Fair Work Ombudsman v Joban's Trolley Collection Pty Ltd
[2018] FCCA 743
•29 March 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v JOBAN’S TROLLEY COLLECTION PTY LTD & ANOR | [2018] FCCA 743 |
| Catchwords: INDUSTRIAL LAW – Compensation and penalties – appropriate penalty to be imposed – multiple contraventions of Fair Work Act 2009 (Cth) – whether multiple contraventions should be grouped and treated as a single contravention – whether contraventions arose out of a single course of conduct – application of totality principle. |
| Legislation: Fair Work Act 2009 (Cth), ss.44, 45, 90, 125, 535, 539, 546, 550, 557, 712 Fair Work Regulations 2009, regs.3.33, 3.34, 3.37, 3.44, 3.46 |
| Cases cited: Australian Competition and Consumer Commission v Eternal Beauty Products Pty Ltd [2012] FCA 1124 Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560; 246 ALR 35; (2008) 60 AILR 100-809 Fair Work Ombudsman v Bosen Pty Ltd & Ors [2011] VMC 91 Fair Work Ombudsman v Grandcity Travel & Tour Pty Ltd & Anor [2015] FCCA 1759 Fair Work Ombudsman v Mai& Anor [2016] FCCA 1481 Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 Gibbs v the Mayor, Councillors and Citizens of City of Altona [1992] FCA 553; 37 FCR 216; (1992) 34 AILR 369; 42 IR 255 Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14; 1 R 14 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 McIver v Healey [2008] FCA 425; (2008) 60 AILR 100-850 Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383; 247 ALR 714; (2008) 60 AILR 100-883; 171 IR 455 |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | JOBAN’S TROLLEY COLLECTION (ACN 162 834 077) |
| Second Respondent: | JOBANJEET SINGH |
| File Number: | MLG 2743 of 2016 |
| Judgment of: | Judge Mercuri |
| Hearing date: | 5 October 2017 |
| Date of Last Submission: | 5 October 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 29 March 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr O’Brien |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Advocate for the First Respondent: | Mr Singh |
| Solicitors for the First Respondent: | None | |
| Advocate for the Second Respondent: | In person | |
| Solicitors for the Second Respondent: | None |
ORDERS
THE COURT MAKES THE FOLLOWING DECLARATIONS
The first respondent contravened the following
(a)section 45 of the Fair Work Act 2009 (Cth) (“the FW Act”) by virtue of a contravention of clause 16.1 of the Award by failing to pay the employees the minimum hourly rate;
(b)section 45 of the FW Act by virtue of a contravention of clause 27.2(a) of the Award by failing to pay the employees the Saturday penalty rate;
(c)section 45 of the FW Act by virtue of a contravention of clause 27.2(b) of the Award by failing to pay the employees the Sunday penalty rate;
(d)section 45 of the FW Act by virtue of a contravention of clause 27.3 of the Award by failing to pay the employees the public holiday penalty rate;
(e)section 45 of the FW Act by virtue of a contravention of clause 27.1(a) of the Award by failing to pay the employees the shift penalty;
(f)section 45 of the FW Act by virtue of a contravention of clause 28.2 of the Award by failing to pay the employees the first two hours overtime rate;
(g)section 45 of the FW Act by virtue of a contravention of clause 28.2 of the Award by failing to pay the employees the after first two hours overtime rate;
(h)section 45 of the FW Act by virtue of a contravention of clause 28.3 of the Award by failing to pay the employees the Sunday overtime rate;
(i)section 45 of the FW Act by virtue of a contravention of clause 27.3 of the Award by failing to pay the employees the public holiday overtime rate;
(j)section 45 of the FW Act by virtue of a contravention of clause 23.2 of the Award by failing to pay the employees their superannuation contributions;
(k)section 44 of the FW Act by virtue of a contravention of section 90(2) of the FW Act and clause 29.7 of the Award by failing to pay the employees their accrued annual leave entitlements and their annual leave loading;
(l)subsection 535(1) of the FW Act by failing to make employee records specifying the rate of remuneration paid to the employees as prescribed by subregulation 3.33(1)(a) of the Fair Work Regulations 2009 (“the FW Regulations”) (in relation to the rates records);
(m)subsection 535(1) of the FW Act by failing to make employee records specifying the penalty rates to which the employees were entitled as prescribed by subregulation 3.33(3)(d) of the FW Regulations (in relation to the penalty records);
(n)subsection 535(1) of the FW Act by failing to make employee records specifying the superannuation contributions made on behalf of the employees as prescribed by regulation 3.37 of the FW Regulations (in relation to the superannuation records);
(o)subsection 535(1) of the FW Act by failing to make employee records specifying the rate of remuneration paid to the employees as prescribed by subregulation 3.33(1)(a) of the FW Regulations (in relation to the pay records);
(p)subsection 535(1) of the FW Act by failing to make employee records specifying the penalty rates to which the employees were entitled as prescribed by subregulation 3.33(3)(d) of the FW Regulations (in relation to the pay records);
(q)subsection 535(1) of the FW Act by failing to make employee records specifying the penalty rates to which the hahah employees were entitled as prescribed by subregulation 3.33(3)(d) of the FW Regulations (in relation to the time book penalty records);
(r)subsection 535(1) of the FW Act by failing to make employee records specifying the overtime hours which the employees actually worked as prescribed by subregulation 3.34 of the FW Regulations (in relation to the time book penalty records);
(s)subsection 535(1) of the FW Act by failing to make employee records specifying the superannuation contributions made on behalf of the employees as prescribed by subregulation 3.37 of the FW Regulations (in relation to the pay records);
