Fair Work Ombudsman v Golden Vision Food and Beverage Services Pty Ltd and Anor (No.2)
[2016] FCCA 1721
•8 July 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v GOLDEN VISION FOOD AND BEVERAGE SERVICES PTY LTD & ANOR (No.2) | [2016] FCCA 1721 |
| Catchwords: INDUSTRIAL LAW – Application for imposition of pecuniary penalties – consideration of penalty – sham contracting – where single employee was underpaid – failure to comply with Notice to Produce – failure to keep proper records. |
| Legislation: Fair Work Act 2009 (Cth), ss.45, 357(1), 535(1), 536(1), 550(1), 557(1) 712(1), 712(3) Fair Work Regulations 2009 (Cth) |
| Cases cited: Fair Work Ombudsman v Bound For Glory Enterprises & Anor [2014] FCCA 432 Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (No 2) [2013] FCA 582 Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First respondent: | GOLDEN VISION FOOD AND BEVERAGE SERVICES PTY LTD |
| Second respondent: | JIA NING WANG |
| File Number: | BRG 562 of 2015 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 11 December 2015 |
| Date of Last Submission: | 11 December 2015 |
| Delivered at: | Brisbane |
| Delivered on: | 8 July 2016 |
REPRESENTATION
| Counsel for the applicant: | Ms Garner |
| Solicitors for the applicant: | Office of the Fair Work Ombudsman |
| Counsel for the respondents: | Mr Mackie |
| Solicitors for the respondents: | Mullins Lawyers |
ORDERS
THE COURT DECLARES THAT:
the First respondent has contravened:
(a)s.357(1) of the Fair Work Act 2009 (Cth) by, on 17 July 2014 and then three weeks later, representing to Ming Lee Ching that the contract of employment under which she was employed was a contract for services under which she performed work as an independent contractor;
(b)s.45 of the Fair Work Act 2009 (Cth) by failing to pay Ming Lee Ching the minimum hourly wage for hours worked Monday to Friday in accordance with cl.32.1 of the Hospitality Industry (General) Award 2010 between 21 July, 2014 and 10 August, 2014;
(c)s.45 of the Fair Work Act 2009 (Cth) by failing to pay Ming Lee Ching the minimum hourly wage for hours worked on a Saturday in accordance with cl.32.1 of the Hospitality Industry (General) Award 2010 between 21 July, 2014 and 10 August, 2014;
(d)s.45 of the Fair Work Act 2009 (Cth) by failing to pay Ming Lee Ching the minimum hourly wage for hours worked on a Sunday in accordance with cl.32.1 of the Hospitality Industry (General) Award 2010 between 21 July, 2014 and 10 August, 2014;
(e)s.45 of the Fair Work Act 2009 (Cth) by failing to pay Ming Lee Ching casual loading for all hours worked in accordance with cl.32.1 of the Hospitality Industry (General) Award 2010 between 21 July, 2014 and 10 August, 2014;
(f)s.45 of the Fair Work Act 2009 (Cth) by failing to pay Ming Lee Ching a penalty for hours worked in the evening period in accordance with cl.32.3(a) of the Hospitality Industry (General) Award 2010 between 21 July, 2014 and 10 August, 2014;
(g)s.45 of the Fair Work Act 2009 (Cth) by failing to pay Ming Lee Ching a penalty for hours worked in the morning period in accordance with cl.32.3(b) of the Hospitality Industry (General) Award 2010 between 21 July, 2014 and 10 August, 2014;
(h)s.45 of the Fair Work Act 2009 (Cth) by failing to pay Ming Lee Ching for hours worked in which Ming Lee Ching did not have a prescribed meal break in accordance with cl.31.4 of the Hospitality Industry (General) Award 2010 between 21 July, 2014 and 10 August, 2014;
(i)s.535(1) of the Fair Work Act 2009 (Cth) by failing to make and keep records in respect of the employment of Ming Lee Ching between 21 July, 2014 and 10 August, 2014 as prescribed in regs. 3.32(a) to (f), 3.33(1) and 3.33(3) of the Fair Work Regulations 2009 (Cth);
(j)s.536(1) of the Fair Work Act 2009 (Cth) by not providing payslips to Ming Lee Ching within one day of making a payment in respect of work performed by Ming Lee Ching; and
(k)s.712(3) of the Fair Work Act 2009 (Cth) by failing to comply with a notice to produce issued pursuant to s.712 of the Fair Work Act 2009 (Cth) and dated 4 November 2014.
the Second respondent was for the purposes of s.550(1) of the Fair Work Act 2009 (Cth), involved in the First respondent’s contraventions set out in declaration 1 above.
