Fair Work Ombudsman v Neubauer
[2023] FedCFamC2G 150
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Neubauer [2023] FedCFamC2G 150
File number(s): ADG 356 of 2021 Judgment of: JUDGE BROWN Date of judgment: 3 March 2023 Catchwords: INDUSTRIAL LAW – FAIR WORK – penalty hearing – failure to comply with issued Compliance Notice – employer provided false and misleading payslip – legislative purpose of compliance notice – calculation of penalty – matters to be considered Legislation: Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) ss 3, 90(2), 117(2)(b), 536(3), 539, 557, 639(2), 681, 682, 701, 706, 712(1), 716, 717(1)
Federal Circuit & Family Court of Australia (Division 2) (General Federal Law) Rules 2021 Div 13.2
Clerks – Private Sector Award 2020
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8
Blandy v Coverdale NT Pty Ltd [2008] FCA 1533
Fair Work Ombudsman v Corporation Sun Pty Ltd [2020] FCCA 2849
Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709
Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579
Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151
Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557
Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272
Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258
Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801
Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Mornington Inn Pty Ltd v Jordon [2008] FCAFC 70
Minister for Immigration & Citizenship v Li (2013) 249 CLR 332
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Veen v R (No 2) (1988) 164 CLR 465
Division: Division 2 General Federal Law Number of paragraphs: 98 Date of hearing: 3 February 2023 Date of last submission: 22 February 2023 Place: Adelaide Counsel for the Applicant: Ms Walker SC Solicitor for the Applicant: HWL Ebsworth Respondent: No appearance ORDERS
ADG 356 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: JOSEF SAMUEL NEUBAUER
Respondent
order made by:
JUDGE BROWN
DATE OF ORDER:
3 March 2023
THE COURT DECLARES THAT:
A.the Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (“the Act”), by failing to comply with the Compliance Notice; and
B.The Respondent contravened section 536(3) of the Act, by knowingly providing Mr de Souza with pay slips which displayed false or misleading information.
THE COURT ORDERS THAT:
1.Pursuant to section 545(1) of the Act, the Respondent take the steps that were required by the Compliance Notice within 28 days of this order by:
(a)calculating and paying to Mr de Souza the amounts it was required to pay to Mr de Souza in respect of the First, Second and Third Contraventions as required by the Compliance Notice ; and
(b)preparing and producing to the Applicant a schedule outlining its calculations of the outstanding amounts it was required to pay to Mr de Souza, and providing proof that the outstanding amounts have been rectified as set out in paragraph 1(a) above.
2.Pursuant to section 546(1) of the Act pay a pecuniary penalty of THIRTEEN THOUSAND, NINE HUNDRED AND EIGHTY SIX DOLLARS ($13,986.00) to the Commonwealth for the contraventions pleaded in paragraphs A & B above, within 28 days of the date of this order.
3.The Applicant have liberty to apply on 7 days' notice in the event that any 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 BROWN:
INTRODUCTION
The Fair Work Ombudsman[1] commenced these proceedings against Josef Samuel Neubauer,[2] on 29 November 2021, pursuant to the provisions of the Fair Work Act 2009 (Cth).[3] In general terms, the FWO seeks the imposition of civil penalties against the respondent for failing to comply with a notice requiring him to pay the proper wage entitlements of one of his employees and providing that employee with a false and misleading payslip.
[1] Herein referred to as “the FWO” or “the Ombudsman”.
[2] Hereinafter referred to as “Mr Neubauer” or “the respondent”.
[3] Hereinafter referred to as “the FWA” or “the Act”.
The proceedings have not been defended with due diligence by Mr Neubauer. In these circumstances, on an earlier occasion, the Court has determined that the respondent is liable for two contravention arising under the Act. These reasons for judgment are directed towards determining the appropriate penalty which should be imposed.
In this context, it is the contention of the FWO that the contraventions must be regarded as being serious due to the lack of cooperation demonstrated by the respondent and significantly by the fact that the deception engineered by him, in respect of the payslip was a serious and calculated one, involving the false attribution of the relevant employer.
In these circumstances, the FWO contends that the appropriate penalty to be imposed should be one of 80% of the prescribed statutory penalty for each offence, to which should be applied a discount of 10% to reflect the totality of the two fines to be so imposed.
This would result in a fine of $13,986.00, which counsel for the FWO, Ms Walker of Senior Counsel submits is in keeping with the overall seriousness of the relevant breaches of the industrial law and congruent for the need for both general and specific deterrence.
