Fair Work Ombudsman v Goldfinger Facility Management Pty Ltd and Anor (No.2)
[2017] FCCA 2374
•11 October 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v GOLDFINGER FACILITY MANAGEMENT PTY LTD & ANOR (No.2) | [2017] FCCA 2374 |
| Catchwords: INDUSTRIAL LAW – Contraventions – assessment of penalty. |
| Legislation: Cleaning Services Award 2010, Sch.B, cll.B9.8-WA.2.8, B9.8-WA.2.9, B9.8-WA.2.13, B9.8-WA.2.14, B9.8-WA.2.15, 12.5(a), 20.1, 28.2, 28.3 Fair Work Regulations 2009 (Cth) Federal Circuit Court Rules 2011 (Cth), r.13.03A(2) |
| Cases cited: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809 Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216; (1992) 42 IR 255; (1992) 34 AILR 369 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | GOLDFINGER FACILITY MANAGEMENT PTY LTD (ACN 167 304 350) |
| Second Respondent: | BLAGOJCE DJONESKI |
| File Number: | PEG 414 of 2014 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 13 July 2016 |
| Date of Last Submission: | 13 July 2016 |
| Delivered at: | Perth |
| Delivered on: | 11 October 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr R Hooker |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| For the Respondents: | No appearance |
ORDERS
The Applicant is to file a Minute of Proposed Orders to reflect these Reasons for Judgment by 4.00pm on 18 October 2017, and that final Orders issue electronically from Chambers thereafter.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 414 of 2014
| FAIR WORK OMBUDSMAN |
Applicant
And
| GOLDFINGER FACILITY MANAGEMENT PTY LTD (ACN 167 304 350) |
First Respondent
| BLAGOJCE DJONESKI |
Second Respondent
REASONS FOR JUDGMENT
Introduction and contraventions
The Applicant, the Fair Work Ombudsman (“FW Ombudsman”) seeks the imposition of pecuniary penalties on Goldfinger Facility Management Pty Ltd ACN 167 304 350 (“Goldfinger”), the first respondent, and Blagojce Djoneski (“Mr Djoneski”), the second respondent, and related relief, in relation to contraventions of the Fair Work Act 2009 (Cth) (“FW Act”) and the Fair Work Regulations 2009 (Cth) (“FW Regulations”) as found and declared by this Court on 28 April 2016 (collectively, the “Contraventions”).
The contraventions concern the employment of the following employees of Goldfinger Facility Management Pty Ltd (“Goldfinger”);
a)Scott Ferriday (“Mr Ferriday”) who was employed from 18 April 2014 to 15 May 2014;
b)Youngmi Lee (“Ms Lee”) who was employed from 16 May 2014 to 1 June 2014;
c)Gippeum Kim (“Ms G Kim”) who was employed from 20 May 2014 to 2 June 2014;
d)Eunsong Kim (“Ms E Kim”) who was employed from 13 May 2014 to 2 June 2014;
e)Shujauuddin Khaja (“Mr Khaja”) who was employed from 5 May 2014 to 27 June 2014; and
f)Usaid Quraishi (“Mr Quraishi”) who was employed from 1 April 2014 to 5 August 2014,
(collectively the “Employees”): Statement of Claim (“SOC”) at [6] and [8].
Parties and employees concerned
At all material times, Goldfinger carried on a business in the commercial contracting cleaning industry in Perth, Western Australia. Relevantly, Goldfinger held a commercial cleaning contract at the Melbourne Hotel (“Hotel”), situated at 942 Hay Street, Perth.
At all material times Mr Djoneski was a director of Goldfinger and was responsible for its overall direction, management and control: SOC at [5].
The Employees' employment involved work of varying kinds at the Hotel: SOC at [4]. Specifically:
a)Mr Ferriday, Ms Lee, Ms G Kim and Ms E Kim (“Cleaning Employees”) were engaged by Goldfinger as housekeepers on a casual basis. Their duties were to clean and make up rooms in the Hotel: SOC at [8] and [11]. All held working holiday visas, and Mr Ferriday was a Welsh national, while Ms Lee, Ms G Kim and Ms E Kim were Korean nationals: SOC, at [9] and [10];
b)Mr Khaja was engaged by Goldfinger as its General Manager: SOC, at [2]; and
c)Mr Quraishi was engaged by Goldfinger as a Marketing Specialist: SOC at [16] and [17]. Mr Quraishi is an Indian national and was the holder of a Temporary Business Entry Visa (Class UC): SOC at [20].
The Employees (other than Mr Khaja) were not paid at all during their periods of employment: SOC at [29], [35], [41], [47], [53], [60], [67], [74], [100], [111] and [116]. Goldfinger paid Mr Khaja $600 on 3 July 2014 and $1,000 on 23 July 2014: SOC at [91].
