Fair Work Ombudsman v Sapphire Freighters Pty Ltd (No 2)
[2021] FCCA 1692
•26 July 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Fair Work Ombudsman v Sapphire Freighters Pty Ltd (No 2) [2021] FCCA 1692
File number(s): MLG 825 of 2020 Judgment of: JUDGE MERCURI Date of judgment: 26 July 2021 Catchwords: INDUSTRIAL LAW – contravention of Road Transport (Long Distance Operations) Award 2010 – breach of civil remedy provision per section 716(5) of the Fair Work Act 2009 (Cth) - application for imposition of penalties - compliance notice served upon the respondent pursuant to section 716(1) of the Fair Work Act 2009 (Cth) - failure to comply with compliance notice – determination of appropriate penalties – consideration of respondent’s continued failure to comply with compliance notice – consideration of deliberateness of non-compliance – consideration of any contrition, corrective action and cooperation with enforcement authorities – consideration of the nature and extent of any loss or damage to the employee of the respondent - consideration of need for specific and general deterrence – orders for penalties. Legislation: Crimes Act 1914 (Cth) ss 4A
Fair Work Act 2009 (Cth) ss 12, 539, 545, 546, 716, 716, 717
Road Transport (Long Distance Operations) Award 2010
Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3
Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46
Fair Work Ombudsman v ASGBRIS Pty Ltd and Anor [2020] FCCA 553
Fair Work Ombudsman v Nobrace Centre Pty Ltd and Anor (No 2) [2019] FCCA 2144
Fair Work Ombudsman v NSH North Pty Ltd [2017] FCA 1301
Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290
Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Number of paragraphs: 38 Date of last submission/s: 4 May 2021 Date of hearing: 4 May 2021 Place: Melbourne Solicitor for the Applicant: Ms Clemens Solicitor for the Respondent: No appearance by or on behalf of the respondent ORDERS
MLG 825 of 2020 BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: SAPPHIRE FREIGHTERS PTY LTD
Respondent
ORDER MADE BY:
JUDGE MERCURI
DATE OF ORDER:
26 JULY 2021
THE COURT ORDERS THAT:
1.Pursuant to section 545(1) of the Fair Work Act 2009 (Cth) (‘FW Act’), the respondent takes the steps that were required by the Compliance Notice within 28 days of this order, by:
(a)Calculating and paying the outstanding entitlements it was required to pay to Mr Anthony Lawlor and to Mr Anthony Lawlor’s Superannuation Fund;
(b)Preparing and producing to the Applicant a schedule outlining its calculation of the outstanding entitlements it was required to pay Mr Anthony Lawlor referred to in order 1(a) above, and providing proof that the outstanding entitlements were rectified as set out in order 1(a) above.
2.Pursuant to section 546(1) of the FW Act, the respondent pay a pecuniary penalty of $21,500 to the Commonwealth for the contravention of section 716(5) of the FW Act, within 28 days of this order.
3.The applicant has liberty to apply on seven days’ notice in the event that any of the preceding orders are not complied with.
REASONS FOR JUDGMENT
JUDGE MERCURI:
INTRODUCTION
Before the court is an application filed 11 March 2020 for the imposition of a penalty in respect of the respondent’s failure to comply with a compliance notice dated 6 December 2019.
When the matter came before the court, there was no appearance for the respondent.
BACKGROUND
The respondent operates a long distance road freight business, based in Melbourne.[1] In July 2018, the Fair Work Ombudsman (‘FWO’) received a request for assistance from an employee of the respondent, Mr Anthony Lawlor (‘Employee’).[2]
[1] See affidavit sworn by Mr Aaron Jon Mullan on 26 March 2021 at [10] (‘Mullan Affidavit’).
[2] Mullan Affidavit at [25].
Following an investigation of the Employee’s claims, Fair Work Inspector Aaron Mullan, (‘FWI Mullan’) formed a reasonable belief pursuant to section 716(1)(b) of the Fair Work Act 2009 (Cth) (‘FW Act’) that the respondent had contravened various provisions of the Road Transport (Long Distance Operations) Award 2010 (‘the Award’) and the National Employment Standards (‘NES’) by failing to provide the Employee all of his terms and conditions of employment.
