Fair Work Ombudsman v JPA Manchester Pty Ltd
[2018] FCCA 845
•20 April 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v JPA MANCHESTER PTY LTD & ANOR | [2018] FCCA 845 |
| Catchwords: INDUSTRIAL LAW – Penalty – contraventions of the General Retail Industry Award 2010 relating to remuneration – failure to comply with record keeping obligations under the Fair Work Act 2009 (Cth) – appropriate penalty to be imposed – relevant considerations – applicable penalty of each contravention. |
| Legislation: Crimes Act 1914 (Cth), s.4AA Fair Work Act 2009 (Cth), ss.3, 44, 45, 90, 535, 536, 539, 546, 550, 557, 715 Fair Work Regulations 2009 (Cth), regs.3.33, 3.34, 3.36, 3.40, 4.01A |
| Cases cited: Commonwealth v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining & Energy Union v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; [2015] HCA 46 Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623 Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301 Fair Work Ombudsman v Ramsey Food Processing Pty Ltd(No.2) [2012] FCA 408 Fair Work Ombudsman v Siner Enterprises Pty Ltd (No.2) [2018] FCCA 589 Fair Work Ombudsman v South Jin Pty Ltd (No.2) [2016] FCA 832 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | JPA MANCHESTER PTY LTD (ACN 111 143 483) |
| Second Respondent: | JIA PING OU |
| File Number: | SYG 1501 of 2017 |
| Judgment of: | Judge Smith |
| Hearing date: | 22 March 2018 |
| Date of Last Submission: | 22 March 2018 |
| Delivered at: | Sydney |
| Delivered on: | 20 April 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms V Brigden |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Counsel for the Respondents: | Mr B Zipser |
| Solicitors for the Respondents: | Juris Cor Legal |
ORDERS
The first respondent pay a penalty of $153,333 pursuant to s.546(1) of the Fair Work Act 2009 (Cth) (FW Act) for its contraventions as set out in paragraph 1 of the orders of Judge Smith entered on 22 March 2018.
Pursuant to sub-s.546(3)(a) of the FW Act, the first respondent pay the penalty amounts to the Consolidated Revenue Fund of the Commonwealth within 28 days of this order.
The second respondent pay a penalty of $8,505 pursuant to s.546(1) of the FW Act within the meaning of s.550 of the FW Act, in the following contraventions of the first respondent:
(a)s.44(1) of the FW Act, by failing to pay Ms Yu accrued untaken annual leave upon termination of employment as prescribed by s.90(2) of the FW Act;
(b)s.45 of the FW Act, by failing to pay Ms Yu annual leave loading on termination of employment as prescribed by sub-cl.32.3(b)(i) of the General Retail Industry Award 2010;
(c)s.535(1) of the FW Act by failing to make employee records specifying leave taken and the balance of leave Ms Yu was entitled to as prescribed by reg.3.36(1) of the Fair Work Regulations 2009 (Cth) (FW Regulations); and
(d)s.535(1) of the FW Act by failing to make an employee record specifying the termination of Ms Yu’s employment as prescribed by reg.3.40 of the FW Regulations.
Pursuant to sub-s.546(3)(a) of the FW Act the second respondent pay the penalty amount in order 3 above to the Consolidated Revenue Fund of the Commonwealth within 28 days of this order.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1501 of 2017
| FAIR WORK OMBUDSMAN |
Applicant
And
| JPA MANCHESTER PTY LTD (ACN 111 143 483) |
First Respondent
| JIA PING OU |
Second Respondent
REASONS FOR JUDGMENT
The first respondent, JPA Manchester Pty Ltd, operated a business which included a warehouse, an online retail store and several retail shops selling bed linen and homewares. The second respondent, Mr Jia Ping Ou, was the sole director and secretary of JPA.
JPA employed Ms Lei Yu from 3 January 2012 until 14 October 2015 at three of its retail shops. Shortly after the termination of Ms Yu’s employment the Fair Work Ombudsman (FWO) commenced investigation of JPA’s compliance of its legal obligations in respect of Ms Yu.
In May 2017 the FWO commenced these proceedings alleging that JPA had breached a number of the provisions of the Fair Work Act 2009 (Cth) and the Fair Work Regulations 2009 (Cth). The FWO also claimed that Mr Ou was involved in several of JPA’s contraventions. Although the respondents initially contested liability in these proceedings, after the matter had been set down for hearing and the FWO had served its evidence on liability, the respondents admitted having contravened the Act. In light of that admission, and the respondents’ consent to the making of declarations and an order for payment of the amounts that should have been paid to Ms Yu, the remaining issue in the proceedings is the imposition of a penalty under the Act.
Relevant factual background
The following factual background is taken largely from the Statement of Agreed Facts signed on behalf of the parties which became an exhibit in the proceedings. Certain other facts are relevant to the Court’s consideration of the penalty to be imposed for the admitted contraventions. Those facts will be dealt with later in these reasons.
