Fair Work Ombudsman v Melotte
[2024] FedCFamC2G 1318
•4 December 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Melotte [2024] FedCFamC2G 1318
File number(s): MLG 717 of 2023 Judgment of: JUDGE RILEY Date of judgment: 4 December 2024 Catchwords: INDUSTRIAL LAW – Fair Work – penalties – the respondents were involved in contraventions by a corporation, which is now in liquidation – quantum of penalties agreed by the parties. Legislation: Fair Work Act 2009 ss. 539(2), 546(2)(b), 557 Cases cited: Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450; (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 314 IR 301; [2022] HCA 13
Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; [2015] HCA 46
Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364
Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Division: Division 2 General Federal Law Number of paragraphs: 72 Hearing date: Determined on the papers Date of last submissions: 15 November 2024 Place: Melbourne Solicitor for the Applicant: Fair Work Ombudsman Solicitor for the First and Second Respondents: Madgwicks Lawyers ORDERS
MLG 717 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: LOUISE MAREE MELOTTE
First Respondent
TRAVIS FRANCIS MELOTTE
Second Respondent
ORDER MADE BY:
JUDGE RILEY
DATE OF ORDER:
4 DECEMBER 2024
THE COURT ORDERS THAT:
1.By 4pm on 4 March 2025, pursuant to s.546(1) of the Fair Work Act2009 (“the Act”), the first respondent pay to the Consolidated Revenue Fund of the Commonwealth pecuniary penalties in the sum of $95,000 in respect of the contraventions in declaration 1 made on 7 August 2024.
2.By 4pm on 4 March 2025, pursuant to s.546(1) of the Act, the second respondent pay to the Consolidated Revenue Fund of the Commonwealth pecuniary penalties in the sum of $9,000 in respect of the contraventions in declaration 2 made on 7 August 2024.
3.The applicant have liberty to apply on three days’ notice in the event that either of the preceding 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
JUDGE RILEY
INTRODUCTION
This is an application for penalties in respect of certain contraventions of the Fair Work Act 2009 (“the Act”).
The applicant is the Fair Work Ombudsman (“the FWO”). The first respondent, Ms Melotte, was the sole director and controlling mind of a company which ran a hotel, restaurant and cafe. The second respondent, Mr Melotte, was responsible for the day to day operation of the business. The company contravened the Act in various ways. Ms Melotte was involved in all of the contraventions and Mr Melotte was involved in two of them. The company has gone into liquidation but the business is continuing to operate through another corporate entity.
The parties asked the court to fix the penalties on the papers. They jointly sought an agreed penalty for each respondent.
BACKGROUND
In her submissions on penalty filed on 19 September 2024, the FWO provided the following background to this matter:
8. During the period 1 May 2017 to 28 July 2019 (Assessment Period) Loelal Pty Ltd ACN 604 512 558 (in liquidation) (Company), operated a hotel, café and restaurant at 82 Vincent Street, Daylesford, Victoria, trading as “Hotel Frangos” and “Café Koukla” (Business).
9. This matter involves three distinct cohorts of the Company’s employees:
(a)the ASA Employees – 11 employees who were paid an annual salary which was at least 25% above the rate prescribed for their classification in the Award. By payment of these salaries, the Company attracted the operation of clause 27.1 of the Award, which would relieve them of the obligation to pay on a weekly basis the penalty rates, overtime and other monetary entitlements arising under the Award provided that the salary paid over a year (or lesser period if employment ended before the end of the year) was sufficient to cover all amounts to which the employee was entitled. In the case of the ASA Employees, their salaries were not sufficient to cover their full Award entitlements;
(b) the Non-ASA Employees – 17 employees who were paid an annual salary which was less than 25% above the rate prescribed for their classification. Clause 27.1 of the Award did not apply to these employees and the Company was not relieved of the obligation to pay on a weekly basis the penalty rates, overtime and other monetary entitlements arising under the Award. The amounts paid to the Non-ASA employees did not satisfy their weekly Award entitlements; and
(c) the Casual Employees – 74 employees who were employed on a casual basis.
10. Over the Assessment Period, relevant to these proceedings, the Company employed a total of 97 employees across the three cohorts (Employees). The majority of ASA Employees worked as cooks in the kitchen (seven of the 11 ASA Employees) with the remainder working as food and beverage attendants. Just over half of the Non-ASA Employees worked as food and beverage attendants (10 of the 17 Non-ASA Employees) with the remainder working in the kitchen. 71 of the 74 Casual Employees worked as food and beverage attendants, with the remaining three working in the hotel.
11. During the Assessment Period, the First Respondent was the sole director of the Company; she was the controlling mind of the Company and responsible for the overall direction, control, management and supervision of the Company. She was a person responsible for:
(a) engaging employees;
(b) setting the rates of pay for the employees;
(c) accessing, approving and modifying employee timesheets;
(d) reviewing and processing payroll; and
(e) maintaining the Company’s records including records of hours of work and leave and issuing pay slips.
12. The Second Respondent was a person responsible for the day to day management of the Business; he was involved in creating staff rosters, and accessing, approving and modifying employees’ timesheets.
13.In the 2FAD [the second further amended defence], the Respondents admitted that during the Assessment Period, the Company contravened the FW Act and various clauses of the Award by failing to:
(a) comply with clauses 27.1(b)(ii) and 27.1(c) of the Award and failing to pay overtime, public holiday penalties and/or no break penalties to the ASA Employees;
(b) pay minimum wages, overtime, penalties, no break penalties and/or annual leave to the Non-ASA Employees;
(c) pay minimum wages, casual loading, minimum engagement, overtime, penalties and/or no break penalties to the Casual Employees; and
(d) comply with section 62(1) of the FW Act for two employees, by requesting or requiring Mr Subash Shrestha and Mr Suraj Bartaula to work unreasonable additional hours in excess of 38 hours per week.
14. In total, the Company’s contraventions resulted in admitted underpayments of $321,202.48 (Underpayment) to the Employees across the three cohorts. On 7 July 2022, prior to these proceedings being commenced, the Company was placed in voluntary liquidation.
15. In the 2FAD, the Respondents admitted that:
(a) the First Respondent was involved, within the meaning of section 550(2)(c) of the FW Act, in all of the admitted contraventions. The matters for which the First Respondent was responsible and of which she admits having knowledge are at paragraphs 142 to 144 of the FASOC; and
(b) the Second Respondent was involved in the admitted contraventions of section 62(1) of the FW Act by requesting or requiring Mr Shrestha and Mr Bartaula to work unreasonable additional hours in excess of 38 hours per week. The matters for which the Second Respondent was responsible and of which he admits having knowledge are at paragraphs 148 and 149 of the FASOC.
16. Pursuant to section 550(1) of the FW Act, a person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
17. Prior to the commencement of the liability hearing in this matter, the parties reached agreement with respect to all aspects of liability and the proposed civil remedies.
