Fair Work Ombudsman v Kang
[2017] FCCA 1010
•18 May 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v KANG | [2017] FCCA 1010 |
| Catchwords: INDUSTRIAL LAW – Application for imposition of pecuniary penalties. |
| Legislation: Fair Work Act 2009, ss.3, 45, 90(2), 535(1), 536(1), 550, 557, 682 Fair Work Regulations 2009, rr.3.36, 3.44 Restaurant Industry Award 2010, cls.20.1, 33.2, 34.1, 35.2 |
| Cases cited: Fair Work Ombudsman v ACN 052 182 180 Pty Ltd & Anor [2013] FCCA 688 Fair Work Ombudsman v ECFF Pty Ltd [2014] 2996 Fair Work Ombudsman v EJ Group International Pty Ltd & Anor [2017] FCCA 997 Fair Work Ombudsman v Mamak Pty Ltd & Ors [2016] FCCA 2104 Fair Work Ombudsman v Soleimani & Anor [2014] FCCA 2380 Fair Work Ombudsman v South Jin Pty Limited (No.2) [2016] FCA 832 Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258 Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153 |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | DAI IL KANG |
| File Number: | BRG 1009 of 2016 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 12 May 2017 |
| Date of Last Submission: | 12 May 2017 |
| Delivered at: | Brisbane |
| Delivered on: | 18 May 2017 |
REPRESENTATION
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Solicitors for the Respondents: | So Dong Lawyers |
ORDERS
BY CONSENT THE COURT DECLARES THAT:
From on and after 22 July 2015, the respondent was involved, within the meaning of s.550(1) of the Fair Work Act 2009 (Cth), in the contraventions by Ballina One Sushi Pty Ltd of:
(a)s.45 of the Fair Work Act 2009 (Cth), by failing to pay the minimum rate of pay prescribed by cl.20.1 of the Restaurant Industry Award 2010;
(b)s.45 of the Fair Work Act 2009 (Cth), by failing to pay the minimum Saturday penalty prescribed by cl.34.1 of the Restaurant Industry Award 2010;
(c)s.45 of the Fair Work Act 2009 (Cth), by failing to pay the minimum Sunday penalty prescribed by cl.34.1 of the Restaurant Industry Award 2010;
(d)s.45 of the Fair Work Act 2009 (Cth), by failing to pay the minimum overtime rate of pay for overtime worked on Monday to Friday prescribed by cl.33.2(a) of the Restaurant Industry Award 2010;
(e)s.45 of the Fair Work Act 2009 (Cth), by failing to pay the minimum overtime rate of pay for overtime worked on a Saturday prescribed by cl.33.2(b) of the Restaurant Industry Award 2010;
(f)s.45 of the Fair Work Act 2009 (Cth), by failing to pay the minimum overtime rate of pay for overtime worked on a Sunday prescribed by cl.33.2(c) of the Restaurant Industry Award 2010;
(g)s.45 of the Fair Work Act 2009 (Cth), by failing to pay the required minimum annual leave loading prescribed by cl.35.2(b) of the Restaurant Industry Award 2010;
(h)s.44(1) of the Fair Work Act 2009 (Cth), by failing to pay annual leave on termination of employment as required by s.90(2) of the Fair Work Act 2009 (Cth);
(i)s.535(1) of the Fair Work Act 2009 (Cth), by failing to make and keep for seven years records as prescribed by reg. 3.36(1) of the Fair Work Regulations 2009 (Cth);
(j)reg. 3.44(1) of the Fair Work Regulations 2009 (Cth), by failing to ensure that the records it was required to keep were not false or misleading to its knowledge;
(k)reg. 3.44(6) of the Fair Work Regulations 2009 (Cth), by making use of entries in employee records, knowing those records were false or misleading; and
(l)s.536(1) of the Fair Work Act 2009 (Cth), by failing to give a pay slip within one working day of paying an amount to an employee in relation to the performance of work.
THE COURT ORDERS THAT:
Pursuant to s.546(1) of the Fair Work Act 2009 (Cth) the respondent pay a penalty in the total amount of $20,000 in respect of the contraventions the subject of declaration 1 hereof.
Pursuant to s.546(3)(a) of the Fair Work Act 2009 (Cth), the respondent is to pay the penalty amounts to the Commonwealth within 28 days.
