Fair Work Ombudsman v Choi Brothers Pty Ltd

[2018] FCCA 1155

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v CHOI BROTHERS PTY LTD & ANOR [2018] FCCA 1155

Catchwords:
INDUSTRIAL LAW – Assessment of penalties for admitted contraventions of the Fair Work Act and applicable Award – Statement of Agreed Facts – parties in substantial agreement as to outcome – penalties imposed at 80 per cent of range agreed by the parties.

Legislation:

Fair Work Act 2009

Cases cited:

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) [2018] HCA 3

Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623
Trade Practices Commission v CSR Limited [1990] FCA 521
Commonwealth of Australia v Director, Fair Work Building Inspectorate [2015] HCA 46

Applicant: FAIR WORK OMBUDSMAN

First Respondent: CHOI BROTHERS PTY LTD
(A.C.N. 605 019 583)

Second Respondent: SEUNG-GEUN CHOI

File Number: MLG 2330 of 2017

Judgment of: Judge Burchardt

Hearing date: 6 April 2018

Date of Last Submission: 6 April 2018

Delivered at: Melbourne

Delivered on: 6 June 2018

REPRESENTATION

Counsel for the Applicant: Ms Minster

Solicitors for the Applicant: Office of the Fair Work Ombudsman

Counsel for the Respondent: Mr Doran

Solicitors for the Respondent: Nevett Ford Lawyers

THE COURT DECLARES THAT:

1. The First Respondent, Choi Brothers Pty Ltd, contravened each of the following civil remedy provisions:

   (a)Section 45 of the FW Act, by failing to pay to Zhu Li (Mr Li) the minimum rate of pay prescribed by clause 20.1 of the Restaurant Industry Award 2010 (“Restaurant Award”).

   (b)Section 45 of the FW Act, by failing to pay to Mr Li the casual loading prescribed by clause 13.1 of the Restaurant Award.

   (c)Section 45 of the FW Act, by failing to pay to Mr Li the Saturday penalty rates prescribed by clause 34.1 of the Restaurant Award.

   (d)Section 45 of the FW Act, by failing to pay to Mr Li the Sunday penalty rates prescribed by clause 34.1 of the Restaurant Award.

   (e)Section 45 of the FW Act, by failing to pay to Mr Li the Public Holiday rates prescribed by clause 34.1 of the Restaurant Award.

   (f)Section 45 of the FW Act, by failing to pay to Mr Li penalties pursuant to clause 32.4 of the Restaurant Award if breaks were not provided pursuant to clause 32.1 of the Restaurant Award.

   (g)Section 45 of the FW Act, by failing to inform Mr Li of his employment status as requested by clause 10.2 of the Restaurant Award.

   (h)

   Section 44(1) of the FW Act, by failing to provide Mr Li with

   
   

   a Fair Work Information Statement.

   (i)Section 535(1) of the FW Act, by failing to make and keep records in respect of Mr Li as prescribed by sub-regulation 3.32(c) of the FW Regulations.

   (j)Subsection 536(1) of the FW Act, by failing to issue payslips to Mr Li.

2. The Second Respondent, Mr Seung-Geun Choi, was involved, within the meaning of subsection 550(1) of the FW Act, in each of the First Respondent’s contraventions identified in paragraph 1 above.

THE COURT ORDERS THAT:

1. The First Respondent pay a total penalty of $55,404 pursuant

   
   

   to subsection 546(1) of the FW Act for its contraventions set out in order 1 above.

2. Pursuant to subsection 546(3) of the FW Act, the First Respondent pay the penalty amounts to the Consolidated Revenue Fund of the Commonwealth within 28 days of the Order.

3. The Second Respondent pay a total penalty of $5,508 pursuant

   
   

   to subsection 546(1) of the FW Act for his involvement in the contraventions set out in subparagraphs 1(h), 1(i), and 1(j) above; and

4. Pursuant to subsection 546(3) of the FW Act, the Second Respondent pay his respective penalty amount to the Consolidated Revenue Fund of the Commonwealth within 28 days of this order.

5. The First Respondent and the Second Respondent, pursuant to subsection 546(3)(a) of the FW Act, pay their respective penalty amounts to the Consolidated Revenue Fund of the Commonwealth within 28 days of the Court’s order.

