Fair Work Ombudsman v Powell
[2022] FedCFamC2G 831
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v Powell [2022] FedCFamC2G 831
File number: MLG 2032 of 2021 Judgment of: JUDGE FORBES Date of judgment: 13 October 2022 Catchwords: INDUSTRIAL LAW - Fair Work Act – employer’s contravention of s 716 Compliance Notice – failure to provide pay slips pursuant to s 536 – false and misleading payslips - declarations of contraventions – further orders for compliance and penalties sought by Ombudsman – principles and factors relevant to determination of penalties Legislation: Crimes Act 2009 (Cth) s 4AA
Evidence Act 1995 (Cth) s 191
Fair Work Act 2009 (Cth) s 3, 30N, 47, 48, 536, 539, 545, 546, 547, 557, 716, 717
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) FCR 560
Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Fair Work Ombudsman v Al Hilfi [2016] FCA 193
Fair Work Ombudsman v Goldream Pty Ltd [2021] FedCFamC2G 61
Fair Work Ombudsman v Hess [2021] FCCA 1883
Fair Work Ombudsman v Nobrace Centre Pty Ltd (No 2) [2019] FCCA 2144
Fair Work Ombudsman v NSH North Pty Ltd t/a New Shanghai Charlestown (2017) 275 IR 148
Fair Work Ombudsman v PEBS Group Pty Ltd[2021] FedCFamC2G 158
Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No 2) [2020] FCCA 2583
Fair Work Ombudsman v Yogurtberry World Square [2016] FCA 1290
Kelly v Fitzpatrick [2007] FCA 1080
Trade Practices Commission v CSR Ltd[1990] FCA 521
Division: Division 2 General Federal Law Number of paragraphs: 103 Date of last submission: 25 March 2022 Date of hearing: 29 April 2022 Place: Melbourne Solicitor for the Applicant: Ms Parry Solicitor for the Applicant: Norton Rose Fulbright Respondent: No appearance ORDERS
MLG 2032 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: ADAM POWELL
Respondent
order made by:
JUDGE FORBES
DATE OF ORDER:
13 OCTOBER 2022
THE COURT ORDERS THAT:
1.Pursuant to section 546(1) of the Fair Work Act 2009 (Cth) (“the FW Act”), the Respondent:
(a)pay a pecuniary penalty of $3,330.00 for the contravention of section 716(5) of the FW Act, the subject of the declaration made by this Court on 21 December 2021, within 28 days of the date of this order.
(b)pay a pecuniary penalty of $6,660.00 for the contravention of section 536(3) of the FW Act, the subject of the declaration made by this Court on 21 December 2021, within 28 days of the date of this order.
2.Pursuant to section 546(3)(a) of the FW Act, any pecuniary penalties ordered to be paid by the Respondent be paid into the Consolidated Revenue Fund of the Commonwealth within 28 days.
3.Pursuant to section 545(1) of the FW Act, within 28 days of the date of this order, the Respondent take the steps that were required by the Compliance Notice given to the Respondent on 19 January 2021 in respect of the employment of Jaxon Taylor by:
(a)calculating and paying Jaxon Taylor the outstanding entitlements the Respondent was required to pay as stated in the Compliance Notice to Jaxon Taylor’s nominated bank account; and
(b)calculating and paying the additional superannuation contributions the Respondent was required to pay in respect of the outstanding entitlements on behalf of Jaxon Taylor into the nominated superannuation fund of Jaxon Taylor; and
(c)preparing and producing to the Applicant a schedule outlining its calculation of the outstanding entitlements that it was required to pay to Jaxon Taylor, and the additional superannuation contributions the Respondent was required to pay in respect of the outstanding entitlements on behalf of Jaxon Taylor into the nominated superannuation fund of Jaxon Taylor; and
(d)providing proof that the full payment of the outstanding entitlements has been made to Jaxon Taylor in full payment has been made of the additional superannuation contributions into the nominated superannuation fund of Jaxon Taylor.
4.Pursuant to section 547(2) of the FW Act, the Respondent pay interest to Jaxon Taylor on the amounts owed to him pursuant to paragraph 3(a) of this order, within 28 days of the date of this order.
5.The Applicant has liberty to apply on seven days’ notice in the event that 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: The Court may vary or set aside a judgment or order 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 FORBES:
INTRODUCTION
On 21 December 2021, declarations were made by this Court that the respondent Mr Adam Powell (“the respondent”) had contravened sub-section 716(5) of the Fair Work Act 2009 (Cth) (“the FW Act”), arising from his failure to comply with a compliance notice issued on 13 January 2021, and sub-section 536(3) FW Act, for providing an employee with false or misleading payslips.
The Fair Work Ombudsman (“Ombudsman”) now seeks orders that the respondent take the steps required by the Compliance Notice and that pecuniary penalties be imposed against the respondent in relation to two declared contraventions of the FW Act.
On 29 April 2022, the Ombudsman’s application came before this Court. Ms Parry represented the Ombudsman. There was no appearance by the respondent at this hearing. In support of its application for orders and penalties, the Ombudsman relied upon its originating application and accompanying statement of claim, both filed on 13 August 2021, as well as numerous affidavits deposing to the background facts and service of relevant documents. These documents have been read and considered in reaching my decision.
BACKGROUND
The circumstances that resulted in the respondent’s declared contraventions are summarised below. This summary has derived from the statement of claim and the affidavits filed by the Ombudsman. The Court is satisfied that the documents the Ombudsman sought to rely on in their submission on penalty have been served on the respondent. The evidence contained within these documents has not been challenged by the respondent.
