Fair Work Ombudsman v Azman
[2022] FedCFamC2G 198
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Azman [2022] FedCFamC2G 198
File number(s): SYG 1860 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 25 March 2022 Catchwords: INDUSTRIAL LAW – assessment of pecuniary penalty for admitted contravention of s 716(5) of the Fair Work Act 2009 (Cth). Legislation: Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) ss 90(2), 539(1), 539(2), 546, 557A, 700, 716(2), 716(5), 717
Timber Industry Award 2010 cls 17.2, 26.2, 30.1(a)
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The BKH Contractors Case) (No 2) [2018] FCA 1563
Bevis v VA Holdings Pty Ltd trading as Granton Homes & Ors [2020] FCCA 2082
Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492
Fair Work Ombudsman v VS Investment Group Pty Ltd [2013] FCCA 208
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Division: Fair Work Number of paragraphs: 35 Date of hearing: 15 March 2022 Place: Sydney Solicitor for the Applicant: Ms C Leach of the Office of the Fair Work Ombudsman, by video Solicitor for the Respondent: Mr J O’Shaughnessy of Wright Law ILP, by video ORDERS
SYG 1860 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: RAMAZAN AZMAN
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
25 MARCH 2022
THE COURT DECLARES THAT:
1.The respondent contravened s 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with a compliance notice given to the respondent on 25 March 2021 pursuant to s 716(2) of the FW Act.
THE COURT ORDERS THAT:
2.Pursuant to s 546(1) of the FW Act the respondent pay a pecuniary penalty in the sum of $2,664 in relation to the contravention identified in declaration 1.
3.The respondent pay the pecuniary penalty referred to in order 2 to the Commonwealth by 22 April 2022.
4.The parties have liberty to apply within 7 days’ notice in relation to any question that may arise concerning the implementation of these orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
The applicant (FWO) applies under s 546 of the Fair Work Act 2009 (Cth) (FW Act) for an order that the respondent, Mr Azman, pay a pecuniary penalty because of his admitted contravention of s 716(5) of the FW Act. The FWO also claims a declaration that reflects Mr Azman’s admitted contravention of the FW Act.
I will begin by setting out the relevant admitted facts,[1] the provision of the FW Act Mr Azman admits he contravened, and the contraventions themselves.
[1] These are contained in a Statement of Agreed Facts filed on 26 November 2021
ADMITTED FACTS AND CONTRAVENTIONS
Mr Azman is and was at all relevant times a sole trader holding an Australian Business Number and operating a kitchen manufacturing and installation business trading as “Award Kitchens” in New South Wales. At all relevant times Mr Azman was required to comply with the FW Act in relation to his employees.
In or around December 2020, the FWO commenced an investigation into Mr Azman’s compliance with Commonwealth workplace laws after receiving a request for assistance from Mr Yucel Gungor (Employee) on or around 3 December 2020. At all relevant times, Mr Meehan, a Fair Work Inspector appointed under s 700 of the FW Act, had carriage of the investigation.
As a result of the investigation, Mr Meehan formed the belief that: the Employee was employed by Mr Azman in the period 9 July 2018 to 6 August 2020 (Employment Period); the Timber Industry Award 2010 (Award) covered and applied to the Employee’s employment; the Employee worked full-time; the Employee was entitled to be classified as a “Level 1 Timber Furniture Production Employee”; the Employee was paid flat hourly rates of pay, which did not meet his minimum hourly rate or overtime entitlements; and at the end of the Employment Period, the Employee was not paid anything by Mr Azman for his accrued untaken annual leave.
Because of the matters referred to in paragraph 5, Mr Meehan formed a reasonable belief that Mr Azman contravened cl 17.2 of the Award, cl 30.1(a) of the Award, and s 90(2) of the FW Act (Contraventions).
Compliance Notice
On 25 March 2021, Mr Meehan gave a notice to Mr Azman pursuant to s 716(2) of the FW Act (Compliance Notice).
The Compliance Notice was sent via express post to Mr Azman’s last known business address.
The Compliance Notice required Mr Azman to:
(a)take action (Specified Action) to remedy the direct effects of the Contraventions by 30 April 2021 by:
(i)calculating and paying to the Employee the amounts owing in respect of the Contraventions;
(ii)in respect of the amounts paid to the Employee in compliance with the Compliance Notice, calculating additional superannuation contributions required by cl 26.2 of the Award and paying such contributions to the Employee’s superannuation fund; and
(b)produce to the FWO reasonable evidence of the steps taken by Mr Azman to comply with the Compliance Notice by 7 May 2021, including:
(i)details of Mr Azman’s calculations; and
(ii)proof of full payment of the amounts described in paragraph 9(a)(i) and 9(a)(ii) above.
Mr Azman admits that he failed to take the Specified Action by 30 April 2021, and he failed to produce evidence of compliance with the Compliance Notice by 7 May 2021.
