Fair Work Ombudsman v La KOSTA Childcare Centre and Kindergarten Pty Ltd
[2012] FMCA 551
•29 June 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v LA KOSTA CHILDCARE CENTRE AND KINDERGARTEN PTY LTD & ORS | [2012] FMCA 551 |
| INDUSTRIAL LAW – Breaches of award provisions – s.182(1) and s.185(2) of the Workplace Relations Act and s.45 of the Fair Work Act 2009 – penalty. |
| Children’s Services Award 2010 sch.A, cls.23, 24.3 Workplace Relations Act 1996 ss.6(1), 182(1), 185(1), 185(2), 235(2), 719(1), 719(2), 728(1), 791(1), 841 |
| Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 Hoare v the Queen (1989) 167 CLR 348 Kelly v Fitzpatrick (2007) 166 IR 14 Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 171 FCR 357 at 37 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | LA KOSTA CHILDCARE CENTRE AND KINDERGARTEN PTY LTD |
| Second Respondent: | KOSTA STERJOV |
| Third Respondent: | SNEZANA STERJOV |
| File Number: | MLG 997 of 2011 |
| Judgment of: | Whelan FM |
| Hearing date: | 24 May 2012 |
| Date of Last Submission: | 24 May 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 29 June 2012 |
REPRESENTATION
| Counsel for the Applicant: | Ms Hartigan |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Counsel for the First Respondent: | Mr McKenney |
| Solicitors for the First Respondent: | Felix A Vitiello Solicitor |
| Counsel for the Second Respondent: | Mr McKenney |
| Solicitors for the Second Respondent: | Felix A Vitiello Solicitor |
| Counsel for the Third Respondent: | Mr McKenney |
| Solicitors for the Third Respondent: | Felix A Vitiello Solicitor |
ORDERS
THE COURT DECLARES THAT:
The First Respondent contravened the following provisions of the Workplace Relations Act 1996 (“WR Act”), the Fair Work Act 2009 (“FW Act”), the Children’s Services (Victoria) Award 2005 (“Pre-Modern Award”) which included a preserved Australian Pay and Classification Scale (“APCS”) derived from the Pre-Modern Award, the Children’s Services Award 2010 (“Modern Award”) and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (“Transitional Act”) in respect of the employment of Ms Rebecca Lambert (“Lambert”), Ms Zadje Memeti (“Memeti”), Ms Semina Hurasevic (“Hurasevic”), Ms Anne Mortier (“Mortier”), Ms Carolyn Smith (“Smith”), Ms Dillian Taylor (“Taylor”), Ms Casey Lee Hedanek (“Hedanek”), Ms Lisa McEwan (“McEwan”) and Ms Shakila Intezar (“Intezar”):
(a)By failing to pay minimum wages or the basic periodic rate of pay to Lambert. Memeti, Hurasevic, Smith, Taylor, McEwan and Intezar in contravention of:
(i)Clause 16 of the Pre-Modern Award (Lambert, Memeti, Smith, McEwan);
(ii)Section 182(1) of the WR Act (Lambert, Memeti, Hurasevic, Smith, Taylor, McEwan, Intezar);
(iii)Item 5 of Schedule 16 to the Transitional Act (Lambert, Memeti, Hurasevic, Smith, Taylor, McEwan, Intezar); and
(iv)Section 45 of the FW Act (clause A.2.3 of Schedule A of the Modern Award) (Lambert, Memeti, Hurasevic, Smith, McEwan, Intezar);
(b)By failing to pay the applicable casual loading to Memeti in contravention of:
(i) Section 185(2) of the WR Act.
(c)By failing to pay overtime to Lambert, Memeti, Hurasevic, Smith, Taylor, McEwan, Intezar, Mortier and Hedanek in contravention of:
(i) Clause 24.1 of the Pre-Modern Award; and
(ii)Section 45 of the FW Act (cl.23 of the Modern Award) (Lambert, Memeti, Hurasevic, Smith, McEwan, Intezar, Mortier and Hedanek).
(d)By failing to pay overtime meal allowance to Lambert, Memeti, Hurasevic, Smith, Taylor, McEwan, Intezar, Mortier and Hedanek in contravention of:
(i)Clause 19.4.1 of the Pre-Modern Award to Lambert, Memeti, Hurasevic, Smith, Taylor, McEwan, Mortier and Hedanek; and
(ii)Section 45 of the FW Act (cl.A.5.2 of Schedule A of the Modern Award) (Lambert, Memeti, Smith and Mortier).
(e)By failing to pay shift work loading to Lambert, Memeti, Smith, McEwan, Intezar, and Mortier in contravention of:
(i) Clause 27.1 of the Pre-Modern Award; and
(ii)Section 45 of the FW Act (cl.A.5.2 of Schedule A of the Modern Award) (Intezar and Mortier).
(f)By failing to pay annual leave loading to Lambert, Memeti, Hurasevic, Smith, Taylor, McEwan, Intezar, Mortier and Hedanek in contravention of:
(i)Clause 29.11.2 of the Pre-Modern Award (Lambert, Memeti, Smith, Taylor, McEwan, Intezar, and Mortier); and
(ii)Section 45 of the FW Act (cl.24.3 of the Modern Award) (Hurasevic, Memeti, Mortier and McEwan).