Business and employee entitlements
At all relevant times, the respondent was a sole trader carrying on a business known as “Oak and Stone Landscaping” (“the business”). The business provided landscaping services within the state of Victoria. The respondent is a “national system employer” for the purpose of section 30N(1) of the FW Act.
Employees of the business performing general landscaping and labouring work were entitled to be paid wages and work to conditions stipulated within the Building and Construction General On-site Award 2010 (“the Award”). The Award covered the respondent’s business within the meaning of section 48 of the FW Act. The Award stipulated various employee entitlements including the minimum wage and the hourly rate of pay in respect of ordinary hours as well as casual loading.
As a national system employer, the respondent was also bound to adhere to various obligations imposed by the FW Act. Relevantly, this included the obligation that an employer provide its employees with payslips that are not false or misleading[1].
[1] Fair Work Act 2009 (Cth) s 536(3)
On 4 August 2020, Mr Jaxon Taylor commenced working for the business. Mr Taylor was 17 years old at the time of his employment. He was engaged on a casual basis to perform work as a labourer.
As an employee of the business, the Award applied to Mr Taylor within the meaning of section 47 of the FW Act. Under the Award, the work performed by Mr Taylor classified him as a Construction Worker CW 1 (level a). Mr Taylor was entitled to be paid $21.58 in respect of each ordinary hour worked[2] with an additional $5.40 as a casual loading[3].
[2] Building and Construction General On-site Award 2021 cl 19.1
[3] Building and Construction General On-site Award 2021 cl 14.5
Mr Taylor performed approximately two months of work for the respondent’s landscaping business. After 11 October 2020, Mr Taylor ceased working for the business.
The respondent paid Mr Taylor a flat rate of $21.88 per hour. For the entire employment period, the respondent paid Mr Taylor a total amount of $1,344.60 by way of the following three payments made through electronic fund transfer:[4]
(a)$217.40 on 7 September 2020;
(b)$563.80 on 22 September 2020; and
(c)$563.80 on 22 September 2020.
[4] Statement of Claim page 3, para 6
Other than these three payments, Mr Taylor did not receive any further remuneration from the respondent for the work he performed throughout the employment period. Bank statements which formed part of the Ombudsman’s evidence confirmed these were the only payments received by Mr Taylor.
Mr Taylor was not provided with payslips by the respondent within one working day of the days on which he was paid these amounts, as required by s 536(1) of the FW Act.
However, after Mr Taylor had raised issues about his pay and a week or more after he ceased working for the respondent, the respondent provided Mr Taylor with access to six weekly pay slips which had been produced using an electronic accounting software. The electronic pay slips (“the pay slips”) purportedly related to the pay periods between 31 August 2020 until 11 October 2020. Each pay slip displayed a date range of the relevant pay period, the “casual ordinary hours” worked during the pay period, leave accrued for the period, the net amount of wages owing, superannuation contribution and the date on which payment was purportedly made to Mr Taylor.
Among other things, the six payslips contained the following information:
Period start Period end Hours worked Rate Amount payable Net after tax Date paid 1 31/8/2020 6/9/2020 38 $21.88 $831.25 $724.25 19/10/2020 2 7/9/2020 13/9/2020 22 $21.88 $481.25 $453.25 26/10/2020 3 14/9/2020 20/9/2020 38 $21.88 $831.25 $724.25 2/11/2020 4 21/9/2020 27/9/2020 38 $21.88 $831.25 $724.25 9/11/2020 5 28/9/2020 4/10/2020 38 $21.88 $831.25 $724.25 16/11/2020 6 5/10/2020 11/10/2020 38 $21.88 $831.25 $724.25 23/11/2020
The pay slips purported that throughout the six pay periods, Mr Taylor was entitled to be paid a total net payment of $4,074.50. Mr Taylor did not receive six payments. He only received payment in the amount of $1,344.60 from the respondent in three instalments. The amounts recorded on the pay slips were never paid to Mr Taylor, on the date stipulated or otherwise
Compliance Notice s 716 FW Act
In or around November 2020, Mr Taylor requested the assistance of the Ombudsman regarding the alleged underpayments. Following Mr Taylor’s request for assistance, the Ombudsman directed Fair Work Inspector Ms Karnee Erina Mitchell to conduct an investigation into the respondent’s compliance with terms of the FW Act as well as the Award. Ms Mitchell was assisted by Senior Fair Work Investigator, Ms Lisa Rossow.
On 24 November 2020, Ms Mitchell had a brief telephone conversation with the respondent in which, inter alia, he said words to the effect that he:
(a)did not pay Mr Taylor for four weeks of work; and
(b)did not provide Mr Taylor with his first payslip.
In or around November 2020, the Ombudsman made requests via email and telephone calls for the respondent to provide employment records or evidence in respect of any rectification payments made. The respondent did not provide these employment records or evidence as requested[5].
[5] Mitchell Affidavit sworn 24 March 2022, page 5
On 30 November 2020 Mr Powell emailed the Ombudsman requesting that all official documentation and requests be forwarded via Ms Mitchell’s supervisor.
On 1 December 2020, the Ombudsman emailed Mr Powell seeking to confirm that pursuant to the phone call made on 24 November 2020, Mr Powell made admissions that he had not paid Mr Taylor. The Ombudsman again requested Mr Powell to volunteer Mr Taylor’s employment records. On the same day, Mr Powell replied to this correspondence advising that “due to considered abuse”[6] he did not wish to continue to discuss the matter with Ms Mitchell. He stated that he wished to make a complaint and requested that Ms Mitchell’s supervisor take carriage of the matter.
