Fair Work Ombudsman v Baruch
[2011] FMCA 1007
•7 December 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v BARUCH | [2011] FMCA 1007 |
| INDUSTRIAL LAW – Termination of employment – where applicants employed by respondent’s company – where applicants received no remuneration – whether s.182(3) Work Place Relations Act and item 5 of schedule 16 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 contravened – whether s.235(2) WRA and item 6, schedule 16 of the Transitional Act contravened – whether s.661(4) WRA and item 6, schedule 16 of the Transitional Act contravened. PROCESS AND PROCEDURE – Where matter heard pursuant to Part 13, Rule 13.03C(1)(e) of the Federal Magistrates Court Rules2001 (Cth) – where respondent unlikely to attend further proceedings – whether penalties hearing should be heard contemporaneously. INDUSTRIAL LAW – Penalties – factors going to penalty. |
| Workplace Relations Act1996 (Cth) ss.182(3), 235(2), 661(4), 719(2) Fair Work Act2009 (Cth) s.550 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) Federal Magistrates Court Rules2001 (Cth) |
| Gibbs & City of Altona (1992) 37 FCR 216 Mason & Harrington Corporation Proprietary Limited trading as Pangaea Restaurant & Bar (2007) FMCA 7 Kelly & Fitzpatrick (2007) Sharpe & Dogma Enterprises Proprietary Limited (2007) FCA 1550 |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | RON BARUCH |
| File Number: | SYG 682 of 2011 |
| Judgment of: | Raphael FM |
| Hearing date: | 7 December 2011 |
| Date of Last Submission: | 7 December 2011 |
| Delivered at: | Sydney |
| Delivered on: | 7 December 2011 |
REPRESENTATION
| Solicitors for the Applicant: | Fair Work Ombudsman |
| For the Respondent: | No Appearance |
ORDERS
Pursuant to subsection 719(1) of the Workplace Relations Act 1996 (WR Act) and subsection 546(1) of the Fair Work Act 2009 (Cth) (FW Act), a penalty of $6,000.00 be imposed on the Respondent in respect of his involvement in the contravention of subsection 182(3) of the WR Act and Item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) in relation to the employment of Joel Edward Donnelly and Daniel Enzo Scremin.
Pursuant to subsection 719(1) of the WR Act and subsection 546(1) of the FW Act, a penalty of $6,000.00 be imposed on the Respondent in respect of his involvement in the contravention of subsection 235(2) of the WR Act and item 6 of Schedule 16 of the Transitional Act I relation to the employment of Joel Edward Donnelly and Daniel Enzo Scremin.
Pursuant to subsection 719(1) of the WR Act and subsection 546(1) of the FW Act, a penalty of $6,000.00 be imposed on the Respondent in respect of his involvement in the contravention of subsection 661(1) of the WR Act and item 4 of Schedule 4 of the Transitional Act in relation to the employment of Joel Edward Donnelly and Daniel Enzo Scremin.
The penalties referred to in paragraphs 1 to 3 above be paid by the Respondent as follows:
(a)the amount of $3,530.26 of the penalties to be paid to Joel Edward Donnelly.
(b)the amount of $3,530.26 of the penalties to be paid to Daniel Enzo Scremin.
(c)the amount of $10,939.48 of the penalties to be paid to the Applicant.
The penalties listed in order 4 be paid within 28 days.
The Respondent provide to the Applicant copies of banking documentation evidencing that the payment has been made in accordance with order 4(a) and (b) above, within 30 days of payment.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 682 of 2011
| FAIRWORK OMBUDSMAN |
Applicant
And
| RON BARUCH |
Respondent
REASONS FOR JUDGMENT
This proceeding, which is an application seeking civil penalties for various breaches of the Workplace Relations Act1996 (Cth)[1] and the Fair Work Act2009 (Cth)[2], is being dealt with today pursuant to Part 13, Rule 13.03C(1)(e) of the Federal Magistrates Court Rules2001 (Cth), which allows for the determination of a matter when the respondent fails to appear. That the respondent did not appear today was not surprising, as he has taken no real part either in the proceedings, which were commenced on 8 April 2011, or in the previous inquiries by the Fair Work Ombudsman[3] which led to the proceedings being instituted. Such was the respondent’s reluctance to involve himself in these matters that it was necessary for the applicant to obtain an order for substituted service against him.