On 10 December 2019, FWI Mullan served a compliance notice on the respondent pursuant to section 716(2) of the FW Act.[3] The compliance notice required the respondent to calculate the amounts owing to the employee and to rectify them by 3 January 2020 and provide evidence of such rectification to the FWO by 10 January 2020.[4]
[3] Mullan Affidavit at [19].
[4] Applicant’s written submissions filed 29 March 2021 at [11] and [12].
FWI Mullan attests to the steps taken during his investigation to bring this issue to the respondent’s attention and to have the respondent either remedy the underpayments or to make an application to the court seeking to overturn the compliance notice.[5]
[5] Mullan Affidavit at [16] to [25].
It is common ground that the respondent did not comply with the compliance notice within the specified time frame, nor had it done so at any time prior to this hearing, despite numerous requests and reminders from the applicant to do so.
On 1 February 2021, in response to an application in a case filed by the applicant for summary judgment on 9 October 2020, the court made declarations that the respondent:
(a)was in default in these proceedings; and
(b)had contravened section 716(5) of the Fair Work Act 2009 (Cth).
Section 716(5) of the Act is a civil remedy provision.
The applicant seeks the imposition of penalties in relation to the respondent’s contravention. The applicant seeks penalties in the range of $18,900 to $22,500 as appropriate. It is submitted for the applicant in its outline of submissions filed 29 March 2021, that penalties in this high range are appropriate given:
(a)the respondent’s continued failure to comply with the statutory notice required the commencement of these proceedings in circumstances where legal proceedings could otherwise have been avoided;
(b)notwithstanding default judgement having been entered against the respondent on 1 February 2021, the respondent has continued to fail to take any steps to comply with the statutory notice resulting in the amounts owing to the Employee’s (of approximately $6,000) continuing to remain outstanding;
(c)there is strong need for specific deterrence in circumstances where the respondent remains registered; and
(d)there is also a strong need for general deterrence particularly in the Road Freight Transport industry which has significant rates of non-compliance with workplace laws.[6]
[6] See Mullan Affidavit annexure AJM-15.
For the following reasons, I agree that penalties within the range recommended by the applicant are appropriate in this case.
The compliance notice process provides a quick and inexpensive means by which underpayments of employment entitlements can be rectified efficiently and without the need for litigation. This process was specifically introduced to provide an enforcement mechanism which did not require parties to come to court in relatively straightforward underpayment claims.[7] This is an important part of the armoury for a workplace regulator seeking to achieve an efficient and speedy outcome for what are often vulnerable workers[8] in a way that relieves employers from incurring legal costs associated with lengthy contravention proceedings and the potential imposition of penalties arising from such contraventions.[9]
[7] Explanatory Memorandum to the Fair Work Bill 2008 at [2673].
[8] Fair Work Ombudsman v Nobrace Centre Pty Ltd and Anor (No 2) [2019] FCCA 2144 at [19], Fair Work Ombudsman v ASGBRIS Pty Ltd and Anor [2020] FCCA 553 at [37] and cases referred to therein.
[9] Fair Work Act 2009 (Cth) ss 716(4A), (4B).
In the absence of a reasonable excuse, a person who fails to comply with a compliance notice is in breach of a civil remedy provision.[10] The maximum penalty for such a breach $31,500[11] in the case of a body corporate.[12]
[10] Fair Work Act 2009 (Cth) ss 716(5), (6).
[11] This amount is based on a penalty unit amount of $210 which applied at the time of the contravention. See also section 12 of the FW Act which provides that a ‘penalty unit’ has the same meaning as section 4AA of the Crimes Act 1914 (Cth),
[12] Fair Work Act 2009 (Cth) ss 539(2), 546(2).
