Fair Work Ombudsman v El Baba Lawyers Pty Ltd
[2024] FedCFamC2G 143
•23 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v El Baba Lawyers Pty Ltd [2024] FedCFamC2G 143
File number(s): SYG 1718 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 23 February 2024 Catchwords: INDUSTRIAL LAW – assessment of pecuniary penalty for admitted contravention of s 716(5) of the Fair Work Act 2009 (Cth). Legislation: Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) ss 12, 324(1), 539(1), 539(2), 546, 550(1), 550(2), 557A, 700, 716(1), 716(2), 716(5)
Legal Services Award 2020 cls 15.1, 24.2, 32.1(d)
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
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Division: Fair Work Number of paragraphs: 52 Date of hearing: 13 September 2022 Place: Sydney Counsel for the Applicant: Ms C Bembrick Solicitor for the Applicant: The Office of the Fair Work Ombudsman Counsel for the Respondents: Mr B Rauf and Ms E Aitken Solicitor for the Respondents: El Baba Lawyers ORDERS
SYG 1718 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: EL BABA LAWYERS PTY LTD
First Respondent
MONA EL BABA
Second Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
23 FEBRUARY 2024
THE COURT DECLARES THAT:
1.The first respondent, El Baba Lawyers Pty Ltd, contravened s 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with the Compliance Notice issued on 26 March 2021.
2.The second respondent, Ms Mona El Baba, was involved in El Baba Lawyers’ contravention of s 716(5) of the FW Act, within the meaning of s 550(2) of the FW Act, and for that reason contravened s 716(5) of the FW Act.
THE COURT ORDERS THAT:
3.Pursuant to s 546(1) of the FW Act, El Baba Lawyers pay a pecuniary penalty of $12,000 to the Commonwealth for the contravention set out in declaration 1 within 28 days of this order.
4.Pursuant to s 546(1) of the FW Act, Ms Mona El Baba pay a pecuniary penalty of $2,400 to the Commonwealth for the contravention set out in declaration 2 within 28 days of this order.
5.The applicant have liberty to apply on seven days’ notice if orders 3 or 4 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
INTRODUCTION
The applicant (FWO) applies under s 546 of the Fair Work Act 2009 (Cth) (FW Act) for orders that the first respondent, El Baba Lawyers Pty Ltd (EBL), and the second respondent, Ms El Baba, pay pecuniary penalties because EBL contravened s 716(5) of the FW Act by failing to comply with a compliance notice given under s 716(2), and because Ms El Baba was involved in EBL’s contravention of s 716(5) of the FW Act, within the meaning of s 550(2) 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] and I will then set out additional evidence and other facts that give context to the admitted facts, and which are relevant to assessing penalty.
[1] These are contained in the Statement of Agreed Facts filed on 2 June 2022.
ADMITTED FACTS AND CONTRAVENTIONS
EBL is and was at all relevant times the operator of a legal services business. Ms El Baba is and was at all relevant times: the sole director and secretary of EBL; responsible for the overall operation, management, and control of EBL; and responsible for ensuring EBL complies with its legal obligations under the FW Act.
In or around 17 February 2021, the FWO received a request for assistance from Mr Chahadah in relation to his employment with EBL. Mr Acevedo (FWI Acevedo), a Fair Work Inspector appointed under s 700 of the FW Act, responded to that request by commencing an investigation (Investigation). Between 17 March 2021 and 24 March 2021 the FWO and the respondents exchanged correspondence, and engaged in communications regarding the employment of Mr Chahadah.
As a result of the Investigation, FWI Acevedo formed the belief that: Mr Chahadah was employed by EBL as a full time employee between 20 July 2020 and 8 February 2021 (Contravention Period); the Legal Services Award 2020 (Award) covered and applied to EBL in relation to the employment of Mr Chahadah; Mr Chahadah was classified as a “Level 1 – Legal, clerical and administrative employee under the Award”; Mr Chahadah was paid at an hourly rate of approximately $20.51 during the Contravention Period; and Mr Chahadah resigned from his employment on 8 February 2021.
