Fair Work Ombudsman v CNL Group Pty Ltd
[2021] FedCFamC2G 215
•11 November 2021
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 referred to as “the Act”) by failing to pay each of the employees, Risa Harayama and Mirei Sugawara (hereinafter referred to as “the Employees”) the minimum rate of pay prescribed by clause 20.1 of the Restaurant Industry Award 2010 (hereinafter referred to as “the Restaurant Award”);
(b)section 45 of the Act by failing to pay each of the Employees the casual loading prescribed by clause 13.1 of the Restaurant Award;
(c)section 45 of the Act by failing to pay each of the Employees Saturday penalty rates prescribed by clause 34.1 of the Restaurant Award;
(d)section 45 of the Act by failing to pay each of the Employees the Sunday penalty rates prescribed by clause 34.1 of the Restaurant Award;
(e)section 45 of the Act by failing to pay each of the Employees an additional amount for work after 10pm pursuant to clause 34.2 of the Restaurant Award;
(f)section 44 of the Act by failing to provide each of the Employees with a Fair Work Information Statement in accordance with subsection 125(1) of the Act;
(g)section 536(1) of the Act, by failing to give pay slips to each of the Employees within one day of making payment to them in relation to the performance of work;
(h)section 535(4) of the Act, by making or keeping the payment summary, knowing it to be false or misleading;
(i)section 535(4) of the Act, by making or keeping pay slips knowing them to be false or misleading;
(j)section 718A of the Act by producing each of the pay slips and PAYG statements to Fair Work Inspector Alexander on 8 December 2018, knowing, or being reckless as to, whether each of the documents was false or misleading; and
(k)section 707A of the Act, in that it intentionally hindered or obstructed Fair Work Inspector Alexander and Fair Work Officer Maunder on 16 January 2019.
2.The Second Respondent, Yubing Li (hereinafter referred to as “the Second Respondent”):
(a)contravened section 707A of the Act, in that she intentionally hindered or obstructed Fair Work Inspector Alexander and Fair Work Officer Maunder on 16 January 2019;
(b)was involved in, within the meaning of section 550 of the Act, the following contraventions of the First Respondent and is therefore taken to have herself contravened the following provisions:
(i)section 45 of the Act by failing to pay each of the Employees the minimum rate of pay prescribed by clause 20.1 of the Restaurant Award;
(ii)section 45 of the Act by failing to pay each of the Employees the Saturday penalty rates prescribed by clause 34.1 of the Restaurant Award;
(iii)section 45 of the Act by failing to pay each of the Employees the Sunday penalty rates prescribed by clause 34.1 of the Restaurant Award;
(iv)section 45 of the Act by failing to pay each of the Employees an additional amount for work after 10pm pursuant to clause 34.2 of the Restaurant Award;
(v)section 536(1) of the Act, by failing to give pay slips to each of the Employees within one day of making payment to them in relation to the performance of work;
(vi)section 535(4) of the Act, by making and keeping pay slips knowing they were false or misleading; and
(vii)section 718A of the Act by producing the each of the pay slips and PAYG statements to Fair Work Inspector Alexander on 8 December 2018, knowing, or being reckless as to whether, each of the documents was false or misleading.
THE COURT ORDERS THAT:
3.The First Respondent pay a total penalty of $66,528.00 pursuant to subsection 546(1) of the Act for its contraventions set out in order (1) above.
4.The Second Respondent pay a total penalty of $11,692.80 pursuant to subsection 546(1) of the Act for her contraventions set out in order (2) above.
5.Pursuant to section 546(3) of the Act, that the pecuniary penalties ordered to be paid by the First and Second Respondents in orders (3) and (4) above are paid to the Commonwealth within twenty-eight (28) days of the date of this order.
6.The Applicant has liberty to apply.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review 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 BROWN:
INTRODUCTION
The Fair Work Ombudsman[1] commenced these proceedings against CNL Group Pty Ltd,[2] Yubing Li,[3] and Mingang Du[4] on 13 February 2020. The proceedings are instituted pursuant to the provisions of the Fair Work Act 2009 (Cth).[5]
[1] Hereinafter referred to as “the FWO” or “the Ombudsman”.
[2] Hereinafter referred to as “CNL”.
[3] Hereinafter referred to as “Ms Li”.
[4] Hereinafter referred to as “Mr Du”.
[5] Hereinafter referred to as “the FWA” or “the Act”.
At relevant times, namely between 11 April 2018 and 29 August 2018, the respondents concerned were involved in the operation of a licenced restaurant located at 95-97 Gouger Street, Adelaide, known as Gyoza Gyoza, which serves Japanese cuisine.
CNL was the holder of a franchise to operate the business restaurant. As a consequence, it employed waiting staff from time to time. The case concerns the admitted failure of the respondents to pay two staff members their proper entitlements under the applicable modern award.
In the jargon of industrial lawyers, these reasons for judgment are related to a penalty hearing – that is what monetary penalty should be imposed by the court and what other orders should be made.
Ms Li is the sole director and shareholder of CNL. Mr Du is her husband. Both Ms Li and Mr Du work at the restaurant. However, Ms Li was the holder of the franchise and was contractually obliged to maintain and operate CNL’s business.
As a consequence, Ms Li is the person who was responsible for keeping the business records of CNL; keeping relevant wage records for each of its employees; calculating and making payment to its various employees; and preparing and issuing pay slips to those employees.
Although Mr Du has been named as a respondent to these proceedings, it has been agreed that no penalties will be sought against him, by the FWO, in respect of any employer breaches of the provisions of the FWA, as it applies to CNL’s employment of staff, in the period from April to August 2018.
The FWO, in its Statement of Claim, instituting these proceedings,[6] allege that CNL and Ms Li have breached provisions of the FWA, relating to the level of wages due to two of the company’s employees.
[6] See Statement of Claim filed 13 February 2020.
Those employees are Risa Harayama, who was employed at Gyoza Gyoza as a waitress, between 21 May 2018 to 25 August 2018; and Mirei Sugawara, who was similarly employed, between 11 April 2018 and 29 August 2018.
In particular, the FWO alleges that CNL failed to pay Ms Harayama and Ms Sugawara the level of wages, to which they were entitled, pursuant to the provisions of the relevant modern award, which is the Restaurant Industry Award 2010 (“the Award”).
Both Ms Harayama and Ms Sugawara were employed on a casual basis, pursuant to the provisions of the Award. The FWO alleges that CNL has contravened the provisions of the FWA on the following bases:
·Failing to pay them the minimum rate of pay;
·Failing to pay them the required casual loading;
·Failing to pay them the Saturday penalty rate;
·Failing to pay them the Sunday penalty rate;
·Failing to pay them the additional amount required to be paid after they had worked after 10.00pm.
In addition, the FWO alleges that CNL failed to provide Ms Harayama and Ms Sugawara copies of the Fair Work Information Statement, as required by the provisions of the Act and did not provide each of them with pay slips in accordance with the Act.
In addition, the FWO alleges that CNL and Ms Li maintained false employment records in a number of areas and, as a result, issued incorrect pay slips based on that false information. As a consequence, it is further alleged that, when these matters were being investigated by a Fair Work Inspector, false employment records were provided to the relevant inspector.
The respondents have been legally represented throughout these proceedings. At the first mention of the case, the parties were referred to mediation. As a consequence of this mediation, it was agreed that the respondents did not need to provide a formal defence.
More significantly, it was agreed that a Statement of Agreed Facts, would be prepared for the court’s consideration, a central element of which was that CNL and Ms Li would formally admit the various contraventions of the FWA alleged against each of them.
In these circumstances, the proceedings are concerned not with whether CNL and Ms Li are civilly liable for breaching the Act, but only with the quantum of the penalty, which should be imposed upon them, in respect of the 11 contraventions arising under the provisions of the FWA.
In these circumstances, the parties have been able to agree upon a Statement of Agreed Facts, relating to the various breaches arising under the FWA.[7] Pursuant to section 191 of the Evidence Act 1995 (Cth) the matters agreed to in this document are taken not to be in dispute. As such, they form the evidentiary basis for the court’s necessary findings in the case.
[7] See Statement of Agreed Facts filed 9 July 2020.
These proceedings are directed towards determining the appropriate level of penalty, to be levelled on both CNL and Ms Li. Those penalties are to be fixed in the light of the Statement of Agreed Facts, which was filed on 9 July 2020.[8]
[8] Ibid.
