Fair Work Ombudsman v Skyjohn Pty Ltd
[2022] FedCFamC2G 563
•12 July 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fair Work Ombudsman v Skyjohn Pty Ltd [2022] FedCFamC2G 563
File number(s): ADG 337 of 2021 Judgment of: JUDGE BROWN Date of judgment: 12 July 2022 Catchwords: INDUSTRIAL LAW – fair work – claim for unpaid leave entitlements following termination of employment – penalty hearing – failure to comply with Compliance Notice – where respondents have not participated in proceedings – first time offenders – primacy of issues – relating to general and specific deterrence – calculation of penalty Legislation: Crimes Act 1914 (Cth) s 4AA
Fair Work Act 2009 (Cth) ch 2, ss 3, 90, 539, 546, 550, 681, 682, 701, 706, 712, 716, 717
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), rr 13.04, 13.05
Cases cited: Australian Building and Construction Commissioner v Pattinson [2022] HCA 13
Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCFCA 8
Blandy v Coverdale NT Pty Ltd [2008] FCA 1533
Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290
Fair Work Ombudsman v Corporation Sun Pty Ltd [2020] FCCA 2849
Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709
Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365
Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557
Fair Work Ombudsman v Matcraft Pty Ltd & Ors [2021] FCCA 272
Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801
Kelly v Fitzpatrick [2007] FCA 1080
Mason v Harrington Corporation Pty Ltd [2007] FMCA 7
Minister for Immigration & Citizenship v Li (2013) 249 CLR 332
Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65
Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412
Veen v R (No 2) (1988) 164 CLR 465
Division: Division 2 General Federal Law Number of paragraphs: 99 Date of hearing: 10 June 2022 Place: Adelaide Counsel for the Applicant: Mr Bergander-Florek Solicitor for the Applicant: HWL Ebsworth Lawyer Solicitor for the Respondents: No appearance
Table of Corrections 18 August 2022 In paragraph 93 and Order 4a the sum of $13,320.00 has been replaced by $16,650.00 18 August 2022 In paragraph 93 and Order 4b the sum of $2,664.00 has been replaced by $3,330.00 ORDERS
ADG 337 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: FAIR WORK OMBUDSMAN
Applicant
AND: SKYJOHN PTY. LTD. (ACN 008 142 756)
First Respondent
PETER ALBERT ROBINSON
Second Respondent
ORDER MADE BY:
JUDGE BROWN
DATE OF ORDER:
12 JULY 2022
*AMENDED 18 AUGUST 2022THE COURT DECLARES THAT:
1.The First Respondent contravened section 716(5) of the Fair Work Act 2009 (Cth), (hereinafter referred to as the Act) by failing to comply with the Compliance Notice.
2.The Second Respondent was involved, within the meaning of section 550(2) of the Act, in the contravention of section 716(5) of the Act by the First Respondent, and has therefore contravened section 716(5) of the Act pursuant to section 550(1) of the Act.
THE COURT ORDERS THAT:
3.Pursuant to section 545(1) of the Act, the First Respondent take the steps that were required by the Compliance Notice, within 28 days of this order by:
(a)paying Simon Miller (“Mr Miller”) a net amount of $1,019.34; and
(b)prepare and produce to the Applicant proof that $1,019.34 was paid to Mr Miller.
4.Pursuant to section 546(1) of the Act:
(a)the First Respondent pay a pecuniary penalty of
THIRTEEN THOUSAND, THREE HUNDRED AND TWENTY DOLLARS ($13,320.00)*SIXTEEN THOUSAND, SIX HUNDRED AND FIFTY DOLLARS ($16,650.00) for the First Respondent's contravention of section 716(5) of the Act; and(b)the Second Respondent pay a pecuniary penalty of
TWO THOUSAND, SIX HUNDRED AND SIXTY FOUR DOLLARS ($2,664.00)*THREE THOUSAND, THREE HUNDRED THIRTY DOLLARS ($3,330.00) for his involvement in the contravention by the First Respondent of section 716(5) of the Act.
5.Pursuant to section 546(3) of the Act, the pecuniary penalty ordered to be paid by the First and Second Respondent in order (4) above is paid to the Commonwealth within twenty eight (28) days of the date of this order.
6.The Applicant has liberty to apply on 7 days' notice in the event that any of the preceding orders are not complied with.
THE COURT NOTES THAT
A.These Orders have been amended pursuant to rule 17.05(2)(e) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 on 18 August 2022
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 variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE BROWN:
INTRODUCTION
The Fair Work Ombudsman[1] commenced these proceedings against Skyjohn Pty Ltd and Peter Albert Robinson (“Mr Robinson”) on 12 November 2021. The proceedings are instituted pursuant to the provisions of the Fair Work Act 2009 (Cth)[2].
[1] Hereinafter referred to as “the FWO” or “the Ombudsman”.
[2] Hereinafter referred to as “the FWA” or “the Act”.
At relevant times, Skyjohn Pty Ltd[3] operated a motor vehicle repair business at 84 Exeter Terrace, Dudley Park, in the State of South Australia. Skyjohn is a small business and the Second Respondent, Mr Robinson, is its sole director and the person who manages its overall operation and management. As such, he is responsible for ensuring that Skyjohn meets its obligations, as an employer, pursuant to the provisions of the FWA.
