Fair Work Ombudsman v Contracting Plus Pty Ltd & Anor
[2011] FMCA 191
•10 March 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v CONTRACTING PLUS PTY LTD & ANOR | [2011] FMCA 191 |
| INDUSTRIAL LAW – Contravention Workplace Relations Act – sham contracting – inadequate record keeping – underpayment of wages – call centre employees – imposition of penalties. |
| Crimes Act 1914 (Cth) Workplace Relations Regulations2006 (Cth) 19.4(1), 19.4(2), 19.5(1), 19.6(1), 19.8(1)(c), 19.8(1)(d), 19.11(1), 19.11(2), 19.11(3)(a), 19.11(3)(b), 19.13(1), 19.20 |
| Kelly v Fitzpatrick [2007] FCA 1080 Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; [2008] FCAFC 70 Building Workers’ Industrial Union of Australia & Ors v Odco Pty Ltd (1991) 29 FCR 104 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65 QR Limited v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2010] FCAFC 150 Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 Re Michael James Lynch v Buckley Sawmills Pty Ltd [1984] FCA 306; 3 FCR 503; 9 IR 469 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | CONTRACTING PLUS PTY LTD |
| Second Respondent: | RANDALL ROWE |
| File Number: | BRG 1001 of 2009 |
| Judgment of: | Burnett FM |
| Hearing date: | 28 February 2011 |
| Date of Last Submission: | 28 February 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 10 March 2011 |
REPRESENTATION
| Counsel for the Applicant: | Ms G.B. Dann |
| Solicitors for the Applicant: | Clayton Utz |
| There was no appearance by or on behalf of the First Respondent |
| The Second Respondent appeared on his own behalf |
ORDERS
THE COURT DECLARES:
The First Respondent has contravened section 182(1) of the Workplace Relations Act 1996 (WR Act) which is an "applicable provision" for the purposes of section 718 of the WR Act.
The Second Respondent, by reason of section 728(1) of the WR Act has contravened section 182(1) of the WR Act which is an "applicable provision" for the purposes of section 718 of the WR Act.
The First Respondent has contravened section 900(1) of the WR Act in respect of Mr Keith John Isbel.
The First Respondent has contravened section 900(1) of the WR Act in respect of Mr David Aaron George.
The First Respondent has contravened section 900(1) of the WR Act in respect of Mr Benjamin Schinkel P Montgomery.
The First Respondent has contravened section 900(1) of the WR Act in respect of Mr Owen Lindsay Ross Strathie-Murray.
The First Respondent has contravened section 900(1) of the WR Act in respect of Mr Andrew Gareth Mills.
The Second Respondent, by reason of section 728(1) of the WR Act, has contravened section 900(1) of the WR Act in respect of Mr Keith John Isbel.
The Second Respondent, by reason of section 728(1) of the WR Act, has contravened section 900(1) of the WR Act in respect of Mr David Aaron George.
The Second Respondent, by reason of section 728(1) of the WR Act, has contravened section 900(1) of the WR Act in respect of
Mr Benjamin Schinkel P Montgomery.
The Second Respondent, by reason of section 728(1) of the WR Act, has contravened section 900(1) of the WR Act in respect of Mr Owen Lindsay Ross Strathie-Murray.
The Second Respondent, by reason of section 728(1) of the WR Act, has contravened section 900(1) of the WR Act in respect of Mr Andrew Gareth Mills.
The First Respondent has contravened the provisions of clauses of 19.4(1) and (2), 19.5(1), 19.6(1), 19.8(1)(c) and (d), 19.11(1), 19.11(2), 19.11(3)(a) and (11)(b), 19.13(1) and 19.20 of Part 19 of Chapter 2 of the Workplace Regulations 2006 (WR Regulations).
The Second Respondent, by reason of section 728(1) of the WR Act, has contravened the provisions of clauses of 19.4(1) and (2), 19.5(1), 19.6(1), 19.8(1)(c) and (d), 19.11(1), 19.11(2), 19.11(3)(a) and (11)(b), 19.13(1) and 19.20 of Part 19 of Chapter 2 of the WR Regulations.
THE COURT ORDERS
The imposition of a penalty under section 719 of the WR Act on the First Respondent for contravention of section 182(1) in the amount of $29,700.
The imposition of a penalty under section 719 of the WR Act on the Second Respondent for contravention of section 182(1) in the amount of $5,940.
The imposition of a penalty under section 904 of the WR Act on the First Respondent for contravention of section 900(1) of the WR Act in respect of:
(a)Mr Keith John Isbel, in the amount of $24,750;
(b)David Aaron George, in the amount of $26,400;
(c)Mr Benjamin Schinkel P Montgomery, in the amount of $26,400;
(d)Mr Owen Lindsay Ross Strathie-Murray, in the amount of $24,750; and
(e)Mr Andrew Gareth Mills, in the amount of $24,750.
The imposition of a penalty under section 904 of the WR Act on the Second Respondent for contravention of section 900(1) of the WR Act in respect of:
(a)Mr Keith John Isbel, in the amount of $4,950;
(b)David Aaron George, in the amount of $5,280;
(c)Mr Benjamin Schinkel P Montgomery, in the amount of $5,280;
(d)Mr Owen Lindsay Ross Strathie-Murray, in the amount of $4,950; and
(e)Mr Andrew Gareth Mills, in the amount of $4,950.
In accordance with clause 14.3 and 14.4 of Part 14 of Chapter 2 of the WR Regulations, the imposition of a penalty on the First Respondent for contravention of, in Part 19 of Chapter 2 of the WR Regulations, clauses:
(a)19.4(1) and (2), in the amount of $4,400;
(b)19.5(1), 19.6(1), in the amount of $4,400;
(c)19.8(1)(c) and (d), 19.11(1), 19.11(2), 19.11(3)(a) and (3)(b), in the amount of $4,400;
(d)19.13(1), in the amount of $4,400; and
(e)19.20, in the amount of $4,400.
In accordance with clause 14.3 and 14.4 of Part 14 of Chapter 2 of the WR Regulations, the imposition of a penalty on the Second Respondent for contravention of, in Part 19 of Chapter 2 of the WR Regulations, clauses:
(a)19.4(1) and (2), in the amount of $880;
(b)19.5(1), 19.6(1), in the amount of $880;
(c)19.8(1)(c) and (d), 19.11(1), 19.11(2), 19.11(3)(a) and (3)(b), in the amount of $880;
(d)19.13(1), in the amount of $880; and
(e)19.20, in the amount of $880.
That the First and Second Respondents pay the penalties imposed under orders 15 to 20 to the Applicant within 28 days of the date of this order.
