Fair Work Ombudsman v S and a Enterprises (Qld) Pty Ltd and Anor

[2017] FCCA 3332

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v S & A ENTERPRISES (QLD) PTY LTD & ANOR [2017] FCCA 3332

Catchwords:
INDUSTRIAL LAW – Awards – breach of award – contravention of FW Act – breach admitted –pecuniary penalty –penalty to be paid to the Commonwealth.

Legislation:

Fair Work Act 2009 (Cth) s.712(3)

Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7

Applicant: FAIR WORK OMBUDSMAN

First Respondent:  S & A ENTERPRISES PTY LTD(QLD) PTY LTD ACN 132 287

Second Respondent:  AVINASH PRATAP SINGH

File Number: BRG 1040 of 2016

Judgment of: Judge Vasta

Hearing date: 11 December 2017

Date of Last Submission: 11 December 2017

Delivered at: Brisbane

Delivered on: 11 December 2017

REPRESENTATION

Counsel for the Applicant: Ms Gall

Solicitors for the Applicant: Fair Work Ombudsman

Counsel for the First Respondent: Mr Jones

Solicitors for the First Respondent Cornerstone Law Offices

Counsel for the Second Respondent: Mr Jones

Solicitors for the Second Respondent Cornerstone Law Offices

ORDERS

THE COURT DECLARES THAT:

1. The First Respondent contravened the following civil remedy provisions:

   (a)Section 45 of the Fair Work Act 2009 (Cth) (FW Act) by failing to pay Pranay Krishna Alawala and Avinash Nakka (Employees) the minimum casual adult rate for Monday to Friday work as required by clause 36.3 of the Vehicle, Manufacturing, Repair and Retail Award 2010 (Modern Award);

   (b)Section 45 of the FW Act by failing to pay the Employees Saturday rates of pay as required by clause 36.3 of the Modern Award;

   (c)Section 45 of the FW Act by failing to pay the Employees Sunday rates of pay as required by clause 36.3 of the Modern Award;

   (d)Section 45 of the FW Act by failing to pay Mr Nakka public holiday rates of pay as required by clause 36.3 of the Modern Award;

   (e)Section 45 of the FW Act by failing to pay Mr Alawala overtime rates as required by clause 36.3 of the Modern Award;

   (f)Section 535(1) by failing to keep records required by regulation 3.33(1)(a) of the Fair Work Regulations 2009 (Cth) (FW Regulations) in relation to the Employees;

   (g)Section 535(1) by failing to keep records required by regulation 3.33(3) of the FW Regulations in relation to the Employees;

   (h)Regulation 3.44(1) of the FW Regulations by failing to ensure that records of rates of remuneration required to be kept in relation to the Employees were not false or misleading;

   (i)Regulation 3.44(1) of the FW Regulations by failing to ensure that records of hours worked required to be kept in relation to the Employees were not false or misleading;

   (j)Regulation 3.44(6) of the FW Regulations by making use of entries in employee records in respect of rates of remuneration by entering these into the 7-Eleven payroll system, knowing that those entries were false or misleading;

   (k)Regulation 3.44(6) of the FW Regulations by making use of entries in employee records in respect of hours worked by entering these into the 7-Eleven payroll system, knowing that those entries were false or misleading;

   (l)Regulation 3.44(6) of the FW Regulations by making use of entries in employee records by producing these to the Fair Work Ombudsman, knowing that those entries were false or misleading;

   (m)Section 712(3) of the FW Act by failing to produce records or documents in response to the Notice to Produce Records or Documents dated 21 August 2015; and

   (n)Section 712(3) of the FW Act by failing to produce records or documents in response to the Notice to Produce Records or Documents dated 10 February 2016.

2. The Second Respondent was involved in each of the contraventions referred to in Declaration 1 above, pursuant to section 550(1) of the FW Act.

THE COURT ORDERS THAT:

1. Pursuant to section 546(1) of the FW Act, the First Respondent pay pecuniary penalties in the sum of $160,650.00 in respect of the contraventions referred to at Declaration 1 above.

2. Pursuant to section 546(1) of the FW Act, the Second Respondent pay pecuniary penalties in the sum of $32,130.00 in respect of the contraventions referred to at Declaration 2 above.

3. Pursuant to section 546(3)(a) of the FW Act, any pecuniary penalties ordered to be paid by the Respondents be paid to the Commonwealth within 90 days of the Court’s orders.

