Fair Work Ombudsman v Darrell Crouch & Associates Pty Ltd
[2023] FedCFamC2G 80
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Darrell Crouch & Associates Pty Ltd [2023] FedCFamC2G 80
File number(s): PEG 87 of 2021 Judgment of: JUDGE LUCEV Date of judgment: 10 February 2023 Catchwords: INDUSTRIAL LAW – Fair Work – contravention of compliance notice – agreed statement of facts as to contravention and accessorial involvement – penalty hearing – factors for consideration as to penalty – failure to make proper payment in lieu of notice of termination – whether alleged error in communication by Fair Work Ombudsman warrants reduction in appropriate penalty – whether deliberate choice by employer not to comply with compliance notice – whether genuine apology by employer – where no or nominal penalty sought by employer – necessity for general and specific deterrence Legislation: Crimes Act 1912 (Cth) s 4AA
Fair Work Act2009 (Cth) ss 117, 539, 546, 550, 682, 716, 717
Fair Work Bill 2008 (Cth)
Workplace Relations Act 1996 (Cth)
Explanatory Memorandum to the Fair Work Bill 2008 (Cth)
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union and Another [2018] HCA 3; (2018) 262 CLR 157; (2018) 92 ALJR 219; (2018) 273 IR 211; (2018) 351 ALR 190; (2018) 70 AILR 102-917
Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13; (2022) 96 ALJR 426; (2022) 314 IR 301; (2022) 399 ALR 599
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809
Commonwealth Bank of Australia v Finance Sector Union of Australia [2007] FCAFC 18; (2007) 157 FCR 329; (2007) 161 IR 262; (2007) 59 AILR 100-640
Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494
Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354
Fair Work Ombudsman v Absynthe Restaurant Pty Ltd & Anor [2015] FCCA 58
Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128
Fair Work Ombudsman v Althaus Homes Pty Ltd [2021] FCCA 126
Fair Work Ombudsman v ANSA Finance Pty Ltd [2022] FedCFamC2G 833
Fair Work Ombudsman v ASGBRIS Pty Ltd & Anor [2020] FCCA 553
Fair Work Ombudsman v Baal Gammon Copper Pty Ltd [2021] FCCA 348
Fair Work Ombudsman v Blu Hornsby Pty Ltd & Anor [2016] FCCA 1150
Fair Work Ombudsman v First Group of Companies Pty Ltd (Deregistered) & Ors [2018] FCCA 1228
Fair Work Ombudsman v Gothic Downs Pty Ltd [2022] FedCFamC2G 21
Fair Work Ombudsman v Kleen Group Pty Ltd & Anor [2016] FCCA 278
Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272
Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No.2) [2019] FCCA 2144
Fair Work Ombudsman v NSH North Pty Ltd (t/as New Shanghai Charlestown) [2017] FCA 1301; (2017) 275 IR 148; (2017) 69 AILR 102-890
Fair Work Ombudsman v Pacific Security Services [2021] FedCFamC2G 111
Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No 2) [2020] FCCA 2583
Fair Work Ombudsman v T & Sons Pty Ltd [2020] FCCA 3519
Fair Work Ombudsman v Tester [2021] FCCA 771
Fair Work Ombudsman v Viper Industries Pty Ltd & Anor [2015] FCCA 492
Fair Work Ombudsman v VS Investment Group Pty Ltd & Anor [2013] FCCA 208
Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290; (2016) 68 AILR 102-690
Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 147 IR 462; (2005) 224 ALR 467; (2005) 58 AILR 100-440
George v Rockett [1990] HCA 26; (1990) 170 CLR 104; (1990) 48 A Crim R 246; (1990) 64 ALJR 384; (1990) 93 ALR 483
Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14
Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357; (2005) 79 ALJR 1048; (2005) 215 ALR 213
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
Olsen v Sterling Crown Pty Ltd [2008] FMCA 1392; (2008) 177 IR 337
Ponzio v B & P Caelli ConstructionsPty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; (2007) 59 AILR 100-669
Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 256 CLR 507; (2015) 89 ALJR 750; (2015) 254 IR 371; (2015) 323 ALR 1
Division: Division 2 General Federal Law Number of paragraphs: 100 Date of last submission/s: 17 February 2022 Date of hearing: 17 February 2022 Place: Perth Counsel for the Applicant: Ms E Luck Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondents: Mr S Taylor Solicitor for the Respondents: Linfoot Commercial Law ORDERS
PEG 87 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: DARRELL CROUCH & ASSOCIATES PTY LTD (ACN 009 301 035)
First Respondent
DARRELL JOHN CROUCH
Second Respondent
order made by:
JUDGE LUCEV
DATE OF ORDER:
10 FEBRUARY 2023
THE COURT:
1.Declares that:
(a)the first respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (“FW Act”) by failing to comply with a Compliance Notice issued pursuant to s 716(2) of the FW Act on 22 January 2021; and
(b)the second respondent was involved, within the meaning of s 550(2) of the FW Act, in the contravention by the first respondent of s 716(5) of the FW Act declared at [1(a)] above.
2.Orders that:
(a)pursuant to s 546(1) of the FW Act, the first respondent pay a pecuniary penalty to the Commonwealth for the contravention declared at [1(a)] above in the amount of $14,985 within 28 days of the order;
(b)pursuant to s 546(1) of the FW Act, the second respondent pay a pecuniary penalty to the Commonwealth for the contravention declared at [1(b)] above in the amount of $2,997 within 28 days of the order; and
(c)the applicant have liberty to apply on 7 days’ notice in the event that any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE LUCEV
Introduction
Proceedings in this Court were commenced by an application lodged by the Fair Work Ombudsman (“FWO”) on 30 April 2021 against Darrell Crouch & Associates Pty Ltd (“DC & Associates”) and Darrell John Crouch (“Mr Crouch”) (together “Respondents”). The application alleges that the Respondents have contravened s 716(5) of the Fair Work Act2009 (Cth) (“FW Act”), and that the contravention by Mr Crouch arises because he is accessorily liable by reason of s 550(1) of the FW Act.
On 6 July 2021, the parties entered into a Statement of Agreed Facts. At [1]-[2] of the Statement of Agreed Facts DC & Associates admit that it contravened s 716(5) of the FW Act by failing to comply with a compliance notice issued under s 716 of the FW Act on 22 January 2021 (“Compliance Notice”), and Mr Crouch admits that he was involved, within the meaning of s 550(2) of the FW Act, in the contravention by DC & Associates, and the parties agreed to the Court making declarations to that effect. As such the matter has come before the Court for penalty hearing.
The Court has before it the following materials:
(a)the Originating Application and Statement of Claim filed 30 April 2021;
(b)the Amended Defence and Amended Response filed 15 June 2021;
(c)the Statement of Agreed Facts filed 6 July 2021;
(d)the FWO’s Outline of Submissions on Penalty filed 7 September 2021 (“FWO’s Submissions”);
(e)the Respondents’ Outline of Submissions on Penalty filed 28 September 2021 (“Respondents’ Submissions”);
(f)the FWO’s Outline of Submissions in Reply filed 12 October 2021 (“FWO’s Reply Submissions”);
(g)the affidavit of Daniel Spencer sworn 26 July 2021 (“Spencer Affidavit”);
(h)the affidavit of Louise Claire Casey affirmed 26 July 2021 (“Casey Affidavit”);
(i)the affidavit of Darrell John Crouch sworn 12 August 2021 (“First Crouch Affidavit”);
(j)the affidavit of Lee Taylor sworn 12 August 2021 (“First Taylor Affidavit”);
(k)the affidavit of Darrell John Crouch sworn 28 September 2021 (“Second Crouch Affidavit”);
(l)the affidavit of Lee Taylor sworn 15 December 2021 (“Second Taylor Affidavit”); and
(m)the transcript of the hearing on 17 February 2022 (“Transcript”).
Background
By way of background the Court observes that:
(a)an investigation by the FWO into the Respondents began subsequent to a request for assistance made by Mahesh Pithadia (“Employee”), a former employee of DC & Associates’ real estate and business broking agency: Statement of Agreed Facts [8];
(b)on 22 January 2021 Fair Work Inspector Casey (“FWI Casey”) issued the Compliance Notice to DC & Associates based on her reasonable belief that DC & Associates had contravened s 117 of the FW Act, a term of the National Employment Standards, between 5 and 11 February 2019, in respect of the Employee: Statement of Agreed Facts [13]-[15];
(c)the Compliance Notice required DC & Associates to take requisite action as specified in the Compliance Notice in order to remedy the direct effects of the contravention, and to provide to the FWO evidence of compliance by 26 February 2021: Statement of Agreed Facts [16];
(d)DC & Associates failed to comply with the Compliance Notice in that it did not:
(i)take the specified action by the remediation date; or
(ii)produce to the FWO evidence of compliance with the Compliance Notice,
by 26 February 2021: Statement of Agreed Facts [18];
(e)Mr Crouch was responsible for ensuring that DC & Associates complied with the Compliance Notice: Statement of Agreed Facts: [20];
(f)Mr Crouch did not co-operate with FWI Casey in relation to ensuring compliance with the Compliance Notice: Statement of Agreed Facts [21];
(g)the parties have agreed to the Court making the following orders:
(i)pursuant to s 546(1) of the FW Act, DC & Associates pay a pecuniary penalty to the Commonwealth, for DC & Associates’ contravention of s 716(5) of the FW Act, within 28 days of the order;
(ii)pursuant to s 546(1) of the FW Act Mr Crouch pay a pecuniary penalty to the Commonwealth, as Mr Couch was involved within the meaning of s 550(2) of the FW Act in the contravention of DC & Associates’ contravention of s 716(5) of the FW Act, within 28 days of the order;
(iii)the FWO have liberty to apply on 7 days’ notice in the event that any of the preceding orders are not complied with; and
(iv)such further orders as the Court considers appropriate: Statement of Agreed Facts [23]-[24].
The Proceedings
The course of these proceedings has been as follows:
(a)on 30 April 2021 the FWO commenced proceedings by filing the Originating Application and Statement of Claim;
(b)the Statement of Agreed Facts was filed on 6 July 2021;
(c)the matter was heard on 17 February 2022;
(d)at hearing, Mr Crouch was cross-examined and gave evidence that:
(i)he is presently the director, company secretary, a shareholder and principal of DC & Associates: Transcript p 8;
(ii)in addition to managing DC & Associates’ real estate business, Mr Crouch holds roles in property development and construction: Transcript p 8;
(iii)in light of Mr Crouch’s role as an employer, he has come to be aware of the FWO and its role: Transcript p 9;
(iv)as a consequence of an interaction with the FWO in 2013:
(A)at that time he would have been aware of the FWO’s functions: Transcript p 11; and
(B)he was aware of the minimum entitlements for employees at DC & Associates: Transcript p 11;
(v)Mr Crouch surmised that the Employee was engaging with the FWO in some form or another: Transcript p 13;
(vi)the Compliance Notice was sent to Mr Crouch’s office by post on 22 January 2021, however, Mr Crouch’s staff did not bring it to his attention. Mr Crouch asserted that this contributed to non-compliance with the Compliance Notice: Transcript p 13;
(vii)Mr Crouch had a copy of the Compliance Notice, as sent to Mr Crouch’s email by the FWO’s Mr Daniel Spencer (“Mr Spencer”) on 22 January 2021: Transcript p 14;
(viii)Mr Crouch had “skimmed over” the letter containing details pertaining to a compliance notice: Transcript p 16-17;
(ix)because Mr Crouch failed to properly read the letter containing details pertaining to a compliance notice, the Respondents had missed significant relevant issues about the FWO’s powers and the obligations owed by the Respondents: Transcript p 17;
(x)at the time Mr Crouch received the Compliance Notice he was of the belief that the Employee had been paid accurately and in full: Transcript p 18;
(xi)Mr Crouch considered the investigation:
(A)to be “a load of bullshit”: Transcript p 20; and
(B)conducted by way of telephone calls without written correspondence to be “foolish”: Transcript p 21;
(xii)Mr Crouch had “skimmed” the Compliance Notice to the extent that Mr Crouch was aware that there were penalties for non-compliance: Transcript p 22; and
(xiii)Mr Crouch’s “annoyance” was “definitely the main reason for non-compliance”: Transcript p 23. The “annoyance” was in reference to Mr Couch being “found guilty”: Transcript p 24.
Agreed Facts
The Agreed Facts are as follows, with the mobile number and email of Mr Crouch being omitted:
A. ADMITTED CONTRAVENTIONS
1.On the basis of the facts set out below, [DC & Associates] admits that it contravened section 716(5) of the Fair Work Act 2009 (Cth) (FW Act), by failing to comply with a compliance notice issued under section 716 of the FW Act on 22 January 2021 by Louise Casey, a Fair Work Inspector (FWI) appointed under section 700 of the FW Act (FWI Casey).
2.[Mr Crouch] admits that he was involved, within the meaning of section 550(2) of the FW Act, in the contravention of section 716(5) of the FW Act admitted by [DC & Associates] in paragraph 1 above.
B. PARTIES
The [FWO]
3. The FWO, is and was at all relevant times:
(a)a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to section 687(1) of the FW Act;
(b) a FWI pursuant to section 701 of the FW Act; and
(c)a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions in accordance with section 539(2) of the FW Act.
