Fair Work Ombudsman v Bound For Glory Enterprises & Anor
[2014] FCCA 432
•6 June 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v BOUND FOR GLORY ENTERPRISES PTY LTD & ANOR | [2014] FCCA 432 |
| Catchwords: INDUSTRIAL LAW – Penalty hearing – agreed contraventions – employees in pizza restaurant – underpayment of wages – failure to pay correct minimum rates for apprentices, trainees and other employees – failure to pay casual loadings – failure to accrue or pay annual leave – failure to accrue personal leave – failure to keep records – statement of agreed facts – dispute over grouping – submissions on penalty range in civil penalty proceedings – determination of appropriate penalty. |
| Legislation: Fair Work Act 2009 (Cth), ss.44, 45, 90, 96, 535(1), 536(1), 539(2), 545, 546(2)(a), 550, 557(1), 559 |
| Bristow v City Petroleum [1987] 1 WLR 529 Plancor Pty Ltd v Liquor Hospitality and Misc Union (2008) 171 FCR 357 Mason v Harrington Corporation Pty Ltd[2007] FMCA 7 Kelly v Fitzpatrick(2007) 166 IR 14 Australian Ophthalmic Supplies Pty Ltd v Mc Alary-Smith [2008] FCAFC 8 Fair Work Ombudsman v Roselands Fruit Market Pty Ltd & Anor [2010] FMCA 599 Veen v The Queen (No.2) [1988] HCA 14 Temple v Powell [2008] FCA 714 Australian Building & Construction Commissioner v Construction, Forestry, Mining & Energy Union (No.2) [2010] FCA 977 Pearce v R (1998) 194 CLR 610 Johnson v R (2004) 205 ALR 346 Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479 Fair Work Ombudsman v Ramsey Food Processing (No.2) [2012] FCA 408 Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 Cotis v McPherson (2007) 169 IR 30 Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 Fair Work Ombudsman v Orwill Pty Ltd [2011] FMCA 730 Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 Fair Work Ombudsman v Cleaners New South Wales Pty Ltd [2009] FMCA 683 Fair Work Ombudsman v Revolution Martial Arts Pty Ltd and Anor [2013] FMCA 125 Fair Work Ombudsman v Stewarts Transport and Logistics Pty Ltd and Ors [2010] FMCA 905 Fair Work Ombudsman v Maclean Bay Pty Ltd (No.2) [2012] FCA 557 Fair Work Ombudsman v Bento Kings Meadows [2013] FCCA 977 Barbaro v R [2014] HCA 2 Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2014] FCA 160 NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72 Rocky Holdings Pty Limited v Fair Work Ombudsman [2014] FCAFC 62 Australian Competition and Consumer Commission v Energy Australia Pty Ltd [2014] FCA 336 |
| Applicant: | fair work ombudsman |
| First Respondent: | BOUND FOR GLORY ENTERPRISES pty ltd (ACN 100 518 438) |
| Second Respondent: | RUBY CHAND |
| File Number: | MLG 905 of 2013 |
| Judgment of: | Judge O’Sullivan |
| Hearing date: | 14 March 2014 |
| Date of Last Submission: | 14 March 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 6 June 2014 |
REPRESENTATION
| Counsel for the Applicant: | Ms M. Richards S.C |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the First and Second Respondents: | Mr J. D’Abaco |
| Solicitors for the First and Second Respondents: | Harwood Andrews |
THE COURT DECLARES THAT:
The First Respondent contravened:
(a)item 2(2) of Schedule 16 of the Fair Work(Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (Transitional Act) by failing to pay the 31 employees named in Schedule 1 to these Orders at least the hourly rate of pay in Schedule A of the La Porchetta Employee Collective Agreement Vic [095740449-1] (Collective Agreement) for each hour of work, in contravention of clause 10 of the Collective Agreement;
(b)item 2(2) of Schedule 16 of the Transitional Act by failing to pay Omar Popal, Bikramjith Singh and Sunita Singh for the full time apprentice hours of work of 38 hours per week, in contravention of in contravention of clause 5 and clause 10 of the Collective Agreement;
(c)item 5 of Schedule 16 of the Transitional Act by failing to pay Omar Popal at least the periodic rate of pay he was entitled to under the Collective Agreement immediately prior to becoming employed as a trainee, which was preserved by the Australian Pay and Classification Scale derived from the National Training Wage Award 2000 (Training Pay Scale) from 5 July 2009 to 31 December 2009, in contravention of section 182(1) of the Workplace Relations Act 1996 (WR Act);
(d)item 5 of Schedule 16 of the Transitional Act by failing to pay Stefan Albanese, Anthony Filipovic, Brett Klimisch, Amy Mumford, Brady Russell and Omar Popal at least the periodic rate of pay in the Training Pay Scale for each of their guaranteed hours between 5 July 2009 and 31 December 2009, in contravention of section 182(1) of the WR Act, which was a term of the Australian Fair Pay and Conditions Standard (AFPCS);
(e)section 45 of the Fair Work Act 2009 (FW Act) by failing to pay Matthew Cooke, Louise Cummings, Hanna Davis, Carlos Estrada, Taylah Hogan, Omar Popal, Skye Riseley, Sophie Thomson, Mahdi Urozgani and Libby Vasquez at least the minimum hourly rate of pay they were entitled to under the Collective Agreement immediately prior to becoming employed as trainees, between 1 January 2010 and 5 February 2012, in contravention of clause D.5.3(a) of Schedule D of the Restaurant Industry Award 2010 (Modern Award);
(f)the safety net contractual entitlements of the 22 trainees listed in Schedule 2 to these Orders who were in employment on or after 1 January 2010, by failing to pay them for their guaranteed hours of work;
(g)item 2(2) of Schedule 16 of the Transitional Act by failing to pay the 24 casual employees listed in Schedule 3 to these Orders a casual loading of 25% in addition to their minimum hourly rate of pay, in contravention of clause 5 of the Collective Agreement;
(h)item 6(1)(a) of Schedule 16 of the Transitional Act by failing to credit accrued annual leave to full time and part time employees on a monthly basis from 5 July 2009 to 31 December 2009, in contravention of section 234(2) of the WR Act, which was a term of the AFPCS;
(i)section 44 of the FW Act by failing to progressively accrue annual leave to full time and part time employees from 1 January 2010 to 10 December 2011, in contravention of section 87(2) of the FW Act, which is a term of the National Employment Standards (NES);
(j)item 6(1)(a) of Schedule 16 of the Transitional Act by failing to pay Anthony Filipovic, Brett Klimisch, Devinderjit Mour and Marnie Scott untaken accrued annual leave upon termination of their employment, in contravention of section 235(2) of the WR Act, which was a term of the AFPCS;
(k)section 44 of the FW Act by failing to pay Stefan Albanese, B. Bikram, Kate Crawford, Louise Cummings, Hanna Davis, Chanel Dubuisson, Carlos Estrada, Taylah Hogan, Dana Lee, Amy Mumford, Trisha Nieva, Skye Riseley, Brady Russell, Sumitpal Singh, Dildar Singh, Daniel Simons, Sophie Thomson, Ahmed Turkmani and Libby Vasquez, untaken accrued annual leave in contravention of section 90(2) of the FW Act, which is a term of the NES;
(l)item 6(1)(a) of Schedule 16 of the Transitional Act by failing to credit accrued personal/carer’s leave to full time and part time employees on a monthly basis from 5 July 2009 to 31 December 2009, in contravention of section 246(4) of the WR Act, which was a term of the AFPCS;
(m)section 44 of the FW Act by failing to progressively accrue personal/carer’s leave to full time and part time Employees from 1 January 2010 to 10 December 2011, in contravention of section 96(2) of the FW Act, which is a term of the NES;
(n)section 535(1) of the FW Act, by failing to make and keep a record containing details of whether employees’ employment was full time or part time, permanent, temporary or casual and the date on which an employee’s employment began, in contravention of regulation 3.32 of the Fair Work Regulations 2009 (FW Regulations);
(o)section 535(1) of the FW Act, by failing to make and keep a record containing details of the rate of remuneration paid to employees, and in the case of casual or irregular part time employees guaranteed a rate of pay set by reference to a period of time worked, the hours worked, in contravention of regulation 3.33 of the FW Regulations;
(p)section 535(1) of the FW Act, by failing to make and keep a record containing details of the overtime hours, including the number of overtime hours worked during each day and when an employee started and ceased working overtime hours, in contravention of regulation 3.34 of the FW Regulations;
(q)section 535(1) of the FW Act, by failing to make and keep a record containing details of employees’ accrual of leave, any leave taken by employees and the balance of employees’ entitlement to that leave from time to time, in contravention of regulation 3.36 of the FW Regulations;
(r)section 535(1) of the FW Act, by failing to make and keep a record containing details of the termination of any employee’s employment, in contravention of regulation 3.40 of the FW Regulations; and
(s)section 535(1) of the FW Act, by failing to make and keep records in respect of Melissa Tep, Sarah Jean Thoonen, Emily Cebic, Natahsha Chengbraydoo, Rebecca Crespo, Abby Gallego, James Gentile, Emily Harris, Tarnia Jane Cummings, Sarah Dortmans, Sarah Jane Hill, Georgia Hogan, Shannon Johns, Natasha Jones, Bonny Parker, Ashleigh Purser, Justin Rohlf, Cassandra Santos, Meagan Sneddon, James Szabo, Sarah Jane Thoonan and Mario Gupta.
A declaration that the Second Respondent was involved in each of the contraventions by the First Respondent set out in paragraph (1) above pursuant to section 550(1) of the FW Act.
AND THE COURT ORDERS THAT:
Pursuant to section 545(2) of the FW Act the First Respondent pay the balance of the total underpayments that remain outstanding at the date of this order, in monthly instalments on the dates and in the amounts specified for each employee in Schedule 4 to these Orders.
Pursuant to section 547(2) of the FW Act, the First Respondent pay the interest at the applicable pre-judgment rate on the amounts ordered to be paid pursuant to order (3) above.
Pursuant to section 545(1) of the FW Act, the First Respondent take all reasonable steps to locate employees who are entitled to payments pursuant to orders 3 and 4 above.
Any amounts payable under orders 3 and 4 above that have not been paid by 28 October 2014 because the First Respondent was unable to locate the employee, shall be paid to the Commonwealth pursuant to section 559 of the FW Act on that date.
Pursuant to section 546(1) of the FW Act, the First Respondent pay an aggregate penalty in the amount of $139,507.50 for the contraventions set out in the Declarations in 1(a) to 1(e) and 1(g) to 1(s) above.
