Fair Work Ombudsman v DB Richardson Trading Pty Ltd (No 2)
[2023] FedCFamC2G 203
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v DB Richardson Trading Pty Ltd (No 2) [2023] FedCFamC2G 203
File number(s): MLG 1273 of 2022 Judgment of: JUDGE MANSINI Date of judgment: 15 March 2023 Catchwords: INDUSTRIAL LAW – FAIR WORK – application for pecuniary penalties following default judgment – where first respondent employer failed to comply with compliance notice and second respondent was involved – where default judgment declared contraventions of s.716(5) and s.550 of the Fair Work Act 2009 (Cth) – consideration of relevant factors – penalties determined. Legislation: Fair Work Act 2009 (Cth) ss.539, 545, 546, 547, 550(2), 716
Electrical, Electronic and Communications Award 2010
Electrical, Electronic and Communications Award 2020
Cases cited: Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654.
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13.
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25.
Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8.
CFMMEU v ABCC [2018] FCAFC 97.
Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53.
Markarian v The Queen [2005] HCA 25.
Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076.
Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 61.
Division: Division 2 General Federal Law Number of paragraphs: 56 Date of last submission/s: 7 March 2023 Date of hearing: 9 March 2023 Place: Melbourne Solicitor for the Applicant: Fair Work Ombudsman The Respondents: No appearance ORDERS
MLG 1273 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: DB RICHARDSON TRADING PTY LTD
First Respondent
DESMOND BRIAN RICHARDSON
Second Respondent
order made by:
JUDGE MANSINI
DATE OF ORDER:
15 March 2023
THE COURT ORDERS THAT:
1.Pursuant to s.546(1) of the Fair Work Act 2009 (Cth) (Act):
(a)the First Respondent pay a pecuniary penalty of $13,320 for the contravention of s.716(5) of the Act; and
(b)the Second Respondent pay a pecuniary penalty of $1,998 for his involvement in the First Respondent’s contravention of s.716(5) of the Act.
2.Pursuant to s.546(3)(a) of the Act, the pecuniary penalties ordered against the Respondents set out in Orders 1(a) and 1(b) herein, are to be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days.
3.The Fair Work Ombudsman 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 Mansini
INTRODUCTION
Before the Court is an application for the imposition of penalties for contraventions of the Fair Work Act 2009 (Cth) (Act).
By default judgment of 16 December 2022, the First Respondent was declared to have contravened s.716(5) of the Act by failing to comply with a compliance notice. The Second Respondent was declared to have been involved in the First Respondent’s contravention within the meaning of s.550(2) of the Act (Default Judgment).
These reasons address the remaining question of the appropriate pecuniary penalty(ies) (if any).
Context
The factual context to the matter is outlined in the Default Judgment and not repeated here. The following paragraphs are most pertinent to the question presently before the Court.
The Applicant is the Fair Work Ombudsman (FWO).
The First Respondent, DB Richardson Trading Pty Ltd (ACN 628 997 197), is and was at all relevant times a company that operates an electrical services business trading as “Electrafi” in Ashburton, in the state of Victoria.
The Second Respondent, a Mr Desmond Brian Richardson, is and was at all relevant times the sole director of the First Respondent with responsibility for its overall operation, management, control and ensuring compliance with its legal obligations under the Act.
The compliance notice subject of the contraventions declared in the Default Judgment was issued on 15 September 2021 pursuant to s.716(2) of the Act, following an investigation into the First Respondent in respect of two employees who alleged to have been underpaid various entitlements owed in the course of their employment with the First Respondent (Compliance Notice). The issuing inspector formed a reasonable belief within s.716(1) of the Act that the First Respondent had contravened various sections of: the National Employment Standards in the Act (NES); terms of the Electrical, Electronic and Communications Award 2010 (Electrical Award 2010); and, from 13 November 2020, terms of the Electrical, Electronic and Communications Award 2020 (Electrical Award 2020).
By the Compliance Notice the First Respondent was required, by 15 October 2021, to take a range of actions to calculate and remedy the direct effects of the identified contraventions matters and keep a record of same. The FWO specified that the time for production of reasonable evidence of compliance with the actions specified therein including proof of payment was by 22 October 2021.
Also on 15 September 2021, the Second Respondent acknowledged receipt of the Compliance Notice.
On 25 October 2021 and 11 May 2022, the FWO emailed the Respondents at their last known email address providing a further and final opportunity (respectively) for compliance with the Compliance Notice.
On 6 June 2022, these proceedings were commenced by way of application and a statement of claim. The Court received evidence of service of the originating materials the First and Second Respondents as detailed in the Default Judgment.