(g)By failing to pay untaken annual leave on termination of employment to Lambert, Memeti, Hurasevic, Smith, Taylor, McEwan, Intezar, Mortier and Hedanek in contravention of:
(i)Section 44 of the FW Act (s.90(2) of the FW Act) (Lambert, Memeti, Hurasevic, Smith, McEwan, Intezar, Mortier and Hedanek); and
(ii)Section 235(2) of the WR Act and Item 16 of the Transitional Act (Taylor).
The Second Respondent was involved in each of the contraventions specified in paragraph 1 above within the meaning of s.728(1) of the WR Act and s.550(1) of the FW Act.
THE COURT ORDERS THAT:
Pursuant to s.719(1) of the WR Act and s.546(1) of the FW Act that the First Respondent pay an aggregate penalty of $85,000.00 in respect of the contraventions referred to in Declarations 1(a) to 1(g) above.
Pursuant to s.719(1) of the WR Act and s.546(1) of the FW Act that the Second Respondent pay an aggregate penalty of $17,000.00 in respect of the contraventions referred to in Declarations 1(a) to 1(g) above.
Pursuant to s.841(a) of the WR Act and s.546(3)(a) of the FW Act that the penalties imposed on the First and Second Respondents be paid into the Consolidated Revenue Fund of the Commonwealth.
The payment of penalties referred to in Order 1 and 2 above be made as follows:
(a)The payments by the First Respondent are to be made in accordance with the following:
(i) $25,000.00 to be paid within 30 days; a further
(ii) $30,000.00 to be paid within 90 days; and a further
(iii)$30,000.00 to be paid within 120 days of the date of this Order.
(b)The payments by the Second Respondent are to be made in accordance with the following:
(i) $5,000.00 to be paid within 30 days; a further
(ii) $6,000.00 to be paid within 90 days; and a further
(iii)$6,000.00 to be paid within 120 days of the date of this Order.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 997 of 2011
| FAIR WORK OMBUDSMAN |
Applicant
And
| LA KOSTA CHILDCARE CENTRE AND KINDERGARTEN PTY LTD |
First Respondent
| KOSTA STERJOV |
Second Respondent
| SNEZANA STERJOV |
Third Respondent
REASONS FOR JUDGMENT
This matter concerns an application brought by the Fair Work Ombudsman (“FWO”) seeking the making of declarations and the imposition of civil penalties on the First and Second Respondents. The First Respondent was the employer of the nine employees, Rebecca Lambert, Zadje Memeti, Semina Hurasevic, Anne Mortier, Carolyn Smith, Dillian Taylor, Casey Lee Hedanek, Lisa McEwan and Shakila Intezar, who were the complainants in this matter. The Second Respondent is the sole director and secretary of the First Respondent.
The parties have filed a Statement of Agreed Facts. In that statement the First Respondent admits to contravening:
·Clause 16 of the Children’s Services (Victoria) Award 2005 (“the Pre-Modern Award”);
·Section 182(1) of the Workplace Relations Act 1996 (Cth) (“the WR Act”);
·Item 5 of Schedule 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act2009 (“the Transitional Act”);
·Section 185(1) of the WR Act;
·Clause 24.1 of the Pre-Modern Award;
·Clause 19.4.1 of the Pre-Modern Award;
·Clause 27.1 of the Pre-Modern Award;
·Clause 29.11.2 of the Pre-Modern Award;
·Section 235(2) of the WR Act;
·Item 6 of schedule 16 of the Transitional Act;
·Section 44 of the Fair Work Act 2009 (Cth) (“the FW Act”) with respect to s.90(2) of the FW Act;
·Section 45 of the FW Act with respect to:
- Clause A.2.3 of Schedule A of the Children’s Services Award 2010 (“the Modern Award”);
- Clause 23 of the Modern Award;
- Clause A.5.2 of Schedule A of the Modern Award; and
- Clause 24.3 of the Modern Award.
These contraventions relate to various of the employees but include:
·Failure to pay minimum wages or the basic period rate of pay;
·Failure to pay the applicable casual loading;
·Failure to pay overtime;
·Failure to pay overtime meal allowance;
·Failure to pay shift work loading;
·Failure to pay annual leave loading;
·Failure to pay untaken annual leave on termination of employment.
The First Respondent admits that the contraventions resulted in underpayment of wages and entitlements to the employees totalling $116,230.50 gross. The Second Respondent admits to his involvement, within the meaning of s.728 of the WR Act and s.550 of the FW Act, in the contraventions.
The parties have also agreed to propose a total aggregate penalty range which should be imposed on each of the First and Second Respondents. The application in so far as it related to the Third Respondent has been discontinued.
The relevant legislative provisions
Because of the time frame over which the contraventions occurred, the applicable legislation involves provisions of the WR Act, the FW Act and the Transitional Act. They also involve provisions of two Awards.
Of particular relevance are s.182(1) and s.185(1) of the WR Act; s.44 and s.45 of the FW Act and items 5 and 6 of Schedule 16 of the Transitional Act, which provide as follows:
s.182 WR Act - The guarantee
Guarantee of APCS basic periodic rates of pay
(1) If:
(a) the employment of an employee is covered by an APCS; and
(b) the employee is not an APCS piece rate employee;
the employee must be paid a basic periodic rate of pay for each of the employee’s guaranteed hours (pro‑rated for part hours) that is at least equal to the basic periodic rate of pay (the guaranteed basic periodic rate of pay) that is payable to the employee under the APCS.
s.185(1) WR Act - The guarantee
(1) This section applies to a casual employee for whom, under section 182, there is a guaranteed basic periodic rate of pay, other than a casual employee in relation to whom the following paragraphs are satisfied:
(a) subsection 182(1) applies to the employee;
(b) the APCS that covers the employment of the employee does not contain casual loading provisions under which a casual loading is payable to the employee;
(c) the employee’s employment is not covered by a workplace agreement.
s.44 FW Act - Contravening the National Employment Standards
(1) An employer must not contravene a provision of the National Employment Standards.