(footnotes omitted)
LIABILITY DECLARATIONS AND COMPENSATION FOR LOSS
On 7 August 2024, the court made declarations on liability based on admissions and ordered that Ms Melotte to pay compensation for loss suffered as a result of the contraventions as follows:
THE COURT DECLARES BY CONSENT THAT, having regard to the admissions made by the respondents in the second further amended defence filed on 5 August 2024:
1. Pursuant to s.141 of the Federal Circuit and Family Court of Australia Act 2021 (“the FCFCOA Act”), by her involvement in contraventions by Loelal Pty Ltd (in liquidation) (ACN 604 512 558) (“the company”), and pursuant to s.550 of the Fair Work Act 2009 (“the Act”), during the period 1 May 2017 to 28 July 2019 (“the assessment period”), Ms Louise Maree Melotte contravened:
a. section 45 of the Act, by:
i. failing to comply with cl.27.1(b)(ii) and cl.27.1(c) of the Hospitality Industry (General) Award 2010 (“the Award”) for the 11 employees identified in schedule 1 of the further amended statement of claim (“FASOC”);
ii. failing to pay overtime rates to the 11 employees identified in schedule 5 of the FASOC pursuant to cl.33.3(a) of the Award;
iii. failing to pay public holiday rates to the 10 employees identified in schedule 6 of the FASOC pursuant to cl.32.1 of the Award;
iv. failing to pay the no break penalty to the 10 employees identified in schedule 7 of the FASOC pursuant to cl.31.4 of the Award;
v. failing to pay the minimum wage pursuant to cl.20.1 of the Award to Suraj Bartaula;
vi. failing to pay the minimum wage to the 12 casual employees identified in schedule 8 of the FASOC pursuant to cl.20.1 or cl.20.5 of the Award;
vii. failing to pay casual loading to the 63 employees identified in schedule 9 to the FASOC pursuant to cl.13.1 of the Award;
viii. failing to pay minimum engagement entitlements to the 10 employees identified in schedule 10 of the FASOC pursuant to cl.13.2 or cl.13.3 of the Award;
ix. failing to pay Saturday rates to the two full-time employees identified in schedule 11 of the FASOC pursuant to cl.32.1 of the Award;
x. failing to pay Saturday rates to the 47 casual employees identified in schedule 11of the FASOC pursuant to cl.32.1 of the Award;
xi. failing to pay Sunday rates to the 10 full-time employees identified in schedule 12 of the FASOC pursuant to cl.32.1 of the Award;
xii. failing to pay Sunday rates to the 52 casual employees identified in schedule 12 of the FASOC pursuant to cl.32.1 of the Award;
xiii. failing to pay public holiday rates to the 14 full-time employees identified in schedule 13 of the FASOC pursuant to cl.32.1 of the Award;
xiv. failing to pay public holiday rates to the 33 casual employees identified in schedule 13 of the FASOC pursuant to cl.32.1 of the Award;
xv. failing to pay the evening penalty to the eight full-time employees identified in schedule 14 of the FASOC pursuant to cl.32.3(a) of the Award;
xvi. failing to pay the evening penalty to the 54 casual employees identified in schedule 14 of the FASOC pursuant to cl.32.3(a) of the Award;
xvii. failing to pay the night work penalty to the two full-time employees identified in schedule 15 of the FASOC pursuant to cl.32.3(b) of the Award;
xviii. failing to pay the night work penalty to the 33 casual employees identified in schedule 15 of the FASOC pursuant to cl.32.3(b) of the Award;
xix. failing to pay overtime rates to the 17 full-time employees identified in schedule 16 of the FASOC pursuant to cl.33.3(a) of the Award;
xx. failing to pay overtime rates to the 34 casual employees identified in schedule 16 of the FASOC pursuant to cl.33.3(a) of the Award;
xxi. failing to pay the no break penalty to the 11 employees identified in schedule 17 of the FASOC pursuant to cl.31.4 of the Award;
xxii. failing to pay the no break penalty to the 51 casual employees identified in schedule 17 of the FASOC pursuant to cl.31.4 of the Award; and
xxiii. failing to pay annual leave loading to Suraj Bartaula pursuant to cl.34.2 of the Award; and
b. section 44(1) of the Act, by:
i. failing to pay annual leave to Suraj Bartaula pursuant to s.90(1) of the Act;
ii. failing to pay annual leave on termination to the three employees identified in schedule 20 of the FASOC pursuant to s.90(2) of the Act;
iii. requesting or requiring Subash Shrestha to work unreasonable additional hours in excess of 38 hours per week in contravention of s.62(1) of the Act; and
iv. requesting or requiring Suraj Bartaula to work unreasonable additional hours in excess of 38 hours per week in contravention of s.62(1) of the Act.
2. Pursuant to s.141 of the FCFCOA Act, that by his involvement in contraventions by the company, and pursuant to s.550 of the Act, during the assessment period Travis Francis Melotte contravened s.44(1) of the Act by:
a. requesting or requiring Subash Shrestha to work unreasonable hours in excess of 38 hours per week in contravention of s.62(1) of the Act; and
b. requesting or requiring Suraj Bartaula to work unreasonable hours in excess of 38 hours per week in contravention of s.62(1) of the Act.
THE COURT ORDERS BY CONSENT THAT:
…
5. Pursuant to s.545(1) or s.545(2)(b) of the Act, Ms Melotte pay compensation for loss suffered because of her contraventions in declaration 1, in the amount of $321,202.48 (“the underpayment”) to the employees affected by the contraventions in declaration 1 (“employees” and each an “employee”) as set out in the schedule attached to these orders.
6. Pursuant to s.545(1) of the Act or s.140 of the FCFCOA Act:
a. if after making reasonable attempts, Ms Melotte is unable to locate any employee prior to the due date of the first instalment payment, Ms Melotte pay the applicant the initial instalment payment and any subsequent instalment payments required for the relevant employee; and
b. if Ms Melotte defaults on any payment under the schedule, and fails to rectify the default within 14 days, the whole of the underpayment still outstanding at that date (including any instalments that have not yet fallen due under the schedule) will become immediately payable to the applicant.
7. Pursuant to s.545(1) of the Act or s.140 of the FCFCOA Act, within 90 days of receiving any amounts pursuant to order 6, the applicant seek to locate and pay the amount to the relevant employee.
8. Pursuant to s.545(1) of the Act or s.140 of the FCFCOA Act, if the applicant is unable to locate and pay any employee specified in order 7 above within the time specified in that order, the applicant is to pay to a person the amount specified in order 6(a) for that employee if:
a. the person makes a claim for the amount in accordance with s.559(3) of the Act; and
b. the applicant is satisfied that the person is entitled to the amount.
9.Pursuant to s.545(1) of the Act or s.140 of the FCFCOA Act, if a person paid an amount in accordance with order 8, the applicant also pay the person any interest on the amount that would be payable under s.559(3A) of the Act if the amount were paid to the person under s.559(3).
10. Pursuant to s.545(1) or s.545(2)(b) of the Act:
a. in respect of the amounts payable under the schedule, Ms Melotte make any superannuation contributions on behalf of the employees to their nominated superannuation funds, or alternatively to an authorised superannuation clearing house, in the amounts that the company would have been required to pay under superannuation legislation; and
b. in respect of each instalment payment set out in the schedule, any superannuation amounts payable under suborder (a) must be paid by the date on which the relevant instalment payment falls due.
MATERIAL RELIED UPON:
On 15 November 2024, the parties emailed to chambers a list of materials relied upon by each of them in respect to penalty.
