Fair Work Ombudsman v Delishesco Pty Ltd
[2022] FedCFamC2G 471
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Delishesco Pty Ltd [2022] FedCFamC2G 471
File number(s): BRG 222 of 2021 Judgment of: JUDGE VASTA Date of judgment: 17 June 2022 Catchwords: INDUSTRIAL LAW – Contraventions of Fair Work Act 2009 (Cth) – Underpayments to employees – failure to give pay slips – failure to keep records – provision of false material to the Fair Work Ombudsman – pecuniary penalty – deterrence Legislation: Fair Work Act 2009 (Cth): s 44, s 45, s 535, s 536, s 550, s 557A, s 557B, s 718A Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA
Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Mason v Harrington Corporation Proprietary Limited t/as Pangaea Restaurant & Bar [2007] FMCA 7
Division: Division 2 General Federal Law Number of paragraphs: 106 Date of last submission/s: 13 June 2022 Date of hearing: 13 June 2022 Place: Brisbane Counsel for the Applicant: Mr McKechnie Solicitor for the Applicant: Fair Work Ombudsman Counsel for the Respondents: Mr Mackie Solicitor for the Respondents: Mjt Law
Table of Corrections 4 July 2022 In paragraph 102 the penalty amount for the serious contravention of failing to pay 28 employees the minimum adult hourly rates of $50,000 has been corrected to $45,000 In paragraph 102 the penalty amount for the serious contravention of failing to pay 30 employees a casual loading amount of $70,000 has been corrected to $65,000 ORDERS
BRG 222 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: DELISHESCO PTY LTD
First Respondent
YINAN YANG
Second Respondent
ORDER MADE BY:
JUDGE VASTA
DATE OF ORDER:
17 JUNE 2022
BY CONSENT, THE COURT DECLARES THAT:
1.The First Respondent, Delishesco Pty Ltd, contravened the following civil remedy provisions in the period 1 December 2018 to 31 March 2019:
(a)section 45 of the Fair Work Act 2009 (Cth) (FW Act), by failing to pay the Employees in rows 1 to 28 in Column A of Schedule B the minimum Adult hourly rates prescribed by clause 20.1 of the Restaurant Industry Award 2010 (Restaurant Award);
(b)section 45 of the FW Act, by failing to pay Employees Sihan Wang (Karen) and Yalin Liu (Effy) in Schedule C the junior hourly rates prescribed by clause 20.3 of the Restaurant Award;
(c)section 45 of the FW Act by failing to pay the Employees in rows 1 to 30 in Column A of Schedule D the casual loading pursuant to clause 13.1 of the Restaurant Award;
(d)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 23 in Column [A] of Schedule E the Saturday penalty rates pursuant to clause 34.1 of the Restaurant Award;
(e)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 22 in Column A of Schedule F the Sunday penalty rates pursuant to clause 34.2 of the Restaurant Award;
(f)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 7 in Column A of Schedule G the public holiday penalty rates pursuant to clause 34.1 of the Restaurant Award;
(g)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 6 in Column A of Schedule H the overtime rates for hours worked on Monday to Friday pursuant to clause 33.2(a) of the Restaurant Award;
(h)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 7 in Column A of Schedule I the overtime rates for hours worked on Saturday pursuant to clause 33.2(b) of the Restaurant Award;
(i)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 7 in Column A of Schedule J the overtime rates for hours worked on Sunday pursuant to clause 33.2(c) of the Restaurant Award;
(j)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 16 in Column A of Schedule K the penalty rates for work done between the hours of 10.00 pm and midnight Monday to Friday pursuant to clause 34.2(a)(i) of the Restaurant Award;
(k)section 45 of the FW Act, by failing to pay Split Shift Allowance to Zhao Dan, Wonjae Yang and Spark Yong in Column A of the Schedule L, as full-time or part-time employees who had a broken workday pursuant to clause 24.2 of the Restaurant Award;
(l)section 45 of the FW Act, by failing to cash out annual leave in accordance with an agreement in respect of Zhao Dan, pursuant to clause 35.8 of the Restaurant Award;
(m)section 45 of the FW Act, by failing to agree in writing upon the guaranteed hours Wonjae Yang at the time of engagement pursuant to clause 12.3 of the Restaurant Award;
(n)section 44 of the FW Act, by failing to pay Wonjae Yang for absence on a day that is a public holiday pursuant to section 116 of the FW Act;
(o)section 718A of the FW Act, by producing timesheets to a fair work inspector that it knew, or was reckless as to whether they were, false or misleading;
(p)section 718A of the FW Act, by producing pay slips to a fair work inspector that it knew, or was reckless as to whether they were, false or misleading;
(q)section 718A of the FW Act, by producing payroll spreadsheets to a fair work inspector that it knew, or was reckless as to whether they were, false or misleading;
(r)section 718A of the FW Act, by producing annual leave records to a fair work inspector that it knew, or was reckless as to whether they were, false or misleading;
(s)section 536(1) of the FW Act, by failing to give the Employees a pay slip within one working day of receiving an amount in relation to the performance of work;
(t)section 535(1) of the FW Act, by failing to make and keep annual leave records as required by reg 3.36 of the Fair Work Regulations 2009 (Cth) (FW Regulations).
