Fair Work Ombudsman v BSH Transport Solutions Pty Ltd
[2023] FedCFamC2G 90
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v BSH Transport Solutions Pty Ltd [2023] FedCFamC2G 90
File number(s): ADG 342 of 2021 Judgment of: JUDGE BROWN Date of judgment: 28 February 2023 Catchwords: INDUSTRIAL LAW – FAIR WORK – penalty hearing – failure to comply with issued Compliance Notice – claim for unpaid leave entitlements following termination of employment – calculation of penalty – legislative purpose of compliance notices – issues of deterrence – matters to be considered Legislation: Crimes Act 1912 (Cth) s 4AA
Evidence Act 1995 (Cth) s 191
Fair Work Act 2009 (Cth) Pt 2-2, ss 3, 90, 99, 539, 546, 550, 681, 682, 701, 706, 712, 716
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
Blandy v Coverdale NT Pty Ltd [2008] FCA 1533
Fair Work Ombudsman v Corporation Sun Pty Ltd [2020] FCCA 2849
Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709
Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579
Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151
Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557
Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272
Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801
Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Minister for Immigration & Citizenship v Li (2013) 249 CLR 332
Mornington Inn v Jordon [2008] FCAFC 70
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Veen v R (No 2) (1988) 164 CLR 465
Division: Division 2 General Federal Law Number of paragraphs: 92 Date of hearing: 9 December 2022 Place: Adelaide Counsel for the Applicant: Mr Bergander-Florek Solicitor for the Applicant: HWL Ebsworth Counsel for the Respondents: Mr Kernahan Solicitor for the Respondents: Johnston Withers Lawyers ORDERS
ADG 342 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: BSH TRANSPORT SOLUTIONS PTY LTD
First Respondent
BRENTON PHILIP SMITH
Second Respondent
order made by:
JUDGE BROWN
DATE OF ORDER:
28 February 2023
THE COURT DECLARES THAT:
A.The First Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (“the Act”) by failing to comply with the Compliance Notice.
B.The Second Respondent was involved, within the meaning of section 550(2) of the Act, in the contravention of section 716(5) of the Act by the First Respondent, and has therefore contravened section 716(5) of the Act pursuant to section 550(1) of the Act.
THE COURT ORDERS THAT:
1.Pursuant to section 545(1) of the Act, the First Respondent take the steps that were required by the Compliance Notice:
(a)within 14 days of this order, produce to the Applicant a schedule that sets out the calculations of the information in respect of the outstanding annual leave and the personal leave payments (including a reconciliation of the payments made to Ms Murphy in November 2021 and May 2022) and the additional superannuation contributions that are due to be paid into Ms Murphy's superannuation fund;
(b)within 14 days thereafter:
(i)make a payment to Ms Murphy in relation to any shortfall of the outstanding entitlements in relation to the annual leave and personal leave contraventions and provide a proof of payment to the Applicant; and
(ii)make a payment in respect of the additional superannuation contributions that are due to be paid into Ms Murphy's superannuation fund and provide proof of payment to the Applicant;
2.Pursuant to section 546( 1) of the Act:
(a)the First Respondent pay a pecuniary penalty of SIXTEEN THOUSAND DOLLARS ($16,000.00) to the Consolidated Revenue Fund of the Commonwealth for the First Respondent's contravention of section 716(5) of the Act, within 28 days of this order; and
(b)the Second Respondent pay a pecuniary penalty of THREE THOUSAND DOLLARS ($3,000.00) to the Consolidated Revenue Fund of the Commonwealth for his involvement in the contravention by the First Respondent of section 716(5) of the Act, within 28 days of this order.
3.The Applicant has liberty to apply on 7 days' notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
Introduction
The Fair Work Ombudsman[1] commenced proceedings against BSH Transport Solutions Pty Ltd and Brenton Philip Smith,[2] on 17 November 2021, pursuant to the provisions of the Fair Work Act 2009 (Cth).[3]
[1] Hereinafter referred to as “the FWO” or “the Ombudsman”.
[2] Hereinafter referred to as “BSH” & “Mr Smith” respectively.
[3] Hereinafter referred to as “the FWA” or “the Act”.
BSH operates a road freight and transport business. Mr Smith is its sole director and is responsible for the company’s overall management and operations.
