Fair Work Ombudsman v R & a Barbers Zone Pty Ltd
[2023] FedCFamC2G 39
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v R & A Barbers Zone Pty Ltd [2023] FedCFamC2G 39
File number(s): SYG 109 of 2022 Judgment of: JUDGE HUMPHREYS Date of judgment: 30 January 2023 Catchwords: INDUSTRIAL LAW – Fair Work Act – Health and Beauty Industry Award – liability conceded – determination of penalty. Legislation: Fair Work Act 2009 (Cth) ss 90, 550, 557, 716, 789GD
Hair and Beauty Industry Award 2010
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301
Fair Work Ombudsman v Nobrace Centre Pty Ltd (in Liquidation)(No 2) [2019] FCCA 2970
Canturi v Sita Coaches Pty Ltd (2002) 116 FCR 276
Australian Ophthalmic Supplies Pty Ltd v McAlary‑Smith (2008) 165 FCR 560
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Seven Network (Operations) Pty Ltd v Communications, Electrical, Electronic, Energy Information, Postal, Plumbing and Allied Services Union of Australia (2001) 110 IR 372
Australian Building and Construction Commissioner v J Hutchinson Pty Ltd T/A Hutchinson Builders [2019] FCA 667
Fair Work Ombudsman v Soma Kitchen Pty Ltd and Anor (No 2) [2020] FCCA 2583
Glenn Jordan v Mornington Inn Proprietary Limited [2007] FCA 1384
Fair Work Ombudsman v Pioneer Personnel Pty Ltd [2017] FCCA 3223
Division: Division 2 General Federal Law Number of paragraphs: 34 Date of last submission/s: 20 January 2023 Date of hearing: Chambers Hearing Place: Parramatta Table of Corrections 3 February 2023 Inclusion of orders 1 – 3 in the cover sheet. ORDERS
SYG 109 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: R&A BARBERS ZONE PTY LTD ACN 624 797 137
First Respondent
ARSIN YOUSIF
Second Respondent
order made by:
JUDGE HUMPHREYS
DATE OF ORDER:
30 January 2023
THE COURT ORDERS BY CONSENT THAT:
1.The First Respondent contravened s 716(5) of the Fair Work Act 2009 (Cth) (“the Act”) by failing to comply with the Award Compliance Notice.
2.The First Respondent contravened s 716(5) of the Act by failing to comply with the JobKeeper Compliance Notice.
3.The Second Respondent was involved, within the meaning of s 550(2) of the Act, in each of the contraventions by the First Respondent of s 716(5) of the Act as declared at orders 1 and 2 above.
THE COURT FURTHER ORDERS THAT:
4.Pursuant to s 546(1) of the Act, the First Respondent pay a pecuniary penalty of $13,336.00 to the Commonwealth within 28 days of the date of these orders.
5.Pursuant to s 546(1) of the Act, the Second Respondent pay a pecuniary penalty of $2,664.00 to the Commonwealth within 28 days of the date of these orders.
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 HUMPHREYS
Introduction
This judgement concerns the appropriate penalties to be imposed on the first and second respondents following admissions contained in a Statement of Agreed Facts as to the following:
a. R and A Barbers Zone Pty Ltd (“the first respondent”) failed to comply with two Compliance Notices given to it on 5 May 2021, pursuant to s 716(5) of the Fair Work Act 2009 (Cth) (“the Act”); and
b. The second respondent, Mr Arsin Yousif, was involved within the meaning of s 550(2) of the Act in the contraventions of the first respondent, thereby contravening s 716(5) of the Act on two occasions.
Background
On 11 November 2020, the former employee of the first respondent, Mr Dalfar Saqat (“the employee”) approached the Fair Work Ombudsman (“FWO”) claiming that he was engaged as a full-time apprentice with the first respondent. The employee claimed that he was paid a flat rate between $380-$600 for all hours worked in one week and that he was not paid his accrued annual leave when his employment ended on 12 September 2020.
