Fair Work Ombudsman v LINDSAY F. Nelson Manufacturing Pty Ltd (No.2)
[2020] FCCA 718
•3 April 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v LINDSAY F. NELSON MANUFACTURING PTY LTD (No.2) | [2020] FCCA 718 |
| Catchwords: INDUSTRIAL LAW – Application for declaration and pecuniary penalties following liability hearing – consideration of relevant matters – penalties imposed at levels in between the positions contended for by the parties. |
| Legislation: Fair Work Act 2009 (Cth), ss.44(1), 45, 92, 545, 550, 557, 712(3) |
| Cases cited: Fair Work Ombudsman v Finetune Holdings Proprietary Limited (No.3) (2012) FMCA 83 |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | LINDSAY F. NELSON MANUFACTURING PTY LTD |
| File Number: | MLG 1088 of 2017 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 10 March 2020 |
| Date of Last Submission: | 10 March 2020 |
| Delivered at: | Dandenong |
| Delivered on: | 3 April 2020 |
REPRESENTATION
| Counsel for the Applicant: | Mr McKenna |
| Solicitors for the Applicant: | Office of the Fair Work Commission |
| Counsel for the Respondent: | Ms Fitzgerald |
| Solicitors for the Respondent: | Robertson Hyetts |
ORDERS
The parties are to confer and forward agreed Minutes of Orders effecting these Reasons for Judgment within 14 days.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1088 of 2017
| FAIR WORK OMBUDSMAN |
Applicant
And
| LINDSAY F. NELSON MANUFACTURING PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introductory
On 22 August 2019, I issued reasons for judgment in this matter. Put shortly, I upheld contraventions in relation to a Mr Wells and Mr Hector and upheld a Contravention Application in relation to what was described as the first Notice to Produce. These reasons for judgment assume familiarity with those earlier reasons.
The matter has now been heard as to what penalties and/or declarations should be made. Put shortly, the applicant seeks penalties in a range between $100,000 and $140,000 (rounded off) upon the first respondent and between $20,520 and $28,080 upon Mr Nelson, the second respondent.
The respondents submit that a penalty of $23,600 should be imposed upon the first respondent and $4,720 for Mr Nelson.
The disparity in these positions in part reflects their view of the seriousness or otherwise of the contraventions concerned, but also turns upon the way in which the matters should be grouped. For the reasons that follow, I think penalties in the amounts of $50,000 should be imposed upon the first respondent and $10,000 on the second respondent. I am also persuaded that in this case it is appropriate that there be declaratory relief as the applicant seeks.
The Contraventions
As I understand the matter, there is no dispute that the civil penalty provisions of the Fair Work Act 2009 (Cth) (“the Act”) that have taken place are (see applicant’s written submissions paragraph 8):
a)Section 712(3), by failing to comply with the NTP served on the first respondent on 19 May 2016;
b)Section 44(1), by failing to pay Mr Wells the required amount for accrued, untaken annual leave on termination of employment, as required by section 92 of the NES in the National Employment Standard in the Act;
c)Section 45, by:
i)Failing to pay Mr Hector the minimum cash or rate of pay in accordance with clause 12.5(c) of the Road Transport and Distribution Award 2010 (“RTD Award”);
ii)Failing to pay Mr Hector owed time penalties in accordance with clause 15.5(d) of the RTD Award;
iii)Failing to pay Mr Hector overtime real allowance in accordance with clause 26.3 of the RTD Award;
iv)Failing to pay Mr Hector the minimum driving rate in accordance with clause 13.3(a) of the Road Transport (Long Distance Operations) Award 2010 (“RT (LDO)”);
v)Failing to pay Mr Hector casual loading on the minimum driving rate in accordance with the then clause 10.3B of the RT (LDO) Award.
