Fair Work Ombudsman v S & L Lenz Pty Ltd
[2022] FedCFamC2G 763
Federal Circuit and Family Court of Australia
(DIVISION 2)
Fair Work Ombudsman v S & L Lenz Pty Ltd [2022] FedCFamC2G 763
File number(s): PEG 382 of 2020 Judgment of: JUDGE LUCEV Date of judgment: 14 September 2022 Catchwords: INDUSTRIAL LAW – Fair Work – contravention of compliance notice – agreed statement of facts as to contravention and accessorial involvement – penalty hearing – factors for consideration as to penalty Legislation: Crimes Act 1912 (Cth) s 4AA
Fair Work Act 2009 (Cth) ss 90, 117, 539, 546, 557, 682, 716, 717
General Retail Industry Award 2020 cl 20.4
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union and Another [2018] HCA 3; (2018) 262 CLR 157; (2018) 92 ALJR 219; (2018) 273 IR 211; (2018) 351 ALR 190; (2018) 70 AILR 102-917
Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13; (2022) 96 ALJR 426; (2022) 314 IR 301; (2022) 399 ALR 599
Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 246 ALR 35; (2008) 60 AILR 100-809
Commonwealth v Director, Fair Work Building Industry Inspectorate (Agreed Penalties Case) [2015] HCA 46; (2015) 258 CLR 482; (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494
Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354
Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128
Fair Work Ombudsman v Blu Hornsby Pty Ltd & Anor [2016] FCCA 1150
Fair Work Ombudsman v First Group of Companies Pty Ltd (Deregistered) & Others [2018] FCCA 1228
Fair Work Ombudsman v Goldream Pty Ltd [2021] FedCFamC2G 61
Fair Work Ombudsman v Kleen Group Pty Ltd and Another [2016] FCCA 278
Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301; (2017) 275 IR 148; (2017) 69 AILR 102-890
Fair Work Ombudsman v PEBS Group Pty Ltd [2021] FedCFamC2G 158
Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No 2) [2020] FCCA 2583
Fair Work Ombudsman v VS Investment Group Pty Ltd & Anor [2013] FCCA 208
Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14
Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357; (2005) 79 ALJR 1048; (2005) 215 ALR 213
Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383; (2008) 171 IR 455; (2008) 247 ALR 714; [2008] 60 AILR 100-883
Olsen v Sterling Crown Pty Ltd [2008] FMCA 1392; (2008) 177 IR 337
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; (2007) 59 AILR 100-669
Division: Division 2 General Federal Law Number of paragraphs: 53 Date of last submission/s: 18 February 2022 Date of hearing: 18 February 2022 Place: Perth Counsel for the Applicant: Ms E Luck Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr S Heathcote via CISCO Webex Solicitor for the Respondent: APX Law Pty Ltd ORDERS
PEG 382 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: S & L LENZ PTY LTD
Respondent
order made by:
JUDGE LUCEV
DATE OF ORDER:
14 september 2022
THE COURT:
1.Declares that:
(a)the respondent contravened s 716(5) of the Fair Work Act 2009 (Cth) (“FW Act”) by failing to comply with a Compliance Notice issued pursuant to s 716(2) of the FW Act on 25 August 2020.
2.Orders that:
(a)pursuant to s 545(1) of the FW Act, the respondent take the steps that were required by the compliance notice within 28 days from the date of the order, by:
(i) calculating for the employee named in the Compliance Notice:
(A)the amount the employee should have been paid in respect of each of the entitlements set out in the compliance notice;
(B)the amount the employee should have been paid in respect of additional superannuation contributions;
(ii)paying the outstanding amount of entitlements it was required to pay the employee as a result of (i)(A) above to the Employee;
(iii)paying the additional superannuation contributions it was required to pay on behalf of the employee as a result of (i)(B) above into the nominated Superannuation Fund of the employee (or in the event that the employee has not made a nomination, to a fund in accordance with clause 20.4 of the General Retail Industry Award 2020);
(iv)preparing and producing to the applicant a schedule outlining its calculations of the outstanding entitlements and additional superannuation contributions it was required to pay the employee as a result of (i) to (iii) above and providing proof of any amounts paid as a result of (ii) to (iii) above;
(b)pursuant to section 547(2) of the FW Act, the respondent pay interest to the employee on the amounts owed to the employee pursuant to (a)(ii) (interest to be calculated at the Federal Court of Australia’s pre-judgement interest rate applying at the date of this order) above within 28 days of the order;
(c)in the event that the employee cannot be located or payment cannot be made to the employee for any reason, then any such payment is to be made to and retained by the Commonwealth in accordance with section 559 of the FW Act;
(d)pursuant to section 546(1) of the FW Act, the respondent pay a pecuniary penalty of $21,450 in respect of its contravention of section 716(5) of the FW Act within 28 days of the date of the order;
(e)pursuant to section 546(3)(a) of the FW Act, the pecuniary penalty ordered to be paid by the respondent in (d) above be paid to the Commonwealth of Australia; and
(f)the applicant have liberty to apply on 7 days’ notice in the event that any of the preceding 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
JUDGE LUCEV
INTRODUCTION
Before the Court is an application lodged by the Applicant, the Fair Work Ombudsman (“FWO”), on 21 December 2020 against the Respondent, S & L Lenz Pty Ltd (“S & L Lenz”). The application alleges that S & L Lenz has contravened s 716(5) of the Fair Work Act2009 (Cth) (“FW Act”).
On 16 September 2021 the parties entered into a Statement of Agreed Facts. At [12] of the Statement of Agreed Facts S & L Lenz admits that it contravened s 716(5) of the FW Act by failing to comply with the compliance notice issued in this matter (“Compliance Notice”), and the parties agreed to the Court making declarations to that effect, and for orders rectifying the non-compliance and the imposition of a penalty. As such the matter has come before the Court for a penalty hearing to determine the quantum of penalty.
