Fair Work Ombudsman v Matcraft Pty Ltd & Ors

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FEDERAL CIRCUIT COURT OF AUSTRALIA

Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272

File number(s): PEG 191 of 2020
Judgment of: JUDGE KENDALL
Date of judgment: 18 February 2021
Catchwords: INDUSTRIAL LAW – Penalty hearing – admitted contraventions – failure to comply with Compliance Notice – factors for consideration.
Legislation:

Crimes Act 1914 (Cth), s 4AA

Fair Work Act 2009 (Cth), ss 539, 546, 550, 557, 716

Federal Circuit Court Rules 2001 (Cth), r 13.03C

Cases cited:

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113

Australian Building and Construction Commissioner v J Hutchinson Pty Ltd T/A Hutchinson Builders (Hutchinson) [2019] FCA 667

Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46

Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301

Jordan v Mornington Inn Pty Ltd [2007] FCA 1384

Kelly v Fitzpatrick [2007] FCA 1080

Mornington Inn v Jordan [2008] FCAFC 70
Number of paragraphs: 105
Date of hearing: 15 February 2021
Place: Perth
Counsel for the Applicant: Ms K Ruhl
Solicitor for the Applicant: Fair Work Ombudsman
Respondents: No appearance by or for the respondents

ORDERS

PEG 191 of 2020
BETWEEN:

FAIR WORK OMBUDSMAN

Applicant
AND:

MATCRAFT PTY LTD

First Respondent

PAUL RUTHENBERG

Second Respondent

LEANNE RUTHENBERG

Third Respondent

ORDER MADE BY:

JUDGE KENDALL

DATE OF ORDER:

18 FEBRUARY 2021

THE COURT DECLARES THAT:

1.The first respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.

2.The second respondent was involved, within the meaning of section 550(2) of the Fair Work Act 2009 (Cth), in the contravention by the first respondent of section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.

3.The third respondent was involved, within the meaning of section 550(2) of the Fair Work Act 2009 (Cth), in the contravention by the first respondent of section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.

THE COURT ORDERS THAT:

1.The first respondent take the steps that were required by the Compliance Notice, pursuant to section 545(1) of the Fair Work Act 2009 (Cth), within 28 days of this order, by:

(a)calculating the outstanding entitlements it was required to pay the Employee, including superannuation;

(b)paying the outstanding entitlements it was required to pay the Employee referred to in order 1(a) above, to the Employee;

(c)calculating and paying superannuation into the Employee’s nominated superannuation fund for additional superannuation contributions it was required to pay on the outstanding entitlements referred to in order 1(b) above (as required by clause 21.2 of the Vehicle Manufacturing, Repair, Services and Retail Award 2010); and

(d)preparing and producing to the applicant, a schedule outlining its calculation of the outstanding entitlements it was required to pay the Employee referred to in order 1(a) above, providing proof that the outstanding entitlements were rectified as set out in orders 1(b) and 1(c).

2.The first…

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Details
Case
[2021] FCCA 272
Decision Date

CaseChat Overview and Summary

The Federal Circuit Court of Australia, presided over by Judge Kendall, considered a penalty hearing concerning admitted contraventions of the *Fair Work Act 2009* (Cth) by Matcraft Pty Ltd and two of its directors, Mr and Mrs Ruthenberg. The dispute arose from Matcraft's failure to comply with a Compliance Notice issued by the Fair Work Ombudsman, which required the company to calculate and rectify underpayments of wages and superannuation to an employee. The directors were alleged to be involved in this contravention.

The central legal issue before the Court was to determine the appropriate pecuniary penalties to be imposed on Matcraft and its directors for the admitted contravention of section 716(5) of the Act, and for the directors' involvement in that contravention under section 550(2). The Court was required to consider the nature, circumstances, and extent of the contravention, as well as the consequences that arose from it, in accordance with established principles for penalty determination.

Judge Kendall reasoned that the failure to comply with a Compliance Notice strikes at the core objects of the *Fair Work Act 2009* (Cth), which aim to provide accessible and effective dispute resolution and compliance mechanisms. The Court noted that Matcraft had failed to pay an employee wages for a significant period, had not adhered to an agreed payment plan, and had not responded to the Compliance Notice or subsequent correspondence from the Fair Work Inspector. Despite the respondents admitting the contraventions and agreeing to the Court making declarations and orders, the Court emphasized that non-compliance with a Compliance Notice is a serious matter.

