Fair Work Ombudsman v Raying Holding Pty Ltd and Anor (No.3)
[2018] FCCA 668
•21 March 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v RAYING HOLDING PTY LTD & ANOR (No.3) | [2018] FCCA 668 |
| Catchwords: INDUSTRIAL – Liability as accessory to employer’s contraventions of the Fair Work Act 2009 – sham contracting – underpayment of employees – failure to keep records – failure to provide pay slips – pecuniary penalties – relevant considerations – course of conduct. |
| Legislation: Crimes Act 1914, s.4AA |
| Fair Work Ombudsman v Raying Holding Pty Ltd & Anor [2015] FCCA 36 Fair Work Ombudsman v Raying Holding Pty Ltd & Anor (No.2) (2017) 324 FLR 289 Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 Kelly v Fitzpatrick (2007) 166 IR 14 McIver v Healey [2008] FCA 425 Johnson v The Queen (2004) 78 ALJR 616 Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Rocky Holdings Pty Limited v Fair Work Ombudsman (2014) 221 FCR 153 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | RAYING HOLDING PTY LTD ACN 144 614 175 |
| Second Respondent: | ZU NENG SHI |
| File Number: | SYG 511 of 2014 |
| Judgment of: | Judge Cameron |
| Hearing date: | 8 March 2018 |
| Date of Last Submission: | 8 March 2018 |
| Delivered at: | Sydney |
| Delivered on: | 21 March 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr D. Chin |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| No appearance by or on behalf of the First Respondent |
| Solicitors for the Second Respondent: | Ms Y. Zhang of Ren Zhou Lawyers |
DECLARATIONS
The second respondent contravened s.357(1) of the Fair Work Act 2009 (“FW Act”) by reason of being involved in, for the purposes of s.550 of the FW Act, the first respondent’s contravention referred to in declaration 1(a) made on 15 January 2015 in respect of the first respondent’s misrepresentation to Wei Hua Huang that the contract under which he was engaged to perform work for the first respondent was a contract for services under which he would perform services as an independent contractor.
The second respondent contravened s.357(1) of the FW Act by reason of being involved in, for the purposes of s.550 of the FW Act, the first respondent’s contravention referred to in declaration 1(a) made on 15 January 2015 in respect of the first respondent’s misrepresentation to Daying Quan that the contract under which he was engaged to perform work for the first respondent was a contract for services under which he would perform services as an independent contractor.
The second respondent contravened s.45 of the FW Act by reason of being involved in, for the purposes of s.550 of the FW Act, the first respondent’s contravention referred to in declaration 1(b) made on 15 January 2015 in respect of the first respondent’s failure to provide Kwok To Li, Kwok Chi Sum and Ling Hui Wang with their basic rate of pay in contravention of cl.19 of the Meat Industry Award 2010 (“Modern Award”).
The second respondent contravened s.45 of the FW Act by reason of being involved in, for the purposes of s.550 of the FW Act, the first respondent’s contravention referred to in declaration 1(c) made on 15 January 2015 in respect of the first respondent’s failure to provide Kwok To Li, Kwok Chi Sum, Ling Hui Wang and Jou Chian with their casual loading in contravention of cl.15.9 of the Modern Award.
The second respondent contravened s.45 of the FW Act by reason of being involved in, for the purposes of s.550 of the FW Act, the first respondent’s contravention referred to in declaration 1(d) made on 15 January 2015 in respect of the first respondent’s failure to pay Wei Hua Huang, Daying Quan, Kwok To Li, Ho Hsuan Ching, Kwok Chi Sum, Ling Hui Wang, Hao-Cyun Sung, Po Lin Chen, Chun Jung Chiang and Jou Chian their applicable overtime rates for every hour worked as overtime in contravention of cl.36.1(a) of the Modern Award.