(t)subregulation 3.44(1) of the FW Regulations by failing to ensure the rates records were not knowingly false or misleading;
(u)subregulation 3.44(1) of the FW Regulations by failing to ensure the penalty records were not knowingly false or misleading;
(v)subregulation 3.44(1) of the FW Regulations by failing to ensure the superannuation records were not knowingly false or misleading;
(w)subregulation 3.44(1) of the FW Regulations by failing to ensure the pay records were not knowingly false or misleading;
(x)subregulation 3.44(1) of the FW Regulations by failing to ensure the time book penalty records were not knowingly false or misleading;
(y)subregulation 3.44(1) of the FW Regulations by failing to ensure the time book overtime records were not knowingly false or misleading;
(z)subregulation 3.44(6) of the FW Regulations by making use of the rates records by submitting them to the Talent 2 Payroll System despite knowing them to be false or misleading;
(aa)subregulation 3.44(6) of the FW Regulations by making use of the penalty records by submitting them to the Talent 2 Payroll System despite knowing them to be false or misleading;
(bb)subregulation 3.44(6) of the FW Regulations by making use of the superannuation records by submitting them to the Talent 2 Payroll System despite knowing them to be false or misleading;
(cc)subregulation 3.44(6) of the FW Regulations by making use of the rates records by failing to advise UTC that they were inaccurate despite knowing them to be false or misleading;
(dd)subregulation 3.44(6) of the FW Regulations by making use of the penalty records by failing to advise UTC that they were inaccurate despite knowing them to be false or misleading;
(ee)subregulation 3.44(6) of the FW Regulations by making use of the superannuation records by failing to advise UTC that they were inaccurate despite knowing them to be false or misleading;
(ff)subregulation 3.44(6) of the FW Regulations by making use of the rates records by allowing them to be used in accordance with the Talent 2 Payroll System to generate payslips and the Talent 2 Payroll Journal despite knowing them to be false or misleading;
(gg)subregulation 3.44(6) of the FW Regulations by making use of the penalty records by allowing them to be used in accordance with the Talent 2 Payroll System to generate payslips and the Talent 2 Payroll Journal despite knowing them to be false or misleading;
(hh)subregulation 3.44(6) of the FW Regulations by making use of the superannuation records by allowing them to be used in accordance with the Talent 2 Payroll System to generate payslips and the Talent 2 Payroll Journal despite knowing them to be false or misleading;
(ii)subregulation 3.44(6) of the FW Regulations by making use of the pay records by producing them to the applicant for the purpose of establishing that it was compliant with workplace laws despite knowing them to be false or misleading;
(jj)subregulation 3.44(6) of the FW Regulations by making use of the time book penalty records by producing them to the applicant for the purpose of establishing that it was compliant with workplace laws despite knowing them to be false or misleading;
(kk)subregulation 3.44(6) of the FW Regulations by making use of the time book overtime records by producing them to the applicant for the purpose of establishing that it was compliant with workplace laws despite knowing them to be false or misleading;
(ll)subsection 536(2) of the FW Act by failing to provide pay slips to the employees which included the information prescribed by regulation 3.46 of the FW Regulations; and
(mm)
section 44 of the FW Act by failing to give the employees the
Fair Work Information Statement as required by section 125(1) of the FW Act.
The second respondent was involved, within the meaning of
subsection 550(1) of the FW Act, in each of the first respondent’s contraventions at paragraph 1 above.
THE COURT ORDERS THAT
Pursuant to subsection 546(1) of the Fair Work Act 2009 (Cth)
(“the FW Act”), the first respondent pay pecuniary penalties for the contraventions of the civil remedy provisions set out in the declarations at paragraph 1 above in the sum of $190,128.
Pursuant to subsection 546(1) of the FW Act, the second respondent pay pecuniary penalties for the contraventions of the civil remedy provisions set out in the declarations at paragraph 1 above in the sum of $40,510.
Pursuant to subsection 546(3)(a) of the FW Act, the first respondent and the second respondent each pay their respective penalty amounts to the Consolidated Revenue Fund of the Commonwealth within 28 days.
The applicant have liberty to apply in the event that any of the preceding orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2743 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| JOBAN’S TROLLEY COLLECTION PTY LTD (ACN 162 834 077) |
First Respondent
And
| JOBANJEET SINGH |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is an application brought by the Fair Work Ombudsman (“FWO”) seeking the imposition of civil penalties under the Fair Work Act 2009 (Cth) (“FW Act”) for various breaches of the FW Act and the
Fair Work Regulations 2009(“FW Regulations”) by the respondents.
This proceeding commenced on 15 December 2016 by application and statement of claim filed by the applicant. The parties filed a
Statement of Agreed Facts and Admissions on 5 May 2017 (“SOAF”).
The applicant relies upon the following further documents:
a)affidavit of Kylie Lynne Murtagh affirmed 29 May 2017;
b)
affidavit of Mohammed Akram Mohammed Taher affirmed
22 May 2017;
c)affidavit of Islam Sharifi affirmed 24 May 2017;
d)affidavit of Kylie Lynne Murtagh affirmed 20 June 2017; and
e)
applicant’s Outline of Submissions on Penalty filed
10 August 2017.
The respondents rely upon the affidavit of the second respondent affirmed 25 July 2017 and brief submissions made by the second respondent on his own behalf and on behalf of the first respondent at the hearing.