[1] “WRA”
[2] “FWA”
[3] “FWO”
In the light of the respondent’s absence and his conduct I propose to provide these reasons in short form, noting where the information that I am relying upon appears in the evidence provided by the applicant.
I should state from the outset my gratitude for the helpful and detailed written submissions provided by the applicant, which include a chronology and provide both a history of the matter and the basis upon which the orders are sought. The evidence which I have considered in coming to the decision that I have made in respect of the respondent consists of the affidavits of Joel Edward Donnelly affirmed on 14 October 2011, Daniel Enzo Scremin sworn on 12 October 2011, an affidavit of Vi-Lay Liu affirmed on 11 October 2011, and an affidavit of Annabel Sarah Anderson affirmed on 13 October 2011.The respondent, Mr Baruch, was the sole shareholder and director of a company called Linkwizz Pty Ltd (ACN 134164970). The company operated as an online marketing company which was formed to sell advertising space to customers and design advertisements for them.
In May 2009 Mr Scremin, who was employed at the time by News Corporation, was contacted by a recruitment agent who suggested that he might be interested in a job with Linkwizz, a new company that had recently been formed. Mr Scremin was also asked whether any other person that he knew might be interested in a similar job and he told the recruiter that Mr Donnelly might also be interested. Mr Scremin and Mr Donnelly each attended an interview with Mr Baruch, who offered both of them a position entitled Sales Manager at a salary of $50,000 per annum plus what was described by him as “the legislative minimum entitlements in relation to sick leave and annual leave”. It is not clear whether the $50,000 included superannuation or was net of superannuation.
Mr Scremin and Mr Donnelly commenced work with Mr Baruch and Linkwizz on 22 June 2009. They worked in Mr Baruch’s apartment, which was set up as a home office. On 20 July 2009 Mr Baruch told Mr Donnelly that the employment arrangements between them were void or invalid and that he was not prepared to make any payment to him other than on a commission-only basis. Mr Donnelly was told that if he didn’t accept this proposal his employment would be terminated. Mr Donnelly did not accept the proposal. The contract of employment was terminated but he was not payed for the month which he had worked, or for a period of seven days’ notice to which he was entitled, or for the pro rata holiday pay. On 21 July 2009 Mr Scremin’s employment was terminated on the same basis.
It appears that the conduct of Mr Baruch was not unique to these two gentlemen. On 30 July 2009 a Mr Certes complained to the Fair Work Ombudsman that Mr Baruch had acted in a similar manner with him.
He was, in fact, the immediately preceding employee of Linkwizz. The Fair Work Ombudsman commenced investigations and on 18 August 2011 Mr Donnelly lodged a complaint with the Ombudsman. On 24 August 2011 Mr Scremin also lodged a complaint.It is clear from the evidence that the practice of the Fair Work Ombudsman is to seek resolution of matters such as this by negotiation with an employer, and attempts were made to do this. But Mr Baruch made it clear that he was not interested in coming to any resolution. He told Ms Liu that he was having problems and that he was unable to make any payment to his employees.
Mr Certes took matters into his own hand and commenced proceedings in the small claims division of the New South Wales Local Court.
He succeeded in obtaining a judgment for the contractual wages that were not paid to him. This was enforced through a garnishee against a bank account held by Mr Baruch, but it did not produce a full reimbursement. In October 2009 the Fair Work Ombudsman issued contravention letters to Mr Baruch and the company but did not commence proceedings against either until 8 April 2011. In the meantime, on 15 June 2010, Linkwizz was placed into administration and was eventually wound up.