The Court's approach to penalty
The authorities establish that the appropriate penalties are to be determined as follows:
a)first, the Court identifies the separate contraventions involved. Each contravention of, in turn each separate obligation imposed by, the FW Act (or the FW Regulations) is a separate contravention of a civil remedy provision for the purposes of s.539(2) of the FW Act: Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216; (1992) 42 IR 255; (1992) 34 AILR 369 at [25] per Gray J (“Gibbs”); McIver v Healey [2008] FCA 425; (2008) 60 AILR 100-850 at [16] per Marshall J;
b)second, the Court should consider whether the extent to which the contraventions so identified in the first step constitute a "course of conduct", and thus ought be treated as a single contravention within the meaning and operation of s.557 of the FW Act: FW Act, s.557(1);
c)third, to the extent that two or more contraventions have common elements, the Court may take this into account in considering the appropriateness in all the circumstances of the quantum of penalty for the contraventions. That reflects the basic principle that a contravener should not be penalised more than once for what, in a practical sense, amounts to the same contravening conduct, such that the penalties imposed by the Court should be an appropriate, but fair response to what Goldfinger and Mr Djoneski did in contravention of their statutory obligations: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809 at [46] per Graham J (“Australian Ophthalmic Supplies”);
d)fourth, the Court, having identified the relevant factors arising from the first three steps, must fix appropriate penalties for each contravention having regard to all of the circumstances of the case; and
e)fifth, having fixed appropriate penalties for the contraventions, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the contravening conduct: Kelly v Fitzpatrick[2007] FCA 1080; (2007) 166 IR 14 at [30] per Tracey J (“Kelly”); Australian Ophthalmic Supplies at [23] per Gray J; [71] per Graham J and [102] per Buchanan J. The Court should apply an "instinctive synthesis" (often referred to in the applicable case law as the "totality principle'') in making this assessment: Australian Ophthalmic Supplies at [27] per Gray J and [55] and [78] per Graham J.
Contraventions admitted by way of default
Based on the admissions which Goldfinger is deemed to have made, by reason of its default, pursuant to r.13.03A(2) of the FCC Rules, Goldfinger contravened:
a)section 45 of the FW Act in that it failed to pay Mr Ferriday, Ms Lee, Ms G Kim and Ms E Kim (“Cleaning Employees”) the minimum rate of pay for day shift hours worked in accordance with subclause B.9.8-WA.2.8 of Schedule B of the Cleaning Services Award 2010 [MA000022] (“Cleaning Services Award”);
b)section 45 of the FW Act in that it failed to pay Mr Ferriday, Ms Lee and Ms E Kim, the minimum hourly rate for early shift hours in accordance with subclause B.9.8 - WA.2.9 of Schedule B of the Cleaning Services Award;
c)section 45 of the FW Act in that it failed to pay the Cleaning Employees the minimum hourly rate for hours worked on a Saturday in accordance with subclause B.9.8 - WA.2.13 of Schedule B of the Cleaning Services Award;
d)section 45 of the FW Act in that it failed to pay Mr Ferriday, Ms Lee and Ms E Kim the minimum hourly rate for hours worked on a Sunday in accordance with subclause B.9.8 - WA.2 .14 of Schedule B of the Cleaning Services Award;
e)section 45 of the FW Act in that it failed to pay Mr Ferriday, Ms G Kim and Ms E Kim the minimum hourly rate for hours worked on a public holiday in accordance with subclause B.9.8 - WA.2.15 of Schedule B of the Cleaning Services Award;
f)section 45 of the FW Act in that it failed to pay Mr Ferriday, Ms G Kim and Ms E Kim for overtime worked, Monday to Saturday in accordance with clause 28.2 of the Cleaning Services Award;
g)section 45 of the FW Act in that it failed to pay Mr Ferriday for overtime worked on a Sunday in accordance with clause 28.3 of the Cleaning Services Award;
h)section 45 of the FW Act in that it failed to pay Ms E Kim for overtime worked on a public holiday in accordance with clause 28.4 of the Cleaning Services Award;
i)section 45 of the FW Act in that it failed to pay Mr Ferriday, Ms Lee and Ms E Kim casual loading in accordance with clause 12.5(a) of the Cleaning Services Award;
j)section 45 of the FW Act in that it failed to pay the Cleaning Employees weekly or fortnightly in accordance with clause 20.1 of the Cleaning Services Award;
k)section 293 of the FW Act by failing to pay Mr Khaja the amount prescribed under the National Minimum Wage Order 2013 – 2014 (“NMWO 2013”);
l)section 293 of the FW Act by failing to pay Mr Quraishi the amount prescribed under the NMWO 2013 up to 1 July 2014 and the National Minimum Wage Order 2014 – 2015 (“NMWO 2014”) thereafter until 5 August 2014;
m)section 44 of the FW Act by failing to pay Mr Khaja and Mr Quraishi their accrued but untaken annual leave entitlements at the time of the termination of their employment in accordance with s.90(2) of the FW Act;
n)section 44 of the FW Act by failing to pay Mr Khaja and Mr Quraishi for their ordinary hours of work on a public holiday as required by s.116 of the FW Act;
o)section 323 of the FW Act by failing to pay Mr Khaja and Mr Quraishi wages in full; and
p)section 536(1) of the FW Act by failing to give a pay slip to Mr Khaja in respect of a payment made to him on 23 July 2014.
The Employees were underpaid the following amounts:
a)Mr Ferriday - $3,351.70;
b)Ms Lee - $1,557.01;
c)Ms G Kim - $1,263.34;
d)Ms E Kim - $3,344.21;
e)Mr Khaja - $4,287.68; and
f)Mr Quraishi - $1,239.92.
None of the underpayments have been rectified by Goldfinger (nor, it would appear on the evidence before the Court, have any efforts been made towards any such rectification).
