Fair Work Ombudsman v Pioneer Personnel Pty Ltd

[2017] FCCA 3223

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v PIONEER PERSONNEL PTY LTD [2017] FCCA 3223

Catchwords:
INDUSTRIAL LAW – Failure to pay minimum standards – effect of publicity – adverse publicity – consideration of means of encouraging compliance without resorting to penalty proceedings – the benefits of adopting procedures that encourage cooperation with the FWO.

Legislation:

Fair Work Act 2009, ss.44, 45, 546, 116

Cases cited:

Australian Competition and Consumer Commission v Nationwide News Ltd (1996) ATPR 41–519

Australian Competition and Consumer Commission v Nissan Motor Company (Australia) Pty Ltd (1998) ATPR 41–660

Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8

Commonwealth of Australia v Director of Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate [2015] HCA 46

Cousins v Merringtons Pty Ltd & Anor (No.2) [2008] VSC 340

Eva v Southern Motors Box Hill Pty Ltd (1997) 15 ALR 428, 437

Fair Work Ombudsman vCommercial and Residential Cleaning Group Pty Ltd & Ors [2017] FCCA 2838

Mason v Harrington Corporation Pty Ltd [2007] FMCA 7

Applicant: FAIR WORK OMBUDSMAN

Pioneer: PIONEER PERSONNEL PTY LTD

File Number: MLG 1083 of 2016

Judgment of: Judge McNab

Hearing date: 24 November 2017

Date of Last Submission: 24 November 2017

Delivered at: Melbourne

Delivered on: 19 December 2017

REPRESENTATION

Counsel for the Applicant: Mr Tracey

Solicitors for the Applicant: Fair Work Ombudsman

Counsel for Pioneer: Mr Snaden

Solicitors for Pioneer: Robert James Lawyers

IT IS DECLARED THAT:

1. Pioneer has contravened:

   (a)section 45 of the Fair Work Act 2009 by failing to pay each of Ms Cope, Ms Howard, Ms Ingles and Ms Scholes for the minimum engagement period as required by clause 24.2(b) of the Cleaning Award;

   (b)section 45 of the Fair Work Act 2009 by failing to pay Ms Cope, Ms Dare, Ms Howard, Ms Ingles, and Ms Scholes part time loading as required by clause 12.4(b)(iii) of the Cleaning Award;

   (c)section 45 of the Fair Work Act 2009 by failing to agree to a part time pattern of work agreement with Ms Cope, Ms Dare, Ms Howard, Ms Ingles, Mr Pedrozo, Ms Scholes and Mr Singh as required by clause 12.4(a) of the Cleaning Award;

   (d)section 45 of the Fair Work Act 2009 by failing to pay Ms Dare and Mr Djaferoski broken shift allowance as required by clause 17.1 of the Cleaning Award;

   (e)section 45 of the Fair Work Act 2009 by failing to pay Mr Djaferoski, Mr Pedrozo and Mr Singh shift loading as required by clause 27.1(a) of the Cleaning Award;

   (f)section 45 of the Fair Work Act 2009 by failing to pay Ms Cope, Ms Howard, Ms Dare and Mr Djaferoski overtime rates as required by clause 28.2 of the Cleaning Award;

   (g)section 45 of the Fair Work Act 2009 by failing to pay full annual leave loading to Ms Cope, Ms Dare and Ms Howard, as required by clause 29.4(a) of the Cleaning Award; and

   (h)subsection 44(1) of the Fair Work Act 2009 by failing to pay Mr Pedrozo and Ms Scholes the base rate of pay for their ordinary hours for their absence on a public holiday pursuant to section 116 of the Fair Work Act 2009. 

ORDERS

1. Pursuant to subsection 546(1) of the Fair Work Act 2009, Pioneer pay the Applicant the following:

   (a)$2,000 in respect of breaches of section 45 of the Fair Work Act 2009 by failing to pay each of Ms Cope, Ms Howard, Ms Ingles and Ms Scholes for the minimum engagement period as required by clause 24.2(b) of the Cleaning Award;

   (b)$2,000 in respect of breaches of section 45 of the Fair Work Act 2009 by failing to pay Ms Cope, Ms Dare, Ms Howard, Ms Ingles, and Ms Scholes part time loading as required by clause 12.4(b)(iii) of the Cleaning Award;

