Fair Work Ombudsman v Ausinko Pty Ltd
[2018] FCCA 3524
•30 November 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v AUSINKO PTY LTD & ORS | [2018] FCCA 3524 |
| Catchwords: INDUSTRIAL LAW – Commonwealth – Compliance and enforcement – Civil remedies – Pecuniary penalty orders – Amount of penalty – Course of conduct. INDUSTRIAL LAW – Commonwealth – Compliance and enforcement – Civil remedies – Pecuniary penalty orders – Amount of penalty – Totality and proportionality. |
| Legislation: Crimes Act 1914 (Cth), s.4AA |
| Cases cited: Commonwealth of Australia v Director Fair Work Building Industry Inspectorate (2015) 254 CLR 482 Murrihy v Betezy.com.au Pty Ltd (No 2) (2013) 221 FCR 118 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | AUSINKO PTY LTD |
| Second Respondent: | RICHARD SANG KYUN KIM |
| Third Respondent: | CHAO LIU |
| File Number: | BRG 577 of 2016 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 14 December 2016 |
| Date of Last Submission: | 14 December 2016 |
| Delivered at: | Brisbane |
| Delivered on: | 30 November 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Seck |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| No appearance by the First Respondent |
| Counsel for the Second Respondent: | Mr Alexander |
| Solicitors for the Second Respondent: | Emmanuel Lawyers |
| Counsel for the Third Respondent: | Mr Curran |
| Solicitors for the Third Respondent: | DWF (Australia) |
ORDERS
Within seven days hereof, the applicant bring in orders consistent with these reasons.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 577 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| AUSINKO PTY LTD |
First Respondent
| RICHARD SANG KYUN KIM |
Second Respondent
| CHAO LIU |
Third Respondent
REASONS FOR JUDGMENT
These reasons relate to the penalties to be imposed upon the second and third respondents because of their involvement in contraventions of the Fair Work Act 2009 (Cth) committed by the first respondent. The first respondent is now in liquidation and the applicant does not seek to proceed against it. The applicant does, however, seek to proceed against the second and third respondents who were, for the purposes of s.550(1) of the Fair Work Act, involved in the contraventions committed by the first respondent.
The second and third respondents raised as a preliminary matter, the standing of the applicant to apply for an order to give effect to a safety net contractual entitlement arising under a contract, rather than arising under a modern award. The issue arises in this case because as set out later in these reasons, the applicant pursues an order to give effect to a safety net contractual entitlement in respect of one of the first respondent’s former employees.
However, I am satisfied that the applicant has standing to apply for the orders for which she applies in respect of the safety net contractual entitlement. Pursuant to s.541 of the Fair Work Act the applicant, as a Fair Work Inspector, has standing to apply to the Court for an order in relation to employers contravention of a safety net contractual entitlement, in circumstances where a Fair Work Inspector has also applied to the Court in respect of breaches of an award relating to that same employee. As the facts set out hereunder show, the applicant has applied to the Court in respect of contraventions of a certain award in respect of an employee, Ms Seryun Kang together with an application for an order in relation to her safety net contractual entitlement. However, the applicant acknowledges that the Court does not have jurisdiction to impose penalties in respect of a contravention of a safety net contractual entitlement. No penalty is sought in respect of that entitlement.
Background
The first respondent operated a car washing and café business in Southport and Labrador on the Gold Coast. The second respondent was appointed as a director of the first respondent in 1990 and was the managing director of the first respondent during the times relevant to these proceedings. The third respondent was employed by the first respondent around 2003 and during the relevant time he was the general manager.
The parties have agreed on the facts upon which this matter proceeds. A statement of agreed facts was filed in the proceedings on 12 October, 2016 and I proceed on the basis of the facts set out in that statement. During the course of the argument in this matter objection was taken to various aspects of the evidence relied upon by each party. I ruled on those objections at the commencement of the hearing. Nonetheless, some issues still arise about the way in which the respondents have approached the case having regard to the statement of agreed facts. I will deal with each of those issues as they arise.
In late June, 2014 the applicant commenced an audit of the first respondent’s operations following the receipt of a number of complaints lodged by former employees. As part of the audit the applicant assessed the first respondent’s compliance with the Fair Work Act and the Fair Work instruments that applied to it for the period 27 February, 2014 to 6 June, 2014. That is a period of three months and 10 days.
The audit identified that there were 58 employees who worked for the first respondent in that period: 46 of them worked as car washers on a casual basis and 12 of them worked in the café outlets connected to the car wash performing either customer service and serving roles or cooking roles. Amongst those employees, there was a mixture of casual, part-time and full-time employees.
In addition to those employees there was another employee called Seryeun Kang. She was employed on a full-time basis from at least 4 October, 2012 until 14 May, 2014. She was working in Australia pursuant to a Temporary Work (Skilled) (subclass 457) visa sponsored by the first respondent.
