Fair Work Ombudsman v Manning
[2013] FCCA 1443
•27 September 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FWO v MANNING | [2013] FCCA 1443 |
| Catchwords: INDUSTRIAL LAW – Fair Work Act 2009 (Cth) – respondent sole director, Secretary, Managing Director and beneficial owner of corporate employer – employer in business of designing, programming and supplying computer training software – contraventions – employees underpaid total of $314,594.92 – contraventions considered serious – penalty at the high end of the scale considered appropriate – penalty of $52,800 – penalty sum to be divided between employees in parts proportionate to their share of outstanding entitlements. |
| Legislation: Fair Work Act 2009 (Cth), ss.44, 45, 90(2), 119, 293, 323, 323(1), 546, 550, 550(1), 550(2)(a), 550(2)(c), 557, 557(1), 712, 712(3) |
| Workplace Ombudsman v Securit-E Holdings Pty Ltd (In Liquidation) & Ors [2009] FMCA 700 Quinn v Martin (1977) 16 ALR 141 Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550 Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Yardley v Betts (1979) 22 SASR 108 |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | JAMES ROBERT MANNING |
| File Number: | ADG 62 of 2012 |
| Judgment of: | Judge Simpson |
| Hearing date: | 30 January 2013 |
| Date of Last Submission: | 30 January 2013 |
| Delivered at: | Adelaide |
| Delivered on: | 27 September 2013 |
REPRESENTATION
| Counsel for the Applicant: | Ms M Carter |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| The Respondent: | In person |
THE COURT DECLARES THAT:
Pursuant to s.550(1) of the Fair Work Act 2009 (Cth) (“FW Act”), the respondent is taken to have contravened the following provisions of the FW Act by being involved in the failures of Compliance and Competency Management Pty Ltd (In Liquidation) (ACN 099 137 274) (“the Employer”) as follows:
(a)Subsection 712(3) of the FW Act by being involved in the Employer’s failure to comply with a notice to produce a record or documents within a specified period, without reasonable excuse;
(b)Section 323(1) of the FW Act by being involved in the Employer’s failure to pay to Alan Timms (“Timms”), Anthony Kikkert (“Kikkert”), Shaikh Shahid Siddiqui (“Siddiqui”) and Mark Lorenz (“Lorenz”) their safety net contractual entitlements in full and at least monthly during the period from on or around 22 September 2010 until the termination of each employee’s employment (“the Contravention Period”);
(c)Section 45 of the FW Act in respect of Penny Feast (“Feast”) by being involved in the Employer’s failure to pay to Feast wages owing at least fortnightly as required by cl.23.1 of the Clerks - Private Sector Award 2010 (“Clerks Award”) during the Contravention Period;
(d)Section 293 of the FW Act in respect of Timms by being involved in the Employer’s failure to comply with the National Minimum Wage Order during the Contravention Period;
(e)Section 45 of the FW Act in respect of Feast by being involved in the Employer’s failure to pay the applicable minimum rate of pay required by cl.16 of the Clerks Award during the Contravention Period;
(f)Section 45 of the FW Act in respect of Kikkert, Lorenz and Siddiqui by being involved in the Employer’s failure to pay the applicable minimum rate of pay required by cl.15 of the Professional Employees Award 2010 (“Professionals Award”) during the Contravention Period;
(g)Section 45 of the FW Act in respect of Feast by being involved in the Employer’s failure to pay Feast her severance entitlement as required by cl.14.5 of the Clerks Award;
(h)Section 45 of the FW Act in respect of each of Kikkert, Siddiqui, Feast and Lorenz by being involved in the Employer’s failure to make superannuation contributions on their behalf on and from 1 January 2010 until their respective dates of termination of employment, as required by cl.24.2 of the Clerks Award (in relation to Feast) and cl.17.2 of the Professionals Award (in relation to Kikkert, Siddiqui and Lorenz); and
(i)Section 44 of the FW Act in respect of each of the Timms, Kikkert, Siddiqui, Lorenz and Feast by being involved in the Employer’s failure to pay the annual leave due to each employee on termination as required by subs.90(2) of the FW Act.