On 30 April 2021, the office of the FWO received an enquiry from Elaine Murphy, who had previously been employed by BSH as an administrative assistant. She commenced her employment in November of 2018 and formally resigned on 20 April 2021.[4]
[4] See Annexure AJ-3 to the Affidavit of Amey Abhay Jambekar filed 14 September 2022.
Earlier, Ms Murphy had submitted a medical certificate to BSH indicating that she was unfit for work between 13 April and 5 May 2021.
From the perspective of Mr Smith, the circumstances in which Ms Murphy left the employ of BSH are controversial. He alleges that Ms Murphy had directed a sum of $1,600.00, which was due to BSH from one of its clients, to her own bank account.[5]
[5] See Affidavit of Brenton Philip Smith filed 8 December 2022 at [19]-[23].
It is Mr Smith’s evidence that, amongst her other duties, Ms Murphy was responsible for attending to BSH’s payroll, including calculating her own wages. Ms Murphy’s final payslip related to a pay period, which commenced on 14 April 2021 and concluded on 27 April 2021. This payslip indicated the following:
·She received no salary for the relevant fortnight;
·Her entitlement to annual leave at the time was 225.0760 hours. No payment was recorded in respect of these hours;
It was these circumstances which led Ms Murphy to approach the FWO. As a consequence of her approach, the FWO appointed a Fair Work Inspector, Mr Jambekar, to investigate a complaint that she had not been paid her full termination entitlements.
On 20 May 2021, Mr Jambekar wrote to Mr Smith in the following terms:
Elaine has advised that:
•She wasn’t paid her Personal Leave, even when she submitted a Medical Certificate
•She wasn’t paid her accrued Annual Leave at the end of her employment[6]
[6] See Annexure AJ-5 to the Affidavit of Amey Abhay Jambekar filed 14 September 2022.
It is Mr Jambekar’s evidence that Mr Smith did not respond to his correspondence. In these circumstances, on the basis of what he had gleaned from Ms Murphy, Mr Jambekar concluded that it was probable that BSH had contravened sections 90(2) and 99 of the FWA.
Each of these sections fall within the purview of Part 2-2 of the FWA, which prescribes the National Employment Standards, which are applicable to all employers and employees, who have an employment relationship covered by the National Employment Standards. There is no controversy in the current matter that the parties to these proceedings fall within the parameters of the National Employment Standards.
In particular, section 90(2) stipulates that any employee, employed pursuant to the National Employment Standards, is entitled to be paid annual leave accrued as at the date such employment ends. Section 99 pertains to the entitlement of employees to be paid for personal/carers leave, including leave arising from ill health.
Given the contents of Ms Murphy’s final payslip and the information, which she provided to him, Mr Jambekar concluded that, on her termination, Ms Murphy had an accrued unused annual leave entitlement balance of approximately 225 hours and unused personal/carers leave entitlements of approximately 158 hours.
In addition, he understood that her base hourly rate of pay was $38.00 gross. In these circumstances, he calculated that Ms Murphy was entitled to a sum of approximately $11,438.00 gross on her termination, relating to her accrued annual leave entitlements and personal leave relating to her last pay period, which had been covered by a medical certificate.
On 24 May 2021, Mr Jambekar issued a Compliance Notice directed to BSH and Mr Smith in the following terms:
·On or before 2 July 2021, BSH calculate the number of hours of personal leave, to which Ms Murphy was entitled between 14 April 2021 and 4 May 2021 (the period in which she had provided a medical certificate);
·Calculate the amount of accrued leave to which Ms Murphy was entitled on the termination of her employment;
·Pay Ms Murphy the two sums to which she was entitled;
·Provide proof to the FWO, on or before 9 July 2021 that these calculations had been undertaken and the relevant sums arising paid to Ms Murphy.
It is the position of the FWO that BSH did not comply with the relevant Compliance Notice within the time frame stipulated. In these circumstances, it commenced the current proceedings, in which it seeks the imposition of a pecuniary penalty on each of the Respondents on the basis that they have contravened the provisions of section 716(5) of the FWA. The FWO further asserts that Mr Smith bares accessorial liability for the omissions of BSH pursuant to the provisions of section 550(1) of the Act.
