Fair Work Ombudsman v Bastawrose
[2018] FCCA 257
•9 February 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v BASTAWROSE & ORS | [2018] FCCA 257 |
| Catchwords: INDUSTRIAL LAW – Breaches of civil remedy provisions of the Fair Work Act 2009 – penalties – pecuniary penalties – relevant considerations. |
| Legislation: Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, item 2A of sch.3, items 3 and 21 of sch.3A, items 4A and 16 of sch.16 |
| Cases cited: Kelly v Fitzpatrick (2007) 166 IR 14 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | NADER BASTAWROSE |
| Second Respondent: | AMGAD SAMAAN |
| Third Respondent: | ASHRAF YOUSSEF |
| File Number: | SYG 2762 of 2014 |
| Judgment of: | Judge Cameron |
| Hearing date: | 10 November 2015 |
| Date of Last Submission: | 10 November 2015 |
| Delivered at: | Sydney |
| Delivered on: | 9 February 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr M. Seck |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondents: | Mr P.F. Singleton |
| Solicitors for the Respondents: | Marsdens Law Group |
THE COURT DECLARES THAT:
The respondents contravened the following civil remedy provisions:
(a)s.44(1) of the Fair Work Act 2009 (“FW Act”) (by contravening s.90(2) of the FW Act) by failing to pay annual leave on termination to Nashaat Attalla and Chantelle-Cherie Salucci;
(b)s.44(1) of the FW Act (by contravening s.116 of the FW Act) by failing to pay Nashaat Attalla and Chantelle-Cherie Salucci in respect of time that they were absent from work on a public holiday or part of a public holiday;
(c)item 4A(1) of sch.16 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (“FW (TPCA) Act”) (by contravening cl.13 and Table 1 of the Division 2B State Award derived from the Pharmacy Assistants (State) Award (NSW)) and s.45 of the FW Act (by contravening cl.17 of the Pharmacy Industry Award 2010) by failing to pay Nashaat Attalla the minimum rate of pay;
(d)item 4A(1) of sch.16 to the FW (TPCA) Act (by contravening cl.9 of the Division 2B State Award derived from the Pharmacy Assistants (State) Award (NSW)) and s.45 of the FW Act (by contravening cl.26.2(a)(i) of the Pharmacy Industry Award 2010) by failing to pay Nashaat Attalla and Chantelle-Cherie Salucci overtime rates;
(e)item 4A(1) of sch.16 to the FW (TPCA) Act (by contravening cl.10(i)(a) of the Division 2B State Award derived from the Pharmacy Assistants (State) Award (NSW)) and s.45 of the FW Act (by contravening cl.26.2(b) of the Pharmacy Industry Award 2010) by failing to pay Nashaat Attalla penalty rates for morning, evening and late evening work, Monday to Friday;
(f)item 4A(1) of sch.16 to the FW (TPCA) Act (by contravening cl.10(i)(d) of the Division 2B State Award derived from the Pharmacy Assistants (State) Award (NSW)) and s.45 of the FW Act (by contravening cl.26.2(d) of the Pharmacy Industry Award 2010) by failing to pay Nashaat Attalla penalty rates applicable for ordinary hours worked on a Sunday;
(g)item 4A(1) of sch.16 to the FW (TPCA) Act (by contravening cl.10(i)(e) of the Division 2B State Award derived from the Pharmacy Assistants (State) Award (NSW)) and s.45 of the FW Act (by contravening cl.31.3 of the Pharmacy Industry Award 2010) by failing to pay Nashaat Attalla penalty rates for work on a public holiday;
(h)item 4A(1) of sch.16 to the FW (TPCA) Act (by contravening cl.13 of the Division 2B State Award derived from the Pharmacy Assistants (State) Award (NSW)) and s.45 of the FW Act (by contravening cl.17 of the Pharmacy Industry Award 2010) by failing to pay Nashaat Attalla the minimum hours of engagement per week for a full time employee;
(i)s.45 of the FW Act (by contravening cl.26.2(c) of the Pharmacy Industry Award 2010) by failing to pay Nashaat Attalla penalty rates for work on a Saturday;
(j)s.45 of the FW Act (by contravening cl.19.3(b) of the Pharmacy Industry Award 2010) by failing to pay Chantelle-Cherie Salucci the special clothing allowance;
(k)s.535(1) of the FW Act by failing to comply with their obligations in relation to employee records; and
(l)s.536(2) of the FW Act by failing to comply with their obligations in relation to pay slips.
THE COURT ORDERS THAT:
The first respondent pay pecuniary penalties in the total sum of $15,000.
The second respondent pay pecuniary penalties in the total sum of $15,000.
The third respondent pay pecuniary penalties in the total sum of $15,000.
All pecuniary penalties imposed be paid into the Consolidated Revenue Fund of the Commonwealth on or before 9 March 2018.
The respondents pay interest to Nashaat Attalla and to Chantelle-Cherie Salucci, in amounts to be quantified by further order.
The parties file within twenty eight days a proposed minute of order quantifying the interest ordered in order 5, such quantification to be calculated in accordance with the Federal Court Interest on Judgments Practice Note.
The sums for interest payable to Nashaat Attalla and Chantelle-Cherie Salucci be paid to them on or before 23 March 2018.
The parties have liberty to apply on 3 days’ notice in relation to the working out of orders 5 and 6.
The applicant have liberty to apply on 7 days’ notice in the event that any of these orders is not complied with.
| FEDERAL CIRCUIT COURT AT SYDNEY |
SYG 2762 of 2014
| FAIR WORK OMBUDSMAN |
Applicant
And
| NADER BASTAWROSE |
First Respondent
| AMGAD SAMAAN |
Second Respondent
| ASHRAF YOUSSEF |
Third Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The respondents, Mr Bastawrose, Mr Samaan and Mr Youssef, were partners in a business known as Save & Deliver (“Partnership”). At all relevant times they operated five pharmacies in New South Wales: two in Maroubra and one each in Mt Druitt, Flinders and Liverpool. Relevantly for present purposes, the Flinders pharmacy was primarily managed by Mr Bastawrose, the Liverpool pharmacy was primarily managed by Mr Samaan and the Mt Druitt pharmacy was primarily managed by Mr Youssef.
Mr Nashaat Attalla and Ms Chantelle-Cherie Salucci are former employees of the respondents. Mr Attalla primarily worked at the Mt Druitt pharmacy and Ms Salucci worked at the Flinders pharmacy. On 3 October 2014 the applicant (“Ombudsman”) commenced this proceeding alleging that the respondents had contravened the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (“FW (TPCA) Act”) and the Fair Work Act 2009 (“FW Act”) by failing to pay Mr Attalla and Ms Salucci their annual leave, annual leave loading, public holiday pay and overtime entitlements. The Ombudsman alleged that the respondents had also failed to pay Mr Attalla his minimum rates of pay, his minimum hours of engagement per week and applicable penalty rates and had failed to pay Ms Salucci a special clothing allowance. It was further alleged that the respondents had contravened the FW Act by failing to provide Mr Attalla and Ms Salucci with pay slips containing details about their superannuation and by failing to make and keep employee records.
On 15 July 2015 the parties filed a statement of agreed facts in which the respondents admitted to contravening the provisions of the FW (TPCA) Act and FW Act alleged by the Ombudsman. The Ombudsman has sought declarations that the respondents contravened those Acts, orders imposing pecuniary penalties on the respondents and, relevantly, an order for the payment of interest on the sums which had not originally been paid but which were paid following the commencement of this proceeding.
STATEMENT OF AGREED FACTS
The relevant agreed facts as set out in the statement of agreed facts are summarised below.
The parties agreed that Mr Attalla and Ms Salucci performed the following duties:
Employee
Period of employment
Duties
Mr Attalla
23 Sep 2009 – 17 Jun 2013
Driving a delivery van; delivering medication; picking up and dropping off supplies between the partnership’s pharmacies; giving medication to customers (but not dispensing duties); receiving goods; filling prescriptions; stocking shelves; checking stock prices on computer system; cleaning duties
Ms Salucci
29 Jun 2012 – 6 Sep 2013
Customer service; liaising with product representatives; organising medication for delivery to customers (but not dispensing duties); invoicing, banking; ordering stock and general stock control; store displays; cleaning duties; delivery duties
The parties agreed that from 1 January 2010 to 31 January 2011 the respondents were bound by the Division 2B State Award derived from the Pharmacy Assistants (State) Award (NSW) (“Division 2B Award”). They agreed that during that period Mr Attalla worked as a permanent full-time employee and was properly classified as a Pharmacy Assistant Competency Level 1 under the Division 2B Award.