BACKGROUND
The FWO alleges that the respondent operated a cleaning business known as City Central Cleaning from premises located in Pulteney Street, Adelaide. In the course of operating this business, Mr Neubauer employed Kleyton Ferreira de Souza, on a part-time basis, as an administrative assistant, between 16 October 2020 and 8 February 2021.
In early February of 2021, Mr de Souza complained to the office of the FWO that he had been dismissed by the respondent without proper notice. More significantly, Mr de Souza asserted that Mr Neubauer had failed to pay him his final wage instalment and his accrued annual leave, when he had been dismissed.
The office of the FWO appointed a Fair Work Inspector, Ms Emma Warren to investigate Mr de Souza’s complaints. Ms Warren determined that Mr de Souza’s employment was covered by the provisions of a modern award, Clerks – Private Sector Award 2020.[4]
[4] Hereinafter referred to as “the Award”.
During the course of Ms Warren’s investigation, Mr de Souza provided her with his relevant bank records; emails passing between him and Mr Neubauer; his timesheet; and relevantly a payslip dated 12 February 2021.[5] As a consequence of her interview with Mr de Souza and her inspection of the documents provided, Ms Warren concluded that Mr de Souza had not been paid in accordance with the Award.
[5] See Annexure ELW-7 to the Affidavit of Ms Warren filed 29 September 2022.
Mr de Souza’s final payslip indicated that he was employed by City Central Cleaning of 186 Pulteney Street, Adelaide. Under the employer designation, on the payslip, is an Australian Business Number. Ms Warren searched the relevant business number and discovered that it was registered to a Josef Neubauer, who was born on 13 October 1951. Accordingly, at relevant times, this person was aged in his late sixties.[6]
[6] It is convenient to refer to him as Mr Neubauer Senior in these reasons for judgment.
In June of 2021, Ms Warren contacted Mr Neubauer Senior, who advised her that he had no connection with City Central Cleaning and thus no knowledge of Mr de Souza’s employment. On request, Mr Neubauer Senior provided the FWO with a recent photograph of himself.
Later enquiries undertaken by Ms Warren indicate that Mr Neubauer Senior and the respondent are father and son, but are currently estranged. Ms Warren also obtained a photograph of the respondent and requested Mr de Souza compare it with the photograph of Mr Neubauer Senior. Mr de Souza confirmed that he had been employed by the former.
As a consequence of her investigation, Ms Warren formed the belief that Mr de Souza had not been paid his proper entitlement pursuant to the Award. In particular, she reached the following conclusions:
·Mr de Souza had not been paid the weekly rate prescribed by the Award for the ordinary hours worked by him;
·Mr de Souza had not been paid his accrued annual leave in contravention of section 90(2) of the FWA; and
·Mr de Souza had not been paid the prerequisite amount, in lieu of notice, on the termination of his employment, in contravention of section 117(2)(b) of the FWA.
In these circumstances, Ms Warren determined to issue a Compliance Notice to the respondent pursuant to the provisions of section 716(2) of the FWA. In general terms, the relevant Compliance Notice required the respondent to undertake a number of steps in order to discharge his obligations under both the Award and the applicable provisions of the FWA.
These obligations can be summarised as follows:
·Calculate the minimum wage entitlements due to Mr de Souza between 29 January 2021 and 15 February 2021;
·Calculate the amount of leave due to Mr de Souza as at 15 February 2021 and add to it the appropriate leave loading of 17.5%; and
·Calculate the payment in lieu of notice to which Mr de Souza was entitled.
The relevant Compliance Notice requires Mr Neubauer to make these calculations and rectify the resulting underpayment to Mr de Souza on or before 23 August 2021. Thereafter, Mr Neubauer was required to provide evidence to the FWO that he had complied with these obligations on or before 30 August 2021.
It is the FWO’s position that Mr Neubauer has not complied with any of his obligations under the Compliance Notice and has therefore contravened the provisions of section 716(5) of the Act. In addition, as a consequence of the inclusion of a false or misleading Australian Business Number on Mr de Souza’s payslip, the FWO contends that Mr Neubauer has contravened the provisions of section 536(3) of the Act which renders it a civil penalty provision, potentially attracting a penalty of $13,320.00 to provide an employee with a payslip which displays false or misleading information.
Ms Warren has deposed that she arranged for the service of the relevant Compliance Notice on the respondent, by registered post, at a number of addresses, in the Adelaide area, associated with him. Thereafter, Ms Warren and other officers of the FWO contacted Mr Neubauer by telephone and email to discuss with him how he might comply with the Notice and to avoid litigation. In particular, in an email dated 12 August 2021, Mr Whetlor, a member of the Notice Assistance Team, indicated to Mr Neubauer that he had calculated the sums due to Mr de Souza, in respect of the three Award breaches to amount to a sum of $3,039.37.[7]
[7] See Annexure ELW-21 to the affidavit of Ms Warren filed 29 September 2022.