Pursuant to section 546(1) of the FW Act, the Second Respondent pay an aggregate penalty in the amount of $27,901.50 for his involvement in the First Respondent’s contraventions set out in the declarations in 1(a) to 1(e) and 1(g) to 1(s) above.
Pursuant to section 546(3)(a) of the FW Act, the First and Second Respondents pay their respective penalties to the Commonwealth by
28 October 2014.The Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
SCHEDULE 1
| 1. Stefan Albanese 2. Dalleet Aujla 3. B Bikram 4. A Arshad 5. Aimee Barling 6. Narelle Beavis 7. Deanna Block 8. Bridget Browne 9. Melissa Careem 10. Louise Cummings 11. Cassandra Carnevale 12. Kate Crawford 13. Hanna Davis 14. Chanel Dubuisson 15. Vivian Dumergue-Sanchez | 16. Sarah Dudman 17. Taylah Hogan 18. Lucy Jenkin 19. Novina Kalapurackal 20. Dana Lee 21. Amy Mumford 22. Devinderjit Mour 23. Sofija Plavsic 24. Terry Pyke 25. Brady Russell 26. Marnie Scott 27. Daniel Simons 28. Sunita Singh 29. Sumitpal Singh 30. Merline Thomas 31. Libby Vasquez |
SCHEDULE 2
| 1. Stefan Albanese 2. Jessica Bakker 3. Brent Bartels 4. Jessica Boavida 5. Matthew Cooke 6. Louise Cummings 7. Hanna Davis 8. Lauren Eastwick 9. Carlos Estrada 10. Taylah Hogan 11. Julia McLean | 12. Amy Mumford 13. Omar Popal 14. Rachelle Poulter 15. Skye Riseley 16. Brady Russell 17. Mohini Singh 18. Sophie Thomson 19. Mahdi Urozgani 20. Libby Vasquez 21. Xanthe Wenders 22. Sarah Wynveld |
SCHEDULE 3
| 1. Brandon Anderson 2. A Arshad 3. Aimee Barling 4. Narelle Beavis 5. Deanna Block 6. Bridget Browne 7. Melissa Careem 8. Louise Cummings 9. Cassandra Carnevale 10. Hanna Davis 11. Vivian Dumergue-Sanchez 12. Sarah Dudman | 13. Karna Ellis 14. Taylah Hogan 15. Brodie Greene 16. Lucy Jenkin 17. Novina Kalapurackal 18. Sofija Plavsic 19. Terry Pyke 20. Kai Richardson 21. Brady Russell 22. Daniel Simons 23. Sumitpal Singh 24. Merline Thomas |
SCHEDULE 4
Employee | Amount | Payable no later than |
| 1. A Arshad | $960.96 | 28 April 2014 |
| 2. B. Bikram | $6,587.20 | 28 April 2014 |
| 3. Dalleet Kaur Aujla | $860.00 | 28 April 2014 |
| 4. Sumitpal Singh | $8,713.43 | 28 April 2014 |
| 5. Dildar Singh | $2,087.80 | 28 April 2014 |
| 6. Trisha Nieva | $353.77 | 28 April 2014 |
| 7. Devinderjit Mour | $1,161.09 | 28 April 2014 |
| 8. Ahmed Turkmani | $4,804.80 | 28 April 2014 |
| 9. Louise Cummings | $2,429.52 | 28 April 2014 |
| 10. Carlos Estrada | $3,730.10 | 28 April 2014 |
| 11. Omar Popal | $12,679.17 $12,679.17 | 28 April 2014 28 May 2014 |
| 12. Vivian Dumergue-Sanchez | $76.17 | 28 June 2014 |
| 13. Narelle Beavis | $217.13 | 28 June 2014 |
| 14. Karna Ellis | $164.05 | 28 June 2014 |
| 15. Sarah Dudman | $25.70 | 28 June 2014 |
| 16. Bridget Browne | $56.43 | 28 June 2014 |
| 17. Mellisa Careem | $547.16 | 28 June 2014 |
| 18. Cassandra Carnevale | $15.80 | 28 June 2014 |
| 19. Kate Crawford | $540.40 | 28 June 2014 |
| 20. Brodie Greene | $224.93 | 28 June 2014 |
| 21. Novina Kalapurackal | $248.85 | 28 June 2014 |
| 22. Daniel Simons | $2,808.74 | 28 June 2014 |
| 23. Chanel Dubuisson | $733.42 | 28 June 2014 |
| 24. Hanna Davis | $10,435.41 | 28 July 2014 |
| 25. Terry Pyke | $366.36 | 28 July 2014 |
| 26. Deana Block | $373.28 | 28 August 2014 |
| 27. Lauren Eastick | $356.67 | 28 August 2014 |
| 28. Sophie Thomson | $3,278.92 | 28 August 2014 |
| 29. Anthony Filipovic | $800.39 | 28 August 2014 |
| 30. Brady Russell | $2,246.05 | 28 August 2014 |
| 31. Taylah Hogan | $557.12 | 28 August 2014 |
| 32. Lucy Jenkin | $491.78 | 28 August 2014 |
| 33. Libby Vasquez | $994.10 | 28 August 2014 |
| 34. Brett Klimisch | $339.35 | 28 August 2014 |
| 35. Dana Lee | $968.67 | 28 August 2014 |
| 36. Mahdi Urozgani | $166.73 | 28 August 2014 |
| 37. Julia McLean | $701.12 | 28 September 2014 |
| 38. Brandon Anderson | $173.34 | 28 September 2014 |
| 39. Stefan Albanese | $1,310.84 | 28 September 2014 |
| 40. Brent Bartels | $429.30 | 28 September 2014 |
| 41. Jessica Bakker | $97.57 | 28 September 2014 |
| 42. Sarah Wynveld | $271.49 | 28 September 2014 |
| 43. Marnie Scott | $204.21 | 28 September 2014 |
| 44. Sofija Plavsic | $649.12 | 28 September 2014 |
| 45. Rachelle Poulter | $155.09 | 28 September 2014 |
| 46. Amy Mumford | $2,424.55 | 28 September 2014 |
| 47. Merline Thomas | $190.59 | 28 September 2014 |
| 48. Kai Richardson | $83.60 | 28 September 2014 |
| 49. Skye Riseley | $2,854.22 | 28 September 2014 |
| FEDERAL CIRCUIT COURT AT MELBOURNE |
MLG 905 of 2013
| FAIR WORK OMBUDSMAN |
Applicant
And
| BOUND FOR GLORY ENTERPRISES pty ltd |
First Respondent
| RUBY CHAND |
Second Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings involved inter alia allegations that young employees were given pizza and soft drinks instead of their correct pay and other entitlements. Such a practice belongs in the dark ages[1] rather than twenty first century Australia.
[1] In Bristow v City Petroleum [1987] 1 WLR 529 Lord Ackner said “the Old Truck enactments were very numerous and date from about the year 1464. The particular evil intended to be remedied was the system of payments by masters of their men’s wages wholly or in part with goods – a system open to various abuse.”
In these proceedings it was alleged, and is now admitted, that
52 employees (including those engaged as apprentices and trainees) were underpaid $127,824.75 whilst working at a pizza restaurant in suburban Melbourne between July 2009 and February 2012.
The admitted conduct in these proceedings bears out the truth of the observation that:
“[T]he hospitality industry [is] an industry notorious for non compliance with standards imposed by industrial instruments [it] is also an industry in which enforcement of those standards has proved to be notoriously difficult.”[2]
[2] See Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 171 FCR 357 at [37]
These proceedings were commenced by the Fair Work Ombudsman (“the applicant”) against Bound for Glory Enterprises Pty Ltd (“the first respondent”) and Ruby Chand (“the second respondent”). The applicant sought declarations, pecuniary penalties and other orders for contraventions of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (“the Transitional Act”) and the Fair Work Act 2009 (Cth) (“the FW Act”) by the respondents.
The first respondent was the operator of a La Porchetta pizza restaurant in Berwick, Victoria. The second respondent was at all relevant times for the purposes of these proceedings the director of the first respondent and responsible for the employment of employees at the business.
After the proceedings were commenced the respondents made certain admissions, there were orders by consent for the parties to file material and the matter was listed for a penalty hearing.
The respondents, who engaged a number of workers under programs from which they received a subsidy, now admit that apprentice cooks, full and part time trainees along with other employees were not paid the correct minimum rates, casual employees did not get casual loadings, annual leave was not accrued and/or not paid on termination for those entitled to it, full and part time employees did not get accrued personal leave and appropriate employment records were not kept.
It was not disputed that it had been a practice for employees of the first respondent to get ‘free’ or ‘half priced’ food, pizza and soft drinks and that the respondents now understood this cannot ‘offset’ legal obligations to employees.
On 20 December 2013 the parties filed a Statement of Agreed Facts (“S.O.A.F”) which is Annexure A to these reasons.[3] Aside from the evidence upon which they relied both parties filed detailed written submissions for the penalty hearing. The applicant filed submissions on 19 February 2014. The respondents filed submissions on 4 March 2014. The applicant filed submissions in reply on 12 March 2014.
[3] see s.191 Evidence Act 1995 (Cth)
As a result of the admissions made by the respondents the proceedings before the Court now only concern the question of what penalties should be imposed for the admitted contraventions by the respondents of the FW Act and associated legislation.
These proceedings were heard together with (P)MLG906/2013.
The lawyers in both proceedings were the same and they adopted the submissions made in the other proceedings to the extent they were relevant.[4] However, whilst there was a common (second) respondent in both proceedings, the businesses concerned, admitted contraventions, employees affected and evidence in each of the proceedings were different.
[4] The respondents filed a single set of submissions for (P)MLG905/2013 and (P)MLG906/2013
In these proceedings the applicant submitted for the reasons set out below that the maximum penalty that could be imposed on the first respondent was $181,500.00 and the second respondent was $36,300.00. However taking into account the matters referred to in submissions the applicant’s position was an appropriate penalty in all the circumstances for the first respondent was between $139,507.50 and $155,966.25 and between $27,901.50 and $31,193.25 for the second respondent.
The respondents submit that the penalty sought by the applicant should be reduced as inter alia the respondents have cooperated, made admissions, accepted the wrong doing, expressed regret and taken steps to comply with their obligations. The respondents submitted given the above and if their submission as to how the contraventions should be grouped were accepted that an appropriate penalty in all the circumstances for the first respondent was a penalty of between $72,600.00 and $108,900.00.
In relation to the appropriate penalty to be imposed on the second respondent in these proceedings the respondents contended that the admitted contraventions should be “grouped” together with those that are admitted by him in (P)MLG906/2013 otherwise he would be penalised twice for what was submitted was “essentially the same conduct”. Given the above, in that event it was submitted a total penalty of between $3,960.00 and $10,890.00 was appropriate for the second respondent.