On and from 1 February 2011 the respondents were bound by the Pharmacy Industry Award 2010 (“Modern Award”). The parties agreed that Mr Attalla was properly classified as a Pharmacy Assistant Level 1 under the Modern Award and worked as permanent full-time employee from 1 February 2011 to 4 November 2012 and as a permanent part-time employee from 5 November 2012 until the end of his employment. It was also agreed that Ms Salucci held a Certificate II in Community Pharmacy and was properly classified as a Pharmacy Assistant Level 2 under the Modern Award. She worked as a permanent full-time employee.
The parties agreed that during his employment Mr Attalla was paid the following flat rates of pay:
a)from 23 September 2009 to 27 December 2009 - $12 per hour;
b)from 28 December 2009 to 7 May 2012 - $13 per hour; and
c)from 8 May 2012 until 17 June 2013 - $14 per hour.
They also agreed that Ms Salucci was paid the following flat rates:
a)from 29 June 2012 to 31 December 2012 - $18 per hour; and
b)from 1 January 2013 to 6 September 2013 - $21 per hour.
Non-payment of annual leave and annual leave loading
Pursuant to s.87 of the FW Act, from 1 January 2010 Mr Attalla and Ms Salucci were entitled to four weeks of annual leave for each year of service which accrued progressively. The respondents were also required by cl.29.3 of the Modern Award to pay them a loading of 17.5% for any period of annual leave taken.
It was agreed that during their employment neither Mr Attalla nor Ms Salucci took any paid annual leave. The respondents admitted that they had contravened s.90(2) of the FW Act, and thereby contravened s.44 of the same Act, by failing to pay Mr Attalla and Ms Salucci their annual leave entitlements, resulting in the following underpayments:
Employee
Accrued annual leave hours
Annual leave underpayment
Annual leave loading underpayment
Mr Attalla
502.75
$8,813.21
$1,542.31
Ms Salucci
171.49
$3,155.42
$552.20
Non-payment for public holidays not worked
At all times after 1 January 2010, s.116 of the FW Act required the respondents to pay Mr Attalla and Ms Salucci their applicable minimum rate of pay for any time they were absent from work on a day or part day which was a public holiday.
The respondents were required to pay Mr Attalla the following minimum rates of pay:
Time period
Applicable industrial instrument
Applicable rate of pay
1 Jan 2010 – 28 Feb 2010
Division 2B Award
$16.12
1 Mar 2010 – 31 Jan 2011
Division 2B Award
$16.41
1 Feb 2011 – 30 Jun 2011
Modern Award
$16.47
1 Jul 2011 – 30 Jun 2012
Modern Award
$17.03
1 Jul 2012 – 17 Jun 2013
Modern Award
$17.53
They were also required to pay Ms Salucci the following minimum rates of pay:
Time period
Applicable industrial instrument
Applicable rate of pay
29 Jun 2012 – 30 Jun 2012
Modern Award
$17.41
1 Jul 2012 – 30 Jun 2013
Modern Award
$17.93
1 Jul 2013 – 6 Sep 2013
Modern Award
$18.40
The respondents admitted that they had contravened s.116, and thereby contravened s.44 of the FW Act, by failing to pay Mr Attalla $1,355.64 for the hours he was entitled to be absent from work on public holidays and $1,210.31 to Ms Salucci for the hours she was entitled to be absent from work on public holidays.
Underpayments of minimum rates of pay
Division 2B Award
The respondents admitted that they had contravened item 4A(1) of sch.16 to the FW (TPCA) Act and cl.13 and table 1 of pt.B of the Division 2B Award by, in the period between 1 January 2010 to 31 January 2011, paying Mr Attalla rates of pay which were less than the rates of pay set out in the Division 2B Award. They admitted that they had underpaid Mr Attalla $5,021.69 as a result of those contraventions.
Modern Award
The respondents also admitted that they had breached cl.17 of the Modern Award, and had thereby contravened s.45 of the FW Act, by, in the period between 1 February 2011 and 17 June 2013, failing to pay Mr Attalla rates of pay which were at least equal to the rates of pay set out in the Modern Award. They admitted that they had underpaid Mr Attalla $5,720.98 as a result of those contraventions.
Non-payment of overtime
Division 2B Award
Pursuant to item 4A(1) of sch.16 to the FW (TPCA) Act and cl.9 of the Division 2B Award, from 1 January 2010 to 31 January 2011 the respondents were required to pay Mr Attalla the following overtime rates for all hours worked in excess of his ordinary hours of work:
Time period
Overtime for first two hours
Overtime thereafter
Overtime on Sunday
1 Jan 2010 – 28 Feb 2010
$24.18
$32.24
$32.24
1 Mar 2010 – 31 Jan 2011
$24.62
$32.82
$32.82
It was agreed that the respondents had breached cl.9 of the Division 2B Award and contravened item 4A(1) of sch.16 to the FW (TPCA) Act by paying Mr Attalla for his overtime work at rates less than those required, resulting in an underpayment of $4,647.34.
Modern Award
On and from 1 February 2011 the respondents were required by cl.26.2(a)(i) of the Modern Award to pay Mr Attalla the following overtime rates for all hours worked in excess of his ordinary hours of work:
Time period
Overtime for first two hours
Overtime thereafter
Overtime on Sunday
Public holiday
1 Feb 2011 – 30 Jun 2011
$24.71
$32.94
$32.94
$41.18
1 Jul 2011 – 30 Jun 2012
$25.55
$34.06
$34.06
$42.58
1 Jul 2012 – 17 Jun 2013
$26.30
$35.06
$35.06
$43.83
The respondents were also required to pay Ms Salucci the following overtime rates:
Time period
Overtime for first two hours
6 Jun 2012 – 30 Jun 2012
$26.12
1 Jul 2012 – 30 Jun 2013
$26.90
1 Jul 2013 – 6 Sep 2013
$27.60
It was agreed that the respondents had breached cl.26(a)(i) of the Modern Award, and thereby contravened s.45 of the FW Act, by failing to pay Mr Attalla and Ms Salucci the overtime rates of pay provided for by the Award. In this regard Mr Attalla was underpaid $6,283.16 and Ms Salucci was underpaid $5.97.
Weekday penalty rates
Division 2B Award
Pursuant to cl.10(i)(a) of the Division 2B Award, from 1 January 2010 to 31 January 2011 the respondents were required to pay Mr Attalla the following penalty rates for any ordinary hours he worked in the early morning, evening and late evening on weekdays:
Time period
Mon-Fri
6-8.30am
Mon-Fri
7-9pm
Mon-Fri
9pm-midnight
1 Jan 2010 – 28 Feb 2010
$24.18
$20.15
$24.18
1 Mar 2010 – 31 Jan 2011
$24.62
$20.51
$24.62
The respondents admitted that they had breached cl.10(i)(a) of the Division 2B Award, and had consequently contravened item 4A(1) of sch.16 to the FW (TPCA) Act, by underpaying Mr Attalla $1,525.33 in relation to his weekday penalty rates.
Modern Award
On and from 1 February 2011, cl.26.2(b) and cl.A.8 of sch.A to the Modern Award required that the respondents pay Mr Attalla the following penalty rates for ordinary hours worked in the early morning, evening and late evening on weekdays:
Time period
Mon-Fri
7-8.30am
Mo-Fri 8-8.30am
Mon-Fri
7-9pm
Mon-Fri
9pm-midnight
1 Feb 2011 – 30 Jun 2011
$24.71
$23.06
$20.59
$24.71
1 Jul 2011 – 30 Jun 2012
$25.55
$22.41
$21.29
$25.55
1 Jul 2012 – 17 Jun 2013
$26.30
$21.04
$21.91
$26.30
It was agreed that the respondents had contravened cl.26.2(b), and consequently contravened s.45 of the FW Act, by underpaying Mr Attalla $1,950.07 in this regard.
