evidence is inconsistent with the second respondent’s evidence that he falsified the payroll summaries given to the accountants (at least the first email was sent well before the time that he did that).  As I have already discussed, the second respondent created payroll summaries in March, 2016, April, 2016, July, 2016 and October, 2016 that he knew were false and he provided those documents to the first respondent’s former accountant.  The evidence establishes that the respondents knew that Ms Zhang’s pay rates were insufficient to meet her minimum legal entitlements.  During the course of the investigation the second respondent told a Fair Work Inspector that he thought that $12 per hour was “too low” to be paying Ms Zhang.  He told the Fair Work Inspector that he had increased her pay rate from $12 per hour to $24 per hour on the first respondent’s records provided to its accountants (the payroll summaries) to ensure they were above the “legal rate”.  The inescapable conclusion is that he knew that the payroll summaries provided to the accountants were false and contained false rates and hours of work.

16. The respondents argue that the creation of the false documents and the provision of the false information to the accountants only occurred on four occasions in 2016 and that it did not occur when Ms Zhang began employment in 2015.  Nor was it repeated in 2017 in Ms Zhang’s final calendar year of employment.  They argue that those matters are inconsistent with the proposition that the respondents were deliberately trying to hide their contraventions.

17. However this does not explain the provision of the deliberately false information to the accountants especially when the accountants had themselves provided to the respondents information about the relevant award and where the respondents might go to obtain further information about it.  In any event, it is the wrong enquiry.  The question is not whether the respondents deliberately attempted to hide their contraventions, but whether the contraventions themselves were deliberate.  Nonetheless, the manufacture and production of the false records to Mazars demonstrates the active steps taken by the second respondent to conceal the fact that Ms Zhang was being paid rates which were inadequate to meet her minimum entitlements. Whilst the second respondent’s evidence suggests that he thought paying employees $12 per hour was “common practice in Australia” and was more or less a “mistake”, I accept the applicant’s submission that:

    (a)the creation and use of false records;

    (b)the second respondent’s comments to the effect that the rate was “too low”; and

    (c)that he had heard about a “legal rate of pay”

    more than suggests that he was aware that the rate paid was less than the legal requirement.

18. The second and third respondents each admit that they knew the first respondent paid rates to Ms Zhang which were insufficient to meet minimum entitlements.  The relevant records were falsified such that the rates were made to look as though $24 per hour was paid, more than double the rate Ms Zhang was actually paid.   If it were the case that the second respondent did not know that the rates were insufficient there would have been no necessity to falsify the payroll summaries.

19. The first respondent obtained Ms Zhang’s superannuation details and made a single payment of superannuation on 19 October, 2016 in the amount of $64.9875 (representing 9.5% of Ms Zhang’s wages, consistent with the requirement under the relevant legislation for that period).  No further superannuation payments were made.  I accept that the superannuation payment demonstrates that the respondents well knew that there was a requirement to make superannuation contributions on Ms Zhang’s behalf.  I accept the applicant’s submission that the failure to otherwise make and continue to make superannuation contributions for Ms Zhang was a deliberate course of action on the respondents’ part.  Notwithstanding the respondents’ submissions to the contrary, it follows that the respondent knew that there was an obligation to pay superannuation.  That they might not have known of the precise description of the source of that obligation (i.e., the precise provision in the award) is not to the point.

20. I take into account that:

    (a)the evidence relied upon by the applicant in relation to deliberateness primarily, if not entirely, involves the second respondent only, not the third respondent; and

    (b)the evidence of deliberateness relates to the underpayment contraventions. There is no suggestion that the respondents knew of their obligations in relation to employee records or payslips, for example.

21. As I have already indicated, the primary purpose of civil penalties is to promote the public interest in compliance with the workplace laws in place in this country the position of beginner in penalties is an exercise in putting a price on a contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the relevant legislation.  The penalties need to be imposed at a level that makes the contravening conduct clearly unprofitable and the prospect of future contraventions unlikely.  Penalties, however, must be proportionate to the contravening conduct.

22. The respondents have no record of prior contraventions. It seems that the first respondent continues to operate the business and the second and third respondents remain the current directors and involved in its day to day operations.  Of relevance to the question of specific deterrence is the fact that the respondents have agreed to injunctive relief in this matter.  I accept the respondents’ submissions that the injunctive relief goes directly to the issue of specific deterrence.  That is a matter that affects the fixing of the penalties in this case.

23. The respondents’ contraventions deprived Ms Zhang of the protection of the minimum safety net provided for in the Fair Work Act and in doing so undermined the minimum standards provided for by that Act and the Regulations which are designed to provide an even playing field for all employers with regard to employment costs. I accept that the record keeping and payslip contraventions by the respondents also have the capacity to undermine minimum standards as proper record keeping and payslips play a central role in the capacity of the applicant as a regulator to monitor and enforce compliance with minimum employment standards.

