Fair Work Ombudsman v Song

[2016] FCCA 2827

FEDERAL CIRCUIT COURT OF AUSTRALIA

FAIR WORK OMBUDSMAN v SONG & ORS [2016] FCCA 2827

Catchwords:
INDUSTIAL 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

Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7

Applicant: FAIR WORK OMBUDSMAN

First Respondent: IEE WIE SONG

Second Respondent: SIEW LAY YEOH

Third Respondent: TSUYOSETSU PTY LTD ACN 151 931 181

Fourth Respondent: TAIKUKEN PTY LTD ACN 159 904 944

File Number: BRG 295 of 2016

Judgment of: Judge Vasta

Hearing date: 20 October 2016

Date of Last Submission: 20 October 2016

Delivered at: Brisbane

Delivered on: 20 October 2016

REPRESENTATION

Counsel for the Applicant: Mr Dwyer

Solicitors for the Applicant: Fair Work Ombudsman

Counsel for the Respondents: Mr Massy

Solicitors for the Respondents: Sparke Helmore

ORDERS

AND UPON THE DECLARATION OF THE COURT THAT the First Respondent and the Second Respondent, in their capacity as a partnership within the meaning of section 5 of the Partnerships Act 1981 (Qld), each contravened the following civil remedy provisions:

A. Section 45 of the Fair Work Act 2009 (Cth) (FW Act), by failing to pay Mr Ong, Mr Chiu, Ms Lin and Mr Dai the minimum rates of pay prescribed by clause 17 of the Fast Food Award;

B. Section 45 of the FW Act, by failing to pay Mr Ong, Mr Chiu, Ms Lin and Mr Dai casual loading (for Monday to Saturday) prescribed by clause 13.2 of the Fast Food Award and clause A.6.4 of Schedule A to the Fast Food Award;

C. Section 45 of the FW Act, by failing to pay Mr Ong, Mr Chiu, Ms Lin and Mr Dai evening penalty rates prescribed by subclause 25.5(a)(i) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;

D. Section 45 of the FW Act, by failing to pay Mr Ong, Mr Chiu, Ms Lin and Mr Dai Saturday penalty rates prescribed by subclause 25.5(b) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;

E. Section 45 of the FW Act, by failing to pay Mr Ong, Mr Chiu, Ms Lin and Mr Dai Sunday penalty rates prescribed by subclause 25.5(c) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;

F. Section 45 of the FW Act, by failing to pay Mr Ong, Mr Chiu, Ms Lin and Mr Dai public holiday penalty rates prescribed by clause 30.3 of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;

G. Section 45 of the FW Act, by failing to pay Mr Ong overtime rates prescribed by clause 26 of the Fast Food Award;

H. Subsection 44(1) of the FW Act, by failing to pay Mr Ong accrued annual leave at the base rate of pay during his employment as prescribed by subsection 90(1) of the FW Act;

1. Section 45 of the FW Act, by failing to pay Mr Ong annual leave loading prescribed by subclause 28.3(b) of the Fast Food Award;

J. Subsection 44(1) of the FW Act, by failing to pay Mr Ong personal leave during his employment as prescribed by section 99 of the FW Act;

K. Subsection 44(1) of the FW Act, by failing to pay untaken paid annual leave and annual leave loading to Mr Ong on termination of his employment as prescribed by subsection 90(2) of the FW Act;

L. Section 45 of the FW Act, by failing to advise the Employees of their classification as prescribed by subclause 16.1 of the Fast Food Award;

M.Section 45 of the FW Act, by failing to advise the Employees of their employment category as prescribed by clause 10.2 of the Fast Food Award;

N. Subsection 535(1) of the FW Act, by failing to make and keep employee records of the kind prescribed by the Fair Work Regulations 2009 (Cth) (FW Regulations); and

O. Subsection 536(1) of the FW Act, by failing to give the Employees a pay slip within one working day after paying an amount owed to them.