THE COURT ORDERS THAT:
the First respondent pay a total penalty of $17,500 constructed as follows:
(a)for the contraventions set out in declaration 1(a) hereof - $5,000;
(b)for the contraventions set out in declarations 1(b) – 1(h) hereof - $5,000;
(c)for the contraventions set out in declaration 1(i) hereof - $2,500;
(d)for the contraventions set out in declaration 1(j) hereof - $2,500;
(e)for the contravention set out in declaration 1(k) hereof - $2,500;
the Second respondent pay a total penalty of $3,500 constructed as follows:
(a)for the contraventions set out in declaration 1(a) hereof - $1,000;
(b)for the contraventions set out in declarations 1(b) – 1(h) hereof - $1,000;
(c)for the contraventions set out in declaration 1(i) hereof - $500;
(d)for the contraventions set out in declaration 1(j) hereof - $500;
(e)for the contravention set out in declaration 1(k) hereof - $500.
All penalties shall be paid by to the Commonwealth within 28 days of this order.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 562 of 2015
| FAIR WORK OMBUDSMAN |
applicant
And
| GOLDEN VISION FOOD AND BEVERAGE SERVICES PTY LTD |
First respondent
| JIA NING WANG |
Second respondent
REASONS FOR JUDGMENT
Ming Lee Ching was employed by the Golden Vision Food and Beverage Services Pty Ltd between 21 July, 2014 and 10 August, 2014 as a dish washer in Golden Vision’s Restaurant, Fire and Stone, at Tangalooma Island Resort, Moreton Island, Queensland. Ms Lee is a Chinese National who held a working holiday visa and was on a working holiday in Australia.
Jia Ning Wang is and was at the relevant times, the sole director and sole shareholder of Golden Vision. He was responsible for the overall management of the affairs of Golden Vision’s business. He is an experienced businessman, knowledgeable and experienced regarding the general application of Awards to employees. He holds a Masters qualification in Management.
The circumstances in which Mr Wang caused Ms Lee to be engaged by Golden Vision and her subsequent treatment by the respondents when she worked in Golden Vision’s business led to Ms Lee making a complaint to the Fair Work Ombudsman about those matters. The Fair Work Ombudsman investigated Ms Lee’s complaints and these proceedings are the result of her investigations.
Both respondents now agree that they have breached the Fair Work Act 2009 (Cth) in the respects that I have discussed more fully below. The respondents agree to the imposition of pecuniary penalties upon them for those contraventions. These reasons relate to the penalties that ought to be imposed upon the respondents for the admitted contraventions.
For the reasons that follow, I have determined that penalties totalling $17,500 for Golden Vision and $3500 for Mr Wang are appropriate.
Background
On about 17 July, 2014 and before her employment by Golden Vision commenced, Mr Wang said to Ms Lee that to work at Golden Vision’s restaurant, she would be engaged by Golden Vision as an independent contractor and would need to have an Australian Business Number, or ABN, for that purpose. Ms Lee did not have an ABN at that time. She did not even know what that was. She was on a working holiday in Australia.
About three weeks later, after she commenced working at Golden Vision’s restaurant, Mr Wang repeated to Ms Lee that in order for her to continue working at the restaurant she required an ABN.
To meet Mr Wang’s demand, on 6 August, 2014 Ms Lee applied for and was allocated an ABN. She applied online using a computer belonging to Golden Vision. She used Mr Wang’s address as the relevant address for the purposes of the ABN registration.
The parties agree that by reason of the conversations had between Mr Wang and Ms Lee on 17 July, 2014 and some three weeks later concerning the need for an ABN and Ms Lee’s status as an independent contractor, Golden Vision represented to Ms Lee that her engagement by Golden Vision was a contract for services under which she performed work as an independent contractor.
However, Golden Vision and Mr Wang now agree that those representations were false because, properly analysed, at all times during her engagement with Golden Vision, Ms Lee was an employee and Golden Vision was her employer.
Section 357(1) of the Fair Work Act provides that a person who employs, or proposes to employ, an individual must not represent to the individual that the contract of employment under which the individual is, or would be, employed is a contract for services under which the individual performs, or would perform, work as an independent contractor.
The parties agree that by making the representations on 17 July, 2015 and then again about three weeks later, Golden Vision contravened s.357(1) of the Act. There are clearly two contraventions: one on each occasion that the representations were made.