Weekend penalty rates
Division 2B Award
Pursuant to cl.10(i)(d) of the Division 2B Award and item 4A(1) of sch.16 to the FW (TPCA) Act, from 1 March 2010 to 31 January 2011 the respondents were required by to pay Mr Attalla $32.82 an hour for his ordinary hours worked on a Sunday. The respondents contravened those provisions by underpaying Mr Attalla $9.91 in that regard.
Modern Award
On and from 1 February 2011 the respondents were required by cl.26.2(c) of the Modern Award to pay Mr Attalla the following rates of pay for work performed on Saturdays:
Time period
Sat 8.30am-6pm
Sat 6-9pm
1 Feb 2011 – 30 Jun 2011
$20.59
$24.71
1 Jul 2011 – 30 Jun 2012
$21.29
$25.55
1 Jul 2012 – 17 Jun 2013
$21.91
$26.30
It was agreed that the respondents contravened cl.26.2(c) of the Modern Award, thereby contravening s.45 of the FW Act, by failing to pay Mr Attalla the applicable rates for the work he undertook on Saturdays, resulting in an underpayment of $7,246.54.
The respondents were also required by cl.26.2(d) of the Modern Award to pay Mr Attalla the following rates of pay for work performed on Sundays:
Time period
Applicable rate
1 Feb 2011 – 30 Jun 2011
$32.94
1 Jul 2011 – 30 Jun 2012
$34.06
1 Jul 2012 – 17 Jun 2013
$35.06
It was agreed that the respondents contravened cl.26.2(d), and thus s.45 of the FW Act, by failing to pay Mr Attalla the applicable rates for the work he undertook on Sundays, resulting in an underpayment of $10,656.27.
Public holiday penalty rates
Division 2B Award
Pursuant to cl.10(i)(e) of the Division 2B Award and item 4A(1) of sch.16 to the FW (TPCA) Act, from 1 March 2010 to 31 January 2011 the respondents were required to pay Mr Attalla $41.03 an hour for his ordinary hours worked on public holidays. The respondents admitted that they had contravened those provisions by failing to pay Mr Attalla the prescribed rate for the ordinary hours he worked on public holidays, resulting in an underpayment of $868.93.
Modern Award
From 1 February 2011 the respondents were also required by cl.31.3 of the Modern Award to pay Mr Attalla the following rates of pay for work performed on public holidays:
Time period
Applicable rate
1 Feb 2011 – 30 Jun 2011
$41.18
1 Jul 2011 – 30 Jun 2012
$42.58
1 Jul 2012 – 17 Jun 2013
$43.83
The respondents admitted that they had underpaid Mr Attalla $2,885.73 in this regard and thereby contravened cl.31.3 of the Modern Award and s.45 of the FW Act.
Minimum hours of engagement
Division 2B Award
Pursuant to item 4A(1) of sch.16 to the FW (TPCA) Act and cls.2 and 13 of the Division 2B Award, from 1 March 2010 to 31 January 2011 the respondents were required to pay Mr Attalla, as a full-time permanent employee, for at least thirty-eight ordinary hours of work per week at the minimum rates of pay set out in the Division 2B Award. The respondents admitted that they had contravened cl.13 by failing to pay Mr Attalla for at least thirty-eight hours of work in every week, resulting in an underpayment of $262.56.
Modern Award
From 1 February 2011 to 5 November 2012 the respondents were also required by cls.11 and 17 of the Modern Award to pay Mr Attalla, as a full-time permanent employee, for at least thirty-eight hours of work in any week. The respondents admitted that they had breached cl.17 of the Modern Award, and thereby contravened s.45 of the FW Act, by underpaying Mr Attalla $3,220.94 in that regard.
Special clothing allowance
The parties agreed that, pursuant to cl.19.3(b) of the Modern Award, from 29 June 2012 to 6 September 2013 the respondents were required to pay Ms Salucci a special clothing allowance of $6.10 a week because they required her to wear and launder a uniform. The respondents did not pay Ms Salucci any special clothing allowance and thereby contravened cl.19.3(b) of the Modern Award and s.45 of the FW Act. Ms Salucci was underpaid $372.10 in respect of the special clothing allowance.
Total underpayments
The respondents agreed that they had underpaid Mr Attalla an amount of $62,010.59 and Ms Salucci an amount of $5,296. The total underpayments were $67,306.59. At the time the statement of agreed facts was executed, those underpayments had not been rectified but they were subsequently paid.
Failure to make and keep records
At all material times the respondents were required by s.535(1) of the FW Act to make and keep records relating to the employment of Mr Attalla and Ms Salucci. They agreed that they had contravened that provision by failing to make or keep the required records.
Failure to give pay slips with the prescribed information
The respondents were also required by s.536(2) and reg.3.46(5) of the Fair Work Regulations 2009 (“FW Regulations”) to provide Mr Attalla and Ms Salucci with pay slips which provided details about superannuation payments made on their behalf. The respondents agreed that they had contravened s.536(2) by failing to provide pay slips which specified the name and number of any superannuation fund to which contributions were made as required by reg.3.46(5)(a) of the FW Regulations.
Prior compliance history
In August and October 2013 the Ombudsman received complaints from Mr Attalla and Ms Salucci about their employment with the respondents. The investigation into those complaints ultimately led to the commencement of this proceeding. The parties agreed that prior to receiving Mr Attalla and Ms Salucci’s complaints, the Ombudsman had received three other complaints related to the respondents:
a)the first complaint, received on 23 December 2009, related to a company named Minapharm Pty Ltd (“Minapharm”) of which all three respondents were directors. The complainant, a casual Pharmacy Assistant, alleged that prior to commencing work, Minapharm had agreed to pay her $12 an hour. The complainant resigned after one day of work and alleged that Mr Bastawrose told her that she would be paid $10 an hour for the day’s work. During the course of the investigation of that complaint Mr Bastawrose was advised of the application of modern awards and the pay rates under the applicable instrument. The complaint was resolved after Mr Bastawrose paid the complainant $90;
b)the second complaint was made against the Partnership and was resolved on 17 August 2011 when the respondents agreed to pay the complainant $4,000; and
c)the third complaint was made on 20 November 2012 by a Pharmacy Assistant employed by Minapharm who alleged that that she had been underpaid her minimum rate of pay, had not been paid any penalty rates, had not received pay slips and was owed an amount between $2,000 and $3,000. During the course of that investigation Mr Youssef was directed to the part of the Ombudsman’s website which deals with pay slips and pay rates. That complaint was resolved by mediation on 2 January 2013.
Investigation of Mr Attalla and Ms Salucci’s complaints
The parties agreed that the investigation into Mr Attalla and Ms Salucci’s complaints to the Ombudsman proceeded in the manner set out below.
The Ombudsman received Mr Attalla’s complaint on 23 August 2013 and by letter dated 23 September 2013 Maria Loutsopoulos, a Fair Work Inspector, notified the respondents that the Ombudsman had commenced an investigation into that complaint. On 27 September 2013 Ms Loutsopoulos and another Fair Work Inspector met with Mr Youssef to inform him of the investigative process into Mr Attalla’s complaint and during that meeting they advised Mr Youssef that they would be seeking various employee records. By emails sent to Ms Loutsopoulos on 1 and 4 October 2013 Mr Youssef provided various employment-related documents.
Ms Salucci’s written complaint was received by the Ombudsman on 1 October 2013. On 9 October 2013 Ms Loutsopoulos telephoned Mr Bastawrose to inform him of Ms Salucci’s complaint and also wrote to all the respondents advising them of the complaint. On the same day Ms Loutsopoulos telephoned Mr Youssef and informed him that she would require further documents in relation to Mr Attalla’s employment and that she would serve a Notice to Produce on the respondents seeking those further documents.
On 10 October 2013 Ms Loutsopoulos served two separate Notices to Produce on the respondents seeking specified documents in relation to Mr Attalla and Ms Salucci’s employment. Mr Bastawrose responded to the Notice to Produce in relation to Ms Salucci by providing some of the requested records. In further correspondence he asserted that he had thought that the Notice to Produce only sought a sample of documents rather than all the documents relating to Ms Salucci’s employment. Mr Bastawrose did later provide the remaining documents sought in the Notice to Produce. On 25 October 2013 Mr Youssef responded to the Notice to Produce in relation to Mr Attalla by providing some of the requested records but he only provided extracts of Mr Attalla’s work hours rather than the actual records of the hours worked as required.