By reason of the Employer’s failures referred to in paragraph 1 of these Orders, it is further declared that the employees are owed outstanding entitlements in the following amounts:
(a)in respect of Timms – $73,550.87;
(b)in respect of Kikkert – $84,739.58;
(c)in respect of Siddiqui – $27,990.99;
(d)in respect of Lorenz – $103,033.96; and
(e)in respect of Feast – $25,279.53,
(collectively, the “Outstanding Entitlement”).
IT IS ORDERED THAT:
The respondent pay pecuniary penalties in the aggregate amount of FIFTY TWO THOUSAND, EIGHT HUNDRED DOLLARS ($52,800) pursuant to s.546 of the FW Act in respect the contraventions referred to in paragraph 1 of these Orders (“the Penalty”).
The respondent pay the Penalty to the employees in parts proportionate to their share of the Outstanding Entitlement, being:
(a)in respect of Timms – 23.4%;
(b)in respect of Kikkert – 26.9%;
(c)in respect of Siddiqui – 8.9%;
(d)in respect of Lorenz – 32.8%; and
(e)in respect of Feast – 8.0%.
The respondent to provide to the applicant evidence of payments made in accordance with Order 4 above within 7 days of the respondent making each relevant payment.
In relation to each employees’ share, in the event that the respondent is unable to locate the employee, the respondent to pay the relevant employee’s share of the penalty to the applicant as a Collector of Public Monies.
In the event that the applicant receives money in respect of a particular employee’s share in accordance with Order 6, the applicant to:
(a)in the event that the applicant knows the relevant employee’s whereabouts, pay the money to the employee;
(b)in the event that the applicant is unable to pay the money to the relevant employee because the applicant does not know the employee’s whereabouts, pay the amount into the Consolidated Revenue Fund of the Commonwealth.
That the Penalty be payable by the respondent within 60 days of the date of these Orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 62 of 2012
| FAIR WORK OMBUDSMAN |
Applicant
And
| JAMES ROBERT MANNING |
Respondent
REASONS FOR JUDGMENT
I have before me an application brought by the Fair Work Ombudsman (“the applicant”) against James Robert Manning (“the respondent”). The respondent was the sole owner and operator of a company, J R and J V Manning Nominees Pty Ltd (“the employer”), that ran a business designing, programming and supplying computer training software. The employer went into liquidation on a creditor’s winding up application on 16 February 2012.
These proceedings relate to a number of serious contraventions of the Fair Work Act 2009 (Cth) (“the Act”) by the employer in relation to each of five former employees. The respondent agrees that, by reason of s.550 of the Act, he is a person involved in each of the contraventions and is thereby taken to have also contravened the provisions.
At the commencement of the hearing, the applicant tendered the following documents:
·Document headed “Amended Agreed Statement of Facts and Matters” (“the Agreed Statement”)[1] signed by the parties in November 2012;
·An affidavit of Alan Stewart Timms, sworn 13 September 2012;
·An affidavit of Shaikh Shahid Siddiqui, affirmed 13 September 2012;
·An affidavit of Mark Gregory Lorenz, affirmed 13 September 2012;
·An affidavit of Penny Louise Feast, affirmed 17 September 2012;
·An affidavit of Stephen Christopher Ranieri, sworn 14 September 2012; and
·An affidavit of Angeliek Peters, affirmed 18 September 2012.
[1] The Agreed Statement is annexed at the end of these reasons.
The respondent did not tender any evidence in relation to his liability in mitigation of penalty. He was unrepresented throughout.
The Agreed Statement evidences that the parties have reached substantial agreement about many facts including the facts that prove the respondent’s contravention of various provisions of the Act.
Having examined the affidavits that have been tendered, I consider it appropriate to make findings of fact as have been agreed to by the parties and as detailed in the Agreed Statement.
It will be seen from the Agreed Statement that the respondent accepts that he was involved in each of the ten contraventions committed by the employer in that he aided, abetted, counselled or procured the employer’s contraventions within the meaning of subs.550(2)(a) of the Act and/or in the alternative, was by act or omission directly and indirectly knowingly concerned in or a party to the contraventions within the meaning of subs.550(2)(c) of the Act.
