Fair Work Ombudsman v Nilkanth Enterprise Pty Ltd
[2024] FedCFamC2G 687
•1 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Nilkanth Enterprise Pty Ltd [2024] FedCFamC2G 687
File number(s): MLG 1105 of 2023 Judgment of: JUDGE J YOUNG Date of judgment: 1 August 2024 Catchwords: INDUSTRIAL LAW – FAIR WORK – applicant seeks declaration of contraventions of the Fair Work Act 2009 (Cth) – contravention of civil remedy provisions – penalties sought - underpayment – where respondent cooperated by signing statement of agreed facts – where underpayment has since been rectified – declarations of contraventions and penalty orders made. Legislation: Corporations Act 2001 (Cth)
Fair Work Act 2009 (Cth) ss 3(b), 12, 14, 539(2), 545(1), 546, 550, 687(1), 700(1), 701, 716(5),
793(1)
General Retail Industry Award 2020
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8
CFMMEU v ABCC [2018] FCAFC 97
Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (In Liq) (No 4) [2021] FCA 1242
Fair Work Ombudsman v IE Enterprises Pty Ltd [2021] FCA 60
Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290
Fair Work Ombudsman v Yuxuan Group Pty Ltd [2023] FedCFamC2G 1081
Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68,
Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65
Trade Practices Commission v CSR Ltd [1990] FCA 762
Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41
Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 611
Division: Division 2 General Federal Law Number of paragraphs: 52 Date of hearing: 15 July 2024 Place of hearing: Melbourne Solicitor for the Applicant: Ms Stolzenhain of the Office of the Fair Work Ombudsman Solicitor for the Respondents: Mr Mohamed of Starnet Legal Pty Ltd ORDERS
MLG 1105 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: NILKANTH ENTERPRISE PTY LTD
First Respondent
ASHVINKUMAR MAVJIBHAI CHAVAN
Second Respondent
ORDER MADE BY:
JUDGE J YOUNG
DATE OF ORDER:
1 AUGUST 2024
THE COURT DECLARES THAT:
1.The First Respondent contravened s 716(5) of the Fair Work Act 2009 (Cth) (FW Act) by failing to comply with the Compliance Notice issued to the First Respondent on 13 October 2022.
2.The Second Respondent was involved, within the meaning of s 550(2) of the FW Act, in the Contravention by the First Respondent of section 716(5) of the FW Act declared at Order 1 herein and is taken to have contravened that provision.
THE COURT ORDERS THAT:
3.Pursuant to s 546(1) of the FW Act, the First Respondent pay a pecuniary penalty in the amount of $6,660 to the Commonwealth within 28 days of the date of these Orders.
4.Pursuant to s 546(1) of the FW Act, the Second Respondent pay a pecuniary penalty in the amount of $1,332 to the Commonwealth within 28 days of the date of these Orders.
5.The Applicant have liberty to apply on seven days’ notice in writing in the event of noncompliance with Order 3 or 4 herein.
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 J YOUNG:
Before the Court is an application by the Fair Work Ombudsman (FWO) for declarations that the respondents have contravened several civil remedy provisions of the Fair Work Act 2009 (Cth) (Act) and for the imposition of penalties in respect of those contraventions.
BACKGROUND
The relevant facts are agreed as summarised in the following paragraphs.
The Applicant is the Fair Work Ombudsman (FWO). The FWO is and was at all materials times:
(a)a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to s 687(1) of the Act;
(b)a Fair Work Inspector pursuant to s 701 of the Act; and
(c)a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions pursuant to s 539(2) of the Act.
The First Respondent is and was at all relevant times:
(a)a company incorporated under the Corporations Act 2001 (Cth) and registered since 5 August 2016;
(b)a “constitutional corporation” within the meaning of section 12 of the Act;
(c)a “national system employer” within the meaning of section 14 of the Act;
(d)the operator of a greengrocer selling fruit, vegetables, meats and groceries under the trading name Strawberry Point (Business) with a registered office located at Unit 2, 18 Cornhill Street, Ferntree Gully in the State of Victoria (Registered Office); and
(e)by reason of the matters pleaded in paragraphs 4(a) to 4(d) above, covered by the Act in respect of its employees.
