Fair Work Ombudsman v Commercial and Residential Cleaning Group Pty Ltd
[2017] FCCA 2838
•22 November 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v COMMERCIAL AND RESIDENTIAL CLEANING GROUP PTY LTD & ORS | [2017] FCCA 2838 |
| Catchwords: INDUSTRIAL LAW – Penalties – contraventions of industrial award. |
| Legislation: Cleaning Services Award 2010 Crimes Act 1914 (Cth), s.4AA(1) Fair Work Act 2009 (Cth), ss.3, 44, 45, 90, 99, 117, 323, 324, 535, 536, 539, 546, 550, 557, 712 Federal Circuit Court of Australia Act 1999 (Cth), s.59 |
| Cases cited: Australian Competition and Consumer Commission v ACN 135 183 372 (in liquidation) (formerly known as Energy Watch Pty Ltd) [2012] FCA 749; [2012] ATPR 42-405 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | COMMERCIAL AND RESIDENTIAL CLEANING GROUP PTY LTD (ACN 110 759 236) |
| Second Respondent: | MARK POVEY |
| Third Respondent: | CATHERINE PAINO-POVEY |
| File Number: | PEG 269 of 2014 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 9 July 2015 |
| Date of Last Submission: | 9 July 2015 |
| Delivered at: | Perth |
| Delivered on: | 22 November 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr AJ Power |
| Solicitors for the Applicant: | The Office of the Fair Work Ombudsman |
| For the Respondents: | No appearance |
ORDERS
The Court orders that:
(a)the first respondent pay penalties in the sum of $361,200 pursuant to section 546 of the Fair Work Act 2009 (Cth) (“Fair Work Act”);
(b)the second respondent pay penalties in the sum of $72,240 pursuant to section 546 of the Fair Work Act; and
(c)the third respondent pay penalties in the sum of $77,400 pursuant to section 546 of the Fair Work Act.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 269 of 2014
| FAIR WORK OMBUDSMAN |
Applicant
And
| COMMERCIAL AND RESIDENTIAL CLEANING GROUP PTY LTD (ACN 110 759 236) |
First Respondent
| MARK POVEY |
Second Respondent
| CATHERINE PAINO-POVEY |
Third Respondent
REASONS FOR JUDGMENT
Introduction
By way of a Statement of Agreed Facts (“SOAF”) filed on 18 December 2014, the respondents have each admitted liability for contraventions of the Fair Work Act 2009 (Cth) (“FW Act”) and the Cleaning Services Award 2010 (“Cleaning Award”), in relation to an application brought by the applicant, the Fair Work Ombudsman.
The respondents are:
a)the first respondent, Commercial and Residential Cleaning Group Pty Ltd, a company which operated a contract cleaning business in the Perth area;
b)the second respondent, Mark Povey, a manager and a person acting in the position of a director of the first respondent during the contravening period. He was directly involved in the management of the cleaning business and the payment of the first respondent's employees; and
c)the third respondent, Ms Catherine Paino-Povey, a manager and director of the first respondent during the contravening period. She was also directly involved in the management of the cleaning business and the payment of the first respondent's employees,
(collectively “the Respondents”).
The parties agreed to the making of the declarations and orders set out in [132] to [145] of the SOAF with respect to the admitted contraventions. In summary, the contraventions relate to the failure of the Respondents to:
a)meet a broad range of minimum entitlements due to be paid to employees of the first respondent;
b)keep and maintain adequate or correct records and to issue payslips; and
c)comply with a Notice to Produce (“NTP”) served upon the first respondent during the applicant’s investigation.
The contraventions relate to the employment of three adult employees who were employed on a full-time basis as domestic cleaners by the first respondent: SOAF at [18], as follows:
a)Kuan (Ann) Chen (“Chen”) from 22 June 2012 to 21 September 2012;
b)Pei-Chun (Ariel) Liang (“Liang”) from 5 November 2012 to 7 November 2012; and
c)Pei-Wen (Eos) Chou (“Chou”) from 31 January 2013 to 2 April 2013,
(collectively, the “Employees”): SOAF at [15]-[17].
The Employees were employed to work a 38 hour week (based on working 7.6 hours per day) and were advised that they would be paid $16.47 and $17.05 per hour. The hourly rates did not meet their minimum entitlements, particularly when the Employees worked additional hours attracting overtime or allowances, and further, the first respondent did not pay the employees on time or at all for some work performed.
The first respondent also did not pay the Employees in respect of termination entitlements, including annual leave, and in the case of Chou, was not paid any amount when she took a period of personal leave or any payment in lieu of notice of termination.
The underpayments the subject of the contraventions are as follows:
a)Chen: $5,835.92;
b)Liang: $569.57; and
c)Chou: $5,106.17.
Evidence and submissions
The applicant relies upon the following documents:
a)SOAF filed on 18 December 2014; and
b)the affidavits of:
i)Pei-Wen (Eos) Chou affirmed on 10 February 2015 (“Chou Affidavit”);
ii)Kuan-Yuan (Ann) Chen affirmed on 16 May 2014 (“Chen Affidavit”);
iii)Pei-Chun (Ariel) Liang affirmed 11 February 2015 (“Liang Affidavit”); and
iv)Clare Marie Hartigan affirmed 13 February 2015 (“Hartigan Affidavit”).
The applicant also relied upon a written outline of submissions filed on 24 April 2015 and a further written outline of submissions (limited to the mode of payment of penalties) tendered at hearing on 9 July 2015.
The Respondents did not appear at the hearing on 9 July 2015. The Respondents had been given leave to file and serve any amended defence and any application in a case to withdraw from or vary the SOAF together with any supporting affidavits by 3 July 2015. No application in a case was filed, although the Respondents filed what purported to be a “Submission for Amended Defence of Statement of Agreed Facts” and an affidavit of the second respondent affirmed 3 July 2015. In circumstances where:
a)there was no application in a case as such to withdraw from or vary the SOAF;
b)the document filed was neither an amended defence nor an application in a case to withdraw from or vary the SOAF;
c)the supporting affidavit of the second respondent was not a validly affirmed affidavit because it was affirmed in front of a pharmacist who is not a person authorised to witness an affidavit for these purposes: Federal Circuit Court of Australia Act 1999 (Cth), s.59; Oaths, Affidavits and Statutory Declarations Act 2005 (WA), ss.9(6) and 6(2);
d)because the Respondents did not appear at the hearing on 9 July 2015 no affidavit evidence was tendered on their behalf, and no leave was sought to amend or vary either the Respondents’ defence or the SOAF; and
e)the first respondent was not legally represented and no leave for it to be represented by either the second or third respondent had been granted: Federal Circuit Court Rules 2001 (Cth), r.9.04,
the Court therefore proceeded to determine the matter on the basis of the SOAF and the evidence tendered by the applicant.