It should be noted, as the applicant’s written submissions point out, that the Court made no express finding as to the liability of Mr Nelson pursuant to section 550 of the Act. However, it is clear both from the way in which the proceeding has been conducted, and the outcome that the Court has envisaged, that there is no dispute that Mr Nelson was at all material times the guiding mind and will of the first respondent and comes within the involvement described in section 550 of the Act. Indeed, the Court has already made orders against Mr Nelson pursuant to section 545, and it is clear from the written submissions lodged by the respondents that there is no issue as to whether or not Mr Nelson should be the subject of penalty. The question is how much.
The Approach to the Exercise
The parties’ written submissions tabulate the methodology for cases such as these in largely similar terms. The Court must first identify the separate contraventions with each breach of an award being a separate contravention.
The second step is to consider whether each contravention should be dealt with independently or whether there should be some degree of aggregation for the contraventions arising out of the course of conduct, bearing in mind that section 557 of the Act provides that two or more contraventions of a civil remedy provision are taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person. The next step is to consider whether there should be further adjustment to ensure that to the extent of any overlap between the groups of separate aggregated contraventions there is no double penalty imposed.
The next step is to consider the appropriate penalty in respect of each final individual group of contraventions taken in isolation, and finally the application of the totality principle.
It will be noted that I perhaps followed more closely the methodology set out in the applicant’s written submissions, but in substance there is no material difference between the parties’ positions.
Contraventions
These have already been set out above.
In my view, whether one is considering the matter pursuant to section 557 of the Act or pursuant to the common law course of conduct authorities (as they are described in the applicant’s written submissions), in the end this is a matter of common sense. In my view, the failure to comply with the Notice to Produce plainly stands alone. Likewise, the failure to pay Mr Wells his annual leave on termination of employment is equally clearly a standalone matter.
In my opinion, the failures to pay Mr Hector the minimum casual rate of pay and overtime penalties in accordance with clause 12.5 of the RTD Award should be grouped together. They arise out of the course of conduct upon which the first and second respondents embarked. Mr Hector was paid a flat rate of pay and it was that single act that led to both of these infractions.
The failure to pay Mr Hector overtime meal allowance is an obligation of a different character and, in my view, stands alone.
In respect of the failure to pay Mr Hector the minimum driving rate and casual loading in respect of the RTLDO Award, I apply the same reasoning referred to above in relation to the rates of pay under the RTD Award. In my opinion, these matters arise out of what was plainly the same course of conduct on the part.
It therefore follows that there are five contraventions for these purposes.
The Appropriate Penalty in Respect of Each Individual Contravention or Group of Contraventions
The parties agree, as I would see it in outline, that the non-exhaustive list of factors set out in Mason v Harrington Corporation Limited (2007) FMCA 7, subsequently applied amongst many others by Tracey J in the Federal Court decision of Kelly v Fitzpatrick (2007) FCA 1080 are generally likely to be of assistance. They are not anything more, however, than a convenient indication and are certainly not matters to be, as it were, ticked off in every case.
Although the parties’ written submissions approach the matter differently, it is convenient to deal with these matters largely in the way in which the applicant sets them out.
The Nature and Circumstances of the Contraventions – the Notice to Produce
As I observed in my first judgment, the first respondent is not an enormous corporation. I described it at paragraph 30 as a small country based family business. Having reviewed all the material now before me, it would seem that perhaps to describe it as small may have been in error. It has employed up to 150 employees and, as best I understand it, now employs 40. For a country firm, that is not by any means minute. Nonetheless, it is plainly a relatively unsophisticated organisation. I set out the correspondence constituting the background at paragraphs 30 to 42 and then said at paragraph 43:
Given that the emails, in part at least, refer to time slips lodged by Mr Hector, and given that those time slips were plainly on any view of the matter never forwarded to the applicant, in my view the infraction of the Notice to Produce is made out. The failure to respond to the Notice to Produce within 14 days was, of itself in my view, not unreasonable given the size and scope of the first respondent’s operations. However, the failure to the provide the timesheets is not in anyway justified. To this extent, therefore, the contravention is made out.
