Fair Work Ombudsman v Austop Natural Therapy and Supplies Pty Ltd
[2020] FCCA 2920
•30 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v AUSTOP NATURAL THERAPY AND SUPPLIES PTY LTD & ORS | [2020] FCCA 2920 |
| Catchwords: INDUSTRIAL LAW – Admitted contraventions of Fair Work Act 2009 – underpayment by small business of foreign national employee – assessment of penalty – non-exhaustive list of factors relevant to the imposition of a penalty – underpayments nearly entirely paid by respondents – misleading and deceptive conduct of accountant – general and specific deterrence – totality principle. |
| Legislation: Fair Work Act 2009 (Cth), ss.44, 45, 87, 90(1), 90(2), 535(1), 536(1), 550(1), 550(2)(c), 557(1), 712. |
| Cases cited: Fair Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634 Fair Work Ombudsman v New South Wales Motel Management Services Pty Ltd & Ors [2019] FCCA 2638 Kelly v Fitzpatrick [2007] FCA 1080 at [14] Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 Other materials: |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | AUSTOP NATURAL THERAPY AND SUPPLIES PTY LTD |
| Second Respondent: | YUSEN YIN |
| Third Respondent: | WENHUA LIU |
| Fourth Respondent: | KEITH GOLDING & ASSOCIATES PTY LTD |
| File Number: | MLG 1013 of 2019 |
| Judgment of: | Judge McNab |
| Hearing date: | 27 February 2020 |
| Date of Last Submission: | 27 February 2020 |
| Delivered at: | Melbourne |
| Delivered on: | 30 October 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr McKenna |
| Solicitors for the Applicant: | The Office of the Fair Work Ombudsman |
| Second Respondent appearing in person |
| Third Respondent appearing in person |
| Counsel for the Fourth Respondent: | Mr Ternovski |
| Solicitors for the Fourth Respondent: | HWL Ebsworth Lawyers |
ORDERS
As to the First Respondent, the Court declares by consent that the First Respondent contravened the following civil remedy provisions:
(a)section 45 of the Fair Work Act 2009 (Cth) (“the Fair Work Act”) by failing to pay Ms Zhongyu Zhou (Ms Zhou) minimum rates of pay for all ordinary hours of work as required by clause 17 of the Hair and Beauty Industry Award 2010 (“the Award”);
(b)section 45 of the Fair Work Act by failing to pay Ms Zhou overtime rates for all overtime hours worked as required by clause 31.2(a) of the Award;
(c)section 45 of the Fair Work Act by failing to pay Ms Zhou Saturday penalty rates for all relevant hours worked as required by clause 31.2(b) of the Award;
(d)section 45 of the Fair Work Act by failing to pay Ms Zhou Sunday penalty rates for all relevant hours worked as required by clause 31.2(c) of the Award;
(e)section 45 of the Fair Work Act by failing to pay Ms Zhou public holiday penalty rates for all relevant hours worked as required by clause 35.3 of the Award;
(f)section 44 of the Fair Work Act by failing to pay Ms Zhou for annual leave taken between 9 and 13 April 2017, as required by section 90(1) of the Fair Work Act;
(g)section 44 of the Fair Work Act by failing to pay Ms Zhou annual leave on termination of her employment, as required by section 90(2) of the Fair Work Act;
(h)section 45 of the Fair Work Act by failing to pay Ms Zhou annual leave loading, as required by clause 33.3 of the Award;
(i)section 45 of the Fair Work Act by failing to make superannuation contributions for the benefit of Ms Zhou, so as to avoid the superannuation guarantee charge, as required by clause 24.2 of the Award;
(j)section 45 of the Fair Work Act by failing to ensure Ms Zhou did not work more than six consecutive days in a row, as required by clause 30.4 of the Award;
(k)section 535(1) of the Fair Work Act by failing to make and keep records prescribed by the Fair Work Regulations 2009 (Cth) (“the Fair Work Regulations”) for a period of 7 years, in respect of payments made to Ms Zhou, as required by regulations 3.33, 3.34 and 3.36 of the Fair Work Regulations 2009 (Cth) (“the Fair Work Regulations”);
(l)section 536(1) of the Fair Work Act by failing to provide payslips to Ms Zhou within one working day of making payment;
(m)regulation 3.44(1) of the Fair Work Regulations by keeping records that it knew were false or misleading in respect of:
(i)the rate of remuneration paid to Ms Zhou;
(ii)the gross and net amounts paid to Ms Zhou;
(iii)the overtime hours paid to Ms Zhou; and
(iv)the annual leave taken by Ms Zhou; and
(n)regulation 3.44(6) of the Fair Work Regulations by making use of an entry in an employee record it was required to make and keep, while knowing the entry was false or misleading in respect of the Payslips.
As to the Second, Third and Fourth Respondent, the Court declares by consent that:
(a)the Second Respondent was involved in each of the First Respondent's contraventions identified in order 1(a) to 1(l) above pursuant to section 550 of the Fair Work Act;
(b)the Third Respondent was involved in each of the First Respondent's contraventions identified in order 1(a) to 1(l) above pursuant to section 550 of the Fair Work Act; and
(c)the Fourth Respondent was involved in each of the First Respondent's contraventions identified in order 1(m) and 1(n) above pursuant to section 550 of the Fair Work Act.
The Court orders that:
(a)the First Respondent pay a total penalty of $8500 pursuant to subsection 546(1) of the Fair Work Act for its contraventions as set out in order 1 above;
(b)the Second Respondent pay a total penalty of $2800 pursuant to subsection 546(1) of the Fair Work Act for his involvement in the contraventions as set out in order 1(a) to 1(l) above;
(c)the Third Respondent pay a total penalty of $2800 pursuant to subsection 546(1) of the Fair Work Act for her involvement in the contraventions as set out in order 1(a) to 1(l) above;
(d)the Fourth Respondent pay a total penalty of $5000 pursuant to subsection 546(1) of the Fair Work Act for its involvement in the contraventions as set out in order 1(m) and 1(n) above;
(e)pursuant to subsection 546(3)(a) of the Fair Work Act, the First Respondent, Second Respondent, Third Respondent and Fourth Respondent, pay their respective penalty amounts as set out above to the Consolidated Revenue Fund of the Commonwealth within 60 days of the Court's order in this proceeding;
(f)the First Respondent pay compensation to the Consolidated Revenue Fund of the Commonwealth of Australia, in the sum of $47.68, pursuant to section 545(2)(b) of the Fair Work Act, within 14 days of this order, unless already paid; and
(g)the Applicant distribute the amount ordered to be paid pursuant to paragraph 3(f) above to Ms Zhou.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1013 of 2019
| FAIR WORK OMBUDSMAN |
Applicant
And
| AUSTOP NATURAL THERAPY AND SUPPLIES PTY LTD |
First Respondent
| YUSEN YIN |
Second Respondent
| WENHUA LIU |
Third Respondent
| KEITH GOLDING & ASSOCIATES PTY LTD |
Fourth Respondent
REASONS FOR JUDGMENT
Introduction
This matter involves admitted contraventions of the Hair and Beauty Industry Award 2010 (“the Award”), the Fair Work Act 2009 (Cth) (“the Fair Work Act”) and the Fair Work Regulations 2009 (Cth) (“the Fair Work Regulations”) by the four Respondents.
The Applicant (“the Fair Work Ombudsman”) seeks declarations of contravention by consent and pecuniary penalties.
The issue to be determined is the quantum of the penalty as to be imposed on each of the Respondents.
Background
In this matter the Court has the benefit of two agreed statement of facts filed on 25 September 2019 and 10 October 2019.
