Fair Work Ombudsman v Jenni International Pty Ltd and Anor (No.2)
[2020] FCCA 2924
•30 October 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v JENNI INTERNATIONAL PTY LTD & ANOR (No.2) | [2020] FCCA 2924 |
| Catchwords: INDUSTRIAL LAW – Assessment of penalty – contraventions of the Fair Work Act2009 – underpayment by small business of non-Australian citizen employees – non-exhaustive list of factors relevant to the imposition of a penalty – underpayment of entitlements was significant – no exhibited contrition or evidence of corrective action – general and specific deterrence a significant factor – respondents conduct was deliberate – second respondent a highly educated person – first respondent and second respondent to pay pecuniary penalties. |
| Legislation: Fair Work Act 2009 (Cth), ss.44, 45, 90(2), 535(1), 536(1), 545(1), 550(2)(c). |
| Cases cited: ACE Insurance Limited v Trifunovski (No. 2) [2012] FCA 793 Other Materials: |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | JENNI INTERNATIONAL PTY LTD (ACN 161 787 140) |
| Second Respondent: | JORDAN SHAN |
| File Number: | MLG 2715 of 2017 |
| Judgment of: | Judge McNab |
| Hearing date: | 14 February 2020 |
| Date of Last Submission: | 19 March 2020 |
| Delivered at: | Melbourne |
| Delivered on: | 30 October 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Tracey |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| No appearance by the First Respondent |
| Second Respondent appearing in person |
ORDERS
Pursuant to subsection 546(1) of the Fair Work Act 2009 (Cth), the First Respondent pay pecuniary penalties in the total sum of $90,000.
Pursuant to subsection 546(1) of the Fair Work Act 2009 (Cth), the Second Respondent pay pecuniary penalties in the total sum of $31,000.
Pursuant to subsection 546(3)(a) of the Fair Work Act 2009 (Cth), the First Respondent and Second Respondent pay their respective penalty amounts, as set out in Order 1 and Order 2, to the Consolidated Revenue Fund of the Commonwealth.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2715 of 2017
| FAIR WORK OMBUDSMAN |
Applicant
And
| JENNI INTERNATIONAL PTY LTD (ACN 161 787 140) |
First Respondent
| JORDAN SHAN |
Second Respondent
REASONS FOR JUDGMENT
In reasons for judgment delivered on 18 October 2019, the Court found that the Second Respondent, Mr Jordan Shan (“Mr Shan”), was liable as an accessory to contraventions of the Fair Work Act 2009 (Cth) (“the Fair Work Act”) made by the First Respondent, Jenni International Pty Ltd (“Jenni International”).
Earlier, on 27 July 2018, the Court made declarations that the First Respondent had contravened the Fair Work Act resulting in underpayments of two employees, Ms Narae Yang (“Ms Yang”) and Mr Geonsang Park (“Mr Park”) (together, “the Employees”), who worked at Dae Bark Mart, an Asian grocery store run by the First Respondent. The Court made declarations that the First Respondent contravened the following civil remedy provisions of the Fair Work Act:
a)s45 of the Fair Work Act by:
i)failing to pay Mr Park the minimum rate of pay prescribed by clause 17 of the General Retail Industry Award 2010 (“the Award”);
ii)failing to pay Ms Yang the minimum rate of pay prescribed by clause 12.7 of the Retail Award;
iii)failing to pay the Employees the Saturday penalty rate prescribed by clause 29.4(b) of the Award;
iv)failing to pay the Employees the Sunday penalty rate prescribed by clause 29.4(c) of the Award;
v)failing to pay Mr Park the Evening Work penalty rate prescribed by clause 29.4(a) of the Award;
vi)failing to pay Mr Park the public holiday penalty rate prescribed by clause 29.4(d) of the Award;
vii)failing to pay Mr Park for overtime worked on a Monday to Saturday as prescribed by clause 29.2(a) of the Award;
viii)failing to pay the Employees for overtime worked on a Sunday and Mr Park for overtime worked on a public holiday as prescribed by clause 29.2(c) of the Award;
ix)failing to pay Ms Yang for overtime worked outside of her part-time hours as prescribed by clause 29.2(b) of the Award;
x)failing to provide Mr Park with two consecutive days off per week as prescribed by clause 28.11 of the Retail Award;
xi)failing to provide Mr Park with three consecutive days off per four week period as prescribed by clause 28.13 of the Award;
xii)failing to vary in writing Ms Yang's part-time hours as prescribed by clause 12.3 of the Award;
b)s44 of the Fair Work Act by failing to pay the Employees their accrued annual leave on termination as required by section 90(2) of the Fair Work Act;
c)s535(1) of the Fair Work Act by failing to make and keep employee records as prescribed by Fair Work Regulations 2009 (Cth) (“the Fair Work Regulations”) 3.32, 3.33, 3.34, 3.36, 3.37 and 3.40; and
d)s536(1) of the Fair Work Act, by failing to provide pay slips to the Employees within one working day of paying an amount to them in relation to the performance of work.
On 18 October 2019, the Court found that the Second Respondent was involved in each of the First Respondent's contraventions set out above, pursuant to s550(2)(c) of the Fair Work Act, except for the contravention at [1(a)(xii)] of this judgment: see Fair Work Ombudsman v Jenni International and Anor [2019] FCCA 2971 at [4], [71]. Pursuant to s545(1) of the Fair Work Act, the Court ordered that the Respondents, jointly and severally, pay compensation in the total sum of $13,997.28 to the Applicant (with the Applicant to pay that compensation to the Employees) being:
a)$9,147.30 to be paid to Mr Park (or 65% of any amount paid by Jenni and Mr Shan if the amount was less than the full amount owing); and
b)$4,849.98 to be paid to Ms Yang (or 35% of any amount paid by Jenni and Mr Shan if the amount was less than the full amount owing).
