Fair Work Ombudsman v Delahill Pty Ltd

Case •

[2018] FCCA 3629

•

13 December 2018

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v DELAHILL PTY LTD & ANOR [2018] FCCA 3629

Catchwords:
INDUSTRIAL LAW – Breaches of civil remedy provisions of the Fair Work Act 2009 – penalties – pecuniary penalties – relevant considerations.

INDUSTRIAL LAW – Failure to comply with compliance notice – whether the conduct alleged to justify the issuing of the compliance notice should be taken into account when determining the penalty for not complying with the compliance notice.

Legislation:

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Fair Work Act 2009, ss.539, 546, 550, 700, 715, 716, 717

Crimes Act 1914, ss.4AA, 4F

Workplace Relations Act 1996
Kelly v Fitzpatrick (2007) 166 IR 14
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Fair Work Ombudsman v Hair Industrie Mt Druitt Pty Ltd [2015] FCCA 3426
Fair Work Ombudsman v Absynthe Restaurant Pty Ltd [2015] FCCA 58
Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150
ACE Insurance Ltd v Trifunovski (No 2) (2012) 215 IR 206
Australian Building & Construction Commissioner v Construction, Forestry, Mining & Energy Union (No 2) (2010) 199 IR 373
Applicant: FAIR WORK OMBUDSMAN
First Respondent: DELAHILL PTY LTD ACN 003 252 444
Second Respondent: GUILHERME ROQUE REBELLO
File Number: SYG 1612 of 2015
Judgment of: Judge Cameron
Hearing date: 8 August 2016
Date of Last Submission: 8 August 2016
Delivered at: Sydney
Delivered on: 13 December 2018

REPRESENTATION

Counsel for the Applicant: Ms C. Bembrick
Solicitors for the Applicant: Office of the Fair Work Ombudsman
The Second Respondent appeared in person and on behalf of the first respondent

THE COURT DECLARES THAT:

  1. The first respondent contravened s.716(5) of the Fair Work Act 2009 (“FW Act”) by failing to comply with the compliance notice issued by the applicant on 2 April 2015.

  2. The second respondent was involved, within the meaning of s.550(2) of the FW Act, in the first respondent’s contravention of s.716(5) of the FW Act.

THE COURT ORDERS THAT:

  1. The first respondent pay a penalty of $15,000, in respect of its contravention of s.716(5) of the FW Act.

  2. The second respondent pay a penalty of $3,000, in respect of his involvement in the first respondent’s contravention of s.716(5) of the FW Act.

  3. The penalties ordered in orders 1 and 2 be paid into the Consolidated Revenue Fund of the Commonwealth within 28 days.

  4. 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 SYDNEY

SYG 1612 of 2015

FAIR WORK OMBUDSMAN

Applicant

And

DELAHILL PTY LTD ACN 003 252 444

First Respondent

GUILHERME ROQUE REBELLO

Second Respondent

REASONS FOR JUDGMENT

INTRODUCTION

  1. The first respondent (“Delahill”) operates a plastic products manufacturing business under the trading name ABCO Plastics at a factory in Guildford, a suburb of Sydney.  The second respondent, Mr Rebello, is the sole director and secretary of Delahill.

  2. Mr Anura Karunaratne and Mrs Gnana Karunaratne, who are husband and wife, are former employees of Delahill.  On 11 September 2014 they lodged complaints with the applicant (“Ombudsman”) concerning their employment with Delahill.  Following an investigation, the Ombudsman concluded that Delahill had contravened the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (“FW (TPCA) Act”) and the Fair Work Act 2009 (“FW Act”) by failing to pay Mr and Mrs Karunaratne variously minimum rates of pay, casual loading, overtime and public holiday penalty rates. Pursuant to s.716(2) of the FW Act, on 2 April 2015 the Ombudsman issued to and served on Delahill a compliance notice requiring it to pay Mr and Mrs Karunaratne their outstanding entitlements by 30 April 2015. Delahill failed to comply with that notice and on 12 June 2015 the Ombudsman commenced this proceeding seeking:

    a)a declaration that Delahill had contravened s.716(5) of the FW Act by failing to comply with the compliance notice;

    b)an order requiring it to comply with the compliance notice; and

    c)the imposition of a pecuniary penalty on it. 

  3. The Ombudsman also alleged that Mr Rebello had been involved in Delahill’s contravention of s.716(5) of the FW Act and sought the imposition of a pecuniary penalty on him as well.

  4. On 21 December 2015 Delahill paid the outstanding wages amounts to Mr and Mrs Karunaratne.

  5. The Ombudsman’s allegations against the respondents were set out in a statement of claim filed on 12 June 2015.  On 11 March 2016 the respondents filed an amended defence admitting most of the allegations in the statement of claim. 

THE PROCEEDING IN THIS COURT

Delahill’s contravention

  1. It was alleged by Ombudsman but not admitted by the respondents that, after conducting an investigation into Mr and Mrs Karunaratne’s complaints lodged on 11 September 2014, Shawn Ingle, a Fair Work Inspector appointed under s.700 of the FW Act, formed a reasonable belief that at various times between 1 July 2009 and 23 September 2014 Delahill had contravened the terms of the industrial instruments which applied to Mr and Mrs Karunaratne’s employment.

  2. It was, variously, expressly or implicitly admitted that on 2 April 2015 Mr Ingle issued Delahill with a compliance notice pursuant to s.716(2) of the FW Act requiring it to pay, by 30 April 2015, $10,196.87 (gross) to Mr Karunaratne and $76,498.72 (gross) to Mrs Karunaratne in respect of underpayments of minimum rates of pay, casual loading, penalty rates and overtime rates. The respondents admitted that Delahill did not make the payments specified in the compliance notice by 30 April 2015 and that by failing to comply with the notice had thereby contravened s.716(5) of the FW Act.

Mr Rebello’s accessorial liability

  1. Mr Rebello admitted that he was an officer of Delahill and that he had been aware of Mr and Mrs Karunaratne’s complaints to the Ombudsman and of the Ombudsman’s investigation into those complaints.

  2. The Ombudsman alleged that a copy of the compliance notice was sent to Mr Rebello by email on 2 April 2015.  Mr Rebello admitted that at a meeting on 19 May 2015 he informed two of the Ombudsman’s inspectors that he had received a copy of the compliance notice on 2 April 2015, that he had understood that it had required Delahill to pay money to Mr and Mrs Karunaratne and that Delahill had not paid the money.  He admitted that he:

    a)had had actual knowledge of the notice;

    b)had known that Delahill was required to comply with the notice;

    c)had had actual knowledge of Delahill’s failure to comply with the notice; and

    d)had been an intentional participant in Delahill’s failure to comply with the notice. 

  3. Mr Rebello admitted that by virtue of his knowledge he was involved, within the meaning of s.550(2) of the FW Act, in Delahill’s contravention of s.716(5) of the FW Act. He accepted that by reason of s.550(1) he was also taken to have contravened s.716(5) of the FW Act.

  4. The respondents admitted that the Ombudsman was entitled to orders for pecuniary penalties but alleged that there were mitigating circumstances which merited consideration. 

Defence

  1. The respondents did not allege that they had a defence to the Ombudsman’s action under s.716(6) of the FW Act in the form of a reasonable excuse for not complying with the compliance notice.

RELEVANT LEGISLATION

  1. At all material times, ss.715, 716 and 717 of the FW Act relevantly provided:

    715Enforceable undertakings relating to contraventions of civil remedy provisions

    Application of this section

    (1)This section applies if the Fair Work Ombudsman reasonably believes that a person has contravened a civil remedy provision.

    Accepting an undertaking

    (2)The Fair Work Ombudsman may accept a written undertaking given by the person in relation to the contravention, except as provided by subsection (5).

    Withdrawing or varying an undertaking

    (3)The person may withdraw or vary the undertaking at any time, but only with the Fair Work Ombudsman’s consent.

