Fair Work Ombudsman v Sheth

[2016] FCCA 3433

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v SHETH & ANOR [2016] FCCA 3433

Catchwords:

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

Legislation:

Fair Work Act 2009 (Cth), s.557
Federal Circuit Court Rules 2001, r.13.03C(1)(e)

Cases cited:
Mason & Harrington Corporation Proprietary Limited (trading as Pangaea
Restaurant and Bar) [2007] FMCA 7

Applicant: FAIR WORK OMBUDSMAN

First Respondent: BIJAL GIRISH SHETH

Second Respondent: BRISCLEAN EMPLOYMENT PTY LTD (ACN 160 144 972)

File Number: BRG 1174 of 2015

Judgment of: Judge Vasta

Hearing date: 10 November 2016

Date of Last Submission: 10 November 2016

Delivered at: Brisbane

Delivered on: 10 November 2016

REPRESENTATION

Counsel for the Applicant: Ms Coulthard

Solicitors for the Applicant: Fair Work Ombudsman

There being no appearance by or on behalf of the Respondents

ORDERS

AND UPON THE DECLARATIONS OF THE COURT THAT the Respondent was involved in (within the meaning of subsection 550(2) of the Fair Work Act) each of the following civil penalty contraventions committed by Brisclean:

A.Section 357 of the Fair Work Act by representing to each of Pranom McManus, A N Tanvir Ahmed, Naresh Kumar and Saradeep Singh that the contracts of employment under which they were engaged were contracts for services under which they performed work as independent contractors;

B.Section 45 of the Fair Work Act by failing to pay minimum rate to each of Pranom McManus, A Tanvir Ahmed, Naresh Kumar and Saradeep Singh pursuant to clause 16 of the Cleaning Award;

C.Section 45 of the Fair Work Act by failing to pay part−time loading to A N Tanvir Ahmed, Naresh Kumar and Saradeep Singh pursuant to clause 12.4(b)(iii) of the Cleaning Award;

D.Section 45 of the Fair Work Act by failing to pay shift penalty loadings to A N Tanvir Ahmed, Naresh Kumar and Saradeep Singh pursuant to clause 27.1 of the Cleaning Award;

E.Section 45 of the Fair Work Act by failing to pay Saturday loading to A N Tanvir Ahmed, Naresh Kumar and Saradeep Singh pursuant to clause 27.2(a) of the Cleaning Award;

F.Section 45 of the Fair Work Act by failing to pay Sunday loading to Naresh Kumar pursuant to clause 27.2(b) of the Cleaning Award;

G.Section 45 of the Fair Work Act by failing to pay public holiday rates to A N Tanvir Ahmed, Naresh Kumar and Saradeep Singh pursuant to clause 27.3 of the Cleaning Award;

H.Section 45 of the Fair Work Act by failing to pay overtime rates for the first 2 hours to Saradeep Singh pursuant to clause 28.2 of the Cleaning Award;

1. Section 45 of the Fair Work Act by failing to pay overtime rates after the first 2 hours to Saradeep Singh pursuant to clause 28.2 of the Cleaning Award;

J.Section 45 of the Fair Work Act by failing to pay overtime rates on public holidays to Saradeep Singh pursuant to clause 28.4 of the Cleaning Award;

K.Section 44 and 45 by failing to pay annual leave entitlements upon termination of employment to A N Tanvir Ahmed, Saradeep Singh and Naresh Kumar pursuant to subsection 90(2) of the Fair Work Act and section 29.7 of the Cleaning Award;

L.Section 45 of the Fair Work Act by failing to pay minimum rate to Ajitpal Singh pursuant to clause 41 of the Vehicle Award;

M.Section 45 of the Fair Work Act by failing to pay casual loading to Ajitpal Singh pursuant to clause 41 of the Vehicle Award;

N.Section 45 of the Fair Work Act by failing to pay Saturday loading to Ajitpal Singh pursuant to clause 41 of the Vehicle Award;

