Fair Work Ombudsman v Chia Tung Development Corp. Ltd
[2016] FCCA 3457
•2 December 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v CHIA TUNG DEVELOPMENT CORP. LTD & ANOR | [2016] FCCA 3457 |
| Catchwords: INDUSTRIAL LAW – Multiple contraventions of Fair Work Act – imposition of pecuniary penalties. |
| Legislation: Crimes Act 1914 (Cth), s.4AA. Fair Work Act 2009, ss.12, 90, 539, 546, 550, 716, 717. Federal Circuit Court Rules 2001, rr.13.03A, 16.05. |
| Cases cited: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 326 ALR 476; [2015] HCA 46 Fair Work Ombudsman v Kentwood Industries Pty Ltd (No. 3) [2011] FCA 579 Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58 Fair Work Ombudsman v The Syndicate Group Pty Ltd [2015] FCCA2847 Kelly v Fitzpatrick [2007] FCA 1080 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | CHIA TUNG DEVELOPMENT CORP. LTD |
| Second Respondent: | MR MICHAEL CHEN-FA LIN |
| File Number: | SYG 562 of 2016 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 2 December 2016 |
| Date of Last Submission: | 2 December 2016 |
| Delivered at: | Wollongong |
| Delivered on: | 2 December 2016 |
REPRESENTATION
| Solicitors for the Applicant: | Fair Work Ombudsman |
| There was no appearance by or on behalf of the Respondents. |
ORDERS
Leave be granted to the Applicant to rely on the affidavit of Kerry Patrick O’Brien affirmed on 2 December 2016.
Pursuant to subsection 546(1) of the Fair Work Act:
(a)the First Respondent, Chia Tung Development Corp., Ltd, pay a penalty of $24,300.00, for its contravention of subsection 716(5) of the FW Act; and
(b)the Second Respondent, Michael Chen-Fa Lin, pay a penalty of $4,860.00, for his involvement in the First Respondent’s contravention of subsection 716(5) of the FW Act.
Pursuant to section 546(3) of the FW Act that any pecuniary penalties ordered to be paid by the First and Second Respondents are paid into the Consolidated Revenue Fund of the Commonwealth within 28 days of the date of this order.
The Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
Within 7 days, the Solicitor for the Applicant is to notify the Respondents of the Orders made today at their last known addresses.
THE COURT NOTES THAT:
A.There was no appearance by or on behalf of the Respondents when the matter was called at 2:05pm.
B.These orders are made in the absence of the Respondents and the Respondents are at liberty to make such application as they may be advised pursuant to Rule 16.05 of the Federal Circuit Court Rules 2001.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 562 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| CHIA TUNG DEVELOPMENT CORP. LTD & ANOR |
First Respondent
| MR MICHAEL CHEN-FA LIN |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 19 September 2016, this Court declared that, by reason of the Respondents' default under subrule 13.03A(2) of the Federal Circuit Court Rules 2001 (Cth):
a)the First Respondent, Chia Tung Development Corp. Ltd (Chia Tung) contravened subsection 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with a compliance notice issued on 8 January 2016 (Compliance Notice); and
b)the Second Respondent, Mr Michael Chen-Fa Lin (Mr Lin), was involved in Chia Tung's contravention of subsection 716(5) of the FW Act, within the meaning of subsection 550(2) of the FW Act.
Reasons for judgment were published on that date and reported as [2016] FCCA 2777.
The Applicant, the Fair Work Ombudsman (FWO), now seeks the imposition of pecuniary penalties against Chia Tung and Mr Lin in relation to their contravention of sub-section 716(5) of the FW Act.
These proceedings arise from Chia Tung's failure to comply with the Compliance Notice. The Compliance Notice required Chia Tung to pay two employees (Employees) a total of $61 ,910.34, which Fair Work Inspector Ying Zheng (Inspector Zheng) had determined was owed to the Employees under the Building and Construction General On-Site Award 2010 (Building Award) and the National Employment Standards in the FW Act, in respect of minimum wages, overtime performed on Monday to Friday, Saturdays and rostered days off, Sunday and public holiday penalty rates, and non-payment of outstanding accrued untaken leave (including leave loading) payable on the termination of the Employees' employment.
The two Employees, Mr Arlan Segura (Mr Segura) and Mr Jeofrey Valmeo (Mr Valmeo) who were nationals of the Republic of the Philippines, had come to Australia solely to work as metal fabricators and welders for Chia Tung, and were resident in Australia during their employment on Temporary Work (Short Stay Activity) (sub-class 400) visas. In the Compliance Notice, Inspector Zheng determined that Chia Tung owed Mr Segura $26,445.29 (gross), and Mr Valmeo $35,465.05 (gross). Those amounts were not paid by 22 January 2016, as required by the Compliance Notice, and at the date of hearing, almost nine months later, have still not been paid.
The FWO submitted that there being few mitigating factors in this matter, and that it would be appropriate for this Court to impose penalties in the high to maximum range (as set out in Annexure A which is reproduced in Schedule 1 to these reasons for judgment), because of the following factors:
a)Chia Tung and Mr Lin have a history of not complying with the FW Act, having entered into an Enforceable Undertaking with the FWO on 30 March 2015 (Undertaking), and despite promising in the Undertaking to engage in ongoing compliance with their workplace relations obligations, have failed to do so within less than a year of entering into the Undertaking;
b)the underpayment affected two vulnerable employees who were sent to Australia from the Philippines, with the sole purpose of performing work in Australia for Chia Tung;
c)the Respondents have shown no contrition and taken no corrective action;
d)the Respondents have deliberately and systematically failed to engage with the FWO since the commencement of its investigation into the underpayments to the Employees, requiring the FWO to issue the Compliance Notice, commence these proceedings and seek default judgment, in circumstances where such litigation could have been avoided; and
e)there is a strong need for both specific and general deterrence.
