Fair Work Ombudsman v AVA Travel Pty Ltd

[2018] FCCA 3627

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v AVA TRAVEL PTY LTD & ORS [2018] FCCA 3627

Catchwords:
INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – assessing penalty – deterrence.

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

INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – amount of penalty – totality and proportionality.

Legislation:

Crimes Act 1914 (Cth), s.4AA
Evidence Act 1995 (Cth), s.191
Fair Work Act 2009 (Cth), ss.44, 45, 90(2), 323, 357(1), 358, 535, 536, 546, 550(1), 557(1), 557(2)
Fair Work Regulations 2009 (Cth)
Passenger Vehicle Transportation Award 2010

Cases cited:

Australian Ophthalmis Supplies Pty Ltd v MsAlary-Smith [2008] FCAFC 8
Commonwealth of Australia v Director Fair Work Building Industry Inspectorate (2015) 254 CLR 482
Johnson v R (2004) 205 ALR 346
Pearce v R (1998) 194 CLR 610

Applicant: FAIR WORK OMBUDSMAN

First Respondent: AVA TRAVEL PTY LTD

Second Respondent: TERRY HUANG

Third Respondent: CHIN KUEN YUNG

Fourth Respondent: JTH ENTERPRISES PTY LTD

File Number: BRG 1167 of 2016

Judgment of: Judge Jarrett

Hearing date: 18 December 2017

Date of Last Submission: 18 December 2017

Delivered at: Brisbane

Delivered on: 7 December 2018

REPRESENTATION

Counsel for the Applicant: Ms Coulthard

Solicitors for the Applicant: Office of the Fair Work Ombudsman

Solicitors for the First, Third and Fourth Respondents: Woods Prince Lawyers

ORDERS

1. The application against the fourth respondent is dismissed.

BY CONSENT THE COURT DECLARES THAT:

1. The first respondent contravened the following provisions of the Fair Work Act 2009 (Cth):

   (a)s.357(1) by representing to certain of its employees that the contract of employment under which those employees were employed would, from 1 October, 2014 be a contract for services under which those employees performed work as independent contractors;

   (b)s.357(1) by making the continuing representations that the contract of employment under which those certain employees were employed was, from 1 October, 2014 a contract for services under which those employees performed work as independent contractors;

   (c)s.358 by threatening to dismiss those employees in order to engage them as independent contractors;

   (d)s.45 by contravening:

   (i)     clause 14.1 of the Passenger Vehicle Transportation Award 2010 by failing to pay Minimum Rate to certain of its employees;

   (ii)    clause 10.5(c) of the Award by failing to pay Casual Loading to its employee Anthony Lee;

   (iii)     clause 23.2 of the Award by failing to pay Saturday penalty to certain of its employees;

   (iv)   clause 23.2 of the Award by failing to pay Sunday penalty to certain of its employees;

   (v)    clause 23.4 of the Award by failing to pay Public Holiday penalty to certain of its employees;

   (vi)   clause 23.1 of the Award by failing to pay Monday to Saturday Overtime rates to certain of its employees;

   (vii)    clause 23.2 of the Award by failing to pay Sunday Overtime rates to certain of its employees;

   (viii)  clause 23.5 of the Award by failing to pay Early/Late Penalty to certain of its employees;

   (ix)   clause 10.5(d) of the Award by failing to pay Casual Minimum Engagement Pay to its employee Anthony Lee;

   (x)    clause 10.3(b) of the Award by failing to pay Full Time Minimum Engagement Pay to its employee Harry Hong;

   (xi)   clause 21.5 of the Award by failing to pay Waiting Time rates to certain of its employees;

   (xii)    clause 20.2 of the Award by failing to make Superannuation Payments to the employees during the period one October, 2014 to 31 December, 2014;

   (xiii) clause 19.1 of the Award by failing to pay its employees weekly or fortnightly;

   (xiv)   clause 19.2 of the Award by failing to pay its employees within two days of the expiration of the pay period;

   (e)s.44 by failing to pay annual leave entitlements to Harry Hong on termination as required by s.90(2) of the Fair Work Act;

   (f)s.323 by failing to pay its employees at least monthly;

   (g)s.535 by failing to keep records as required by Fair Work Regulations 2009 (Cth) in relation to its employees; and

   (h)s.536 by failing to provide certain of its employees with a pay slip containing the contents prescribed by the Fair Work Regulations.