On 1 September 2021, after the time for formal compliance with the Notice had closed, the FWO sent the respondent what it characterises as a final opportunity to respond letter. This did not achieve any resolution. To the contrary, the respondent indicated his view that the allegation of any misuse of the ABN number relating to the payslip issue was false. He did not provide any details as to why he considered this to be the case.
In this context, Ms Warren has deposed to the argumentative stance Mr Neubauer took to FWO staff indicating his view that the process was unfair to him and no-one had shown him any evidence that he had misused the ABN.
In all these circumstances, as it had indicated to Mr Neubauer it would do, the FWO commenced the current proceedings against him on 29 November 2021. No response or formal document has been filed by him in the proceedings to date.
CONDUCT OF THE PROCEEDINGS
It proved impractical for the FWO to personally serve the respondent. In these circumstances an application was made for substituted service and in lieu of personal service he be served by electronic means. I made this order on 10 May 2022 being satisfied that the respondent had arranged his affairs to make formal contact with him as difficult as possible. Part of the difficulty arising from the respondent’s utilisation of his father’s ABN number.
The case was adjourned until 28 June 2022. On this occasion the respondent appeared in person and forcefully stated to me that he was not responsible for any act of omission relating to the employment of Mr de Souza as the correct person to be the respondent in these proceedings with his father Josef Neubauer Senior. The FWO did not accept that there was any error.
In these circumstances, the respondent was directed to file a response and affidavit with 28 days in which he could set out why there had been such a significant mistake, as he claimed. He did not take up this opportunity and has not appeared in Court on any subsequent mentions of the matter.
In these circumstances, I found the view that he was not conducting any defence of the proceedings brought against him with the required degree of diligence. In these circumstances, I formed the view that I could exercise the discretion conferred on the Court pursuant to Division 13.2 of the Federal Circuit & Family Court of Australia (Division 2) (General Federal Law) Rules 2021 to enter judgment, in respect of liability, in favour of the FWO.
The case was then adjourned for a potential penalty hearing and Mr Neubauer was given an opportunity to file evidence and submissions in respect of its quantum but advised, if he did not do so, the case would proceed on an undefended basis. The FWO has filed its material in respect of penalty.
Having considered the evidence provided by Ms Warren, which remained un-contradicted, I am satisfied that there is no substance to the respondent’s contention that he has been prosecuted erroneously. It appears to me to incontrovertible, given the statements of Mr Neubauer Senior to officers of the FWO and the fact that Mr de Souza has identified the respondent as his employer, that the respondent has utilised his father’s ABN as a ruse to avoid his industrial obligations.
THE RELEVANT LEGISLATIVE PROVISIONS
The objects of the FWA are contained in section 3. They include the provision of an industrial safety net, for Australian employees, which is maintained through the enforcement of a system of minimum terms and conditions specified in the modern award system.
The Office of the Fair Work Ombudsman is created by section 681 of the FWA. One of the functions of the Ombudsman under section 682 of the FWA is to enforce compliance with the Act, including any workplace obligations residing on employers, as a consequence of relevant industrial awards, mandating rates of pay and conditions of employment.
In turn, the FWO may appoint Fair Work Inspectors, who are authorised to utilise what are characterised as compliance powers.[8] In general terms, inspectors are directed to investigate complaints in respect of breaches of the industrial law and are authorised to enter workplaces and determine whether an employer has contravened the law, including in respect of the application of any relevant modern award or otherwise failed to comply with the industrial safety net.
[8] See Fair Work Act 2009 (Cth) s 706.
In addition, the FWO has a responsibility to educate, advise and assist, both employers and employees, in respect of their respective obligations, arising under the Act and, if necessary, commence proceedings, in appropriate courts, to enforce the provisions of the FWA.
Section 682(1) of the FWA confers a number of functions on the Ombudsman, which include promoting compliance with the Act through providing assistance to employers so that they know the extent of their obligations to their employees, particularly in terms of their employees’ entitlements.
The aim being to iron out problems and misunderstandings expeditiously and in a cost effective manner, without recourse to litigation so that underpayments are rectified efficiently and fairly. As will be delineated in due course, it is in this context that the power conferred upon a Fair Work Inspector to issue Compliance Notices must be considered.
