Fair Work Ombudsman v KLM Foods Pty Ltd
[2025] FedCFamC2G 140
•11 February 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v KLM Foods Pty Ltd [2025] FedCFamC2G 140
File number: LNG 49 of 2023 Judgment of: JUDGE BLAKE Date of judgment: 11 February 2025 Catchwords: INDUSTRIAL LAW – Admitted contraventions – imposition of pecuniary penalties – factors considered – penalties proposed by Applicant excessive – penalties imposed on the Respondents. Legislation: Crimes Act 1914 (Cth) s 4AA.
Evidence Act 1995 (Cth) s 191.
Fair Work Act 2009 (Cth) ss 45, 325, 535(1), 536(3), 557(1), 718A(1).
Fair Work Regulations 2009 (Cth) regs 3.33(3)(d), 3.34.
Cases cited: Anwad v Vic Solar Technologies [2020] FCCA 2838
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 249 FCR 458
Australian Building Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560
Basi v Namitha Nakul Pty Ltd (No 2) [2023] FCA 671
Fair Work Ombudsman v Hutt Nominees Pty Ltd [2023] FedCFamC2G 41
Fair Work Ombudsman v OzKorea Pty Ltd [2018] FCCA 3620
Fair Work Ombudsman v Sushi Bay Pty Ltd (in liq) (No 3) [2024] FCA 869
Nabi v New Era Balustrading [2020] FCCA 2246
Yes Insurance Group Pty Ltd v Fair Work Ombudsman [2024] FCA 1366
Division: Division 2 General Federal Law Number of paragraphs: 108 Date of hearing: 20 November 2024 Place: Melbourne via Microsoft Teams Solicitor for the Applicant: Mr Reece of the Fair Work Ombudsman Solicitor for the Respondents: Mr Loganathan of Logan & Partners ORDERS
LNG 49 of 2023 BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: KLM FOODS PTY LTD
First Respondent
LOVELEEN GUPTA
Second Respondent
ORDER MADE BY:
JUDGE BLAKE
DATE OF ORDER:
11 FEBRUARY 2025
THE COURT DECLARES THAT:
1.During a contravention period from November 2017 to approximately June 2023, KLM contravened the following civil remedy provisions:
(a)section 45 of the Fair Work Act 2009 (Cth) (‘the Act’) by failing to pay Mr Saraswat the afternoon shift penalty rate, as required by clause 25.2 of the Vehicle Repair, Services and Retail Award 2020 (‘2020 Award’);
(b)section 45 of the Act by failing to pay Mr Saraswat, Mr Tirukkolluri and Mr Singh (collectively, ‘the Employees’) the public holiday penalty rate, as required by clause 27.4(a)(iv) of the 2020 Award;
(c)section 45 of the Act by failing to pay the Employees the rate for the first three hours of overtime performed on Monday to Saturday, as required by clause 27.5(b) of the 2020 Award;
(d)section 45 of the Act by failing to pay the Employees the rate for overtime after the first three hours of overtime on Monday to Saturday, as required by clause 27.5(b) of the 2020 Award;
(e)section 45 of the Act by failing to pay the Employees the rate for overtime worked on a Sunday, as required by clause 27.5(b) of the 2020 Award;
(f)section 45 of the Act by failing to pay Mr Tirukkolluri the rate of overtime worked on a public holiday, as required by clause 27.5(b) of the 2020 Award;
(g)section 325(1) of the Act for unreasonably requiring Mr Tirukkolluri to pay to another person amounts payable to him in relation to the performance of work for the benefit of KLM and/or Mr Gupta;
(h)section 535(1) of the Act by failing to make and keep records of the type required by regulation 3.33(3)(d) of the Fair Work Regulations 2009 (Cth) (‘Regulations’);
(i)section 535(1) of the Act by failing to make and keep records of the type required by regulation 3.34 of the Regulations;
(j)section 45 of the Act by failing to make a part-time agreement, as required by clause 12.3 of the Vehicle Repair, Services and Retail Award 2010, in relation to Mr Tirukkolluri;
(k)section 45 of the Act by failing to make a part-time agreement, as required by clause 10.3 of the 2020 Award, in relation to Mr Saraswat;
(l)section 536(3) of the Act by knowingly providing a false or misleading pay slip to Mr Tirukkolluri; and
(m)section 718A(1) of the Act by knowingly giving false or misleading information or documents to a Fair Work Inspector who was performing functions under or in connection with a law of the Commonwealth.
2.Mr Gupta was involved in the contraventions set out at paragraph 1, within the meaning of section 550(2)(c) of the Act, and therefore committed those contraventions, pursuant to section 550(1).
THE COURT ORDERS THAT:
3.Pursuant to section 546(1) of the Act, KLM pay a pecuniary penalty of $135,143.63 to the Commonwealth with respect to the Contraventions declared at paragraph 1 above within 90 days of the date of this Order.
4.Pursuant to section 546(1) of the Act, Mr Gupta pay a pecuniary penalty of $27,028.73 to the Commonwealth with respect to the Contraventions declared at paragraph 2 above within 90 days of the date of this Order.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BLAKE:
The issue to be determined in this matter is the amount of pecuniary penalties that should be imposed on the Respondents for various contraventions of the Fair Work Act 2009 (Cth) (‘Act’).
The Applicant relied on its Initiating Application filed 19 December 2023, its Statement of Claim filed 19 December 2023, the affidavit of Fair Work Inspector Griggs (‘FWI Griggs’) affirmed 24 July 2024, the affidavit of Yatharth Saraswat (‘Mr Saraswat’) sworn 24 July 2024, the affidavit of Hari Tirukkolluri (‘Mr Tirukkolluri’) sworn 25 July 2024, its written submissions on penalty filed 20 September 2024 and its written submissions in reply on penalty filed 25 October 2024.
The Respondents relied on the affidavit of Loveleen Gupta (‘Mr Gupta’) affirmed 11 October 2024, the written submissions of KLM Foods Pty Ltd (‘KLM’) filed 8 October 2024 and the written submissions of Mr Gupta filed 8 October 2024 (Mr Gupta relied on submissions in respect of proceeding LNG48/2023 in this proceeding).
The affidavits of FWI Griggs, Mr Tirukkolluri, Mr Saraswat and Mr Gupta were read into evidence. There was no cross-examination.
This proceeding was listed and heard together with proceeding LNG48/2023, being Fair Work Ombudsman v Vizaan Ltd Pty Ltd & Anor (‘Vizaan Proceeding’). Mr Gupta is the Second Respondent in both proceedings.
BACKGROUND FACTS
The parties prepared and submitted a Statement of Agreed Facts dated 14 June 2024 and a Further Statement of Agreed Facts dated 16 July 2024. Both documents were prepared for the purposes of section 191 of the Evidence Act 1995 (Cth). I refer to both of these documents collectively in these reasons as the ‘Agreed Facts’. The Agreed Facts form the background to these proceedings.
Agreed Facts
The Applicant is the holder of an office established under the Act and has standing to commence and pursue these proceedings.
KLM is a national system employer within the meaning of the Act and the operator of two petrol stations in Tasmania located respectively at Sandy Bay and Kingston. Mr Gupta is the sole director of KLM.
In the period 28 December 2020 to 21 February 2021 (‘Underpayment Period’), KLM employed three employees: Mr Saraswat, Mr Tirukkolluri and Mr Singh (collectively, the ‘Employees’). Mr Tirukkolluri and Mr Saraswat were engaged to work less than 38 ordinary hours per week. Mr Singh was engaged to work an average of 38 ordinary hours per week. Each was employed as a console operator.
Between the period 1 July 2019 to 3 May 2020, the Vehicle Repair, Services and Retail Award 2010 (‘2010 Award’) covered and applied to KLM and Mr Tirukkolluri. Between 4 May 2020 and 17 May 2021, the Vehicle Repair, Services and Retail Award 2020 (‘2020 Award’) covered and applied to the Employees and KLM (collectively, ‘the Awards’). The Employees fell within the ‘Vehicle industry RS&R employee level – 4 R4’ classification in Schedule A of the Awards.
Mr Tirukkolluri was a part-time employee within the meaning of clause 12 of the 2010 Award and within the meaning of clause 10 of the 2020 Award. Mr Saraswat was a part-time employee within the meaning of clause 10 of the 2020 Award. Mr Singh was a full-time employee within the meaning of clause 9 of the 2020 Award.
