Fair Work Ombudsman v Chilis (Shellharbour) Pty Ltd

[2010] FMCA 718

FEDERAL MAGISTRATES COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v CHILIS (SHELLHARBOUR) PTY LTD & ORS [2010] FMCA 718

INDUSTRIAL LAW – Contravention of civil remedy provisions of the Workplace Relations Act and Regulations – failure to pay annual leave entitlements on termination of employment – failure to pay employee for time worked – respondent companies placed in voluntary administration – admission of contravention by Group General Manager – liability to penalties established.

Workplace Relations Act 1996, ss.4(1), 6(1), 167(1A), 717, 718, 719, 722, 728

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, ss.11(1), 13(1)

Australian Competition & Consumer Commission v Giraffe World Australia Pty Ltd [1999] FCA 1161
Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560
Cotis (Office of Workplace Services) v Pow Juice Pty Ltd [2007] FMCA 140
CPSU v Telstra Corporation Limited (2001) 108 IR 228
Flattery v Italian Eatery t/as Zeffirelli's Pizza Restaurant [2007] FMCA 9
Forge v ASIC (2004) 52 ACSR 1
Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216
Kelly v Fitzpatrick (2007) 166 IR 14
Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurants and Bars [2007] FMCA 7
McIver v Healy [2008] FCA 425
Ponzio v B&P Caelli Constructions Pty Ltd (2007) 158 FCR 543
Rural Press Limited v Australian Competition & Consumer Commission [2002] FCAFC 213
Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550
Yorke v Lucas [1985] HCA 65

Applicant: FAIR WORK OMBUDSMAN

First Respondent: CHILIS (SHELLHARBOUR) PTY LTD ACN 109 095 865

Second Respondent: CHILIS (PENRITH) PTY LTD
ACN 106 193 846

Third Respondent GAVIN REYNOLDS

File Number: SYG 1549 of 2009

Judgment of: Lloyd-Jones FM

Hearing dates: 22 February 2010 and 3 June 2010

Delivered at: Sydney

Delivered on: 17 September 2010

REPRESENTATION

Counsel for the Applicant: Mr O’Neil at the first liability hearing
Mr Michael Selinger (solicitor) at final hearing

Solicitors for the Applicant: Holding Redlich Lawyers

Counsel for the Respondents: Mr C. Bolger

DECLARATIONS

1. The First Respondent has:

   (a)Breached cl.17 of the Australian Workplace Agreement (AWA) between the First Respondent and Ms Tenika Setter (Setter AWA) by failing to pay Ms Setter for time worked; and

   (b)Breached cl.5(c) of the Setter AWA by failing to advise Ms Setter of her core hours of employment and provide her with a minimum of 20 hours of paid work per fortnight.

2. The Second Respondent has breached cl. 5(c) of the AWA between the Second Respondent and Ms Natasha Foster (Foster AWA) by failing to advise Ms Foster of her core hours of employment and provide her with a minimum of 20 hours of paid work per fortnight.

3. The Third Respondent has, by operation of s.728 of the Workplace Relations Act 1996, breached clause 28(g) of:

   (a)     The AWA between Restaurant Services Group Pty Ltd (RSG) and Bianca Sorrenti (Sorrenti AWA) by failing to pay Ms Sorrenti accrued and untaken annual leave on termination of her employment; and

   (b)    The AWA between RSG and Wayne Brogan (Brogan AWA) by failing to pay Mr Brogan accrued and untaken annual leave on termination of his employment.

ORDERS

1. The First Respondent pay to Ms Tenika Setter pursuant to s.719(5) of the Workplace Relations Act 1996, the sum of $232.94 for unpaid wages.

2. Pursuant to s.722 of the Workplace Relations Act 1996 that interest at a rate of 10% be paid by the First Respondent to Ms Setter.

3. The First Respondent pay a penalty of $33,000.00 pursuant to s.719(1) of the Workplace Relations Act 1996 with respect to the First Respondent’s breaches of the Setter AWA.

4. The Second Respondent pay to Ms Natasha Foster pursuant to s.719(5) of the Workplace Relations Act 1996, the sum of $1,682.64 for unpaid wages.

5. Pursuant to s.722 of the Workplace Relations Act 1996 that interest at a rate of 10% be paid by the Second Respondent to Ms Foster.

6. The Second Respondent pay a penalty of $33,000.00 pursuant to s.719(1) of the Workplace Relations Act 1996 with respect to the Second Respondent’s breaches of the Foster AWA.

7. The Third Respondent pay a penalty of $600.00 pursuant to s.719(1) of the Workplace Relations Act 1996, by way of s.728 of the Act, for his involvement in the breach of cl.28(g) of the Sorrenti AWA and the Brogan AWA.

8. Orders 1, 2, 4 and 5 be paid within 28 days.

9. The penalties payable under orders 3, 6 and 7 are to be paid to the Commonwealth of Australia within 28 days.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 1549 of 2009

FAIR WORK OMBUDSMAN

Applicant

And

CHILIS (SHELLHARBOUR) PTY LTD

First Respondent

CHILIS (PENRITH) PTY LTD

Second Respondent

GAVIN REYNOLDS

Third Respondent

REASONS FOR JUDGMENT

The proceedings

1. This is an application filed on 29 June 2009, commenced under s.718 of the Workplace Relations Act 1966 (Cth) (“WR Act”) for the imposition of penalties and other orders under s.719 of the WR Act on persons who breached “applicable provisions” binding upon them.

2. On 1 July 2009 the WR Act was repealed by the provisions of the Fair Work Act 2009 (Cth). In respect of breaches occurring prior to 1 July 2009, s.11(1) of Part 3 of Schedule 2 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (“T&C Act”) provides that the WR Act continues to apply on or after 1 July 2009 in relation to conduct that occurred before that date. Section 13(1) of Part 3 of Schedule 18 of the T&C Act gives Fair Work inspectors the power to make or continue applications under the WR Act.

3. The application of 29 June 2009 which is supported by a Statement of Claim of the same date, seeks the following orders:

   1.  A declaration that the First Respondent has:

   (a) Breached clause 17 of the Australian Workplace Agreement (AWA) between the First Respondent and Ms Tenika Setter (Setter AWA) by failing to pay Ms Setter for time worked; and

   (b)  Breached clause 5(c) of the Setter AWA by failing to advise Ms Setter of her core hours of employment and provide her with a minimum of 20 hours of paid work per fortnight.

   2.  A declaration that the Second Respondent has breached clause 5(c) of the AWA between the Second Respondent and Ms Natasha Foster (Foster AWA) by failing to advise Ms Foster of her core hours of employment and provide her with a minimum of 20 hours of paid work per fortnight.

   3.  A declaration that the Third Respondent has, by operation of section 728 of the WR Act, breached clause 28(g) of each of:

   (a) the AWA between Restaurant Services Group Pty Ltd (RSG) and Bianca Sorrenti (Sorrenti AWA) by failing to pay Ms Sorrenti accrued and untaken annual leave on termination of her employment;

   (b) the AWA between RSG and Wayne Brogan (Brogan AWA) by failing to pay Mr Brogan accrued and untaken annual leave on termination of his employment; and

   (c) the AWA between RSG and Jessica Brown (Brown AWA) by failing to pay Ms Brown accrued and untaken annual leave on termination of her employment.

   4. An order that the First Respondent pay a penalty pursuant to section 719(1) of the WR Act with respect to the First  Respondent’s breach of the Setter AWA which is an ‘applicable provision’ for the purposes of section 718 of the WR Act.

   5.  An order that the Second Respondent pay a penalty pursuant to section 719 of the WR Act with respect to the Second Respondent’s breach of the Foster AWA which is an ‘applicable provision’ for the purposes of section 718 of the WR Act.

   6.  An order that the Third Respondent pay a penalty or penalties pursuant to section 719(1) of the WR Act, by way of section 728 of the Act, for his involvement in the breach of clause 28(g) of the following AWAs:

   a) Sorrenti AWA;

   b) Brogan AWA; and

   c) Brown AWA.

   7.  An order that the First Respondent pay to Ms Setter (a former employee or the First Respondent) pursuant to section 719(5) of the WR Act, the sum of $232.94 for unpaid wages.

   8.  An order under section 722 of the WR Act that interest at such a rate as the Court thinks fit be included in any amount of damages that is ordered to be paid by the First Respondent to Ms Setter.

   9. An order that the First Respondent pay to Ms Foster (a former employee or the Second Respondent) pursuant to section 719(5) of the WR Act, the sum of $1,682.64 for unpaid wages.

   10. An order under section 722 of the WR Act that interest at such a rate as the Court thinks fit be included in any amount of damages that is ordered to be paid by the Second Respondent to Ms Foster.

   11. Such further or other orders as the Court thinks fit.

   Grounds of application

   1.  The Applicant seeks the declarations and orders set out in this Application on the grounds stated in the accompanying Statement of Claim.

Background

1. The Applicant is and was at all times a workplace inspector by force of s.167(1A) of the WR Act and entitled pursuant to s.718(1) of the WR Act to bring this application. The First Respondent was at all times a body corporate, incorporated under the Corporations Act2001 (Cth) which was constituted within the meaning of s.4(1) of the WR Act, was an employer within the meaning of s.6(1) of the WR Act and capable of being sued in its corporate name. The company was the operator of the Shellharbour franchise of the Chilis restaurant chain based in Shellharbour, New South Wales. The First Respondent was the employer of Ms Tenika Setter (Ms Setter) from approximately 3 May 2005 until approximately 30 September 2006.

2. The Second Respondent was at all material times a body corporate, incorporated under the Corporations Act2001 (Cth) and a constitutional corporation within the meaning of s.4(1) of the WR Act. The corporate body was an employer within the meaning of s.6(1) of the WR Act and was capable of being sued in its corporate name. The Second Respondent was the operator of the Penrith franchise of the Chilis restaurant chain based in Penrith, New South Wales. The company was the employer of Ms Natasha Foster (Ms Foster) from approximately 15 December 2005 until approximately 30 September 2006.

