Fair Work Ombudsman v Clarke Allied Work Pty Ltd
[2024] FedCFamC2G 922
•19 September 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Clarke Allied Work Pty Ltd [2024] FedCFamC2G 922
File number(s): ADG 153 of 2023 Judgment of: JUDGE LUCEV Date of judgment: 19 September 2024 Catchwords: INDUSTRIAL LAW – Contraventions – failure to comply with compliance notice – agreed statement of facts and admissions – agreed penalty – relevant principles concerning agreed penalty – factors for assessment of whether agreed penalty proposed is appropriate. Legislation: Crimes Act 1914 (Cth), s 4AA
Fair Work Act 2009 (Cth) ss 3, 539, 546, 716
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3; (2018) 262 CLR 157; (2018) 92 ALJR 219; (2018) 273 IR 211; (2018) 351 ALR 190; (2018) 70 AILR 102-917
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 274 CLR 450; (2022) 96 ALJR 426; (2022) 314 IR 301; (2022) 399 ALR 599
Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2002] FCA 619
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640; (2013) 304 ALR 186; (2013) 88 ALJR 176; (2013) 96 ACSR 475
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809
Commonwealth Bank of Australia v Finance Sector Union of Australia [2007] FCAFC 18; (2007) 157 FCR 329; (2007) 161 IR 262; (2007) 59 AILR 100-640
Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354
Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128
Fair Work Ombudsman v Althaus Homes Pty Ltd [2021] FCCA 126
Fair Work Ombudsman v Anastasio [2023] FedCFamC2G 827; (2023) 381 FLR 331
Fair Work Ombudsman v Blu Hornsby Pty Ltd & Anor [2016] FCCA 1150
Fair Work Ombudsman v Donence [2023] FedCFamC2G 32
Fair Work Ombudsman v Galb Pty Ltd & Anor [2020] FCCA 2712
Fair Work Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634
Fair Work Ombudsman v Hospitality 3564 Pty Ltd [2022] FedCFamC2G 1035
Fair Work Ombudsman v HSCC Pty Ltd [2020] FCA 655
Fair Work Ombudsman v Mai Pty Ltd [2016] FCCA 1481
Fair Work Ombudsman v Metro Northern Enterprises Pty Ltd [2013] FCCA 1323
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301
Fair Work Ombudsman v Pioneer Personnel Pty Ltd [2017] FCCA 322; (2017) 275 IR 454; (2017) 69 AILR 102-903
Fair Work Ombudsman v Rum Runner Pty Ltd [2018] FCCA 1129
Fair Work Ombudsman v Syndicate Group Pty Ltd [2015] FCCA 2847
Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492
Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 147 IR 462; (2005) 224 ALR 467; (2005) 58 AILR 100-440
Jordan v Mornington Inn Pty Ltd [2007] FCA 1384; (2007) 116 IR 33; (2007) 60 AILR 100-744
Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14
Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; [2004] ATPR 41-993
Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383; (2008) 171 IR 455; (2008) 247 ALR 714
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; (2007) 59 AILR 100-669
Secretary, Department of Health and Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545
The Commonwealth of Australia v Director, Fair Work Building Inspectorate [2015] HCA 46; (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494
Trade Practices Commission v CSR Ltd [(1991) ATPR 41-076
Division: Division 2 General Federal Law Number of paragraphs: 45 Date of last submission/s: 31 July 2024 Date of hearing: Determined on the papers Place: Perth Solicitor for the Applicant: Ms R Smith and Ms S Williams Solicitor for the Respondent: Standon Lawyers ORDERS
ADG 153 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: CLARKE ALLIED WORK PTY LTD (ACN 640849387)
Respondent
ORDER MADE BY:
JUDGE LUCEV
DATE OF ORDER:
19 SEPTEMBER 2024
THE COURT:
1.Declares that the Respondent contravened s 716(5) of the Fair Work Act 2009 (Cth) (“FW Act”) by failing to comply with the compliance notice given to the Respondent on 29 September 2022.
2.Orders that:
(a)pursuant to s 546(1) of the FW Act the Respondent pay a pecuniary penalty to the Commonwealth Consolidated Revenue Fund with respect to the contravention of s 716(5) of the FW Act in the amount of $7,992 within 28 days of this order; and
(b)the Applicant have liberty to apply on 7 days’ notice if the preceding order is not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE LUCEV
INTRODUCTION
In Fair Work Ombudsman v Anastasio [2023] FedCFamC2G 827; (2023) 381 FLR 331 (“Anastasio”) at [1] per Judge Lucev the Court found in penalty hearings in fair work proceedings that conferral between the parties with respect to penalty was consistent with the role of the Commonwealth (there, and here, the Fair Work Ombudsman (“FWO”)) as a model litigant. In these proceedings the FWO and the respondent, Clarke Allied Work Pty Ltd (“Clarke Allied”) have conferred and reached agreement as to penalty, and also that the matter be dealt with on the papers. The matter concerns a contravention of s 716(5) of the Fair Work Act 2009 (Cth) (“FW Act”) by reason of Clarke Allied having failed to comply with a compliance notice (“Compliance Notice”) issued by the FWO on 29 September 2022 (“Contravention”).