4. Pursuant to section 545(1), the First Respondent will, within 30 days of the date of this order, display a notice in the 7-Eleven store located at 508 Vulture Street, East Brisbane, Queensland and operated by the First Respondent in a prominent position that can be easily viewed by all employees (Workplace Notice) on the following terms:

   (a)the Workplace Notice must contain:

   (i)Information on the minimum rates of pay, casual loading and penalty rates under the Modern Award; and

   (ii)Information on how to contact the Fair Work Ombudsman;

   (b)the Workplace Notice must be in a form approved by the Applicant at least 7 days prior to the First Respondent displaying the Workplace Notice; and

   (c)the First Respondent will provide proof of the display of the Workplace Notice to the Applicant within 14 days of the Workplace Notice being approved by the Applicant.

5. Pursuant to section 545(1) of the FW Act, the First Respondent will at its own expense engage a third party with qualifications in accounting or workplace relations to undertake, an audit of the First Respondent's compliance with the FW Act and the Modern Award on the following terms:

   (a)the audit period will be for a period of six months commencing on the date of this order;

   (b)the audit is to be completed within 30 days of the end of the audit period;

   (c)the audit will apply to all employees employed at any time during the audit period in a classification of work under the Modern Award;

   (d)the audit will assess the First Respondent's compliance with the following obligations according to each employee's classification of work, category of employment and hours worked during the audit period:

   (i)wages and work related entitlements under the Modern Award;

   (ii)accrual and payment of entitlements under the National Employment Standards in Part 2−2 of the FW Act; and

   (iii)record keeping obligations in Division 3 of Part 3−6 of the FW Act and Division 3 of Part 3−6 of the FW Regulations.

6. An order that within 30 days of the audit referred to in Order 5 above being completed, the First Respondent will provide to the Applicant:

   (a)a copy of the audit report which will include a statement of the methodology used in the audit; and

   (b)written details of any contraventions identified in the audit and the steps the First Respondent will take to rectify any identified contravention(s) and by when the rectification will occur.

7. Liberty for the Applicant to apply to the Court on seven days’ notice for the matter to be re-listed in the event that any of the preceding orders are not complied with.

8. The Respondent’s pay the Fair Work Ombudsman’s costs of and incidental to the adjournment fixed in the sum $2,747.50.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 1040 of 2016

FAIR WORK OMBUDSMAN

Applicant

And

S & A ENTERPRISES (QLD) PTY LTD ACN 132 287

First Respondent

AVINASH PRATAP SINGH

Second Respondent

REASONS FOR JUDGMENT

(Ex tempore)

1. By application, filed on 7 November 2016, the Applicant, the Fair Work Ombudsman, has sought declarations and pecuniary penalties against the First Respondent, S & A Enterprises (Queensland) Pty Ltd and the Second Respondent, Avinash Pratap Singh. 

2. S & A Enterprises is a company that was set up by the Second Respondent and his wife.  That company was running a 7-Eleven store which was a convenience store attached to a petrol station located on the corner of Vulture Street and Wellington Road at Woolloongabba.

3. The Fair Work Ombudsman had reason to investigate the First Respondent because it was given a complaint by an employee.  After that employee made a complaint, another employee also did. 

4. The first employee, Mr Allawala, was employed at least from 7 July 2014 to 30 November 2014 on a casual basis as a console operator.  His duties included serving customers, handling cash, using the cash register and console, packing and refilling stock and refilling fuel pumps. 

5. The other employee, Mr Nakar, was employed from 7 July 2014 to 31 August 2014 on a casual basis as console operator with similar duties. 

6. The general method of payment of wages, roughly, is that the Second Respondent would be the person who would tell the two employees when they were to work and what hours they would be working and also set the rate of pay.  The employees themselves would fill out time sheets. 

7. What Mr Singh, the Second Respondent, would do was to enter the hours into the pay system and that pay system would then calculate, using the award, what payment should be made.  That was sent through to the main office of 7-Eleven and the main office would then put that amount of money into the bank accounts of each of the employees. 

8. What became obvious was that the Respondents were entering inaccurate hours and inaccurate rates of pay into the payroll system. This created records that appeared to show that the employees were paid at the rates of pay prescribed by the modern award, including penalty rates and overtime rates of pay, which actually bore no relation to their hours of work or actual hourly rates. 

9. It became very difficult then for the Fair Work Ombudsman to investigate the complaints because the records of the business would show that the employees were actually paid correctly. 

10. The way in which the Fair Work Ombudsman was able to reconstruct the accounts was in one of two ways.  At the beginning of the shifts, the employees were meant to sign into the cash register so that they could operate the cash register during their time and then, when they finished their shift, they had to sign out of that cash register. 

11. At the beginning of the shifts, the employee was also required to sign the acknowledgement of the level of fuel that was there at the service station at the time that they started the shift and to sign off again when they finished the shift what the level of fuel was.  One can see the sense in such a system. 

