Fair Work Ombudsman v Pebs Group Pty Ltd
[2021] FedCFamC2G 158
•18 October 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
Fair Work Ombudsman v PEBS Group Pty Ltd [2021] FedCFamC2G 158
File number(s): MLG 2804 of 2020 Judgment of: JUDGE RILEY Date of judgment: 18 October 2021 Catchwords: INDUSTRIAL LAW – declaration that the first respondent failed to comply with a compliance notice – declaration that the second respondent was involved in the first respondent’s contravention – amount of penalties to be imposed on each respondent. Legislation: Fair Work Act 2009 ss 550, 545(1), 546(1), 716(2) and (5) Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3
Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665; (2008) ASAL 55-176; (2007) ATPR 42-138; [2006] FCA 1427
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; [2015] HCA 46
Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228; [2001] FCA 1364
Fair Work Ombudsman v Bedington [2012] FMCA 1133
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301
Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70
Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170
Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Number of paragraphs: 74 Division Division 2 General Federal Law Date of hearing: 25 August 2021
8 September 2021Place: Melbourne Advocate for the Applicant: Chelsea Hannaford Solicitor for the Applicant: Fair Work Ombudsman Advocate for the First Respondent: Shane McGrath Solicitor for the First Respondent: None Advocate for the Second Respondent: In person Solicitor for the Second Respondent: None ORDERS
MLG2804 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: PEBS GROUP PTY LTD (ACN 610 966 071)
First RespondentSHANE MCGRATH
Second Respondent
ORDER MADE BY:
JUDGE RILEY
DATE OF ORDER:
18 OCTOBER 2021
UPON THE ADMISSIONS MADE BY THE RESPONDENTS, THE COURT DECLARES THAT:
1.The first respondent contravened s.716(5) of the Fair Work Act 2009 (“the Act”) by failing to comply with the compliance notice issued on 13 February 2020 pursuant to s.716(2) of the Act.
2.Pursuant to s.550 of the Act, the second respondent was involved in the first respondent’s contravention identified in declaration 1.
THE COURT ORDERS THAT:
3.Within 28 days, pursuant to s.545(1) of the Act, the first respondent take the steps that it was required to take by the compliance notice issued on 13 February 2020 by:
(a)paying the outstanding entitlements it was required to pay to Ms Shebana Munaf of $114.17; and
(b)paying the outstanding entitlements it was required to pay on behalf of Ms Shebana Munaf of $10.01 to her nominated superannuation fund.
THE COURT ORDERS BY CONSENT THAT:
4.Within 28 days, pursuant to s.546(1) of the Act:
(a)the first respondent pay a pecuniary penalty to the Commonwealth for the contravention set out in declaration 1; and
(b)the second respondent pay a pecuniary penalty to the Commonwealth, for his involvement (within the meaning of s.550(2) of the Act) in the contravention set out in declaration 2.
THE COURT ORDERS THAT:
5.The pecuniary penalty to be paid by the first respondent be $15,120.
6.The pecuniary penalty to be paid by the second respondent be $3,024.
THE COURT ORDERS BY CONSENT THAT:
7.The applicant have liberty to apply on seven days’ notice in the event any of the preceding orders are not complied with.
Note: The form of the order is subject to the entry in the court’s records.
Note:This copy of the court’s reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE RILEY:
INTRODUCTION
This matter concerns:
(a)declarations that:
(i)the first respondent failed to comply with a compliance notice issued under s.716(2) of the Fair Work Act 2009 (“the Act”); and
(ii)the second respondent was involved, within the meaning of s.550 of the Act, in that failure;
(b)orders for compliance with the compliance notice; and
(c)the penalties to be imposed for the non-compliance with the compliance notice.
The parties filed a statement of agreed facts on 23 January 2021. In the statement of agreed facts, they agreed on the declarations to be made, orders for compliance and that penalties should be imposed and should be payable to the Commonwealth. However, they disagreed on the amount of the penalties to be imposed.
The respondents were not legally represented. Mr McGrath, the second respondent, as the sole director of the first respondent, was given leave to appear for the first respondent.
The matter came on for hearing on 25 August 2021. Mr McGrath had enormous difficulty joining the hearing by Microsoft Teams. Eventually, the hearing proceeded with Mr McGrath appearing by telephone.
Mr McGrath initially indicated that he had not read the Fair Work Ombudsman’s submissions on penalty because he was given the wrong email address for the Commonwealth Courts Portal. However, he later conceded that he had been served with them and had read them. The respondents did not file any written submissions themselves.
Mr McGrath told the court at the hearing on 25 August 2021 that he had tried to file material in March or April 2021 in accordance with court orders. He acknowledged that my associates had told him at that time that his material had not been filed, and, if he wished to rely on it, he would have to file it properly.