2.That each of the First Respondent’s contraventions at paragraphs 1(a) and (c) to (i) above were serious contraventions within the meaning of section 557A of the FW Act:
(a)section 45 of the FW Act by failing to pay the Employees in rows 1 to 28 in Column A of Schedule B the minimum Adult hourly rates prescribed by clause 20.1 of the Restaurant Award;
(b)section 45 of the FW Act by failing to pay the Employees in rows 1 to 30 in Column A of Schedule D the casual loading pursuant to clause 13.1 of the Restaurant Award;
(c)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 23 in Column [A] of Schedule E the Saturday penalty rates pursuant to clause 34.1 of the Restaurant Award;
(d)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 22 in Column A of schedule F the Sunday penalty rates pursuant to clause 34.2 of the Restaurant Award;
(e)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 7 in Column A of Schedule G the public holiday penalty rates pursuant to clause 34.1 of the Restaurant Award;
(f)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 6 in Column A of Schedule H the overtime rates for hours worked on Monday to Friday pursuant to clause 33.2(a) of the Restaurant Award;
(g)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 7 in Column A of Schedule I the overtime rates for hours worked on Saturday pursuant to clause 33.2(b) of the Restaurant Award;
(h)section 45 of the FW Act, by failing to pay the Employees in rows 1 to 7 in Column A of Schedule J the overtime rates for hours worked on Sunday pursuant to clause 33.2(c) of the Restaurant Award;
3.The Second Respondent, Mr Yinan Yang, was involved, pursuant to section 550(1) of the FW Act, in each of the First Respondent’s contraventions set out in paragraph 1 above.
4.The Second Respondent was involved, within the meaning of section 557A(5A) of the FW Act, in the First Respondent’s contraventions, set out in paragraph 2 above.
THE COURT ORDERS THAT:
1.The First Respondent pay penalties pursuant to section 546(1) of the FW Act for its contraventions at paragraph 1 above and for the serious contraventions at paragraph 2 above in the sum of $305,000.00
2.The Second Respondent pay penalties pursuant to section 546(1) of the FW Act for his involvement in the contraventions at paragraph 1 above and for the serious contraventions at paragraph 2 above in the sum of $50,000.00
3.Pursuant to section 546(3)(a) of the FW Act that all pecuniary penalties imposed on the First Respondent and Second Respondent be paid into the Consolidated Revenue Fund of the Commonwealth of Australia within 540 days of the date of this Order.
4.The Applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE VASTA
INTRODUCTION
On 28 May 2021, the Applicant, Fair Work Ombudsman (“the FWO”), filed an application in this Court seeking declarations against the First and Second Respondents, Delishesco Pty Ltd and Yinan Yang respectively, for contraventions of the Fair Work Act 2009 (Cth) (“the FW Act”). The application also asked this Court to award pecuniary penalties for those contraventions.
I made a number of preliminary orders in Chambers on 28 June 2021 and 20 July 2021. On 16 August 2021, I ordered that the parties work upon a statement of agreed facts but if liability was still being contested, then certain orders would come into place. On 19 October 2021, the parties filed a statement of agreed facts.
On 29 November 2021, I ordered that a penalty hearing occur on Monday, 13 June 2022. I made orders for the filing of any affidavit evidence and submissions by the parties. I extended time for filing on two occasions after that date. The penalty hearing proceeded on 13 June 2022.
Background
The First Respondent owned and operated a restaurant trading as Moga Izakaya & Sushi and operated out of premises in Baroona Road in Paddington, Brisbane. The Second Respondent is the sole director of the First Respondent and was general manager of the restaurant from June 2018.
