Fair Work Ombudsman v Koojedda Carpentry Pty Ltd as trustee for the Gumley Trust & Ors (No.2)
[2017] FCCA 2577
•26 October 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v KOOJEDDA CARPENTRY PTY LTD AS TRUSTEE FOR THE GUMLEY TRUST & ORS (No.2) | [2017] FCCA 2577 |
| Catchwords: INDUSTRIAL LAW – Penalty – alleged failure to pay and underpayment of entitlements – alleged failure to produce records and documents. |
| Legislation: Crimes Act 1914 (Cth), s.4AA(1) Fair Work Act 2009 (Cth), ss.3, 44, 45, 90, 117, 536, 539, 545, 546, 550, 557, 559, 712 Fast Food Industry Award 2010 |
| Cases cited: Australia Nursing Federation & Ors v Alcheringa Hostel Inc [2004] FCA 375; (2004) 136 FCR 530; (2004) 138 IR 122; (2004) 54 AILR 100-204 |
| Applicant: | Fair Work Ombudsman |
| First Respondent: | Koojedda Carpentry Pty Ltd As Trustee For The Gumley Trust |
| Second Respondent: | Mark Ross Gumley |
Third Respondent: | Gemma Gumley |
| File Number: | PEG 244 of 2015 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 14 June 2017 |
| Date of Last Submission: | 14 June 2017 |
| Delivered at: | Perth |
| Delivered on: | 26 October 2017 |
REPRESENTATION
| Counsel for the Applicant: | Ms H Millar |
| Solicitors for the Applicant: | The Office of the Fair Work Ombudsman, Brisbane |
| For the First Respondent: | No appearance |
| For the Second Respondent: | In person |
For the Third Respondent: | In person |
DECLARATIONS AND ORDERS
The Court declares that:
The First Respondent contravened the following civil remedy provisions:
(a)section 45 of the Fair Work Act 2009 (Cth) (“FW Act”) by failing to pay the minimum hourly rate of pay in contravention of clauses A.2.5 and 20 of the Restaurant Industry Award 2010 (“Restaurant Award”);
(b)section 45 of the FW Act by failing to pay the minimum hourly rate of pay in contravention of clauses A.2.5 and 17 of the Fast Food Industry Award 2010 (“Fast Food Award”);
(c)section 45 of the FW Act by failing to pay the minimum hourly rate of pay for a 19 year old junior employee, in contravention of clauses A.2.5 and 20.3 of the Restaurant Award;
(d)section 45 of the FW Act by failing to pay the applicable casual loading in contravention of clause 13.1 of the Restaurant Award;
(e)section 45 of the FW Act by failing to pay the appropriate penalty rate for work performed on a Saturday in contravention of clauses A.5.4 and 34.1 of the Restaurant Award;
(f)section 45 of the FW Act by failing to pay the appropriate penalty· rate for work performed on a Sunday in contravention of clauses A.5.4 and 34.1 of the Restaurant Award;
(g)section 45 of the FW Act by failing to pay the appropriate penalty rate for work performed on Saturday in contravention of clauses A.5.4 and 25.5 of the Fast Food Award;
(h)section 45 of the FW Act by failing to pay the appropriate penalty loading for work performed on a Sunday in contravention of clauses A.6.4 and 25.5 of the Fast Food Award;
(i)section 45 of the FW Act by failing to pay the applicable public holiday loading for work performed on a designated public holiday in contravention of clauses A.5.4 and 34.1 of the Restaurant Award;
(j)section 45 of the FW Act by failing to pay the applicable overtime loading for time worked outside of ordinary hours in contravention of clause 33.2 of the Restaurant Award;
(k)section 45 of the FW Act by failing to pay the applicable overtime for time worked outside of ordinary hours in contravention of clause 26.1 of the Fast Food Award;
(l)section 44(1) of the FW Act by failing to pay accrued but untaken annual leave entitlements on termination of employment, in contravention of section 90(2) of the FW Act;
(m)section 45 of the FW Act by failing to pay annual leave loading in contravention of clause 35.2 of the Restaurant Award;
(n)section 45 of the FW Act by failing to pay annual leave loading in contravention of clause 28.3 of the Fast Food Award;
(o)section 44(1) of the FW Act by failing to make payment in lieu of notice upon termination of employment pursuant to section 117 of the FW Act;
(p)section 712(3) of the FW Act by failing to comply with a notice to produce records or documents issued pursuant to section 712(1) of the FW Act; and
(q)section 536(1) of the FW Act, by failing to provide payslips to employees.
The Second Respondent was involved, within the meaning of section 550(2) of the FW Act, in the contraventions of the First Respondent at paragraphs 1(o) and (p) above.
The Third Respondent was involved, within the meaning of section 550(2) of the FW Act, in the contraventions of the First Respondent at paragraphs 1(a) to 1(l) and 1(p) and 1(q) above
THE COURT ORDERS THAT:
Pursuant to section 545(2) of the FW Act, the First Respondent pay the following amounts within 28 days of the date of this order, less applicable taxation:
(a)Tamara Howlett: $4,243.48
(b)Rachel Wheatley: $2,209 .73
(c)Rebecca Gould: $1,242.44
(d)Jasamine Jones: $505.40
(e)Tessa Haub: $1,308.72
(f)Michael Jacobs: $5,193.50
(g)Kazutaka Sumi: $4,381.07
(h)Stacey Clark: $952.11
Pursuant to section 559(1) of the FW Act, in the event the First Respondent is unable to locate any of the above employees within 28 days of this order, the First Respondent pay the amount due to the employees to the Commonwealth within a further seven days.
Pursuant to section 546 of the FW Act the First Respondent pay a penalty of $139,995.
Pursuant to section 546 of the FW Act the Second Respondent pay a penalty of $3,000.
Pursuant to section 546 of the FW Act the Third Respondent pay a penalty of $12,000.
Pursuant to section 546(3)(a) of the FW Act the pecuniary penalties imposed against the First Respondent be paid to the Commonwealth within 28 days of this order.
Pursuant to section 546(3)(c) of the FW Act the pecuniary penalties imposed against the Second and Third Respondents be paid to the Applicant within 28 days of this order, with the Applicant to distribute the penalty amounts to the employees as follows:
Employee Underpayment Amount Percentage of total penalty to be distributed Tamara Howlett $4,243.48 21.18% Rachel Wheatley $2,209 .73 11.03% Rebecca Gould $1,242.44 6.20% Jasamine Jones $505.40 2.52% Tessa Haub $1,308.72 6.53% Michael Jacobs $5,193.50 25.92% Kazutaka Sumi $4,381.07 21.87% Stacey Clark $952.11 4.75%
The Applicant has liberty to apply on seven days' notice in the event that any of the preceding orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT Perth |
PEG 244 of 2015
| Fair Work Ombudsman |
Applicant
And
| Koojedda Carpentry Pty Ltd As Trustee For The Gumley Trust ACN 111 218 476 |
First Respondent
| Mark Ross Gumley |
Second Respondent
| Gemma Gumley |
Third Respondent
REASONS FOR JUDGMENT
Introduction
The applicant, the Fair Work Ombudsman (“FW Ombudsman”) seeks the imposition of pecuniary penalties on Koojedda Carpentry Pty Ltd As Trustee for the Gumley Trust ACN 111 218 476 (“Koojedda Carpentry”), the first respondent and on Mark Gumley and Gemma Gumley, the second and third respondents respectively (“Mr Gumley and Ms Gumley” respectively), and for related relief, in relation to agreed contraventions of the Fair Work Act 2009 (Cth) (“FW Act”).
The proceedings were commenced on 5 June 2015 by the FW Ombudsman, and on 5 December 2016, a statement of agreed facts (“SAF”) was entered into, whereby Koojedda Carpentry, Mr Gumley and Ms Gumley, admitted to the alleged contraventions. The SAF is Appendix A to these Reasons for Judgment.
The contraventions relate to eight former employees of Koojedda Carpentry who worked at two businesses operated by Koojedda Carpentry, as follows:
a)the Hidden Gem Café, located at Gelorup, Bunbury (“Café”);
b)the Dalycious Deli, located at Dalyellup, Bunbury (“Deli”),
(together the “Businesses”).