The Court also made orders for the Respondents, jointly and severally, to pay interest to the Applicant (with the Applicant to pay that compensation to the Employees), on the amounts referred to above, at the Federal Court of Australia's pre-judgment interest rate, being:
a)$712.61 in respect of Mr Park; and
b)$384.41 in respect of Ms Yang.
Following delivery of judgment on 18 October 2019, the Court made further orders (in addition to the declarations and orders as above) as follows:
“4.The matter be listed to the Federal Circuit Court of Australia in Melbourne on 14 February 2020 at 10.00am for a further hearing to determine the penalties and other orders that should be imposed upon the Respondents.
5.The Applicant is to file and serve evidence and submissions on the issue of penalty by 4pm 10 January 2020.
6.The Respondents are to file and serve any evidence and submissions on the issue of penalty by 4pm 24 January 2020.
7. The Applicant is to file and serve any evidence or submissions in reply by 4pm 31 January 2020.”
In relation to those orders, the Applicant filed the following documents:
a)an affidavit, whose deponent was Ms Yang, on 9 January 2020 (“Ms Yang’s affidavit”);
b)an affidavit, whose deponent was Fair Work Inspector Clint Rollins, on 9 January 2020 (“Fair Work Inspector Collin’s affidavit”); and
c)submissions as to penalty on 10 January 2020.
The Second Respondent filed four affidavits on 11 February 2020 in support of his submissions as to penalty. The Second Respondent then filed a fifth affidavit on 12 February 2020. For clarity, those affidavits are:
a)an affidavit sworn by the Second Respondent on 10 February 2020, which encloses a “Balance Sheet and Supporting Documents” (“the Second Respondent’s first affidavit”);
b)an affidavit sworn by the Second Respondent on 10 February 2020 which encloses “Ex Wife Sun’s Demand Letter and Her Supporting Documents” (“the Second Respondent’s second affidavit”);
c)an affidavit sworn by the Second Respondent on 10 February 2020 which encloses “Ex Wife Ren’s demand letter and her supporting documents” (“the Second Respondent’s third affidavit”);
d)an affidavit sworn by Dang Chunyu on 10 February 2020 which encloses “Demand letter by Wang” (“Dang Chunyu’s affidavit”); and
e)an affidavit sworn by the Second Respondent on 11 February 2020 which encloses “4 property valuations” (“the Second Respondent’s fourth affidavit”).
The Second Respondent also filed submissions as to penalty on 10 February 2020.
The matter was heard on 14 February 2020, and judgment was reserved on a date to be advised. By way of orders made in chambers on 19 February 2020, the matter was reserved for judgment after 20 March 2020. The Court also made orders on 19 February 2020, as follows:
“1. The Respondents file and serve a further affidavit in relation to the financial position of the Respondents by 5 March 2020.
2. Liberty is granted to the Applicant to file any submissions in reply to the Respondents evidence by 20 March 2020.”
The Second Respondent filed a further affidavit on 19 February 2020 (“the Second Respondent’s fifth affidavit”) and subsequently filed further submissions as to penalty on 28 February 2020.
The Applicant filed submissions in reply on 19 March 2020.
Approach to be taken in relation to fixing penalty
A non-exhaustive list of factors relevant to the imposition of a penalty was usefully summarised by Mowbray FM (as he then was) in
Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar[2007] FMCA 7 at [26] to [59]. Those factors include:
a)the nature and extent of the conduct which led to the breaches;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the breaches;
d)whether there had been similar previous conduct by the Respondents;
e)whether the breaches were properly distinct or arose out of the one course of conduct;
f)the size of the business enterprise involved;
g)whether or not the breaches were deliberate;
h)whether senior management was involved in the breaches;
i)whether the party committing the breach had exhibited contrition, taken corrective action and co-operated with the enforcement authorities;
j)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
k)the need for specific and general deterrence.
This summary was adopted by Tracey J in Kelly v Fitzpatrick [2007] FCA 1080 at [14]. While the summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion: see Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550. The discretion remains at large.
The factors which are material to this matter and the question of appropriate penalties are addressed below. What the Court needs to determine is an appropriate penalty proportionate to the gravity of the contravention.
The Applicant’s Submissions
The Applicant filed submissions as to penalty on 10 January 2020 and on 19 March 2020.
The Applicant notes at [2] – [3] of the submissions filed on 19 March 2020, that the First Respondent did not appear at the hearing before the Court on 14 February 2020, and has not participated in the proceeding at any time. The Applicant states at [2] that:
“At no time has the Second Respondent had leave to represent the First Respondent. Since this proceeding commenced in February 2017, the Second Respondent has only intermittently been an officeholder of the First Respondent and has not been an officeholder of the First Respondent since September 2019.”
On that basis, the Applicant submits at [3] that:
“…the Court must proceed to determine any penalty orders as against the First Respondent on the basis of the Applicant’s submissions and evidence. Nothing submitted or filed by the Second Respondent affects the question of the penalty to be imposed upon the First Respondent, including because the Second Respondent has not demonstrated any basis for how the Court could conclude that his evidence shows a fulsome picture of the First Respondent’s position, including its financial position.”
By way of the submissions filed on 10 January 2020, the Applicant makes clear claims as to the factors that the Court should take into consideration in determining what is the appropriate penalty in this matter.
Nature and Extent of the Conduct
At [19] of the submissions filed on 10 January 2020, the Applicant summarises the nature of the Second Respondent’s contraventions as follows:
“Notwithstanding that he is a highly educated economics professor who has worked at an Australian University, the Second Respondent, in running the First Respondent’s Business, failed to ensure that his vulnerable Employees were paid the minimum Award rates of pay, as well as overtime and penalty rates; failed to accord them other Award conditions; failed to pay them annual leave, a basic entitlement for all national system employees; failed to keep employee records; and failed to provide the Employees with pay slips.”