Pursuant to s.545 of the Fair Work Act 2009 (Cth) and within 28 days of these orders, the respondent pay the applicant $8,328.16 in respect of amounts underpaid to certain of the employees of Ballina One Sushi Pty Ltd and that:
(a)the applicant will within 28 days of receipt of any such payment, pay the money so received as follows:
Employee
Underpayment amount
Percentage of total
Nguyen
$1,356.90
16.29%
Kong
$4,448.58
53.42%
Yong Kang
$2,522.68
30.29%
(b)in the event that the applicant receives part payment of the amount required by order (4)(a) hereof, the money be distributed to the person listed therein in accordance with the percentage of total underpayment outlined in the table above; and
(c)in the event that the applicant cannot locate any of the persons listed in order (4)(a) hereof, pay the applicable amount due to each person that cannot be located to the Commonwealth within a further 7 days.
Pursuant to s.547(2) of the Fair Work Act 2009 (Cth), the respondent pay interest at the applicable pre-judgment rate on the outstanding underpayment.
Pursuant to s.545(1) of the Fair Work Act 2009 (Cth), the respondent, within 28 days of the date of this order, is to:
(a)register with the Applicant’s “My Account” portal at and complete the profile including the Award options;
(b)provide to the Applicant his “My Account” registration number; and
(c)register with the Applicant’s Online Learning Centre at and complete all education courses designed for employers and provide the Applicant with evidence of completion of those courses within a further one month.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 1008 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| DAI IL KANG |
Respondent
REASONS FOR JUDGMENT
Dai Kang was the sole director and shareholder of Ballina One Sushi Pty Ltd (in liquidation), the operator of the Sushi Kuni restaurant located at the Ballina Central Shopping Centre in Ballina, New South Wales. Ballina One was placed into external administration shortly after the Fair Work Ombudsman finalised its investigation into the matters dealt with in these proceedings.
The Fair Work Ombudsman’s investigation revealed that Ballina One had contravened the Fair Work Act 2009 (Cth) in a number of respects.
Mr Kang now admits the contraventions by Ballina One and in particular that it:
a)contravened the Fair Work Act and Restaurant Industry Award 2010 by failing to pay minimum rates of pay, weekend penalties, overtime penalties, annual leave and annual leave loading;
b)contravened the Fair Work Act by failing to keep records of annual leave entitlements and a failure to issue pay slips; and
c)contravened the Fair Work Regulations 2009 (Cth) by creating false or misleading records, and providing those false and misleading records to the Fair Work Ombudsman.
Mr Kang admits that he was involved in those contraventions for the purposes of s.550(1) of the Fair Work Act.
These reasons are about the penalty to be imposed upon Mr Kang for the contraventions of the Fair Work Act that he is taken to have committed by reason of the contraventions of Ballina One.
Background
From 29 January 2015 to 26 August 2015, Ballina One was the operator of the Ballina Sushi Kuni. Mr Kang was the sole director and shareholder of Ballina One, and was its controlling mind. He was responsible for its operations including the engagement of employees, setting of wages and conditions and record keeping.
Relevantly Ballina One employed Thuy Nguyen, Kesoo Kong and Byung Yong Kang to work at the Ballina Sushi Kuni. During their respective employment periods, both Kong and Yong Kang held subclass 417 (working holiday) visas.
The employees were engaged on a full-time basis, regularly worked shifts between 10-12 hours per day and were paid flat rates of pay ranging between $120-$160 per day (including on weekends).
In July, 2015 the Fair Work Ombudsman received two separate requests for assistance from employees of Ballina One alleging they were being underpaid and that they had not received pay slips. On 21 July, 2015 the Fair Work Ombudsman sent an email to Mr Kang in both English and Korean attaching one of the requests for assistance and containing a list of hyperlinks to information published by the Fair Work Ombudsman. The information included material published by the Fair Work Ombudsman on:
a)minimum pay rates, including a hyperlink to the Fair Work Ombudsman’s Pay Calculator which would help find the relevant award and calculate specific rates;
b)penalty rates, allowances and overtime, including information that penalty rates were payable on weekends and/or when employees were working overtime; and
c)on pay slips, including that pay slips had to be given to employees with one working day of paying them and the information the required to be included on those pay slips.
