Fair Work Ombudsman v Joys Child Care Ltd & Anor (No 2)
[2020] FCCA 2326
•12 August 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v JOYS CHILD CARE LIMITED & ANOR (No.2) | [2020] FCCA 2326 |
| Catchwords: INDUSTRIAL LAW – Penalty Hearing – failure to comply with compliance notices. |
| Legislation: Fair Work Act 2009 (Cth), ss.539, 546, 557, 716, 717. |
| Cases cited: AustralianOphthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 Fair Work Ombudsman v Absynthe Restaurant Pty Ltd & Anor [2015] FCCA 58 Fair Work Ombudsman v ASGBRIS Pty Ltd & Anor [2020] FCCA 553 Fair Work Ombudsmanv Blu Hornsby Pty Ltd & Anor [2016] FCCA 1150 Fair Work Ombudsman v Bundaberg Security Pty Ltd [2014] FCCA 592 Fair Work Ombudsman v Chia Tung Development Corp Ltd [2016] FCCA 3457 Fair Work Ombudsman v Crystal Carwash Café Pty Ltd (No 2) [2014] FCA 827 Fair Work Ombudsman v NSH North Pty Ltd (t/as New Shanghai Charlestown) [2017] FCA 1301 Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65 Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 Fair Work Ombudsman v Scott Redmond t/as Cleaning Excellence [2019] FCCA 3697 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | JOYS CHILD CARE LIMITED |
| Second Respondent: | JAN SHANG |
| File Number: | SYG 1277 of 2018 |
| Judgment of: | Judge Altobelli |
| Hearing date: | 12 August 2020 |
| Date of Last Submission: | 12 August 2020 |
| Delivered at: | Wollongong |
| Delivered on: | 12 August 2020 |
REPRESENTATION
| Solicitors for the Applicant: | The Fair Work Ombudsman |
| The Second Respondent appeared by videoconference and as authorised representative of the First Respondent |
ORDERS
Pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (‘the Act’):
(a)The First Respondent pay a pecuniary penalty of $25,200, in respect of its contravention of section 716(5) of the Act; and
(b)The Second Respondent pay a pecuniary penalty of $5,040, in respect of his contravention of section 716(5) of the Act.
Pursuant to section 546(3) of the Act, the pecuniary penalties ordered to be paid by the First and Second Respondents are paid to the Commonwealth within 28 days of the date of this Order.
All outstanding applications otherwise be dismissed and the matter removed from the list of cases awaiting finalisation.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT WOLLONGONG |
SYG 1277 of 2018
| FAIR WORK OMBUDSMAN |
Applicant
And
| JOYS CHILD CARE LIMITED |
First Respondent
| JAN SHANG |
Second Respondent
EXTEMPORE REASONS FOR JUDGMENT
These Reasons for Judgment were delivered orally. They have been corrected from the transcript. Grammatical errors have been corrected and an attempt has been made to render the orally delivered Reasons amenable to being read.
By way of extempore Reasons for Judgment, I incorporate and accept as my own reasons the document prepared on behalf of the Fair Work Ombudsman entitled “Applicant’s submissions on penalty” which is incorporated below from paragraph 3 to paragraph 48 inclusive in its entirety.
The principles
The authorities establish that the appropriate penalties are to be determined in the following manner:[1]
a)the first step is to identify the separate contraventions involved. Each contravention of each separate obligation found in the Fair Work Act 2009 (Cth) (hereafter referred to as ‘the FW Act’) is a separate contravention of a civil remedy provision for the purposes of s 539(2) of the FW Act;
b)second, s 557(1) of the FW Act makes provision for treating multiple contraventions of the same civil remedy provision, that result from a single course of conduct by the same person, as a single contravention;
c)third, to the extent that two or more contraventions have common elements, this should be taken into account in considering what an appropriate penalty is in all the circumstances for each contravention;
d)fourth, the Court should consider an appropriate penalty to impose in respect of each contravention (whether a single contravention or a course of conduct) having regard to all of the circumstances of the case; and
e)finally, having fixed an appropriate penalty for each contravention, the Court should consider the overall penalties arrived at and apply the totality principle to “ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary”.[2]
[1] Fair Work Ombudsman v NSH North Pty Ltd (t/as New Shanghai Charlestown) [2017] FCA 1301 (NSH North) at [36].