DETERMINATION OF PENALTIES
The approach to determining what penalty is to be ordered in any particular circumstance is well settled. In this instance, there is only one contravention alleged, and therefore omitting those elements which relate to multiple contraventions, the relevant factors as summarised by Bromwich J in Fair Work Ombudsman v NSH North Pty Ltd [2017] FCA 1301 at [36] are as follows:
a)Identify the separate contraventions, with each breach of each obligation being a separate contravention, and each breach of a term of the Award being a separate contravention.
b)…
c)…
d)Consider the appropriate penalty in respect of each final individual group of contraventions, taken in isolation.
e)Consider the overall penalties arrived at, including by reference to those which may be proposed by the FWO … and what is proposed by the respondents, and apply the totality principle, to ensure that the penalties for each respondent are proportionate to the conduct viewed as a whole, making such adjustments as are necessary …
In Kelly v Fitzpatrick [2007] FCA 1080; 166 IR 14, Tracey J adopted the ‘non-exhaustive range of considerations to which regard may be had in determining whether particular conduct calls for the imposition of a penalty, and if it does the amount of the penalty’ set out by Mowbray Federal Magistrate (as he then was) in Mason v Harrington Corporation Pty Ltd [2007] FMCA 7. Relevantly, they were:
(a)the nature and extent of the conduct which led to the breaches;
(b)the circumstances in which that conduct took place;
(c)the nature and extent of any loss or damage sustained as a result of the breaches;
(d)whether there had been similar previous conduct by the respondent;
(e)whether the breaches were properly distinct or arose out of the one course of conduct;
(f)the size of the business enterprise involved;
(g)whether or not the breaches were deliberate;
(h)whether senior management was involved in the breaches;
(i)whether the party committing the breach had exhibited contrition;
(j)whether the party committing the breach had taken corrective action;
(k)whether the party committing the breach had cooperated with the enforcement authorities;
(l)the need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
(m)the need for specific and general deterrence.
Nature and circumstances of the conduct
The contravention in this case arises from the respondent’s failure to comply with, or indeed take issue with, the compliance notice issued by FWI Mullan. The compliance notice related to the respondent’s failure to pay the Employee his proper rate of pay, certain allowances and his annual leave on termination.
In his affidavit sworn 25 March 2021, the Employee has given evidence that:
(a)he was in financial difficulty when he took on the job with the respondent and agreed to a 40c per km rate of pay (being a rate below the prescribed rate under the Award);
(b)he worked long hours to earn as much money as he could;
(c)he raised his underpayment with Mr Demasi, the Director of the respondent and in short, Mr Demasi made it clear he had no intention of paying him anything further;
(d)after he ceased working for the respondent, in 2019, he was diagnosed with cancer;
(e)he was unable to meet the repayments on his utility and now has a bad credit rating; and
(f)he had to relocate to feel safe (in the context of some threatening comments made by Mr Dimasi which are referred to in his affidavit).
In addition to the Employee raising his underpayment claims directly with the respondent, and as set out in FWI Mullan’s affidavit, the respondent was given numerous opportunities to address the alleged underpayment issue before the compliance notice was issued, and numerous opportunities to deal with the compliance notice after it was issued and before legal proceedings were commenced.
Once legal issues were commenced, and notwithstanding attending various hearings, the respondent has not filed any substantive material, they have not filed any material taken issue with the demands made in the compliance notice. As noted, the respondent did not appear at the penalty hearing before me.
The respondent’s conduct in failing to adequately or appropriately engage in this process has resulted in the applicant being forced to initiate these proceedings, incurring further costs and expense.
Deliberateness
It is submitted for the applicant that it is apparent from the respondent’s response to FWI Mullan’s requests during the investigation, that the respondent had no intention of complying with the compliance notice and rectifying the underpayment claims. I agree that this inference could be drawn from the respondent’s communications with the applicant. Moreover, notwithstanding these proceeding having been on foot for over 12 months, and that default orders were made in February 2021, the compliance notice had still, as at the date of the hearing, not been complied with.
Contrition, corrective action and cooperation with enforcement authorities
There is no evidence of any contrition, corrective action or cooperation with the authorities in this case. Quite the contrary. Not only has the respondent taken no action to comply with, or take issue with, the compliance notice, it has not taken any substantive action in these proceedings other than filing a notice of appearance and attending various hearings.
