Fair Work Ombudsman v Mahomet (Trading as Academy for Kids)
[2017] FCCA 3000
•15 December 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v MAHOMET (TRADING AS ACADEMY FOR KIDS) | [2017] FCCA 3000 |
| Catchwords: INDUSTRIAL LAW – Application for imposition of civil penalties – statement of agreed facts – respondent admitting multiple contraventions – respondent previously penalised for similar contraventions in 2014 – consideration of matters relevant to penalty – penalties imposed at higher level sought by applicant. |
| Legislation: Fair Work Act 2009 (Cth) ss.44, 45, 90, 116, 545, 546, 557 |
| Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 Fair Work Ombudsman v Group Property Services Pty Ltd & Anor [2017] FCA 557 Fair Work Ombudsman v Promoting U Proprietary Limited [2012] FMCA 58 |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | VIVIEN MAHOMET (TRADING AS ACADEMY FOR KIDS) |
| File Number: | MLG 2719 of 2016 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 13 November 2017 |
| Date of Last Submission: | 15 November 2017 |
| Delivered at: | Dandenong |
| Delivered on: | 15 December 2017 |
REPRESENTATION
| Counsel for the Applicant: | Ms Eleftheriadis |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondent: | Ms Mahomet, In Person |
THE COURT DECLARES THAT:
The Respondent has contravened the following civil remedy provisions:
(a)Section 45 of the Fair Work Act 2009 (Cth) (“the FW Act”) by failing to pay the Employees their minimum wages, in contravention of clauses 14.1 and A.2.5 of Schedule A to the Children’s Services Award 2010 (“the Award”);
(b)Section 45 of the FW Act by failing to pay the Employees the broken shift allowances in contravention of clause 15.1 of the Award;
(c)Section 45 of the FW Act by failing to pay the Employees overtime rates of pay in contravention of clause 23.1 of the Award;
(d)Section 44 of the FW Act by failing to pay the Employees their accrued but untaken annual leave entitlements on the termination of their employment as prescribed by section 90(2) of the FW Act; and
(e)Section 44 of the FW Act by failing to pay the Employees for their absence on public holidays as prescribed by section 116 of the FW Act.
THE COURT ORDERS THAT:
Pursuant to Section 546 of the FW Act, the Respondent pay pecuniary penalties in respect of the contraventions of the FW Act declared in paragraph (1) above in the sum of $85,000.
Pursuant to Section 546(3) of the FW Act, the pecuniary penalties payable by the Respondent be paid to the Commonwealth.
Pursuant to Section 545(1) of the FW Act, the Respondent notify the Applicant in writing if:
(a)The Respondent employs any person subject to a traineeship;
(b)The Respondent employs any person for which the Respondent receives a Commonwealth Wage Subsidy;
(c)The Respondent opens any further sites trading under the name ‘Academy for Kids’; or
(d)The Respondent acquires any further business interest that employs employees;
within 30 days of the above actions being taken for a period of two years from the date of the Court’s orders.
Pursuant to Section 545(1) of the FW Act and/or Section 545(1)(a) of the FW Act, the Respondent be restrained by injunction from engaging in conduct that contravenes the Award and/or the National Employment Standards contained in the FW Act in respect of employees employed in the children’s services and early childhood education industry as defined in clause 3 of the Award.
The Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2719 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| VIVIEN MAHOMET (TRADING AS ACADEMY FOR KIDS) |
Respondent
REASONS FOR JUDGMENT
Introductory
This is a penalty proceeding arising out of numerous contraventions by the respondent of the Fair Work Act. Notwithstanding some delay, the parties were in the ultimate to produce a Statement of Agreed Facts (“SOAF”). It should be noted that the respondent, who represented herself at trial, has not filed any materials apart from a notice of address for service. Her oral submissions at trial, to which I shall come, were essentially self-exculpatory and sought that penalties be imposed at the lower end of the scale. No objection was taken by the respondent to the methodology proposed by the applicant as to the nature of the contraventions and the way in which the court should approach them.
Statement of agreed facts
From the SOAF (which is fully supported by the affidavits filed), it is apparent that the contraventions relate to the employment of a Ms Bullow from 5 May 2014 to 10 September 2015 and a Ms Inverno, who was employed from 2 September 2013 to 18 December 2015.