   (c)$2,000 in respect of breaches of section 45 of the Fair Work Act 2009 by failing to agree to a part time pattern of work agreement with Ms Cope, Ms Dare, Ms Howard, Ms Ingles, Mr Pedrozo, Ms Scholes and Mr Singh as required by clause 12.4(a) of the Cleaning Award;

   (d)$2,000 in respect of breaches of section 45 of the Fair Work Act 2009 by failing to pay Ms Dare and Mr Djaferoski broken shift allowance as required by clause 17.1 of the Cleaning Award;

   (e)$2,000 in respect of breaches of section 45 of the Fair Work Act 2009 by failing to pay Mr Djaferoski, Mr Pedrozo and Mr Singh shift loading as required by clause 27.1(a) of the Cleaning Award;

   (f)$2,000 in respect of breaches of section 45 of the Fair Work Act 2009 by failing to pay Ms Cope, Ms Howard, Ms Dare and Mr Djaferoski overtime rates as required by clause 28.2 of the Cleaning Award;

   (g)$2,000 in respect of breaches of section 45 of the Fair Work Act 2009 by failing to pay full annual leave loading to Ms Cope, Ms Dare and Ms Howard, as required by clause 29.4(a) of the Cleaning Award; and

   (h)$2,000 in respect of breaches of subsection 44(1) of the Fair Work Act 2009 by failing to pay Mr Pedrozo and Ms Scholes the base rate of pay for their ordinary hours for their absence on a public holiday pursuant to section 116 of the Fair Work Act 2009.  

2. Pursuant to subsection 546(3)(a) of the Fair Work Act 2009, the pecuniary penalties imposed in order 2 above be paid within 28 days of the date of this order into the Consolidated Revenue Fund of the Commonwealth.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 1083 of 2016

FAIR WORK OMBUDSMAN

Applicant

And

PIONEER PERSONNEL PTY LTD

Pioneer

REASONS FOR JUDGMENT

1. Pioneer Personnel Pty Ltd (‘Pioneer’) by a statement of agreed facts has admitted underpaying nine employees a total of $5,200 over a nine month period. It is the subject of an admitted underpayment of $3,832.85. In submissions made by counsel for Pioneer and in correspondence with the Fair Work Ombudsman (‘FWO’), Pioneer has said that in fact it does not owe that amount and is evidence from the employee that he has been paid all shift allowances and over time. Pioneer’s position is that it paid the amounts claimed in relation to the particular employment because the costs of contesting the claim outweighed the cost of paying same. That said, Pioneer by its counsel was at pains to point out that it did not seek to withdraw from the statement of agreed facts. In relation to the balance of the contraventions referred to in the statement of agreed facts, the underpayments represented an underpayment of $4.50 per week over an eight month period to each of the eight employees.

2. Each of the applicant and Pioneer filed submissions on penalty and Pioneer filed an affidavit of Francis Xavier Scarce, a director of Pioneer, which sets out the history of Pioneer’s dealings with the FWO and the process by which the matter came before the court for a penalty hearing in respect of agreed contraventions in the sum of $5,200. The FWO asked the court to impose penalties totalling between $118,320 and $159,120 in respect of those contraventions.

3. Mr Scarce was not cross-examined on his affidavit and many of the submissions that were made by Pioneer about the course of proceedings were not the subject of challenge in submissions in response. In particular, a submission that this may be the lowest amount of underpayments that has proceeded to a full penalty hearing was not challenged.

4. The applicant, in making submissions in support of the orders of the magnitude referred to earlier pointed to the following factors:

   a)Pioneer is not a small employer;

   b)the underpaid entitlements are minimum entitlements due to low paid workers;

   c)there is a need to that further the objects the Fair Work Act by ensuring compliance with the Act; and

   d)whilst civil penalties are not concerned with punishment there is a need for specific and general deterrence and penalties should be set at a level such as to put a price on the contravention that is sufficiently high so as to deter repetition by the contravener and to deter others who may be minded to contravene legislation: Commonwealth of Australia v Director of Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate [2015] HCA 46.