LEGISLATIVE PROVISIONS
Section 45 of the FWA provides that a person must not contravene a term of a modern award. There is no controversy that the Restaurant Industry Award 2010 is such a modern award and provides minimum awards of pay for employees working in the restaurant industry and sets penalty rates for weekend and out of normal hours work.
Section 44(1) of the FWA provides that a person must not contravene a provision of the National Employment Standards. One of the statutory obligations of the FWO is to promulgate regularly what those standards are.[9] This relates primarily to things such as the maximum numbers of hours which can be worked; parental leave entitlements; annual leave; carers’ leave; and other related matters.
[9] See Fair Work Act 2009 (Cth) s 124(1).
In this context, section 125(1) of the Act requires employers to give an information statement, in which these standards are listed, before, or as soon as practicable after, an employee starts employment.
Section 536(1) and (2) requires employers to provide their employees with pay slips, within one day of paying wages, which contains information prescribed by regulation.[10] This information must include the name of the employer and employee; the pay period; gross and net amounts of payment; and any amount referable to loading, allowance or other penalty.
[10] Fair Work Regulations 2009 (Cth) rr 3.45-3.46.
Pursuant to section 535, employers are required to make and keep, for a period of up to seven years, records in respect of the employees engaged by them. Again, the extent and content of these records is prescribed by regulation.[11] In brief, these records relate to basic employment details; rates of pay; dates of work; hours worked; overtime; penalties, and the like. The records are required to be accurate, legible and available on demand to a Fair Work Inspector.
[11] Ibid rr 3.31-3.44.
In this context, section 535(4) prohibits an employer from making or keeping an employee record or producing an employee pay slip knowing it to be false or misleading. In addition, pursuant to section 718A, it is unlawful for a person to provide false information or produce false or misleading information to a Fair Work Inspector.
The FWA creates the office of the Fair Work Inspector, whose function, in general terms, is to ensure compliance, by employers, with the National Employment Standards and any applicable modern award. In this context, section 718A proscribes that a person must not provide false or misleading information to a Fair Work Inspector, who is carrying out any compliance powers; whilst section 707A prescribes that a person must not hinder or obstruct an inspector in this regard.
Each of the relevant sections is to be characterised as a civil remedy provision by virtue of section 539. Section 539(2) delineates the maximum penalty to be applied to any contravention established by the court. In each case, the maximum penalty is one of 60 penalty units.
At relevant times, a penalty unit amounted to $210.00.[12] Pursuant to the provisions of section 546(2)(b) of the FWA, if the person who has committed the offence in question is a body corporate, the maximum penalty is to be multiplied by five.
[12] See Crimes Act 1914 (Cth) s 4AA.
Accordingly, the maximum penalty applicable to each of the admitted contraventions by the first respondent is $63,000.00 and in respect of the second respondent $12,600.00. Ms Li is liable to penalty as a consequence of the accessorial liability provisions contained in section 550 of The FWA, which reads as follows:
(1)A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
(2)A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a)has aided, abetted, counselled or procured the contravention; or
(b)has induced the contravention, whether by threats or promises or otherwise; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d)has conspired with others to effect the contravention.
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.
Ms Li would pay her, in cash, for the hours she has worked each week. Ms Harayama would sign a form, in a cash book, to acknowledge receipt of her wages. However, she was never provided with a pay slip.
In June 2018, Ms Harayama asked Ms Li for her pay slips, in order to do her tax return. Ms Li replied in the following terms:
I cannot give you a payslip because we do not deduct tax from your wages so you cannot lodge a tax return. You are on a working holiday visa so you do not need to lodge a tax return.[16]
[16] See Affidavit of Risa Harayama filed 5 August 2020 at [12].
In September 2018, Ms Harayama was advised, by her partner, that she was being underpaid. As a consequence, she contacted the FWO. Ms Harayama has deposed that she struggled to make ends meet, particularly in terms of paying her rent, whilst she was employed at Gyoza Gyoza.
Ms Sugawara was born, in Japan, on 26 October 1981. After a period of time living in New Zealand, she moved to Australia in July 2015, pursuant to a New Zealand Citizen Family Relationship Visa. She and her husband lived in Adelaide.
Ms Sugawara also responded to an advertisement posted outside the Gyoza Gyoza restaurant, which she saw in April 2018, indicating that the restaurant needed waiting staff. Ms Sugawara began working at Gyoza Gyoza on 11 April 2018. At the time, she required income to pay her rent, living expenses and to pay off a loan, which she had incurred to pay for surgery.
For the first 3 weeks of her employment, she was paid at the rate of $12.00 per hour. Thereafter, when she designated as an advanced junior, she was paid $13.00 per hour and later again, from August 2018, when designated as a basic senior, she was paid $14.00 per hour.
Ms Sugawara ceased employment at Gyoza Gyoza on 29 August 2018. For the last 2 days of her employment, she was paid at the rate of $19.00 per hour. During the period of her employment, no change was made in respect of payment for her hours of work, regardless of whether she worked on Saturdays or Sundays.
There was no provision for sick pay. Ms Li rostered Ms Sugawara, at Gyoza Gyoza, on Tuesdays, Wednesdays, Thursdays and Saturdays. She worked on Sundays from time to time. The times, which she worked, were recorded on a timesheet, kept at the restaurant. However, Ms Sugawara also kept her own independent record of the hours which she worked.
Ms Sugawara’s evidence, which is not contested, is that she did not receive any pay slips from Ms Li or any other person at Gyoza Gyoza, notwithstanding the fact that she asked Ms Li for them. She was paid in a mixture of cash and by direct deposit, into her bank account.
After working at Gyoza Gyoza, for several months, Ms Sugawara became concerned that she was being underpaid, particularly as she was struggling to pay her bills. In these circumstances she contacted the Fair Work Ombudsman.
Neither Ms Harayama nor Ms Sugawara entered into a formal written contract of employment with CNL. Both are to be regarded as been employed on a casual basis. As previously indicated, the applicable award is the Restaurant Industry Award 2010.
Due to the fact that she had some previous experience working in the restaurant industry, Ms Harayama was classified as a Food and Beverage Attendant Grade 2 under Schedule B of the Award.
On the other hand, Ms Sugawara, given her lack of experience, for the first three months of her employment, was classified as a Food and Beverage Attendance Grade 1, initially at the introductory level.
In these circumstances, the minimum hourly rate, applicable to each employee, for the relevant periods, is as follows:[17]
[17] See Statement of Agreed Facts filed 9 July 2020 at [23].
Employee
Period
Minimum Rate
Ms Harayama
21.05.2018 – 01.07.2018
$19.53
02.07.2018 – 01.07.2018
$20.22
Ms Sugawara
11.04.2018 – 01.07.2018
$18.29
02.07.2018 – 11.07.2018
$18.93
12.07.2018 – 29.08.2018
$19.47
The agreed calculation is that Ms Harayama worked 207.95 ordinary hours and Ms Sugawara worked 330.18 ordinary hours in the relevant period.[18]
[18] Ordinary hours are those which fall on Monday to Friday.
On the basis of the hours worked by her, Ms Harayama was underpaid the sum of $1,410.95 in respect of the minimum rate to which she was entitled; whereas Ms Sugawara was underpaid $1,683.93. This constitutes count 1, which can be characterised as failing to pay minimum rates.[19]
[19] See Statement of Agreed Facts filed 9 July 2020 at [24]-[25].
In addition, given their casual employment, both Ms Harayama and Ms Sugawara were entitled to a casual loading of 25%, on their minimum rate, pursuant to Clause 13.1 of the Award. Given the rates of pay each actually received from CNL, this resulted in Ms Harayama being underpaid $1,035.40 and Ms Sugawara being underpaid $1,527.38. This constituted count 2 and can be characterised as failing to pay casual loading.[20]
[20] Ibid at [26]-[27].
Both Ms Harayama and Ms Sugawara worked on Saturdays. As such, pursuant to Clause 34.1 of the Award, they were required to be paid time and a half, inclusive of casual loading, for the ordinary hours worked by them. This resulted in Ms Harayama being underpaid $1,492.54, in respect of Saturday rates; whilst Ms Sugawara was underpaid $1,867.12 in respect of Sunday rates. This constitutes count 3 and can be characterised as failing to pay Saturday rates.[21]
[21] Ibid at [30]-[31].