The second respondent contravened s.44(1) of the FW Act by reason of being involved in, for the purposes of s.550 of the FW Act, the first respondent’s contravention referred to in declaration 1(e) made on 15 January 2015 in respect of the first respondent’s failure to pay Wei Hua Huang and Daying Quan for absences on public holidays during the period 3 October 2011 to 17 May 2013.
The second respondent contravened s.535(1) of the FW Act by reason of being involved in, for the purposes of s.550 of the FW Act, the first respondent’s contravention referred to in declaration 1(f) made on 15 January 2015 in respect of the first respondent’s failure to make and keep employee records which included the information prescribed by regs.3.33(2), 3.34, 3.36(1) and 3.37 of the Fair Work Regulations 2009.
The second respondent contravened s.536(1) of the FW Act by reason of being involved in, for the purposes of s.550 of the FW Act, the first respondent’s contravention referred to in declaration 1(g) made on 15 January 2015 in respect of the first respondent’s failure to provide Kwok To Li, Ho Hsuan Ching, Kwok Chi Sum, Ling Hui Wang, Hao-Cyun Sung, Po Lin Chen, Chun Jung Chiang and Jou Chian with pay slips.
ORDERS
The second respondent pay penalties totalling $43,000 for his involvement in the first respondent’s contraventions of the FW Act.
The penalties be paid to the Consolidated Revenue Fund of the Commonwealth within 28 days.
The applicant have liberty to apply on seven days’ notice in the event that the preceding orders are not complied with.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 511 of 2014
| FAIR WORK OMBUDSMAN |
Applicant
And
| RAYING HOLDING PTY LTD ACN 144 614 175 |
First Respondent
| ZU NENG SHI |
Second Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The first respondent (“Raying Holding”) operated a labour hire business which supplied employees to an abattoir in Scone, New South Wales. The second respondent, Mr Shi, was at all material times, principally responsible for the overall direction, management and supervision of Raying Holding’s operations.
On 15 January 2015 a default judgment was entered against Raying Holding (Fair Work Ombudsman v Raying Holding Pty Ltd & Anor [2015] FCCA 36 (“first judgment”)) and declarations made that Raying Holding had committed the following contraventions of the Fair Work Act 2009 (“FW Act”):
a)s.357 of the FW Act by misrepresenting to Wei Hua Huang and Daying Quan that the contract under which each of them was engaged to perform work for Raying Holding was a contract for services under which each of them would perform services as an independent contractor;
b)s.45 of the FW Act (by contravening cl.19 of the Meat Industry Award 2010 (“Modern Award”)), by failing to provide Kwok To Li, Kwok Chi Sum and Ling Hui Wang their basic rate of pay;
c)s.45 of the FW Act (by contravening cl.15.9 of the Modern Award), by failing to provide Kwok To Li, Kwok Chi Sum, Ling Hui Wang and Jou Chian their casual loading;
d)s.45 of the FW Act (by contravening cl.36.1(a) of the Modern Award), by failing to pay Wei Hua Huang, Daying Quan, Kwok To Li, Ho Hsuan Ching, Kwok Chi Sum, Ling Hui Wang, Hao-Cyun Sung, Po Lin Chen, Chun Jung Chiang and Jou Chian (“Employees”) their applicable overtime rates for every hour worked as overtime;
e)s.44 of the FW Act, by failing to pay Wei Hua Huang and Daying Quan for absences on public holidays during the period 3 October 2011 to 17 May 2013;
f)s.535(1) of the FW Act, by failing, during at least the period 12 March 2011 to 5 July 2013, to make and keep employee records which included the information prescribed by regs.3.33(2), 3.34, 3.36(1) and 3.37 of the Fair Work Regulations 2009 (“FW Regulations”); and
g)s.536(1) of the FW Act, by failing to provide Kwok To Li, Ho Hsuan Ching, Kwok Chi Sum, Ling Hui Wang, Hao-Cyun Sung, Po Lin Chen, Chun Jung Chiang and Jou Chian (“Casual Employees”) with pay slips during at least the period 4 November 2012 to 5 July 2013.