The FWO relied upon:
(a)her further amended statement of claim on 18 December 2023;
(b)the respondents’ defence filed on 4 July 2023, amended on 22 November 2023 and further amended on 5 August 2024;
(c)the FWO’s submissions on penalty filed on 19 September 2024;
(d)her submissions in reply on penalty filed on 6 November 2024;
(e)in the affidavit affirmed by Charlotte Maree Mitchell on 12 February 2024:
(i)paragraphs 1 to 4, 7, 8, 13, 14, 15, 16(b), 16(f), 16(h), 16(i), 16(j), 16(k), 16(l), 16(m), 17, 18 and 19; and
(ii)annexures CM-6, CM-10, CM-12, CM-13, CM-14, CM-15, CM-16, CM-17 and CM-35;
(f)in the affidavit affirmed by Charlotte Maree Mitchell on 24 May 2024:
(i)paragraphs 2, 6 and 14; and
(ii)annexures CM-38 and CM-46;
(g)in the affidavit affirmed by Subash Shreshta on 15 February 2024:
(i)paragraphs 1, 2, 3, 6, 11, 12, 16 to 21, 27, 28, 53, 55, 57, 79, 85 to 87 and 9; and
(ii)annexure SS-15;
(h)in the affidavit sworn by Suraj Bartaula on 14 February 2024, paragraphs 1, 2, 3, 9, 10, 15, 27, 28, 30 to 33, 35 to 38 and 45 to 48; and
(i)the affidavits affirmed by Rachel Clare Smith on 19 September 2024 and 6 November 2024.
The respondents relied upon:
(a)their submissions on penalty filed on 15 October 2024;
(b)the affidavit affirmed by Louise Maree Melotte on 15 October 2024, except:
(i)in paragraph 3, the words “As a result of the Fair Work Ombudsman’s investigation and these proceedings, I became aware that”; and
(ii)in paragraph 8, the words “After becoming aware of the Underpayments,”; and
(c)the affidavit affirmed by Travis Francis Melotte on 15 October 2024, except:
(i)in paragraph 3, the words “As a result of the Fair Work Ombudsman’s investigation and these proceedings, I became aware that”; and
(ii)in paragraph 7, the words “After becoming aware of the Contraventions,”.
MAXIMUM PENALTIES
The maximum penalty that the court may impose in respect of each contravention is $12,600: s.539(2) and s.546(2)(b) of the Act. The maximum penalty for an individual is 60 penalty units. The value of a penalty unit increased during the period of the contraventions from $180 to $210. In Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557 at [396]-[398], it was held that, where a contravention spans a period where different penalties applied, it is appropriate for the court to apply the higher rate. Having said that, it is also a relevant consideration that part of the contravention occurred during a period when the penalty was lower.
PROPOSED PENALTIES
The FWO and respondents jointly proposed the following total penalties:
(a) for Ms Melotte, $95,000;
(b) for Mr Melotte, $9,000.
In view of the High Court’s decision in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; [2015] HCA 46, it may be appropriate to accept the parties’ proposals as to penalties. In that case, the High Court said:
47.… NW Frozen Foods and Mobil Oil were concerned with the very different conception applicable to civil penalty proceedings that, because fixing the quantum of a civil penalty is not an exact science, there is a permissible range in which "courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another". It is only in that latter sense and only to that extent that the court will not depart from the submitted figure "merely because it might otherwise have been disposed to select some other figure".
…
58.... Subject to the court being sufficiently persuaded of the accuracy of the parties’ agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and, for the reasons identified in Allied Mills, highly desirable in practice for the court to accept the parties’ proposal and therefore impose the proposed penalty...
(footnotes omitted).
THE PURPOSE OF CIVIL PENALTIES
In Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450; (2022) 175 ALD 383; (2022) 399 ALR 599; (2022) 96 ALJR 426; (2022) 314 IR 301; [2022] HCA 13, the High Court said that:
[9]Under the civil penalty regime provided by the Act, the purpose of a civil penalty is primarily, if not solely, the promotion of the public interest in compliance with the provisions of the Act by the deterrence of further contraventions of the Act. …
[10]The Full Court’s critical error was that it was distracted by a concern, drawn from the criminal law, that a penalty must be proportionate to the seriousness of the conduct that constituted the contravention. The power conferred by s 546 of the Act is not subject to constraints drawn from the criminal law and there is no place for a “notion of proportionality”, in the sense in which the Full Court used that term, in a civil penalty regime. Further, and relatedly, their Honours were misled by the view that the Act required that the maximum penalty be reserved for only the most serious examples of the offending comprehended by s 349(1), and that this principle could prevent the court from imposing the maximum penalty even though a penalty in that amount might reasonably be considered to be necessary to deter future contraventions of a like kind. Nothing in the text, context or purpose of s 546 requires that the maximum penalty be reserved for the most serious examples of misconduct within s 349(1). What is required is that there be “some reasonable relationship between the theoretical maximum and the final penalty imposed”. That relationship is established where the maximum penalty does not exceed what is reasonably necessary to achieve the purpose of s 546: the deterrence of future contraventions of a like kind by the contravenor and by others.
(footnote omitted)
APPROACH TO DETERMINING PENALTY
Bromwich J summarised the proper approach to determining penalty in cases such as this in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 at paragraph 36 as follows:
(1)Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2)Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3)Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4)Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5)Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
A convenient checklist of the factors that the court might consider in determining penalty includes the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at paragraphs 26 to 57 and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at paragraph 14. That list is as follows, (with paragraph letters inserted):
(a)The nature and extent of the conduct which led to the breaches.
(b)The circumstances in which that conduct took place.
(c)The nature and extent of any loss or damage sustained as a result of the breaches.
(d)Whether there had been similar previous conduct by the respondent.
(e)Whether the breaches 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 breaches were deliberate.
(h)Whether senior management was involved in the breaches.
(i)Whether the party committing the breach had exhibited contrition.
(j)Whether the party committing the breach had taken corrective action.
(k)Whether the party committing the breach had cooperated 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.
(m)The need for specific and general deterrence.
The court must, of course, be mindful of the caution expressed by the High Court at paragraph 19 of Pattinson as follows:
It may readily be seen that this list of factors includes matters pertaining both to the character of the contravening conduct (such as factors 1 to 3) and to the character of the contravenor (such as factors 4, 5, 8 and 9). It is important, however, not to regard the list of possible relevant considerations as a “rigid catalogue of matters for attention” as if it were a legal checklist. The court's task remains to determine what is an “appropriate” penalty in the circumstances of the particular case.
(footnotes omitted)
Step 1: identifying the breaches
The breaches are as set out above.
Step 2: single course of conduct
Section 557 of the Act relevantly provides that:
(1)For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
(2)The civil remedy provisions are the following:
(a)section 44 (which deals with contraventions of the National Employment Standards);
(b) section 45 (which deals with contraventions of modern awards);
…
(3)Subsection (1) does not apply to a contravention of a civil remedy provision that is committed by a person after a court has imposed a pecuniary penalty on the person for an earlier contravention of the provision.
On this issue, the FWO submitted, and the respondents did not dispute, that:
26.Under section 557 of the FW Act, the Court is bound to group together multiple contraventions which arise out of a single course of conduct, treat them as a single contravention and on that basis determine a single apposite penalty.
