Fair Work Ombudsman v M.X.S Australia Pty Ltd
[2022] FedCFamC2G 267
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v M.X.S. Australia Pty Ltd [2022] FedCFamC2G 267
File number(s): BRG 435 of 2021 Judgment of: JUDGE VASTA Date of judgment: 21 March 2022 Catchwords: INDUSTRIAL LAW – breach of the Fair Work Act 2009 (Cth) –employer not paying out entitlements- Assessment of pecuniary penalties Legislation: Fair Work Act 2009 (Cth): s 90(2), s716 Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3
Mason v Harrington Corporation Proprietary Limited trading as Pangea Restaurant & Bar [2007] FMCA 7
Division: Division 2 General Federal Law Number of paragraphs: 23 Date of last submission/s: 21 March 2022 Date of hearing: 21 March 2022 Place: Brisbane Solicitor for the Applicant: Australian Government Solicitor Solicitor for the Respondent: No appearance by or on behalf of the Respondent ORDERS
BRG 435 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: M.X.S. AUSTRALIA PTY LTD
Respondent
ORDER MADE BY:
JUDGE VASTA
DATE OF ORDER:
21 MARCH 2022
THE COURT ORDERS THAT:
1.Pursuant to s 546(1) of the Fair Work Act 2009 (Cth) (FW Act) the Respondent pay pecuniary penalties to the Commonwealth in respect of the contravention of s 716(5) of the FW Act as contained in order 2 of the orders of this Court dated 14 February 2022, in the amount of $22,500 within 28 days of this order.
2.The Applicant have liberty to apply on seven days notice in the event that any of the Court’s orders are not complied with.
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
(Ex tempore)JUDGE VASTA
The Respondent, M.X.S. Australia Pty Ltd, traded as a business called MedX Physio. They practised at a suite in Lawson Street, Southport and had been in business since 19 December 2018. From 3 February 2020, the Respondent employed a person by the name of Drew Pitulanin, whom I will call “the employee”. The employee was terminated on 7 August 2020. The employee had accrued, but not taken, annual leave and, upon his termination, was not paid the accrued but untaken annual leave by the Respondent company.
The employee sought the assistance of the Fair Work Ombudsman. The Fair Work Ombudsman, from December 2020, made a number of investigations leading to the Fair Work Inspector forming a belief that the Respondent had contravened s 90(2) of the Fair Work Act 2009 (Cth) (“the Act”) by failing to pay the accrued, but untaken, annual leave to the employee upon termination.
On 18 February 2021, the inspector gave to the Respondent a compliance notice pursuant to s 716 of the Act, which required the Respondent to take a number of actions to remedy the direct effects of the contravention.
The notice required the Respondent to take those actions by 18 March 2021 and to provide reasonable evidence of the compliance with those actions to the Fair Work Ombudsman by 25 March 2021.
The Respondent failed to take that specified action by that time and, certainly, failed to produce any reasonable evidence of compliance. On the calculations made by the Fair Work Ombudsman, at the time of termination the employee had 78 hours and 42 minutes of accrued but untaken annual leave, which paid at his hourly base rate of $41.6667, that being his hourly base rate, as well as a 17.5 per cent loading, led to a payment needed of $3,569.93.
The Fair Work Ombudsman filed an originating application in this Court, on 24 September 2021, asking for a declaration that there had been a contravention, enforcement of the compliance notice, and pecuniary penalties for the contravention of s 716. On 18 October 2021, I made preliminary directions and ordered that the Respondent reply to the application and to give evidence to the Court. On 14 February 2022, nothing other than a notice of address for service had been filed by the Respondent, and the Respondent was, realistically, not communicating either with the Court or with the Fair Work Ombudsman.
I then, pursuant to the appropriate rule of the Court, gave a judgment in favour of the Applicant making the declarations and enforcing the compliance notice. I adjourned the matter for a penalty hearing and the matter has come on today for a penalty hearing. When discussing the chronology of this matter, I had noted that the Respondent had failed to comply with the compliance notice by the due date.
I have been privy to a number of emails sent backwards and forwards between the Fair Work Inspectors and the principal and only shareholder of the Respondent, Mr Brewer. Mr Brewer had not accepted the calculations and findings of the Fair Work Ombudsman. Notwithstanding that, there is a measure within a compliance notice for a person to contest certain matters. The company and Mr Brewer did not ever avail themselves of that opportunity, but kept a rather obstinate stance that they did not accept the findings and that this was a bogus complaint from the employee.
