Fair Work Ombudsman v Jooine (Investment) Pty Ltd
[2013] FCCA 2144
•20 December 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v JOOINE (INVESTMENT) PTY LTD | [2013] FCCA 2144 |
| Catchwords: INDUSTRIAL LAW – Sham contracting – Failure to pay award entitlements – Respondent employed foreign national on working holiday visa to undertake cleaning work – Admission of contraventions of Fair Work Act 2009(Cth) – Agreed Statement of Facts – Principles and considerations relevant to imposition of penalties. |
| Legislation: Crimes Act 1914 (Cth), s.4AA |
| Australian Building & Construction Commissioner v Inner Strength Steel FixingPty Ltd [2012] FCA 499 Australian Licenced Aircraft Engineers Association v Qantas Airways Limited (No. 2) [2013] FCCA 1696 Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 Cotis v MacPherson (2007) 169 IR 30 Clothing & Allied Trades Union v Snugglerite Industries Pty Ltd (1990) 34 IR 124 Director of The Fair Work Building Industry Inspectoratev Giovanni Italiano [2013] FCCA 530 Fair Work Ombudsman v Cleaners New South Wales Pty Ltd (2009) 186 IR 467 Fair Work Ombudsman v Conn & Ors [2010] FMCA 828 Fair Work Ombudsman v E A Fuller & Sons Pty Ltd & Anor [2013] FCCA 5 Fair Work Ombudsman v Foure Mile Pty Ltd & Anor [2013] FCCA 682 Fair Work Ombudsman v Glad Group Pty Ltd (ACN 092 928 115) [2012] FMCA 731 Fair Work Ombudsman v Happy Cabby Pty Ltd & Anor [2013] FCCA 397 Fair Work Ombudsman v Palcoy Pty Ltd & Anor [2013] FCCA 1411 Fair Work Ombudsman v Pucci [2011] FMCA 997 Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (No. 2) [2012] FCA 408 Fair Work Ombudsman v Security Protection Services Pty Ltd & Ors (2010) 194 IR 96 Flattery v Italian Eatery t/as Zeffirelli’s Pizza Restaurant (2007) 163 IR 14 Hanssen Pty Ltd v Jones (2009) 179 IR 57 Kelly v Fitzpatrick (2007) 166 IR 14 Markarian v R (2005) 228 CLR 357 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mill v R (1988) 166 CLR 59 Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357 Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 Workplace Ombudsman v Saya Cleaning Pty Ltd & Anor [2009] FMCA 38 Workplace Ombudsman v Securit-E Holdings Pty Ltd (in liquidation) & Ors (2009) 187 IR 330 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | JOOINE (INVESTMENT) PTY LTD (ACN 057 422 483) |
| Second Respondent: | JAE KYE LEE |
| File Number: | SYG 1184 of 2012 |
| Judgment of: | Judge Lloyd-Jones |
| Hearing date: | 16 April 2013 |
| Delivered at: | Sydney |
| Delivered on: | 20 December 2013 |
REPRESENTATION
| Solicitor for the Applicant: | J. Robertson of Fair Work Ombudsman |
| The Respondents: | The Second Respondent appeared in person and was granted leave to appear on behalf of the First Respondent |
ORDERS
THE COURT DECLARES THAT:
The first respondent, Jooine (Investment) Pty Ltd (ACN 057 422 483) (“Jooine”), contravened the following civil penalty provisions:
(a)Subsection 357(1) of the Fair Work Act 2009 (Cth), by misrepresenting to Mr Donghwan Park that the contract of employment under which Mr Park performed work for Jooine was a contract for services, where Mr Park would perform work as an independent contractor, on the following dates:
(i)On or about 15 April 2011;
(ii)19 April 2011;
(iii)1 May 2011;
(iv)On or about 15 May 2011;
(v)On or about 23 May 2011; and
(vi)On or before 25 May 2011.
(b)Section 45 of the Fair Work Act 2009 (Cth), by failing to pay Mr Park an hourly rate in accordance with item NSW.2.9 of clause B.9.2 of Schedule B of the Cleaning Services Award 2010;
(c)Subsection 44(1) of the Fair Work Act 2009 (Cth), by failing to pay Mr Park accrued annual leave at termination of employment pursuant to s.90 of the Fair Work Act 2009 (Cth); and
(d)Subsection 323(1) of the Fair Work Act 2009 (Cth), by failing to pay Mr Park an amount payable to him in relation to the performance of work in full.
The second respondent, Jae Kye Lee, was involved in each of the contraventions committed by Jooine set out in Order 1 above.
THE COURT ORDERS THAT:
Under s.545 of the Fair Work Act 2009 (Cth) that within 14 days of today’s date Jooine pay Mr Donghwan Park the amount of $1,858.53 which is outstanding to him as a result of Jooine’s contraventions of the Fair Work Act 2009 (Cth).
Under s.547 of the Fair Work Act 2009 (Cth) that Jooine pay interest to Mr Park on the amount referred to in Order 3 above.
Jooine pay penalties pursuant to s.546(1) Fair Work Act 2009 (Cth) to a total amount of $47,520, which is made up of the following amounts:
(a)$23,760 in respect of the contravention of s.357(1) of the Fair Work Act 2009 (Cth) by misrepresenting to Mr Park that his contract of employment was a contract for services;
(b)$11,880 in respect of the contravention of s.45 of the Fair Work Act 2009 (Cth) by failing to pay minimum wages to Mr Park; and
(c)$11,880 in respect to the contravention of s.323(1) of the Fair Work Act 2009 (Cth) by failing to pay an amount due to Mr Park in respect of the performance of work in full.
Jae Kye Lee pay penalties pursuant to s.546(1) Fair Work Act 2009 (Cth) to a total amount of $9,504, which is made up of the following amounts:
(a)$4,752 in respect of the contravention of s.357(1) of the Fair Work Act 2009 (Cth) by misrepresenting to Mr Park that his contract of employment was a contract for services;
(b)$2,376 in respect of the contravention of s.45 of the Fair Work Act 2009 (Cth) by failing to pay minimum wages to Mr Park; and
(c)$2,376 in respect to the contravention of s.323(1) of the Fair Work Act 2009 (Cth) by failing to pay an amount due to Mr Park in respect of the performance of work in full.
Pursuant to s.546(3) of the Fair Work Act 2009 (Cth) that Jooine and Jae Kye Lee pay the penalty amounts set out in Orders 5 and 6 above to the Consolidated Revenue Fund of the Commonwealth of Australia.
Jooine and Jae Kye Lee pay the amounts in orders (5) and (6) of these orders to the Commonwealth of Australia within twenty-eight (28) days of today’s date.
The applicant have liberty to apply on seven (7) days’ notice in the event that any of the preceding orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1184 of 2012
| FAIR WORK OMBUDSMAN |
Applicant
And
| JOOINE (INVESTMENT) PTY LTD (ACN 057 422 483) |
First Respondent
| JAE KYE LEE |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This is an application by the applicant, Fair Work Ombudsman (“FWO”), alleging contraventions of the Fair Work Act 2009 (Cth) (the “FW Act”) by the respondents, Jooine (Investment) Pty Ltd (“Jooine”) and Jae Kye Lee (“Mr Lee”). Mr Lee is the sole director, shareholder and company secretary of Jooine, as well as being its financial controller, site manger, recruiter and trainer.
FWO alleges that Jooine engaged in sham contracting in relation to Mr Donghwan Park (“Mr Park”), a part-time cleaner with the company from March 2011 to May 2011. Specifically, it is alleged by FWO that Jooine, through its director Mr Lee, attempted to disguise the true nature of an employment relationship between it and Mr Park, by misrepresenting to Mr Park that he was an independent contractor, thereby preventing Mr Park from receiving the protections provided to Australian employees under industrial laws and instruments.
An agreed statement of facts (the “ASOF”) was prepared by FWO and signed by the respondents admitting various contraventions of the FW Act by the respondents. Accordingly, the hearing before the Court on 16 April 2013 was for the purposes of determining what civil penalties should be imposed on the respondents.