The contraventions were in relation to:
·failure to pay untaken accrued annual leave on termination;
·failure to make a severance payment;
·failure to make superannuation contributions;
·failure to pay minimum wage entitlements;
·failure to comply with frequency of payment obligations; and
·failure to comply with a Notice to Produce.
As a result of these contraventions, five employees of the employer suffered underpayments totalling $314,594.93.
As will be seen from the Agreed Statement, there have been numerous contraventions of the provisions of the Act by the employer. It is necessary to decide whether, by application of s.557 of the Act, some contraventions should be considered to constitute a single contravention on the basis that they arose out of a course of conduct.
The onus of establishing the benefit of subs.557(1) of the Act is on the respondent.[2] The facts of this case indicate that the respondent may have the benefit of subs.557(1) of the Act in relation to repeated contraventions of each respective term whether the multiple contraventions affected a single employee or multiple employees. The subsection operates only in relation to two or more contraventions of the same term.[3]
[2] See the case of Workplace Ombudsman v Securit-E Holdings Pty Ltd (In Liquidation) & Ors [2009] FMCA 700 at para 5.
[3] Quinn v Martin (1977) 16 ALR 141 at 143 – 5; Seymour v Stawell Timber Industries Pty Ltd (1985) 9 FCR 241 at 266 – 7; Gibbs v The Mayor, Councillors and Citizens of the City of Altona (1992) 37 FCR 216 at 223.
It should also be noted that separate contraventions will occur (ie s.557(1) will have no application) where the employer contravenes, for example, the superannuation provisions of different awards.
A summary of the agreed contraventions[4] is as follows:
[4] As summarised in the applicant’s Written Submissions on Penalty.
“Identification of the contraventions
It is agreed that the employer has contravened:
(a)Section 44 of the FW Act by:
(i)failing to pay the employees their accrued but untaken annual leave on termination of employment as required under subs.90(2) of the FW Act; and
(ii)failing to make a severance payment to Ms Feast as required by s.119 of the FW Act;
(b)Section 45 of the FW Act by:
(i)failing to pay superannuation to:
A.Mr Kikkert, Mr Siddiqui and Mr Lorenz and therefore contravening cl.17.2 of the Professional Employees Award 2010 (“Professionals Award”); and
B.Ms Feast and therefore contravening cl.24.2 of the Clerks – Private Sector Award 2010 (“Clerks Award”); and
(ii)failing to pay;
A.Mr Siddiqui, Mr Lorenz and Mr Kikkert in accordance with the applicable minimum wage set by the Professionals Award;
B.Ms Feast in accordance with the applicable minimum wage set by the Clerks Award; and
C.Ms Feast at least fortnightly in contravention of cl.23.1 of the Clerks Award.
(c)Section 293 by failing to pay Mr Timms in accordance with the applicable national minimum wage order which was made on 29 June 2010 by Fair Work Australia (“Minimum Wage Order”);
(d)Section 323 of the FW Act by failing to pay, in relation to the performance of their work, the full contractual entitlement to:
(i)Mr Timms, Mr Kikkert, Mr Siddiqui, Ms Feast and Mr Lorenz at least monthly.
(e)Subsection 712(3) of the FW Act by failing to provide documents or records required to be produced pursuant to a Notice to Produce Records or Documents under s.712 without reasonable excuse.”
In this case, s.45 of the Act was contravened by the employer in respect of the employees Mr Kikkert, Mr Siddiqui, Mr Lorenz and Ms Feast. Whilst there are at least nine contraventions of s.45 of the Act, by application of s.557(1), these reduce to five contraventions as although it may be argued that only one decision was made by the employer to not pay superannuation during the relevant period, the obligation to pay superannuation arose through two distinct clauses in each of the separate instruments, being the Professional Award and the Clerks Award.
Similarly it may be said that there was only one decision made not to pay the employees in accordance with their minimum wage entitlement. However, this obligation arose from two distinct provisions in the Clerks Award and the Professionals Award and should be treated as two contraventions.
