Fair Work Ombudsman v Futures Green Pty Ltd
[2011] FMCA 412
•6 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v FUTURES GREEN PTY LTD & ANOR | [2011] FMCA 412 |
| INDUSTRIAL LAW – Workplace Relations Act 1996 – Workplace Relations Regulations 2006 – Notional Agreement Preserving State Awards – breaches – accessorial liability – consideration of matters relevant to penalty. |
| Workplace Relations Act 1996, ss.4, 167, 171, 182, 208, 717, 718, 719, 722, 728, 846, cls.32 & 43 of sch.8 Annual Holidays Act 1944 (NSW), s.4 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009, item 2 of sch.1, item 11 of sch.2, items 12 & 13 of sch.18 Fair Work Act 2009, ss.682, 701 Workplace Relations Regulations 2006, regs.14.3, 14.4, 14.5, 19.9, 19.11 |
| Kelly v Fitzpatrick (2007) 166 IR 14 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 A & L Silvestri Pty Ltd v Construction, Forestry, Mining & Energy Union [2008] FCA 466 Gibbs v Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | FUTURES GREEN PTY LTD (ACN 089 084 275) |
| Second Respondent: | GARRY RICHARD PAYNE |
| File Number: | SYG 2715 of 2010 |
| Judgment of: | Cameron FM |
| Hearing date: | 17 May 2011 |
| Date of Last Submission: | 17 May 2011 |
| Delivered at: | Sydney |
| Delivered on: | 6 June 2011 |
REPRESENTATION
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Solicitors for the Respondents: | Second Respondent in person |
DECLARATIONS
The first respondent contravened:
(a)s.182 of the Workplace Relations Act 1996;
(b)clause 6(a) of the notional agreement preserving the Nurseries Employees (State) Award (NSW);
(c)clause 11 of the notional agreement preserving the Nurseries Employees (State) Award (NSW);
(d)s.4(3)(b)(ii) of the notional agreement preserving the Annual Holidays Act 1944 (NSW);
(e)reg.19.1(1) of the Workplace Relations Regulations 2006; and
(f)reg.19.11(3) of the Workplace Relations Regulations 2006.
By reason of his involvement in the first respondent’s contraventions, the second respondent is taken to have contravened:
(a)s.182 of the Workplace Relations Act 1996;
(b)clause 6(a) of the notional agreement preserving the Nurseries Employees (State) Award (NSW);
(c)clause 11 of the notional agreement preserving the Nurseries Employees (State) Award (NSW); and
(d)s.4(3)(b)(ii) of the notional agreement preserving the Annual Holidays Act 1944 (NSW).
ORDERS
Pursuant to s.719(6) of the Workplace Relations Act 1996 the first respondent pay the following amounts to the following employees in respect of outstanding wages and entitlements:
(a)Kelly Toms - $2,121.59;
(b)Danielle Fleming - $1,809.93;
(c)Sarah Fleming - $3,636.52;
(d)Mark Williams - $1,856.25;
(e)Tom Hazell - $1,994.49;
(f)Ben Brown - $262.90;
(g)Bronson Brown - $2,586.18;
(h)Scott Presbury - $4,030.85;
(i)Jake Brown - $3,130.10;
(j)Anita Bruggy - $593.71;
(k)Julie Dunn - $411.67;
(l)Karran Keaton - $2,232.86;
(m)Tammy Watson - $1,419.98;
(n)Simone Farlow - $138.64;
(o)Scott Amor - $177.33;
(p)Ashley Panta - $364.46; and
(q)Ian Dibley - $225.16.
Pursuant to s.722 of the Workplace Relations Act 1996 the first respondent pay the following amounts to the following employees representing interest on outstanding wages and entitlements for the period 16 December 2010 to 6 June 2011:
(a)Kelly Toms - $86.75;
(b)Danielle Fleming - $74.01;
(c)Sarah Fleming - $148.70;
(d)Mark Williams - $75.90;
(e)Tom Hazell - $81.56;
(f)Ben Brown - $10.75;
(g)Bronson Brown - $105.75;
(h)Scott Presbury - $164.82;
(i)Jake Brown - $127.99;
(j)Anita Bruggy - $24.27;
(k)Julie Dunn - $16.84;
(l)Karran Keaton - $91.30;
(m)Tammy Watson - $58.06;
(n)Simone Farlow - $5.66;
(o)Scott Amor - $7.25;
(p)Ashley Panta - $14.90; and
(q)Ian Dibley - $9.21.
The first respondent pay a penalty of $3,000 in relation to its breach of s.182 of the Workplace Relations Act 1996 in failing to pay employees the minimum rate of pay that was at least equal to the basic periodic rate of pay under the Australian Pay and Classification Scale derived from the terms of the Nurseries Employees (State) Award (NSW).
The first respondent pay a penalty of $5,000 in relation to its breach of clause 6(a) of the notional agreement preserving the Nurseries Employees (State) Award (NSW) in failing to pay employees required overtime rates.
