Fair Work Ombudsman v Chaipom

[2017] FCCA 3211

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v CHAIPOM & ANOR [2017] FCCA 3211

Catchwords:
INDUSTRIAL LAW – FAIR WORK – Penalty hearing.

Legislation:

Fair Work Act 2009 (Cth), ss.323, 357, 536, 546, 547

Applicant: FAIR WORK OMBUDSMAN

First Respondent:

Second Respondent:

VINAI CHAIPOM

ANDREA CLAUDIA MARIE PAULINE DELAFONTEYNE

File Number: DNG 22 of 2016

Judgment of: Judge Young

Hearing date: 5 December 2017

Date of Last Submission: 5 December 2017

Delivered at: Darwin

Delivered on: 5 December 2017

REPRESENTATION

Counsel for the Applicant: Mr S. Prain

Solicitors for the Applicant: Fair Work Ombudsman

First Respondent: In person

Second Respondent: In person

THE COURT DECLARES THAT:

1. During the period from 22 September 2015 to 20 November 2015, the First Respondent was the employer of:

   (a)Philippe Alexis Fournier (Mr Fournier);

   (b)Jan Alexander Manuel Hoffmann (Mr Hoffman);

   (c)Hsu−Yi Huang (Mr Huang);

   (d)Ayke Andreas Junior (Mr Junior);

   (e)Brian George Katavich (Mr Katavich);

   (f)Simeon Joas Kleine (Mr Kleine);

   (g)Johannes Lehr (Mr Lehr);

   (h)Yanik Leinkenjost (Mr Leinkenjost);

   (i)Timothy Ian Matthews (Mr Matthews);

   (j)Davide Murtas (Mr Murtas);

   (k)Timo Nakowitsch (Mr Nakowitsch);

   (l)Marcel Philipp Sinn (Mr Sinn),

   (i)(collectively the Employees).

2. The First Respondent contravened:

   (a)Count 1: section 45 of the Fair Work Act 2009 (‘FW Act’) by failing to pay each of Mr Fournier, Mr Huang, Mr Junior, Mr Katavich, Mr Kleine, Mr Lehr for the period from 23 October 2015 until 28 October 2015, Mr Matthews and Mr Murtas minimum rates of pay for adult employees as prescribed by clause 14.1(a) of the Horticultural Industry Award 2010 (Award); and

   (b)Count 2: section 45 of the FW Act by failing to pay each of Mr Hoffmann, Mr Leinkenjost, Mr Sinn for the period from 25 September 2015 until 30 October 2015, Mr Lehr for the period from 1 October 2015 until 22 October 2015 and Mr Nakowitsch the required minimum junior rates of pay prescribed by clause 16.1 of the Award; and

   (c)Count 3: section 45 of the FW Act by failing to pay the Employees the required casual loading prescribed by clause 10.4(b) of the Award; and

   (d)Count 4: section 45 of the FW Act, by failing to pay on the day of termination of employment, or forward by post on the next working day, wages due to the Employees as required by clause 19.3 of the Award; and

   (e)Count 5: section 45 of the FW Act, by failing to pay each of the Employees at least fortnightly as required by clause 19.1 of the Award on basis of irregular payments; and

   (f)Count 6: section 323(1) of the FW Act, by failing to pay the Employees the amounts payable in relation to the performance of work in full, in money and at least monthly on the basis of irregular payments; and

   (g)Count 7: section 45 of the FW Act by failing to fortnightly pay each of the Employees that received no payment as required by clause 19.1 of the Award; and

   (h)Count 8: section 323(1) of the FW Act by failing to pay in full and at least monthly to employees that received no payment; and

   (i)Count 9: section 357(1) of the FW Act, by misrepresenting to Mr Hoffmann that the contract of employment under which he was, or would be, employed by the First Respondent, was a contract for services under which he performed, or would perform, work as an independent contractor; and

   (j)Count 10: section 357(1) of the FW Act, by misrepresenting to Mr Sinn that the contract of employment under which he was, or would be, employed by the First Respondent, was a contract for services under which he performed, or would perform, work as an independent contractor; and

   (k)Count 11: section 536(1) of the FW Act, by failing to give Mr Hoffmann, Mr Junior, Mr Kleine, Mr Lehr, Mr Leikenjost, Mr Matthews, Mr Nakowitsch and Mr Sinn a payslip within one working day of paying an amount to each of those employees in relation to the performance of work.