Koojedda Carpentry opened:
a)the Café in or around June 2012; and
b)the Deli in 2014.
It is not in dispute that the Businesses were no longer operating by early 2016.
There are eight employees of Koojedda Carpentry who worked at the Businesses and who are affected by the contraventions. The employees, their period of employment, and their place of work is set out in the table below:
Employee Period of Employment Worked at Rachel Wheatley 11 June to 30 August 2013 Cafe Tamara Howlett 25 January to 14 April 2014 Cafe Michael Jacobs 24 February to 15 June 2014 Cafe 10 June to 18 June 2014 Deli Tessa Haub 11 March to 28 March 2014 Cafe Kazutaka Sumi 15 March to 30 March 2014 Cafe 31 March to 19 June 2014 Deli Rebecca Gould 22 April to 22 May 2014 Cafe Jasamine Jones 7 May to 15 June 2014 Cafe Stacey Clark 30 July to 21 September 2014 Cafe
Jacobs and Sumi were both qualified chefs, and worked as such in both the Café and Deli. Wheatley, Howlett, Haub, Gould, Jones and Clark worked as food and beverage attendants at the Café.
Award coverage
The Café and Deli were small businesses of different natures. Consequently, different awards applied to work at each of the Café and Deli. The work at the Café was covered by the Restaurant Industry Award 2010 (“Restaurant Award”) and the work performed at the Deli was covered by the Fast Food Industry Award 2010 (“Fast Food Award”). Thus, Jacobs and Sumi were covered by each of the Restaurant Award and the Fast Food Award when working in the Café and Deli respectively. The remainder of the employees were covered by the Restaurant Award as they worked only in the Café.
Summary of contraventions
The contraventions in respect of these employees can be broadly summarised as follows:
a)Koojedda Carpentry paid rates of pay to the employees which did not meet the minimum award rates as well as rates for casual loading, overtime, weekend penalties and public holiday penalties;
b)Koojedda Carpentry failed to pay three employees their accrued annual leave entitlements on termination of employment;
c)Koojedda Carpentry failed to pay one employee payment in lieu of notice upon termination of his employment;
d)Koojedda Carpentry failed to pay six of the eight employees any wages at all during part or all of their employment; and
e)Koojedda Carpentry failed to issue payslips on a regular basis and failed to comply with a notice to produce (“NTP”).
Mr Gumley was involved in Koojedda Carpentry’s contraventions relating to the failure to make payment in lieu of notice and the failure to comply with the NTP, within the meaning of s.550 of the FW Act: SAF at [4].
Ms Gumley was involved in all of Koojedda Carpentry’s contraventions with the exception of the failure to make payment in lieu of notice: SAF at [5].
The Court’s approach to penalty
The authorities establish that the appropriate penalties are to be determined as follows:
a)first, the Court identifies the separate contraventions involved. Each contravention of, in turn each separate obligation imposed by, the FW Act is a separate contravention of a civil remedy provision for the purposes of s.539(2) of the FW Act: Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216; (1992) 42 IR 255; (1992) 34 AILR 369 at [25] per Gray J (“Gibbs”); McIver v Healey [2008] FCA 425; (2008) 60 AILR 100-850 at [16] per Marshall J;
b)second, the Court should consider whether the extent to which the contraventions so identified in the first step constitute a "course of conduct", and thus ought to be treated as a single contravention within the meaning and operation of s.557 of the FW Act: FW Act, s.557(1);
c)third, to the extent that two or more contraventions have common elements, the Court may take this into account in considering the appropriateness in all the circumstances of the quantum of penalty for the contraventions. That reflects the basic principle that a contravener should not be penalised more than once for what, in a practical sense, amounts to the same contravening conduct, such that the penalties imposed by the Court should be an appropriate, but fair response to what Koojedda Carpentry and Mr Gumley and Ms Gumley did in contravention of their statutory obligations: Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809 at [46] per Graham J (“Australian Ophthalmic Supplies”);
d)fourth, the Court, having identified the relevant factors arising from the first three steps, must fix appropriate penalties for each contravention having regard to all of the circumstances of the case; and
e)fifth, having fixed appropriate penalties for the contraventions, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the contravening conduct: Kelly v Fitzpatrick[2007] FCA 1080; (2007) 166 IR 14 at [30] per Tracey J (“Kelly”); Australian Ophthalmic Supplies at [23] per Gray J; [71] per Graham J and [102] per Buchanan J. The Court should apply an "instinctive synthesis" (often referred to in the applicable case law as the "totality principle'') in making this assessment: Australian Ophthalmic Supplies at [27] per Gray J and [55] and [78] per Graham J.
Factual material
As indicated at [2] above the SAF is Annexure A to these Reasons for Judgment. In addition to the SAF the Court has had regard to the affidavits sought to be relied upon by the FW Ombudsman: see FW Ombudsman’s submission at [14], and to the affidavits filed by Mr Gumley and Ms Gumley.
Contraventions admitted
Koojedda Carpentry has admitted: SAF at [3], that it contravened the following provisions of the FW Act:
a)section 45 of the FW Act by failing to pay each of the Café Employees (other than in relation to Jones) the minimum hourly rate of pay in contravention of Schedule A.2.5 of the Restaurant Award, read in conjunction with clause 20 of the Restaurant Award;
b)section 45 of the FW Act by failing to pay Jacobs and Sumi the minimum hourly rate of pay while working at the Deli, in contravention of Schedule A.2.5 of the Fast Food Award, read in conjunction with clause 17 of the Fast Food Award;
c)section 45 of the FW Act by failing to pay Howlett the minimum hourly rate of pay for a 19 year old junior employee, in contravention of Schedule A.2.5 of the Restaurant Award, read in conjunction with clause 20.3 of the Restaurant Award;
d)section 45 of the FW Act by failing to pay Howlett, Wheatley, Gould, Jones and Haub the applicable casual loading, in contravention of clause 13.1 of the Restaurant Award;
e)section 45 of the FW Act by failing to pay Howlett, Wheatley, Gould, Jones, Haub, Clark and Jacobs the appropriate penalty rate for work undertaken on a Saturday, in contravention of Schedule A.5.4 of the Restaurant Award, read in conjunction with clause 34.1 of the Restaurant Award;
f)section 45 of the FW Act by failing to pay Howlett, Wheatley, Gould, Jones, Haub, Clark and Jacobs the appropriate penalty rate for work undertaken on a Sunday, in contravention of Schedule A.5.4 of the Restaurant Award, read in conjunction with clause 34.1 of the Restaurant Award;
g)section 45 of the FW Act by failing to pay Sumi the appropriate penalty rate for work undertaken on Saturday while working at the Deli, in contravention of Schedule A.5.4 of the Fast Food Award, read in conjunction with clause 25.5 of the Fast Food Award;
h)section 45 of the FW Act by failing to pay Jacobs and Sumi the appropriate penalty loading for work undertaken on a Sunday while working at the Deli in contravention of Schedule A.6.4 of the Fast Food Award, read in conjunction with clause 25.5 of the Fast Food Award;
i)section 45 of the FW Act by failing to pay Jacobs and Sumi the applicable overtime loading for time worked outside of ordinary hours while working at the Cafe, in contravention of clause 33.2 of the Restaurant Award;
j)section 45 of the FW Act by failing to pay Jacobs the applicable public holiday loading while working at the Café for work undertaken on a designated public holiday, in contravention of Schedule A.5.4 of the Restaurant Award, read in conjunction with clause 34.1 of the Restaurant Award;
k)section 45 of the FW Act by failing to pay Sumi the applicable overtime for time worked outside of ordinary hours while working at the Deli, in contravention of clause 26.1 of the Fast Food Award;
l)section 44(1) of the FW Act by failing to pay Jacobs, Sumi and Clark all accrued but untaken annual leave entitlements on termination of their employment, in contravention of subsection 90(2) of the FW Act;
m)section 45 of the FW Act by failing to pay Jacobs and Clark annual leave loading in contravention of clause 35.2 of the Restaurant Award;
n)section 45 of the FW Act by failing to pay Sumi annual leave loading in contravention of clause 28.3 of the Fast Food Award;
o)section 44(1) of the FW Act by failing to pay Jacobs in lieu of notice upon termination of his employment pursuant to section 117 of the FW Act;
p)section 712(3) of the FW Act, by Koojedda Carpentry’s failure to comply with the NTP; and
q)section 536(1) of the FW Act, by Koojedda Carpentry failing to provide payslips to the Employees.