(2) However, an order cannot be made under Division 2 of Part 4‑1 in relation to a contravention (or alleged contravention) of subsection 65(5) or 76(4).
s.45 FW Act - Contravening a modern award
A person must not contravene a term of a modern award.
Schedule 16 Transitional Act
(5) Compliance with transitional APCSs, the transitional FMW and transitional special FMWs
A person must not contravene section 182 or 185 of the WR Act as that section continues to apply under item 5 of Schedule 9.
(6) Compliance with minimum entitlements
Minimum entitlements
(1)A person must not contravene any of the following provisions:
(a) Divisions 3, 4, 5, and 6 of Part 7 of the WR Act as they continue to apply under item 2 of Schedule 4;
(b) Divisions 1 and 2 of Part 12 of the WR Act as they continue to apply under item 3 of Schedule 4;
(c) section 661 of the WR Act as it continues to apply under item 4 of Schedule 4.
Extended operation of parental leave
(2)A person must not contravene Division 6 of Part 12 of the WR Act as it continues to apply under item 3 of Schedule 4.
Facts before the court
The First Respondent was at the material times an employer within the meaning of s.6(1) of the WR Act and a national system employer within the meaning of s.14(a) of the FW Act. It carried on a childcare business at two locations in Hampton Park and Noble Park, Victoria. The Second Respondent was licenced under the Children’s Services Act 1996 (Vic) to operate the business and was responsible for its day-to-day management.
The employees were all employed (for varying periods of time) as childcare workers. They were both qualified and unqualified and in the case of two employees performed the work of Manager/Assistant Director of the two centres. With the exception of three of the employees, all were over the age of 21. One employee was full-time but all others were either part-time or casual employees.
Prior to 1 January 2010 the First Respondent was bound by the Pre-Modern Award (18 July 2005 to 26 March 2006); and a preserved Australian Pay and Classification Scale (“APCS”) derived from the Pre-Modern Award (from 27 March 2006). From 1 January 2010 the First Respondent was bound by the Modern Award.
Underpayment of minimum wages
The Statement of Agreed Facts sets out the rates of pay, paid to the nine employees during the period of their employment. It also sets out the relevant rates for those periods, for the appropriate classifications, under cl.16 of the Pre-Modern Award, in accordance with the basic periodic rate of pay as contained in the APCS (derived from the Pre-Modern Award) and then in accordance with cl.A.2.3 of Schedule A of the Modern Award.
From the material presented I am satisfied that the First Respondent breached cl.16 of the Pre-Modern Award with respect to Lambert, Memeti, Smith and McEwan. The First Respondent also contravened s.185 of the WR Act and Item 5 of Schedule 16 of the Transitional Act and s.45 of the FW Act with respect to all nine employees.
Failure to pay casual loading
The employee Memeti was employed as a part-time employee from the commencement of her employment until about 18 February 2008, as a casual employee from about 18 February 2008 until 1 January 2009 and then as a part-time employee from about 1 January 2009 until 15 February 2010.
The figures set out in the Statement of Agreed Facts indicate that during the period that the employee was employed as a casual she was not paid the applicable casual loading. I am satisfied that this constitutes a breach of s.185(1) of the WR Act.
Underpayment of overtime
Under the provisions of cl.24.1 of the Pre-Modern Award, an employee who worked overtime was entitled to be paid time and a half for the first two hours and double time thereafter. The First Respondent agrees that Lambert, Memeti, Smith and Mc Ewan all worked overtime during the relevant period.
Further between 27 March and 31 December 2009 in accordance with the provisions of the APCS and cl.24.1 of the Pre-Modern Award, the First Respondent was obliged to pay time and a half for the first two hours and double time thereafter for overtime worked. All of the employees worked overtime during this period.
From 1 January 2010 the provisions of sub-cl.23.1 and 23.2 of the Modern Award obliged the First Respondent to pay overtime at the rates of time and a half for the first two hours and double time thereafter. All employees, except Taylor, worked overtime during that period.
As the First Respondent admits that no overtime was paid it breached the provisions of the Award and the APCS and contravened s.45 of the FW Act.
Failure to pay overtime meal allowance
From 18 July 2005 until 26 March 2006, in accordance with cl.19.4.1 of the Pre-Modern Award, the First Respondent was obliged to pay the employees meal money as prescribed by the Pre-Modern Award from time to time, where an employee was required to continue work after the usual finishing hours of work (on a week day) beyond one hour and where the employer did not supply the employee with an adequate meal.
Lambert, Memeti, Smith and McEwan worked overtime beyond one hour after their usual finishing hours during that period and the First Respondent did not supply them with an adequate meal. Further, the First Respondent did not pay Lambert, Memeti, Smith and McEwan meal money.