On 10 February 2015 Raying Holding was deregistered and proceedings against it were stayed.
In a judgment delivered on 12 September 2017 (Fair Work Ombudsman v Raying Holding Pty Ltd & Anor (No.2) (2017) 324 FLR 289 (“second judgment”)), I found that between 12 March 2011 and 5 July 2013 Mr Shi had been involved, within the meaning of s.550(2)(c) of the FW Act, in Raying Holding’s contraventions particularised in [2(a)-(e) and (g)] above, and made the same finding concerning [2(f)] above in respect of the period 14 March 2011 to 5 July 2013. Based on those findings, Mr Shi is taken to have contravened the same provisions as Raying Holding contravened in the above periods.
This stage of the proceeding concerns the imposition of pecuniary penalties on Mr Shi pursuant to s.546(1) of the FW Act. The applicant (“Ombudsman”) also seeks declarations that Mr Shi was involved in Raying Holding’s contraventions.
LEGISLATION
The provisions of the FW Act which Mr Shi was found to have contravened are set out in the second judgment at [7]-[14].
Section 539 of the FW Act provides that ss.44(1), 45, 357(1), 535(1) and 536(1) are civil remedy provisions. Sections 539(2) and 546(2) provide that the maximum pecuniary penalty the Court may impose for each contravention of ss.44(1), 45 and 357(1) is 60 penalty units for an individual. For a contravention of ss.535(1) and 536(1), ss.539(2) and 546(2) provide for a maximum pecuniary penalty of 30 penalty units for an individual. From 1 July 2009 a penalty unit was worth $110 and from 28 December 2012 until 30 July 2015 a penalty unit was worth $170: s.4AA Crimes Act 1914.
APPLICANT’S EVIDENCE
The Ombudsman relied on the statement of agreed facts (“SOAF”) filed on 31 July 2015 and summarised in the second judgment at [18]-[33].
She also relied on the affidavits of Paula Cunneen affirmed 8 July 2015, Monique Tudman affirmed 13 July 2015, Emma Travers affirmed 7 July 2015, Kim Huang affirmed 14 July 2015 and Grant Courtney affirmed 29 July 2015. These affidavits have also been summarised or referred to in the second judgment at [34]-[44] and [54].
In addition, the Ombudsman relied on the affidavits of Yim Fong Mak affirmed 14 July 2015 and Lucy Madden affirmed 20 July 2015 on the basis that they were already before the Court. The former affidavit annexed a transcript of interview between Ms Cunneen and Wei Hua Huang, one of the Employees. Ms Madden’s affidavit had not been read at the liability hearing and so I have not had regard to it.
SECOND RESPONDENT’S EVIDENCE
Relevantly for this part of the proceeding, Mr Shi swore or affirmed (it was not specified which) an affidavit on 7 December 2017. Mr Shi deposed that he was not a true director of Raying Holding and had not been part of its day-to-day management, being, instead, involved “to get contracts” for the company. Mr Shi did accept, however, that he might have been responsible for Raying Holding’s “mistake”, given his role in acquiring business for the company. He deposed that he had done his best to negotiate a better deal for Raying Holding at the Scone abattoir so that, in turn, the workers of Raying Holding could receive better pay.
Mr Shi deposed that he had tried to assist settlement of the dispute between Raying Holding and the “Union” (Australasian Meat Industry Employees Union (“AMIEU”)) and had co-operated with “Fairwork” (the applicant) once the Ombudsman became involved in the matter. He also deposed that Raying Holding made full payment to its workers as soon as the Ombudsman asked it to.
