Fair Work Ombudsman v Nobrace Centre Pty Ltd (in Liquidation)
[2019] FCCA 2979
•15 November 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v DESIRE FOOD PTY LTD & ANOR | [2019] FCCA 2979 |
| Catchwords: INDUSTRIAL LAW – Penalty hearing – where non-Australian citizens were underpaid by a franchisee – Crust Pizza – multiple breaches of the Fast Food Industry Award 2010 – breach of the Fair Work Act 2009 (Cth) – provision to the Fair Work Ombudsman of false or misleading information or documents – admitted contraventions – where the contraveners have repaid underpayments. |
| Legislation: Fair Work Act 2009 (Cth), ss.44, 45, 90(2), 536(2), 536(1), 546, 550, 557, 718A |
| Cases cited: Fair Work Ombudsman v Amritsaria Four Pty Ltd [2016] FCCA 968 Kelly v Fitzpatrick [2007] FCA 1080 Markarian v R [2005] HCA 25 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | DESIRE FOOD PTY LTD |
| Second Respondent: | CHERN MING LEE |
| File Number: | MLG 2924 of 2018 |
| Judgment of: | Judge McNab |
| Hearing date: | 31 July 2019 |
| Date of Last Submission: | 31 July 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 15 November 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Tracey |
| Solicitors for the Applicant: | Fair Work Ombudsman |
| Counsel for the First and Second Respondents: | Ms Levine |
| Solicitors for the First and Second Respondents: | LGM Advisors |
THE COURT DECLARES BY CONSENT THAT:
Declarations that the First Respondent (Desire Food) contravened the following civil remedy provisions:
(a)section 45 of the Fair Work Act 2009 (Cth) (‘FW Act’), by failing to pay each of Mr Danish Naqash (‘Mr Naqash’), Mr Ali Shah Motani (‘Mr Motani’), Mr Mohit Verma (‘Mr Verma’), Mr Benipal Navraj Singh (‘Mr Singh’), Mr Qamar Awan (‘Mr Awan’) and Mr Zohaib Khan (‘Mr Khan’) (collectively the ‘Casual Employees’) the minimum rates of pay required by clause 17 of the Fast Food Industry Award 2010 (‘Fast Food Award’) and clause A.3.5 of Schedule A to the Fast Food Award;
(b)section 45 of the FW Act, by failing to pay the Casual Employees the casual loading required by clause 13.2 of the Fast Food Award;
(c)section 45 of the FW Act, by failing to pay each of Mr Naqash, Mr Motani, Mr Verma, Mr Awan, Mr Franz Yuan Delos Santos (‘Mr Santos’) and Mr Khan the penalty rates for hours worked between 9:00pm and midnight Monday to Friday, as required by clause 25.5(a)(i) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;
(d)section 45 of the FW Act, by failing to pay Mr Naqash, Mr Motani, Mr Verma, Mr Singh, Mr Awan, Mr Santos and Mr Khan (‘the Employees’) the Saturday penalty rates required by clause 25.5(b) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;
(e)section 45 of the FW Act, by failing to pay Mr Naqash, Mr Motani, Mr Verma, Mr Awan, Mr Santos and Mr Khan the Sunday penalty rates required by clause 25.5(c)(ii) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;
(f)section 45 of the FW Act, by failing to pay Mr Naqash, Mr Awan and Mr Khan the public holiday penalty rates required by clause 30.3 of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;
(g)section 45 of the FW Act, by failing to pay each of the Employees the special clothing allowance required by clause 19.2(b)(ii) of the Fast Food Award;
(h)sections 44 and 90(2) of the FW Act, by failing to pay Mr Santos his untaken paid annual leave at termination of employment;
(i)section 45 of the FW Act, by failing to provide Mr Naqash with meal breaks as required by clause 27 of the Fast Food Award;
(j)section 45 of the FW Act, by failing to provide Mr Naqash with a transport allowance as required by clause 19.6 of the Fast Food Award;
(k)section 45 of the FW Act, by failing to engage Mr Naqash, Mr Motani, Mr Singh, Mr Awan and Mr Khan for a minimum of 3 hours per day as required by clause 13.4 of the Fast Food Award;
(l)section 536(1) of the FW Act, by failing to provide Mr Naqash with a pay slip within one working day of payment of his wage;
(m)section 536(2) of the FW Act, by failing to ensure that pay slips that it gave to the Employees included information prescribed by the Fair Work Regulations 2009 (Cth);
(n)section 45 of the FW Act, by failing to pay Mr Naqash on a weekly basis as required by clause 22 of the Fast Food Award; and
(o)section 718A of the FW Act, by providing Fair Work Inspector Amanda Teow with information and documents that it knew to be false or misleading.
