Fair Work Ombudsman v Ozkorea Pty Ltd & Ors (No.2)
[2018] FCCA 3620
•7 December 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v OZKOREA PTY LTD & ORS (No.2) | [2018] FCCA 3620 |
| Catchwords: INDUSTRIAL LAW – Imposition of pecuniary penalties – contravention of the Fair Work Act 2009 – contravention of Award entitlements – failure to keep records – course of conduct – penalties imposed. |
| Legislation: Fair Work Act 2009 (Cth), ss.45, 536(2), 539(2), 546(1), 546(3)(a), 550, 557 |
| Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union[2017] FCAFC 113 Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 Gibbs v the Mayor, Councillors and Citizens of the City of Altona [1992] FCA 553 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | OZKOREA PTY LTD (ACN 603 658 804) |
| Second Respondent: | SUNG GUN HWANG |
| Third Respondent: | PIONEER FACILITY SERVICES PTY LTD (ACN 163 765 9280) |
| Fourth Respondent: | PIONEER CONTRACTING SERVICES PTY LTD (ACN 164 009 036) |
| File Numbers: | LNG 31 of 2016 and LNG 32 of 2016 |
| Judgment of: | Judge McNab |
| Hearing date: | 5 October 2018 |
| Date of Last Submission: | 5 October 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 7 December 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Healy |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondents: | Mr Snaden |
| Solicitors for the Respondents: | Robert James Lawyers |
DECLARATIONS
During the period from 1 January 2014 to 12 January 2015, the First Respondent in LNG31/2016, Sung Gun Hwang contravened the Fair Work Act 2009 (Cth) (‘Act’), the Fair Work Regulations 2009 (‘Regulations’) and the Cleaning Services Award 2010 (‘Cleaning Award’) by failing to:
(a)pay minimum hourly rates pursuant to cl 16 of the Cleaning Award;
(b)pay part time loading pursuant to cl 12.4(b)(iii) of the Cleaning Award;
(c)pay night shift loading pursuant to cl 27.1(b) of the Cleaning Award;
(d)pay Saturday penalty rate pursuant to cl 27.2(a) of the Cleaning Award;
(e)pay Sunday penalty rate pursuant to cl 27.2(b) of the Cleaning Award;
(f)pay public holiday rates pursuant to clause 27.3 of the Cleaning Award;
(g)pay a minimum engagement period as required by cl 24.2(e) of the Cleaning Award;
(h)pay overtime rates in accordance with cl 28.2 of the Cleaning Award;
(i)pay Sunday overtime rates in accordance with cl 28.3 of the Cleaning Award;
(j)engage employees in writing pursuant to cl 12.4(a) of the Cleaning Award;
(k)pay wages weekly or fortnightly pursuant to cl 20.1 of the Cleaning Award;
(l)ensure employees received two consecutive full days off pursuant to cl 24.5 of the Cleaning Award;
(m)prepare and post a roster pursuant to cl 25.1 of the Cleaning Award;
(n)make and keep records pursuant to s 535(1) of the Act;
(o)make and keep accurate records pursuant to s 535(2) of the Act;
(p)ensure that a record required to be kept under the Regulations was not false or misleading pursuant to reg 3.44(1) of the Regulations;
(q)not make use of entries in a record required to be made and kept knowing that it was false and misleading pursuant to reg 3.44(6) of the Regulations; and
(r)give the pay slips pursuant to s 536(2) of the Act.
During the period from 13 January 2015 to 1 September 2015, the First Respondent in LNG32/2016, OzKorea Pty Ltd, contravened the provisions referred to at declarations 1(a) to (e) and 1(g) to (r) above.
Sung Gun Hwang was involved, within the meaning of s 550 of the Act, in each of OzKorea Pty Ltd’s contraventions referred to in declaration 2 above.
Pioneer Facility Services Pty Ltd was involved, within the meaning of s 550 of the Act, in the underpayment contraventions of OzKorea Pty Ltd and Sung Gun Hwang (declared in subparagraphs 1(a) to 1(e) and 2 (to the extent it concerns OzKorea Pty Ltd’s contraventions specified at subparagraphs 1(a) to 1(e)) above.
Pioneer Contracting Services Pty Ltd was involved, within the meaning of s 550 of the Act, in the underpayment contraventions of Sung Gun Hwang and OzKorea Pty Ltd declared in subparagraphs 1(a) to 1(e) and 2 (to the extent it concerns OzKorea Pty Ltd’s contraventions specified in subparagraphs 1(a) to 1(e)) above.
AND THE COURT ORDERS THAT:
Sung Gun Hwang pay a total pecuniary penalty of $5,000 pursuant to s 546(1) of the Act for the contraventions declared in paragraphs 1 and 3 of the Declarations.
OzKorea Pty Ltd pay a total pecuniary penalty of $20,400, pursuant to s 546(1) of the Act, for its contraventions declared in paragraph 2 of the Declarations.
Pioneer Facility Services Pty Ltd pay a total pecuniary penalty of $17,000 pursuant to s 546(1) of the Act, for its involvement in the contraventions of OzKorea Pty Ltd and Sung Gun Hwang declared in subparagraphs 1(a) to 1(e) and 2 of the Declarations.
Pioneer Contracting Services Pty Ltd pay a total pecuniary penalty of $17,000 pursuant to s 546(1) of the Act, for its involvement in the contraventions of OzKorea Pty Ltd and Sung Gun Hwang as declared in subparagraphs 1(a) to 1(e) and 2 of the Declarations.
