Fair Work Ombudsman v Hongyen Pty Ltd
[2018] FCCA 196
•2 February 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v HONGYEN PTY LTD & ANOR | [2018] FCCA 196 |
| Catchwords: INDUSTRIAL LAW – Breach of provisions of Fair Work Act 2009 – breach of provisions of modern award – failure to properly categorise experience level of employees – failure to pay minimum wages applicable – failure to pay appropriate loading for weekend work – failure to pay appropriate loading for casual work – failure to accrue employee’s leave entitlements and pay annual leave – principles to be applied to undefended proceedings – quantum of civil penalty to be imposed – relevance of prior involvement with Fair Work Ombudsman – size of enterprise – considerations of general deterrence and specific deterrence. |
| Legislation: Fair Work Act 2009, ss.14; 44; 44(1); 45; 90(1); 539(2); 545(1); 546; 550(1); 550(2); 557(1); 701; 712 Acts Interpretation Act 1901 (Cth), s.15AB(1)(b) |
| Cases cited: Taylor v Taylor (1970) 143 CLR 1 Speedo Holdings BV v Evans (No.2) [2011] FCA 1227 Fair Work Ombudsman v Kentwood Industries Pty Ltd (No.3) [2011] FCA 579 Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 Australian Ophthalmic 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 FWO v Ramsey Food Processing Pty Ltd (No.2) [2012] FCA 408 Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman [2014] FCAFC 62 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 | |
| First Respondent: | HONGYEN PTY LTD |
| Second Respondent: | ALBERT TRAN |
| File Number: | ADG 369 of 2016 |
| Judgment of: | Judge Brown |
| Hearing date: | 8 September 2017 |
| Date of Last Submission: | 8 September 2017 |
| Delivered at: | Adelaide |
| Delivered on: | 2 February 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms Littlewood |
| Solicitors for the Applicant: | Office of Fair Work Ombudsman |
| Counsel for the Respondents: | No appearance |
ORDERS
The court declares that the second respondent Albert Tran, in default of his appearance before the court, has contravened the following provisions of the Fair Work Act 2009 (Cth) (hereinafter referred to as “the Act”):
(a)Section 44(1) of the Act by:
(i)Failing to make payment to Ms Uyen Vo for a period of annual leave under section 90(1) of the Act to which she was entitled;
(ii)Failing to afford Ms Uyen Vo her entitlement to accrue personal leave under section 96 of the Act.
(b)Section 45 of the Act by:
(i)Failing to pay minimum wages to part-time employees as required by clause 12.7 of the Hair & Beauty Industry Award 2010 (hereinafter referred to as “the Award”).
(ii)Failing to pay minimum wages to a casual employee as required by clause 13.2 of the Award;
(iii)Failing to pay the required casual loading as required by clause 13.2 of the Award;
(iv)Failing to pay the Saturday loading as required by clause 31.2(b) of the Award;
(v)Failing to pay the Sunday loading as required by clause 31.2(c) of the Award;
(vi)Failing to pay leave loading to an employee during a period of annual leave as required by clause 33.3(a) of the Award; and
(vii)Failing to comply with the rostering requirements for part-time employees in clause 12.8(b) of the Award.
The court orders as follows:
Pursuant to section 546(1) of the Act, within 28 days, the second respondent pay a total pecuniary penalty fixed in the sum of $12,000.00.
Pursuant to section 546(3)(a) of the Act, the penalty imposed on the second respondent be paid to the Commonwealth.
Pursuant to section 545(1) of the Act that the second respondent:
(a)within a period of four weeks from the date of these orders, register with the applicant’s “My Account” portal at and complete the profile details;
(b)within a further period of two weeks after the period in subparagraph (a) provide to the applicant his “My Account” registration number; and
(c)within a period of six weeks from the date of these orders, register with the applicant’s Online Learning Centre at: , complete the courses “Hiring Employees” and “Managing Employees” and provide the applicant with evidence of completion of those courses.
The proceedings against the first respondent be otherwise dismissed.
A sealed copy of these orders and the relating reasons for judgment be forwarded to the second respondent by pre-paid post to his last known address.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 369 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| HONGYEN PTY LTD |
First Respondent
| ALBERT TRAN |
Second Respondent
REASONS FOR JUDGMENT
Introduction
The Fair Work Ombudsman (hereinafter referred to as the “FWO” or “the Ombudsman”) commenced these proceedings pursuant to the provisions of the Fair Work Act 2009 (Cth)[1] naming Hongyen Pty Ltd and Albert Tran as the respondents. Since early 2013, Mr Tran has been a director, secretary and sole shareholder of Hongyen Pty Ltd.
[1] Hereinafter referred to as the FWA or the Act
Between 13 July 2014 and 19 June 2016, Hongyen Pty Ltd operated a business known as Citi Nails & Beauty, at a shopping centre – Tea Tree Plaza – in suburban Adelaide. It provided a variety of services to its customers, including manicures, pedicures and nail extensions.
Mr Tran was employed by the business as its manager. In this capacity, he employed five individuals – Uyen Vo; Tran Thi Hau; Tram Le; Xuan Nguyen; and Thi Duong; to provide the business’ services to its various customers.
Ms Vo, Ms Le, Ms Nguyen and Ms Duong were employed as part-time employees. Ms Hau was a casual. Each employee was covered by the provisions of the Hair & Beauty Industry Award 2010 “the Award”. Although none of the employees were technically qualified nail technicians, they were each experienced in performing nail extensions and like procedures for their customers and did so.
The FWO alleges that Hongyen Pty Ltd, through the agency of Mr Tran, underpaid each of the staff members, in the following ways:
·misclassifying their relevant level of experience, in the hair and beauty industry, particularly in respect of the provision of nail extensions;
·regarding them as trainees, when they were not;
·failing to pay minimum pay awards, given their past experience and how they were required to be classified under the Award;
·failing to pay applicable loadings for weekend work; and
·failing to pay Ms Vo her annual leave, with appropriate leave loading, after not properly recording her accumulation of this leave.
·it is also alleged that there were irregularities in the rostering of these staff members, vis-à-vis the provisions of the Award.