12. Using those two methods of ensuring that proper accounts and records were kept at the shop, the Fair Work Ombudsman was able to compare those records with the pay records.  It was quickly discovered that the hours that were put into the payment system were quite inaccurate. 

13. The investigation showed that there was a failure to pay the minimum rates for both employees.  There was a failure to pay Saturday rates for both employees.  There was a failure to pay Sunday rates for both employees; a failure to pay public holiday rates for Mr Nakar; and a failure to pay overtime rates for Mr Allawala.

14. This added up to a total underpayment during that period of $4,439.05 to Mr Allawala and $1,154.10 to Mr Nakar. 

15. Whilst those two sums do not seem to be huge sums and the total was only some $5,595.00, one has to look a little deeper into that.  Mr Allawala was only paid 75 per cent of what he was entitled to be paid and Mr Nakar was only paid 59 per cent of what he was entitled to be paid. 

16. Notwithstanding the submissions from the Respondents that these were not vulnerable employees, nevertheless they were employees who were doing the job that they were asked to do and were entitled to be paid properly.  For Mr Nakar to only receive 59 per cent of what he was properly to be paid, even though he worked only a seven-week stint, does go to illustrate the way in which the Respondents acted. 

17. Not only is it blight upon the system for workers to be exploited in this way, it also enables a business such as that of the Respondents to unfairly profit.  Even if one were looking at just Mr Allawala's matter, the fact that the Respondent saved 25 per cent of employee costs on Mr Allawala and then 41 per cent of employment costs on Mr Nakar gives their business a leg-up against legitimate businesses that they do not deserve. 

18. It is for this reason that deterrence is, first and foremost, the role of the Courts in setting pecuniary penalties. 

19. But this underpayment could not have taken place if it were not for the record keeping contraventions of the First Respondent.  The fact is that they put false data into the computer which not only causes the underpayment but creates false records. 

20. The Second Respondent has a tertiary degree in accountancy.  The employees themselves, because they were given no pay slips - and that is not a contravention that is alleged against the First or Second Respondent - the employees had absolutely no way of knowing what it was that they were being paid or not being paid. 

21. This inevitably led to even further resentment by them and a jumping to conclusions, which may or may not have been correct, as to why their wages were lower than what they should have been. 

22. The employees had no idea what it was they were being paid or what the rate was or anything other than the fact that amounts of money would turn up in their bank account. 

23. The record keeping was an appalling breach of the standards that are needed for businesses to operate fairly in this country.  But not only did that mean that there were false records that were kept, it meant that when the Fair Work Ombudsman wanted those records, they were given false records, which, as I have already pointed out, has meant that the investigation was a lot more arduous and tedious than it should have been. 

24. As well as that, there were two notices to produce by the Fair Work Ombudsman served upon the First Respondent.  The first was in August 2015.  A notice to produce was served on the Second Respondent in relation to the First Respondent and a second notice to produce was served on the Second Respondent for the First Respondent on 10 February 2016. 

25. The first notice to produce required production of records and documents by 21 September 2015.  There were no documents produced in answer to that notice. 

26. The second notice to produce required the First Respondent to produce records by 2 March 2016. 

27. On 2 and 3 March, the Second Respondent, on behalf of the First Respondent, produced a number of documents in relation to that notice to produce.  Those documents were not all of the documents that were required to be produced in relation to those notices.  There were no rosters and time books.  There was nothing that showed the name, date of birth, contact details and employment status of employees.  There were no tax file number declarations and superannuation fund details. 

28. Those two breaches of s.712(3) of the Fair Work Act 2009 (Cth) (“the Act”), I take very seriously.

29. There was, as I have said, failure to make and keep record of actual rates of remuneration, failure to keep records of penalty rate entitlements and a failure to ensure records were not false or misleading.  There was a duty not to have false or misleading rates records within the payroll system for “rates” records or for “hours” records. 

30. Those are the contraventions that have been admitted by the First and Second Respondents. 

31. In the submissions made on behalf of the First and Second Respondents, it was noted by counsel appearing for the First and Second Respondents that there was another director, that is, the wife of the Second Respondent, who also profited from these contraventions because this was a company. 

32. However, there is no evidence to show that the wife had any knowledge of what it was that the husband was doing.  That conclusion seems to be in accordance with what the two employees have said and what was admitted by the Second Respondent when he had an informal interview with the Fair Work Ombudsman inspector. 

33. The submission has been made that, whilst pecuniary penalties are called for, such penalties should not be crushing or oppressive.  The fact that an appropriate penalty may be of a significant amount will not automatically mean it is a crushing penalty unless it is a penalty that is really outside of what the proper penalty for such a contravention ought to be.  It is something that a Court must take into account. 