As detailed in the Default Judgment, the Second Respondent appeared before the Court at the second mention of the matter on 26 October 2022 and was therefore aware of the proceedings. On that occasion, the Second Respondent had the benefit of an explanation as to what was required of the Respondents in order to defend the proceedings and the consequences if the Respondents were in default. The Respondents were then afforded further opportunity to defend the claim but did not file any material in opposition as directed or at all.
On 13 December 2022, the matter proceeded to hearing of the contravention issues. The FWO was represented by a solicitor and there was no appearance by or on behalf of the First and Second Respondents. Default Judgment was entered, with reasons delivered on 16 December 2022.
By the Default Judgment, the Court was satisfied that there was no impediment to the Court proceeding to deal with the application in respect of the First or Second Respondent. The Court declared that:
1.Upon admissions that the Respondents are taken to have made consequent upon the Respondents’ default pursuant to rule 13.04(2) of the Federal Circuit and Family Court of Australia (General Federal Law) Rules 2021 (Rules):
(a)the First Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (Act) by failing to comply with a compliance notice given to it on 15 September 2021 (Compliance Notice); and
(b)the Second Respondent was involved, within the meaning of section 550(2) of the Act, in the First Respondent’s contravention of section 716(5) of the Act by failing to comply with the Compliance Notice.
Also on 16 December 2022, the Court ordered that:
2.Pursuant to section 545(1) of the Act, the First Respondent take the steps that were required by the Compliance Notice within 28 days of this order by:
(a)calculating and paying to the Fair Work Ombudsman (FWO) the outstanding entitlements it was required to pay to the two former employees specified in and pursuant to the Compliance Notice (Outstanding Entitlements);
(b)calculating and paying superannuation contributions into the former employees’ nominated superannuation funds for any additional superannuation contributions it is required to pay under clause 19.2 of the Electrical, Electronic and Communications Award 2020 in respect of the Outstanding Entitlements referred to at order 2(a) above (Outstanding Superannuation);
(c)preparing and producing to the FWO a schedule outlining the First Respondent’s calculations of the Outstanding Entitlements and Outstanding Superannuation as set out in orders 2(a) and 2(b) above; and
(d)providing evidence to the FWO that the Outstanding Superannuation as set out in order 2(b) above has been rectified.
3.Pursuant to section 547(2) of the Act, within 28 days of this order, the First Respondent pay interest to the Applicant in respect of the Outstanding Entitlements required to be paid under order 2(a) above.
4.The FWO distribute to the former employees the amounts paid pursuant to order 2(a) and order 3 above within 180 days of the payment being made.
5.The matter is adjourned to 10.00am on 9 March 2023 for a further hearing in respect of the FWO’s claim for penalties to be imposed on the First Respondent and Second Respondent pursuant to section 546(1) of the Act for the contraventions set out at declarations 1(a) and (b) above.
6.By 4.00pm on 30 January 2023, the FWO is to file and serve evidence and submissions relating to penalty.
7.By 4.00pm on 20 February 2023, the First Respondent and Second Respondent are to file and serve evidence and submissions relating to penalty.
8.By 4.00pm on 27 February 2023, the FWO is to file and serve any submissions in reply relating to penalty.
9. The parties have liberty to apply.
A copy of the Default Judgment was emailed by my chambers to the Respondents at their last known email addresses. The Court also received evidence of service of the orders made pursuant to the Default Judgment, an affidavit of Fair Work Inspector Ms Tara Schebella, and the FWO’s submissions filed as to penalty.
On 9 March 2023, the matter proceeded to hearing on the question of penalty. The FWO was represented by a solicitor and there was no appearance by or on behalf of the First and Second Respondents. Being satisfied that the Respondents were served with the materials filed in support of the penalty application and on notice of the penalty hearing, and in all of the circumstances, I determined it was appropriate to proceed with the penalty hearing absent the attendance of the First and Second Respondents.
As at the date of the hearing, there was no evidence before the Court that the First Respondent had taken the action required by the Compliance Notice as required by the order of the Court made on 16 December 2022 or at all. In response to the Court’s enquiry in this respect, the FWO solicitor informed the Court that as at 7 March 2023 the Commonwealth had not received payment pursuant to the Court’s 16 December 2022 orders. Immediately after the hearing, the FWO attempted to contact the employees whose entitlements were subject of the Compliance Notice. The FWO subsequently filed two further affidavits which deposed neither employee has received payment.
Materials relied upon
In relation to penalty, the FWO relied on the following materials:
(a)statement of claim filed 6 June 2022;
(b)affidavit of Sophie Louise Vassallo affirmed and filed on 17 October 2022;
(c)affidavit of Sophie Louise Vassallo affirmed and filed on 21 October 2022; and
(d)affidavit of Fair Work Inspector Ms Tara Schebella affirmed and filed on 16 January 2023.
