Fair Work Ombudsman v HML Holdings Pty Ltd (No 2)
[2023] FedCFamC2G 466
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v HML Holdings Pty Ltd (No 2) [2023] FedCFamC2G 466
File number(s): SYG 1716 of 2022 Judgment of: JUDGE LAING Date of judgment: 6 June 2023 Catchwords: INDUSTRIAL LAW – assessment of a pecuniary penalty for contravention of s 716(5) of the Fair Work Act 2009 (Cth) – where default judgment occurred following the respondent’s non-engagement with proceedings – where underpayment to employee not rectified, despite the Court’s orders, at the time of determination – penalty determined Legislation: Fair Work Act 2009 (Cth) ss 90, 539, 546, 716
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 399 ALR 599
Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Non-Indemnification Personal Payment Case) [2018] FCAFC 97; (2018) 264 FCR 155
Fair Work Ombudsman v Aisha & Umma Enterprises Pty Ltd [2023] FedCFamC2G 382
Fair Work Ombudsman v Corporation Sun Pty Ltd & Anor [2020] FCCA 2849
Fair Work Ombudsman v Hess [2021] FCCA 1883
Fair Work Ombudsman v HML Holdings Pty Ltd [2023] FedCFamC2G 119
Fair Work Ombudsman v Rika Foods North Melbourne Pty Ltd [2023] FedCFamC2G 379
Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290; (2016) 68 AILR 102–690
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076
Division: Division 2 General Federal Law Number of paragraphs: 34 Date of hearing: 29 May 2023 Place: Sydney Solicitor for the Applicant: Ms A Clemens of Fair Work Ombudsman Respondent: No appearance ORDERS
SYG 1716 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: HML HOLDINGS PTY LTD
Respondent
order made by:
JUDGE LAING
DATE OF ORDER:
6 JUNE 2023
THE COURT ORDERS THAT:
1.Pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (FW Act), within 28 days of this order the Respondent pay a pecuniary penalty of $20,000 to the Commonwealth for its contravention of section 716(5) of the FW Act as declared on 20 February 2023.
2.The Applicant has liberty to apply on seven days’ notice in the event that the above order is not complied with.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE LAING:
INTRODUCTION
Before the Court is an application by the Fair Work Ombudsman (FWO) for orders under s 546 of the Fair Work Act 2009 (Cth) (FW Act) requiring the respondent, HML Holdings Pty Ltd (HML Holdings), to pay a pecuniary penalty. The penalty is sought in respect of a contravention by HML Holdings of s 716(5) of the FW Act by failing to comply with a compliance notice (Compliance Notice) in respect of underpayments to an employee (Employee).
PROCEDURAL HISTORY
The procedural history in this matter is set out to some extent in my judgment dated 20 February 2023: Fair Work Ombudsman v HML Holdings Pty Ltd [2023] FedCFamC2G 119 (Default Judgment).
The FWO commenced these proceedings through an Application and Statement of Claim filed on 23 November 2022. The FWO sought default judgment, which was granted on 20 February 2023 after two non-appearances and non-compliance by HML Holdings with procedural orders. Orders were made on that occasion including the following declaration:
2.Upon admissions which the respondent is taken to have made, consequent upon default pursuant to r 13.04(2) of the FCFCOA Rules, the Court declares that the respondent contravened… s 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with the Compliance Notice issued by Fair Work Inspector Charles Ford on 13 May 2022 (Compliance Notice) in respect of Mr Anil Shakya (Employee).
I also made the following orders:
3.Pursuant to s 545(1) of the FW Act, within 28 days of this Order the respondent take steps to comply with the Compliance Notice by:
(a)paying the underpayment amount of $6,076.53 to the Employee; and
(b)preparing and producing to the applicant a schedule outlining the outstanding amounts and providing proof that these amounts have been paid.
4.Pursuant to s 547(2) of the FW Act, the respondent pay interest at the applicable pre-judgment rate to the Employee on the amounts owed to the Employee in order 3(a).
Further orders were made setting the matter down for a hearing on the question of penalty and providing a regime for further evidence and submissions. No material in this regard has been filed by HML Holdings.
PRINCIPLES
The principles regarding imposition of penalties were considered by the High Court in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13; (2022) 399 ALR 599 (Pattinson). There, it was stated that “the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act” (at [9] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ). The “real task” of the Court was therefore described as “fixing the penalty which it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions of the Act” (at [71]).