The Second Respondent (“Mr Yin”) is the sole director of the First Respondent (“the company” or “Austop”), and the Third Respondent (“Ms Liu”) is the company secretary, with each holding 50% of the shares in the company. The Fourth Respondent is a company that provided accounting services to Austop (Keith Golding & Associates Pty Ltd” “TG Audit”) and of which Mr Keith Golding (“Mr Golding”) was Director during the period of the contraventions.
From 24 December 2016 to 23 July 2017 (“the employment period”) the First Respondent employed Ms Zhou, a Chinese national and holder of a subclass 462 Work and Holiday visa, as a full-time employee in one of its massage parlours. Ms Zhou predominantly provided relaxation and deep tissue massages to the First Respondent’s customers, but she also performed additional duties including cleaning, opening and closing the store, operating the cash register and answering phone calls.
During the employment period, the First Respondent paid Ms Zhou on a commission basis in cash as follows:
a)40% of the price of a massage for all massages performed by her from the commencement of her employment until 26 March 2017;
b)42% of the price of a massage for all massages performed by her from 27 March 2017 until 21 May 2017; and
c)45% of the price of a massage for all massages performed by her from 22 May 2017 until the cessation of her employment.
During the employment period, Ms Zhou:
a)worked between 5 and 7 days per week (usually working 6 days a week);
b)when rostered on to work, usually worked the trading hours of the First Respondent’s Ballarat massage parlour, being:
i)Monday, Tuesday, Wednesday and Thursday from 9.00am to 5.30pm;
ii)Friday from 9.00am to 6.00pm;
iii)Saturday from 9.00am to 5.00pm; and
iv)Sunday from 10.00am to 4.00pm;
c)would usually take a 60 minute unpaid break each day during the Employment Period.
On 18 August 2017, Fair Work Inspector John Richards (“the Fair Work Inspector”) issued to the First Respondent a Notice to Produce various documents by 7 September 2017 in relation to Ms Zhou’s employment, pursuant to s712 of the Fair Work Act (“the August Notice to Produce”). The documents to be produced included, amongst other things, records or documents that detailed or related to Ms Zhou’s rate of pay, salary, payslips and records of the hours that Ms Zhou worked for the First Respondent.
On 18 August 2017, the First Respondent authorised the Fourth Respondent to:
a)assist with updating the First Respondent’s record keeping to satisfy the requirements of the Applicant; and
b)reply to the August Notice to Produce with all updated records as required.
On 28 August 2017, Mr Golding, in his role at the Fourth Respondent, was informed by the First Respondent that:
a)Ms Zhou was paid in cash;
b)Ms Zhou was paid a commission calculated as a percentage of the cost of the massage that she performed; and
c)the First Respondent did not provide Ms Zhou with pay slips at all.
In response, the Fourth Respondent, under the authorisation given by the First Respondent:
a)created payslips purporting to relate to Ms Zhou during the Employment Period on behalf of the First Respondent (“the Payslips”); and
b)kept various documents purporting to relate to Ms Zhou during the Employment Period, including the Payslips on behalf of the First Respondent.
It is agreed that the Payslips did not accurately relate to or record the payment of wages to Ms Zhou during the employment period: see [17] of the agreed statement of facts filed on 25 September 2019.
On 7 September 2017, Mr Golding wrote to the Applicant on behalf of the First Respondent in reference to the August Notice to Produce and:
a)addressed each category of document required to be produced pursuant to the August Notice to Produce;
b)produced various documents in purported response to particular categories identified in the August Notice to Produce, including the Payslips;
c)produced the above documents including the Payslips without qualification, in purported satisfaction of its obligations under the August Notification to Produce.
The Fair Work Inspector provides further background to this matter in his affidavit affirmed on 7 November 2019, stating at [17] and [19] that:
“17. After I received the documents provided in response to the August NTP, I reviewed them and identified that certain records I understood to exist that detailed hours worked by Ms Zhou had not been provided. On 18 September 2017, I determined that Austop had not complied with the August NTP and sent its legal representatives five emails attaching:
(a) a letter titled 'Failure to comply with a Notice to Produce Records or Documents' (Failure to Comply Letter);
(b) folders of documents and records submitted by Ms Zhou to FWO, including daily worksheets recording the price and duration of massages performed by Ms Zhou (Daily Worksheets), rosters and text messages; and
(c) a photograph of a daily timesheet photographed during the site visit[…]
…
19. On 22 September 2017, Austop's legal representatives sent me three emails attaching:
(a) correspondence from Austop's legal representatives dated 22 September 2017;
(b) correspondence from KG&A dated 21 September 2017;
(c) rosters;
(d) Daily Worksheets;
(e) the Award Calculation Spreadsheet; and
(f) scanned copies of the Payslips.”
The Fair Work Inspector further states at [21] that on 1 March 2018, he attended the offices of the Fourth Respondent and handed to Mr Golding a further Notice to Produce (“the March Notice to Produce”). The Fair Work Inspector states at [22] of his affidavit that:
“On 13 March 2018, KG&A sent me a letter in response to the March NTP which enclosed, amongst other records:
(a) emails sent from KG&A to Ms Liu dated 23 July 2015 and 29 July 2015, which refer to the requirements of the Award and the classification of Austop's employees under the Award;
(b) email sent from KG&A to Ms Liu dated 16 August 2017, which provides a link to the Award and attached a document titled 'hair-and-beauty-industry-award-ma000005-pay-guide.docx;
(c) memorandum dated 18 August 2017 from Mr Yin, in his capacity as Director of Austop, to KG&A, which refers to the August NTP and authorises KG&A to "assist with the update of my record keeping to satisfy their requirements" and to "reply to the Fair Work letter on my behalf with all updated records as required';
(d) email chain between Sophie Zhu and Ms Li, dated from 18 August 2017 to 24 August 2017, which refer to, amongst other things, 'Fair work" and the Award; and
(e) handwritten file notes with KG&A letter heads, which record conversations and/or meetings between 'Maggie' or 'ML' and 'TG', in relation to Austop, dated 16 August 2017 and 28 August 2017.”
On the basis of this background, I will now turn to the contraventions of the Respondents as set out in the two agreed statement of facts filed on 25 September 2019 and 10 October 2019.
Underpayment Contraventions by the First Respondent
The Payslips created and provided by the Fourth Respondent to the Applicant, at the behest of the First Respondent in relation to the August Notice to Produce, generally show that Ms Zhou was paid for her:
a)Ordinary hours worked at the hourly rates of:
i)$19.91 during the period to 2 July 2017; and
ii)$20.56 during the period from 3 July 2017.
b)Saturday hours worked at the hourly rate of:
i)$26.48 to 25 June 2017; and
ii)$27.34 from 26 June 2017.
c)Sunday hours worked at the hourly rates of:
i)39.82 to 25 June 2017; and
ii)$41.12 from 26 June 2017.
d)Overtime hours worked at the hourly rate of $19.91 to 2 July 2017; and
e)Hours worked on public holiday at the hourly rate of $49.78 to 2 July 2017.
Despite the contents of the Payslips, Ms Zhou was entitled to be paid in accordance with the Hair and Beauty Industry Award 2010 (“the Award”). As such, as stated at [18] of the agreed statement of facts filed on 10 October 2019, Ms Zhou was required to be paid by the First Respondent the following minimum hourly rates during the employment period:
Entitlement
Award Clause(s)
To 2 July 2017
From 3 July 2017
Minimum hourly rate of pay
17
$19.91
$20.56
Overtime (first 3 hours)
31.2(a)
$29.87
Overtime (after 3 hours)
31.2(a)
39.82
Saturday loading
31.2(b)
$6.57
$6.78
Sunday Loading
31.2(c)
$19.91
$20.56
Public Holiday Rates
35.3
$49.78
The First Respondent was also required by:
a)s90(1) of the Fair Work Act to pay Ms Zhou her base rate of pay for her ordinary hours of work during a period of annual leave;
b)clause 33.3 of the Award to pay Ms Zhou, with respect of annual leave whichever is greater, but not both of:
i)17.5% leave loading; or
ii)the relevant weekend rates; and
c)s90(2) of the Fair Work Act to pay Ms Zhou for all accrued, untaken annual leave at termination of employment (with Ms Zhou entitled to accrue four weeks of paid annual leave per year of service in accordance with s87 of the Fair Work Act).