The First Respondent had a number of employees. During the period from 1 December 2018 to 31 March 2019 (the assessment period), there were 34 employees whose wages were the subject of investigation by the FWO. These 34 employees were classified as either a “waitress”, “waiter”, “kitchen hand”, “unqualified cook”, “cook” or “dishwasher”.
The Restaurant Industry Award 2010 applied to the First Respondent and covered all 34 employees. During this time, there were four full-time employees, one part-time employee and 29 casual employees.
Contraventions
The First Respondent has admitted that to all of the following contraventions regarding its employees over the assessment period.
·The First Respondent admitted that they failed to pay adult minimum hourly rates to the employees.
·The First Respondent has admitted that they failed to pay junior minimum hourly rates.
·The First Respondent admitted to failing to pay casual loading.
·The First Respondent admitted to failing to pay Saturday penalty rates.
·The First Respondent admitted to failing to pay Sunday penalty rates.
·The First Respondent admitted to failing to pay public holiday penalty rates.
·The First Respondent admitted to failing to pay overtime rates for overtime worked on Monday to Friday.
·The First Respondent admitted to failing to pay overtime rates on Saturdays.
·The First Respondent admitted to failing to pay overtime rates on Sundays.
·The First Respondent admitted to failing to pay evening penalty rates between 10 PM and midnight Monday to Friday.
·The First Respondent admitted to failing to pay the split shift allowance to full-time employees.
·The First Respondent admitted to failing to cash out annual leave in accordance with an agreement.
·The First Respondent admitted to failing to agree in writing upon the guaranteed hours for part-time employees.
All 13 of these failures were contraventions of s 45 of the FW Act.
The First Respondent also admitted to contravening s 44 of the FW Act in that it failed to pay for absence on public holiday rates.
All told, these contraventions meant that, collectively, the 34 employees were underpaid a total of $75,716.90. The First Respondent has now repaid the employees whom they were able to contact. The First Respondent has also given the Applicant the list of the 19 employees whom they could not find and has paid what was owed to them to the Applicant.
The First Respondent admitted to failing to make and keep annual leave records of the employees (which is a breach of s 535 of the FW Act).
The First Respondent admitted to failing to provide payslips within one working day of making payment (which is a breach of s 536 of the FW Act).
False records
The investigation, launched by the Applicant, began in February 2019. During the course of the investigation, the First Respondent was issued with “notices to produce” (“NTP”) which were given to the Second Respondent. All NTPs included a warning that the Respondents may be liable to a civil penalty for giving false or misleading documents or information.
The First NTP was issued on 26 March 2019. This notice was handed personally to the Second Respondent. It requested documents and records relating to a particular employee’s employment.
On 12 April 2019, in response to that NTP, the First Respondent provided the Applicant with pay slips and a payroll spreadsheet that related to the particular employee.
On 26 April 2019, the Applicant issued another NTP to the First Respondent. This notice was issued by leaving a copy of the notice at the restaurant and by sending a copy of the notice to the Second Respondent by email. This notice requested documents and records relating to all employees engaged by the First Respondent to perform work at the restaurant during the assessment period.
On 6 June 2019, in response to the April NTP, the First Respondent produced payslips for 16 of the employees, 161 weekly timesheets for the employees, a document referred to as “front of house staff payroll spreadsheet” and another document referred to as “kitchen staff payroll spreadsheet”.
On 1 July 2019, also in response to the April NTP, the First Respondent produced to the Applicant a document called “annual leave details spreadsheet”.
On 4 September 2019, the Second Respondent advised the Applicant, at a meeting with the inspectors, that the First Respondent did not calculate the full-time employees accrued leave and did not record when any leave was taken by any of the employees. Such an admission undermined the credibility of the annual leave document that had been produced on 1 July 2019.
On 21 November 2019, the Second Respondent was interviewed by an inspector. This interview was recorded. During the interview, the Second Respondent produced new timesheets for the employees during the assessment period that were different to the timesheets that had been earlier produced on 6 June 2019. The Second Respondent admitted that the documents that had been provided on 6 June 2019 were false or misleading and were created for the purpose of responding to the investigation.
On 22 November 2019, the Second Respondent sent an email to the inspector attaching payroll spreadsheets for the employees during the assessment period that were different to the payroll spreadsheets that had been produced on 6 June 2019. The spreadsheets also showed that the documents produced by the First Respondent in relation to the first NTP, on 12 April 2019, were also different.
The First Respondent admits that they produced the material, on 12 April 2019, 6 June 2019 and 1 July 2019, knowing that the material was false and misleading in a material particular.
