Fair Work Ombudsman v Hutt Nominees Pty Ltd
[2023] FedCFamC2G 41
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Hutt Nominees Pty Ltd [2023] FedCFamC2G 41
File number(s): ADG 62 of 2021 Judgment of: JUDGE BROWN Date of judgment: 3 February 2023 Catchwords: INDUSTRIAL LAW – Fair work – underpayment of two employees – penalty hearing – where company has been placed into liquidation – failure to comply with compliance notice – first time offender – calculation of penalty Legislation: Corporations Act 2001 (Cth) s 500(2)
Crimes Act 1912 (Cth) s 4AA
Evidence Act 1995 (Cth) s 191
Fair Work Act 2009 (Cth) ss 3, 539(2), 545, 550, 557(1), 681, 682, 701, 706, 716, 717(1)
Fast Food Industry Award 2010 Sch B
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
Blandy v Coverdale NT Pty Ltd [2008] FCA 1533
Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365
Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579
Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272
Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7Minister for Immigration & Citizenship v Li (2013) 249 CLR 332
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Veen v R (No 2) (1988) 164 CLR 465Division: Division 2 General Federal Law Number of paragraphs: 150 Date of hearing: Considered on the papers in Chambers Place: Adelaide Solicitor for the Applicant: Office of the Fair Work Ombudsman First Respondent: No appearance Solicitor for the Second Respondent: Wallmans Lawyers ORDERS
ADG 62 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: HUTT NOMINEES PTY LTD
First Respondent
JASON MATTHEW HOOD
Second Respondent
order made by:
JUDGE BROWN
DATE OF ORDER:
3 February 2023
THE COURT DECLARES THAT:
A.the First Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (“the Act”) by failing to comply with each of the Compliance Notices dated 2 September 2020; and
B.the Second Respondent was involved, within the meaning of section 550(2) of the Act, in the contraventions by the First Respondent declared at paragraph A above.
THE COURT ORDERS THAT:
1.Pursuant to section 545(1) of the Act, the Second Respondent pay within 28 days of the date of this Order:
(a)Mr Aiden Stacey the sum of TWENTY TWO THOUSAND, TWO HUNDRED AND FORTY SEVEN DOLLARS AND EIGHTY NINE CENTS ($22,247.89);
(b)Ms Shyanne Sibly the sum of ONE THOUSAND, SEVEN HUNDRED AND FIFTY DOLLARS ($1,750.00)
2.Pursuant to section 546(1) of the Act the Second Respondent pay a pecuniary penalty of THREE THOUSAND THREE HUNDRED AND THIRTY DOLLARS ($3,330.00), for the contravention declared at paragraph B above.
3.Pursuant to section 546(3) of the Act, the pecuniary penalty ordered to be paid by the Second Respondent in Order (2) above is to be paid to the Commonwealth within twenty-eight (28) days of the date of this order.
4.The Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are 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 BROWN:
Introduction
These reasons for judgment should be read in conjunction with reasons published concurrently in the matter of Fair Work Ombudsman v McNeill Investments Pty Ltd.[1]The second respondent in those proceedings, as in this matter,[2] is Jason Matthew Hood.[3]
[1] See Fair Work Ombudsman v McNeill Investments Pty Ltd [2023] FedCFamC2G 40. Hereinafter referred to as “the McNeill Investments matter”.
[2] Hereinafter referred to as ‘the Hutt Nominees matter”.
[3] Hereinafter referred to as “Jason Hood” or “Jason”.
Both this case and the McNeill Investments matter arise because the Fair Work Ombudsman[4] has commenced proceedings against proprietary limited companies, which operated separate and distinct Subway franchises at 23 Jetty Road and 25 Jetty Road, Glenelg, alleging various breaches of the industrial law.
[4] Hereinafter referred to as “the FWO” or “the Ombudsman”.
The premises at 23 Jetty Road are contained within the Bayside Village Shopping precinct; whereas the premises at 25 Jetty Road are a standalone outlet. As I understand it, the two businesses are distinct, although they had common directors and the same line of trade.
Subway is an American multinational fast food restaurant franchise that specializes in submarine sandwiches, wraps, salads and drinks. It has many franchised outlets in South Australia.
Mr Jason Hood was a director of each company and the person legally responsible, at relevant times, for the management of each franchise shop, including each company’s employment responsibilities under the provisions of the Fair Work Act 2009 (Cth).[5] However, in August 2017, Jason Hood moved to Western Australia to begin a distinct business venture there.
[5] Hereinafter referred to as “the FWA” or “the Act”.
In these circumstances, Jason left his brother Darryl John Hood[6] to manage both operations. He was also a director of each company and so the person on the ground nominally in charge of staff rosters and wage calculations. It is accepted that on occasions between 2017 and 2020, Darryl has been significantly unwell and has been admitted to psychiatric facilities in respect of mental health and substance abuse issues.
[6] Hereinafter referred to as “Darryl Hood” or “Darryl”.
In this context, it is clear that staff arrangements, at the Subways operated by both Hutt Nominees and McNeill Investments fell into difficulties. As a consequence, between September and October 2019, staff members at each of the outlets contacted the office of the FWO and a Fair Work Inspector was appointed to investigate their complaints.
Three employees were involved in the matter – two at the outlet operated by Hutt Nominees; and one at the outlet operated by McNeill Investments. Their complaints related to their underpayment in breach of the applicable modern awards.
As a consequence, Compliance Notices were issued to both companies and, in respect of McNeill Investments, a Notice to Produce documents relating to the employment of the employee concerned. From the perspective of the FWO, compliance with these procedures was inadequate, leading to the institution of proceedings.
Jason Hood accepts that as a director of each company, he is legally responsible for their actions. It is his position that he and Darryl are now estranged and Darryl’s management of each of the business concerned was deficient, particularly in respect of the keeping of employment records.
From his perspective, these factors should mitigate any pecuniary penalty to be imposed upon him. In these circumstances, he accepts that he must bear responsibility for any contraventions of the relevant industrial law committed by each company and he has formally admitted liability on behalf of each company.
Hutt Nominees and McNeill Investments have sold their respective Subway franchises. Their financial affairs were in disarray. As a consequence, each has been placed into liquidation. The FWO has elected not to proceed against Darryl due to his situation but is proceeding against Jason.