Mr Azman admits that, because of the matters referred to in paragraphs 5 to 10 above, he failed to comply with the Compliance Notice, and for that reason contravened s 716(5) of the FW Act.
Rectification of underpayment
Had Mr Azman taken the Specified Action, the Employee would have been paid $21,026.27 in relation to the entitlements set out in paragraph 6 above: $10,644.14 in relation to the contravention of cl 17.2 of the Award; $6,039.83 in relation to the contravention of cl 30.1(a) of the Award; and $4,342.30 in relation to the contravention of s 90(2) of the FW Act. The Employee also would have had the benefit of $1,030.79 in superannuation contributions.
On or around 20 May 2021, Mr Azman paid $4,774 to the Employee.
On or around 1 and 2 November 2021, Mr Azman paid $6,847.50 to the Employee, and $1,030.79 in relation to the Employee’s superannuation.
On 23 November 2021 Mr Azman further paid the Employee $4,342.30.
As at 26 November 2021, being the date the Statement of Agreed Facts was filed, Ms Azman still owed the Employee $5,062.47. On 17 January 2022, however, Mr Azman paid $5,062.47 to the Australian Taxation Office in relation to Pay As You Go taxation amounts for the Employee. Therefore, there are no additional amounts owing to the Employee.[2]
PENALTY
[2] Applicant’s Submissions on Penalty, [19]
Power and principles
Subsection 546(1) of the FW Act provides that this Court may, on application, order a person to pay a pecuniary penalty the Court considers is appropriate if the Court is satisfied the person has contravened a “civil remedy provision”.[3] That expression is defined in s 539(1) of the FW Act to include the provisions identified in column 1 of the table to s 539(2) of the FW Act. Subsection 716(5) is in column 1 of the table to s 539(2) of the FW Act.
[3] I repeat in this and the following 4 paragraphs what I said in Bevis v VA Holdings Pty Ltd trading as Granton Homes & Ors [2020] FCCA 2082, at [33]-[38]
Subsection 546(2) of the FW Act provides that the pecuniary penalty the Court may impose must not, where the person is an individual, be more than “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2)” and, if the person is a body corporate, must not be more than five times “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2)”. The maximum penalty units for a contravention of s 716(5) of the FW Act as at 30 April 2021, being the day by which Mr Azman was required to carry out the Specified Action, are 30 penalty units for an individual, and 150 penalty units for a body corporate. (This excludes “serious contraventions”, as defined in s 557A of the FW Act.) Section 12 of the FW Act provides that “penalty unit” has the meaning given by s 4AA of the Crimes Act 1914 (Cth). The penalty unit provided for by s 4AA of that Act as at 30 April 2021 was $222. Thus, $6,660 is the maximum penalty Mr Avalos may be ordered to pay for his contravention of s 716(5) of the FW Act.
The approach of most judges when assessing penalties for a single contravention of a provision of the FW Act is to take into account the non-exhaustive considerations Tracey J identified in Kelly v Fitzpatrick,[4] which his Honour adopted from the judgment of Mowbray FM in Mason v Harrington Corporation Pty Ltd.[5] Those considerations are:
[4] Kelly v Fitzpatrick [2007] FCA 1080, at [14]
[5] Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
(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 respondent;
(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;
(j)whether the party committing the breach had taken corrective action;
(k)whether the party committing the breach had cooperated with the enforcement authorities;
(l)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
(m)the need for specific and general deterrence.
Also relevant is the maximum penalty for the contravention provided for by the FW Act; and here I refer to the following passage from the judgment of Flick J in The BKH Contractors Case (No 2):[6]
In undertaking the task of assessing and quantifying the penalties to be imposed, the maximum penalty prescribed by the Commonwealth legislature for a specific contravention serves as a “yardstick” against which the assessment of penalties is generally to proceed . . . .
[6] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The BKH Contractors Case) (No 2) [2018] FCA 1563, at [19]
Nature, extent, circumstances and deliberateness of the contravening conduct
The Compliance Notice, which was emailed and posted to Mr Azman, set out the steps required to comply with the Compliance Notice and the potential consequences of failing to do so. Mr Azman did not fully rectify the underpayment until 17 January 2022, eight months after the time specified by the Compliance Notice.