Pursuant to section 701 of the Act, the FWO is also a Fair Work Inspector. The FWA empowers the Ombudsman to delegate its statutory responsibilities to Fair Work Inspectors. The Act confers upon such inspectors a number of powers in order to ensure compliance with provisions of the Act. Among other things, inspectors can enter the work place and require the production of employee records.[9] Ms Warren at relevant times, held the office of Fair Work Inspector under the Act.
[9] See Fair Work Act 2009 (Cth) s 712(1).
Having read the affidavit material deposed by Ms Warren in this matter, I am left in no doubt that the FWO attempted to assist Mr Neubauer to comply with the Notice issued to him and provided the necessary calculations to enable him to do so. In response to its overtures, the FWO received only evasion and obfuscation from the respondent and was put to greater expense, including the not inconsiderable expense of these proceedings.
In addition, the FWO, as a consequence of its status as a Fair Work Inspector, has statutory authority to bring proceedings under the Act and seek the imposition of penalties, if breaches of the FWA are established.[10]
[10] See Fair Work Act 2009 (Cth) s 539(2).
Section 716(1) of the Act provides that, if an inspector believes, on reasonable grounds, that a person has contravened a provision of the National Employment Standards, the inspector concerned may issue that person with a ‘Compliance Notice’ requiring the person nominated to take action to remedy the contravention in question.
As indicated above, a failure to pay accrued annual leave on termination and to pay personal leave are covered by provisions of the National Employment Standards and can be subject to the terms of a Compliance Notice.
Pursuant to the applicable legislation, any Compliance Notice must provide particulars of the contraventions of the Act alleged and outline any rights of review that arise under the Act. There is no issue in the present case other than that the Compliance Notice in question complies with the provisions contained in sections 716(2) and 716(3) of the FWA.
Sections 716(1) and 716(2) of the Act delineates the criteria, which must be satisfied before an inspector may issue a Compliance Notice. Firstly, the power itself is a discretionary one and like all administrative decisions must be exercised reasonably.
Whether a discretion, conferred by statute, is exercised in a legally reasonably manner, it must be determined by reference to the statute itself, particularly its subject matter, scope and purpose.[11]
[11] See Minister for Immigration & Citizenship v Li (2013) 249 CLR 332, 370-371 [90] (Gageler J).
In this particular case, as indicated above, one of the purposes of the FWO is to provide an industrial safety net, for workers, so far as the application of industrial awards is concerned, as well as to educate employers in regard to their industrial responsibilities.
Secondly, the discretion may be exercised only once a reasonable belief is formed by the relevant inspector. The discretion must be exercised appropriately and not in an arbitrary, illogical or capricious manner.
Section 717(1) of the Act authorises a person who has been serviced with a Compliance Notice to apply to the Court to have the notice reviewed on the basis that there has been no contravention as specified or the Notice does not otherwise comply with the applicable legislation.
In Fair Work Ombudsman v Matcraft Pty Ltd,[12] Judge Kendall explained the legislative intention of a Compliance Notice, as an alternative to litigation, in the following terms:
As explained in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), the purpose of s 716 of the Act is to provide an alternative to litigation. Section 716 is an informal mechanism whereby the applicant can identify potential contraventions of the Act and seek rectification without an employer having to admit liability.
One of the objects of the Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms. Section 716 encapsulates this objective by allowing employees to make a request for assistance which the applicant can then resolve through the use of s 716.[13]
[12] Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272.
[13] Fair Work Ombudsman v Matcraft Pty Ltd [2021] FCCA 272 at [34]-[35] (Kendall J).
In addition, as previously indicated, the relevant legislation allows an employer to challenge a Notice if it is believed there are no grounds for its issue or the Notice itself is invalid. In these circumstances, it is the contention of the FWO that if the respondents had complied with the Notice in question, it would have been precluded from bringing these proceedings, with a commensurate saving of public resources.
In Fair Work Ombudsman v Trek North Tours & Anor (No 2),[14] Judge Jarrett explained the underlying rationale of the Compliance Notice system in the following terms:
The provision of notices to employers serves a number of purposes, not the least of which is to give the employer an opportunity to deal with the contravention that is being alleged, or, in the case of notices to produce, to provide information which would demonstrate that no contravention of the Act has occurred. The regime set out under s.716 and s.717 of the Act relating to compliance notices represents a regime which would avoid proceedings coming to a court at all if an employer took the steps set out in those sections.[15]
[14] Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801.
[15] Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801 at [22].