That the Applicant apply the monies received by it under order 21 as follows:
(a)distributing to the employees of the First Respondent identified in schedule one attached to this order (Schedule 1), being the subject of the contravention of section 182(1) of the WR Act (Employees), on a pro rata basis, amounts up to the total amount identified in relation to each of the Employees in Schedule 1 plus interest calculated from 24.12.2009 until 31.12.2009 at the rate of 7.00% per annum and from 1.1.2010 to 10.3.2011 at the rate of 7.75% per annum;
(b)if the Applicant is unable to locate any of the Employees the Applicant remits any monies held on account of those Employees to the Commonwealth Consolidated Revenue Fund; and
(c)in respect of any remainder, remitting to the Commonwealth Consolidated Revenue Fund.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 1001 of 2009
| FAIR WORK OMBUDSMAN |
Applicant
And
| CONTRACTING PLUS PTY LTD |
First Respondent
| RANDALL ROWE |
Second Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
This application concerns contraventions of the Workplace Relations Act 1966 (Cth) (WR Act) in respect of sham transactions, record keeping contraventions and other contraventions by the first respondent employer and the second respondent, as director of the first respondent, he being a person involved in the first respondent’s contraventions.
Specifically the applicant seeks declarations first, that the first respondent has contravened s.182(1) of the WR Act, which is an applicable provision for the purposes of s.718 of that Act; second, a declaration that the second respondent has contravened s.182(1) of the WR Act, which is an applicable provision for the purposes of s.118 of the Act; third, a declaration that the first respondent has contravened s.900 of the WR Act in respect of each Keith John Isobel, David Aaron George, Benjamin Shinkle-Montgomery, Owen Lindsay Ross Strathie-Murray and Andrew Gareth Mills; fourth, a declaration that the second respondent has contravened s.900 of the WR Act in respect of each of Mr Keith John Isobel, David Aaron George, Benjamin Shinkle-Montgomery, Owen Lindsay Ross Strathie-Murray and Andrew Gareth Mills; fifth, a declaration that the first respondent has contravened the provisions of clauses 19.4(1) and (2), 19.5(1), 19.6(1), 19.8(1)(c) and (d), 19.11(1) and (2), 19.11(3)(a) and (b), 19.13(1) and 19.20 of part
19 of chapter 2 of the Workplace Relations Regulations 2006 (Cth) (The Regulations); and, finally, a declaration that the second respondent has contravened the provisions of clauses 19.4(1) and (2), 19.5(1), 19.6(1), (119.8(1)(c) and (d), 19.11(1) and (2), 19.11(3)(a) and (b), 19.13(1) and 19.20 of part 19 of chapter 2 of the Regulations.
It seeks the imposition of penalties in respect of those contraventions and orders for payment of the employees underpaid of amounts underpaid, which are due to them, including interest.
The parties have agreed relevant facts and materially they are these.
The applicant is the Fair Work Ombudsman, appointed pursuant to the Act and is a Fair Work inspector. It has standing to apply to the Court for orders in respect of s.719 of the Act for imposing pecuniary penalties in relation to contraventions and, likewise, in respect of penalties for contraventions of the regulations. It also has standing to seek orders requiring payment of underpayments under the applicable provisions of the Act.
The first respondent is and was at all material times a company duly registered in accordance with the requirements of the Corporations Act2001 (Cth) and is capable of suing or being sued. It was at all times a constitutional corporation and an employer within the meaning of those terms provided for in the Act.
It employed the employees listed in schedule 1 to the Statement of Agreed Facts and also a Mr Mark Pavier. In total there appear to be 116 employees.
The second respondent was at all material times the sole director of the first respondent and in day to day control of the operations of the first respondent and is and was its operative and controlling mind. He was the representative of the first respondent with whom persons engaged and primarily dealt; the person who made decisions on behalf of it as to the basis upon which persons were engaged to perform work and would be engaged; the entity by whom those persons would be engaged to perform work; the terms and conditions upon which the persons would be engaged; what persons being engaged would be told about the nature and terms of their engagement, what documentation would be entered into between the parties to the engagement; and, what documentation would be provided to those persons. He made decisions in relation to payments to principal employees engaged to perform work, the work they performed and the time, method and manner of payment.
At all material times the nature of the business, which was conducted by the first respondent, was a telephone marketing business and to that extent the first respondent conducted labour hire from the business premises.
The first respondent engaged each of the employees to work as telemarketers who, by telephone, from premises controlled by it, sold services, including in particular electricity services, for a client of the first respondent.
At all material times each of the employees was an employee within the meaning of the term provided for in the Act when engaged to perform the work within the business.
At the relevant times there existed an Australian pay classification scale of an APCS, which was a preserved APCS within the meaning of that term given by s.208 of the Act and it was applicable to the work. The APCS is derived from the Clerical Employees Award – State 2002 (Queensland) upon the commencement of schedule 1 of the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) on 27 March 2006.
The coverage provisions of the APCS included in clauses 1.6.2 and 1.6.3, the definition of “clerk”, which included a person who performed the work the subject of this complaint. The APCS formed part of the Australian Fair Pay and Conditions Standard or the AFPCS.
Pursuant to s.182 of the Act the first respondent was required to pay each of the employees at least the guaranteed basic periodic rate of pay, payable under the APCS, for each of the employee’s guaranteed hours of work. In breach of the APCS, the first respondent failed to pay each of the employees, listed in schedule 2 to the agreed facts, at least the guaranteed basic periodic rate of pay payable under the APCS for each of the employee’s guaranteed hours of work.
The hourly rates that the first respondent was required to pay are set in the Statement of Agreed Facts and varied between the relevant dates, that is, between 10 August 2006 to the present; from $17.03 per hour to $18.94 per hour. It is agreed the first respondent did not pay the employees listed in the schedule in accordance with the APCS, although they were paid in terms which will be described later.
The first respondent paid the employees less than the required hourly rate for the hours recorded by the employees and, in consequence of the payment breaches, each of the employees has been underpaid by the amounts that are set out in schedule 2 to the Statement of Claim. Those underpayments relate to all of 116 named employees, being an underpayment to all of 115 employees in the amount of $45,356.49 and an underpayment to Owen Strathie-Murray in an amount of $640.37.
It is agreed that as at the date of the hearing the first respondent had not rectified the underpayments and that those underpayments remained outstanding.
Moving then to the sham contract contraventions. The complaint on this matter concerns five employees, they being Keith Isobel,
David Aaron George, Benjamin Shinkle-Montgomery, Owen Lindsay Ross Strathie-Murray and Andrew Gareth Mills.
First, Mr Isobel. As at 1 March 2007 the first respondent was a party to a contract with Mr Isobel, which was partly oral and partly in writing. Insofar as it was oral, it was made between Mr Lowe, for and on behalf of the first respondent, and Mr Isobel by a conversation in or about September 2006. Insofar as it was in writing, it was contained in an undated Personal Details Form and Weekly Remuneration Structure Sheet.
The principal terms of the contract were that Mr Isobel would perform the work at the second respondent’s premises. He would be paid remuneration by way of a base retainer of $300.00 gross per week minimum for up to 14 sales, with commission. That agreement was varied on 8 February 2007, by agreement between the parties, to provide that Mr Isobel would perform supervisory work, listening in on other staff members’ telephone conversations for quality assurance and compliance purposes. For this it was agreed he would be paid $17.00 per hour. Mr Isobel was to perform work checking identifications to establish the sales contracts. In respect of those duties he was to be paid $14.00 per hour. That agreement was recorded in a file note dated 30 March 2007.