KLM paid each of the Employees flat rates of pay for a fixed number of hours each fortnight, without distinction as to the time, day or the actual number of hours which they worked as follows:
Employee Pay rate Hours of work for which payment was made per fortnight Mr Tirukkolluri $21.54 - during the period 14 December 2020 to 7 February 2021 40 $21.92 - during the period 25 January 2021 to 21 February 2021 Mr Singh $21.54 - during the period 28 December 2020 to 10 January 2021 76 $22.54 - during the period 11 January 2021 to 24 January 2021 $22.92 - during the period 25 January 2021 to 21 February 2021 Mr Saraswat $16.15 - during the period 14 December 2020 to 24 January 2021 (19 years old) 40 $19.18 - during the period 25 January 2021 to 21 February 2021 (20 years old)
During the Underpayment Period, KLM was required, pursuant to clause 25.2 of the 2020 Award, to pay Mr Saraswat the minimum hourly rate for ordinary hours of work during a shift commencing after 12.00 pm and not later than 6.00 pm, but failed to do so. KLM admits it breached section 45 of the Act and clause 25.2 of the 2020 Award (‘the minimum rate contravention’). The particular hours Mr Saraswat worked, the amount he was paid, the amount to which he was entitled and the amount of the underpayment are as follows:
Employee Minimum hourly entitlement Hours Entitlement Paid Underpayment Mr Saraswat $19.06 - during the period 14 December 2020 to 24 January 2021 (19 years old) 74.60 $1,552.00 $1,321.75 $230.25 $22.24 - during the period 25 January 2021 to 7 February 2021 (20 years old) $22.63 - during the period 8 February 2021 to 21 February 2021 (20 years old)
During the Underpayment Period, KLM was required, pursuant to clause 27.4(a)(iv) of the 2020 Award, to pay the Employees the minimum hourly rate for ordinary hours of work performed on a public holiday, but failed to do so. KLM admits it breached section 45 of the Act and clause 27.4(a)(iv) of the 2020 Award (‘public holiday rate contravention’). The particular hours the Employees worked, the amount they were paid, the amount to which they were entitled and the amount of underpayment are as follows:
Employee Hourly Entitlement Hours Entitlement Paid Underpayment Mr Tirukkolluri $43.08 - during the period 14 December 2020 to 7 February 2021 19 $823.84 $413.82 $410.02 $43.84 - during the period 8 February 2021 to 21 February 2021 Mr Singh $43.08 - during the period 14 December 2020 to 7 February 2021 30 $1,298.10 $718.24 $579.86 $43.84 - during the period 8 February 2021 to 21 February 2021 Mr Saraswat $32.30 - during the period 14 December 2020 to 24 January 2021 (19 years old) 13.93 $504.18 $253.50 $250.68 $37.70 - during the period 25 January 2021 to 7 February 2021 (20 years old) $38.36 - during the period 8 February 2021 to 21 February 2021 (20 years old) Total $1,240.56
During the Underpayment Period, KLM was required to pay the Employees, pursuant to clause 27.5(b) of the 2020 Award, the minimum hourly rate for the first three hours of overtime performed on Monday to Saturday, but failed to do so. KLM admits it breached section 45 of the Act and clause 27.5(b) of the 2020 Award (‘first overtime contravention’). The particular hours the Employees worked, the amount they were paid, the amount to which they were entitled and the amount of the underpayment is as follows:
Employee Hourly Entitlement Hours Entitlement Paid Underpayment Mr Tirukkolluri $32.31 - during the period 14 December 2020 to 7 February 2021 96.07 $3,115.35 $1,390.72 $1,724.63 $32.88 - during the period 8 February 2021 to 21 February 2021 Mr Singh $32.31 - during the period 14 December 2020 to 7 February 2021 21 $680.22 $0 $680.22 $32.88 - during the period 8 February 2021 to 21 February 2021 Mr Saraswat $24.23 - during the period 14 December 2020 to 24 January 2021 (19 years old) 56.35 $1,502.58 $1,084.17 $418.41 $28.28 - during the period 25 January 2021 to 7 February 2021 (20 years old) $28.77 - during the period 8 February 2021 to 21 February 2021 (20 years old) Total $2,823.26
During the Underpayment Period, KLM was required to pay the Employees, pursuant to clause 27.5(b) of the 2020 Award, the minimum hourly rate for overtime performed after the first three hours of overtime on Monday to Saturday, but failed to do so. KLM admits it breached section 45 of the Act and clause 27.5(b) of the 2020 Award (‘second overtime contravention’). The particular hours the employees worked, the amount they were paid, the amount to which they were entitled and the amount of the underpayment is as follows:
Employee Hourly entitlement Hours Entitlement Paid Underpayment Mr Tirukkolluri $43.08 - during the period 14 December 2020 to 7 February 2021 114 $4,930.88 $0 $4,930.88 $43.84 - during the period 8 February 2021 to 21 February 2021 Mr Singh $43.08 - during the period 14 December 2020 to 7 February 2021 31.50 $1,360.44 $0 $1,360.44 $43.84 - during the period 8 February 2021 to 21 February 2021 Mr Saraswat $32.30 - during the period 14 December 2020 to 24 January 2021 (19 years old) 26.75 $953.14 $158.27 $794.87 $37.70 - during the period 25 January 2021 to 7 February 2021 (20 years old) $38.36 - during the period 8 February 2021 to 21 February 2021 (20 years old) Total $7,086.19
During the Underpayment Period, KLM was required, pursuant to clause 27.5(b) of the 2020 Award, to pay the Employees the minimum hourly rate for overtime that they worked on a Sunday, but failed to do so. KLM admits it breached section 45 of the Act and clause 27.5(b) of the 2020 Award (‘Sunday rate contravention’). The particular hours the Employees worked, the amount they were paid, the amount to which they were entitled and the amount of the underpayment is as follows:
Employee Hourly entitlement Hours Entitlement Paid Underpayment Mr Tirukkolluri $43.08 - during the period 14 December 2020 to 7 February 2021 49 $2,121.56 $0 $2,121.56 $43.84 - during the period 8 February 2021 to 21 February 2021 Mr Singh $43.08 - during the period 14 December 2020 to 7 February 2021 7.50 $323.10 $0 $323.10 $43.84 - during the period 8 February 2021 to 21 February 2021 Mr Saraswat $32.30 - during the period14 December 2020 to 24 January 2021 (19 years old) 26.02 $912.14 $8.71 $903.43 $37.70 - during the period 25 January 2021 to 7 February 2021 (20 years old) $38.36 - during the period 8 February 2021 to 21 February 2021 (20 years old) Total $3,348.09
During the Underpayment Period, KLM was required to pay Mr Tirukkolluri, pursuant to clause 27.5(b) of the 2020 Award, the minimum hourly rate for overtime that he worked on a public holiday, but failed to do so. KLM admits it breached section 45 of the Act and clause 27.5(b) of the 2020 Award (‘second public holiday rate contravention’). The particular hours that Mr Tirukkolluri worked, the amount he was paid, the amount to which he was entitled and the amount of the underpayment is as follows:
Employee Hourly Entitlement Hours Entitlement Paid Underpayment Mr Tirukkolluri $43.08 - during the period 14 December 2020 to 7 February 2021 9 $387.72 $0 $387.72 $43.84 - during the period 8 February 2021 to 21 February 2021
Each of the minimum rate contravention, the public holiday rate contravention, the first overtime contravention, the second overtime contravention, the Sunday rate contravention and the second public holiday rate contravention (collectively, the ‘Underpayment contraventions’) resulted in each of the Employees not being paid the following amounts:
(a)Mr Singh: $2,943.62;
(b)Mr Saraswat: $2,597.64;
(c)Mr Tirukkolluri: $9,574.81,
(the ‘Underpayments’).
Mr Tirukkolluri’s employment ceased in around July 2022. KLM failed to pay him an amount in respect of his period of untaken paid annual leave. Mr Tirukkolluri made repeated demands that he be paid his outstanding annual leave entitlement. On 15 May 2023, FWI Griggs sent a letter to KLM and Mr Gupta in which, relevantly, rectification of the underpayments was sought.
In around late May 2023, a meeting occurred between Sai Sheshan Pokala (‘Mr Pokala’), Mr Tirukkolluri and Mr Gupta. At that meeting, Mr Tirukkolluri told Mr Gupta he was still owed his annual leave entitlements. Mr Gupta denied that Mr Tirukkolluri was entitled to the untaken annual leave entitlements. Mr Gupta told Mr Tirukkolluri that the Applicant had requested KLM pay him a gross amount of $9,000 which after-tax would be around as much as Mr Tirukkolluri’s annual leave entitlement, and that he had a cheque for that amount (‘Rectification Cheque’). Mr Gupta stated that he owed Mr Pokala money for the work he performed for KLM. Mr Gupta said to Mr Tirukkolluri that KLM would only pay him his annual leave entitlement if he cashed the Rectification Cheque and paid that money to Mr Pokala. Mr Tirukkolluri cashed the Rectification Cheque and paid the amount to Mr Pokala. Between June 2023 and November 2023, KLM paid to Mr Tirukkolluri his annual leave entitlement.