Based on the admissions which Mr Djoneski is deemed to have made, by reason of his default, pursuant to r.13.03A(2) of the FCC Rules, Mr Djoneski was "involved in" each of Goldfinger's contraventions within the meaning of s.550(2) of the FW Act, and pursuant to s.550(1) of the FW Act is thereby taken to have himself committed those contraventions: see order 2 of the Court’s orders of 28 February 2016.
Grouping of Contraventions
Course of conduct
There were repeat contraventions by Goldfinger over a period of time between about 1 April 2014 to 5 August 2014.
Two or more contraventions may, depending upon the particular circumstances attract the operation of the course of conduct provisions contained in s.557 of the FW Act.
Goldfinger is entitled to the benefit of the course of conduct provisions in relation to repeated breaches of each relevant provision in respect of each employee; for instance, the multiple contraventions of the minimum wage provisions arising from the failure to pay an employee's wages should be treated as a single contravention. In this instance, Goldfinger has the benefit of the statutory course of conduct provision in relation to the multiple breaches of each separate provision with respect to each of the employees: see Fair Work Ombudsman v VS Investment Group Pty Ltd & Anor [2013] FCCA 208 at [19] per Judge Jarrett where the Court said as follows:
Moreover, in my view s 557(1) does not require the Court to treat the alleged contraventions of s 45 of the Fair Work Act (by failure to pay basic rates of pay for example) in respect of multiple employees, as one contravention. The failure to pay a basic rate of pay to one employee over time might properly be seen as a course of conduct. However, the failure to pay a basic rate of pay to a number of employees should not, in my view, be seen as a “course of conduct” for the purposes of s 557(1) unless it is the result of a single decision made by the employer. The failures to pay basic rates of pay to a number of different employees are several and separate courses of conduct in respect of each employee which is dependent upon the decision made in respect of that employee. So much seems to be accepted by the approach of Marshall J in McIver v Healy (above)."
Common element
Although each individual obligation gives rise to a separate contravention: Gibbs at [24] per Gray J, Blandy v Coverdale NT Pty Ltd (ACN 102 611 423) [2008] FCA 1533; (2008) 178 IR 150 at [56] per Reeves J, it is open to the Court to group separate contraventions together where the contraventions may be said to overlap with each other or involve the potential punishment of contraventions for the same or substantially similar conduct: Pearce v The Queen [1998] HCA 57; (1998) 194 CLR 610; (1998)103 A Crim R 372; (1998) 72 ALJR 1416; (1998) 156 ALR 684 at [40] per McHugh, Hayne and Callinan JJ; Johnson v The Queen (2004) 205 ALR 346 at [27]-[34] per Gummow, Callinan and Heydon JJ; Australian Ophthalmic Supplies at [46] and [72] per Graham J and [93] per Buchanan J; Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479 at [24]-[25] per Bromberg J.
In the Court’s view Goldfinger and Mr Djoneski are therefore entitled to the benefit of further grouping on the basis of common elements, as follows:
a)the failure to pay the Cleaning Employees the minimum rate of pay for day shift hours and early shift hours as required by the Cleaning Services Award arose from the failure to pay minimum rates of pay for any shift work;
b)the failure to pay the Cleaning Employees the Saturday and Sunday penalties as required by the Cleaning Award arose from the failure to pay any weekend penalties;
c)the failure to pay the Cleaning Employees overtime at the rates applicable for work performed Monday to Saturday and Sunday as required by the Cleaning Services Award arose from the failure to pay any overtime; and
d)the failure to pay amounts prescribed under the National Minimum Wage in respect of Mr Khaja and Mr Quraishi respectively arose from the failure to pay any amounts under the NMWO 2013 and NMWO 2014 respectively.
These contraventions can therefore be grouped for common elements on the basis that the contraventions arise from the same or substantially similar conduct as set out in the table showing penalties determined by the Court at [65] below. The remaining contraventions should not be grouped.
On the basis of the 12 contraventions, as set out in the table showing penalties determined by the Court at [65] below, which includes those contraventions that have been grouped, the maximum penalty that the Court can impose on Goldfinger is $586,500 (11 contraventions with a maximum penalty of $51,000 and 1 contravention with a maximum penalty of $25,500: FW Act, s.539(2)). The maximum penalty that the Court can impose on Mr Djoneski is $117,300 (11 contraventions with a maximum penalty of $10,200 and 1 contravention with a maximum penalty of $5,100) for his involvement in Goldfinger's contraventions.
Factors relevant to penalty
A non-exhaustive list of factors relevant to the imposition of a penalty was usefully summarised by this Court in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[55] per Mowbray FM (“Harrington Corporation”). Those factors include:
a)the nature and extent of the conduct which led to the breaches;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the breaches;
d)whether there had been similar previous conduct;
e)whether the breaches were properly distinct or arose out of the one course of conduct;
f)the size of the business enterprise involved;
g)whether or not the breaches were deliberate;
h)whether senior management was involved in the breaches;
i)whether the party committing the breach had exhibited contrition, taken corrective action and cooperated with the enforcement authorities;
j)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
k)the need for specific and general deterrence.
This summary was adopted in Kelly at [14] per Tracey J. While the summary is a convenient checklist, it does not restrict the matters which may be taken into account in the exercise of the Court's discretion: Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at [11] per Gyles J; Australian Ophthalmic Supplies at [91] per Buchanan J.