[2] Fair Work Ombudsman v Nobrace Centre Pty Ltd (No 2) [2019] FCCA 2144 (Nobrace) at [10]; NSH North at [36]; Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 (Kelly) at [30]; AustralianOphthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [23] (per Gray J), [71] (per Graham J) and [102] (per Buchanan J).
As this matter relates to only one contravention of a civil remedy provision, being s 716(5) of the FW Act, in respect of each Respondent, the course of conduct and common element considerations are not relevant.
A non-exhaustive list of factors relevant to the imposition of an appropriate penalty was usefully summarised by Mowbray FM (as he then was) in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar (Pangaea).[3] Those factors include:
[3] [2007] FMCA 7 at [26] - [59].
a)the nature and extent of the conduct which led to the contravention;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the contravention;
d)whether there had been similar previous conduct by a respondent;
e)the size of the business enterprise involved;
f)whether or not the contravention was deliberate;
g)whether senior management was involved in the contravention;
h)whether the party committing the contravention has exhibited contrition;
i)whether the party committing the contravention has taken corrective action;
j)whether the party committing the contravention has cooperated with the enforcement authorities;
k)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
l)the need for specific and general deterrence.
This summary has been adopted by subsequent Courts.[4]
[4] See for example Kelly at [14]; Nobrace at [11]; Fair Work Ombudsman v Scott Redmond t/as Cleaning Excellence [2019] FCCA 3697 (Redmond) at [13]; Fair Work Ombudsman v ASGBRIS Pty Ltd & Anor [2020] FCCA 553 (ASGBRIS) at [39] - [40].
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 in imposing a penalty.[5]
[5] Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at [11].
In addition, and particularly relevantly in this matter, the High Court of Australia has acknowledged that “the purpose of a civil penalty… is primarily if not wholly protective in promoting the public interest in compliance” and “an attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others” who might be tempted to engage in a relevant contravention.[6]
[6] Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) (FWO v FWBII) 258 CLR 482 at [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ), including citing Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52 & 152.
The factors that the FWO submits are material to the Court’s determination of the penalties to be imposed in these proceedings are addressed below.
Nature, circumstances and extent of the conduct and deliberateness
The relevant conduct in this matter is the deliberate failure of each of the Respondents to comply with the Compliance Notices.
A compliance notice issued pursuant to section 716 of the FW Act provides an important statutory mechanism for a Fair Work Inspector to deal with non-compliance with minimum entitlements in the FW Act, as an alternative to commencing litigation for each underlying contravention of an entitlement.[7] The compliance notice framework creates an opportunity for a person to whom it is served to rectify the matters set out in the notice and gain protection from civil remedy proceedings in respect of the underlying contravention(s),[8] thus encouraging efficient and cost-effective rectification of contraventions and payment of outstanding employee entitlements. Section 717 of the FW Act also provides a clear mechanism for a recipient of the notice to seek a review of the notice.
[7] Fair Work Bill 2008, Explanatory Memorandum at [2673]. See also Redmond at [19]; Fair Work Ombudsman v Syndicate Group Pty Ltd & Anor [2015] FCCA 2847 at [27]; Fair Work Ombudsman v Absynthe Restaurant Pty Ltd & Anor [2015] FCCA 58 at [36].
[8] If a person complies with a compliance notice, no civil remedy proceedings can be brought against the person in respect of the underlying contravention: s 716(4A) of the FW Act. The person is not taken to have admitted or been found to have contravened the civil remedy provision in respect of an underlying contravention(s): s 716(4B) of the FW Act.
On 2 November 2017, Inspector Liu issued the Compliance Notices onto Joys by personally handing the notices to Mr Shang at the Centre. The Compliance Notices required Joys to, by 17 November 2017, pay $35,062.17 to Ms Bing and $19,689.92 to Ms Wang, and provide reasonable evidence of the payments to the FWO. Joys and Mr Shang failed to take any steps to comply with the Compliance Notices by the due date, or at all.
