Fair Work Ombudsman v RS and JS Pty Ltd (in Liq)

[2017] FCCA 1210

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v RS & JS PTY LTD (IN LIQ) & ANOR [2017] FCCA 1210

Catchwords:
INDUSTRIAL LAW – Fair work – failure to comply with compliance notice – First Respondent in liquidation – Second Respondent director of First Respondent – where Second Respondent was not the employer when the breaches occurred – where Second Respondent had no knowledge of the breaches – where compliance notice issued at a time when Second Respondent liable director of company – pecuniary penalty imposed.

Legislation:

Fair Work Act 2009, s.716(5)

Cases cited:

Construction, Forestry, Mining and Energy Union v Hamberger (2003) 127 FCR 309

Hadgkiss v Sunland Construction (Qld) Pty Ltd [2006] FCA 1566

John Holland Pty Ltd v Maritime Union of Australia (No.2) (2010) 192 IR 431

Kelly v Fitzpatrick (2007) 166 IR 14

Mason v Harrington Corporation Pty Ltd [2007] FMCA 7

McDonald v Australian Building & Construction Commissioner [2011] FCAFC 29

Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72

Stuart-Mahoney v Construction, Forestry, Mining and Energy Union (2008) 177 IR 61

Applicant: FAIR WORK OMBUDSMAN

First Respondent: RS & JS PTY LTD (IN LIQ) (ACN: 156 399 754)

Second Respondent: HARI PAL

File Number: MLG 658 of 2016

Judgment of: Judge Hartnett

Hearing date: 17 May 2017

Delivered at: Melbourne

Delivered on: 7 June 2017

REPRESENTATION

Solicitor acting as Counsel for the Applicant: Ms Ablett

Solicitors for the Applicant: Office of the Fair Work Ombudsman

Solicitor acting as Counsel for the Second Respondent: Mr Freadman

Solicitors for the Second Respondent: On Target Lawyers

THE COURT DECLARES THAT the Second Respondent, Hari Pal, was involved, within the meaning of sub-s.550(2) of the Fair Work Act 2009 (Cth) (‘the Act’) in the contravention of sub-s.716(5) of the Act by the First Respondent as set out in Orders made by the Court on 13 September 2016.

UPON THE SECOND RESPONDENT UNDERTAKING to repay the employees, Ms Manpreet Kaur and Ms Ramandeep Gill, the balance of unpaid wages outstanding and in the sum of $3,582.91 by way of $500 monthly instalments

THE COURT ORDERS THAT:

1. Pursuant to s.546(1) of the Act the Second Respondent pay pecuniary penalties (‘the penalties’) in respect of its contravention of sub-s.716(5) in the amount of $500.

2. Pursuant to s.546(3) of the Act penalties be paid into the Consolidated Revenue Fund of the Commonwealth within 120 days of the date of this order.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 658 of 2016

FAIR WORK OMBUDSMAN

Applicant

And

RS & JS PTY LTD (IN LIQ) (ACN: 156 399 754)

First Respondent

HARI PAL

Second Respondent

REASONS FOR JUDGMENT

1. These reasons can be stated in short compass. The proceedings are most unfortunate but still proceedings necessary for the Regulator to institute. These reasons go to the contravening conduct of, and imposition of penalties to be imposed on, the Second Respondent. The First Respondent is now a company in liquidation (from 20 September 2016). At the time of liquidation of the First Respondent, the Second Respondent was not a director or shareholder of the First Respondent. By orders made by the Court on 13 September 2016 the First Respondent was ordered, amongst other orders, to pay compensation of $8,082.91 to the Applicant for payment out by the Applicant to the two subject employees in this litigation. Such compensation payments have not been made by the First Respondent employer.

History

1. The Second Respondent was born in India on 3 June 1984. He is aged 33 years. He arrived in Australia in 2005 and became an Australian citizen in February 2013. He married his wife in that year.

2. The First Respondent operated a restaurant called Punjabi Tandoori Corner in Richmond. The First Respondent’s business activities were within the coverage of the Restaurant Industry Award 2010 (‘Modern Award’). The First Respondent employed Ms Manpreet Kaur from 24 October 2014 to 16 January 2015 and Ms Ramandeep Gill from 5 December 2014 to 25 January 2015 (‘employment periods’). Both employees were in Australia on student visas.

