Fair Work Ombudsman v Pro Install Electrical Pty Ltd
[2022] FedCFamC2G 138
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Pro Install Electrical Pty Ltd [2022] FedCFamC2G 138
File number(s): MLG 572 of 2021 Judgment of: JUDGE MCNAB Date of judgment: 10 February 2022 Catchwords: INDUSTRIAL LAW – FAIR WORK – failure to comply with a compliance notice – consent orders agreed to rectify non-compliance – penalty ordered – second respondent sole director of first respondent (in liquidation). Legislation: Clerks – Private Sector Award 2010
Corporations Act 2001 (Cth) s 471B.
Fair Work Act 2009 (Cth) ss 545(1), 546, 547(2), 550, 716(5).
Cases cited: Fair Work Ombudsman v Joys Childcare Limited & Anor (No 2) [2020] FCCA 2326
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7
Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550.
Division: Division 2 General Federal Law Number of paragraphs: 39 Date of last submission/s: 9 February 2022 Date of hearing: 10 February 2022 Place: Melbourne Counsel for the Applicant: Ms Rebecca Preston Solicitor for the Applicant: Rankin Business Lawyers Counsel for the Respondents: Appeared in person ORDERS
MLG 572 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: PRO INSTALL ELECTRICAL PTY LTD (ACN 624 691 569)
First Respondent
MR LUKE WARREN
Second Respondent
ORDER MADE BY:
JUDGE MCNAB
DATE OF ORDER:
10 FEBRUARY 2022
UPON THE ADMISSIONS MADE BY THE SECOND RESPONDENT, THE COURT DECLARES THAT:
1.The Second Respondent was involved, within the meaning of section 550 of the Fair Work Act 2009 (Cth) (“FW Act), in the contravention by the First Respondent (“Pro Install”) of section 716(5) of the FW Act by failing to comply with a compliance notice issued on 4 May 2020 (“Compliance Notice”) in respect of two former employees, Ms Amy Watson (“Ms Watson”) and Ms Ellen Hodson (“Ms Hodson”).
THE COURT ORDERS BY CONSENT THAT:
2.Pursuant to section 545(1) of the FW Act, the Second Respondent pay to the Applicant the amount of $1,914.54 on account of the amounts Pro Install was required to pay for the benefit of Ms Watson and Ms Hodson pursuant to the Compliance Notice.
3.Pursuant to section 547(2) of the FW Act, the Second respondent pay the amount of $122.49 in pre-judgment interest on the amount referred to in order 2 above.
4.The Second respondent pay the amounts referred to in orders 2 and 3 above (being the total sum of $2,037.03hin 28 days of the date of this order.
5.The Applicant, within 28 days of receiving the amount referred to in order 4 above, pay the sum of $1,282.05 to Ms Watson and the sum of $754.98 to Ms Hodson.
THE COURT ORDERS THAT:
6.Pursuant to section 546 of the FW Act, the Second Respondent pay a pecuniary penalty in the amount of $3,780 to the Commonwealth, in respect of his contravention of section 716(5) of the FW act (by operation of section 550(1) of the FW Act), within 60 days of this order.
7.The Applicant has liberty to apply in the event that any of the above 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
(Delivered Ex Tempore – Revised From Transcript)
Judge McNab
INTRODUCTION
This proceeding comes before the Court by way of application and statement of claim filed on 26 March 2021. By the statement of claim, the Applicant, the Fair Work Ombudsman (“FWO”) claims that the Second Respondent (“Mr Luke Warren”) has contravened s 716(5) of the Fair Work Act 2009 (Cth) (“the FW Act”) by operation of s 550 of the FW Act.
The First Respondent (“Pro Install Electrical Pty Ltd”) is a company in liquidation against which the FWO has not sought leave to proceed under s 471B of the Corporations Act 2001 (Cth).
The claim is against the Mr Luke Warren (“the Second Respondent”) for his involvement in Pro Install Electrical Pty Ltd.’s (“the First Respondent”) contravention of s 716(5) of the FW Act being its failure to comply with a compliance notice in relation to two of its former employees Ms Watson and Ms Hodson issued on 4 May 2020.
