Fair Work Ombudsman v Foure Mile Pty Ltd & Anor
[2013] FCCA 682
•28 June 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v FOURE MILE PTY LTD & ANOR | [2013] FCCA 682 |
| Catchwords: INDUSTRIAL LAW – Fair Work – awarding penalties under the Workplace Relations Act 1996 (Cth) and the Fair Work Act 2009 – consideration of factors relevant to the amount of penalty. |
| Legislation: Workplace Relations Act1996 (Cth) (as amended by the Workplace Relations Amendment (Work Choices) Act2005) |
| Kelly v Fitzpatrick 166 IR 14, [2007] FCA 1080 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; [2007] ALMD 6759; (2007) 59 AILR 100-669 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | FOURE MILE PTY LTD |
| Second Respondent: | MALCOLM GARRY LEECH |
| File Number: | MLG 1595 of 2011 |
| Judgment of: | Judge Riethmuller |
| Hearing dates: | 17 December 2012 and 19 February 2013 |
| Date of Last Submission: | 19 February 2013 |
| Delivered at: | Melbourne |
| Delivered on: | 28 June 2013 |
REPRESENTATION
| Counsel for the Applicant: | Ms Hall |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the First Respondent: | There being no appearance by or on behalf of the First Respondent. |
| Counsel for the Second Respondent: | Ms Clancy |
| Solicitors for the Second Respondent: | Madgwicks |
DECLARATIONS
By reason of the Second Respondent's involvement in the First Respondent's failure to comply with the provisions set out below, the Second Respondent himself contravened those provisions, for the purposes of section 728 of the Workplace Relations Act 1996 (Cth) (the WR Act) and section 550 of the Fair Work Act 2009 (Cth) (FW Act) respectively. The provisions are:
subsection 117(2) of the FW Act and hence subsection 44(1) of the FW Act (failure to make payment in lieu of notice of at least the amount the First Respondent would have been liable to pay to the Complainant at the full rate of pay for the hours he would have worked had the employment continued until the end of the 4 week period of notice);
subsection 90(2) of the FW Act and hence subsection 44( 1) of the FW Act (failure to pay the Complainant the amount that would have been payable to him had he taken all of his accrued, untaken annual leave);
Clause 34.7.2(b) of the Transport Workers (Long Distance Drivers) Award 2000 (as amended by the Workplace Relations (Work Choices) Amendment Act 2005) (the Pre-Modern Award) (failure to pay the Complainant any annual leave loading in respect of annual leave taken by the Complainant during the period between 27 March 2006 and 31 December 2009 (the Second Period)); Clause 23.2(b)(i) of the Road Transport (Long Distance Operations) Award 2010 (the Modern Award) and hence section 45 of the FW Act (failure to pay the Complainant any annual leave loading in respect of annual leave taken by the by the Complainant between 1 January 2010 and 2 August 2010 (the Third Period));
Clause 19.3.1 of the Pre-modern Award (failure to pay the Complainant the prescribed cents-per-kilometre (CPK) rate of pay in respect of trips undertaken by the Complainant during the Second Period);
Clause 13.4 of the Modern Award and hence Section 45 of the FW Act (failure to pay the Complainant the prescribed CPK rate of pay in respect of trips undertaken by the Complainant during the Third Period);
Clause 19.4.2 of the Pre-Modern Award (failure to pay the Complainant the prescribed hourly driving rate in respect of trips undertaken by the Complainant during the Second Period);
Clause 13.5 of the Modern Award and hence Section 45 of the FW Act (failure to pay the Complainant the prescribed hourly driving rate in respect of trips undertaken in during the Third Period);
Clause 35.1 of the Pre-Modern Award (failure to pay the Complainant public holiday pay in respect of the public holidays falling on Boxing Day 2008, New Year's Day 2009 and Labour Day 2009);
Section 116 of the FW Act and hence subsection 44(1) of the FW Act (failure to pay the Complainant public holiday pay in respect of the public holiday falling on New Year's Day 2010);
Clause 19.2.2 of the Pre-Modern Award (failure to provide the Complainant with 4 weeks notice in writing when the method of payment, being either the CPK or the hourly driving rate method, was to be changed from one to the other during the Second Period);
Clause 13.3(b) of the Modern Award and hence section 45 of the FW Act (failure to provide the Complainant with 4 weeks notice in writing when the method of payment, being either the CPK or the hourly driving rate method, was to be changed from one to the other during the Third Period); and
Subsection 535(1) of the FW Act (failure to make and keep a record in relation to the Complainant that set out the balance of his entitlement to annual leave from time to time during the Third Period).
