FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v CNL Group Pty Ltd [2021] FedCFamC2G 215
File number(s): ADG 76 of 2020 Judgment of: JUDGE BROWN Date of judgment: 11 November 2021 Catchwords: INDUSTRIAL LAW – FAIR WORK – Underpayment of two employees – penalty hearing – where respondent’s admit to the charges against them – where the respondent’s maintained false and misleading records – interference with the investigative powers of the Fair Work Ombudsman – where the respondents have been cautioned by the Fair Work Ombudsman previously – first time offender – calculation of penalty – intuitive synthesis. Legislation: Acts Interpretation Act 1901 (Cth), s 15AB.
Crimes Act 1914 (Cth), s 4AA.
Evidence Act 1995 (Cth), s 191.
Fair Work Act 2009 (Cth), ss 3, 44, 45, 125, 134, 535, 536, 539, 546, 550, 557, 682, 701, 706, 707A, 712, 718A.
Fair Work Regulations 2009 (Cth), rr 3.1, 3.44, 3.45, 3.46.
Restaurant Industry Award 2010, cl 13.1, 20.1, 34.1, 34.2.Cases Cited:
Armstrong v Bigeni Contracting Pty Ltd & Anor [2008] FMCA 485.
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8.
Blandy v Coverdale NT Pty Ltd [2008] FCA 1533.
Fair Work Ombudsman v ECFF Pty Ltd [2014] FCCA 2996.
Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579.
Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151.
Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557.
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301.
Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258.
Kelly v Fitzpatrick [2007] FCA 1080.
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7.
Mornington Inn v Jordon [2008] FCAFC 70.
Plancor Pty Ltd v Liquor Hospitality & Miscellaneous Union [2008] FCAFC 170.
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65.
Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman [2014] FCAFC 62.
Veen v R (No 2) (1988) 164 CLR 465.
Yorke & Anor v Lucas (1985) 158 CLR 661.Division: Division 2 General Federal Law Number of paragraphs: 208 Date of hearing: 3 May 2021 Place: Adelaide Counsel for the Applicant: Ms Walker Solicitor for the Applicant: Fair Work Ombudsman Counsel for the Respondents: Mr Lazarevich Solicitor for the Respondents: Duc Mai Lawyers ORDERS
ADG 76 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: CNL GROUP PTY LTD (ACN 162 933 851)
First Respondent
YUBING LI
Second Respondent
MINGANG DU
Third Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
11 NOVEMBER 2021
THE COURT DECLARES BY CONSENT THAT:
1.The First Respondent, CNL Group Pty Ltd (hereinafter referred to as “the First Respondent”), contravened the following civil remedy provisions:
(a)section 45 of the Fair Work Act 2009 (Cth) (hereinafter…
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Details
- Case
- [2021] FedCFamC2G 215
- Decision Date
CaseChat Overview and Summary
The Fair Work Ombudsman brought proceedings against CNL Group Pty Ltd, represented by its managing director, Ms Li, in the Federal Circuit Court. The matter related to the underpayment of two employees, Ms Harayama and Ms Sugawara, in breach of the Fair Work Act 2009. The central issue for the court was to determine the appropriate penalty for the respondents, who admitted to the charges and had been previously cautioned by the Fair Work Ombudsman. The court needed to weigh the severity of the offences against various mitigating factors, such as the relatively small scale of the business and the fact that it was the first offence for the respondents.
In considering the penalty, the court recognised the need to deter future breaches while also considering the context of the offences. The court acknowledged that the underpayment of the employees was a serious breach of the industrial safety net, which the Fair Work Ombudsman was established to protect. The court also noted the respondents' lack of sophistication, the modest nature of their business, and the fact that the employees had been fully compensated. Despite these mitigating factors, the court emphasised the importance of maintaining the integrity of the industrial relations system and the need for a penalty that reflects the seriousness of the offences.
The court concluded that, while the penalties must not be oppressive, they needed to be proportionate to the conduct engaged in by the respondents. The court determined that the penalty should reflect the gravity of the offences, which involved exploiting vulnerable individuals and engaging in an elaborate scheme to conceal the underpayment. The court ultimately imposed penalties that, while significant, were balanced against the mitigating factors present in the case.
The final orders included a determination of the appropriate penalties for the respondents, which were calculated based on the number of offences and the specific circumstances of the case. The court ensured that the penalties were sufficient to achieve the objectives of deterrence and censure, while also taking into account the nature of the respondents' business and the impact of the penalties on them.
In considering the penalty, the court recognised the need to deter future breaches while also considering the context of the offences. The court acknowledged that the underpayment of the employees was a serious breach of the industrial safety net, which the Fair Work Ombudsman was established to protect. The court also noted the respondents' lack of sophistication, the modest nature of their business, and the fact that the employees had been fully compensated. Despite these mitigating factors, the court emphasised the importance of maintaining the integrity of the industrial relations system and the need for a penalty that reflects the seriousness of the offences.
The court concluded that, while the penalties must not be oppressive, they needed to be proportionate to the conduct engaged in by the respondents. The court determined that the penalty should reflect the gravity of the offences, which involved exploiting vulnerable individuals and engaging in an elaborate scheme to conceal the underpayment. The court ultimately imposed penalties that, while significant, were balanced against the mitigating factors present in the case.