The first respondent pay a penalty of $300 in relation to its breach of clause 11 of the notional agreement preserving the Nurseries Employees (State) Award (NSW) in failing to pay permanent employees annual leave loading.
The first respondent pay a penalty of $400 in relation to its breach of s.4(3)(b)(ii) of the notional agreement preserving the Annual Holidays Act 1944 (NSW) in failing to pay a casual employee pro rata annual leave.
The first respondent pay a penalty of $1,000 in relation to its breach of reg.19.9(1) of the Workplace Relations Regulations 2006 in failing to include the prescribed content of overtime hours worked by employees in employee records.
The first respondent pay a penalty of $1,000 in relation to its breach of reg.19.11(3) of the Workplace Relations Regulations 2006 in failing to include the prescribed content of penalty rates owed to employees in employee records.
The second respondent pay a penalty of $600 in relation to his involvement in the first respondent’s breach of s.182 of the Workplace Relations Act 1996.
The second respondent pay a penalty of $1,000 in relation to his involvement in the first respondent’s breach of clause 6(a) of the notional agreement preserving the Nurseries Employees (State) Award (NSW).
The second respondent pay a penalty of $60 in relation to his involvement in the first respondent’s breach of clause 11 of the notional agreement preserving the Nurseries Employees (State) Award (NSW).
The second respondent pay a penalty of $80 in relation to his involvement in the first respondent’s breach of s.4(3)(b)(ii) of the notional agreement preserving the Annual Holidays Act 1944 (NSW).
The payments ordered in orders 1 and 2 be paid within twenty-eight (28) days by sending bank cheques made out to the respective individual employees to the following address: Attention: Annabel Anderson, Fair Work Ombudsman, Level 12, 255 Elizabeth Street, Sydney NSW 2000.
The penalties imposed by orders 3 to 12 be paid within 28 days by sending a bank cheque made out to the Consolidated Fund to the following address: Attention: Annabel Anderson, Fair Work Ombudsman, Level 12, 255 Elizabeth Street, Sydney NSW 2000.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2715 of 2010
| FAIR WORK OMBUDSMAN |
Applicant
And
| FUTURES GREEN PTY LTD (ACN 089 084 275) |
First Respondent
| GARRY RICHARD PAYNE |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 16 December 2010 the applicant (“Ombudsman”) brought proceedings against the respondents alleging breaches of the Workplace Relations Act 1996 (“WRA”) in respect of the operation of a plant nursery business. It was alleged that the first respondent had failed to pay certain employees the basic periodic rate of pay, had failed to pay employees overtime, had failed to pay a casual employee pro-rata annual leave, had failed to pay permanent employees annual leave loading and had failed to make records which the Workplace Relations Regulations 2006 (“Regulations”) required be made. It was alleged that the second respondent was knowingly concerned in or a party to certain of the first respondent’s breaches and thereby had accessorial liability for those breaches pursuant to s.728(2)(c) of the WRA. The Ombudsman sought:
a)declarations that the first respondent contravened the WRA, the Regulations and applicable notional agreements preserving state awards and that the second respondent was involved in the contraventions of the WRA and the notional agreements preserving state awards;
b)the imposition of pecuniary penalties on the respondents;
c)an order that payments be made to rectify the underpayments of the employees’ wages and entitlements; and
d)an order that interest be paid on the underpayments.
Following the commencement of these proceedings, the parties reached agreement on relevant facts with the result that the matter is now before the Court principally for the purpose of determining what penalty or penalties are appropriate to be imposed on the respondents.
Statutory provisions
The Ombudsman’s action is brought under the WRA. Since the events in question, all the statutory provisions relevant to these proceedings have been repealed by sch.1 to the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (“FW(TPCA) Act”). Nevertheless, item 11 of sch.2 to the FW(TPCA) Act provides that the WRA continues to apply on and after its repeal in relation to conduct that occurred before the repeal. Consequently, the WRA continues to apply to these proceedings and to the issues which they raise. The Regulations have not been repealed.
Part 3 of sch.8 to the WRA preserved the Nurseries Employees (State) Award (NSW) as a notional agreement preserving state awards (“Nurseries NAPSA”) with the consequence, by virtue of s.208 of the WRA, that it was also a preserved APCS, i.e. Australian Pay and Classification Scale, (“Nurseries APCS”). At the relevant time s.182(1) of the WRA provided:
(1) If:
(a) the employment of an employee is covered by an APCS; and
(b) the employee is not an APCS piece rate employee;
the employee must be paid a basic periodic rate of pay for each of the employee’s guaranteed hours (pro-rated for part hours) that is at least equal to the basic periodic rate of pay (the guaranteed basic periodic rate of pay) that is payable to the employee under the APCS.
Part 3 of sch.8 to the WRA also preserved the Annual Holidays Act 1944 (NSW) as a notional agreement preserving state awards (“Annual Holidays NAPSA”). Clause 32 of sch.8 to the WRA had the effect that the first respondent was bound to observe the terms of the Nurseries NAPSA and the Annual Holidays NAPSA.