(the “Admitted Contraventions”).
The FW Ombudsman submitted, and the Court accepts, that:
a)contraventions of the same terms of the Restaurant Award and, separately, the Fast Food Award, in relation to multiple employees, may be treated as one contravention under s.557 of the FW Act, provided that there is one course of conduct; and
b)such grouping is appropriate in this proceeding, and that therefore, whilst the Employees were repeatedly underpaid their minimum wages and entitlements, a single penalty for the contravention of each separate award provision is appropriate.
The FW Ombudsman also submitted, and the Court also accepts, that contraventions of a similar character under the Restaurant Award and Fast Food Award, for example the failure to pay minimum hourly wages, cannot be treated as a single contravention under s.557 of the FW Act as the separate awards reflect separate and discrete obligations for the Businesses. Nevertheless, the Court accepts that there may be a degree of overlap between the contraventions across the Restaurant Award and the Fast Food Award. In that regard, the Court notes what was said by the Federal Court in Gibbs, FCR at 223 per Gray J:
If the different terms impose cumulative obligations or obligations that substantially overlap, it is possible to take into account the substance of the matter by imposing no penalty, or a nominal penalty, in respect of breaches of some terms, but a substantial penalty in respect of others.
Nature and extent of the contravening conduct
Underpayment of wages and leave entitlements
The underpayment contraventions affected each of the Employees, resulting in individual underpayments of between $505.40 to $5,193.50: SAF at Schedule 6. Many of the Employees were experienced in the hospitality industry and held relevant qualifications, for example:
a)Michael Jacobs had approximately 13 years’ experience in the hospitality industry and held a Certificate II in Patisserie and a Diploma in Hospitality: SAF at [22]; Jacobs Affidavit at [17]-[18];
b)Rachel Wheatley had approximately 23 years’ experience in the hospitality industry: SAF at [14(c)];
c)Stacey Clark had approximately 17 years’ experience in the hospitality industry: SAF at [20(c)]; and
d)Kazutaka Sumi was qualified with a Certificate III in Hospitality (Commercial Cookery) and a Diploma of Hospitality and had five years previous experience working in the hospitality industry as a chef: SAF at [28(a) and (f)].
The underpayment contraventions came about because the Employees worked hours in excess of 38 hours a week, across weekdays, weekends and public holidays, and were paid as follows:
Employee Unpaid periods
Pay rate
Tamara Howlett: SAF at [13]
No wages at all:
(i) from 17 to 23 February 2014;
(ii) from 17 to 23 March 2014; and
(iii) from 31 March to 20 April 2014.
At all other times, an hourly rate of pay varying between $14.06 and $19.69 per hour.
Rachel Wheatley: SAF at [15]
No wages at all from 29 July to 4 August 2013; and
At all other times, an hourly rate of pay varying between $15.33 and $17.49 per hour.
Rebecca Gould: SAF at [17]
No wages at all from 19 to 22 May 2014.
At all other times, an hourly rate of pay between $9.75 and $17.49 per hour.
Jasamine Jones: SAF at [19]
An hourly rate of
$17.49 per hour.
Tessa Haub: SAF at [21]
No wages at all during the 2.5 week employment period
Michael Jacobs: SAF at [25]
No wages at all from 9 to 22 June 2014.
At all other times, an hourly rate of pay varying between $19.07 and $38.13 per hour.
Stacey Clark: SAF at [27]
No wages at all from 28 July to 3 August 2014 and 1 to 7 September 2014.
At all other times, an hourly rate of pay varying between $18.02 and $27.03 per hour.
Kazutaka Sumi: SAF at [31]
An hourly rate of pay varying between $19.07 and $38.13 per hour.
Michael Jacobs held a Temporary Work (Skilled) subclass 457 visa whilst he was employed by Koojedda Carpentry. Koojedda Carpentry put in place a contract purporting that Michael Jacobs would be paid certain amounts however, at no stage was he paid amounts consistent with the contract: SAF at [23]-[25].
The contravening conduct was not confined to a short or defined period of time. Rather, the contraventions continued for over 15 months, across the Businesses, and affected employees in different roles.
Failure to issue pay slips
The Employees in this matter were not provided with pay slips within one working day of being paid, or in some cases they were not provided pay slips at all. The failure to provide pay slips should not be viewed merely as an administrative matter. Rather, it has serious consequences for employees, limiting their ability to monitor and pursue their legal entitlements, as set out in this Court in Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012] FMCA 258 at [67] per Riethmuller FM, and cited with approval in Fair Work Ombudsman v Bundaberg Security Pty Ltd [2014] FCCA 592; (2014) 241 IR 424 at [26] per Judge Jarrett:
Whilst the record keeping obligation with respect to pay slips only appears in the Regulations, its central importance in industrial matters cannot be underestimated. Proper pay slips allow employees to understand how their pay is calculated and therefore easily obtain advice. Pay slips provide the most practical check on false record keeping and underpayments, and allow for genuine mistakes or misunderstandings to quickly be identified. Without proper pay slips employees are significantly disempowered, creating a structure within which breaches of the industrial laws can be easily perpetrated.
The NTP
The purpose of the powers conferred on Fair Work Inspectors (such as the power to issue NTPs) is to provide the FW Ombudsman with an effective means for investigating and enforcing compliance within minimums standards and industrial instruments. The deliberate choice to not comply with statutory notices, such as an NTP, undermines the effectiveness of statutory notices as an enforcement tool and, consequently, the FW Ombudsman’s ability to effectively enforce compliance with the FW Act.
On this point the comments of this Court in Fair Work Ombudsman v Nerd Group Australia Pty Ltd (No 3) [2012] FMCA 891 at [11]-[12] per Lucev FM (“Nerd Group”) in relation to the potential loss or damage arising from a failure to comply with NTPs are apposite:
11. The extent of the conduct and loss and damage might be said to be limited to the failure to produce the relevant documents. It goes further than that, however, because it involves not merely a failure to comply with the requests in the First NTP and Second NTP, but also has the following consequence:
a. the powers conferred on Fair Work Inspectors, which are designed to provide the FW Ombudsman with means to investigate and enforce compliance with minimum legislated standards, and industrial instruments, are impaired by a failure to comply with an NTP; and
b.employees may be denied their lawful entitlements, or part thereof, because the failure to comply with the NTP means that documents essential to a determination of which entitlements have been complied with are not produced, and entitlements, or partly met entitlements, might not be able to be calculated, properly or at all.
12. The investigative, compliance and enforcement powers of the FW Ombudsman, and the payment to employees of entitlements, are therefore adversely affected by a failure to comply with an NTP. Thus there is damage and loss in the sense of a failure to comply with a statutory objective, and “this effect must be considered as being of similar importance as would be the case if loss and damage were suffered.” By failing to provide the records as requested, Nerd Group and Mr Garber engaged in conduct undermining the utility and effectiveness of the relevant legislative provisions.” [Citations removed].
In these proceedings, Koojedda Carpentry, Mr Gumley and Ms Gumley produced records to the FW Ombudsman only in the initial stage of the investigation: First Cole Affidavit at [23]-[29]. These included some timesheets and limited payroll advices for Ms Haub and Ms Howlett. The records were incomplete and at times inaccurate: Wong Affidavit at [51]. When, following a number of further complaints from employees, a further NTP was issued in July 2014 and then again in October 2014, no documents at all were produced in response: First Cole Affidavit at [60]-[71]. This meant that for the employees who lodged complaints with the FW Ombudsman at a later stage of the investigation – Ms Gould, Mr Jacobs and Mr Sumi – the only records Koojedda Carpentry, Mr Gumley and Ms Gumley produced relevant to these employees were limited timesheets. In order to calculate these employees’ entitlements, the FW Ombudsman had to supplement these partial time records with the employees’ own records of the hours they worked, payslips kept by the employees and the employees bank statements: Wong Affidavit at [58]. As a result, the FW Ombudsman had to invest substantially more time in conducting the assessment and investigation than if the records had been produced as required.
The substantial penalties set by the legislature for contraventions of statutory notices (such as NTPs) reinforce the importance placed on compliance with such enforcement tools.