On 27 July, the two requests for assistances were withdrawn after they indicated they had independently resolved their grievances with Ballina One.
On 25 August, 2015 the Fair Work Ombudsman conducted a site visit to the Ballina Sushi Kuni as part of a regional audit campaign. During the site visit, fair work inspectors spoke with Dai Kang about Ballina One’s terms and conditions of employment and its time and wage records. Mr Kang told the fair work inspectors that Ballina One’s time and wage records were kept at his personal address and as a result fair work inspectors agreed they would return the following day to collect them. Before the fair work inspectors left, Mr Kang was cautioned not to create records if he did not have any, to ensure the records he was going to provide were correct and that it was an offence to provide false or misleading records to the fair work inspectors.
After the site visit, Mr Kang did not return to his personal address to collect the records as he had told the fair work inspectors he would do. Instead, he created new time and wage records in respect of the Ballina One’s employees. On 26 August, 2015 fair work inspectors returned to the Ballina Sushi Kuni and Mr Kang provided them with the incorrect and newly created records.
The records so provided were not a reflection of the true hours worked by Ballina One’s employees. They incorrectly recorded a reduced number of hours worked by Kong and Yong Kang and as a result made it appear as if they were paid higher rates of pay than they were actually paid.
In April 2016, Ballina One sold the Ballina Sushi Kuni for approximately $209,416.03. Between April 2016 and July 2016, approximately $165,670 was incrementally either transferred to other accounts or withdrawn as cash from Ballina One’s bank account.
On 14 June 2016, the Fair Work Ombudsman sent a “Findings of Contravention Letter” to Ballina One and Mr Kang. The letter outlined that the Fair Work Ombudsman’s audit found underpayment and record keeping contraventions of the Fair Work Act and Regulations, including underpayments of $42,673.37 to five employees (two of whom are not the subject of these proceedings).
On 21 July, 2016 Ballina One was placed into external administration.
The contraventions
So as to determine what, if any, pecuniary penalty ought to be imposed upon Mr Kang it is necessary to identify each of the separate contraventions that have been committed. Mr Kang admits to being involved, within the meaning of s.550(1) of the Fair Work Act, in Ballina One’s contraventions of the following civil remedy provisions of the Fair Work Act:
a)failing to pay the minimum rate (cl.20.1 of the Restaurant Industry Award);
b)failing to pay the minimum Saturday penalty (cl.34.1 of the Restaurant Industry Award);
c)failing to pay the minimum Sunday penalty (cl.34.1 of the Restaurant Industry Award);
d)failing to pay the minimum overtime rate of pay for overtime worked on Monday to Friday (cl.33.2(a) of the Restaurant Industry Award);
e)failing to pay the minimum overtime rate of pay for overtime worked on a Saturday (cl.33.2(b) of the Restaurant Industry Award);
f)failing to pay the minimum overtime rate of pay for overtime worked on a Sunday (cl.33.2(c) of the Restaurant Industry Award);
g)failing to pay the required minimum annual leave loading (cl.35.2(b) of the Restaurant Industry Award);
h)failing to pay annual leave on termination of employment (s.90(2) of the Fair Work Act);
i)failing to make and keep records of annual leave entitlements (s.535(1) of the Fair Work Act);
j)keeping records which were false or misleading to its knowledge (reg.3.44(1) of the Regulations);
k)making use of entries in employee records which were false or misleading to its knowledge (reg.3.44(6) of the Regulations); and
l)failing to issue pay slips within one working of paying employees (s.536(1) of the Fair Work Act).
Subsection 557(1) of the Fair Work Act provides that two or more contraventions of a term of a civil remedy provision committed by the same person, and arising out of a course of conduct, are taken to constitute a single contravention of the provision. Subsection 557(1) is engaged in this case. Each of the numerous contraventions of the Restaurant Industry Award is a contravention of s.45 of the Act. The contraventions were committed by the same person, namely Ballina One. If they arose out of the same course of conduct, they must be taken to constitute a single contravention. That is the legislatively mandated outcome. However, as the decision in Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153 directs, s.557(1) operates on contraventions which occur when a term of an Award is contravened through the operation of s.45 of the Act. The contravention occurs when a term of a modern award is contravened. The effect of s.557(1) in relation to contraventions of s.45 is that two or more contraventions of a term of a modern award are taken to constitute a single contravention, but contraventions of disparate provisions of the Award are not to be treated as a single contravention of s.45 of the Act.