The First Respondent admits that they contravened s 718A of the FW Act by producing timesheets to a fair work inspector that it knew were false and misleading.
The First Respondent admits that they contravened s. 718A of the FW Act by producing payslips to a fair work inspector that it knew were false and misleading.
The First Respondent admits that they contravened s 718A of the FW Act by producing payroll spreadsheets to a fair work inspector that it knew were false and misleading.
The First Respondent admits that they contravened s 718A of the FW act by producing annual leave records to a fair work inspector that it knew were false and misleading.
Serious Contraventions
On 15 September 2017, the legislature enacted s 557A and s 557B of the FW Act. Those provisions read as follows:-
557A Serious contravention of civil remedy provisions
(1) A contravention of a civil remedy provision by a person is a serious contravention if:
(a) the person knowingly contravened the provision; and
(b) the person's conduct constituting the contravention was part of a systematic pattern of conduct relating to one or more other persons.
557B Liability of bodies corporate for serious contravention
(1) For the purposes of subsection 557A(1), a body corporate knowingly contravenes a civil remedy provision if the body corporate expressly, tacitly or impliedly authorised the contravention.
What this means is that, if it is proved that a person (or body corporate) knowingly contravened a civil remedy provision of the FW Act and the conduct was part of the systematic pattern of conduct, then that person (or body corporate) had committed a serious contravention. The consequences for committing a serious contravention are that the maximum penalties are increased tenfold.
Previous dealings of the Respondents with the Applicant
In February 2018, the Applicant commenced an investigation into the compliance of the First Respondent following requests for assistance from two former employees of the First Respondent. Those employees allege that they did not receive sufficient minimum wage payments, overtime, superannuation or annual leave entitlements as a result of their employment with the First Respondent.
During the investigation, the inspectors were dealing with the Second Respondent.
At the end of the investigation, the inspector sent the First Respondent correspondence outlining his findings. They were that the First Respondent had contravened both the Award and the FW Act. There was an assessment that one of the employees was owed $1,595.30 in entitlements. The First Respondent paid the money back to the employee in August 2018.
On 21 September 2018, the Applicant sent the First Respondent correspondence cautioning the First Respondent that the Applicant may commence proceedings against it, if the Applicant became aware of any future non-compliance by the First Respondent.
What this means, in relation to the current matter, is that the First Respondent knew that the Restaurant Award covered and applied to its employment of the employees and that the rates of pay, which were being paid to the employees, were insufficient to meet the minimum rates of pay in the Award.
Consequences
This means that, with regard to the contraventions relating to minimum wages, casual loading, Saturday penalties, Sunday penalties, public holiday penalties, weekday overtime, Saturday overtime and Sunday overtime, the First Respondent knowingly committed these contraventions. These contraventions were neither ad hoc nor inadvertent.
Because the First Respondent had acted in the way that it had back in 2018, and had been put on notice by the Applicant, the conduct was part of a systematic pattern of conduct.
This means that those contraventions, mentioned above, are serious contraventions as that term is defined in s 557A of the FW Act.
The result is that the First Respondent has contravened the FW Act in 20 different ways; eight of which are serious contraventions.
The Second Respondent, pursuant to s 550 of the FW Act, was directly or indirectly knowingly concerned in all of the contraventions of the First Respondent. The Second Respondent admits this fact.
The maximum penalty for the First Respondent is therefore calculated at $5,796,000 and the maximum penalty for the Second Respondent is calculated at $1,159,200.
Declarations
As can be gleaned by the way in which these Reasons have been given, there has been a great deal of cooperation by the Applicant and the Respondents as to the manner in which the contraventions should be grouped and as to the orders and declarations that the Court should make.
I will make the orders that the parties have agreed for me to make.
The Court must now decide the appropriate pecuniary penalties.
Seriousness and why deterrence is needed
In this case, the aspect of deterrence looms large. In fact, it might seem that it overshadows almost everything else. The severity and seriousness of what the First and Second Respondent have done cannot be overstated. The fact that the legislature has enacted such severe maximum penalties demonstrates the serious nature of these contraventions.
The Respondent has systematically underpaid 34 employees. None of the employees has an Anglo-Celtic or European name. They were mainly Chinese, Japanese, Korean or Thai nationals with many using Anglicised names. Most of these employees are workers on visas who are apt to being exploited because of their unfamiliarity with the English language and Australian industrial law. They are also able to be exploited because of the fact that they are in Australia for a short time. It is instructive that over half of the affected employees were not able to be found by the Respondents given that the assessment period concluded nearly 2 ½ years before the Respondents were able to properly pay them.