[6] Mitchell Affidavit sworn 24 March 2022, page 50, annexure KM-9
On 11 December 2020, Ms Mitchell’s supervisor, Ms Kathleen Prastalo, had a telephone conversation with the respondent in which he made admissions to the effect that he had not paid Mr Taylor[7].
[7] Mitchell Affidavit sworn 24 March 2022, page 6
Ms Mitchell deposes that as a result of her investigation into Mr Taylor’s employment, she formed a reasonable belief within the meaning of section 716(1) of the FW Act that the respondent had contravened clauses 19.1 and 14.5 of the Award due to his failure to pay Mr Taylor the minimum wage and casual loading entitlements.
On 13 January 2021, Ms Mitchell issued a compliance notice directed to the respondent pursuant to section 716(2) of the FW Act (“the Compliance Notice”). The Compliance Notice was personally served on the respondent at his residential address on 13 January 2021.
The Compliance Notice required the respondent to undertake the following steps before 24 February 2021:
(a)identify the number of hours Mr Taylor worked during the employment period;
(b)identity the amount that was paid to Mr Taylor during the employment period;
(c)calculate the amount that he should have paid Mr Taylor throughout the employment period;
(d)make a payment to Mr Taylor of the difference between the amount referred to in paragraph (b) and (c).
(e)make a record of the information and amounts referred to in paragraphs (a) to (c) and the amount referred to in (d); and
(f)calculate and pay additional outstanding superannuation contributions required by the Award into Mr Taylor’s nominated superannuation fund.
The Compliance Notice also required the respondent to produce reasonable evidence to the Ombudsman of his compliance including a copy of a schedule of calculations and payment, and evidence that the outstanding wages and superannuation amounts had been paid to Mr Taylor.
The Compliance Notice stated that failure to comply with these actions on or before 3 March 2021 may result in the respondent contravening section 716(5) of the FW Act, a civil remedy provision. The Compliance Notice also informed Mr Powell of his rights to seek a review of the notice pursuant to section 717 of the FW Act on the grounds that he had not committed the contravention set out in the notice and/or because the notice did not comply with the requirements of ss 716(2) or (3).
The Compliance Notice satisfied the requirements of section 716(3) of the FW Act. The respondent did not take the specific action required by the Compliance Notice by 24 February 2021 and he failed to produce reasonable evidence of his compliance by 3 March 2021.
On 4 March 2021, Ms Mitchell emailed the respondent a ‘Failure to comply with Compliance Notice[8]. This notice informed the respondent that he had 7 days to provide a reasonable excuse for his failure to comply with the Compliance Notice. Pursuant to ss 716(6), the civil remedy provision of failing to comply with compliance notice does not apply “if the person has a reasonable excuse”. The respondent did not provide any excuse for his non-compliance within the requisite timeframe.
[8] Mitchell Affidavit sworn 24 March 2022, page 7
On 22 March 2021, Mr Taylor’s mother notified the Ombudsman that Mr Taylor had not received the outstanding wage entitlement that was required by the Compliance Notice.
Infringement Notice r 4.04 FW Act
On 19 January 2021, the Ombudsman also issued an infringement notice in respect of a Pay Slip Contravention pursuant to regulation 4.04 of the FW Act (“the Infringement Notice”). The Infringement Notice alleged that the respondent had contravened sub-section 536(3) of the FW Act, by providing pay slips to Mr Taylor that were false and misleading.
The Infringement Notice was personally served on the respondent with the Compliance Notice. The Infringement Notice required the respondent to pay a penalty amount of $1,332.00 by 10 March 2021.
The respondent failed to meet his obligation under the Infringement Notice. Accordingly, on 23 April 2021, the respondent was emailed a letter notifying him of his failure to pay the penalty amount. The effect of this email was the withdrawal of the Infringement Notice pursuant to regulation 4.08(4) such that the respondent was no longer able to pay the infringement amount in lieu of proceedings being brought for a civil penalty for a contravention of s 536(3).
Litigation background
On 13 August 2021, the Ombudsman instigated these proceedings by way of an originating application and a statement of claim.
The Ombudsman sought the making of final orders and declarations pursuant to the respondent’s alleged contravention of sub-sections 716(5) and 536(3) of the FW Act. On 26 August 2021, the respondent was personally served a sealed copy of the application and the statement of claim to his residential address.
In an affidavit sworn by Ms Allana Jayde Smith, a solicitor acting for the Ombudsman, Ms Smith deposed to a telephone call in August 2021 in which she said the respondent indicated that he intended to admit liability and cooperate with the Ombudsman to resolve the matter. During this call the respondent is said to have indicated a preparedness to consent to a proposed minute drafted by the Ombudsman by which the parties would agree to various procedural orders including that they make a statement of agreed facts.
By consent orders made by this Court on 31 August 2021, the parties agreed to file and serve a statement of agreed facts by 15 September 2021[9].
[9] Order 2 of the Orders made by Judge Forbes on 31 August 2021
The Court was subsequently informed that the Ombudsman and the respondent did engage in an attempt to prepare a statement of agreed facts for the purpose of section 191 of the Evidence Act 1995 (Cth). However, in her affidavit Ms Smith deposed that in the process of preparing this document, the respondent did not consent to making admissions relating to the payslip contravention. On 17 September 2021 the respondent communicated to the Ombudsman that he no longer wished to participate in the making of the statement of agreed facts[10].
