Fair Work Ombudsman v Deja Vu Elite Security Pty Ltd and Anor (No.2)
[2018] FCCA 2960
•19 October 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v DEJA VU ELITE SECURITY PTY LTD & ANOR (No.2) | [2018] FCCA 2960 |
| Catchwords: INDUSTRIAL LAW – Penalties – some admitted contraventions and some contraventions found by the court following a liability hearing. |
| Legislation: Crimes Act 1914, s.4AA(1) Fair Work Act 2009, ss.45, 536(2), 545(1), 546(1), 546(3)(a), 570, 712(3), 798 Fair Work Regulations 2009, regs.3.44, 4.01A Federal Circuit Court Rules 2001, Pt 1 of Sch 1 General Retail Industry Award 2010, cls.12.2, 13.2, 17, 18.2, 20.2(b)(ii), 29.4(a), 29.4(b), 29.4(c), 29.4(d) |
| Cases cited: Australian and International Pilots Association v Qantas Airways Ltd (No 3) (2007) 162 FCR 392; (2007) 165 IR 464; [2007] FCA 879 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First respondent: | DEJA VU ELITE SECURITY PTY LTD (ACN 131 423 651) |
| Second respondent: | SAID HADDAD |
| File number: | MLG 179 of 2017 |
| Judgment of: | Judge Riley |
| Hearing date: | 17 July 2018 |
| Date of last submission: | 17 July 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 19 October 2018 |
REPRESENTATION
| Counsel for the applicant: | Cathy Dowsett |
| Solicitors for the applicant: | Fair Work Ombudsman |
| Counsel for the respondents: | John Ribbands |
| Solicitors for the respondents: | P. W. Sotir & Co |
ORDERS
The first respondent pay penalties in the amount of $157,950 pursuant to s.546(1) of the Fair Work Act 2009 (“the Act”) for contravening:
(a)s.45 of the Act, by contravening:
(i)clause 12.2;
(ii)clause 13.2;
(iii)clause 17;
(iv)clause 18.2;
(v)clause 29.4(a);
(vi)clause 29.4(b);
(vii)clause 29.4(c);
(viii)clause 29.4(d);
(ix)clause 20.2(b)(ii);
of the General Retail Industry Award 2010 (“the Award”);
(b)s.536(2) of the Act, by giving pay slips to Grant Ferguson, Narelle Richards, Jessica Clarke-Wingrave, and Angelica Benitez (“the employees”) that did not accurately state the periods to which the pay slips related;
(c)reg.3.44(1) of the Fair Work Regulations 2009 (“the Regulations”), by failing to ensure that records required to be kept in relation to the employees were not false or misleading;
(d)reg.3.44(4) of the Regulations, by altering records relating to the employees, other than as permitted by the Act or the Regulations;
(e)reg.3.44(6) of the Regulations, by making use of records by producing them to the applicant, knowing that those records were false or misleading; and
(f)s.712(3) of the Act, by failing to comply with a notice to produce.
The second respondent pay penalties in the amount of $31,590 pursuant to s.546(1) of the Act for contravening the same provisions.
ORDER BY CONSENT
Pursuant to s.546(3)(a) of the Act, all penalties imposed on the respondents be paid to the Commonwealth within 28 days.
ORDERS
Pursuant to s.545(1) of the Act, within 30 days, the first respondent display a notice (“the workplace notice”) at the premises of the business operated by the first respondent (the IGA supermarket on Station Street in Fairfield, Victoria), and at the premises of any other businesses owned or operated by the first or second respondents that are covered by the Award.
The workplace notice:
(a)be easily viewable by all employees;
(b)contain information on the minimum rates of pay, casual loading and penalty rates under the Award;
(c)contain information on how to contact the Fair Work Ombudsman; and
(d)be displayed continuously for a period of one year.
Within 14 days of the workplace notice first being displayed, the first respondent provide to the applicant proof of it being displayed.
Pursuant to s.570(2)(b) of the Act, the respondents pay the applicant’s costs of this proceeding, fixed in the sum of $11,616.90.
ORDER BY CONSENT
The applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 179 of 2017
| FAIR WORK OMBUDSMAN |
Applicant
And
| DEJA VU ELITE SECURITY PTY LTD (ACN 131 423 651) |
First respondent
And
| SAID HADDAD |
Second respondent
REASONS FOR JUDGMENT
Introduction
This matter concerns the penalties to be imposed for certain contraventions of the Fair Work Act 2009 (“the Act”) and the Fair Work Regulations 2009 (“the Regulations”).
The applicant is the Fair Work Ombudsman. The first respondent is a company which owns an IGA supermarket. The second respondent is the director of the first respondent and the manager of the supermarket.
The respondents conceded a good many of the contraventions alleged against them and entered into a statement of agreed facts. On the basis of their admissions, declarations were made on 31 May 2018 in Fair Work Ombudsman v Deja Vu Elite Security Pty Ltd & Anor [2018] FCCA 1402 (“the liability judgment”) as follows:
a)having regard to the admissions made by the respondents in the statement of agreed facts filed in this proceeding, the first respondent contravened:
i)s.45 of the Act, by contravening:
A.clause 17;
B.clause 18.2;
C.clause 13.2;
D.clause 29.4(a);
E.clause 29.4(b);
F.clause 29.4(c);
G.clause 29.4(d);
H.clause 20.2(b)(ii); and
I.clause 12.2;
of the General Retail Industry Award 2010 (“the Award”); and
ii)s.536(2) of the Act, by giving pay slips to Grant Ferguson, Jessica Clark-Wingrave, Narelle Richards and Angelica Benitez (“the employees”) that did not accurately state the periods to which the pay slips related; and
b)the second respondent was involved in each of the contraventions committed by the first respondent identified in declaration 1.
In addition, the respondents disputed a number of allegations made against them. Those allegations concerned:
a)failing to ensure that records required to be made and kept were not false or misleading to the employer’s knowledge;
b)altering, or failing to ensure that another person did not alter, records required to be made and kept except as permitted by the Act and Regulations;
c)making use of a record knowing it to be false; and
d)failing to comply with a notice to produce.
Those allegations were the subject of a liability hearing. In the liability judgment, the court found each of the allegations to be proven. Consequently, the court made additional declarations that:
a)the first respondent contravened:
i)reg.3.44(1) of the Regulations, by failing to ensure that records required to be kept in relation to the employees were not false or misleading;
ii)reg.3.44(4) of the Regulations, by altering records relating to the employees, other than as permitted by the Act or the Regulations;
iii)reg.3.44(6) of the Regulations, by making use of records by producing them to the applicant, knowing that those records were false or misleading;
iv)s.712(3) of the Act, by failing to comply with a notice to produce; and
b)the second respondent was involved in each of the contraventions committed by the first respondent identified in the previous declaration.
At the parties’ request, the penalty hearing in the present matter was conducted jointly with the penalty hearing in a related matter, Fair Work Ombudsman v Hadya Nominees Pty Ltd & Anor, MLG180/2017 (“the Hadya matter”). The second respondent in the present matter was also the second respondent in the Hadya matter. The second respondent was a director of the first respondent in the Hadya matter. The first respondent in the Hadya matter owned a different IGA store to the IGA store owned by the first respondent in the present matter.
Documents relied upon
At the penalty hearing, the applicant relied on:
a)the statement of agreed facts filed on 24 November 2017;
b)the liability judgment;
c)the affidavits:
i)affirmed by Patricia Louise Campbell, Fair Work Inspector, on 15 December 2017 and 16 February 2018;
ii)affirmed by Ms Campbell on 20 June 2018 and filed in the Hadya matter;
iii)affirmed by Sally Patti McLeod, Fair Work Inspector, on 15 December 2017;
iv)affirmed by Beverley Reid on 18 December 2017; and
v)sworn by Narelle Cindy Richards on 15 December 2017; and
d)the applicant’s outline of submissions.
The respondents did not indicate what documents they relied upon. They did not file any affidavits in relation to the questions of penalty and costs, but did file an outline of submissions.
Proposals of the parties
The applicant proposed that the following orders be made:
1.The First Respondent pay penalties in the amount of $________ pursuant to section 546(1) of the FW Act for the following contraventions of the Fair Work Act 2009 (Cth) (FW Act) and the Fair Work Regulations 2009 (Cth) (FW Regulations) declared by this Court on 31 May 2018, as set out in the decision of Fair Work Ombudsman v Deja Vu Elite Security Pty Ltd & Anor [2018] FCCA 1402:
(a)section 45 of the FW Act, by contravening clause 17 of the General Retail Industry Award 2010 (Award);
(b)section 45 of the FW Act, by contravening clause 18.2 of the Award;
(c)section 45 of the FW Act, by contravening clause 13.2 of the Award;
(d)section 45 of the FW Act, by contravening clause 29.4(a) of the Award;
(e)section 45 of the FW Act, by contravening clause 29.4(b) of the Award;
(f)section 45 of the FW Act, by contravening clause 29.4(c) of the Award;
(g)section 45 of the FW Act, by contravening clause 29.4(d) of the Award;
(h)section 45 of the FW Act, by contravening clause 20.2(b)(ii) of the Award;
(i)section 45 of the FW Act, by contravening clause 12.2 of the Award;
(j)section 536(2) of the FW Act, by giving pay slips to Mr Grant Ferguson, Ms Narelle Richards, Ms Jessica Clarke-Wingrave, and Ms Angelica [Benitez] (the Employees) that did not accurately state the period to which the pay slip related;
(k)regulation 3.44(1) of the FW Regulations, by failing to ensure that records required to be kept in relation to the Employees was not false or misleading;
(l)regulation 3.44(4) of the FW Regulations, by altering records relating to the Employees, other than as permitted by the FW Act or the FW Regulations;
(m)regulation 3.44(6) of the FW Regulations, by making use of records by producing them to the Applicant, knowing that those records were false or misleading; and
(n)section 712(3) of the FW Act, by failing to comply with a notice to produce.
2.The Second Respondent pay penalties in the amount of $_______ pursuant to section 546(1) of the FW Act, for the contraventions identified in paragraph 1 above, as declared by this Court on 31 May 2018, and set out in the decision of Fair Work Ombudsman v Deja Vu Elite Security Pty Ltd & Anor [2018] FCCA 1402.
3.Under section 546(3)(a) of the FW Act, all penalties imposed on the Respondents be paid to the Commonwealth within 28 days.
4.Pursuant to section 545(1) of the FW Act the First Respondent will, within 30 days of the date of this order, display a notice at the premises of the business operated by the First Respondent (the IGA supermarket on Station Street in Fairfield, Victoria), or other entities owned or operated by the First Respondent or the Second Respondent that are covered by the Award, that can be easily viewed by all employees (Workplace Notice) on the following terms:
(a)the Workplace Notice must:
(i) contain information on the minimum rates of pay, casual loading and penalty rates under the Award;
(ii) contain information on how to contact the Fair Work Ombudsman; and
(b)the First Respondent will provide proof of the display of the Workplace Notice to the Applicant within 14 days of display; and
(c)the Workplace Notice must be displayed continuously for a period of one year.
