Fair Work Ombudsman v Lycamobile Pty Ltd

[2013] FCCA 2132

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v LYCAMOBILE PTY LTD [2013] FCCA 2132

Catchwords:
INDUSTRIAL LAW – Awards – breach of award – underpayment of wages – agreed statement of facts – breaches admitted – same course of conduct – totality principle – factors going to penalty – penalties imposed.

Legislation:  

Fair Work Act 2009 (Cth), ss.44, 45, 539, 546, 557

Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Workplace Ombudsman v Saya Cleaning Pty Ltd & Anor [2009] FMCA 38 Fair Work Ombudsman v Go Yo Trading Pty Ltd [2012] FMCA 865

Applicant: FAIR WORK OMBUDSMAN

Respondent: LYCAMOBILE PTY LTD

File Number: BRG 567 of 2012

Judgment of: Judge Burnett

Hearing date: 8 February 2013

Date of Last Submission: 8 February 2013

Delivered at: Brisbane

Delivered on: 8 February 2013

REPRESENTATION

Solicitors for the Applicant: FAIR WORK OMBUDSMAN

Solicitors for the Respondent: HOLDING REDLICH LAWYERS

ORDERS

THE COURT DECLARES:

1. That the respondent contravened:

   (a)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 17 of the General Retail Industry Award 2010);

   (b)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 28.1 of the General Retail Industry Award 2010);

   (c)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 13.2 of the General Retail Industry Award 2010);

   (d)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 29.4(a) of the General Retail Industry Award 2010);

   (e)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with  clause 29.2(a) of the General Retail Industry Award 2010);

   (f)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clauses 29.4(b) and 13.2 of the General Retail Industry Award 2010);

   (g)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 29.4(c) of the General Retail Industry Award 2010);

   (h)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 29.4(d) of the General Retail Industry Award 2010);

   (i)Section 44 of the Fair Work Act 2009 (by virtue of failing to comply with section 90(2) of the Fair Work Act 2009);

   (j)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 32.3 of the General Retail Industry Award 2010);

   (k)Section 44 of the Fair Work Act 2009 (by virtue of failing to comply with section 117(2) of the Fair Work  Act 2009);

   (l)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 14.1 of the Telecommunications Services Award 2010);

   (m)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 21.1 of the Telecommunications Services Award 2010);

   (n)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 20.8 of the Telecommunications Services Award 2010 );

   (o)Section 44 of the Fair Work Act 2009 (by virtue of failing to comply with section 116 of the Fair Work Act 2009); and

   (p)Section 45 of the Fair Work Act 2009 (by virtue of failing to comply with clause 23.3(b) of the Telecommunications Services Award 2010).

THE COURT ORDERS:

1. That pursuant to section 546(1) of the Fair Work Act 2009 the respondent pay $59,400.00 for contraventions of sections 44 and 45 of the Fair Work Act 2009.

2. That pursuant to section 546(3)(a) of the Fair Work Act 2009 that all penalties be paid into the Consolidated Revenue Fund of the Commonwealth within 28 days of the date of the order.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT BRISBANE

BRG 567 of 2012

FAIR WORK OMBUDSMAN

Applicant

And

LYCAMOBILE PTY LTD

Respondent

REASONS FOR JUDGMENT

(Ex tempore)

1. This application concerns contraventions alleged by the applicant against the respondent in respect of the underpayment of 13 employees who were employed at various times by the respondent.  They were underpaid a sum totalling $28,034.18 in respect of entitlements under the General Retail Industry Award 2010, the Telecommunications Services Award 2010 and the National Employment Standards (“the NES”).  In the claim filed by the applicant it seeks, among other things, declarations in respect of the various contraventions.  The order for declarations is not contested and from the facts as they are illustrated in the material it is appropriate that declarations be made. I will also make declarations in terms of paragraph 2.1 of the applicant’s outline of submissions on penalty. 

2. The applicant also seeks orders pursuant to s.546(1) of the Fair Work Act 2009 (Cth) (“the Act”) that the respondent pay penalties for the contraventions of s.44 and s.45 of the Act. That is the only issue which remains alive in the application between the parties. In addition, it seeks an order, pursuant to s.546 (3)(a) of the Act, that the penalties be paid into the Consolidated Revenue Fund of the Commonwealth within 28 days of the date of the order. There does not to be any issue in relation to this consequential order. So far as the legislative framework is concerned, that matter is not in issue. It is as is outlined in section 3 of the applicant’s written outline, and I will not expand upon it.