Background
These proceedings were commenced by application supported by statement of claim on 31 May 2012. The proceedings originally travelled in the docket of his Honour Smith FM before his retirement. The matter was referred to mediation on 29 June 2012, before a registrar of this Court. The matter came before a registrar for conference on four separate occasions in 2012. Ultimately, the matter did not resolve at mediation, however, the issues within were significantly reduced. The proceedings were then transferred to my docket on the retirement of Smith FM, before finally coming before the Court for hearing on 16 April 2013.
On 22 October 2012 the parties signed and filed the ASOF. The document was in the following terms:
AGREED STATEMENT OF FACTS
The Parties agree as set out below.
THE FAIR WORK OMBUDSMAN
1. The Applicant, the Fair Work Ombudsman, has standing and authority to bring these proceedings.
JOOINE (INVESTMENT) PTY LTD
2. At all relevant times, the First Respondent, Jooine (Investment) Pty Ltd (Jooine), was and remains:
a) a company incorporated under the Corporations Act 2001 (Cth);
b) a constitutional corporation within the meaning of section 12 of the Fair Work Act 2009 (FW Act);
c) a “national system employer” within the meaning of section 14 of the FW Act;
d) able to be sued in and by its corporate name; and
e) the operator of a business in the contract cleaning services industry.
JAE KYE LEE
3. At all relevant times, the Second Respondent, Jae Kye Lee (also known as “Jack Lee”) (Mr Lee) was:
a) the sole director, shareholder and company secretary of the First Respondent; and
b) the financial controller, site manager, recruiter and trainer of the First Respondent.
EMPLOYMENT OF DONGHWAN PARK
4. Mr Donghwan Park (also known as “Andy Park”) (Mr Park) was an employee of Jooine in the period from 24 March 2011 until 25 May 2011 (Employment Period).
5. Mr Park:
a) was a South Korean national;
b) had limited proficiency in English; and
c) lived in Australia on a working holiday visa at the time of the contraventions agreed to below.
6. Prior to the Employment Period, Mr Park had no experience running his own business.
7. On or about 23 March 2011, before the Employment Period, Mr Park responded to an advertisement by Jooine for cleaners in the Korean online publication “Hojunara”.
8. On 23 March 2011, Mr Park attended an interview with Mr Lee which was held in Mr Lee’s car at Chatswood. During this time:
a) Mr Lee, on behalf of Jooine, agreed to engage Mr Park to perform cleaning duties;
b) Mr Lee asked Mr Park to attend training on 24 and 25 March 2011 at an office building located at 50 Strathallan Avenue, Northbridge, in the State of New South Wales (Training);
c) Mr Lee told Mr Park that he would not be paid for attending the Training; and
d) Mr Lee asked Mr Park to provide him with his Tax File Number when he attended the Training.
9. Between 8:30pm and 1am on 24 March 2011, and between 8:30pm and 12:30am on 25 March 2011, Mr Park attended the Training with Mr Lee at the office located at 50 Strathallan Avenue, Northbridge.
10. During the Training, Mr Lee showed Mr Park the tasks that he was to perform and the order in which they should be performed (dusting, mopping, and then cleaning the toilet).
11. During the Training, Mr Park was required to perform tasks but was not paid at all for the Training.
12. During the Employment Period, Mr Park:
a) was employed to clean offices on two floors of the building at 50 Strathallan Avenue, Northbridge, in the State of New South Wales;
b) performed duties including dusting, mopping, and cleaning the toilet;
c) was provided with all cleaning products, toilet paper, hand towels, soaps, a vacuum cleaner, rubbish bags and a uniform – all the products with which he was required to carry out his duties, apart from gloves (which Mr Park provided himself);
d) was required to wear a company uniform containing Jooine’s name and logo;
e) had his work controlled by Mr Lee who carried out on-site inspections after Mr Park had performed his work and provided feedback to Mr Park (indicating where cleaning needed to be redone or fixed up) by telephone message;
f) worked on a part-time basis on the following arrangement:
i) from 8:30pm to 1am on 24 March 2011;
ii) from 8:30pm to 12:30am on 25 March 2011; and
iii) from 8:30pm for two and a half hours per day, five days a week from Monday to Friday, in the period from 28 March 2011 to 25 May 2011; and
g) was paid a total of $437.50 (based on a rate of $12.50 per hour).
13. On or about 15 April 2011, Mr Lee, on behalf of Jooine:
a) required Mr Park to apply for an Australian Business Number (ABN) from the Australian Taxation Office;
b) took Mr Park to a computer terminal at the client’s premises at 50 Strathallen Avenue, Northbridge, New South Wales, and guided him through the steps to apply for an ABN;
c) said to Mr Park words to the effect of “You cannot be paid unless you have an ABN”; and
d) provided Mr Park with an annotated document named “Who is an employee? Who is an independent contractor?”, a copy of which is annexed and marked “ASOF1”.
14. On 19 April 2011, Jooine required Mr Park to provide it with a computer-generated invoice named “Copy of text for Sub-contrator1.xls” [sic]. A copy of this invoice is annexed and marked “ASOF2”.
15. On or about 29 April 2011, Jooine paid Mr Park $593.75 for work he performed for Jooine. From that amount, Jooine deducted $156.25 from Mr Park’s pay as a “deposit”, in case Mr Park failed to work for Jooine for a period of four months. A copy of Mr Park’s invoice for this amount is annexed and marked “ASOF2A”.
16. On 1 May 2011, Jooine required Mr Park to sign a Contractor Agreement. The Contractor Agreement referred to Mr Park as a contractor. A copy of the Contractor Agreement is annexed and marked “ASOF3”.
17. On or about 15 May 2011, Jooine required Mr Park to provide invoices to Jooine, by handwriting invoices in a lined book and providing them to Mr Lee. A copy of one invoice provided by Mr Park in response to this request is annexed and marked “ASOF4”.
18. On or about 23 May 2011, at 50 Strathallan Avenue, Northbridge, New South Wales, Mr Lee called a meeting with Mr Park and his colleague, Mr Namki Kim (Mr Kim), in response to an audit of Jooine which was being conducted by the Fair Work Ombudsman. During this meeting, Mr Lee, on behalf of Jooine:
a) advised Mr Park to say to the Fair Work Ombudsman that he was an independent contractor;
b) advised Mr Park to say to the Fair Work Ombudsman that Mr Park’s employment had the following factors:
i) Mr Park was paid according to a verbal quotation rather than on an hourly rate;
ii) Mr Park’s wages varied depending on the quality of the work performed; and
iii) Mr Park’s hours of work were flexible;
c) provided Mr Park with an annotated document reflecting the oral representations above (a copy of which, along with a copy of a certified translation, is annexed and marked “ASOF5”); and
d) advised Mr Park that the on-site cleaning contract with the client would be terminated (and both Mr Park and Mr Kim would not be able to perform any further work for Jooine) if he did not follow the instructions in subparagraph 0 above.
19. The responses which Mr Lee told Mr Park to say to the Fair Work Ombudsman on or about 23 May 2011 (as set out in paragraph 0 above) were false.
20. On 25 May 2011, Mr Park resigned from his employment with Jooine.
21. On or before 25 May 2011, Jooine provided Mr Park with a “Notice of Obligation Breach and Contract Termination”. A copy of this document is annexed and marked “ASOF6”.
INVESTIGATION BY THE FAIR WORK OMBUDSMAN
22. Between March 2011 and July 2011, the Fair Work Ombudsman conducted an audit of the First Respondent’s business as part of a general audit of businesses in the cleaning industry which reportedly engaged independent contractors, the Sham Contracting Operational Intervention. The Fair Work Ombudsman conducts audits in order to monitor compliance with the FW Act and fair work instruments, under section 682(1)(b) of the FW Act.
23. On 22 July 2011, the Fair Work Ombudsman commenced an investigation into a complaint raised with the Fair Work Ombudsman by Mr Park concerning the underpayment of wages (Investigation).
24. In July 2011, the Fair Work Ombudsman offered Mr Lee to participate in a voluntary Record of Interview in relation to the investigation. This opportunity was accepted by Mr Lee.