A further affidavit was filed by the second respondent on 8 November 2016. No leave was sought, nor granted, for that affidavit to be tendered in these proceedings and the Court has had no regard to it.
On 9 July 2015 the Court made declarations and orders in relation to the contraventions agreed in the SOAF and as to payment to the Employees and the payment of any penalty amounts determined by the Court but reserved judgment with respect to the amount of any penalty and the manner in which any penalty payments awarded should be applied if underpayments to the Employees were not paid by the Respondents.
The Court’s approach to penalty
The authorities establish that the appropriate penalties are to be determined as follows:
a)first, the Court identifies the separate contraventions involved. Each contravention of, in turn each separate obligation imposed by, the FW Act is a separate contravention of a civil remedy provision for the purposes of s.539(2) of the FW Act: Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216; (1992) 42 IR 255; (1992) 34 AILR 369 at [25] per Gray J (“Gibbs”); McIver v Healey [2008] FCA 425; (2008) 60 AILR 100-850 at [16] per Marshall J;
b)second, the Court should consider whether the extent to which the contraventions so identified in the first step constitute a "course of conduct", and thus ought to be treated as a single contravention within the meaning and operation of s.557 of the FW Act: FW Act, s.557(1);
c)third, to the extent that two or more contraventions have common elements, the Court may take this into account in considering the appropriateness in all the circumstances of the quantum of penalty for the contraventions. That reflects the basic principle that a contravener should not be penalised more than once for what, in a practical sense, amounts to the same contravening conduct, such that the penalties imposed by the Court should be an appropriate but fair response to the contravention of statutory obligations: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809 at [46] per Graham J (“Australian Ophthalmic Supplies”);
d)fourth, the Court, having identified the relevant factors arising from the first three steps, must fix appropriate penalties for each contravention having regard to all of the circumstances of the case; and
e)fifth, having fixed appropriate penalties for the contraventions, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the contravening conduct: Kelly v Fitzpatrick[2007] FCA 1080; (2007) 166 IR 14 at [30] per Tracey J (“Kelly”); Australian Ophthalmic Supplies at [23] per Gray J, [71] per Graham J and [102] per Buchanan J. The Court should apply an "instinctive synthesis" (often referred to in the applicable case law as the "totality principle'') in making this assessment: Australian Ophthalmic Supplies at [27] per Gray J and [55] and [78] per Graham J.
Insofar as orders 8 and 9 of the orders of 9 July 2015 provide for the payment of the Employees’ underpayments to be met from any penalty payments awarded, in the event that the underpayment orders are not complied with, and for the circumstances in which any payment of any penalty amount to be remitted to the Consolidated Revenue Fund of the Commonwealth, the Court is satisfied that it is appropriate to make orders for penalties to be paid to the affected individuals where it is unlikely that they will be able to enforce orders for outstanding amounts owing to them, or would otherwise be unable to recover their entitlements and for any excess or unallocated amount to be paid to the Commonwealth Consolidated Revenue Fund: Fair Work Ombudsman v Maclean Bay Pty Ltd(No.2) [2012] FCA 557; (2012) 64 AILR 101-635 at [53]-[54] per Marshall J (“Maclean Bay (No.2)”); Fair Work Ombudsman v Foure Mile Pty Ltd & Anor [2013] FCCA 682.
Contraventions admitted: see SOAF at Annexure A
In these proceedings the following contraventions are admitted:
Provision Contravened Description of contravention
Contraventions /
employees
Section 45 of the FW Act
Contravening a term of a modern award (Minimum rates of Pay - Clause 16.1 of the Cleaning Award) Repeated contravention
All 3 Employees
Section 45 of the FW Act
Contravening a term of a modern award (Frequency of payment - Clause 20.1 of the Modern Award) Repeated contravention
All 3 Employees
Section 323(1) of the FW Act
Failure to pay each of the Employees' wages in full in relation to the performance of work. Repeated contravention
All 3 Employees
Section 323(1) of the FW Act
Failure to pay Chen in full by making deductions to her wages which were not permitted
pursuant to section 324 of the FW Act
Chen only
Section 45 of the FW Act
Contravening a term of a modern award (failing to pay the Employees for travel time -Clause 17 of the Cleaning Award)
Repeated contravention
All 3 Employees
Section 45 of the FW Act
Contravening a term of a modern award (Overtime rates - Clause
28.2 of the Cleaning Award)
Repeated contravention
All 3 Employees
Section 45 of the FW Act
Contravening a term of a modern award (Access to Rosters - Clause 25.1 of the Cleaning Award) Repeated contravention
All 3 Employees
Section 45 of the FW Act
Contravening a term of a modern award (Meal Breaks – Clause 26.2 of the Cleaning Award) Repeated contravention
All 3 Employees
Section 44(1) of the FW Act
Contravening the NES (failing to pay Employees on termination amounts payable for annual leave required by section 90(2) of the FW Act) Repeated contravention
All 3 Employees
Section 44(1) of the FW Act
Contravening the NES (failing to pay Chou any amount when Chou took a period of personal leave as required by section 99 of the FW Act) Chou only
Section 44(1) of the FW Act
Contravening the NES (failing to pay Chou minimum 1 weeks' notice of termination or make payment in lieu as required by section 117(2) of the FW Act) Chou only
Section 45 of the FW Act
Contravening a term of a modern award (Superannuation - Clause
23.2 of the Cleaning Award)Repeated contravention
All 3 Employees
Section 535(1) FW Act
Failing to make and keep records in relation to employees of the kind prescribed in FW Regulations
Repeated contravention
All 3 Employees
Section 536(1) FW Act
Failing to issue payslips that include the information required by the FW Regulations.
2 contraventions Chen and Chou.
Section 712(3) of the FW Act
Failing to comply with a NTP
1 contravention
The power of the Court to impose pecuniary penalties in respect of contraventions of the FW Act arises from section 546(1) of the FW Act, which provides that an eligible court may impose a pecuniary penalty where it is satisfied that a person has contravened a civil remedy provision, which includes each of the admitted contraventions.
The maximum penalty that may be imposed under s.546(2) of the FW Act for a contravention of a civil remedy provision is:
a)60 penalty units for an individual; and
b)300 penalty units for a body corporate.
In the case of the contraventions of s.535(1) and 536(1) of the FW Act, the maximum penalty that may be imposed under s.546(2) of the FW Act is:
a)30 penalty units for an individual; and
b)150 penalty units for a body corporate.
Section 4(1) of the FW Act provides that "penalty unit" has the same meaning as in the Crimes Act 1914 (Cth) (“Crimes Act”). From 28 December 2012, the Crimes Legislation Amendment (Serious Drugs, Identify Crime and Other Measures) Act 2012 increased the amount of a penalty unit in s.4AA of the Crimes Act from $110 to $170.
