Fair Work Ombudsman v Finn Fish Pty Ltd
[2018] FCCA 203
•31 January 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v FINN FISH PTY LTD & ANOR | [2018] FCCA 203 |
| Catchwords: INDUSTRIAL LAW – Penalty hearing – contraventions of award – penalties imposed. |
| Legislation: Fair Work Act 2009, ss.45, 712, 535 Fair Work Regulations 2009, reg.3.32, 3.33, 3.36 |
| Cases cited: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate, Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | FINN FISH PTY LTD TRADING AS RED SALMON (ACN 101 426 724) |
| Second Respondent: | ABDUL HAFEEZ BILWANI |
| File Number: | MLG 1361 of 2016 |
| Judgment of: | Judge Riethmuller |
| Hearing date: | 31 August 2017 |
| Date of Last Submission: | 6 October 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 31 January 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Bakri |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondents: | Mr Millar |
| Solicitors for the Respondents: | HMB Employment Lawyers Pty Ltd |
ORDERS
Pursuant to s.546(1) of the Fair Work Act 2009 (“the Act”), the First Respondent pay a penalty of $163,000 in respect of the Contraventions of the Act as set out in paragraph 1 of the Orders made 31 August 2017.
Pursuant to s.546(1) of the Act, the Second Respondent pay a penalty of $29,500 in respect of the Contraventions of the Act as set out in paragraph 1 of the Orders made 31 August 2017.
Pursuant to 546(3)(a) of the FW Act, all pecuniary penalties imposed on the First and Second Respondents pursuant to these Orders be paid to the Commonwealth consolidated revenue within 90 days.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1361 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| FINN FISH PTY LTD TRADING AS RED SALMON (ACN 101 426 724) |
First Respondent
| ABDUL HAFEEZ BILWANI |
Second Respondent
REASONS FOR JUDGMENT
The applicant has brought proceedings against the first and second respondents with respect to contraventions of the Fair Work Act2009 (“the Act”). The first respondent admitted the following contraventions with respect to 13 employees:
a)Section 45 of the Act by failing to pay minimum rates of pay prescribed by clause 20.1 of the Restaurant Industry Award 2010 (“the Award”);
b)Section 45 of the Act by failing to pay casual loading prescribed by clause 13.1 of the Award;
c)Section 45 of the Act by failing to pay Saturday penalty rates as prescribed by clause 34.1 of the Award;
d)Section 45 of the Act by failing to pay Sunday penalty rates as prescribed by clause 34.1 of the Award;
e)Section 45 of the Act by failing to pay public holiday penalty rates as prescribed by clause 34.1 of the Award;
f)Section 45 of the Act by failing to pay overtime rates as prescribed by clauses 33.1 and 33.2 of the Award;
g)Section 45 of the Act by failing to pay additional penalty amounts for night work prescribed by clause 34.2 of the Award;
h)Section 45 of the Act by failing to pay the split shift allowance in accordance with clause 24.2 of the Award;
i)Section 45 of the Act by failing to pay annual leave loading in accordance with clause 35.2(b) of the Award;
j)Section 712(3) of the Act by failing to comply with a notice to produce documents and/or records issued pursuant to s.712 of the Act and dated 18 June 2015; and
k)Section 535(1) of the Act by failing to make or keep records as required by regs.3.32, 3.33 and 3.36 of the Fair Wok Regulations 2009.
The second respondent has admitted that he was involved in each of the contraventions as he was, at all relevant times, the secretary, sole director and sole shareholder of the first respondent.
In determining the appropriate civil penalties to impose, it is important to have regard to the statements of the High Court in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate, Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 where the court cited the judgment of French J in Re Trade Practices Commission v CSR Limited [1990] FCA 521: see [55]. In Re Trade Practices Commission v CSR Limited French J said:
40. Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt. IV. Nor, if it be necessary to say so, is there any compensatory element in the penalty fixing process - Trade Practices Commission v. Mobil Oil Australia Ltd[1984] FCA 363; (1984) 4 FCR 296 at 298 (Toohey J.). The principal, and I think probably the only, object of the penalties imposed by s.76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.
As Kiefel J (as her Honour then was), Bell, Nettle and Gordon JJ said:
It is also true, as the Full Court observed, that the regulator in a civil penalty proceeding is not disinterested [fn: FWBII v CFMEU (2015) 229 FCR 331 at 376 [139]; cf Barabaro (2014) 253 CLR 58 at 71 [29]]. As has been seen, under the BCII Act, the Director's statutory functions include monitoring and promoting appropriate standards of conduct by building industry participants generally. It is, therefore, naturally to be assumed that the Director will fashion penalty submissions with an overall view to achieving that objective and thus perhaps, if not probably, with one eye to considerations beyond the case in hand. That consideration, however, supports, rather than detracts from, the propriety of a court receiving joint (or separate) submissions as to facts and penalty and imposing the proposed penalty if persuaded that it is appropriate. As was emphasised in NW Frozen Foods [fn: [1996] FCA 1134: (1996) 71 FCR 285 at 290-295], it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance.