By telephone and email correspondence in October and November 2013 Ms Loutsopoulos offered to conduct recorded interviews with each of the respondents. None of the respondents participated in a recorded interview.
On 17 December 2013 Ms Loutsopoulos telephoned Mr Bastawrose and Mr Youssef separately and advised them of the outcome of the Ombudsman’s investigation. On 18 December 2013 she issued a letter of determination addressed to the respondents identifying their alleged contraventions of the FW Act and the alleged underpayments owed to Mr Attalla and Ms Salucci, including the details of her calculations of those alleged underpayments.
LEGISLATION
Award coverage
I January 2010 – 30 January 2011
Prior to 1 January 2010, the respondents, as partners in the Save & Deliver business, were bound by the Pharmacy Assistants (State) Award (NSW). On 1 January 2010, by force of the Industrial Relations (Commonwealth Powers) Act 2009 (NSW), the State of New South Wales referred to the Commonwealth its industrial relations powers in relation to employers who were neither constitutional corporations nor State public sector or local government sector employers. Division 2B of pt.1-3 of the FW Act, which commenced on 1 January 2010, deals with the application of that Act in States which referred their industrial relations power to the Commonwealth between 1 July 2009 and 1 January 2010 (“Division 2B referral commencement”). On that date the respondents became “national system employers” within the meaning of s.30N(1) of the FW Act and “Division 2B State reference employers” within the meaning of item 2A(4A) of sch.3 to the FW (TPCA) Act. The respondents became bound by the FW Act and, by virtue of item 3 of sch.3A to the FW (TPCA) Act, the Division 2B Award derived from the Pharmacy Assistants (State) Award (NSW).
1 February 2011 onwards
By the combined operation of item 21 of sch.3A of the FW (TPCA) Act and cl.A.8.2 of sch.A to the Modern Award, the Division 2B Award ceased to apply to the respondents on 31 January 2011. Thereafter the respondents were bound by the Modern Award.
Fair Work Act
As already noted, from 1 January 2010, the respondents were bound by the FW Act.
Annual leave
Section 87 of the FW Act relevantly provides that for each year of service with his or her employer, an employee is entitled to four weeks of paid annual leave which accrues progressively during a year of service according to the employee’s ordinary hours of work.
Section 90 of the FW Act provides:
90 Payment for annual leave
...
(2)If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.
Public holiday pay
Section 116 provides:
116 Payment for absence on public holiday
If, in accordance with this Division, an employee is absent from his or her employment on a day or part‑day that is a public holiday, the employer must pay the employee at the employee’s base rate of pay for the employee’s ordinary hours of work on the day or part‑day.
Records and pay slips
Sections 535 and 536 of the FW Act relevantly provide:
535 Employer 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.
…
536 Employer obligations in relation to pay slips
(1)An employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work.
(2) The pay slip must:
(a)if a form is prescribed by the regulations—be in that form; and
(b)include any information prescribed by the regulations.
Regulation 3.46 of the FW Regulations relevantly provides:
3.46 Pay slips—content
...
(5)If the employer is required to make superannuation contributions for the benefit of the employee, the pay slip must also include:
(a)the amount of each contribution that the employer made during the period to which the pay slip relates, and the name, or the name and number, of any fund to which the contribution was made; or
(b)the amounts of contributions that the employer is liable to make in relation to the period to which the pay slip relates, and the name, or the name and number, of any fund to which the contributions will be made.
Course of conduct
At the relevant time, s.557 of the FW Act provided:
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:
(a)subsection 44(1) (which deals with contraventions of the National Employment Standards);
(b)section 45 (which deals with contraventions of modern awards);
…
(n)subsections 535(1) and (2) (which deal with employer obligations in relation to employee records);
(o)subsections 536(1) and (2) (which deal with employer obligations in relation to pay slips);
…
Penalties and compensation
Division 2B State Awards
Item 4A(1) of sch.16 to the FW (TPCA) Act provides that a person must not contravene a term of a Division 2B State Award.
Item 16 of sch.16 to the FW (TPCA) Act provides that pt.4-1 of the FW Act, which includes ss.539 (civil remedy orders), 545 (orders that courts may make) and 546 (pecuniary penalty orders), applies to item 4A(1) of sch.16 to the FW (TPCA) Act as if that item were part of the FW Act. In combination, ss.539(2) and 546(2) of the FW Act, as affected by item 16 of sch.16 to the FW (TPCA) Act, provide that the maximum pecuniary penalty for each respondent for a contravention of item 4A(1) of sch.16 to the FW (TPCA) Act is 60 penalty units. At the time of the alleged breaches a penalty unit was worth $110: s.4AA Crimes Act 1914.
The NES, Modern Awards, records and pay slips
Section 45 of the FW Act provides that a person must not contravene a term of a modern award.
By virtue of s.61(3) of the FW Act, ss.87, 90 and 116 are provisions of the National Employment Standards (“NES”). Section 44(1) provides that an employer must not contravene a provision of the NES. Section 539 provides that ss.44(1), 45, 535(1) and 536(2) are civil remedy provisions.
Sections 539(2) and 546(2) of the FW Act provide that the maximum pecuniary penalty for a contravention of s.44(1) of the FW Act and, by virtue of s.45, of individual clauses of the Modern Award is 60 penalty units for an individual. For a contravention of ss.535(1) and 536(2), ss.539(2) and 546(2) provided for maximum penalties of 30 penalty units for an individual. Until 27 December 2012 a penalty unit was worth $110. In the period 28 December 2012 to 30 July 2015 a penalty unit was worth $170: s.4AA Crimes Act.
The Division 2B Award
Clause 2 of the Division 2B Award defined a weekly employee as an employee engaged to work for an average of thirty-eight hours or more a week.
Clause 13 and table 1 of pt.B of the Division 2B Award set out the minimum weekly rates of pay applicable to employees who were covered by that award.
Clauses 9 and 10 relevantly provided:
9.Overtime
(i)An employee shall be paid overtime for all work:
(a)In excess of five days per week or a six day/four-day roster or a four-day roster as prescribed in subclause (ii) of clause 6, Rosters for Weekly and Regular Part-time Employees;
(b)in excess of an average of 38 hours per week in accordance with clauses 3, Ordinary Hours of Work, and 4, Implementation of Thirty-eight Hour Week, and the said clause 6; or
(c)performed outside rostered hours.
(ii)Overtime shall be paid for at the rate of time and one half for the first two hours and double time thereafter, except when worked on Sunday when it shall be paid for at the rate of double time.
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10. Penalty Rates for Certain Ordinary Hours
(i)Ordinary time worked as follows shall be paid at the rates indicated:
(a) On Monday to Fridays, inclusive:
(1) between 6.00 a.m. and 8.30 a.m. — time and one half;
(2) between 7.00 p.m. and 9.00 p.m. — time and one quarter;
(3) between 9.00 p.m. and midnight — time and one half.
(b)On Saturdays between 6.00 a.m. and 8.30 a.m. and between 6.00 p.m. and midnight — time and one half.
(c)On Saturdays between 8.30 a.m. and 6.00 p.m. — time and one quarter.
(d)On Sundays — double time, with a minimum payment as for three hours work;
(e)On a holiday as defined in clause 22, Holidays — double time and one half with minimum payment as for three hours work.
(ii)The penalty rates provided by this clause shall not be cumulative on overtime rates.
The Modern Award
Clause 11 of the Modern Award defines a full-time employee as an employee who is engaged to work an average of thirty-eight hours a week.
Clause 17 of the Modern Award sets out the minimum weekly rates of pay. Clause A.8 of sch.A to the Modern Award made transitional provisions for Division 2B employers. It provides:
A.8 Former Division 2B employers
A.8.1This clause applies to an employer which, immediately prior to 1 January 2011, was covered by a Division 2B State award.
A.8.2All of the terms of a Division 2B State award applying to a Division 2B employer are continued in effect until the end of the full pay period commencing before 1 February 2011.
