Fair Work Ombudsman v Harvey
[2016] FCCA 3013
•23 November 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v HARVEY | [2016] FCCA 3013 |
| Catchwords: INDUSTRIAL LAW – Breach of terms of modern award and national employment standards – failure to provide appropriate wage slips and keep employment records – admission of liability in respect of breaches – admission made at a late stage – relevance of personal circumstances of respondent – imposition of civil penalty – matters to be considered. |
| Legislation: Fair Work Act 2009 (Cth), ss.3(b); 3(c); 134; 535; 535(1); 536(1); 539(2); 546(1); 546(3); 557(1); 701; 712(1); 716; 716(5) Fair Work Regulations 2009, rr.3.32; 3.33; 3.34 |
| Cases cited: Fair Work Ombudsman v Kentwood Industries Pty Ltd (No3) [2011] FCA 579 Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 Attorney-General (SA) v Tichy (1982) 30 SASR 84 Johnson v R (2004) 78 ALJR 616 Mornington Inn v Jordan (2008) 168 FCR 383 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Kelly v Fitzpatrick [2007] 166 IR 14 Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 Veen v R (No 2) (1988) 164 CLR 465 Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 FWO v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 Plancor Pty Ltd v Liquor Hospitality & Miscellaneous Union (2008) 171 FCR 357 |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | SHARNA HARVEY |
| File Number: | ADG 444 of 2015 |
| Judgment of: | Judge Brown |
| Hearing date: | 14 September 2016 |
| Date of Last Submission: | 14 September 2016 |
| Delivered at: | Adelaide |
| Delivered on: | 23 November 2016 |
REPRESENTATION
| Counsel for the Applicant: | Ms K Clark |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Counsel for the Respondent: | Ms K Eaton |
| Solicitors for the Respondent: | Gilchrist Connell |
ORDERS
Upon noting that the respondent makes full admissions in respect of all the matters contained in the Statement of Agreed Facts filed on 5 May 2016 the Court declares that the respondent has contravened the following provisions of the Fair Work Act 2009 (Cth) (hereinafter referred to as “the FW Act”).
(a)Section 716(5) of the FW Act by failing to comply with a compliance notice dated 25 June 2015;
(b)Section 535(1) of the FW Act by failing to keep necessary employee records as required by the Fair Work Regulations 2009 (Cth);
(c)Section 536(1) of the FW Act by failing to give payslips to relevant employees.
Pursuant to subsection 546(1) of the FW Act the respondent pay a total pecuniary penalty fixed in the sum of $1,400.00.
Pursuant to subsection 546(3)(a) of the FW Act that the pecuniary penalty specified in order 2 hereof be paid to the Commonwealth by instalments within a period not exceeding twelve (12) months of the date of these orders, the instalments to be agreed between the parties and, if not agreed, as specified by the Court.
The applicant have liberty to apply on seven (7) days’ notice in the event that any of these orders are not complied with.
All applications be otherwise dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 444 of 2015
| FAIR WORK OMBUDSMAN |
Applicant
And
| SHARNA HARVEY |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, the Fair Work Ombudsman,[1] commenced these proceedings on 30 November 2015, naming Sharna Harvey as the respondent. In 2012, Ms Harvey set up a business called Sharn’s Cleaning Services, in Whyalla, South Australia. Ms Harvey has lived in Whyalla for around twenty years and, during this period, worked as a cleaner. She is not a sophisticated business person and is functionally illiterate.
[1] Hereinafter referred to as the FWO; the Ombudsman; or the applicant
Prior to January 2015, Ms Harvey operated her business utilising herself as its only employee. She cleaned residential properties on referral from a Whyalla real estate agency and, from time to time, cleaned premises for deceased estates, on the direction of the Public Trustee.
Ms Harvey’s personal background is highly relevant to these proceedings, which arise because Ms Harvey has admitted breaching provisions of the Fair Work Act 2009 (Cth).[2]In particular, it is admitted by Ms Harvey that she failed to keep appropriate employment records; provide payslips; and pay eight employees the wages due to them, pursuant to the applicable awards. The FWO seeks the imposition of civil penalties, against Ms Harvey, pursuant to the provisions of the FWA, in respect of these matters.
[2] Hereinafter referred to as the FWA or the Act
Ms Harvey was born on 20 June 1951, in the Adelaide Hills. She attended primary school at the Croydon Primary Opportunity School, but left at the age of eleven. In her sworn testimony to the court, she indicated that she is unable to read and write. Throughout her life, she has been reliant on others to read important documents for her.
Ms Harvey’s first job, after leaving school, was working for Tom the Cheap, a firm of grocers. Ms Harvey was engaging in stocking shelves. Thereafter, she worked for Safcol, in Adelaide, gutting fish. Ms Harvey married when she was 21 and has four children, all now adult. She separated from her husband, who was a cabinet maker, in 1992.
In 1980, she and her family moved to Whyalla. She obtained employment, as an industrial cleaner, with BHP (now OneSteel) cleaning the crib room at its Whyalla smelter. I accept that this was extremely hard work.
