Fair Work Ombudsman v SHMAP Group Pty Ltd
[2018] FCCA 3527
•4 December 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v SHMAP GROUP PTY LTD & ANOR | [2018] FCCA 3527 |
| Catchwords: INDUSTRIAL LAW – Application for imposition of civil penalties – agreed Statement of Facts – attempts by respondents to resile from agreed Statement of Facts – determination of matters in dispute – penalties fixed at 29.5 per cent of the applicable maximum. |
| Legislation: Fair Work Act 2009, ss.545, 550, 557(1) Fair Work Regulations2009, reg.3.446 |
| Cases cited: Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301 Kelly v Fitzpatrick [2006] 166 IR 14 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | SHMAP GROUP PTY. LTD. (ACN 611 023 735) |
| Second Respondent: | SAJID AMIN |
| File Number: | MLG 2742 of 2017 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 1 October 2018 |
| Dates of Last Submission: | 1 & 2 October 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 4 December 2018 |
REPRESENTATION
| Counsel for the Applicant: | Ms Kelly |
| Solicitors for the Applicant: | The Office of the Fair Work Ombudsman |
| The Respondents: | Mr Amin the First Respondent in person and on behalf of the Second Respondent. |
ORDERS
The parties are to agree orders and declarations within 7 days and
to forward same to the Court.
In default of agreement the Court will list the matter for mention.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 2742 of 2017
| FAIR WORK OMBUDSMAN |
Applicant
And
| SHMAP GROUP PTY. LTD. (ACN 611 023 735) |
First Respondent
| SAJID AMIN |
Second Respondent
REASONS FOR JUDGMENT
Introductory
This is a penalties hearing arising out of certain admitted contraventions of the Fair Work Act 2009 (Cth) (“FW Act”) and industrial instruments. One might have thought that the existence of
a Statement of Agreed Facts (“SOAF”) would assist the Court significantly, and, more particularly, reduce the degree of controversy in the matter.
In the light of the submissions made by the second respondent – who, by leave of the Court, represented not only himself but the first respondent (of which he has at all times been the controlling mind)
– it is more appropriate to commence with what was said at Court.
Submissions of counsel for the Fair Work Ombudsman in respect of matters in dispute
Counsel pointed to the SOAF. Counsel noted that the alleged underpayments were admitted. In relation to record-keeping and payslips, counsel noted that it was admitted that these were not made within one day, did not express a rate of pay, that the records had not been kept and were false and misleading. Counsel pointed, however, to Annexure A to the SOAF which denoted certain disputed facts and relief.
This shows, relevantly, that the respondents do not agree that SHMAP Group Pty. Ltd. (ACN 611 023 735) (“SHMAP”) knowingly made use of false or misleading entries in respect of hours worked by Ms Lewis, nor that SHMAP made an entry on the Lewis time records without
Ms Lewis’ knowledge, and, accordingly, they deny that SHMAP contravened reg.3.446 of the Fair Work Regulations2009
(“FW Regulations”) by knowingly making use of false or misleading entries in respect of hours worked by Ms Lewis.
In respect of records relating to Mr Lee, the respondents do not agree that SHMAP made any entry on the Mr Lee time records, and,
as a result, did not knowingly make use of false or misleading entries in respect of the hours worked by Mr Lee.
Counsel pointed out that the respondents produced the records to Fair Work Inspector Cordell Malcolm Jackson (“FWI Jackson”). It is agreed (SOAF at paragraph 69) that SHMAP was required to keep records of the hours worked by the employees. At paragraph 70 of the SOAF records that records were kept in respect of Ms Lewis, and paragraph 71 sets out the manner in which those records are false and misleading (namely, that they recorded less hours in the weeks that she worked than she actually worked).
At paragraph 72 of the SOAF, it is agreed that the respondents knew that the hours of work included in the Lewis time records were false and misleading, and this includes actual knowledge on the part of Mr Amin to this effect. It is also agreed in paragraph 72(b) and (c) that, in about December 2016, Mr Amin asked Ms Lewis to sign blank timesheets, and, in around December 2006, Mr Amin created the Lewis time records by recording hours in those records which
Mr Amin knew were less than Ms Lewis’ actual hours of work.