It is Jason’s position that he had nothing personally to do with the day to day affairs of either company, which he left to his brother. As a consequence, he has not been able to access records, which should have been compiled and maintained by his brother. Nonetheless he asserts that he has done his best to cooperate with the FWO.
In these circumstances, in each case, he has admitted his complicity by agreeing to an agreed statement of facts. As a consequence, these proceedings are directed towards the Court imposing what it considers is an appropriate pecuniary penalty.
In order to save costs, the parties also agreed that this process could be undertaken by the Court, on the papers without the need for additional submissions. As there are two distinct proceedings, although there is much factual commonality between the two cases, there must be two reasons for judgment and two distinct orders dealing with penalty. These reasons for judgment relate to the Hutt Nominees matter.
Institution of proceedings
The FWO commenced proceedings against Hutt Nominees Pty Ltd and Jason Hood on 22 March 2021. The proceedings are instituted pursuant to the provisions of the Fair Work Act 2009 (Cth).
At relevant times, the First Respondent, Hutt Nominees Pty Ltd[7] was the trustee for the Glenelg Subway Trust, which operated a fast food outlet franchisee Subway Systems Australia Pty Ltd,[8] at 25 Jetty Road, Glenelg. Mr Jason Hood was a director of Hutt Nominees, along with his brother, Darryl Jason Hood.
[7] Hereinafter referred to as “Hutt Nominees”.
[8] Hereinafter referred to as “Subway”.
The proceedings are stayed against the First Respondent, pursuant to section 500(2) of the Corporations Act 2001 (Cth), as Hutt Nominees was placed into liquidation after proceedings were commenced. The FWO submits it has not sought leave to continue the proceedings, against Hutt Nominees.
Hutt Nominees employed Aidan Stacey (“Mr Stacey”) and Shyanne Sibley (“Ms Sibley”) as casual employees to perform duties of a Fast Food Employee Level 1 as defined in Schedule B of the Fast Food Industry Award 2010.[9]
[9] Hereinafter referred to as “the Award”.
Amongst other things, the Award provided a casual minimum wage; allowances for overtime; loadings for hours worked on Saturday, Sunday and public holidays as well as other loadings relating to the casual nature of the employment and the hours worked.
Background
In October 2019, the FWO received two requests for assistance from employees of Hutt Nominees, firstly, Mr Stacey on 2 October 2019 and secondly, Ms Sibly on 8 October 2019.[10] As a consequence, the Ombudsman appointed a Fair Work Inspector,[11] Ms Isabel Pires (“Ms Pires”), to investigate the compliance of Hutt Nominees with the provisions of the Award.
[10] See affidavit of Isabel Pires filed 21 December 2021 at [5].
[11] See section 701, Fair Work Act 2009 (Cth).
Ms Pires deposes she made contact with Jason on 10 December 2019 via telephone. It is her evidence they had conversed with words to the effect of her introducing herself as:
A Fair Work Inspector with the Fair Work Ombudsman. The reason for my call is because we have received two requests for assistance from former employees
Further asking of Mr Jason Hood what was his involvement with the business. Mr Hood responding:
Me and my brother have been business partners for 20 odd years. I am a director for the two business. As my name is a company director I am responsible for fixing this, because my name is attached to this.[12]
[12] See affidavit of Isabel Pires filed 21 December 2021 at [6].
The FWO submits that it attempted to make further contact with Jason on four separate occasions following 10 December 2019. However, those attempts were fruitless on each occasion and a voicemail was left.
Following the investigation, on 2 September 2020, Ms Pires issued three separate Compliance Notices[13] directed to Hutt Nominees concerning the underpayment of entitlements to two of its employees, namely, Mr Stacey and Ms Sibly. In each case, the Compliance Notices’ were also directed to Darryl Hood and Jason Hood, as the company’s directors at the relevant time.
[13] See section 716(2), Fair Work Act 2009 (Cth)
The Compliance Notices were served by express registered post to Hutt Nominees’ registered office in suburban Adelaide. They were delivered on 3 September 2020. The three Compliance Notices were also emailed to Darryl, on the same day.
The first Compliance Notice directed to Hutt Nominees alleged the company had failed to pay its employee, Mr Stacey, his additional penalty entitlements, comprising of seven aspects of his entitlements, under the Award, for the period of 7 August 2017 to 8 October 2019.
The second Compliance Notice directed to Hutt Nominees alleged it had also failed to pay another employee, Ms Sibly, its additional penalty entitlements, comprising of six aspects of her entitlements, under the Award, during the periods Ms Sibly was employed as a casual employee being 25 January 2018 to 11 February 2018 and then 11 May 2019 to October 2019.
The third Compliance Notice directed to Hutt Nominees regarded the same employee, Ms Sibly. For the period of 12 February 2018 to 10 May 2019, Ms Sibly was employed as a part-time employee, meaning she accrued leave entitlements. The Compliance Notice alleged that Ms Sibly was not paid her accrued annual leave entitlements at the termination of employment.
In general terms, the relevant Compliance Notices required the company concerned to undertake the following discrete steps:
· Firstly, calculate and rectify the underpayments involved to Mr Stacey and Ms Sibly, in respect of each breach of the Award and forward the respective sums, to each of the two employees concerned no later than 15 October 2020;
· Secondly, calculate the number of annual leave hours that had accrued to Ms Sibley during her time as a part-time employee, then calculate the monies awarded to her and forward the sum her;
· Thirdly, calculate the superannuation contributions relevant to the calculated underpayments, pay such contributions to the Superannuation Fund chosen of the two employees by the due date; and
· Finally, provide written evidence to the FWO that the above had been completed no later than 22 October 2020.
The FWO’s position is that Hutt Nominees did not comply with either of the three Notices, and the monies owed are still outstanding. In these circumstances, the FWO commenced proceedings against Hutt Nominees and Jason Hood on 22 March 2021.
At the time of filing, the FWO sought the imposition of monetary penalties on both Hutt Nominees and Jason Hood, pursuant to section 716(5) of the FWA for failing to comply with the relevant Compliance Notice, together with further orders directing that Mr Stacey and Ms Sibly be paid their entitlements as per each relevant Compliance Notice.
