Fair Work Ombudsman v Hess

[2021] FCCA 1883

FEDERAL CIRCUIT COURT OF AUSTRALIA

Fair Work Ombudsman v Hess [2021] FCCA 1883

File number(s):

BRG 530 of 2020

Judgment of:

JUDGE JARRETT

Date of judgment:

13 August 2021

Catchwords:

INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – assessing penalty – admitted contraventions – agreed penalty.

INDUSTRIAL LAW – Commonwealth – compliance and enforcement – civil remedies – pecuniary penalty orders – amount of penalty – particular cases. 

Legislation:

Crimes Act 1914 (Cth) s 4AA

Fair Work Act 2009 (Cth) ss 535(1), 536(1), 539(2), 546(2), 557(1), 712, 716(2), 716(5)

Fair Work Regulations 2009 (Cth) regs 3.31, 3.33(2), 4.01(A), 4.04, 5.05

Pastoral Award 2010

Cases cited:

Australian Building and Construction Commissioner v CFMMEU [2020] FCA 549

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157

CFMMEU v ABCC (2018) 264 FCR 155

Commonwealth of Australia v Director of the FWBII (2015) 258 CLR 482

Number of paragraphs:

40

Date of last submission/s:

23 July 2021

Date of hearing:

23 July 2021

Place:

Brisbane

Solicitors for the Applicant:

Office of the Fair Work Ombudsman

The Respondent:

In person

ORDERS

BRG 530 of 2020

BETWEEN:

FAIR WORK OMBUDSMAN

Applicant

AND:

MARK LEONARD HESS

Respondent

ORDER MADE BY:	JUDGE JARRETT
DATE OF ORDER:	13 AUGUST 2021

THE COURT DECLARES THAT:

1.The respondent contravened:

(a)s.716(5) of the Fair Work Act 2009 (Cth) by failing to comply with a compliance notice issued to him pursuant to s.716(2) of the Fair Work Act 2009 (Cth) on 20 February, 2020;

(b)s.535(1) of the Fair Work Act 2009 (Cth), by failing to make and keep for seven years records of the kind prescribed by reg.3.33(2) of the Fair Work Regulations2009 (Cth), being records of hours worked for casual employees; and

(c)s.536(1) of the Fair Work Act 2009 (Cth), by failing to issue pay slips to the an employee within one working day of paying them, or at all.

THE COURT ORDERS THAT:

2.Within 28 days of this order, the respondent pay a pecuniary penalty to the Commonwealth pursuant to s.546(1) of the Fair Work Act 2009 (Cth) in the total amount of $17,500 which is made up of:

(a)a penalty of $3,500 in respect of the respondent’s contravention of s.716(5) of the Fair Work Act 2009 (Cth);

(b)a penalty of $7,000 in respect of the respondent’s contravention of s.535(1) of the Fair Work Act 2009 (Cth); and

(c)a penalty of $7,000 in respect of the respondent’s contravention of s.536(1) of the Fair Work Act 2009 (Cth)

REASONS FOR JUDGMENT

JUDGE JARRETT:

1. The respondent operates a dairy farm business trading as M.L. Hess Dairy Producer in Maclagan, Queensland.  As a result of an investigation commenced in 2019, the applicant formed the view that the respondent had contravened certain provisions of the Fair Work Act 2009 (Cth). These proceedings are the result of an investigation.

2. Mr Hess admits that he:

   (a)failed to comply with a compliance notice issued on 20 February, 2020 in contravention of s.716(5) of the Act;

   (b)failed to make and keep records in contravention of s.535(1) of the Act; and

   (c)failed to give pay slips in contravention of s.536(1) of the Act.

3. In these proceedings the applicant seeks declarations of contravention and the imposition of a pecuniary penalty upon the respondent for those contraventions.

   BACKGROUND

4. In 2018, the applicant conducted an investigation into the respondent’s employment practices. During that investigation a fair work inspector provided to the respondent links to the applicant’s website for templates and guidance material in relation to time sheets, pay slips and wage records. The fair work inspector concluded that certain contraventions of the Fair Work Act had occurred and he caused a “Findings of Contravention” letter under reg.5.05 of the Fair Work Regulations 2009 (Cth) to be sent to the respondent. The contravention concerned the underpayment of wages pursuant to the Pastoral Award 2010 and contraventions of the Act in respect of record keeping and the provision of pay slips.