Issues for determination
As is evident from the SOAF[1], the respondents have admitted certain breaches of the FW Act and the FW Regulations. The respondents have also agreed that they will pay pecuniary penalties for the admitted conduct. The issue for determination in these proceedings is the quantum of any such penalties.
[1] Attached and marked Annexure A.
At the hearing, the applicant indicated that it was seeking lower penalties in respect of both the first and second respondent to those initially set out in its Outline of Submissions. At the hearing, the applicant tendered two updated tables setting out the penalties it seeks in respect of the first and second respondents respectively.[2]
[2] Exhibit A and Exhibit B.
Background
The facts as set out below are taken from the SOAF.
The first respondent carried on a business providing trolley collection services in regional Victoria. It subcontracted to a separate entity, United Trolley Collections Proprietary Limited (“UTC”). The first respondent provided trolley collection services at Woolworths and related companies at the Bendigo Market Place in Bendigo
(“Bendigo site”).
The second respondent was at all relevant times and, at the time of the hearing, the sole director and sole shareholder of the first respondent.
This application relates to the employment by the first respondent of two employees, Mr Taher and Mr Sharifi who were both employed by the first respondent to provide a trolley collecting service at the Bendigo site on a full-time basis (collectively referred to as
“the employees”).
The work performed by the employees was covered by the
Cleaning Services Award 2010(“Award”). Both Mr Taher and
Mr Sharifi were employed at the lowest classification under the Award as Cleaning Services Employees – Level One, in accordance with schedule D of the Award. Mr Taher was employed between
18 December 2014 and August 2015. Mr Sharifi was employed from 18 December 2014 to 31 July 2015. The underpayments which gave rise to these proceedings relate to an assessment period from
5 January to 21 June 2015 (“Assessment Period”).
During the Assessment Period, the employees worked varying days including Saturdays, Sundays and public holidays. They were paid varying amounts on a fortnightly basis. Their hourly rate varied between $9.73 and $19.19 in the case of Mr Taher and between $13.55 and $19.32 in the case of Mr Sharifi.
In the course of the investigation into the alleged underpayments of
the employees, the respondents were served with a
Notice to Produce issued pursuant to section 712 of the FW Act. The second respondent, on behalf of the first respondent, provided various documents to the applicant in response to this notice. In addition, the second respondent participated in a recorded interview on
17 December 2015. The second respondent also participated in a second recorded interview with the applicant on 25 July 2016.
As a result of its investigation, on 31 August 2016, the applicant sent a contravention letter to the second respondent as director of the
first respondent outlining the outcome of the investigation and detailing the alleged contravention and requiring the first respondent to repay the amount of $29,468.41 (gross) to the employees.
In September 2016, the second respondent negotiated a repayment plan which would see the employees repaid in full by
11 November 2016.
Although some payments were made by the respondents to the employees pursuant to this payment plan, the final amount of $9,535.11 was only paid to Mr Taher on 25 January 2017. Similarly the final amount of $7,708.41 was paid to Mr Sharifi on 25 January 2017. The final payments were not made until after these proceedings were initiated on 15 December 2016.
Admitted contraventions
The SOAF also records contraventions admitted by the respondents.[3]
[3] Paragraphs 3 and 4 of the SOAF.
The SOAF also notes that the respondents admit that the underpayment contraventions resulted in the employees being underpaid a total of $29,031.40.[4]
[4] The individual underpayment to each employer is set out in Annexure A to the SOAF.
Approach to penalty proceedings
The court’s power to impose penalties arises under section 546 of the FW Act which relevantly provides:
The Federal Court, the Federal Circuit Court or an eligible State or Territory court may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provisions.
Note: Pecuniary penalty orders cannot be made in relation to conduct that contravenes a term of a modern award, a national minimum wage order or an enterprise agreement only because of the retrospective effect of a determination (see subsections 167(3) and 298(2)).
In determining what, if any, penalties ought to be applied in respect of the contravening conduct by the respondents, the court is required to:
a)
identify the separate contraventions involved. Each contravention of each separate obligation found in the FW Act and the
FW Regulations is a separate contravention of a civil remedy provision for the purposes of section 539(2) of the
FW Act;[5]
b)consider whether the contraventions arising in the first step constitute a course of conduct having regard to the requirements section 557(1) of the FW Act;
c)having regard to the fact that employers should not be penalised more than once for the same conduct – the penalties imposed by the court should be an appropriate response to the conduct of the respondents.[6] This is a distinct exercise from, and is in addition to the final application by the court of the “totality principle;”[7]
d)determine an appropriate penalty for each contravention and, if relevant, each group of contraventions, taking into account all the relevant circumstances; and
e)apply an “instinctive synthesis” in assessing whether the penalty is an appropriate response to the conduct which led to the contraventions by applying the “totality principle”.[8]
[5] Gibbs v the Mayor, Councillors and Citizens of City of Altona [1992] FCA 553; 37 FCR 216; (1992) 34 AILR 369; 42 IR 255 at [24]; McIver v Healey [2008] FCA 425; (2008) 60 AILR 100-850 at [16].
[6]Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560; 246 ALR 35; (2008) 60 AILR 100-809
[7]Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383; 247 ALR 714; (2008) 60 AILR 100-883; 171 IR 455.