[10] Smith Affidavit sworn 9 December 2021, page 6
On 27 October 2021, the matter was listed for a directions hearing. There was no appearance by the respondent on this occasion. I vacated the order made by consent on 31 August 2022 concerning the statement of agreed facts and made various procedural orders to enable the matter to be prepared for a contested trial. I am satisfied that these orders were served on the respondent on 29 October 2021 via email.
Default judgment and declaration
On 9 December 2021, the Ombudsman filed an Application in a Proceeding seeking default judgment against the respondent (“the Default Application”) pursuant to rule 13.05(2)(c) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021. The Ombudsman sought judgment against the respondents by reason of his failure to comply with the orders made by the Court on 27 October 2021, which required the respondent to file and serve a notice of address for service, response and any defence.
The Default Application was supported by an affidavit of Ms Smith, which deposed that the orders made on 27 October 2021 were emailed to the respondent on 29 October 2021. Within that email, the Ombudsman had put the respondent on notice that if he failed to comply with the October 2021 orders it intended to seek default judgment against him. The respondent did not respond to this correspondence.
On 10 December 2021, the Ombudsman emailed a sealed copy of the Default Application to the respondent’s personal email address and several days later, had it delivered via courier to the respondent’s residential address.
At a Directions Hearing on 14 December 2021, Ms Smith appeared on behalf of the Ombudsman. There was no appearance for or on behalf of the respondent. Upon being satisfied that service of the Default Application was effective, I adjourned the Ombudsman’s Default Application for a further 7 days to ensure that the respondent had an opportunity to engage in the proceeding should he wish to.
I made orders that the Ombudsman serve a copy of these orders on the respondent’s email address. In an affidavit Ms Parry, a solicitor acting for the Ombudsman, deposed that a copy of these orders were emailed to the respondent on 14 December 2021.
At the hearing for the Ombudsman’s Default Application on 21 December 2021, Ms Parry appeared on behalf of the Ombudsman. Once again, there was no appearance by or on behalf of the respondent. Being satisfied as to service and being satisfied that the statement of claim pleaded a viable cause of action, I granted the Ombudsman the relief sought in its Default Application.
I made declarations and orders in the following terms:
THE COURT DECLARES THAT:
1.The Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) by failing to comply with the Compliance Notice given to the Respondent on 19 January 2021.
2.The Respondent contravened section 536(3) of the Fair Work Act 2009 (Cth) by knowingly giving pay slips to Jaxon Taylor that were false or misleading.
THE COURT ORDERS THAT:
3.The Applicant serve a copy of these orders within 7 days on the Respondent by way of:
a.pre-paid post in a sealed envelope addressed to the Respondent at the Respondent’s address [redacted]; and
b.email to ************@hotmail.com.
4.The matter is adjourned to 29 April 2022 at 10.15am for a further hearing in respect of the Applicant’s claim for penalties to be imposed on the Respondent for the contraventions declared.
5.Evidence in chief on the question of penalty be by way of affidavit
6.The Applicant file and serve evidence and submissions relating to penalty by no later than 25 March 2022.
7.The Respondent file and serve evidence and submissions relating to penalty by no later than 8 April 2022.
8.The parties have liberty to apply.
AND THE COURT NOTES THAT:
A.Pursuant to Rule 17.05 of the Federal Circuit and Family Court of Australia (Division 2) Rules 2021, the Court has the power to vary or set aside a judgment or order after it has been entered in circumstances where it was made in the absence of a party.
Ms Parry deposed in an affidavit that on 22 December 2021 a copy of the default judgment orders were sent to the respondent’s email address as well as his residential address via express post.
PENALTY PROCEEDING
The Ombudsman now seeks the imposition of pecuniary penalties against the respondent for the declared contraventions of sub-sections 716(5) and 536(3) of the FW Act. The Ombudsman also seeks orders requiring the respondent to take the necessary steps to comply with the Compliance Notice.
Under sub-section 546(1) of the FW Act, this Court is granted the power to order a person to pay a pecuniary penalty in circumstances where it is satisfied that a person has contravened a civil remedy provision. Pursuant to the table in sub-section 539(2) of the FW Act, s 536(1) and 716(5) are each a civil remedy provision.
A contravention of sub-section 716(5) attracts a maximum penalty of 30 penalty units for an individual. For breaches occurring after 1 July 2020, the value of a penalty unit is $222[11]. The maximum penalty for contravention of sub-section 716(5) is $6,660.00.
[11] Crimes Act 2009 (Cth) s 4AA
The maximum penalty amount for non-serious contraventions of section 536(3) is 60 penalty units or $13,320.00.
On 25 March 2022, the Ombudsman filed a written outline of submission that went to the issue of penalty. The Court is satisfied that the respondent was served a sealed copy of this submission.
Within its written submissions, the Ombudsman submits that the following penalties on the respondent are appropriate:
Contravention Maximum Penalty Recommended penalty range 60 to 70% s.716(5) $6,660.00 $3,996.00 - $4,662.00 s.536(3) $13,320.00 $7,992.00 - $9,324.00
The Ombudsman submits that an appropriate penalty amount for the respondent’s two contraventions should total between $11,988.00 and $13,986.00.
Applicable legal principles
The approach of the Court in determining penalties is well settled. The Court has a broad discretion to assess the appropriate penalty. In Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown[12] Bromwich J endorsed the following approach:
(a) identify the separate contraventions involved-each contravention of each separate obligation in the FW Act is a separate contravention;
(b) consider whether any of the contraventions arising from the above constitute a single course of conduct within the meaning of section 557(1) of the FW Act;
(c) consider the extent to which two or more of the contraventions have common elements - the penalties imposed should be an appropriate response to the conduct of the respondent;
(d) consider the appropriate penalty for each contravention and, if relevant, each group of contraventions; and
(e) finally, assess whether the overall penalty is an appropriate and proportionate response to the conduct as a whole which led to the contraventions. This is the application of the “totality principle”.
