Fair Work Ombudsman v Dynamics Clean Services Pty Ltd
[2022] FedCFamC2G 175
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Dynamics Clean Services Pty Ltd [2022] FedCFamC2G 175
File number(s): SYG 1566 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 18 March 2022 Catchwords: INDUSTRIAL LAW – assessment of pecuniary penalties for admitted contravention of s 716(5) of the Fair Work Act 2009 (Cth). Legislation: Cleaning Services Award 2020 cls 11.3, 18.2, 20.2(c)
Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) ss 539, 546, 550, 557A, 700, 716, 717
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The BKH Contractors Case) (No 2) [2018] FCA 1563
Bevis v VA Holdings Pty Ltd trading as Granton Homes & Ors [2020] FCCA 2082
Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492
Fair Work Ombudsman v VS Investment Group Pty Ltd [2013] FCCA 208
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Division: Fair Work Number of paragraphs: 32 Date of hearing: 8 March 2022 Place: Sydney Solicitor for the Applicant: Mr J Leith of Australian Government Solicitor The Respondents: No appearance by, or on behalf of, the respondents ORDERS
SYG 1566 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: DYNAMICS CLEAN SERVICES PTY LTD (ACN 617 601 402)
First Respondent
ALAN AVALOS
Second Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
18 MARCH 2022
THE COURT DECLARES THAT:
1.The first respondent contravened s 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with a compliance notice given to the first respondent on 12 February 2021 pursuant to s 716(2) of the FW Act.
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 referred to in declaration 1 and, by reason of s 550(1) of the FW Act, is taken to have contravened s 716(5) of the FW Act.
THE COURT ORDERS THAT:
3.Pursuant to s 546(1) of the FW Act the first respondent pay a pecuniary penalty in the sum of $10,656 in relation to the contravention identified in declaration 1.
4.The first respondent pay the pecuniary penalty referred to in order 3 to the Commonwealth by 15 April 2022.
5.Pursuant to s 546(1) of the FW Act the second respondent pay a pecuniary penalty in the sum of $2,131 in relation to the contravention identified in declaration 2.
6.The second respondent pay the pecuniary penalty referred to in order 5 to the Commonwealth by 15 April 2022.
7.The parties have liberty to apply within 7 days’ notice in relation to any question that may arise concerning the implementation of these orders.
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
INTRODUCTION
The applicant (FWO) applies under s 546 of the Fair Work Act 2009 (Cth) (FW Act) for orders that the first respondent, Dynamics Clean Services Pty Ltd (DCS), and the second respondent, Mr Avalos, pay pecuniary penalties because of their admitted contravention of s 716(5) of the FW Act. The FWO also seeks declarations that reflect the respondents’ admitted contravention of s 716(5) of the FW Act.
I will begin by setting out the relevant admitted facts,[1] the provisions of the FW Act the respondents admit they contravened, and the contraventions themselves.
[1] These are contained in a Statement of Agreed Facts filed on 5 November 2021
ADMITTED FACTS AND CONTRAVENTIONS
DCS is and was at all relevant times a company that provides cleaning services in Sydney.
Mr Avalos is and was at all relevant times the sole director and shareholder of DCS.
From 5 November 2020 to 11 February 2021 Ms Gemayell, a Fair Work Inspector appointed under s 700 of the FW Act, commenced an investigation into DCS after receiving a request for assistance from Sadima Gurang (Employee).
As a result of the investigation Mr Keene, a Fair Work Inspector appointed under s 700 of the FW Act, formed the belief that: DCS employed the Employee from 20 October 2020 to 25 October 2020 on a casual basis (Casual Employment); DCS and the Employee were covered by the Cleaning Services Award 2020 (Cleaning Award); given the duties the Employee performed the Employee fell within the classification of “Cleaning Services Employee Level One” in Annexure A to the Cleaning Award; and the Employee was not paid for any hours worked.
As a result of the matters in paragraph 6, Mr Keene formed the belief that DCS contravened cl 11.3 of the Cleaning Award, and cl 20.2(c) of the Cleaning Award (Contraventions).
Compliance Notice
On 12 February 2021 Mr Keene gave a notice to DCS pursuant to s 716(2) of the FW Act (Compliance Notice).
The Compliance Notice required DCS to do the following:
(a)remedy the direct effects of the Contraventions by 19 March 2021 by taking the following specified action (Specified Action):
(i)identify the number of hours the Employee worked during the Casual Employment;
(ii)calculate the amount DCS should have paid to the Employee during the Casual Employment;
(iii)make payment to the Employee in respect of the amounts calculated; and
(iv)make a record of the information and amounts referred to in (i) and (ii), and the amount of the payment referred to in paragraph (iii) (Underpayment Rectification Information); and
(v)calculate and pay additional superannuation contributions required by cl 18.2 of the Cleaning Award in respect of those amounts; and
(b)produce to the FWO reasonable evidence of DCS’s compliance with (a) above by producing a schedule that sets out the Underpayment Rectification Information in respect of the Contraventions that concerned the Employee and the additional superannuation contributions calculated and paid to the Employee’s Superannuation Fund and proof that full payment was made by 26 March 2021.