[8] Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14; 1 R 14 at [30] (Tracey J).
Contraventions
As stated, each of the admitted contraventions is set out in paragraphs
3 and 4 of the SOAF. The respondents also admit that the underpayment contraventions resulted in the employees not receiving $29,031.40 (“Total Underpayment”).[9]
[9] Paragraph 5 of the applicant’s Statement of Agreed Facts filed 5 May 2017.
Course of conduct
The applicant, in its written submissions, acknowledged the effect of section 557(1) of the FW Act and that the respondents are entitled to the benefit of that section in relation to the contraventions.[10]
[10] Paragraphs 21 and 22 of the applicant’s Outline of Submissions filed 10 August 2017.
Section 557(1) of the FW Act provides that where there are two or more contraventions of a civil penalty provision, it is taken to be a single contravention where the contraventions are committed by the same person and the contraventions arise out of a course of conduct by that person.
The applicant submitted that the application of section 557 of the
FW Act to the present circumstances results in the respondents having engaged in:
a)ten contraventions of section 45 of the FW Act;
b)two contraventions of section 44 of the FW Act;
c)eight contraventions of section 535(1) of the FW Act;
d)
six contraventions of subregulation 3.44(1) of the
FW Regulations;
e)
twelve contraventions of subregulation 3.44(6) of the
FW Regulations; and
f)one contravention of section 536(2) of the FW Act.
The respondents did not make any submissions on this point. I agree with the applicant’s characterisation of the contraventions after applying section 557 of the FW Act.
Grouping of contraventions
In relation to the issue of grouping, the applicant acknowledged that in addition to section 557, it is open to the court to further group separate contraventions together where the contraventions may be said to overlap with each other or involve the potential punishment of the respondents to the same or substantially similar conduct.[11]
[11] Paragraph 24 to 34 of the applicant’s Outline of Submissions filed 10 August 2017 and case law referred to therein.
The applicants made the following submissions:
26In some cases, the court has approached grouping by imposing a single penalty for a group or category of contraventions where contraventions of multiple provisions of the FW Act or an award contain common elements or can be said to overlap with each other. …
27 In other cases, the court has treated each contravention separately (save where section 557 applies) but either:
(a)has taken into account in the fixation of each penalty the fact that the contraventions arose from a course of conduct; or
(b)considered whether the penalties should be imposed cumulatively or concurrently (or partly concurrently) in order to ensure that the penalty total is just and appropriate.…
30.In the FWO’s submission, the legitimacy of different approaches to course of conduct was recognised by the court in Construction, Forestry, Mining and Energy Union v Williams [2009] FCAFC 171 when it said (at [30]) “the manner in which they [the course of conduct principles] are applied will vary from case to case. So, for example… The court may lower individual fines or accumulate fines. The list is not exhaustive.” Similarly, in Cahill, Middleton and Gordon JJ identified that the need to avoid double punishment is a “sentencing objective” and “[h]ow a sentencing judge achieves that sentencing objective (as one amongst many conflicting objectives) is not cast in stone.”
At paragraph 33 of its Outline of Submissions, the applicant outlined the approach it believed should guide the court in considering which contraventions could be appropriately grouped as arising from the same course of conduct in this case. In summary, the applicant submitted that:
a)the overtime contraventions ought to be grouped together;
b)the record keeping contraventions in breach of section 535(1) should be grouped into two separate subgroups, namely:
i)those contraventions arising from the second respondent entering false information into the Talent 2 payroll system; and
ii)those contraventions arising from the second respondent creating false time sheets and payslips for the purposes of the FWO investigation;
c)the record keeping contraventions in breach of regulation 3.44(1) ought to be similarly grouped into two separate subgroups, namely:
i)contraventions relating to Talent 2 records; and
ii)contraventions relating to the FWO investigation records; and
d)the contraventions relating to making use of false and misleading records in breach of regulation 3.44(6) ought to be similarly grouped into two separate subgroups, namely:
i)contraventions relating to Talent 2 records; and
ii)contraventions relating to the FWO investigation records.
The applicant amended its position at the hearing. Mr O’Brien, counsel for the applicant explained that the applicant was prepared to further group the recordkeeping obligations together and apply the lower penalty applicable to the regulation breaches resulting in a reduction in the maximum penalty being sought from both the first and the second respondents.[12]
[12] Transcript page 6 at lines 32 to 43.
Mr O’Brien stated in relation to the grouping issue:
The grouping of the failure to keep accurate records of section 535 subsection (1), and the making of false records, subregulation 3.44(1) in the Fair Work Regulations, that the conduct behind doing so gives rise to the contravention of not making an accurate record, but of also making – of creating a knowingly false record. We say that it’s appropriate in this instance to group those separate contraventions together because it acknowledges that it was largely the contravening conduct likely to give rise to the same set of contraventions.[13]
[13] Transcript page 23 at line 45 to page 24 at line 6.
Mr O’Brien also made reference to a decision of this court in which a similar approach was taken being Fair Work Ombudsman v Mai& Anor [2016] FCCA 1481. Mr O’Brien went on to say:
In that matter, similarly there were allegations that an employer had failed to make accurate records, and the conduct… contravened the Fair Work Regulations by creating a false and misleading record. The conduct that gave rise to those two contraventions was later in the penalty process grouped by the court, and one penalty was imposed because the legal and factual elements of those two contraventions were sufficiently similar to group them. And it is that process that we’re, with our amended tables, asking the court to do which is more favourable to the respondents.[14]
[14] Transcript page 24 at lines 32 to 39.