3. Turning to the question of penalties, s.539(2) of the Act states that the maximum penalty that may be imposed by a court for a contravention of s.45 is sixty penalty units. Section 546(2) of the Act prescribes that a pecuniary penalty unit imposed by the court must not be more than the amount referred to in s.539(2) in respect of an individual and where the body is a body corporate the penalty must not be more than five times the maximum number of penalty units referred to in s.539(2). A penalty unit has a value of $110.00 and it follows by reference to those matters that the maximum penalty that the Court can impose under the Act for contraventions by the respondent (being a body corporate) is $33,000.00 in respect of each contravention.

4. There is no issue concerning the approach that the Court ought to adopt in determining penalty; broadly, it is a five step approach. First, the Court must identify each occurrence of contravention. Each contravention gives rise to a separate obligation under the Act and amounts a separate contravention for the provisions of the Act. They should be identified individually.

5. Secondly, the Court must have regard to s.557(1) of the Act. That provision provides that where two or more contraventions of a civil remedy provision are committed by the same person, and the contraventions arose out of the same conduct by the person, those contraventions are taken to constitute a single contravention.

6. Thirdly, to the extent that two or more contraventions had common elements, that factor should be taken into account when considering what is an appropriate penalty in the circumstances for each contravention or course of conduct. It is open to the Court to group contraventions together where the various contraventions may be said to overlap and involve potential punishment for substantially similar conduct.  The penalties imposed by the Court should be an appropriate response to what the respondent did. This task is distinct from and in addition to the final application of the totality principle, which I will speak of shortly. 

7. Fourthly, the Court should then consider an appropriate penalty to impose in respect of each contravention as a single contravention alone or as part of a course of conduct, having regard to all the circumstances of the case. 

8. Finally, having fixed an appropriate penalty for each contravention, 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 contravention. The Court should apply an instinctive synthesis test in making this assessment, or what is known as the ‘the totality principle.’ In this instance the respondent has admitted to 16 contraventions in respect of the 13 employees. 

9. The contraventions can be broadly classed into nine categories:

   i)the hourly rate underpayment contravention;

   ii)the failure to pay an average of 38 hours per week underpayment contravention;

   iii)the casual loading underpayment contravention; 

   iv)the overtime underpayment contravention; 

   v)the penalty rates underpayment contravention; 

   vi)the entitlement to be absent on a public holiday underpayment contravention; 

   vii)the accrued annual leave on termination underpayment contravention; 

   viii)the annual leave loading underpayment contravention;  and

   ix)the pay in lieu of notice underpayment contravention. 

10. The contraventions occurred over a relatively brief period of approximately six months between 11 February 2011 and 22 September 2011. As I have earlier noted, s.557 operates to limit those contraventions to one contravention of each provision of the modern awards in the NES. Arguably, on that basis, the respondent would face a maximum penalty of $528,000.00. However, as I have noted, it is open to the Court to group separate contraventions where the contraventions may be said to overlap or involve punishment for the same or substantially similar conduct.

11. The applicant accepts that, where contraventions have common elements, this approach should be adopted when determining the appropriate penalty to ensure that the respondent is not punished more than once for the same or substantially similar conduct. Accordingly, in that regard it accepts that the contraventions fall into the nine categories I have identified. Adopting that grouping approach, the applicant contends, and the respondent does not disagree, that the maximum penalty against the respondent would be $297,000.00. 

12. Turning then to the factors relevant to penalty, in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7, Mowbray FM set out a non-exhaustive list of factors which are potentially relevant to the imposition of penalties. His Honour’s list has been endorsed by the Federal Court in Kelly v Fitzpatrick [2007] FCA 1080, where Tracey J, while noting that Mowbray FM’s list provided a convenient check list, added that that of itself does not proscribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion. However, for present purposes Mowbray FM’s decision provides a helpful checklist.

13. I look then to the relevant matters. The first matter to be considered is the nature and extent of the conduct.  In this instance, the conduct, save for one employee, relates principally to the engagement of employees to undertake the retail sale of SIM cards.  The manner in which the products were sold appears to have been by cold canvassing prospective customers in public places, such as supermarkets and shopping centres.  The employees were engaged at a set rate of $15.00 per hour, which was paid irrespective of the relevant award and NES minimum conditions. 

