Fair Work Ombudsman v Klinsic Constructions Pty Limited (No 2)

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FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Fair Work Ombudsman v Klinsic Constructions Pty Limited (No 2) [2023] FedCFamC2G 283

File number(s): SYG 273 of 2022
Judgment of: JUDGE GIVEN
Date of judgment: 20 April 2023   
Catchwords: INDUSTRIAL LAW – Imposition of penalty for failure to comply with notice – underpayment of wage and redundancy entitlements – antagonistic approach by respondents to statutory regulator and employee – where remorse directed more to being penalised than to subject of contraventions   
Legislation:

Corporations Act 2001 (Cth)

Crimes Act 1914 (Cth) s 4AA

Crimes Amendment (Penalty Unit) Act2022 (Cth)

Fair Work Act 2009 (Cth) ss 117, 546, 550, 557, 716

Cases cited:

Australian Building and Construction Commissioner v Pattinson (2022) 399 ALR 599

Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25

Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith  165 FCR 560

Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Anor (2015) 258 CLR 482

Fair Work Ombudsman v ACN 146 435 118 Pty Ltd (No 2) [2013] FCCA 1270

Fair Work Ombudsman v ASGBRIS Pty Ltd [2020] FCCA 553

Fair Work Ombudsman v Blu Hornsby Pty Ltd [2016] FCCA 1150

Fair Work Ombudsman v Chia Tung Development Corp Ltd [2016] FCCA 3457

Fair Work Ombudsman v Jaycee Trading Pty Ltd (No. 2) [2013] FCCA 2128

Fair Work Ombudsman v Klinsic Constructions Pty Limited [2022] FedCFamC2G 622

Fair Work Ombudsman v Nobrace Centre Pty Ltd (No 2) [2019] FCCA 2144

Fair Work Ombudsman v NSH North Pty Ltd (t/as New Shanghai Charlestown) (2017) 275 IR 148

Kelly v Atanaskovic Hartnell Corporate Services Pty Ltd (No 3) [2023] FedCFamC2G

Kelly v Fitzpatrick 166 IR 14

Molina v Galloway [2022] FedCFamC2G 904

Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543

Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412

Trade Practices Commission v CSR Ltd (1991) ATPR 41-076

Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38

Division: Division 2 General Federal Law
Number of paragraphs: 71
Date of hearing: 28 October 2022
Place: Sydney
Solicitor for the Applicant: Mr A Morris of the Fair Work Ombudsman
The First Respondent:  Mr J Klinsic (second respondent)
The Second Respondent:  In person

ORDERS

SYG 273 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

FAIR WORK OMBUDSMAN

Applicant
AND:

KLINSIC CONSTRUCTIONS PTY LIMITED

First Respondent

JOHN KLINSIC

Second Respondent

order made by:

JUDGE GIVEN

DATE OF ORDER:

20 April2023

THE COURT ORDERS THAT:

(1)

Pursuant to s 546(1) of the Fair Work Act 2009 (Cth) (Act), the first respondent must pay a pecuniary penalty of $18,981 to the Consolidated Revenue Fund of the Commonwealth of Australia, within 60 days of this order for its contravention of


s 716(5) of the Act, as declared by the Court on 20 July 2022.

(2)Pursuant to s 546(1) of the Act, the second respondent must pay a pecuniary penalty of $3,762 to the Consolidated Revenue…

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Details
Case
[2023] FedCFamC2G 283
Decision Date

CaseChat Overview and Summary

The matter of Fair Work Ombudsman v Klinsic Constructions Pty Limited (No 2) involved the Fair Work Ombudsman, the applicant, and Klinsic Constructions Pty Limited, the respondent. The dispute centred on the respondent’s failure to comply with a Compliance Notice issued under the Fair Work Act 2009 (Cth). The Fair Work Ombudsman sought penalties against the respondent for non-compliance with the notice, which related to various breaches of workplace laws, including the failure to pay ordinary time hourly rate, industry-specific redundancy pay, and payment in lieu of notice to an employee. The Federal Circuit and Family Court of Australia presided over the case, where the primary issue was whether the penalties imposed on the respondent were appropriate given the seriousness of the non-compliance and the need for deterrence.