KLM admits it required Mr Tirukkolluri to pay Mr Pokala amounts payable to Mr Tirukkolluri in relation to the performance of work, that such a requirement was unreasonable, and that such payment was to the benefit of KLM and Mr Gupta. KLM admits by its conduct it contravened section 325 of the Act (‘requirement to pay contravention’).
Section 535(1) of the Act and regulation 3.33(3)(d) of the Fair Work Regulations 2009 (Cth) (‘Regulations’) required KLM to make and keep for seven years, records that specified the penalty rates that the Employees were entitled to be paid. KLM failed to keep the required records and thereby contravened section 535(1) of the Act (‘first pay records contravention’).
Section 535(1) of the Act and regulation 3.34 of the Regulations required KLM to make and keep for seven years, a record that specified the number of overtime hours worked by each of the Employees during each day, or when each of the Employees started and ceased working overtime hours. KLM failed to keep the required records and thereby contravened section 535(1) of the Act (‘second pay records contravention’).
Clause 12.3 of the 2010 Award (in respect of Mr Tirukkolluri) and clause 10.3 of the 2020 Award (in respect of Mr Saraswat) required KLM to agree in writing with each of them their hours worked each day, which days of the week they worked, their actual starting and finishing times each day, that any variation must be in writing, that all time worked in excess of agreed hours would be paid at overtime rates and the times of taking and the duration of meal breaks. KLM did not comply with these requirements, thereby contravening section 45 of the Act, clause 12.3 of the 2010 Award and clause 10.3 of the 2020 Award. The failure to make an agreement with Mr Tirukkolluri I refer to as the ‘part-time agreement contravention’. The failure to make an agreement with Mr Saraswat I refer to as the ‘second part-time agreement contravention’.
Section 536(3) of the Act prohibited KLM from giving a false or misleading payslip to Mr Tirukkolluri. On or around 10 February 2021, KLM gave a payslip to Mr Tirukkolluri that indicated that he worked 40 hours during the period 25 January 2021 to 7 February 2021. The payslip was false because Mr Tirukkolluri worked at least 98 hours in that period. Mr Gupta knew the payslip was false and misleading because he knew the hours worked by Mr Tirukkolluri and knew the hours recorded in the payslip. KLM knew the payslip was false and misleading and it thereby contravened section 536(3) of the Act (‘false payslip contravention’).
On 7 April 2021, Fair Work Inspector Natalie May (‘FWI May’) issued KLM with a notice to produce documents or records (‘NTP’). The NTP included a warning that KLM may be liable to a civil penalty for giving false or misleading information. KLM produced certain documents to FWI May on 6 May 2021. On 14 May 2021, FWI May indicated to Mr Gupta that KLM had not provided records of the times, days and dates worked by the Employees. In around early May 2021, Mr Gupta directed Mr Tirukkolluri and Mr Saraswat to fill in timesheets that purported to record their hours of work (‘Timesheets’). The hours recorded on the Timesheets by Mr Tirukkolluri and Mr Saraswat when compared to their actual hours of work are set out in the table below:
Employee Fortnight Hours recorded on Timesheets Actual hours worked Mr Tirukkolluri 28 December 2020 to 10 January 2021 32 91 11 January 2021 to 24 January 2021 40 91 25 January 2021 to 07 February 2021 36 98 08 February 2021 to 21 February 2021 36 84.04 Mr Saraswat 28 December 2020 to 10 January 2021 32 34.29 11 January 2021 to 24 January 2021 40 54.38 25 January 2021 to 07 February 2021 36 58.40 08 February 2021 to 21 February 2021 36 49.52
As can be seen from the above, the Timesheets were false or misleading because each of these individuals worked in excess of the hours they recorded on the Timesheets. Mr Gupta subsequently produced the Timesheets to FWI May. KLM and Mr Gupta knew the Timesheets were false or misleading because Mr Gupta knew the hours of work recorded for each of the individuals as well as the hours they actually worked. KLM thereby contravened section 718A(1) of the Act (‘false document contravention’).
Mr Gupta was, inter alia, a person responsible for ensuring KLM complied with its obligations under the Act and the Awards, was the controlling mind of KLM and a person responsible for the overall direction, management and supervision of KLM’s operations, was the person responsible for or with oversight of the Employees performing work, a person responsible for determining wages and conditions of the Employees, a person responsible for the rostering of Employees and the issuing and preparing of payslips to the Employees, a person responsible for the oversight of processing payroll and for the payment of amounts to the Employees, a person who supervised the day-to-day running of the business and who had oversight of the making and keeping of records relating to hours of work, rates of pay and amounts paid to the Employees, a person whose name was included at the end of the contracts issued to the Employees, who signed the Employees Tax File Number declarations, who communicated with FWI May on behalf of KLM and the person who produced the Timesheets to FWI May.
Mr Gupta knew the Awards applied to the Employees, that KLM had engaged the Employees to perform work, that Mr Tirukkolluri and Mr Saraswat were part-time employees and that Mr Singh was a full-time employee. Mr Gupta knew the content of the employment contracts of the Employees, the nature of the work the Employees performed, the hours worked by the Employees, the amounts paid to the Employees, that the Employees worked more hours of work than they were paid for, that the Employees worked hours including hours on afternoons on Monday to Friday, Saturdays, Sundays and public holidays, that the hours worked by the Employees included overtime hours, that KLM did not keep employee records specifying overtime hours or penalty rates, that KLM did not make part-time employment agreements as required by clause 12.3 of the 2010 Award and clause 10.3 of the 2020 Award, the contents of the communications from the Applicant, that KLM owed Mr Tirukkolluri his annual leave entitlements and that KLM owed Mr Tirukkolluri the amount set out in the letter from FWI Griggs of 15 May 2023.
Mr Gupta admits he was an intentional participant in each of the minimum rate contravention, the public holiday rate contravention, the first overtime contravention, the second overtime contravention, the Sunday rate contravention, the second public holiday rate contravention, the requirement to pay contravention, the first pay records contravention, the second pay records contravention, the part-time agreement contravention, the second part-time agreement contravention, the false payslip contravention and the false document contravention.
LEGAL PRINCIPLES
In the recent decision of the Federal Court of Australia in Fair Work Ombudsman v Sushi Bay Pty Ltd (in liq) (No 3) [2024] FCA 869 (‘Sushi Bay’), Katzmann J at [11]-[21] summarised the principles governing the approach to determining the imposition of civil penalties. I intend to approach this matter in a manner consistent with the principles enunciated by Katzmann J.
IDENTIFICATION AND GROUPING OF THE CONTRAVENTIONS
I have identified the various contraventions above.
Section 557(1) of the Act relevantly provides that two or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if the contraventions are committed by the same person and the contraventions arose out of a course of conduct by the person. This principle also finds voice in the common law: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 249 FCR 458 at [88].
The Applicant accepts that the Respondents are entitled to the benefit of section 557(1) in relation to the following:
(a)in respect of Mr Saraswat, the multiple contraventions of clause 25.2 of the 2020 Award that constitute the minimum rate contravention;
(b)in respect of the Employees, the multiple contraventions of clause 27.4(a)(iv) of the 2020 Award that constitute the public holiday rate contravention;
(c)in respect of the Employees, the multiple contraventions of clause 27.5(b) of the 2020 Award that constitute the first overtime contravention;
(d)in respect of the Employees, the multiple contraventions of clause 27.5(b) of the 2020 Award that constitute the second overtime contravention;
(e)in respect of the Employees, the multiple contraventions of clause 27.5(b) of the 2020 Award that constitute the Sunday rate contravention;
(f)in respect of Mr Tirukkolluri, the multiple contraventions of clause 27.5(b) of the Award that constitute the second public holiday rate contravention;
(g)in respect of the Employees, the multiple contraventions of section 535(1) of the Act and regulation 3.33(3)(d) of the Regulations that constitute the first pay records contravention; and
(h)in respect of the Employees, the multiple contraventions of section 535(1) of the Act and regulation 3.34 of the Regulations in respect of overtime that constituted the second pay records contravention.
I agree it is appropriate to group these contraventions together as submitted by the Applicant. Accordingly, each of the contraventions above will be treated as a single contravention.
The Applicant submits that section 557(1) of the Act ought not apply to the part-time agreement contravention and the second part-time agreement contravention. That submission was advanced on the basis that the conduct occurred at different times, almost a year apart, and involved two different employees. No submission was advanced to the contrary by the Respondents. I accept the submission of the Applicant. Each of these contraventions will be treated as a separate contravention.
No submission was made that the remaining contraventions should be grouped together in some way. Accordingly, they will be treated as separate contraventions.