The individual underpayments ranged from $92.66 to $9,588.97 with the shortfall of minimum entitlements representing between 30-35% of the wages to which they were entitled to receive.
The investigation started because one of the employees realised that being paid $16 per hour was not correct. He then started to search for information on the Internet about the correct minimum payment.
The fact that the employees did not receive payslips hampered their ability to know what they were paid and whether all their entitlements were being given to them.
The previous dealings, that the First and Second Respondents had with the Applicant, illustrate the deliberate nature of this conduct.
The provision of false records to the Applicant is extremely serious. This material was given to the Applicant in April 2019, June 2019 and July 2019. It was not until September 2019 that there was an acknowledgement that some of the material may have been false and it took until November 2019 for the Second Respondent to “come clean”. The provision of that material did hamper the investigation from the time it was given until the time that it was admitted that the information was false.
To provide false material to the Applicant, especially when warnings have been given as to the consequences of doing so, is an extremely serious aspect to the conduct that has occurred.
The Second Respondent
The Second Respondent has provided three affidavits which explain the conduct of the First Respondent, and himself, through his eyes.
The Second Respondent said that the First Respondent was established so that he and his family could have a form of “silent income” while he, the Second Respondent, continued working as a software engineer in Sydney where he and his family lived. The Second Respondent said that he put a manager in place to run the First Respondent. He said that the manager was a person he knew well because she was the wife of a business partner (in another enterprise of the Second Respondent).
The Second Respondent said that he was able to leave the running of the business to that manager for approximately three years (from 2015 to 2018). He said that he received a penalty notice from the Australian Tax Office because the First Respondent had not paid superannuation to its employees. The Second Respondent said that he then travelled to Brisbane to try and discover what was happening in the business.
Dishonesty of the manager
The Second Respondent said that he discovered that the First Respondent had a number of debts; most significantly to the ANZ bank of nearly $300,000 and to the ATO of almost $200,000. All up, the Second Respondent said that the First Respondent owed over $620,000 to various debtors. The Second Respondent discovered that the manager had misappropriated company monies to gamble at the Treasury Casino and also to purchase two Mercedes-Benz vehicles. He terminated her employment.
The Second Respondent said that the manager told him that she had a gambling problem and that she was stealing money in order to facilitate her habit. Notwithstanding all that the manager had done, the Second Respondent said that he did not report her criminal conduct to the police nor did he pursue her for restitution/compensation.
What the Second Respondent did next
The Second Respondent said that he decided to take over the full-time running of the day-to-day operations of the First Respondent in July 2018. He said that he worked as a chef as well is a front of house employee for the First Respondent so that he could reduce the business wage expenses.
The Second Respondent said that he had to consider whether to wind up the First Respondent and close the restaurant down. He said that he was aware that a number of the employees held sponsored visas and that, if the First Respondent ceased trading, these employees would have to find new employment within 28 days. He said that he was concerned that these employees were unlikely to be able to do so and that they would lose their ability to live in Australia. He was aware that these employees enjoyed living in Australia and did not wish to return to their countries of origin.
He said that he felt if he had wound up the business and caused the employees to return home, he would have felt a strong sense of shame and embarrassment in that he was unable to stop his manager from mismanaging the business causing the prejudice to the employees. He said that he decided to repair the significant financial issues faced by the First Respondent because he wanted the employees to remain in Australia.
He said that when he took over, he did not know that the First Respondent had implemented an unlawful pay structure which had resulted in underpayments to employees. The Second Respondent said that because he was under stress and that he had a lack of knowledge, he relied heavily upon the “expertise” of the head chef, Jun Hua. He said that the chef had been closely involved in the operations of the First Respondent and he made out that he knew the applicable remuneration payable to employees. The Second Respondent said that he trusted the judgement knowledge and expertise of the chef.
Receipt of 2018 FWO letter
The Second Respondent acknowledged that he received a letter of caution from the Applicant on 21 September 2018 in relation to two employees. He said that while he was concerned by allegations that the manager had allowed these employees to be underpaid, he was also aware that there was personal issues between the manager and one of the employees. The Second Respondent said that the chef told him that the employees were being paid above market rate and so he believed that the manager’s system of payments to staff was correct and lawful.
The Second Respondent acknowledged that he should have taken further steps to check whether the First Respondent was compliant with its employment obligations.