    Relationship with orders in relation to contraventions of civil remedy provisions

    (4)An inspector must not apply for an order under Division 2 of Part 4‑1 in relation to a contravention of a civil remedy provision by a person if an undertaking given by the person under this section in relation to the contravention has not been withdrawn.

    …

    716   Compliance notices

    Application of this section

    (1)This section applies if an inspector reasonably believes that a person has contravened one or more of the following:

    (a)     a provision of the National Employment Standards;

    (b)     a term of a modern award;

    (c) a term of an enterprise agreement;

    (d)     a term of a workplace determination;

    (e) a term of a national minimum wage order;

    (f)a term of an equal remuneration order.

    Giving a notice

    (2)The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:

    (a)take specified action to remedy the direct effects of the contravention referred to in subsection (1);

    (b)produce reasonable evidence of the person’s compliance with the notice.

    (3)     The notice must also:

    (a)set out the name of the person to whom the notice is given; and

    (b)set out the name of the inspector who gave the notice; and

    (c)set out brief details of the contravention; and

    (d)explain that a failure to comply with the notice may contravene a civil remedy provision; and

    (e)explain that the person may apply to the Federal Court, the Federal Circuit Court or an eligible State or Territory Court for a review of the notice on either or both of the following grounds:

    (i)     the person has not committed a contravention set out in the notice;

    (ii)     the notice does not comply with subsection (2) or this subsection; and

    (f)set out any other matters prescribed by the regulations.

    Relationship with enforceable undertakings

    (4)An inspector must not give a person a notice in relation to a contravention if:

    (a)the person has given an undertaking under section 715 in relation to the contravention; and

    (b)     the undertaking has not been withdrawn.

    Relationship with civil remedy provisions

    (4A)An inspector must not apply for an order under Division 2 of Part 4‑1 in relation to a contravention of a civil remedy provision by a person if:

    (a)the inspector has given the person a notice in relation to the contravention; and

    (b)     either of the following subparagraphs applies:

    (i)     the notice has not been withdrawn, and the person has complied with the notice;

    (ii)     the person has made an application under section 717 in relation to the notice that has not been completely dealt with.

    (4B)A person who complies with a notice in relation to a contravention of a civil remedy provision is not taken:

    (a)     to have admitted to contravening the provision; or

    (b)     to have been found to have contravened the provision.

    Person must not fail to comply with notice

    (5)A person must not fail to comply with a notice given under this section.

    (6)Subsection (5) does not apply if the person has a reasonable excuse.

    717   Review of compliance notices

    (1)A person who has been given a notice under section 716 may apply to the Federal Court, the Federal Circuit Court or an eligible State or Territory Court for a review of the notice on either or both of the following grounds:

    (a)the person has not committed a contravention set out in the notice;

    (b)the notice does not comply with subsection 716(2) or (3).

    (2)At any time after the application has been made, the court may stay the operation of the notice on the terms and conditions that the court considers appropriate.

    (3)The court may confirm, cancel or vary the notice after reviewing it.

  2. Section 539 of the FW Act provides that s.716(5) is a civil remedy provision. In combination, ss.539(2) and 546(2) provide that the maximum pecuniary penalty for a contravention s.716(5) is 30 penalty units for an individual and 150 penalty units for a body corporate. As at 30 April 2015, a penalty unit was worth $170: ss.4AA, 4F of the Crimes Act 1914.

EVIDENCE

Applicant

Anura Karunaratne

  1. Mr Karunaratne deposed that he arrived in Australia in 2008, had completed high school and could speak and write English moderately well.

  2. Mr Karunaratne deposed that on 1 April 2009 he and his wife attended Delahill’s factory for an interview with the factory manager, Mohammad Haddad.  Mr Karunaratne deposed that Mr Haddad showed them around the factory, demonstrated how the equipment worked and introduced them to Sylvia Rebello, the second respondent’s wife.  He deposed that Mr Haddad offered him and his wife jobs commencing that day. 

  3. Mr Karunaratne denied the proposition put to him in cross-examination that he and his wife had worked in Mr Rebello’s garden before working in the factory.  He also denied having begged Mr Rebello for employment and having been willing to accept less than full terms and conditions because he wanted to enter the Australian workforce.

Role, wages and hours

  1. Mr Karunaratne deposed that in his role as a process worker for Delahill he operated machinery, mixed raw material into machines, ground down any waste from machines, packed products into boxes, loaded boxes onto pallets for delivery and cleaned the factory.  He deposed that when he commenced work he bought himself a safety suit and face mask because Delahill did not provide that safety equipment even though mixing chemicals was part of his job.

  2. Mr Karunaratne deposed that two weeks after he commenced work he had a conversation with Mr Haddad, in his wife’s presence, during which he asked Mr Haddad about his wages.  He deposed that Mr Haddad told him that he had to speak to Mr and Mrs Rebello about that issue.  Mr Karunaratne deposed that in mid-April 2009 he and his wife spoke to Mrs Rebello about their wages.  He deposed that she initially offered to pay them $50 each a day for ten hours of work each day.  Mr Karunaratne deposed that after he said that that was too low, she then said that they would be paid $6.50 per hour for a probationary period of three months and that they would be employed as casual employees.  Mr Karunaratne deposed that while he considered $6.50 to be a very low wage rate, he and his wife had needed money so he had continued working for that pay.

  3. Mr Karunaratne deposed that in June 2009 Mrs Rebello told him that he had passed his probationary period and that his pay rate would go up to $13 an hour.  She also said that Delahill’s policy did not allow it to employ married couples so Mrs Karunaratne would not be on the payroll, would not receive pay slips and would be paid $8 an hour.

  4. Mr Karunaratne usually worked from Monday to Friday from 7.30am to 6pm, with a ten minute morning tea break and a half hour lunch break.   He deposed that he could not recall taking any sick days while employed by Delahill, although he may have taken off a day or two.  Mr Karunaratne deposed that he was not paid for days on which he did not work, including when the factory was closed for two to three weeks over the Christmas holidays.  He deposed that although he had not usually worked on public holidays, on the occasion when he did he was not paid at more than his usual rate.

  5. Mr Karunaratne deposed that from mid-April 2009, about a week or two after he commenced working at the factory, to sometime in 2010, he and his wife had also often worked on Sundays in the garden of a property owned by the Rebellos.  He deposed that on each occasion he worked for ten hours and was paid $50.

  6. Mr Karunaratne deposed that during his employment he was never told by Mr Haddad, Mr Rebello or Mrs Rebello that his performance was unsatisfactory.  He deposed that he had not started work at the factory with the expectation that he would be required to look for another job. 

Effect of low wages

  1. Mr Karunaratne deposed that in 2009 and 2010 his and his wife’s living expenses were $730 a week and they had struggled financially because of the low wages they had received from Delahill.  He deposed that in 2009 and 2010 he and his wife did not eat at restaurants or buy lunch at work as they could not afford to.  He deposed that about once a week when their finances had been really low they had visited a food bank after work to obtain dinner.  Mr Karunaratne deposed that they had also had to use the savings they had brought to Australia to pay for their daughter’s university fees as the income they had received from Delahill had barely covered their living expenses.

  2. Mr Karunaratne deposed that he did not receive any superannuation from Delahill between April 2009 and July 2009 but from the latter date superannuation contributions were made on his behalf.  On 21 December 2015 he received a cheque of $9,990 from Delahill in respect of underpaid wages.  He deposed that he had not received a superannuation payment in relation to that amount.

  3. Mr Karunaratne deposed that he left Delahill on 9 June 2010.

Gnana Karunaratne

  1. As with her husband, Mrs Karunaratne arrived in Australia in 2008.  She deposed that when she arrived in Australia she had some understanding of English but no knowledge or understanding of Australian workplace laws.