ORDERS
The Second Respondent pay an aggregate penalty pursuant to:
(a)Section 719(1) of the Workplace Relations Act1996
(b)Regulation 14.4 of the Workplace Regulations; and
(c)Section 546(1) of the Fair Work Act2009.
for the contraventions of the Pre-Modern Award, the Fair Work Act and the Modern Award referred to in the above declarations as they relate to conduct on and from 27 March 2006 in the amount of $42,075.
The payment of penalties referred to above be made within 12 months of the date of this Order.
Pursuant to section 841(b) of the Workplace Relations Act 1996 and section 546(3)(c) of the Fair Work Act, the Commonwealth pay the Applicant, Mr Robert Farley the sum of $41,303.21 from the penalties that are recovered from the second respondent.
The Second Respondent be injuncted and an injunction issue restraining him from transferring, forgiving, gifting, renouncing or in any other way altering or dealing with his rights, interests or entitlements from the trustee or to the corpus of the M & J Leech Family Trust as a debt, distribution appointment or otherwise, and further that any monies paid by the trustee be placed in the trust account of his solicitors until the penalty in Order 3 is paid in full.
In the event that the Second Respondent defaults under Order 3, the Second Respondent is ordered to direct the Trustee of the M & J Leech Family Trust (ABN 19 275 728 830) to repay any residual amount owing under Order 3 within 30 days from the monies owed by the Trustee to the Second Respondent.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1595 of 2011
| FAIR WORK OMBUDSMAN |
Applicant
And
| FOURE MILE PTY LTD |
First Respondent
| MALCOLM GARRY LEECH |
Second Respondent
REASONS FOR JUDGMENT
The Applicant seeks that a penalty be imposed upon the First and Second Respondents for breaches of the Workplace Relations Act 1996 (Cth) (as amended by the Workplace Relations Amendment (Work Choices) Act2005) and the Fair Work Act 2009 (Cth).
In substance the complaints relate to the underpayment of Mr Robert Farley, a former employee of the First Respondent, in the sum of $48,381.60. This was calculated by reference to a failure to pay full rates of pay for the hours the employee would have worked until termination and, when calculating the payment in lieu of notice, the payment with respect to:
a)Accrued leave;
b)Leave loading;
c)Failure to provide the prescribed cents per kilometre rate of pay for trips undertaken by the employee as a driver;
d)Failure to pay the prescribed hourly driving rate;
e)Failure to pay public holiday pay at the appropriate rate; and
f)Failure to keep appropriate records with respect to annual leave.
Background
The First Respondent was a company carrying on the business of freight forwarding transport and road freight transport undertaken both interstate and for long distance operations together with shorter trips within the State of Victoria. The company employed the employee from 12 September 2005 until 2 August 2010.
The Second Respondent was at all relevant times, and prior to 27 June 2012, the sole director and shareholder of the company, being responsible for the day-to-day management direction and control of the company. The Second Respondent was responsible for setting the wage rates and making payments and settling the terms and conditions for the employee. He was one of two shareholders (with his wife) in the corporation.
There is no question that the Second Respondent was knowingly concerned in the contraventions given that he was the controlling mind of the corporation at the relevant time.
For the purpose of this decision I do not need to recount the precise details of the award and each of the contraventions which are set out in detail in the agreed statement of facts.
In substance, despite various changes to rates of pay and award conditions from 7 November 2005 the employee continued to receive payments as set when he commenced his employment.
The Applicant received a complaint from the employee on 26 August 2010 and wrote to the Respondents on 27 August 2010. On 7 October an inspector contacted the Respondents to discuss the matter, and forwarded information and records on 19 October 2010 to the Respondents. Subsequently, on 7 December 2010 a Fair Work inspector served the First Respondent with a notice to produce documents, being the relevant documents necessary to ascertain the records relating to the employment of the employee. Following discussions, a further notice to produce was sent on 22 October.