Regulation 19.9(1) of chp.2 of the Regulations provides:
19.9 Contents of records — overtime hours worked
(1) If a penalty rate or loading (however described) must be paid for overtime hours actually worked by an employee, the record relating to the employee must state:
(a) the number of overtime hours worked by the employee during each day; or
(b) when the employee started and ceased working overtime hours.
Regulation 19.11(3) provides:
19.11 Contents of records — pay
…
(3) If the employee is entitled to be paid:
(a) an incentive-based payment; or
(b) a bonus; or
(c) a loading; or
(d) a penalty rate; or
(e) another monetary allowance or separately identifiable entitlement;
the record relating to the employee must contain details of the payment, bonus, loading, rate, allowance or entitlement.
Section 171(3) of the WRA had the effect that the Nurseries APCS was part of the Australian Fair Pay and Conditions Standard applicable to the first respondent’s employees. Clause 43 of sch.8 to the WRA provided that a notional agreement preserving state awards could be enforced as if it were a collective agreement and that a workplace inspector had the same functions and powers in relation to such an agreement as he or she had in relation to a collective agreement.
Section 719(1) of the WRA provided:
(1) An eligible court may impose a penalty in accordance with this Division on a person if:
(a) the person is bound by an applicable provision; and
(b) the person breaches the provision.
Section 717(a)(ii) defined “applicable provision” to include the Australian Fair Pay and Conditions Standard and a collective agreement. Section 718(1) provided that an inspector could bring civil penalty proceedings for breach of an applicable provision. Section 4 of the WRA defined “inspector” to mean a workplace inspector.
Regulations 19.9(3) and 19.11(6) provide respectively that reg.19.9(1) and reg.19.11(3) are civil remedy provisions. Regulation 14.3(2) of chp.2 of the Regulations provides that a workplace inspector may apply for an order in respect of a contravention of, amongst other provisions, regs.19.9(1) and 19.11(3). Regulation 14.4 provides that the Court may impose a pecuniary penalty on a person who contravenes a civil remedy provision.
Section 167(1A) of the WRA provided that the Workplace Ombudsman was a workplace inspector. That office was abolished by the FW(TPCA) Act: item 2 of sch.1 and item 12 of sch.18. However, the presently relevant functions of the Workplace Ombudsman were assumed by the Ombudsman: s.682(1)(d) of the Fair Work Act 2009 (“FWA”). Item 13 of sch.18 to the FW(TPCA) Act and s.701 of the FWA empower the Ombudsman to bring these proceedings.
As to the second respondent’s alleged accessorial liability for certain of the conduct of the first respondent, s.728 of the WRA relevantly provided:
728 Involvement in contravention treated in same way as actual contravention
(1) A person who is involved in a contravention of a civil remedy provision is treated as having contravened that provision.
(2) For this purpose, a person is involved in a contravention of a civil remedy provision if, and only if, the person:
…
(c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; …
Admitted facts
In an agreed statement of facts filed by the parties on 27 April 2011 the respondents admitted, with one minor exception, the allegations contained in the amended statement of claim filed by the Ombudsman on 3 March 2011. Relevant admitted facts and allegations are summarised below.
From August 1999 until June 2010 the first respondent operated a nursery business which catered to the needs of the plantation forest industry. However, from December 2009 the first respondent ceased earning income as its clients went into liquidation. The nursery business has been on the market since January 2010.
During the period 2 April 2006 to 8 March 2009 (“Audit Period”) the first respondent employed about fifty-two employees. The nineteen employees specified in the amended statement of claim were all employed as nursery hands and ten of them were juniors during their periods of employment.
During the Audit Period the first respondent paid certain of its employees a flat hourly rate which was below the basic periodic rate of pay under the Nurseries APCS. In doing so, the first respondent breached s.182 of the WRA because it failed to pay its employees a minimum hourly rate of pay that was at least equal to the basic periodic rate under the Nurseries APCS. This resulted in the following underpayments:
a)Ronda Toms - $659.83;
b)Danielle Fleming - $1,599.21;
c)Sarah Fleming - $2,664.69;
d)Mark Williams - $796.73;
e)Tom Hazell - $639.96;
f)Bronson Brown - $623.11;
g)Scott Presbury - $1,786.20;
h)Jake Brown - $1,389.51;
i)Anita Bruggy - $58.23;
j)Julie Dunn - $302.34;
k)Karran Keaton - $1,001.97;
l)Tammy Watson - $1,419.98;
m)Simone Farlow - $31.52;
n)Scott Amor - $52.70;
o)Ashley Panta - $266.38;
p)Shane Hastings - $72.48; and
q)Ian Dibley - $225.16.