5. The applicant sent a “Letter of Caution” to Mr Hess for those contraventions.  The letter indicated that if the applicant became aware of any future non−compliance, the letter “would be considered in deciding what action was appropriate and in the determination of any penalty to be imposed”.

6. In 2019, the applicant again commenced an investigation into the respondent’s compliance with the Fair Work Act following a request for assistance by one of the respondent’s employees. The employee alleged the non-payment of wages from 1 August, 2019 to 12 November, 2019.

7. As part of the investigation, a fair work inspector issued a notice to produce records and documents to the respondent pursuant to s.712 of the Fair Work Act. The notice required the production of, among other things, time and wage records. The respondent partially complied with the notice, but failed to produce time and wage records by the required date, or at all.

8. As a result of the investigation, the fair work inspector formed a belief that the respondent had contravened terms of the Pastoral Award in respect of the employee’s base rate of pay, casual loading, and public holiday loading.

9. On 20 February, 2020 the fair work inspector personally served the respondent with:

   (a)a compliance notice pursuant to s.716(2) of the Act, requiring him to:

   (i)take specified action by 19 March, 2020 to remedy the direct effects of the alleged contraventions by calculating and back-paying the employee’s correct entitlements and paying additional superannuation contributions as required by the Pastoral Award; and

   (ii)produce to the applicant evidence of the respondent’s compliance with the notice, including by producing a copy of its calculations, by 26 March, 2020; and

   (b)issued two infringement notices pursuant to reg.4.04 of the Regulations with a payment deadline of March, 2020 in respect of:

   (i)a failure to make and keep records of the details of the hours worked by the employee in accordance with reg.3.31 of the Regulations and s.535(1) of the Act; and

   (ii)a failure to issue a pay slip within one working day of payment to the employee pursuant to s.536(1) of the Act.

10. The respondent did not accept that the award applied to the employment of his employee.  In February, 2020 he had a meeting with the fair work inspector concerned who advised the respondent that he could apply to a court for a review of the compliance notice that had been issued to him.  In the same meeting, the respondent told the fair work inspector that he had looked at the applicant’s website resources regarding his record keeping obligations, the details of which had been provided during the 2018 investigation but it was “too hard” and he had no further records to produce.

11. It is uncontroversial that the respondent did not take the action specified in the compliance notice by 19 March, 2020 or provide evidence of calculations or rectification payments by 26 March, 2020.

12. On 2 April, 2020 a fair work inspector sent correspondence to the respondent regarding the failure to comply with the compliance notice and a reminder notice for the infringement notice relating to the failure to make and keep records of the details of the hours worked by the relevant employee.  The infringement notice relating to the failure to provide pay slips was withdrawn because of a typographical error, but it was reissued with a new deadline of May, 2020.

13. On 8 April, 2020 the respondent contacted the fair work inspector in response to the correspondence.  He again disputed the application of the Pastoral Award but admitted that the infringement notices were due to his own negligence in not keeping records and not issuing pay slips.  The respondent also sought an extension for payment of the infringement notices and was advised he would need to lodge an official request in accordance with the details on the infringement notices.  The applicant did not receive a request for a payment extension.

14. On 5 May, 2020 the fair work inspector contacted the respondent to advise of the applicant’s intention to commence proceedings against him if he did not comply with the compliance notice.

15. On 27 August, 2020 the fair work inspector sent a letter to the respondent withdrawing both infringement notices and subsequently, on 25 September, 2020 the applicant commenced these proceedings.

16. On 27 May, 2021 the applicant advised the respondent that she had conducted an assessment of the employee’s entitlements under the Pastoral Award and had determined that the outstanding wages due to him were:

    (a)$6,150.37 (gross) in outstanding wages; and

    (b)$548.28 in respect of superannuation.

17. Between 7 and 8 July, 2021, the respondent paid those amounts in full in accordance with the compliance notice.

    THE CONTRAVENTIONS

18. The respondent admits to contravening:

    (a)s.716(5) of the Fair Work Act by failing to comply with the compliance notice by the due date;

    (b)s.535(1) of the Fair Work Act, by failing to make and keep for seven years records of the kind prescribed by reg. 3.33(2) of the Fair Work Regulations, being records of hours worked for casual employees; and

    (c)s.536(1) of the Fair Work Act, by failing to issue pay slips to the employee within one working day of paying him, or at all.