A declaration that the Second Respondent, Chern Ming Lee, also known as "Rick Lee" (Mr Lee), was involved, pursuant to section 550 of the FW Act, in the contraventions committed by Desire Food, as set out in paragraphs:
(a)1 (a) to (g) and (k) above, from 13 September 2016; and
(b)1 (h), (I), (m) and (o) above.
Orders that:
(a)Desire Food pay penalties in the amount of $63,500 pursuant to section 546(1) of the FW Act for its contraventions set out at paragraph 1 above; and
(b)Mr Lee pay penalties in the amount of $11,900 pursuant to section 546(1) of the FW Act for his involvement in Desire Food's contraventions as set out at paragraphs 1 above.
An order pursuant to section 546(3)(a) of the FW Act requiring Desire Food and Mr Lee to pay their respective penalty amounts to the Consolidated Revenue Fund of the Commonwealth within one hundred and twenty (120) days of the order for payment.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2924 of 2018
| FAIR WORK OMBUDSMAN |
Applicant
And
| DESIRE FOOD PTY LTD |
First Respondent
| CHERN MING LEE |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This matter arises by application filed on 26 September 2018 by the Fair Work Ombudsman (‘FWO’).
Prior to the matter coming for trial on 31 July 2019, many of the issues in the matter had resolved by agreement. This included the declarations the Court should make with respect to the First Respondent, Desire Food Pty Ltd (ACN 155 477 017) (‘Desire Food’) and the Second Respondent, Mr Chern Ming (‘Mr Lee’).
The issue that remained for the Court was the quantum of the penalties that should issue against Desire Food and Mr Lee.
Background
Desire Food is a corporate entity that previously operated a Crust Pizza franchise, trading as ‘Crust Gourmet Pizza Bar Cheltenham’. Mr Lee was the director of Desire Food from 2 February 2012 and had a 20% shareholding. Mr Lee was, at all material times, involved in Desire Food’s operation and responsible for many tasks, such as management and supervision of industrial agreements, staff pay rates and record keeping.
The FWO, by their originating application and an Amended Statement of Claim of 12 April 2019, alleged that:
a)Desire Food contravened provisions of the Fast Food Industry Award 2010 (‘Fast Food Award’) and the Fair Work Act 2009 (Cth) (‘the Act’); and
b)Mr Lee was involved, pursuant to s 550 of the Act, in the majority of Desire Food’s contraventions.
The FWO alleged that the contraventions of the First and Second Respondents (collectively, ‘the Respondents’) related to 7 employees (‘Employees’). The FWO separate these into two groups:
a)the Naqash Employment Period (‘Naqash Employment Period’), consisting of Mr Naqash who was employed as a delivery driver for 2 years and 7 months between the period of 19 October 2013 and 14 May 2016; and
b)the Sample Employee Period (‘Sample Employee Period’), consisting of Mr Motani, Mr Verma, Mr Singh, Mr Awan, Mr Santos and Mr Zhan.
The FWO alleged that the underpayments were in the sum of:
a)$30,416.10 for Mr Naqash, having been paid between $13 to $18 per hour plus $1 per delivery he made (whilst using his own car); and
b)$5,309.47 for the Sample Employee Period, for the period of 22 May 2017 to 2 July 2017.
Statement of agreed facts
On 26 February 2019, the parties filed a Statement of Agreed Facts in relation to this matter.
In that Statement of Agreed Facts, the Respondents agreed that:
a)Mr Naqash was underpaid $30,416.10; and
b)the Sample Employee Period employees were underpaid $5,309.47.
On 20 January 2018 and 1 August 2018, Desire Food rectified these underpayments and paid the Employee’s their entitlements.