Accordingly in general terms, the successful implementation of the process envisaged when a Compliance Notice is issued represents a win/win for all concerned in the following terms:
·An underpaid employee gets his/her entitlements expeditiously and as calculated pursuant to all the applicable provisions of the relevant award;
·An employer is educated about his/her responsibilities under the relevant industrial system without being penalised or forced to incur the costs and indignities of litigation or indeed to be identified as an errant employer; and
·The public purse is spared the cost of bringing expensive proceedings to court.
The failure of the respondent to comply with the relevant notice served upon him engages the provisions of section 716(5) of the Act, which renders it a civil remedy provision if a person fails to comply with a Compliance Notice.
Section 536(3) of the FWA reads as follows:
(3)An employer must not give a pay slip for the purposes of this section that the employer knows is false or misleading.
The provision of appropriate and correct payslips is an essential component of a fair system of wage regulation. Employees, particularly vulnerable ones, are entitled to know what they have been paid and by whom and specifically how their wages are broken down. They are also entitled to know the formal identity of their employer so that relevant queries about the terms of employment can be referred to the appropriate source.
This is important so that in cases of dispute, the Industrial regulator is able to quickly ascertain the identity of the relevant employer so that any misunderstanding can be expeditiously sorted out and any shortfall in entitlements remedied. In this context, it is central that those in authority can expeditiously search relevant official records so it can be known with whom they need to communicate.
In this context, I respectfully adopt what was said by Judge Reithmuller in Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor[16] as follows:
Without proper payslips, employees are significantly disempowered, creating a structure within which breaches of the industrial laws can easily be perpetrated.
In the present matter, I am satisfied that Mr Neubauer adopted the subterfuge of utilising his father’s ABN in order to evade his responsibilities arising under industrial law.
[16] Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd & Anor [2012] FMCA 258 at [67].
Contraventions arising under both section 716(5) and section 536(3) of the FWA are characterised as civil remedies proceedings and pursuant to the provisions of section 539 of the Act the former attracts a fine of up to 30 penalty units and the latter one of 60 penalty units. At relevant times, a penalty unit amounted to $222.00.[17]
[17] See Crimes Act 1914 (Cth) s 4AA.
Accordingly the maximum penalty liable to be imposed on the respondent is one of $6,660.00 for the Compliance Notice offence and one of $13,320.00 for the pay slip offence, a total of $19,980.00.
LEGAL PRINCIPLES APPLICABLE TO PENALTY HEARINGS
The approach, which the Court is required to take, in respect of these contravention proceedings, has been delineated in a number of decisions of the Federal Court.[18] The process can be summarised as follows:
·The Court should identify each separate contravention, arising from a breach of either the applicable award or the FWA itself. Pursuant to section 539(2) each such contravention is a distinct incident for penalty purposes;
·The Court should determine whether any of these incidents arise in a single course of conduct, within the terms envisaged by section 557(1);
·Then give consideration as to whether any of these contraventions contain elements and factor this into considering what is an appropriate penalty, in all the circumstances, for each contravention;
·Thereafter, the Court should fix an appropriate penalty for each single or group contravention, taking into account all relevant circumstances; and
·Finally, the Court should apply the totality principle. This final step constitutes a review of the aggregate penalty calculated, and envisages a consideration of whether such a penalty is an appropriate response to the conduct, which lead to the various contraventions in question. This case has been described as a process of intuitive synthesis.[19]
[18] Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [42] (Mansfield J), citing Fair Work Ombudsman v Kentwood Industries Pty Ltd (No 3) [2011] FCA 579 at [10] (McKerracher J).
[19] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [55] (Graham J).
The totality principle arises when a court is called upon to sentence an individual, as here, in respect of a number of identifiable offences. It is directed to review the penalties imposed, in total, in respect of individual offences to determine whether those penalties, in aggregate, constitute a just and appropriate penalty, in all the circumstances arising. As indicated earlier, it has been characterised as a process of intuitive synthesis.
Gray J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (“Australian Ophthalmic Supplies”) said as follows:
[What is required] is to determine an appropriate level of penalty for each contravention, as if it were a separate offence, and then look at the aggregate of those penalties in the light of the overall conduct of the [offender], to form a view as to whether that aggregate [is] out of proportion to that overall conduct.[20]
[20] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [23] (Gray J).
Regardless of these considerations, the fundamental task, for the Court, is to determine, from all the factual circumstances arising, the gravity or seriousness of the offending, which it is called upon to penalise. Again there is general agreement between the parties as to the considerations relevant to this task, which has been delineated in a number of decisions of both this Court and the Federal Court.[21] The considerations are as follows:
[21] Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] FCA 1080 at [14]. (Tracey J); Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [23] (Reeves J).
