Fair Work Ombudsman v Global Express Consultancy Pty Ltd
[2016] FCCA 2446
•11 October 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v GLOBAL EXPRESS CONSULTANCY PTY LTD & ANOR | [2016] FCCA 2446 |
| Catchwords: INDUSTRIAL LAW – Penalty – contraventions of the Storage Services and Wholesale Award 2010 and Food, Beverage and Tobacco Manufacturing Award 2010 relating to remuneration – failure to comply with record keeping obligations under the Fair Work Act 2009 (Cth) – appropriate penalty to be imposed on each respondent – relevant considerations – applicable penalty for each contravention. |
| Legislation: Crimes Act 1914 (Cth), s.4AA(1) |
| Cases cited: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | GLOBAL EXPRESS CONSULTANCY PTY LTD (ACN 103 569 839) |
| Second Respondent: | YAN HU |
| File Number: | SYG 2958 of 2015 |
| Judgment of: | Judge Smith |
| Hearing date: | 9 August 2016 |
| Date of Last Submission: | 9 August 2016 |
| Delivered at: | Sydney |
| Delivered on: | 11 October 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms V R Brigden |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| The Second Respondent appeared in person. |
DECLARATIONS
The first respondent, Global Express Consultancy Pty Ltd contravened the following civil penalty provisions:
(a)section 45 of the Fair Work Act 2009 (Cth) (“FW Act”) by failing to pay each of the Banquet Desserts Pty Ltd (“Banquet”) Employees and the Vienna Schubert Estia Pty Ltd (“VSE”) Employees minimum weekly wages as required by clauses 13.1 and A.2.5 of Schedule A to the Food, Beverage and Tobacco Manufacturing Award 2010 (“Food Manufacturing Award”);
(b)section 45 of the FW Act by failing to pay each of the South Pack Laboratories Pty Ltd (“SPL”) Employees minimum weekly wages as required by clause 15.1 of the Storage Services and Wholesale Award 2010 (“Storage Services Award”);
(c)section 45 of the FW Act by failing to pay each of the Banquet Employees and the VSE Employees casual loading as required by clauses 13.1 and A.2.5 of Schedule A to the Food Manufacturing Award;
(d)section 45 of the FW Act by failing to pay each of the SPL Employees casual loading as required by subclause 11.4(b) of the Storage Services Award;
(e)section 45 of the FW Act by failing to pay each of the Saturday Banquet Employees a penalty rate for all ordinary hours worked on a Saturday as required by subclause 30.2(e) and clause A.6.4 of Schedule A to the Food Manufacturing Award;
(f)section 45 of the FW Act by failing to pay each of: Tsai Wei Li; Ching Ting Shih; Sze Yan Leung; Hui Ting Yu; Yun Jen Chen; Chi Hsien Fan; Han Ni Li; Huo Chi Yang; Hsin Huang; Hsiao-Tung Lin; Chan-I Chu; Siu Hung Tsang; Sin Yee Leung; Yu-Chiao Chen; Yu Fang Chen; and Ru-Yi Hsu overtime rates for the first three hours worked outside of ordinary hours as required by clause 33.1 of the Food Manufacturing Award;
(g)section 45 of the FW Act by failing to pay each of the SPL Employees overtime rates for the first two hours worked outside of ordinary hours as required by clause 24.1 of the Storage Services Award;
(h)section 45 of the FW Act by failing to pay each of the Overtime Employees overtime rates for time worked outside ordinary hours, after the first three hours worked as required by clause 33.1 of the Food Manufacturing Award;
(i)subsection 323(1)(a) of the FW Act by failing to pay each of the Deduction Employees in full by deducting unauthorised amounts from each of the Deduction Employees' pay; and
(j)subsection 536(2) of the FW Act and subclause 3.46(1)(f) of the Fair Work Regulations 2009 (Cth) (“FW Regulations”) by failing to provide each of the Deduction Employees with a payslip which recorded the net amount paid to each of the Deduction Employees.
The second respondent, Yan (Wendy) Hu, was involved in the first respondent’s contraventions as set out in (1)(a)-(j) above.
ORDERS
The first respondent pay penalties pursuant to section 546(1) of the FW Act fixed in the amount of $87,783.75.
The second respondent pay penalties pursuant to section 546(1) of the FW Act fixed in the amount of $17,556.75.
Pursuant to section 546(3)(a) of the FW Act, any penalties be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days.
The applicant have liberty to apply on seven days’ notice in the event that any of the orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2958 of 2015
| FAIR WORK OMBUDSMAN |
Applicant
And
| GLOBAL EXPRESS CONSULTANCY PTY LTD (ACN 103 569 839) |
First Respondent
| YAN HU |
Second Respondent
REASONS FOR JUDGMENT
The second respondent (“Ms Hu”) was, at all material times, the sole director and shareholder of the first respondent, Global Express Consultancy Pty Ltd (“Global”). From about September 2013 Global conducted a labour hire business in Sydney, New South Wales.
The applicant, Fair Work Ombudsman (“FWO”) and respondents agree that Global contravened the Fair Work Act2009 (Cth) (“FW Act[1]”) and Fair Work Regulations2009 (Cth) (“FW Regulations”) by failing to pay employees minimum weekly wages, casual loading, penalty rates, and overtime rates as well as deducting unauthorised amounts from pay and failing to provide employees with a payslip which recorded deductions from pay.