I note that, at paragraph 16 of FWI Jackson’s affidavit affirmed
14 September 2018, it is deposed that Mr Amin handed personnel files for nine employees to him on the second site visit and that copies of the timesheets are behind tab 9 of exhibit CMJ1 and copies of the payslips tab 10.
Counsel submitted that these materials showed that the disputed matters in relation to Ms Lewis were made out.
Counsel submitted that whether Ms Lewis knew that SHMAP made an entry on her timesheets was irrelevant. Counsel pointed out that Ms Lewis had sworn on affidavit that she signed the relevant timesheet before any hours of work were entered on it, that she handed it back to Mr Amin after she signed it and that she did not see or have any knowledge of Mr Amin or anyone else entering any specific hours of work on the relevant timesheet.
It should be noted in passing that the applicant has put FWI Jackson and three employees, Ms Lauren Pennacchia, Mr Kaiwei Jin and
Ms Dayle Lewis on affidavit. In response to a question during the course of the trial, Mr Amin, who impressed me as being extremely articulate and intelligent, unequivocally indicated that he did not seek to cross‑examine.
The dispute in relation to Mr Lee
Counsel referred to paragraphs 77, 79, 81 and 84 of the SOAF. These relevantly concede that SHMAP was required to ensure that records were kept that were not false or misleading to its knowledge, to keep
a record of the hours worked by Mr Lee during the Lee audit period, that SHMAP kept records of those hours as set out at paragraph 79 and provided those records to FWI Jackson by Mr Amin on 27 July 2017.
Paragraph 81 agrees that the Lee time records are false and misleading because they inaccurately record the hours that Mr Lee worked because they do not record any work on Sundays or on public holidays when he, in fact, worked. Paragraph 84 of the SOAF indicates that at all times SHMAP knew the hours of work included in the Lee time records were false and misleading because Mr Amin knew this himself.
The relevant pay records showing that Mr Lee worked on Australia Day and Labour Day are at pages 352 and 359 of the annexures to
FWI Jackson’s affidavit.
Counsel noted that the respondents do not agree that SHMAP made any entry on the Lee time records but submitted that the regulation does not require the employer to make the record; rather, the employer must have the record and keep it.
The submissions of Mr Amin
It should be noted that, as with the preceding account, what follows is taken from my notes. Mr Amin spoke under some pressure of speech at times, and it was not always easy to understand what his submissions were addressing because they had a slightly scattergun approach.
Mr Amin said that the first audit by FWI Jackson found contraventions. He bought the business in June 2016 and had no prior experience. He wanted a franchise business, and he expected it was properly run.
He was given training but was not given enough detail. The franchise was not involved with meetings with the employees. He said he would run the business the same for three to four months. Some employees were much more experienced than him. The audit took place after three to four months, and he was not even there. He told FWI Jackson he did not have much experience. Insofar as false documents were concerned, he did not submit anything false. Whatever the Fair Work Ombudsman (“FWO”) asked, he did. He paid a fine of $12,000 straight away. He was improving the system.
In June/July 2017, he had received the FWO findings. He admitted them straight away. In December 2016, he had no guidance, and he implemented changed software. After that, there were apps in the mobiles and the employees entered their own timesheets. He created a bank file from this. There was no fluctuation on pay rates. There was no entry he could do in their mobiles before they got their salary server.
Ms Lewis is not truthful. She sat in front of him. He did not enter anything. There was a massive fight after three months, and he was overseas at the time. He decided to make her go. After one month, she wanted him to sign documents for Centrelink. He said he would indicate misconduct on those documents, and then she threatened him.
He told employees they would move to fortnightly. They had to put in a fortnightly format. Yes, he filled up the timesheet, but not only Ms Lewis’. No previous timesheets were checked. Employees entered their own. After December 2016, he had no control of the timesheets.
Mr Lee was involved with these girls also. Everyone tried to get the maximum. From 1 January onwards, he had 90 per cent corrected. Mr Lee put two of his girls inside the roster to gain advantage. There was no recording by Mr Amin on Mr Lee’s behalf. Once he started Lee on breaks, he straight away went to FWI Jackson. He now does what the FWO wants.