27. The Applicant submits that the:
(a) First Respondent is entitled to the benefit of section 557(1) of the FW Act in relation to repeated contraventions of:
(i) each separate obligation under the Award for ASA Employees;
(ii) each separate obligation under the Award for Non-ASA Employees;
(iii) each separate obligation under the Award for Casual Employees;
(iv) section 62(1) of the FW Act for Mr Shrestha;
(v) section 62(1) of the FW Act for Mr Bartaula;
(vi) section 90(2) of the FW Act;
(b) Second Respondent is entitled to the benefit of section 557(1) of the FW Act in relation to repeated contraventions of:
(i) section 62(1) of the FW Act for Mr Shrestha; and
(ii) section 62(1) of the FW Act for Mr Bartaula.
28. The Applicant submits that the contraventions impacting each cohort (that is, the ASA Employees, Non-ASA Employees and Casual Employees) should be treated separately. While some Award clauses were contravened in relation to more than one cohort, (for example the failure to pay overtime pursuant to clause 33.3(a) of the Award), the contraventions in respect of each cohort arose out of different courses of conduct:
(a) the Company paid the ASA Employees an annual salary which was sufficient to meet the 25% requirement in clause 27.1(a) of the Award, but insufficient over the course of a year (or shorter time if employment ended earlier), to cover all Award monetary obligations;
(b) the Company paid salaries to the Non-ASA Employees which were not only insufficient to attract the operation of clause 27 of the Award, such that the Company was not relieved of the requirement to pay the employees by the week, but also insufficient to meet those weekly Award entitlements; and (c) the Company paid the Casual Employees an hourly rate which was insufficient to meet all of their Award entitlements.
29. The Applicant submits that the contraventions of section 62(1) of the FW Act for Mr Shrestha and Mr Bartaula should be treated separately. Each of Mr Shrestha and Mr Bartaula worked their own rosters and as such the request or requirement to work unreasonable additional hours was separate and distinct. Further, the matters which under section 62(1) go to determining whether additional hours are reasonable or unreasonable operate independently in relation to the particular circumstances of each of Mr Shrestha and Mr Bartaula, including:
(a) the risk to the employee’s health and safety from working the additional hours;
(b) the employee’s personal circumstances including family responsibilities; and
(c) the nature of the employee’s role and level of responsibility.
30. While the Applicant submits that the contraventions of section 62(1) of the FW Act for Mr Shrestha and Mr Bartaula should be treated separately, the Applicant recognises that there is a degree of overlap in the circumstances of the contraventions, including the relevant considerations that must be taken into account, such as the needs of the workplace and the usual patterns of work in the industry. The Applicant has taken this overlap into account in the penalties sought for each separate contravention of section 62(1).
31. Section 557 does not allow the grouping of contraventions of separate terms of the Award or provisions of the national employment standards (NES), notwithstanding that each such contravention is, respectively, a breach of sections 45 or 44 of the FW Act. In Fair Work Ombudsman v Ho, the Full Court of the Federal Court of Australia held that this is equally applicable to accessories.
I accept those submissions. Applying the course of conduct provisions results in no reduction in the number of contraventions as set out in the declarations reproduced above.
Step 3: grouped breaches
In relation to grouping, the FWO submitted, and the respondents did not dispute, that:
32.In considering common law course of conduct, an appropriate inquiry is whether ‘there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged’, such that the offender would be ‘punished twice for what is essentially the same criminality’. The interrelationship may be legal, ‘in the sense that it arises from the elements of the [contraventions]’, or factual, ‘because of a temporal or geographical link or the presence of other circumstances compelling the conclusion that the [contraventions] arise out of substantially the same act, omission or occurrences’.
33. Where contraventions form part of a common law course of conduct, the Court’s discretion as to how to address the overlap in contravening conduct in the imposition of an appropriately deterrent penalty is broad, in that the court may, but is not bound to impose a single penalty, and is not constrained by the maximum penalty applying to one of the contraventions.
34. The Applicant submits that there is a relevant overlap in respect of the following contraventions:
(a) clause 27.1 of the Award (contravention 1 in Annexure B) on the one hand and the failure to pay the ASA Employees overtime (clause 33.3(a)), public holiday penalties (clause 32.1) and no break penalties (clause 31.4). These contraventions arise from the Company’s failure to pay a salary over the course of a year (or shorter time if employment ended earlier) sufficient to satisfy all Award monetary obligations; and
(b) the failure to pay annual leave and annual leave loading to one employee (contraventions 13 and 14 in Annexure B) in respect of the same period of leave.
35. The Applicant submits that, other than as set out above, there should be no further grouping of contraventions, as the contraventions each have a separate and distinct character, and they do not arise from one particular course of conduct.
36.Having regard to the limited underpayment, the Applicant does not seek a separate penalty in respect of the failure to pay the night work penalty to two Non-ASA Employees (contravention 10 in Annexure B).
I accept those submissions. Applying them to the contraventions by Ms Melotte set out in the declarations reproduced above results in no penalty being sought for two of the contraventions, being:
(a)contravention 1(a)(i), which is grouped with contraventions 1(a)(ii), (iii) and (iv); and
(b)contravention 1(a)(xxiii), which is grouped with contravention 1(b)(i).
Additionally, the FWO sought no penalty in respect of contravention 1(a)(xvii), because it only resulted in an underpayment of $8.28.
There is no reduction due to grouping in the contraventions by Mr Melotte.
Consequently, after grouping, and the waiver regarding the $8.28, Ms Melotte faces penalties for 24 contraventions and Mr Melotte faces penalties for two contraventions.
Step 4: the appropriate penalty for the breaches
(a) and (b) the nature and extent of the conduct which led to the breach and the circumstances in which that conduct took place
In relation to these topics, the FWO submitted and the respondents did not dispute that:
39. Over the Assessment Period, the Company underpaid:
(a) the ASA Employees a total of $71,935.67;55
(b) the Non-ASA Employees a total of $178,489.97;56 and
(c) the Casual Employees a total of $70,776.84.57
40. The annual salaries of the ASA Employees and the Non-ASA Employees were paid in weekly instalments irrespective of the number of hours worked and when these hours were worked. This approach resulted in underpayments for public holiday penalties and overtime for the ASA Employees, and underpayments including for weekend penalties, public holiday penalties and overtime for Non-ASA Employees.
41.Clause 27.1 of the Award provides a mechanism for employers to simplify their payroll by paying the same amount each pay period, but on the proviso that the employer meet their full Award obligations over the course of a year. This mechanism ensures that an employee is not disadvantaged by the salary arrangement. In respect of the ASA Employees, the First Respondent failed to take any steps to ensure that the salary paid to each ASA Employee was sufficient to cover all amounts to which the employee was entitled. The underpayments for the ASA Employees clearly demonstrate the impact of the failure by the First Respondent to ensure that the annual salaries were sufficient for the hours worked.
42. For the Non-ASA Employees, the salary paid was insufficient to attract the operation of clause 27.1 of the Award and as such the Company was required to ensure employees were paid appropriate amounts each pay period for the hours actually worked. Despite this, the Company and the First Respondent still paid these employees weekly instalments of their salary without regard for the overtime and penalties attracted by their actual hours of work.
43. The size of the underpayments for the ASA Employees and Non-ASA Employees highlights the significant additional hours being worked by the employees and the benefit the Company, and it’s owner the First Respondent, unlawfully derived from its use of salary payments. The ASA Employees and Non-ASA Employees cohorts included employees who were sponsored by the Company and who were dependent on the Company for their right to remain in Australia.
