Fair Work Ombudsman v Oliver Brown Soul Pty Ltd

[2017] FCCA 3061

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v OLIVER BROWN SOUL PTY LTD & ANOR [2017] FCCA 3061

Catchwords:
INDUSTRIAL LAW – Awards – breach of award – contravention of FW Act – breach admitted –pecuniary penalty –penalty to be paid to the Commonwealth.

Legislation:

Fair Work Act 2009 (Cth) ss.45, 550(1), 536(1), 546

Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7

Applicant: FAIR WORK OMBUDSMAN

First Respondent: OLIVER BROWN SOUL PTY LTD (ACN 602 240 451)

Second Respondent: STEVEN CHUNG

File Number: BRG 473 of 2017

Judgment of: Judge Vasta

Hearing date: 4 December 2017

Date of Last Submission: 4 December 2017

Delivered at: Brisbane

Delivered on: 4 December 2017

REPRESENTATION

Solicitors for the Applicant: Fair Work Ombudsman

There being no appearance by or on behalf of the First or Second Respondent.

ORDERS

THE COURT DECLARES THAT:

1. The Second Respondent, Mr Steven Chung, was, from 11 July 2015, involved in each of the following contraventions by the First Respondent, pursuant to section 550(1) of the FW Act:

   (a)section 45 of the Fair Work Act 2009 (Cth), by failing to pay the minimum adult rate of pay to Ms Heera In, Mr Sammuel McEwen, Ms Jin Sook Lee, Ms Yeejin Choo and Ms Hyeonjeong Shim, in accordance with clause 20.1 of the Restaurant Industry Award 2010;

   (b)section 45 of the Fair Work Act 2009 (Cth), by failing to pay the minimum junior (20 year old) rate of pay to Ms Jenny Bai, in accordance with clause 20.3 of the Restaurant Industry Award 2010;

   (c)section 45 of the Fair Work Act 2009 (Cth), failing to pay the Monday to Friday casual loading to Ms Heera In, Mr Sammuel McEwen, Ms Jin Sook Lee, Ms Yeejin Choo, Ms Hyeonjeong Shim, Ms Ellen Taylor, Mr Kenji Nakauchi, Ms Gyulim Go, Ms Jenny Bai and Ms Natasha Ainsley, in accordance with clause 13.1 of the Restaurant Industry Award 2010;

   (d)section 45 of the Fair Work Act 2009 (Cth), by failing to pay the Saturday penalty rate to Ms Heera In, Mr Sammuel McEwen, Ms Jin Sook Lee, Ms Yeejin Choo, Ms Hyeonjeong Shim, Ms Ellen Taylor, Mr Kenji Nakauchi, Ms Gyulim Go, Ms Jenny Bai and Ms Natasha Ainsley, in accordance with clause 34.1 of the Restaurant Industry Award 2010;

   (e)section 45 of the Fair Work Act 2009 (Cth), by failing to pay the Sunday penalty rate to Ms Heera In, Mr Sammuel McEwen, Ms Jin Sook Lee, Ms Yeejin Choo, Ms Hyeonjeong Shim, Ms Ellen Taylor, Mr Kenji Nakauchi, Ms Gyulim Go and Ms Jenny Bai, in accordance with clause 34.1 of the Restaurant Industry Award 2010;

   (f)section 45 of the Fair Work Act 2009 (Cth), by failing to pay the public holiday penalty rate to Ms Heera In, Mr Sammuel McEwen, Ms Jin Sook Lee, Ms Yeejin Choo, Ms Hyeonjeong Shim, Ms Ellen Taylor, Mr Kenji Nakauchi, Ms Gyulim Go, Ms Natasha Ainsley, Ms Chong Un Park and Mr Tae Uk Kim, in accordance with clause 34.1 of the Restaurant Industry Award 2010;

   (g)section 45 of the Fair Work Act 2009 (Cth), by failing to pay the late night penalty to Ms Heera In, Mr Sammuel McEwen, Ms Yeejin Choo, Ms Hyeonjeong Shim, Ms Ellen Taylor, Mr Kenji Nakauchi, Ms Jenny Bai, Ms Gyulim Go, Ms Natasha Ainsley and Ms Chong Un Park, in accordance with clause 34.2(a)(i) of the Restaurant Industry Award 2010;