2. The third respondent was involved in the first respondent’s contraventions set out in declaration (2)(a) and 2(b) hereof within the meaning of that phrase as used in s.550(1) of the Fair Work Act.

BY CONSENT THE COURT ORDERS THAT:

1. Pursuant to s.545(1) of the Fair Work Act that the first respondent undertake, or at its expense engage a third party with qualifications in accounting or workplace relations to undertake, an audit of its compliance with the Fair Work Act and Passenger Vehicle Transportation Award 2010 on the following terms:

   (a)the audit period will be the period commencing on 1 July, 2014 and ending six months after the date of this Statement of Agreed Facts (the “audit period”);

   (b)the audit will be completed in two phases as follows:

   (i)     Phase 1 of the audit:

   A.  will apply to:

   (a)Chris Lee, Desmond Choy and Chinlian Lin who were employed or otherwise engaged to perform work for the first respondent during the audit period; and

   (b)Harry Hong and Anthony Lee in respect of any periods of engagement falling outside of the period 1 July, 2014 to 31 December, 2014;

   B.  is to be completed within sixty (60) days of the end of the audit period;

   (ii)    Phase 2 of the audit:

   A.  will apply to all employees and persons otherwise engaged to perform work for the first respondent at any time during the audit period and not covered in Phase 1 of the audit;

   B.  is to be completed within six months of the end of the audit period;

   (c)according to each employee’s classification of work, category of employment, and hours worked during the audit period, the audit will assess the first respondent’s compliance with the following obligations:

   (i)wages and work related entitlements under the Award, other industrial instruments or national minimum wage orders;

   (ii)accrual and payment of entitlements under the National Employment Standards in Part 2-2 of the Fair Work Act;

   (iii)method and frequency of payment as required by s.323 of Fair Work Act;

   (iv)permitted deductions as required by s.325 of the Fair Work Act;

   (v)prohibitions with respect to sham contracting arrangements under Division 6 of Part 3-1 of the Fair Work Act; and

   (vi)record keeping and pay slip requirements in Division 3 of Part 3-6 of the Fair Work Act.

   (d)within thirty (30) days of the completion of each phase of the audit, the first respondent will provide to the applicant:

   (i)a copy of the audit report which will include a statement of the methodology used in the audit; and

   (ii)written details of any contravention(s) identified in the audit, the steps the first respondent will take to rectify any identified contravention(s) and by when the rectification will occur.

THE COURT FURTHER ORDERS THAT:

1. Pursuant to s.546(1) of the Fair Work Act the first respondent pay a pecuniary penalty in respect of the contraventions set out in declaration (2) hereof of $164,475.

2. Pursuant to s.546(1) of the Fair Work Act the third respondent pay pecuniary penalties in respect of the contraventions set out in declaration (2)(a) and (2)(b) hereof of $3,825.

3. Pursuant to s.546(3)(a) of the Fair Work Act the penalties be paid to the Consolidated Revenue Fund of the Commonwealth within twenty-eight (28) days of the date of this order.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 1167 of 2016

FAIR WORK OMBUDSMAN

Applicant

And

AVA TRAVEL PTY LTD

First Respondent

TERRY HUANG

Second Respondent

CHIN KUEN YUNG

Third Respondent

JTH ENTERPRISES PTY LTD

Fourth Respondent

REASONS FOR JUDGMENT

1. These reasons relate to the penalties to be imposed upon the first and third respondents because of certain admitted contraventions of the Fair Work Act 2009 (Cth) committed by the first respondent.

2. The third respondent was the sole director, secretary and shareholder of the first respondent.  The third respondent admits that he was involved in within the meaning of s.550(1) of the Fair Work Act in the first respondent’s contraventions of the Act as alleged by the applicant.