[DC & Associates]
4. [DC & Associates], is and was at all relevant times:
(a)a company incorporated under the provisions of the Corporations Act 2001 (Cth) and registered since 17 March 1988;
(b)a ‘constitutional corporation’ within the meaning of section 12 of the FW Act;
(c)a ‘national system employer’ within the meaning of section 14 of the FW Act;
(d) a ‘person’ within the meaning of section 716 of the FW Act;
(e)a company that operates a real estate and business broking agency trading as Darrell Crouch and Associates Pty Ltd that provides services associated with sales, acquisitions, leasing and/or management of residential, commercial, retail, strata or other leasehold or real property and/or businesses (the Business); and
(f)a company with a registered office of Suite 5, 21 Wanneroo Road, Joondanna WA 6060.
[Mr Crouch]
5. Mr Crouch is and was at all relevant times:
(a) a natural person capable of being sued;
(b) the Managing Director of DC & Associates;
(c) a shareholder and sole secretary of DC & Associates;
(d)the Principal of, and responsible for the overall operation and control of, the Business;
(e)together with the other director, responsible for the overall operation and control of [DC & Associates]; and
(f) together with the other director, responsible for ensuring that [DC & Associates] complied with its legal obligations under the FW Act.
C. CONTRAVENTION OF SECTION 716(5) OF THE FW ACT
The Inspector
6. FWI Casey is and was at all relevant times a FWI who was appointed by the [FWO] under section 700 of the FW Act.
The Investigation
7.From in or around December 2020 to January 2021, FWI Casey undertook an investigation into [DC & Associates’] compliance with Commonwealth workplace laws (the Investigation) in respect of the Business.
8.The Investigation commenced following a request for assistance made to the FWO from Mahesh Pithadia (the Employee) who had been employed by [DC & Associates].
9.Prior to the Investigation commencing, FWO Customer Service Officer, Cody Arnold, telephoned [Mr Crouch] twice, on 2 December 2020 and then on 8 December 2020, to discuss the Employee’s request for assistance. During the second phone call, [Mr Crouch] stated that he thought the initial phone call was a hoax.
10.During the 2 December 2020 call Mr Arnold informed [Mr Crouch] that [Mr Crouch] would receive an email from the [FWO] and, in the 8 December 2020 call, Mr Arnold informed [Mr Crouch] he thought an email had, between those calls, been sent to [Mr Crouch]. However, Mr Arnold had inadvertently sent the email intended for Mr Crouch to the Employee. [Mr Crouch] therefore did not receive Mr Arnold’s email.
11.FWI Casey was assisted in the Investigation by Daniel Spencer, a Fair Work Officer at the FWO.
12.On 11 January 2021, Daniel Spencer telephoned [Mr Crouch] on [Mr Crouch’s mobile number], which is [Mr Crouch’s] telephone number, to discuss the Investigation. Daniel Spencer and [Mr Crouch] discussed whether the Employee had received his full entitlement to payment in lieu of the minimum period of notice of termination on termination of his employment. [Mr Crouch’s] position was that the Employee had received his full entitlement. Daniel Spencer informed [Mr Crouch] that the next step may be compliance action.
13. As a result of the Investigation, FWI Casey formed a belief that:
(a)[DC & Associates] employed the Employee on a full time basis from on or around 29 August 2016 until on or around 4 February 2019;
(b)the Real Estate Industry Award 2010 (the Award) covered and applied to the Employee’s employment;
(c)the Employee’s employment was terminated by [DC & Associates] on or around 4 February 2019;
(d)[DC & Associates] did not provide the Employee with notice prior to the termination of his employment;
(e)in accordance with the Award, [DC & Associates] had 7 days after the date of termination in which to pay the Employee, inter alia, all amounts due to the Employee under the National Employment Standards, including payment in lieu of the minimum period of notice of termination; and
(f)[DC & Associates] failed to pay the Employee his full entitlement to payment in lieu of the minimum period of notice of termination, within 7 days after the termination of the Employee’s employment.
14.Based upon the factors set out in paragraph 13 above, FWI Casey formed a belief that [DC & Associates] had contravened section 117 of the FW Act, a term of the National Employment Standards (the Contravention).
The Compliance Notice
15.On 22 January 2021, FWI Casey gave a notice to [DC & Associates] pursuant to section 716 of the FW Act (the Compliance Notice).
16. The Compliance Notice required [DC & Associates] to:
(a)remedy the direct effects of the Contravention by 19 February 2021 (the Remediation Date) by taking the following specified action in respect of the Employee (the Specified Action):
(i)identify the minimum period of notice [DC & Associates] was required to give to the Employee;
(ii)calculate the full amount owed to the Employee for payment in lieu of notice;
(iii)make a payment to the Employee in respect of the payment in lieu of notice;
(iv)make a record of the information and amount referred to in paragraphs 16(a)(i) and 16(a)(ii) above and the amount of the payment referred to in paragraph 16(a)(iii) above (the Underpayment Rectification Information);
(v) calculate and pay additional superannuation contributions required by clause 16.2 of the Award in respect of the amount required to be paid to the Employee by [DC & Associates] as a result of the steps taken at paragraphs 16(a)(i) to 16(a)(iii) above to the Employee’s chosen superannuation fund; and
(b)produce to the [FWO] reasonable evidence of its compliance with the actions described in paragraph 16(a) above by 26 February 2021 by:
(i)producing a schedule that set out the Underpayment Rectification Information in respect of the Contravention, and the additional superannuation contributions calculated and paid to the Employee’s superannuation fund; and
(ii)proof that full payment was made to the Employee as required to be made by paragraph 16(a) above.
Correspondence between the FWO and Mr Crouch
17.After FWI Casey gave the Compliance Notice to [DC & Associates] and before the Remediation Date, FWI Casey and Daniel Spencer had the following correspondence or attempted correspondence with Mr Crouch:
(a)On 2 February 2021, Daniel Spencer attempted to call [Mr Crouch] on [Mr Crouch’s mobile number] and left a voice message for [Mr Crouch] to return his call;
(b)On 10 February 2021, Daniel Spencer called [Mr Crouch] on [Mr Crouch’s mobile number]. [Mr Crouch] did not want to discuss the matter;
(c)On 10 February 2021, Daniel Spencer emailed [Mr Crouch] at [Mr Crouch’s work email], reminding him of the Remediation Date and to provide evidence of compliance to the [FWO] by 26 February 2021;
(d)On 11 February 2021, Mr Crouch emailed Daniel Spencer and said, among other things, “we are not able to comply with any requests from the Fair Works Ombudsman”;
(e)On 11 February 2021, Daniel Spencer emailed Mr Crouch at [Mr Crouch’s work email] and explained that the paperwork that had been sent to [Mr Crouch] was a compliance notice set out in the form required by the FW Act, and offered to assist [Mr Crouch] to contact the Employee to obtain banking details or any other details required for compliance with the Compliance Notice; and
(f) On 17 February 2021, FWI Casey attempted to call [Mr Crouch] on [Mr Crouch’s mobile number] and left a message about the due date; sent an email to [Mr Crouch] at [Mr Crouch’s work email], which contained a reminder about the due date; and sent a text message to [Mr Crouch] at [Mr Crouch’s mobile number], which contained a reminder about the due date.
Failure to comply with the Compliance Notice
18. [DC & Associates] did not:
(a) take the Specified Action by the Remediation Date; or
(b)produce to the [FWO] any evidence of compliance with the Compliance Notice by 26 February 2021.
19.[Mr Crouch] was aware of the Compliance Notice since on or about 22 January 2021 by reason of him being then sent an email by Daniel Spencer attaching the Compliance Notice.
20.[Mr Crouch] was responsible for ensuring that [DC & Associates] complied with the Compliance Notice.
21.[Mr Crouch] did not co-operate with FWI Casey and Daniel Spencer in relation to ensuring compliance with the Compliance Notice.
Subsequent action by [DC & Associates]
22. Since the commencement of these proceedings, [DC & Associates] has:
(a)obtained legal advice about the nature of the proceedings and the need to attend to complying with the Compliance Notice;
(b) co-operated with the [FWO] to date;
(c)determined the attachments to the email referred to at paragraph 19 were indeed true, correct and in proper form as required in a Compliance Notice;
(d)accepted, based on legal advice, the Employee was entitled to a further 2 week payment in lieu of notice and that amount was not paid when the Employee’s position was terminated;
(e)admitted both [DC & Associates] and [Mr Crouch] did not comply with the Compliance Notice when and how they were, appropriately, required by the [FWO];
(f)identified the minimum period of notice [DC & Associates] was required to give to the Employee;
(g)calculated the full amount owed to the Employee for payment in lieu of notice;
(h)made a payment to the Employee in respect of the payment in lieu of notice;
(i)made a record of the Underpayment Rectification Information;
(j) calculated and paid additional superannuation contributions required by clause 18.2 of the Real Estate Industry Award 2020 to pay on behalf of the Employee as a result of the steps taken at paragraph 22 above into the Employee’s chosen superannuation fund;
(k)prepared and produced to the [FWO]:
(i)a schedule that sets out its calculations of the Underpayment Rectification Information in respect of the Employee, and the additional superannuation contributions calculated that will be paid into the Employee’s superannuation fund; and
(ii)proof that full payment has been made to the Employee of the payments required to be made by paragraph 22 above;
(l)written to the [FWO] on 14 June 2021 apologising for the inconvenience caused by its, and [Mr Crouch’s], failure to comply with the Compliance Notice and the consequent need to commence these proceedings (June 2021 Letter);
(m)in the June 2021 Letter and otherwise, on its own and [Mr Crouch’s] behalf, stated they have conducted an investigation into how the failure occurred, then asserted they have established procedures to ensure such failures to comply do not recur; and
(n)the [FWO] accepted that the Respondents apologised for the inconvenience caused in in the June 2021 Letter in an email sent from the [FWO’s] solicitors to the Respondents’ solicitors on 1 July 2021.
Agreed Relief Sought
23. The parties agree to the Court making declarations that:
(a)[DC & Associates] contravened section 716(5) of the FW Act by failing to comply with the Compliance Notice; and
(b)[Mr Crouch] was involved, within the meaning of section 550(2) of the FW Act, in the contravention by [DC & Associates] of section 716(5) of the FW Act declared at paragraph 23(a) above.
24. The parties agree to the Court making the following orders:
(a)pursuant to section 546(1) of the FW Act, [DC & Associates] pay a pecuniary penalty to the Commonwealth for the contravention declared at paragraph 23(a) above within 28 days of the order;
(b)pursuant to section 546(1) of the FW Act, [Mr Crouch] pay a pecuniary penalty to the Commonwealth for the contravention declared at paragraph 23(b) above within 28 days of the order;
(c)the [FWO] have liberty to apply on 7 days’ notice in the event that any of the preceding orders are not complied with; and
(d) such further orders as the Court considers appropriate.
Consideration
Principles relevant to determination of penalty
The appropriate steps to be considered in fixing an appropriate penalty were summarised in Fair Work Ombudsman v NSH North Pty Ltd (t/as New Shanghai Charlestown) [2017] FCA 1301; (2017) 275 IR 148; (2017) 69 AILR 102-890 (“New Shanghai Charlestown”) (citing Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494 (“Agreed Penalties Case”) at [64] per French CJ, Kiefel, Bell, Nettle and Gordon JJ, Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 (“Kelly”) at [30] per Tracey J and Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809 (“Australian Ophthalmic Supplies”) at [23] per Gray J, [71] per Graham J and [102] per Buchanan J). This case involves a single contravention, namely, the failure to comply with the Compliance Notice. It is therefore unnecessary to consider grouping courses of conduct under s 557 of the FW Act. Of the five steps set out in New Shanghai Charlestown, only the first, fourth and fifth steps are relevant here, and consequently the appropriate steps are:
(a)first, to identify each separate contravention involved. A contravention of each separate obligation imposed by the FW Act is a separate contravention of a civil remedy provision for purposes of s 539(2) of the FW Act;
(b)second, to consider the appropriate penalty in respect of the contravention; and
(c)third, to consider the overall penalty arrived at and apply the totality principle, to ensure that the penalty is appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary.
Maximum Penalties
Section 539 of the FW Act sets out the maximum penalties that may be imposed for contraventions of civil penalty provisions by reference to penalty units.
Section 4AA of the Crimes Act 1914 (Cth) defined a “penalty unit’ as $222 at the time the Respondents failed to comply with the Compliance Notice. Penalty units are defined by s 12 of the FW Act to have the same meaning as in s 4AA of the Crimes Act 1914 (Cth).
Section 546(2)(a) of the FW Act provides that the maximum penalty for an individual is the maximum number of penalty units referred to in the relevant item in column 4 of the table in section 539(2) of the FW Act. Item 33 relates to s 716(5) of the FW Act, providing in column 4 that the maximum penalty is 30 penalty units. Accordingly, the maximum penalty for Mr Crouch is $6,660. Section 546(2)(b) of the FW Act provides that the maximum penalty for a body corporate is 5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table in s 539(2) of the FW Act, which in this case is therefore 150 penalty units. Accordingly, the maximum penalty for DC & Associates is $33,300.
Maximum penalties are set by Parliament as a reflection of the worst possible case, which can be evaluated against the case presently before the Court: Australian Ophthalmic Supplies at [108] per Buchanan J, applying Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357; (2005) 79 ALJR 1048; (2005) 215 ALR 213 at [31] per Gleeson CJ, Gummow, Hayne and Callinan JJ.
