Fair Work Ombudsman v Fu Kang GC Pty Ltd
[2021] FedCFamC2G 313
•1 December 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Fu Kang GC Pty Ltd [2021] FedCFamC2G 313
File number(s): BRG 598 of 2020 Judgment of: JUDGE VASTA Date of judgment: 1 December 2021 Catchwords: INDUSTRIAL LAW – Breach of the Fair Work Act 2009 (Cth) – Assessment of pecuniary penalties. Legislation: Fair Work Act 2009 (Cth), ss.535, 536, 550, 718A Cases cited: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7
Division: Division 2 General Federal Law Number of paragraphs: 69 Date of last submission/s: 19 November 2021 Date of hearing: In Chambers on the papers Place: Brisbane Solicitor for the Applicant: Ms Hannaford upon providing written submissions to chambers Solicitor for the Respondents: The Respondents representing themselves and not making any further submissions in relation to penalty ORDERS
BRG 598 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: FU KANG GC PTY LTD
First Respondent
YINGCHUN WANG
Second Respondent
LIANGTAO ZHAO
Third Respondent
ORDER MADE BY:
JUDGE VASTA
DATE OF ORDER:
1 DECEMBER 2021
THE COURT DECLARES THAT:
1. The First Respondent contravened the following civil remedy provisions:
a.section 535(1) of the FW Act, by falling to make and keep records as required by regulations 3.33(1), 3.34 and 3.36 of the FW Regulations;
b.section 536(1) of the FW Act, by falling to provide the Employee with pay slips;
c. section 718A(1)(a) of the FW Act, by producing the Initial Pay Slip to FWIs Williams and McCauley who were exercising powers or performing functions under the FW Act, knowing, or being reckless as to whether, the Initial Pay Slips were false or misleading;
d. section 718A(1)(a) of the FW Act, by producing the Subsequent Pay Slips to FWIs Williams and McCauley who were exercising powers or performing functions under the FW Act, knowing, or being reckless as to whether, the Subsequent Pay Slips were false or misleading;
e.section 718A(1)(a) of the FW Act, by producing the Cash Payment Records to FWIs Williams and McCauley who were exercising powers or performing functions under the FW Act, knowing, or being reckless as to whether, the Cash Payment Records were false or misleading;
f.section 45 of the FW Act, by failing to pay the Employee the applicable adult hourly rates for each ordinary hour he worked, in contravention of clause 20.1 of the Award;
g.section 45 of the FW Act by failing to pay the Employee the Saturday Penalty Rate for each ordinary hour he worked on a Saturday, in contravention of clause 34.1 of the Award;
h.section 45 of the FW Act by failing to pay the Employee the Sunday Penalty Rate for each ordinary hour he worked on a Sunday, in contravention of clause 34.1 of the Award;
i.section 45 of the FW Act by failing to pay the Employee the Public Holiday Penalty Rate for each ordinary hour he worked on a Public Holiday, in contravention of clause 34.1 of the Award;
j.section 45 of the FW Act by failing to pay the Employee the Evening Penalty for each applicable hour worked, in contravention of clause 34.2(a)(i) of the Award;
k.section 45 of the FW Act by failing to pay the Employee the Morning Penalty, in contravention of clause 34.2(a)(ii) of the Award;
l.section 45 of the FW Act by failing to pay the Employee the Overtime Rates for each hour in excess of ordinary hours worked Monday to Friday, in contravention of clause 33.1(a) of the Award;
m.section 45 of the FW Act by failing to pay the Employee the Overtime Rates for each hour in excess of ordinary hours worked midnight Saturday to midnight Sunday, in contravention of clause 33.1(a) of the Award;
n.section 45 of the FW Act by failing to pay the Employee the Overtime Rates for each hour in excess of ordinary hours worked Sunday, in contravention of clause 33.1(a) of the Award;
o.section 45 of the FW Act by failing to pay the Employee a Split Shift Allowance for each separate work period in a broken work day, in contravention of clause 24.2 of the Award;
p.section 44(1) of the FW Act by failing to pay accrue Annual Leave entitlements for the Employee, in contravention of section 87 of the FW Act;
q.section 44(1) of the FW Act by failing to pay Annual Leave entitlements on termination and/or Annual Leave Loading on termination as required by clause 35.2 of the Award, in contravention of section 90(2) of the FW Act;
r.section 45 of the FW Act by failing to make superannuation contributions for the benefit of the Employee such as would avoid the payment of the superannuation guarantee charge as prescribed by clause 30.2(a) of the Award.