The position of Ms Kang is different to the other 58 employees who worked for the first respondent in the relevant period in this way. Ms Kang had a contract of employment with the first respondent whereby she was to be paid an annual salary of $49,330. She needed a written contract of employment for the purposes of her visa. During the period of her employment, the first respondent paid that amount into her bank account in accordance with her employment contract and her agreed annual salary. However, each week, Ms Kang was required to pay amounts in cash back to representatives of the first respondent so that she was, in effect, paid between $15 and $18.50 per hour for each hour she worked.
The purpose of civil penalty proceedings like these is primarily, if not wholly, protective in that they promote public interest in compliance with the industrial laws of this country: see Commonwealth of Australia v Director Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at 55.
The Contraventions
It is necessary to identify the separate contraventions said to have been committed by the first respondent in this case.
By reason of the statement of agreed facts filed on 12 October, 2016 the respondents have admitted that the first respondent contravened, and the second and third respondents were involved in the contraventions of, the following provisions of the Fair Work Act and Fair Work Regulations 2009:
a)in relation to Ms Kang:
i)the safety net contractual entitlement of Ms Kang, by failing to pay her entitlement to $949 (gross) per week pursuant to a written contract of employment she entered into with Ausinko;
ii)s.325(1) of the Fair Work Act by requiring Ms Kang to spend a part of an amount payable to her in relation to the performance of work, where that requirement was unreasonable;
iii)s.45 of the Fair Work Act by failing to pay the applicable minimum hourly wages in accordance with cl.A.2.5 of the Award;
iv)s.45 of the Fair Work Act by failing to pay the applicable Saturday rate of pay in accordance with cls.A.6.4 and 43.3 of the Award;
v)s.45 of the Fair Work Act by failing to pay the applicable Sunday rate of pay in accordance with cl.43.3 of the Award;
vi)s.45 of the Fair Work Act by failing to pay the applicable public holiday rate of pay in accordance with cl.A.6.4 of the Award;
vii)s.45 of the Fair Work Act by failing to pay overtime in accordance with cl.43.4 of the Award;
b)in relation to the 46 car washers employed by the first respondent:
i)s.45 of the Fair Work Act by failing to pay employees the applicable minimum hourly wages in accordance with cl.A.2.5 of the Award;
ii)s.45 of the Fair Work Act by failing to pay employees casual loading in accordance with cl.A.5.4 of the Award;
iii)s.45 of the Fair Work Act by failing to pay employees a Saturday loading in accordance with cl.A.5.4 of the Award;
iv)s.45 of the Fair Work Act by failing to pay employees a Sunday loading in accordance with cl.A.5.4 of the Award;
v)s.45 of the Fair Work Act by failing to pay employees a public holiday loading in accordance with cl.A.5.4 of the Award;
vi)s.45 of the Fair Work Act by failing to pay employees overtime loading in accordance with cl.41.1 of the Award;
c)in relation to the casual employees who worked in the cafe:
i)s.45 of the Fair Work Act by failing to pay employees the applicable minimum casual rate of pay in accordance with cls.A.2.5 and A.6.4 of the Award;
ii)s.45 of the Fair Work Act by failing to pay employees a weekend rate of pay in accordance with cl.A.7.3 of the Award;
iii)s.45 of the Fair Work Act by failing to pay employees a public holiday rate of pay in accordance with cls.A.6.4 and A.7.3 of the Award;
d)in relation to the permanent employees who worked in the cafe:
i)s.45 of the Fair Work Act by failing to pay the applicable minimum hourly wages in accordance with cl.A.2.5 of the Award;
ii)s.45 of the Fair Work Act by failing to pay the applicable Sunday rate of pay in accordance with cl.43.3 of the Award;
iii)s.45 of the Fair Work Act by failing to pay the applicable public holiday rate of pay in accordance with cl.A.6.4 of the Award;
iv)s.45 of the Fair Work Act by failing to pay overtime in accordance with cl.43.4 of the Award; and
e)in relation to the all employees (except Ms Kang):
i)s.536(1) of the Fair Work Act by failing to provide pay slips to employees within one working day of payment.
Section 557 (1) of the Fair Work Act provides that for the contraventions provided for in s.557(2) two or more contraventions of the same civil remedy provisions will be treated as a single contravention where that contravention was committed by the same person and arose from the same course of conduct. This provision is particularly relevant in this case given the number of employees involved and the number of contraventions of the applicable award.
Throughout the relevant period the Vehicle Manufacturing Repair Services And Retail Award 2010 applied to and covered the first respondent with respect to the employment of Ms Kang and the 58 other employees who are the subject of the contraventions in these proceedings.
Contraventions of the same term of an award may be treated as a single contravention pursuant to s.557(1) of the Fair Work Act if they arise out of a course of conduct. The parties agree that here there are multiple contraventions (some hundreds of them) of the same term of the Award in respect of multiple employees that can be treated as a single contravention.