DECLARATION AND ORDERS SOUGHT BY CONSENT
By consent the parties seek a declaration and orders in the following terms:
Declarations by consent that:
1.The Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with the compliance notice given to the Respondent on 29 September 2022.
Orders that:
2.Pursuant to section 546(1) of the FW Act, the Respondent pay a pecuniary penalty to the Commonwealth Consolidated Revenue Fund with respect to the contravention of section 716(5) of the FW Act in the amount of $7,992 within 28 days of this order.
3.The Applicant have liberty to apply on 7 days’ notice if the preceding order is not complied with.
4. Such further orders as the Court considers appropriate.
The parties have agreed to a penalty of $7,992 for the Contravention, being 30% of the maximum with a 20% discount for cooperation and rectification..
ISSUE
The primary issue for the Court is whether the agreed penalties are appropriate penalties. This involves:
(a)a consideration of the principles concerning the approach to be taken by the Court where an agreed penalty is proposed; and
(b)an assessment of whether the penalty proposed is appropriate having regard to relevant considerations.
STATEMENT OF AGREED FACTS
A Statement of Agreed Facts (“SOAF”) was filed on 7 June 2024, and is in the following terms:
This Statement of Agreed Facts (SOAF) is made by the Applicant and the Respondent for the purposes of section 191 of the Evidence Act 1995 (Cth).
A. ADMITTED CONTRAVENTION
1.On the basis of the facts set out below, the Respondent, Clarke Allied Work Pty Ltd, admits that it contravened section 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing without reasonable excuse to comply with a compliance notice given to it on or around 29 September 2022 (Compliance Notice) in relation to alleged contraventions of the FW Act in respect of its employment of Phillip (Ziyi) Li (Employee).
B. THE PARTIES
The Applicant
2. The Applicant, the Fair Work Ombudsman, is and was at all relevant times:
(a)a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to section 687(1) of the FW Act;
(b)a Fair Work Inspector (FWI) pursuant to section 701 of the FW Act; and
(c)a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions pursuant to section 539(2) of the FW Act.
3.FWI Sevda Keremelevski (FWI Keremelevski) is and was at all relevant times a FWI appointed by the Applicant under section 700 of the FW Act.
The Respondent
4. The Respondent is and was at all relevant times:
(a)a company incorporated under the Corporations Act 2001 (Cth) and registered since 11 May 2020;
(b)a “constitutional corporation” within the meaning of section 12 of the FW Act;
(c)a “national system employer” within the meaning of section 14 of the FW Act;
(d)operating a dietitian business in South Australia and trading as “The Innovative Dietitian”; and
(e)required to comply with the FW Act in respect of the employment of the Employee, as referred to in paragraph 6(a) below.
5. CONTRAVENTION OF SECTION 716(5) OF THE FW ACT
The Investigation
5.On or about 9 August 2022, FWI Keremelevski commenced an investigation into the Respondent’s compliance with the FW Act (Investigation).
6.Based on the information obtained during the Investigation, FWI Keremelevski formed a reasonable belief that:
(a) the Respondent employed the Employee from:
(i)10 August 2020 to 2 May 2021 on a part-time basis as a Dietitian;
(ii)from 3 May 2021 to 10 June 2022 on a full-time basis as a Principal Dietitian;
(b)the Health Professionals and Support Services Award 2020 (Award) covered and applied to the Respondent in relation to the Employee’s employment;
(c)from 3 May 2021 to 10 June 2022, the Employee was classified as a Health Professional employee – Level 2 pursuant to the Award;
(d)the Employee was not paid for ordinary hours of work pursuant to the Award from 23 May 2022 to 10 June 2022 (Underpayment Period); and
(e)the Employee was not paid for accrued but untaken annual leave and annual leave loading on the termination of his employment.
7.By reason of the matters at paragraph 6 above, FWI Keremelevski formed a reasonable belief, within the meaning of section 716(1) of the FW Act, that in respect of the Employee’s employment, the Respondent contravened:
(a)clause 17 of the Award by failing to pay the Employee the minimum rate; and
(b)section 90(2) of the FW Act, a provision of the National Employment Standards, by failing to pay accrued but untaken annual leave on termination of employment,
(collectively, Contraventions).
Compliance Notice
8.On or around 29 September 2022, FWI Keremelevski gave the Respondent a notice in respect of the Contraventions pursuant to section 716(2) of the FW Act (Compliance Notice) by posting the Compliance Notice to the Respondent’s registered office, being 239 Magill Road, Maylands, SA, 5069 (Registered Office).