During the Audit Period the first respondent also breached clause 6(a) of the Nurseries NAPSA by failing to pay certain of its employees overtime rates for work performed outside ordinary hours, namely, time and a half for the first two hours and double time thereafter. The relevant employees were paid a flat hourly rate regardless of whether or not such work was performed outside ordinary hours and were consequently underpaid the following amounts:
a)Kelly Toms - $12,737.03;
b)Ronda Toms - $326.49;
c)Danielle Fleming - $210.72;
d)Sarah Fleming - $971.83;
e)Mark Williams - $1,059.52;
f)Tom Hazell - $1,354.53;
g)Ben Brown - $262.90;
h)Bronson Brown - $1,850.49;
i)Scott Presbury - $2,244.65;
j)Jake Brown - $1,740.59;
k)Anita Bruggy - $237.03;
l)Julie Dunn - $109.33;
m)Karran Keaton - $1,021.98;
n)Simone Farlow - $107.12;
o)Scott Amor - $124.63;
p)Ashley Panta - $98.08; and
q)Shane Hastings - $296.10.
Pursuant to clause 11 of the Nurseries NAPSA the first respondent was required to pay its permanent employees a 17.5% annual leave loading in addition to the payment of annual leave taken. During the Audit Period the first respondent breached clause 11 of the Nurseries NAPSA in respect of four of its permanent employees, resulting in the following underpayments:
a)Kelly Toms - $239.15;
b)Bronson Brown - $208.51;
c)Anita Bruggy - $298.45; and
d)Karran Keaton - $208.91.
Pursuant to s.4(3)(b)(ii) of the Annual Holidays NAPSA the first respondent was required to pay its casual employees a pro-rata annual leave entitlement equal to one twelfth of the employee’s ordinary earnings. However, during the Audit Period the first respondent breached s.4(3)(b)(ii) in respect of one of its casual employees, Rhonda Toms, resulting in a $1,210.02 underpayment.
In addition, between 27 March 2007 to 21 September 2008 the first respondent failed to include in its employee records details relating to overtime hours worked or penalty rates to which employees were entitled, in breach of regs.19.9(1) and 19.11(3) of the Regulations. The first respondent required employees to complete records which stated their starting and finishing times. At the end of each pay period this information was extracted into an excel spreadsheet which indicated only the total number of hours worked in each pay period. The original record was then returned to the employees as a pay slip but the first respondent did not retain a copy.
As a result of the Ombudsman’s investigations, the first respondent rectified some of the underpayments owed to its former employees. Consequently, and allowing for an adjustment in relation to Kelly Toms whose wages were overpaid by $3,836.76, the outstanding amount owed by the first respondent to its former employees is $26,992.37, that figure being comprised of the following individual amounts:
a)Kelly Toms - $2,121.60;
b)Danielle Fleming - $1,809.93;
c)Sarah Fleming - $3,636.52;
d)Mark Williams - $1,856.25;
e)Tom Hazell - $1,994.49;
f)Ben Brown - $262.90;
g)Bronson Brown - $2,586.18;
h)Scott Presbury - $4,030.59;
i)Jake Brown - $3,130.10;
j)Anita Bruggy - $593.71;
k)Julie Dunn - $411.67;
l)Karran Keaton - $2,232.86;
m)Tammy Watson - $1,419.98;
n)Simone Farlow - $138.64;
o)Scott Amor - $177.33;
p)Ashley Panta - $364.46; and
q)Ian Dibley - $225.16.
Shane Hastings was overpaid $29.92.
The second respondent was at all material times the director and secretary of the first respondent. He was responsible for determining and setting the employees’ wage rates and conditions, including the flat hourly rate of pay. The second respondent was therefore knowingly concerned in or a party to each of the first respondent’s contraventions of the WRA and the NAPSAs pursuant to s.728(2)(c) of the WRA.
Evidence
The Ombudsman relied on the affidavit of Jason James Rhodes sworn 23 March 2011. Mr Rhodes is a Senior Fair Work Inspector and he deposed to the complaint he received from Kelly Toms and to the investigation which he undertook into the first respondent’s compliance with the WRA and the Regulations. The exhibits to Mr Rhodes’s affidavit demonstrate that after a period of discussion and correspondence, the Ombudsman issued a final notice dated 28 October 2009 foreshadowing the possible commencement of litigation if outstanding contraventions were not remedied within seven days. It appears from Mr Rhodes’s file notes that the respondents disagreed with the Ombudsman’s calculations of the amounts owed to employees.
The respondents tendered a statement by the second respondent in which he said that he did not spend much time in the office as the business required him to be in a semi-trailer doing pick-ups and deliveries between Tasmania and South East Queensland. He said that most of the decisions relating to the business were left to the nursery manager and office administrators. He stated that he valued his staff and their efforts and that any underpayments claimed by the Ombudsman were unintentional and/or an oversight.
The second respondent stated that the first respondent had been involved in an on-going procedure to rectify the underpayments but that “[u]nfortunately circumstances change[d]”. In this regard he said that in September 2009 the first respondent lost one of its main sources of income when its supply contract with the Queensland Department of Primary Industries – Forestry was not renewed. Subsequently, in December 2009, the first respondent lost its other source of income when its client, Forest Enterprise Australia Ltd, went into voluntary administration and ceased trading.
