Fair Work Ombudsman v BSW Electrical Pty Ltd
[2024] FedCFamC2G 1214
•14 November 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v BSW Electrical Pty Ltd [2024] FedCFamC2G 1214
File number(s): MLG 678 of 2024 Judgment of: JUDGE MANSINI Date of judgment: 14 November 2024 Catchwords: FAIR WORK - Application for pecuniary penalties – where Respondent admitted to contravention of s.716 of the Fair Work Act 2009 (Cth) by failure to comply with statutory compliance notice and penalty hearing proceeded on default of Respondent – consideration of relevant factors – penalties determined. Legislation: Corporations Act 2021 (Cth) ss.12, 14, 109X
Crimes Act (Cth) 1914 s.4AA
Fair Work Act 2009 (Cth) ss.90, 539, 545, 546, 687, 701, 716
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r.13.06
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
CFMMEU v ABCC [2018] FCAFC 97
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Trade Practices Commission v CSR Ltd (1991) ATPR 41-076
Division: Division 2 General Federal Law Number of paragraphs: 54 Date of hearing: 10 September 2024 Place: Melbourne Solicitor for the Applicant: Fair Work Ombudsman The Respondent: No appearance ORDERS
MLG 678 of 2024 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: BSW ELECTRICAL SERVICES PTY LTD
Respondent
ORDER MADE BY:
JUDGE MANSINI
DATE OF ORDER:
14 NOVEMBER 2024
THE COURT DECLARES THAT:
1.Upon the admissions of BSW Electrical Services Pty Ltd (the Respondent), the Respondent contravened s.716(5) of the Fair Work Act 2009 (Cth) by its failure to comply with the statutory compliance notice dated 24 February 2023.
THE COURT ORDERS THAT:
1.Pursuant to s.546(1) of the Act, the Respondent pay a pecuniary penalty of $6,400 to the Commonwealth of Australia for the contravention declared at 1 above, within 60 days of this order.
2.The Applicant has liberty to apply on 7 days’ notice, in the event that the preceding order is 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 Mansini
IN SUMMARY
This is an application by the Fair Work Ombudsman (FWO) regarding an electrical contracting business that did not comply with a statutory compliance notice.
The notice was issued following investigation of a report by a former employee which led the inspector to believe that there had been underpayments in contravention of the minimum conditions in the legislation and modern award.
The FWO asked the Court to make declarations of the admitted contraventions of the Fair Work Act 2009 (Cth) (the Act) by BSW Electrical Services Pty Ltd (ACN 078 901 701) (the Respondent). The FWO also sought the imposition of pecuniary penalties.
These reasons explain the relief that has been ordered by the Court.
CONTEXT
Factual
The following factual context was either agreed or not disputed and constitutes findings I have made.
The FWO is and was at all relevant times a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to s.687(1) of the Act; a Fair Work Inspector pursuant to s.701 of the Act; and a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions pursuant to s.539(2) of the Act.
The Respondent is and was at all relevant times:
(a)a company incorporated under the Corporations Act 2021 (Cth) and registered since 13 June 1997;
(b)a constitutional corporation within the meaning of s.12 of the Act;
(c)a national system employer within the meaning of s.14 of the Act;
(d)a company with a registered address:
(i)from 9 June 2020 to 17 April 2023, of 79 Koornalla Cresent, Mount Eliza VIC 3930; and
(ii)from 18 April 2023, of 32 Cliff Road, Frankston VIC 3199;
(e)a company whose sole director and secretary was a Mr Bruce Weiser of 32 Cliff Road, Frankston VIC 3199;
(f)a company which operated an electrical contracting business; and
(g)by reason of the matters at (a) to (c) and (f) above, a company covered by the Act in respect of its employees.
Between 9 June 2015 and 31 March 2022 the Respondent employed a Mr Aryan Javadi (the Employee) on a full time basis to perform work for the business.
On 5 January 2023, the FWO received a request for assistance from the Employee.
In January 2023, an investigation was commenced by Fair Work Inspector Ms Jenna Willson (previously known as “Smith”, hereinafter referred to as Fair Work Inspector Willson). Fair Work Inspector Willson is and was at the relevant times appointed to that role under s.700 of the Act.