O.Section 45 of the Fair Work Act by failing to pay overtime for the first three (3) hours to Ajitpal Singh pursuant to clause 41 of the Vehicle Award;

P.Section 45 of the Fair Work Act by failing to pay overtime after the first three (3) hours to Ajitpal Singh pursuant to clause 41 of the Vehicle Award;

Q.Section 536 of the Fair Work Act by failing to issue payslips to the Cleaners within one (1) working day of payment;

R.Subsection 535(1) of the Fair Work Act by failing to make or keep employment records as required by sub regulation 3.33(2) of the Fair Work Regulations in relation to the Cleaners;

S.Subsection 712(3) by failing to comply with a Notice to Produce Records or Documents dated 15 August 2014;

T.Subsection 712(3) by failing to comply with a Notice to Produce Records or Documents dated 2 September 2014;

U.Subsection 712(3) by failing to comply

THE COURT ORDERS:

1. That pursuant to r.13.03C(1)(e) of the Federal Circuit Court Rules 2001, the Respondent pay the amount of $126,540.00 pursuant to s.545 of the Fair Work Act within twenty-eight (28) days to the Consolidated Revenue Fund of the Commonwealth.

2. That pursuant to s.545 of the Fair Work Act that the Respondent pay the amount of $59,878.53 to the Applicant within twenty-eight (28) days of these Orders. The Applicant will:

   (a)Within fourteen (14) days of receipt of the amount pay:

   (i)$6,678.68 to A N Tanvir Ahmed;

   (ii)$26,492.62 to Sarabdeep Singh;

   (iii)$22,545.11 to Naresh Kumar;

   (iv)$4,162.12 to Ajitpal Singh; and

3. That in the event that the Applicant cannot locate any of Ajitpal Singh, A N Tanvir Ahmed, Naresh Kumar and Saradeep Singh, pay the applicable amount due to each employee that cannot be located to the Commonwealth within a further seven (7) days.

4. That should the Respondent be unable to comply with the orders in Order 2 by reason of personal insolvency, that the penalties be paid as follows:

   (a)Any penalty payable by the Respondent be paid to the Employees in the appropriate proportion up to the amount of $59,878.53; and

   (b)Any remaining monies be paid to the Consolidated Revenue Fund of the Commonwealth.

5. That the Applicant be granted liberty to apply on seven (7) days' notice.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 1174 of 2015

FAIR WORK OMBUDSMAN

Applicant

And

BIJAL GIRISH SHETH

First Respondent

BRISCLEAN EMPLOYMENT PTY LTD (ACN 160 144 972)

Second Respondent

REASONS FOR JUDGMENT

(Ex Tempore)

1. By application filed on 18 December 2015, the Fair Work Ombudsman sought declarations that the First Respondent, Bijal Girish Sheth, had breached the Fair Work Act 2009(Cth) (“the FW Act”) and was liable for pecuniary penalties.  The matter first came before me in February of 2016.

2. The First Respondent did not appear on that occasion and I did end up making orders.  The First Respondent knew about all of the orders that I had made, and ended up signing an agreed statement of facts that was filed in this court on 22 August 2016 and then consenting to an order that I made in Chambers on 11 October 2016 adjourning the matter to today.

3. Apart from that, he has filed no material and has not appeared here today. As I said earlier in the hearing, I am proceeding pursuant to rule r.13.03C(1)(e) of the Federal Circuit Court Rules 2001 and hearing the matter on the merits.

4. The facts, in short compass, are that the company, Brisclean Proprietary Limited, was a company of which Mr Sheth was the sole director, secretary and shareholder.  He was the controlling mind of the company and he was responsible for the overall direction, management and supervision of the company’s operations, including the setting of pay rates, the maintaining of employee records and the setting of conditions for the employees.  He was the one who was making the decisions on behalf of the company and was, in effect, the man who was behind the corporate veil. 

5. That company has since gone into administration.  However, whilst it was a going concern, it employed five people, Mr Ahmed, Mr Singh, a Mr Kumar, Mr Singh and Ms McManus.  Those persons performed cleaning duties.  The first three seem to be people who cleaned offices and residents.  Mr Singh, it seemed, washed and detailed cars, and whilst Ms McManus was a cleaner, she was mainly cleaning hotel rooms, making beds and changing linen, etcetera.