In an email sent to the Fair Work Ombudsman on Sunday, 13 June 2021, the principal, Mr Brewer, said this:
Further to my previous emails I do not accept these findings. This fellow never once came to work on time and had numerous days off when required, which I’ve previously detailed and is evident by his own text messages where he clearly says he’s not coming, despite being requested. This matter was discussed with my accountant, who was aware of the situation, and has calculated that because of [the employee’s] undoubted days of non-attendance nothing was owing.
Furthermore, and to be absolutely clear, [the respondent] is completely finished, it has no assets, no income, and no prospect of trading again. The company has not traded, nor had any income since March 2020 when it shut due to Covid and the Government lockdowns. I believe the accountant has notified ASIC that [the respondent] is insolvent and that the bank, which is owed close to $100,000, has started proceedings. My personal situation is, I’m 70, have no appreciable assets and my only income is the aged pension.
He closed the email saying that he would have no means to pay in any event. The Fair Work Ombudsman replied on Wednesday, 16 June and said:
Further to your email on 13 June 2021, can you please provide to me by Monday 21/6/2021 any further evidence that the company has in relation to the days that the employee took off or took leave, including:
1)the specific dates and/or hours that the employee took either days off or leave, including annual leave and sick leave;
2)the type of leave for each occurrence, eg, annual leave, sick leave, etc
To date, the company has provided
- text messages with the employee on 1, 8, 22, 23 and 30 July 2020;
-payslips which don’t show any payments of leave or reference to days off.
Mr Brewer then wrote back on 22 June saying:
I believe I have explained all this in previous emails, but to summarise:
(1)I believe this is a bogus claim from the beginning and that the facts bear this out.
(2)The business opened in February 20 and closed in March. The original administrator (my son) left in February due to illness and as a consequence the business has had no administration. I haven’t skills in that area. When the Covid hit, I was advised that I could claim JobKeeper for [the employee] who had just started, as a means to keep him on while I attempted to put things in place and eventually reopen.
(3)I contracted a bookkeeper to keep things in order and to specifically look after the JobKeeper in liaison with the accountant. And, although people were saying that the JobKeeper was at best confusing, it was my understanding that they had it under control. I now know that they may have made some mistakes, but it wasn’t my intention.
(4)Due to the abrupt shutdown of the practice I was unable to maintain a bookkeeper and had to take on the responsibility myself, something I am not familiar with and although I did my best to ensure correct records were kept, clearly in hindsight the pressure of the situation as well as my lack of experience in this area meant that some of the accounting such as the deduction of leave being represented on the payslips fell by the wayside.
(5)Now, here’s the point; [the employee] was on the JobKeeper and therefore I would have been happy to keep him on in the hope that I could re-open and continue the business. So why did I terminate him? Because he didn’t turn up and come to work when I asked and required him to, which is verified by the text messages.
To reiterate, [the employee] never once came to work on time, and he had many days of complete no show, which would amount to a far greater amount than any leave entitlements he may have otherwise been owed. Evidence can be provided through a spreadsheet of all days [the employee] was asked to attend work and never showed up. Accompanying this will be a sworn statutory declaration from myself, a reputable witness to that fact.
Furthermore, this process is extremely time-consuming and costly and as I’ve explained I have been completely ruined by the failure of the business, as a result of Covid and the government lockdowns, and there is no likelihood of the company ever trading again and my personal situation is I have no income other than the age pension, nor any appreciable assets.
The Fair Work Ombudsman replied to Mr Brewer and said:
Thank you for your response.
If you wish to provide the spreadsheet and statutory declaration, you can do so and the FWO will consider this evidence. However, please note that the FWO places more weight on contemporaneous evidence, such as the text messages, payslips and payroll records already provided. If you have any questions, please call or email me.
That seems to be the last communication. The person, Mr Brewer, did not ever submit a spreadsheet, nor any statutory declaration. The Fair Work Ombudsman was left with the evidence that it had, which the Respondent had said was correct, and that was all of the payslips that were given to the employee. There were no recordings on any of those payslips that there were either any days off, whether that be by sick leave or by annual leave, at all, and the annual leave aspect of the payslips had been appropriately increased with every payslip.