Various documents were ultimately produced on 7 January but not all.
During a meeting on 22 March 2011, the Second Respondent was asked whether he had ever had discussions with the employee about the award that was applicable and he said that he had not. The Second Respondent said words to the effect that, when he started employing people in 1996 he looked online at the rate (of pay) and this was the rate he “went by”. The Second Respondent consulted Wagenet online in relation to appropriate wages, which outlined the minimum wage order for the transport and storage industry sector.
Ultimately, an application was issued, supported by a statement of claim, on 7 November 2011. On 27 June 2012 creditors commenced a winding up of the First Respondent.
On 16 July, following a mediation with a Registrar of the Court, liability was admitted together with the agreed facts. The matter was then set down for a penalty hearing.
As the First Respondent is in liquidation, the issues before me relate to the appropriate penalty for the Second Respondent. The parties agreed that the appropriate penalty range should be 45-70% of the total maximum penalty payable, on the basis of 13 contraventions grouped together as various contravention groups for the purpose of determining penalty.
It is clear that the employee will only receive payment if he receives a payment from the penalties paid by the Second Respondent (as is provided for under s.841 of the WorkPlace Relations Act and s.546 of the Fair Work Act).
In this case, the circumstances in which the First Respondent entered into liquidation are relevant. In April of 2011, the company, Foure Mile Holdings Pty Ltd, was incorporated to act as trustee for the M and J Leech Family Trust. It now operates the Second Respondent’s trucking business. The business was previously operated and owned by Foure Mile Pty Ltd. When giving evidence, the Second Respondent says that he transferred the vehicles as he thought he could be left with nothing, that is, that it was purely ‘asset protection’ (Transcript, p15.39). Of course, from the employee’s perspective, the transactions were ‘asset stripping’ of the company.
Another company has also been set up, Foure Mile Trading and Mechanical Pty Ltd. However, it does not appear to have any significant role in the business nor relevance to these proceedings. Whilst the Second Respondent’s wife is obviously interested in the trust, she has not participated in the business and works as a nurse.
Despite being the controlling mind of the trustee company, the Second Respondent was remarkably vague with respect to the financial position of the business and the current structure. He said that the land from which the business operates is owned by his in-laws, however a shed is owned by the trust. The balance sheet, however, seems to list the land although rental is referred to for the shed. There appears to have been money borrowed from Bendigo Bank with respect to the shed.
Importantly the trust statements indicate that the trustee, in operating the trust, owes the Second Respondent $79,000 (Transcript p7.l29). The price for which the truck was transferred to the trustee company was less than the insured value of the truck. It is unclear what the true market value of the vehicle was at the time. The Second Respondent’s evidence was to the effect that the truck’s value was far lower than the insured value. It appears the value may have been struck by reference to what might have been achieved for the trucks in an auction sale (a process that appears to me to be akin to a fire sale).
Whilst the company that is the First Respondent is now in liquidation it appears to me that the business has continued to operate, with the Second Respondent as the controlling person. The business is now operated by the trustee company on behalf of a family trust. It also appears clear that the restructure of the business was to avoid the consequences of these proceedings, and that the underpayments remain outstanding. That is, although the restructure of the business has occurred so that there is no longer a company with any assets to pay the employee, the business continues to be operated by the Second Respondent. I am satisfied that the debt to the employee is unlikely to be met from the liquidation.
It also appears clear that the Second Respondent was aware that there were various awards and that, over time, changes would be made to them, but did not verify the rates of the awards after 1997.
The Second Respondent is now a member of the Victorian Transport Association and can therefore call upon the industry body to provide advice and assistance to assist him in complying with workplace laws.