As a result of the investigation, Fair Work Inspector Willson formed a belief that, between 9 June 2015 and 31 March 2022:
(a)the Respondent employed the Employee on a full-time basis, initially as an apprentice electrician and later as a qualified electrician;
(b)the Electrical, Electronic and Communications Contracting Award 2020 (Award), a modern award and industrial instrument made under the Act, covered and applied to the Employee’s employment with the Respondent;
(c)the Employee performed duties within the classification of an Electrical Worker, Grade 5 under the Award from around 2021, when he became a qualified electrician; and
(d)the Respondent failed to pay the Employee his accrued but unused annual leave, including annual leave loading, at the end of the employment contrary to s.90(2) of the Act.
As such, Fair Work Inspector Willson formed a reasonable belief within the meaning of s.716(1) of the Act that the Respondent contravened s.90(2) of the Act in respect of the Employee.
On 3 March 2023, Fair Work Inspector Willson personally served a statutory compliance notice dated 24 February 2023 on the Respondent (via Mr Weiser, pursuant to s.109X(1)(b) of the Corporations Act 2001 (Cth)) (the Notice). The Notice was issued pursuant to s.716(2) of the Act. In summary, the Notice stated that the Respondent was required to:
(a)By 20 April 2023, take the following action to remedy the direct effects of Fair Work Inspector Willson’s identified contravention of s.90(2):
(i)Identify the number of hours of the Employee’s accrued untaken paid annual leave, identify the amount paid to the Employee at the end of the employment in respect of the accrued annual leave entitlement, calculate the amount that should have been paid to the Employee in respect of the accrued annual leave entitlement and make a payment to the Employee of the difference between the amount paid and that which should have been paid at the end of the Employee’s employment;
(ii)make a record of certain of the information and amounts to be calculated and paid as referred to at (i) above; and
(b)By 27 April 2023, produce to the FWO reasonable evidence of the Respondent’s compliance with the actions specified in the Notice (summarised at (a) above).
The Respondent did not take the actions specified in the Notice by 20 April 2023 or produce reasonable evidence of such compliance to the FWO by 27 April 2023.
The amount the Respondent would have paid to the Employee, had the Respondent complied with the Notice, was agreed as $14,196 gross (the Underpayment).
From 29 May 2023 to 15 February 2024, the Respondent paid a total amount of $6,740 to the Employee in a series of payments as follows:
(a)$500 on 29 May 2023;
(b)$200 on 1 June 2023;
(c)$400 on 15 June 2023;
(d)$500 on 3 July 2023;
(e)$500 on 5 September 2023;
(f)$500 on 10 October 2023;
(g)$500 on 3 November 2023;
(h)$500 on 10 November 2023;
(i)$500 15 December 2023; and
(j)$2,640 on 15 February 2024.
After the commencement of these proceedings on 22 March 2024, on 2 April 2024, the Respondent paid a further amount of $2,640 to the Employee. By this final instalment, the Underpayment was repaid to the Employee in full.
Procedural
On 22 March 2024, the FWO commenced these proceedings by filing an application and a statement of claim.
On 22 April 2024, the Court made programming orders regarding the question of penalty in chambers by consent.
On 26 April 2024, the FWO filed a statement of agreed facts which was endorsed by Mr Weiser (the Respondent’s Director).
On 27 May 2024, the FWO filed an outline of submissions on the question of penalty with an accompanying affidavit of Fair Work Inspector Willson deposed on 27 May 2024.
On 11 June 2024, the Court amended programming orders extending the date for filing and re-listed the penalty hearing by consent.
On 20 June 2024, the Respondent filed an affidavit of Mr Bruse Weiser deposed on 14 June 2024 on the question of relief.
On 1 July 2024, the FWO filed an outline of submissions in reply and, on 9 September 2024, filed a court book and a list of authorities.
On 10 September 2024, the matter proceeded to hearing before the Court as presently constituted. On that occasion, the FWO was represented by a solicitor advocate and there was no appearance for or on behalf of the Respondent.