All pecuniary penalties be paid to the Commonwealth, pursuant to s 546(3)(a) of the Act, within 28 days of the date of these orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
LNG 31 of 2016 and LNG 32 of 2016
| FAIR WORK OMBUDSMAN |
Applicant
And
| OZKOREA PTY LTD (ACN 603 658 804) |
First Respondent
| SUNG GUN HWANG |
Second Respondent
| PIONEER FACILITY SERVICES PTY LTD (ACN 163 765 9280) |
Third Respondent
| PIONEER CONTRACTING SERVICES PTY LTD (ACN 164 009 036) |
Fourth Respondent
REASONS FOR JUDGMENT
(As Corrected)
Introduction
The Fair Work Ombudsman seeks the imposition of penalties against OzKorea Pty Ltd (‘OzKorea’) and Sung Gun Hwang for various breaches of the Fair Work Act 2009 (Cth) (‘the Act’) over two time periods. The first time period, 1 January 2014 to 12 January 2015 (‘the First Period’), is the subject of LNG 31 of 2016 and involves Mr Hwang and the second time period, 13 January 2015 to 1 September 2015 (‘the Second Period’), is the subject of LNG 32 of 2016 and involves OzKorea. The breaches alleged in both matters concern underpayments under the Cleaning Services Award 2010 (‘the Award’) and a failure to keep accurate records. Penalties are also sought against Pioneer Facility Services Pty Ltd and Pioneer Contracting Services Pty Ltd for being knowingly concerned in the breaches in both periods. The breaches were found to have occurred in reasons for judgments delivered on 24 August 2018.
Written submissions have been filed on behalf of each of the Respondents and oral submissions were received on 5 October 2018. These reasons for decision on penalties should be read in conjunction with the reasons given in the liability proceedings.
Relationship between the parties
During the first time period, Sung Gun Hwang (‘Mr Hwang’) was a sole trader and in the second period, he was the sole director of OzKorea Pty Ltd (‘OzKorea’).
Pioneer Facility Services Pty Ltd and Pioneer Contracting Services Pty Ltd (‘the Pioneer Respondents’) are members of the Pioneer Facilities Services group. The Pioneer Facilities Services group held a contract with Woolworths to provide cleaning services at four sites in Tasmania (‘the Woolworths Contract’).
Mr Hwang, as a sole trader, and later OzKorea was engaged by the Pioneer Respondents to fulfil their cleaning service obligations under the Woolworths Contract.
The detail of these arrangements is set out at [6] – [13] of the Applicant’s outline of submissions:
6On 23 July 2012, Woolworths Limited entered into a contract with RCS Cleaning Services Pty Ltd as trustee for RCS Cleaning Services Unit Trust trading as Swan Hill Commercial Cleaning (Swan Hill) for cleaning services at the Woolworths sites in Tasmania (Woolworths Cleaning Contract), including stores at Deloraine, Georgetown, Mowbray and Riverside. The Woolworths Cleaning Contract was signed by Mr Vince Legudi) on behalf of Swan Hill.
7On 18 March 2014, the Woolworths Cleaning Contract was novated by agreement to the partnership of Frank Enterprises Trust & Gummow Holdings Trust & Sound Nominees Trust which trades under the name of PFS (Woolworths Novation Agreement). The three Directors of PFS are Mr Legudi (director of Sound Nominees Pty Ltd), Mr Aaron Dickinson (director of Gummow Holdings Pty Ltd) and Mr Frank Scarce (director of Frank Enterprises Pty Ltd). The Woolworths Novation Agreement was signed on behalf of PFS by Mr Legudi, Mr Dickinson and Mr Scarce.
8PFS subsequently subcontracted the Woolworths Cleaning Services Agreement to PCS. PFS is the parent company to PCS. Mr Dickinson is the sole Director of PCS. PCS is wholly owned by PFS.
…
11OzKorea was incorporated on 13 January 2015. Mr Hwang became its sole director, secretary and shareholder.
12The three shareholders of PFS are Frank Enterprises Pty Ltd; Gummow Holdings Pty Ltd and Sound Nominees Pty Ltd.
13.During both the [first period] and the [second period], PCS subcontracted the Woolworths Cleaning Contract initially to Mr Hwang and later OzKorea, to perform cleaning services at Woolworths sites in Mowbray, Riverside, Deloraine and Georgetown.
Four employees are the subject of the breaches in these proceedings, first employed by Mr Hwang as a sole trader and then by OzKorea after its incorporation (‘the Underpaid Employees’). They are:
a)Seunghun Ok;
b)Sang Hwang Park;
c)Hyunjae Jung; and
d)Saifullah Sidek.
The underpayments, over a two year period, totalled $21,332.
Approach to penalty given that there are two proceedings
In submissions filed by the Applicant on 19 September 2018, the Applicant seeks penalties against Mr Hwang in relation to 18 contraventions and his involvement in 17 contraventions of OzKorea. It seeks penalties against Mr Hwang in an amount between $30,000 and $40,000. It seeks penalties against OzKorea in relation 17 contraventions in the total sum of between $85,736 and $125,800.
In relation to the Pioneer Respondents, it seeks penalties for their involvement in six contraventions of Mr Hwang and OzKorea, totalling between $76,500 and $102,000 against each Pioneer Respondent.
In submissions filed 19 September 2018, the Applicant submitted that it was appropriate for the Court to impose a single penalty on each of the Respondents in respect of the conduct alleged in both proceedings. On
2 October 2018 the Applicant filed some supplementary submissions on penalty and submitted that the correct approach was to seek the same total penalties against each of the Respondents, but that the penalties are to be apportioned between the proceedings and imposed as separate penalties in each proceeding. That approach would result in the Respondents being ordered to pay the same penalty twice. In the case of Mr Hwang where there would be penalties imposed for 35 contraventions, penalties for OzKorea for 34 contraventions and penalties for the Pioneer Respondents for 24 contraventions.