The FWO calculates the amount of underpayment, to the five employees concerned, to be $7,493.83, in the relevant period, which is between 13 July 2014 and 19 June 2016. Neither respondent has taken any active steps in these proceedings.
In particular, no formal response has been filed in respect of the statement of claim, prepared on behalf of the FWO, which particularises the various complaints levelled by the respondents, by reference to the applicable provisions of the FWA.
However, at an earlier stage, Mr Tran informally admitted the breaches concerned to both the court and the representatives of the FWO and indicated that he did not intend to contest the respondents’ liability for them.
In these circumstances, the FWO initially sought that the court should enter judgment, in its favour, by default, pursuant to the provisions of the Federal Circuit Court Rules 2001. In particular, the FWO sought that the court should impose pecuniary penalties, after it has formally declared that the relevant respondents had breached the applicable provisions of the FWA.
The relevant penalty hearing, took place on 8 September 2017, in the absence of both Mr Tran and/or a representative of Hongyen Pty Ltd. Prior to judgment being released, I was advised that Hongyen Pty Ltd was placed in voluntary administration on 18 September 2017.
In these circumstances, the FWO concedes that its application against Hongyen Pty Ltd must be stayed and it no longer seeks any declarations or orders against Hongyen Pty Ltd. In these circumstances, it seeks orders against only Mr Tran. In these circumstances, I propose to dismiss the application against Hongyen Pty Ltd.
The FWO is a statutory appointment under the FWA.[2] 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.[3] One of the responsibilities of the FWO is to monitor compliance with the FWA.
[2] Hereinafter referred to as the FWA or the Act
[3] 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 their respective 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 FWA empowers the Ombudsman to delegate its statutory responsibilities to Fair Work Inspectors. 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.[4]
[4] 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.[5]
[5] See FWA at section 539(2)
Two fair work inspectors have been previously involved in the industrial affairs of Hongyen Pty Ltd. They are Joel Stephen Rawlings and Kathryn Maree Spurrell. Each of them has filed an affidavit in these proceedings.[6]
[6] See affidavit of Joel Stephen Rawlings filed 11 August 2017 and affidavit of Kathryn Maree Spurrell also filed 11 August 2017
Mr Rawlings was appointed as a fair work inspector in 2009. He deposes that, in 2012, the FWO inaugurated a campaign to educate employers in the hair and beauty industry about their responsibilities under Commonwealth workplace law. It being the perception of the FWO that employees in this industry were vulnerable and, given the nature of the industry, many employers were small in scale and so not well placed to know their workplace obligations.
As part of this campaign, fair work inspectors randomly identified employers, within the hair and beauty industry, and inspected two week samples of their employees’ time and wage records. Hongyen Pty Ltd was one of the employers selected to take part in this audit in November of 2012.
As a consequence, Mr Rawlings examined Hongyen Pty Ltd’s wage records and discussed them with Mr Tran and his accountant. In February of 2012, Mr Rawlings discovered some irregularities in regards to how Hongyen Pty Ltd was remunerating a numbers of its employees, in respect of minimum rates of pay and weekend penalties under the Award.
In particular, the audit found underpayment of six employees of Hongyen Pty Ltd, including Ms Vo. The underpayments ranged from a minimum amount of $235.39 to a maximum amount of $1,384.45. Mr Tran was invited by Mr Rawlings to voluntarily rectify the underpayments, which he did, repaying a total amount of $4,353.15, including $546.86 to Ms Vo. The contraventions each took place at Citi Nails & Beauty, at its Tea Tree Plaza premises.
In 2015, the FWO decided to conduct a further audit, following on from its 2012 campaign into the hair and beauty industry. Ms Spurrell was appointed by the FWO to conduct this follow up, so far as Hongyen Pty Ltd was concerned.
Ms Spurrell was appointed a fair work inspector on 27 April 2010. She obtained wage records in respect of Hongyen Pty Ltd from 29 February 2016 onwards. In addition, Ms Spurrell served two notices to produce, on Hongyen Pty Ltd, pursuant to the provisions of section 712 of the FWA. As a consequence of her investigations, Ms Spurrell identified that Hongyen Pty Ltd had underpaid five of its employees, by failing to properly apply the provisions of the Hair & Beauty Industry Award 2010.
The Hair & Beauty Industry Award 2010 is a modern award. Pursuant to section 45 of the FWA a person must not contravene a term of a modern award. This section is noted to be a civil remedy provision, to which part 4-1 of the Act applies.
In addition, section 44(1) of the Act, provides that:
“An employer must not contravene a provision of the National Employment Standards”.
Provisions of the National Employment Standards are contained in Part 2-1 of the Act. They include payment for annual leave [section 90(1)]; and the entitlement to accrue personal leave [section 96]. Again breaches of the National Employment Standards are characterised as being civil remedy provisions to which Part 4-1 applies.
Section 90(1) of the Act reads as follows:
“(1) If, in accordance with this Division, an employee takes a period of paid annual leave, the employer must pay the employee at the employee's base rate of pay for the employee's ordinary hours of work in the period.”
Section 96(1) of the Act reads as follows:
“(1) For each year of service with his or her employer, an employee is entitled to 10 days of paid personal/carer's leave.”
Ms Spurrell found that Hongyen Pty Ltd had breached both the National Employment Standards and the applicable modern awards in respect of the employment of Ms Vo; Ms Le; Ms Nguyen; Ms Duong; and Ms Hau. It is as a consequence of these breaches that the FWO has commenced the current proceedings.
Collectively, the employees concerned were underpaid the total amount of $7,493.83, broken down as follows:
Employee
Underpayment
Ms Vo
$6,346.96
Ms Le
$135.45
Ms Nguyen
$550.72
Ms Duong
$147.66
Ms Hau
$313.04
Total
$7,493.83
So far as each of the individual employees was concerned, Ms Spurrell found as follows:
a)Ms Vo
Ms Vo commenced employment with Hongyen Pty Ltd on 11 July 2011. She was part time but was paid as a trainee. However, by dint of her experience, she should have been classified as a hair and beauty employee level 2, as she was providing services as a qualified nail technician or an unqualified beautician or cosmetologist.