25. The Investigation revealed that Jooine had:
a) misrepresented to Mr Park that the contract of employment under which he performed work for Jooine was a contract for services, where Mr Park performed work as an independent contractor (as detailed in paragraphs 0 to 0 below);
b) failed to pay Mr Park the minimum wage (as detailed in paragraphs 44 to 0 below);
c) failed to pay Mr Park annual leave (as detailed in paragraphs 51 to 0 below);
d) failed to pay amounts due to Mr Park in full (as detailed in paragraphs 56 to 0 below);
e) failed to pay Mr Park on a weekly or fortnightly basis[1]; and
[1] The Fair Work Ombudsman no longer presses this contravention (see paragraph 63).
f) failed to provide Mr Park with a payslip[2].
[2] The Fair Work Ombudsman no longer presses this contravention (see paragraph 64).
26. The Fair Work Ombudsman later determined that in November 2011, during the Investigation, Jooine failed to comply with a Notice to Produce.[3]
[3] The Fair Work Ombudsman no longer presses this contravention (see paragraph 65).
27. On 27 March 2012, the Fair Work Ombudsman sent a “Determination of Contravention” letter to Jooine in relation to the contraventions set out above. The letter was translated into Korean.
REQUESTS FOR PAYMENT BY MR PARK
28. On 29 June 2011, Jooine provided Mr Park with a cheque for $506.25. A copy of the cheque is annexed and marked “ASOF7”.
29. On or about 1 July 2011, Jooine dishonoured the cheque dated 29 June 2011. A copy of the return letter from the ANZ Bank to Mr Park is annexed and marked “ASOF8”.
30. On 5 July 2011 Mr Park contacted Jooine to ask for a new cheque to be made out to him. A copy of this correspondence is annexed and marked “ASOF9”.
31. On 12 July 2011, Mr Lee told Mr Park that payment would be made by direct debit on 23 July 2011. A copy of this correspondence is annexed and marked “ASOF10”.
32. On 20 July 2011, Mr Lee told Mr Park that he would have to wait until the following Friday (29 July 2011) to be paid, as it had not received money from the “site company”. A copy of this correspondence is annexed and marked “ASOF11”.
33. On 11 August 2011, Mr Lee told Eva Domino, a Fair Work Inspector appointed under section 700 of the FW Act (Inspector Domino), that Mr Park would only be paid if Mr Park signed a “Termination Agreement” with Jooine.
34. On 18 August 2011, Mr Lee sent Mr Park an email demanding payment of $1,000. A copy of this email is annexed and marked “ASOF12”.
LEGISLATION
35. At all times during the Employment Period, Jooine was bound in respect of Mr Park by the FW Act.
INDUSTRIAL INSTRUMENT
36. At all times during the Employment Period, the industrial instrument which applied to Mr Park’s employment with Jooine was the Cleaning Services Award 2010 (Modern Award).
37. Mr Park performed work for Jooine during the Employment Period which was within the coverage of the Modern Award classification of “Cleaning Services Employee Level 1”.
38. During the Employment Period, Mr Park was entitled to the terms and conditions in the Modern Award (in addition to any applicable legislative minimum conditions).
SHAM CONTRACTING CONTRAVENTION
39. Under section 357 of the FW Act, an employer is not allowed to misrepresent to an individual that the contract of employment under which the individual is employed by the employer is a contract for services, under which the individual performs work as an independent contractor.
40. At all times during the Employment Period, Mr Park was an employee of Jooine.
41. The fact that Mr Park was an employee of Jooine can be demonstrated by the following factors:
a) before he commenced work with Jooine, Mr Park did not advertise for work, but replied to an advertisement by Jooine in the Korean online publication “Hojunara”;
b) Mr Park had no prior experience in running his own business;
c) Mr Park was asked to provide his Tax File Number to Mr Lee during the Training;
d) Mr Park was provided with two days of supervised training in his job and instructed what duties he should perform when cleaning;
e) Mr Park was provided all the products with which he was required to carry out his duties, apart from gloves;
f) Mr Park was required to wear a company uniform which contained Jooine’s name and logo;
g) Mr Lee, on behalf of Jooine, controlled Mr Park’s work and provided him with feedback;
h) Mr Park did not operate or run his own business, but rather was subject to the control of Jooine; and
i) Mr Park was paid a wage per hour rather than a rate for completion of work.
42. On the following dates, in the circumstances set out above, Jooine represented to Mr Park that the contract under which he would perform work for Jooine was a contract for services, where Mr Park would perform work as an independent contractor:
a) on or about 15 April 2011, by requiring Mr Park to apply for an ABN, saying to Mr Park words to the effect of “You cannot be paid unless you have an ABN” and providing Mr Park with an annotated document annexed and marked as “ASOF1”;
b) 19 April 2011, by requiring Mr Park to provide it with a computer-generated invoice which is annexed and marked as “ASOF2”;
c) 1 May 2011, by requiring Mr Park to sign a Contractor Agreement, which is annexed and marked as “ASOF3”;
d) on or about 15 May 2011 by requiring Mr Park to provide invoices to Jooine by handwriting invoices in a lined book and providing them to Mr Lee (a copy of one invoice of which is annexed and marked as “ASOF4”;
e) on or about 23 May 2011, by:
i) advising Mr Park he was an independent contractor;
ii) advising Mr Park that he should say to the Fair Work Ombudsman that he was paid according to a verbal quotation rather than an hourly rate, that his wages varied depending on the quality of the work performed, and that his hours of work were flexible;
iii) providing Mr Park with a document reflecting the oral representations in subparagraph 0 above (which is annexed and marked as “ASOF5”); and
iv) advising Mr Park that the on-site cleaning contract with the client would be terminated (and Mr Park and Mr Kim would not be able to perform any further work for Jooine) if he did not follow the instructions set out in subparagraph 0 above.
f) on or before 25 May 2011, by providing Mr Park with a “Notice of Obligation Breach and Contract Termination” which is annexed and marked as “ASOF6”.
43. Jooine contravened section 357 of the FW Act on or about 15 April 2011, on 19 April 2011, on 1 May 2011, on or about 15 May 2011, on or about 23 May 2011, and on or before 25 May 2011, when it misrepresented to Mr Park during the Employment Period that the contract of employment under which Mr Park performed work for Jooine was a contract of services where he performed work as an independent contractor.
UNDERPAYMENT CONTRAVENTIONS
Minimum wage
44. During the Employment Period, Jooine was required to pay Mr Park no less than the minimum wage as provided for by clause B.9.2 of Schedule B of the Modern Award.
45. According to item NSW.2.9 of clause B.9.2 of Schedule B of the Modern Award, during the Employment Period, the minimum rate for an employee employed in New South Wales on a part-time basis working an afternoon shift was $19.65 per hour.
46. During the Employment Period, Mr Park worked 108.5 hours during afternoon shifts from Monday to Friday.
47. Mr Park was entitled to be paid $2132.03 in respect of minimum wages during the Employment Period.
48. On or about 29 April 2011, Jooine paid Mr Park $437.50.
49. Mr Park was not paid at all for work performed during the Training on 24 and 25 March 2011.
50. Jooine failed to comply with item NSW.2.9 of clause B.9.2 of Schedule B of the Modern Award, and therefore contravened section 45 of the FW Act, by failing to pay Mr Park the minimum wage in the Modern Award.
Annual leave
51. During the Employment Period, pursuant to subsections 87(1), 87(2) and 90(2) of the FW Act, Mr Park was entitled to:
a) four weeks of annual leave per year of service;
b) accrue annual leave progressively during a year of service, according to Mr Park’s ordinary hours of work; and
c) when his employment ended, if Mr Park had a period of untaken leave, to be paid the amount that would have been payable to him had he taken that period of leave.
52. During the Employment Period, Mr Park accrued 8.346145 hours of annual leave and did not take any annual leave.
53. On termination of employment on 25 May 2011, Mr Park was entitled to be paid $164.00 in respect of annual leave.
54. On termination of employment on 25 May 2011, Jooine failed to pay Mr Park any annual leave, in contravention of subsection 90(2) of the FW Act.
55. Jooine therefore failed to comply with subsection 44(1) of the FW Act, by failing to pay Mr Park his accrued annual leave upon termination.
