Fair Work Ombudsman v Australian Sales & Promotion Pty Ltd & Anor
[2016] FCCA 2804
•10 November 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v AUSTRALIAN SALES & PROMOTIONS PTY LTD & ANOR | [2016] FCCA 2804 |
| Catchwords: INDUSTRIAL – Sham contracting – underpayment of employee – failure to keep records – pecuniary penalties – relevant considerations – grouping principle. |
| Legislation: Fair Work Act 2009, ss.285, 293, 294, 325, 357, 535, 539, 546, 550, 557, 617, 793 Crimes Act 1914, s.4AA |
| Cases cited: Kelly v Fitzpatrick (2007) 166 IR 14 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Australian Building & Construction Commissioner v Construction, Forestry, Mining & Energy Union (No 2) (2010) 199 IR 373 Fair Work Ombudsman v Australian Sales & Promotions Pty Ltd [2013] FCCA 1502 Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479 Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 Roughton v Pinjarra Crane & Access Hire Pty Ltd [2015] FCCA 481 ACE Insurance Ltd v Trifunovski (No 2) (2012) 215 IR 206 Fair Work Ombudsman v Bound for Glory Enterprises Pty Ltd [2014] FCCA 432 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | AUSTRALIAN SALES & PROMOTIONS PTY LTD ACN 104 339 273 |
| Second Respondent: | PAUL AINSWORTH |
| File Number: | SYG 1784 of 2014 |
| Judgment of: | Judge Cameron |
| Hearing date: | 21 October 2016 |
| Date of Last Submission: | 21 October 2016 |
| Delivered at: | Sydney |
| Delivered on: | 10 November 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms C. Bembrick |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondents: | Mr J. Darams |
| Solicitors for the Respondents: | Norton Rose Fulbright Australia |
THE COURT DECLARES THAT:
The first respondent contravened:
(a)section 357 of the Fair Work Act 2009 (“FW Act”) by representing to Thomas Beckitt that the contract of employment under which he was engaged was a contract for services under which he performed work as an independent contractor;
(b)section 293 of the FW Act by failing to pay minimum wages to Thomas Beckitt pursuant to clause 4 of the National Minimum Wage Order 2012;
(c)section 293 of the FW Act by failing to pay casual loading to Thomas Beckitt pursuant to clause 5 of the National Minimum Wage Order 2012;
(d)section 293 of the FW Act by failing to pay casual loading to Thomas Beckitt pursuant to clause 5 of the National Minimum Wage Order 2013;
(e)section 325 of the FW Act by requiring Thomas Beckitt to spend part of an amount payable to him, totalling $465.30; and
(f)section 535(1) of the FW Act by failing to make or keep employment records in respect of Thomas Beckitt as required by reg.3.33(2) of the Fair Work Regulations 2009.
The second respondent was involved within the meaning of s.550 of the FW Act in each of the first respondent’s contraventions of the FW Act.
THE COURT ORDERS THAT:
The first respondent pay pecuniary penalties totalling $100,000 for its contraventions of the FW Act.
The second respondent pay pecuniary penalties totalling $24,000 for his involvement in the first respondent’s contraventions of the FW Act.
The penalties be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days.
The applicant have liberty to apply on 7 days’ notice in the event that any of these orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1784 of 2014
| FAIR WORK OMBUDSMAN |
Applicant
And
| AUSTRALIAN SALES & PROMOTIONS PTY LTD ACN 104 339 273 |
First Respondent
| PAUL AINSWORTH |
Second Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The first respondent (“ASAP”) operates a business which provides direct fundraising services to charities and not for profit organisations, including face to face solicitation of donations from members of the public. The second respondent (“Mr Ainsworth”) is the sole director of ASAP. Mr Thomas Beckitt was employed by ASAP in 2013.
On 30 June 2014 the applicant (“Ombudsman”) commenced this proceeding. In her amended statement of claim, the Ombudsman alleged that ASAP had contravened the Fair Work Act 2009 (“FW Act”) by falsely representing to Mr Beckitt that he was engaged as an independent contractor, by failing to pay Mr Beckitt his minimum rates of pay and casual loading and by requiring him to spend part of the money payable to him on expenses associated with him purportedly being an independent contractor. The Ombudsman alleged that ASAP had also contravened the FW Act by failing to make and keep employee records in respect of Mr Beckitt. The Ombudsman further alleged that Mr Ainsworth had accessorial liability for ASAP’s contraventions of the FW Act.
On 18 March 2015 the parties filed a statement of agreed facts in which the respondents admitted the contraventions of the FW Act alleged by the Ombudsman. The parties now seek declarations that the respondents contravened the FW Act as well as orders imposing pecuniary penalties on the respondents.
STATEMENT OF AGREED FACTS
Relevant agreed facts are summarised below.
The parties
Mr Beckitt was born in the United Kingdom in 1987 and arrived in Australia in February 2013 on a working holiday visa. From 6 March 2013 to 8 July 2013 he was engaged to perform work for ASAP, initially as a fundraiser and then from 25 March 2013 until the end of his employment as a team leader.
Mr Ainsworth was at all relevant times the sole director of ASAP. He was also the sole director and sole shareholder of an entity known as PMA Unit Pty Ltd (“PMA”). PMA was at all relevant times a shareholder of ASAP and was dependent on the latter for funding to meet its obligations. It did not operate a business on its own account, although it did receive income from sources other than ASAP. It was agreed between the parties that Mr Ainsworth was the controlling mind of ASAP and PMA and the person responsible for the management of the business affairs of those entities, including negotiating and entering into contracts and making payments on their behalf. In the case of ASAP, Mr Ainsworth was assisted by ASAP’s Chief Executive Officer.
During the course of Mr Beckitt’s employment, ASAP also employed Mark Ainsworth (Mr Ainsworth’s brother), Lauren Hicks and Camilla Kiernan. The parties agreed that for the purposes of s.793 of the FW Act, Mark Ainsworth, Ms Hicks and Ms Kiernan had the apparent or ostensible authority to make representations to Mr Beckitt on behalf of ASAP.