CONSIDERATION
Drawing on the Ombudsman’s written submissions, I conclude that the question of penalty is to be determined as follows:
a)the Court is to identify the separate contraventions involved. Each contravention of a separate obligation in the Modern Award, FW Act and FW Regulations is a separate contravention: Gibbs v Mayor, Councillors and Citizens of City of Altona (1992) 37 FCR 216 at 223; Kelly v Fitzpatrick (2007) 166 IR 14 at 17 [11]; McIver v Healey [2008] FCA 425 at [16];
b)the Court should consider whether contraventions resulting from any particular courses of conduct should be treated as a single contravention under s.557(1) of the FW Act;
c)to the extent that two or more contraventions have common elements, this should be taken into account when considering an appropriate penalty for those contraventions: Johnson v The Queen (2004) 78 ALJR 616 at 618 [4]-[5]; Fair Work Ombudsman v Lifestyle SA Pty Ltd [2014] FCA 1151 at [61]-[63]. A contravener should not be penalised twice for what is, in substance, the same conduct. This is distinct from the totality principle: Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383 at 396-398 [41]-[46] (per Stone and Buchanan JJ);
d)the Court should determine an appropriate penalty to impose in respect of each contravention (whether a single contravention, a course of conduct or group of contraventions) having regard to all of the circumstances of the case; and
e)having fixed an appropriate penalty for each contravention or group of contraventions, the Court should consider the aggregate penalty to determine whether it is an appropriate response to the contravening conduct: Kelly v Fitzpatrick at 21-22 [30]; Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560.
Turning to the criteria which are to be considered when setting penalties, it was said by Tracey J in Kelly v Fitzpatrick at 18-19 [14] that in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7 Mowbray FM had identified “a non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty”. Justice Tracey adopted those considerations, describing them as follows:
· The nature and extent of the conduct which led to the breaches.
· The circumstances in which that conduct took place.
· The nature and extent of any loss or damage sustained as a result of the breaches.
· Whether there had been similar previous conduct by the respondent.
· Whether the breaches were properly distinct or arose out of the one course of conduct.
· The size of the business enterprise involved.
· Whether or not the breaches were deliberate.
· Whether senior management was involved in the breaches.
· Whether the party committing the breach had exhibited contrition.
· Whether the party committing the breach had taken corrective action.
· Whether the party committing the breach had co-operated with the enforcement authorities.
· The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements and
· The need for specific and general deterrence.
Considerations relevant to this case are:
a)whether the breaches were properly distinct or arose out of the one course of conduct;
b)the nature and extent of the conduct which led to the breaches;
c)the circumstances in which that conduct took place;
d)the nature and extent of any loss or damage sustained as a result of the breaches;
e)whether or not the breaches were deliberate;
f)whether the party committing the breach has exhibited contrition;
g)whether the party committing the breach has taken corrective action;
h)whether the party committing the breach has co-operated with the enforcement authorities;
i)compliance with minimum standards; and
j)the need for specific and general deterrence.
Whether the breaches were properly distinct or arose out of the one course of conduct
Notwithstanding Mr Shi’s submissions as to how a course of conduct is to be characterised, related breaches of a particular award term are likely to be considered to be one course of conduct whereas breaches of various award provisions which are in turn all contraventions of a particular provision of the FW Act, such as s.45, generally cannot be so considered: Gibbs v Mayor, Councillors and Citizens of the City of Altona (1992); Rocky Holdings Pty Ltd v Fair Work Ombudsman (2014) 221 FCR 153.
In this case I conclude that the breaches of cls.15.9, 19 and 36(1)(a) of the Modern Award each represented a single course of conduct such that Mr Shi should be subject to only one penalty for his involvement in Raying Holding’s repeated contraventions of each of those provisions. I note that Mr Shi abandoned his submission that the breaches of s.357(1) of the FW Act in respect of Mr Huang and Mr Quan should be considered to be one course of conduct.
Taking into account my conclusions concerning courses of conduct, I find that there were eight contraventions which can attract pecuniary penalties. They are identified later in these reasons in the table particularising the penalties to be imposed.