The Fair Work Ombudsman submits that Mr Kang is entitled to the benefit of s.557(1) of the Fair Work Act in relation to his involvement in Ballina One’s multiple contraventions and in particular the contraventions relating to:
a)failure to pay minimum rate of pay;
b)failure to pay Saturday penalties;
c)failure to pay Sunday penalties;
d)failure to pay overtime (Monday to Friday);
e)failure to pay overtime (Saturday);
f)failure to pay overtime (Sunday);
g)failure to pay annual leave;
h)failure to pay annual leave loading;
i)failure to make a record of annual leave;
j)failure to issue pay slips;
k)keeping false or misleading records; and
l)making use of false or misleading records.
In addition to s.557(1), it is open to the Court to group separate contraventions where the contraventions contain common elements or overlap with each other or involve the potential punishment of the respondents for the same or substantially similar conduct. The Fair Work Ombudsman submits that the Monday to Friday, Saturday and Sunday overtime contraventions can be grouped on the basis of their common elements. Additionally, Mr Kang’s failure to pay Nguyen and Yong Kang annual leave on termination and the failure to pay annual leave loading have sufficient overlap to have a common element. However, the Fair Work Ombudsman submits that there is no other basis on which the Court should group the remaining contraventions.
I do accept that it is not appropriate to further group any of the contraventions as each contravention arose from the breach of a distinct and separate obligation provided by a term of the Award. The respondent did not contend to the contrary. However, all of the “underpayment contraventions” as the Fair Work Ombudsman describes them, arise from a course of conduct – namely the decision by Ballina One to pay a flat rate of pay. The consequence of that course of action was for Ballina One to not comply with the Award requirements as alleged in these proceedings. Even though the various contraventions of the Award provisions cannot be treated as one contravention for the purposes of s.557(1) of the Fair Work Act, they can nonetheless be treated as having some commonality and involving the same culpability. It is important that the respondent not be punished for the same conduct more than once.
In my view it is appropriate to impose a higher penalty upon the respondent in respect of the contravention relating to the failure to pay the minimum rate and a lesser penalty in respect of the other underpayment contraventions because they all arise from a course of conduct embarked on by Ballina One.
Based on the above, the contraventions can be grouped into nine contraventions, namely:
a)s.45: Failure to pay minimum wage (cl.20.1 Restaurant Industry Award);
b)s.45: Failure to pay Saturday penalty (cl.34.1 Restaurant Industry Award);
c)s.45: Failure to pay Sunday penalty (cl.34.1 Restaurant Industry Award);
d)s.45: Failure to pay overtime penalty (Monday to Friday) (cl.33.2(a) Restaurant Industry Award), failure to pay overtime penalty (Saturday) (cl.33.2(b) Restaurant Industry Award), failure to pay overtime penalty (Sunday) (cl.33.2(c) Restaurant Industry Award);
e)s.44(1): Failure to pay annual leave on termination (s.90(2) Fair Work Act), failure to pay annual leave loading (cl.35.2(b) Restaurant Industry Award);
f)s.535(1): Failure to make and keep records (reg.3.36(1) Regulations);
g)reg.3.44(1): Making and keeping false or misleading records;
h)reg.3.44(6): Making use of false or misleading records; and
i)s.536(1): Failure to issue pay slips within one day.
The maximum penalties the Court may impose in respect of the civil remedy provisions contravened by Mr Kang are:
a)$10,800 (60 penalty units) in respect of contraventions of ss.44(1) and 45 of the Fair Work Act;
b)$5,400 (30 penalty units) in respect of contraventions of ss.535(1) and 536(1) of the Fair Work Act; and
c)$3,600 (20 penalty units) in respect of contraventions of regs.3.44(1) and 3.44(6) of the Regulations.
Accordingly, the total maximum penalty that may be imposed on Mr Kang is $72,000.
Consideration
The underpayment contraventions arose as Ballina One and Mr Kang paid flat daily rates to the employees of between $120-$160 per day, including on weekends. As the employees routinely worked between 10-12 hours per day, the amounts paid to them were far below even the minimum wages and penalties contained in the Restaurant Industry Award.