3. The first respondent has agreed to the relief sought by the applicant in respect of certain declarations and other matters.  The third respondent has agreed to certain declaratory relief sought by the applicant against him.  The matters to be determined by the Court are the pecuniary penalty orders that are to be made in respect of the first respondent and the third respondent.

4. By an order of this Court on 25 August, 2017 these proceedings against the second respondent were dismissed with no orders to costs.  Further, the applicant seeks no relief against the fourth respondent and the proceedings against the fourth respondent should also be dismissed.

Background

1. The first respondent operated a tourist bus coach business servicing two companies in Queensland. 

2. These proceedings concern the conduct of the first respondent, in which the third respondent was involved, towards three of its employees, Mr Harry Hong, Mr Chris Lee and Mr Anthony Lee in their employment with the first respondent in the period from 1 July, 2014 to 31 December, 2014. The three employees commenced employment with the first respondent at different times, but all were employed during the period I have just specified.

3. Each gentleman worked as a coach driver of tourist buses transporting tourists around the Gold Coast and the Brisbane region of Queensland.  The tourist buses driven by the employees were passenger vehicles which undertook charter, single day tours, or which operated regularly between fixed terminals with a return distance of less than 650 km.  The Passenger Vehicle Transportation Award 2010.  Anthony Lee was engaged as a casual employee and Harry Hong was engaged as a full-time employee.  But, notwithstanding the nature of the employment of each of the employees, they were paid a simple flat rate of $20.59 for all hours that they worked throughout their employment.  Had they been paid pursuant to the terms of the Award they would have been entitled to a number up of other loadings and penalty rates, minimum engagement pay and waiting time pay.

4. The parties agree that in about September, 2014 the first respondent sent to each of the employees a text message which said:

   dear all, please apply ABN and give to accounting before the end of this month, AVA driver wages starting next month will be the way to go ABN recorded, super still will have until the end of the month but in the next month, replaced by ABN way no longer provides.

5. The apparent purpose of that text message was to advise the employees that they would be moving to independent contractor status rather than remain as employees of the first respondent. However, the work of the employees did not change in any way. The only real difference was that instead of submitting timesheets or job records, the employees submitted invoices to the first respondent and they were paid on those invoices. The same flat rate of pay that they were paid for each hour worked, remained.

6. However, despite the attempt to convert the employees to independent contractors, the first and third respondents now admit that the employees continued to be employed by the first respondent.

7. The applicant commenced an investigation into the first respondent and its workplace practices after it received a complaint from Mr Hong in 2015. There were some investigations carried out which led to the issuing of a contravention letter by the applicant to the first respondent late in that year. These proceedings were commenced in December, 2016.

8. Both respondents admit that the first respondent committed the following contraventions of the Fair Work Act:

   Sham contracting contraventions

   a)in contravention of s.357(1) of the Fair Work Act, it represented to its employees that the contracts of employment under which they were engaged by the first respondent would become a contract for services under which its employees would perform their work as independent contractors;

   b)in contravention of s.357(1) of the Fair Work Act, it made continuing representations to its employees that the contracts of employment under which they were engaged by the first respondent would become a contract for services under which they would perform their work as independent contractors;

   c)in contravention of s.358 of the Fair Work Act, it threatened to dismiss its employees in order to engage them as independent contractors;

   Underpayment contraventions totalling $43,477.21

   d)in contravention of s.45 of the Fair Work Act, it underpaid Harry Hong and Anthony Lee various wage entitlements under the Award;

   e)in contravention of s.45 of the Fair Work Act it failed to pay Harry Hong and Anthony Lee weekly or fortnightly as required by clause 19.1 of the Award;

   f)in contravention of s.45 of the Fair Work Act it failed to pay Harry Hong and Anthony Lee within two days of the expiration of a pay period as required by clause 19.2 of the Award;

   g)in contravention of s.44 of the Fair Work Act it failed to pay annual leave entitlements to Harry Hong on the termination of his employment as required by s.90(2) of the Fair Work Act;

   h)in contravention of s.45 of the Fair Work Act it failed to make superannuation contributions on behalf of its employees during the period from 1 October, 2014 to 31 December, 2014;

   i)in contravention of s.323 of the Fair Work Act it failed to pay its employees at least monthly;

   Record keeping and payslip contraventions

   j)in contravention of s.535 of the Fair Work Act it failed to keep records as required by the Fair Work Regulations 2009 (Cth); and

   k)in contravention of s.536 of the Fair Work Act it failed to provide its employees with a pay slip containing the contents prescribed by the Fair Work Regulations.