The maximum penalty that may be imposed on the first respondent for each contravention of the FW Act in relation to the employment of Chou and the contravention of s.712(3) of the FW Act is $51,000 and in the case of the second and third Respondents the maximum penalty for each contravention is $10,200.
In circumstances where the decisions which led to the contraventions were made prior to 28 December 2012, and consistent with Murrihy v Betezy.com.au Pty Ltd (No.2) [2013] FCA 1146; (2013) 221 FCR 118; (2013) 66 AILR 102-078 at [6] to [28] per Jessup J the lower value of a penalty unit ought to be applied to the contraventions as a whole as they relate to the Employees apart from the contraventions of s.99 of the FW Act and s.117(2) of the FW Act in relation to the employment of Chou and the contravention of s.712(3) of the FW Act.
Nature and extent of the contravening conduct
Grouping of Contraventions
Course of conduct
Two or more contraventions may, depending upon the particular circumstances, attract the operation of the course of conduct provisions contained in s.557 of the FW Act.
The issue in these proceedings is whether the breaches arose out of separate acts or decisions of the employer, or out of a single act or decision: Rowe v Capital Territory Health Commission (1982) 1 IR 133; (1982) 62 FLR 383; (1982) 39 ALR 39; ALR at 65 per Keely J (“Rowe”); accepted by the Court in Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241; (1985) 13 IR 289; (1985) 70 ALR 391; FCR at 266-267 per Gray J (with whom Northrop J agreed at 245) (“Stawell Timber”).
In Rowe the Federal Court was not prepared to find that the two breaches had arisen out of a course of conduct, and noted that the breaches in respect of the two nurses had arisen out of separate decisions, one in 1979 and one sometime later in 1981. The Federal Court further clarified that any other breaches which arose in respect of nurses enrolled in 1980 would have been treated as one course of conduct. This implies that any other contraventions which flowed from the same decision in relation to a rate of pay would have been considered to be a single course of conduct.
The approach in Rowe was accepted in Stawell Timber although distinguished on the facts of that matter because the two breaches resulted from the employer's single act of purporting to dismiss a number of employees.;
Rowe and Stawell Timber clearly indicate that where contraventions arise at different points in time and from different decisions made by the employer, the contraventions are properly treated as separate and distinct, and not arising from a course of conduct.
The two contraventions in respect of s.323(1) of the FW Act should properly be treated as two separate courses of conduct and therefore two contraventions, as they arise out of different sets of facts and different decisions by the first respondent, namely:
a)the ongoing failure to pay the Employees in full and to withhold payment from them in relation to work performed, over their periods of employment: SOAF at [29]-[34]; and
b)the particular decision by the first respondent to deduct from Chen's wages amounts described as "payments for car damage insurance excess", thereby failing to pay Chen in full for those weeks of work: SOAF at [35]-[38].
The first respondent therefore engaged in a total of 15 contraventions of the FW Act, but is entitled to the benefit of the course of conduct provisions in the manner set out in Annexure B to the applicant’s submissions.
Common element
It is open to the Court to group separate contraventions together where the contraventions may be said to overlap with each other or involve the potential punishment of a respondent for the same or substantially similar conduct: Australian Ophthalmic Supplies at [46] per Graham J and [93] per Buchanan J. The Full Court of the Federal Court in Australian Ophthalmic Supplies accepted that this approach is open to the Court in determining appropriate penalties at [46] and [72] per Graham J..
The circumstances of this matter do not warrant any application of grouping principals as each of the 15 admitted contraventions are separate and distinct and cannot be said to overlap each other.
Penalty – factors for consideration
A non-exhaustive list of factors relevant to the imposition of a penalty appears in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[55] per Mowbray FM (“Harrington Corporation”). Those factors include:
a)the nature and extent of the conduct which led to the breaches;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the breaches;
d)whether there had been similar previous conduct;
e)whether the breaches were properly distinct or arose out of the one course of conduct;
f)the size of the business enterprise involved;
g)whether or not the breaches were deliberate;
h)whether senior management was involved in the breaches;
i)whether the party committing the breach had exhibited contrition, taken corrective action and cooperated with the enforcement authorities;
j)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
k)the need for specific and general deterrence.
This summary was adopted in Kelly at [14] per Tracey J. While the summary is a convenient checklist, it does not restrict the matters which may be taken into account in the exercise of the Court's discretion: Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at [11] per Gyles J; Australian Ophthalmic Supplies at [91] per Buchanan J.
Nature and extent of the contravening conduct
Wage and accrued entitlement contraventions
The contravening conduct extended over the entire duration of each of the Employees' respective periods of employment, and involved a failure to pay the Employees their full and proper entitlements, or in the case of Liang any payment at all: SOAF Annexure B and Liang Affidavit at [14], in accordance with the Cleaning Award and the FW Act.
The first 12 contraventions: see [15] above, cover numerous employee protections, including the guaranteed minimum rate of pay, the entitlement to regular payment, the entitlement to be paid in full, the prohibition of the deduction from wages, the failure to pay superannuation, overtime, travel time, personal and annual leave and entitlements including notice upon termination and the lack of access to rosters.
At the commencement of employment, the Respondents told the Employees that they would not be paid for the first few weeks of employment, and would receive payment for those first few weeks of employment, when their employment ended: Chen Affidavit at [90] to [96]; Chou Affidavit at [36] to [49]. This practice is unlawful as employers cannot withhold wages. In any event, it was not honoured by the Respondents.
When the Employees did receive payments those payments were, on several occasions, less than the full entitlement owing to them. For example:
a)Chen was paid reduced amounts for the entire period of her employment excepting the weeks ending 9, 16 and 23 September 2012 where she was not paid at all: SOAF at Annexure A;
b)Chen was also deprived of a significant portion of her wages by the first respondent deducting an amount because of damage that was caused to a company car: Chen Affidavit at [113]-[114]; and
c)Chou was paid reduced amounts for the entire period of her employment excepting the weeks ending 10, 17, 24 and 31 March 2013 where she was not paid at all: SOAF at Annexure C.
After the Employees' employment ended they were not paid their full outstanding wages, including entitlements to overtime rates, allowances, termination of payments and accrued annual leave and annual leave loading entitlements: Chou Affidavit at [46]; Chen Affidavit at [132].
The first respondent obtained a benefit from the underpayments of the Employees. Given the underpayments are yet to be rectified the first respondent continues to receive the benefit of the Employees' unpaid entitlements.
The conduct of the Respondents shows that, on a systematic basis, they failed to provide basic entitlements to the Employees in accordance with minimum standards established under the FW Act.