44. The Casual Employees were paid insufficient amounts per shift for the hours worked. 15 of the Casual Employees were aged 21 or younger (Junior Employees). For three of the Junior Employees, the underpayment admitted by the First Respondent included the failure to pay minimum wage.
45. The First Respondent admits she had knowledge that the Company adopted a system whereby the annual salaries paid to each of the ASA Employees and Non-ASA Employees, and the hourly rates paid to the Casual Employees, were not sufficient to cover their entitlements.
46. Mr Shrestha and Mr Bartaula were two of the workers sponsored by the Company and dependent on the Company for their right to remain in Australia. In addition to the admitted underpayments for Mr Shrestha and Mr Bartaula, being $32,815.22 and $48,516.11 respectively, the Respondents have admitted to their involvement in requesting or requiring Mr Shrestha and Mr Bartaula to work unreasonable hours in excess of 38 hours per week in contravention of section 62(1) of the FW Act. Mr Shrestha and Mr Bartaula were more often than not rostered to work in the kitchen for more than 38 hours per week.
47. The timesheets produced by the Company show they worked significant hours:
(a) in the period from 27 November 2017 to 30 June 2019 (which equates to 83 weeks), Mr Bartaula worked:64
(i) greater than 38 hours in 76 weeks;
(ii) an average of 49.29 hours per week in the weeks he worked greater than 38 hours;
(iii) two weeks of greater than 63 hours per week; and (iv) twenty-eight weeks of greater than 50 hours per week, with the longest week being 64.25 hours;
(b) in the period from 23 October 2017 to 23 June 2019 (which equates to 87 weeks), Mr Shrestha worked:66
(i) greater than 38 hours in 82 weeks;
(ii) an average of 49.03 hours per week in the weeks he worked greater than 38 hours;
(iii) four weeks of 63 hours or more per week; and (iv) thirty weeks of 50 hours or more per week, with the longest week being 74 hours.67
…
49. The First Respondent admits that she had knowledge that the Company adopted a system whereby Mr Shrestha and Mr Bartaula were requested or required to work additional hours of more than 38 hours per week at the Business which were not reasonable.68 The Second Respondent admits he had knowledge that Mr Shrestha and Mr Bartaula were requested or required to work additional hours of more than 38 hours per week at the Business which were not reasonable.
(footnotes omitted)
I accept those submissions.
(c) the nature and extent of any loss or damage sustained
In relation to this topic, the FWO submitted and the respondents did not dispute that:
50.As a result of the failure to pay minimum wages, casual loading, minimum engagement, overtime, penalties, no break penalties and/or annual leave, 97 employees suffered a combined loss of $321,202.48. While the underpayment amounts for some employees were relatively small, there are significant underpayments for some employees. For example:
(a) the largest individual underpayment was $48,516.11 for Mr Bartaula;
(b) seven employees were underpaid more than $10,000 and four of these employees were underpaid more than $20,000. These are self-evidently significant sums for low-paid, award-dependent workers;
(c) for some employees, the amount underpaid was a significant proportion of their total salary over their employment period. For example:
(i) Tracey Cummings, during her employment period of approximately four months, was only paid approximately 60% of what she was entitled to;
(ii) Corey Rae, during the period of approximately 14 months that he was employed as an Adult Apprentice, was underpaid $23,641.37, which is equivalent to over 50% of his annual salary of $42,000;
(d) Mr Shrestha, for the period of approximately 4 months that he was a Non-ASA Employee, was underpaid $17,666.94. Mr Shrestha’s total underpayment was $32,815.22; and
(e) 15 employees who were employed for less than 6 months were underpaid more than $1,000. For example, Eunsil Kim was employed for approximately five months and was underpaid $8,437.44.
51. The Respondents admit that Mr Shrestha and Mr Bartaula were requested or required to work more than 38 hours per week. In the circumstances where Mr Shrestha and Mr Bartaula were not paid overtime, penalty rates or other compensation for working additional hours (other than sometimes receiving time off in lieu for hours worked on a public holiday), each additional hour of work had the effect of lowering their hourly rate of pay to unacceptable, exploitative levels:
(a) Mr Bartaula’s annual salary of $40,000 equated to an hourly rate of $20.24 for a 38 hour week ($40,000 /52 weeks /38 hours), $15.61 per hour over a 49.29 hour week, and $11.97 over a 64.25 hour week;
(b) Mr Shrestha’s annual salary of:
(i) $60,000 equated to an hourly rate of $30.34 per hour for a 38 hour week, and $23.53 per hour for a 49.03 hour week;
(ii) $50,000 equated to an hourly rate of $25.30 for a 38 hour week, $19.61 per hour for a 49.03 hour week, and $12.99 per hour for a 74 hour week.
52. The impact on Mr Shrestha and Mr Bartaula, including due to working long hours, was significant:
(a) Mr Shrestha experienced poor sleep, feeling sad and worried, and feeling tired. He suffered social isolation as a result of long working hours, reporting that he no longer had an interest in anything, and drank alcohol by himself when he did have days off. He was diagnosed with an adjustment disorder with anxiety. Mr Shrestha and his wife talked about divorce, and Mr Shrestha was unable to plan a holiday with her as he did not know more than one week in advance when he would have leave;
(b) Mr Bartaula experienced exhaustion and in July 2019 he was hospitalised because he was exhausted and unwell. Mr Bartaula lost 16 kg during the period he worked at the Business and developed knee pain. He was diagnosed with a major depressive disorder. Mr Bartaula and his wife ‘nearly divorced’ as he never had time to see her.
(footnotes omitted)
I accept those submissions.
(d) whether there had been similar previous conduct
It was not submitted that the respondents had engaged in any similar contravening conduct.
(e) whether the breaches arose out of the one course of conduct
This is issue was addressed above.
(f)the size of the business enterprise involved
The parties did not make any submissions on this point. The Fair Work definition of a small business is fewer than 15 employees. The company in the present case had 97 employees in the two years of the assessment period, though it is not clear that they were all employed at the same time. It is probably fair to say that the respondents were not running a small business.
In any event, there is ample authority that small businesses must meet their legal obligations just as much as large businesses. For example, Justice Tracey said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at paragraph 28:
…No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level” see Australian Competition and Consumer Commission v ABB Transmission & Distribution Ltd [2001] ATPR 41-815 at [13].
Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at paragraph 27:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty…
(footnote omitted)
(g) whether or not the breaches were deliberate
The parties did not specifically address this topic. However, the FWO submitted in connection with other topics, and the respondents did not dispute, that:
45.The First Respondent admits she had knowledge that the Company adopted a system whereby the annual salaries paid to each of the ASA Employees and Non-ASA Employees, and the hourly rates paid to the Casual Employees, were not sufficient to cover their entitlements.
…
49.The First Respondent admits that she had knowledge that the Company adopted a system whereby Mr Shrestha and Mr Bartaula were requested or required to work additional hours of more than 38 hours per week at the Business which were not reasonable. The Second Respondent admits he had knowledge that Mr Shrestha and Mr Bartaula were requested or required to work additional hours of more than 38 hours per week at the Business which were not reasonable.
(footnotes omitted)
To that extent, the contraventions were deliberate.