19. The record-keeping contraventions (that is the contraventions of ss.535(1) and 536(1)) are numerous. The respondent committed a contravention of the Act each time he failed to keep relevant records or failed to issue to his employee a pay slip. However, s.557(1) of the Act provides that where two or more contraventions of a term of a civil remedy provision is committed by the same person and those multiple contraventions arise out of a course of conduct by that person, the multiple contraventions must be taken to constitute a single contravention of the relevant provision. The applicant accepts that the respondent is entitled to the benefit of this provision in respect of the multiple contraventions of ss.535(1) and 536(1) of the Act.

20. Thus, for the purposes of imposing penalties in this case, there are three contraventions namely one contravention each of ss.716(5), 535(1) and 536(1) of the Fair Work Act.

    THE MAXIMUM PENALTY

21. The maximum penalty that the Court may impose on the respondent is $31,500 comprised of:

    (a)$6,300 in respect of s.716(5) of the Act; and

    (b)$12,600 in respect of the contraventions of each of s.535(1) and s.536(1) of the Act.

22. The authorities demonstrate that it is appropriate for the Court to consider the maximum penalties as an indication of the legislature’s view of the conduct and as part of determining where the contraventions sit as against the maximum “yardstick”.

    CONSIDERATION OF PENALTY

23. Deterrence, both specific and general, is the “principal and indeed only” objective of pecuniary penalties under the Fair Work Act: Commonwealth of Australia v Director of the FWBII (2015) 258 CLR 482 at 506 [55]; CFMMEU v ABCC (2018) 264 FCR 155 at 167 [19]; Australian Building and Construction Commissioner v CFMMEU [2020] FCA 549 at [26]. Retribution, denunciation and rehabilitation have no part to play.

24. The penalties in this case must be set at a level such that it would be likely to act as a deterrent to preventing similar contraventions by like-minded persons.  It must have the necessary “sting or burden” to secure “the specific and general deterrent effects that are the raison d’être of its imposition”: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at [116].

25. Subsections 539(2) and 546(2) of the Act, along with reg.4.01(A) of the Fair Work Regulations, prescribe maximum penalties that may be imposed for contraventions of civil remedy provisions, by reference to penalty units within the meaning of s.4AA of the Crimes Act 1914 (Cth).

26. As I have remarked in previous decisions, the compliance notice regime established in the Fair Work Act provides a mechanism for the efficient and cost-effective rectification of identified contraventions of the Act. The compliance notice at issue here sought to address the underpayment of one employee on the basis of a fair work inspector’s belief that the respondent had contravened terms of the Pastoral Award. The compliance notice gave the respondent the opportunity to rectify the contraventions and thereby be protected from civil remedy proceedings just like the present proceedings. The respondent was also advised of his entitlement to seek a review of the compliance notice if he wished to do so. The respondent elected to take up neither opportunity. He did not back-pay the affected employee until July, 2021, well after proceedings were commenced and 15 months after the time specified by the notice. These are significant matters.

27. The record keeping contraventions have arisen because of the respondent’s failure to make and keep employment records as he is obliged to do.  Information of fundamental importance such as the hours of work performed by the employee need to be recorded for the benefit of both the employee and the employer.  The respondent failed to issue pay slips to the employee, preventing him from understanding what he had been paid.

28. The evidence shows that the applicant provided ample opportunity to the respondent to rectify the contraventions before commencing proceedings and provided between three and five months for payment of the infringement notices before they were withdrawn and these proceedings were commenced.

29. The applicant submits, and I accept, that the seriousness of these contraventions is increased because the respondent had previously been advised by the applicant of his obligations under the Pastoral Award and the Act. He had been provided with information regarding his record keeping and pay slip obligations pursuant to the Fair Work Act. In 2018 he had been provided with information about those obligations and how they might be discharged. He was advised of the minimum entitlements for his employees. Notwithstanding those matters, the respondent committed identical contraventions less than a year after the 2018 investigation was completed. That conduct indicates that he does not take his obligations as an employer seriously.