Pursuant to the provisions of section 539(2) of the Act, any contravention of section 716(5) characterised as a civil remedy provision, which attracts a maximum penalty of 30 penalty units. At relevant times, a penalty unit was $222.00.[7] Pursuant to the provisions of section 546(2)(b) of the FWA, if the person who has committed the offence in question is a body corporate, the maximum penalty is to be multiplied by five.
[7] See Crimes Act 1912 (Cth) at section 4AA.
Accordingly, in the current matter, the maximum penalty, so far as BSH is concerned is one of $33,300.00 and for Mr Smith one of $6,660.00. As will be delineated in greater detail, in due, course, both BSH and Mr Smith have formally admitted their culpability in respect of the failure to do what was required by the Compliance Notice. As a consequence, these proceedings are directed towards calculating the appropriate penalty in all the circumstances prevailing.
In this context, is the FWO’s position that there has been a wholesale failure of the compliance notice system and therefore the Court should impose a reasonably significant penalty to reflect the need for general deterrence. The FWO is also concerned that although Ms Murphy has received some of her outstanding entitlements, some of them still remain outstanding.
In these circumstances, counsel for the FWO, Mr Bergander-Florek, seeks the imposition of a penalty of between $16,983.00 and $19,813.50 for BSH and between $3,366.00 and $3,927.00 for Mr Smith. This is between 60% and 70% of the prescribed maximum in each case but with a discount of 15% to reflect the cooperation with authorities arising from an admission of liability.
On the other hand, Mr Kernahan, counsel for each respondent points to what he characterises as extenuating circumstances, which significantly reduce the severity of the offending and thus should lead the Court to mitigate the penalty to be imposed. These relate to the size of the business concerned; the logistical challenges it faces; the admission of liability; and the fact that in the absence of Ms Murphy from its office, it was difficult for it to calculate the monies due to her, as she previously managed the payroll.
The Conduct of the Proceedings to Date
The FWO’s application first came into court on 15 March 2022. On this occasion, I was told that neither respondent would contest liability in respect of the FWO’s allegation that they had failed to comply with the notice for wage rectification issued by it in respect of Ms Murphy.
In these circumstances, the parties were directed to file a Statement of Agreed Facts within 28 days. The case was then adjourned to 19 April 2022.
The Statement of Agreed Facts had not been agreed by the adjourned date and in these circumstances, the case was adjourned until 31 May 2022.
The same situation prevailed on 31 May 2022, namely the Statement of Agreed Facts had not been filed. Therefore the case was adjourned, once again, until 20 June 2022.
Ultimately, after a further adjournment, a Statement of Agreed Facts, was finally filed on 12 August 2022.[8] In the SOAF, BSH admits that it contravened section 716(5) of the Act and Mr Smith formally admits his accessorial liability therein.
[8] Hereinafter referred to as “the SOAF”.
Pursuant to section 191 of the Evidence Act 1995 (Cth) the matters agreed to in the SOAF are taken not to be in dispute. As such, they form the evidentiary basis for the court’s necessary findings in this case and the pecuniary penalties which follow.
On 12 August 2022, the matter was listed for a penalty hearing, which was scheduled to take place on 19 October 2022. This penalty hearing did not take place as the respondents were not ready for it. In these circumstances, a further penalty hearing was scheduled for 9 December 2022.
On the day of the hearing, Mr Smith filed an affidavit, in which he set out what he asserted were circumstances which mitigated the seriousness of the contravention in question.
The Relevant Legislative Provisions
The objects of the FWA are contained in section 3. They include the provision of an industrial safety net, for Australian employees, which is maintained through the enforcement of a system of minimum terms and conditions specified in the modern award system.
The Office of the Fair Work Ombudsman is created by section 681 of the FWA. One of the functions of the Ombudsman under section 682 of the FWA is to enforce compliance with the Act, including any workplace obligations residing on employers, as a consequence of relevant industrial awards, mandating rates of pay and conditions of employment.
In turn, the FWO may appoint Fair Work Inspectors, who are authorised to utilise what are characterised as compliance powers.[9] In general terms, inspectors are directed to investigate complaints in respect of breaches of the industrial law and are authorised to enter workplaces and determine whether an employer has contravened the law, including in respect of the application of any relevant modern award or otherwise failed to comply with the industrial safety net.