In the course of her work for Golden Vision, Ms Lee’s duties included washing dishes and general utensils used for cooking within the restaurant’s kitchen and disposing of waste from the kitchen. Ms Lee was:
a)directed and supervised in her work by other employees of Golden Vision, including another person employed to wash dishes and the Head Chef;
b)was provided with a uniform (being a white shirt and a waterproof apron) by Golden Vision. She was required to wear closed shoes, in accordance with Golden Vision’s occupational health and safety obligations;
c)provided with all the tools and equipment that she used in her work by Golden Vision;
d)provided with meals and accommodation;
e)not able to, and did not, delegate her work;
f)was paid on a weekly basis;
g)required to sign a document which outlined the days and hours she worked and the amount she was paid; and
h)not required to provide a tax invoice to Golden Vision.
Ms Lee did not operate a business or company, nor did she register for GST. She did not advertise her services. She did not undertake any work other than the work she performed for Golden Vision. She did not hold any relevant insurances including public liability insurance, sickness or accident insurance or workers’ compensation insurance.
However, Golden Vision did not withhold tax or superannuation in respect of Ms Lee’s remuneration.
Save for the last matter, all of the matters I have just set out are consistent with Ms Lee being an employee of Golden Vision rather than an independent contractor.
The parties agree that as an employee, Ms Lee’s employment was subject to the Hospitality Industry (General) Award 2010 and for the purposes of that Award she was a casual employee. She was employed in the classification of kitchen attendant grade 1 as set out in Schedule D of the Award. She was entitled to be paid according to cl.13 of the Award.
As a consequence of the respondents’ approach to Ms Lee’s employment, she was not paid what she was entitled to be paid according to the Award. She was not paid the correct minimum hourly rate of pay prescribed by the Award nor was she paid the loadings that applied to her employment. In particular she was not paid the casual loading, Saturday minimum rate, Sunday minimum rate, evening penalty rate and morning penalty rate. She was not provided with the meal breaks prescribed by the Award and consequently she was entitled to a higher rate of pay for certain periods of time that she worked. She was not paid her entitlement in that regard and that was a contravention of the Award.
The parties agree that Ms Lee was underpaid a total of $2,123.51 because Golden Vision did not observe her entitlements under the Award.
However, the Award is not one-sided. During her employment, Golden Vision provided Ms Lee with shared accommodation located at the Tangalooma Island Resort and three meals per day. In those circumstances the Award provided (in cl.39.2 thereof) that Golden Vision was entitled to deduct from Ms Lee’s wages an amount of $181.89 per week for the provision of accommodation and meals to her. For the relevant period the amount that Golden Vision was entitled to deduct was $545.67. Accordingly, the amount to which Ms Lee is entitled from Golden Vision is $1,577.84. Golden Vision paid her that amount on 1 June, 2015.
The parties agree that s.535(1) of the Fair Work Act required Golden Vision to make and keep for seven years, employee records of the kind prescribed by the Fair Work Regulations 2009 (Cth) in relation to Ms Lee. Golden Vision did not keep any employee records of the relevant kind in respect of Ms Lee and so contravened that provision of the Fair Work Act.
Golden Vision did not give Ms Lee any payslips. Ever. That was a contravention of s.536(1) of the Fair Work Act.
The Fair Work Ombudsman commenced investigating Golden Vision’s conduct towards Ms Lee in October, 2014. Section 712(1) of the Fair Work Act permits a Fair Work Inspector to require a person, by notice, to produce a record or document to that inspector. If a person is given a notice in the appropriate form, they must not fail to comply with the notice: s.712(3) of the Act.
On 4 November, 2014 Fair Work Inspector Alexis Duggan issued a Notice to Produce Records or Documents pursuant to s.712(1) of the Act to Golden Vision. The notice was sent to Mr Wang in his capacity as a director of Golden Vision. The notice sought the production of records in respect of Ms Lee including:
a)all documents relating to payments made to Ms Lee in respect of cleaning services performed by her; and
b)all documents containing information about the times and dates during which Ms Lee performed work or provided services to Golden Vision.
Golden Vision did not respond to the notice to produce. Again: ever. As a consequence, Golden Vision contravened s.712(3) of the Fair Work Act by failing to comply with the notice to produce.
On 19 December 2014, the applicant issued Golden Vision with a compliance notice, alleging that Ms Lee had been underpaid $2,129.18 and two infringement notices for failure to keep records and failure to provide payslips. The underpayment was rectified about six months later.
There is no dispute between the parties that Mr Wang was involved in Golden Vision’s contraventions for the purposes of s.550(1) of the Fair Work Act. He was the only person in control of Golden Vision’s business. He engaged Ms Lee and was responsible for the underpayment of her entitlements. He was responsible for Golden Vision’s failure to keep the required employment records relating to Ms Lee. He was responsible for Golden Vision failing to respond to the notice to produce.