THE COURT ORDERS THAT:

1. Pursuant to section 545(2)(b) of the FW Act, the First Respondent pay the following amount of $35,630.26 in compensation to the Employees in respect of the contraventions in paragraph 2 above, calculated as follows:

   (a)Mr Fournier: $2,917.35;

   (b)Mr Hoffmann: $3,750.30;

   (c)Mr Huang: $1,966.51;

   (d)Mr Junior: $3,135.88;

   (e)Mr Katavich: $648.30;

   (f)Mr Kleine: $2,646.90;

   (g)Mr Lehr: $2,706.33;

   (h)Mr Leinkenjost: $2,464.37;

   (i)Mr Matthews: $5,119.23;

   (j)Mr Murtas: $3,457.60;

   (k)Mr Nakowitsch $3,103.36; and

   (l)Mr Sinn: $3,714.13.

2. Pursuant to section 547(2) of the FW Act, the First Respondent pay interest at the applicable pre-judgment rate on the amounts in paragraph 3 above.

3. The amounts in Orders 3 and 4 above be paid to the Applicant (together, the Total Payments) within thirty (30) days of the date of this order.

4. The Applicant is to:

   (a)within 28 days of receipt of the Total Payments, pay the applicable amounts due to the relevant Employees;

   (b)in the event that the Applicant receives a partial payment of the Total Payments, distribute the monies received to the Employees in accordance with each Employee’s percentage share of the Total Payments; and

   (c)in the event that the Applicant cannot locate any of the Employees within a period of 28 days after receipt of part or all of the Total Payments, within a further 7 days pay the applicable amount due to each Employee that cannot be located to the Commonwealth pursuant to section 559 of the FW Act.

5. The First Respondent pay pecuniary penalties pursuant to section 546(1) of the FW Act for the contraventions set out in Declaration (2) above in the total sum of $25,412 as per the table at Annexure A to these orders.

6. Pursuant to section 546(3)(a) of the FW Act, the First Respondent is required to pay any pecuniary penalty amounts to the Commonwealth within thirty (30) days of the date of this order.

7. The application, in so far as it concerns the Second Respondent, is otherwise dismissed.

8. The Applicant have liberty to apply on 7 days’ notice in the event that any of the preceding orders are not complied with.

Annexure A

Contraventions		Grouping by common element	Maximum Penalty (no discount)	Discount for cooperation	Proposed Penalty Range	Penalty
Count	Nature of Contraventions
Count 1	Section 45 of the FW Act, Award cl. 14.1(a) -Failure to pay adult minimum wages	Failure to pay minimum award wages	$10,800	10%	70%	$6,804
Count 2	Section 45 of the FW Act, Award cl. 16.1-Failure to pay junior minimum wages
Count 3	Section 45 of the FW Act, Award cl. 10.4(b) -Failure to pay casual loading	Failure to pay casual loading	$10,800	10%	70%	$6,804
Count 4	Section 45 of the FW Act, Award cl. 19.3 -Failure to pay wages on termination	Failure to pay on termination	$10,800	Overlap, with counts 1, 2, and 3		$1,000
Count 5	Section 45 of the FW Act, Award cl 19.1-Failure to pay fortnightly to employees on basis of irregular payments	Failure to pay on basis of irregular payments	$10,800	Overlap, with counts 1, 2, and 3		$1,000
Count 6	Section 323(1) of the FW Act- Failure to pay in full and at least monthly on basis of irregular payments
Count 7	Section 45 of the FW Act, Award cl. 19.1-Failure to pay fortnightly to employees that received no payment	Failure to pay to employees that received no payment	$10,800	Overlap, with counts 1, 2, and 3		$1,000
Count 8	Section 323(1) of the FW Act-Failure to pay in full and at least monthly to employees that received no payment
Count 9	Section 357(1) of the FW Act- Misrepresenting employment as independent contracting to Mr Hoffman	Sham Contracting	$10,800	10%	70%	$6,804
Count 10	Section 357(1) of the FW Act -Misrepresenting employment as independent contracting to Mr Sinn
Count 11	Section 536(1) of the FW Act – Failure to issue payslips	Failure to issue payslips	$5,400	$2,000
11 Contraventions		7 Groups	$25,412

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT DARWIN

DNG 22 of 2016

FAIR WORK OMBUDSMAN

Applicant

And

VINAI CHAIPOM

First Respondent

ANDREA CLAUDIA MARIE PAULINE DELAFONTEYNE

Second Respondent

REASONS FOR JUDGMENT

Ex-Tempore

1. These reasons for judgement were delivered orally. They have been corrected from the transcript. Grammatical errors have been corrected and an attempt has been made to render the orally delivered reasons amenable to being read.