3. Ms Kaur and Ms Gill were paid a flat rate of $12.00 gross per hour during their employment periods. The First Respondent did not pay Ms Kaur for 11 hours of work or Ms Gill for 27.45 hours of work during their final week of employment. The First Respondent did not pay Ms Kaur any wages for 31 hours of work performed between 30 October 2014 and 25 November 2014. The First Respondent contravened the following clauses of the Modern Award:-

   a)20.1 (ordinary hours);

   b)13.1 (casual loading);

   c)34.1 (Saturday penalty);

   d)34.1 (Sunday penalty); and

   e)34.1 (public holiday).

4. On 18 August 2015, some seven months after the cessation of the employment of Ms Kaur and Ms Gill, the Second Respondent became the sole director, shareholder and secretary of the First Respondent. He purchased the restaurant business from the First Respondent. The Second Respondent continued in that capacity with the First Respondent until 22 March 2016 when a change of company details form was lodged with the Australian Securities and Investments Commission (ASIC), informing ASIC that Mr Ng Chan Meng was now the sole director and secretary of the First Respondent. Mr Meng's appointment date was backdated to 19 August 2015.

5. A compliance notice was issued to the First Respondent by the Applicant on 16 October 2015. The Compliance Notice required the First Respondent:-

   a)to take specified action to remedy the direct effects of the contraventions, including payment by 13 November 2015 as follows:-

   i)$5,395.10 to Ms Kaur; and

   ii)$2,687.81 to Ms Gill,

   (underpayment amounts); and

   b)to produce reasonable evidence of the First Respondent's compliance with the Compliance Notice, by providing to Inspector Thomas evidence of such payments having been made, by 20 November 2015.

6. The Second Respondent, subsequent to the receipt of the compliance notice by the First Respondent, attempted to transfer the First Respondent business back to the earlier director of the First Respondent, Mr Ravinder Singh. Under Mr Singh’s directorship, the underpayments had occurred and the Fair Work Ombudsman had commenced an investigation. Ultimately, the transfer of the business and company (back to Mr Singh) did not occur.

The proceedings

1. The Applicant relied upon an affidavit of Mr Luke Thomas affirmed 8 December 2017. The Second Respondent relied upon an affidavit affirmed by him on 8 February 2017. Both parties relied upon written submissions filed.

2. The contravention of the First Respondent, and Second Respondent, by virtue of the Second Respondent admitting that he was involved in the contravention within the meaning of sub-s.550(2) of the Act, was a failure to comply with a compliance notice and thus a breach of s.716(5) of the Fair Work Act 2009 (Cth) (‘the Act’). Section 716 is as follows:-

   “FAIR WORK ACT 2009 - SECT 716

   Compliance notices

   Application of this section

   (1)  This section applies if an inspector reasonably believes that a person has contravened one or more of the following:

   (a)  a provision of the National Employment Standards;

   (b)  a term of a modern award;

   (c)  a term of an enterprise agreement;

   (d)  a term of a workplace determination;

   (e)  a term of a national minimum wage order;

   (f)  a term of an equal remuneration order.

   Giving a notice

   (2)  The inspector may, except as provided by subsection (4), give the person a notice requiring the person to do either or both of the following within such reasonable time as is specified in the notice:

   (a)  take specified action to remedy the direct effects of the contravention referred to in subsection (1);

   (b)  produce reasonable evidence of the person's compliance with the notice.

   (3)  The notice must also:

   (a)  set out the name of the person to whom the notice is given; and

   (b)  set out the name of the inspector who gave the notice; and

   (c)  set out brief details of the contravention; and

   (d)  explain that a failure to comply with the notice may contravene a civil remedy provision; and

   (e)  explain that the person may apply to the Federal Court, the Federal Circuit Court or an eligible State or Territory Court for a review of the notice on either or both of the following grounds:

   (i)  the person has not committed a contravention set out in the notice;

   (ii)  the notice does not comply with subsection (2) or this subsection; and

   (f)  set out any other matters prescribed by the regulations.