The Contraventions
On the basis of the facts set out above, Golden Vision admits contravening the following provisions:
a)s.357(1) of the Fair Work Act by representing to Ms Lee that the contract of employment under which she was employed was a contract for services under which she performed work as an independent contractor;
b)s.45 of the Fair Work Act by failing to pay Ms Lee the minimum hourly wage for hours worked Monday to Friday in accordance with cl.32.1 of the Award;
c)s.45 of the Fair Work Act by failing to pay Ms Lee the minimum hourly wage for hours worked on a Saturday in accordance with cl.32.1 of the Award;
d)s.45 of the Fair Work Act by failing to pay Ms Lee the minimum hourly wage for hours worked on a Sunday in accordance with cl.32.1 of the Award;
e)s.45 of the Fair Work Act by failing to pay Ms Lee casual loading for all hours worked in accordance with cl.32.1 of the Award;
f)s.45 of the Fair Work Act by failing to pay Ms Lee a penalty for hours worked in the evening period in accordance with cl.32.3(a) of the Award;
g)s.45 of the Fair Work Act by failing to pay Ms Lee a penalty for hours worked in the morning period in accordance with cl.32.3(b) of the Award;
h)s.45 of the Fair Work Act by failing to pay Ms Lee for hours worked in which Ms Lee did not have a prescribed meal break in accordance with cl.31.4 of the Award;
i)s.535(1) of the Fair Work Act by failing to make and keep records in respect of Ms Lee as prescribed in the Fair Work Regulations, being the kind of records referred to in paragraph 76 of the Statement of Claim filed on 19 June, 2015;
j)s.536(1) of the Fair Work Act by not providing payslips to Ms Lee within one day of making a payment in respect of work performed by Ms Lee; and
k)s.712(3) of the Fair Work Act by failing to comply with the notice to produce issued pursuant to s.712 of the Act by Fair Work Inspector Duggan on 4 November, 2014.
Two or more contraventions of the Fair Work Act may, depending upon the particular circumstances of the case, attract the operation of s.557(1) of the Act. By that subsection the Court must treat multiple contraventions of certain civil penalty provisions of the Act as a single contravention if the contraventions are committed by the same person and they arose out of a course of conduct by that person.
Section 557(1) is engaged in this case. Leaving aside the contraventions of s.357(1) and 712(3) of the Act, each of the remuneration related contraventions and the record keeping contraventions involve multiple contraventions of each provision. The contraventions were committed by the same person, namely Golden Vision. If they arose out of the same course of conduct by Golden Vision, they must be taken to constitute a single contravention. That is the legislatively mandated outcome.
There can be no doubt that the contraventions all arose out of a course of conduct described compendiously as the employment of Ms Lee by Golden Vision. The multiple contraventions of s.535(1) of the Act (record keeping) must be treated as a single contravention. Similarly, the multiple contraventions of s.536(1) of the Act (pay slips) must be treated as a single contravention.
However, that is not so with respect to the multiple contraventions of s.45 of the Act relating to the remuneration contraventions by Golden Vision. As the decision in Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153 directs, s.557(1) does not operate so as to consolidate into a single contravention, multiple contraventions of s.45 of the Act where those contraventions are based upon breaches of different terms or obligations in an Award. Section 557(1) of the Act will operate to consolidate multiple contraventions of the same term or obligation in an Award, but it will not operate across different terms or obligations.
The applicant submits, and I accept, that the application of s.557(1) of the Fair Work Act results in the following contraventions for the purposes of these proceedings:
| Description of contravention | Number of contraventions before s.557(1) | Number of contraventions after s.557(1) | |
| cl 32.1 of the Award | Failure to pay minimum hourly wage Monday to Friday | 19 | 1 |
| cl 32.1 of the Award | Failure to pay Saturday loading | 3 | 1 |
| cl 32.1 of the Award | Failure to pay Sunday loading | 3 | 1 |
| cl 32.1 of the Award | Failure to pay casual loading | 19 | 1 |
| cl 32.3(a) of the Award | Failure to pay evening penalty | 19 | 1 |
| cl 32.3(b) of the Award | Failure to pay morning penalty | 1 | 1 |
| cl 31.4 of the Award | Failure to pay higher rate when meal break not given | 1 | 1 |
| s.535(1) of the Fair Work Act | Failure to make and keep records | Numerous (sub- regulation 3.32(a) to (f) and 3.33(1) and 3.33(3)) | 1 |
| s.536(1) of the Fair Work Act | Failure to provide pay slips | 3 | 1 |
In addition to those contraventions there are three further contraventions, namely the two contraventions of s.357(1) for misrepresenting the nature of Ms Lee’s engagement and one contravention of s.712(3) for failing to comply with the notice to produce.