6. Pursuant to subsection 545(1) the First Respondent and the Second Respondent agree that orders be made of the FW Act that the First Respondent and Second Respondent:

   (a)

   Within a period of two months, register with the Applicant’s

   
   

   “My Account” portal at and complete the profile including the Award options;

   (b)Within a further month after the period in subparagraph 8(a) above, provide to the Applicant their respective “My Account” registration number; and

   (c)Within a period of two months, register with the Applicant’s Online Learning Centre at and complete all education courses designed for employers and provide the Applicant with evidence of completion of those courses within a further month.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 2230 of 2017

FAIR WORK OMBUDSMAN

Applicant

And

CHOI BROTHERS PTY LTD (A.C.N. 605 019 583)

First Respondent

SEUNG-GEUN CHOI

Second Respondent

REASONS FOR JUDGMENT

Introductory

1. This is the second of two inter-related matters arising out of the business activities of the second respondent.  It is, for reasons that will be obvious, almost identical, to the judgment in the other matter.

2. The parties have in truth narrowed the issues enormously.  There is not only a Statement of Agreed Facts but a Statement of what, subject to only very minor qualifications, is an agreed set of submissions on penalty.  The only practical difference between the parties is whether the penalties to be imposed should be, as the respondents seek, at the lower end of the range or, as the applicant puts it, at some other, albeit unspecified, level.

3. For the reasons that follow, I think that the penalties to be imposed upon the respondents should be at 80 per cent of the applicable maximum.  Further, I note that otherwise the orders proposed by the applicant are fully consented to by the respondent, including the respondents’ consent to orders that will have the effect of educating them about their workplace responsibilities, an order within the Court’s power (see Australian Building and Construction Commissioner
   v Construction, Forestry, Mining and Energy Union (CFMEU) [2018] HCA 3).

4. Given that the parties are in such substantial agreement, it is not in my view appropriate to set out reasons for judgment at inordinate length. 

   
   

   I will paint with a relatively broad brush.

The factual background

1. The first respondent, of which the second respondent is the sole director and shareholder, at all material times operated a cafe in Lonsdale Street, Melbourne trading as “Bread Kingdom”.

2. In 2013, another business operated by Mr Choi (Photoplus) was the subject of a targeted audit and Mr Choi signed a client’s commitment form at that time.  While this compliance form was limited to obligations in relation to employee records, (an obligation in relation to payslips), it clearly envisaged the employer subsequently issuing payslips to all employees and the keeping of appropriate time and wages records. 

3. A payslip forwarded to the Fair Work Ombudsman in 2013 records

   
   

   a pay rate for an employee of $18 per hour.  This is of some significance (see exhibit JRR-1 to the affidavit of John Robert Richards, tab 4). 

4. In 2016, the first respondent employed a Chinese student in Australia on a limited working holiday and student visa, who was also employed by Photoplus’ premises.  The employee Mr Li was employed as

   
   

   a barrista/waiter on a casual basis for periods from February to October 2016.  He was employed on flat rates of pay, between $11 per hour and $13 per hour.

5. Numerous requirements of the Fair Work Act 2009 (“FW Act”) were not met.

6. The payment of a flat rate to this casual employee, and the other admitted contraventions, led to very substantial underpayments

   
   

   of $12,654.  These underpayments were rectified by the first respondent in June 2017 following the intervention of the applicant.  They represent substantial amounts of money to the worker and arose in what were short periods of employment.

7. Because the employer kept no time and wages records, provided no payslips and otherwise generally wholly failed to adhere to the requirements of the applicable Award and the FW Act, the first respondent was responsible for multiple contraventions. It is not necessary, given the agreement between the parties, to set them out in any detail. They have been assessed by agreement in respect of course of conduct, common element and the 10 contraventions that this process produced in respect of the first respondent are set out in appendix A and are the three of Mr Choi.

8. It is agreed that the penalties which the Court should impose are in the range $52,245 to $69,255 for Choi Brothers and $5,265 to $6,885

   
   

   for Mr Choi.

9. The submissions of the applicant go on to refer the factors relevant

   
   

   to penalty in a fashion now in my view well established.  It is not necessary to elaborate on the case law, which is sufficiently traversed in the applicant’s written submissions at paragraphs 36-37.

10. I note that the submissions for the applicant lay stress upon the 2013 audit, pointing out that the contraventions in 2016 took place in full knowledge of the respondent’s obligations in respect of record-keeping and payslips because at the time that the 2013 audit Mr Choi was made fully aware of those obligations.  Although in his affidavit Mr Choi sought to downplay the force of the 2013 audit, I accept

    
    

    the submissions made orally at Court by counsel for the applicant that Mr Choi well knew his obligations from 2013 onwards.  I also note that while paying $18 on the payslip he did then provide the applicant, three years later he was quite content to commence employment for a new casual employee at the rate of $11 per hour.  I accept again the inference in the applicant’s written submissions that it should be inferred that Mr Choi knew of or was reckless as to the minimum pay obligations.

The relevant considerations – vulnerability of the employees

1. It is clear that the employee was a foreign national with necessarily limited knowledge of Australian workplace laws.  His disempowerment in the workplace is self-evident.