JPA relevantly conducted three retail shops selling homewares and bed linen at 11 Cope Street, Redfern, 155 Redfern Street, Redfern and Parkside Plaza, 1-13 Wandella Street, Miranda in the State of New South Wales. Mr Ou was the sole director and shareholder of JPA.
JPA employed Ms Yu during the period 3 January 2012 to 14 October 2015. During that period, Ms Yu worked as a shop assistant at the Miranda and Redfern stores. Ms Yu performed duties including displaying goods in the shops, stocking shelves, operating the cash register and customer service. Those activities fell within the description of Retail Employee Level 1 in accordance with Schedule B of the General Retail Industry Award 2010 (Retail Award).
Failure to pay minimum wage
From 2 January 2012 to 6 July 2014, for the purposes of the transitional provisions of Schedule A of the Retail Award (Transitional Provisions), the preserved Australian Pay and Classification Scale derived from the Shop Employees (State) Award (APCS) applied. The following table sets out, for each relevant period, the amount that Ms Yu was actually paid by JPA as well as her entitlement for the minimum hourly rates in accordance with cl.A.2.5 of sch.A to the Retail Award in the period up to 6 July 2014 and cl.17 of the Retail Award in the period from 7 July 2014.
Period
Entitlement Rate
2 January 2012 to 1 July 2012
$17.03
2 July 2012 to 20 June 2013
$17.53
1 July 2013 to 6 July 2014
$17.98
7 July 2014 to 12 July 2015
$18.52
13 July 2015 to 1 November 2015
$18.99
In total, Ms Yu worked 6,567.83 ordinary hours on Monday to Friday and, according to the Retail Award was entitled to be paid $117,808.20. However, Ms Yu was only paid a total of $93,822.98. In light of these facts, Ms Yu was underpaid in the sum of $23,985.22 and JPA breached a term of the modern award and so contravened s.45 of the Act, a civil remedy provision under s.539(2) of the Act.
Failure to pay Saturday penalty loadings
Clause 29.4(b) of the Retail Award required JPA to pay Ms Yu a penalty loading of 25% for ordinary hours of work performed on a Saturday.
Ms Yu worked a total of 7 hours on a Saturday and so was entitled to be paid $32.65; however she was not paid any Saturday penalty. By reason of that, JPA contravened a term of the modern award and so contravened s.45 of the Act.
Failure to pay public holiday loadings
Clause 29.4(d) of the Retail Award required JPA to pay Ms Yu a public holiday penalty of 150% for ordinary hours worked on a public holiday. Ms Yu worked a total of 30.75 hours on a public holiday and was entitled to be paid $1,047.08; however, she was not paid any public holiday penalty. In light of those facts, JPA breached a term of the modern award and thereby contravened s.45 of the Act.
Failure to pay overtime rates (Monday to Saturday) for the first 3 hours of overtime
Clause 29.2(a) of the Retail Award required JPA to pay Ms Yu an overtime rate of 150% for the first 3 hours of overtime worked on Monday to Saturday. Ms Yu worked a total of 564.5 overtime hours for the first 3 hours of overtime and so was entitled to be paid $14,867.72. Ms Yu was only paid a total of $6,891.80 being an underpayment of $7,975.88[1]. By reason of those facts JPA contravened a term of the modern award and so contravened s.45 of the Act.
[1] This amount is the agreed underpayment between the parties in the Statement of Agreed Facts filed on 5 March 2018.
Failure to pay overtime rates (Monday to Saturday) for overtime in excess of 3 hours
Clause 29.2(a) of the Retail Award required JPA to pay Ms Yu an overtime rate of 200% for the hours of overtime worked in excess of the first 3 hours of overtime worked on Monday to Saturday. In total, Ms Yu worked 724 overtime hours in excess of 3 hours and was entitled to be paid $25,369.93. However, she was only paid $8,746.92, an underpayment of $16,623.01. Accordingly, JPA contravened a term of the modern award and s.45 of the Act.
Failure to pay annual leave entitlement on termination of employment
Section 90(2) of the Act required JPA to pay Ms Yu at the rate of $18.99 per hour of accrued annual leave on the termination of her employment. At the time of termination of employment Ms Yu had accrued 503.83 hours of annual leave and was so entitled to be paid $9,567.73. Ms Yu was not paid any accrued annual leave. For that reason, JPA contravened s.90(2) of the Act and contravened s.44(1) of the Act, another civil remedy provision under s.539(2) of the Act.
Failure to pay annual loading on termination of employment
Sub-clause 32.3(b)(i) of the Retail Award required JPA to pay annual leave loading at the rate of $3.32 per hour of accrued annual leave on termination of employment. As already noted, on termination of her employment Ms Yu had accrued 503.83 hours of annual leave and so is entitled to be paid $1,672.72 in respect of leave loading; however, she was not paid any annual leave loading upon termination of her employment. In those circumstances, JPA breached a term of the modern award and thereby contravened s.45 of the Act.