During the period 27 March 2006 to 31 December 2009, in accordance with the APCS and cl.19.4.1 of the Pre-Modern Award, the First Respondent was obliged to pay the employees meal money as prescribed by the Pre-Modern Award from time to time, where an employee was required to continue work after the usual finishing hours of work (on a week day) beyond one hour and where the employer did not supply them with an adequate meal.
During the period specified, all the employees (except Intezar) worked overtime beyond one hour after their usual finishing hours and the First Respondent did not supply an adequate meal. Neither did the First Respondent pay them meal money.
From 1 January 2010 the First Respondent was, pursuant to cl.A.5.2 of Schedule A of the Modern Award, obliged to pay the employees, meal money as prescribed under cl.19.4.1 of the Pre-Modern Award, where an employee was required to continue work after the usual finishing hours of work (on a week day) beyond one hour and where the employer did not supply the employee with an adequate meal.
During that period, Lambert, Memeti, Smith and Mortier worked overtime beyond one hour after their usual finishing hours and the First Respondent did not supply an adequate meal. Further, the First Respondent did not pay them meal money.[1]
[1] Statement of Agreed Facts, 16 March 2012, paragraphs 36-44.
The First Respondent therefore breached cl.19.4.1 and cl.19.4.3 of the Pre-Modern Award; the APCS and s.45 of the FW Act by contravening cl.A.52 of Schedule A of the Modern Award.
Failure to pay shift work loading
From 18 July 2005 until 26 March 2006, in accordance with cl.27.1 of the Pre-Modern Award, the First Respondent was obliged to pay the employees, for each rostered shift where their rostered hours of ordinary duty finished between 6.30pm and 8.00am, or commenced between 6.30pm and 6.30am on a given day, shift work loading of 2.5 per cent of the rate for their particular classification.
During that period, Smith and McEwan worked rostered shifts and had rostered hours of ordinary duty which either finished between 6.30pm and 8.00am, or commenced between 6.30pm and 6.30am on a given day. The First Respondent did not pay Smith and McEwan shift work loading.
Further, during the period from 27 March 2006 to 31 December 2009, in accordance with the APCS and cl.27.1 of the Pre-Modern Award, the First Respondent was obliged to pay the employees, for each rostered shift where the employee’s rostered hours of ordinary duty finished between 6.30pm and 8.00am, or commenced between 6.30pm and 6.30am on a given day, shift work loading of 2.5 per cent of the rate for their particular classification.
During that period, Smith, Memeti, Mortier, McEwan and Lambert worked rostered shifts and had rostered hours of ordinary duty which either finished between 6.30pm and 8.00am, or commenced between 6.30pm and 6.30am on a given day. The First Respondent did not pay Smith, Memeti, Mortier, McEwan and Lambert shift work loading.
From 1 January 2010, the First Respondent was, pursuant to cl.A.5.2 of Schedule A of the Modern Award, obliged to pay the employees, for each rostered shift where the employee’s rostered hours of ordinary duty finished between 6.30pm and 8.00am, or commenced between 6.30pm and 6.30am on a given day, shift work loading of 2.5 per cent of the rate for their particular classification.
After 1 January 2010, Intezar and Mortier worked rostered shifts and had rostered hours of ordinary duty which either finished between 6.30pm and 8.00am, or commenced between 6.30pm and 6.30am on a given day. The First Respondent did not pay Intezar and Mortier shift work loading.[2]
[2] Statement of Agreed Facts, 16 March 2012, paragraphs 45 – 53.
The First Respondent therefore breached cl.27.1 of the Pre-Modern Award the APCS and s.45 of the FW Act by contravening cl.A.5.2 of Schedule A of the Modern Award.
Failure to pay annual leave loading
From 18 July 2005 until 26 March 2006, the First Respondent was obliged to pay the employees annual leave loading of 17.5 per cent as prescribed by cl. 29.11.2 of the Pre-Modern Award.
The employees Smith, Memeti, McEwan and Lambert took periods of annual leave during that period. The First Respondent did not pay Smith, Memeti, McEwan and Lambert annual leave loading in respect of those periods of annual leave.
Further, during the period from 27 March 2006 to 31 December 2009, in accordance with the APCS and cl.29.11.2 of the Pre-Modern Award, the First Respondent was obliged to pay the employees annual leave loading of 17.5 per cent when they took annual leave.
The employees Smith, Memeti, Mortier, Taylor, Intezar, McEwan and Lambert took periods of annual leave during that period. The First Respondent did not pay Smith, Memeti, Mortier, Taylor, Intezar, McEwan and Lambert annual leave loading in respect of those periods of annual leave.
From 1 January 2010, the First Respondent was, pursuant to cl.24.3 of the Modern Award, obliged to pay the employees annual leave loading of 17.5 per cent in addition to the payment for the annual leave they took.
The employees Hurasevic, Memeti, Mortier and McEwan took periods of annual leave after 1 January 2010.
The First Respondent did not pay Hurasevic, Memeti, Mortier and McEwan annual leave loading in addition to payment for leave.[3]
[3] Statement of Agreed Facts, 16 March 2012, paragraphs 54 – 62.
The First Respondent therefore breached cl.29.11.2 of the Pre-Modern Award, the APCS and s.45 of the FW Act by contravening cl.24.3 of the Modern Award.
Failure to pay untaken annual leave on termination of employment
When the employment of each employee apart from Taylor ended, the First Respondent was obliged to pay that employee any amount that would have been payable to the employee had they taken a period of untaken annual leave, pursuant to ss.90(2) of the FW Act.