The second respondent stated that the first respondent had not traded since June 2010. In August 2010 the first respondent sold most of its assets in order to meet staff redundancy entitlements and to clear outstanding debts. He stated that, despite this, the first respondent had debts of $274,205.30 not including the amounts calculated by the Ombudsman as owing to staff. He said that, with no income, the first respondent would not be able to repay any of the outstanding amounts. He also stated that he had significant personal debts.
The second respondent stated that first respondent’s nursery business and the property where it was located went on the market in April 2010 but that despite an auction arranged in May 2010 and continued advertising, the downturn in the forestry managed investment schemes had made it difficult to find a buyer.
The second respondent also gave evidence, saying that he was a “hands on” person and, as he was outside all the time, the office staff looked after what happened there. He said that during the course of the Ombudsman’s inquiry they went over the books three times but admitted that mistakes had been made by the office staff. He said that the first respondent had sold most of its assets to pay employee entitlements but, because of the downturn in the industry, had not been able to sell everything they had wanted to sell. He also gave evidence as to his and the first respondent’s assets and liabilities.
Submissions
Applicant
The Ombudsman submitted that the first respondent had committed the following breaches:
a)s.182(1) of the WRA – failure to pay employees a basic periodic rate of pay;
b)clause 6(a) of the Nurseries NAPSA – failure to pay employees overtime;
c)clause 11 of the Nurseries NAPSA – failure to pay permanent employees annual leave loading;
d)s.4(3)(b)(ii) of the Annual Holidays NAPSA – failure to pay casual employees pro-rata annual leave;
e)reg.19.9(1) of the Regulations – failure to include prescribed content in relation to overtime hours worked in employee records; and
f)reg.19.11(3) of the Regulations – failure to include prescribed content in relation to penalty rates in employee records.
He sought declarations against the first respondent in respect of those breaches as well as a declaration that the second respondent was involved in the breaches set out in (a) to (d).
The Ombudsman conceded that the underpayment breaches, although repetitively committed, constituted a single course of conduct as one decision was made by the first respondent to pay an incorrect hourly base rate which was also insufficient to satisfy overtime rates, annual leave loading for permanent employees and pro-rata annual leave for casual employees. It was also conceded that the repetitive nature of the record keeping contraventions constituted a single course of conduct in respect of the regulatory provisions which were not observed.
The Ombudsman submitted that the first respondent’s record keeping contraventions meant that it was impossible for the Ombudsman to calculate the exact extent of the underpayments and that the calculations provided to the Court were, in a financial sense, significantly more beneficial to the first respondent than may have been the case had correct records been maintained. In this connection, the Ombudsman submitted that the first respondent’s record keeping breaches were serious ones and represented a breach of a minimum requirement imposed on employers by the WRA.
The Ombudsman submitted that the total underpayment to the employees was $36,700.97 of which $24,870.77 remained outstanding. He submitted that ten of the seventeen affected employees were juniors and that there was no evidence that any of the employees were well versed in industrial and employment matters or in the exercise of their rights. The Ombudsman submitted that the impact on the employees was therefore substantial. He also submitted that, given that many of the employees were juniors and therefore in a vulnerable bargaining position, it was especially important that the employees’ minimum standards be enforced in this case. In his oral submissions the Ombudsman submitted that the employees in question were vulnerable.
The Ombudsman submitted that the first respondent was a small business which employed approximately fifty-two employees during the Audit Period. He noted that the first respondent ceased earning an income in December 2009 but submitted that insolvency, whether personal or corporate, was not a refuge from sanction. He submitted that while the respondents may not have deliberately set out to breach the WRA, the second respondent was reckless in relation to his responsibilities as the person responsible for the determination of the employees’ legal minimum payments. He submitted that the second respondent was the sole director and secretary of the first respondent and, accordingly, was the person solely responsible for determining and setting the employees’ wage rates and conditions. He submitted that the second respondent had also received a breach notice in November 2008 but had failed to rectify the underpayments in full.
The Ombudsman acknowledged that the respondents had provided assistance during the investigation, had admitted liability in these proceedings and had partially rectified the underpayments owing to the employees in the amount of $11,830.20. However, the Ombudsman submitted, the respondents had not accepted responsibility for their conduct nor had they expressed any sincere contrition.
The Ombudsman submitted that the contraventions in this case concerned the minimum entitlements of employees in the nursery industry, with almost half of them being juniors. He submitted that the penalties in this case should be imposed at a meaningful level in order to deter other employers from committing similar contraventions.
The Ombudsman submitted that low range penalties were appropriate in the circumstances.
Second respondent
The respondents relied on the submissions contained in the statement filed by the second respondent. In that statement the second respondent submitted that he had not been able to work following a second heart attack in September 2010. However, he was ineligible for a disability pension as he continued to own the property where the nursery business used to trade. He submitted that, consequently, he had no income and he and his wife had been living off their small savings. He detailed the totals of his liabilities and current liquid assets. He submitted that, given their current circumstances, neither he nor the first respondent were in a position to be able to pay such penalties as might be imposed by the Court.