The applicant submits that the contraventions committed in respect of Ms Kang should be dealt with differently to the contraventions committed in respect of all of the other employees and that they should not be grouped together. The applicant argues that in the case of Ms Kang, there was a deliberate strategy put in place to pay her a flat rate of pay that was below her award and contractual entitlements but at the same time maintaining the appearance of compliance with workplace and immigration laws. That is to say, those contraventions involved additional dishonesty and deceit on the part of the first respondent than did the payment of an insufficient flat rate of pay to all of the other employees. I accept that submission.
The applicant points out that in addition to the statutory course of conduct provisions it is always open to the Court to “group” separate contraventions where the contraventions contain common elements or can be said to overlap with each other. The purpose in taking that approach is to avoid penalising a contravener twice for the same or substantially the same conduct. Here, unless that approach is taken, there is a real risk of that occurring. That is because:
a)there are a large number of employees involved;
b)there are a number of different classifications involved within the group of employees;
c)there are different employment categories within the group of employees.
As a result, the minimum entitlements for each group of employees (determined by employment status or classification or both) come from different terms under the Award. By reason of the way in which this particular Award is structured the applicant points out that the failure to meet the same obligation in respect of all of the relevant employees might give rise to at least three separate and distinct contraventions of the Act. In those circumstances, the applicant submits that it is appropriate to further consolidate the underpayment contraventions in respect of all of the employees (save for Ms Kang) into the following categories:
a)failure to pay minimum wage;
b)failure to pay casual loading;
c)failure to pay Saturday rates of pay;
d)failure to pay Sunday rates of pay;
e)failure to pay public holiday rates of pay; and
f)failure to pay overtime.
On that basis, the applicant contends that there are 13 groups of contraventions for which the applicant seeks penalties against the second and third respondent. That is to say, six relating to underpayments of various entitlements to all employees, except Ms Kang, six relating to the contraventions arising out the conduct towards Ms Kang, and one in relation to all employees, except Ms Kang, arising out of the failure to provide pay slips.
The second and third respondents argue that there should be just one “group” in relation to the underpayments of all employees including Ms Kang because all of these multiple contraventions arose out of:
a)the one transaction;
b)or course of conduct; or
c)had the same common element, arising from the decision to pay the employees a flat hourly rate of pay
whether they were car wash employees or café employees or had different duties.
However, the second respondent accepts the applicant’s contention that the contract arrangement between the first respondent and Ms Kang was a course of conduct separate from that with all other employees. Nonetheless, the second respondent argues that the requirement cast upon Ms Kang to make weekly repayments of some of Ms Kang’s wages to the first respondent was merely the mechanism implemented by it to pay Ms Kang an hourly rate, so that properly viewed, the contravention was the same course of conduct or had the same common element as the underpayments of the other employees. Further, the multiple contraventions of the Award were also due to the effective payment of a flat hourly rate to Ms Kang, and therefore should be treated as a single transaction.
I accept the submission of the applicant and reject those of the second respondent. The course of conduct represented by the payment of a flat hourly rate to all of the employees except Ms Kang is not the same as the course of conduct engaged in with Ms Kang. Whilst it may have produced the same result, the path was very different because it involved deceptive means and far more elaborate conduct on the part of the second and third respondents to achieve the ends it was designed to achieve.
All of the contraventions that are the subject of this proceeding except for the first respondent’s failure to meet Ms Kang’s safety net contractual entitlement, are breaches of a civil remedy provision for the purposes of the Fair Work Act. The maximum penalties for the contraventions are prescribed in s.539(2) of the Fair Work Act. Annexure A to these reasons sets out the maximum penalties that might be imposed in this case in respect of each of the respondents.
A penalty unit has the same meaning as s.4AA of the Crimes Act 1914 (Cth). For the material period from 4 October, 2012 (being the start of the first week in which Ms Kang began to make weekly repayments to the first respondent) to 28 December, 2012 a penalty unit was $110. For the material periods from 28 December, 2012 to 14 May, 2014 or 6 June, 2014 a penalty unit was $170. The second respondent argues that if the penalty is imposed by reference to the time the course of conduct commenced that was in contravention of the Act, then a penalty unit of $110 should apply to the contraventions in respect of Ms Kang.
The authorities show a divergence of approach depending upon when the change in the value of penalty unit occurred relative to the contravening conduct.
The second respondent directs my attention to Murrihy v Betezy.com.au Pty Ltd (No 2) (2013) 221 FCR 118 where the Court held that a lower penalty unit should be applied in circumstances where the whole of the contravening conduct occurred prior to the increase in the penalty unit.
Where multiple contraventions that occurred over a period of time have been treated as a single contravention, the applicant submits it would not give sufficient weight to the whole of the circumstances of the contravention to treat a course of conduct as occurring at a single point in time. In these circumstances, the applicant submits that the Court should have regard to the proportion of the time period before and after the change in penalty unit value in determining which value to apply. This is applicable in respect of the contraventions in respect of Ms Kang.