I do not agree that the penalty should be imposed in respect of each proceeding. The only reason there are two proceedings is for convenience, as the already lengthy documents would have been more unwieldy if both periods been dealt with in the same statement of claim. The same employees are the subject of contraventions over both periods and nothing changed in relation to the conduct of the Pioneer Respondents between the two periods other that they started dealing with and paying OzKorea rather than Mr Hwang.
In my view, prejudice may be suffered by the Respondents if the Applicant's decision to file separate proceedings leads to the imposition of separate penalties in respect of each proceeding. This is because it may appear to third parties that the conduct was far worse than it actually was because of the sheer number of breaches being found due to the manner of conducting the proceedings separately. I will deal with the matter in the manner first proposed by the Applicant.
Found breaches of the Act
Mr Hwang and OzKorea admit that the Underpaid Employees were underpaid during the First Period and the Second Period.
On 20 September 2016, Mr Hwang and OzKorea rectified the underpayments, totalling $21,332.33.
It has been found that during the period from 1 January 2014 to
12 January 2015, Sung Gun Hwang, contravened the Act and the Award by failing to:
a)pay minimum hourly rates pursuant to cl 16 of the Award;
b)pay part time loading pursuant to cl 12.4(b)(iii) of the Award;
c)pay night shift loading pursuant to cl 27.1(b) of the Award;
d)pay Saturday penalty rate pursuant to cl 27.2(a) of the Award;
e)pay Sunday penalty rate pursuant to cl 27.2(b) of the Award;
f)pay public holiday rates pursuant to cl 27.3 of the Award;
g)pay a minimum engagement period as required by cl 24.2(e) of the Award;
h)pay overtime rates in accordance with cl 28.2 of the Award;
i)pay Sunday overtime rates in accordance with cl 28.3 of the Award;
j)engage employees in writing pursuant to cl 12.4(a) of the Award;
k)pay wages weekly or fortnightly pursuant to cl 20.1 of the Award;
l)ensure employees received two consecutive full days off pursuant to cl 24.5 of the Award;
m)prepare and post a roster pursuant to cl 25.1 of the Award;
n)make and keep records pursuant to s 535(1) of the Act;
o)make and keep accurate records pursuant to s 535(2) of the Act;
p)ensure that a record required to be kept under the Regulations was not false or misleading pursuant to reg 3.44(1);
q)not make use of entries in a record required to be made and kept knowing that it was false and misleading pursuant to reg 3.44(6) of the Regulations; and
r)give the pay slips pursuant to s 536(2) of the Act.
It was also found that during the period from 13 January 2015 to
1 September 2015, OzKorea contravened the Act and Award by failing to:
a)pay minimum hourly rates pursuant to cl 16 of the Award;
b)pay part time loading pursuant to cl 12.4(b)(iii) of the Award;
c)pay night shift loading pursuant to cl 27.1(b) of the Award;
d)pay Saturday penalty rate pursuant to cl 27.2(a) of the Award;
e)pay Sunday penalty rate pursuant to cl 27.2(b) of the Award;
f)pay a minimum engagement period as required by cl 24.2(e) of the Award;
g)pay overtime rates in accordance with cl 28.2 of the Award;
h)pay Sunday overtime rates in accordance with cl 28.3 of the Award;
i)engage employees in writing pursuant to cl 12.4(a) of the Award;
j)pay wages weekly or fortnightly pursuant to cl 20.1 of the Award;
k)ensure employees received two consecutive full days off pursuant to cl 24.5 of the Award;
l)prepare and post a roster pursuant to cl 25.1 of the Award;
m)make and keep records pursuant to s 535(1) of the Act;
n)make and keep accurate records pursuant to s 535(2) of the Act;
o)ensure that a record required to be kept under the Regulations was not false or misleading pursuant to reg 3.44(1);
p)not make use of entries in a record required to be made and kept knowing that it was false and misleading pursuant to reg 3.44(6) of the Regulations; and
q)give the pay slips pursuant to s 536(2) of the Act.
Documents relied upon
The Applicant relies on the following documents:
a)Reasons for decision, Judge McNab dated 24 August 2018;
b)Statement of Agreed Facts filed in LNG31/2016 on 9 September 2016;
c)Statement of Agreed Facts filed in LNG32/2016 on 9 September 2016;
d)Affidavit of Sang Hwang Park dated 15 June 2017 (as redacted);
e)Affidavit of Hyunjae Jung dated 15 June 2017 (as redacted);
f)Affidavit of Sung Gun Hwang dated 22 June 2017 (as redacted);
g)Affidavit of Inspector Kristen Desmond dated 23 June 2017 (as redacted);
h)Affidavit of Inspector Kristen Desmond dated 24 November 2017; and
i)Affidavit of Inspector Kristen Desmond dated 17 September 2018.
Mr Hwang and OzKorea rely on the following documents:
a)Affidavit of Sung Gun Hwang sworn 1 October 2018.
The Pioneer Respondents rely on the following documents:
a)Reasons for decision, Judge McNab dated 24 August 2018; and
b)Affidavit of Francis Xavier Scarce affirmed 2 October 2018.