Factors Relevant to Penalties
The High Court has explained the primary purpose of the imposition of civil penalties. In the Agreed Penalties Case the High Court stated “…whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance…”: at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. More recently the High Court has further explained, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union and Another [2018] HCA 3; (2018) 262 CLR 157; (2018) 92 ALJR 219; (2018) 273 IR 211; (2018) 351 ALR 190; (2018) 70 AILR 102-917 (“ABCC v CFMEU”) at [116] per Keane, Nettle and Gordon JJ, that the “principal object” of deterrence depends on a penalty having the necessary “sting or burden” to secure the specific and general deterrent effects that are the raison d’être of its imposition.
Civil penalty provisions have as their primary purpose the promotion of the public interest in compliance with the relevant law: Agreed Penalties Case at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. That purpose has, since this matter was argued, been reinforced by the judgment of the High Court in Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13; (2022) 96 ALJR 426; (2022) 314 IR 301; (2022) 399 ALR 599 (“Pattinson”) where at [71] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ the purpose of the civil remedy regime in the FW Act was described by the majority as being the promotion of the public interest in compliance with the provisions of the FW Act by way of deterrence of further contravention. In Pattinson at [66] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ the High Court expressed the view that s 546 of the FW Act had, as its underlying theory, the notion that the financial disincentive imposed by way of pecuniary penalty will be such as to encourage compliance with the law by ensuring that contraventions are viewed by the contravener, and others, “as an economically irrational choice”. The High Court further observed that the function of the court imposing a penalty was to give effect to the intention of the FW Act in this regard, and that the courts must do what they can to deter noncompliance with the FW Act.
In determining what penalty to impose the Court must assess the seriousness of the offending subject to the alleged contravention in the context of all the factual circumstances that arise. In that regard the Court has long had regard to a series of considerations, which are not fixed and which are not a check-list: Pattinson at [18] and [68] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ; Kelly at [14] per Tracey J; Australian Ophthalmic Supplies at [91] per Buchanan J. Those consideration are as follows:
(a)the nature and extent of the conduct which led to the breach;
(b)the circumstances in which the conduct took place;
(c)the nature and extent of any loss or damage sustained as a result of the breach;
(d)whether there has been similar previous conduct by the alleged contravener;
(e)whether the breach was properly distinct or arose out of one course of conduct;
(f)the size of the business enterprise involved;
(g)whether or not the breach was deliberate;
(h)the involvement of senior management in the breach;
(i)whether the party committing the breach had shown contrition;
(j)whether the party committing the breach has taken corrective action;
(k)whether the party committing the breach has cooperated with enforcement authorities;
(l)the need to ensure compliance with minimum standards by the provision of an effective means for investigation and enforcement of employee entitlements; and
(m)the need for specific and general deterrence.
Factors relevant to this matter are considered below.
Nature and extent and circumstances of the conduct which led to the breach
The FWO submitted as follows:
(a)the power of a FWI to issue a compliance notice was introduced into the FW Act to provide a mechanism for dealing with non-compliance with minimum entitlements in the FW Act, as an alternative to commencing court proceedings: Explanatory Memorandum to the Fair Work Bill 2008 (Cth) at [2673]. If a person complies with a compliance notice, no civil remedy proceedings can be brought against the person for an underlying contravention and that non-compliance is not taken to be an admission of the contravention: FW Act, ss 716(4A) and (4B);
(b)section 717 of the FW Act allows a recipient of a compliance notice to apply to the Federal Court, Federal Circuit Court or an eligible State or Territory Court for a review of the compliance notice on either or both of the grounds that the recipient had not committed a contravention set out in the compliance notice and that the compliance notice does not comply with ss 716(2) or (3) of the FW Act. DC & Associates took no steps to apply for a review of the Compliance Notice under s 717 of the FW Act;
(c)compliance notices provide a mechanism for the efficient and cost-effective rectification of identified potential contraventions of the FW Act, including underpayments to employees. Compliance notices have been recognised by the Court as “an important part of the armoury of Fair Work Inspectors in fulfilling their functions”: Fair Work Ombudsman v Blu Hornsby Pty Ltd & Anor [2016] FCCA 1150 at [29] per Judge Smith. The efficacy of compliance notices will be eroded or negated if recipients perceive that a failure to comply carries no meaningful consequences: Fair Work Ombudsman v Tester [2021] FCCA 771 at [28] per Judge Jarrett;
(d)in the present case, the Compliance Notice clearly set out the specified actions DC & Associates was required to take to remedy the direct effects of the contravention identified by the Compliance Notice. If DC & Associates did not agree with the Compliance Notice, it had the option to seek a review of it under s 717 of the FW Act. DC & Associates could have also communicated or corresponded directly with FWI Casey or FWI Spencer if it considered there was an error in the Compliance Notice, or if there was evidence that the minimum entitlements of the Employee who was the subject of the Compliance Notice were in fact provided to him;
(e)there is no evidence that DC & Associates took any steps to comply with, or challenge, the Compliance Notice until after the FWO commenced this proceeding;
(f)Mr Crouch deliberately chose not to comply with the Compliance Notice. That Mr Crouch claims he did not “appreciate the nature and seriousness” of the Compliance Notice: First Crouch Affidavit at [56], is no excuse;
(g)Mr Crouch’s involvement in DC & Associates’ failure to comply with the Compliance Notice over an extended period of time and until after the FWO commenced this proceeding demonstrates a disregard for the obligations of DC & Associates under the FW Act, noting that:
(i)there were clear steps available to DC & Associates to comply with the Compliance Notice, which DC & Associates did not take;
(ii)review rights were clearly explained in paragraph 5 of the Compliance Notice, which DC & Associates chose not to exercise; and
(iii)there was no attempt by DC & Associates whatsoever to quantify or rectify the contravention referred to in the Compliance Notice until after the FWO commenced this proceeding.
The Respondents submitted as follows:
(a)as to the FWO’s conduct and the Compliance Notice;
(i)the FWO has a compliance and enforcement role;
(ii)the FWO has a Compliance and Enforcement Policy (“Compliance and Enforcement Policy”), understood to have been attached to the email with the Compliance Notice when sent to the Respondents: Casey Affidavit p 21 which provides, as its stated first function:
promoting harmonious, productive and cooperative workplace relations and compliance with the FW Act and fair work instruments including through the provision of education, assistance and advice.
(iii)in the circumstances of this matter the FWO did not meet its own standard and did not provide “harmonious and cooperative workplace relation” with “assistance and advice, at least in respect of its approach to the Respondents;
(iv)the Respondents are concerned that the Court, in coming to its view on penalty, have close regard to the FWO’s conduct up to the time it issued the Compliance Notice, on or about 22 January 2021 (“Pre-CN Conduct”);
(v)it is the Respondents position that the FWO’s Pre-CN Conduct:
(A)was unprofessional and inappropriate, having regard to (or what should be) standard practice and the FWO’s Compliance and Enforcement Policy;
(B)the error of the FWO’s Mr Cody Arnold (“Mr Arnold”) failing to send the email to the Respondents, and instead sending the email (“December 2020 Email”) intended for Mr Crouch to the Employee (the “Error”), caused such annoyance to the Respondents as to cause the Respondents to inappropriately ignore the seriousness of the Compliance Notice; and
(C)in turn, contributed to, these proceedings on penalty being before the Court;
(vi)the Pre-CN Conduct includes, relevantly:
(A)a telephone call made by Mr Arnold to Mr Crouch in or about 2 December 2020;
(B)Mr Arnold agreeing, during that call, to send to Mr Crouch an email verifying the identity of the FWO;
(C)Mr Arnold failing to send the December 2020 Email to the Respondents, and instead resulting in the Error occurring;
(D)missing an opportunity to correct the Error; and
(E)all other communications had by the FWO and Respondents, before the Compliance Notice, being only by telephone;
(vii)the FWO did not recognise the Error until about July 2021, instead believing that the Respondents had received the December 2020 Email from Mr Arnold, in consequence of which:
(A)the FWO issued the Compliance Notice in January 2021 without knowledge of the Error; and
(B)the Respondents did not have an opportunity to address the concerns raised in the FWO’s investigation before the Compliance Notice was issued;
(viii)the Compliance Notice includes, at its opening paragraph, a statement that the FWO had concluded it formed a “reasonable belief” that the Respondents had contravened the FW Act (“Reasonable Belief”): Spencer Affidavit p 20;
(ix)the Respondents refute the reasonableness of that stated Reasonable Belief because the FWO did not reasonably engage with the Respondents;
(x)a reasonable belief needs to be formed before a Compliance Notice can be issued: s 716(1) of the FW Act;
(xi)the FWO did not ask to, and did not, visit the Respondents to go through the concerns it had identified during its investigation;
(xii)the FWO did not provide the Respondents with information purported to be provided to the Respondents in the December 2020 Email, being the Error: Spencer Affidavit, Annexure DS-2;
(xiii)the FWO did not provide the Respondents with an opportunity to provide information from the Respondents’ own records and to thus engage in the FWO’s investigation;
(xiv)had the FWO properly engaged with the Respondents, the Compliance Notice would likely not have been issued; and
(xv)the FWO failed to accord the Respondents the qualities and style of approach the FWO has declared as its own in its Compliance and Enforcement Policy: see [17(a)(ii)] above;
(b)as to the Respondents’ conduct:
(i)as stated above, the Compliance Notice includes, at its opening paragraph, a conclusive statement that the FWO had formed the Reasonable Belief that the Respondents had contravened the FW Act: Spencer Affidavit p 20;
(ii)the Respondents refute the reasonableness of the Reasonable Belief;
(iii)given the Reasonable Belief and the Respondents dispute about it, the Respondents did not respond to it because of a mistaken belief that by disregarding the Compliance Notice legal action would be commenced to have an independent arbiter determine the accuracy of the Reasonable Belief (“Mistaken Belief”);
(iv)the Respondents did disregard the Compliance Notice, not because of its contents but because they regarded it as unreasonable, inflammatory and unprofessional and the Respondents then acted or, rather, did not act as they were under the Mistaken Belief;
(v)the Respondents admit the consequence of their inaction under the Mistaken Belief, contributed to by the Error and Pre-CN Conduct, in these proceedings;
(vi)when these proceedings commenced the Respondents, almost immediately:
(A)obtained legal advice;
(B)on getting legal advice took the steps required of DC & Associates in the Compliance Notice and engaged and cooperated with the FWO and its solicitors; and
(C)apologised to the FWO because the Respondents did not, until the proceedings commenced and until they received legal advice, appreciate the nature or mechanism of a compliance notice;
(vii)the Respondents simply did not understand how the Compliance Notice worked and, unwittingly and under their Mistaken Belief, let it expire believing there would be another opportunity to challenge the FWO’s Reasonable Belief;
(viii)the FWO, by its failed processes and by the Respondents’ Mistaken Belief (contributed to by the FWO), failed to clearly and effectively communicate the nature of the Compliance Notice to the Respondents;
(ix)thus, the purpose and intent of compliance notices as referred to in the FW Act, the authorities and the Compliance Notice itself, in this case, failed;
(x)the words of the Compliance Notice might be clear, but the Pre-CN Conduct induced the Mistaken Belief and this is why the Respondents’ view is as it is; and
(xi)the FWO and Respondents do not have the discretion between them to agree on penalty, that is a matter for the Court to decide.
(c)as to the preliminary conclusive submission:
(i)the Respondents respectfully submit it is open for the Court to consider that the FWO’s Pre-CN Conduct did not meet the appropriate standards for engagement with the community and, further, and on public interest grounds and in fact, the FWO did not establish a reasonable belief as required under s 716(1) of the FW Act;
(ii)it might be open to the Court, on its own application and at its own determination based on these submissions, to dismiss these proceedings on penalty and, indeed dismiss the entire application, on the basis that the Compliance Notice was not validly issued; and
(iii)the Respondents actively choose to not make an application to challenge the validity of the issuance of the Compliance Notice because doing so is cost inhibitive. Rather, the Respondents submit to the Court its views on penalty are reasonable, and the penalty should be nominal;
(d)as to the FWO’s engagement with the Respondent in prior cases: in obiter dicta various judgments provide reference to the FWO’s processes and engagement with impugned employers before the issue of compliance notices, including for example:
(i)in Fair Work Ombudsman v Absynthe Restaurant Pty Ltd & Anor [2015] FCCA 58, the investigator wrote to the employer with letters and emails in the course of the FWO investigation before the Compliance Notice was issued;
(ii)in Fair Work Ombudsman v Althaus Homes Pty Ltd [2021] FCCA 126 and Fair Work Ombudsman v Baal Gammon Copper Pty Ltd [2021] FCCA 348 there is commentary on notices and exchanges in the decision, again, before the issue of a compliance notice;
(iii)in Fair Work Ombudsman v T & Sons Pty Ltd [2020] FCCA 3519 there was a long investigation of about 6 months and reference to “interaction” indicating an exchange of material relevant to a determination of whether employee entitlements were accorded, or not - acknowledging there is no specific reference to a letter or an email sent from the FWO (but it is apparent); and
(iv)Fair Work Ombudsman v Trek North Tours & Anor(No 2) [2015] FCCA 1801 concerned, relevantly, compliance notices issued after the respondents failed to respond to a notice to produce documents first provided by the FWO;
(e)whilst not all of the judgments provide commentary about the provision of something in writing by the FWO to an employer before deciding, in the context of an investigation, that an employer is “guilty” of a legislative contravention of the type referred to at [17(b)(i)] above, the Respondents’ doubt those employers got nothing;
(f)as to the FWO’s submissions:
(i)save as to what should amount to a significant additional discount on penalty, possibly up to 100%, on account of the points made above and as provided in the following paragraphs, the FWO provides sound submissions on the law and what the Court can and should consider in relation to the matter;
(ii)responding to various points made in the FWO’s submissions the Respondents say:
(A)it is true that the Respondents admitted they contravened section 716(5) of the FW Act, and that remains true save that the Error was discovered after the admission was made, in the course of the exchanges leading up to the penalty hearing date and the admission may be, for reasons provided above, unsound;
(B)as to whether the admissions are unsound, the Respondents defer to the Court’s view on matters raised at [17(c)] above; and
(C)the FWO’s submissions about the Respondents’ communications, or lack thereof, with the FWO between the date of issue of the Compliance Notice and the commencement of these proceedings need to be read in light of the above submissions on the Respondents’ Mistaken Belief;
(iii)the Respondents agree that the purpose and intent of the compliance notice mechanism is to provide an opportunity to avoid, or to have an alternative to, court proceedings. However, the FWO failed to use the mechanism properly. It checked its own records to see that it had properly engaged with the Respondents and, seeing its own erroneous record of an email sent by Mr Arnold to DC & Associates, assumed (incorrectly) that those processes were accorded;
(iv)the Respondents’ solicitors invited the FWO to withdraw the Compliance Notice and these court proceedings but the FWO declined: Second Crouch Affidavit, Annexures DC-1 and DC-2;
(v)the FWO’s submissions state that the efficacy of compliance notices will be eroded if recipients perceive that a failure to comply carries no meaningful consequences. Under these circumstances the FWO contributed to, if not caused, the failure; and
(vi)the FWO suggests that there was an extended period of time in which Mr Crouch was involved in DC & Associates’ failure to comply with the Compliance Notice. This is an exaggeration. The Compliance Notice was issued on 22 January 2021 and it expired on 19 February 2021. That was after an investigation that the Respondents were first informed about in December 2020, and an investigation about which the Respondents received nothing in writing, despite an assurance that there would be, until the Compliance Notice itself.