The Court has before it the following materials:
(a)the Originating Application and Statement of Claim filed 21 December 2020;
(b)the Defence and Response filed 7 May 2021;
(c)the FWO’s Reply filed 24 May 2021;
(d)the Statement of Agreed Facts filed 16 September 2021;
(e)the FWO’s Outline of Submissions on Penalty filed 12 November 2021 (“FWO’s Submissions”);
(f)the affidavit of Julia Mary White affirmed 1 July 2021 (“White Affidavit);
(g)the affidavit of Sara Anicic affirmed 4 October 2021 (“Anicic Affidavit”);
(h)the affidavit of Courtney Nicole Leach Adams affirmed 5 October 2021 (“Leach Adams Affidavit”); and
(i)the transcript of the hearing on 18 February 2022.
At hearing Counsel for S & L Lenz appeared but indicated that S & L Lenz had opted not to file any affidavits or any other material (including written submissions), that there was a Statement of Agreed Facts, and that S & L Lenz were content to have the orders as set out in the Statement of Agreed Facts made. Obviously, that submission was made subject to the Court’s determination of the quantum of penalty.
BACKGROUND
By way of background the Court observes that:
(a)S & L Lenz operated a supermarket and grocery store trading as IGA Byford until around July 2019;
(b)in February and March 2020 the FWO received requests for assistance from Ms Tania Male (“Employee”), a former employee of S & L Lenz. The Employee claimed that she had not been paid out her notice entitlements or her accrued annual leave on termination of her employment with S & L Lenz: White Affidavit at [5]-[6] and Annexures JMW-2 and JMW-3 at pp 11-12, 17-19;
(c)as a result of the requests for assistance, between June and August 2020 Fair Work Inspector (“FWI”) White investigated S & L Lenz’ compliance with Commonwealth workplace laws: Statement of Agreed Facts at [4];
(d)following the investigation, on 25 August 2020 FWI White gave the Compliance Notice to S & L Lenz pursuant to s 716(2) of the FW Act: Statement of Agreed Facts at [7];
(e)the Compliance Notice was issued as FWI White had formed the reasonable belief that:
(i)S & L Lenz employed the Employee on a full-time basis from on or around 15 April 2013 until around 29 January 2020, when S & L Lenz terminated the Employee’s employment;
(ii)on terminating the Employee’s employment S & L Lenz had failed to pay an amount to the Employee in lieu of notice at the full rate of pay for the hours she would have worked had her full-time employment continued to the end of the minimum period of notice as required by s 117 of the FW Act; and
(iii)at the time the Employee’s employment ended the Employee had accrued but untaken annual leave for which S & L Lenz failed to pay her in contravention of s 90(2) of the FW Act;
(f)the Compliance Notice satisfied the requirements of s 716(3) of the FW Act: Statement of Agreed Facts at [9]. It required S & L Lenz to calculate and rectify any underpayments to the Employee by 9 September 2020 and provide evidence to the FWO of compliance by 16 September 2020; and
(g)S & L Lenz did not comply with the Compliance Notice. On 17 September 2020 the FWO sent a letter to S & L Lenz titled “Failure to Comply with Compliance Notice”: White Affidavit, Annexure JMW-14 at pp 57-58.
The Proceedings
The course of these proceedings has been as follows:
(a)on 21 December 2020 the FWO commenced the proceeding by originating application and statement of claim alleging that S & L Lenz had breached s 716(5) of the FW Act;
(b)S & L Lenz filed a response and defence to the claim on 7 May 2021, admitting it had contravened s 716(5) of the FW Act but denying one of the contraventions set out in the Compliance Notice, and FWI White’s ability to form a reasonable belief founding the capacity to issue the Compliance Notice insofar as it related to the s 117 “notice” contravention;
(c)on 24 May 2021 the FWO filed a reply in response to the S & L Lenz’ defence;
(d)on 26 May 2021 the FWO’s lawyers wrote to S & L Lenz’ solicitor encouraging S & L Lenz to take corrective action required by the Compliance Notice at least in respect of the contravention of s 90(2) of the FW Act. The letter stated that if such corrective action is taken the FWO would ask the Court to take S & L Lenz’ rectification of that part of its non-compliance with the Compliance Notice into account on the question of penalty: Anicic Affidavit at [4], Annexure SA-1 at p 5;
(e)on 5 July 2021 the FWO filed the White Affidavit in support of the claim;
(f)on 17 August 2021 the FWO’s lawyers wrote to S & L Lenz’ solicitor regarding a proposed Statement of Agreed Facts. The letter encouraged S & L Lenz to take corrective action in respect of the Compliance Notice before being required to do so by order of the Court, stating that if such action is taken the FWO would ask the Court to take the rectification of the non-compliance into account on the question of penalty: Anicic Affidavit at [5], Annexure SA-2 at pp 9-10;
(g)on 16 September 2021 the parties entered into the Statement of Agreed Facts, whereby S & L Lenz admitted the Compliance Notice was properly issued but not complied with;
(h)on 16 September 2021 the Court made orders substituting the listed two-day liability hearing for a single day hearing on the question of penalty. The FWO was ordered to file and serve any evidence in respect of the penalty issue by 5 October 2021 and S & L Lenz was ordered to file and serve any evidence on the penalty issue by 26 October 2021; and
(i)in compliance with the orders, the FWO filed the Anicic Affidavit and Leach Adams Affidavit. S & L Lenz did not file any evidence (or submissions) in the proceedings.