For relevant periods, Ms Vo was underpaid as follows:
Relevant period Rate Paid per hour Base rate payable per hour Hours worked Underpayment 13/7/14-3/7/15 $16.00 $18.97 840 $2.97 4/7/15-29/8/15 $16.00 $19.44 160 $3.44 30/8/15-18/6/16 $17.50 $19.44 760 $1.94 Total $4,519.60
In addition, Ms Vo took annual leave between 1 February 2016 and 28 February 2016. She was not paid any moneys whatsoever in respect of her four weeks leave. At the time she had accrued approximately 218 hours of annual leave, to which she was entitled as a part-time employee of Hongyen Pty Ltd, but no such time had been accrued, on her behalf, by the firm.
Pursuant to clause 33.3(a) of the Award, her leave attracted a loading of 17.5%, which equated to $3.40 per hour. Ms Vo was entitled to the sum of $1,827.36, calculated as follows:
Entitlement
Rate payable
Hours of leave
Entitlement
Paid
Underpayment
Annual Leave
$19.44 per hour
80
$1,555.20
Nil
$1,555.20
Leave loading
$3.402 per hour
80
$272.16
Nil
$272.16
Total
$1,827.36
b) Ms Le
Ms Le was employed by Hongyen Pty Ltd between 26 August 2015 and 18 June 2016. Ms Le was an unqualified employee, who was performing the role of a nail technician. Accordingly, she was to be categorised as a level 2 employee under the award. The hourly rate was $19.44. However, she was paid $18.99. This lead to the following underpayment:
Relevant period Rate Paid per hour Base rate payable per hour Hours worked Underpayment per hour 26/8/15-18/6/16 $18.99 $19.44 301 $0.45 Total $135.45 c) Ms Nguyen
Similar considerations apply to Ms Nguyen. However she was also employed on both Saturday and Sunday and did not receive any loading in respect of the applicable weekend work. In respect of the Saturday time, the loading is 33%; whilst on Sunday the loading is 100%.
Under the applicable award Ms Nguyen should have been paid $19.44 per hour. However, she was paid $16.00 per hour. This resulted in the following underpayment:
Relevant period Rate Paid per hour Base rate payable per hour Hours worked Underpayment 8/3/16-9/6/16 $16.00 $19.44 102 $3.44 Total $350.88
Entitlement Rate payable as a loading Hours of leave Entitlement Paid Underpayment Saturday loading $6.42 per hour (33%) 24 $154.08 Nil $154.08 Sunday loading $19.44 hour (100%) 4 $77.16 $32.00 $45.76 Total $199.84 d) Ms Duong
Ms Duong’s situation is almost identical to that of Ms Nguyen, other than she received $18.99 per hour. Again, Ms Duong was employed between 7 March and 18 June 2016 by Hongyen Pty Ltd and performed the work of a nail technician.
After 1 July 2015, the hourly rate of pay prescribed by the award was $19.44. In addition, Ms Duong did not receive either Saturday or Sunday loading. She worked four Saturdays and four Sundays in the relevant period. The underpayment in respect of her situation is summarised as follows:
Relevant period Rate Paid per hour Base rate payable per hour Hours worked Underpayment 7/3/16–18/6/16 $18.99 $19.44 154 $69.30 Total $69.30
Entitlement Rate payable as a loading Hours of leave Entitlement Paid Underpayment Saturday loading $6.42 per hour (33%) 4 $25.68 Nil $25.68 Sunday loading $19.44 hour (100%) 4 $77.16 $25.08 $52.68 Total $78.36 e) Ms Hau
Slightly different considerations apply to Ms Hau. She was employed on a casual basis and accordingly was entitled to a casual loading under the award. In addition, during her period of employment between 18 August 2015 and 18 June 2016, she was underpaid by $0.45 per hour. She was underpaid $0.11 per hour in respect of her loading entitlements. Again, her underpayment can be summarised as follows:
Relevant period Rate Paid per hour Base rate payable per hour Hours worked Underpayment 18/8/15-18/6/16 $18.99 $19.44 559 $251.55 Total $251.55
Entitlement Casual loading Casual loading paid Underpayment per hour Hours worked Underpayment $4.86 per hour $4.75 per hour $0.11 $61.49 559 $61.49 Total $61.49
The principles applicable to default judgment
The FWO commenced these proceedings, by way of an application filed on 2 November 2016, which was supported by a statement of claim. The application was personally served on Mr Tran, on 10 November 2016, at an address in Canley Heights, New South Wales.
On the first mention of the matter, which occurred on 15 December 2016, Mr Tran appeared before the court via telephone. He indicated that neither he nor Hongyen Pty Ltd intended to contest liability in respect of the various assertions arising from the statement of claim filed by the Ombudsman.
In these circumstances, all parties agreed that the case should be fixed for a penalty hearing on 3 May 2017. Further directions were made in respect of the filing of a statement of agreed facts in anticipation of this hearing.
No agreed statement of facts was forthcoming. When the case returned to court, for further directions, on 3 April 2017, it became apparent that Mr Tran was no longer prepared to concede liability. As a consequence, orders were made requiring the filing of a defence and the vacation of the penalty hearing.
Neither Mr Tran nor Hongyen Pty Ltd complied with the direction that a defence be filed. As a consequence, on 23 May 2017, when the case returned to court, the proceedings were adjourned for an undefended hearing, on 8 September 2017. Mr Tran attended court by telephone when this hearing date was allocated.
Mr Tran did not appear on the hearing date. In all the circumstances, I have no doubt that Mr Tran was aware of the hearing date. In the past, he has had a solicitor acting on his behalf. In addition, I am satisfied that the Ombudsman, as a model litigant, has taken all reasonable steps to keep Mr Tran informed of the process of these proceedings and what is required from him to take part in them.