When Smith, Memeti, Mortier, Intezar, McEwan, Hedanek, Hurasevic and Lambert’s employment came to an end in February 2010, they had accrued hours of annual leave.
At the end of their employment, the First Respondent did not pay out their accrued annual leave.
From 26 March 2006 to 31 December 2009, the First Respondent was obliged to pay untaken accrued annual leave to an employee whose employment ended at a particular time pursuant to s.235(2) of the WR Act and Item 6 of Schedule 16 of the Transitional Act.
Upon the end of Taylor’s employment on or about 24 December 2009, the First Respondent did not pay Taylor her untaken accrued annual leave.[4]
[4] Statement of Agreed Facts, 16 March 2012, paragraphs 63 – 67.
The First Respondent therefore breached s.44 of the FW Act by contravening s.90(2) of the FW Act and contravened s.235(2) of the WR Act and Item 6 of Schedule 16 of the Transitional Act.
Conclusions on the facts
On the facts admitted the First Respondent breached the two Awards and contravened the relevant Acts. The Second Respondent admits that he was aware of and responsible for setting and adjusting wage rates for the complainants, aware of and responsible for the making and keeping of records regarding the complainants’ employment; responsible for engaging the complainants and negotiating their terms and conditions of employment, including pay and leave entitlements; and aware of the requirement to pay minimum wages and to accord minimum entitlements to the complainants.
He was, within the meaning of s.728 of the WR Act and s.550 of the FW Act involved in the contraventions.
Relevant principles for determining penalty
The Applicant in its submissions with respect to penalty sets out the legislative provisions relating to penalty. The Respondent does not quibble with that aspect of the submission.
The Applicant relies on the provisions of s.791(1) of the WR Act and s.546(1) of the FW Act as providing the jurisdictional basis for the imposition of a pecuniary penalty by the Court if it is satisfied that the person has breached an ‘applicable provision’ (s.719(1) of the WR Act) or contravened a civil remedy provision (s.546(1) of the FW Act).
Significantly, s.719(2) of the WR Act and s.557(1) of the FW Act provide that where two or more breaches are committed by the same person, and the breaches arose out of a course of conduct by that person, the breaches are taken to constitute a single breach.
In this case there are multiple breaches of the same provisions and/or the successor provisions of the Awards and Acts.
The parties also agree that the relevant approach to determining an appropriate penalty is the five-step process set out in the Applicant’s submissions at paragraph 4.2:
(a) The first step for the Court is to identify the separate contraventions involved. Each breach of separate obligation found in the WR Act, FW Act, Pre-Modern Award, Modern Award and Transitional Act in relation to each employee, is a separate contravention.[5]
(b) Secondly, consider whether the breaches arising in the first step constitute a single course of conduct.[6]
(c) Thirdly, to the extent that two or more contraventions have common elements, this should be taken into account in considering what is an appropriate penalty in all the circumstances for each contravention. The First Respondent should not be penalised more than once for the same conduct. The penalties imposed by the Court should be an appropriate response to what the First Respondent did.[7] This task is distinct from and in addition to the final application of the “totality principle”.[8]
(d) Fourthly, consider the appropriate penalty for the single breach(es) and, if relevant, each group of contraventions, taking into account all of the relevant circumstances.
(e) Finally, having fixed an appropriate penalty for each group of contraventions or course of conduct, the Court should take a final look at the aggregate penalty, to determine whether it is an appropriate response to the conduct which led to the breaches.[9] The Court should apply an “instinctive synthesis” in making this assessment.[10] This is what is known as an application of “the totality principle.”
[5] Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223; McIver v Healey [2008] FCA 425 at [16] (unreported, Federal Court of Australia, 7 April 2008, Marshall J).
[6] Subsection 719(2) of the WR Act; s.557(1) of the FW Act.
[7] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 571 [46] (Graham J).
[8] Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [41]-[46] (Stone and Buchanan JJ).
[9] See Kelly v Fitzpatrick (2007) 166 IR 14 at [30] (Tracey J); Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 567 [23] (Gray J), 576 [71] (Graham J) and 583 [102] (Buchanan J).
[10] Australian Opthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 at 567-8 [27] (Gray J) and 572 [55] and 577 [78] (Graham J).
Identifying the contraventions
The contraventions have already been set out at paragraphs 11 to 50. There were multiple contraventions of the same or substantially similar provisions and s.719(2) of the WR Act and s.557(1) of the FW Act therefore clearly apply.
There were also legislative changes during the period covered by the application. Each period therefore gives rise to separate contraventions. The Court should therefore also consider whether there was a single course of conduct which straddles the different periods (see Fair Work Ombudsman v Offshore Marine Services Pty Ltd [2012] FCA 498) in considering an appropriate penalty.
The Applicant and Respondents have agreed that for the purpose of determining an appropriate penalty the contraventions may be grouped as six categories:
·Underpayment of minimum wages and/or basic periodic rate of pay.
·Underpayment of casual loading.
·Failure to pay overtime.
·Failure to pay overtime meal allowance.
·Failure to pay shift work loading.
·Failure to pay annual leave loading and untaken annual leave on termination.
Factors relevant to penalty
The factors to be taken into account by the Court in determining penalty have been considered in a number of cases before this Court and the Federal Court. A summary of those considerations was set out by Mowbray FM in Mason v Harrington Corporation Pty Ltd.[11] They are as follows:
[11] Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at 26-59.