The FWO and Desire Food are in further agreement as to the Court making declarations that Desire Food contravened the following civil remedy provisions:
(a) section 45 of the Fair Work Act 2009 (Cth) (FW Act), by failing to pay each of Mr Danish Naqash (Mr Naqash), Mr Ali Shah Motani (Mr Motani), Mr Mohit Verma (Mr Verma), Mr Benipal Navraj Singh (Mr Singh), Mr Qamar Awan (Mr Awan) and Mr Zohaib Khan (Mr Khan) (collectively the Casual Employees) the minimum rates of pay required by clause 17 of the Fast Food Industry Award 2010 (Fast Food Award) and clause A.3.5 of Schedule A to the Fast Food Award;
(b) section 45 of the FW Act, by failing to pay the Casual Employees the casual loading required by clause 13.2 of the Fast Food Award;
(c) section 45 of the FW Act, by failing to pay each of Mr Naqash, Mr Motani, Mr Verma, Mr Awan, Mr Franz Yuan Delos Santos (Mr Santos) and Mr Khan the penalty rates for hours worked between 9:00pm and midnight Monday to Friday, as required by clause 25.5(a)(i) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;
(d) section 45 of the FW Act, by failing to pay Mr Naqash, Mr Motani, Mr Verma, Mr Singh, Mr Awan, Mr Santos and Mr Khan (the Employees) the Saturday penalty rates required by clause 25.5(b) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;
(e) section 45 of the FW Act, by failing to pay Mr Naqash, Mr Motani, Mr Verma, Mr Awan, Mr Santos and Mr Khan the Sunday penalty rates required by clause 25.5(c)(ii) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;
(f) section 45 of the FW Act, by failing to pay Mr Naqash, Mr Awan and Mr Khan the public holiday penalty rates required by clause 30.3 of the Fast Food Award and clause A. 7.3 of Schedule A to the Fast Food Award;
(g) section 45 of the FW Act, by failing to pay each of the Employees the special clothing allowance required by clause 19.2(b )(ii) of the Fast Food Award;
(h) sections 44 and 90(2) of the FW Act, by failing to pay Mr Santos his untaken paid annual leave at termination of employment;
(i) section 45 of the FW Act, by failing to provide Mr Naqash with meal breaks as required by clause 27 of the Fast Food Award;
(j) section 45 of the FW Act, by failing to provide Mr Naqash with a transport allowance as required by clause 19.6 of the Fast Food Award;
(k) section 45 of the FW Act, by failing to engage Mr Naqash, Mr Motani, Mr Singh, Mr Awan and Mr Khan for a minimum of 3 hours per day as required by clause 13.4 of the Fast Food Award;
(I) section 536(1) of the FW Act, by failing to provide Mr Naqash with a pay slip within one working day of payment of his wage;
(m) section 536(2) of the FW Act, by failing to ensure that pay slips that it gave to the Employees included information prescribed by the Fair Work Regulations 2009 (Cth);
(n) section 45 of the FW Act, by failing to pay Mr Naqash on a weekly basis as required by clause 22 of the Fast Food Award; and
(o) section 718A of the FW Act, by providing Fair Work Inspector Amanda Teow with information and documents that it knew to be, or was reckless as to whether they were, false or misleading.
There was disagreement as to order O (above), but was later admitted by the Respondents.
The FWO and Mr Lee were in agreement that Mr Lee was involved in, pursuant to s 550 of the Act, the contraventions set out at [11](a) to (g), (k) from 13 September 2016 and [11](h), (l), (m) and (o).
Issues to be determined
As the parties have consented to the breaches, what remains is for the Court to determine the appropriate penalty.
I note that the FWO is not seeking penalties in relation to [11](h) (being contravention of ss 44 and 90(2)) or [11](m) (being contravention of s 536(2)) and is content for declarations to be made that contraventions occurred.
Submissions
Both parties recognise that the Court has a broad discretion when imposing pecuniary penalties pursuant to s 546 of the Act. The appropriate penalty is to be determined by an ‘instinctive synthesis’.[1]
[1] Applicant’s submissions, filed 13 June 2019, [19]; Respondent’s submissions, filed 19 July 2019, [7].
Justice Bromwich in Fair Work Ombudsman v NSH North Pty Ltd [2017] FCA 1301 at [36] outlined an approach to assess the appropriate penalty:
(1) Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
(2) Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
(3) Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
(4) Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
(5) Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary
(citations omitted).
I shall adopt this structure.
Identification of each contravention
The 15 contraventions listed at [11] in respect of Desire Food and the 12 contraventions at [13] in respect of Mr Lee are agreed between the parties.
Application of s 557
Section 557 of the Act stipulates that:
(1) For the purposes of this Part, 2 or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.
The FWO submits that the Respondents, while entitled to group breaches of the same provision, are not entitled to group separate provisions of a modern award. The FWO relies on Rocky Holdings Pty Ltd v Fair Work Ombudsman [2014] FCAFC 62 at [11]-[18] and Parker v Australian Building and Construction Commissioner [2019] FCAFC 56 at [283]-[284] (‘Parker’).