Because of the matters referred to in paragraph 5, FWI Acevedo formed a reasonable belief, pursuant to s 716(1) of the FW Act, that EBL contravened cl 15.1 of the Award during the Contravention Period by failing to pay Mr Chahadah full time minimum wages regarding his original hours worked (Contravention).
Compliance Notice
On 26 March 2021 FWI Acevedo gave EBL a compliance notice pursuant to s 716(2) of the FW Act (Compliance Notice). Also on 26 March 2021, Fair Work Officer Mr Chin (FWO Chin) sent a copy of the Compliance Notice to Ms El Baba’s email address.
The Compliance Notice required EBL to:
(a)take the following actions to remedy the direct effects of the Contravention by 27 April 2021 (Specified Action):
(i)identify the number of hours worked by Mr Chahadah during the Contravention Period;
(ii)identify the amount EBL paid to Mr Chahadah during the Contravention Period in respect of the applicable full time minimum wage in respect of the ordinary hours worked (Entitlement);
(iii)calculate the amount EBL should have paid to Mr Chahadah during the Contravention Period for the Entitlement;
(iv)make full payment to Mr Chahadah of the difference between the amount paid to Mr Chahadah and the amount that should have been paid to Mr Chahadah;
(v)make a record of the information and amounts referred to in (i) and (iii) and the amount of the payment referred to in (iv) immediately above;
(vi)calculate and pay any additional superannuation contributions required by cl 24.2 of the Award in respect of the amounts owed to Mr Chahadah; and
(b)produce reasonable evidence to the FWO of compliance with the Compliance Notice by 4 May 2021, by producing a copy of the schedule of calculations and payments, and evidence that the amounts owed had been paid to Mr Chahadah.
Between 26 March 2021 and 19 May 2021 the FWO and the respondents exchanged correspondence and engaged in communications relating to the Compliance Notice, calculations for the satisfaction of the Compliance Notice, and the employment of Mr Chahadah.
EBL failed to take the Specified Action by 27 April 2021, and failed to produce evidence of compliance with the Compliance Notice by 4 May 2021.
Between 12 July 2021 and 6 September 2021 the FWO’s legal representatives and the respondents exchanged correspondence regarding EBL’s failure to comply with the Compliance Notice.
Admitted contravention
EBL admits to contravening s 716(5) of the FW Act by failing to comply with the Compliance Notice; and EBL has contravened s 716(5) of the FW Act.
Rectification
On 8 April 2022, EBL paid to Mr Chahadah an amount of $2,950.43. There are no amounts owing to Mr Chahadah.
Accessorial liability of Ms El Baba
Because of the admitted matters I identify in paragraph 3 of these reasons, Ms El Baba was responsible for ensuring EBL complied with the Compliance Notice; and because of the admitted matters I have identified in paragraphs 3, 7, and 10 of these reasons, Ms El Baba: had actual knowledge of the Compliance Notice; had actual knowledge that EBL failed to comply with the Compliance Notice; and Ms El Baba was an intentional participant in EBL’s failure to comply with the Compliance Notice. For these reasons, Ms El Baba: was involved, within the meaning of s 550(2) of the FW Act, in the contravention by EBL of s 716(5) of the FW Act; and pursuant to s 550(1) of the FW Act, is taken to have herself contravened s 716(5) of the FW Act.
ADDITIONAL FACTS AND EVIDENCE
Events before Compliance Notice issued
FWO Chin first contacted Ms El-Baba about Mr Chahadah by email sent on 17 March 2021.[2] FWO Chin said that, based on information and evidence provided to him, Mr Chahadah informed him that on Friday 22 January 2021 he had been told he had been dismissed from his full time role without notice, but would be engaged as a casual from Monday 25 January 2021; and that Mr Chahadah completed 4 days as a casual where his wages did not increase to compensate for casual loading. FWO Chin also said that Mr Chahadah claimed he had not been paid for two days “as provided for the February payslip”; and that he had not been paid for additional hours. FWO Chin said that it appeared that the Award applied, and that Mr Chahadah alleged he should be classified as a level 3 grade, legal, clerical and administrative employee.