(a) The nature and extent of the conduct which led to the breaches;
(b) The circumstances in which the 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 by the employer;
(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;
(j) Whether the party committing the breach had taken corrective action;
(k) Whether the party committing the breach had co-operated with the enforcement authorities;
(l) The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
(m) The need for specific and general deterrence.
The nature and extent of the conduct which led to the breaches
It is not disputed that the contraventions occurred over a significant period of time, involved a wide range of contraventions, and nine different employees.
The Respondent submits in mitigation that a number of the contraventions arose in circumstances where the Respondents failed to correctly classify the employees. Classification provisions are a matter of interpretation about which, reasonable minds may differ.
While I accept that this may well be the case, the classification structures of the Pre-Modern and Modern Award are not complex, and in those cases where the Respondents failed to recognise the qualifications of the employees the scope for any dispute would appear to be limited.
The Second Respondent accepts that he was aware of the applicable industrial instrument but claims that he had no more than a rudimentary knowledge of it. The Respondents submit that while they might be considered negligent in applying the Award, it goes too far to describe the contraventions as deliberate.
Despite the attempts by both the Applicant and the Respondents to go beyond the Statement of Agreed Facts in their submissions the Court can only take into account the evidence before it. That evidence is that the Second Respondent was aware of the requirement to pay minimum wages and to accord minimum entitlements.
While there may have been some misunderstanding by the Applicant about the appropriate classification rates, the failure to pay such minimum entitlements as overtime, shift work loading and annual leave entitlements indicate at the very least wilful negligence on the part of the Respondents.
The total underpayments amounted to $116,230.60. Two employees were underpaid more than $17,000.00 each, three employees more than $23,000.00 each, while one employee was underpaid as much as $28,349.00.
Circumstances in which the conduct took place
During the relevant period the First Respondent conducted the business at two childcare centres in Hampton Park and Noble Park in Victoria. The Second Respondent was the sole director and secretary of the First Respondent.
Little more can be discerned from the Statement of Agreed Facts, apart from the fact that almost all of the employees were working on a part-time or casual basis and had been employed for varying periods of between seven years and twelve months by the Respondents. The hourly rates of pay received by them varied from $11.00 per hour to $21.53 and the applicable rates varied from $7.04 to $23.01. They may therefore be generally described as low-paid employees.
Nature and extent of any loss or damage sustained as a result of the breaches
The Applicant submits that the total assessed underpayments are significant and the conduct occurred over a long period of time. Even though the Respondents have repaid the employees the assessed underpayment, the employees lost significant amounts of money over a prolonged period during which the Respondents had the use and enjoyment of these amounts.
The Applicant further submits that these were vulnerable employees who were reliant on the minimum wage. If it was not for the actions of the FWO it is highly doubtful that they would ever have been reimbursed for the underpayments.
The Respondent submits that the assessed underpayments were not finalised until after an extensive period of negotiation between the parties and a number of variations to the assessments. Amended assessments were provided to the Respondents in July 2011 and agreed to by the Respondents within five months. Further the Respondents rectified the underpayments prior to the due date on 29 February 2012.
It is apparent from the Statement of Agreed Facts that there was extensive negotiation between the parties prior to the instigation of proceedings by the FWO. It is further apparent that agreement to the assessed underpayments was not reached until the parties participated in mediation in December 2011.
It was some two years after the making of the complaints by the employees that they were paid the assessed underpayments.
It is undeniable that for periods of up to five years employees were denied their statutory entitlements and that the Respondents had the benefit of those underpayments. The amounts in some cases were significant and the employees can appropriately be described as low paid.
Similar previous conduct
There was no evidence of any similar contraventions of Commonwealth workplace laws by the Respondents.
Whether the breaches arose out of the one course of conduct
The provisions of s.719(2) of the WR Act and s.557(1) of the FW Act treat multiple contraventions which occur in the course of the conduct of the Respondents as a single breach. The parties have agreed that the contraventions can appropriately be grouped into six categories for the purposes of determining an appropriate penalty. Each of these may be considered as a single course of conduct.
Size of the business
During the relevant period the First Respondent operated two childcare centres and employed approximately 20 employees to work in the business.
Since April 2010 the First Respondent has not directly operated the Hampton Park centre and the employment of staff has been the responsibility of Guardian Childcare Alliance Pty Ltd. The Court was informed at the hearing that from 1 June 2012, Guardian Childcare Alliance Pty Ltd would also be operating the centre at Noble Park.
There was no information before the Court concerning the financial position of the Respondents. It may reasonably be inferred from the Respondents’ agreement to a penalty range that the Respondents have the capacity to pay a penalty imposed on them within the range given.
Deliberateness of the breaches
The Applicant submits that the Respondents displayed a general disregard for compliance with workplace laws and the contraventions should be considered to have included an element of deliberateness.
The Respondent submits that there is no basis for a submission that the Respondents knew they were acting unlawfully. The Statement of Agreed Facts indicates that the Respondents applied the law in a particular way which was clearly incorrect. It is a different question as to what the Respondents intended in those circumstances.
As previously stated while there may be some scope for an argument that it was the employer’s misapplication of the award classifications which led to the underpayment of the minimum rates, a failure to pay such basic minimum entitlements as overtime, shift loading and accrued annual leave can hardly be described as misapplication of the Award.