  2. Mrs Karunaratne’s evidence in relation to her and her husband’s job interview with Mr Haddad, their duties at the factory, the garden work they undertook at Mr and Mrs Rebello’s property, their weekday hours of work, their sick leave and public holiday pay, their pay up until June 2010, their living expenses in 2009 and 2010 and the difficulties they encountered paying their living expenses was similar to her husband’s evidence.

Wages and hours

  1. In addition to her weekday hours, Mrs Karunaratne deposed that in her first and second years at Delahill she also worked some Saturdays from 7am to midday or 7:30am to 1pm.  She confirmed her husband’s evidence that she was initially paid $6.50 an hour for three months and thereafter $8 an hour.  Mrs Karunaratne deposed that in June 2010 she asked Mrs Rebello for a pay rise and from then until June 2011 she was paid $13 an hour.  She deposed that in June 2011 she asked Mrs Rebello for another pay rise and was offered a pay increase of $1 an hour.  Mrs Karunaratne deposed that when she said that that would still not be enough, Mrs Rebello said that Delahill could not afford to pay her more.  She deposed that she was paid $14 an hour from that time until she stopped working for Delahill on 12 September 2014.

  2. Mrs Karunaratne deposed that from April 2009 to July 2010 she did not receive any superannuation from Delahill and only started receiving such payments in August 2010.  She deposed that on 21 December 2015 she received a cheque of $55,190 from Delahill in respect of underpaid wages but had not received any superannuation on that amount.

Effect of low wages

  1. Mrs Karunaratne deposed that between 2010 and 2014 her expenses, as split between her and her husband, remained the same as they had been in 2009 and 2010.  She deposed that although she had found it hard to pay her expenses it had been a little easier because her husband had found a new job in June 2010 and earned better wages. 

  2. Mrs Karunaratne deposed that her low wages had made her feel very sad.  She deposed that on a few occasions she had tearfully spoken to Mr Haddad about her low wages and he always told her that he could not do anything to help her and that it was up to Mr and Mrs Rebello.  Mrs Karunaratne deposed that despite her low wages, she had kept working for Delahill for five years because she had not thought she could obtain other work as her English language skills were not perfect and she did not have any qualifications past her high school education.  Mrs Karunaratne deposed that she had needed to earn a living in some way and so she had stayed in her job.  She deposed that since leaving Delahill on 12 September 2014 she had not been employed and instead stayed at home to look after her grandchild.

  1. Mrs Karunaratne deposed that she had never told anyone at the factory that she had a bad back and could not lift more than ten kilograms.  She deposed that she had never been told by Mr Haddad or Mr and Mrs Rebello that they were not happy with her work.

Shawn Ingle

Investigation into complaints

  1. Mr Ingle is the Fair Work Inspector who conducted the investigation into Mr and Mrs Karunaratne’s complaints.  He deposed that as part of his investigation he conducted an electronically recorded telephone interview with Mr Rebello on 12 November 2014.  The transcript of the interview attached to Mr Ingle’s affidavit indicates that Mr Rebello said that:

    a)he was responsible for the payment of wages and bills and the administrative tasks of Delahill’s business.  He also made the final decisions within the business;

    b)Mr and Mrs Karunaratne had been employed as casual workers.  He understood the legal difference between a permanent and casual employee;

    c)they had originally done work around his home and after asking for many months to be able to work in his factory, and because they were new to Australia and needed work, he agreed to employ them at an agreed flat rate; and

    d)from 2007, when Delahill’s business had a downturn, he stopped paying penalty rates to his employees.  He told his employees that they would not be forced to work overtime but that if they chose to work they would not be paid more than their ordinary time rate.  He had not sought any advice on the issue and had taken his employees’ agreement to work overtime without being paid penalty rates to have been “enterprise bargaining”.  He also did not pay penalty rates for weekend work.

  2. Mr Ingle deposed that on 23 December 2014 Mr Rebello met with Emma Travers, a senior Fair Work Inspector, and was presented with a letter outlining the Ombudsman’s findings on the investigation into Mr and Mrs Karunaratne’s complaints and a proposed enforceable undertaking (Mr Rebello was required to respond to those documents by 9 January 2015).

  3. On 12 January 2015 Mr Ingle received an email from Mr Haddad which attached a letter from Mr Rebello.  Mr Rebello’s letter read, in part:

    My Apologies for not replying earlier as I am waiting on replies from a few Legal firms regarding my 2 former employees – your clients and the subsequent draft for compensation.

    I strongly believe that your clients have taken undue advantage of our good nature and naivety and my wife’s absence and mine in the workplace due to reasons pointed out earlier and chose to set a trap to get maximum compensation with your help.

    I have also pointed out to you time and again that your clients had clearly agreed to work for the rate offered to them and had not made us aware at any stage of their entire employment that they were not satisfied with their wages knowing full well how they could retaliate.

    ...

    As you are aware I am Overseas at the moment and request more time to think of the various options I have to take this matter forward.

    Accompanying Mr Rebello’s letter was a letter from the Australian Taxation Office (“ATO”) dated 27 August 2014 setting out information about a payment plan in relation to a tax debt that Delahill owed.

  4. On 14 January 2015 Mr Ingle wrote to Mr Rebello advising him that the information he had provided did not meet the requirements of a request for an extension or the requirements for negotiating a payment plan as discussed at his meeting with Ms Travers on 23 December 2014.  Mr Rebello was also required to provide, within seven days, a response to the Ombudsman’s findings, any additional evidence he wished to provide in relation to those findings, as well as reasons, evidence and time frames to support any request for an extension and/or payment plan.  Mr Ingle further advised that the Ombudsman might commence proceedings seeking enforcement of the compliance notice and penalties.

  5. On 19 January 2015 Mr Rebello sent an email to Mr Ingle stating:

    ... I do not have any further evidence to provide other than bringing to your attention that in my opinion … we are both equally responsible for reasons made known to you in my earlier correspondence.

    Hence I am prepared to pay 50% of the sum calculated as full and final payment less tax to these 2 employees.

    Moreover I would kindly request that this amount be paid in equal instalments of $2000/- per month as I am already struggling to keep up with ATO obligations as advised in my previous email.

Compliance Notice

  1. Mr Ingle deposed that in February and March 2015 the Ombudsman decided to issue Delahill with the compliance notice and to give it a final opportunity to comply with its obligations.  He deposed that he drafted the compliance notice relying on documents, including time cards and pay slips, which Delahill had produced to the Ombudsman in October 2014.  The compliance notice opened with the following statement:

    I, Shawn Ingle, being a duly appointed Fair Work Inspector, reasonably believe that Delahill Pty Ltd trading as ABCO Plastics (Employer) has contravened the Manufacturing and Associated Industries and Occupations Award 2010 (Manufacturing Award), in relation to the employment of the following employees:

    ·Mr Anura Karunaratne (Mr Karunaratne), and

    ·Mrs Gnana Karunaratne (Mrs Karunaratne).

    (collectively, Employees)

    It set out the contraventions which the Ombudsman believed Delahill had committed and went on to say:

    Required action under this Notice

    14.In accordance with section 716(2) of the [Fair Work] Act, by Thursday 30 April 2015 the Employer is required to:

    (a)make payment of $10,196.87 (gross) to Mr Karunaratne;

    (b)make payment of $76,498.72 (gross) to Mrs Karunaratne.

    15.Payment is to be made by the provision of cheques payable to each of Mr Karunaratne and Mrs Karunaratne. …

    Employer rights and obligations under this Compliance Notice

    16.Failure to comply with this Compliance Notice may contravene a civil remedy provision of the Act.

    17.If the Employer does not comply with this Compliance Notice, the Fair Work Ombudsman may commence legal action against the Employer and/or individuals involved in the contraventions to recover any outstanding monies and to seek civil penalties.  Civil penalties may also be sought for non-compliance with this Compliance Notice.