   (h)section 45 of the Fair Work Act 2009 (Cth), by failing to pay the early morning penalty to Ms Heera In and Ms Hyeonjeong Shim, in accordance with clause 34.2(a)(ii) of the Restaurant Industry Award 2010; and

   (i)section 536(1) of the Fair Work Act 2009 (Cth), by failing to provide pay slips to Ms Heera In, Ms Hyeonjeong Shim, Ms Yeejin Choo and Ms Jin Sook Lee.

ON A FINAL BASIS THE COURT ORDERS THAT:

1. Pursuant to section 546(1) of the Fair Work Act 2009 (Cth), the Second Respondent is to pay penalties of $27,200.00 in respect of the contraventions set out at paragraphs 1(a) to 1(g) and 1(i) above.

2. Pursuant to section 546(3)(a) of the Fair Work Act 2009 (Cth), the Second Respondent is to pay the penalty to the Consolidated Revenue Fund of the Commonwealth within 28 days of this order.

3. The Applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

No. BRG 473 of 2017

FAIR WORK OMBUDSMAN

Applicant

And

OLIVER BROWN SOUL PTY LTD (ACN 602 240 451)

First Respondent

And

STEVEN CHUNG

Second Respondent

REASONS FOR JUDGMENT

(Ex tempore)

1. By application filed on 19 May 2017, the Fair Work Ombudsman sought declarations and pecuniary penalties against the First Respondent, Oliver Brown Soul Pty Ltd and the Second Respondent, Steven Chung. 

2. The First Respondent is a company that is now in liquidation.  It had been a company that was running a Belgian chocolate and café store in the complex known as Soul at the Gold Coast.  The Second Respondent is the manager of that store and had, for all intents and purposes, the complete running of the store, including the hiring of staff and the setting of their wages.

3. Because of the First Respondent being in liquidation, the proceedings against the First Respondent are necessarily stayed and that is why there is no appearance for the First Respondent.  The Second Respondent has chosen not to appear today.  Notwithstanding that, the Applicant has, quite properly, stated that they wished for the matter to proceed and I have agreed with that course. It is proper in all the circumstances for the matter to proceed.

4. The Applicant became involved because an employee by the name of Ms In contacted the Fair Work Ombudsman and complained that she was not being paid her proper wages.  At the time, the Fair Work Ombudsman was also conducting audits of a number of restaurants in the Surfers Paradise area.  Because of the combination of those two things, the Fair Work Ombudsman then conducted an audit of the First Respondent from the period 1 June 2015 to 20 September 2015. 

5. The Fair Work Ombudsman also looked at the whole of Ms In’s period of employment, which was 23 January 2015 to 10 August 2015.  In the audit, there was a discovery that there were 11 other employees, all of whom were casual (as was Ms In), that had been underpaid.

6. The employees were all covered by the Food and Beverage Attendants Award and most of the persons were within either the grade 2 level of food and beverage attendant or were introductory because of their ages. 

7. At the site visit that the Fair Work Ombudsman inspector had conducted, the Second Respondent had informed that inspector that all persons were covered under the Award and were all being paid at grade 1 level.  Once a Notice to Produce was served upon the First Respondent and time sheets were produced and wages calculations were made, it was soon seen that such a statement by the Second Respondent was in fact incorrect and quite blatantly so.

8. The underpayments were quite significant and they fell into a number of categories.  First off was an underpayment of the minimum adult rate of pay and an underpayment of the minimum junior rate of pay.  There was also a failure to pay casual loading; a failure to pay Saturday penalty rates; a failure to pay Sunday penalty rates; a failure to pay public holiday penalty rates; an underpayment of late night penalty rates; and, for two employees, and a non-payment of early morning penalty rates.

9. Without going into each of those underpayments, in total there was $24,575.36 underpaid to all 12 employees.  Ms In, the person who, for want of a better term, was the whistle-blower, was underpaid a total of $9,188.00.  All of the other employees that were noted were underpaid sums ranging from $83.00 up to $3,800.00. 