ASAP’s business
In 2012 and 2013 ASAP entered into written fundraising agreements with Amnesty International Australia (“Amnesty”) and with the Wesley Mission under which it agreed to provide face to face fundraising services for those organisations in exchange for payment (“Fundraising Agreements”). The Fundraising Agreements relevantly required ASAP to:
a)engage appropriately qualified fundraisers to carry out the fundraising services;
b)ensure that the fundraisers represented the organisations in a respectful and positive manner;
c)regularly monitor the performance of all fundraisers; and
d)provide initial and ongoing training to all fundraisers.
ASAP’s obligations under the Fundraising Agreements were undertaken by PMA. By virtue of an agreement made between ASAP and PMA in early 2013, PMA was also responsible for engaging workers to satisfy ASAP’s obligations under its agreement with Wesley Mission (“PMA Wesley Contract”). PMA subsequently purported to engage Mr Beckitt to provide fundraising services under the Fundraising Agreements.
On 5 February 2013 PMA entered into a written contract with i.Contract Pty Ltd (“i.Contract”) under which i.Contract was required to provide administration and payment services to workers engaged by PMA. Relevantly for this proceeding, i.Contract was required to:
a)obtain and maintain insurance in Mr Beckitt’s name;
b)make deductions from amounts payable to Mr Beckitt for Pay as You Go (“PAYG”) tax, public liability insurance and fees;
c)create invoices in respect of fundraising services performed by Mr Beckitt, which were issued and sent to Mr Ainsworth at PMA; and
d)make payments to Mr Beckitt.
At all relevant times Certica Pty Ltd (“Certica”) was an entity which operated in conjunction with i.Contract to provide services to PMA.
Mr Beckitt’s employment
Commencement
On 5 March 2013 Mark Ainsworth interviewed Mr Beckitt at the ASAP premises and offered him a position as a fundraiser, an offer which Mr Beckitt accepted the same day. The parties agreed that the offer and acceptance gave rise to a contract of employment between ASAP and Mr Beckitt.
On 6 March 2013, Ms Hicks provided training to Mr Beckitt on sales techniques and at the conclusion of the training provided to him:
a)a document described as a “Services Agreement” between him and PMA;
b)a single page document entitled “CONGRATULATIONS!!” which set out instructions on the arrangements he was required to set up in order to get paid, including:
i)applying for an Australian Business Number (“ABN”);
ii)registering with Certica;
iii)sending an email to Ms Hicks containing his ABN details and copies of documents completed for registration with Certica; and
iv)visiting Certica’s website in order to complete a form and clicking “agree” to the terms and condition;
c)a document entitled “ABN Registration Guide”; and
d)a document entitled “PMA Contractor Registration Guide”.
Duties
The parties agreed that at the commencement of each working day, Mr Beckitt attended the ASAP premises and was directed by Ms Hicks or Ms Kiernan to attend certain locations for the performance of his duties, namely different kiosks located in Westfield shopping centres and other shopping centres or at street locations.
The parties agreed that Mr Beckitt was subject to the day to day operational direction and control of ASAP, exercised by Mark Ainsworth, in that Mark Ainsworth:
a)regularly contacted him to provide directions and instructions and to check on his whereabouts and progress; and
b)directed him to work Monday to Friday from 8am to 5pm during the period he was employed as a fundraiser and from 7:45am to 5pm during the period he was employed as a team leader.
Payments
During his employment as a fundraiser, Mr Beckitt was paid $50 per day plus commission, less deductions for PAYG tax, public liability insurance and fees. As a team leader he was paid $67 per day plus commission, less deductions for PAYG tax, public liability insurance and fees.
Nature of relationship between Mr Beckitt and ASAP
The parties agreed that Mr Beckitt was engaged as an employee, and not as an independent contractor, because:
a)prior to his employment he had had no sales experience and was required to attend training on sales techniques provided by ASAP. He was also required to apply the sales techniques outlined in the training and to follow specific written sales scripts or “pitches” in performing his duties, although he was able to deviate from those guidelines;
b)he was required to attend ASAP’s premises at the commencement of each working day to be directed by Mark Ainsworth, Ms Hicks or Ms Kiernan to attend work at certain shopping centres or other locations;
c)he was required to wear specified clothing and apparel which identified him with Amnesty or Wesley Mission;
d)he was required to work set hours;
e)he was subject to day to day direction, supervision and control by ASAP;
f)the Fundraising Agreements placed contractual obligations upon ASAP in relation to the conduct and performance of his work;
g)he was provided with an iPad by Mark Ainsworth in order to perform his fundraising and team leader duties;
h)as a team leader, he issued directions to team members as directed by Mark Ainsworth, was required to report on the progress of his team to Mark Ainsworth throughout the day and at the end of each of week was required to complete a weekly team activity sheet for himself and his team members;
i)he was paid on a weekly basis;
j)he was required to follow the instructions set out in the “Congratulations” document and to sign up to the i.Contract arrangements in order to be paid and did not have any choice or discretion about the form of the i.Contract arrangements;
k)he did not create invoices and did not provide any information to i.Contract for the purpose of the creation of invoices;
l)he personally performed all of his duties and did not have the discretion to delegate the work he performed; and
m)he did not work or provide his labour or services to any other person or entity during his employment with ASAP and was not operating, promoting or generating a business of his own.