The nature and extent of the loss and damage suffered

1. I have already dealt with this.  The underpayments were very significant.  The employee received only 51.5 per cent of what he should have been paid.  The precise effect upon Mr Li is set out in his affidavits.  I accept the applicant’s submission that significant weight should be given to this matter. 

Previous similar conduct

1. There is no previous similar conduct save in relation to the payslips issue. 

The size and financial circumstances of the business.

1. Mr Choi has filed an affidavit which puts the financial position of the company, and to an extent himself, as being difficult.  Choi Brothers no longer operates.  Nonetheless, as Barker J has recently stated in Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623 at [131]:

   “… But the penalties to be imposed should not be crafted on the basis of what the respondents can or cannot afford to pay.”

Were the breaches deliberate?

1. The contraventions in relation to record-keeping and payslips were plainly deliberate given the events in 2013.  I further accept, and indeed this is not challenged by the respondents, that the respondents’ underpayment contraventions were reckless given the provision of an earlier payslip to the applicant much higher than what the employee was paid during his employment period.  I further accept the submission of the parties that the contraventions otherwise alleged against Choi Brothers and Mr Choi were ones that should have been avoided.  Events of 2013 should have put them on notice that they were minimum obligations and caused the respondents to take steps to check and comply with them.

Was senior management involved?

1. This is a one-man company.  His accessorial liability is admitted. 

   
   

   In my view this aspect of the matter does not take the Court further.

Contrition and corrective action

1. The respondents did not actually apologise to the employees until their submissions in response to the otherwise agreed submissions of the applicant in the case.  It is not a matter to which great weight should be given.  I note further that Mr Choi has completed a number of FWO courses, and give him credit for this.  

Compliance with minimum standards

1. I accept the submissions of the parties that the FW Act provides

   
   

   “a scheme of minimum terms and conditions for all employees,

   
   

   and imposes obligations on employers and to prevent exploitation” (applicant’s submissions, paragraph 71).  This is plainly a relevant consideration.

Specific deterrence

1. Mr Choi’s evidence is that the Choi Brothers Café has closed.  It is not clear if it will re-open.  In the light of Mr Choi’s disregard of his obligations, both in a far more minor way, in 2013, and in the matters the subject of this application, it is important that a penalty be imposed to specifically deter both Choi Brothers and Mr Choi from further contravention.  As French J said (as his Honour then was) in Trade Practices Commission v CSR Limited [1990] FCA 521:

   “The principal, and I think probably the only, object of the penalties imposed by section 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act.”

General deterrence

1. It is sufficient to say that I accept the force of the applicant’s written submissions at paragraphs 72 to 74 as to the applicability and importance of general deterrence in cases such as these.  This is more particularly the case in retail industries where the workforce is often casualised and transitory as was the case here.

Cooperation with the enforcement authorities

1. I have not dealt with this matter in the same order as that in the written submissions.  Nonetheless I note that the parties agree that the respondents should have the benefit of a 25 per cent discount of the maximum penalties for the first and second respondents.  That discount is already reflected in the maximum range of penalties proposed. 

The totality principle

1. The parties have agreed that there should be a totality discount in respect of the first respondent of 40 per cent but none for Mr Choi.  The figures proposed, which I note are very substantially lower obviously for Choi than for the first respondent, which may well not be trading at all, are reflected in the proposed total range at paragraph 78 of the agreed submissions.

Conclusion as to the appropriate percentage of penalties

1. I think that these are significant contraventions.  They involve very substantial underpayments to a marginalised and disadvantaged worker.  The contraventions were either in my view knowing (payslips and the like) or at the very least reckless.  There is a need to deter both the respondents and others.  The respondents have already had the benefit of their cooperation with the applicant and, in the case of the first respondent, a substantial benefit under the totality principle.  In these circumstances, it is not necessary to consider the totality principle further as the parties have already done so.

2. Bearing in mind however that it is for the Court and not the parties to determine an appropriate precise penalty, and noting of course that since the decision of the High Court in Commonwealth of Australia v Director, Fair Work Building Inspectorate [2015] HCA 46 established that it is permissible for the parties to propose a range, I think that the appropriate range of penalties is 80 per cent of the applicable maximum, even though this case includes one employee rather than three in Photoplus.

3. This is a case that calls for strong remedies.  I note that it is well-established that the Court should not set penalties by reference to the fact that there may be yet worse forms of contravention that might give rise to higher penalties but rather that the penalties in this case should be set at a level commensurate with the degree of culpability of the respondents.  The Court needs to send a clear message in my view that behaviour of this sort, most particularly in circumstances where to

   
   

   an extent the employer was on express notice of its obligations, will give rise to serious sanctions.

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.

Date: 6 June 2018