[3] Hereinafter referred to as “Skyjohn”.
Skyjohn employed Simon Miller (“Mr Miller”), in its business, at an hourly rate of $30.00 gross. Mr Miller left the employment of Skyjohn on 12 March 2021. As a consequence, he was entitled to be paid accrued unused annual leave entitlements, together with a loading of 17.5%, pursuant to the National Employment Standards.
On 8 April 2021, Mr Miller contacted the FWO alleging that Skyjohn had failed to pay him his entitlements following the end of his employment with it. As a consequence, the Ombudsman appointed a Fair Work Inspector, Ms Monica Okulicz, to investigate Mr Miller’s complaint of having been underpaid.
As part of the investigation, Mr Miller provided to Ms Okulicz his payslip for the period from 11 March 2021 to 17 March 2021, which indicated that he was due an amount of $3,499.34 after payment of tax. This included an amount of $3,567.34 gross for accrued but unused annual leave.
After Mr Miller had left Skyjohn’s employment, he and Mr Robinson entered into an agreement by which Mr Miller would be paid his outstanding entitlements by weekly instalments of $500.00. Pursuant to this agreement, a total sum of $2,480.00 was paid to Mr Miller in instalments which occurred on 16 March; 8 April; 14 April; and 22 April of 2021; respectively. Ms Okulicz was able to confirm these payments by reviewing Mr Miller’s bank records.
In late-April 2021, Ms Okulicz conducted an analysis of the documents provided to her by Mr Miller and concluded that he was entitled to a further net payment of $1,019.34, given her understanding of the amounts which he had already been paid and the monies owing when he left Skyjohn’s employ.
In these circumstances, she began to correspond with Mr Robinson via email. In this correspondence, Mr Robinson confirmed, on 29 April 2021, that there was an agreement between him and Mr Miller to pay the latter the sum of $500.00 per week until the outstanding entitlements had been paid to him.
On 29 April 2021, Mr Robinson contacted Ms Okulicz by telephone and indicated that he had not been able to pay any further amounts to Mr Miller because the bank had frozen his account.[4] Mr Robinson further indicated his intention to pay the monies due, when the issues with his bank had been sorted out.
[4] See Annexure AC 5 to Affidavit of Adam Charles Douglas Corn filed 1 June 2022.
Section 90(2) of the FWA provides as follows:
(2) If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.
The section contains one of the relevant terms and conditions of the National Employment Standards.
As a consequence of the advice provided to her by Mr Robinson, Ms Okulicz formed a belief that Skyjohn had failed to pay Mr Miller his unpaid annual leave, on the termination of his employment and thus had breached section 90(2) of the Act.
In these circumstances, the FWO determined to issue a Compliance Notice directed toward Skyjohn and its sole director, Mr Robinson, pursuant to the provisions of section 716(2) of the FWA. In general terms, the relevant Compliance Notice required Skyjohn to undertake a number of steps in order to discharge its obligations under the Compliance Notice. These can be summarised as follows:
·Calculate the number of hours of annual leave that had accrued to Mr Miller when he left the employment of Skyjohn;
·Calculate the amount of hours of annual leave Mr Miller should have been paid, when his employment ended;
·Calculate the monies actually paid to Mr Miller, for accrued unused annual leave after his employment ended;
·Subtract the lesser amount from the greater amount and pay it to Mr Miller; and
·Provide written proof to the FWO of these calculations and evidence that the amount owed to Mr Miller had been paid to him.
The relevant Compliance Notice required Skyjohn to undertake these actions prior to 18 June 2021 and provide the prerequisite proof by 25 June 2021. It is the FWO’s position that Skyjohn did not comply with this Notice.
It was against this background that the FWO has commenced proceedings against Skyjohn and Mr Robinson, in this court, which commenced on 12 November 2021. The FWO seeks the imposition of monetary penalties on both Skyjohn and Mr Robinson, pursuant to section 716(5) of the FWA for failing to comply with the relevant Compliance Notice, together with further orders directing that Mr Miller be paid his termination leave entitlements.
The relevant Statement of Claim was personally served on Mr Robinson on 19 December 2021, at an address in suburban Adelaide.[5] In addition, Skyjohn was served at its registered office on 14 December 2021.[6]
[5] See Affidavit of Service of Colin Andrew Dale filed 10 January 2022.
[6] See Affidavit of Service of Timothy Chambers filed 10 January 2022
The case first came into court on 15 March 2022 on which occasion neither respondent appeared. They were each ordered to file answering documents within 28 days and the case was adjourned until 19 April 2022. Thereafter, neither Mr Robinson nor Skyjohn had filed any response or a defence to the Statement of Claim, or taken any active role in defending the proceedings.
In these circumstances, on 19 April 2022, default judgment, in respect of liability, was entered against both Skyjohn and Mr Robinson. These orders were made pursuant to the provisions of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), on the basis that neither Skyjohn nor Mr Robinson had taken any necessary procedural steps in the proceedings and axiomatically had failed to defend them with due diligence.[7]
[7] See Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 13.04(2)-13.05(2).
In addition, on 19 April 2022, the proceedings were adjourned until 10 June 2022 when it was anticipated that the FWO would make submissions as the appropriate penalty to be imposed on each respondent. I am satisfied that both Skyjohn and Mr Robinson were aware of this hearing but once again have elected not to take part in the proceedings.