9. The third respondent admits that he was involved in those contraventions for the purposes of s.550(1) of the Fair Work Act.

10. The parties agree that by reason of the admitted contraventions relating to the payment of Award rates and entitlements the three employees were collectively underpaid $43,477.21.  Before these proceedings were commenced, the first respondent proposed a payment plan over six months to rectify those underpayments.  The plan was accepted by the applicant and on or around 15 May, 2017 the last payment was made by the first respondent.  The first respondent has therefore done that which it had a duty to do and paid the three employees named in these proceedings that to which they were entitled by law.

11. Two or more contraventions of the Fair Work Act may, depending upon the particular circumstances of the case, attract the operation of s.557(1) of the Act. By that subsection the Court must treat multiple contraventions of certain civil penalty provisions of the Act as a single contravention if the contraventions are committed by the same person and they arose out of a course of conduct by that person.

12. The parties agree that s.557(1) is engaged in this case. Leaving aside the contraventions of s.357(1) and 358 of the Act, each of the remuneration related contraventions and the record keeping contraventions involve multiple contraventions of each provision that gives rise to each separate obligation upon the first respondent. The contraventions were committed by the same person, namely the first respondent. If they arose out of the same course of conduct by the first respondent, they must be taken to constitute a single contravention. That is the legislatively mandated outcome.

13. The parties agree that by application of s.557(1) of the Act the following number of contraventions can be separately identified:

Section	Contraventions	Particulars
Section 357	6	Conversion Text was sent to each of the Employees (3 representations) + Continuing Representations were made to each of the Employees (3 representations).
Section 358	3	Conversion Text was sent to each of the Employees (3 threats to dismiss).
Section 45	14	Contravention of the following 14 award clauses: 1. clause 14.1 – Minimum rate; 2. clause 10.5(c) – Casual loading; 3. clause 23.2 – Saturday penalty; 4. clause 23.2 – Sunday penalty; 5. clause 23.4 – Public Holiday penalty; 6. clause 23.1 – Overtime (Monday to Saturday); 7. clause 23.2 – Overtime (Sunday); 8. clause 23.5 – Early/Late penalty; 9. clause 10.5(d) – Casual minimum engagement; 10. clause 10.3(b) – Full time minimum engagement; 11. clause 21.5 – Waiting time rates; 12. clause 20.2 – Superannuation; 13. clause 19.1 – Pay weekly/fortnightly; 14. clause 19.2 – Pay within two days of expiration of pay period.
Section 44	1	Failure to pay annual leave on termination in respect of Harry Hong only.
Section 323	1	Failure to pay at least monthly
Section 535	1	Failure to keep records
Section 536	1	Failure to issue payslips

1. As the authorities reveal, to the extent to which two contraventions found proved contain common elements, it would be wrong to punish the perpetrator twice for those contraventions. The Court may group separate contraventions together where the contraventions may be said to overlap or involve the potential punishment for the same or substantially similar conduct: Pearce v R (1998) 194 CLR 610 at [40], Johnson v R (2004) 205 ALR 346 at [27] – [34] and Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [46], [71], [72] and [93].

2. The parties agree that should I adopt that approach, which they both urge that I do, the contraventions with which the Court must deal may be summarised as follows:

Respondent	Section	Number of contraventions
First Respondent	Section 44	1 contravention
Section 45	10 contraventions
Section 323	1 contravention
Section 357	1 contravention
Section 358	1 contravention
Section 535	1 contravention
Section 536	1 contravention
Third Respondent	Section 357	1 contravention

1. I accept that is that an appropriate way to approach the contraventions in this case having regard to the common elements displayed between the various contraventions within each group. On that basis, and having regard to the fact that at the relevant times a penalty unit for the purposes of the fixing penalties under the Fair Work Act was $170 the maximum penalty that might be imposed upon the first respondent in respect of each of the first 14 contraventions set out in the table above is $51,000. In respect of the last two contraventions (ss.535 and 536), the maximum penalty is $25,500 for each contravention. The total maximum penalty that might be imposed upon the first respondent in respect of all of the contraventions is $765,000. In respect of the contravention of s.357 by the third respondent, the maximum penalty is $10,200.