2. The Second Respondent was involved, pursuant to section 550 of the FW Act, in each of the contraventions committed by the First Respondent declared in paragraph 1, save for the contravention at 1(r).
3. The Third Respondent was involved, pursuant to section 550 of the FW Act, in each of the contraventions committed by the First Respondent declared at paragraphs 1(e) to (o) and 1(r) above.
THE COURT ORDERS THAT:
4. The First Respondent pay pecuniary penalties in the sum of $190,000.00 pursuant to section 546(1) of the FW Act for the contraventions of the FW Act as declared at paragraph 1 above.
5. The Second Respondent pay pecuniary penalties in the sum of $23,000.00 pursuant to section 546(1) of the FW Act for her involvement in the First Respondent’s contraventions of the FW Act as declared in paragraph 2 above.
6. The Third Respondent pay pecuniary penalties in the sum of $12,500.00 pursuant to section 546(1) of the FW Act for his involvement in the First Respondent’s contraventions of the FW Act as declared in paragraph 3 above.
7. Pursuant to section 546(3)(a) of the FW Act, all penalties imposed on the Respondents be paid to the Commonwealth within 28 days of the date of the Court’s orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE VASTA
INTRODUCTION
The First Respondent is a company that operated two restaurants; the “Fu Kang Gold Coast Chinese Restaurant” which was located at Frank Street Labrador and “Memory Taste of Fu Kang” which was located at Scarborough Street Southport. The Second Respondent (who was known as Christine) and the Third Respondent (who was known as Frank) are a married couple who, together, are the controlling mind of the First Respondent.
From 31 May 2016 to 25 January 2017, the First Respondent employed Tianxiao Wang, also known as Luke, to work in the restaurants. Luke is a Chinese citizen who was permitted to work in Australia pursuant to a temporary work visa that was sponsored by the First Respondent. The contract of employment between Luke and the First Respondent was dated 8 April 2015.
The contract stated that Luke was to work as a cook and to perform duties associated with cooking. The contract stated that Luke’s weekly working hours were 38.5 hours per week for which he would be paid $53,900 annually. This sum is equivalent to a weekly wage of $1037 gross or $846 net with an hourly rate of $26.95.
After an investigation, the Fair Work Ombudsman (“the FWO”) established that Luke had been underpaid. In the course of the investigation, the Respondents were not completely honest with the FWO and were also found to have committed a number of contraventions of the Fair Work Act 2009 (Cth) (“the FW Act).
The Respondents have all admitted the contraventions and rectified the underpayments to Luke. The Court now must assess what pecuniary penalties should be made because of the contraventions.
The Investigation
Luke claimed that he had worked in excess of 38.5 hours a week and that he had a notebook where he kept records of his work. That diary record alleged that Luke worked between 22 and 87 hours per week.
The FWO issued a notice to produce records pertaining to Luke’s employment. Notwithstanding that the Respondents replied to the FWO both after the due date and in a sporadic manner, the documents that were produced attempted to paint a picture that Luke was, in fact, paid properly.
The Respondents produced an initial payslip, subsequent payslips and cash payment records. The Respondents were under a duty, pursuant to s 718A of the FW Act to ensure that they did not give information, or produce a document, to the FWO that they knew was false or misleading.