Following an investigation, the FWO formed a reasonable belief that the respondent had contravened:
a. Section 90(2) of the Act and Clauses 17,31.2(c) and 33.3(b)(i) of the Hair and Beauty Industry Award 2010 (“the Award”) by failing to pay the employee his minimum wage, penalty rates for Saturdays and accrued annual leave loading including loading on termination; and
b. Section 789GD of the Act by failing to ensure the wage condition was satisfied in respect of the employee.
The Compliance Notices required the first respondent to calculate and rectify any underpayments to the employee by 15 June 2021 and to provide the FWO with evidence of compliance by 22 June 2021. The first respondent did not take any steps to comply with the Compliance Notices by the due dates.
Following a request for further time, the first respondent was allowed until 13 July 2021 to comply with the Compliance Notices and provide evidence of that compliance.
On 27 January 2022, due to the continuing non-compliance of the first respondent with the Compliance Notices, these proceedings were commenced. On 6 October 2022, the first respondent rectified the non-compliance with the Compliance Notices.
The Law in Relation to Penalty Under the Act
The Court has a broad discretion as to penalty. In Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [71] it was stated that the Court should fix a penalty “it considers fairly and reasonably to be appropriate to protect the public interest from future contraventions of the Act”. Further, at [10] and [12], the High Court stated that the penalty must not exceed what is “reasonably necessary to achieve the purpose of section 546: the deterrence of future contraventions of a like kind by the contravener and others”.
In Fair Work Ombudsman v NSH North Pty Ltd t/as New Shanghai Charlestown [2017] FCA 1301 Bromwich J summarised how the discretion is to be approached at [36], as follows:
1. Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
2. Consider whether each separate contravention should be dealt with independently or with some degree of aggregation for those contraventions arising out of a course of conduct, noting that s 557 of the FW Act provides that two or more contraventions of a given civil remedy provision are to be taken to be a single contravention if committed by the same person and arising out of a course of conduct by that person.
3. Consider whether there should be further adjustment to ensure that, to the extent of any overlap between groups of separate aggregated contraventions, there is no double penalty imposed, and that the penalty is an appropriate response to what each respondent did.
4. Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
5. Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO (as permitted by Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; 258 CLR 482 (CFMEU Civil Penalties Case) at [64]) and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary: see Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14 at [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; 165 FCR 560 at [23]. [71] and [102].
The purpose of a civil penalty is primarily, if not wholly, promoting the public interest in compliance with the laws that have been contravened, and it does not engage principles of retribution or rehabilitation: (see; Fair Work Ombudsman v Nobrace Centre Pty Ltd (in Liquidation)(No 2) [2019] FCCA 2970 per Kelly J at [65] (“Nobrace”). As the principles of retribution or rehabilitation are not involved in the determination of a civil penalty, this intensifies the focus of a civil penalty determination on issues of specific and general deterrence: (see; Nobrace at [66]).
The Act does not set out any mandatory criteria, inclusive or exclusive, that the Court must consider when determining whether to impose a penalty or the amount of any penalty: (see; Canturi v Sita Coaches Pty Ltd (2002) 116 FCR 276 at [88]). The choice of penalty must be guided by the “individual circumstances of a case, not by a line-by-line comparison with another case”: (see; Australian Ophthalmic Supplies Pty Ltd v McAlary‑Smith (2008) 165 FCR 560 at [12]). The process is an intuitive one by the Court and not an application of a scientific process: (see; Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at [60]-[63]).