At the time of the penalty hearing, it remained the case that neither Respondent had filed material in accordance with the directions of the Court or at all.
APPROACH TO DETERMINATION OF PENALTIES
The Court’s power to impose pecuniary penalties in respect of the established contravention resides in s.546(1) of the Act.
Section 546(1) permits the Court to impose a pecuniary penalty “that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision”. By the Default Judgment, that state of satisfaction exists.
It falls to determine what level of penalty (if any) is appropriate as against the First Respondent and the Second Respondent in light of their respectively established contraventions. The present case involves a single contravention by the First Respondent being a corporation, the maximum penalty for which is $33,300 (s.546(2)(b) and s.539(2)) and a single contravention by the Second Respondent being an individual, the maximum penalty for which is $6,660 (s.546(2)(a) and s.539(2)).
Factors relevant to the Court’s discretion
As recently affirmed by the High Court of Australia, the purpose of a civil penalty under the regime provided by the Act is primarily, if not wholly, protective in the promotion of the public interest in compliance with the provisions of the Act and in (general and specific) deterrence of further contraventions.[1] An “appropriate” penalty being one that “strikes a reasonable balance between oppressive severity and the need for deterrence in a particular case”.[2]
[1] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [15]-[16] (Pattinson )citing the plurality in (the Agreed Penalties Case) and French J in Trade Practices Commission v CSR Ltd [1990] FCA 762.
[2] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [41].
The task of assessing what amount to impose involves the selection of a figure taking into account all factors relevant to the particular case.[3] The oft cited decision of French J in Trade Practices Commission v CSR Ltd[4] listed those factors relevant to an overall assessment of penalty, restated by the Full Court in CFMMEU v ABCC:
..the nature, character and seriousness of the conduct; the loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and, any co-operation with the regulator and contrition.[5]
[3] Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 611, [75] (Gaudron, Gummow and Hayne JJ); Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357, 373-375, [37] (Gleeson CJ, Gummow, Hayne and Callinan JJ); Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68, 84, [55] (Allsop CJ, Davies and Wigney JJ); Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25, 36 [44] (Jagot, Yates and Bromwicgh JJ) as cited by Snaden J at [26] in Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654.
[4] [1990] FCA 762; [1991] ATPR 41-076 at [42].
[5] [2018] FCAFC 97 at [20].
This is not an exhaustive list. Further, each case warrants an “idiosyncratic” approach and a careful analysis of all relevant circumstances - as was stated in Australian Ophthalmic Supplies:
Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.[6]
[6] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J).
I consider the present matter in light of those well-established principles.
Nature and deliberateness
The relevant conduct in the present case is the First Respondent’s failure to comply with the Compliance Notice and the Second Respondent’s involvement in the First Respondent’s failure to so comply. The Compliance Notice was issued following investigation and on the basis of a Fair Work Inspector’s reasonable belief that the First Respondent had contravened provisions of the NES and relevant Award in respect of entitlements owed to two employees, in particular:
(a)Various provisions of the Award in relation to junior apprentice minimum wages, the minimum wage and casual loading entitlements; and
(b)The NES in relation to annual leave entitlements.
The Compliance Notice required the First Respondent to take certain remedial actions by 21 April 2021 including to: calculate and rectify any underpayments and superannuation contributions owed to the employees by 15 October 2021 and provide evidence of the Respondent’s compliance to the FWO by 22 October 2021. The Compliance Notices met the requirements of s.716(3) of the Act.
The materials before the Court establish that the Compliance Notice was given to the Second Respondent as the sole director, controlling and operative mind of the First Respondent on 15 September 2022 by express post and email.
During the period 25 October 2021 to 11 May 2022, attempts were made by the FWO (including by post and email) to communicate with the Second Respondent about the need for compliance with the Compliance Notice and the consequences of non-compliance.
Notwithstanding the Second Respondent’s acknowledgment of the Compliance Notice, reasonable evidence of compliance was not forthcoming by the deadline afforded by the FWO’s final opportunity of 11 May 2022 or at all.
As to the issues subject of the Compliance Notice, it is relevant for present purposes that the notice related to underpayments of two employees who were engaged to work for the First Respondent as junior and apprentice workers. I accept the submission of the FWO that these features naturally disposed the two employees to greater vulnerability in the employment relationship. Further, the underlying contraventions subject of the Compliance Notice were taken to be admitted in the Default Judgment and remain undefended in this Court.
In light of the above, the Second Respondent was aware of the Compliance Notice and the consequences of failure to comply. The decision of the Second Respondent not to comply or ensure the First Respondent’s compliance with the Compliance Notice was deliberate. The circumstances which gave rise to the Compliance Notice should also be taken into account in determining penalty in this case.