On 1 June 2022, the FWO filed detailed submissions regarding the appropriate penalties to be imposed, which were supported by an affidavit of Adam Corn, who is the Fair Work Inspector who has been designated to oversee the prosecution in this matter.
Given the non-involvement of Skyjohn and Mr Robinson, I acknowledge that I have no information regarding either respondent’s financial circumstances or whether there are any mitigating factors, from their perspective, which ameliorate the failure to pay Mr Miller the full extent of his wage entitlements. However, in my view it is clear that the person solely responsible for this omission, can only be Mr Robinson, who is the sole director and administrator of Skyjohn.
As a consequence of the default judgment entered against the respondents on 19 April 2022, it has been formally found that the Compliance Notice in question was legally valid and properly issued and it has not been complied with because Skyjohn, through the agency of its director Mr Robinson:
·failed to take the specified action by the date and time specified in it; and
·did not produce to Ms Okulicz or the FWO reasonable evidence of their compliance with the Notice by the date and time specified.
Accordingly, it has been established that the relevant provision of the FWA relating to non-compliance with the relevant Notice has been contravened and therefore attracts a penalty pursuant to the Act.
This contravention engages the provisions of section 716(5) of the Act, which renders it a civil remedy provision if a person fails to comply with a Compliance Notice. Pursuant to section 539(2), a breach of section 716(5) potentially attracts a fine of up to 30 penalty units. At relevant times, a penalty unit amounted to $222.00 for an individual.[8]
[8] See Crimes Act 1914 (Cth) s 4AA; see Outline of Submissions of the Fair Work Ombudsman filed 1 June 2022 at [15].
However, pursuant to the provisions of section 546(6) of the FWA, if the person contravening the relevant civil penalties provision is a body corporate, the maximum penalty applicable is five times that applying to a natural person. Accordingly the maximum penalty liable to be imposed on Mr Robinson is one of $6,660.00 and on Skyjohn one of $33,300.00.
It is the submission of the FWO that each respondent’s conduct warrants a penalty of 80% of the maximum penalty, which would result in a penalty being imposed on Mr Robinson of $5,328.00 and on Skyjohn one of $26,640.00.[9]
[9] See Outline of Submissions of the Fair Work Ombudsman filed 1 June 2022 at [42].
In the relevant Statement of Claim, the FWO seeks that any pecuniary penalty imposed by the court be paid to the Commonwealth within 28 days of imposition pursuant to the provisions of section 546(3) of the Act.
It is the FWO’s position that $1,019.34 of the amount of wages due to Mr Miller, when he ceased employment at Skyjohn, remain outstanding. In these circumstances, it seeks further orders requiring payment of this sum together with interest and provision of proof that it has been paid.
As it has been formally established that the relevant provision of the FWA relating to non-compliance with the relevant Notice have been contravened, it falls to the court to calculate the appropriate penalties pursuant to the Act. These reasons for judgment relate to the calculation of that penalty and what are the relevant factors which should inform it.
THE RELEVANT LEGISLATIVE PROVISIONS
The objects of the FWA are contained in section 3. They include the provision of an industrial safety net, for Australian employees, which is maintained through the enforcement of a system of minimum terms and conditions specified in the modern award system.
The Office of the Fair Work Ombudsman is created by section 681 of the FWA. One of the functions of the Ombudsman under section 682 of the FWA is to enforce compliance with the Act, including any workplace obligations residing on employers, as a consequence of relevant industrial awards, mandating rates of pay and conditions of employment.
In turn, the FWO may appoint Fair Work Inspectors, who are authorised to utilise what are characterised as compliance powers.[10] In general terms, inspectors are directed to investigate complaints in respect of breaches of the industrial law and are authorised to enter workplaces and determine whether an employer has contravened the law, including in respect of the application of any relevant modern award or otherwise failed to comply with the industrial safety net.
[10] See Fair Work Act 2009 (Cth) s 706.
In addition, the FWO has a responsibility to educate, advise and assist, both employers and employees, in respect of their respective obligations, arising under the Act and, if necessary, commence proceedings, in appropriate courts, to enforce the provisions of the FWA.
Pursuant to section 701 of the Act, the FWO is also a Fair Work Inspector. The FWA empowers the Ombudsman to delegate its statutory responsibilities to Fair Work Inspectors. The Act confers upon such inspectors a number of powers in order to ensure compliance with provisions of the Act. Among other things, inspectors can enter the work place and require the production of employee records.[11]
[11] See Fair Work Act 2009 (Cth) s 712(1).
In addition, the FWO, as a consequence of its status as a Fair Work Inspector, has statutory authority to bring proceedings under the Act and seek the imposition of penalties, if breaches of the FWA are established.[12]
[12] See Fair Work Act 2009 (Cth) s 539(2).
Section 716 of the Act provides that, if an inspector believes, on reasonable grounds, that a person has contravened a term of a modern award, the inspector concerned may issue that person with a ‘Compliance Notice’ requiring the person nominated to take action to remedy the contravention in question.