A.8.3Subject to this clause, from the first full pay period commencing on or after 1 February 2011 a Division 2B employer must pay no less than the minimum wages, loadings and penalty rates which it would be required to pay under this Schedule if it had been a national system employer immediately prior to 1 January 2010.
A.8.4Despite clause A.8.3, where a minimum wage, loading or penalty rate in a Division 2B State award immediately prior to 1 February 2011 was lower than the corresponding minimum wage, loading or penalty rate in this award, nothing in this Schedule requires a Division 2B employer to pay more than the minimum wage, loading or penalty rate in this award.
A.8.5Despite clause A.8.3, where a minimum wage, loading or penalty rate in a Division 2B State award immediately prior to 1 February 2011 was higher than the corresponding minimum wage, loading or penalty rate in this award, nothing in this Schedule requires a Division 2B employer to pay less than the minimum wage, loading or penalty rate in this award.
A.8.6In relation to a Division 2B employer this Schedule commences to operate from the beginning of the first full pay period on or after 1 January 2011 and ceases to operate from the beginning of the first full pay period on or after 1 July 2014.
Clause 19 of the Modern Award is concerned with allowances. At all material times it relevantly provided:
19. Allowances
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19.3 Special clothing
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(b)Where an employee is required to launder any special uniform, dress or other clothing, the employer who provided that special clothing will arrange for its cleaning or the employee will be paid an allowance of $6.10 per week.
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Clause 26 relates to overtime and penalty rates. Clause 31 also relates to penalty rates. At all material times, those clauses relevantly provided:
26. Overtime
26.1 Reasonable overtime
(a)Subject to clause 26.1(b) an employer may require an employee other than a casual to work reasonable overtime at overtime rates in accordance with the provisions of this clause.
(b)An employee may refuse to work overtime in circumstances where the working of such overtime would result in the employee working hours which are unreasonable having regard to:
(i)any risk to employee health and safety;
(ii)the employee’s personal circumstances including any family responsibilities;
(iii)the needs of the workplace or enterprise;
(iv)the notice (if any) given by the employer of the overtime and by the employee of their intention to refuse it; and
(v)any other relevant matter.
26.2(a) Overtime
(i)Hours worked in excess of the ordinary number of hours of work prescribed in clauses 25.2 and 25.3 are to be paid at time and half for the first two hours and double time thereafter. Overtime worked on a Sunday is to be paid at the Sunday rate of double time, and overtime worked on a Public Holiday is to be paid at the Public Holiday rate of double time and half.
(ii)The rates provided by clause 26.2(b) and (c) shall not be cumulative on overtime rates.
(iii)For casual employees the casual loading is not payable on overtime.
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31. Public holidays
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31.3Work on a public holiday must be compensated by payment at the rate of 250% (casuals 275%) of the minimum rate.
Clause 29 relevantly provides:
29. Annual leave
29.1. Annual leave is provided for in the NES.
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29.3. Annual leave loading
During a period of annual leave an employee will receive a loading calculated on the rate of wage prescribed in clause 17—Minimum weekly wages of this award. Annual leave loading payment is payable on leave accrued.
The loading will be as follows:
(a)Day work: Employees who would have worked on day work only had they not been on leave—17.5% or the relevant weekend penalty rates, whichever is the greater but not both.
(b)Shiftwork: Employees who would have worked on shiftwork had they not been on leave—a loading of 17.5% or the shift loading (including relevant weekend penalty rates) whichever is the greater but not both.
EVIDENCE
Mr Attalla
Mr Attalla was born in Egypt and migrated to Australia in December 2008. He deposed that while he speaks some English, his command of the language is not very good and he needed his wife’s help to write any documents.
Mr Attalla commenced work at the Mt Druitt pharmacy in September 2009. He deposed that during his interview with Rami Moussa, the Pharmacist in Charge, he was told that he would be employed as a Pharmacy Assistant. Mr Moussa also told him that he would be paid $12 an hour for a minimum of forty hours of work a week, with no fixed days. Mr Attalla deposed that when he commenced work in September 2009 Mr Youssef showed him how to prepare methadone doses and from then until September 2012 he prepared methadone doses for about thirty customers each week. He deposed that his job also included delivering prescriptions from the Mt Druitt pharmacy to the Liverpool pharmacy each morning, making customer deliveries for the Liverpool pharmacy as well as the Mt Druitt pharmacy and picking up and dropping off supplies between the Save & Deliver pharmacies. Mr Attalla deposed that he spent two to three hours on his delivery duties and then spent the rest of the day assisting in the Mt Druitt pharmacy, which included serving customers, receiving goods, filling prescriptions, stocking shelves, checking stock prices on Save & Deliver’s computer system and general cleaning duties. He deposed that twice a week he also took rubbish from the pharmacy to his home because the pharmacy did not have a rubbish bin.
Mr Attalla deposed that from 2010 his working hours became fairly regular and he usually worked every Monday, Thursday, Saturday and Sunday for ten to twelve hours a day, often working more than forty hours a week. He deposed that he did not take any morning tea, lunch or afternoon tea breaks and usually ate his lunch while making deliveries.
From about 2010 Mr Attalla’s pay rate increased to a flat hourly rate of $13. Mr Attalla deposed that he had often asked Mr Youssef to increase his pay rate and the latter always refused and told him that if he disclosed his pay rate to anyone else his employment would be terminated. He deposed that in May 2011 he commenced work as a Pharmacy Assistant at another pharmacy unrelated to the respondents because his pay was too low to allow him to pay his bills and support his family. He deposed that he worked at the other pharmacy on Tuesdays, Wednesdays and Fridays, which meant he worked every day of the week and did not have any days off. Mr Attalla deposed that in May 2012, after asking for another pay increase, his pay was increased to a flat hourly rate of $14. He deposed that when he asked for a further pay rise in September 2012 and expressed his view that he should be paid more because he prepared methadone doses, Mr Youssef told him to no longer prepare those doses.
Mr Attalla deposed that he was never paid for days he did not work and he had attended work when he was sick in order not to lose income.
Mr Attalla deposed that he had not received any pay slips and kept a record of his work days and hours by photocopying pages of the wages book in which Mr Moussa recorded his days and hours of work. He deposed that in April 2012 when he wanted to apply for a home loan he asked Mr Youssef for two pay slips and a letter proving he worked at the Mt Druitt pharmacy. He deposed that Mr Youssef gave him the letter but did not provide him with any pay slips.
Mr Attalla’s employment ended on 17 June 2013.
Ms Salucci
Ms Salucci commenced work at the Flinders pharmacy on 29 June 2012. At that time she held a Certificate II in Community Pharmacy and indicated so in the resume she submitted with her job application. Ms Salucci deposed that during an interview with Mr Bastawrose in June 2012, he told her that she would be employed as a Pharmacy Assistant, working for thirty-eight hours each week. She deposed that he also offered to pay her $18 an hour, which was the same amount she had been paid in her previous job as a Pharmacy Assistant. Ms Salucci deposed that although Mr Bastawrose did not mention the basis on which she would be employed, she assumed from that conversation that she would be employed on a full-time basis and agreed to take the position on that assumption.
Ms Salucci deposed that her duties included customer service, liaising with product representatives, organising medications for delivery to customers (but not dispensing duties), invoicing, banking, ordering stock and general stock control, maintaining store displays, cleaning duties, supervising junior staff and delivery duties, which until October 2013 she performed using her own car. She deposed that she worked Monday to Friday, for an average thirty-eight hours a week. She deposed that she had a half an hour lunch break on each day she worked.
Ms Salucci deposed that she did not receive any pay slips during her employment. She deposed that she completed her start, finish and break times on a roster which was displayed in the kitchen. She deposed that she was paid in cash on Mondays and required to sign a wages book to confirm that she had received her pay.
Ms Salucci deposed that she was never paid for days that she did not work, including public holidays. She deposed that in October 2012 she raised with Mr Bastawrose that she had not been paid for a public holiday and said that if she was a casual employee then she needed to be paid a higher hourly rate. She deposed that Mr Bastawrose told her that he would increase her pay in January 2013. Ms Salucci deposed that she did not take any annual leave because she was concerned that her employment would be terminated after Mr Bastawrose told her that she was employed on a casual basis.