[2] Affidavit of V Acevedo 18.02.2022; annexure “VA-17”, page 103
Ms El Baba responded by email sent on 17 March 2021 stating “see attached email confirming that [Mr Chahadah] resigned and immediately left the office (mid-way through the day and I was in trial at Court with no notice at all)”.[3] At 4:53 pm on 18 March 2021 FWO Chin sent an email to Ms El Baba, confirming that the email that was attached to Ms El Baba’s email showed Mr Chahadah had resigned. FWO Chin asked whether there were any emails or other correspondence regarding Mr Chahadah’s resigning “as a full timer on 22 January 2021 as alleged”; and FWO Chin suggested that Mr Chahadah may be classified as a level 3, and asked whether Ms El Baba disputed that.
[3] Affidavit of V Acevedo 18.02.2022; annexure “VA-17”, page 102
On 18 March 2021 Ms El Baba had a telephone conversation with FWO Chin in which she disputed there was no discussion of Mr Chahadah going casual, noting that the discussion was about Mr Chahadah dropping to two days a week. In his notes of the conversation he had with Ms El Baba, FWO Chin recorded that Ms El Baba “alluded [to] unpaid leave”. FWO Chin also recorded discussion about two other matters, one of which was “classification definitions” under the Award.[4] Ms El Baba sent an email to FWO Chin at 3:43 pm on 18 March 2021.[5] Ms El Baba said she did not agree Mr Chahadah was a level 3; he was “mostly incompetent”, and did “not complete 90% of the work allocated to him and every task of his needed to be overviewed”. Ms El Baba said Mr Chahadah “was not even level 1”. Ms El Baba also said that she would be “filing a report with respect to [Mr Chahadah] and his theft of the office after-house (secure building) office key”, and asked FWO Chin for his consent “to show this email chain of correspondence to police”. FWO Chin gave his consent by email sent at 6:24 pm on 19 March 2021.[6]
[4] Affidavit of V Acevedo 18.02.2022; annexure “VA-10”, page 98
[5] Affidavit of V Acevedo 18.02.2022; annexure “VA-12”, page 108
[6] Affidavit of V Acevedo 18.02.2022; annexure “VA-13”, page 115
On 23 March 2021 Ms El Baba sent an email to FWO Chin attaching documents that were intended to reveal the type of work Mr Chahadah performed.[7]
[7] Affidavit of V Acevedo 18.02.2022; annexure “VA-13”, page 114
Events after Compliance Notice issued but before proceeding commenced
On 26 March 2021, FWO Chin telephoned Ms El Baba and left a voicemail that he would be sending a compliance notice.[8] FWO Chin sent an email attaching the Compliance Notice,[9] after which Ms El Baba telephoned FWO Chin.[10] According to the note of the telephone conversation FWO Chin prepared, Ms El Baba said that FWO Chin had “not considered her side of the investigation”. Ms El Baba said that “she may deduct 4 weeks wage from [Mr Chahadah] alleging failure to provide minimum notice as per employment contract”. Ms El Baba followed up this conversation with an email she sent to FWO Chin at 6:12 pm on 26 March 2021.[11] It would be convenient if I reproduce Ms El Baba’s email in full (emphasis and errors in original):
[8] Affidavit of V Acevedo 18.02.2022; annexure “VA-18”, page 155
[9] Affidavit of V Acevedo 18.02.2022; annexure “VA-19”, page 160
[10] Affidavit of V Acevedo 18.02.2022; annexure “VA-18”, page 157
[11] Affidavit of V Acevedo 18.02.2022; annexure “VA-19”, page 159
I note that the letter and annexures therein do not cover what we discussed, namely the issues with respect to the following:
1) Your findings as to whether [Mr Chahada] breached a full−time employment obligations by virtue of not providing any notice at all ? You advised me my loss should be taken into account but no where have you referenced this? You have not referenced anywhere in your correspondence of even date that this calculation should be taken into account, rather you go further and advise: “make a payment to him of the difference between the amount referred to in (2) and the amount referred to in (3) immediately above”. Although you advised me that the additional advanced leave payments and any financial loss by virtue of his resignation without notice must be considered, you have omitted the inclusion of such reference in your letter correspondence.