Nature and extent of the contravening conduct
The nature and extent of the contravening conduct which the Court takes into account in this case includes the following:
a)the Employees were engaged with Goldfinger for short periods of time, ranging from a couple of weeks to approximately four months;
b)Mr Khaja had a wife and child in India and worked in Australia in order to send money home to them: Khaja Affidavit, at [3];
c)during their respective employment periods, the Employees were not paid at all for work performed, other than in relation to Mr Khaja who was paid an amount of $1,600;
d)during the investigation, officers of the FW Ombudsman were unable to communicate with Mr Djoneski as his whereabouts were unknown, and despite numerous site visits in an attempt to speak with Mr Djoneski, Mr Djoneski was evasive and failed to respond to any attempts at communication on the part of the FW Ombudsman.
The contraventions in this matter are serious and comprise:
a)a complete, conscious and deliberate failure on the part of Goldfinger and Mr Djoneski to:
i)pay the Employees at all (other than in relation to Mr Khaja who was paid the sum of $1,600); and
ii)satisfy fundamental minimum entitlements of employees under the FW Act, and entitlements pursuant to the employment contracts the Employees had with Goldfinger; and
b)a complete disregard for Goldfinger's legal obligations as an employer, and the absence of any expression of contrition, regret or acceptance of wrongdoing as demonstrated by the lack of:
i)cooperation with the FW Ombudsman's investigation; and
ii)participation in these proceedings,
by Goldfinger and Mr Djoneski.
Although (as the FW Ombudsman submitted) an employer must not focus on the financial interests of its business at the expense of attending to its legal obligations as an employer: Fair Work Ombudsman v Kojima & Anor [2013] FCCA 976 at [39] and [40] per O’Sullivan J, the Court is unable on the evidence to say if Goldfinger and Mr Djoneski did so in this case, as opposed to simply, and wholly, disregarding its obligation to pay various entitlements to the Employees as part of its standard mode of operation.
Circumstances in which the conduct took place
Mr Ferriday, Ms G Kim, Ms E Kim and Mr Quraishi were all holders of working holiday visas: SOC at [10].
The FW Ombudsman submitted that there was exploitation of employees in circumstances of genuine vulnerability, namely Mr Ferriday, Ms G Kim, Ms E Kim and Mr Quraishi who were Welsh, Korean and Indian working holiday visa holders respectively, and who were seeking employment in Australia in the cleaning industry.
There was, in relation to Mr Khaja, Mr Quraishi and Mr Ferriday, some evidence of their vulnerability to exploitation by reason of their need to be employed whilst in Australia on the relevant visas, and their preparedness to accept employment in the commercial cleaning industry as a consequence, and to, in essence, take what was offered to them. The evidence was not, however, particularly compelling, and merely because an employee is a foreign national, unfamiliar with Australia’s labour practices, does not mean that they are more vulnerable to underpayment or exploitation than any other employee who is seeking employment: Hanssen Pty Ltd v Jones [2009] FCA 192; (2009) 179 IR 57 at [55]-[56] and [60] per Siopis J. The circumstances outlined in the affidavit evidence do not amount to compelling evidence of vulnerability, or exploitation, of each of the Employees concerned. The evidence does indicate that, particularly in the case of Mr Khaja and Mr Ferriday, they clung to employment with Goldfinger in the hope of being paid, and left when it became evident that they were not going to be paid, but there is nothing in the evidence which indicates that they were, in that regard, in any different a position to any other employee who might have been seeking and obtained employment in the commercial cleaning industry, or with Goldfinger.
Circumstances variously relating to the Employees included the following:
a)other than Mr Khaja, the Employees were not paid at all for minimum rates of pay, overtime, penalty rates and casual loading or overtime;
b)Mr Khaja was not paid his wages in full, having only received the sum of $1,600: Khaja Affidavit at [19]; and
c)Mr Khaja and Mr Quraishi were not paid annual leave upon termination of employment or public holiday pay: SOC at [106]-[117].
Nature and extent of the loss
The Court notes the following concerning the nature and extent of the loss suffered by the Employees:
a)the total underpayment owing to the Employees of $26,627.10, which, although a relatively moderate sum in the context of matters which come before this Court, was nonetheless very significant to the Employees as it represented their entire entitlements. In Fair Work Ombudsman v Zillion Zenith International Ply Ltd [2014] FCCA 433 at [26] per Judge O’Sullivan the Court noted:
The amounts involved may seem trifling to some but they were required to be paid to young employees for whom they were far from trifling and for which they've had to wait.
b)the loss suffered by the Employees was also significant because it involved complete non-payment during employment. The Employees were deprived of the protections of the FW Act; and
c)the underpayments to the Employees remain outstanding. Goldfinger has received a benefit by reason of the non-payment of wages and entitlements. In Fair Work Ombudsman v Lycamobile Pty Ltd [2013] FCCA 2132 at [16] per Judge Burnett (“Lycamobile”) the Court specifically considered the issue of depriving employees engaged in 'basic employment' of the financial benefit of their employment and stated:
… in terms of cash flow, the delay in paying basic remuneration to employees engaged in what can only be described as basic employment leads to a very strong inference that the hardship occasioned to those employees would have been greater than might otherwise be expected for higher paid employees, who one would expect to be better financially resourced.