At the hearing the second respondent submitted that the Ombudsman had given them inconsistent advice which had, in relation to some perceived underpayments, been demonstrated to have been wrong. He submitted that mistakes had been made in the office which had both advantaged and disadvantaged employees and that this tended to balance out. He also said that benefits in kind were supplied to employees in addition to their wages. He also said, from the bar table, that when the Ombudsman’s investigation commenced and employees contacted him asking what to do, he told them to do what they thought was right.
Findings
As a consequence of the facts agreed by the parties, I find that the first respondent contravened the following provisions:
a)s.182 of the WRA;
b)clause 6(a) of the Nurseries NAPSA;
c)clause 11 of the Nurseries NAPSA;
d)s.4(3)(b)(ii) of the Annual Holidays NAPSA;
e)reg.19.9(1) of chp.2 of the Regulations; and
f)reg.19.11(3) of chp.2 of the Regulations.
I further find that the second respondent was knowingly concerned and therefore involved in the contraventions of the WRA and the two NAPSAs which I have found to have been committed by the first respondent.
There will be declarations giving effect to these findings.
Considerations as to penalty
As Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14 at 18-19 [14], in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mowbray FM identified “a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty”. Tracey J adopted those considerations and described them as follows:
· The nature and extent of the conduct which led to the breaches.
· The circumstances in which that conduct took place.
· The nature and extent of any loss or damage sustained as a result of the breaches.
· Whether there had been similar previous conduct by the respondent.
· Whether the breaches were properly distinct or arose out of the one course of conduct.
· The size of the business enterprise involved.
· Whether or not the breaches were deliberate.
· Whether senior management was involved in the breaches.
· Whether the party committing the breach had exhibited contrition.
· Whether the party committing the breach had taken corrective action.
· Whether the party committing the breach had cooperated with the enforcement authorities.
· The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and
· The need for specific and general deterrence.
However, as Gyles J said in A & L Silvestri Pty Ltd v Construction, Forestry, Mining & Energy Union [2008] FCA 466 at [6], there are no mandatory statutory criteria.
Considerations relevant to this case are:
a)the nature and extent of the conduct which led to the breaches;
b)the nature and extent of any loss or damage sustained as a result of the breach;
c)whether there has been similar previous conduct by the respondents;
d)whether the breaches were properly distinct or arose out of the one course of conduct;
e)the deliberateness of the breaches;
f)compliance with minimum standards;
g)contrition, corrective action and co-operation with the enforcement authorities; and
h)the need for specific and general deterrence.
The nature and extent of the conduct which led to the breaches
The first respondent paid its employees a flat hourly rate of pay regardless of the number of hours they worked or the day on which the work in question was performed. In doing so, its employees were denied overtime and annual leave loading payments to which they were entitled under the Nurseries NAPSA. An employee of the first respondent was also not paid her full annual leave entitlements pursuant to the Annual Holidays NAPSA. Further, because the first respondent’s record keeping was inadequate it was not possible for the Ombudsman to identify with complete precision the extent and detail of the first respondent’s breaches of its obligations under the WRA and the two NAPSAs.
The second respondent’s evidence was that he left the running of the office to others while he attended to other aspects of the business. He said that any underpayments were unintentional or an oversight and this may be true to the extent that, because he preferred to do “hands on” work, he failed to ensure that those operating the office made sure that the first respondent observed its employment obligations. However, the second respondent’s ignorance does not change the fact that the first respondent intended to pay its employees at a flat rate even though overtime and annual leave entitlements are well-known features of employment arrangements.
The employees in question were employed as nursery hands, their duties including potting seedlings and weeding pots. Ten of the employees in question were juniors. As observed by the Ombudsman in his written submissions on penalty, there was no evidence to suggest that any of the employees were well versed in industrial and employment matters or in the exercise of their rights.
The nature and extent of any loss or damage sustained as a result of the breach
The Ombudsman submitted that the total underpayment to the employees was $36,700.97. However, according to the figures particularised in a schedule to the amended statement of claim and agreed by the parties, the total underpayment to the employees was $36,671.30. That schedule also indicates that the first respondent made a number of payments totalling $9,708.60 by way of rectification of those underpayments. It also appears that, by the time the Ombudsman’s written submissions were filed, the first respondent had made a further rectification payment of $2,121.60, leaving an amount outstanding of $24,841.10, a figure which does not include the overpayment of $29.92 to Mr Hastings.
Whether there has been similar previous conduct by the respondents
The Ombudsman conceded that there was no evidence or suggestion that either of the respondents had previously engaged in conduct similar to that alleged in these proceedings.
Whether the breaches were properly distinct or arose out of the one course of conduct
Section 719(2) provides that if two or more breaches of an applicable provision are committed by the same person and those breaches arise out of a course of conduct by that person, the breaches are to be taken to constitute a single breach of that provision. Regulation 14.5 of chp.2 of the Regulations provides similarly in relation to breaches of the Regulations.