For the reasons to which I will turn this submission ignores not only the statutory context under which these proceedings are being conducted but the separate contraventions affecting separate employees in separate businesses which the Court must address.
The admitted contraventions
The admitted contraventions were identified during an audit of the first respondent by the applicant covering the period from 5 July 2009 to
5 February 2012.The S.O.A.F sets out the detail of the admitted contraventions.
They include a failure to pay the correct minimum rates of pay, failure to pay casual loadings, failure to accrue annual and personal leave or pay untaken annual leave on termination and a failure to keep records. In its submissions filed 13 February 2014 the applicant noted the respondents admitted to multiple contraventions comprising:“(a)item 2(2) of the Transitional Act by failing to comply with various terms of the La Porchetta Employee Collective Agreement Vic [095740449-1] (Collective Agreement) regarding payment of full time, part time and casual employees, including apprentices;
(b)item 5 of the Transitional Act by failing to comply with the Australian Pay and Classification Scale derived from the National Training Wage Award 2000 (Training Pay Scale) in relation to trainee rates of pay and guaranteed hours of work;
(c)section 45 of the FW Act by failing to comply with the Restaurant Industry Award 2010 (Modern Award) in relation to trainee rates of pay;
(d)item 6(1)(a) of Schedule 16 of the Transitional Act by failing to comply with various terms of the Australian Fair Pay and Conditions Standard (AFPCS) in relation to paid personal/carer’s leave and annual leave;
(e)section 44 of the FW Act by reason of failing to comply with various terms of the National Employment Standards (NES) in relation to paid personal/carer’s leave and annual leave; and
(f)section 535(1) of the FW Act by failing to comply with various terms of the Fair Work Regulations 2009 (FW Regulations), or to make any records at all.”
It was agreed that underpayments as a result of the admitted contraventions total $127,824.75 for 52 employees.
The hearing
At the penalty hearing on 14 March 2014, the applicant was represented by Ms Richards of Senior Counsel and the respondents were represented by Mr D’Abaco of Counsel.
At the penalty hearing the applicant relied on the:
a)application and statement of claim filed on 25 June 2013;
b)the S.O.A.F filed on 20 December 2013;
c)affidavit of Sam Hills affirmed on 23 January 2014;
d)affidavit of Lauren Marie Eastick affirmed on 23 January 2014;
e)affidavit of Caitlin Elizabeth Baillie affirmed on 24 January 2014; and
f)
affidavit of Brent Andrew Wallace Bartels affirmed on
24 January 2014.
At the penalty hearing the respondents relied on the:
a)application and statement of claim filed on 25 June 2013;
b)the S.O.A.F filed on 20 December 2013;
c)affidavit of Ruby Chand affirmed 13 January 2014;
d)further affidavit of Ruby Chand sworn 11 February 2014;[5]
e)
correspondence of the applicant dated 18 February 2014,
20 February 2014 and 27 February 2014; and
f)correspondence from the respondents’ solicitor dated 28 February 2014.
[5] Mr Chand gave evidence and was cross examined. He was not an impressive witness. His evidence before the Court was notable for his failure to recall important details to shift blame and strained the bounds of credulity at times. I accept the applicant’s criticism of that evidence.
The legal framework
These proceedings concern admitted contraventions of inter alia the Transitional & FW Act which it is agreed occurred between July 2009 and February 2012 and are contraventions of civil remedy provisions of the Transitional and FW Acts and associated legislation.
During that period the employment of employees by the respondents was regulated by the Transitional Act and FW Act along with a number of applicable industrial instruments.
The applicant is a “Fair Work Inspector” pursuant to s.701 of the FW Act and can bring proceedings for contravention of civil remedy provisions of the Transitional & FW Acts.
Section 546 of the FW Act enables a Court to impose a penalty upon a person who has contravened a civil remedy provision.
Save for the record keeping contraventions the maximum penalty for each of the other admitted contraventions by the first respondent is 300 penalty units and by the second respondent is 60 penalty units. In relation to the admitted contraventions concerning record keeping the maximum penalty for each contravention is 150 penalty units for the first respondent and 30 penalty units for the second respondent.
Section 12 of the FW Act provides that “penalty unit” has the same meaning as in the Crimes Act 1914 (Cth). Section 4AA of the Crimes Act 1914 defined “penalty unit” to be $110 at the time the admitted contraventions occurred.[6]
[6] See Crimes Legislation Amendment (Serious Drugs, Identity Crime and Other Measures) Act 2012 (Cth) amended the value of a penalty unit for offences after 28 December 2012
Section 557(1) of the FW Act provides that where two or more breaches are committed by the same person, the Court should consider whether the breaches arose out of a course of conduct by the person, such as to be taken to constitute a single breach of the term.
Approach to penalty proceedings
The factors which may be taken into account in the assessment of penalty are well established. These weren’t in dispute between the parties. The factors relevant to the imposition of a penalty were summarised by Mowbray FM in Mason v Harrington Corporation Pty Ltd[2007] FMCA 7 at [26]-[59], as follows:
“a.the nature and extent of the conduct which led to the breaches;
b.the circumstances in which that conduct took place;
c.the nature and extent of any loss or damage sustained as a result of the breaches;
d.whether there had been similar previous conduct by the 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.whether or not the breaches were deliberate;
h.whether senior management was involved in the breaches;
i.whether the party committing the breach had exhibited contrition;
j.whether the party committing the breach had taken corrective action;
k.whether the party committing the breach had cooperated with the enforcement authorities;
l.the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
m.the need for specific and general deterrence.”
This summary was adopted by Tracey J in Kelly v Fitzpatrick(2007) 166 IR 14. In Australian Ophthalmic Supplies Pty Ltd v Mc Alary-Smith [2008] FCAFC 8 Buchanan J after referring to the decision in Kelly v Fitzpatrick (supra) said at [9]:
“9.Checklists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations…”
In Fair Work Ombudsman v Roselands Fruit Market Pty Ltd & Anor [2010] FMCA 599 Driver FM (as His Honour then was) summarised the approach the Court should follow in these sorts of proceedings at paragraphs 22 to 26 as follows:
“22.The first step for the Court is to identify the separate contraventions involved. Each breach of each separate obligation found in the AFPCS, the NAPSA is a separate contravention of a term of an applicable provision for the purposes of s.719.[7]
[7] Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223; McIver v Healey [2008] FCA 425 at [16] (unreported, Federal Court of Australia, 7 April 2008, Marshall J).
23.However, s.719(2) provides for treating multiple breaches, involved in a course of conduct, as a single breach.
24.Secondly, to the extent that two or more contraventions have common elements, this should be taken into account in considering what is an appropriate penalty in all the circumstances for each contravention. The respondents should not be penalised more than once for the same conduct. The penalties imposed by the Court should be an appropriate response to what the respondents did.[8]
This task is distinct from and in addition to the final application of the “totality principle”.[9]
25.Thirdly, the Court will then consider an appropriate penalty to impose in respect of each course of conduct, having regard to all of the circumstances of the case.
26.Fourthly and finally, having fixed an appropriate penalty for each group of contraventions or course of conduct, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the breaches.[10] The Court should apply an “instinctive synthesis” in making this assessment.[11]
This is what is known as an application of the ‘totality principle’.”
[8] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [46] (Graham J) (unreported, Full Court of the Federal Court of Australia, 20 February 2008, Gray, Graham and Buchanan JJ) (Merringtons).
[9] Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 at [41]-[46] (Stone and Buchanan JJ) (unreported, Full Court of the Federal Court of Australia, 7 May 2008, Gyles, Stone and Buchanan JJ) (Mornington Inn).
[10] see Kelly v Fitzpatrick (2007) 166 IR 14 at [30] (Tracey J) (Kelly); Merringtons, supra at [23] (Gray J), [71] (Graham J) and [102] (Buchanan J).
[11] Merringtons, supra at [27] (Gray J) and [55] and [78] (Graham J).
Grouping of admitted contraventions
The admitted contraventions have been summarised earlier and are set out in detail in Annexure A. As a result of the application of the statutory course of conduct provisions it was agreed there were
18 separate contraventions. However the parties disagreed on how those contraventions should be grouped taking into account common elements.
The applicant submitted:
“13.….
14.Section 557(1) of the FW Act provides for two or more contraventions of a term of a civil remedy provision that arise out of a course of conduct to be taken to constitute a single contravention of the provision. The Applicant accepts that the Respondents are entitled to the benefit of section 557 of the FW Act in relation to repeated contraventions of each separate term of the Collective Agreement, Training Pay Scale, Modern Award, AFPCS, NES, and section 535(1) of the FW Act in respect of multiple employees. This will apply to the multiple contraventions of each provision, and constitute 18 separate courses of conduct.
Grouping
15.As set out above, it is open to the Court to group separate contraventions together where the contraventions may be said to overlap with each other or involve the potential punishment of the Respondents for the same or substantially similar conduct.[12]
[12] See: Pearce v R (1998) 194 CLR 610 at [40], Johnson v R (2004) 205 ALR 346 at [27] – [34], Merringtons, supra at [46], [72] (Graham J) and [93] (Buchanan J) and Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479 at [24] – [25] (Bromberg J).
16.The Applicant accepts that ten of the 18 separate contraventions set out in Annexure A have common elements and should be grouped together, with only one penalty imposed in respect of each group of contraventions.
17.In this case four groups of contraventions are part of an ongoing failure by the First Respondent to comply with provisions of the same kind, but arising under different legislative provisions or instruments. As a result of changes in legislation and/or award coverage, this resulted in six separate contraventions occurring. The Applicant submits that the following contraventions should be grouped into four groups as follows:
(a)Minimum rate of pay for trainees under the Training Pay Scale, and from 1 January 2010 under Schedule D of the Modern Award;
(b)Failure to credit personal/carer’s leave entitlements under the AFPCS, and from 1 January 2010 under the NES;
(c)Failure to credit annual leave entitlements under the AFPCS, and from 1 January 2010 under the NES; and
(d)Failure to pay untaken accrued annual leave on termination of employment under the AFPCS, and from 1 January 2010 under the NES.
18.The following contraventions have sufficient similarity or overlap in factual circumstances to be appropriately grouped together:
(a)Failure to pay minimum rates of pay under the Collective Agreement and Modern Award
The Applicant accepts that the First Respondent did not differentiate the rates of pay paid to the employees according to whether they were trainees or part time employees covered by the Collective Agreement and the rate of pay usually only increased with age rather than progression from trainee to another classification.
(b) Failure to make and keep records
This includes contraventions of five separate record-keeping provisions in the FW Regulations, as well as a failure to make any records at all for certain employees able to be identified by the Applicant. These contraventions arise out of an overall failure by the First Respondent to make and keep proper employment records.