·The nature and extent of the conduct which led to the breaches;
·The circumstances in which the conduct took place;
·The nature and extent of any loss or damage sustained as a result of the breaches;
·Whether there has been similar previous conduct by the respondent;
·Whether the breaches were properly distinct or arose out of the one course of conduct;
·The size of the business enterprise involved;
·Whether or not the breaches were deliberate;
·Whether senior management was involved in the breaches;
·Whether the party committing the breaches has exhibited contrition;
·Whether the party committing the breaches has taken corrective action;
·Whether the party committing the breaches has cooperated with the enforcement authorities;
·The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
·The need for specific and general deterrence.
The Court needs to be careful not to apply a formulaic approach to the imposition of penalties or attempt to extrapolate the penalties imposed in one case to the circumstances of another. Each case involving the imposition of a civil penalty warrants an idiosyncratic approach and a careful analysis of all relevant circumstances. As was stated in Australian Ophthalmic Supplies:
Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.[22]
[22] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J).
Clearly the check-list, as enumerated above, is useful. However, it is not to be regarded as an exhaustive list of factors to be considered. The ultimate control on any sentence is that it must be proportionate to the offence committed. A court is not permitted to impose a sentence greater than is warranted by the objective circumstances of the offending.[23]
[23] Veen v R (No 2) (1988) 164 CLR 465, 472 (Mason CJ, Brennan, Dawson, and Toohey JJ).
However, in the context of the significant interest the public has in ensuring that employees are paid their proper entitlements and are accorded the protection of the industrial safety net envisaged by the legislature, the Court cannot lose sight of the importance of deterrence, both in a specific and general sense.
Penalties have to be fixed at a meaningful level, not set at a level at which their imposition, on an errant employer, can be seen as an acceptable cost of doing business for the employer. In short, penalties must hurt so that others who are considering cutting corners, so far as the payment and protection of their employees are concerned, will be deterred from doing so.
In the recent case of Australian Building and Construction Commissioner v Pattinson[24] the High Court discussed the inherent problems likely to arise when principles of retributive sentencing, relevant to the criminal law, are applied in civil penalty proceedings. In this context, the High Court rejected the principle of proportionality being applied to the calculation of penalties in the civil sphere. Essentially, the High Court indicated the principle that the maximum penalty should be reserved only for the worst or most egregious examples of the applicable offence did not apply in civil penalty proceedings.
[24] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13.
In addition, the High Court indicated that the primacy of deterrence is the objective of any civil penalty regime. As such a sentencing court, in a civil penalty matter, is required to impose a penalty which is proportionate in the sense that it strikes a reasonable balance between deterrence and what is described as oppressive severity.[25]
[25] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [41].
In this context, concepts also applicable in criminal sentencing, such as totality, parity and course of conduct remained relevant. As such, a court sentencing in respect of a civil penalty provision matter retained a discretion. As with all discretions, it is one which must be exercised fairly and reasonably given the subject matter, scope and purpose of the legislation being applied. The aim being to arrive at a penalty which is appropriate.
In this context the High Court indicated as follows:
It is important to recall that an "appropriate" penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a "one‑off" result of inadvertence by the contravenor rather than the latest instance of the contravenor's pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law … In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors … [such as] where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
It is not necessary to multiply examples further. It is sufficient to say that a court empowered by s 546 to impose an "appropriate" penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.[26]
[26] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [46] – [48].
In addition, in this context, the essential purpose of Compliance Notices must be considered. As indicated above, prompt compliance with their terms can result in a win/win situation for all concerned. The industrial regulator and the public purse is not put to the expense of a hearing; an underpaid employee can be reimbursed promptly; and an errant employer is spared the bother and embarrassment of public prosecution, and is given an opportunity to learn about and rectify past failings for the good of all concerned.
DISCUSSION
Nature and extent of the conduct leading to the breaches
I agree with the FWO’s submission that the payslip offence must be regarded as a serious matter. I accept Ms Warren’s evidence that it was not immediately apparent to her that the ABN supplied was false and it took her some time to ascertain the true state of affairs. As such, her investigations were impeded to some extent.
In the circumstances, I accept the thrust of Ms Walker’s SC submissions that the respondent’s conduct interfered with the FWO’s effectiveness and thus, if such conduct is replicated by other employers, has the potential to undermine the effectiveness of the industrial safety net of all employees.