In Mason v Harrington Corporation Pty Ltd [2007] FMCA 7, Mobray FCM set out what is a now well accepted set of factors relevant in assessing a pecuniary penalty. They are as follows:
a) the nature and extent of the conduct which led to the breaches;
b) the circumstances in which the conduct took place;
c) the nature and extent of any loss sustained as a result of the breaches;
d) whether there has been similar previous conduct by the Respondents;
e) whether the breaches were properly distinct or arose out of one course of conduct;
f) the size of the business enterprise involved;
g) whether or not the breaches were deliberate;
h) whether senior management was involved in the breaches;
i) whether the party committing the breach had exhibited contrition;
j) whether the party committing the breach had taken corrective action;
k) whether the party committing the breach had cooperated with enforcement authorities;
l) the need to ensure compliance with minimum standards by provision of an effective means for the investigation and enforcement of employee entitlements; and
m) the need for specific and general deterrence.
Merkel J in Seven Network (Operations) Pty Ltd v Communications, Electrical, Electronic, Energy Information, Postal, Plumbing and Allied Services Union of Australia (2001) 110 IR 372 set out some guiding considerations for the Court at 374:
… matters to be taken into account in determining the appropriate penalty include the cost of the contravention, deterrence, the flagrancy and deliberateness of the breach, the offender’s past record of behaviour and any contrition displayed by the offender.
Multiple Contraventions and Course of Conduct
In respect of the first respondent, while there were two failures to comply with the compliance notices issued to it and to contraventions of s 716(5) of the Act, it was submitted in this case there were common elements in that the Compliance Notices were given to the first respondent on the same date along with a single covering letter for both Notices. Both notices related to the same employee and were the result of a single request for assistance made by that employee to the FWO.
For these reasons, the FWO submits it would be appropriate for a single penalty to be imposed in respect of the two contraventions of s 716(5) of the Act. The Court accepts this submission noting that each of the contraventions arises out of a single course of conduct by the first respondent. For the same reason, it is appropriate to impose only a single penalty in respect of the second respondent.
Factors in relation to Penalty
General and Specific Deterrence
On behalf of the FWO, it was submitted that the hair and beauty services industry is one where in relation to disputes received by the FWO, approximately 39.6% come from young workers and 18% come from visa holders. Contraventions in relation to termination, wages and conditions, underpayment of hourly rates, and annual leave over particular concern accounting for up to 15% of all disputes in this industry.
Compliance notices are an important tool for the FWO and compliance with such notices avoids the need for litigation or the imposition of penalties. Thus, penalties for non-compliance should be set at a level which demonstrates there are serious consequences for failing to comply with a compliance notice. A meaningful penalty will send a message to other employers in the industry to take timely action to comply with notices issued by the FWO.
In terms of specific deterrence, it was noted that the first respondent remains registered and the business continues to operate with the second respondent continuing to have responsibility for employing staff or overseeing other apprentices’ entitlements in the future as its Director shareholder and secretary. It was submitted that the penalty imposed should contain a sufficient “sting or burden” that the respondents will “seek to avoid the risk of subjection to future penalties’: (see; Australian Building and Construction Commissioner v J Hutchinson Pty Ltd T/A Hutchinson Builders [2019] FCA 667 at [15]).
Nature, circumstances and deliberateness of the contravening conduct
It was submitted the respondents were on notice from as early as 31 May 2021 of the due date for compliance with the Compliance Notices and that a failure to do so may lead to the FWO commencing proceedings in this Court.
The first respondent admits it did not have a reasonable excuse for the non-compliance and that it did not take the steps required to comply with the Notices as at 15 June 2021.
On behalf of the FWO, it was submitted that Fair Work Inspector Mackie engaged in extensive communications with the second respondent and the first respondent’s accountant regarding the non-compliance and encouraged them to take action to comply with issues set out in the Compliance Notices. The failure to comply with the compliance notices demonstrates serious disregard by the first respondent of its obligations under the Act and the authority of the FWO as a regulator of Commonwealth workplace laws.
In this case, the loss involved a foreign national working in Australia pursuant to a Humanitarian Visa. The Court is of the view that the employee was a particularly vulnerable employee who, it appears, was taken advantage of by the first and second respondents. The circumstances of the employee are such that the non-compliance should attract a higher penalty that perhaps otherwise might be the case.