The nature and extent of the conduct which led to the breaches
The nature and extent of the relevant conduct was discussed at length in the second judgment.
The circumstances in which that conduct took place
Again, the relevant circumstances have been discussed at length in the second judgment. They need not be canvassed further now other than to highlight a few. The first is that the Employees were vulnerable to exploitation and the second is that they were exploited in that they were paid less than their entitlements. The third is that the interests of the revenue were compromised by Raying Holding’s conduct.
The nature and extent of any loss or damage sustained as a result of the breaches
As recorded in the second judgment, as a result of the contraventions, Raying Holding underpaid the Employees the following amounts:
Employee
Total Underpayment
Wei Hua Huang
$4,102.35
Daying Quan
$10,257.77
Kwok To Li
$4,720.15
Kwok Chi Sum
$3,038.63
Jou Chian
$2,831.59
Ho Hsuan Ching
$7,533.52
Hao-Cyun Sung
$6,003.19
Chun Jung Chiang
$1,608.02
Ling Hui Wang
$1,231.86
Po Lin Chen
$347.41
TOTAL
$41,674.49
Whether or not the breaches were deliberate
In the second judgment I found that at all relevant times Mr Shi was aware that workers in the meat industry were covered by an award and that any ignorance on his part of details of the Modern Award was the result of wilful blindness on his part. I also found that Mr Shi knew, at the time, that the contracts proposed to Messrs Huang and Quan were contracts for services rather than contracts of employment. I further found that Mr Shi knew the facts which demonstrated that the prescribed employee records were not kept for the Employees and that pay slips were not given to the Casual Employees.
The breaches were deliberate.
Whether the second respondent has exhibited contrition
In his affidavit of 7 December 2017 Mr Shi avoided expressions of contrition. The most he was willing to say was:
I accepted that I might have responsibility for Raying’s mistake because I was in such situation that I got business for Raying. [sic]
Mr Shi has not acknowledged and taken responsibility for his unlawful conduct, misleadingly painting himself as a victim of circumstance. This attitude is really only a continuation of the account which Mr Shi pressed on the Court in the previous stage of this case, namely that he was ignorant of material matters, claims which were rejected.
Whether the second respondent has taken corrective action
The parties agreed before the hearing which led to the second judgment that the amounts due to the Employees had been paid. Also, once the AMIEU became involved, Raying Holdings and Mr Shi took steps to regularise the employment and remuneration of the Employees.
There is otherwise no evidence of corrective action.
Mr Shi’s evidence was that he is in the process of retiring and that his son Michael has assumed his position. I infer that Mr Shi has been working at Raying Holding for much of the period between the point Raying Holding came to the attention of the AMIEU and the Ombudsman and the present day. He gave no indication of any steps having been taken at his direction to ensure that contraventions of the sort seen in this matter were not repeated by Raying Holding or any other business in which he had managerial responsibilities.
Whether the second respondent has co-operated with the enforcement authorities
Ms Cunneen’s affidavit indicates that Mr Shi did co-operate with the Ombudsman’s investigation and entered into a statement of agreed facts concerning Raying Holding’s contraventions and his own role in that company. However, importantly, he disputed unsuccessfully the Ombudsman’s allegations concerning his knowledge of important matters, including the relevant award.
Discounts for co-operation are not allowed simply because enforcement proceedings have been made less complicated and less expensive by appropriate concessions. The benefit of such a discount should be reserved for cases where it can be fairly said that an admission of liability: (a) has indicated an acceptance of wrongdoing and a suitable and credible expression of regret; and/or (b) has indicated a willingness to facilitate the course of justice: Mornington Inn v Jordan (2008) at 405 [76]. I do not believe that such conclusions would be appropriate in this case.