Loss and damage
The failure of the First Respondent to comply with its legislative obligations denied the employees the benefit of their entitlements as junior and apprentice workers under the Electrical Award 2010, Electrical Award 2020 and the NES.
The outstanding entitlements owed to the two employees (by the Default Judgment, taken to be admitted in these proceedings) remain unrectified after 18 months. That is a significant period of time for minimum wages to be outstanding and ought properly be regarded as too long. The degree of underpayment and consequential loss was also serious.
Further, the FWO has spent time and public resources in dealing with civil remedy proceedings.
Corrective action, cooperation with the FWO and contrition
The Second Respondent did not ensure the First Respondent’s compliance with the Compliance Notice and, despite acknowledging receipt, did not actively cooperate or engage with the FWO in an effort to comply or partially comply with the Compliance Notice or rectify the underlying underpayments.
Since the commencement of these proceedings, the Second Respondent has been properly served with relevant applications, orders and submissions. The Second Respondent attended the Court on one occasion and demonstrated his awareness of the proceedings and what was required of the Respondents. Nothing was filed by or on behalf of the Respondents in this matter and the Respondents did not enter an appearance at the contravention hearing or the penalty hearing.
It follows that the First and Second Respondents have not cooperated with the regulator or taken the opportunity to demonstrate before the Court any contrition, corrective action taken or attempt to correct the wrongdoing subject of these proceedings. In the circumstances, I am not able to apply a discount on account of these factors.
Size of the business and financial circumstances
On the evidence before the Court, the First Respondent remains registered and the Second Respondent is sole director.
The Second Respondent’s failure to defend or engage with these proceedings has resulted in there being no evidence as to the First Respondent’s current trading status, size of the business or the financial circumstances of the Respondents.
In any event, size and financial circumstances of an employer do not excuse contraventions of workplace laws.
Compliance with minimum standards
A further and important consideration in this matter is the need for compliance with the statutory framework. A compliance notice is a statutory mechanism to address non-compliance with minimum entitlements which presents an opportunity to resolve such matters in an efficient and cost-effective way.
Here, the First Respondent’s failure to comply with the Compliance Notice has necessitated litigation and undermined the Act’s enforcement framework and the safety net of entitlements it is designed to protect.
Deterrence
The FWO contended that the Court should order a penalty in specific and general deterrence. It emphasised the need for general deterrence in the electrical contracting industry. The FWO filed an affidavit of Fair Work Inspector Ms Tara Schebella which included the FWO’s report titled “Industry profile and FWO Interactions: Electrical Beauty Services”. The report highlighted that, across all industries, 4.9% of disputes involve apprentice or trainee workers, but in the electrical services industry, 30.9% of dispute involve apprentice or trainee workers.
This is a case where there is a need for specific deterrence, particularly in circumstances where the Second Respondent has failed to participate in the proceedings and the First Respondent remains registered. It is also necessary given the lack of any contrition and failure to make any attempt to rectify the underpayments to the employees which remain outstanding.
There is also a need for general deterrence, to emphasise the importance of the maintenance of effective minimum terms and conditions of employment and adherence to the provisions of industrial instruments and legislation. It is important that the penalty be imposed at a level sufficient to discourage such contraventions being treated by employers in the electrical industry as just another cost of doing business.
CONCLUSION / THE APPROPRIATE PENALTY
The First Respondent contravened s.716(5) of the Act by failing to comply with the Compliance Notice.
The Second Respondent was involved, within the meaning of s.550(2) of the Act, in the First Respondent’s contravention of s.716(5) by failing to comply with the Compliance Notice.
When all of the above factors are considered, I am satisfied that it is appropriate to impose a pecuniary penalty on each of them pursuant to s.546(1).
The FWO’s recommended penalty range in respect of the single contravention by the First Respondent is $23,310 to $26,640 and in respect of the single contravention of the Second Respondent is $4,662 and $5,328 (representing an estimated 70-80% for each of the separate contraventions).
In the particular circumstances of this case, a penalty in the range of 70-80% of the maximum is excessive. Weighing the various competing factors, I consider it appropriate to fix the penalty at 40% totalling $13,320 for the First Respondent’s contravention and 30% totalling $1,998 for the Second Respondent’s involvement in that contravention. In my view, this is a proportionate response to the respective contraventions and strikes a reasonable balance between oppressive severity and the need for both general and specific deterrence in this case. The greater penalty for the First Respondent is reflective of my assessment of the greater need for deterrence in that respect.
The FWO pursued this proceeding as regulator and sought that the pecuniary penalty be paid to the Commonwealth to enable enforcement action in the event that the Respondents do not comply. I am satisfied it is appropriate to order accordingly.
No order as to interest was sought and I make no order in this respect.
I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 15 March 2023
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