Fair Work Ombudsman v South Jin Pty Ltd
[2015] FCA 1456
•18 December 2015
FEDERAL COURT OF AUSTRALIA
Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456
Citation: Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 Parties: FAIR WORK OMBUDSMAN v SOUTH JIN PTY LTD (ACN 133 198 099), KI BOK JIN, COASTAL TROLLEY SERVICES PTY LTD (ACN 100 786 909) and EDWARD STROOP File number: SAD 158 of 2014 Judge: WHITE J Date of judgment: 18 December 2015 Catchwords: INDUSTRIAL LAW – civil penalty proceedings – alleged contravention of Cleaning Services Award 2010 – alleged contravention of Fair Work Act 2009 (Cth) and Workplace Relations Act 1996 (Cth) – whether employees were casuals – whether employees underpaid wages, overtime, penalties and superannuation – whether employer failed to issue payslips – whether employer failed to keep proper records – degree of knowledge required to establish accessorial liability – whether second, third and fourth respondents had the requisite knowledge. Legislation: Corporations Act 2001 (Cth) s 471B
Evidence Act 1995 (Cth) ss 62, 63
Fair Work Act 2009 (Cth) ss 45, 87, 96, 165, 535, 536, 557, 687, 701, 709, 712, 793
Fair Work Regulations 2009 (Cth) regs 3.32, 3.34, 3.46
Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth)
Federal Circuit Court of Australia Act 1999 (Cth) s 43
Federal Circuit Court Rules 2001 (Cth) r 4.05
Federal Court Rules 2011 (Cth) r 26.11
Industrial Relations Act 1988 (Cth) s 178
Superannuation Guarantee (Administration) Act 1992 (Cth) s 19
Workplace Relations Regulations 1996 (Cth) regs 19.4, 19.8, 19.20, 19.21
Workplace Relations Act 1996 (Cth) ss 182, 185, 186, 195, 235, 264, 323, 465, 638, 718, 719, 728, 826Cases cited: Adler v Australian Securities and Investments Commission [2003] NSWCA 131; (2003) 170 FLR 1
Ashbury v Reid (1961) WAR 49
Australasian Meat Industry Employees’ Union v Sunland Enterprises Pty Ltd (1988) 24 IR 467
Australian Competition and Consumer Commissioner v Giraffe World Australia Pty Ltd (No 2) [1999] FCA 1161; (1999) 95 FCR 302
Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342
Award Modernisation [2009] AIRCFB 345
Bernardino v Abbott [2004] NSWSC 430
Construction, Forestry, Mining and Energy Union v Clarke [2007] FCAFC 87; (2007) 164 IR 299
Doyle v Sydney Steel Co Ltd (1936) 56 CLR 545
Fair Work Ombudsman v Honest and Frank Pty Ltd [2010] SAIRC 23
General Retail Industry Award 2010 [2009] AIRCFB 983
Giorgianni v The Queen (1985) 156 CLR 473
Hamzy v Tricon International Restaurants [2001] FCA 1589; (2001) 115 FCR 78
Integrated Trolley Management Pty Ltd [2010] FWA 3317
Kelly v Fitzpatrick [2007] FCA 1080; (2007) 166 IR 14
McIver v Healey [2008] FCA 425
Melrose Farm Pty Ltd t/as Milesaway Tours v Milward [2008] WASCA 175; (2008) 175 IR 455
Official Trustee in Bankruptcy v Mitchell [1992] FCA 521, (1992) 38 FCR 364
Qantas Airways Ltd v Transports Workers’ Union of Australia [2011] FCA 470; (2011) 280 ALR 503
R v Nifadopoulos (1988) 36 A Crim R 137
Re Maidstone Buildings Provisions Ltd [1971] 1 WLR 1085
Reed v Blue Line Cruises Ltd (1996) 73 IR 420
Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd [1994] FCA 1222, (1994) 123 ALR 681
Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; (2003) 216 CLR 53
Ryde‑Eastwood Leagues Club Ltd v Taylor (1994) 56 IR 385
Sent v Jet Corporation of Australia (1984) 2 FCR 201
The Mayor, Councillors and Citizens of the City of Altona [1992] FCA 374; (1992) 37 FCR 216