Grouping of Contraventions
Course of conduct
Two or more contraventions may, depending upon the particular circumstances, attract the operation of the course of conduct provisions contained in s.557 of the FW Act.
Koojedda Carpentry is entitled to the benefit of the course of conduct provisions in relation to repeated breaches of each relevant provision in respect of each employee; for instance, the multiple contraventions of the minimum wage provisions arising from the failure to pay an employee's wages should be treated as a single contravention. In this instance, Koojedda Carpentry has the benefit of the statutory course of conduct provision in relation to the multiple breaches of each separate provision with respect to each of the employees.
Common element
Although each individual obligation gives rise to a separate contravention: Gibbs, FCR at 223 per Gray J, Blandy v Coverdale NT Pty Ltd (ACN 102 611 423) [2008] FCA 1533; (2008) 178 IR 150 at [56] per Reeves J, it is open to the Court to group separate contraventions together where the contraventions may be said to overlap with each other or involve the potential punishment of contraventions for the same or substantially similar conduct: Australian Ophthalmic Supplies at [46] and [72] per Graham J and [93] per Buchanan J; Fair Work Ombudsman v Tiger Telco Pty Ltd (in liq) [2012] FCA 479 at [24]-[25] per Bromberg J.
In the Court’s view it can be accepted that some of the contraventions have common elements, and should be grouped together. Therefore, Koojedda Carpentry, Mr Gumley and Ms Gumley are entitled to the benefit of further grouping on the basis of common elements, as follows:
Contraventions Grouping 1 section 45 of the FW Act by failing to pay each of the Café Employees (other than in relation to Jones) the minimum hourly rate of pay while working at the Café, in contravention of Schedule A.2.5 of the Restaurant Award, read in conjunction with clause 20 of the Restaurant Award Minimum hourly wage contravention (Restaurant Award)
2 section 45 of the FW Act by failing to pay Howlett the minimum hourly rate of pay for a 19 year old junior employee, in contravention of Schedule A.2.5 of the Restaurant Award, read in conjunction with clause 20.3 of the Restaurant Award 3 subsection 44(1) of the FW Act by failing to pay Jacobs, Sumi and Clark all accrued but untaken annual leave entitlements on termination of their employment, in contravention of subsection 90(2) of the FW Act Failure to pay annual leave loading on termination
4 section 45 of the FW Act by failing to pay Jacobs and Clark annual leave loading in contravention of clause 35.2 of the Restaurant Award 5 section 45 of the FW Act by failing to pay Sumi annual leave loading in contravention of clause 28.3 of the Fast Food Award These contraventions can therefore be grouped for common elements on the basis that the contraventions arise from the same or substantially similar conduct as set out in the table showing penalties determined by the Court at [82]-[84] below. The remaining contraventions should not be grouped.
Penalty – factors for consideration
A non-exhaustive list of factors relevant to the imposition of a penalty appears in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26]-[55] per Mowbray FM (“Harrington Corporation”). Those factors include:
a)the nature and extent of the conduct which led to the breaches;
b)the circumstances in which that conduct took place;
c)the nature and extent of any loss or damage sustained as a result of the breaches;
d)whether there had been similar previous conduct;
e)whether the breaches were properly distinct or arose out of the one course of conduct;
f)the size of the business enterprise involved;
g)whether or not the breaches were deliberate;
h)whether senior management was involved in the breaches;
i)whether the party committing the breach had exhibited contrition, taken corrective action and cooperated with the enforcement authorities;
j)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
k)the need for specific and general deterrence.
This summary was adopted in Kelly at [14] per Tracey J. While the summary is a convenient checklist, it does not restrict the matters which may be taken into account in the exercise of the Court's discretion: Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 at [11] per Gyles J; Australian Ophthalmic Supplies at [91] per Buchanan J.
Nature and extent of the contravening conduct
The nature and extent of the contravening conduct which the Court takes into account in this case includes the following:
a)the contraventions included the failure to afford the Employees basic entitlements and, on a number of occasions, failing to make any payments to Employees for their work;
b)the failure to rectify the underpayments to the Employees, in whole or part, even while the Businesses were trading and where some of the individual amounts owed to the Employees were significant to some of the Employees; and
c)the ongoing failure of Koojedda Carpentry and Mr Gumley and Ms Gumley to meet basic employer obligations over an extended period of time, despite interventions by the FW Ombudsman.
Circumstances in which the conduct took place
Koojedda Carpentry commenced operating the Café in or around June 2012: Mr Gumley’s Affidavit at [2]. Only a few months afterwards, a former employee of Koojedda Carpentry lodged a complaint with the FW Ombudsman in respect of unpaid annual leave entitlements: Second Cole Affidavit at [8(a)]. In addition to the complaints the subject of these proceedings, the FW Ombudsman received a total of six formal complaints from employees and former employees of Koojedda Carpentry as well as an additional informal enquiry: Second Cole Affidavit at [8]-[9]. Of these complaints and enquiries six of them involved allegations of non-payment of wages: Second Cole Affidavit at [8]-[9].
The FW Ombudsman acknowledges that Koojedda Carpentry, Mr Gumley and Ms Gumley paid amounts to each of the former employees who contacted the FW Ombudsman: Second Cole Affidavit at [8]-[9].
Whilst the Court may place most weight on a prior finding of a court, the Court may have regard to other similar conduct of Koojedda Carpentry and Mr Gumley and Ms Gumley in determining penalty: Williams v Construction, Forestry, Mining and Energy Union (No 2) [2009] FCA 548; (2009) 182 IR 327 at [26]-[28] per Jessup J (“Williams (No 2)”). In particular while there is a clear difference between the weight the Court can give to a finding of fact, and a record of workplace complaints, ongoing complaints can be indicative of a “practical acceptance by the Respondents of wrongdoing”: Fair Work Ombudsman v Cuts Only The Original Barber Pty Ltd [2014] FCCA 2381 at [174] per Judge Riley.
The FW Ombudsman acknowledges the significant personal circumstances detailed in the affidavits of Mr Gumley and Ms Gumley are relevant to the Court’s assessment of penalty.
Nature and extent of the loss
The Court notes the following concerning the nature and extent of the loss suffered by the Employees:
a)the total underpayment owing to the Employees is $20,036.48; and
b)although a relatively moderate sum in the context of matters which come before this Court, it is relevant to note that the underpayments occurred over relatively short periods for each employee, as follows:
Employee Total underpayment Approximate duration of employment Tamara Howlett $4,243.48 11 weeks Rachel Wheatley $2,209.73 11 weeks Rebecca Gould $1,242.44 4 weeks Jasamine Jones $505.40 5 weeks Tessa Haub $1,308.72 2.5 weeks Michael Jacobs $5,193.50 16 weeks Kazutaka Sumi $4,381.07 14 weeks Stacey Clark $952.11 10 weeks
The underpayments must also be viewed in the context that:
a)Ms Haub was not paid any amount for the time she worked;
b)Ms Howlett was paid less than half of her minimum award entitlements;
c)Ms Wheatley and Ms Gould were paid less than three quarters of their minimum award entitlements: amounts derived from Schedules 1 to 6 of the SAF; and
d)these underpaid amounts remain unpaid, and there is no immediate likelihood that the Employees will receive those funds.
The nature and extent of the loss suffered by the Employees is significant and warrants the imposition of a meaningful penalty because:
a)the underpayment of $20,036.48 is not an insignificant sum, particularly in the context of those employees who were not paid at all, and the fact that the employees were covered by an award setting minimum rates;
b)the contraventions involved contravention of minimum standards of the most fundamental kind, namely the payment of wages and entitlements: Fair Work Ombudsman v Dawe [2013] FMCA 191 at [23] per Emmett FM;
c)in this case the adverse compliance history relates to the Businesses, to employees of the same type, covered by the same awards, and in respect of the same fundamental minimum standards for the payment of wages and entitlements and Koojedda Carpentry has had the benefit of the non-payment of wages and entitlements: Fair Work Ombudsman v Shafi Investments Pty Ltd & Ors (No 2) [2013] FMCA 168 at [15] per Whelan FM, whilst denying the Employees the benefit of the underpaid entitlements: Fair Work Ombudsman v Lycamobile Pty Ltd [2013] FCCA 2132 at [16] per Burnett FM; and
d)Koojedda Carpentry has not taken any steps to rectify the underpayment.
