Fair Work Ombudsman v Saga Source Pty Ltd

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FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Fair Work Ombudsman v Saga Source Pty Ltd [2023] FedCFamC2G 954  

File number(s): PEG 243 of 2022
Judgment of: JUDGE VASTA
Date of judgment: 26 October 2023
Catchwords: INDUSTRIAL LAW – Contraventions of Fair Work Act 2009 (Cth) – pecuniary penalty – deterrence
Legislation: Fair Work Act2009 (Cth) ss 545(1), 546(1), 547(2), 550(2)(c), 716(5)
Cases cited:

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3

Australian Building and Construction Commissioner v Pattinson [2022] HCA 13

Mason v Harrington Corporation Proprietary Limited t/as Pangaea Restaurant & Bar [2007] FMCA 7
Division: Division 2 General Federal Law
Number of paragraphs: 32
Date of last submission/s: 25 August 2023
Date of hearing: In Chambers on the papers
Place: Brisbane
Solicitor for the Applicant: Office of the Fair Work Ombudsman
Counsel for the Respondents: The Second Respondent on behalf of the Respondents

ORDERS

PEG 243 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN:

FAIR WORK OMBUDSMAN

Applicant
AND:

SAGA SOURCE PTY LTD ACN 645 410 206

First Respondent

AYDEN LEE HERNAN-SAYERS

Second Respondent

ORDER MADE BY:

JUDGE VASTA

DATE OF ORDER:

26 OCTOBER 2023

BY CONSENT, THE COURT DECLARES THAT:

A.The First Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth) (“FW Act”) by failing to comply with the Compliance Notice; and

B.The Second Respondent was involved, within the meaning of section 550(2)(c) of the FW Act, in the First Respondent’s contravention of section 716(5) of the FW Act.

BY CONSENT, THE COURT ORDERS THAT:

1.Pursuant to section 545(1) of the FW Act, within 60 days of this order, the First Respondent paid to the employee, Mr Braedan Dowellon, the amount of $6,956.75.

2.Pursuant to section 547(2) of the FW Act, within 60 days of this order, the First Respondent pay interest to the employee, Mr Braedan Dowellon, the amount in Order 1 herein at the applicable pre-judgment interest rate prescribed by the Federal Circuit and Family Court of Australia.

3.The Applicant have liberty to apply on seven days’ notice in the event that any of the Orders herein are not complied with.


THE COURT ORDERS THAT:

4.Pursuant to section 546(1) of the FW Act, the First Respondent pay a pecuniary penalty in the sum of $12,000 to the Commonwealth for the contraventions in Declaration A above, within 60 days of this order.

5.Pursuant to section 546(1) of the FW Act, the Second Respondent pay a pecuniary penalty in the sum of $2,500 to the Commonwealth for the contraventions in Declaration B above, within 60 days of this order.

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…

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Details
Case
[2023] FedCFamC2G 954
Decision Date

CaseChat Overview and Summary

The Fair Work Ombudsman initiated proceedings against Saga Source Pty Ltd and its sole director, seeking pecuniary penalties for breaches of the Fair Work Act 2009 (Cth). The breaches involved underpayment of an employee and failure to pay accrued annual leave. The case was heard in the Australian Federal Circuit and Family Court, with the primary focus being on determining the appropriate level of pecuniary penalties to achieve deterrence and ensure compliance with workplace laws.

The court was tasked with evaluating the gravity of the contraventions, the culpability of the respondents, and the effectiveness of the penalties in deterring future breaches. It considered the High Court's guidance in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union, which emphasised that the primary purpose of pecuniary penalties is deterrence, both specific and general. The court had to balance the need for deterrence with the financial circumstances of the respondents, while also taking into account the respondents' belated compliance with the compliance notice.

After considering the maximum penalties available and the respondents' financial situation, the court determined that the appropriate penalty for Saga Source Pty Ltd was $12,000 and for the director, $2,500. The court did not view the case as one where the respondents had blatantly disregarded the authority of the Fair Work Ombudsman or the court. However, it emphasised that once a compliance notice is issued, the priority for the employer must be compliance with the notice. The court concluded that the penalties set were sufficient to achieve the desired deterrent effect.