Of course any penalty must be proportionate to the breach as was discussed by Gilmour J in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (No.4) [2017] FCA 580 at [34]-[35]:
34. Generally and relevantly any penalty imposed must be proportionate to the offence and in accordance with prevailing standards of punishment and will have regard both to specific and general deterrence: Ponzio v B&P Caelli Constructions Pty Ltd[2007] FCAFC 65; (2007) 158 FCR 543 at [93]. Indeed deterrence is a significant consideration and will frequently be of primary importance in fixing pecuniary penalties: Director, Fair Work Building Industry Inspectorate v Construction, Forestry Mining and Energy Union (2015) 229 FCR 331 at 359 [71].
35. The Court requires, by a process described as “instinctive synthesis” in Australian Opthalmic Supplies Pty Ltd v McAlary Smith [2008] FCAFC 8; (2008) 165 FCR 560 at 567–568 [27] and 572 [55], to take into account all relevant factors and to arrive at a single result which takes due account of them all.
In determining the appropriate penalty, regard must be had to the various breaches, and whether or not it is appropriate to group some breaches for the purposes of imposing a penalty. Whilst there are breaches with respect to each employee, it is appropriate to group the breaches with respect to the relevant provisions breached, not by individual employees. The respondents argue that contraventions 2 to 7 all arise out of the first respondent paying a flat rate of pay, not paying a casual loading, Saturday penalty rates, Sunday penalty rates, public holiday penalty rates or overtime penalty rates, and therefore should be treated as one course of conduct. The respondents accept that failure to pay shift allowances should be considered a separate penalty amount, as was the failure to pay annual leave loading.
I am not persuaded that the breaches relating to casual loading, penalty rates for Saturdays, Sundays and public holidays and separate penalty rates for night work are within the one course of conduct when one has regard to their separate nature under the Award and the fact that they arise as a result of separate events. They are distinct breaches of the Award provisions. I therefore proceed on the basis of the groupings as argued by the applicant.
As a result of the penalties applicable to each of the offences, the maximum penalties payable by the first respondent are $739,500, and by the second respondent $147,900. After the groupings, this reduces the amounts to $535,500 for the first respondent and $107,100 for the second respondent.
There is no specific list or limit on the factors that may be relevant in any given case in determining penalty. However, a list of factors that are ordinarily relevant and summarised by Federal Magistrate Mowbray in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 remains a useful guide, provided one does not see it as a rigid catalogue or restrictive list: see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8.
The respondents operate a restaurant business.
The total underpayment amount for the 13 employees was $26,707.79. The amounts of the underpayment ranged from as little as $154.90 for one employee to as much as $4,781.22 for another. When considered in percentage terms (as a percentage of the earnings of the employees during the relevant periods) the underpayments represent somewhere between 16.95% and 38.22% of the minimum rates that the employees ought to have received.
The 13 employees are not on significant incomes. Over the period of approximately three months the various employees were entitled to wages ranging from $482.34 (a casual employee who performed few shifts) to as great a sum as $15,931.19 for the employee who worked the most hours. It is apparent that all of these employees are on low incomes, at best around $60,000 per annum, but for many less than $25,000 per annum. The amounts of the underpayments represent a significant imposition upon workers who are earning low rates of pay.
It was submitted on behalf of the respondents that the flat rate that was paid to the employees was effectively at the margins of the Award entitlements. The submissions were put on the basis that the rates paid to the employees were junior rates of pay, for the most part, when under the Award staff were required to be paid the adult rate of pay as they were involved in the service of alcohol. This goes a small way to explaining the situation, but does not fully address the substance of the complaint that employees were paid at minimal flat rates of pay and none of the various loadings appropriate under the Award.
I note that with at least one employee, there is a claim of a failure to pay leave loading, but that the employee was receiving a flat rate of pay in excess of the Award, making the underpayment in this regard modest at best.
With respect to the failure to comply with a notice to produce documents, the respondents say that they were only two days overdue when they complied, which gives the breach the appearance of being quite minor. However, the documents produced contained a number of discrepancies when the version that was produced (a typed version) was compared to the original handwritten documents. The original documents were not initially produced. Some three months was taken for the applicant to be provided with those original documents, delaying the investigation.
With respect to the failure to keep appropriate records, it is said that this is a flow-on effect of deciding to pay employees a flat rate rather than the various rates provided for under the Award. The result of the decision to pay flat rates meant that there were not records of the details of the penalty rates which ought to have been paid. Similar problems arose with respect to the failure to describe employees as permanent or casual staff in the records. In this sense, the record keeping breaches must be seen as partly a result of the breaches with respect to the award generally. However, the purpose of the record keeping provision must be to ensure that there is compliance with the Award.