Section 717(1) of the Act authorises a person who has been serviced with a Compliance Notice to apply to the court to have the notice reviewed on the basis that there has been no contravention as specified or the notice does not otherwise comply with the applicable legislation.
Significantly, if the relevant notice is complied with and recompense made to the employee concerned as directed and the prerequisite proof of compliance provided, pursuant to the provision of section 716(4B) of the Act, no formal record is made of the omission which led to the issue of the notice in the first place.
In the current matter, I have read the affidavit of Mr Corn,[13] who is a Fair Work Inspector and has had the carriage of the investigation into Mr Miller’s complaint, in conjunction with his colleague, Ms Okulicz, who is also a Fair Work Inspector. Mr Corn is Ms Okulicz’s team leader.
[13] See Affidavit of Adam Charles Douglas Corn filed 1 June 2022.
On the basis of Mr Corn’s evidence, I am satisfied that Mr Miller sought the assistance of the FWO to investigate whether he had received his proper wage entitlements on the termination of his employment with Skyjohn in early April of 2021. In this context, Mr Miller provided the payslip received by him for the period from 11 March 2021 to 17 March 2021, together with his bank statement for the period after his termination.
From these documents the FWO was able to calculate that Mr Miller was due $4,767.34 gross on termination and $3,499.34 net. Mr Miller’s bank statement indicated that Mr Robinson had deposited the sum of $2,480.00 into the account between 16 March 2021 and 22 April 2021, leaving an outstanding balance, as previously indicated, of $1,019.34.
After her engagement to investigate Mr Miller’s complaint, Ms Okulicz corresponded with Mr Robinson, who confirmed that he and Mr Miller had earlier agreed for the outstanding wages to be paid in instalments. However, on 29 April 2021, Mr Robinson indicated to Ms Okulicz that neither he nor Skyjohn were able to make any further payments. It was in this context that Ms Okulicz elected to issue the Compliance Notice, relevant to these proceedings, on 21 May 2021.
Thereafter, various officers of the FWO sought to contact Mr Robinson and left voice messages on his telephone regarding the Compliance Notice and the monies due pursuant to it but to no avail. In addition between mid-June and mid-July of 2021, the FWO sent emails and text messages to Skyjohn’s email address and Mr Robinson’s mobile telephone to advise them of what were the consequences of not complying with the notice, namely court proceedings would be commenced.
I am satisfied that it was reasonable for Ms Okulicz to issue the relevant Compliance Notice. I am also satisfied, on the basis of Mr Corn’s evidence that, as at the date of these proceedings, the Compliance Notice in question remains unsatisfied. I am also satisfied, again on the basis of Mr Corn’s affidavit, that Skyjohn remains registered and Mr Robinson remains it sole director and secretary.
In the relevant Statement of Claim, the FWO asserts that Mr Robinson bears accessorial liability for the actions of Skyjohn given his role as its director and secretary. On the basis that he was knowingly concerned in its actions and was the person responsible for ensuring the company discharged its obligations as a national system employer pursuant to the provision of the FWA.
Section 550(1) of the Act provides that a person who is involved in a contravention of a civil remedy provision of the Act is also taken to have contravened that provision. Section 550(2) provides a definitive list of the circumstances in which a person is taken to be involved in a contravention. A person is so involved only if the person concerned:
·has aided, abetted, counselled or procured the contravention; or
·has induced the contravention, whether by threats or promises or otherwise; or
·has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
·has conspired with others to effect the contravention.
In Fair Work Ombudsman v Devine Marine Group Pty Ltd[14] White J explained the concept of a party being knowingly concerned in a contravention under the FWA in the following terms:
The notion of being “knowingly concerned” in a contravention has a different emphasis from that of aiding, abetting, counselling or procuring” a contravention. To be knowingly concerned in a contravention, the person must have engaged in some act or conduct which “implicates or involves him or her” in the contravention so that there be a “practical connection between” the person and the contravention…
[14] Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [178].
Pursuant to the applicable legislation, any Compliance Notice must provide particulars of the contraventions of the Act alleged and outline any rights of review that arise under the Act. There is no issue in the present case other than that the Compliance Notice in question complies with the provisions contained in sections 716(2) and 716(3) of the FWA.
Sections 716(1) and 716(2) of the Act delineates the criteria, which must be satisfied before an inspector may issue a Compliance Notice. Firstly, the power itself is a discretionary one and like all administrative decisions must be exercised reasonably.
Whether a discretion, conferred by statute, is exercised in a legally reasonably manner, it must be determined by reference to the statute itself, particularly its ‘subject-matter, scope and purpose’.[15] In this particular case, as indicated above, one of the purposes of the FWO is to provide an industrial safety net, for workers, so far as the application of industrial awards is concerned, as well as to educate employers in regard to their industrial responsibilities.
[15] See Minister for Immigration & Citizenship v Li (2013) 249 CLR 332, 370-1 [90] (Gageler J).
Secondly, the discretion may be exercised only once a reasonable belief is formed by the relevant inspector. The discretion must be exercised appropriately and not in an arbitrary, illogical or capricious manner.
The exercise of the relevant discretion cannot be disproportionate to the issue raised. To be exercised reasonably, it must be possible to glean from the relevant decision record ‘an evident and intelligible justification’ for the pertinent decision.[16]
[16] See Minister for Immigration & Citizenship v Li (2013) 249 CLR 332, 370-1 367 [76] (Hayne, Kiefel & Bell JJ).