I am not, however, persuaded that in this case the breaches were merely technical or inadvertent. The Second Respondent was concerned that the business was not very profitable, and operated at a marginal level. He appeared to hold the view that he was providing a benefit by way of a job to the employee and that this should be borne in mind. It appears to me that this wholly misconceives the nature of the difference between employment and joint venture. Many persons choose to undertake work for a level of reward less than would be set as the minimum in the various awards, on conditions set out under the legislative scheme for employees in the hope of achieving business growth or the establishment of a business that will be significantly more profitable, or valuable, to them in the long term. It remains every person’s right to operate their own business or trading venture and live off the profits that they can generate as they see fit. In this regard, it is common for persons to join together in partnerships or form companies or joint ventures. Significantly, when a person is not a joint venturer or partner, but working simply as an employee, they have no prospects of sharing in the wealth of the business venture in the future (if this comes to pass). It is for those operating a new or marginal business to make an election as to whether or not to seek partners or joint venturers who may be prepared to work for less than the award in a business operation in the hope of making a significant gain in the future. Alternatively, if workers are to be employed, regardless of the state of the business, the minimum terms and conditions must be remunerated on at least the minimum terms and conditions provided for in the legislation and the awards. For the law to be otherwise would simply create a category of underpaid workers who were being exploited to subsidise inefficient or otherwise unprofitable business operations, or business start-up periods.
For this reason, it is no answer to these breaches to say that a job was being provided which could not be provided if award wages were paid.
The Contraventions
It is appropriate that I identify the distinct groups of contraventions for which the penalty must relate. These were set out in the statement of agreed facts:
The contraventions - underpayments
Contravention of Subsection 117(2)(b) of the FW Act (a provision of the National Employment Standards) (failure to pay termination in lieu of notice)
27. On or about 2 August 2010, the First Respondent terminated the Complainant's employment.
28. The First Respondent was required by section 117 of the FW Act, a provision of the National Employment Standards (NES), to:
(a) give the Complainant a minimum period of 4 weeks' notice of termination of employment: or
(b) make payment in lieu of notice of at least the amount the First Respondent would have been liable to pay to the Complainant at the full rate of pay for the hours he would have worked had the employment continued until the end of the 4 week period of notice.
29. In the 4 weeks prior to the termination the Complainant drove an average of 2,798.50 kilometres per week. At the time of the termination the CPK rate prescribed by clause 13.4 of the Modern Award was 33.98 cents/km. The Complainant earned $950.93 per week in the 4 weeks prior to the termination.
30. The full rate of pay for the hours the Complainant would have worked had the employment continued until the end of the 4 week period of notice was $950.93 per week.
31. The First Respondent did not give the Complainant the minimum period of 4 weeks' notice of the termination, but made a payment to the Complainant in lieu of 4 weeks' notice at the rate of $646.00 per week.
32. By reason of the matters alleged in paragraphs 9 and 27 to 31 above, the Second Respondent contravened subsection 117(2)(b) of the FW Act.
33. By reason of the matters alleged In paragraph 32 above, the Second Respondent contravened subsection 44(1) of the FW Act.
34. By reason of the matters alleged in paragraphs 27 to 31 above, the Complainant was underpaid the sum of $1,219.72 in respect of payment in lieu of notice of termination.
Contravention - underpayment of accrued untaken annual leave on termination
35. The First Respondent was required by s 90(2) of the FW Act, a provision of the NES, to pay the Complainant on termination of the employment the amount that would have been payable to him had he taken his accrued, untaken annual leave.
36. At the time of the termination, the Complainant had accrued, untaken annual leave of 157.7 hours.
37. The Complainant was entitled to be paid $2,711.26 in respect of the balance of his accrued untaken annual leave.
38. Following the termination, the First Respondent paid the Complainant $646.00 In respect of 38 hours accrued, untaken annual leave.
39. The First Respondent failed to pay the Complainant the amount that would have been payable to him had he taken all of his accrued, untaken annual leave.
40. By reason of the matters stated in paragraphs 9 and 35 to 39 above, the Second Respondent contravened section 90(2) of the FW Act.
41. By reason of the matters set out in paragraph 40, the Second Respondent contravened section 44(1) of the FW Act.
Contraventions - failure to pay annual leave loading on annual leave taken
During the Second Period
42. During the Second Period, the First Respondent was required by clause 34.7.2(b) of the Pre-modern Award to pay the Complainant annual leave loading of 30% on the minimum rate of pay prescribed by clause 17 of the Pre-modern Award.