Consideration of penalty
The Applicant seeks penalties from each of the parties as follows:
Identification of each contravention
Mr Sung Gun Hwang
| Provision | Contravention | Maximum penalty for First Respondent | Source | |
| 1 | Fair Work Act 2009 s 45 | Failing to pay the minimum rate of pay pursuant to cl 16 of the Award | $10,200 | Act, Item 2 of s 539(2) |
| 2 | Fair Work Act 2009 s 45 | Failing to pay part time loading pursuant to cl 12.4(b)(iii) of the Award | $10,200 | |
| 3 | Fair Work Act 2009 s 45 | Failing to pay night shift loading pursuant to cl 27.1(b) of the Award | $10,200 | |
| 4 | Fair Work Act 2009 s 45 | Failing to pay Saturday penalty rate pursuant to cl 27.2(a) of the Award | $10,200 | |
| 5 | Fair Work Act 2009 s 45 | Failing to pay Sunday penalty rate pursuant to cl 27.2(b) of the Award | $10,200 | |
| 6 | Fair Work Act 2009 s 45 | Failing to pay public holiday rates pursuant to clause 27.3 of the Award | $10,200 | |
| 7 | Fair Work Act 2009 s 45 | Failing to pay a minimum engagement period as required by cl 24.2(e) of the Award | $10,200 | |
| 8 | Fair Work Act 2009 s 45 | Failing to pay overtime rates in accordance with cl 28.2 of the Award | $10,200 | |
| 9 | Fair Work Act 2009 s 45 | Failing to pay Sunday overtime rates in accordance with cl 28.3 of the Award | $10,200 | |
| 10 | Fair Work Act 2009 s 45 | Failing to engage employees in writing pursuant to cl 12.4(a) of the Award | $10,200 | |
| 11 | Fair Work Act 2009 s 45 | Failing to pay wages weekly or fortnightly pursuant to cl 20.1 of the Award | $10,200 | |
| 12 | Fair Work Act 2009 s 45 | Failing to ensure employees received two consecutive full day off pursuant to cl 24.5 of the Award | $10,200 | |
| 13 | Fair Work Act 2009 s 45 | Failing to prepare and post a roster pursuant to cl 25.1 of the Award | $10,200 | |
| 14 | Fair Work Act 2009 s 535(1) | Failing to make and keep records | $5,100 |
| 15 | Fair Work Act 2009 s 535(2) | Failing to make and keep accurate records | $3,400 |
| 16 | Fair Work Regulations 2009 reg 3.44(1) | Failing to ensure that a record required to be kept under the Regulations was not false or misleading | |
| 17 | Fair Work Regulations 2009 reg 3.44(6) | Failing to not make use of entries in a record required to be made and kept under the Regulations knowing that it was false and misleading | $3,400 |
| 18 | Fair Work Act 2009 S 536(2) | Failing to give payslips | $5,100 |
OzKorea Pty Ltd
| Provision | Contravention | Maximum penalty for Second Respondent | Source | |
| 1 | Fair Work Act 2009 s 45 | Failing to pay the minimum rate of pay pursuant to cl 16 of the Award | $51,000 | Act, Item 2 of s 539(2) |
| 2 | Fair Work Act 2009 s 45 | Failing to pay night shift loading pursuant to cl 27.1(b) of the Award | $51,000 | |
| 3 | Fair Work Act 2009 s 45 | Failing to pay Saturday penalty rate pursuant to cl 27.2(a) of the Award | $51,000 | |
| 4 | Fair Work Act 2009 s 45 | Failing to pay Sunday penalty rate pursuant to cl 27.2(b) of the Award | $51,000 | |
| 5 | Fair Work Act 2009 s 45 | Failing to pay part time loading pursuant to clause 12.4(b)(iii) of the Award | $51,000 | |
| 6 | Fair Work Act 2009 s 45 | Failing to pay a minimum engagement period as required by cl 24.2(e) of the Award | $51,000 | |
| 7 | Fair Work Act 2009 s 45 | Failing to pay overtime rates in accordance with cl 28.2 of the Award | $51,000 | |
| 8 | Fair Work Act 2009 s 45 | Failing to pay Sunday overtime rates in accordance with cl 28.3 of the Award | $51,000 | |
| 9 | Fair Work Act 2009 s 45 | Failing to engage employees in writing pursuant to cl 12.4(a) of the Award | $51,000 | |
| 10 | Fair Work Act 2009 s 45 | Failing to pay wages weekly or fortnightly pursuant to cl 20.1 of the Award | $51,000 |
| 11 | Fair Work Act 2009 s 45 | Failing to ensure employees received two consecutive full day off pursuant to cl 24.5 of the Award | $51,000 |
| 12 | Fair Work Act 2009 s 45 | Failing to prepare and post a roster pursuant to cl 25.1 of the Award | $51,000 |
| 13 | Fair Work Act 2009 s 535(1) | Failing to make and keep records | $25,500 |
| 14 | Fair Work Act 2009 s 535(2) | Failing to make and keep accurate records | |
| 15 | Fair Work Regulations 2009 reg 3.44(1) | Failing to ensure that a record required to be kept under the Regulations was not false or misleading | $17,000 |
| 16 | Fair Work Regulations 2009 reg 3.44(6) | Failing to not make use of entries in a record required to be made and kept under the Regulations knowing that it was false and misleading | $17,000 |
| 17 | Fair Work Act 2009 S 536(2) | Failing to give payslips | $25,500 |
Pioneer Facility Services Pty Ltd
| Provision | Contravention | Maximum penalty for Third Respondent | Source | |
| 1 | Fair Work Act 2009 s 45 | Failing to pay the minimum rate of pay pursuant to cl 16 of the Award | $51,000 | Act, Item 2 of s 539(2) |
| 2 | Fair Work Act 2009 s 45 | Failing to pay night shift loading pursuant to cl 27.1(b) of the Award | $51,000 | |
| 3 | Fair Work Act 2009 s 45 | Failing to pay Saturday penalty rate pursuant to cl 27.2(a) of the Award | $51,000 | |
| 4 | Fair Work Act 2009 s 45 | Failing to pay Sunday penalty rate pursuant to cl 27.2(b) of the Award | $51,000 | |
| 5 | Fair Work Act 2009 s 45 | Failing to pay part time loading pursuant to | $51,000 |
Pioneer Contracting Services
| Provision | Contravention | Maximum penalty for Fourth Respondent | Source | |
| 1 | Fair Work Act 2009 s 45 | Failing to pay the minimum rate of pay pursuant to cl 16 of the Award | $51,000 | Act, Item 2 of s 539(2) |
| 2 | Fair Work Act 2009 s 45 | Failing to pay night shift loading pursuant to cl 27.1(b) of the Award | $51,000 | |
| 3 | Fair Work Act 2009 s 45 | Failing to pay Saturday penalty rate pursuant to cl 27.2(a) of the Award | $51,000 | |