The Second Respondent is and was at all relevant times:
(a)a natural person capable of being sued;
(b)the sole director of the First Respondent since 22 March 2018;
(c)the sole shareholder of the First Respondent;
(d)a person with actual or apparent responsibility for:
(i)the operation, management and control of the First Respondent; and
(ii)ensuring the First Respondent complied with its legal obligations under the Act; and
(e)a person whose conduct (engaged in on behalf of the First Respondent and within the scope of his actual or apparent authority) is taken to be that of the First Respondent pursuant to section 793(1) of the Act.
In or around June 2022, the FWO commenced an investigation into the First Respondent’s compliance with the Act in respect of its employment of Sana Banu (Employee). During her relevant employment period with the First Respondent, the Employee held an international student visa. The investigator, Fair Work Inspector Ryan Keyhoe (FWO Inspector) is, and was at all material times, appointed under s 700(1) of the Act.
On 13 October 2022, the FWO Inspector gave a compliance notice (Notice) to the First Respondent, having formed a reasonable belief that in respect of the Employee’s employment the First Respondent had contravened the following clauses of the General Retail Industry Award 2020 (Award):
(a)between 3 May 2021 and 26 September 2021, clauses 17.1 and 11.3 – casual minimum wages;
(b)between 27 September 2021 and 23 May 2022, clauses 17.1 and 11.1 – casual minimum wages; and
(c)clause 22.1(b) – Saturday and Sunday casual penalty rates.
The Notice required the First Respondent, by 11 November 2022, to take a arrange of actions to calculate and remedy the direct effects of the identified contraventions and keep a record of the same. The Notice also required the First Respondent, by 18 November 2022, to provide evidence to the FWO of compliance with the actions required by the Notice, including proof of payment to the Employee.
The First Respondent failed to comply with the Notice.
On 21 June 2023 proceedings were commenced by way of Application and a Statement of Claim.
On 20 February 2024, the First Respondent rectified the effects of its non-compliance with the Notice by paying the Employee the agreed total underpayment amount, being $5,474.00.
On 23 February 2024 the parties filed a Statement of Agreed Facts which, amongst other things, provided that:
(1)the First Respondent contravened s 716(5) of the Act by failing to comply with the Notice issued to the First Respondent on 13 October 2022; and
(2)the Second Respondent was involved, within the meaning of s 550(2) of the Act in the First Respondent’s contravention of s 716(5) of the Act and pursuant to s 550(1) of the Act is taken to have contravened s 716(5).
DOCUMENTS RELIED UPON
The FWO relies upon the following documents:
(1)the Application filed on 21 June 2023;
(2)the Statement of Claim filed 21 June 2023;
(3)the Statement of Agreed Facts filed on 23 February 2024;
(4)the affidavit of FWO Inspector Ms Tran filed 8 March 2024;
(5)the FWO’s written submissions filed on 5 April 2024; and
(6)the FWO’s written submission in reply filed on 1 July 2024.
The Respondents rely upon the following documents:
(1)the Respondents’ Response filed 30 November 2023; and
(2)the Respondents’ written submissions filed on 16 June 2024.
THE CONTRAVENTIONS
Section 716(5) and 550(1) of the Act are civil remedy provisions.
A fair work inspector may apply to this Court for orders in relation to contraventions of ss 716(5) and 550(1): s 539(2). The Court may make any order it considers appropriate if satisfied that a person has contravened a civil remedy provision: s 545(1) The Court may also make a pecuniary penalty order for such contraventions: s 546.
