Fair Work Ombudsman v My Salon Erina Pty Ltd
[2021] FedCFamC2G 343
•10 December 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v My Salon Erina Pty Ltd [2021] FedCFamC2G 343
File number(s):
SYG 315 of 2021
Judgment of:
JUDGE CAMERON
Date of judgment:
10 December 2021
Catchwords:
INDUSTRIAL LAW – Breaches of civil remedy provisions of the Fair Work Act 2009 (Cth) – imposition of pecuniary penalties – relevant considerations.
Legislation:
Fair Work Act 2009 (Cth) ss 536, 539, 546, 550, 557, 716
Crimes Act 1914 (Cth) s 4AA
Cases cited:
Kelly v Fitzpatrick (2007) 166 IR 14
Division:
Fair Work
Number of paragraphs:
28
Date of hearing:
6 December 2021
Solicitor for the Applicant:
Mr A. Morris (Office of the Fair Work Ombudsman)
Counsel for the Respondents:
The second respondent appeared in person
ORDERS
SYG 315 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: MY SALON ERINA PTY LTD ACN 632 464 781
First RespondentNELVIN NITESH LAL
Second Respondent
ORDER MADE BY:
JUDGE CAMERON
DATE OF ORDER:
10 DECEMBER 2021
THE COURT ORDERS THAT:
1.The first respondent pay a penalty of $55,440.
2.The second respondent pay a penalty of $13,000.
3.The penalties be paid to the Commonwealth.
4.The penalties be paid within 28 days.
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 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 CAMERON
INTRODUCTION
This proceeding was brought by the Fair Work Ombudsman (“Ombudsman”) under the Fair Work Act 2009 (“FW Act”) in respect of the employee, Ms Anastasi, of the first respondent (“My Salon Erina”). My Salon Erina is the operator of a hairdressing business in Erina, New South Wales. The second respondent, Mr Lal, is the son of My Salon Erina’s sole director and shareholder, Ms Lal, and was responsible for the management of My Salon Erina.
BACKGROUND FACTS
The Ombudsman commenced this proceeding by filing an application and statement of claim on 2 March 2021. The respondents have not filed notices of address for service, responses or defences.
On 10 June 2021 the Ombudsman filed an application in a case seeking default judgment against the respondents. On 12 July 2021 the Court declared that the first respondent had contravened ss.716(5) and 536(1) of the FW Act by failing to comply with a compliance notice served in October 2020 (“Compliance Notice”) and by failing to give pay slips to Ms Anastasi and that Mr Lal was involved in those contraventions. By reason of the latter finding, Mr Lal is taken by virtue of s.550 of the FW Act to also have contravened ss.716(5) and 536(1) of the FW Act. The Ombudsman now seeks the imposition of pecuniary penalties on the respondents pursuant to s.546(1) of the FW Act.
On 12 July 2021 the Court also relevantly ordered:
…
3. Orders be made that:
(a)pursuant to s.545(1) of the FW Act, the first respondent take the steps that were required by the Compliance Notice within 35 days of this order, by:
(i)calculating and paying to the applicant the outstanding entitlements the first respondent was required to pay to the Employee, as specified in the Compliance Notice;
(ii)calculating and paying superannuation contributions into the Employee’s nominated superannuation fund for any additional superannuation contributions it was required to pay on the outstanding entitlements referred to in paragraph 3(a)(i) above;
(iii)preparing and producing to the applicant a schedule outlining its calculation of the outstanding entitlements it was required to pay the Employee; and
(iv)providing proof that the outstanding entitlements were rectified as set out in paragraphs 3(a)(i) and 3(a)(ii) above;
(b)pursuant to s.547(2) of the FW Act the first respondent pay to the applicant interest on the amount referred to in paragraph 3(a)(i) above in an amount agreed by the parties or in default of agreement as determined by the Court within 28 days of the determination of that amount;
(c)the applicant distribute to the Employee the amounts paid pursuant to paragraph 3(a)(i) and 3(b) above within 90 days of the respective payment being made; …
RELEVANT LEGISLATION
Administration
In 2020, s.716 of the FW Act relevantly provided:
716 Compliance notices
Application of this section
(1)This section applies if an inspector reasonably believes that a person has contravened one or more of the following:
…
(b) a term of a modern award;
…
Giving a notice
(2)The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a) take specified action to remedy the direct effects of the contravention referred to in subsection (1);
(b) produce reasonable evidence of the person’s compliance with the notice.