    18.Complying with the Compliance Notice is not an admission that the Employer contravened, or was found to have contravened, the Modern Award.

    19.The Employer may apply to the Federal Court, Federal Circuit Court or eligible State or Territory Court for a review of this Compliance Notice on either or both of the following grounds:

    (a)the Employer did not commit the contraventions set out in this Compliance Notice;

    (b)this Compliance Notice does not comply with sections 716(2) or 716(3) of the Act.

  2. Mr Ingle deposed that on 2 April 2015 he attended the Delahill factory with Christine Wang, another Fair Work Inspector, and handed the compliance notice to Mr Haddad.  Mr Ingle deposed that in his and Ms Wang’s presence, Mr Haddad emailed a copy of the compliance notice to Mr Rebello, who was in India at the time.  On 21 April 2015 Mr Ingle sent Mr Rebello an email reminding him that the compliance notice had a compliance date of 30 April 2015.  Mr Ingle deposed that he did not receive a response to that email.

  3. Mr Ingle deposed that on 1 May 2015, after Delahill had failed to comply with the compliance notice, he telephoned Delahill and spoke to Mr Haddad.  During the conversation Mr Haddad said that Mr Rebello was not in Australia.  He also said that he had given Mr Rebello a copy of the original compliance notice when Mr Rebello had last returned to Australia on 7 April 2015.  Mr Ingle deposed that on the same day he attempted to contact Mr Rebello by telephone in India with no success.  He deposed that he also sent to Mr Rebello’s email a letter addressed to Delahill, marked to Mr and Mrs Rebello’s attention, advising that Delahill had failed to comply with the compliance notice and asking them to advise, within seven days, if Delahill had a reasonable excuse for its failure to comply with the compliance notice.  Mr Ingle deposed that his letter did not provide Delahill with an extension of time to comply with the compliance notice, it merely sought confirmation within seven days of any reasons for the failure to comply.  Mr Rebello and Mr Ingle then exchanged a number of emails and arranged a meeting between Mr Rebello and Ms Travers on 19 May 2015.

Later correspondence

  1. Mr Ingle deposed that on 26 May 2015 he received a telephone call from James Welch of Access Law Group, who said that he had been appointed to represent Delahill and asked for documents related to the assessment and calculation of the unpaid wages set out in the compliance notice.  Mr Ingle deposed that on 27 May 2015 he sent an email to Mr Welch inviting him to contact him and advising that he could seek any documents he wished to have by email.  Mr Ingle deposed that he did not receive any request for information from Mr Welch.  

  2. Mr Ingle deposed that on 17 December 2015 he received two cheques from Delahill addressed to Mr and Mrs Karunaratne for the amounts set out in the compliance notice, less tax.  He deposed that he had organised for those cheques to be provided to Mr and Mrs Karunaratne.

  3. Mr Ingle deposed that on 22 April 2016 he conducted a number of searches.  Those searches indicated that:

    a)Mr Rebello was the director of seven companies, including Delahill, and the secretary of six of those companies;

    b)Delahill had ten secured creditors and the security for each of those creditors was listed as “commercial property”; and

    c)Mr and Mrs Rebello owned, as joint tenants, three properties, Mr Rebello owned one property by himself and one of his companies, Rebello Family Holdings Pty Ltd, also owned one property.

Emma Travers

  1. In 2014 and 2015 Ms Travers was Mr Ingle’s manager and assisted him with his investigation into Mr and Mrs Karunaratne’s complaints.

Findings letter and enforceable undertaking

  1. On 23 December 2014 Mr and Mrs Rebello attended a meeting with Ms Travers and Maria Loutsopoulos, another Fair Work Inspector.  Ms Travers deposed that during the meeting she gave Mr and Mrs Rebello a letter addressed to Delahill dated 23 December 2014 which outlined the Ombudsman’s findings into Mr and Mrs Karunaratne’s complaints.  The Ombudsman’s findings as set out in the letter were that:

    a)Mr and Mrs Karunaratne had been employed as casual employees;

    b)Delahill had contravened the Workplace Relations Act 1996 (“WR Act”), the FW (TPCA) Act and the FW Act by underpaying Mr Karunaratne $10,691.02 in respect of his rate of pay, casual loading and overtime;

    c)Delahill had contravened the WR Act, the FW (TPCA) Act and the FW Act by underpaying Mrs Karunaratne $76,498.02 in respect of her rate of pay, casual loading and overtime; and

    d)Delahill had contravened the FW Act by failing to keep records of the hours worked and the overtime hours worked by its employees.

    The letter required Delahill to respond to the findings by 9 January 2015.

  2. Ms Travers deposed that she also gave Mr and Mrs Rebello a draft enforceable undertaking for their consideration.  The draft enforceable undertaking required Delahill to admit that it had contravened the relevant industrial instruments referred to in the findings letter.  It also required Delahill to undertake to rectify the underpayments to Mr and Mrs Karunaratne, post public notices in a newspaper and at its factory concerning its contraventions, apologise to Mr and Mrs Karunaratne, ensure future compliance with workplace laws, conduct continuing audits into its compliance with workplace laws, implement a training program on workplace laws for its payroll employees, Mr Haddad and its directors and make a donation of $3,000 to a worker’s rights organisation.

  3. Ms Travers deposed that at the meeting she and Mr Rebello had the following exchange:

    Ms Travers:... the enforceable undertaking we have offered cannot be entered into unless you agree to pay the employees their minimum entitlements.  Can you take the enforceable undertaking and get back to me by 9 January 2015.  If we can’t agree to an enforceable undertaking, we may consider litigation.  The enforceable undertaking is the easier option but we must be satisfied that your work practices will improve.

    Mr Rebello:Can I seek legal advice? I don’t have $87,000 to pay the employees.  I am going away, can I get an extension?

    Ms Travers:Yes please do seek legal advice.  You can come back to use with a payment plan for us to consider.  There is no guarantee that we will give you an extension before we proceed further, but please get back to me about why you need one before the 9th of January.

    Mr Rebello:We didn’t want to employ them.  I don’t want to give an apology.  The employees have money.

    Ms Travers:The Fair Work Ombudsman would consider giving an extension for the amount to be paid but you would need to provide evidence of financial hardship and to propose a payment plan, by 9 January 2015.

  4. Ms Travers deposed that Mr and Mrs Rebello did not contact her after that meeting to discuss the findings letter or the draft enforceable undertaking.

Compliance Notice

  1. On 19 May 2015, after Delahill had failed to comply with the compliance notice, Ms Travers and another Fair Work Inspector had a meeting with Mr Rebello.  Ms Travers deposed that Mr Rebello said that he had received the compliance notice by email on 3 April 2015 and Mr Ingle’s letter dated 1 May 2015 concerning Delahill’s failure to comply with the compliance notice.  Ms Travers deposed to the following conversation between her and Mr Rebello:

    Ms Travers:Why did you not respond [to the 1 May 2015 letter]?

    Mr Rebello:The employees knew full well that they agreed to work under those conditions.  In four years they didn’t make any remarks about being unhappy.  Many people outside the company told them to leave if they were unhappy and they chose not to.  They chose to stay, so they can take advantage of the situation.  They are conners.  They knew what the law says but they also know the requirements and agreed to work. My wife is on medication, she would have lunch with them, they said nothing.  I’m not around to monitor the situation, they are taking advantage.

    I’m running a company overseas as manufacturing has dried up. I have not had a chance to seek legal advice.  I have been overseas and my wife had an operation on the 12th of May 2015. On the 2nd of January I went to India.  Then from the 7th of March to 21st of March I was in Australia and again on the 12th of May. On the 2nd of June I was in India and 23 June I returned to Australia when my wife was home from rehab.

    Ms Travers:We proposed an Enforceable Undertaking in December and tried to work with you to develop this.  As we did not receive a reasonable response from you, the Fair Work Ombudsman issued the Compliance Notice.