Further submissions by counsel in respect of the contraventions and penalties
Counsel relied upon the applicant’s outline of submissions. In relation to the nature and the extent of the conduct and the surrounding circumstances, it was submitted that the respondents’ conduct was serious. 15 employees did not receive minimum entitlements. The flat rate of pay they were paid from Monday to Friday was 11 per cent shy. Also, there was no casual loading for 13 out of the 15 employees. The average underpayment was approximately $800 over a nine-week audit period. Counsel referred to Ms Lewis’ affidavit paragraphs 13 and 14, which indicate that Mr Amin was the driving force in her starting work on a pay rate of $15 per hour. Counsel also referred to the affidavit of Mr Kaiwei Jin at paragraphs 10 and 11, which again show Mr Amin setting rates of pay in this case of $14 per hour.
It was submitted that four of the employees were under 20 and four were visa holders and were therefore in disadvantaged situations.
The second significant submission advanced by the counsel was the nature of the loss and damage. The impact on employees was serious. Ms Pennacchia was underpaid $1,672. In her affidavit, she had deposed to relying on this income to pay basic expenses and the difficulties that its non-receipt gave rise to. Counsel also referred to Ms Lewis’ affidavit at paragraph 46 which likewise showed the significant practical difficulties that the underpayments contributed to.
The third significant submission made by counsel concerned the deliberateness of the breaches, or, at least, their recklessness.
Counsel pointed to paragraph 89 of the SOAF by which it is agreed that, at all relevant times, Mr Amin was responsible for determining the rates of pay paid to employees, knew the rates of pay paid to employees, was responsible for authorising payments to them, was responsible for producing payslips on behalf of SHMAP and issuing the same, was responsible for making and keeping records in respect of the employees and knew that the award applied to SHMAP and the employees and knew the award described minimum rates of pay and conditions for the employees.
Counsel referred to paragraph 85 of the written submissions wherein it is described that representatives of Degani Bakery Café Pty Ltd and Mr Amin communicated about the award and the importance of the award on a number of occasions before 14 June 2016 when the franchise started. So much, it was submitted, is made out by paragraph 90(b) of the SOAF in as much as Mr Amin sent an email
to Tracy Truman of Degani Bakery Pty Ltd (“Degani”) on 9 May 2016 where he wrote words to the effect that he would be using the award. It is clear that this is so (see tab 24, page 160 of the exhibits to FWI Jackson’s affidavit).
Further, by virtue of paragraph 90(a) of the SOAF, it is agreed that Mr Amin completed the FWO’s Basic Online Training Course on or around 29 April 2016, which covered, amongst other things, pay awards, types of employment, record keeping and payslips. Mr Amin’s own affidavit deposed at paragraph 4 that:
“all pay rates and rosters were shared with SHMAP, which Rising Fortune told are correct and same should be followed, and SHMAP believed that all wages are correct as all employees were on tax and superannuation was paid”.
It was submitted that Mr Amin demanded that employees record less hours to inflate their pay rates later. Mr Jin has deposed at paragraphs 22 to 25 to this effect and Ms Lewis at paragraphs 40 to 41.
Counsel submitted that the evidence in Mr Lee’s case is that Mr Amin controlled the hours entered. This is further deposed to in FWI Jackson’s affidavit at paragraphs 24, 59 and 60 and appears to be corroborated by text messages at page 136 behind annexure 18 of the annexures to FWI Jackson’s affidavit.
This is further corroborated by the interview with Mr Lee behind tab 45 to FWI Jackson’s affidavit. Similar matters are recorded in respect to Ms Lewis at paragraph 41 of FWI Jackson’s affidavit and appears corroborated by a file note behind tab 35 of the affidavit.
Counsel pointed out that it was the FWO who contacted Ms Lewis, not the other way around. Other employees were on affidavit also.
The final aspect of the recklessness or deliberate nature of the respondents’ conduct flowed from the contravention findings letter dated 5 June 2017. The respondents had already been given the award and pay rates on 7 December 2016 by FWI Jackson. Despite this, it was submitted that on 27 July 2017 the respondents provided the FWO with Mr Lee’s false records.