AGREED FACTS
The Statement of Agreed Facts is as follows (original emphasis):
A. PARTIES
The Applicant
1.The Applicant is and was at all relevant times:
(i)a statutory appointee of the Commonwealth appointed by the Governor-General by written instrument pursuant to section 687(1) of the Fair Work Act 2009 (Cth) (the FW Act);
(ii) a Fair Work Inspector (FWI) pursuant to section 701 of the FW Act; and
(iii)a person with standing to bring these proceedings and to apply for orders for contraventions of civil remedy provisions in accordance with section 539(2) of the FW Act.
The Respondent
2.The Respondent is and was at all relevant times:
(a)a company incorporated under the provisions of the Corporations Act 2001 (Cth);
(b)a ‘person’ within the meaning of section 716 of the FW Act; and
(c)a company that had operated a supermarket and grocery store trading as IGA Byford and located at 867 South Western Highway, Byford Western Australia 6122 prior to its closure in or around July 2019.
B. CONTRAVENTION OF SECTION 716(5) OF THE FW ACT
The Inspector
3.FWI Julia White (FWI White) was at all relevant times a FWI who was appointed by the Applicant under section 700 of the FW Act.
The Investigation
4.From in or around June 2020 to August 2020, FWI White undertook an investigation into the Respondent’s compliance with Commonwealth workplace laws (the Investigation).
5.The Investigation commenced following several requests for assistance made to the Applicant from Tania Male (the Employee) who had been employed by the Respondent.
6.As a result of the Investigation, FWI White formed a reasonable belief, within the meaning of section 716(1) of the FW Act, that:
(a)the Respondent is and was at all relevant times a ‘constitutional corporation’ within the meaning of section 12 of the FW Act;
(b)the Respondent is and was at all relevant times a ‘national system employer’ within the meaning of section 14(1)(a) of the FW Act;
(c)the Respondent employed the Employee on a full-time basis from on or around 15 April 2013 until on or around 29 January 2020 (the Full Time Employment);
(d)the Respondent terminated the Employee’s employment on or around 29 January 2020;
(e)at the time the Employee’s Full Time Employment ended, the Employee had accrued but untaken annual leave; and
(f) the Respondent had, on or around 29 January 2020, failed to pay the Employee:
(i)her accrued but untaken annual leave upon cessation of her Full Time Employment with the Respondent in contravention of section 90(2) of the FW Act, a term of the National Employment Standards (NES); and (Annual Leave Contravention)
(ii)a payment in lieu of notice of at least the amount the Respondent would have been liable to pay to the Employee at the full rate of pay for the hours she would have worked had the Full Time Employment continued until the end of the minimum period of notice, worked out under subsection 117(3) of the FW Act, in contravention of section 117 of the FW Act, a term of the NES
(Notice Contravention)
(collectively, the Contraventions).
Compliance Notice
7.On 25 August 2020, FWI White gave the Respondent a notice pursuant to section 716(2) of the FW Act (the Compliance Notice).
8.Pursuant to section 716(2) of the FW Act, the Compliance Notice required the Respondent to:
(a)remedy the direct effects of the Contraventions by 9 September 2020 by taking the following specified action in respect of the Employee (the Specified Action):
(i) in respect of the Annual Leave Contravention:
A.calculate the full amount of accrued annual leave owed to the Employee upon termination of employment;
B.make payment to the Employee in respect of annual leave; and
C.make a record of the information and amounts referred to in paragraph 8(a)(i)(A) and the amount of the payment referred to in paragraph 8(a)(i)(B);
(ii) in respect of the Notice Contravention:
A.identify the minimum period of notice the Respondent was required to give the Employee;
B.calculate the full amount owed to the Employee for payment in lieu of notice;
C.make payment to the Employee in respect of the payment in lieu of notice;
(iii)calculate and pay additional superannuation contributions required by clause 22.2 of the Award in respect of the amounts required to be paid to the Employee by the Respondent as a result of the steps taken at paragraphs 8(a)(i) to 8(a)(ii) above to the Superannuation Fund chosen by the Employee; and
(b)produce to the Applicant reasonable evidence of its compliance with the steps described in paragraph 8(a) above, by producing a schedule that set out the Underpayment Rectification Information in respect of each contravention that concerned the Employee and the additional superannuation contributions calculated and paid to the Employee’s Superannuation Fund and proof that full payment was made to the Employee by 16 September 2020.
9. The Compliance Notice met the requirements of section 716(3) of the FW Act.
Failure to comply with the First Compliance Notice
10. The Respondent did not:
(a)take the Specified Action by 9 September 2020, or at all; or
(b)produce to the Applicant any evidence of compliance with the Compliance Notice by 16 September 2020, or at all.
11.By reason of the matters set out in paragraph 10 above, the Respondent failed to comply with the Compliance Notice and thereby contravened section 716(5) of the FW Act.
D. AGREED DECLARATION AND RELIEF
12.The Parties agree to a declaration that the Respondent contravened section 716(5) of the FW Act by failing to comply with the Compliance Notice.
13.The Parties agree to the following orders:
(a)pursuant to section 545(1) of the FW Act, the Respondent take the steps that were required by the Compliance Notice within 28 days from the date of the order, by:
(i) calculating for the Employee:
A.the amount the Employee should have been paid in respect of each of the entitlements set out in the Contraventions;
B.the amount the Employee should have been paid in respect of additional superannuation contributions;
(ii)paying the outstanding amount of entitlements it was required to pay the Employee as a result of paragraph 13(a)(i)A) above to the Employee;
(iii)paying the additional superannuation contributions it was required to pay on behalf of the Employee as a result of paragraph 13(a)(i)B) above into the nominated Superannuation Fund of the Employee (or in the event that the Employee has not made a nomination, to a fund in accordance with clause 20.4 of the General Retail Industry Award 2020);
(iv)preparing and producing to the Applicant a schedule outlining its calculations of the outstanding entitlements and additional superannuation contributions it was required to pay the Employee as a result of paragraphs 13(a)(i) to 13(a)(iii) above and providing proof of any amounts paid as a result of paragraphs 13(a)(ii) to 13(a)(iii) above;
(b)pursuant to section 547(2) of the FW Act, the Respondent pay interest to the Employee on the amounts owed to the Employee pursuant to paragraph 13(a)(ii) above within 28 days of the order;
(c)in the event that the Employee cannot be located or payment cannot be made to the Employee for any reason, then any such payment is to be made to and retained by the Commonwealth in accordance with section 559 of the FW Act;
(d)pursuant to section 546(1) of the FW Act the Respondent pay a pecuniary penalty to the Commonwealth for the contravention set out at paragraph 12 above within 28 days of the order;
(e)the Applicant have liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with; and
(f)such further orders as the Court considers appropriate.