24. Whilst the first respondent operated a small business, it is well established that the size and financial circumstances of an employer does not exculpate breaches of workplace laws.  Small businesses have the same obligation as larger employers to meet minimum employment standards, and therefore penalties at a meaningful level should be imposed regardless of an employer’s size or financial position.  That is not to say, however, that the financial circumstances of a respondent are not a relevant consideration in determining an appropriate penalty and whether the size of that penalty is “meaningful”.  Clearly they are.  A penalty must not be crushing or oppressive.

25. The financial information before the Court regarding the respondents’ capacity to pay penalties is contained within correspondence from Mr Vincent Shi of ShineWing Australia Pty Ltd which records that:

    (a)the first respondent owes a debt of $31,504.62 to the Australian Taxation Office;

    (b)the second respondent owes a debt of $17,923.95 to the ATO; and

    (c)the third respondent owes a debt of $35,764.36 to the ATO.

26. As the applicant points out, notwithstanding evidence by the second respondent and the third respondent regarding ATO debts, loans for delivery vehicles and another high-interest loan, there is no evidence of the first respondent’s assets or any profit/loss reports from the four stores it continues to operate.   

27. Of considerable significance is that once the compliance issue was brought to the attention of the respondents, they immediately commenced rectification steps with respect to their business practices. This included obtaining professional HR advice, increasing pay rates and proper record keeping. I accept that these steps were undertaken almost immediately after the issue arose, before both the commencement of this application and before the completion of the applicant’s investigation.  The respondents have apologised to Ms Zhang and made restitution to her of the underpaid amount.

28. Aside from those matters, the first respondent has admitted to the contraventions, by way of a statement of agreed facts soon after these proceedings were commenced.  Those matters, I accept, indicate contrition and regret on the part of each of the respondents in this case.  These matters, and the cooperation extended by the respondents to the applicant in her investigation and these proceedings in particular, warrant a discount on the penalty that might otherwise have been imposed in the absence of those actions.  I think here, the cooperation exhibited by the respondents is a true indication by them of an acceptance of their wrongdoing and a credible expression of regret.  Their actions clearly indicate a willingness to facilitate the course of justice.

    FIXING OF PENALTY

29. Having regard to the above matters, in my view the penalties that ought to be imposed in this matter taking into account the seriousness of the contraventions and what I have found to be the deliberate nature of the underpayment contraventions should be as set out in annexure A to these reasons.  The penalties I have fixed take into account the various matter set out above and reflect an attempt to balance those matters.  The corrective action and contrition exhibited by the respondents’ figures prominently in my assessment.  The penalties expressed in the annexure incorporate a discount for the co-operation and “early plea” by the respondents although I have not specified that separately.

30. The aggregate penalty for the first respondent is $96,300.00.  Having regard to the totality of that penalty and the matters I have referred to above, I do not consider any further discount is appropriate.  I consider that a penalty in that amount is an appropriate response to the contravening conduct in this case.  I am not persuaded that a penalty in that sum will be crushing or oppressive.  I consider it to be commensurate with the seriousness of the conduct engaged in by the first respondent.

31. The aggregate penalty for each of the second and third respondents $18,860.  Having regard to the totality of that penalty and the matters I have referred to above, I do not consider any further discount is appropriate.  I consider that a penalty in that amount is an appropriate response to the contravening conduct in this case.  I am not persuaded that a penalty in that sum will be crushing or oppressive for either of them. 

1. The respondents request that any penalties imposed upon them be payable in monthly instalments over six months, in respect of the first respondent and three months, in respect of the second and third respondents.  I am not persuaded that such orders are not appropriate and I am prepared to give the respondents that time to pay the penalties imposed upon them.

2. I make orders accordingly.

I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Jarrett delivered on 28 May, 2021.

Associate:

Dated:       28 May 2021

ANNEXURE A – PENALTIES

Penalties for the First Respondent

Contravention	Description of contravention	Amount of underpayment	Penalty Units	Maximum Penalty	Penalty
section 45 of the FW Act by virtue of a contravention of clause 14.1 of the Modern Award	Failure to pay minimum rates	$15,106.30	60 units (x $180)	$54,000	$21,600
section 45 of the FW Act by virtue of a contravention of clause 10.5(c) of the Modern Award	Failure to pay casual loading	$11,372.62	60 units (x $180)	$54,000	$21,600
section 45 of the FW Act by virtue of a contravention of clause 22.1 of the Modern Award	Failure to pay overtime rates	$1,491.44	60 units (x $180)	$54,000	$5,400
section 45 of the FW Act by virtue of a contravention of clause 22.5(a)(i) of the Modern Award	Failure to pay Saturday penalty rates	$433.99	60 units (x $180)	$54,000	$5,400
section 45 of the FW Act by virtue of a contravention of clause 19.1 of the Modern Award	Failure to pay Ms Zhang weekly or fortnightly	N/A	60 units (x $180)	$54,000	$5,400
section 45 of the FW Act by virtue of a contravention of clause 20.2 of the Modern Award	Failure to pay superannuation contributions	N/A	60 units (x $180)	$54,000	$5,400
section 535(1) of the FW Act by virtue of a contravention of FW regulations 3.32, 3.34 and 3.40	Failure to make and keep records	N/A	30 units (x $180)	$27,000	$8,100
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – March, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$18,000	$4,500
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – April, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$18,000	$4,500
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – July, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$18,000	$4,500
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – October, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$18,000	$4,500
section 536(1) of the FW Act	failing to provide pay slips within 1 working day	N/A	30 units (x $180)	$27,000	$5,400
Total penalty			$450,000	$96,300

Penalties for the Second Respondent

Contravention	Description of contravention	Amount of underpayment	Penalty Units	Maximum Penalty	Penalty
section 45 of the FW Act by virtue of a contravention of clause 14.1 of the Modern Award	Failure to pay minimum rates	$15,106.30	60 units (x $180)	$10,800	$4,320
section 45 of the FW Act by virtue of a contravention of clause 10.5(c) of the Modern Award	Failure to pay casual loading	$11,372.62	60 units (x $180)	$10,800	$4,320
section 45 of the FW Act by virtue of a contravention of clause 22.1 of the Modern Award	Failure to pay overtime rates	$1,491.44	60 units (x $180)	$10,800	$1,000
section 45 of the FW Act by virtue of a contravention of clause 22.5(a)(i) of the Modern Award	Failure to pay Saturday penalty rates	$433.99	60 units (x $180)	$10,800	$1,000
section 45 of the FW Act by virtue of a contravention of clause 19.1 of the Modern Award	Failure to pay Ms Zhang weekly or fortnightly	N/A	60 units (x $180)	$10,800	$1,000
section 45 of the FW Act by virtue of a contravention of clause 20.2 of the Modern Award	Failure to pay superannuation contributions	N/A	60 units (x $180)	$10,800	$1,000
section 535(1) of the FW Act by virtue of a contravention of FW regulations 3.32, 3.34 and 3.40	Failure to make and keep records	N/A	30 units (x $180)	$5,400	$1,620
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – March, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$3,600	$900
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – April, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$3,600	$900
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – July, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$3,600	$900
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – October, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$3,600	$900
section 536(1) of the FW Act	failing to provide pay slips within 1 working day	N/A	30 units (x $180)	$5,400	$1,000
Total penalty			$90,000	$18,860

Penalties for the Third Respondent

Contravention	Description of contravention	Amount of underpayment	Penalty Units	Maximum Penalty	Penalty
section 45 of the FW Act by virtue of a contravention of clause 14.1 of the Modern Award	Failure to pay minimum rates	$15,106.30	60 units (x $180)	$10,800	$4,320
section 45 of the FW Act by virtue of a contravention of clause 10.5(c) of the Modern Award	Failure to pay casual loading	$11,372.62	60 units (x $180)	$10,800	$4,320
section 45 of the FW Act by virtue of a contravention of clause 22.1 of the Modern Award	Failure to pay overtime rates	$1,491.44	60 units (x $180)	$10,800	$1,000
section 45 of the FW Act by virtue of a contravention of clause 22.5(a)(i) of the Modern Award	Failure to pay Saturday penalty rates	$433.99	60 units (x $180)	$10,800	$1,000
section 45 of the FW Act by virtue of a contravention of clause 19.1 of the Modern Award	Failure to pay Ms Zhang weekly or fortnightly	N/A	60 units (x $180)	$10,800	$1,000
section 45 of the FW Act by virtue of a contravention of clause 20.2 of the Modern Award	Failure to pay superannuation contributions	N/A	60 units (x $180)	$10,800	$1,000
section 535(1) of the FW Act by virtue of a contravention of FW regulations 3.32, 3.34 and 3.40	Failure to make and keep records	N/A	30 units (x $180)	$5,400	$1,620
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – March, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$3,600	$900
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – April, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$3,600	$900
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – July, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$3,600	$900
regulation 3.44(1) of the FW Regulations and regulation 3.44(6) of the FW Regulations – October, 2016	Failure to ensure records required to be kept in relation to Ms Zhang were not false or misleading to its knowledge and making use of those records	N/A	20 units (x $180)	$3,600	$900
section 536(1) of the FW Act	failing to provide pay slips within 1 working day	N/A	30 units (x $180)	$5,400	$1,000
Total penalty			$90,000	$18,860