As the authorities to which I was taken by both parties reveal, to the extent to which two contraventions of which a person stands convicted contain common elements, it would be wrong to punish that person twice for the commission of the elements that are common.
The two contraventions of s.357(1) of the Act (which the parties have agreed is only one contravention) should, for the purposes of imposing a penalty be treated as a single contravention. The conduct is the same, in respect of the same employee. The second representation was a reiteration of the first.
The applicant argues that a separate (although different) penalty ought to be imposed upon the respondents for each of the identified contraventions and on that basis, the maximum penalty that might be imposed upon Golden Vision is $510,000 and upon Mr Wang is $102,000.
The respondent’s contend, I think (it was not entirely clear), that I should consider that there are but two contraventions here – one which relates to the decision to characterise Ms Lee’s engagement as a contract for services and one for failure to comply with the notice to produce.
The respondents argue that I should recognise the overlap between the Award-based contraventions, the contraventions of s.357(1) of the Act and the record keeping and pay slip contraventions because, it was argued, that all of those contraventions flow from Mr Wang’s view that Ms Lee was engaged as an independent contractor. If that were not the case, she would have been paid according to the Award, records of her employment would have been kept and pay slips provided. There would have been no statements to the effect that she was an independent contractor.
There is some force in the argument. In one sense, each of the contraventions (save for the contravention of s.712(3) of the Act) was an outward manifestation of the single decision to engage Ms Lee as an independent contractor (irrespective of whether that was undertaken knowing it to be a wrong categorisation).
The evidence strongly supports the view that there was a single decision made by Mr Wang, for Golden Vision, to treat Ms Lee as a contractor, whether he knew that in truth she was an employee or not. All of the contraventions flowed from that single approach. But the actions taken in consequence of the single decision were of different types and had different characteristics. The misrepresentations about Ms Lee’s status were acts of a different nature to the acts that led to her underpayment. They were different to the failure to record any information about her employment by Golden Vision as required by the Act and Regulations.
Leaving aside the s.712(3) contravention, in my view there is not sufficient commonality across all of the contraventions to impose a single penalty for all of them.
As I have said above, there should be a single penalty for the two contraventions of s.357(1) of the Act.
The respondents argue that the contraventions of s.45 of the Act should, for the purposes of penalty, be treated as a single contravention because:
a)all breaches related to the same decision of the respondents, that is, to pay Ms Lee a flat rate as a contractor instead of as an employee;
b)the contraventions relate to the same employee over a short, three-week timeframe;
c)some of the contraventions are underpayments for very small amounts, the lowest being $4.43;
d)the separate contraventions do not take into account the valid deduction of $1,577.84 under cl.39.2 of the Award.
Again, there is force in these arguments. Taking those matters into account it would be “inherently disproportionate” to increase the maximum penalty that might be imposed upon the respondents by reason of some very minor underpayments of Award requirements.
Despite the applicant’s position with respect to the identification of the contraventions in respect of which penalties should be imposed, the applicant’s submissions are consistent with a single approach to the Award-based contraventions. The applicant’s submission (paragraph 46 of the applicant’s written submissions is but one example), tend to refer to a total underpayment, rather than seven separate underpayments. It is the totality of Golden Vision’s failure to meet its Award obligations that are the focus of attention. The way in which the applicant has approached the deduction of the amounts to which Golden Vision was entitled under the Award from Ms Lee confirms that the contraventions ought to be viewed as a single transaction.
Whilst I do not intend to treat the contraventions of the Award provisions as a single contravention, the commonality between them demands that one larger penalty be imposed for one of the contraventions and then a lesser or no penalty be imposed for others.
The contraventions of s.535(1) and 536(1) of the Act should attract separate penalties. They are different manifestations of the respondent’s approach to Ms Lee’s employment. The failure to provide pay slips deprived Ms Lee of the ability to understand the way in which she was being paid. The failure to keep records hindered the applicant’s investigation.
Consideration of Penalty
Before embarking on a discussion of the relevant matters, it is important to point out that there have been difficulties with this application proceeding without fuss. The difficulties have been created by the respondents. When the matter first came before the Court on 13 July, 2015 an order was made for the parties to file a statement of agreed facts (I was told the matter was not contested on liability) and for each party to file written submissions for use at the penalty hearing. However, on 24 September, 2015 I made orders to facilitate an application that the respondents wished to pursue to enable them to withdraw the admissions they had made that went to liability. That was not observed and by a subsequent order I made directions designed to clarify what was in issue and what was in dispute. Further orders were made on 26 October, 2015 which required the applicant to file and serve written submission and any affidavit evidence material upon which she wished to rely by a certain date. The respondents were then to do the same. As it turns out, what the respondents did was to file evidence which attempted to answer many of the criticisms of the respondents’ behaviour made by the applicant in her written submissions. For example, the applicant submitted and it was the case, that there was no expression of contrition or regret for the respondents’ actions. There was no apology to Ms Lee. But in his affidavit filed on 10 December, 2015 Mr Wang sought to cure those difficulties by expressing regret and contrition. He apologised to Ms Lee in the affidavit without suggesting that he had ever communicated his apology to her in any way. I found Mr Wang’s evidence in his affidavit filed on 10 December, 2015 contrived and disingenuous.