Record keeping and payslip contraventions
The contravening conduct extended to matters involving record keeping and the provision of pay slips to the Employees. The evidence indicates that:
a)the first respondent did not provide to Chen and Chou a payslip within one day of payment being made, as required under s.536 of the FW Act: SOAF at [79]-[81]; and
b)the first respondent did not keep the required time sheets or records of hours worked, as required under s.535 of the FW Act: Chen Affidavit at [99].
Central to the enforcement of workplace laws is the ability of employees and the regulator to ascertain and verify employees' entitlements through the maintenance of accurate records and pay slips. In Fair Work Ombudsman v Orwill Pty Ltd & Ors [2011] FMCA 730; (2011) 63 AILR 101-461 at [21] per Lucev FM it was observed that:
Manifestly, failure to make and maintain records in relation to employee entitlements, undermines the utility and effectiveness of workplace inspectors, and their ability to determine whether or not there has been compliance with minimum standards and industrial instruments, and the provision of effective means for investigation and enforcement of employee entitlements.
The non-provision of pay slips can impact significantly on the employees' capacity to verify and prove their income and entitlements; particularly where disputes arise as to outstanding amounts: Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012] FMCA 258 at [67] per Riethmuller FM. The record keeping and pay slip obligations play an important role in monitoring compliance with relevant industrial instruments.
The above observations were made in very similar terms in Fair Work Ombudsman v ACN 146 435 118 Pty Ltd & Anor (No.2) [2013] FCCA 1270 at [34] per Judge Lucev (and see also at [35]) (“ACN 146 435 118 No.2”). In ACN 146 435 118 (No.2) the third respondent in these proceedings was the second respondent, and the second respondent in these proceedings was a director of the first respondent.
NTP contravention
The relevant NTPs required the production of records or documents regarding the transfer of business from the business the subject of judgment and orders in ACN 146 435 118 to the first respondent: SOAF at [83] and [117].
The NTP was not complied with. The third respondent suggested that the requested documents existed, and then failed to provide the documents: SOAF at [125]-[126].
The Respondents’ conduct has stifled the applicant's ability to conduct a full investigation of complaints made against the Respondents. Such conduct undermines the effectiveness of the principal objects of the workplace relations system: ACN 146 435 118 at [37] per Judge Lucev.
Circumstances in which the conduct took place
The Respondents' conduct in this matter warrants the awarding of high penalties by reason of:
a)the range of contraventions: see [15] above;
b)the vulnerability of the Employees; and
c)the prior compliance history of the Respondents.
Whether an employee is vulnerable and whether that vulnerability has been exploited in the course of an employer's contravention is relevant to the determination of penalty: ACN 146 435 118 at [43] per Judge Lucev. In ACN 146 435 118 (No 2) at [53] per Judge Lucev the Court observed as follows:
53. There is evidence that Chai, McDermott, Wen, and Yau may be vulnerable. They displayed limited and unsophisticated knowledge of entitlements under Australian workplace law. Chai and Yau were on a working holiday visa and spoke limited English. Chai was unclear at the interview as to whether any of the Corporation's or Ms Paino-Povey's conduct was unlawful or a breach of her statutory rights, including whether or not she had received, or was aware she ought to receive, for example, annual leave. Yau's English skills were limited, at least to the extent that she had to use an interpreter to swear her affidavit. There is no evidence to suggest whether Wen had limited English skills or not, however he was a foreign national and in Australia on a temporary basis, as were Chai and Yau. Chai's, Wen's and Yau's circumstances are comparable to Sanada Investments where the employees in that case were foreign nationals, on temporary working holiday visas, had limited English skills, and were employed for short periods. McDermott was also on a working holiday visa and employed for a short period, however, as an Irish national it is reasonable to infer she had basic English language skills. Chai, McDermott, Wen and Yau respectively were all low paid workers, and were underpaid 59%, 59%, 48%, and 76% of their total entitlements. These are large (and in Yau's case, very large) underpayments. This is more than both Vainu and McMillan who appear by reason of their national origin, workplace knowledge and employment history to be less vulnerable than Chai, McDermott, Wen and Yau, all of whom, by a combination of their being foreign nationals on temporary visas, and in the case of Chai, Wen and Yau, with English as a second language, together with the nature of the work, combined to put those four employees into the category of vulnerable employees. It is not without significance that their treatment, particularly in relation to the quantum of underpayment, was worse (and in the case of Yau significantly worse) than that afforded to Vainu and McMillan. In the Court's view, the more vulnerable the employee, the more likely it was that the Corporation and Ms Paino-Povey would underpay them.
These proceedings demonstrate similar circumstances and a similar mode of operation by the Respondents in these proceedings, in which the second respondent was a director of the first respondent in ACN 146 435 118 (No 2), and the third respondent was the second respondent in ACN 146 435 118 (No 2).
It is of course necessary to prove that an employee is not only vulnerable, but was also exploited: ACN 146 435 118 (No 2) at [43]-[49] per Judge Lucev; Hanssen Pty Ltd v Jones [2009] FCA 192; (2009) 179 IR 57 at [55] per Siopis J. The Court is satisfied that that each of the Employees were vulnerable workers because:
a)they were all Taiwanese nationals in Australia on working holiday visas: Chen Affidavit at [2]-[3]; Chou Affidavit at [2]-[3]; Liang Affidavit at [3] and [5];
b)they were all from non-English speaking backgrounds: Chen Affidavit at [4]; Chou Affidavit at [2]. Ms Chen is not fluent in English and required the use of an interpreter in order to affirm her affidavit;
c)it may be inferred from the Employees’ nationality, visa status and lack of English language skills that they had limited experience in, and knowledge of, the Australian workplace relations regime and had limited choice in relation to employment positions. Ms Liang has affirmed evidence as to a limited understanding of her what her options were when she was not paid: Liang Affidavit at [15]. Ms Chen has affirmed evidence of her limited understanding of her employment rights in Australia: Chen Affidavit at [138]. In particular, Ms Chen:
i)did not understand everything in the documents she was asked to sign by the first respondent: Chen Affidavit at [16], and she signed them so that she could get the job: Chen Affidavit at [25]; and
ii)was not aware of annual leave or superannuation entitlements: Chen Affidavit at [123]-[124];
d)the Employees were classified at the base level pursuant to the Cleaning Award, it is reasonable to infer that the Employees were performing low skilled work and were reliant on the payment of statutory minimum wages and on the safety net conditions in the Cleaning Award and FW Act;
e)of the extent of the loss suffered by the Employees (see [51] below) which might not have been tolerated had the Employees been more aware of their rights; and
f)it is open to infer that the Respondents’ actions towards the Employees formed part of a deliberate business strategy to engage vulnerable employees, refuse to pay them during their first few weeks of employment, refuse to pay them their full entitlements when they fell due (or at all in the case of Liang), and then refuse to pay outstanding wages owed to the Employees on the termination of the employment relationship, particularly insofar as the conduct mirrors the behaviour of the second and third respondents in these proceedings with respect to employees the subject of judgment and orders in ACN 146 435 118 (No 2).