14. It is alleged by the applicant that the contraventions represent a failure by the respondent to provide basic and important entitlements under the relevant workplace relations legislation.  It is not in contest that the purpose of the legislation is to provide a safety net which ensures adequate minimum entitlements to employees, particularly those who are vulnerable or in low income roles as was mainly the case in relation to these employees, having regard to the level of skill involved in the performance of their duties.  In addition, all of these employees were non-citizens of Australia, with investigations revealing that none had been born in Australia although two were permanent residents and one was a person making application for permanent residency. 

15. Investigations revealed that five of the employees were on working holidays in Australia, three of the employees were on student temporary visas and, in respect of at least one employee, his or her level of English was such that an interpreter was required to assist in the conduct of an interview.  They would appear to be persons who would be seen to be vulnerable and were engaged in a form of employment which was at the lower end of the employment scale.  The total underpayment of the employees was $28,034.18.  In saying that, I note at this point that although the sum is sizeable, one employee alone accounts for about $8,800.00 of that sum. In respect of the rest, as is evidenced from the table of material particularising the claims, the underpayments ranged from underpayment of almost minimal hours to significant underpayments in respect of longer standing employees. 

16. It was submitted that a further consideration in the context of the extent of the conduct is the fact that during the course of these events the employees were deprived of the financial benefits with which they ought to have been provided. It does not escape my attention that, in terms of cash flow, the delay in paying basic remuneration to employees engaged in what can only be described as basic employment leads to a very strong inference that the hardship occasioned to those employees would have been greater than might otherwise be expected for higher paid employees, who one would expect to be better financially resourced. 

17. As I have noted, the employment involved the selling of SIM cards and the circumstances suggested some degree of vulnerability.  The applicant referred me to the decisions of this Court in Workplace Ombudsman v Saya Cleaning Pty Ltd & Anor [2009] FMCA 38 and Fair Work Ombudsman v Go Yo Trading Pty Ltd [2012] FMCA 865 in support of a contention that the fact of vulnerability ought be given significant weight in assessing the quantum of penalty. I accept that submission. So far as the nature of loss and damage is concerned, I have earlier made observations about the quantum of the underpayment, its disparate application across the 13 employees involved and, of course, the time period over which underpayments occurred.

18. As I have noted, the employees received $15.00 an hour during the course of their employment and what they were denied was the difference between the hourly rate and the award entitlement. That fact mitigates to some extent the hardship which the contraventions occasioned.  There is no evidence that the applicant had engaged in any previous contravention of workplace laws, a matter which arises by reason of its particular circumstances, which I will turn to shortly. 

19. Concerning the issue of whether the breaches were distinct or arose out of one course of conduct, it was submitted that the Court can take into account the fact that the underpayment contraventions arose out of a single course of conduct, namely, a decision to pay the employees a flat hourly rate. It was however contended that even if the contraventions are properly characterised as arising from one transaction or a single course of conduct, the Court is not obliged to treat the contraventions as a single contravention.  Nevertheless, it occurs to me that this is an instance where one poor decision has resulted in the consequence of these contraventions.

20. It follows, subject to my views on the basis for that decision, that it is appropriate that some weight be given to the approach of that particular consideration.  The business itself has not been the subject of express evidence, although in broad terms it is agreed that the business is the Australian arm of a global organisation, with its headquarters in the United Kingdom.

21. There is no direct evidence concerning the exact number of employees that were engaged from the respondent, although at the moment it appears that the respondent has between 60 and 70 employees.  It seems that at the material time there may have been upwards of 600 employees involved in the respondent’s enterprise.  In any event, the fact remains that the respondent’s enterprise is not a small business.

22. That perhaps leads into the question of deliberateness of the breach. The applicant acknowledges that the respondent may not have deliberately set out to contravene the Act, but contends, and I think with good reason, that the actions by the respondent demonstrate some degree of recklessness or disregard for the respondent’s statutory obligations. The fact remains that, as was debated between myself and counsel for the respondent, an enterprise entering into a new foreign market ought take greater care to ensure that its activities are compliant with the local regulatory regime.

23. There is no evidence that this occurred.  At best, the respondent’s evidence was that it employed an accountant, Mr Tapan Kotecha, to undertake duties which included overseeing the respondent’s payroll.  Respectfully, engaging an accountant to undertake payroll is not the same as engaging an accountant to ensure compliance with the regulatory regime surrounding payroll, payroll being simply an accounting activity.  I am satisfied from the material which is before the Court and the agreed facts that this omission was a significant omission, and indeed gave rise to unnecessary harm to the employees concerned as well as exposing the respondent to unnecessary risk. 