The contravention of s.357(1) of the Act attracts a maximum penalty of $51,000 for Golden Vision and $10,200 for Mr Wang. So too, do the contraventions of ss.45 (based upon breaches of the Award) and 712(3) of the Act. The record keeping contraventions and the pay slip contraventions each attract a maximum penalty of $25,500 for Golden Vision and $5,100 for Mr Wang.
Ms Lee was a 26 year old worker from a non-English speaking background who was in Australia on a working holiday visa at the time the contraventions occurred. Ms Lee did not speak fluent English and was not cognisant of her workplace rights. When told by Mr Wang that she would need to apply for an ABN she did not understand what that meant.
Mr Wang is an experienced and qualified businessman. He was involved in and directed the overall operations and management of Golden Vision’s affairs. The evidence demonstrates that Mr Wang was knowledgeable and experienced regarding the general application of industrial awards in respect of employees.
On his own evidence, Mr Wang knew of the practical difference between an employee and an independent contractor. He says that he made a deliberate decision to engage Ms Lee as an independent contractor and not an employee. He compared her position to a person engaged to mow lawns and suggests that she was in no different position – she was engaged to produce a particular result – clean dishware - which she could do in her own way and in her own time, for a flat rate of $100 per shift.
But his comparison bears no scrutiny. Unlike a person engaged to mow lawns, Ms Lee had no idea about how much work was involved from shift to shift – that depended upon the amount of custom for the restaurant from shift to shift. Unlike a person engaged to mow lawns, Ms Lee did not provide her own equipment. She did not run a business. Her work was directed by others. It would be a surprising proposition if Golden Vision or Mr Wang would have countenanced Ms Lee only washing half of the dishes each shift with an intention to clean those remaining in her next shift.
There is evidence from Mr Wang to suggest that knew of the importance of the distinction between an employee and the rights that flowed to an employee and a contractor. It must have been clear to Mr Wang, given his experience and education, that Ms Lee was likely to be an employee and not an independent contractor. She was engaged in very low skilled work, had no control over her working hours and she did not run her own business. She did not hold any related insurances, was unable to delegate work and all of the equipment she used such as a dishwasher, gloves, and cleaning products, were supplied by Golden Vision.
Mr Wang’s own evidence convinces me that the way he sought to engage Ms Lee on behalf of Golden Vision was designed to contain and minimise Golden Vision’s operating costs. He had come to the attention of the applicant in the past for that reason. In particular four employees had complained that they were paid a “rolled up” hourly rate in their employment rather than their Award calculated rates. Those complaints were mediated by the applicant and resolved.
The applicant argues that I should conclude that Golden Vision’s contraventions were deliberate – that is to say, Golden Vision deliberately misrepresented to Ms Lee her employment status. But I decline to make that finding. The evidence does not support it.
At best, the evidence supports that Golden Vision and Mr Wang were reckless when they made the representations to Ms Lee that she would be a contractor. Despite what Mr Wang says was his lack of knowledge about these issues, he took no steps to ascertain in any definitive way whether Golden Vision could engage Ms Lee as a contractor at all and if so what needed to be done to accomplish that. Acting on the basis that Ms Lee was in fact a contractor was also reckless given those matters. The failure to keep proper records or give pay slips were also reckless acts by Golden Vision in the circumstances.
Misrepresenting Ms Lee’s engagement by Golden Vision as that of an independent contractor, even recklessly rather than deliberately, is serious. The applicant has directed my attention to the decision of the Federal Court of Australia in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (No 2) [2013] FCA 582 at [2]:
The vice of this conduct is that it unfairly deprives workers of the benefits of employment and unfairly undermines the effective operation of the system established by the Fair Work Act 2009 (Cth) (the FW Act) and other industrial legislation. Additionally, it arguably distorts competition to the disadvantage of employers who honour their statutory obligations. It constitutes an offence under the FW Act.