2. This is a penalty hearing in relation to a prosecution under the Fair Work Act 2009 (Cth). There are initially two respondents, Mr Chaipom, and his partner, Ms Delafonteyne was a second respondent. At the outset of the hearing, given that Mr Chaipom had admitted the offences and latterly, at least, cooperated with the Fair Work Ombudsman which is bringing this prosecution, it was agreed by the applicant, the Fair Work Ombudsman, that the counts against Ms Delafonteyne ought to be dismissed, and an order was made accordingly. The prosecution then proceeded simply against Mr Chaipom.

3. Mr Chaipom had agreed facts with the Fair Work Ombudsman earlier this year, and the matter proceeded on the basis of some agreed facts, primarily relating to the elements of the various contraventions.  In addition, the applicant relied on a number of affidavits setting out some other factual matters.  I am satisfied that Mr Chaipom was given an opportunity to challenge that material, but he did not either file affidavit material of his own, not at least until yesterday, some very brief material, and he did not require any of the deponents of the affidavits relied on by the Fair Work Ombudsman for cross-examination.  So the matter proceeded on the basis of a statement of agreed facts and uncontested evidence. 

4. The factual background is as follows.  Mr Chaipom employed a number of people to work in mango orchards in 2015.  He had acquired, as I understand it, the right to cultivate and pick mangoes from owners of mango farms in the Darwin regional area.  There were about four farms in all involved.  There were 12 employees that are the subject of these proceedings:  10 of whom were 417 visa holders.  That is they were people from overseas who were given temporary rights to work in Australia.  Six of those persons were what is described in the Horticulture Award 2010 (“the Award”) - the relevant award for these proceedings - as “juniors”, and juniors does not mean children but means persons until they reach the age of 21:  in other words, 20 and under.

5. Of the 12 persons who were the subject of these contraventions, four involved cases where the employees were not paid at all.  The total underpayments across the 12 employees were $35,630. The underpayments ranged from $648 to $5,119, so there was an average underpayment across the 12 employees of slightly less than $3,000.  The employment periods for the workers varied from two to three weeks usually, and on one occasion seven weeks, over a period of about two months from September 2015 to November 2015.

6. In addition to the underpayment of employees, Mr Chaipom has been prosecuted for certain offences under the Fair Work Act 2009 (Cth) (“the Act”), particularly entering into sham contracts in breach of subsection 357(1) of the Act and other offences, such as failure to issue payslips under subsection 546(1) of the Act, and failures under subsection 323(1) of the Act, that is, in each case, failure to pay monthly. Those offences, under section 323, seem to overlap to a very great degree, if not a complete degree, with obligations under the Horticulture Award clause 19.1.

7. Most, if not all, of the Award contraventions constitute, at the same time, a breach of the Act. For example, section 45 of the Act requiring payment of minimum wages is also a contravention of the Award. In imposing a penalty, I will take the overlap issue into account.

8. By way of some further background, it was submitted by Mr Prain for the Fair Work Ombudsman that there were a number of factors that were of particular significance in the background to this matter and I accept his submissions on these points.

9. The employees were, for the most part, persons from overseas, colloquially known as backpackers, seeking employment pursuant to their 417 visas.  In some cases, they needed 88 days of proved employment in order to be eligible for an extension of their visas for a second year.  In some cases, the employees were unable to obtain an extension of their visas because the failure of Mr Chaipom to provide payslips meant that they were unable to prove that they had worked the requisite 88 days in the first year.  So the failure to provide payslips, for example, had some very real consequences.

10. Mr Prain, counsel for the prosecutor, submitted that the work was hard work.  It was outdoor work in the Darwin regional area.  It was hot.  The employees complained that they lived in primitive conditions. I accept those submissions. The misrepresentation to two of the employees that they were contractors was, according to Mr Prain, more culpable because the persons who were the subject of those representations, Mr Hoffman and Mr Sin, were from overseas and could not be expected to be as familiar with their rights as an Australian.  So the misrepresentation that they were independent contractors was a representation to particularly vulnerable people, and I accept Mr Prain’s submissions that that makes Mr Chaipom’s conduct more blameworthy.