Being satisfied that the Respondent was on notice of the hearing, had elected not to attend the hearing in person and not sought to attend virtually, and had entered consent orders and an agreed statement of facts, it was considered appropriate to proceed in the absence of the Respondent pursuant to r.13.06 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
APPLICATION BEFORE THE COURT
The parties agreed that the Court should make the following orders:
(a)a declaration that the Respondent contravened s.716(5) of the Act by failing to comply with the Notice;
(b)pursuant to s.546(1) of the Act, the Respondent pay pecuniary penalties to the Commonwealth in respect of the contravention of s.716(5);
(c)the Applicant have liberty to apply; and
(d)such further order or orders as the Court considers appropriate
I am satisfied that the statement of claim filed in this matter and upon which the FWO relies complies with the rules of pleading and properly pleads a cause of action that supports the grant of relief.
It falls to determine what relief is appropriate to order on the materials before the Court.
Whether to declare a contravention
Relevantly, s.716 of the Act provides (and at all relevant times provided):
Compliance notices
Application of this section
(1) This section applies if an inspector reasonably believes that a person has contravened one or more of the following:
(a) a provision of the National Employment Standards;
…
Giving a notice
(2) The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a) ..
(b) ..
…
Person must not fail to comply with notice
(5) A person must not fail to comply with a notice given under this section.
Note: This subsection is a civil remedy provision (see Part 4-1).
Section 716(5) of the Act is a civil remedy provision. A fair work inspector may apply to this Court for orders in relation to contraventions of s.716(5). The Court may make any order it considers appropriate where satisfied that a person has contravened a civil remedy provision: s.545(2) of the Act.
Important to the statutory scheme is the concept that compliance with a statutory compliance notice given under s.716 of the Act does not of itself constitute an admission of the underlying contravention(s) or a finding of such contravention(s): s.716(4B). However, a failure to comply with a statutory compliance notice amounts to a contravention of s.716(5) of the Act (subject to an exception for reasonable excuse which does not presently apply).
By the facts alleged in the statement of claim and the admissions of the Respondent in the statement of agreed facts, it is established that the subject statutory compliance notice met the requirements of s.716(3) of the Act and the Respondent contravened s.716(5) of the Act by its failure to comply with the statutory compliance notice issued by Fair Work Inspector Willson on 3 March 2023 (dated 24 February 2023) (earlier defined as the Notice).
The Court has a wide discretion to make declarations. Having regard to the admissions and consent of the Respondent, in the circumstances of this case, I am satisfied that this is an appropriate case for declaratory relief, if for no other reason than to record the Court’s disapproval of the contravening conduct.
Approach to determination of penalties
The second form of relief sought by the FWO is the imposition of a pecuniary penalty for the Respondent’s declared contravention of s.716(5) in the range of $13,200 to $16,500.
As earlier referenced, the Court may make any order it considers appropriate where satisfied that a person has contravened a civil remedy provision: s.545(2) of the Act. The Court may also make a pecuniary penalty order for such contravention and may impose a pecuniary penalty “that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision”: s.546 of the Act.
As reasoned above, the requisite state of satisfaction that the Respondent contravened s.716(5) of the Act by its non-compliance with the Notice exists. The parties agreed that a pecuniary penalty ought be imposed for contravention and it therefore falls to determine what level of penalty is appropriate as against the Respondent in light of its established contravention.
At the relevant time, the single contravention of s.716(5) by the Respondent corporation attracted a maximum penalty of $41,250 for a corporation: s.546(2)(b). As at the time of the contravention, the value of the penalty until was $275: s4AA of the Crimes Act 1914 (Cth). The FWO sought a pecuniary penalty in the range of 40% to 50% of the maximum penalty that may be imposed with a discount of 20% for the Respondent’s cooperation in these proceedings – a total penalty of between $13,200 and $16,500. The Respondent asked that a penalty of no more than $3,000 be imposed.
The purpose of a civil penalty under the regime provided by the Act is primarily, if not wholly, protective in the promotion of the public interest in compliance with the provisions of the Act and in (general and specific) deterrence of further contraventions: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [15]-[16] (Pattinson) citing the plurality in Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 and French J in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 (CSR Ltd). An “appropriate” penalty being one that “strikes a reasonable balance between oppressive severity and the need for deterrence in a particular case”: Pattinson at [46].