[1] Unless otherwise indicated, all statutory references are to the Fair Work Act2009 (Cth).
The parties also agree that Ms Hu was involved in those contraventions within the meaning of s.550(2) of the FW Act and that, by reason of s.550(1) of the FW Act is taken to have committed those contraventions.
The parties also agree that declarations, to the effect that these contraventions have taken place, ought to be made.
On the basis of evidence before the Court, I am satisfied that there have been the contraventions as agreed and will make the declarations sought. The only issue remaining is the appropriate penalty that ought to be imposed on the respondents in respect of the contraventions.
Background
Ms Hu came to Australia as an international student in 1999 and graduated from the University of Wollongong in 2002 with a major in Information Technology (IT).
In 2013 she approached three companies on behalf of Global to supply them with workers: Banquet Desserts Pty Ltd (“Banquet”), Vienna Schubert Estia Pty Ltd (“VSE”) and South Pack Laboratory Pty Ltd (“SPL”).
Global had a “Labour Higher Agreement” and an “Employee Agreement” drawn up by a firm of solicitors for the purposes of its business. Global entered into the first of these agreements with each of the three companies and the employee agreement with its employees.
The agreement with each of the companies was that Global would be paid specified rates on an hourly basis in respect of the services provided to the company by workers employed by Global. It was a term of each agreement that Global would be solely responsible for and solely bear the liability for the payment of remuneration to the workers, including any salaries and wages to which any of them may be entitled under any rule, statute, the common law or industrial instrument.
It is immediately apparent from these agreements that Global bore a significant risk in relation to its obligations to any worker provided by it to the companies. On the face of the agreements, Global had no control over the time or the days on which those workers carried out the services required by the companies. While there was a difference of about 15% between the rates paid to Global for work performed at different times, it is clear that that difference was insufficient to meet the additional wage burden that might be incurred for overtime and weekend work. Under the agreement, Global, and not the companies, was responsible for that additional burden.
The extent of that risk suggests several possibilities including negligent legal advice and some form of collusion by the companies. I will say nothing more about those possibilities because the relevant parties were not involved in these proceedings and the evidence is insufficient to come to a firm view about them. However, it ought to be of some concern to the FWO that companies may be able to effectively avoid liability under the FW Act by outsourcing their responsibilities in the way that may have occurred here.
Ms Hu stated in her affidavit that she did not fully investigate the minimum wage and follow the awards set down by the law when entering into these agreements. Whether or not Ms Hu conducted a full investigation is unclear; however, I find that she was aware of Global’s obligations at all relevant times. The records kept by the applicant show that, on a number of occasions in 2013 and 2014, Ms Hu made a number of calls to the Fair Work Infoline, a telephone information service provided by the FWO, and was given advice about the various rates of pay for workers in the relevant industries, including additional casual rates and penalty rates on Saturdays, Sundays and public holidays.
Underpayment contraventions
In the period 10 February 2014 to 17 May 2015 (“contravention period”) a total of 19 employees were employed by Global on a casual basis to work at the three companies. Nine employees worked at Banquet’s premises, eight worked at VSE’s premises, and two worked at SPL.
The employees working at Banquet and VSE performed general packing duties that brought them within the Food, Beverage and Tobacco Manufacturing Award 2010 (“Food Award”). The employees working at SPL performed packing duties that brought them within the Storage Services and Wholesale Industry Award 2010 (“Storage Award”).
During the contravention period Global breached both the Food Award and Storage Award in a number of respects. As the Awards are modern awards, each failure by Global to comply with them constituted breaches of s.45 of the FW Act which is a civil remedy provision under s.539(2).
Failure to pay minimum wages
Both Awards required Global to pay the employees minimum rates of pay for their respective classifications for ordinary hours worked[2]; however, Global failed to comply with that obligation and underpaid the employees a total of $5,973.54 in respect of ordinary hours.
[2] Clauses 13.1 and A.2.5 of sch.2 to the Food Award; cl.15.1 of the Storage Award & cl.20.1 of the Food Award.
Failure to pay casual loading
The Awards also required Global to pay each of the relevant employees a casual loading of 25% for all ordinary hours worked[3]. However, during their respective employment periods, Global did not pay any amount in respect of casual loading to any of the employees. In this way, Global underpaid the employees a total of $28,619.40. This constituted a contravention of a provision of a modern award and, by extension, a contravention of s.45 of the FW Act.
[3] Clauses 13.1 and A.2 5 of sch.A to the Food Award; cl.11.4(b) of the Storage Award.
Failure to pay Saturday penalty rates
The Food Award required Global to pay the following penalty rates for all ordinary hours worked on a Saturday[4]:
a)140% in the period up to 30 June 2014; and
b)150% in the period from 1 July 2014 onwards.
[4] Clauses 30.2(e) and A.6.4 of sch.A to the Food Award.
Seven of Global’s employees who worked at Banquet’s premises worked ordinary hours on a Saturday. Global did not pay those employees any penalty loading for the work performed on a Saturday and thereby underpaid them a total of $731.20. This constituted a contravention of the Food Award and also of s.45 of the FW Act.
Failure to pay overtime – first three hours/first two hours
The Awards required Global to pay its employees overtime rates for hours worked outside of, or in excess of, ordinary hours. The Food Award provided that the rate was 150% of the employee’s ordinary base rate of pay for the first three hours of overtime[5]. The Storage Award provided that the rate was 150% of the employee’s ordinary base rate of pay for the first two hours of overtime[6]. Global failed to pay these rates to 18 of its employees for work performed by them in the first two or three hour period after ordinary hours during the contravention period. The total amount of underpayment was $3,289.91.