In Fair Work Ombudsman v Amritsaria Four Pty Ltd & Anor [2016] FCCA 968 at [52] the bulk of the contravening conduct occurred after an increase to penalty unit value. The higher penalty unit value was applied to the entire course of conduct, with regard being had to the fact that a lower penalty applied for the smaller portion of time.
In my view, having regard to the fact that the vast bulk of the contravening conduct in this case occurred after the increase in the value of a penalty unit on 28 December, 2012 the approach adopted in Amritsaria Four Pty Ltd is the preferable approach. Thus, in my view, I ought to adopt a penalty unit value of $170 for all of the contraventions with regard being had to the fact that a lower penalty applied for a small portion of time.
Those maximum penalties total $127,500 in respect of each of the second and third respondents as set out in Annexure A to these reasons.
The contraventions in this case do not represent isolated incidents or sporadic episodes of non-compliance with the requirements of the Fair Work Act. Rather, they are widespread and involve a large number of employees. The conduct which led to the contraventions:
a)spanned the period between 27 February, 2014 and 6 June, 2014 and involved some 58 employees of the first respondent; and
b)an arrangement with Ms Kang that spanned the period between 4 October, 2012 and 14 May, 2014 in relation to Ms Kang.
All of the first respondent’s employees employed during the relevant period save for those relatively few identified as “full-time staff” were affected by these contraventions.
The second respondent, as the sole director of the first respondent, knew about the contract of employment with Ms Kang and the weekly repayment arrangement, knew that the car wash employees and café employees were paid between approximately $12 and $17 per hour and not paid additional loadings or penalty rates, knew that Ausinko did not issue pay slips to those employees and knew that the Award applied to the car washing operations and the whole of the business.
By his written submissions, repeated in oral submission, the second respondent argues that in fact, the first respondent paid all of the relevant employees except Ms Kang the correct hourly rate. He submits that were it not for the applicant’s “incorrect adjustments to those figures made by the applicant to derive “Hourly Rates Range” in Schedule 1 of the SOAF, there would be no contravention of the minimum rates of pay for the 33 employees who were classified as RS&R Level 1”.
Paragraph 76 of the Statement of Agreed Facts filed on 12 October, 2016 provides:
Actual rates paid to the Employees
76. During the Audit Period, Ausinko paid the Audit Employees the hourly rates of pay identified in Schedule 1, Column F (collectively, Actual Hourly Rates).
Section 191 of the Evidence Act 1995 (Cth) provides:
191 Agreements as to facts
…
(2) In a proceeding:
(a) evidence is not required to prove the existence of an agreed fact; and
(b) evidence may not be adduced to contradict or qualify an agreed fact;
unless the court gives leave.
The submissions made by the second respondent seek to qualify the agreed facts the subject of paragraph 76 of the Statement of Agreed Facts. To do so, the second respondent requires leave of the Court. No leave was sought or obtained. I reject the second respondent’s submission on that basis, along with the other submissions made by the second respondent to the effect that the applicant has miscalculated the hourly rates paid to the employees by reason of the deduction of tax. The second respondent is fixed by the admissions in paragraphs 76 to 128 of the Statement of Agreed Facts and cannot seek to adduce evidence to contradict or qualify those admissions without leave. As I have already said, no application for leave to do that has been made.
While Ms Kang was working for the first respondent she received $15 an hour for the period of 4 October, 2012 to 26 February, 2014 and $18.50 per hour between 27 February, 2014 and 18 May, 2014. She was entitled to more than that under her employment contract. She was paid the amounts to which she was entitled under her employment contract each week by the first respondent paying to her the sum of $789 per week into a nominated bank account and paying $160 per week by way of tax to the Australian Taxation Office.
However, during each week that she worked for the first respondent she was required to pay back to the first respondent a portion of what she had received. In October, 2012 she was verbally instructed to make those repayments in cash. She did that and from 6 March, 2013 to 14 May, 2014 she gave the weekly repayments to the third respondent. There is no consistency in the amount of the repayments and they varied from week to week. It is an agreed fact that the weekly repayments made by Ms Kang were implemented by the first respondent as a mechanism whereby she was in fact paid a flat hourly rate (in the amounts to which I have already referred) rather than her entitlements under her contract.
The applicant submits that the respondents’ conduct in respect of Ms Kang was exploitative and took advantage of her vulnerability. Ms Kang’s evidence is that prior to October, 2012 she had been employed by the first respondent on a full-time basis. She was receiving $13.50 an hour for the hours that she had worked and she was paid in cash. However in October, 2012 she was told by an employee of the first respondent that she would start receiving her wages into a bank account but at the same time she would have to pay back some money to the first respondent to “save her visa” and avoid the company “getting in trouble”. At least that is what she swears in her affidavit relied upon by the applicant.