5.Pursuant to section 570(2)(b) of the FW Act, the Respondents are, jointly and severally, liable to pay the Applicant’s costs incurred by reason of this proceeding, which total $11,616.90.
6.The Applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
The applicant recommended aggregate penalties be imposed:
a)on the first respondent of between $128,061 and $157,950; and
b)on the second respondent of between $25,612 and $31,590.
The respondents opposed the costs order, argued that the workplace notice should be displayed for less than one year and recommended aggregate penalties be imposed:
a)on the first respondent of between $42,930 and $60,732; and
b)on the second respondent of between $8,505 and $11,988.
In other respects, the respondents did not cavil with the applicant’s proposed orders.
Facts
The agreed facts are set out in the liability judgment at paragraphs 5 to 81. Additional facts, relating to the contested issues, were found in the liability judgment. At the penalty hearing, there was no cross examination of any witnesses. Subject to the discussion below of the objections to certain aspects of the applicant’s affidavits, I accept the facts as set out in them.
Approach to determining penalty
In general, the proper approach to determining penalty in cases such as this is as follows. The first step for the court is to identify each separate contravention involved.
Where there are multiple contraventions, the second step is to consider whether any of the various contraventions constituted a single course of conduct, such that multiple breaches should be treated as a single breach.
The third step is for the court to consider the extent, if any, to which two or more contraventions have common elements. A person should not be penalised more than once for the same conduct.
The penalty imposed by the court should be an appropriate response to the contravenor’s conduct.[1] This is a separate process from the application of the totality principle.[2]
[1] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [46] (Graham J).
[2] Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70 at [41]-[46] (Stone and Buchanan JJ).
The fourth step is for the court to consider the appropriate penalty for each breach, treating multiple breaches arising from a course of conduct as a single breach, and taking into account any common elements shared by the various breaches.
The fifth step is for the court to apply the totality principle.
This requires the court to consider the aggregate penalty overall, and determine whether it is an appropriate response to the conduct which resulted in the breaches.[3] The court in this step makes an “instinctive synthesis”.[4]
[3] See Kelly v Fitzpatrick (2007) 166 IR 14 at [30] (Tracey J) (Kelly); Ophthalmic, supra at [23] (Gray J), [71] (Graham J) and [102] (Buchanan J).
[4] Ophthalmic, supra at [27] (Gray J) and [55] and [78] (Graham J).
A convenient checklist of the factors that the court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is as follows (with paragraph letters inserted):
(a)The nature and extent of the conduct which led to the breaches.
(b)The circumstances in which that conduct took place.
(c)The nature and extent of any loss or damage sustained as a result of the breaches.
(d)Whether there had been similar previous conduct by the respondent.
(e)Whether the breaches were properly distinct or arose out of the one course of conduct.
(f)The size of the business enterprise involved.
(g)Whether or not the breaches were deliberate.
(h)Whether senior management was involved in the breaches.
(i)Whether the party committing the breach had exhibited contrition.
(j)Whether the party committing the breach had taken corrective action.
(k)Whether the party committing the breach had cooperated with the enforcement authorities.
(l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
(m)The need for specific and general deterrence.
The court must, of course, be mindful of the caution expressed by Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [91] as follows:
Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. There is no suggestion in the present case that the learned Magistrate made any relevant error in her identification of the matters which she should consider in fixing penalties.
The court will consider the circumstances of the case under the various headings suggested by Mowbray FM, and then consider whether any other matters are relevant.
Step 1: identifying the breaches
The first respondent’s contraventions are summarised above and are set out more fully in the liability judgment. The second respondent was involved in each of the contraventions committed by the first respondent.
Step 2: single course of conduct
The applicant stated in her written submissions that:
30.Section 557(1) of the FW Act provides that, for specified contraventions of the FW Act29, two or more contraventions of the same civil remedy provision will be treated as a single contravention where that contravention was committed by the same person, and arose from the same course of conduct. Particularly relevant is whether the acts arose out of separate acts or decisions of the Respondents or out of the same act or decision.
31.… contraventions of the same term of the Award in relation to multiple employees, may be treated as one contravention under section 557(1) of the FW Act, provided that there is one course of conduct.
29 Including contraventions of sections 45, 536 and 712 of the FW Act, and contraventions of the civil remedy provisions prescribed by the FW Regulations.
The respondents did not make any submissions specifically on the course of conduct point.
I accept that the respondents’ multiple contraventions of a single provision can appropriately be treated a single contravention, even where the contravention occurred numerous times and in respect of numerous employees.
Step 3: grouped breaches
The applicant argued that contraventions (a) and (b) in order 1 of her proposed orders should be grouped as a single breach, as they related to contraventions of the minimum base rates of pay, albeit for adult employees in one case (clause 17 of the Award), and junior employees in the other (clause 18.2 of the Award). The applicant submitted that the remaining breaches were sufficiently distinct in their character and obligations and should not be grouped.
The applicant’s proposed grouping, as set out in Annexure A to her written submissions on penalty, is as follows:
a)minimum rate contraventions (adult and junior), being breaches of s.45 of the Act by contravening cl.17 and cl.18.2 of the Award;
b)casual loading, being a breach of s.45 of the Act by contravening clause 13.2 of the Award;
c)evening penalty, being a breach of s.45 of the Act by contravening clause 29.4(a) of the Award;
d)Saturday penalty, being a breach of s.45 of the Act by contravening clause 29.4(b) of the Award;
e)Sunday penalty, being a breach of s.45 of the Act by contravening clause 29.4(c) of the Award;
f)public holiday penalty, being a breach of s.45 of the Act by contravening clause 29.4(d) of the Award;
g)uniform allowance, being a breach of s.45 of the Act by contravening clause 20.2(b)(ii) of the Award;
h)failure to agree on a regular pattern of work, being a breach of s.45 of the Act by contravening clause 12.2 of the Award;
i)failure to provide pay slips with the required information, being a breach of s.536(2) of the Act;
j)failure to make and keep records that were not false or misleading, being a breach of reg.3.44(1) of the Regulations;
k)altering records in contravention of reg.3.44(4) of the Regulations, being a breach of reg.3.44(4) of the Regulations;
l)making use of a false or misleading record, being a breach of reg.3.44(6) of the Regulations; and
m)failure to comply with a notice to produce, being a breach of s.712(3) of the Act.
The respondents submitted that:
6.There is no hard and fast established test for the manner in which contraventions are grouped. The underlying principle is to avoid the potential duplication of punishment for the same or substantially similar conduct.
“There is no exact science in this decision. It is a question of considering the nature of the contraventions and the nature of the ‘criminality’ involved.”1
7.In Sureguard Barker J accepted the submissions on the part of the Respondents which resulted in the grouping together of contraventions related to minimal hourly rates and separate groupings in respect to casual loading contraventions and night time penalty rates.
1Fairwork Ombudsman v Sureguard Security Pty Ltd [2017] FCA 1566 per Barker J at [43]
The respondents agreed that the minimum rate contraventions for adults and juniors (clauses 17 and 18.2 of the Award) should be grouped as one breach. The respondents also accepted that failing to agree on a regular pattern of work (clause 12.2 of the Award), failing to provide pay slips with the required information (s.536(2) of the Act) and failing to comply with a notice to produce (s.712(3) of the Act) should each be treated as separate contraventions.
However, the respondents also submitted that there should be additional groupings as follows:
a)loading and allowances breaches, being breaches of s.45 of the Act by contravening cl.13.2 and cl.20.2(b)(ii) of the Award;
b)penalty rates breaches, being breaches of s.45 of the Act by contravening cl.29.5(a), (b), (c) and (d) of the Award; and
c)record keeping breaches, being breaches of reg.3.44(1), (4) and (6) of the Regulations.
The respondents’ groupings would result in seven contraventions as opposed to the applicant’s 13. The respondents submitted that:
9. A grouping in this manner reflects the approach that is consistent with principle and takes into account the common elements and overlap that exist in the contraventions that are placed within each group.
The applicant relied on Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153; (2014) 243 IR 244; [2014] FCAFC 62 where North, Flick and Jagot JJ stated:
18.… The object and purpose of provisions such as s 557 and its predecessor provisions is to ensure that an “offender is not punished twice for what is essentially the same criminality”. When considering the principles to be applied when imposing a penalty for contraventions of the Building and Construction Industry Improvement Act 2005 (Cth) Middleton and Gordon JJ in Construction, Forestry, Mining and Energy Union v Cahill (2010) 194 IR 461; 269 ALR 1 stated the issue to be resolved in that appeal as follows:
[35]The appellants submitted that the sentencing discretion miscarried because her Honour failed to consider a relevant matter (whether the three contraventions ought properly be seen as arising out of the one course of conduct) or because her Honour misdirected herself in the application of the “one course of conduct” or the “one transaction” principle …
In resolving that argument, their Honours concluded:
[39]As the passages in Construction, Forestry, Mining and Energy Union v Williams (2009) 191 IR 445 explain, a “course of conduct” or the “one transaction principle” is not a concept peculiar to the industrial context. It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry. Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions.
(Emphasis in original.)
These observations, it may be noted, have been applied when considering the operation of s 557 of the Act: Construction, Forestry, Mining and Energy Union v North Goonyella Coal Mine Pty Ltd [2013] FCA 1444 at [60] per Logan J; Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 at [65]-[66] per Gilmour J; BHP Coal Pty Ltd v Construction, Forestry, Mining and Energy Union (No 2) [2014] FCA 193 at [13] per Collier J. If the appellants’ construction of s 557 be accepted, it could follow that an offender could engage in different “criminality” and be punished once.
19.Fifth, there are contrary decisions. The reasoning of Logan J in QR Ltd FCA at [16]-[19] is against the appellants. Logan J said:
16In my view, the course of conduct must be associated with the particularised term of the particularised instrument. That is the contravention of the term of the transitional instrument. One does not look at course of conduct for the purposes of s 557 at a level of abstraction divorced from the contravened provision as particularised (ie the term in question and the transitional instrument in question).
…
20.We agree with this reasoning. The appellants’ argument to the contrary, that the controlling mechanism is that the contraventions arise from a course of conduct, is not a persuasive answer, particularly in light of his Honour’s observations about the operation of s 557(3).
…
26.Eighth, the FWO’s construction is not counter-intuitive. To the contrary, the appellants’ argument would lead to arbitrary and capricious outcomes. Adopting the FWO’s submissions in this regard:
For example, an employer who has contravened a range of provisions under a modern award resulting in large widespread underpayments to a number of employees would be subject to the same maximum penalty of $33,000 as an employer who has contravened one award provision for one employee on one occasion.
Similarly, an employee’s employment may be governed exclusively by a modern award, an enterprise agreement, or an NES, or it may be governed by a combination of all three. If all the terms or provisions contravened appear in a single instrument, there would be but a single contravention and single penalty. If, however, there was more than one source of the terms or provisions, even though the contraventions were in substance identical, the maximum available penalties could be doubled or tripled, depending upon the number of applicable instruments.
Further, the appellants’ construction would have the effect that multiple breaches of different modern awards would be treated as a single contravention so long as they arose from a single course of conduct …
These arbitrary and capricious results are avoided if it be accepted that s. 557 operates to group together contraventions of the same provision or term.