In a subsequent record of interview Mr Lowe, for the first respondent, stated that the contracts with individuals for work were with the first respondent.
So in the period 1 March 2007 to 9 April 2007 Mr Lowe, for the first respondent, made representations to Mr Isobel that his contract was for services, pursuant to which he was to be paid, as agreed. He was also told on or about 15 January 2007 that there would be no superannuation payments because the arrangement was a labour hire arrangement and that he would not receive any sick leave or other similar benefits, nor would he accrue any annual leave entitlements.
A person or persons, on behalf of the first respondent, subsequently provided Mr Isobel with an induction booklet, which he retained until he ceased working. The booklet contained a document headed Sales Works Australia General Policy, which contained the following statements:
“If there has been no contact with the contractor for three consecutive days termination will be assumed.
Contractors found making personal calls without prior permission will be automatically terminated.”
It also contained a document headed Misleading or Deceptive Conduct or Customer Transfers, which referred to the contractor. The first respondent provided pay slips to Mr Isobel, including for the pay periods after 1 March 2007, which designated his classification as Labour Hire Cont Plus. Mr Isobel was not paid as an employee for each of the periods after 1 March 2007.
Other factors relevant to his contract of employment were that
Mr Isobel was paid an hourly rate of remuneration; he did not provide tax invoices for services to the first respondent; he was required to use the first respondent’s equipment; he was unable to work from home; he worked under the supervision and control of the first respondent; and, he worked set shifts, as specified in the document provided to him. PAYG tax was taken from his pay and he did not have any special qualifications, nor provide any particular skilled labour. Those matters are relevant to addressing a matter raised by the respondents in the plea in mitigation.
As far as the arrangement with Mr David Aaron George was concerned, he too, in early March entered into a contract with the first respondent. The contract was oral and made between the team leader for the first respondent, a fellow known by the name of Will Cabalena, and Mr George. The conversation was held on the premises in early September 2006.
The principal terms of the agreement were that Mr George would perform the work and that the remuneration would be a base payment of $300.00 gross per week and that, once Mr George had earned commissions in excess of $300.00 per week, he would receive the commissions he had earned.
On or about November 2006 that contract was varied, by agreement between the parties, and Mr George agreed that he would perform quality assurance services and on that basis it was agreed that
Mr George would be paid a flat rate of $450.00 per week. That contract was further varied in January 2007 when it was agreed
Mr George would be paid an hourly rate of $14.50 per hour.
There is no question that Mr George was employed by the first respondent, that fact having been admitted by Mr Lowe in a subsequent record of interview.
In the period from 1 March 2007 to July 2007 Mr Lowe, on behalf of the first respondent, made representations to Mr George that the contract was for services, pursuant to which Mr George performed work, or was to perform work for the first respondent. It was plain from that contract, however, that Mr George would not be paid annual leave for Christmas or the New Year period, he would not take or accrue annual leave entitlements and he was not paid accrued annual leave entitlements when he ceased working. Like the earlier employees his employee designation or classification was “Labour Hire Cont Plus” and he was not paid as an employee during each and every pay period from 1 March to July 2007.
Features of his employment arrangement included that he was paid an hourly rate of remuneration; he did not provide tax invoices for services to the first respondent; he required equipment from within the premises and did not supply his own equipment; he was not able to take work home; he worked under the supervision and control of the first respondent; PAYG tax was taken from his pay; and, he did not have any special qualifications, nor possess any particular skill in the labour that he provided.
The third employee subject to the sham contracting provisions was Benjamin Shinkle-Montgomery. As at 1 March 2007 he was a party to a contract with the first respondent, that contract being an oral contract made between a person, on behalf of the first respondent, and
Mr Montgomery in a telephone conversation on or about January 2007, the principal terms of which were that Mr Montgomery would perform work for the first respondent, would be paid remuneration of a minimum return of $300.00 per week for working the required
30 hours per week, Monday to Friday, between 9 am and 3 pm, and to earn in excess of $300.00 Mr Montgomery was required to have earned commission payments in the order of $300.00.
On or about 16 April 2007 the Montgomery contract was varied to provide that Mr Montgomery would act as a team leader, which included, in addition to making his own sales calls, training new staff members, closing calls on difficult sales for others, drafting the roster for his team members and reporting floor figures to the floor manager and completing general housekeeping tasks. Mr Montgomery would work from 9 am to 3 pm five days per week and from 3.30pm to 7.00pm three days per week. His minimum retainer was increased, to $450.00 per week and to earn in excess of $450.00, Mr Montgomery was required to have earned commission payments of more than $450.00.
Mr Montgomery ceased his employment on 14 May 2007 and in about August 2007 received a group certificate, which identified the first respondent as the employer.
In the period from 1 March 2007 to 14 May 2007 it is agreed that
Mr Lowe and/or Mr Chandler, another employee of the first respondent, for and on behalf of the first respondent, made representations to Mr Montgomery that his contract for services was as earlier stated.
It is agreed that on more than one occasion Mr Montgomery was told that he was not an employee; that he was in fact half way between an employee and a labour hire contractor; that if he was labour hire he would be required to supply everything himself and that tax would be paid for him; that he could still take advantage of the tax benefits of being a labour hire contractor, he could write off his bus fares to and from work, lunch, drinks on Friday after work and other things; and, he was not required to have an ABN.
In fact the first respondent deducted tax from Mr Montgomery’s remuneration throughout his entire period of employment, although he was not paid as an employee, including for each and every pay period from 1 March 2007 to 14 May 2007.
Throughout that period Mr Montgomery did not provide tax invoices for services to the first respondent. He was required to use the equipment in the premises of the first respondent and did not supply his own equipment. He was not able to work from home and he worked under the supervision and control of the first respondent. He worked set hours, as agreed, and PAYG was taken from his pay. He did not have any special qualifications, nor provide any particular skill in the labour which was provided.
Concerning Mr Owen Lindsay Ross Strathie-Murray. It is agreed that he first entered into a contract with the first respondent on or about
2 May 2007. The contract was oral and made between Mr Lowe or
Mr Chandler, for and on behalf of the first respondent, and Mr Strathie-Murray in a conversation at the premises on or about that date.
The principal terms of the contract were that Mr Strathie-Murray would perform work for the respondents and that he would receive a base retainer or remuneration, by way of a base retainer, of $300.00 gross per week minimum for up to 14 sales, with commission. At that time he was given a general contractor policy, which he signed, a Victoria Electricity New Employee Training Check List, which he signed, a personal details document, which he signed and a document entitled Misleading and Deceptive Conduct and Customers Transfers, again which he also signed.
When spoken to, he was told to select “labour hire” when completing the Australian Taxation Office Tax File Number Declaration. He did this. It is, however, accepted that the first respondent was his employer or at least the other contracting party.
In fact Mr Strathie-Murray was not paid as an employee during the period 2 May 2007 to 24 May 2007; he was paid an hourly rate of remuneration; he did not provide tax invoices for the services that he rendered to the first respondent; he was required to use the equipment in the premises of the first respondent and did not provide his own equipment; he was unable to work from home; he worked under the supervision and control of the first respondent; PAYG tax was taken from his pay; and, he did not possess any special qualifications, nor provide any special or skilled labour.