It is a significant thing for proceedings to be determined in the absence of one of the parties, particularly proceedings which potentially include the imposition of a pecuniary penalty on the absent party. The court has an obligation to ensure that the parties to proceedings before it have an opportunity to participate in those proceedings. Before a person can be adversely affected by judicial order, he or she must be afforded an adequate opportunity to be heard.[7]
[7] See Taylor v Taylor (1970) 143 CLR 1
The court cannot compel a respondent to engage in litigation. It is however obliged to give a respondent the opportunity to put evidence before the court and, if he or she wishes to do so, contest any evidence relied upon by the applicant. In this particular case, Mr Tran has not chosen to contest formally any of the evidence put forward by the FWO, through its relevant witnesses, Mr Rawlings and Ms Spurrell.
A respondent, whether by intransigence, disinterest or manipulation cannot succeed in denying an applicant a just resolution, according to law, of his or her application, by choosing not to take part in a proceeding. In these circumstances, the court has mechanisms to resolve applications in the absence of a party, if it is satisfied it is appropriate to do so.
In this particular, I am satisfied that Mr Tran is aware of the nature of the Ombudsman’s application, particularly in respect of the central issue arising in it, which concerns the underpayment of the five employees concerned. Prior to the institution of proceedings, Ms Spurrell provided him with a thorough written analysis of the results of her audit of the employment records of Hongyen Pty Ltd.
Rule 13.03A(2) of the Federal Circuit Court Rules 2001 “the Rules” sets out the circumstances in which a respondent is taken to be in default. It includes the following:
·the respondent has not satisfied the applicant’s claim;
·has not complied with an order in the proceedings;
·has not produced a document;
·has not defended the proceedings with due diligence.
The powers of the court, when a respondent is found to be in default, are set out in Rule 13.03B(2) as follows:
“(2) If a respondent is in default, the Court may:
(a)order that a step in the proceeding be taken within the time limited in the order; or
(b)if the claim against the respondent is for a debt or liquidated damages—grant leave to the applicant to enter judgment against the respondent for:
(i) the debt or liquidated damages; and
(ii) if appropriate—costs; or
(c)if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings—give judgment against the respondent for the relief that:
(i) the applicant appears entitled to on the statement of claim; and
(ii) the Court is satisfied it has power to grant; or
(d)give judgment or make any other order against the respondent; or
(e)make an order mentioned in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order.”
In Speedo Holdings BV v Evans (No.2)[8] Flick J identified some principles, which are to be applied by the court, when considering whether to enter a judgment against a defaulting respondent. They can be summarised as follows: the power is discretionary; and it must necessarily be utilised cautiously.
[8] Speedo Holdings BV v Evans (No.2) [2011] FCA 1227 at [20] – [21]
In all the circumstances of this case, I am satisfied that Mr Tran has failed to defend the proceedings with due diligence. In particular, he has failed to file a defence to the action as ordered. He has not attended at court for the hearing, nor has he filed any affidavit evidence in respect of the matter.
In these circumstances, I am satisfied that it is appropriate to proceed to determining the FWO’s application on the basis of the pleadings contained in its statement of claim, which are un-contradicted.
Other relevant legal provisions
Hongyen Pty Ltd was a national system employer within the definition provided by section 14 of the FWA. The evidence clearly indicates that it was the employer of each of the five employees concerned in these proceedings. Accordingly, it was required to comply with the provisions of the Act, particularly those contained in sections 44 and 45.
As previously indicated, the Ombudsman no longer seeks orders against Hongyen Pty Ltd because it has been placed in voluntary administration. At relevant times, the evidence available to me clearly points to the fact that Mr Tran was the sole director and secretary of the company. At relevant times, he was its sole shareholder.
Pursuant to section 550(1) of the Act:
“A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.”
More specifically, section 550(2) provides the circumstances in which a person is taken to have been involved in such a contravention. The circumstances can be summarised as follows:
·the person has aided, abetted, counselled or procured the contravention;
·has induced the contravention;
·has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
·has conspired to bring the contravention about.
The evidence is unequivocal that Mr Tran hired the staff of Citi Nails & Beauty and determined their rates of pay. In addition, it was he who liaised with Mr Rawlings following the first audit of Hongyen Pty Ltd. Accordingly, he was responsible for ensuring that appropriate wages were paid to staff and records were kept in respect of leave. He liaised with the business’ accountant, Mr Le, in respect of these matters.
In these circumstances, I am satisfied that Mr Tran was directly involved in the various contraventions, alleged by the Ombudsman and is therefore personally liable for them.
The FWO seeks a range of orders against Mr Tran, including declarations that he has breached the provisions of the FWA and orders he pay pecuniary penalties, as a consequence of those breaches.
Pursuant to section 545(1) of the Act, this court is authorised to make any order it considers appropriate, if satisfied that a person has contravened a civil remedy of the FWA. Accordingly, I am satisfied that I have the jurisdiction to make the declarations as sought by the Ombudsman.
In addition, pursuant to section 546 of the FWA, the court may order that a person pay a pecuniary penalty, if satisfied that person has contravened a civil remedy provision. The maximum level of penalty is prescribed by the table contained within section 539(2).
So far as individuals, such as Mr Tran are concerned, the maximum penalty for breaches of sections 44 and 45 of the Act is one of sixty penalty units. At relevant times, pursuant to the provisions of the Crimes Act1914, a penalty unit amounted to $180.00. Accordingly, the maximum penalty, which can be imposed upon Mr Tran, for each of the alleged contraventions, is one of $10,800.00.
Consideration
These proceedings involve the underpayment of minimum wages, weekend penalty rates and, so far as Ms Vo is concerned, annual leave and the accrual of personal leave, over time.
The approach, which the court is required to take in respect of these proceedings, has been delineated in a number of decisions in the Federal Court.[9] They provide a four step process, which I 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.[10]
[9] See Fair Work Ombudsman v Kentwood Industries Pty Ltd (No.3) [2011] FCA 579 per McKerracher J applied in Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42] per Mansfield J
[10] Australian Ophthalmic 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.” [11]
[11] 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 Ophthalmic 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.”[12]
[12] Australian Ophthalmic 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. This process overall has been characterised as being one of intuitive synthesis.