The respondents’ case, sworn to by the second respondent, is that Ms Kang was the one who instigated the repayment arrangement, as the second respondent had initially refused her request for full-time employment and sponsorship for a subclass 457 visa.
Neither witness was cross-examined. There is no basis to simply accept the evidence of Ms Kang especially given the second respondent’s uncontested submissions that Ms Kang:
a)had a business education and business qualifications from an Australian educational institution; and
b)demonstrated by her conduct that she was capable of pursuing her rights, by lodging a complaint with the Fair Work Ombudsman on 17 November, 2014 and lodging a complaint about her dismissal.
I am not satisfied that the respondents exploited Ms Kang or that she was especially vulnerable because she held a 457 visa or because English was not her first language. Nonetheless, the process adopted was for the benefit of the first respondent because it reduced the first respondent’s liability for remuneration to Ms Kang. To implement that process:
a)each Friday, Ms Kang was paid a weekly net wage of $789 into her bank account; an amount consistent with the annual income provided for in her contract;
b)each week, usually on a Friday, Saturday or Monday, Ms Kang would also collect two separate pay slips from an employee of the first respondent including, at times, Mr Liu;
c)the first pay slip showed a gross payment of $949 and a net payment of $789, with no details of hours worked;
d)the second pay slip showed the total hours worked by Ms Kang, an hourly rate of $15 ($18.50 from February 2014) and a total gross payment equal to her hourly rate multiplied by the number of hours she worked;
e)Ms Kang was required to pay to the first respondent the difference between the net payment shown on the false pay slip ($789) and the net payment shown on her actual pay slip;
f)after receiving the pay slips, Ms Kang withdrew cash from an ATM and, before she received her next pay, made a cash payment to an employee of the first respondent. In the period from March, 2013 to May, 2014, Ms Kang paid these amounts directly to Mr Liu; and
g)on each occasion that Ms Kang made a cash payment, she signed a spreadsheet detailing the amount she paid back in cash to the first respondent.
For the period of her employment from October, 2012 to May, 2014, Ms Kang repaid a total of $21,685 to the first respondent.
I accept the applicant’s submission that this conduct and strategy is serious. It demonstrates intentional deception designed to conceal from those who might have an entitlement or obligation to enquire of, the true position. That it was intentional is not in doubt because the respondents admit that they were aware that minimum wages were required to be paid to Ms Kang. Moreover, it was the second respondent who put in place a contract with Ms Kang that provided for her to be paid the amounts required under both immigration and workplace laws. More than that, the second respondent authorised the production of records to the applicant which demonstrated that Ms Kang was being paid her contractual salary. That is to say, not only was the scheme implemented with a view to intentionally deceive the authorities, that intention was put into practice.
Notwithstanding that I am not satisfied that Ms Kang was a vulnerable worker by reason of her status as a 457 visa holder or that because English was not her first language, there can be no doubt on the material before me that Ms Kang was imposed upon by those working for the first respondent, including the second and third respondents to make repayments to the first respondent of part of her wages on the basis that she might lose her job and her visa if she did not.
The applicant alleges that the evidence demonstrates a sufficient foundation for drawing an inference that Ms Kang’s employment was terminated within months of her deciding to stop making the repayments demanded of her by the first respondent. The second respondent says that Ms Kang’s employment was ceased because she was redundant, but the applicant points to the following matters from which it says the relevant inference ought to be drawn (footnotes omitted):
41. Ms Kang perceived that she had no choice but to make the Weekly Repayments, otherwise she might lose her job and her visa. The Applicant submits this perception was not without foundation. When Ms Kang determined to cease making the payments, she was faced with significant pressure from Mr Kim, Mr Liu and other Ausinko employees to continue to make the repayments. Ultimately, Ms Kang’s employment was terminated within months of ceasing the repayments. Although Mr Kim has deposed that Ms Kang was terminated by reason of redundancy, the Applicant submits that it is open for the Court to infer that Ms Kang’s termination was at least related to her decision to cease making the Weekly Repayments, in circumstances where:
(a) within a week of discussing her decision not to continue to make the Weekly Repayments, Ms Kang was given a formal warning letter for minor complaints in respect of her dress;
(b) shortly thereafter, Ms Kang was then required to go on eight weeks of paid leave in circumstances where she had never received paid leave previously;
(c) Ms Kang’s employment was terminated while she was on leave, for a reason unrelated to her warning letter; and
(d) following her termination, Ms Kang saw an advertisement for the position of a fulltime chef at the cafe of the Business and was advised by an employee of Ausinko that she had been replaced with a new employee.
However, I decline to draw the inference that the applicant invites me to draw because, essentially, the applicant’s submission is that not only was the Fair Work Act contravened by the conduct to which I have referred in the ways alleged in these proceedings, the first respondent through the second and third respondents also took adverse action against Ms Kang in contravention of the Fair Work Act. It seems to me to be inappropriate to bring to account in the present process matters which are more properly the subject of a separate and distinct allegation of a contravention of s.340(1) of the Fair Work Act. If such an application was made, it would give the respondents the opportunity to properly meet it.