The Applicant submits at [22] – [23] that the Employees worked for the Respondents in circumstances which illustrate their vulnerability to exploitation as follows:
Mr Park
(a) Mr Park was paid $12 for most of his employment (contrary to the Second Respondent’s assertion made to the Inspector, of $14-$15);
(b) Mr Park did not receive pay slips during his employment with the First Respondent;
(c) Mr Park never took any annual or personal leave during his employment, because he never knew those entitlements existed (which he would have known, had he been provided with a pay slip complying with the FW Regulations);
(d) Mr Park was not paid annual leave upon termination of his employment;
(e) see further, in relation to Mr Park’s circumstances when working for the First Respondent and being subject to the contravening conduct, the Park Affidavit at [84] – [91];
Ms Yang
(f) Ms Yang was paid $10 per hour when she first started working for the First Respondent;
(g) Ms Yang’s pay increased to $11 per hour, towards the end of her employment;
(h) Ms Yang resigned when she realised she was being underpaid;31
(i) Ms Yang never received pay slips during her employment with the First Respondent;
(j) Ms Yang never took annual leave or personal leave during her employment with the First Respondent, because she never knew those entitlements existed (which she would have known, had she been provided with a pay slip complying with the FW Regulations); and
(k) Ms Yang was not paid annual leave upon termination of her employment.
The Applicant submits at [24] that:
“The unlawful conduct in this case is properly characterised as the exploitation of vulnerable employees by someone (the Second Respondent) who knew, and yet deliberately ignored and avoided, the First Respondent’s obligations as an employer.”
Loss or Damage
The Applicant notes at [25] that the total underpayment in this matter is not high, but contends that what may be considered small amounts can be “significant to vulnerable or low paid employees”, citing the decision of his Honour Judge O’Sullivan in Fair Work Ombudsman v Zillion Zenith International Pty Ltd [2014] FCCA 433 at [52].
In relation to the Employees’ loss in this matter, the Applicant’s submits at [26]:
“Ms Yang’s period of employment was only three months and 15 days, and Mr Park’s period of employment was only three months and 12 days. In the context of these short periods of employment, it can be seen that the underpayments are substantial (approximately $9,000 for Mr Park and $4,800 for Ms Yang). Furthermore, in Ms Yang’s case, due to the underpayments she was required to borrow money from her mother in order to pay bills and was prevented from being involved in recreational activities.”
Similar previous conduct
The Applicant makes submissions at [29] that there is no prior contravening conduct on the part of the Respondents which has been the subject of a matter before the Courts.
However, the Applicant further submits at [29] that the Second Respondent “was on notice and aware of Commonwealth workplace laws since (at least) February 2015”. The Applicant submits at [29] – [30] that:
“29. […]This was when an employee, Akiko Toyama, lodged a request for assistance with the Applicant in respect of her employment by the First Respondent at Kinya Restaurant (Toyama Matter).
30. In correspondence with the Applicant in respect of the Toyama Matter, the Second Respondent (“the boss” of Kinya Restaurant37) was advised of the functions of the FWO as including “ensuring compliance with Commonwealth workplace laws and of the Restaurant Industry Award 2010, including the specific pay rates for the various classifications of a casual employee, including Saturday, Sunday, Public Holiday, early work and evening work rates. In a file note of a phone call between FWI Marilyn Sturgeon and the Second Respondent dated 17 April 2015, it is stated that “ER is now aware that EEs can not sign away their right to minimum wage set out in the awards.”
On the basis of this prior notice, the Applicant makes further submissions at [31] – [32] that the Second Respondent’s prior conduct and involvement in the ‘Toyama Matter’ is relevant, despite no findings of contravention against the Respondent, as:
“31. The Second Respondent advised FWI Rollins over the course of the investigation in the present matter:
(a) that he hadn’t done any research on the employees’ wages and conditions;
(b) he was not aware of what he should pay and had no knowledge of the correct rate; and
(c) he was not aware of the minimum wage or the “grocery award”.
32. When FWI Rollins questioned the Second Respondent and said words to the effect, “I find that hard to believe as the FWO has had contact with you previously in relation to a restaurant business and provided you with information about minimum wages and awards”, the Second Respondent did not respond.”
Whether the breaches arose out of a course of conduct
The Applicant initially makes submissions as to s557(1) of the Fair Work Act, which effectively provides that two or more contraventions of the same civil remedy provision are taken to constitute a single contravention if the contraventions are committed by the same person, and arise out of a single course of conduct by the person. In such circumstances the Court is required to impose one penalty for the multiple contraventions. At [10] the Applicant states that they accept that:
“The Respondents are entitled to the benefit of section 557(1) of the FW Act in relation to repeated contraventions over time periods of each separate obligation under the Award, which would otherwise result in multiple separate contraventions of section 45 of the FW Act. The operation of the section should, in the present case, also lead to the Court grouping contraventions of Award clauses relating to the underpayment of penalty rates where both of the Employees have been affected. Such grouping is reflected in the table in Annexure A.”: see Annexure A at [68] of this judgment.
The Applicant makes further submissions at [12] that:
“…in comparison to grouping under section 557 of the FW Act, where the Court finds that multiple contraventions arise out of a single course of conduct under the common law, the Court is not bound to impose only one penalty: it must ensure that the wrongdoing is adequately punished and the objects for fixing a penalty have been adequately met”: see Fair Work Ombudsman v Construction, Forestry, Maritime, Mining and Energy Union (the Hutchison Ports Appeal) [2019] FCAFC 69 at [90] per Ross J.
The Applicant submits at [13] “when grouping contraventions under the common law, the number of contraventions does not reduce.”: see Fair Work Ombudsman v Bundaberg Security Pty Ltd [2014] FCCA 592 at [12].