I have found that the first respondent breached:
a)s.182 of the WRA;
b)clause 6(a) of the Nurseries NAPSA;
c)clause 11 of the Nurseries NAPSA;
d)s.4(3)(b)(ii) of the Annual Holidays NAPSA;
e)reg.19.9(1) of chp.2 of the Regulations; and
f)reg.19.11(3) of chp.2 of the Regulations.
I have also found that the second respondent was involved in the first respondent’s breaches of:
a)s.182 of the WRA;
b)clause 6(a) of the Nurseries NAPSA;
c)clause 11 of the Nurseries NAPSA; and
d)s.4(3)(b)(ii) of the Annual Holidays NAPSA.
The first respondent’s failure to pay overtime, penalty rates and annual leave appears, as was submitted by the Ombudsman, to have arisen out of a single course of conduct as
… one decision was made by the First Respondent to pay the Employees the incorrect hourly base rate below the APCS and which was not sufficient to satisfy overtime rates, annual leave loading (for permanent employees) and pro rata annual leave (for casual employees).
It can also be accepted, as submitted by the Ombudsman, that the failure to keep proper records was one course of conduct
… as one decision was made by the First Respondent to only make and maintain records which demonstrated the total number of hours worked in each pay period and which did not include the [prescribed] content in relation to overtime rates and penalty rates.
However, the Ombudsman did not concede that the contraventions of the various statutory, regulatory or NAPSA-based provisions were anything other than separate breaches and I conclude that they should be considered to be separate breaches. In this connection, regard should be had to what Gray J said in Gibbs v Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 at 223:
The object of s 178(2) [a previous version of s.719(2)] appears to be that a party bound by an award and pursuing a course of conduct involving repeated acts or omissions, which would ordinarily be regarded as giving rise to a series of separate breaches, should not be punished separately for each of those breaches. If such a party has pursued a course of conduct which gives rise to breaches of several different obligations, there is no reason why it should be treated as immune in respect of its breach of one obligation, merely because it has acted in breach of another. This reasoning leads to the conclusion that each separate obligation found in an award is to be regarded as a “term”, for the purposes of s 178 of the Act. The ascertainment of what is a term should depend not on matters of form, such as how the award maker has chosen to designate by numbers or letters the various provisions of an award, but on matters of substance, namely the different obligations which can be spelt out.
Consequently, I find that the first respondent committed six contraventions and the second respondent, four.
The deliberateness of the breaches
I accept that the respondents did not set out to underpay their workers but no evidence was adduced by them which indicated that they had made proper inquiry to determine the true scope of their employment obligations. The first respondent wrote to Mr Rhodes, the Senior Fair Work Inspector, on 12 September 2008 stating that it had been unaware that the award it had been using had changed to a NAPSA. Mr Rhodes’s file note of a telephone conversation he had with the second respondent’s wife on 20 November 2008 indicates that the first respondent had then mistakenly calculated staff entitlements pursuant to the notional agreement based on the Horticultural Industry (State) Award rather than according to the notional agreement based on the Nurseries Employees (State) Award. It appears that the use of an incorrect award had been a practice inherited from the previous owners of the business.
Compliance with minimum standards
It can be accepted that the making of proper records facilitates the enforcement of the minimum standards imposed by the legislation and that employers should ensure that they keep proper records of the hours worked, and entitlements accrued, by their employees. The first respondent failed to meet its obligations in this regard.
Contrition, corrective action and co-operation with the enforcement authorities
The respondents have accepted their culpability for the breaches which have been proved. Nevertheless, nothing in the second respondent’s statement or evidence to the Court demonstrated regret at having denied the first respondent’s employees their full entitlements. The impression I gained of the second respondent was that of a straightforward man who was bewildered how, if he had not intended to short-change his employees, he now found himself before the Court. It seems that, even now, he does not fully appreciate the need for careful attention to detail in the maintenance of records and the payment of employee entitlements.
It appears that the respondents endeavoured to co-operate with the Ombudsman prior to the commencement of these proceedings although it is also apparent, notwithstanding discussions and correspondence with the Ombudsman’s representatives, that the first respondent did not remedy all of the underpayments. Nevertheless, the first respondent did make significant payments in reduction of the amounts outstanding and I accept that the respondents have sold what assets they could sell in order to meet their liabilities. I also accept that had the first respondent not lost its business, and thus its income, it would have complied with the obligations it owed, as pointed out to it by the Ombudsman.
Also significant in the assessment of the respondents’ attitude to the actions of the Ombudsman is that for the purposes of these proceedings they reached agreement with the Ombudsman on many relevant facts and have admitted the contraventions alleged against them.
The need for specific and general deterrence
The second respondent appeared to be overwhelmed by the events which have overtaken him, represented by the failure of his business and the initiation of these proceedings. He seemed unwilling to recognise the seriousness of the breaches which have been admitted. For this reason, a component for special deterrence is appropriate to discourage the respondents from behaving in a similar way in the future.