I am satisfied that the Statement of Claim filed in this matter and upon which the FWO relies, complies with the rules of pleading and properly pleads a cause of action that supports the grant of relief. In particular, I am satisfied that the facts alleged in the Statement of Claim and the admissions of the Respondents in the Statement of Agreed Facts establish that the First Respondent contravened s 716(5) by failing to comply with the Notice and that the Second Respondent was involved, pursuant to s 550(1), and within the meaning of s 550(2) of the Act, in the First Respondent’s contravention of s 716(5) by failing to comply with the Notice.
The Court has wide discretion to make declarations. Having regard to the admissions of the Respondents and in the particular circumstances of this case, I am satisfied that this is an appropriate case for declaratory relief.
DETERMINATION OF PENALTIES
The Court’s power to impose pecuniary penalties resides in s 546(1) of the Act.
Section 546(1) permits the Court to impose a pecuniary penalty “that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.”
In light of the admissions of the Respondents, that state of satisfaction exists. It falls to determine what level of penalty (if any) is appropriate as against the Respondents in light of the established contraventions.
The single contravention of s 716(5) by the First Respondent, being a corporation, attracts a maximum penalty of $33,300 (calculated based on the penalty unit amount which applied at the time of the contravention). The Second Respondent also engaged in a single contravention by their involvement pursuant to s 550(1) and as an individual also attracts a maximum penalty of $6,600: ss 546(2)(a) and 539(2).
The FWO submitted that an appropriate total penalty is:
(a)$10,500 for the First Respondent’s contravention (31% of the maximum inclusive of a 20% discount); and
(b)$2,100 for the Second Respondent's contravention (31% of the maximum inclusive of a 20% discount).
Factors relevant to the Court’s discretion
As recently affirmed by the High Court of Australia, the purpose of a civil penalty under the regime provided by the Act is primarily, if not wholly, protective in the promotion of the public interest in compliance with the provisions of the Act and in deterrence of further contraventions: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13, [15]-[16] (Pattinson) citing the plurality in the Agreed Penalties Case and French J in Trade Practices Commission v CSR Ltd [1990] FCA 762. An “appropriate” penalty being one that “strikes a reasonable balance between oppressive severity and the need for deterrence in a particular case”: Pattinson, [41].
The task of assessing what amount to impose involves the selection of a figure taking into account all factors relevant to the particular case: Wong v The Queen [2001] HCA 64; (2001) 207 CLR 582, 611, [75] (Gaudron, Gummow and Hayne JJ); Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357, 373-375, [37] (Gleeson CJ, Gummow, Hayne and Callinan JJ); Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53; (2018) 260 FCR 68, 84, [55] (Allsop CJ, Davies and Wigney JJ); Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25, 36 [44] (Jagot, Yates and Bromwich JJ) as cited by Snaden J at [26] in Australian Building and Construction Commissioner v Pattinson [2019] FCA 1654. The oft cited decision of French J in Trade Practices Commission v CSR Ltd [1990] FCA 762; [1991] ATPR 41-076 at [42] listed those factors relevant to an overall assessment of penalty, and were restated by the Full Court in CFMMEU v ABCC [2018] FCAFC 97 at [20] as follows:
...the nature, character and seriousness of the conduct; the loss and damage caused; the circumstances in which the conduct took place; the size of the contravener and its degree of power; the deliberateness of the conduct and the time over which it occurred; the degree of involvement of senior officials or management; the culture of the organisation as to compliance or contravention; and, any co-operation with the regulator and contrition.
This is not an exhaustive list. Further, each case warrants an “idiosyncratic” approach and a careful analysis of all relevant circumstances, as was stated in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCA 8 at [12] (Graham J):
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.
Nature of the conduct
The relevant conduct in the present case is the First Respondent’s failure to comply with the Notice and the Second Respondent’s involvement in that non-compliance, having been responsible to ensure that the First Respondent complied with its obligations under the Act at the relevant times. Compliance with the Notice required the First Respondent to prepare certain calculations and take specified remedial action by 11 November 2022 and provide reasonable proof of this to the FWO by 18 November 2022. The Respondents did not comply with the Notice. The subject matter of the Notice was the underpayment of one former employee in the total amount of $5,474.00 for various contraventions of the Award. However, it is uncontested that on 20 February 2024 the First Respondent rectified the effects of its non-compliance with the Notice by paying the Employee the agreed total underpayment amount, being $5,474.00.