[9] See Fair Work Act 2009 (Cth) s 706.
In addition, the FWO has a responsibility to educate, advise and assist, both employers and employees, in respect of their respective obligations, arising under the Act and, if necessary, commence proceedings, in appropriate courts, to enforce the provisions of the FWA.
Section 682(1) of the FWA confers a number of functions on the Ombudsman, which include promoting compliance with the Act through providing assistance to employers so that they know the extent of their obligations to their employees, particularly in terms of their employees’ entitlements.
The aim being to iron out problems and misunderstandings expeditiously and in a cost effective manner, without recourse to litigation so that underpayments are rectified efficiently and fairly. As will be delineated in due course, it is in this context that the power conferred upon a Fair Work Inspector to issue Compliance Notices must be considered.
Pursuant to section 701 of the Act, the FWO is also a Fair Work Inspector. The FWA empowers the Ombudsman to delegate its statutory responsibilities to Fair Work Inspectors. The Act confers upon such inspectors a number of powers in order to ensure compliance with provisions of the Act. Among other things, inspectors can enter the work place and require the production of employee records.[10] Mr Jambekar, at relevant times, held the office of Fair Work Inspector under the Act.
[10] See Fair Work Act 2009 (Cth) s 712(1).
In addition, the FWO, as a consequence of its status as a Fair Work Inspector, has statutory authority to bring proceedings under the Act and seek the imposition of penalties, if breaches of the FWA are established.[11]
[11] See Fair Work Act 2009 (Cth) s 539(2).
Section 716(1) of the Act provides that, if an inspector believes, on reasonable grounds, that a person has contravened a provision of the National Employment Standard, the inspector concerned may issue that person with a ‘Compliance Notice’ requiring the person nominated to take action to remedy the contravention in question.
As indicated above, a failure to pay accrued annual leave on termination and to pay personal leave are covered by provisions of the National Employment Standards and can be subject to the terms of a Compliance Notice.
Pursuant to the applicable legislation, any Compliance Notice must provide particulars of the contraventions of the Act alleged and outline any rights of review that arise under the Act. There is no issue in the present case other than that the Compliance Notice in question complies with the provisions contained in sections 716(2) and 716(3) of the FWA.
Sections 716(1) and 716(2) of the Act delineates the criteria, which must be satisfied before an inspector may issue a Compliance Notice. Firstly, the power itself is a discretionary one and like all administrative decisions must be exercised reasonably.
Whether a discretion, conferred by statute, is exercised in a legally reasonably manner, it must be determined by reference to the statute itself, particularly its subject matter, scope and purpose.[12]
[12] See Minister for Immigration & Citizenship v Li (2013) 249 CLR 332, 370-371 [90] (Gageler J).
In this particular case, as indicated above, one of the purposes of the FWO is to provide an industrial safety net, for workers, so far as the application of industrial awards is concerned, as well as to educate employers in regard to their industrial responsibilities.
Secondly, the discretion may be exercised only once a reasonable belief is formed by the relevant inspector. The discretion must be exercised appropriately and not in an arbitrary, illogical or capricious manner.
Section 717(1) of the Act authorises a person who has been serviced with a Compliance Notice to apply to the court to have the notice reviewed on the basis that there has been no contravention as specified or the notice does not otherwise comply with the applicable legislation.
In Fair Work Ombudsman v Matcraft Pty Ltd,[13] Judge Kendall explained the legislative intention of a Compliance Notice, as an alternative to litigation, in the following terms:
As explained in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), the purpose of s 716 of the Act is to provide an alternative to litigation. Section 716 is an informal mechanism whereby the applicant can identify potential contraventions of the Act and seek rectification without an employer having to admit liability.
One of the objects of the Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms. Section 716 encapsulates this objective by allowing employees to make a request for assistance which the applicant can then resolve through the use of s 716.[14]
[13] See Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272.
[14] See Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272 at [34]-[35] (Kendall J).
In addition, as previously indicated, the relevant legislation allows an employer to challenge a Notice if it is believed there are no grounds for its issue or the Notice itself is invalid. In these circumstances, it is the contention of the FWO that if the respondents had complied with the Notice in question, it would have been precluded from bringing these proceedings, with a commensurate saving of public resources.