The payslips indicated that Luke was paid $26.95 per hour for all hours worked and that the Respondents had deducted tax and had made superannuation payments for Luke’s benefit. The cash payment records recorded that the Respondents paid Luke $846 in cash per week.
The investigation found that there was no tax deducted from Luke’s wage and no superannuation was paid for his benefit. The investigation further showed that the Respondents paid Luke between $200 and $600 per week.
This meant that the representations made by the Respondents to the FWO were false and misleading. It is obvious that the Respondents knew that those representations were misleading.
The Contraventions
The Respondents have admitted that they have contravened s 718A of the FW Act, by giving to the FWO, payslips and cash payment records knowing that they were false or misleading.
The Respondents were required to make and keep records that would record:-
·the rate of remuneration paid to an employee
·the gross and net amounts paid to an employee
·the number of overtime hours worked by an employee during each day
·any leaves that in employee takes
·the balance (if any) of an employee’s entitlement to that leave from time to time
The Respondents failed to make and keep any of these records. The Respondents have admitted that they have contravened s 535 of the FW Act by failing to do so.
The Respondents were also required to provide payslips. The Respondents have admitted that they have contravened s 536 of the FW Act by failing to do so.
Underpayments
The obvious corollary to these contraventions is that the Respondents have underpaid Luke. The Respondents have admitted contravening the FW Act in the following manner.
The first underpayment contravention is a failure to pay minimum adult hourly rates. Under the Award, Luke was to be paid between $20.13 an hour and $20.61 an hour as a minimum rate. During the assessment period, Luke worked a total of 858.63 ordinary hours and was entitled to be paid $17,658.98 in respect of those hours. He was actually paid $6989.92 in respect of those hours. This meant that he was underpaid $10,669.06.
The next underpayment contravention is a failure to pay Saturday penalties. During the assessment period, Luke worked 97.52 hours on a Saturday and was entitled to be paid $2505.14 in respect of those hours. He was in fact paid $869.05 in respect of those hours. This meant that he was underpaid $1636.09.
The next underpayment contravention is a failure to pay Sunday penalties. During the assessment period, Luke worked a total of 38.35 hours on a Sunday and was entitled to be paid $1177.97 in respect of those hours. He was in fact paid $311.50 in respect of those hours. This meant that he was underpaid $866.47.
The next underpayment contravention is a failure to pay public holiday penalties. During the assessment period, Luke worked a total of 15.02 hours on a public holiday and was entitled to be paid $773.81 in respect of those hours. He was actually paid $154.80 in respect of those hours. This meant that he was underpaid $619.01.
The next underpayment contravention is a failure to pay evening penalties. During the assessment period, Luke worked 50 hours between 10 PM and midnight on a Monday to Friday. He was entitled to be paid $103 in respect of these hours but was paid nothing. This meant that he was underpaid $103.
The next underpayment contravention is a failure to pay morning penalties. During the assessment period, Luke was entitled to an additional 15% of the standard hourly rate for each hour, or part of an hour, that he worked between midnight and 6 AM. He worked 10 ordinary hours between midnight and 6 AM and was entitled to be paid $30.34. He was paid nothing. This meant that he was underpaid $30.34.
The next underpayment contravention is a failure to pay overtime rates. During the assessment period, Luke worked overtime if he worked in excess of the average of 38 hours per week or in excess of 11.5 hours per day or by working without a minimum break of 10 hours between the finish of work on one day and the commencement of work on the next, or by working without eight full days off per four week period. On the calculations made by the FWO, Luke was underpaid $29,999.82 in respect of overtime.
The next underpayment contravention is a failure to pay shift allowance. Because Luke worked broken days, he was entitled to be paid the split shift allowance in respect of 288 separate work periods. He was entitled to be paid an additional $1124.26 in respect of this allowance but was paid nothing. This means that he was underpaid $1124.26.