Moreover, Ms Kang has taken unfair dismissal proceedings in respect of termination of her employment and that matter has been resolved between her and the respondents. I give this matter concerning her termination no weight.
The position is a little different, I think, in relation to the other employees concerned. Some were new to Australia and some were on working holiday visas. It is of considerable concern that the second respondent used the fact that a number of the first respondent’s employees had limited understanding about Australian laws and regulations as justification for the low rates of pay that were being paid. That is consistent with his admission recorded by the Fair Work Inspector Mackie that the second and third respondents had determined the rates of pay somewhere between “the rates of pay from the Fair Work Ombudsman and something from Asian culture”. Requests from his employees to be paid the amounts to which they were entitled caused the third respondent to become upset because he expected loyalty from employees within “the Asian culture”.
As I have indicated above, the period during which the applicant conducted an audit was a little over three months. During that time the underpayment of the 58 employees concerned ranged across the non-payment of minimum wages, casual loading, Saturday penalty rates, Sunday penalty rates, public holiday penalty rates and overtime. The underpayments totalled $117,775 to 58 employees. The underpayments across the individual employees ranged from $82 to a maximum of $6,329.
The second and third respondents knew that the first respondent had obligations under the Award to pay penalty rates and other entitlements yet nonetheless they countenanced, it seems, the first respondent paying an amount to its employees which was insufficient to meet its Award obligations.
In addition to the underpayment contraventions, none of the employees (save Ms Kang) were provided with payslips during the relevant period. The significance of that matter has been commented on before in this Court: Fair Work Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634 at [34] and Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012] FMCA 258 at [67]. Even more concerning is that when the applicant requested copies of “payroll advices” or other records of wages paid to the first respondent’s employees, the first respondent produced documents that appeared to be payslips but which the second respondent has now admitted, were created for the purpose of producing to the applicant. Those actions were plainly intended to deceive the applicant and thwart its investigative process.
When the contraventions in this case were committed, the first respondent had operated its car wash and café business for at least 12 years and for all of that time both of the second and third respondents had been involved in the business. It was well established. At the same time, the second respondent was a director of five other companies at least three of which were trading entities. One of them has extensive business interests via a franchise operation. The first respondent’s business has ceased since the Fair Work Ombudsman’s audit.
The extent of the loss in this case is significant. Ms Kang was underpaid $29,528 over approximately 18 months. That was two thirds of what she was entitled to be paid under her contract and the Award. The balance of the underpayment, $117,775 was divided between the other employees. Some of them were underpaid relatively minor amounts but at least 26 of them were underpaid between $2,000 and $6,300. As the applicant points out, the evidence establishes that in respect of the employees who were underpaid relatively minor amounts, that came about because of the short periods of their employment rather than because they were paid close to their Award entitlements.
There can be no doubt that the conduct in this case was deliberate, intentional and calculated to deceive. The evidence garnered by the Fair Work Inspector Mackie during the course of her interviews with both respondents indicated that whilst they were aware of the employee’s Award entitlements, they deliberately chose not to pay them that because they did not think that they were “worth” that amount. The applicant had earlier engaged in an education process with the first respondent and the second and third respondents in May, 2012 and had provided information about various matters including the tools available on the applicant’s website for calculating rates of pay and the like. The second respondent had received a report from the applicant following the applicant’s visit in May, 2012 which set out the first respondent’s non-compliance with the Award entitlements with respect to its employees. That report, however, was apparently disregarded by both gentlemen.
I accept that a deliberate strategy to underpay employees weighs in favour of a higher penalty: Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128.
The first respondent and the second and third respondents have not been found to have contravened the Fair Work Act before. I take that into account. I also take into account the fact that when the Fair Work Ombudsman visited the first respondent’s premises in May, 2012 the contravening conduct in respect of Ms Kang had been on foot for some time. Thus, despite knowing that what they were doing was a contravention of the Act, the second and third respondents on behalf of the first respondent continued contravening the provisions of the Fair Work Act and subsequently acted in a way so as to conceal that conduct from the applicant.
Both the second and third respondents have sworn to their regret at their involvement in the contraventions. It is difficult, however, to accept the sincerity of those dispositions given that the first time there has been any expression of remorse or regret is in the context of these proceedings. There is no evidence that either the second or third respondents have taken any steps to apologise to Ms Kang or any of the other employees affected by their conduct.
Moreover, the applicant argues that the inference is fairly open that the second respondent has restructured his business affairs and caused the first respondent to be placed into liquidation in order to shield the first respondent and his other companies from the consequences of these proceedings. The second respondent argues that I should reject that inference. Again, there was no cross-examination of the second respondent about these matters and he has denied them. In the circumstances, I cannot be satisfied that it is appropriate to draw the inferences the applicant suggests.