The statement of claim
The relevant statement of claim and application were personally served on Jason Hood on Saturday 27 March 2021 at an address in the western suburbs of Adelaide.[14] The FWO alleges as follows:
·Hutt Nominees failed to take the actions specified in any of the Compliance Notices by the time specified;
·Jason Hood had accessorial liability for the non-compliance because he was knowingly concerned in the breaches concerned as he had been personally provided with the relevant Compliance Notices, as a director of the company;
·It sought the imposition of pecuniary penalties and that the outstanding entitlements of Mr Stacey and Ms Sibly be paid and proof provided to this effect; and
·The pecuniary penalties be paid to the Commonwealth.
[14] See affidavit of Service of Matthew Stephens filed 6 May 2021.
Section 550(1) of the Act provides that a person who is involved in a contravention of a civil remedy provision of the Act is also taken to have contravened that provision. Section 550(2) provides a definitive list of the circumstances in which a person is taken to be involved in a contravention. A person is so involved only if the person concerned:
·has aided, abetted, counselled or procured the contravention; or
·has induced the contravention, whether by threats or promises or otherwise; or
·has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
·has conspired with others to effect the contravention.
In Fair Work Ombudsman v Devine Marine Group Pty Ltd[15] White J explained the concept of a party being knowingly concerned in a contravention under the FWA in the following terms:
The notion of being “knowingly concerned” in a contravention has a different emphasis from that of aiding, abetting, counselling or procuring” a contravention. To be knowingly concerned in a contravention, the person must have engaged in some act or conduct which “implicates or involves him or her” in the contravention so that there be a “practical connection between” the person and the contravention…
[15] Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [178].
As a consequence of his formal admissions in the case, Jason Hood has acknowledged that he was involved in the failure of Hutt Nominees to comply with the relevant notices, which were served upon and thereafter whether by direct act or omission, he was knowingly involved in the failure to comply with them as required by section 716(5) of the Act.
Conduct of proceedings
The case came into Court, for the first time, on 24 May 2021. On this occasion, Mr Paul appeared on behalf of the Ombudsman and Ms Lithgow appeared on behalf of the respondents. The respondents were ordered to file and serve a response and defence within twenty eight days and the case was adjourned to 25 June 2021.
The respondents filed their Response and Defence on 24 June 2021, at that time the respondent opposed the making of all orders sought the applicant, although the respondents consented to a mediation. On 25 June 2021, consent orders were made in Chambers, granting the FWO leave to file a reply and further directing the parties to attend a mediation on 6 September 2021.
Essentially, Jason Hood asserted that he had a reasonable excuse for the contraventions in question, which related to the fact that Darryl Hood had practical responsibility for the payroll of Hutt Nominees, in conjunction with his then wife, Brooke Hood. In addition, Mr Stacey did not wish action to be taken.
In its Reply, the FWO indicated that it did agree that these factors or any others amounted to a reasonable excuse, given it view that Jason Hood was a director of the company and had been served with the various Compliance Notices relevant to the matter.
As a consequence of the mediation agreed by the parties, liability in the matter was consensually resolved. Essentially it was admitted that the Compliance Notices in question were legally valid and properly issued. In these circumstances, the Court was then left to adjudicate what would be the appropriate penalty to be imposed on the respondents.
On 9 November 2021, further orders by consent were made, timetabling the filing of documents, including a Statement of Agreed Facts, in preparation for the hearing on penalty set down for one day on 11 April 2022.
The Statement of Agreed Facts was filed on 16 December 2021.[16] Pursuant to section 191 of the Evidence Act 1995 (Cth) the matters agreed to in this document are taken not to be in dispute. As such, they form the evidentiary basis for the Court’s necessary findings in this case.
[16] Hereinafter referred to as the SOAF.
The Court was informed by correspondence dated 23 March 2022, that Mr Ian Burford had been appointed for Hutt Nominees by way of resolution for voluntary winding up. Further requesting the penalty hearing be relisted to a directions hearing to allow the FWO to review and consider the impact of Mr Burford’s appointment and to allow time for Mr Burford to familiarise himself with relevant matters.
On 8 April 2022, the Court was further informed by the FWO that pursuant to section 500(2) of the Corporations Act 2001 they no longer sought to continue the proceedings against the First Respondent. Therefore, the FWO elected to proceed again Jason Hood alone in respect of three contraventions, of failing to comply with a Compliance Notice issued under section 716, arising under the provisions of the FWA.
Contraventions of section 716(5) of the FWA are characterised as civil remedy provisions, which pursuant to the provisions of section 539(2) of act, attract a maximum penalty of 30 penalty units. At relevant times, a penalty unit amounted $222.00.[17] Accordingly, the maximum penalty liable applicable to Jason Hood is $6,660.00.[18]
[17] See Crimes Act 1912 (Cth) s 4AA.
[18] See outline of submissions of the applicant filed 25 February 2022.
Pursuant to the provisions of section 545(1) of the FWA, the Court is authorised to make any order it considers appropriate in any such civil remedy proceedings. Pursuant to section 545(2)(b), this can include an order awarding a person compensation for any loss that a person has suffered as a consequence of the relevant contravention.
In addition, particularly germane to the circumstances of this case is section 545(3) of the Act, which grants the Court a discretion to order an employer to pay a relevant employee any amount which it is satisfied was due to that employee if the employer concerned was required to pay such amount pursuant to any provision of the Act or if the employer has contravened a relevant civil remedy provision.
It was the initial position of the FWO, and as noted in the Statement of Agreed Facts, the penalty to be applied should carry a discount of 20% on the condition the respondents were to reimburse Mr Stacey and Ms Sibly, either by lump sum or payment plan, their entitlements.
As matters have transpired, with Hutt Nominees being placed into liquidation, those payments have not been attended to, the FWO have revised their position submitting that an appropriate penalty would be in the range of $3,396.00 to $3,962.00.[19]
[19] See outline of submissions of the applicant filed 27 May 2022.
The FWO relies on the following documents for the purposes of penalty:
· Statement of Agreed Facts filed 16 December 2021;
· Affidavit of FWI Pires filed 21 December 2021; and
· Outline of submissions filed 25 February 2022 and 27 May 2022.
Mr Hood relies on the following documents for the purposes of penalty:
· Statement of Agreed Facts filed 16 December 2021;
· Unsworn affidavit of Mr Jason Hood filed 8 February 2022; and
· Outline of submissions filed 13 May 2022.
Statement of agreed facts
The parties agree that Mr Stacey was employed as a casual employee between 7 August 2017 and 8 October 2019. During these periods he was paid a flat hourly rate regardless of when he worked. Under the relevant award, he was entitled to be paid a loading for working on Saturdays, Sundays and public holidays; if he worked more than 76 hours in a fortnight; or between the hours of 10.00pm and midnight on weekdays. He was also entitled to a laundry allowance in respect of his work uniform.