Given the daily rates paid, at times Ballina One paid the employees between $10 and $13.33 dollars for each hour worked. For an Introductory level employee under the Restaurant Industry Award, the minimum wage was between $16.87 and $17.29 during the relevant employment periods. The employees were significantly underpaid.
The total underpayment by Ballina One to the employees was $19.307.57. That represents between 27-44% of their minimum entitlements over the period of the contraventions. However, Mr Kang’s admissions relate to only part of that period. For reasons that are not readily apparent, his admissions relate only to the period from 22 July, 2015 to 26 August, 2015 during which the underpayment to the employees was $8,328.16.
The record keeping contraventions relate to Mr Kang’s involvement in Ballina One’s failure to make and keep employment records that specified the employees annual leave entitlements. That was information that Ballina One was required to keep by s.535(1) of the Fair Work Act and reg.3.36(1) of the Fair Work Regulations.
Ballina One did not issue pay slips to its employees and Mr Kang admits that he was involved in that conduct.
These contraventions are serious because:
a)they occurred after Mr Kang was put on notice that Ballina One was not complying with its record keeping and pay slip obligations by reason of complaints made by Ballina One employees in July, 2015; and
b)they occurred after Mr Kang had received the email from the Fair Work Ombudsman giving him information about the pay rates payable under the Award and other information relating to Ballina One’s responsibilities including the issue of pay slips.
The contraventions of regs.3.44(1) and 3.44(6) of the Fair Work Regulations arose from Mr Kang’s creation of false or misleading records and their subsequent provision to the Fair Work Ombudsman following a request by fair work inspectors to review Ballina One’s time and wage records during their site visit on 25 August, 2015.
Mr Kang was cautioned by fair work inspectors during the site visit not to make up employee records and that it was an offence to provide false or misleading records to the Fair Work Ombudsman. Despite receiving that caution, Mr Kang subsequently created incorrect time records on the day he received the caution and then provided them to the Fair Work Ombudsman’s agents. The records he provided were false or misleading as they typically recorded that Kong and Yong Kang worked less than 38 hours per week and not generally having an entitlement to overtime. This made it appear as though Kong and Yong Kang were receiving higher hourly rates of pay than they in fact were.
Because Mr Kang provided the incorrect time records to the Fair Work Ombudsman, it was necessary for the Fair Work Ombudsman to obtain and rely upon contemporaneous records kept by each of the employees as evidence of their hours of work and their bank statements to determine the amounts paid to them. The Fair Work Ombudsman was also required to seek production of Ballina One’s bank statements from the Commonwealth Bank to cross-check the amounts paid to the employees. As a result, the process used by the Fair Work Ombudsman to calculate the underpayments owed to the employees was longer and more complicated, and required additional resources to be expended on fair work inspectors undertaking extensive investigations.
Mr Kang admits that after receiving the Fair Work Ombudsman’s email following the initial complaints in July, 2015 he had knowledge of the Restaurant Industry Award and that it applied to Ballina One. Despite this, Mr Kang did not take any steps to ensure the employees’ rates of pay complied with the minimums in the Restaurant Industry Award. Ballina One and Mr Kang plainly placed Ballina One’s financial interests ahead of that of the employees.
I accept the submissions for the Fair Work Ombudsman that in addition to the matters summarised above concerning the seriousness of the underpayment contraventions and the failure to provide pay slips, the nature and extent of the conduct warrants the imposition of meaningful penalties as the conduct involved:
a)the creation of false and misleading records, and their production to the Fair Work Ombudsman, in its role as a regulator in circumstances where Mr Kang was warned against such a course of action;
b)contraventions of minimum standards of the most fundamental kind, being the payment of minimum wages and penalties; and
c)a failure to make and keep fundamental records and issue pay slips.
The contraventions were committed in relation to three employees, two of whom were of Korean nationality and held subclass 417 (Working Holiday) visas. The employees’ duties also meant that they were each properly classified in the lowest classification of the Restaurant Industry Award. The loss incurred by the employees as a result of Mr Kang’s involvement was substantial.
The employees’ have not received any of their unpaid entitlements from Ballina One. The liquidator of Ballina One has reported to ASIC that he does not consider any dividend will be paid to creditors, including the employees. However, in submissions for Mr Kang it was suggested that he had placed his solicitors in funds sufficient to meet the underpayments to the employees. No explanation was offered as to why no payment had been made prior to the hearing before me. No mention was made of outstanding interest.