Given the evidence available from Mr Corn, I am satisfied that there is no issue regarding the reasonableness of the belief of the FWO that Skyjohn had breached the relevant provisions contained in section 90 of the FWA by failing to pay Mr Miller cash in lieu of leave entitlements on his termination and Mr Robinson was accessorily involved in this breach and therefore it was therefore entitled to issue the Compliance Notice, which it did.
In addition, in light of its educative role and obligation to promote cooperative workplace relations.[17] It was, in my view, clearly appropriate for the FWO, through the agency of Ms Okulicz and to attempt to engage in correspondence with the respondents in order to see whether the monies due to Mr Miller could be advanced by the respondents without recourse to litigation.
[17] See Fair Work Act 2009 (Cth) s 682(1)(a)(i).
In this context, the application of a Compliance Notice issued under section 716 must be considered. In Fair Work Ombudsman v Matcraft Pty Ltd & Ors,[18] Judge Kendall explained the legislative intention of a Compliance Notice, as an alternative to litigation, in the following terms:
As explained in the Explanatory Memorandum to the Fair Work Bill 2008 (Cth), the purpose of s 716 of the Act is to provide an alternative to litigation. Section 716 is an informal mechanism whereby the applicant can identify potential contraventions of the Act and seek rectification without an employer having to admit liability.
One of the objects of the Act is to provide accessible and effective procedures to resolve grievances and disputes and provide effective compliance mechanisms. Section 716 encapsulates this objective by allowing employees to make a request for assistance which the applicant can then resolve through the use of s 716.[19]
[18] See Fair Work Ombudsman v Matcraft Pty Ltd & Ors [2021] FCCA 272.
[19] See Fair Work Ombudsman v Matcraft Pty Ltd & Ors [2021] FCCA 272 at [34]-[35] (Kendall J).
In addition, as previously indicated, the relevant legislation allows an employer to challenge a Notice if it is believed there are no grounds for its issue or the Notice itself is invalid. In these circumstances, it is the contention of the FWO that if the respondents had complied with the Notice in question, it would have been precluded from bringing these proceedings, with a commensurate saving of public resources.
In Fair Work Ombudsman v Trek North Tours & Anor (No 2),[20] Judge Jarrett explained the underlying rationale of the compliance notice system in the following terms:
The provision of notices to employers serves a number of purposes, not the least of which is to give the employer an opportunity to deal with the contravention that is being alleged, or, in the case of notices to produce, to provide information which would demonstrate that no contravention of the Act has occurred. The regime set out under s.716 and s.717 of the Act relating to compliance notices represents a regime which would avoid proceedings coming to a court at all if an employer took the steps set out in those sections.[21]
[20] See Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801.
[21] See Fair Work Ombudsman v Trek North Tours & Anor (No 2) [2015] FCCA 1801 at [22].
Accordingly in general terms, the successful implementation of the process envisaged when a Compliance Notice is issued represents a win/win for all concerned in the following terms:
·An underpaid employee gets his/her entitlements expeditiously and as calculated pursuant to all the applicable provisions of the relevant award;
·An employer is educated about his/her responsibilities under the relevant industrial system without being penalised or forced to incur the costs and indignities of litigation or indeed to be identified as an errant employer; and
·The public purse is spared the cost of bringing expensive proceedings to court.
As indicated above, it is the central submission of the FWO that, in the present case, there has been a singular and a failure on the part of the respondents to engage with the Compliance Notice procedure. Which has resulted in Mr Miller being deprived of what are his financial entitlements on termination and, as a consequence, for the public purse being put to the expense of the Ombudsman having to pursue this litigation.
As such, the provisions of section 716 of the Act, which is potentially helpful to both errant employers and the industrial regulator, have been entirely circumvented and therefore the court should consider a significant penalty as a matter of both general and specific deterrence, given the interest the community has in ensuring that there is compliance with relevant legislation, and protecting the rights of employees to be paid what they are entitled.
The FWO concedes that neither respondent is previously known to it as a consequence of any past breaches of the industrial law. However, the FWO contends that there has been a total failure of the Compliance Notice system and in conjunction with the fact that Mr Miller has been deprived of his financial entitlements for a period of over a year, this must be regarded as a relatively serious contravention of the Act.
In addition, the FWO contends that the evidence indicates that the respondents have failed to cooperate with it and have expressed no contrition for their failure to pay Mr Miller the correct amount due to him. As such, the court has a responsibility, in the penalties which it imposes, to bring home the seriousness of the omission in question.
This omission must also be viewed in the context of the not inconsiderable expense incurred by the community in bringing these contravention proceedings, which are designed to buttress the integrity of the system of industrial regulation in Australia and the maintenance of the industrial safety net. It is potentially to the benefit of all employees subject to the National Employment Standards that errant employers are castigated if the prescribed minimum terms and conditions applicable pursuant to this system are effectively enforced to ensure compliance.
In these circumstances, in its submissions on penalty, the FWO emphasises the need for both general and specific deterrence. Essentially, both the individual employer concerned and other employers, who may be tempted to breach the industrial law, must be left under no misconception that the quantum of any penalty imposed can be rationalised as being the cost of doing business and so be tempted to breach any applicable employment standards in future.