9.Pursuant to section 716(2) of the FW Act, the Compliance Notice required the Respondent to:
(a)by 27 October 2022, take specified action to remedy the direct effects of the Contraventions (Specified Action) including:
(i)calculating and paying the outstanding amounts owed to the Employee in respect of the Contraventions;
(ii)calculating and paying to the Employee’s chosen superannuation fund any additional superannuation required to be paid in respect of the amounts referred to in paragraph 9(a)(i); and
(b)by 3 November 2022, produce reasonable evidence to the Applicant of the Respondent’s compliance in carrying out the Specified Action set out in the Compliance Notice by preparing and producing calculations and evidence that the amounts owed had been paid to the Employee.
10. The Compliance Notice met the requirements of section 716(3) of the FW Act.
Failure to comply with the Compliance Notice
11. The Respondent admits it did not:
(a)take the Specified Action set out in the Compliance Notice by 27 October 2022; or
(b)produce to the Applicant reasonable evidence of compliance in carrying out the Specified Action set out in the Compliance Notice by 3 November 2022;
(c)apply to have the Compliance Notice reviewed by an eligible court under section 717 of the FW Act.
12. The Respondent admits that it:
(a) failed to comply with the Compliance Notice;
(b)did not have a reasonable excuse for failing to comply with the Compliance Notice; and
(c) as a result, contravened section 716(5) of the FW Act.
Amount under the Compliance Notice
13. During the Underpayment Period, the Employee:
(a)was not paid for 106.5 ordinary hours of work pursuant to the Award (Underpayment Hours); and
(b)pursuant to clause 17.3 of the Award, was entitled to be paid $3,487.87 for the Underpayment Hours.
14. At the conclusion of his employment, the Employee:
(a)had 177.37 hours of accrued but untaken annual leave (Outstanding Annual Leave Hours);
(b) was not paid for the Outstanding Annual Leave Hours; and
(c)pursuant to section 90(2) of the FW Act, was entitled to be paid $6,899.72 for the Outstanding Annual Leave Hours.
15.By reason of the matters set out at paragraphs 13 and 14, the Respondent would have paid the Employee $10,387.59 (Underpayment Amount) if it had taken the Specified Action.
16.After the time for compliance with the Compliance Notice had expired, the Respondent paid to the Employee:
(a) $3,487.87 gross in respect of the Underpayment Hours; and
(b)$6,899.72 gross in respect to the Outstanding Annual Leave Hours totalling an amount of $10,387.59 gross.
17.In addition to the payments made by the Respondent to the Employee at paragraph 16 above the Respondent has paid to the Employee’s nominated superannuation fund, Host Plus, an additional amount of $1,085.99.
18.By reason of the matters set out at paragraphs 13 to 17 above the Respondent has paid the Employee the Underpayment Amount, plus additional superannuation contributions of $1,085.99.
D. RECOMMENDED RELIEF
Declaration
19.By consent the parties seek a declaration that the Respondent contravened section 716(5) of the FW Act by failing to comply with the Compliance Notice.
Orders
20. By consent the parties seek orders that:
(a)pursuant to section 546(1) of the FW Act, the Respondent pay a pecuniary penalty to the Commonwealth with respect to the contravention agreed in paragraph 19;
(b)the Applicant have liberty to apply on 7 days’ notice if the preceding order is not complied with; and
(c) such further orders as the Court considers appropriate.
RELEVANT PRINCIPLES CONCERNING AGREED PENALTY
In dealing with proposed agreed penalties under Commonwealth legislation the Federal Court has developed certain principles for guidance. They include:
(a)that the court the bears ultimate responsibility for determining the penalty, it is not bound by the parties agreement, and must consider for itself what constitutes an appropriate penalty to be imposed: Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; [2004] ATPR 41-993 (“Mobil Oil”) at [51(i)], [56] and [79] per Branson, Sackville and Gyles JJ;
(b)determining penalty quantum is not an exact science, and within a permissible range a particular figure is not necessarily more appropriate than another figure: Mobil Oil at [51(ii)] per Branson, Sackville and Gyles JJ;
(c)promoting settlement of litigation is in the public interest, and where the parties agree on facts and penalty, they may present a statement of agreed facts, including a view as to the effect of those facts, and submissions on penalty: Mobil Oil at [51(iii)] per Branson, Sackville and Gyles JJ;
(d)the view of the regulatory body is relevant, particularly where the view concerns matters within the regulator’s expertise, but is not determinative of penalty: Mobil Oil at [51(iv)] per Branson, Sackville and Gyles JJ;
(e)in determining appropriate penalty the court will examine all the circumstances, including an agreed statement of facts, and, if appropriate, may act on that statement: Mobil Oil at [51(v)] per Branson, Sackville and Gyles JJ; and
(f)a jointly proposed penalty will not be rejected simply because the court might have chosen a different figure: it is sufficient if the jointly proposed penalty is “within the permissible range”: Mobil Oil at [51(vi)] per Branson, Sackville and Gyles JJ, or “broadly speaking” within that range: Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2002] FCA 619 at [24] per Weinberg J.