As it turns out the Court accepts these submissions.
Material filed in the Proceedings
The FWO relied on the following documents filed in these proceedings;
a)Application dated 11 March 2016 and filed on 14 March 2016;
b)Statement of Claim dated 11 March 2016 and filed on 14 March 2016 (SOC);
c)Applicant's Submissions on Service dated 6 May 2016 and filed on 6 May 2016 (Service Submissions);
d)Affidavit of Shay Minster affirmed on 5 May 2016 and filed on 6 May 2016 (Minster Affidavit);
e)Affidavit of Ying Zheng affirmed on 6 May 2016 and filed on 6 May 2016 (First Zheng Affidavit);
f)Affidavit of Kerry Patrick O'Brien affirmed on 5 July 2016 and filed on 5 July 2016 (First O'Brien Affidavit);
g)Application in a Case dated 23 August 2016 and filed 23 August 2016 (Default Judgment Application);
h)Applicant's Submissions on Default Judgment dated 23 August 2016 and filed 23 August 2016 (Default Submissions);
i)Affidavit of Arlan Bacaron Segura sworn on 29 July 2016 and filed 24 August 2016 (Segura Affidavit);
j)Affidavit of Ying Zheng affirmed on 18 August 2016 and filed 24 August 2016 (Second Zheng Affidavit);
k)Affidavit of John Kwong Hong Tang sworn on 18 August 2016 and filed 23 August 2016 (Translator Affidavit);
l)Affidavit of Jeofrey Balitian Valmeo affirmed on 18 August 2016 and filed 24 August 2016 (Valmeo Affidavit);
m)Affidavit of Kerry Patrick O'Brien affirmed on 23 August 2016 and filed 24 August 2016 (Second O'Brien Affidavit);
n)Affidavit of Kerry Patrick O'Brien affirmed on 8 September 2016 and filed 8 September 2016 (Third O'Brien Affidavit); and
o)Affidavit of Ying Zheng affirmed on 22 September 2016 and filed on 17 October 2016 (Third Zheng Affidavit).
The Determination of Penalty[1]
[1] These reasons for judgment are based on the Applicant’s submissions on penalty.
The process through which this Court engages in the determination of penalty is well settled: Fair Work Ombudsman v Kentwood Industries Pty Ltd (No. 3) [2011] FCA 579 at [10]; Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42].
By reason of its default, this Court has declared that Chia Tung contravened subsection 716(5) of the FW Act, by failing to comply with the Compliance Notice. By reason of his default, this Court has declared that Mr Lin committed that contravention himself, by reason of his involvement in Chia Tung's contravention within the meaning of subsection 550(1) of the FW Act. The maximum penalties for this contravention are (See item 33 of sub-section 539(2) of the FW Act):
a)$27,000, being 150 penalty units (Pursuant to section 12 of the FW Act, a “penalty unit” has the same meaning as within section 4AA of the Crimes Act 1914 (Cth), which at the time of the contravention was $180) for Chia Tung; and
b)$5,400, being 30 penalty units, for Mr Lin.
As these proceedings concern a single contravention of the FW Act by each Respondent, no grouping or course of conduct considerations arise.
The factors that are of relevance to this Court's determination of penalties for contraventions of the FW Act are also well-settled, but they are not a “rigid catalogue of matters for attention" : Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 (Merringtons) at [88]-[91], citing Kelly v Fitzpatrick [2007] FCA 1080 (Kelly) at [14]. However, in setting a penalty, the Court should be mindful of the recent statement by the High Court of Australia explaining the purpose for the imposition of civil penalties: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 326 ALR 476; [2015] HCA 46 (Cth v FWBII):
“[55] ... whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. .. The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act (Cth v FWBll at [55], citing Trade Practices Commission v CSR Ltd (1991) ATPR 41-076; [1990]FCA521).
Application of Penalty Principles
Nature and extent of the conduct and circumstances in which the conduct took place
Inspector Zheng, having formed a reasonable belief that Chia Tung had contravened the Building Award and underpaid the Employees, served the Compliance Notice on Chia Tung on 8 January 2016 (First Zheng Affidavit at [5] - [10]. The Compliance Notice required, by 22 January 2016, payment of $61,910.34 to be made to the Employees and reasonable evidence of the amount paid to be provided to the FWO by 29 January 2016 (Annexure YZ-2 to the First Zheng Affidavit). Chia Tung failed to make any payment within the time required by the Compliance Notice (First Zheng Affidavit at [16 – [17]), or at any time thereafter.
The power of a Fair Work Inspector to issue a compliance notice was introduced into the FW Act to provide a mechanism for dealing with non-compliance with minimum entitlements in the FW Act, as an alternative to commencing litigation for each underlying contravention of an entitlement (Fair Work Bill 2008, Explanatory Memorandum at [2673]). This has been emphasised in recent cases where compliance notices have not been complied with (Fair Work Ombudsman v The Syndicate Group Pty Ltd [2015] FCCA2847 at [27]; Fair Work Ombudsman v Absynthe Restaurant Pty Ltd [2015] FCCA 58 at [36]).
A properly issued compliance notice creates an opportunity for a person to whom it is served to rectify the matters set out in the notice and gain protection from civil remedy proceedings in respect of the underlying contravention(s). If that person complies with the compliance notice:
a)no civil remedy proceedings can be brought against the person in respect of an underlying contravention: sub-section 716(4A) of the FW Act; and
b)the person is not taken to have admitted or been found to have contravened the civil remedy provision in respect of an underlying contravention, sub-section 716(4A) of the FW Act.