(3)The notice must also:
(a) set out the name of the person to whom the notice is given; and
(b) set out the name of the inspector who gave the notice; and
(c) set out brief details of the contravention; and
(d) explain that a failure to comply with the notice may contravene a civil remedy provision; and
(e) explain that the person may apply to the Federal Court, the Federal Circuit Court or an eligible State or Territory Court for a review of the notice on either or both of the following grounds:
(i)the person has not committed a contravention set out in the notice;
(ii)the notice does not comply with subsection (2) or this subsection; …
…
(5)A person must not fail to comply with a notice given under this section.
Rights and responsibilities of employees and employers
Section 536(1) of the FW Act provides that an employer must give a pay slip to each of its employees within one working day of paying an amount to the employee in relation to the performance of work.
Compliance and enforcement
Section 546(1) of the FW Act provides the Court may order a person to pay a pecuniary penalty if they have contravened a civil remedy provision. Section 539(2) of the FW Act provides that ss.716(5) and 536(1) are civil remedy provisions. The combined effect of ss.539(2) and 546(2)(b) is that:
(a)the maximum penalty for a contravention of s.716(5) of the FW Act is 150 penalty units for a corporation and 30 penalty units for an individual; and
(b)the maximum penalty for a contravention of s.536(1) of the FW Act is 300 penalty units for a corporation and 60 penalty units for an individual, unless it is a serious contravention which it is not contended the present contravention was.
At the time of the contraventions a penalty unit was worth $210: s.4AA Crimes Act 1914 (Cth). The maximum penalty that can be imposed in this case is:
(a)for a contravention of s.716(5) of the FW Act: $31,500 for a corporation and $6,300 for an individual; and
(b)for a contravention of s.536(1) of the FW Act: $63,000 for a corporation and $12,600 for an individual.
APPLICANT’S EVIDENCE
In her affidavit of 1 October 2021, Fair Work Inspector Samantha Rowe deposed that:
(a)in mid-2020, the Ombudsman commenced an investigation into Ms Anastasi’s allegation that she had been underpaid wages by My Salon Erina and had not received payslips;
(b)Mr Lal was the manager of My Salon Erina;
(c)on 6 October 2020 she issued the Compliance Notice. It required My Salon Erina to calculate any underpayments owing to Ms Anastasi, rectify those amounts and provide the Ombudsman with reasonable evidence of its compliance by 5 November 2020;
(d)that same day, she emailed and arranged for the Compliance Notice to be sent to My Salon Erina but they did not comply with it;
(e)on 9 November she sent a letter titled “Failure to Comply with Compliance Notice” to My Salon Erina and Mr Lal. It requested that My Salon Erina advise the Ombudsman why it had not complied with the Compliance Notice. That same day she had the following conversation with Mr Lal:
Ms Rowe:It [the Compliance Notice] required you to calculate all money owed to Katya and rectify those underpayments.
Mr Lal:I’ll take a look at it
Ms Rowe:Nelvin, I sent copies to your email, registered business address and the shop location address you asked me to send it to. I have given you a month to comply.
Mr Lal:You can leave it with me. I can take a look at it this afternoon and get back to you tomorrow.
Ma Rowe:I’m going to send you an email advising that the business has 7 days to comply with the compliance notice then we will seriously consider litigation.
(f)a further letter was sent on 17 November 2020 providing My Salon Erina with a final opportunity to comply with the Compliance Notice and on 25 February 2021 letters were sent to the respondents notifying them that legal action would be commenced;
(g)annexed to her affidavit was a file note of a 30 September 2021 with Ms Anastasi confirming that as at that date she had received no payment relevant to this proceeding; and
(h)on 30 September 2021 she conducted a search that showed the My Salon Erina was still registered.
I accept the inspector’s evidence.
In his affidavit of 6 December 2021, Andrew Morris, a solicitor in the Ombudsman’s employ, deposed that:
(a)the details of the orders made upon default judgment had been provided to the respondents shortly after they were made;
(b)as at 3 December 2021 the underpayments had still not been rectified; and
(c)as at 3 December 2021 My Salon Erina was still registered.
Mr Morris further deposed that on 2 September 2021 Zebadiah Holmes, also a solicitor in the Ombudsman’s employ, received from Mr Lal an email attaching payslips relating to Ms Anastasi and saying:
I still can't see how she has been under payed, (sic) she was paid correctly including penalty rates.