In The Commonwealth of Australia v Director, Fair Work Building Inspectorate [2015] HCA 46; (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494 (“Agreed Penalties Case”) the High Court held that the principles applicable to agreed penalty submissions in a civil penalty proceeding remain those articulated in Mobil Oil: at [32] and [47]-[50] per French CJ, Kiefel, Bell, Nettle and Gordon JJ and [68] per Gageler J.
ASSESSMENT OF APPROPRIATE PENALTIES
In assessing whether the proposed penalty is appropriate the Court must have regard to the primary purpose of the imposition of civil penalties under the FW Act.
The High Court has explained the primary purpose of the imposition of civil penalties. In the Agreed Penalties Case the High Court stated “…whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd [(1991) ATPR 41-076; [1990] FCA 762], is primarily if not wholly protective in promoting the public interest in compliance…”: at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. More recently the High Court has further explained, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3; (2018) 262 CLR 157; (2018) 92 ALJR 219; (2018) 273 IR 211; (2018) 351 ALR 190; (2018) 70 AILR 102-917 (“ABCC v CFMEU”) at [116] per Keane, Nettle and Gordon JJ, that the “principal object” of deterrence depends on a penalty having the necessary “sting or burden” to secure the specific and general deterrent effects that are the raison d’être of its imposition. That purpose has been reinforced by the judgment of the High Court in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 274 CLR 450; (2022) 96 ALJR 426; (2022) 314 IR 301; (2022) 399 ALR 599 (“Pattinson”) where at [9] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ the purpose of the civil remedy regime in the FW Act was described by the majority as being the promotion of the public interest in compliance with the provisions of the FW Act by way of deterrence of further contravention. In Pattinson at [66] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ the High Court expressed the view that s 546 of the FW Act had, as its underlying theory, the notion that the financial disincentive imposed by way of pecuniary penalty will be such as to encourage compliance with the law by ensuring that contraventions are viewed by the contravener, and others, “as an economically irrational choice”. The High Court further observed that the function of the court imposing a penalty was to give effect to the intention of the FW Act in this regard, and that the courts must do what they can to deter non-compliance with the FW Act.
In determining what penalty to impose the Court must assess the seriousness of the offending subject to the alleged contravention in the context of all the factual circumstances that arise. In that regard the Court has long had regard to a series of considerations, which are not fixed and which are not a check-list: Pattinson at [18] and [68] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ; Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 (“Kelly”) at [14] per Tracey J; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809 at [91] per Buchanan J. Those considerations include the following:
(a)the nature and extent of the conduct which led to the breach;
(b)the circumstances in which the conduct took place;
(c)the nature and extent of any loss or damage sustained as a result of the breach;
(d)whether there has been similar previous conduct by the alleged contravener;
(e)whether the breach was properly distinct or arose out of one course of conduct;
(f)the size of the business enterprise involved;
(g)whether or not the breach was deliberate;
(h)the involvement of senior management in the breach;
(i)whether the party committing the breach had shown contrition;
(j)whether the party committing the breach has taken corrective action;
(k)whether the party committing the breach has cooperated with regulatory authorities;
(l)the need to ensure compliance with minimum standards by the provision of an effective means for investigation and enforcement of employee entitlements; and
(m)the need for specific and general deterrence.
FACTUAL BACKGROUND
The relevant factual background is sufficiently set out in the SOAF and the affidavits of:
(a)Fair Work Inspector Sevda Keremelevski (“FWI Keremelevski”) filed on 5 July 2024 (“Keremelevski Affidavit”);
(b)Sophie Williams filed on 5 July 2024 (“Williams Affidavit”); and
(c)Ms Fiona Margaret Clarke filed on 31 July 2024 (“Clarke Affidavit”).
To the extent necessary the above affidavit material is referred to in the penalty considerations set out below.
PENALTY CONSIDERATIONS
Nature and extent of and circumstances in which the conduct which led to the contravention took place
The FWO submitted that:
(a)the contravention of s 716(5) of the FW Act took place against a background where Clarke Allied was on notice from 29 September 2022 of the due date for compliance with the Compliance Notice, and that failure to comply with the Compliance Notice may lead to the FWO commencing proceedings seeking civil penalties and orders for compliance: Keremelevski Affidavit, Annexures [SK-3] and [SK-5];
(b)after giving Clarke Allied the Compliance Notice, but before compliance was due on 3 November 2022, FWI Keremelevski gave Clarke Allied three separate reminders to comply with the Compliance Notice: Keremelevski Affidavit, Annexures [SK-4] to [SK-6]. On this basis, the FWO submits that Clarke Allied’s failure to comply with the Compliance Notice was deliberate. After compliance was due, Clarke Allied was given a further three opportunities to rectify its non-compliance with the Compliance Notice before these proceedings were commenced, but Clarke Allied did not do so: Keremelevski Affidavit, Annexures [SK-7] and [SK-8]; Williams Affidavit, [5]-[6], Annexures [SW-1]; and
(c)as a result of Clarke Allied’s failure to comply with the Compliance Notice, and failure to rectify its non-compliance, the FWO was required to bring proceedings seeking orders to remedy the Contravention.