BACKGROUND
Investigation
In or around March 2020, the FWO commenced an investigation into the First Respondent after receiving requests for assistance from former employee of the company, Ms Watson. Ms Watson commenced employment with the First Respondent on 1 July 2019 and her employment was terminated on 20 January 2020.
Subsequently, the FWO received a further request for assistance from former employee Ms Hodson, who complained that she had received no pay from the First Respondent in respect of her short period of employment. Ms Hodson commenced employment with the First Respondent on 17 February 2022 and her employment was terminated on 21 February 2020.
The materials reviewed by the FWO, including documents that the First Respondent produced to the FWO in respect of each of Ms Watson and Ms Hodson showed that:
(a)consistent with their accounts, each had been employed in clerical/administrative roles. Ms Watson had performed reception and other administrative duties while Ms Hodson had performed bookkeeping duties;
(b)the First Respondent had terminated each of their employment by alleging gross misconduct;
(c)the termination letter provided to Ms Watson was dated 20 January 2020. It stated that Ms Watson’s last day of employment would be 27 January 2020 and that termination was to be effective immediately; and
(d)the termination letter provided to Ms Hodson was dated 21 February 2020. It stated the Ms Hodson’s last day of employment would be 28 February 2020 and that termination was to be effective immediately.
A Notice to Produce was issued by the FWO to the First Respondent (directed to the attention of the Second Respondent) requiring the production of all payslips, banking transactions records and other pay records in respect of Ms Watson. However, the First Respondent did not produce any such documents to the FWO. The First Respondent also did not provide any such documents in relation to Ms Hodson.
A payslip provided by Ms Watson to the FWO stated the applicable award to be the Clerks – Private Sector Award 2010 (“the Clerks Award”).
By reason of the matters set out above, Fair Work Inspector (“FWI”) Mr Brian Elson formed the reasonable belief that:
(a)the Clerks Award had applied to both Ms Watson and Ms Hodson in their employment with the First Respondent; and
(b)the First Respondent had contravened cl 23.5 of the Clerks Award in respect of each Ms Watson and Ms Hodson, by failing to pay outstanding wages to termination of employment and all other amount payable under the Clerks Award and the National Employment Standards.
Clause 23.5 of the Clerks Award states:
23.5 Payment on termination of employment
(a)The employer must pay an employee no later than 7 days after that day on which the employee’s employment terminates:
(i)the employee’s wages under this award for any complete or incomplete pay period up to the end of the day of termination; and
(ii)all other amounts that are due to the employee under this award and the NES.
(b)The requirement to pay wages and other amount under paragraph (a) is subject to further order of the Commission and the employer making deductions authorised by this award or the Act.
Compliance Notice
Following the formation of FWI Mr Elson’s belief that the First Respondent had contravened cl 23.5 of the Clerks Award in respect of both Ms Watson and Ms Hodson, FWI Mr Elson issued the compliance notice in relation to the same dated 4 May 2020 (“Compliance Notice”). The Compliance Notice was directed to the First Respondent and marked to the attention of the Second Respondent. It was sent by registered mail to the First Respondent’s registered office and additionally was emailed to the Second Respondent’s email address.
Among other things, the Compliance Notice required the First Respondent:
(a)by 15 June 2020, to:
(i)identify all amounts payable to each of Ms Watson and Ms Hodson up to the end of the day of the termination of their employment;
(ii)identify the amounts actually paid;
(iii)pay the difference between (i) and (ii);
(iv)make a record of each of the above amounts;
(b)by 22 June 2020, to provide to the FWO proof of full payment of the amount specified in paragraph (a)(iii) above.
Non-compliance with Compliance Notice
Following correspondence between the FWO and Jessica Wang, Accounts Manager of the First Respondent, on 28 May 2020 the FWO emailed Ms Wang. The email copied in the Second Respondent noting:
(a)the potentially serious consequences of non-compliance with the Compliance Notice; and
(b)that the Second Respondent was copied on the email “to ensure his involvement”.
The Second Respondent responded to the email stating among other things that the Compliance Notice was being reviewed.
On 23 June 2020 the First Respondent provide the FWO with calculations identifying:
(a)an underpayment of $652.38 in respect of Ms Hodson, and a payment submission recording payment of that amount to Ms Hodson the following day, and unpaid superannuation of $57.56; and
(b)an overpayment to Ms Watson of $128.66.