In reply, the FWO submitted that:
(a)the Respondents’ submissions raise allegations about the FWO up until the time that it issued the Compliance Notice on 22 January 2021. They contend, in effect, that the unintentional issuing of an email to the incorrect recipient caused the Respondents to fail to comply with the Compliance Notice and has led to these proceedings, and rely on it to argue that the Respondents should receive either no penalty or a nominal penalty of $1: Respondents’ Submissions at [51];
(b)the above contentions are speculative, ignore agreed and admitted facts about what the Respondents actually did, and would lead to the Court imposing a penalty that is manifestly inadequate;
(c)the quoted passage by the Respondents from the Compliance and Enforcement Policy relied upon by the Respondents should not be read in isolation, but in the context of the remainder of the relevant paragraph which describes the FWO’s functions: Casey Affidavit p 21, as follows:
•monitoring compliance with the FW Act and fair work instruments;
•inquiring into and investigating any act or practice that may be contrary to the FW Act, a fair work instrument or a safety net contractual entitlement;
•commencing proceedings in a Court (or in limited circumstances making an application to the Fair Work Commission) to enforce the FW Act, a fair work instrument or a safety net contractual entitlement; and
•referring matters to other relevant authorities where appropriate.
(d)in commencing these proceedings, the FWO is fulfilling the functions given to the FWO under s 682 of the FW Act, as described in the Compliance and Enforcement Policy;
(e)the Error does not constitute a breach of the Compliance and Enforcement Policy (which does not impose any legal obligation), nor does it negate the FWO’s obligations to fulfil its functions under the FW Act. It also does not provide the Respondents with an excuse for failing to pay the Employee his entitlements provided for by the National Employment Standards (which is admitted by the Respondents);
(f)the Respondents did have opportunities to address concerns raised about the FWO’s investigation before the Compliance Notice was issued. Those opportunities included:
(i)FWI Spencer telephoning Mr Crouch on 11 January 2021, an admitted and agreed fact: Statement of Agreed Facts at [12]; and
(ii)Mr Arnold telephoning Mr Crouch on 8 December 2020, another admitted and agreed fact: Statement of Agreed Facts at [10];
(g)the Respondents have admitted that they contravened s 716(5) of the FW Act by failing to comply with the Compliance Notice: Statement of Agreed Facts at [1]-[2]. On 5 July 2021 they signed (while having the benefit of legal representation) a Statement of Agreed Facts admitting matters about their contravention. There is no scope for the Respondents to now claim within this proceeding that FWI Casey did not have the requisite Reasonable Belief to issue the Compliance Notice;
(h)the FWO rejects the Respondents’ submission that the FWO did not provide the Respondent with an opportunity to provide information and that it did not properly engage with the Respondents. The contention that the Compliance Notice would not likely have been issued is speculative and should be rejected, particularly because on 11 January 2021 (prior to the issuing of the Compliance Notice), Mr Crouch had informed the FWO that his position was that the former Employee had received his full entitlement, an admitted and agreed fact: Statement of Agreed Facts [12];
(i)the Respondents were clearly informed of the remedies available to them if they wished to challenge the Compliance Notice. The FWO refers to:
(i)page 2 of the cover letter to the Compliance Notice: Casey Affidavit p 10, which states:
(A)the Compliance Notice provides DC & Associates with a further opportunity to rectify the contravention;
(B)the Compliance Notice sets out a number of actions that DC & Associates is required to take on or before 19 February 2021;
(C)complying with the Compliance Notice is not an admission (nor does it constitute a finding) that DC & Associates has contravened the FW Act: see also paragraph 4 of the Compliance Notice: Casey Affidavit p 12 at [4];
(D)if DC & Associates fails to comply with the Compliance Notice by 19 February 2021, it may contravene s 716(5) of the FW Act, unless it has a reasonable excuse: see also paragraph 1 of the Compliance Notice: Casey Affidavit p 12 at [1]. In those circumstances, the FWO may (without further notice) commence legal action against DC & Associates and/or individuals involved in DC & Associates’ failure to comply with the Compliance Notice: see also paragraph 2 of the Compliance Notice: Casey Affidavit p 12 at [2], and that a court may impose penalties of up to $6,660 in respect of an individual or $33,300 in respect of a body corporate for each failure to comply with a Compliance Notice; and
(E)alternatively, DC & Associates may apply to a court for a review of the Compliance Notice on either or both of the grounds that DC & Associates did not commit the contravention set out in the Compliance Notice or the Compliance Notice does not comply with s 716(2) or 716(3) of the FW Act: see also paragraph 5 of the Compliance Notice: Casey Affidavit p 12 at [5];
(j)the Respondents do not have a reasonable excuse for failing to take notice of the Compliance Notice, and (as they accept: Respondents’ Submissions at [28]) made a conscious decision to simply “let it expire”;
(k)the Respondents incorrectly refer to an employer being “guilty” of a legislative contravention or “guilty of wrongdoing” when a FWI forms a reasonable belief under s 716 of the FW Act and issues a Compliance Notice. Section 716(4B) of the FW Act expressly states that a person who complies with a compliance notice in relation to a contravention of a civil remedy provision is not taken to have admitted to contravening the provision or to have been found to have contravened the provision. The effect of this subsection was explained in the cover letter to the Compliance Notice and the Compliance Notice itself;
(l)the Respondents admitted contravening s 716(5) of the FW Act at the time the Statement of Agreed Facts was filed by the parties on 6 July 2021. That the Respondents knew of the Error prior to this admission is clear from the Statement of Agreed Facts at [10] which expressly states “Mr Arnold had inadvertently sent the email intended for Mr Crouch to the Employee. Mr Crouch therefore did not receive Mr Arnold’s email”;
(m)despite the Error, the FWO did engage with the Respondents; and
(n)the length of time from the issuing of the Compliance Notice until the Compliance Notice was complied with by DC & Associates was from 22 January 2021 until June 2021: Casey Affidavit pp 49-50.
Consideration - Nature and extent and circumstances of the conduct which led to the breach
The Respondents seek exculpation, or a large measure thereof, from the consequences of the failure to comply with the Compliance Notice, primarily on the basis of their assertions concerning the Pre-CN Conduct of, and Error by, the FWO.
The Respondent’s seek to assert that there was not a proper basis for the Reasonable Belief because the FWO did not, as part of the Pre-CN Conduct, comply with the Compliance and Enforcement Policy insofar as it contains provisions concerning the FWO’s educative, assistance and advice functions in the course of fulfilling its function of promoting harmonious, productive and cooperative workplace relations and compliance with the FW Act. The FWO argues that it did as much as was necessary to meet the functions set out in the Compliance and Enforcement Policy, and also argues that the Compliance and Enforcement Policy gives rise to no legal obligations. In relation to the FWO’s latter argument it is convenient to set out the functions of the FWO as contained in s 682(1) of the FW Act, which provides as follows:
(1) The Fair Work Ombudsman has the following functions:
(a) to promote:
(i) harmonious, productive and cooperative workplace relations; and
(ii) compliance with this Act and fair work instruments;
including by providing education, assistance and advice to employees, employers, outworkers, outworker entities and organisations and producing best practice guides to workplace relations or workplace practices;
(b) to monitor compliance with this Act and fair work instruments;
(c)to inquire into, and investigate, any act or practice that may be contrary to this Act, a fair work instrument or a safety net contractual entitlement;
(d)to commence proceedings in a court, or to make applications to the FWC, to enforce this Act, fair work instruments and safety net contractual entitlements;
(e) to refer matters to relevant authorities;
(f)to represent employees or outworkers who are, or may become, a party to proceedings in a court, or a party to a matter before the FWC, under this Act or a fair work instrument, if the Fair Work Ombudsman considers that representing the employees or outworkers will promote compliance with this Act or the fair work instrument;
(g)any other functions conferred on the Fair Work Ombudsman by any Act.
The functions in the Compliance and Enforcement Policy effectively mirror the functions in s 682(1) of the FW Act. It is therefore immaterial as to whether the functions in the Compliance and Enforcement Policy gives rise to enforceable legal obligations, because s 682(1) of the FW Act prescribes as functions of the FWO effectively the same functions relied upon by the Respondents from the Compliance and Enforcement Policy in these proceedings, who argue that the conduct of the FWO in some way justifies the Respondents conduct in relation to the failure to comply with the Compliance Notice.
The functions under s 682(1) of the FW Act give rise to statutory obligations, entitlements and powers on the part of the FWO: Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 256 CLR 507; (2015) 89 ALJR 750; (2015) 254 IR 371; (2015) 323 ALR 1 at [109] per Nettle J.
In Fair Work Ombudsman v Priority Matters Pty Ltd [2017] FCA 833 at [154]-[155] per Flick J the Federal Court, in setting aside a finding by the Federal Circuit Court of Australia that the FWO had an obligation to make inquiries with the Australian Taxation Office as to the status of a taxation refund which might be used by an employer to pay monies owed to employees, observed as follows:
154The role of the Ombudsman in discharging the statutory functions conferred by s 682(1), with respect, cannot be seen as involving any responsibility to reclaim moneys owed to a corporate employer or any responsibility to advance the payment of monies potentially owing: cf. Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28, (2015) 256 CLR 507. There in question was whether the Fair Work Ombudsman could be regarded as having acting “on behalf of” an employee (Mr Tomlinson) in commencing a proceeding under s 682(1)(d). In rejecting the argument, Nettle J concluded (at 544 to 545):
[114]Since the proceeding was brought under s 682(1)(d) of the Fair Work Act and s 719 of the [Workplace Relations Act 1996 (Cth)], it logically cannot be that the Ombudsman’s claim in relation to the appellant was made by the Ombudsman as representative of the appellant or otherwise “on behalf of” the appellant. The Ombudsman was not representing the appellant in a claim under s 719 but acting in exercise of the Ombudsman’s own statutory right of action to enforce the Fair Work Act. The Ombudsman was not making the appellant’s claim “on behalf of” the appellant but making the Ombudsman’s own claim pursuant to s 682(1)(d) of the Fair Work Act under s 719 of the Workplace Relations Act for an order to compel the enforcement of the Fair Work Act.
[115]Nor is the claim by the Ombudsman under s 719 otherwise of such a nature that it should be regarded as made “on behalf of” the appellant. The relationship between the appellant and the Ombudsman did not fall into one of the established categories of legal and equitable relationships earlier described. The appellant did not engage the Ombudsman as his agent to litigate the question of whether Ramsey Food was his employer and as such had failed to pay his entitlements.
[116]As far as can be told, the appellant did not have any control over the conduct of the Ombudsman’s claim. The highest the evidence went in that regard was that the appellant placed the facts of his predicament before the Ombudsman and asked the Ombudsman if there was anything which the Ombudsman could do to procure for the appellant his entitlements.
[117]There is nothing about the power conferred on the Ombudsman by s 682(1)(d) of the Fair Work Act or on the court by s 719 which could be viewed as imposing anything in the nature of a fiduciary duty on the Ombudsman in favour of the appellant.
[118]The Ombudsman could not realistically be regarded as the corporate embodiment of the appellant – even for just the purposes of recovery of the appellant’s unpaid entitlements – in the sense of the appellant being the person who made decisions and gave instructions on behalf of the Ombudsman as to how the Fair Work proceeding should be conducted. On the evidence, the scope of the appellant’s involvement was limited to being a witness.
[119]Further, because of the Ombudsman’s statutory responsibilities to enforce the Act generally, it is not possible to exclude the potential for at least some conflict of interest between the Ombudsman’s objectives in and manner of conducting the Fair Work proceeding and the appellant’s interests in recovering his entitlements.