AND UPON THE DECLARATION OF THE COURT THAT the Third Respondent contravened the following civil remedy provisions:

A. Section 45 of the FW Act, by failing to pay Ms Shih the minimum rates of pay prescribed by clause 17 of the Fast Food Award;

B. Section 45 of the FW Act, by failing to pay Ms Shih casual loading (for Monday to Saturday) prescribed by clause 13.2 of the Fast Food Award and clause A.6.4 of Schedule A to the Fast Food Award;

C. Section 45 of the FW Act, by failing to pay Ms Shih evening penalty rates prescribed by subclause 25.5(a)(i) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;

D. Section 45 of the FW Act, by failing to pay Ms Shih Saturday penalty rates prescribed by subclause 25.5(b) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;

E. Section 45 of the FW Act, by failing to pay Ms Shih Sunday penalty rates prescribed by subclause 25.5(c) of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;

F. Section 45 of the FW Act, by failing to pay Ms Shih public holiday penalty rates prescribed by clause 30.3 of the Fast Food Award and clause A.7.3 of Schedule A to the Fast Food Award;

G. Section 45 of the FW Act, by failing to engage Ms Shih for a minimum engagement period of three hours as prescribed by clause 13.4 of the Fast Food Award;

H. Section 45 of the FW Act, by failing to advise Ms Shih of her classification as prescribed by clause 16.1 of the Fast Food Award;

1. I. Section 45 of the FW Act, by failing to advise Ms Shih of her employment category as prescribed by clause 10.2 of the Fast Food Award;

J. J. Subsection 535(1) of the FW Act, by failing to make and keep employee records of the kind prescribed by the FW Regulations; and

K. Subsection 536(1) of the FW Act, by failing to give an employee a pay slip one working day after paying an amount owed to them.

AND UPON THE DECLARATION OF THE COURT THAT that the Fourth Respondent contravened the following civil remedy provisions:

A. Section 45 of the FW Act, by failing to pay Mr Chiu the minimum rates of pay prescribed by clause 20 of the Restaurant Award;

B. Section 45 of the FW Act, by failing to pay Mr Chiu casual loading (for Monday to Saturday) prescribed by clause 13.1 of the Restaurant Award and clause A.6.4 of Schedule A to the Restaurant Award;

C. Section 45 of the FW Act, by failing to pay Mr Chiu evening penalty rates prescribed by subclause 34.2(a)(i) of the Restaurant Award and clause A.7.3 of Schedule A to the Restaurant Award;

D. Section 45 of the FW Act, by failing to pay Mr Chiu early work penalty rates prescribed by subclause 34.2(a)(ii) of the Restaurant Award and clause A.7.3 of Schedule A to the Restaurant Award;

E. Section 45 of the FW Act, by failing to pay Mr Chiu Saturday penalty rates prescribed by clause 34.1 of the Restaurant Award and clause A.7.3 of Schedule A to the Restaurant Award;

F. Section 45 of the FW Act, by failing to pay Mr Chiu Sunday penalty rates prescribed by clause 34.1 of the Restaurant Award and clause A.7.3 of Schedule A to the Restaurant Award;

G. Section 45 of the FW Act, by failing to pay Mr Chiu public holiday penalty rates prescribed by clause 34.1 of the Restaurant Award and clause A.7.3 of Schedule A to the Restaurant Award;

H. Subsection 535(1) of the FW Act, by failing to make and keep employee records of the kind prescribed by the FW Regulations; and

1. Subsection 536(1) of the FW Act, by failing to give an employee a pay slip within one working day after paying an amount owed to them.

THE COURT ORDERS ON A FINAL BASIS:

1. That First Respondent pay pecuniary penalties fixed in the sum of $40,500.00.

2. That the Second Respondent pay pecuniary penalties fixed in the sum of $32,400.00

3. That the Third Respondent pay pecuniary penalties fixed in the sum of $99,000.00

4. That the Fourth Respondent pay pecuniary penalties fixed in the sum of $29,250.00

5. That the time to pay with respect to Orders 1 to 4 above be within nine (9) months from the date of this Order.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 295 of 2016

FAIR WORK OMBUDSMAN

Applicant

And

IEE WIE SONG

First Respondent

SIEW LAY YEOH

Second Respondent

TSUYOSETSU PTY LTD ACN 151 931 181

Third Respondent

TAIKUKEN PTY LTD ACN 159 904 944

Fourth Respondent

REASONS FOR JUDGMENT

(Ex tempore)

Introduction

1. By originating application filed in this court on 1 April 2016, the Fair Work Ombudsman sought declarations that the Respondents had breached the provisions of the Fair Work Act 2009 (Cth) (“the FW Act”) as well as seeking pecuniary penalties for some of those breaches.

2. The agreed statement of facts does set out what the facts are.  In short compass, the First and Second Respondents are persons who had come to Australia from Malaysia (but are resident here), had formed a partnership and then operated a takeaway food business that traded eventually as Teppanyaki Lovers at the Myer Centre in Brisbane.