Mr Morris went on to record that on 15 September 2021 Mr Holmes replied to Mr Lal relevantly saying:
In relation to the payslip [sic] you have provided we agree that the hourly payment rate in the pay slips appear to be consistent with the Employee's entitlements under the Hair and Beauty Industry Award 2010 (Award) between 10 October 2019 and 31 May 2020 (Assessment Period).
However, based on records from the Assessment Period, including rosters provided by the Employee to the FWO, the pay slips do not accurately record the total hours worked by the Employee during the Assessment Period. Those records indicate the Employee regularly worked 40 - 43 hours per week during the Assessment Period.
To assist My Salon with rectifying its non-compliance with the Compliance Notice, please see attached rosters for the periods 25 November - 1 December 2019, 2 - 15 December 2019, 6 - 12 January 2020 and 2 - 9 February 2020, which have been redacted so that only the Employee's name is visible. During all of these periods, the Employee worked a consistent roster that equated to around 43 hours per week (depending on precise break times). The equivalent pay slips do not reflect the hours recorded in these rosters.
I accept Mr Morris’s evidence.
CONSIDERATION
When determining an appropriate penalty to impose, regard should be had to all of the circumstances of the case, guided by the various discretionary considerations discussed in authorities such as Kelly v Fitzpatrick (2007) 166 IR 14, in order to arrive at a single result that is an instinctive synthesis of those various factors.
In this case, the Court is concerned with two contraventions by each respondent. Each respondent has been found to have contravened ss.716(5) and 536(1) of the FW Act. In that connection, the Ombudsman accepts that the failure to give pay slips should be treated as a course of conduct under s.557(1) of the FW Act and so, in respect of each respondent, be treated as one contravention only.
The respondents have adduced no evidence to explain their failures to comply with the Compliance Notice and with the orders of the Court. The evidence adduced by the Ombudsman indicates they were given more than one opportunity to comply with the Compliance Notice, and so avoid this litigation, but they failed to avail themselves of those opportunities. It is true that after default judgment was entered the respondents provided to the Omdudsman various pay slips purportedly recording Ms Anastasi’s work hours and the correctness of related payments, but the accuracy of those time records was disputed by the Ombudsman, who relied on Mr Anastasi’s roster records. The respondents have not sought to address those concerns apart from Mr Lal’s submission in addresses that those roster records did not take account of breaks that were taken. Significantly, however, the respondents did not seek to lead from their own records any evidence on the issue.
The contraventions committed by the respondents are both serious strikes against the FW Act’s system of minimum workplace standards protections. Compliance notices are an efficient and cost-effective means for the Ombudsman to notify contraveners of their contraventions and to secure inexpensive compliance without the need to resort to litigation. The respondents have, in substance, accepted the breaches particularised in the Compliance Notice but have disregarded the notice and its significance. If unaddressed, this lassitude might be emulated by others and lead to the system of compliance notices falling into disrepute which could see the enforcement of employees’ workplace rights rendered more difficult or less efficient. Similarly, the failure to provide pay slips prevented Ms Anastasi from knowing, contemporaneously, whether her pays were correct. The provision of pay slips contemporaneously with the payment of wages or salary is an important workplace right which holds employers to account. The respondents’ breach of that obligation has meant that the Ombudsman has had to assess Ms Anastasi’s entitlements by reference to her own roster records. The fact that the respondents have, only belatedly, produced pay slips whose accuracy is contested by the Ombudsman serves to demonstrate the value of such records being produced at the time of payment rather than later when a dispute arises.
The seriousness of the respondents’ failure to act on the Compliance Notice is compounded by their failures to co-operate in a material way with the Ombudsman since the Compliance Notice was served or default judgment pronounced or to express regret, remorse or contrition for their conduct. During addresses Mr Lal spoke of the difficulties that the business suffered during the COVID-19-related lockdowns over the last two years but did not explain why those quiet times were not used to discuss with the Ombudsman the matters in issue in this proceeding as the Ombudsman, in effect, sought following service of the Compliance Notice. In addresses Mr Lal did say that unidentified systems had been introduced that would avoid the repetition of the contravening conduct but did not produce documents, or evidence from the accountant to whom he referred, to substantiate his claims.
Overall, the respondents’ conduct does not fill me with confidence that they treat the Contravention Notice or this proceeding seriously or that they intend to behave differently in the future.