LEGAL PRINCIPLES APPLICABLE TO PENALTY HEARINGS
The fundamental task, for the court, is to determine, from all the factual circumstances arising, the gravity or seriousness of the offending, which it is called upon to penalise. The matters to be considered have been delineated in a number of decisions of both this court and the Federal Court.[22] The considerations are as follows:
[22] See Mason v Harrington Corporation Pty Ltd [2007] FMCA 7; Kelly v Fitzpatrick [2007] FCA 1080 at [14]. (Tracey J); Blandy v Coverdale NT Pty Ltd [2008] FCA 1533 at [23] (Reeves J).
·The nature and extent of the conduct which led to the breaches;
·The circumstances in which the conduct took place;
·The nature and extent of any loss or damage sustained as a result of the breaches;
·Whether there has been similar previous conduct by the respondent;
·Whether the breaches were properly distinct or arose out of the one course of conduct;
·The size of the business enterprise involved;
·Whether or not the breaches were deliberate;
·Whether senior management was involved in the breaches;
·Whether the party committing the breaches has exhibited contrition;
·Whether the party committing the breaches has taken corrective action;
·Whether the party committing the breaches has cooperated with the enforcement authorities;
·The need to ensure compliance with minimum standards by provision of an effective means for investigation and enforcement of employee entitlements; and
·The need for specific and general deterrence.
The court needs to be careful not to apply a formulaic approach to the imposition of penalties or attempt to extrapolate the penalties imposed in one case to the circumstances of another. Each case involving the imposition of a civil penalty warrants an idiosyncratic approach and a careful analysis of all relevant circumstances. As was stated in Australian Ophthalmic Supplies:
Penalties are not a matter of precedent. The choice of penalty must be dictated by the individual circumstances of a case, not by a line by line comparison with another case.[23]
[23] See Australian Opthalmic Supplies Pty Ltd v McAlary-Smith [2008] FCFCA 8 at [12] (Graham J).
Clearly the check-list, as enumerated above, is useful. However, it is not to be regarded as an exhaustive list of factors to be considered. The ultimate control on any sentence is that it must be proportionate to the offence committed. A court is not permitted to impose a sentence greater than is warranted by the objective circumstances of the offending.[24]
[24] See Veen v R (No 2) (1988) 164 CLR 465, 472 (Mason CJ, Brennan, Dawson, and Toohey JJ).
However, in the context of the significant interest the public has in ensuring that employees are paid their proper entitlements and are accorded the protection of the industrial safety net envisaged by the legislature, the court cannot lose sight of the importance of deterrence, both in a specific and general sense.
Penalties have to be fixed at a meaningful level, not set at a level at which their imposition, on an errant employer, can be seen as an acceptable cost of doing business for the employer. In short, penalties must hurt so that others who are considering cutting corners, so far as the payment and protection of their employees are concerned, will be deterred from doing so.
This is particularly important for vulnerable employees, who work in small scale industries, such as the crash repair industry, who work in small premises not readily amenable to industrial oversight. In addition, there is a risk such employees may not be aware of their award entitlements and the means by which they can seek redress if those entitlements are disregarded.
In this context, the danger being that some employers may be inclined to factor in the prospect or risk of incurring a penalty in deciding to underpay their employees in order to secure personal gain and given the type of factors listed above consider that the financial incentive of not paying the full extent of entitlements is a risk worth taking. In such cases, civil penalties must be set at a sufficiently high level to deter both the contravenor and others who might be tempted to do so.
In the recent case of Australian Building and Construction Commissioner v Pattinson[25] the High Court discussed the inherent problems likely to arise when principles of retributive sentencing, relevant to the criminal law, are applied in civil penalty proceedings. In this context, the High Court rejected the principle of proportionality being applied to the calculation of penalties in the civil sphere. Essentially, the High Court indicated the principle that the maximum penalty should be reserved only for the worst or most egregious examples of the applicable offence did not apply in civil penalty proceedings.
[25] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13.
In addition, the High Court indicated that the primacy of deterrence is the objective of any civil penalty regime. As such a sentencing court, in a civil penalty matter, is required to impose a penalty which is proportionate in the sense that it strikes a reasonable balance between deterrence and what is described as oppressive severity.[26]
[26] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [41].
In this context, concepts also applicable in criminal sentencing, such as totality, parity and course of conduct remained relevant. As such, a court sentencing in respect of a civil penalty provision matter retained a discretion. As with all discretions, it is one which must be exercised fairly and reasonably given the subject matter, scope and purpose of the legislation being applied. The aim being to arrive at a penalty which is appropriate.
In this context the High Court[27] indicated as follows:
…[I]t is important to recall that an "appropriate" penalty is one that strikes a reasonable balance between oppressive severity and the need for deterrence in respect of the particular case. A contravention may be a "one‑off" result of inadvertence by the contravenor rather than the latest instance of the contravenor's pursuit of a strategy of deliberate recalcitrance in order to have its way. There may also be cases, for example, where a contravention has occurred through ignorance of the law … In such cases, a modest penalty, if any, may reasonably be thought to be sufficient to provide effective deterrence against further contraventions.