Total underpayment
56. As a result of Jooine’s failure to pay Mr Park the required minimum wage and annual leave, Mr Park was underpaid $1858.53, calculated on the following basis:
Minimum wage not paid
$2132.03
Annual leave not paid
$164.00
Total of minimum wage and annual leave
$2296.03
Less Amount Paid on 29 April 2011
-$437.50
Total Underpayment
$1858.53
57. The total underpayment amount remains outstanding and has not been paid.
DEDUCTION AND FREQUENCY OF PAYMENT CONTRAVENTIONS
Deductions from wages
58. During the Employment Period, Jooine was required to pay Mr Park all amounts payable to him in relation to the performance of work in full, in accordance with subsection 323(1) of the FW Act.
59. In the period from 24 March 2011 to 21 April 2011, Mr Park was required to be paid $593.75 by Jooine for work he performed.
60. On or about 29 April 2011, Jooine deducted $156.25 from Mr Park’s pay as a “deposit”, because Mr Park had failed to work for Jooine for a period of four months, and paid him $437.50.
61. The deduction of $156.25 from Mr Park’s pay on or about 29 April 2011 was not a deduction permitted under section 324 of the FW Act because:
a) it was not authorised by Mr Park and principally for his benefit;
b) it was not authorised by Mr Park in accordance with an enterprise agreement;
c) it was not authorised by or under a modern award or order of Fair Work Australia; and
d) it was not authorised by or under a law of the Commonwealth of Australia, a State or Territory, or the order of a court.
62. By failing to pay Mr Park all amounts payable to him in relation to the performance of work in full, Jooine failed to comply with subsection 323(1) of the FW Act.
CONTRAVENTIONS NO LONGER PRESSED
Frequency of pay contravention
63. The Fair Work Ombudsman no longer presses the contravention of section 45 of the FW Act as set out in paragraphs 45 to 49 of the Statement of Claim dated 31 May 2012, in relation to frequency of pay.
Notice to Produce contravention
64. The Fair Work Ombudsman no longer presses the contravention of section 712 of the FW Act as set out in paragraphs 53 to 56 of the Statement of Claim dated 31 May 2012, in relation to failure to respond to a Notice to produce documents within 14 days without a reasonable excuse.
Pay slip contravention
65. The Fair Work Ombudsman no longer presses the contravention of section 536 of the FW Act as set out in paragraphs 57 to 59 of the Statement of Claim dated 31 May 2012, in relation to failure to provide a payslip.
INVOLVEMENT OF THE SECOND RESPONDENT
66. At all relevant times Mr Lee was:
a) the sole director, shareholder and company secretary of Jooine;
b) the financial controller, site manager, recruiter and trainer of Jooine;
c) the operative and controlling mind of Jooine; and
d) the person who made decisions on behalf of Jooine in relation to:
i) the basis upon which persons engaged to perform work for Jooine (including Mr Park) would be engaged;
ii) the terms and conditions upon which persons would be engaged;
iii) what payments would be made to persons engaged to perform work;
iv) the work to be performed by any person;
v) the time, method, and manner of payment; and
vi) what deductions, if any, would be made from any payments.
67. At all relevant times Mr Lee knew that:
a) Mr Park was an employee of Jooine;
b) Mr Park was entitled to be paid or provided with entitlements by Jooine in accordance with the FW Act and the Modern Award; and
c) Mr Park was not being paid or provided with the correct entitlements.
68. Mr Lee made the representations set out in the facts agreed to at paragraphs 13 to 14 and 15 to 0 above.
69. At all relevant times, Mr Lee knew that the contract between Mr Park and Jooine was a contract of employment and not a contract for services.
ADMISSIONS
70. The First Respondent admits that it contravened the following provisions of the FW Act:
a) section 357 of the FW Act, by misrepresenting to Mr Park on or about 15 April 2011, on 19 April 2011, on 1 May 2011, on or about 15 May 2011, on or about 23 May 2011, and on or before 25 May 2011, that the contract of employment under which he performed work was a contract for services, whereby Mr Park would perform work as an independent contractor;
b) section 45 of the FW Act, by failing to pay Mr Park in the minimum wage in accordance with item NSW.2.9 of clause B.9.2 of Schedule B of the Modern Award;
c) subsection 44(1) of the FW Act, by failing to pay Mr Park his accrued annual leave upon termination of employment; and
d) subsection 323(1) of the FW Act, by failing to pay Mr Park all amounts payable to him in relation to the performance of work in full.
71. The Second Respondent admits that he was involved in (within the meaning of subsection 550 of the FW Act) the First Respondent’s contraventions of sections 357, 45, 44(1), 323(1), and 712 of the FW Act.
I adopt the ASOF for the purposes of these reasons.
Contraventions of the FW Act
The respondents have admitted (in the ASOF) contravening the FW Act. There are four separate contraventions admitted that are the subject of the penalty hearing before this Court.
First Contravention – Misrepresenting Employment as Independent Contracting Arrangement
The first contravention by the respondents is in respect of s.357(1) of the FW Act. This section relevantly states:
(1) A person (the employer) that employs, or proposes to employ, an individual must not represent to the individual that the contract of employment under which the individual is, or would be, employed by the employer is a contract for services under which the individual performs, or would perform, work as an independent contractor.
Note: This subsection is a civil remedy provision (see Part 4‑1).
(2) Subsection (1) does not apply if the employer proves that, when the representation was made, the employer:
(a) did not know; and
(b) was not reckless as to whether;
the contract was a contract of employment rather than a contract for services.
Second Contravention – Contravening a Modern Award
The second contravention of the FW Act by the respondents is in respect of s.45 of the Act. This section states:
A person must not contravene a term of a modern award.
Note 1: This section is a civil remedy provision (see Part 4‑1).
Note 2: A person does not contravene a term of a modern award unless the award applies to the person: see subsection 46(1).
Third Contravention – Contravening the National Employment Standards
The third contravention by the respondents is of s.44(1) of the FW Act. This section states:
(1) An employer must not contravene a provision of the National Employment Standards.
Note: This subsection is a civil remedy provision (see Part 4‑1).
(2) However, an order cannot be made under Division 2 of Part 4‑1 in relation to a contravention (or alleged contravention) of subsection 65(5) or 76(4).
Note 1: Subsections 65(5) and 76(4) state that an employer may refuse a request for flexible working arrangements, or an application to extend unpaid parental leave, only on reasonable business grounds.
Note 2: Modern awards and enterprise agreements include terms about settling disputes in relation to the National Employment Standards (other than disputes as to whether an employer had reasonable business grounds under subsection 65(5) or 76(4)).
Fourth Contravention – Method and Frequency of Payment
The fourth contravention admitted by the respondents is of s.323(1) of the FW Act. This section states:
Method and frequency of payment
(1) An employer must pay an employee amounts payable to the employee in relation to the performance of work:
(a) in full (except as provided by section 324); and
(b) in money by one, or a combination, of the methods referred to in subsection (2); and
(c) at least monthly.
Note 1: This subsection is a civil remedy provision (see Part 4‑1).
Note 2: Amounts referred to in this subsection include the following if they become payable during a relevant period:
(a) incentive‑based payments and bonuses;
(b) loadings;
(c) monetary allowances;
(d) overtime or penalty rates;
(e) leave payments.
…
Statutory Framework
The FWO is appointed by the Governor General by written instrument under s.687 of the FW Act and is a Fair Work Inspector under s.701 of the FW Act.
The power to impose a penalty in respect of contraventions of ss.44(1), 45, 323(1) and 357 of the FW Act is conferred by s.546 of the FW Act. Section 546 relevantly provides:
Pecuniary penalty orders
(1) 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 provision.
…
Determining amount of pecuniary penalty
(2) The pecuniary penalty must not be more than:
(a) if the person is an individual--the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2); or
(b) if the person is a body corporate--5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table in subsection 539(2).
Payment of penalty
(3) The court may order that the pecuniary penalty, or a part of the penalty, be paid to:
(a) the Commonwealth; or
(b) a particular organisation; or
(c) a particular person.
…
Items 1, 2, 10 and 11 of s.539(2) of the FW Act provide that the maximum penalty units that may be imposed by this Court for contraventions of ss.44(1), 45, 323(1) and 357(1) of the FW Act is 60 penalty units in the case of an individual and 300 penalty units in the case of a body corporate.