The second respondent appeared on his own behalf and was granted leave to also appear on behalf of the first respondent. As such, not surprisingly, no submissions were put in relation to the principles to which the court ought to have regard in determining what, if any, penalty should be imposed. Importantly, on the question of grouping no submissions were put on behalf of the respondents.
Having considered the submissions put on behalf of the applicant and the respondent’s material and the relevant authorities, and the nature of each of the contravened obligations, in large part I accept the submissions of the applicant.
However, there are three areas where I diverge from those submissions, namely in relation to weekend and public holiday penalty rates and the payment of overtime.
In relation to penalty rate contraventions, the applicant submits that the court should not group the following:
a)Saturday penalty rate contravention;
b)Sunday penalty rate contravention;
c)public holiday penalty rate contravention; and
d)shift penalty rate contravention.
Having regard to the nature of the entitlements and recognising that “there is no exact science” in the grouping decision but rather that “it is a question of considering the nature of the contravention and the nature of the ‘criminality’ involved”[15], I am satisfied that it is appropriate to group the Saturday, Sunday and public holiday penalty rates as one.
[15] Fair Work Ombudsman v Sureguard Security Pty Ltd [2017] FCA 1566 at [43].
I am not satisfied, however, that the shift penalty rate contravention ought to be grouped, but rather it should be treated as a separate contravention.
For similar reasons, I find that the various overtime contraventions should be grouped and treated as one contravention.
I also find that the false and misleading records contraventions should be grouped; that is,
a)one grouping relating to the keeping of false and misleading records both with respect to Talent 2 payroll system and the time and pay records; and
b)one grouping relating to the use of false and misleading records.
This more properly, in my view, reflects the criminality involved in the conduct engaged in by the respondents. Applying this approach, I find that the 39 admitted contraventions are reduced to a group of 10 as follows:
First respondent
CONTRAVENTION GROUPING
1
Failure to pay minimum hourly rate
2
Failure to pay weekend/public holiday penalty rate
3
Failure to pay shift penalty
4
Failure to pay overtime on Monday to Sunday and on public holidays
5
Failure to make superannuation contributions
6
Failure to pay annual leave on termination
7
Failure to provide Fair Work Information Statement
8
Keeping false and misleading records
9
Using false and misleading records
10
Failing to include (or correctly include) prescribed content in pay slips
Second respondent
CONTRAVENTION GROUPING
1
Failure to pay minimum hourly rate
2
Failure to pay weekend/public holiday penalty rate
3
Failure to pay shift penalty
4
Failure to pay overtime on Monday to Sunday and on public holidays
5
Failure to make superannuation contributions
6
Failure to pay annual leave on termination
7
Failure to provide Fair Work Information Statement
8
Keeping false and misleading records
9
Using false and misleading records
10
Failing to include (or correctly include) prescribed content in pay slips
The applicant submits that there should be a 10% discount to reflect “the respondents’ admissions after the commencement of proceedings, cooperation in entering into the SOAF and corrective action taken.”
It is common ground that the respondents agreed to repay the employees their entitlements in full once they received the contravention letter from the FWO on or about 31 August 2016 and entered into a payment plan in September 2016. For some reason, which was not fully explained, the respondents did not fully comply with this payment plan and at the time of initiating these proceedings in December 2016, the respondents still owed the employees the sum of $17,243.52.
Shortly after these proceedings were commenced, the respondents rectified the underpayment in full and entered into the SOAF and otherwise cooperated with the applicant.
In Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 68 FCR 383; 247 ALR 714; (2008) 60 AILR 100-883; 171 IR 455
(“Mornington Inn”), Stone and Buchanan JJ discussed the circumstances in which a discount on penalty is appropriate where a guilty plea is entered and the possible quantum of that discount.[16] At
paragraph 75, their Honours relevantly stated:
A conventional consideration in assessing a discount in a criminal case for a plea of guilty is the state in the proceeding at which the plea is entered. Normally, the maximum discount for this factor, sometimes thought to be 25%, is reserved for a plea made at the first reasonable opportunity…
[16] Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; 168 FCR 383; 247 ALR 714; (2008) 60 AILR 100-883; 171 IR 455 at [74]-[85].
They went on to note that the rationale for a discount for an early plea in a criminal case:
does not apply neatly to a case, such as the present, where a civil penalty is sought and the case proceeds on pleadings. Nevertheless… it should be accepted… that a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.
In Mornington Inn, the appeal was against the ‘modest’ discount of 10% granted in circumstances where the trial judge found there was no evidence of contrition or remorse.
I am satisfied on the evidence in this case, particularly having regard to the fact that some of the underpayment was in fact rectified prior to the commencement of proceedings, that a discount of slightly more than 10% is warranted to reflect the respondents’ cooperation and corrective action taken. I find that a discount of 15% is appropriate.
Relevant factors in determining appropriate penalty
I now turn to the question of the factors relevant to determining an appropriate penalty.
In Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14; 1 R 14,
the Honourable Justice Tracey set out, in a convenient summary, the principles which apply in a case such as this. His Honour referred to the decision of Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 in which Mowbray FM (as he then was):
identified “a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of the penalty, and if it does the amount of the penalty.[17]
[17] Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [24].