Similar considerations apply to Sunday hours. Ms Harayama was underpaid $459.65 in respect of the Sundays, which she worked; whilst Ms Sugawara was underpaid the sum of $969.40, in respect of the Sundays, which she worked. The applicable provision is Clause 34.1 of the Award. This constitutes count 4 and be characterised as failing to pay Sunday rates.[22]
[22] Ibid at [33]-[34].
Finally, in respect of the underpayment of Ms Harayama and Ms Sugawara, Clause 34.2 of the Award requires restaurant industry employees to be paid a loading of 10%, if they work outside of standard hours, which end at 10.00pm. On this basis, Ms Harayama was underpaid $25.91 in respect of her after 10.00pm loading; whilst Ms Sugawara was underpaid an amount of $45.15. This constitutes count 5 and can be characterised as failing to pay after 10pm loading.[23]
[23] Ibid at [36]-[37].
An underpayment pursuant to section 45 of the Act is engaged. It provides that a person must not contravene a term of a modern award. There is no controversy that the restaurant industry award is a modern award and therefore, in respect of the underpayment of Ms Harayama and Ms Sugawara, CNL and Ms Li have committed 5 contraventions of the applicable Award.
The total underpayment in respect of Ms Harayama, in respect of all five counts applicable, was $4,424.45 and so far as Ms Sugawara was concerned, the amount was $6,092.98. The total underpayment being $10,517.43. CNL rectified the underpayments concerned on 11 October 2019.
As a consequence of the Statement of Agreed Facts, the first and second respondents admit that they did not provide to either Ms Harayama or Ms Sugawara a Fair Work Information Statement as defined by section 125(1) of the FWA, and so contravened a provision of the National Employment Standards, leading to a breach of section 44 of the Act.[24] This represents count 6 and can be characterised as the failing to provide Fair Work Information Statements.
[24] Ibid at [41].
Firstly, Ms Harayama, on 17 September 2018, and then secondly, Ms Sugawara, on 21 September 2018, contacted the FWO Infoline to request information in respect of their employment at Gyoza Gyoza. As a consequence, in October 2018, the FWO commenced to investigate CNL and its employment relationship with Ms Harayama and Ms Sugawara.
In October of 2018, the office of the FWO instructed Andrew John Alexander, a Fair Work Inspector, to investigate the complaints made by Ms Harayama and Ms Sugawara. He was assisted in this task, by another Fair Work Inspector, Belinda Maunder.
Ms Harayama and Ms Sugawara were initially interviewed, over the telephone, by Mr Alexander and indicated to him that they had not received any pay slips from Ms Li. Both Ms Harayama and Ms Sugawara have subsequently deposed affidavits, which the FWO relies on in these proceedings.[25]
[25] See Affidavit of Risa Harayama and Affidavit of Mirei Sugawara both filed 5 August 2020.
In her affidavit, Ms Harayama deposed as follows:
Every Wednesday afternoon, Cherry [Ms Li] would pay me in cash for the hours I worked the week before. Each time I was given cash, I would have to sign a form in a cash book to say I received my pay. In June 2018, I asked Cherry for my payslips so I could do my tax return. Cherry said: "I cannot give you a payslip because we do not deduct tax from your wages so you cannot lodge a tax return. You are on working holiday visa so you do not need to lodge a tax return."
I took photos of the cash book and rosters because I thought this might be some evidence of my hours and wages while working at the Restaurant since Cherry refused to give me pay slips.[26]
[26] See Affidavit of Risa Harayama filed 5 August 2020 at [12].
Ms Sugawara deposed in similar terms, namely, she was paid in cash, after being shown a piece of paper, by Ms Li, which was said to record the hours she had worked. She was then asked to sign for the money received by her. Ms Sugawara also deposes that she asked Ms Li for her pay slips but did not receive any response from her. She was fearful, if she persisted, she might lose her job.
This evidence, which is formally admitted,[27] constitutes count 7 and can be characterised as the failure to issue pay slips in contravention of section 536(1) of the FWA.
[27] See Statement of Agreed Facts filed 9 July 2020 at [44]-[45].
On 19 September 2018, following her conversation with Mr Alexander, Ms Harayama wrote an email to Mr Du in order to inform him of her belief that she had been underpaid, whilst employed at Gyoza Gyoza, and provide to him with what she thought were the applicable hourly rates of pay. In response to her inquiry, Ms Harayama was provided with a spreadsheet said to set out the hours which she had worked and the rates of pay she had received.[28]
[28] See Affidavit of Andrew Alexander filed on 12 April 2021 at annexure AA7, and the Affidavit of Risa Harayama filed 5 August 2021 at annexure RH1.
It is admitted that the payment summary was false and misleading[29] because it did not properly record the hours actually worked by Ms Harayama – the difference being 52 minutes. More significantly, the summary overstated both the gross pay to which she was entitled and the net pay actually received by her – the difference in each case being $2,660.23 and $409.85 respectively and misstated the hourly rates at which she had been paid.
[29] See Statement of Agreed Facts filed 9 July 2020 at [46]-[51].
In regard to the hourly rates, the payment summary provided to Ms Harayama indicated she had earned between $18.29 to $28.40 per hour, when in fact she had actually earned between $11.87 and $14.72 per hour.
This constitutes count 8, which can be characterised at the making and keeping of false records in respect of a payment summary in contravention of section 535(4) of the FWA.
Mr Alexander and Ms Maunder first attended on the premises of Gyoza Gyoza on 21 November 2018, where they met Ms Li. Mr Alexander, as he was entitled to do pursuant to the provisions of section 712(1) of the FWA, served a notice on Ms Li requiring her to produce relevant wage records in respect of Ms Harayama and Ms Sugawara.
As indicated above, pursuant to section 712(3) a person served with such a notice is required to comply with the production with it. A failure to do so can render the person liable to the imposition of a civil remedy penalty. [30]
[30] See Fair Work Act 2009 (Cth) s 539.
It is an agreed fact that Mr Alexander, at the time he provided the notice to Ms Li, informed her any failure to comply with the terms of notice was a civil remedy penalty. In addition the notice itself bore the following endorsement:
You may be liable to a civil remedy under the Act for giving false or misleading information or producing false or misleading documents. It is also a serious offence under the Criminal Code (Cth).[31]
[31] See Statement of Agreed Facts filed 9 July 2020 at [60].
On 8 December 2018, Mr Alexander received an email from the first respondent in which was included the following documents:
·A letter from Ms Li, dated 28 November 2018, in which she indicated she was enclosing pay slips for both Ms Haramaya and Ms Sugawara, extracts from the staff roster and PAYG summaries;
·A spreadsheet of the hours purported to have been worked by Ms Harayama;
·A spreadsheet of the hours purported to have been worked by Ms Sugawara;
·Pay slips purported to arise from these spreadsheet indicting hourly rates, hours worked and ordinary hours worked on Saturdays and Sundays relating to work performed by Ms Harayama;
·Pay slips purported to arise from these spreadsheet indicting hourly rates, hours worked and ordinary hours worked on Saturdays and Sundays relating to work performed by Ms Sugawara;
·Deposits made into an account held by Ms Sugawara.
Unbeknownst to Ms Li, Ms Harayama took photographs, with her mobile phone, of the cash book which Ms Li utilised to record the wages actually paid to her each week and which Ms Li required her to sign. Ms Harayama also kept her own records of the hours she worked and when those hours took place. These were provided to Mr Alexander on 12 December 2018.
In addition, Ms Sugawara kept her own independent records of the hours she worked and the actual amount of the wages paid to her. She provided her records to Mr Alexander on 9 January 2019. Thereafter, Mr Alexander tallied the various records with one another. He found that the hours worked calculated by both women matched the records provided by Ms Li, but the pay slips recorded amounts substantially higher than those recorded in the cashbook and which had been received by Ms Harayama and Ms Sugawara.[32]
[32] See Affidavit of Andrew Alexander filed 12 April 2020 at [18]-[19].
The difference between the gross amount stated on the relevant pay slip and the amount received was $3,223.59 in the case of Ms Harayama and $4,524.92 in the case of Ms Sugawara. In net terms the discrepancy was $789.53 and $3,011.42 respectively.
The incorrect hourly rates recorded on the pay slips and the actual rates applied ranged between $18.29 and $36.58 whilst the hourly rate actually received by Ms Harayama was between $11.87 and $14.72 and between $11.57 and $14.32 for Ms Sugawara.
These are the facts which support count 9, which can be characterised as the keeping of false records, in the form of the pay slips provided by Ms Li to Mr Alexander, in contravention of section 535(4) of the FWA.