Mr McGrath indicated at the hearing on 25 August 2021 that he wanted to rely on evidence proving the first respondent’s payments to employees following the compliance action by the Fair Work Ombudsman (“the Ombudsman”). The Ombudsman indicated that she agreed with Mr McGrath’s figures, except that there remained outstanding to one employee $114.17 in underpayments and $10.01 in superannuation. During the hearing on 25 August 2021, Mr McGrath accepted that those figures were accurate and that he owed that money. Therefore, there was no need for evidence about that matter.
However, in addition, Mr McGrath indicated that he wished to file evidence about the first respondent’s inability to rectify the underpaid amounts for 10 months after the time for compliance with the compliance notice. Mr McGrath assured the court that he would be able to file an affidavit addressing that matter within a week.
Consequently, the respondents were given a week to file any affidavit material, and the hearing was adjourned to 8 September 2021. The respondents did not file any affidavit material. The hearing proceeded on 8 September 2021 without any material from the respondents.
MATERIAL RELIED UPON
At the hearing on 25 August 2021, the Ombudsman relied upon:
(d)the affidavit affirmed by Sarah Eloise Crowe Allen on 28 January 2021;
(e)the affidavit affirmed by Sarah Eloise Crowe Allen on 26 March 2021;
(f)the affidavit affirmed by Chelsea Diane Hannaford on 18 August 2021;
(g)the parties’ statement of agreed facts filed on 23 January 2021; and
(h)the Ombudsman’s submissions on penalty filed on 26 March 2021.
In her written submissions filed on 26 March 2021, the Ombudsman said she also relied upon:
(a)her application filed on 30 July 2021; and
(b)her statement of claim filed on 30 July 2021.
The respondents did not seek to cross-examine on any of the affidavits relied on by the Ombudsman.
As indicated above, the respondents did not have any material to rely upon, save for the statement of agreed facts.
LEGISLATION
Subsection 716(2) of the Act provides that:
The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:
(a)take specified action to remedy the direct effects of the contravention referred to in subsection (1);
(b)produce reasonable evidence of the person’s compliance with the notice.
Subsection 716(5) of the Act provides that:
A person must not fail to comply with a notice given under this section.
Section 550 of the Act provides that:
(1)A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
Note:If a person (the involved person) is taken under this subsection to have contravened a civil remedy provision, the involved person’s contravention may be a serious contravention (see subsection 557A(5A)). Serious contraventions attract higher maximum penalties (see subsection 539(2)).
(2)A person is involved in a contravention of a civil remedy provision if, and only if, the person:
(a) has aided, abetted, counselled or procured the contravention; or
(b)has induced the contravention, whether by threats or promises or otherwise; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d)has conspired with others to effect the contravention.
Subsection 546(1) provides that:
The Federal Court, the Federal Circuit and Family Court of Australia (Division 2) or an eligible State or Territory court may, on application, order a person to pay a pecuniary penalty that the court considers is appropriate if the court is satisfied that the person has contravened a civil remedy provision.
Subsection 545(1) provides that:
The Federal Court or the Federal Circuit and Family Court of Australia (Division 2) may make any order the court considers appropriate if the court is satisfied that a person has contravened, or proposes to contravene, a civil remedy provision.
AGREED FACTS
The parties set out the agreed facts in a statement of agreed facts filed on 23 January 2021 as follows:
The Applicant and the Fair Work Inspectors
1.The FWO has standing and authority to bring these proceedings and seek orders under section 539 of the Fair Work Act 2009 (Cth) (FW Act).
2.Fair Work Inspector (FWI) Kelli Portbury (FWI Portbury) and FWI Sarah Allen (FWI Allen) are and were at all relevant times Fair Work Inspectors appointed by the FWO under section 700 of the Fair Work Act 2009 (FW Act).
The Respondents
3.At all relevant times, PEBS Group is and was:
(a)company incorporated under the provisions of the Corporations Act 2001 (Cth) and registered since 25 February 2016;
(b)a “constitutional corporation” within the meaning of section 12 of the FW Act;
(c)a “national system employer” within the meaning of section 14(1)(a) of the FW Act;
(d)covered by and required to comply with the FW Act in respect of the Employees referred to at paragraph 5 below; and
4. PEBS Group was at all relevant times a company that
(a) sold advertising space for businesses in an online directory; and
(b)has a registered office at 5 Valentine Lane, Cranbourne North, Victoria (Registered Office).
5. At all relevant times the Second Respondent is and was:
(a) a natural person capable of being sued;
(b) the sole director of the PEBS Group since 26 February 2016;
(c) the operative and controlling mind of the First Respondent;
(d)responsible for the overall operation, management and control of the First Respondent; and
(e)responsible for ensuring the PEBS Group complied with its legal obligations under the FW Act.