Between November, 2015 and May, 2016 the first respondent made rectification payments to its employees amounting to $82,976.58. A further $64,327.39 remains outstanding of which, $27,068.93 is owing to Ms Kang. There have been no further payments made since May, 2016 although there is a repayment plan now in place. It is difficult to see how those matters mitigate the penalty to be imposed in this case because, as Judge Cameron observed in Fair Work Ombudsman v Australia Sales Pty Ltd [2016] FCCA 2804 at [82]: belatedly doing what the law requires be done at an earlier time amounts to no more than late performance of a duty.
The respondents have participated in these proceedings and admitted the contraventions at an early stage. They participated and assisted in the applicant’s investigation through the provision of documents and records albeit in some cases false ones, they participated in interviews and entered into a payment plan with the applicant to facilitate at least the partial rectification of the underpayments to some of the employees. The applicant contends that the respondents’ cooperation should attract a discount on the maximum penalties of 20%. The respondents argue that it should attract a discount of 25%. In my view, a discount of 20% is appropriate given that during the course of the investigation the respondents’ cooperation was not as full and frank as it could have been by reason of the provision of false documents to the Fair Work Inspector.
The second respondent now seeks to put material before the Court which contradicts the Statement of Agreed Facts in some respects. That tends to tell against the sincerity of his regret expressed in his affidavit material. Also, militating against that is the fact established by the evidence that at the same time the applicant was investigating the first respondent and providing information to second and third respondents about their obligations, those two gentlemen were having conversations with Ms Kang in which they encouraged her to continue making the weekly repayments which constitutes some of the contraventions in this case.
This is yet another case where the object of the Fair Work Act to ensure “a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the national employment standards, modern award and national minimum wage orders” for all employees has been effectively subverted. I accept the applicant’s submission that the conduct in this case – the unlawful repayment of wages and the inadequate hourly rates paid in the circumstances described above – is an affront to the minimum employment standards that all employees should expect to receive in this country.
Deterrence is a central feature of the imposition of pecuniary penalties under the Fair Work Act. The penalty must be fixed at a sufficient level that it promotes the public interest in compliance and attempts to put a price on the contravention that is sufficiently higher to deter repetition by both the contravener and others who might be tempted to contravene the legislation. A civil penalty should never be seen as an acceptable cost of doing business.
Here it is necessary for the penalties in this case to mark the Court’s disapproval of the first respondent’s conduct and the involvement of the second and third respondents in that conduct. Both the second and third respondents continue to be involved in business through their corporate interests, although the third respondent says that he is now unemployed. Nonetheless, the potential remains for both of these gentlemen to re-engage in business activities that will require the employment of staff. Given the deliberate way in which they went about disregarding the first respondent’s employees’ rights as the evidence demonstrates in this case, it seems to me that there is a real risk that that type of conduct might be repeated. The penalties in this case should act as a significant deterrent to that happening.
General deterrence too, is a significant factor in this case. A clear message that the mistreatment of young, unskilled workers is not something that the community tolerates.
At the time of these contraventions, the first respondent employed over 75 employees. It was not a small concern.
The applicant in discharging her duty to the Court has set out some proposed penalty ranges for each of the second and third respondents. There is a difference between the two. The penalties in some cases for the third respondent are less than those for the second. The applicant submits that that is appropriate because it reflects:
a)that the third respondent ultimately reported to the second respondent as part of his responsibility for the overall management of the first respondent’s payroll and employee records and for making decisions on behalf of the first respondent regarding setting and adjusting rates of pay in respect of employees;
b)the heightened need for specific deterrence in the case of the second respondent; and
c)the lack of contrition exhibited by the second respondent.
I accept the applicant’s and the third respondent’s submission that the third respondent’s culpability in some respects is less than that of the second respondent for the reasons given by the applicant.
Penalties
The penalties argued for by the applicant represent a range of 46% to 57% of the maximum penalty for the second respondent after a discount of 20% has been applied to take into account the second respondent’s cooperation in these proceedings. In respect of the third respondent they represent a 36% to 46% of the discount of the maximum.
The conduct in this case, like so many others that come before this Court, is egregious. It amounts in the case of the 58 employees, to wage theft from those employees. In respect of Ms Kang it is express wage theft. She was expected to repay part of her wages to the first respondent at the direction of the second and third respondents. That was in circumstances where they had no legal authority to insist that be done.
The amount of the underpayment is significant. Whilst on an individual basis to particular employees it may not have been a large sum of money for which that employee was deprived, but that is not to the point. The evidence in this case demonstrates a systematic approach to the regulation of the wage expenses for this business so as to return to the first respondent a significant benefit. It is a benefit which it has not yet or now never likely to fully disgorge to the employees.