These facts are formally admitted by the respondents, who formally acknowledge that the pay slips in question were false and misleading because they each knew the applicable hourly rates to be paid and what was recorded on the pay slips did not correlate with what was recorded in the cash book and what the two employees were actually paid.[33]
[33] See Statement of Agreed Facts filed 9 July 2020 at [52]-[57].
As indicated above, as he was authorised to do, Mr Alexander provided a notice to Ms Li requiring her to produce relevant employment records in order to enable him to carry out his compliance investigation into the matters raised by Ms Harayama and Ms Sugawara with the Office of the Fair Work Ombudsman.
Again, the respondents admit that the records produced by Ms Li on 8 December 2018 were false and misleading and as a consequence breached the provisions of section 718A of the FWA. This constitutes count 10, which can be characterised as the providing false records charge.[34]
[34] Ibid at [58]-[66].
On 16 January 2019, Mr Alexander and Ms Maunder attended at the premises of Gyoza Gyoza in order to serve a further notice to produce, inspect relevant records there and, if necessary, interview staff. The two inspectors produced their identification badges to Ms Li and Mr Alexander explained that they were investigating possible breaches of the FWA.
Ms Maudner spoke to approximately four employees at the restaurant, who indicated that day was pay day. Ms Maunder asked questions, of these employees, as to how they were paid and whether they had received pay slips. Mr Alexander served the notice to produce on Ms Li in the restaurant area. Given that it was apparently the day on which staff were paid, Mr Alexander asked Ms Li to see contemporary employee records, particularly, the wages book for 2019 and any current pay slips.
In this context, Mr Alexander indicated that, on the last time he had visited the restaurant, records had been kept in the back office. Mr Alexander asked to be taken to the office to see whatever records were there. Mr Alexander followed Ms Li into the office area where Ms Li produced a black bag, in which she said records were kept. Mr Alexander noted a black spiral notebook, which appeared to him to be some kind of time record. Mr Alexander noted that Ms Li concealed the notebook under her hand bag.
The two returned to the restaurant and Mr Alexander began taking photographs of documents produced. He then asked Ms Li if wages were being paid that day. Ms Li indicated that this was the case and wages would be paid by direct deposit.
In this context, Ms Maunder asked whether there was a time, pay and wages book which allowed Ms Li to calculate what was due to each employee. Ms Li indicated that she did not as yet have such a book for 2019. Ms Maunder asked Ms Li how she could pay wages without such a record and queried whether her denial was truthful.
Thereafter, Mr Alexander indicated that he thought he had seen something in the back office, which might have been a wage record. He asked Ms Li to produce to him the black notebook and other papers she had placed under her handbag. The two returned to the back office. Mr Alexander attempted to pick up the black notebook but Ms Li got to it first. Mr Alexander noted that that there was a notation on it which read fortnightly wages or pays.
Mr Alexander said to Ms Li that he wanted to inspect the book and if it was not produced to him he would regard Ms Li as having hindered him in the performance of his duties. He went to take the book, upon which Ms Li grabbed her stomach and asked to go to the toilet. Ms Li took the book and other records with her and left the room. Ms Maunder, a short time later, checked the female toilet, but Ms Li was not there. Ms Li was found, a few minutes later, in the back of the restaurant clutching her stomach and walking bent over.
Mr Alexander requested a staff member to call for Ms Li’s husband to attend, which he did. Mr Alexander indicated to Mr Du the purpose of his visit and his belief that Ms Li still had relevant wage records. Mr Alexander also consulted with his superiors by telephone. Mr Du called an ambulance for his wife. The records and black notebook in Ms Li’s hand, when she had left the back office, whilst indicating she was unwell, were not subsequently produced and Mr Alexander was not able to locate them in the back area of the restaurant or in any adjacent rubbish receptacle.
An ambulance arrived at the scene, upon which Mr Alexander and Ms Maunder decided nothing of any further use could be achieved by remaining at the premises. This chain of events constitutes count 11, which can be characterised as Ms Li hindering and obstructing Mr Alexander in the performance of his functions as a Fair Work Inspector carrying out a workplace inspection in contravention of section 707A of the FWA.
Ms Li has formally admitted the elements of the civil offence.[35] The elements can be summarised as follows:
·Mr Alexander had an entitlement to enter the premises in question because he reasonably believed that documents relevant to a breach of a modern award may be there;
·He introduced himself to Ms Li and identified himself and warned her that she might be liable to penalty if she hindered his duties on the premises;
·He asked to inspect records;
·Ms Li refused to produce records to him and hindered his activities by removing the black spiral notebook from the restaurant office and then concealing it in someplace unknown to Mr Alexander;
·The book in question, which Mr Alexander believes to be a wage record, has not subsequently been produced to him.
[35] Ibid at [67]-[75].
Ms Li has formally acknowledged her accessorial liability to seven of the counts admitted by the first respondent, of which she is the sole director and shareholder. CNL Pty Ltd has admitted that it employed Ms Harayama and Ms Sugawara. Ms Li has admitted that she was the person responsible for keeping the employment records of the company; calculating pay and preparing and issuing pay slips to employees.
The FWO maintains a database of its interactions with employers in the context of its authority to ensure compliance with the provisions of the FWA. Mr Alexander has access to that database and examined it to ascertain whether the FWO had had any previous involvement with CNL Pty Ltd.
This search revealed that the FWO issued a letter of caution to Ms Li in June of 2018, which followed complaints made to it in respect of employment practices at CNL’s restaurant, which had led to a formal audit being undertaken. The formal caution related to the failure to pay correct penalty rates for work performed on public holidays by four employees and for paying incorrect hourly rates for three part time and one full time employee. In addition, the first respondent was cautioned in respect of failing to issue pay slips containing prescribed information regarding penalty rates. The amount of underpayment found was $2,225.24.[36]
[36] See Affidavit of Andrew Alexander filed 5 August 2020 at annexure AA28.
THE RESPECTIVE POSTION OF THE PARTIES ON PENALTY
It is the submission of the FWO that it is of paramount importance for the court to focus on what are the overall objects of the legislation concerned and the public purposes of the compliance regime, which the FWO administers. The objects of the Fair Work Act are set out in section 3. Amongst these is the following:
[E]nsuring a guaranteed safety net of fair, relevant and enforceable minimum wages and conditions through the National Employment Standards, modern awards and national minimum wage orders.[37]
[37] Fair Work Act 2009 (Cth) s 3(b).
The above objective is taken up by a specific objective, in respect of the implementation of a system of modern awards, which is contained in section 134 of the Act. It is to ensure a fair and relevant minimum safety net in terms of the provision of conditions relevant to employment. Amongst other things, it is to ensure additional remuneration for overtime; work on weekends; and public holidays.[38]
[38] Ibid s 134(1)(da).
As previously indicated, the Restaurant Industry Award 2010 is a modern award and applies to employers/employees in the restaurant industry. Amongst other things, the award specifies minimum rates of pay; loading for casual employees; penalty rates for work on Saturday, Sunday and on public holidays; and payment for work performed outside of prescribed hours.
Necessarily, many employees, who work as waiting staff in restaurants, work irregular hours, including on weekends and on public holidays. In addition, their work is often provided in small establishments and the onerous hours involved may attract vulnerable individuals. One of the purposes of the Award is to ensure that such employees receive proper recompense for such matters and receive the protection to which they are entitled under the industrial safety net.
It is the gravamen of the FWO’s position that the respondents, in the current matter, have manifestly failed to adhere to the standards provided by the relevant modern award applicable to its employees and have hindered its compliance powers by providing false records.
Accordingly, it is the submission of counsel for the FWO, Ms Walker, that notwithstanding the underpayments involved are small and involve only two employees, the deception involved by the employer, in fabricating employment records and hindering its functions must be regarded as flagrant in nature and so call for a high degree of censure from the court.
As such significant monetary penalties should be imposed in respect of all eleven groups of offences so far as CNL is concerned which should reflect a range of 40% to 60% of the maximum, for the majority of the matters, with a discount on the total penalty of 30% leading to a range of total penalty of between $111,132.00 to $139,356.00 for it; with a similar range for Ms Li, in respect of eight groups of offences, with again a total discount of 30% leading to a range of penalties for her of between $18,346.00 to $22,579.00.
The maximum penalty, which could be imposed on CNL for the contraventions agitated by the FWO is one of $693,000.00 and so far as Ms Li is concerned, one of $100,800.00.