(Emphasis in original.)
In relation to the altering of a pay slip and the using of a false pay slip contraventions, Judge Burchardt of this court said in FWO v OZ Staff Holdings Pty Ltd & Ors (No.2) [2016] FCCA 2594 that:
16.Although it puts the matter shortly, I accept the submissions of the applicant. It was one thing to create these records and keep them. It was another matter altogether to use them. As best I understand it the parties agreed that the grouping of these matters for these purposes involves an exercise of discretion and, in my opinion, that discretion should be exercised as I have indicated.
With respect, I adopt his Honour’s reasoning and conclusions on the payslip contraventions.
In relation to the other groupings proposed by the respondents, I am not persuaded that they contain the necessary degree of overlap. To my mind, the groupings proposed by the applicant are appropriate.
Step 4: the appropriate penalty for the breaches
a. the nature and extent of the conduct which led to the breach
The applicant argued that the nature of the conduct was that the breaches were deliberate. The applicant noted that the second respondent was well aware of his employees’ minimum entitlements because, prior to the breaches in the present proceeding, the applicant had given him specific information about the Award and the first respondent’s obligations as an employer. In addition, the second respondent was a member of Master Grocers Australia which provided information to him about his employees’ entitlements. The second respondent conceded these matters in the statement of agreed facts. The respondents did not dispute that their conduct in this case was deliberate.
The extent of the conduct is considerable in the sense that there was a plethora of different breaches which affected four different employees. The respondents’ contraventions of the Act, the Regulations and the Award resulted in underpayments to the employees totalling $3,907.65 in a two month period.
In addition, the respondents manufactured false pay records that indicated the employees were paid the correct award rates when they were not.
On the other hand, as submitted by the respondents, the offending conduct concerned a relatively small number of employees from the overall staff contingent employed by the first respondent.
b. the circumstances in which that conduct took place
The conduct took place in the context of the first respondent’s operation of an IGA supermarket in Fairfield. The second respondent was aware of the first respondent’s obligations to its employees, as it had dealings with the applicant which consisted of:
a)six separate complaints;
b)correspondence dated 5 October 2012, 2 May 2013 and 25 November 2013; and
c)a letter of caution dated 28 March 2014.
c. the nature and extent of any loss or damage sustained
The applicant argued that the respondents’ conduct caused significant losses that were both financial and non-financial. The applicant argued that the losses to the employees were aggravated by the vulnerability of the employees concerned.
The respondents’ total underpayments to its employees amounted to $3,907.65 during a two month period. The underpayments were rectified prior to the commencement of this proceeding.
The applicant submitted that, even though the sums underpaid may not be high, there were significant underpayments to employees who were predominantly classed at the lowest level of the Award. The applicant referred to Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492, where Judge Emmett accepted the applicant’s submission that:
7. …
36.… While this amount is not objectively large, this does not mean it is not significant for [the employee].
The applicant relied on Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [85] where it was said that:
The combination of age and the low-paid positions may have made some of the employees more vulnerable to exploitation.
The applicant relied on Fair Work Ombudsman v Soleimani [2014] FCCA 2380 at [50] where it was said that:
I am satisfied, having regard to [the employees’s] young age at the time she was employed, the fact she was reliant on the minimum wage, had limited employment experience and hence limited knowledge of her entitlements, that she was a vulnerable employee.
The applicant also relied on Fair Work Ombudsman v Bound for Glory Enterprises Pty Ltd & Anor [2014] FCCA 432 at [52] where it was said that:
It is no answer to addressing the gravity of the conduct and loss involved in the aggregate to seek to emphasise the individual amounts for some of the employees. The amounts involved may seem trifling to some but they were required to be paid to young employees for whom they were far from trifling and for which they’ve had to wait.
In relation to vulnerability, the applicant noted that Ms Clarke-Wingrave was 19 years old at the beginning of the relevant period and turned 20 during that period. The applicant submitted that, because of Ms Clark-Wingrave’s age and her low paid position, she was vulnerable to exploitation.
The applicant noted that Ms Richards deposed that she was financially supporting her son who had just finished high school. She stated that she hardly ever called in sick because if [she] didn’t work [she] wouldn’t get paid and had bills to pay.
The respondents submitted that Viper Industries and Bound for Glory should be viewed in their context. In Viper Industries, the matter was decided on an undefended basis and concerned an employee who remained unpaid for a period of 14 weeks. In Bound for Glory, the matter concerned 52 employees who were underpaid a total of $127,824 over a prolonged period.
The respondents submitted that the objectively … relatively small amounts underpaid to the employees nevertheless caused the employees loss. However, the respondents argued that, notwithstanding an audit conducted by the applicant, the total number of contraventions disclosed was relatively small and limited compared to the total number of employees.
I accept the submissions of all parties as outlined above, save that I consider that the losses would have been significant to the employees involved.
d. whether there had been similar previous conduct
In relation to this factor, the applicant sought to rely on paragraphs 27 to 45 of the affidavit affirmed by Ms Campbell on 20 June 2018. Those paragraphs detailed various complaints made to the applicant by employees associated with the second respondent and administrative action taken by the applicant in response. The respondents objected to those paragraphs being accepted into evidence.
The basis of the respondents’ objection was expressed in their written submissions as follows:
33. The paragraphs in the affidavit are inadmissible and consequentially the submissions inappropriate for a number of reasons but primarily;
a. There were no such matters alleged in the Statement of Claim;
b. There were no such matters contended for in the SOAF;
c. As a consequence of (a) and (b) above, there has been no opportunity for the Respondents to enquire into the accuracy or otherwise of the assertions that have been made. It represents a fundamental denial of procedural fairness and natural justice.
34. If, contrary to our submission, the Court finds that the evidence is admissible then it is of such little weight that the Court should have little or no regard to the content.
Essentially, the respondents’ complaint about paragraphs 27 to 45 of Ms Campbell’s affidavit was that the issues raised in it were raised too late for the respondents to deal with them. That submission flies in the face of orders made by consent on 31 May 2018 to the effect that the applicant was to file and serve any affidavit relating to penalty by 21 June 2018 and the respondents were to file and serve any affidavit relating to penalty by 28 June 2018. In oral submissions, the respondents acknowledged that the applicant’s affidavit was served on them on 20 June 2018. The respondents did not file any affidavit in reply by 28 June 2018 or at all.
The penalty hearing before this court was on 17 July 2018. If the respondents had been genuinely prejudiced by having only one week to respond to Ms Campbell’s affidavit, they had over three weeks prior to the penalty hearing to prepare an affidavit and seek an extension of time to file and serve it. Alternatively, they could have sought an adjournment of the penalty hearing. However, they did not do so.
It emerged during oral submissions that the second respondent was overseas and had been for a few weeks prior to the penalty hearing. The second respondent presumably knew when he was required to file material and knew the date of the penalty hearing, but went overseas anyway. Of course, with electronic communication, being overseas is no bar to providing instructions.
In any event, the basis of the objection raised by the respondents in their written submissions is not sound. In a worst case scenario, the respondents could have sought an adjournment to respond to Ms Campbell’s affidavit.
In oral submissions, the respondents also said that paragraphs 27 to 45 of Ms Campbell’s affidavit did not claim that there had been findings by a court of prior contraventions, but only that there had been complaints and administrative action. The respondents said that they had admitted that they were aware of their actions, so paragraphs 27 to 45 of Ms Campbell’s affidavit did not take the matter significantly further. This was not an objection to admissibility as such.
In maintaining that the paragraphs should be admitted into evidence, the applicant relied on Fair Work Ombudsman v Grandcity (GW) Travel & Tour Pty Ltd [2015] FCCA 1759, where it was said at [53] that:
This is a case where there has been previous conduct that resulted in intervention by the applicant. Whilst there has not been a previous imposition of penalty, that intervention should have left the second respondent (and through her other companies she controls including the first respondent) well aware of their obligations.
The applicant also relied on Bound for Glory where it was said at [56] that:
Whilst it is correct to observe that the respondents have not previously been convicted of contraventions of workplace laws, it could hardly be contended that the respondents hadn’t previously come to the attention of the authorities. Unfortunately it would appear the attempts to secure voluntary compliance were [un]successful in deterring or preventing further unlawful conduct.
The applicant relied on Fair Work Ombudsman v Jay Group Services Pty Ltd & Ors [2014] FCCA 2869, where it was said that:
64.Any suggestion that the above respondents were new to the business environment, naïve in respect of the requirements of employing staff or the general tenets of employment law are completely unsustainable. The Lang Penalty Affidavit has a section headed “Compliance history of the First and Third Respondent” that states the following at [25]-[29]:
25.On 17 February 2014, in preparation of this affidavit, I conducted a search of the FWO’s Internal case management system. This records all complaints received by the FWO.
26.I searched for all complaints lodged against “Jay Group Services Pty Ltd” and discovered that 7 complaints have been lodged against the first respondent, in addition to the twelve complaints lodged by the Employees listed…
27. I received the electronic file for each of the 7 complaints and saw that:
(a) 3 of the matters concerned the alleged underpayment of labourers but these matters were closed due to insufficient evidence being available to the FWO;
(b) 3 of the matter[s] involved underpayments of employees employed as cleaners and were resolved through the FWO’s voluntary compliance mechanisms; and
(c) 1 of the matters involved underpayments of an employee employed as a carwasher and was resolved through the FWO’s voluntary compliance mechanisms.
28.In relation to one of the matters … that were closed due insufficient evidence, I saw from the “Case Decision Record” dated 11 July 2012 (CDR) on the file that the FWO issued a Notice to Produce to the third respondent which was not complied with. I also saw that a Record of Interview was offered to the third respondent but the offer was not accepted.
29. The CDR also indicated that there were purported subcontracting arrangements in place between the first, third and fifth respondents similar to those in the current proceedings…
65.Also contained in the Lang Penalty Affidavit is the “Compliance History of the Fourth Respondent and his related companies” which states at [30]-[35]:
30.I am aware that the current proceedings are the third set of legal proceedings brought by the FWO and its predecessors against the fourth respondent. I am aware of this because I was one of the inspectors involved in an earlier investigation into the activities of the fourth respondent and his previous company Xidis Pty Ltd.
31.The FWO’s predecessor agencies have undertaken the following proceedings against the fourth respondent and his previous company Xidis Pty Ltd (which also traded as Effective Supermarket Services):
(a) Inspector Dekic v Xidis Pty Ltd & Nick Iksidis (2007) in which the Melbourne Magistrates Court imposed a penalty of $12,500 against Xidis Pty Ltd and $12,500 against Nick Iksidis for the underpayment of trolley collection workers in Victoria…
(b) Inspector Lang v Xidis Pty Ltd & Nick Iksidis [2008] FMCA 1009 in which the Federal Magistrates Court imposed a penalty of $120,000 against Xidis Pty Ltd for the underpayment of trolley collection workers in NSW and Victoria. No penalty was imposed against Nick Iksidis as he undertook to personally pay the penalty of Xidis Pty Ltd…
32. I currently have carriage of a number of other trolley collection investigations and compliance activities in the trolley collection industry.