The Honourable Justice Tracey adopted those considerations, namely:
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 loss or damage sustained as a result of the breaches;
d)whether there had been similar previous conduct by the respondent;
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;
j)whether the party committing the breach had taken corrective action;
k)whether the party committing the breach had cooperated with the enforcement authorities;
l)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
m)the need for specific and general deterrence.
As noted by Graeme J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560; 246 ALR 35; (2008) 60 AILR 100-809:
Checklists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations.[18]
[18] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560; 246 ALR 35; (2008) 60 AILR 100-809 at [91].
Noting that this is not an exhaustive list, I address each of these considerations in turn to the extent that they are relevant to my determination.
The nature and extent of the conduct which led to the breaches
The Award and NES contraventions identified in the Assessment Period relate to conduct between 5 January 2015 and 21 June 2015 and resulted in total underpayments to two employees of $29,031.40.
The employees, who are both of a non-English speaking background, having come to Australia as refugees, were paid significantly below their statutory entitlements. They both have limited knowledge of English and have minimal education in their country of origin.
As a consequence, the employees concerned did not have the benefit of their statutory entitlements for a period of up to 18 months after they became due and payable.
In his affidavit of 25 July 2017, the second respondent did not provide any explanation for his failure to comply with his obligations under the FW Act other than to say:
I accept that I have no good excuses or reasons for these contraventions.[19]
[19] Paragraph 11 of the second respondent’s affidavit affirmed and filed 25 July 2017.
The second respondent further deposes:
My failure to properly turn my mind to workplace relations laws was a product of my preoccupation with operating the business for the sake of providing for my family… I wrongly presumed that understanding and complying with workplace relations law was something I could attend to later when I had more time.[20]
[20] Paragraph 13 of the second respondent’s affidavit affirmed and filed 25 July 2017.
In addition, the respondents’ recordkeeping contraventions made it more difficult for the employees to understand their entitlements. Their failure to provide copies of the Fair Work Information Statement added to the employees’ inability to understand what their entitlements should have been.
Of particular concern in relation to the recordkeeping contraventions is the fact that the respondent intentionally created, or had the employees create, false records which did not reflect the hours that they actually worked, the pay that they were entitled to or which they received.
It is of further concern that the second respondent entered incorrect data into the Talent 2 payroll system to mask the underpayments to the employees and to ensure that UTC did not become aware of this. This is the most concerning aspect of this case and reflects poorly upon the respondents. It also brings into question some of the comments made in the second respondent’s affidavit which seek to suggest that he was ‘unaware’ of his legal obligations. His conduct in creating false records and ensuring that UTC did not become aware of his payment arrangements belies this explanation and suggests that he in fact was well aware that what he was doing was wrong.
Mr Taher also gave evidence that as a result of the inaccurate pay slips he received, he was unable to take out a personal loan.[21]
[21] Paragraph 19 of the affidavit of Mohammed Akram Mohammed Taher affirmed and filed 22 May 2017.
The creation of these false records also made it difficult for the applicant to conduct its investigation in a timely and efficient manner.
Circumstances in which the conduct took place
Of particular concern in this case is the vulnerability of the employees. The second respondent deposes in his affidavit of his desire to have provided an opportunity to employ low-skilled workers with limited knowledge of English.[22] He says:
It was never my intention to exploit or harm the interests of
Mr Taher, Mr Eslam (sic) or any other employee. On the contrary, I wanted to give them the chance to earn an income for their families…[22] Paragraph 10 of the second respondent’s affidavit affirmed and filed 25 July 2017.
The applicant on the other hand, points to this as evidence that the second respondent was recruiting:
…individuals who were less likely to be aware of their workplace rights, or have the knowledge and skills to enforce those rights, which was exacerbated by the poor and false record keeping, inaccurate pay slips and failure to provide the Fair Work Information Statement.[23]
[23] Paragraph 54 of the applicant’s Outline of Submissions filed 10 August 2017.
I am satisfied that the second respondent employed individuals with limited skills and knowledge of English with limited knowledge of or capacity to enforce their rights. His failure to provide them with information about their rights in the form of the Fair Work Information Statement and accurate pay records meant that it was more difficult for them to raise any concerns or prosecute any underpayment claim against him.
Nature and extent of the loss or damage
As stated above, the employees were underpaid a combined sum of $29,031.40. The fact that this amount was accumulated over a relatively short six month period is of particular concern. Moreover, given the vulnerability of the employees, this sum is significant. It also represented over 40% of each employees’ actual entitlement over the relevant period. Each of the employees gave evidence of the impact the underpayment had on them.[24]
[24] Paragraph 20 of the affidavit of Mohammed Akram Mohammed Taher affirmed 22 May 2017 and filed 29 May 2017 and paragraphs 28 and 29 of the affidavit of Eslam Sharifi affirmed 24 May 2017 and filed 29 May 2017.
Any similar previous conduct
The respondents have not previously been the subject of any FWO proceeding for breaching workplace laws.
Whether the breaches were distinct or arose out of one course of conduct
This has been dealt with above.
Size and financial circumstances of the business
The first respondent employed about 35 employees in the trolley collection business at five sites in regional Victoria. I note the comments of Federal Magistrate Simpson (as he then was) in
Workplace Ombudsman v Saya Cleaning Pty Ltd[2009] FMCA 38 which are particularly apt in this case:
The first respondent is a small company and, I infer, has very few assets. However, as Justice Tracey said in Kelly v Fitzpatrick:
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction must be imposed at a meaningful level.[25]
[25] Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38 at [26]-[30].