Should a person fail to comply with a compliance notice, item 33 of subsection 539(2) of the FW Act allows only Fair Work Inspectors to bring civil remedy proceedings against that person and seek appropriate orders to remedy the contravention, including pecuniary penalties under section 546 of the FW Act.
Opportunities to procure compliance prior to this litigation
It is a significant factor in this matter that the Respondents were given ample time and multiple opportunities to procure compliance and avoid this litigation. From March 2015 onwards, during Inspector Zheng's investigation, representatives of Chia Tung in fact acknowledged and accepted that the Employees were entitled to Australian wages and conditions during their employment. The Court infers that Mr Lin was aware of those communications and was in a position to take action to rectify the underpayments:
a)Inspector Zheng met with Mr Lin and Chia Tung's representatives on 11 August 2015 to address the outstanding underpayments. At this meeting, a representative of Chia Tung, Mr Jamieson, undertook to provide further information concerning the purported underpayments, with Mr Lin acknowledging the need for compliance (Third Zheng Affidavit, at page 53);
b)in an email of 14 August 2015, the FWO provided the Respondents with the relevant pay rates applicable to the Employees. Over the course of 25 and 26 August 2015, Chia Tung then provided the FWO with calculations for the wages owed to the Employees. One of these emails provided a forwarded email from an “innovationhitech.com.au" address (Annexure YZ-10 to the Third Zheng Affidavit, at page 53);
c)after reviewing the calculations, the FWO provided a final version to Chia Tung's legal representatives, indicating that payment was to be made by 30 September 2015 (Third Zheng Affidavit at [26 – [27]). However, payment was not received by this date. The FWO then followed up Chia Tung's legal representative on various occasions over October to December 2015, and then Mr Lin directly between 23 December 2015 and 5 Jan 2016, where it was also indicated that a failure to comply may lead to the commencement of legal proceedings (Third Zheng Affidavit at [27] – [37]), but there was no compliance; and
d)following the provision of the Compliance Notice, on 1 February 2016, having received no evidence that Chia Tung had complied with it, Inspector Zheng sent, by email and international registered mail, a letter to Mr Lin advising that Chia Tung had failed to comply with the Compliance Notice, and requesting that Mr Lin advise within 7 days if there was a “reasonable excuse" for Chia Tung's non-compliance (First Zheng Affidavit at [12], Annexure YZ-6 to the First Zheng Affidavit).
It was only on 4 February 2016, after the Compliance Notice was issued by Inspector Zheng and after the date for compliance had passed, that the Second Respondent wrote to Inspector Zheng to inform her that the Compliance Notice would not be complied with as the Employees were “paid through their country of origin” (First Zheng Affidavit at [14], Annexure YZ-8 to the First Zheng Affidavit).On 5 February 2016, Inspector Zheng wrote to the Second Respondent and informed him of his right of review under s.717 of the FW Act (First Zheng Affidavit at [15], Annexure YZ-9 to the First Zheng Affidavit). Again, there was no response from Mr Lin to that email.
Despite the Respondents' extensive interaction with the FWO and the education provided to them by the FWO about the FW Act and the role of the FWO, no review of the Compliance Notice was filed and no amounts were paid pursuant to the Compliance Notice (First Zheng Affidavit at [16] – [18]; Second O’Brien Affidavit at [26] – [27]).
While the Respondents had ample opportunity to seek professional advice about the nature of the Compliance Notice and the consequences of non-compliance (including by having access to legal representatives during the FWO's investigation), and while they were clearly warned of the consequences of non-compliance (with the Compliance Notice stating that a failure to comply with the Compliance Notice would contravene a civil remedy provision) (SOC at [7]) the Respondents failed to take any steps whatsoever to rectify the underpayments to the Employees. The FWO considered that this disregard for the Compliance Notice, especially after previously seeking legal advice and assistance in responding to the FWO investigations and after showing an intention to pay prior to the Compliance Notice being issued, as intentional, as demonstrating a complete unwillingness to comply with Chia Tung's obligations, and as a strong aggravating factor in relation to penalty.
Underlying breaches of the Building Award and the National Employment Standards
It is also a relevant factor that the Compliance Notice addressed Chia Tung's failure to comply with a large number of different terms of the Building Award and the National Employment Standards. As set out in the Compliance Notice, the First Respondent failed to pay:
a)minimum wages (sub-clause 19.3(b) of the Building Award);
b)overtime for hours worked on Saturdays and days otherwise allocated to be Rostered Days Off (clause 37.1 of the Building Award);
c)penalty rates for Sunday work (clause 37.5 of the Building Award);
d)penalty rates for public holiday work (clause 37.9 of the Building Award);
e)overtime for time work on Monday to Friday (clause 36.2 of the Building Award); and
f)accrued annual leave and leave loading payable on termination of employment (sub-section 90(2) of the FW Act and sub-clause 38.2(b) of the Building Award).
The FWO submits, and the Court accepts, that account should be taken of the multiple contraventions alleged in the Compliance Notice, as the Respondents have not indicated that they dispute the matters alleged in the notice. Relevantly, Judge Manousaridis in Fair Work Ombudsman v Hair lndustrie Mt Druitt Pty Ltd [2015] FCCA 3426 said at [11]-[12]:
"[11] The nature of the conduct which led to Hair lndustrie's contravention is its failure to comply with the compliance notice. There is no evidence to suggest Hair lndustrie made any attempt to comply with the notice. That, however, does not exhaust the conduct that it is relevant to examine; for the notice was issued in relation to contraventions of the Award and of [the] NES which an inspector of the FW Ombudsman had reasonable grounds for believing Hair lndustrie had engaged in.