At the time Jooine and Mr Lee engaged in conduct contravening the FW Act, s.4AA of the Crimes Act 1914 (Cth) stated:
4AA Penalty units
(1) In a law of the Commonwealth or a Territory Ordinance, unless the contrary intention appears:
penalty unit means $110.
…
Accordingly, the maximum penalty that may be imposed by this Court for each contravention of the FW Act by an individual (such as Mr Lee) is $6,600. The maximum penalty that may be imposed by this Court for each contravention of the FW Act by a body corporate (such as Jooine) is $33,000.
Section 557 of the FW Act states:
Course of conduct
(1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
(2) The civil remedy provisions are the following:
(a) section 44(1) (which deals with contraventions of the National Employment Standards);
(b) section 45 (which deals with contraventions of modern awards);
…
(g) section 323(1) (which deals with method and frequency of payment);
…
This Section provides that multiple contraventions of particular provisions of the FW Act may, depending on the circumstances, attract the operation of the course of conduct provisions contained therein. Two or more contraventions of a specific civil penalty provision (as listed in s.557(2) of the FW Act) are taken to constitute a single contravention if the contraventions are committed by the same person and arise out of a course of conduct by that person. The specific provisions listed in s.557(2) of the FW Act do not include contraventions of s.357(1) of the FW Act.
Hearing
At the hearing on 16 April 2013 Mr Robertson appeared for FWO and Mr Lee, with the assistance of a Korean interpreter, appeared in person and on behalf of Jooine (with the leave of the Court).
Ombudsman’s Submissions on Penalty
The FWO submits if the Court finds that liability is proven, as agreed by the parties in the ASOF, the following principles should be taken into account by the Court when determining the question of appropriate penalty, being:
a)First, the Court is to identify the separate contraventions involved. Each contravention of a separate obligation found in the FW Act in relation to each employee is a separate contravention;
b)Second, the Court should consider whether the contraventions (if there are more than one) arising in the first step constitute a single course of conduct, pursuant to s.557(1) of the FW Act;
c)Third, to the extent that two or more contraventions have common elements, this should be taken into account in considering what is an appropriate penalty in the circumstances for each contravention. Jooine and Mr Lee should not be penalised more than once for the same conduct. The penalties imposed by the Court should be an appropriate response to what Jooine and Mr Lee did: see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [46]. This task is distinct from and in addition to the final application of the totality principle: see Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [41]-[46] per Stone and Buchanan JJ (Gyles J dissenting);
d)Fourth, the Court should consider the appropriate penalty for the single contraventions and, if relevant, each group of contraventions, taking into account all of the relevant circumstances; and
e)Fifth, the Court should consider whether it is an appropriate response to the conduct that led to the contraventions: see Kelly v Fitzpatrick (2007) 166 IR 14 at [30] per Tracey J; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (supra) at [23], [71] and [102]. The Court should apply “instinctive synthesis” in making this assessment; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (supra) at [27], [55] and [78].
The FWO accepts that, where contraventions have common elements or are part of a course of conduct, this should be taken into account when considering an appropriate penalty. Multiple contraventions of particular provisions may, depending on particular circumstances, attract the operation of s.557 of the FW Act: see Clothing & Allied Trades Union v Snugglerite Industries Pty Ltd (1990) 34 IR 124 at 126 per Keely J. Of particular relevance is whether the contraventions arose out of separate acts or decisions of the employer or out of a single act or decision. The latter will constitute a course of conduct, but the former will not: see Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 at 266-267 per Gray J (with whom Northrop J agreed at 245). The onus of establishing the benefit of s.557 of the FW Act is on Jooine and Mr Lee: see Workplace Ombudsman v Securit-E Holdings Pty Ltd (in liquidation) & Ors (2009) 187 IR 330 at [5].
In the current proceedings, the FWO accepts that Jooine and Mr Lee have the benefit of s.557 of the FW Act in relation to repeated contraventions of s.45 of the FW Act, being a failure to pay Mr Park minimum wages on multiple occasions.
The FWO submits that Jooine and Mr Lee do not have the benefit of the operation of s.557 of the FW Act in relation to repeated contraventions of s.357(1) of the FW Act. Based on the facts in this matter, the FWO accepts the multiple misrepresentations by Jooine to Mr Park have common elements and appear to have arisen from one decision by Jooine and Mr Lee to misclassify Mr Park as an independent contractor at the commencement of his employment. Accordingly, the FWO submits these contraventions should be grouped as a single contravention by Jooine and Mr Lee.
Other than outlined above the FWO argues that the course of conduct or common element provisions of the FW Act do not otherwise reduce the number of contraventions.
Notwithstanding, the FWO has agreed with Jooine and Mr Lee not to seek a penalty for Jooine’s admitted contravention of s.44(1) of the FW Act. The FWO still seeks a declaration, however, that Jooine has contravened this subsection.
For the reasons set out above, the FWO submits the Court should find that Jooine and Mr Lee engaged in a total of three contraventions for which penalties should be imposed. These contraventions are submitted to be:
a)Misrepresenting to Mr Park that his employment relationship with Jooine was an independent contracting arrangement (s.357(1) of the FW Act);
b)Failure to pay minimum rates of pay to Mr Park (s.45 of the FW Act); and
c)Failure to pay amounts required to be paid to Mr Park in relation to the performance of work in full (s.323(1) of the FW Act).
Therefore, the FWO submits the maximum penalties the Court can impose on Jooine and Mr Lee in these proceedings are $99,000 for Jooine and $19,800 for Mr Lee.
The FWO submits the factors that are relevant to the imposition of a penalty have been summarised by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59]. The FWO submits the relevant factors are as follows:
a)The nature and extent of the conduct which led to the contraventions;
b)The circumstances in which that conduct took place;
c)The nature and extent of and loss or damage sustained as a result of the contraventions;
d)Whether there had been previous similar conduct by the defendant;
e)Whether the contraventions 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 contraventions were deliberate;
h)Whether senior management was involved in the contraventions;
i)Whether the party committing the contraventions had exhibited contrition;
j)Whether the party committing the contraventions had taken corrective action;
k)Whether the party committing the contraventions 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 specific need for general deterrence.
This summary was adopted by Tracey J in Kelly v Fitzpatrick (supra) 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 at [11] per Gyles J; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (supra) at [91] per Buchanan J.
Nature and extent of the conduct
The contraventions in this matter represent a failure by Jooine to provide basic and important entitlements under Australian workplace laws. Jooine misrepresented to Mr Park that his employment relationship with Jooine was an independent contracting arrangement, denying him the right to receive the basic entitlements afforded to employees. Consequently, Mr Park was not paid minimum wages or annual leave. In addition, a further unlawful deduction was made from Mr Park’s wages.
A purpose of Australian workplace laws is to provide a safety net to ensure that employees are paid adequate minimum entitlements, particularly those who are vulnerable or in low income roles. The laws also ensure there is an even playing field in the industry for all employers in respect of their employment costs. Contraventions of these entitlements undermine the workplace relations regime as a whole and demonstrate a disregard for Jooine’s legal obligations.
Circumstances in which the conduct took place
At all times during the period from 24 March 2011 to 25 May 2011, Jooine was the employer of Mr Park (ASOF at [4]). At the time of his employment, Mr Park was a South Korean national with limited proficiency in English in Australia on a working holiday visa (ASOF at [4]).
Notwithstanding that Mr Lee is also of a South Korean background, it is submitted by the FWO that Mr Park was a vulnerable employee by virtue of his background, as it is unlikely, given his language difficulties, that Mr Park understood his rights under Australian laws during the course of his employment. As part of the misrepresentations, Jooine, through Mr Lee, required Mr Park to sign complex documentation relating to the sham contracting arrangement, including a 21 page contractor agreement which attempted to limit Jooine’s legal liability (ASOF at Annexure “ASOF3”), and two breach and contract termination notices (ASOF at Annexure “ASOF6”). The FWO submits Mr Park’s vulnerability should be a significant factor in determining penalty and refers the Court to Workplace Ombudsman v Saya Cleaning Pty Ltd & Anor [2009] FMCA 38 per FM Simpson (as he then was) at [20] where his Honour stated:
… The vulnerability of these employees and the way they were exploited by the respondent is a significant factor when assessing the quantum of penalty…
Mr Lee was responsible for the day to day management, direction and control of the Jooine’s operations. Further, Mr Lee was responsible for determining the terms and conditions upon which Mr Park was engaged by Jooine and the person who made the misrepresentations to Mr Park. Mr Lee’s conduct was the cause of Jooine’s contraventions of the FW Act.