The final orders included a determination of the appropriate penalties for the respondents, which were calculated based on the number of offences and the specific circumstances of the case. The court ensured that the penalties were sufficient to achieve the objectives of deterrence and censure, while also taking into account the nature of the respondents' business and the impact of the penalties on them.
Orders
Orders of the court
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Background
Background to the litigation
In a formal sense, Ms Li admits that she was involved in the various contraventions of the Act pertaining to Ms Harayama and Ms Sugawara within the meaning of section 550, and therefore has an accessorial liability.BACKGROUND The Office of the Fair Work Ombudsman is created by section 682 of the FWA. One of the functions of the Ombudsman is to enforce compliance with the Act, including any workplace obligations residing on employers, as a consequence of relevant industrial awards, mandating rates of pay and conditions of employment. In turn, the FWO may appoint Fair Work Inspectors, who are authorised to utilise what are characterised as compliance powers.[13] In general terms, inspectors are directed to investigate complaints in respect of breaches of the industrial law and are authorised to enter workplaces and determine whether an employer has contravened the law, including in respect of the application of any relevant modern award or a provision of the National Employment Standards or otherwise failed to comply with the industrial safety net.[13] See Fair Work Act 2009 (Cth) s 706. In addition, the FWO has a responsibility to educate, advise and assist, both employers and employees, in respect of their respective obligations, arising under the Act and, if necessary, commence proceedings, in appropriate courts, to enforce the provisions of the FWA. Pursuant to section 701 of the Act, the FWO is also a Fair Work Inspector. The FWA empowers the Ombudsman to delegate its statutory responsibilities to Fair Work Inspectors. The Act confers upon such inspectors a number of powers in order to ensure compliance with provisions of the Act. Among other things, inspectors can enter the work place and require the production of employee records.[14][14] Ibid s 712(1). In addition, the FWO, as a consequence of its status as a Fair Work Inspector, has statutory authority to bring proceedings under the Act and seek the imposition of penalties, if breaches of the FWA are established.[15] [15] Ibid s 539(2). Ms Harayama was born in Japan on 7 December 1992. She first arrived in Australia, pursuant to a working holiday visa, on 21 March 2018, following which she worked, as a waitress, in a licenced restaurant on the Gold Coast. In May 2018, she moved to live in Adelaide. She responded to an advertisement placed on the premises of the Gyoza Gyoza restaurant, which indicated they had a vacancy for waiting staff. She was interviewed and offered a position at a rate of pay of $12.00 per hour. She started on the date of her interview, which was 21 May 2018. After one month of employment, her pay was increased to $13.00 per hour. Ms Harayama has deposed that the rate of which she was paid was always fixed at the same rate, regardless of whether she worked on weekends or at night and no matter how many hours she worked per week. Ms Li was her supervisor and it was Ms Harayama’s understanding that she owned the restaurant. At the start and end of each shift, Ms Harayama would write down when she had started and finished work, on a sheet of paper. However, Ms Harayama also kept her own independent record.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
In these circumstances, the court must give earnest consideration to the need to deter Mr Li, in future, from breaching either the Award relevant in these proceedings or other awards germane to any future business activity to be undertaken by her. The calculation of penalties and conclusions It has been said that the task of sentencing is one of the hardest judicial tasks, as it requires the synthesis of competing considerations to arrive at a penalty, which is just and appropriate. Necessarily it is a process of intuitive synthesis. It is useful to think in terms of percentages, but sentencing is not a purely arithmetical process. Eleven offences have been calculated for the first respondent and eight for the second respondent in respect of which penalties must be calculated. I am required to look at the penalties so imposed in aggregate to determine whether it is an appropriate response to the conduct, which led to the breaches. Whilst the penalties, in total must not be oppressive or crushing, they must be proportionate to the conduct engaged in by each of the respondents. I am also alive to the fact that for all intents and purposes Ms Li is the controlling mind of CNL. The inevitable tension between these various considerations encapsulates the particular difficulty of this matter. I regard the conduct of the respondents as being extremely serious and requiring a heavy level of censure. Through a process of artifice, two vulnerable individuals, from overseas, were exploited and underpaid. In terms of the idiosyncratic features of the case, some of the more relevant factors appear to be the amount of underpayment; the fact that only two employees were involved; and the fact that the offending was cut short relatively early on. These are mitigating factors. At the same time, the respondent engaged in an elaborate subterfuge to conceal the underpayment and prevent it being amenable to detection by the industrial authorities. Such offences strike at the heart of the industrial safety net, which the FWO was inaugurated to maintain. On the other hand, the second respondent is not a sophisticated business person and the enterprise she and the first respondent operated is a modest one. The employees concerned have been recompensed in full and the sums involved, although of great subjective significance to the employers concerned are not huge ones. The rort instigated by Ms Li did not result in her inordinate enrichment. The respondents are also first offenders. The legislature has inaugurated a broad range of penalties for the offences in question. Clearly, the top of this range must be reserved for the most serious examples of breach, including repeat offenders. In terms of corporate offenders, I must also bear in mind the wide range of corporate employers – from publically listed corporations, with huge payrolls, deep corporate pockets and ready access to all manner of legal and accounting advice – to small mum and dad businesses, providing modest services to members of the general public.
Ratio Decidendi
Legal Principle Established
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