Nature and extent of the loss
The Employees are owed a total of $11,511.66 in wages and entitlements plus superannuation and interest. The underpayment amount has been established notwithstanding the failure of the first respondent to make and keep proper records and issue payslips. These underpayments are not large amounts per se, but they nevertheless represent a not insignificant amount for Employees reliant on the minimum entitlement provisions of the Cleaning Award and the FW Act, as can be seen in the context of the length of employment and the loss as a percentage of their total entitlements: SOAF at Annexures A, B and C. Over their respective periods of employment, which were between 3 days and 3 months:
a)Chen was underpaid $5,835.92, or approximately 46% of her total entitlement for the period 22 June 2012 to 21 September 2012;
b)Liang was underpaid $569.57, which was 100% of her total entitlement, albeit for the very short period of her employment from 5 November 2012 to 7 November 2012; and
c)Chou was underpaid $5,106.17, or approximately 66% of her total entitlement for the period 31 January 2013 to 2 April 2013.
Chou gives evidence of the financial stress she was under because she was not paid by the first respondent. She had to borrow money from a friend and only ate one meal a day to be able to pay her rent: Chou Affidavit at [70].
Liang gives evidence that she needed the money to pay for her rent and expenses and felt as though she had been taken advantage of as an international worker: Liang Affidavit at [15].
The nature and extent of the loss suffered by the Employees was significant and warrants the imposition of a significant penalty because:
a)it involves contraventions of minimum standards of the most fundamental kind, namely the payment of wages and entitlements: Fair Work Ombudsman v Dawe [2013] FMCA 191 at [23] per Emmett FM;
b)it involves a not insignificant amount of underpayment, being $11,511.66, given the relatively short periods of employment (being three days to three months) and that the Cleaning Award sets minimum rates of pay and entitlements;
c)the first respondent has obtained the benefit of the underpayments during the Employees’ period of employment, and subsequently, by reason of there being no rectification of the underpayments: Fair Work Ombudsman v Shafi Investments Pty Ltd & Ors (No.2) [2013] FMCA 168 at [15] per Whelan FM; Fair Work Ombudsman v Lycamobile Pty Ltd [2013] FCCA 2132 at [16] per Judge Burnett;
d)the contravening conduct in relation to each of the Employees only ceased because the Employees’ employment with the first respondent ended; and
e)the first respondent also failed to make superannuation contributions for the Employees, which is another contravention of a minimum legislated standard entitlement.
Previous contraventions and previous similar conduct
By reference to ACN 146 435 118 (No.2) the Court notes that:
a)there are common directors and shareholders in ACN 146 435 118 Pty Ltd and the first respondent: SOAF at [9]-[10];
b)the second and third respondents operated ACN 146 435 118 Pty Ltd: SOAF at [9]-[10];
c)the third respondent was a party (she was the second respondent) to the proceedings in ACN 146 435 118 (No.2), and was the subject of Court orders in those proceedings;
d)the relevant conduct in ACN 146 435 118 (No.2) concerned 6 employees employed between June 2011 and January 2012: ACN 146 435 118 (No.2) at [9] per Judge Lucev, whereas the conduct in these proceedings concerned conduct between June 2012 and April 2013; and
e)in ACN 146 435 118 (No.2) the Court ordered compensation of $22,510.62 (plus interest and superannuation) be paid to the employees and imposed penalties on:
i)ACN 146 435 118 Pty Ltd in the amount of $286,550; and
ii)the third respondent in these proceedings in the amount of $51,310,
and that that compensation and those penalties have not been paid: SOAF at [100].
The contraventions found by the Court in ACN 146 435 118 (No.2) are similar to those currently before the Court in that they related primarily to minimum rates of pay, frequency of pay, overtime, penalty rates, failure to pay amounts owing on termination, failing to comply with a NTP and record keeping obligations: ACN 146 435 118 (No.2) at [12] per Judge Lucev.
By reason of the fact that the first respondent in these proceedings and ACN 146 435 118 Pty Ltd had common directors, including the second respondent and the third respondent in these proceedings, and that the third respondent in ACN 146 435 118 (No.2) is the second respondent in these proceedings, the Court considers that appropriate weight must be given to the previous contravention by the third respondent and the previous similar conduct by a corporation in which both the second and third respondents were involved.
Whether the breaches arose out of the one course of conduct
As to whether the breaches arose out of the one course of conduct that is a matter which the Court has addressed at [28] above.
Size and financial circumstances of respondents
Employers, be they small, medium or large, have an obligation to meet minimum standards in relation to their employees, and they cannot overcome financial difficulties by underpaying their employees: Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38; (2009) 61 AILR 101-000 at [26]-[30] per Simpson FM (“Saya Cleaning”).
In Fair Work Ombudsman v Ultra Tune Australia Pty Ltd [2012] FMCA 560; (2012) 225 IR 326 at [40]-[47] per Lucev FM (“Ultra Tune”), the relevant authorities of the then Federal Magistrates Court, the Federal Court, and the former Industrial Relations Court of Australia were considered at length. In Ultra Tune the Federal Magistrates Court found that Saya Cleaning was not authority for the proposition that the size and financial resources of a contravener, or its capacity to pay, can be ignored, or not considered, when determining penalty, because in Saya Cleaning the Federal Magistrates Court did not actually express a view as to whether or not the size and financial resources of a contravener ought to affect penalty: Ultra Tune at [43] per Lucev FM. In Ultra Tune, on the basis of authority binding the Federal Magistrates Court, and now this Court, including the Federal Court and Australian Industrial Relations Court authorities there cited: Ultra Tune at [40]-[41] per Lucev FM, the Federal Magistrates Court found that the size and financial resources of a contravener may be considered in relation to penalty, and that if Saya Cleaning said otherwise it was inconsistent with those superior court authorities: Ultra Tune at [41] and [43(b)] per Lucev FM. More recently, the Federal Court has held that the financial circumstances of a respondent may be a relevant consideration in determining an appropriate penalty and whether the size of that penalty is meaningful: Hansen v Mt Martha Community Learning Centre Inc (No.2) [2015] FCA 1283 at [5] per Jessup J.
The fact that the financial circumstances of a respondent may be a relevant consideration in determining an appropriate penalty and whether the size of that penalty is meaningful is not however finally determinative: other factors, and in particular general deterrence, must be had regard to.