| 4 | Fair Work Act 2009 s 45 | Failing to pay Sunday penalty rate pursuant to cl 27.2(b) of the Award | $51,000 | |
| 5 | Fair Work Act 2009 s 45 | Failing to pay part time loading pursuant to cl 12.4(b)(iii) of the Award | $51,000 |
Section 557 grouping of contraventions
The Applicant submits that the contraventions of the same provision of the Act, as far as they relate to more than one employee and multiple acts, may be grouped as long as this arises out of one course of conduct eventuating from a single decision. By this, I understand that the Applicant submits that where there is a decision to pay a flat rate of pay to multiple employees and that results in breaches of a number of provisions (i.e. failure to pay minimum rates, failure to pay loadings) a penalty would not be imposed each time the provision is breached – rather breaches of each obligation are separately grouped. They submit that there can be no “course of conduct” if the contraventions are of different obligations.[1]
[1] Gibbs v the Mayor, Councillors and Citizens of the City of Altona [1992] FCA 553 [24].
The proper approach to the exercise of the sentencing discretion, including the approach to s 557 of the Act, was considered by Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 [36]:
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 with some degree of aggregation for those contraventions arising out of a course of conduct, noting that section 557 of the Fair Work 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 (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) HCA 46; 258 CLR 482 at 64) 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: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at (30); Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at (23), (71) and (102).
In Construction, Forestry, Mining and Energy Union v Cahill [2010] FCAFC 39 [39], Middleton and Moore JJ stated the following in relation to the course of conduct provisions:
… a “course of conduct” or the “one transaction principle” is not a concept peculiar to the industrial context. It is a concept which arises in the criminal context generally and one which may be relevant to the proper exercise of the sentencing discretion. The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factually specific enquiry. Bare identity of motive for commission of separate offences will seldom suffice to establish the same criminality in separate and distinct offending acts or omissions.
The Applicant accepted that is open for the Court to group separate contraventions together where the contraventions overlap with each other and where there is a potential for the Respondent to be punished twice for the same or substantially similar conduct.
The Pioneer Respondents submit that the finding that they were involved in underpayment breaches arises from a single act: that is, to fail to pay a sum sufficient to cover award rates. I accept that submission, however, in light of binding authority, I will impose a penalty for each contravention that they were involved in. Had I taken a different approach and found that there was one contravention, the total penalty imposed would be in the same amount as that which I have determined.
It seems that the proper approach is to fix separate penalties for each separate contravention and consider whether the aggregate is extreme and, if so, adjust each penalty to avoid that outcome: Australian Building and Construction Commissioner v Huddy(No.2) [2017] FCA 1088 per White J; Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union[2017] FCAFC 113 [148].
Assessment of appropriate penalties
The Court is to determine a penalty which is proportionate to the contravening conduct and to the contravener’s circumstances by a process of instinctive synthesis after taking into account all relevant factors: Australian Ophthalmic Supplies Pty Ltd v McAlary‑Smith [2008] FCAFC 8 [27] (Gray J), [55] (Graham J); Markarian v The Queen [2005] HCA 25 [37], [39].
Factors relevant to penalty
The Court will consider below the non-exhaustive list of factors referred to by the Federal Court in Kelly v Fitzpatrick [2007] FCA 1080 at [14].
Nature and extent of contravening conduct
The Applicant sought orders in the proceeding in relation to the underpayment for employees over two periods. The underpayments totalled $21,332 and the period ran from 1 January 2014 to 22 January 2015.
The Applicant asks the Court to draw inferences that that were more than four underpaid workers, the conduct extended over a period of time and the underpayments were higher than $21,332.
The case was conducted on the basis that four employees were affected by the underpayments and it was in respect of those employers the orders were sought. I presume that Mr Hwang and OzKorea admitted the contraventions on the basis that they would be punished in relation to the underpayment of those named employees.
The Applicant invites the Court to find that ‘Pioneer Contracting Services may have paid other subcontractors performing work under the Woolworths contract similar amounts’.[2]
[2] Applicant’s submissions [49] – [50], [54], [57].
It is also submitted by the Applicant that these inferences give rise to a ‘likelihood that the contravening conduct extend beyond the period during which the underpayments could be quantified’.
I will not draw the inferences referred to by the Applicant. The Applicant has proceeded against Respondents in respect of specific breaches relating to specific employees. I do not consider it appropriate to expand the scope of the matter for the purposes of fixing a penalty by drawing inferences in relation to matters which were not the subject of evidence in the liability proceeding.