In Fair Work Ombudsman v Trek North Tours & Anor (No 2),[15] Judge Jarrett explained the underlying rationale of the compliance notice system in the following terms:
The provision of notices to employers serves a number of purposes, not the least of which is to give the employer an opportunity to deal with the contravention that is being alleged, or, in the case of notices to produce, to provide information which would demonstrate that no contravention of the Act has occurred. The regime set out under s.716 and s.717 of the Act relating to compliance notices represents a regime which would avoid proceedings coming to a court at all if an employer took the steps set out in those sections.[16]
[15] See Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801.
[16] See Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801 at [22].
Accordingly in general terms, the successful implementation of the process envisaged when a Compliance Notice is issued represents a win/win for all concerned in the following terms:
·An underpaid employee gets his/her entitlements expeditiously and as calculated pursuant to all the applicable provisions of the relevant award;
·An employer is educated about his/her responsibilities under the relevant industrial system without being penalised or forced to incur the costs and indignities of litigation or indeed to be identified as an errant employer; and
·The public purse is spared the cost of bringing expensive proceedings to court.
The Evidence of FWI Jambekar
As indicated above Mr Jambekar was assigned to investigate Ms Murphy’s complaint in May 2021 and made his first contact with Mr Smith on 20 May 2021. The Compliance Notice was issued on 24 May 2021. It is Mr Jambekar’s evidence that another officer of the FWO attempted to contact Mr Smith in June to offer him assistance in complying by the due date of 9 July 2021.
On 12 July 2021, BSH’s accountant did produce to the FWO records relating to Ms Murphy’s entitlement but omitted calculations relating to her superannuation contributions. Later, in November of 2021, Ms Murphy was provided with a further payslip, which indicated that she was due a net payment of $5,974.73. Ms Murphy was actually credited an amount of $5,074.73. On 20 May 2022, Ms Murphy received a further payment of $4,000.00 from BSH.
The SOAF indicates as follows:
BSH has not produced to the Applicant a schedule that sets out the calculations of the information in respect of the Annual Leave Contravention, the Personal Leave Contravention and the additional superannuation contributions that are due to be paid into Ms Murphy's superannuation fund.[17]
[17] See SOAF at [24].
In these circumstances Mr Jambekar has deposed that the FWO remains unsatisfied as to what was the actual sum due to Ms Murphy. In these circumstances, the FWO has submitted that Ms Murphy has had to wait a significant period of time for her entitlements and it remains unclear whether she received all monies to which she is entitled, including so far as superannuation is concerned. Certainly, the amount produced is less than his original calculation of $11,438.00.
Mr Jambekar has also deposed that BSH is known to the FWO in the sense that inquiries have been made to, by other employees of BSH, between 2016 and 2021 in respect of annual leave and other wage discrepancy. None of these matters proceeded to litigation or resulted in the issue of Compliance Notices. Finally, Mr Jambekar has deposed that Mr Smith remains the sole director of BSH. He is also the registered proprietor of fourteen pieces of real property in South Australia.
The Evidence of Mr Smith
Mr Smith deposes that he has been operating BSH since 2004. It provides a freight service primarily between Roxby Downs and Adelaide. It employs seventeen drivers and five administrative staff. Mr Smith is also involved in driving. He has provided BSH’s profit and loss statement for the financial year ending 30 June 2021. No evidence was led regarding what those records revealed in respect of the financial strength or otherwise of the business.
The effect of Mr Smith’s affidavit is that he remains of the view that Ms Murphy has not provided an adequate explanation to him regarding irregularities regarding how she utilised the sum of $1,600.00 received from one of BSH’s creditors prior to her emailing her resignation to him. As previously indicated, in her absence, it was difficult for him to access necessary payroll records, given his other responsibilities in the business. In these circumstances, he did the best he could to answer the FWO’s inquiries via his accountants. He has recently changed accountants. The implication of this change being that he was not satisfied with the services previously provided to him.