In total, JPA underpaid Ms Yu $60,904.29. It has still not paid her any of that amount in spite of conceding its liability to do so.
Record-keeping contraventions
Failure to make and keep records as prescribed by s.535(1) of the Act
Section 535(1) of the Act required JPA to make and keep for a period of 7 years certain records in relation to Ms Yu including employee records prescribed by the Regulations that include:
a)the rate of remuneration, gross and net, paid to Ms Yu (sub-regs.3.33(1)(a) and 3.33(1)(b));
b)the loadings and penalty rates and other entitlements Ms Yu was entitled to be paid (sub-regs.3.33(3)(c), 3.33(3)(d) and 3.33(3)(e));
c)the number of overtime hours worked or when Ms Yu started and ceased working overtime each day (sub-reg.3.34);
d)Ms Yu’s entitlement to leave, any leave taken and the balance of leave (sub-reg.3.36(1)); and
e)Ms Yu’s termination of employment (sub-reg.3.40).
JPA produced its wage records in respect of Ms Yu pursuant to a Notice to Produce issued by Fair Work Inspector Zheng on 8 January 2016. Those records did not comply with the Regulations. The respondents contested the extent of this non-compliance in connection with the issue of penalties. For that reason, it will be necessary to examine the question in greater detail later in these reasons. For present purposes it is sufficient to note my conclusion that JPA contravened s.535(1) of the Act, a civil remedy provision under s.539(2) of the Act.
Payslips contravention
Section 536(1) of the Act required JPA to give to Ms Yu a payslip within one working day after she was paid. JPA failed to provide Ms Yu with payslips within one working day after she was paid, or at all, and so breached s.536(1) of the Act, a civil remedy provision under s.539(2) of the Act.
Accessorial liability of the second respondent
Mr Ou admits, and I accept, that he knew the following matters:
a)JPA was covered by the Act and the Retail Award;
b)JPA employed Ms Yu;
c)Ms Yu was employed as a shop assistant on a permanent full-time basis;
d)Ms Yu took a period of annual leave from 12 February 2014 to 23 March 2014;
e)Ms Yu’s employment was terminated on around 7 October 2015; and
f)Ms Yu was entitled to be paid her accrued annual leave and annual loading upon termination of her employment.
In light of Mr Ou’s knowledge of those matters, together with the fact that he was the sole director and shareholder of JPA and acted in accordance with the scope of his actual apparent authority in the business of JPA, Mr Ou was involved, within the meaning of s.550(1) of the Act, in the contraventions by JPA of the provisions of the Act as set out above.
The Court was satisfied of those facts at the conclusion of the hearing on penalty and declarations were made together with an order that JPA pay to Ms Yu the amount of underpayment.
The Court’s approach to the determination of penalty
As noted recently by Judge Lucev in Fair Work Ombudsman v Siner Enterprises Pty Ltd (No.2) [2018] FCCA 589 at [11], the courts have developed a set of principles as steps in the process of determining a quantum of penalty as follows:
…
a)first, the Court identifies the separate contraventions involved. Each contravention of, in turn each separate obligation imposed by, the FW Act is a separate contravention of a civil remedy provision for the purposes of s.539(2) of the FW Act: … Rocky Holdings Pty Ltd & Anor v Fair Work Ombudsman…;
b)second, the Court should consider whether the extent to which the contraventions so identified in the first step constitute a “course of conduct”, and thus ought to be treated as a single contravention within the meaning and operation of s.557 of the FW Act…;
c)third, to the extent that two or more contraventions have common elements, the Court may take this into account in considering the appropriateness in all the circumstances of the quantum of penalty for the contraventions. That reflects the basic principle that a contravener should not be penalised more than once for what, in a practical sense, amounts to the same contravening conduct, such that the penalties imposed by the Court should be an appropriate but fair response to the contravention of statutory obligations: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith…;
d)fourth, the Court, having identified the relevant factors arising from the first three steps, must fix appropriate penalties for each contravention having regard to all of the circumstances of the case, and the basic nature and purpose of imposing a penalty…; and
e)fifth, having fixed appropriate penalties for the contraventions, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the contravening conduct: Kelly v Fitzpatrick…. The Court should apply an “instinctive synthesis” (often referred to in the applicable case law as the “totality principle'”) in making this assessment: Australian Ophthalmic Supplies at [27], [55] and [78].
(Citations omitted)
The separate contraventions, course of conduct and common elements
The parties accepted that contraventions of a particular obligation imposed by the same “provision” of the National Employment Standards or “term” of a modern award[2], may be grouped under s.557 of the Act provided “that there is one course of conduct arising from a single decision of the employer”.
[2] See Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301 at [39].