Trade Practice Commission v Australian Meat Holdings Pty Ltd (1988) 83 ALR 299
Yorke v Lucas (1983) 49 ALR 672
Yorke v Lucas (1985) 158 CLR 661
Young Investments Group Pty Ltd v Mann [2012] FCAFC 107
Zamora (No 2) [1921] 1 AC 891Date of hearing: 23-26 March 2015 Place: Adelaide Division: FAIR WORK DIVISION Category: Catchwords Number of paragraphs: 396 Counsel for the Applicant: Ms M Richards SC with Ms K Clark Solicitor for the Applicant: Office of the Fair Work Ombudsman Counsel for the First and Second Respondents: The First and Second Respondents did not appear Counsel for the Third and Fourth Respondents: Mr A Lazarevich Solicitor for the Third and Fourth Respondents: WBH Legal
Table of Corrections 26 February 2016 In the second sentence of paragraph 53, “its” has been replaced with “the”. 26 February 2016 In the first sentence of paragraph 155, “causal” has been replaced with “casual”. 26 February 2016 In the last sentence of paragraph 164, “causal” has been replaced with “casual”. 26 February 2016 In paragraph 204, “includes” has been replaced with “include”. 26 February 2016 In paragraph 377, “21 November 2010” is replaced with “2 September 2010”. 26 February 2016 In paragraph 395(h), “12 September 2010” is replaced with “2 September 2010”. 19 July 2016 In the last sentence of paragraph 19, “period” is replaced with “periodic”. 19 July 2016 In the first line of paragraph 296, “shows” is replaced with “show”. 19 July 2016 In the last sentence of paragraph 331, “entitlements” is replaced with “obligations”. 19 July 2016 In paragraph 356, “indicative” is replaced with “adjusted effective”.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
FAIR WORK DIVISION
SAD 158 of 2014
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: SOUTH JIN PTY LTD (ACN 133 198 099)
First RespondentKI BOK JIN
Second RespondentCOASTAL TROLLEY SERVICES PTY LTD
(ACN 100 786 909)
Third RespondentEDWARD STROOP
Fourth Respondent
JUDGE:
WHITE J
DATE OF ORDER:
18 DECEMBER 2015
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.The Applicant is to file and serve minutes of the declarations and other orders to give effect to the Court’s findings.
2.The matter is adjourned to Wednesday, 10 February 2016 for submissions as to the appropriate orders and submissions as to penalty.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
FAIR WORK DIVISION
SAD 158 of 2014
BETWEEN: FAIR WORK OMBUDSMAN
ApplicantAND: SOUTH JIN PTY LTD (ACN 133 198 099)
First RespondentKI BOK JIN
Second RespondentCOASTAL TROLLEY SERVICES PTY LTD
(ACN 100 786 909)
Third RespondentEDWARD STROOP
Fourth Respondent
JUDGE:
WHITE J
DATE:
18 DECEMBER 2015
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
Introduction
[1]
The hierarchy of contracts – overview
[7]
The requirements of the WR Act and the FW Act
[13]
The application of the Cleaning Services Award to trolley collectors
[35]
The contraventions alleged against South Jin
[44]
Were the trolley collectors casual employees?
[56]
An admission by Mr Jin?
[58]
The concept of casual employment
[65]
Implications from the Workplace Relations Act
[72]
Implications from the Cleaning Services Award
[75]
The evidence of Mr Sarkar
[85]
The evidence of Jongsu Jeong
[94]
The reliability of the wage records
[104]
The involvement of Paul Hyun
[119]
Conclusion on the South Jin wage records
[134]
Consideration of the employees other than Mr Sarkar
[136]
Were the trolley collectors underpaid?