[5] Clause 33.1 of the Food Award.
[6] Clause 24.1 of the Storage Award.
The underpayments constituted contraventions of the Awards and s.45 of the FW Act.
Failure to pay overtime-after three hours
The Food Award required Global to pay overtime rates of 200% of an employee’s ordinary base rate of pay for all overtime hours worked after the first three hours of overtime[7]. During the contravention period, 10 of Global’s employees who were covered by the Food Award worked overtime after the first three hours of overtime but were not paid the relevant overtime rate by Global for that work. Those employees were underpaid a total of $5,270.65 in respect of this overtime.
[7] Clause 33.1 of the Food Award.
These underpayments constituted contraventions of the Food Award and s.45 of the FW Act.
Failure to pay wages in full
Sub-section 323(1)(a) of the FW Act provides that an employer must pay an employee amounts payable to the employee in relation to the performance of work in full (except as provided by s.324). Section 324 (1) provides that an employer may deduct an amount from an amount payable to an employee in accordance with s.323(1) if:
a)the deduction is authorised in writing by the employee and is principally for the employee’s benefit; or
b)the deduction is authorised by the employee in accordance with an enterprise agreement; or
c)the deduction is authorised by or under a modern award or an Fair Work Commission order; or
d)the deduction is authorised by or under a law of the Commonwealth, a State or a Territory, or an order of a court.
Global made deductions from the wages of 14 of its employees in the relevant period totalling $3,605.28. None of those deductions were permitted by s.324 of the FW Act. For those reasons, each deduction constituted a contravention of sub-s.323(1)(a) of the FW Act.
Section 323(1) of the FW Act is a civil remedy provision: s.539(1).
Pay slip contraventions
Section 536(2) of the FW Act requires an employer to give to each of its employees a payslip that includes any information prescribed by the regulations. Sub-regulation 3.46(1)(f) of the FW Regulations requires a payslip to specify the net amount of payment.
The payslips given by Global to those employees from whose pay it had made deductions did not record any of those deductions. In that way, those payslips failed to specify the net amount of payment. In those circumstances Global contravened s.536(2) of the FW Act. Section 536(2) is a civil remedy provision: s.539(1).
Accessorial liability
At all material times Ms Hu was:
a)responsible for the day-to-day operation of Global’s business including its payroll and accounting functions;
b)responsible for engaging each of the employees on behalf of Global;
c)aware of the nature of the duties performed by each of the employees for Global;
d)aware of the hours that each of the employees worked for Global;
e)responsible for determining the employees’ terms and conditions of employment, including their rate of pay on behalf of Global;
f)aware that industrial awards and the FW Act applied to the work performed by the employees; and
g)the person responsible for the payment of wages to each of the employees on behalf of Global.
In those circumstances, Ms Hu had actual knowledge of the factual matters which comprised each of the contraventions dealt with above and was an intentional participant in the factual matters comprising those contraventions. In light of that, she aided, abetted, counselled or procured and/or was, by her acts or omissions directly or indirectly knowingly concerned in, or a party to, those contraventions.
By reason of those matters, Ms Hu was involved in the contraventions within the meaning of s.550(2) of the FW Act and so, by reason of s.550(1) of FW Act is taken to have committed the contraventions.
Other relevant conduct
The FWO received a number of complaints from some of Global’s employees. As a result of these complaints an investigation was undertaken in respect of Global and its compliance with workplace laws. A Fair Work Inspector, Ms Hurrell, first spoke to Ms Hu in connection with this investigation on 2 March 2015. I accept Ms Hurrell’s evidence about this and other conversations with Ms Hu. It is unnecessary to set out those conversations in any detail although I will refer to aspects of them later in these reasons. Two matters are worth noting for present purposes. First, Ms Hu appeared at all times to be willing to assist the FWO’s investigation, and secondly, Ms Hu generally appeared to be very frank in her discussions with Ms Hurrell and other officers involved in the investigation. She appeared willing to say things to them that were clearly against her interest.
During the investigation Ms Hu spent a considerable period in China. Her evidence was, and I accept, that she was there between 17 February 2015 and 12 August 2015. In spite of this, she spoke to Ms Hurrell by telephone on a number of occasions. In her absence, her husband, Mr Jeremy Chotzen also spoke to Ms Hurrell and attended a meeting with her and another Inspector at the offices of the FWO in Sydney on 10 July 2015.
On 31 August 2015 both Ms Hu and her husband and attended a meeting with Ms Hurrell and another officer at the FWO’s Sydney office. At that meeting she was served with a “Findings of Contravention” letter. On 13 September 2015 Ms Hu emailed the FWO and sought a review of the investigation attaching a letter dated 11 September 2015. Ms Hu attended a recorded interview at FWO’s office on 24 September 2015.
The application for review was rejected on 25 September 2015 and Ms Hu wrote to the Prime Minister on 14 October 2015 complaining, amongst other things, that the investigation had been unfair. That complaint has not been pressed in these proceedings.
On 19 October 2015 Ms Hu sought legal advice from a firm of solicitors who agreed to write a payment plan and mitigation with the FWO. “Mitigation” is the term used by Ms Hu in her evidence. I understand it to be a reference to attempting to settle with the FWO.