The matter to be considered in determining penalty, cases involving breaches of industrial law provisions, have been delineated in a number of decisions of both this court and the Federal Court.[13]
[13] 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 Ophthalmic 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.”[14]
[14] Australian Ophthalmic 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.[15]
[15] See Veen v R (No.2) (1988) 164 CLR 465 at 472
As indicated above, the legislative provisions relating to how contraventions arising under the FWA are to be grouped, for the purposes of calculation of penalty are contained in section 557(1) of the FWA, which reads as follows:
“(1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
In FWO v Ramsey Food Processing Pty Ltd (No.2) Buchanan J considered the application of section 719(2) of the Workplace Relations Act 1996, the legislative predecessor of section 557. He said as follows:
“On one view, the failure to make any of the required payments arose from a single course of conduct. They all arose from a determination by the respondents that no payment would be made upon the termination of employment of any of the employees, or the employees as a group. However, this approach gives insufficient attention to the separate legal character of the three forms of obligation earlier identified. I am satisfied that each of those forms of obligation requires separate recognition. I am not, however, satisfied that each individual example of defiance of an obligation is permitted separate recognition. In my view the individual examples, constituted by the failure to make payments to particular individual employees, arise out of a course of conduct in each of the three instances. Any penalty must be assessed taking that into account.”[16]
[16] FWO v Ramsey Food Processing Pty Ltd (No.2) [2012] FCA 408 at [2] The passage was approved by the Full Court in Rocky Holdings [2014] FCAFC 62 at [18]
The leading case, on the application of section 557 is the Full Court authority of Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman.[17]This was a case broadly analogous to the current one in the sense that the appellant employer concerned had admitted numerous breaches of a modern award in respect of such things as the payment of penalty rates for work on Saturdays and public holidays in contravention of section 45 of the FWA.
[17] Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman [2014] FCAFC 62
In Rocky Holdings the Full Court did not accept that these various incidents of breach were to be regarded as a single course of conduct, referral to a common incident of the employer breaching the applicable modern award per se. The Full Court’s reasoning, in my view, can be summarised as follows:
·The key legislative intent of the FWA is to ensure, through an effective penalty regime, compliance with the minimum terms of relevant modern awards, not to reduce the number of contraventions of civil penalty provisions; see [12].
·It is the provision of the Act, set out in subsection 557 (2), which is relevant to the course of conduct delineated in subsection (1); see [13].
·Subsections (1) and (2) are ambiguous. They are capable of referring to the existence of the identified provision or the substance of the identified provision. As such, it is acceptable to have regard to the relevant Explanatory Memorandum, in resolving the ambiguity;[18] see [14].
·The object and purpose of section 557 is to ensure that an offender is not punished twice for what is essentially the same criminality. What is or is not the same criminality is an exercise requiring close consideration. However bare identity of motive is seldom sufficient to establish the same criminality in separate and distinct acts of offending; see [18].
·It is wrong to characterise the various contraventions of the modern award in question as being merely particulars of an overall breach of section 45; see [24].
·It potentially confusing to apply principles dealing with the punishment and sentencing of criminal offences to the application of civil penalties; see [25].
·Such an analysis has the prospect of leading to arbitrary and capricious outcomes. By way of example an employer who had contravened a wide range of award provisions, leading to widespread underpayment of a number of employees would be subject to the same maximum penalty as an employer who had contravened one award provision, in respect of one employee on one occasion. This is counter-intuitive; see [26].
[18] See Acts Interpretation Act 1901 (Cth) at section 15AB(1)(b)
Of these reasons, in my view, the last one is the one most applicable to the circumstances of the current case. The court must beware of groupings of offences, which leads to capricious or artificial outcomes, bearing in mind that each contravention relates to a separate and distinct breach of a term of the FWA.
In my view, this is not a case where there has been a wholesale failure of the modern award system, so far as Ms Vo, Ms Le, Ms Nguyen, Ms Duong and Ms Hau are concerned. Each of them was paid an hourly rate for their employment.
The misconduct of the employer relates to its failure to properly characterise the level of experience of the workers concerned, particularly in regards to regarding Ms Vo and Ms Nguyen as being trainees under the applicable award. The award covers employers and employees in the hair and beauty industry, which includes the performance of manicures, pedicures, nail enhancement and nail artistry techniques.
Pursuant to the award, the classification of an employee, in the hair and beauty industry, is to be determined by reference to the skill level attained in respect of the performance of nail treatments and various allied techniques, such as nail painting, manicures, pedicures and the application of acrylic nail sets.
Under the award, level 1 employee is defined as meaning either a receptionist or salon assistant. Level 1 employees include employees who hold appropriate certificates in makeup and/or nail technology or are to be regarded as unqualified beauticians or cosmetologists.
The distinction between level 1 and level 2 employees arises if the employees concerned are actually performing the work of a qualified nail technician or otherwise of an unqualified beautician and/or cosmetologist.
In this case, each of the workers concerned was performing the work of a nail technician, whilst not holding the formal certification. Accordingly, the breaches arise as a consequence of each of the workers being wrongly classified, at a lower level, and paid an inappropriate hourly rate, and in Ms Hau’s case, not paid the appropriate casual loading, which relates to that base rate. In addition, it is the case that Ms Vo and Ms Nguyen were treated as trainees, whilst they were in fact performing the work of qualified nail technicians.
Ms Vo was a relatively longstanding employee of Hongyen Pty Ltd. She commenced employment, with Citi Nails, in mid-July of 2011. Accordingly, pursuant to the provisions of the FWA she was entitled to accrue leave and to take paid leave. She was not paid in respect of her four week holiday, which she took in February of 2016, when she went on holiday to Vietnam to visit her family. Ms Spurrell formerly interviewed Ms Vo in respect of this aspect of the case.
Ms Nguyen and Ms Duong were entitled to loadings for work performed on Saturday and Sunday. The applicable loading was 33% for Saturday and 100% for Sunday. In this particular case, no penalty loading was paid to either Ms Nguyen or Ms Duong for their work on Saturdays, whilst on Sundays, Ms Nguyen was paid 50% of her loading and Ms Duong 33%.