MAXIMUM PENALTIES
The Act sets penalties by reference to penalty units as defined in section 4AA of the Crimes Act 1914 (Cth). The maximum penalties that may be imposed on KLM in respect of each contravention are as follows:
Contravention Penalty Units Penalty Unit Value Maximum Penalty minimum rate contravention 300 $222 $66,600 public holiday rate contravention 300 $222 $66,600 first overtime contravention 300 $222 $66,600 second overtime contravention 300 $222 $66,600 Sunday rate contravention 300 $222 $66,600 second public holiday rate contravention 300 $222 $66,600 requirement to pay contravention 300 $275 $82,500 first pay records contravention 300 $222 $66,600 second pay records contravention 300 $222 $66,600 part-time agreement contravention 300 $210 $63,000 second part-time agreement contravention 300 $210 $63,000 false payslip contravention 300 $222 $66,600 false document contravention 300 $222 $66,600
The maximum penalties for Mr Gupta in respect of each contravention are as follows:
Contravention Penalty Units Penalty Unit Value Maximum Penalty minimum rate contravention 60 $222 $13,320 public holiday rate contravention 60 $222 $13,320 first overtime contravention 60 $222 $13,320 second overtime contravention 60 $222 $13,320 Sunday rate contravention 60 $222 $13,320 second public holiday rate contravention 60 $222 $13,320 requirement to pay contravention 60 $275 $16,500 first pay records contravention 60 $222 $13,320 second pay records contravention 60 $222 $13,320 part-time agreement contravention 60 $210 $12,600 second part-time agreement contravention 60 $210 $12,600 false payslip contravention 60 $222 $13,320 false document contravention 60 $222 $13,320 ASSESSMENT OF PENALTY
The nature and extent of the contravening conduct and the circumstances in which it took place
This is a case in which there are multiple breaches of the Act.
At paragraph [3] of his written submissions, Mr Gupta says he ‘did not have actual knowledge of his legal obligations’. That submission cannot be accepted. It flies in the face of what is set out in paragraph [69] of the Agreed Facts. There, Mr Gupta has admitted knowledge of a range of matters, including that the Award applied to the Employees, the hours worked by the Employees, the payments made to the Employees, and that KLM did not keep employee records specifying overtime hours worked or penalty rates. In my view, Mr Gupta had knowledge of all of the matters set out in the Agreed Facts.
The Underpayment contraventions meant the Employees were not paid what they were owed. They were paid instead a flat rate of pay in circumstances where the Respondents knew what they were entitled to under the Awards. The Respondents blatantly disregarded the Awards terms.
While the Awards were disregarded, it is relevant to note two matters. First the total of the Underpayments to all Employees was $15,116.07. Mr Singh was underpaid $2,943.62, Mr Saraswat was underpaid $2,597.64 and Mr Tirukkolluri was underpaid $9,574.81. These were significant amounts for the Employees, but not large amounts in the context of many other underpayment matters that come before the Court. Second, the Underpayment Period was approximately two months, a reasonably confined period of time. These were not contraventions that extended over many months or years.
In respect of the false payslip contravention, Mr Gupta knew the real hours Mr Tirukkolluri worked, but deliberately presented him with a document that was false.
The part-time agreement contravention and the second part-time agreement contravention resulted in two of the employees not being properly engaged under the Award. The Respondents had knowledge of the Award terms, but did nothing.
The first pay records contravention and the second pay records contravention are of significance. The failure to keep proper records makes the task of ensuring compliance with relevant laws more difficult. It makes it more difficult for employees to easily check what they are entitled to and for employers to respond to any queries. It also makes it difficult for persons such as the Applicant to identify contraventions of workplace laws.
In many cases, the failure to keep proper records is often the most serious offence. Not here. What is particularly concerning is the conduct of the Respondents that occurred after the Applicant commenced its investigation. There are two relevant and separate contraventions.
The first contravention is the requirement to pay contravention. That conduct of Mr Gupta occurred in circumstances where FWI Griggs had written to Mr Gupta and asked him to rectify matters and underpayments. Mr Gupta was aware of what was being asked of him. By their conduct (which is outlined earlier), however, the Respondents sought to make it appear to the Applicant that they were complying with a request to rectify underpayments, when in fact they were seeking to circumvent it. On any view, that is serious. It is particularly unpalatable that an employee should be required to pay another, amounts the employee has earned in the performance of work.
The second contravention is the false document contravention. Mr Gupta, following a discussion with FWI May (and in the context of responding to a NTP), instructed Mr Saraswat and Mr Tirukkolluri to complete timesheets that purportedly recorded their hours of work, and then provided those documents to FWI May. As noted earlier, the Timesheets plainly did not faithfully record the actual hours of work of Mr Tirukkolluri and Mr Saraswat. It is an aggravating factor that the Respondents involved the Employees in the scheme to create false documents. This was conduct designed to mislead the Applicant into thinking that the Respondents had in fact complied with their obligations, when in fact they had not. It was conduct designed to throw the Applicant off the scent during the investigation.
In the circumstances of this case, all of the contraventions noted above were deliberate.
The ill treatment of immigrant workers is a feature of this jurisdiction, a point noted by Katzmann J in Sushi Bay. This is another such case. The Employees here were relatively recent arrivals and vulnerable workers. Mr Saraswat arrived in Australia in February 2020 to study on a student visa. He had not previously travelled outside his home country. Similarly, Mr Tirukkolluri arrived from India in July 2017 to study and had not previously travelled outside India. He too, initially arrived on a student visa. Neither of these individuals had knowledge of their entitlements.
Attached to FWI Griggs affidavit are various reports dealing with the ill-treatment of migrant workers and in particular, such workers not receiving their lawful entitlements. These include the report in 2019 of the Migrant Workers’ Taskforce, a report in March 2022 from the Senate Economics References Committee entitled ‘Systemic, Sustained and Shameful - Unlawful Underpayment of Employees’ Remuneration’ and a report in May 2023 from the Grattan Institute entitled ‘Short-Changed - How to Stop the Exploitation of Migrant Workers in Australia’.
Loss or damage caused by the contravening conduct
I have noted that the total of the Underpayments is $15,116.07. It is important to keep that figure firmly in mind. That is not to overlook the fact, however, that the amounts in question were significant to the Employees. The evidence of Mr Tirukkolluri and Mr Saraswat is that the failure to pay them correctly had a significant impact on their lives. Mr Saraswat in his affidavit notes the practical difficulties that arose because of the failure to pay him properly, including difficulties meeting his bills and other living expenses. He also speaks to the impact the underpayments had on his overall well-being. Mr Tirukkolluri too struggled to pay his daily living expenses. Thus, the loss or damage sustained by the Employees was not limited to financial loss or damage, but also had a real impact on their day-to-day living.
The period over which the contraventions occurred
As noted, the Underpayment Period was confined. That is of significance.
There are, however, a number of contraventions in addition to the Underpayment contraventions. All the contraventions in total spanned a number of years. The part-time agreement contravention and the second part-time agreement contravention occurred a year apart. The false document contravention occurred in May 2021. The requirement to pay contravention occurred in May 2023.
Have the Respondents engaged in similar previous conduct?
There is no evidence before me to suggest that either KLM or Mr Gupta have previously engaged in similar conduct. Accordingly, the contraventions are to be treated as first offences.
Corrective action and contrition
It was submitted by KLM and Mr Gupta that, inter alia, Mr Gupta ‘has implemented numerous measures in his other venture to ensure that such contraventions do not take place’, that he has ‘engaged a proper accountant’, has ‘engaged a consulting agency named Employsure’, and has ‘reviewed his records’. While I note this was outlined in the submissions, there is no evidence before me as to whether these things occurred. In the circumstances, the submissions constitute little more than assertions without factual foundation. I am unable to give them any weight.
There is no evidence before me of either KLM or Mr Gupta having apologised for their conduct, or otherwise having shown any remorse. The Respondents have, however, made rectification to the Employees.
The size and financial circumstances of the Respondents
KLM was registered on 25 June 2014. Mr Gupta is the sole director. It operates the service stations at Sandy Bay and Kingston. There is no evidence before the Court as to the size of KLM or the overall nature of its operations.
The Respondents submitted that KLM is not ‘financially healthy’. It was submitted that any penalty above $50,000 would be financially crippling and place KLM into voluntary administration. In support of that submission, Mr Gupta attached to his affidavit a number of documents including:
(a)a document from the Australian Taxation Office (‘ATO’) that shows KLM profits for the 2022/2023 year as being $56,889;
(b)an ‘Activity statement’ from the ATO dated 7 October 2024 that apparently shows taxation owing by KLM to the ATO of $1,196,620.39;
(c)a document from the ATO dated 7 October 2024 concerning superannuation guarantee that shows KLM owes to the ATO amounts for the superannuation guarantee of $171,307.61;
(d)a document from the ATO created 9 March 2024 showing overdue and outstanding director’s penalties of $293,502 for KLM foods (it is not clear on the face of the documents whether this is payable by Mr Gupta or KLM);
(e)a document from the ATO created 9 March 2024 showing overdue and outstanding director’s penalties of $442,989.87 for KLM foods (it is not clear on the face of the documents whether this is payable by Mr Gupta or KLM); and
(f)a document from the ATO created 9 March 2024 showing overdue and outstanding director’s penalties of $46,508.74 for KLM foods (it is not clear on the face of the documents whether this is payable by Mr Gupta or KLM).
