Fair Work Ombudsman v Lotus Farm Pty Ltd
[2024] FedCFamC2G 369
•26 April 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Lotus Farm Pty Ltd [2024] FedCFamC2G 369
File number: MLG 1077 of 2023 Judgment of: DEPUTY CHIEF JUDGE MERCURI Date of judgment: 26 April 2024 Catchwords: INDUSTRIAL LAW – FAIR WORK – parties by consent seek declaration of contraventions of the Fair Work Act 2009 (Cth) – contraventions of civil remedy provisions in FW Act – underpayment of two employees – where underpayment has since been rectified – parties jointly seek imposition of penalties in an agreed range – exact penalty to be imposed determined by the court – guiding penalty principles agreed – penalties at lower end of agreed range appropriate – orders stayed for three months – declarations of contraventions and penalty orders made. Legislation: Fair Work Act 2009 (Cth), ss 45, 323(1)(a), 535(1), 536(1), 546, 550, 718 and 718A(1)
Horticulture Industry Award 2010
Cases cited: Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate and Ors [2015] HCA 46; (2015) 258 CLR 482
Fair Work Ombudsman v Roach [2023] FCA 781
Division: Division 2 General Federal Law Number of paragraphs: 48 Date of last submissions: 4 March 2024 Date of hearing: 4 March 2024 Place: Melbourne Counsel for the Applicant: Ms N Campbell Solicitor for the Applicant: Fair Work Ombudsman Counsel for the Respondents: Mr T Joseph Solicitor for the Respondents: Nguyen Do Lawyers ORDERS
MLG 1077 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: LOTUS FARM PTY LTD (ACN 167 006 135)
First Respondent
SON THAI
Second Respondent
ORDER MADE BY:
DEPUTY CHIEF JUDGE MERCURI
DATE OF ORDER:
26 APRIL 2024
THE COURT DECLARES BY CONSENT THAT:
1.The First Respondent, Lotus Farm Pty Ltd (Lotus Farm), contravened the following civil remedy provisions in the period 19 June 2017 to 3 September 2020:
(a)section 45 of the Fair Work Act 2009 (Cth) (the FW Act) by failing to pay Ms Trang Minh Thi Le (Ms Le) and Ms Loan Thi Kim Vu (Ms Vu) the minimum hourly rate of pay required by clauses 10.4(b) and 14.1(a) of the Horticulture Industry Award 2010 (Award);
(b)section 45 of the FW Act by failing to pay Ms Le and Ms Vu the casual loading required by clause 10.4(b) of the Award;
(c)section 45 of the FW Act failing to pay Ms Le the overtime rates required by clause 24.3 of the Award;
(d)section 45 of the FW Act by failing to pay Ms Le the public holiday penalty loadings required by clause 28.3 and 28.4 of the Award;
(e)section 323(1)(a) of the FW Act by failing to pay Ms Le in full by making deductions from her wages on 19 October 2019 and 1 November 2019;
(f)section 718 of the FW Act by producing false or misleading pay slips to a Fair Work Inspector on 26 October 2021 knowing, or being reckless as to whether, they were false or misleading;
(g)section 536(1) of the FW Act by failing to give Ms Le and Ms Vu pay slips within one working day of paying an amount in relation to the performance of work; and
(h)section 535(1) of the FW Act by failing to make and keep records for the purposes of regulation 3.33(1) and 3.33(2) of the Fair Work Regulations 2009.
2.Mr Son Thai was involved, pursuant to section 550(1) of the FW Act, in each of Lotus Farm’s contraventions as set out in paragraph 1 above.
THE COURT ORDERS THAT:
1.Lotus Farm pay pecuniary penalties in the sum of $130,806 pursuant to section 546(1) of the FW Act for the contraventions in paragraph 1 above.
2.Mr Son Thai pay pecuniary penalties in the sum of $28,987 pursuant to section 546(1) of the FW Act for his involvement in each of the contraventions in paragraph 2 above.