[..]
[12] I must bear in mind that it is no element of a contravention of s. 716(5) of the FWAct that the person to whom a notice under s.716(2) of the FWAct has been issued has in fact contravened any of the provisions identified in the compliance notice. A penalty for a contravention of s. 716(5) of the FWAct cannot, therefore, be assessed on the assumption that the person to whom a compliance notice has been issued has contravened those provisions. Nevertheless, account should be taken of the contraventions alleged in the notice, at least where the person against whom the notice is issued has not indicated he or she disputes the matters alleged in the notice. Hair lndustrie has not indicated it disputes any of the matters alleged in the compliance notice that was served on it. It is, therefore, appropriate to take into account the nature of the contraventions alleged in the compliance notice." (emphasis added).
Although the FWO accepted that Mr Lin disputed (albeit informally) that the Employees were entitled to the benefit of Australian employment conditions, there has been no dispute by Chia Tung or Mr Lin about the matters that led to the contraventions of the Building Award or the National Employment Standards contained within the Compliance Notice. The FWO submitted that, and the Court accepts, that the underpayment of multiple entitlements by Chia Tung, as alleged in the Compliance Notice, is a factor that warrants a higher penalty.
Vulnerability of the Employees
The Employees, who are Filipino nationals, were at all times under the control of Chia Tung while working in Australia. The FWO submitted, and the Court accepts, that they were vulnerable and more susceptible to exploitation within the workplace than the wider Australian community (Fair Work Ombudsman v Sonisolar Pty Ltd & Anor [2016] FCCA 2027 at [116]).
The Employees were recruited by Chia Tung, while in the Philippines, to perform work in Australia (Valmeo Affidavit at [4] – [15]; Segura Affidavit at [7] – [9]): during the period the subject of the Compliance Notice, this took place on at least three separate occasions (and also later while the Employees were on 457 visas, during a period which is the subject of the Undertaking) (Valmeo Affidavit at [30], [44]; Segura Affidavit at [18], [30]. Throughout each period of work in Australia the Employees performed work, which was substantially the same, returning to the Philippines at the request of Chia Tung so their visas for the next period could be organised (Valmeo Affidavit at [32] – [33]; Segura Affidavit at [20], [21], [27]). The Employees typically worked 11-12 hour shifts from Monday to Saturday, paid at a flat rate, with additional overtime only sometimes paid for Sunday or late evening work (Valmeo Affidavit at [37] – [38]; Segura Affidavit at [24] – [25]). Each period of work was covered by a separate fixed-term contract, signed by Mr Lin on behalf of Chia Tung, but which did not specify the relevant hours to be worked or rates of pay (Segura Affidavit at [11] - [16]; Valmeo Affidavit at [17] - [29]). Chia Tung provided the Employees with accommodation during their stay in Australia, but this involved four men staying in each room of a four or five bedroom house (Valmeo Affidavit at [34]; Segura Affidavit at [22]).
This Court draws an inference that the Employees in this situation did not have any personal knowledge of lawful entitlements in Australia, particularly in the case of Mr Segura who had limited English language proficiency. Mr Valmeo was aware that he was being paid more than for his work in the Philippines, but less than that for Australian workers; however, he did not wish to raise this issue with Mr Lin out of fear of losing his job (Valmeo Affidavit at [41]; Segura Affidavit at [31] – [34].
In Fair Work Ombudsman v GoYo Trading Pty Limited [2012] FMCA 865, Jarrett FM (as his Honour then was) stated at [15]-[16]:
'Foreign nationals, working in Australia on visas, be they 417 visas or 457 visas or some other form of visa, in my view, represent a particular class of employee who are potentially vulnerable to improper practices by their employer. The cases demonstrate that those characteristics mean that a particular employee concerned is of a vulnerable class: see, for example, Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012]FMCA258, Fair Work Ombudsman v Orwill Pty Ltd [2011]FMCA730; Fair Work Ombudsman v Sanada Investments Pty Ltd [2010]FMCA401 at [60].
It is important, in my view, that employees in such a potentially vulnerable position have their entitlements met, and that employers understand very clearly that such employees are not available for exploitation.'
The FWO submitted, and the Court accepts, that the Respondents had a heightened level of responsibility to ensure they were complying with their obligations to the Employees, given that their background and knowledge left them with little understanding of their rights under Australian workplace laws (Fair Work Ombudsman v Quality Food World Pty Ltd [2016] FCCA 207 at [12]).
The FWO submitted that in this matter a significant aggravating factor was that Chia Tung and Mr Lin did engage in improper practices in relation to the Employees and took advantage of them. Not only were the Employees underpaid the amounts in the Compliance Notice, but the events of 6 July 2015 onwards suggest that attempts were made to compel the Employees into not continuing with their complaints to the FWO. On that date, Mr Lin met separately with Mr Segura and Mr Valmeo, requesting that each of them sign a letter withdrawing their complaint with the FWO. Both Employees signed out of fear of losing their jobs (Valmeo Affidavit at [46] – [56]). The Court accepts that this was indeed the case.
Judge Smith in Fair Work Ombudsman v Btu Hornsby Pty Ltd & Anor [2016] FCCA 1150, at [37], has said that, while it is not relevant if a threat is actually carried out, threatening conduct itself is still of significant concern. The FWO considered that Mr Lin's request to the Employees was of significant concern in and of itself and should increase any penalty ordered by this Court. The Court agrees.