The penalty that is appropriate to protect the public interest by deterring future contraventions of the Act may also be moderated by taking into account other factors … [such as] where those responsible for a contravention of the Act express genuine remorse for the contravention, it might be considered appropriate to impose only a moderate penalty because no more would be necessary to incentivise the contravenors to remain mindful of their remorse and their public expressions of that remorse to the court. Similarly, where the occasion in which a contravention occurred is unlikely to arise in the future because of changes in the membership of an industrial organisation, a modest penalty may be appropriate having regard to the reduced risk of future contraventions.
It is not necessary to multiply examples further. It is sufficient to say that a court empowered by s 546 to impose an "appropriate" penalty must act fairly and reasonably for the purpose of protecting the public interest by deterring future contraventions of the Act.
[27] Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 at [46] – [48].
In addition, in this context, the essential purpose of Compliance Notices must be considered. As indicated above, prompt compliance with their terms can result in a win/win situation for all concerned. The industrial regulator and the public purse is not put to the expense of a hearing; an underpaid employee can be reimbursed promptly; and an errant employer is spared the bother and embarrassment of public prosecution, and is given an opportunity to learn about and rectify past failings for the good of all concerned.
DISCUSSION
Nature and extent of the conduct leading to the breaches
I know nothing about the financial circumstances of Skyjohn and have not been informed as to why Mr Miller’s employment was terminated. There is no suggestion that Mr Robinson attempted to miscalculate the sums due to Mr Miller on his termination. Rather he and Mr Miller entered into an agreement to pay off what was due in instalments. This led to the greater proportion of Mr Miller’s leave entitlements, on termination, being paid consensually.
Thereafter, some factor or factors, of which I am unaware, intervened and Mr Robinson reneged on the agreement which had been reached, which in turn led to Mr Miller involving the Ombudsman to pursue the matter on his behalf. Ultimately, this led to the issue of the relevant Compliance Notice, which was entirely disregarded, leading to the instigation of these proceedings.
In objective terms, although the sum of money outstanding is of some moment to Mr Miller, it is not a large sum and is dwarfed by the magnitude of the penalties now sought by the FWO. Clearly, it would have been in both respondents’ interests to have complied with the relevant Notice.
Size of business and involvement of senior management
I have no evidence regarding the extent of the turnover of the Skyjohn. The FWO does not assert that it is anything other than a small enterprise and, in these circumstances, it is something of a misnomer to refer to senior management. In practical terms, Mr Robinson is Skyjohn and he is its only managerial influence. Again, to my mind, it is a significant factor that Mr Robinson at least attempted to make good the larger proportion of what was due to Mr Miller prior to the involvement of the FWO.
Accordingly, I do not think it could be said that Mr Robinson has brazenly ignored his obligations towards Mr Miller. Rather, for reasons which Mr Robinson has declined to provide to me, Skyjohn has not been able to complete its earlier proffered agreement to pay Mr Miller his due entitlements by way of instalments, leaving the amount of $1,019.34 outstanding.
However, in general terms, the fact that an errant employer conducts business on a small scale or may have fallen into financial difficulty, must be regarded as one factor, amongst many, in regards to how penalties are to be calculated. In this regard, I adopt the comments of Driver FM (as his Honour then was) in Rajagopalan v BM Sydney Building Materials Pty Ltd[28] as follows:
Employers must not be left under the impression that because of their size or financial difficulty that they are able to breach an award. Obligations by employers for adherence to industrial instruments arise regardless of their size. Such a factor should be of limited relevance to the Court’s consideration of penalty.[29]
[28] Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412.
[29] See Rajagopalan v BM Sydney Building Materials Pty Ltd [2007] FMCA 1412 at [27] (Driver FM).
Corrective action, cooperation and contrition
Again for reason about which I can only conjecture, the respondents have not elected to pay the sum due to Mr Miller. The most concrete and useful example of contrition, which could have been provided by the respondent would have been the full payment of what was acknowledged to be due to Mr Miller. This has not occurred. There is no evidence of any corrective action. Despite the overtures of Ms Okulicz, the Compliance Notice was disregarded by the respondents, which I accept undermines the fundamental objectives of the system involved.
General and specific deterrence
As I have already observed deterrence has two aspects – general deterrence directed towards the community as a whole, and specific deterrence directed towards the individual concerned whose conduct is to be sanctioned. As the High Court has recently indicated, issues of deterrence must be accorded primacy in the imposition of any civil penalty.
In Fair Work Ombudsman v Darna Pty Ltd,[30] Judge Hartnett said as follows in respect of the importance of the Compliance Notice process in the industrial regulatory system in this county:
The Explanatory Memorandum to the Fair Work Bill 2008 (Cth) provides that compliance notices were designed to be another option to deal with non-compliance instead of pursuing court proceedings. It was to be a less costly and less time consuming procedure. Section 716 of the FW Act allows a person to whom a compliance notice is issued an opportunity to rectify an under payment without being subject to civil remedy provisions. The First Respondent’s failure to comply with the Compliance Notice issued has, in these proceedings, caused the Applicant and the Court to spend time and public funds in dealing with civil remedy proceedings which would not have been necessary had compliance occurred.[31]
[30] Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709.
