Fair Work Ombudsman v Back Your Cause Pty Ltd
[2023] FedCFamC2G 955
•26 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Back Your Cause Pty Ltd [2023] FedCFamC2G 955
File number(s): BRG 178 of 2023 Judgment of: JUDGE VASTA Date of judgment: 26 October 2023 Catchwords: INDUSTRIAL LAW – Contraventions of Fair Work Act 2009 (Cth) – pecuniary penalty – deterrence Legislation: Fair Work Act2009 (Cth) s 546(1) Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Mason v Harrington Corporation Proprietary Limited t/as Pangaea Restaurant & Bar [2007] FMCA 7
Division: Division 2 General Federal Law Number of paragraphs: 33 Date of last submission/s: 4 September 2023 Date of hearing: In Chambers on the papers Solicitor for the Applicant: Clayton Utz Counsel for the Respondents: The Respondents did not provide submissions
Table of Corrections 30 October 2023 In Order 2, the words “to the Commonwealth” have been inserted between the words “penalty” and “for” ORDERS
BRG 178 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: BACK YOUR CAUSE PTY LTD ACN 604 344 24
First Respondent
AARON MURRAY
Second Respondent
ORDER MADE BY:
JUDGE VASTA
DATE OF ORDER:
26 OCTOBER 2023 AMENDED ORDER 30 OCTOBER 2023
THE COURT ORDERS THAT:
1.Pursuant to s. 546(1) of the Fair Work Act 2009 (Cth) (“FW Act”), the First Respondent pay a pecuniary penalty to the Commonwealth for the contravention in Declaration A of orders dated 7 August 2023 in the sum of $25,000, within 28 days of this order.
2.Pursuant to s. 546(1) of the FW Act, the Second Respondent pay a pecuniary penalty to the Commonwealth for the contravention in Declaration B of orders dated 7 August 2023 in the sum of $5,000, within 28 days of this order.
3.The Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
Notation: Order has been amended pursuant to Rule r.17.05(2)(h) Federal Circuit and Family Court (Division 2)(General Federal Law) Rules 2021 to add “to the Commonwealth” in order 2.
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
JUDGE VASTA
INTRODUCTION
On 20 April 2023, the applicant, Fair Work Ombudsman (“FWO”) asked this Court to make declarations against the first respondent, Back Your Cause Pty Ltd, and the second respondent, Aaron Murray, in that the first respondent and second respondent had contravened the Fair Work Act2009 (Cth) (“FW Act”). The applicant also sought the imposition of pecuniary penalties for the contravention.
The matter came before me on 26 June 2023. On that date, I had affidavits that satisfied me that the first respondent and second respondent had been properly served. Neither the first respondent, nor the second respondent, appeared before me on that day.
I ordered that the respondents file and serve a response and defence by 4 PM on 20 July 2023. I also ordered that if the respondents did not comply with that order, the applicant was at liberty to file and serve an application seeking default judgment.
The respondents did not comply with the order and the applicant filed an application for default judgment on 1 August 2023. That application came before me on 7 August 2023. On that date I made default orders as well as the declarations that had been sought.
I ordered that the applicant file and serve any material and submissions on the question of penalty by 4 September 2023. I ordered that the respondents file and serve any affidavit evidence and submissions on the question of penalty by 4 PM on 3 October 2023 and set the matter down for a penalty hearing on 23 October 2023.
I ordered that, in the event that the respondents did not file the material on the question of penalty, that the penalty hearing be vacated and the question of penalty be determined on the papers.
The respondents did not file any material and the applicant asked that the question of penalty be determined on the papers.
I have now considered all the material and will give my reasons as to what I consider to be the appropriate order.
Background
The first respondent is a company that has been incorporated since 2015. Its business is providing recruitment services for client companies. The second respondent is the general manager of the first respondent and is a person with the responsibility for the operation, management, and control of the first respondent. In effect, the second respondent is the controlling mind of the first respondent.
Ms Deborah Zink (“the employee”) began working for the first respondent on 27 July 2020. She finished working for the first respondent on 17 November 2021.
After her employment ceased, the employee contacted the applicant asking for assistance with respect to, what she believed to be, underpayments.
The investigation
On 21 June 2022, the applicant commenced an investigation in relation to the employment of the employee. The investigation found that the employee was engaged on a full-time basis as a Business Development Manager. It was determined that there was no award that actually applied in relation to her employment and thus, the employee was entitled to the national minimum wage.
The investigation found that the employee still had some accrued, but untaken, annual leave when she ceased employment. It was determined that she was not paid that entitlement when her employment ended. It was also found that, for the period 18 October 2021 until her termination date (17 November 2021), the employee was not paid the minimum wage.