The Underpayment to Mr Wells
When Mr Wells left his employment, he was owed in excess of $10,000 in accrued annual leave entitlements. He was paid just over $2,000 two weeks later, leaving $8,500 outstanding. Seven months after that, the first respondent made three partial rectification payments totalling $6,156 in October and November 2016. As the applicant’s written submissions correctly point out, these were only paid after Fair Work Inspector O’Leary had issued a findings of contravention letter to the respondents. The amount of $2,365.94 made outstanding at the commencement of the proceedings and constituted 22 per cent of the underpayment to Mr Wells.
There has been a dispute between the parties as to the extent to which the late or non-payment of Mr Wells’ annual leave may have impacted upon his endeavours to establish his own business and a serious accident to Mr Wells as a result of work taken because of shortness of funds. Mr Wells has indeed deposed to that effect. Nonetheless, as the respondents correctly assert, in the proceedings before Judge Wilson (as His Honour then was) the respondents were not permitted to challenge and it is too late to rectify that deficiency now.
Having said this however, the nature of Mr Wells’ employment would reasonably support an inference, and I find that it does, that funds owing to Mr Wells were important to him and their absence must necessarily have impacted upon his financial circumstances during the relevant periods.
The Underpayments to Mr Hector
At paragraph 27 of their written submissions, the respondent submitted:
Mr Hector is not a vulnerable employee. The amount involved is very small. Half of the time worked by Mr Hector the company was significantly overpaying him vis-à-vis the award and the underpayment with respect to the award for the other half of his work time was not large. The contravention ought to only attract a nominal penalty, reflecting the fact that initially the FWO was not even minded to enforce this technical breach.
Mr Hector was only employed for a short period of time. The total underpayment arising from the contraventions was $3,600. At the commencement of proceedings following some overpayments and a partial rectification payment made in November 2006, the amount in dispute at the commencement of the proceedings was $3,000. These are, as the applicant submits, a significant amount of the total due to be paid to Mr Hector for his four-month employment.
Once again, the respondents put in issue the evidence filed by Mr Hector as to the effects upon him of his non-receipt of the monies when they were originally due. It should be noted that while I of course accept that that evidence has not been subject to challenge, it is reasonable to infer that for a person engaged in the relatively low paid sort of work Mr Hector was apparently accustomed to doing, that its absence should make his life more difficult.
I would also observe in passing that the respondents’ assertions as to overpayments appear to me to be entirely incorrect. At the hearing of the matter, the applicant tendered as exhibit “FWO-1” the National Minimum Wage Order 2015 which prescribes rates of pay that would exceed what Mr Hector was paid.
The Need to Ensure Compliance with Minimum Standards
I accept the submission of the applicant that the failure to comply with a Notice to Produce necessarily made the applicant’s task in assessing whether or not there had been contraventions more difficult. So much, in my view, is self-evident. I also accept that the failure to comply with the Notice to Produce undermines the statutory scheme for the investigation and correction of contraventions and must be taken to be what was described in Fair Work Ombudsman v Finetune Holdings Proprietary Limited (No.3) (2012) FMCA 83 at 69 as “serious conduct warranting an immediate penalty”. I further accept that the contravention in respect of Mr Wells involves a contravention of the national employment standard which of itself, given that it is minimum standards, is necessarily significant.
Similar Prior Conduct
The applicant’s written submissions at paragraph 47 point to a number of prior circumstances between 2007 and 2017 in which 14 other employees of the first respondent sought assistance in relation to matters not dissimilar to those involved in this case. These matters are supported by the affidavit of Fair Work Inspector O’Leary. The respondents by way of contradistinction submit that some of the matters which complaint were made did not involve underpayment and many were readily complied with.
In my view, this matter should not be given excessive weight as the particular circumstances may ultimately have not been particularly significant, but they do fall for consideration when one turns to the matter of specific deterrence.
General Deterrence
There is plainly always a need for general deterrence. As French J said in Trade Practices Commission v CSR Limited [1990] FCA 521 at [40], the purpose of penalties is to “deter repetition by the contravener and by others who might be tempted to contravene the Act”.
In this case, the employees were engaged in poorly paid work on any view of the matter. It is plainly desirable that, and this perhaps repeats remarks made earlier in relation to importance of minimum standard, that lower paid workers generally are paid that to which they are entitled.