   Relationship with enforceable undertakings

   (4)   An inspector must not give a person a notice in relation to a contravention if:

   (a)  the person has given an undertaking under section 715 in relation to the contravention; and

   (b)  the undertaking has not been withdrawn.

   Relationship with civil remedy provisions

   (4A)  An inspector must not apply for an order under Division 2 of Part 4-1 in relation to a contravention of a civil remedy provision by a person if:

   (a)  the inspector has given the person a notice in relation to the contravention; and

   (b)  either of the following subparagraphs applies:

   (i)  the notice has not been withdrawn, and the person has complied with the notice;

(ii)  the person has made an application under section 717 in relation to the notice that has not been completely dealt with.

Note:          A person other than an inspector who is otherwise entitled to apply for an order in relation to the contravention may do so.

(4B)  A person who complies with a notice in relation to a contravention of a civil remedy provision is not taken:

(a)  to have admitted to contravening the provision; or

(b)  to have been found to have contravened the provision.

Person must not fail to comply with notice

(5)  A person must not fail to comply with a notice given under this section.

Note:          This subsection is a civil remedy provision (see Part 4-1).

(6)  Subsection (5) does not apply if the person has a reasonable excuse.”

1. A statement of agreed facts was made by the Applicant and the Second Respondent, dated 27 May 2016, and filed in the proceedings.

Consideration

1. The statement of agreed facts was discussed by solicitors for the parties in April 2016, within one month of the initiating of the proceedings. Within six weeks approximately of the proceedings commencing and prior to the signing of the statement of agreed facts, the Applicant published an announcement on the Fair Work website about the First Respondent and the Second Respondent in relation to bad work practices. This publication caused the Second Respondent, as stated in his affidavit of 8 February 2017 at paragraph 31, “a great deal of embarrassment and I fear gave me a bad name within the India community”. That publication was relevantly as follows:-

   “Melbourne restaurant faces Court over failure to respond to backpayment of Indian visa-holders

   19 May 2016

   The former operator of an Indian restaurant at Richmond, in suburban Melbourne, is facing Court for allegedly failing to respond to a request to back-pay thousands of dollars to two former employees.

   The Fair Work Ombudsman has commenced legal action against RS & JS Pty Ltd, which previously owned and operated Konna Indian Cuisine, later renamed Punjabi Tandoori Corner.

   Also facing Court is former company director Hari Pal.

   The Fair Work Ombudsman alleges that two Indian national visa-holders studying in Australia were short-changed a total of more than $8000 for work they performed at the restaurant between October, 2014 and January last year.

   It is alleged the two females were paid a flat rate of $12 an hour for waiting on tables and did not receive penalties when working on weekends, nights and public holidays.

   They were allegedly short-changed $5395 and $2687.

   The Fair Work Ombudsman issued a Compliance Notice to RS & JS Pty Ltd in October last year requiring the underpayment to be rectified, but it was not.

   Fair Work Ombudsman Natalie James says the alleged underpayment was significant given it accumulated over such a short timeframe.

   She says the employer's failure to respond to the Compliance Notice and the involvement of vulnerable overseas workers were factors in the Agency's decision to litigate.

   “We will always look to work with employers to resolve issues co-operatively and voluntarily where we can, but we take a dim view of employers who do not engage with us and deliberately ignore us and their workplace obligations,” she said.

   RS & JS Pty Ltd faces a penalty up to $27,000, while Mr Pal faces a penalty of up to $5400.

   …”

2. In submissions the Court was informed by the Applicant that such a publication is in accordance with usual practice at that stage of proceedings. The Court accepts the publication was damaging to the Second Respondent. Further, it contained no elaboration on the particular circumstances of this particular Respondent.

3. The particular circumstances of the Second Respondent were that he was not the director (nor a shareholder) of the First Respondent when the underpayment amounts arose. So, whilst he did not underpay employees during his time as a director of the First Respondent, he became liable for the behaviour of the First Respondent in relation to a period when he was not involved in, nor had any knowledge of, the underpayments. Further, the Second Respondent was not informed by the First Respondent of any alleged or actual underpayments of employees during the prior operations of the company. He took on his sole directorship absent that knowledge. Nor was the Second Respondent informed by the former director of the First Respondent of the Fair Work Ombudsman’s investigation. The Fair Work Ombudsman informed the Second Respondent that whilst that was so, liability fell with him as the director of the company at the time the compliance notice issued.