Previous contraventions and previous similar conduct
Neither Koojedda Carpentry, Mr Gumley nor Ms Gumley has previously been the subject of legal proceedings by the FW Ombudsman for any contravention of a workplace law.
The FW Ombudsman, however, submits that the extensive non-compliance history that Koojedda Carpentry, Mr Gumley and Ms Gumley have with the FW Ombudsman is relevant to the Court’s assessment of penalty. In addition to the complaints that are the subject of these proceedings, six other formal complaints were made against the Koojedda Carpentry in the period November 2012 to January 2015: Second Cole Affidavit at [8].
Insofar as those compliance-related events relate to alleged failures to pay entitlements under the FW Act the Court repeats what it said in Fair Work Ombudsman v ACN 146 435 118 Pty Ltd & Anor (No 2) [2013] FCCA 1270 at [58] per Judge Lucev:
… In that regard, the Court notes that it is conduct relevant to the contraventions complained of which might go to the question of the circumstances in which the conduct took place, and might include for example, opportunities to remedy that conduct, or to make payment of underpayments, prior to, and during the course of, any proceedings instituted in respect of the contraventions which is relevant. As for other conduct of the directors and related entities which has not resulted in contravention findings, that conduct must be accorded very limited weight. That said, such conduct of directors and related entities may still be relevant for the purposes of the specific and general deterrence and deliberateness factors to be considered by the Court in imposing penalty. It is to prior contraventions and conduct of respondents that the Court must primarily look for the purposes of this factor, and not the investigative record of the regulator. The Court must be careful not to impose sentence in respect of matters which have not, and may not, ever result in contravention proceedings, and which may not, in any event, constitute a contravention of the statute. Worse than that, it ought not contribute to an inappropriate over-zealousness on the part of the regulator if courts were to consider prior involvement with the regulator as a significant sentencing factor, except as it relates to the circumstances of the particular contraventions before the Court.
In this matter, bearing in mind the proximity of the other complaints, and the fact that they were seemingly remedied, but that the matters the subject of the contravention still occurred and were not remedied, it is appropriate to have some regard to the prior adverse compliance history of Koojedda Carpentry, Mr Gumley and Ms Gumley, but it is still appropriate to treat both Koojedda Carpentry and Mr Gumley and Ms Gumley as first time contraveners. Ordinarily, that would entitle them to a discount on penalty, and in most cases a significant discount on penalty.
Whether the breaches arose out of the one course of conduct
See [26]-[29] above.
Size and financial circumstances of respondents
Employers, be they small, medium or large, have an obligation to meet minimum standards in relation to their employees, and they cannot overcome financial difficulties by underpaying their employees: Workplace Ombudsman v Saya Cleaning Pty Ltd [2009] FMCA 38; (2009) 61 AILR 101-000 at [26]-[30] per Simpson FM (“Saya Cleaning”).
In Fair Work Ombudsman v Ultra Tune Australia Pty Ltd [2012] FMCA 560; (2012) 225 IR 326 at [40]-[47] per Lucev FM (“Ultra Tune”), the relevant authorities of the then Federal Magistrates Court, the Federal Court, and the former Industrial Relations Court of Australia were considered at length. In Ultra Tune the Federal Magistrates Court found that Saya Cleaning was not authority for the proposition that the size and financial resources of a contravener, or its capacity to pay, can be ignored, or not considered, when determining penalty, because in Saya Cleaning the Federal Magistrates Court did not actually express a view as to whether or not the size and financial resources of a contravener ought to affect penalty: Ultra Tune at [43] per Lucev FM. In Ultra Tune, on the basis of authority binding the Federal Magistrates Court, and now this Court, including the Federal Court and Australian Industrial Relations Court authorities there cited: Ultra Tune at [40]-[41] per Lucev FM, the Federal Magistrates Court found that the size and financial resources of a contravener may be considered in relation to penalty, and that if Saya Cleaning said otherwise it was inconsistent with those superior court authorities: Ultra Tune at [41] and [43(b)] per Lucev FM. More recently, the Federal Court has held that the financial circumstances of a respondent may be a relevant consideration in determining an appropriate penalty and whether the size of that penalty is meaningful: Hansen v Mt Martha Community Learning Centre Inc (No 2) [2015] FCA 1283 at [5] per Jessup J.
The available evidence before the Court indicates that between 2012 and 2015 Koojedda Carpentry employed approximately 8 to 15 employees: Second Cole Affidavit at [8]-[9] and operated the Businesses at two sites. The FW Ombudsman acknowledges that the Businesses are best characterised as small businesses, and that the following are appropriate matters for the Court to consider:
a)the Businesses no longer operate: SAF at [8];
b)the owner of the properties where the Businesses operated took possession of the commercial assets of the Businesses: Ms Gumley’s Affidavit at [22];
c)there is no other evidence that Koojedda Carpentry is trading in any capacity or has any assets of value, thereby reducing the relevance of specific deterrence;
d)Mr Gumley and Ms Gumley are both currently unemployed, with no known source of income and no known assets and limited financial means; and
e)the specific personal circumstances of Mr Gumley and Ms Gumley both currently and during the period when the contraventions occurred.
In relation to Koojedda Carpentry and its financial position the FW Ombudsman submitted that:
82. To the extent the Court may have concerns about the First Respondent’s capacity to pay the appropriate penalties, the Applicant relies on the relevant line of authority regarding the primacy of general deterrence. In ACCC v Leahy Petroleum Pty Ltd (No 2) [2005] FCA 254, in the context of determining appropriate civil penalties under consumer protection law, Merkel J stated:
“The size of the contravening companies and their respective capacities to pay a penalty were relied upon as factors in mitigation in the present case. Plainly, such factors can be relevant to the penalty that is necessary to deter the company from contravening the Act in the future. … However, a contravening company’s capacity to pay a penalty is of less relevance to the objective of general deterrence because that objective is not concerned with whether the penalties imposed have been paid. Rather, it involves a penalty being fixed that will deter others from engaging in similar contravening conduct in the future. Thus, general deterrence will depend more on the expected quantum of the penalty for the offending conduct, rather than on a past offender’s capacity to pay a previous penalty.”
83. These comments have been applied and endorsed in the workplace relations context. In Jordan v Mornington Inn Pty Ltd [2007] FCA 1384, Heerey J stated at [99]:
“As to the respondent’s own financial position, however, in considering the size of a penalty, capacity to pay is of less relevance than the objective of general deterrence: Leahy (No 2) at [9]. In any event, to the extent that financial hardship might mitigate what would otherwise be an appropriate penalty, such an argument would need to be based on evidence.”
84. On appeal, Stone and Buchanan JJ described the above statement of principle as being “unimpeachable”. Similarly, in Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58, Burchardt FM (as he then was) observed at [57]:
“... Respondents cannot hope to have their conduct in effect exonerated by the Court merely because they are impecunious. Parliament has set significant penalties for the sort of contraventions that the Respondents engaged in and I do not think it is appropriate for the totality principle to operate simply to ensure that penalties are imposed in suitably insignificant amounts to meet the Respondents’ capacity to pay.”
(FW Ombudsman’s submissions at [82]-[84] – footnotes omitted).
The FW Ombudsman submitted that:
a)if the Court is satisfied that Koojedda Carpentry is unable to pay any penalty which may be imposed on it in this matter (which the FW Ombudsman contends is apparent from the information before the Court) then, in the circumstances of this case, little or no weight ought to be given to the consideration of capacity to pay; and
b)rather, in relation to Koojedda Carpentry, the FW Ombudsman submits the Court should be primarily guided by the objective of general deterrence. The penalty should stand as an assessment of the seriousness of the conduct and serve as a warning to others not to commit similar contraventions in the future.
In this case there is material before the Court as to the size of Koojedda Carpentry’s business, which indicates that Koojedda Carpentry is a non-operational small business, that the Businesses were small businesses, and that Koojedda Carpentry has either no, or very limited, capacity to pay any penalty imposed.