24. To that end, there seems to me to have been at least the involvement of senior management by omission, although I accept that there is no evidence of any direct act. However, I accept the submission made by the respondent that the omission was gross and, in my view, unreasonable having regard to contemporary corporate practice.  So far as contrition, corrective action and cooperation are concerned, I think that the respondent’s response has been more appropriate.

25. Once these matters were brought to the respondent’s attention, it cooperated fully with the applicant in the course of the investigation.  It supplied documents as requested, it quickly made reparation in respect of underpayment to employees, and it has taken an opportunity to bring this matter to a conclusion at minimal expense to the taxpayers as quickly as possible. They are matters which I think ought to be taken into consideration.  I note the submission made by the applicant that there has not been a formal apology.

26. Even so, I think that money speaks louder than words, and that the relevant employees will have been delighted to have received cheques for any underpayment, and no doubt will accept that as better than any apology.  There is no disagreement between the parties, and particularly on the part of the applicant, in relation to the appropriateness of a discount on account of this factor.  Other matters which the applicant identified, and which I think are relevant, concern particularly the need to ensure that the penalty imposed contributes to both general and specific deterrence.

27. There is a need for specific and general deterrence as a means of communicating to the broader public the need to satisfy the principal objects of the Act. That is to ensure a guaranteed safety net of fair, relevant and enforceable minimum terms and conditions are respected by the business community. The legislation puts in place provision for the imposition of significant penalties for breaches of those minimum entitlements, which I accept reinforces the importance placed by our community on the need for compliance with minimum standards.

28. It was submitted that a fact of general deterrence will always be a significant factor in sentencing for contraventions of the Act, and I accept that as an appropriate consideration. In addition, the applicant submitted that this instance demonstrated a need for specific deterrence. It was submitted that the respondent continues to employ people in the business and some component for specific deterrence is warranted.

29. While I accept the applicant’s submissions on that matter, and am conscious that specific deterrence is one of the factors to be weighed in the general order made by way of penalty,  I am satisfied that a general order in terms that I propose does send a message of specific deterrence to the respondent. Therefore I do not think that any order need be expressly directed to that matter.

1. While the respondent is now conscious of its obligations, in that regard I am cognisant  of the respondent’s submissions that as the supplier of global mobile virtual network services, it arrived in Australia and commenced activities here in around late 2009 to early 2010. I note its submission that it held a genuine yet mistaken belief that by paying an hourly rate which it set at $15.00 per hour it was satisfying the applicable federal minimum hourly award rate for employees in Australia as at December 2010, and that generally it was unaware of the existence of a modern award system in Australia.

2. I note its submission that four managers from its affiliated entities in the United Kingdom travelled to Australia to assist in the recruitment and training of staff until the launch of its business in Australia.  However, those factors do not, in my view, detract from my observations that it was quite unreasonable for an overseas enterprise to simply set up shop in Australia without having conducted an appropriate due diligence in relation to matters such as the regulatory regime governing its employees.

3. Again, as I debated with counsel for the respondent, it seemed to me unlikely that the respondent would not have engaged solicitors, for instance, to negotiate a lease for premises, which no doubt it may have required for its administration, and having done that it could not be accepted as unreasonable that it might also inquire as to any other matters that might govern its operations in Australia. I accept that it did not set out to deliberately or maliciously contravene its obligations under the Act, but its omission was egregious in any event.

4. The applicant contends that a penalty range in the order of 30 to 40 per cent should be imposed. The respondent contends for something in the order 10 to 20 per cent. I have given careful consideration to these submissions and the various considerations which I have addressed above. I have concluded that the applicant’s contention for a penalty in the order of 30 to 40 per cent is too high.

5. I think that something approaching 20 per cent is an appropriate penalty. That then leaves me then to consider that matter against the context of the totality. When I consider the range of penalties submitted and adopt the instinctive synthesis approach, the figure of 20 per cent appears to be an appropriate figure.  It follows that I intend to impose a penalty in respect of each of the breaches fixed in a sum of 20 per cent ($6,600.00), which gives a total penalty of $59,400.00. I will also make the declarations and the order for payment to consolidated revenue.

I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Judge Burnett

Date: 10 December 2013