4. The complaints to the Fair Work Ombudsman had been made in February 2015. In those complaint forms, the complainants granted the Applicant permission to contact the employer described as Mr Singh.  The investigation commenced at that time. This was many months before the Second Respondent purchased the First Respondent company business. The compliance notice however did not issue until October 2015, eight months after the complaints were lodged. Mr Singh was a director of the First Respondent from at least 24 October 2014 to 18 August 2015. Had the compliance notice issued earlier, the individual responsible, Mr Singh, would have been liable.

5. Whilst left with debts of which he was unaware at the time of purchase of the First Respondent business, and a business with no profitability, the Second Respondent nevertheless commenced to rectify the underpayment amount of $8082.91 by way of $500 monthly instalments from 6 September 2016. He also obtained the services of solicitors and commenced to incur legal costs. As at 8 February 2017 the Second Respondent had forwarded to the Fair Work Ombudsman the sum of $4,500 in rectification of the compliance notice. The sum of $3582.91 remains owing.

6. The Second Respondent was shocked by the underpayments. He liaised with Mr Singh, for Mr Singh to pay the outstanding sums owing. Until January 2016 he thought Mr Singh would pay the amounts owing. In May 2016 he signed the statement of agreed facts.

Penalties

1. The factors to consider in determination of penalties are well known and set out in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick (2007) 166 IR 14 at [14]; Stuart-Mahoney v Construction, Forestry, Mining and Energy Union (2008) 177 IR 61 at [40]; John Holland Pty Ltd v Maritime Union of Australia (No 2) (2010) 192 IR 431 at [27]; McDonald v Australian Building & Construction Commissioner [2011] FCAFC 29 at [15]; Construction, Forestry, Mining and Energy Union v Hamberger (2003) 127 FCR 309 at [51]; and Hadgkiss v Sunland Construction (Qld) Pty Ltd [2006] FCA 1566 at [11].

2. The Second Respondent does not oppose or consent to the imposition of a pecuniary penalty. The Second Respondent submits that if a pecuniary penalty is to be imposed such pecuniary penalty should be in the range of $500-$1,500. This submission is in the context of the Second Respondent's payments toward the underpayments and his willingness to provide a personal undertaking in respect of continuing same as shall be ordered by the Court.

3. It is clear the Second Respondent has cooperated from an early stage of this proceeding. He is attending to the repayments in the face of the First Respondent’s default, and is willing to provide his own personal undertaking to continue such payments. Such payments in fact exceed the maximum penalty that could be ordered by the Court against the Second Respondent.

4. The Second Respondent is a first time contravener and needs no specific deterrence. Perhaps next time he will engage his own lawyers when seeking to purchase a business and obtain full disclosure from the seller of the business. He is not in a financial position to take any legal action with respect to this and it is trite to suggest he do so.

5. Any penalty imposed upon the Second Respondent beyond $500 would be harsh and ‘crushing’.[1] He is already ensuring the very necessary payments to the employees of their entitlements. He has suffered the media announcement.

   [1] Submissions filed by the Second Respondent dated 16 February 2017 at paragraph [13].

6. The real need and major consideration in this proceeding is for general deterrence in the hospitality industry. The facts of this case are however, unusual. Whilst this element would be expected to be given quite significant weight, here I do not find that is the case.

7. No agreement has been reached between the parties as to penalty. Whilst the Court bears ultimate responsibility for assessing penalty, promoting settlement of litigation is in the public interest. In a case such as this a jointly proposed penalty “within the permissible range” might have been anticipated.[2] The maximum penalty the Court could impose is $5,400. The range proposed by the Fair Work Ombudsman is $1,350-$1890. The Applicant sought any penalty be paid to the Commonwealth and not the employees. The Court prefers the range as proposed by the Second Respondent having considered those matters required in the determination of penalty, and taking into account the undertaking given to the Court by the Second Respondent to pay compensation to the exploited employees.

   [2] Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [2004] FCAFC 72, 53(vi) per Branson, Sackville and Gyles JJ.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Judge Hartnett

Date: 7 June 2017