Nature and Extent of the Loss
The FWO submits that the total underpayment of $1,858.53 is a significant underpayment, given that the underpayment took place over a short period of time of just over two months. As a “Cleaning Services Employee Level 1” working an afternoon shift (ASOF at [45]), Mr Park was entitled to a wage of $19.65 per hour under the Modern Award, but Jooine chose to provide Mr Park with a wage of only $12.50 per hour (ASOF at Annexure “ASOF2A”), being only 63% of the of the wages to which he was entitled.
From the $593.75 Mr Park was contractually entitled to be paid for the 47.5 hours worked in March to April 2011 Jooine then made an unlawful deduction of $156.25 (ASOF at [60], Annexure “ASOF2A”). The real wage Mr Park received after the deduction equates to only $9.21 per hour, which is less than half of what he should have been paid.
Mr Park did not receive any wages for training conducted on 24 and 25 March 2011 (ASOF at [49]), for the period from April to May 2011, or for any annual leave.
The underpayment amount remains outstanding, and Mr Park has been without the benefit of this amount for a considerable period of time. Jooine and Mr Lee have had the benefit of not paying these amounts to Mr Park while having received the money from their clients for the work performed by Mr Park.
In addition to the monetary loss to Mr Park, as a result of Jooine’s sham contracting and Mr Park being misclassified as an independent contractor, he was also likely deprived of other basic protections that employees would ordinarily be entitled to, such as payment of insurance premiums for workers’ compensation (see Australian Building & Construction Commissioner v Inner Strength Steel Fixing Pty Ltd [2012] FCA 499 at [14]). The FWO submits, even though there was no actual loss to Mr Park in this regard, the Court should take into account these additional losses when considering the penalty to be imposed.
Further, there is no evidence to suggest that Jooine’s and Mr Lee’s failure to comply with their workplace obligations would not have continued had Mr Park not resigned his employment and had the respondents’ conduct not been brought to the attention of the FWO.
Similar Previous Conduct
The FWO is not aware of any previous contraventions engaged in by either Jooine or Mr Lee.
Whether Contraventions Arose Out Of One Course of Conduct
The FWO submits there should be four contraventions in the matter before the Court (and penalties are sought in respect of three of these contraventions).
Size and Financial Circumstances of the Business
In the material provided by Jooine, Jooine and Mr Lee have asked the Court to take into account, when setting a penalty, that both Jooine and Mr Lee are in financial difficulty. Documentation in support of this contention has been put forward.
In their documentation, Jooine and Mr Lee have indicated they are “considering to declare personal and company bankruptcy”. The material also alleges that Jooine is a small business with income of approximately $8,000 per month, very limited profit and only two independent contractors currently engaged to perform work. Further, the material suggests it will be difficult for Jooine and Mr Lee to pay any penalties ordered by the Court. The FWO repeats its submissions that little weight should be given to these materials.
To the extent that Jooine and Mr Lee could seek to rely on the size of the business of their financial circumstances to excuse the contraventions of the FW Act, the FWO submits that such a submission should be rejected. The FWO relies on Workplace Ombudsman v Saya Cleaning (supra) at [27]-[28] where Simpson FM (as he then was) stated:
27. In Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at paras 27 to 29 it was said:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to a Court’s consideration of penalty.
28. Notwithstanding financial hardship that an employer may be experiencing Lynch v Buckley Sawmills Pty Ltd (1984) 3 FCR 503 at 508 Keely J said:
In this connection it is important that the respondent — and other employers bound by the award or by other awards under the Act — understand the importance of complying with an award and it follows that any decision taken by them which is regarded as affecting their obligations to comply with particular provisions of the award or the award generally should only be taken after careful consideration. They must not be left under the impression that in times of financial difficulty they can breach an award made under the Act either with impunity or in the belief that no substantial penalty will be imposed in respect of a breach found by a court to have been committed.
Notwithstanding Jooine’s and Mr Lee’s financial circumstances and size (of Jooine), the FWO submits that the law should mark its disapproval of the conduct in question and set an appropriate penalty which serves as a warning to others (see Kelly v Fitzpatrick (supra)). A threat of insolvency, whether personal or corporate, should not be a way to avoid a penalty (see Cotis v MacPherson (2007) 169 IR 30 at [12]).
Deliberateness of the Contraventions
The FWO argues neither Jooine nor Mr Lee has put forward any evidence as to the motivation behind the admitted contraventions. Notwithstanding, it is submitted the misrepresentations engaged in by Jooine and Mr Lee were deliberate, were an attempt to avoid paying Mr Park his workplace entitlements and reduce Jooine’s workplace obligations, and were designed to prevent the FWO discovering that contraventions of the FW Act had occurred. In particular, the FWO submits:
a)The representation made on 15 April 2011 made it clear Mr Park could only be paid by Jooine if he had an Australian Business Number (implying that he could not be engaged by Jooine on any basis other than as an independent contractor) (ASOF at [13], [42](a));
b)The representation made on 1 May 20111 asked Mr Park to sign a contractor agreement which, among other things, attempted to reduce Jooine’s liability in relation to providing or paying for equipment and insurance (ASOF at Annexure “2A” Clauses 1.7, 1.8);
c)The representation made on or about 23 May 2011 to Mr Park and his colleague N. Kim was made in order to mislead the FWO during its audit about the status of Mr Park’s relationship with Jooine. Mr Park was advised by Mr Lee to tell the FWO about factors relating to his employment that were false (ASOF at [18](b), 19) and advised that he may not be able to perform any work for Jooine if these instructions were not followed (ASOF at [18](d)). Under s.682 of the FW Act the FWO is empowered to “monitor compliance with [the FW Act] and fair work instruments” and “inquire into, and investigate, any act or practice that may be contrary to [the FW Act], a fair work instrument or a safety net contractual entitlement”. Jooine and Mr Lee’s actions were an attempt to hinder the FWO in the functions with which it is empowered; and
d)The representation made on or before 25 May 2011 involved providing Mr Park with a “Notice of Obligation Breach and Contract Termination” (which Mr Park subsequently signed), which attempted to end the contracting arrangement between Jooine and Mr Park, and asked Mr Park to agree to forego $312.50 for failing to work for Jooine for a period of four months (ASOF a [21], [42](f), Annexure “ASOF6”).
Involvement of Senior Management
A corporate entity can only act through its authorised officers and agents. Mr Lee was and is the sole director of Jooine and its “directing mind and will” (ASOF at [66]). Mr Lee made each of the representations to Mr Park (ASOF at [68]) while he knew the true relationship between Jooine and Mr Park was one of employment (ASOF at [69]). He was also responsible for the underpayments and unlawful deduction (ASOF at [66](d)), and was involved in each of the contraventions made by Jooine (ASOF at [66]-[69], [71]).
Contrition, Corrective Action, Cooperation with Authorities
This consideration involves three related but separate elements. Each of them is relevant to these proceedings.
Contrition
There is no statement of regret or remorse by Jooine or Mr Lee. The FWO submits the Court should take into account Jooine’s and Mr Lee’s behaviour when Mr Park first requested payment of his entitlements. At this time, Mr Lee, on behalf of Jooine:
a)Dishonoured a cheque which he had given to Mr Park to pay his contractually agreed outstanding entitlements (which were below the minimum entitlements required under the Modern Award) (ASOF at [28]-[29]);
b)Told the FWO that he would only pay Mr Park the contractually agreed entitlements if Mr Park signed a “Termination Agreement” (ASOF at [32]-[33]); and
c)Sent an email to Mr Park demanding that he pay $1,000 to Jooine (ASOF at [34], Annexure “ASOF12”).