FWI Pires has calculated that Mr Stacey is due an amount of $22,247.89 (gross) plus $2,204.40 in respect of his entitlements to superannuation.[20]
[20] See SOAF at [21].
Ms Sibly was employed, also on a casual basis, for two periods between 25 January and 11 February 2018 and then between 11 May and 1 October 2019. In the first period she was under 17 years of age. She turned 18 on 27 June 2018. She would have been due a wage increment on each of her relevant birthdays.
Ms Sibly was paid a flat hourly rate, which did not include loading for working on Saturdays and Sundays; public holidays; or between 10.00pm and midnight on weekdays. She was also entitled to a school-based traineeship and a laundry allowance. She did not receive accrued leave entitlements or a loading referral to the casual minimum hourly wage
FWI Pires has calculated that Ms Sibly is due a total of $1,750.00 (gross) for underpayment; $175.00 in superannuation entitlement. The SOAF indicates that Hutt Nominees would pay the sum of $2,447.89 to Mr Stacey within 28 days of the signing of the document and thereafter 11 monthly instalments of $1,800.00 and $1,750.00 to Ms Sibly within 28 days. Each worker’s superannuation entitlements were to be paid in same timeframe.[21]
[21] See SOAF at [21] – [22].
Significantly, the SOAF indicates that the parties agree on the range of penalty which should apply, which for Jason Hood is between $3,196.80 and $3,729.60.[22] This range was posited on the basis of the satisfaction of the rectification agreed to by Jason Hood. In this context, it is significant that the parties now agree that this rectification has not been made and the offer to make it has been withdrawn. Accordingly, Mr Stacey and Ms Sibly remain out of pocket.
[22] See SOAF at [27].
The relevant legislative provisions
The objects of the FWA are contained in section 3. They include the provision of an industrial safety net, for Australian employees, which is maintained through the enforcement of a system of minimum terms and conditions specified in the modern award system.
The Office of the Fair Work Ombudsman is created by section 681 of the FWA. One of the functions of the Ombudsman under section 682 of the FWA is to enforce compliance with the Act, including any workplace obligations residing on employers, as a consequence of relevant industrial awards, mandating rates of pay and conditions of employment.
In turn, the FWO may appoint Fair Work Inspectors, who are authorised to utilise what are characterised as compliance powers.[23] In general terms, inspectors are directed to investigate complaints in respect of breaches of the industrial law and are authorised to enter workplaces and determine whether an employer has contravened the law, including in respect of the application of any relevant modern award or otherwise failed to comply with the industrial safety net.
[23] See Fair Work Act 2009 (Cth) s 706.
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 provisions of 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. Among other things, inspectors can enter the work place and require the production of employee records.[24] Ms Pires at relevant times, held the office of Fair Work Inspector under the Act.
[24] See Fair Work Act 2009 (Cth) s 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.[25]
[25] See Fair Work Act 2009 (Cth) s 539(2).
Section 716 of the Act provides that, if an inspector believes, on reasonable grounds, that a person has contravened a term of a modern award, the inspector concerned may issue that person with a ‘Compliance Notice’ requiring the person nominated to take action to remedy the contravention in question.
There can be no controversy that the Fast Food Industry Award 2010 was such a modern award and covered and applied to the respondents in respect of his employment of Mr Stacey and Ms Sibly, at Subway, from 7 August 2017 to 10 May 2019. I am also satisfied that the Compliance Notices were issued to the two respondents by Ms Pires, on 2 September 2020.
Pursuant to the applicable legislation, any Compliance Notice must provide particulars of the contraventions of the Act alleged and outline any rights of review that arise under the Act. There is no issue in the present case other than that the Compliance Notices in question complies with the provisions contained in sections 716(2) and 716(3) of the FWA.
Sections 716(1) and 716(2) of the Act delineates the criteria, which must be satisfied before an inspector may issue a Compliance Notice. Firstly, the power itself is a discretionary one and like all administrative decisions must be exercised reasonably.
Whether a discretion, conferred by statute, is exercised in a legally reasonably manner, it must be determined by reference to the statute itself, particularly its ‘subject-matter, scope and purpose’.[26]
[26] See Minister for Immigration & Citizenship v Li (2013) 249 CLR 332, 370-1 [90] (Gageler J).
In this particular case, as indicated above, one of the purposes of the FWO is to provide an industrial safety net, for workers, so far as the application of industrial awards is concerned, as well as to educate employers in regard to their industrial responsibilities.
Secondly, the discretion may be exercised only once a reasonable belief is formed by the relevant inspector. The discretion must be exercised appropriately and not in an arbitrary, illogical or capricious manner.
Section 717(1) of the Act authorises a person who has been serviced with a Compliance Notice to apply to the Court to have the notice reviewed on the basis that there has been no contravention as specified or the notice does not otherwise comply with the applicable legislation.
FWI Pires’ evidence
As previously indicated, it is Ms Pires’ evidence that, following being contacted by Mr Stacey and Ms Sibly in October of 2019, she contacted Jason Hood, by telephone, in mid-December of 2019, at which stage he acknowledged that, as a director of Hutt Nominees, he had a responsibility to fix the underpayment issue.
However, thereafter, her attempts to follow through with him, in this regard, were fruitless and her voice messages went unanswered. It was in this context, that the relevant Compliance Notices were issued approximately 11 months after the wage infractions had come to the notice of the FWO.
Given the evidence available from FWI, I am satisfied that there is no issue regarding the reasonableness of the belief of the FWO that Hutt Nominees had breached the relevant provisions of the Award by failing to pay Mr Stacey and Ms Sibly their proper wage loadings for working outside regular hours and other benefits.
In addition, in light of its educative role and obligation to promote cooperative workplace relations.[27] It was, in my view, clearly appropriate for the FWO, through the agency of FWI Pires to attempt to engage in correspondence with the respondents in order to see whether the monies due to Mr Stacey and Ms Sibly could be advanced by the respondents without recourse to litigation.
[27] See Fair Work Act 2009 (Cth) s 682(1)(a)(i).