Nature and extent of the loss
The amount required to be paid by the Compliance notice, $26,445.29 (gross) for Mr Segura, and $35,465.05 (gross) for Mr Valmeo respectively, is a significant amount of money when this amount is put in context for the Employees. When the amounts the Employees were paid are compared to the amounts that Chia Tung was required to pay them, the Employees were paid less than AU$5 per hour (The FWO has calculated this figure by dividing the total amounts paid to the Employees during the period covered by the Compliance Notice by the total hours worked in that period. For example, Mr Valmeo was paid $7,380.47 in the period covered by the Compliance Notice for a total of 1,485 hours worked (being an equivalent hourly rate of AU$4.97); Mr Segura was paid $5,274.58 for the period covered by the Compliance Notice for a total of 1,111 hours worked (being an equivalent hourly rate of AU$4.75). The calculations appear at Annexure YZ-10 to the Third Zheng Affidavit, at page 55). This amount is well below the minimum wage in Australia and such conduct deserves significant sanction, in this Court’s view.
The loss also extends beyond the mere monetary value of the underpayments. As referred to above, the Employees were engaged on a series of fixed-term contracts commensurate to the period of their visas, but which did not provide details about their relevant hours of work and rate of pay. The Employees typically worked 11-12 hour shifts from Monday to Saturday, paid at a flat rate, with overtime only sometimes paid for Sunday or late evening work (Valmeo Affidavit at [37] – [38]; Segura Affidavit at [24] – [25]). The amounts sought in the Compliance Notice included penalty rates, overtime, accrued but untaken annual leave and annual leave loading. Given the amounts paid to the Employees, they were effectively working a large number of additional hours, and working hours at unsocial times, for little to no benefit.
The Court finds that the amounts in the Compliance Notice remain unpaid and the Respondents have profited from and have received the benefit of holding that money for a significant period of time.
Similar previous conduct
This Court has accepted that it is a relevant consideration for penalty if a party to an enforceable undertaking has subsequent litigation brought against it (Fair Work Ombudsman v AIMG BQ Pty Ltd [2016] FCCA 1024 at [83] – [89] and [131]). The Undertaking is a highly relevant factor in the determination of penalty in this matter.
On 30 March 2015, Mr Lin entered into the Undertaking with the FWO on behalf of Chia Tung. In that document, Chia Tung relevantly admitted that:
a)it had breached Australian workplace laws by contravening certain clauses of the Building Award and the FW Act and underpaying employees over $873,000 (Annexure YZ-11 to the First Zheng Affidavit – Enforceable Undertaking, clause 11); and
b)it employed workers that were in Australia pursuant to subclass 457 and subclass 400 visas, and that those employees were covered by the FW Act and the Building Award (Annexure YZ-11 to the First Zheng Affidavit – Enforceable Undertaking, clauses 3-7).
Two issues in the Undertaking are relevant to this matter;
a)firstly, the contraventions in the Undertaking largely mirror the underlying contraventions in these proceedings - in the Undertaking, Chia Tung admitted that it had failed to pay its employees overtime, penalty rates for Saturdays and Sundays, and accrued but untaken annual leave (Annexure YZ-11 to the First Zheng Affidavit – Enforceable Undertaking, clause 11). Those contraventions form the majority of the underlying contraventions in the Compliance Notice. The breach of the Compliance Notice took place only nine months after Chia Tung and Mr Lin had signed the Undertaking, during which time Chia Tung and Mr Lin had undertaken to undergo training on their obligations under the FW Act (sub-clause 14(j) of the Undertaking) and to register with the FWO's "My Account" portal and undergo the training modules in that portal (sub-clause 14(h) of the Undertaking). As such, there can be no suggestion that the failure to comply with the Compliance Notice was done in ignorance of the law. It can be inferred that Chia Tung and Mr Lin knew full well what they were obliged to pay and simply chose not to do so; and
b)secondly, at sub-paragraph 14(h)(i) of the Undertaking, Chia Tung specifically undertook to "ensure compliance at all times and in all respects with applicable Commonwealth workplace laws and instruments, including but not limited to the FW Act and the Building Award' . Less than nine months later, Chia Tung and Mr Lin failed to comply with the FW Act or the Building Award in respect of Mr Segura and Mr Valmeo by not complying with the Compliance Notice. Therefore, not only have they breached the FW Act by failing to comply with the Compliance Notice, but by the same actions they are also in breach of the Undertaking.
Together, the FWO submitted, and the Court accepts, that these factors warrant a significant penalty against Chia Tung. While the FWO accepted that Mr Lin was did not give personal undertakings in the Compliance Notice, as the director and guiding mind of Chia Tung and the person who could have given a direction to pay Mr Segura and Mr Valmeo, it is submitted that he is equally culpable. The Court agrees.
Size and financial circumstances of the business
There is evidence before the Court concerning the financial performance of Chia Tung (Chia Tung Credit Report) (Annexure SM-1 to the Minster Affidavit). The Chia Tung Credit Report details that Chia Tung had the following annual turnover (in US dollars):
a)in 2010, $5,533,546 (at page 13);
b)in 2011, $6, 137,773 (at page 8);
c)in 2012, $3,581,524 (at page 8); and
d)in 2013, $5,849.563 (at page 8).
The Chia Tung Credit Report also states that, at the time the report was generated on 9 March 2016, Chia Tung held capital of US$1,678,979 (at page 7). Further, the Chia Tung Credit Report states that 95% of the relevant sales for Chia Tung were international exports (at page 12).
Mr Lin is a director, shareholder, manager and company director of Chia Tung and also a current shareholder in an Australian entity, Innovation Hi-Tech Australia Pty Ltd (ACN 600 568 045) (Innovation Hi-tech), which is also named in the Undertaking as a company with which Chia Tung would monitor compliance of workplace relations obligations as a subsidiary or transferee (Minster Affidavit at [7] and [9]. The FWO accepts that Chia Tung Australia Pty Ltd, a company of which Mr Lin was formerly a director, is now in liquidation).