The respondent has at not stage expressed any regret, remorse or contrition for its actions or, importantly, the impact of its actions on the Employee.
Nature and extent of any loss or damage
The Employee has, and continues to be deprived of the benefit of the entitlements owing to him. The affidavit filed by FWI Mullan shows that the Employee was owed at least $6,000 which is a significant amount for an employee, particularly having regard to the relatively short period of employment with the respondent during which this liability accrued. The Employee has given evidence about the impact on him financially and on his mental and physical health as a result of the underpayment.
It is also relevant that the respondent’s failure to comply with the compliance notice, in circumstances where it has not taken any issue with the compliance notice, nor filed any evidence which explains its non-compliance, has caused the regulator to expend public funds in bringing these proceedings.
Size and financial circumstances of the business
In circumstances where the respondent has not filed any material, there is no evidence before the court as to the respondent’s size or financial circumstances.
Deterrence
One of the key factors in determining an appropriate penalty in a particular case is the question of deterrence. As stated by the High Court in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate [2015] HCA 46 at [55]:
… 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 Ltd, is primarily if not wholly protective in promoting the public interest in compliance.
‘… Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law; have any part to play in economic regulation of the kind contemplated by Pt IV .. [of the Trade Practices Act’ … The principal, and it think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.’ (emphasis added)
Similar comments were made in the context of contraventions of the FW Act in Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3 at [116] where the plurality (Keane, Nettle and Gordon JJ) noted:
…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. … 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’étre of its imposition.
Specific deterrence
In this case, it is submitted that there is a particular need for specific deterrence where the respondent remains registered[13] and needs to be deterred from engaging in similar contravening conduct in future. I agree with this submission. The respondent’s conduct throughout the investigation phase, following the issuing of the compliance notice and throughout these proceedings, has demonstrated a clear disregard for its obligations under workplace laws. A penalty is required to be set at a sufficient level to act as a deterrence to the respondent from engaging in similar conduct in the future.
[13] Exhibit A.
General deterrence
As to general deterrence, it is trite to say that a penalty must be set at a level which is likely to dissuade others from engaging in similar conduct in the future and simply seeing this type of penalty as a ‘cost of doing business’.[14]
[14] Fair Work Ombudsman v Yogurberry World Square Pty Ltd [2016] FCA 1290 at [27].
The respondent is located in Victoria and operates in the Road Freight Transport Industry. Material filed by the applicant suggests that this industry generates the second highest number of disputes which are dealt with by the FWO, has a significant number of employing businesses, of approximately 24,000 and there are more disputes referred to in this industry from Victoria that any other State or Territory.[15]
[15] See Mullan Affidavit at [26].
FWO RECOMMENDATION AS TO PENALTY
Having regard to each of these factors, the applicant submits that a penalty of between 60 to 70% of the maximum, ought to be imposed. That equates to a penalty of between $18,900 and $22,050.
It is further submitted that whilst the penalty imposed must not be crushing or oppressive, it must nevertheless bear relatively to the seriousness of the conduct engaged in by the respondent.
In the absence of any evidence before the court about the financial circumstances of the respondent, there is no evidence that a penalty at that level would be crushing or oppressive.
CONCLUSION
Having regard to the circumstances of this matter, including the lack of participation by the respondent notwithstanding having been given numerous opportunities to do so, I find that it is appropriate when balancing all of the relevant considerations to impose a penalty of $21,500.
In coming to this view, I have had particular regard to the need for deterrence both specific and general in cases such as this. I have also had regard to the fact that not only did the respondent fail to engage with the FWO during the investigation phase, and then fail to comply with the compliance notice once issued, but at no stage did it take issue with the compliance notice as permitted by section 717 of the FW Act, nor has the respondent put any evidence before this court as to whether it had a reasonable excuse not to comply.
In those circumstances, and in circumstances where a $6,000 underpayment is significant to the Employee who had only worked for the respondent for about one year, I am satisfied that a penalty of $21,500 is appropriate in all of the circumstances.
For each of these reasons, I make the orders set out at the commencement of these written reasons.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mercuri. Associate:
Dated: 26 July2021
0
8
0