The Nature and Extent of the Loss
It was submitted that the employee was directly impacted by the failure to comply with a Compliance Notices, because he was denied a significant sum of wages and superannuation contributions. It was not until 6 October 2022, more than 16 months after the first respondent was required to take specific action, that the employee received his full entitlements. It was further submitted that there was a public loss occasioned by the need to commence proceedings in this Court in order to affect compliance and the payment to the employee of his entitlements.
Reference was made to Fair Work Ombudsman v Soma Kitchen Pty Ltd and Anor (No 2) [2020] FCCA 2583 at [39] where the following was said:
… the purpose of s.716 is to provide an alternative to litigation. That is, it is designed to prevent litigation. Litigation is timely and expensive. It is also not controversial that Court resources are limited and this Court actively promotes alternative resolution methods in order to reduce unnecessary expenditure. Here, that purpose has been systematically undermined.
Compliance with Minimum Standards
One of the principal purposes of the Act is to provide a guaranteed safety net of fair relevant and enforceable minimum terms and conditions for all employees. In failing to comply with minimum terms and conditions, the respondents prioritise their own interests at the expense of the employee’s minimum entitlements. The efficacy statutory notices, such as compliance notices, will be hindered or made redundant if recipients perceive that a failure to comply carries no meaningful consequences.
Size and Circumstances of the Business
No evidence has been supplied that the non-compliance with the Compliance Notices were as a result of financial hardship arising from the COVID-19 pandemic or that the respondents would be unable to meet any penalty that would otherwise be appropriate.
In any event, it is well established that the size and circumstances of the employer do not exculpate contraventions of workplace laws and that a capacity to pay a penalty will be of less relevance than general deterrence: (see; Glenn Jordan v Mornington Inn Proprietary Limited [2007] FCA 1384 at [99].
Corrective Action, Co-operation and Contrition
The Court has accepted that more weight should be placed on cooperation that is ‘meaningful, active or early’: (see; Fair Work Ombudsman v Pioneer Personnel Pty Ltd [2017] FCCA 3223 at [47]). The FWO accepts that, by admitting the contraventions and making a full payment of the agreed underpayment amount to the employee after these proceedings were commenced the respondents have reduced the complexity of the proceedings and that a discount of 20% on the penalty that might otherwise have been imposed is appropriate.
The Court notes however, that the corrective action was taken only after proceedings in this Court were commenced. In these circumstances, the discount that might otherwise have been applied had corrective action been taken earlier must be reduced.
Recommendation as to Penalty by the FWO
Based on the penalty factors outlined above, the applicant initially submitted that the following penalty ranges are appropriate:
a. First Respondent R and A Barbers: Contravention of s 716(5) of the Act non-compliance with two Compliance Notices, maximum Penalty of $33,000 for each contravention. Recommended range (after course of conduct grouping) 50% -60% of maximum $16,650 - $19,980. Allowing a 20% discount for rectification: Total (after 20% discount) $13,320-$15,984.
b. Second Respondent, Mr Yousif: Award Compliance Contravention Notice non-compliance. Maximum penalty $6,660. Recommended range 50% - 60%, $3,330- $3,996: Total (after 20% discount) $2,664 - $3,197.
In joint submission filed 9 January 2023, the parties submitted by consent that the appropriate penalties are as follows:
a) $13,336.00 in respect of the first respondent; and
b) $2,664 in respect of the second respondent.
Disposition and Orders
The Court has considered all relevant factors set out above. The Court is of the view that the recommended ranges are appropriate in all of the circumstances and the joint submission.
The Court is of a view however, that a clear message needs to be sent to employers that there will be a cost that outweighs any benefit in underpaying employees their award entitlements.
The Court considers the appropriate penalty for the first respondent is $13,336.00. Given the role of the second respondent in the contraventions the appropriate penalty is $2,664.00.
The orders of the Court are those set out at the beginning of this judgement.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Humphreys. Deputy Associate:
Dated: 30 January 2023
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