From the SOAF, it is apparent that Ms Bullow was underpaid $7403.01 and Ms Inverno $5574.17. These amounts were only finally paid to the two workers in February 2017.
The contraventions alleged, and agreed in the SOAF, are multiple. The respondent failed to pay the employees’ the required minimum hourly rates of pay. She failed to pay broken-shift allowance. She failed to pay the required overtime rates of pay. She failed to pay the employees’ annual leave and annual leave loading on termination of employment. She failed to make payment for public holidays.
It is agreed that there will be declarations as set out in paragraph 53 of the SOAF which reflect all these contraventions.
The FWO’s approach to methodology
The written submissions of the applicant set out at paragraph 19 a five-step methodology to the determination of penalty. The respondent has not said anything to the contrary. I accept this is an appropriate way to proceed, not least because I have done so in earlier decisions (see Fair Work Ombudsman v James Nelson Pty Ltd & Anor [2016] FCCA 531 at [14]).
There is for these purposes no dispute as to the first step – namely the identification of the separate contraventions involved.
Insofar as the second step is concerned – namely whether these breaches taken together constitute a single course of conduct pursuant to s 557(1) of the Fair Work Act or whether they should, pursuant to s 557(3), be treated as separate, I can state shortly that I accept the applicant’s submissions (see paragraphs 21 – 33). I accept that the respondent is entitled to the benefit of s 557(1) with respect to the following: (a) the minimum wage contraventions, (b) the overtime contraventions, (c) the public holiday contraventions and (d) the broken shift contraventions falling on or before the decision in the first penalty case.
I accept that the decision not to pay each of two employees their annual leave entitlements on termination arose at two separate times and should be treated as two deliberate courses of conduct.
I accept, therefore, as the applicant submits (paragraph 32, written submissions) that there a total of six contraventions arising out of the s 557(1) contraventions.
The broken shift contraventions that occurred after an earlier decision in another penalty case against the respondent cannot, of course, attract the operation of s 557(1) because of the terms of s 557(3). I accept as the applicant submits that accordingly there are 222 separate contraventions of the broken shift allowance, and for the reasons set out at paragraphs 37 - 43 inclusive of the applicant’s written submissions, these should be grouped as a total of 25 separate groups of contraventions.
I further accept that the penalty unit that should be applied to each contravention should be either $170 or $180 for contraventions which fall respectively entirely between 28 December 2012 and 30 July 2015 and 31 July 2015 and 30 June 2017. Applying the approach adopted by Katzmann J in Fair Work Ombudsman v Group Property Services Pty Ltd & Anor [2017] FCA 557 at [395] - [398], where contravention occurred over a period of time where the penalty unit increased, the increase at the time of cessation of conduct should be applied.
As the applicant correctly submits, the penalty in total that could be imposed for each contravention that occurred exclusively in the period between 28 December 2012 and 30 July 2015 is $10,200, and for each contravention that occurred either exclusively in the period between 31 July 2015 and 30 June 2017 or spanned those two penalty unit periods would be $10,800.
Accordingly, the maximum penalties the court can impose against the respondent is $261,000, as set out in column C of the annexure A to the applicant’s written submissions.
It should be noted that I have dealt with these matters in a relatively short-hand way, as they are not the subject of contradiction by the respondent (even bearing in mind that she is not legally represented) and because the reasoning in the applicant’s written submissions is, in my view, both entirely persuasive and in accordance with authority.
The approach to the imposition of penalties
The applicant’s written submissions point, unsurprisingly, to the observations of the High Court in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46, where the High Court at [55] said:
whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Limited, is primarily if not wholly protective in promoting the public interest in compliance:
Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation within the sense of the Old and New Testament moralities that imbue much of our criminal law have any part to play in the economic regulation of the kind contemplated by Pt IV (of the Trade Practices Act) … The principal and, I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the Act.
It is well established that in considering the penalty to be imposed there are a number of matters which will perhaps often arise, noting that they are not an exhaustive list. Against this backdrop, I come to address the matters upon which the applicant relies.