33.On or about 12 February 2014, I received a phone call from an employer in the trolley collection industry in relation to another trolley collection investigation of which I have carriage. During the conversation, the employers said to me words to the following effect:
“Nick Iksidis rang me the other day looking for trolley collection work.”
34. On or about 18 February 2014, I received a further telephone call from the employer referred to in the paragraph immediately above in relation to another trolley collection investigation. During the conversation, the employer said to me words to the following effect:
“There was a tender for a trolley collection contract at Aldi’s North Sydney last week. One of my contacts at Aldi’s told me that Nick Iksidis has put a tender in.”
35.As a result of the above conversations and the fourth respondent’s compliance history, it is my understanding that the fourth respondent may still be operating in the trolley collection industry or may seek to in the near future.
66.I further note the submissions made by FWO under the heading “Factors Relating to Penalty for the First and Third Respondent - Deliberateness of the Breaches” using the approach in Mason v Harrington Corporation (supra), states:
59.At the very least, Jay Group and Mr Singh would have known that an employee is entitled to be paid for worked performed given the past operations of Jay Group in the cleaning industry. Mr Singh has now admitted that he knew that the terms and conditions of the Employees would have been covered by an award (Jay Group SOAF at [77(e)] and that he knew, or ought to have known, that the amount of $15,730 invoiced by Jay Group to Xidis Aust trading as ESS (Jay Group SOAF at [21]) would not be sufficient to meet the minimum wage obligations payable to the Employees (Jay Group SOAF at [77(g)]).
60. FWO submits that the breaches occurred in circumstances where Jay Group and Mr Singh were at least reckless in relation to their obligations.
67.This logically leads to the issue of deterrence. I accept the submissions of FWO in respect of “Factors Relating to Penalty for the First and Third Respondents – General deterrence”, which state at [65] and [69]:
65.It is indisputable that the most fundamental purpose of a civil penalty is to ensure compliance with the law. The setting of a penalty in respect of contravening conduct deliberately marks the seriousness with which the public regards such compliance, and naturally is designed to act as a deterrent, both by encouraging compliance in the first instance and also by imposing serious financial consequences for non-compliance.
…
69.The contraventions in the current proceedings concern the removal of key employment entitlements by way of a failure to pay employees for work performed during the Claim Period. The penalties in this case should be imposed on a meaning level so as to deter other employers from committing similar contraventions, especially in industries and circumstances where the employees are vulnerable (Lang Penalty Affidavit at [36] to [46]) and may have less awareness of their entitlements. Directors and managers of such companies should be under no misapprehension that a decision to rely on employees’ unpaid labour, particularly in circumstances of vulnerable employees will not be met with significant penalties.
68.Based on material before the Court, I believe the significantly more important issue concerns specific deterrence. The nature of the contraventions is not in the category of business operators who undertake the venture where they inadvertently and unintentionally breach the law due to lack of familiarity or experience in a particular aspect of the venture. In this matter it was more than a miscalculation or misunderstanding of an award requirement, but rather, a total failure to meet minimum standards of the most fundamental kind being a complete non-payment of wages and entitlements. Consequently, I believe this places greater emphasis on submissions made by FWO in respect “Factors relating to penalty for the first and third respondent – Specific Deterrence”, which state at [70]-[71]:
70. As Justice Gray in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union ([2008] FCAFC 170) at [37] observed:
“…Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur…”
71.The need for specific deterrence is significant in this case as Jay Group continues to operate a cleaning business (Lang Penalty Affidavit at [10(a)] and [10(c)]) and may continue to employ employees (although no evidence of this has been filed). The cleaning industry is known for high levels on non-compliance (See the FWO’s National Cleaning Services Campaign 2010-2011 Final Report at ArticleDocuments/714/national-cleaning-services-campaign-final-report.pdf.aspx, Fair Work Ombudsman v Jooine (Investment) Pty Ltd & Anor [2013] FCCA 2144; Fair Work Ombudsman v Glad Group Pty Ltd [2011] FMCA 233; Fair Work Ombudsman v Cleaners New South Wales [2009] FMCA 683). As outlined… Jay Group also has a history of non-compliance (similar previous conduct)(Lang Penalty Affidavit at [27] to [28]).
72. Where a business continues to operate, this will be an important consideration for specific deterrence, as referred to in Fair Work Ombudsman v Fortcrest Investments Pty Ltd ([2010] FMCA 18 at [96]):
“The respondent continues in business and it is important that a penalty be imposed at a sufficient level to deter the respondent from acting so recklessly in the future when it comes to properly acquainting itself with its obligations as an employer.”
73. There is no evidence of any systems, processes or other measures adopted by Jay Group to ensure compliance in the future. Driver FM, as he was at the time, referred to this consideration in Fair Work Ombudsman v Roselands Fruit Market & Anor ([2010] FMCA 599), where he stated (at [75]):
“…I am not persuaded that the respondents have put in place systems to prevent a recurrence of the breaches and accordingly, specific deterrence plays an important factor.”
74. Mr Singh is still currently employed as the Operations Manager for Jay Group (Singh Penalty Affidavit at [2]) and may therefore have some involvement in engaging employees and have some responsibility for determining their terms and conditions of employment.
75. Further… the penalty evidence filed by Mr Singh indicates no real contrition (Singh Penalty Affidavit at [30]) for the contraventions that have occurred.
The applicant also relied on Fair Work Ombudsman v Cuts Only the Original Barber Pty Ltd [2014] FCCA 2381 at [174] where it was said that:
The large number of previous complaints against the first respondent and associated companies indicates that there is a need in this case for considerable specific deterrence. Clearly, there is a difference between a complaint and a finding of a court, and the prior history in this case does not rise above the level of complaint. However, the manner in which those complaints were resolved is reasonably indicative of a practical acceptance by the respondents of wrongdoing.
Paragraphs 27 to 45 of Ms Campbell’s affidavit are as follows:
Complaints and requests for assistance sent to the FWO
27. The FWO maintains an electronic database known as ‘Nexus’, which includes records of complaints and requests for assistance lodged with the FWO. Nexus also keeps records of letters, file notes, and correspondence conducted throughout a FWO matter.
28. In my role as a FWI, I am authorised to access the Nexus database, including records kept in the Nexus database detailing complaints and requests for assistance lodged by individuals. I am able to conduct searches of the Nexus database.
29.From my review of the Nexus database, I am aware that the FWO has received multiple complaints and requests for assistance from former employees of entities directed by Mr Haddad, which have been logged on Nexus. The former employees have been referred to by their first names only, and personal details have been redacted.
Sofia M. request for assistance
30. On 23 April 2009, the FWO received a request for assistance from Sofia M. in respect of her employment with Deja Vu. Sofia M. alleged that she was not paid for absences on a public holiday and that she did not receive pay slips. The matter resolved by way of payment of $111.02 to Sofia M. Annexed and marked “PLC− 51” are copies of two letters addressed to Mr Haddad (incorrectly spelt ‘Haddan’) dated 28 April 2009, and 15 July 2009, in respect of Sofia M.’s request for assistance.
Petra M. request for assistance
31. On 11 August 2009, the FWO received a request for assistance from Petra M. in respect of her employment with Deja Vu, with allegations of underpayments. In a letter to Mr Haddad (incorrectly spelt ‘Haddan’) dated 18 May 2010, Fair Work Inspector Barry McDonnell stated that he determined Deja Vu:
(a) failed to provide Petra M. with pay slips;
(b) failed to maintain adequate leave, superannuation and termination records;
(c) failed to properly pay Petra M. entitlements on termination; and
(d) did not pay Petra M. for all work undertaken.
32. The matter resolved by way of payment of $1,201.26 (net).
Annexed and marked “PLC− 52” is a copy of the letter addressed to Mr Haddad (incorrectly spelt ‘Haddan’) in respect of Petra M.’s request for assistance, dated 18 May 2010.
Sara A. request for assistance
33. On 20 September 2011, the FWO received a request for assistance from Sara A. regarding her employment with Keyran Pty Ltd. The matter was investigated from around September 2011 to around January 2015, and it was determined that Keyran Pty Ltd had underpaid Sara A. A payment plan was agreed as a way to rectify the alleged underpayment amount, although Keyran Pty Ltd did not finalise the payments to the FWO’s knowledge, and a FWO representative provided Sara A. with information regarding the small claims jurisdiction in the Federal Circuit Court of Australia.
34. During the investigation of Sara A.’s request for assistance, Master Grocers Australia advised that it represented Mr Haddad and Keyran Pty Ltd, and indicated in a letter to the FWO dated 9 February 2011 that he was a member of the association. Annexed and marked “PLC− 53” is a copy of the letter from Master Grocers Australia to the FWO in respect of Sara A’s request for assistance, dated 9 February 2011.
Rex R. request for assistance
35. On 5 January 2012, the FWO received a request for assistance from Rex R. regarding his employment with Naim Enterprises Pty Ltd, with allegations of underpayments of the hourly rate, and a failure to pay accrued annual leave on termination. The FWO corresponded with Mr Haddad and others regarding this matter. This matter resolved by way of payment of $2,262.95 to Rex R., and the FWO sent a finalisation letter to Mr Haddad on 2 February 2012. Annexed and marked “PLC− 54” is a copy of the letter from the FWO to Mr Haddad dated 2 February 2012.
Simon L. request for assistance
36. On 14 February 2012, the FWO received a request for assistance from Simon L. regarding his employment with Naim Enterprises Pty Ltd. Simon L. alleged contraventions regarding his wages. The matter was resolved voluntarily, by way of a payment of $1,000 to Simon L. Annexed and marked “PLC− 55” is a copy of a letter dated 14 May 2012 from the FWO to Mr Haddad regarding the voluntary resolution achieved.
Harry B.S. request for assistance
37. On 10 September 2012, the FWO received a request for assistance from Harry B.S. regarding his employment with Deja Vu. Harry B.S. alleged that he was not paid the correct rate of pay. The matter resolved by way of payment of $5,000 to Harry B.S. Annexed and marked “PLC− 56” is a copy of a letter dated 5 October 2012 from the FWO to Mr Haddad regarding the voluntary resolution achieved.
Nelson M. request for assistance
38. On 9 October 2012, the FWO received a request for assistance from Nelson M. regarding his employment with Deja Vu, with allegations of underpayments. The FWO corresponded with Mr Haddad regarding this matter. This matter resolved by way of payment of $1,039 to Nelson M.
Bill T. request for assistance
39. On 21 February 2013, the FWO received a request for assistance from Bill T. regarding his employment with Mr Haddad at Station Street IGA. Bill T. alleged that he was not paid the correct rate hourly of pay, was not paid for work on public holidays, and was not paid annual leave. A contravention letter was issued to Mr Haddad (and another individual) on 2 May 2013, with details of the contraventions and entitlements under the General Retail Industry Award 2010. Bill T. was paid $2,155 with respect to his underpayment. Annexed and marked “PLC− 57” is a copy of the contravention letter dated 2 May 2013 from the FWO to Mr Haddad (and another individual).
Paul J. request for assistance
40. On 24 June 2013, the FWO received a request for assistance from Paul J. regarding his employment with Deja Vu. Paul J. alleged that he was not paid the correct hourly rate, and did not receive his entitlements on the termination of his employment.