I have accepted this submission and its application to the facts of this case. That was the basis for setting out my findings of contravention in the way that I have above.
The respondents submitted that, in addition to grouping the matters by reference to contraventions of the same obligation, there ought to be grouping in respect of the contraventions of the obligation to pay a penalty loading for ordinary work performed on a Saturday; and the obligation to pay a loading for work performed on a public holiday.
The FWO submitted that, while grouping of contraventions of different obligations is possible, that can only occur where “there are “common elements” to the acts or omissions which led to the contraventions” and, in considering this issue, the Court should give weight to the separate legal character of the contraventions: Fair Work Ombudsman v Ramsey Food Processing Pty Ltd(No.2) [2012] FCA 408 at [2].
In Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479 Bromberg J explained, at [24] that:
It is also open to the court to group separate contraventions together where the contraventions may be said to overlap or involve the potential punishment for the same or substantially similar conduct: Pearce v R (1998) 194 CLR 610 at [40] (McHugh, Hayne and Callinan JJ), Johnson v R (2004) 205 ALR 346 at [27] – [34] (Gummow, Callinan and Heydon JJ) and Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [46], [71] and [72] (Graham J) and [93] (Buchanan J).
I do not accept, however, that the failure to pay penalty loading for work performed on Saturday overlaps with the failure to pay loading for work on a public holiday in this sense. Other than the bare fact that loadings are involved, the two obligations are of a substantially different character. That is recognised in the difference between the loading for Saturday work (25%) and Public Holiday work (150%).
Further, it cannot reasonably be said, beyond a very high level of generality, that the breach of those two obligations was part of a single decision, or substantially similar conduct. Although they did not go so far, the respondents’ submission, if accepted, would lead to a conclusion that there was only one contravention in respect of Ms Yu because JPA made a single decision to pay a flat hourly rate of pay regardless of when work was performed by her. That approach does not sufficiently recognise the nuances in the contraventions engaged in by JPA and, by dint of his knowledge and involvement, by Mr Ou.
For those reasons, I find that it is appropriate to group the following contraventions: first, the failure to pay overtime rates; secondly, the failure to pay annual leave and leave loading upon termination; and thirdly, the record keeping contraventions.
At [89] below there is a table that sets out the contraventions grouped in this way. The table also sets out the maximum penalty for each contravention and my conclusions as to the appropriate discount to be applied to the maximum and the final penalty amount.
The appropriate penalty for each contravention
Maximum penalty
An essential element of determining penalty is the maximum penalty set for each contravention. The maximum penalty is used as a yardstick together with all of the other relevant factors: Markarian v R (2005) 228 CLR 357 at 372 [31]; [2005] HCA 25.
The pecuniary penalty that may be imposed depends on the type of contravention and whether or not the person in question is an individual or a body corporate. A penalty in respect of an individual must not be more than the maximum number of penalty units referred to in the relevant item in column 4 of the table in s.539(2) and, in respect of a body corporate it must not be more than 5 times the maximum number of penalty units in that column: s.546(2).
The maximum penalty for the contravention of the regulations is included in the table in s.539(2) by the operation of reg.4.01A.
A “penalty unit” in the Act has the same meaning as in s.4AA of the Crimes Act 1914 (Cth). On 31 July 2015 the value of the penalty unit under that Act was increased from $170 to $180. The contraventions occurred between 3 January 2012 and 14 October 2015. In light of that, as the respondents submitted, for most of the contravention period the value of the penalty unit was $170 and, had Ms Yu’s employment been terminated 4 months earlier, the lower value would have been applicable. The respondents submitted that, in those circumstances, it would be arbitrary and unfair to apply the higher penalty rate.
While the bulk of the contravening conduct may have taken place prior to the increase in the value of the penalty unit, the higher value should be applied: Fair Work Ombudsman v Grouped Property Services Pty Ltd (No.2)[2017] FCA 557 at [396] – [398]; Fair Work Ombudsman v Amritsaria Four Pty Ltd [2016] FCCA 968 at [44] – [52]. There is nothing unfair or anomalous about that result. It is simply the outcome of the respondents having the benefit of grouping under s.557 of the Act. However, as the FWO accepted, the Court can consider, as a mitigating factor, the fact that the lower penalty applied for a significant part of the contravention period: Fair Work Ombudsman v Mamak Pty Ltd [2016] FCCA 2104 at [47].
Factors relevant to penalty
Over the course of time the courts have developed a number of guidelines for the exercise of their power to impose pecuniary penalties. In Kelly v Fitzpatrick (2007) 166 IR 14 at 18-19 [14]; [2007] FCA 1080, Tracey J referred to the following:
·…The nature and extent of the conduct which led to the breaches.
·The circumstances in which that conduct took place.
·The nature and extent of any loss or damage sustained as a result of the breaches.
·Whether there had been similar previous conduct by the respondent.