Specific Deterrence
The respondent may be an unsophisticated organisation in human resources terms. Nonetheless, it seems to me that the respondents should be strongly admonished by the Court’s processes from any further repetition. The practice of paying an all-in rate is strewn with difficulty and if they wish to continue it, they will have to err rather more on the side of generosity than they have in the past.
Contrition and Remedial Action
There has been no expressions of remorse or contrition on behalf of the respondents. Nor, so far as I can see, has any remedial work been undertaken. The lack of contrition and remedial action, it should be noted, does not of course mean that any heavier penalty should be imposed. Rather, it means that the respondents do not get the benefit of any reduction in penalty that such actions might have given rise to.
Conclusion on the Rates of Penalty to be imposed
In relation to the failure to comply with the Notice to Produce, in my opinion, the 20 per cent range submitted by the applicants is indeed appropriate. For the reasons that are given, Notices to Produce are important. This was, however, one contravention only and it arose in the circumstances that I described in my earlier judgment where the first respondent’s administrative procedures seemed inadequate. In all the circumstances, in my view, 20 per cent is an appropriate amount (i.e. $10,800 and $2,100).
In relation to the contravention involving Mr Wells, I think that this should be assessed at 40 per cent of the applicable maximum. I note that there appear to have been prior difficulties in this area (see applicant’s schedule and annexure A to the applicant’s written submissions and the evidence of Fair Work Inspector O’Leary) (i.e. $21,600 and $4,320).
The Three Contraventions in Relation to Mr Hector
In my view, all involve the same insouciance towards the award obligations.
If I have not indicated this already, I do not accept that these should all be grouped as the respondents seek because they all arose out of one decision on the part of the respondents to pay Mr Hector a flat rate of pay. That of course is true as far as it goes but it ignores the fact that these are separate award obligations and for the reasons already given, they should be assessed as such. I think that the failures to pay minimum casual rates and overtime penalties should be assessed as at 30 per cent of the applicable maximum, given the totality of the circumstances and the amounts involved ($16,200 and 3,240). The failure to pay overtime meal allowance which involved $89 should be assessed at 5 per cent ($2,700 and $540), and the failures to pay in accordance with the RT (LDO) Award should likewise be assessed at 30 per cent ($16,800 and $3,240).
The Totality Principle
The total figures required to be paid will be $68,100 and $13,500 for each of the respondents before the application of the totality principle. I have noted and had regard to the affidavit sworn by Mr Nelson as to his personal circumstances. Nonetheless, it has been said on numerous occasions and in various different ways that parties who contravene legislative requirements such as these cannot expect to have the penalties adapted to suit their purse (see FWO v Promoting U Pty Ltd & Anor [2012] FMCA 58).
In all the circumstances, in my opinion, consideration of the totality principle should lead in this case to final figures of $50,000 and $10,000 dollars.
Declarations
The applicant seeks declarations, asserting that these would “assist in clearly identifying the contravening conduct and set out the foundation on which any consequential orders, including penalty or pecuniary penalty orders are made” (written submissions paragraph 80). It is also submitted that declarations would serve to deter others from engaging in similar conduct.
The respondents resist the making of declarations on the footing that the evidence is unsatisfactory and general principles as to the lack of utility of declarations in many cases.
The oral submissions appear to go close to suggesting the declarations might be embarrassing for the respondents.
In circumstances where the respondents have expressed no contrition, where they are a small to medium size employer in a small Victorian country town, I think that everybody should understand in this particular case as clearly as possible what it is that has been done wrong. This will have the effect of notifying the community generally and, more particularly, ensuring that the respondents and obviously Mr Nelson in particular, both clearly understand the nature of their conduct in this instance and the lack of desirability of repetition. I will make the declarations sought by the Fair Work Ombudsman.
I will direct the parties to confer and forward agreed Minutes of Orders effecting these Reasons for Judgment within 14 days.
I certify that the preceding forty-four (44) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Associate:
Date: 3 April 2020
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