Ms Harvey’s daughter introduced her to the real estate agent, who provided her with the opening, which led her to forming Sharn’s Cleaning Service. The real estate agent completed the necessary forms for her to apply for an ABN in respect of the business. During the period Ms Harvey operated Sharn’s Cleaning Service, it was her practice to charge out her services at the rate of $22.50 per hour. I accept that it was not a large or sophisticate enterprise.
Until recently, Ms Harvey lived in a home, in Whyalla, which she leased from the Housing Trust of South Australia. She had occupied the property for around twenty years. She now lives with her 38 year old daughter and her grandchildren, which she (Ms Harvey) finds very trying. It is wholly as a consequence of these proceedings that Ms Harvey has been compelling to let go her housing trust lease.
As a consequence of the FWO’s prosecution of her, Ms Harvey has closed her cleaning business. She has recently turned 65 years of age and will qualify for receipt of the aged pension in a few weeks’ time. She has no other independent sources of financial support.
On 22 January 2015, Ms Harvey was cold called by one Robyn Pedler. At the time, Ms Pedler was employed as a recruitment advisor by Salvation Army Employment Plus, based at its Whyalla office. She found Ms Harvey’s business and telephone number through a business listing guide for Whyalla. I accept that Ms Harvey did not in any way whatsoever seek out Ms Pedler for the purpose of engaging staff.
Ms Pedler’s role, at Salvation Army Employment Plus, was to assist unemployed persons to transition from receipt of social security to permanent paid employment. Ms Pedler has qualifications and experience in human resources and recruitment. At relevant times, she had knowledge of applicable Commonwealth Government schemes, which provided subsidies for employers, who took on individuals, who had previously been in receipt of social security.
In the initial phone conversation between Ms Pedler and Ms Harvey, Ms Pedler acknowledges that she asked Ms Harvey if she had any openings for cleaners in her business, at that time. Ms Harvey indicated that her business was busy at the time and she was potentially interested in recruiting staff, with Ms Pedler’s assistance. The two arranged to meet face-to-face a few days later.
Ultimately, Ms Harvey engaged nine individuals, referred to her by Ms Pedler, whom she employed as casual cleaners in her business. It is the employment of these individuals, which has led to the FWO electing to prosecute Ms Harvey. It is agreed that these individuals were not paid the wages due to them pursuant to the applicable modern award. It is also acknowledged that Ms Harvey did not provide them with appropriate wage slips or keep relevant employment records.
It is agreed by both the applicant and Ms Harvey that the amount of underpayment of the various workers concerned is $7,673.08. The FWO accepts that this sum was paid, in full, on 8 March 2016. It is Ms Harvey’s evidence, which I accept, that she sold various items of personal property, including her cleaning equipment, in order to pay this sum. As a consequence, she was no longer able to operate her business and to meet the rent on her housing trust accommodation, which has, in turn, led to her moving in with her adult daughter. This was a great personal hardship for her.
As previously indicated, these proceedings are concerned with what monetary penalty should be imposed upon Ms Harvey in respect of three contraventions arising from separate provisions of the FWA. It is the submission of the FWO that Ms Harvey’s offending is in the mid-range of culpability and should attract a penalty of between 40% & 50% of the maximum prescribed by the applicable legislation.
On the other hand, it is the submission of pro bono counsel for Ms Harvey that there are significant mitigating factors, in the case, which dictate that the court should impose a significantly lower penalty. Essentially, it is Ms Harvey’s position that she fundamentally misunderstood what Ms Pedler told her about the level of government assistance for the workers concerned, particularly the amount of subsidy which would be provided, both by and to whom it would be paid. The confusion is said to have arisen as a consequence of Ms Harvey’s understanding of so-called Work for the Dole Schemes.
Accordingly, Ms Harvey rejects any notion that she has behaved in a predatory fashion, in respect of the workers concerned, whom by dint of their lack of skills and length of unemployment are to be characterised as vulnerable employees.
Rather, in the submission of her counsel, it is understandable that Ms Harvey, has been under a fundamental misconception of her employment obligations, given her level of literacy and limited, if any, industrial law experience.
These proceedings are directed to resolving this issue between the parties concerned and determining the appropriate penalties to be imposed.
Background
The nine employees concerned all commenced employment, with Sharn’s Cleaning Services, in late January 2015. They ceased their employment at various dates between 28 January 2015 and 3 April 2015. On 23 February 2015, the FWO received a workplace complaint form, from one of the workers concerned, which complained of a non-payment of wages by Ms Harvey.
As a consequence of this, the FWO appointed Joanne Latz to investigate the matter. Ms Latz is a Fair Work Inspector. Ms Latz subsequently received complaint forms from the other eight employees, whose non-payment led to the current proceedings.
The FWO is a statutory appointment under the FWA.[3] One of the objects of the FWA is to ensure that employees in Australia receive regulated minimum awards of pay and are fairly and transparently treated, in their workplace, without exploitation.[4] One of the responsibilities of the FWO is to monitor compliance with the FWA.
[3] Hereinafter referred to as the FWA or the Act
[4] See FWA at section 3(b) & (c)
In addition, the FWO has a responsibility to educate, advise and assist, both employers and employees, in respect of obligations arising under the Act and, if necessary, commence proceedings, in appropriate courts, to enforce the FWA.