155The reasons for concluding that the Fair Work Ombudsman has no such “role or function” as that described by the primary Judge, accordingly, are as follows:
•such a “role or function” stands outside the objects of the Act as set forth in s 3;
•the promotion of “workplace relations” as referred to in s 682(1)(a) is the promotion of such “workplace relations” within the framework of the Fair Work Act;
•the text of s 682(1) expresses a focus upon the enforcement of the provisions of the Fair Work Act and the promotion of the objects of that Act;
•section 682(1)(e) suggests that any “role or function” which the Fair Work Ombudsman may have vis-a-vis other statutory authorities is the power to “refer matters to relevant authorities” such that those authorities may then discharge such statutory functions as may be vested in them; and
•in commencing a proceeding seeking the enforcement of the Fair Work Act, the Fair Work Ombudsman is not acting “on behalf of” any other party to that proceeding and is potentially discharging functions which may be in conflict with the interests of another party (cf. Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28, (2015) 256 CLR 507).
The reference in s 682(1)(a) to the term “including” obviously enough provides that the examples thereafter set forth are not an exhaustive description of the manner in which the Fair Work Ombudsman discharges the “function” of promoting workplace relations and compliance with the Act. But the term “including” cannot be construed as expanding upon the “function” of promoting “workplace relations” within the structure of the Fair Work Act itself.
The FWO’s obligation under s 682(1)(a) of the FW Act to promote harmonious, productive and cooperative workplace relations and compliance with the FW Act is one which must be considered in its factual context. In this case, prior to the Compliance Notice issuing on 22 January 2021 Mr Crouch:
(a)was spoken to on the telephone by Mr Arnold twice, on 2 and 8 December 2020, concerning the Employee’s request for assistance to the FWO to be paid his entitlements: Statement of Agreed Facts at [9];
(b)had been told by Mr Arnold that the Respondents would receive an email from the FWO, but because of the Error, no email was sent to the Respondents: Statement of Agreed Facts at [10]; and
(c)was spoken to by FWI Spencer in a telephone call on 11 January 2021 in which they discussed the Employee’s request to be paid his entitlements, and in relation to which Mr Crouch maintained that the Employee had been paid his full entitlements, causing FWI Spencer to advise that the FWO’s next step may be to issue a compliance notice: Statement of Agreed Facts at [12].
Mr Crouch regarded the FWO’s approach to the Investigation “as amateurish and inappropriate”, “in light of there being nothing but telephone calls to me by the FWO asserting the Employee’s position without according me an opportunity to present ‘my side of the story’”: First Crouch Affidavit at [41].
The Respondent’s reliance on the Error takes this matter nowhere. The Error was a simple administrative mistake by Mr Arnold, a Customer Service Officer with the FWO, in sending the December 2020 Email to the Employee rather than to Mr Crouch on behalf of the Respondents. Nothing of any substance turns on the December 2020 Email in terms of the capacity of the FWO to form the requisite Reasonable Belief because it, relevantly, did no more than:
(a)reiterate the Employee’s claim that he had not received payment on termination in lieu of notice or for accrued annual leave on termination; and
(b)refer to the entitlement to be paid accrued annual leave and provide an electronic link with respect to payment in lieu of notice: Spencer Affidavit at [9] and Annexure DS-2,
in circumstances where Mr Crouch in his 11 January 2021 telephone conversation with FWI Spencer would assert that the Employee had been paid his entitlements in full.
FWI Spencer was not cross-examined on his notes of the 11 January 2021 conversation: Spencer Affidavit, Annexure DS-3 which indicate that:
Phone Call to ER Darrell Crouch 0412 343 000
Advised I was calling regarding EE
Advised that my colleagues had previously spoken with him regarding EE
Advised that l was a Fair Work Officer assisting an inspector with investigating the issue Asked if EE would have some to discuss the matter
ER said he could spare a bit of time but was busy
Advised that as previously raised the EE was claiming he was not paid the correct notice and annual leave
Advised that the EE had provided payslip notice showing the notice he was paid did not appear correct
ER said he had checked with his accountant twice and he was paid correctly
Advised that on the information I had, this did not appear to be the case
Asked if the ER could explain how EE was paid correctly from his perspective
ER said on leaving the EE had raised a number of miscellaneous claims that turned out not to be true
ER said the EE had caused him trouble which still affected the business
Advised that the next step may be compliance action, and the ER would need to show that he had paid the EE correctly. ER said he not give a f*** and I could take him to the highest court in the land if I wished
ER said he got angry when he though of the EE
ER terminated the call.
Having spoken to Mr Crouch, FWI Casey formed the belief set out in the Statement of Agreed Facts at [13] that:
(a)the First Respondent employed the Employee on a full time basis from on or around 29 August 2016 until on or around 4 February 2019;
(b)the Real Estate Industry Award 2010 (the Award) covered and applied to the Employee's employment;
(c)the Employee's employment was terminated by the First Respondent on or around 4 February 2019;
(d)the First Respondent did not provide the Employee with notice prior to the termination of his employment;
(e)in accordance with the Award, the First Respondent had 7 days after the date of termination in which to pay the Employee, inter alia, all amounts due to the Employee under the National Employment Standards, including payment in lieu of the minimum period of notice of termination; and
(f)the First Respondent failed to pay the Employee his full entitlement to payment in lieu of the minimum period of notice of termination, within 7 days after the termination of the Employee's employment.
and based thereon formed a belief that DC & Associates had contravened s 117 of the FW Act, that being a term of the National Employment Standards (“NES”).
Aside from the alleged failure to make payment in lieu of the minimum period of termination within seven days after termination of the Employee’s employment and the consequent belief that DC & Associates had contravened s 117 of the FW Act the other matters in respect of which FWI Casey formed a belief do not appear to be controversial.
In relation to the alleged failure to make payment in lieu of the minimum period of termination within seven days after termination of the Employee’s employment the evidence indicates that:
(a)the FWO had received a request for assistance from the Employee alleging the failure to make payment in lieu of the minimum period of termination within seven days after termination of the Employee’s employment;
(b)the FWO had received a copy of the Employee’s payslip showing that he had not been paid correctly;
(c)Mr Crouch had said that he had checked the matter with his accountant twice and that the Employee had been correctly paid;
(d)the FWO had asked Mr Crouch if he could explain how it was, from his perspective, that the Employee had been correctly paid; and
(e)it is not evident that Mr Crouch provided any such explanation.
By reason of s 716(1) of the FW Act an FWI must hold a reasonable belief that an employer has contravened one of the provisions, terms or directions set out therein, and relevantly for present purposes, a provision of the NES: FW Act, s 716(1).
This Court has recently dealt with what constitutes a reasonable belief for the purposes of s 716(1) of the FW Act: see Fair Work Ombudsman v Gothic Downs Pty Ltd [2022] FedCFamC2G 21 (“Gothic Downs”) at [20]-[22] per Judge Riley; Fair Work Ombudsman v ANSA Finance Pty Ltd [2022] FedCFamC2G 833 (“ANSA Finance”) at [129] per Judge Forbes; Fair Work Ombudsman v Pacific Security Services [2021] FedCFamC2G 111 at [52]-[54] per Judge Blake, each referring to the judgment of the High Court of Australia in George v Rockett [1990] HCA 26; (1990) 170 CLR 104; (1990) 48 A Crim R 246; (1990) 64 ALJR 384; (1990) 93 ALR 483.
In ANSA Finance at [129] per Judge Forbes the Court observed that:
In determining whether or not there was a reasonable belief, is not necessary for the Court to be satisfied on the balance of probabilities that the underlying contraventions of fair work instruments have in fact occurred. The proper test is whether there was a rational basis for the Inspector’s belief based on the information available to the Inspector at the time the reasonable belief was formed.
In Gothic Downs at [21]-[22] per Judge Riley the Court observed that:
Gothic noted in its post-hearing submissions that Mr Roberts conceded in cross-examination that he did not himself calculate the shortfall in respect of Ms Kaur. Instead, Gothic argued, Mr Roberts had only relied on what Ms Kaur had said. As such, Gothic argued, Mr Roberts could not have formed a reasonable belief that Gothic had contravened a workplace law.
That submission is to misunderstand what is required for a reasonable belief. It is somewhat more than a suspicion, and it must have a rational basis, but it does not require proof on a balance of probabilities. Also, to assess whether a person had a reasonable belief requires the court to look back at the information that the relevant person had at the time that the allegedly reasonable belief was formed. That assessment is not based on any additional information that might be known at the time of the court’s assessment.
The Respondents fell prey at the time of these events to a perception that it was necessary for an FWI to actually form a reasonable belief on the basis of proof, hence their complaint that they had been found “guilty” on an insufficient evidentiary basis.
In the Court’s view the following facts:
(a)the request for assistance from the Employee to the FWO to assist in remedying the alleged underpayment;
(b)the existence of a payslip which appeared to show that the amount paid to the Employee on termination did not appear to be correct; and
(c)the apparent failure by Mr Crouch to provide an explanation as to how they considered the Employee to have been paid correctly,
was a sufficient and reasonable basis for FWI Casey to have formed the Reasonable Belief.
The fact that some of the information upon which the Reasonable Belief was based was obtained by telephone is not a basis which precluded the formation of the Reasonable Belief. The formation of a reasonable belief does not necessarily require that a possible contravener be given the opportunity to comment upon any alleged contravention, but in any event in this case it is plain from the evidence that Mr Crouch, contrary to his assertion in the First Crouch Affidavit at [41], was asked not merely to comment upon the alleged contravention, but also given the opportunity to explain how it was that the Respondents said the Employee had been paid correctly.
For the above reasons the Court has concluded that the Reasonable Belief was properly formed by FWI Casey.
The Respondents also asserted that they had the Mistaken Belief which was a belief that by disregarding the Compliance Notice legal action would be commenced to have an independent arbiter determine the accuracy of the Reasonable Belief, and that the Respondents disregarded the Compliance Notice based on the Mistaken Belief because they considered the Compliance Notice to be “unreasonable, inflammatory and unprofessional”: Respondents’ Submissions at [25].
Given the allegation made it is appropriate to set out fully the terms of the Compliance Notice which were: Casey Affidavit, Annexure LCC-2, as follows:
I, Louise Casey, being a duly appointed Fair Work Inspector, reasonably believe that DARRELL CROUCH & ASSOCIATES PTY LTD (Employer) trading as DARRELL CROUCH AND ASSOCIATES PTY LTD has contravened a provision of the National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (FW Act), as described below. This Compliance Notice requires you to take steps to remedy the contraventions described below.
Rights and obligations under this Compliance Notice
1.Failure to comply with this Compliance Notice may contravene section 716(5) of the FW Act and render you liable for a civil penalty (unless you have a reasonable excuse).
2.You may be liable to a civil remedy if you give false or misleading information or produce false or misleading documents. It is also a serious offence under the Criminal Code (Cth).
3.If you do not comply with this Compliance Notice, the Fair Work Ombudsman may, without further notice, commence legal action against you and/or individuals involved in your failure to comply with this Compliance Notice to recover any outstanding monies which this Compliance Notice requires you to pay and to seek civil penalties.
4.Complying with the Compliance Notice is not an admission that you contravened, or have been found to have contravened, the FW Act.
5.You may apply to the Federal Court, Federal Circuit Court or eligible State or Territory Court for a review of this Compliance Notice on either or both of the following grounds:
(a)you did not commit the contravention set out in this Compliance Notice;
(b)this Compliance Notice does not comply with sections 716(2) or 716(3) of the FW Act.
Details of the contravention
6.The Employer, between 5 February 2019 and 11 February 2019 (Period), contravened the clause of the Fair Work Act set out in the table below.
No
Clause
Details of contravention
(a)
Section 117 of the FW Act
Payment in Lieu of Notice contravention
Failing to pay Mahesh Pithadiya payment in lieu of notice of at least the amount the Employer would have been liable to pay to him at the full rate of pay for the hours that he would have worked had the employment continued until the end of the minimum period of notice
(Payment in Lieu of Notice entitlement).
Required action under this Compliance Notice
7.In accordance with section 716(2) of the FW Act, I require you by 19 February 2021 to:
Step 1 – calculate and rectify underpayments
(a)In respect of the contraventions referred to in row (a) of the table above and Mahesh Pithadiya's employment:
1.Identify the minimum period of notice (notice) the Employer was required to give to Mahesh Pithadiya;
2.Calculate the full amount owed to Mahesh Pithadiya for payment in lieu of notice;
3.Make a payment to Mahesh Pithadiya in respect of the payment in lieu of notice; and
4.make a record of the information and amounts referred to in (1)-(2) and the amount of the payment referred to in (3) immediately above (Underpayment Rectification Information).
Step 2 – Superannuation
(b)calculate additional superannuation contributions required by clause 16.2 of the Real Estate Industry Award 2010 in respect of the amounts required to be paid to Mahesh Pithadiya as a result of Step 1; and
(c)pay such additional superannuation contributions to Mahesh Pithadiya's chosen Superannuation Fund.