The Respondents submit that they failed to comply with the Notice because it was not received. I reject that submission. Firstly, the Statement of Agreed Facts sets out that the FWO Inspector “gave” the Notice to the First Respondent via express post to the Registered Office of the First Respondent and via email to the Second Respondent. Secondly, the Statement of Agreed Facts sets out that the Second Respondent agreed that he had actual knowledge “at all relevant times” of the Notice that was given to the First Respondent, that the First Respondent failed to comply with the Notice, and that he was an intentional participant in the First Respondent’s failure to comply with the Notice.
The Respondents also submit that they run other business and have not previously appeared in any Court in respect of any contraventions of the Act. I accept that submission and have had regard to it.
Loss
In this case, the period between the Notice being issued and rectification of the underpayment was a period of approximately 15 months. I consider the delay in the Employee receiving their lawful entitlements is a relevant loss flowing from the contravention. There is also the wastage of public resources in pursuit of this matter, including the commencement of this litigation. These are all factors to be taken into consideration of the penalty in the present case.
Deliberateness
The Respondents submit that they failed to comply with the Notice because it was not received. I reject that submission. I refer to and repeat my comments at paragraph [28] above.
The Respondents also submit that they can be taken to have expressed remorse for their conduct by complying with the Notice, including making the underpayment and filing a Response on 30 November 2023 where they consented to the orders sought in the FWO Statement of Claim. However, the First Respondent did not comply with the Notice. Rather, the First Respondent rectified the effects of its non-compliance with the Notice by making payment to the Employee at a later point in time.
The Respondents also submit that their moral culpability is reduced because they delegated responsibility for compliance with the Notice to “Mr Dushan” and therefore their case can be differentiated from “cases in which small business owners are directly and knowingly involved in the underpayment of employees”. This submission is rejected. Firstly, there is no evidence before the Court to support this assertion. Secondly, the Statement of Agreed Facts sets out that the Second Respondent agreed that he had actual knowledge “at all relevant times” of the Notice that was given to the First Respondent, that the First Respondent failed to comply with the Notice, and that he was an intentional participant in the First Respondent’s failure to comply with the Notice.
Size of the business, management involvement and financial circumstances
There is no specific evidence before the Court as to the size of the First Respondent’s business. The Australian Securities and Investment Commission (ASIC) search indicates that the Second Respondent is the sole director and shareholder of the First Respondent.
By their own admission, the Second Respondent was the person with actual or apparent authority over the Business and responsible for ensuring the First Respondent’s compliance with the Notice and involved in the First Respondent’s contravention. ASIC searches also indicate that the Second Respondent is also the director and secretary of another registered entity.
The Respondents submit that:
(a)they lost significant income during COVID-19 due to loss of wholesale customers;
(b)the Second Respondent’s trading income has significantly reduced since incorporation in 2018 to now be approximately 10% of its initial trading income;
(c)the Second Respondent’s first business failed, forcing him to sell the family home to repay loans obtained to purchase that business; and
(d)the Second Respondent is the father of 3 children.
There is, however, no evidence of these matters before the Court nor any evidence which established any serious difficulty with paying a penalty if ordered to do so. In any event, the size and financial circumstances of an employer do not excuse an employer of its obligations to comply with workplace laws.
Corrective action, cooperation with the FWO and contrition
As set out above, the First Respondent has now rectified the effects of its non-compliance. However, as also set out above, this did not occur until some eight months after these proceedings were commenced and some 15 months after the Notice required the action to be taken.
The Respondents filed a Response on 30 November 2023 where they consented to the orders sought in the FWO Statement of Claim, however this was prior to rectification. Further, the Respondents have spared some cost and complexity by working with the FWO to submit an agreed statement of facts and their admissions. The FWO concedes that a discount is justified on the basis that the Respondents have demonstrated a willingness to facilitate the court of justice through the proceedings.