Investigation Summary
6.In or around September 2019, FWI Portbury commenced an investigation into the First Respondent’s compliance with the FW Act (Investigation), under the supervision of FWI Allen.
7.At all relevant times, Mr McGrath used the email address [email protected] (Email Address) to communicate with FWI Portbury and FWI Allen.
8.As a result of the Investigation, FWI Allen formed a reasonable belief, within the meaning of section 716(1) of the FW Act, that during the Employment Periods:
(a)PEBS Group employed the individuals in the table below (Employees) to work in the business in the respective periods set out in the table (Employment Periods):
Employee
Period
Shebana Munaf (Ms Munaf)
7 July 2019 and 9 August 2019
Izaac Richards (Mr Richards)
15 July 2019 and 17 July 2019
Bailey Andrew (Mr Andrew)
8 July 2019 and 17 July 2019
Kimberly Tirant (Ms Tirant)
25 June 2019 and 23 July 2019
Dylan Hamilton-Thomson (Mr Hamilton-Thomson)
8 July 2019 and 22 July 2019
(b)the employees performed telemarketing roles by cold calling businesses to sell advertisement space on the ‘Rainbow’ directory owned by PEBS Group from the PEBS Group office;
(c)Ms Munaf was employed as a ‘sales representative’ and was also responsible for managing the account of any business that she engaged as clients through telemarketing;
(d)by reason of the matters pleaded in paragraphs 3, 4, and 8(a) to 8(c) above, during the Employment Periods:
(i)the Clerks - Private Sector Award 2010 (Award), a modem award under the FW Act, covered and applied to PEBS Group with respect to the employment of the Employees; and
(ii)the Employees performed duties within either level 1 or 2 classification under the Clerks Award;
(e) Ms Munaf was engaged by PEBS Group on a full-time basis;
(f)Mr Richards, Mr Andrew, Ms Tirant and Mr Hamilton-Thomson were engaged by PEBS Group on a part time basis;
(g)during their respective Employment Periods:
(i)PEBS Group did not make any payments to Ms Munaf, Mr Richards, Mr Andrew, and Mr Hamilton-Thomson in relation to the performance of work;
(ii)PEBS Group made partial payment to Ms Tirant for the performance of work but failed to pay Ms Tirant all amounts owing to her,
(h)on the morning of 17 July 2019, Mr Richards was terminated by the Second Respondent via text message without notice;
(i)PEBS Group did not pay the Employees for their accrued annual leave upon the termination of their employment with PEBS Group.
9.By reason of the matters in paragraph 8, FWI Allen formed a reasonable belief pursuant to section 716(1)(b) of the FW Act that the PEBS Group had contravened the following terms of the Clerks Award in respect of the Employees:
(i)clause 16 of the Clerks Award (full-time minimum wage) in respect of Ms Munaf’s employment;
(ii)clause 11. 7 of the Clerks Award (part-time minimum wage) in respect of Mr Richards, Mr Andrew, Ms Tirant and Mr Hamilton-Thomson’s employment;
(iii)section 90(2) of the FW Act (annual leave) for each of the Employees; and
(iv)section 117 of the FW Act (notice of termination) for Mr Richards.
(the Contraventions)
Failure to comply with a Compliance Notice
10.On 13 February 2020, FWI Allen gave a compliance notice to the PEBS Group pursuant to section 716(2) of the FW Act (Compliance Notice) by:
(a)posting the Compliance Notice by express post to the Registered Office; and
(b)sending an email to the Second Respondent at [email protected] and attaching a copy of the Compliance Notice.
11.The Compliance Notice was delivered to the Registered Office on 14 February 2020.
12.Pursuant to section 716(2) of the FW Act, the Compliance Notice required PEBS Group:
(a)to take the following action (Specified Action) by 17 March 2020 to remedy the direct effects of the Contraventions for each Employee:
(i)identify the number of hours the relevant Employee worked during the Employment Period, in respect of which a relevant entitlement was required to be paid by the Award (Hours) (except for entitlements not paid on an hourly basis);
(ii)identify the amount PEBS Group paid to the Employee during the Employment Period in respect of the entitlement (having regard to the Hours, where applicable);
(iii)calculate the amount the Employee should have been paid during the Employment Period in respect of the entitlements (having regard to the Hours, where applicable);
(iv)make a payment to the employee of the difference between the amount referred to in paragraph 12(a)(ii) and the amount referred to in paragraph 12(a)(iii);
(v)make a record of the information and amounts referred to at 12(a)(i) to 12(a)(iii) and the amount of the payment referred to in 12(a)(iv) above (Underpayment Rectification Information);
(vi)calculate additional superannuation contributions required by clause 24.2 of the Clerks Award in respect of amounts required to be paid to the Employees as a result of the process referred to at 12(a)(i) to 12(a)(iii) above, to the chosen superannuation fund of the Employee, or a superannuation fund as provided by clause 24.4 of the Clerks Award; and
(b)produce reasonable evidence of the steps taken by PEBS Group to comply with the Compliance Notice by 24 March 2020, including a schedule that set out:
(i)the Underpayment Rectification Information in respect to each of the Contraventions; and
(ii)additional superannuation contributions calculated and paid in accordance with paragraph 12(a)(vi) above.
