Fair Work Ombudsman v Glasshouse Mountains Tavern Pty Ltd

[2016] FCCA 1899

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v GLASSHOUSE MOUNTAINS TAVERN PTY LTD & ANOR [2016] FCCA 1899

Catchwords:
INDUSTRIAL LAW – Application for civil penalties ‑ consideration of range of penalty to be applied – where proceedings as against First Respondent only stayed – where proceedings as against Second Respondent proceeded ‑ pecuniary penalty imposed upon Second Respondent.

Legislation:

Workplace Relations Act 1996, ss.44, 97, 324, 323, 546, 550

Cases cited:

Fair Work Ombudsman v Glasshouse Mountains Tavern Pty Ltd & Anor [2014] FCCA 1115
Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59
Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7

Kelly v Fitzpatrick [2007] FCA 1080

Applicant: FAIR WORK OMBUDSMAN

First Respondent: GLASSHOUSE MOUNTAINS TAVERN PTY LTD

Second Respondent: TAMMI MAREE POINTON

File Number: BRG 383 of 2012

Judgment of: Judge Baumann

Hearing date: 2 February 2015

Date of Last Submission: 19 May 2015

Delivered at: Brisbane

Delivered on: 26 July 2016

REPRESENTATION

Counsel for the Applicant:	Mr Fraser
Solicitors for the Applicant:	Fair Work Ombudsman
Solicitors for the First Respondent:	Aitken Legal
Solicitors for the Second Respondent:	Aitken Legal

Noting the Order made 2 December 2014

And further noting the First Respondent, Glasshouse Mountains Tavern Pty Ltd is now in administration

ORDERS

1. In respect of all contraventions pursuant to subsection 546(1) of the Fair Work Act 2009 (Cth) a pecuniary penalty is imposed upon the Second Respondent (within the meaning of subsection 550(2) of $3,000.00.

2. Pursuant to subsection 546(3)(a) of the Act, the penalty imposed be paid into the Consolidated Revenue Fund of the Commonwealth within ninety (90) days of the date of this Order.

3. That the Applicant have liberty to apply on seven (7) days’ notice for enforcement.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 383 of 2012

FAIR WORK OMBUDSMAN

Applicant

And

GLASSHOUSE MOUNTAINS TAVERN PTY LTD

First Respondent

TAMMI MAREE POINTON

Second Respondent

REASONS FOR JUDGMENT

Introduction

1. On 30 May 2014, in this matter Judge Burnett (as he then was) delivered Reasons as to liability in these proceedings (see Fair Work Ombudsman v Glasshouse Mountains Tavern Pty Ltd & Anor [2014] FCCA 1115). His Honour’s said Reasons, although making findings of contravention, did not result in a declaration of contravention, but rather adjourned the matter to a date to be fixed for the hearing of submissions.

2. Subsequent to the delivery of Reasons, His Honour resigned from this Court, and after further submissions were made, the Court was satisfied power existed for another Judge to make the declarations that were consistent with the Reasons previously delivered.

3. On 18 November 2014 the Court was informed that there still remained a dispute between the parties as to the amount owing to the employee, Ms Dowdell, in respect of accrued untaken annual leave upon the termination of the employment.

4. After further negotiations, the parties were able to resolve the quantification of the liability, and as a result, this Court made declarations in the following terms on 2 December 2014:

   “1.    The First Respondent contravened:

   (a)section 44 of the Fair Work Act 2009by failing to pay Ms Julie Dowdell’s accrued but untaken leave upon the termination of her employment with the First Respondent pursuant to section 90(2) of the Fair Work Act 2009;

   (b)section 44of the FW Act by failing to pay Ms Julie Dowdell’s accrued and taken personal leave in accordance with section 99 of the Fair Work Act 2009; and

   (c)section 323 of the Fair Work Act 2009 be making deductions from the amounts payable to Ms Julie Dowdell which were not authorised by section 324 of the Fair Work Act 2009.