41. I investigated the matter between June and November 2013, and issued a contravention letter to Mr Haddad (and another individual) on 25 November 2013. My letter set out that I had determined there were contraventions arising under the Fair Work Act 2009 and the General Retail Industry Award 2010, including failing to pay the casual loading, failing to pay public holiday penalty rates, and failing to keep proper records. Paul J. was paid $2,045.15 with respect to his underpayment. Annexed and marked “PLC− 58” is a copy of my contravention letter to Mr Haddad (and another individual), dated 25 November 2013.
42. On 28 March 2014, Rob Price, Director of the FWO's Regional and Young Workers Team, issued a letter of caution on Mr Haddad (and another individual), which formally cautioned Mr Haddad (and another individual) about the contraventions referred to in the preceding paragraph, and encouraged the business operated by Mr Haddad to take corrective action. Annexed and marked “PLC− 59” is a copy of Mr Price’s letter of caution to Mr Haddad (and another individual), dated 28 March 2014.
New requests for assistance
43. Since this matter was filed in the Federal Circuit Court of Australia in January 2017, I have received three new requests for assistance regarding Deja Vu and Mr Haddad.
44. The first request for assistance regarded Ms Beverly Reid and is set out in paragraphs 53 to 58 of my affidavit affirmed 15 December 2017.
45. I have also received two requests for assistance from former employees of Deja Vu with allegations of underpayments. I am currently investigating these matters.
In my view, paragraphs 43 to 45 of Ms Campbell’s affidavit do not advance matters and should be given no weight. In paragraphs 43 and 45, there is insufficient information to form a view about whether the requests were well-founded. Paragraph 44 refers to another affidavit, which was not challenged, and speaks for itself.
To the extent that paragraphs 27 to 42 deal with matters where the second respondent agreed to make a payment to the affected employees, those payments can be taken as a concession of wrong doing and can therefore be understood to be evidence of prior similar conduct. I reject the respondents’ submission that this evidence does not take the matter any further. It adds to the respondents’ concessions made in the statement of agreed facts by giving colour and context. Paragraphs 27 to 42 are admissible.
e. whether the breaches arose out of the one course of conduct
This point has already been addressed.
f. the size of the business enterprise involved
The first respondent conducted an IGA grocery store, which would qualify as a small business. The second respondent has an involvement in a number of other small businesses.
The applicant argued that it is well-established that the size of the business and the financial circumstances of its owners are not considered to be exculpatory in cases of breaches of workplace laws. The applicant noted that there was no evidence that the respondents lacked the capacity to pay appropriate penalties. On the contrary, the applicant noted evidence in Ms Campbell’s affidavit affirmed on 20 June 2018 that the second respondent owned two properties with a combined value of about $3 million.
The respondents objected in their written submissions to Ms Campbell’s evidence about the second respondent’s financial circumstances. I accept that objection. Ms Campbell was not qualified to give evidence of the valuation of real estate. Moreover, as noted by the respondents, the title searches exhibited to Ms Campbell’s affidavit showed that both properties were subject to mortgages. There was no evidence as to the extent of the mortgages. In addition, the title search of the Warrandyte property reveals a caveat lodged by a purchaser. From that, it would appear that the Warrandyte property had been sold. Therefore, on Ms Campbell’s own evidence, the combined value to the second respondent of the two properties could be expected to have been somewhat less than $3 million.
In any event, the respondents did not provide any evidence to the court about their financial circumstances and did not ask the court to make any adjustment to their penalties on the basis of financial hardship.
I accept that Ms Campbell’s evidence about the respondents’ financial circumstances is objectionable and should be struck out. The court is left with no evidence about the respondents’ financial circumstances.
The respondents noted that they had not put the first respondent into liquidation to avoid payment, and had taken corrective action. I accept that, although refraining from putting the first respondent into liquidation is hardly deserving of credit.
The respondents also submitted that:
44. …
b. The business undertaken by the first Respondent is nonetheless a small business which does not have the same degree of compliance resources as a large enterprise, nor the degree of profitability;
The applicant argued that there is no evidence before the court in regard to compliance resources or the business’s degree of profitability. That is correct. However, it is a matter of common knowledge that small businesses do not have the same degree of compliance resources as large businesses. Having said that, equally, it is a matter of common knowledge that small businesses do not need the compliance resources that large businesses need for their large numbers of employees.
Small businesses are required by law to know the basic entitlements of a small number of employees. There are many publicly available resources to assist small businesses in that task. More importantly, in the present case, the second respondent had been told previously exactly what the employees’ entitlements were. The respondents’ claim that, as a small business, they did not have sufficient compliance resources is spurious.
The respondents’ claim about profitability is unsupported by evidence. While it may be true that some large businesses make large profits, some go into liquidation. The actual percentage return on investment may or may not be greater for a particular small business than for a particular large business. This argument is also spurious.
For completeness, I note the following cases in relation to the issues of the size of the business and financial hardship. In Fair Work Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634, Judge Jones said at [47]:
I am satisfied that, whilst the size and financial circumstances of a Respondent employer does not exculpate conduct by employers contravening the Act, it may be a relevant consideration in determining the appropriate penalty.
Federal Magistrate Burchardt, as his Honour then was, said in the Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58 at [57]:
… Nonetheless, the Respondents cannot hope to have their conduct in effect exonerated by the Court merely because they are impecunious. Parliament has set significant penalties for the sort of contraventions that the Respondents engaged in and I do not think it is appropriate for the totality principle to operate simply to ensure that penalties are imposed in suitably insignificant amounts to meet the Respondents’ capacity to pay.
Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [28]:
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level” (citation omitted)
Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at [27]:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty. … (footnote omitted)
g. whether or not the breaches were deliberate
The applicant submitted that the respondents’ conduct was deliberate and that this is probably the most aggravating feature of the case. The applicant submitted that the respondents knew their legal obligations with respect to minimum entitlements and deliberately underpaid the employees and then sought to deliberately mislead the applicant by creating false and misleading records.
The applicant relied on the unchallenged evidence of Ms Campbell which showed that the applicant had provided the second respondent with information on the minimum entitlements applicable to the employees. Further, the applicant relied on the unchallenged evidence of Ms McLeod that she advised the second respondent not to create records and to be forthright if records did not exist.
The respondents did not deny that the breaches were deliberate but submitted that the contraventions involved a relatively small number of employees and were isolated incidents.
I accept that the breaches were deliberate, and involved a relatively small number of employees.
h. whether senior management was involved in the breach
As conceded in the statement of agreed facts, at all relevant times, the second respondent was the director, company secretary and majority shareholder of the first respondent and was effectively in control of all operations of its business. The second respondent admitted to being involved in the contraventions.
contrition, corrective action and co-operation with the authorities
In relation to this factor, the respondents relied on Fair Work Ombudsman v Sureguard Security Pty Ltd [2017] FCA 1566, where Barker J said:
31. As to contrition, corrective action and cooperation, the applicant makes the following observations and submissions:
(1)Where a corporate respondent is involved, an expression of contrition is most clearly seen by the way that the corporation takes steps to correct its wrongdoing and change its behaviour. As Perram J said in ACE Insurance at [113]-[114]:
113. It is not clear to me how an artificial construct such as a corporation can experience the complex human emotion of contrition made up, as it is, of an amalgam of distinctly human emotions such as regret, shame and sympathy. I do not doubt that a corporation may exhibit signs of regret but it is too much to expect that such an artificial construct can be meaningfully contrite.
114. For civil penalty cases involving corporations it would be more coherent to ask only whether the corporation has changed its behaviour. Nothing more can be expected; a person who does not literally or physically exist may not wear sackcloth.
(2)While certainly a relevant circumstance and warrants some mitigation on penalty, the weight to be afforded to the respondent’s rectification is to be considered in light of recent comments by a Federal Circuit Court judge that: “Belatedly doing what the law required to be done at an earlier time amounts to no more than the late performance of a duty”. See Fair Work Ombudsman v Australian Sales & Promotion Pty Ltd & Anor [2016] FCCA 2804 at [82]. This is particularly so as:
In the absence of… any evidence of genuine contrition or corrective action, the only inference the Court can draw is that rectification of the underpayment appears more a matter of expediency, a ‘cost of doing business’, than an acceptance of wrongdoing. ...
The applicant relied on paragraph 32 of Sureguard, where it was said that:
As to the question of corrective action, the respondent rejects the proposition that a company cannot exhibit contrition other than “changing behaviour”, as suggested by the applicant with reference to Ace Insurance. In Construction, Forestry, Mining and Energy Union v Pilbara Iron Company (Services) Pty Ltd (No 4) (2012) 225 IR 113; [2012] FCA 894, Katzmann J disagreed with Ace Insurance at [34]:
A corporation may admit it’s wrongdoing and spare the other parties the costs of prosecuting the case. In a jurisdiction, such as this, where costs can only be awarded in exceptional cases that is a meaningful expression of contrition. The corporation may also offer recompense. It may apologise. The decision-makers themselves could offer apologies. It may introduce precautions to guard against the risk of reoffending.
In the present case, the second respondent is a natural person whose contrition and so on can be assessed in the usual way. There was no evidence that the respondents had apologised to the employees concerned.
In relation to corrective action, the applicant acknowledged that the first respondent had rectified the underpayments prior to the commencement of these proceedings. The second respondent gave evidence in the liability hearing that he had instituted a third party payroll system to prevent similar defaults in the future. However, the evidence did not extend to the detail of the instructions given to the third party about how to calculate payments. It is not self-evident that the third party would facilitate payments according to the required minimum standards.
The applicant acknowledged that the respondents had made partial admissions, which facilitated these proceedings. The applicant argued that the respondents were entitled to a 15% discount on the maximum penalty in respect of the contraventions which they admitted and no discount for the contraventions which they disputed.
The respondents sought a discount of 25% for admissions, notwithstanding that they did not admit all facts and it was necessary to have a limited hearing on liability. It seems to me that the applicant’s proposed discount for admissions is appropriate in this case where there is no significant evidence of contrition or corrective action, where it was necessary to have a liability hearing on a number of issues and where the second respondent fabricated false records.
j. the need to ensure compliance with minimum standards
The applicant urged the court to give this factor considerable weight, particularly in relation to the record keeping requirements. That was said to be because the respondents had deliberately created false and misleading records. The applicant submitted that, if the employees had not kept and provided to the applicant their own payslips, the extent of the contraventions may have gone undetected. The applicant also emphasised that it is employers who are legally obliged to keep proper records, not employees.
The applicant relied on Fair Work Ombudsman v Nerd Group Australia Pty Ltd (No 2) (2012) 262 FLR 315; [2012] FMCA 6 at [118], where Federal Magistrate Lucev, as his Honour then was, said:
… It is clear that, subject to any reasonable excuse, Parliament intended that the FW Ombudsman be able to require a person, particularly an employer, to produce documents and records, for without them the FW Ombudsman may not be able to properly fulfil the statutory remit to ensure compliance with guaranteed minimum standards by means of inquiry, investigation and the commencing of court proceedings. It is, therefore, abundantly clear that the requirement to produce records or documents is critical to the effectiveness of the means of ensuring one of the FW Act’s most important objects.