A number of potentially relevant considerations have been identified in cases such as Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076 at [42]; Construction, Forestry, Maritime, Mining and Energy Union v Australian Building and Construction Commissioner (The Non-Indemnification Personal Payment Case) [2018] FCAFC 97; (2018) 264 FCR 155 at [20] and Mason v Harrington Corporation Pty Ltd [2007] FMCA 7. However, it is to be borne in mind that such recitations of potentially relevant considerations are not to be used as if they “were a legal checklist”: Pattinson at [19]. The Court’s task is to determine the appropriate penalty or penalties by reference to the particular circumstances of each case.
MAXIMUM PENALTY
Pursuant to ss 539(2) and 546(2)(b) of the FW Act, the maximum penalty that the Court may impose is $33,300 for a contravention by HML Holdings of s 716(5) of the FW Act. This is based upon the penalty unit amount of $222 that applied at the time of the contravention.
It has been held that the maximum, whilst a relevant consideration, does not constrain the exercise of the discretion under s 546 beyond requiring “some reasonable relationship between the theoretical maximum and the final penalty imposed”: Pattinson at [10]. This “relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others”: Pattinson at [10].
ASSESSMENT OF PENALTY
Material relied upon
In addition to the admissions taken to have been made by reference to the pleadings, the FWO relied upon the following evidence on the question of penalty:
(a)an affidavit of Farishte Tehmasp Parekh affirmed on 24 January 2023 (First Parekh Affidavit);
(b)an affidavit of Fair Work Inspector Charles Ford affirmed on 17 April 2023 (FWI Ford Affidavit); and
(c)an affidavit of Farishte Tehmasp Parekh affirmed on 18 May 2023 (Second Parekh Affidavit).
No material was filed on behalf of HML Holdings.
Service of the relevant documents
The Second Parekh Affidavit confirms that copies of the orders made on 20 February 2023 as well as the FWO’s submissions and further affidavit evidence on the question of penalty have been served upon HML Holdings by Express Post to its Registered Office. Attempts have also been made to draw these documents to HML Holdings’ attention via email.
No communication from HML Holdings has been received by the FWO in response.
I am satisfied that HML Holdings was appropriately served with the relevant documents in this matter. There was no appearance for HML Holdings at the listed hearing. That non-appearance followed a history of HML Holdings’ non-engagement with this matter. In these circumstances, I determined that it was appropriate to proceed with the penalty hearing in the absence of HML Holdings pursuant to rule 13.06(1)(e) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
Circumstances surrounding the contravention and subsequent action
HML Holdings was trading as Espresso Warriors Mittagong, a café in Mittagong, New South Wales that operated as part of the Espresso Warriors franchise chain of cafes: FWI Ford Affidavit at [6]-[7]. HML Holdings employed the Employee as a chef from 21 June 2020 to 22 February 2022: FWI Ford Affidavit at [10]; Statement of Claim at [5].
Prior to lodging his Request for Assistance with the FWO, the Employee attempted to seek payment of his outstanding entitlements directly from HML Holdings to no avail: FWI Ford Affidavit at [24] and Annexure CAPF-13 to the FWI Ford Affidavit.
The Compliance Notice issued on 13 May 2022 was in respect of a failure by HML Holdings to pay the Employee for accrued but untaken annual leave as required by s 90(2) of the FW Act. The Compliance Notice required HML Holdings to take specified action remedying this by 1 July 2022: FWI Ford Affidavit at [13] and Annexure CAPF-4 to the FWI Ford Affidavit.
No such action was taken. The evidence demonstrates that there were multiple attempts by the FWO to engage with HML Holdings on this issue, including by telephone, email and post. HML Holdings does not appear to have meaningfully engaged with the FWO in response to these attempts: FWI Ford Affidavit at [8] to [27]. Nor does HML Holdings appear to have meaningfully engaged with the FWO in response to these proceedings: First Parekh Affidavit at [3] to [20]; Second Parekh Affidavit at [4]-[10]; see also [3]-[13] of the Default Judgment.
There is no credible evidence before me indicating any mitigating circumstances surrounding the non-compliance or lack of engagement. At most, there have been vague references in the limited communications to the FWO to a hospital visit and someone else being responsible: see [4] and [11] of the Default Judgment.
It appears that the Employee still has not been paid: FWI Ford Affidavit at [25] and Annexure CAPF-14 to the FWI Ford Affidavit. This is notwithstanding the orders made on 20 February 2023 requiring that this occur.
The need to ensure compliance with minimum standards
The FWO has observed that the need to ensure compliance with minimum standards is an important consideration for reasons that include the following:
(a)one of the stated principal objects of the FW Act is to provide a guaranteed safety net of fair, relevant and enforceable minimum standards for employees: s 3(b) of the FW Act;
(b)it is important for the FWO to be able to exercise compliance powers effectively. Companies’ failure to comply with compliance notices undermines this framework and the ability for employees’ rights to be protected; and
(c)the penalties available for non-compliance demonstrates the importance placed upon compliance with minimum obligations under the FW Act.