Pursuant to section 701 of the Act, the FWO is also a fair work inspector. The Act confers upon such inspectors a number of powers in order to ensure compliance with provisions of the Act. Amongst other things, inspectors can enter work premises and require the production of employee records.[5]
[5] See FWA at section 712(1)
In addition, the FWO, as a consequence of its status as a fair work inspector, has statutory authority to bring proceedings under the Act and seek the imposition of penalties, if breaches of the FWA are established.[6]
[6] See FWA at section 539(2)
The award applicable to the various workers concerned is the Cleaning Services Award 2010. In addition, one of the employees concerned was retained to perform some clerical duties for Ms Harvey. The employee’s duties were covered by the terms of the Clerks-Private Sector Award 2010. On 30 March 2015, Ms Latz first attempted to contact Ms Harvey to discuss the various complaints received by the FWO regarding the nine individuals employed by Ms Harvey.
Both the Cleaning Services Award 2010 and the Clerks-Private Sector Award 2010 are modern awards, which set minimum terms and conditions for employees in specified industries and occupations pursuant to National Employment Standards. The eight workers affected by underpayment and the amounts owed to each are calculated as follows:
Name Period of Employment Hours worked Amount Due Casual loading Amount Paid L. Fulton 27/01/15– 03/04/15 78.25 1625.40 406.13 Nil A. Griffin 09/02/15-10/02/15 9.5 171.10 42.75 Nil K. Hanley 27/01/15- 28/01/15 16 288.16 72.00 Nil D. James 29/01/15-03/02/15 22.5 405.23 101.25 500.00 R. Quinn 27/01/15-11/03/15 74.5 1,341.75 335.25 500.00 L. Reid 27/01/15-02/03/15 131 2,359.31 589.50 300.00 L. Robertson 27/01/15-28/01/15 16 288.16 72.00 nil A. Dunn 30/1/15-18/02/15 39 700.15 174.94 nil Total 7,179.26 1,793.82 1,300.00 Total amount owed $7,673.08
A. Phyland 11/02/15-12/03/15 Nil 1,220.00[7] [7] Paid in full – relates to payslips and record keeping only
On 8 April 2015, Ms Latz and Ms Harvey had a conversation, in which Ms Harvey indicated that it was her understanding, from Ms Pedler, that the workers concerned would be “working for the dole” and therefore Centrelink would be paying 90% of the wages due to the employees concerned and Ms Harvey 10%. Ms Harvey indicated that she has signed two documents with Ms Pedler, about the scheme, but did not know what these documents were.
I have no reason to doubt that Ms Harvey believed this to be the case at relevant times. I accept that there is likely to be a general level of misconception about the application of so-called work for the dole schemes. In addition, the phrase itself seems to me to be something of a misnomer, which is likely to lead to misconceptions, particularly amongst persons who have not got a strong grasp of government policies in respect of employment.
Ms Latz arranged a time, with Ms Harvey, to come to Whyalla to interview her formally. Ms Latz requested that Ms Harvey bring any documents and work records relevant to the nine employees concerned to the meeting. Ms Latz strongly recommended to Ms Harvey that she bring a support person to the interview, which was scheduled for 30 April 2015.
The 30 April meeting was not particularly productive. Ms Harvey did not bring any records, indicating that they were with her friend Miriam, who was in Ceduna that day. Ms Latz told her that it was her view that she (Ms Harvey) was the employer of the nine workers concerned and was therefore liable for their wages.
As a consequence of these matters, on 25 June 2015, Ms Latz issued a Compliance Notice pursuant to the provisions of section 716(2) of the Act, requiring Ms Harvey to pay the sum of $7,673.08 by no later than 21 July 2015, in order to clear the wages due to the nine individuals concerned. The covering letter, with the notice, warned Ms Harvey that if the sum was not paid, she would be at risk of being prosecuted under the Act.
Ms Harvey did not ignore the notice, which she received on 2 July 2015. I accept that she did not have the money available to pay the sum within the timeframe stipulated. She closed her business on 2 July 2015 and has not worked since. On this date, her bank account contained the sum of $823.93.[8] She consulted a local Whyalla solicitor, Mr Tom Byrne for advice.
[8] See Exhibit A
Mr Byrne telephoned Ms Latz. He advised that Ms Harvey was a “bit confused” about the infringement notice but had told him that she “would plead guilty” in respect of it. Mr Byrne also indicated that Ms Harvey did not have $7,000.00 but would be able to pay the sum in instalments. Ms Latz confirmed that she herself had not spoken to Ms Harvey about the prospects of paying the overdue wages in instalments. Thereafter Ms Latz’s file note reads as follows:
“Tom asked FWI what opinion was of her. FWI stated that not relevant to the matter. Tom stated that FWI must have formed some opinion due to dealing with Sharna. Tom stated that Sharna appears to have some kind of disability and asked if FWI had met with Sharna. FWI stated yes. Tom asked whether met with Sharna face to face. FWI sated yes. Tom asked FWI ‘Is she the full quid?’ FWO stated that not going to answer that question. Tom asked words to the effect ‘do I need something in writing?’ FWI stated words to the effect ‘I find that question offensive, whether I had something in writing or not.”[9]
[9] See Exhibit JLL 45 to Ms Latz’s affidavit filed 5 July 2015 at page 131
On 6 August 2015, an associate of Mr Byrne wrote to Ms Latz informing her that Ms Harvey was illiterate and therefore did not understand any documents which she had executed with the Salvation Army. It was therefore asserted that she could not have understood the terms of any relevant agreement and as a consequence Ms Harvey disputed the apparent contraventions as set out in the letter. The letter concluded with the following statement:
“We are hopeful that we can liaise with the Salvation Army directly and come to an arrangement to settle this matter without further recourse. We respectfully therefore ask that you hold off on taking any further action in this matter until such time as we have progressed negotiations with the Salvation Army.”[10]
[10] Ibid at Exhibit JLL 48 at page 135
It seems clear that Mr Byrne and his associate were assisting Ms Harvey with no expectation of being paid for their professional services, given her straitened financial circumstances. Correspondence passing between Mr Byrne’s firm and Ms Latz emphasised Ms Harvey’s lack of sophistication and her apparent belief that there had been a 90/10% arrangement negotiated through the Salvation Army in respect of the workers concerned, which meant that Ms Harvey was only liable for 10% of the wages due.