The current proceedings are only against Mr Baruch. They are brought pursuant to sections of the WRA, and then under schedules to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth)[4], as the time of the employees’ employment straddled the conclusion of the WRA and the commencement of the FWA.
Mr Baruch’s involvement in the proceedings is pursuant to s.550 of the FWA, which provides that a person who is involved in the contravention of a civil remedy provision is taken to have contravened that provision. Three contraventions are alleged in respect of each employee. The first is a contravention of s.182(3) of the WRA, and then item 5 of schedule 16 of the Transitional Act. Section 182(3) of the WRA requires an employer to pay an employee a basic periodic rate of pay for each of their guaranteed hours that is at least equal to the standard minimum wage. Although both Mr Donnelly and Mr Scremin were contractually entitled to a wage higher than the minimum wage, I accept the submission of the applicant that all that can be sought in these proceedings is a figure based upon the standard minimum wage, which at the time was $14.31 per hour. The calculation of the amount owing on this basis to both employees is $4808.16.
[4] “Transitional Act”
The second contravention alleged is one of failing to pay annual leave pursuant to s.235(2) of the WRA and item 6, schedule 16 of the Transitional Act. The annual leave component is also based upon the minimum wage, and the total figure is $334.56. The third contravention is a failure to pay notice pursuant to s.661(4) of the WRA and item 6, schedule 16 of the Transitional Act. The amount owed in respect of a failure to pay notice is based upon the contractual wage, and is therefore $958.90 for each employee, a total of $1917.80.
In their affidavits Mr Donnelly and Mr Scremin explain in some detail how they were hired by Mr Baruch, their working for the company, the period during which they worked and the fact of their dismissal. I am satisfied from that evidence and from Mr Baruch’s apparent admissions to the FWO that the allegations set out in the statement of claim are made out, and that the contraventions alleged have been proved.
Although a respondent in matters of this nature would normally be entitled to request and receive a separate hearing in relation to penalty, the court is not prohibited from dealing with both contravention and penalty at the same time. In a case where a respondent has acted in the manner that Mr Baruch has acted, as established by the evidence to which I have previously referred, it is appropriate the penalty be dealt with today as it is unlikely that he would make any appearance at a penalty hearing if one was set down for a later date.
The first matter that should concern a judicial officer considering penalties is whether or not it can be said that the actions which constitute the contravention consist of a single course of conduct. Section 719(2) of the WRA states:
“(2) Subject to subsection (3), where:
(a) two or more breaches of an applicable provision are committed by the same person; and
(b) the breaches arose out of a course of conduct by the person;
the breaches shall, for the purposes of this section, be taken to constitute a single breach of the term.”
Section 719 can be applied to individual contraventions but it is generally considered that where there are different contraventions, then each should be treated individually; see Gibbs & City of Altona (1992) 37 FCR 216 at 223 per Gray J. In the instant case, I am satisfied that the actions that Mr Baruch took on behalf of his company, for which he is personally liable, as already stated, in respect of Mr Donnelly and Mr Scremin constituted a single course of conduct in respect of each individual contravention. So the court can impose a penalty in respect of each individual contravention but only in respect of one breach of each section.
The factors which the court should take into account as relevant to the imposition of a penalty under the WRA were summarised by Mowbray FM in Mason & Harrington Corporation Proprietary Limited trading as Pangaea Restaurant & Bar (2007) FMCA 7 at [26 to 59]. His Honour’s summary was adopted by Tracey J in Kelly & Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 [14], although his Honour noted that whilst such a summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion; Sharpe & Dogma Enterprises Proprietary Limited (2007) FCA 1550. I will deal with each of the relevant matters in turn.