The Current Investigation
The Second Respondent said that he received the First NTP on 26 March 2019. He said that he did what he could to get those records to the Applicant within the timeframe. Despite the enormous stress that he said he was under, the Second Respondent was still able to produce records.
The Second Respondent said that he received another NTP on 26 April 2019. This notice required a significant number of documents to be produced and the Second Respondent said that this was extremely difficult given all of the problems that the business was still undergoing. He said that he asked for an extension of time within which to produce the records but this was not forthcoming.
The Second Respondent, for some unknown reason, felt that the Applicant was treating him differently because of his Chinese descent and was trying to set him up to fail.
The reasons of the Second Respondent for producing false documents
The Second Respondent said that he had a conversation with the chef around 11 May 2019. He said that the chef voiced his concern that because he (the chef) was involved with the decision-making at the time of the underpayments, he (the chef) may be implicated in any contraventions. The chef had told the Second Respondent that he was on the sponsored Visa and that any unlawful conduct in which he had engaged could result in his visa being revoked. He said that the chef suggested that the Second Respondent create false documents.
The Second Respondent said that he was hesitant to accept this proposal but he was concerned that should the chef’s visa be revoked, the First Respondent would be without a head chef and the Second Respondent would no longer have anyone to consult with regarding the running of the business.
The Second Respondent said that he consulted with most of the employees of the First Respondent. He said that they voiced their concerns that the First Respondent may become insolvent as a result of the pecuniary penalties and that their sponsored visas could be revoked. The employees told the Second Respondent that they were also worried that the Department would discover that they were working more than the 20 hours which they were allowed to work per week. This breach of their visa conditions could also mean that they would be deported.
The Second Respondent said that his employees each agreed that he (the Second Respondent) should instead create and produce falsified documents to the Applicant. Second Respondent said that he promised the employees that he would repay them for any debt owing once the business had recovered from the mismanagement of the former manager.
While the Second Respondent says that he is now deeply regretful for his unethical, deceitful and dishonest actions, his main concern at the time was the ongoing financial viability of the First Respondent and ensuring that the employees were able to remain in Australia.
The Eventual Confession
The Second Respondent had been invited to be interviewed by the Applicant in November 2019. The Second Respondent said that the day before the interview, he felt regretful and remorseful about what he had done and so emailed the inspector confessing that he had provided misleading documents. In the interview the next day, the Second Respondent said that he told the Applicant that the documents had been false and misleading.
The Second Respondent said that he did not mention the chef when he made these admissions because “it was ultimately my decision, not his”. He said that he did not want the chef or any of the employees to face prosecution. He said that he believed if he had told the Applicant about their complicity they would also be punished and have their visas revoked.
The cooperation since November 2019
The Second Respondent said that he then assisted the Applicant as best he could and provided all original copies of documents. He said that he began to contact all employees who had been underpaid so that he could make good their underpayment. He said that he was successful in repaying 15 of the employees and has given the balance of the monies owed for the other 19 employees to the Applicant for the benefit of those employees.
He said that he agreed to all the facts contained in the statement of agreed facts because: it would save the Court, and the Applicant, the time and effort to determine liability; it would save the First Respondent from further legal costs which might prejudice its ability to pay pecuniary penalties; it would ensure that any current or former employees of the First Respondent were not required to give evidence; and, it was a gesture of contrition and recognition of the regret or remorse he felt for his past actions.
The current position of the First Respondent
The Second Respondent has provided evidence of the financial position of the First Respondent. He claims that the First Respondent would only be able to pay a pecuniary penalty in the order of $150,000 otherwise it would not be able to survive as a going concern.
The Second Respondent has informed the Court that the First Respondent has not traded since the end of February 2022. This is as a result of localised flooding that occurred in Brisbane at that time. The premises of the First Respondent were subject to flood levels of approximately 1.5 m and the business simply has not been able to reopen. The Second Respondent is hopeful that the business would be able to resume trading as a takeaway restaurant to begin with before it could go back to offering a dine in service.
The Second Respondent said that the First Respondent ensures that all of its employees are now paid correctly in line with the Award.
The Assessment of Pecuniary Penalties
The law in relation to assessment of pecuniary penalties has really been laid down quite comprehensively. The High Court, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3, said, at paragraph 116 of that judgment:
As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty's general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition.