On 27 August 2015, Ms Latz elected to issue a Notice to Produce to Ms Harvey requiring her to produce employment records in respect of the nine individuals concerned. Mr Byrne responded formally on 25 September 2015. He indicated his client had not kept records. He also wrote as follows:
“We are instructed that in early 2015 our client was approached by a woman by the name of Robyn from a Salvation Army agency who advised her that through that agency she could benefit from employing workers who were receiving unemployment benefits on a scheme whereby 90% of the wage was to be paid through the agency and our client would be liable to pay 10%. The agency introduced the workers to our client and they worked for our client at various cleaning sites for various periods of time in early 2015. Our client instructs us that while she has a recollection of the names of the workers as set out in your notice, she does not have any written documentation with respect to those workers in the nature of hours of work, location of work performed or payslips. Any documentation which she did have, she instructs, was provided to you at your request.
We have contacted The Salvation Army. They confirm that there was such an arrangement as described by our client, known as a 90/10 arrangement. They confirmed that Robyn worked for The Salvation Army agency in Whyalla but advised that she is no longer employed. I enclose a copy of our letter to The Salvation Army dated 10 August 2015. We had a telephone response from Graham from Employment Plus on 13 August 2015, advising that there was such a thing as a 90/10 program that operated for a period of time but it was not operating now. It was to support unemployed people seeking work. He advised that he could not find any record of Sharna Harvey as an employer in their system and that the Whyalla site was closed. We were subsequently advised by Graham Ryan that we would need to communicate with Andrew Greed of The Salvation Army Contracts Department and make a Freedom of Information application and obtain copies of any of their documentation. We have not yet done so, but will make that application.
With respect to your letter to our client dated 23 September 2015, advising of Non Compliance with Compliance Notice, our client does not have the assets with which to pay the alleged outstanding amount.”[11]
[11] Ibid at Exhibit JLL 53 at page 167
Mr Byrne enclosed Ms Harvey’s tax returns for the years ending 30 June 2013, 2014 & 2015; her bank statements; and the creditor ledger kept in respect of the Whyalla real estate agent, who had been her major client in respect of the provision of her cleaning services. In 2015, her income tax return indicated an income of $9,487.00.
The applicant commenced these proceedings on 30 November 2015. Mr Byrne’s firm advised on 7 December that it would not be acting for Ms Harvey in the proceedings. The case came before the court, for its first directions on 3 February 2016, when the matter was referred to mediation on 3 May 2016.
On the first hearing date, Ms Harvey appeared in person by telephone from Whyalla. She was obviously distraught and emphasised that she was unable to read and had not meant to cause anyone any trouble. On 8 March 2016, Ms Harvey forward the sum of $7,673.08, which was the full amount required by the compliance notice.
I accept that it was a matter of some difficulty for Ms Harvey to raise the sum in question. I accept that she did so by selling items of her personal property. As at 30 June 2014, Ms Harvey had a superannuation balance of nil.[12] I also accept that she has no assets of any significant value and for the remainder of her life, her sole source of income is likely to be the Aged Pension.
[12] See Exhibit B
Although I accept that the workers who were not paid as a result of this sorry story can only be described as being significantly financially disadvantaged, this description also applies to Ms Harvey. In addition, due to her level of education and functional illiteracy, Ms Harvey is also significantly socially disadvantaged.
At the mediation convened by the court on 3 May 2016 Ms Harvey indicated that she had no intention of contesting any matters before the court. Accordingly, on 12 May 2016 the court allocated a date for a penalty hearing only. Ms Harvey has been represented by pro bono legal advisers since 9 June 2016.
Applicable Legal Provisions
The objects of the Fair Work Act are set out in section 3. Amongst these is the following:
“ensuring a guaranteed safety net of fair, relevant and enforceable minimum wages and conditions through the National Employment Standards, modern awards and national minimum wage orders;” [FWA section 3(b)]
The above objective is taken up by a specific objective, in respect of the implementation of a system of modern awards, which is contained in section 134 of the Act. It is to ensure a fair and relevant minimum safety net in terms of the provision of conditions relevant to employment. Amongst other things, it is to take into account the relative living standards and the needs of the low paid [section 134(1)(a)].