2) You have confirmed that you are in your possession of all the pay slips and including the employment contract. Yet, despite this you again request information for identification of hours worked, identify what was paid?
3) I draw your attention to the to clause 18 B ii of the contract which you assert to have: Should the Employee terminate the employment and fail to give the four (4) week notice period prior to the date of termination of the Employee’s employment, the Employer may withhold payment entitlements to the Employee in respect of the difference between the period of notice provided by the Employee to the Employer, and the four (4) week notice period.
4) It is my view you have not taken point 3 above into account at all, notwithstanding the email I forwarded to you from [Mr Chahadah] which clearly represents his resignation with no notice. In addition although we have discussed my approximate 3 weeks of leave in advance and how this must be taken into account, again you have not made any reference to this in your letters today.
5) I have done basic mathematical calculation of "base 1 legal admin/clerk " — of what you asserted the pay should be, and taken into account my advanced leave payment, resignation without notice breach of a full−time employee, and damages/loss for breach of contract and I firmly assert it all leads to NIL outstanding further “payment to him of the difference...”.
6) I assert you have failed to take into account the financial loss incurred by the company entirely despite clear correspondence and evidence sent you showing this. I therefore have concerns with respect to the investigation of this matter.
I am considering an my options moving forward and I would appreciate a timely response.
On 6 April 2021 FWO Chin replied to Ms El Baba’s email in which he said the following: [12]
(a)The Compliance Notice was issued on the basis that EBL was found to be non-compliant with Commonwealth workplace laws, and contravened the Award specifically for underpayment of applicable minimum wages.
(b)Clause 7 of the Compliance Notice is designed to outline the required actions EBL is required to take “in respect of the contravention” the Compliance Notice identifies.
(c)The FWO had received evidence, including the employment contract and pay slips. The Compliance Notice required EBL to review its records, and calculate the amounts owed. That is “where as part of your evidence to review, calculate and rectify – if you believe the Employee failed to provide minimum notice as required as per resignation, to show the evidence to justify”. The FWO will then assess this.
(d)The employment contract required a notice period greater than the relevant minimum provided by the National Employment Standards (NES). Although that gave rise to no issues, that did not entitle EBL to withhold from an employee’s wages if an employee does not give the required notice, more than one week’s wages; and that is because of cl 32.1(d) of the Award.
(e)If EBL withholds more than one week’s wages from Mr Chahadah the FWO “may assess this as unlawful deduction and [EBL] may only have partially complied with the Compliance Notice”.
[12] Affidavit of V Acevedo 18.02.2022; annexure “VA-20”, page 163
On 20 April 2021 FWO Chin sent to Ms El Baba a “follow up reminder” email reminding her that “the Compliance Notice is due next week TUESDAY 27 April 2021”, and invited Ms El Baba to contact him if “there are any queries”. [13] FWO Chin also provided an estimate of what was potentially owed by EBL to Mr Chahadah. On 22 April 2021 FWO Chin sent a further email reminding Ms El Baba that the “Compliance Notice will soon be due on 27 April 2021 Tuesday”.[14]
[13] Affidavit of V Acevedo 18.02.2022; annexure “VA-21”, page 169
[14] Affidavit of V Acevedo 18.02.2022; annexure “VA-22”, page 179
On 30 April 2021 FWI Acevedo sent EBL a “Failure to Comply with Compliance Notice” letter requesting that EBL provide the FWO with a reasonable excuse for its failure to comply with the Compliance Notice within seven days.[15]
[15] Affidavit of V Acevedo 18.02.2022; annexure “VA-23”, page 181
On 5 May 2021 Ms El Baba sent an email to FWO Chin with a number of attachments, including a letter addressed to FWI Chin. Ms El Baba’s letter opened with the following paragraph:[16]