The FWO commenced these proceedings on 30 October 2015. Ms Hu received a letter on 12 November 2015 from her lawyers and on this occasion was advised to file a cross claim instead of settling with the FWO. Ms Hu was also told to hold off repaying the underpayments to employees. However, she disagreed with that advice and repaid them in full on 27 January 2016.
Ms Hu then terminated the engagement of her lawyers and contacted the FWO for further directions on how to proceed. On 4 April 2016 she signed a statement of agreed facts for the purposes of these proceedings. That statement was later slightly amended and a further statement of agreed facts was signed by the parties on 27 May 2016.
Ms Hu gave evidence that Global ceased operations in August 2015 and that it would be deregistered after these proceedings are finalised.
Consideration
In its statement of claim the FWO sought a variety of relief including declarations, orders requiring the repayment of underpayments, orders for the payment of penalties, an injunction restraining Ms Hu from being involved in contraventions of the Awards and the National Employment Standards in pt.2–2 of the FW Act and an order requiring Global to undertake an audit of its compliance with its workplace obligations. The respondents have agreed to the making of declarations and have repaid the amounts of the underpayments of the employees. The FWO does not press for any injunction or an order that Global undertake an audit.
I consider that there is significant utility in the making of the declarations sought and, accordingly, those declarations will be made.
The Court has power under s.546(1) of the FW Act to order a person to pay a pecuniary penalty that it considers appropriate if that person has contravened a civil remedy provision. Each of the contraventions referred to above was a contravention of a civil remedy provision. The issues then are: whether the Court ought to order either or both of the respondents to pay a pecuniary penalty in respect of the contraventions and, if so, what pecuniary penalty is appropriate. The Court may order such a penalty, or part of it, to be paid to a particular person: s.546(3). The parties agree that any penalty in these proceedings ought to be paid to the Consolidated Revenue Fund of the Commonwealth.
The FWO, as the regulator, has proposed the following range of aggregate penalties in order to ensure compliance with statutory requirements in the broader public interest and to protect that interest:
a)Global: $65,025 – $95,370; and
b)Ms Hu: $13,005 – $19,074.
The FWO does not seek the imposition of a penalty in respect of the failure to pay minimum weekly wages to those employees who worked at SPL and I will exclude those contraventions from further consideration.
For the following reasons I consider that the following aggregate penalties are appropriate in the circumstances of this case and that it is appropriate that those penalties be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days of the orders:
a)Global: $87,783.75; and
b)Ms Hu: $17,556.75.
The approach to determination of appropriate penalty
The approach to determining the appropriate penalties under the FW Act is:
i)to identify the separate contraventions involved;
ii)to the extent that two or more contraventions have common elements, take that fact into account;
iii)consider an appropriate penalty in respect of each contravention having regard to all the circumstances of the case; and
iv)take a final look at the aggregate penalty to determine whether it is an appropriate response to the contravening conduct. This last step is known as the “totality principle”.
Section 557(1) of the FW Act provides that two or more contraventions of a term of a civil remedy provision committed by the same person and arising out of a course of conduct by the person are taken to constitute a single contravention of the provision. In this case, the FWO accepted that the respondents were entitled to the benefit of this provision to the effect that the contraventions of a term of an award amount to a single contravention and so too will be the contraventions of sub-ss.323(1)(a) and 536(2) of the FW Act: see Rocky Holdings Pty Limited v Fair Work Ombudsman (2014) 221 FCR 153; [2014] FCAFC 62.
I accept the FWO’s concession. It is clear from Global’s agreements with each of Banquet, VSE and SPL taken with the employment agreements entered into with each of the relevant employees, that each of the separate contraventions of the Awards and the provisions of the FW Act were not only committed by Global, but also arose out of a course of conduct by it. On the other hand, it is clear that contraventions of different requirements of a single award must be treated as separate contraventions for the purposes of s.557.
The second step in the process of determining an appropriate penalty is to consider whether there are shared common elements in any of the contraventions: Pearce v R (1998) 194 CLR 610; [1998] HCA 57 at [40] (McHugh, Hayne and Callinan JJ), Johnson v R (2004) 78 ALJR 616; [2004] HCA 15 at [27] – [34] (Gummow, Callinan and Heydon JJ) and Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; [2008] FCAFC 8 at [46], [71] and [72] (Graham J) and [93] (Buchanan J).
Here, there were separate contraventions that related to the first and subsequent period of overtime work performed after ordinary hours. Clause 33.1 of the Food Award provided for different overtime rates in respect of the first three hours worked outside ordinary hours and any subsequent overtime hours. The contraventions of these two requirements clearly have significant overlap and, for that reason, I consider that they are properly to be taken as though they were one contravention.
The result of the first two steps is that the appropriate penalty will be determined on the basis of the contraventions as set out in table 1 below.
