Fair Work Ombudsman v Phua & Foo Pty Ltd

Case [2018] FCA 137

FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Phua & Foo Pty Ltd [2018] FCA 137

File number(s): WAD 374 of 2017
Judge(s): SIOPIS J
Date of judgment: 22 February 2018
Catchwords: INDUSTRIAL LAW - penalty determination - admitted contraventions of s 45 of the Fair Work Act 2009 (Cth) - failure to pay minimum rates, casual loading and weekend penalty rates in accordance with the FW Act and the Restaurant Industry Award 2010 – appropriate penalty.  
Legislation: Fair Work Act 2009 (Cth) ss 45, 545(1), 712
Cases cited:

Fair Work Ombudsman v Grouped Property Services Pty Ltd (No 2) [2017] FCA 557

Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 233

Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153.

Date of hearing: Determined on the papers.
Date of last submissions: 8 December 2017
Registry: Western Australia
Division: Fair Work Division
National Practice Area: Employment & Industrial Relations
Category: Catchwords
Number of paragraphs: 71
Solicitor for the Applicant: Clayton Utz
Solicitor for the Respondent: Tan and Tan Lawyers

ORDERS

WAD 374 of 2017
BETWEEN:

FAIR WORK OMBUDSMAN

Applicant
AND:

PHUA & FOO PTY LTD (ACN 106 090 733)

Respondent

JUDGE:

SIOPIS J

DATE OF ORDER:

22 FEBRUARY 2018

THE COURT DECLARES THAT:

1.During the period 29 December 2014 to 28 September 2015, the respondent contravened the following civil penalty provisions:

(a)s 45 of the Fair Work Act 2009 (Cth), by contravening clause 20.1 of the Restaurant Industry Award 2010 by failing to pay 14 of the employees the required minimum rate of pay under the Restaurant Award;

(b)s 45 of the Fair Work Act, by contravening clause 13.1 of the Restaurant Award by failing to pay the employees the casual loading required under the Restaurant Award;

(c)s 45 of the Fair Work Act, by contravening clause 34.1 of the Restaurant Award by failing to pay the employees the Saturday penalty rates required under the Restaurant Award; and

(d)s 45 of the Fair Work Act, by contravening clause 34.1 of the Restaurant Award by failing to pay 25 of the employees the Sunday penalty rates required under the Restaurant Award.

AND THE COURT ORDERS THAT:

2.Pursuant to s 546(1) of the Fair Work Act, the respondent is to pay a pecuniary penalty in respect of the contraventions of the Fair Work Act declared above in the sum of $35,000.

3.Pursuant to s 546(3)(a) of the Fair Work Act, the pecuniary penalties payable by the respondent be paid into the Consolidated Revenue Fund of the Commonwealth of Australia within 28 days of the date of this order.

4.Pursuant to s 545(1) of the Fair Work Act, all persons engaged by the respondent who have managerial responsibility for decisions regarding wages and conditions, at the expense of the respondent, to engage a suitably qualified compliance professional or legal practitioner with expertise in workplace relations law to conduct training, either jointly or individually, to occur within…

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Fair Work Ombudsman v Phua & Foo Pty Ltd [2018] FCA 137
Case
[2018] FCA 137
Decision Date

CaseChat Overview and Summary

The Fair Work Ombudsman (FWO) brought proceedings against Phua & Foo Pty Ltd in the Federal Circuit Court of Australia for contraventions of section 45 of the Fair Work Act 2009 (Cth), specifically the failure to pay minimum rates, casual loading, and weekend penalty rates in accordance with the Fair Work Act and the Restaurant Industry Award 2010. The FWO conducted an audit in 2015 which revealed that the respondent had been paying a flat rate to its employees, irrespective of the day of the week or the nature of the hours worked, which did not comply with the Award's requirements.

The court was required to decide the appropriate penalty for the admitted contraventions, taking into account various factors such as the respondent's contrition, corrective action, and cooperation, as well as the need for deterrence. The court found that the respondent, through its director, had deliberately ignored its legal obligations and had paid its employees at a flat rate, which did not meet the applicable rates under the Award. However, the court did note that the respondent had promptly reimbursed the underpaid employees, cooperated with the FWO, and taken steps to ensure compliance in the future, which were considered in mitigation of the penalty. The court also found that there were no previous contraventions of workplace laws by the respondent.

In determining the appropriate penalty, the court considered the importance of deterrence, particularly given the vulnerability of the employees and the widespread nature of non-compliance within the restaurant industry. The court concluded that the penalty should reflect an element of specific deterrence to remind the respondent of the need to comply with its statutory obligations and to deter others in the industry from flouting the law. The court ordered that the respondent pay a pecuniary penalty of $35,000, and that all persons engaged by the respondent with managerial responsibility for decisions regarding wages and conditions to engage a suitably qualified compliance professional or legal practitioner to conduct training in relation to compliance with the Award and the National Employment Standards.

Orders

Orders of the court

2. Pursuant to s 546(1) of the Fair Work Act, the respondent is to pay a pecuniary penalty in respect of the contraventions of the Fair Work Act declared above in the sum of $35,000.

3. Pursuant to s 546(3)(a) of the Fair Work Act, the pecuniary penalties payable by the respondent be paid into the Consolidated Revenue Fund of the Commonwealth of Australia within 28 days of the date of this order.