3.Pursuant to section 546(3)(a) of the FW Act all pecuniary penalties imposed on Lotus Farm and Mr Son Thai be paid into the Consolidated Revenue Fund of the Commonwealth of Australia within 28 days of the Court’s orders.
4.Order 1 and 2 above be stayed for a period of three months from the date of these orders.
5.The Applicant have liberty to apply.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
DEPUTY CHIEF JUDGE MERCURI:
INTRODUCTION
Before the court is an application by the Fair Work Ombudsman (‘applicant’) for declarations that the respondents have contravened a series of civil remedy provisions of the Fair Work Act 2009 (Cth) (‘FW Act’) and for the imposition of penalties in respect of those contraventions.
The parties have filed a Statement of Agreed Facts (‘SOAF’) and also jointly seek the imposition of penalties within an agreed range. The parties largely agree on the principles which guide the court in fixing penalties for contraventions of civil remedy provisions under the FW Act and largely agree on their application to the agreed facts in this case. The parties also jointly seek that court impose penalties within an agreed range and that there should be some time given to the respondents to pay those penalties.
The difference between the parties is the exact figure within the agreed range that the penalties ought be set and the amount of time of any stay to allow the respondents to pay those penalties.
DOCUMENTS RELIED UPON
The Applicant relies upon the following documents:
(a)the Application filed on 19 June 2023;
(b)the Statement of Claim also filed on 19 June 2023;
(c)the SOAF:
(d)the affidavit of Jodi Lee Gribben affirmed 3 November 2023;
(e)the affidavit of Loan Thi Kim Vu affirmed 2 November 2023;
(f)the affidavit of Trang Minh Thi Le affirmed 2 November 2023; and
(g)the Applicant’s outline of submissions filed on 17 January 2024 and reply submissions filed on 28 February 2024.
The respondents rely upon:
(a)the affidavit of Ba Phuc Tran affirmed 29 November 2023;
(b)the affidavit of Son Thai affirmed 30 November 2023;
(c)the respondents’ outline of submissions filed on 31 January 2024 and the respondents’ further submissions on penalty filed 23 February 2024.
BACKGROUND
The following brief summary is taken from the SOAF and is not in contention.
The First Respondent is a corporation which operated a farm producing fruit and vegetables in Werribee. The Horticulture Industry Award 2010 (‘Award’) as varied from time to time, applied at all relevant times to the First Respondent in respect of Ms Vu and Ms Le.
The Second Respondent was at all material times, a co-director and company secretary of the First Respondent. He was, for all intents and purposes, responsible for the management of the First Respondent’s employees.
The contraventions the subject of these proceedings, occurred during the Assessment Period, namely between 19 June 2017 and 3 September 2020. During that Assessment Period, the First Respondent employed both Ms Vu and Ms Le. Ms Le was employed from 20 February 2017 to 3 September 2020. Ms Vu was employed from 27 February 2017 until 21 January 2018. It is common ground that the employees did not work continuously throughout these periods.
The Award covered the First Respondent and Ms Vu and Ms Le and at all relevant times, both Ms Vu and Ms Le were classified as Level 1 employees pursuant to the Award.
It is also common ground that in 2017, Ms Le was instructed to (and did) repay to the First Respondent certain amounts of her pay. In addition, it is also common ground that in 2019, the First Respondent made unauthorised deductions from Ms Le’s wages.
The First Respondent admits that it failed to comply with its obligations under the Award to pay Ms Vu and Ms Le their entitlements to:
(a)minimum rates of pay;
(b)casual loadings;
(c)overtime; and
(d)public holiday penalty rates.
By reason of these admitted contraventions, the First Respondent underpaid:
(a)Ms Le the total sum of $22,363.52; and
(b)Ms Vu the total sum of $6,167.30.
The First Respondent rectified the underpayment to Ms Le on 10 August 2022 and rectified the underpayment to Ms Vu on 20 June 2023. In addition, the First Respondent has made the following superannuation rectification payments:
(a)$2,566.08 in respect of Ms Le; and
(b)$1,224.61 in respect of Ms Vu.
