Fair Work Ombudsman v Galb Pty Ltd

[2020] FCCA 2712

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v GALB PTY LTD & ANOR [2020] FCCA 2712

Catchwords:
INDUSTRIAL LAW – Application filed by Fair Work Ombudsman – pecuniary penalties – hospitality industry – admission to failure to comply with Compliance Notice – contravention – penalty imposed.

Legislation:

Fair Work Act 2009 (Cth), ss.12, 550, 546, 716

Restaurant Industry Award 2010 (Cth)

Cases cited:

Kelly v Fitzpatrick [2007] FCA 1080

Fair Work Ombudsman v Hair Industrie Mt Druitt Pty Ltd at [2015] FCCA 3426

Applicant: FAIR WORK OMBUDSMAN

First Respondent: GALB PTY LTD (ACN 133 592 364)

Second Respondent: CHAO LIANG

File Number: LNG 132 of 2019

Judgment of: Judge Riethmuller

Hearing date: 10 June 2020

Date of Last Submission: 10 June 2020

Delivered at: Townsville

Delivered on: 30 September 2020

REPRESENTATION

Solicitors for the Applicant: Australian Government Solicitor

Solicitors for the Respondents: Cann Legal

THE COURT DECLARES THAT:

1. The First Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (‘the Act’) by failing to comply with a Compliance Notice issued on 10 September 2019; and

2. The Second Respondent was involved, within the meaning of section 550(2) of the Act, in the contravention by the First Respondent of section 716(5) of the Act and is taken, by section 550(1) of the Act, to have contravened section 716(5) of the Act.

ORDERS

1. Pursuant to section 546(1) of the Act, the First Respondent pay a pecuniary penalty of $12,000 to the to the Consolidated Revenue Fund of the Commonwealth for the contravention set out in Declaration 1 above within 28 days of this order.

2. Pursuant to section 546(1) of the Act, the Second Respondent pay a pecuniary penalty of $2,500 to the to the Consolidated Revenue Fund of the Commonwealth for his involvement (within the meaning of section 550(2) of the Act) in the contravention set out in Declaration 1 and 2 above within 28 days of this order.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT HOBART

LNG 132 of 2019

FAIR WORK OMBUDSMAN

Applicant

And

GALB PTY LTD (ACN 133 592 364)

First Respondent

CHAO LIANG

Second Respondent

REASONS FOR JUDGMENT

Overview

1. The applicant, the Fair Work Ombudsman (‘the applicant’), filed an Application and Statement of Claim in this court on 4 December 2019 seeking pecuniary penalties to be imposed upon the respondents.

2. The First Respondent, Galb Pty Ltd (‘Galb’) is a company which operates a restaurant ‘Jade Willow Chinese Restaurant’ in Tasmania. The Second Respondent is Mr Chao Liang (‘Mr Liang’) who was the sole director and secretary of Galb and responsible for the operation and management of Galb (collectively ‘the respondents’).

3. The first respondent admits that it failed to comply with a compliance notice (‘CN’) provided on 10 September 2019, which gave rise to a contravention of s 716(5) of the Fair Work Act 2009 (Cth) (‘the Act’). The second respondent was involved in the contravention as he was the operating mind of the corporate first respondent, Galb.

4. The respondents admitted the contraventions in the Statement of Agreed Facts filed on 28 February 2019.

5. The applicant seeks penalties of $15,120 against the first respondent and $3,024 against the second respondent on the basis that:

   a)Mr Liang’s knowledge of the requirement to comply with the CN and the consequences for failing to do so means that the contraventions were deliberate;

   b)the failure to comply with a statutory notice is serious; and

   c)there is a need for deterrence given that Galb and Mr Liang operate in the restaurant industry.

6. There is no agreement between the parties as to what the appropriate range of pecuniary penalties is to be imposed. The Respondents made submissions to the effect that this was a ‘mid-range’ contravention and therefore ‘half’ the maximum penalty should be applied to the Respondents.

7. There are a number of factors the Court should consider in determining an appropriate penalty, as referred to in Kelly v Fitzpatrick [2007] FCA 1080 (‘Kelly’s case’). I turn now to consider the relevant factor under the convenient headings provided for in Kelly’s case. I note however, that the list is not intended to be exhaustive, rather, a guide to assist in ensuring that relevant considerations are taken into account.