Circumstances in which the conduct took place
In relation to Mr Hwang and Oz Korea, Mr Hwang admitted that he recruited employees from the University of Tasmania and that they were mostly students in the Korean community. The employees were from non-English-speaking backgrounds and were working hours between 12 AM to 3 AM and/or 3:30 AM to 6:30 AM up to 7 days per week.
The Applicant accepted that Mr Hwang and Oz Korea’s contraventions were not deliberate and referred to Mr Hwang’s evidence that he decided to pay flat rates because these were rates paid by other “Korean people in the Launceston area” for this type of work. I accept the submission is made on behalf of Mr Hwang and Oz Korea that their culpability for the breaches is far lower than would be the case if the conduct was deliberate. I also accept that this is not a case of persons with knowledge of the proper rates of pay taking advantage of employees who were ignorant of their rights.
The Applicant makes a concession in its submissions that it accepts that the contravening conduct of the Pioneer Respondents was not deliberate or intentional. It is difficult to see how that concession can be reconciled with the case that was pleaded against the Pioneer Respondents, the submissions made in the course of the liability proceedings and the findings of the Court that they were knowingly concerned in the contraventions by Mr Hwang and Oz Korea because they omitted to pay to Mr Hwang and Oz Korea an amount sufficient to cover the minimum Award amounts. The Court made findings that the only person from the Pioneer Respondents who was involved in the omission by which the Pioneer Respondents have each been held accessorily liable is Mr Dickinson. There is certainly no evidence or any allegation put that the conduct of Mr Dickinson or the Pioneer Respondents was part of a scheme to avoid payment of Award rates and it is on this basis that I understand the Applicant’s submissions that the Pioneer Respondents did not engage in deliberate conduct. The Applicant’s concession, albeit confusing, is something that I take into account in a significant way when fixing penalty.
Nature and extent of the loss
The underpayments in respect of the four employees, amounting to $21,332.33, is a significant amount for those workers. It should also be borne in mind however that the employees were paid a $15 flat rate without deduction for tax and the loss that they suffered should not be calculated against what they would have been paid as a gross amount with tax deducted.
Previous similar conduct
No prior similar conduct is alleged against any of the Respondents.
Size and financial circumstances of the business
Mr Hwang has given evidence by an affidavit sworn 1 October 2018 that he is a very poor state, both in terms of his financial position and his health. In September 2015 he had a heart attack and was in hospital for eight days and has been unable to work since. He has also been unable to study and, due to failure to advise Centrelink of his inability to study, he now has an Austudy debt of approximately $10,000.
Mr Hwang gave evidence that he is currently on a Newstart allowance and receives about $403 per fortnight (which amount takes into account $100 deducted per fortnight to repay the Austudy debt). He also receives Family Tax benefits of about $242.34 per fortnight. I accept that
Mr Hwang and his wife have very little income, a home with a mortgage and a dependent child. They have no other assets and manage with the assistance from family in South Korea and friends. Mr Hwang has no capacity to pay the penalties sought by the Fair Work Ombudsman and if the penalty was enforced as a debt he may be made bankrupt (a proposition which counsel for the Applicant accepted).
Mr Hwang’s health is poor as evidenced by a report from his general practitioner and he has seen a psychologist about depression.
OzKorea is not trading and has no assets.
In relation to the Pioneer Respondents, evidence regarding the size and circumstances of the business run by the Pioneer entities is given in an affidavit of Francis Xavier Scarce sworn 2 October 2018. In summary, he gives evidence of commencing a small cleaning business in 1986 in partnership with another person, where he would clean the site himself in conjunction with one employee and one of the sites included a single Safeway supermarket. In about 2013, Mr Scarce, Mr Dickinson and
Mr Legudi became business partners and incorporated the Pioneer entities to facilitate that arrangement. The Pioneer business currently employs 120 direct employees and about 150 subcontractors; of these subcontractors, 145 engaged cleaners for Woolworths supermarkets.
The Pioneer business cleans more than 600 commercial sites across Australia and has a turnover of approximately $52.1 million, $42.3 million of which is derived from cleaning Woolworths supermarkets. This includes $900,000 as the revenue for cleaning Woolworths supermarkets in Tasmania. The Pioneer Respondents conducted a substantial business.
Whether senior management involved in the contravention
In relation to OzKorea, Mr Hwang was the director and manager of that company. In relation to the Pioneer Respondents, Mr Dickinson is one of the managing directors of the business.
Cooperation, contrition and corrective action
Mr Hwang’s cooperation in this proceeding is very significant, notwithstanding that when first approached by the Applicant he produced a false document purporting to set out the payments received by workers. Since that time he is cooperated extensively with the Applicant. He swore an affidavit which was relied upon by the applicant the liability proceeding, entered into statement of agreed facts and travelled to Victoria to give evidence in the proceeding.
Mr Hwang borrowed money to meet the underpayments and has paid all underpayments back to the employees concerned.
I accept that Mr Hwang has experienced considerable shame and distress as a result of his involvement in this matter, including his involvement in the proceeding which has been ongoing for some time. I also accept that he is contrite.
The Pioneer Respondents have defended this proceeding as they are entitled to and therefore did not cooperate or accept liability.
Mr Scarce has given evidence of the company’s participation in an audit process since 2014, whereby Woolworths audits 5% of its stores on an annual basis. This is to ensure that cleaners who cleaned its stores are paid in accordance with the applicable statutory instruments. He also gave evidence that as of September 2018, Pioneer has initiated its own audit process in order to check that subcontractors comply with their obligations and pay employees their minimum entitlements. The audit also checks subcontractor’s compliance with required record-keeping.