Corrective Action
Jooine has not taken any corrective action to rectify the underpayment to Mr Park, even after being issued with a contravention letter on 27 March 2012. That letter (which was translated into Korean) set out the applicable industrial instrument, the alleged contraventions and enclosed information to enable Jooine to take steps to rectify the contraventions. Further, Mr Park remains out of pocket and there is no guarantee that he will receive the outstanding entitlements owed to him. The FWO is also unaware of any steps that either Jooine or Mr Lee has taken to prevent further contraventions of the FW Act.
The FWO notes that the material provided by Jooine and Mr Lee have promised to “abide by Fair Work Ombudsman regulations in the future” (Jooine Materials, Letter at page 4). However, in light of Jooine’s and Mr Lee’s failure to take any action to rectify the underpayment of Mr Park, the Court should have little confidence there will be future compliance.
Cooperation with Authorities
These proceedings arise from a FWO audit which took place between March and July 2011. The FWO submits Mr Lee, on behalf of Jooine, hindered the FWO’s audit by instructing Mr Park and his colleague N. Kim to lie about the circumstances of their employment to the FWO by discussing aspects of their employment which were false (ASOF at [18](a), [18](b), [18](c), [19]), and threatening their continued work for Jooine at Northbridge if they told the FWO the truth about their employment (ASOF at [18](d)). This conduct has already been addressed by the FWO under the sub-heading “Deliberateness of the contraventions” and, in the FWO’s view, is a significant factor to be considered in respect of the penalty to be imposed for the misrepresentation contravention.
In the subsequent investigation into Mr Park’s employment which arose following his complaint to the FWO, the FWO does acknowledge that Jooine and Mr Lee generally demonstrated a cooperative attitude. Mr Lee participated in a recorded interview with the FWO in August 2011 when requested (ASOF at [24]). The FWO also acknowledges that Jooine and Mr Lee have enabled the matter to proceed by way of the ASOF, with Jooine and Mr Lee admitting to four contraventions. This has saved a considerable cost to the public by avoiding the need for a fully contested liability hearing.
The FWO submits that both Jooine and Mr Lee should be offered a 20% discount on the maximum penalty for their cooperation and early admission in these proceedings.
Ensuring Compliance with Minimum Standards
The FWO submits one of the objects of the FW Act has been the maintenance of an effective safety net of minimum terms and conditions, and effective enforcements mechanisms. This is an important consideration in these proceedings. The substantial penalties set by Parliament for contraventions of such minimum entitlements reinforce the importance placed on compliance with minimum standards.
Jooine and Mr Lee misclassified Mr Park as an independent contractor with the effect that he was denied his minimum entitlements, including the right to receive minimum wages under the Modern Award and annual leave. Mr Park received no benefits from his employment other than his low contractually agreed wages. Jooine and Mr Lee then deducted a further amount from those wages. Accordingly, the FWO submits penalties should be imposed at a meaningful level to ensure compliance with these minimum standards.
General Deterrence
The FWO submits it is well established that “the need for specific and general deterrence” is a factor that is relevant to the imposition of a penalty under the FW Act and its predecessors: see, for example Mowbray FM in Mason v Harrington Corporation (supra) at [26]-[59].
The FWO contends the role of general deterrence in determining the appropriate penalty is illustrated by the comments of Lander J in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [93]:
…In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217. …
This can only be seen as a deliberate attempt to avoid the substantial and protective provisions of the FW Act. Consequently, the penalty made in this matter should be a strong and specific deterrent to Mr Lee and to others who seek to pursue this type of contacting versus employment structure. The deterrent should also extend to the advisors who have facilitated the orchestration of these scams, to prevent their further proliferation of such advice and facilitation. From a limited examination of the contract material and associated documentation, it appears to have been prepared by someone who was familiar with employment law within this country and with a deliberate intention to circumvent the legislative framework that has been put in place to protect vulnerable individuals from exploitation in a labour environment. It would seem unlikely that Mr Lee could have obtained this document and modified it for his own purposes and understanding to avoid the structures of labour law currently in operation.
There is no dispute that employers should be deterred from engaging in the contraventions that are alleged in this matter, such as sham contracting, underpayments and unlawful deductions. This ensures there is an even playing field between employers and employees and that employers are required to pay the correct minimum terms and provide correct minimum conditions of employment, and should not be able to undercut each other to disadvantage businesses which legitimately want to provide their employees with their correct entitlements. The FWO in its written submissions at [56]-[59] above has made comments about the effect that sham contracting has on the Australian economy and other employers generally.
Sham contracting arrangements can allow employers to avoid tax obligations and to uncut other employers in the contract cleaning industry. If employers pay minimum terms and entitlements there is an even playing field between employers and this was something that Jooine and Mr Lee failed to do. The deterrent particularly needs to be conveyed to the cleaning industry. The cleaning industry, by its own nature, attracts employees that are unskilled and for that reason is likely to attract vulnerable workers. Many of these employees will be like Mr Park in that they will have little understanding of their employment rights when they begin employment in Australia.
To be considered in respect of specific deterrence is the important factor that although this contravention was detected at least two years prior to this matter being heard by the Court, there have been no steps taken to ensure future compliance and there has been no repayment of any money owed.
At the commencement of the hearing, Mr Lee sought to hand to the Court a folder of documents not in the form of an affidavit with annexures that he indicated that he wished to rely upon. Mr Lee is a self-represented litigant and did not appear to have any knowledge of the procedures adopted by the Court, nor has he attempted to seek any advice in order to comply with Court orders. The folder of documents was accepted by the Court as evidence filed by Mr Lee on his behalf and that of Jooine.
Within that bundle of documents are some invoices from contractors who continue to engage in cleaning for Jooine. This is obviously evidence that Jooine and Mr Lee continue to engage contractors and that Jooine is still operating. Mr Lee is still a director of that company. Specific deterrence, given that there has been no compliance to date, should be directed to both Mr Lee and Jooine so that they do not engage in further contraventions of which they are clearly aware.
In the material provided to the Court, Mr Lee is attempting to raise two factors, emphasising that he and his company have a number of issues which they seek the Court to take into account in settling penalty. Mr Lee wishes to emphasise circumstances surrounding his marital problems, psychiatric problems from anxiety and stress, and financial difficulties. In support of his claim of financial difficulties, Mr Lee has provided statements which are made up of one month’s worth of financial transactions for the month of November 2012 and a number of documents indicating that Jooine has a number of debts.
The documentation relating to Jooine’s debts are dated October and November 2012 and there also appears to be records of income received from client sites and payments to contractors. On examination, these documents are quite selective and they do not provide a clear snapshot of either Jooine’s or Mr Lee’s financial positions. The contraventions which are the subject of these proceedings took place between March and May 2011, whereas the financial material placed before the Court relates to a period a year and a half later.
Clearly, the financial records are not from the time of the contraventions and it is not appropriate to accept that these financial records can be relied upon as a factor in litigation for why the conduct was engaged in. In respect of Jooine there is nothing contained in these documents that addresses the issue of whether Jooine is able to pay its debts, however, there is a request that penalties be paid in instalments.
Moving to the assertions made by Mr Lee, in respect of his marital problem, there is nothing before the Court to suggest that these claimed problems affected him at the time of contravention, which was 18 months prior. In respect of Mr Lee’s psychiatric problems, the total of that evidence is made up of a mental health treatment plan, which was made in November 2012, whereas the contraventions took place a year and a half beforehand. There is no evidence that Mr Lee was suffering from those conditions at the time of the contraventions. Within that documentation, it is noted that the main problem in his diagnosis refers to a life crisis. Mr Lee, in oral submissions, admitted that there were issues going on in his life, but there is nothing to support the suggestion that any of his conduct in relation to the contraventions can be blamed on his mental health at that time.
The Court notes that the submissions from the FWO that it has attempted to assist Mr Lee in respect of all issues leading up to the commencement of proceedings in this Court. The contravention letter which was sent by the FWO inspectors in this matter was translated into Korean, as were the letters sent to Mr Lee when these proceedings were commenced. Mr Lee has had the Court’s assistance with interpreters at all hearings and mediations. At an early stage Mr Lee, prior to the commencement of the proceedings, was made aware that there was a need to repay the outstanding amounts due to Mr Park, but this has not occurred.