Table 1
Contravention Relevant provision and/or term 1 Failure to pay each of the Banquet employees and VSE employees minimum weekly wages s.45 of FW Act
cll.13.1 and A.2.5 of Schedule A to Food Award2 Failure to pay each of the Banquet and VSE employees casual loading s.45 of FW Act
cll.13.1 and A.2.5 of Schedule A to Food Award3 Failure to pay each of the SPL employees casual loading s.45 of FW Act
cl.11.4(b) of Storage Award4 Failure to pay employees a penalty rate for all ordinary hours worked on a Saturday:
Tsai Wei Li; Ching Ting Shih;
Sze Yan Leung; Hui Ting Yu;
Yu Jen Chen; S Yu Liao; and
Chi Hsien Fans.45 of FW Act
cll.30.2(e) and A.6.4 of Schedule A to Food Award5 Failure to pay employees overtime rates for the first three hours worked outside of ordinary hours:
Tsai Wei Li; Ching Ting Shih;
Sze Yan Leung; Hui Ting Yu;
Yun Jen Chen; Chi Hsien Fan;
Han Ni Li; Huo Chi Yang;
Hsin Huang; Hsia-Tung Lin; Chan-I Chu; Siu Hung Tsang; Sin Yee Leung; Yu-Chaio Chen; Yu Fang Chen; and Ru-Yi Hsus.45 of FW Act
cl.33.1 to Food Award6 Failure to pay SPL employees overtime rates for the first two hours worked outside of ordinary hours s.45 of FW Act
cl.24.1 of Storage Award7 Failure to pay employees in full by deducting unauthorised amounts from pay:
Tsai Wei Li; Sze Yan Leung;
Hui Ting Yu; Yun Jen Chen;
S Yu Liao; Chi Hsien Fan;
Han Ni Li; Huo Chi Yang;
Hsin Huang; Hsiao-Tung Lin;
Chan-I Chu; Sin Yee Leung;
Yu-Chiao Chen; and Yu Fang (“Deduction Employees”)sub-s.323(1)(a) of FW Act 8 Failure to provide payslips which recorded the net amount paid to each of the Deduction employees s.536(2) of the FW Act
sub-reg.3.46(1)(f) of the FW Regulations
Before turning to consideration of the relevant circumstances it is pertinent to have regard to the maximum penalty that may be imposed in respect of each contravention.
The pecuniary penalty that may be imposed depends on the type of contravention and whether or not the person in question is an individual or a body corporate. Under sub-s.546(2)(a), a penalty in respect of an individual must not be more than the maximum number of penalty units referred to in the relevant item in column 4 of the table in s.539(2) and, in respect of a body corporate it must not be more than 5 times the maximum number of penalty units in that column: sub-s.546(2)(b).
The maximum penalty for the contravention of the FW Regulations is included in the table in s.539(2) by the operation of reg.4.01A.
A “penalty unit” in the Act has the same meaning as in the Crimes Act 1914 (Cth) (“Crimes Act”). Section 4AA(1) of the Crimes Act provides the penalty unit amount. At the time of the contraventions, a penalty unit was $170 which applied from 28 December 2012[8] until 26 June 2015[9]. That is the penalty unit amount which will be applied.
[8] When it was amended by the Crimes Legislation Amendment (Serious Drugs, Identity Crime and Other Measures) Act 2012(Cth) (“Amending Act”).
[9] When it was amended by the Crimes Legislation Amendment (Penalty Unit) Act 2015 (Cth).
The FWO did not seek the imposition of a penalty in respect of the failure to pay minimum rates to the employees of Global who worked at SPL (that is, the first contravention above). Taking that into account, the maximum penalties for the contraventions by each of the respondents are set out in table 2 below.
Table 2
Provision and/or term Global Ms Hu 1 s.45 of FW Act
cll.13.1 and A.2.5 of sch.A to Food Award$51,000 $10,200 2 s.45 of FW Act
cll.13.1 and A.2.5 of sch.A to Food Award$51,000 $10,200 3 s.45 of FW Act
cl.11.4(b) of Storage Award$51,000 $10,200 4 s.45 of FW Act
cll.30.2(e) and A.6.4 of sch.A to Food Award$51,000 $10,200 5 s.45 of FW Act
cl.33.1 to Food Award$51,000 $10,200 6 s.45 of FW Act
cl.24.1 of Storage Award$51,000 $10,200 7 sub-s.323(1)(a) of FW Act $51,000 $10,200 8 s.536(2) of the FW Act
sub-reg.3.46(1)(f) of the FW Regulations$25,500 $5,100 Total $382,500 $76,500
Consideration and relevant circumstances
In Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 (“Kelly”) at 18-19 [14], Tracey J referred to the following as a non-exhaustive list of factors to consider when determining an appropriate penalty:
· 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.
I will consider each of these noting that there is a clear overlap between some of them.
Nature, extent and circumstances of the contravening conduct
Global’s approach was, in effect, to pay a flat hourly rate to its employees, regardless of the obligations under the FW Act and the Awards. Thus, over a number of years Global failed to pay its employees the minimum rates to which they are entitled ($5,965.31 under the Food Award and $8.23 in respect of the Storage Award), casual loading ($26,671.08 in respect of the Food Award and $1,948.32 in respect of the Storage Award), and penalty rates including overtime rates $9,106.64 in respect of the Food Award and $185.12 in respect of the Storage Award). While these amounts do not appear to be significant for a 15 month period it must be recalled that these underpayments of minimum amounts and, at least to some employees, constituted a significant proportion of the wages to which they were entitled. Further, although Ms Hu suggested that she paid her employees better than they would have been paid elsewhere, that is beside the point.
Further, the unlawful deduction from the employees’ wages was the result of a requirement implemented by Global that the employees pay a $400 “bond” in consideration of obtaining employment which was to be returned after six months of work with Global. Ms Hu told Ms Hurrell quite frankly in a telephone conversation in March 2015 this bond was not returned if the employee was lazy or moved jobs or states before the 6 months of work with Global was reached.