These are all matters I consider relevant and find that a discount of 20% ought be applied to any penalty ordered.
Compliance with minimum standards
It is an object of the Act to promote a guaranteed safety net of fair, relevant, and enforceable minimum terms and conditions for all employees, regardless of their visa status or other vulnerabilities: s 3(b) of the Act; Fair Work Ombudsman v IE Enterprises Pty Ltd [2021] FCA 60 at [77] (IE Enterprises). Underpayment of employees and the exploitation of vulnerable employees undermines this core object of the Act which is fundamental to the effectiveness of workplace regulation in Australia: IE Enterprises at [77]. The mere fact that a person is young, a citizen of another country, or in Australia on a visa does not necessarily lead to the conclusion that those persons are vulnerable employees: Fair Work Ombudsman v Yuxuan Group Pty Ltd [2023] FedCFamC2G 1081 at [66]. However, the vulnerability of employees on temporary visas, such as the Employee, has been judicially recognised as “notorious”: Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (In Liq) (No 4) [2021] FCA 1242 at [740].
A further and important consideration in this case is the need for compliance with the statutory framework. The statutory framework concerning compliance notices is an important mechanism for an inspector to deal with non-compliance with minimum entitlements in the Act as an alternative to commencing litigation. It also provides a means of early resolution and rectification without penalty.
The failure to comply with a statutory notice issued by the FWO is serious and such conduct ultimately undermines the Act’s enforcement framework and the safety net of entitlements it is designed to protect.
Deterrence
General deterrence must serve a purpose such that the penalty is not seen by others as just “the cost of doing business”: Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290, [27]. In order to be useful as a general deterrent, a penalty “should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by likeminded persons or organisations’: Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65, [93] (Lander J).
In my view, there is a need for general deterrence in this matter, to emphasise the importance of an effective compliance framework and at a sufficient level to impress upon other employers the importance of complying with the legal obligations owed to their employees. Further, the FWO’s ‘Industry profile and FWO Interactions’ report (Industry Report) on the Supermarket and Grocery Stores industry (Industry) shows that, across the reporting period of July 2020 to December 2023:
(a)there was a “high” overall dispute rate in the Industry;
(b)21% of Industry disputes relates to visa holders; and
(c)the highest number of visa disputes involved an international student visa, being the class of visa held by the Employee during her employment with the First Respondent.
Further, the contravention occurred in the 2022-23 financial year and the Industry Report relevantly shows that 32% of Industry disputes in that financial year related to visa holders.
I also consider this is a case where there is a need for specific deterrence. Although there is no evidence of whether the First Respondent currently employs any employees, it is still trading and the Respondents have demonstrated a disregard for their obligations under the Act by failing to comply with the Notice. Further, the Second Respondent continues to be involved in the Business and is associated with another business, giving rise to, at least, the potential risk that they may be involved in the management of employees and the determination of their entitlements.
THE APPROPRIATE PENALTY
When all of the above factors are considered, I am satisfied that it is appropriate to impose a pecuniary penalty on the First Respondent for its contravention of s 716(5) and on the Second Respondent for their involvement in that contravention pursuant to s 550(1) of the Act.
Weighing all of the above factors, I consider it is appropriate to fix the penalty at 40% of the maximum for both the First Respondent and the Second Respondent, less a 20% reduction on account of the corrective action, and cooperation, in the amounts of $6,660 and $1,332 respectively.
In my view, this is a proportionate response to the respective contraventions of ss 716(5) and 550(1) and strikes a reasonable balance between oppressive severity and the need for both general and specific deterrence in this particular case.
The FWO sought an order that the penalty be payable to the Commonwealth of Australia within 28 days of these orders.
For the reasons set out above, I make the declarations and orders set out at the commencement of this judgment.
I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment of Judge J Young. Associate:
Dated: 1 August 2024
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