The Contraventions

1. Galb employed five people (Ms S, Ms H, Ms L, Mr C and Ms B) all of which were casual employees. The business is a restaurant serving Chinese cuisine. The Restaurant Industry Award 2010 (‘the Award’) applied. Each employee was a ‘Level 2’ employee under the Award (in substance food and beverage service staff in the restaurant). The staff had, in working for Galb:

   a)on some days worked shifts less than 2 hours in duration, but had not been paid for a minimum of two hours work;

   b)at times worked on weekends an public holidays; and

   c)at times worked after 10pm on a weekday.

2. The applicant found the respondent to have contravened the relevant Award in a variety of ways:

   a)clause 20.1 (minimum wages);

   b)clause 13.1 (casual loading);

   c)clause 13.3 (minimum payment for two hours’ work);

   d)clause 34.1 (Saturday, Sunday and Public Holiday penalties); and

   e)clause 34.2 (late night additional payments).

3. The applicant sets out that following an investigation, an officer provided the second respondent a CN on 10 September 2019, a document setting out the various contraventions of the award noted by the Fair Work Inspector. A spreadsheet was also provided setting out the relevant amounts of underpayments that covered a period of around 10 months. Other information and assistance was provided to the respondents in order to aid their compliance with the legislation and the CNs. In this case the Fair Work Inspector was clearly putting education and compliance at the forefront in the approach to the respondents. It is most unfortunate that the respondents did not work with the Inspector to resolve their failures to comply with the Act, without the need for court proceedings.

4. Galb had underpaid staff a total of $17,870.46 in wages and $1,289.87 in superannuation contributions. Despite the reasonable stance of the Fair Work Ombudsman in issuing a CN rather than immediately prosecuting the respondents, they nonetheless did not make payments to the employees. It was only after proceeds were commenced to prosecute the respondents for failing to comply with the notices that the payments were made, some 18 months after the CN. However, it is important to note that payments have been made and that one of the core objectives of the legislation has now been achieved, that is, the payment of appropriate wages to employees.

5. The maximum penalty that may be imposed for failing to comply with a notice is $31,500 for a corporation and $6,300 for an individual: see ss 12 and 546 of the Act. The applicant submits that in this matter there is only a single contravention by each respondent in relation to the civil remedy provisions.

Vulnerable nature of employees

1. As the applicant submits, the contraventions by the respondents resulted in additional delay in the payment of full entitlements to young, low paid employees working on a casual basis a few hours per week. No reasonable excuse for the failure to comply with the CN has been provided. It was only after these proceedings were commenced and a lawyer had been consulted that the respondents began to take seriously the obligation to comply with the CN.

The nature and extent of the conduct which led to the breaches & the circumstances in which that conduct took place.

1. The applicant points out that whilst ‘penalty is being imposed for the failure to comply with the CN, it is relevant to take into account the nature and extent of the conduct that led to the giving of the CN by the FWI’: see Fair Work Ombudsman v Hair Industrie Mt Druitt Pty Ltd at [2015] FCCA 3426 at [11].

2. The underpayments were the result of Galb paying its employees at a flat rate per hour of between $8 and $14 for actual hours worked, irrespective of their entitlements to casual loadings, other penalty rates and statutory requirements for a minimum number of hours for a given shift. 

The nature and extent of any loss or damage sustained as a result of the breaches.

1. The delay in making payments to the workers meant that people on low incomes were without a not insignificant part of their entitlements for a lengthy period.

Size of the Business.

1. In this case the business is a small restaurant in a small town. It did not have a Human Resources department or other more sophisticated systems to ensure compliance. However, this is not a penalty for the underpayments, but the failure to comply with the CN. The CN and the assistance provided by the Fair Work Inspector meant that this small business was well aware of the obligations. 

2. There is no evidence of the precise financial position of the respondents.  Notably, the second respondent is the sole owner of two properties in Tasmania with estimated values of $340,000 and $400,000 respectively, and one of two co-owners of a third property with an estimated value of $887,000. One of these properties has a mortgage registered on the title. Whilst there is dispute as to the true value of the properties, the respondents nonetheless have two modest properties that are without mortgages.

3. Whilst the second respondent is the guiding mind of the first respondent, both have nonetheless breached the Act. If a person chooses to arrange their business affairs through separate entities (and obtain the advantages of limited liability and income splitting and structuring for taxation assessment purposes) the entities should not be treated as if they are only one entity for the purpose of penalty.

Whether the party committing the breach had expressed contrition and taken corrective action.