·Whether the breaches were properly distinct or arose out of the one course of conduct.
·The size of the business enterprise involved.
·Whether or not the breaches were deliberate.
·Whether senior management was involved in the breaches.
·Whether the party committing the breach had exhibited contrition.
·Whether the party committing the breach had taken corrective action.
·Whether the party committing the breach had cooperated with the enforcement authorities.
·The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and
·The need for specific and general deterrence.
…
Those guidelines are meant to assist in the determination of what penalty is appropriate and do not constitute mandatory considerations. In Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151, Mansfield J said this about the guidelines:
[74]That provides a convenient checklist, but it does not restrict matters that may be taken into account in the exercise of judicial discretion: Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at [11]; Australian Ophthalmic Supplies v McAlary-Smith (2008) 165 FCR 560 (Australian Ophthalmic Supplies) at [91]; Offshore Marine Services at [12]. Nor does it require specific attention to matters which are not relevant or not focused on in submissions. In the exercise of judicial discretion, the Court should not be distracted from paying “appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain the public confidence in the statutory regime which imposes the obligations”: Australian Ophthalmic Supplies at [91]; Offshore Marine Services at [12]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Service Union of Australia v QR Limited (No 2) [2010] FCA 652 at [34]-[35].
The matters referred to in these guidelines are by no means discrete from one another. Particular facts may be relevant to a number of the considerations. For that reason, the failure to mention all facts relevant to a particular consideration does not mean that I have not given full consideration to that matter. Rather, the following analysis sets out the facts most pertinent to each particular matter even though those facts have also been considered as a whole.
Nature and extent of the conduct
a. Underpayment contraventions
Ms Yu was underpaid in respect of most of her entitlements: from the minimum rate of pay to penalty rates, overtime, annual leave and leave loading. As the following table reveals, some underpayments were more significant than others.
Entitlement
Underpayment amount
Percentage of total underpayment
Minimum rate
$23,985.22
40%
Saturday penalty
$32.65
5%
Public Holiday penalty
$1,045.27
1.7%
Overtime (first 3 hours)
$7,975.88
13%
Overtime (after first 3 hours)
$16,623.01
27.3%
Annual leave
$9,567.73
15.7%
Leave loading
$1,672.72
2.8%
It is relevant that, at the same time that JPA was underpaying Ms Yu, JPA had been found by the FWO to have contravened the Act in respect of another employee, Ms Tang.
On 6 March 2014, the FWO received a request for assistance from Ms Tang and undertook an investigation of JPA’s compliance with the Act and Regulations.
On 6 August 2014, the Fair Work Inspector conducting the investigation, Ms Zheng, caused JPA to be given a copy of a Complaints Investigations Findings Letter together with a draft Enforceable Undertaking (EU) during a meeting between the parties. Ms Zheng had concluded that JPA had contravened the Retail Award in respect of minimum wages, casual loading, annual leave and annual leave loading.
On 27 October 2014, JPA admitted the contraventions and rectified the underpayment. Further, on 29 September 2014 JPA entered into an EU with the FWO under s.715 of the Act. Mr Ou executed the EU for JPA.
Amongst the undertakings given by JPA in the EU was that JPA was to develop and implement “demonstrable systems and processes in relation to payroll to ensure ongoing compliance in relation to the contraventions including rates of pay, loadings, penalties, taxation and superannuation”.
Whether or not JPA did, in fact, comply with that particular undertaking, the contraventions that took place after 29 September 2014 (or at least 28 days after that date) must have been entirely deliberate. There is no question that, at least by the time of the EU, JPA was aware of its various obligations under the Retail Award and yet it continued to underpay Ms Yu for another 12 months.
b. Employee record contraventions
The importance of accurate employment records cannot be overstated. They are an essential tool in assessing compliance with workplace laws: Fair Work Ombudsman v Han Investments Pty Ltd [2017] FCA 623; Grouped Property Services Pty Ltd (No. 2). That is important from the perspective of the FWO who has the responsibility for ensuring that compliance, but also from the perspective of the employer. As will be seen, one of the principle reasons that JPA eventually agreed to liability in these proceedings is that it could not disprove the allegations against it. That was because it had insufficient records.
There was some dispute in the proceedings about the extent of this contravention. The respondents contended that the records produced by it substantially complied with its obligations. For this reason, it contended that the contravention was not deliberate. The FWO accepted that the records produced by JPA complied in some respects with the Regulations but clearly not in others. On the other hand, it pointed out that the records did not cover the entire contravention period.