Concerning Mr Andrew Gareth Mills, he was employed or entered into a contract on or about November 2007. It was an oral contract. It was a contract for the provision of services, under which he would perform work for the first respondent as an independent contractor.
Its principal terms were to the effect that tax would be deducted out of amounts due to Mr Mills and the arrangement he was told, was like being on an ABN because Mr Mills would be able to claim all his work expenses, although he did not need an ABN. He was told because he did not have an ABN the 80/20 rule did not apply to him that he was a special type of contractor. The principal terms of his contract were that he would perform the work and he would be paid remuneration on a commission only basis of $30.00 per sale.
On 21 December 2007 that contract was varied whereby he accepted appointment as a position of team leader, which required him to manage his team and maintain set sales targets for his team and provide training. It was agreed to pay Mr Mills $5 for each sale made by his team members, in addition to any other commission or bonus entitlement that he had.
That amended agreement was further varied on 1 March 2008 when
Mr Mills was offered and accepted the position of sales manager or floor manager. Then his duties also included that of training and inducting staff, setting rosters and assisting with the payroll. It was agreed that Mr Mills would be paid a base salary, plus the override for sales made by Mr Mills’ team. Again, in a record of interview, it was accepted by Mr Lowe that the first respondent was the contracting party for that particular arrangement.
At the time of his initial engagement Mr Mills was told to select “labour hire” when completing the Australian Taxation Office Tax File Number Declaration Form. He was also told to tell new workers, whom he was to be responsible for upon engagement: tax would be deducted out of amounts due to them; the arrangement was like the benefit of being on an ABN because the worker would be able to claim all of his or her work expenses, although the worker did not need an ABN and, because the worker did not have an ABN, the 80/20 rule would not apply to the worker; but, they were to be told they were not employees, but were a special type of contractor. He was also instructed that he was to tell all new workers that they should select the “labour hire” when completing the Australian Taxation Office Tax File Number Declaration Form.
From about 1 March 2008 Mr Mills was in fact paid the base remuneration agreed and incentive for sales made by the team;
Mr Mills did not provide tax invoices for the services he provided to the first respondent; he was required to use the equipment in the premises and did not supply his own equipment; he was not able to work from home and Mr Mills worked under the supervision and control of the first respondent; PAYG tax was taken from Mr Mills; and, he did not have any special qualifications, nor did he have any special skilled labour which he brought to bear in relation to these matters.
It is by reference to the agreed facts that in respect of each of these five employees that the allegations of sham transactions giving rise to contravention of provisions of the Act, as alleged by the applicant, are supported.
Next are the facts relevant to the failure to make or keep proper records. Broadly, the allegations are that the first respondent did not keep or maintain records in respect of employee details records, employee payment records, payslip records, superannuation records, or keep the required condition of the records and keep the required form of records. In support of those contraventions these facts are agreed.
The first respondent was required to make or cause to be paid and to keep records relating to the employees and keep the records for a continuous period of seven years. The records relating to the employees ought to have contained the name of the employer, the name of the employee and whether the employees’ employment was full-time or part-time, whether the employees’ employment was permanent, temporary or casual and the date on which the employees’ employment began.
It was also required to keep a record containing details of the rate of remuneration to be paid to an employee, hours worked by a casual employee, in the case of a casual employee, who was guaranteed a basic periodic rate of pay, details of incentive payments, bonuses, loadings, penalty rates and other entitlements and details of gross and net amounts paid to the employee and any other deductions made from the gross amount paid to the employee.
It was also required to issue to employees a written payslip relating to each payment by the first respondent of an amount paid to the employees as remuneration and to do so within one day of payment and that the payslip contain the following details, that is, the name of the employer, the name of the employee, the date on which the payment to which the payslip relates is made, the period to which the payslip relates, if the employee is paid an hourly rate of pay, the ordinary hourly rate and the number of hours in that period for which the employee was paid at rate and the amount of the payment made at that rate and, if the employee was paid at an annual rate of pay, that rate is at the latest date to which the payment relates, the gross amount of the payment, the net amount of payment and any amount paid that is an incentive based payment by of bonus, loading, monetary allowance, penalty rate or other separately identifiable entitlement the employee has.
The record was also to include the details in respect of each amount deducted from the gross amount of the payment, including the name and the number of the fund or account into which the deduction was paid and, if the employer was required to make superannuation contributions for the benefit of the employee, the amount of each contribution that the employer has made for the benefit of the employee during the period to which the payslip relates and the name of any fund to which that contribution was made, all the amounts of contributions that the employer is liable to make in relation to the period to which the payslip relates and the name of any fund to which those contributions will be made.
Finally, in terms of the record keeping obligations, it was required to keep a record of superannuation contributions made for employees, including the amount of the contributions made, the period in which the contributions were made, the dates on which the contributions were made, the name of any fund to which the contributions were made, the basis on which the employer became liable to make contributions, including the keeping of a record of any election made and the date of any relevant election and to keep records in a condition to allow the inspector to determine the employee’s entitlements and whether the employee was receiving those entitlements and also to keep a record in legible form that is readily accessible to the Workplace inspector. The evidence, it is agreed, records that these matters were not attended to.
So far as the contravention of the second respondent is concerned, it is agreed that the second respondent was involved in the contraventions conceded by the first respondent in that the second respondent aided, abetted, counselled or procured the contraventions and, by his acts or omissions, was directly and/or indirectly knowing and concerned in or party to the contraventions in the manner which I have earlier expressed in the agreed facts.
Moving then to submissions in respect of penalty, it being agreed that the facts, as agreed, give rise to contraventions, which I will specifically address in a moment.
The contraventions or breaches, which are admitted by each of the first and second respondent, are of the following: first, the Australian Payment Classification Scale, or the APCS, which derives from the Clerical Employees Award - State 2002 (Queensland); second the
WR Act; and, third, the Workplace Relations Regulations.
The parties agree that, for the purpose of assessing penalty, there are 18 identifiable breaches of those regulations and/or sections which, for reasons which I will explain shortly, can broadly be further refined to the following: first, a single breach of s.182(1) of the WR Act, by failure to pay 116 employees at least the guaranteed basic periodic rate of pay payable under the APCS for each of the employees’ guaranteed hours of work; a breach of s.900(1) of the Act in respect of Keith John Isobel; a breach of s.900(1) of the Act in respect of David Aaron George; a breach of s.900(1) of the Act in respect of Benjamin Shinkle-Montgomery; a breach of s.900(1) of the Act in respect of Owen Lindsay Ross Strathie-Murray; a breach of s.900(1) of the Act in respect of Andrew Gareth Mills; a breach of regulation 19.4(1) and 19.4(2); a breach of regulation 19.5(1) and 19.6(1); a breach in respect of regulations 19.8(1)(c), 19.8(1)(d), 19.1(1), 19.1(2), 19.1(3)(a) and 19.11(3)(b), a breach of regulation 19.13(1), and a breach of regulation 19.20.