Matters relevant to fixing the penalty

1. The overarching purpose for the imposition of civil penalties is “... to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [55].

2. The applicant points out that one of the stated purposes of the Fair Work Act is to provide a safety net of minimum entitlements for employees. It is right to acknowledge, therefore, that the underpayment contraventions represent a failure to provide the two employees who were the subject of those contraventions with basic and important conditions and entitlements under the Act and the Award.

1. The applicant argues that the “Employees were low skilled and reliant on their minimum award entitlements. They each spoke English as a second language and experienced difficulties understanding the English language beyond basic conversational English.”  However, I have some difficulty accepting that submission.  Each of the employees concerned gave evidence by way of affidavit in which they each deposed that they had the capacity to read, write and speak “basic conversational English”.  The jurats to their affidavits do not suggest that any of them required their affidavit to be interpreted to them for the purposes of swearing to the content of the affidavit.  The affidavits go beyond what I would consider “basic conversational English”.

2. There is no evidence given by Mr Hong for example that his English language skills prevented him from properly communicating with his employer, understanding what was happening in terms of his employment or in any other way disadvantaged him. Indeed on his evidence in August, 2015 he lodged a workplace complaint with the Fair Work Ombudsman because he was “upset with the Company for changing me to an ABN and hoped that the FWO could help me”. Mr Hong gives no evidence from which one might conclude that he is “low-skilled”.

3. The same observations can be made in respect of the evidence given by the employees, Anthony Lee and Chris Lee.

4. I reject the applicant’s submission that by reason of the low skilled work undertaken by the employees and the fact that English was their second language “the Respondents ought to have had a heightened awareness of the need to ensure proactive compliance with workplace relations obligations”.

5. The applicant submits and I accept that the evidence tends to show that the first respondent intended to convert its workforce over from employees to independent contractors.  The third respondent decided to do that based, it seems, upon some accounting or similar advice.

6. The respondents accept that the contravention of s.357(1) of the Act is serious. However, the contraventions relied upon in these proceedings only relate to three (3) employees.

7. The underpayments were to only two (2) employees, Mr Hong and Mr Anthony Lee. The total underpayment amount was $43,477.21 made up of:

   a)$ 27,938.61 in respect of Mr Hong; and

   b)$15,538.60 in respect of Mr Anthony Lee.

8. They are significant amounts in the context of the period over which the underpayments occurred.  Objectively, they are significant sums to workers earning relatively modest incomes.  It is also relevant to record that some of the underpayments arose because Mr Hong and Mr Lee were told that the maximum number of hours drivers could claim in one day was ten hours, which was further reduced to eight hours on or around June 2014.  At times, they worked shifts that were longer than the “maximum hours” and only claimed the maximum hours.

9. Another significant factor is that the underpayments were further compounded by delay in the payment of wages.  Mr Hong, Mr Chris Lee and Mr Anthony Lee each had to go without payment for months at a time, causing all three of them to rely on credit cards to pay for food, bills, loans, school fees and other household expenses.  They each depose that the delayed payment of wages was a source of stress, anger and worry, as one would expect. 

10. Mr Hong was not provided with personal leave or annual leave during his five years of employment. As a result, he did not take holidays and only occasionally took time off due to illness. He did not get paid sick leave.

11. The respondents submitted that much of the first respondent’s contravening conduct arose out of a single course of conduct.  But I do not think that was the case.  There was one distinct course of conduct related to the payment of flat hourly rates rather than by reference to Award entitlements and a second relating to the giving of what was described in the evidence as the “conversion text”.  The Award and record keeping contraventions commended at a time earlier than the sham contracting contravention.