Other Contravention
Luke was entitled to accrue four weeks of paid annual leave and, if this was not taken, he needed to be paid for that annual leave when he finished employment. Luke was not paid for any period of accrued annual leave nor was he paid any annual leave loading. During the assessment period, Luke was entitled to have accrued 62.23 hours of annual leave which meant that he was entitled to be paid $1507.29, which included his leave loading, upon termination of his employment. This means that he was underpaid $1507.29.
The Respondents have admitted this contravention too.
Adding all of those totals together, Luke was underpaid a total of $46,555.34.
Superannuation
Luke was entitled to have the Respondents pay superannuation contributions. On the ordinary time earnings, the Respondents were obliged to pay $790.90 in superannuation contributions. They did not make any such contribution. The Respondents have admitted this contravention.
Rectification
On 22 June 2021 the Respondents fully rectified the amounts owed to Luke by paying to him the sum of $46,555.34 for the underpayments and $790.90 for the outstanding superannuation contributions.
Accessorial liability
Both the Second Respondent and the Third Respondent have admitted that they were “knowingly concerned in, or a party to, the contraventions of the FW Act committed by the First Respondent”. Pursuant to s 550(2)(c) of the FW Act, both the Second Respondent and the Third Respondent are accessorily liable for the contraventions.
Other matters
Both the Second Respondent and the Third Respondent have filed affidavits. In those affidavits, they have both said that the hospitality and restaurant business was heavily impacted by COVID-19 and this has meant that they have shut down both restaurants.
Both the Second and Third Respondents have said that, due to the loss of income, they had to borrow money from a friend to pay Luke what he was owed. The Third Respondent said that he is looking for work as a chef and the Second Respondent said that she is going to have to make an application to Centrelink. Both say that they are living in budget rental premises and will not open any restaurant or start any business any time in the future.
They both say that they have “learnt my lesson from this matter” and that “as a business owner, I should have paid attention to relevant regulations and complied with the law”. They both apologised to the FWO and the Court for the trouble they have caused which “could have been easily avoided if I had complied with the law at first place”.
They both have asked for the court to show mercy “on the potential penalty that may occur”.
History of litigation
The FWO filed the originating application and statement of claim on 12 November 2020. On 16 December 2020, the matter came before me in Chambers where I ordered the Respondents to file and serve a response and defence.
The defence admitted a great deal of the allegations but denied some key claims made by the FWO. I looked at the matter again, in Chambers, in February 2021 where I made orders that the parties file and serve any affidavits on which they intend to rely and ordered that the matter go to a Registrar for mediation. The matter did not ever go to mediation because of what then occurred.
The FWO filed all of the material. On 30 March 2021, the solicitors for the Respondents withdrew from the matter and the Second and Third Respondents became unrepresented. The Third Respondent filed an affidavit on 10 June 2021 stating that he was ready to make good all of the underpayments but did not have any details of Luke so that he could make those payments.
On 22 June 2021, the Third Respondent filed another affidavit detailing that he had now made all of the rectification payments.
The parties then made a representation to my Chambers and I made orders, again in Chambers, on 1 July 2021, which set the matter down for a penalty hearing on 24 November 2021. I also made directions as to the filing of any further affidavits and/or submissions, noting that the Respondents intend to make admissions to all matters and contraventions alleged in the statement of claim filed in the proceeding.
On 19 November 2021, an email from the parties was sent to my Chambers. It said that the parties have negotiated and advised that neither party would be calling witnesses at the penalty hearing, neither party has evidentiary objections, all documents intended to be relied upon by the parties have been filed with the Court and that the Respondents would not be making any penalty submissions.
The email stated that the parties are of the opinion that it would be appropriate for the Court to determine the issue of penalty on the papers. My Associates contacted the parties to inform them that I would determine the matter on the papers.
This means that the matter has actually never been mentioned in Court and the first time that it will be mentioned is when I deliver this judgement. Because of this, I have not had to give the Second and/or Third Respondent leave to represent the First Respondent.