6. What the company did was instead of employing those five people properly, it told those five people that they were independent contractors and that they had to have a contract with Brisclean.  They were told that they had to get an ABN, to submit that to the company and to submit regular invoices to the company.  In doing so, this was a device used by the company so as to avoid its obligations under the relevant awards which were the Cleaning Award and for Mr Singh, who was cleaning the cars, it is the Vehicle Award.

7. These contracts easily fit the definition under the FW Act as “sham contracts”. This was quite blatant behaviour by the company and certainly by Mr Sheth himself in setting up such a regime where workers were easily exploited. The workers in this case were all from an overseas background where English was not their first language and it was not something that they realised was in contravention of what are Australian National Employment Standards.

8. The fact is that this may not have even come to the notice of the Fair Work Ombudsman, but for the fact that the company was not paying the invoices, which is a staggering set of events.  Of course, once there was a complaint made to the Fair Work Ombudsman, the truth soon started to unravel. 

9. There was a notice to produce given by the Fair Work Ombudsman which was ignored.  Another notice to produce was given and that was ignored.  A further notice to produce was given and that was ignored.  It took four attempts for the Fair Work Ombudsman to get any sort of material and the material that was given was Spartan indeed. 

10. It seems that, notwithstanding that the employees were to give invoices to the company, even those invoices gave very little detail, and it was very hard for the Fair Work Ombudsman to go back and try and recreate what had occurred with the sham contracting. 

11. The dearth of detail in the invoices is something that also points to the audacity of this scheme, because, if it were even thought that there was some form of genuine contracting relationship between the cleaners and the company, there would have to have been a proper record of exactly what it was that was done so that the money could be paid.  It seems simply that the invoicing itself was just something that the company was going through to justify paying the under-award payments that they were making.  It was not a genuine business activity at all.

12. Because of the under-award payment, it meant not only were the workers not paid their minimum wages, for three of them who were, in effect, working part-time, they were not paid their part-time loading;  there was a failure to pay shift loading;  there was a failure to pay Saturday loading;  a failure to pay Sunday loading;  a failure to pay public holiday loading;  a failure to pay overtime rates;  a failure to pay overtime on public holidays;  a failure to pay annual leave on termination;  and, as I say, the failure to make and keep records and certainly a failure to provide payslips.  As well as those, there are the three failures to comply with the notices to produce, as I have said.

13. In order to look at these myriad transactions, but to do so in what would be a fair way, s.557 of the FW Act allows me to group these breaches of the Act. Very helpfully at paragraph 31 of her submissions, Ms Coulthard has grouped a number of these transactions. Whilst I agree in general with what it is that she has done, I am of the view that the failure to pay minimum rates under the vehicle award, the failure to pay Saturday loading under the vehicle award and the failure to pay overtime under the vehicle award are matters that ought be grouped with failing to pay the equivalent minimum rates, Saturday loading and overtime under the cleaning award, and so, thus, I have grouped the offences into a total of 16 offences rather than the 19 that Ms Coulthard suggested.

14. I am also of the view that, even though it had been submitted originally that I could look at what the maximum penalty was before December 2012 and what the maximum penalty is afterwards, and, in effect, add those two together to get a maximum penalty for the group, I am not of the view that that is a proper way for me to proceed. Therefore, on my calculations of the matters, there are 14 groups of offences that carry a maximum of $10,200.00 and two offences that carry a maximum of $5,100.00.  That gives a total maximum penalty that I could impose upon Mr Sheth of $153,000.00. 

15. There are many factors that are relevant to the imposition of a penalty and mostly I have been influenced by looking at the matters that were summarised by Mowbray J in the matter of Mason & Harrington Corporation Proprietary Limited (trading as Pangaea Restaurant and Bar) [2007] FMCA 7.  Whilst His Honour went through some 13 particular aspects, and those aspects have been well and truly recognised by the authorities as being the proper aspects, it is also noted that this is simply not a “tick-a-box” type matter and that one has to look overall at what are the matters that give rise to the sort of penalty that ought be awarded. 