Ms Spurrell has deposed that she interviewed Ms Vo on 9 June 2016 and discussed with her issues surrounding her holiday to Vietnam and roster arrangements at Citi Nails generally. Ms Vo indicated that she was not aware that she was entitled to paid holiday leave or that she could take annual leave at all. It was her belief that as she was a trainee, she was not entitled to leave.
Further, Ms Vo indicated that her roster and that of Ms Nguyen, Ms Le and Ms Duong were routinely changed. In this context, Ms Spurrell also had access to the time book of Ms Nguyen, which indicates that the days and times on which she worked varied considerably.
As such, it was clear to Ms Spurrell that Hongyen Pty Ltd did not provide a regular roster of when individual employees would work well in advance of that work. Rather, employees were notified, via text message, two days prior to the shift they were required to work. As such, they had no predictability as to when they would work.
In the statement of claim, the Ombudsman has asserted that this represents a breach of clause 12.8 of the award, which requires that part-time employees have the security of knowing their rosters in advance, with the intent that they be in a position to organise other aspect of their lives.
Accordingly, on the basis of the evidence of Ms Spurrell, I find that the following contraventions of the Act have been established:
No FWA section Particulars Worker affected Maximum penalty 1 44(1)/90(1) Failure to make annual leave payment Ms Vo $10,800 2 44(1)/96 Failure to accrue personal leave Ms Vo $10,800 3 45 Failure to pay minimum wages to part-time employees, improperly designated as trainees Ms Vo and Ms Nguyen $10,800 4 45 Failure to pay minimum wages for employees incorrectly classified as level 1 Ms Le and Ms Duong $10,800 5 45 Failure to pay minimum wage for causal employee Ms Hau $10,800 6 45 Failure to allow award loading for casual work Ms Hau $10,800 7 45 Failure to allow Saturday penalty Ms Nguyen and Ms Duong $10,800 8 45 Failure to allow Sunday penalty Ms Nguyen and Ms Duong $10,800 9 45 Rostering contraventions (clause 12.8) Ms Vo, Ms Nguyen, Ms Le and Ms Duong $10,800
In all the circumstances of this case, I propose to group together, the failure to make annual leave payments and to accrue leave in respect of Ms Vo; the failure to pay minimum wages to Ms Vo, Ms Nguyen and Ms Le; the failure to pay minimum wages and loading for the casual employee, Ms Hau; the failure to pay weekend penalty rates; and finally the rostering contraventions. Accordingly, as I have grouped the various matters, there are five contraventions, which attract a maximum total penalty of $52,500.00, so far as Mr Tran is concerned.
It is the Ombudsman’s submission that, given its direct previous educative involvement with both Hongyen Pty Ltd and Mr Tran, regarding their respective obligations as employers under the Act, the offending falls into the category of moderately serious, and as such should attract a penalty in the range of between 60% and 70% of the maximum.
The Ombudsman concedes that the fact that the employees concerned have been paid their various entitlements, as a consequence of its involvement is a matter which calls for some discount on the applicable penalties. I now turn to consider the offending and other sentencing considerations in more detail.
Nature and extent of the conduct
The amounts underpaid in respect of Ms Le, Ms Nguyen and Ms Duong, as a consequence of their misclassification, are modest in nature. From the Ombudsman’s perspective, notwithstanding the comparatively small amounts involved, the contraventions are serious because, by necessary implication, each of the employees is to be characterised as a vulnerable one, who was as such more dependant than other employees on receiving the applicable minimum wage.
In these circumstances, the Ombudsman would characterise the management decision to characterise employees as being trainees, when they were not, as being a particularly cynical and exploitative one.
It is further the Ombudsman’s submission that this classification cannot be excused on the basis of any ignorance to be attributed to Mr Tran, as he had had the benefit of an earlier intervention from the FWO, in respect of his employment obligations and should, if he was not actually aware of it, known that the fact of providing nail extensions and the like, by his employees, called for their categorisation at the higher level, regardless of the absence of formal qualifications.
The Ombudsman would also characterise Mr Tran’s conduct, so far as Ms Vo is concerned, as being particularly egregious, given that she had been in his employ for a period of around five years. In interview with Ms Spurrell, she indicated her lack of awareness that she was entitled both to accrue annual leave and to be paid for it, given the length of her service. Again, from the Ombudsman’s perspective, this is indicative of a vulnerable employee, who has been exploited by her employer, in respect of an essential element of the industrial safety net – that is to say holiday pay.
Again, the Ombudsman regards the payment to pay proper weekend penalty rates as being objectively serious conduct, although the amounts involved are modest. It is submitted that again it is an essential component of the industrial safety net that workers are compensated for working outside standard working hours.
It is the Ombudsman’s contention that the same considerations apply to the erroneous categorisation of Ms Hau, who has not been provided with the legislatively sanctioned compensation to which she was entitled as a casual employee, because she did not otherwise have the benefits of established hours of employment.
These considerations also apply to the rostering contravention. The relevant provision of the award is designed to ensure that part-time employees have some ability to predict their hours in advance, so that they can otherwise balance and plan for their other personal commitments.
The Ombudsman categorises this offending in the following terms:
“[the relevant clause of the award] is designed to ensure that part-time employees have the security of knowing their rosters in advance and to provide a degree of certainty over hours. This is one of the key differences and benefits of a part-time employee as opposed to a casual. The part-time employees days and times of work varied considerably. Further, the respondents had a practice of not providing a roster, instead opting to only notify employees, via text message, two days in advance of a shift.”[19]
[19] See applicant’s written submissions at paragraph 109-110
I agree with all these submissions. The employees concerned were vulnerable employees, who provided their work in a small business setting. It seems to be the case that they were generally unaware of their entitlements, under the Award, and their services were utilised to provide the maximum convenience for the employer, at their expense.
In all these circumstances, the offending conduct concerned, in my view, must be regarded as being serious. This is particularly so in respect of Ms Vo, who was deprived of one of the most significant aspects arising from the modern award system – that is, the right to have an annual paid holiday. In addition, as a long-term employee, it must have been the case her employee was aware of the fact that she was being inappropriately characterised, for the purposes of calculating her remuneration.