Factors to take into account when assessing Pecuniary Penalty
The law in relation to assessment of pecuniary penalties has really been laid down quite comprehensively. The High Court, in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46, said, at paragraph 55 of that judgment,
No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
“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 [of the Trade Practices Act]. ... 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.”
In Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7 (“the Pangea Case”), the Court went through, in effect, a number of factors that Courts should be mindful of when imposing pecuniary penalties. One must be careful though, in looking at the Pangaea case, that one doesn’t simply look at those matters as some form of checklist to see whether or not the facts of the case, with the particular factors, either aggravate or mitigate the penalty.
As such, the list compiled in Pangaea is extremely useful, but it should not be a formula used by the Court to slavishly come up with some sort of, almost mathematical guide for the imposition of penalties.
Groupings
The first thing that the Court must do is to decide into what “groupings” these contraventions should be classified, which will then determine what the maximum penalty is.
Pursuant to s 557, the Court should group the contravention so that there is a common grouping of contraventions so that a respondent is not penalised twice for substantially the same conduct.
As has been detailed, false documents were “uttered” to the FWO on three separate occasions: on 29 March 2019, the First Respondent gave the FWO the initial payslip; on 3 July 2019, the First Respondent gave the FWO the subsequent payslips; and, on 29 August 2019, the First Respondent (during the interview of the Third Respondent) gave the FWO the handwritten records of cash payments.
This means that there were three separate occasions upon which the Respondents knowingly gave false material to the FWO. It seems to me that such behaviour should not be grouped and that these three contraventions should be treated as separate and distinct contraventions.
There were three distinct contraventions of s 535 of the FW Act. I am of the view that these contraventions should be grouped into one contravention of failing to make and keep records.
There is a distinct contravention of s 536 in that there was a failure to provide payslips.
There were many contraventions that resulted in underpayments. I am of the view that they should be grouped into the following contraventions:-
·failure to pay the minimum rate of pay;
·failure to pay Saturday, Sunday, public holiday, evening and morning penalty rates and shift allowance;
·failure to pay overtime, including Saturday and Sunday overtime;
·failure to accrue annual leave and to pay annual leave upon termination; and
·failure to pay superannuation;
The maximum penalties are, therefore, as follows:-
Short Contravention Description
Maximum Penalty
First Respondent
Second Respondent
Third Respondent
1.
Production of false records on 29 March 2019
$63,000
$12,600
N/A
2.
Production of false records on 3 July 2019
$63,000
$12,600
N/A
3.
Production of false records on 29 August 2019
$63,000
$12,600
$12,600
4.
Failure to make and keep records
$27,000
$5,400
N/A
5.
Failure to provide payslips
$27,000
$5,400
N/A
6.
Failure to pay the minimum rate of pay
$54,000
$10, 800
$10, 800
7.
Failure to pay penalty rates and shift allowance
$54,000
$10,800
$10,800
8.
Failure to pay overtime
$54,000
$10,800
$10,800
9.
Failure to accrue and pay annual leave
$54,000
$10, 800
N/A
10.
Failure to pay superannuation
$54,000
N/A
$10,800
TOTAL:
$513,000.00
TOTAL:
$91,800.00
TOTAL:
$55,800
This gives a total maximum penalty of $513,000.00. This amount indicates how serious the contraventions, committed by the First Respondent, are seen by the Courts. On my rough calculations, the maximum penalties, faced by the Second Respondent is $91,800 and Third Respondent is $55,800.00.
Relevant Factors
As has been already said, deterrence is the major factor in setting the appropriate penalty.
There is quite a deal of deliberation in this behaviour. It seems to me that the First Respondent represented to the Immigration Department that Luke would be paid according to the contract. An undertaking to abide by Australian workplace law is a significant reason for the Department to grant someone, such as Luke, a Visa that would enable him to work in this country. It seems to me that the First Respondent did not have any intention of complying with the contract that had been provided to the Immigration Department.