In this context, the application of a Compliance Notice issued under section 716 must be considered. In Fair Work Ombudsman v Matcraft Pty Ltd,[28] Judge Kendall explained the legislative intention of a Compliance Notice, as an alternative to litigation, in the following terms:
As explained in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), the purpose of s 716 of the Act is to provide an alternative to litigation. Section 716 is an informal mechanism whereby the applicant can identify potential contraventions of the Act and seek rectification without an employer having to admit liability.
One of the objects of the Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms. Section 716 encapsulates this objective by allowing employees to make a request for assistance which the applicant can then resolve through the use of s 716.[29]
[28] See Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272.
[29] See Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272 at [34]-[35] (Kendall J).
In addition, as previously indicated, the relevant legislation allows an employer to challenge a Notice if it is believed there are no grounds for its issue or the Notice itself is invalid. In these circumstances, it is the contention of the FWO that if the respondents had complied with the Notice in question, it would have been precluded from bringing these proceedings, with a commensurate saving of public resources.
In Fair Work Ombudsman v Trek North Tours & Anor (No 2),[30] Judge Jarrett explained the underlying rationale of the Compliance Notice system in the following terms:
The provision of notices to employers serves a number of purposes, not the least of which is to give the employer an opportunity to deal with the contravention that is being alleged, or, in the case of notices to produce, to provide information which would demonstrate that no contravention of the Act has occurred. The regime set out under s.716 and s.717 of the Act relating to compliance notices represents a regime which would avoid proceedings coming to a Court at all if an employer took the steps set out in those sections.[31]
[30] See Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801.
[31] See Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801 at [22].
Accordingly in general terms, the successful implementation of the process envisaged when a Compliance Notice is issued represents a win/win for all concerned in the following terms:
·An underpaid employee gets his/her entitlements expeditiously and as calculated pursuant to all the applicable provisions of the relevant award;
·An employer is educated about his/her responsibilities under the relevant industrial system without being penalised or forced to incur the costs and indignities of litigation or indeed to be identified as an errant employer; and
·The public purse is spared the cost of bringing expensive proceedings to Court.
FWI Pires has provided evidence regarding the prevalence of industrial complaints in the fast food industry. The industry employs a large percentage of young workers aged between 15 and 25 of whom Ms Sibly is one. Statistics indicate 50.7% of workers in the industry fall into this category. Takeaway food services is ranked as the fifth most common industry for employee complaints relating to award irregularities. In terms of the industry dispute rate, the level of wage, penalty rate infringements and the like, is categorised by the FWO as being moderate.[32]
[32] See affidavit of FWI Pires filed 21 December 2021 at Annexure IDSP-8.
Jason Hood’s evidence
It is Jason Hood’s evidence that when he received the relevant Compliance Notices, in September of 2020, he was under the misunderstanding that his brother, Darryl Hood would take care of the repayments as he (Darryl Hood) was the one who had possession of the relevant business records.[33] It also being the case by this time, Jason was a resident of Western Australia and did not have involvement in the day to day management of the business.
[33] See outline of submissions of the second respondent filed 13 May 2022.
In this context, it must be noted that it is an agreed fact that Jason Hood has admitted his accessorial liability pursuant to section 550(2)(c) of the Act, which has been detailed above.[34]
[34] See SOAF at [23] to [25].
There was no compliance with either of the relevant notices prior to the stipulated date and the two employees remain unpaid. It now falls to the Court to calculate the relevant penalty that should be imposed on Jason Hood.
Jason Hood, as a director of the company, admits responsibility of the contraventions. It is his evidence that in August of 2017 he moved to Western Australia to pursue a business venture and has remained living there ever since, although he regularly travels back to Adelaide to visit his family.
Following his relocation Jason ceased having day to day involvement and responsibility in respect to the business here in Adelaide. He understood that his brother, Darryl Hood, was maintaining such duties and decisions in his absence.
Jason Hood deposes that upon his relocation he attempted to resign himself from the business and his brother would take control of all aspects. On his account, an agreement was reached at a meeting on 16 November 2018, with the assistance of an accountant Mr Fox. The only evidence I have been provided in regards to this agreement is an email from Mr Fox to all attendees of the meeting dated 19 November 2018, the email reads as follows:
Hi All
Please find following a record of our discussion and resolutions from our meeting Friday November 16 at 1:30pm
The meeting was held at my office 167 Unley Rd Unley
In attendance was Peter Hood, Jason Hood, Darryl Hood and myself.
1.Transfer of Stores – It was agreed that Darryl would Purchase Jason’s half interest in the three stores Glenelg, Harbour Town and Bayside
From that date forward Jason deposes that it was his genuinely held understanding his involvement had concluded and his brother Darryl was to maintain all aspects of the business. It is Jason’s evidence, Darryl Hood has suffered health issues from 2016 onwards, which has led to him to being admitted to numerous hospitals from time to time. Mr Hood has provided a Medical Certificate of Darryl Hood dated 12 November 2021 that states he is unable to track down and deal with records to do with the Subway Business.
In this context, Jason Hood asserts that on receipt of the Compliance Notices, he took steps to try and ascertain the relevant business and employee records but was frustrated by the neglect of his brother Darryl. As a consequence, his attempts, in this regard, were fruitless. In submissions put on his behalf by his solicitor, Jason Hood indicates as follows in respect of the failure to make rectification to the two employees concerned:
Mr Hood has, to date, been unable to demonstrate contrition by repaying Mr Stacey and Ms Sibley as he laboured under the misapprehension that Mr Stacey and Ms Sibley had been repaid by his brother. It was not possible for him to confirm this until he had reviewed the employee records which was greatly hampered by Darryl Hood’s personal circumstances and Mr Hood’s habitation in Western Australia. With the collapse of the First Respondent, it was not appropriate for Mr Hood to repay Mr Stacey and Ms Sibley personally unless he was certain that they had not already been paid.
Mr Hood is now no longer in a position to make the repayments on behalf of the First Respondent. He has sympathy for both Mr Stacey and Ms Sibley and understands that the Applicant considers contrition an important aspect of its submissions on penalty. He is willing to offer Mr Stacey and Ms Sibley a written apology.[35]
[35] See outline of submissions of the second respondent filed 13 May 2022 at [20]-[21].
It seems unlikely that this offer of an apology has been actively pursued by either the FWO or Mr Hood. In particularly, I have not been advised of the response of the workers concerned to the prospect of being offered an apology. It seems to me to be more likely than not that they would regard such an apology as being tokenistic and self-serving. Both are likely to be more focussed on receiving what they were each entitled to. After all, this was the reason why they complained to the FWO in the first place.