We note your letter of 30 April 2021 and advise that our office had previously raised with Mr. Jay Chin in email correspondence our issues and concerns with the Compliance Notice. It is asserted that the information reflected in the Compliance Notice is incorrect and there is subsequently no actions or payment of compliance necessitated by our office. Notwithstanding this, our office indicated our intention to prepare our own calculations and response to the Compliance Notice as contained herewith. We note the contents of this correspondence and advise that our office required additional time to prepare a response, noting the often urgent and demanding nature of our ordinary work in the legal profession. Accordingly, please find below our response to the Compliance Notice……
[16] Affidavit of V Acevedo 18.02.2022; annexure “VA-24”, page 194
Under the heading “Calculation and Rectification of Underpayments”, Ms El Baba stated that Mr Chahadah was employed between 20 July 2020 and 5 February 2021 as a personal assistant; he was employed on a full time basis up to 15 January 2021; then from 18 January to 5 February 2021 Mr Chahadah worked “on the basis of 2 days per week”; that despite the assertions of Mr Chahadah, “no underpayment of wages has occurred and Mr. Chahadah has been paid in full as legally required, and may have in fact overpaid pursuant to the Employment Contract”. Ms El Baba set out in a table the hours Ms El Baba says Mr Chahadah worked for each week of his employment, and the wages paid. Ms El Baba then made submissions that Mr Chahadah fell within the level 1 classification; and Ms El Baba submitted that under Mr Chahadah’s contract of employment, he was required to give four weeks’ notice, and if he did not do so then, under cl 18(B)(iii) “the Employer may withhold payment entitlements to the Employee in respect of the difference between the period of notice provided by the Employee to the Employer, and the four (4) week notice period”.
On 7 May 2021 FWO Chin responded to Ms El Baba’s letter of 5 May 2021.[17] FWO Chin stated that Mr Chahadah was covered by the Award, that the Award permitted the deduction of only one week’s wages in relation to an employee’s not giving notice, and, moreover, directed Ms El Baba’s attention to s 324(1) of the FW Act. FWO Chin also gave the following detailed response to the information Ms El Baba provided about the amounts Mr Chahadah was paid:
[17] Affidavit of V Acevedo 18.02.2022; annexure “VA-25”, page 268
In summary:
•The employee was underpaid the base hourly rate throughout his employment. You are required to calculate the total amount of underpayment.
•Your assessment confirms the employee worked a total of 892.5 ordinary hours throughout the course of his employment.
•The total amount that can be withheld for failure to provide the required notice is 1 week.
•You can deduct annual leave that was taken in advance by the Employee which had not yet accrued at the end of employment. However, the calculations you have submitted are incorrect. Please note:
•The employee has been paid a total of 15 days paid leave; 12 of which are from annual leave and the remaining 3 are paid leave via public holiday.
•The payslip 26/10/2020 to 06/11/2020 confirms 8 days of paid annual leave was provided to the employee. This is correct.
•The payslip 21/12/2020 to 01/01/2021 confirms 7 days of paid annual leave was provided to the employee however this is incorrect. The public holidays occurred on 25th Dec 2020, 28th Dec 2020 and 1st Jan 2021 for this pay period, therefore the employee is entitled to 3 days of paid leave without using annual leave. 4 days of annual leave would have been taken from the employee's balance instead of 7 days.
•The employee would have accrued a total of 77.1 hours of annual leave throughout the course of the employment based on the total ordinary hours paid (1005 hours) – 892.5 hours was worked and 15 days of paid leave (112.5 hours).
•The employee was paid for 12 days of annual leave taken which is equivalent to 90 hours – therefore the annual leave hours to be deducted is 12.9 hours.
•The employee was underpaid the base hourly rate for the annual leave hours taken, and leave loading applicable that was not paid. You are required to calculate the total amount of underpayment.
I refer to my email on 20 April 2021 for the same estimates, where the total amounts OWING to Mr Chahadah is $2950.43.