Reasonable evidence of steps taken to comply with this Compliance Notice
8.In accordance with section 716(2) of the FW Act, I require you to produce the following reasonable evidence of your compliance with the actions specified in paragraph 7 above:
(a) a schedule that sets out:
(i)in relation to Mahesh Pithadiya and in respect of the contravention outlined above, the Underpayment Rectification Information;
(ii)in relation to Mahesh Pithadiya, the additional superannuation contributions calculated for the employee and paid to his Superannuation Fund in accordance with Step 2; and
(b)proof that full payment has been made to Mahesh Pithadiya as required to be made by Step 1 and Step 2, such as a bank transfer showing the transfer of funds to Mahesh Pithadiya and his Superannuation Fund, or a copy of the employee's payroll records showing the payment(s).
9.The evidence referred to above must be provided to the Fair Work Ombudsman by 26 February 2021 by email to [Mr Spencer’s email omitted] or by post to PO Box 9887 BRISBANE QLD 4001.
10.You may be liable to a civil penalty or other civil remedy under the FW Act if you give false or misleading information or produce false or misleading documents in response to this Compliance Notice. You may also be liable for a criminal offence under the Criminal Code (Cth) if you do so.
The Compliance Notice was sent to the Respondents with a three page covering letter: Casey Affidavit, Annexure LCC-2 (“CN Covering Letter”), which indicated as follows:
(a)that the FWO had conducted an investigation, as a result of which FWI Casey reasonably believed that DC & Associates had contravened a provision of the FW Act as set out in the Compliance Notice;
(b)that the investigation had concluded that the Employee, having been employed for more than two years by DC & Associates and being over 45 years of age, was entitled to 3 weeks’ notice upon termination of his employment, but a payslip provided to the FWO showed that he had been paid one week in lieu of notice upon his termination from employment with DC & Associates;
(c)that the underpayment arising from the contravention had not been rectified, and that it had been determined that the appropriate enforcement measure was to issue the Compliance Notice;
(d)that the Compliance Notice provided a further opportunity to rectify the contravention and set out actions required to be taken by DC & Associates, asking DC & Associates to “[p]lease consider the actions specified in the Notice carefully”;
(e)said that complying with the Compliance Notice was not an admission of a contravention of the FW Act;
(f)contains electronic links to the section of the FW Act relevant to the contravention, and a link to the FWO’s website regarding notice termination of employment, in order to “assist” DC & Associates “to undertake the calculations and rectification required by the Compliance Notice”;
(g)pointed out that:
(i)a failure to comply with the Compliance Notice may contravene s 716(5) of the FW Act, and may result in the FWO “without further notice” commencing legal action against DC & Associates for failure to comply with the Compliance Notice, and that a court may impose monetary penalties of up to $6,660 for an individual and $33,300 for a corporation, for each failure to comply with the Compliance Notice; and
(ii)alternatively, that DC & Associates may apply to a court for a review of the Compliance Notice on the basis that DC & Associates had not committed the contravention set out in the Compliance Notice, or that the Compliance Notice did not comply with ss 716(2) and (3) of the FW Act.
The Compliance Notice and the CN Covering Letter are in plain English and expressed in a manner enabling the content to be easily understood. On a plain reading of them there is nothing which:
(a)indicates that by disregarding the Compliance Notice legal action would be commenced to have an independent arbiter determine the accuracy of the Reasonable Belief; or
(b)justifies the Respondents’ submission that the Compliance Notice was “unreasonable, inflammatory and unprofessional”.
In short, there is nothing in the Compliance Notice and the CN Covering Letter or the conduct of the officers of the FWO which could have induced the Mistaken Belief. Rather, the circumstances in which the Respondents failed to comply with the Compliance Notice were of their own making. As set out at [37] above, Mr Crouch did not engage with the opportunity to explain how it was that the Respondents said that the Employee had been correctly paid. When the Compliance Notice was issued the response on 11 February 2021 (three weeks after the issuance of the Compliance Notice) (“February 2021 Response”) from Mr Crouch on behalf of the Respondents: Spencer Affidavit, Annexure DS-8, is instructive:
Dear Dan,
I note in the documents received to date that your office conducted a full investigation into the complaint made against us by an incompetent ex-employee, Pithadiya.
Your office states that as a result of your investigation you believe that Darrell Crouch and Associates Pty Ltd have contravened a provision of an Act.
Your so called investigation is a load of bullshit! (All one sided)
We received a couple of phone called from an unknown source with no ID shown on my mobile phone asking some questions about an employee who has not been with the Company since early 2019.
If that is your investigation, you are all fools!
Even the paperwork your office has sent to us in very amateurish and full of threats.
That being said, we are not able to comply with any requests from the Fair Works Ombudsman.
Mahesh Pithyadiya has cost this company tens of thousands of dollars and lost Clients because of his gross incompetence and we have intended and do intend to issue a civil legal claim against him but do not have his current employment details or his address.
Can you please send us his current address and details for our records?
Kind Regards,
Darrell Crouch
Principal/Managing Director
Darrell Crouch & Associates Pty Ltd
It is pertinent to observe that the February 2021 Response says nothing about an independent arbiter determining the accuracy of the Reasonable Belief, and whilst it describes the FWO’s investigation as “bullshit”, the FWO’s investigators as “fools”, and the FWO’s “paperwork” as “very amateurish and full of threats” that is not an accurate description of the Compliance Notice which, as the Court has observed above, is in plain English and expressed in a manner enabling the content to be easily understood, or of the conduct of the investigation or the investigators. Further, the Compliance Notice clearly sets out the possible consequences of non-compliance, namely the commencement of proceedings for failure to comply with the Compliance Notice, as well as the alternative course of action available to DC & Associates to apply to a Court for a review of the Compliance Notice on the bases that the contravention was not committed or that the Compliance Notice did not comply with s 716(2) or (3) of the FW Act. The Respondents then indicated, conclusively, that they were “not able to comply with any requests from the … [FWO]”.
It is evident that the Respondents paid little heed to the Compliance Notice: Mr Crouch only “glanced at it”, and regarded it (and the ongoing contact from the FWO) as a “mere nuisance”: First Crouch Affidavit at [53] and [55]. In cross-examination Mr Crouch conceded that he merely “skimmed through” the Compliance Notice: Transcript p 22, and that his “annoyance” at the FWO “was definitely the main reason for non-compliance”: Transcript p 23, and he “decided not to engage with FWO unless and until they issued proceedings”: First Crouch Affidavit at [55].
It must also be observed that had the Respondents properly read the CN Covering Letter and the Compliance Notice, and utilised the information provided therein to go to s 117(3) of the FW Act, which is a straightforward and easily understood provision, they would have, or ought to have, readily appreciated that the Employee was entitled to 3 weeks payment in lieu notice of termination of employment by reason of his being an employee over the age of 45 with at least two years’ service.
Save for the Error, which was a minor administrative matter, no criticism can be levelled against the FWO or its officers in respect of their conduct in this matter. The circumstances in which the Respondents failed to comply with the Compliance Notice were entirely of the Respondents own making. The Respondents made a conscious decision, from a very early stage in their contact with the FWO, not to cooperate with any investigation, and subsequently not to comply with the Compliance Notice. The Respondents did not alter this position for more than four months, and only then upon issuance of proceedings by the FWO and receipt of advice from the Respondents own solicitors. In the circumstances, there is nothing in the nature and extent and circumstances of the conduct leading to non-compliance with the Compliance Notice which would justify any reduction in the appropriate penalty.
Nature and extent of loss and damage sustained
The FWO submitted as follows:
(a)the Employee subject to the Compliance Notice had been denied his entitlement as a result of the contravention of the FW Act, identified in the Compliance Notice, from the time his employment was terminated in February 2019 until DC & Associates rectified its non-compliance with the Compliance Notice in June 2021;
(b)there is also the issue that the conduct of DC & Associates has occasioned a more public loss, in that DC & Associates’ failure to comply with the Compliance Notice, and Mr Crouch’s involvement in that failure, has caused the FWO as the workplace regulator to spend time and public funds, and will cause the Court to spend time and public funds, dealing with proceedings which would not have been required had compliance occurred. The Respondents’ failure left the FWO with no other option than to commence these proceedings at the public’s expense in order to recover the outstanding amount owed to the Employee; and
(c)this is contrary to the objective of a compliance notice. The Courts have recognised that compliance notices provide a mechanism for an efficient and cost effective alternative to commencing litigation for each underlying contravention: Fair Work Ombudsman v Nobrace Centre Pty Ltd & Anor (No.2) [2019] FCCA 2144 (“Nobrace”) at [19] per Judge Blake; Fair Work Ombudsman v ASGBRIS Pty Ltd & Anor [2020] FCCA 553 at [36] per Judge Tonkin, however, that is only the case where compliance notices are complied with.
The Respondents’ submissions did not expressly deal with this factor in either their written or oral submissions.
Consideration – nature and extent of loss and damage sustained
The underpayment in this case was $2,692.31 (less tax), plus associated superannuation contributions of $256.78, a not insignificant loss for an individual employee who was employed on an annual salary of $70,000: Casey Affidavit, Annexure LCC-7. The loss to the Employee is not a continuing one as DC & Associates rectified the underpayment to the Employee in early June 2021: Casey Affidavit, Annexure LCC-7.
A compliance notice is intended to be a mechanism which avoids the institution of proceedings for contraventions of the FW Act: Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No 2) [2020] FCCA 2583 (“Soma Kitchen”) at [39] per Judge Kendall; Nobrace at [19] per Judge Blake. The failure to comply with the Compliance Notice has resulted in loss, it being necessary for the Commonwealth (and thus, the ordinary taxpayer) to fund the proceedings instituted by the FWO and the time and resources expended by this Court in hearing and determining these proceedings. Because of the matters put by the Respondents, and the manner in which they were put, in these proceedings the time and resources expended by this Court in having to determine these proceedings has been far greater than would ordinarily be the case. Compliance with the Compliance Notice by DC & Associates would have obviated these losses.
In short, the Respondents have contributed significantly to the losses suffered as a consequence of their contravening conduct.
Whether or not the contravention was deliberate
The FWO submitted as follows:
(a)the Respondents’ behaviour demonstrates a deliberate disregard for DC & Associates’ obligations under the FW Act and the authority of the FWO as a regulator of Commonwealth workplace laws;
(b)the Compliance Notice was posted to DC & Associates’ registered office address. A copy was also emailed directly to Mr Crouch’s email address. The Compliance Notice was discussed, or attempted to be discussed, with Mr Crouch by phone calls, emails and an SMS message sent by FWI Casey and FWI Spencer. The Court may therefore infer that the Respondents’ contraventions occurred with Mr Crouch, who was the controlling mind of DC & Associates, having full knowledge of the Compliance Notice and what it required. There is also a lack of regard shown for the FWO’s efforts to engage with Mr Crouch prior to issuing the Compliance Notice and prior to this proceeding commencing. This includes the following:
(i)two telephone calls made by Mr Arnold on 2 and 8 December 2020, prior to the issuing of the Compliance Notice, which gave Mr Crouch an opportunity to respond to the allegation that the Employee had not been paid his notice in lieu of termination: Statement of Agreed Facts at [9]; Spencer Affidavit at [7];
(ii)a telephone call made by FWI Spencer on 11 January 2021, prior to the issuing of the Compliance Notice, which gave a further opportunity for Mr Crouch to provide his position, and put Mr Crouch on notice that the FWO was likely to take steps to enforce the Employee’s entitlement to be paid notice in lieu of termination: Statement of Agreed Facts at [12]; Spencer Affidavit at [10];
(iii)two telephone calls on 2 and 10 February 2021, and emails on 10 and 11 February 2021, by FWI Spencer after the issuing of the Compliance Notice: Statement of Agreed Facts at [17], Spencer Affidavit at [12]-[14] and [16]; and
(iv)a telephone call, email and SMS message sent by FWI Casey on 17 February 2021, after the issuing of the Compliance Notice: Statement of Agreed Facts at [17]; Casey Affidavit at [9];
(c)there is no suggestion in any of the evidence that Mr Crouch ever took any steps to comply with the Compliance Notice until this proceeding was commenced by the FWO. That background and evidence demonstrates that Mr Crouch, both on his own behalf and on behalf of DC & Associates, deliberately chose not to comply with the Compliance Notice. Because DC & Associates acted through the agency of Mr Crouch, the conclusion should be drawn that Mr Crouch’s conduct was deliberate;
(d)if the Respondents are (belatedly) alleging that the FWO did not afford the Respondents procedural fairness, the FWO submits that this allegation is not necessary to deal with in light of the Respondents’ admission in the Statement of Agreed Facts that DC & Associates contravened s 716(5) of the FW Act and Mr Crouch was involved, within the meaning of s 550(2) of the FW Act, in that contravention;
(e)even if that were not the case, the Respondents were afforded procedural fairness. The FWO refers to the Statement of Agreed Facts at [12]. In that paragraph, it is an agreed fact that FWI Spencer telephoned Mr Crouch on 11 January 2021, prior to the issuing of the Compliance Notice, and gave him the opportunity to set out the Respondents’ position in respect of the Employee’s claim and informed Mr Crouch that the next step may be compliance action; and
(f)further, the Respondents had the opportunity to challenge the Compliance Notice under s 717 of the FW Act if the Respondents considered there was a ground upon which to do so. The Respondents did not avail themselves of this opportunity. Rather, the Respondents have agreed that FWI Casey issued the Compliance Notice pursuant to s 716 of the FW Act and DC & Associates failed to take the specified action in the Compliance Notice and produce reasonable evidence by the required dates. Mr Crouch additionally gives evidence that he received the Compliance Notice and took a deliberate decision that DC & Associates would not comply with it unless and until the FWO commenced court proceedings to enforce it: First Crouch Affidavit at [55]. This proceeding is the direct and inevitable consequence of that decision.