The Respondents have neither filed nor provided any evidence of size or financial difficulty.
Employers, be they small, medium or large, and regardless of their financial circumstances, have an obligation to meet minimum standards in relation to their employees and actually adhere to workplace relations legislation (Kelly at [27]; Maslen v Core Drilling Services Pty Ltd & Anor (No.2) [2015] FCCA 290 at [51] per Lucev J). The Courts have previously found that sanctions should be imposed on a meaningful level (Kelly at [28]) regardless of the employers' size or financial position. In Fair Work Ombudsman v Bosen Pty Ltd [2011] VMC 81, Magistrate Hawkins stated at [51]:
“There is a need to send a message to the community at large, and small employers particularly, that the correct entitlements for employees must be paid and that steps must be taken by employers (of all sizes) to ascertain and comply with minimum entitlements (as opposed to ignoring those obligations). Compliance should not be seen as the bastion of the large employer, with human resources staff and advisory consultants (accountants, consultants. lawyers) behind them."
Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, Driver FM (as his Honour then was) held:
“[27] 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 a Court's consideration of penalty.
[...]
[29] The effect the imposition of a penalty may or may not have on the respondent's business should not be taken into account when imposing the penalty. This is particularly the case where the respondent has failed to adduce any proper evidence of such an effect."
The Respondents' financial position at the time of the contravention is not relevant to the question of penalty (Kelly at [28]). The relevant consideration is the objective seriousness of the conduct.
Deliberateness
The FWO submitted that The only inference which the Court ought to draw is that Chia Tung and Mr Lin have made a deliberate choice not to comply with the Compliance Notice, in light of the following factors:
a)Chia Tung (through Mr Lin) entered into the Undertaking with the FWO in March 2015. From that document, it is evident that Chia Tung and Mr Lin knew about their workplace relations obligations. In addition, Chia Tung undertook to attend training in the period before the Compliance Notice arose;
b)Chia Tung had given an specific undertaking in the Undertaking document to ensure that it complied in future with the FW Act and the Building Award;
c)Mr Lin attempted to compel Mr Segura and Mr Valmeo to withdraw their complaints (from which it can be inferred that he knew that if the complaint was substantiated, Chia Tung would owe them money);
d)discussions took place in August and September 2015 with the FWO, in which Chia Tung's representatives gave indications to the FWO that the money owed to Mr Segura and Mr Valmeo would be paid (as discussed above); and
e)the FWO made considerable efforts, both before and after the issuing of the Compliance Notice to ensure that Chia Tung and Mr Lin understood the Compliance Notice and these proceedings (as discussed above under the heading "co-operation" below). In response to this, Mr Lin has asserted that the Employees had been paid sufficiently in Taiwan/the Philippines, and also that he would not participate in these proceedings.
The Court agrees it was the responsibility of the Respondents to ensure that the Compliance Notice was complied with, reviewed or a reasonable excuse provided to the FWO. The Respondents were made aware of these responsibilities. The Respondents have simply chosen not to comply with their obligations. This is a highly significant aggravating factor and one warranting a significant penalty.
Whether senior management was involved in the contravention
This Court has found, by reason of his default, that Mr Lin was involved in Chia Tung's contravention. The evidence before the Court (First Zheng Affidavit at [6] and [14]; Minster Affidavit at [5]) demonstrated that Mr Lin was intimately involved in the contravention and was the sole person responsible for Chia Tung's conduct. Mr Lin was:
a)the signatory to the Undertaking on behalf of Chia Tung;
b)well aware of Mr Segura and Mr Valmeo's complaints, including by being the person who attempted to compel Mr Segura and Mr Valmeo to withdraw their complaints;
c)well aware of the FWO's investigation that led to the Compliance Notice;
d)fully aware of the Compliance Notice (First Zheng Affidavit at [9], [10] and [15]);
e)ultimately responsible for, and the only person who could have procured compliance with the Compliance Notice on behalf of Chia Tung; and
f)the person who decided that Chia Tung would not comply with the Compliance Notice.
The contravention was committed by Mr Lin in full knowledge of his workplace relations obligations regarding the FW Act and the Building Award. Penalties should be imposed at a meaningful level reflecting Mr Lin's clear involvement in and authorisation of the contravention.
Contrition and corrective action
The Court finds that there has been no contrition or corrective action displayed by the Respondents. The underpayments to Mr Segura and Mr Valmeo remain unpaid more than nine months after the Compliance Notice was issued. There has been no apology given by either of the Respondents. The Respondents have not reacted to the Compliance Notice in any way other than to tell the FWO informally that they consider that Mr Segura and Mr Valmeo were paid the right wages in Taiwan/the Philippines. The Respondents have not participated in these proceedings in any way, causing the FWO to seek default judgment.
Chia Tung and Mr Lin's last contact with the Applicant was on the afternoon of 19 August 2016 (Second O’Brien Affidavit at [17] – [24]). During this conversation Mr Lin indicated that he would "surrender" and "keep silent' as he "did not have the skills or time to handle this matter" . In response, Mr O'Brien of the FWO warned him that if Chia Tung or he failed to participate, the Respondents could be subject to penalties from this Court. No response has been received from the Respondents since. It can be inferred that the Respondents are choosing to ignore these proceedings.
The FWO submitted, and the Court accepts, that when the undertakings about future compliance made in March 2015 are taken into account, the lack of contrition and corrective action is a significant aggravating factor warranting a penalty at the high end.