3. The Third Respondent is a natural person and is the former Group General Manager of Restaurant Services Group Pty Ltd (“RSG”), a company engaged to provide restaurant management services to the Chilis chain of stores.  RSG is now in liquidation.

4. Ms Setter was employed by the First Respondent as a part-time employee and was engaged pursuant to an Australian Workplace Agreement (AWA) with a rate of pay of $8.30 per hour.  Pursuant to the Setter AWA, Ms Setter was entitled to be advised of her core hours of employment and to receive a minimum of 20 hours of paid work per fortnight.  It is alleged that Ms Setter was never advised of her core hours of employment and did not receive 20 hours of paid work per fortnight on a number of occasions during her employment.  The First Respondent directed Ms Setter to wait at the First Respondent’s premises before commencing work on a number of occasions during her period of employment and Ms Setter was not paid for this time.  Ms Setter was underpaid a total of $232.94 in wages by the First Respondent.

5. Ms Foster was employed by the Second Respondent as a part-time employee from approximately 15 December 2005 until approximately 30 September 2006.  During that period Ms Foster was engaged pursuant to an AWA (Foster AWA).  Pursuant to the Foster AWA, Ms Foster’s rate of pay was $6.43 until 25 February 2006 and $8.33 per hour during the remainder of her employment.  Pursuant to the Foster AWA, Ms Foster was entitled to be advised of her core hours of employment and to receive a minimum of 20 hours of paid work per fortnight.  It is alleged that Ms Foster was never advised of her core hours of employment and did not receive 20 hours of paid work per fortnight on a number of occasions during her employment.  Ms Foster was underpaid a total of $1,682.64 in wages by the Second Respondent. 

6. Ms Bianca Sorrenti was employed by RSG from approximately 1 October 2006 until she resigned from her employment on or about 26 December 2007. During that time, Ms Sorrenti was engaged pursuant to an AWA (Sorrenti AWA) and received a rate of pay of $8.33 per hour until 29 January 2007 and after that date $9.73 per hour for the remainder of her employment. Ms Sorrenti was entitled to be paid for any accrued or untaken annual leave on termination of employment. It is alleged that Ms Sorrenti was not paid accrued annual leave on termination of employment with RSG. By failing to pay Ms Sorrenti in respect of her accrued annual leave entitlements, RSG was in breach of the Sorrenti AWA and therefore contravened the WR Act. At all material times, the Third Respondent was involved in this contravention as contemplated by s.728 of the WR Act. As a result of this breach, Ms Sorrenti was not paid a total of 35.97 hours of accrued annual leave, which equates to $350.70.

7. Wayne Brogan was employed on a full-time basis as the Head of Kitchen by RSG from approximately 13 December 2006 until he resigned from his employment on or about 19 December 2007. During that time, Mr Brogan was engaged pursuant to an AWA (Brogan AWA) and his rate of pay was $13.92 per hour. Mr Brogan’s rate of pay at the time of his resignation was $22.83. Mr Brogan was entitled to be paid for any accrued or untaken annual leave upon termination of his employment. Mr Brogan was only paid for five hours of annual leave on the termination of his employment with RSG. By failing to pay Mr Brogan in respect of his full accrued annual leave entitlements, RSG was in breach of the Brogan AWA and thereby contravened the WR Act. At all material times the Third Respondent was involved in this contravention as contemplated by s.728 of the WR Act. As a result of this breach, Mr Brogan was underpaid a total of 150.86 hours of accrued annual leave which equates to $2,099.97 (applied at a maximum rate of pay of $13.92 per hour pursuant to the Brogan AWA).

8. The Statement of Claim also identifies a Jessica Brown who was employed as a part-time employee by RSG from approximately 6 February 2007 until she resigned from her employment on or about 9 June 2007.  When the contraventions in respect of the Sorrenti and Brogan AWAs were put to the Court at the liability hearing on 22 February 2010, the claims concerning Jessica Brown were withdrawn and are no longer relevant to these proceedings.

Evidence in respect of liability and penalty

1. A Statement of Agreed Facts was filed on 2 June 2010.

2. The Applicant relies upon:

   a)Affidavit of inspector Mark Roland Davidson dated 11 September 2009;

   b)Affidavit of Tenika Setter dated 8 September 2009;

   c)Affidavit of Natasha Foster dated 9 September 2009;

   d)Affidavit of Bianca Sorrenti dated 9 September 2009;

   e)Affidavit of Emma Lloyd dated 9 September 2009;

   f)Affidavit of Wayne Brogan dated 10 September 2009;

   g)Affidavit of Trent John Webb Dawson dated 8 September 2009; and

   h)Affidavit of Brian Forbes dated 17 December 2009.

3. The Third Respondent relies upon:

   a)Statement of Gavin Reynolds sworn 8 April 2010.

Liability hearing for First and Second Respondents

1. At the liability hearing on 22 February 2010, Mr Bolger appearing for the Third Respondent indicated that his client admitted to his involvement pursuant to s.728 of the WR Act in the contravention of cl.28(g) of the Sorrenti AWA and cl.28(g) of the Brogan AWA. This concession was made on the condition that the matters concerning Jessica Brown were withdrawn. Consequently, in paragraph 3 of the application, the final orders sought admissions in respect of 3(a) and 3(b) on the understanding that the claim is not pressed in relation to Ms Brown and no orders were sought in relation to her.

2. That admission disposed of the questions as to liability against the Third Respondent in relation to those two matters.  The rest of the orders sought against the Third Respondent related to penalties.  Consequently, this part of the proceedings was adjourned to allow the preparation of an affidavit relating to mitigating circumstances and a Statement of Agreed Facts for the separate penalty hearing.

3. In respect of the First and Second Respondent, both of which were under administration and not being defended, the matter proceeded ex parte on the issue of liability.  Mr O’Neill, appearing for the Applicant on that occasion, moved on the application filed 19 June 2009, seeking various orders in relation to each of the first and Second Respondents indicating that he relied on the following affidavits:

   a)Affidavit of Brian Forbes affirmed 17 December 2009 and filed on 18 December 2009;

   b)Affidavit of Mark Ronald Davidson, sworn and filed 11 September 2009;

   c)Affidavit of Tenika Setter sworn 8 September 2009 and filed 11 September 2009; and

   d)Affidavit of Natasha Foster affirmed 9 September 2009 and filed 11 September 2009.

4. The affidavit of Mark Ronald Davidson, Fair Work Inspector, contains annexures of a company search in relation to Chilis (Shellharbour) Pty Ltd and at Exhibit 9, the accompanying documentation in relation to Chilis (Penrith) Pty Ltd and Exhibit 11, the management agreement involving Chilis Restaurant Development Pty Ltd, with both the First and Second Respondents.  That material goes to the existence of the corporate respondents and the nature of the business in broad terms at the relevant time of the alleged offences. 

5. In para.5 of the affidavit of Mr Brian Forbes, who is a Commonwealth Government employee in a role as Assistant Director of the Assessment Centre for the Workplace Authority, he indicates that on 29 November 2009 he received a request from Sara Krins, a lawyer from the Fair Work Ombudsman, to assess the computer records of the WPA in relation to Australian Workplace Agreements lodged by Chilis (Shellharbour), Chilis (Penrith) and Restaurant Services Group for the following:

   a)Tenika Setter

   b)Natasha Foster

   c)Natasha Abazidas (being the former name of Natasha Foster)

   The affidavit then details the extraction of the irrelevant AWAs for the above named individuals.

6. The First Respondent employed Ms Setter as “host” from 3 May 2005 until approximately 30 September 2006 (affidavit of Ms Setter at [2], [4] and [12]).  Ms Setter was employed as a part-time Grade 1 employee pursuant to the AWA (affidavit of Ms Setter at [9], affidavit of Mr Forbes at [8] – [10]).   Each of those documents are attached as annexures.  The affidavit of Ms Setter contains background information and specifically the issue of “Failure to Pay for Time Worked” is dealt with in paras.14 – 22.  The underpayment claim is set out in para.23.  Supporting documentation is contained as annexures.  The core hours issue is dealt with at para.24.

7. The Second Respondent employed Ms Foster as a “host” from approximately 11 December 2005 to 30 September 2006 (affidavit of Ms Foster [3], [4] and [13]).  Ms Foster was engaged as a part-time employee pursuant to an AWA (affidavit of Ms Foster at [11] – [12], affidavit of Mr Forbes at [11] – [14]).  Ms Foster was initially a probationary employee and on 25 February 2006 became a Grade 1 employee pursuant to the Foster AWA. 

8. The affidavit of Ms Foster is similar to that of Ms Setter, considered above.  In para.20, important information in respect of hours worked, which is the basis of the claim in this matter, is addressed.  The information supplied is against a minimum requirement of 20 hours and the short-fall is indicated.  Under the section head “Failure to Pay for Time Worked” the situation where an employee is required to wait if the manager or someone in such a position did not think the restaurant was busy enough for the employee to start work is explained.  Ms Foster states she was given a time to start at which she would arrive at work, but then was told to wait until an assessment could be made.  Ms Foster indicates:

   Sometimes I was told to wait 10 – 45 minutes before commencing my shift.

   Attached as annexures to this affidavit is the AWA signed by both the employer and the employee and Ms Foster’s fortnightly payslips.

Alleged breaches in relation to the First Respondent

1. Mr O’Neill indicated that he relied on the document entitled “Applicant’s submission on liability” which was filed on 8 February 2010, as far as it relates to the First and Second Respondent. 

2. Clause 5(c) of the Setter AWA provides that part-time employees are entitled to be advised of their core hours of employment and to receive a minimum of 20 hours per fortnight (affidavit of Ms Setter at [11] – [26]).  The First Respondent failed to advise Ms Setter of her core hours of employment and Ms Setter did not receive 20 hours of paid work per fortnight on three occasions.  In breach of cl.5, Ms Setter was only required to work and was paid for less than 20 hours per fortnight in the fortnight ending 19 April 2006, 6 September 2006 and 20 September 2006.