3. In that business, they employed four persons, a Mr Wong, a Mr Chu, a Ms Lin and a Mr Di.  The First and Second Respondents later incorporated the Third Respondent.  The Third Respondent opened a Sushi takeaway business in Anzac Square called Nigi Nigi.  In August of 2012, the First and Second Respondents incorporated the Fourth respondent, and in January 2013 the Fourth respondent opened a Japanese restaurant in Market Square, Sunnybank called KU-O. 

4. The First and Second Respondents were the only directors of the Third and Fourth respondent and the only shareholders in the Third respondent and were shareholders in the Fourth respondent.  What has occurred is that the four employees that I noted for the First and Second Respondents at the Myer Centre store were employed.  Mr Chu was also employed by the Fourth Respondent at the Market Square shop. A further person, Ms Shi, was employed by the Third Respondent.

5. Through a complaint and then an investigation, it was found by the Fair Work Ombudsman, and admitted to eventually by all four Respondents, that there had been chronic underpayment of those five employees.  What had occurred with regard to the employees was that they were paid a base rate.  The base rate was well and truly under the award rate and it ignored such things as casual loading, penalty rates for evening work, penalty rates for Saturdays or Sundays, public holidays and overtime. 

6. As well as that, there was failure to advise employees of their employment category and classification. There was a failure to keep records in accordance with the FW Act and regulations and there was a failure to issue payslips to the employees. With regard to these matters, the Respondents agreed that this did occur. What they have said is that the conduct ought be mitigated by these matters:

   a)That they had very little experience in business here in Australia; and

   b)That there was, in effect, a level of naivety about their setting up of a business.

7. However, it does seem that for people with a level of naivety, they were able to set up one business and then incorporate and set up another business and then incorporate and set up a third business, so the level of naivety has to be seen in that light.  There was a submission made that until the Fair Work Ombudsman came knocking on the door of  the First Respondent, he did not know that there was such a thing as an award which would dictate the rates of pay that he, as an employer, would have to pay his employees within that particular industry.

8. As I said during the course of the hearing, I don’t accept that as being a true state of affairs.  At the very best for the Respondent, one could say that he was acting with a large degree of wilful blindness as to what his obligations were. 

9. The submission has been made as well by the Respondents that they were, in effect, a struggling small business and that the workers, whilst they were being underpaid, were not the subject of greedy exploitation or a targeting because of their non-familiarity with Australian employment conditions and Australian employment law.

10. To their credit, it does seem that once the Fair Work Ombudsman did become involved, that there was a level of cooperation that was quite high, which ended up in there being an agreed statement of facts tendered in this case that led to a repayment of all the outstanding amounts of money and letters of apology.  Though when one looks at the timing of the letters of apology there may be some cause for the cynicism that had been displayed by the Fair Work Ombudsman.

11. Notwithstanding that, one of the great matters in their favour is that, neither the First nor Second Respondent, nor the corporate entities, ever came to the adverse notice of the Fair Work Ombudsman before this time.

12. Notwithstanding that, I do see these matters as a very serious breach of the FW Act.

13. It may be said that the Respondents themselves had come from Malaysia and that the workers were Malaysian, but what that means is there is a deal of responsibility for those who are dealing as employers in Australia undertaking what is fair and just in Australia as far as compliance with the legislation. There is an obligation on them to ensure that workers from a similar culture to the employers are not exploited.

14. It would seem that if someone from a particular culture comes to Australia and is employed by somebody else from the same background, there would be an automatic level of trust and comfort in that fact.  In many ways, by not complying with the law of this country there has been an exploitation of the five workers that is extremely serious. 

15. The workers were minimum wage employees.  The minimum wage is set in this country for a reason.  It is an acknowledgment by this country that this is a sum by which every worker in the country must, at least, be paid.

16. To not pay workers the minimum wage affects those workers in a far greater way than it would for workers who are “up the scale”. In percentage terms it is a great burden. When one considers that the total underpaid to those five workers was $148,710.55, for those workers who are at the bottom of the tree that is an extremely significant sum of money. So for those reasons, I do consider this as a serious breach of the FW Act.

17. There has been quite a deal of argument as to what I ought do as far as groupings are concerned. Section 557 of the FW Act relevantly reads:

    “557  Course of conduct

    (1) For the purposes of this Part, 2 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.

    …”

18. What the Fair Work Ombudsman, has done is grouped the contraventions by the actual contravention.   For example, a failure to pay the minimum rates of pay was a failure in respect of all five workers. 

19. But if one is looking at the First and Second Respondents, this happened in the case of four workers. In the case of the Third Respondent, in the case of one worker and in the case of the Fourth Respondent, in the case of one worker. 