The parties also agreed that at all relevant times ASAP, not PMA, was Mr Beckitt’s employer by reason of the following matters:
a)PMA, in entering into arrangements with ASAP under which it purported to engage Mr Beckitt, was not operating or engaging in any business on its own account. The PMA Wesley Contract was negotiated and executed by Mr Ainsworth on behalf of both ASAP and PMA and no other natural person represented the interests of PMA in relation to that contract. In those circumstances, the PMA Wesley Contract was not an arm’s-length commercial transaction;
b)ASAP’s agreement with Amnesty contained non-delegable obligations requiring ASAP to engage workers for the purpose of work to be performed under the agreement;
c)the Fundraising Agreements required ASAP to direct and control the conduct and work of persons engaged to perform work under the agreements and Mr Beckitt was engaged for the purpose of ASAP meeting its obligations under the agreements;
d)when Mr Beckitt attended his interview, the premises he attended contained signage referring to ASAP;
e)the offer of work made to Mr Beckitt was made by Mark Ainsworth, an employee of ASAP, and in doing so Mark Ainsworth was acting on ASAP’s behalf;
f)the training which Mr Beckitt was required to undertake was conducted by Ms Hicks, an employee of ASAP;
g)ASAP, rather than PMA, determined the terms and conditions of Mr Beckitt’s engagement;
h)when performing his duties Mr Beckitt was subject to the control and direction of Mark Ainsworth, an employee of ASAP;
i)Mr Beckitt’s fundraising and team leader duties were performed partly at street locations and partly at shopping centre kiosks which were leased and paid for by ASAP. ASAP then charged PMA for the cost of the kiosks;
j)PMA did not operate any independent business, although it did obtain income from sources other than ASAP;
k)PMA did not exercise control or direction over Mr Beckitt; and
l)ASAP held a non-delegable obligation to perform services for its clients under the Fundraising Agreements and received payments from its clients for work performed by Mr Beckitt. The parties agreed that although ASAP utilised PMA to make payments to Mr Beckitt, that did not affect the true nature of the payments as being from ASAP to Mr Beckitt.
Admitted contraventions
Sham contracting
It was agreed that on or about 6 March 2013, ASAP made representations to Mr Beckitt that the contract under which he performed work was a contract for services under which he performed work as an independent contractor by:
a)providing him with the “Services Agreement” which contained express representations that he was an independent contractor;
b)providing him with the documents entitled “Congratulations”, “ABN Registration Guide” and “PMA Contractor Registration Guide”, which contained implied representations that he was an independent contractor; and
c)requiring him to enter into arrangements whereby i.Contract issued invoices in respect of the work he performed and made deductions, including public liability insurance, from his payments, which implied that he was an independent contractor.
ASAP admitted that by reason of those representations, it had contravened s.357 of the FW Act.
Rates of pay
They parties agreed that:
a)from 6 March 2013 to 1 July 2013 Mr Beckitt’s employment was subject to the National Minimum Wage Order 2012 (“NMWO 2012”); and
b)from 2 July 2013 to 8 July 2013 his employment was subject to the National Minimum Wage Order 2013 (“NMWO 2013”).
They agreed that ASAP was also required to comply with the FW Act in relation to its employment of Mr Beckitt.
Minimum wages
From 6 March 2013 to 1 July 2013 ASAP was required by cl.4.1 of NMWO 2012 to pay Mr Beckitt a minimum rate of pay of $15.96 per hour. ASAP failed to pay Mr Beckitt that rate and as a result underpaid him $5,092.66. ASAP admitted that by failing to pay Mr Beckitt his minimum rate of pay it had contravened s.293 of the FW Act.
Casual loading
The parties agreed that Mr Beckitt was employed as a casual employee. From 6 March 2013 to 1 July 2013 ASAP was required by cl.5 of NMWO 2012 to pay Mr Beckitt a casual loading of 23%, being $3.67 an hour. Mr Beckitt was not paid the casual loading and as a result was underpaid $2,588.84 in that period. From 2 July 2013 to 8 July 2013 ASAP was also required by cl.5 of NMWO 2013 to pay Mr Beckitt a casual loading of 24%, being $3.93. Mr Beckitt was not paid the casual loading and as a result was underpaid $171.90 in that period.
ASAP admitted that by failing to pay Mr Beckitt his casual loading entitlements it had contravened s.293 of the FW Act.
Requirement to spend amounts payable
The parties agreed that by virtue of s.325 of FW Act, ASAP was not allowed to directly or indirectly require Mr Beckitt to spend any part of an amount payable to him in relation to the performance of his work if the requirement was unreasonable in the circumstances.
During his employment Mr Beckitt was required to spend $465.30 of the money payable to him for the performance of his work on payments for public liability insurance and fees to i.Contract. The parties agreed that the requirement for Mr Beckitt to sign up to i.Contract/Certica and for him to spend part of the money payable to him was unreasonable. ASAP admitted that by virtue of that requirement, it had contravened s.325 of the FW Act.
Failure to make and keep records
At all material times ASAP was required by s.535(1) of the FW Act to make and keep records relating to Mr Beckitt’s employment. ASAP agreed that it had contravened that provision by failing to make or keep the required records.
Accessorial liability
Mr Ainsworth admitted that he was:
a)directly or indirectly knowingly concerned in or a party to; or
b)otherwise “involved in”, within the meaning of s.550 of the FW Act,
each of ASAP’s contraventions.
Rectification
The respondents admitted that their contraventions resulted in Mr Beckitt being underpaid $7,853.40. The Ombudsman admitted that that underpayment had been rectified by 19 June 2014.
LEGISLATION
Sham contracting
Section 357 of the FW Act provides:
357 Misrepresenting employment as independent contracting arrangement
(1)A person (the employer) that employs, or proposes to employ, an individual must not represent to the individual that the contract of employment under which the individual is, or would be, employed by the employer is a contract for services under which the individual performs, or would perform, work as an independent contractor.
(2)Subsection (1) does not apply if the employer proves that, when the representation was made, the employer:
(a) did not know; and
(b) was not reckless as to whether;
the contract was a contract of employment rather than a contract for services.
Minimum wages and casual loading
In combination ss.285 and 617 of the FW Act require a panel of Fair Work Commission members to make a national minimum wage order in each financial year. A national minimum wage order applies to all award or agreement free employees who are not junior employees, employees to whom training arrangements apply or employees with a disability: s.294(3) of the FW Act. Mr Beckitt’s duties were not covered by an award or agreement and he was not a junior employee, an employee to whom training arrangements applied or an employee with a disability.
The parties’ agreement concerning the terms and application of NMWO 2012 and NMWO 2013 has been set out earlier in these reasons at [21]-[25].
Section 293 of the FW Act provides that an employer must not contravene a term of a national minimum wage order.
Other payments
Section 325 of the FW Act relevantly provides:
325Unreasonable requirements to spend amount
(1)An employer must not directly or indirectly require an employee to spend any part of an amount payable to the employee in relation to the performance of work if the requirement is unreasonable in the circumstances.