On the other hand, it is the position of each of the respondents that, in dollar terms, the underpayments of Ms Harayama and Ms Sugawara must be regarded as modest and the periods of underpayment relatively brief. In addition, there has been complete restitution and an expression of contrition made by the respondents, who by their admission of facts, must be taken to have cooperated with the authorities.
In these circumstances, counsel for the respondents, Mr Lazarevich, cautions the court against imposing a crushing sentence on the respondents in question. It is his submission that the restaurant in question must be considered a small, family run enterprise, which is currently struggling financially.
Given all these factors, it is submitted that in total a penalty in the range of $20,000.00 to $50,000.00 is appropriate for the first respondent and one of between $5,000.00 and $10,000.00 is appropriate for Ms Li.
LEGAL PRINCIPLES APPLICABLE TO PENALTY HEARINGS
The approach, which the court is required to take, in respect of these contravention proceedings, has been delineated in a number of decisions of the Federal Court.[39] The process can be summarised as follows:
·The court should identify each separate contravention, arising from a breach of either the applicable award or the FWA itself. Pursuant to section 539(2) each such contravention is a distinct incident for penalty purposes;
·The court should determine whether any of these incidents arise in a single course of conduct, within the terms envisaged by section 557(1);
·Then give consideration as to whether any of these contraventions contain elements and factor this into considering what is an appropriate penalty, in all the circumstances, for each contravention;
·Thereafter, the court should fix an appropriate penalty for each single or group contravention, taking into account all relevant circumstances;
·Finally, the court should apply the totality principle. This final step constitutes a review of the aggregate penalty thus far calculated and envisages a consideration of whether such a penalty is an appropriate response to the conduct, which lead to the various contraventions in question. This case has been described as a process of intuitive synthesis.[40]
[39] See Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42] (Mansfield J), citing Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579 at [10] (McKerracher J).
[40] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [55] (Graham J).
The totality principle arises when a court is called upon to sentence an individual, as here, in respect of a number of identifiable offences. It is directed to a review of the penalties imposed, in total, in respect of individual offences to determine whether those penalties, in aggregate, constitute a just and appropriate penalty, in all the circumstances arising. As indicated earlier, it has been characterised as a process of intuitive synthesis best summarised in the well-known line from The Mikado “the punishment must fit the crime.”
Gray J in Australian Ophthalmic Supplies Pty Ltdv McAlary-Smith (“Australian Ophthalmic Supplies”) said as follows:
What is required is to determine an appropriate level of penalty for each contravention, as if it were a separate offence, and then look at the aggregate of those penalties in the light of the overall conduct of the [offender], to form a view as to whether that aggregate [is] out of proportion to that overall conduct.[41]
[41] Ibid [23] (Gray J).
Regardless of these considerations, the fundamental task, for the court, is to determine, from all the factual circumstances arising, the gravity or seriousness of the offending, which it is called upon to penalise. Again, there is general agreement between the parties as to the considerations relevant to this task, which has been delineated in a number of decisions of both this court and the Federal Court.[42] The considerations are as follows:
[42] See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] FCA 1080 at [14] (Tracey J); Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [23] (Reeves J).
·The nature and extent of the conduct which led to the breaches;
·The circumstances in which the conduct took place;
·The nature and extent of any loss or damage sustained as a result of the breaches;
·Whether there has been similar, previous conduct by the respondent;
·Whether the breaches were properly distinct or arose out of the one course of conduct;
·The size of the business enterprise involved;
·Whether or not the breaches were deliberate;
·Whether senior management was involved in the breaches;
·Whether the party committing the breaches has exhibited contrition;
·Whether the party committing the breaches has taken corrective action;
·Whether the party committing the breaches has cooperated with the enforcement authorities;
·The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
·The need for specific and general deterrence.
The court needs to be careful not to apply a formulaic approach to the imposition of penalties or attempt to extrapolate the penalties imposed in one case to the circumstances of another. Each case involving the imposition of a civil penalty warrants an idiosyncratic approach and a careful analysis of all relevant circumstances. As was stated in Australian Ophthalmic Supplies:
Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.[43]
[43] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J).
Clearly the check-list, as enumerated above, is useful. It is not to be regarded as an exhaustive list of factors to be considered. The ultimate control on any sentence is that it must be proportionate to the offence committed. A court is not permitted to impose a sentence greater than is warranted by the objective circumstances of the offending.[44]
[44] See Veen v R (No 2) (1988) 164 CLR 465, 472 (Mason CJ, Brennan, Dawson, and Toohey JJ).
As indicated above, the legislative provisions relating to how contraventions arising under the FWA are to be grouped for the purposes of calculation of penalty are contained in section 557(1) of the FWA, which reads as follows:
(1)For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a)the contraventions are committed by the same person; and
(b)the contraventions arose out of a course of conduct by the person.
The leading case, on the application of section 557 is the Full Court authority of Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman (“Rocky Holdings”).[45]This was a case broadly analogous to the current one in the sense that the appellant employer concerned had admitted numerous breaches of a modern award in respect of such things as the payment of penalty rates for work on Saturdays and public holidays in contravention of section 45 of the FWA, in respect of multiple employees.
[45] Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman [2014] FCAFC 62.
In Rocky Holdings, the Full Court did not accept that these various incidents of breach were to be regarded as a single course of conduct, referral to a common incident of the employer breaching the applicable modern award per se. The Full Court’s reasoning, in my view, can be summarised as follows:
·The key legislative intent of the FWA is to ensure, through an effective penalty regime, compliance with the minimum terms of relevant modern awards, not to reduce the number of contraventions of civil penalty provisions;[46]
·It is the provision of the Act, set out in subsection 557(2), which is relevant to the course of conduct delineated in 557(1);[47]
·Subsections (1) and (2) are ambiguous. They are capable of referring to the existence of the identified provision or the substance of the identified provision. As such, it is acceptable to have regard to the relevant Explanatory Memorandum, in resolving the ambiguity;[48]
·The object and purpose of section 557 is to ensure that an offender is not punished twice for what is essentially the same criminality. What is or is not the same criminality is an exercise requiring close consideration. However bare identity of motive is seldom sufficient to establish the same criminality in separate and distinct acts of offending;[49]
·It is wrong to characterise the various contraventions of the modern award in question as being merely particulars of an overall breach of section 45;[50]
·It potentially confusing to apply principles dealing with the punishment and sentencing of criminal offences to the application of civil penalties;[51]
·Such an analysis has the prospect of leading to arbitrary and capricious outcomes. By way of example an employer who had contravened a wide range of award provisions, leading to widespread underpayment of a number of employees would be subject to the same maximum penalty as an employer who had contravened one award provision, in respect of one employee on one occasion. This is counter-intuitive;[52]
[46] Ibid [12] (North, Flick and Jagot JJ).
[47] Ibid [13].
[48] Ibid [14]; see Acts Interpretation Act 1901 (Cth) s 15AB(1)(b).
[49] Ibid [18].
[50] Ibid [24].
[51] Ibid [25].
[52] Ibid [26].
Of these reasons, in my view, the last one is the one most applicable to the circumstances of the current case. The court must beware of groupings of offences, which lead to capricious or artificial outcomes, bearing in mind that each contravention relates to a separate and distinct breach of a term of the FWA.
The FWO proposes the following grouping of matters:
119
FWA provision contravened
Respondent
No. of contraventions
1
Section 45 Failure to pay minimum rates to Ms Harayama and Ms Sugawara
First and Second
29
2
Section 45 Failure to pay casual loading to Ms Harayama and Ms Sugawara
First
29
3
Section 45 Failure to pay Saturday rates to Ms Harayama and Ms Sugawara
First and Second
29
4
Section 45 Failure to pay Sunday rates to Ms Harayama and Ms Sugawara
First and Second
15
5
Section 45 Failure to pay hours after 10pm to Ms Harayama and Ms Sugawara
First and Second
26
6
Section 44 Failure to give Ms Harayama and Ms Sugawara Fair Work Information Statement
First
2
7
Section 536 Failure to issue pay slips to Ms Harayama and Ms Sugawara
First and Second
30
8
Section 535(4) Making and keeping false Payment Summary
First
1
9
Section 535(4) Making and keeping false Harayama pay slips and Sugawara pay slips
First and Second
Numerous
10
Section 718A Providing false or misleading information or documents to Inspectors
First and Second
1
11
Section 707A Hindering and obstructing Inspectors
First and Second
1
These seem to me to represent an appropriate grouping of matters noting that it takes into account the fact that various aspects of the applicable Award were breached in relation to two employees on multiple occasions. Other counts that relate to the concealment and falsification of evidence relating to the Award breaches are approached individually.