Furthermore, the decision with respect to the frequency of payment of Ms Feast’s wages arose from yet another clause in the Clerks Award. On this basis, in relation to the payment of minimum wage entitlement and frequency of payment provisions, there are three separate contraventions of s.45 of the Act.
The same rational should be applied to the contraventions of s.323 of the Act which required payment to Messrs Timms, Kikkert, Siddiqui, Lorenz and Ms Feast monthly. Similarly, the contraventions of s.44 arose out of two separate obligations under the Act: the obligation to pay the employees their accrued but untaken annual leave entitlements on termination of employment (subs.90(2) of the Act) and the obligation to make a severance payment to Ms Feast (s.119 of the Act). There is a single contravention of subs.712(3) of the Act.
I find therefore that there are a total of ten contraventions in this case. They are:
a)One contravention for failure to pay the employees their accrued untaken annual leave on termination of employment [(a)(i) of para.10];
b)One contravention for failure to make a severance payment to Ms Feast [(a)(ii) of para.10];
c)One contravention for failure to pay superannuation to Messrs Kikkert, Siddiqui and Lorenz [(b)(i)A of para.10];
d)One contravention for failing to pay superannuation to Ms Feast [(b)(i)B of para.10];
e)One contravention for failure to pay Mr Siddiqui, Mr Lorenz and Mr Kikkert in accordance with the applicable minimum wage set by the Professionals Award [(b)(ii)A of para.10];
f)One contravention for failure to pay Ms Feast in accordance with the applicable minimum wage set by the Clerk’s Award [(b)(ii)B of para.10];
g)One contravention for failure to pay Ms Feast at least fortnightly [(b)(ii)C of para.10];
h)One contravention for failing to pay Mr Timms in accordance with the applicable minimum wage [(c) of para.10];
i)One contravention for failing to pay Messrs Timms, Kikkert, Siddiqui and Lorenz and Ms Feast their full contractual entitlement at least monthly [(d) of para.10]; and
j)One contravention for failing to comply with a Notice to Produce [(e) of para 10].
The maximum penalty for each contravention is 60 penalty units (or $6,600). The maximum penalty that can be imposed for all ten contraventions is $66,000.
The next step is to determine what penalties should be imposed. The factors relevant to the imposition of a penalty under Commonwealth workplace laws have been summarised by Mobray FM in Mason v Harrington Corporation Pty Ltd[5] as follows:
[5] [2007] FMCA 7.
a)The nature and extent of the conduct which led to the contravention;
b)The circumstances in which the conduct took place;
c)The nature and extent of any loss or damage sustained as a result of the contraventions;
d)Whether there had been similar previous conduct by the respondent;
e)Whether the contraventions were properly distinct or arose out of the one course of conduct;
f)The size of the business enterprise involved;
g)Whether or not the contraventions were deliberate;
h)Whether senior management was involved in the contraventions;
i)Whether the party committing the contravention had exhibited contrition;
j)Whether the party committing the contravention had taken corrective action;
k)Whether the party committing the contravention had co-operated with the enforcement authorities;
l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
m)The need for specific and general deterrence.
It is to be noted that while this summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion.[6]
[6] See Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550.
The task of the Court is to fix penalties which pay appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. The factors relevant to this matter and the question of appropriate penalties are addressed in turn below.
The conduct in this case involved the failure of Mr Manning to ensure that the employer paid the employees’ wages and other entitlements between 22 September 2010 and the end of each of the employees’ employment with the employer. This period of non-payment during their employment spanned from a period of two months to almost seven months. It also involved the failure by the employer to pay the employees annual leave on termination of employment, superannuation, and to pay Ms Feast severance pay on termination of employment. Further, the case involves the failure to produce documents for records in accordance with a Notice to Produce (NTP) issued by the applicant. I agree with the submission on behalf of the applicant, that each of these contraventions represents a substantial failure by Mr Manning to comply with fundamental obligations imposed on employers by the legislature. In particular, the minimum standards governing the required frequency of payment obligations are mandated to ensure that employees have sufficient funds to cover the basic costs of living. Similarly, strong public policy grounds underpin the entitlement to the prescribed minimum compulsory superannuation contributions and annual leave payments set by the legislature to assist employees to fund their enjoyment of retirement and holidays.