20. Having regard to the First and Second Respondent, it would be grouped as one particular act.  For the failure to pay the casual loading, one particular act; penalty rates: one particular act; the evening, Monday to Friday penalty rates, one particular act; Saturday penalty rates, one particular act.

21. Whilst the Respondents do not cavil with the legality of such a grouping pursuant to s.557 of the FW Act, and do not argue that such groupings are within the discretion of the Court, they point to a number of matters that have been considered by other Courts that would suggest that, notwithstanding s.557 of the FW Act, the Court can actually also invoke the common law to further group those contraventions so as to ensure that a person is not being twice punished for the same act.

22. Very helpfully, what the Respondents have done is put their particular groupings into a table in their submissions. In their argument, the failure to pay minimum rates, casual loading, evening penalty rates, Saturday/Sunday/public holiday penalty rates and overtime was, really, one contravention, because it was one decision to pay a flat hourly rate that led to all of those contraventions.

23. Further the failure to pay an accrued annual leave at base-rate of pay, the leave loading to pay paid personal leave and to pay untaken paid annual leave and leave loading upon termination was one decision by the First Respondent to acknowledge the employees’ entitlement to the benefit of any paid leave at all.  So, therefore, it is submitted that a Court could view this behaviour as one course of conduct. 

24. As attractive as those submissions may be, to my mind, it really would tend to somehow minimise and sanitise the effect of the FW Act to accede to those submissions. The conduct of the First Respondent was, at the very best for him, a wilful blindness to his obligations under the law and, specifically, under the award. Those obligations were to pay a minimum rate, to pay casual loading, to pay penalty rates on evenings, Saturdays, Sundays, public holidays, and to pay overtime.

25. To group them all as one, to my mind, does not reflect the true culpability of the First Respondent and the Second, Third and Fourth Respondents subsequently.  Therefore, I do not accede to that submission.  Accordingly, have grouped the contraventions in the same manner that the Applicant has. 

26. I have had regard to the “list” compiled in the case of Mason & Harrington Corporation Pty Ltd t/as Pangea Restaurant & Bar [2007] FMCA 7 by Mowbray FM, as he then was, in these matters, where he listed the number of considerations that a Court ought to look at in deciding “what is the appropriate penalty”.  I have already gone through quite a number of those in the course of these reasons.  But I have had regard to all of them.  As it has been said in subsequent authorities, whilst those considerations are a very useful reference point for a Court, they should not be used as some form of checklist or “tick-the-box”. 

27. What a Court must do is assess, overall, what is the appropriate penalty, what are the mitigating circumstances that would lessen or discount those penalties, and what then is the overall effect to give effect to what the legislation has asked the Court to do to ensure that the aims of the FW Act are met.

28. Therefore, in this case, I am of the view that I should look at each of the particular aspects of the offending by the Respondents and look at the result and adjudicate what ought to end up being awarded by me on that particular calculation.

29. Therefore, when I am looking at the First and Second Respondents with regard to the takeaway in the Myer Centre, the failure to pay the minimum wage has a maximum penalty of $10,200.00. 

30. In my view, the failure to pay the minimum wage, in all of the circumstances, is extremely serious.  I would impose a penalty of $8,000.00. 

31. For failing to pay the casual loading, I would impose a penalty of $8,000.00. 

32. For a failure to pay the Monday to Friday evening penalty, I would impose a penalty of $2,000.00. 

33. For the failure to pay the Saturday penalty rates I would impose a penalty of $7,000.00.  

34. For the Sunday rates I would impose a penalty of $7,000.00. 

35. For the public holidays I would impose a penalty of $7,000.00.

36. For failure to pay overtime I would impose a penalty of $4,000.00.

37. With regard to the annual leave, the annual leave was paid, but it was paid on the wrong base salary, and so there was an underpayment there.  Whilst I am of the view that it is a separate matter, one has to look at it appropriately, given that I have imposed a quite hefty penalty for failing to pay the minimum penalty. For those reasons, I decline to make any penalty for failing to pay the annual leave and for failing to pay the leave loading.

38. As far as failing to pay the annual leave upon termination, I impose a penalty of $1,000.00. 

1. For failing to pay personal leave when taken, I impose a penalty of $1,000.00. 

2. For failing to notify the employees of their category of employment, I impose a penalty of $1,000.00. 

3. With regard to failing to keep records, this is a very serious breach of the Fair Work Regulations. It is incumbent upon all employers to keep proper records so that both they and employees know exactly what has occurred.

4. For that reason, I would impose a penalty of $4,000.00.

5. For failing to provide payslips, again, payslips are extremely important to employees so that they know exactly what they have been paid, what their rate is, what their annual leave calculations are. 