I accept that the Pioneer Respondents have set up an audit process, and also accept that they took action to terminate the subcontracting arrangements with OzKorea when they were specifically made aware that Award provisions were breached.
I also accept that they have implemented measures to assist in ensuring that subcontractors comply with workplace laws, including employing a qualified chief executive officer, participating in audits conducted by independent third parties, and employing a human resources manager, a recruitment coordinator and an HR officer who are all in a position to oversee the arrangements made between subcontractors and their employees. They have also implemented arrangements whereby employees of subcontractors can readily contact Pioneer with enquiries in relation to entitlements. I accept the evidence of Mr Scarce that the Pioneer Respondents have taken significant steps to address the issues that arose in this proceeding.
Compliance with minimum standards
The Court has made findings that Mr Hwang and OzKorea were in breach of minimum standards and that the Pioneer Respondents were knowingly concerned in the breach.
Specific and general deterrence
In my view, specific deterrence has little role to play for determining penalty for Mr Hwang and Oz Korea. Neither of them are now involved in employing people and it is unlikely that they will be in a position of employing staff again. General deterrence does have a role to play, but in considering general deterrence, one must take into account the specific circumstances of the breaches and the circumstances of Mr Hwang and OzKorea.
In relation to the Pioneer Respondents, these matters represent a first offence. The cost of defending the proceeding will have been significant and the associated publicity may have had an impact on the business. Specific deterrence does have a role to play in this matter in relation to the Pioneer Respondents as they are so heavily invested in this area of work and the engagement of subcontractors. In relation general deterrence, I accept that level of penalty should be set at a level that persuades other participants in the market to ensure that minimum standards are met.
Determination
Sung Gun Hwang
| Provision | Contravention | Maximum penalty for First Respondent | Penalty imposed | |
| 1 | Fair Work Act 2009 s 45 | Failing to pay the minimum rate of pay pursuant to cl 16 of the Award | $10,200 | $300 |
| 2 | Fair Work Act 2009 s 45 | Failing to pay part time loading pursuant to | $10,200 | $300 |
| 3 | Fair Work Act 2009 s 45 | Failing to pay night shift loading pursuant to cl 27.1(b) of the Award | $10,200 | $300 |
| 4 | Fair Work Act 2009 s 45 | Failing to pay Saturday penalty rate pursuant to cl 27.2(a) of the Award | $10,200 | $300 |
| 5 | Fair Work Act 2009 s 45 | Failing to pay Sunday penalty rate pursuant to cl 27.2(b) of the Award | $10,200 | $300 |
| 6 | Fair Work Act 2009 s 45 | Failing to pay public holiday rates pursuant to clause 27.3 of the Award | $10,200 | $300 |
| 7 | Fair Work Act 2009 s 45 | Failing to pay a minimum engagement period as required by cl 24.2(e) of the Award | $10,200 | $300 |
| 8 | Fair Work Act 2009 s 45 | Failing to pay overtime rates in accordance with cl 28.2 of the Award | $10,200 | $300 |
| 9 | Fair Work Act 2009 s 45 | Failing to pay Sunday overtime rates in accordance with cl 28.3 of the Award | $10,200 | $300 |
| 10 | Fair Work Act 2009 s 45 | Failing to engage employees in writing pursuant to cl 12.4(a) of the Award | $10,200 | $300 |
| 11 | Fair Work Act 2009 s 45 | Failing to pay wages weekly or fortnightly pursuant to cl 20.1 of the Award | $10,200 | $300 |
| 12 | Fair Work Act 2009 s 45 | Failing to ensure employees received two consecutive full day off pursuant to cl 24.5 of the Award | $10,200 | $300 |
| 13 | Fair Work Act 2009 s 45 | Failing to prepare and post a roster pursuant to cl 25.1 of the Award | $10,200 | $300 |
| 14 | Fair Work Act 2009 s 535(1) | Failing to make and keep records | $5,100 | $300 |
| 15 | Fair Work Act 2009 s 535(2) | Failing to make and keep accurate records | ||
| 16 | Fair Work Regulations 2009 reg 3.44(1) | Failing to ensure that a record required to be kept under the Regulations was not false or misleading | $3,400 | $300 |
| 17 | Fair Work Regulations 2009 reg 3.44(6) | Failing to not make use of entries in a record required to be made and kept under the Regulations knowing that it was false and misleading | $3,400 | $300 |
| 18 | Fair Work Act 2009 s 536(2) | Failing to give payslips | $5,100 | $200 |
| Total penalty imposed | $5,000 | |||
OzKorea Pty Ltd
| Provision | Contravention | Maximum penalty for Second Respondent | Penalty imposed | |
| 1 | Fair Work Act 2009 s 45 | Failing to pay the minimum rate of pay pursuant to cl 16 of the Award | $51,000 | $1,200 |
| 2 | Fair Work Act 2009 s 45 | Failing to pay night shift loading pursuant to cl 27.1(b) of the Award | $51,000 | $1,200 |
| 3 | Fair Work Act 2009 s 45 | Failing to pay Saturday penalty rate pursuant to cl 27.2(a) of the Award | $51,000 | $1,200 |
| 4 | Fair Work Act 2009 s 45 | Failing to pay Sunday penalty rate pursuant to cl 27.2(b) of the Award | $51,000 | $1,200 |