SUBMISSIONS
FWO’s Submissions
In relation to general deterrence the FWO submitted that:
(a)general deterrence must serve such purpose that the penalty is not seen by others as just “the cost of doing business”. In order to be useful as a general deterrent, a penalty “should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by like-minded persons or organisations”: Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65; (2007) 158 FCR 543; (2007) 162 IR 444; (2007) 59 AILR 100-669 at [93] per Lander J;
(b)the FWO’s Industry Profile and FWO Interactions Report - Supermarkets and Grocery Stores: Leach Adams Affidavit, Annexure CNLA-3 at pp 12-15, shows a moderate dispute rate in this industry with 247 disputes completed and 34 compliance notices issued in the financial year ending 30 June 2021. Accordingly, general deterrence is an important factor in these proceedings;
(c)there is a need to send a message to employers generally (as well as those individuals who are ultimately responsible for the actions of an employing entity) and to the grocery and supermarket stores industry in general, that a failure to comply with a compliance notice will not be tolerated by the FWO, the community or the courts; and
(d)S & L Lenz’ failure to comply with the Compliance Notice negatively impacts the FWO’s ability to fulfil its statutory function by regulating this industry and avoid the costs of litigation. It effectively thwarts the powers given to the FWO as a regulatory authority: Fair Work Ombudsman v Kleen Group Pty Ltd and Another [2016] FCCA 278 (“Kleen Group”) at [25] per Judge Emmett.
In relation to specific deterrence the FWO submitted that:
(a)specific deterrence is directed at ensuring that a contravener will not risk engaging in the same contravening conduct in the future: Fair Work Ombudsman v AJR Nominees Pty Ltd (No 2) [2014] FCA 128 (“AJR Nominees”) at [50] per Gilmour J. In this regard, “it is often relevant to look at the remedial steps that have been taken to ensure that no contravention will occur in the future”: Fair Work Ombudsman v Soma Kitchen Pty Ltd & Anor (No 2) [2020] FCCA 2583 (“Soma Kitchen”) at [60] per Judge Kendall;
(b)whilst it might be noted that S & L Lenz no longer operates the relevant store, it is of note that the Employee continued to be employed by S & L Lenz for a period after the store closed: White Affidavit, Annexure JMW-2 at p 12, and S & L Lenz, which continues to be a registered company: Leach Adams Affidavit, Annexure CNLA-2 at p 7, expressed an ongoing need for the Employee’s services for 16 hours a week, albeit on a casual basis, following the termination of her employment: White Affidavit, Annexures JMW-2 at p 12 and JMW-5 at p 31;
(c)without any business records or other supporting documents provided to the contrary, it appears that S & L Lenz continues to operate on some basis. As such, the need for specific deterrence remains an important factor;
(d)there is a need for specific deterrence because S & L Lenz still has not complied with the Compliance Notice: Leach Adams Affidavit, Annexure CNLA-1 at p 5. This is despite this proceeding being on foot since 21 December 2020 and the parties entering into a Statement of Agreed Facts in September 2021, by which S & L Lenz admitted the Compliance Notice was validly issued and had not been complied with. S & L Lenz’ ongoing non-compliance, in circumstances where it no longer makes any argument that it is not obligated to comply, shows that a significant penalty from the Court is needed to demonstrate to S & L Lenz that such conduct is not acceptable; and
(e)a penalty within the suggested penalty range would both emphasise to others the impact and consequences of failing to comply with a compliance notice and deter S & L Lenz from contravening s 716(5) of the FW Act in the future.
In relation to the nature, extent and circumstances of the conduct the FWO submitted that:
(a)one of the objects of the FW Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms. Section 716 of the FW Act encapsulates this objective by allowing employees to make a request for assistance which the FWO can then resolve through the process of issuing a compliance notice. Compliance notices provide a mechanism for the efficient and cost-effective rectification of identified potential contraventions of the FW Act, including underpayments to employees. Compliance notices have been recognised by the Court as “an important part of the armoury of Fair Work Inspectors in fulfilling their functions”: Fair Work Ombudsman v Blu Hornsby Pty Ltd & Anor [2016] FCCA 1150 at [29] per Judge Smith, recently quoted with approval in Fair Work Ombudsman v Goldream Pty Ltd [2021] FedCFamC2G 61 (“Goldream”) at [27] per Judge Kelly;
(b)section 717 of the FW Act allows a recipient of a compliance notice to apply for a review of the notice if they consider that the contraventions set out in the notice did not occur or because the notice does not comply with the requirements of the FW Act;
(c)the Compliance Notice clearly sets out the specified actions S & L Lenz is required to take to remedy the direct effects of the contraventions identified in the Compliance Notice. If S & L Lenz did not agree with the Compliance Notice, it could have sought to review it under s 717 of the FW Act and further communicated with FWI White if it considered there was an error, or if there was evidence that the minimum entitlements had in fact been met. There is no evidence that S & L Lenz took any steps to comply with or challenge the Compliance Notice before the FWO commenced this proceeding;
(d)despite being repeatedly encouraged to do so, by 22 September 2021 S & L Lenz still had not made any payment to the Employee: Leach Adams Affidavit at [5]-[7]. There is no evidence that it has done so now. It seems S & L Lenz has no intention of complying with the Compliance Notice and rectifying the underlying contraventions until compelled to do so by this Court. An ongoing failure to comply with a compliance notice is relevant to the extent and nature of the conduct, and may show that the conduct was serious and demonstrates a disregard for obligations under the FW Act: Fair Work Ombudsman v PEBS Group Pty Ltd [2021] FedCFamC2G 158 (“PEBS Group”) at [40] per Judge Riley; Goldream at [29] per Judge Kelly; and
(e)in so acting, S & L Lenz undermines the efficacy of such notices and, as such, the FWO submits, that S & L Lenz’ contravention should carry a meaningful consequence by imposition of a penalty in the higher range.