DCS failed to take the Specified Action by 19 March 2021, and failed to produce evidence of compliance with the Compliance Notice by 26 March 2021. For these reasons, DCS contravened s 716(5) of the FW Act.
Given the matters referred to in paragraph 4, Mr Avalos had actual knowledge that the Compliance Notice was given to DCS, had actual knowledge of DCS’s failure to comply with the Compliance Notice, and was an intentional participant in DCS’s failure to comply with the Compliance Notice. For those reasons, Mr Avalos was a person involved, within the meaning of s 550(2)(c) of the FW Act in DCS’s contraventions of s 716(5) of the FW Act, and because of s 550(1) of the FW Act, Mr Avalos is taken to have contravened s 716(5) of the FW Act.
Death of the Employee and subsequent payments made by DCS
On 28 April 2021 the Employee died.
The Employee’s surviving relatives, Kamala Gurang, Sher Bahadur Gurung, and Krishma Gurang are the executors of the Employee’s estate (Executors).
On 15 May 2021 DCS paid $217.90 to the Employee’s bank account, which the Executors have access to.
On that same day, Mr Avalos sent Mr Keene an email and stated that DCS had paid the Employee. Attached to that email was a copy of a bank transaction record which stated that $217.90 was transferred to the Employee. In his email Mr Avalos said “the company paid [the Employee] an amount of $217.90 including deductions of tax and apple airpods using her wage”. A copy of a receipt for “Airpods Pro” for $448.00 was also attached to Mr Avalos’ email.
On 15 May 2021 Mr Avalos sent Mr Keene a further email which referred to a complaint from a client of DCS regarding “stolen apple airpods”. Mr Avalos stated that DCS “has every right to deduct [the Employee’s] wages”.
On 26 May 2021 Mr Keene sent an email to Mr Avalos and stated that the FWO was of the view that DCS had failed to comply with the Compliance Notice and DCS could not withhold wages for “the airpods”.
On 6 September 2021 DCS paid the balance of monies owed to the Employee pursuant to the Cleaning Award, being $608.50. This was paid into the Employee’s bank account, which the Executors have access to.
Admitted contraventions
On the basis of the facts set out above, DCS admits that it contravened s 716(5) of the FW Act by failing to comply with the Compliance Notice issued under s 716 of the FW Act. And Mr Avalos admits that he was involved, within the meaning of s 550(2) of the FW Act, in the contravention of s 716(5) admitted by DCS. On these facts the admissions are well made.
PENALTY
Power and principles
Subsection 546(1) of the FW Act provides that this Court may, on application, order a person to pay a pecuniary penalty the Court considers is appropriate if the Court is satisfied the person has contravened a “civil remedy provision”.[2] That expression is defined in s 539(1) of the FW Act to include the provisions identified in column 1 of the table to s 539(2) of the FW Act. Subsection 716(5) is in column 1 of the table to s 539(2) of the FW Act.
[2] I repeat in this and the following 4 paragraphs what I said in Bevis v VA Holdings Pty Ltd trading as Granton Homes & Ors [2020] FCCA 2082, at [33]-[38]
Subsection 546(2) of the FW Act provides that the pecuniary penalty the Court may impose must not, where the person is an individual, be more than “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2)” and, if the person is a body corporate, must not be more than five times “the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2)”. The maximum penalty units for a contravention of s 716(5) of the FW Act as at 19 March 2021, being the day by which DCS was required to carry out the Specified Action, are 30 penalty units for an individual, and 150 penalty units for a body corporate. (This excludes “serious contraventions”, as defined in s 557A of the FW Act.) Section 12 of the FW Act provides that “penalty unit” has the meaning given by s 4AA of the Crimes Act 1914 (Cth). The penalty unit provided for by s 4AA of that Act as at 19 March 2021 was $222. Thus, $33,300 is the maximum penalty DCS may be ordered to pay for its contravention of s 716(5) of the FW Act; and $6,660 is the maximum penalty Mr Avalos may be ordered to pay for DCS’s contravention of s 716(5) of the FW Act.
The approach of most judges when assessing penalties for a single contravention of a provision of the FW Act is to take into account the non-exhaustive considerations Tracey J identified in Kelly v Fitzpatrick,[3] which his Honour adopted from the judgment of Mowbray FM in Mason v Harrington Corporation Pty Ltd.[4] Those considerations are:
[3] Kelly v Fitzpatrick [2007] FCA 1080, at [14]
[4] Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
(a)the nature and extent of the conduct which led to the breaches;
(b)the circumstances in which that conduct took place;
(c)the nature and extent of any loss or damage sustained as a result of the breaches;
(d)whether there had been similar previous conduct by the respondent;
(e)whether the breaches were properly distinct or arose out of the one course of conduct;
(f)the size of the business enterprise involved;
(g)whether or not the breaches were deliberate;
(h)whether senior management was involved in the breaches;
(i)whether the party committing the breach had exhibited contrition;
(j)whether the party committing the breach had taken corrective action;
(k)whether the party committing the breach had cooperated with the enforcement authorities;
(l)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
(m)the need for specific and general deterrence.