19.The Applicant submits that no further grouping should be applied. Each of the remaining contraventions relates to a separate and distinct entitlement or obligation and each should be treated as a separate contravention attracting an appropriate penalty.”
The respondents submitted:
“
7.The Court should group separate contraventions together where the contraventions overlap with each other, or involve the potential punishment of the Respondents for the same or substantially similar conduct. The Respondents refer to and adopt the authorities cited by the Applicant at footnote 6 of page 5 of the Applicant’s Submission in MLG905/2013 and footnote 6 of page 4 of the Applicants Submission in MLG906/2013.
8.Mr Chand is the sole director and sole shareholder of both Zillion Zenith International Pty Ltd (Zillion Zenith) and Bound For Glory Enterprises Pty Ltd (Bound For Glory). His contraventions of the Transitional Act and the FW Act arise out of identical conduct in respect of each of those companies. Accordingly, his contraventions in respect of Zillion Zenith and Bound For Glory should be “grouped” together as a single series of contraventions and penalised accordingly. The Court should not impose separate penalties upon Mr Chand in respect of both Zillion Zenith and Bound For Glory.
9.Otherwise, Mr Chand would be penalised twice for what is essentially the same conduct.
…
13.In respect of the contraventions by Zillion Zenith and Bound For Glory, the Respondents acknowledge the Applicant’s “grouping” of contraventions as set out in Annexure A to its Submission. However, the Respondents further submit that the following contraventions have sufficient similarity or overlap in factual circumstances to also be grouped together:
(a)The contraventions in respect of the “Failure to pay trainees for guaranteed hours in accordance with AFPCS” and “Failure to pay apprentices for full-time hours under collective agreement” involve the same type of conduct, i.e. a failure to pay employees for a specified number of hours per week. The fact that the contraventions involve different groups of employees (trainees and apprentices) is immaterial. Both of these contraventions should be grouped together as one contravention;
(b)A total of four contraventions involving the accrual of annual leave and the payment of accrued annual leave upon termination are admitted by each of the Respondents. All four contraventions should be grouped together as a single contravention, as they too arise out of the same or substantially same conduct. The consequence of Zillion Zenith and Bound for Glory failing to accrue employees’ annual leave entitlements during the course of their employment is that upon the termination of their employment, they did not receive a payment representing their accrued annual leave. This is clearly a single course of conduct. Accordingly, it is appropriate for the contraventions (ie. the failure to accrue annual leave and the failure to pay accrued annual leave upon termination) to be grouped as one contravention.
14.If the contraventions are grouped in the above manner, there is a total of six groups of contraventions, not eight as submitted by the Applicant.
…
The applicant submitted in reply:
“Grouping
2.At [8] and [9] of their submission, the Respondents submit that the contraventions of the Second Respondent, Mr Chand, in respect of the First Respondent in this proceeding (Bound for Glory), should be grouped together with Mr Chand’s contraventions in respect of the First Respondent in proceeding MLG906/2013 (Zillion Zenith). No authority is cited in support of this submission, which should be rejected by the Court.
3.Mr Chand is liable as an accessory for the contraventions by Bound for Glory in respect of 52 of its employees at La Porchetta Berwick. He is also liable as an accessory for a series of similar contraventions by a separate employer, Zillion Zenith, in respect of 59 employees at La Porchetta Pakenham. There are separate proceedings against the two employers. While the two proceedings are being dealt with together as a matter of procedural convenience, their subject matter is separate and distinct.
4.Imposing separate penalties on Mr Chand in each proceeding would not penalise him twice for what is essentially the same conduct. Mr Chand runs two separate businesses. He has admitted involvement in extensive underpayment and record keeping contraventions by each business. There is no basis for grouping his wrongdoing in relation to one business with his wrongdoing at his other business.
5.The Respondents further submit at [10] to [11] that the Court should “heavily discount” the penalties to be imposed on Mr Chand because he is the sole director, sole shareholder and sole and directing mind of Bound for Glory, and any penalties imposed on Bound for Glory will directly and immediately affect Mr Chand. This submission overlooks the authority of Fair Work Ombudsman v Ramsey Food Processing (No.2) [2012] FCA 408, [8], in which a similar submission was dismissed:
The present legislative scheme fixes quite different (and much lower) penalties for individuals than for corporations. The culpability of each respondent must be assessed individually and in the context set by the maximum penalty prescribed in each case. I reject the suggestion, if this was what was intended, that either or both respondents might have the benefit of any reduction in penalty because they were jointly, as well as individually, culpable.
See also Minister for Sustainability, Environment, Water, Population and Communities v Woodley [2012] FCA 957, [66]
6.The Respondents acknowledge the grouping of contraventions by Bound for Glory proposed by the Applicant, but submit at [13] that the contraventions should be further grouped as follows:
(a)the contraventions of the Collective Agreement by failing to pay the apprentices for their full time apprentice hours of work, and the contraventions of the AFPCS by failing to pay the Trainees for their guaranteed hours; and
(b)the contraventions involving failure to accrue annual leave and the contraventions involving failure to pay annual leave on termination.
7.The Applicant submits that these further groupings would be inappropriate, for the following reasons:
(a)The first set of contraventions were contraventions of separate instruments, in relation to employees employed on a different basis and undertaking different kinds of training. The apprentices[13] were employed full time and were entitled to be paid for a 38 hour week at the rates for apprentices specified in the Collective Agreement. They were not paid for their full time hours of work.[14] The trainees were all undertaking a Certificate III training package and were engaged on training contracts that required a minimum of 13 hours employment per week, at the very low minimum rates of pay specified in the Training Pay Scale. They were not paid these rates for their guaranteed minimum hours.[15] Despite the common element of failure to pay for contracted minimum hours, the two sets of contraventions are separate and distinct.
(b)The obligation to accrue annual leave during employment precedes the obligation to pay accrued untaken annual leave on termination. It enables employees to take paid leave during the course of their employment. That this is not simply a cash benefit is evident from the restricted circumstances in which paid annual leave can be cashed out, prescribed in sections 92 and 93 of the FW Act. It is not the case that the only consequence of Bound for Glory’s failure to accrue annual leave for its employees was that they did not receive payment for their accrued annual leave on termination. They also lost the benefit of being able to take paid breaks during their employment.[16] These two sets of contraventions relate to separate conduct and should not be grouped.”
[13] Omar Popal, Bikramjith Singh and Sunita Singh.
[14] SOC at 33-41; SOAF at 33-39. The hourly rate of pay was $10.86 for a first year apprentice and $12.83 for a second year apprentice.
[15] SOC at 42-50, 55-58; SOAF at 40-49, 55-57.
[16] Bartels affidavit at 17; Eastick affidavit at 13-14.
The applicant submitted the admitted contraventions should be placed into eight different groups for both respondents as follows:
i)failure to pay minimum rates;
ii)failure to make minimum payment for apprentices;
iii)failure to make minimum payment for trainees;
iv)failure to pay casual loading under agreement;
v)failure to accrue annual leave;
vi)failure to pay untaken annual leave on termination;
vii)failure to accrue personal leave;
viii)failure to make and keep records.
The respondents take issue with those submissions on two separate bases. Firstly the respondents contend that the contraventions at (ii) and (iii) above should be grouped together and the contraventions at (v) and (vi) should also be grouped together.
Secondly the respondents contend that the admitted contraventions by the second respondent in these proceedings should be grouped with the admitted contraventions by that respondent in (P)MLG906/2013 (or treated) in such a way that a single penalty only be imposed for that conduct (across both proceedings).
As is noted above the applicant’s written submissions addressed why the respondent’s submission on the first issue should be rejected.[17]
I accept the submissions made on behalf of the applicant on the first issue. There are separate and distinct obligations in each of the different grouped contraventions. As Gray J said in Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 at 233:“If … a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another.”
[17] See para [6-7] of applicant’s submissions in reply
Bearing in mind the applicant couldn’t seek a civil penalty for the contravention of the guaranteed hours, the respondents’ submissions as to further grouping should be rejected (to the extent they differ from those sought by the applicant) as they fail to recognise the separate and distinct obligations under separate and distinct statutory or legislative provisions in relation to minimum rates for trainees, apprentices and other employees and the different nature of the other obligations.[18]
[18] See Rocky Holdings Pty Limited v Fair Work Ombudsman [2014] FCAFC 62
In relation to the second issue the applicant’s submissions in reply addressed how the Court should approach the respondents’ submission which was that the second respondent (in both proceedings) should only be punished once for his conduct in both this proceeding and in (P)MLG906/2013.[19]
[19] See paras [2-5] of applicant’s submissions in reply
In Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No.2) [2012] FCA 408, Buchanan J discussed whether the intimate connection between the first and second respondent risked punishing the second respondent twice for the same conduct and should therefore be taken into account. Relevantly, at [8] he stated:
[8]A submission was made by the respondents that some consideration should be given to reducing the amount of the penalty imposed on one or other of the respondents to account for the intimate connection between the actions of the first respondent and the conduct of the second respondent. As I understood the submission, it was that there was a risk of punishing twice for the same conduct – i.e. punishing both the first and second respondents for the conduct of the second respondent. The submission appeared to rely on the judgment of Mansfield J in Australian Prudential Regulation Authority v Holloway (2000) 45 ATR 278; [2000] FCA 1245, although I do not understand how it could do so. In that judgment Mansfield J fixed lesser penalties on Mr Holloway, the “alter ego” of Holloway & Co, than on Holloway & Co. In the legislative scheme which his Honour was applying no distinction was made between the maximum penalty that could be applied to corporations and the maximum penalty that could be applied to individuals. That is not the case here. The present legislative scheme fixes quite different (and much lower) penalties for individuals than for corporations. The culpability of each respondent must be assessed individually and in the context set by the maximum penalty prescribed in each case. I reject the suggestion, if this was what was intended, that either or both respondents might have the benefit of any reduction in penalty because they were jointly, as well as individually, culpable.”
I accept the applicant’s submissions and am satisfied to accede to the respondents’ submission on this issue would be tantamount to ignoring (or in my view impermissibly treating in the context of different legal entities the conduct of an individual which results in) separate contraventions affecting separate employees in separate businesses.
Considerations
Turning to the relevant considerations in submissions upon which it relied the applicant contended[20] the relevant factors when fixing penalties in this case include:
[20] The respondents agreed with those submissions
a)the nature and extent of the offending conduct;
b)the nature and extent of any loss or damage;
c)any similar previous conduct;
d)whether the breaches were properly distinct or arose out of one course of conduct;
e)the size of the respondents business;
f)the deliberateness of the breach;
g)the involvement of senior management;
h)the respondents contrition, corrective action and cooperation with the enforcement authorities;
i)ensuring compliance with minimum standards; and
j)deterrence.