On that basis, the Applicant submits at [14] – [15] that, as set out in Annexure A of the submissions filed on 10 January 2020 (see [64] of this judgment) that:
“14. Consistent with the position outlined above[…]
(a) save as set out below, there should be no further grouping of contraventions by application of the common law principle, as the contraventions each have a separate and distinct character, they usually concern only one of the two Employees (who were each paid different rates of pay) and they do not arise from one particular course of conduct (such as a decision to pay the same flat rate of pay across a business); however,
(i) no penalty is sought in respect of contravention 11 in Annexure A, because the conduct underlying that contravention substantially overlaps with the conduct the subject of contravention 10;
(ii) similarly, no penalty is sought in respect of contravention 13 in Annexure A, because the conduct underlying that contravention substantially overlaps with the conduct the subject of contravention 12; and
(b) lower penalty ranges in respect of the penalty rate and overtime contraventions are appropriate in recognition of the limited extent to which it may be said there is an underlying course of conduct in paying (albeit differing) flat rates of pay below the minimum base rates required by the Award, because payment of those flat rates had some causal connection with both the base rate contraventions, and the penalty rate and overtime contraventions.
15. It follows, in the Applicant’s submission, that there are 16 contraventions. The First Respondent is liable to paying a penalty in respect of all 16 contraventions; and the Second Respondent is liable to paying a penalty in respect of 15 contraventions, because he was not an accessory in one of the First Respondent’s contraventions (as noted above).”
The size of the respondent's business
The Applicant submits at [39] – [40] that they accept that size of the First Respondent business is small. However they submit that the size and financial circumstances of a business “does not exculpate conduct by employers contravening the Act”: see Fair Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634 at [47]. Additionally, the Applicant submits that small business have the same obligations as larger employers to meet minimum employment standards: see Kelly v Fitzpatrick [2007] FCA 1080 at [28].
Deliberateness of the breaches
At [35] the Applicant submits that, the Second Respondent had knowledge of the rates paid to the Employees and that he was found by this Court to have been an intentional participant in the First Respondent’s contraventions: see Fair Work Ombudsman v Jenni International and Anor [2019] FCCA 2971 at [63], [71].
The Applicant submits at [36] that the Second Respondent had previously been on notice and was aware of Commonwealth workplace laws since February 2015 in relation to the ‘Toyama Matter’. On that basis, the Applicant submits that the Second Respondent’s prior conduct and knowledge “belie the Second Respondent’s assertions during the investigation that he did not know the correct award and never did research”. The Applicant submits that:
“These assertions were also made in the context of the Second Respondent accepting that there was a minimum wage in Australia, known to him because introductory economics textbooks mention minimum wages and how minimum wages create unemployment for society [Fair Work Ombudsman v Jenni International and Anor [2019] FCCA 2971] (at [32]). The assertions are also undermined by the Court’s finding in [Fair Work Ombudsman v Jenni International and Anor [2019] FCCA 297] that it did not accept that a business owner who has previously been investigated by the FWO (and supplied a copy of the Restaurant Award) and who was previously a professor of economics in Australia was unaware of Australia’s industrial award system and the regulation of wages by industrial awards (at [72]).”
The Applicant further submits at [34] that:
“In any event, these matters justify the Court holding that the Respondents’ contravening conduct in the present case was deliberate and that it occurred in circumstances where the Respondents were well and truly aware of their Award and statutory obligations.”
Involvement of Senior Management
The Applicant submits at [42] that “there is no doubt that the Second Respondent was heavily involved in the contravening conduct”, citing Fair Work Ombudsman v Jenni International and Anor [2019] FCCA 2971 at [6], [64].
The Applicant provides comprehensive and detailed submissions at [42] – [45] as to the Second Respondent’s involvement as senior management. Relevantly, the Applicant submits at [42] – [43] that:
“42 […] [the Second Respondent] described himself in text messages as the “Boss”.
43. At all material times (from 14 March 2013 until 21 December 2017), he was the sole director and secretary of the First Respondent and consequently:
(a) was the operative and controlling mind of the First Respondent; and
(b) responsible for ensuring the First Respondent complied with its legal obligations under the FW Act.”
The Applicant submits at [46] that the Second Respondent’s central involvement in the business of the First Respondent and the conduct constituting the contraventions is summarised in Fair Work Ombudsman v Jenni International and Anor [2019] FCCA 2971 at [28]. On the basis of the Second Respondent’s involvement in the First Respondent’s contraventions as an individual who was in senior management of the First Respondent, the Applicant submits at [46] that “[p]enalties should be imposed at a meaningful level to reflect the Second Respondent’s involvement”.
Contrition, corrective action and cooperation with authorities
The Applicant submits at [47] that:
“The Respondents have shown no contrition and have not attempted to rectify the underpayment. There was no excuse for any of the contraventions, let alone any reasonable excuse. The Second Respondent’s previous interaction with the Applicant has not deterred him from committing the contraventions. This lack of contrition, both generally speaking and when viewed in the context of the Respondents’ failure to comply with the Court’s orders and to rectify the underpayment, is a significant aggravating feature of the case.”
In relation to the conduct of the First Respondent, the Applicant cites his Honour Perram J in ACE Insurance Limited v Trifunovski (No. 2) [2012] FCA 793 at [113] – [114], for the contention that “[w]here a corporate respondent is involved, an expression of contrition is most clearly seen by the way that the corporation takes steps to correct its wrongdoing and change its behaviour.”: see Applicant’s submissions at [48]. On that basis, the Applicant submits that the “[t]he First Respondent has taken no corrective action, even when that action is now required by an order of the Court”.
In relation to whether the Respondents have cooperated with the relevant enforcement authorities , the Applicant submits at [50] that:
“The Respondents have also not co-operated with the Applicant in any meaningful way throughout the investigation. While the Second Respondent agreed to meet with FWI Rollins, as explained above he used that opportunity to make false assertions about Mr Park’s wages being higher than they in fact were. The Respondents also failed to provide the Applicant with relevant documents and information requested by FWI Rollins.”
On the basis of these submissions, the Applicant submits at [51] that:
“Taking into account the above matters…the Respondents are not entitled to any discount on penalty that might otherwise have been applied.”