13. The Compliance Notice met the requirements of section 716(3) of the FW Act.
14.PEBS Group did not take the Specified Action set out in the Compliance Notice by 17 March 2020, and therefore failed to comply with the Compliance Notice.
15.PEBS Group admits that, by reason of the matters agreed in paragraphs 8 to 14 above, PEBS Group contravened section 716(5) of the FW Act.
Liability of the Second Respondent
16.By reason of the matters agreed in paragraphs 5, 7, 10 to 12, and 14 above, the Second Respondent:
(a)was responsible for ensuring that PEBS Group complied with the Compliance Notice;
(b)had actual knowledge of the Compliance Notice that was given to PEBS Group; and
(c)had actual knowledge of PEBS Group’s failure to comply with the Compliance Notice.
17.The Second Respondent admits that, by reason of the matters agreed to in paragraph 16 above, he:
(a)was involved, within the meaning of section 550(2)(c) of the FW Act, in PEBS Group’s contravention of section 716(5) of the FW Act as admitted in paragraph 15 above; and
(b)pursuant to section 550(1) of the FW Act, is to be taken to have personally contravened section 716(5) of the FW Act.
18.On 15 January 2021, the First Respondent made the following payments to the Employees:
(a) $624.29 to Bailey Andrew;
(b) $1,519.41 to Kim Tirant;
(c) $467.24 to lzaac Richards;
(d) $1,012.01 to Dylan Hamilton; and
(e) $3,428.99 to Shebana Manuf.
THE PROPOSED DECLARATIONS
Paragraph 19 of the statement of agreed facts proposed that the following declarations be made by the court:
By consent, the parties seek declarations that:
(a)PEBS Group contravened section 716(5) of the FW Act by failing to comply with the Compliance Notice; and
(b)the Second Respondent was involved, within the meaning of section 550(2)(c) of the FW Act, in PEBS Group’s contravention of section 716(5) of the FW Act.
There has been authority in the past to the effect that it is not appropriate for a court to make declarations based on admissions. However, there is more recent authority that in certain cases it is appropriate for the court to make declarations in such circumstances.
In particular, in Australian Competition and Consumer Commission v Dataline.net.au Pty Ltd (2006) 236 ALR 665; (2008) ASAL 55-176; (2007) ATPR 42-138; [2006] FCA 1427, Kiefel J, as her Honour then was, considered at paragraphs 52 to 59 the rationale for the previous approach taken by the courts. Her Honour came to the view that the previous approach may no longer be warranted, particularly in public interest cases such as this, and particularly if the declarations are preceded by a statement that they are made upon admissions.
In all the circumstances of this case, I am satisfied that it is appropriate to make the declarations sought by the parties on the basis of the admissions made by the respondents, provided that the declaration is preceded by an appropriate preamble. The declarations will be made accordingly.
PROPOSED ORDERS BY CONSENT
Paragraph 20 of the statement of agreed facts proposed that the following orders be made by consent:
Compliance Orders
(a)pursuant to section 545(1) of the FW Act, PEBS Group take the steps that were required by the Compliance Notice within 28 days of this order, by:
(i)calculating the outstanding entitlements it was required to pay the Employees;
(ii)paying to the Employees any difference between the outstanding entitlements owed to the Employees referred to in paragraph 20(a)(i) above and the payments received by the Employees referred to in paragraph 18 above;
(iii)calculating and paying into the Employees’ nominated superannuation funds, or a superannuation fund as provided for by the Clerks Award, any additional superannuation contributions it was required to pay on the outstanding entitlements referred to in paragraph 20(a)(i) above; and
(iv)preparing and producing to the Applicant a schedule outlining its calculation of the outstanding entitlements it was required to pay to, or on behalf of, the Employees; and
(v)providing evidence that the outstanding entitlements were rectified as set out in paragraph 20(a)(i) to 20(a)(iii) above.
(b)pursuant to section 547(2) of the FW Act that PEBS Group pay interest on the amounts owed to the Employees pursuant to paragraph 20(a)(ii) above within 28 days of this order;
Penalty orders
(c) pursuant to section 546(1) of the FW Act, within 28 days of this order:
(i)PEBS Group pay a pecuniary penalty to the Commonwealth, for the contravention set out in 19(a) above; and
(ii)the Second Respondent pay a pecuniary penalty to the Commonwealth, for his involvement (within the meaning of section 550(2) of the FW Act) in the contravention referred to in paragraph 19(b) above;
Other orders
(d)the FWO have liberty to apply on seven days’ notice in the event any of the preceding orders are not complied with; and
(e)such further orders as the Court considers appropriate.