Once again the Respondents did not expressly address this factor, but they did not dispute that the Respondents conduct was deliberate, but sought to justify it by reference to what they argued was a lack of basis for the Reasonable Belief and their own Mistaken Belief.
Consideration – whether or not the contravention was deliberate
For the reasons set out at [19]-[47] above the Respondents’ attempted justifications of their conduct in not complying with the Compliance Notice are not made out. As the Court has already found at [47] above the Respondents made a conscious decision, from a very early stage in their contact with the FWO, not to cooperate with any investigation, and subsequently not to comply with the Compliance Notice, and did not alter this position for more than four months, and only then, upon issuance of proceedings by the FWO and receipt of advice from the Respondents own solicitors.
The Respondents thus had numerous opportunities to comply with the Compliance Notice, but failed to do so, resulting in the consequence that the current proceedings were initiated by the FWO. Even then compliance took a further four weeks and did not take place until the Respondents had taken advice from their solicitors.
In Fair Work Ombudsman v Viper Industries Pty Ltd & Anor [2015] FCCA 492 at [42] per Judge Emmett it was observed as follows:
… intentional failure to comply with a mandatory notice issued by the workplace regulator is “conduct ... [which] undermines the utility and effectiveness of a fundamental object” [of] the FW Act. The failure to comply undermines and frustrates the powers conferred on Fair Work Inspectors, which are conferred for the purposes of providing an effective means of enforcing compliance with lawful minimum entitlements. There is a significant cost to the public by reason of the need to bring this matter before the court to enforce compliance.
In the circumstances there can be no doubt that the Respondents’ conduct in failing to comply with the Compliance Notice was deliberate.
Contrition, corrective action and cooperation with the regulator
The FWO submitted as follows:
(a)the Respondents admit the contraventions, and consent to the making of declarations and orders (including orders that the Respondents pay penalties). The early and full admissions made by the Respondents have obviated the need for a liability hearing. The Respondents’ conduct in this regard meets the threshold for a discount on penalty in recognition of their cooperation: 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 at [75]-[76] per Stone and Buchanan JJ;
(b)in relation to corrective action, DC & Associates rectified its non-compliance with the Compliance Notice in June 2021, following the commencement of these proceedings: Casey Affidavit at [11]-[14];
(c)Mr Crouch has “apologised for the inconvenience caused” and “the confusion” in a letter to the FWO dated 14 June 2021 (“June 2021 Letter”): Casey Affidavit, Annexure LCC-9, but has not apologised for its failure to comply with the Compliance Notice, nor have the Respondents apologised to the Employee for failing to pay him his minimum entitlements. Mr Crouch has stated that he is “not inclined to make any form of apology” to the Employee: First Crouch Affidavit at [65], and in the language used demonstrates a continued contempt for the Employee and his rights to his minimum entitlements;
(d)additionally, Mr Crouch has admitted that he did not cooperate with FWI Casey and FWI Spencer in relation to ensuring compliance with the Compliance Notice: Statement of Agreed Facts at [21]. It is notable that the Respondents have filed this evidence in this proceeding, despite having admitted their contravening conduct. The Court should assume that the Respondents consider their own subjective opinion of the Employee as being relevant to the extent to which DC & Associates is entitled to disregard an employee’s statutory entitlements;
(e)further, Mr Crouch seeks to diminish his role in causing the non-compliance with the Compliance Notice by describing his instructions to Mr Lee Taylor, the bookkeeper, regarding the entitlements paid to the Employee, as a “miscommunication”: First Crouch Affidavit at [78]-[79]. Mr Crouch claims that it has been his practice “over the past 40 years to not advise other staff members how or why an employee is no longer with the company’: First Crouch Affidavit at [82]. This apparently also includes his bookkeeper, who is required to have that information in order to be able to pay former employees their correct entitlements at termination or the ending of employment. Mr Crouch’s evidence in this regard suggests, at best, a cavalier attitude towards taking the appropriate steps to ensure that DC & Associates complies with its minimum obligations to its employees; and
(f)the FWO submits that a discount on penalty of 15% would be appropriate.
The Respondents submitted as follows:
(a)on the matter of “contrition” the FWO’s submissions identify the Respondents’ apology and the FWO suggests in its submissions that the extent of the apology was not about failing to comply with the Compliance Notice itself. This is a misinterpretation on the part of the FWO;
(b)the Respondents’ inaction and failure to respond to the Compliance Notice and comply with its requirements is something the Respondents regret, about which they are contrite and for which they have apologised. This is the intent of the words “[w]e apologise for the confusion” recorded in the June 2021 Letter: Spencer Affidavit, Annexure LCC-9;
(c)the Respondents have and will put in place procedures to ensure the failings on their part in relation to the Compliance Notice will not occur again; and
(d)the Respondents have incurred significant legal fees, have been informed about the meaning and consequence of compliance notices, do not wish to receive another and intend to abide the law.
Consideration – contrition, corrective action and cooperation with the regulator
Issuing compliance notices forms a part of the legislative scheme under the FW Act for the purpose of promoting compliance with relevant provisions of the FW Act. A compliance notice informs employers of the obligations and entitlements owed to employees, and gives them the opportunity to rectify any alleged non-compliance with a Modern Award or the NES, or to challenge the basis for the FWI’s belief. The compliance notice mechanism is an essential part of the tool kit of the FWO (acting through FWIs) in endeavouring to resolve contraventions of the FW Act cost effectively, expeditiously and without the need for legal proceedings: FW Act, s 682(1). The purpose of s 716 has been described as “an alternative to litigation” in the following passage from Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272 at [34]-[35] per Judge Kendall:
34.As explained in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), the purpose of s 716 of the Act is to provide an alternative to litigation. Section 716 is an informal mechanism whereby the FWO can identify potential contraventions of the Act and seek rectification without an employer having to admit liability.
35.One of the objects of the Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms. Section 716 encapsulates this objective by allowing employees to make a request for assistance which the FWO can then resolve through the use of s 716.
In the above circumstance, an appropriate penalty must acknowledge the legislative intention underlying the power of FWIs to issue compliance notices, and in particular that the issuance of a compliance notice is primarily directed to providing an alleged contravenor with an opportunity to remedy the alleged contravention so as to obviate the need for litigation in relation to the alleged contravention, or, which did not occur here, for the alleged contravenor to challenge the compliance notice, a course which, if successful, obviates the need for determination of the alleged contravention.
Consideration of these issues in this case falls into three parts:
(a)the first part, up until the time of compliance with the Compliance Notice, involving a complete absence of cooperation with the FWO;
(b)the second part involving:
(i)cooperation with the FWO by reason of an admission of liability and a preparedness to enter into the Statement of Agreed Facts;
(ii)a degree of contrition by reason of the Respondents’ apology; and
(iii)an indication that corrective action would be taken to prevent future occurrences; and
(c)the third part, relates to the Respondents’ submissions in these proceedings concerning the FWO’s conduct and any penalty to be imposed upon the Respondents.
In relation to the circumstances of the first part it is unnecessary to say more than has already been said at [19]-[47] and [55]-[58] above, save to find that that conduct entailed no cooperation with the FWO, no exhibition of contrition and no preparedness to undertake corrective action.
In relation to the second part the Respondents are entitled to credit for the fact that they have:
(a)cooperated with the FWO in so far as they have:
(i)admitted liability; and
(ii)been prepared to enter into the Statement of Agreed Facts; and
(b)taken corrective action by remedying the under-payment of the Employee.
The apology appears in the June 2021 Letter. The Respondents apologise, first, “for the inconvenience caused” and, second, “for the confusion”. They do not apologise, per se, for the failure to comply with the Compliance Notice. Significantly, there is no mention in the June 2021 Letter of the Error, the alleged lack of a basis for the Reasonable Belief on the part of the FWI Casey, or the Mistaken Belief on the part of the Respondents. The June 2021 letter does assert that there was correspondence “received” from the FWO by “my office … of which there was delays in bringing the issue to my attention earlier”. Whatever correspondence from the FWO that statement refers to, it cannot be the Compliance Notice, for:
(a)in the February 2021 Response Mr Crouch describes the FWO’s investigation as “bullshit”, the FWO’s officers as “fools”, and the FWO’s “paperwork” as “very amateurish and full of threats”;
(b)under cross-examination Mr Crouch effectively conceded that the “paperwork” was a reference to the Compliance Notice: Transcript pp 21-22; and
(c)the February 2021 Response was written on 11 February 2021, just three weeks after the issuance of the Compliance Notice, and eight days before compliance was required,
and it therefore follows that there was no delay in the Compliance Notice being drawn to Mr Crouch’s attention, or at the very least, not such a delay as would have prevented compliance by 19 February 2021 as required by the Compliance Notice. The Court is not satisfied that the apology is, in its terms, an apology for failure to comply with the Compliance Notice, but if it is such an apology it is both equivocal and superficial.
In relation to the third part, it is relevant to note that the Respondents submitted that:
(a)they would have had vastly greater respect for the FWO’s role as a workplace regulator had the FWO not made the Error;
(b)like-minded employers are probably the same as the Respondents and reasonably expect that when an agency such as the FWO contacts them they are entitled to require the FWO to properly identify itself in writing and engage in due processes and natural justice principles before concluding an employer is guilty of wrongdoing; and
(c)it is open to the Court to be critical of the FWO in its conduct of the matter.
It is pertinent to observe that the above submissions by the Respondents were made in writing, by their solicitors (and therefore presumably on instructions), and obviously following consideration of the law and facts in this matter. For the reasons set out at [26] above, the Court has already concluded that the Error was a minor administrative error. It also did not preclude DC & Associates from complying with the Compliance Notice sent subsequent to the Error, and received by the Respondents at least eight days prior to the time specified for compliance.
The suggestion that “like-minded employers” might act in the same manner or have the same expectations as the Respondents is self-fulfilling and hardly helpful. It proceeds from the misconception that a compliance notice is a finding of guilt, and ignores the fact that the Respondents were not denied procedural fairness, but rather consciously decided to ignore the Compliance Notice: see [47] above. It also ignores the fact that a prudent employer acting reasonably would have either complied with the compliance notice, or sought to review or challenge it on the bases provided under s 716(2) and (3) of the FW Act.
The Respondents’ ongoing unwarranted criticisms of the FWO diminish any suggestion by the Respondents that they are contrite with respect to their conduct in this matter, and further, those criticisms do not necessarily suggest that the Respondents would be cooperative in any future engagements with the FWO.
Any suggestion that the Respondents are contrite concerning their conduct in this matter is at odds with the submission that the appropriate penalty in this case might be no penalty at all, or a nominal penalty of $1. Whilst the quantum of an appropriate penalty is further discussed below: see [96]-[99] below, it suffices for present purposes to observe that the Respondents’ penalty quantum submission demonstrates a failure to appreciate the gravity of the Respondents’ conduct in the context of the quantum of the legislatively prescribed penalties and the recent law with respect thereto.
In the above circumstances, the Court has concluded that it is appropriate to apply a discount on any penalty to be paid by the Respondents, but only for those aspects of the conduct in the second part conduct which relate to the admission of liability and a preparedness to enter into the Statement of Agreed Facts.
Size of business
The size of the business does not excuse a business from any required compliance under the FW Act: Kelly at [28] per Tracey J, but properly evidenced, and for proper reasons, an incapacity to pay may afford some relief by way of mitigation of penalty: Olsen v Sterling Crown Pty Ltd [2008] FMCA 1392; (2008) 177 IR 337 at [65]-[76] per Lucev FM, and the various Federal Court authorities there cited.
In this case, the evidence indicates that DC & Associates is a small to medium enterprise employing 17-19 employees, but the evidence says nothing about the financial capacity of the Respondents: see First Crouch Affidavit at [9] and [98]-[101]; the June 2021 Letter, and in the absence of such evidence from the Respondents, it is not possible to draw any conclusions with respect to whether or not there is any incapacity to pay on the their part. In those circumstances, there is no basis to consider mitigating any penalty on the basis of the size of the business or its capacity to pay.
Involvement of senior management in the breach
The affidavits of FWI Casey and then FWI Spencer shows that:
(a)Mr Crouch is one of 2 directors of DC & Associates: Casey Affidavit at [16];
(b)Mr Crouch is the sole secretary of DC & Associates: Casey Affidavit, Annexure LCC-10;
(c)Mr Crouch is the ‘Principal/Managing Director’ of DC & Associates’ real estate and business broking agency: Spencer Affidavit, Annexure DS-8;
(d)the Compliance Notice was emailed to Mr Crouch at his email address: Spencer Affidavit at [11];
(e)FWI Spencer attempted to communicate with Mr Crouch after the issuing of the Compliance Notice, but before it fell due, by telephoning him on 2 and 10 February 2021: Spencer Affidavit at [12]-[13];
(f)FWI Spencer corresponded with Mr Crouch after the issuing of the Compliance Notice, but before it fell due, by email on 10 and 11 February 2021: Spencer Affidavit at [14] and [16]; and
(g)FWI Casey attempted to communicate with Mr Crouch after issuing the Compliance Notice, but before it fell due, by telephoning Mr Crouch, emailing Mr Crouch and sending an SMS message to Mr Crouch on 17 February 2021: Casey Affidavit at [9].