The High Court reaffirmed that principle very recently in the matter of Australian Building and Construction Commissioner v Pattinson [2022] HCA 13. It has been said that this decision is a “game changer”, however, the decision had really reiterated that the principles involved in criminal law (such as retribution and proportionality) do not play the same role in determining an appropriate pecuniary penalty. The approach must be to impose a penalty that will deter, both specifically and generally. The High Court said, at paragraph 46 of that case:
[46]It is important to recall that an “appropriate” penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. …
[47]The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors … where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
[48]It is not necessary to multiply examples further. It is sufficient to say that a court empowered by section 546 to impose an “appropriate” penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.
In Mason v Harrington Corporation Proprietary Limited t/as Pangaea Restaurant & Bar [2007] FMCA 7, which is known as the “Pangaea case”, the Court went through, in effect, a number of factors the Court should be mindful of when imposing pecuniary penalties. One must be careful, though, in looking at the Pangaea case (Supra), that one does not simply look at those matters as some form of checklist to see whether or not the facts of the case with the particular factors either aggravate or mitigate the penalty. As such, the list compiled in Pangaea (Supra) is extremely useful, but it should not be a formula used by the Court to slavishly come up with some sort of almost mathematical guide for the imposition of penalties. Notwithstanding what has now been said in Pattinson (supra), there is still a place for a Court to consider these aspects.
Issues and consideration
While it is correct to say that the evidence of the Second Respondent is not contradicted by sworn evidence (except for one detail), this does not mean that the Court must accept it. It is difficult to understand why the Second Respondent did not make a police complaint about the dishonest conduct of the former manager. The Second Respondent has given no evidence as to the quantum of the misappropriation.
It is also difficult to understand why, if the First Respondent was only created to give the Second Respondent and his family a “silent income”, he felt the need to maintain the business and look after the welfare of the employees, was such a priority.
It is also difficult to accept that the Second Respondent, in effect, ignored the warning of the Applicant in their September 2018 letter, and instead preferred the counsel of a worker who had no understanding of industrial and employment practice, because he trusted that the systems put in place by a manager, he knew to be dishonest, were correct even though the FWO had said that those systems had failed to pay an employee lawfully.
The only evidence from employees comes from the affidavits of Kosuke Tsutsuki and Yuuto Fukumura. It was the complaint from Mr Fukumura that caused the Applicant to commence their investigation. Mr Tsutsuki deposed to the fact that he told the Second Respondent that he was unhappy at being paid $16 an hour but was rebuffed. According to the agreed statement of facts, this employee did have his wages raised eventually. I do note that the Second Respondent denies the approach by Mr Tsutsuki, however I would accept the evidence of Mr Tsutsuki.
There is no evidence from the chef, or any other employee, that there was any form of “group agreement” as to the provision of false records. Whilst Mr Fukumura would not have been employed at this time, it would seem that Mr Tsutsuki would have been employed but there is no mention by him of any such agreement.
This evidence would seem to show that there were complaints about the payments being made in these complaints were being made to the Second Respondent. Given that he had already been given a warning letter by the Applicant and he now had other complaints (which he could not casually dismissed as being the product of personality clashes), it is startling that the Second Respondent made no investigations but seemingly continue to rely upon advice of his chef.
There is evidence of cooperation but that cooperation did not begin when it should have; that is, when the Applicant first began its investigation. There is certainly evidence of remorse and of positive moves to ensure future compliance with the FW Act and Award rates.
The pecuniary penalties
The submission of the Respondents was that the sum of $150,000 is a sufficient penalty to deter the Respondents specifically and others of like mind, generally. The submission is that $150,000 is a very large impost upon a small business. That would seem to be a meritorious submission upon first glance. The sum of $150,000 is not a small amount.
However, there has to be some context to that amount. Upon closer consideration, that amount is not as large as it may, prima facie, appear to be.
According to the financial records submitted by the First Respondent, there has been a slow deterioration in the turnover of the business but the cost to the business of paying the employees has remained somewhat constant.
In the 2016/2017 financial year, turnover was $1,516,173 and the wages bill for that financial year was $523,765.
In the 2017/2018 financial year, turnover was $1,411,856 and the wages bill for that financial year was $523,292.
In the 2018/2019 financial year (which is the year in which the assessment period occurred), turnover was $1,347,636 and the wages bill for that financial year was $504,317.
In the 2019/2020 financial year, turnover was $1,170,031 and the wages bill for that financial year was $516,272.