The FWO says the contraventions occurring in the Naqash Employment Period and the Sample Employment Period should be treated separately. That is, they should not be grouped. The FWO says this as the knowledge of the Respondents had changed between the two employment periods and the ‘facts giving rise to the contraventions are sufficiently disparate such that it could not be concluded that the contraventions arose out of the same course of conduct’.
The FWO says the Respondents’ level of knowledge had changed during the 12 months between Naqash Employment Period (concluding may 2016) and the Sample Employment Period (commencing roughly 12 months later) as:
a)the franchisor of Crust Pizza, the Retail Food Group, reviewed Desire Food’s books and emailed Desire Food stating that the company should ‘remain vigilant of the award rates and conditions’ in August 2016;
b)Mr Lee admitted to being aware of the Fast Food Award around September 2016 (and by virtue of being the guiding mind of the company, Desire Food is also taken to have knowledge); and
c)Mr Lee did not take proactive steps to adjust the pay rate after being questioned by Fair Work Inspector Teow on 22 May 2017 (‘Inspector Teow’).
The Respondents accept that it is open to the Court to accept the FWO’s approach to grouping. The Respondents also appear to accept that there are two distinct periods.
Whether further grouping should occur
The FWO accepts that there is a common law principle allowing the Court to group separate contraventions where the contraventions overlap or, ‘if [the contraventions were] treated separately, [this] would result in the Respondents being penalised twice for substantially similar conduct’.[2] The FWO says that the contraventions have distinct legal and factual characters, and it is better to deal with any overlapping conduct through the totality principle.
[2] Applicant’s submissions, filed 13 June 2019, [26].
In response to the FWO’s submissions, the Respondents contend that there is significant factual similarities of the contraventions and this means that grouping should occur.
The Respondents claim that the “unsociable hours” loading for, amongst others, Saturday and Sunday penalty rates, public holiday rates and Monday-Friday night time shifts should be grouped into a single contravention for each of the two periods. The Respondents rely on Judge Jones in Fair Work Ombudsman v First Group of Companies (Deregistered) & Ors [2018] FCCA 1228 where Her Honour grouped contraventions of the “unsociable hours”.
The Respondents assert it is just to group in such a manner as it would ‘ensure that the Respondents are not penalised more than once for the same or related conduct’.[3]
[3] Respondent’s submissions, filed 19 July 2019, [16].
The Respondents say that should their grouping be accepted, then:
(a) there were nine contraventions by Desire Food during the Naqash Employment Period; (b) there were six contraventions by Desire Food during the Sample Employment Period; and (c) Mr Lee was involved in seven contraventions.
The Respondents say, lastly, that should the Court not group the contraventions in the manner proposed, the Court ‘ought to ensure a just result by substantially reducing the overall penalty on totality to account for the factual commonality underpinning a number of the contraventions’.[4] The Respondents rely on the Full Federal Court in Parker at [274] that the ‘course of conduct’ and the ‘totality principle’ ‘provide different solutions to the issue of a multiplicity of offences or contraventions and how best to arrive at a just result, which is part of the reason why they often must be considered separately, but in the context of one another’.
[4] Respondent’s submissions, filed 19 July 2019, [17].
In reply, the FWO submit that the Respondents’ proposed grouping is inapt. The FWO note that s 45 of the Act states ‘a person must not contravene a term of a modern award’ (the FWO’s emphasis).[5] The FWO buttress this argument by citing Bromwich J in Fair Work Ombudsman v Lohr [2018] FCA 5 at [34] who stated, ‘the fact of flat rates of pay cannot operate to deny the multiplicity of contraventions that this approach was found by his Honour to have produced’.
[5] Applicant’s submissions in Reply, filed 25 July 2019, [9].
The FWO note that the Respondents’ argument that there was the same ‘course of conduct’ across each contravention is not consistent with Mr Lee informing Inspector Teow that Desire Food paid 1.5 times the normal rate on public holidays and that the correct amount was not paid due to a desire to keep operating costs down. The FWO say that the payment of $1 per delivery to Mr Naqash represents an attempt to pay his delivery entitlements, albeit lower than required.
The FWO says that if this Court decides against the FWO’s submissions, that the Court is not bound to impose only one penalty. The FWO says the Court may impose more than one penalty to ensure that the wrongdoing is adequately punished.
The FWO seeks penalties arising from:
Twelve contraventions during the Naqash Employment Period against Desire Food;
Nine contraventions during the Sample Employment Period against Desire Food; and
Ten contraventions against Mr Lee.