4. Pursuant to s 545(1) of the Fair Work Act, all persons engaged by the respondent who have managerial responsibility for decisions regarding wages and conditions, at the expense of the respondent, to engage a suitably qualified compliance professional or legal practitioner with expertise in workplace relations law to conduct training, either jointly or individually, to occur within three months of the date of this order, in relation to compliance with:

(a) wages and work-related entitlements under the Restaurant Award; and

(b) accrual and payment of entitlements under the National Employment Standards contained in Part 2-2 of the Fair Work Act.

5. The respondent is to notify the applicant in writing, within seven days of the training, referred to in order 4 above of the attendees and the name(s) of the person(s) who conducted the training.

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

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

The parties requested that the Court determine the appropriate penalty and make final orders on the papers.THE EVIDENCEThe affidavit of Ms Gowri Suppiah dated 20 October 2017 The FWO relied on the affidavit of Ms Gowri Suppiah. The evidence of Ms Suppiah was to the following effect. In 2015, the FWO conducted an audit of employers in the Southern Perth region of Western Australia regarding employers’ compliance with the FW Act in respect of wages and record keeping. The respondent was one of the employers selected to be audited. On 18 December 2015, an inspector issued the respondent with a notice to produce records or documents pursuant to s 712 of the FW Act. The notice contained nine categories of documents, including:3.All documents and records, including pay slips, that relate to or record the payment of wages to workers engaged by PHUA & FOO PTY LTD in the Relevant Period including records or documents containing any of the following information:…e. bonuses, loadings, allowances, penalty rates, incentive-based payments or other separately identifiable entitlements; On 11 January 2016, Mr Phua responded to the notice to produce by way of a letter enclosing documents. In relation to the third category of documents, Mr Phua stated in his letter:As per item 3 I want to clarify that I pay my employees the same rate whether they work on weekends or weekdays because the nature of my business simply cannot afford to pay the weekend penalty rate. To entice my employees to work on weekends however, I pay a slightly higher rate during normal hours. On 15 March 2017, Mr Phua participated in a recorded interview at the office of the FWO with Ms Suppiah and another inspector. During the course of that interview, Ms Suppiah asked:…so when you agreed with your employees to pay a rate, was that rate a fixed rate for all hours worked or did they receive penalty rates for weekends? Mr Phua replied:No, no. Just flat rate. We agreed that we all – because we are a small restaurant, we cannot pay… On 29 May 2017, the FWO sent a letter to Mr Phua, which contained the FWO’s findings in relation to the audit of the respondent (the FWO audit letter). The letter included a finding that the respondent had “paid a flat hourly rate of pay, for all hours worked” which was generally insufficient to meet the applicable casual rates of pay and did not comply with the obligation to pay weekend penalty rates under the Restaurant Award. The letter also contained a seven page appendix which set out in detail the alleged underpayments. The letter also stated that the respondent needed to rectify the underpayments detailed in the appendix and to provide evidence of such payments. Ms Suppiah also annexed a report from the FWO based on research undertaken by the FWO. The report showed that during the financial years 2013 to 2016, the restaurant/café industry had generated the most number of dispute lodgements to the FWO of any industry; and that the work force in that industry tended to be, on average, young, with less education, lower paid, employed part-time, with higher levels of culturally and linguistically diverse backgrounds. The research also speculated that employment within that industry would increase by 12% during the years leading up to 2020.The affidavit of Mr Phua dated 28 September 2017

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

As I have mentioned, the respondent is a family company. Mr Phua who is a director of the respondent, is also responsible for the day to day business operations of the respondent. He was responsible, therefore, for the contravening conduct of the respondent.Contrition, corrective action and cooperation The FWO accepts that following the investigation and receipt of the FWO audit letter, the respondent promptly reimbursed the employees the monies in respect of which they had been underpaid. In my view, this circumstance is to be taken into account in favour of the respondent in assessing the appropriate penalty. However, it is necessary to bear in mind that, in doing so, the respondent was doing no more than complying with its legal obligations which, as I have previously found, it had, through Mr Phua, deliberately ignored. However, it is the case that during the investigation, Mr Phua, on behalf of the respondent, cooperated with the FWO by providing documents and attending an interview. Further, after the proceeding was commenced, the respondent, at an early stage, made admissions of liability and agreed a statement of facts. This level of cooperation is to be taken into account in the respondent’s favour in assessing an appropriate penalty. Further, Mr Phua, on behalf of the respondent, has apologised to the affected employees and demonstrated a commitment to complying with the Restaurant Award in the future by undertaking a course on the proper administration of the respondent’s payroll system.Previous contraventions of workplace laws There was no evidence that the respondent had been found liable previously for any contravention of workplace laws.Deterrence As I have said, the primary purpose of the imposition of a civil penalty is deterrence. In this case, in my view, notwithstanding Mr Phua’s evidence that he will ensure that the respondent does not breach the law again, and the training course he has undertaken, it is, nevertheless, necessary that the penalty reflect an element of specific deterrence. This is because of the deliberate disregard which the respondent has previously shown to compliance with the Restaurant Award conditions in an environment where the affected employees are casual and vulnerable employees. This is to remind the respondent of the continuing need to comply with its statutory obligations. Further, the penalty should also act as a deterrent to others in the restaurant/café industry who may be minded to flout the law with a view to increasing profit at the expense of vulnerable employees. As mentioned, there is in evidence a FWO report which shows that the failure to meet minimum employment obligations is widespread within the restaurant/café industry which employs a large number of vulnerable employees. The penalty should be at a level such that the payment of a penalty is not regarded as simply a cost of doing business whilst continuing to exploit vulnerable employees.WHAT IS THE APPROPRIATE PENALTY? I now turn to determine the question of the appropriate penalty to impose in this case.