I also accept that Mr de Souza is to be regarded as a vulnerable employee. It is the FWO’s understanding that he is a visa holder. The FWO has provided evidence of messages which he sent to Mr Neubauer on 13 February 2021 in which he asked when he could expect to be paid and indicated further that he was struggling to buy food. This request fell on deaf ears.
In my view, this is a case in which there has been a wholesale failure of the Compliance Notice scheme, through which the function of the relevant Fair Work Inspector has been essentially frustrated. Mr Neubauer has ignored the Compliance Notice issued to him.
The general public has an interest in ensuring prompt and effective compliance with any breach of the industrial regime when it comes to light. The respondent was on notice from July of 2021 regarding the issues raised in the Compliance Notice. He was advised of the nature of Compliance Notice proceedings and the possibility of civil penalties being imposed. This had no effect.
In his text messages to Mr de Souza, Mr Neubauer indicated to him that he would be paid and he should not worry. He also indicated that his business had operated just fine for the past four years and had made a monthly profit of over $18,000.00. Despite his admission of indebtedness to Mr de Souza and the subsequent engagement of the compliance notice system, Mr de Souza remains out of pocket.
The goal of the Compliance Notice system is expeditious resolution of issues to do with award and industrial entitlements, so both employee and employer can move on with a minimum of disruption and expense. These aims have not been achieved in the current matter.
The Compliance Notice system is intended to provide an alternative to litigation, with a reduction in all incidental expense which litigation inevitably produces. This objective has not been achieved in the current matter. This is a serious consideration in respect of the setting of a penalty.
Size of the business and capacity to pay financial penalties
Due to the fact that Mr Neubauer has elected not to take part in the proceedings, there is scant evidence about the size of the business concerned apart from Mr Neubauer’s own statements regarding its success. I take these assertions with a pinch of salt.
In any event it is well established that it is no excuse for an offender to rely on the fact that they are the operator of a small business. To the contrary, the Court must bear in mind that small businesses of one form or another represent a large component of employers in this country.
In these circumstances, I adopt the comments of Driver FM in Rajagopalan v BM Sydney Building Materials Pty Ltd as follows:
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.[27]
[27] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27].
Corrective action, cooperation and contrition
The respondent has not cooperated with the proceedings to any degree whatsoever and has expressed scant contrition, if any at all. He maintained to the Court that it was his father who was responsible for the operation of the relevant business, not him.
After indicating to Mr de Souza that he should not worry about getting paid, Mr Neubauer did nothing. Obviously the most effective way for the respondent to demonstrate cooperation and contrition would have been to pay Mr de Souza the relatively modest amount of money which was due to him. The calculation of the sum was set out to Mr Neubauer by Mr Whetlor. It had no effect.
Deterrence
Deterrence has two aspects – general deterrence directed towards the community as a whole, and specific deterrence directed towards the individual concerned whose conduct is to be sanctioned. As the High Court has recently indicated, issues of deterrence must be accorded primacy in the imposition of any civil penalty.
In my view, both aspects are significant in the current matter. Mr Neubauer is a young person. The tone of his communications to Mr de Souza is that he sees himself as having something of an entrepreneurial bent. He acknowledges having run a commercial cleaning business for around four years. Such business employ unskilled workers, who are potentially open to exploitation by the unscrupulous.
In this context, I accept Ms Walker’s submission regarding the issue:
The Respondent's deliberate refusal to meet his obligations under the FW Act despite the numerous attempts of the Applicant to encourage him to do so, in circumstances where he admits that Mr de Souza is owed unpaid wages, as well as his selective engagement with the Applicant and the Court makes it plain that there is a need for specific deterrence. The Applicant submits that it should therefore be given very significant weight in the determination of penalty.[28]
[28] See Applicant’s submissions on Penalty filed 27 October 2022 at [48].
In Fair Work Ombudsman v Darna Pty Ltd,[29] Judge Hartnett said as follows in respect of the importance of the Compliance Notice process in the industrial regulatory system in this county:
The Explanatory Memorandum to the Fair Work Bill 2008 (Cth) provides that compliance notices were designed to be another option to deal with non-compliance instead of pursuing court proceedings. It was to be a less costly and less time consuming procedure. Section 716 of the FW Act allows a person to whom a compliance notice is issued an opportunity to rectify an under payment without being subject to civil remedy provisions. The First Respondent’s failure to comply with the Compliance Notice issued has, in these proceedings, caused the Applicant and the Court to spend time and public funds in dealing with civil remedy proceedings which would not have been necessary had compliance occurred.[30]
[29] Fair Work Ombudsman v Darna Pty Ltd & Anor [2015] FCCA 709.