The failure to comply with the Compliance Notices should be seen in the context of the information and opportunities provided by the FWO to the Respondents during the course of the investigation, to assist Joys to comply with its obligations to Ms Bing and Ms Wang and avoid the need for litigation:
a)on 10 July 2017, Fair Work Inspector Kathleen Hill (Inspector Hill) emailed Mr Shang providing information about the role of the FWO and its enforcement measures, which included information about compliance notices and litigation and a copy of the FWO’s Compliance and Enforcement Policy;[9]
b)on 2 November 2017, at the time the Compliance Notices were issued, Inspector Rodwell explained to Mr Shang the employer’s rights and obligations in relation to compliance notices (including the right to have the notices reviewed by a Court), and strongly recommended that he seek legal advice on behalf of both himself and Joys;[10] and
c)on 22 November 2017, after Joys had failed to comply with the Compliance Notices within the specified time:
i)Inspector Hill emailed Mr Shang a letter titled “Non-compliance with compliance notices”, which outlined the consequences for failing to comply with the Compliance Notices;[11] and
ii)Inspector Hill also called Mr Shang and explained to him that he could seek a review of the Compliance Notices by a court.[12]
[9] Liu Affidavit at Exhibit YL-1, Tab 21 (p354 - 359).
[10] First Rodwell Affidavit at [9].
[11] Liu Affidavit at Exhibit YL-1, Tab 27 (p415 - 417).
[12] Liu Affidavit at Exhibit YL-1, Tab 28 (p418 - 419).
Notwithstanding the above, Mr Shang advised the FWO that Joys would not comply with the Compliance Notices, including by stating this to Inspector Rodwell at the time the Compliance Notices were issued.[13]
[13] First Rodwell Affidavit at [10].
Joys did not provide the FWO with a reasonable excuse for failing to comply with the Compliance Notices, nor did it seek a review of the Compliance Notices pursuant to section 717 of the FW Act.[14]
[14] Liu Affidavit at [40]; First Rodwell Affidavit at [13].
The Respondents were responsible for ensuring the compliance with the Compliance Notices, ensuring that an appropriate review was sought or establishing that Joys had a reasonable excuse for non-compliance. The Respondents were made aware of these responsibilities on multiple occasions, however, they chose not to undertake any of these courses of action.
The Respondents also had ample opportunity to seek professional advice about the nature of the Compliance Notices and the consequences of non-compliance.
In light of the above, the decision of the Respondents to not comply with the Compliance Notices should be considered to be deliberate.
The specific circumstances giving rise to the Compliance Notices in this case should also be taken into account in determining appropriate penalties.
The Respondents are first time contravenors and have not previously been found to have contravened any workplace laws. However, the Compliance Notices in this case each related to identified contraventions in respect of an individual employee who was not paid any amount for work performed for Joys over approximately a 12-month period. In its decision in this matter, this Court observed that “It was a completely unequal relationship. Miss Bing and Miss Wang gave everything and received nothing in return. It would seem that the Respondents did everything they possibly could to disguise the arrangement that it had with Miss Bing and Miss Wang in ways that sought to avoid the impression of employment. But that is what it was in substance… For all practical purposes, these workers were taken advantage of by the Respondents.”[15]
[15] FWO v Joys at [35] - [36].
Nature and extent of the loss
Joys’ failure to comply with the Compliance Notices by the required date of 17 November 2017 further denied Ms Bing and Ms Wang the benefit of the rectification of underpaid amounts set out in these notices relating to their respective periods of employment with Joys.
Given this failure, the FWO was required to commence these proceedings to seek orders requiring payment of the amounts in the Compliance Notices. As a result of the Payment Orders made on 20 December 2019, Joys and Mr Shang were required to pay the amounts in the notices to the FWO by 17 January 2020.
As of 19 June 2020, neither Joys nor Mr Shang have made any payments to the FWO, as required by the Payment Orders.[16]
[16] Second Rodwell Affidavit at [10].
This has resulted in Ms Bing and Ms Wang being further denied the amounts of $35,062.17 and $19,689.92, plus interest, respectively. Given the underpayment amounts identified in the Compliance Notices arose during the period February 2016 to February 2017, Ms Bing and Ms Wang have now been without the benefit of these amounts for more than three years.
These amounts are significant amounts of money, including in respect of each of Ms Bing’s and Ms Wang’s individual circumstances. Each of Ms Bing and Ms Wang has given evidence of the impact of the non-payment of their entitlements on them.
Ms Bing
Ms Bing worked at the Centre between 8 February 2016 and 30 January 2017, primarily on a full time basis.[17] During this period, Ms Bing was not paid at all for work performed. Ms Bing was required to live off Centrelink payments that she received as a single mum. In addition, Ms Bing gives evidence that she also had to rely on her children’s father to pay for living expenses so that she could undertake study (being her unpaid work for Joys).[18]
[17] Bing Affidavit at [19]; FWO v Joys at [22] - [33].
[18] Bing Affidavit at [48].