(h) whether senior management was involved in the breach
This topic was not specifically addressed by the parties in submissions. However, it is clear that senior management was involved in the breaches. At relevant times, Ms Melotte was the sole director of the company and Mr Melotte was involved in the management of the business.
(i), (j) and (k) contrition, corrective action and co-operation with the authorities
The FWO submitted on these topics that:
66.A court may take into account a party’s admission as a mitigating factor in assessing penalty.
67. The Applicant acknowledges that, by admitting the contraventions, the Respondents have reduced the cost and complexity of the proceedings, and spared the public purse the full cost of a contested hearing. The parties have agreed to penalties that reflect the Respondents’ cooperation. The Respondents’ cooperation, however, came very late in the piece and only after the parties had expended all the time and cost required to prepare for the scheduled liability hearing. While the admissions should be afforded recognition in the penalties imposed, the measure of any reduction should be tempered by their lateness.
68. The orders of the Court dated 7 August 2024 (Orders) require the First Respondent to pay compensation to the Employees for the loss suffered because of her contraventions. The compensation was required to be paid in accordance with a 12-month payment schedule. The total amount of the compensation payable is equal to the value of the Underpayment. The First Respondent has paid the first instalment in accordance with the payment schedule set out in the Orders.101 Approximately 70% of the Underpayment remains unpaid.
69.The agreed penalties incorporate a 10% discount for the full, but late, admissions made by each Respondent sparing the public purse the cost of a contested hearing and demonstrating each Respondents acceptance of their wrongdoing.
(footnotes omitted)
In Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70 at [76], Stone and Buchanan JJ in the Full Court of the Federal Court said that:
… a discount should not be available simply because a respondent has spared the community the cost of a contested trial. Rather, the benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice.
In connection with regret, the respondents submitted that:
The Respondents have each apologised and expressed their remorse for their contraventions. They have each given evidence of steps they have taken to ensure that businesses they are involved in comply with their obligations.
On the evidence before the court, Ms Melotte’s apology and remorse consisted of her saying at paragraph 7 of her affidavit sworn on 15 October 2024 that:
In the course of these proceedings, I have been provided with affidavits from some of the affected employees which have detailed the impact the Underpayments had on those employees' health and personal lives. I am sincerely sorry and remorseful for the effect the Underpayments had on employees and their families.
Mr Melotte said, in almost identical words, at paragraph 6 of his affidavit sworn on 15 October 2024, that:
In the course of these proceedings, I have been provided with affidavits from the Employees which have detailed the extensive impact the Contraventions had on the health and personal lives of the Employees. I am sincerely sorry and remorseful for the effect the Contraventions had on the Employees and their families.
There is no evidence of Mr and Ms Melotte apologising directly to the 97 employees affected by the contraventions. The claims in the affidavits relied on by Mr and Ms Melotte for the purposes of the determination of penalty that they are sorry and remorseful do not ring entirely true, not least because the wording is so similar in both affidavits.
In relation to cooperation, the respondents submitted that:
4.In addition to the matters referred to in the Applicant’s Submissions, the Respondents submit that they have co-operated in two other significant ways.
5. First, they, and the Company, co-operated fully in the investigation in that they responded to each request for information, engaged with the applicant and her employees in correspondence, and worked to narrow the issues between the parties.
6. Second, while they do not get credit for an early resolution of the case, they did make early admissions as to the great majority of the company’s contraventions. Once they had seen the Applicant’s evidence, they made further admissions on the basis of that material. The evidence that the Applicant had to prepare was likely to have been significantly narrower than otherwise on the basis of those admissions.
In submissions in reply, the FWO said that:
3.In response to paragraphs 5 and 6 of the Respondents’ Submissions, during the Applicant’s investigation of the Company, the Respondents communicated with employees of the Applicant and the Company complied with its legal obligations to respond to a Notice to Produce issued 2 August 2019. Prior to making full admissions, the Respondents entered into a Statement of Agreed Facts with the Applicant with respect to the admissions made in their defence,3 and subsequently conceded that the Applicant had established the correct classification of Mr Bartaula and Mr Shrestha under the Award,4 which narrowed the issues in dispute. However, the concessions regarding classification were only made by the Respondents in their Outline of Submissions on Liability filed on 19 June 2024 and after the Applicant had expended the time and cost required to prepare her submissions on classification.
4.The Respondents’ cooperation is already recognised in the discount proposed in the agreed penalties.
5.The Applicant notes that the First Respondent has paid the second instalment in accordance with the payment schedule set out in the Orders. Approximately 51% of the Underpayment remains unpaid.
I accept that Mr and Ms Melotte made full admissions. However, those admissions were not made at the first opportunity. It may be thought that their admissions, following receipt of the FWO’s evidence, were a recognition that they would inevitably be found liable.
Ms Melotte also said in her affidavit sworn on 15 October 2024 that, presumably after the underpayments were detected, the company which perpetrated the underpayments brought in new systems to facilitate staff being paid correctly. That company has gone into liquidation. Ms Melotte said that the company which is now running Hotel Frangos (which she is the director of, and which might be a phoenix company) is using the new systems. Obviously, the new systems are a step in the right direction but not a guarantee of future compliance.
All in all, I consider that Mr and Ms Melotte are not particularly remorseful, though they certainly regret being caught. Ms Melotte has now repaid 51% of the underpayments. As the balance of the underpayments is now Ms Melotte’s personal liability, it is likely that she will pay that amount in full. In addition, Mr and Ms Melotte made full admissions, albeit not at the earliest opportunity. The 10% reduction in penalty proposed by the parties is appropriate in the circumstances.
(l) the need to ensure compliance with minimum standards
On this topic, the FWO submitted, and the respondents did not dispute, that:
60.It is a fundamental element of Australia’s workplace relations scheme that employees are entitled to be paid minimum amounts of remuneration commensurate with the level and nature of their work and hours of work.
Compliance with the Award
61. A main object of the FW Act is to provide a guaranteed safety net of minimum terms and conditions for employees and to provide effective enforcement mechanisms.
62. The Courts have recognised the importance of imposing a penalty that gives effect to this important object of the FW Act. The maintenance of such a safety net is of particular importance in a competitive service industry, such as the cafés and restaurants industry, where the underpayment of wages can provide a competitive advantage over employers who do not meet lawful wage costs.
63. The importance of ensuring compliance with minimum standards is also reflected in the magnitude of the legislated maximum penalties that may be imposed in respect of a contravention of an applicable provision of the FW Act. In the present case, the non-compliance with the minimum wages, casual loading, minimum engagement, penalties and overtime set out in the Award strongly undermines the statutory object of the FW Act.
64. The requirement in sub-clauses 27.1(b)(ii) and 27.1(c), that the salary paid to an employee over the course of a year (or lesser period in the case of termination of employment) is sufficient to satisfy all Award monetary obligations, is fundamental in protecting the integrity of awards as a safety net. For the ASA Employees, the Company failed to ensure that the salary paid to them was sufficient to cover their Award monetary entitlements.
Compliance with the NES
Section 62(1) of the FW Act
65. The Respondents admitted contraventions of section 62(1) of the FW Act are objectively serious because of the impact that working long hours had upon Mr Shrestha and Mr Bartaula as addressed in paragraph 52 above. It is important to deter other employers from engaging in similar practices, which breach one of the fundamental minimum standards established in the NES, impinge on an employee’s capacity to enjoy time away from work and can create an unsafe work environment. To require vulnerable sponsored staff, who are dependent on their employer for their right to remain in Australia, to work unreasonable additional unpaid hours is particularly egregious and must be deterred.