In his affidavit, the second respondent makes certain comments about the financial distress that these proceedings have caused him and his family and that he would not be able to pay a “substantial penalty”.[26] Neither respondent provided any evidence to the court as to their current financial position. The applicant acknowledges that the second respondent has indicated in his affidavit that the first respondent is now no longer trading.[27]
[26] Paragraphs 16 to 20 of the second respondent’s affidavit affirmed and filed 25 July 2017.
[27] Paragraph 62 of the applicant’s Outline of Submissions filed 10 August 2017 and paragraph 16 of the second respondent’s affidavit affirmed and filed 25 July 2017.
In those circumstances, the court cannot give any weight to the current financial position of the respondents in determining an appropriate penalty.
Whether the breaches were deliberate
It is trite to state that ignorance of the law is no excuse.[28]
[28] Australian Competition and Consumer Commission v Eternal Beauty Products Pty Ltd [2012] FCA 1124 (Murphy J) at [54]; Fair Work Ombudsman v Access Embroidery (Australia) Pty Ltd & Anor [2012] FMCA 835 at [40]−[41]; Fair Work Ombudsman v Bosen Pty Ltd & Ors [2011] VMC 91.
In any event, even if the respondents were not aware of the particular award or industrial instrument which regulated the employment of employees of the first respondent, it is evident from the steps taken by the second respondent to falsify the records which it kept and the records which it entered in the Talent 2 payroll system that the respondents were aware of the fact that they were not complying with necessary industrial laws.
I also note that the sub-contractor agreement between UTC and the first respondent clearly refers to the need for the first respondent to ensure that applicable industrial laws are complied with.[29]
[29] Annexure KLM-2 to the affidavit of Kylie Lyn Murtagh affirmed 20 July 2017.
I am satisfied that the contraventions were deliberate. Moreover, in the course of the applicant’s initial investigation, the second respondent provided records which he knew to be inaccurate in response to the applicant’s requests for documents. This was a deliberate act to try and minimise the respondents’ contravention of workplace laws.
The involvement of senior management
The second respondent is the controlling mind and will of the
first respondent.
Whether the party committing the breach had exhibited contrition, taken corrective action and cooperated with the enforcement authorities.
The second respondent has demonstrated contrition, not only though his affidavit and his submissions to this court, but also in the fact that he agreed to repay the underpayment to the employees upon receipt of the Contravention Letter, entering into a payment plan and then making some payments in accordance with that payment plan.
It is not clear from the evidence before this court why the second respondent ceased making payments under that agreed plan. However, he did then repay the balance of the outstanding amount shortly after these proceedings were initiated by the applicant.
To that extent, it can be said that the respondents have demonstrated some contrition and taken corrective action.
It is also the case however, as discussed above, that when the applicant initially requested documents from and interviewed the second respondent, that the second respondent provided false and misleading information. Having said that, the respondents did ultimately cooperate with the applicant and in particular signed the SOAF filed in these proceedings.
The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements
In this case, it is conceded by the second respondent that he maintained and relied upon employee records which he knew were incorrect. Indeed, there is evidence that he assisted the employees to generate records which were clearly not reflective of the hours actually worked.
Similarly, it is conceded that the second respondent relied upon these records, firstly to ensure that UTC did not become aware of the fact that he was not complying with his workplace obligations and secondly, to try and satisfy the applicant in the first instance that he was in fact compliant.
The need for specific and general deterrence
There is evidence before the court that the second respondent has registered another company in respect of which he is the sole director. There is no evidence as to whether that company employs any staff although, at the hearing of this matter, the second respondent made submissions from the bar table to the effect that he registered this company to allow him to obtain work once the first respondent ceased trading.
In his affidavit, the second respondent stated:
I recognise and accept that the purpose of workplace relations law is to protect the rights of workers who may be vulnerable to underpayment of their salaries and entitlements, and that this is the reason for the proceedings now pending against the first respondent and myself before this Honourable Court.
In light of the fact that the first respondent is still registered, and the second respondent has established another company, there is some purpose in imposing a penalty which has the effect of specific deterrence in respect of both respondents. This is particularly so given the intentional and deliberate nature of many, if not all, of the contraventions.
With regard to general deterrence, the applicant said in its Outline of Submissions:
93.The need for general deterrence in the present case is very important and the law should mark its disapproval of the respondents’ conduct by setting a penalty which serves as a thing to others. Employers should be in no doubt that they have a positive obligation to ensure that they comply with the obligations which they owe to their employees under the law. In Fair Work Ombudsman v McLean Bay Pty Ltd (No 2), Marshall J observed:
“it is important to ensure that the protections provided by the [FW Act] to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected.’’[30]
[30] Paragraph 93 of the applicant’s Outline of Submissions filed 10 August 2017 and the case law referred to therein.
Counsel for the applicant stated:
General deterrence is a relevant factor in this matter… I took your Honour to the… inspectors’ affidavit and the Woolworths’ enquiry report. We say that demonstrates a clear need for general deterrence. More broadly than that, the Court, we say, should send a message to employees in the trolley collection industry, particularly those that might employ migrant workers who may be vulnerable by reason of their age or of limited education, or of limited English skills, or who simply want a job… and the Court should impose meaningful penalties in this instance…[31]
[31] Transcript page 23 at lines 13 to 24.