The Court notes that as part of the records sent to the Applicant in response to the March Notice to Produce, Mr Golding included a copy of three emails which refer to the requirements of the Award and the classification of the First Respondent’s employees under the Award: see Fair Work Inspector Richards’ Affidavit at page 143 – 145. An email from Ms Sophie Zhu, an employee of the Fourth Respondent, to ‘Maggie Liu’ (taken to be the Third Respondent) dated 23 July 2015, states the following:
“Hi Maggie,
Refer to wages recording & minimum wages, we advise the followings for your attention –
1. Your business is under hair & beauty award 2010 (see the link The attached is Minimum weeks wages for level 1 as per sec 10, 17, 18, 28 & 31, which you will note that the rate is varied based on type of employment, age, hours of work & level of skills etc. We kindly advise if any specific arrangement occurs you may need to consider to check up the award or contact Fairwork 131394 accordingly.
3. Please take care of type of employment see sec 10 in the award & each employee requires to complete a Contract/agreement of employment as attached.
4. In addition, please note that there has been recent compliance activity from Fair Work as to the correct details to be shown on Employee Pay Slips. We attach an example of how to keep your pay slip recording required by Fair Work Act. The Pay Slip Pad “Time and Wages Recording” can be purchased from Officeworks and other Stationers. Penalties apply for non-compliance.
5. The Fairwork Act is to be completed by each employee when employment commences.
[…]
7. In terms of “commission based payment”, Fairwork advise that if the employee work say 8 hours per day & see only say 2 customers, they must be paid the award wage rate for that day of work.
[…]
Regards,
Sophie Zhu CPA
Keith Golding & Associates Pty ltd
Certified Practising Accountants”
A second email titled ‘MINIMUM WAGES’ from Ms Zhu to the Third Respondent dated 29 July 2015, contains the following passage:
“We have reviewed previous our advice with further contact with fairwork & they advise the level 2 should apply to employees who are doing the masseur work, level 1 only applies to the reception.”
Ms Zhu sent a third email to the Third Respondent on 16 August 2017, attaching a document titled “hair-and-beauty-industry-award-ma000005-pay-guide.docx” and stating:
“Hello Maggie,
1. Hair and Beauty Industry Award 2010 Please find minimum wages as attachment
Regards,
Sophie Zhu CPA
Keith Golding & Associates Pty ltd
Certified Practising Accountants”
During the employment period, Ms Zhou performed work which attracted the relevant minimum rate or accrued entitlement under the Award and in respect of that work was entitled to be paid, actually paid and underpaid the following amounts:
Entitlement
Hours
Entitled
Paid
Underpaid
Minimum hourly rates of pay to 2 July 2017
1019.29
$20,294.06
$16,316.37
$4,537.43
Minimum hourly rates of pay from 3 July 2017
107.66
$2,213.49
$1,653.75
Overtime (first 3 hours)
17.34
$517.95
$270.76
$661.52
Overtime (after 3 hours)
16.75
$666.99
$252.66
Saturday loading to 2 July 2017
131.58
$864.48
$21.81
$988.98
Saturday loading from 3 July 2017
21.58
$146.31
$0.00
Sunday Loading to 2 July 2017
125.08
$2,490.34
$0.00
$2,831.22
Sunday loading from 3 July 2017
16.58
$340.88
$0.00
Public holiday rates
71.5
$3,559.27
$1,149.45
$2,409
Annual leave taken from 9 to 13 April 2017 inclusive
38
$756.58
$0.00
$756.58
Annual leave loading
38
$132.24
$0.00
$132.24
Annual leave on termination
49.83
$1,203.89
$0.00
$1,203.89
Total
$13,521.68
On the basis of the information above, the First Respondent underpaid Ms Zhou a gross amount of $13,521.68 during the employment period.
On or on about 7 September 2017, the First Respondent remitted to Australian Taxation Office payments of:
a)$11,808.00 in relation to tax withheld from Ms Zhou in the period from 24 December 2016 to 30 June 2017; and
b)$1,666.00 purportedly in relation to tax withheld from Ms Zhou in the period from 1 July 2017 to 23 July 2017.
As at 10 October 2019, when the second agreed statement of facts was filed with the Court, there was $47.68 outstanding in relation to the underpayment of Ms Zhou’s entitlements.
By reason of the matters above, the First Respondent contravened:
a)s45 of the Fair Work Act by failing to pay Ms Zhou minimum rates of pay for all ordinary hours of work as required by clause 17 of the Award;
b)s45 of the Fair Work Act by failing to pay Ms Zhou overtime rates for all overtime hours worked as required by clause 31.2(a) of the Award;
c)s45 of the Fair Work Act by failing to pay Ms Zhou Saturday penalty rates for all relevant hours worked as required by clause 31.2(b) of the Award;
d)s45 of the Fair Work Act by failing to pay Ms Zhou Sunday penalty rates for all relevant hours worked as required by clause 31.2(c) of the Award;
e)s45 of the Fair Work Act by failing to pay Ms Zhou public holiday penalty rates for all relevant hours worked as required by clause 35.3 of the Award;
f)s44 of the Fair Work Act by failing to pay Ms Zhou for annual leave taken between 9 and 13 April 2017, as required by s90(1) of the Fair Work Act;
g)s44 of the Fair Work Act by failing to pay Ms Zhou annual leave on termination of her employment, as required by s90(2) of the Fair Work Act; and
h)s45 of the Fair Work Act by failing to pay Ms Zhou annual leave loading, as required by clause 33.3 of the Award.
Record Production and Record Keeping Contraventions of the First Respondent and Fourth Respondent
As stated above, with the authorisation of the First Respondent, the Fourth Respondent produced the Payslips, purporting to relate to Ms Zhou’s wages during the employment period. On 7 September 2017, Mr Golding wrote to the Applicant on behalf of the First Respondent, and, referring to the August Notice to Produce, attached various documents in purported response and satisfaction of the categories of documents required to be produced in relation to Ms Zhou’s employment, including the Payslips. These documents had been also provided to Ms Zhou.
The Payslips provided to the Applicant and Ms Zhou by Mr Golding were false or misleading because Ms Zhou was in fact:
a)was paid in cash and on a commission basis;
b)was not paid as set out at [18] above; and
c)did not regularly take paid annual leave during the employment period.
By reason of the background set out above in relation to the production of the Payslips by Mr Golding to be used and kept as records of Ms Zhou’s wages during the employment period, the Fourth Respondent knew the Payslips were false or misleading.
Further, on the basis of the authorisation given to the Fourth Respondent to produce the Payslips on behalf of the First Respondent and that the Payslips were kept as part of the First Respondent’s record keeping:
a)the First Respondent contravened r3.44(1) of the Fair Work Regulations by keeping records it knew to be false or misleading in respect of:
i)the rate of remuneration paid to Ms Zhou;
ii)the gross and net amounts paid to Ms Zhou;
iii)the overtime hours paid to Ms Zhou; and
iv)the annual leave taken by Ms Zhou.
b)the Payslips were made and kept by the First Respondent for Subdivision 1 of division 3 of Part 3-6 of the Fair Work Regulations and the Payslips were false or misleading.
c)the First Respondent, through the Fourth Respondent, made use of the Payslips knowing them to be false or misleading.
d)the First Respondent contravened r3.44(6) of the Fair Work Regulations with respect to the Payslips by providing the Payslips to the Applicant in response to August Notice to Produce.