Consideration of the penalty in respect of each final group of contraventions
The penalty units over the relevant periods were:
Penalty Unit
Value
28 December 2012 to 30 July 2015 $170 31 July 2015 to 30 June 2017 $180 1 July 2017 to present $210
For the Naqash Employment Period, the award contraventions occurred when the penalty unit changed from $170 to $180, and the contravention of s 536(1) occurred during the penalty period of $170. The FWO says that the higher amount should be taken into account, before considering the lower penalty unit when applying the principle of totality.
For the Sample Employment Period, the penalty unit period was $180 when the award contraventions occurred and $210 when the contravention of s 718A occurred.
The Respondents accept that it is open to the Court to apply the higher penalty unit, but urges the Court to take into account that a lower penalty also applied during the period. I note that the question of whether the higher penalty should be applied is one of some complexity, particularly where the contravening conduct overlaps the date on which the quantum of a penalty is increased: see Fair Work Ombudsman v Grouped Property Services (No. 2) [2017] FCA 557 at [387]-[398]. I see no error in the course urged by the FWO.
If the Court was to adopt the FWO’s approach to the grouping of contraventions the maximum penalties that the Court may impose are:
(a)$1,114,500 for Desire Food being $619,500 for the contraventions occurring in the Naqash Employment period and $495,000 for contraventions in the Sample employment period; and
(b)$104,100 for Mr Lee.
Mitigating or aggravating circumstances
The parties then turned to whether there were any mitigating or aggravating circumstances in relation to the contraventions.
The FWO says that a discount of no more than 15% for cooperation is appropriate given that Mr Lee provided Inspector Teow with false or misleading information and documents.
The FWO says a further reduction of 15% for Desire Food and 10% for Mr Lee on the basis of totality is appropriate.
The FWO, under the heading ‘Summary of Key Factors’ at [44] of their submissions filed 13 June 2019, summarised the factors it says are particularly relevant to the imposition of penalties:
(a) the significant financial loss to Mr Naqash, involving his minimum and basic employment entitlements;
(b) the importance of promoting and ensuring compliance with minimum award standards, and the particular significance of that issue within the fast food industry;
(c) the deliberate conduct in underpaying the Sample Employees, in circumstances where the Respondents knew about the Fast Food Award since at least September 2016. Furthermore, the Respondents were asked about pay rates and the Fast Food Award by Inspector Teow on the first day of the Sample Employment Period, but they took no steps to apply the correct rates of pay; and
(d) the Respondents were aware of their record keeping responsibilities and were told by Inspector Teow not to create documents. Despite this, they still provided false or misleading documents and information to the FWO.
These factors, and others, were expanded on from [45] to [68].
At [69] to [106] of the submissions filed 13 June 2019, the FWO made submissions on the circumstances in which the contraventions occurred, the fact that the Respondents have not previously been found to be in breach, the size and financial circumstances of the business, the deliberateness of the underpayments and provision of false or misleading documents, the involvement of senior management in the contraventions, the cooperation, contrition and corrective actions taken, compliance with minimum standards and, lastly, deterrence.
The Respondents say that it is significant that the underpayments have been rectified. They rely on Riethmuller J in Fair Work Ombudsman v Finn Fish Pty Ltd [2018] FCCA 203 at [20] where His Honour states that:
The primary purpose of the legislation is to ensure that employees receive the minimum rates of pay set by the community through the industrial processes, and that has ultimately been achieved in this case. I proceed on the basis that appropriate corrective action has taken place and employees have now been paid their entitlements.
(the Respondents’ emphasis).
I note that in the same judgment at [28], His Honour also says that:
Ultimately, I am satisfied that the significant factors of making admissions and rectifying underpayments have been carried out by the respondents; however, I am not persuaded that this was a consequence of anything more than the reality that a successful prosecution for contravention would have ensued in any event.
(the Court’s emphasis).
The Respondents say that to the extent compliance is an aim of the FWO, this has already occurred by the corrective action.
The Respondents further say there are mitigating circumstances given that the Respondents entered into a Statement of Agreed Facts early in the proceedings, which dispensed the need for evidence to be lead on whether contraventions occurred. It is said that notwithstanding Mr Lee’s provision of false or misleading documents, he otherwise cooperated with the FWO. The Respondents seek a 30% reduction for both of the Respondents on this basis.