Legal Principles Applicable to Penalty Hearings
The approach, which the court is required to take, in respect of these contravention proceedings, has been delineated in a number of decisions of the Federal Court.[18] The process can be summarised as follows:
·The court should identify each separate contravention, arising from a breach of either the applicable award or the FWA itself. Pursuant to section 539(2) each such contravention is a distinct incident for penalty purposes;
·The court should determine whether any of these incidents arise in a single course of conduct, within the terms envisaged by section 557(1);
·Then give consideration as to whether any of these contraventions contain elements and factor this into considering what is an appropriate penalty, in all the circumstances, for each contravention;
·Thereafter, the court should fix an appropriate penalty for each single or group contravention, taking into account all relevant circumstances; and
·Finally, the court should apply the totality principle. This final step constitutes a review of the aggregate penalty calculated, and envisages a consideration of whether such a penalty is an appropriate response to the conduct, which lead to the various contraventions in question. This case has been described as a process of intuitive synthesis.[19]
[18] See Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42] (Mansfield J), citing Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579 at [10] (McKerracher J).
[19] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [55] (Graham J).
The totality principle arises when a court is called upon to sentence an individual, as here, in respect of a number of identifiable offences. It is directed to review the penalties imposed, in total, in respect of individual offences to determine whether those penalties, in aggregate, constitute a just and appropriate penalty, in all the circumstances arising. As indicated earlier, it has been characterised as a process of intuitive synthesis.
Gray J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (“Australian Ophthalmic Supplies”) said as follows:
What is required is to determine an appropriate level of penalty for each contravention, as if it were a separate offence, and then look at the aggregate of those penalties in the light of the overall conduct of the [offender], to form a view as to whether that aggregate [is] out of proportion to that overall conduct.[20]
[20] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [23] (Gray J).
Regardless of these considerations, the fundamental task, for the Court, is to determine, from all the factual circumstances arising, the gravity or seriousness of the offending, which it is called upon to penalise. Again there is general agreement between the parties as to the considerations relevant to this task, which has been delineated in a number of decisions of both this court and the Federal Court.[21] The considerations are as follows:
[21] See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] FCA 1080 at [14]. (Tracey J); Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [23] (Reeves J).
·The nature and extent of the conduct which led to the breaches;
·The circumstances in which the conduct took place;
·The nature and extent of any loss or damage sustained as a result of the breaches;
·Whether there has been similar previous conduct by the respondent;
·Whether the breaches were properly distinct or arose out of the one course of conduct;
·The size of the business enterprise involved;
·Whether or not the breaches were deliberate;
·Whether senior management was involved in the breaches;
·Whether the party committing the breaches has exhibited contrition;
·Whether the party committing the breaches has taken corrective action;
·Whether the party committing the breaches has cooperated with the enforcement authorities;
·The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
·The need for specific and general deterrence.
The court needs to be careful not to apply a formulaic approach to the imposition of penalties or attempt to extrapolate the penalties imposed in one case to the circumstances of another. Each case involving the imposition of a civil penalty warrants an idiosyncratic approach and a careful analysis of all relevant circumstances. As was stated in Australian Ophthalmic Supplies:
Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.[22]
[22] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J).
Clearly the check-list, as enumerated above, is useful. However, it is not to be regarded as an exhaustive list of factors to be considered. The ultimate control on any sentence is that it must be proportionate to the offence committed. A court is not permitted to impose a sentence greater than is warranted by the objective circumstances of the offending.[23]
[23] See Veen v R (No 2) (1988) 164 CLR 465, 472 (Mason CJ, Brennan, Dawson, and Toohey JJ).
However, in the context of the significant interest the public has in ensuring that employees are paid their proper entitlements and are accorded the protection of the industrial safety net envisaged by the legislature, the Court cannot lose sight of the importance of deterrence, both in a specific and general sense.
Penalties have to be fixed at a meaningful level, not set at a level at which their imposition, on an errant employer, can be seen as an acceptable cost of doing business for the employer. In short, penalties must hurt so that others who are considering cutting corners, so far as the payment and protection of their employees are concerned, will be deterred from doing so.
In the recent case of Australian Building and Construction Commissioner v Pattinson[24] the High Court discussed the inherent problems likely to arise when principles of retributive sentencing, relevant to the criminal law, are applied in civil penalty proceedings. In this context, the High Court rejected the principle of proportionality being applied to the calculation of penalties in the civil sphere. Essentially, the High Court indicated the principle that the maximum penalty should be reserved only for the worst or most egregious examples of the applicable offence did not apply in civil penalty proceedings.
[24] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13.