The FWO submits it gave Mr Azman “ample opportunity to rectify his non-compliance”. The FWO further submits that Mr Azman initially sought to review the reasonableness of Mr Meehan’s belief, but he did not institute a review under s 717 of the FW Act, despite being on notice of the consequences of failing to comply with the Compliance Notice. The FWO also submits that Mr Azman’s contravention was deliberate because Mr Azman was aware of what he was required to do to comply with the Compliance Notice, but he chose not to. The FWO further submits that Mr Azman’s failure to comply with the Compliance Notice represents a serious disregard of the enforcement powers of the FWO.[7]
[7] Applicant’s Submissions on Penalty, [28]-[31]
Mr Azman, on the other hand, submits the contravention was not deliberate, but resulted from an incorrect understanding of the Award.[8] In his affidavit Mr Azman says that he was initially “unaware that the Employee was being paid under the incorrect Award”.[9]
[8] Respondent’s Submissions on Penalty, [17]
[9] Affidavit of Mr Azman 09.02.2022, [5]
In assessing the parties’ competing submissions, the following passage from the judgment of Judge Emmett in Fair Work Ombudsman v Viper Industries Pty Ltd applies to the nature of Mr Azman’s contravention of s 716(5) of the FW Act.[10]
The Respondents’ intentional failure to comply with a mandatory notice issued by the workplace regulator is “conduct ... [which] undermines the utility and effectiveness of a fundamental object” [of] the FW Act. The failure to comply undermines and frustrates the powers conferred on Fair Work Inspectors, which are conferred for the purposes of providing an effective means of enforcing compliance with lawful minimum entitlements. There is a significant cost to the public by reason of the need to bring this matter before the court to enforce compliance.
[10] Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492, at [7]
I accept that Mr Azman may have had an incorrect understanding of his legal obligations; but I also accept that Mr Azman had sufficient opportunity to acquire an understanding of what his legal obligations are, and to comply with them. In particular, I find he had sufficient time to do so before the FWO commenced this proceeding.
These are matters that weigh in favour of assessing penalty at the higher end of the scale.
In his affidavit Mr Azman says that his business was “severely impacted by Covid” which “delayed [his] response”.[11] Mr Azman also says that this is the first time he has received a compliance notice in “more than 20 years of business”.[12] I give little weight to Mr Azman’s evidence that his business was “severely impacted” because he has given no evidence about how the COVID-19 pandemic affected his business, and how that in turn prevented him from complying with the requirements of the Compliance Notice. I accept that Mr Azman had not previously been given a compliance notice under s 716(2) of the FW Act; but the relevance of this is that Mr Azman’s contravention is to be assessed on the basis that Mr Azman has no record of any previous contravention of the FW Act.
[11] Affidavit of Mr Azman 09.02.2022, [7]
[12] Affidavit of Mr Azman 09.02.2022, [12]
Deterrence
Mr Azman has paid the amount owed to the Employee, and, for that reason, there is no need for the penalty to reflect any element for specific deterrence. As for general deterrence, I adopt what Judge Jarrett said in Fair Work Ombudsman v VS Investment Group Pty Ltd:[13]
The failure to comply with a notice properly issued by the applicant in the course of its investigations and the discharge of its statutory functions is serious. Recipients of such notices should be left under no misapprehension about their obligations to comply with those notices.
[13] Fair Work Ombudsman v VS Investment Group Pty Ltd [2013] FCCA 208, at [51]
The FWO referred to data contained in an industry profile of the “Carpentry Services” industry, and submitted there is a need to send a message to employers generally, and specifically to employers within the carpentry industry, that a failure to comply with a compliance notice will not be tolerated by the FWO, the community, or the courts.[14]
[14] Applicant’s Submissions on Penalty, [39]
The penalty should be set at a level that signals not only to employers in the carpentry industry, but to all employers that a wilful disregard of a compliance notice issued under s 716(2) of the FW Act will be met with a significant penalty.
Nature and extent of loss occasioned by contravention
The Employee was entitled to be paid $21,026.27, and superannuation contributions of $1,030.79. Mr Azman, however, has paid the amount in full. The FWO submits that the delay in the Employee receiving his wages and the significance of the entitlements is a relevant loss flowing from Mr Azman’s contravention.[15] These amounts are significant, and the delay in Ms Azman paying the Employee the amounts due to him constitute a significant loss.
[15] Applicant’s Submissions on Penalty, [41]
Contrition, corrective action, and cooperation
Mr Azman admitted his contravention and, as I have noted, Mr Azman has paid the amount owing to the Employee, although he did not pay all of the amounts he owed to the Employee until after the FWO commenced this proceeding. In his affidavit Mr Azman says he has consulted with his “accountant and [his] legal representative” and has “taken steps to prevent any future issues from arising”.[16]
[16] Affidavit of Mr Azman 09.02.2022, [13]
The FWO submits that Mr Azman should be afforded a 20% discount on account of his admissions and cooperation. I accept the FWO’s submission.
Assessment
The FWO submits that, it would be appropriate to impose mid to high range penalties (60%-70%) with a discount of 20% for Mr Azman’s admitted contravention of s 716(5) of the FW Act. Mr Azman’s solicitor notes that the Court has the discretion to reduce the penalty to be ordered if a person admits the contraventions and cooperates with the Court process. In my opinion, it would be appropriate to assess penalty at 50% of the maximum amount ($3,330) and apply to that a 20% discount ($2,664).
DISPOSITION
I will make a declaration that Mr Azman contravened s 716(5) of the FW Act; and I will order that Mr Azman pay a pecuniary penalty in the amount of $2,664 to the Commonwealth within 28 days after the day on which I pronounce my orders.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 25 March 2022
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