Failing to make and keep employment records and failing to issue Payslips
During the employment period, pursuant to s535(1) of the Fair Work Act and r3.33, r3.34 and r3.36 of the Fair Work Regulations, the First Respondent was required to make and keep for seven years, records relating to Ms Zhou's employment: see paragraph [43] of the agreed statement of facts. As such, on the basis of the background set out above, the First Respondent contravened s535(1) of the Fair Work Act, as The First Respondent did not make and/or keep records in relation to any of the matters during the Employment Period.
Further, during the employment period, the First Respondent was required to give to Ms Zhou a pay slip within one working day of paying an amount to Ms Zhou in relation to the performance of work: see s536(1) of the Fair Work Act. As such, on the basis of the background set out above, the First Respondent contravened s536 of the Fair Work Act, as the First Respondent did not provided Ms Zhou with payslips during the employment period.
Other Award Contraventions by the First Respondent
Superannuation Contributions
Pursuant to clause 24.2 of the Award, the First Respondent was required to make superannuation contributions to a superannuation fund for the benefit of Ms Zhou during the employment period so as to avoid the superannuation guarantee charge.
Such contributions were to be made:
a)at the rate of 9.5% of Ms Zhou's ordinary time earnings where Ms Zhou earned more than $450 in a calendar month;
b)on or before 28 April 2017 for the period between 1 January to 31 March 2017; and
c)on or before 28 July 2017 for the period between 1 April and 30 June 2017.
During the employment period, Ms Zhou's ordinary time earnings exceeded $450 in each calendar month between January and June 2017. As such, the First Respondent was required to make superannuation contributions for Ms Zhou's benefit:
a)on or before 28 April 2017 for the period between 1 January to 31 March 2017; and
b)on or before 28 July 2017 for the period between 1 April and 30 June 2017.
As such, the First Respondent contravened s45 of the Fair Work Act, as the First Respondent did not make any superannuation contributions for Ms Zhou's benefit until on or on about 6 September 2017.
Working Six or More Consecutive Days
Pursuant to clause 30.4 of the Award, Ms Zhou was prohibited from working ordinary hours and any reasonable overtime over more than six consecutive days during the Employment Period.
During the employment period, Ms Zhou worked for the First Respondent consecutively for:
a)11 days between 26 December 2016 and 5 January 2017;
b)22 days between 19 January 2017 and 9 February 2017;
c)8 days between 14 February 2017 and 21 February 2017;
d)13 days between 23 February 2017 and 7 March 2017;
e)8 days between 21 March 2017 and 28 March 2017;
f)8 days between 21 April 2017 and 28 April 2017; and
g)7 days between 11 May 2017 and 17 May 2017.
As such, the First Respondent contravened s45 of the Fair Work Act, as Ms Zhou worked ordinary hours and any reasonable overtime over more than six consecutive days.
The Second and Third Respondent’s Involvement in the Contraventions.
In the agreed statement of facts, it is put that the Second and Third Respondent’s had identical knowledge and involvement in the contraventions in relation to Ms Zhou’s employment. As the Court has the benefit of an agree statement of facts, Second and Third Respondent’s involvement and knowledge of the Contraventions is as follows:
“58. At all material times during the Employment Period, the Second Respondent knew:
(a) that the Award applied to Ms Zhou's employment;
(b) the hours worked by Ms Zhou;
(c) the nature of the work performed by Ms Zhou;
(d) the amounts paid to Ms Zhou by the First Respondent;
(e) that Ms Zhou:
(i) took a period of leave between 9 and 13 April 2017;
(ii) was not paid for her a period of leave between 9 and 13 April 2017; and
(iii) was not paid for her accrued, unused annual leave at termination;
(f that the First Respondent:
(i) did not make superannuation contributions for Ms Zhou's benefit prior to 6 September 2017;
(ii) failed to issue pay slips to Ms Zhou; and
(iii) failed to make and keep employment records with respect to Ms Zhou.”
It is also put in the agreed facts that the Second and Third Respondent:
a)had a practical connection and/or were active participants in the First Respondents contraventions of the following sections of the Fair Work Act:
i)s44 and s45 (in relation to annual leave loading, superannuation and by reason of Ms Zhou working ordinary hours and reasonable overtime over more than six consecutive days);
ii)s535(1) (making and keeping of records in relation to Ms Zhou’s employment);
iii)s536(1) (providing payslips to Ms Zhou)
b)for the purposes of s550(2)(c) of the Fair Work Act, were knowingly concerned in, and a party to, each of the First Respondent's contraventions of s45 of the Fair Work Act, in the same matters as described above.
c)by reason of s550(1) of the Fair Work Act, are taken to have committed the contraventions as described above.
Principles on the determination of penalty
At [15] of its submissions filed 19 December 2019, the Applicant outlines the authorities relevant to determining appropriate penalties:
“(a) the first step is to identify the separate contraventions involved. Each contravention of each separate obligation found in the Fair Work Act, the Award and the Fair Work Regulations is a separate contravention of a civil remedy provision for the purposes of section 539(2) of the Fair Work Act [citing Gibbs v The Mayor, Councillors and Citizens of City of Altona [1992] FCA 374; (1992) 37 FCR 216 at [24]];
(b) second, section 557(1) of the Fair Work Act makes provision for treating multiple contraventions of the same civil remedy provision that result from a single course of conduct, as a single contravention;
(c) third, to the extent that two or more contraventions have common elements, this should be taken into account in considering what an appropriate penalty is in all the circumstances for each contravention;
(d) fourth, the Court should consider an appropriate penalty to impose in respect of each contravention, (whether a single contravention, a course of conduct or group of contraventions), having regard to all of the circumstances of the case; and
(e) finally, having fixed an appropriate penalty for each contravention (or, if relevant, each group of contraventions), the Court should consider the overall penalties arrived at and apply the totality principle to "ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary'' [citing NSH North at [36]; Kelly v Fitzpatrick [2007] FCA 1080 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary Smith [2008] FCAFC 8; (2008) ALR 35; (2008) 165 FCR 560 at [23], [71] and [102]].
Applicant’s submissions as to Penalty
Declarations
The Applicant submits that there is utility in the Court using its wide discretionary power to make the agreed declarations because they accurately identify the Respondents’ contravening conduct.
Penalty
At [13] of its submissions filed 19 December 2019, the Applicant seeks pecuniary penalties in the aggregate range of:
a)$106,000 − $132,000 for 14 contraventions by the First Respondent;
b)$16,200 − $22,600 for 12 contraventions by the Second Respondent;
c)$16,200 − $22,600 for 12 contraventions by the Third Respondent; and
d)$18,480 – 21,840 for 2 contraventions by the Fourth Respondent.
At [14] of the same submissions, the Applicant submits that these penalties reflect the balancing of the following considerations:
a)the seriousness of the conduct;
b)the need for general deterrence to ensure compliance with minimum standards in the hair and beauty industry;
c)the importance of specific deterrence, given that the first respondent remains registered and the fourth respondent continues to trade;
d)the size, sophistication and level of knowledge of the respondents;
e)the fact that the respondents have not previously been found to have contravened workplace laws; and
f)the Respondents’ cooperation during this proceeding, including the First Respondent’s corrective action in rectifying underpayments.
At [18] – [19] of the same submissions, the Applicant states that, excluding the contravention of section 90 of the Fair Work Act (failing to pay annual leave taken) and clause 33.3 of the Award (failing to pay annual leave loading), a separate penalty should be imposed for each of the other contraventions.