The FWO’s submissions on penalty
It is the submission of the FWO that the most significant consideration for the Court in setting a penalty is the community’s interest in ensuring employers comply with the provisions of industrial awards pertaining to them and employers promptly rectify any breaches of such awards. As such, penalties have to be fixed at a level which will deter potential contraveners and avoid them seeing the imposition of a penalty merely as the cost of doing business.
The FWO rejects any submission that the fact that Jason Hood was not involved in the day to day management of the business reduces his culpability for its transgressions, given he was a director of it at all relevant times. It submits that the evidence indicates that he was properly provided with the relevant Compliance Notices, which clearly were directed to him for his rectification of the various award provisions applicable.
The FWO also relies on the public policy principles which underpin the Compliance Notice regime created by section 716. As indicated above, it is a system directed to the avoidance of litigation and the achievement of speedy rectifications of award breaches. It is in the public interest that the public purse is not put to the expense of litigation.
Axiomatically, it benefits employees if they receive their proper entitlements promptly. In these circumstances, it contends that considerations of both general and specific deterrence are relevant. In the context of specific deterrence, it is noted by the FWO that Jason Hood is a director of several other companies and engages in a variety of other businesses.
The FWO accepts that Jason Hood has cooperated by not putting liability into issue and by agreed to the SOAF. As such there has been a demonstration of contrition which will be advanced when complete rectification of the underpayments due to Mr Stacey and Ms Sibly has been made.
The FWO notes, as indicated above from the evidence of FWI Pires, the fast food industry has a moderate level of wage and related disputes. The industry accounting for 2.7% of all disputes received by it between mid-2018 and mid 2021 or some 1,701 matters. However, wage disputes made up 14% of these matters.
As previously indicated, the parties initially agreed upon a range of penalties to be applied. However, this agreement was predicated on the basis that Jason Hood would ensure that Mr Stacey and Ms Sibly were paid their entitlements within a reasonable time frame.
This rectification has not occurred and Jason Hood has indicated that he is no-longer in a position to fulfil his offer. In these circumstances, the FWO makes the following submission:
The Applicant submits that the Second Respondent should be afforded a 15% discount, rather than 20%, for his fulsome admissions which have facilitated the course of justice. Despite his expressions of regret at this late stage, the most “concrete” method of expressing contrition to an underpaid employee is to pay the monies that are due to them.17 The Second Respondent had ample opportunity to ensure that the First Respondent rectify the effects of its non-compliance before the First Respondent entered liquidation, having been put on notice of the First Respondent’s failures and the possibility of these proceedings on 29 October 2020. The Second Respondent did not take these opportunities to tangibly demonstrate his regret and has provided no explanation for his failure to do so.
The Applicant does not suggest that there should be any change to the agreed penalty range of 60% - 70%. With the reduced discount for cooperation, the Applicant now submits that penalties in the range of $3,396 - $3,962 would be appropriate to secure deterrence in respect of the Second Respondent and the public in general.[36]
[36] See outline of submissions of the applicant filed 27 May 2022 at [13] – [14].
The respondent’s submissions on penalty
Jason Hood submits that he promptly admitted the contraventions in question and has agreed to a range of penalty to which he should be liable. From his perspective, this is evidence of both cooperation and contrition.
With the liquidation of Hutt Nominees, Jason Hood no longer can have any responsibility for taking remedial action on its behalf. As previously indicated, it is the effect of his evidence that he considered that his practical involvement in the day to day operation of the business ceased in late 2018, when it was agreed Darryl would purchase his interest in the business.
Given his lack of access to the business records, which were held by Darryl Hood and his wife, Jason Hood submits that he was unable to attend to the Compliance Notices in question. As such, it is submitted that his contraventions were both inadvertent and unintentional. The FWO does not accept these submissions.
The solicitor for Mr Jason Hood submits that a penalty towards the lower end of the agreed range should be imposed in the light of what he would characterise as his client’s significant cooperation and the lack of any need for specific deterrence given the fact that Jason Hood personally was not involved with the circumstances surrounding the award infractions, which related to the omissions of his brother, Darryl.
In this context, it is submitted that Jason has acknowledged his liability arising from his directorship of Hutt Nominees and accepts that he must be penalised as a consequence of the company’s failure. However, it is further submitted that he personally has learnt a salutary lesson and he personally is not an appropriate vehicle for the general deterrence of the community.
As such, it is submitted that the prospect of Jason re-offending must be regarded as being extremely remote; he should be entitled to the full benefit of being a first offender, who has cooperated with the industrial regulator; and, in all these circumstances, it would not be in the public interest to impose a significant penalty.
Legal principles applicable to penalty hearings
The approach, which the Court is required to take, in respect of these contravention proceedings, has been delineated in a number of decisions of the Federal Court.[37] The process can be summarised as follows:
·The Court should identify each separate contravention, arising from a breach of either the applicable award or the FWA itself. Pursuant to section 539(2) each such contravention is a distinct incident for penalty purposes;
·The Court should determine whether any of these incidents arise in a single course of conduct, within the terms envisaged by section 557(1);
·Then give consideration as to whether any of these contraventions contain elements and factor this into considering what is an appropriate penalty, in all the circumstances, for each contravention;
·Thereafter, the Court should fix an appropriate penalty for each single or group contravention, taking into account all relevant circumstances;
·Finally, the Court should apply the totality principle. This final step constitutes a review of the aggregate penalty calculated, and envisages a consideration of whether such a penalty is an appropriate response to the conduct, which lead to the various contraventions in question. This case has been described as a process of intuitive synthesis.[38]
[37] See Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42] (Mansfield J), citing Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579 at [10] (McKerracher J).
[38] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [55] (Graham J).
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 review 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.
Gray J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (“Australian Ophthalmic Supplies”) 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.[39]
[39] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [23] (Gray J).
Regardless of these considerations, the fundamental task, for the Court, is to determine, from all the factual circumstances arising, the gravity or seriousness of the offending, which it is called upon to penalise. Again there is general agreement between the parties as to the considerations relevant to this task, which has been delineated in a number of decisions of both this Court and the Federal Court.[40] The considerations are as follows:
[40] See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] FCA 1080 at [14]. (Tracey J); Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [23] (Reeves J).
·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.[41]
[41] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J).