I accept these submissions and have taken them into account in determining the appropriate penalty.
Nature and extent of loss
The Employee continues to be denied his outstanding entitlements that he should have been paid in February 2022, when his employment ended. He is owed $6,076.53, as well as interest accrued on this amount at the applicable pre-judgment rate. This amount relates to 226.55 hours of accrued but untaken annual leave: Statement of Claim at [5] and [12]-[13]; 20 February 2023 orders. I have taken into account the loss to the Employee in this regard in determining an appropriate penalty: Fair Work Ombudsman v Corporation Sun Pty Ltd & Anor [2020] FCCA 2849 at [35]; Fair Work Ombudsman v Hess [2021] FCCA 1883 at [35].
HML Holdings’ failure to comply with the Compliance Notice or engage with the FWO has also resulted in the FWO instituting proceedings, resulting in the expenditure of public funds.
Size and resources of the business
As HML Holdings has not engaged with these proceedings, I have no material before me indicating that the size or resources of the business ought to have any bearing on the question of penalty.
Deterrence
It has been repeatedly emphasised in penalty cases that general deterrence must serve a purpose that ensures that any penalty imposed is not seen as “the cost of doing business”: see for example Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290; (2016) 68 AILR 102–690 at [27]. Penalties must be set at a level which demonstrates that there are serious consequences for non-compliance, to deter others from failing to comply: at [56]-[57].
The FWO has submitted that the Cafés and Restaurants industry is a priority to them, having regard to the significant dispute and enforcement rates associated with that industry. The evidence before me indicates that in the 2019 to 2022 period, the industry involved 9.5% of all FWO disputes, which was an “Industry Dispute Rate” that was categorised as “high”. The industry appears to have experienced the highest level of disputes overall in the 2021 to 2022 period: FWI Ford Affidavit at [34] to [35] and Annexure CAPF-20 to the FWI Ford Affidavit. Whilst there are some limitations in this evidence, I accept that industry specific issues have been recognised as informing the need for general deterrence in other cases: see for example Fair Work Ombudsman v Aisha & Umma Enterprises Pty Ltd [2023] FedCFamC2G 382 at [42]-[44] and [52] and Fair Work Ombudsman v Rika Foods North Melbourne Pty Ltd [2023] FedCFamC2G 379 at [55]-[56].
In any event, I accept the significant role that the need for general deterrence plays in determining penalties. The penalty imposed in this matter should be sufficiently high to impress upon other employers the importance of complying with their legal obligations, and in particular the need to comply with statutory notices from the FWO.
I accept that there is also a particular need for specific deterrence in this case. On the evidence before me HML Holdings remains registered, although it no longer appears to be trading as Espresso Warriors Mittagong: FWI Ford Affidavit at [29]-[33] and Annexures CAPF-15 to CAPF-19 to the FWI Ford Affidavit. Its lack of engagement prior to and during these proceedings shows a concerning level of disregard for its obligations under the FW Act and to the Court. I have taken into account that the FWO has not alleged that HML Holdings has previously engaged in any other breaches of the FW Act. However, specific deterrence nonetheless assumes some significance in circumstances where HML Holdings has not meaningfully engaged with these proceedings or with the FWO generally in relation to this matter and has provided no indication of any contrition or intention to pay the Employee’s entitlements without further enforcement action.
Determination of penalty
The FWO submitted that the penalty imposed in this matter should be fixed in the high range of $26,640 to $29,970 (being 80-90% of the maximum).
The FWO submitted that although the penalty imposed must not be crushing or oppressive, it must nevertheless bear relativity to the seriousness of the conduct engaged in by HML Holdings. The FWO observed that there was no evidence suggesting that such penalties would be crushing or oppressive to HML Holdings.
I accept, having regard to the above, that a substantial penalty is warranted in this case. This is taking into account, inter alia, the need for deterrence as well as HML Holdings’ lack of engagement in these proceedings or payment to the Employee notwithstanding the Compliance Notice and the Court’s orders. These matters combine to indicate a level of disregard on the part of HML Holdings for its obligations under the law.
However, taking into account all of the circumstances in this matter, including the singular nature of the contravention and the absence of any history of prior contraventions, I consider that a penalty in the amount of $20,000 would be appropriate (which is just over 60% of the maximum). I consider that this strikes a reasonable balance between oppressive severity and the need for both general and specific deterrence (Pattinson at [41]).
The FWO seeks that the pecuniary penalty be paid to the Commonwealth within 28 days. I accept that this is appropriate and will so order.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Laing. Associate:
Dated: 6 June 2023
0
10
0