The nature and extent of the loss suffered by the Employees is significant and warrants the imposition of a meaningful penalty because:
a)the underpayment of $26,627.10 is not an insignificant sum, in the context of the short employment periods and the award reliant employees to whom it relates;
b)it involves contraventions of minimum standards of the most fundamental kind, namely the payment of wages and entitlements: Fair Work Ombudsman v Dawe [2013] FMCA 191 at [23] per Emmett FM;
c)Goldfinger had had the benefit of the non-payment of wages and entitlements: Fair Work Ombudsman v Shafi Investments Pty Ltd & Ors (No 2) [2013] FMCA 168 at [15] per Whelan FM, whilst denying the Employees the benefit of the underpaid entitlements: Lycamobile at [16] per Burnett FM; and
d)Goldfinger has not taken any steps to rectify the underpayment.
Previous contraventions
Neither Goldfinger nor Mr Djoneski has previously been the subject of legal proceedings by the FW Ombudsman for any contravention of a workplace law.
The FW Ombudsman relied upon what it said was a significant history of compliance-related events in relation to entities either associated with Goldfinger (and often bearing similar names), or in relation to which Mr Djoneski had been involved.
Insofar as those compliance-related events relate to alleged failures to pay entitlements under the FW Act the Court repeats what it said in Fair Work Ombudsman v ACN 146 435 118 Pty Ltd & Anor (No 2) [2013] FCCA 1270 at [58] per Judge Lucev:
… In that regard, the Court notes that it is conduct relevant to the contraventions complained of which might go to the question of the circumstances in which the conduct took place, and might include for example, opportunities to remedy that conduct, or to make payment of underpayments, prior to, and during the course of, any proceedings instituted in respect of the contraventions which is relevant. As for other conduct of the directors and related entities which has not resulted in contravention findings, that conduct must be accorded very limited weight. That said, such conduct of directors and related entities may still be relevant for the purposes of the specific and general deterrence and deliberateness factors to be considered by the Court in imposing penalty. It is to prior contraventions and conduct of respondents that the Court must primarily look for the purposes of this factor, and not the investigative record of the regulator. The Court must be careful not to impose sentence in respect of matters which have not, and may not, ever result in contravention proceedings, and which may not, in any event, constitute a contravention of the statute. Worse than that, it ought not contribute to an inappropriate over-zealousness on the part of the regulator if courts were to consider prior involvement with the regulator as a significant sentencing factor, except as it relates to the circumstances of the particular contraventions before the Court.
In relation to alleged non-compliance the FW Ombudsman also relied upon a denied contractual benefits case heard in the Western Australian Industrial Relations Commission (“WAIRC”). In that regard, the Court repeats what was said in Fair Work Ombudsman v Proplas Industries Pty Ltd & Anor (No 3) [2012] FMCA 130 (“Proplas Industries (No 3)”) that a breach of denied contractual benefits determination by the WAIRC is not in relation to the breach of an industrial award or industrial instrument, but rather a claim for denied contractual benefit under a quasi-contractual jurisdiction given to the WAIRC by the Western Australian Parliament, and is not an example of a contravention of a penalty type provision, but more akin to a determination of a civil breach of contract claim, and is therefore not a type of case which this Court will consider in determining whether or not there has been similar previous conduct for penalty purposes: Proplas Industries (No 3) at [41] per Lucev FM.
In all of the above circumstances, it is appropriate to treat both Goldfinger and Mr Djoneski as first time contraveners. Ordinarily, that would entitle them to a discount on penalty, and in most cases a significant discount on penalty.
Whether the breaches arose out of the one course of conduct
See [11]-[16] above.
Size and financial circumstances of the business
Goldfinger is no longer trading. The Australian Securities Investment Commission (“ASIC”) has commenced strike off action against it. The FW Ombudsman has obtained a deferral of the ASIC strike off action.
The FW Ombudsman submitted that while Goldfinger and Mr Djoneski have not filed any evidence as to their size or financial position, it is clear on the authorities that the size of a business and an employer's financial position at the time of the contraventions are not relevant to the question of penalty. Employers, be they small, medium or large, have an obligation to meet minimum standards in relation to their employees, and they cannot overcome financial difficulties by underpaying their employees: Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38; (2009) 61 AILR 101-000 at [26] to [30] per Simpson FM (“Saya Cleaning”).
The submission that:
a)employers must meet their obligations notwithstanding their financial difficulties is correct; and
b)the size of a business and an employer’s financial position are not relevant to the question of penalty is incorrect.
The latter matter was dealt with in Fair Work Ombudsman v Ultra Tune Australia Pty Ltd [2012] FMCA 560; (2012) 225 IR 326 at [40]-[47] per Lucev FM (“Ultra Tune”), where the relevant authorities of the then Federal Magistrates Court, the Federal Court, and the former Industrial Relations Court of Australia were considered at length. In Ultra Tune the Federal Magistrates Court found that Saya Cleaning was not authority for the proposition that the size and financial resources of a contravener, or its capacity to pay, can be ignored, or not considered, when determining penalty, because in Saya Cleaning the Federal Magistrates Court did not actually express a view as to whether or not the size and financial resources of a contravener ought to affect penalty: Ultra Tune at [43] per Lucev FM. In Ultra Tune, on the basis of authority binding the Federal Magistrates Court, and now this Court, including the Federal Court and Australian Industrial Relations Court authorities there cited: Ultra Tune at [40]-[41] per Lucev FM, the Federal Magistrates Court found that the size and financial resources of a contravener may be considered in relation to penalty, and that if Saya Cleaning said otherwise it was inconsistent with those superior court authorities: Ultra Tune at [41] and [43(b)] per Lucev FM.