The circumstances in which the conduct took place and the nature and extent of the loss and damage suffered
In both written and oral submissions counsel for the applicant pointed to the significant measure of underpayment, which was agreed. The applicant runs Academy for Kids, a business name for a childcare centre which provides before- and afterschool care. In 2014 proceedings were brought by the applicant against the respondent, which led to judgment entered ultimately against the respondent by Judge O’Sullivan. It is common cause that some of the offending in this case took place either during the hearing before Judge O’Sullivan or thereafter.
It is common cause that both of the employees who were underpaid were persons in respect of whom a Commonwealth wage subsidy was payable to them in respect of them as long-term unemployed. One of the contraventions in the proceeding before Judge O’Sullivan was a broken shift contravention, which was why s 557(3) applies in this case.
In oral submissions, counsel submitted that these were long-term unemployed persons in respect of whom a subsidy was available. It was difficult for them to raise their concerns. They have both filed affidavits to this effect.
It was submitted that the respondent was on notice as a result of the 2014 case and that penalties of approximately $20,000 in that case did not appear to have stopped the respondent’s conduct. It was submitted that records show (this is not controversial.) that there were 11 complaints about the respondent between 2009 to 2012, which led to a formal caution in February 2012. The respondent still operates three childcare centres.
The written submissions point out that, in compensation for her employment of the employees, the respondent received Commonwealth wage subsidies totalling $6000, which amounted to almost half the amount the respondent was required to back-pay the employees.
In her oral submissions made before the court the respondent said that she was not aware that what she was doing was wrong in 2014. She said a company called MatchWorks had approached her and asked for an opportunity for the employees to work in the industry. Their hourly rate acknowledged their lack of skill. The case worker asked if she could continue them and she was happy to teach them. One employee was unable to continue her traineeship, and she paid $15,000 to retrain the other. She had not thought that the employees were underpaid, because this was done through MatchWorks and Practical Outcomes. She was sorry she had misinterpreted the award that the employees were under and had arranged to repay them. She did not have the former employees details, so it took until February 2017 to repay them through the Fair Work Ombudsman. Employees were employed with her through MatchWorks and there were problems with employees understanding the child care regulations. She said the Fair Work Ombudsman had refused to speak to her because of the 2014 matter. She did not feel that the penalties should be at the high level because it was MatchWorks responsibility. She had brought the employees back into the workforce and was happy to help people to do this.
It will be seen that the admittedly rather rough paraphrase of what the respondent had to say at court constitutes, in essence, a complete self-exculpation. She sought to place the blame for the underpayment of the employees on other agents and/or a lack of understanding on her part of what the appropriate to cover the employees was.
In circumstances where she had been through a process culminating in a court decision, this professed state of ignorance is really not one to which it is possible to give any credence, especially given that Ms Mahomet has not put that explanation on affidavit.
I accept the submission of the applicant that these were indeed vulnerable employees. They would have been naturally reticent to challenge their employer after being unemployed for a long period of time. Their underpayment is made all the more off-putting by the fact that during their employment Ms Mahomet received wage subsidy in respect of these employees in any event.
The nature and extent of the loss sustained as a result of the breaches
This matter can be dealt with shortly. Underpayments of a total of $14,341.93 (an amount ultimately reduced by offsets) in one and a half to two and a half years of employment plainly represented a lot of money for poorly paid employees like this. It took a long time for these underpayments to be rectified, and the failure to pay promptly is dealt with in the evidence that Ms Bullow has provided on affidavit.
Specific deterrence
Once again, this matter can be dealt with relatively shortly. It is well accepted that specific deterrence is a facet going to the quantum of penalty to be imposed. Put shortly, the respondent clearly has continued to act in breach of the law despite being well aware, at least in general terms, of what her responsibilities were. A person who is the subject of a penalty finding in 2014 who continues to contravene in the fashion that the respondent did requires a sharp lesson to make her appreciate more clearly than thus far has apparently been the case what her legal obligations are. This is all the more the case given that she still operates three child care centres.
General deterrence
It is once again well-established that general deterrence is very important. It is all the more so given the industry profile provided by the applicant described in the affidavit of Ms Campbell at paragraph 48 and exhibit PLC26. I accept the submission at paragraph 85 of the applicant’s written submissions that:
The applicant submits that when imposing penalties the Court should have regard to the message sent to employers and the community generally, to make it clear that employers must comply with minimum standards. The imposition of a penalty in this matter will assist in ensuring other employers in the children’s services industry are compliant with their obligations.