Clarke Allied submitted that:
(a)this is not a case where Clarke Allied deliberately ignored the Compliance Notice or was indifferent to its statutory workplace obligations, but rather a situation where Clarke Allied initially relied on erroneous and misguided advice from Mr John Fitzpatrick (“Mr Fitzpatrick”), Clarke Allied’s former business advisor and in-house legal counsel;
(b)Clarke Allied, through its director Ms Clarke, acknowledges that prior to receiving the Compliance Notice, the FWO liaised with Clarke Allied to address the issue concerning its former employee, Mr Phillip (Ziyi) Li (“Mr Li”), and his final payment from Clarke Allied following his resignation from employment: Clarke Affidavit at [47]-[75];
(c)Clarke Allied further acknowledges that it received the Compliance Notice: Clarke Affidavit at [52], and further communications from the FWO with respect to responding to the Compliance Notice: Clarke Affidavit at [58] and [61];
(d)throughout the FWO’s investigation Mr Fitzpatrick was Clarke Allied’s trusted business advisor and in-house legal counsel whose advice Ms Clarke relied on in dealing with the Compliance Notice: Clarke Affidavit at [60];
(e)based on advice from Mr Fitzpatrick Ms Clarke had understood that Clarke Allied had responded to the Compliance Notice: Clarke Affidavit at [56], [57], [59], [61] and [62];
(f)it was not until proceedings were instituted by the FWO against Clarke Allied and Mr Fitzpatrick ultimately failed to prepare a Defence, despite numerous follow ups from Ms Clarke, that Ms Clarke made the decision to terminate Mr Fitzpatrick’s services on or around 2 November 2023: Clarke Affidavit at [71]-[75]; and
(g)after engaging specialist legal advice in or around December 2023, Ms Clarke promptly attended to rectifying the Contravention.
This is an instance of a single failure to comply with a compliance notice. The Compliance Notice in this case related to a relatively small amount of money (albeit that it may have been significant to Mr Li) and two discrete failures to pay: the first a failure to pay the sum of $3,487.87 for ordinary hours of work for a single relatively short 19 day period prior to Mr Li’s resignation, the second a failure to pay the sum of $6,899.72 by way of outstanding annual leave upon Mr Li’s resignation.
The failure to comply with the Compliance Notice and the underpayments the subject of the Compliance Notice are both therefore at the lower end of the spectrum of contravening conduct under the FW Act.
More concerning, however, are the circumstances leading to the failure to comply with the Compliance Notice, it having been given to Clarke Allied on 29 September 2022. There were then three separate reminders in relation to compliance with the Compliance Notice (due on 3 November 2022) sent by the FWO on 5, 12 and 27 October 2022 by FWI Keremelevski. Neither the reminders nor the Compliance Notice elicited any response from Clarke Allied. Clarke Allied left the matter in the hands of a senior officer, who was also apparently in-house counsel, who seemingly did nothing to ensure compliance with the Compliance Notice. And whilst Ms Clarke’s actions in terminating the services of Mr Fitzpatrick are, in the circumstances outlined above, entirely understandable, it remains the case that there was an organisational failure because no one ensured that there had been compliance with the Compliance Notice. It was then not until more than eight months later, proceedings having been initiated for failure to comply with the Compliance Notice on 13 June 2023, that the payments required to be made to Mr Li by the Compliance Notice were finally made.
In the circumstances there is little in the nature and extent of the conduct and the circumstances in which the conduct took place which ameliorates the conduct of Clarke Allied.
Nature and extent of loss
The extent of the loss of entitlements to Mr Li is set out at [15] above, and need not be repeated, save to say that it is not a significant amount and is at the lower end of the spectrum of entitlement loss.
The failure to comply with a statutory notice gives rise to a significant public loss, because the FWO is required to bring proceedings before the Court to enforce compliance: Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492 at [42] per Judge Emmett. The ultimate purpose of s 716 of the FW Act is to prevent timely and expensive litigation in relation to contraventions of the FW Act. The failure of Clarke Allied to comply with the Compliance Notice undermines that purpose.
The failure to comply with the Compliance Notice therefore results in it being necessary for the Commonwealth to fund the proceedings instituted by the FWO and the time and resources expended by this Court in hearing and determining the proceedings (albeit that ultimately both the facts and penalty are agreed). Compliance with the Compliance Notice by Clarke Allied would have obviated those losses.
Size and financial resources of the contravener
It is well-established that, regardless of size and financial circumstances, an employer is not exculpated from contraventions of workplace laws: Fair Work Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634 at [46] per Judge Jones; Fair Work Ombudsman v Rum Runner Pty Ltd [2018] FCCA 1129 at [102] per Judge Jones; Kelly at [28] per Tracey J. Size and financial circumstances may however be relevant considerations in determining penalty where appropriate evidence is put forward, but this needs to be weighed against the need for general deterrence: Fair Work Ombudsman v Althaus Homes Pty Ltd [2021] FCCA 126 at [35] per Judge Jarrett; Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 at [105]-[106] per Bromwich J. In other words, “capacity to pay is of less relevance than the objective of general deterrence”: Jordan v Mornington Inn Pty Ltd [2007] FCA 1384; (2007) 116 IR 33; (2007) 60 AILR 100-744 at [99] per Heerey J. As a statement of principle, this was described on appeal as “unimpeachable”: Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383; (2008) 171 IR 455; (2008) 247 ALR 714 at [69] per Stone and Buchanan JJ.