I accept those submissions.
(m) the need for specific and general deterrence
In Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3, Keane, Nettle and Gordon JJ said at paragraph 116:
As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 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 the 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.
(footnotes omitted)
In relation to general deterrence, Lander J noted in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 at paragraph 93:
… 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. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded 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 the penalty…
(footnotes omitted)
Similarly, in Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364 at [9], Finkelstein J said:
… even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law’s disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ….
On the topic of deterrence, the FWO submitted that:
53. As set out at paragraph 23 above, it is well established that achieving deterrence, both specific and general, is the purpose of the imposition of penalties under the FW Act. General deterrence must serve a purpose such that the penalty is not seen by others as just ‘the cost of doing business’. Specific deterrence is directed to ensuring that a contravener is sufficiently discouraged from embarking upon engaging in the same kind of contravening conduct in the future.
General deterrence
54. The cafés and restaurants industry is one that is notorious for underpayment to staff. The prevalence of compliance issues in this industry is also borne out by the data collected by the Applicant.
55. The cafés and restaurants industry has a high workplace dispute rate. As set out in the Applicant’s Industry Profile and FWO Interactions report for the cafés and restaurants industry for the period July 2017 to June 2024:
(a) approximately 10% of all disputes received by the Applicant were in relation to the cafés and restaurants industry;
(b) 38% of the total disputes in the cafés and restaurants industry related to visa holders. This is higher than the percentage of all Applicant disputes relating to visa holders, being 20%;
(c) 31% of all disputes in the cafés and restaurants industry occurred in Victoria; and
(d) the cafés and restaurants industry accounted for a significant proportion of the following enforcement actions taken by the Applicant: 19.8% of all compliance notices issued, 27.4% of all infringement notices issued and 22.4% of all formal cautions issued.
56. The Applicant submits that there is a need to send a message to all employers in the cafés and restaurants industry that contraventions of the Award and the FW Act are serious and unacceptable and that obligations to workers cannot be avoided or abrogated. The high levels of non-compliance in the cafés and restaurants industry reinforces the need to make it known that conduct of the kind engaged in by the Respondents in this case will not be tolerated.
Specific deterrence
57. Specific deterrence is important in this matter given the Business continues to operate. The business name Hotel Frangos is currently held by Archaios Pty Ltd (Archaios). The First Respondent is currently the Director and Secretary of Archaios.
58. The Second Respondent had a significant role in the Business during the Assessment Period, as set out in paragraph 12 above, and from 28 May 2020 until the Company went into liquidation was the sole director and secretary of the Company. There is no evidence to suggest that the Second Respondent has ceased his involvement in the Business.
59. Given their history of involvement in the Business, and the likelihood of continuing to be involved in employing staff, any penalty must be fixed at a level which specifically deters the Respondents from engaging in further contravening conduct.
The respondents seem to have accepted the FWO’s submissions on general deterrence, but said in relation to specific deterrence that:
8.… [The respondents have] referred to the deterrent effect of involvement in these proceedings, independent of the deterrent effect of the penalties to be imposed. Finally, they have referred to the publicity resulting from the instigation of the proceedings and its effect on them.
9. While they accept there is still a role for specific deterrence in this case, they submit it is significantly moderated by those matters.
The FWO also submitted in reply that:
6.In response to paragraph 8 of the Respondents’ Submissions, while the Respondents’ affidavits pleasingly set out a range of steps they have taken to achieve compliance with the FW Act following the Applicant’s investigation, the Applicant does note that this evidence does not address steps taken to ensure employees are not working beyond their maximum weekly hours, or compliance with annualised salary arrangements. These gaps reinforce the need for the agreed penalties to achieve specific deterrence.
Mr and Ms Melotte referred in their affidavits, in almost identical words, to the stress that the legal proceedings had put them under. They both said that they were anxious to ensure that no more contraventions happened in any business they were involved in because they wished to comply with the law and because they did not wish to repeat the extremely unpleasant experience they had been through.
Strangely, Mr and Ms Melotte spoke about the legal proceedings as an occurrence that had happened to them, rather than as an occurrence that they had brought upon themselves through their own choices.
In relation to publicity, the respondents described in their affidavits the media coverage of their underpayments and attached copies of some social media posts saying that they were “grubs” and “Calombaris in the Country”. Other posts said:
a.I will never attend Frangos again. Disgraceful for ripping off your employees. …
b.So awful for those taken advantage [of] people, especially in such a “reputable” place here in Daylesford. …
The FWO submitted in reply that:
7.Further, in response to the Respondents’ submission regarding publicity of the current proceedings, the Courts have acknowledged that negative publicity is one of the inevitable consequences of wrongdoing and should not be a mitigating factor in assessing the appropriate penalty.
8. Both the Courts and the Australian Law Reform Commission have recognised the use of media releases as a proper and effective tool of a government regulator and supporting the Applicant’s functions under section 682(1)(a) of the FW Act, namely to educate workplace participants and deter non-compliance.
9.Courts will generally only take negative publicity into account on the issue of penalty where a regulator's media release is “adverse” in the limited sense of being “unfair or incorrect”. There is no suggestion that the Applicant’s media release in this matter was unfair or incorrect, and in fact the Respondents admitted to each of the contraventions alleged by the Applicant.
10. The Respondents contend that specific deterrence is significantly moderated by factors including the publicity resulting from the instigation of these proceedings and its effect on them. In House of Hoi An, this Honourable court specifically rejected that past and future publicity achieved the objective of specific deterrence.
(footnotes omitted)
I accept the FWO’s submissions in relation to publicity. Mr and Ms Melotte’s self-pity in relation to the publicity issue, if anything, suggests that their “remorse” is only regret for being caught, not a recognition of how their conduct has damaged other people.
I also accept the FWO’s submissions in relation to deterrence generally.
Other issues
The respondents submitted that:
10.Pursuant to the orders made on 7 August 2024 (August Orders), the First Respondent is required to pay compensation to employees affected by the contraventions of the Company (Compensation). The Compensation is to be paid by way of five (5) instalments totalling $321,202.48, payable over a period of 11 months.
11. In addition to the Compensation, the First Respondent is also required to make any superannuation contributions on behalf of employees in respect of the Compensation.
12. Owing to the quantum of the Compensation and the Agreed Penalties, the Respondents submit that a slightly greater period be permitted for the Respondents to pay the Agreed Penalties, so as not to compromise the First Respondent’s ability to comply with the August Orders.
The respondents submitted that the penalties should be required to be paid within 90 days, rather than the 60 days proposed by the FWO. In reply submissions, the FWO accepted that 90 days was appropriate. I also accept that 90 days is appropriate for the payment of the penalties.
However, it must be emphasised that the compensation Ms Melotte is paying to the affected employees is not part of the penalty as such. It is simply the amounts that should have been paid to the affected employees between five and seven years ago. As the sole shareholder of the company that employed them, Ms Melotte has had the benefit of the $321,202.48 for many years. It has no doubt improved her lifestyle at the expense of the affected employees.
The appropriate penalty
The maximum penalty for each contravention is $12,600. With a 10% discount for admissions, the maximum penalty for each contravention is $11,340. The parties jointly proposed penalties of various percentages of the discounted figure for the various contraventions.