…
Employee records
Section 535 of the FW Act provides:
535Employer obligations in relation to employee records
(1)An employer must make, and keep for 7 years, employee records of the kind prescribed by the regulations in relation to each of its employees.
(2) The records must:
(a)if a form is prescribed by the regulations—be in that form; and
(b) include any information prescribed by the regulations.
(3)The regulations may provide for the inspection of those records.
For the purposes of s.535, the Fair Work Regulations 2009 (“FW Regulations”) relevantly provide:
3.32Records—content
For subsection 535(1) of the Act, a kind of employee record that an employer must make and keep is a record that specifies:
(a)the employer’s name; and
(b)the employee’s name; and
(c)whether the employee’s employment is full‑time or part‑time; and
(d)whether the employee’s employment is permanent, temporary or casual; and
(e)the date on which the employee’s employment began; and
(f)on and after 1 January 2010—the Australian Business Number (if any) of the employer.
3.33 Records—pay
(1)For subsection 535(1) of the Act, a kind of employee record that an employer must make and keep is a record that specifies:
(a)the rate of remuneration paid to the employee; and
(b)the gross and net amounts paid to the employee; and
(c)any deductions made from the gross amount paid to the employee.
(2)If the employee is a casual or irregular part‑time employee who is guaranteed a rate of pay set by reference to a period of time worked, the record must set out the hours worked by the employee.
(3) If the employee is entitled to be paid:
(a)an incentive‑based payment; or
(b)a bonus; or
(c)a loading; or
(d)a penalty rate; or
(e)another monetary allowance or separately identifiable entitlement;
the record must set out details of the payment, bonus, loading, rate, allowance or entitlement.
Accessorial liability
Section 550 of the FW Act provides:
550Involvement in contravention treated in same way as actual contravention
(1)A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2)A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a)has aided, abetted, counselled or procured the contravention; or
(b)has induced the contravention, whether by threats or promises or otherwise; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d)has conspired with others to effect the contravention.
Course of conduct
Section 557 of the FW Act relevantly provides:
557 Course of conduct
(1)For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a)the contraventions are committed by the same person; and
(b)the contraventions arose out of a course of conduct by the person.
(2) The civil remedy provisions are the following:
…
(e)section 293 (which deals with contraventions of national minimum wage orders);
…
(i)subsection 325(1) (which deals with unreasonable requirements to spend amounts);
…
(n)subsections 535(1) and (2) (which deal with employer obligations in relation to employee records);
…
(s)any other civil remedy provisions prescribed by the regulations.
…
Penalties and compensation
Section 539 of the FW Act provides that ss.293, 325(1), 357(1) and 535(1) are civil remedy provisions. In combination ss.539(2) and 546(2) of the FW Act provide that the maximum pecuniary penalty for a contravention of ss.293, 325(1) and 357(1) of the FW Act is 60 penalty units for an individual and 300 penalty units for a body corporate. For a contravention of s.535(1), ss.539(2) and 546(2) provide for a maximum penalty of 30 penalty units for an individual and 150 penalty units for a body corporate. At the time the admitted contraventions occurred a penalty unit was worth $170: s.4AA Crimes Act 1914.
FINDINGS ON LIABILITY
I find that ASAP contravened:
a)s.357 of the FW Act by representing to Mr Beckitt that the contract of employment under which he was engaged was a contract for services under which he performed work as an independent contractor;
b)s.293 of the FW Act by failing to pay minimum wages to Mr Beckitt pursuant to cl.4 of NMWO 2012;
c)s.293 of the FW Act by failing to pay casual loading to Mr Beckitt pursuant to cl.5 of NMWO 2012;
d)s.293 of the FW Act by failing to pay casual loading to Mr Beckitt pursuant to cl.5 of NMWO 2013;
e)s.325 of the FW Act by requiring Mr Beckitt to spend part of an amount payable to him, totalling $465.30; and
f)s.535(1) of the FW Act by failing to make or keep employment records in respect of Mr Beckitt as required by reg.3.33(2) of the FW Regulations.
I find that Mr Ainsworth was involved, within the meaning of s.550 of the FW Act, in each of ASAP’s contraventions of the FW Act.
EVIDENCE
Ombudsman
Thomas Beckitt
Mr Beckitt’s evidence concerning his engagement and employment with ASAP essentially supported the facts rehearsed in the statement of agreed facts. He also deposed that he applied to ASAP after having seen an online advertisement which said things such as:
(a) “earn up to $1000 per week in your first week”;
(b) “meet new people and enjoy your work”; and
(c) “backpackers are welcome”.
Mr Beckitt deposed that during his interview with Mark Ainsworth he said that he had just moved to Australia and that during the training he attended on 6 March 2013 he was asked by Ms Hicks to sign a contract. Mr Beckitt deposed that he was given limited time to sign the contract and as a result he only skim-read it and did not seek any advice on it. He deposed that he had believed that he had had to sign the contract immediately to obtain the job.
In relation to his pay, Mr Beckitt deposed that he was only able to earn his daily base rate of pay if he secured $120 worth of pledges in a week. He deposed that it took a lot of work to secure those pledges and his ability to do so was greatly influenced by the locations he worked from, his mood, and during the period he was team leader, the time he spent motivating his team members. Mr Beckitt deposed that he also had the option of earning commission but even when he did, it was rare for him to earn “decent money”. He deposed that the amounts he earned were also delayed for two weeks and depended on customers not cancelling or failing to pay their pledges.
Mr Beckitt deposed that he had believed that he was paid by PMA as it was the payer listed in his bank statements and had assumed that it was the same entity as ASAP. He deposed that at the time he received the “Congratulations” document he had not been familiar with ABNs. He also assumed that Certica was a third party payroll provider and had not realised that amounts would be deducted from his pay. Mr Beckitt deposed that when the pay in his account was less than the amount he thought he had earned, he assumed that the difference was a result of tax. He deposed that it was only in July 2013 when he attempted to complete his tax return that he became aware that his arrangement with Certica meant he had been paying for public liability insurance. Mr Beckitt deposed that he was unable to complete his tax return online because he was registered as a business for tax purposes and so had spent $67.90 engaging the services of eTax accountants.