5. There is agreement about the proper consideration of  the factors relevant to penalty and both parties referred to the non- exhaustive factors relevant to the imposition of penalty summarised by Mowbray FM in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 at [26]-[59]. Those factors are as follows:

   a)the nature and extent of the conduct which led to the contraventions;

   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 contraventions;

   d)whether there has been similar previous conduct by Pioneer;

   e)whether the contraventions were properly distinct or arose out of one course of conduct;

   f)the size of the business enterprise involved;

   g)whether or not the contraventions were deliberate;

   h)whether senior management was involved in the contraventions;

   i)whether the party committing the contraventions had exhibited contrition or taken corrective action and cooperated with enforcement authorities;

   j)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and

   k)the need for specific and general deterrence.

6. This checklist has been frequently applied and is not an exhaustive statement of the matters which are to be taken into account as was stated by Buchanan J in Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8 at [91]:

   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.

7. I also accept the submission of Pioneer that the fundamental principle is that the penalty or punishment must fit the crime or offence in simple terms.

Background

1. Pioneer relied upon an affidavit of Francis Xavier Scarce sworn 17 November 2017. That affidavit sets out a detailed account of the interactions between Pioneer and the FWO since about March 2014 when the FWO approached Pioneer in relation to cleaning contracts with Myer Ltd held by Pioneer and associated entities.

2. In about March 2014 management of Pioneer met with members of the FWO to discuss allegations regarding the use of independent contractors in place of employees to provide cleaning services to Myer stores.

3. In about April 2014 Pioneer voluntarily provided documents and information to the FWO after a request was made by a member of the FWO. The provision of documents was substantial. It follows request for documents and meetings between Pioneer and members the FWO. The evidence discloses that from 2014 until 24 May 2016, Pioneer cooperated fully with the FWO in meeting with its representatives, producing documents that were demanded either informally or formally and paying employees who have been underpaid in a timely way when the underpayment was established. It is notable that following the investigations which commenced in April 2014, on 17 December 2015 the solicitors for Pioneer were served with a contravention letter alleging that Pioneer had failed to pay nine employees a total of $100,032.31 (gross) and had contravened 16 provisions of the Fair Work Act. Upon receipt of the contravention letter, Pioneer provided further information to the FWO.

4. On 18 January 2016, an amended contravention letter was sent to the solicitors for Pioneer, amending the amount of contravention from $100,032.31 to $18,674.43 and listing 13 contraventions of the Fair Work Act (rather than the previous 16). Mr Scarce deposes that in relation to the minimum engagement period issue, Pioneer did not just back pay employees affected during the FWO investigation period from 1 April 2014 to 30 November 2014 as listed in the contravention letters, but paid all affected employees where the minimum engagement period should have been paid but was not paid over the entire period of the contract since it was first awarded (in around November 2013). Upon receipt of the amended contravention letter, there was further and frequent correspondence between the FWO and Pioneer.

5. On around 12 April 2016, a representative of the FWO requested further details of written part-time agreements with part-time employees and copies of payroll records of Pioneer. On 24 May 2016, Pioneer by its solicitors received a copy of an originating application and statement of claim, alleging that the affected employees had been underpaid a total of $7,958.07. The amount that Pioneer admitted that it had underpaid was paid to affected employees on or around 24 June 2016.

6. It seems that on the basis of the evidence of Mr Scarce that the statement of agreed facts was prepared between 26 August 2016 and 9 August 2017. Pioneer submits that the time involved in preparation of the statement of agreed facts was effectively a waste time and money as the statement of agreed facts replicates the contraventions admitted by Pioneer in response to the statement of claim and adds nothing. Having perused the statement of agreed facts that submission would appear to be correct. As stated earlier, the final amount of underpayment was in the sum of $5,200.

The Effect of Publicity

1. A significant matter raised by Pioneer in the affidavit of Mr Scarce and in its submissions is the effect of publicity on Pioneer. It is apparent from the matters which have been outlined above that Pioneer was operating an ongoing business throughout the course of the investigation. The affidavit of Mr Scarce at paragraph [68] deposes that he recalls that at a meeting on 8 December 2014, one of the FWO representatives mentioned that they had spoken to or were speaking to Myer about their review of the cleaning industry and the contract between Pioneer and Myer, and that they were doing this as part of their “bottom-up and top-down” investigation. Communication through meetings and correspondence between Pioneer and Myer occurred between December 2014 and April 2015.