A significant number of previous complaints were said to have been made against the respondents. None of these resulted in a specific determination by the court or the imposition of a penalty. For this reason I do not take them into account as previous breaches of the Act. However they are relevant to demonstrate that the respondents ought to have been well aware of their obligations under the Act and the Award. The extensive complaints list show that the respondents have had extensive dealings with the applicant’s offices since 2003. The respondents must have been well aware of their obligations under the Award.
The second respondent was the owner and operator of the business. He was the person who was the guiding mind and controller of the company. However he says he played little part in the day-to-day management of the company, which employed a restaurant manager, a bookkeeper and an external accountant. The second respondent has lived in Australia for 40 years and has been the sole director and shareholder for some 14 years. The second respondent has also been involved in the operation of other companies. I am persuaded that he has been an active business person in Australia. Whilst the respondents say that the bookkeeper, external accountant and restaurant manager were responsible for operational matters and financial compliance, it is difficult to conclude that the contraventions were not deliberate decisions taken in the operation of the business. Importantly, it has been admitted that the second respondent was responsible for setting and adjusting pay rates, determining wages and other conditions. Having regard to the history of the involvement of the applicant’s office with the respondents I reject the submission that the conduct was not deliberate in this case. The submissions in this regard appear to be an attempt to divert blame to employees despite the second respondent being the controlling mind of the company.
The applicant’s office points to the youth of many of the employees, making a submission that young employees may be classified as more vulnerable to exploitation than older employees. Significantly, in the restaurant industry, employees are often employed on a casual basis earning low rates of pay. I find that it is relevant to take into account that many of the employees were young, and the nature of the industry and levels of pay of employees.
The second respondent says that he is very apologetic to all of the staff regarding the underpayments, and that the underpayments were promptly rectified. The most significant factor is that the underpayments have been rectified. The primary purpose of the legislation is to ensure that employees receive the minimum rates of pay set by the community through the industrial processes, and that has ultimately been achieved in this case. I proceed on the basis that appropriate corrective action has taken place and employees have now been paid their entitlements.
The applicant sought to rely upon evidence that the second respondent had interrogated employees as to whether or not they had spoken to the applicant. However, this was denied and the witnesses were not available and therefore this was hearsay evidence and inadmissible. It is not appropriate for me to take into account disputed hearsay in determining the penalty.
The second respondent also submitted that he was distracted as a result of health issues of a family member.
Whilst the underpayments have now all been rectified, this did not occur by way of a simple process, as is apparent from the affidavits by the Fair Work Inspector as to the time that this took.
Claims that he took “a genuine interest in” his “staff’s wellbeing and personal development” are hollow when one considers that there were significant underpayments involved in this case. Goodwill does not pay employees’ rent and food bills.
On the material as a whole, I am not persuaded that the respondents have demonstrated remorse or contrition, particularly having regard to the approach of the second respondent in attempting to deflect blame to other staff when he was clearly the controlling mind of the business, Had he instructed the employees responsible for payments to simply comply strictly with the Award (and seek advice from the applicant’s Office if they were uncertain as to the interpretation of the conditions) it is very unlikely any breach would have occurred.
In this case, the respondents entered into a statement of agreed facts which avoided the need for a liability hearing which reduced the cost of the proceedings.
The respondent’s training manual has not been provided to the applicant’s office on the basis that it is private property and will not be disclosed, indicating a continued reluctance to engage in an open dialogue with the applicant.
Ultimately, I am satisfied that the significant factors of making admissions and rectifying underpayments have been carried out by the respondents; however, I am not persuaded that this was a consequence of anything more than the reality that a successful prosecution for contravention would have ensued in any event.
The profit and loss statements for the business were provided by the respondents. The statements show that the business ran at a loss in 2015, receiving a gross profit from trading only $593,982 yet with expenses of $608,455, and only ultimately resulted in a profit because of trust distributions received of over $35,000. In the 2016 year, the figures record gross sales as dropping by around $96,000 but gross profit as dropping only by around $50,000. There are aspects of the figures that indicate that they are not particularly reliable, for example, the opening and closing stock in both years was the same round figure of $3,000, and the alcohol purchases in both years were a little over $48,500, both ending in round figures. Some of the other factors that affected the bottom line which do not relate to these proceedings or any impact of adverse publicity include an increase in bank charges of around $1,500, $6,000 more being spent on equipment, $6,000 more being spent on insurance, a $5,000 rates and taxes expense compared to a $2,000 refund and a minimal distribution from a trust. I am not persuaded that the profit and loss statements alone provide a reliable picture of the profitability of the business, nor its trading circumstances. Nor is there sufficient historical data to identify any trend that is said to appear, in order to justify the claims that the adverse publicity of these proceedings caused a reduction in sales.