Evidence of contrition, corrective action and cooperation
Once again, this matter can be dealt with shortly. The applicant’s written submissions are entirely apposite. I agree that a discount of 10 per cent should be offered (see written submissions paragraphs 89 - 95 inclusive).
I further note that the respondent has not expressed any remorse and has not apologised to the two employees. Indeed, before the Court, the respondent’s remarks were entirely directed to putting the blame on third parties and involved some measure of criticism of the employees themselves.
Financial circumstances of the respondent
The respondent, despite orders that would have facilitated it, has not put any evidence before the Court as to her financial circumstances. She continues to run three child care centres. Furthermore, as I observed in Fair Work Ombudsman v Promoting U Proprietary Limited [2012] FMCA 58 at [57]:
Respondents cannot hope to have their conduct in effect exonerated by the Court merely because they are impecunious. Parliament has set significant penalties for the sort of contraventions that the respondents engaged in and I do not think it is appropriate for the totality principle to operate simply to ensure that penalties are imposed in suitably insignificant amounts to meet the respondent’s capacity to pay.
The level of penalty recommended by the applicant
The applicant seeks varying penalties in respect of the particular contraventions. In my view, the penalty to be imposed for the annual leave contraventions should be 70 per cent. The failure to pay annual leave upon cessation of employment was, in my view, egregious.
I accept the submissions of the applicant that a penalty of between 60 and 70 per cent should be paid for the minimum wage contravention. I further accept that a penalty of between 50 and 60 per cent should be paid for the public holidays not worked and a penalty of 30 to 40 per cent for the overtime contravention.
Broken shift allowance contraventions should, for the reasons set out at paragraphs 106 - 108 of the applicant’s written submissions, be set at between 70 and 80 % of the available maximum.
The actual assessment of the detailed penalty amounts is set out in annexure A. It is a complicated set of calculations.
Given that the respondent has not really made any meaningful submissions as to the range, and given that in my opinion this case has as its most salient feature the fact that the respondent has a very poor record of compliance (I have not even touched in detail on the complaints from 2009 to 2012 and the warning notice given by the FWO in 2012) suggests that both specific and general deterrence are significant. In these circumstances in my view the penalty should be imposed at the top of the range contended for by the applicant which I would round off to $85,000.
The final consideration as to penalty is the operation of the totality principle.
This is as it were a final review or overview of the aggregate penalty to determine whether it is an appropriate response to the conduct that led to the breaches and is not oppressive or crushing (Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8).
I accept as the applicant submits that the total proposed is an appropriate outcome for the conduct concerned and that there is no evidence that it would be crushing for the respondent.
The injunctions sought
The applicant seeks a further Notification Order (as it is described) and an injunction pursuant to s 545 of the Act to restrain the respondent from engaging in conduct that contravenes the award and/or the National Employment Standard in respect of employees engaged in the respondent’s children’s services or early childhood education industry.
I was at first not inclined to make this order as it in substance merely requires the respondent to obey the law. Counsel, however, drew my attention to the decision of Katzmann J in Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 at [1133] – [1137] in which her Honour clearly contemplated orders of this character. Furthermore, Mansfield J in Director of the Fair Work Building Industry Inspectorate v Cartledge and Ors [2014] FCA 1047 at [109] said
Although the injunction does no more than require the respondents to comply with the law, its granting has the benefit of deterring the respondents from engaging in a contravention of Part 3 - 4 of the FW Act in the future by attaching to any such contraventions the range of sanctions available for breach of a Court order.
Here, the applicant seeks the Notification Order and injunction pursuant to s 545 of the Act. Section 545(1) relevantly reads
The Federal Court or the Federal Circuit Court may make any order the Court considers appropriate if the Court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.
In the light of the approach taken by the Federal Court referred to immediately above, it is clear that this Court has power to make the orders sought.
In the face of the respondent’s failure properly to comply with the law in the past, and on repeated occasions, it is in my view appropriate to make the orders sought.
There will accordingly be declaration and orders made as sought by the applicant with the total sum to be ordered by way of penalty to be $85,000.
I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Date: 15 December 2017
Key Legal Topics
Areas of Law
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Employment Law
Legal Concepts
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Breach
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Penalty
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Remedies