    Mr Rebello:The Fair Work Ombudsman is not being impartial.

    Ms Travers:It is not lawful to negotiate out of the legislative minimums.

    Mr Rebello: I know this.  But we were giving these people a chance to get into the workforce.  My wife has been looking after the accounts.  I know there are penalties but didn’t know that someone who agreed was an issue.  I have not ignored it completely.  I am not in a position to pay. I have a $90,000 tax debt for 2014.  I have to pay instalments.  The company is running at a loss.  I can give you the financials later.

    Ms Travers:How would you propose a resolution?

    Mr Rebello:I cannot pay the full amount.  I am prepared to pay 50%.  They agreed.  They are taking advantage of the situation.  Legislation is one thing but you must look at the personal as well.  Knowing full well they’ve come back four years later to stab us in the back, it’s unreasonable. I’m seeking legal advice after this meeting.

    My wife processed the pay, her condition is not good. I understand I have broken the law but unknowingly.  I know the law.  When I did enterprise bargaining we negotiated.  I was involved and knew this was the case.  Since starting a business in India my wife negotiated with them for the amount of money.  They agreed.

    Ms Travers:This is a serious matter.  The compliance notice service has gone through approvals at higher levels.  It is beyond the stage of any negotiation, as the company has failed to respond to previous steps.  I recommend you seek legal advice as previously recommended in December 2014.

    Mr Rebello:Current employees at factories are being paid the required rate.  Why did they not move before four years?  They should have left.

    Ms Travers:The Fair Work Ombudsman is considering litigation.

    Mr Rebello:The employees are also responsible.  They are meant to try to resolve with the employer first.  The employees want a bonus and to stay in the country.

    Ms Travers:The employees have 6 years to lodge a request for assistance with the Fair Work Ombudsman.

  2. Ms Travers deposed that Mr Rebello provided her with:

    a)letters from the ATO addressed to him and his wife and dated 8 September 2014.  The letters indicate that as at that date Mr and Mrs Rebello had substantial outstanding tax debts;

    b)his and his wife’s taxation estimates for the financial year ending 30 June 2014.  The estimates indicated that Mr and Mrs Rebello would be required to pay substantial amounts of tax for that financial year; and

    c)medical documents dated 18 April 2015 indicating that Mrs Rebello suffered from depression due to a number of physical illnesses.

  3. Ms Travers deposed that in her view the documents provided by Mr Rebello failed to show sufficient details of Delahill’s financial ability or inability to pay the amounts specified in the compliance notice.

Annabel Dunn

  1. Ms Dunn was the solicitor in the Ombudsman’s office with carriage of this matter.  She deposed that on 29 May 2015 Bella Stagoll, a senior lawyer in the Ombudsman’s office, wrote to Mr Rebello advising him, amongst other things, that she had received instructions that Delahill had not complied with the compliance notice and had not provided a reasonable excuse for failing to do so.  Ms Stagoll encouraged Mr Rebello to take immediate action to rectify the underpayments to Mr and Mrs Karunaratne. 

  2. In a response on the same day Mr Rebello said that at his meeting with Ms Travers on 19 May 2015 he had explained his current financial circumstances and his wife’s medical condition.  He also said that he would be travelling overseas on 3 June 2015 and sought some time to make monthly instalments or make arrangements to borrow some money.  In a further email on 30 May 2015 Mr Rebello said that he had assumed that Mr Ingle had extended the date on which he had to comply with the compliance notice by seven days.  He said:

    At no point did I say that I had no intention of paying but I made Ms Travers aware time and again that at all times the 2 persons agreed to work for the wages they were offered considering that they were new to this type of work and also at no time during their entire term of working for us did they bring to anyone’s notice that they were not happy with their wages as there were made aware that we were prepared to help them till they found work of their choice.

    I always made FWO aware that they were equally at fault for not bringing their issues to anyone’s attention before approaching the FWO and that I should be liable to pay half of what I owe them, especially that they took advantage of my wife knowing that she had a medical condition and that I was overseas.

Respondents

Guilherme Rebello

  1. Mr Rebello deposed that he began running ABCO Plastics in 1987.  He deposed that due to a downturn in manufacturing in Australia, in 2007 he set up a business in India and began spending two to three months at a time there with two week breaks in Australia.  He deposed that his wife had stopped working for the business in July 2014.

Mr and Mrs Karunaratne’s employment

  1. Mr Rebello deposed that in February 2008 his wife had an accident which required her to be hospitalised for nine months.  He deposed that in early 2009 while she was at home recuperating, she was introduced to Mr and Mrs Karunaratne by a friend who said that they were seeking work.  Mr Rebello said that he and his wife employed Mr and Mrs Karunaratne to do some gardening work.  He deposed that after about six months the Karunaratnes convinced his wife to employ them at Delahill’s factory and she did so on the proviso that they would continue to look for suitable work elsewhere.

  2. Mr Rebello deposed that Mr Karunaratne stopped working at the factory in 2010 but that Mrs Karunaratne had been unable to secure other employment.  Mr Rebello deposed that Mrs Karunaratne had claimed to have been unable to lift more than ten kilograms because of a bad back.  He deposed that she had also been “laid off several times for lack of work” and had then stopped attending work without notice in September 2014.

Ombudsman’s investigation

  1. Mr Rebello deposed that in September 2014 Mrs Karunaratne advised Mr Haddad that she and her husband had lodged a complaint with the Ombudsman.  He deposed that soon thereafter Mr Ingle contacted him requesting information and records on Mr and Mrs Karunaratne’s employment.  Mr Rebello deposed that he had participated in a telephone interview with Mr Ingle.

  2. Mr Rebello deposed that on three occasions before the compliance notice deadline of 30 April 2015, he instructed Mr Haddad to call Mr Ingle in order to arrange a meeting to discuss his financial position, to request an extension to comply with the notice and to discuss a periodic payment plan.  He deposed that Mr Ingle had not taken Mr Haddad’s calls.

  3. Mr Rebello deposed that he eventually had a meeting with Ms Travers on 19 May 2015.  He deposed that during that meeting Ms Travers repeatedly asked him if he was aware of the consequences of non-compliance with the compliance notice.  Mr Rebello deposed that between 2010 and 2015 his wife had several surgeries which had taken a toll on his health, finance and focus on work.  He deposed that he made Ms Travers aware of his difficult financial circumstances, his frequent overseas travel and surgery which his wife was due to have on 12 May 2016 and provided her with supporting documentation.  The documents annexed to Mr Rebello’s affidavit showed that in 2015 he and his wife had substantial tax debts and that in February 2016 they had also owed amounts to the factory’s electricity supplier.  The annexures also indicated that Mrs Rebello had had a number of periods of serious ill heath since 2008.

  4. Mr Rebello deposed that in May 2015 he asked his accountant to investigate whether he could access his superannuation.  He deposed that he eventually paid Mr and Mrs Karunaratne the amounts owed to them in September 2015.

  5. Mr Rebello deposed that he had engaged a firm of consultants and the NSW Business Chamber to oversee the business’s workplace relations issues.  He deposed that he had attended webinars to inform himself of various changes to workplace laws. 

Response to Ombudsman’s investigation

  1. Mr Rebello agreed that in the first half of 2015 he had been the person responsible for paying Delahill’s bills and wages. He accepted that he had known, from at least December 2014, that the Ombudsman considered that Delahill owed wages to Mr and Mrs Karunaratne and that those amounts had been set out in the Ombudsman’s letter of 23 December 2014.

  2. Mr Rebello said that his view had been that Mr and Mrs Karunaratne had taken advantage of him and Delahill and had cheated him by complaining to the Ombudsman, and he had only been prepared to pay half of what was ostensibly owed.  He said that such a figure was appropriate given the low level of the work they had done and the slow pace at which Mrs Karunaratne worked.