In Jordan v Mornington Inn Pty Ltd [2007] FCA 1384; (2007) 166 IR 33; (2007) 60 AILR 100-744 (“Mornington Inn”) the Federal Court was required to determine the appropriate penalties to be imposed on an employer for admitted contraventions of the Workplace Relations Act 1996 (Cth), and at [99] per Heerey J stated:
As to the respondent's own financial position, however, in considering the size of a penalty, capacity to pay is of less relevance than the objective of general deterrence: Leahy (No 2) at [9]. In any event, to the extent that financial hardship might mitigate what would otherwise be an appropriate penalty, such an argument would need to be based on evidence. Apart from the income figures mentioned above, which were advanced from the Bar table, no such evidence was forthcoming.
Mornington Inn went on appeal: Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383; (2008) 171 IR 455; (2008) 247 ALR 714; [2008] 60 AILR 100-883 (“Mornington Inn Appeal”). In Mornington Inn Appeal at [69] per Stone and Buchanan JJ the statement of principle in Mornington Inn at [99] per Heerey J was described as being "unimpeachable".
Mornington Inn Appeal can properly inform the approach the Court should adopt in the present matter. This is particularly so given the significance the principle of general deterrence in relation to contraventions of workplace laws.
The Court accepts that the first respondent may be characterised as a small business. In this case there is, however, nothing in the size of the first respondent’s business which mitigates the failure to pay entitlements, keep or maintain records or produce records to the applicant in accordance with the provisions of the FW Act.
Whilst the second respondent has indicated to the Employees that they do not have any assets to pay the claims made by the Employees, the Respondents have not filed any direct evidence of financial hardship or as to their respective current financial positions. Even if a sufficient evidentiary basis existed for the Court to find that either or all of the Respondents are experiencing financial difficulty, the weight the Court ought to give such evidence must be balanced against considerations of the objective seriousness and deliberateness of the contravening conduct. As was observed in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27] per Driver FM:
27. 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…
The Court should not be deterred from imposing the appropriate penalty only because the Respondents may have difficulties paying it: Australian Competition and Consumer Commission v ACN 135 183 372 (in liquidation) (formerly known as Energy Watch Pty Ltd) [2012] FCA 749; [2012] ATPR 42-405 at [19] per Marshall J; Cotis v Pow Juice Pty Limited [2007] FMCA 140 at [68] per LloydJones FM.
Ensuring compliance with minimum standards
Ensuring compliance with minimum standards is a very important consideration in contravention cases. The objects of the FW Act include the maintenance of an effective safety net of minimum terms and conditions, and effective enforcement mechanisms: FW Act, s.3(b). The substantial penalties set by Parliament and awarded by the Courts for failing to comply with minimum award obligations reinforce the importance placed on compliance with minimum standards and an effective enforcement framework: FW Act, s.539(2).
The Respondents' contraventions involved significant failures to adhere to the minimum standards required by the FW Act. The importance of ensuring compliance with Australia's workplace laws should not be underestimated and be given appropriate weight in considering what penalties should be imposed for the contraventions. In Fair Work Ombudsman v Kentwood Industries Pty Ltd (No.3) [2011] FCA 579 McKerracher J at [36] said:
In imposing a penalty against the respondents, it is necessary for the court to set the penalty in a range that reinforces the fundamental importance of compliance with the employment standards enshrined in Commonwealth workplace laws.
The importance of the maintenance of effective minimum terms and conditions of employment and enforcement of industrial instruments is reflected in the magnitude of the maximum penalties that may be imposed in respect of any contravention of an applicable provision. In Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 147 IR 462; (2005) 224 ALR 467; (2005) 58 AILR 100-440 at [72] per Merkel J it was observed that:,
Finally, I note that the penalties imposed in the present case... greatly exceed penalties imposed under the WR Act or its predecessors in previous cases. It may be that breaches by unions and employers of industrial legislation from time to time have been accepted as part of the give and take of industrial disputation. However, in recent years industrial legislation has increasingly codified and prescribed what is acceptable, and what is unacceptable, industrial conduct. The legislature has, over time, also moved to increase the penalties that may be imposed in respect of unlawful industrial conduct. In mv view, any light handed approach that might have been taken in the past to serious, wilful and ongoing breaches of the industrial laws should no longer be applicable. (emphasis added)
The obsolescence of the light handed approach is reinforced by its frequent application in penalty judgments in this Court: see, for example, Fair Work Ombudsman v Crocmedia Pty Ltd [2015] FCCA 140; (2015) 67 AILR 102-344 at [40] per Judge Riethmuller; Fair Work Ombudsman v Mildura Battery Company Pty Ltd & Anor [2014] FCCA 192 at [68] per Judge F Turner; TheDirector of the Fair Work Building Industry Inspectorate v Robko Construction Pty Ltd & Anor (No.2) [2015] FCCA 177 at [15]-[16] per Judge Simpson.
The object of providing a guaranteed safety net of adequate minimum entitlements for employees: FW Act, s.3(b), has particular force for those employees who are vulnerable or in low income roles, and with respect to providing an 'even playing field' for all employers with regard to employment costs: ACN 146 435 118 (No 2) at [82] per Judge Lucev. The maintenance of the safety net is particularly pertinent in a competitive service industry such as the cleaning industry, in which employment costs are often the most significant outlay and form the basis for price competition.
Beyond the inherent seriousness of the Respondents' failure to afford the Employees basic minimum employment entitlements in the form of regular wages and entitlements, there are significant aggravating factors in this case, including the deliberate and repeated nature of the Respondents' conduct, the prior similar conduct and the vulnerability of the Employees.
In the context of the objects of the FW Act requiring compliance with minimum standards, including minimum rates of pay and entitlements, the contraventions in this case involve an undermining of the statutory objects and purpose of the FW Act, the conduct of the Respondents necessitates ordering penalties at a meaningful and significant level to demonstrate that there are serious consequences for failing to comply with the FW Act, and to act as an incentive for employers to comply with minimum standards.
Deliberateness of contraventions
The third respondent is a repeat offender, and the second respondent was the sole director, secretary and shareholder of ACN 146 435 118 Pty Ltd during the relevant time in respect of the proceedings in ACN 146 435 118 (No.2). The second and third respondents were jointly responsible for the overall direction, management and supervision of the operations of ACN 146 435 118 Pty Ltd: ACN 146 435 118 (No.2) at [65]-[70] per Judge Lucev.
Deliberateness is proven by the second and third respondents' awareness of their obligations under the Cleaning Award and FW Act because:
a)since 2006 the Respondents or companies previously run by the second or third respondents have been subject to a significant number of complaints by employees and former employees in relation to the very issues which are the subject of these contraventions, including previous proceedings in this Court: SOAF at [95]-[100]; ACN 146 435 118 (No.2); and
b)as a consequence of those complaints, the Respondents received repeated advice and warnings from the applicant about their obligations under the FW Act with respect to the very issues which are the subject of these contraventions: SOAF at [95]-[100].