However, by the time the Ombudsman filed her written submissions on 26 March 2021, proposed orders (a) and (b) had been overtaken by events, in that the first respondent had complied with the compliance notice save for the small sums outstanding in respect of Ms Munaf. Otherwise, the proposed orders are appropriate and will be made by consent.
In addition, in her written submissions, the Ombudsman proposed an order 3 as follows:
The First Respondent take the steps that were required by the Compliance Notice, pursuant to section 545(1) of the FW Act, within 28 days of this order, by:
(a)paying the outstanding entitlements it was required to pay to Ms Munaf of $114.17; and
(b)paying the outstanding entitlements it was required to pay to Ms Munaf of $10.01 to her nominated superannuation fund.
The respondents did not resist that order. Indeed, Mr McGrath said on the second day of the hearing that the first respondent had already paid the required amounts. However, from an abundance of caution, I will make that order as an order of the court, as the respondents did not formally consent to it. If it has already been complied with, then well and good.
ISSUE IN DISPUTE
The issue remaining, and on which the parties were in dispute, is the amount of the penalties to be imposed.
APPROACH TO DETERMINING PENALTY
Bromwich J summarised the proper approach to determining penalty in cases such as this in Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 at [36] as follows:
(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 (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) 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].
A convenient checklist of the factors that the court might consider in determining penalty include the matters that were identified by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59] and adopted by Tracey J in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [14]. That list is as follows:
(a) The nature and extent of the conduct which led to the breaches.
(b) The circumstances in which that conduct took place.
(c)The nature and extent of any loss or damage sustained as a result of the breaches.
(d) Whether there had been similar previous conduct by the respondent.
(e)Whether the breaches were properly distinct or arose out of the one course of conduct.
(f) The size of the business enterprise involved.
(g) Whether or not the breaches were deliberate.
(h) Whether senior management was involved in the breaches.
(i) Whether the party committing the breach had exhibited contrition.
(j) Whether the party committing the breach had taken corrective action.
(k)Whether the party committing the breach had cooperated with the enforcement authorities.
(l)The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements.
(m) The need for specific and general deterrence.
The court must, of course, be mindful of the caution expressed by Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560; (2008) 246 ALR 35; [2008] FCAFC 8 at [91] as follows:
Check lists of this kind can be useful providing they do not become transformed into a rigid catalogue of matters for attention. At the end of the day the task of the Court is to fix a penalty which pays appropriate regard to the circumstances in which the contraventions have occurred and the need to sustain public confidence in the statutory regime which imposes the obligations. There is no suggestion in the present case that the learned magistrate made any relevant error in her identification of the matters which she should consider in fixing penalties.
The court will consider the circumstances of the case under the various headings suggested by Mowbray FM, and then consider whether any other matters are relevant.
Step 1: identifying the breaches
As stated above, the first respondent contravened s.716(5) of the Act by failing without reasonable excuse to comply with a compliance notice, and the second respondent was involved in that breach pursuant to s.550 of the Act.
Step 2: single course of conduct
As there was only one breach by the first respondent, which the second respondent was involved in, the single course of conduct principles do not need to be considered.
Step 3: grouped breaches
As there was only one breach, the grouped breaches principles do not need to be considered.
Step 4: the appropriate penalty for the breaches
a. the nature and extent of the conduct which led to the breach
In her written submissions filed on 26 March 2021, the Ombudsman said that:
20.The power of a FWI to issue a compliance notice was introduced into the FW Act to provide a mechanism for dealing with non-compliance with minimum entitlements in the FW Act, as an alternative to commencing litigation for each underlying contravention of an obligation.21 If a person complies with a compliance notice, no civil remedy proceedings can be brought against the person for an underlying contravention.22
21.Compliance notices thereby provide a mechanism for the efficient and cost-effective rectification of identified contraventions of the FW Act, including underpayments to employees. Compliance notices have been recognised by the Court as “an important part of the armoury of Fair Work Inspectors in fulfilling their functions”.23
22.In the present case, the Compliance Notice sought to address the underpayment of five employees on the basis of FWI Allen’s reasonable belief that PEBS Group had contravened terms of the Award. The Compliance Notice gave PEBS Group the opportunity to rectify the contraventions, and therefore be protected from civil remedy proceedings in respect of the contraventions. The Respondents elected not to take that opportunity. Indeed, they did not back-pay the affected employees until 15 January 2021, well after proceedings were commenced and 10 months after the time specified by the Compliance Notice.