  3. Mr Rebello said that he was out of Australia from 2 January 2015 to 20 February 2015, during which time he could not do anything in relation to the Ombudsman’s concerns, but that upon his return he sought a loan from his bank albeit unsuccessfully. He then travelled overseas again and, when back in Australia, once more unsuccessfully applied for a loan.

  4. Mr Rebello understood upon receipt of the compliance notice in early April 2015 that Delahill was required to pay the amounts it particularized. He also knew that failure to comply with the notice might contravene a FW Act civil remedy provision but said that there had been nothing he could do. He said that Mr Haddad had tried to speak to Mr Ingle on three occasions but did not get a response.

  5. Mr Rebello had wanted to negotiate a reduced payment with the Ombudsman, specifically, half of what was demanded, because Mrs Karunaratne had been a poor worker not worth the award wage whom, together with her husband, he had employed to help them as friends and at the request of a priest.  However, he accepted that he had been wrong in this attitude and would pay Award rates in the future. He also accepted that he had been wrong to not act on the compliance notice by not paying the amounts it particularised.  He said that the problem would not repeat itself because he would never again employ such an unqualified person.

DISCUSSION

  1. As Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14 at 18-19 [14], in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mowbray FM identified “a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty”. Tracey J adopted those considerations, describing them as follows:

    ·    The nature and extent of the conduct which led to the breaches.

    ·    The circumstances in which that conduct took place.

    ·    The nature and extent of any loss or damage sustained as a result of the breaches.

    ·    Whether there had been similar previous conduct by the respondent.

    ·    Whether the breaches were properly distinct or arose out of the one course of conduct.

    ·    The size of the business enterprise involved.

    ·    Whether or not the breaches were deliberate.

    ·    Whether senior management was involved in the breaches.

    ·    Whether the party committing the breach had exhibited contrition.

    ·    Whether the party committing the breach had taken corrective action.

    ·    Whether the party committing the breach had cooperated with the enforcement authorities.

    ·    The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and

    ·    The need for specific and general deterrence.

  2. Considerations relevant to this case are:

    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)the size of the business enterprise involved;

    f)whether or not the breaches were deliberate;

    g)whether senior management was involved in the breaches;

    h)whether the party committing the breach had exhibited contrition;

    i)whether the party committing the breach had taken corrective action;

    j)whether the party committing the breach had cooperated with the enforcement authorities;

    k)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and

    l)the need for specific and general deterrence.

Submissions

Ombudsman’s submissions

  1. The Ombudsman advanced the following matters as the basis for her application for the imposition of penalties in this case:

    a)as a general matter, non-compliance with the statutory power provided to Fair Work Inspectors under s.716 of the FW Act was a serious matter;

    b)the failure to comply with the compliance notice in this case caused her to commence this proceeding in circumstances where such litigation could have been avoided;

    c)the amount cited in the compliance notice was a significant one considering that it concerned only two employees;

    d)the vulnerability of Mr and Mrs Karunaratne, who had limited understanding of the English language and/or the laws pertaining to employee entitlements;

    e)Mr Rebello’s lack of contrition;

    f)Mr Rebello’s insistence that Mr and Mrs Karunaratne were partially responsible for Delahill’s failure to pay minimum wages;

    g)the unwillingness of the respondents to pay the amounts particularised in the compliance notice for more than eight months following its issue;

    h)the fact that Mr Rebello was an experienced businessman with significant exposure to the manufacturing industry;

    i)the need for specific deterrence; and

    j)the need for general deterrence in relation to the manufacturing industry and to demonstrate that notices issued by the Ombudsman need to be complied with.

Respondents’ submissions

  1. The respondents’ submissions were not really responsive to the matters in issue.  They stressed what the respondents contended was unfairness to them, contending that:

    a)Mr and Mrs Karunaratne had not told the truth; and

    b)the Ombudsman had taken a one-sided approach and had accepted Mr and Mrs Karunaratne’s account of events without obtaining corroboration of their evidence.

  2. The respondents went on to submit that the Ombudsman had not discharged her responsibilities by:

    a)failing to treat the respondents’ explanations for the contravention as reasonable under s.716 of the FW Act, specifically those explanations concerning Mr Rebello’s need to travel overseas, his wife’s medical condition and his household duties;

    b)failing to have regard to the respondents’ financial hardship;

    c)“showcasing” them as bad employers without regard to their 34 years of operation and their contribution to the manufacturing industry, as payers of tax and as trainers of employees;

    d)failing to acknowledge the burden on small enterprises of the  complexity of and changing requirements for workplace compliance;

    e)failing to take into account the time and money Mr Rebello had to devote to his wife and her care while also running his company, including from abroad;

    f)failing to have regard to mendacity on the part of Mr and Mrs Karunaratne which was said to have been revealed in a number of contexts;

    g)failing to have regard to Mr Karunaratne’s facility with English;

    h)failing to accept Mr Rebello’s allegation that Mr and Mrs Karunaratne had worked in his home garden before working in the factory and had been employed as a favour so that they could get employment experience in Australia and that in any event they did not rely on the wages Delahill paid because they had other sources of money.

  3. The respondents submitted that the Ombudsman’s attitude to them had been a huge drain on their time and financial resources in that they had had to deal with a case manufactured by a couple who rorted the system, cheated and stole from Mr Rebello and damaged plants, equipment and fittings in his garden as well as equipment and moulds at Delahill’s factory.

  4. The respondents also submitted that although the Ombudsman contended that her office had kept reminding them about the compliance notice, she did not take into account:

    a)the limited time they said they had to secure a loan for $90,000;

    b)the fact that a loan was refused by the bank on two separate occasions;

    c)Mr Rebello’s absences in India from January 15 to April 15; and

    d)the time Mr Rebello spent assisting his wife with various medical procedures.

  5. The respondents submitted that they had always paid their employees above award wages and had not deliberately cheated Mr and Mrs Karunaratne, whom they had just been trying to help.

  6. It was submitted:

    The FWO in their Learned Wisdom has chosen to ignore my Genuine excuses for not Complying with their Compliance Notice and were waiting for an opportunity to slap me with a fine and were more than Happy to take the 2 Employees word without questioning their truthfulness (errors included)

    in circumstances where Mr and Mrs Karunaratne had cash and were living a happy and comfortable life while Mr Rebello was hardworking and had to care for his ill wife.

  7. Mr Rebello also argued that he had not had $90,000 in his bank account and that it was a lot of money to find in four weeks. He submitted that it took him about seven months to lay his hands on the sum and only after he had accessed his superannuation. 

  8. The respondents also sought their own relief, expressed in the written submissions in the following terms:

    (a)the Penalties and any Costs whatsoever be set aside and the Payments made to Employees retrieved and distributed to any worthwhile cause.

    (b)Investigate the Genuineness of their … Status with the Immigration Authorities and the … Visa granted.

    (c)Investigate with the ATO if the Funds brought into the Country have been declared and the whereabouts of Funds not declared.

    (d)Investigate the Genuineness of their Affidavits and the Possibility of a Lie-Detector Test.

    (e)Investigate their ability to read, write and understand English.

    (f)Ensure that the FWO Overseas Team has competent people to handle Overseas matters.

    (e) [sic] Apologise for Undermining and Demeaning Delahill and Myself for their Ruthless Callous Attitude towards a Hardworking , Family orientated Crime free Individual.

Considerations

The nature and extent of the conduct which led to the breaches

  1. The contravening conduct with which this matter is concerned is Delahill’s failure to comply with the compliance notice which Mr Ingle served on 2 April 2015 and Mr Rebello’s involvement in that contravention.  According to para.2673 of the Explanatory Memorandum to the Fair Work Bill 2008, the purpose of compliance notices is to provide Fair Work Inspectors with an alternative to litigation when dealing with instances of non-compliance with the statutory scheme. 