The task of assessing what amount to impose involves the selection of a figure taking into account all factors relevant to the particular case: CSR Ltd, as applied in this context see for example CFMMEU v ABCC [2018] FCAFC 97. I turn to consider the appropriate penalty in light of those well established principles and non-exhaustive list of factors from the case authorities.
The relevant conduct is the Respondent’s failure to comply with the Notice by taking the steps outlined therein by the specified dates. Specifically, the Respondent was required to identify, calculate and make payment of the Employee’s accrued but unused annual leave entitlements and to produce reasonable evidence of this to the FWO by the dates provided therein (20 and 27 April 2023).
The Respondent filed evidence which sought to explain the underlying contravention (the failure to pay the accrued but unused annual leave entitlement in accordance with the National Employment Standards) as being on account of his suffering from an extremely stressful family trauma at the time of the Employee’s resignation. Further, the Respondent’s usual accountant was absent on maternity leave and a replacement accountant was engaged which contributed to the oversight. In addition to the direct expression of regret, I accept these matters as relevant to the assessment of the degree of contrition however there is no basis to conclude on the evidence that the contravention of s.716(5) (the failure to comply with the Notice) was anything other than deliberate.
Also relevant are the steps taken to gradually rectify the underlying contraventions and loss sustained by the Employee, which was resolved shortly after these proceedings commenced. That said, the Employee remained out of pocket for a considerable amount relative to their salary for a considerable time (that is, the total amount of $14,196 was not repaid until 2 years after the entitlement was first due and around one year after the steps including calculation and payment were due to be taken in accordance with the Notice).
The Respondent has also shown cooperation during these proceedings by taking steps to facilitate the effective conduct of the matter (working with the FWO to submit consent orders and an agreed statement of facts) and by making an admission of liability for the contravention relatively promptly.
It is not controversial that the Respondent is a small business which employed just 4 persons at the time of Mr Weiser’s affidavit in these proceedings.
There is no evidence of a prior contravention.
Beyond his statement that a large fine would place the Respondent in financial jeopardy, there is no probative evidence before the Court as to the Respondent’s particular financial circumstances. It is apparent that senior management, being a Director, were involved in the subject contravention of s.716(5).
In my view, there is a need for general deterrence in this matter, to emphasise the importance of an effective compliance framework and at a sufficient level to impress upon other employers in the electrical services industry the importance of complying with legal obligations owed to the employees. That is particularly so where the Court has received unchallenged evidence of the FWO (for the period July 2020 to December 2023) of the relatively high instance of disputation over pay and conditions in the electrical services industry involving apprentices and trainees, who may fairly be characterised as a vulnerable class of workers. Further, the evidence established that a particularly vulnerable class of young workers (between the ages of 15 to 25 year) made up a higher proportion of disputes received by the FWO in the electrical industry in that period.
A further and important consideration in this case is the need for compliance with the statutory framework. The statutory framework concerning compliance notices is an important mechanism for an inspector to deal with non-compliance with minimum entitlements in the Act and is intended to enable early resolution and rectification without penalty or the need to commence litigation. The failure to comply with a statutory compliance notice issued by the FWO is serious and such conduct ultimately undermines the Act’s enforcement framework and the safety net of entitlements it is designed to protect.
I have taken into account the Respondent’s evidence that they have made changes to their accounting and payroll team to ensure that the underlying contravention will not occur again. However, I consider there is also a need for specific deterrence in the present case given that the Respondent remains a registered business which continued to engage employees at the time of Mr Weiser’s affidavit in these proceedings.
Resolution
When all of the above factors are considered, I am satisfied that it is appropriate to make a declaration that the Respondent contravened s716(5) of the Act by failing to comply with the Compliance Notice dated 24 February 2023 and impose a pecuniary penalty on the Respondent for its contravention.
Weighing the various competing factors, I consider it appropriate to impose a penalty in the amount of $8,000. I am satisfied that, in the particular circumstances, it is appropriate to apply a 20% discount on account of the Respondent’s corrective action, contrition and cooperation.
In my view, this is a proportionate response which strikes a reasonable balance between oppressive severity and the need for deterrence in this particular case.
CONCLUSION
For the above reasons, I will make declarations and order payment of the pecuniary penalty in the amount of $6,400 to the Commonwealth of Australia be made within 60 days.
I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 14 November 2024
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