The applicant relied on Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 where it was said that:
200.The failure to produce accurate records, and the choice to instead create and produce false records, supports a clear and ready inference that all the respondents were aware that they were contravening the law, if not long before in the case of Ms Jenna Xu. It constituted a deliberate diversion of the FWO from its statutory duty. It was an attempt to conceal what had taken place and prevent enforcement action being taken. It may well have facilitated the illegal conduct continuing. It certainly impeded an effective investigation taking place until accurate records were produced.
201.Moreover, the creation and production of false records to the FWO for the inescapable purpose of thwarting the FWO’s investigation can be taken into account not just in relation to the regulation breaches, but also as indicating the moral culpability of each of the respondents in relation to the contraventions this was evidently designed to conceal, albeit mainly in relation to New Shanghai Charlestown, Mr Chen and Ms Sarah Zhu. The wilful deception engaged in by New Shanghai Charlestown, Mr Chen and Ms Sarah Zhu, reflects their attitude toward the primary contraventions and elevates the need for general and specific deterrence in relation that antecedent conduct. In the case of Ms Jenna Xu, even though it has not been shown that she knew what the Award obligations were until the FWO notice to produce was served, it is clear that she knew from the time of the creation and production of the false records and was an active participant in the attempted cover-up.
The respondents submitted that the applicant’s argument in this regard was inherently flawed as the actual pay slips were emailed to the employees and were always available. However, this argument flies in the face of the respondents’ argument at the liability hearing, which was that the pay slips had been destroyed in a computer malfunction. Whether the employees had their payslips on email or not, the fact remained that the respondents did not produce the payslips to the applicant when asked, and if the employees had not produced them, the applicant would not have been able to determine their correct entitlements.
I consider that it is appropriate to give this matter considerable weight.
k. the need for specific and general deterrence
The applicant argued that specific and general deterrence are central to the imposition of penalties in fair work matters. The applicant relied on Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 326 ALR 476; (2015) 90 ALJR 113; (2015) 255 IR 87; [2015] HCA 46 where the High Court said:
55. No less importantly, whereas criminal penalties import notions of retribution74 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 compliance75:
“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. ... The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”
74Gapes (1979) 27 ALR 87 at 90 per Smithers J; cf Ingleby (2013) 39 VR 554 at 565 [44] per Weinberg JA.
75 (1991) ATPR ¶41-076 at 52,152; cf FWBII v CFMEU (2015) 229 FCR 331 at 357-358 [65]-[67].
…
110. It is because the Commissioner may, on occasion, be too pragmatic in taking such a stance that the court must exercise its function to ensure that the penalty imposed is just, bearing in mind competing considerations of principle, including that of equality before the law and the need to maintain effective deterrence to other potential contraveners. In this latter regard, in Australian Competition and Consumer Commission v TPG Internet Pty Ltd146, French CJ, Crennan, Bell and Keane JJ approved the statement by the Full Court of the Federal Court in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission147 that a civil penalty for a contravention of the law:
“must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business”.
146 (2013) 250 CLR 640 at 659 [66]; [2013] HCA 54.
147 (2012) 287 ALR 249 at 265 [62]-[63].
In relation to specific deterrence, Gray J observed in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170 at [37] that:
… Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur. …
The applicant relied on Plancor to argue that a relevant consideration is that the respondents continue to operate an IGA in Fairfield, which is subject to continuing Fair Work investigation for complaints of non-compliance. However, as discussed, there is insufficient evidence before the court to form a view that the complaints are well-founded.
In any event, the applicant submitted in her written submissions on penalty that:
95. … there is a need to send a message in the strongest terms that the Court does not tolerate the contravening conduct. The Respondents need to be deterred specifically from any future similar contravening conduct.
In relation to general deterrence, Lander J noted in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 at [93]:
… In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty…(citations omitted)
Similarly, in Community and Public Sector Union (CPSU) v Telstra Corp Ltd (2001) 108 IR 228; [2001] FCA 1364, Finkelstein J said at [9]:
… even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law’s disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ….
The applicant submitted that general deterrence is a critical factor in this matter. The applicant relied on the observations of Marshall J in Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29]:
…It is important to ensure that the protections provided by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected. ...
The applicant relied on data from their Industry Profile, which is set out in Ms Campbell’s affidavit affirmed on 20 June 2018. The Industry Profile shows the following statistics:
(a) 26.5% of requests for assistance received by the FWO were from individuals aged between 15 to 24 years, while 26.1% were from individuals aged 45 years and older;
(b) since July 2017, per thousand businesses in the general retail industry (Industry), the FWO received disputes relating to 21.2%. This is approximately 212 disputes per thousand general retail businesses; and
(c) sales assistants were the most common occupation for the Industry, comprising 25.2% of the Industry’s workforce. Sales assistants have an ANZSCO skill level of 5, which has the lowest educational skill level, being commensurate with an Australian Qualifications Framework Certificate 1 or compulsory secondary education.
The applicant argued that the vulnerability of Ms Clark-Wingrave, a young employee, is reflected in the number of overall disputes received by the applicant from this category of worker. Further, the applicant noted that each of the employees was employed in some form of a sales assistant role, which is the most common and lowest-skilled occupation for this industry. The applicant also noted that the above statistics indicate that the general retail business is an industry in high need of deterrence in relation to workplace defaults.
It appears that similar data was provided to the court in Fair Work Ombudsman v Mhoney Pty Ltd [2017] FCCA 811, where Judge Burchardt said:
66. I accept that the materials provided by the applicant are open to some measure of qualification. It is not important to embark on a detailed analysis of why this is so. That is because it is notorious, in my view, that the retail industry is prone to underpayment. This court has dealt with this industry on numerous occasions in the past. It seems to be a fact of life that persons in the retail industry are unpaid. I note in this instance the employment was that of a recently arrived person in Australia with no English. Mr Taleb’s own affidavit seems to suggest that he employed similar persons in the past (his endeavours to help other refugees and the like).
67. In my view, general deterrence is important, and particularly in an industry such as this characterised often by small operators with little understanding of industrial instruments and the law.
In response, the respondents argued in relation to general deterrence that the industry materials provided by the applicant were open to some measure of qualification, as noted by Judge Burchardt in Mhoney. I accept that submission. Such statistics are obviously capable of many interpretations and should only be given to a court via appropriately qualified experts. Having said that, the respondents accepted that the court had dealt with participants in the retail industry on many occasions in respect of wage underpayments. It seems to me that it can be taken as accepted that there is a significant level of underpayment of employees in the retail industry.
Otherwise, the respondents argued that the need for general deterrence should be weighed against the scale of the business concerned, bearing in mind that larger enterprises often have dedicated human resources departments. As discussed above, the size of a business is of limited relevance in assessing penalty.
The respondents also argued that large penalties can and frequently do cripple small businesses. That is a bold submission coming from parties who did not file any evidence of their financial circumstances. In any event, it seems to me that this is an issue better dealt with in relation to the application of the totality principle.
For the reasons discussed above, I consider that general deterrence is a significant factor in this matter.
The respondents argued in their written submissions on penalty that specific deterrence is not a significant issue in this proceeding because the first respondent had engaged a third party to attend to payroll requirements. However, as discussed above, too little was made known to the court about the instructions given to the third party to know whether this amounts to corrective action or not.
It seems to me that specific deterrence is a very significant factor in this matter because the respondents deliberately engaged in their contravening conduct after they were made aware of the correct entitlements of their employees and were told not to create records.
For some reason, the parties thought it would be more efficient to have one penalty hearing for both this matter and the Hadya matter, and that Ms Campbell’s affidavit affirmed on 20 June 2018 which was filed in the Hadya matter, to apply to the present matter. It seems to me that that approach has made this matter unnecessarily complicated and cumbersome.
In any event, the applicant said specifically in oral submissions that the court should take nothing from the present matter into the Hadya matter and vice versa, as both matters will be considered simultaneously[5]. I accept that that is the correct approach and that is the basis upon which I will determine the penalties in this case.
[5] Transcript page 20 line 22.
Other issues
I do not consider that there are any other relevant issues in this case.
Step 4: the appropriate penalty
Sections 539, 546 and 798 of the Act and reg.4.01A of the Regulations provide that the maximum penalties for:
a)a breach of s.45 of the Act is 60 penalty units for a natural person and 300 penalty units for a corporation;
b)a breach of s.536(2) of the Act is 30 penalty units for a natural person and 150 penalty units for a corporation;
c)a breach of s.712(3) of the Act is 60 penalty units for a natural person and 300 penalty units for a corporation;
d)a breach of reg.3.44(1) of the Regulations is 20 penalty units for a natural person and 100 penalty units for a corporation;
e)a breach of reg.3.44(4) of the Regulations is 20 penalty units for a natural person and 100 penalty units for a corporation; and
f)a breach of reg.3.44(6) of the Regulations is 20 penalty units for a natural person and 100 penalty units for a corporation.
A penalty unit at the relevant times was $180.[6]
[6] Section 4AA of the Crimes Act 1914.
In her written submissions, the applicant said:
114.In summary, for the different groups of contraventions the Applicant has recommended the following varied penalty ranges:
(a)high to maximum range penalties of between 80% and 100% for the Disputed Contraventions;
(b)medium, and medium-to-high, range penalties of between 40% and 60% for the contraventions in respect of minimum rates, casual loadings, Sunday penalties; and
(c)low, and low-to-medium, range contraventions of between 10% and 40% for the remaining contraventions.
115.The Applicant has recommended the same penalty ranges for both Respondents on the basis that Mr Haddad was at all relevant times the primary actor and decision maker of Deja Vu. In other words, Mr Haddad was centrally involved in all of the contraventions.
In tabular form, the applicant proposed penalties for the first respondent as follows:
Contravention Grouping Maximum penalty – First Respondent Maximum penalty with discount of 15% where applicable Proposed penalty range for Respondents Proposed range – First Respondent Section 45 of the FW Act, by contravening clause 17 of the Award Minimum rate contraventions (adult and junior) $54,000 $45,900 Medium
40-50%$18,360 –
$22,950Section 45 of the FW Act, by contravening clause 18.2 of the Award Section 45 of the FW Act, by contravening clause 13.2 of the Award Casual loading $54,000 $45,900 Medium
40-50%$18,360 –
$22,950Section 45 of the FW Act, by contravening clause 29.4(a) of the Award Evening penalty $54,000 $45,900 Low to medium
30-40%$13,770 –
$18,360Section 45 of the FW Act, by contravening clause 29.4(b) of the Award Saturday penalty $54,000 $45,900 Low to medium
30-40%$13,770 –
$18,360Section 45 of the FW Act, by contravening clause 29.4(c) of the Award Sunday penalty $54,000 $45,900 Medium to high
50-60%$22,950 –
$27,540Section 45 of the FW Act, by contravening clause 29.4(d) of the Award Public holiday penalty $54,000 $45,900 Low to medium
30-40%$13,770 –
$18,360
Section 45 of the FW Act, by contravening clause 20.2(b)(ii) of the Award Uniform allowance $54,000 $45,900 Low
20-30%$9,180 –
$13,770Section 45 of the FW Act, by contravening clause 12.2 of the Award Failure to agree on a regular pattern of work $54,000 $45,900 Low
20-30%$9,180 –
$13,770Section 536(2) of the FW Act, Failure to provide pay slips with the required information
$27,000
$22,950
Low
10-20%$2,295 –
$4,590Regulation 3.44(1) of the FW Regulations Failure to make and keep records that were not false/misleading $18,000
$18,000
(no discount)High to maximum;
90-100%$16,200 – $18,000
Regulation 3.44(4) of the FW Regulations
Altering records in contravention of regulation 3.44(4) of the FW Regulations
$18,000
$18,000
(no discount)High to maximum;
90-100%$16,200 – $18,000
Regulation 3.44(6) of the FW Regulations
Making use of a false/misleading record
$18,000
$18,000
(no discount)High to maximum;
90-100%$16,200 – $18,000
Section 712(3) of the FW Act
Failure to comply with an NTP
$54,000
$54,000
(no discount)High;
80-90%$43,200 –
$48,600TOTALS $567,000 $498,150 $213,435 –
$263,250
In tabular form, the respondents proposed penalties for the first respondent as follows[7]:
[7] Some of the respondents’ calculations are wrong.