3. Clause 17 of the Setter AWA provides that the employee’s hourly rate of pay will be as set out in annexure B, unless the employee is a trainee.  Ms Setter was not a trainee.  Attachment B of the Setter AWA provides that a 17 year old Grade 1 employee is entitled to be paid $8.17 per hour.  Ms Setter was in fact paid $8.33 per hour by the First Respondent.  The First Respondent directed Ms Setter to wait at the First Respondent’s premises before commencing her duties on a number of occasions.  In the breach of cl.17 of the Setter AWA, the First Respondent did not pay Ms Setter for the 18.25 hours she spent waiting before commencing duties (affidavit of Ms Setter at [18] – [22] – [23]). The Applicant alleges that the breach of cl.5(c) and cl.17 of the Setter AWA results in the total underpayment to Ms Setter in the amount of $232.94.

Alleged breaches in relation to the Second Respondent

1. Clause 5(c) of the Foster AWA provides that part-time employees are entitled to be advised of their core hours of employment and to receive a minimum of 20 hours per fortnight (affidavit of Ms Foster at [18]).  The Second Respondent failed to advise Ms Foster of her core hours of employment and Ms Foster did not receive 20 hours of paid work per fortnight on a number of occasions.

2. Pursuant to cl.17 at attachment B of the Foster AWA, Ms Foster was paid at a rate of $6.42 per hour until February 2006 and $8.33 per hour after this date (affidavit of Ms Foster at [14]).  In breach of cl.5(c) of the Foster AWA, Ms Foster was only required to work and was only paid for less than 20 hours per fortnight in the fortnight ending 15 December 2005, 14 January 2006, 28 January 2006, 11 February 2006, 25 February 2006, 11 March 2006, 8 April 2006, 22 April 2006, 6 May 2006, 3 June 2006, 17 June 2006, 1 July 2006, 15 July 2006, 29 July 2006, 12 August 2006, 26 August 2006, 9 September 2006, 20 September 2006 and 30 September 2006.  The Applicant alleges that the Second Respondent breached the cl.5(c) of the Foster AWA resulting in an underpayment to Ms Foster of $1,682.64 (affidavit of Ms Foster at [21] and [24]).

Findings in respect of liability of the First and Second Respondents

1. On the uncontested affidavit material before the Court, I am satisfied of the corporate status of the First and Second Respondent and the employment status of Ms Setter and Ms Foster.  I am satisfied that the alleged breaches in respect to cl.5(c) and 17 of Ms Setter’s AWA occurred. Similarly, that the alleged breaches of cl.5(c) and 17 of Ms Foster’s AWA have occurred.  A brief summary of those offences is set out below: 

   The Third Respondent has, by operation of section 728 of the WR Act, breached clause 28(g) of:

   (a)    The AWA between Restaurant Services Group Pty Ltd (RSG) and Bianca Sorrenti (Sorrenti AWA) by failing to pay Ms Sorrenti accrued and untaken annual leave on termination of her employment; and

   (b)    the AWA between RSG and Wayne Brogan (Brogan AWA) by failing to pay Mr Brogan accrued and untaken annual leave on termination of his employment.

2. Consequently, an appropriate penalty in accordance with the provisions of the WR Act should be applied.

3. The material before me also indicates that all the appropriate steps have been undertaken in respect of service of the required documents on both the First and Second Respondent and that this has occurred.  This is evidenced by the Affidavits of Service which bear the Registry date stamps, indicating that they were filed on 30 July 2009.  Both affidavits were sworn by Andrew Ng – Saad, licensed process server sworn 7 July 2009, detailing service on the First and Second Respondent respectively on 2 July 2009.  Both affidavits indicate that a person identifying themselves as being authorised to accept service on behalf of those two companies accepted the documentation. 

   1.  The First Respondent has:

   (a) Breached clause 17 of the Australian Workplace Agreement (AWA) between the First Respondent and Ms Tenika Setter (Setter AWA) by failing to pay Ms Setter for time worked; and

   (b) Breached clause 5(c) of the Setter AWA by failing to advise Ms Setter of her core hours of employment and provide her with a minimum of 20 hours of paid work per fortnight.

   2.  The Second Respondent has breached clause 5(c) of the AWA between the Second Respondent and Ms Natasha Foster (Foster AWA) by failing to advise Ms Foster of her core hours of employment and provide her with a minimum of 20 hours of paid work per fortnight.

4. I am satisfied that the material summarised above indicated and in totality was sufficient to establish the breaches and ground the appropriate orders.  At this point, the proceedings were adjourned until 3 June 2010 for a hearing in respect of liability of the Third Respondent and a penalty hearing in respect of all Respondents.

Statement of agreed facts

1. On 2 June 2010, an agreed statement of facts was filed which addresses the contravening conduct in this matter.  That statement contains the following:

   Failure to pay annual leave to Bianca Sorrenti

   4.  Ms Sorrenti was employed by RSG on a part-time basis at the Chilis restaurant located at 315 – 323 Great Western Highway, Wentworthville (Chilis Wentworthville) from approximately 1 October 2006 until she resigned from her employment on or about 26 December 2007.

   5.  Ms Sorrenti’s date of birth is 30 January 1989.

   6.  Ms Sorrenti’s employment was covered by an AWA which was lodged with the Workplace Authority on 27 February 2007 (Sorrenti AWA).

   7.  Ms Sorrenti’s rate of pay was:

   a. $8.33 per hour until 29 January 200; and

   b.  $9.74 per hour from 30 January 2007 for the remainder of her employment.

   8.  Pursuant to clause 28(g) of the Sorrenti AWA, Ms Sorrenti was entitled to be paid for any accrued and untaken annual leave upon termination of her employment.

   9.  Ms Sorrenti was not paid for any accrued annual leave on termination of her employment with RSG.  Ms Sorrenti has not received any payments from RSG since the termination of her employment in respect of her accrued annual leave.

   10. By failing to pay Ms Sorrenti in respect of her accrued annual leave entitlements, RSG was in breach of the Sorrenti AWA and thereby contravened the Workplace Relations Act 1996 (WR Act).

   11.  As a result of this breach, Ms Sorrenti was not paid a total of 35.97 hours of accrued annual leave which equates to $350.70.

   Failure to pay annual leave to Wayne Brogan

   12.    Wayne Brogan was employed on a full-time basis as the Head of Kitchen by RSG at Chilis Wentworthville from approximately 13 December 2006 until he resigned from his employment on or about 19 November 2007.  Mr Brogan worked a further period of four weeks until ceasing work on 19 December 2007.

   13. Mr Brogan’s employment was covered by an AWA which was lodged with the Workplace Authority on 5 January 2007 (Brogan AWA).

   14. Pursuant to the Brogan AWA, Mr Brogan’s rate of pay was $13.92 per hour.  Mr Brogan in fact received payment at the rate of $22.83 per hour.

   15.  Pursuant to clause 28(g) of the Brogan AWA, Mr Brogan was entitled to be paid for any accrued and untaken annual leave upon termination of his employment.

   16.  On termination Mr Brogan had an accrued annual leave entitlement of 155.86 hours.  Mr Brogan was paid for 5 hours of annual leave on the termination of his employment with RSG.  Mr Brogan has not received any further payments from RSG since the termination of his employment in respect of his accrued annual leave.

   17.    By failing to pay Mr Brogan in respect of his full accrued annual leave entitlements, RSG was in breach of the Brogan AWA and thereby contravened the WR Act.

   18.    As a result of this breach, Mr Brogan was underpaid a total of 150.86 hours of accrued annual leave which, at the hourly rate of $13.92, equates to $2,099.97.  At the rate of $22.83, the amount of underpayment equates to $3,444.13.

   The Third Respondent’s involvement in breaches

   19.    The Third Respondent was involved in the contraventions by RSG of clause 28(g) of the Sorrenti AWA and clause 28(g) of the Brogan AWA within the meaning of section 728(c )of the WR Act, in that the Third Respondent was knowingly concerned in the acts and omissions by which Ms Sorrenti and Mr Brogan were not paid their annual leave entitlements on termination of their employment.

   (a) The Third Respondent’s position at RSG

   20.    The Third Respondent held the position of Group General Manager of RSG.  In this position he reported directly to Mr Chris White, who held the positions of Chief Executive Officer and Chief Operating Officer of RSG.  Mr White reported to Alan Noor, Director of RSG.  In the position of Group General Manager of RSG, the Third Respondent was involved in the operations of all Chilis restaurants in New South Wales, including Chilis Wentworthville.

   21. The Third Respondent was involved in employment matters such as hiring staff.

   22. In relation to the financial management of RST, the Third Respondent was responsible for approvals relating to payments to suppliers and petty cash requests.

   23. The Third Respondent ran regular phone-conference meetings between the managers of the NSW Chilis stores (managers meeting) during which he provided financial information and gave directions to the managers in relation to various aspects of the day-to-day running of the Chilis restaurants.

   (b)  The Third Respondent’s conduct

   24.  In November 2007, Mr Brogan had a conversation with the Third Respondent about payment of his annual leave entitlements on termination.  The Third Respondent made representations to Mr Brogan, to the effect that if he worked a four week notice period he would receive payment for his accrued annual leave.

   25. On 14 January 2008, the Third Respondent’s employment was terminated by RSG.  A copy of the Third Respondent’s letter of termination is attached as Annexure A. 

   26.  At the managers meeting on 14 January 2008, Mr Reynolds communicated a directive from the directors that termination payment would not be paid to staff, and directed that all staff enquiries relating to the payment of termination pay be referred to himself, Nikki Griffin or Chris White.  A copy of the minutes from the meeting is attached as Annexure B to this statement of agreed facts.

   27. On 22 January 2008, Ms Sorrenti sent a letter to Chilis Wentworthville in relation to the payment of her annual leave on termination.  A copy of this letter is attached as Annexure C to this statement of agreed facts.