The FW Ombudsman acknowledges that the financial circumstances of Mr Gumley and Ms Gumley are such that even low range penalties, such as those recommended by the FW Ombudsman, would be meaningful and have a deterrent effect: FW Ombudsman’s submissions at [81].
In this case, the FW Ombudsman properly acknowledges that the financial circumstances of a respondent are a consideration for the Court in setting penalty. The FW Ombudsman further submits however that it is a consideration which may be given significantly less weight as against the object of general deterrence, and the effect of a penalty in that regard.
The Court is inclined in the circumstances of this case to give more weight to general deterrence than to the fact that Koojedda Carpentry is a small business with no, or limited, capacity to pay any penalty. That is because, in this case, there were fundamental breaches of minimum standards in relation to wages and other entitlements which ought properly be the subject of general deterrence by way of an appropriate penalty. Further, the Court notes that, effectively, neither Koojedda Carpentry nor the Businesses continue to operate, and the effect of a penalty will not be as significant as it might be for a small business which continues to operate, and where the Court might consider other factors such as the effect on the ongoing viability of, or capacity to employ, in such a business: Textile Clothing and Footwear Union of Australia v Lotus Cove Pty Ltd [2004] FCA 43 at [47] per Merkel J; Australia Nursing Federation & Ors v Alcheringa Hostel Inc [2004] FCA 375; (2004) 136 FCR 530; (2004) 138 IR 122; (2004) 54 AILR 100-204 at [45(f)] per Ryan J. The Court also takes into account the personal circumstances of Mr Gumley and Ms Gumley (and in particular the imprisonment of Ms Gumley for certain offences, which need not be further expanded upon here), and considers that the FW Ombudsman’s submission that Mr Gumley and Ms Gumley’s personal circumstances ought to be taken into account in setting penalty, and that their financial circumstances are such that even a low range penalty would have a meaningful deterrent effect, are appropriate and correct. The Court will therefore weigh this factor accordingly when setting penalties.
Ensuring compliance with minimum standards
Ensuring compliance with minimum standards is a very important consideration in contravention cases. The objects of the FW Act include the maintenance of an effective safety net of minimum terms and conditions, and effective enforcement mechanisms: FW Act, s.3(b). The substantial penalties set by Parliament and awarded by the Courts for failing to comply with minimum award obligations reinforce the importance placed on compliance with minimum standards and an effective enforcement framework: FW Act, s.539(2).
In the context of the objects of the FW Act requiring compliance with minimum standards, including minimum rates of pay and entitlements, the contraventions in this case involve an undermining of the statutory objects and purpose of the FW Act, and in that context, a meaningful penalty is appropriate. The conduct of Koojedda Carpentry, Mr Gumley and Ms Gumley necessitates ordering penalties at a meaningful level to demonstrate that there are serious consequences for failing to comply with the FW Act, and to act as an incentive for employers to comply with minimum standards.
Deliberateness of contraventions
The Court notes that:
a)Mr Gumley and Ms Gumley had taken steps to inform themselves of lawful minimum rates of pay: Second Cole Affidavit at [14]-[16]; and
b)Mr Gumley also attended a meeting with a Fair Work Inspector in December 2013, which was arranged by the Fair Work Inspector specifically for the purpose of educating Mr Gumley as to Koojedda Carpentry’s employment obligations: Second Cole Affidavit at [14].
Subsequent to the steps referred to in the previous paragraph there is no evidence to suggest that any of the employment practices of Koojedda Carpentry were changed, and, save for Ms Wheatley, each of the Employees were employed after the meeting with the Fair Work Inspector: SAF at [11], and Koojedda Carpentry failed to pay them basic entitlements, including, in some cases, any payment at all for time worked.
In written submissions the FW Ombudsman submitted that the contravening conduct of Koojedda Carpentry, Mr Gumley and Ms Gumley does not appear to have been deliberate, and submits that there was, rather, a reckless disregard for workplace laws. The Court does not accept that the conduct of Koojedda Carpentry, Mr Gumley and Ms Gumley was, in its totality, not deliberate. The circumstances are such that inquiries were made by them concerning lawful minimum rates of pay, and the FW Ombudsman, through a Fair Work Inspector, advised Mr Gumley of Koojedda Carpentry’s employment obligations, this advice coming on the back of complaints as to non-payment of minimum rates of wages and entitlements, and following those events some of the Employees were not paid at all for various periods, and a number of them were paid less than that to which they were entitled. This conduct has the characteristic of wilful disregard, or deliberateness, rather than reckless disregard, and particularly so with respect to those of the Employees who were not paid at all for various periods. At hearing Counsel for the FW Ombudsman submitted, properly in the Court’s view, that in circumstances where there was no payment at all to any employee there was a “deliberateness” involved in that failure: Transcript, page 2.
Were it not for the Court’s view that the conduct is deliberate, it may have been that the Court would have imposed penalties slightly less than those determined and set out at [82]-[84] below.
Corrective action, contrition and cooperation
In relation to contrition and corrective action the Court observes that:
a)none of the underpayment amounts owing to the Employees have been rectified and neither Koojedda Carpentry, Mr Gumley nor Ms Gumley have taken any steps to commence making payments to the Employees; and
b)it is unlikely that the Employees will ever receive the amounts they are owed by Koojedda Carpentry, from either Koojedda Carpentry, Mr Gumley or Ms Gumley because:
i)Koojedda Carpentry is no longer trading and has no known assets;
ii)ASIC has initiated strike off action against Koojedda Carpentry: SAF at [91]. While this has been deferred at the request of the FW Ombudsman, it is likely that Koojedda Carpentry will be deregistered shortly after the deferral period expires; and
iii)Mr Gumley and Ms Gumley are currently both unemployed, with no known source of income or assets of any significant value: of Mr Gumley’s Affidavit at [10]; and
c)Mr Gumley and Ms Gumley have acknowledged their contravening conduct and expressed remorse for their conduct: Mr Gumley’s Affidavit at [3]; Ms Gumley’s Affidavit at [29], but the Court notes that there is no evidence that either of them have personally apologised to the Employees affected by their conduct.
In relation to cooperation with the FW Ombudsman the FW Ombudsman submitted that the cooperation of Koojedda Carpentry, Mr Gumley and Ms Gumley “can be characterised, at the highest, as limited”: FW Ombudsman’s submission at [61]. For reasons which appear immediately hereunder, the characterisation of the cooperation as “limited” is correct, and such cooperation as there was, in particular by way of entering into the SAF, came late in the proceedings.
The FW Ombudsman acknowledged in submissions that as a consequence of contact from a Fair Work Inspector payments were made to employees who had lodged earlier complaints, and Mr Gumley had attended a meeting with an Fair Work Inspector to discuss Koojedda Carpentry’s obligations as an employer: Second Cole Affidavit at [8]-[9]. In the Court’s view this can hardly be characterised as cooperation in relation to the existing complaints. If anything, as observed above, it put each of Koojedda Carpentry, Mr Gumley and Ms Gumley on notice that employees were entitled to be paid in accordance with each of the relevant awards, and, if anything, evinces a lack of cooperation with the FW Ombudsman by reason of the complaints the subject of these proceedings.
The Court notes that the SAF was completed in December 2016, but came against a background of:
a)the provision of incomplete records following requests in May and June 2014 from the FW Ombudsman as part of its investigation: First Cole Affidavit at [23]-[29];
b)the production of no documents at all in response to requests for information in July and October 2014, and a general lack of response to communication from the FW Ombudsman during this period: First Cole Affidavit at [60]-[71]; and
c)that as a consequence of the limited cooperation given to the FW Ombudsman, the FW Ombudsman was required to rely upon a range of sources and evidence made and kept by the Employees in order to determine basic information including hours worked by the Employees and the amounts that they were paid.
The Court may discount penalty where admissions have been made by respondents in civil penalty proceedings, and the discounts may be greater where the admissions are supplemented by findings of genuine contrition or regret: Mornington Inn Pty Ltd v Jordan[2008] FCAFC 70; (2008) 168 FCR 383; (2008) 171 IR 455; (2008) 247 ALR 714; [2008] 60 AILR 100-883 at [74] and [76] per Stone and Buchanan JJ (“Mornington Inn”).