Consideration of JPA’s records requires some analysis of the way in which those records were given to the FWO. The manner and extent of JPA’s production of its wage records to the FWO in connection with this matter is a little complicated. It is also relevant to the issue of the deliberateness of JPA’s conduct. For those reasons it is convenient to leave my analysis of this issue until later in these reasons. That said, I have also taken that consideration into account for the purposes of weighing the nature and extent of this contravention.
c. Payslip contravention
The requirement to provide an employee with a payslip also plays an important role in the scheme of the Act. Payslips allow an employee to understand how his or her wages are calculated and to check whether he or she is being paid all of the entitlements: Fair Work Ombudsman v South Jin Pty Ltd (No.2) [2016] FCA 832 at [55].
In light of that role, I agree with the FWO’s submission that the obligation to provide pay slips is not merely administrative.
The circumstances in which the contraventions took place
There are two matters of particular concern in this matter: first, the vulnerability of Ms Yu; and secondly, the fact that JPA had entered into an EU concerning similar contraventions and yet continued to contravene its obligations in respect of Ms Yu.
Ms Yu is 56 years old with limited ability to speak and understand English. Her understanding of Australian workplace laws is also limited. Although she thought that she was being underpaid Ms Yu thought that, at her age, she would find it difficult to find alternative employment. These factors not only made Ms Yu vulnerable to exploitation but also sharpened the impact of the contraventions on her. I turn to that consideration next.
Nature and extent of the loss or damage suffered
Ms Yu’s uncontested evidence was that she struggled to pay for basic items such as food and could not afford to visit her family in China. She relied on others, including her former partner, for money and was concerned that she could not meet her mortgage obligations and might have to sell her home.
On the other hand, JPA has, for years now, benefitted from the underpayment contraventions and has effectively shifted part of the costs burden of its business onto a vulnerable employee.
The respondents relied on the fact that the underpayments in respect of Saturday penalty rates and Public Holiday penalty rates were relatively modest (about $1,078) and that the penalty sought by the FWO was disproportionate to that amount. The same point was made in respect of the failure to pay annual leave and leave loading (about $11,200). I have taken this into consideration along with all of the other factors in determining the appropriate penalty.
Previous similar conduct
While neither respondent has been the subject of proceedings for contraventions of workplace laws, JPA executed the EU in respect of very similar contraventions to those the subject of these proceedings. That is a factor that carries significant weight.
Size of the business enterprise
JPA conducts a small to medium enterprise with 25 to 30 employees. The relevance of this is not that size is an excuse for failure to comply with workplace laws but, rather, that in determining an appropriate penalty the Court ought to avoid a penalty that is oppressive or crushing. Here, there is no evidence of the financial capacity of either of the respondents.
Whether the breaches were deliberate
As I have noted, the respondents contended that the pay record contraventions were not deliberate after the entry into the EU because the pay records kept from that time substantially complied with the Regulations. In order to properly assess this submission, and the conduct of the respondents overall, it is necessary to consider the way in which JPA responded to the investigation by the FWO into the complaint made by Ms Yu.
On 13 November 2015, shortly after Ms Yu had made a request for assistance, Ms Zheng, a Fair Work Inspector, sent an email to JPA outlining Ms Yu’s complaints and asking for a response by 27 November 2015.
JPA engaged a lawyer, Mr Gao, who replied on its behalf by email dated 8 December 2015. In his email Mr Gao stated that Ms Yu had been underpaid $1,996.76 and attached a document that purported to calculate that amount (8 December document). The 8 December document was entirely inaccurate. For instance, it showed that the applicant had been paid at the rate of $19.54 in 2012. That was simply not the case. The FWO did not argue that this document revealed deliberate obfuscation but, rather, that there was no real attempt to co-operate in the FWO’s investigation. I accept that characterisation.
On 8 January 2016, Ms Zheng issued a notice to produce requiring JPA to produce by 28 January 2016, amongst other things, all records or documents relating to the times worked by Ms Yu, documents which identified overtime worked by her and wage payment records.
On 28 January 2016, Mr Gao hand delivered to the FWO’s office in Sydney the following documents:
a)a copy of Ms Yu’s driver’s licence;
b)a tax file number declaration form;
c)a description of Ms Yu’s duties;
d)a copy of the Retail Award;
e)PAYG payment summaries for the years ending 30 June 2012 to 30 June 2015; and
f)rosters for June 2014 to October 2015.
By email dated 4 February 2016, Ms Zheng wrote to Mr Gao asking for further documents in response to the Notice to Produce and inviting Mr Ou to attend an electronically recorded interview.
Further correspondence ensued in which Mr Sun[3] indicated that Mr Ou would not attend an interview and that certain documents did not exist. Those documents included annual leave and personal leave records.
[3] An employed lawyer of the firm retained by the respondents.
By email dated 3 March 2016, Ms Zheng told Mr Gao that she still had not received payslips and requested a face to face meeting with any representative of JPA.
On 14 March 2016, Mr Gao sent Ms Zheng a number of payslips by email. The first of those payslips was for the period commencing on the week from 30 June 2014 to 6 July 2014 and ending on the week from 5 October 2015 to 11 October 2015.