   28.  On or about 29 February 2008 Ms Sorrenti attended the head office of Chilis Wentworthville and spoke to the Third Respondent about her termination entitlements.  The Third Respondent made representations to Ms Sorrenti, to the effect that she would be paid her accrued leave entitlements on 6 March 2008.

   29.  On or about 6 March 2008 RSG was placed into voluntary administration.

   30.  The pay run for RSG due to be processed on or about 6 March 2008 was not processed.

   31.  As of the date of this statement of agreed facts Ms Sorrenti and Mr Brogan have not been paid their accrued annual leave by RSG.

   Admission of breaches

   32.  The Third Respondent admits the breaches alleged in paragraph 48 of the Statement of Claim as that paragraph relates to Bianca Sorrenti and Wayne Brogan.

   33.    The Third Respondent consents to the Court making a declaration that the Third Respondent has, by operation of section 728 of the WR Act, breached clause 28(g) of the Sorrenti AWA by failing to pay Ms Sorrenti accrued and untaken annual leave on termination of her employment.

   34.  The Third Respondent consents to a declaration by the Court that the Third Respondent has, by operation of section 728 of the WR Act, breached clause 28(g) of the Brogan AWA by failing to pay Mr Brogan accrued and untaken annual leave on termination of his employment.

Final Hearing

1. The Applicant was represented by Mr Selinger and the Respondent by Mr Bolger.  The parties agreed that as the issues against the First and Second Respondent had been dealt with on 22 February 2010. The claims against Mr Reynolds, the Third Respondent, will be dealt with initially followed by the issue of penalties for all Respondents.  It was noted that Mr Reynolds was present and available to give evidence, however Mr Selinger indicated that Mr Reynolds was not required for cross-examination on his Statement dated 8 April 2010.  Mr Reynolds has admitted the breaches alleged in para.48 of the Statement of Claim as that paragraph relates to Bianca Sorrenti and Wayne Brogan.

2. The breaches admitted in paragraph 48 are pursuant to s.728 of the WR Act, that Mr Reynolds breached cl.28(g) of the Sorrenti AWA and Brogan AWA, in that Ms Sorrenti and Mr Brogan were not paid accrued and untaken annual leave by RSG upon termination of their employment. The Third Respondent has consented to the Court making a declaration consistent with the terms of para.48 of the Statement of Claim in respect of the breaches of the Sorrenti AWA and the Brogan AWA. Mr Reynolds made the admissions and consented to the making of orders as the hearing on 22 February 2010.

Findings in respect of liability of the Third Respondent

The employees

1. Ms Sorrenti was employed by RSG at the Chilis Restaurant located at 315 – 323 Great Western Highway in Wentworthville as a “hostess”/waitress from approximately 1 October 2006 until 26 December 2007 (affidavit of Ms Sorrenti at [2], [7] – [9]).  Ms Sorrenti was engaged as a part-time employee pursuant to an AWA (affidavit of Ms Sorrenti at [8], affidavit of Mr Forbes at [21] – [23]).  Ms Sorrenti was initially a probationary Grade 1 employee until 29 January 2007 and then became a Grade 2 employee pursuant to “attachment A” of the Sorrenti AWA. 

2. Clause 28(g) of the Sorrenti AWA provides that any accrued but untaken annual leave will be paid to the employee upon termination (affidavit of Ms Sorrenti at [10], [17]).  When Ms Sorrenti terminated her employment with RSG on 26 December 2007 she had 35.97 hours of accrued annual leave (affidavit of Ms Sorrenti at [17] – [18]).  Ms Sorrenti was entitled to be paid her annual leave at her ordinary hourly rate.  In accordance with attachment B to the Sorrenti AWA, on termination of her employment, her hourly rate was $9.74.  Ms Sorrenti was not paid her accrued annual leave on termination of her employment with RSG.  At all material times, the Third Respondent was involved in the contravention as contemplated by s.726 of the WR Act (affidavit of Ms Sorrenti at [13] – 15]).  The Applicant alleges that this breach resulted in an underpayment of $350.70 to Ms Sorrenti.

3. Mr Brogan was employed by RSG at Chilis Wentworthville as a Kitchen Manager from 13 December 2006 to 19 December 2007 (affidavit of Mr Brogan at [2] – [3]). Mr Brogan was engaged as a full-time employee pursuant to an AWA (affidavit of Mr Brogan at [8] – [9], affidavit of Mr Forbes at [18] – [20]).

4. Clause 28(g) of the Brogan AWA provides that any accrued but untaken annual leave will be paid to an employee upon termination (affidavit of Mr Brogan at [16] – [18]). When Mr Brogan terminated his employment with RSG on 19 December 2007, he had 150.86 hours of accrued annual leave (affidavit of Mr Brogan at [18]). Mr Brogan was paid a rate of $22.83 per hour. However, pursuant to attachment B of the Brogan AWA, the maximum hourly rate of pay was $13.92 so he was entitled to be paid for accrued annual leave at the rate of $13.92 in accordance with the maximum rate of pay in his AWA. Mr Brogan was not paid his accrued annual leave on termination of his employment with RSG. At all material times, the Third Respondent was involved in the contravention as contemplated by s.728 of the WR Act. The Applicant alleges that this breach resulted in an underpayment of $2,099.97 (affidavit of Mr Brogan at [18] – [19]).

Alleged breaches

1. Mr Selinger submits that the above breaches are two distinct issues, albeit that they both relate to the failure to pay annual leave, but arise in different factual circumstances.  Mr Brogan’s resignation and the arrangement for working out the notice period should be treated as a separate offence as to that of Ms Sorrenti.  It is submitted that the timing of the respective breaches was significant.  In August 2007, Mr Reynolds in his capacity as Group General Manager, became aware of the financial difficulties with the Chilis restaurants. He was aware in general terms that there was financial difficulties and that the directors were looking at a possible sale of the business. 

2. Mr Brogan gave notice of his intention to resign in late November 2007 and was told in conversation, which is not in dispute, with Mr Reynolds that if he worked out his notice period he would be paid his accrued annual leave.  Mr Brogan worked out his notice period and that concluded at the end of December, but upon termination he was not paid his annual leave.  There is no evidence before the Court as to any steps taken by Mr Reynolds to secure payment of that annual leave for Mr Brogan.  Significantly, at that time, there was still a capacity to pay annual leave to people who had been terminated or resigned.  There was evidence that some other people had in fact been paid, although at that stage there was a requirement to obtain approval from the directors of RSG. 

3. Mr Selinger acknowledges that Mr Reynolds was not a director of the company, but was employed in the capacity as a Group General Manager.  However, Mr Selinger contends that there was an obligation for a senior manager, such as Mr Reynolds, to take steps to secure the payment of annual leave for employees who had resigned or been terminated.  It is brought to the Court’s attention that on 14 January 2008, Mr Reynolds himself was notified that his employment had been terminated.  He was given a letter of notice of termination and in that document he was advised that at that point, RSG was unable to pay his annual leave, long service leave or other entitlements at that time. 

4. At a meeting also held on 14 January 2008, Mr Reynolds notified the managers of various stores that termination payments would not be paid by the company. 

5. Mr Selinger submits that it was after 14 January 2008 when Mr Reynolds had the conversation with Ms Sorrenti about the payment of annual leave.  At the time of the conversation, Mr Reynolds knew because of his own situation, that the directors had indicated that payments would not be made.  However, Mr Reynolds’ advice to Ms Sorrenti was that if the directors gave approval, outstanding payments would be made in the next payroll run scheduled for 6 March 2008, being the same date on which the company went into voluntary administration.

6. It is submitted that there is quite a different factual scenario between what happened with Mr Brogan at the time when payments could have been made, as distinct from the time when Ms Sorrenti was seeking payment of her annual leave.  Mr Selinger acknowledges that there is a similarity between the two offences which raises the issue of the principle of totality, however Mr Selinger submits that the proper approach to these two separate offences which is to take into account all relevant matters, designate a penalty for each of those two offences and then apply the principal of totality overall to the two offences. 

1. Mr Selinger acknowledges that the position held by Mr Reynolds was not one of the directors and was not of the directing mind of the company.  He accepts that ultimately Mr Reynolds did not have the capacity to direct that payments be made, or not be made.  However, the Statement of Agreed Facts evidences that there was an involvement by Mr Reynolds in the matter in which annual leave entitlements were denied to certain employees over this period of time.  It is acknowledged that there was a period of uncertainty as it was not clear whether a sale of the business would take place and whether entitlements would be paid. Mr Selinger submits that the breaches arose, while not deliberate on account of Mr Reynolds, while there was a pattern being put in place at that time, for entitlements not to be paid to employees.  This is the gravamen of the offence.  Denying employees payment of annual leave is a serious offence and Mr Reynolds is liable for that as a consequence of the structure of the Act.

Submission on behalf of the Third Respondent

1. Mr Bolger, appearing on behalf of Mr Reynolds, indicated that his client did not cavil with the issue that Ms Sorrenti and Mr Brogan were entitled to their annual leave on termination, but a system was put in place by the Chief Operating Officer, Mr Chris White, in September 2007 preventing the payment because of RSG’s financial difficulties.  The instruction was issued in the following email:

   Due to cost control all termination holiday pay must be approved by me prior to Nicky, the payroll and HR manager making any payments (Statement of Gavin Reynolds – Annexure B)

2. The above email was distributed on 19 September 2007 indicating a decision had been made by the Chief Operating Officer as to what will happen with termination pay.  That email was sent to Ms Griffin (Payroll & Human Resources Manager), Mr Reynolds (Group General Manager), Ms Hughes (Administration and Marketing Manager) and to the Store Managers of the Shellharbour, Wollongong, Campbelltown, Wentworthville and Penrith Chilis restaurants. 