In his affidavit, the second respondent stated:
I have engaged in the very conduct that the FW Act and the FW Regulations are intended to avoid, and for that I am truly sorry. I would impress upon all employers not to make the mistakes I have made and to ensure strict fidelity to all Australian law, including workplace relations law.
I am satisfied that there is a need for general deterrence in this case to send a message to employers in the trolley collection industry that failure to comply with their workplace obligations will have consequences.
Totality principle
The applicant’s submissions in relation to the totality principle are set out at paragraphs 106 and 107 which relevantly states:
Having fixed an appropriate penalty for each course of conduct, the court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the breaches, and is not oppressive or crushing.
Whilst the penalty imposed must not be crushing or oppressive, it must never the less their relativity to the seriousness of the conduct engaged in by the respondents.[32]
[32] Paragraphs 106 to 107 of the applicant’s Outline of Submissions filed 10 August 2017 and the case law referred to therein.
Consideration of appropriate penalty
On the basis of the submissions referred to above and the material before the court the factors which are particularly relevant to determining a penalty that ought to be imposed in this case are:
a)the nature of the conduct;
b)the significant amount of the underpayment particularly having regard to the proportion of pay actually received by the employees;
c)the level of cooperation and rectification;
d)the initial attempt by the respondents to rely on false and misleading records;
e)the remorse demonstrated by the second respondent; and
f)the need for specific and general deterrence.
Applying my assessment in relation to grouping above, the applicant has submitted that:
a)penalties in the range of 50% to 60% should be applied in relation to the failure to provide the Fair Work Information Statement;
b)penalties in the range of 80% to 90% should be applied in relation to the following contraventions:
i)keeping false and misleading records; and
ii)using false and misleading records; and
c)penalties in the range of 60% to 70% should be applied in relation to the payslips contravention.
I also refer to paragraphs 69 to 71 above with regard to the respondents’ submissions regarding their financial capacity.
I have had regard to these submissions in reaching my conclusions on an appropriate penalty.
Having regard to each of these factors the appropriate penalty for each respondent is:
a)in relation to the first respondent, it is appropriate to impose a total penalty for the contraventions of $190,128 made up as follows:
Grouped Contravention
Maximum penalty after 15% discount
Range sought by FWO
Penalty imposed consequent on this decision
Failure to pay minimum hourly rate
$43,350
60 – 70%
$23,842
Failure to pay weekend and public holiday penalty rates
$43,350
60 – 70%
$23,842
Failure to pay shift penalty
$43,350
60 – 70%
$23,842
Failure to pay overtime
$43,350
60 – 70%
$23,842
Failure to make superannuation contributions
$43,350
60 – 70%
$23,842
Failure to pay annual leave on termination
$43,350
60 – 70%
$23,842
Failure to provide Fair Work Information Statement
$43,350
50 – 60%
$19,507
Keeping false and misleading records
$14,450
80 – 90%
$12,282
Using false and misleading records
$14,450
80 – 90%
$12,282
Failing to include (or correctly include) prescribed content in pay slips
$21,675
60 – 70%
$13,005
TOTAL FIRST RESPONDENT
$190,128
b)in relation to the second respondent, it is appropriate to impose a penalty for the contraventions of $40,510 made up as follows:
Grouped Contravention
Maximum penalty after 15% discount
Range sought by FWO
Penalty imposed consequent on this decision
Failure to pay minimum hourly rate
$8,670
60 – 70%
$4,768
Failure to pay weekend and public holiday penalty rates
$8,670
60 – 70%
$4,768
Failure to pay shift penalty
$8,670
60 – 70%
$4,768
Failure to pay overtime
$8,670
60 – 70%
$4,768
Failure to make superannuation contributions
$8,670
60 – 70%
$4,768
Failure to pay annual leave on termination
$8,670
60 – 70%
$4,768
Failure to provide Fair Work Information Statement
$8,670
50 – 60%
$3,900
Keeping false and misleading records
$2,890
80 – 90%
$2,601
Using false and misleading records
$2,890
80 – 90%
$2,601
Failing to include (or correctly include) prescribed content in pay slips
$4,335
60 – 70%
$2,800
TOTAL SECOND RESPONDENT
$40,510
Consistent with the authorities referred to above, it is appropriate to take a final look at the aggregate penalty to determine whether it is an appropriate response to the conduct which led to the contraventions and that it is not oppressive or crushing.
As noted by his Honour Judge O’Sullivan of this court:
The application of the totality principle does not mean the penalties arrive at before its application must be reduced. Any penalties imposed should reflect the circumstances and be just and appropriate. [33]
[33] Fair Work Ombudsman v Grandcity Travel & Tour Pty Ltd & Anor [2015] FCCA 1759 at [84].
There is no evidence before this court that the penalties would be crushing or oppressive. Moreover, having regard to the circumstances in this case, in particular the fact that:
a)the underpayments arising from these contraventions amounted to almost $30,000 in respect of only two employees over a six month period,
b)the affected employees fall within what could be called a group of vulnerable employees; and
c)the extent to which the respondents went to avoid detection by falsifying records;
I am satisfied that the penalties are appropriate.
Conclusion
For each of the reasons set out above, I make the declarations and orders as set out at the beginning of these reasons.
I certify that the preceding ninety-nine (99) paragraphs are a true copy of the reasons for judgment of Judge Mercuri
Date: 29 March 2018
0
12
3