Given that the Failure to Comply deadline is today - I require the payment paid to the employee AS SOON AS POSSIBLE and evidence of this payment via receipt provided to me by Tuesday 11 May 2021, otherwise the Fair Work Ombudsman will be taking further action.
On 13 May 2021 FWI Acevedo sent EBL a “Final opportunity to rectify non-compliance with compliance notice” letter. A copy of this letter was emailed to Ms El Baba on the same day.[18] The letter states that if EBL fails to rectify its non-compliance the FWO will consider appropriate enforcement action, which may include commencing legal action. The letter noted that the maximum penalties a court may impose for a contravention of s 716(5) of the FW Act is $33,300 for a company, and “$6,600 [sic]” for an individual.
[18] Affidavit of V Acevedo 18.02.2022, [33]; annexure “VA-26”
On 17 May 2021 Ms El Baba replied to FWI Acevedo’s letter of 13 May 2021.[19]
[19] Affidavit of V Acevedo 18.02.2022, [34]
On 19 May 2021 FWI Acevedo called EBL and asked to speak to Ms El Baba; but he was told Ms El Baba was unavailable. On the same day, FWI Acevedo sent an email to Ms El Baba in which he outlined the options available to EBL, which included applying to the Federal Court of Australia, this Court, or eligible State or Territory Court for review of the Compliance Notice.[20]
[20] Affidavit of V Acevedo 18.02.2022, annexure “VA-27”
Events after commencement of proceeding
The FWO commenced this proceeding on 14 September 2021, and on 4 May 2022 I was notified the respondents had admitted the contravention of s 716(5) of the FW Act.
Ms El Baba’s evidence
Ms El Baba has made an affidavit in which she refers to the extensive dealings she had with FWO Chin. Ms El Baba deposes:
At the time, I formed the view at [sic] that I had a reasonable excuse as I had accepted Mr Chahada [sic] was classified as Level 1 under the Award, which left the only matter in dispute being the calculations and the sum owed to Mr Chahada [sic]. However, due to my calculations in respect of the advanced leave payment and the 4-week notice period being withheld, I formed a view at the time that there was no amount outstanding and the Compliance Notice had been satisfied. I accept that this reflected a mistaken understanding of the steps which were required to comply with the Compliance Notice.
By “[a]t the time”, I infer Ms El Baba intends to refer to 27 April 2021, being the time by which EBL was required to comply with the Compliance Notice. Assuming that is so, Ms El Baba does not explain why she considered she had a reasonable excuse for not complying with the Compliance Notice. On 20 April 2021 Ms El Baba had received an email from FWO Chin which set out the hours Mr Chahadah was working, and the rates he was due to be paid under the Award compared with the amount EBL was paying him. The email showed that EBL had been paying Mr Chahadah at a rate that was less than the Award rate; and, in his email of 6 April 2021, FWO Chin explained to Ms El Baba that under the Award an employer was entitled to withhold no more than one week’s wages where an employee resigned without giving the required notice. Ms El Baba does not explain the reasons for which she believed EBL was entitled to withhold up to four weeks of wages, given the information FWO Chin had provided to her.
Further, Ms El Baba does not say whether she was aware that she had read the section of the Compliance Notice headed “Rights and Obligations under this Compliance Notice” which provided that she could apply to one of the courts there specified “for a review of this Compliance Notice” on either or both of the two grounds there specified, one of them being that “you did not commit the contraventions set out in this Compliance Notice”; and Ms El Baba therefore does not explain why she did not apply to a court to review the Compliance Notice, given she disagreed that she had not paid Mr Chahadah his full entitlements.
Ms El Baba further deposes:
On or around 16 March 2022 I instructed Thrive Workplace Consulting & Legal to assist with questions which I had relating to the employment of Mr Chahada [sic] and the Compliance Notice. Subsequently, I understand and accept that the views I had held about the application of the Award to the employment of Mr Chahada [sic] and my ability to deduct the monies which he owed to the First Respondent were incorrect. I further accepted that the amount estimated by the FWO as owed to Mr Chahada [sic] was correct. It was on this basis that I admitted the contravention and attended to the payment of the outstanding amount to Mr Chahada [sic] immediately.