3. It is submitted that Mr Reynolds admits his involvement in the contraventions.  He communicated to Mr Brogan that he would not be paid his annual leave and in relation to Ms Sorrenti, that her annual leave would be paid, if approved.  In both cases the entitlements were not paid.  Mr Reynolds accepts the consequences of RSG’s contravention of these two AWAs and the failure to pay the entitlements.  The reason espoused by RSG, which was communicated to Mr Reynolds in relation to this non-payment, was due to financial difficulty.  This financial difficulty crystallised and became quite apparent to all parties on 6 March 2008 when RSG went into voluntary administration.  Mr Bolger contends that there is no evidence that Mr Reynolds was involved as a decision maker, in not to pay either Ms Sorrenti or Mr Brogan. 

4. In Mr Brogan’s affidavit of 10 September 2009 at para.16, he deposes to the circumstances in which Mr Reynolds has a conversation with him about his notice, and the requirement to work that notice out.  It is submitted that there can be no criticism of Mr Reynolds indicating to Mr Brogan that he had a contract of employment and that he was required to work out his period of notice, and there is nothing unlawful in respect of that instruction.  Mr Reynolds states that at that stage, annual leave entitlements were being approved by Mr White and that he did not become aware of the fact that these payments were not being made until January 2008.  There is correspondence to that effect in respect of his own termination letter dated 14 January 2008, stating that the company was in financial difficulty.  Mr Reynolds was given three months notice that he was to be terminated and he was not going to receive his entitlements unless the financial position of the company improved.  Mr Reynolds indicated that at that stage he was hopeful of such an improvement because there were some ongoing negotiations with a company identified as The Iris Group who may purchase the business.  In those circumstances, the entitlements of the employees, including his own, would have been saved. 

5. In Mr Brogan’s affidavit at para.20 there is a further conversation between Wayne Brogan (WB) and Gavin Reynolds deposed:

   WB:“Gavin, I haven’t received any of my annual leave like you told me I would, what’s going on?”

   Mr Reynolds:      “The directors have decided they are not paying out any money”

   WB:“But you told me that if I worked for four weeks, I would receive my annual leave.  You told me to work the four weeks and I’ve done the right thing and haven’t received any money”

   Mr Reynolds:        “There’s nothing I can do, it’s not my money”

   WB:“It’s not fair”

   Mr Reynolds:        “I agree but there’s nothing I can do”.

6. Mr Bolger contends that this evidence as to Mr Reynolds’ involvement in Mr Brogan’s contravention is at its highest, but this does not make Mr Reynolds solely responsible.  Mr Bolger submits that the applicant concedes that Mr Reynolds was not a director of the company.  He was not the controlling mind of the company and the evidence of Mr Chris White was the person who was approving the payments in those circumstances.  The culpability of Mr Reynolds in relation to the failure by RSG was really limited to the issue that he was the communicator of the fact a decision had been made not to pay entitlements and there was nothing he could do about it.  Mr Reynolds, at para.43 of his Statement, responds to the issues raised by Mr Brogan in his affidavit at paras.20- 21.  Mr Reynolds’ Statement deposes the following:

   [43] I have read the affidavit of Wayne Brogan filed in the proceedings and affirmed on 10 September 2009.  I refer to paragraphs 20 and 21 of that affidavit.  I agree I had a conversation with Mr Brogan where words to the substances and effect were said as set out.  I did not have the authority to approve annual leave and or termination payments.  Mr Chris White had to approve these payments.  From in or about January 2008 I was told by Chris White that no termination payments were being made.  I communicated this to the mangers at a management meeting on or about 14 January 2008.  The minutes of that meeting are attached and marked “C”.  This was not my decision and I had not authority or ability to override this decision,  I recall having a conversation with Mr Brogan at about this time where I informed him that I only had responsibility to make payments from petty cash.  He said to me “all I want is my money, can’t you pay me out of petty cash?” I advised him that I could not do this as the petty cash facility was not a suitable option, as a remittance for taxation purposes was required.

7. Then at para.44 of Mr Reynolds’ Statement he deposes:

   I advised Mr Brogan to contact Mr White directly, as he was the person who could approve his termination payment.  I recall referring Mr Brogan’s complaint to Mr White and Mr Noor for their consideration and approval.  I am aware that no approval for the payment of Mr Brogan’s entitlements was forthcoming as Mr Brogan continued to contact me to complain.  He advised me on one occasion that “Chris White has not returned my calls”.  I maintained to Mr Brogan that I could not do anything as it was not my decision and I had no authority to approve his payment.

8. Mr Bolger submits that Mr Brogan was an Assistant Manger and had held that position since February 2007.  He had participated in management meetings and would have known who Mr White was.  However, there is no evidence to indicate whether Mr Brogan contacted Mr White or not. 

9. It is submitted that in relation to whether there was any implied misrepresentation or misleading statements by Mr Reynolds at the time when he asked Mr Bolger to work out his notice period, two issues arise.  Firstly, that was not an unlawful request. Secondly, at the time Mr Reynolds made that statement, there were other persons including Mr Brogan’s own manager who had resigned and did get their termination pay.  Mr Reynolds does not depose the fact that he was involved in those approvals, but he was aware that they were paid.

10. Mr Bolger acknowledges that Mr Reynolds admitted that he was involved in the contravention, in that he communicated certain things to Mr Brogan, but the liability of RSG to pay Mr Brogan was not met.  However, during this time, Mr Reynolds attended various management meetings which are recorded in minutes annexed to Mr Reynolds’ Statement as follows:

    a)Annexure F – 29 January 2008 under the heading “Gavin (Reynolds)”

    ·    There are only two legal options regarding the sale

    (i)All entitlements are carried over to the new employer or

    (ii)RSG will pay out all entitlements.

    b)Annexure G – 4 February 2008 appearing under the sub-heading “Gavin”

    ·    Entitlements

    o   Holiday pay

    o   Iris will not carry over the entitlements staff members have accrued with RSG.

    o   RSG must pay out all staff entitlements.

11. Mr Bolger submits that in respect to Mr Brogan, Mr Reynolds did take some corrective action to try to rectify RSG’s breaches by referring Mr Brogan to Mr White and by actually contacting Mr White and Mr Noor, passing on the complaint.  Regrettably for Mr Brogan, no payments were made,  but as the Applicant concedes, the liability to make such annual leave payments rests with the employer, not with the manager.  It is submitted that there is nothing else that Mr Reynolds could have done as it was not his responsibility to pay it out of his own pocket as he doesn’t have that liability.  The system in place whereby Mr White was making the approvals and Mr Reynolds’ untested and uncontested evidence is that he conveyed that issue to Mr White. 

12. In respect to Ms Sorrenti, who was a casual employee who was working front – of – house, she resigned on or about 12 December 2007 because she had found a new job.  She gave her resignation to the General Manager, Rachael Kent.  She finished work on 26 December 2007 but did not receive her termination payment, being her annual leave which had been accrued during the period of her employment.  Ms Sorrenti is a young employee who has worked casually and has sufficient amount of service to support the contention that she had been a loyal employee of RSG.  All of these aspects are conceded by Mr Reynolds. 

13. On 22 January 2008 Ms Sorrenti sent a letter to Chilis indicating that she has not received her annual leave entitlements.  In Ms Sorrenti’s affidavit at para.12 she deposes the following:

    [12] On or about 29 January 2008 I went to the head office of Chilis Wentworthville which is located at the back of Chilis Wentworthville.  I knocked on the door and it was opened by Nikki Griffin.  I understand that Ms Griffin’s position was that of the manager in charge of payroll because I had previously spoken to her about pay queries over the years I had been employed.  I had a conversation with Ms Griffin in words to the effect:

    BS:“I resigned a month ago and have not received my   annual leave yet.  I was wondering what is happening?”

    Nikki:“There are lots of people asking about their termination pay but I haven’t received permission from my director, Allan [Noor] to pay the annual leave.  I can’t do anything about it until I get permission but this should happen soon.  You can contact Allen if you like he will be in on Thursday.”

14. On 28 February 2008, Ms Sorrenti again visits the offices of Chilis Wentworthville and at para.15 of her affidavit she deposes to the following:

    [15]  A couple of minutes later I had a conversation with Gavin Reynolds in words to the following effect. Emma Lloyd was also present for this conversation.

    BS:“Hi, I’d like to get a copy of my AWA.  Also,  I was wondering when I’ll be receiving my annual leave because I resigned two months ago”

    Gavin:“Yes, you will be getting paid next Thursday so you should receive the money next Saturday. You can get a copy of your AWA from Rachael”

    BS:“OK. Can I also get a copy of my last three payslips?”

    Gavin:“Yes, I will get Nikki to print them off for you”.

15. In Mr Reynolds’ Statement at para.45 he makes the following comment in respect of this conversation:

    [45]  On or about 29 February 2008 Ms Sorrenti attended the head office of Chilis Wentworthville and spoke to me about her termination entitlements.  I have read the affidavit of Bianca Sorrenti sworn 9 September 2009.  At paragraph 15 of that affidavit is a conversation with Ms Sorrenti, however I do not agree with that the conversation was in the words set out at paragraph 15 of her affidavit.  I say that during the conversation with Ms Sorrenti words to the following substance and effect were said:

    Sorrenti:  “Hi, I’d like to get a copy of my AWA”

    Me:           “You can get a copy of your AWA from Nikki”

    Sorrenti:“I also want to know what is happening with my holiday pay.  I resigned two months ago and have not been paid”.

    Me: “If there is any money owed to you then it will be submitted to Chris White for approval.  If it is not approved then it will be paid in the next pay run on Thursday”

    Sorrenti:   “Can I get a copy of my last 3 payslips”

    Me:           “Yes, you will have to get them off Nikki”.

    The conversation took place in the door way of the head office.  Another girl was present with Ms Sorrenti during the conversation.  I also spoke to the other girl, who I understand was Emma Lloyd about her entitlements.  Ms Lloyd I understand was still an employee of RSG at that time.  Once the conversation finished I walked to Nikki Griffin’s workstation and spoke to her.  I said words to the substance and effect:

    Me:        “Nikki, Bianca Sorrenti is here following up her final pay and would like a copy of her AWA and last 3 payslips. Can you take care of this?”