In relation to the nature and extent of loss the FWO submitted that;
(a)the single Employee, the subject of the Compliance Notice, had been denied her entitlement to around $35,000 because of the contraventions the FW Act identified in the Compliance Notice from the time her employment ended in January 2020. She remains without her entitlement while the FWO is compelled to pursue orders for compliance in this proceeding;
(b)S & L Lenz’ conduct has occasioned a public loss in that the FWO, as the workplace regulator, has been caused to spend time and public funds bringing and pursuing the proceedings and used Court time and further public funds, which would not have been required had compliance occurred, contrary to the objectives of the FW Act and the compliance notice process within it;
(c)S & L Lenz admitted the contravention and consented to the making of a declaration and orders (including an order that S & L Lenz pay a penalty). Although made later than is ideal, and after requiring the FWO to prepare and file evidence and a reply, the admission made by S & L Lenz obviated a need for a liability hearing against S & L Lenz. The conduct in this regard may be considered to meet the threshold for a discount on penalty in recognition of its cooperation in this regard: Mornington Inn Pty Ltd v Jordan [2008] FCAFC 70; (2008) 168 FCR 383; (2008) 171 IR 455; (2008) 247 ALR 714; [2008] 60 AILR 100-883 (“Mornington Inn”) at [75]-[76] per Stone and Buchanan JJ;
(d)S & L Lenz has not yet apologised for failing to comply with the Compliance Notice and has not taken any steps to rectify the non-compliance. S & L Lenz’ acceptance of wrongdoing in the Statement of Agreed Facts is undermined by its lack of contrition, regret or actions to rectify its non-compliance. The FWO submits that S & L Lenz’ sole act of cooperation in filing the Statement of Agreed Facts reflects an acceptance of the inevitable after seeing the evidence against it, rather than a meaningful intention to facilitate justice; and
(e)a discount on penalty of 10% would be appropriate in the circumstances.
In relation to deliberateness the FWO submitted that:
(a)S & L Lenz has not put on any evidence regarding the circumstances of the contravention, and it may thereby be inferred that nothing S & L Lenz could say in this regard would help it;
(b)S & L Lenz has been given multiple opportunities to engage with the FWO investigation, comply with the Compliance Notice and rectify the contraventions, all to no effect. This behaviour demonstrates a deliberate disregard for S & L Lenz’ obligations under the FW Act and the authority of the FWO as a regulator of Commonwealth workplace laws;
(c)during the investigation FWI White engaged with Mr Steven Lenz, the sole director of S & L Lenz, several times by telephone and email: White Affidavit at [8], Annexures JMW-8 to JMW-11 at pp 38-47;
(d)on 22 June 2020 FWI White spoke with Mr Lenz on the telephone, noting the several attempts that she had previously made to contact S & L Lenz. During the telephone call Mr Lenz, on behalf of S & L Lenz, stated that the Employee should have terminated her own employment to meet her entitlements, made several (to date unfounded) allegations that the Employee was malicious and engaged in serious misconduct and accused the Employee of abandoning her role. Mr Lenz further instructed FWI White to issue a Compliance Notice, which would be passed to S & L Lenz’ lawyers for response. For her part, FWI White informed Mr Lenz that failure to comply with the Compliance Notice may result in FWO taking legal action, which Mr Lenz appeared to welcome: White Affidavit, Annexure JMW-9 at pp 41-42;
(e)on 25 June 2020 following an unsuccessful telephone conversation, FWI White sent an email to Mr Lenz inviting him to respond to the allegations made by the Employee: White Affidavit, Annexure JMW-11 at pp 46-47;
(f)the Compliance Notice was properly served but was ignored. FWI White’s letter of non-compliance dated 17 September 2020 similarly failed to gain a response;
(g)after commencing the proceeding, the FWO’s lawyers have also attempted to encourage S & L Lenz to take the mitigating step of rectifying the non-compliance: see [10(d)] and [12(b)] above; and
(h)in the circumstances, it must be inferred that the non-compliance was deliberate and remains so to date. This is particularly where S & L Lenz has still not complied with the Compliance Notice, despite the admissions made in the Statement of Agreed Facts. This Court has previously accepted that non-compliance where a respondent is clearly aware of the Compliance Notice and what it requires may be regarded as deliberate: PEBS Group at [52] per Judge Riley.
In relation to totality and penalty the FWO submitted that:
(a)in all the circumstances, given the nature of the contravention (which is ongoing), the factual basis which informed the Compliance Notice being issued, the conduct of S & L Lenz throughout, and with little established by way of mitigation, a penalty in the higher range of 80% to 90% of the maximum penalty is appropriate in this case, with a 10% discount for cooperation;
(b)an appropriate penalty is one that is not crushing or oppressive, is proportionate to the conduct engaged in, and does not have the effect of exonerating that conduct: Fair Work Ombudsman v First Group of Companies Pty Ltd (Deregistered) & Others [2018] FCCA 1228 at [77] per Judge Jones and the authorities cited therein; and
(c)S & L Lenz has not filed any evidence that demonstrates that a penalty of any proportion would be oppressive. Nonetheless, the Court is obliged to consider such possibility. The FWO submits that the Court can be assured that no reduction based on totality is necessary.