Ms El Baba does not identify the basis on which she had previously understood that her view that EBL was entitled to withhold four weeks’ worth of wages from the amount of wages EBL owed Mr Chahadah was correct, and the FWO’s view that EBL could withhold at most only one week was not correct; and she does not identify what it was that led her on around 16 March 2022 to consider that her belief was incorrect.
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”.[21] 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.
[21] I repeat in this and the following 4 paragraphs much of 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 27 April 2021, being the day by which EBL 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 27 April 2021 was $222. Thus, $33,300 is the maximum penalty EBL may be ordered to pay for its contravention of s 716(5) of the FW Act, and $6,660 is the maximum penalty Ms El Baba may be ordered to pay for EBL’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,[22] which his Honour adopted from the judgment of Mowbray FM in Mason v Harrington Corporation Pty Ltd.[23] Those considerations are:
[22] Kelly v Fitzpatrick [2007] FCA 1080, at [14]
[23] 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):[24]
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 . . . .
[24] 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 FWO submits that the respondents’ disregard for the Compliance Notice was intentional, and reflective of the unwillingness by the respondents to comply with their obligations. The FWO submits the FWO liaised with EBL before the Compliance Notice was issued; once the Compliance Notice was issued the respondents were aware of the Compliance Notice and knew of the obligation to comply with it, but did not; and the FWO took multiple steps to encourage EBL to comply with the Compliance Notice.[25]
[25] Applicant’s submissions on penalty, [46]-[50]
The respondents, on the other hand, submit that EBL is a small business, and at the time of contravention EBL lacked dedicated human resources, and payroll support. The respondents further submit that the non-compliance with the Compliance Notice was borne out of a misunderstanding of the Compliance Notice process, and a misinterpretation of EBL’s obligations under the Award. The respondents also submit that Ms El Baba did not ignore the FWO, but rather Ms El Baba “meaningfully engaged” with the FWO.[26]
[26] Respondents’ Outline of Submissions on Penalty, [3.4]-[3.11]
I do not accept Ms El Baba had “meaningfully engaged” with the FWO. The FWO provided to Ms El Baba extensive information that was relevant to enabling Ms El Baba – a lawyer – to identify what the FWO alleged constituted the contravention of the FW Act in relation to which the Compliance Notice was issued; and also to enable EBL to understand what was required of EBL to be in a position to comply with the Compliance Notice. Ms El Baba, however, persisted in asserting that Mr Chahadah had been paid his wages in full, and that in any event EBL was entitled to withhold four weeks of his wages because of his alleged failure to give notice; and Ms El Baba did so without explaining why she considered her position was correct, and the position of the FWO was incorrect. Moreover Ms El Baba insisted on her position without applying to a court to review the Compliance Notice on the grounds that EBL had not contravened the FW Act in the manner alleged in the Compliance Notice.
I am prepared to accept that Ms El Baba genuinely believed that EBL owed no wages to Mr Chahadah and, for that reason, she believed that EBL had done all it was required to do to comply with the Compliance Notice. I do not accept, however, that Ms El Baba’s belief was reasonable. On the contrary, I find her belief to have been unreasonable. The FWO provided to Ms El Baba detailed information which showed that EBL had not paid Mr Chahadah in full the wages to which he was legally entitled; and Ms El Baba did not articulate to the FWO, and has not articulated in her affidavit, the reasons for which she did not accept as correct the views the FWO had expressed to her and which finally found expression in the Compliance Notice.
I also do not accept that the mistake Ms El Baba may have made which led her not to cause EBL to comply with the Compliance Notice is to be explained by EBL’s being a small business, and at the time of contravention EBL’s lacking dedicated human resources and payroll support. EBL did not comply with the Compliance Notice because of what I have found was an unreasoned and unreasonable belief Ms El Baba maintained that EBL did not owe Mr Chahadah any money on account of his wages.