In subsequent correspondence between the FWO and Ms Wang for the First Respondent:
(a)the FWO identified issues with the First Respondent’s calculations in respect of Ms Watson, including that her continuing employment for the company in January 2020 had not been accounted for;
(b)Ms Wang said that she had been working off company records rather than from direct knowledge of Ms Watson’s employment circumstances and that she would need to confirm those circumstances with the Second Respondent, including whether Ms Watson had worked in January as she claimed; an
(c)Ms Wang then confirmed that Ms Watson had indeed worked in January, and provided calculations identifying a salary underpayment to Ms Watson of $1,121.64, and superannuation of $82.96. The FWO requested that the First Respondent proceed to pay the relevant amounts.
No confirmation was provided that payment had been made to either of Ms Watson or Ms Hodson.
Prior to this proceeding, the First Respondent has not rectified any of its identified underpayments, as required by the Compliance Notice. Despite the First Respondent committing to rectify the underpayments, this never occurred.
On 17 March 2021 the FWO sent a letter outlining the ongoing non-compliance by the First Respondent to relevant persons including the Second Respondent.
CONSIDERATION
This matter came before me on 10 February 2020 as a hearing on liability. The First Respondent in liquidation, did not appear. The Second Respondent, who is the sole director of the First Respondent appeared before the Court.
In discussions between the Court, the Second Respondent and Ms Preston, who appeared on behalf of the FWO, there was a position that was agreed to between the parties. The Second Respondent consented to orders being made for a declaration in relation to his involvement in the contravention of s 716(5) of the FW Act by failing to comply with a compliance notice issued on 4 May 2020 in respect of two former employees of the First Respondent.
There is also an agreed position as stated in Orders [2]-[5] of the minute of proposed orders which are set out below:
(2)Pursuant to s 545(1) of the FW Act, the Second Respondent pay to the Applicant the amount of $1,914.54 on account of the amounts the First Respondent was required to pay for the benefit of Ms Watson and Ms Hodgson, pursuant to the Compliance Notice.
(3)Pursuant to s 547(2) of the FW Act, the Second Respondent pay the amount of $122.49 in pre-judgment interest on the amount referred to in Order [2] above.
(4)The Second Respondent pay the amounts referred to in Orders [2] and [3] above (being the total sum of 2,037.03) within 28 days of the date of this order.
(5)The FWO, the Applicant, within 28 days of receiving the amount referred to in Order [4] above, pay the sum of $1,282.05 to Ms Watson and the sum of $754.98 to Ms Hodson.
The parties placed before the Court an agreed position as to the penalty for the Second Respondent in relation to the contravention of s 716(5) of the FW Act which was in the sum of $3,780. Discretion resides with the Court to determine whether that is a reasonable penalty when considering all the circumstances of this matter.
The background of this matter is set out in the statement of claim filed on 26 March 2021, which I will not recite, but also in the affidavit of FWI Elson, which was sworn and filed with the Court on 22 November 2021.
Mr Elson is a Fair Work Inspector who was employed in the office of the FWO, and he made an affidavit setting out the service of the Compliance Notice on 4 May 2020 and the efforts made to ensure the First Respondent complied with that notice. That evidence is set out in the background above. The evidence shows that the FWO made a concerted effort to deal with the First Respondent and the Second Respondent in relation to the matters arising from the Compliance Notice.
In my view, the dealings between the parties demonstrate that the First and Second Respondent displayed a pretended compliance with the notice through the provision of pay records which, in fact, support a finding that the payments were not paid. There was promised compliance by the Second Respondent on numerous occasions, but no compliance was achieved. That is a significant matter.
I refer to the decision of Judge Altobelli (as then he was) in Fair Work Ombudsman v Joys Childcare Limited & Anor (No 2) [2020] FCCA 2326 at [11]:
11.A compliance notice issued pursuant to section 716 of the FW Act provides an important statutory mechanism for a Fair Work Inspector to deal with non-compliance with minimum entitlements in the FW Act, as an alternative to commencing litigation for each underlying contravention of an entitlement. The compliance notice framework creates an opportunity for a person to whom it is served to rectify the matters set out in the notice and gain protection from civil remedy proceedings in respect of the underlying contravention(s), thus encouraging efficient and cost-effective rectification of contraventions and payment of outstanding employee entitlements. Section 717 of the FW Act also provides a clear mechanism for a recipient of the notice to seek a review of the notice.