[12] [2017] 275 IR 148 at [36]
It is well established that the primary purpose of civil penalty provisions is to promote the public interest in compliance.[13] This purpose was recently reinforced by the High Court of Australia in Australian Building and Construction Commissioner v Pattinson (‘Pattinson’)[14], where the majority stated that the purpose of the civil remedy regime in the FW Act is the promotion of the public interest in compliance with provisions of the FW Act by way of deterrence of further contravention[15].
[13] Trade Practices Commission v CSR Ltd[1990] FCA 521; (1991) ATPR 41-076 at 52,152 [42]; Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ)
[14] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [9]
[15] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [71]
Reaching for that purpose involves putting a price on a contravention which is fairly and reasonably appropriate. A penalty should carry a sufficient sting to ensure that is not seen as a just the cost of doing business. In Pattinson the Court stated at [66]:
“The theory of s 546 of the Act is that the financial disincentive involved in the imposition of pecuniary penalty will encourage compliance with the law by ensuring that contraventions are viewed by the contravenor and others as an economically irrational choice. Whether or not experience vindicates the theory of the Act is a matter for Parliament. The court’s function is to give effect to the intention of the Act. In this regard, the court must do what it can to deter non-compliance with the Act.”
Fundamental to the Court’s task is an assessment of the gravity and seriousness of the offending which it is called upon to penalise, having regard to all relevant factual circumstances. The considerations deemed relevant to this task are well known and frequently cited[16]. They include:
[16] Trade Practices Commission v CSR Ltd (1991) ATPR 41-076; [1990] FCA 521 at [42]; see also Pattinson at [18]; Kelly v Fitzpatrick [2007] FCA 1080 at [14]
·The nature and extent of the conduct which led to the breach;
·The circumstances in which the conduct took place;
·The nature and extent of any loss or damage sustained as a result of the breach;
·Whether there has been similar previous conduct by the respondent;
·Whether the breach was properly distinct or arose out of one course of conduct;
·The size of the business enterprise involved;
·Whether or not the breach was deliberate;
·The involvement of senior management in the breach;
·Whether the party committing the breach has shown contrition;
·Whether the party committing the breach has taken corrective action;
·Whether the party committing the breach has cooperated with enforcement authorities;
·The need to ensure compliance with minimum standard by provision of an effective means for investigation and enforcement of employee entitlements; and
·The need for specific and general deterrence.
While this extensive list is well-settled, it is not to be interpreted by the Court as a “rigid catalogue of matters for attention”[17]. In Pattinson, the High Court reiterated that this list of possible relevant considerations ought not to be treated as a checklist. The Court may take into consideration matters relevant to both the character of the contravening conduct and of the contravenor[18]. The Court’s task is and remains the determination of what penalty is most appropriate given all of the relevant circumstances of the case[19].
CONSIDERATIONS
[17] Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) FCR 560; [2008] FCAFC 8 [91]
[18] Pattinson at [19]
[19] Pattinson at [68]
Nature of the conduct which led to the breach
The circumstances which resulted in the Ombudsman issuing the Compliance Notice have been described within the background to these reasons. The contraventions involved one employee, Mr Taylor, in circumstances where the respondent breached fundamental obligations under the Award to pay the employee appropriately for the work done and under FW Act to rectify the deficiency by complying with the Ombudsman’s notice.
Mr Taylor was entitled to be paid $4,637.50 for the work he performed[20], less tax. He was in fact paid barely a third of that. The respondent has not engaged in these proceedings and the failure to pay is not contested.
[20] Based on the payslips produced by the respondent in October 2020
The Ombudsman applied to the Court for default judgment. Declarations were made by this Court that the respondent contravened both sub-sections 716(5) and 536(3) of the FW Act. It is clear that the respondent’s conduct engages the pecuniary penalty regime under the FW Act.
Nature, circumstances and deliberateness of conduct
The Ombudsman’s written submission on penalty appropriately addresses this consideration in the following manner[21]:
[21] Footnotes excluded
Compliance Notice
27. The power of a Fair Work Inspector 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
28. TheCourts have recognised that compliance notices provide a mechanism for the efficient and cost-effective rectification of identified contraventions of the FW Act, including underpayments to employees.
29. If the Respondent had complied with the Compliance Notice:
(a) theApplicant would have been prevented from bringing civil remedy proceedings against him in respect of the underlying contraventions pursuant to section 716(4A) of the FW Act; and
(b) he would not be taken to have admitted or contravened the civil remedy provisions in respect of the underlying contraventions pursuant to section 716(4B) of the FW Act.
30. However, where a person fails to comply with a compliance notice, section 539(2) of the FW Act allows a Fair Work Inspector to bring civil remedy proceedings against that person, to seek appropriate orders to remedy the contravention and obtain pecuniary penalties under section 546 of the FW Act.
31. On19 January 2021, a copy of the Compliance Notice was given to the Respondent.
32. TheRespondent was aware of the Compliance Notice and the obligation to comply with it, including that failure to comply may lead to the Applicant commencing proceedings seeking civil penalties and orders for compliance. These obligations and consequences were spelt out in the Compliance Notice.
33.Despite being given ample time and multiple opportunities by the Applicant to comply with the Compliance Notice and avoid litigation, the Respondent failed to comply with the Compliance Notice by the required date.