It is of some moment to record that in April, 2016 Ballina One sold the Ballina Sushi Kuni for approximately $209,416.03 and that between April and July, 2016 Mr Kang transferred or withdrew approximately $165,670 from Ballina One’s bank account. On 21 July 2016, Ballina One was placed into external administration.
There is some evidence before me about Mr Kang’s financial position, however it is not clear if it is complete. Mr Kang no longer operates the store at Ballina and has, apparently returned to his previous occupation as a tradesman.
In my view, there can be no doubt that Mr Kang’s actions that led to Ballina One’s contraventions were deliberate and calculated. Although Mr Kang argued during the investigation by the Fair Work Ombudsman into these contraventions that they were due to his inexperience operating a business and that they occurred due to the financial pressures faced by restaurants having to pay “government rates”, he did not press those arguments before me. In any event, the argument carries no weight because Mr Kang was completely aware of the obligation that Ballina One was under to pay its employees properly and to meet its other obligations to them as an employer.
Further, an investigation by the Fair Work Ombudsman into EJ Group International Pty Ltd (EJ Group), another corporation of which Mr Kang is the sole director and shareholder, found contraventions of the Fair Work Act and Regulations during a period commencing after the site visit by fair work inspectors to the Ballina Sushi Kuni on 25 August, 2015. The contraventions identified by the Fair Work Ombudsman against EJ Group are similar to those alleged in these proceedings and resulted in an underpayment to two employees in excess of $9,000 during the period from December, 2015 to March, 2016. I have dealt with the contraventions arising from those matters in separate reasons for judgment (see Fair Work Ombudsman v EJ Group International Pty Ltd & Anor [2017] FCCA 997).
I accept that the deliberateness of the record keeping and pay slip contraventions is underscored by the fact that an allegation regarding failure to provide pay slips was made by the Ballina One employees that made complaints in July, 2015 which complaints prompted the email from the Fair Work Ombudsman that provided Mr Kang with information about employers’ responsibilities and obligations. Despite resolving those issues with those employees, Mr Kang took no steps to ensure that the employees who are the subject of the present contraventions were provided with pay slips.
The creation of the incorrect time records by Mr Kang, in response to a statutory request by fair work inspectors to see Ballina One’s time and wages records, can only be seen as deliberate, particularly serious and a calculated attempt to mislead the Fair Work Ombudsman in the course of their investigation.
As I have set out above, the underpayments alleged by the Fair Work Ombudsman remain outstanding. The liquidator has indicated in his report to ASIC that no dividend will be paid to creditors of Ballina One. While Mr Kang, as part of the Fair Work Ombudsman’s investigation and in the evidence from his solicitor in these proceedings, has attempted to acknowledge his wrong doing, no action has been taken to express that regret to the employees concerned. They remain out of pocket.
The evidence demonstrates that during the investigation Mr Kang demonstrated difficulty accepting that corrective action was required. He stated to the fair work inspectors that: “Actually the problem is because the business is not doing that much money. If I had to pay the amount to Australian award I’d rather close my business”. That statement only serves to demonstrate the deliberateness of Mr Kang’s actions and his lack of remorse for the actions of Ballina One.
Mr Kang’s cooperation with the Fair Work Ombudsman’s investigation is marred by his attempt to misled the investigation by the provision of false records. It is correct to say, however, that he did make admissions about the creation of those false records in an interview with Fair Work inspectors in February, 2017. During these proceedings, he admitted the contraventions and his involvement in them at an early stage.
One of the principal objects of the Fair Work 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” for all employees: Fair Work Act, s.3. The conduct underpinning the underpayment contraventions of the Restaurant Industry Award deprived the employees of the protection of that minimum safety net. I accept the applicant’s submission that contravention of these fundamental entitlements weakens the workplace relations regime as a whole and displays a disregard for Ballina One and Mr Kang’s legal obligations.
As well as protecting employees, the Fair Work Act is designed to provide an even playing field for all employers with regard to employment costs. By failing to adhere to the requirements of the Restaurant Industry Award, Ballina One and Mr Kang undermined this objective and traded on the employees’ credit.