Here, Ms Lee was deprived of the benefits of her Award regulated employment. I am satisfied that the respondents knew that Ms Lee would ordinarily be considered to be an employee and that a person in her role would be an employee but nevertheless attempted to engage her as an independent contractor. That permitted Golden Vision to avoid Award safety net obligations and led to cost savings for Golden Vision. It also enabled Golden Vision to avoid its record keeping obligations which, amongst other things, are designed to assist employees to know how their entitlements have been calculated and paid. They also facilitate any investigative process by the applicant designed to monitor and enforce compliance with minimum employment standards.
The remuneration contraventions are serious because they represent a failure by Golden Vision to pay to Ms Lee her most basic entitlements as an employee. The underpayment was what might appear to be a relatively modest amount of $1,577.84. But to a young person on a working holiday, it was no doubt a significant sum. Ms Lee was only paid approximately one third of her remuneration entitlements.
Neither Golden Vision nor Mr Wang has been the subject of other proceedings by the applicant for contraventions of workplace laws. However, Mr Wang has been involved in the complaints that I have set out already. Nonetheless, it is not the case that he, or Golden Vision, has previously been dealt with for contraventions under the Act. That is a relevant consideration.
Golden Vision conducts a small business. It apparently has about 15 employees including two operations managers. It had a gross income of over $890,000 in the financial year ended 30 June, 2015, a substantial increase on its previous year’s operations. That translated to a net profit before tax of a little over $25,700. However, the company’s expenses for that year included a curious expense of $429,543 described as “Commission Paid”. That expense was not explained in the evidence.
Irrespective of the size of Golden Vision’s operation and its financial position, an appropriate monetary sanction must be imposed at a meaningful level. Employers, large, medium or small, cannot overcome financial difficulties by underpaying employees or misrepresenting their employment a contract for services in order to avoid paying statutory entitlements.
Despite Mr Wang’s most recent affidavit, there is no evidence of genuine contrition or remorse on the part of the respondents save that they have rectified the underpayments to Ms Lee. The rectification came approximately six months after a compliance notice was issued requiring the amount to be paid to Ms Lee and it was paid in the face of impending litigation. Mr Wang argues that the underpayment was rectified immediately that he was given notice of the “correct value” of the underpayment. But it was always within Mr Wang’s power to calculate Ms Lee’s correct entitlements and pay them to her. He knew which Award applied. He knew the rates that she ought to have been paid because he sets out in his first affidavit, for example, the amount that Golden Vision was entitled to charge Ms Lee for her accommodation and food under the Award. His delay in rectifying the modest underpayment tells against any finding that the contrition and regret now expressed is genuine.
Nonetheless, throughout the applicant’s investigation, the respondents maintained the Ms Lee was an independent contractor and not an employee. Mr Wang showed no contrition whilst the applicant was, through her Inspectors, conducting the investigation. He told Fair Work Inspector Northwood that: “Your findings are wrong and I am not going to pay the Compliance Notice”. Further, at the conclusion of the investigation, Mr Wang said to Fair Work Inspector Northwood that he did not want pay the amount in the Compliance Notice because: “She ate too much food and used too much air-conditioning”.
There is no evidence that the respondents have communicated any apology to Ms Lee.
Mr Wang’s most recent evidence suggests that the respondents have now put in place some steps to ensure future compliance with workplace laws, to avoid any further misclassification of employees as contractors, and to prevent further possible contraventions of the Award and the Fair Work Act.
Mr Wang co-operated in the applicant’s investigation by participating in a formal record of interview. However, Golden Vision did not comply with the notice to produce. Moreover, the respondents conduct in these proceedings has been less than cooperative. Despite informing the Court that the respondents intended to proceed by way of full admissions, the respondents filed a defence on 6 August, 2015 which disputed various factual matters that underpinned the contraventions and was at odds with his stated intention to make full admission and proceed directly to a penalty hearing. The filing of the defence in the form that it was caused further expense because the application had to be relisted.
It is important to recognise the seriousness of record-keeping and payslip contraventions. The First and Second respondents have admitted to failures to comply with record keeping obligations and both the First and Second respondents have admitted to failing to provide payslips. In Fair Work Ombudsman v Bound For Glory Enterprises & Anor [2014] FCCA 432 the Court recorded:
Ensuring compliance with minimum standards is an important consideration in this case. One of the principal objects of the FW Act is the maintenance of an effective safety net of employer obligations, and effective enforcement mechanisms. The failure to keep records by the respondents which is admitted arguably undermines and frustrates the attainment of that object. There is also the issue that the failure to keep the records themselves and the vice that conduct gives rise to. As was identified in Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258 and Fair Work Ombudsman v Orwill Pty Ltd & Anor [2011] FMCA 730 the problem where employers don’t keep proper records is that it creates a structure within which breaches of the industrial laws can easily be perpetrated.