10. What is significant about this is that all of those employees were, in effect, minimum wage workers.  Looking at the individual sums of money, it may be thought that, in the great scheme of things, this was not a great sum.  But for persons who are on the minimum wage, such sums are quite crucial just simply to their existence and, for that reason, actions that result in their not being paid properly cannot be simply dismissed as being “minor infractions”.

11. When one gets to Ms In, who over the period of seven months was underpaid $9,188.42, it becomes quite significant. 

12. What is also of note is that there were different employees who were paid at different levels. There were some employees that were not, to use the vernacular, “taken advantage of” in the same way that others were. 

13. In reality, it meant that Mr Chung, the Second Respondent, who was responsible for setting the wages, discriminated against a number of the employees on, it would seem, the basis either of coming from a non-English speaking background, having a visa or their youth.  There doesn’t seem to be any other explanation as to why there were some rates given to some people and other rates given to others, except when one looks at the personal and cultural background of each of the workers.

14. It would seem that a worker on a visa who came from a non-English speaking background was certainly underpaid more than a person who is a permanent resident of this country from an English-speaking background. 

15. But those are simply observations I make that really go to the deliberateness of what it was that was done. 

16. As well as these underpayments, for four of the employees, there was a failure to issue pay slips.  Again, that shows the level of discrimination by Mr Chung as to whom he gave pay slips and to whom he did not. 

17. It is easy to infer that this was not an enterprise conducted by the Second Respondent that affected all employees across the board in a similar way.  It was an enterprise in which Mr Chung quite deliberately calculated to see what it was that he could “get away with.”

18. There is no other inference that was open on the evidence before me. 

19. Unfortunately, Mr Chung has not chosen to appear here to in any way explain these anomalies that have led to the inferences that I am drawing.  The only explanation that the Court has been given are the following. 

20. First off, the principal of the First Respondent, Mr Kang, has informed the Court, through an affidavit, that he set up the business but lived interstate and ran it by remote control.  He said that Mr Chung, the Second Respondent, was the person who was making all the decisions.  Mr Kang, in effect, said that he made none of the decisions and simply relied on his manager. Mr Kang said complied, he said, with everything that was brought to his attention. 

21. As far as Mr Chung is concerned, the only material before the Court was this; on 22 August 2017 at 9 am, Mr Raptis, a representative of the Applicant, wrote to Mr Chung and informed him of his obligations.  Mr Chung replied at 4.33 pm that same day and said this:

    “I wish to advise you and the court that I will not be filing any separate evidence but to state that I have done what was done on the best interests of employer and admit that it was a wrong decision I have made. I regret I will also not engage in further activities as such by changing field of work which does not require decision-making as such.  I ask you and court leniency to this matter.  Regards, Steven Chung.”

22. On 2 November 2017, Mr Raptis telephoned Mr Chung, and Mr Chung returned the phone call on 3 November.  Mr Chung had it explained to him as to why Mr Raptis was calling him, that being that there was a change in the time for this hearing from 2.15pm until 10.00 am and Mr Raptis was ensuring that Mr Chung understood this.  During the conversation Mr Raptis said to Mr Chung:

    “The reason for my call yesterday was to confirm that you have received our evidence and submissions and whether or not you intend to file any submissions.  I am also calling to see if you require any of the Fair Work Ombudsman’s witnesses to attend the hearing for cross-examination.”

    Mr Chung replied:

    “I have received your evidence and your submissions.  I have not changed my mind since my last email to you that I have not appointed a legal representative and I do not intend to make an appearance.  I will not attend unless it is a legal requirement that I attend.  I have received legal advice that there is no requirement for me to attend the hearing.”

    Mr Raptis told him:

    “You are not legally required to attend the hearing.  However, the court is entitled to make orders in your absence. “

    Mr Chung said:

    “I will attend the hearing if it has a bearing on the court’s decision.”