The Respondent’s further assert that is it in their favour that there have been no prior contraventions, that Mr Lee had limited experience running a business and had not intended to break the law, that the Sample Employee Period was short and the underpayments were not significant. Insofar as the FWO argue that some of the Employees were on student visas and were more vulnerable, the Respondents extract Smith J in Fair Work Ombudsman v Amritsaria Four Pty Ltd [2016] FCCA 968 at [60] that:
Many employees are vulnerable to a certain extent and for different reasons: age, employment experience, financial needs, lack of control of record-keeping, and lack of knowledge of workplace rights. As Lucev FM (as his Honour then was) said in Fair Work Ombudsman v Ultra Tune Australia Ltd(2012) 225 IR 326 ; [2012] FMCA 560 at 336 [14], one cannot simply assume that because an employee is a foreign national, he or she is unfamiliar with Australia’s labour practices, or more vulnerable to underpayment or exploitation than any other employee.
The Respondents also say that there is limited specific deterrence in this situation as Desire Food is no longer trading, is a first time contravener, has cooperated with FWO and has taken corrective action. The same is said for Mr Lee: that he is not employed in the fast food industry (he is currently employed as a factory hand), is a first-time contravener, has co-operated with the FWO and expressed regret as to his conduct.
The totality principle: consideration of the overall penalties
The FWO submit that the Court should consider whether the aggregate penalty is appropriate to the conduct, such that the penalty is not oppressive but commensurate with the seriousness of the conduct. A 15% discount for Desire Food and 10% for Mr Lee is said to be appropriate.
The FWO therefore, seek penalties in the range of:
a)$191,336 to $260,154 for Desire Food; and
b)$25,234 to $32,371 for Mr Lee.
The Respondents say that there should be a further 15% reduction on the account of totality.
The Respondents therefore, seek penalties in the range of:
a)$38,779 and $72,203 for Desire Food; and
b)$4,221 and $7,693 for Mr Lee.
FWO’s submission in reply
In Reply, the FWO notes that the Respondents seek penalties in the range of 3-7% of the maximum for Desire Food and 4-7% for Mr Lee.
The FWO says that penalties must be fixed at a level such that the penalty is not merely a cost of doing business, and should reflect the serious and protracted nature of the contravening conduct, Mr Lee’s attempts to mislead the FWO, the impact on the staff who were underpaid (such as Mr Naqash), the deliberateness of the actions and the need for general deterrence. The FWO submits that the Respondents’ proposal does not do this.
The FWO responds to the Respondents’ claims in regard to whether the Court should consider the corrective action as a mitigating factor and whether Mr Lee can be said to have cooperated after having produced false or misleading documents. As a counterpoint to the Respondent’s claims that Mr Lee was inexperienced in the field, the FWO say that Mr Lee had been employed as a manager of the Pizza Bar since 2012 (5 years earlier than the Sample Employment Period) and had been notified by the franchisor (the Retail Food Group) after an audit found him to be in contravention. The FWO say that Mr Lee had significant resources to carry out the business of the Pizza Bar in compliance with the law, but chose not to do so.
Replying to the submission that Mr Lee did not intend to break the law, the FWO note that Mr Lee knowingly provided false or misleading documents to Inspector Teow. The FWO cavils with the submission that because the Sample Employment Period was short, there should be a discount: the FWO note that a sample period is a sample and by nature, limited in time.
The FWO question the Respondent’s claims that Mr Lee has expressed regret. The FWO note that he has not apologised to those he underpaid. This is in circumstances where Mr Lee’s statement of regret was filed after the FWO put this issue to him in its submissions filed 13 June 2019.
Lastly, the FWO responded to the Respondents submissions which focused on specific deterrence, noting that general deterrence is also a consideration.
Consideration
The Court has regard to the factors that may be considered in assessing the appropriate penalty to be imposed for the contravention which are referred to in Kelly v Fitzpatrick [2007] FCA 1080.
The contraventions in the Naqash Employment Period occurred over an extended period of 2.5 years and had a significant effect on Mr Naqash. All the Employees were vulnerable, came from non-English speaking backgrounds and were living in Australia subject to visas. I am also mindful that the underpayments during the Sample Employee Period to a number of the employees were not substantial ($581.96 in respect of Mr Motani, $94.02 in respect of Mr Singh and $77.47 in respect of Mr Santos).
I also accept that Mr Lee had limited experience in running a business and had no formal training in management of the business. He is also a person for whom English is not his primary language. His previous work experience was as a pizza maker, and prior to that, as a pastry and kitchen hand. I also accept that the underpayments have been re-paid as outlined in [10] above. I also accept that the provision of false and misleading documents to the FWO is a serious contravention and further do not accept a submission that Mr Lee did not intend to break or disregard the law when providing the records that are the subject of the contravention.