Nonetheless, the respondents have not been dealt with by way of contravention of the Fair Work Act before. In my view, a penalty in respect of each contravention group of 40% for the second respondent and 30% for the third respondent is appropriate. In respect of those groups where there are multiple contraventions of different provisions, I have imposed a slightly higher penalty in respect of one of those contraventions and no penalty in respect of the rest in that group. For those groups, the penalty for the second respondent I fix at 50 % pf the maximum and 40% of the maximum for the third respondent. Accordingly, I impose upon the second and third respondents, the penalties set out in Annexure A hereto.
The total penalty for the second respondent is $42,432. The total penalty for the third respondent is $26,520. In my view those penalties are an appropriate response to the conduct which led to the contraventions, which was, given the circumstances of this case, serious.
On the evidence, particularly that of the second respondent, they are not oppressive or crushing but they are sufficient to mark the Court’s disapproval of the respondents’ conduct and serve as a warning to others that similar conduct can have serious consequences and ought not be repeated.
The applicant seeks a number of other orders, none of which are opposed and which are, in the circumstances, appropriate. Given the concessions made by the applicant in its submissions in reply about the orders that should be made, it is appropriate to direct the applicant to bring in minutes that reflect the parties’ agreement about the orders to be made and these reasons.
I certify that the preceding seventy-seven (77) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 30 November, 2018.
Date: 30 November, 2018
Annexure A
Applicant’s recommended grouping and penalty ranges
| Contravention | Proposed Grouping | Maximum Penalty | Reduced Maximum: 20% discount | Amount | |
| Kim | Liu | ||||
| Section 325 of the Fair Work Act – unreasonable requirement to spend an amount | 1. Unreasonable requirement to spend | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act – contravention of clause A.2.5 of the Award: minimum rates (Ms Kang) | 2. Failure to pay minimum rates: Ms Kang | $10,200 | $8,160 | $3,264 | $2040 |
| Section 45 of the Fair Work Act – contravention of clause A.2.5 of the Award: minimum rates (Car Wash Employees) | 3. Failure to pay minimum rates: Audit Employees | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act – contravention of clauses A.2.5 and A.6.4 of the Award: minimum casual rates (casual Café Employees) | Nil | Nil | |||
| Section 45 of the Fair Work Act − contravention of clause A.2.5 of the Award: minimum rates (permanent Café Employees) | Nil | Nil | |||
| Section 45 of the Fair Work Act − contravention of clause A.5.4 of the Award: casual loading (Car Wash employees) | 4. Failure to pay casual loading | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act − contravention of clauses A.2.5 and A.6.4 of the Award: Saturday rates (Ms Kang) | 5. Failure to pay Saturday rates: Ms Kang | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act –contravention of clause A.5.4 of the Award: Saturday loading (Car wash Employees) | 6. Failure to pay Saturday rates: Audit Employees | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act − contravention of clause A.7.3 of the Award: weekend rates (casual café Employees) | $10,200 | $8,160 | Nil | Nil | |
| Section 45 of the Fair Work Act − contravention of clause A.5.4 of the Award: Sunday loading (Car Wash Employees) | 7. Failure to pay Sunday rates: Audit Employees | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act $3,264 − contravention of clause 43.3. of the Award: Sunday rates (permanent Café Employees) | $10,200 | $8,160 | Nil | Nil | |
| Section 45 of the Fair Work Act − contravention of clause 43.3 of the Award: Sunday rates (Ms Kang) | 8. Failure to pay Sunday rates: Ms Kang | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act − contravention of clause A.6.4 of the Award: public holiday rates (Ms Kang) | 9. Failure to pay public holiday rates: Ms Kang | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act − contravention of clause A.5.4 of the Award: public holiday rates (Car Wash Employees) | 10. Failure to pay public holiday rates: Audit Employees | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act − contravention of clauses A.6.4 and A.7.3 of the Award: public holiday rates (casual Café Employees) | $10,200 | $8,160 | Nil | Nil | |
| Section 45 of the Fair Work Act − contravention of clause A.6.4 of the Award: public holiday rates (permanent Café Employees) | $10,200 | $8,160 | Nil | Nil | |
| Section 45 of the Fair Work Act − contravention of clause 43.4 of the Award: overtimes rates (Ms Kang) | 11 Failure to pay overtime rates: Ms Kang | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act − contravention of clause 43.4 of the Award: overtime loading (Car Wash Employees) | 12. Failure to pay overtime rates: Audit Employees | $10,200 | $8,160 | $3,264 | $2,040 |
| Section 45 of the Fair Work Act − $2,448 contravention of clause 43.4 of the Award: overtimes rates (permanent Café Employees) | $10,200 | $8,160 | Nil | Nil | |
| Section 536 of the Fair Work Act – failure to issue payslips (Audit Employees) | 13. Failure to issue payslips: Audit Employees | $5,100 | $4,080 | $3,264 | $2,040 |
| TOTAL | $127,500 | $102,000 | $42,432 | $26,520 | |
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