Ensuring compliance with minimum standards
The Applicant submits at [52] – [53] that:
“Compliance with minimum standards is an important consideration in the present case for the following reasons:
(a) one of the stated principal objects of the FW Act is the preservation of an effective safety net for employee entitlements and effective enforcement mechanisms;
(b) it is vital to ensure compliance with a safety net of awards to create an even playing field and ensure all employees are appropriately remunerated for the work they perform; and
(c) the substantial penalties set by the legislature for contraventions of the FW Act reinforce the importance placed on compliance with minimum standards.
53.The Respondents have failed even to pay minimum wages to the Employees, let alone to pay Award base rates, overtime rates and penalty rates. They have failed to comply with important statutory record keeping requirements and the statutory obligation to provide pay slips. And they have even failed to accord the Employees any annual leave entitlements. All of this occurred in circumstances where the Second Respondent knew that the Award and industrial laws applied to his Business.”
Specific and general deterrence
The Applicant submits at [57] that:
“The High Court has held that a primary purpose of civil penalties is to promote the public interest in compliance, and to attempt to put a price on a contravention that is sufficiently high to deter repetition by the “contravenor” and by others who might be tempted to contravene the same legislation.”: see Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [55]; see also Fair Work Ombudsman v NSH North Pty Ltd t/a New Shanghai Charlestown [2017] FCA 1301 at [89].
The Applicant further submits at [59] that:
“General and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct [citing Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54 at [55]]. The appropriate penalty to be fixed should not be regarded by others as an acceptable cost of business”: see Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54 at [66].
On the basis of these principles, the Applicant submits at [60] – [62] that in relation to specific deterrence:
“60. The Second Respondent maintains a connection with Australia and with the businesses operated by companies of which he is, or has been, a director or shareholder. There is every reason to infer that he continues to have, or will have in the future, responsibility for employing people.
61. The need for specific deterrence is also apparent having regard to the fact that his previous dealings with the Applicant, and his prior knowledge of the industrial and award system, did not deter him from engaging in the contravening conduct.
62. The Respondents’ non-compliance with the Court’s orders for compensation and their failure to rectify the underpayment also make specific deterrence an important and weighty consideration.”
In relation to general deterrence, the Applicant relevantly submits at [64] that:
“There is a need to send a message to employers generally, and to the retail industry in particular, that underpayment of wages, National Employment Standards-based entitlements, and record-keeping and pay slips contraventions will not be tolerated by the FWO.”
The Applicant makes submissions at [65] that the Fair Work Ombudsman’s Industry Profile for the retail industry for the period of July 2015 to December 2018 (“the Industry Profile”) show that:
“(a) close to 10% of all disputes received by the FWO were in relation to the retail industry;
(b) 13.9% of all disputes received in relation to the retail industry were from visa holders; and
(c) the FWO recovered $6,572,055 in underpayments.”
The Applicant submits at [66] that industry profiles have previously been accepted by the Court as evidence of non-compliance and the need for deterrence in a particular industry: see Fair Work Ombudsman v NSH North Pty Ltd t/a New Shanghai Charlestown [2017] FCA 1301 at [199].
On that basis, the Applicant submits at [68] that:
“The high levels of non-compliance in the retail industry, including with respect to visa holders, reinforce the need to protect a vulnerable workforce.”
The Second Respondent’s Submissions
By way of submissions filed on 10 February 2020, the Second Respondent, purporting to make submissions on behalf of ‘Jenni and Jordan Shan’, made the following brief submissions:
“1. We have no intention to make an appeal against the court orders to save the time and resources, and to end the proceeding.
2. Please consider all the materials we had submitted and filed at the Court.
3. Please consider the minor role (as identified by the Court and FWO) of the second respondent, Jordan Shan (Dr.) when considering the penalty.
4. We have reached an agreement with FWO for a payment plan to payback the underpayments as judged by the Court.
5. Both Jenni and Jordan Shan have severe financial hardship as we have submitted and demonstrated to FWO, and herein we submit and update the Court for its attention and concessional consideration.
6. We are at the edge of accompany and personal bankruptcy if further penalty is imposed on Jenni and on Jordan Shan.
7. Fair Work Act 2009 provides, it is considered the effect of the order on the viability of the enterprise and personal welfare.
8. The balance sheet we provided shows that currently Jenni and Jordan Shan face some $600,000 to $950,000 in default and are paying some $10,500 a month towards ATO and Australian super indebtedness, etc.
9. Jordan Shan has no any incomes sources except few rental properties but are in negative gearing, being a 61-year-old man with severe medical complications as proofed to the Court in his earlier submissions.
10. Jenni is running a financial loss at the moment as evidenced herein attached. Shareholders are struggling to dispose personal assets to pay off the above indebtedness.
11. My ex-wife is now seeking at the Family Court for property settlement, MLC8050/2015 claiming 50% of my properties.
12. The social impact of a possible bankruptcy and personal one will lead to the unemployment of at least 5 employees and the financial collapse of our three families.
13. We ask the Court for a leave to negotiate with FWO for a minor penalty and on a payment plan. We believe it is not a revenge on us but a lesson we shall learn for the future.”
(Copied exactly)
As noted above, the Second Respondent filed various affidavits on 11 February 2020 and 12 February 2020. Those affidavits were filed in support of the Second Respondent’s claims about his financial position which is reflected in his submissions filed 10 February 2020.
As stated at [10] of this Judgment, the Second Respondent filed further brief submissions as to penalty on 28 February 2020. Those submissions are as follows:
“1. I reply on my "Outline of Submission" I filed on the 10th February, and the "Balance Sheet" I filed on the 11th, February and the evidences I submitted and filed on the 11th (5 of them), and the new information on our indebtedness on the 12th and the 19th February.
2. We declare that we won't appeal or oppose the judgement orders in return for a light penalty judgment, and please note the monthly debt repayments Jenni is making at the moment.
4. The above request comes from the following circumstances, or reasons:
4.1 The significant penalty will cause the collapse of the business and some 5 employees will lose their jobs and become jobless to place pressures on public resources.