Mr Manning was the sole director, secretary and beneficial owner of the employer. He was the person responsible for directing and authorising the payment of wages to the employees. Mr Manning’s failure to ensure that the employer paid the employee’s their full salary occurred over a length period, in which only some partial payments were made. The partial payments made to the employees after 22 September 2010 were very small in proportion to their outstanding entitlements which continued to accumulate until the termination of their employment months later. None of the employees received any payments from the employer after the respective termination of employment dates.
The affidavit evidence of Mr Timms, Mr Siddiqui, Mr Lorenz and Ms Feast demonstrate that Mr Manning’s failure to ensure the employer paid the employees’ entitlements in full and in accordance with the frequency of payment provisions, had a significantly adverse impact on each of them. For example, Mr Timms and Mr Siddiqui both deposed in their respective affidavits that they found it difficult to meet their living expenses as a result of not being paid. In November 2010, Mr Siddiqui took out a personal loan in order to meet his personal expenses which further exacerbated the extent of loss that he suffered.
Messrs Siddiqui, Timms and Lorenz and Ms Feast each deposed that from 22 September 2010 to the end of their respective periods of employment (and in Ms Feast’s case after the end of her employment), Mr Manning made a number of representations to each of them indicating that they would receive their wages “soon” and that although the employer was experiencing financial difficulties, there was a strong probability that it would either secure new contracts or obtain venture capital to increase financial viability. As a result of these promises that the employer would again be profitable, the employees concerned continued to work for the employer without being paid until March/April 2011. Mr Timms declined a specific opportunity of alternate employment on the basis of Mr Manning’s representations about the employer’s future capacity to repay the outstanding entitlements. Likewise, Ms Feast prolonged her employment with the employer in reliance on the promises of payment made to her by Mr Manning.
I agree with the applicant’s submission that upon determining that the employer was unable to meet its debts to its employees as they fell due, it could and should have immediately ceased trading.
Messrs Timms, Siddiqui and Lorenz stated that if Mr Manning had told them in September 2010 that the employer would not be able to pay their wages, that they would have sought new employment at that time rather than continuing to work for the employer for the extended period until March/April 2011. Consequently, Mr Manning’s conduct materially aggravated the extent of the outstanding entitlements incurred by each of the employees. Mr Manning could have minimised the losses incurred by the employees had he acted in a more reasonable and candid manner in conducting the business of the employer particularly in regard to his communication with the employees about its financial viability.
The significant quantum of the total outstanding entitlements owed to the employees by the employer is partially attributable to the relevantly high statutory minimum wages that Messrs Kikkert, Lorenz and Timms were entitlement to receive. Ms Feast and Mr Siddiqui were entitled to relevantly modest statutory minimum wages such that the quantum of their outstanding entitlements needs to be assessed in that context.
Of the employees, Mr Timms and Mr Lorenz were each over the age of 45 as at the date of the admitted contraventions, which is an age widely adopted by industrial instruments and legislation as warranting additional entitlement upon termination of employment to cushion such individuals against any additional challenges which they may face in securing alternative employment. The conduct of Mr Manning towards these individuals needs to be assessed in the context of that vulnerability.
The NTP contravention occurred in the following circumstances:
a)The NTP was personally served on the respondent in his capacity as sole director of the employer on 10 April 2011;
b)The respondent knew that the NTP required the employer to produce specific records or documents in relation to the employees employment on or before 25 April 2011;
c)The respondent knew that no documents or records were provided by the employer to the applicant on or before 25 April 2011 or at any time subsequently;
d)The respondent knew that no reasonable excuse was provided by the employer for the non-compliance with the NTP on or before 25 April 2011;
e)On 27 April 2011, Ms Peters attempted to call Mr Manning and left a voice message informing him that the NTP deadline had passed. Mr Manning did not respond to Ms Peters;
f)On 4 May 2011, a failure to comply with an NTP Notice was issued to Mr Manning;
g)The applicant engaged a process server to serve the Notice on Mr Manning and due to difficulties in locating Mr Manning, Ms Peters contacted Mr Kikkert in an attempt to locate Mr Manning. Mr Kikkert informed Ms Peters that Mr Manning was working for a company called Love Energy;
h)On 25 May 2011, the Notice was served on Mr Manning personally; and
i)The employees had not been paid their full entitlements since 22 September 2010.