I accept these documents show that KLM has significant debts outstanding to the ATO, and that its profit at least for the 2022/2023 year appears modest. I give some weight to these matters, however, they do not make good the submission that KLM is not financially healthy or that any penalty above $50,000 will be financially crippling such as to place KLM into voluntary administration. That is because there is not evidence that discloses the overall financial position or health of KLM. For example, there is no evidence as to the overall size and financial position of KLM. There is no evidence before me as to the nature of its businesses or operations, the number of employees it employs, its cash reserves, the value of its goods, its current and non-current assets or its liabilities. To illustrate the point, the debts to which KLM points may show that it is in a precarious financial position if it has, to take a simple example, liabilities that exceed its assets. KLM may not, however, be in a precarious financial position if it has assets that will exceed its liabilities. The true position of KLM is simply not known.
There is then the position of Mr Gupta. As I have noted above, it may be that the directors penalties are debts payable by Mr Gupta personally, however, that is not clear and it is therefore not possible to place weight on them when assessing Mr Gupta’s position.
Attached to the affidavit of FWI Griggs were property searches and Equifax searches that disclosed the following:
(a)Mr Gupta owns a property at Granton with an estimated property value of $720,000 and the loan amount against the property is recorded as nil;
(b)Mr Gupta and Swati Gupta own a property in Montrose with an estimated property value of $1,040,000 and the loan amount against the property is recorded as nil; and
(c)Mr Gupta and Swati Gupta own a property in Lutana with an estimated property value of $520,000 and the loan amount against the property is recorded as nil.
The Applicant asked me to accept these valuations for the purposes of its submission that Mr Gupta has the capacity to pay any penalties that may be imposed. I am not prepared to accept these estimated values as accurate estimates of the value of the properties when one has regard to the disclaimer that is noted on each of the documents. That disclaimer makes clear the valuation is generated using a computer driven mathematical model, and without physical inspection of the property. More significantly, the disclaimer states that the value ‘must not be relied upon as a professional valuation or an accurate representation of the market sale or rental value of the subject property. CoreLogic does not warrant the accuracy, currency or completeness of the AVM Estimate...’. While I do not accept the valuations, I accept Mr Gupta owns one property, and has a share in two others.
There is then the question of any loans attached to the properties. Mr Gupta’s representative contended that the three properties above were not mortgage free, that the combined mortgage on all the properties was approximately $1.8 million and that Mr Gupta was making monthly repayments towards those mortgages of $13,000. In support of that submission, Mr Gupta’s representative referred the Court to bank statements that were annexed to Mr Gupta’s affidavit. One bank statement with Loan ID 18575 bearing the account name of Mr Gupta and Swati Gupta shows the balance of the loan being $1,053,757.41 as at 30 June 2024. Another bank statement bearing Loan ID 18576 with an account name of Mr Gupta and Swati Gupta shows an outstanding loan amount of $646,798.55 as at 30 June 2024.
I am not able to make any finding as to whether the properties above are subject to a mortgage loan. There is no evidence before me about how Equifax obtains its information in relation to whether a property is mortgaged or not, or whether that information is reliable. There is also no evidence before me from Mr Gupta that the loans he refers to are mortgage loans. I accept, however, that Mr Gupta has a share in loans in the amounts set out in the bank statements and the amount of $1.7 million is a significant sum.
Thus, the position of Mr Gupta is as follows:
(a)Mr Gupta is the holder of one property, and shares holdings in two other properties; and
(b)Mr Gupta shares liabilities with Swati Gupta of approximately $1.7 million.
Given the evidence, I do not accept the Applicant’s submission that Mr Gupta’s financial position is sound. Equally though, I do not accept that Mr Gupta’s financial position is precarious. The evidence is not sufficient to reach either conclusion.
The Involvement of Senior Management
Mr Gupta was and is the sole director of KLM, the controlling mind of KLM, and among other things, the person responsible for ensuring that KLM complied with its obligations. Senior management of KLM was therefore involved in the contraventions.
Co-operation
KLM and Mr Gupta ultimately entered into the Agreed Facts which avoided the need for a trial on the factual issues in dispute. They also have rectified the Underpayments.
It cannot be said, however, that KLM and Mr Gupta co-operated throughout the entire process. The requirement to pay contravention and the false document contravention both occurred during the investigation by the Applicant, and were designed to throw the Applicant off the scent during its investigation. Co-operation was not always forthcoming.
In the circumstances, the Applicant submits that a 15% discount for co-operation is appropriate.
Need to ensure compliance with minimum conditions
The Act, together with the Awards, sets out minimum conditions of employment to which employees are entitled. The Act and the Awards also seek to regulate the behaviour of participants in the labour market.
This is a case where the contraventions were deliberate. There is a need to ensure compliance with the minimum conditions.
This is not just a case where the Employees were underpaid their entitlements. Four contraventions arise from conduct that strikes at the heart of ensuring compliance with the system of minimum terms and conditions. The first is the first pay records contravention. The second is the second pay records contravention. The third is the false documents contravention. The fourth is the requirement to pay contravention. By engaging in this conduct, the Respondents engaged in conduct that frustrates the mechanisms designed to bring about quick or effective compliance.
Deterrence
Specific deterrence is directed at the party who has contravened the provisions of the Act. It is concerned with ensuring a contravening party is not prepared to engage in the contravening conduct in the future.
There is a need for specific deterrence in this case. The conduct in paying employees a flat rate of pay, when the Respondents otherwise had knowledge of the Awards, is deliberate. There has been no remorse shown. There is no evidence of steps taken to ensure that the failures which occurred here do not occur again. It is significant that KLM continues in operation. It is also significant that Mr Gupta appears to have interests in or be involved in other entities that may well conduct business and employ employees, including ZV Retail Pty Ltd, AGHA Juice Hobart Pty Ltd and Southern Tasmania Petroleum Pty Ltd.
In written submissions at paragraphs [58]-[59] the Applicant contended that payment of a fixed rate of pay regardless of when work was performed and whether additional hours were worked, was a deliberate and systematic approach taken to deprive the Employees of their entitlements. The Applicant referred to the decision of Halley J in Basi v Namitha Nakul Pty Ltd (No 2) [2023] FCA 671. This submission was not developed orally before me. I am not persuaded to characterise what occurred here as a ‘dishonest scheme to deprive employees of their statutory entitlements’. The facts of this case differ significantly from what was before Halley J where, inter alia, a ‘cashback’ regime was enforced by the employer by coercive behaviour. As I have said, however, the conduct of the Respondents was deliberate and that means there is a real need for specific deterrence in this case.
General deterrence is concerned with ensuring, among other things, that the penalty is likely to act as a deterrent in preventing similar contraventions by like-minded persons. As I have noted, the Employees in this case were all recent immigrants to the country. I have noted earlier in these reasons, the evidence that was placed before the Court in relation to the exploitation of migrant workers, which remains a significant problem in the Australian community. There is a need to send a strong and clear message to ensure that the type of conduct disclosed in this case is not repeated.
CONSIDERATION OF PENALTY
Included as Annexure A to the Applicant’s submissions was a table setting out the penalties the Applicant seeks to have imposed on KLM. Included as Annexure B to the Applicant’s submissions was a table setting out the penalties the Applicant seeks to have imposed on Mr Gupta. I have reproduced each of those annexures to this judgment as Annexures 1 and 2 respectively. It can be seen from these documents that the Applicant has arrived at the proposed penalty on each of the Respondents by applying the following steps:
(a)proposing a penalty for each contravention. The proposed penalty for each contravention is arrived at by specifying that the penalty to be imposed should be a certain specified percentage of the maximum penalty available for that contravention;
(b)applying a 15% discount for co-operation; and
(c)applying a further 20% discount for totality.