   2.The Second Respondent was involved in the First Respondent’s contraventions in paragraphs 2(a), (b) and c above pursuant to section 550(1) of the Fair Work Act 2009”

5. A penalty hearing took place on 2 February 2015, with the Fair Work Ombudsman (“FWO”) represented by Mr Fraser and the First and Second Respondents represented by Mr Campbell.  In support of earlier written submissions, the parties made brief oral submissions.  The written submissions relied upon were filed on 17 December 2014 (Applicant FWO) and 20 January 2015 (Respondents).  Furthermore, the Second Respondent filed and relied upon an affidavit sworn 29 January 2015 and filed on that date.

6. Those submissions and further material have been read and considered and the failure to record every submission in these Reasons should not be construed otherwise.

7. On 11 May 2015, the FWO requested the matter be listed for mention as a result of the asserted impact of the decision of the Full Court in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59. On 19 May 2015 further oral submissions were taken, however the High Court subsequently, on Appeal, set aside the Full Court decision.

8. Finally, by way of history, by email to my Associate dated 10 June 2015, the FWO informed the Court that the First Respondent was placed into external administration on 9 June 2015. Pursuant to s.440(d) of the Corporations Act 2001 (Cth), these proceedings are therefore stayed as against the First Respondent only. The Court agrees with the Applicant’s submission that the proceedings as against the Second Respondent can proceed to determination in relation to the imposition of civil penalties.

9. These Reasons deal with that issue.  The Court regrets the delay in delivering these Reasons.

10. In circumstances where I did not hear the evidence of the parties during the trial conducted on 14 October 2013, some of the impressions gained from doing so, which may aid the exercise of the discretion on penalties, is simply not available to me.

Competing submissions

1. For the reasons articulated in the written submissions, the FWO contends for the imposition of a penalty against the Second Respondent, and based on three separate contraventions, of between $10,560.00 and $12,540.00 – being a range of 53% to 63% of an aggregate maximum penalty of $19,800.00 ($6,600.00 for each contravention).  As earlier recorded, determination of penalties to be imposed upon the First Respondent, is currently stayed.

2. After contending for the “grouping” of the two contraventions, under s.44 of the Fair Work Act 2009 (Cth) (“FW Act”), the submissions of the Respondents contend that the penalties recommended by the Applicant “are at the higher end and that lower penalties would be appropriate”.

Principles to be applied

1. The Respondent adopts the Applicant’s statement of principles relevant to determining penalty set out at paragraphs 15 to 19 of the Applicant’s submissions and, for completeness, they are repeated and adopted by the Court as a correct statement:

   “15.  The first step for the Court is to identify the separation contraventions involved.  Each breach of an obligation is a separate contravention.

   16.    Secondly, the Court should consider whether the breaches arising in the first steps constitute a single course of conduct.

   17.    Thirdly, to the extent that two or more contraventions have common elements, this should be taken into account in considering what is an appropriate penalty in all the circumstances for each contravention.  The First Respondent and Second Respondent should not be penalised more than once for the conduct.  The penalty imposed by the Court should be an appropriate response to what the First Respondent and Second Respondent did.  This task is distinct from and in addition to the final application of the ‘totality principle’.

   18.    Fourthly, consider the appropriate penalty for the single breaches and, if relevant, each group of contraventions, taking in account all of the relevant circumstances.

   19.    Finally, consider whether it is an appropriate response to the conduct which led to the breaches.  The Court should apply an ‘instinctive synthesis’ in making this assessment.  This is known as an application of the ‘totality principle’.”

Brief factual matrix

1. No useful purpose, for these parties, is served by reciting all the facts as found by Judge Burnett as they are well known to them.  Some brief chronology is helpful, namely:

   a)Ms Julie Dowdell in early January 2007 responded to an advertisement for the position of assistant manager of the Glasshouse Mountain Tavern (owned and operated by the First Respondent), and after an interview, she received a telephone call from the Second Respondent offering her the position of “venue manager”.  Ms Dowdell was employed in this position from 18 February 2008 to 2 January 2011, when she resigned;

   b)at the time of her termination of employment, Ms Dowdell estimated that she had accrued untaken leave with a value of at least $7,708.00 (inclusive of an entitlement to personal leave taken between 21 December 2012 and 2 January 2011);

   c)upon termination, Ms Dowdell was paid only $2,771.50 – calculated by disallowing the claimed personal leave; deducting a penalty for late notice of termination and further deducting a fee for a gaming course paid by her employer;

   d)it was a critical dispute in this case, as to whether the employee, Ms Dowdell was a “senior manager” who would have then been excluded from the appropriate award.  Judge Burnett found at [21] that:

   “…I am satisfied that Ms Pointon constituted the senior management of the business. Ms Dowdell acted under her direction in undertaking the management and supervisory duties at the GMT and in directing staff and implementing the tavern’s policies and systems. In undertaking her duties and activities she did not perform the duties of senior management…”

   On the basis of this finding the appropriate award applied to Ms Dowdell and had to be complied with.

   e)As the employee gave her employer four weeks’ notice of termination, the Court found that the award requirement of two weeks’ notice was satisfied and therefore the First Respondent was not entitled to withhold funds on the basis of incorrect notice. Furthermore, this employee was entitled to rely upon s.97 of the FW Act, and have paid personal leave when she was suffering from the effects of Crohn’s disease between 21 December 2010 and 2 January 2011. Judge Burnett, in his Reasons, fully considered the Respondents’ submissions as to the reasons why they did not accept the doctor’s certificate produced by the employee. His Honour rejected those reasons and found that the deduction was, and amounted, to a contravention;

   f)His Honour found that a deduction of $495.00 for a gaming nominee course undertaken by Ms Dowdell, but paid for by Glasshouse Mountains Tavern, was not a permitted deduction within the meaning of s.324 of the FW Act;

   g)the hearing before Judge Burnett took place on 14 October 2013 and Reasons were delivered on 30 May 2014.  As noted, His Honour did not actually make declarations of contravention on 30 May 2014 – that did not occur until the order of 2 December 2014.  On 4 January 2015, the sum of $7,971.29 was paid to the employee.  It is indeed fortunate that Ms Dowdell received the payment before the First Respondent went into administration some five months later.

Grouping of contraventions

1. I accept the submission of the Respondent (at [8] to [10]), that the two contraventions under s.44 of the FW Act do arise from the same course of conduct – namely the failure to apply the award conditions to termination pay entitlements rather than applying mistakenly, the terms of the written contract of employment.

Factors relevant to penalty

1. The often quoted factors identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 and adopted and approved by Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 and other authorities, which arose from a number of decisions of the Federal Court of Australia, which “non-exhaustive” were as follows:

   a)The nature and extent of the conduct which led to the breaches;

   b)The circumstances in which the conduct took place;

   c)The nature and extent of any loss or damage sustained as a result of the breaches;

   d)Whether the breaches were properly distinct or arose out of the one course of conduct;

   e)The size of the business enterprise involved;

   f)Whether senior management was involved in the breaches;

   g)Whether the party committing the breach had exhibited contrition;

   h)Whether the party committing the breach had cooperated with the enforcement authorities;

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

   j)The need for specific and general deterrence.

2. It was accepted by the parties that these factors should guide the exercise of my discretion when determining penalties.

Discussion

Nature and extent of the conduct which led to the breaches

1. The Applicant submits that the contraventions arise from a deliberate decision not to provide an employee with her minimum entitlements as provided for in the Natural Employment Standards (NES).  I accept this submission, although I note the evidence of Ms Pointon in her recent affidavit about her reliance of advice.

Nature and extent of the loss

1. The total underpayment was $6,759.03, which for a person in Ms Dowdell’s position was a significant detriment.  The period over which she was without her entitlement was four years.  I accept that until the Reasons were delivered and the ultimate declaration of contravention made, the matter was in dispute.  The First Respondent had the benefit of these funds for four years.

Similar previous conduct

1. There is no evidence of any previous contravention proceedings for similar conduct and no suggestion that any other employees have been underpaid.  I regard this as an important factor.