As a consequence of the above failure to provide documents, the applicant was unable to independently assess the employer’s records or documents relevant to the investigation in order to verify it’s quantification of the extent of the underpayments incurred by the employees. The applicant’s capacity to investigate and enforce compliance with Commonwealth workplace laws could be materially hindered in circumstances where records and documents are not produced in compliance with a NTP.
The evidence of the deponent, Mr Timms, is that Mr Manning rarely attended at the workplace from 22 September 2010. The inference arises that he was not attending to the improvement of day-to-day management of the business from that date. There is evidence before the Court that Mr Manning secured alternative employment for himself as a “systems manager” from as early as March 2011. He did so in circumstances where he had not given the employees any certainty about the future of the employer’s business.
I infer that Mr Manning made adhoc payments for purposes which included creating and maintaining uncertainty in the employees’ minds as to the future prosperity of the business so that Mr Manning could advance his own objective of selling the business as a going concern.
I find that Mr Manning deliberately advanced his own personal interests over those of the employees during the period in which the employees were underpaid and that his conduct in this regard should be assessed as warranting a significant penalty that gives a weight to the principles of specific and general deterrence.
The detriment caused to the five employees is significant. In total, the five employees were underpaid approximately $226,304.03 in wages. Further, collectively, the employees did not receive approximately $14,602.81 in superannuation entitlements or approximately $73,688.08 in accrued annual leave entitlements payable on termination of employment. In total, the underpayments sustained by the employees amounted to approximately $314,594.92.
These losses have not been rectified by the employer which is now in liquidation with no real prospect of making any further contribution to the employees due to its very poor financial situation and other substantial debts owed to outstanding creditors.
The loss or damage which principally arises from Mr Manning’s failure to comply with the NTP should be considered in the context of the relevant statutory objectives and characterise as “conduct … (which) undermines the utility and effectiveness of a fundamental object of power conferred by the Fair Work Act”[7]
[7] Secretary, Department of Health & Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545.
One of the principle objects of the Fair Work Act is to ensure a guaranteed safety net of fair relevant and enforceable minimum terms and conditions for all employees. The compliance powers conferred by the Act on Fair Work Inspectors includes the power to issue a NTP under s.712 are critical components of the framework established by the Fair Work Act. In this regard, in order to enforce these minimum standards, Fair Work Inspectors must be able to exercise their compliance powers effectively. The purpose of the compliance powers conferred on Fair Work Inspectors (such as the power to issue a NTP under s.712 of the Fair Work Act) is to provide the applicant with effective means for investigating and enforcing compliance with minimum standards and industrial instruments.
The respondent’s conduct in my view, stifled the applicant’s ability to conduct an efficient and comprehensive investigation of the complaint made by the employees to the applicant. Such conduct undermines the compliance powers and principle objects of the Act.
There is no evidence of any suggestion that Mr Manning has previously engaged in similar conduct regarding contravention of Commonwealth workplace laws.
The size of the business was such that Mr Manning was well positioned to know that the employer was not capable of sustaining its trading costs, especially in relation to the accrual of the employees’ wages and entitlements. Yet he continued to merit and encourage the continuance of the employer’s business. In doing so, he used the employees to project to other creditors the appearance of solvency.
Mr Manning has more than 20 years’ experience managing and operating businesses which employed more than five people. Between March 1988 and the present day, Mr Manning has held the position of director in 27 different companies. I infer that the admitted contraventions were not the result of Mr Manning’s lack of prior experience in conducting a business or in dealing with human resource matters, including the employment and payment of employees. Mr Manning was recklessly indifferent to his statutory obligations to ensure that the employer paid the employees their minimum statutory entitlements at the required frequency. Mr Manning wilfully and flagrantly disregarded his obligation to ensure that the employer met those minimum statutory obligations despite repeated pleas from the employees to do so over an extended period and in circumstances where Mr Manning received the benefit of the employees’ ongoing services by actively misrepresenting the employer’s capacity to rectify the steadily accumulating underpayment liability to the employees.