S & L Lenz Submissions
As indicated at [4] above S & L Lenz filed no written materials in these proceedings. At hearing Counsel for S & L Lenz submitted that:
(a)this was not a case where S & L Lenz had wantonly done the wrong thing and needed to be punished at the higher end of the spectrum of potential consequences on the basis that they had deliberately and blatantly chosen to disregard the Compliance Notice; and
(b)S & L Lenz had not accepted, in the Statement of Agreed Facts, that the things happened as the FW Inspector said that they had, but that the FW Inspector had a proper basis for forming the view that she did, and that it was still disputed to this day whether or not the employee concerned had an entitlement to payment in lieu of notice.
CONSIDERATION
Principles relevant to determination of penalty
The appropriate steps to be considered in fixing an appropriate penalty were summarised in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301; (2017) 275 IR 148; (2017) 69 AILR 102-890 (“New Shanghai Charlestown”) (citing Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 258 CLR 482 (2015) 90 ALJR 113; (2015) 255 IR 87; (2015) 326 ALR 476; (2015) 67 AILR 102-494 (“Agreed Penalties Case”) at [64] per French CJ, Kiefel, Bell, Nettle and Gordon JJ, Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14 (“Kelly”) at [30] per Tracey J and Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCAFC 8; (2008) 165 FCR 560; (2008) 165 FLR (560); (2008) 246 ALR 35: (2008) 60 AILR 100-809 (“Australian Ophthalmic Supplies”) at [23] per Gray J, [71] per Graham J and [102] per Buchanan J. This case involves a single contravention. It is therefore unnecessary to consider grouping of courses of conduct under s 557 of the FW Act. Of the five steps set out, only the first, fourth and five steps are relevant here, and consequently the appropriate steps are:
(a)first, to identify each separate contravention involved. A contravention of each separate obligation imposed by the FW Act is a separate contravention of a civil remedy provision for purposes of s 539(2) of the FW Act;
(b)second, to consider the appropriate penalty in respect of the contravention; and
(c)third, to consider the overall penalty arrived at and apply the totality principle, to ensure that the penalty is appropriate and proportionate to the conduct viewed as a whole, making such adjustments as are necessary.
Maximum Penalties
Section 539 of the FW Act sets out the maximum penalties that may be imposed for contraventions of civil penalty provisions by reference to penalty units.
Section 4AA of the Crimes Act 1912 (Cth) defined a “penalty unit’ as $222 at the time the Respondents failed to comply with the Compliance Notice. Penalty units are defined by s 12 of the FW Act to have the same meaning as in s 4AA of the Crimes Act 1912 (Cth).
Section 546(2)(a) of the FW Act provides that the maximum penalty for an individual is the maximum number of penalty units referred to in the relevant item in column 4 of the table in section 539(2) of the FW Act. Item 33 relates to s 716(5) of the FW Act, providing in column 4 that the maximum penalty is 30 penalty units. Section 546(2)(b) of the FW Act provides that the maximum penalty for a body corporate is 5 times the maximum number of penalty units referred to in the relevant item in column 4 of the table in s 539(2) of the FW Act, which in this case is therefore 150 penalty units. Accordingly, the maximum penalty for S & L Lenz is $33,300.
Maximum penalties are set by Parliament as a reflection of the worst possible case, which can be evaluated against the case presently before the Court: Australian Ophthalmic Supplies at [108] per Buchanan J, applying Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357; (2005) 79 ALJR 1048; (2005) 215 ALR 213 at [31] per Gleeson CJ, Gummow, Hayne and Callinan JJ.
Factors Relevant to Penalties
The High Court has explained the primary purpose of the imposition of civil penalties. In the Agreed Penalties Case the High Court stated “…whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Pty Ltd, is primarily if not wholly protective in promoting the public interest in compliance…”: at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. More recently the High Court has further explained, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union and Another [2018] HCA 3; (2018) 262 CLR 157; (2018) 92 ALJR 219; (2018) 273 IR 211; (2018) 351 ALR 190; (2018) 70 AILR 102-917 at [116] per Keane, Nettle and Gordon JJ, that the “principal object” of deterrence depends on a penalty having the necessary “sting or burden” to secure the specific and general deterrent effects that are the raison d’être of its imposition.
Civil penalty provisions have as their primary purpose the promotion of the public interest in compliance with the relevant law: Agreed Penalties Case at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. That purpose has, since this matter was argued, been reinforced by the judgment of the High Court in Australian Building and Construction Commissioner v Pattinson & Anor [2022] HCA 13; (2022) 96 ALJR 426; (2022) 314 IR 301; (2022) 399 ALR 599 (“Pattinson”) where at [71] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ the purpose of the civil remedy regime in the FW Act was described by the majority as being the promotion of the public interest in compliance with the provisions of the FW Act by way of deterrence of further contravention. In Pattinson at [66] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ the High Court expressed the view that s 546 of the FW Act had, as its underlying theory, the notion that the financial disincentive imposed by way of pecuniary penalty will be such as to encourage compliance with the law by ensuring that contraventions are viewed by the contravener, and others, “as an economically irrational choice”. The High Court further observed that the function of the court imposing a penalty was to give effect to the intention of the FW Act in this regard, and that the courts must do what they can to deter noncompliance with the FW Act.