In addition, the High Court indicated that the primacy of deterrence is the objective of any civil penalty regime. As such a sentencing court, in a civil penalty matter, is required to impose a penalty which is proportionate in the sense that it strikes a reasonable balance between deterrence and what is described as oppressive severity.[25]
[25] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [41].
In this context, concepts also applicable in criminal sentencing, such as totality, parity and course of conduct remained relevant. As such, a court sentencing in respect of a civil penalty provision matter retained a discretion. As with all discretions, it is one which must be exercised fairly and reasonably given the subject matter, scope and purpose of the legislation being applied. The aim being to arrive at a penalty which is appropriate.
In this context the High Court indicated as follows:
It is important to recall that an "appropriate" penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a "one‑off" result of inadvertence by the contravenor rather than the latest instance of the contravenor's pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law … In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors … [such as] where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
It is not necessary to multiply examples further. It is sufficient to say that a court empowered by s 546 to impose an "appropriate" penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.[26]
[26] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [46] – [48].
In addition, in this context, the essential purpose of Compliance Notices must be considered. As indicated above, prompt compliance with their terms can result in a win/win situation for all concerned. The industrial regulator and the public purse is not put to the expense of a hearing; an underpaid employee can be reimbursed promptly; and an errant employer is spared the bother and embarrassment of public prosecution, and is given an opportunity to learn about and rectify past failings for the good of all concerned.
Discussion
Nature and extent of the conduct leading to the breaches
As noted above, this is a case in which there has been a wholesale failure of the Compliance Notice scheme, through which the function of the relevant Fair Work Inspector has been essentially frustrated. The general public has an interest in ensuring prompt and effective compliance with any breach of the industrial regime when it comes to light.
Each respondent was on notice from May of 2021 regarding the issues raised in the Compliance Notice. Each was advised of the nature of Compliance Notice proceedings and the possibility of civil penalties being imposed. This had no effect.
There has been no compliance with the strict terms of the notice issued to the respondents and, from Mr Jambekar’s perspective, it remains unclear what is the exact amount due to Ms Murphy. The goal of the compliance notice system is expeditious resolution of issues to do with award and industrial entitlements, so both employee and employer can move on with a minimum of disruption and expense. These aims have not been achieved in the current matter.
The Compliance Notice system is intended to provide an alternative to litigation, with a reduction in all incidental expense which litigation inevitably produces. This objective has not been achieved in the current matter. This is a serious consideration in respect of the setting of a penalty.
Involvement of Senior Management
Mr Smith was responsible as its director for the management of BSH’s management and had both actual and apparent responsibility for ensuring it complied with its obligations under the FWA.
Corrective action, cooperation and contrition
Some corrective action has been taken by BSH but it occurred at a late stage well after the issue of the relevant Compliance Notice. Ms Murphy received her most recent payment on 30 May 2022, a year after the Notice was issued and after the proceedings were instituted.
No formal expressions of contrition have been made. The proceedings themselves have not proceeded with any degree of seamlessness. Although it has proceeded on the basis of a SOAF, the process leading to its filing took a significant period. In these circumstances, counsel for the FWO submits that BSH has displayed a somewhat lackadaisical approach to the enforcement process which should reduce any discount in respect of penalty to one of 10% for admitting liability and one of 5% in respect of the late payments to Ms Murphy.
Deterrence
As I have already observed deterrence has two aspects – general deterrence directed towards the community as a whole, and specific deterrence directed towards the individual concerned whose conduct is to be sanctioned. As the High Court has recently indicated, issues of deterrence must be accorded primacy in the imposition of any civil penalty.
In Fair Work Ombudsman v Darna Pty Ltd,[27] Judge Hartnett said as follows in respect of the importance of the Compliance Notice process in the industrial regulatory system in this county:
The Explanatory Memorandum to the Fair Work Bill 2008 (Cth) provides that compliance notices were designed to be another option to deal with non-compliance instead of pursuing court proceedings. It was to be a less costly and less time consuming procedure. Section 716 of the FW Act allows a person to whom a compliance notice is issued an opportunity to rectify an under payment without being subject to civil remedy provisions. The First Respondent’s failure to comply with the Compliance Notice issued has, in these proceedings, caused the Applicant and the Court to spend time and public funds in dealing with civil remedy proceedings which would not have been necessary had compliance occurred.[28]
[27] Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709.