The fourth submission made related to cooperation and contrition. It was conceded that rectification took place on 29 September 2017, but this did not happen until the proceedings were issued. A new pay system commenced on 4 December 2016 was used to create false records for Mr Lee. There has been no apology to the employees, and the respondents blame everyone else.
Counsel conceded that there was a SOAF, but this should only lead to
a modest discount because the Lee records were still false. The respondents failed to self-audit. The history of this failure is at paragraphs 72 to 81 of FWI Jackson’s affidavit.
The fifth submission made was that specific deterrence was important. Mr Amin still runs the business and is the director and secretary of SHMAP. SHMAP is still operating. There have been incorrect records and abuse of those records. The abuse in relation to Mr Lee was after the FWO was involved, as detailed in the affidavits of Ms Lewis and Mr Jin.
Counsel noted the formal objections taken to Mr Amin’s affidavit. It was noted that relief was partly agreed but penalty was disputed. The requirement on the part of the respondents to undertake training was disputed as was an external audit. It was submitted the latter should be ordered as there had been a failure to self-audit.
The further submissions of Mr Amin
Mr Amin referred to the impact of all this. He referred to the persons who were underage students or on specific visas. He said that, since he started, at meetings he had given small presents from his own pocket. He understood teamwork works. His intentions were good. He discussed with employees and took care of the students. He had no intention to demoralise employees. After months, he saw which people could handle more shifts and multitasking. Hiring people was left to him. The previous owner had said people would work here in Greensborough and be paid cash.
Mr Amin said no one had ever opened the award in front of him and explained it to him. It was never discussed in any detail. An employee from Perth told him. The broker who sold him the business gave him a different picture from Degani. There were two different awards. Either the restaurant or the fast-food award could apply. He had no prior experience. The franchise knew this. They knew the names of the employees, and he was told to hire them. There were some 14 or 15 employees. He referred to his affidavit. Half the employees had prior experience. Rates were from the employees. He had the impression these were from the previous employer. He had two weeks’ training in the Greensborough shop and had to listen to the people around him.
The FWO went to Mr Lee’s affidavit, which says he ordered them to alter hours. He said they entered the hours from the mobile application. Mr Lee was the only one he asked to falsify timesheets. He had been supportive to Dayle (Ms Lewis). She went abroad for two months, and he gave her her job back. Dayle did various entries from the mobile application. Kaiwei Jin had no experience and does not speak English. He asked why Edmond had not put in an affidavit. He had worked for cash. Employees asked to work for cash, but he refused. He tried to go legally. (Mr Amin appeared to place all the blame in relation to Mr Lee on Mr Lee). He said luckily he did not listen to him completely.
He tendered as exhibit R1 payslip documents which are, in fact, annexed to FWI Jackson’s affidavit. He had provided all documents in relation to the self-audit and had not known what else he should provide.
Mr Amin said earlier this year there had been a press release by the FWO. This had placed huge problems on him. He had problems with the franchise and problems with the shopping centre. He had invested all the money he had saved. He is going to try and recover half his investment. He asked, “When is it going to stop?” He said he was going to sell the premises. He said, “Any penalty, I can’t pay. I do
a private job and have good money. It is all pumped into the business. Since the findings letter, everything has improved.” He had invested $400,000 in the business, and it would be hard to sell.In response, counsel pointed out that no employees had been called by Mr Amin.
Mr Amin’s affidavit
Much of the introductory paragraphs are consistent with the oral submissions that Mr Amin made. I note that, at paragraph 10, he set out flat rates of pay. The affidavit at paragraph 11 asserts that there was a process of transition from weekly to fortnightly pay and that most of the contraventions were done unintentionally and followed what the store was doing for more than a year.