The FWO submitted that it was relevant that the employees in this case were all foreign nationals working in Australia on temporary visas. It was submitted that this made them more vulnerable to exploitation given that they were likely to have less knowledge of their rights under Australian workplace laws than Australian residents and citizens might. I give that matter some weight, although I note that there was no direct evidence of the vulnerability of any particular individual amongst the employees, and note that the investigation which led to these proceedings was brought about by complaints made to the FWO by the employees themselves, indicating that they had some awareness of their rights.
That said, I find that Global deliberately sought to engage foreign nationals as employees because of Ms Hu’s opinion, which she willingly shared with Ms Hurrell, that they were “younger, cheaper and faster than locals who are old and slow”. Given that I have rejected Ms Hu’s evidence that she was not aware of Global’s obligations in respect of its employees, this reveals a strategy of deliberately underpaying employees in order to maximise the profits of Global’s business. Indeed, as I have mentioned above, it seems essential to Global’s continued existence that it underpay its employees. That conclusion is fortified by the fact that Global has now ceased to operate in light of FWO’s investigations and these proceedings.
Nature and extent of any loss or damage sustained as a result of the breaches
This consideration overlaps considerably with the circumstances of the breaches. In addition to what I have said about that matter, I would add in this respect that there were 14 Global employees who were subject to deductions of $400 in respect of a bond required as a condition of employment. That is a significant amount of money for a person who is engaged at the rate of approximately $17 per hour (gross). Leaving aside tax payable, it would take over 23 hours for an employee to earn that money. In addition, I note that the employee who was most heavily impacted by the underpayment contraventions was underpaid approximately 34% of the amount which she was entitled to be paid.
The fact that the employees accepted employment by Global does not mitigate against the amount and nature of the underpayments. First, it cannot be assumed that the employees were aware that they were being underpaid and there was no evidence to support the proposition; and secondly, as noted by Marshall J in Australian Workers Union v Johnson Matthey (Aust) Ltd [2000] FCA 728 at [5] “a transgressor should not unduly benefit from the stoicism of the injured party”.
Previous similar conduct
There is no evidence of any previous similar conduct to be taken into account.
Whether the breaches were distinct or arose out of one course of conduct
This matter has been taken into account in light of s.557 of the FW Act.
Size and financial circumstances of the business enterprise
There is very little evidence about the size and finances of Global’s business. However, certain inferences can be drawn from the nature of the business and the fact that it was able to be conducted while its principal, Ms Hu, was away in China. First, although there were 17 employees relevant to these proceedings and Ms Hu told Ms Hurrell that there were 20 employees, those employees did not engage in work in any enterprise conducted directly by Global. Global’s business was to locate employees suitable for the work required by its customers and then, having provided those employees, to pay them for the work conducted for the customers. This suggests a small and uncomplicated business.
That said, the size of the business is no real excuse for a consistent and deliberate series of contraventions of workplace laws. Small businesses are required to pay their employees just as large employees are required to do: see for example Kelly at [28].
Whether the breaches were deliberate
As I have said, I reject Ms Hu’s evidence that she was not aware of Global’s obligations in respect of its employees and found that each of the contraventions was part of a deliberate strategy aimed at maximising Global’s profits. This is a matter which carries significant weight.
Whether senior management was involved
Ms Hu’s involvement in the contraventions was not contested. Further, there was no issue that she was senior, if not the only management of Global.
Contrition and whether there has been any corrective action
Ms Hu admits that her business decisions were badly made and in conflict with the award set down by the legislation. She stated that she regretted not fully studying the award system before entering into the employment business and regrets underpaying the workers. Beyond these statements of regret, subject to one matter, there is little to suggest any level of contrition by the respondents in respect of the contraventions.
I agree with the FWO submissions that the following statements by Ms Hu that were made to it during the course of the investigation into Global’s business indicates a lack of contrition:
a)‘The working holiday makers are very greedy asking for more money, but that's human nature.’ (initial telephone conversation with FWI Hurrell on 2 March 2015);
b)‘The employees get very greedy. I am not a greedy agent, I am reasonable.’ (initial telephone conversation with FWI Hurrell on 2 March 2015);
c)‘The employees have now become greedy, which is why they have lodged complaints.’ (telephone conversation with FWI Hurrell on 27 March 2015);
d)‘The overseas workers are younger, cheaper and faster than locals who are old and slow. The locals just get Centrelink payments. I just pay the market rate, it is business and economics.’ (telephone conversation with FWI Hurrell on 22 May 2015);
e)‘You provide information on the minimum rates. The minimum rates are too high. They know how much they pay me. Even if my company closes I will continue to complain because my company has been destroyed.’ (first telephone conversation with FWI Hurrell on 8 July 2015);
f)‘Some people take advantage of the law. This law is not fair. The majority of small businesses in Australia do not pay people the minimum wage.’ (first telephone conversation with FWI Hurrell on 8 July 2015);
g)‘If the other companies pay me the money, I will pay the people. If the other companies do not pay me the difference, I cannot pay the money because I don't have money. You should negotiate for me to enforce the law. The companies should have responsibility. You can't just blame me. The employees signed the contact. I didn't force them.’ (second telephone conversation with FWI Hurrell on 8 July 2015);
h)‘But everyone signed a contract. Don't the employees have a responsibility to know? The contact (sic) rates should apply.’ (second telephone conversation with FWI Hurrell on 8 July 2015)
i)‘I agree that the employer finds the tax rates, but wages are not the same. If the employee doesn't know, and the FWO gave me the wrong information, it's not my fault.’ (second telephone conversation with FWI Hurrell on 8 July 2015); and
j)‘It is not fair that the FWO is holding me responsible.’ (meeting on 31 August 2015 to discuss the Findings of Contravention letter).