The final orders included the proposed pecuniary penalties, ensuring that the respondents were held accountable for their breaches of workplace laws and emphasising the importance of compliance with the Fair Work Act.

Orders

Orders of the court

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Background

Background to the litigation

I have now considered the matters and will give my reasons as to the orders I have considered as being appropriate.Background The first respondent is a company that was incorporated and registered on 26 October 2020. It was the operator of an information technology business. The second respondent was the sole director of the first respondent and was also responsible for the overall operation, management and control of the first respondent. This means that he was responsible for ensuring that the first respondent complied with its legal obligations under the FW Act. In January 2022, the applicant was contacted by Braedan Dowell (the employee) who asked for assistance because he felt he had been underpaid. The applicant then commenced an investigation.The investigation What was revealed was that the employee had been employed as a Junior Backend Developer. He commenced employment on 8 November 2020 and concluded his employment on 31 December 2021. The employee was employed on a part-time basis and was employed as a Level I Graduate Professional under the Professional Employees Award 2020 (“Award”). The investigation showed that the employee took personal leave from 5 July 2021 to 25 August 2021. In this period, the first respondent did not pay the employee for the hours of personal leave taken and the wages that were paid were below the minimum rates in the Award. The investigation also showed that the first respondent did not pay the employee for his accrued, but untaken, annual leave at the end of his employment.Consequences of the investigation The applicant, having formed the belief that those facts illustrated contraventions of the FW Act, gave the first respondent a compliance notice on 11 March 2022. That notice required the first respondent to remedy the contraventions by 18 April 2022 and to produce reasonable evidence of compliance with the notice by 25 April 2022.The compliance notice The first respondent (and the second respondent) did not comply with the compliance notice. There was some belated compliance with the notice by the second respondent who, on 3 August 2022, sent an email to the applicant calculating what the employee was owed under the compliance notice. That amount is $6,956.75. The employee still had not been paid any of that money.Pecuniary penalties The law in relation to assessment of pecuniary penalties has really been laid down quite comprehensively. The High Court, in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3, said, at paragraph 116 of that judgment:As has been observed, the principal object of an order that a person pay a pecuniary penalty under s 546 is deterrence: specific deterrence of the contravener and, by his or her example, general deterrence of other would-be contraveners. According to orthodox sentencing conceptions as they apply to the imposition of civil pecuniary penalties, specific deterrence inheres in the sting or burden which the penalty imposes on the contravener. Other things being equal, it is assumed that the greater the sting or burden of the penalty, the more likely it will be that the contravener will seek to avoid the risk of subjection to further penalties and thus the more likely it will be that the contravener is deterred from further contraventions; likewise, the more potent will be the example that the penalty sets for other would-be contraveners and therefore the greater the penalty's general deterrent effect. Conversely, the less the sting or burden that a penalty imposes on a contravener, the less likely it will be that the contravener is deterred from further contraventions and the less the general deterrent effect of the penalty. Ultimately, if a penalty is devoid of sting or burden, it may not have much, if any, specific or general deterrent effect, and so it will be unlikely, or at least less likely, to achieve the specific and general deterrent effects that are the raison d'être of its imposition.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

The applicant has correctly submitted that the financial circumstances of respondents do not exculpate breaches of workplace laws. It is a question for the Court to look at what level the pecuniary penalty should be set so that it is “appropriate”.Conclusion I have had regard to the maximum penalties available. I have had regard to the partial compliance of the first respondent and second respondent, albeit that such compliance was over three months late. I do not see this case as one where the first respondent and second respondent have “thumbed their noses” at the authority of the applicant or the Court. I acknowledge what the second respondent has said about the dire financial straits in which the first respondent finds itself, however, once a compliance notice is given to an employer, the priority for the employer must be compliance with the notice. In all the circumstances, I am of the view that the appropriate penalty for the first respondent is one of $12,000. I am of the view that the appropriate penalty for the second respondent is one of $2,500.Order I will make the orders as proposed by the parties with the amount of pecuniary penalties inserted.

Ratio Decidendi

Legal Principle Established

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