Mr Beckitt deposed that in most weeks his pay only covered his essential costs, such as food and rent. He deposed that in some weeks he relied solely on his savings and he had been unable to travel around Australia as he had intended. Mr Beckitt deposed that on 19 April 2013 he was robbed of some money and personal items which upset him and in turn affected his ability to make sales and earn his base rate of pay. He deposed that he had had to rely on his parents for funds and without their support he would have had to return to the United Kingdom.
Mr Beckitt deposed that he left his employment with ASAP on 8 July 2013 in order to earn money elsewhere. He deposed that he had not wanted to continue to struggle financially or to seek support from his parents.
Karen Burton
Ms Burton was the Fair Work Inspector who conducted the investigation into Mr Beckitt’s complaint lodged with the Ombudsman on 26 August 2013. Her affidavit set out the conduct of her investigation. It is not necessary to reproduce that evidence other than to record that the respondents co-operated by providing documents and information and, in Mr Ainsworth’s case, by participating in a recorded interview.
Kerry O’Brien
Mr O’Brien is a solicitor employed in the Ombudsman’s office. He deposed that on 4 March 2016 he conducted a search on ASAP’s website and observed that Isabella Bartolini was listed as the National Recruitment and Marketing Manager on the “Contact Us” page of the website.
Mr O’Brien deposed that in order to determine whether ASAP was still advertising for salespeople, on 10 March 2016 he conducted a number of internet searched and found:
a)sixty-six job advertisement results for the search term “PMA Unit” on the website hundred and seventy-five job advertisement results for the search term “ASAP Direct” on the Simply Hired website;
c)sixteen results for the search term “PMA Unit” on the website He deposed that he observed that the advertisements on the Meega website were substantially similar to those on the Simply Hired website;
d)several results for the search term “PMA Unit” on the website Mr O’Brien deposed that he printed two of the advertisements, one of which was headed “Job: Full-time hours and Immediate Start $$$ - Ref 144444f32” and concluded with the words “KIND REGARDS ISABELLA”; and
e)one advertisement using the search term “ASAP Direct” on the Locanto website.
Mr O’Brien deposed that on 8 March 2016 he conducted a company search which indicated that PMA had been deregistered on 17 May 2015. He also conducted a search on Mr Ainsworth which indicated that as at 8 March 2016 he was the director of five companies, including ASAP.
Respondents
The respondents did not file any evidence in the proceeding.
Finding
The Ombudsman’s witnesses were not required for cross-examination and I accept their evidence.
CONSIDERATION
Relevant considerations
As Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14 at 18-19 [14], in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mowbray FM identified “a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty”. Tracey J adopted those considerations, describing them as follows:
· The nature and extent of the conduct which led to the breaches.
· The circumstances in which that conduct took place.
· The nature and extent of any loss or damage sustained as a result of the breaches.
· Whether there had been similar previous conduct by the respondent.
· Whether the breaches were properly distinct or arose out of the one course of conduct.
· The size of the business enterprise involved.
· Whether or not the breaches were deliberate.
· Whether senior management was involved in the breaches.
· Whether the party committing the breach had exhibited contrition.
· Whether the party committing the breach had taken corrective action.
· Whether the party committing the breach had cooperated with the enforcement authorities.
· The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and
· The need for specific and general deterrence.
Considerations relevant to this case are:
a)whether there had been similar previous conduct by the respondents;
b)the circumstances in which the conduct took place;
c)the nature and extent of the conduct;
d)the nature and extent of any loss or damage sustained as a result of the breaches;
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)the deliberateness of the breaches;
h)contrition, corrective action and co-operation with the enforcement authorities;
i)compliance with minimum standards; and
j)the need for specific and general deterrence.
In determining the penalties to be imposed I have had regard to the principle of proportionality, the purposes of sentencing and the task of instinctive synthesis of various factors into a single result which were discussed by Barker J in Australian Building & Construction Commissioner v Construction, Forestry, Mining & Energy Union (No 2) (2010) 199 IR 373 at 376 [4]-[7].
Similar previous conduct
A proceeding similar to the present one was brought against ASAP in 2012: Fair Work Ombudsman v Australian Sales & Promotions Pty Ltd [2013] FCCA 1502 which, according to the reasons for judgment, was commenced on 9 August 2012 (“2012 proceeding”). In that case ASAP admitted that it had treated five employees as independent contractors rather than as employees and that, amongst other associated contraventions, had failed to pay minimum wages, casual loadings and Saturday loadings to those employees and had failed to make and keep employee records as required by the FW Regulations.
The reasons for judgment in the 2012 proceeding record that, amongst other matters, ASAP admitted in a statement of agreed facts dated 28 March 2013 that:
a)after the employees the subject of that proceeding had completed initial training, it had required each of them to complete and sign a document titled “Contractor Agreement”;
b)during their periods of engagement it had required the employees:
i)to attend its premises in the morning and participate in group activity or training during which the employees were required to practise suggested sales pitches or dialogue;
ii)to notify it of all sales at the end of each day so that the sales could be processed;
c)it directed the employees as to the location, time and manner in which they were to perform door-to-door sales work:
i)the contractor agreement provided that each of the employees’ “Sales Territory” was “as directed”;
ii)the employees were required to attend its premises by 9:30am each morning and were driven to a location it specified;
iii)the employees were required to return to a specified pick up point at the relevant location by 6pm and were driven back to its premises;
iv)a code of conduct required the employees to “call or SMS your team leader if you are running late, also you must never leave the field without your team or in extreme circumstances at least call your team leader prior to leaving”;
v)the employees were required to work full-time hours Monday to Friday; and
vi)the employees were provided with sales scripts to follow;
d)the employees were provided with and required to wear its clients’ clothing for each of their marketing campaigns;
e)the employees did not promote to the public any business of their own;
f)cl.5.1 (b) of the contractor agreement stated: “The Contractor must (b) not engage any other person to perform marketing services without the prior written consent of ASAP”;
g)cl.19.2 of the contractor agreement stated: “Neither party may assign or transfer, whether in whole or in part, the benefit of this agreement or any rights or obligations hereunder, without the prior written consent of the other party”;
h)it determined the employees’ commission structure and rates without negotiating with them; and
i)the employees were not required to have any qualifications or prior experience.