11. Mr Prain also made submissions about some of the particular hardships that some of the employees had suffered as a result of their underpayment.  Mr Fournier was simply not paid at all, for example, with the consequences that one might expect.  Mr Hoffman, for example, because of his underpayments, was forced to borrow from friends to remain in Australia before going home.  They were, it appears from the material in front of me, not particularly well-heeled backpackers. They were dependent upon being paid for their work and they were either not paid or underpaid.

12. Mr Prain also said that the conduct of Mr Chaipom was deliberate.  He said, and this was not challenged, that on 13 October 2015 a Fair Work inspector visited Mr Chaipom as part of a campaign called Harvest Trail that the Fair Work Ombudsman was conducting in the horticultural industry in the Darwin area.  At that time, Mr Chaipom was given what has been called an “education pack” which was advice about his obligations under the Horticulture Award and his obligations concerning minimum payment to employees.

13. It appears there is some evidence that Mr Chaipom may have been aware, at least in outline, of his obligations even before that time because there is some reference in Mr Hoffman’s affidavit to discussing terms and conditions with Mr Chaipom.  It was also submitted by Mr Prain that there was no evidence of contrition or corrective action by Mr Chaipom.  In particular, he said that despite the visit of the Fair Work inspector on 13 October, Mr Chaipom continued after that date to underpay workers. 

14. Indeed, it was said that on 1 December 2015, when the Fair Work inspectors visited Mr Chaipom where he was working, Mr Chaipom encouraged the employees not to cooperate with the Fair Work inspector.  There was other evidence of Mr Chaipom’s non-cooperation, once the Fair Work Ombudsman indicated to him that he would be the subject of proceedings.  There is evidence that he avoided service of proceedings.  There is some evidence that he behaved in a very irresponsible way towards the process server who said that Mr Chaipom threatened him with a vehicle, tried to run him off a road.

15. There was other evidence that Mr Chaipom had spoken offensively to a solicitor acting for the applicant.  None of that was challenged and I accept that evidence.  Nevertheless, as at 5 April 2017, Mr Chaipom decided on a different course of action and after that date he was cooperative.  He agreed on a statement of facts with the applicant and that is a detailed statement of facts covering all of the elements and by his cooperation he has saved the authorities a great deal of trouble and expense in further prosecuting him.

16. Part of that, I suspect, was because Mr Chaipom’s partner, Ms Delafonteyne, had also been named as a respondent, and there seems to have been evidence that would have implicated her in breaches of the Act as well. As part of the agreement reached between the Fair Work Ombudsman and Mr Chaipom there was a considerable advantage extended by the Fair Work Ombudsman, that is, by consenting to the dismissal of the proceedings against Ms Delafonteyne. I am satisfied that that was a very significant advantage extended to her, and one, frankly, that the Fair Work Ombudsman did not have to extend.

17. The contraventions, I find, were deliberate and are serious for the reasons that Mr Prain addressed me about, in particular that the employees were vulnerable employees in the sense that they were from overseas.  They would have limited knowledge of their workplace rights, and, if those workplace rights were breached, it would be of enormous difficulty for them to pursue their rights.  In other words, they were ripe for exploitation and I am satisfied that Mr Chaipom’s conduct amounts to exploitation.

18. It was said by Mr Prain in submissions that I ought not extend any significant discount on penalty to Mr Chaipom because his cooperation was minimal.  I do not agree that it was minimal and I do propose to give a discount on the penalty that I would have otherwise imposed, not the 5 per cent that Mr Prain submitted I should extend, but rather 10 per cent, which I think more truly reflects the practical advantage that was achieved by Mr Chaipom agreeing to a statement of facts and, in substance, conceding his guilt.

19. The other factors that Mr Prain addressed me about were the questions of specific and general deterrence.  In relation to specific deterrence, he said that Mr Chaipom’s conduct showed a deliberate disregard of the law.  I accept that.  There has been no evidence of any particular remorse from Mr Chaipom and I agree with that submission as well.  Mr Chaipom told me in submissions that he was sorry about what had happened but he also filed an affidavit yesterday that, despite me asking whether or not he really wanted to rely on it, seems to suggest that he feels a sense of grievance against the Fair Work Ombudsman.  I agree with Mr Prain that that affidavit is not really suggestive of any remorse or real regret for his actions.