In determining what penalty to impose the Court must assess the seriousness of the offending subject to the alleged contravention in the context of all the factual circumstances that arise. In that regard the Court has long had regard to a series of considerations, which are not fixed and which are not a check-list: Pattinson at [18] and [68] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ; Kelly at [14] per Tracey J; Australian Ophthalmic Supplies at [91] per Buchanan J. Those consideration are as follows:
(a)the nature and extent of the conduct which led to the breach;
(b)the circumstances in which the conduct took place;
(c)the nature and extent of any loss or damage sustained as a result of the breach;
(d)whether there has been similar previous conduct by the alleged contravener;
(e)whether the breach was properly distinct or arose out of one course of conduct;
(f)the size of the business enterprise involved;
(g)whether or not the breach was deliberate;
(h)the involvement of senior management in the breach;
(i)whether the party committing the breach had shown contrition;
(j)whether the party committing the breach has taken corrective action;
(k)whether the party committing the breach has cooperated with enforcement authorities;
(l)the need to ensure compliance with minimum standards by the provision of an effective means for investigation and enforcement of employee entitlements; and
(m)the need for specific and general deterrence.
consideration of factors
Nature and extent of the conduct which led to the breach and circumstances in which the conduct took place
The nature of the conduct leading to the contravention is a failure to comply with the Compliance Notice issued to S & L Lenz. It is a single contravention by S & L Lenz. The contravention took place in circumstances where S & L Lenz were afforded the opportunity, over a number of months, from August to December 2020, to comply with the Compliance Notice, but it failed to do so.
The Compliance Notice relates to a failure to pay a single employee accrued and untaken annual leave upon termination of employment, and a failure to pay in lieu of notice upon termination, contrary to ss 90(2) and 117 of the FW Act respectively. Both entitlements are terms of the NES. The Compliance Notice also required that S & L Lenz take steps to calculate additional superannuation contributions required in respect of the alleged contraventions.
The FWO encouraged S & L Lenz to make payment to the employee, but S & L Lenz did not do so, and still have not done so.
Overall, it is clear that the nature and extent of conduct engaged in by S & L Lenz, and the circumstances in which that conduct took place, are such as to engage the pecuniary penalty regime under the FW Act, and there is otherwise nothing in the nature and extent of that conduct, or the circumstances in which the conduct took place, which ameliorates the conduct of S & L Lenz.
Nature and extent of loss and damage sustained
The underpayment in this case is approximately $35,000, plus associated superannuation contributions, which remain unpaid by S & L Lenz, and is a significant loss for the individual employee who was employed on an annual salary of $59,280: White Affidavit, Annexure JMW-4. The loss to the employee continues because S & L Lenz has still not rectified the underpayments to the employee.
A compliance notice is intended to be a mechanism which avoids the institution of proceedings for contraventions of the FW Act: Soma Kitchen at [39] per Judge Kendall. The failure to comply with the Compliance Notice also results in loss, it being necessary for the Commonwealth (and thus, the ordinary taxpayer) to fund the proceedings instituted by the FWO and the time and resources expended by this Court in hearing and determining these proceedings. Compliance with the Compliance Notice by S & L Lenz would have obviated these losses.
In short, S & L Lenz have done nothing to alleviate the losses suffered as a consequence of their contravening conduct.
Whether or not the breach was deliberate
S & L Lenz was given a number of months to participate in the investigation and comply with the Compliance Notice. It failed to do so. Consequently, the current proceedings were initiated by the FWO.
No steps of any kind have been taken by S & L Lenz to facilitate compliance with the Compliance Notice, that is, there has been no payment of the alleged entitlements, nor any preparation of the requested schedule of underpayments and additional superannuation contributions required as a consequence of the underpayments.
In the absence of any evidence at all from S & L Lenz to support the assertion by its Counsel that S & L Lenz had not wantonly done the wrong thing, the evidence establishes that there was deliberate conduct constituting the contravention by way of failure to comply with the Compliance Notice.
Minimum standards, cooperation and contrition
Issuing compliance notices forms a part of the legislative scheme under the FW Act for the purpose of promoting compliance with relevant provisions of the FW Act. A compliance notice informs employers of obligations and entitlements owed to employees, and gives them the opportunity to rectify any alleged non-compliance with a Modern Award or the NES, or to challenge the basis for the FWI’s belief. The compliance notice mechanism is an essential part of the tool kit of the FWO (acting through FWIs) in endeavouring to resolve contraventions of the FW Act cost effectively, expeditiously and without the need for legal proceedings: FW Act, s 682(1); Soma Kitchen at [39] per Judge Kendall. No application for review was made in this case.
An appropriate penalty must acknowledge the legislative intention underlying the power to issue compliance notices, and in particular that the issuance of a compliance notice is primarily directed to providing an alleged contravener with an opportunity to remedy the alleged contravention so as to obviate the need for litigation in relation to the alleged contravention, or, for the alleged contravener to challenge the compliance notice, which did not occur here, a course which, if successful, obviates the need for determination of the alleged contravention.
S & L Lenz’ willingness to enter into a Statement of Agreed Facts is some evidence of cooperation with the FWO, but a willingness which was late in coming, and lacking in contrition or remorse whether manifested by an apology, or more practically by payments to the employee concerned.
Cooperation which is half-hearted or late is not necessarily enough to mitigate penalty. As was observed in Olsen v Sterling Crown Pty Ltd [2008] FMCA 1392; (2008) 177 IR 337 (“Sterling Crown”) at [78]-[79] per Lucev FM (footnotes omitted) echoing Mornington Inn:
78 The mere fact that the contravention has been admitted and a consequent court hearing averted, does not of itself warrant a penalty reduction. More is required, namely:
a)an indication of an acceptance of wrongdoing and a suitable and credible expression of regret; and/or
b)an indication of a willingness to facilitate the course of justice.
79It must not be forgotten that dependent upon the stage at which the contravention is admitted the primary saving may be to the respondent in respect of the unnecessary cost of a contested hearing in circumstances where the applicant has already incurred much of the cost involved in preparation for a hearing, particularly where, as here, in civil proceedings the matter proceeds (or would proceed) on affidavit.