Looking then to the underpayments. The applicant applies for the imposition of penalties pursuant to s.119(1) of the Act in respect of contraventions of s.182(1) of the Act by the first and second respondents. Section 119(1) of the Act enables the Court to impose a penalty in respect of a breach of an applicable provision by a person bound by the provision. An applicable provision is defined in s.117 to include a term of the APCS.
Section 119(2) of the Act provides that where two or more breaches of an applicable provision are committed by the same person and the breaches arose out of a course of conduct by the person, the breaches shall, for the purposes of s.119 of the Act, be taken to constitute a single breach of the applicable provision.
Section 727 of the Act defines civil remedy provisions to include breaches under s.719. There is a maximum penalty provided under s.719 of 300 penalty units for a body corporate and 60 penalty units for an individual.
Next concerning the sham contracting. The applicant applies to the Court for the imposition of a penalty under s.904 of the Act in respect of the contraventions of s.900 of the Act by the first and second respondents concerning the engagement of each of Messrs Isobel, George, Shinkle-Montgomery, Strathie-Murray and Mills.
Section 904 of the Act enables the Court to impose a pecuniary penalty on a person who has contravened s.900(1). There is no equivalent provision in s.904 to s.119(2), but, as my reasons indicate, I have taken the view, for reasons that I will explain shortly, that each of these contraventions should be considered separately.
By virtue of s.900(3), s.900(1) is a civil remedy provision and, for the purposes of s.728 of the Act, the second respondent admits that he was involved in the contraction of the s.900 contraventions. The maximum penalty for the s.900(1) is 300 penalty units for the first respondent as a corporate and 60 penalty units for the second respondent as an individual.
Concerning the regulations, the applicant applies to the Court for the imposition of penalties in respect of the various regulations, which I have earlier particularised.
Clause 14.4 of part 4 in chapter 2 of the Regulations, allows a Court to order a person who contravenes a civil remedy provision in the regulations to pay a pecuniary penalty, up to a maximum permissible under s.846(2)(g) of the Act. Regulation provides for a civil penalty for contraventions of the regulations not exceeding 10 penalty units for an individual and 50 penalty units for a body corporate.
Given that strict liability applies to the physical elements in the sub-regulations 19.4(1) and (2), 19.5(1), 19.6(1), 19.8(1), 19.11(3)(a) and (b), 19.13(1) and 19.20, for the purpose of s.728 of the Act and for the purpose of s.28 of the Act, the second respondent admits he was involved in contravention of the regulations and that follows.
So far as the involvement of the second respondent is concerned, s.728 of the Act provides that a person who is involved in a contravention of a civil remedy provision is treated as having contravened that provision. For this purpose a person is involved only if the person has aided, abetted, counselled or procured the contravention.
As noted in the agreed facts, the second respondent was the sole director of the first respondent and, in that capacity, admitted that he was in control of the day to day operations and was the operative and controlling mind of the first respondent. It was also agreed he was the representative of the first respondent, with whom persons to be engaged by the first respondent primarily dealt, and he was the person who made decisions, on behalf of the first respondent, as to the basis upon which those persons were engaged to perform work and their terms and conditions and the payments that were to be made to them. It is admitted by the second respondent that he was involved in the contraventions of s.182, s.900 and of the relevant regulations.
It follows, having regard to the admitted facts and the statutory background, that the Court has power to impose penalties on each of the first and second respondents by virtue of s.119 of the Act for the single breach admitted to s.182(1) of the Act, s.904 of the Act, each of the five admitted breaches of s.900 of the Act and clause 14.4 of part 4 of chapter 2 of the regulations for any admitted breaches of the regulations.
In terms of the Court’s approach, the commonly accepted approach is as follows: that the Court will first identify the separate contraventions involved. Each breach of each separate obligation found in the Act is a separate contravention and has to be separately identified and assessed.
Secondly, to the extent that two or more contraventions have common elements, this should be taken into account in considering the appropriate penalty for all of the circumstances for each contravention. The respondents should not be penalised more than once for the same conduct and penalties imposed by the Court should be an appropriate response to the respondents’ conduct, although this task is distinct from and in addition to the final application of the totality principle.
Thirdly, the Court ought then consider an appropriate penalty to impose in respect to each course of conduct, having regard to all the circumstances of the case. Finally, having fixed an appropriate penalty for each group of contraventions or course of conduct, the Court should take a final look at the aggregate penalty to determine whether it is an appropriate response to the conduct which led to the breaches. In this sense it is said the Court should apply an instinctive synthesis in making this assessment. This is what is commonly known as application of the totality principle.
Dealing then with the course of conduct, commencing with the underpayments. Section 719(2) of the Act, as I have earlier noted, calls upon the Court to consider two or more breaches of a civil remedy provision that arise out of a course of conduct to be taken to constitute one single breach of the civil remedy provision. It has been authoritatively noted in other Courts, and accepted, that where breaches of a particular term arise out of a course of conduct, even if they involve different employees, they would be treated as a single breach. Likewise, when there are breaches of two distinct terms of an industrial instrument, they are not treated as a single breach, even if they arise out of one course of conduct.
In this instance the applicant accepts that the contraventions concerning the failure to pay each of the 116 employees at least the guaranteed basic periodic rate of pay payable under the APCS for each of the employees guaranteed hours of work, in breach of s.182(1) of the Act, should be treated as the same course of conduct, in accordance with s.119(2) of the Act.
Next are the breaches of the relevant regulations. Clause 14.5 of part 14 of chapter 2 of the regulation deals with multiple contraventions of the civil remedy provisions and is expressed in similar terms to the Act. It provides that where a person commits two or more contraventions of a civil remedy provision of the regulations and each contravention relates to the same action or course of conduct, then they are taken to be a single contravention of the civil remedy provision.
It is agreed that there are a number of clauses in the regulations which were breached, which may give rise to consideration of this provision. The applicant submits that the respondents committed multiple contraventions of each specific clause of the regulations and accepts that the multiple contraventions of the same clause should be taken as one course of conduct.
The collection might be made as follows: breaches of regulations 19.4(1) and 19.4(2) should be collected together; breaches of regulations 19.5(1) and 19.6(1) should be collected together; and breaches of regulations 19.8(1)(c), 19.8(1)(d), 19.11(1), 19.11(20, 19.11(3)(a) and 19.11(3)(b) should be collected together, giving in aggregate five contraventions of the relevant regulations.
So far as the sham contracting provisions are concerned, it is accepted by the applicants that there is no comparable provision concerning s.900, as applies to s.719 or clause 14.5.2 of the regulations relating to multiple breaches. It contends, however, that despite this, where a defendant’s contravention amounts to a singular course of conduct, it may be considered when assessing the appropriate penalty. I was, helpfully, referred to the recent decision of QR Ltd v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia[1] and the observations of the Court, where they noted at [49]:
“Even if section 557(2) does not apply to a case to oblige to treat as one contravention or the consequences of a particular piece of conduct, it is open to the Court in an appropriate case to take into account, as a matter of discretion, the circumstance that the same acts or omissions had resulted in multiple contraventions by multiple breaches of terms cast in similar language in each of the multiple agreements by imposing a lesser penalty or even no penalty in respect of breaches of some terms, while imposing a substantial penalty in respect of breaches of other terms.”