[153]
Identifying the contraventions of s 45
[162]
Failure to pay the superannuation contributions
[194]
Failure to provide pay slips
[203]
Failure to keep proper records
[216]
Accessorial liability
[223]
Statutory provisions
[224]
Accessory liability – principles
[227]
Elements of the contraventions
[237]
ITM background
[242]
ITM tendering for contracts
[249]
The Coles 2005 Contract
[254]
Coles and Kmart – Kurralta Park site
[259]
Woolworths Group – Marion, Elizabeth and West Lakes sites
[264]
Dan Murphy’s Marion
[270]
ITM subcontracts with CTS
[271]
Foodland Fairview Park
[285]
The CTS – South Jin subcontracts
[287]
Comparison of the payments
[293]
South Jin’s use of the indicative rosters
[295]
The CTS Respondents and the CS Award
[297]
Assessment of Mr Stroop’s credibility
[311]
The knowing involvement of the CTS Respondents
[326]
Accessory liability – conclusions
[368]
Accessorial liability of Mr Jin
[378]
Conclusion
[395]
Introduction
The first respondent (South Jin) was the employer of trolley collectors. These are the persons who retrieve shopping trollies at and around supermarkets and major stores and relocate them for the use of future customers.
The Fair Work Ombudsman (the FWO) alleges that, in the period between 16 February 2009 and 21 November 2010 (the Relevant Period), South Jin failed to comply with several of the obligations imposed on it by, and under, the Workplace Relations Act 1996 (Cth) (the WR Act) and by, and under, the Fair Work Act 2009 (Cth) (FW Act) in respect of 49 trolley collectors. The FWO alleges that the second respondent (Mr Jin) is liable as an accessory in respect of the same contraventions and that the third and fourth respondents, Coastal Trolley Services Pty Ltd (CTS) and Mr Stroop (together the CTS Respondents), are liable as accessories in respect of nine of the contraventions of South Jin.
The FWO seeks declarations with respect to each of the contraventions alleged and the imposition of penalties.
The proceedings were commenced in the Federal Circuit Court (the FCC) (then the Federal Magistrates Court). South Jin did not file a defence and judgment by default was entered against it on 17 July 2012. On the following day, an order for the winding up of South Jin was made. The pursuit of the proceedings against it was then stayed, as the FWO has not sought leave to proceed against it: Corporations Act 2001 (Cth) s 471B. The proceedings against the remaining respondents were transferred to this Court in June 2014.
The Court ordered that the trial proceed in two stages, with the first stage to comprise a trial of all issues other than the issue of penalty and the second stage, should it become necessary, the claims with respect to penalty.
Although Mr Jin denied the FWO allegations relating to his liability as an accessory, his lawyer informed the Court that he did not wish to take any part in the liability aspects of the trial. He does however wish to be heard on the matter of penalty should the Court find the contraventions alleged against him to be established. In those circumstances, Mr Jin was excused from attending at the liability trial.
The hierarchy of contracts – overview
In and before 2009 and 2010, Integrated Trolley Management Pty Ltd (ITM) had contracts with Coles Group Ltd, formerly Coles Myer Ltd (Coles) and Woolworths Ltd (Woolworths) for the provision of trolley collection services at a number of stores in shopping centres in South Australia. These proceedings concern trolley collectors employed at four of those locations as well as those employed at the Fairview Park Foodland Store. The four locations of Coles and Woolworths are the Kurralta Park Coles and Kmart stores, the Woolworths and Big W stores at Elizabeth, the West Lakes Woolworths store and, at the Marion Shopping Centre, the Woolworths, Big W and Dan Murphy’s stores and, until 15 March 2009, the Marion Coles, Kmart and Target stores.
The directors of ITM are Mr Hills and Mr Vickery. Both gave evidence in the trial.
ITM entered into sub‑contracts with CTS for the provision of its services under the contracts with Coles and Woolworths. At relevant times Mr Stroop was the director and majority shareholder of CTS. He managed the trolley collection operations of CTS, including its sub‑contracts, and had the day to day responsibility for its trolley collection business. Mr Stroop gave evidence in the trial.
CTS in turn sub‑contracted the work to South Jin, and it was South Jin which employed the trolley collectors. It seems that many of the 49 trolley collectors were young men from South Korea who entered Australia on student or working holiday visas.
At relevant times, Mr Jin was the sole director of South Jin and he held all shares in it. By reason of the form of his defence, Mr Jin is taken to have admitted that he was the manager of South Jin’s operations. There is, however, some evidence that a Mr Paul Hyun may also have been involved in the management. I will refer to that evidence shortly.