The proposed penalty for each contravention
Underpayment contraventions
There are six Underpayment contraventions. The first matter to observe is that the penalty sought by the Applicant in relation to each of the Underpayment contraventions far exceeds the amount of the underpayments that arose in this matter. So much may be seen from the tables below which set out the relevant breach, the amount of the underpayment arising from that contravention in respect of the Employees and Applicant’s proposed penalty:
KLM
Contravention Underpayment Applicant’s Proposed Penalty the minimum rate contravention $230.25 $13,320 (20% of the maximum) public holiday rate contravention $1,240.56 $26,640 (40% of the maximum) first overtime contravention $2,823.26 $33,300 (50% of the maximum) second overtime contravention $7,086.19 $39,960 (60% of the maximum) Sunday rate contravention $3,348.09 $33,300 (50% of the maximum) second public holiday rate contravention $387.72 $13,320 (20% of the maximum) Total $15,116.07 $159,840 Mr Gupta
Contravention Underpayment Applicant’s Proposed Penalty the minimum rate contravention $230.25 $2,664 (20% of the maximum) public holiday rate contravention $1,240.56 $5,328 (40% of the maximum) first overtime contravention $2,823.26 $6,660 (50% of the maximum) second overtime contravention $7,086.19 $7,992 (60% of the maximum) Sunday rate contravention $3,348.09 $6,660 (50% of the maximum) second public holiday rate contravention $387.72 $2,664 (20% of the maximum) Total $15,116.07 $31,968
The Underpayment contraventions concern a failure to pay the Employees some, or in some instances all, of their remuneration. A review of Annexure 1 and 2 and the tables above discloses that the Applicant has not proposed the same level or percentage of the maximum penalty for each of the Underpayment contraventions. I asked the Applicant why there was a difference. The Applicant stated:
The reason for the different percentages is predominantly based around the need for deterrence in relation to each of the contraventions. So, in some examples, you will find that there’s a particular quantum of underpayment or, for example, non-payment of an entitlement and, therefore, a larger percentage is reflected for that reason.
Later, the Applicant returned to the topic and stated:
So, we say that the different penalties are to ensure that the penalty has a reasonable relationship to the severity of the contravention, as well as reflecting the need for deterrence. So, as I say, in some cases there will be a complete failure to pay entitlements. In some cases, there will be a partial failure, and there will be various amounts of underpayment depending on which contravention. So, we say that that is part of the reason for the variation.
I accept that the amount of the underpayment flowing from a contravention is a factor to consider when assessing the level of penalty. I accept it is also relevant to take account of whether an employee has been partially paid, or not paid at all. While I am prepared to accept these matters, I am not satisfied that the Applicant has necessarily applied such an approach with the rigour one might expect. For example:
(a)20% of the maximum penalty is proposed for the minimum rate contravention and the second public holiday rate contravention. I accept that the amounts of the underpayments in each of these is similar, however, one is a complete failure to pay an employee anything in respect of the second public holiday rate contravention, while the minimum rate contravention concerned at least some partial payment to the employee; and
(b)50% of the maximum penalty is proposed for the first overtime contravention. The amount of the underpayment for that contravention is $2,823.26, and it involves partial payments made to two employees, and a complete failure to pay one employee. This should be contrasted with the Sunday rate contravention, where 50% of the maximum penalty is also sought. There, the total amount of the underpayment is $3,348.09 (a similar amount to the first overtime contravention), however, only one employee received partial payment and two employees were not paid at all.
More concerning, however, is the level of the penalties sought in this matter. It is to be recalled that the primary purpose of civil penalties is deterrence and within that context, a civil penalty ‘must be fixed with a view to ensuring that the penalty is not such as to be regarded by [the] offender or others as an acceptable cost of doing business’: Australian Building Construction Commissioner v Pattinson [2022] HCA 13 at [17]. The penalties proposed by the Applicant in this case are excessive. The penalty proposed for KLM for the minimum rate contravention is approximately 57 times greater than the amount of the underpayment. The penalty proposed for the public holiday rate contravention for KLM is approximately 21 times greater than the amount of the underpayment. The penalty proposed for the second overtime contravention is 5.6 times the amount of the relevant underpayment.
Recently, in Yes Insurance Group Pty Ltd v Fair Work Ombudsman [2024] FCA 1366, Snaden J was asked to consider whether penalties sought and obtained by the Applicant in that case were excessive. Snaden J stated at [96]-[97]:
The penalties for which the FWO agitated were, by some margin, wholly outside the range of sentencing options that were properly available. I would not contemplate a penalty anywhere close to 80% of the maximum available for cooperative (or at least partly cooperative) first-time contraveners whose conduct, although wrong, involved a small sum, the non-payment of which was voluntarily corrected and not wholly without extenuating explanation.
It is difficult to fathom how an agency of the Commonwealth would seek penalties in this case that bear any resemblance to (indeed, might, in some cases, exceed) those that it seeks, from time to time, as against recidivist corporate contraveners whose apparently unrepentant conduct visits far greater commercial damage. In the circumstances, the penalties for which the FWO agitated were extreme. This is not the first time that I have had occasion to say so: Fair Work Ombudsman v Australian Workers’ Union [2020] FCA 60, [67].
In this matter, the Applicant has sought penalties for the various underpayment contraventions ranging from 20% to 60% of the maximum penalty available. This, in circumstances where the amounts in question are small, the underpayment contraventions occurred over a limited period of time and the Respondents are first time contraveners. When all the circumstances are considered, the penalties proposed by the Applicant, when compared against the amount of the underpayments in this case, exceed what is necessary to send a message to the Respondents and others that contravention of the Act and Awards is an acceptable cost of doing business. The penalties proposed exceed what is necessary to deter the Respondents and others from contravening the Act and Awards.
For the reasons referred to above, I am minded to adjust the penalty for each of the Underpayment contraventions as follows:
KLM
Contravention Underpayment Applicant’s Proposed Penalty Court Assessed penalty minimum rate contravention $230.25 $13,320 (20% of maximum penalty) $1,665 (2.5% of maximum penalty) public holiday rate contravention $1,240.56 $26,640 (40% of maximum penalty) $9,990 (15% of maximum penalty) first overtime contravention $2,823.26 $33,300 (50% of maximum penalty) $13,320 (20% of maximum penalty) second overtime contravention $7,086.19 $39,960 (60% of maximum penalty) $26,640 (40% of maximum penalty) Sunday rate contravention $3,348.09 $33,300 (50% of maximum penalty) $13,320 (20% of maximum penalty) second public holiday rate contravention $387.72 $13,320 (20% of maximum penalty) $1,665 (2.5% of maximum penalty) Total $15,116.07 $159,840 $66,600 Mr Gupta
Contravention Underpayment Applicant’s Proposed Penalty Court Assessed Penalty minimum rate contravention $230.25 $2,664 (20% of maximum penalty) $333 (2.5% of maximum penalty) public holiday rate contravention $1,240.56 $5,328 (40% of maximum penalty) $1,998 (15% of maximum penalty) first overtime contravention $2,823.26 $6,660 (50% of maximum penalty) $2,664 (20% of maximum penalty) second overtime contravention $7,086.19 $7,992 (60% of maximum penalty) $5,328 (40% of maximum penalty) Sunday rate contravention $3,348.09 $6,660 (50% of maximum penalty) $2,664 (20% of maximum penalty) second public holiday rate contravention $387.72 $2,264 (20% of maximum penalty) $333 (2.5% of maximum penalty) Total $15,116.07 $31,568 $13,320
I am conscious that the level and amount of penalties set out above in respect of Mr Gupta are slightly less than the quantum of the Underpayments. That may seem anomalous, but it is not when regard is had to the following. First, the difference between the quantum of the Underpayments and the amount of the penalties imposed on Mr Gupta overall is not significant. Secondly, the Respondents have rectified the underpayments. So, the penalty is an additional amount that is being paid. Third, the penalties have been imposed in respect of the same conduct on KLM (who was the employer of the Employees) and the amount of the penalties imposed on KLM is significant. Fourth, Mr Gupta is not the employer of the Employees. Fifth, such an outcome is not unusual: see Anwad v Vic Solar Technologies [2020] FCCA 2838; Fair Work Ombudsman v Hutt Nominees Pty Ltd [2023] FedCFamC2G 41; Fair Work Ombudsman v OzKorea Pty Ltd [2018] FCCA 3620 and Nabi v New Era Balustrading [2020] FCCA 2246.
In my view, the penalties set out above achieve the primary aim of specific and general deterrence. They properly take into account the amount of each underpayment in the setting of the ultimate penalty. They properly weigh and set a level of penalty such that the contravention cannot be regarded as an acceptable cost of doing business, when the level of penalty is taken into account. The penalties properly weigh the deliberate conduct of the Respondents, the fact the contraventions occurred over a short period of time and that this is a first offence for these Respondents.