On 18 August 2021, Mr Brewer and the Respondent were given the final opportunity to rectify the non-compliance with the compliance notice and they were offered a payment plan, that is, for a period of two years there could be partial payments as low as $150 per payment made so as to get to the sum of $3,600. This was refused by the Respondent and, as I previously said, on 24 September, the Fair Work Ombudsman brought this action. What is left for this Court to do is to assess the proper amount that should be awarded by way of pecuniary penalty.
It should be noted that the regime of being able to issue compliance notices was introduced into the Act so that there would be a mechanism to address non-compliance with certain employment obligations arising under the Act. This was seen as an alternative to commencing litigation for each underlying contravention. As the Courts have recognised, this mechanism is both efficient and cost-effective. It allows for the rectification of identified contraventions of the Act, including underpayments, and it then prevents the Fair Work Ombudsman from bringing civil remedy proceedings against a respondent who has complied with the notices, and allows the respondent to have been not taken to have contravened any civil remedy provisions in respect of the underlying contraventions.
To simply not comply with a compliance notice is a very serious contravention of the Act. Realistically, the Fair Work Ombudsman is being more than fair with a respondent when they issue a compliance notice, and for a respondent to simply ignore the contravention notice and not comply with any of its provisions, especially the dispute provisions of the notice, is a thumbing of the nose at the system itself.
The law in relation to assessment of pecuniary penalties has really been laid down quite comprehensively. The High Court in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3 said at paragraph 116 of that judgment:
As has been observed, the principal object of an order that a person pay a pecuniary penalty under section 546 is deterrence, specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties, and thus the more likely it will be that the contravener is deterred from further contraventions.
Likewise, the more potent will be the example that the penalty sets for other would-be contraveners and, therefore, the greater the penalty’s general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d’être of its imposition.
In Mason v Harrington Corporation Proprietary Limited trading as Pangea Restaurant & Bar [2007] FMCA 7 this is known as the “Pangea case” - the Court went through, in effect, a number of factors the Court should be mindful of when imposing pecuniary penalties. One must be careful, though, in looking at the Pangea case that one does not simply look at those matters as some form of checklist to see whether or not the facts of the case with the particular factors either aggravate or mitigate the penalty. As such, the list compiled in Pangea is extremely useful, but it should not be a formula used by the Court to slavishly come up with some sort of almost mathematical guide for the imposition of penalties.
In this case, the need for deterrence is quite obvious. The Respondent was given a number of opportunities to comply with the notice. Notwithstanding that the Respondent did not take advantage of the dispute mechanism within the compliance notice, the Fair Work Ombudsman still listened to the claims that the principal was making as to the appropriateness of a finding that there had been a lack of payment made. But even if what the Respondent was saying at its highest could be made out, the Respondent still owed, at worst, five days unpaid leave. There has been no attempt to acknowledge even that, and certainly no attempt to pay any money.
There is an obstinance and belligerence in the repeated claim that the calculations made by the Fair Work Ombudsman were bogus and were contrary to what the principal says he knows of the case. The proof of the pudding is always in the eating and, here, the Respondent was invited to provide the spreadsheet, text messages, and any other material that was said to show how “bogus” the complaint from the employee was. And yet it was not produced and it still has not been produced. There is very much an element of humbug in the manner in which the Respondent has approached their obligations under the Act.
Whilst the business seemed to be a small one, and whilst it seems as though it has been an unfortunate casualty of the COVID pandemic, that does not relieve it of its responsibilities. Whilst it has been said by the principal that the business is to be wound up, it is now March 2022 and the business has not been wound up. There is no proof that has been given to the Court, or to the Fair Work Ombudsman, that this business is insolvent, or that it has a large number of debts which it cannot ever hope to pay. The Court does note, however, the personal bankruptcy of Mr Brewer, the principal.
The Court finds it very difficult to find any matters of mitigation for the Respondent. The matter has proceeded in the absence of any person representing the Respondent, which may easily been seen as reflective of the attitude of the Respondent to its responsibilities to the Court.
The maximum penalty is one of $33,300. Having a look at all of the circumstances and the overarching principles in affixing a pecuniary penalty, I am of the view that the appropriate penalty is one of $22,500.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Vasta. Dated: 14 April 2022
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