The affidavit deposed to receiving the contravention letter of 5 June 2017 and asserted that SHMAP commence work to rectify the underpayment by instalments which were paid out by 29 December 2017. The affidavit asserts complete cooperation on SHMAP’s part with the FWO. It deposes to difficulties in understanding awards and
a lack of prior experience. It repeats criticism of Ms Lewis and Mr Lee. The affidavit repeats denials on Mr Amin’s part of knowledge of the entry of hours of work. He sought to downplay his receipt of an email from Michelle Brooke of Degani on 23 May 2016 where Ms Brooke wrote words to the effect that SHMAP must pay in accordance with the award and that this was black and white. Likewise, he sought to downplay the receipt of another email from Ms Brooke on 8 August 2016 which included words to the effect that he should contact the FWO for the most up‑to‑date copy of the industry award.
Largely, the applicant’s objections to the respondents’ evidence are either that they contradict matters in the SOAF or that they are irrelevant. The objections, in my view, should be upheld.
Findings on the areas of disputed liability
In substance, the defence offered by the respondents in respect of Ms Lewis amounts to endeavours to resile from the SOAF.
In my view, the admissions contained in the SOAF, taken with the evidence in FWI Jackson’s affidavit and the affidavits of the employees who were expressly not required for cross-examination, mean that it is quite clear that the respondents contravened reg.3.446 of the
FW Regulations by knowingly making use of false or misleading entries in respect of the hours worked by Ms Lewis. There is no question that, by paragraphs 69 and 70 of the SOAF, SHMAP was required to and did keep records of the hours worked by Ms Lewis. By paragraph 71, it is clear that those records were false and misleading because they recorded less hours of work in the relevant weeks than Ms Lewis actually worked. By paragraph 72, SHMAP knew that the hours of work in the Lewis time records were false and misleading because Mr Amin knew what hours she had worked, that he asked her to sign blank timesheets, and, in December, created the time records which he knew were less than Ms Lewis’ actual hours of work.
It is beyond question that these misleading records were provided
to FWI Jackson and thus the first respondent made use of them. This contravention is plainly made out.
In relation to the Lee records, paragraph 79 of the SOAF records that SHMAP kept records of hours worked by Mr Lee. By paragraph 80,
it is admitted that those records were provided to FWI Jackson by
Mr Amin on behalf of SHMAP. By paragraph 81, it is agreed that the Lee time records are false and misleading because they do not record the work that he did on Sundays and public holidays. It is agreed that Mr Lee worked on the various Sundays and Australia Day and Labour Day. By paragraph 84 of the SOAF, it is agreed that SHMAP knew the hours of work in the Lee records were false and misleading because
Mr Amin knew the actual hours worked by Mr Lee, including the Sundays and public holidays, and it is agreed that Mr Amin requested Mr Lee to record the Labour Day hours as worked on some other day.
FWI Jackson has given evidence that, on 7 July 2017, he issued
a Notice to Produce Records to SHMAP and that he was provided the Lee records in response. This production was, as the applicant’s written submissions point out, a use of the records within the meaning of the FW Act. In the face of the agreed matters, it is plain that this contravention is also made out.
Mr Amin’s endeavours to explain away the various matters as being the responsibility of the employees themselves to whom he effectively attributed malice and/or misconduct are simply not susceptible of being made out on the materials.
Given the nature of the knowledge of SHMAP, being at all times effectively that of Mr Amin, it is obvious that he was involved in the contraventions within the meaning of s.550 of the FW Act.
The penalties to be imposed
The applicant’s written submissions set out at paragraph 40 the methodology which it is submitted the court should adopt in determining penalty. I accept that methodology is appropriate and have regard to the authorities footnoted to the paragraph. In my respectful view, this approach is now sufficiently well-established not to require the extensive citation of authority. It is perhaps sufficient to note that, in Fair Work Ombudsman v NSH North Pty Ltd trading as New Shanghai Charlestown [2017] FCA 1301, Bromwich J expressly endorsed such an approach.
Identification of separate contraventions
It is clear, as the applicant’s written submissions point out, that there are 12 separate contraventions of separate obligations under the FW Act and Regulations as set out in paragraphs 37 and 38 of the submissions.
Course of conduct – section 557(1)
Section 557(1) of the Act reads:
“For the purposes of this part, two or more contraventions of a civil remedy provision referred to in subsection (2) are, subject to subsection (3), taken to constitute a single contravention if:
(a) the contraventions are committed by the same person; and
(b) the contraventions arose out of a course of conduct by the person.”