Record keeping and pay slip obligations play a vital role in the capability of the regulator to monitor and enforce compliance with minimum employment standards, one of the functions of the Fair Work Ombudsman under s.682 of the Fair Work Act. The Courts have recognised that proper record keeping “is the bedrock of compliance” with workplace laws: Fair Work Ombudsman v ACN 052 182 180 Pty Ltd & Anor [2013] FCCA 688 at [20] and Fair Work Ombudsman v Soleimani & Anor [2014] FCCA 2380 at [55].
Further, it is well established that failing to provide pay slips can impede both employees and the Fair Work Ombudsman from determining and enforcing workplace entitlements. It effectively disempowers employees and undermines the ability of employees to identify and challenge underpayments: Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258 at [67]; Fair Work Ombudsman v South Jin Pty Limited (No.2) [2016] FCA 832 and Fair Work Ombudsman v Mamak Pty Ltd & Ors [2016] FCCA 2104.
Given the importance of proper record-keeping and adherence to pay slip requirements, it is of no surprise that in Fair Work Ombudsman v ECFF Pty Ltd [2014] 2996 Judge Hartnett observed at [35]:
... the creation of false time and wage books by the Respondents was particularly disturbing behaviour, worthy of significant reprimand.
General deterrence is important in this case. As it did in Fair Work Ombudsman v EJ Group International Pty Ltd (above), the evidence before me demonstrates that:
a)the Restaurant Industry accounted for 11% of all disputes lodged with the Fair Work Ombudsman between July 2013 to June 2016, which is the highest of all industries from which dispute forms were received;
b)during the Fair Work Ombudsman’s 2015 National Hospitality Industry Campaign – Restaurants, Cafés and Catering the Fair Work Ombudsman conducted 1,066 compliance activities and found 615 (58%) businesses to be in contravention; and
c)the restaurant industry represented a significant proportion of compliance outcomes in the 2015 – 2016 financial year – with 35% of all Compliance Notices, 19% Letters of Caution, 27% Infringement Notices issued and 34% of all Fair Work Ombudsman litigations relating to the restaurant industry.
I accept that it is appropriate that there should be a strong message to the restaurant industry by imposing penalties at a meaningful level that will deter employers operating in similar circumstances to Mr Kang from contravening the Fair Work Act. Employers should be left in no doubt that it is not economic to conduct their business at the expense of their employees’ entitlement to proper pay rates as prescribed by applicable Awards.
Penalties
The conduct by Mr Kang in this matter was serious. There is no dispute that he caused Ballina One to pay the relevant employees otherwise than in accordance with their entitlements under the Restaurant Industry Award. He did not cause Ballina One to keep proper records and issue pay slips, and created and then produced false records to the Fair Work Ombudsman when challenged about the amounts paid to the employees. The loss to the employees was not insubstantial.
In my view, taking into account a discount for his cooperation in these proceedings, penalties as set out below are appropriate in respect of each of the contraventions:
| Maximum | Penalty (% of maximum) | Penalty | |
| Failure to pay minimum rates | $10,800 | 50% | $5,400 |
| Failure to pay Saturday penalties | $10,800 | 30% | $3,240 |
| Failure to pay Sunday penalties | $10,800 | 30% | $3,240 |
| Failure to pay overtime (Monday to Friday) | $10,800 | 30% | $3,240 |
| Failure to pay overtime (Saturday) | $10,800 | $0 | |
| Failure to pay overtime (Sunday) | $10,800 | $0 | |
| Failure to pay annual leave | $10,800 | 30% | $3,240 |
| Failure to pay annual leave loading | $10,800 | $0 | |
| Failure to make and keep records | $5,400 | 30% | $1,620 |
| Keeping false or misleading records | $3,600 | 70% | $2,520 |
| Making use of false or misleading records | $3,600 | 70% | $2,520 |
| Failure to issue pay slips | $5,400 | 30% | $1,620 |
| Total | $26,640 |
The total penalty of $26,640 is not, however, an appropriate response to the offending involved in this case in my view. Whilst the contraventions are serious and involve deliberate conduct on the part of the respondent an appropriate response is a total penalty of $20,000.
Accordingly, I make the orders set out at the commencement of these reasons.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 18 May, 2017.
Date: 18 May, 2017
Key Legal Topics
Areas of Law
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Employment Law
Legal Concepts
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Penalty
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Statutory Construction
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