Additionally, it is important that the penalties imposed by the Court send a message to others not to engage in contravening conduct such as that committed by the respondents in these proceedings. It is appropriate that such penalties as are imposed are imposed at a level which will act as a deterrent to others who might be likely to offend. Nevertheless, the penalties should not be crushing.
Compensation and penalties
Given the admissions concerning the amounts outstanding to the first respondent’s former employees, pursuant to s.719(6) of the WRA the first respondent will be ordered to pay the following amounts in respect of outstanding wages and entitlements as calculated, and corrected, according to sch.3 of the amended statement of claim:
a)Kelly Toms - $2,121.59;
b)Danielle Fleming - $1,809.93;
c)Sarah Fleming - $3,636.52;
d)Mark Williams - $1,856.25;
e)Tom Hazell - $1,994.49;
f)Ben Brown - $262.90;
g)Bronson Brown - $2,586.18;
h)Scott Presbury - $4,030.85;
i)Jake Brown - $3,130.10;
j)Anita Bruggy - $593.71;
k)Julie Dunn - $411.67;
l)Karran Keaton - $2,232.86;
m)Tammy Watson - $1,419.98;
n)Simone Farlow - $138.64;
o)Scott Amor - $177.33;
p)Ashley Panta - $364.46; and
q)Ian Dibley - $225.16.
To these figures should be added the following amounts for interest pursuant to s.722 of the WRA:
a)Kelly Toms - $86.75;
b)Danielle Fleming - $74.01;
c)Sarah Fleming - $148.70;
d)Mark Williams - $75.90;
e)Tom Hazell - $81.56;
f)Ben Brown - $10.75;
g)Bronson Brown - $105.75;
h)Scott Presbury - $164.82;
i)Jake Brown - $127.99;
j)Anita Bruggy - $24.27;
k)Julie Dunn - $16.84;
l)Karran Keaton - $91.30;
m)Tammy Watson - $58.06;
n)Simone Farlow - $5.66;
o)Scott Amor - $7.25;
p)Ashley Panta - $14.90; and
q)Ian Dibley - $9.21.
In a draft form of order the Ombudsman submitted that interest accrue from the commencement of these proceedings. The evidence does not permit a more accurate assessment of when interest should commence to accrue and I have accepted the date proposed by the Ombudsman. Interest has been calculated at the rate applied by the Supreme Court of New South Wales.
The draft form of order submitted by the Ombudsman provided that the amounts owing to the employees should be paid within twenty-eight days by sending to him, to the attention of Annabel Anderson, bank cheques made out to the individual employees. There will be an order to this effect.
The maximum penalty for each of the first respondent’s contraventions of s.182 and the provisions of the NAPSAs is $33,000 (s.719(4)) and for each breach of the Regulations is $5,500 (reg.14.4 and s.846(2)(g)). The maximum penalty for each of the second respondent’s contraventions of s.182 and the provisions of the NAPSAs is $6,600.
I have taken into account the matters considered above including the Ombudsman’s submission that the penalties imposed should be in the low range. In the circumstances, I consider the appropriate penalties in this matter to be:
a)with respect to the first respondent:
i)$3,000 in relation to its breach of s.182 of the WRA in failing to pay employees the minimum rate of pay under the Nurseries NAPSA;
ii)$5,000 in relation to its breach of clause 6(a) of the Nurseries NAPSA in failing to pay employees the required overtime rates;
iii)$300 in relation to its breach of clause 11 of the Nurseries NAPSA in failing to pay permanent employees annual leave loading;
iv)$400 in relation to its breach of s.4(3)(b)(ii) of the Annual Holidays NAPSA in failing to pay a casual employee pro rata annual leave;
v)$1,000 in relation to its breach of reg.19.9(1) of the Regulations in failing to include the prescribed content of overtime hours worked by employees in employee records; and
vi)$1,000 in relation to its breach of reg.19.11(3) of the Regulations in failing to include the prescribed content of penalty rates owed to employees in employee records;
b)with respect to the second respondent:
i)$600 in relation to his involvement in the first respondent’s breach of s.182 of the WRA;
ii)$1,000 in relation to his involvement in the first respondent’s breach of clause 6(a) of the Nurseries NAPSA;
iii)$60 in relation to his involvement in the first respondent’s breach of clause 11 of the Nurseries NAPSA; and
iv)$80 in relation to his involvement in the first respondent’s breach of s.4(3)(b)(ii) of the Annual Holidays NAPSA.
The total penalty to be imposed on the first respondent is $10,700. The total penalty to be imposed on the second respondent is $1,740. I am satisfied that these are just and appropriate amounts as aggregate figures.
The Ombudsman’s draft form of order provided that the penalties be paid to the Commonwealth by sending to him, to the attention of Annabel Anderson, a bank cheque made out to the Consolidated Fund. There will be an order to this effect.
I certify that the preceding seventy (70) paragraphs are a true copy of the reasons for judgment of Cameron FM
Date: 6 June 2011