The Second Respondent has conceded that he was involved in each of the underpayment contraventions outlined above.
It is also not in dispute that during the applicant’s investigation, the First Respondent provided false or misleading documents to the applicant in response to a Notice to Produce. The respondents concede that the First Respondent knew or was reckless as to whether the pay slips it provided in response to the Notice to Produce were false or misleading. The First Respondent admits that it contravened section 718A(1) of the FW Act in providing the pay slips to the applicant in response to the Notice to Produce knowing or being reckless as to whether they were false or misleading.
It is also common ground that the First Respondent did not provide Ms Vu or Ms Le with pay slips as required by section 536(1) of the FW Act.
The First Respondent further admits that contrary to section 535(1) of the FW Act, he failed to make and keep prescribed employee records for a period of seven years.
The Second Respondent was involved, within the meaning of section 550(2)(c) of the FW Act in each of the First Respondent’s contraventions.
RELIEF SOUGHT
The parties therefore seek, by consent, declarations made in the terms set out at the commencement of these written reasons, both in respect of the First Respondent’s contraventions and in respect of the Second Respondent’s involvement in those contraventions.
The parties also seek the imposition of penalties in respect of those contraventions.
ISSUES
In light of the above, the issues for determination in this matter are therefore relatively confined.
Before turning to those issues, it is appropriate to say something about the way in which the court deals with a consent position in relation to the imposition of penalties for contravention of a civil penalty position. Section 546 of the FW Act empowers this court to ‘order a person to pay a pecuniary penalty that the court considers appropriate if the court is satisfied that the person has contravened a civil remedy provision’.
In this case, as outlined above, the First Respondent has admitted contravening various civil penalty provisions. The Second Respondent has admitted being involved in those contraventions within the meaning of section 550 of the FW Act and is therefore also taken to have contravened the civil penalty provisions.
LEGAL PRINCIPLES
In the applicant’s written submissions, the applicant sets out the legal principles which guide a court in determining an appropriate penalty for the breach of a civil remedy provision. The respondents do not take issue with those submissions. I do not propose to set them out in full but I accept that they are the correct principles which are to guide my determination in this matter.[1]
[1] Applicant’s Outline of Submissions filed on 17 January 2024, Part D.
I also accept that the grouping of contraventions sought by the applicant and consented to by the respondents is appropriate.
In this case, because of the timing of the relevant contraventions, there has been an increase to the value of the penalty unit over the relevant period. I agree with the manner in which the applicant proposes to treat the applicable penalty over the relevant period.
SUBMISSIONS AND CONSIDERATION
Applying the well settled principles on determining a penalty for breach of a civil remedy provision, the applicant seeks penalties in the range of $201,240 to $224,794 in respect of the First Respondent and the range of $38,649.60 to $44,956.80 in respect of the Second Respondent. The calculations which lead to these figures are set out in detail at Annexure B to the applicant’s written submissions which are found at court book pages 276 to 283.
The applicant further submits that applying the totality principal to these amounts, they should be further reduced by 35% in the case of the First Respondent and 25% in the case of the Second Respondent. Applying such a reduction, the Applicant therefore seeks penalties in the range of $130,806 to $146,116.10 for the First Respondent and the range of $28,987.20 to $33,717.60 for the Second Respondent.
The respondents agree to this range but submit that the penalty ought to be at the lower end of that range in both cases.
Even though the parties have agreed to a penalty range for the contraventions, the amount of any penalty imposed remains a matter for the court. The court must still be persuaded that the proposed penalties are within an appropriate range in so far as they are not so manifestly inadequate or manifestly excessive.
As stated by the majority in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate and Ors [2015] HCA 46; (2015) 258 CLR 482 at paragraph [59]:
It is true that there is a public interest in the imposition of civil penalties as opposed to the purely private interests which are in issue in many civil proceedings. But civil penalty proceedings are by no means the only civil proceedings in which the public interest is involved. … Once it is understood that civil penalties are not retributive, but like most other civil remedies essentially deterrent or compensatory and therefore protective, there is nothing odd or exceptionable about a court approving an agreed settlement of a civil proceeding which involves the public interest; provided of course that the court is persuaded that the settlement is appropriate.