23.The Applicant made extensive efforts to discuss the Compliance Notice with Mr McGrath before the due date and provided ample opportunity for the Respondents to rectify the breach before commencing proceedings.24
24.It is submitted that the Respondents’ failure to comply with the Compliance Notice for a protracted period represents a disregard for the enforcement powers of the Applicant and the compliance protections of the FW Act. This has necessitated litigation in an effort to bring about compliance, while the affected Employees awaited payment.
FN 21:Fair Work Bill 2008, Explanatory Memorandum, at [2673].
FN 22:Section 716(4A) of the FW Act. See also, section 716(4B) of the FW Act which provides that, in complying, the person is not taken to have admitted or been found to have contravened the civil remedy provision of an underlying contravention.
FN 23:Fair Work Ombudsman v Blu Hornsby Pty Ltd & Anor [2016] FCCA 1150, at [29].
FN 24:Allen Affidavit at [22-25].
Mr McGrath did not address this issue in his oral submissions.
I accept the Ombudsman’s submissions on this point.
I note that, technically, there was only one breach. However, it affected five employees, and resulted in them being underpaid wages to the total of $8,974.86 (by the Ombudsman’s calculation, or $8,704.86 by my calculation) and superannuation to the total of $851.78. The period in which the underpayments occurred varied between a few days and a month. However, the fact that the underpayments did not continue for longer was due to the prompt action of the employees.
While there was only one breach, it continued for a long time. The compliance notice required the first respondent to comply by 17 March 2020. It did not comply until 29 January 2021. That delay occurred notwithstanding that the Ombudsman made numerous attempts to contact the first respondent, and then filed these proceedings on 30 July 2020.
b. the circumstances in which that conduct took place
The Ombudsman relied on her submissions under the previous heading. The respondents made certain submissions on this point but they were not supported by evidence so I disregard them.
The respondents also alluded to difficulties caused by the COVID-19 pandemic. However, I note that, as a matter of public record, the first lockdown in Melbourne, which consisted of stage 3 restrictions, did not start until 31 March 2020, two weeks after the time for compliance with the compliance notice. The respondents did not provide any evidence that their business was adversely impacted by the pandemic prior to the first lockdown, or indeed, at any other time.
c. the nature and extent of any loss or damage sustained
In her written submissions filed on 26 March 2021, the Ombudsman said that:
33.The Employees were directly impacted by PEBS Group’s failure to comply with the Compliance Notice because they were denied wages in the total sum of $8,974.86 and superannuation contributions of $851.78.32
34.While the Court’s focus appropriately should be directed to the non-compliance with the Compliance Notice rather than the contraventions alleged in it,33 the delay in the employees receiving their wages is a relevant loss flowing from the breach before the Court.34
35.The other relevant loss in this matter is the “frustration and stultification of the statutory purpose”35 behind section 716 of the FW Act, which as noted above, is to prevent litigation.
FN 32:Allen Supplementary Affidavit at [7-8].
:Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No.2) [2020] FCCA 2583 (Soma Kitchen) at [38].
:Corporation Sun at [22].
:Soma Kitchen at [39].
The respondents did not dispute these submissions. I accept the Ombudsman’s submissions on this point.
d. whether there had been similar previous conduct
It was not alleged that the respondents had engaged in any similar conduct on a previous occasion.
e. whether the breaches arose out of the one course of conduct
There was only one breach, so it did arise from the one course of conduct.
f. the size of the business enterprise involved
In her written submissions filed on 26 March 2021 at paragraph 41, the Ombudsman said that:
There is no evidence currently before the Court from PEBS Group relating to its size or financial circumstances. Further, it is well established that the size and financial circumstances of an employer do not exculpate contraventions of workplace laws.39
FN 39:Kelly at [28]; Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27]; Corporation Sun at [37].
The respondents did not make any submissions on this point. I accept the Ombudsman’s submission in this regard.
I note that Tracey J said in Kelly v Fitzpatrick (2007) 166 IR 14; [2007] FCA 1080 at [28]:
No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not it will, normally, be necessary to mark the failure by imposing an appropriate monetary sanction. Such a sanction “must be imposed at a meaningful level” (citation omitted).
Similarly, in Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412, the court said at [27]:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty. …
g. whether or not the breaches were deliberate
In her written submissions filed on 26 March 2021 at paragraph 36, the Ombudsman said that:
Mr McGrath was emailed a copy of the Compliance Notice, which plainly set out what was required to comply and the potential consequences for failing to do so.36 FWI Allen attempted to discuss the Compliance Notice with Mr McGrath shortly after it was issued and another FWI emailed him a reminder to comply prior to the due date.37 The contravention was deliberate in that Mr McGrath was well aware of what was required to comply and yet did not do it.
FN 36: SOAF at [10(b)]; Allen Affidavit at [17], Annexure SECA-9, pg. 41-44.