The proviso referred to in [71] is the fact that the applicant went against her legal advice in connection with these proceedings and came to an arrangement with the FWO instead of bringing a cross claim. It is possible to see this as a recognition of wrongdoing and a willingness, colloquially speaking, to put things right. Indeed, shortly after terminating the engagement of its lawyers, Global paid its employees the amount of the underpayments.
However, upon reflection, I am not satisfied that the course taken by the respondents in this respect does establish that there was any real contrition. The difficulty lies in the fact that there is no evidence of the details of the legal advice: for instance, against whom the cross claim was proposed to have been brought. It would be speculation to suggest that they were to be brought against any or all of Banquet, VSE or SPL or, indeed against the solicitors who had advised Global in respect of the arrangements entered into with those companies. It would be equally speculative to find that Global did not pursue any cross claims because, in reality, the arrangements with those companies were not part of some unwritten arrangement between them and Global. For those reasons, I am not satisfied that the respondents’ actions in going against legal advice, was indeed an indication of contrition for the contraventions.
That said, the respondents have expedited these proceedings by agreeing to a statement of facts rather than contesting the contraventions and thereby shown a willingness to facilitate the course of justice. For that reason, they are entitled to a discount on the penalty to be imposed: see Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; [2008] FCAFC 70 at [74]-[76] (Stone and Buchanan JJ).
Cooperation with the FWO
In my view, Ms Hu, both personally and on behalf Global, exhibited a reasonable degree of cooperation with FWO in its investigation of the complaints against the respondents. Bearing in mind that she was overseas for a significant portion of that investigation, she nevertheless spoke to Ms Hurrell and answered her questions in a frank manner, occasionally so frank as to be against her interests.
Although there was one instance in which Ms Hu was not entirely frank with the FWO, it was temporary and inconsistent with the balance of her conduct.
While I have accepted the submission that Ms Hu’s conduct did not reveal any real contrition during the course of the investigation that is a different matter to cooperation with the investigating authority. That cooperation in my view suggests at least an awareness of wrongdoing and the authority of the FWO, both of which lead to the inference that it is unlikely that Ms Hu and Global will engage in similar contraventions in the future. That is a matter that I will take into account in considering deterrence.
Compliance with minimum standards
There is no question that it is a principal object of the FW Act to ensure the preservation of any effective safety net for employee entitlements and effective enforcement mechanisms: s.3. Further, it is clear that the minimum hourly rates and weekend penalty rates are separate aspects of the safety net established by the FW Act and the Awards: Fair Work Ombudsman v Devine Marine Group Pty Ltd (2015) 234 FCR 122; [2015] FCA 370 at [17].
Further, the obligation to provide accurate payslips to employees is an important part of ensuring the effectiveness of the safety net for those employees. Payslips enable an employee, as well as the FWO in any investigation, to ascertain with some precision whether or not employee entitlements have been fulfilled.
For those reasons, the nature of the contraventions in this case is serious.
Deterrence
Deterrence is undoubtedly one of the most important factors in determining an appropriate penalty: Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 90 ALJR 113; [2015] HCA 46 at [55] (French CJ, Kiefel, Bell, Nettle and Gordon JJ). Keane J said much the same thing, at [110]:
It is because the Commissioner may, on occasion, be too pragmatic in taking such a stance that the court must exercise its function to ensure that the penalty imposed is just, bearing in mind competing considerations of principle, including that of equality before the law and the need to maintain effective deterrence to other potential contraveners. In this latter regard, in Australian Competition and Consumer Commission v TPG Internet Pty Ltd, French CJ, Crennan, Bell and Keane JJ approved the statement by the Full Court of the Federal Court in Singtel Optus Pty Ltd v Australian Competition and Consumer Commission that a civil penalty for a contravention of the law:
“must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business.”
(Citations omitted)
I accept Ms Hu’s evidence that Global will be deregistered after these proceedings on the basis that it has not been active since at least August 2015 in light of FWO’s investigation. For that reason there is no basis upon which to take into account specific deterrence in respect of Global.
Similarly, I consider it unlikely, although not impossible, that Ms Hu will engage in conduct similar to that constituting the contraventions in question in these proceedings. I have come to that conclusion in spite of the fact that I do not think that she is contrite for her involvement in the contraventions. As I have noted above, a number of statements that she made to the FWO reveal that she felt that she was being victimised in the investigation and that the contraventions were other people’s fault. That said, Ms Hu showed herself at all times to be a plain speaking individual, often saying things to Ms Hurrell that were clearly against her interests. In her conversations with Ms Hurrell, she appeared to have been focused upon profitmaking. That, of course, is not unusual in business. However, given that her engagement in the contraventions has led to a significant financial loss, I find it unlikely that she would engage in any further such conduct in the future. For that reason, I do not give the question of specific deterrence much weight in assessing the appropriate penalty.