CTS negotiated a trolley collection contract directly with Fairview Park Foodland store. That contract came into operation on 1 April 2009. CTS sub‑contracted the provision of the trolley collection services at the Fairview Park Foodland store to South Jin. ITM provided management services to CTS in respect of that contract.
The requirements of the WR Act and the FW Act
As already noted, the FWO claims relate to the period between 16 February 2009 and 21 November 2010. The WR Act was in force during part of this period, until the FW Act came into operation on 1 July 2009. The repeal of the WR Act and the commencement of the FW Act were governed by the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (the Transitional Act).
In the period between 16 February 2009 and 31 December 2009, the trolley collectors employed by South Jin were award free. South Jin was however subject to the obligations imposed by the WR Act. It continued to be so bound during the “bridging period” for which the Transitional Act provided, namely, from 1 July 2009 to 31 December 2009.
From 1 January 2010, the employment of the trolley collectors was governed by the FW Act and by the Cleaning Services Award (CS Award), a modern award made by the Australian Industrial Relations Commission (AIRC) on 3 April 2009. The CS Award commenced on 1 January 2010. An Exposure Draft of that Award had been circulated in early 2009.
In February and March 2009, contractors such as ITM and CTS had sought to have trolley collectors removed from the coverage of the then proposed CS Award. That attempt failed, as did a later attempt after the CS Award had been made: see the decision of the AIRC in General Retail Industry Award 2010 [2009] AIRCFB 983 delivered on 22 December 2009. This meant that the CS Award applied to the employment of trolley collectors immediately upon its commencement on 1 January 2010. This was inconvenient for ITM and its sub‑contractors as, amongst other things, the CS Award did not contain, in relation to trolley collectors, the standard transitional provisions adopted by the AIRC to facilitate the introduction of modern awards such as it.
ITM then applied to Fair Work Australia (FWA) to have the employment of trolley collectors employed by contractors governed by the General Retail Industry Award (the GRI Award) or, in the alternative, for a variation of the CS Award so as to have transitional provisions included. Only the application for variation succeeded: Integrated Trolley Management Pty Ltd [2010] FWA 3317. FWA made the order of variation on 23 April 2010 and ordered that it come into effect that same day. There was no order for retrospectivity.
The effect of this course of events with respect to the trolley collectors employed by South Jin in the Relevant Period was as follows.
In the period from 16 February 2009 to 31 December 2009, ss 182, 185, 186 and 195 of the WR Act applied to the trolley collectors. Section 182(3) required that they be paid the “basic periodic rate of pay”:
(3) If:
(a) the employment of an employee is not covered by an APCS; and
(b)the employee is not a junior employee, an employee with a disability, or an employee to whom a training arrangement applies;
the employee must be paid a basic periodic rate of pay for each of the employee’s guaranteed hours (pro‑rated for part hours) that is at least equal to the standard FMW (the guaranteed basic periodic rate of pay).
The “standard FMW” to which s 182(3) referred was the standard Federal Minimum Wage (FMW) fixed in s 195. It was common ground that the FMW in 2009 was $14.31 per hour.
In respect of casuals, s 185 provided (relevantly):
185 The guarantee
(1)This section applies to a casual employee for whom, under section 182, there is a guaranteed basic periodic rate of pay, other than a casual employee in relation to whom the following paragraphs are satisfied:
(a) subsection 182(1) applies to the employee;
(b)the APCS that covers the employment of the employee does not contain casual loading provisions under which a casual loading is payable to the employee;
(c)the employee’s employment is not covered by a workplace agreement.
(2)The casual employee must be paid, in addition to his or her actual basic periodic rate of pay, a casual loading that is at least equal to the guaranteed casual loading percentage of that actual basic periodic rate of pay.
Section 185(3) fixed the “guaranteed casual loading percentage” referred to in s 185(2) as the “default casual loading percentage”. That was 20% (WR Act s 186).
Accordingly, this meant that, in the period from 16 February 2009 to 31 December 2009, South Jin was obliged:
(a)by ss 182(3) and 195 of the WR Act, to pay at least the FMW of $14.31 per hour;
(b)by ss 185(2) item 3 and 186 of the WR Act, to pay “the default casual loading” of 20% to those employees who were casuals. This produced an hourly rate of $17.17.