The nature and extent of the conduct which led to the breaches
I have described the actions of Mr Baruch in employing Mr Scremin and Mr Donnelly, allowing them to work for a month and then declining to pay them. It seems to me that the extent of the conduct could be considered quite considerable because employees of that type would normally be expected to be paid weekly or fortnightly, and they had to wait a month before being told that no payment would be made to them. These comments cover the second relevant matter, being the circumstances in which the conduct took place. Although the employer was a company, Mr Baruch was very much its controller and mind.
The nature and extent of any loss or damage sustained as a result of the breaches
The loss to these employees was considerably more than the amount in respect of which the contraventions are brought because they were not employed at the minimum wage but at the reasonable wage of $50,000 per annum. It is on that basis that their real loss should be calculated. Both of them left secure employment with News Corporation to take these positions. They had a period during which they were without employment.
Whether there had been similar previous conduct by the defendant
This employer had acted in an identical manner towards Mr Certes, the immediately preceding employee of the company. This tells very seriously against Mr Baruch.
Whether the breaches were properly distinct or arose out of the one course of conduct
I have already discussed this. I am satisfied that the breaches should be considered as one course of conduct in respect of each individual breach.
The size of the business enterprise involved
The enterprise was small. It was a start up. However, being small does not excuse reprehensible conduct.
Whether or not the breaches were deliberate
It would appear from all the evidence that they were.
Whether senior management was involved in the breaches
Apart from the two employees whose complaints have led to these proceedings, Mr Baruch was the only other person involved in the business. He was a director of the company.
Whether the party committing the breach had exhibited contrition
The evidence of Ms Vi-Lay Liu makes it clear that Mr Baruch has not exhibited any contrition, and indicated no intention to attempt to make recompense.
Whether the party committing the breach had taken corrective action
Mr Baruch has taken no corrective action. Although he has a judgment against him from Mr Certes, he was unable to make payment in full.
Whether the party committing the breaches cooperated with the enforcement authorities
Mr Baruch has hardly cooperated with the enforcement authorities. Quite the contrary, he has made it difficult for them to serve him.
He has made no attempt to attend any of the court proceedings. He is not here today.
The need to ensure compliance with minimum standards by provision of an effective means for an investigation and enforcement of employee entitlements
This is accepted.
The need for specific and general deterrence
Acting in the manner in which I am satisfied Mr Baruch acted towards employees is something which no employer should do. There is a need for general deterrence to prevent such activity occurring elsewhere.
If an employer enters into a contractual arrangement with an employee, it should be honoured. And if the employer wishes to bring that contractual arrangement to an end then the law requires him to pay or give notice and to pay outstanding entitlements. Those obligations are essential terms of the contract. In regard to Mr Baruch himself, there is a need for specific deterrence because the evidence is that he acted in a similar way immediately prior to the employment of Mr Scremin and Mr Donnelly. He must be taught a lesson. It must be made abundantly clear to him that such conduct will not be tolerated, and he should be discouraged from attempting it again.
I have taken all these matters into consideration. I am of the view that Mr Baruch’s conduct was egregious. I am disturbed by his failure to take any interest whatsoever in these proceedings or in the investigations carried out by the FWO prior thereto. I am disturbed by the fact that he has made no attempt whatsoever to right the wrong that he committed against Mr Donnelly and Mr Scremin. To my mind, the only penalty that is appropriate is one in the very highest part of the range.
I have been provided with some helpful short minutes of order which will allow me to utilise the penalty (if paid) towards recompensing the employees, who are otherwise unable to recover this sum from the company in liquidation.
In respect of the contravention of s.182(3) of the Workplace Relations Act, I order that Mr Baruch pay a penalty of $6000. In respect of the contravention of s.235(2) of the Workplace Relations Act, I order that Mr Baruch pay a penalty of $6000. In respect of the contravention of s.661(4) of the Workplace Relations Act, I order that Mr Baruch pay a penalty of $6000. I make orders in accordance with the draft initialled by me, amended in brown and placed with the papers.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Raphael FM.
Date: 13 December 2011
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