Also relevant is the maximum penalty for the contravention provided for by the FW Act; and here I refer to the following passage from the judgment of Flick J in The BKH Contractors Case (No 2):[5]
In undertaking the task of assessing and quantifying the penalties to be imposed, the maximum penalty prescribed by the Commonwealth legislature for a specific contravention serves as a “yardstick” against which the assessment of penalties is generally to proceed . . . .
[5] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (The BKH Contractors Case) (No 2) [2018] FCA 1563, at [19]
Nature, extent, circumstances, and deliberateness of the contravening conduct
The contravention consists of DCS failing to comply with the requirements of the Compliance Notice. The Compliance Notice clearly set out the Specified Action DCS was required to take to remedy the direct effects of the Contraventions. If DCS did not agree with the Compliance Notice, DCS could have sought a review under s 717 of the FW Act and further communicated with Mr Keene if it considered there was an error, or if there was evidence that the minimum entitlements had in fact been met. Further, it was only after this proceeding was commenced that DCS paid the money it owed to the Employee under the Cleaning Award. In so acting, DCS undermined the efficacy of compliance notices. I accept the FWO’s submission that DCS and Mr Avalos’ contraventions should carry a meaningful consequence by the imposition of penalties at the middle of the range.
The following passage from the judgment of Judge Emmett in Fair Work Ombudsman v Viper Industries Pty Ltd applies to the nature of DCS’s contravention of s 716(5) of the FW Act, and Mr Avalos’ involvement in that contravention.[6]
The Respondents’ intentional failure to comply with a mandatory notice issued by the workplace regulator is “conduct ... [which] undermines the utility and effectiveness of a fundamental object” [of] the FW Act. The failure to comply undermines and frustrates the powers conferred on Fair Work Inspectors, which are conferred for the purposes of providing an effective means of enforcing compliance with lawful minimum entitlements. There is a significant cost to the public by reason of the need to bring this matter before the court to enforce compliance.
[6] Fair Work Ombudsman v Viper Industries Pty Ltd [2015] FCCA 492, at [7]
Nature and extent of loss occasioned by contravention
According to the evidence of Mr Keene, the Employee was entitled to be paid approximately $826.40 for the time worked during the Casual Employment. DCS, however, has paid the amount in full.
Corrective action and cooperation
DCS and Mr Avalos admitted their contraventions and, as I have noted, DCS has paid the amount owing to the Employee.
The FWO submits that a discount on penalty of 20% would be appropriate in the circumstances. I accept that submission.
Deterrence
Given DCS has paid the amount it owes the Employee, there is no need for the penalty to reflect any element for specific deterrence. As for general deterrence, I respectfully adopt what Judge Jarrett said in Fair Work Ombudsman v VS Investment Group Pty Ltd:[7]
The failure to comply with a notice properly issued by the applicant in the course of its investigations and the discharge of its statutory functions is serious. Recipients of such notices should be left under no misapprehension about their obligations to comply with those notices.
[7] Fair Work Ombudsman v VS Investment Group Pty Ltd [2013] FCCA 208, at [51]
The FWO relies on data contained in an industry profile of the “Building and Other Industrial Cleaning Services” industry, and submitted this indicates the importance of general deterrence for the industry.[8] The FWO submits that the penalty should be set at a level that should signal to employers generally, and to the cleaning industry more specifically, that a failure to comply with a lawfully issued compliance notice will not be tolerated by the FWO. The FWO further submits that there is a need to send a message to individuals who are involved in the management of companies that employ persons that there will be a significant penalty to pay if they do not comply, or take steps necessary to ensure they comply, with provisions of the FW Act. I accept these submissions.
[8] Applicant’s Submissions on Penalty, [33]
Assessment
The FWO submits that, given the nature of the contravention, the factual basis on which the Compliance Notice was issued, and the conduct of DCS and Mr Avalos before the FWO commenced this proceeding, a penalty in the range of 40% of the maximum penalty is appropriate in this case, with a 20% discount for the respondents’ cooperation. I accept the FWO’s submission.
DISPOSITION
I propose to make declarations to the effect that DCS contravened s 716(5) of the FW Act, and that Mr Avalos was involved in that contravention. I also propose to order that DCS pay a pecuniary penalty in the amount of $10,656 to the Commonwealth within 28 days after I pronounce my orders. And that Mr Avalos pay a pecuniary penalty in the amount of $2,131, and that he pay this amount to the Commonwealth within 28 days after the day I pronounce my orders.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 18 March 2022
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