Co-operation
The Court finds that the Respondents have failed to properly engage with the investigation performed by the FWO concerning the Employees, have failed to comply with the Compliance Notice and have failed to engage with these proceedings commenced by the FWO in any meaningful way. By failing to participate in these proceedings, the FWO was required to seek default judgment against the Respondents. The Respondents have failed to defend the proceedings with any due diligence; they have not contracted the FWO or the Court to propose how the matter may proceed, sought additional time to take any steps, or sought advice or legal representation (Default Submissions at [23]).
While Mr Lin has been the primary point of contact for Chia Tung, not only has he failed to direct Chia Tung to repay the unpaid monies to the Employees, but he has also failed to co-operate with a large number of enquiries from the FWO about the proceedings and non-compliance with the Compliance Notice. In many cases, Mr Lin has simply not responded when contacted by the FWO. At other times, when he has responded to communications from the FWO, he has given undertakings to reply to correspondence but has then not done so. Mr Lin's lack of co-operation should be seen in the context of these proceedings where the FWO has gone to substantial effort, including letters and emails (some of which have been translated at cost to the FWO) and international phone calls, to put Chia Tung and Mr Lin on notice of the proceedings, but to no avail:
a)on 16 March 2016, the FWO wrote to both Respondents putting them on notice that legal proceedings had been commenced, also enquiring as to whether they would be engaging Australian solicitors to accept service. No response was provided (First Zheng Affidavit at [19] – [20]; Annexure YZ-10 to the First Zheng Affidavit);
b)on 23 May 2016, and 6 June 2016 the FWO sent various emails to various known contact email addresses of representatives of Chia Tung, including Mr Lin, in attempt to serve the Respondents electronically. No response was received aside from one read receipt received on 26 May 2016 (First O’Brien Affidavit at [20] – [26]; Annexures KO-11, KO-1, KO-2, KO-12, KO-4, KO-5, KO-3, KO13, KO14, KO-15 and KO-16 of the First O’Brien Affidavit) ;
c)on 14 June 2016, the FWO attempted to contact Mr Lin on two occasions, a message was left for Mr Lin indicating that proceedings had been commenced and the next court date, a further follow up call was made by the FWO on 4 July 2016. No response was received (First O’Brien Affidavit at [12] – [18]; Second O’Brien Affidavit at [8]);
d)on 14 and 15 July 2016, the FWO made contact with Mr Lin who undertook to respond to previous communications sent to the Respondents. During the phone call of 15 July 2016, it was explained to Mr Lin that the Court could make orders in the absence of the Respondents and that legal advice should be sought.47 No response was provided (Second O’Brien Affidavit at [6] – [7]; the Second O’Brien Affidavit deposes that, after 15 July 2016, no contact was made with the Second Respondent until 10 August 2016, when the Applicant contacted the First Respondent by telephone);
e)on 19 July 2016, the FWO provided Mr Lin with a copy of the orders made by this Court concerning the timeframe for the filing of evidence in the hearing concerning the non compliance with the Compliance Notice (Annexure KO-1 to the Second O’Brien Affidavit);
f)on 2 August 2016, the FWO sent a further email to Mr Lin, to notify of the upcoming court deadline for the Respondents to file certain evidence;
g)on 6 and 8 August 2016 (Second O’Brien Affidavit at [11] – [14]) the FWO again tried unsuccessfully to make contact with Mr Lin through telephone calls;
h)the FWO successfully made contact with Mr Lin by telephone on 10 August 2016, but during this phone call he expressed the view that Chia Tung did not owe any outstanding amounts to the Employees as they were paid in Taiwan into their Philippines bank account for the work performed. During this telephone call, the FWO also advised that the Respondents were in default of this Court's orders for the filing of evidence and that the FWO could assist the Respondents in presenting their case to the Court if required (Second O’Brien Affidavit at [15]);
i)a response was received on 12 August 2016 by way of an email from Mr Lin to the FWO, which attached a spread sheet of relevant payments made to the Employees, as well as a document, written in Mandarin, requesting that the Court dismiss the proceedings as the Employees worked on subclass 400 visas, and for these periods agreed to be and were paid locally in the Philippines. This response also indicated that the Employees agreed to sign “agreement letters to withdraw their complaints" (Segura Affidavit at [2]; Valmeo Affidavit at [3]. The original document appears at Annexure K0-4 to the Second O'Brien Affidavit, whilst a certified translation appears at Annexure K0-4 to the Second 0-Brien Affidavit. The Translator Affidavit sets out the translation of the original document);
j)after trying, unsuccessfully, to contact Mr Lin by email on 16 August 2016, and telephone on 17 and 19 August 2016, to assist the Respondents to file their evidence in this matter, the FWO made contact with Mr Lin on the afternoon of 19 August 2016 (Second O’Brien Affidavit at [17] – [24]). As set out above, during this conversation Mr Lin indicated that he would “surrender" and “keep silent” as he did “not have the skills or time to handle this matter''. In response, the FWO advised that if Mr Lin failed to participate the Respondents could be subject to penalties from this Court. No response has been received from the Respondents since this telephone call (Second O’Brien Affidavit at [17] – [24]); and
k)on 24 August 2016, the FWO served the Respondents with all relevant evidence filed in this matter and again encouraged the Respondents to seek legal advice concerning these proceedings (Annexure K-04 to the Third O’Brien Affidavit). Again, no response was received.
The Court finds that the Respondents have demonstrated a lack of respect both to the FWO as the regulator, and more importantly to this Court. Again, this is a factor suggesting that a high range penalty is appropriate.
Ensuring compliance with minimum standards
The need to ensure compliance with minimum standards, by the provision of an effective means for investigation and enforcement of employee entitlements, is an important factor in this matter. The use of compliance notices by the FWO has been described above as an effective means of enforcement of employee entitlements, which avoids the need for litigation.