I accept that the adverse publicity is likely to have had an effect on the business as most ordinary citizens find it completely unacceptable that a business would engage in conduct whereby staff on minimum wages were underpaid. This is a consequence of the breaches of the Act.
It was argued that there was an error in the publicity by the applicant. The respondents said that the claim that Award entitlements were between $18.02 per hour and $22.53 per hour was incorrect as the rates are recorded as $17.35 an hour to $18.02 an hour in the statement of agreed facts. I accept the applicant’s submissions with respect to the general principles that apply with respect to publicity where it is said in their outline of submissions:
118. The FWO’S position in respect of its media activity as a regulator can be summarised as follows:
(a) it is appropriate for a regulator in general, and the FWO in particular, to publicise its enforcement activities to inform the public on issues regarding workplace relations and to achieve a normative effect on the behaviour of employers (FWO v Cleaners NSW Pty Ltd (2009) 186 IR 467 at 476-477; Cousins v Merringtons Pty Ltd & Anor (No 2) [2008] VSC 341 at [63]-[64] (Cousins v Merringtons)).
(b) publicity and embarrassment resulting from a medial relates are often inevitable consequences of wrong doing and in most cases will not be relevant to the assessment of the appropriate penalty (Eva v Southern Motors Box Hill Pty Ltd (1977) 30 FLR 213 at 222 (Southern Motors); Trade Practices Commission v Cue Design Pty Ltd and Cue and Co Pty Ltd [1996] FCA 1343 at [23] (Cue Design); FWO v Symes [2013] FMCA 38 at [28]);
(c) publicity may be taking into account as part of the background against which penalty should be assess where the publicity is ‘adverse’, meaning that it is initiated by the prosecuting authorities, involves unfair or incorrect reporting or is misleading, and therefore creates a risk of ‘cumulative punishment’ (Southern Motors at 222-223; Cue Design at [25]; Cousins v Merringtons at [63]);
(d) a moderately worded, accurate media release that shows appropriate restraint in tone and content will not operate to mitigate penalty (Cue Design at [25]-[26]; Cousins v Merringtons at [65]; and
(e) even where media coverage causes embarrassment to a respondent, this does not satisfy the requirements of general deterrence or negate the need for the Court to set a monetary penalty that marks the Court and the community’s disapproval of a respondent’s conduct (FWO v Stewarts Transport & Logistics Pty Ltd & Ors [2010] FMCA 905 at [84]).
It does not appear to me that such discrepancy, in the context of this case (and in particular the relatively high percentage of the total income that employees were entitled to), demonstrates that the media release could be considered as being without restraint in tone and content or in some other way improper. In reality, it appears to be an error, which in the context of this case would make little, if any, difference to the thrust of the media releases.
The media releases have resulted in some very negative comments and some racist comments through electronic media. Regardless of the conduct engaged in by the respondents, racist taunts are a completely inappropriate response from an unidentified member of the public. It seems that the responses evoked from the public in this case have been more extreme than opprobrium for the conduct and avoidance of the business, and I take this into account.
The second respondent appears either directly (or through entities he controls) to own two properties in Collingwood having combined values of somewhere between $1.2 and $1.9 million. The second respondent is in a financial position so much stronger than that of the employees, that the underpaid employees could only dream of ultimately having assets of similar proportions.
I do take into account that the second respondent’s personal circumstances which included responsibilities for his son and mother weigh in his favour, as with his charitable endeavours.
Whilst it is important to ensure that penalties are not crushing, it is also important to ensure that penalties are at a level to ensure that it is uneconomic for employers to engage in such conduct.
In the particular circumstances of this case, I impose penalties as follows:
Contraventions
First Respondent
Second Respondent
Failure to pay minimum rates
$25,000
$5,000
Failure to pay casual loading
$20,000
$3,000
Failure to pay Saturday penalty rate
$17,000
$3,000
Failure to pay Sunday penalty rate
$17,000
$3,000
Failure to pay public holiday rate
$17,000
$3,000
Failure to pay overtime rates (all clauses grouped)
$20,000
$3,000
Failure to pay night work penalties
$17,000
$3,000
Failure to pay split shift allowance
$10,000
$2,000
Failure to pay annual leave loading
$5,000
$1,500
Failure to comply with Notice to Produce
$10,000
$1,500
Failure to keep records
$5,000
$1,500
Total Penalty
$163,000
$29,500
The applicant proposed the appropriate time for payment was within the range of three to six months. The respondents sought any penalty to be paid by way of four quarterly instalments. In the circumstances of this case, it appears reasonable to allow for 90 days for the respondents to make arrangements for financial accommodations to meet the penalty.
I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller
Associate:
Date: 31 January 2018
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