The parties jointly proposed penalties for Ms Melotte as follows:
No. Declaration
No.Contravention Employees impacted Underpayment amount Penalty percentage sought Penalty amount sought ASA contraventions 1 1(a)(i) s 45 of the FW Act - failing to comply with cl.27.1 of the Award for ASA Employees 11 - No separate penalty sought - grouped with contraventions 2 - 4 2 1(a)(ii) s 45 of the FW Act - failing to pay overtime rates to ASA Employees pursuant to cl.33.3(a) of the Award 11 $ 50,316.57 70% $ 7,938.00 3 1(a)(iii) s 45 of the FW Act - failing to pay public holiday rates to ASA Employees pursuant to cl.32.1 ofthe Award 10 $ 21,167.57 50% $ 5,670.00 4 1(a)(iv) s 45 of the FW Act - failing to pay the no break penalty to ASA Employees pursuant to cl.31.4 of the Award 10 $ 1,605.56 40% $ 4,536.00 Non-ASA contraventions 5 1(a)(v) s 45 of the FW Act - failing to pay minimum wage pursuant to cl.20.1 of the Award to S Bartaula 1 $ 58.50 10% $ 1,134.00 6 1(a)(ix) s 45 of the FW Act - failing to pay Saturday rates to Non-ASA Employees pursuant to cl.32.1 of the Award 2 $ 2,577.72 30% $ 3,402.00 7 1(a)(xi) s 45 of the FW Act - failing to pay Sunday rates to Non-ASA Employees pursuant to cl.32.1 of the Award 10 $ 4,664.36 40% $ 4,536.00 8 1(a)(xiii) s 45 of the FW Act - failing to pay public holiday rates to Non-ASA Employees pursuant to cl.32.1 of the Award 14 $ 35,145.45 60% $ 6,804.00 9 1(a)(xv) s 45 of the FW Act - failing to pay the evening penalty to Non-ASA Employees pursuant to cl.32.3(a) of the Award 8 $ 1,192.11 10% $ 1,134.00 10 1(a)(xvii) s 45 of the FW Act - failing to pay the night work penalty to Non-ASA Employees pursuant to cl.32.3(b) of the Award 2 $ 8.28 No penalty sought 11 1(a)(xix) s 45 of the FW Act - failing to pay overtime rates to Non-ASA Employees pursuant to cl.33.3(a) of the Award 17 $ 143,921.34 70% $ 7,938.00 12 1(a)(xxi) s 45 of the FW Act - failing to pay the no break penalty to Non-ASA Employees pursuant to cl.31.4 of the Award 11 $ 2,516.25 30% $ 3,402.00 13 1(a)(xxiii) s 45 of the FW Act - failing to pay annual leave loading to S Bartaula pursuant to cl.34.2 of the Award 1 $ 146.68 No separate penalty sought- grouped with contravention 14 14 1(b)(i) s 44(1) of the FW Act - failing to pay annual leave to S Bartaula pursuant to s 90(1) of the FW Act 1 $ 68.29 10% $ 1,134.00 15 1(b)(ii) s 44(1) of the FW Act - failing to pay annual leave on termination to Non-ASA Employees pursuant to s 90(2) of the FW Act 3 $165.77 10% $ 1,134.00 Casual contraventions 16 1(a)(vi) s 45 of the FW Act - failing to pay minimum wage to Casual Employees pursuant to cl.20.1 or cl.20.5 of the Award 12
$ 2,159.94
60%
$ 6,804.00
17 1(a)(vii) s 45 of the FW Act - failing to pay casual loading to Casual Employees pursuant to cl.13.1 of the Award 63 $ 19,292.28 70% $ 7,938.00 18 1(a)(viii) s 45 of the FW Act - failing to pay minimum engagement entitlements to Casual Employees pursuant to cl.13.2 or cl.13.3 of the Award 10 $ 237.76 10% $ 1,134.00 19 1(a)(x) s 45 of the FW Act - failing to pay the Saturday rates to Casual Employees pursuant to cl.32.1 of the Award 47 $ 10,291.38 50% $ 5,670.00 20 1(a)(xii) s 45 of the FW Act - failing to pay Sunday rates to Casual Employees pursuant to cl.32.1 of the Award 52 $ 10,381.12 50% $ 5,670.00 21 1(a)(xiv) s 45 of the FW Act – failing to pay public holiday rates to Casual Employees pursuant to cl.32.1 of the Award 33 $ 4,030.02 40% $ 4,536.00 22 1(a)(xvi) s 45 of the FW Act - failing to pay the evening penalty to Casual Employees pursuant to cl.32.3(a) of the Award 54 $ 1,261.20 20% $ 2,268.00 23 1(a)(xviii) s 45 of the FW Act - failing to pay the night work penalty to Casual Employees pursuant to cl.32.3(b) of the Award 34 $ 910.83 20% $ 2,268.00 24 1(a)(xx) s 45 of the FW Act - failing to pay overtime rates to Casual Employees pursuant to cl.33.3(a) of the Award 34 $ 13,526.23 70% $ 7,938.00 25 1(a)(xvi) s 45 of the FW Act - failing to pay the no break penalty to Casual Employees pursuant to cl.31.4 of the Award 51 $ 8,686.08 30% $ 3,402.00 Section 62(1) 26 1(b)(iii) s 44(1) of the FW Act - requesting or requiring S Shrestha to work unreasonable additional hours in contravention of s 62(1) of the FWAct 1 - 40% $ 4,536.00 27 1(b)(iv) s 44(1) of the FW Act - requesting or requiring S Bartaula to work unreasonable additional hours in contravention of s 62(1) of the FW Act 1 - 40% $ 4,536.00 Total $105,462.00
The parties jointly proposed penalties for Mr Melotte as follows:
No. Declaration No.
Contravention Employees impacted Penalty percentage sought Penalty amount sought 1
2(a)
s 44(1) of the FW Act - requesting or requiring S Shrestha to work
unreasonable additional hours in contravention of s 62(1) of the FW Act1
40%
$4,536.00
2
2(b)
s 44(1) of the FW Act - requesting or requiring S Bartaula to work unreasonable additional hours in contravention of s 62(1) of the FW Act 1
40%
$4,536.00
Total $9,072.00
I consider that the various proposed penalties are an appropriate remedy in respect of each contravention in all of the circumstances of this case.
The total proposed penalties for Ms Melotte are $105,462.00 and the total proposed penalties for Mr Melotte are $9,072.00, rounded down to $9,000.
Step 5: the totality principle
The FWO submitted, and the respondents did not dispute, that:
70.Where multiple penalties are to be imposed, the totality principle allows the Court to check the cumulative amount imposed to ensure that it is just and appropriate. The Court may assess the final penalty and decide whether a reduction is required to achieve the purpose of deterrence. In this case the Applicant submits that:
(a) for the First Respondent, a totality discount of approximately 10% is appropriate; and
(b) for the Second Respondent, no further reduction on the basis of totality is necessary.
(footnote omitted)
I accept that submission. The effect of that submission is that Ms Melotte’s total penalty will be reduced to $95,000. Mr Melotte’s penalty will remain at $9,000.
CONCLUSION
There will be orders accordingly.
I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 4 December 2024
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