4.2. The families of the shareholders will face further parlours financial hardship. Two of them are single mums. and we have sold cars and personal assets to clear the indebtedness and to support current employees.
4.3. To recap, we face some $950,000 in total (adding the figures of the Family Court judgements, the SRO debt and the other creditors to the figures in the balance sheet), and we are making some $9600 monthly repayment to ATO, Fair Work, SRO, Family Court judgements, and Australia Super etc.
4.4. Jenni is making financial losses by its recent profit and loss sheets (filed on the 11th February 2020).
4.5. We are hoping to sell the business but it worth nothing without assets and hence it attracts no interest when it faces huge indebtedness.
4.6. The alleged amount, the one judged by the court was $7800 if no interests are included and hence are a small amount, and
4.7. It was the first time for Jenni to have this legally judged contravention.
5. We humbly ask the Court to distinguish a penalty with a revenge (seeking from Fair Work).
6. We propose a penalty figure between $25,000 to 35,000 for Jenni and $15,000 to 20,000 for Jordan Shan.
7. We hope we can put this behind and pay it on an instalment and we have learnt a lesson for the future.”
Consideration of Penalty as against the First and Second Respondent
Nature and Extent of the Conduct
The extent of the underpayments here are significant in terms of the total earnings of the affected employees during their respective periods of employment.
Loss or Damage
Due to the Employees’ short employment periods, the underpayment of the Employees’ entitlements was significant being the total sum of $13,997.28, and specifically being:
a)$9,147.30 in relation to the underpayment of Mr Park’s entitlements across his employment period of approximately three months and 12 days; and
b)$4,849.98 in relation to the underpayment of Ms Yang’s entitlements across her employment period of approximately three and 15 days.
Similar previous conduct
The Court accepts that the Respondents have not been the subject of previous findings in relation to similar contraventions or conduct. However, the Court also accepts that:
a)the Second Respondent has previously been on notice and aware of Commonwealth workplace laws since February 2015; and
b)during Fair Work investigations in this matter, the Second Respondent advised Fair Work Inspector Rollins that he was not aware of the applicable award, what the minimum wage was and what the correct wage rates were: see [26] of this judgment.
Whether the breaches arose out of a conduct
In this matter, there has been a total of 31 contraventions being:
a)16 contraventions by the First Respondent; and
b)15 contraventions by the Second Respondent.
I accept the Applicant’s submissions as above in relation to grouping of contraventions and the proper approach to fixing penalties where there is an underlying course of conduct which leads to a number of contraventions.
The size of the respondent's business
The Court accepts the Applicant’s submissions that the size and financial circumstances of a business “does not exculpate conduct by employers contravening the Act”: see Fair Ombudsman v Hiyi Pty Ltd [2016] FCCA 1634 at [47]. Additionally, small business have the same obligations as larger employers to meet minimum employment standards: see Kelly v Fitzpatrick [2007] FCA 1080 at [28].
The contraventions involved in this matter did involve a small business. I note the cases cited by the Applicant are to the effect that the small size of the business does not provide an excuse for failing to comply with minimum standards. I accept that to be the case, but I also accept that in fixing an appropriate penalty the size of business and the revenue generated may affect the business’ capacity to pay a penalty, and what may be a modest penalty for a large business may be a devastating penalty for a small business.
Deliberateness of the breaches
The breaches were deliberate and I accept that the arrangements were set up by the Respondents with the knowledge that the minimum standards were not being met.
Contrition, corrective action and cooperation with authorities
I accept the Applicant’s submissions that the Respondents have not exhibited contrition in this matter. The Court notes the Second Respondent’s brief submissions as at [50] and [52] above, where the Respondent’s effectively surmises that this is a ‘lesson’ that they will learn from for the future.
In relation to corrective action and cooperation with authorities, the Court accepts that, up to the point in time that the Applicant made submissions as to penalty, the Respondents had not taken corrective action or cooperated with enforcements authorities in this matter. The Second Respondent made submissions, as at [1] of the submissions filed on 10 February 2020, that:
“We have reached an agreement with FWO for a payment plan to payback the underpayments as judged by the Court.”
There is no evidence before the Court that such a ‘payment plan’ has been agreed to by the parties. The Second Respondent’s submissions and affidavits filed in relation to penalty make no further mention of a payment plan and provide no documentary evidence that a payment plan has been agreed to by the parties. In submissions filed by the Applicant in relation to penalty, there is no mention of an agreed ‘payment plan’, and the Applicant’s submissions filed on 10 January 2020, as at [35] – [38] above, clearly indicate that the Applicant is of the view that the Respondents have made no steps to correct the entitlement underpayments.
On that basis, the Court is of the view that, despite the Second Respondent’s assertion that the Respondents have taken steps to agree to a payment plan with the Applicant, that the Respondents have not taken corrective action or cooperated with authorities in relation to the entitlement underpayments.
Ensuring compliance with minimum standards, specific and general deterrence
Any penalty imposed must be directed at ensuring compliance with minimum standards particularly in the areas of business where the scope for exploitation is present. Here, both specific and general deterrence play a significant role.
Specific and general deterrence forms part of the factors relevant to the imposition of a penalty under the Fair Work Act: See Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26] – [29]; Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543, 93.
By way of summary, the Applicant submitted at [16] – [17] of submissions filed on 10 January 2020, that:
“16. Pursuant to section 539(2) of the FW Act, the Court may impose maximum penalties of $54,000 for each of the First Respondent’s contraventions, and $10,800 for each of the Second Respondent’s contraventions.
17. If the Court accepts the FWO’s approach to statutory and common law grouping as set out above, the maximum penalties that the Court could impose are:
(a) $864,000 for the 16 contraventions on the part of the First Respondent; and
(b) $172,800 for the 15 contraventions on the part of the Second Respondent.”