The nature and extent of the offending conduct
The applicant submitted:
“26.The contravening conduct was widespread and persistent; it affected all types of employees employed by the First Respondent and was not limited to a particular time period within the Audit Period.
27.The contraventions were only discovered because of the Applicant’s intervention. Its attempts to uncover and quantify the full extent of the contraventions were significantly hindered by the First Respondent’s failure to make and keep proper employment records.
28.It can be inferred that but for the Applicant’s intervention the contraventions would have continued. Indeed, there is evidence that the contravening conduct continued even after these proceedings were commenced – this evidence is detailed in paragraphs 80 to 88 below.
29.The employees affected by the contraventions were vulnerable. They were predominantly young workers employed while at school and reliant on junior rates of pay. It is well accepted by the Courts that young workers employed in the hospitality industry are vulnerable.[21]
[21] See for example Fair Work Ombudsman v Chillis (Shellharbour) [2010] FMCA 718 at [100]; Fair Work Ombudsman v Hongyun Chinese Restaurant (in liquidation) [2013] FCCA 52 at [46], Fair Work Ombudsman v Todaro [2013] WAIRComm 104 at 4-5, 23; Rajogopalan v Brinker Australia [2008] FMCA 311.
30.The age of an employee when they commenced working at the restaurant could be calculated by the Applicant for 38 of the 63 known employees. Of those 38 employees:[22]
[22] For example where the Applicant obtained training records from third party providers and was able to identify an employment start date.
(a)23 were aged between 15 and 17 years of age;
(b)nine were aged 18; and
(c)eight were aged between 20 and 26 years of age (of which two were apprentices).[23]
[23] Omar Popal and Bikramjit Singh included periods as apprentices.
31.Based on the age of the employees, the Court can infer that for most school aged workers this was their first job and they had little or no knowledge about their minimum entitlements. This is supported by the following evidence:
32.Lauren Eastick deposes to La Porchetta being her first job at 16 years old when she was at high school and she had “no knowledge about minimum wages of conditions when [she] started”;[24] and
[24] Eastick Affidavit at paragraph 2.
33.Brent Bartels deposes to La Porchetta being his first paid job at 18 years old.[25]
[25] Bartels Affidavit at paragraph1.
34.The First Respondent also exploited the training arrangements that applied to the apprentices and trainees. Despite entering into and lodging training contracts agreeing to comply with the obligations of the training agreement,[26] the First Respondent failed to comply with one of the most basic conditions; providing hours of work.
[26] SOAF at 16(g).
35.In the case of the three apprentices undertaking a cooking apprenticeship during the Audit Period, the training contract entered into by the First Respondent and registered with authorities guaranteed 38 hours per week of employment and training.[27] The guarantee of hours forms part of the training bargain that permits an employer to lawfully pay lower minimum rates of pay, in this case 55% and 65% of the fully qualified rate, in return for providing the apprentice with full time work and training.
[27] SOAF at 15.
36.For the trainees, it was a condition of the training contract that the trainees receive a minimum number of hours of work and training each week. The training package applicable to the certificate undertaken by the trainees required a minimum of 13 hours employment per week in order to lawfully engage the trainee, and this was the basis on which the First Respondent usually engaged its trainees.[28] The First Respondent obtained a financial benefit by rostering the trainees to work when convenient to its business and being required to pay no more than the low trainee rates of pay, without meeting the corresponding obligation to provide a guaranteed number of hours of work and structured training each week.
[28] SOAF at 16.
37.In addition to failing to provide apprentices and trainees with the minimum hours of work required by their training contracts, it now appears that some of them may not have received their certificates due to the First Respondent’s failure to pay its training provider. The Second Respondent states that because the First Respondent has not paid FS Learning for the training services it provided, employees who have completed their training have not received their certificates.[29]
[29] Supplementary affidavit of Ruby Chand at paragraph 4.
38.The Second Respondent admits that he was a person who signed some of the apprentice and trainee contracts, as well as associated documentation lodged with training providers for the trainees and apprentices engaged by the First Respondent.[30] He was an active participant in the business’ use of exploitative training arrangements.
[30] SOAF at 12(h).
39.A further aggravating factor is that the majority of the identified underpayments arise from failures by the First Respondent to comply with the Collective Agreement.
The Second Respondent admits that he knew the Collective Agreement applied and what obligations it imposed.[31]
[31] SOAF at 12(g) and 13(b).
40.The Collective Agreement is eight pages of basic terms and conditions; it provides for flat rates of pay for most hours worked and a large degree of flexibility for the employer in relation to rostering employees.[32] It does not contain any complex provisions providing for special rates, loadings or allowances.
41.The minimum rates of pay in the Collective Agreement have remained the same since it commenced operation in July 2009, and continue to set the minimum rates for employees of the First Respondent. Only at such time as the Collective Agreement is replaced or terminated, or to the extent a minimum rate of pay falls below the minimum base rate in the Modern Award for a particular classification, will this change.
42.Even with such a beneficial agreement in place, the First Respondent failed to comply with its most basic obligations to pay employees the applicable minimum rates of pay. There was a complete non-payment of the 25% casual loading to casual employees employed during the Audit Period.
43.The Second Respondent was the person responsible for the First Respondent’s compliance with workplace laws.
He apparently failed to obtain any advice about his company’s obligations to its employees, despite being on notice of the requirement to comply with these obligations through interactions with the Applicant and predecessor agencies since 2007.
44.The Second Respondent also admits that, at least until December 2011, he paid less than the minimum rates because he believed he could offset lawful minimums by provision of free or discounted food and drink.[33] There is no suggestion that this arrangement was authorised by employees in accordance with s 324 of the FW Act. He gives no evidence of the basis for his belief that “the food and drinks provided to the employees during the Audit Periods was of greater monetary value than the cash amounts which were not paid to the employees.”[34]
[32] See for example clause 6 and 7 permitting rosters from Monday to Sunday and generous spread of hours with only non-voluntary additional hours attracting a higher rate of pay.
[33] Affidavit of Ruby Chand at paragraph 5.
[34] In any event, the Second Respondent’s descriptions of this offset arrangement are mixed and unreliable. He initially claimed (at paragraphs 4 and 5 of his first affidavit) that employees were permitted to not only consume free meals and drinks during their shifts, but could take food home when not working. This evidence is directly contradicted by each of the former employees who has filed an affidavit in this proceeding and in proceeding (P)MLG906/2013. The Second Respondent now says (at paragraphs 11 and 14 of his supplementary affidavit) that food was charged at half price for employees not working in the kitchen, and full price from early 2012.
The respondents submitted:
“18.The Respondents accept that the contraventions are of a serious and widespread nature.
19.However, there is no basis for the Court to infer (as it has been invited to do by the Applicant) that the contraventions would have continued had it not been for the Applicant’s intervention. It is possible that employees may have independently brought these contraventions to the Respondents’ attention, appropriate advice obtained, and remedial action taken.
20.Contrary to the Applicant’s Submission, there is no evidence before the Court that the contraventions continued after the Proceedings were issued.
21.The Respondents acknowledge that the contraventions involve young workers, some of whom were still at school while employed by Zillion Zenith and Bound For Glory. However, for many of these employees, the opportunity to work while still at school provided them with a source of income and useful training and experience.
22.Further, the Applicant’s submissions at paragraph 29 of the Applicant’s Zillion Zenith Submission and paragraph 30 of the Applicant’s Bound For Glory Submission do not account for the age of all affected employees during the audit periods. Of the 49 employees listed in Schedule 4 of the Statements who were employed by either Zillion Zenith or Bound For Glory at the commencement of the relevant audit period, 25 (51%) were 18 or older at the commencement of the relevant audit period. Of the 62 employees listed in Schedule 4 of the Statements who commenced employment with either Bound For Glory or Zillion Zenith after the commencement of the audit period, 19 were 18 or older at the commencement of employment.[35]
23.To say that all of the workers were “vulnerable” is wide of the mark. There is no evidence before the Court that any of the workers suffered from any disability or impediment which was exploited by the Respondents - for example, language difficulties, foreign nationals on visas, etc.
24.Contrary to the Applicant’s submission, there is little evidence before the Court to draw the inference that for most of the employees, their employment with Zillion Zenith or Bound For Glory was their “first job”. For all the Court knows, many of the employees may have worked elsewhere previously on a part-time or casual basis, or indeed, worked elsewhere whilst also employed by Zillion Zenith or Bound for Glory.
25.Further, while the employees may have had little or no knowledge about their entitlements, the same can be said for many employees in the workforce. The employees here are probably no different to other employees involved in proceedings of this nature which come before the Court, in respect of their lack of knowledge of their legal entitlements.
26.As noted above, the Respondents accept the serious and widespread nature of the contraventions. However, in assessing the imposition of penalties the Court should also have regard to the following matters:
(a)During the period of the contraventions, Mr Chand’s father was seriously ill, having been diagnosed with Parkinson’s Disease and heart problems. He also underwent an operation on his prostate gland. Mr Chand visited his father five times in India during this period, spending approximately 23 weeks out of Australia. While this does not excuse the Respondents’ conduct, Mr Chand’s personal problems and concern for his father’s health obviously affected the Respondents’ attention to complying with their legal obligations;[36]
(b)During the period of the contraventions, employees who worked in the kitchen (including supervisors) received free food and drink. Other employees received half priced food and a free drink.[37] The Respondents now understand and accept that the provision of these benefits did not offset their legal obligations to the employees pursuant to the Transitional Act and the FW Act. However, the benefits were received and accepted by the employees and were in addition to their minimum legal entitlements.”
[35] Based on the dates of birth and earliest dates of commencement of employment set out in Schedule 1 of the Statements for Bound For Glory and Zillion Zenith.
[36] Affidavit of Ruby Chand affirmed 13 January 2014, paragraph 3.
[37] Supplementary Affidavit of Ruby Chand sworn 11 February 2014, paragraph 11.
The applicant submitted in reply:
“8.At [19] of their submission the Respondents submit that there is no basis for the Court to infer that the contraventions would have continued had the Applicant not intervened. The Respondents submit that it is possible that employees may have independently brought these contraventions to the Respondents’ attention, appropriate advice obtained and remedial action taken.
9.This submission ignores the history of earlier interventions by the Applicant and its predecessors, in 2007, 2008, 2009 and 2012.[38] Plainly, these interventions did not bring about across the board compliance with Bound for Glory’s obligations to pay its employees their minimum entitlements. Mr Chand does not depose to having sought advice on any of these occasions; there is no basis for supposing that he might have done so in response to an employee complaint. The Respondents appear to have rectified the underpayments specifically identified by the Applicant, while continuing to underpay employees and keep incomplete records.