  2. The sums cited in the compliance notice were not paid within the period stipulated in that notice.

The circumstances in which that conduct took place

  1. As noted in the Ombudsman’s oral and written submissions, the failure to comply with the compliance notice occurred notwithstanding her inspectors’ efforts to assist Delahill understand and comply with its obligations to Mr and Mrs Karunaratne and so avoid the need for litigation.  The compliance notice was only issued after the Ombudsman had, on 23 December 2014, provided the respondents with a letter setting out her findings and had proffered them a draft enforceable undertaking which they failed to address in any material way.  The respondents were also told they could seek flexibility in the manner of their rectification of the underpayments if they provided cogent evidence of financial hardship together with a payment plan but they made a substantively unresponsive reply within the time allowed.  It was not until three months had passed without any relevant action by the respondents that the compliance notice was issued.  The Ombudsman made further attempts to engage with the respondents but rectification only occurred after the commencement of this proceeding.

  2. Referring to this conduct, the Ombudsman submitted that:

    … the Respondents had ample opportunity to seek professional advice about the nature of the Compliance Notice and the consequences of non­compliance.  The Respondents were also warned of the consequences of non-compliance.  The FWO considers that this disregard for the Compliance Notice, especially after suggesting that advice would be sought, but was not sought, was intentional and demonstrates an unwillingness by the Respondents to comply with their obligations.

  3. In an interview with Mr Ingle on 12 November 2014, Mr Rebello demonstrated awareness that casual employees were entitled to receive penalty rates.  Despite this knowledge, he did not procure Delahill’s compliance, in the form of paying the amount specified in the compliance notice, until well after this proceeding had been commenced. 

  4. Instead of accepting responsibility for the underpayment on behalf of Delahill, Mr Rebello instead blamed Mr and Mrs Karunaratne for accepting the underpayments, when he told Ms Travers on 19 May 2015:

    a)“they want a bonus and to stay in the country”;

    b)“they chose to stay, so they can take advantage of the situation.  They are conners”;

    c)“they should have left” if they had not been happy with their pay; and

    d)“they agreed” to the rate of pay.

  5. That evidence was partly corroborated by Mr Rebello’s oral evidence in this matter.  He did not resile from the position that he had done the Karunaratnes a favour and they had taken advantage of his good nature to complain about the fact that he had not paid them according to the relevant industrial instruments. 

  6. The Ombudsman submitted that it would be “appropriate to take into account the nature of the contraventions alleged in the compliance notice” if a respondent who has failed to comply with a compliance notice has not taken issue with the contraventions alleged in that notice:  Fair Work Ombudsman v Hair Industrie Mt Druitt Pty Ltd [2015] FCCA 3426 at [12]. However, notwithstanding what was said in that case, having regard to the comments of Judge Jarrett in Fair Work Ombudsman v Absynthe Restaurant Pty Ltd [2015] FCCA 58 at [24] and [25] and Judge Smith in Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150 at [27] and [28], I do not think that it is appropriate when setting penalties for failing to observe the requirements of a compliance notice to have regard to the conduct which a Fair Work Inspector believed justified the issuing of the notice, particularly if that conduct has not been formally alleged and formally admitted or properly proved. The relevant contravention is failure to comply with the notice, not the supposed underlying conduct. Consequently, when setting a penalty, regard should only be had to issues which are associated with the contravention which is the subject of the proceeding, not with other supposed contraventions which are not.

  7. Further, Mr Rebello’s factual allegations concerning how the Karunaratnes came to work for him and Delahill and whether they first worked in his garden, were of no real relevance to the determination of penalties for the respondents’ contraventions of the FW Act, although the relevance and consistency of his account over time suggests to me that it is accurate. Mr Rebello did not suggest that he had mistaken the applicable rates or entitlements and in substance he simply contended that, in the circumstances, those requirements ought to be inapplicable. Employers cannot take it upon themselves to set pay rates and entitlements at levels lower than prescribed. Mr Rebello’s sense of injustice was misplaced.

The nature and extent of any loss or damage sustained as a result of the breaches

  1. The failure of the respondents to comply with the compliance notice meant that Mr Karunaratne was denied the $10,196.87 (gross) owed to him and Mrs Karunaratne the $76,4968.72 (gross) owed to her not only in the period prior to the notice but for seven months thereafter.  These were significant sums of money, particularly for individuals in Mr and Mrs Karunaratne’s circumstances.

  2. Mr and Mrs Karunaratne deposed that they felt sad and stressed working for such low wages and struggled to meet their living expenses and buy food.  The failure to comply with the compliance notice had a significant effect on Mr and Mrs Karunaratne.

Whether there had been similar previous conduct by the respondent

  1. The Ombudsman submitted that neither of the respondents had previously been the subject of court proceedings for contraventions of workplace laws.

The size of the business enterprise involved

  1. As the Ombudsman observed, there was limited evidence of the size and financial circumstances of Delahill or of the financial circumstances of Mr Rebello.  The respondents provided some limited financial evidence during the investigation.  The evidence before the Court showed that:

    a)Delahill traded as ABCO Plastics;

    b)approximately four other staff worked at the factory;

    c)Delahill owned motor vehicles subject to finance obligations and Mr Rebello owned real property subject to unquantified mortgages;

    d)Mr Rebello operated manufacturing businesses in Australia and India and accepted that during the Karunaratnes’ respective employment periods, he was the director of Delahill and that he ran the operations; and

    e)Mr Rebello was the director and/or secretary of six other companies.

  2. An employer cannot be absolved of its legal responsibility to comply with the law in relation to employees through financial difficulty or otherwise, regardless of its size or its financial position.  An employer’s financial position at the time of the contravention is of very limited relevance to the question of penalty, the relevant consideration being the objective seriousness of the conduct.

Whether or not the breaches were deliberate

  1. The Ombudsman argued forcefully that the contravening conduct had been deliberate.  She referred in that connection to the fact that Mr Rebello admitted that he had received the compliance notice in early April 2015, understood it and knew that it meant that Delahill was obliged to pay Mr and Mrs Karunaratne.  She also referred to the efforts to which her inspectors went to remind Mr Rebello that the compliance notice was due and to warn him of the consequences of not complying with it.  She also referred to Mr Rebello’s criticisms of Mr and Mrs Karunaratne and to his resistance to making payment in full.

  2. The Ombudsman’s submission was, in summary, that the respondents simply chose not to comply with their obligations with the consequence that the relevant conduct had been deliberate.

  3. To be balanced against these facts is Mr Rebello’s evidence concerning the difficulties he had in laying his hands on the funds necessary to satisfy the obligations owed to Mr and Mrs Karunaratne.  I accept that owing to a downturn in business he and Delahill had few liquid assets at the relevant time and found it difficult to make the required payments.  I also accept that Mrs Rebello’s ill-health would have been a significant concern and distraction for Mr Rebello.  However, I believe that it is nevertheless appropriate to conclude that the failure to comply with the notice was deliberate as the Ombudsman contended.

  4. It should not be forgotten that the compliance notice was not the first step taken by the Ombudsman’s office.  Rather, it came nearly five months after Mr Ingle interviewed Mr Rebello by telephone and three months after the substance of the underpayment contraventions was made plain to Delahill and Mr Rebello in the 23 December 2014 meeting.  Moreover, the respondents made no contemporaneous efforts of any substance to explain to the Ombudsman Delahill’s delay in satisfying the requirements of the notice.  Given those facts together with Mr Rebello’s stated desire to negotiate a reduced compensation amount, an unwillingness to comply with the notice according to its terms must be inferred.

Whether senior management was involved in the breaches

  1. Mr Rebello was at all relevant times a director and secretary of Delahill and the person responsible for Delahill’s compliance with workplace laws.  During his recorded interview with Mr Ingle, Mr Rebello stated that he made all of the decisions for Delahill in respect of financial management, payment of wages and the hiring and termination of workers.