It is the FWO’s position that the nine employees concerned in this case fall within the descriptor of the low paid as a consequence of their casual status in an industry – the cleaning industry – which is particularly prone to exploit its workers. As such, the provision of a minimum wage safety is particularly relevant to their personal circumstances.
Section 716 of the Act empowers a Fair Work Inspector to issue a notice to any specified employer requiring compliance with the terms of any modern award applicable to the terms and conditions of employees employed by that employer, if it is believed, on reasonable grounds that there has been non-compliance with the relevant award. Failure to comply with such a notice is categorised as a civil remedy provision to which Part 4-1 of the Act applies.
Section 535(1) & (2) of the FWA provides that an employer must keep records relating to its employees in a form prescribed by regulation. In this case regulations 3.32, 3.33 & 3.34 of the Fair Work Regulations 2009, which require records to be kept as to whether an employee was full-time or part-time; permanent, temporary or casual; the rate of remuneration applicable to that employment, including any relevant loading or penalty rate; and details relating to overtime. Again failure to comply with section 535 is categorised as a civil remedy provision.
Section 536(1) of the FWA provides as follows:
“An employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work.”
As indicated above, four of Ms Harvey’s employees did receive wages from her. However none of these individuals was provided with a pay slip in contravention of this provision. Again breaches of this section are classed as civil remedy provisions.
Ms Harvey has formally admitted three breaches of the FWA arising in respect of section 716; 535; and 536. Section 539(2) prescribes the maximum penalty for each of these offences, which is 30 penalty units. At relevant times, a penalty unit amounted to $170.00.[13] Accordingly, the maximum penalty applicable to Ms Harvey for each offence is $5,100.00 or in aggregate $15,300.00.
[13] See section 4AA of the Crimes Act 1914 (Cth)
The approach, which the court is required to take in respect of these contravention proceedings, is not controversial, so far as the parties are concerned. It has been delineated in a number of decisions of the Federal Court[14] and described as a four step process, which I will summarise as follows:
·Firstly, the court should identify each separate contravention arising from a breach of either the applicable award or the FWA and determine whether any of these arise in a single course of conduct within the terms envisaged by section 557(1);
·Secondly, determine what is the appropriate penalty to be imposed (whether in terms of a single episode of contravention or as part of a course of conduct), having regard to all the circumstances of the case;
·Thirdly, give consideration to whether any of these contraventions contain common elements and factor this into considering what is an appropriate penalty, in all the circumstance, for each contravention;
·Fourthly, apply the totality principle. This final step constitutes a review of the aggregate penalty thus far calculated and a consideration of whether such a penalty is an appropriate response to the conduct which led to the various contraventions. This step has been categorised as a process of instinctive synthesis.[15]
[14] See Fair Work Ombudsman v Kentwood Industries Pty Ltd (No3) [2011] FCA 579 per McKerracher J applied in Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42] per Mansfield J
[15] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [55] per Graham J
The third and fourth steps are to be distinguished from one another. In the context of the former, the following comments, approved by Gleeson CJ in Johnson v R, are apposite, although arising in the context of actual criminal proceedings:
“Where there are truly two or more incursions into criminal conduct, consecutive sentences will generally be appropriate. Where, whatever the number of technically identifiable offences committed, the prisoner was truly engaged upon one multi-faceted course of criminal conduct, the judge is likely to find concurrent sentences just and convenient.” [16]
[16] See Attorney-General (SA) v Tichy (1982) 30 SASR 84 at 92-93 per Wells J; cited with approval by Gleeson CJ in Johnson v R (2004) 78 ALJR 616; and followed by Stone and Buchan JJ in Mornington Inn v Jordan (2008) 168 FCR 383 at 397
The totality principle arises when a court is called upon to sentence an individual, as here, in respect of a number of identifiable offences. It is directed to a review of the penalties imposed, in total, in respect of individual offences to determine whether those penalties, in aggregate, constitute a just and appropriate penalty, in all the circumstances arising. As indicated earlier, it has been characterised as a process of intuitive synthesis best summarised in the well-known line from The Mikado “the punishment must fit the crime.”
Gray J in Australian Opthalmic Supplies Pty Ltd said as follows:
“What is required is to determine an appropriate level of penalty for each contravention, as if it were a separate offence, and then look at the aggregate of those penalties in the light of the overall conduct of the [offender], to form a view as to whether that aggregate [is] out of proportion to that overall conduct.”[17]
[17] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (supra) at [23]
Regardless of these considerations, the fundamental task, for the court, is to determine, from all the factual circumstances arising, the gravity or seriousness of the offending, which it is called upon to penalise. Again there is general agreement between the parties as to the considerations relevant to this task, which has been delineated in a number of decisions of both this court and the Federal Court.[18]
[18] See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] 166 IR 14 at [14]; Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [23]
The considerations are as follows:
·the nature and extent of the conduct which led to the breaches;
·the circumstances in which the conduct took place;
·the nature and extent of any loss or damage sustained as a result of the breaches;
·whether there has been similar previous conduct by the respondent;
·whether the breaches were properly distinct or arose out of the one course of conduct;
·the size of the business enterprise involved;
·whether or not the breaches were deliberate;
·whether senior management was involved in the breaches;
·whether the party committing the breaches has exhibited contrition;
·whether the party committing the breaches has taken corrective action;
·whether the party committing the breaches has cooperated with the enforcement authorities;
·the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
·the need for specific and general deterrence.