20. The other issue that was raised is that there is no evidence that Mr Chaipom will not engage people in similar employment in the future.  That is true as far as it goes but whether or not he will employ people I do not know.  In relation to general deterrence, there is evidence that there is widespread non-compliance with workplace obligations in the horticultural industry.  There is evidence of exploitation of seasonal workers.  Mr Prain submitted that a significant penalty was required to deter other employers from following the same course of conduct.  I also heard submissions from Mr Prain about the significance of the respondent’s financial circumstances. 

21. Mr Prain submitted, and I accept this submission, that the financial circumstances of the respondent would not be relevant to the question of the degree of culpability in failing to comply with the relevant workplace obligations at the time there were breaches.  He also submitted that, in imposing a penalty, it should not be a penalty solely tailored towards meeting the respondent’s ability to pay.  I accept that submission.  There is no real evidence before me about Mr Chaipom’s present financial circumstances.  He told me that he was unemployed and there is no evidence to the contrary.

1. For the purpose of the penalty I am about to impose, I accept that he is unemployed.  Whether he will remain unemployed is another matter altogether.  There is, it would appear, no real reason to expect that that is anything other than a temporary circumstance for Mr Chaipom.  So taking all those matters into account, I propose to impose the following penalties.  There is a fair degree of commonality or overlap between the various contraventions, and I have attempted to tailor the financial penalties accordingly.

2. Referring to annexure B in the applicant’s outline which include 11 separate contraventions – they are not numbered in the annexure, but I will refer to them as the contraventions 1 through to 11, and I think that can be reasonably easily followed. Contraventions 1 and 2, which constitute the failure to pay Award wages, have been grouped on the basis that count 1 is a contravention at the same time of both the Act and the clause 14.1 of the Award, that is failure to pay adult wages, and a breach of clause 16.1, failure to pay junior wages, has significant common elements. That is the failure to pay Award wages.

3. The maximum penalty for each of these offences for an individual is $10,800.  So I propose to impose one penalty for both of those, and after a discount of 10 per cent for cooperation, I propose to impose a fine of 70 per cent of the remainder.  That is there will be a fine on those two counts of $6,804.

4. In relation to count 3, which is a breach of section 45 and clause 10.4(b) of the Award, a failure to pay casual loading, after the 10 per cent discount, I will impose a fine, again, of 70 per cent of the amount which results in a figure of $6,804.

5. In relation to count 4, which is also a breach of section 45 of the Act and clause 19.3 of the Award, that is a failure to pay wages on termination, I am satisfied there is a very significant overlap between that offence and the preceding offences, that is the, if I can call them that, substantive offences, that is the underpayment of Award wages. and I propose, simply, to impose a $1,000 fine.

6. In relation to counts 5 and 6, which are a failure to pay fortnightly or a failure to pay monthly, the first obligation arises under the Award, in substance, and the second arises under section 323 of the Act, a failure to pay fortnightly or a failure to pay monthly. The prosecution has laid two counts there with the substance of the factual allegation being that Mr Chaipom paid the employees irregularly. The offence relates to, in substance, irregular payments, and, again, the irregular payments are stand alone and constitute an offence. Even though there are two contraventions laid, I simply propose to fine the respondent $1,000 for both of those. That is a single amount of $1,000 because of the significant overlap between the offences.

7. In relation to counts 7 and 8, these are breaches of clause 19.1 of the Award which is a failure to pay fortnightly and 8 is breach of section 323 of the Act which is a failure to pay monthly. The substance of both contraventions is a failure to make any payments at all to four of the employees.

8. The non-payments are taken up in the general amount underpaid which I have dealt with in substance in counts 1, 2 and 3, so I propose, again, to simply impose a fine of $1,000 in respect of both of those, taking into account the very significant overlap between the two.  That is a single amount for the two counts 7 and 8.

9. In relation to counts 9 and 10, these relate to two sham contracts concerning Mr Hoffman and Mr Sin.  I consider those to be serious offences, and, again, after a discount of 10 per cent that I have referred to, I consider that a fine of 70 per cent of the remainder is appropriate.  So there will be a fine of $6,804 in respect of both of those counts:  a single fine.

10. Count 11 is a breach of section 536 of the Act, that is a failure to issue payslips. I consider that to have been a deliberate failure and I will impose a fine of $2,000.

I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Judge Young

Associate: 

Date:  18 December 2017