The other contraventions
The Applicant proposes a penalty of 80% of the maximum for the requirement to pay contravention. The Applicant described this conduct as ‘particularly aggravating’. Any conduct in contravention of section 325 of the Act might be described as ‘particularly aggravating’. After all, it is a provision designed to prevent an employer requiring an employee to spend money in a particular way that is properly earned by that employee. This does not, however, advance the Applicant’s case. Section 325 of the Act prohibits certain conduct. The Act provides that conduct that falls foul of section 325 of the Act may be penalised by the imposition of a penalty of up to $82,500 for a corporation and $16,500 for an individual. Thus, the legislature has contemplated that contravention of section 325 may lead to the imposition of a penalty anywhere along a range from zero penalty units to up to the maximums set out above. The question that confronts the Court is what penalty along that range, given the nature of the offence committed in contravention of section 325, should be imposed.
Given the above matters, I asked the Applicant why the proposed penalty was 80% of the maximum. The Applicant submitted that it was the circumstances surrounding this contravention that separated it from others. That is, the Respondents were the subject of an investigation. They had failed to keep records. They had provided false and misleading information to a Fair Work Inspector in the course of the investigation, thereby trying to hide the contravention. Moreover, having been directed as part of the investigation to rectify matters, the Respondents embarked on a course of conduct designed to avoid compliance and avoid meeting their responsibilities at the expense of Mr Tirukkolluri.
I accept the thrust of these submissions. The circumstances do distinguish this particular contravention from others that may arise (for example, an employer contravening section 325 of the Act when there is no investigation on foot). The circumstances are aggravating, notwithstanding this is a first offence for the Respondents. I will set the penalty for this particular contravention at 50% of the maximum penalty, or $41,250 for KLM and $8,250 for Mr Gupta.
The Applicant proposes a penalty of 50% of the maximum penalty for each of the first pay records contravention and the second pay records contravention. No submission was received on why 50% of the maximum is more appropriate than 60% of the maximum, or indeed 20% of the maximum, or less. Failing to keep records can make it difficult for the Applicant and others to ensure compliance, but that is not a sufficient explanation for setting the penalty at 50% of the maximum. That situation will always arise where there is a failure to keep proper records.
As I pointed out earlier in respect of the contravention of section 325 of the Act, section 535 of the Act requires the keeping of relevant, proper records. The Act provides that conduct that falls foul of section 535 of the Act may be penalised by the imposition of a penalty of up to $66,600 for a corporation or $13,320 for an individual. Thus, the legislature has contemplated that contravention of section 535 may lead to the imposition of a penalty anywhere along a range from zero penalty units up to the maximums set out above. The question that confronts the Court is what penalty along that range, given the nature of the offence committed in contravention of section 535, should be imposed
I am not satisfied in the circumstances that a penalty of 50% of the maximum should be imposed for the first pay records contravention or the second pay records contravention. That level of penalty fails to take account of the fact that this is a first offence for these Respondents, or the level of underpayments that have resulted from the contravention. In my view, the penalty should be set at 15% of the maximum penalty, or $9,990 for KLM and $1,998 for Mr Gupta, for each of these two contraventions.
The Applicant proposes a penalty of 10% of the maximum penalty in respect of the part-time agreement contravention and the second part-time agreement contravention. No submission was received on why it should be 10% of the maximum penalty, or some other figure. I am satisfied having regard to the nature of the offence, the deliberateness of the conduct, the fact that this is the first contravention of the Act by the Respondents and the other matters referred to earlier that 10% of the maximum penalty is appropriate for each of these contraventions, being $6,300 for KLM and $1,260 for Mr Gupta.
The Applicant proposes a penalty of 60% of the maximum penalty in respect of the contravention relating to the provision of a false or misleading payslip to Mr Tirukkolluri. No submission was received on why this level of penalty is sought. I accept that the provision of false or misleading payslips to employees is a serious matter, but that does not explain why 60% of the maximum penalty is sought in this case. As I have explained above in relation to section 325 of the Act and section 535 of the Act, section 536(3) of the Act prohibits certain conduct. The Act provides that conduct that falls foul of section 536(3) of the Act may be penalised by the imposition of a penalty of up to $66,600 for a corporation and $13,320 for an individual. Thus, the legislature has contemplated that contravention of section 536(3) of the Act may lead to the imposition of a penalty anywhere along a range from zero penalty units up to the maximums set out above. The question that confronts the Court is what penalty along that range, given the nature of the offence committed in contravention of section 536(3), should be imposed.
In my view, weighing up the matters referred to above, including the deliberate nature of the conduct, the fact that it is a first offence, and the fact that vulnerable employees were involved, a penalty of 20% of the maximum penalty will be imposed for the false payslip contravention being $13,320 for KLM and $2,664 for Mr Gupta.
The Applicant proposes a penalty of 70% of the maximum for the contravention by the Respondents of section 718A of the Act. The Applicant described this contravention as ‘particularly aggravating’ but did not expand on why.
As I have explained above in relation to section 325, section 535 and section 536(3) of the Act, section 718A(1) prohibits certain conduct. The Act provides that conduct that falls foul of section 718A(1) of the Act may be penalised by the imposition of a penalty of up to $66,600 for a corporation or $13,320 for an individual. Thus, the legislature has contemplated that contravention of section 718A(1) of the Act may lead to the imposition of a penalty anywhere along a range from zero penalty units up to the maximums set out above. The question that confronts the Court is what penalty along that range, given the nature and circumstances of the offence committed in contravention of section 718A(1) of the Act, should be imposed.
In my view, there are two matters that distinguish this contravention of section 718A(1). First, the contravention occurred in the context of an active investigation (it is theoretically possible that a contravention of this provision could occur outside of an investigative context, though it is difficult to think of exactly how that might arise at present). Second, and more importantly, this was not just the provision of a false document created only by an employer. The Respondents in this case involved the Employees in the contravention by directing them to complete inaccurate timesheets. Thus, the Respondents used their power to pressure the Employees to create false documents that were then given to the Applicant. These matters, however, need to be weighed against the fact that this is a first offence. Given the circumstances, a penalty set at 50% of the maximum is appropriate, being $33,300 for KLM and $6,660 for Mr Gupta.
Accordingly, the Court sets the penalties for the various offences as follows:
KLM
Contravention Penalty minimum rate contravention $1,665 public holiday rate contravention $9,990 first overtime contravention $13,320 second overtime contravention $26,640 Sunday rate contravention $13,320 second public holiday rate contravention $1,665 requirement to pay contravention $41,250 first pay records contravention $9,990 second pay records contravention $9,990 part-time agreement contravention $6,300 second part-time agreement contravention $6,300 false payslip contravention $13,320 false document contravention $33,300 Total Penalty $187,050 Mr Gupta
Contravention Penalty minimum rate contravention $333 public holiday rate contravention $1,998 first overtime contravention $2,664 second overtime contravention $5,328 Sunday rate contravention $2,664 second public holiday rate contravention $333 requirement to pay contravention $8,250 first pay records contravention $1,998 second pay records contravention $1,998 part-time agreement contravention $1,260 second part-time agreement contravention $1,260 false payslip contravention $2,664 false document contravention $6,660 Total penalty $37,410 Discount for co-operation
The Applicant proposed a discount of 15% for co-operation of the Respondents. I agree that in the circumstances of this case and given the extent of the co-operation I have noted earlier, a discount of 15% is appropriate. Accordingly, the amounts set out in the paragraph above should be reduced by 15%. This results in a total fine to KLM of $158,992.5 and a total fine to Mr Gupta of $31,798.5.
Totality
The Court now needs to consider the application of the totality principle. The principle has been described by Full Courts of the Federal Court of Australia. In Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 at [117] a Full Court described it as, inter alia, a review to ensure the sentence is ‘just and appropriate’. In Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at [102], a Full Court described it, inter alia, as a ‘final check to ensure that a total or aggregate penalty is not, in all the circumstances, excessive’.
The Applicant proposed a 20% discount for totality ‘to ensure that the total penalties imposed are not inappropriate but nevertheless will be sufficient to secure general deterrence and specific deterrence’. Little else was submitted on the question of totality. In my view, an adjustment of 20% is not called for given the approach I have taken above. The appropriate adjustment for totality is a further discount of 15%. That produces a total penalty to KLM of $135,143.63 and a total penalty to Mr Gupta of $27,028.73.
ORDERS AND DECLARATIONS
I will make orders that the Respondents pay the penalties set out in these reasons. No submission was received as to the time in which the pecuniary penalties were to be paid. I will order that the pecuniary penalties be paid within 90 days of the date of this order. The Applicant also sought the making of declarations. The Respondents made no submission on this issue. Declarations will issue in the form sought by the Applicant against each Respondent.