The court needs to be careful not to apply a formulaic approach to the imposition of penalties or attempt to extrapolate the penalties imposed in one case to the circumstances of another. Each case involving the imposition of a civil penalty warrants an idiosyncratic approach and a careful analysis of all relevant circumstances. As was stated in Australian Opthalmic Supplies:
“Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.”[19]
[19] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (supra) at [12]
Clearly the check-list, as enumerated above, is useful. It is not to be regarded as an exhaustive list of factors to be considered. The ultimate control on any sentence is that it must be proportionate to the offence committed. A court is not permitted to impose a sentence greater than is warranted by the objective circumstances of the offending.[20] I will now turn to consider the matters, as relevant, under the check-list set out.
[20] See Veen v R (No 2) (1988) 164 CLR 465 at 472
Nature and Extent of the Conduct
Ms Harvey is not a sophisticated person. I accept that she did not set out to exploit the nine individuals concerned with a view to lining her own pocket. In my assessment, she is not a manipulative or callous person. Rather, she acted out of a fundamental misapprehension of the scheme to which Ms Pedler introduced her. As such, she thought that she was helping the individuals concerned.
In my view, Ms Harvey was naive and gullible, rather than manipulative or grasping. In my view, the evidence further indicates that she was totally “out of her depth” when dealing with Ms Latz and the FWO. As such, I do not consider that her conduct indicates a demonstrable disregard for the powers and compliance mechanisms contained within the FWA.
Ms Harvey did not seek out Ms Pedler. She was cold called because her name appeared in a directory of small businesses operating in Whyalla, which is an area of significant economic disadvantage within South Australia. Ms Harvey was approached because, as the operator of a cleaning business, Ms Pedler considered that she (Ms Harvey) might be able to assist individuals who had been unemployed for long periods.
Ms Pedler did not make any independent inquiries regarding the extent of Ms Harvey’s business or of Ms Harvey herself. In this context, in my view, it is interesting to note that Mr Byrne regarded Ms Harvey as suffering some form of disability from his consultation with her. In this context, I accept that Ms Harvey is illiterate.
I also accept that the relevant conditions surrounding this scheme, which Ms Pedler brought to Ms Harvey’s attention, were complex. In this context, in my view, there was a fundamental level of miscommunication between Ms Harvey, on the one hand and Ms Pedler, on the other.
In these circumstances, I accept the submission made on Ms Harvey’s behalf that she took on the nine employees concerned because she wanted to help them find work in the community not because of any desire to exploit them for her own benefit.
I also accept that Ms Harvey was mortified when she discovered her misconception. This is demonstrated by her comment to Mr Byrne “I’ll plead guilty”.
In these circumstances, I do not accept that there is any cogent evidence to indicate that Ms Harvey has ever sought to shirk her responsibilities to the employees affected by her misconception.
From early July 2015 onwards, I find that Ms Harvey began to take steps to satisfy the moneys owed by her. From her perspective, $7,000.00 was a huge amount of money. She had no resources to borrow it. As such, her only recourse was to close her business and sell its equipment, which she did. This led to the particularly significant hardship, for her, of losing her modest rented home of many years.
In my view, it is also significant that Ms Harvey discharged her obligations to the employees concerned prior to the mediation ordered by the court. In all these circumstances, counsel for Ms Harvey submits that her failure to comply with the compliance notice is a matter of moderate seriousness. Counsel for the FWO contends that it is a matter of reasonable seriousness, which calls for a penalty of between 40% and 50% of the maximum prescribed.
It is Ms Harvey’s position that she thought the employees concerned would receive welfare payments of up to 90% of their salary, whilst she would have to contribute the remaining 10%. In response, the FWO points to the fact that five of the employees concerned were not paid at all and, in any event, Ms Harvey did not sign any agreement with Salvation Army Employment Plus.
In these circumstances, the FWO submits that the failure of Ms Harvey to keep proper employment records and not issue payslips has had serious consequences, which include:
·The employees concerned did not know what were their proper entitlements and were unable to hold Ms Harvey to account;
·The situation frustrated the ability of the FWO to investigate the employee’s entitlements; and
·The lack of records created a structure in which breaches of the FWA could easily be perpetuated.
Balancing the naivety of Ms Harvey on the one hand and the vulnerability of the employees concerned on the other, I would categorise Ms Harvey’s offences at being at the lesser end of the scale. I reach this conclusion because there was no elaborate scheme of deception and, in many ways, Ms Harvey’s situation was analogous to that of the employees affected. She too was a low paid worker, with few skills and limited education.
The nature and extent of any loss or damage sustained
Ms Harvey’s conduct resulted in the employees concerned being deprived of their financial entitlements for a period of approximately one year. I accept that the employees concerned were each vulnerable individuals and the amounts outstanding to them was significant given their level of financial disadvantage.
Lynette Fulton is in her late fifties and has limited education. She has deposed that Ms Harvey’s failure to pay her personally, between late January and April 2015, caused her considerable financial hardship. She was unable to pay her electricity bill and had to enter a payment plan in respect of her gas account.