1. Whilst I am not persuaded that the respondents have exhibited any contrition (the compliance only occurred after proceeding were commenced) it is nonetheless relevant that payments have now been made. 

2. However, a subsequent underpayment discovered in November 2019 suggests little has changed, despite the respondents saying that systems are now in place to ensure compliance.

Whether the party committing the breach had cooperated with the enforcement authorities.

1. The applicant acknowledges that the respondents have cooperated in the matter and not obstructed the investigation. The respondents did not attempt to hide paperwork, or falsify documents. 

2. The admissions have saved considerable legal expenses and court time.  This must be reflected in the penalty in favour of the respondents.

The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements

1. The applicant, quite rightly, points out the CN provisions are designed to provide a simple and cost effective way to ensure compliance, whilst educating employers. Most employers would welcome a CN rather than a prosecution. It is important that CNs are taken seriously by employers and not ignored. The conduct of the respondents has simply put the applicant to the expense of litigation, despite the obvious breaches that led to the CN. Those employers who make genuine errors of judgment quickly comply with CN - the respondents did not comply quickly.

Deterrence

1. In this case, the conduct of the respondents leads to the conclusion that the penalty should also act as a deterrent to them against future breaches. 

2. It is also important that there be a general deterrent in industries with casual staff where underpayments may be small when compared to the costs of litigation, although significant for individual workers. Failure to rectify underpayments in cases of amounts that are modest compared to the costs of litigation place an unreasonable burden on the Australian public when funding the Fair Work Ombudsman’s office. 

Other considerations

1. In this case I take into account that the impact of the COVID-19 restrictions have had a far more severe impact upon some businesses than others. The necessary health restrictions have been a heavy burden for the hospitality sector. The Respondents business turnover has reduced by 60% to 70% as the take away component of the business is the only aspect of the business that has been able to continue trading.

2. The respondents submit that there was an intention to comply with the CN but a language barrier gave rise to a degree of mistrust and paranoia.  Mr Liang sought assistance from his daughter who was studying to complete her accounting qualifications around that time, however, due to her exam schedule she was not immediately available to assist him.  Mr Liang’s daughter did attempt to communicate with the applicant’s legal adviser in late December 2019 on his behalf. I take into account that Mr Liang, like many Australians, comes from a non-English speaking background. I also take into account the reality that many in the community rely upon their children for language assistance, but are also sometimes reticent to disclose to their children somewhat embarrassing failings or press them to help with other worrying aspects of life when they under their own pressures from study. Whilst these matters do not provide an ‘excuse’ for the conduct, they do provide an explanation that must be borne in mind when considering the extent to which the conduct was more an avoidance, akin to procrastination, of what would inevitably come to pass, than a contumelious disregard of the respondents’ obligations.

Conclusion

1. Like many small cases, this case provides a range of competing facts and circumstances that make it difficult to set an appropriate penalty.  All of the matters set out above are relevant to penalty. The respondents’ decisions to make the payments (albeit late in the process) and admission to the breaches are significant, and no doubt primarily led to the penalty range sought by the applicant, as opposed to demands for a greater penalty.  However, the conduct also changed a simple investigation into a lengthy matter with the costs of court proceedings (albeit truncated by the admissions of the respondents).

2. Having regard to all of the circumstances of this case I find that it is appropriate to impose penalties of $12,000 upon the first respondent and $2,500 on the second respondent.

3. I therefore make the following declarations:

   a)The First Respondent contravened section 716(5) of the Act by failing to comply with a compliance notice issued on 10 September 2019; and

   b)The Second Respondent was involved, within the meaning of section 550(2) of the Act, in the contravention by the First Respondent of section 716(5) of the Act and is taken, by section 550(1) of the Act, to have contravened section 716(5) of the Act.

4. In the circumstances I will impose penalties as follows:

   a)Pursuant to section 546(1) of the Act, the First Respondent pay a pecuniary penalty of $12,000 to the to the Consolidated Revenue Fund of the Commonwealth for the contravention set out in paragraph 31(a) above within 28 days of this order; and

   b)Pursuant to section 546(1) of the Act, the Second Respondent pay a pecuniary penalty of $2,500 to the to the Consolidated Revenue Fund of the Commonwealth for his involvement (within the meaning of section 550(2) of the Act) in the contravention set out in paragraphs 31(a) and (b) above within 28 days of this order.

5. I therefore make orders accordingly.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller

Associate: 

Date: 30 September 2020