[30] Fair Work Ombudsman v Darna Pty Ltd & Anor [2015] FCCA 709 at [11].
As I have already observed, so far as the current matter is concerned, the Compliance Notice procedure has been an abject failure in bringing about a prompt restitution to the employees concerned and the saving imposition on the public purse. One of the central purposes of the modern award system and the related enforcement procedures is to ensure all employees have the benefit of the industrial safety net provided by relevant awards.
To be able to enforce the terms of modern awards, Fair Work Inspectors must be able to exercise their compliance powers effectively through investigation and then rectification. When there has been a concerted non-compliance with a Notice issued by a Fair Work Inspector, the Court needs to indicate that such non-compliance will be regarded as a serious matter by reference to the quantum of any penalty imposed.
I accept that the failure to comply with a Compliance Notice has the potential to undermine the entire purpose of the relevant statutory regime. If an employer does not accept the contents of any Notice served upon it, the regime provides formal mechanisms of review.[31]
[31] Fair Work Ombudsman v Corporation Sun Pty Ltd [2020] FCCA 2849 at [63] (Kendall J).
In Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2), Marshall J said as follows:
It is important to ensure that the protection afforded by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless respected.[32]
[32] Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29] (Marshall J).
In imposing a penalty to reflect general deterrence, the Court must impose fines that cannot be seen by others as the cost of doing business.[33]The role of general deterrence in fixing appropriate penalty is demonstrated by what Lander J said in Ponzio v B & P Caelli Constructions Pty Ltd,[34] namely:
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 likeminded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty (citations omitted).
[33] Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290 at [27] (Flick J).
[34] Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 at [93] (Lander J).
In my view, it is important that employers recognise that compliance notices are significant and are thus encouraged to manage their business so that errors, including innocent ones, can be rectified quickly and cheaply for the benefit of both business and employee. These considerations are applicable to both large and small employers.
I consider the issues raised by the payslip violation to be particularly serious and therefore deserving of a significant level of disapprobation by the Court. In my view, it was a calculated attempt to deceive. A strong message must be sent to the community regarding the centrality of accurate payslips in the industrial system. In this context, I accept Ms Walker’s submissions, in the following terms, regarding deterrence in the current matter:
The Applicant submits that there is a need to send a message to all employers including those in the cleaning industry that contraventions relating to false or misleading payslips and deliberate refusals to comply with Compliance Notices where there are admitted failures to meet employee obligations are serious and unacceptable.
The need for general deterrence in this case is reinforced by the fact that for the industrial cleaning industry, the Applicant's data analysis records that there is a high degree of disputes by reference to the number of employees in the industry, and that 28% of disputes within the industry and 16% of the Applicant's disputes in the industry in the financial year ending 30 June 2022 related to visa holders.[35]
[35] See Applicant’s submissions on Penalty filed 27 October 2022 at [50] – [51]
THE CALCULATION OF PENALTIES
As previously indicated the maximum penalty available for both offences is one of $19,980.00. The FWO asserts that the seriousness of the offending warrants a penalty of 80% of these maximum. It is submitted that, notwithstanding the fact that Mr Neubauer is to be approached as a first offender, the seriousness of the breaches, particularly in respect of the dishonest and calculated use of a false ABN, do not justify any more significant discount, particularly when his significant lack of cooperation is considered.
I agree with this submission. In addition, given that Mr de Souza remains out of pocket in respect of his entitlements, this is a further major factor which militates against any greater discount being made. These were significant infractions and Mr Neubauer has, in effect, thumbed his nose at both the FWO and Mr de Souza. As such, issues of deterrence must loom large.
The next step is to look at the aggregate of the penalties in total and consider whether the total penalty is an appropriate one when the circumstances of the offending are considered. As previously indicated this has been described as a process of intuitive synthesis. Does the total penalty appear to be correct in aggregate?
This has been characterised as the Court having a last look at the total just to see whether it looks wrong.[36]The application of the totality principle is not to be automatically applied and some form of discount invariably given. It is a safeguard consideration directed to avoid injustice or unfairness. In this regard, the FWO proposes a further discount of 10%. I will adopt this course.
[36] See Mornington Inn Pty Ltd v Jordon [2008] FCAFC 70 at [91] (Stone and Buchanan JJ).
At the end of this process, I propose to impose a penalty of $13,986.00 on Mr Neubauer. I will make the declarations sought by the FWO and require the respondent to reimburse Mr de Souza the sums due to him and make the other orders and declarations as sought by the FWO.
For all these reasons the orders of the Court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 3 March 2023
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