| 5 | Fair Work Act 2009 s 45 | Failing to pay part time loading pursuant to clause 12.4(b)(iii) of the Award | $51,000 | $1,200 |
| 6 | Fair Work Act 2009 s 45 | Failing to pay a minimum engagement period as required by cl 24.2(e) of the Award | $51,000 | $1,200 |
| 7 | Fair Work Act 2009 s 45 | Failing to pay overtime rates in accordance with cl 28.2 of the Award | $51,000 | $1,200 |
| 8 | Fair Work Act 2009 s 45 | Failing to pay Sunday overtime rates in accordance with cl 28.3 of the Award | $51,000 | $1,200 |
| 9 | Fair Work Act 2009 s 45 | Failing to engage employees in writing pursuant to cl 12.4(a) of the Award | $51,000 | $1,200 |
| 10 | Fair Work Act 2009 s 45 | Failing to pay wages weekly or fortnightly pursuant to cl 20.1 of the Award | $51,000 | $1,200 |
| 11 | Fair Work Act 2009 s 45 | Failing to ensure employees received two consecutive full day off pursuant to cl 24.5 of the Award | $51,000 | $1,200 |
| 12 | Fair Work Act 2009 s 45 | Failing to prepare and post a roster pursuant to cl 25.1 of the Award | $51,000 | $1,200 |
| 13 | Fair Work Act 2009 s 535(1) | Failing to make and keep records | $25,500 | $2,400 |
| 14 | Fair Work Act 2009 s 535(2) | Failing to make and keep accurate records | ||
| 15 | Fair Work Regulations 2009 reg 3.44(1) | Failing to ensure that a record required to be kept under the Regulations was not false or misleading | $17,000 | $1,200 |
| 16 | Fair Work Regulations 2009 reg 3.44(6) | Failing to not make use of entries in a record required to be made and kept under the Regulations knowing that it was false and misleading | $17,000 | $1,200 |
| 17 | Fair Work Act 2009 s 536(2) | Failing to give payslips | $25,500 | $1,200 |
| Total penalty imposed | $20,400 | |||
Pioneer Facility Services Pty Ltd
| Provision | Contravention | Maximum penalty for Third Respondent | Penalty imposed | |
| 1 | Fair Work Act 2009 s 45 | Failing to pay the minimum rate of pay pursuant to cl 16 of the Award | $51,000 | $5,000 |
| 2 | Fair Work Act 2009 s 45 | Failing to pay night shift loading pursuant to cl 27.1(b) of the Award | $51,000 | $3,000 |
| 3 | Fair Work Act 2009 s 45 | Failing to pay Saturday penalty rate pursuant to cl 27.2(a) of the Award | $51,000 | $3,000 |
| 4 | Fair Work Act 2009 s 45 | Failing to pay Sunday penalty rate pursuant to cl 27.2(b) of the Award | $51,000 | $3,000 |
| 5 | Fair Work Act 2009 s 45 | Failing to pay part time loading pursuant to cl 12.4(b)(iii) of the Award | $51,000 | $3,000 |
| Total penalty imposed | $17,000 | |||
Pioneer Contracting Services
| Provision | Contravention | Maximum penalty for Fourth Respondent | Penalty imposed | |
| 1 | Fair Work Act 2009 s 45 | Failing to pay the minimum rate of pay pursuant to cl 16 of the Award | $51,000 | $5,000 |
| 2 | Fair Work Act 2009 s 45 | Failing to pay night shift loading pursuant to cl 27.1(b) of the Award | $51,000 | $3,000 |
| 3 | Fair Work Act 2009 s 45 | Failing to pay Saturday penalty rate pursuant to cl 27.2(a) of the Award | $51,000 | $3,000 |
| 4 | Fair Work Act 2009 s 45 | Failing to pay Sunday penalty rate pursuant to cl 27.2(b) of the Award | $51,000 | $3,000 |
| 5 | Fair Work Act 2009 s 45 | Failing to pay part time loading pursuant to cl 12.4(b)(iii) of the Award | $51,000 | $3,000 |
| Total penalties imposed | $17,000 | |||
The penalties that the applicant seeks to be imposed on Mr Hwang are crushing given his circumstances and the level of cooperation (as shown by the fact that he has paid the underpayments) so the sum I propose to impose is a significant amount.
The fines levied against OzKorea and the Pioneer Respondents are also significant and will act as a general deterrent. They also reflect:
a)the submission that was made by the Applicant in the penalty proceeding that their conduct was not deliberate; and
b)that the Pioneer Respondents have taken steps to ensure compliance with Awards where employees are engaged by subcontractors.
The penalties imposed on each of the Pioneer Respondents also reflects that they are associated entities and the total penalty to be paid by the Pioneer Respondents is $40,000.
I impose total penalties of:
a)$5,000 on Mr Hwang;
b)$20,400 on OzKorea;
c)$20,000 on Pioneer facility services; and
d)$20,000 on Pioneer contracting services.
I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of Judge McNab
Associate:
Date: 7 December 2018
Corrections
The following changes have been made:
The name of the Second Respondent (“Sung Gun Hwang”) has been changed to Sung Gun Hwang.
The Orders have been changed and these changes have been underlined.
Item 5 of the table in respect of OzKorea Pty Ltd at [20] and [57]:
| 5 | Fair Work Act 2009 s 45 | Failing to pay | $51,000 | $1,200 |
Item 6 of the table in respect of Pioneer Facility Services Pty Ltd and Pioneer contracting Services Pty Ltd at [20]:
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Item 6 and the 'Total penalty imposed' row in each of the tables in respect of Pioneer Facility Services Pty Ltd and Pioneer Contracting Services Pty Ltd at [57] of the Judgment be amended as follows:
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| Total penalties imposed | $ | |||
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