The failure to keep proper records and refusing to comply with the notice to produce documents or records is serious. In the present case, Ms Lee took and kept photos on her telephone of payments made to her and of the shifts she worked. She was able to provide those to the applicant for the purposes of the investigation. They enabled the applicant to calculate the underpayments owing to Ms Lee. Moreover, the evidence reveals that Mr Wang informed Fair Work Inspector Duggan that he had a copy of the summary amount Ms Lee was paid in his possession but did not intend to give that to the applicant because he was busy and did not have time to collate the documents in order to comply with the notice to produce.
Both specific and general deterrence play a role in the fixing of penalties in this case. The applicant submits that specific deterrence is of considerable significance in these proceedings because, amongst other reasons, Golden Vision continues to employ workers, Mr Wang remains in control of the business and there is no credible evidence of contrition or regret. I accept those submissions.
The penalty also needs to act as a deterrent to others who might be tempted to contravene the Act. It is important to send a message to others in the community, namely employers:
a)who engage (or contemplate engaging) in contracting arrangements with people who would ordinarily be seen as employees;
b)who employ 417 visa holders; and
c)who operate in the hospitality industry in general.
I accept that Ms Lee was a member of a vulnerable group of workers, namely workers from a non-English speaking background and subject to a working holiday visa.
There is evidence before me that establishes that in 2015, the applicant participated in a Senate Inquiry dealing with workers on temporary visa programs. The Senate Inquiry’s Interim Report recorded that submissions to the Inquiry drew attention to the fact that Working Holiday Makers, including 417 visa holders are generally young, low skilled and with lower than average English skills.
A recent report produced by the applicant on the Hospitality Industry titled “National Hospitality Industry Campaign: Restaurants, Cafe’s and Catering” (2015) found that in a sample of businesses in Queensland only 51% were compliant. The applicant argues that given the high levels of non-compliance in the industry, general deterrence is important to deter any employers who may be tempted to commit similar contraventions in the industry. I agree.
I also accept that there is also a need to send a message to the community, and particularly employers, that employers must take steps to respond to notices to produce issued by the Fair Work Ombudsman. The attitude demonstrated by Mr Wang to compliance with the notice to produce served on Golden Vision should be actively discouraged.
The Penalties
This is not a case of deliberate or wilful disregard of the employee’s entitlements. It is a case of an employer attempting to avoid the imposition of expense and inconvenience. The law does not prevent or prohibit that approach, provided it is done correctly. An employer can hardly be criticised for structuring its business in such a way as to reduce the incidence of expense, provided it does so in ways which fall within the law rather than outside it.
Having regard to the matters I have discussed above, and making due allowance for the respondents’ cooperation with the applicant and in these proceedings, it seems to me that in respect of Golden Vision the following penalties are appropriate:
a)one penalty of $5,000 for the contraventions of s.357(1) of the Fair Work Act;
b)one penalty of $5,000 for the contraventions of s.45 of the Fair Work Act;
c)one penalty of $2,500 for the contravention of s.535(1) of the Fair Work Act;
d)one penalty of $2,500 for the contravention of s.536(1) of the Fair Work Act; and
e)one penalty of $2,500 for the contraventions of s.712(3) of the Fair Work Act
In respect of Mr Wang the following penalties are appropriate:
a)one penalty of $1,000 for the contraventions of s.357(1) of the Fair Work Act;
b)one penalty of $1,000 for the contraventions of s.45 of the Fair Work Act;
c)one penalty of $500 for the contravention of s.535(1) of the Fair Work Act;
d)one penalty of $500 for the contravention of s.536(1) of the Fair Work Act; and
e)one penalty of $500 for the contraventions of s.712(3) of the Fair Work Act
The total penalty for Golden Vision is $17,500. The total penalty for Mr Wang is $ 500.
In my view those penalties are an appropriate response to the conduct which led to the contraventions. On the evidence they are not oppressive or crushing but they are sufficient to mark the Court’s disapproval of the respondent’s conduct and serve as a warning to others that similar conduct can have serious consequences and ought not be repeated.
Finally, the applicant seeks an order that Golden Vision undertake a wages and entitlements audit for workers engaged by it for the period 1 July, 2014 to 30 June, 2015 to assess compliance with the Fair Work Act and applicable industrial instruments. I decline to make that order for a number of reasons. First, the order is opposed by the respondents. Second, no argument, written or oral was addressed to this issue by the applicant in light of the respondents’ opposition to the order. Third, the source of the Court’s power to make that order was not identified. Fourth, the evidence does not suggest that the order is otherwise appropriate.
I make the orders set out at the commencement of these reasons.
I certify that the preceding eighty-four (84) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 8 July, 2016.
Date: 8 July 2016
2
4
4