In this case, however, nothing turns on the issue because there is nothing in the materials before the Court that properly indicates the size of Goldfinger’s business, or its capacity to pay, or which otherwise indicates that they might be a factor warranting any reduction in the penalty which would otherwise be imposed.
Ensuring compliance with minimum standards
Ensuring compliance with minimum standards is a very important consideration in contravention cases. The objects of the FW Act include the maintenance of an effective safety net of minimum terms and conditions, and effective enforcement mechanisms: FW Act, s.3(b). The substantial penalties set by Parliament and awarded by the Courts for failing to comply with minimum award obligations reinforce the importance placed on compliance with minimum standards and an effective enforcement framework: FW Act, s.539(2).
In the context of the objects of the FW Act requiring compliance with minimum standards, including minimum rates of pay and entitlements, the contraventions in this case involve an undermining of the statutory objects and purpose of the FW Act, and in that context, a meaningful penalty is appropriate. Ordering penalties at a meaningful level demonstrates that there are serious consequences for failing to comply with the FW Act, and act as an incentive for employers to comply with minimum standards.
Deliberateness of contraventions
The FW Ombudsman submits that the conduct of Goldfinger and Mr Djoneski was deliberate.
Goldfinger and Mr Djoneski did not attempt to make payment to the Employees at all during their employment periods despite requests to do so (other than in relation to Mr Khaja who received a total amount of $1,600). There is also evidence which indicates that when enquiries were made by certain employees of Mr Djoneski those enquiries were either deflected, avoided or not answered.
In all the circumstances the Court has no doubt that the actions of Goldfinger (through Mr Djoneski) and Mr Djoneski were deliberate, and that the penalty to be imposed should reflect the deliberate nature of the contraventions by Goldfinger and Mr Djoneski.
Corrective action, contrition and cooperation
Neither Goldfinger nor Mr Djoneski has rectified the underpayments owing to the Employees, and have avoided having to pay the Employees by various means, including abandoning the offices from which Goldfinger operated and failing to communicate with the FW Ombudsman.
The Court is satisfied that neither Goldfinger nor Mr Djoneski:
a)has taken any corrective action;
b)is contrite; or
c)cooperated at any stage, or in any way, with the FW Ombudsman.
The Court may discount penalty where admissions have been made by respondents in civil penalty proceedings, and the discounts may be greater where the admissions are supplemented by findings of genuine contrition or regret. Given the failure of Goldfinger and Mr Djoneski to cooperate with the FW Ombudsman’s investigation, and to participate in these proceedings, no such penalty discount is warranted in this case.
The Court therefore considers that the penalty must reflect the lack of corrective actions, contrition and cooperation by Goldfinger and Mr Djoneski.
Involvement of senior management
On the evidence Mr Djoneski was the senior manager in Goldfinger, and a director. As such, and on the evidence given on affidavit by some the Employees in these proceedings, Mr Djoneski was the operative mind in relation to the employment and payment of the Employees. Goldfinger’s most senior management was therefore directly involved in the contraventions, both for the purposes of penalty assessment and accessorial liability for the purposes of s.550 of the FW Act (as to the latter see order 2 of the Court’s orders of 28 April 2016).
Deterrence
It is well established that the need for specific and general deterrence are matters that are relevant to the imposition of a civil penalty: Harrington Corporation at [51]-[55] per Mowbray FM; Ponzio v
B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 62 IR 444; (2007) 59 AILR 100-669 at [93] per Lander J (“B & P Caelli Constructions”).
General deterrence
In Fair Work Ombudsman v Maclean Bay Pty Ltd(No 2) [2012] FCA 557; (2012) 64 AILR 101-635 at [29] per Marshall J the Federal Court observed that:
It is important to ensure that the protections provided by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected.
The role of general deterrence in determining the appropriate penalty is illustrated by the comments in B & P Caelli Constructions at [93] per Lander J:
In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217.
Employers should be in no doubt that they have a positive obligation to ensure compliance with the obligations they owe to their employees under the law, and that they must provide their employees with the correct entitlements and issue payslips. It is also important to maintain a level playing field for all employers in an industry, with respect to wage costs. Those employers who fail to comply with minimum obligations gain an unfair competitive advantage over those employers who do comply with their workplace obligations. The Court also observes that it is now almost notorious that there are significant pockets of non-compliance in relation to the payment of wages and entitlements, either at all or correctly, in the commercial cleaning industry, and the Court notes that there was evidence in these proceedings as to the significant activity undertaken by the FW Ombudsman in endeavouring to deal with and ensure that employers paid employees in the commercial cleaning industry their correct wages and entitlements.
It follows from the above that a meaningful and robust measure of general deterrence is appropriate in this case so that other employers, particularly in the commercial cleaning industry, are not impressed with the idea that they can avoid payment of employees’ minimum entitlements, such as occurred in this case.