In relation to the failure to comply with the NTP contravention the evidence supports the contention that the contravention was deliberate as follows:
a)the third respondent knew what her obligations were with respect to NTPs, having been the subject of prior non-compliance with an NTP: ACN 146 435 118 (No.2) at [36]-[39] per Judge Lucev; and
b)the third respondent confirming she was happy to supply the documents the subject of the NTP, however as the Respondents’ solicitors and accountants offices were closed for the Christmas period, the documents would be provided at a later date, but were not so provided: SOAF at [125]-[126].
The third respondent was therefore aware of the nature and purpose of the NTP but elected not to comply. In this context, the NTP contravention could only have been deliberate.
The Court finds that the contraventions were deliberate, and as a consequence penalties which appropriately reflect the deliberateness of the contraventions should be awarded.
Corrective action, contrition and cooperation
There is no evidence before the Court of any steps taken by the Respondents to rectify the underpayments, intention to rectify the underpayments or prevent contraventions in any potential future business dealings: SOAF at [100]; Chou Affidavit at [64]-[69]; Liang Affidavit at [12]; Chen Affidavit at [129].
The Court notes that the compensation and penalties awarded in ACN 146 435 118 (No.2) remain unpaid: SOAF at [100].
During the course of this proceeding the Respondents have cooperated insofar as they have made admissions (by way of the SOAF) allowing for the matter to proceed directly to a hearing on penalty: SOAF at [131]. The Respondents were however uncooperative during the investigation and had initially advised the applicant that the first respondent did not employ cleaning employees only to then admit to the conduct once the proceedings were commenced: SOAF at [101]-[113].
Where respondents co-operate and make admissions early in the course of an investigation or soon after the commencement of proceedings, it is appropriate to allow a discount of penalty: Mornington Inn Appeal at [75]-[76] per Stone and Buchanan JJ. In considering the application of a penalty discount for cooperation and contrition, the statements of Stone and Buchanan JJ in Mornington Inn are apposite:
...a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability:
(a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or
(b) has indicated a willingness to facilitate the course of justice.
In this case the Court notes that:
a)the second and third respondents were uncooperative during the applicant's investigation period which spanned some 14 months: SOAF at [101]-[129] and thus the admissions came late in the proceedings; and
b)there is a the lack of contrition and no evidence of corrective action by the Respondents.
As such the Respondents’ admissions do not fall within the class identified in the Mornington Inn Appeal cited above. Whilst there has been a modicum of cooperation by the Respondents, it has been minimal, late, and no more than a recognition of the likely outcome, and combined with the lack of contrition and lack of rectification of the underpayments, does not warrant a discount on penalty.
Involvement of senior management
In this case:
a)the third respondent was at relevant times director, secretary and sole shareholder of the first respondent: SOAF at [9](b) and [10](f);
b)the second and third respondents were jointly responsible for the overall direction, management and supervision of the first respondent's operations including in respect of industrial instruments and arrangements: SOAF at [9](d) and [10](i);
c)the Employees raised concerns regarding their pay primarily with the third respondent: Chou Affidavit, Annexure PWC-1, Liang Affidavit at [12], Chen Affidavit at [103]-[109];
d)the second respondent terminated Ms Chou and negotiated Ms Chou's final pay: Chou Affidavit, Annexures PWC-5 and PWC-9, and issued the Employees with payment summaries containing incorrect figures: Chou Affidavit (49) and Annexure PWC-7; and
e)both the second and third respondents were the persons with whom the applicant dealt concerning the prior complaints and the investigation leading to these proceedings.
As such, the second and third respondents were the senior management of the first respondent, and the operative minds in relation to the employment and payment of the Employees, and therefore directly involved in the contraventions, both for the purposes of penalty assessment and accessorial liability for the purposes of s.550 of the FW Act: see also order 2 of the Court’s orders of 9 July 2015. Their involvement in the contraventions is significant and warrants the imposition of a significant penalty.
Deterrence
It is well established that the need for specific and general deterrence are matters that are relevant to the imposition of a civil penalty: Harrington Corporation at [51]-[55] per Mowbray FM; Ponzio v
B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 62 IR 444; (2007) 59 AILR 100-669 at [93] per Lander J (“B & P Caelli Constructions”).
General deterrence
In Maclean Bay (No.2) at [29] per Marshall J the Federal Court observed that:
It is important to ensure that the protections provided 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 they are respected.
The role of general deterrence in determining the appropriate penalty is illustrated by the comments in B & P Caelli Constructions at [93] per Lander J:
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: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. 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: R v Thompson (1975) 11 SASR 217.
General deterrence is a critical factor in these proceedings, and employers should be in no doubt that they have a positive obligation to ensure compliance with the obligations they owe to their employees under the law, and that they must provide their employees with the correct entitlements and issue payslips, and that significant penalties running to the tens of thousands or hundreds of thousands of dollars may be imposed upon corporate respondents who fail to comply with such obligations. Those employers who fail to comply with minimum obligations gain an unfair competitive advantage over those employers who do comply with their workplace obligations. The Court also observes that it is now almost notorious that there are significant pockets of non-compliance in relation to the payment of wages and entitlements, either at all or correctly, in the cleaning industry, which appears to be an industry that attracts unskilled labour and so is more likely to attract vulnerable workers: Fair Work Ombudsman v Glad Group Pty Ltd [2012] FMCA 731 at [23] per Emmett FM; Fair Work Ombudsman v Terrence Cyril Thomas t/as Over the Top Happy Cleaning Services [2013] FCCA 536 at [42] and [47]-[48] per Judge Riley (“Top Happy”). In Top Happy the Court imposed a penalty of 90% of the maximum penalty, reduced to 80% on totality considerations for employees, some of whom, like the Employees, were from overseas backgrounds with little understanding of their workplace rights: Top Happy at [30], [56] and [58] per Judge Riley.
In this case, the warning to others that general deterrence will send is that contraventions of the kind found in this case will not be tolerated and vulnerable workers are not available for exploitation: Fair Work Ombudsman v Kingsford Carwash Pty Ltd & Anor (No.2) [2012] FMCA 1210, and the Court notes at [37] per Smith FM that:
…there has been provision in Commonwealth legislation since 2006 for a basic minimum rate of pay for unskilled work, whether permanent or casual, and whether part-time or full-time. No Australian business should be able to think that it can make its profits by disregarding the requirements of these laws.
It follows from the above that a meaningful and robust measure of general deterrence is appropriate in this case so that other employers, particularly in the cleaning industry, are not impressed with the idea that they can avoid payment of employees’ minimum entitlements, such as occurred in this case.
Specific deterrence
Specific deterrence is significant in this case. In Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union [2008] FCAFC 170; (2008) 171 FCR 357; (2008) 177 IR 243 at [37] per Gray J observed :
Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur.