Clearly the check-list, as enumerated above, is useful. However, 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.[42]
[42] See Veen v R (No 2) (1988) 164 CLR 465, 472 (Mason CJ, Brennan, Dawson, and Toohey JJ).
However, in the context of the significant interest the public has in ensuring that employees are paid their proper entitlements and are accorded the protection of the industrial safety net envisaged by the legislature, the Court cannot lose sight of the importance of deterrence, both in a specific and general sense.
Penalties have to be fixed at a meaningful level, not set at a level at which their imposition, on an errant employer, can be seen as an acceptable cost of doing business for the employer. In short, penalties must hurt so that others who are considering cutting corners, so far as the payment and protection of their employees are concerned, will be deterred from doing so.
In the recent case of Australian Building and Construction Commissioner v Pattinson[43] the High Court discussed the inherent problems likely to arise when principles of retributive sentencing, relevant to the criminal law, are applied in civil penalty proceedings. In this context, the High Court rejected the principle of proportionality being applied to the calculation of penalties in the civil sphere. Essentially, the High Court indicated the principle that the maximum penalty should be reserved only for the worst or most egregious examples of the applicable offence did not apply in civil penalty proceedings.
[43] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13.
In addition, the High Court indicated that the primacy of deterrence is the objective of any civil penalty regime. As such a sentencing Court, in a civil penalty matter, is required to impose a penalty which is proportionate in the sense that it strikes a reasonable balance between deterrence and what is described as oppressive severity.[44]
[44] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [41].
In this context, concepts also applicable in criminal sentencing, such as totality, parity and course of conduct remained relevant. As such, a Court sentencing in respect of a civil penalty provision matter retained a discretion. As with all discretions, it is one which must be exercised fairly and reasonably given the subject matter, scope and purpose of the legislation being applied. The aim being to arrive at a penalty which is appropriate.
In this context the High Court indicated as follows:
It is important to recall that an "appropriate" penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a "one‑off" result of inadvertence by the contravenor rather than the latest instance of the contravenor's pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law … In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors … [such as] where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the Court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
It is not necessary to multiply examples further. It is sufficient to say that a Court empowered by s 546 to impose an "appropriate" penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.[45]
[45] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [46] – [48].
In addition, in this context, the essential purpose of Compliance Notices must be considered. As indicated above, prompt compliance with their terms can result in a win/win situation for all concerned. The industrial regulator and the public purse is not put to the expense of a hearing; an underpaid employee can be reimbursed promptly; and an errant employer is spared the bother and embarrassment of public prosecution, and is given an opportunity to learn about and rectify past failings for the good of all concerned.
Discussion
Nature and extent of the conduct leading to the breaches
This is a case that the Compliance Notice Scheme has been entirely disregarded in the sense that it did not achieve its primary objectives, namely the prompt rectification of the relevant breaches of the industrial law and the avoidance of litigation.
The Compliance Notices cannot be regarded as unduly complex documents. The steps to be taken are clearly delineated. The objective of the notice readily apparent. The responsible employer is required to calculate what is due to the employees in question; then pay the sum so calculated; and then prove payment to the FWO. None of these steps was taken in the stipulate time. Accordingly, in my view, the breach must be regarded as a significant one.
Given Jason Hood’s role as a director of the employer company, in my view, the failings of his brother cannot absolve him of liability for the company’s omissions. It remains significant that the two employees in question remain out of pocket, notwithstanding the earlier commitment to make restitution. Again, this is indicative of a wholesale failure of the administrative regime to correct award violations promptly and cheaply.
The evidence of FWI Pires indicates that she attempted to liaise with both Jason and Darryl Hood to assist them to comply with the requirements of the relevant notices but to no avail. This was after Jason had indicated to her that he was responsible for fixing this on account of his directorship of Hutt Nominees.
Thereafter she made contact with both directors of Hutt Nominees on numerous occasions indicated that Court proceeding would follow non-compliance. As such, I am satisfied that the initiation of proceedings in this Court was a last resort on the part of the FWO.
I acknowledge that Jason Hood has been left holding the bag for his brother and fellow director. I accept that he perceived that he had nominally, at least, indicated to his brother that he was removing himself from responsibility for Hutt Nominees with his move to Western Australia and the sale of his interest.
However, the formalities in this regard were not completed and Jason remained a director of the company, with all the responsibilities which that entailed, which included ensuring compliance with statutory notices issued to the company in question. I do not consider that this circumstance alone can result in a significant reduction of the penalty to be imposed.
Nature and extent of loss
The two employees concerned, Mr Stacey and Ms Sibly, have not been provided with their financial entitlements. In particular, Mr Stacey has been deprived of what is a significant sum of money. Earlier indications that the loss would be made good have proved to be hollow and has been withdrawn. An apology will serve little practical purpose to Mr Stacey, who has been underpaid a sum in excess of $20,000.00. In addition, it is noteworthy that the matter has been outstanding for a period of over two years.
Of equal significance, there has been no saving to the public purse by the FWO’s decision to adopt the Compliance Notice procedure as means of making good the loss sustained by Mr Stacey and Ms Sibly. It is important that, in the penalties the Court imposes, support is given to Compliance Notice system, which if adhered to, benefits both workers, who get their entitlements promptly and employers, who avoid the expense and obloquy of being involved in ligation.
Compliance with minimum standards
As I have indicated above, one of the principle objectives of the FWA is to ensure that employees are provided with all the benefits of an industrial safety net, in terms of award and penalty payments based on the industry in which they are involved.
Fast food workers, as is the case in the current matter, frequently work inconvenient hours. The relevant award recognises the burden arising from such hours and provided compensation for them. If an employer is unfamiliar with the provisions of any relevant award, one of the consequence of a Compliance Notice is to provide education about such an issue and avoid any future infringement in similar terms.
In this case, neither Mr Stacey nor Ms Sibly were provided with their basic award entitlements. As such, a significant objective of the industrial system has been undermined. It remains the case to this date and will remain so. So far as the two employees are concerned, the industrial safety net has failed and their approach to the FWO has provided no practical outcome.
Contrition, corrective action and cooperation with authorities
The FWO submits the second respondent, Jason Hood has to some extent cooperated with the proceedings in admitted accessorial liability, albeit with the assistance of a mediation and filling a Statement of Agreed Facts, therefore saving the public purse.