2. In around June 2015, Myer terminated its contract with Pioneer and Pioneer ceased cleaning sites for Myer in August 2015. Mr Scarce deposes that an article was published by The Age in or around 23 October 2015 which stated that “Myer had previously had a contract with Pioneer Services but cut ties with the company after a Australia’s workplace watchdog found it was using a subcontractor that that was exploiting cleaners.[1]” Mr Scarce deposes at paragraph [75] of the affidavit that:

   Myer then engaged the Spotless Group to perform the cleaning work that Pioneer was previously contracted to perform. Spotless, in turn, removed all the directly employed employees that had previously worked for the Pioneer and required subcontractors work in the stores instead. Pioneer employees working at Myer sites all their lost their jobs.

   [1] Affidavit of Francis Xavier Scarce affirmed 17 November 2017 [74].

3. It should be borne in mind that this occurred in the context of admitted contraventions of proven contraventions in the sum of $5,200. At paragraph [97] of the Scarce affidavit he deposes that the loss of the Myer contract in or around June 2015 amounted to a financial loss of Pioneer of approximately $9,000,000 – $10,000,000 in revenue annually, which equated to a loss of profit of approximately $450,000 – $600,000 annually. The affidavit goes on at paragraph [99]:

   A press release was issued by the FWO in relation to the impending litigation against the respondent and Aaron Dickinson on or around 30 May 2016 and was published on the FWO’s website.

4. Pioneer and Aaron Dickinson were directly mentioned, despite there never having been any evidence that Mr Dickinson knew about or was otherwise involved in the underpayment as alleged. Paragraph [101] of the affidavit provides that:

   As a result of the FWO press release, Pioneer received a number of concerned communications and requests for explanations from current clients, including Woolworths and Target.

5. Paragraph [102] of the affidavit provides:

   Pioneer was also well into the tendering process with Queensland University at the time that the media articles were published. Pioneer was immediately removed from the tendering process once the stories broke. That contract was potentially worth approximately $5,000,000 in revenue per annum to Pioneer.

6. In the course of the FWO’s investigation, Pioneer has spent over $190,000 in external legal fees as well as approximately $40,000 in other professional advisory fees in connection with the FWO’s investigation and the subsequent legal proceedings.[2]

   [2] Affidavit of Francis Xavier Scarce affirmed 17 November 2017 [93].

7. Paragraph [96] of the affidavit provides:

   Errors in the Statement of Claim were pointed out to the FWO by Pioneer’s representatives, and the futility of the claim against Aaron Dickinson (who had no involvement whatsoever in the amounts that were or were not paid to the affected employees) was raised, however it was not until late the proceeding that the FWO decided to withdraw its claim against Mr Dickinson and withdraw the allegations that were not admitted by the respondent.

8. In relation to the improvements made by Pioneer to oversight of employees and payment of entitlements, Mr Scarce at paragraph [104] deposed that Pioneer currently employs 152 personnel and when it had the Myer contract, it employed approximately 142 employees to clean the Myer stores out of a total of 229 employees. At paragraph [105] of the affidavit, Mr Scarce deposed:

   The directors of Pioneer are not knowledgeable in all areas of workplace laws; we built our business from the ground up, initially performing the cleaning work in our various businesses ourselves. As the business grew, we engaged suitable staff who we believed knew all aspects of workplace laws and the minimum entitlements owed to employees as we, as directors of Pioneer, were committed to make sure Pioneer was always compliant with the law.

9. At paragraph [106]:

   When Pioneer took on the Myer contract it employed staff that had been previously employed with the previous contractor engaged by Myer. Pioneer let the workers continue with their hours and rosters as they were with the previous employer. Pioneer failed to take adequate steps to have a sufficient degree of oversight or supervision of employee rosters and hours worked.

10. The affidavit deposes to significant rectification processes that have been implemented, which include the engagement of a dedicated Human Resources Manager to oversee employee matters as well as engaging a suitably qualified payroll officer, a senior payroll officer, as well as a Chief Financial Officer to oversee the administrative function of the business and appoint a suitably qualified Chief Executive Officer.[3] None of these matters which were deposed to by Mr Scarce were subject to challenge.

    [3] Affidavit of Francis Xavier Scarce affirmed 17 November 2017 [109].