12. The parties agree that the first and third respondents have not previously been the subject of proceedings by the applicant or the applicant’s predecessors for contraventions of workplace laws.

13. The applicant accepts that the first respondent is a small business. The size of the first respondent is still a consideration in determining a penalty. The first respondent’s balance sheet as at June 2017 shows total equity of $25,794.02. Moreover, since these proceedings were commenced, by reason of recent flooding, it is suggested that the first respondent’s business has either ceased to operate or alternatively is operating at a much reduced capacity. Whilst these matters are important, they do not detract from the proposition that an appropriate penalty should be imposed so as to make it clear that employees of small businesses are entitled to the very same protections offered by the Fair Work Act as employees of large operations.

14. I tend to the view that the evidence in this case does not establish that the first and third respondents embarked upon the course of action that has lead them here through a deliberate attempt to sidestep the obligations placed upon the first respondent as an employer under the Fair Work Act. I accept the submission for the respondents that the sham contracting contraventions have come about through clumsiness and inadvertence rather than anything else. However, there is no proper evidence before me which explains why the first respondent chose to pay the two underpaid employees a flat rate of pay that did not take into account all of their entitlements under the relevant award. Both were long-term employees and had been paid a flat rate of pay a considerable period of time before the sham contracting contravention came about.

15. I reject the submission that the sham contracting contravention came about because the first and third respondents wished to convert the employees to independent contractors so as to afford them more flexibility in their working arrangements.  As counsel for the applicant pointed out in submissions, the evidence of the employees is that after the “conversion text” was sent, their working arrangements did not change.  There is nothing in the evidence to suggest that they were told that their working arrangements were now “more flexible”.

16. The third respondent has admitted his involvement in the first respondent’s sham contracting contravention.  I accept the third respondent’s expression of contrition for his contravening conduct and the first respondent’s contraventions.  I accept that this is demonstrated through his co-operation by admitting the contraventions and rectifying the underpayments.  The underpayments to Mr Hong and Mr Anthony Lee were remedied by the first respondent by 15 May, 2017.

17. It is plain from the evidence that the rectification of the underpayments came about once both the applicant and the first and third respondents were satisfied about what was owed to the two employees.  The evidence demonstrates that for various reasons, that was not a straightforward process.  The evidence shows that:

    a)on 10 February, 2016 the applicant issued:

    i)against the first and fourth respondents (as a partnership), a contravention letter concerning the underpayments to Mr Hong and Mr Anthony Lee during the period from 1 October, 2014 to 31 December, 2014; and

    ii)against the first respondent, a contravention letter concerning the underpayments to Mr Hong and Mr Anthony Lee during the period from 1 July, 2014 to 30 September, 2014;

    b)on 18 March, 2016 the respondents’ lawyer wrote to the applicant’s representative:

    i)accepting that there was an underpayment to Mr Hong and Mr Anthony Lee;

    ii)not admitting contraventions of ss.357(1) or 535(1) of the Fair Work Act; and

    iii)requesting the respondents’ accountant further consider the findings in the contravention letter, with a view to making further submissions regarding the underpayments;

    c)between 8 April, 2016 and 12 May, 2016 the respondents’ lawyer and the applicant’s representative exchanged emails regarding the respondents’ calculations of the underpayments;

    d)on 27 May, 2016 the second respondent and the respondents’ lawyer met with the applicant’s representative regarding the calculations of the underpayments which resulted in:    

    i)the applicant’s representative advising she would review the calculations for the underpayments in light of the respondents’ calculations; and

    ii)the applicant’s representative issuing a Notice to Produce to the first respondent on 27 May, 2016;

    e)on 10 June, 2016 the first respondent produced documents to the applicant in response to that notice;

    f)the applicant’s representative between 8 and 9 November, 2016:

    i)withdrew the contravention letter against the first and fourth respondents; and

    ii)issued an amended contravention against the first respondent which included a revised position in respect of the contraventions alleged against the first respondent and a revised underpayment calculations in respect of Mr Hong and Mr Anthony Lee;

    g)on 2 December, 2016 the first respondent’s lawyer wrote to the applicant proposing a payment plan to rectify the total underpayment to Mr Hong and Mr Anthony Lee over a six month period by way of monthly instalments of $7,247.99 commencing on 15 December, 2016; and

    h)on 9 December, 2016 the applicant’s representative accepted the payment plan.