With regards to the totality principle, the Applicant, at [85] of their submission,s cites the decision of Burchardt FM (as he then was) in Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58 and says that similar considerations should apply with the respect to the First, Second and Third Respondents in this case. At [57] of that decision, His Honour said:
“[…] Respondents cannot hope to have their conduct in effect exonerated by the Court merely because they are impecunious. Parliament has set significant penalties for the sort of contraventions that the Respondents engaged in and I do not think it is appropriate for the totality principle to operate simply to ensure that penalties are imposed in suitably insignificant amounts to meet the Respondents’ capacity to pay.”
The Applicant also submits at [15] – [16] of their submissions filed 20 February 2020, that the penalties imposed on the Fourth Respondent should not be reduced to the extent of the overlap of the two contraventions regarding false and misleading records because:
a)The Fourth Respondent bears the evidentiary burden of establishing that the contraventions arose from the same course of conduct, which they have not established; and
b)creating and keeping false and misleading records is a separate decision from the action of using and producing the records to the regulator.
First, Second and Third Respondents’ Submissions
With respect to their financial status, the First, Second and Third Respondents, in submissions filed on 16 January 2020, state that, amongst other things:
a)The First Respondent is a very small business under financial pressure particularly since December 2017 due predominately to higher competition in a small town. In the financial year from July 2017 to 31 June 2018, the First Respondent was only able to generate a profit of $5970.08 and for the financial year from July 2018 to 31 June 2019, incurred a loss of $25,038.17.
b)Ms Liu has stopped working since giving birth to their baby girl last year;
c)the company is not operating the massage shop at the moment as they sold the business on or about 1 February 2019 for $30,000.00 with the sale proceeds being used to pay off a car loan of approximately $23,066.62 as of 20 August 2019;
d)the Second and Third Respondents share all of the family’s assets and liabilities equally; and
e)the Third Respondent stopped working to in order to take care of their young baby and between 1 July 2017 and 30 June 2018,
f)the Second Respondent’s taxable income was $34,660.
Regarding deterrence, the Respondents assert that the Court should take into consideration their expression of deep remorse, all reasonable steps taken by them to resolve this case’s issues, cooperation with enforcement authorities, and their increased understanding of Australian employment law: see [29] – [42], [61] – [77] of the Respondent’s submissions filed on 16 January 2020.
The Respondents submit that the First Respondent undertook corrective action promptly, repaying most of the underpayment to Ms Zhou prior to the proceedings, with only $47.68 remaining outstanding as of 10 October 2019, which they say they will pay as soon as reasonably possible: see [76] of submissions filed on 16 January 2020.
The Second and Third Respondent also note that:
a)They come from non-English speaking backgrounds and are parents to two children, including a young baby;
b)they have already incurred $31,000 worth of costs for accounting and legal fees with respect to this matter;
c)this has had a huge health impact on the third respondent, especially during her pregnancy;
d)the second and third respondents have fully cooperated with the Applicant to the best of their ability;
e)the offered an unconditional apology for the underpayments; and
f)they have never been involved in workplace law contraventions in the past.
Fourth Respondent’s submissions
The Fourth Respondent admits to making two contraventions, namely:
a)knowingly keeping false or misleading records in breach of r3.44(1) of the Fair Work Regulations; and
b)making use of false or misleading records in breach of r3.44(6) of the Fair Work Regulations.
In relation to these contraventions the Fourth Respondent submits at [10(f)] – [10(g)] that:
“f. For the first contravention, the Court should impose a penalty at the lower end of the range sought by the FWO; and
g. for the second contravention, the Court should impose a penalty that is substantially lower than the range sought by the FWO.”
The need for specific deterrence
The Fourth Respondent submits at [1] that “there is little need for specific deterrence”. This submission is made on the basis that:
“Keith Golding & Associates Pty Ltd has since changed its company name to TG Audit Services Pty Ltd and ceased providing accounting services. The latter is apparent from the documents exhibited to the Nguyen Affidavit, which show that:
a. Mr Trevor Golding, the sole director and company secretary of TG Audit, cancelled his CPA Australia Public Practice Certificate on 26 November 2019 on the basis that he is “no longer providing public accounting services”.
b. Mr Golding transferred clients to another registered tax agent.”
The Fourth Respondent submits that, due to these changes in their business, it can be inferred that “TG Audit is very unlikely to engage in similar conduct in the future”, particularly as:
a)they have ceased to provide accounting services; and
b)Mr Golding is no longer involved with the business.
Substantial Overlap between Contraventions
The Fourth Respondent submits that there is substantial overlap between the elements of the two contraventions admitted by it, requiring the penalty for the second contravention to be moderated to the extent of that overlap of the contraventions “the additional culpability that the second contravention adds to the first contravention is limited”.
The Fourth Respondent cites FWO v Auspac Hospitality Management Pty Ltd [2019] FCCA 3489, where at [15] the Court stated that:
“to the extent to which any two contraventions contain common elements it would be wrong to punish that person twice for the commission of the elements that are common”.
The Fourth Respondent submits that the Applicant’s submissions on penalty filed on 19 December 2019 acknowledge this principle. The Applicant’s submissions relevantly state:
“15. The authorities establish that the appropriate penalties are to be determined in the follow manner:
…
(c)…to the extent that two or more contraventions have common elements, this should be taken into account in considering what an appropriate penalty is in all the circumstances for each contravention (citing Fair Work Ombudsman v NSH North Pty Ltd [2017] FCA 1301 (“NSH North”) at [36]).
…
17. It is further open to the Court to consider whether any of the contraventions overlap with each other or have common elements to the extent that, if treated separately, it would result in the Respondents being penalised twice for substantial similar conduct. This is sometimes referred to as the application of the common law course of conduct principle.” (citing Australian Ophthalmic Suppliers Pty Ltd v McAlary Smith (2008) 165 FCR 560 at [46] who cite Pearce v The Queen [1998] HCA 57 at [4]).
The Fourth Respondent submits at [6] that it admitted to accessorial liability for the two contraventions:
“While the contraventions are distinct, they have overlapping elements, namely that:
(a) the Payslips contained false or misleading information; and
(b) Austop knew that the Payslips contained false or misleading information.”
Further, to be liable as an accessory to either contravention, TG Audit must have had knowledge of the facts above. TG Audit’s knowledge is therefore another common element o its accessorial liability for both contraventions.
Hence, once an appropriate penalty is imposed for the first of these contraventions the penalty that would otherwise be appropriate for the second contravention ought to be reduced to the extent of the overlap above.”
Penalties
The Fourth Respondent submits that the Court should impose a penalty at the lower end of the range sought by the Applicant for the first contravention and a penalty substantially lower than the range sought by the Applicant for the second contravention because, amongst other things, TG Audit admitted the relevant contraventions at an early stage and that TG Audit had “operated an accounting practice for nearly 35 years with an unblemished record”: see Fourth Respondent’s submissions at [10].
Approach to be taken in relation to fixing penalty
A non-exhaustive list of factors relevant to the imposition of a penalty was usefully summarised by Mowbray FM (as he then was) in
Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar[2007] FMCA 7 at [26] to [59]. Those factors include:-
a)the nature and extent of the conduct which led to the breaches;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the breaches;
d)whether there had been similar previous conduct by the Respondents;
e)whether the breaches were properly distinct or arose out of the one course of conduct;
f)the size of the business enterprise involved;
g)whether or not the breaches were deliberate;
h)whether senior management was involved in the breaches;
i)whether the party committing the breach had exhibited contrition, taken corrective action and co-operated with the enforcement authorities;
j)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
k)the need for specific and general deterrence.
This summary was adopted by Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 at [14]. While the summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion: see Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550. The discretion remains at large.