I note that in support of the submission on penalty the Second Respondent has produced a reference and certificates in relation to his compliance with food safety standards and the accreditation of the Noble Park Centre under the Quality Improvement and Accreditation system for long day care centres. The Second Respondent was clearly aware of his regulatory responsibilities in those regards and admits that he was aware of his regulatory requirements with respect to minimum wages and minimum entitlements. At best his actions, on behalf of the First Respondent, show a negligence which in the circumstances I would consider to be wilful.
Involvement of senior management
It is uncontested that the Second Respondent was involved in each of the contraventions of the First Respondent.
Contrition, corrective action, co-operation with authorities
The Applicant contends that although the First Respondent has now rectified the underpayments, there is no evidence of any contrition shown by the Respondents. Rather, the evidence shows that the Respondents disputed the accuracy of the assessments and entitlements of the employees, denied the employees were entitled to any relief and sought to have any underpayments offset against any overpayments and/or non-monetary benefits provided, sent letters of demand to three employees assessed as being overpaid while continuing to dispute the underpayment assessments and while those employees were assessed as being owed outstanding annual leave entitlements.
The Respondents submit that the statement of remorse is done formally in the Respondents’ submissions. The Respondents have also made admissions and entered into an agreed statement of facts – these were recognised by the Court in Fair Work Ombudsman v Offshore Marine Services Pty Ltd[12] as evidence of contrition:
The applicant has properly acknowledged that there is evidence of contrition by OMS by reason of its admissions as well as to entering into an agreed statement of facts.[13]
[12] Fair Work Ombudsman v Offshore Marine Services Pty Ltd [2012] FCA 498.
[13] Fair Work Ombudsman v Offshore Marine Services Pty Ltd [2012] FCA 498 at paragraph 44.
The Respondents further submit that because the issue of off-setting could not be explored with the Applicant because of its policy against set-offs, the Respondents should not be criticised for asserting their legal rights to recover overpayments. The Respondents also had a right to dispute the findings of the FWO.
The written submissions of the Respondents state, “[t]he Respondents instruct that it makes a statement of regret and remorse for failing to comply with their Award obligations.”[14]
This statement was made in April 2012, over two years after the complaints were originally brought and four months after the Respondents had conceded the Award breaches and contraventions. The Respondent cites paragraph 44 of Fair Work Ombudsman v Offshore Marine Services Pty Ltd in support of their evidence of contrition. It should be noted that in that case his Honour also referred to “the timing of the admissions – at the earliest reasonable opportunity, and without any defence having been filed;”[15] and also refers to a formal apology having been made to the complainants and an offer made to them to refund money they spent on training.
[14] Written Submissions of the Respondents dated 20 April 2012,at paragraph 40.
[15] Fair Work Ombudsman v Offshore Marine Services Pty Ltd [2012] FCA 498 at paragraph 45.
There is no evidence in this case of any apology having been made directly to the employees themselves. The employees were paid their statutory entitlements but not a penny more. Further, in my view it could only be regarded as callous to write letters of demand to the employees whom the FWO had found to have been overpaid, while continuing to fail to pay those same employees annual leave owed to them.
The Respondents did take corrective action but only after proceedings had been instituted, a notice of defence filed and the matter had been subject to mediation. I accept that the decision to contract the operation of the centre to a management company does fall within the ambit of corrective action.
The Applicant admits that the Respondents generally co-operated with the Applicant by providing documents. The Applicant claims however that the Respondents’ actions during the investigation substantially delayed the finalisation of the investigation. The Applicant acknowledged that the Respondents’ co-operation in the execution of a Statement of Agreed Facts and its admissions saved the cost of a fully contested hearing.
The Respondents submit that they were fully co-operative with the Applicant and should not be criticised for engaging with the Applicant in the issues involved in the investigation. There was substantial interaction over a number of months leading ultimately to the resolution of the matters by agreement.
I accept that the Respondents co-operated in the investigation and, after the application had been made, in mediation which lead to the admissions and payments made to the employees.
Ensuring compliance with minimum standards
The Applicant submits and the Respondent accepts that:
(a)One of the principal objects of the WR Act and the FW Act is the maintenance of an effective safety net of minimum terms and conditions of employment and effective enforcement mechanisms of the obligations imposed by the Acts and other industrial instruments.[16]
(b)To this end, the Acts make provision for the investigation of alleged contraventions of obligations imposed by industrial instruments and the imposition of penalties where it is established that breaches have occurred.
(c)The substantial penalties set by the legislature for breaches of such minimum entitlements reinforce the importance placed in compliance with minimum standards.[17]
[16] Sections 3(c) and 3(f) of the WR Act and sections 3(b) and 3 (c) of the FW Act.
[17] Applicant’s Written Submissions of 30 March 2012 at paragraph 6.3.10.
Specific deterrence
The Applicant referred to the statement of Gray J in Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union:
Specific deterrence focuses in the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur.[18]
[18] Plancor Pty Ltd v Liquor Hospitality and Miscellaneous Union (2008) 171 FCR 357 at 37.
The most significant factor in relation to specific deterrence is the decision of the Respondents to no longer directly employ staff at the two childcare centres. This does not, of course, mean that the Second Respondent might not choose to engage in a business venture in the future where he has the role of an employer. I accept, however, that little weight should be given to specific deterrence.