The legal issues that the court had to resolve included the determination of the appropriate level of penalty for the respondent's non-compliance with the Compliance Notice. The court had to consider the seriousness of the breach, the respondent’s level of culpability, and the necessity for general and specific deterrence. The court examined the respondent’s failure to take corrective action despite the notice and the ongoing non-compliance as of the penalty hearing date. Furthermore, the court had to weigh the need to maintain the integrity of statutory enforcement mechanisms against the respondent’s limited engagement with the proceedings.

The court found that the penalties imposed were justified given the respondent's serious non-compliance, which necessitated the commencement of litigation. The court noted the respondent's lack of meaningful engagement and ongoing non-compliance as significant factors. The need for general deterrence to uphold the statutory enforcement mechanisms and specific deterrence to ensure compliance by the respondent in the future were also considered. The court determined that the penalties were necessary to send a clear message to employers in the building and construction industry about the consequences of non-compliance. The court also highlighted the importance of deterring the respondent, who remained registered and a director of the company, from repeating such breaches.

Orders

Orders of the court

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Background

Background to the litigation

The applicant says the range referred to in the preceding paragraph is appropriate because: (a)the Company’s failure to comply with a statutory notice, namely the Compliance Notice is serious, and required the applicant to commence proceedings in circumstances where litigation could have been avoided; (b)the respondents failed to meaningfully engage with the proceedings and, as at the date of the penalty hearing, had still not complied with the remaining steps outlined in the Compliance Notice (and as ordered by the Court on 20 July 2022); (c)there is a need for general deterrence in relation to non-compliance with compliance notices in order to maintain the integrity of the applicant’s statutory enforcement mechanisms, as well as to send a clear message to employers in the building and construction industry; and (d)there is a need for specific deterrence because, as at the date of the penalty hearing, the Company remained registered and Mr Klinsic remained its director. Background At all relevant times, the Company: (a)is, and was, incorporated under the Corporations Act 2001 (Cth) and has been registered since 28 July 1992; and (b)operated in the building and construction industry building residential homes. Mr Klinsic is, and was at all relevant times, a director of the Company and responsible for its overall operation, management and control. Between the period of 6 January 2019 to 14 July 2021 (relevant period) the Company employed Mr Blake Sims (employee). In or around July 2021, Fair Work Inspector Tara Schebella (FWI) commenced an investigation into the respondents’ compliance with Commonwealth workplace laws. On 9 December 2021, the FWI issued the Compliance Notice after forming a reasonable belief that the Company had contravened provisions of the relevant Awards relating to payment of the ordinary time hourly rate and industry specific redundancy pay, as well as s 117(2)(b) of the Act, by failing to pay the employee in lieu of notice of his termination. The Compliance Notice required that the Company take specified action by 14 January 2022 to remedy the contraventions outlined in the Compliance Notice by: (a)calculating and paying the employee any outstanding entitlement with respect to the ordinary time hourly rate of pay based on his hours of work throughout the relevant period; (b)calculating and paying the employee the amount that should have been paid to him in respect of industry specific redundancy; (c)calculating and paying the employee the amount that should have been paid to him in respect of payment in lieu of notice; (d)calculating and paying the employee any additional superannuation contributions in respect of the amounts required to be paid set out in paragraphs (a) to (c) above; and (e)thereafter, producing reasonable evidence of the Company’s compliance, by 21 January 2022. The Company did not take the action specified in the Compliance Notice by 14 January 2022, and therefore also did not provide evidence of same by 21 January 2022. Accordingly, on 25 February 2022, the applicant commenced these proceedings. The chronology of the events in the proceedings leading to the entry of default judgment are set out in the reasons for the default judgment at [14] to [33].

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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