Specific deterrence
There is no dispute that:
a)Goldfinger is no longer trading;
b)ASIC has commenced strike off action against Goldfinger;
c)the strike off action by ASIC has been deferred at the request of the FW Ombudsman; and
d)the whereabouts of Mr Djoneski is not presently known.
There is some evidence before the Court that as at April 2016 Mr Djoneski might have been involved in a cleaning company called Cannon Trading Pty Ltd as a manager. It is therefore possible that Mr Djoneski remains an active participant in the commercial cleaning industry.
Whilst Goldfinger is not presently trading, there remains a risk that Goldfinger may continue to trade in the future.
The Court should impose penalties on Goldfinger and Mr Djoneski that meaningfully endeavour to ensure that there is no future non-compliance by Goldfinger and Mr Djoneski.
Penalty recommendations
In The Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Ors [2015] HCA 46; (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494 (“Director FWBII”) the High Court confirmed that parties to civil penalty proceedings can make submissions which:
a)identify a range of penalties;
b)nominate specific penalties in respect of particular contraventions; and
c)urge the Court to adopt an agreed position on penalties.
In Director FWBII French CJ, Kiefel, Bell, Nettle and Gordon JJ held (at [60]):
It is also true, as the Full Court observed, that the regulator in a civil penalty proceeding is not disinterested. As has been seen, under the BC/I Act, the Director's statutory functions include monitoring and promoting appropriate standards of conduct by building industry participants generally. It is, therefore, naturally to be assumed that the Director will fashion penalty submissions with an overall view to achieving that objective and thus perhaps, if not probably, with one eye to considerations beyond the case in hand. That consideration, however, supports, rather than detracts from, the propriety of a court receiving joint (or separate) submissions as to facts and penalty and imposing the proposed penalty if persuaded that it is appropriate. As was emphasised in NW Frozen Foods, it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance." (footnotes omitted)
In determining penalty the Court has had regard to the penalty recommendations contained in Annexure A to the FW Ombudsman’s submissions to the Court.
Penalties
The contraventions, which are serious, demonstrate a high level of culpability on the part of Goldfinger and Mr Djoneski. The factors that tend to indicate that include the following:
a)the repeated nature of the conduct, which involved a deliberate disregard for minimum entitlements under the Cleaning Services Award, NMWO-2013 and NMWO-2014 and the FW Act;
b)the failure of Goldfinger and Mr Djoneski to rectify the underpayments at all;
c)the failure of Goldfinger and Mr Djoneski to co-operate during the FW Ombudsman's investigation or these proceedings;
d)the failure of Goldfinger and Mr Djoneski to offer any demonstration of contrition, remorse or corrective action; and
e)the need for general and specific deterrence, particularly where, as here, the senior manager was the operative mind in relation to the contraventions.
By contrast, there are some factors which would tend to indicate a lower level of culpability, namely:
a)that both Goldfinger and Mr Djoneski are first time contraveners;
b)that the contraventions occurred over a relatively short period in respect of each of the Employees; and
c)perhaps as a consequence of (b) above, the amounts concerned, whilst significant for each employee concerned, do not constitute a significant sum in total.
Overall, the factors indicating a lower level of culpability do not significantly affect the serious nature of the contraventions in this case, and the necessity to impose meaningful penalties, save that Goldfinger and Mr Djoneski are first time contraveners.
In the Court’s view there is no proper basis for making a distinction between the failure to pay monetary entitlements owing, whether they be by way of minimum wages, minimum hourly rates, overtime, casual loading, leave entitlements, or a requirement to make those payments at a particular time or in a particular manner. Each constitutes a failure to pay the appropriate entitlement, and ought to be assessed accordingly by way of penalty. In the circumstances, the Court considers that, having regard to all of the above factors, a penalty in the range of 40% to 60% is appropriate in relation to both Goldfinger and Mr Djoneski in relation to the contraventions relating to a failure to pay, pay on time, or pay in full, and that a penalty of 45% is considered appropriate by the Court for those contraventions.
The failure to issue payslips does not fall into the same category of seriousness of contravention as the failure to make payments, and bearing in mind that there is a single contravention in respect of two instances of payment to Mr Khaja, the Court accepts the FW Ombudsman’s penalty recommendation of 10% for Goldfinger and Mr Djoneski in this respect.