Maximum Penalties as per FWO (prior to grouping as proposed by Respondents) $567,000 Maximum Penalties (post grouping) $315,000 Discount for admissions 25% Maximum (including 25% discount) $236,250 Contraventions Maximum Inc. 25% discount % Amount a. Minimum rate
$54,000
$40,500
30-40% $12,150-$16,200
b. Loading and allowances
$54,000
$40,500
30-40% $12,150-$16,200
c. Penalty Rate
$54,000
$40,500
20-30% $8,100-$12,150
d. Regular pattern of work
$54,000
$40,500
10-20% $4,050-$8,100
e. Required info on payslips
$27,000
$20,250
10-20% $2,700-$5,400
f. Record keeping
$18,000
$13,500
60-80% $8,100-$10,800
g. Notice to produce
$54,000
$40,250
60-80%
$24,300-$32,400
TOTAL RANGE
$71,550-$101,250
In tabular form, the applicant proposed the following penalties for the second respondent:
Contravention Grouping Maximum penalty – Second Respondent Maximum penalty with discount of 15% where applicable Proposed penalty range for Respondents Proposed range – Second Respondent Section 45 of the FW Act, by contravening clause 17 of the Award Minimum rate contraventions (adult and junior) $10,800 $9,180 Medium
40-50%$3,672 –
$4,590Section 45 of the FW Act, by contravening clause 18.2 of the Award Section 45 of the FW Act, by contravening clause 13.2 of the Award Casual loading $10,800 $9,180 Medium
40-50%$3,672 –
$4,590Section 45 of the FW Act, by contravening clause 29.4(a) of the Award Evening penalty $10,800 $9,180 Low to medium
30-40%$2,754 –
$3,672Section 45 of the FW Act, by contravening clause 29.4(b) of the Award Saturday penalty $10,800 $9,180 Low to medium
30-40%$2,754 –
$3,672Section 45 of the FW Act, by contravening clause 29.4(c) of the Award Sunday penalty $10,800 $9,180 Medium to high
50-60%$4,590 –
$5,508Section 45 of the FW Act, by contravening clause 29.4(d) of the Award Public holiday penalty $10,800 $9,180 Low to medium
30-40%$2,754 –
$3,672Section 45 of the FW Act, by contravening clause 20.2(b)(ii) of the Award Uniform allowance $10,800 $9,180 Low
20-30%$1,836 –
$2,754Section 45 of the FW Act, by contravening clause 12.2 of the Award Failure to agree on a regular pattern of work $10,800 $9,180 Low
20-30%$1,836 –
$2,754Section 536(2) of the FW Act, Failure to provide pay slips with the required information
$5,400
$4,590
Low
10-20%$459 –
$918Regulation 3.44(1) of the FW Regulations Failure to make and keep records that were not false/misleading $3,600
$3,600
(no discount)High to maximum;
90-100%$3,240 – $3,600
Regulation 3.44(4) of the FW Regulations
Altering records in contravention of regulation 3.44(4) of the FW Regulations
$3,600
$3,600
(no discount)High to maximum;
90-100%$3,240 – $3,600
Regulation 3.44(6) of the FW Regulations
Making use of a false/misleading record
$3,600
$3,600
(no discount)High to maximum;
90-100%$3,240 – $3,600
Section 712(3) of the FW Act
Failure to comply with an NTP
$10,800
$10,800
(no discount)High;
80-90%$8,640 –
$9,720TOTALS $113,400 $99,630 $42,687 –
$52,650
In tabular form, the respondents proposed the following penalties for the second respondent:
Maximum Penalties as per FWO (prior to grouping as proposed by Respondents) $113,400 Maximum Penalties (post grouping) $63,000 Discount for admissions 25% Maximum (including 25% discount) $47,250 Contraventions Maximum Inc. 25% discount % Amount a. Minimum rate
$10,800 $8,100 30-40% $2,430-$3,240 b. Loading and allowances
$10,800 $8,100 30-40% $2,430-$3,240 c. Penalty Rate
$10,800 $8,100 20-30% $1,620-$2,430 d. Regular pattern of work
$10,800 $8,100 10-20% $810-$1,620 e. Required info on payslips
$5,400 $4,050 10-20% $405-$810 f. Record keeping
$3,600 $2,700 60-80% $1,620-$2,160 g. Notice to produce $10,800 $8,100 60-80% $4,860-6,480 TOTAL RANGE
$14,175-$19,980
As discussed above, I do not accept the respondents’ arguments about grouping.
The parties did not explain why they proposed a different percentage of the maximum penalty for different breaches. However, they appear to have agreed that it is appropriate to impose differential penalties and, broadly speaking, they appear to have agreed on which breaches should incur lower levels of penalty.
In my view, it is appropriate in all the circumstances of this case to order penalties for both respondents at the top of the ranges proposed by the applicant. It seems to me that the conduct of the respondents in this case was particularly egregious. It was deliberate. There has been no apology to the employees affected by the respondents’ conduct. The respondents continue to be involved in the retail industry. The second respondent fabricated records. There is a considerable need in this case for both general and specific deterrence.
On the other hand, I accept that the respondents made partial admissions and spared the regulator, the relevant employees and the court the necessity of a hearing on all liability issues. As such, they are entitled to a discount. However, I do not consider that the circumstances of the case warrant a discount of the size the respondents submitted.
In particular, I consider that the breaches of regs.3.44(1), 3.44(4) and 3.44(6) of the Regulations warrant the maximum penalty, because of the deliberate nature of those breaches, the fabrication of records, and the respondents insisting on a liability hearing in relation to those matters.
Consequently, the penalties for the first respondent for each breach would be as follows:
| Contravention | Grouping | Penalty – First Respondent |
| Section 45 of the FW Act, by contravening clause 17 of the Award | Minimum rate contraventions (adult and junior) | $22,950 |
| Section 45 of the FW Act, by contravening clause 18.2 of the Award | ||
| Section 45 of the FW Act, by contravening clause 13.2 of the Award | Casual loading | $22,950 |
| Section 45 of the FW Act, by contravening clause 29.4(a) of the Award | Evening penalty | $18,360 |
| Section 45 of the FW Act, by contravening clause 29.4(b) of the Award | Saturday penalty | $18,360 |
| Section 45 of the FW Act, by contravening clause 29.4(c) of the Award | Sunday penalty | $27,540 |
| Section 45 of the FW Act, by contravening clause 29.4(d) of the Award | Public holiday penalty | $18,360 |
| Section 45 of the FW Act, by contravening clause 20.2(b)(ii) of the Award | Uniform allowance | $13,770 |
| Section 45 of the FW Act, by contravening clause 12.2 of the Award | Failure to agree on a regular pattern of work | $13,770 |
| Section 536(2) of the FW Act, | Failure to provide pay slips with the required information | $4,590 |
| Regulation 3.44(1) of the FW Regulations | Failure to make and keep records that were not false/misleading | $18,000 |
| Regulation 3.44(4) of the FW Regulations | Altering records in contravention of regulation 3.44(4) of the FW Regulations | $18,000 |
| Regulation 3.44(6) of the FW Regulations | Making use of a false/misleading record | $18,000 |
| Section 712(3) of the FW Act | Failure to comply with an NTP | $48,600 |
| TOTAL | $263,250 |
The penalties for the second respondent for each breach would be as follows:
| Contravention | Grouping | Penalty – Second Respondent |
| Section 45 of the FW Act, by contravening clause 17 of the Award | Minimum rate contraventions (adult and junior) | $4,590 |
| Section 45 of the FW Act, by contravening clause 18.2 of the Award | ||
| Section 45 of the FW Act, by contravening clause 13.2 of the Award | Casual loading | $4,590 |
| Section 45 of the FW Act, by contravening clause 29.4(a) of the Award | Evening penalty | $3,672 |
| Section 45 of the FW Act, by contravening clause 29.4(b) of the Award | Saturday penalty | $3,672 |
| Section 45 of the FW Act, by contravening clause 29.4(c) of the Award | Sunday penalty | $5,508 |
| Section 45 of the FW Act, by contravening clause 29.4(d) of the Award | Public holiday penalty | $3,672 |
| Section 45 of the FW Act, by contravening clause 20.2(b)(ii) of the Award | Uniform allowance | $2,754 |
| Section 45 of the FW Act, by contravening clause 12.2 of the Award | Failure to agree on a regular pattern of work | $2,754 |
| Section 536(2) of the FW Act, | Failure to provide pay slips with the required information | $918 |
| Regulation 3.44(1) of the FW Regulations | Failure to make and keep records that were not false/misleading | $3,600 |
| Regulation 3.44(4) of the FW Regulations | Altering records in contravention of regulation 3.44(4) of the FW Regulations | $3,600 |
| Regulation 3.44(6) of the FW Regulations | Making use of a false/misleading record | $3,600 |
| Section 712(3) of the FW Act | Failure to comply with an NTP | $9,720 |
| TOTAL | $52,650 |
Step 5: the totality principle
The applicant submitted that a 40% totality discount would be appropriate in the circumstances. The respondents agreed with this discount.
In the absence of evidence from the respondents about their financial circumstances, I am not in a position to form the view that the penalties will be crushing or otherwise excessive.
In relation to the check that is required by the totality principle, I would have considered that the aggregate penalties indicated above are appropriate for the whole of the contravening conduct engaged in by the respondents. However, I am prepared to accept the discount conceded by the applicant.
Consequently, the total penalties for the first respondent will be $157,950 and the total penalties for the second respondent will be $31,590. There will be orders accordingly.
The workplace notice
The applicant seeks that an order be made in the following terms:
a)Pursuant to s.545(1) of the Act the first respondent, within 30 days of the date of this order, display a notice at the premises of the business operated by the first respondent (the IGA supermarket on Station Street in Fairfield, Victoria), or other entities owned or operated by the first respondent or the second respondent that are covered by the Award, that can be easily viewed by all employees (“the workplace notice”) on the following terms:
i)the workplace notice must:
A.contain information on the minimum rates of pay, casual loading and penalty rates under the Award;
B.contain information on how to contact the Fair Work Ombudsman; and
ii)the first respondent provide proof of the display of the workplace notice to the applicant within 14 days of display; and
iii)the Workplace Notice must be displayed continuously for a period of one year.