At paragraphs 45-46 of the written submissions, the applicant asserted:
“45. The FWO accepts that the Respondents are entitled to the benefit of section 557(1) in relation to repeated contraventions of each separate obligation under the Award, resulting in separate breaches of section 45 of the FW Act. The FWO also accepts that the Respondents are entitled to the benefit of section 557(1) with respect to repeated contraventions of each separate obligation under section 536(1) and under section 536(2) of the FW Act.
46. By reason of regulation 4.03A of the FW Regulations, the FWO also accepts the Respondents are entitled to the benefit
of section 557(1) of the FW Act with respect to the repeated contraventions of regulation 3.441 by keeping the Lewis time records and with respect to repeated contraventions
of regulation 3.441 by keeping the Lee time records. However, because the Lewis time records and Lee time records relate
to different employees, were kept at different times (November 2016 compared to January to April 2017) and kept in different ways (handwritten timesheets as opposed to electronically),
the FWO submits that keeping the Lewis time records and the Lee time records arose out of separate acts and decisions and does not constitute a single course of conduct.”
I accept the force of those submissions, and I also accept the analysis of the contraventions set out paragraph 48 of the applicant’s submissions. There are 12 contraventions of the FW Act and Regulations.
Common elements of two or more contraventions
I accept the concession made by the applicant at paragraph 50 of the written submissions that:
“In addition to the statutory course of conduct provisions outlined above, it is open to the Court to group separate contraventions where the contraventions contain common elements or can be said to overlap with each other. It would be appropriate for the Court to group contraventions where, if they were treated separately, it would potentially penalise the respondents twice for the same or substantially similar conduct.”
The applicant concedes that the contraventions relating to minimum adult rates of pay and minimum junior rates of pay share common elements in that they arose from the same conduct of underpaying base minimum wages, and I accept the concession that those may be grouped together. I also accept the submission that, otherwise, the contraventions arise from separate and distinct entitlements and should be assessed individually.
It might be thought at one level of analysis that the various underpayment claims, of which there are six, all spring from the same course of conduct, namely, paying flat rates of pay. In my view, that is not appropriate. I accept the submission of the applicant that to do so would give insufficient weight to the separate legal character of the obligations.
I note that the applicant has set out in annexure A to the written submissions the maximum penalties that may be imposed against the respondents together with suggested penalty ranges. I accept that the maximum penalties that may be imposed are $396,000 with respect to SHMAP and $79,200 with respect to Mr Amin.
The level of penalties to be imposed
It is accepted that here is a useful list of possible relevant matters as set out by Tracey J in Kelly v Fitzpatrick [2006] 166 IR 14 (“Kelly”), accepting the proviso that these are not a catalogue of matters that are required to be taken into consideration.
I bear steadily in mind the observations of Gyles J in A & L Silvestri
v CFMEU [2008] FCA 466 at [6]:“The discretion is at large. There are no mandatory statutory criteria, and it is wrong to regard factors seen as relevant by one court as statutory criteria. Indeed, lists of facts can confuse an essentially straightforward task and lead to over-elaborate reasoning.”
Nature and extent of conduct and circumstances in which the conduct took place
I accept the applicant’s submission that the respondents conduct represents a serious failure to afford employees basic minimum entitlements. All 15 employees were underpaid, and the contravention in relation to records of Mr Lee’s hours of work lasted from 8 January 2017 to 23 April 2017.
It is clear that SHMAP admits that it paid flat hourly rates of pay rather than the minimums prescribed by the award at rates ranging from $12 an hour to $23.64 an hour. The details of the underpayments are set out in the applicant’s written submissions. As indicated earlier, the average underpayment was $834 per employee over the nine-week audit period, which is a significant amount for employees at low rates of pay. The evidence shows that the employees were not in a position to bargain meaningfully with Mr Amin and a number of the employees were either young and/or students and/or on restrictive visas.