11. In submissions, Pioneer regarded as significant the press release published by the FWO on 30 May 2016, which was issued after the proceedings had been issued. It will be recalled that the statement of claim alleged underpayments in the sum of $7,958.07. The 30 May 2016 press release alleged that Pioneer personnel underpaid nine employees more than $18,000 between April and November 2014. That stands in contradiction to the amount claimed in the statement of claim issued at about the same time. The press release also names Mr Dickinson as a person who was “put on notice as early as March 2014 of the need to pay employees minimum award rates.” The FWO withdrew its claims against Mr Dickinson after proceedings were issued.

1. The press release also referred to enforceable undertakings that the FWO entered into with two cleaning subcontractors working with at Myer sites where they were found to be misclassifying workers and underpaying them and referred to two cleaners being underpaid almost $12,000 in just six weeks.

2. Counsel for the FWO referred to a decision of a Hansen J in Cousins v Merringtons Pty Ltd & Anor (No.2) [2008] VSC 340 at [61] – [64] where his Honour referred to authorities where the question arose whether “adverse” publicity should be taken into account in the mitigation of penalty. His Honour stated at [60] that the cases referred to, being Eva v Southern Motors Box Hill Pty Ltd (1997) 15 ALR 428, 437, Australian Competition and Consumer Commission v Nationwide News Ltd (1996) ATPR 41–519, 42, 507 and Australian Competition and Consumer Commission v Nissan Motor Company (Australia) Pty Ltd (1998) ATPR 41–660, 41, 352–353, indicate that “adverse” means unfair or incorrect reporting.

3. Hansen J at paragraph [65] rejected the submission that publicity ought to be taken into account as a factor mitigating against the grant of relief as the court may otherwise consider just in the circumstances. He stated:

   In my view the publicity referred to was the mere and foreseeable consequence of the conduct engaged in. Were it otherwise, the fact of publicity of relevant matters by the moving party in the litigation or the media generally, might have the effect of limiting the exercise of statutory power conferred for the protection of the public.

4. The question in this case arises as to whether the press release constituted adverse publicity as that expression was used by Hansen J. In my view it does. The press release issued at the time that proceedings were issued referred to an amount of underpayment which was more than double the amount actually claimed in the statement of claim. For that reason, the press release was not an accurate account of the alleged underpayment. In my view the comments of Smithers J in Eva v Southern Motors Box Hill Pty Ltd (1997) 15 ALR 428, 437 are apt:

   In assessing appropriate punishment for a crime the court is required to have in mind not only the nature and extent of the offence itself but also a wide variety of associated circumstances. Such circumstances constitute a context in which to view the penalty. Adverse publicity is often one of the inevitable consequences of wrongdoing and in most cases is without influence in the assessment of the appropriate penalty.

   But adverse publicity initiated by the prosecuting authority itself requires special consideration. If the matter is publicized ahead of the trial, and widely, and in terms likely to induce public censure of the parties concerned and those parties are in day-to-day business relationships with the public, then there is obvious danger of injury to the lawful business of the parties which from a practical point of view may have the effect of effectuating a cumulative punishment; cf Fisse, The Use of Publicity as a Sanction Against Business Corporations, (1971) 8 Melbourne University Law Review, at pp. 107, 109. In such a case an element has been injected into the situation which subjects the party to more than the natural and probable consequences of mere publication of the fact that they are being prosecuted for named offences. In my view this is a case in which, by reason of the press release of the prosecuting authority, the danger of cumulative punishment along these lines is real and should be treated as part of the background against which the penalty should be assessed. And I have so treated it.

5. In my view the misstatement of the amount of the alleged underpayment and the naming of Mr Dickinson in circumstances where he was not subsequently proceeded against are not dissimilar to those in the matter of Eva v Southern Motors Box Hill Pty Ltd (1997) 15 ALR 428 at 437 and the effect of adverse publicity will be taken into account in this case when determining penalty. I do not accept that the effect of publicity and the involvement of third parties is simply an ordinary consequences of the failure on the part of Pioneer to pay minimum standards.

Consideration of relevant factors going to penalty

Nature/extent of the conduct

1. Pioneer submits that the contraventions involve underpayments caused by breaches of separate provisions of the Cleaning Services Award 2010 and The National Employment Standards. The FWO drew particular reference to a failure on Pioneer’s part to roster four employees for a minimum engagement period and a failure to agree to a part-time pattern of work for particular employees.

