Fair Work Ombudsman v S & L Lenz Pty Ltd

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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…
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Details
Case
[2022] FedCFamC2G 763
Decision Date

CaseChat Overview and Summary

The case of Fair Work Ombudsman v S & L Lenz Pty Ltd involved a dispute concerning alleged breaches of workplace laws by S & L Lenz. The Fair Work Ombudsman (FWO) brought proceedings against S & L Lenz for contravening section 716(5) of the Fair Work Act 2009 (FW Act), following an investigation into the company's compliance with workplace laws. The FWO alleged that S & L Lenz had failed to pay a former employee her accrued annual leave and a payment in lieu of notice upon termination of her employment, contravening sections 90(2) and 117 of the FW Act. The FWO issued a Compliance Notice requiring S & L Lenz to remedy the contraventions and provide evidence of compliance. S & L Lenz admitted to contravening section 716(5) of the FW Act by failing to comply with the Compliance Notice but disputed one of the contraventions and the FWO Inspector's ability to form a reasonable belief regarding the notice contravention.

The primary legal issue before the Court was the determination of an appropriate penalty for S & L Lenz's contravention of section 716(5) of the FW Act. The Court had to consider various factors, including the need for deterrence, the absence of contrition, and the company's status as a first-time contravener. The Court also needed to determine the maximum penalty applicable under section 539 of the FW Act and apply the principles of proportionality and totality to arrive at a penalty that was both appropriate and proportionate to the conduct.

In its decision, the Court noted that while deterrence was a key consideration, the complete lack of contrition and limited cooperation from S & L Lenz warranted a penalty lower than the maximum. The Court took into account S & L Lenz's agreement to enter into a Statement of Agreed Facts and their status as first-time contraveners. Ultimately, the Court determined that an appropriate deterrent penalty was one set at 65% of the maximum penalty, amounting to $21,450. The Court concluded that the appropriate penalty, considering all circumstances, was $21,450. The Court ordered S & L Lenz to comply with the Compliance Notice, pay the relevant penalties, and make appropriate payments to the affected employee. Additionally, the Court granted the FWO liberty to apply for further orders if S & L Lenz failed to comply with the penalty order.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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. PARTIESThe Applicant1.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 Respondent2.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 ACTThe Inspector3.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 Investigation4.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 Notice7.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; andC.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 Notice10. 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 RELIEF12.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.SUBMISSIONSFWO’s Submissions

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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.CONSIDERATIONPrinciples 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.