On 15 March 2016, Mr Ou and Mr Gao met with Ms Zheng. At the meeting Mr Gao asked Ms Zheng to ignore the 8 December document. After the meeting Ms Zheng wrote to Mr Gao allowing him a week to respond to a number of requests. One of those requests was to produce any documents that confirmed the hourly rate paid to Ms Yu given that the 8 December document was not to be relied on.
On 23 March 2016, Mr Gao responded to Mr Zheng’s requests in a letter[4] sent by email. Attached to the letter were a number of documents including time and wage records in relation to Ms Yu. Amongst other things, Mr Gao explained that, due to a miscommunication with JPA, the 8 December document had incorrectly showed the difference between the “rate before tax and rate after tax, but not underpayment.” However, even that statement was incorrect. The 8 December document did not show any correct hourly rate, whether before or after tax.
[4] The date of the letter being 22 March 2016.
The respondents argue that the documents sent by Mr Gao substantially complied with the requirements of the Regulations. The attachment to the letter marked “B” were leave records. They are for the period 30 June 2014 to 11 October 2015. Regulation 3.36(1) requires records to be kept that included Ms Yu’s entitlement to leave, any leave taken and the balance of leave.
The documents produced by JPA record the amount of leave that accrued each week and the total “available” at the end of the financial year. There is no record in the document of leave taken by Ms Yu in February and March 2014. That is clearly because there is no record that relates to that period. Further, the document does not include the running balance of leave accrued. In light of that, the documents were only partially compliant with the requirements of the regulation.
The documents attached to the letter and marked “C” were wage records for the weekly periods from 28 July 2014 to 11 October 2015. The Regulations require an employee must make and keep records that include:
a)the rate of remuneration, gross and net, paid to Ms Yu [sub-regs.3.33(1)(a) and 3.33(1)(b)]. The records produced included that information;
b)the loadings and penalty rates and other entitlements Ms Yu was entitled to be paid [sub-regs.3.33(3)(c), 3.33(3)(d) and 3.33(3)(e)]. The records did not include these details. For instance, the records showed that Ms Yu worked on Australia Day in 2015, a public holiday, but no loading was shown;
c)the number of overtime hours worked or when Ms Yu started and ceased working overtime each day [sub-reg.3.34]. This was complied with.
This analysis shows that JPA was very slow in responding to the requests by the FWO for information and documents. When JPA finally responded it gave an incomplete set of records that only partially applied. While I accept that the wage records themselves show some effort to comply with the requirements of the Regulations, that effort must be judged against the undertakings in the EU to “ensure” compliance. Thus, while some allowance may be given for the records kept in the last year of Ms Yu’s employment, that allowance is not a large one.
Whether senior management was involved
In my view this consideration has less significance for small to medium enterprises where the most usual structure is for the owner of the company to be the manager of the business and there is little other management involved in the day to day running of the business. While there was little evidence about the day to day running of JPA’s business, it is clear that Mr Ou was responsible for the overall direction, management and control of the company and its business and that he was involved, to that extent, in the contraventions.
Contrition, corrective action and rectification
Contrary to the respondents’ submissions, there was little or no contrition in this case. Counsel for the respondents frankly admitted that liability on the underpayment contraventions was only admitted because the respondents could not prove what payments had in fact been made. This might be a recognition that the respondents were inevitably going to lose on liability, but it does not reveal any consciousness of, or remorse for serious and long-term contraventions. Further, and perhaps more critically, JPA has still not paid Ms Yu the amounts it now admits that it owes her.
The respondents have, on the other hand, saved some court time and public expense by its admission of liability. That is clearly to be encouraged. I deal with this further below.
Co-operation with the FWO
The respondents accepted that they had not engaged in model conduct in dealing with the FWO in relation to this matter. However, they point to the fact that they engaged a lawyer to assist them with the matter, that their solicitor engaged in considerable correspondence with the FWO and that Mr Ou attended an interview.
While I accept that the respondents have shown some co-operation with the FWO, it was limited and, on one occasion, the documents produced by them were potentially misleading. I dealt with that issue at [60] – [74] above.
Overall, I find that the respondents’ approach was to leave it to the FWO to prove its case and then determine how to react. That approach explains why it was not until after the FWO had filed all of its evidence that the respondents admitted liability.
Compliance with minimum standards
One of the principal aims of the Act is to ensure a “guaranteed safety net of fair, relevant and enforceable minimum terms and conditions through the National Employment Standards, modern awards and national minimum wage orders”: s.3. JPA’s conduct deprived Ms Yu of this minimum protection in a way that displayed a significant disregard for workplace law.
Specific deterrence
The respondents’ lack of remorse, their conduct in the face of the undertakings given in the EU, and failure to pay Ms Yu the money owed to her suggests that specific deterrence has an important role in these proceedings.