The Compliance Notice
On 11 July 2022, the first respondent was served with a compliance notice. The compliance notice required the first respondent to remedy the effects of the contraventions.
It required the first respondent to identify the number of hours of untaken annual leave, identify what the first respondent had paid the employee, to pay the employee what was owed and to make a record of that payment.
The notice also required the first respondent to identify the number of hours that the employee worked during the period from 18 October 2021 until 17 November 2021, identify what had been paid to the employee, pay the employee what was owed and to make a record of such payment.
The notice required the first respondent to have completed those tasks by 8 August 2022 and to then produce reasonable evidence to the applicant of such compliance by 15 August 2022.
The first respondent failed to comply with the compliance notice. The only action that the first respondent took was to email pay slips to the applicant. However, those pay slips did not provide evidence of what was actually owed to the employee and the payslips were not evidence that there was actually any payment made in accordance with those payslips.
The calculations performed by the applicant showed that the employee had 123.58 hours of untaken accrued annual leave at the cessation of her employment. She was entitled to a base rate pay of $36.44 per hour for that annual leave. Those calculations also showed that the employee had worked for 232.5 hours prior to her termination date in which she was not paid wages. She was entitled to a minimum hourly rate of $20.33 for that time.
The total amount that was owed to the employee was, on the calculations of the applicant, $9,229.27.
Pecuniary penalties
The law in relation to assessment of pecuniary penalties has really been laid down quite comprehensively. The High Court, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3, said, at paragraph 116 of that judgment:
As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty's general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition.
The High Court reaffirmed that principle in the matter of Australian Building and Construction Commissioner v Pattinson [2022] HCA 13. The High Court said, at paragraph 46:
[46]It is important to recall that an “appropriate” penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. …
[47]The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors … where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
[48]It is not necessary to multiply examples further. It is sufficient to say that a court empowered by section 546 to impose an “appropriate” penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.
In Mason v Harrington Corporation Proprietary Limited t/as Pangaea Restaurant & Bar [2007] FMCA 7, which is known as the Pangaea case, the Court went through, in effect, a number of factors the Court should be mindful of when imposing pecuniary penalties. One must be careful, though, in looking at the Pangaea case (Supra), that one does not simply look at those matters as some form of checklist to see whether or not the facts of the case with the particular factors either aggravate or mitigate the penalty. As such, the list compiled in Pangaea (Supra) is extremely useful, but it should not be a formula used by the Court to slavishly come up with some sort of almost mathematical guide for the imposition of penalties.
Notwithstanding what has been said in Pattinson (supra), the principles in Pangea are still apposite when looking at the circumstances of the contravention as well as the circumstances of the contravenor.
Nature of the Compliance Notice regime
In accordance with the authorities, it is trite to say that deterrence is the primary objective of the imposition of pecuniary penalties. However, it is important to strike a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case.
The act of the first respondent (and the second respondent), which needs to be deterred, is the act of failing to comply with the compliance notice. In many ways, the size of the amount underpaid by an employer is not a particularly relevant factor. Whether the underpayment is $500, or $50,000, is a secondary consideration to the Court needing to deter the actual non-compliance with the compliance notice.
This is because the Court is not dealing with the first respondent (and second respondent) for contravening the payment provisions of the FW Act. It is dealing with the first respondent (and second respondent) for the failure to comply with the compliance notice.
The Court has said, on numerous occasions, that the compliance notice regime is one of the true benefits of the FW Act. It allows for identification to be made of the contravention but allows an employer the opportunity to rectify that contravention without any penalty - either monetary or otherwise. It is for this reason that failing to comply with a compliance notice is seen by the Court as a very serious contravention.
Factors
The Court has not had the courtesy of the first respondent (or the second respondent) engaging with this process. On the evidence before the Court, that lack of engagement is also illustrated by the peremptory way that the first respondent treated their obligations under the compliance notice.
As the task of the Court is to find the “appropriate” penalty, that task is made more difficult when the Court does not have any material from the first respondent or the second respondent. The Court can only assume that the company is still a going concern (the Court has evidence that the company is still registered) and that it has sufficient funds to have met the requirements of the compliance notice.
The fact that the first respondent, and the second respondent, have treated the compliance notice with contempt is a factor where the Court must send a very strong deterrent message.
Conclusion and orders
In keeping with the principles that have been espoused by the High Court, I have concluded that a pecuniary penalty against the first respondent of $25,000 is warranted. I have concluded that a pecuniary penalty against the second respondent of $5000 is warranted.
I will make orders in those terms.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Vasta. Associate:
Dated: 26 October 2023
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