6. For that reason, I would also impose a penalty of $4,000.00. 

7. That would give a total of $54,000.00 as the penalty.

8. In this case, I have looked at all of the mitigating factors that I have spoken of before, which include the lack of previous adverse attention and an acceptance that there was a level of naivety, though not to the same extent. There has been contrition and apologies, and that, to some extent, there must have been some corrective action taken. 

9. For that reason, I impose a very large discount, probably a larger one than I would normally impose, of 25 per cent, which leaves me ordering pecuniary penalties against the First Respondent in the sum of $40,500.00. 

10. With regard to the Second Respondent, whilst I have paid very close attention to the submissions of the Applicant regarding the culpability of the Second Respondent, to my mind, there is something to be said for the fact that, when one does go through the material, it does seem as though the person really making the decisions is the First Respondent. 

11. For that reason, I propose to discount the pecuniary penalty against the Second Respondent by a further 20 per cent.  I order that the Second Respondent pay a pecuniary penalty of $32,400.00. 

12. With regard to the Third Respondent, the Third Respondent had committed breaches against one particular individual.  However, because the Third Respondent is a corporate entity, the maximum penalty is far greater. 

13. With regard to the failure to pay the minimum rates of pay, I would order a pecuniary penalty of $30,000.00. 

14. For failing to pay the casual loading another $30,000.00. 

15. There is no penalty sought for any failure to pay evening penalty rates.

16. For the failure to pay Saturday rates, I would impose a penalty of $10,000.00. 

17. For failing to pay the Sunday rates a penalty of $10,000.00

18. For the failure to pay public holiday rates a further $10,000.00. 

19. The failure to roster for a minimum engagement, I would order a pecuniary penalty of $1,000.00. 

20. For failing to classify the employee in writing, I would order a pecuniary penalty of $1,000.00. 

21. For the failure to keep records, I would order a pecuniary penalty of $20,000.00

22. For failing to issue payslips, a penalty of $20,000.00. 

23. That is a total of $132,000.00. 

24. In keeping with the same discounting that I have done in the other matters when looking at the First Respondent, I am of the view that I should also apply the 25 per cent discount.  That leaves a pecuniary penalty of $99,000.00 in respect of the Third Respondent.

25. With regard to the Fourth Respondent, again, that was only one person, but that one person, in many ways, was also caught up with the failure of the First and Second Respondents.  For that reason, I am also giving penalties that are somewhat less than what I would normally give. 

26. With regard to a failing to pay the minimum wage, I am ordering a pecuniary penalty of $15,000.00. 

27. For a failure to pay a casual loading, a penalty in this case of $10,000.00. 

28. For failing to pay the evening penalty rates, a penalty of $1000.00. 

29. Failing to pay the Saturday penalty rates, $1000.00. 

30. Failing to pay the Sunday penalty rates the sum of $1,000.00. 

31. Failing to pay the public holiday rates the sum of $1000.00. 

32. The record keeping and the payslips, I would order a penalty of $5,000.00 for each of those. 

33. That gives a total of $39,000.00 for the Fourth Respondent. 

34. I would also apply a 25 per cent discount to that sum, which ends up a total of $29,250.00. 

35. The Applicant has sought declarations.  The Respondents have argued that there is no need for the declarations, because the Respondents have agreed to a statement of agreed facts, which are on the record, and there will be an order for penalties, and the fact that the money that was owed to the workers has all been repaid.  Therefore, the public denunciation that comes with the making of declarations has already been achieved.

36. I do not agree with that submission. The fact is that what the Applicants have engaged in is a breach of the FW Act. That Act enables there to be a maintaining of the social fabric of this country when we are talking about our industrial awards. It is incumbent upon Courts to register the community’s denunciation of such breaches. For those reasons, I am of the view there is great utility in making the declarations and I do so.

37. The Applicant has also asked, as part of the penalty, that I order that the Third and Fourth Respondents assess their compliance with the FW Act, and with the awards, for a six-month period so that they can show that they have paid the minimum wages and entitlements to all their workers and that proper records and payslips are kept. They are then to provide the details of any contraventions and steps needed or taken to rectify any contravention within 28 days of the expiration of the six-month period.

38. I can understand the reason that the Applicant wants such an order. But given that this was the first time that either of the Third or Fourth Respondents had come to the adverse attention of the Fair Work Ombudsman, and that the breaches of the FW Act only involved one particular employee, I am of the view that it is unnecessary to make that order and I decline to do so.

I certify that the preceding seventy-six (76) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date: 12 December 2016