Ms Salucci deposed that when she commenced her employment she was paid a flat rate of $18 an hour. From 1 January 2013 Ms Salucci’s hourly rate of pay was increased to $21. Ms Salucci deposed that she did not receive any payment for her delivery duties and was not reimbursed for the petrol she used to make the deliveries. She deposed that as a result of her low rate of pay she had to watch her spending carefully. She deposed that it had been hard for her to keep up with all her bills and she had not had money to spend on social activities.
Ms Salucci resigned from her employment on 7 September 2013. She deposed that her last pay did not include any payment for accrued annual leave and she had not received any payments from the respondents since her resignation.
Maria Loutsopoulos
The Ombudsman also relied on an affidavit of the Fair Work Inspector who conducted the investigation which led to this proceeding, Ms Loutsopoulos.
The respondents
In separate affidavits the respondents each accepted responsibility for the underpayment of Mr Attalla and Ms Salucci and attributed those underpayments to their mismanagement of their business. They expressed their regret at depriving Mr Attalla and Ms Salucci of their entitlements and apologised for having done so. They also deposed that they had been unaware of the underpayments and had not intended to underpay Mr Attalla and Ms Salucci. The respondents deposed that they had been distressed by this proceeding and by publications in the media and on the Ombudsman’s website of matters related to this proceeding. They deposed that they had since made changes to their business practices to ensure that there were no further underpayments of their employees. In particular Mr Youssef deposed that the Partnership had since engaged an accounting firm to provide it with payroll management services and had engaged a specialist insurance provider to review its superannuation arrangements. He also deposed that he had attended a Pharmacy Guild of Australia workshop on employment responsibilities and applicable rates of pay for employees. He also said that the Partnership had made all of its employees aware of the complaints made by Mr Attalla and Ms Salucci and what the Partnership was doing to prevent similar contraventions in the future. Additionally, Mr Bastawrose said that the Partnership had provided each new employee with a contract based on a template from the Pharmacy Guild.
In relation to their co-operation with the Ombudsman, Mr Youssef deposed that after the Ombudsman issued its determination on 18 December 2013, they had accepted their liability to compensate Mr Attalla and Ms Salucci. He deposed that they had attempted to calculate the amounts owing and on 17 February 2014 had advised the Ombudsman that they would pay compensation to Mr Attalla and Ms Salucci. Mr Youssef accepted that the money the Partnership had offered to pay Mr Attalla and Ms Salucci in February 2014 had been less than what the Ombudsman had found was owed to them. He deposed that they had nonetheless been determined to pay the appropriate compensation and to work with the Ombudsman to determine the correct amount due but the Ombudsman had not responded to their communication until September 2014. Mr Youssef said that the underpayments, without interest, had been rectified four weeks before the penalty hearing and that superannuation on the underpayments had been paid a week or two before the hearing. He said that the payments had been delayed because the Partnership had had problems calculating the amounts owed and had also had to wait to receive Mr Attalla and Ms Salucci’s account details.
Mr Youssef, who was responsible for the management of the Mt Druitt pharmacy where Mt Attalla worked, deposed that Mr Attalla had been primarily employed as a delivery driver. He deposed that Mr Attalla had also been employed to fill in for other employees when those employees cancelled their shifts and so had not had any minimum hours of work a week. Mr Youssef deposed that he had not realised that Mr Attalla should properly have been classified as a Pharmacy Assistant and that the Partnership had never intended to employ him in that role. In relation to Mr Attalla’s duties in the pharmacy, Mr Youssef deposed that Mr Attalla had not had any pharmacy qualifications and had a limited grasp of English which had limited his ability to communicate with customers. He denied that Mr Attalla had prepared methadone doses or had had to take rubbish from the pharmacy to his home. Mr Youssef said that Mr Attalla’s pay slips had been posted to him but he might not have received them because he had changed his address several times.
Mr Bastawrose, who was primarily responsible for the management of the Flinders pharmacy, accepted that Ms Salucci should have been properly classified as a Pharmacy Assistant Level 2 but deposed that at the relevant time he had not realised that she should have been classified as such. He deposed that Ms Salucci had not produced her pharmacy assistant qualification to him even though he had asked for it on several occasions and so he did not know that she held that qualification. He deposed that he asked to see a copy of the certificate because the mere assertion of it in the resume did not prove that she had it. He also deposed that the business had encouraged Ms Salucci to seek a statement of attainment which it would not have done had it known of her qualification. Mr Bastawrose said that he had been aware that the Modern Award provided for employee classifications but said that his understanding had been that an employee with a Certificate II in Community Pharmacy would be classified at a particular level under the Modern Award only if they provided a copy of the certificate and performed, as a major and substantial part of their role, the duties and responsibilities for that classification. He said that even though Ms Salucci had held a Certificate II she had not been employed as a Pharmacy Assistant Level 2 because the pharmacy had not had such a role at the time she was employed. He said that he had made it clear at the beginning that the role was a Level 1 role. Mr Bastawrose said he had not looked at the Pharmacy Assistant Level 2 competencies before Ms Salucci made her complaint to the Ombudsman.
Mr Bastawrose deposed that when he interviewed Ms Salucci he told her that her job would be on a casual basis. He deposed that in October 2012 Ms Salucci asked him to make her role full-time but he told her that he was not able to and that all of the Partnership’s employees were employed on a casual basis. Mr Bastawrose deposed that Ms Salucci had taken several sick and annual leave days during her employment and there had been no issue with her returning to work. He denied that she had been solely responsible for the training of new staff members.
Mr Samaan deposed that at the relevant times he was not directly involved in the management of the Partnership’s Flinders and Mt Druitt pharmacies.
Prior compliance history
Mr Youssef
Mr Youssef said that he vaguely remembered from possible conversations he had with Mr Bastawrose that there might have been a complaint lodged against Minapharm in December 2009 regarding the underpayment of wages. However, he did not remember any of the details of the complaint or the details of how it was resolved, although he understood that the resolution of the dispute involved the payment of money to the complainant.
In relation to the complaint made against the Partnership in June 2011, Mr Youssef said that he had looked at the Modern Award to determine the complainant’s wage rates, the definition of a casual employee and the casual rate of pay. He agreed that in about July 2011 when he corresponded with the Ombudsman about that complaint, he looked at the Modern Award and it would have been apparent to him that the wage rate for the lowest classification was above $14 (and yet Mr Attalla’s pay rate was between $12 and $14 an hour). He said that at that time he had not thought that Mr Attalla was employed under the Modern Award and thought that he was a driver. However, he had not been aware whether there had been an award which applied to drivers and had not checked whether there was one.
Mr Youssef said that the complaint made against Minapharm in November 2012 was made by an employee at the Maroubra pharmacy, which he owned at the time, and concerned the complainant’s classification. He said that he was aware at the time that the Modern Award applied to the complainant’s employment but said that the award had not set out which classification would apply to a particular employee. He said that he had looked at the classifications set by the Pharmaceutical Society Australia and the Pharmacy Guild and that the Ombudsman had ultimately accepted his arguments concerning the complainant’s classification. Mr Youssef said that he was also aware at that time that there was a methodology for determining the appropriate classification of employees and that there were appropriate wages for each of those classifications. He said he could not remember being given a checklist or being asked to review particular information by the Ombudsman prior to the mediation of the matter.
Mr Bastawrose
Mr Bastawrose said that he was primarily responsible for the Maroubra pharmacy when a former employee made a complaint against the Partnership in December 2009. He said that the complainant worked for one day then asked to be paid in cash. Mr Bastawrose said he refused to pay her in cash and told her that she still needed to fill out forms, including a tax file declaration, before she could be paid, to which she responded that she needed the money in cash and would lodge a complaint. Mr Bastawrose said that when an officer of the Ombudsman’s office telephoned him, he explained the situation and the officer understood. He said that he and the officer had agreed on the amount which was owed to the employee and he eventually paid her that amount. Mr Bastawrose said that he could not recall receiving any letters from the Ombudsman regarding that complaint or being informed about the application of the Modern Award or the Fair Work info line. He said he had not considered the Award because the dispute had not related to the Award or the employee’s rate of pay.