Clarke Allied is an employing entity established in May 2020 which now employs 29 staff with a fulltime equivalent staff number of approximately 20: Clarke Affidavit at [10] and [13]. The available evidence would appear to indicate that Clarke Allied is a small to medium size enterprise, but the evidence gives no indication as to its financial position. There is no evidence which would indicate that Clarke Allied would be unable to pay an appropriate penalty, particularly bearing in mind that the agreed amount is a modest $7,992.
Compliance with minimum standards
The FWO submits that:
(a)one of the principal purposes of the FW Act is to provide a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions for all employees: FW Act, s 3(b). Compliance notices have been recognised by the Court as an “important part of the armoury of Fair Work Inspectors in fulfilling their functions”: Fair Work Ombudsman v Blu Hornsby Pty Ltd & Anor [2016] FCCA 1150 at [29] per Judge Smith. Compliance notices are designed to provide a simple and cost effective way to ensure compliance, whilst educating employers: Fair Work Ombudsman v Galb Pty Ltd & Anor [2020] FCCA 2712 at [24] per Judge Riethmuller. This Court has recognised that a failure to comply with a statutory notice properly issued by the FWO is objectively serious conduct: Fair Work Ombudsman v Donence [2023] FedCFamC2G 32 at [48] per Judge Riley;
(b)Clarke Allied’s failure to comply with the Compliance Notice undermines the enforcement framework established by the FW Act, and the safety net of entitlements it is designed to protect. As such, the penalty against Clarke Allied should be set at a level which reflects the seriousness of a failure to comply with a statutory notice; and
(c)while the FWO accepts that Clarke Allied has ultimately rectified its non-compliance, the delay in Mr Li receiving his minimum entitlements constitutes a relevant loss flowing from the Contravention: Fair Work Ombudsman v Hospitality 3564 Pty Ltd [2022] FedCFamC2G 1035 at [80] per Judge Forbes.
Clarke Allied submits:
(a)prior to the subject-matter proceedings Clarke Allied had no history of contravening workplace laws, nor any judgment against it: Clarke Affidavit at [82] and [91];
(b)it is an employer who, through its various workplace initiatives: Clarke Affidavit at [14], including:
(i)providing supported traineeships as part of also being a registered training organisation: Clarke Affidavit at [15] and [17];
(ii)providing on-going staff workplace training and education: Clarke Affidavit at [14] and [16]; and
(iii)providing staff with access to mental health professionals: Clarke Affidavit at [14],
is an employer who actively engages with its staff and promotes a workplace that is supportive of its employees and the community;
(c)with respect to Mr Li, Clarke Allied supported him during his employment and with his career aspirations, including by way of:
(i)employing him as a dietician when he did not have prior experience in the dietetics field: Clarke Affidavit at [20];
(ii)promoting him ahead of the incremental progression steps in the Health Professionals and Support Services Award 2020 (“Award”) and providing him with an annual salary as a Principal Dietician in excess of the minimum applicable rate provided for under the Award: Clarke Affidavit at [23];
(iii)supporting him to obtain the Fermentable Oligosaccharides, Disaccharides, Monosaccharides and Polyols (“FODMAP”) qualification for irritable bowel syndrome: Clarke Affidavit at [24.a.]; and
(iv)providing ongoing training, mentoring and coaching: Clarke Affidavit at [24.b.]–[24.e.]; and
(d)without derogating from the seriousness of Clarke Allied’s contravening conduct, which Clarke Allied accepts complete responsibility for, there is no suggestion that the underpayment (which has been rectified) arose from a misclassification under the Award.
As already alluded to the damage in a case such as this is often to the utility and effectiveness of the relevant statutory objective: see [20] above; Secretary, Department of Health and Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at [56] per Flick J. A principle and fundamental object of the FW Act is the preservation of an effective safety net for employee entitlements and effective enforcement mechanisms: FW Act, s 3. The substantial penalties now set by the Commonwealth Parliament and now awarded by courts for failing to comply with minimum obligations reinforces the importance placed on compliance with minimum standards and an effective enforcement framework: FW Act, s 539(2); Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 147 IR 462; (2005) 224 ALR 467; (2005) 58 AILR 100-440 (“FSU”) at [72] per Merkel J; Commonwealth Bank of Australia v Finance Sector Union of Australia [2007] FCAFC 18; (2007) 157 FCR 329; (2007) 161 IR 262; (2007) 59 AILR 100-640, FCR at [192] per Branson J.