34.It is submitted that the Respondent’s failure to comply with the Compliance Notice represents a deliberate 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 Employee continues to await payment.
35. Asa result of the Respondent’s failure to comply with the Compliance Notice, the Applicant was required to bring proceedings seeking orders to remedy the underlying contraventions.
36. The Respondent’s conduct in failing to comply with the Compliance Notice, coupled with the Respondent’s conduct in respect of and failure to engage in these proceedings, demonstrates a deliberate disregard for the Respondent’s obligations under the FW Act, the authority of the Applicant as a regulator of Commonwealth workplace laws, and the orders of the Court.
Pay slips
37. Thesignificance of compliance with minimum terms and conditions cannot be overstated. Nor can the significance of compliance with the relevant record keeping and pay slip obligations.
38. Payslips play a vital role in permitting an employee to monitor the discharge of the obligations owed to them by the employer. A failure to keep records of hours worked and to provide pay slips impedes both employees and the Applicant from determining and enforcing workplace entitlements, and effectively disempowers employees and undermines the ability of employees to identify and challenge underpayments.
39. In the present case, the Respondent failed to pay the Employee for all hours worked, and then created false pay slips which concealed the non-payment. Upon being investigated by the Applicant, the Respondent was not forthcoming in respect of whether the payments had been made to the Employee or not, which hindered the Applicant’s ability to determine whether Commonwealth workplace laws had been complied with.
40. TheRespondent showed a disregard for his record keeping obligations and the need to engage honestly with the FWO.
41. Further,the Employee was a young vulnerable worker, and for whom the underpayments were not trifling amounts.
Infringement Notice
42. Thepower of a Fair Work Inspector to issue an infringement notice was introduced into the FW Act as a mechanism to deal with non-compliance as an alternative to litigation to enforce a contravention. The Court has accepted that a failure to comply with a statutory notice will result in consequences for the recipient.
43. If the Respondent had complied with the Infringement Notice, the Respondent would have avoided the Applicant bringing civil remedy proceedings against him in respect of the Pay Slip Contravention.
44. In view of these factors, the Applicant submits that both the Compliance Notice Contravention and the Pay Slip Contravention were serious and deliberate, and that an appropriate penalty should be imposed for the Contraventions.
I accept the Ombudsman’s submission. The respondent’s non-compliance with both the Compliance Notice and the Infringement Notice should be viewed as an intentional and serious disregard of his obligations as an employer.
Each of these notices provided the respondent with the opportunity to remedy his alleged contraventions. One of the objects of the FW Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms.
I am satisfied that the respondent was allowed a reasonable timeframe to comply with the rectification steps required by the Compliance Notice and to pay the amounts which were clearly owing to Mr Taylor. I am satisfied that the respondent was afforded an opportunity to address the pay slip contravention by paying the Infringement Notice. The respondent could have avoided this litigation but he did not take the steps to do so.
The Compliance Notice alerted the respondent to the avenues of review that were available to him. If he did not agree with the notice, he could have sought to review it under section 717 of the FW Act and further communicated with the Ombudsman if he considered there was an error, or if there was evidence to demonstrate that the minimum entitlements had in fact been met. However he did not seek to contest that validity of these notices. Further, there has been no evidence put before the Court to suggest that Mr Powell had any reasonable excuse for not complying with these notices.
The respondent’s contravention in relation to the pay slips is particularly egregious. As the Ombudsman submitted, payslips play a vital role in permitting an employee to monitor the discharge of obligations owed to them by their employer. A failure to discharge the obligation of keeping proper records and providing timely and accurate payslips effectively disempowers employees and undermines their ability to identify and challenge underpayments[22]. I would add that this is especially so where the employee is young and a recent entrant to the workforce.
[22] Fair Work Ombudsman v Hess [2021] FCCA 1883 at [31]
Here the content of the payslips produced by the employer bear almost no relationship with the amounts actually paid to Mr Taylor or the times when payments were to be made to him. They seem to have been produced only after Mr Taylor ceased working for Mr Powell. As Mr Powell did not participate in the proceeding or offer any evidence to explain the payslips, the Court is unable to reconcile the discrepancy between the paperwork and the reality of the situation.
Based on the evidence available, I am satisfied that the respondent’s non-compliance with the two notices demonstrated a deliberate disregard of his FW Act obligations which significantly undermines the importance of the statutory notice schemes and the authority of the Ombudsman as a regulator of Commonwealth workplace laws.
The Court infers that the respondent has no intention of complying with the Compliance Notice and rectifying the underlying contraventions until compelled to do so by this Court. An ongoing failure to comply with a compliance notice is relevant to the extent and nature of the conduct, and may show that the conduct was serious and demonstrates a disregard for obligations under the FW Act.[23]
[23] Fair Work Ombudsman v PEBS Group Pty Ltd[2021] FedCFamC2G 158 (“PEBS Group”) at [40] per Judge Riley; Fair Work Ombudsman v Goldream Pty Ltd [2021] FedCFamC2G 61 at [29] per Judge Kelly
Vulnerability of employee
The Ombudsman submits that given Mr Taylor was 17 years of age throughout the employment period he is classified in a more vulnerable group of employees[24].
[24] Fair Work Ombudsman v Al Hilfi [2016] FCA 193, [25]; Fair Work Ombudsman v Yogurtberry World Square [2016] FCA 1290, [24]-[26]
Mr Taylor’s youth and inexperience in the workforce makes him especially susceptible to unfair and unlawful practices in the workplace. A young employee is particularly reliant on the guaranteed safety net of fair, relevant and enforceable minimum terms and conditions promised by the FW Act[25]. In this case Mr Taylor performed his part of the work/wages bargain and he was entirely dependent on the employer doing the right thing by him.