43. The First Respondent failed to pay the Complainant any annual leave loading in respect of annual leave taken by the Complainant during the Second Period.
44. By reason of the matters stated in paragraphs 9, 42 and 43 above, the Second Respondent contravened clause 34.7.2(b) of the Pre-modern Award.
45. By reason of the matters stated in paragraphs 42 to 43 above, the Complainant was underpaid the sum of $1,370.85 in respect of annual leave taken during the Second Period.
During the Third Period
46. During the Third Period the First Respondent was required by clause 23.2(b)(ii) of the Modern Award to pay the Complainant annual leave loading of 30% on the minimum weekly rate of pay prescribed by clause 13.1 of the Modern Award.
47. The First Respondent failed to pay the Complainant any annual leave loading In respect of annual leave taken by the Complainant during the Third Period.
48. By reason of the matters stated in paragraphs 9, 46 and 47 above, the Second Respondent contravened clause 23.2(b)(ii) of the Modern Award.
49. By reason of the matters stated in paragraph 48 above, the Second Respondent contravened section 45 of the FW Act.
50. By reason of the matters stated In paragraph 46 and 47 above the Complainant was underpaid the sum of $1,277.00 in respect of annual leave taken during the Third Period.
Contraventions - underpayment of CPK rate
During the Second Period
51. During the Second Period the First Respondent was required by clause 19.3.1 of the Pre-Modern Award to pay the Complainant at the prescribed CPK rate of pay as follows:
(a) 28.14 cents per kilometre driven in the small truck, as a driver Grade 3;
(b) 29.54 cents per kilometre driven In the large truck, as a driver Grade 6.
52. The First Respondent paid the Complainant less than the prescribed CPK rate in respect of trips undertaken by the Complainant during the Second Period.
53. By reason of the matters stated In paragraphs 9, 51 and 52 above, the Second Respondent contravened Clause 19.3.1 of the Pre-modern Award.
54. By reason of the matters stated In paragraphs 51 and 52 above, the Complainant was underpaid the sum of $27,968.40 In respect of trips paid at a CPK rate during the Second Period.
During the Third Period
55. During the Third Period the First Respondent was required by clause 13.4 of the Modern Award to pay the Complainant at the prescribed CPK rate of pay as follows:
From 1 January 2010:
(a) 31.23 cents per kilometre driven in the small truck, as a driver Grade 1; and
(b) 32.62 cents per kilometre driven In the large truck, as a driver Grade 4;
From 1 July 2010:
(a) 32.58 cents per kilometre driven in the small truck, as a driver Grade 1; and
(b) 33.98 cents per kilometre driven in the large truck, as a driver Grade 4;
56. The First Respondent, paid the Complainant less than the prescribed CPK rate in respect of trips undertaken by the Complainant during the Third Period.
57. By reason of the matters stated In paragraphs 9, 55 and 56 above, the Second Respondent contravened Clause 13.4 of the Modern Award.
58. By reason of the matters stated in paragraph 57, the Second Respondent contravened section 45 of the FW Act.
59. By reason of the matters stated in paragraphs 55 and 56 above, the Complainant was underpaid the sum of $8,515.99 in respect of trips paid at a CPK rate during the Third Period.
Contraventions - underpayment of hourly driving rate
During the Second Period
60. During the Second Period the First Respondent was required by clause 19.4.2 of the Pre-modern Award to pay the Complainant at the prescribed hourly driving rate as follows:
(a) $21.11 per hour driven in the small truck, as a driver Grade 3;
(b) $22.15 per hour driven in the large truck, as a driver Grade 6.
61. The First Respondent paid the Complainant less than the prescribed hourly driving rate in respect of trips undertaken by the Complainant during the Second Period.
62. By reason of the matters stated in paragraphs 9, 60 and 61 above, the Second Respondent contravened Clause 19.4.2 of the Pre-Modern Award.
63. By reason of the matters alleged in paragraphs 60 and 61 above, the Complainant was underpaid the sum of $7,640.87 In respect of trips paid at an hourly driving rate during the Second Period.