I certify that the preceding one hundred and eight (108) numbered paragraph are a true copy of the Reasons for Judgment of Judge Blake. Associate:
Dated: 11 February 2025
| ANNEXURE 1 – PROPOSED PENALTIES – FIRST RESPONDENT – KLM | |||||||
| Declaration no. | Contravention | Relevant period | Penalty Units | Penalty Unit value | Maximum penalty | Proposed penalty % | Proposed penalty |
| 1(a) | Section 45 of the FW Act by failing to pay Mr Saraswat the afternoon shift penalty rate, as required by clause 25.2 of the Vehicle Award 2020 | 28 December 2020 - 21 February 2021 | 300 | $222 | $66,600 | 20% | $13,320 |
| 1(b) | Section 45 of the FW Act by failing to pay the Employees the public holiday penalty rate, as required by clause 27.4(a)(iv) of the Vehicle Award 2020 | 28 December 2020 - 21 February 2021 | 300 | $222 | $66,600 | 40% | $26,640 |
| 1(c) | Section 45 of the FW Act by failing to pay the Employees the rate for the first three hours of overtime performed on Monday to Saturday, as required by clause 27.5(b) of the Vehicle | 28 December 2020 - 21 February 2021 | 300 | $222 | $66,600 | 50% | $33,300 |
| Declaration no. | Contravention | Relevant period | Penalty Units | Penalty Unit value | Maximum penalty | Proposed penalty % | Proposed penalty |
| 1(d) | Section 45 of the FW Act by failing to pay the Employees the rate for overtime after the first three hours of overtime on Monday to Saturday, as required by clause 27.5(b) of the Vehicle Award 2020 | 28 December 2020 - 21 February 2021 | 300 | $222 | $66,600 | 60% | $39,960 |
| 1(e) | Section 45 of the FW Act by failing to pay the Employees the rate for overtime worked on a Sunday, as required by clause 27.5(b) of the Vehicle Award 2020 | 28 December 2020 - 21 February 2021 | 300 | $222 | $66,600 | 50% | $33,300 |
| 1(f) | Section 45 of the FW Act by failing to pay Mr Tirukkolluri the rate of overtime worked on a public holiday, as required by clause 27.5(b) of the Vehicle | 28 December 2020 - 21 February 2021 | 300 | $222 | $66,600 | 20% | $13,320 |
| Declaration no. | Contravention | Relevant period | Penalty Units | Penalty Unit value | Maximum penalty | Proposed penalty % | Proposed penalty |
| 1(g) | section 325(1) of the FW Act for unreasonably requiring Mr Tirukkolluri to pay to another person amounts payable to him in relation to the performance of work for the benefit of KLM and/or Mr Gupta | 31 May 2023 - June 2023 | 300 | $275 | $82,500 | 80% | $66,000 |
| 1(h) | section 535(1) of the FW Act by failing to make and keep records of the type required by regulation 3.33(3)(d) of the FW Regulations | 28 December 2020 - 21 February 2021 | 300 | $222 | $66,600 | 50% | $33,300 |
| 1(i) | section 535(1) of the FW Act by failing to make and keep records of the type required by regulation 3.34 of the FW Regulations | 28 December 2020 - 21 February 2021 | 300 | $222 | $66,600 | 50% | $33,300 |
| 1(j) | Section 45 of the FW Act by failing to make a part-time agreement, as required by clause 12.3 of the Vehicle Award 2010, in relation to Mr Tirukkolluri | November 2017 (being when Mr Tirukkolluri commenced employment with KLM) | 300 | $210 | $63,000 | 10% | $6,300 |
| Declaration no. | Contravention | Relevant period | Penalty Units | Penalty Unit value | Maximum penalty | Proposed penalty % | Proposed penalty |
| 1(k) | Section 45 of the FW Act by failing to make part-time agreement, as required by clause 10.3 of the Vehicle Award 2020, in relation to Mr Saraswat | 29 June 2020 (being when Mr Saraswat commenced employment with KLM) | 300 | $210 | $63,000 | 10% | $6,300 |
| 1(l) | Section 536(3) of the FW Act by knowingly providing a false or misleading pay slip to Mr Tirukkolluri | 10 February 2021 | 300 | $222 | $66,600 | 60% | $39,960 |
| 1(m) | Section 718A(1) of the FW Act by knowingly giving false or misleading information or documents to a Fair Work Inspector who was performing functions under or in connection with a law of the Commonwealth | 17 May 2021 | 300 | $222 | $66,600 | 70% | $46,620 |
| Total | 3900 | $874,500 | $391,620 | ||||
| Total after 15% discount for cooperation | $332,877 | ||||||
| Total after further 20% reduction for totality | $266,302 (approx. 30% of potential maximum) | ||||||
| ANNEXURE 2 – PROPOSED PENALTIES – SECOND RESPONDENT – MR GUPTA | |||||||
| Declaration no. | Contravention | Relevant period | Penalty Units | Penalty Unit value | Maximum penalty | Proposed penalty % | Proposed penalty |
| 1(a) | Section 45 of the FW Act by failing to pay Mr Saraswat the afternoon shift penalty rate, as required by clause 25.2 of the Vehicle Award 2020 | 28 December 2020 - 21 February 2021 | 60 | $222 | $13,320 | 20% | $2,664 |
| 1(b) | Section 45 of the FW Act by failing to pay the Employees the public holiday penalty rate, as required by clause 27.4(a)(iv) of the Vehicle Award 2020 | 28 December 2020 - 21 February 2021 | 60 | $222 | $13,320 | 40% | $5,328 |
| 1(c) | Section 45 of the FW Act by failing to pay the Employees the rate for the first three hours of overtime performed on Monday to Saturday, as required by | 28 December 2020 - 21 February 2021 | 60 | $222 | $13,320 | 50% | $6,660 |
| Declaration no. | Contravention | Relevant period | Penalty Units | Penalty Unit value | Maximum penalty | Proposed penalty % | Proposed penalty |
| 1(d) | Section 45 of the FW Act by failing to pay the Employees the rate for overtime after the first three hours of overtime on Monday to Saturday, as required by clause 27.5(b) of the Vehicle Award 2020 | 28 December 2020 - 21 February 2021 | 60 | $222 | $13,320 | 60% | $7,992 |
| 1(e) | Section 45 of the FW Act by failing to pay the Employees the rate for overtime worked on a Sunday, as required by clause 27.5(b) of the Vehicle Award 2020 | 28 December 2020 - 21 February 2021 | 60 | $222 | $13,320 | 50% | $6,660 |
| 1(f) | Section 45 of the FW Act by failing to pay Mr Tirukkolluri the rate of overtime worked on a public holiday, as required by clause 27.5(b) of the Vehicle | 28 December 2020 - 21 February 2021 | 60 | $222 | $13,320 | 20% | $2,664 |
| Declaration no. | Contravention | Relevant period | Penalty Units | Penalty Unit value | Maximum penalty | Proposed penalty % | Proposed penalty |
| 1(g) | section 325(1) of the FW Act for unreasonably requiring Mr Tirukkolluri to pay to another person amounts payable to him in relation to the performance of work for the benefit of KLM and/or Mr Gupta | 31 May 2023 - June 2023 | 60 | $275 | $16,500 | 80% | $13,200 |
| 1(h) | section 535(1) of the FW Act by failing to make and keep records of the type required by regulation 3.33(3)(d) of the FW Regulations | 28 December 2020 - 21 February 2021 | 60 | $222 | $13,320 | 50% | $6,660 |
| 1(i) | section 535(1) of the FW Act by failing to make and keep records of the type required by regulation 3.34 of the FW Regulations | 28 December 2020 - 21 February 2021 | 60 | $222 | $13,320 | 50% | $6,660 |
| 1(j) | Section 45 of the FW Act by failing to make a part-time agreement, as required by clause 12.3 of the Vehicle Award 2010, in relation to Mr Tirukkolluri | November 2017 (being when Mr Tirukkolluri commenced employment with KLM) | 60 | $210 | $12,600 | 10% | $1,260 |
| Declaration no. | Contravention | Relevant period | Penalty Units | Penalty Unit value | Maximum penalty | Proposed penalty % | Proposed penalty |
| 1(k) | Section 45 of the FW Act by failing to make part-time agreement, as required by clause 10.3 of the Vehicle Award 2020, in relation to Mr Saraswat | 29 June 2020 (being when Mr Saraswat commenced employment with KLM) | 60 | $210 | $12,600 | 10% | $1,260 |
| 1(l) | Section 536(3) of the FW Act by knowingly providing a false or misleading pay slip to Mr Tirukkolluri | 10 February 2021 | 60 | $222 | $13,320 | 60% | $7,992 |
| 1(m) | Section 718A(1) of the FW Act by knowingly giving false or misleading information or documents to a Fair Work Inspector who was performing functions under or in connection with a law of the Commonwealth | 17 May 2021 | 60 | $222 | $13,320 | 70% | $9,324 |
| Total | 780 | $174,900 | $78,324 | ||||
| Total after 15% discount for cooperation | $66,575 | ||||||
| Total after further 20% reduction for totality | $53,260 maximum) | ||||||
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