In relation to admissions and the application of a penalty discount the Court further observes that:
a)each of Koojedda Carpentry, Mr Gumley and Ms Gumley have made full admissions in respect of the contraventions; and
b)the admissions came over a year after the proceedings had been filed, and after the FW Ombudsman had prepared and filed liability evidence.
In the circumstances, the Court will apply a discount on the maximum penalty that may be imposed on each of Koojedda Carpentry, Mr Gumley and Ms Gumley, and notes that the FW Ombudsman submits that a discount of no more than 10% would be appropriate to recognise the admissions and the limited cooperation by Koojedda Carpentry, Mr Gumley and Ms Gumley during the FW Ombudsman’s investigation. The Court accepts that this is an appropriate discount in all of the circumstances.
Involvement of senior management
On the evidence:
a)Mr Gumley was the sole director and shareholder of Koojedda Carpentry: SAF at [90]; and
b)Ms Gumley was responsible for the day-to-day management of the Café, including being ultimately responsible for decisions in respect to Employees’ terms and conditions of employment: SAF at [91].
As such, Mr Gumley and Ms Gumley were the senior management of Koojedda Carpentry, and the operative minds in relation to the employment and payment of all of Koojedda Carpentry’s employees, and therefore directly involved in the contraventions, both for the purposes of penalty assessment and accessorial liability for the purposes of s.550 of the FW Act.
Deterrence
It is well established that the need for specific and general deterrence are matters that are relevant to the imposition of a civil penalty: Harrington Corporation at [51]-[55] per Mowbray FM; Ponzio v
B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 62 IR 444; (2007) 59 AILR 100-669 at [93] per Lander J (“B & P Caelli Constructions”).
General deterrence
In Fair Work Ombudsman v Maclean Bay Pty Ltd(No 2) [2012] FCA 557; (2012) 64 AILR 101-635 at [29] per Marshall J the Federal Court observed that:
It is important to ensure that the protections provided by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless they are respected.
The role of general deterrence in determining the appropriate penalty is illustrated by the comments in B & P Caelli Constructions at [93] per Lander J:
In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty: R v Thompson (1975) 11 SASR 217.
General deterrence is a critical factor in these proceedings, and employers should be in no doubt that they have a positive obligation to ensure compliance with the obligations they owe to their employees under the law, and that they must provide their employees with the correct entitlements and issue payslips, and that significant penalties running to the tens of thousands or hundreds of thousands of dollars may be imposed upon corporate respondents who fail to comply with such obligations. Those employers who fail to comply with minimum obligations gain an unfair competitive advantage over those employers who do comply with their workplace obligations. The Court also observes that it is now almost notorious that there are significant pockets of non-compliance in relation to the payment of wages and entitlements, either at all or correctly, in the restaurant and hospitality industry: Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union [2008] FCAFC 170; (2008) 171 FCR 357; (2008) 177 IR 243 at [37] per Gray J (“Plancor”); Fair Work Ombudsman v Kojima & Anor [2013] FCCA 976 at [1] per Judge O’Sullivan (“Kojima”) (although in Kojima the comment was made specifically in relation to vulnerable employees who were foreign nationals working in Australia on visas in the restaurant and hospitality industry). The Court notes that there was evidence in these proceedings as to the significant activity undertaken by the FW Ombudsman in endeavouring to deal with and ensure that employers paid employees in the restaurant and hospitality industry their correct wages and entitlements.
It follows from the above that a meaningful and robust measure of general deterrence is appropriate in this case so that other employers, particularly in the restaurant and hospitality industry, are not impressed with the idea that they can avoid payment of employees’ minimum entitlements, such as occurred in this case.
Specific deterrence
The Court notes that:
a)in assessing the relevance of specific deterrence to appropriate penalties, the Court should look at the attitude expressed by Koojedda Carpentry, Mr Gumley and Ms Gumley, including by looking to any remorse or contrition expressed and any steps they have taken to ensure that no future breaches will occur: Plancor at [37] per Gray J;
b)the Court accepts that specific deterrence currently has limited weight in these proceedings in circumstances where Koojedda Carpentry is no longer trading and Mr Gumley and Ms Gumley do not currently operate businesses that employ employees and have indicated to the Court they do not intend to work in roles where they employ people again; and
c)the Court nevertheless notes that Mr Gumley and Ms Gumley may have the capacity to be involved in contraventions in the future, whether that be as an employer or manager. In that regard there remains a need for a penalty to be set at a “meaningful” level, sufficient to deter Mr Gumley and Ms Gumley from engaging in contravening behaviour in the future. As set out above, the current financial circumstances of the Mr Gumley and Ms Gumley are relevant to determining the extent to which a penalty imposed will be meaningful.
The Court should therefore impose penalties on Koojedda Carpentry, Mr Gumley and Ms Gumley that meaningfully endeavour to ensure that they are deterred from any future non-compliance with their obligations pursuant to the FW Act and any relevant industrial instruments.
Penalties
Penalty recommendations
In The Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate & Ors [2015] HCA 46; (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494 (“Director FWBII”) the High Court confirmed that parties to civil penalty proceedings can make submissions which:
a)identify a range of penalties;
b)nominate specific penalties in respect of particular contraventions; and
c)urge the Court to adopt an agreed position on penalties.
In Director FWBII at [60] per French CJ, Kiefel, Bell, Nettle and Gordon JJ the High Court said that:
It is also true, as the Full Court observed, that the regulator in a civil penalty proceeding is not disinterested. As has been seen, under the BCII Act, the Director's statutory functions include monitoring and promoting appropriate standards of conduct by building industry participants generally. It is, therefore, naturally to be assumed that the Director will fashion penalty submissions with an overall view to achieving that objective and thus perhaps, if not probably, with one eye to considerations beyond the case in hand. That consideration, however, supports, rather than detracts from, the propriety of a court receiving joint (or separate) submissions as to facts and penalty and imposing the proposed penalty if persuaded that it is appropriate. As was emphasised in NW Frozen Foods, it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance. (footnotes omitted)
In determining penalty the Court has had regard to the penalty recommendations contained in Annexure A to the FW Ombudsman’s submissions to the Court. Where it is necessary to impose a civil penalty it ought to be fixed at a level which ensures that the penalty cannot be regarded simply as part of an acceptable or usual cost of doing business: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20; (2012) 287 ALR 249; (2012) ATPR 42-387 at [62]-[63] per Keane CJ, Finn and Gilmour JJ.
Assessment of penalties
On the basis of the contraventions, as set out in the tables showing penalties determined by the Court at [82]-[84] below, which includes those contraventions that have been grouped, the maximum penalties that the Court can impose under s.539(2) of the FW Act (bearing in mind that at the time the contraventions occurred a penalty unit was defined as being $170: Crimes Act 1914 (Cth)), s.4AA(1) are as follows:
a)Koojedda Carpentry: $841,500;
b)Mr Gumley: $20,400; and
c)Ms Gumley: $127,500.
The Court has had regard to the submissions made by the FW Ombudsman as to the appropriate penalty ranges and aggregate penalties within those ranges, with which the Court generally agrees. In that regard the Court observes as follows:
a)the FW Ombudsman has proposed penalty ranges for each of the recommended groups of contraventions. In summary, for the different groups of contraventions the FW Ombudsman has recommended varied penalty ranges including:
i)mid-range penalties of 40-50% for the underpayments of minimum wages, casual loading and record keeping contraventions;
ii)low to mid-range penalties of 20-30% and 30-40% for the underpayments of penalties and entitlements on termination where these affected multiple employees;
iii)low range penalties of 5-10% and 10-20% where the contraventions affect only one employee and resulted in minimal underpayments; and
iv)no penalties for underpayments of weekend penalty rates under the Fast Food Award due to the small underpayments and the overlap with the failure to pay weekend penalty rates under the Restaurant Award; and
b)the proposed ranges result in the following recommended aggregate penalty ranges:
i)$140,000 to $188,000 in respect of Koojedda Carpentry;
ii)$4,590 to $5,967 in respect of Mr Gumley; and
iii)$26,979 to $36,133 in respect of Mrs Gumley.