During the Third Period
64. During the Third Period the First Respondent was required by clause 13.5 of the Modern Award to pay the Complainant at the prescribed hourly driving rate as follows:
From 1 January 2010:
(a) $23.42 per hour driven in the small truck, as a driver Grade 1; and
(b) $24.47 per hour driven in the large truck, as a driver Grade 4;
From 1 July 2010:
(a) $24.44 per hour driven in the small truck, as a driver Grade 1: and
(b) $25.48 per hour driven in the large truck, as a driver Grade 4.
65. The First Respondent paid the Complainant less than the prescribed hourly driving rate in respect of trips undertaken by the Complainant during the Third Period.
66. By reason of the matters stated in paragraphs 9, 64 and 65 above, the Second Respondent contravened clause 13.5 of the Modern Award.
67. By reason of the matters stated in paragraph 66 above, the Second Respondent contravened section 45 of the FW Act.
68. By reason of the matters stated In paragraphs 64 and 65 above, the Complainant was underpaid the sum of $820.03 In respect of trips paid at an hourly driving rate during the Third Period.
Contraventions - failure to pay public holidays during periods of annual leave
During the Second Period
69. During the Second Period the First Respondent was required by clause 35.1 of the Pre-Modern Award to grant the Complainant a day off without loss of pay (public holiday pay) in respect of the public holidays listed in clause 35.1.3(c) of the PreModern Award.
70. Clause 34.2 of the Pre-Modern Award provided that a period of annual leave did not include a public holiday observed on a working day during the period of leave.
71. The First Respondent failed to pay the Complainant public holiday pay in respect of the public holidays falling on Boxing Day 2008, New Year's Day 2009 and Labour Day 2009.
72. The First Respondent paid the Complainant for a day's annual leave in respect of each of those public holidays.
73. By reason of the matters stated in paragraphs 9 and 69 to 72 above, the Second Respondent contravened clause 35.1 of the Pre-Modern Award.
74. By reason of the matters alleged at paragraphs 69 to 72 above, the Complainant was underpaid the sum of $504.32 in respect of the public holidays falling on Boxing Day 2008, New Year's Day 2009 and Labour Day 2009.
During the Third Period
75. During the Third Period, the First Respondent was required by section 116 of the FW Act, a provision of the NES, to pay the Complainant public holiday pay in respect of the public holidays listed in section 115(1 )(a) of the FW Act.
76. During the Third Period, s 89(1) of the FW Act provided that, if a period during which an employee takes paid annual leave includes a public holiday the employee Is taken not to be on paid annual leave on that public holiday.
77. The First Respondent failed to pay the Complainant public holiday pay In respect of the public holiday falling on New Year's Day 2010.
78. The First Respondent paid the Complainant for a day's annual leave in respect of that public holiday.
79. By reason of the matters stated in paragraphs 9 and 75 to 78 above, the Second Respondent contravened section 116 of the FW Act.
80. By reason of the matters stated in paragraph 79 above, the Second Respondent contravened subsection 44(1) of the FW Act.
81. By reason of the matters alleged at paragraphs 75 to 78 above, the Complainant was underpaid the sum of $126.08 in respect of the public holiday falling on New Year's Day 2010.
…
Contraventions - notice of change of payment method
During the Second Period
85. During the Second Period, the First Respondent was required by clause 19.2.2 of the Pre· Modern Award to the Complainant with 4 weeks notice in writing when the method of payment, being either the CPK or hourly driving rate method, was to be changed from one to the other.
86. The First Respondent changed from one payment method to the other throughout the Second Period but failed to provide any notice of change in payment method during the Second Period.
8? By reason of the matters stated in paragraphs 9, 85 and 86 above, the Second Respondent contravened clause 19.2.2 of the Pre-Modern Award.
During the Third Period
88. During the Third Period, the First Respondent was required by clause 13.3(b) of the Modern Award to provide the Complainant with 4 weeks notice In writing when the method of payment (being either the CPK or hourly driving rate method), was to be changed from one to the other.
89. The First Respondent changed from one payment method to the other throughout the Third Period, but failed to provide any notice of change in payment method during the Third Period.