The applicant referred to the affidavit of the first respondent sworn on 6 February 2018 where he deposed that:
4.Deja Vu is the operator of an IGA Supermarket at 140 Station Street Fairfield (“the business”). It employs approximately 15 persons from time to time. The precise number varies depending upon seasonal fluctuations as well as the number of hours which the employees are able to work. By that ii mean to say that many of our employees simply work on a part-time basis so the total number of employees depends upon the collective availability to fulfil the daily staff needs of the business.
The respondents agreed to the posting of the workplace notice but not for the period of one year, as proposed by the applicant. The respondents did not say for how long the notice should be displayed.
I consider that, in all the circumstances of this case, it is appropriate for the workplace notice to be displayed for a year. There will be an order largely in the terms sought by the applicant.
Costs
The applicant sought an order that the respondents jointly and severally pay her costs of preparing and appearing at the liability hearing on 22 February 2018.
In support of the application for costs, the applicant relied on an affidavit sworn by Maria Bicchi on 22 June 2018.
Section 570 of the Act sets out the costs scheme in this jurisdiction. That section is as follows:
570Costs only if proceedings instituted vexatiously etc.
(1)A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.
(2)The party may be ordered to pay the costs only if:
(a) the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or
(b) the court is satisfied that the party’s unreasonable act or omission caused the other party to incur the costs; or
(c) the court is satisfied of both of the following:
(i)the party unreasonably refused to participate in a matter before the FWC;
(ii)the matter arose from the same facts as the proceedings.
The applicant submitted that costs should be awarded against the respondents as the respondents had engaged in unreasonable acts or omissions that caused the applicant to incur costs.
The applicant stated in her written submissions that:
135.… the Respondents engaged in unreasonable acts for the purposes of section 570(2)(b) of the FW Act, by continuing to contest the Applicant’s claim in respect of the Disputed Contraventions in circumstances where:
(a) the position set out in the Amended Defence filed 25 October 2017 and Further Amended Defence filed 8 November 2017, and the evidence filed on behalf of the Respondents, did not support an arguable legal or factual case to the allegations contained in the Statement of Claim which remained in contest in this proceeding;
(b) the documents that the Respondents alleged were lost by reason of a computer crash were produced to the Court in response to the Subpoena issued on Sky Software;
(c) the Respondents were put on notice of the likelihood their claim would fail (on 31 January 2018); and
(d) the Respondents were put on notice that they had no defence and their own evidence went to meeting the Applicant’s claim (on 12 February 2018).
The applicant relied on Ryan v Primesafe (2015) 323 ALR 107; [2015] FCA 8 where Mortimer J said:
64.I accept the general import of the authorities relied on by the applicant and Mr McDonald in their written submissions about the significance of the threshold set by s 570(2) of the Fair Work Act. Although some of the authorities relied on dealt with the predecessor provisions to s 570, there is no difference in substance in the way the threshold is expressed. The discretion conferred by the confined terms of s 570(2) should be exercised cautiously, and the case for its exercise should be clear: see Saxena v PPF Asset Management Ltd [2011] FCA 395 at [6] per Bromberg J. The reason for caution is the potential for discouraging parties’ pursuit in a complete and robust way of the claims for contravention which they seek to make under the Fair Work Act, or the defence of such claims. The policy behind s 570 is to ensure that the spectre of costs being awarded if a claim is unsuccessful does not loom so large in the mind of potential applicants (in particular, in my opinion) that those with genuine grievances and an arguable evidentiary and legal basis for them are put off commencing or continuing proceedings. It is an access to justice provision. In so far as it operates to the benefit of respondents, it is designed to ensure respondents feel free to pursue arguable legal and factual responses to the claims made against them. There is an almost identical provision in s 611 of the Fair Work Act, giving the Fair Work Commission a similar costs power, conditioned by similarly-worded considerations. The predecessor provisions, and the conscious broadening of the statutory terms used in s 570, are traced by the Full Court in Australasian Meat Industry Employees’ Union v Fair Work Australia (No 2) (2012) 203 FCR 430; 289 ALR 552; [2012] FCAFC 103 at [3]–[4] per Jessup and Tracey JJ.
The applicant also relied on Australian and International Pilots Association v Qantas Airways Ltd (No 3) (2007) 162 FCR 392; (2007) 165 IR 464; [2007] FCA 879 where Tracey J said:
36.In dealing with an application for costs under s 347(1) of the Act, in Standish v University of Tasmania (1989) 28 IR 129, Lockhart J was called on to decide whether the proceeding had been instituted “without reasonable cause”. His Honour drew a distinction between the pursuit of an argument which does not succeed and the institution of a proceeding which is misconceived in the sense of being incompetent: see at 138-9. This distinction may, in my view, assist in determining whether conduct is unreasonable for the purposes of s 824(2). The prosecution of any incompetent or hopeless case can be regarded as “an unreasonable act” within the meaning of s 824(2). Conversely, in my opinion, the pursuit of a contentious, and ultimately unsuccessful, argument is not an unreasonable act. In my view the applicant’s defence of its pleadings in the first strike-out application falls into the latter category. I take a different view of the applicant’s conduct in relation to the second strike-out application. The second further amended statement of claim contained the same major deficiencies as its predecessor insofar as it dealt with the Pt XA claim. The applicant instituted but then withdrew an application for leave to appeal from my decision. It persisted with pleadings which were inconsistent with my reasons for striking-out the first amended statement of claim. In so persisting, I consider that the applicant acted unreasonably for the purposes of s 824(2). The second further amended statement of claim also sought to plead a cause of action under Pt 16. That aspect of the pleading failed by reason of embarrassment, not because it was untenable. I do not consider that it was unreasonable for the applicant to pursue the Pt 16 aspect of its claim. In my view it is appropriate to order that the applicant pay half the respondent’s costs of the second strike-out application.
The applicant also relied on Australian Workers Union v Leighton Contractors Pty Ltd (No 2) (2013) 232 FCR 428; [2013] FCAFC 23 where Dowsett, McKerracher and Katzmann JJ said:
7.In Khiani v Australian Bureau of Statistics [2011] FCAFC 109 (Khiani) the Full Court endorsed the summary of the authorities provided by Reeves J in Re Australian Education Union (NT Branch) (No 2) [2011] FCA 728 at [27]-[30]. In our view the authorities establish the following principles:
(1) The purpose or policy of the section is to free parties from the risk of having to pay their opponents’ costs in matters arising under the Act, while at the same time protecting those parties who are forced to defend proceedings that have been instituted vexatiously or without reasonable cause.
(2) It follows from the protection offered by s 570(2) that a person will rarely be ordered to pay the costs of a proceeding. But it is not necessary to prove that there are exceptional circumstances warranting the making of an order: Spotless Services Australia Ltd v Senior Deputy President Marsh [2004] FCAFC 155 (Spotless) at [12]-[13] (to the extent that the Full Court in Council of Kangan Batman Institute of Technology and Further Education v Australian Industrial Relations Commission (2006) 156 FCR 275 (Kangan) held otherwise, we would respectfully disagree).
(3) The relevant question is whether the proceeding had reasonable prospects of success at the time it was instituted, not whether it ultimately failed: R v Moore; Ex parte Federated Miscellaneous Workers’ Union of Australia (1978) 140 CLR 470 at 473 per Gibbs J; Kangan at [60]. In Kanan v Australian Postal and Telecommunications Union (1992) 43 IR 257 at 264-265 (approved in Kangan) Wilcox J said:
If success depends upon the resolution in the applicant’s favour of one or more arguable points of law, it is inappropriate to stigmatise the proceeding as being “without reasonable cause”. But where, on the applicant’s own version of the facts, it is clear that the proceeding must fail, it may properly be said that the proceeding lacks a reasonable cause.
The applicant noted in her written submissions at paragraph 140 that:
(a) the Applicant’s evidence was filed on 18 December 2017;
(b) the only evidence filed by the Respondents in this proceeding is the affidavit of Mr Haddad sworn 6 February 2018;
(c) Mr Haddad deposed in his Affidavit sworn 6 February 2018 that he had disputed liability for the contested allegations “not on the basis of a dispute as to whether or not the facts as described by the FWO happened, but rather, because I had no intention to mislead the FWO. To the contrary, I thought that I was doing the right thing.”
(d) the Respondents have advanced no authority for the proposition that a contravention of regulations 3.44(1), 3.44(5), 3.44(6) of the FW Regulations, or section 712 of the FW Act relies on a finding that Mr Haddad intended to mislead the Applicant;
(e) as the Deja Vu Liability Decision found, in order to make out a contravention of the record keeping regulations the Applicant was not required to prove an intention to wilfully mislead or deceive, “[a]ll that was required was that the first respondent kept the records that the second respondent knew were inaccurate. His intention and motivation were irrelevant. That accords with the plain words of the regulation”. In short, Mr Haddad’s asserted belief that he was doing the right thing did not, and could not, amount to an arguable case in response to the Disputed Contraventions; and
(f) the admissions made in the Amended Defence, Deja Vu SOAF, and Mr Haddad’s affidavit are such that the Respondents had no arguable factual or legal basis to resist a finding of contravention of regulations 3.44(1) or 3.44(6) of the FW Regulations. (citations omitted)
The applicant sought costs of $11,616.90 calculated in accordance with Part 1, Schedule 1 of the Federal Circuit Court Rules 2001 as follows:
a)item 6 – preparation for final hearing (one day matter): $6,603;
b)item 12 – advocacy loading for a full day hearing: $1,099.50;
c)item 13 – daily hearing fee for full day hearing: $2,199;
d)item 14 – disbursement for hearing fee from FCCA: $735; and
e)item 15 – disbursement for photocopying for each page of three Court Books ordered to be filed and served: $980.40 (being 1,290 pages at $0.76 per page).
The respondents opposed the application for costs on the basis that it did not follow from the rejection of their defence that they did not have an arguable case. However, the fact is that the respondents did not have an arguable case. Their defence was, quite simply, preposterous, particularly in circumstances where the records that the respondents said had been destroyed in a computer malfunction and were irrecoverable were obtained by the applicant under subpoena from an agent of the first respondent, Sky Software. I consider that the respondents’ defence of the disputed contraventions was an unreasonable act or omission warranting a costs order.
In that event, the respondents submitted that the court should exercise its discretion to reduce the amount to a fixed sum or a percentage of the amount claimed, given that the respondents’ concessions limited the scope of the dispute.
Notwithstanding that the respondents’ concessions limited the scope of the dispute, the fact remains that the hearing took almost a full day, beginning at 10:06am and finishing at 3:20pm. As such, it is appropriate for the costs to be calculated on the basis of a hearing of one full day.
The amounts sought by the applicant are on scale and seem to me to be entirely reasonable in the circumstances of this case. There will be an order accordingly.
I certify that the preceding one hundred and fifty-one (151) paragraphs are a true copy of the reasons for judgment of Judge Riley
Date: 19 October 2018
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