The nature and extent of the loss
As previously indicated, the level of underpayment, although significant to each of the employees concerned, particularly Ms Vo, is not a huge sum of money. In addition, each of the employees concerned has now been fully compensated, in respect of the underpayment concerned. In my view, these are significant matters, which call for a significant reduction in the penalties to be imposed.
Similar previous conduct
In my view, it is a significant factor that Mr Tran has had previous involvement with the FWO in the context of running Citi Nails. As such, the FWO brought to Mr Tran’s attention the following salient aspects of the Award, as it applied to his various staff members:
·The Act and the Award set out the minimum pay entitlements for employees, which are not subject to any negotiation;
·Saturday and Sunday penalty rates must be paid to employees working on those days;
·Employees performing manicures and pedicures were level 2 hair and beauty employees and were required to be paid as such under the Award;
·A trainee could only be paid as such if there was a registered training agreement in place.
It is the FWO’s submission that the prior conduct, identified in the 2012 audit, has essentially been replicated by Mr Tran in the current contraventions before the court and, as such, is indicative of a poor attitude to his obligations under the law. The Ombudsman would characterise the various transgressions as being deliberate in nature and, as such, calling for a more significant penalty than would otherwise be accorded.
I agree with this submission. None of the transgressions can be categorised as an oversight. Mr Tran is in a situation where it must be inferred that he knew what were his obligations arising under the Act and the Award, but he chose not to observe them. Again, this is particularly so in respect of his conduct towards Ms Vo, who was classified as a trainee when she was patently not so, given the number of years she had worked in the salon concerned.
Size and financial circumstances of the respondent
I have limited knowledge regarding the size of the enterprise concerned in these proceedings. However, I accept that given the nature of the business formally operated by Hongyen Pty Ltd, it falls within the descriptor of small business.
Enquiries conducted by Ms Spurrell indicate that Mr Tran is the owner of two pieces of real property in New South Wales. It is also Ms Spurrell’s understanding that Hongyen Pty Ltd has sold its interest in Citi Nails to another company TT Adelaide Nails Pty Ltd. The circumstances surrounding this sale and indeed the liquidation of Hongyen Pty Ltd are unknown to me.
In particular, Mr Tran has elected not to place any mitigatory evidence, before the court, regarding either his own personal circumstances or that of the company, which he previously controlled. In particular, I am unaware of the turnover of the business or what level of profit, if any, which it produced. I know nothing about Mr Tran’s background, either as a business person or otherwise.
Evidence, provided by Ms Spurrell, indicates that employees in the hair and beauty industry, in generic terms, are amongst the more vulnerable employees, to exploitation, within the Australian workforce. This is because they are very often employed in small salons and are generally unskilled or have lower skill sets and are less articulate and aware of their own rights and the obligations of their employers. Very often, as is the case here, such workers are from a non-English speaking background.
It is a trite but true principle of industrial law that employers have an obligation to meet minimum employment standards to their employees and are not entitled to overcome financial challenges, arising in their business, by underpaying their employees.
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 [20] 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.”
[20] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27]
Involvement of senior management
Mr Tran was the sole director of Hongyen Pty Ltd and the person responsible for its direction, management and control. As such, in my assessment, he was integral to every decision made by the company, as he was both its hands and brain. Mr Tran recruited all the employees concerned and was responsible for the decisions to characterise them as either trainees or level 1 nail technicians.
Cooperation and contrition
As previously indicated, each of the under remunerated employees, concerned in these proceedings, has been paid the moneys due to her. Accordingly, it cannot be said, in my view, that Mr Tran has completely thumbed his nose at both the FWO and the court. In my view, it is a significant thing that none of the aggrieved employees concerned remains out of pocket.
However, the fact remains that Mr Tran has only done, somewhat belatedly, what was required of him under the law. As such, although his conduct may be seen as an acceptance of his wrong doing, it is very far from genuine contrition. Rather, it could be easily said that Mr Tran has paid the wages because he has been caught out and has no other viable option available to him.
Given Mr Tran has elected not to take part in these proceedings, I am not in a position to tease out this issue, with any degree of deftness. Mr Tran has not made any direct expression of remorse to the court. In addition, I am not in a position to assess whether he has taken any corrective action in respect of other employees, who in the past have been underpaid in a similar manner to the employees concerned in this case. In addition, I do not know whether he has apologised directly to any of the employees, who have been directly affected by his underpayment of them.
Cooperation
It is Ms Spurrell’s evidence that Mr Tran’s engagement with the 2015 audit process was sporadic and usually delayed. After indicating an initial willingness to cooperate with the process of a penalty hearing, through agreement with a prepared statement of facts, Mr Tran has further failed to engage with the process before the court. As such, apart from his rectification of the wages arising in this case, there is scant evidence of any significant cooperation with the FWO.
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.” [21]
[21] 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[22] 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)
[22] Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [93] approved by Mansfield J in Lifestyle SA (supra) at [154]
In this particular case, the FWO submits there is a particular relevance to general deterrence given the nature of the hair and beauty industry and the prevalence of industrial disputes in it. In this context, the FWO has submitted statistics, which indicate as follows:
·As at June 2016, there were approximately 15,500 employers within the industry;
·Between 2014 and 2016, complaints from the hair and beauty industry amounted for 2.6% of all disputes, involving the FWO, making it the fifth highest number of complaints, by industry;
·The rate of disputes, within the industry, is higher than in other industries – 28.2 per thousand employees, as opposed to 24.6 across other industries;
·Between 2015 and 2017, 30.8% of disputes in the hair and beauty industry, involved trainees and/or apprentices;
·The top five areas for dispute, in the hair and beauty industry, related to underpayment of minimum wages, annual leave entitlements and weekend penalties.
Accordingly, the FWO submits that there is a prevalence of cases involving the underpayment of trainees and/or apprentices, in the industry, particularly in respect of minimum wages, annual leave entitlements and weekend penalties.