Ordering penalties at a meaningful level for a compliance notice breach allows a Court to show that there are serious consequences for failing to comply with a compliance notice, in circumstances where compliance in the first place would have allowed the Respondents to escape any penalty or any finding of a breach of the FW Act.
Specific and general deterrence
It is well-established that the need for specific and general deterrence is a factor that is relevant to the imposition of a penalty under the FW Act (See, for example, Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[59] and Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543 at 559-60 Lander J). In Cth v FWBII , the High Court held that at least a primary purpose of civil penalties is to promote the public interest in compliance and to attempt to put a price on a contravention that is sufficiently high to deter repetition by a contravenor and by others who might be tempted to contravene legislation (Cth v FWBII at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ; see also at [110] per Keane J).
General deterrence
General deterrence is directed at ensuring that the penalty will act as a deterrent to others who might be likely to offend (Cth v FWBII at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ and [110] per Keane J). The FWO submitted, and the Court accepts, that it is important to send a message to others in the community, namely employers:
a)who receive notices issued by the regulator;
b)who employ subclass 400 visa holders; and
c)who operate in the building and construction industry in general.
The need for general deterrence is particularly important in light of comments made by this Court that vulnerable workers employed under visa conditions are more likely to have their concerns or complaints about their employment pass under the radar before returning to their country of origin (Sonisolar at 116).
Specific Deterrence
Chia Tung continues to operate and Mr Lin continues to be its director (Annexure SM-1 to the Minster Affidavit. Also, we infer this from conversations Mr Lin had with Mr O'Brien of the FWO; for example, when Mr Lin said "I have my business, I have to travel” at the Second O'Brien Affidavit at [23]). There is also evidence that Chia Tung continues to have an associated company in Australia, Innovation Hi-Tech, and Mr Lin is a shareholder of that company (Minster Affidavit, Annexure “SM-4”). The Court can infer that there is a strong likelihood that Chia Tung and/or Mr Lin does and will continue to engage employees in Australia.
There is a strong need for specific deterrence in these proceedings. After underpaying their workers over $873,000 and signing a statutory undertaking in which Chia Tung agreed to comply with the FW Act and the Building Award, Chia Tung and Mr Lin have again breached the FW Act, less than nine months later when the FWO Investigated and determined that Mr Segura and Mr Valmeo were entitled to be repaid wages. Throughout the investigation and the issuing of the Compliance Notice, Chia Tung and Mr Lin have engaged in behaviour that the FWO submitted was not indicative of a responsible employer. In light of:
a)the fact that undertakings were given to comply with the FW Act which have not been fulfilled, meaning that voluntary compliance has not deterred Chia Tung and Mr Lin from further contraventions;
b)the attempts to compel Mr Segura and Mr Valmeo to withdraw their complaints; and
c)the complete lack of contrition, corrective action or co-operation in this matter.
The Court finds that there is a strong need to deter Chia Tung and Mr Lin from engaging in further contraventions of the FW Act. The FWO contended, and the Court agrees, that a penalty in the high range would achieve this outcome.
Totality
Having fixed an appropriate penalty for each contravention, the Court must take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct that led to the breaches.
Whilst the penalty imposed must not be crushing or oppressive (See Kelly at [30]; Merringtons at [23] per Gray J, [71] per Graham J, [102] per Buchanan J), it must be commensurate with the seriousness of the conduct engaged in by the Respondents (See also: Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58).
The Respondents have not filed any evidence to suggest that a particular penalty would be crushing or oppressive.
Recommendation as to Penalty Amount
The FWO submitted, and the Court accepts, that the conduct by the Respondents in this matter was serious. The Respondents:
a)failed to pay the Employees their correct entitlements in the sum of $61,910.34, which is significant, given the short period of employment of the Employees;
b)in failing to comply with the Compliance Notice, have exploited two vulnerable visa holders;
c)attempted to force the Employees to withdraw their complaint to the FWO;
d)failed to properly and meaningfully participate in these proceedings or demonstrate any contrition; and
e)breached their own undertakings to comply with the FW Act and the Building Award.
Therefore, in reliance on the evidence and submissions set out above, the FWO recommended that the Court impose penalties in the range of 80% to 100%, as set out in the first schedule to these reasons. The FWO's proposed penalty ranges would result in a total range of penalties:
a)between $21,600 to $27,000 for Chia Tung; and
b)between $4,320 to $5,400 for Mr Lin.
The FWO sought orders that the penalties be paid to the Consolidated Revenue Fund of the Commonwealth and within 28 days of the order.
Penalty Imposed
Having regard to the evidence before the Court and the matters set out above, the Court finds that an appropriate penalty against the First Respondent is $24,300.00 or 90% of the maximum penalty, and against the Second Respondent $4,860.00, again 90% of the maximum penalty. The amounts should be paid into Consolidated Revenue.
As these proceedings were dealt with on an undefended basis, the Court will note the Respondents’ rights under r.16.05 of the Federal Circuit Court Rules 2001.
I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Date: 3 February 2017
Schedule 1
Annexure A
First Respondent
| Relevant provisions | Description of contravention | Max penalty | Penalty range |
| FW Act s 716(5) (being a failure to comply with a Compliance Notice) | Compliance Notice Failure to comply with a Compliance Notice: section 716(5) of the FW Act | $25,500 per breach | 80% to 100% $21,600 - $27,000 |
Second Respondent
| Relevant provisions | Description of contravention | Max penalty | Penalty range |
| FW Act s 716(5) (being a failure to comply with a Compliance Notice) | Compliance Notice Failure to comply with a Compliance Notice: section 716(5) of the FW Act | $5,100 per breach | 80% to 100% $4,320 - $5,400 |
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