FN 37:Allen Affidavit at [18-19], Annexure SECA-10, pg. 133-138 and SECA-11, pg. 139-142.
Mr McGrath denied that the first respondent’s non-compliance was a deliberate act. However, he did not substantiate that in any way. There is no doubt that the first respondent received the compliance notice. I do not doubt that Mr McGrath understood what it required. He did not assert that the first respondent had attempted to comply, but, through some misadventure, its attempts were unsuccessful. I therefore conclude that the first respondent’s non-compliance was deliberate.
h. whether senior management was involved in the breach
By his own admissions, senior management, in the form of Mr McGrath, was involved in the breach.
i. contrition, corrective action and co-operation with the authorities
In her written submissions filed on 26 March 2021, the Ombudsman said that:
37.The Respondents have now addressed the issues required by the Compliance Notice, but took ten months and significant involvement from the FWO to do so.
38.There remains $114.17 in underpayments and $10.01 in superannuation outstanding for Ms Manuf. The Applicant acknowledges this arose from a transposition error in its communication in December 2020, although had the Respondents taken the required action earlier or satisfactorily completed the calculations required of it, such error would not have arisen. Nevertheless, while the Applicant seeks an order that these amounts be rectified, the Applicant does not rely on the failure to rectify those amounts in January 2021 as an aggravating factor.
39.The Respondents have not expressed any contrition or regret for their actions.
40.In light of the Respondent’s full admissions and the action taken (albeit well after the timeframe required) to back-pay the employees, the Applicant submits that the Respondents should be afforded a 20% discount on account of their admissions and cooperation.38
FN 38:Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70 at [75]-[76].
The respondents did not make any submissions on this point. I accept the Ombudsman’s submissions in this regard.
j. the need to ensure compliance with minimum standards
In her written submissions filed on 26 March 2021, the Ombudsman said that:
25.One of the principal purposes of the FW Act is to provide a guaranteed safety net of fair, relevant, and enforceable minimum terms and conditions for all employees.25 To be able to enforce these terms, FWIs must be able to exercise their compliance powers effectively. The purpose of the powers conferred on FWIs is to provide the Applicant with an effective means of investigating and enforcing compliance with minimum standards and industrial instruments.
26.The Courts have observed that a compliance notice is intended “to avoid litigation” and that failure to comply with a compliance notice “undermines the entire purpose of the statutory provision”.26
27.The Respondents’ failure to comply with the Compliance Notice undermines the FW Act’s enforcement framework and the safety net of entitlements it is designed to protect.27
FN 25:Section 3(b) FW Act.
FN 26:Fair Work Ombudsman v Corporation Sun Pty Ltd & Anor [2020] FCCA 2849 (Corporation Sun) at [63].
FN 27:Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801 at [21] − [22].
The respondents did not make any submissions on this point. I accept the Ombudsman’s submissions in this regard.
k. the need for specific and general deterrence
In her written submissions filed on 26 March 2021, the Ombudsman said that:
Specific deterrence
28.It is submitted that there is a need for specific deterrence to ensure that the Respondents will not be prepared to embark upon the risk of engaging in the same contravening conduct in the future.28
29.PEBS Group continues to operate and Mr McGrath remains its sole director. While the Respondents have put on no evidence regarding the number of employees presently engaged, the Applicant submits that with the Respondents’ continued involvement in business there is a likelihood of them employing staff into the future. On this basis, it is important that the penalties imposed be sufficient to deter the Respondents from future conduct that undermines the powers of FWIs or the efficacy of statutory notices.
30.It is necessary that any penalty imposed on the Respondents contain sufficient “sting or burden” that the Respondents will “seek to avoid the risk of subjection to future penalties”.29
31.There is a need to send a message to the Respondents that the Court does not tolerate such contraventions and the impact they have on affected individuals and public resources.
General deterrence
32.To achieve general deterrence, penalties should be set at a level to deter others who may engage in similar conduct and must not [be] seen by others as just “an acceptable cost of doing business”.30 Recipients of statutory notices issued by regulators such as the Applicant must be under no misapprehension about their obligations to comply with those notices, and that failure to do so will result in consequences.31
FN 28:Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 (AJR Nominees) at [50].
FN 29:Australian Building and Construction Commissioner v J Hutchinson Pty Ltd T/A Hutchinson Builders [2019] FCA 667 at [15] (unreported, 7 May 2019, Logan J).
FN 30:Fair Work Ombudsman v Rum Runner Trading Pty Ltd & Anor [2018] FCCA 1129 at [120] citing Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 at [62]- [63]; Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 at [93] (Lander J).
FN 31: Fair Work Ombudsman v Deborah Ruth Souris [2016] FCCA 345 at [48].
The respondents did not make any submissions on this point. I accept the Ombudsman’s submissions in this regard.