[28] Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709 at [11].
As I have already observed, so far as the current matter is concerned, the Compliance Notice procedure has been an abject failure in bringing about a prompt restitution to the employees concerned and the saving imposition on the public purse. One of the central purposes of the modern award system and the related enforcement procedures is to ensure all employees have the benefit of the industrial safety net provided by relevant awards.
To be able to enforce the terms of modern awards, Fair Work Inspectors must be able to exercise their compliance powers effectively through investigation and then rectification. When there has been a concerted non-compliance with a Notice issued by a Fair Work Inspector, the court needs to indicate that such non-compliance will be regarded as a serious matter by reference to the quantum of any penalty imposed.
I accept that the failure to comply with a Compliance Notice has the potential to undermine the entire purpose of the relevant statutory regime. If an employer does not accept the contents of any Notice served upon it, the regime provides formal mechanisms of review.[29]
[29] See Fair Work Ombudsman v Corporation Sun Pty Ltd [2020] FCCA 2849 at [63] (Kendall J).
In Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2), Marshall J said as follows:
It is important to ensure that the protection afforded 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 respected.[30]
[30] Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29] (Marshall J).
In imposing a penalty to reflect general deterrence, the Court must impose fines that cannot be seen by others as the cost of doing business.[31]The role of general deterrence in fixing the appropriate penalty is demonstrated by what Lander J said in Ponzio v B & P Caelli Constructions Pty Ltd,[32] namely:
In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend…. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by likeminded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty.
[31] See Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290 at [27].
[32] Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 at [93] (Lander J).
In my view, it is important that employers recognise that Compliance Notices are significant and are thus encouraged to manage their business so that errors, including innocent ones, can be rectified quickly and cheaply for the benefit of both business and employee. These considerations are applicable to both large and small employers.
Given BSH remains in business and Mr Smith remains in control of it, there is a need for the penalty to be imposed to include some aspect of specific deterrence. In this context, I note the evidence of Mr Jambekar that BSH has been the subject of past inquiries to the FWO from former employees.
Size of the business and capacity to pay financial penalties
I have no reason to doubt Mr Smith’s evidence that, in the absence of Ms Murphy from the administrative team at BSH, it was difficult for him and his then accountant to calculate what was due to her. I also accept that as a person who was heavily involved in the day to day logistics of the business – that is ensuring that freight was delivered, which included a level of actual driving for him, Mr Smith was a very busy person.
However, the evidence indicates BSH is a reasonably sized enterprise. It cannot be considered a one man band. It is well established that it is no excuse for an offender to rely on the fact that they are the operator of a small business. To the contrary, the Court must bear in mind that small businesses of one form or another represent a large component of employers in this country.
In these circumstances, I adopt the comments of Driver FM in Rajagopalan v BM Sydney Building Materials Pty Ltd as follows:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.[33]
[33] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27].
The Calculation of Penalties
As previously indicated the maximum penalty available is one of $33,300.00 for BSH and one of $6,600.00 for Mr Smith. The FWO asserts that the seriousness of the offending warrants a penalty falling between 60% to 70% of these maxima, to which should attach a discount of 15% for the cooperation arising from liability being admitted and some reasonably significant restitution being paid to Ms Murphy, albeit belatedly. I accept these submissions. I propose to impose a penalty at the lower end of the range sought by the FWO.
The next step is to look at the aggregate of the penalties in total and consider whether the total penalty is an appropriate one when the circumstances of the offending are considered. As previously indicated this has been described as a process of intuitive synthesis. Does the total penalty appear to be correct in aggregate?
This has been characterised as the Court having a last look at the total just to see whether it looks wrong.[34]The application of the totality principle is not to be automatically applied and some form of discount invariably given. It is a safeguard consideration directed to avoid injustice or unfairness.
[34] See Mornington Inn v Jordon [2008] FCAFC 70 at [91] (Stone and Buchanan JJ).
At the end of this process, I propose to impose a penalty of $16,000.00 on BSH and one of $3,000.00 on Mr Smith. These amounts are slightly less than those sought by the FWO. I will make the declarations sought by the FWO and require BSH reimburse Ms Murphy and make the other orders as sought.
For all these reasons the orders of the Court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding ninety-two (92) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 28 February 2023
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