  2. Whatever role Mrs Rebello might have had, Mr Rebello was plainly Delahill’s principal decision-maker.

Whether the party committing the breach had exhibited contrition

  1. Evidence and submissions were focussed on the underlying conduct concerning Mr and Mrs Karunaratne but, for the reasons I have given, that is not a relevant matter.

  2. Although Mr Rebello said that he would not, in the future, fail to pay full award wages, he did not express any sentiment concerning the failure to comply with the contravention notice and no evidence was led to demonstrate conduct demonstrative of contrition on Delahill’s part.  However, it would have been difficult to do so.  On the subject of manifestation of contrition by a corporation, in ACE Insurance Ltd v Trifunovski (No 2) (2012) 215 IR 206 Perram J said, in comments which were not in issue on the subsequent appeal:

    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.

    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. (at 228-229 [113]-[114])

  3. Perhaps the most tangible expression of contrition realistically possible in a case such as this concerning a contravention which undermines the effective operation of a useful, simple and non-litigious mechanism for the enforcement of the substantive requirements of the FW Act, is that the respondents did not contest the proceeding and the amount owing was paid before the hearing of the application.

  4. Some small discount on penalty should be allowed for this.

Whether the party committing the breach had taken corrective action

  1. Mr Rebello organised for the amount identified in the compliance notice to be paid in December 2015 but the Ombudsman argued that any mitigation of penalty arising from this should be limited, given that the amount was paid more than seven months after the compliance notice required it be paid (30 April 2015), six months after this proceeding was commenced (12 June 2015) and fifteen months after the commencement of the Ombudsman’s investigation (September 2014).  As already noted, a small discount for finally paying the outstanding amounts will be allowed.

  2. Mr Rebello deposed that he had engaged Employsure to assist with his workplace relations responsibilities, but did not provide evidence of what steps had been taken.  In any event, such activities are of no real relevance to the contravention under consideration.

Whether the party committing the breach had co-operated with the enforcement authorities

  1. Although he did not respond to the Ombudsman’s entreaties to enter into an enforceable undertaking, act promptly on the compliance notice or accept his liability under it until late in the piece, Mr Rebello was reasonably co-operative with the inspectors and the investigation, particularly given what I accept were his difficult personal and business circumstances.  Mr Haddad seems also to have been co-operative.

  2. I infer that Mr Rebello’s mistaken understanding of the appropriate response to the Karunaratnes’ claims led to admissions not being made until he instructed a solicitor.

  3. The Ombudsman submitted that when admissions are made within close proximity to hearing and many months after proceedings are commenced, and where there is no real contrition shown, little discount should be applied.  No discount additional to the one already foreshadowed will be allowed.  In substance, that discount is being allowed under one criterion but based on all the small co-operative and corrective actions taken by the respondents.

The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements

  1. The Ombudsman submitted that the powers conferred on Fair Work Inspectors (such as the power to issue compliance notices) are intended to provide her with an effective means for investigating and enforcing compliance with minimum standards and industrial instruments without reliance on court proceedings. It can be accepted that failure to comply with a compliance notice undermines the FW Act’s enforcement framework and the safety net of entitlements it is designed to protect.

  2. As the Ombudsman submitted, ordering penalties at a meaningful level encourages compliance with these minimum standards and allows the Court to show that there are consequences for failing to comply with a compliance notice.

The need for specific and general deterrence

Specific deterrence

  1. The Ombudsman contended that specific deterrence was necessary in this case.  Again, submissions were directed to issues associated with the alleged underpayments, rather than to the failure to act on the compliance notice, and so were of limited assistance.  Nonetheless, Mr Rebello is a businessman and some element for specific deterrence is appropriate to ensure that he does not fail to address any future compliance notice in the way he failed to address in a substantive way the one the subject of this proceeding.

General deterrence

  1. The Ombudsman submitted that the Court should mark its disapproval of Delahill and Mr Rebello’s conduct by setting a penalty that served as a warning both to other employers in the industry and employers that have been issued with compliance notices. 

  2. Again, the Ombudsman’s submissions were more directed to the underlying, alleged contraventions than to the one in issue in this proceeding. Nevertheless, the effective operation of the compliance notice system depends on parties engaging with the requirements of such notices and the related provisions of the FW Act. The penalties to be imposed will incorporate an element reflecting the Court’s disapproval of the relevant conduct in this matter with a view to encouraging others not to repeat it.

Respondents’ submissions

  1. Turning to the other matters raised by the respondents which were relevant to the imposition of penalties:

    a)the respondents complained that the Ombudsman should have:

    i)treated their explanations for the contravention as reasonable under s.716 of the FW Act;

    ii)had regard to their “financial hardship”,

    iii)acknowledged the burden on small enterprises of the  complexity of and changing requirements for workplace compliance; and

    iv)taken into account the time and money Mr Rebello had to devote to his wife and her care while also running his company, including from abroad.

    However, they did not identify any miscarriage of discretion on the Ombudsman’s part in deciding to seek penalties for the respondents’ contravention of s.716(5) of the FW Act. The respondents made similar complaints concerning other difficulties they laboured under in 2015 without demonstrating any relevant or material error on the Ombudsman’s part.

  2. The respondents also complained that the Ombudsman had mentioned them publicly.  The adverse consequences of such publicity can be taken into account when setting penalties so that a contravener is not, in effect, punished too severely, however, insufficient information was supplied in connection with this contention for any substantive regard to be given to it.

  3. Further, the fact that the Ombudsman’s pursuit of this matter has been expensive and distracting for the respondents is the product of their own failure to comply with the compliance notice.  It has not been demonstrated that the Ombudsman’s conduct merits criticism by the Court.

  4. The respondents’ submission that:

    The FWO in their Learned Wisdom has chosen to ignore my Genuine excuses for not Complying with their Compliance Notice and were waiting for an opportunity to slap me with a fine and were more than Happy to take the 2 Employees word without questioning their truthfulness (errors included)

    in circumstances where Mr and Mrs Karunaratne had cash and were living a happy and comfortable life but Mr Rebello was hardworking and cared for his ill wife, ignores the fact that the respondents could have sought review of the compliance notice under s.717 of the FW Act. If there had been any error in the Ombudsman’s approach, that was the way to pursue it but that did not happen and so this is not a complaint which is relevant to the matters in issue in this case.

  5. The respondents also sought various orders from the Court. These were set out earlier at [78]. The Court does not have power under the FW Act to make such orders and the respondents did not demonstrate any other power or reasonable basis which would justify the making of orders of that sort.

FINDING

  1. The contraventions alleged have been proved.  There will be declarations to that effect.

PENALTIES

  1. The maximum penalty for Delahill’s contravention is $25,500 and $5,100 in the case of Mr Rebello. 

  2. When determining the appropriate penalties to be imposed on the respondents, I have taken into consideration the matters rehearsed earlier in these reasons.  I have also had regard to the principle of proportionality, the purposes of sentencing and the task of instinctive synthesis of various factors into a single result which were discussed by Barker J in Australian Building & Construction Commissioner v Construction, Forestry, Mining & Energy Union (No 2) (2010) 199 IR 373 at 376 [4]-[7]. I consider the appropriate penalties to be:

    a)$15,000 for Delahill’s contravention of s.716(5) of the FW Act; and

    b)$3,000 for Mr Rebello’s contravention of s.716(5) of the FW Act.

  3. I believe that those amounts are just and appropriate.  They should be paid to the Consolidated Revenue Fund within twenty-eight days.

I certify that the preceding one-hundred and twenty-one (121) paragraphs are a true copy of the reasons for judgment of Judge Cameron

Date: 13 December 2018

Key Legal Topics

Areas of Law

  • Employment Law

  • Statutory Interpretation

Legal Concepts

  • Breach

  • Penalty

  • Statutory Construction

  • Remedies

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