By contrast, general deterrence is an important matter in these proceedings. Those engaged in employing people in Australia must be aware that they face significant penalties for breaching their legal obligations in respect of their employees. Those penalties cannot be seen as no more than an acceptable cost of doing business.
Further, it is important for employers to recognise that foreign nationals, just as much as Australian residents and citizens are entitled to full pay for work done by them and that the vulnerability of those workers will be taken into account in the assessment of penalties.
Other considerations
Miss Hu gave evidence that in October 2015 she went to see a General Practitioner (GP) to discuss her mental health concerns involving depression resulting from the investigation by the FWO and impending trial. She was offered counselling services but did not proceed with them on the grounds that she would seek support from her family. She relied upon a medical certificate from her GP dated 3 June 2016 to the effect that she was suffering depression since October 2015 and was still not coping well. The doctor gave her opinion that Ms Hu needs to attend counselling and indicated that she had prescribed antidepressants.
I accept that the investigation into Global’s business and the instigation of these proceedings by the FWO has had an impact upon Ms Hu’s health. However, to a very large extent, that has been brought about by her own actions and I do not consider it appropriate to give Ms Hu’s health any significant weight in determining the appropriate penalty in these proceedings.
The appropriate penalties
Taking into account all of these considerations I consider the following are appropriate:
a)a 15% discount across the board for both respondents in light of their willingness to facilitate the course of justice;
b)a penalty of 50% of the maximum in respect of the casual loading contravention given that that constituted the largest proportion of the total underpayment;
c)a penalty of 25% of the maximum in respect of the minimum wages, overtime rates (in respect of the Food Award) and failure to pay wages in full contraventions because of the large proportion that these bought to the total underpayment and the fact there should be a strong message that the requirement of a bond as a precondition to employment will not be tolerated;
d)a penalty of 15% of the maximum in respect of the Saturday penalty rates and payslips contraventions; and
e)a penalty of 5% for the failure to pay overtime rates in respect of the Storage Award taking into account the small amount of the underpayment.
The consequent penalties are shown in tables 3 and 4 below.
Table 3
| Global Express | |||||
| Contravention | Maximum Penalty | Discount | Penalty | Total | |
| 1 | Failure to pay each of the Banquet employees and VSE employees minimum weekly wages | $51,000.00 | 15% | 25% | $10,837.50 |
| 2 | Failure to pay each of the Banquet and VSE employees casual loading | $51,000.00 | 15% | 50% | $21,675.00 |
| 3 | Failure to pay each of the SPL employees casual loading | $51,000.00 | 15% | 50% | $21,675.00 |
| 4 | Failure to pay employees a penalty rate for all ordinary hours worked on a Saturday | $51,000.00 | 15% | 15% | $6,502.50 |
| 5 | Failure to pay employees overtime rates for the first three hours worked outside of ordinary hours | $51,000.00 | 15% | 25% | $10,837.50 |
| 6 | Failure to pay SPL employees overtime rates for the first two hours worked outside of ordinary hours | $51,000.00 | 15% | 5% | $2,167.50 |
| 7 | Failure to pay employees in full by deducting unauthorised amounts from pay | $51,000.00 | 15% | 25% | $10,837.50 |
| 8 | Failure to provide payslips which recorded the net amount paid to each employee | $25,500.00 | 15% | 15% | $3,251.25 |
| TOTAL | $382,500.00 | $87,783.75 | |||
Table 4
| Ms Hu | |||||
| Contravention | Maximum Penalty | Discount | Penalty | Total | |
| 1 | Failure to pay each of the Banquet employees and VSE employees minimum weekly wages | $10,200.00 | 15% | 25% | $2,167.50 |
| 2 | Failure to pay each of the Banquet and VSE employees casual loading | $10,200.00 | 15% | 50% | $4,335.00 |
| 3 | Failure to pay each of the SPL employees casual loading | $10,200.00 | 15% | 50% | $4,335.00 |
| 4 | Failure to pay employees a penalty rate for all ordinary hours worked on a Saturday | $10,200.00 | 15% | 15% | $1,300.50 |
| 5 | Failure to pay Banquet and VSE employees overtime rates for the first three hours worked outside of ordinary hours | $10,200.00 | 15% | 25% | $2,167.50 |
| 6 | Failure to pay SPL employees overtime rates for the first two hours worked outside of ordinary hours | $10,200.00 | 15% | 5% | $433.50 |
| 7 | Failure to pay employees in full by deducting unauthorised amounts from pay | $10,200.00 | 15% | 25% | $2,167.50 |
| 8 | Failure to provide payslips which recorded the net amount paid to each employee | $5,100.00 | 15% | 15% | $650.25 |
| TOTAL | $76,500.00 | $17,556.75 | |||
I have also considered the totality of penalties for each of the respondents to determine whether it is an appropriate response to the conduct which led to the breaches and is not oppressive or crushing. However, I can see no reason to reduce or otherwise alter the amount of penalty and, in particular there is no evidence of the financial circumstances of either of the respondents sufficient to conclude that these penalties would impose an overly oppressive burden upon them.
For the reasons given, the declarations sought by the FWO will be made and penalties in the amount of $87,783.75 and $17,556.75 will be imposed upon the respondents respectively.
I certify that the preceding ninety-two (92) paragraphs are a true copy of the reasons for judgment of Judge Smith
Date: 11 October 2016
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