In all of these circumstances, the penalties to be imposed against Goldfinger and Mr Djoneski are as follows:
| Contravention | Maximum penalty | Goldfinger – penalty range | Mr Djoneski – penalty range |
| Section 45 of the FW Act by failing to pay the Cleaning Employees the minimum rate of pay for day shift hours worked in accordance with subclause B.9.8 – WA.2.8 of Schedule B of the Cleaning Services Award; Section 45 of the FW Act by failing to pay Mr Ferriday, Ms G Kim and Ms E Kim, the minimum hourly rate for early shift hours in accordance with subclause B.9.8 – WA.2.9 of Schedule B of the Cleaning Services Award. | 60 penalty units ($10,200) for an individual 300 penalty units ($51,000) for a corporation | 45%: | 45%: |
| Section 45 of the FW Act by failing to pay the Cleaning Employees the minimum hourly rate for hours worked on a Saturday in accordance with subclause B.9.8 - WA.2.13 of Schedule B of the Cleaning Services Award; Section 45 of the FW Act by failing to pay the Cleaning Employees the minimum hourly rate for hours worked on a Sunday in accordance with subclause B.9.8 - WA.2.14 of Schedule B of the Cleaning Services Award. | 60 penalty units 300 penalty units | 45%: | 45%: |
| Section 45 of the FW Act by failing to pay Mr Ferriday, Ms G Kim and Ms E Kim the minimum hourly rate for hours worked on a public holiday in accordance with subclause B.9.8 – WA.2.15 of Schedule B of the Cleaning Services Award. | 60 penalty units ($10,200) for an individual 300 penalty units ($51,000) for a corporation | 45%: | 45% |
| Section 45 of the FW Act by failing to pay Mr Ferriday, Ms G Kim and Ms E Kim for overtime worked, Monday to Saturday in accordance with clause 28.2 of the Cleaning Services Award; Section 45 of the FW Act by failing to pay Mr Ferriday for overtime worked on a Sunday in accordance with clause 28.3 of the Cleaning Services Award. | 60 penalty units 300 penalty units | 45%: $22,950 | 45% $4,590 |
| Section 45 of the FW Act by failing to pay Ms E Kim for overtime worked on a public holiday in accordance with clause 28.4 of the Cleaning Services Award. | 60 penalty units ($10,200) for an individual 300 penalty units ($51,000) for a corporation | 45%: | 45% |
| Section 45 of the FW Act by failing to pay the Cleaning Employees casual loading on overtime in accordance with clause 12.5(a) of the Cleaning Services Award. | 60 penalty units ($10,200) for an individual 300 penalty units ($51,000) for a corporation | 45%: | 45% |
| Section 45 of the FW Act by failing to pay the Cleaning Employees weekly or fortnightly in accordance with clause 20.1 of the Cleaning Services Award. | 60 penalty units ($10,200) for an individual 300 penalty units ($51,000) for a corporation | 45%: | 45% |
| Section 293 of the FW Act by failing to pay Mr Khaja the amount prescribed under the NMWO 2013; Section 293 of the FW Act by failing to pay Mr Quraishi the amount prescribed under the NMWO 2013 up to 1 July 2014 and the NMWO 2014 thereafter until 5 August 2014. | 60 penalty units ($10,200) for an individual 300 penalty units ($51,000) for a corporation | 45%: | 45% |
| Section 44 of the FW Act by failing to pay Mr Khaja and Mr Quraishi their accrued but untaken annual leave entitlements at the time of the termination of their employment in accordance with subsection 90(2) of the FW Act. | 60 penalty units ($10,200) for an individual 300 penalty units ($51,000) for a corporation | 45%: | 45% |
| Section 323 of the FW Act by failing to pay Mr Khaja and Mr Quraishi wages in full. | 60 penalty units ($10,200) for an individual 300 penalty units ($51,000) for a corporation | 45%: | 45% |
| Section 536(1) of the FW Act by failing to give a pay slip to Mr Khaja in respect of a payment made to him on 7 and 23 July 2014. | 30 penalty units ($5,100) for an individual 150 penalty units ($25,500) for a corporation | 10%: | 10%: |
| Totals: | Maximum penalties for Goldfinger $586,500 Maximum penalties for Mr Djoneski $117,300 | $255,000 | $51,000 |
Totality
Having fixed an appropriate penalty for each contravention, the Court must take a "final look" at the aggregate penalty, to determine whether it is, overall, an appropriate response to the conduct which led to the breaches, and is not oppressive or crushing: Kelly at [30] per Tracey J; Australian Ophthalmic Supplies at [23] per Gray J, [71] per Graham J and [102] per Buchanan J. Whilst the penalty imposed must not be crushing or oppressive, it must nevertheless be proportionate to the seriousness of the conduct engaged in by Goldfinger and Mr Djoneski: Fair Work Ombudsman v Promoting U Pty Ltd & Anor [2012] FMCA 58 at [52]-[54] per Burchardt FM. Essentially, the totality principle requires the Court, once it has made a judicial evaluation of what it considers to be an appropriate aggregate penalty, to examine one final time, the aggregate penalty in order to determine whether it appears wrong: Ultra Tune at [68] per Lucev FM, citing, amongst others, Australian Ophthalmic Supplies at [27]-28] per Gray J and [78] per Graham J.
Having regard to the nature of the bulk of the contraventions concerned, that is the 11 contraventions which relate to a failure to pay minimum wages and entitlements, and the number of employees concerned, and notwithstanding that the contraventions occurred over relatively short periods in relation to each employee, but nothing that that was also the total period of employment for each employee, and having regard to the lack of contrition, cooperation with the FW Ombudsman over a significant period of time, and the involvement of senior management, the Court is not persuaded that this is an appropriate case for the application of the totality principle, and notes that the penalties have been assessed, in large part, at the lower end of the relevant penalty range. In those circumstances there will be no adjustment of the penalties having regard to the totality principle.
Service of final orders
There should be an order that service of the final Orders made be effected in accordance with the Court’s orders of 23 February 2016.
Orders
The Court orders that the FW Ombudsman file a Minute of Proposed Orders to reflect these Reasons for Judgment by 4.00pm on 18 October 2017, and that final Orders issue electronically from Chambers thereafter.
I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Date: 11 October 2017
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