90. By reason of the matters stated In paragraphs 9, 88 and 89 above, the Second Respondent contravened Clause 13.3(b) of the Modern Award.
91. By reason of the matters stated in paragraph 90, the Second Respondent contravened section 45 of the FW Act.
Contravention - employment records
92. During the Third Period, the First Respondent was required by s 535(1) of the FW Act to make and keep records of the kind prescribed by the FW Regulations In relation to the employment of the Complainant.
93. Relevantly, the First Respondent was required by regulation 3.36(1) of the FW Regulations to make and keep a record in relation to the Complainant that set out the balance of his entitlement to annual leave from time to time.
94. The First Respondent failed to make and keep a record in relation to the Complainant that set out the balance of his entitlement to annual leave from time to time during the Third Period.
95. By reason of the matters stated in paragraph 9 and 92 to 94 above, the Second Respondent contravened s.535(1) of the FW Act.
It was agreed that the contraventions be grouped as follows:
Grouping of contraventions
4.6 The Applicant accepts that some of the contraventions have common elements and that this should be taken into account in considering an appropriate penalty to ensure that the Second Respondent is not punished more than once for the same or substantially similar conduct.
4.7 The Applicant and Second Respondent have agreed that the contraventions fall into the following 8 distinct groups:
(i) failure to pay the Employee the required minimum in respect of payment in lieu of notice of termination (subsection 117(2) of the FW Act and section 44(1) of the FW Act) (the notice of termination contravention);
(ii) failure to pay the Employee the amount that would have been payable to him had he taken all of his accrued, untaken annual leave on termination (subsection 90(2) of the FW Act and hence section 44(1) of the FW Act) (the accrued annual leave contravention);
(iii) failure to pay the Employee annual leave loading in respect of annual leave taken during the period between 27 March 2006 and 31 December 2009 (the Second Period) and the period between 1 January 2010 and 2 August 2010 (the Third Period) (clause 34.7.2(b) of the Pre-modern Award and clause 23.2(b)(ii) of the Modern Award and hence and Section 45 of the FWAct) (the annual leave loading contraventions);
(iv) failure to pay the Employee the prescribed cents-per-kilometre (CPK) rate
in respect of trips undertaken by the Complainant during the Second and Third Periods (Clause 19.3.1 of the Pre-Modern Award and 13.4 of the Modern Award (and hence Section 45 of the FW Act) (the CPK rate contraventions);
(v) failure to pay the Employee the prescribed hourly driving rate in respect of trips undertaken during the Second and Third Period (Clause 35.1 of the Pre-modern Award and Clause 13.5 of the Modern Award (and hence Section 45 of the FW Act) (the hourly driving rate contraventions);
(vi) failure to pay the Employee public holiday pay in respect of the public holidays falling on Boxing Day 2008, New Year's Day 2009, Labour day 2009 and New Year's Day 2010 (Clause 35.1 of the Pre-Modern award and Section 116 of the FW Act (and hence subsection 44(1) of the FW Act) (the public holiday contraventions);
(vii) failure to provide the Employee with 4 week's notice in writing when the method of payment, being either the CPK or hourly driving rate method was to be changed from one to the other during the Second and Third Periods (Clause 19.2.2 of the Pre-Modern Award and Clause 13.3(b) of the Modern Award (and hence Section 45 of the FW Act) (the notice of change of payment method contraventions); and
(viii) failure to create and maintain the required records in respect of the Employee's employment (Section 535(1) of the FW Act (3.36(1) of the FW Regulations) (the record keeping contraventions).
4.8 For the purposes of these submissions, the notice of termination, accrued annual leave, annual leave loading, CPK rate, hourly driving rate and public holiday contraventions will be collectively referred to as the underpayment contraventions.
On the basis of such grouping the maximum penalty that can be imposed on the second respondent would be $49,500.
Thus, there are no fixed categories of matters that are relevant to the imposition of a penalty, although a number of factors that ought ordinarily be considered are set out by Mowbray FM (as his Honour then was) in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at 26 to 59. The summary given by his Honour was adopted by Tracey J in Kelly v Fitzpatrick 166 IR 14, [2007] FCA 1080 at paragraph 14.