10.At [21] the Respondents appear to place some reliance on the opportunity given by them to young employees to work while still at school, providing them with a source of income and useful training and experience. This does not, however, explain or excuse the underpayment of these young workers. They, like any other employee, were entitled to legal minimum rates of pay and conditions.”
[38] SOAF at 80-90.
On any description of the conduct involved here the nature and extent of it warrants severe sanction by way of penalty. I accept the applicant’s submissions as to the aggravating factors.
Nature and extent of any loss or damage
The applicant submitted:
“43.The total underpayment of $127,824.75 is significant, particularly when viewed in light of the significant record keeping contraventions.
44.Over $122,000.00 of the total underpayment relates to underpayment of minimum wages for hours of work.
45.The apprentices were deprived of the opportunity and benefit of working the guaranteed hours, resulting in underpayments totalling $50,858.11 to three apprentices during the Audit Period where pay slips were provided. Two apprentices were owed in excess of $23,000.[39]
46.Similarly for trainees, not only were some of the trainees paid less than the minimum hourly rate of pay for hours they were paid, but ten of them were not always provided with or paid for the hours guaranteed by their training contracts.[40] The $24,564.61 underpayment of 20 trainees is particularly significant when regard is had to low rates of pay that apply to trainees (including a 20% reduction off the hourly rate where the training is to provided wholly on the job), and the absence of full pay records for trainees during the Audit Period.
47.The loss occasioned by the failure to pay trainees and apprentices for their guaranteed hours extends to benefits such as superannuation and leave entitlements that would have been calculated on the ordinary hours of work.
48.Whilst some of the individual underpayments are small, they should be considered in light of the incomplete records made available by the Respondents.[41] For example, Mr Bartels and Ms Eastick were underpaid $429.30 and $356.67 respectively in the seven weeks from December 2011 to February 2012, the only period for which pay slips were provided to the Applicant. In relation to Mr Bartels, no pay slips were provided for the four months of his employment between August 2011 and December 2011. No pay slips were provided for Ms Eastick’s five months of employment from July 2011 to December 2011. It is likely that both Mr Bartels and Ms Eastick were also underpaid during those periods. In the absence of records, however, the underpayment cannot be calculated.
49.The Respondents admit that the First Respondent did not accrue paid annual leave or personal leave entitlements to the benefit of any of its full time and part time employees. Both Ms Eastick and Mr Bartels depose to never being paid if they took time off, despite having entitlements to accrue and take paid leave.[42] The Court can infer that no other full or part time employee received paid holidays or personal leave throughout the Audit Period.”
[39] Omar Popal and Sunita Singh. See Schedule 4 of the SOAF.
[40] SOAF at 45-48, 51 and 55-57.
[41] SOAF Schedules 1 to 4.
[42] Eastick Affidavit a paragraph 14, Bartels Affidavit at paragraph 17.
The respondents submitted:
“27.…The total of the underpayment by Bound For Glory is $127,824.75. Obviously, these are significant amounts.
28.However, in respect of individual employees, many of the underpayments are relatively small. …
29.In respect of Bound For Glory, the underpayments include the following:
(a)Brandon Anderson - $173.34;
(b)Jessica Bakker - $97.57;
(c)Brent Bartels - $429.30;
(d)Narelle Beavis - $217.13;
(e)Deana Block - $373.28;
(f)Bridget Browne - $56.43;
(g)Cassandra Carnevale - $15.80;
(h)Sarah Dudman - $25.70;
(i)Vivian Dumergue-Sanchez - $76.17;
(j)Lauren Eastwick - $356.67;
(k)Karna Ellis - $164.05;
(l)Brodie Greene - $224.93;
(m)Lucy Jenkin - $491.78;
(n)Novina Kalapurackal - $248.85;
(o)Brett Klimisch - $339.35;
(p)Trisha Nieva - $353.77;
(q)Rachelle Poulter - $155.09;
(r)Terry Pyke - $366.36;
(s)Kai Richardson - $83.60;
(t)Marnie Scott - $204.21;
(u)Merline Thomas - $190.59;
(v)Mahdi Urozgani - $166.73; and
(w)Sarah Wynveld - $271.40.”[43]
[43] Schedule 4, Bound For Glory Statement of Agreed Facts dated 20 December 2013.
The applicant submitted in reply:
“11.At [29] the Respondents list 23 employees, out of the total of 52, for whom the underpayment claimed is less than $500. The Applicant notes that it has calculated the underpayments based on the pay slips provided by Bound for Glory and that it has not been able to calculate underpayments for periods for which no pay slips were provided.[44] This both detracts from the force of the submission made by the Respondents at [29] and highlights the gravity of the record-keeping contraventions. Both Mr Bartels and Ms Eastick, who are listed at [29] of the Respondents’ submission deposed to the period of their employment being longer than the period an underpayment was able to be calculated for them.”[45]
[44] Applicant’s submission at [48].
[45] Bartels affidavit at 19; Eastick affidavit at 21.
It is no answer to addressing the gravity of the conduct and loss involved in the aggregate to seek to emphasise the individual amounts for some of the employees. The amounts involved may seem trifling to some but they were required to be paid to young employees for whom they were far from trifling and for which they’ve had to wait.
Any similar previous conduct
The applicant submitted:
“50.The Respondents have not previously been the subject of proceedings by the Applicant or its predecessors for contraventions of workplace laws.
51.The SOAF demonstrates that the First Respondent engaged similar conduct in 2007, 2008, 2009 and 2012 and attracted the attention of the Applicant and its predecessor agencies the Office of Workplace Services (OWS) and Workplace Ombudsman (WO). In 2007 an audit of compliance with the award and record keeping obligations was undertaken.
In 2008 a workplace complaint was investigated, which resulted in another audit in 2009. In 2012 a further workplace complaint of underpayment of wages was investigated.[46] The Second Respondent was involved in each of these investigations and audits.[47]
52.The Applicant submits that the First Respondent’s previous conduct is relevant and of similar character to the matters currently before the Court and can be taken into account when determining the appropriate penalty.[48]
53.In particular, by August 2009 the Respondents were left in no doubt that the First Respondent must ensure the requirements of the applicable instruments and record keeping obligations were being met for all employees. The Determination of Contravention letter sent to the Second Respondent on 5 August 2009 explicitly dealt with underpayment of wages, failures to keep proper pay records and payment of untaken annual leave on termination of employment.[49]
54.The warning given to the First Respondent in August 2009 did not result in the Respondents taking sufficient, if any, steps to prevent further contraventions.[50] This is also despite the First Respondent being well aware of the regulator, supplied with Fact Sheets and being able to seek advice from the Franchisor.
55.In the Applicant’s submission, whilst the Court may place most weight on a prior finding of a court, the Court may have regard to the Respondents’ prior conduct in determining penalty. This is particularly so where that conduct demonstrates that the Respondents were on notice of their obligations to comply with applicable laws and industrial instruments.”
[46] SOAF at 80- 90.
[47] SOAF at 81- 82, 84 -85, 89-90.
[48] Veen v The Queen (No 2) [1988] HCA 14 at page 477; Temple v Powell [2008] FCA 714 at [64] as summarised in Australian Building & Construction Commissioner v Construction, Forestry, Mining & Energy Union (No 2) [2010] FCA 977 at [47], [64].
[49] SOAF at 85-86.
[50] Veen v The Queen (No 2) [1988] HCA 14 at page 477; Temple v Powell [2008] FCA 714 at [64] as summarised in Australian Building & Construction Commissioner v Construction, Forestry, Mining & Energy Union (No 2) [2010] FCA 977.
The respondents submitted:
“30.The Respondents have not previously been convicted of contraventions of workplace laws.
31.The Respondents have not previously been charged with any contraventions of workplace laws.
32.These Proceedings are the first time that any legal proceedings of this nature have been brought against the Respondents.[51]
33.The Statements both deal with the compliance history of the Respondents. Ultimately, all that history reveals is that the Applicant (including its predecessor agencies) has had concerns in relation to the Respondents’ compliance with workplace laws. After enquiries were made, the Respondents’ fully cooperated with the Applicant, remedial action was taken by the Respondents and those concerns were resolved. No proceedings for contraventions of workplace laws were brought by the Applicant (or its predecessor agencies) at that time.
34.Accordingly, contrary to the Applicant’s submission, the Court should have little regard (if any) to the Respondent’s alleged poor compliance history. The Respondents have a clean record. This supports a diminution of any penalties imposed.”
[51] Statements of Agreed Facts dated 20 December 2013, paragraph 81 (for Zillion Zenith and Mr Chand) and paragraph 91 (for Bound For Glory and Mr Chand).
The applicant submitted in reply:
“12.The Respondents submit at [30]-[34] that the Court should have little if any regard to their previous interactions with the Applicant and its predecessor agencies,[52] since these are the first legal proceedings to be brought against them.
To the contrary, the fact that neither Bound for Glory nor Mr Chand responded to these repeated interventions by the Applicant increases their culpability and highlights the need for strong specific deterrence in their case.
13.In 2007, 2008 and 2009 the Respondents merely rectified underpayments brought specifically to their attention by the Applicant, paying the employees concerned what they were owed. It is plain that the Respondents did not otherwise attend to ensuring that all Bound for Glory employees received their minimum wages and entitlements. Bringing these obligations to the Respondents’ attention did not bring about general compliance.”
[52] SOAF at 80-90; Applicant’s submission at [51].
Whilst it is correct to observe that the respondents have not previously been convicted of contraventions of workplace laws it could hardly be contended that the respondents hadn’t previously come to the attention of the authorities. Unfortunately it would appear the attempts to secure voluntary compliance were successful in deterring or preventing further unlawful conduct.
Whether the breaches were properly distinct or arose out of one course of conduct
The issues relevant to this factor have already been set out above.
The size of the respondents business
The applicant submitted:
“57.The Second Respondent deposes to the First Respondent employing 25 employees as at 13 January 2014.[53] This is not a small business.
58.The First Respondent’s business operates a La Porchetta franchise, a national pizza and pasta restaurant chain. The Collective Agreement is a standard “La Porchetta” branded workplace agreement, identifying in clause 1 that the employer is a franchisee. It can be inferred that as a franchisee of the La Porchetta restaurant franchise the First Respondent had access to information, advice and assistance in relation to the Collective Agreement and the operation of the franchise more broadly.
59.An employer’s financial position at the time of the contraventions is not relevant to the question of penalty.[54] Employers, be they small, medium or large, have an obligation to meet minimum standards in relation to their employees; they cannot overcome financial difficulties by underpaying their employees.[55]”
[53] Affidavit of Ruby Chand at paragraph 13.