    Nikki:       “Yes, sure”.

    I then observed Nikki Griffin have a conversation with Bianca Sorrenti. I was not party to that conversation and left to attend to other work. 

16. It is noted that there is a discrepancy in the contents of these conversations as to what was said was, if approved or alternatively, you will be paid.  However, the next pay cycle was scheduled for 6 March 2008 and on that day RSG went into voluntary administration.  It is submitted that there is no suggestion that Mr Reynolds had any involvement in that decision and indeed he himself is again a victim of the fact that the company went into voluntary administration.  Mr Reynolds deposes in his statement that he did not receive any annual leave payments or any other termination payments from RSG.  It is conceded and an agreed fact that the final pay run was not processed.  That was a frustrating event for Ms Sorrenti as even if the payment had been approved, she was not paid her leave because the pay run was not processed, although she should have been paid at the time of her resignation on 26 December 2007.  It is noted that the Applicant’s case against Mr Reynolds is that his involvement arises from a conversation in the last week of RSG’s operation, before it went into administration, although the terms of that conversation are not specifically or essentially in dispute.

17. Mr Reynolds’ Statement is consistent with the system that was in place in that the payment had to be approved.  That Statement was consistent with what Ms Griffin had already told Ms Sorrenti.  It was conceded however, that Mr Reynolds did not take any further steps other than to convey Ms Sorrenti’s concerns to Ms Griffin.  There is no evidence that he took up Ms Sorrenti’s matter with Mr White or Mr Noor, a director of the company.

The law in respect to involvement in breaches

1. The Applicant referred the Court to the following authorities: Yorke v Lucas [1985] HCA 65; Australian Competition & Consumer Commission v Giraffe World Australia Pty Ltd [1999] FCA 1161; Rural Press Limited v Australian Competition & Consumer Commission [2002] FCAFC 213; Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17, which show that in order for a person to have assessorial liability under s.728(2) of the WR Act, he or she:

   a)Must have knowledge of the essential facts constituting the contravention;

   b)Must be knowingly concerned in the contravention;

   c)Must be an intentional participant in the contravention based on actual, not constructive, knowledge of the essential facts constituting the contravention although constructive knowledge may be sufficient under s.728(2)(c) in the case of wilful blindness; and

   d)Need not know that the matters in question constitute a contravention.

2. The Applicant alleges that the Third Respondent was “involved in” the alleged contraventions within the meaning of s.728 of the WR Act as the Third Respondent:

   a)Held the position of Group General Manager for RSC prior to the company being placed into voluntary administration on 6 March 2008 (affidavit of inspector Davidson at [19], affidavit of Mr Dawson at [6], [25] and annexure G);

   b)Was involved in hiring staff for the Chilis restaurant chain (affidavit of Mr Brogan at [4] – [13]);

   c)Was responsible for the overall running of RSG (affidavit of Mr Brogan at [11] – [13], affidavit of Mr Dawson at [8], [14] – [15], [17] – [18], [28] – [30]);

   d)Was in charge of the operations of all of the Chilis restaurants and managed the day-to-day running of the RSG business including in relation to employment matters and staff entitlements (affidavit of Inspector Davidson at [19], affidavit of Mr Brogan at [4] , [13], affidavit of Mr Dawson at [7] – [8], [12], [14] – [15], [17] – [18], and [28] – [30], affidavit of Ms Sorrenti at [13], [15], affidavit of Ms Lloyd [4] – [5]);

   e)Minutes of the meeting held on 14 January 2008, 4 February 2008 and 10 April 2008 indicate Mr Reynolds’ involvement in the termination of holiday pay issues and hours of work issues;

   f)Spoke to Ms Sorrenti and “made representations to her about her termination entitlements” and the payment of these entitlements (affidavit of Ms Sorensen at [13] –[15]); and

   g)On or about 29 February 2008, the Third Respondent told Ms Sorrenti that she would be paid her termination entitlements on 6 March 2008 (affidavit of Ms Sorrenti at [15]).

Penalty hearing

1. This prosecution is brought under the WR Act in relation to the breaches of the aforementioned Australian Workplace Agreements. Section 719(1) of the WR Act enables this Court to impose a penalty in respect of a breach of and the applicable provision by a person bound by the provision. “Applicable provision” is defined in s.717 which is preserved by schedule 7A (transitional arrangements for existing AWAs) of the WR Act to include a term of an AWA. Section 719(2) provides where two or more breaches of an applicable provision are committed by the same person, and the breaches arose out of conduct by the person, the breach shall, for the purposes of s.719 to constitute a single breach of the term. Section 727 of the WR Act provides that s.719 is a civil remedy provision for the purposes of Part 14, Division 3 of the WR Act.

2. The Third Respondent, Mr Gavin Reynolds is a natural person and Group General Manager of RSG (now in liquidation), the company engaged at the relevant time to provide restaurant management services to the Chilis chain of restaurants.  Mr Reynolds had actual knowledge of the essential facts constituting the contravention, was knowingly concerned in the contravention and was intentionally involved in the contraventions.

3. When determining penalty there is recent authority in the New South Wales Court of Appeal to the effect that in a civil penalty proceedings a Court should approach the determination of the contravention issue and penalty in two stages: Forge v ASIC (2004) 52 ACSR 1 at 93 per McColl JA at 426. In that decision the Court of Appeal concluded that while a person may waive the right to a separate hearing on penalty, it is incumbent upon the relevant Tribunal to draw the right specifically to the person’s attention and is incumbent upon the applicant in such proceedings to draw the attention to that issue. That approach has been adopted in this matter in that in the hearing on 22 February 2010, counsel representing Mr Reynolds advised the Court that his client had made certain admissions in respect to his involvement pursuant to s.728 of the WR Act in the contravention of cl.28(g) of the Sorrenti AWA and cl.28(g) of the Brogan AWA. The matter was then adjourned to 3 June 2010 at which time submissions were heard from counsel in respect to issues of mitigation concerning prior to the determination of penalty.

1. Liability has been proven in respect of the First and Second Respondents by the decision of the party now in control of those organisations not to defend these proceedings and in respect to the Third Respondent by his admissions. In those circumstances, it is incumbent on this Court to take into account the following principles in determining the question of penalty. Each separate contravention of the respective AWAs in respect of each employee has been identified. In the decision above, each separate contravention of the relevant AWA has been identified for the purposes of s.719: Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at [223]; McIver v Healy [2008] FCA 425 per Marshall J at [16]. The Court notes that s.719(2) provides for treating multiple breaches involved in the course of conduct as a single breach.

2. Where two or more contraventions have common elements, this should be taken into account in considering what is an appropriate penalty in all the circumstances for each contravention and the Respondent should be penalised more than once for the same conduct.  The penalty imposed by the Court should be an appropriate response to the Respondent’s breach: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560.

3. At this point, consideration of the appropriate penalty to impose in respect of each course of conduct can be made, having regard to all of the circumstances of the case.  Finally, having fixed an appropriate penalty for each group of contraventions or courses of conduct, an appropriate penalty can be determined by assessing whether it is an appropriate response to the conduct which led to the breaches: Kelly v Fitzpatrick (2007) 166 IR 14 per Tracey J at [30]. In Australian Ophthalmic Supplies Pty Ltd (supra) per Gray J at [27] and Graham J at [55] and [78] their Honours indicated that the Court should apply an “instinctive synthesis” in making this assessment. 

4. The factors relevant to the imposition of a penalty under the WR Act have been summarised in the frequently quoted decision of Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurants and Bars [2007] FMCA 7 per Mowbray FM which was subsequently adopted in Kelly v Fitzpatrick (supra) per Tracey J at [14].  It is acknowledged that while the summary in Pangaea is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion: Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 per Gyles at [11]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (supra) per Buchannan J at [91].

Penalty in respect of Third Respondent

1. Counsel for the applicant, in his written submissions, indicate that he relies upon the following material in respect to penalty:

   a)Affidavit of Bianca Sorrenti dated 9 September 2009 at paras.9, 10, 17, 18;

   b)Affidavits of Wayne Brogan dated 10 September 2009 at paras.4, 15, 16, 17, 18, 19, 20;

   c)Affidavit of Third Respondent dated 8 April 2010;

   d)Minutes of Chilis management meeting held on 14 January 2008, 4 February 2008 and 10 April 2008; and

2. Mr Selinger, in his written submissions, submits that Mr Reynolds’ breaches are able to be categorised as follows:

   a)Failure to pay Ms Sorrenti accrued and untaken annual leave (cl.28(g) Sorrenti AWA) (maximum penalty $6,600.00);

   b)Failure to pay Mr Brogan and untaken annual leave (cl.28(g) Brogan AWA) (maximum penalty $6,600.00).

   In respect of these breaches, it was submitted that they should be properly characterised as two distinct breaches arising out of two separate courses of conduct as there are a number of factors which indicate that the breaches arose in that way.  Each breach affected a separate employee and involved a separate AWA and occurred at a different time.

3. Ms Sorrenti’s final day of employment was 26 January 2007 (affidavit of Ms Sorrenti at [9]).  On or about 28 February 2008, Ms Sorrenti had the conversation with Mr Reynolds about the payment of her annual leave and Mr Reynolds indicated that termination payment may be paid the following week (statement of Mr Reynolds at [45]). Mr Brogan resigned his employment on 12 November 2007 and his final day of work was 9 December 2007 (affidavit of Mr Brogan at [15] – [17]).  On or about 19 November 2007, Mr Reynolds advised Mr Brogan that if he worked his four week notice period, then he would be paid his annual leave (affidavit of Mr Brogan at [16] and [20], Statement of Mr Reynolds at [43]).  This contravention occurred some weeks before the managers meeting on 14 January 2008.  Consequently, the maximum penalty that could be imposed against Mr Reynolds is $13,200.00.