In addition, I note that in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; (2015) 326 ALR 476; (2015) 90 ALJR 113; (2015) 255 IR 87; [2015] HCA 46, French CJ, Kiefel, Bell, Nettle and Gordon JJ said at [55]:
No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act]. ... The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”
(footnotes omitted)
Similarly, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (CFMEU) (2018) 262 CLR 157; (2018) 351 ALR 190; (2018) 92 ALJR 219; (2018) 273 IR 211; [2018] HCA 3, Keane, Nettle and Gordon JJ said at [116]:
As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty's general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition.
(footnotes omitted)
In relation to specific deterrence, Gray J observed in Plancor Pty Ltd v Liquor, Hospitality and Miscellaneous Union (2008) 171 FCR 357; (2008) 177 IR 243; [2008] FCAFC 170 at [37] that:
… Specific deterrence focuses on the party on whom the penalty is to be imposed and the likelihood of that party being involved in a similar breach in the future. Much will depend on the attitude expressed by that party as to things like remorse and steps taken to ensure that no future breach will occur. …
In relation to general deterrence, Lander J noted in Ponzio v B & P Caelli Constructions Pty Ltd (2007) 158 FCR 543; (2007) 162 IR 444; [2007] FCAFC 65 at [93]:
… In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like minded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty…(citations omitted)
Similarly, in Community and Public Sector Union v Telstra Corporation Limited (2001) 108 IR 228 at 230-231; [2001] FCA 1364, Finkelstein J said:
… even if there be no need for specific deterrence, there will be occasions when general deterrence must take priority, and in that case a penalty should be imposed to mark the law's disapproval of the conduct in question, and to act as a warning to others not to engage in similar conduct ….
Other issues
The Ombudsman submitted that a 20% discount for admissions and cooperation was appropriate in this case. The respondents did not make any submissions on this point. I accept the Ombudsman’s proposal.
In addition, I note that in Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; (2008) 247 ALR 714; (2008) 171 IR 455; [2008] FCAFC 70, Stone and Buchanan JJ held at [75]:
A conventional consideration in assessing a discount in a criminal case for a plea of guilty is the stage in the proceedings at which the plea is entered. Normally, the maximum discount for this factor, sometimes thought to be 25%, is reserved for a plea made at the first reasonable opportunity …
In Fair Work Ombudsman v Bedington [2012] FMCA 1133 Jarrett FM held at [87]:
The cases indicate that a discount on the penalty to be imposed is appropriate where there has been co-operation and admissions early in the course of an investigation or soon after the commencement of proceedings. Such discounts range as high as 30% in some cases. …
Step 4: the appropriate penalty
In her written submissions filed on 26 March 2021, the Ombudsman said that:
42.The Applicant submits that it would be appropriate to impose mid-range penalties (50-60%) for the admitted contravention, giving rise to penalties as follows (detailed further in Annexure B:
(a) $12,600 to $15,120 in respect of PEBS Group; and
(b) $2,520 to $3,024 in respect of Mr McGrath.
43.It is submitted that these penalties reflect an appropriate and proportionate response to the Respondents’ conduct.
In Annexure B of her written submissions filed on 26 March 2021, the Ombudsman provided the following breakdown of her proposed appropriate penalty amounts for each respondent:
First Respondent
Contravention Maximum penalty Penalty with 20% discount Recommended penalty range Penalty amount
Section 716(5) of the FW Act, by failing to comply with a compliance notice $31,500
$25,200
50-60%
$12,600 - $15,120 Second Respondent
Contravention Maximum penalty Penalty with 20% discount Recommended penalty range Penalty amount
Section 716(5) of the FW Act, by failing to comply with a compliance notice $6,300
$5,040
50-60%
$2,520 - $3,024
The respondents submitted that they had eventually rectified the underpayments. Mr McGrath also said, without evidence, that a “massive” penalty would “cripple” him financially.
In my view, an appropriate and proportionate response to the respondents’ wrongdoing is a penalty of:
(a)$15,120 for the first respondent; and
(b)$3,024 for the second respondent.
This level of penalty reflects the facts that:
(a)the respondents deliberately failed to comply with the compliance notice for 10 months;
(b)the respondents ignored the Ombudsman’s attempts to engage during that period;
(c)the respondents obliged the Ombudsman to commence these proceedings;
(d)the respondents eventually complied with the compliance notice and rectified the underlying underpayments (with the exception of about $120, which was occasioned by the Ombudsman’s typographical error);
(e)the respondents made admissions for the purposes of these proceedings;
(f)the respondents are continuing in business; and
(g)penalties need to be set at a level that ensures that employers generally do not treat penalties as a trifling “cost of doing business”.
Step 5: the totality principle
In my view, the total penalties for the two respondents are an appropriate and proportionate response to their wrongdoing.
CONCLUSION
There will be orders accordingly.
I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 18 October 2021
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