Whether breaches arose out of a course of conduct

1. I have already found that the two breaches of s.44 of the FW Act do arise out of the same course of conduct (rejecting, by inference, the Applicant’s submissions at paragraphs 21 to 23).

2. I also take into account that Judge Burnett found the deduction of the gaming license nomination, although a contravention, arose because the “deduction clause” did not specify the amount of the deduction.  His Honour specifically found the contravention established “for want of form” (paragraph [121] of his Reasons for Judgment).

Size of business

1. As the business is now in administration, its current “size” is completely unknown.  At the time of the offences, the business was a standalone entity operating with minimal staff.  The owner, in part, was the Second Respondent.  However, small businesses, just as large corporate employers, must meet their obligations to employees and size alone (although the impact of penalties might cause more financial pain) is not the sole determinate.  In my view, considering that the First Respondent is now in administration, this factor has little relevance.

Whether the breaches were deliberate

1. Judge Burnett found that the breaches were deliberate, although arising to some extent upon advice about the application of the appropriate award to this employee.  I am bound by that finding.  I indicate that although Judge Burnett made adverse credit findings about the Second Respondent and regarded her conduct/cross examination during the trial as unhelpful, I am not prepared to rely upon that finding to extend such behaviour to the conduct as an employer during the currency of Ms Dowdell’s employment.

Involvement of senior management

1. Ms Pointon was a director and shareholder of Glasshouse Mountains Tavern Pty Ltd and managed the business.  She was as “senior” as you could get for this business.  She had significant experience in the hospitality industry, although since March 2010 she was under the care of a Psychiatrist for a “major depressive disorder” – which I note was during the period of employment of Ms Dowdell.

Contrition, collective action and cooperation with authorities

1. The Applicant concedes that “the Respondents replied to FWO inquiries during the investigation and provided information and documents when requested.”  I have earlier recorded when repayment was made, and I accept it could have taken place earlier than it did.  There is no evidence of contrition – in the form of an apology for example – extended by the Second Respondent to the employee.

2. The Respondents maintained their interpretation that the employee was a senior manager and therefore excluded from the award, and it was not until the Reasons of Judge Burnett were delivered that the Respondents were conclusively informed, that they were not correct.  I accept the findings of Judge Burnett, but in my view, as the evidence of Ms Pointon in her affidavit points out, she relied upon advice.  That is not a defence, but it does put her conduct in context.

Ensuring compliance with minimum standards

1. As has been noted by higher authority, one of the principal objects of the Act is the maintenance of a safety net of minimum terms and conditions of employment and effective enforcement of the obligations imposed by awards and other industrial instruments (see Kelly v Fitzpatrick at [27]). If the statutory obligations of agencies like the Applicant are not, in cases where breaches are found to exist, capable of achieving a remedy of enforcement, it is likely that community standards of compliance will drop. This is not the clear intention of the Parliament who has from time to time increased penalties.

Deterrence

1. I do not regard, on the facts of this case, that specific deterrence is a significant factor or one of significant weight to the appropriate penalty.  I accept that the principles for general deterrence as articulated at paragraphs 51, 52, 53 and 56 of the Applicant’s submissions do apply.

Conclusion

1. On the basis of there being two separate contraventions (the first two being grouped), the maximum penalty for the Second Respondent as an accessory, is $6,600 each – or a total of $13,200.

2. I regard a penalty of 40% for the first two contraventions (grouped together) of $2,640.00 as appropriate.

3. The contravention of s.323 of the FW Act, whilst established, was based on Judge Burnett’s finding that it lacked form – namely specifying the amount of the deduction. In my view, a much lower penalty is, in these circumstances, justified - perhaps in the range of 10% or $660.00 – for a very technical breach.

4. Considering the totality principles, and the evidence of Ms Pointon, I propose to impose a total penalty of $3,000.00.  I do not ignore her financial position and health challenges – both of which have probably deteriorated since the filing of her affidavit on 29 January 2015 as a consequence of the administration of the company.

5. In the circumstances, I propose to give the Second Respondent 90 days to pay the penalty.

I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Judge Baumann.

Date:  26 July 2016