[54] See Cotis v McPherson (2007) 169 IR 30 at [16] and Kelly at [28]
[55] Kelly at [27]; Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27].
The respondents submitted:
“36.…Bound For Glory [is a] small businesses…has 25 employees.[56] The Court should have regard to the size of the companies in setting the quantum of any penalties imposed upon …Bound For Glory.
37.Moreover, …Bound For Glory [is not] in a strong financial position.
38.…
[56] Affidavit of Ruby Chand affirmed 13 January 2014, paragraph 13.
39. In respect of Bound For Glory:
(a)In the 2011 financial year, Bound For Glory suffered a loss of $12,179.30;
(b)In the 2012 financial year, Bound For Glory suffered a loss of $59,662.07; and
(c)In the 2013 financial year, Bound For Glory earned a small profit of $22,227.11.[57]
[57] Annexure “RC5” to Affidavit of Ruby Chand affirmed 13 January 2014.
40.…Bound For Glory [is not a] particularly profitable or successful businesses. The imposition of a severe penalty upon them by the Court may cause grave financial hardship (or worse) to the companies, particularly when it is borne in mind that both companies have taken steps to repay the underpayments owed to employees (see paragraphs 52 to 57 below).
41.While …Bound For Glory are franchisees of La Porchetta, this does not have any bearing upon their small size or capacity to pay any penalties imposed by the Court. The Court may take judicial notice of the fact that franchisees (like …Bound For Glory) operate as separate legal entities and stand-alone business ventures, separate and apart from their franchisor. Contrary to the Applicant’s submission, there is no evidence before the Court upon which it can infer that either …, Bound For Glory or Mr Chand had access to information, advice and assistance in relation to workplace laws or the collective agreement by virtue of the companies being franchisees.
42.Indeed, there is a risk that if severe penalties are imposed upon …Bound For Glory, their franchise agreements with La Porchetta Franchising Pty Ltd may be terminated.[58] If this were to occur, then … Bound For Glory would cease trading. Not only would have this have an immediate and catastrophic effect upon the continued employment of their current employees, but former (and current) employees who are scheduled to receive their underpayments would not be paid.
43.For his part, Mr Chand has substantial financial liabilities. While he owns the property at ‘address omitted’, this is his home. He owes approximately $860,000.00 on the property to the National Australia Bank.[59]
44.Further, while Mr Chand owns an investment property at
‘address omitted’, he owes the Commonwealth Bank of Australia approximately $200,000.00 on that property.”[60]
[58] Affidavit of Ruby Chand affirmed 14 January 2014, paragraph 25.
[59] Supplementary Affidavit of Ruby Chand sworn 11 February 2014, paragraph 9.
[60] Supplementary Affidavit of Ruby Chand sworn 11 February 2014, paragraph 8.
Regardless of its size or the claims (and that is the highest that they can be put) of impecuniosity the respondents business was not absolved of its legal obligations in relation to the employees. As has been noted in the applicant’s submissions it is also no excuse.
To the extent that the submissions made by the respondents sought to convey the picture of a business teetering on the edge of insolvency the evidence didn’t support such a finding.
The deliberateness of the breach
The applicant submitted:
“60.The Applicant submits that the Court should find that the breaches were deliberate and this is an important factor in favour of penalties in the high range.
61.As set out above, the contraventions were so widespread and persistent they were part of a systemic business practice. This is reinforced by the fact that contraventions of the same kind occurred over the same period of time at the second La Porchetta restaurant franchise controlled by the Second Respondent in his capacity as director and shareholder of a separate corporate entity (subject of the proceedings in MLG906/2013).
62.There is no plausible explanation given for how the contraventions occurred. In fact, the evidence of the Second Respondent contains an implicit admission that that he knew the employees were being underpaid when he states that he “believed that Bound for Glory and Zillion Zenith were allowed to pay employees less than the total amount of money to which they were entitled under a collective agreement or award”[61] in return for non-monetary benefits in the form of food and drink.
63.The Second Respondent also deposes to periods of time spent overseas visiting his father to support a claim he did not pay “as close attention to the affairs [of the First Respondent] as he should have”.[62] The Applicant submits that no weight should be placed on the claim that personal distractions during the Audit Period somehow result in the contraventions being anything other than deliberate, in light of the similar conduct prior to the Audit Period and systemic nature of the contraventions across both businesses during and after the Audit Period.”
[61] Affidavit of Ruby Chand at paragraph 5.
[62] Affidavit of Ruby Chand at paragraph 3.
The respondents submitted:
“45.The Respondents do not suggest that the contraventions occurred through oversight or mere inadvertence. The contraventions were not deliberate in the sense of being “carefully weighed, or considered; studied; intentional”.[63]
46.Ultimately, the contraventions occurred as a result of gross carelessness on the part of the Respondents.”
[63] Definition of “deliberate” per Macquarie Dictionary 5th Edition.
The applicant submitted in reply:
“14.At [45]-[46] the Respondents submit that the contraventions were not deliberate but occurred as a result of “gross carelessness” on their part. The Court should reject that submission.
15.Mr Chand has chosen not to provide the Court with any explanation as to how it came to be that 52 Bound for Glory employees were underpaid over a period of 2 years and
7 months. How did it happen that employees were paid at rates below those in the Collective Agreement? Why was it that trainees were not paid for the minimum hours of work promised in their training contracts? Why did employees have no paid leave before December 2011? How was it that employee records were incomplete or missing altogether? The nature and extent of the contraventions is not explained by carelessness. The only conclusion the Court can draw is that the contraventions were deliberate.”
It was submitted on their behalf that the respondents’ conduct and the contraventions that occurred as a result were as a result of gross carelessness for their statutory responsibilities. Counsel for the applicant submitted that the only conclusion the Court could come to was that the conduct was deliberate.
In the circumstances in light of the submissions and the evidence before the Court (where the contraventions are as the applicant submits so widespread and persistent) I am satisfied that the conduct engaged in by the respondents was part of a systematic business practice. In the situation where the respondents were receiving subsidies or benefits for engaging apprentices and trainees and have admitted still not making sure that those same employees received their minimum entitlements the irresistible inference was the conduct engaged in was part of a deliberate course of conduct by the respondents as to how the business (if it could be called that) was run.
The involvement of senior management
The applicant submitted:
“64.The Second Respondent is, and was at all relevant times, the sole director and shareholder of the First Respondent.
He has admitted involvement in all of the contraventions.[64]
65.There is no evidence that responsibility for the contraventions was shared by anyone else. Since September 2008 he had sole responsibility for the business.[65]”
[64] SOAF at 3.
[65] SOAF at 12.
The respondents made no submissions on this factor.
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.[88]
[88] Fair Work Ombudsman v Taj Palace & Anor [2012] FMCA 258 at [67]
Specific Deterrence
The applicant submitted:
“98.It is well-established that the need for specific and general deterrence is a factor that is relevant to the imposition of a civil penalty.[89]
[89] See for example, Pangaea, supra at [26]-[59] and Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 at 559-60 (Lander J).
Specific deterrence
99.The Applicant submits that specific deterrence is of considerable significance in these proceedings, where the First Respondent continues to trade and employ workers, including young workers and the Second Respondent remains in control of the business.
100.The Applicant notes the comments of Gray J in Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union where his Honour observed in relation to specific deterrence that:
“[m]uch will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur".[90]
101.As set out above in these submissions, there is no evidence of any remorse. The evidence of steps taken to prevent future contraventions has been discredited, and instead the Applicant has put evidence before the Court that contraventions regarding leave entitlements and rates of pay appear to have continued.
102.Having regard to the prior compliance history of the Respondents, the extent of the contraventions and their conduct in these proceedings that suggests a complete disregard for the seriousness of the matter, the Applicant submits that only penalties imposed at the high end are likely to make the contravening conduct unprofitable and the prospect of any future contraventions commercially, and personally, undesirable.”
[90] (2008) 171 FCR 357 at 369.
The respondents submitted:
“63.The Respondents acknowledge that specific deterrence is an important consideration in assessing the quantum of any penalties to be imposed upon them.
64.The objective of specific deterrence has already been achieved. Mr Chand has deposed to his shame, embarrassment and upset as a consequence of the contraventions and the adverse media publicity which he, Zillion Zenith and Bound For Glory have attracted. The Court may infer that these proceedings and the contraventions underlying them have had a profound and distressing effect upon him.[91]
65.At the time of the commencement of these proceedings, the Applicant issued a Media Release dated 3 July 2013.[92]
[91] Affidavit of Ruby Chand affirmed 14 January 2014, paragraph 28.
[92] Affidavit of Ruby Chand affirmed 14 January 2014, Annexure “RC11”.
In that Media Release, the Applicant made (inter alia) the following comments:
“Acting Fair Work Ombudsman, Michael Campbell, said the significant amount of the alleged underpayments and the number of vulnerable young workers were significant factors in the decision to commence legal action.
Mr Chand was allegedly involved in his companies committing multiple breaches of workplace laws. Mr Chand faces penalties of up to $6,600 per breach and his companies face penalties of up to $30,000 per breach.”
66.The Applicant’s Media Release has been the subject of extensive press and online reporting.[93]
67.The substantial publicity which these proceedings have attracted is a significant penalty in itself. The Court should take into account this publicity and find that, to a large extent, the objective of specific deterrence has already been achieved, without the necessity for a substantial penalty to be imposed upon the Respondents.[94]
68.Contrary to the Applicant’s Submission, there is clear evidence of remorse on the part of all of the Respondents, particularly Mr Chand.”
[93] Affidavit of Ruby Chand affirmed 14 January 2014, Annexure “RC11”.
[94] See Fair Work Ombudsman v Cleaners New South Wales Pty Ltd [2009] FMCA 683 at [25]; Fair Work Ombudsman v Revolution Martial Arts Pty Ltd and Anor [2013] FMCA 125 at [51]; Fair Work Ombudsman v Stewarts Transport and Logistics Pty Ltd and Ors [2010] FMCA 905 at [80] and [82].
The applicant submitted in reply:
“20.At [67] the Respondents submit that the substantial publicity that the proceeding has attracted is a significant penalty in itself.
21.Mr Chand’s affidavit annexes a number of articles published following the commencement of the proceeding. The Applicant’s press release gives a matter of fact account of allegations that the Respondents now admit to be true. Most of the articles simply recount the press release. Some articles also report comments attributed to Mr Chand, to the effect that he had been targeted by the Applicant and had given employees free food and drink that cost him more than the underpaid wages. If he made the comments reported, Mr Chand is responsible for some of the publicity he found so embarrassing.