Lara Reid has provided similar evidence. She is a single parent. Her Centrelink benefits were cut because it was assumed that she was in paid employment with Ms Harvey. As a consequence, she was not able to pay her regular accounts and deposes that she almost lost her accommodation. She was forced to borrow money from friends and her parents to make do.
None of the other workers affected by Ms Harvey’s conduct has filed an affidavit in the proceedings. I have tallied the amounts due to each of them and what was paid earlier in these reasons for judgment. In monetary terms, Ms Fulton and Ms Reid were the employees who were due to the largest sums.
Similar previous conduct
The FWO concedes that Ms Harvey has never previously contravened the FWA.
Size and financial circumstances of the respondent
Ms Harvey operated what can only be regarded as a small business. Her business began because a Whyalla Real Estate Agent had need of a cleaner. Ms Harvey had experience as a paid cleaner over many years. As a consequence of these factors, she became a business proprietor almost by accident, intending only to employ herself.
I accept the FWO’s submission that the size of a business should not deflect the court from imposing an appropriate level of penalty to demonstrate its assessment of the overall seriousness of the conduct involved and to serve as a warning to others.
Small business, in Australia, is a significant employer in terms of the number of persons which it employs. In these circumstances, I adopt the comments of Driver FM (as his Honour then was) in Rajagopalan v BM Sydney Building Materials Pty Ltd [21] as follows:
“Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.”
[21] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27]
The deliberateness of the breaches
I acknowledge that the FWO was forced to issue the compliance notice in question prior to receiving any recompense from Ms Harvey in respect of the under payment of the workers concerned. However, I do not accept that she deliberately set out to ignore Ms Latz or to avoid her responsibilities. Rather, as I have previously characterised her, Ms Harvey was a person completely out of her depth in the situation in which she found herself.
In my view, in assessing the overall culpability of her behaviour, it is necessary for the court to place significant circumstances on the idiosyncratic circumstances of Ms Harvey. She is illiterate and poorly educated. She has scant, if any administrative or business skills. Naively, she thought she was helping others, who shared her disadvantage.
In all these circumstances, I accept the submissions of counsel for Ms Harvey that her conduct is more a matter of inadvertence on her part, rather than of deliberate recklessness. In particular, I accept that she and Ms Pedler were at complete cross purposes in respect of how the employees concerned were to be paid.
Involvement of senior management
Ms Harvey was the only management of Sharn’s Cleaning Services. Indeed, for most of the businesses existence, she was its only employee. Given her business acumen, in my view, it is something of a misnomer to speak of senior management in the context of this particular business.
Contrition and corrective action
I had the benefit of taking direct oral evidence from Ms Harvey. As a consequence, I have no doubt that her regret for what occurred and her contrition in respect of it are entirely genuine. Her statement to Mr Byrne “I’ll plead guilty” is, in my view, evocative of her personal distress and regret for her mistake and the consequences it has had for others.
Ms Harvey has never been a wealthy person. She has struggled financially throughout her life. I accept that she has sold whatever modest items of property she has to make good her mistakes in respect of her employment of the individuals concerned. In my view, it is hard to imagine a more powerful example of corrective action than that Ms Harvey has given up her home in order to recompense the victims of her behaviour.
The size and financial resources of the respondent
Ms Harvey is 65 years of age. She has no superannuation and no savings. She is effectively a lodger, in her daughter’s home, because she is not able to obtain accommodation of her own. At best, she will be able to return to rented public housing, when her aged pension comes through.
On any view, she faces an uncertain financial future, after a lifetime of hard work. She utilised her funds to pay the compliance notice in question. As such, it is difficult to see how Ms Harvey would be able to pay any penalty imposed upon her, no matter what its quantum. I accept that this is a relevant consideration in respect of the calculation of the penalty to be imposed and is a mitigating factor.
General deterrence
One of the central purposes of imposing a civil penalty, in proceedings such as these, is to deter other employers from embarking on a similar course of conduct to that engaged upon by the transgressing employer. In FWO v Maclean Bay Pty Ltd (No 2) Marshall J said as follows:
“It is important to ensure that the protection afforded 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 respected.” [22]
[22] FWO v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29]
The role of general deterrence in fixing appropriate penalty is demonstrated by what Lander J said in Ponzio v B & P Caelli Constructions Pty Ltd[23] namely:
“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…. 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... “(citations removed)
[23] Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [93] approved by Mansfield J in Lifestyle SA (supra) at [154]
Ms Latz has provided evidence regarding the involvement of the FWO in the cleaning industry. It is an industry which employs predominantly low skilled individuals, who are modestly paid. The vast majority of employees in the industry have only a year 10 or lesser educational attainment. Many are migrants to Australia.
As a consequence of these matters, individuals employed in the cleaning industry are particularly vulnerable to being exploited by unscrupulous employees. As such, the FWO submits that there is a need for the court to impose a sufficiently onerous penalty to deter others from underpaying employed cleaners. This is particularly so given that the FWO receives a significant number of complaints from employees, in the cleaning industry, in respect of underpayment.