[25] Fair Work Act 2009 (Cth) s 3
Mr Taylor was vulnerable to the priorities of his employer. Save for withdrawing his labour, he had little bargaining power in the relationship. He sought information about his pay and was provided with misleading documentation. The evidence reveals that Mr Taylor’s mother had to involve herself in the process of advocating on her son’s behalf.
Nature and extent of loss
The Ombudsman submits that Mr Taylor was directly impacted by the respondent’s non-compliance with the Compliance Notice as he has been denied wages and superannuation contributions that were properly owed to him.
Mr Taylor undoubtedly suffered a material loss stemming from the respondent’s contraventions. The delay in Mr Taylor receiving his entitlements is in and of itself a relevant loss flowing from the failure to comply with the Compliance Notice[26].
[26] Fair Work Ombudsman v Hess [2021] FCCA 1883 at [35] per Judge Jarrett
The amount of underpayment was clearly not trifling considering that Mr Taylor was only 17 years old at the time of his employment. He worked for approximately six weeks and was entitled to net wages of more than $4,000.00. He has been paid just one third of that. The respondent’s conduct has done more than deprive Mr Taylor of his rightful pay and entitlements – given his youth it is conduct prone to undermine his confidence in future employers and employment opportunities.
The failure to comply with a statutory notice also occasions a more public loss[27]. The legislature has set penalties for non-compliance with a compliance notice because a failure to comply will cause (as it has done in these proceedings) the Ombudsman and the Court to expend time and scarce public resources and funds dealing with civil remedy proceedings which could have been avoided had compliance occurred[28].
[27] Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No 2) [2020] FCCA 2583 at [39] per Judge Kendall
[28] Fair Work Ombudsman v Nobrace Centre Pty Ltd (No 2) [2019] FCCA 2144 (“Nobrace”) at [19] per Judge Blake
Corrective action cooperation and contrition
The Ombudsman submits that a discount for cooperation and contrition would be inappropriate in these circumstances, given that the respondent did not make admissions in the course of these proceedings, failed to participate in the proceedings, did not take steps to rectify the underpayment amount or formally acknowledge any wrongdoing or loss suffered by Mr Taylor.
I accept that the respondent displayed some evidence of a preparedness to cooperate with the Ombudsman early on and before proceedings were commenced. During telephone calls throughout November and December 2020, the respondent made oral admissions to agents of the Ombudsman, admitting to having under paid Mr Taylor. However, despite these apparent admissions, the respondent did not make the repayments which then formed the basis of the Ombudsman issuing the Compliance Notice.
Further, once these proceedings were initiated, the respondent displayed some willingness to cooperate with the Ombudsman by way of consenting to the making of an agreed statement of facts. However, the respondent later withdrew his cooperation (which he was entitled to do), expressing to the Ombudsman that he was reluctant to admit to both of the alleged contraventions. But having done so the respondent then did nothing to contest the Ombudsman’s application for declarations, orders and penalties.
I agree with the Ombudsman that there should be no discount to the respondent for contrition and cooperation. The respondent has not apologised for his failure to comply with the Compliance Notice and there is no objective evidence of regret, contrition or remedial action. Save for an initial willingness to cooperate, which may well have been motivated by self-interest, the respondent’s disengagement from these proceedings further displays a lack of remorse for his conduct and an unwillingness to account for his actions.
Size of business
The size of the business does not excuse a business from any required compliance under the FW Act[29]. The size and financial circumstances of an employer may be relevant to the penalty assessed, but these considerations are always to be weighed against the need for general deterrence.
[29] Kelly at [28] per Tracey J
There is no evidence before the Court relating to the size of the respondent’s business or his specific financial circumstances. The Court infers, however, that the respondent’s landscaping business was small in scale.
Properly evidenced, and for proper reasons, an incapacity to pay may afford some relief by way of mitigation of penalty[30]. However, in the absence of any evidence from the respondent, it is not possible to draw any conclusions with respect to whether or not there is an incapacity to pay on his part. In those circumstances, there is no basis to consider mitigating any penalty on the basis of the size of the business or its capacity to pay.
[30] Sterling Crown at [65]-[76] per Lucev FM, and the various Federal Court authorities there cited.
Involvement of senior management
In the present case, I am satisfied that by virtue of his operation as a sole trader, the respondent was responsible for the active day to day management of the business. He was responsible for ensuring compliance with all Fair Work instruments. He was the recipient of the Compliance Notice and the Infringement Notice. There is no evidence that anyone other than the respondent was responsible for the non-compliance and his early engagement with the Ombudsman points to his direct involvement.
Compliance with minimum standards
The Ombudsman submits the following on this consideration:
63. The Respondent’s 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, and reflects a prioritisation of the Respondent’s own interests at the expense of the Employee’s minimum entitlements under the Construction Award.
64. The failure to comply with a statutory notice properly issued by the Applicant is
serious. The efficacy of statutory notices such as compliance notices will be
hindered or made redundant if recipients perceive that a failure to comply carries
no meaningful consequences. Given the important of a FWI’s power to issue compliance notices and that compliance with such notices avoids the need for litigation or the imposition of any penalties, penalties for non-compliance should be set at a level which demonstrates there are serious consequences for failing to comply with a compliance notice. In doing so, the Court will deter other parties from failing to comply with compliance notices.