2. The FWO submit that the minimum engagement provisions set parameters which affect the viability of an employee’s shift. They also protect an employee from being expected to complete cleaning work beyond what is reasonable or achievable. Reference was made to an employee who was not rostered for the minimum engagement period (being four hours) on 43 occasions. It is said that on each of these occasions the employee should have been rostered for four hours by reason of the total square meterage of the site where the work was performed yet she was only rostered for three hours on each of those occasions.

3. Pioneer states in relation to this contravention that the contravention arose out of a misreading of clause 22 of the Award. That clause required the part-time employees be paid per shift as though they had worked at least the minimum period of engagement per shift. The clause prescribed the minimum applicable period by reference to the size of the location at which the work was performed. Clause 22(f) of the Award provided that the minimum engagement period from employees who are engaged at a location with a total cleaning area in excess of 5000m² would be four hours.

4. Pioneer submits that the employees in respect of whom Pioneer has conceded that it has contravened clause 22 of the Award were engaged to clean areas that were smaller than 5000m²; however the locations within which those spaces were located were all in excess of 5000m². Mr Scarce deposed that Pioneer incorrectly applied the clause on the basis that it believed that the stipulation in relation to 5000m² applied per floor (Scarce affidavit at [4]). As a result of that explanation, I accept that this was not a deliberate breach and I do not accept that an inference can be drawn that the affected employee was required to perform four hours work in the space of three hours. That inference could not be drawn without knowing the tasks involved and the square meterage of each of the areas to be cleaned by the particular employees who have been underpaid.

Circumstances in which that conduct took place

1. The FWO referred to the circumstances of Pioneer Personnel providing labour for cleaning services for Myer around Australia including:

   a)Maroochydore, Queensland;

   b)Murray Street Hobart; and

   c)Chadstone Victoria

   and that it had responsibility for ensuring that its employees were correctly paid and it had failed to discharge that responsibility.

2. Pioneer submits that:

   a)the errors that occurred were isolated and affected only a small fraction of the company’s employees; and

   b)the errors did not occur in an environment of neglect or widespread disregard for entitlements. I accept that submission and it is not contended otherwise by the FWO.

Nature and extent of the loss sustained by the employees

1. The FWO submitted that the admitted underpayments are substantial in the circumstances where they are underpayments of minimum entitlements for employees working under the lowest classification prescribed by a modern award and that such underpayments have a significant impact on the employees involved. It is also pointed out that the employees had to wait to be paid back the entitlements. The circumstances in which the monies were paid back has to be considered from the perspective of the Pioneer, where they were in a situation where they were actively working with the FWO in order to ascertain whether there were any underpayments and to what extent. Once the underpayments were ascertained they were paid without delay. There were underpayments, but they were rectified once ascertained and the underpayment was accompanied by an unequivocal apology.

Previous conduct

1. It is not alleged that Pioneer has engaged in similar conduct previously.

Course of conduct

1. The parties have agreed to compartmentalise Pioneer’s conduct into eight separate contraventions. The first two of the eight contraventions arise because of the misapplication by Pioneer of clause 22 of the Award as referred to above.

Size of the business

1. Pioneer Facilities Group, of which the Pioneer is part, is a large business and there is no submission made that it is unable to meet the minimum standards for its employees. Further there is no evidence that the companies are not able to ensure that minimum standards are met, although there is evidence that since this investigation was initiated, it has taken significant remedial steps to ensure compliance.

Whether the contraventions were deliberate

1. The FWO does not submit that the admitted contraventions were deliberate; however it does submit that they arose as a result of negligence on the part of that company in circumstances where its business was to provide labour to a large retailer, and that this is an aggravating factor. I regard the contraventions in this case arising largely as a result of oversight or a misunderstanding of provisions of the award (which provisions are not straightforward). I do not consider that the contraventions were deliberate or arising as a result of gross negligence.

Involvement of senior management

1. There is no evidence that senior management were involved in the breach and the FWO discontinued its case against second respondent.

Cooperation, contrition and corrective action

1. It is apparent from the narration of the facts leading to proceedings being issued that Pioneer Personnel has fully cooperated with the FWO both in the investigation and in the conduct of the proceeding.