Having regard to the totality of the evidence in this matter and the submission of the parties, I am satisfied that the range proposed is appropriate in that sense.
One of the main purposes of civil penalties is to encourage compliance with the legislation. Deterrence, both general and specific, is therefore a key consideration. The penalty must be set at a level where it will deter the respondents themselves and others from engaging in similar conduct.
I have also had regard to the fact that these contraventions have resulted in employees, who could properly be regarded as vulnerable workers, being substantially underpaid during their employment. They have given evidence about the impact of that on their lives and I have had regard to that.
I have also had regard to the industry in which the respondents operate and the need to set the penalties at a rate which would not be perceived as simply the cost of doing business.
In addition, I have also had regard to the fact that the respondents did co-operate with the regulator, conceding liability immediately upon the filing of a statement of claim. Moreover, the respondents have fully rectified the underpayments and demonstrated their remorse, both to the individual employees concerned and also by introducing changes to their processes and procedures to minimise the risk of this occurring again.
Notwithstanding this, I have also had regard to the fact that the respondents failed to provide employees with pay slips and then provided misleading information to the applicant when issued with a Notice to Produce. This is particularly serious in circumstances where the provision of misleading information was clearly a deliberate act and had the potential to derail and or extend the investigation. Ultimately, this was ameliorated to some degree by the respondents’ concession made in these proceedings.
Weighing up all of these matters and the other evidence before the court, I am satisfied that penalties within the agreed range are appropriate in the circumstances.
As to the exact figure within that range, I find that having regard to the totality of the evidence, penalties at the lower end of the range are appropriate. This is particularly so in circumstances where the range itself is not excessive. In the case of the First Respondent there is a difference of just over $15,000 and in the case of the Second Respondent, there is a difference of under $5,000.
In this case, having regard to the respondents’ conduct including in providing misleading information to the applicant, engaging in multiple contraventions resulting in significant underpayments to Ms Vu and Ms Le, the failure to maintain appropriate records are all serious matters and the penalties imposed must reflect the Court’s strong disapproval. This is particularly so given the nature of the industry and the vulnerability of the affected employees.
I accept that the respondents have since taken steps to ensure compliance with their Award obligations and other obligations under the FW Act. I do not accept, however, that as a consequence there is little or no need for specific deterrence in this case. The respondents continue to employ staff and operate within the same industry.
The penalties at the lower end of the range are still significant and will still meet the primary purpose of such penalties, namely, to deter similar behaviour both generally within the industry and specifically in the case of the respondents. I am satisfied that penalties at the lowest end of the proposed range strikes the right balance between oppressive severity and deterrence.[2]
[2] Fair Work Ombudsman v Roach [2023] FCA 781 at [13].
Stay of order
Both parties agree that a stay of the orders is appropriate in the circumstances. They differ as to the length of any such stay. The applicant submits, with some force, that a stay of more than three months would have an impact on the deterrent effect of the order. I agree.
It is submitted for the respondents that they are a small business and that penalties even at the bottom end of the range proposed will require time to satisfy.
It was not submitted that if a stay of six months was not granted that the First Respondent would be unable to continue trading. Moreover, even if such a submission were made, that would not necessarily justify the granting of a longer stay.
Ultimately, fixing the penalties at the rate proposed included consideration of the ‘totality principle’ and ensuring that the penalty would not be oppressive or crushing. Having done so, it is not appropriate in my view to provide an unduly long period of time within which to satisfy the penalty. To do so would undermine its deterrent effect.
For each of these reasons, I make the declarations sought by consent and order that the First Respondent pay penalties in the total sum of $130,806 in respect of the admitted contraventions it engaged in and that the Second Respondent pay penalties in the total sum of $28,987 in respect of the admitted contraventions he engaged in. I will stay the orders requiring such payment for 3 months.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment of Deputy Chief Judge Mercuri. Associate: LH
Dated: 26 April 2024
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