The factors which are material to this matter and the question of appropriate penalties are addressed below. What the Court needs to determine is an appropriate penalty proportionate to the gravity of the contravention.
Consideration of Penalty as against the First, Second and Third Respondent
Nature and Extent of the Conduct
The extent of the underpayments here are significant in terms of the total earnings of the affected employee during the seven months of employment. It is also of great significance of the Respondents have participated in the enforcement process brought by the Applicant and have repaid the sum of $13,521.68 (save for $42.68).
Loss or Damage
The admitted underpayment of Ms Zhou’s entitlements was significant, being in the sum of $13,521.68, across the employment period which was approximately 7 months. However the First Respondent has repaid the majority of the amount owed to Ms Zhou and, as of 10 October 2019, there was $42.68 in payments outstanding.
Similar previous conduct
There is no evidence of similar previous contraventions by the First, Second or Third Respondent in relation to their respective contraventions.
Whether the breaches arose out of a course of conduct
In this matter, there has been a total of 50 contraventions being:
a)14 contraventions by the First Respondent;
b)12 contraventions by the Second Respondent; and
c)12 contraventions by the Third Respondent.
The 14 contraventions by the first Respondent and the 12 contraventions by each of the Second and Third Respondents do all in large part arise from the manner in which the employee was engaged by the First Respondent. The Second and Third Respondents position - as set out in an affidavit filed in the proceeding – was that the employee was paid a percentage of the revenue earned from each customer that she attended upon. If an employee developed a following amongst the customers then the employee's income would increase. It is also said by the Second and Third Respondents that, had they known that they had to pay the employee during quiet periods when the employee was not attending upon a customer, they would have sent the employee home.
That provides an explanation for the conduct and provides a setting as to how the underpayments of the employee’s entitlements arose. It should be stressed that no allegation was made by the Applicant that sexual services were being offered at what was described in the statement of agreed facts, prepared by the Applicant, as a "massage parlour". That suggestion was specifically disavowed by the Applicant at the hearing. In large part the conduct did occur as a result of a course of conduct and the Court takes that into account when fixing the total penalty.
The size of the respondent's business
The Applicant submitted at [54] – [55], the size and financial circumstances of a business “does not exculpate conduct by employers contravening the Act”: see Fair Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634 at [47]; Fair Work Ombudsman v New South Wales Motel Management Services Pty Ltd & Ors [2019] FCCA 2638 at [28]. Additionally, small business have the same obligations as larger employers to meet minimum employment standards: see Kelly v Fitzpatrick [2007] FCA 1080 at [28].
The contraventions involved did involve a small business. I note the cases cited by the Applicant at [61] above are to the effect that being a small business does not provide an excuse for failing to comply with minimum standards. I accept that to be the case, but I also accept that in fixing an appropriate penalty the size of business and the revenue generated may affect the business’ capacity to pay a penalty, and what may be a modest penalty for a large business may be a devastating penalty for a small business.
Deliberateness of the breaches
At [69] – [72] of submissions as to penalty filed on 16 January 2020, the First, Second and Third Respondent state:
“69. At no time, was it the intention of the First, Second or Third respondent to underpay Ms Zhou as it was because of the act of kindness of the Second respondent to offer her a job when there was no real need for employment at the time and her job could be easily replaced by either Second or Third respondent.
70. As aforementioned, the First, Second and Third Respondents signed the Statement of Agreed Facts without seeking to make any changes because we have realised our fault in this matter.
71. The First, Second and Third Respondents have been fully cooperative with authorities throughout the whole process.
72. For the above reasons, we believe the Court should see the actions of the First, Second and Third Respondents as unintentional and without malice.”
However I note that the Fourth Respondent, in relation to the March Notice to Produce, provided evidence to the Applicant that the Fourth Respondent had given advice via email to the Third Respondent in relation to the Modern Award that applied to Ms Zhou’s employment on three different occasions: see [21] – [23] of this Judgment. The Court views this correspondence as evidence that the Third Respondent was aware of the Award that applied to Ms Zhou’s employment and was therefore aware of Ms Zhou’s entitlements under the Award.
Contrition, corrective action and cooperation with authorities
The Respondents have readily admitted to the contraventions at early stages in the matter and have sought to cooperate with the Applicant to resolve the matter at an early stage. The Second and Third Respondent made an immediate and unconditional apology both to Ms Zhou and to the Court: see submissions filed on 16 January 2020 at [68].
As has previously been stated in this judgment, the First Respondent has attempted to rectify the monetary amounts that were owed to Ms Zhou. As of 10 October 2019, there was only $42.68 still outstanding.
However, I do take into account the submission of the Applicant at [68] of its submissions filed on 19 December 2019 that:
“Any cooperation by the Respondents during the investigation should be assessed in light of the total conduct during this period, given:
(a) the conflicting information provided by [Third Respondent] as to [the employee’s] rate of pay during her initial discussions with Inspector John Richards (Inspector Richards);
(b) the provision by Austop and TG Audit of false or misleading Payslips in response to a statutory August Notice to Produce; and
(c) the fact that Austop and TG Audit only advised that the Payslips provided were not accurate records of Ms Zhou's employment Inspector Richards issued the Failure to Comply and made Austop aware that he knew of the existence of true records, which Austop failed to provide to the FWO.”
Ensuring compliance with minimum standards, specific and general deterrence
Any penalty imposed must be directed at ensuring compliance with minimum standards particularly in the areas of business where the scope for exploitation is present. Here, both specific and general deterrence play a significant role.
Specific and general deterrence forms part of the factors relevant to the imposition of a penalty under the Fair Work Act: See Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[29]; Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543, 93.
The First, Second and Third Respondents have made various submissions as to why any penalty in relation to deterrence should be at the lower end of the range proposed by the Applicant, due to the nature of the contraventions by each Respondent.
In this case I am not of the view that there should not be a significant penalty imposed as a specific deterrence. The Applicants have demonstrated contrition. They are no longer operating the business and they have given evidence of significant financial hardship, hardship which I assume has increased since the Covid-19 crisis.