In relation to the approach to grouping, I adopt the approach submitted by the FWO as the correct approach given that it is the approach endorsed by the Full Court in Rocky Holdings Pty Ltd v Fair Work Ombudsman [2014] FCAFC 62. I also acknowledge the view put by Bromwich J in Fair Work Ombudsman v Lohr [2018] FCA 5 that the payment of a flat rate of pay does not mean that there has not been a multiplicity of breaches.
However, I do accept that the payment of a flat rate of pay which may lead to a modest level of underpayment to the employee can lead to a very wide range of breaches each with very high maximum penalties. The effect of those penalties may be taken into account when fixing a total penalty to be imposed so as to avoid excessive or oppressive punishment. When all the contraventions are lined up, even where there is a substantial discount is given, the result can still be excessive given the number of contraventions triggered by the payment of a flat rate of pay. Further, the level of the penalties sought to be imposed can be distorted if one proceeds by calculating each of the maximum penalties that apply to the myriad contraventions and then applying a discount to the aggregated maximum. As was stated by the plurality in Markarian v R [2005] HCA 25 at [31]:
It follows that careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick. That having been said, in our opinion, it will rarely be, and was not appropriate for Hulme J here to look first to a maximum penalty, and to proceed by making a proportional deduction from it. That was to use a prescribed maximum erroneously, as neither a yardstick, nor as a basis for comparison of this case with the worst possible case.
(citations omitted)
I take into account the cooperation of the Respondents in this proceeding and the fact that all the underpayments have been repaid. The fact of cooperation is significant both in terms of the savings of cost to the FWO and of time to the Court. Where these kinds of matters are not the subject of cooperation and every issue is contested, the hearing time extends into multiple days and often involves affected employees having to give evidence. The cooperation of the Respondents in admitting the breaches shall receive a greater recognition than that submitted by the FWO.
As to specific deterrence, I note that Desire Food has sold the pizza shop business and is no longer trading. The company has not previously contravened, has cooperated through admissions (albeit after having submitted false and misleading documents) and rectified the underpayments. There is a reference in the FWO’s submissions that Desire Food remains registered, however, I accept the evidence of the Respondents that Desire Food is no longer trading.
In relation to Mr Lee, he has given evidence that he has left the fast food industry and is now working as a factory hand. He has expressed regret for his conduct, particularly in relation to the contraventions relating to knowingly providing false documents. I also note that he had a 20% shareholding in Desire Food and was not the major shareholder.
I also accept that the business was small and the operators were inexperienced. This is a factor to consider in relation to the capacity to pay, to the impact of the penalties, and to the number of employees affected by the contravention: Hansen v Mt Martha Community Learning Centre Inc (No 2) [2015] FCA 1283 at [5].
In those circumstances, I do not regard the need for specific deterrence to be of central importance in this case.
General deterrence is important as a means of communicating the need for all employers to comply with workplace laws. It is particularly important regarding the contravening conduct in relation to the provision of false information and the creation of false documents. Similarly, the penalties to be imposed for conduct such as paying a flat rate of pay which does not account for award entitlements should be fixed at level which renders it uneconomic to engage in such conduct. The penalty should be such that it is not simply another cost of doing business.