Given the underpayment, I accept the applicant’s submission that the failure to provide appropriate pay slips was especially important. It has the inevitable consequence that the employees were not readily able
to monitor and pursue their legal entitlements. I accept the evidence of Ms Pennacchia, who said that her payslips were difficult to understand because of these inadequacies.
I note – and, with respect, agree with – the passage in the applicant’s extract of the decision of Riethmuller FM, as his Honour then was, in Fair Work Ombudsman v Taj Palace Tandoori Indian Restaurant Pty Ltd [2012] FMCA 258, where his Honour said, at [67]:
“Whilst the record-keeping obligation with respect to pay slips only appears in the Regulations, its central importance in industrial matters cannot be underestimated. Proper pay slips allow employees to understand how their pay is calculated and therefore easily obtain advice. Pay slips provide the most practical check on false record keeping and underpayments, and allow for genuine mistakes or misunderstandings to quickly be identified. Without proper pay slips, employees are significantly disempowered, creating a structure within which breaches
of industrial laws can easily be perpetrated.”
I note and accept the submission that not only were the employees vulnerable by virtue of their age, they were vulnerable because they were low-income earners reliant on the protection of their minimum wages. The evidence of the effects of underpayment has already been alluded to. Four of the employees were visa holders and were obviously significantly disempowered.
I note that final rectification of the underpayments was not completed until December 2017, about six months after the contravention letter.
The size of the business involved and the financial circumstances of the employers
The respondent was not a large institutional employer, employing at least 15 employees during the audit period. I respectfully adopt what Tracey J said in Kelly at [28]:
“No less than large corporate employers, small businesses have an obligation to meet minimum employment standards and their employees, rightly, have an expectation that this will occur. When it does not, it will, normally, be necessary to mark the failure by imposing an appropriate money sanction. Such
a sanction “must be imposed at a meaningful level”.
The respondents’ financial circumstances are in no ways clearly denoted. Mr Amin said in oral submissions that he has put $400,000 of his savings (all of them) into the business and does not expect to recoup it. He also said, however, if I understood him correctly, that he has ancillary employment which is well paid and that he puts that money into the business also. Mr Amin has not gone to the lengths of giving any detailed explanation of his financial circumstances.
Even if either his or SHMAP’s finances are in disarray, I would observe that those who contravene industrial law cannot expect to have otherwise appropriate penalties tailored to meet their own financial exiqiencies.
Deliberateness of the breaches
Despite Mr Amin’s powerfully expressed submissions orally, and largely repeated in his affidavit, as to his exculpation, it is clear that these were deliberate breaches. I accept the submission of the applicant that, at the very least, he was reckless. He had clearly been alerted to the existence and importance of the award. In oral submissions, he appeared to complain that others had not taken the time and trouble to educate him properly. Not only does the evidence suggest that some endeavours were made to so educate him, it is for him as the employer, and for the employer itself through him, properly to inform themselves, particularly when they were on clear notice that obligations were extant. This is all the more so the case in respect of the false records relating to Mr Lee, which were, as the material makes clear, deliberate.
Involvement of senior management
Mr Amin was at all times a director of SHMAP and responsible for the overall management of the business. It is through Mr Amin’s actions that the contraventions occurred. Notwithstanding this, however, to talk in terms of senior management about what has all the appearance of being a one-man show is perhaps to exaggerate the issue. It is not a matter to which, in the circumstances, I give any greater weight than to note that Mr Amin was plainly involved within the meaning of s.550 of the FW Act with all the contraventions.
Corrective action and contrition
There has been a measure of corrective action. The underpayments have been rectified. Nonetheless, this took a not inconsiderable period of time. The respondents have, however, saved the Court time and money by agreeing to the SOAF (albeit that this agreement has been somewhat undercut by the submissions made orally and on affidavit by Mr Amin). I further accept that, by introducing an MYOB electronic timekeeping and payslip system in December 2006 that allows employees to record their hours of work through a mobile application, matters have improved.
Insofar as contrition is concerned, Mr Amin deserves little credit. He has roundly sought to blame everyone but himself before the Court. There is no need to say more than that.
Cooperation with the authorities
The applicant concedes that the respondents are entitled to a discount due to their cooperation but submits that it should be modest because the false records relating to Mr Lee were kept after the investigation commenced and provided to the FWO and put minimal effort into conducting self-audits.