In addition, the FWO does not seek penalties against Ms Li for failing to provide a Fair Work Information Statement and in respect of the keeping of false employment records, accepting that the obligations feel upon the formal employer.
In any event, no matter how the various counts are ultimately cut and diced, the court’s fundamental obligation is to impose a penalty that accords with the overall seriousness of the offending in question. In this context, the amount of the underpayment is relevant, as is the number of employees concerned but clearly, in respect of the Award offences, there was a concerted course of conduct, not an isolated incident, of underpayment.
In this case, I am satisfied that the respondents have comprehensively failed to supply significant elements of the minimum terms of employment, to which Ms Harayama and Ms Sugawara were entitled and these should be grouped together. As such, there has been a significant failure of the industrial safety net so far as they are concerned. In addition, there are significant aggravating features, arising in the case, as a consequence of the respondents’ efforts to deceive the FWO about their breach of the relevant Award.
DISCUSSION
Nature and extent of the conduct leading to the breaches
Both Ms Harayama and Ms Sugawara are of Japanese descent and neither had lived in Australia for a lengthy period of time when the contravention occurred. Ms Harayama arrived on a tourist visa in March 2018, which she converted to a working holiday visa, she has since departed Australia.
Ms Sugawara is married and as a consequence has an entitlement to live in Australia. However, notwithstanding this fact, I consider both women should be regarded as being workers who are vulnerable to exploitation, in employment, given their non-English speaking background. This is particularly so in respect of Ms Harayama. She is to be regarded as a transitory employee, who was on holiday.
Individuals, in her position, if subject to the exploitation of an employer, may put it down to a bad employment experience and overlook it, before moving on to the next destination on their holiday itinerary. In addition, such individuals are likely to be ignorant of how they can complain to the Australian authorities in order to seek redress for the poor employment behaviour to which they have been subject.
In her affidavit, Ms Harayama deposes that, whilst living in Adelaide, she struggled to make ends meet, on the wages she received. Ms Sugawara deposes in similar terms, indicating that she and her husband struggled to pay their rent and bills, including in respect of a loan taken out to pay medical expenses. From time to time, the rate of pay was $12.00 per hour, which was approximately two thirds of the minimum hourly rate. Clearly, in these circumstances, each was deprived of the protection of the industrial safety net.
In this context, whilst in global terms, the amounts of underpayment in respect of Ms Harayama and Ms Sugawara’s employment were relatively small, in subjective terms, to each of them, the amounts involved were significant indeed and represented the difference between being on the breadline and having some modest financial buffer. I accept that both women were, in effect, living hand to mouth as a consequence of receiving, in percentage terms, far less than the wages to which they were each entitled.
The provision of accurate and timely pay slips to employees is a significant protective factor provided by the industrial system. It enables employees to check their rates of pay, hours of work and any penalties available to them in black and white terms, and make sure the information recorded accords with what actually happened.
Employees, particularly vulnerable ones, are entitled to know what they have been paid and how specifically their wages are broken down. Such employees need to know this information promptly so that they can query any areas of uncertainty and sort out any misunderstandings. On a basic level, they need to be able to budget and make properly informed decisions about whether they will elect to continue to work in a particular manner, such as on weekends and at night time.
In this context, I respectfully adopt what was said by Riethmuller FM in Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor as follows:[53]
Proper pay slips allow employees to understand how their pay is calculated and therefore easily obtain advice. Pays slips provide the most practical check on false record keeping and underpayment, and allow for genuine mistakes or misunderstandings to be quickly identified. Without proper payslips, employees are significantly disempowered, creating a structure within which breaches of the industrial laws can easily be perpetrated.[54]
[53] Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258.
[54] Ibid at [67] (Riethmuller FM).
The obligation to keep and use accurate records is central to the achievement of the overall objectives of the FWA. In blunt terms, it enables the industrial regulator to oversee the obligations of employers and determine whether those obligations have been met or, if not, whether this is a matter of inadvertence or deliberation. In this context, I respectfully adopt the comments of Judge Hartnett in Fair Work Ombudsman v ECFF Pty Ltd as follows:[55]
[T]he creation of false time and wage books by the respondents was particularly disturbing behaviour, worthy of significant reprimand.[56]
[55] Fair Work Ombudsman v ECFF Pty Ltd [2014] FCCA 2996.
[56] Ibid at [35] (Hartnett J).
It is highly significant that the extent of the breaches in this matter came to light as a consequence of the fact that Ms Harayama took photographs of the cashbook proffered to her by Ms Li and Ms Sugawara recorded her own hours. Other less sophisticated employees may not have had such foresight and indeed the tenor of Ms Sugawara’s evidence is that she initially accepted her lesser wages because she did not want to lose her job.
The evidence of Mr Alexander indicates that Ms Li had previous dealings with the FWO, which had arisen in respect of complaints of Award breaches in respect of employees, who had complained about being paid significantly under the relevant Award and not being provided with pay slips. This had resulted in CNL being issued with a formal caution in June 2018.
Accordingly, it cannot be said that Ms Li was unaware of the functions of either the FWO or the terms of the Award, which applied to her employees. It is in this context that the respondent’s course of conduct, when the FWO subjected them to a further investigation, that the caution did not have a corrective effect on their conduct.
The facts, which the respondents have admitted, indicate that once the FWO became involved in the complaints of Ms Harayama and Ms Sugawara, employment records were falsified in an attempt to frustrate the compliance functions of the FWO. They were designed to impede Mr Alexander and Ms Maunder’s investigations and to deflect culpability for their wrongful actions. If the falsehoods had not been detected, it would have most likely meant that Ms Harayama and Ms Sugawara would not have received their proper recompense. Given their calculation, they must be regarded as serious breaches.
What happened at the restaurant on 16 January 2019 has elements of high farce about it. I can understand that Ms Li may have panicked at the arrival of Mr Alexander and Ms Maunder. Clearly, she was not expecting their attendance and was not thinking clearly when they arrived. She reacted to the moment and with little, if any, forethought, when she absconded with the black notebook. What information the book contained will not be known, as it has not been recovered by the FWO.
Conceivably, it might have contained information relevant to other breaches of the industrial law. I am not in a position to conjecture in this regard and the respondents cannot be sentenced in respect of matters for which they have not been charged. However, notwithstanding these considerations, the actions of Ms Li did hinder Mr Alexander in the commission of his duties and Ms Li continued with her obstructive behaviour notwithstanding having been warned of its potential consequences.
Deliberateness
Necessarily, there is a significant level of overlap between the various matters to which the court must have regard in constructing appropriate penalties. In the context of assessing the degree of culpability involved, it is relevant that Ms Li had previous involvement with the FWO in the context of the recent underpayment of staff and non-compliance with the applicable Award.
In these circumstances, I am satisfied that her various admitted breaches of the FWO were deliberate. It cannot be said that she did not know the nature of her obligations under the Act, particularly in regard to paying the minimum wage and relevant penalties for hours worked on weekends and after 10.00pm. These issues are perennial in the restaurant industry, which is one in which holiday visa holders and non-Australian residents frequently seek employment because no formal qualifications are required and experience can be acquired on the job.
Equally significantly, because of the past involvement of the FWO in the restaurant, Ms Li was aware who she could contact if there was any doubt about her obligations under the Act. She could have easily sought clarification about the appropriate hourly rates for any or all of her employees.
In addition, there is evidence to indicate that Ms Li knowingly kept a series of sham records in order to conceal her underpayment from potential scrutiny by the relevant authorities. In my view, this was a calculated action designed to frustrate the application of the industrial safety net to vulnerable employees.
The purpose of the legislation is clear. Employers are required to keep detailed and comprehensive records in order to ensure that employees are paid what is due to them and, if necessary, this can be checked by the relevant regulator. In the case of Ms Li, there has been a comprehensive failure of this safeguard, which is solely attributable to Ms Li.
In Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown, Bromwich J said as follows:
The unavoidable inference is that the creation and production of the false employment records was designed to conceal the primary breaches and thereby thwart the FWO investigation.[57]
[57] Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 at [2] (Bromwich J).