The respondent informed the Court that he was impecunious and had no assets. He said that he worked as a self-employed consultant and earnt little. He said that he suffered from depression.
The evidence indicates that Mr Manning was recklessly indifferent to his statutory obligations. Mr Manning made various statements to the employees that indicated that they would receive further payments from the employer. On 22 November 2012, Mr Manning wrote in an email to Ms Feast in words to the effect that her entitlement would be finalised shortly. On multiple occasions Mr Manning said to Mr Timms, Mr Siddiqui, Mr Kikkert and Ms Feast words to the effect that the employees would be paid shortly or when the clients paid their outstanding invoices. Mr Siddiqui said in his affidavit that Mr Manning on numerous occasions told him that he would receive his pay soon, in the next few days, or the following week and told him that a venture capitalist company would take over the business and pay Mr Siddiqui for all entitlements owed to him. Ms Feast said in her affidavit that Mr Manning told her that he was waiting for the bank to make the transfer of wages and that he was waiting for a government contract to come through and that when it does, she would receive all of her entitlements. Mr Timms said that Mr Manning told him that he would be paid within a few days and that a venture capitalist company would be injecting money into the business.
Despite knowing that the employer was unable to rectify any of the underpayments to the employees after their respective terminations of employment dates, Mr Manning continued to make statements to the employees indicating that they would be paid.
So far as the question of senior management is concerned, it is agreed that Mr Manning was the sole director and secretary of the employer who managed and controlled the business conducted by the employer.
I note that since the commencement of these proceedings, Mr Manning has co-operated with the applicant to expedite the efficient administration of justice through the early admission of liability with respect to the contraventions and by entering into the agreement statement.
One of the principle objects of the Act is the maintenance of an effective safety net and effective enforcement mechanisms. The admitted contraventions undermine those principle objectives. The substantial penalties set by the legislature for contravention of such minimum entitlements reinforce the importance placed on compliance with minimum standards. The penalty imposed upon Mr Manning ought to reinforce that importance.
It is well established that, “the need for specific and general deterrence” is a factor that is relevant to the imposition of penalty under Commonwealth workplace legislation. The role of general deterrence in determining the appropriate penalty is illustrated by the comments of Lander J in Ponzio v B & P Caelli Constructions Pty Ltd[8]:
“In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend: Yardley v Betts (1979) 22 SASR 108. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by likeminded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing penalty.”
[8] (2007) 158 FCR 543.
The contraventions in this case concern a failure by Mr Manning to ensure that employees’ wages and other valuable entitlements were paid by the employer. For a substantial period, this non-payment occurred while the employer received the benefit of work performed by the employees. Given Mr Manning’s beneficial ownership of the employer, the benefit obtained by the employer through the performance of this work without payment can properly be regarded as a benefit obtained by Mr Manning personally at the expense of the employees.
In this case, it is necessary to address specific deterrence by an appropriately high penalty. This is as a result of Mr Manning continuing to operate the business and to employ the employees with knowledge that the outstanding entitlements would continue to accrue in circumstances where those entitlements were very unlikely to ever be paid by the employer. Further, Mr Manning made a number of assertions to the employees that their wages would be paid and that they would receive their full entitlements in circumstances where he knew, or ought to have known, that this was very unlikely. Finally, despite being aware of the employer’s obligations to make rectification payments to the employees, no attempts have been made to make such payments by Mr Manning.
The maximum penalty that I can impose for each contravention is $6,600. I consider that in the circumstances of this case, a penalty of $52,800 is justified being 80% of the maximum penalty.
The sum received from the respondent is to be divided between the employees who were underpaid. It will be distributed in appropriate proportions. Unfortunately, the employees will still be substantially out of pocket as, at best they will only receive approximately 17 cents in the dollar.
I make the orders to be found at the beginning of these reasons.
I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Judge Simpson
Associate:
Date: 27 September 2013
Key Legal Topics
Areas of Law
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Employment Law
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Statutory Interpretation
Legal Concepts
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Penalty
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Statutory Construction
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