The need for a full hearing regarding liability has been avoided. However, the most expedient mechanism for expressing contrition is through a speedy rectification of any under payment to an employee. This did not occur through the Compliance Notice procedure itself. Nor did litigation itself bring about any such rectification, notwithstanding that it was offered and formed the basis for the matter proceeding on a statement of agreed fact.
The admissions made by Jason Hood have saved time and money. This cooperation should result in a discount on the penalty to be imposed. As indicated above, it was the FWO’s initial position that the discount to be applied should be one of 20% but this was posited on the basis of full rectification. It now contends that the discount should be one of 15%.
Size of business
It is Jason Hood’s evidence that Hutt Nominees sold its Subway franchise on 24 February 2021. I have not been advised as to the terms of this sale. However, given its liquidation, it would appear self-apparent that, as Mr Hood has deposed, the company is in a poor financial state and has significant debts and liabilities.
It is well established that the size and financial circumstances of an employer do not, of themselves, provide extenuating circumstances sufficient to reduce the penalty to be imposed for an award infringement or a failure to comply with a Compliance Notice. In this regard, I adopt the comments of Driver FM in Rajagopalan v BM Sydney Building Materials Pty Ltd 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.[46]
[46] See Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27] (Driver FM).
General and specific deterrence
Deterrence has two aspects – general deterrence directed towards the community as a whole, and specific deterrence directed towards the individual concerned whose conduct is to be sanctioned. As the High Court has recently indicated, issues of deterrence must be accorded primacy in the imposition of any civil penalty.
In Fair Work Ombudsman v Darna Pty Ltd,[47] Judge Hartnett said as follows in respect of the importance of the Compliance Notice process in the industrial regulatory system in this county:
The Explanatory Memorandum to the Fair Work Bill 2008 (Cth) provides that compliance notices were designed to be another option to deal with non-compliance instead of pursuing Court proceedings. It was to be a less costly and less time consuming procedure. Section 716 of the FW Act allows a person to whom a compliance notice is issued an opportunity to rectify an under payment without being subject to civil remedy provisions. The First Respondent’s failure to comply with the Compliance Notice issued has, in these proceedings, caused the Applicant and the Court to spend time and public funds in dealing with civil remedy proceedings which would not have been necessary had compliance occurred.
[47] Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709.
As I have already observed, so far as the current matter is concerned, the Compliance Notice procedure has been an abject failure in bringing about a prompt restitution to the employees concerned and the saving imposition on the public purse. One of the central purposes of the modern award system and the related enforcement procedures is to ensure all employees have the benefit of the industrial safety net provided by relevant awards.
Although it is not an industry which can be regarded as meriting the closest attentions of the industrial regulator as a consequence of high rates of non-compliance, the fast food industry did account for 14% of all industry disputes. However, notwithstanding this circumstance, I accept that workers in the industry are vulnerable to exploitation by unscrupulous employers due to the nature of their work and the hours required of them.
As such, issues of general deterrence loom large in this case. In addition, I accept that it is probable that many small business employers, operating small franchises or small fast food outlets, may be unaware of specific provisions of the award applicable to their employees, particularly so far as penalties of weekend and evening work are concerned.
In these circumstances, in my view, the specific objectives of the Compliance Notice system must be supported and a general message sent as to the need for prompt and complete compliance to them. The public has an interest in ensuring such employers comply with the relevant legislation.
Hutt Nominees is in liquidation and is not trading. It cannot employ any further employees. Jason Hood moved to Western Australia prior to the actual award breaches in question. I accept that he remains a director of other companies and continues to engage in business. I have not been advised of the nature of those business and whether they do or do not have significant payrolls.
It would seem to me that there is truth in the submission made to me that Jason Hood has learnt a salutary lesson about the need for vigilance in industrial matters when one is the director of a company employing individuals in a regulated industry such as the fast food industry. As such I do not consider that this is a case calling for a significant degree of specific deterrence, particularly given Jason Hood has not previously contravened any industrial regulation.
Conclusions
The most significant factor in this case is the failure of the Compliance Notice system to firstly bring about the payment to Mr Stacey and Ms Sibly to which they were entitled and secondly avoid litigation. As I am at pains to point out, the laudable and publically advantageous aims of section 716(5) have totally miscarried in this case.
Mr Stacey has not received a significant component of his wages. Ms Sibly, a young person, is not so significantly disadvantaged. However, significant as the sums in question are to each of them, they are likely to pale when compared to the costs arising from bringing these proceedings. There is no sweetening of the sour taste accorded by those proceedings by any realisation that, at the very least, after having made their complaints to the industrial arbiter, Mr Stacey and Ms Sibly did get what that to which they were each entitled.
Rather Mr Jason Hood states that he is no-longer in a position to make the restitution previously offered. Why this is so has not been the subject of further elaboration. For the reasons relating to its liquidation, Hutt Nominees cannot make such restitution and the FWO has elected not to proceed against Darryl Hood.
In my view, the mere assertion that he cannot make good the underpayments due to Mr Stacey and Ms Sibly does not absolve Jason Hood of his obligation arising under section 546(2)(b) of the FWA. The relevant Compliance Notices remain unsatisfied and I propose to order that Mr Jason Hood pay the sums due to both Mr Stacey and Ms Sibly within 28 days of the date of the Court’s order.
The maximum penalty for an individual is one of $6,660.00. It was previously agreed a discount of 20% is appropriate given the level of cooperation arising from the admission of liability, bringing the penalty down to $5,328.00. However due to Mr Hood not providing payment to the two employees as promised, the FWO submits the penalty should now only carry a 15% discount. Mr Jason Hood is a first offender, who has acknowledged culpability in circumstances in which his brother Darryl must be regarded as attracting of more censure. There is a limited need for specific deterrence. However, some level of uncertainty arises in respect of Mr Jason Hood’s level of personal contrition given the failure to make good his undertaking to make rectification in a timely fashion.
In all these circumstances, in my view, an appropriate penalty for Mr Jason Hood, is one of 58.82% of the discounted penalty, which is at the lower end of the range agreed between the parties, prior to Mr Jason Hood’s abrogation of his undertaking to make restitution. The penalty therefore is one of $3,330.00.
It is appropriate that the fine be paid to Commonwealth Consolidated Revenue and the other orders and declarations sought by the FWO be made, particularly the order requiring restitution to be made to Mr Stacey and Ms Sibly, notwithstanding Mr Jason Hood’s indication that he is not able to pay the sums in question.
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 fifty (150) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 3 February 2023
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