In the 2012 proceeding ASAP also admitted that, in contravention of s.535 of the FW Act, it had failed to make and keep pay records for each employee as required by the FW Regulations.
It is apparent that the conduct admitted in the present case is very similar to the conduct admitted in the 2012 proceeding. The significance of previous conduct of a sort similar to the conduct the subject of a subsequent and discrete penalty proceeding was discussed by Barker J in ABCC v CFMEU (No 2) in the following terms:
The parties agree that the applicable principles in relation to this factor are as follows:
(1)Similar prior relevant conduct may be taken into account in assessing penalty, but it cannot be given such weight as to lead to the imposition of a penalty that is disproportionate to the gravity of the instant contravention: Veen v The Queen (No 2) (1988) 164 CLR 465 (Veen), Mason CJ, Brennan, Dawson and Toohey JJ at 477.
(2)Similar previous conduct may demonstrate that a respondent has a history of engaging in the particular conduct in question, that the penalties previously imposed were insufficient to deter the respondent from re-engaging in that conduct and that the respondent has failed to take adequate steps to prevent further contraventions Veen at 477; Mahoney at [44]; Temple v Powell [2008] FCA 714; (2008) 169 FCR 169; 173 IR 189 (Temple) at [64].
(3)A respondent is not to be punished again for the prior conduct. Prior conduct may diminish leniency by reason of good character, having an upward affect [sic] on penalty, albeit within the proper limits indicated by the circumstances of the immediately contravening conduct: R v McInerney (1986) 42 SASR 111 (McInerney), King CJ at 113.
(4)The effect of prior contravening conduct is more cogent if it has been the subject of conviction. If not, the prior conduct is still relevant but perhaps of less weight: McInerney, King CJ at 113 and Cox J at 124; Williams v Construction, Forestry, Mining and Energy Union (No 2) (2009) 182 IR 327 (Williams (No 2)), Jessup J at [26]-[28].
(5)Whether previous misconduct is relevant to fixing a penalty is a question of logic: Temple at [63].
(6)Conduct of a different character does not assist: Leighton Contractors Pty Ltd v Construction, Forestry, Mining and Energy Union (2006) 164 IR 375 (Leighton Contractors) at [67]; Mahoney at [44].
(7)The quality of the conduct and its relevance to the industrial behaviour which the instant legislation seeks to address is determinative, not whether the prior conduct arose under different legislation or different provisions of the instant legislation: Mahoney at [46]; Williams (No 2) at [16]-[17].
(8)Prior relevant conduct includes prior relevant conduct of officials from other branches of the union: Williams (No 2) at [19]-[25].
The respondents submit that to these general propositions ought to be added the following:
(9)Only conduct preceding that in question is taken into account when fixing penalties: Temple at [62].
(10)Past conduct cannot operate so as to increase the penalty beyond that which would be appropriate to the conduct in question: Temple at [63].
(11)Contraventions within a different branch of the union are relevant, but are to be given less weight than contraventions within the branch in question: Draffin v Construction, Forestry, Mining and Energy Union (2009) 189 IR 145 (Draffin) at [72].
(12)Although similar conduct which has been found to contravene other legislative provisions may have potential relevance, including contraventions of Pt 9 of the Workplace Relations Act 1996 (Cth) relating to unlawful industrial act and coercion, conduct which is of a different character does not assist the penalty assessment: Mahoney at [44].
I generally accept the qualifications or refinements of the generally agreed principles, for which the respondents contend. (at 382-384 [47]-[49])
Having regard to the considerations accepted by Barker J, I conclude that the conduct of ASAP which was the subject of the 2012 proceeding should be taken into account in this proceeding.
Those facts should also be taken into account in relation to the proper penalties to be imposed on Mr Ainsworth. In that regard, an Australian Securities and Investments Commission search annexed to Mr O’Brien’s affidavit disclosed that Mr Ainsworth has been a director of ASAP since 10 January 2012 and has been the sole director since 24 September 2012. It must be inferred that he was aware of the contents of the statement of agreed facts filed in the 2012 proceeding before it was signed for ASAP on 28 March 2013 and also aware of the allegations made against ASAP for some time before that. I conclude that such knowledge preceded the engagement of Mr Beckitt in early March 2013.
Circumstances in which the conduct took place
ASAP and, I infer, Mr Ainsworth were aware at all times relevant to this case that a person who worked in circumstances such as those of Mr Beckitt would ordinarily be characterised as an employee and not as an independent contractor. It appears, and I infer, that the interposition of PMA between ASAP and Mr Beckitt was designed to create some form of labour-hire arrangement which would distance ASAP from any potential employment relationship with Mr Beckitt. However, the absence of an arm’s-length relationship between ASAP and PMA meant that the arrangement could not be characterised in that way.
Further, the process by which Mr Beckitt was employed meant that he had no time to properly understand the documents which were presented to him for his signature. Additionally in this connection, Mr Beckett was newly arrived in Australia and could be expected to have been ignorant of Australian laws relating to employment and independent contractors. His unfamiliarity with Australia placed him in a position of particular vulnerability, something of which the respondents must have been aware. It is not insignificant in this context that Mr Beckitt was required to make payments to i.Contract which were plainly not explained to him. If they had been, the nature of the arrangement might have become apparent and caused Mr Beckitt to question the arrangement which was presented to him.
The nature and extent of the conduct
The conduct in which the respondents admittedly engaged has been summarised earlier in these reasons. Principally and in substance, Mr Beckitt was an employee although the legal arrangement he was induced to enter misleadingly purported to make him an independent contractor and he was underpaid as a consequence of that mischaracterisation.