I respectfully adopt these comments as being apposite to the situation arising in the current matter. Whilst Ms Li’s anxiety may provide an explanation as to why she acted in the manner in which she did on 16 January 2019, they do not excuse her conduct, which hindered and frustrated the FWO doing a proper reconciliation of hours worked and payments received and so enable to prompt recompense of the two employees concerned.
Nature and extent of the loss suffered
In dollar terms, Ms Harayama and Ms Sugawara were deprived of entitlement in an amount of $10,517.43 over a period of approximately three months. The amounts due were reimbursed in full in October of 2019 following the commencement of the investigatory process, which resulted in the FWO informing her of the amounts outstanding in late September of 2019. I accept restitution was made promptly. However, the two women concerned were out of pocket for over a year and each was glad to receive what was due to them.
Size of the business and capacity to pay financial penalties
Ms Li has deposed to her background and the financial circumstances of her and her husband. She was born in China in 1975 and came to Australia over twenty years ago. She has two children, who are financially dependent upon her and Mr Du.
She has operated the Gyoza Gyoza Restaurant since 2016. Her husband is the chef. She has worked long hours in the business, seven days a week. It is the effect of her evidence that the pandemic emergency has had a significant impact on the turnover of the business, which fell markedly in the last quarter of the 2020 financial year.
In these circumstances, it is Ms Li’s evidence that she has not been able to pay the franchise fees due to the restaurant’s franchisor, Gyoza Gyoza Pty Ltd in an amount of $144,000.00 and the first respondent also owes the Australian Tax Office an amount of $38,000.00. Ms Li fears that she may be compelled to close the restaurant, if the penalties imposed are too great and this will result in job loss for her current staff, which number around five individuals.
I accept Ms Li is not a wealthy person. She and her husband have modest assets. Their most significant asset is their family home, which she values at around $500,000.00. The property is subject to a mortgage of around $350,000.00. Ms Li has been receiving JobKeeper payments during the pandemic emergency. The business in question must be regarded as a small family run enterprise, with a small workforce.
These are relevant considerations. Any fine levied on Ms Li and the company will hurt because she is not a wealthy person and the company does not have a significant level of asset backing. However, I also accept that the quantum of the penalty to be imposed must be both reflective of the wrongdoing concerned and of sufficient quantum to be meaningful to those individuals to whom it will apply.
It is well established that it is no excuse for an offender to rely on the fact that they are the operator of a small business. To the contrary, the court must bear in mind that small businesses of one form or another represent a large component of employers in this country.
In these circumstances, I adopt the comments of Driver FM in Rajagopalan v BM Sydney Building Materials Pty Ltd as follows:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.[58]
[58] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27] (Driver FM).
Involvement of senior management
This is not a case involving a large or complex business structure. Ms Li is the sole director of CNL and the person responsible for its direction, management and control. As such, for obvious reasons, she was integral to every decision made by the company, as she was both its hands and brain.
There is no controversy that it is appropriate to consider the operation of section 550(1) of the Act to Ms Li’s actions in respect of the payment of Ms Harayama and Ms Sugawara and the employment records kept by her on behalf of CNL.
The section provides that a person who is “involved in” the contravention of a civil remedy provision is to be taken as having contravened that provision and so be liable for the imposition of a penalty under section 546 of the Act. Section 550(2) of the section provides a definitive list of circumstances in which a person is be treated as being involved in a contravention. In the present case section 550(2)(c) is applicable. It speaks of a person being knowingly concerned in or a party to the contravention.
The relevant authorities show that in order for a person to have accessorial liability under section 550 of the FWA,[59] they must be a knowing participant, or in other words:
·must have knowledge of the essential facts constituting the contravention;
·must be knowingly concerned in the contravention;
·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 section 550(2)(c) in cases of wilful blindness.
[59] Yorke & Anor v Lucas (1985) 158 CLR 661, 666-7 (Mason ACJ, Wilson, Deane and Dawson JJ); Armstrong v Bigeni Contracting Pty Ltd & Anor [2008] FMCA 485 at [23] (Cameron FM).
I have no difficulty in reaching the conclusion that Ms Li has accessorial liability for the contraventions of CNL, given her managerial role in the company, and the obvious fact that she was engaged in the recruitment and payment of staff.
However, given the close relationship between Ms Li and the company – they are in practical terms, interchangeable. I acknowledge that I must be careful not to impose an unduly harsh penalty on Ms Li for offences involving both her and the company, which will have the consequence of penalising her twice, and pursuant to the far higher schedule of fines that are applicable to corporations.
I also accept that Ms Li operates a small family business, without a specialist HR department and other managerial support. Ms Li has also deposed that her first language is Cantonese and she does not have any great degree of fluency in English, conversing with the majority of her staff, and at home, in that language.
However, in this context, Ms Li has formally admitted that she was the person legally responsible for operating the restaurant business due to executing the franchise agreement on CNL’s behalf.[60]
[60] See Statement of Agreed Facts filed 9 July 2020 at [8].
It is to Ms Li’s credit that she was able to establish a business, in this country, given her language difficulties. However, in my view, this does not absolve her of responsibility nor can it excuse, a lack of knowledge or her proper application of the applicable industrial regime to her staff.
It is also Ms Li’s evidence that she has suffered an adjustment disorder, resulting in depression and anxiety since these events, which have been exacerbated by the FWO publicising the fact that it has taken action against her and the restaurant for underpayment of its staff. However, it is also one of the functions of the FWO to bring public attention to incidents of industrial malfeasance in order to deter others from engaging in such conduct.
I take into account Ms Li’s individual characteristics. But in this context, I must not overlook the fact that she had earlier been accorded some degree of latitude, by the FWO, in regard to the fulfilment of her obligations as an employer, operating a small business, who did not speak English as her first language, when she was cautioned.
In my view, in assessing the accessorial penalties, it will be relevant that I bear in mind the risk of imposing a duly harsh penalty on Ms Li, given the nature of her overlapping relationship with CNL and the totality of any penalty to be imposed. In addition, as Reeves J observed in Blandy v Coverdale NT Pty Ltd,[61] it is open to the court to impose nominal penalties in appropriate cases, whilst recognising the essential autonomy of individual courts.
[61] Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [56] (Reeves J).
Contrition and corrective action
Ms Li has deposed as follows:
I have learned a valuable lesson and will ensure that both the First Respondent and myself will continue to fully comply with out statutory obligations under the Act, especially the obligation to make correct payments to employees and keep proper employment records.[62]
[62] See Affidavit of Yubing Li filed 22 September 2020 at [43].
In the context of these considerations, the most concrete example of corrective action is the fact that the two staff members concerned were reimbursed promptly following the FWO quantifying the underpayments due to them. However, this followed a period characterised by a singular level of a lack of corrective action by the respondent, including deliberate attempts to obfuscate and avoid liability on their part, which is not congruent with the contrition shown.
From the time Mr Alexander became involved with the respondents up until the service of the second notice to produce, and what followed, neither respondent can be described as having been cooperative with the investigative function of the FWO. The black book, which was at the heart of the hindering charge, has never been produced. It was only because Ms Harayama and Ms Sugawara had kept their own records that the underpayments in question came to light as well as the falsified wage records.
As Bromwich J observed in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown,[63] employers create sham records in order to avoid the scrutiny of the industrial regulator. In my view, such conduct must be regarded as being diametrically opposed, in nature, to cooperation with the industrial regulator. It must be regarded as conduct which was intended to frustrate proper regulation.
[63] Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 at [92] (Bromwich J).
Once the matter has come to court, the parties sought a mediation, and thereafter it was indicated that there would be no dispute as to liability but a hearing would be regarded in respect of the quantum of penalty. In these circumstances, I accept there has been a level of cooperation provided by the respondents which has avoided the undue prolongation of the proceedings.
This high degree of cooperation, which has had significant consequences for the saving of public money, both in terms of court administration costs, and the enforcement costs of the FWO, should properly attract a significant discount on any penalty imposed. It is in the public interest that breaches of the industrial regime are admitted promptly, which happened in the current matter. It is suggested that there be a discount of 20%.
General deterrence
One of the central purposes of imposing a civil penalty, in proceedings such as these, is to deter other employers from embarking on a similar course of conduct to that engaged upon by the transgressing employer. In Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2), Marshall J said as follows:
It is important to ensure that the protection afforded by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless respected.[64]
[64] Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29] (Marshall J).
The role of general deterrence in fixing appropriate penalty is demonstrated by what Lander J said in Ponzio v B & P Caelli Constructions Pty Ltd,[65] namely:
In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend…. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by likeminded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty.