In this case Clarke Allied have simply failed to comply with the minimum standards for payment for ordinary hours for Mr Li and for payment of outstanding annual leave entitlements upon resignation. The matters alluded to in Clarke Allied’s submissions: see [25] above, are not matters which obviate the necessity to comply with minimum standards, particularly as to payments required to be made to employees.
In the context of the objects of the FW Act requiring compliance with minimum standards the contraventions in this case involve an undermining of the statutory objectives and purpose of the FW Act, and require a penalty sufficient to demonstrate the consequences of failing to comply with the FW Act, and to act as an incentive for other employers to ensure that they comply with minimum standards.
Contrition, corrective action and cooperation
In relation to contrition, corrective action and cooperation the FWO submits that:
(a)Clarke Allied has shown contrition during the proceedings, including by, through its director, Ms Clarke, making statements such as “I’m very sorry” and “I’m very ashamed. I will learn from this and move forward”: Williams Affidavit at [7], Annexure [SW-3];
(b)Clarke Allied has taken corrective action by paying the amount of $10,387.59 (gross), plus superannuation to Mr Li, being the amount it would have paid to Mr Li had Clarke Allied complied with the Compliance Notice: SOAF at [16]; and
(c)by entering into the SOAF and admitting the conduct giving rise to the Contravention, Clarke Allied has avoided the need for the parties and the Court to incur the time and expense associated with a contested liability hearing.
Clarke Allied submit in relation to contrition, corrective action and cooperation as follows:
(a)from the time that Clarke Allied terminated Mr Fitzpatrick’s services and engaged alternate, specialist legal advisors, it has rectified the Contravention and worked with the FWO to ensure the correct payments have been made to Mr Li: Clarke Affidavit at [77]-[79], and cooperated with the FWO in relation to the SOAF and an agreed penalty for this Court’s consideration;
(b)Clarke Allied’s director, Ms Clarke, has unreservedly expressed contrition and remorse for the Contravention: Clarke Affidavit at [81] and [82]; Williams’ Affidavit at [7] and Annexure [SW-3];
(c)Ms Clarke has reflected on how Clarke Allied could have better dealt with the FWO’s investigation from the outset: Clarke Affidavit at [80] and [83], and implemented numerous measures to ensure there are steps in place to help ensure Clarke Allied is compliant with its workplace obligations including:
(i)from around September 2023 engaging a Human Resources consultant, Ms Kim Delany from Bloom Consulting and undertaking updated staff assessments, coaching and training: Clarke Affidavit at [84];
(ii)from early December 2023 engaging specialist external legal advisors: Clarke Affidavit at [85];
(iii)from February 2024 subscribing to Employsure and undertaking a review of Clarke Allied’s employment agreements and ensuring Clarke Allied is current with its ongoing employment obligations together with assistance from Clarke Allied’s new external legal advisors: Clarke Affidavit at [86] and [87]; and
(iv)structured leadership team meetings to help with transparent accountability: Clarke Affidavit at [90];
(d)Ms Clarke has also sought personal professional assistance through her psychologist and psychotherapist to help her deal with the “… anxiety, stress, disappointment and shame that … [Mr Fitzpatrick’s] behaviour and my previous trust in him has led to these proceedings…” and to help her improve her leadership skills: Clarke Affidavit at [88] and [89]; and
(e)the contrition, corrective action including post Contravention corrective action, and cooperation exhibited by Clarke Allied through Ms Clarke evidences the seriousness and importance with which it places on this matter and Clarke Allied’s statutory compliance.
The parties submit that a discount of 20% is appropriate for corrective action and rectification.
The Court places weight on cooperation which is meaningful, active or early: Fair Work Ombudsman v Pioneer Personnel Pty Ltd [2017] FCCA 322; (2017) 275 IR 454; (2017) 69 AILR 102-903 at [47] per Judge McNab; Fair Work Ombudsman v Mai Pty Ltd [2016] FCCA 1481 at [145] per Judge Jarrett; Fair Work Ombudsman v Metro Northern Enterprises Pty Ltd [2013] FCCA 1323 at [43] per Judge Barnes.
In this case the Court accepts that the evidence indicates that Clarke Allied is now extremely contrite and has taken appropriate corrective action. Cooperation has, ultimately, been meaningful and active, albeit that it was not as early as it could have been. These factors obviously warrant some amelioration in the quantum of penalty when it is being assessed.
Whether prior contraventions
The only evidence with respect to prior contraventions before the Court is that of Ms Clarke which indicates that Clarke Allied has no prior history of contravening workplace laws, nor any judgment against it: Clarke Affidavit at [82] and [91]. Ordinarily, and subject to consideration of the other factors, Clarke Allied’s status as a first-time contravenor would entitle it to some discount on penalty.
Deterrence
In ABCC v CFMEU at [116] per Keane, Nettle and Gordon JJ it was said that “the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners”; see also Pattinson at [9] and [66] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ (referred to at [9] above).