General deterrence
The Applicant refers to the statement of Lander J in Ponzio v B & P Caelli Constructions Pty Ltd[19] and to CPSU v Telstra Corporation Limited.[20] In particular the Applicant relied on the following statement by 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.[21]
And Finkelstein J:
[e]ven if there be no specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law’s disapproval of the conduct in question, and act as a warning to others not to engage in similar conduct.[22]
[19] Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543.
[20] CPSU v Telstra Corporation Limited (2001) 108 IR 228.
[21] Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 at 93.
[22] CPSU v Telstra Corporation Limited (2001) 108 IR 228 at 231.
The Applicant submits that it is important to send a message to the community at large and to employers in the childcare industry in particular because of the nature of employment in that industry.
I am satisfied that the nature of employment in this industry is sufficiently well known for me to take judicial notice of the type of employment and profile of the employees in the industry. Like the employees in this case they are generally employed on a part-time or casual basis and can appropriately be regarded as low-paid. The industry is not one where enterprise bargaining is widespread and many employees are reliant on minimum wages and conditions. Many employees are young females.
I accept that it is appropriate to remind other employers in this industry of the importance of ensuring that minimum wages and conditions are met.
Appropriate penalty
The Applicant and Respondents have agreed to propose to the Court a range which they consider to be an appropriate aggregate penalty range:
a) between $54,440 to $102,960 in respect of the First Respondent; and
b) between $11,088 to $20,592 in respect of the Second Respondent.[23]
The Respondent submits that the total penalty should be towards the lower end of that range.
[23] Statement of Agreed Facts, 16 March 2012, at paragraph 124.
The approach generally taken by the Court is to fix an appropriate penalty for each contravention or group of contraventions and then to consider whether the total penalty is an appropriate response to the conduct and the penalties imposed are not such as to be oppressive or crushing. In this matter I consider is to be appropriate to treat the contraventions as a whole.
The Respondents drew the Court’s attention to the principles set out by Bromberg J in Fair Work Ombudsman v Tiger Telco Pty Ltd (In Liquidation) and Anor:[24]
[24] Fair Work Ombudsman v Tiger Telco Pty Ltd (In Liquidation) and Anor [2012] FCA 479.
The following principles should also inform the exercise of the Court's discretion:
(a)Proportionality: that any penalty imposed should not exceed that which is appropriate or proportionate to the gravity of the contravention found proven in the light of its objective circumstances: Hoare v the Queen (1989) 167 CLR 348 at 354 (Mason CJ, Deane, Dawson, Toohey and McHugh JJ). See also Veen v The Queen (No 1) (1979) 143 CLR 458 at 467-468 (Stephen J) and 482-483 (Jacobs J) and 495 (Murphy J); Veen v The Queen (No 2) (1988) 164 CLR 465 at 472 (Mason CJ, Brennan, Dawson and Toohey JJ), 485-486 (Wilson J), 490-491(Deane J) and 496 (Gaudron J).
(b)Parsimony: the Court must ensure that it imposes the minimum term consistent with the attainment of the relevant purposes of sentences taking care that the punishment is only for the crimes before the court: R v Valentini (1980) 48 FLR 416 at 420 (Bowen CJ, Muirhead and Evatt JJ).
(c)Penalty maximum: that the maximum penalty should be reserved for the worst type of contravention: Veen v The Queen (No 2) at 478 (Mason CJ, Brennan, Dawson and Toohey JJ); Stuart v Construction, Forestry, Mining and Energy Union (2010) 185 FCR 308 at [30] (Moore J).[25]
[25]Fair Work Ombudsman v Tiger Telco Pty Ltd (In Liquidation) and Anor [2012] FCA 479at 20.
The range proposed by the parties represents between 30 per cent and 50 per cent of the maximum penalty which the Court could impose. Determining the amount of a penalty is not an exact science (NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 per Burchett and Kiefel JJ).[26] I am satisfied that the agreed penalty range falls within the permissible range of appropriate penalties. In determining that the penalty imposed by the Court should be towards the higher rather than the lower end of the range I have given particular weight to the length of time over which the contraventions occurred and the fact that the employees had to wait a further two years before they were paid.
[26]NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285.
While I accept that a statement of remorse was made by the Respondents’ Counsel, I am also influenced by the failure of the Respondents to apologise to the employees themselves and the action taken to seek repayment of overpayments while accrued annual leave was owing to those same employees.
In all the circumstances I consider a penalty of $85,000.00 is appropriate with respect to the First Respondent and a penalty of $17,000.00 is appropriate with respect to the Second Respondent.
The Respondent sought up to twelve months to pay the penalties with quarterly instalments. The Applicant submitted that any period in excess of six months would be too lengthy. I agree that a period of twelve months to pay an amount less than the total owed to employees would be unreasonable. I am prepared to allow the Respondents some time to pay and also to pay by instalments.
The payments by the First Respondent are to be made as follows:
$25,000.00 to be paid within 30 days; a further
$30,000.00 to be paid within 90 days; and a further
$30,000.00 to be paid within 120 days of the date of this Order.
The payments by the Second Respondent are to be made as follows:
$5,000.00 to be paid within 30 days; a further
$6,000.00 to be paid within 90 days; and a further
$6,000.00 to be paid within 120 days of the date of this Order.
All payments are to be made to consolidated revenue.
I certify that the preceding one hundred and eight (108) paragraphs are a true copy of the reasons for judgment of Whelan FM
Associate:
Date: 29 June 2012
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