Consequently, the Court ordered Matcraft to take the steps required by the Compliance Notice, including calculating and paying outstanding entitlements and superannuation to the employee, and to pay a pecuniary penalty of $22,050. Mr and Mrs Ruthenberg were each ordered to pay a pecuniary penalty of $4,410 for their involvement in Matcraft's contravention. The Court granted the respondents 90 days to pay these penalties, acknowledging the potential impact of the COVID-19 pandemic on businesses.

Orders

Orders of the court

THE COURT DECLARES THAT:

1. The first respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.

2. The second respondent was involved, within the meaning of section 550(2) of the Fair Work Act 2009 (Cth), in the contravention by the first respondent of section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.

3. The third respondent was involved, within the meaning of section 550(2) of the Fair Work Act 2009 (Cth), in the contravention by the first respondent of section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice.

THE COURT ORDERS THAT:

1. The first respondent take the steps that were required by the Compliance Notice, pursuant to section 545(1) of the Fair Work Act 2009 (Cth), within 28 days of this order, by:

(a) calculating the outstanding entitlements it was required to pay the Employee, including superannuation;

(b) paying the outstanding entitlements it was required to pay the Employee referred to in order 1(a) above, to the Employee;

(c) calculating and paying superannuation into the Employee’s nominated superannuation fund for additional superannuation contributions it was required to pay on the outstanding entitlements referred to in order 1(b) above (as required by clause 21.2 of the Vehicle Manufacturing, Repair, Services and Retail Award 2010); and

(d) preparing and producing to the applicant, a schedule outlining its calculation of the outstanding entitlements it was required to pay the Employee referred to in order 1(a) above, providing proof that the outstanding entitlements were rectified as set out in orders 1(b) and 1(c).

2. The first respondent pay interest on the amount ordered to be paid in order 1 above to the Employee pursuant to section 547(2) of the Fair Work Act 2009 (Cth), within 28 days of this order.

3. Within 90 days of this order, the first respondent pay a pecuniary penalty of $22,050 to the Commonwealth pursuant to section 546(1) of the Fair Work Act 2009 (Cth) for the contravention by the first respondent as set out in declaration 1 above.

4. Within 90 days of this order, the second respondent pay a pecuniary penalty of $4,410 to the Commonwealth pursuant to section 546(1) of the Fair Work Act 2009 (Cth) for his involvement (within the meaning of section 550 of the Fair Work Act 2009 (Cth)) in the contravention by the first respondent as set out in declaration 2 above.

5. Within 90 days of this order, the third respondent pay a pecuniary penalty of $4,410 to the Commonwealth pursuant to section 546(1) of the Fair Work Act 2009 (Cth) for her involvement (within the meaning of section 550 of the Fair Work Act 2009 (Cth)) in the contravention by the first respondent as set out in declaration 3 above.