22.In Fair Work Ombudsman v Cleaners New South Wales Pty Ltd,[95] Driver FM held:
Actions taken by the Fair Work Ombudsman to enforce compliance with the Workplace Relations Act are taken in part to create publicity in order to achieve a normative effect upon the behaviour of employers. That is appropriate. That publicity is no doubt an embarrassment to the company and that embarrassment is a penalty in itself. The bringing of proceedings in the court, and the publicity attending those proceedings, are part of a general process for deterring contraventions of the Workplace Relations Act. So is the imposition of an appropriate penalty in each case.
23.The pecuniary penalty imposed by the Court in that case was not reduced by reference to the publicity attending the proceeding. Nor should the reporting of the commencement of this proceeding reduce the penalty to be imposed on the Respondents in this case.
[95] (2009) 186 IR 467; [2009] FMCA 683, [25].
In relation to specific deterrence, Gray J observed in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170 at [37] that:
“Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur.”
In relation to the respondents submissions regarding publicity see Fair Work Ombudsman v AJR Nominees Pty Ltd (No.2) [2014] FCA 128. There is the need for specific deterrence in this case. Where the conduct involved represents such a fundamental breach of the safety net payments that are at the heart of the objects of the FW Act and where the respondents are still operating any penalty arrived at must send a clear and unambiguous message to the respondents by way of penalty to deter the possibility they will repeat the breaches.
General Deterrence
The applicant submitted:
“103.The need for general deterrence in the present case is equally important and the law should mark its disapproval of the Respondents’ conduct by setting a penalty which serves as a warning to others.[96]
104.The Respondents operate in an industry notorious for non-compliance with workplace laws.[97] It is an industry where the Courts have often found contraventions that involve the exploitation of vulnerable employees in a weaker bargaining position, such as young workers, which makes enforcement difficult.[98]
105.Recently in Fair Work Ombudsman v Bento Kings Meadows[99] the Court observed:
“In many cases before this Court over the last number of years it has been repeatedly identified that there is a significant risk of underpayments and breaches of workplace legislation in the restaurant and hospitality industry where vulnerable employees … are employed. This case is yet another example that the risk continues to exist.”
[96] (2007) 166 IR 14 at [25].
[97] See for example the comments of Gray J in Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 171 FCR 357 at 367.
[98] Ibid. See also Fair Work Ombudsman v Hongyun Chinese Restaurant (in liquidation) [2013] FFCA 52 at [46], Fair Work Ombudsman v Todaro [2013] WAIRComm 104 at 4-5, 23; Rajogoplan v Brinker Australia [2008] FMCA 311.
[99] [2013] FCCA 977.
The respondents submitted:
“69.The Respondents acknowledge that the issue of general deterrence is also relevant in assessing the quantum of any penalties to be imposed.
70.Given the substantial adverse media publicity which these proceedings have already attracted, the objective of general deterrence has already largely been achieved.”
I reject the respondents’ submissions. There is a need for general deterrence to ensure employers understand they must take steps to ensure correct employee entitlements are paid and statutory requirements are observed (see Kelly v Fitzpatrick [2007] FCA 1080 at paragraph [28]). As Marshall J said in Fair Work Ombudsman v Maclean Bay Pty Ltd (No.2) [2012] FCA 557 at [29]:
“It is important to ensure that the protections provided by the Act to employees are real and effective and properly enforced.
The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected.”
Totality principle
In submissions on this issue the applicant noted that having fixed an appropriate penalty for each course of conduct, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct and is not oppressive or crushing. The applicant submitted that whilst not oppressive or crushing any penalty must bear relativity to the seriousness of the conduct engaged in by the respondents.
The respondents in submissions noted the penalty range they contended for whilst significant strikes the appropriate balance between the seriousness of the contraventions on the one hand and their effect upon the respondent.
Submissions on penalty
After both parties had filed written submissions but before the penalty hearing the respondents indicated they wished to raise for consideration the High Court’s decision in Barbaro v R [2014] HCA 2 (“Barbaro”).
The applicant in written submissions in reply at paragraphs 24 to 29 took the position that until the Full Court of the Federal Court reviews the settled approach in civil penalty proceedings in light of the High Court’s reasoning in Barbaro this Court should not change its practice in relation to penalty submissions.
Both parties had an opportunity to elaborate on their submissions on this issue at the penalty hearing.
The issues raised by the parties had already been considered in Director of the Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2014] FCA 160 by White J on 5 March 2014. For the reasons set out at paragraphs [26] to [31] His Honour declined to depart from the approach to such submissions set out in NW Frozen Foods (supra) and Mobil Oil (supra).
Since the penalty hearing the issue of the decision in Barbaro has also been considered in Australian Competition and Consumer Commission v Energy Australia Pty Ltd [2014] FCA 336. In that decision Middleton J considered the issues presented by Barbaro for civil penalty proceedings at paragraphs [113] to [152]. Importantly His Honour said:
“150.In light of the above observations, I do not consider that the High Court intended to exclude, in a civil context, the making of submissions (joint or otherwise) by the parties as to appropriate orders to make (not just as to penalty, but also as to injunctions and disqualification orders). Without specific mention and consideration, I do not conclude that the High Court implicitly overruled the earlier Full Court decisions of NW Frozen Foods and Mobil Oil.”
Therefore I intend to take into account the submissions of the parties on appropriate penalties.
Submissions on appropriate penalty
The applicant submitted:
106.Where Respondents have co-operated and have made admissions early in the course of an investigation, or soon after the commencement of proceedings, it is appropriate to allow a discount of penalty. However a discount, or discounts of a particular amount, is not automatic upon admissions being made. In considering the application of penalty discount, the statements of Stone and Buchanan JJ in Mornington Inn are apposite:
“... the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.”
107.The Applicant submits that a discount of 5% on penalty is appropriate in recognition for the Respondents’ admissions after commencement of proceedings and co-operation in entering into the SOAF.
108.A greater discount is not appropriate where the admissions of liability are more properly viewed as an acceptance of the inevitable, rather than a genuine acceptance of wrong doing, and where the Respondents have engaged in aggravating conduct of the kind set out above in relation to the evidence filed.
Applicant’s Recommendation
109.The Applicant submits that the appropriate aggregate penalties in this matter fall within the following range:
(a)First Respondent: $139,507.50 - $155,966.25; and
(b)Second Respondent: $27,901.50 - $31,193.25.
110.The table in Attachment A sets out the penalty range the Applicant submits is appropriate for each of the eight groups of contraventions. This is 80% - 90% for all contraventions except the record keeping contraventions, which the Applicant submits warrants a penalty in the range of 90% - 95% of the maximum.
The respondents in written submissions had taken the position that a penalty of between $72,600.00 to $108,900.00 for the first respondent and $3,960.00 to $10,890.00 for the second respondent but with the qualification, which has already been rejected for the reasons referred to earlier, that there should only be one penalty against the second respondent in both this and the proceedings that are (P)MLG 906/2013.
Finding on appropriate penalty
In this matter the contraventions that were appropriately grouped have been identified that both respondents were involved in. This leads to a potential total liability of $181,500.00 for the first respondent and $36,300.00 for the second respondent.
The applicant has submitted that by reason of the matters set out above substantial penalties should be awarded. I agree. The conduct involved (both against those concerned and over such a long period) falls towards the higher end of the scale of offending conduct and undermines both the objects and enforcement of the legislation involved. Notwithstanding the respondents submissions there is no reason to conclude that the respondents will not employ people in the future. As the admitted conduct which occurred over such a long time is serious and there is the need for both specific and general deterrence significant penalties toward the upper end of the high range (or 80%) are warranted and at 90% in relation to the fundamental and flagrant record keeping contraventions.
In all the circumstances, bearing in mind the maximum penalties applicable, I am of the view that the appropriate penalties for the first respondent are:
a)$26,400.00 for failure to pay correct minimum rates;
b)$26,400.00 for failure to pay casual loading;
c)$26,400.00 for failure to accrue annual leave;
d)$26,400.00 for failure to accrue personal leave;
e)$26,400.00 for failure to pay accrued annual leave on termination; and
f)$14,850.00 for the failure to make and keep records.
In relation to the second respondent and again in all the circumstances, bearing in mind the maximum penalties applicable, I am of the view that the appropriate penalties for his involvement in:
a)the failure to pay minimum rates is $5,280.00;
b)the failure to pay casual loading is $5,280.00;
c)the failure to accrue annual leave is $5,280.00;
d)the failure to accrue personal leave is $5,280.00;
e)the failure to pay accrued annual leave on termination is $5,280.00; and
f)the failure to make and keep records is $2,970.00.
However taking into account the rectification to date, the co-operation of the respondents and the resolution of the proceedings at a penalty hearing there should be a discount of only 5% in relation to all of the above contraventions. This is because both the contraventions themselves and the conduct of the respondents fundamentally hamstrung the ability to confirm the affected employees entitlements during the investigation, the co-operation was less than forthcoming. In that sense, and I am not convinced the respondents are genuinely remorseful.
I consider that the individual penalties for the contraventions referred to at paragraph 97 above should be $25,080.00 each for the contraventions at paragraphs 97(a) to (e) and $14,107.50.00 for the contraventions at paragraphs 97(f). For the contraventions at paragraph 98(a) to (e) a penalty of $5,016.00 each and for the contraventions at paragraphs 98(f) a penalty of $2,821.50. This results in a total penalty of $139,507.50 or 77% of the maximum for the admitted contraventions by the first respondent and $27,901.50 or 77% of the maximum for the second respondent.
Having fixed an appropriate penalty for each group of contraventions and taken a final look at the aggregate penalty to determine I am satisfied notwithstanding the respondents evidence it is an appropriate response to the conduct and is not oppressive or crushing.
Conclusion
Therefore, as the Court:
·is directed by the relevant authorities to consider what is appropriate in all the circumstances of this case;[100] and
[100] see Construction Forestry Mining & Energy Union v Coal & Allied Operations Pty Ltd (No.2) (1999) 94 IR 231
·in its discretion in relation to penalty is not fettered by a checklist of mandatory criteria;[101] and
[101] see Australian Ophthalmic Supplies Pty Limited v McAlary-Smith [2008] FCAFC 8
·notes the parties have filed the S.O.A.F and agreed on a timetable for payment of any penalty; and
·is satisfied the individual and aggregate penalty for the whole of the contravening conduct is appropriate;
there will be declarations[102] and orders as set out at the beginning of these reasons for decision.
[102] for the same reasons as in
I certify that the preceding one hundred and two (102) paragraphs are a true copy of the reasons for judgment of Judge O’Sullivan
Associate:
Date: 6 June 2014
(In Liquidation) & Ors [2013] FCCA 52 at 14 and given the parties agreed on the form of orders and time for payment of any penalty.
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