My concerns in this regard are heightened by the fact that this is not the first proceeding of this sort in which Mr Lal has been involved. In her affidavit, FWI Rowe relevantly deposed as follows:
19. My searches during the Investigation identified that:
(a)on 15 April 2015, following legal action being initiated by the FWO, Judge Driver in the Federal Circuit Court imposed penalties totalling $162,000 against multiple hair salons managed by Mr Lal and against Mr Lal personally as an accessory. The Federal Circuit Court also issued an order restraining Mr Lal from underpaying any hairdressing employees in the future. …
(b)on 13 May 2016, following legal action being initiated by the FWO, Judge Manousaridis in the Federal Circuit Court imposed penalties totalling $23,500 against hair salons managed by Mr Lal for the failure to comply with three compliance notices issued under section 716(2) of the FW Act. …
While the penalties that are to be imposed should incorporate a component for general deterrence to discourage others from conducting themselves as the respondents have in this case, to which I will return shortly, I conclude that the penalty to be imposed on Mr Lal should include a particular component for specific deterrence in an attempt to deter him from contravening the FW Act in the future.
The Ombudsman did not suggest that My Salon Erina had been found previously to have contravened the FW Act and so the need for specific deterrence is not as significant an issue in its case, although I note from the search annexed to FWI Rowe’s affidavit that the company was only registered in March 2019. However, the Court has found that its manager, Mr Lal, was involved in the contraventions the subject of this proceeding which points to wrongdoing at a senior level of the company, rather than to error by a junior employee.
The need to attempt to deter similar conduct by others in the future is made clear by the description of the industry in which the respondents operate that is set out in FWI Rowe’s affidavit. The inspector said:
20.In my role as an FWI, I am aware of the research conducted by the Strategic Research, Analysis and Reporting Team within the FWO. I have accessed and read the FWO’s report titled “Industry profile and FWO Interactions: Hairdressing and Beauty Services” (Industry Report). …
21.The Industry Report summarises data for the period July 2017 to June 2021 regarding compliance with workplace laws in the hairdressing and beauty services industry. Among other things, the Industry Report shows that:
(a)from July 2017 to June 2021, the FWO completed 2,530 physical or online requests for assistance (Dispute Forms) from workers in the hairdressing and beauty services industry, being 2.9% of all Dispute Forms completed in that period; and
(b)young workers (15 to 25 years of age) made up 25% of employment in the hairdressing and beauty services industry and accounted for 48.4% of completed disputes in the hairdressing and beauty services industry.
A feature of the hairdressing and beauty industry emerging from that evidence is that it has a high proportion of young employees, as Ms Anastasi was, whose level of complaint to the Ombudsman is disproportionately large when compared with their share of the industry’s workforce. It is not unreasonable to infer, admittedly as a generalisation, that young employees with little experience of the work environment are more vulnerable to attempts at exploitation than older employees with more workplace experience.
It is to be noted that as at the time of the penalty hearing Ms Anastasi had not been paid any further amount by My Salon Erina.
PENALTIES
The Ombudsman has suggested that My Salon Erina’s contravention of s.716(5) of the FW Act should attract a penalty of $25,200 (80% of the maximum) and that its contravention of s.536(1) of the FW Act should attract a penalty of $44,100 (70% of the maximum). Those amounts total $69,300, which the Ombudsman suggested ought to be reduced by 20% producing a total penalty of $55,440. I accept the former figures as appropriate penalties and the latter figure as a just and appropriate amount to impose on My Salon Erina as a total penalty.
The Ombudsman has suggested that Mr Lal’s contravention of s.716(5) of the FW Act should attract a penalty of $5,040 (80% of the maximum) and that his contravention of s.536(1) of the FW Act should attract a penalty of $8,820 (70% of the maximum). Those amounts total $13,860, which the Ombudsman suggested ought to be reduced by 20% producing a total penalty of $11,088. In the circumstances I agree that a penalty of $5,040 should be imposed for the s.716(5) contravention but believe that the penalty for the contravention of s.536(1) should also be set at 80% of the maximum, namely $10,080. Those figures total $15,120 but I consider in the circumstances that $13,000 would be a just an appropriate amount to impose on Mr Lal as a total penalty.
CONCLUSION
There will be orders accordingly.
The respondents are to pay penalties to the Commonwealth within 28 days.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of Judge .
Associate:
Dated: 10 December 2021
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