[65] Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 at [93] (Lander J).
In my view, in this particular case, issues of general deterrence loom large. This is a case concerning compliance with minimum employment standards applicable to two vulnerable employees. In addition, there was an elaborate subterfuge occasioned against the FWO designed to frustrate its essential investigative functions, which was only foiled by the foresight of one of the employees.
It is important to deter other employers from not paying the minimum wage safety net, or paying employees the required loading arising for work performed on weekends and out of hours. These considerations loom large so far as the restaurant and hospitality industry is concerned. Individuals in this industry work unconventional hours. They are entitled to be compensated for these onerous hours.
Given the low level entry skills required to enter the industry, it is attractive to unskilled individuals, including individuals on working holidays or who do speak English as their first language. Such individuals, as was the case with Ms Sugawara, may be disinclined to complain about their treatment for fear of losing their positions. Others may not be aware of potential remedies available to them, or because they are itinerant, or are not inclined to pursue them.[66]
[66] See Fair Work Ombudsman v Java Spice Australia Pty Ltd [2015] FCCA 2930 at [124] (Brown J).
In this context, Ms Maunder has deposed that disputes arising from cafes and restaurant workers constitute 9.5% of disputes referred to the FWO of which 36% pertain to visa holders. It is the industry most prevalent to complaints to the FWO, and the number of workers involved who originate from overseas is also higher than in other industries.[67]
[67] See Affidavit of Belinda Maunder filed 9 April 2021 at [23].
These statistics speak of the need to provide general deterrence to employers in the hospitality industry that the community will not tolerate the exploitation of employees in their industry, including those who originate overseas. They are particularly relevant to the current matter.
In addition, it is essential to the workings of the FWA that a message be sent about the requirement that proper wage records be maintained and there will be no tolerance for any non-compliance in respect of them. In this context, the essential task of the court is to impose a penalty of such a quantum that it is likely to act as a deterrent to prevent similar offending in future by individuals in similar circumstances to those of the current respondents.
Specific deterrence
Considerations relevant to specific deterrence focus on the individual circumstances of the offender concerned and require some degree of prognostication as to the likelihood of re-offending. The most reliable tool for such prognostication is usually the attitude expressed by the party in question.[68]
[68] See Plancor Pty Ltd v Liquor Hospitality & Miscellaneous Union [2008] FCAFC 170 at [37] (Gray J).
Ms Li has deposed that she has learnt a lesson and will ensure that she and the company adhere to proper wage standards and record keeping in future. Sadly, the fact that Ms Li has been given warnings in the past significantly undercuts the credence which can be given to this assertion. However, I also accept that these particular proceedings, given their moment, are likely to have a more salutary effect on Ms Li than her previous involvement with the FWO.
It is Ms Li’s evidence that the restaurant is currently struggling financially due to the pandemic crisis and the adverse publicity occasioned by the FWO investigation. However, the business continues to trade and it would seem more likely than not that the business will continue particularly as the effects of the crisis recede.
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.
The first respondent belongs to the latter rather than the former category. However, small business in percentage terms, is the largest source of employment in Australia and employees are not worthy of a lesser degree of protection merely because they are employed by small enterprise.
In my view, in terms of the underpayment charges, the most serious relates to the failure to pay the minimum wage. When compared to what should have been paid, the amount actually paid was significant and caused economic hardship to both Ms Harayama and Ms Sugawara. I propose to impose a penalty of 30% of the maximum available. This is a significant proportion of the maximum given it is a first offence.
Thereafter, I will impose a lesser penalty in respect of each of the subsequent Award breaches. Although each of these incidents represents a separate breach of a term the Award, given the common aetiology of each such breach, I am satisfied that there is some level of overlap, which must be taken into account in fixing the penalties, which follow.
Out of all the offences, the least serious is the failure to provide the Fair Work Information Statement. It is an important requirement of the Act, but in the current matter, it has the least significance for the victims of the offending in question. I will impose a penalty toward the bottom of the scale.
In the light of what happened later, in my view, the failure to provide pay slips was the most serious of the wage recording offences, depriving as it did Ms Harayama and Ms Sugawara of the ability to query their rates of pay and the conditions attaching to it, particularly in terms of penalty. Again I will impose a penalty of 30% of the maximum and lesser amounts for the offences which follow to allow for overlap.
Counts 10 and 11 must also be considered separately. The provision of false records is a serious matter. It represented a concerted and calculated plan to deceive Mr Alexander. It deserves a significant penalty at the middle of the range. The hinder charge is also serious but Ms Li’s actions did not prevent the FWO bringing these proceedings to a successful conclusion.
I will apply the same considerations in respect of the lesser penalties which apply to Ms Li. For these reasons, I calculate the individual penalties as follows for CNL:
Section 45
failure to pay minimum rate of pay
$18,900.00
Section 45
failure to pay casual loading
$9,450.00
Section 45
failure to pay Saturday rate
$6,300.00
Section 45
failure to pay Sunday rate
$3,150.00
Section 45
failure to pay after 10pm
$0
Section 44
failure to provide information summary
$3,150.00
Section 536
failure to provide pay slips
$18,900.00
Section 535(5)
making and keeping false payment summary
$9,450.00
Section 535(4)
making and keeping false pay slips
$6,300.00
Section 718A
provide false pay records
$18,900.00
Section 707A
hinder Fair Work Inspector
$9,450.00
Total
$103,950.00
Adopting the same methodology in respect of the offences applicable to Ms Li, I calculate the following penalties:
Section 45
failure to pay minimum rate of pay
$3,780.00
Section 45
failure to pay Saturday rate
$1,890.00
Section 45
failure to pay Sunday rate
$1,260.00
Section 45
failure to pay after 10pm
$0
Section 536
failure to provide pay slips
$3,780.00
Section 535(4)
making and keeping false pay slips
$1,890.00
Section 718A
provide false pay records
$3780.00
Section 707A
hinder Fair Work Inspector
$1,890.00
Total
$18,270.00
Counsel for the FWO submits that each respondent is entitled to a discount of 20% to reflect the admission of liability. This renders the appropriate penalties to be reduced to $83,160.00 for CNL and $14,616.00 for Ms Li.
Totality
The next step is to look at the aggregate of the penalties in total and consider whether the total penalty is an appropriate one when the circumstances of the offending are considered. As previously indicated this has been described as a process of intuitive synthesis. Does the total penalty appear to be correct in aggregate?
This has been characterised as the court having a last look at the total just to see whether it looks wrong.[69]The application of the totality principle is not to be automatically applied and some form of discount invariably given. It is a safeguard consideration directed to avoid injustice or unfairness.
[69] See Mornington Inn v Jordon [2008] FCAFC 70 at [91] (Stone and Buchanan JJ).
In Kelly v Fitzpatrick, Tracey J considered what he termed the orthodox position was for the court to determine the appropriate penalty for each contravention and then consider the aggregate figure to ensure “that it was an appropriate response to the conduct which led to the breaches”.[70]
[70] Kelly v Fitzpatrick [2007] FCA 1080 at [30] (Tracey J).
In particular, the court is required to examine the individual circumstances of each respondent in the context of the seriousness of the offending in question in order to ensure that any penalty imposed is not crushing. Looking at the penalties as I have calculated them, there can be no doubt that they involve significant sums, indeed, when compared to the means and resources of each of the respondents.
However, these were serious transgressions, involving vulnerable employees who were deprived of the benefit of the industrial protections to which they were entitled. What then followed was a concerted effort to subvert the efforts of the industrial regulator’s investigation of the breaches arising, which was thwarted only by the forethought of the employees concerned.
At the same time, the offenders concerned operated a small enterprise and restitution has been made. Some level of contrition has been demonstrated. In all the circumstances, the respective total penalties seem excessive and I will apply a further discount of 20% to each of them, leaving CNL with a total penalty of $66,528.00 and Ms Li to a penalty of $11,692.80.
This will render each respondent to penalties less than those sought by the FWO, but the penalties in question cannot be regarded, in my view, as being either token or trivial. They are of sufficient magnitude to provide general deterrence.
Pursuant to section 546(3) of the Act, the court may order the payment of any penalty imposed to be paid to the Commonwealth; a particular organisation; or a particular person. In this case, the FWO seeks that the penalties be paid to the Commonwealth. Given the prosecution has been funded by the FWO, it is obviously appropriate that this course should be adopted.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding two hundred and eight (208) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 11 November 2021
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