The structure which ASAP used involved two companies of which Mr Ainsworth was a director. Both of them worked with Mr Beckitt but neither of them purported to retain him as an employee. As already noted, it seems that a form of labour-hire arrangement was contrived to give ASAP detailed control over the work performed by Mr Beckitt without assuming the responsibilities of an employer while the terms of Mr Beckitt’s engagement with PMA were such that he was paid as an independent contractor.
The structure of the arrangement which ASAP presented to Mr Beckitt and encouraged him to enter into was one whereby all the business risks arising out of the fundraising operations Mr Beckitt conducted were transferred from ASAP to him in that his remuneration depended entirely on how successful he was in that speculative undertaking.
Nature and extent of the loss
Although the amount of money which Mr Beckitt was not paid was not large in absolute terms, it was very significant to him. The difficulties he encountered and the insecurity he felt, together with his much-diminished opportunity to enjoy and explore Australia, have already been set out. In large part, the respondents’ conduct frustrated the purpose of Mr Beckitt’s visa and his visit to Australia in the relevant period.
Moreover, not only was Mr Beckett underpaid but he was required to make insurance and service payments to i.Contract which he only became aware of when he sought to lodge a tax return in July 2013.
Whether the breaches arose out of one course of conduct
The Ombudsman accepted that, pursuant to s.557(1) of the FW Act, ASAP’s repeated contraventions of:
a)s.293 by failing to pay minimum wages to Mr Beckitt pursuant to cl.4 of NMWO 2012;
b)s.293 by failing to pay casual loading to Mr Beckitt pursuant to cl.5 of NMWO 2012;
c)s.293 by failing to pay casual loading to Mr Beckitt pursuant to cl.5 of NMWO 2013;
d)s.325 by requiring that Mr Beckitt spend part of an amount payable to him, totalling $465.30; and
e)s.535(1) by failing to make or keep employment records in respect of Mr Beckitt as required by reg.3.33(2) of the FW Regulations
each represented a single course of conduct such that ASAP should be subject to only one penalty for the repeated contraventions of each of those provisions.
Similar considerations apply to Mr Ainsworth.
Additionally, the two separate contraventions of s.293 arising out of the failure to pay Mr Beckitt casual loading were, in substance if not in form, one course of conduct, albeit one which arose over two national minimum wage order periods. The making of national minimum wage orders every financial year creates the artificial situation in this case that what would otherwise be a single course of conduct is one course of conduct under NMWO 2012 and another one under NMWO 2013. It is appropriate that that conduct be grouped together and treated as just one course of conduct: Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479 at [24]-[25].
Size and financial circumstances of the business
The evidence does not permit a confident view concerning the size of ASAP but it is apparent that Mr Ainsworth does not run the business alone. The smallness of a business may explain ignorance of industrial laws and instruments and some account may be taken of that, depending on the circumstances of each particular case. However, the structure employed by ASAP, involving PMA and i.Contract, was sophisticated and one which demonstrated thought and planning. There is no reason to think that the size of ASAP or its business should have any impact on the quantification of the penalties to be imposed.
It should also be noted that no submission was made concerning the capacity of ASAP to pay pecuniary penalties. However, even if one had been, ASAP’s own financial position and capacity to pay would be of less relevance in considering the size of a penalty than the objective of general deterrence: Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at 403 [69].
Deliberateness of the breaches
The employment arrangement which was the foundation of the contraventions which the respondents have admitted they committed has every appearance of having been developed as a result of the 2012 proceeding. What evidence there is satisfies me that ASAP’s intention was to enjoy the financial benefit of paying Mr Beckitt as an independent contractor while also enjoying the power and authority of an employer in the control it exercised over him in the course of his work.
It is true, as the respondents submitted, that there is nothing inherently unlawful in one person seeking to engage another to do certain work as an independent contractor. However, as already observed, it appears that the arrangement through which ASAP operated in relation to Mr Beckitt was a contrivance to distance ASAP from any potential employment relationship with him.
By the time Mr Beckitt started work, ASAP had been involved in the 2012 proceeding for some time and would have been aware of the likely consequences under the FW Act of confusing employees with contractors. ASAP must be taken to have been aware of the risk it was running if the arrangement it used was unsuccessful in making Mr Beckitt an independent contractor. Significantly, no evidence was adduced by the respondents to suggest that ASAP did not know and was not reckless as to whether Mr Beckitt’s contract was a contract of employment rather than a contract for services.
Because ASAP was willing to participate in an artificial arrangement which involved Mr Beckitt being ostensibly and wrongly retained as an independent contractor through PMA and because, as I infer, it was prepared to run the risk that Mr Beckett was properly to be characterised as an employee rather than an independent contractor, in circumstances where there is no evidence that ASAP did not know and was not reckless as to whether Mr Beckitt’s contract was a contract of employment rather than a contract for services, I conclude that all the contraventions which flowed from ASAP and PMA’s characterisation of Mr Beckitt as an independent contractor should be seen to have been deliberate.
In light of the admissions he has made and the matters discussed earlier at [63], Mr Ainsworth is to be taken to have been involved in ASAP’s decision-making on those questions.
Contrition, corrective action and co-operation with authorities
I am satisfied that ASAP and Mr Ainsworth co-operated freely with the Ombudsman’s office during the course of the investigation and then, before the commencement of this proceeding, paid Mr Beckitt the amounts he should have received or should not have been required to pay. A mistake which led to the payment to Mr Beckitt being made in two stages was, I accept, unintended and will have no effect on the penalties to be imposed. ASAP and Mr Ainsworth have also made the admissions contained in the statement of agreed facts which I accept is evidence of their acceptance of their wrong-doing. I also recognise the savings to the public purse and convenience to other litigants inherent in the parties’ consensual resolution of many issues of fact.
However, those matters only go so far in supporting the application of a discount to the penalties which will be imposed: Mornington Inn v Jordan at 404-405 [75]-[76]. In particular, I do not agree that payment of sums owed is evidence of contrition, contrary to dicta in Roughton v Pinjarra Crane & Access Hire Pty Ltd [2015] FCCA 481 at [32]-[33]. Belatedly doing what the law required be done at an earlier time amounts to no more than the late performance of a duty. Contrition involves regret and sorrow for prior misdeeds and a sense of penitence: Oxford English Dictionary; Macquarie Dictionary.
