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
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)…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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In the Federal Circuit Court, the Fair Work Ombudsman (FWO) brought an action against Hutt Nominees Pty Ltd, represented by its directors Darryl Hood and Jason Hood, for underpaying two employees, Mr Stacey and Ms Sibly, under the relevant industrial award. The FWO issued three compliance notices under the Fair Work Act 2009 (Cth) to Hutt Nominees, which the company failed to comply with. The central legal issue was whether Hutt Nominees, through its directors, had contravened the award by failing to pay the appropriate wage loadings and leave entitlements to Mr Stacey and Ms Sibly. The court needed to determine the appropriate penalty for the contraventions, considering factors such as contrition, corrective action, cooperation with authorities, the size of the business, and the need for general and specific deterrence.
The court found that Hutt Nominees had indeed breached the award by not paying the required wage loadings and leave entitlements. Despite the FWO's attempts to resolve the matter through compliance notices, Hutt Nominees failed to rectify the underpayments. The court highlighted the importance of the compliance notice process in avoiding costly litigation and preserving public resources. It acknowledged that Jason Hood had cooperated to some extent by admitting liability with the assistance of mediation, which warranted a discount on the penalty. However, the failure to make timely rectifications reduced the discount from 20% to 15%. The court also noted that the size and financial circumstances of Hutt Nominees did not justify a reduced penalty for the award infringements. Considering the need for both general and specific deterrence, the court imposed a penalty on Jason Hood, calculated at 58.82% of the discounted penalty, amounting to $3,330.00.
The court ordered Jason Hood to pay the sums due to Mr Stacey and Ms Sibly within 28 days of the order date. The court emphasised the importance of adhering to industrial instruments and the failure of the compliance notice system to achieve its intended outcomes in this case. The decision underscores the significance of the compliance notice process in the industrial regulatory system and the consequences of failing to comply with such notices.
Orders
Orders of the court
Full text does not contain this section.
Background
Background to the litigation
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.
Evidence
Evidence Before The Court
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.
Decision
Reasons for decision
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.
Ratio Decidendi
Legal Principle Established
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.