[1] [2010] FCAFC 150.
In this case it is agreed between the applicant and respondents that there have been five separate contraventions of s.900(1) of the Act in respect of each of the five employees that I have earlier identified. However, while it is accepted the Court retains a discretion to consider whether the conduct giving rise to the five identified breaches stem from the course of conduct, the applicant submitted that the better view is that each of the breaches amounts to a separate and distinct course of conduct. I think that is appropriate in this case. In particular, I consider it appropriate because in this instance each individual was engaged on different terms and conditions at different times and involved the respondents’ exercise of distinct and discrete powers in relation to their engagement.
In my view, the breaches clearly did not stem from one course of conduct. It may have been different if each individual had been engaged at the same time or all on the same terms and conditions. That might invite an inference that there was one course of conduct. However, in this instance the evidence clearly demonstrates that on each occasion the respondent turned its mind discretely to the issue of engagement and in each instance, it seems to me, each engagement constituted a distinct and separate contravention. On that basis, I am satisfied that each of the five sham contracting provisions should be considered discretely.
So far as penalties are concerned, s.4(1) of the Act provides that a penalty unit has the same meaning as provided for in the Crimes Act 1914 (Cth). It provides a penalty unit has a quantum of $110.00.
So far as the contraventions of the Act are concerned, the maximum penalty that may be imposed for the contravention of s.182(1) is 300 penalty units for a corporation and 60 penalty units for an individual. In terms of concerning s.900(1) the maximum is 300 penalty units for a corporation and 60 penalty units for an individual and, so far as it concerns the contraventions of the regulations, the regulations provide that a maximum of 50 penalty units will be applied in respect of a corporation and 10 penalty units in respect of an individual.
In terms of factors relevant to penalty, the approach to be adopted and applied by the Court is now well settled. First, there must be an assessment of the objects of the legislation. In this instance the relevant objects include the need to provide an economically sustainable safety net of minimum wages and conditions for those whose employment is regulated by the Act and ensuring compliance with minimum standards by providing effective means for the investigation and enforcement of employee entitlements.
The object provisions of the WR Act emphasise the importance of minimum standards, including minimum wages, and the enforcement of those standards. This is further effected in the magnitude of penalties which have been fixed for breaches which in this instance are 300 penalty units for corporation and 60 penalty units for an individual.
The factors that are commonly considered relevant in determining penalty are broadly, but not exclusively, these: the nature and extent of the conduct, the circumstances in which the conduct took place, the nature and extent of any loss or damage, similar previous conduct, whether the breaches were properly distinct or arose out of one course of conduct, the size of the entity involved, deliberateness of the breach, involvement of senior management, the corporation’s contrition, corrective action and cooperation with the enforcement authorities and ensuring compliance with minimum standards by providing effective means for investigation and enforcement of employee entitlements and, finally deterrence. Whilst that is a checklist of matters, it is not exclusive and other matters, as may be relevant, ought to be considered.
Dealing generally then with those matters, the question of the nature and extent of the conduct, as I have earlier noted when reciting the agreed facts, the underpayments here relate to 116 employees; each person was engaged by the first respondent pursuant to a contract for services and the breaches occurred over a lengthy two year period, from July 2006 to December 2008; the total of the underpayments to employees were significant, totalling approximately $46,000.00; the employees in this instance were generally people who may be described as having been somewhat vulnerable, they being at the lower end of the employment spectrum; they were employed at rates that were significantly less than the remuneration and entitlements under the APCS; and, there is nothing in the evidence to indicate that the contraventions would not have continued had the applicant not conducted an investigation into the first respondent in or about June 2007.
Although, as I have earlier noted, the employees were in my view, at the lower end of the employment spectrum, two employees in particular stand out for mention because of their age. Mr George was 18 years of age when employed and Mr Montgomery 16 years of age. All up it seems that the employees generally were at a significant disadvantage in seeking assistance and/or representation to address any dissatisfaction in the workplace and, indeed, the investigation was commenced upon or was initiated upon a complaint received by the mother of one of these employees.
I note, in response to the applicant’s contention, that these employees were significantly underpaid; the respondents’ contention that when account is made for sales that were made by the employees, there was no underpayment. He says,:
“Only a very small minority of Asians, perhaps not suited to the role, as their performance of their probation of the three shifts was not up to standard, were paid at the minimum hourly rate, plus a couple of commission payments.”
In fact what Mr Lowe, for the respondents, was saying was that successful employees in fact did better than they would have had they been paid under the APCS, but what his statement clearly also indicates is that those who were not particularly good or adept at the task were clearly left to suffer without any remedy at all. There is nothing before me which enables me to assess the substance or otherwise of Mr Lowe’s submissions, beyond his broad statement contained in Exhibit 2.
Dealing then the nature and extent of any loss, I have earlier noted that the total underpayment in respect of all employees has been calculated at $45,998.96. The underpayment was owed to each of the employees, although some were owed more than others. In particular, those who stand out are Mr George, who is owed about $3800.00, and Mr Isobel about $2800.00, Mr Holmes and Ms Inlay $2400.00 each and
Mr McBride and Mr Shinkle $2000.00 each and then a number of others owed $1000 and then, of course, the balance. Significantly, in this case there has been no effort to repay any of the underpayments.
In terms of similar previous conduct, there is no evidence of any similar conduct by either the first or second respondents and that is a matter which stands in their favour, to be considered in a final assessment of penalty.
I have addressed earlier the question of whether the breaches arose out of one course of conduct and that matter largely is reflected in the final construction of contraventions to be subject to penalty.
In terms of the size of the business, there is limited evidence concerning that matter. The respondents sought to downplay the significance of the size of the business. However, there were 116 employees underpaid during the period of employment and, furthermore, it would seem from the respondents’ submissions to the Court that this business was one which came to him via AFPT, which gave him 16 staff from their Spring Hill office. One would infer that, having regard to the history of the business and the number of employees that were engaged in the business, it was not an insignificant operation; although it is clearly an operation that was perhaps not ostensibly affluent, having regard to the statements made by a number of employees to the Workplace Ombudsman, particularly concerning the presentation of the business to those who attended the business for their initial interviews.
In any event, at the time that the Workplace Ombudsman’s inspector attended the business he observed as many as 35 workers engaged in the business. Those facts would suggest that the business was not insubstantial.
Despite that matter, issues of financial health while relevant, are not necessarily determinative. For instance, as Tracey J said in Kelly v Fitzpatrick[2] at [28]:
“No less than large corporate employers or small businesses have an obligation to meet minimum employment standards and they rightly have an expectation that this will occur. When it does not it will normally be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction must be imposed at a meaningful level.”
[2] [2007] FCA 1080.
Likewise, in Rajagopalan v BM Sydney Building Materials Pty Ltd,[3] where the Court said at [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 and such a factor should be of limited relevance to the Court’s consideration of penalty.”
[3] [2007] FMCA 1412.