30. I accept the applicant’s submissions that the respondent’s conduct is a deliberate disregard by him of his obligations as an employer. His conduct is contemptuous of the applicant’s role and her enforcement powers. His conduct undermines the guaranteed safety net of fair, relevant, and enforceable minimum terms and conditions for all employees and undermines the compliance regime established under the Fair Work Act.

31. The significance of compliance with minimum terms and conditions cannot be overstated.  Nor can the significance of compliance with the relevant record keeping and pay slip obligations with which the respondent here considered he need not comply.  As the applicant points out, the record keeping and pay slip obligations play a vital role in the capability of the applicant to monitor and enforce compliance with minimum employment standards, they also play a vital role in permitting an employee to monitor the discharge of the obligations owed by the employer to them.  A failure to keep records of hours worked and to provide pay slips impedes both employees and the applicant from determining and enforcing workplace entitlements.  It effectively disempowers employees and undermines the ability of employees to identify and challenge underpayments. 

32. Those things came to pass in the present case.  The respondent’s failure to keep records or issue pay slips hampered the applicant’s investigation in 2019 in that the assessment of actual hours worked by the relevant employee was not readily discernable.  In addition, the employee was deprived of the opportunity to understand and check his minimum entitlements during the employment period because he did not receive pay slips.

33. The respondent continues to operate his dairy business and the applicant submits that with the respondent’s continued involvement in business there is a likelihood of his employing staff in the future. On this basis, it is important that the penalties imposed be sufficient to deter him from future conduct that undermines the powers of fair work inspectors or the efficacy of statutory notices. I accept those submissions in the circumstances where the respondent’s failure to meet his obligations under the Fair Work Act in respect of the payment of minimum entitlements to his employees and to keep proper records is, as I have remarked above, repeated and serious. The contraventions have come about as a result of a conscious and deliberate decision not to comply with the Act. He has ignored reasonable warnings given to him by the applicant. I accept that in those circumstances there is a clear need for penalties that answer the requirement for specific deterrence to ensure that the respondent will not be prepared to embark upon the risk of engaging in the same contravening conduct in the future.

34. Moreover, the penalties should be set at a level to deter others who may engage in similar conduct and must not be seen by others as just an acceptable cost of doing business.  I accept that recipients of statutory notices issued by the applicant must be under no misapprehension about their obligations to comply with those notices and that failure to do so will result in consequences.

35. The employee who initiated the 2019 investigation was directly impacted by the respondent’s failure to comply with the compliance notice because he was denied wages (already due to him) of $6,150.37 and superannuation contributions of $548.28.48.  As the applicant points out, while the Court’s focus must be to the non-compliance with the compliance notice rather than the contraventions alleged in it, nonetheless the delay in the employee receiving his wages is a relevant loss flowing from the failure to comply with the notice. 

36. Whilst the respondent has now addressed the issues required by the compliance notice, it took 15 months for him to do so.  The respondent has not expressed any contrition or regret for his actions and failure to comply.  There is no evidence that he has taken any corrective action to ensure compliance with his record keeping and pay slip obligations under the Act.

37. It is relevant to take into account that the respondent has cooperated by admitting the contraventions and joining with the applicant in putting before the Court a statement of agreed facts.  Doing so has resulted in a saving of the resources that would otherwise be associated with a contested liability hearing.  A discount on the penalty to take account of that matter is appropriate.

    FIXING OF PENALTY

38. Having regard to the above matters I consider that the following penalties are appropriate in respect of the contraventions before the Court:

    (a)for the contravention of s.716(5) of the Act - $3,500.00;

    (b)for the contravention of s.535(1) of the Act - $7,000.00;

    (c)the contravention of s.536(1) of the Act - $7,000.00.

39. The aggregate penalty for the three contraventions is $17,500.  I do not consider any further reduction in the penalty is warranted.  There is no evidence that such an aggregate penalty would be crushing or oppressive.  I consider it to be an appropriate response to the serious, deliberate and repeated contraventions of the Act by the respondent.

    CONCLUSION

40. Accordingly, I make the orders set out at the commencement of these reasons.

I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Jarrett delivered on 13 August, 2021.

Associate:

Dated:       13 August 2021