The Applicant, by way of an Annexure A at pages 20 – 21 of their submissions filed on 10 January 2020, detail the penalties that should be imposed against the Respondents:
| Contravention | Maximum penalty – First Respondent | Maximum Penalty – Second Respondent | Percentage Range | Penalty Range Sought – First Respondent | Penalty Range Sought – Second Respondent | ||
| 1. | s.45 - failure to pay minimum rate of pay to Park pursuant to cl.17 of the Award | $54,000 | $10,800 | 50% | 60% | $27,000 - $32,400 | $5,400 - $6,480 |
| 2. | s.45 - failure to pay minimum rate of pay to Yang pursuant to cl.12.7 of the Award | $54,000 | $10,800 | 50% | 60% | $27,000 - $32,400 | $5,400 - $6,480 |
| 3. | s.45 - failure to pay Evening Work pursuant to cl. 29.4(a) of the Award | $54,000 | $10,800 | 30% | 40% | $16,200 - $21,600 | $3,240 - $4,320 |
| 4. | s.45 - failure to pay Saturday penalties pursuant to cl.29.4(b) of the Award | $54,000 | $10,800 | 30% | 40% | $16,200 - $21,600 | $3,240 - $4,320 |
| 5. | s.45 - failure to pay Sunday penalties pursuant to cl. 29.4 (c) of the Award | $54,000 | $10,800 | 30% | 40% | $16,200 - $21,600 | $3,240 - $4,320 |
| 6. | s. 45 - failure to pay public Holiday penalties pursuant to cl 29.4(d) of the Award | $54,000 | $10,800 | 30% | 40% | $16,200 - $21,600 | $3,240 - $4,320 |
| 7. | s.45 - failure to pay overtime Monday to Friday prescribed by cl.29.2(a) of the Award | $54,000 | $10,800 | 30% | 40% | $16,200 - $21,600 | $3,240 - $4,320 |
| 8. | s.45 - failure to pay both employees overtime on a Sunday and Mr Park overtime for public holidays prescribed by 29.2 (c) of the Award | $54,000 | $10,800 | 30% | 40% | $16,200 - $21,600 | $3,240 - $4,320 |
| 9. | s.45 - failure to pay Ms Yang overtime prescribed by cl.29.2(b) of the Award | $54,000 | $10,800 | 30% | 40% | $16,200 - $21,600 | $3,240 - $4,320 |
| 10. | s. 45 - failure to provide two consecutive days off as prescribed by cl.28.11 of the Award | $54,000 | $10,800 | 60% | 70% | $32,400 - $37,800 | $6,480 - $7,560 |
| 11. | s.45 - failure to provide three consecutive days off as prescribed by cl.28.13 of the Award | $54,000 | $10,800 | 0% | 0% | $0 | $0 |
| 12. | s.45 - failure to agree in writing of part-time hours upon commencement of employment as prescribed by cl.12.2 of the Award | $54,000 | $10,800 | 40% | 50% | $21,600 - $27,000 | $4,320 - $5,400 |
| 13. | s 45 - failure to vary in writing part-time hours as prescribed by cl 12.3 of the Award | $54,000 | $10,800 | 0% | NA | $0 | NA |
| 14. | s.44 - failure to pay accrued annual leave on termination as required by s.90(2) of the Fair Work Act | $54,000 | $10,800 | 60% | 70% | $32,400 - $37,800 | $6,480 - $7,560 |
| 15. | s.535 (1) - failure to make and keep employee records | $54,000 | $10,800 | 60% | 70% | $32,400 - $37,800 | $6,480 - $7,560 |
| 16. | s.536 - failure to give pay slips | $54,000 | $10,800 | 60% | 70% | $32,400 - $37,800 | $6,480 - $7,560 |
| TOTALS | $864,000 | $172,800 | $318,600 - $394,200 | $63,720 - $78,840 | |||
The Court notes that the Second Respondent made various submissions as to penalty, both in submissions filed on 10 February 2020 and 28 February 2020, and supported by the six affidavits as above, to the effect that the Second Respondent is in a difficult financial position: see [50] – [52] of this judgment. The Second Respondent submitted that, on the basis of the various documents provided in the six affidavits, that a significant pecuniary penalty would be financially disastrous for not only the Respondents but for employees and shareholders: see [49] of this judgment.
By way of submissions filed on 19 March 2020, the Applicant concedes at [5] that a limited capacity to pay a penalty is a relevant consideration in determining the appropriate pecuniary penalty. However, the Applicant further states that the financial position of a respondent in determining penalty carries little weight, citing his Honour Judge Manousaridis in Fair Work Ombudsman v Her Fashion Box Pty Ltd & Anor [2019] FCCA 425, who stated at [88] of that judgment:
“…The financial position of the person against whom an order for the payment of a pecuniary payment may be relevant but, at least in most cases, would not carry great weight in the assessment of the penalty.”
The Applicant also submits at [4] – [5], in addition to the limited weight that should be given to the Respondent’s financial position, that:
“4.So far as the Second Respondent is concerned, he asserted at the penalty hearing and in written material directed to the matter of penalty (including the recently filed material) that he lacks a financial capacity to pay penalties. He does not seem to submit, however, that he is actually impecunious. Indeed, there are two notable features of the financial evidence the Second Respondent has filed, including, most recently, the Further Affidavit:
(a) first, the evidence does not demonstrate any cogent accounting, or even any cogent summary, of the Second Respondent’s (or the First Respondent’s) current financial position; and
(b) secondly, the evidence demonstrates that, as well as continuing to operate a business, the Second Respondent owns valuable personal assets, including two real properties in inner Melbourne (57 Rosslyn Street, West Melbourne, and 1404/7 Katherine Place, Melbourne).
5. Accordingly, not only has the Second Respondent failed to make a sound or cogent case that he is financially unable to pay a pecuniary penalty, but the evidence before the Court compels the inference that the Second Respondent can meet a penalty order by selling assets (assuming selling assets would be necessary, which is very unclear indeed). Indeed, as it happens, on 14 February 2020 the Family Court of Australia ordered the Second Respondent to list those two properties for sale, by 21 February 2020.”