Mr O’Brien’s evidence indicates that advertisements similar to the one which attracted Mr Beckitt were still being published by ASAP earlier this year. In such circumstances, one might have expected the respondents to try to demonstrate that the conduct the subject of this proceeding was not being perpetuated with other workers. No such evidence was adduced. In ACE Insurance Ltd v Trifunovski (No 2) (2012) 215 IR 206 Perram J said, in comments which were not in issue on the subsequent appeal:
It is not clear to me how an artificial construct such as a corporation can experience the complex human emotion of contrition made up, as it is, of an amalgam of distinctly human emotions such as regret, shame and sympathy. I do not doubt that a corporation may exhibit signs of regret but it is too much to expect that such an artificial construct can be meaningfully contrite.
For civil penalty cases involving corporations it would be more coherent to ask only whether the corporation has changed its behaviour. Nothing more can be expected; a person who does not literally or physically exist may not wear sackcloth. (at 228-229 [113]-[114])
An acceptance of past transgressions does not amount to an intention to not repeat such conduct. There is no evidence that ASAP will not repeat, or is not repeating, conduct of the sort seen in Mr Beckitt’s case. Nor has Mr Ainsworth given any indication of remorse or regret for his part in the relevant events. The penalties to be imposed will reflect the respondents’ failure to demonstrate contrition or willingness to not repeat the contravening conduct.
The Ombudsman also pointed out that the respondents filed their defence to the amended statement of claim late. However, it was less than one month late out of time. It is to be noted in this regard that no defence to the original statement of claim had been filed as significant amendments to that pleading were foreshadowed a month after it was filed. The statement of agreed facts was also filed late but again by less than a month and the reasons for the delay were not explained. Although orders made by the Court should be observed in accordance with their terms, the breaches in question were minor and not suggestive, in my view, of conduct which should be taken into account on the question of what penalties to impose on the respondents.
I consider that a discount of 15% should be applied to the penalties which would otherwise be imposed.
Ensuring compliance with minimum standards
The sham contracting provisions of the FW Act exist to provide a safety net which ensures adequate minimum entitlements to employees, particularly those who are vulnerable or in low income roles. Significantly, Mr Beckitt was paid less than the national minimum wage which is the lowest floor in a safety net created under the FW Act. It is important that employers pay employees at least that amount.
The failure to keep necessary records, which might be a usual concomitant of sham contracting, is particularly pernicious aspect of arrangements such as Mr Beckitt’s because it makes the proper quantification of workers’ entitlements more difficult than would otherwise be the case.
I adopt what Judge O’Sullivan said in Fair Work Ombudsman v Bound for Glory Enterprises Pty Ltd [2014] FCCA 432 at [76]:
Ensuring compliance with minimum standards is an important consideration in this case. One of the principal objects of the FW Act is the maintenance of an effective safety net of employer obligations, and effective enforcement mechanisms. The failure to keep records by the respondents which is admitted arguably undermines and frustrates the attainment of that object. There is also the issue that the failure to keep the records themselves and the vice that conduct gives rise to. As was identified in Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258 and Fair Work Ombudsman v Orwill Pty Ltd & Anor [2011] FMCA 730 the problem where employers don’t keep proper records is that it creates a structure within which breaches of the industrial laws can easily be perpetrated. (reference omitted)
Deterrence
Given that there is no evidence that ASAP has abandoned the practices admitted to have occurred in this case or that Mr Ainsworth regrets his actions and will not repeat them, it is appropriate to impose penalties of a magnitude which will deter the respondents from repeating the relevant conduct.
Similarly, and particularly given the vulnerability of individuals such as Mr Beckitt, of whom there are many in Australia, in order to discourage others from repeating it, it is important that the Court makes it clear that conduct of the sort admitted in this case will be penalised.
Finally, persons should understand that attempting to evade the minimum employment conditions provided by the FW Act by contriving to make employees independent contractors can have serious financial consequences of an adverse kind.
PENALTIES
ASAP
When determining the appropriate penalties to be imposed on ASAP, I have taken into consideration the matters considered earlier in these reasons. I consider the appropriate penalties to be:
a)$30,600 for its contravention of s.357 of the FW Act;
b)$30,600 for its contravention of s.293 of the FW Act by failing to pay minimum wages to Mr Beckitt pursuant to cl.4 of the NMWO 2012;
c)$30,600 for its contravention of s.293 of the FW Act by failing to pay casual loading to Mr Beckitt pursuant to cl.5 of the NMWO 2012 and cl.5 of the NMWO 2013;
d)$30,600 for its contravention of s.325 of the FW Act; and
e)$20,400 for its contravention of s.535(1) of the FW Act.
Those penalties total $142,800. After a 15% discount they total $121,380. However, on review I believe that such a total is excessive. The penalty will be $100,000.
Paul Ainsworth
I have also taken into consideration the matters considered earlier in these reasons when determining the appropriate penalties to be imposed on Mr Ainsworth. I consider the appropriate penalties to be:
a)$6,120 for his involvement in ASAP’s contravention of s.357 of the FW Act
b)$6,120 for his involvement in ASAP’s contravention of s.293 of the FW Act by failing to pay minimum wages to Mr Beckitt pursuant to cl.4 of the NMWO 2012;
c)$6,120 for his involvement in ASAP’s contravention of s.293 of the FW Act by failing to pay casual loading to Mr Beckitt pursuant to cl.5 of the NMWO 2012 and cl.5 of the NMWO 2013;
d)$6,120 for his involvement in ASAP’s contravention of s.325 of the FW Act; and
e)$4,080 for his involvement in ASAP’s contravention of s.535(1) of the FW Act.
Those penalties total $28,560. After a 15% discount they total $24,276. I believe that such a total is just and appropriate given Mr Ainsworth’s central role in the management of ASAP and PMA but it will be rounded to $24,000 for the sake of convenience.
The penalties are to be paid to the Commonwealth within twenty-eight days.
I certify that the preceding ninety-seven (97) paragraphs are a true copy of the reasons for judgment of Judge Cameron
Date: 10 November 2016
6