It is plain that the Second Respondent did not take advantage of the opportunity offered by the compliance notice mechanism and that is a matter of some significance when assessing penalty.
I have regard to the guidelines, which are set out in Kelly v Fitzpatrick [2007] FCA 1080 at [14] referring to a list of non-exhaustive list of factors relevant to the imposition of a penalty. These guidelines were usefully summarised by Mowbray FM (as he then was) in Mason v Harrington Corporation Pty Ltd t/as Pangaea Restaurant & Bar [2007] FMCA 7 at [26] to [59]. Those factors include:
(1)the nature and extent of the conduct which led to the breaches;
(2)the circumstances in which that conduct took place;
(3)the nature and extent of any loss or damage sustained as a result of the breaches;
(4)whether there had been similar previous conduct by the Respondent;
(5)whether the breaches were properly distinct or arose out of the one course of conduct;
(6)the size of the business enterprise involved;
(7)whether or not the breaches were deliberate;
(8)whether senior management was involved in the breaches;
(9)whether the party committing the breach had exhibited contrition, taken corrective action and co-operated with the enforcement authorities;
(10)the need to ensure compliance with minimum standard by provision of an effective means for investigation and enforcement of employee entitlements; and
(11)the need for specific and general deterrence.
While the summary is a convenient checklist, it does not prescribe or restrict the matters which may be taken into account in the exercise of the Court’s discretion: see Sharpe v Dogma Enterprises Pty Ltd [2007] FCA 1550. The discretion remains at large.
There is limited evidence as to the circumstances in which the non-compliance took place. As I stated earlier, this matter commenced as a contested issue as to liability and has effectively converted into a hearing in relation to penalty. I am not minded to adjourn the case to allow the parties to file further evidence or further submissions because I do not think it is in any of the parties’ interests to do so and it not a course that has been urged upon me from the bar table. As a self-represented person, the Second Respondent raised that there were issues in relation to the conduct of the employees concerned. I will not go into detail on this because none of those matters are proved, and there is no evidence that has ever been put before the Court, let alone the FWO or any other person involved in this case prior to proceedings being issued. The matters alleged in relation to the conduct of the employees do not provide any basis for reducing the penalty.
I do take into account that the Second Respondent is a reasonably young man who, at the age of 31, was managing a business with nine employees, running large jobs on significant construction projects. What he stated to the Court indicated that the company had grown at too quick a rate and there were not sufficient controls and administrative systems set up to support the business. He advised the Court that the First Respondent was wound up as a result of the failure to comply with the statutory demand served by a creditor.
The Second Respondent did state that through the course of the Covid-19 pandemic, that there were a number of staff who had to be let go which consequently reduced staff by approximately half through that period. Again, there is no evidence before the Court but I do take judicial notice of the fact that many businesses were adversely affected by the effects of the Covid-19 pandemic.
However, the issue of the effects of the Covid-19 pandemic does not carry a great deal of weight, given that the amounts that were the subject of the compliance notices are reasonably small amounts of money. There is no doubt although that the amounts were significant to the employees concerned.
In my view, it is important that the penalty imposed addresses specific and general deterrence. Specific deterrence is important in this case because of the conduct that has been demonstrated as set out in the affidavits. There has been wilful failure to comply with the notice and to properly deal with and take advantage of the benefits that were offered by the process. Had the notice been complied with, this process could have been avoided.
Given that the Second Respondent is continuing in business and is a relatively young person, I think specific deterrence is important in this case. He must understand the importance of properly managing the payment of staff and dealing with the agencies who are there to ensure compliance with minimum standards.
I also regard general deterrence as very important as a means of maintaining the proper management of the compliance notice regime, which is set up for the benefit of both employers and employees.
CONCLUSION
Having regard to all those matters, I am of the view, that although it is quite a significant penalty and set at 60 per cent of the maximum penalty that is available to the Court, the penalty that was agreed between the parties is an appropriate penalty.
The Court will make orders in the terms of the minute of proposed orders, which have been forwarded to the Court.
I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment of Judge McNab. Associate:
Dated: 10 February 2022
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