Compliance with minimum standards
The failure to keep proper records and to provide employees with pay slips strikes at the heart Australia’s industrial law system because it compromises employees’ ability to monitor their employers’ compliance with industrial laws and the regulator’s ability to investigate breaches of industrial laws. The fact that an employer may mischaracterise an employee as an independent contractor goes only some way to mitigating the significance of breaches of ss.535(1) and 536(1) of the FW Act and would, in any case, require some evidence of the reasonableness of such a misunderstanding before it could be considered a mitigating factor to be taken into account in the setting of a penalty. No such evidence exists in this case.
The need for specific and general deterrence
As Mr Shi was not required for cross-examination on his affidavit of 7 December 2017, I will accept his evidence that he is retiring from his position with Raying Holding and, presumably, from the workforce more generally. On that basis there is no need for specific deterrence.
However, the need for the penalties which will be imposed to include an element for general deterrence is unaffected by Mr Shi’s retirement. This was a case involving vulnerable workers from overseas with a limited grasp of the English language (evidenced by Raying Holding’s employment of interpreters, referred to at para.24 of Mr Courtney’s affidavit, and supported by Mr Shi’s own acknowledged weakness in English) and, in most cases, what must be inferred to have been little or no understanding of the Australian system of industrial instruments, laws and institutions, being generally recent, temporary arrivals. Also, it is not irrelevant that Raying Holding organised the Employees’ accommodation, as revealed by the transcript of Mr Huang’s interview with Ms Cunneen, annexed to Mr Mak’s affidavit, as well as their transport to and from the abattoir as Mr Shi indicated in the record of his conversation with Mr Courtney recorded at para.24 of the latter’s affidavit. These matters suggest further isolation of the Employees from the Australian community as well as an element of practical control over them by Raying Holding and, by implication, Mr Shi.
Such circumstances are too easy to repeat and the Court should express the law’s disapproval of practices which take advantage of vulnerable workers in that way.
PENALTIES
In addition to the matters discussed above, I have regard to the fact that until 28 December 2012, the value of a penalty unit was $110, rather than $170 as it was at the end of the relevant period.
I do not consider that it is appropriate to apply any discount to the penalties which would otherwise be appropriate to be imposed, which I find to be:
| Provision | Contravention | Employees affected | Contravention period | Penalty |
| FW Act s.357(1) | Misrepresenting employment as independent contracting arrangement | Wei Hua Huang | March 2011 to June 2012 | $4,500 |
| FW Act s.357(1) | Misrepresenting employment as independent contracting arrangement | Daying Quan | August 2011 to October 2012 | $4,500 |
| FW Act s.45 | Minimum wages Failing to pay the minimum rate of pay pursuant to cl.19 of the Modern Award | Kwok To Li Kwok Chi Sum | 4 November 2012 to 5 July 2013 | $6,000 |
| FW Act s.45 | Casual loading Failing to pay casual loading pursuant to cl.15.9 of the Modern Award | Kwok To Li Kwok Chi Sum Ling Hui Wang | 4 November 2012 to 5 July 2013 | $6,000 |
| FW Act s.45 | Overtime Failing to pay overtime rates pursuant to cl.36.1(a) of the Modern Award | The Employees | 30 October 2011 to 5 July 2013 | $8,000 |
| FW Act s.44(1) | Public holidays Failure to pay employees for being absent from work on a public holiday | Wei Hua Huang | 3 October 2011 to 17 May 2013 | $5,000 |
| FW Act s.535(1) | Record keeping Failure to keep records with information prescribed by regs.p3.33(2), 3.34, 3.36(1) and 3.37 of the FW Regulations | The Employees | 14 March 2011 to 5 July 2013 | $4,500 |
| FW Act s.536(1) | Pay slips Failure to issue pay slips | The Casual Employees | 4 November 2012 to 5 July 2013 | $4,500 |
| TOTAL | $43,000 |
Those penalties total $43,000. I believe that such a total is just and appropriate.
That amount is to be paid to the Commonwealth within twenty-eight days.
I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Judge Cameron
Date: 21 March 2018
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