6. The applicant have liberty to apply in the event the orders are not complied with

Background

Background to the litigation

The parties agreed to the Court making various declarations and orders in light of the admitted contraventions. The sole issue for the Court is what penalty, if any, should be imposed on each of the respondents for their respective contraventions.BACKGROUND It is not necessary to outline the facts of this matter in detail. However, some context is needed. Matcraft is a manufacturing business. Mr Ruthenberg is a director and secretary of Matcraft. Mrs Ruthenberg is a director of Matcraft. On 14 June 2019, the applicant received a request for assistance from an employee of Matcraft. The employee claimed that he had not been paid wages for his work as a full-time sewing machinist from 1 July 2017. In July 2019, a Fair Work Inspector commenced an investigation in relation to Matcraft. On 17 July 2019, Mr and Mrs Ruthenberg admitted that they had not paid the employee for the period between 1 July 2017 and 30 June 2019 and undertook to pay the employee pursuant to a payment plan from 19 July 2019. From 19 August 2019, Matcraft ceased making payments to the employee as required by the payment plan. On 16 January 2020, the applicant issued a Compliance Notice to Matcraft pursuant to s 716(2) of the Act. The Compliance Notice stated that the Inspector had a reasonable belief that Matcraft had breached cl 33.4 of the Vehicle Manufacturing, Repair, Services and Retail Award 2010 (the “Award”) and required Matcraft to calculate and rectify any underpayments to the employee by 14 February 2020. Matcraft did not respond to the Compliance Notice. Nor were any further payments made to the employee. On 26 February 2020, the Inspector sent Matcraft a “Failure to comply with a Compliance Notice” letter. That letter requested a response by 4 March 2020. No response was provided. On 29 May 2020, a further letter was sent to Matcraft requesting a response by 15 June 2020. No response was provided. An amended letter was sent on 11 June 2020. No response was provided. On 26 June 2020, the applicant commenced proceedings in this Court. It is noted that, by consent, Mr Ruthenberg was given leave to appear on behalf of Matcraft in these proceedings.PROCEDURAL HISTORY IN THIS COURT On 1 September 2020, the Court made orders by consent allowing the parties to file any affidavit evidence and written submissions prior to the hearing. The Court also ordered that the respondents file a notice of address for service by 4 September 2020. No notice of address for service was filed. Pursuant to the orders dated 1 September 2020, the applicant filed an affidavit of Natalie Clare Roberts sworn 30 October 2020 and an outline of written submissions dated 11 December 2020. No materials were filed by or for the respondents. On 1 February 2021, Chambers emailed the parties confirming the arrangements for the hearing. The parties were asked to confer about any objections to the evidence and whether any witnesses were required for cross-examination. On 10 February 2021, a solicitor for the applicant informed the Court that the parties had no objections to the evidence and no witnesses were required for cross-examination. The solicitor for the applicant also forwarded correspondence from Mr Ruthenberg and Mrs Ruthenberg stating, in effect, that they do not dispute any facts, that they intend to pay the employee, that they accept any penalty and that they did not intend to attend the hearing.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The parties also agreed to orders requiring Matcraft to comply with the Compliance Notice within 28 days. It is indeed unfortunate that an order of that sort is even required. Section 716 is designed to prevent orders of that sort. Nevertheless, the order will be made. Non-compliance is not something that the respondents should take lightly.CONCLUSION The Court has determined that the appropriate penalty to be imposed on each of the respondents is as follows:(a)$22,050 for Matcraft; and(b)$4,410 for each of Mr Ruthenberg and Mrs Ruthenberg. The applicant asks that this penalty to be paid within 28 days. Notwithstanding a lack of evidence before the Court, many businesses have been affected by the COVID-19 pandemic. The Court will thus grant the respondents 90 days within which to pay the imposed penalties. The remaining declarations and orders the Court makes are those which the parties agreed to in the statement of agreed facts and will be made in the terms sought.

Ratio Decidendi

Legal Principle Established

Finally, once the Court has determined a penalty in light of the matters above, it will take “one final look” to determine whether the amount is proportionate to the contraventions. This is referred to as the “totality principle” whereby the Court undertakes “a final check” to ensure that the penalty is not unjust or out of proportion to the circumstances of the case: Mornington Inn at [42].CONSIDERATIONNature, circumstances and extent of the contravention and the loss/consequences that arose from it There is a single contravention in this matter arising from a failure to comply with a Compliance Notice. The contravention arises from s 716(5) of the Act. As explained in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), the purpose of s 716 of the Act is to provide an alternative to litigation. Section 716 is an informal mechanism whereby the applicant can identify potential contraventions of the Act and seek rectification without an employer having to admit liability. One of the objects of the Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms. Section 716 encapsulates this objective by allowing employees to make a request for assistance which the applicant can then resolve through the use of s 716. The nature of a failure to comply with s 716 of the Act strikes at the heart of the objects of the Act. Here, the circumstances surrounding the contravention are less than satisfactory. The Compliance Notice was issued on 16 January 2020. The Compliance Notice was issued as it appeared that Matcraft had not complied with the Award. It had not paid the employee (who, it is noted, did not speak English) any wages for the period between 1 July 2017 and 30 June 2019. The circumstances that existed prior to the Compliance Notice being issued are also relevant. The Inspector first visited Matcraft on 17 July 2019 and Mr Ruthenberg admitted that he had not paid the employee. It was arranged for a “payment plan” to commence on 19 July 2019. That payment plan was satisfied for only one month. Matcraft then ceased paying instalments. On 18 October 2019, two Inspectors visited Matcraft. Mr Ruthenberg admitted that he had been “expecting” a visit and knew the reason for the visit. Mr Ruthenberg stated that he hoped to make a “lump sum” payment and return to the payment plan structure in November 2019. Three months after this visit, and five months after Matcraft had ceased making payments to the employee as per the agreed payment plan, the Compliance Notice was issued. It appears Matcraft did not pay the lump sum or return to the payment plan as suggested as the company decided the money should be spent on products for the business (rather than on their employee). The Compliance Notice required that action be taken by 14 February 2020. No action was taken and no communication was made by Matcraft. On 26 February 2020, the applicant issued the letter advising Matcraft that they had failed to comply with the Compliance Notice. That same day, an Inspector spoke to Mr Ruthenberg who advised that “he just couldn’t pay… by the date specified in the [Compliance Notice]”. Whether or not that was the case, this “excuse” does not justify ignoring the Compliance Notice.