I also make reference to the observations of Keely J in Michael JamesLynch v Buckley Sawmills Pty Ltd [1984] FCA 306; 3 FCR 503; 9 IR 469, where when addressing a submission of financial hardship he stated:
“In this connection it is important that the respondent and other employers bound by the award or by other awards under the Act understand the importance of complying with an award and it follows that any decision taken by them, which is regarded as affecting their obligations to comply with particular provisions of the award or the award generally should only be taken after careful consideration. They must not be left under the impression that in times of financial difficulty they can breach an aware made under the Act, either with impunity or in the belief that no substantial penalty will be imposed in respect of a breach found by the Court to have been committed.”
As I have said, there is no evidence of hardship here. However, I think the observations are particularly apposite, as I will note under another heading, dealing with deterrence. The second respondent ought to be made plainly aware of his obligations as a director of a company engaging in employment.
Furthermore, in my view, it is important to emphasise these matters because it is unfair, in my view, that the first respondent’s incapacity to compete commercially ought be subsidised by its employees, with the ultimate multiplier effect of that matter upon other competitors, which seek to compete fairly in the face of what would otherwise be seen as unfair competition from an employer who does not pay his employees in accordance with regulation.
The second respondent also claimed in relation to this matter that, because he was a small business, he could not afford to seek advice regarding the legality of the arrangements that were utilised to engage the employees. That is no answer to his obligations. There is, in my view, simply no excuse for non-compliance.
Next concerns the deliberateness of the breaches. The facts of this case, in my view, compel the conclusion that the respondents were at least reckless in relation to the responsibilities of the company and
Mr Lowe himself, as an employer.
Although, as I have earlier noted, he says that he took on the operation from another operator, accepting that this was the way they did business and accepting a statement made to him by way of reference to the authority in Building Workers’ Industrial Union of Australia & Ors v Odco Pty Ltd (1991) 29 FCR 104, the fact remains that the moment there was some suggestion to him that there was a legal basis for the scheme, as a responsible employer, he ought to immediately have sought to clarify precisely what the scheme was before simply adopting an extant arrangement from another employer into a new arrangement without any contextual appreciation.
I accept the evidence of his omission to investigate these matters is to some extent evidence of a reckless disregard for his statutory obligations. When the applicant first contacted the second respondent concerning information about the arrangements the second respondent participated in an interview with inspectors and answered a number of questions about these arrangements; but again those matters leave little to satisfy the Court that he had in fact turned his mind to his obligations.
In terms of subsequent conduct, I will deal with that matter shortly, but let me say that the conduct of the respondents following the applicant’s initial investigation, to my mind, also leads to a view that the respondents were indifferent to their obligations.
Next are questions of involvement of senior management. Again, by reference to the agreed statement of facts, it is apparent that the second respondent was involved. He was involved in the day to day conduct of the operations of the first respondent. He was the operating and controlling mind of the first respondent. He was its representative and he was the person who made decisions on behalf of the first respondent. Although there was another officer involved in
Mr Michael Chandler and he too was involved in the contraventions, he appears to have been someone with whom the second respondent had close association. Overall senior management appear to have been knowingly involved in all of these contraventions.
In terms of contrition, corrective action and cooperation with the enforcement authorities, first, in terms of contrition and corrective action, as earlier noted, the underpayments still remain outstanding. They are significant sums.
So far as cooperation with the enforcement authorities is concerned, the facts do not lead to a favourable conclusion. After the initial investigation there have been a number of instances where the second respondent has failed to comply with notices to produce. On occasions when those instances have been followed up and undertakings to attend to those notices have been given, particularly by the second respondent, there have been further failures. The conduct of the first and second respondents generally demonstrates, in my view, a clear lack of any cooperation.
As this matter is significant in terms of a consideration of the question of any discount, I will particularise the failings. The second respondent failed to comply with the notices to produce which were issued on
2 June 2007. The applicant did not receive any communication from the respondents by the required compliance date. That was 22 June. So a letter of non-compliance was personally delivered by the Workplace inspector to the first respondent’s premises on 29 June. Documents were produced, in response to notices to produce, then on 2 July.Inspector Wilson had difficulties contacting the second respondent to arrange for him to participate in an interview, as he had not received a response to voice mail messages. Ultimately, the second respondent failed to comply with the notices to produce issued on 21 February 2008, which required compliance by 7 March 2008 and then Inspector Buckley was required to issue a notice for failure to comply. He too had difficulties contacting the second respondent because he did not receive replies to emails or voice messages.
The applicant did not receive responses from the first respondent or the second respondent to the breach notice, issued by Inspector Buckley on 14 May 2008. In response to that, a final notice was issued on
3 June 2008 and the second respondent emailed Inspector Buckley on
4 June, advising he would contact the inspector on 5 June, but that did not occur. On 12 June the second respondent advised the applicant, by email, that he would forward the final notice to his solicitors and his solicitors would contact the applicant within seven days. From the date of the second respondent’s email to the commencement of the proceedings on 24 December 2009, the applicant did not receive any communication from either the first or second respondent or its legal representatives.Now, in part, the respondents say there are two intervening factors. The first is said to be the loss of documentation by the respondents, occasioned by two events, first, the insolvency of a related entity, which is said to have had the records and, secondly, because the respondents’ documents were taken from a place where they were secured in premises controlled by a body corporate. So far as the first assertion is concerned, that matter was addressed succinctly by the timetable of events, explained by counsel for the applicant.
The respondents maintain the appointment of a liquidator to an entity called Sale Works Australia Pty Ltd meant that documents could not be produced. However, that occurred in July 2008. Of course, the demands were made before that time. It would seem there would be no prospect, on that basis, that the liquidator ever had or withheld those records. It is interesting to note that until that time the respondents also would have been in possession of their premises because a landlord would not have evicted them, at least until the date of liquidation.
So far as the records having been removed by the body corporate the proprietors of the body corporate or the managers of the body corporate, is concerned, as is alleged in exhibit 2, that matter is simply not sustainable. Although the assertion is made in terms that documents were placed in a large storage document bin and it was discarded by the body corporate, the body corporate, in correspondence addressed to the second respondent, expressly stated this:
“After having addressed the communal garage areas and the material which had to be removed from the garage and identifying the material to remove from the garage areas, the body corporate noted that the body corporate is sympathetic of your claimed loss, but does not believe any corporate records were amongst the refuse disposed of and sees no consequent need for apology.”
It would seem, so far as the body corporate is concerned, there were no records there and, as noted in its earlier discussion, under the heading Items Removed, the matters removed did not, to the best of the body corporate’s knowledge or the contractor’s knowledge, include business records or any other item of either value or importance.
The applicant submits that the first and second respondents have not cooperated with the applicant subsequent to proceedings, in a manner consistent with their non-cooperation before proceedings. In particular, they note that the applicant’s solicitors have had significant difficulties in effecting service of the application and statement of claim on the respondents at the first respondent’s registered office, although personally serving the second respondent at various locations. The applicant has been required to request an adjournment of a first directions hearing due to difficulties with service.
Further, there has been non-compliance by the respondents with various directions. Indeed, so much is evident by the production of Exhibit 2, which document was of a nature which ought to have been filed by the respondents in accordance with the directions issued in the course of the application, not delivered late, as it was, on the morning of trial.