65. Further, as above, pay slip obligations play a vital role in the capability of the
Applicant to monitor and enforce compliance with minimum employment
standards. The fact that the Respondent provided the Employee false and
misleading pay slips during the Employment Period undermined their ability to
identify and challenge underpayments.I accept this submission. The respondent’s inability to comply with the minimum standards compromises the enforcement framework of the legislation, the overarching object of which is to provide protection to employees.
Deterrence
As has been discussed, deterrence is the central purpose of the civil remedy provisions in the FW Act[31]. In determining the imposition of pecuniary penalty, the Court must have regard for both general and specific deterrence.
[31] Agreed Penalties Case (2015) 258 CLR 482 at 506 [55] (per French CJ, Kiefel, Bell, Nettle and Gordon JJ)
General deterrence
General deterrence aims to promote a message to the community at large that the contravening conduct is unacceptable. In order to effectively send this message, an appropriate penalty “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”[32].
[32] Fair Work Ombudsman v NSH NorthLts t/a New Shanghai Charlestown (2017) 275 IR 148; [2017] FCA 1301 at [98]
The Ombudsman’s written submission cited an industry report prepared by the Ombudsman that concerned compliance with workplace laws within the construction industry between July 2018 to June 2021. The Ombudsman submits the need for general deterrence is particularly important for participants in the construction industry due to the prevalence of non-compliance. Based on that industry report the Ombudsman submitted that:
(a)failure to pay minimum wage requirement was the second most common act of non-compliance within the construction industry;
(b)failure to pay for work performed was frequent within the construction industry; and
(c)pay slip contraventions account for 3% of non-compliance within the construction industry.
I acknowledge the Ombudsman’s submission concerning the prevalence of non-compliance within the construction industry. A penalty should be set at a level which, having regard to the importance and relevance of general deterrence as a consideration, acts as a warning to other employers generally, and in the relevant industry particularly, not to engage in the conduct of contravening compliance notices.
While I accept that there may be circumstances where it is appropriate for a case to be a vehicle for sending a message to discourage like-minded recalcitrants in a particular industry, consideration of penalty and its deterrent effect should always be case and fact-dependent. A respondent should not be subjected to an unreasonable or disproportionate penalty for its mere participation within an industry that is notorious for non-compliance. In the exercise of its discretion, the Court’s task is to properly determine whether the respondent’s particular circumstances are reflective of the industry as a whole and whether it is appropriate to use the respondent to set an example for others in that industry. It is my view in the present case that the need for general deterrence is not as persuasive as the need to specifically deter the respondent.
Specific deterrence
Specific deterrence ensures that a particular contravener does not participate in similar contravening conduct in the future.
The Ombudsman submits that as of March 2022, the respondent’s business was still registered, asserting that the penalty imposed should carry a sufficient sting in order to deter the respondent from future contraventions.
In the circumstances I am satisfied that specific deterrence is required in this case because:
(a)the contravention was deliberate;
(b)no contrition has been exhibited;
(c)no payment has been made to the employee concerned in relation to the underlying underpayment; and
(d)there is no evidence that systems are in place to prevent a repeat of the contravention or to prevent a recurrence of similar underpayments to current or future employees.
The Ombudsman submitted that there is a particular call for specific deterrence in the present case, on account of an alleged prior history of non-compliance with workplace instruments. Within its written submission, the Ombudsman alleges that the respondent formerly operated a separate business, trading as Poppet Eats Mernda Junction, which was covered by the Fast Food Industry Award 2010. The Ombudsman produced correspondence which disclosed that in respect of that other business, the respondent was alleged to have contravened various provision of the Fast Food Industry Award 2010 as well as the FW Act, including the dissemination of false or misleading payslips. The Ombudsman sought to rely on a ‘Letter of Caution’ which was issued to the respondent in June 2020 after the Ombudsman determined that it was not in the public interest to commence litigation because the business had ceased trading. The Letter of Caution put the respondent on notice that future contraventions may result in prosecution and that the letter may be relied upon in respect of penalties.
I give some but limited weight to this evidence. I accept that the respondent is on notice about the importance of complying with workplace laws and the possible consequences of not doing so. However, the particular facts and circumstances giving rise to the Letter of Caution are not clear, no formal findings of fact have been made by a Court and I am not prepared to draw any inference that the respondent has actively engaged in a course of conduct for which a higher penalty is required to achieve specific deterrence. For the purposes of assessing penalties in this proceeding, I consider that the respondent should be treated as a first-time contravener.
PENALTY
Each of the contraventions is a distinct and separate obligation under the FW Act and is therefore a separate breach of the civil remedy provision pursuant to section 539(2).
The Ombudsman submits that an appropriate penalty should be in the range of 60% to 70% of the maximum amount for each of the respondent’s two contraventions, a total between $11,988.00 and $13,986.00.
Having regard to all of the relevant considerations discussed above and having particular regard to the need for deterrence, both specific and general, the Court is of the view that the following penalties are appropriate:
·in respect of the Compliance Notice Contravention, a penalty of $3,330.00, being 50% of the maximum; and
·in respect of the Pay Slip Contravention, the penalty of $6,660.00, also being 50% of the maximum.
Taking all matters into account, I consider a combined aggregate penalty of just under $10,000 is an appropriate response to the conduct which led to the breaches. There is no evidence before the Court which would cause it to conclude that the penalty is unduly crushing or oppressive.
CONCLUSION
The Court has concluded that there ought be orders in the terms set out in Annexure A to the Ombudsman’s written outline of submissions, with the appropriate penalty being set in the amount of $9,990.00.
I certify that the preceding one hundred and three (103) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Forbes. Associate:
Dated: 13 October 2022
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