General deterrence must serve a purpose such that the penalty is not seen by others as just “the cost of doing business”: Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640; (2013) 304 ALR 186; (2013) 88 ALJR 176; (2013) 96 ACSR 475 at [64] and [66] per French CJ, Crennan, Bell and Keane JJ. Fair Work Ombudsman v HSCC Pty Ltd [2020] FCA 655 at [5] per Flick J. In order to be useful as a general deterrent, a penalty “should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations”: Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; (2007) 59 AILR 100-669 at [93] per Lander J.
In Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354 at [56] per Judge Brown this Court explained that s 716 of the FW Act ought to be of assistance to an errant employer, and therefore when dealing with persons who have contravened s 716 of the FW Act it is necessary for the Court to “consider a significant penalty as a matter of both general and specific deterrence, given the interest the community has in ensuring that there is compliance with relevant legislation, and protecting the rights of employees to be paid what they are entitled”.
The efficacy of statutory notices such as compliance notices will be hindered if recipients perceive that a failure to comply carries no meaningful consequences: Anastasio at [21] per Judge Lucev. Given the importance of the power to issue a compliance notice as an enforcement tool and that compliance with compliance notices avoids the need for litigation or the imposition of any penalties: Fair Work Ombudsman v Syndicate Group Pty Ltd [2015] FCCA 2847 at [27] per Judge Hartnett, penalties for non-compliance should be set at a level which demonstrates there are serious consequences for failing to comply with a compliance notice. In doing so, the Court will deter other parties from failing to comply with compliance notices.
There is no disagreement between the FWO and Clarke Allied that:
(a)the penalties imposed by the Court should reflect the need for both general and specific deterrence;
(b)if a person complies with a compliance notice, no civil remedy proceedings can be brought against the person for an underlying contravention: FW Act, s 716(4A)(b)(i). See also, s 716(4B) of the FW Act which provides that, in complying, the person is not taken to have admitted or been found to have contravened the civil remedy provision of an underlying contravention. The efficacy of compliance notices will be hindered if recipients perceive that a failure to comply carries no meaningful consequences;
(c)the FWO submits that the penalty sought for the failure to comply with the Compliance Notice is appropriate as a general deterrent in preventing similar contraventions of a like kind; and
(d)further, in circumstances where Clarke Allied remains registered and is still employing employees: Williams Affidavit, Annexures [SW-3] and [SW-4], specific deterrence is a relevant consideration.
Clarke Allied also submits that given the matters set out at [30] above the likelihood that Clarke Allied will be a repeat offender is miniscule.
In this case, it suffices to observe that the penalty to be set will need to be set at a level which having regard to the importance and relevance of general deterrence as a consideration, acts as a warning to other employers generally, not to engage in the conduct of contravening compliance notices.
Specific deterrence is directed at ensuring that a contravener is not prepared to embark upon the risk of engaging in the same contravening conduct in the future: Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 at [50] per Gilmour J. In this matter, there is a need for a measure of specific deterrence having regard to both the fact that Clarke Allied failed to have proper regard for its obligations under the FW Act in relation to the Compliance Notice and as an employer, and because Clarke Allied continues to operate as a business, and in those circumstances a penalty may operate as a specific deterrent in relation to any possible future conduct in breach of the FW Act. The measure of specific deterrence is, however, significantly ameliorated in this matter by the genuine contrition exhibited by Ms Clarke, and the steps that she took, albeit only after proceedings were instituted by the FWO, to ensure that Mr Li’s entitlements were paid. The Court accepts that those matters set out at [30] above ought to operate as significantly ameliorating the need for specific deterrence. Nevertheless, the penalty to be fixed will need to take account of and be set at a level which has regard to the importance of specific deterrence as a consideration in cases such as this one.
APPROPRIATE PENALTY
The parties are agreed that:
(a)the maximum penalty is but one relevant consideration and does not constrain the exercise of the Court’s discretion beyond requiring the existence of “some reasonable relationship between the theoretical maximum and the final penalty imposed”: Pattinson at [54]-[55] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ;
(b)pursuant to ss 539(2) and 546 of the FW Act, the maximum penalty that the Court may impose for a contravention of s 716(5) of the FW Act is $33,300 for a company: Crimes Act 1914 (Cth), s 4AA; FW Act, ss 539(2) and 546(2)(b); and
(c)the parties agree that a penalty of $7,992, being 30% of the maximum with a 20% discount for cooperation and rectification, for the Contravention is appropriate.
Having regard to all of the circumstances and the considerations in relation to penalty as set out above the Court is satisfied that the agreed penalty of $7,992 is appropriate, and sufficient to operate to give rise to effective deterrence, both general and specific. It is also within a permissible range of likely possible penalties had the matter not been agreed, and is also a penalty to which the FWO as a regulatory body was prepared to agree.
CONCLUSION
For the above reasons the Court is satisfied that it is appropriate to make the declaration and orders as set out at [20] in the SOAF: see [5] above.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Lucev. Associate:
Dated: 19 September 2024
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