Mr Bastawrose said that he had been aware that a complaint had been lodged against Minapharm in November 2012 in relation to a wages dispute but was unaware of the full nature and details of the complaint or that it had been related to an alleged breach of an award.
CONSIDERATION
At the outset, it is appropriate to note that this is a civil proceeding (s.549 FW Act), that the respondents were partners in the Partnership and that each of the admitted contraventions, regardless of which partner caused it, was a contravention by the Partnership (ss.4 and 10(1) Partnership Act 1892 (NSW)) for which each of the respondents is jointly liable (s.9 of the Partnership Act 1892 (NSW)).
Later in these reasons these matters will be discussed further in the context of the quantification and allocation of the penalties to be imposed.
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”. Justice Tracey 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)the circumstances in which the conduct took place and the nature and extent of the conduct;
b)the deliberateness of the breaches;
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 respondents;
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)contrition, corrective action and co-operation with the enforcement authorities;
h)compliance with minimum standards; and
i)the need for specific and general deterrence.
Circumstances in which the conduct took place and the nature and extent of the conduct
The circumstances in which the conduct took place and the nature and extent of the conduct were set out in the statement of agreed facts, as summarised earlier in these reasons. In brief, the Partnership paid Mr Attalla and Ms Salucci flat rates of pay rather than the rates provided by the awards applicable to their work with the consequence that it:
a)under the FW Act failed to pay Mr Attalla or Ms Salucci their annual leave entitlements or for public holidays not worked;
b)failed to pay Mr Attalla or Ms Salucci for overtime worked when covered by the Modern Award;
c)failed to pay Mr Attalla, under both the Division 2B Award and the Modern Award, wages for time worked at at least minimum rates; wages for at least thirty-eight ordinary hours of work per week; or weekday, Sunday and public holiday penalty rates;
d)failed to pay Mr Attalla overtime under the Division 2B Award;
e)failed to pay Mr Attalla or Ms Salucci annual leave loading under the Modern Award;
f)failed to pay Mr Attalla Saturday penalty rates under the Modern Award; and
g)failed to pay Ms Salucci a clothing allowance under the Modern Award.
The respondents’ contraventions tended to undermine the workplace relations regime as a whole because they amounted to a failure to provide basic and important conditions and entitlements provided for by workplace laws. The contraventions involved significant underpayments of base level entitlements to low paid workers who were vulnerable and, at least in Ms Salucci’s case, whose employment relationship was misrepresented as being casual.
Deliberateness of the breaches
Although there was no direct evidence indicating that the respondents had intentionally sought to breach the relevant industrial instruments, they were not novice employers. There is no reason to suspect, particularly given the earlier complaints made against Minapharm and the Partnership, that the Partnership was not aware of the employment entitlements in issue in this case. In that connection, it is to be noted that in relation to Mr Attalla the respondents’ case was that they thought he was a driver, and so not covered by either of the awards relevant to his employment with them. However, no evidence was adduced to suggest that the Partnership had sought to identify which industrial instrument did, in fact, cover him and whether the Partnership was complying with it. The Partnership’s approach to the employment of Ms Salucci was little better. The respondents’ evidence suggests that the Partnership knew that the Modern Award had various grades and had read and understood the provisions concerning level 1 pharmacy assistants but not those concerning level 2 pharmacy assistants. That is not credible. It may be that Mr Bastawrose did not notice Ms Salucci’s qualification cited in her resume but, if so, that only tends to confirm what has come to be my view that the Partnership was largely unconcerned with anything other than its own business needs and was largely uninterested in how those demands were affected by the requirements of industrial law.
There was some debate between the parties concerning whether the respondents had been reckless or negligent in their approach to their obligations as employers under industrial law and in my view it is more a case of the former than the latter. The facts are similar to a situation of wilful blindness in that, for instance, I do not accept that the Partnership believed that it could lawfully pay a flat rate to employees regardless of when and how long they worked, not accrue obligations for annual leave and not make superannuation contributions. The best case for the respondents is that they knew they had obligations but did not seek to determine what they are. That is not negligence, in the sense of mere inattention or carelessness.
Nature and extent of the loss
The losses were all pecuniary. Mr Attalla had been underpaid $62,010.59, the equivalent of about 93 weeks’ wages, while Ms Salucci was underpaid $5,296, about 7.5 weeks’ wages.
The underpayments were rectified during the course of this proceeding.
Similar previous conduct
Although the earlier complaints against Minapharm and the Partnership did not lead to findings of contravention, their substance was not contested in any significant way and revealed an approach to the employment of individuals not dissimilar from the one revealed in the present proceeding. The importance of this lies in the fact that Mr Youssef had had dealings with the Ombudsman as a result of which he could not have failed to notice the existence of a sophisticated structure of employee/employer rights and obligations. This was knowledge possessed by the Partnership and points to a degree of culpable recidivism in the contraventions the subject of this proceeding.
Whether the breaches arose out of one course of conduct
By virtue of s.557(1) of the FW Act, if two or more contraventions of a civil remedy provision are committed by the same person and arose out of a course of conduct pursued by that person, those contraventions are to be taken to constitute a single contravention of that provision. Because the contraventions in this case were those of the Partnership, they should be treated under s.557(1) as having been committed by the same person. Consequently, multiple contraventions of a provision the subject of this proceeding can be classified as a single contravention of the civil remedy provision in question if they arose out of an identifiable course of conduct.
Further, I accept the Ombudsman’s submission that the contraventions which had a common element and involved a course of conduct which commenced under the Division 2B Award and continued under the Modern Award should be grouped together. She submitted that penalties should be imposed on the respondents for the following twelve grouped contraventions:
a)contravention of s.90(2) of the FW Act by failing to pay annual leave and annual leave loading on termination;
b)contravention of s.116 of the FW Act by failing to pay for public holidays not worked;
c)contraventions of cl.13 of the Division 2B Award and cl.17 of the Modern Award by failing to pay for minimum hours of engagement per week for a full time employee;
d)contraventions of cl.13 and Table 1 of the Division 2B Award and cl.17 of the Modern Award by failing to pay the applicable minimum rate of pay;
e)contraventions of cl.9 of the Division 2B Award and cl.26.2(a)(i) of the Modern Award by failing to pay overtime;
f)contraventions of cl.10(i)(a) of the Division 2B Award and cl.26.2(b) of the Modern Award by failing to pay penalty rates for morning, evening and late evening work on Monday to Friday;
g)contraventions of cl.10(i)(d) of the Division 2B Award and cl.26.2(d) of the Modern Award by failing to pay the penalty rate applicable for ordinary hours worked on a Sunday;
h)contraventions of cl.10(i)(e) of the Division 2B Award and cl.31.3 of the Modern Award by failing to penalty rates for work on a public holiday;
i)contravention of cl.26.2(c) of the Modern Award by failing to pay penalty rates for work on a Saturday;
j)contravention of cl.19.3(b) of the Modern Award by failing to pay a special clothing allowance;
k)contravention of s.535(1) of the FW Act by failing to maintain employee records; and
l)contravention of s.536(2) of the FW Act by failing to provide pay slips which provided details about superannuation payments.
Other than noting that non-payment of annual leave loading is relevantly a breach of the Modern Award, I agree with the groupings proposed by the Ombudsman. Because non-payment of leave loading is a breach of an award rather than of a statutory provision, it is not a contravention of s.44 of the FW Act. Consequently, the allegation that it was is not made out.
Although the respondents accepted the Ombudsman’s grouping of the breaches into twelve contraventions, they submitted that legal differences between the groups could not be ignored. In that regard they noted that the four groups relating to the failure to pay penalty rates for work on Saturdays, Sundays, public holidays and for early morning and evening work on weekdays were all concerned with the failure to pay penalty rates for work outside ordinary business hours. They submitted that the two groups relating to the failure to pay for public holidays worked and for minimum weekly engagement were concerned with a failure to make payments which were due even though employees were absent and that the failures to keep employee records and to provide compliant pay slips involved failures to keep required records.
The respondents argued in this connection that, although twelve penalties would be imposed on them, the Court should acknowledge these groupings when applying the totality principle such that the overall level of penalty would thereby be reduced. That submission cannot be accepted. The totality principle is not to be applied only to one part of a case or preferentially to a part of the case. It is a final check to ensure that the total of all the penalties which have been imposed in a case where multiple contraventions have been admitted or proved is not unfair or out of proportion to the circumstances of the case: Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at 397-398 [42]ff.