18. The evidence also demonstrates that during the applicant’s investigation the first and third respondents:

    a)provided the applicant with documentary evidence both voluntarily and pursuant to statutory notices;

    b)engaged with the applicant during the investigation with respect to the calculation of the underpayments;

    c)made relevant and appropriate admissions once these proceedings were commenced; and

    d)entered into the Statement of Agreed Facts with the applicant.

19. The third respondent has also admitted the sham contracting contravention made against him in a timely way.  I accept that the first and third respondents’ co-operation with the applicant and their conduct in these proceedings has resulted in the saving of considerable costs to the public purse by avoiding the need for a fully contested hearing.

20. The need for general deterrence in the present case is important and the law should mark its disapproval of the respondents’ conduct by setting a penalty which serves as a warning to others. 

Penalties

1. The respondents’ co-operation in the applicant’s investigation and in these proceedings has been significant.  Unlike many cases that have recently come before this Court, the respondents’ co-operation has been fulsome and unqualified.  In my view, the discount suggested by the applicant is insufficient in this case to recognise that co-operation.  In my view, an appropriate discount is 25% of the maximum. 

2. Objectively, the contraventions are serious and in my view, the third respondent recognises that. But taking into account that there has been no other contraventions of the Fair Work Act by the first respondent or the third respondent and that the first respondent has taken corrective action in a timely way, the penalty ranges suggested by the applicant in respect of the individual contraventions are too high.

3. In respect of the multiple contraventions of s.45 of the Fair Work Act relating to the underpayments, it seems to me that the best way of approaching that matter is to impose a penalty in respect of the most serious of those contraventions – the failure to pay the minimum rates and a lesser contravention penalty in respect of the other contraventions. That is not to ignore the fact that each individual obligation provided for in the Award is important and ought to be recognised, but the approach flows from the nature of the contraventions in this case, namely the payment of a flat rate which, in respect of each employee, seems to have had its genesis in a single decision by the employer.

4. Accordingly, in my view the following penalties are appropriate in respect of the first respondent’s contraventions:

Description of contravention	Maximum penalty	Discount for Co-operation: 25%	Percentage of maximum	Penalty
Section 357 – Sham contracting	$51,000	$38,250	50%	$19,125
Section 358 – Threat to engage as I/C	$51,000	$38,250	50%	$19,125
Section 45 – Minimum rate	$51,000	$38,250	40%	$15,300
Section 45 – Casual loading	$51,000	$38,250	20%	$7,650
Section 45 – Saturday penalty rates	$51,000	$38,250	20%	$7,650
Section 45 – Sunday penalty rates	$51,000	$38,250	20%	$7,650
Section 45 – Overtime	$51,000	$38,250	20%	$7,650
Section 45 – Early/late work penalties	$51,000	$38,250	20%	$7,650
Section 45 – Minimum engagement	$51,000	$38,250	20%	$7,650
Section 45 – Waiting time	$51,000	$38,250	20%	$7,650
Section 44 – Annual leave on termination	$51,000	$38,250	30%	$11,475
Section 45 – Superannuation	$51,000	$38,250	30%	$11,475
Sections 323 and 45 – Frequency of pay	$51,000	$38,250	30%	$11,475
Section 535 – Failure to keep records	$25,500	$19,125	30%	$11,475
Section 536 – Failure to provide payslips	$25,500	$19,125	30%	$11,475
Total	$765,000	$535,500	$164,475

1. The total penalty for the first respondent of $164,475 is an appropriate response to the first respondent’s offending.  I am not satisfied that a penalty of that magnitude will be crushing.

2. In respect of the third respondent’s contravention, a penalty of 50% of the maximum (reduced by 25%) is also appropriate. That sum is $3,825.00.

3. Accordingly, I make orders as set out at the commencement of these reasons.

I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Judge Jarrett

Associate: 

Date:  7 December 2018