It is to be noted, from the record, that the respondent did not file any material in response to penalty and did not comply with any other orders and provided no material, except for that material which was included in Exhibit 2.
Further, there was the difficulty occasioned with the initial adjournment of the hearing, bearing in mind that when the matter was initially adjourned on 7 September 2010 it was because the first respondent sought to raise a positive defence two days before the trial, without ever having filed any evidence or materials. I note, of course, that no defence has been prosecuted and that the respondents in this instance have consented to penalties and this is simply now a penalty hearing.
All up, it seems to me, the facts demonstrate very little cooperation on the part of the respondents in respect of the general processing of the application.
Concerning specific and general deterrence, those factors need to be considered in this instance. Particularly in this case there is a need for specific deterrence because the second respondent is noted as being the sole director and shareholder of another entity, which trades as Greenthumbs Australia. In any event, as the applicants contend and I accept, the evidence demonstrates no significant contrition or remorse on behalf of the respondents and it follows, in my view, that there is a high need for specific deterrence.
So much is consistent with authority, again citing Rajagopalan (supra), where it was observed:
“There is a need for special deterrence, given that the respondent has not demonstrated it has taken appropriate corrective action with respect to its employment practices within its business generally.”
So far as general deterrence is concerned, Lander J in Ponzio v B & P Caelli Construction Pty Ltd[4] observed at [93]:
“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 instances the deterrence will be the paramount factor in fixing the penalty.”
[4] (2007) 158 FCR 543
In this instance the applicant submits that the Court should have regard to the message sent in the imposition of penalties to employers and the community generally that underpayment of wages will not be tolerated and this is particularly the case where vulnerable employees are involved. I accept that submission.
Although the applicant concedes that the respondents have admitted liability and could be said to have cooperated by partaking in the investigation, at least in a limited fashion; particularly by engaging in the record of interview process; by providing some necessary records and, by signing the agreed statement of facts, although that itself was only agreed on the day of trial and, of course, only after some delay, the applicant says that the Court should not be too anxious to afford the respondent a significant discount for its admission and conduct.
In considering whether or not a discount should be applied, I have regard to the observations of Branston J in Mornington Inn Pty Ltd v Jordan,[5] where her Honour said:
“The rationale for providing a discount for early plea of guilty in a criminal case does not apply neatly to a case such as the present, where a civil penalty is sought and the case proceeds on pleadings. Nevertheless, in our view, it should be accepted, for the same reasons as given in Cameron, that 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 fairly be said an admission of liability (a) has indicated an acceptance of wrongdoing and suitable and credible expression of regret and/or (b) has indicated a willingness to facilitate the course of justice.”
[5] (2008) 168 FCR 383.
In my view, this is a case where neither of those qualities can be demonstrated and, accordingly, I do not consider that any discount ought to be provided in this instance on this basis.
Looking then to summarise the relevant considerations, the hallmarks of this case on penalty are these. First, it involves a large number of employees. Secondly, there is a significant amount of money involved. Third, the breaches extended over a lengthy period of time. There was significant involvement by senior management. There was little cooperation and evidence of contrition by the respondents, particularly because none of the employees have yet been paid their due entitlements.
There is a need for specific deterrence in this instance because the second respondent continues in business. There is the need for general deterrence and, although this is a first offence and, accordingly, there is some allowance to be made for that factor, there is overall, in my view, a need for a high range penalty to be imposed in this instance.
The applicant has contended that a penalty in the range of 65 to 90
per cent of the maximum ought to be imposed. Having regard to the hallmark features that I have earlier addressed and to the respondents’ purported exculpatory submissions, I conclude that these contraventions constitute egregious breaches, for which the respondent can demonstrate no basis for claim to discount, except to recognise it is a first offence.
In the circumstances I am of the view that the penalties in the range circa 80 per cent of the maximum penalty should be imposed, with obvious variation around this to reflect the particular circumstances of the individual offences.
Dealing then with the various breaches, for the s.182(1) breach I have come to the view that the appropriate penalty for the first respondent corporation is 270 penalty units and for the individual 54 penalty units.
For the s.900 contraventions, so far as the contravention against Isobel, for the first respondent corporation 225 penalty units, for the individual 45 penalty units. For the s.900 offence concerning George 240 penalty units for the corporation, 48 penalty units for the individual. For the s.900 contravention concerning Montgomery 240 penalty units for the corporation, 48 penalty units for the individual. For the s.900 contravention for Strathie-Ross 225 penalty units for the corporation, 45 penalty units for the individual. For the s.900 contravention concerning Mills 225 penalty units for the corporation, 45 penalty units for the individual.
So far as the relevant regulations are concerned, for the breaches of regulation 19.4(1) and (2), for the corporation 40 penalty units, for the individual 8 penalty units. For the breaches of regulations 19.5(1) and 19.6(1), for the corporation 40 penalty units, for the individual 8 penalty units. For the contraventions of regulations 19.8(1)(c), 19.8(1)(d), 19.11(1), 19.11(2), 19.11(3)(a) and 19.11(3)(b), for the corporation 40 penalty units, for the individual 8 penalty units. For the contravention of regulation 19.13(1), for the corporation 40 penalty units, for the individual 8 penalty units. For the contravention of regulation 19.20, for the corporation 40 penalty units, for the individual 8 penalty units.
That totals 1675 penalty units in respect of all of those contraventions, which totals $178,750.00 against the corporation, and 325 penalty units or $35,750.00 against the individual.
Having regard to sentencing principles, I am then required to consider whether these penalties are appropriate, having regard to the totality principle. That requires me to consider the aggregate penalty and as to whether or not it is just and appropriate in all the circumstances. In Kelly (supra), Tracey J said this at [30]:
“Another factor which must be taken into account in fixing the pecuniary penalties for multiple breaches of statutory stipulations is the totality principle. The principle is designed to ensure that the aggregate of the penalties imposed is not such as to be oppressive or crushing. Different views have been expressed as to the manner in which the principle ought to be applied. On one view, the starting point should be the determination of an appropriate total penalty. That figure would then be divided by the number of breaches to produce a penalty for each breach.
The orthodox position, however, which I consider should be adopted is that the starting point is the determination of the appropriate penalties for each contravention of the statutory norm. The aggregate figure is then considered, with a view to ensuring that it is an appropriate response to the conduct which led to the breaches.”
This approach was reasonably described in the criminal context in which the totality principle is derived as the orthodox, but not necessarily immutable practice adopted by sentencing courts.
Having regard to the formulation of approach expressed by the Court and to the penalty which appears in the aggregate, having regard to my assessment of the individual offences, I am of the view that the penalties are appropriate in the circumstances and they do constitute a just and appropriate response and, although I accept they are heavy, they are not crushing. They will be the penalties imposed.
One final matter, of course, is that orders are sought that there be payments made to the employees. I make an order in those terms, including interest, which has accrued, and the balance, of course, can then be paid to the Commonwealth.
I direct the sum be paid within 28 days.
I certify that the preceding one hundred and forty (140) paragraphs are a true copy of the reasons for judgment of Burnett FM
Associate:
Date: 14 April 2011
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