Relevant Factors
Turning to relevant factors in this case. The conduct in this case occurred over a significant period of time and resulted in a very large underpayment to an employee. Ultimately, the amount of the underpayment is as agreed at $41,303.21. The business was a very small one, and certainly not of a size where it would be difficult to invite the employee to participate in the ownership or operation of the business, had the Second Respondent wished to allow this.
The Respondents operated a freight forwarding transport business based in Victoria. The Second Respondent was, in substance, the controlling mind of the business and was aware of minimum standards at least at the time of employment.
The underpayment in this case is a large sum with respect to a single employee. It does not appear that the Respondents have made any substantial steps to rectify the underpayments. On the contrary, it appears that arrangements were put in place to ensure that any underpayments and penalties would not be able to be recovered from the First Respondent. Significantly in this case, the underpayments do not relate to a failure to pay any entitlements that would be in excess of the minimum award entitlements, but concern a failure to provide an employee with the basic minimum entitlements under the legislation and award.
It is not alleged that there is any similar previous conduct by the Second Respondent with respect to Australian workplace laws.
Whilst the business is a small one, and therefore without any dedicated human resources personnel and the like, it is also a business that did not have any significant number of employees or complexities surrounding the establishment of appropriate terms and conditions and making the appropriate payments. The Second Respondent’s tax returns from the 2010 and 2011 financial years disclose an income of around $33,000-$44,000 per annum, however the extent to which the assets of the company increased is not clear from the material. Although it appears that, following the restructure, the ultimate result has been that the Second Respondent has an asset base of around $79,000 at least, based upon the debt that the trust financial statements indicate are owing to the Second Respondent.
In this case, I am not persuaded that the breaches were deliberate in the sense of the Second Respondent setting out to exploit the employee, but I am persuaded that they were a product of recklessness.
It does not appear to me that the Second Respondent has shown any real remorse or contrition, nor has corrective action been taken. Rather, the contrary has occurred in the operation of the business. Its re-structure has been such as to effectively deny the employee the capacity of suing the First Respondent with any real expectations of recovering the amount owing. There is clearly a need for deterrence, not only with respect to the specific conduct in the underpayments and with respect to the conditions but also with respect to the conduct in operating the business in such a fashion as to result in an employee being left without any practical remedies for the underpayment.
Whilst the statement of agreed facts and admissions were not made until well into the litigation, they were made well before the trial.
I note that if the breaches are not grouped according to common elements the maximum penalty would be $82,500. The grouping brings the maximum penalty down to $49,500. Whilst I have some reservations about the grouping in this case, the parties are agreed upon it and it is certainly within a reasonable range and one that would be available. I therefore proceed on the basis that a maximum penalty of $49,500 could be imposed. The penalty range suggested by the parties is between 45% and 70% of the maximum. In the peculiar circumstances of this case, I am not persuaded that this adequately reflects the conduct involved. Of particular significance are the facts that the employee is left, on a practical level, unable to recover his entitlements, and that the Second Respondent has actively engaged in what is loosely described as asset stripping of the company in order to continue the business through a separate entity.
Having regard to all of these factors, the overall circumstances and bearing in mind the concessions of the Second Respondent and the timeliness of them, I am of a view that a penalty set at 85% of the maximum is appropriate. I am not persuaded that such a penalty would be crushing in the sense discussed in Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; [2007] ALMD 6759; (2007) 59 AILR 100-669.
I would therefore impose a penalty of $42,075. There is no question it is appropriate under s.841 of the Workplace Relations Act and s.546 of the Fair Work Act to order that $41,303.21 of the penalty is to be paid to the employee.
The applicant agrees to allow a period of 12 months from the date of these orders for the payment of the penalty, provided the injunctions that are presently in place remain to secure the payment as against the interest that the Second Respondent has in the M & J Leech Family Trust. This appears to me to be appropriate. Given the circumstances of the employee and the nature of the case it appears to me the payments should initially be made to the Commonwealth, who should forward on that part of the penalty received, to a maximum of $41,303.21 to the employee so that the Commonwealth remains responsible for the enforcement of the orders.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller
Associate:
Date: 28 June 2013
10
4
3