Specific deterrence is required to deter contraveners from committing further breaches of Australian workplace law. Specific deterrence is appropriate in circumstances where:
a)there has been no contrition;
b)there has been no cooperation with the Court or the regulator;
c)the contravention was serious and deliberate; and
d)the respondent or respondents have continuing involvement in the industry: Liquor, Hospitality and Miscellaneous Union v Cuddles Management Pty Ltd (No.2) [2009] FMCA 746; (2009) 188 IR 435 at 444 per Lucev FM; ACN 146 435 118 (No.2).
The Court notes that:
a)the Respondents have failed to show any form of contrition or intention to alter their behaviour which suggests a lack of responsibility for their actions, and that the likelihood of further contraventions is high; whether via the first respondent or through other corporate entities with which the second and third respondents are involved (as to which see the Hartigan Affidavit);
b)the first respondent has failed to rectify the underpayments;
c)there is no evidence that the Respondents have taken any steps to ensure that their workplace relations obligations are complied with in the future;
d)the third respondent has been engaging in conduct that has been admitted to in this matter for a number of years: see ACN 146 435 118 (No 2); and
e)there is evidence of corporate holdings and structures from which it might be inferred that the second and third respondents might be continuing to operate in the cleaning or allied industry: Hartigan Affidavit.
The third respondent has also been subject to penalties in the past: ACN 146 435 118 (No.2) at [103(b)] and [108(b)] per Judge Lucev, where penalties imposed on the third respondent were between 40 and 55% of the maximum penalty. Because the third respondent continues to disregard her obligations under Australian workplace laws, there is a strong need for penalty in the high range as a means of specific deterrence for the third respondent. Overall, the Court should therefore impose penalties which meaningfully endeavour to ensure that the Respondents are deterred from any future non-compliance with their obligations pursuant to the FW Act and any relevant industrial instruments.
Penalty recommendations
In The Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Ors [2015] HCA 46; (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494 (“Director FWBII”) the High Court confirmed that parties to civil penalty proceedings can make submissions which:
a)identify a range of penalties;
b)nominate specific penalties in respect of particular contraventions; and
c)urge the Court to adopt an agreed position on penalties.
In Director FWBII at [60] per French CJ, Kiefel, Bell, Nettle and Gordon JJ the High Court said that:
It is also true, as the Full Court observed, that the regulator in a civil penalty proceeding is not disinterested. As has been seen, under the BCII Act, the Director's statutory functions include monitoring and promoting appropriate standards of conduct by building industry participants generally. It is, therefore, naturally to be assumed that the Director will fashion penalty submissions with an overall view to achieving that objective and thus perhaps, if not probably, with one eye to considerations beyond the case in hand. That consideration, however, supports, rather than detracts from, the propriety of a court receiving joint (or separate) submissions as to facts and penalty and imposing the proposed penalty if persuaded that it is appropriate. As was emphasised in NW Frozen Foods, it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance. (footnotes omitted)
Assessment of penalties
In determining penalty the Court has had regard to the penalty recommendations (in the “high” penalty range of 80 to 90 percent of the maximum penalty) contained in the applicant’s submissions to the Court. Where it is necessary to impose a civil penalty it ought to be fixed at a level which ensures that the penalty cannot be regarded simply as part of an acceptable or usual cost of doing business: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249; (2012) ATPR 42-387 at [62]-[63] per Keane CJ, Finn and Gilmour JJ.
On the basis of the contraventions, as set out above: see [15] above, the maximum penalties that the Court can impose under s.539(2) of the FW Act are set out in Annexure B to the applicant’s submissions, and are as follows::
a)$1,159,500 for the first respondent, reduced to $516,000 by course of conduct considerations; and
b)$231,900 for each of the second and third respondents, reduced to $103,200 by course of conduct considerations.
Having regard to all of the relevant circumstances as set out above, and bearing in mind the serious nature of the failure to pay (and to rectify non-payment of) wages and entitlements, to comply with an NTP, the deliberateness of the contraventions, the vulnerability of the Employees, the absence of contrition and the need for specific deterrence in particular, the Court considers that penalties in the high range of 70 to 100 percent ought to be imposed upon the Respondents. The Court notes that the sums involved here by way of underpayment are not per se significant, and that the conduct was over a short period. In those circumstances a penalty at the bottom end of that range ought to be imposed upon the first and second respondents, that is, a penalty of 70% of the maximum penalty reduced by the course of conduct considerations. In relation to the third respondent, and bearing in mind her prior contravention in ACN 146 435 118 (No.2) the Court considers that a penalty of 75% of the maximum penalty reduced by course of conduct considerations is appropriate.
In all the circumstances, the penalties assessed to be imposed before totality considerations are follows:
a)on the first respondent – $361,200;
b)on the second respondent – $72,240; and
c)on the third respondent – $77,400.
Totality
Having assessed an appropriate penalty for each contravention, the Court must take a "final look" at the aggregate penalty, to determine whether it is, overall, an appropriate response to the conduct which led to the breaches, and is not oppressive or crushing: Kelly at [30] per Tracey J; Australian Ophthalmic Supplies at [23] per Gray J, [71] per Graham J and [102] per Buchanan J. Whilst the penalty imposed must not be crushing or oppressive, it must nevertheless be proportionate to the seriousness of the conduct engaged in: Fair Work Ombudsman v Promoting U Pty Ltd & Anor [2012] FMCA 58 at [52]-[54] per Burchardt FM. Essentially, the totality principle requires the Court, once it has made a judicial evaluation of what it considers to be an appropriate aggregate penalty, to examine one final time, the aggregate penalty in order to determine whether it appears wrong: Ultra Tune at [68] per Lucev FM, citing, amongst other cases, Australian Ophthalmic Supplies at [27]-[28] per Gray J and [78] per Graham J.
Having regard to the nature of the bulk of the contraventions concerned, the number and nature of the Employees, and notwithstanding that the contraventions involve sums of money which are not significant per se, and occurred over relatively short periods in relation to each Employee, but also having regard to the lack of contrition, cooperation over a significant period of time, the involvement of senior management in the contraventions, and the prior contravention in which the third respondent specifically was involved, the Court is not persuaded that this is an appropriate case for the application of the totality principle. The Court notes in that regard that penalties have been assessed, in large part, at the lower end of the relevant penalty range. Even if it be the case that the Respondents are unlikely to be able to meet any penalty, regardless of size, that merely reinforces that there is no basis for reducing the penalties imposed on account of them being crushing or oppressive, and that the assessment of penalties set out above is appropriate.
Orders
The Court makes orders for payment of penalties by the Respondents as set out in the coversheet, reflecting the conclusions reached in these Reasons for Judgment.
I certify that the preceding one hundred and six (106) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Associate:
Date: 22 November 2017
50
7