The Applicant, by way of an Annexure A at pages 21 – 22 of their submissions filed on 19 December 2019, state that the following penalties should be imposed against the First Respondent:
| Contravention | Nature of Contravention | Maximum Penalty | Penalty Range Sought | Penalty Range sought after application of 20% cooperation discount | |
| Underpayment contraventions | |||||
| 1 | s 45 of the FW Act (cl 17 of the Award) | Failure to pay minimum rates of pay | $54,000 | $21,600 - $24,300 | $17,280- $19,440 |
| 2 | s 45 of the FW Act (cl 31.2(a) of the Award) | Failure to pay overtime | $54,000 | $2,700 -$5,400 | $2,160 - $4,320 |
| 3 | s 45 of the FW Act (cl 31.2(b) of the Award) | Failure to pay Saturday penalties | $54,000 | $5,400 - $10,800 | $4,320- $8,640 |
| 4 | s 45 of the FW Act (cl 31.2(c) of the Award) | Failure to pay Sunday penalties | $54,000 | $10,800- $16,200 | $8,640 - $12,960 |
| 5 | s 45 of the FW Act (cl 35.3 of the Award) | Failure to pay public holiday penalties | $54,000 | $10,800-$16,200 | $8,640- $12,960 |
| 6 | ss 44 & 90(1) of the FW Act | Failure to pay annual leave taken on 9-13 April 2017 | $54,000 | $10,800- $16,200 | 8,640 - $12,960 |
| 7 | s 45 of the FW Act (cl 33.3 of the Award) | Failure to pay annual leave | $54,000 | $12,600- $18,900 | $10,080 -$15,120 |
| 8 | ss 44 & 90(2) of the FW Act | Failure to pay annual leave on termination | $63,000 | $21,600 - $24,300 | $17,280- $19,440 |
| Other Award contraventions | |||||
| 9 | s 45 of the FW Act (cl 24.2 of the Award) | Failure to pay superannuation contributions so as to avoid the superannuation guarantee charge | $63,000 | $3,150 | $2,520 |
| 10 | s 45 of the FW Act (cl 30.4 of the Award) | Failure to ensure no more than six consecutive days worked in a row | $54,000 | $10,800 - $16,200 | $8,640 - $12,960 |
| Record keeping, payslip and false record contraventions | |||||
| 11 | s 535(1) of the FW Act (regs 3.33, 3.34 and 3.36 of the FW Regulations) | Failure to make and keep records | $27,000 | $10,800 - $13,500 | $8,640 - $10,800 |
| 12 | s 536(1) of the FW Act | Failure to provide pay slips | $27,000 | $13,500 - $16,200 | $10,800 - $12,960 |
| 13 | Reg 3.44(1) of the FW Regulations | Keeping records that it knew were false or misleading | $21,000 | $10,500 - $12,600 | $8,400 - $10,080 |
| 14 | Reg 3.44(6) of the FW Regulations | Making use of records knowing they were false or misleading | $21,000 | $12,600 - $14,700 | $10,080 - $11,760 |
| Totals | $600,000 | $136,050 - $184,350 | $108,840 - $147,480 | ||
| Total After Reduction For Totality | $106,000 - $132,000 | ||||
By way of the same Annexure at pages 23 – 24, the Applicant made submissions that the following penalties should be imposed against the Second and Third Respondent:
| Contravention | Nature of Contravention | Maximum Penalty | Penalty Range Sought | Penalty Range sough after application of 20% cooperation discount | |
| Underpayment contraventions | |||||
| 1 | s 45 of the FW Act (cl 17 of the Award) | Failure to pay minimum rates of pay | $10,800 | $4,320 - $4,860 | $3,456 - $3,888 |
| 2 | s 45 of the FW Act (cl 31.2(a) of the Award) | Failure to pay overtime | $10,800 | $540 - $1,080 | $432 - $864 |
| 3 | s 45 of the FW Act (cl 31.2(b) of the Award) | Failure to pay Saturday penalties | $10,800 | $1,080-$2,160 | $864 - $1,728 |
| 4 | s 45 of the FW Act (cl 31.2(c) of the Award) | Failure to pay Sunday penalties | $10,800 | $2,160 - $3,240 | $1,728 - $2,592 |
| 5 | s 45 of the FW Act (cl 35.3 of the Award) | Failure to pay public holiday penalties | $10,800 | $2,160 - $3,240 | $1,728 - $2,592 |
| 6 | ss 44 & 90(1) of the FW Act | Failure to pay annual leave taken on 9-13 April 2017 | $10,800 | $2,160 - $3,240 | $1,728 - $2,592 |
| 7 | s 45 of the FW Act (cl 33.3 of the Award) | Failure to pay annual leave | |||
| 8 | ss 44 & 90(2) of the FW Act | Failure to pay annual leave on termination | $12,600 | $2,520 - $3,780 | $2,016 - $3,024 |
| Other Award contraventions | |||||
| 9 | s 45 of the FW Act (cl 24.2 of the Award) | Failure to pay superannuation contributions so as to avoid the superannuation guarantee charge | $12,600 | $630 | $504 |
| 10 | s 45 of the FW Act (cl 30.4 of the Award) | Failure to ensure no more than six consecutive days worked in a row | $10,800 | $2,160 - $3,240 | $1,728 - $2,592 |
| Record keeping, payslip and false record contraventions | |||||
| 11 | s 535(1) of the FW Act (regs 3.33, 3.34 and 3.36 of the FW Regulations) | Failure to make and keep records | $5,400 | $2,160 - $2,700 | $1,728 - $2,160 |
| 12 | s 536(1) of the FW Act | Failure to provide pay slips | $5,400 | $2,700 - $3,240 | $2,160 - $2,592 |
| Totals | $111,600 | $22,590 - $31,410 | $18,072 - $25,128 | ||
| Total After Reduction For Totality | $16,200 - $22,600 | ||||
Consideration of Penalty as against the Fourth Respondent
Nature and Extent of the Conduct
The Fourth Respondent’s involvement in this matter is significant, in that the Fourth Respondent created payslips, which were false and misleading, purporting to relate to Ms Zhou during the Employment Period on behalf of the First Respondent and provided them to the Applicant, without qualification, in purported satisfaction of the August Notice to Produce.
Loss or Damage
As stated in relation to the consideration of penalty as against the First, Second and Third Respondent, the admitted underpayment of Ms Zhou’s entitlements was significant, being in the sum of $13,521.68 across the employment period which was approximately seven months. However the First Respondent has repaid the majority of the amount owed to Ms Zhou and, as of 10 October 2019, there was $42.68 in payments outstanding.
Similar previous conduct
There is no evidence of similar previous contraventions by the Fourth Respondent in relation to their respective contraventions.
Whether the breaches arose out of a course of conduct
In this matter, there has been a total of two contraventions by the Fourth Respondent.
The Fourth Respondent effectively submits that the two contraventions should be seen by the Court to arise out of a single course of conduct because, despite the distinct nature of the contraventions, there is a substantial overlap in the elements of the Contraventions. On that basis, the Fourth Respondent further submits that once an appropriate penalty is imposed for the first contravention, the penalty that should be imposed for the second contravention ought to be reduced to the extent of the overlap.
The Applicant submits that at [14] – [16], that the Fourth Respondent’s submissions should be rejected, for the following reasons:
“15. First, the common law course of conduct principle is not engaged by reason of a mere overlap of elements. This principle is engaged to ensure an offender is not punished twice for which is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry. Further, it is submitted that TG Audit bears the evidentiary burden of establishing that the contraventions arose from the same course of conduct or the “same criminality”.
16. Second…the specific facts do not establish that the two contraventions arose out of “the same criminality”. Here, TG Audit has put on no evidence as to the circumstances in which they decided to create the false or misleading payslips or the circumstances in which they decided to subsequently provide these pay slips to the FWO.”
The size of the respondent's business
The Court acknowledges that there is no evidence before it in relation to the size of the Fourth Respondent’s business (see the Applicant’s submissions filed on 19 December 2019 at [57]) and notes that the Fourth Respondent made no submissions as to the size of the TG Audit business in submissions as to penalty filed on 13 February 2020.
Deliberateness of the breaches
The Fourth Respondent initially stated at [7] of its defence filed on 9 July 2019, that, in its capacity as the First Respondent’s accountant, it received instructions from the First Respondent relating to Ms Zhou’s employment. The Fourth Respondent stated that it created payslips on behalf of the First Respondent for the purposes of calculating how much the First Respondent ought to have paid Ms Zhou, and that it should have marked the payslips in a way that would have made it clear that they were merely examples of correctly completed payslips.
However by way of the agreed statement of facts filed on 25 September 2020, it is agreed:
a)at [15(a)] that the Fourth Respondent, with the authorisation of the First Respondent, created payslips “purporting to relate to Ms Zhou during the Employment Period” and, as agreed at [15(b)], “kept various documents purporting to relate to Ms Zhou during the Employment Period including the Payslips on behalf of the First Respondent”;
b)at [17] that the payslips did not accurately reflect or record the payment of Ms Zhou’s wages; and
c)at [18] that the Fourth Respondent wrote to the Applicant on behalf of the First Respondent, and provided, amongst other documents, the payslips that purported to relate to Ms Zhou’s employment.