Ms Wang
Ms Wang worked at the Centre between 29 February 2016 and 28 February 2017.[19]
[19] Wang Affidavit at [30].
Ms Wang was not paid for any work that she performed at Joys.[20] Instead, her parents had to support her financially.[21]
[20] Wang Affidavit at [48].
[21] Wang Affidavit at [61].
Size and financial circumstances of the business enterprise
There is limited evidence as to the financial circumstances or size of Joys.
However, regardless of the size of the business or its financial position, an employer cannot be absolved of its legal responsibility to comply with the law in relation to employees through financial difficulty or otherwise.[22] In the context of compliance notices, Jarrett J observed:[23]
“The obligation to comply with the Fair Work Act and, in particular, s 716 falls just as heavily on small corporations and small businesses – and individuals, for that matter – as it does on large employers or business. Put shortly, one cannot shirk one’s responsibilities imposed by law simply because one might be described as a small business or because the business has a particular size. It is incumbent on all employers to comply with the requirements of the Fair Work Act.”
[22] Fair Work Ombudsman v Bundaberg Security Pty Ltd [2014] FCCA 592 at [29] - [30]; Kelly at [28]; Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27].
[23] Fair Work Ombudsman v Extrados Solutions Pty Ltd [2014] FCCA 815 at [10].
To the extent that the Respondents seek to rely on the corporate or not-for-profit status of Joys, the FWO notes that all national system employers, irrespective of their form or business, are required to comply with their obligations under the FW Act. As this Court noted in the liability decision, the fact that “the First Respondent conducted a community based facility, was a not-for-profit company limited by guarantee, and was a registered charity, makes not the slightest difference to the reality of the situation.”[24]
[24] FWO v Joys at [36].
In these circumstances, the Court should not place any weight in respect of this factor in setting any penalties.
Involvement of senior management
Mr Shang is, and was at all relevant times, a director of Joys. Mr Shang was responsible for the management of Joys’ business[25] and was the “controlling mind and body of [Joys]”.[26]
[25] Bing Affidavit at [31]; Wang Affidavit at [46].
[26] FWO v Joys at [42].
Mr Shang was personally served the Compliance Notices in his capacity as director of Joys.[27]
[27] Liu Affidavit at [21] - [29] and [36] - [38].
As outlined at paragraph 37 above, Mr Shang advised the FWO that Joys would not comply with the Compliance Notices.
Contrition, corrective action and cooperation
The Respondents have not shown any contrition regarding the failure to comply with the Compliance Notices. To the contrary, Mr Shang made it clear at the time that the Compliance Notices were served that the Compliance Notices would not be complied with, and did not take any appropriate alternative course of action as outlined at paragraph 26 above.[28]
[28] Liu Affidavit at Exhibit YL-1, Tab 28 (p418 - 419); First Rodwell Affidavit at [10].
After the time for compliance with the Compliance Notices had passed on 17 November 2017, and throughout the course of these protracted proceedings, the Respondents did not take any corrective action in relation to the failure to comply with the Compliance Notices.[29]
[29] Liu Affidavit at [39]; First Rodwell Affidavit at [12].
In fact, notwithstanding this Court’s making of the Payment Orders, neither Joys nor Mr Shang have made any payments to the FWO as required by the orders.[30]
[30] Second Rodwell Affidavit at [10].
This failure to demonstrate any contrition, acknowledgement of wrongdoing or take any corrective action is a significant aggravating feature of this case.
The Courts have acknowledged that a discount for cooperation in proceedings may be appropriate, including for early admissions of liability and to assist the administration of justice.[31] However, the Respondents contested liability in these proceedings. As such, no discount to penalties for cooperation or early admissions is applicable.
[31] See for example, Fair Work Ombudsman v Jetstar Airways Ltd [2004] FCA 33 at [38]; Fair Work Ombudsman v Crystal Carwash Café Pty Ltd (No 2) [2014] FCA 827 at [36] - [38].
Compliance with minimum standards
As set out above, compliance notices form an important part of the regulatory framework of the FW Act and an important tool of Fair Work Inspectors. Compliance with such notices avoids the need for litigation or the imposition on any penalties.[32] The failure to comply with a compliance notice properly issued by the FWO is therefore serious and undermines the effectiveness of such notices as an efficient and cost-effective way to deal with non-compliance without recourse to litigation. In Fair Work Ombudsman v Chia Tung Development Corp Ltd[33] at [54] - [55], Altobelli J observed that, in using compliance notices as an effective means of enforcement and avoiding litigation:
"Ordering penalties at a meaningful level for a compliance notice breach allows a Court to show that there are serious consequences for failing to comply with a compliance notice, in circumstances where compliance in the first place would have allowed the Respondents to escape any penalty or any finding of a breach of the FW Act."