Finally, although the respondents were not shown to have been equally or identically responsible for each of the civil remedy provision contraventions they have admitted, because the contraventions were those of the Partnership and were civil matters, each of the respondents has joint responsibility for them: ss.10 and 12 of the Partnership Act 1892 (NSW).
Size and financial circumstances of the business
Apart from evidence that the Partnership originally operated five pharmacies and at the time of the hearing continued to operate four, there was no other evidence about the size of the Partnership’s business or the individual respondents’ financial circumstances. I accept the respondents’ submission that they ran a small business, but I do not accept that this adequately explains the contraventions, given two of the partners’ previous dealings with the Ombudsman’s office. The point to be made in relation to all enterprises, of whatever size, is that they have a fundamental obligation to pay their employees properly for the work they do. The smallness of an enterprise is, without more, insufficient reason to lessen whatever penalty might otherwise be appropriate and it is no excuse for inaction when an employer is aware of the existence of applicable industrial instruments but fails to properly inform itself of how such instruments operate in the context of its business, as I find was the case here.
Contrition, corrective action and co-operation with authorities
I accept that the respondents accepted liability early in the proceeding and did pay Mr Attalla and Ms Salucci the principal amounts of their entitlements although the Court has not been advised that amounts for interest, which was claimed, have been paid. I also accept that the Partnership has taken significant steps to regularise its operations as far as industrial law is concerned, and made a clean breast of its failings in this case to its staff. The individual respondents also expressed their regret for depriving Mr Attalla and Ms Salucci of their entitlements and apologised for having done so. These were material and important steps and do demonstrate considerable contrition and corrective action. I consider that these steps warrant a discount of 20% of the potential maximum penalties applicable in this case.
I accept that the Partnership might have been more forthcoming with the Ombudsman’s investigators than it was but I am not persuaded, given the other steps taken by the Partnership, that too much should be made of this. A small business which is focussed on conducting its business, as it must to survive, and which has inadequate systems will almost certainly find it difficult to provide quickly or with sufficient detail all the information which, if it had been better managed, it would have been able to produce promptly and completely. Unless there is reason to think that there is concealment or evasion involved, failures of that sort would, in my view, be better considered to be incidents of the record keeping contraventions which have been admitted, rather than as a lack of co-operation.
Ensuring compliance with minimum standards
I accept that the respondents’ failure to keep records hindered the Ombudsman’s investigation into Mr Attalla and Ms Salucci’s entitlements. In that connection 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. (emphasis in original) (reference omitted)
In this case, the same considerations apply to the admitted inadequacies in the respondents’ pay slips.
Deterrence
The Ombudsman submitted that there was a great need for specific deterrence because the respondents had a history of non-compliance and because their contraventions were deliberate and had resulted in significant underpayments totalling $67,306.59. She also submitted in this regard that the respondents continued to trade as the Partnership and still had employees.
The Ombudsman submitted that there was also a great need for general deterrence so as to send a clear message that contraventions of this nature were not acceptable and to demonstrate that contravening would not serve to benefit employers whose conduct undermined the level playing field established by minimum entitlements.
Despite the Ombudsman’s submissions, I consider that the corrective steps taken by the Partnership, not least of which was the respondents’ advice to their staff concerning the contraventions, indicate that there is less need for specific deterrence than was argued. Nevertheless, there must be some element for specific deterrence included in the penalties to be imposed because the contraventions occurred even though Messrs Bastawrose and Youssef had had previous dealings with staff members who alleged underpayments and so should have been more alert than they appear to have been to their duty to comply with industrial legislation and instruments.
There is also a need for an element for general deterrence to be included in the penalties to be imposed. This will be to mark the Court’s disapproval of the admitted contraventions and to discourage other employers from emulating the respondents’ behaviour.
Penalties
The Ombudsman submitted that although the value of a penalty unit increased during the period of the contraventions, the value to be applied was the one in force at the beginning of that period, namely $110. She submitted that, in circumstances where the decisions which led to the contraventions were made prior to 28 December 2012, the lower value of penalty unit ought to be applied to the contraventions as a whole if the conduct commenced before 28 December 2012 and continued after that date. I accept that submission and will proceed on that basis.
At the hearing the parties agreed that the Partnership operated as a single entity and that there was no question of different penalties being applied to different respondents, in the sense that in respect of each grouped contravention there would be one penalty imposed (ie on them together as the Partnership) for the payment of which they would each be jointly and severally liable.
Although such an approach has an apparent appeal, on further examination it may not necessarily be practical because the proceeding has been brought against the individual partners and s.9 of the NSW Partnership Act relevantly provides for the respondents to have joint, not several, liability for the Partnership’s contraventions. That is to say, none of them can be jointly liable in respect of an individual contravention for an amount greater than the statutory or regulatory maximum penalty for a contravention by an individual. This situation is reflected in s.10 of the NSW Partnership Act, which relevantly provides:
10 Liability of firm for wrongs
(1)Subject to subsection (2), where by any wrongful act or omission of any partner in a firm … any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act.
That is to say, no penalty can be imposed on the Partnership greater than that which could be imposed on the individual partner who committed the contravention.
Consequently, and perhaps this is what the parties intended without expressing it in quite this way, an appropriate penalty for the contravention will be set and each respondent will be ordered to pay one third of it. That is to say, the penalties will be quantified as if the respondents were severally liable for a third of the penalty appropriate to the contravention.
In this matter I consider the appropriate penalties to be:
| Provision(s) Contravened | Description of contravention | Maximum penalty | Maximum after discount | Penalty as a percentage of discounted maximum penalty | Aggregate penalty | Penalty per individual |
| Section 90(2) of the FW Act | Non-payment of annual leave on termination | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Section 116 of the FW Act | Non-payment for public holidays not worked | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Clause 13 of the Division 2B Award | Non-payment of minimum hours of engagement per week | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Clause 17 of the Modern Award | ||||||
| Clause 13 and Table 1 of the Division 2B Award | Underpayment of minimum rate of pay | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Clause 17 of the Modern Award | ||||||
| Clause 9 of the Division 2B Award | Non-payment of overtime | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Clause 26.2(a)(i) of the Modern Award | ||||||
| Clause 10(i)(a) of the Division 2B award | Non-payment of penalty rates for morning, evening and late evening work Monday to Friday | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Clause 26.2(b) of the Modern Award | ||||||
| Clause 10(i)(d) of the Division 2B Award | Non-payment of penalty rates for work performed on a Sunday | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Clause 26.2(d) of the Modern Award | ||||||
| Clause 10(i)(e) of the Division 2B Award | Non-payment of penalty rates for work on a public holiday | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Clause 31.3 of the Modern Award | ||||||
| Clause 26.2(c) of the Modern Award | Non-payment of penalty rates for work performed on a Saturday | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Clause 19.3(b) of the Modern Award | Non-payment of the special clothing allowance | $6,600 | $5,280 | 40% | $2,112 | $704 |
| Section 535(1) of the FW Act | Failure to make and keep required employee records | $3,300 | $2,640 | 80% | $2,112 | $704 |
| Section 536(2) of the FW Act | Failure to provide compliant pay- slips to the employees | $3,300 | $2,640 | 80% | $2,112 | $704 |
| TOTAL | $72,600 | $58,080 | $25,344 | $8,448 |
The total of the penalties payable by each of the respondents according to this approach is $8,448. However, I am not satisfied that this is a just and appropriate amount as an aggregate figure for any of the respondents. Given the facts of this matter I consider that an appropriate penalty for each respondent would be $15,000.
The penalties are to be paid to the Commonwealth.
Finally, Mr Attalla and Ms Salucci are entitled to be paid interest on the amounts which were paid to them as a consequence of the Ombudsman’s actions on their behalf. The Court is unaware of the dates on which the relevant payments were made and so the parties are to provide the Court with a proposed minute of order quantifying the amounts which the respondents are to pay Mr Attalla and Ms Salucci by way of interest.
I certify that the preceding one hundred and twenty-seven (127) paragraphs are a true copy of the reasons for judgment of Judge Cameron
Associate:
Date: 9 February 2018
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