The affidavit of Mr Crouch shows the following:
(a)Mr Crouch was responsible for ensuring that DC & Associates’ employees were paid their minimum entitlements: First Crouch Affidavit [19] and [78]-[81]; and
(b)Mr Crouch was aware of the Compliance Notice and made a deliberate decision not to comply with it: First Crouch Affidavit at [55].
Through the Statement of Agreed Facts Mr Crouch has admitted that:
(a)Mr Crouch was aware of the Compliance Notice since on or about 22 January 2021: Statement of Agreed Facts at [19];
(b)Mr Crouch was responsible for ensuring that DC & Associates complied with the Compliance Notice: Statement of Agreed Facts at [20]; and
(c)Mr Crouch did not cooperate with FWI Casey and FWI Spencer in relation to ensuring compliance with the Compliance Notice: Statement of Agreed Facts at [21].
Having regard to the above evidence, Mr Crouch:
(a)was the operative and controlling mind of DC & Associates;
(b)was responsible for the overall operation, management and control of DC & Associates;
(c)was a person responsible for ensuring that DC & Associates complied with its obligations under the FW Act;
(d)had overall responsibility for the payroll operation and function and, therefore, was the person who would be responsible for taking the specified action in the Compliance Notice;
(e)had the Compliance Notice drawn to his attention on numerous occasions; and
(f)took no steps to make DC & Associates either comply with the Compliance Notice, or to seek a review of the Compliance Notice pursuant to s 717 of the FW Act, prior to the commencement of this proceeding by the FWO.
Having regard to the evidence set out immediately above at [75]-[78], and otherwise in these Reasons for Judgment, it is plain that the contravention arising from the failure to comply with the Compliance Notice was one in which Mr Crouch as the most senior manager of DC & Associates was inextricably involved. In the circumstances, this factor is not one which warrants any mitigation of the penalty to be imposed.
Whether prior contraventions
There was no evidence that either of the Respondents had a record of prior contraventions. If they did have a record of prior contraventions the FWO, as a Commonwealth model litigant, would no doubt have informed the Court of that fact as it is relevant to any penalty to be imposed.
There was some evidence that there had been prior contact between the FWO and Mr Crouch concerning employee complaints in 2011 and 2013: Casey Affidavit, Annexure LCC13; Transcript pp 10-11, but apart from establishing that the Respondents ought, in a general sense, have been aware of the functions of the FWO, that evidence was not of any particular assistance.
In the circumstances, the Court will treat the Respondents as first-time contraveners, and assess penalty accordingly.
Deterrence
The FWO submitted as follows:
(a)general deterrence is an important factor in these proceedings. There is a need to send a message to employers generally (as well as those individuals who are ultimately responsible for the actions of an employing entity) and to the real estate services industry in particular, that a failure to comply with a compliance notice will not be tolerated by the FWO, the community or the courts. General deterrence must serve a purpose such that the penalty is not seen by others as just “the cost of doing business”: Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290; (2016) 68 AILR 102-690 at [27] per Flick J;
(b)in order to be useful as a general deterrent, a penalty “should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations”: Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; (2007) 59 AILR 100-669; at [93] per Lander J;
(c)the FWO’s report on the Industry Profile and FWO Interactions on the real estate services industry: Casey Affidavit, Annexure 12, shows that the dispute rate in this industry is moderate, with 204 disputes completed and 8 compliance notices issued to persons in this industry in the 2020-21 financial year. The FWO considers that a dispute is completed when the relevant FWI has taken all action deemed appropriate for that particular matter and has determined that no further action will be taken. Accordingly, general deterrence for employers in the real estate services industry is of importance due to the effect DC & Associates’ failure to comply with the Compliance Notice has had on the ability of the FWO to effectively and efficiently regulate the industry;
(d)the importance of general deterrence in relation to non-compliance with a statutory notice has been recognised by the courts in the past, as non-compliance effectively thwarts the powers given to the FWO as a regulatory authority: Fair Work Ombudsman v Kleen Group Pty Ltd & Anor [2016] FCCA 278 (“Kleen Group”) at [25] per Judge Emmett, and a penalty should be imposed at a sufficient level to emphasise the impact and consequences of failing to comply with a compliance notice;
(e)specific deterrence is directed at ensuring that a contravener is not prepared to embark upon the risk of engaging in the same contravening conduct in the future: Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 (“AJR Nominees (No 2)”) at [50] per Gilmour J. In this regard “it is often relevant to look at the remedial steps that have been taken to ensure that no contravention will occur in the future”: Soma Kitchen at [60] per Judge Kendall;
(f)Mr Crouch is the current director of:
(i)DC & Associates;
(ii)Crouch Group Building Solutions Pty Ltd (ACN 121160183); and
(iii)National Modular Construction Pty Ltd (ACN 126797279);
(g)DC & Associates presently employs about 17 people: First Crouch Affidavit at [9]. Therefore, specific deterrence against DC & Associates is relevant;
(h)there is evidence of Mr Crouch’s current involvement in the employment of employees;
(i)Mr Crouch has demonstrated a lack of knowledge of the obligations DC & Associates owes to its employees and a lack of respect for the FWO’s role as a workplace regulator. This is demonstrated by the following:
(i)in the June 2021 Letter Mr Crouch states that he “was also not aware until that time that an employee over 45 years of age is to be paid extra over somebody less than 45 years of age. (Why?) It is seen by me and others as another cost burden on small business”;
(ii)Mr Crouch failing to advise his bookkeeper that the employment of the Employee, the subject of the Compliance Notice, had been terminated: First Crouch Affidavit at [78]-[82], despite the possible impact of information on the calculation of the Employee’s entitlements; and
(iii)Mr Crouch regarding the “ongoing contacts from FWO, including the Compliance Notice, as a mere nuisance” and deciding to “not engage with FWO unless and until they issued proceedings”: First Crouch Affidavit at [55]; and
(j)Mr Crouch should be left with no doubt that failing to comply with the requirements of the FW Act will not be tolerated by the Court. Accordingly, a penalty should be fixed at a level which specifically deters Mr Crouch from future non-compliance with workplace laws.
The Respondents submitted as follows:
(a)the Respondents do not doubt that they should comply with compliance notices and do not intend to do anything but comply with workplace laws, as they ordinarily do;
(b)they would have had vastly greater respect for the FWO’s role as a workplace regulator had the FWO not made the Error;
(c)like-minded employers are probably the same as the Respondents and reasonably expect, that when an agency such as the FWO contacts them they are entitled to require the FWO to properly identify itself in writing and engage in due processes and natural justice principles before concluding an employer is guilty of wrongdoing; and
(d)it is open to the Court to be critical of the FWO in its conduct of the matter.
Consideration – deterrence
Deterrence is the predominant purpose of civil pecuniary penalties: Agreed Penalties Case at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ.
The penalties imposed by the Court should accurately and appropriately reflect the need for both general and specific deterrence. It must be set at a level such that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons. It must have the necessary “sting or burden” to secure “the specific and general deterrent effects that are the raison d’être of its imposition”: ABCC v CFMEU at [116] per Keane, Nettle and Gordon JJ.
There are two dimensions to deterrence, the first being general deterrence directed at the community as a whole, and the second being specific deterrence directed at the contravener the subject of the particular proceedings: Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354 (“3 Rundle Mall”) at [99] per Judge Brown. Both general and specific deterrence are important aspects of the imposition of civil pecuniary penalties under the FW Act: New Shanghai Charlestown at [90] per Bromwich J.
The failure to comply with a compliance notice effectively undermines the FWO’s power as a regulatory and enforcement authority, thereby reinforcing the need for general deterrence: Kleen Group at [25] per Judge Emmett, and to facilitate the effectiveness of general deterrence an amount of penalty that sends a message that contraventions of this type are serious and not acceptable is required: Fair Work Ombudsman v VS Investment Group Pty Ltd & Anor [2013] FCCA 208 at [54] per Judge Jarrett.
In 3 Rundle Mall at [56] per Judge Brown this Court explained that s 716 of the FW Act ought to be of assistance to an errant employer, and therefore when dealing with persons who have contravened s 716 of the FW Act it is necessary for the Court to “consider a significant penalty as a matter of both general and specific deterrence, given the interest the community has in ensuring that there is compliance with relevant legislation, and protecting the rights of employees to be paid what they are entitled”.
It suffices to observe that any penalty will need to be set at a level which, having regard to the importance and relevance of general deterrence as a consideration and the ongoing stream of applications to this Court concerning failure to comply with compliance notices, acts as a general warning to other employers not to engage in the conduct of contravening compliance notices.
Ensuring that a contravener does not reengage in the same contravening conduct at some future point requires an appropriate measure of specific deterrence: AJR Nominees (No 2) at [50] per Gilmour J.
In circumstances where:
(a)DC & Associates remains in business and continues to employ a number of people;
(b)Mr Crouch remains a director and company secretary, and is the Managing Director, of DC & Associates:
(c)the contravention was deliberate; and
(d)the Respondents’ conduct and contrition (including by way of the apology),
is not such as to allow the Court to conclude that there is not a need for specific deterrence, and the Court refers to and repeats its conclusions at [63]-[72] above.
In the above circumstances a not insignificant measure of specific deterrence is appropriate by way of penalty.
Penalty
The FWO submitted as follows:
(a)pursuant to s 546(1) of the FW Act, the FWO seeks the imposition of pecuniary penalties on the Respondents. The FWO submits that a pecuniary penalty of between $14,152.50 and $16,983 for DC & Associates and a pecuniary penalty of between $2,830.50 and $3,396.60 for Mr Crouch (representing 50% to 60% of the maximum penalties, with a 15% discount for cooperation) should be imposed by the Court; and
(b)having looked at an appropriate penalty for each contravention, the Court should consider the aggregate penalty to ensure that it is an appropriate response to the contravening conduct. An appropriate penalty is one that is not crushing or oppressive, is proportionate to the conduct engaged in, and does not have the effect of exonerating that conduct: Fair Work Ombudsman v First Group of Companies Pty Ltd (Deregistered) & Ors [2018] FCCA 1228 at [77] per Judge Jones and the authorities cited therein.
The Respondents submitted that any penalty should be nominal, minimal, and perhaps $1. That submission was largely premised upon the correctness of the Respondents’ earlier submissions with respect to the Error and the FWO’s conduct in relation to the issuance of the Compliance Notice.
Consideration – penalty
As to quantum of penalty the Respondents submitted that there should be no penalty imposed, or perhaps a nominal penalty of $1. Having regard to the circumstances of this case, the Respondents’ submission is one of the most extraordinary submissions, if not the most extraordinary submission, that the Court as presently constituted has heard as to quantum of penalty in more than 15 years of determining penalty cases under the FW Act and the former Workplace Relations Act 1996 (Cth) (“WR Act”). Almost two decades have passed since the Federal Court suggested, against a background of increased legislated penalties for contraventions in the former WR Act, that the imposition of penalties in industrial law proceedings is no longer to be approached with a light hand: Finance Sector Union v Commonwealth Bank of Australia [2005] FCA 1847; (2005) 147 IR 462; (2005) 224 ALR 467; (2005) 58 AILR 100-440 (“FSU”) at [72] per Merkel J (on appeal the penalty imposed in FSU was reduced, but it was suggested that in future the level of penalties may need to “rise appreciably”: Commonwealth Bank of Australia v Finance Sector Union of Australia [2007] FCAFC 18; (2007) 157 FCR 329; (2007) 161 IR 262; (2007) 59 AILR 100-640, FCR at [192] per Branson J). There may be cases where no penalty, or a nominal penalty, is appropriate, but those cases will be extraordinarily rare. This is not such a case, and the Respondents’ submissions are suggestive of a failure to appreciate the gravity of the Respondents’ conduct in this matter.
The Court need not repeat its conclusions, in particular as to the nature and extent and circumstances of the conduct which led to the contravention: see [19]-[47] above, the deliberateness of the contravention: see [55]-[58] above, contrition and cooperation with the FWO: see [61]-[72] above, and the need for general and specific deterrence: see [85]-[98] above. Those conclusions do however reveal the necessity in this case of imposing a penalty which assists in ensuring future compliance with the law: Agreed Penalties Case at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ; AJR Nominees (No 2) at [50] per Gilmour J, and which has the necessary sting to give effect to the deterrent effects of the penalty provisions of the FW Act: ABCC v CFMEU at [116] per Keane, Nettle and Gordon JJ.
Having particular regard to the need for deterrence, both specific and general, and bearing particularly in mind the Court’s conclusions with respect to contrition and co-operation, this is a case in which a penalty within the range sought by the FWO is appropriate. The Respondents are entitled to some discount by reason of their agreement to enter into the Statement of Agreed Facts, their admission of liability (although even that is somewhat qualified in light of their subsequent submissions) and their status as first-time contraveners. The Court has settled on what it considers to be an appropriate deterrent penalty of 55% of the maximum penalty, with a 10% discount in relation to the factors identified above. The penalty to be imposed is therefore one to be set at 45% of the maximum penalty for each of the Respondents, and will therefore be:
(a)$14,985 for DC & Associates; and
(b)$2,997 for Mr Crouch.
The Court does not consider that the penalties to be imposed are, in their totality, crushing or otherwise inappropriate. There is certainly nothing in the evidence to indicate that that would be the case.
Conclusion and Orders
The Court has concluded that there ought to be declarations and orders essentially in the terms sought by the FWO, and as reflected in the Statement of Agreed Facts at [6], with the appropriate penalties being as set out at [98] above.
I certify that the preceding one hundred (100) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Lucev. Associate:
Dated: 10 February 2023
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