The respondents’ failure to comply with the Compliance Notice, and therefore their contravention of s 716(5) of the FW Act, is to be characterised as a wilful refusal to comply with the Compliance Notice based on an unreasonable and unreasoned belief that EBL had done all that was required of it to comply with the Compliance Notice which, in turn, was based on an unreasonable and unreasoned belief that EBL had paid Mr Chahadah all to which he was entitled.
Nature and extent of any loss or damage
The amount of wages EBL had not paid to Mr Chahadah was $2,950.43. That is a significant amount. EBL did eventually pay Mr Chahadah that amount; but it did not do so until April 2022.
Deterrence
I am not satisfied that the penalty should reflect an element of specific deterrence. There is nothing to suggest there is a tangible prospect EBL or Ms El Baba would knowingly contravene, or recklessly disregard its obligations under, the FW Act.
General deterrence raises different considerations. In their written submissions the respondents submit:[27]
This is not a case in which the primary sentencing consideration of deterrence will be served by the imposition of a pecuniary penalty. The contravening conduct admitted by the Respondents does not involve moral culpability deserving of punishment beyond the reputational and future consequences of the making of declarations against the Respondents.
For the foregoing reasons, the Respondents submit that the Court should only make the declarations sought by the Applicants and a pecuniary penalty should otherwise not be imposed in the present matter. Given the primary purpose of civil penalties as deterrence, in a case in which there was no intention to contravene the FW Act and the Respondents acted in good faith, the legislative purpose cannot be met by the imposition of a pecuniary penalty.
[27] Respondents’ Outline of Submissions on Penalty, [4.1]-[4.2]
This submission is premised on my accepting the respondents’ submissions that Ms El Baba had “meaningfully engaged” with the FWO, and that she was mistaken about EBL’s obligations. I have not accepted that Ms El Baba had “meaningfully engaged” with the FWO; and, although I have accepted Ms El Baba genuinely believed EBL owed no wages to Mr Chahadah and, for that reason, EBL had done all it was required to do to comply with the Compliance Notice, I have found that her belief was unreasonable. I therefore found that the respondents’ contravention of s 716(5) of the FW Act was constituted by a wilful refusal to comply with the Compliance Notice based on an unreasonable belief that EBL had done all that was required of them to comply with the Compliance Notice, and that it had paid Mr Chahadah all to which he was entitled.
I therefore do not accept the respondents’ submission that this is not a case in which the primary sentencing consideration of deterrence will be served by the imposition of a pecuniary penalty. An employer’s decision not to comply with a compliance notice that is based on an unreasoned or unreasonable belief that the employer is under no obligation to do so, coupled with an employer’s not applying to a court to review a compliance notice, is conduct which is to be deterred by the imposition of a pecuniary penalty. A penalty should be set to deter employers from ascertaining what their legal obligations are in relation to a compliance notice on the basis of their own unreasoned or unreasonable beliefs; and therefore to encourage employers to seek advice about the employer’s obligations in relation to a compliance notice that has been served on them, or otherwise to apply to a court for a review of the compliance notice. Employers should be on notice that their deciding not to comply with a compliance notice on the basis of nothing more than their unreasoned and unreasonable belief that they are not obliged to do so will result in their being met with a significant penalty.
Other matters
I have already noted that EBL has taken corrective action by paying Mr Chahadah his wages; there is no evidence of any other contraventions of any industrial laws; and the respondents, albeit well after this proceeding had commenced, admitted their contraventions.
Assessment
In my opinion $12,000 represents the appropriate penalty EBL should be ordered to pay, which means that I consider that $2,400 represents the appropriate penalty Ms El Baba should be ordered to pay.
DISPOSITION
I propose to make declarations that EBL contravened s 716(5) of the FW Act, and that Ms El Baba was involved in that contravention. I will also order that EBL and Ms El Baba pay to the Commonwealth pecuniary penalties of $12,000 and $2,400 respectively, and that they do so within 28 days after the day on which I pronounce my orders.
I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 23 February 2024
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