I accept the force of these submissions. I note the 15 per cent discount contended for by the applicant and think that it is appropriate.
Need to ensure compliance with minimum standards
Once again, I accept the submission of the applicant that, in this case, this is an important matter. Preservation of an effective safety net for employee entitlements and effective enforcement mechanisms are important. As was pointed out in Fair Work Ombudsman v JS Top Pty Ltd & Anor [2017] FCCA 1689 at [61]:
“The failure of a business owner to comply with minimum employment standards and recording practices places them at a direct commercial advantage to owners of similar businesses, in a franchise context or otherwise.”
The creation of false and misleading records is an important factor in this case.
General deterrence
It is well-established that the primary, if not the only, purpose of civil penalties is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and others who might be tempted to contravene (see Commonwealth of Australia
v Director, Fair Work Building Inspectorate & Ors [2015] HCA 46at [55].
In this case, it is obvious that, in the retail industry, general deterrence is important. It is an industry notoriously open to underpayment and exploitation of workers.
This matter is the subject of more detailed consideration in the applicant’s written submissions, but, in my view, it is not necessary
to traverse those matters as the observation just made is trite.
Specific deterrence
Mr Amin appeared to suggest that he does not propose to continue operating the business. The fact is that he still is. Mr Amin’s total lack of contrition, and his earnest endeavours to blame everybody but himself for his own contravention, suggests that specific deterrence
is a matter to which weight should be given in this application.
The applicant has proposed a range of penalties for the first respondent from $110,160 to $143,820 and for Mr Amin of $22,032 to $28,764, being in each instance 28 per cent to 36 per cent of the applicable total maximum penalties before the 15 per cent discount, (noting that the disputed contraventions are established).
The Court is, of course, required, as a final check, to apply the totality principle. The Court has to examine the aggregate penalty to determine by a process of instinctive synthesis whether the aggregate penalty
is an appropriate response to the conduct which led to the contraventions. It must not be crushing or oppressive but also must be commensurate with the seriousness of the conduct engaged in by the respondent (see Fair Work Ombudsman v Promoting U Pty Ltd [2012] FMCA 58).
I note that, following the decision of the High Court in Commonwealth v Director, Fair Work Building Industry Inspectorate & Ors [2015] 258 CLR 482, the Court can properly have regard to the submissions made by the applicant as to what the appropriate quantum is.
I agree with the range percentages suggested by the applicant in the annexure to the written submissions. They accord, in my view, with the seriousness of the conduct, and, in particular, the seriousness of the issues relating to Mr Lee’s records. I would fix the percentage of penalty at 35 per cent in each instance, to which the 15 per cent discount should be applied, producing a total penalty of 29.75 per cent.
I think that penalties of $117,810 for the first respondent and $23,562 for the second respondent are, in the ultimate, an appropriate outcome given the totality of the circumstances of the case. While they
are significant penalties, particularly in relation to SHMAP, they are penalties which, in my view, are not crushing and are the proper amount required to achieve the various results, including particularly general and specific deterrence, that the circumstances of this case require.
Ancillary relief
The question of declarations is not likely to be significant as they are essentially agreed. I accept that it is appropriate in the circumstances of this case to make declarations clearly identifying the contravening conduct.
I think that SHMAP and Mr Amin should pay the pecuniary penalties within 60 days of the orders being made. I accept that Mr Amin should undertake training and education using the FWO’s Online Learning Centre. I do not accept that SHMAP should be compelled to conduct an audit of its compliance with the FW Act for a further three‑month period and rectify any contraventions as it would seem to me that this requires SHMAP to prove the case against itself.
I also accept that the Court has power under s.545 of the FW Act
to make preventative orders (see Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2018] HCA 3 at [10]). Such orders have in the past been made both by the Federal Court and this Court. I accept that training orders are necessary to assist preventing SHMAP and Mr Amin from being involved in further contraventions of the FW Act.
I will order the parties to draft orders to give effect to these conclusions.
I certify that the preceding ninety-four (94) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Associate:
Date: 4 December 2018
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