Contrition, corrective action and cooperation with authorities
The Fourth Respondent readily admitted to the contraventions at an early stage in this matter and sought to cooperate with the Applicant to resolve the matter at an early stage. In submissions filed on 20 February 2020, the Applicant states at [17]:
“The FWO acknowledges that TG Audit made admissions in this proceeding at an early stage; advised the FWO that the Payslips were not accurate records two weeks after their production…”
However, the Applicant further submits at [18(b)] that:
“TG Audit’s act in advising the FWO that the Payslips were not accurate occurred only after the Inspector Richards provided a copy of the actual wage records, which clearly conflicted with those provided by TG Audit.”
Ensuring compliance with minimum standards, specific and general deterrence
As stated above, any penalty imposed must be directed at ensuring compliance with minimum standards particularly in the areas of business where the scope for exploitation is present. Here, both specific and general deterrence play a significant role.
The Applicant, by way of an Annexure A of their submissions filed on 19 December 2019, state that the following should be the penalties imposed against the Fourth Respondent:
| c | Nature of Contravention | Maximum Penalty | Penalty Range Sought | Penalty Range sought after application of 20% cooperation discount | |
| 1 | Reg 3.44(1) of the FW Regulations | Keep records that it knew were false and misleading | $21,000 | $10,500 - $12,600 | $8,400 - $10,080 |
| 2 | Reg 3.44(6) of the FW Regulations | Making use of records knowing they were false or misleading | $21,000 | $12,600 - $14,700 | $10,080 - $11,760 |
| Totals After Reductions for Totality | $42,000 | $23,100 - $27,300 | $18,480 - $21,840 | ||
As the Applicant notes at [77] of submissions as to penalty filed on 19 December 2019:
“Record keeping and pay slip obligations are important in assisting the FWO as a regulator to monitor and enforce compliance with minimum employment standards. The Courts have consistently recognised the need to ensure compliance with minimum standards in terms of these obligations.”
As stated above, the Fourth Respondent made various submissions as to why any penalty in relation to deterrence should be at the lower end of the range proposed by the Applicant, due to the nature of the contraventions by the Fourth Respondent.
Conclusion
In fixing penalties against the Second Respondent and Third Respondent I take into account that they are a husband and wife in an intact family and that if the Court were to fix penalties against each of them in the sum submitted by the Applicant, it would likely have a financially crushing effect on them and their children. The effect of imposing penalties of the measure sought by the Applicant fails to take into account their contrition and cooperation which is significant. I also take into account that the underpayment contraventions represent distinct breaches of the Fair Work Act, however they are all closely react related. I have treated the failure to keep records and provide payslips differently as I regard those obligations as important in protecting employee rights, as payslips enables an employee to check whether they are being paid in their correct entitlements.
As to the penalties imposed on the Fourth Respondent, I take into account that there is no evidence of prior contraventions. However, I accept that there is a need for general and specific deterrence given that the Fourth Respondent was providing professional services which in effect encouraged the First Respondent to authorise the Fourth Respondent to produce false documents to the Applicant. This is a rationale for the higher penalty imposed per breach on the Fourth Respondent.
I do not impose the penalties sought by the Applicant, as the level sought is excessive having regard to the circumstances of the case. The total of the penalties I have imposed is high by any measure when the combined effect of each penalty is considered. The penalties imposed achieve the purpose of general and specific deterrence and are such as to be a strong disincentive for small businesses to engage in similar conduct. I have imposed higher penalties in respect of record keeping and payslip provision contraventions because a failure to comply with those provisions makes it very difficult for an employee to determine what their rate of pay is and whether they are being properly paid.
On the basis of the consideration above, the Court will impose pecuniary penalties in relation to the contraventions as against the First, Second Third and Fourth Respondent as follows:
| Contravention | Penalty Imposed | ||
| Penalties as against the First Respondent | |||
| 1 | s45 of the FW Act (cl 17 of the Award) | Failure to pay minimum rates of pay | $500 |
| 2 | s45 of the FW Act (cl 31.2(a) of the Award) | Failure to pay overtime | $500 |
| 3 | s45 of the FW Act (cl 31.2(b) of the Award) | Failure to pay Saturday penalties | $500 |
| 4 | s45 of the FW Act (cl 31.2(c) of the Award) | Failure to pay Sunday penalties | $500 |
| 5 | s45 of the FW Act (cl 35.3 of the Award) | Failure to pay public holiday penalties | $500 |
| 6 | ss44 & 90(1) of the FW Act | Failure to pay annual leave taken on 9-13 April 2017 | $500 |
| 7 | s45 of the FW Act (cl 33.3 of the Award) | Failure to pay annual leave | $500 |
| 8 | ss44 & 90(2) of the FW Act | Failure to pay annual leave on termination | $500 |
| 9 | s45 of the FW Act (cl 24.2 of the Award) | Failure to pay superannuation contributions so as to avoid the superannuation guarantee charge | $500 |
| 10 | s45 of the FW Act (cl 30.4 of the Award) | Failure to ensure no more than six consecutive days worked in a row | $500 |
| 11 | s535(1) of the FW Act (regs 3.33, 3.34 and 3.36 of the FW Regulations) | Failure to make and keep records | $500 |
| 12 | s536(1) of the FW Act | Failure to provide pay slips | $1000 |
| 13 | Reg 3.44(1) of the FW Regulations | Keeping records that it knew were false or misleading | $1000 |
| 14 | Reg 3.44(6) of the FW Regulations | Making use of records knowing they were false or misleading | $1000 |
| Total | $8500 | ||
| Penalties as against the Second Respondent and Third Respondent | |||
| 1 | s45 of the FW Act (cl 17 of the Award) | Failure to pay minimum rates of pay | $200 |
| 2 | s45 of the FW Act (cl 31.2(a) of the Award) | Failure to pay overtime | $200 |
| 3 | s45 of the FW Act (cl 31.2(b) of the Award) | Failure to pay Saturday penalties | $200 |
| 4 | s45 of the FW Act (cl 31.2(c) of the Award) | Failure to pay Sunday penalties | $200 |
| 5 | s45 of the FW Act (cl 35.3 of the Award) | Failure to pay public holiday penalties | $200 |
| 6 | ss44 & 90(1) of the FW Act | Failure to pay annual leave taken on 9-13 April 2017 | $200 |
| 7 | s45 of the FW Act (cl 33.3 of the Award) | Failure to pay annual leave | $100 |
| 8 | ss44 & 90(2) of the FW Act | Failure to pay annual leave on termination | $100 |
| 9 | s45 of the FW Act (cl 24.2 of the Award) | Failure to pay superannuation contributions so as to avoid the superannuation guarantee charge | $200 |
| 10 | s45 of the FW Act (cl 30.4 of the Award) | Failure to ensure no more than six consecutive days worked in a row | $200 |
| 11 | s535(1) of the FW Act (regs 3.33, 3.34 and 3.36 of the FW Regulations) | Failure to make and keep records | $500 |
| 12 | s536(1) of the FW Act | Failure to provide pay slips | $500 |
| Total | $2800 | ||
| Penalties as against the Fourth Respondent | |||
| 1 | Reg 3.44(1) of the FW Regulations | Keep records that it knew were false and misleading | $2500 |
| 2 | Reg 3.44(6) of the FW Regulations | Making use of records knowing they were false or misleading | $2500 |
| Total | $5000 | ||
The Court will make orders will make orders pursuant to s546(1) of the Fair Work Act that:
a)the First Respondent pay pecuniary penalties in the total sum of $8500;
b)the Second Respondent pay pecuniary penalties in the total sum of $2800;
c)the Third Respondent pay pecuniary penalties in the total sum of $2800; and
d)the Fourth Respondent pay pecuniary penalties in the total sum of $5000.
I certify that the preceding one hundred and five (105) paragraphs are a true copy of the reasons for judgment of Judge McNab
Associate:
Date: 30 October 2020
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