4. Mr Bolger indicated that Mr Reynolds consents to the Court making a declaration consistent with terms of para.48 of the Statement of Claim in respect of the breaches of the Sorrenti and Brogan AWAs. Mr Reynolds made the admission against the making of the orders at the hearing on 22 February 2010. Mr Brogan, on behalf of Mr Reynolds, acknowledges that an AWA is an “applicable provision” as defined in s.716 and s.717 of the WR Act. Section 719 of the WR Act provides that the Court may impose a penalty on a person bound by an applicable provision. The breach of the AWAs by RSG are contraventions of s.719(1) of the WR Act. The operation of s.728 of the WR Act provides that a person involved in a contravention of a civil remedy provision is treated as having contravened the provision. It is acknowledged that Mr Reynolds has admitted to being involved in the contravention of s.719(1) by RSG with respect to the Sorrenti and Brogan AWAs and that he is taken to have contravened that provision. Mr Reynolds further admits that he was only concerned in the contravention by RSG, but denies his involvement in the contraventions arising from matters described in ss.728(a), (b) and or (d) of the WR Act.

5. Both counsel provided detailed written submissions in respect of Mr Reynolds’ involvement in the WR Act and seek to have the Court take those issues into account when determining the quantum of penalty to be imposed.

Findings in respect of penalty for the Third Respondent

1. On the material before me, I acknowledge the admissions made by Mr Reynolds on 23 February 2010 and the legislative consequence of those admissions.  However, in determining the quantum of the penalty that should be applied, I note that Mr Reynolds is not the primary contravener of the Sorrenti and Brogan AWAs.  The primary contravener is RSG and it is RSG’s conduct, specifically that of its directors being Allan Noor and the Chief Executive Officer, Chris White, that resulted in the breach of the Sorrenti and Brogan AWAs because of their failure to release funds to pay the annual leave entitlements to these two employees on termination. 

2. Mr Reynolds’ involvement in the contravention in relation to Mr Brogan, is limited to the communication of the decision of RSG and its directors not to pay entitlements to employees on termination because of severe financial difficulties being experienced by RSG.  Significantly, Mr Reynolds did not have any “statutory obligation” to pay the relevant employees their annual leave entitlements and did not have the obligation or liability to make the payments.  The unchallenged sworn affidavit evidence of the conversations between Mr Reynolds and the employees clearly demonstrates an understanding of RSG’s obligation to pay entitlements on termination but stated clearly, to both employees, that it was not his decision to withhold payment.

3. When Mr Brogan tendered his resignation to Mr Reynolds in November 2007, there is no evidence that Mr Reynolds knew that Mr Brogan would not be paid his annual leave entitlements on termination, at the completion of the notice period.  At the time Mr Reynolds requested Mr Brogan to work out his notice, all payments of entitlements were subject to the approval of the CEO, Mr White and there is evidence indicating that payments were being made.  After 19 December 2007, when Mr Brogan received his final payslip, he called Mr Reynolds to complain that he had not received his termination entitlements.  Mr Reynolds said that the conversation occurred in January 2008 by which time he had been informed by the CEO, Mr White and a director, Mr Noor, that entitlements were not being paid on termination.  Mr Reynolds informed Mr Brogan of this decision and advised him to pursue it with the CEO.   In respect of Ms Sorrenti, she tendered her resignation to her supervisor, Ms Kent, on 26 December 2007.  Mr Reynolds did not become involved in the contravention until 29 February 2008 when he represented to Ms Sorrenti that her entitlement, if approved, would be paid in the next pay-cycle scheduled for 6 March 2008.  The fulfilment of that representation was frustrated by RSG being placed into voluntary administration on that date and no outstanding payments were processed or made.  I note that Mr Reynolds complied with other requests made by Ms Sorrenti on 29 February 2009 concerning the supply of her AWA and her last three pay-slips.

4. Adopting the approach in Pangaea (supra) at [26] – [59] the following submissions are made in respect of each of those factors identified in Pangaea.

   a)Nature and extent of conduct

5. The breaches represent a failure to provide basic and important wages and conditions entitlements under AWAs.  The fundamental nature of the breaches displays a disregard by Mr Reynolds of his statutory obligations.  The breaches affect two employees, one of which was a vulnerable employee because she was a young worker who was aged 18 at the time of the offence and had limited experience in the workforce.

6. Although Mr Reynolds held a senior position in RSG, he was not responsible for the payment of employee entitlements and the decision to withhold payment was made by his superiors, the CEO and a director of that company.  Submissions were made on behalf of Mr Reynolds requesting the Court not to make him a scapegoat for the failure of RSG to meet its liabilities to its employees.  Unfortunately and regrettably, this has already happened.  Mr Reynolds is the only executive of RSG to face prosecution in respect of these breaches, with neither his superiors nor directors facing charges.  Mr Reynolds has also been severely criticised in pres-releases issued by the Fair Work Ombudsman (Media Release – 7 September 2009).

   b)     Circumstances in which the conduct took place

7. One of the employees affected worked part-time and the other full-time.  One employee was employed by the Chilis restaurant chain for three years and eight months, the other for one year.  There is no evidence to suggest that either of the employees were particularly well-versed in industrial or employment matters or the exercise of their rights under the relevant industrial instruments.

8. It is acknowledged that both affected employees were aware that they were entitled to be paid their annual leave entitlements on termination and both made compliant in respect to non-payment, and properly pursued the matter.  The decision of RSG and its director not to make or approve such payments on their termination meant that both employees suffered loss. 

   c)     Nature and extent of loss or damage

9. The underpayments in this matter are $350.70 in respect to Ms Sorrenti and $2,099.97 in respect of Mr Brogan, resulting in a total underpayment of $2,450.57 that Mr Reynolds was involved in pursuant to s.728 of the WR Act. Whilst the total underpayment is not overly large, the underpayments are significant for employees who are reliant on the minimum wage.

10. Mr Reynolds admits that these losses were significant for both employees as they are entitlements that were accrued during employment with RSG.

    d)     Whether the breaches arose out of one course of conduct

11. The AWA clause required that the payment of accrued annual leave on termination arose at separate times and in relation to different circumstances.

    e)     Size of business

12. RSG (in liquidation) of which Mr Reynolds was the Group General Manager, was the company engaged to provide restaurant management services to the Chilis chain.  An employer’s obligation to adhere to workplace relations law arises regardless of their size and financial position and such factors should be of limited relevance to this Court’s consideration of penalty.  However, more so that a medium sized employer, a large employer has the resources and expertise to ensure compliance with workplace law. 

13. The corporate structure detailed in the material before the Court identified four senior management positions reporting to the CEO, Mr White, who in turn, reported to the sole director, Mr Allan Joseph Noor.  Mr Reynolds was not directly responsible for employment matters, rather this was Ms Griffin (payroll and HR Manager) who was responsible for AWA filing, amendments and compliance.  Ms Griffin also calculated fortnightly payroll before seeking final approval from Mr White or Mr Noor.  Mr Reynolds was not responsible for and was not an authorised signatory for any of Chilis’ employee contracts, AWAs or payroll.  Mr Reynolds did not have control or authority to access any of RSG’s bank accounts or authorise payment of employee entitlements on termination as these had to be approved by Mr White.  Regardless of this management structure and responsibilities, no proceedings for the offences in this matter have been commenced against any executive or director of RSG other than Mr Reynolds. 

    f)      Deliberateness of the breaches

14. Mr Reynolds had a conversation with Ms Sorrenti about the non-payment of her entitlements in the presence of another employee, Emma Lloyd, and was aware that the entitlements may still have been outstanding (Statement of Mr Reynolds at [45]).  Mr Reynolds also had conversations with Mr Brogan about the payment of his annual leave entitlements (Affidavit of Mr Brogan at [20]; Statement of Mr Reynolds at [43]).  Mr Reynolds has not provided any evidence to suggest that he was unaware of RSG’s obligation in respect of minimum entitlements.  In fact, Mr Reynolds stated that when he made representations to Ms Sorrenti and Mr Brogan in relation to the payment of their annual leave, he was aware of the decision that had been made regarding the non-payment of termination pay including annual leave (Statement of Mr Reynolds at [42]).

15. Mr Reynolds’ was aware of the obligation, as the employer, to pay employee’s entitlements on termination including annual leave.   This awareness was expressed in conversations with Mr Brogan and Ms Sorrenti and with staff managers in meeting on 14 January 2008, 29 January 2008 and 4 February 2008.  Mr Reynolds was not the employer, nor did he control RSG’s bank accounts, payroll or have the authority to approve payments of entitlements to employees.  There is no evidence that at the time Mr Reynolds informed Mr Brogan that he had to work out his notice period, Mr Reynolds had knowledge that Mr Brogan’s annual leave could not be paid on termination.  In respect to Ms Sorrenti, Mr Reynolds conveyed to Ms Sorrenti that her entitlements, if approved, would be paid in the next pay-cycle which was frustrated by RSG being placed into voluntary administration.  There is no evidence that Mr Reynolds’ involvement in this contravention was deliberate.  Mr Reynolds passed on to Ms Griffin, Ms Sorrenti’s complaint and request for her payslips and AWA which were duly provided to her.  There is no evidence that Mr Reynolds benefited from the breaches or contraventions as he also was affected by the decision of RSG not to pay entitlements.  On the material before the Court I am satisfied that Mr Reynolds’ conduct in relation to the breaches cannot be described as ‘deliberate’ as the failure of the employer to meet its liability to its employees did not lie with Mr Reynolds.

    g)     Involvement of senior management

16. Mr Reynolds was Group General Manager of RSG which was responsible for the management and staffing of the Chilis group of restaurants.  Mr Reynolds was involved in management matters including hiring staff (affidavit of Mr Brogan at [4]). In his role as Kitchen Manager, Mr Brogan dealt directly with Mr Reynolds in relation to all day-to-day issues about the running of the business (affidavit of Mr Brogan at [13]).  All General Managers of the Chilis restaurants reported to Mr Reynolds as Group General Manager (Statement of Mr Reynolds at [17]).  The chain of Chilis restaurants were each managed by RSG.  Mr Reynolds would run regular phone conference meetings between the managers of each of the Chilis restaurants in New South Wales and would provide financial information and give directions to the managers in relation to various aspects of the day-to-day running of the Chilis restaurants (Agreed Statement of Facts at [23]).