General deterrence
It is well-accepted that the penalty imposed for contravention of the Act should be one that would be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations. Indeed, in Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076; [1990] FCA 762 French J explained, at 52,152 that the principal, if not the only object of penalties imposed under the Trade Practices Act 1974 (Cth) was to 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 contravene the Act. That passage was expressly adopted by the plurality of the High Court when dealing with workplace laws in Commonwealth v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining & Energy Union v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at [55]; [2015] HCA 46.
The FWO argued that the retail industry in which JPA operates is particularly susceptible to contraventions in workplace laws. It relied on a report[5] prepared by it that showed that the disputes in the retail industry formed an average of 9.4% of all disputes completed by the FWO in the period 2015–2017, 12.4% of all litigation commenced by the FWO involved the retail industry and that the third highest number of complaints received by the FWO were received in respect of the retail industry.
[5] Fair Work Ombudsman, Fair Work Ombudsman Industry profile and FWO interactions, Retail Trade Industry, (data provided for the period July 2015-December 2017).
I give that report some, but not significant weight. Like most statistics, the results of the report do not show the entire picture and it is possible that it is inaccurate because of that. For example, it may be that 12.4% of all litigation brought by the retail industry concerns the retail industry, but what was the outcome? What were the particular complaints involved and their relative seriousness? That said, the figures have some relevance and do show that there is a need for those involved in the retail industry to be made aware of the possible consequences of contravening workplace laws.
Discount
I consider that there should be a discount of 10% from the maximum penalty for each contravention for the fact that liability in the proceedings was ultimately not contested. This case falls into the second category referred to by Stone and Buchanan JJ in Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at 405 [76]; [2008] FCAFC 70:
… the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.
The appropriate penalty in respect of each contravention
Having regard to all of these matters, I consider that the appropriate penalty in respect of each contravention is as set out in the table below.
After judgment in this matter was reserved, the parties informed the Court that they agreed to a penalty of $8,505 in respect of the second respondent, and an order that he pay that amount to the Consolidated Revenue Fund of the Commonwealth within 28 days of the order. While it is regrettable the parties could not come to an agreement before the hearing, taking into account the fact that they have not had an opportunity to address why a different penalty should be imposed, I am prepared to make the orders in the form agreed to by the parties.
I have given particular weight to the lack of remorse shown by the respondents (particularly the failure to make reparation to Ms Yu) and the fact that these contraventions occurred in the face of undertakings given by JPA to the FWO in respect of earlier, similar contraventions. I am satisfied that these contraventions were made knowingly and deliberately. The respondents took advantage of a vulnerable employee and the Court must send a clear signal to both of them as well as to other employers in the retail industry that workplace rights will not be overridden without significant consequences. For those reasons, I accept that $8,505 is an appropriate penalty in respect of Mr Ou and find that a penalty in the amount of $153,333 ought to be imposed on JPA.
First respondent
Contravention
Maximum penalty
After 10% discount
Penalty imposed
Failure to pay minimum rate
s.45 (cl.A.2.5 of Schedule A and cl.17 of Retail Award)
$54,000
$48,600
$36,450
Failure to pay Saturday penalty loadings
s.45 (cl.29.4(b) of Retail Award)
$54,000
$48,600
$1,458
Failure to pay Public Holiday loading
s.45 (cl.29.4(d) of Retail Award)
$54,000
$48,600
$9,720
Failure to pay overtime (Monday to Saturday (both up to and after first three hours)
s.45 (cl.29.2(a) of Retail Award)
$54,000
$48,600
$38,880
Failure to pay annual leave and annual leave loading on termination
ss.44(1) and 45 of the Act
$54,000
$48,600
$34,020
Failure to make and keep records
s.535 of the Act (regs.3.33(1), 3.33(2), 33.3(3)(c), 3.33(e), 3.34, 3.36(1) and 3.40 of the Regulations)
$27,000
$24,300
$14,580
Failure to issue pay slips
s.536 of the Act
$27,000
$24,300
$18,225
TOTAL
$153,333
Totality
Having determined an appropriate penalty in respect of each contravention it is necessary to consider whether the aggregate penalty is an appropriate response to the conduct which led to the contraventions and that it is not oppressive or crushing.
In the circumstances of this case I do not consider that any adjustments need to be made on the application of this principle.
Time to pay - JPA
Finally, the respondents argued that the penalties should be payable in a manner similar to the way in which it was agreed that JPA should repay Ms Yu, that is, by three instalments over a period of some 84 days. As noted in [88] above, the parties have reached agreement with respect to Mr Ou and the penalty for his involvement and the time within which to pay that penalty. JPA adduced no evidence of its financial status and I can see no other reason in the evidence to support this submission. The first respondent will be ordered to pay the penalties within 28 days of this judgment.
I certify that the preceding ninety-two (92) paragraphs are a true copy of the reasons for judgment of Judge Smith
Associate:
Date: 20 April 2018
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