The FWO in its submissions, which are summarised at [86] above, recommends a discount on the penalties imposed by the Court of 20%. The FWO has indicated that it is not aware of any previous finding by a Court that either Jooine or Mr Lee has contravened Commonwealth workplace laws. No specific submissions have been made in respect of the lack of any allegations of previous contraventions and to any weight that should be placed on that issue as a basis of a penalty discount. In my view, the lack of evidence of previous contraventions does not of itself support a discounting of any penalty imposed. Mr Lee claims that he has been in the business of providing cleaning services for a period of 10 years, but there is no indication of how these services were provided, the corporate structure or contracting details.
Significantly, the contraventions were detected by a compliance review carried out by the FWO into sham contracting. There is no evidence, before the Court to indicate whether this contravention was the first due to a recent adoption of such contravening practices or whether such practices have been in existence for a number of years and remained undetected. Whatever the case may be, it does not detract from the apparent intention to enter into arrangements that were contrary to the provisions of the FW Act. A specific discount was recommended by the representatives of FWO on the basis of the early admissions made by Mr Lee on his behalf and of that of the company, Jooine. The FWO suggests that an offer of a 20% discount on the maximum penalty should be offered to both Jooine and Mr Lee on account of the early admissions.
However, taking into account that there has been no statement of regret or remorse filed, no corrective action to rectify the underpayment of Mr Park and the hindrance of investigations by Mr Lee on behalf of Jooine during the FWO’s audit, such actions should reduce the discount recommended by the FWO. In the circumstances there can be no penalty discount on account of any contrition because there has been none. Similarly, the lack of cooperation during the conduct of the audit does not warrant any penalty discount. It is submitted by the FWO that while the company cooperated after the commencement of proceedings, it did not take corrective action promptly. It is admitted that Mr Lee has been cooperative in admitting the full contraventions and this has saved a considerable cost to the public by avoiding the need for a fully contested hearing. I note the observations of his Honour Driver FM (as he was then) in the decision of Fair Work Ombudsman v Cleaners New South Wales Pty Ltd (2009) 186 IR 467 at [30].
Taking all of these factors into consideration, I have formed the view that the penalty discount should be limited to 10%. In further support of this view, I refer to the circumstances in which Mr Lee provided a cheque to Mr Park for outstanding wages, but subsequently cancelled the cheque, causing it to be bounced on presentation. Mr Lee claims that he took this action because Mr Park had used very bad language and his behaviour was also very bad. Mr Lee also claimed that he could not bear Mr Park’s attitude. This statement made by Mr Lee, when considered against the circumstances of this matter and the deliberate steps that he took to deny Mr Park the fruits of his labour, on a fair basis and under the industrial provisions of this country’s legislation is nothing more than nonsense.
The penalties imposed by the Court should be an appropriate response to what Jooine and Mr Lee have done, but not excessive (see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (supra) at 102 per Buchanan J) for the total conduct involved (see Mill v R (1988) 166 CLR 59). Proceeding on “instinctive synthesis” (Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (supra) per Grey J at [27] and Markarian v R (2005) 228 CLR 357; [2005] HCA 25 at [37]) the Court should have regard to the overall conduct in question. Having fixed the penalty for each contravention, the proper approach is for the Court to consider whether the adequate penalty is appropriate for all contraventions as a whole (see Ponzio v B&P Caelli Constructions Pty Ltd (supra)).
One aspect of that is whether the proposed penalty should be crushing or oppressive, however, such a consideration ought to only be given weight where there is sufficient evidence before the Court to demonstrate that the penalty would have such an effect. Mr Lee, in his oral submissions made in support of the document that he handed to the Court, indicated his alleged dire financial position due to various factors including his health, marital breakup and settlement of those arrangements.
In setting the appropriate penalties, I have borne in mind that the nature of the admitted contraventions which are serious and have only been disclosed by the conduct of an audit by the FWO. Further, these are not contraventions that have occurred due to the misunderstanding or interpretation of provisions of the Act or awards, but a deliberate attempt to circumvent the provisions of the FW Act and the award system. The FWO has suggested that the penalty should be set at 70% of the maximum for the sham contracting provisions and at 40% of the maximum for each for the underpayment and unlawful deduction contraventions, as the sham contracting arrangements were put in place with an apparently deliberate intention of bypassing the provisions of the FW Act and the apparent intention to exploit individuals that are unaware of their entitlements in the industrial environment of this country. Sham contracting arrangements are particularly serious because of the damage that sham contracting can have on the Australian economy and other employers generally. In Australian Building & Construction Commissioner v Inner Strength Steel FixingPty Ltd [2012] FCA 499, his Honour Gilmour J at [30] stated:
30. The establishment of unlawful sham contract arrangements is objectively serious. Sham contracting, by its nature, provides a company with an unfair advantage over its competitors in that the company’s operating expenses are unlawfully reduced, making it more competitive against its rivals and providing increased company revenue. Accordingly, penalties must reflect the objective seriousness of this type of conduct to act as a deterrent to others who might be likely to engage in contraventions: Ponzio v B&P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at [93]
Consequently, I believe that in relation to the sham contract provisions, this Court should impose a penalty of 80% of the maximum penalty. I believe that is an appropriate response to the offending conducts in respect to the penalties of underpayment and unlawful deduction the requested 40% of the total penalty is appropriate. Below are two tables identifying the penalties the Court intends to impose on Jooine and Mr Lee after discounting:
Penalties against Jooine:
| Provision Contravened | Description of contravention | Maximum Penalty | Maximum penalty less 10% discount | Percentage of penalty sought | Range of penalty sought |
| Subsection 357(1) Fair Work Act | Misrepresenting employment contract as an independent contracting arrangement | $33,000 | $29,700 | 80% | $23,760 |
| Section 45 Fair Work Act | Failure to pay minimum wages | $33,000 | $29,700 | 40% | $11,880 |
| Subsection 323(1) Fair Work Act | Failure to pay an amount payable in relation to the performance of work in full (unauthorised deduction from wages) | $33,000 | $29,700 | 40% | $11,880 |
| TOTAL | $47,520 |
Penalties against Mr Lee
| Provision Contravened | Description of contravention | Maximum Penalty | Maximum penalty less 10% discount | Percentage of penalty sought | Range of penalty sought |
| Subsection 357(1) Fair Work Act | Misrepresenting employment contract as an independent contracting arrangement | $6,600 | $5,940 | 80% | $4,752 |
| Section 45 Fair Work Act | Failure to pay minimum wages | $6,600 | $5,940 | 40% | $2,376 |
| Subsection 323(1) Fair Work Act | Failure to pay an amount payable in relation to the performance of work in full (unauthorised deduction from wages) | $6,600 | $5,940 | 40% | $2,376 |
| TOTAL | $9,504 |
Declarations
The FWO has also sought a series of declarations in this matter and, in that respect, I note the comments of her Honour Judge Riley in Director of The Fair Work Building Industry Inspectoratev Giovanni Italiano [2013] FCCA 530 where her Honour stated at [56]-[58]:
Declarations
56. There has been authority in the past to the effect that it is not appropriate for a court to make declarations based on admissions. However, there is more recent authority that in certain cases it is appropriate for the court to make declarations in such circumstances.
57. In particular, in Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665; (2008) ASAL 55-176; (2007) ATPR 42-138; [2006] FCA 1427, Kiefel J, at paragraphs 52 to 59, considered the rationale for the previous approach taken by the courts. Her Honour came to the view that the previous approach may no longer be warranted, particularly in public interest cases such as this, and particularly if the declarations are preceded by a statement that they are made upon admissions.
58. In all the circumstances of this case, I am satisfied that it is appropriate to make the declarations sought by the applicant on the basis of the admissions made by the respondents, provided that the declarations are preceded by an appropriate preamble…
Consequently, I make the declarations as sought by the FWO and order that Jooine and Mr Lee pay penalties as set out in the table at [118] above.
I certify that the preceding one hundred and twenty (120) paragraphs are a true copy of the reasons for judgment of Judge Lloyd-Jones
Associate:
Date: 20 December 2013
Key Legal Topics
Areas of Law
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Employment Law
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Statutory Interpretation
Legal Concepts
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Standing
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Penalty
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Remedies
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Statutory Construction
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