To compound this deception by providing false documentation illustrates the deliberate nature of the contravention. But the provision of false documentation did not just happen once; it happened three times. It is bad enough to be contravening the obligations one has under the FW Act, but to attempt to cover that contravention by the provision of false documentation, is behaviour which merits a most condign response by the Court.
There is an element of exploitation that colours this case. Luke was a vulnerable person in that he relied upon the First Respondent for his ability to be in this country. The First Respondent took advantage of that reliance by contravening the FW Act in a manner which it is unlikely that it would have dared to perpetrate if the employee was not a vulnerable Visa holder such as Luke.
It is a tenet of the Australian industrial relations framework that all employees must be fairly compensated for their work. The Fair Work Commission, in setting Award rates, ensures that the balance between the needs of employees and the requirements of employers, is met. It is incumbent upon all Australians to comply with those requirements. Luke had every right to expect that the First Respondent would honour this tenet.
To my mind, the penalty for the provision of false documentation needs to be in the higher echelon because of the brazen manner in which the First Respondent acted. With respect to the other contraventions, the Court ought set a penalty commensurate with the level of “criminality”.
Mitigation
I have taken into account that the First Respondent is a small business which is now no longer operating. I take into account that the Second and Third Respondents have been hit by the repercussions of the COVID-19 restrictions which has caused them to have to close the businesses operated by the First Respondent.
I have given a very generous discount in the overall penalty because of the cooperation of the three Respondents. The fact that this matter has not had to waste the time of the Court with directions and a mediation is an incredible illustration of the cooperation of the Respondents.
I accept that the contrition shown by the Second and Third Respondents is genuine and that they wish that they had never even thought to stray from the letter of the law. Counterbalancing that, is that the contrition was not immediate even though there was great cooperation once the FWO filed these proceedings.
The defence initially took issue with some of the allegations of the FWO and it was only when the lawyers for the Respondents withdrew, that the Respondents displayed the contrition that they have shown at the present time. For this reason, I will discount the penalty to be awarded against each of them personally to reflect that circumstance.
Because the business is no longer functioning, there is no need for any corrective action. I accept that the Second and Third Respondents will not resurrect this business or attempt to create a new business, but I am satisfied that they have learned the lessons as to how they should comply with the FW Act.
Summary
Taking into account all of the matters, I make the following pecuniary penalties in relation to the contraventions.
Imposed Penalty
Short Contravention Description
First
Second
Third
1. Production of false records on 29 March 201
$40,000
$4,000
2. Production of false records on 3 July 2019
$45,000
$5,000
3. Production of false records on 29 August 2019
$50,000
$8,000
$8,000
4. Failure to make and keep records
$15,000
$1,000
5. Failure to provide payslips
$5,000
$500
6. Failure to pay the minimum rate of pay
$20,000
$3,000
$3,000
7. Failure to pay penalty rates and shift allowance
$5,000
$500
$500
8. Failure to pay overtime
$5,000
$500
$500
9. Failure to accrue and pay annual leave
$2,500
$500
10. Failure to pay superannuation
$2,500
$500
TOTAL:
$190,000
TOTAL:
$23,000
TOTAL:
$12,500
This gives a total of $190,000 as pecuniary penalty for the First Respondent.
The Second Respondent was the person who was most responsible for the payment of the wages. Again taking into account all of the matters, I have assessed that, in total, the Second Respondent should pay a pecuniary penalty of $23,000.
The Third Respondent was not involved with the initial “uttering” of false documents to the FWO, nor was he involved in the record keeping and payslip contraventions. Taking into account the disparity between the Second and Third Respondent, I have assessed, in total, that the Third Respondent should pay a pecuniary penalty of $12,500.
I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Vasta. Dated: 1 December 2021
0