2. The FWO submit that although Pioneer has cooperated with the regulator, it has not shown contrition and its lack of contrition is evident in the affidavit of Mr Scarce. In my view, Pioneer has generally expressed contrition for the contravening conduct but is genuinely upset with the approach taken by the FWO both in relation to involving third parties in the investigation and the publicity. It is also upset that a more efficient means both in terms of time and cost of dealing with the matter could not have been agreed or that binding undertakings could have been sought rather than subjecting the company to a penalty hearing. In my view Pioneer is entitled to express that view and there is a proper foundation for the expression of those views. There has been no adequate explanation provided by the FWO as to why this matter could not have been dealt with with enforceable undertakings. Pioneer is a going concern and there is no reason why undertakings would not have operated to ensure compliance with minimum standards and advance the purposes of the Act.

Ensuring compliance with minimum standards

1. This proceeding is taken by the FWO for the purposes of ensuring minimum standards are complied with but in my view that object could have been achieved by obtaining enforceable undertakings from the company and requiring the company to undergo an audit.

The need for specific and general deterrence

1. In my view there is a limited need for specific deterrence this case. There is no evidence that the contravention arose as a result of any designed or contrived circumstances. There is no evidence of prior conduct or evidence that the company does not take seriously its obligations to pay award entitlements. By reason of the process of the investigation, the company has incurred significant costs and has felt the effects of a publicity campaign which misstated the extent of underpayments alleged. The company has given evidence that it has spent over $200,000 in legal fees in a matter where it readily conceded underpayments. These matters shall be taken into account in considering penalty.

General deterrence

1. It is accepted by Pioneer that general deterrence is important, particularly in a field of employment involving low paid and often vulnerable employees from non-English-speaking backgrounds.

2. In my view, it is important that companies who are the subject of investigation by the FWO should be aware that early and active cooperation may be a means of avoiding very high penalties and publicity, whether adverse or otherwise. The task for the FWO, particularly in cases involving large numbers of employees over different sites is a difficult one and without cooperation can be costly and protracted. If the employer does not cooperate, it is likely that employees will have to be called to give evidence in proceedings and the length of investigations and hearings will increase significantly. To impose a penalty of the kind sought by the FWO in the circumstances of this case would in my view act as an active disincentive for responsible ongoing businesses to provide cooperation with the regulator.

3. The level of penalty which the FWO seeks to impose is said to arise from a tariff which is fixed by reference to other cases involving like companies. This case stands in contradistinction to many of the cases where very high penalties have been imposed on businesses, including cleaning businesses, where the amount of the underpayment alleged is objectively reasonably low. I say this because in many of those cases the employer is no longer running the business at the time of the hearing, has not paid back the monies due to the employees, and has failed to cooperate in any way whatsoever in the investigation process.

4. A feature of many cases involving large penalties is often that the individual actors involved in the contravention have been involved in prior non-compliance. A case in point is Fair Work Ombudsman vCommercial and Residential Cleaning Group Pty Ltd & Ors [2017] FCCA 2838, where Lucev J imposed penalties of $361,200 on a corporate contravener and $72,240 and $77,400 on the two managers and directors of the contravener. The underpayments there were in the sum of about $12,000 involving three employees. That was a case where a corporation associated with the same directors had previously contravened the same award and had engaged in systematic breaches of award and minimum standards. The deliberateness of the contraventions in that case were summarised by Lucev J at paragraphs [75] – [79] of his decision. It was also a case where the penalties awarded in previous proceedings remain unpaid. There are numerous examples of like contraventions where the corporate contravener has gone into liquidation and there is little realistic prospect of the underpayments being made good to any penalties being paid.

5. Counsel for Pioneer submitted that penalties in this case should be set at $100 per breach ($800). In my view the penalty at that level fails to take into account that there has been a failure by a large employer to pay minimum standards and that employees were without the benefit of their pay for an extended period. It also fails to take into account that employees by and large rely on their employers to pay what is legally due to them.

6. Balancing those matters with the factors particular to this case – being a high level of cooperation, the costs to the business associated with the investigation which found a very low level of non-compliance, the effect of adverse publicity, the cost associated with cooperation and the ready access to a less expensive option by the FWO – I fix the penalties at $2,000 per breach.  

I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Judge McNab

Associate: 

Date:  19 December 2017

CORRECTIONS

1. Reasons for judgment: page 15, paragraph 50 third line delete “large employee” and insert “large employer”.