16. In my view, what stands out here has been the sheer audacity of this regime that Mr Sheth has created.

17. It was done in such a way that it exploited persons who were from foreign lands who did not understand our industrial relations system.  It, as it were, made detection very difficult.  It was a scheme designed to allow a casual viewer no other conclusion than these employees were contractors instead of employees. For those reasons, it is a matter that the court needs to come down upon very hard. 

18. The total underpayment is significant in that it totalled $59,878.53.  With regard to these employees, who are at the bottom of the scale working for the minimum wage, to be deprived of a lawful and proper income hits them much harder than it does for other workers who are further up the ladder.  So whilst the quantum is something that I look at, it is a quantum that I look at in the context of who these workers were.

19. As far as the cooperation is concerned, as I had already pointed out, the only thing that Mr Sheth has done is sign the agreed statement of facts.  Whilst that means that there has been a saving to the community of having to prove these matters, the fact is that these matters were going to be easily proved, notwithstanding that that may have taken a little more time and money than was actually expended. For the Fair Work Ombudsman to have to do that would have caused Mr Sheth as well to expend time and money.

20. By the history of the matter that I have already outlined, Mr Sheth has expended no time or money, has not ever turned up for Court and has in some ways treated the Court proceedings with a form of contempt. 

21. That is highlighted by an affidavit of Ms Dwight that has been read and filed today that shows that Mr Sheth is still running a company called Brisclean with a different ACN number and is still in exactly the same business; that is, “an innovative cleaning company currently servicing over 100 venues around Brisbane, Gold Coast, Sunshine Coast, Mackay and Townsville”.

22. They are out in the marketplace, bold as brass with absolutely no remorse for what they have done; as if this is simply an occupational hazard in the way in which they conduct their business.  For that reason, it is my view that there is very little in the way of cooperation for me to mitigate the penalty that I will now impose. 

23. For the sham contracting aspect, I impose a penalty of $10,000.00. 

24. For the failure to pay minimum wages under the Cleaning and Vehicle Award, I impose a penalty of $10,000.00. 

25. For failing to pay the part-time loading under the Cleaning Award, I impose a penalty of $8,000.00. 

26. For the failure to pay shift loading under the Cleaning Award, I impose a penalty of $8,000.00. 

27. For a failure to pay the Saturday loading under the Cleaning Award and the Vehicle Award, I impose a penalty of $9,000.00. 

28. For a failure to pay the Sunday loading under the Cleaning Award, I impose a penalty of $8,000.00. 

29. For a failure to pay the public holiday loading, I impose a penalty of $8,000.00. 

30. For failing to pay overtime rates under the Cleaning Award and the Vehicle Award, I impose a penalty of $9,000.00. 

31. For failure to pay overtime on the public holiday Cleaning Award, I impose a penalty of $8,000.00. 

32. For failing to pay annual leave upon termination, I impose a penalty of $9,000.00. 

33. For failing to pay the casual rates under the Vehicle Award, I impose a penalty of $8,000.00. 

34. For failing to make and keep records, I impose a penalty of $5,000.00. 

35. For failing to provide payslips, I impose a penalty of $5,000.00.

36. For the first failure to comply with the notice to produce, I impose a penalty of $9,000.00. 

37. For the second failure to comply, I impose a penalty of $10,000.00. 

38. And for the third failure to comply, I impose the maximum penalty of $10,200.00. 

39. That gives a total of $133,200.00.  I am of the view that a five per cent discount ought be given. 

40. That would leave a total of $126,540.00 by way of pecuniary penalty. 

41. Under s.545, I am also empowered to make any other order that I feel is in the interests of justice. In this case, I am of the view that I ought make the order that Mr Sheth repay the cleaners the $59,878.53.

I certify that the preceding forty (41) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date: 20 January 2017