34. The submission is made that the Second Respondent is not that well off and that, because he and his wife have now split, there are a number of financial pressures upon the business and upon him personally.  It was said that the Australian Taxation Office is also investigating him and has put a mortgage on the business.  It was submitted that any penalties that this Court imposes could very well lead to the Second Respondent having to declare bankruptcy and the First Respondent going into voluntary liquidation. 

35. Whilst these assertions have been made, there has been no evidence to support any of those matters.  And, whilst I understand what it is that has been said, I must be guided at all times by the evidence. 

36. It was also submitted that this matter was unlike a number of the cases that come before this Court where employers have deliberately targeted workers who are on visas, who would not have English as their first language and would not have a true indication or a true understanding of Australian industrial law to realise that they were actually being exploited. 

37. There is something to be said for that.  However, where that form of exploitation has been established, it is simply an aggravating feature. I accept that, notwithstanding that both Mr Allawala and Mr Nakar are Indian students, the exploitation is not present to the same degree as has been seen in many other cases upon which I have been asked to adjudicate. 

38. It has been put to me that the cooperation of the Second Respondent ought result in a discount of some 20 per cent.  The Fair Work Ombudsman submits that such a discount ought to be in the range of 10 per cent. 

39. In my view, the cooperation of the Respondents has meant that there has not been a need for the matter to go to full hearing, which has saved the cost of witnesses and of the Court's time. This is a significant factor. 

40. Another significant factor is that both Mr Allawala and Mr Nakar have been repaid the underpayments and such was done very early on in the scheme of things. 

41. The Fair Work Ombudsman pointed to a belated attempt by the Second Respondent to put some sort of blame on his wife, which would show that there is a far less level of contrition than that for which the Respondents contend. 

42. However, it seems to me that, when I went through the matters of the wife's involvement, there was a concession by Counsel for the Respondents that such involvement of the wife could not in any way excuse or minimise the conduct of the Respondents. 

43. So, when I add all of those up, it seems to me that a discount in the order of just over 15 per cent would be appropriate. 

44. Having regard to the number of contraventions that are here, the Fair Work Ombudsman has grouped the contraventions into a proper form. 

45. Firstly, the first contravention of failing to pay the minimum wage for the award is one contravention. 

46. Because of the way in which the award is written, there is one clause that covers Saturday/Sunday and public holiday pays, so, therefore, any breach of those three provisions ought to be grouped as one contravention.  I accept the submission of the Fair Work Ombudsman in that respect and it does show a great deal of fairness. 

47. The failure to pay overtime is also a contravention that is grouped by itself. 

48. The failure to produce documents in regard to the 2015 notice to produce is another contravention. 

49. The failure to produce documents under the 2016 notice to produce is a  contravention. 

50. The failure to keep proper records can all be grouped as one contravention. 

1. The use of misleading data into the payroll system is a contravention.

2. The use of misleading data in production of documents to the Fair Work Ombudsman is also a contravention. 

3. Therefore, there are eight contraventions that I must look at. 

4. I have had regard to all of the authorities that talk about the factors that a Court has to take into account in assessing a proper level of penalty.  I am especially mindful of the factors that were enumerated in Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7 (“the Pangea Case”).

5. To my mind, though, the issue of general deterrence is still the overriding matter in this case.  I have taken into account all of the mitigating circumstances in looking at the level to which I will discount the matters. 

6. For the failure to pay the minimum wage, I would impose a pecuniary penalty of $20,000.00. 

7. For a failure to pay the Saturday/Sunday and public holiday rates, I would impose a pecuniary penalty of $20,000.00. 

8. For failure to pay the overtime rate, I would impose a penalty of $10,000.00. 

9. For a failure to comply with the notice to produce - that notice to produce in 2015 - I would impose a penalty of $40,000.00. 

10. For a failure to produce all of the documents required in relation to the 2016 notice to produce, I would ordinarily have given close to the maximum there, but there were some documents produced. So, therefore, I will, as well, impose a penalty of $40,000. 

11. With regard to the failures for record keeping, as I have said in the recitation of the facts, I see these as extremely serious breaches.  They are close to being in the worst category.  In all the circumstances, I would impose a pecuniary penalty of $25,000.00 for that contravention. 

12. For the use of misleading data into payroll and the use of misleading data in producing matters to the Fair Work Ombudsman, they are definitely in the worst category of this contravention and I would impose penalties of $17,000.00 in relation to both. 

13. That gives a total of $189,000.00.  Once I then factor in the discount that leaves a total of $160,650.00. 

14. With regard to Mr Singh's involvement, I would simply give him a fifth of that total, being a total of $32,130.00 because, as it has been noted, his mind was that of the company. 

I certify that the preceding sixty-four (64) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date: 14 May 2018