By way of the further submissions filed on 28 February 2020, the Second Respondent put the following penalty proposal at [6]:
“We propose a penalty figure between $25,000 to 35,000 for Jenni and $15,000 to 20,000 for Jordan Shan.”
The Second Respondent’s proposed penalty represents approximately 8 – 9% of the penalty range sought by the Applicant against the First Respondent and approximately 24 – 25% of the penalty range sought against the Second Respondent.
It is difficult for the Court to get a clear picture of the Respondent’s financial position and ultimately in this case that position does not have a significant effect on the assessment of penalty.
The conduct of the Respondents was deliberate and involved a number of employees where the underpayment of their entitlements was significant. The underpayment of entitlements also occurred where the Second Respondent is a highly educated person and had previously occupied a senior position as an Associate Professor of Applied Economics at Victoria University.
I do not impose the penalties sought by the Applicant, as the level sought is excessive having regard to the circumstances of the case. The total of the penalties I have imposed is high by any measure when the combined effect of each penalty is considered. The penalties imposed achieve the purpose of general and specific deterrence and are such as to be a strong disincentive for small businesses to engage in similar conduct. I have imposed higher penalties in respect of record keeping and payslip provision contraventions because a failure to comply with those provisions makes it very difficult for an employee to determine what their rate of pay is and whether they are being properly paid.
On that basis, the Court will impose penalties against the First Respondent and Second Respondent as follows:
| Contravention of the Fair Work Act | Penalty Imposed | |
| Penalties as against the First Respondent | ||
| 1 | s.45 – failure to pay minimum rate of pay to Park pursuant to cl.17 of the Award | $5,000 |
| 2 | s.45 – failure to pay minimum rate of pay to Yang pursuant to cl.12.7 of the Award | $5,000 |
| 3 | s.45 – failure to pay Evening Work pursuant to cl. 29.4(a) of the Award | $5,000 |
| 4 | s.45 – failure to pay Saturday penalties pursuant to cl.29.4(b) of the Award | $5,000 |
| 5 | s.45 – failure to pay Sunday penalties pursuant to cl. 29.4 (c) of the Award | $5,000 |
| 6 | s. 45 – failure to pay public Holiday penalties pursuant to cl 29.4(d) of the Award | $5,000 |
| 7 | s.45 – failure to pay overtime Monday to Friday prescribed by cl.29.2(a) of the Award | $5,000 |
| 8 | s.45 – failure to pay both employees overtime on a Sunday and Mr Park overtime for public holidays prescribed by 29.2 (c) of the Award | $5,000 |
| 9 | s.45 – failure to pay Ms Yang overtime prescribed by cl.29.2(b) of the Award | $5,000 |
| 10 | s. 45 – failure to provide two consecutive days off as prescribed by cl.28.11 of the Award | $5,000 |
| 11 | s.45 – failure to provide three consecutive days off as prescribed by cl.28.13 of the Award | $5,000 |
| 12 | s.45 – failure to agree in writing of part-time hours upon commencement of employment as prescribed by cl.12.2 of the Award | $5,000 |
| 13 | s 45 – failure to vary in writing part-time hours as prescribed by cl 12.3 of the Award | $5,000 |
| 14 | s.44 – failure to pay accrued annual leave on termination as required by s.90(2) of the Fair Work Act | $5,000 |
| 15 | s.535 (1) – failure to make and keep employee records | $10,000 |
| 16 | s.536 – failure to give pay slips | $10,000 |
| Total | $90,000 | |
| Penalties as against the Second Respondent | ||
| 1 | s.45 – failure to pay minimum rate of pay to Park pursuant to cl.17 of the Award | $2,000 |
| 2 | s.45 – failure to pay minimum rate of pay to Yang pursuant to cl.12.7 of the Award | $2,000 |
| 3 | s.45 – failure to pay Evening Work pursuant to cl. 29.4(a) of the Award | $2,000 |
| 4 | s.45 – failure to pay Saturday penalties pursuant to cl.29.4(b) of the Award | $2,000 |
| 5 | s.45 – failure to pay Sunday penalties pursuant to cl. 29.4 (c) of the Award | $2,000 |
| 6 | s. 45 – failure to pay public Holiday penalties pursuant to cl 29.4(d) of the Award | $2,000 |
| 7 | s.45 – failure to pay overtime Monday to Friday prescribed by cl.29.2(a) of the Award | $2,000 |
| 8 | s.45 – failure to pay both employees overtime on a Sunday and Mr Park overtime for public holidays prescribed by 29.2 (c) of the Award | $2,000 |
| 9 | s.45 – failure to pay Ms Yang overtime prescribed by cl.29.2(b) of the Award | $2,000 |
| 10 | s. 45 – failure to provide two consecutive days off as prescribed by cl.28.11 of the Award | $2,000 |
| 11 | s.45 – failure to provide three consecutive days off as prescribed by cl.28.13 of the Award | $2,000 |
| 12 | s.45 – failure to agree in writing of part-time hours upon commencement of employment as prescribed by cl.12.2 of the Award | $2,000 |
| 13 | s 45 – failure to vary in writing part-time hours as prescribed by cl 12.3 of the Award | $2,000 |
| 14 | s.44 – failure to pay accrued annual leave on termination as required by s.90(2) of the Fair Work Act | $2,000 |
| 15 | s.535 (1) – failure to make and keep employee records | $3,000 |
| Total | $31,000 | |
The Court will make orders pursuant to s546(1) of the Fair Work Act, that the First Respondent pay pecuniary penalties in the total sum of $90,000 and that the Second Respondent pay pecuniary penalties in the total sum of $31,000.
I certify that the preceding seventy-eight (78) paragraphs are a true copy of the reasons for judgment of Judge McNab
Associate:
Date: 30 October 2020
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