17. However, management more senior than Mr Reynolds were involved and responsible for the breaches by RSG.  Mr Reynolds was not responsible for payment of employee entitlements and the decision not to pay the annual leave on termination was made by the CEO, Mr White, and the sole director, Mr Noor. 

18. It is noted that Mr Reynolds admitted the breaches resulting in the requirement for a hearing on liability being dispensed with and the necessity for the calling of evidence from witnesses at a hearing was not required.  Further, Mr Reynolds has accepted and agreed to a statement of facts which has avoided the need for a calling of witnesses for cross-examination.  In Australian Ophthalmic Supplies (supra) per Gray J at [15] – [17]  His Honour discusses matters that may be taken into account when looking at “contrition” exhibited by corporate respondents or employers including the payment of amounts owing to affected employees, admissions of the case against relevant respondents and taking measures to ensure future compliance.  Clearly, the liability for the payment of entitlements rests with RSG as the employer and not with Mr Reynolds who is an employee.  In respect of corrective action, Mr Reynolds  referred Mr Brogan to Mr White for the approval of his annual leave and Ms Sorrenti to the pay-roll and Human Resources Manager for the payment of her entitlements.   The activities of 4 February 2008 show that Mr Reynolds actively pursued the “owners” in respect of the payment of staff entitlements, such as superannuation. The ability to take further directive action was thwarted by RSG being placed into voluntary administration.

    h)     Contrition, corrective action, cooperation with authorities

19. Proceedings in this matter were filed on 29 June 2009. Mr Reynolds did not initially participate in the proceedings but became involved after the Applicant filed its evidence in September 2009. At the liability hearing of this matter on 22 February 2010, Mr Reynolds admitted to his involvement pursuant to s.728 of the WR Act in the contravention of cl.28(g) of the Sorrenti AWA and cl.28(g) of the Brogan AWA. Mr Reynolds, in his Statement filed on 19 April 2010, states that he was sorry that Ms Sorrenti and Mr Brogan were not paid their entitlements (at [42]). This is the only evidence of contrition before the Court. The Applicant has put significant time and resources into pursuing this matter, only to have Mr Reynolds admit to the contraventions “on the doorstep of the Court”. The admissions were made at the last possible opportunity before the liability hearing.

20. Mr Reynolds accepts that there is a need to ensure that employees are paid their entitlements.  This is a factor in consideration for general deterrence.  However, such considerations must be tempered by the fact that Mr Reynolds was the employer and was not responsible for the decision of RSG not to pay the annual leave.  Mr Reynolds has admitted to be knowingly concerned in the contravention of RSG in his position as Group General Manager of that company.  The failures of RSG to pay these entitlements arise from the financial position of RSG and the decision by its directors.  Mr Reynolds does not hide behind RSG’s financial failures but states that this is the reason provided by Messrs Noor and White as to why termination payments were not being approved.

1. In respect to specific terms, Mr Reynolds is no longer employed by RSG.  He has acknowledged and demonstrated an understanding of the rights of employees to be paid their entitlements on termination.  He is now employed as North Region’s Relationship Manger for Fleet Partners Pty Ltd, supervising several employees.  In this new role, he does not hold a position where he makes determinations about whether employees are paid entitlements.  In these circumstances there is no need for specific deterrence as he is unlikely to commit similar breaches of the WR Act or subsequent legislation.

   i)      Ensuring compliance with minimum standards

2. One of the principal objects of the WR Act is the maintenance of the effective safety-net and effective enforcement mechanisms.  The importance of this “safety-net” is reflected not only in the magnitude of the maximum penalties available in respect of any breach of the applicable provisions, but also by the increase of those maximum penalties from August 2004. 

   j)      Specific and general deterrents

3. It is well established that the need for specific and general deterrents is a factor that is relevant to the imposition of a penalty under the WR Act: Pangaea (supra) at [6] – [59].  The role of general deterrents in determining the appropriate penalty is illustrated by the comments in Ponzio v B&P Caelli Constructions Pty Ltd (2007) 158 FCR 543 per Lander J at [93]. Similarly in CPSU v Telstra Corporation Limited (2001) 108 IR 228 per Finkelstein J at 231. In Cotis (Office of Workplace Services) v Pow Juice Pty Ltd [2007] FMCA 140 at [51] I found that there is a need in some circumstances for deterrence, which may include general and special deterrence. As to general deterrence, it is appropriate for the Court to hold, as it was held to be in Flattery v Italian Eatery t/as Zeffirelli's Pizza Restaurant [2007] FMCA 9 per Mobray FM at [66]:

   A clear message needs to be sent to both the [employer] and the industry in general that underpayments of wages will not be tolerated. 

4. As to general deterrents, the hospitality sector employs a large number of vulnerable workers, such as young people who are low-paid with limited experience in the workforce.  General deterrence will always be a significant factor in sentencing breaches of the WR Act.  The imposition of penalties acts as a warning to other employers, particularly in the industry in which the employer operates, that breaches of Commonwealth workplace laws will not be tolerated.

5. Mr Reynolds was a senior manager of a company responsible for managing a restaurant chain which employs a large number of people.  In Mr Reynolds’ current position he is responsible for and supervises a total team of seven employees (Statement of Mr Reynolds at [7]).  It is likely that Mr Reynolds will continue to be involved in managing employees in the future. 

   k)  Subjective factors

6. Mr Reynolds currently earns $110,000.00 plus superannuation and a motor vehicle allowance.  Mr Reynolds has worked for his current employer since 4 December 2008 (Statement of Mr Reynolds at [7]).  In December 2008 Mr Reynolds received an amount of approximately $55,000.00 from GEERS scheme for his outstanding annual leave, pay in-lieu of notice (Statement of Mr Reynolds, annexure D).  There is no evidence that even awarding a maximum penalty of $6,600.00 would be crushing or offensive on Mr Reynolds.  

7. The payment from GEERS was not disputed as it represents Mr Reynolds’ unpaid entitlements from RSG.  On his termination on 6 March 2008 due to RSG going into voluntary administration he was unemployed for a period of eight months from March to December 2008.  He owns a property at Mount Allambie and has a mortgage of approximately $200,000.00 outstanding on the property.  He has a monthly commitment of $2,700.00 in respect of mortgage payments.  He rents a three bedroom residence in Beecroft where he lives with his wife and child.  Rental costs of this property are $550.00 per week.  Mr Reynolds’ wife works full time and they are responsible for child-care costs and living expenses.  A penalty of $13,200.00 which is the maximum in respect of the admitted breaches would represent 12% of Mr Reynolds’ gross salary and such a penalty, in the circumstances would be significant and oppressive. 

Factors relevant to penalty - totality

1. Mr Selinger, in his written submissions, correctly and most appropriately contends that after determining the penalty for each offence, the aggregate penalty should be reviewed to determine whether it is an appropriate response to the conduct which led to breaches and is not oppressive or crushing: Kelly v Fitzpatrick (supra) at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (supra) per Gray CJ at [23], Graham J at [71] and Buchanan J at [102]. 

2. On the material before the Court there is no dispute that there are two independent breaches that occurred in respect of different employees and in a different set of circumstances.  However, there is a commonality in respect of the offences and if funds had been available from the employer, both employees would have received their respective entitlements.

3. Consequently, I believe it is inappropriate, based on the totality principle, that Mr Reynolds should not be penalised twice for a contravention that resulted from the same single action of the Chief Executive Officer and the sole company director of RSG by refusing to pay any employee their rightful employment entitlements on termination of their employment.  Consequently, the $13,200.00 maximum penalty should initially be reduced to $6,600.00.

4. This figure should be further reduced because Mr Reynolds was not the primary contravener as that conduct was that of RSG specifically that of the director, Mr Noor and the Chief Executive Officer, Mr White.  It is the action of those two individuals that led to the breach of the Sorrenti and Brogan AWAs.  Mr Reynolds did not have the statutory obligation to pay the affected employees on termination as that obligation and liability remained with the employer.  Significantly, no other executive or director of RSG has been pursued in respect of these breaches, while Mr Reynolds has been named and humiliated in public announcements in respect of the management of the Chilis chain of restaurants and that organisation’s breaches of the WR Act. 

5. Mr Reynolds has not denied, pursuant to s.728 of the WR Act that he has breached cl.28(g) of the Sorrenti and Brogan AWAs and has admitted that he was the person involved in the contravention of the WR Act. Although this admission was made at a late date, Mr Reynolds did make representations to the Applicant on 4 February 2010 and 7 February 2010 regarding the evidence, legal and factual issues relating to his contraventions. The representations were partially successful in that the Applicant did not proceed against him in respect of the allegations concerning Ms Jessica Brown. There is unchallenged evidence that Mr Reynolds pursued corrective action in an attempt to resolve the liability to these two employees.

6. Such attempts were initially frustrated by the refusal of the CEO and the sole director to pay entitlements, and were further thwarted by RSG being placed into voluntary administration.  This took place during a period in which Mr Reynolds himself had been given notice that his employment would be terminated and that his entitlements were not to be met.  There is no evidence before the Court to suggest that the breaches were either deliberate or that Mr Reynolds received any benefit from them.  In these circumstances, I believe that the penalty should be further reduced to the amount of $600.00.

Penalty in respect of the First and Second Respondent

1. The First and Second Respondents were placed in voluntary administration at the time of these offences and have subsequently been liquidated.  There was no appearance or defence entered on behalf of either corporate body.  The offences against both organisations are proved on the material before the Court and the maximum penalty of $33,000.00 should be applied to both organisations, in addition to the outstanding amounts owed to the employees of those organisations. 

I certify that the preceding one hundred and ten (110) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM

Associate: 

Date:  17 September 2010