I have outlined the penalties that will attach to each contravention in Annexure A, below. In summary, the penalties to be paid are:
Amount to be paid
By Desire Food for the Naqash Employment Period
$42,500
By Desire Food for the Sample Employment Period
$21,000
Mr Lee
$11,900
I otherwise make orders in the terms proposed by the FWO.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Judge McNab
Associate:
Date: 15 November 2019
Annexure A
FWO (Desire Food Pty Ltd) – Naqash Employment Period
Provision
Penalty Unit
Maximum Penalty
Amount sought by the FWO (low)
Amount sought by the FWO (high)
Amount to be paid
1
s 45: failure to pay minimum wages (cl 17 Modern Award)
$180
$54,000
$9,180
$13,770
$4,000
2
s 45: failure to pay casual loading (cl 13.2 Modern Award)
$180
$54,000
$18,360
$22,950
$5,000
3
s 45: failure to pay Mon-Fri night time penalty rates (clause 25.5(a)(i) Modern Award)
$180
$54,000
$4,590
$9,180
$4,000
4
s 45: failure to pay Saturday penalty rates (cl 25.5(b) Modern Award)
$180
$54,000
$13,770
$18,360
$4,000
5
s 45: failure to pay Sunday penalty rates (cl 25.5 Modern Award)
$180
$54,000
$13,770
$18,360
$4,000
6
s 45: failure to pay public holiday penalty rates (cl 30.3 Modern Award)
$180
$54,000
$1 1 ,475
$16,065
$4,000
7
s 45: failure to pay special clothing allowance (cl 19.2(b)(ii) Modern Award)
$180
$54,000
$2,295
$4,590
$4,000
8
s 45: failure to provide meal breaks (cl 27 Modern Award)
$180
$54,000
$2,295
$4,590
$4,000
9
s 45: failure to pay transport allowance (cl 19.6 Modern Award)
$180
$54,000
$4,590
$9,180
$4,000
10
s 45: failure to engage casual for min 3 hours Modern Award)
$180
$54,000
$2,295
$4,590
$4,000
11
s 536(1): failure to issue payslip within 1 working day
170
$25,500
$3,251
$5,419
$750
12
s 45: failure to pay wages weekly or fortnightly (cl 22 Modern Award)
$180
$54,000
$2,295
$2,295
$750
TOTALS
$619,500
$88,166
$129,349
$42,500
FWO (Desire Food Pty Ltd) – Sample Employment Period
Provision
Penalty Unit
Maximum Penalty
Amount sought by the FWO (low)
Amount sought by the FWO (high)
Amount to be paid
1
s 45: failure to pay minimum wages (cl 17 Modern Award)
$180
$54,000
$1 1,475
$16,065
$2,000
2
s 45: failure to pay casual loading (cl 13.2 Modern Award)
$180
$54,000
$20,655
$25,245
$2,000
3
s 45: failure to pay Mon-Fri night time penalty rates (cl 25.5(a)(i) Modern Award)
$180
$54,000
$6,885
$9,180
$2,000
4
s 45: failure to pay Saturday penalty rates (cl 25.5(b) Modern Award)
$180
$54,000
$16,065
$20,655
$2,000
5
s 45: failure to pay Sunday penalty rates (cl 25.5(c)(ii) Modern Award)
$180
$54,000
$16,065
$20,655
$2,000
6
s 45: failure to pay public holiday penalty rates (cl 30.3 Modern Award)
$180
$54,000
$13,770
$18,360
$2,000
7
s 45: failure to pay special clothing allowance (cl 19.2(b)(ii) Modern Award)
$180
$54,000
$4,590
$9,180
$2,000
8
s 45: failure to engage casual for min 3 hours (cl 13.4 Modern Award)
$180
$54,000
$4,590
$9,180
$2,000
9
s 718A: knowingly providing false or misleading documents)
$210
$63,000
$42,840
$48,195
$5,000
OTALS
$495,000
$136,935
$176,715
$21,000
FWO (Desire Food Pty Ltd) – Mr Lee
Provision
Penalty Unit
Maximum Penalty
Amount sought by the FWO (low)
Amount sought by the FWO (high)
Amount to be paid
1
s 45: failure to pay minimum wages (cl 17 Modern Award)
$180
$10,800
$2,295
$3,213
$1,000
2
s 45: failure to pay casual loading (cl 13.2 Modern Award)
$180
$10,800
$4,131
$5,049
$1,000
3
s 45: failure to pay Mon-Fri night time penalty rates (cl Modern Award)
$180
$10,800
$1 ,377
$1 ,836
$1,000
4
s 45: failure to pay Saturday penalty rates (cl 25.5(b) Modern Award)
$180
$10,800
$3,213
$4,131
$1,000
5
s 45: failure to pay Sunday penalty rates (cl 25.5(c)(ii) Modern Award)
$180
$10,800
$3,213
$4,131
$1,000
6
s 45: failure to pay public holiday penalty rates (cl 30.3 Modern Award)
$180
$10,800
$2,754
$3,672
$1,000
7
s 45: failure to pay special clothing allowance (cl 19.2(b)(ii) Modern Award)
$180
$10,800
$918
$1 ,377
$300
8
s 45: failure to engage casual for min 3 hours (cl 13.4 Modern Award)
$180
$10,800
$918
$1 ,836
$300
9
s 536(1): failure to issue payslip within 1 working day
$170
$5,100
$650
$1 ,084
$300
10
S 718A: knowingly providing false or misleading documents
$210
$12,600
$8,568
$9,639
$5,000
TOTALS
$104,100
$28,037
$35,968
$11,900
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