The total amount of underpayments during the assessment period was over $75,000. Whilst this may be an imprecise mathematical calculation, if the rate of underpayment remained constant for a 12 month period, then the underpayments in a financial year would total in the vicinity of $225,000. This would equate to a proper wages bill, for any of the financial years disclosed, of about $730,000.
On the financial records given to this Court, it is very difficult to see how the business would be able to remain a going concern if it paid the amounts that it was lawfully required to pay to its employees. On any method of calculation, the First Respondent has effectively cut 30% of their wages bill by systematically underpaying the employees. This gives the First Respondent a clear advantage over any other similar business if its wages bill is 30% lower than another business which pays its employees according to law.
A pecuniary penalty of $150,000 equates to approximately 21% of the proper wages bill of the First Respondent in any of the financial years disclosed to the Court. To my mind, this does not seem to be sufficient to ensure deterrence.
The Respondents have submitted that “viewed through the lens of deterrence, there is no meaningful difference between imposing a penalty of $150,000, $300,000 or $1 billion; one is not more deterring than the other, because they will each have the same effect”. The submission continued that a penalty of $150,000 was more than ample to ensure that the costs of non-compliance are not seen as the “costs of doing business”. I do not agree with this submission because of the matters already considered.
The Respondents submit that for any small business, a penalty of $150,000 is likely to be fatal. They submit that the maximum general deterrent effect would have been achieved and any larger penalty would be counter-productive because it would signal to operators that there is no utility in cooperating with the Applicant and no utility in confessing to offences because the end result will be the same as if they had behaved in a belligerent and callously greedy manner.
The Respondents submit that “at some point of severity, the message that is sent ceases to be a warning against non-compliance, and instead becomes “may as well be hung for a sheep as a lamb”. I disagree with this submission. It is akin to the submission that is often made in the criminal law when sentencing for violent rape offences that “if too great a penalty is given for a rape, then an offender may say to themselves that they may as well kill the victim because the penalty will be almost the same”.
The pecuniary penalty that is awarded by a Court must be of a sufficient calibre to provide specific and general deterrence whilst not becoming oppressively severe.
Orders
Taking into account all matters, I am of the view that the following pecuniary penalties are appropriate. Even though both the Applicant and the Respondents have asked me to award penalties and then to apply discounts to arrive at the appropriate penalty, I will not perform such an exercise, but rather award the appropriate penalty taking into account all considerations.
For the First Respondent, I award the following pecuniary penalties.
·The serious contravention of failing to pay 28 employees the minimum adult hourly rates -$45,000
·the contravention of failing to pay junior hourly rates - no penalty
·the serious contravention of failing to pay 30 employees a casual loading required -$65,000
·the serious contravention of failing to pay Saturday penalty rates -$8,000
·the serious contravention of failing to pay Sunday penalty rates - $8,000
·the serious contravention of failing to pay public holiday penalty rates - $8,000
·the serious contravention of failing to pay overtime rates of hours worked Monday to Friday - $4,000
·the serious contravention of failing to pay Saturday overtime -$3,000
·the serious contravention of failing to pay Sunday overtime rates - $3,000
·the contravention of failing to pay evening penalty rates - no penalty
·the contravention of failing to pay Split shift allowances - no penalty
·the contravention of failing to cash out annual leave - $2,000
·the contravention failing to agree to guaranteed hours - $2,000
·the contravention of failing to pay for absences on a public holiday - $2,000
·the contravention of producing false timesheets - $40,000
·the contravention of producing false payslips - $40,000
·the contravention of producing false payroll spreadsheets - $40,000
·the contravention of producing false annual leave records - $20,000
·the contravention of failing to give employees a pay slip - $10,000
·the contravention of failing to make and keep annual leave records - $5,000
This is a total of $305,000 for the First Respondent. I am satisfied that this amount is an appropriate penalty that achieves the purpose of specific and general deterrence but is not oppressively severe.
For the Second Respondent, I award the following pecuniary penalties for the corresponding contraventions.
·$8,000
·No penalty
·$10,000
·$1,000
·$1,000
·$500
·$500
·$500
·No penalty
·No penalty
·$500
·$500
·$500
·$7,500
·$7,500
·$7,500
·$3,000
·$1,000
·$500
This is a total of $50,000 for the Second Respondent. I am satisfied that this amount is an appropriate penalty that achieves the purpose of specific and general deterrence but is not oppressively severe.
I will give the Respondents 540 days (which is approximately 18 months) to pay these penalties to the Commonwealth.
I certify that the preceding one hundred and six (106) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Vasta. Associate:
Dated: 17 June 2022
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