Counsel for Ms Harvey points to the fact that Ms Harvey’s offending is highly idiosyncratic in nature. She submits as follows:
“The respondent submits there is only minimal need for general deterrence in this case. It is relevant to this enquiry to establish whether there is some evidence available that this is a common occurrence which needs attention drawn to it by the penalty. It is submitted there is no evidence that this is other than an isolated instance caused solely by the Respondent having been mistaken as to her obligations. Common experience would suggest it is extremely unlikely that such circumstances are common in regards to other businesses which employ people on the work for the dole scheme. The need to warn others not to engage in similar conduct does not appear apposite to the facts of this case.”[24]
I accept these submissions.
[24] See respondent’s penalty submissions at paragraph 68
Specific deterrence
Considerations relevant to specific deterrence focus on the individual circumstances of the offender concerned and require some degree of prognostication as to the likelihood of re-offending. The most reliable tool for such prognostication is usually the attitude expressed by the party in question.[25]
[25] See Plancor Pty Ltd v Liquor Hospitality & Miscellaneous Union (2008) 171 FCR 357 at [37] per Gray J
In my view, given the overwhelming contrition of Ms Harvey and the fact that she has wound up her business, the prospects of her offending in a similar manner are negligible. As such, this is not a case which calls for any particular specific deterrence.
Cooperation
With hindsight Ms Harvey could have cooperated more with Ms Latz’s investigation. She was at times difficult to contact. She did not attend the proposed interview with a support person. It was necessary for an enforcement notice to be issued. The correspondence between her solicitor and the FWO was somewhat tortuous.
However, in my view, in assessing Ms Harvey’s degree of cooperation, it is necessary, once again, to examine her individual circumstances. She is not a sophisticated person. In my view, her behaviour is more analogous with a rabbit caught in the headlights rather than a person who was trying to evade her responsibilities or obfuscate in the face of an investigation.
In my view, the most significant aspect of her cooperation is the fact that she has paid the moneys due to the employees concerned at considerable cost to herself. This is not the actions of an uncooperative person or one who wanted to evade her responsibilities.
Calculation of penalties and conclusions
It has been said that the task of sentencing is one of the hardest judicial tasks, as it requires the synthesis of competing consideration to arrive at a penalty, which is just and appropriate. Necessarily it is a process of intuitive synthesis. It is useful to think in terms of percentages, but sentencing is not a purely arithmetical process.
There are three offences to which penalties must be applied. I am required to look at the penalties so imposed in aggregate to determine whether it is an appropriate response to the conduct, which led to the breaches. Whilst the penalties, in total must not be oppressive or crushing, they must be proportionate to the conduct engaged in by the respondents.
Ms Harvey is a person who has struggled financially for all of her adult life. She is illiterate and unsophisticated. As such, it is inappropriate to regard her as some form of employment predator who has prayed on others weaker and more vulnerable than herself.
I accept that she has behaved naively and gullibly. However, significantly, I do not think that she acted out of greed or definite self-interest. A more sophisticated person would have realised that what Ms Harvey believed was simply too good to be true.
In my view, Ms Harvey’s regret at the predicament in which she has found herself is palpable. She presented in court as an abject and chastened person. I unhesitatingly reached the conclusion that her contrition was not feigned in any way. Ms Harvey is truly mortified by what has occurred.
In my view, the most significant aspect of this case is that all of the employees concerned have been recompensed in full, at not inconsiderable cost to Ms Harvey personally. She has made good the wrong she has done each of these vulnerable individuals.
As such, in my view, notwithstanding the need for general deterrence, this case falls towards the very bottom of the scale for such deterrence. This is particularly so given the idiosyncratic circumstances of both Ms Harvey’s offending and her own circumstances.
If, at an earlier stage, Ms Harvey had been able to negotiate an instalment plan to pay off what was owed to the employees concerned, it is doubtful that these proceedings would have been instigated in the first place. That she did not do so, in my view, is a mark of Ms Harvey’s unsophisticated nature, rather than of any obduracy on her part.
At the end of the sentencing process, I must keep to the forefront of my mind that the person who will be used as a vehicle for general deterrence is one who is a pensioner, aged in her mid-sixties, who is functionally illiterate and a business naïf. Her offending occurred because of her naivety rather than because of any predatory or exploitative behaviour on her part.
Most significantly, at not inconsiderable personal cost to Ms Harvey, each of the underpaid workers has been recompensed in full. As a consequence of this, Ms Harvey has lost her accommodation and has no assets behind her to prepare for her retirement, after a life time of hard work.
In my view, in the true sense of the word, Ms Harvey must be considered a battler like those she misguidedly attempted to help. It is likely to be extremely difficult for her to pay any penalty imposed upon her, no matter how modest.
In all these circumstances, in my view, I must be very careful to fix a penalty that is proportionate to her overall offending and which pays proper regard to her idiosyncratic situation. I must not impose a penalty which is crushing, when viewed in its totality.
The most serious offence was the underpayment count. I will impose a penalty of $700.00. In respect of the two other counts, which I assess to have the same gravity, I will impose penalties of $350.00 in respect of each, making a total penalty of $1,400.00.
I appreciate that this sum is less than 10% of the maximum amount of the penalties applicable in aggregate. However, in my view, there are very many and significant mitigating factors in favour of Ms Harvey.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and twelve (112) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 23 November 2016
Key Legal Topics
Areas of Law
-
Employment Law
Legal Concepts
-
Penalty
-
Remedies
0
12
4