Given the nature of the services provided, within the industry, this is not surprising. In these circumstances, the FWO submits that the court needs to send a strong deterrent message to other employees, who may choose to embark on the same course of conduct as Mr Tran.
I agree it is important to deter other employees from not paying the minimum wage and holiday entitlements applicable to employees in the hair and beauty industry. As previously indicated, in her interview with Ms Spurrell, Ms Vo indicted her lack of awareness of her entitlements in respect of holiday pay.
Given the potential vulnerability of employees, in this industry, in my view it is incumbent upon the court to give significant weight to the objectives of the FWA and the system of modern awards, which it inaugurates. A warning to others, in this regard, must be issued by the court.
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.[23]
[23] See Plancor Pty Ltd v Liquor Hospitality & Miscellaneous Union (2008) 171 FCR 357 at [37] per Gray J
Mr Tran remains the director of companies registered with ASIC. I know little of his involvement with these companies and whether they involve him being required to discharge responsibilities under the FWA. In the past, Mr Tran has been a small business man and has employed individuals to work for him.
In May of 2016, Mr Tran advised Ms Spurrell that he was interested in establishing either a “building or a restaurant business”. Given his past history and these statements, it does not seem unreasonable to assume that he will employ other individuals in future. In these circumstances, in my view, there is a need for the penalty in question to reflect elements of specific deterrence, so far as Mr Tran is concerned.
In this context, the FWO submits as follows:
“The Applicant submits that penalties need to be imposed at a level that makes contravening conduct unprofitable and the prospect of future contraventions commercially undesirable. In particular, the Applicant submits that the Second Respondent must be deterred from breaching minimum employment standards contained in the FW Act and relevant awards when employing persons in future.”[24]
[24] See FWO’s written submissions at paragraph 130
In my view, this is one of the more significant considerations arising in this case. It is, I think, important to point out to Mr Tran that his underpayment of the workers concerned is significant and he bears a personal responsibility for it. In particular, it is important to indicate to him that he cannot leave this responsibility with a defunct company and proceed unscathed by any personal liability to another company.
The failure to provide minimum wage rates, annual leave and personal leave entitlements go to the heart of the objectives of the FWA. If in future, Mr Tran is the hands and brains of a corporation, which employs workers, in some form or other, it is important that he has underlined to him the importance of adhering to these fundamental obligations and that his compliance with them is not optional or resides only with the company concerned, which can be expediently disposed of, when its usefulness to him has ended.
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. I have calculated nine offences, which I have grouped into five separate courses of conduct, so far as the imposition of penalties are concerned.
In my view, the most serious group of contraventions relate to the failure to make annual leave payments to Ms Vo, who had been employed by Mr Tran’s company for a period approaching five years, when the transgression occurred. The offence involved the total failure to pay Ms Vo any leave whatsoever or to recognise her entitlement to such leave.
In addition, in my view, the seriousness of the offending is compounded by the fact that Ms Vo herself was ignorant of her entitlements and, as such, especially vulnerable to the exploitation of Mr Tran. In these circumstances, I calculate a penalty of around 50% of the maximum, namely $5,000.00.
The next group of offences relates to the failure to pay Ms Vo, Ms Nguyen and Ms Le their minimum wage entitlements, given that they were performing nail manicures, extensions and pedicures and, as such, were to be classified as level 2 employees, under the Award, rather than as either trainees or level 1 employees.
Although the amounts of money involved, when the relevant rates of hourly pay are considered, is small, these still represent serious offences, given the vulnerability of the employees concerned. In these circumstances, I assess a penalty of approximately 40% of the maximum, namely $4,000.00 as being the appropriate penalty.
In terms of the failure to pay the minimum wage to Ms Hau, together with the appropriate loading, because she was a casual employee, I assess a penalty of $2,000.00 as being the appropriate penalty.
The failure to pay Saturday and Sunday penalty rates, given the nature of the industry concerned, is also, in my view, a serious offence. The industrial safety net recognises that individuals are to be compensated for working outside ordinary hours.
Although once again the amounts of money involved are modest, Mr Tran has displayed no regard for this central objective of the modern award system. Balancing these factors, I have reached the conclusion that a penalty of $2,000.00 is appropriate. I have reached the same conclusion in respect of the various rostering contraventions.
Accordingly, I have calculated a total penalty, in respect of the five courses of conduct, in an amount of $16,000.00. I propose to apply a 10% discount to this sum, in recognition of the fact that each of the employees concerned has now been paid her various entitlements. Accordingly, this brings the total penalty down to $14,400.00.
The next step is to look at the aggregate of the penalties in total and consider whether the total penalty is an appropriate one when the circumstances of the offending are considered. As previously indicated this has been described as a process of intuitive synthesis. Does the total penalty appear to be correct in aggregate?
In Kelly v Fitzpatrick Tracey J considered what he termed the orthodox position was for the court to determine the appropriate penalty for each contravention and then consider the aggregate figure to ensure “that it was an appropriate response to the conduct which led to the breaches.”[25]
[25] Kelly v Fitzpatrick (2007) 166 IR 14 at [30]
In my assessment, a penalty of $12,000.00 in aggregate is an appropriate one for Mr Tran. Although he has displayed scant regard for the provisions of the FWA, particularly in respect of the previous auditing process of his business, he remains a first offender. In my view, a penalty of $12,000.00 for a first offender, notwithstanding the seriousness of the offending in question, represents a very significant penalty indeed.
The FWO also seeks that Mr Tran engage in a further process of education in respect of his industrial law obligations. This would entail him taking part in an online training course offered by the Ombudsman.
Pursuant to section 545(1) of the Act, the court may make any order, which it considers appropriate, if a contravention is established. It is a very broad discretion. Accordingly, I am satisfied that I have the authority to make the order in question, which is central to the educative objectives of the Act itself and its aim to prevent future breaches of the applicable industrial safety net.
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 forty-eight (148) paragraphs are a true copy of the reasons for judgment of Judge Brown
Associate:
Date: 2 February 2018
Key Legal Topics
Areas of Law
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Employment Law
Legal Concepts
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Penalty
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Remedies
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