    Mr Raptis said:

    “The evidence filed by the Fair Work Ombudsman has included your most recent email to me and contents of our previous telephone conversation in which you make statements that you wanted the court to consider.  It is at the court’s discretion as to the weight it places on those statements.  You have our written submissions which include our proposed penalty ranges.  If there is anything you wish to say in relation to those ranges - if there is anything you want the court to consider as part of determining the penalty then it is in your best interests to attend the hearing to tell the court in person.”

    Mr Chung said:

    “I will give this further consideration as to whether or not I intend.”

    Mr Raptis said:

    “Please call or email me once you have made a decision or if you have any questions.”

23. Mr Raptis received no more communication from Mr Chung and he has not appeared today.  It seems to me that Mr Chung felt that he should be doing everything he could to impress his employer, Mr Kang, and to show Mr Kang that he could run the business and make a profit in what must be noted is a very competitive market at Surfers Paradise. 

24. Unfortunately, the way in which Mr Chung has chosen to undertake that business has been to contravene the Fair Work Act 2009 (Cth) (“the FW Act”). The audit period was for a period of just over three and a half months and even if one took away some of the underpayments to Ms In that fell outside of that audit period, it does seem that, in a three month period, the underpayments would be in the order of $20,000.00.

25. That, if one extrapolates over the course of the year, would mean underpayments in the order $80,000.00.  For any business to be, in effect, saving $80,000.00 from employee entitlements would give them a significant advantage over businesses that were mindful and respectful of their legal obligations to ensure that workers were properly paid.  This is why such conduct by the First and Second Respondents is serious notwithstanding that when one looks at each individual employee, the sum of money may not been seen to be terribly great. 

26. It seems to me that Mr Chung wanted to ingratiate himself with the First Respondent and has made a grave error.  However, I am not convinced totally of his contrition in the matter but it is quite obvious that he is very sorry for being caught. 

27. To Mr Kang’s great credit, when it was put to him by the Fair Work Ombudsman that these persons had been underpaid, he rectified that immediately and in so doing saved any further stress on the employees.  However, this was a decision made by Mr Kang and Mr Kang alone .The credit for such action cannot really be visited upon Mr Chung. 

28. What is in Mr Chung’s favour, though, is that once the figures were shown to him, he did cooperate and he did admit what it was that had occurred.  He also cooperated to the point where the Fair Work Ombudsman was able to make proper calculations in this matter, and for that he does deserve some discount. 

29. I have also had regard to the factors that were enumerated in Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7.

30. To my mind, the principles that need to be accentuated here are those of general deterrence and those of ensuring that the vulnerable workers are not exploited.  I have taken into account all of the matters to which the authorities have described as being optimal to the setting of penalties. 

31. With regard to the first penalty, that is the failure to pay the minimum rates, the maximum penalty is $10,800.00.  I would impose a penalty of $4,000.00. 

32. For the failure to pay casual loading which was, in my view, the greatest of the breaches because it covered each and every worker and it caused the greatest underpayment in its category, I would impose a penalty of $7,000.00. 

33. For the failure to pay Saturday loading, Sunday loading and public holiday loading, I would impose a penalty of $5,000.00 for each of those penalties. 

34. For the failure to pay the late night allowance I would impose a penalty of $1,000.00. 

35. For failure to pay the early morning rate and loading the Fair Work Ombudsman has asked for no penalty and I will not impose a penalty. 

36. As for the failure to provide payslips to the four employees, as I said during the course of the hearing, I see this as an extremely serious breach of an employer’s obligations. 

37. A payslip is essential for employees, especially employees at this low level that each of the four whom were not given payslips because it enables them to know how much superannuation they have been paid.  It enables them to understand where they are with regards to such matters as sick leave or annual leave and it also enables them to see that they have been paid in accordance with the award.  To not provide the payslip to a worker, to my mind, is a most serious matter. Notwithstanding that the maximum penalty for this contravention is $5,400.00, I would impose a penalty of $5,000.00. 

38. When one adds up all of those penalties, one comes to a total of $32,000.00. 

39. I accept the submission of the Fair Work Ombudsman that in these circumstances, those matters of mitigation I have previously spoken of would lead to a discount in the order of 15 per cent.  Taking that discount from $32,000.00, one comes up with a total of $27,200.00.

I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Vasta.

Date: 7 December 2017