[32] Fair Work Ombudsmanv Blu Hornsby Pty Ltd & Anor [2016] FCCA 1150 at [29].
[33] [2016] FCCA 3457.
Ordering penalties at a meaningful level for a compliance notice breach allows a Court to show that there are serious consequences for failing to comply with a compliance notice.
Deterrence
It is well-established that the need for general and specific deterrence is a significant factor that is relevant to the imposition of a civil penalty.[34]
[34] See for example, Redmond at [14]; Nobrace at [37]; Pangaea at [26] - [59]; Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; [2007] FCAFC 65 (Ponzio) at [93] (Lander J).
General deterrence is directed at ensuring that the penalty will act as a deterrent to others who might be likely to offend[35] and that the penalty “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”.[36] It is vital that “the public is left in no doubt that there is a positive obligation to comply with statutory notices issued by the [FWO]”.[37]
[35] FWO v FWBII at [55] (French CJ, Kiefel, Bell, Nettle and Gordon JJ) and [110] (Keane J).
[36] Ponzio at [93] (Lander J).
[37] Redmond at [33].
The FWO submits that it is important to send a message to others in the community that non-compliance with a statutory notice issued by the regulator is a significant matter and has significant consequences. Such a deterrent message will encourage employers who receive such notices to comply or use the applicable review process to challenge the notice, thereby enabling the statutory purpose of compliance notices to be achieved.
Specific deterrence is directed at ensuring that a contravenor is not prepared to embark upon the risk of engaging in the same contravening conduct in future.[38]
[38] Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 at [50].
The FWO submits that there is a particular need for specific deterrence in this case given:
a)Joys remains a registered entity,[39] notwithstanding that it is unclear whether the entity continues to actively operate a child care facility. In Fair Work Ombudsman v Syndicate Group Pty Ltd & Anor [2015] FCCA 2847 at [34], Hartnett J found that deterrence was still a relevant factor and that there was a high need for specific deterrence in that case, despite the fact that the respondent company in that matter was no longer trading but was still registered; and
b)Mr Shang, who is currently the director of 24 separate entities (including Joys),[40] expressly, deliberately and on behalf of Joys refused to comply with the Compliance Notices without reasonable excuse. Mr Shang also did not take any alternative actions that were available to Joys and explained to him, for example, to have the Compliance Notices reviewed by a court.
[39] Second Rodwell Affidavit at Annexure ER-4 (p4 - 7).
[40] Second Rodwell Affidavit at Annexure ER-5 (p8 - 15).
In addition, Joys and Mr Shang have shown an inability or unwillingness to acknowledge the seriousness of the contraventions or take appropriate corrective action, as outlined at paragraphs 36 to 38 above. In these circumstances, penalties should be set at a sufficiently high level to demonstrate the seriousness of the contraventions to each of the Respondents.
Conclusion
Mr Shang represented himself today, I think ostensibly on behalf of the First Respondent as well. Mr Shang’s submissions, I think, fundamentally demonstrated a non-acceptance of the findings that I made in the substantive matter reported as Fair Work Ombudsman v Joys Child Care Limited & ANOR [2019] FCCA 3356. He described the contraventions as technicalities only. He again emphasised to me that the operation undertaken by Joys Child Care was for altruistic and charitable purposes and not a commercial operation and that his role was, at all times, in that context.
Once again, Mr Shang sought to emphasise to me the potential ramifications of any decision and imposition of penalty on charities.
I take all of that into account, and I accept that Mr Shang passionately believes in the matters that he has put before the Court. However, the findings that were made by the Court, referred to in my earlier Judgment, are clear. No appeal has been lodged in respect of the Orders that were made there.
With the greatest of respect, nothing has changed. The importance as submitted by Mr Thirukumar of a deterrence is accentuated, in my opinion, by the fact that this organisation purported to be a charitable organisation. I won’t repeat the comments I’ve made in my earlier Judgment about altruism.
The law is in place. It was clearly breached. The penalties that I have imposed are reasonable and proportionate. I am satisfied in the circumstances that the Orders that I made are consistent with the law.
I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Associate:
Date: 10 September 2020
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