[31] See Fair Work Ombudsman v Darna Pty Ltd [2015] FCCA 709 at [11]
As I have already observed, so far as the current matter is concerned, the Compliance Notice procedure has been an abject failure in bringing about a prompt restitution to the employees concerned and the saving imposition on the public purse. One of the central purposes of the modern award system and the related enforcement procedures is to ensure all employees have the benefit of the industrial safety net provided by relevant awards.
To be able to enforce the terms of modern awards, Fair Work Inspectors must be able to exercise their compliance powers effectively through investigation and then rectification. When there has been a concerted non-compliance with a Notice issued by a Fair Work Inspector, the court needs to indicate that such non-compliance will be regarded as a serious matter by reference to the quantum of any penalty imposed.
I accept that the failure to comply with a Compliance Notice has the potential to undermine the entire purpose of the relevant statutory regime. If an employer does not accept the contents of any Notice served upon it, the regime provides formal mechanisms of review.[32]
[32] See Fair Work Ombudsman v Corporation Sun Pty Ltd [2020] FCCA 2849 at [63] (Kendall J).
Section 90 of the FWA falls within Chapter 2 of the Act, which sets out the terms and conditions of employment, which apply to all workers, who are categories as national systems employees. Accordingly, section 90, which enshrines the entitlement of employees to have holiday pay and as is significant in this case, the right to be paid cash in lieu of holiday, on termination, is one of the core component of the industrial safety net. In Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2),[33] Marshall J said as follows:
It is important to ensure that the protection afforded by the Act to employees are real and effective and properly enforced. The need for general deterrence cannot be understated. Rights are a mere shell unless respected.[34]
[33] Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557.
[34] See Fair Work Ombudsman v Maclean Bay Pty Ltd (No 2) [2012] FCA 557 at [29] (Marshall J).
In imposing a penalty to reflect general deterrence, the court must impose fines that cannot be seen by others as the cost of doing business.[35]The role of general deterrence in fixing appropriate penalty is demonstrated by what Lander J said in Ponzio v B & P Caelli Constructions Pty Ltd,[36] namely:
In regard to general deterrence, it is assumed that an appropriate penalty will act as a deterrent to others who might be likely to offend…. The penalty therefore should be of a kind that it would be likely to act as a deterrent in preventing similar contraventions by likeminded persons or organisations. If the penalty does not demonstrate an appropriate assessment of the seriousness of the offending, the penalty will not operate to deter others from contravening the section. However, the penalty should not be such as to crush the person upon whom the penalty is imposed or used to make that person a scapegoat. In some cases, general deterrence will be the paramount factor in fixing the penalty.[37]
[35] See Fair Work Ombudsman v Yogurberry World Square [2016] FCA 1290 at [27].
[36] Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65.
[37] See Ponzio v B & P Caelli Constructions Pty Ltd [2007] FCAFC 65 at [93] (Lander J).
In my view, it is important that employers recognise that Compliance Notices are significant and are thus encouraged to manage their business so that errors, including innocent ones, can be rectified quickly and cheaply for the benefit of both business and employee. These considerations are applicable to both large and small employers.
CONCLUSIONS
It has been said that the task of sentencing is one of the hardest judicial tasks, as it requires the synthesis of competing considerations to arrive at a penalty which is just and appropriate. Necessarily it is a process of intuitive synthesis. It is useful to think of it in terms of percentages, but sentencing is not a purely arithmetical process.
The penalty to be imposed must be proportionate to the gravity of the offending. This provides a high water mark in respect of the range of the penalty to be imposed before turning to any subjective factors which tend to mitigate the objective assessment of the offending.
In my assessment, an appropriate penalty for the first respondent is one of $16,650.00 and $3,330.00 for the second respondent. These are, in my view, significant sums, which represents 50% of the maximum penalty. I accept that these sums are less than those sought by the FWO.
The mitigating factors which have led to this reduction are the fact that each respondent is a first offender. In addition, I note that after Mr Miller left the employ of Skyjohn, Mr Robinson tried to do the right thing and paid Mr Miller the larger proportion of his leave entitlements, leaving a sum just in excess of $1,000.00 outstanding.
However there has been no cooperation with authorities and the case has been protracted as a consequence, leading to these proceedings, which represent a significant impost on the public purse. At the same time, the breach represents a failure of the Compliance Notice system to achieve its objectives.
As such, a message must be sent to the proprietors of small cottage-type industries, in which employees are isolated from their colleagues and so vulnerable to exploitation through a lack of knowledge, of the importance of prompt and complete rectification of any breaches of the industrial safety net. The penalty imposed, in my view, must be of sufficient moment to achieve the desired degree of general deterrence required.
In all the circumstances, I do not consider that the penalties to be imposed can be considered as being either token or trivial. Although I acknowledge that I have scant information about the respondents’ financial circumstances. Importantly, as indicated above, I consider the penalty to be of sufficient magnitude to provide general deterrence.
Pursuant to section 546(3) of the Act, the court may order the payment of any penalty imposed to be paid to the Commonwealth; a particular organisation; or a particular person. In this case, the FWO seeks that the penalties be paid to the Commonwealth. Given the prosecution has been funded by the FWO, it is obviously appropriate that this course should be adopted.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
Associate:
Dated: 12 July 2022
I certify that the preceding ninety-nine (99) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown.
0
14
3