In this case there is still no expression of regret or remorse by S & L Lenz, and no conduct, for example by way of making outstanding payments in whole or part to the employee concerned, which manifests regret or remorse. Furthermore, there is little indication that what was done by S & L Lenz was by way of facilitating the course of justice, but more a recognition of the inevitable outcome: Dennington v Prescott & Anor [2008] FMCA 1105 at [34] per O’Sullivan FM.
In the above circumstances, the Court has concluded that there is no, or no sufficient, evidence which suggests contrition or corrective action on the part of S & L Lenz. Indeed, the approach of S & L Lenz to these proceedings, and at hearing, was such as to reinforce the fact that there was no effective contrition or corrective action. There is, therefore, no basis for applying a discount on account of contrition or the taking of corrective action. Insofar as the Statement of Agreed Facts was entered into, fairly late in the piece, that limited degree of cooperation with the FWO affords some scope for a slight discount of penalty.
Deterrence
Deterrence is the predominant purpose of civil pecuniary penalties: Agreed Penalties Case at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ.
There are two dimensions to deterrence, the first being general deterrence directed at the community as a whole, and the second being specific deterrence directed at the contravener the subject of the particular proceedings: Fair Work Ombudsman v 3 Rundle Mall Pty Ltd [2022] FedCFamC2G 354 (“3 Rundle Mall”) at [99] per Judge Brown. Both general and specific deterrence are important aspects of the imposition of civil pecuniary penalties under the FW Act: New Shanghai Charlestown at [198] per Bromwich J.
General deterrence
The failure to comply with a compliance notice effectively undermines the FWO’s power as a regulatory and enforcement authority, thereby reinforcing the need for general deterrence: Kleen Group at [25] per Judge Emmett, and to facilitate the effectiveness of general deterrence an amount of penalty that sends a message that contraventions of this type are serious and not acceptable is required: Fair Work Ombudsman v VS Investment Group Pty Ltd & Anor [2013] FCCA 208 per Judge Jarrett.
In 3 Rundle Mall at [56] per Judge Brown this Court explained that s 716 of the FW Act ought to be of assistance to an errant employer, and therefore when dealing with persons who have contravened s 716 of the FW Act it is necessary for the Court to “consider a significant penalty as a matter of both general and specific deterrence, given the interest the community has in ensuring that there is compliance with relevant legislation, and protecting the rights of employees to be paid what they are entitled”.
It suffices to observe that the penalty to be set will need to be set at a level which, having regard to the importance and relevance of general deterrence as a consideration, acts as a warning to other employers generally, and in the relevant industry particularly, not to engage in the conduct of contravening compliance notices.
Specific deterrence
Ensuring that a contravener does not reengage in the same contravening conduct at some future point requires an appropriate measure of specific deterrence: AJR Nominees at [50] per Gilmour J.
In circumstances where it appears that S & L Lenz remains in business and Mr Lenz remains its sole director and company secretary, specific deterrence is required in this case because:
(a)the contravention was deliberate;
(b)no contrition has been exhibited;
(c)no payment has been made to the employee concerned in relation to the underlying underpayment; and
(d)there is no evidence that systems are in place to prevent a repeat of the contravention or to prevent a recurrence of similar underpayments to current or future employees.
In the above circumstances a not insignificant measure of specific deterrence is appropriate by way of penalty.
Size of business
The size of the business does not excuse a business from any required compliance under the FW Act: Kelly at [28] per Tracey J, but properly evidenced, and for proper reasons, an incapacity to pay may afford some relief by way of mitigation of penalty. In this regard, the Court repeats what was said in Sterling Crown at [65]-[76] per Lucev FM, and the various Federal Court authorities there cited.
In this case, in the absence of any evidence from S & L Lenz, it is not possible to draw any conclusions with respect to whether or not there is an incapacity to pay on the part of S & L Lenz. In those circumstances, there is no basis to consider mitigating any penalty on the basis of the size of the business or its capacity to pay.
Involvement of senior management in the breach
As the sole director and company secretary Mr Lenz was the senior managing officer at S & L Lenz. Having regard to the evidence set out above in these Reasons for Judgment it is plain that the contravention arising from the failure to comply with the Compliance Notice was one in which Mr Lenz as a senior manager was involved. In the circumstances, this factor is not one which warrants any mitigation of the penalty to be imposed.
Whether prior contraventions
There was no evidence that S & L Lenz had a record of prior contraventions. If they did have a record of prior contraventions the FWO, as a Commonwealth model litigant, would no doubt have informed the Court of that fact as it is relevant to any penalty to be imposed. In the circumstances the Court will treat S & L Lenz as a first-time contravener, and assess penalty accordingly.
penalty
The FWO seeks a penalty in the range of 80% to 90% of the maximum with a 10% discount for cooperation arising from the willingness to enter into the Statement of Agreed Facts.
Having particular regard to the need for deterrence, both specific and general, and bearing in mind the complete lack of contrition and limited, and somewhat inevitable, cooperation, this is nevertheless not a case in which a high range penalty of the order sought by the FWO is appropriate. S & L Lenz are entitled to some discount by reason of their agreement to enter into the Statement of Agreed Facts, and their status as first-time contraveners. In all the circumstances, the Court is of the view that an appropriate deterrent penalty is one to be set at 65% of the maximum penalty. The penalty to be imposed upon S & L Lenz will therefore be $21,450.
CONCLUSION AND ORDERS
The Court has concluded that there ought to be declarations and orders in the terms set out in Annexure A to the FWO’s Submissions, with the appropriate penalty being, as indicated at [52] above, set in the amount of $21,450.
I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Lucev. Associate:
Dated: 14 September 2022
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