The Court notes that the FW Ombudsman in recommending penalties has taken an approach consistent with that suggested by the Federal Court in Gibbs, FCR at 223 per Gray J cited at [16] above, namely, recommending penalties for breaches of the Fast Food Award in the low range, and in some instances, recommending that no penalties be imposed based on the particular features of the relevant contravening conduct. The Court accepts that the range of penalties recommended by the FW Ombudsman is appropriate, but taking into account all of the matters referred to and set out above, the Court is of the view that in each case the penalty at the lowest end of the recommended penalty range should be the penalty to be imposed. That results in penalties as set out in the tables which appear below.
In relation to Koojedda Carpentry the appropriate penalties are as follows in respect of each of the contraventions:
Contravention Grouped Contravention
Penalty
Section 45 FW Act (Cl 20 Restaurant Award - Adult rate) Minimum hourly wage - Restaurant Award
$18,360
Section 45 FW Act (Cl 20.3 Restaurant Award - junior rate) Section 45 FW Act (Cl 17 Fast food Award - Adult rate) Minimum hourly wage -Fast Food Award $9,180
Section 45 FW Act (Cl 13.1 Restaurant Award - casual loading) Casual loading - Restaurant Award
$18,360
Section 45 FW Act (Cl 34.1 Restaurant Award - Saturday penalty rate) Saturday loading - Restaurant Award
$13,770
Section 45 FW Act (Cl 34.1 Restaurant Award - Sunday penalty rate) Sunday loading - Restaurant Award
$13,770
Section 45 FW Act (Cl 25.5(b) Fast Food Award - Saturday penalty rate) Sunday loading - Fast Food Award
$0
Section 45 FW Act (Cl 25.5(c) Fast Food Award - Sunday penalty rate) Sunday loading - Fast Food Award
$0
Section 45 FW Act (Cl 34.1 Restaurant Award - public holiday loading) Overtime - Restaurant Award
$2,295
Section 45 FW Act (Cl 33.2 Restaurant Award - overtime loading)
Public holiday loading - Restaurant Award
$13,770
Section 45 FW Act (Cl 26.1 Fast Food Award - overtime)
Overtime - Fast Food Award
$9,180
Section 44(1) FW Act (s 90(2) of the FW Act annual leave on termination of employment) Accrued annual leave and leave loading on termination
$9,180
Section 45 FW Act (Cl 35.2 Restaurant Award - annual leave loading) Section 45 FW Act (Cl 28.3 Fast Food Award - annual leave loading) Section 44(1) FW Act (subsection 117(2) of the FW Act by failing to make payment in lieu of notice of termination of employment) Payment in lieu of notice upon termination
$4,590
Section 712(3) FW Act (failure to comply with NTP)
Failure to comply with the NTP
$18,360
Section 536(1) FW Act (failure to issue pay slips)
Failing to provide payslips
$9,180
TOTAL
$139,995
In relation to Mr Gumley the appropriate penalties are as follows in respect of each of the contraventions:
Contravention Grouped Contravention
Penalty
Section 44(1) FW Act (subsection 117(2) of the FW Act by failing to make payment in lieu of notice of termination of employment) Payment in lieu of notice upon termination
$918
Section 712(3) FW Act (failure to comply with NTP) Failure to comply with the NTP $3,672
TOTAL
$4,590
In relation to Ms Gumley the appropriate penalties are as follows in respect of each of the contraventions:
Contravention Grouped Contravention
Penalty
Section 45 FW Act (Cl 20 Restaurant Award - Adult rate) Minimum hourly wage - Restaurant Award
$3,672
Section 45 FW Act (Cl 20.3 Restaurant Award - junior rate) Section 45 FW Act (Cl 17 Fast food Award - Adult rate) Minimum hourly wage -Fast Food Award $1,836
Section 45 FW Act (Cl 13.1 Restaurant Award - casual loading) Casual loading - Restaurant Award
$3,672
Section 45 FW Act (Cl 34.1 Restaurant Award - Saturday penalty rate) Saturday loading - Restaurant Award
$2,754
Section 45 FW Act (Cl 34.1 Restaurant Award - Sunday penalty rate) Sunday loading - Restaurant Award
$2,754
Section 45 FW Act (Cl 25.5(b) Fast Food Award - Saturday penalty rate) Sunday loading - Fast Food Award
$0
Section 45 FW Act (Cl 25.5(c) Fast Food Award - Sunday penalty rate) Sunday loading - Fast Food Award
$0
Section 45 FW Act (Cl 34.1 Restaurant Award - public holiday loading) Overtime - Restaurant Award
$459
Section 45 FW Act (cl 33.2 Restaurant Award - overtime loading)
Public holiday loading - Restaurant Award
$2,754
Section 45 FW Act (Cl 26.1 Fast Food Award - overtime)
Overtime - Fast Food Award
$1,836
Section 44(1) FW Act (s 90(2) of the FW Act annual leave on termination of employment) Payment in lieu of notice upon termination Failure to comply with the NTP
$1,836
Section 45 FW Act (Cl 35.2 Restaurant Award - annual leave loading) Section 45 FW Act (Cl 28.3 Fast Food Award - annual leave loading) Section 712(3) FW Act (failure to comply with NTP)
Failure to comply with the NTP
$3,672
Section 536(1) FW Act (failure to issue pay slips)
Failing to provide payslips
$1,734
TOTAL
$26,979
In all the circumstances, the penalties assessed to be imposed against Koojedda Carpentry, Mr Gumley and Ms Gumley before totality considerations are as follows:
a)Koojedda Carpentry: $139,995;
b)Mr Gumley: $4,590; and
c)Mrs Gumley: $26,979.
Totality
Having assessed an appropriate penalty for each contravention, the Court must take a "final look" at the aggregate penalty, to determine whether it is, overall, an appropriate response to the conduct which led to the breaches, and is not oppressive or crushing: Kelly at [30] per Tracey J; Australian Ophthalmic Supplies at [23] per Gray J, [71] per Graham J and [102] per Buchanan J. Whilst the penalty imposed must not be crushing or oppressive, it must nevertheless be proportionate to the seriousness of the conduct engaged in by Koojedda Carpentry, Mr Gumley and Ms Gumley: Fair Work Ombudsman v Promoting U Pty Ltd & Anor [2012] FMCA 58 at [52]-[54] per Burchardt FM. Essentially, the totality principle requires the Court, once it has made a judicial evaluation of what it considers to be an appropriate aggregate penalty, to examine one final time, the aggregate penalty in order to determine whether it appears wrong: Ultra Tune at [68] per Lucev FM, citing, amongst other cases, Australian Ophthalmic Supplies at [27]-[28] per Gray J and [78] per Graham J.
The aggregate penalties the FW Ombudsman submits are an appropriate response to the contraventions of Koojedda Carpentry and Mr Gumley and Ms Gumley are:
a)$140,000 to $180,000 in respect of Koojedda Carpentry;
b)$3,500 to $5,000 in respect of Mr Gumley; and
c)$12,000 to $15,000 in respect of Ms Gumley.
In relation to the totality principle the Court observes as follows:
a)where Koojedda Carpentry is unlikely to be able to meet any penalty, regardless of its size, there is no basis for reducing the penalties imposed on account of them being crushing or oppressive, and the appropriate penalty for Koojedda Carpentry is $139,995;
b)in assessing whether the total penalties recommended are an appropriate response to Mr Gumley and Ms Gumley’s conduct, it is appropriate for the Court to take into consideration the significant and difficult personal circumstances faced by Mr Gumley and Ms Gumley, particularly at the time of the contraventions;
c)in respect of Mr Gumley and Ms Gumley, on review of their financial and personal circumstances, the proposed penalty ranges may be oppressive. Accordingly, it may be appropriate for the Court to reduce the total penalty imposed against them because of the unusual specific personal circumstances which do warrant some reduction in the assessed penalty; and
d)it is not appropriate to take a mathematical approach to determining whether the total penalty is just and appropriate; Mornington Inn at [60] per Stone and Buchanan JJ. Rather, looking at Mr Gumley and Ms Gumley’s conduct as a whole and assessing this “instinctively”, the Court finds that total penalties in the following amounts are appropriate and proportionate:
i)$3,000 for Mr Gumley; and
ii)$12,000 for Ms Gumley.
Orders
The Court makes orders as set out in the coversheet, reflecting the conclusions reached in these Reasons for Judgment.
I certify that the preceding eighty-nine (89) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Date: 26 October 2017
APPENDIX A
Statement of Agreed facts
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