These provisions continued to apply after 1 July 2009 by virtue of Sch 9, item 5 of the Transitional Act.
Section 45 of the FW Act applied with effect from 1 January 2010. It provides:
45 Contravening a modern award
A person must not contravene a term of a modern award.
Accordingly, in the period from 1 January 2010 to 22 April 2010, South Jin was obliged:
(a)by s 45(1) of the FW Act and cl 16 of the CS Award, to pay at least $15.34 per hour, this being the rate for Level 1 employees, the classification level which appears most appropriate to trolley collectors and, in any event, the lowest classification level;
(b)by s 45(1) of the FW Act and cl 12.5 of the CS Award, to pay a loading of 25% to those employees who were casuals. This was an hourly rate of $19.18;
(c)by s 45(1) of the FW Act and cl 27.1(a) of the CS Award, to pay a loading of 15% of the ordinary hourly rate for work after 6 pm. This was an hourly rate of $17.64 and, with the casual loading, $21.48;
(d)by s 45(1) of the FW Act and cl 27.2 of the CS Award, to pay time and one‑half of the ordinary hourly rate for time worked on Saturdays. This was $23.01 per hour and, with the casual loading, $26.85 per hour;
(e)by s 45(1) of the FW Act and cl 27.2 of the CS Award, to pay double the ordinary hourly rate for all work performed on Sundays. This was $30.68 per hour and, with the casual loading, $34.52 per hour;
(f)by s 45(1) of the FW Act and cl 28 of the CS Award, to pay overtime rates to those employees who worked in excess of 7.6 hours in one day or in excess of five days in the seven day period from Monday to Sunday. Overtime worked from midnight Sunday to midnight Saturday was to be paid at the rate of time and a half for the first two hours, and double time thereafter, and overtime worked on Sundays was to be paid at the rate of double time. This meant that overtime at the rate of time and a half was $23.01 per hour and at the double time rate (other than on Sundays) $30.68 per hour. Overtime on Sundays was at the rate of $30.68 per hour. If the employees were casual, these rates were $26.85, $34.52 and $34.52 per hour respectively.
When the variation to the CS Award inserting transitional provisions became operative on 23 April 2010, the obligations of South Jin changed and were in some respects reduced. In the period from 23 April 2010 to 30 June 2010, South Jin was obliged:
(a)by s 45(1) of the FW Act, cl C.2.3 of Sch C of the CS Award and Sch 9 cl 5(3) of the Transitional Act, to pay at least the transitional standard FMW of $14.31 per hour;
(b)by s 45(1) of the FW Act, cl C.7.2 of Sch C of the CS Award and Sch 9 cl 5(3) of the Transitional Act, to pay the “transitional default casual loading” of 20% in addition to the transitional standard FMW – an aggregate casual rate of $17.17 per hour;
(c)to pay overtime at the same penalty rates as applied in the period from 1 January 2010 to 22 April 2010, although by reason of the application of the transitional provisions, the time and a half rate for overtime worked on Monday to Saturday was $21.47 per hour, the double time rate for overtime worked on Monday to Saturday was $28.62 per hour, and the overtime rate for Sunday was $28.62 per hour.
South Jin was not obliged to pay any penalty rates in respect of Saturday and Sunday work in the period from 23 April 2010 to 30 June 2010.
In the period from 1 July 2010 to the end of the Relevant Period on 21 November 2010, South Jin was obliged:
(a)by s 45(1) of the FW Act and cl C.2.5 of Sch C of the CS Award, to pay at least $15.21 per hour;
(b)by s 45(1) of the FW Act and cl C.7.3 of Sch C of the CS Award, to pay a transitional casual loading of 21% in addition to the rate of $15.21 per hour – an aggregate casual rate of $18.40 per hour;
(c)by s 45(1) of the FW Act and cl 27.2 of the CS Award, to pay penalty rates for Saturday and Sunday work. By reason of the application of the transitional provisions, the Saturday penalty rate was $19.92 per hour and the Sunday penalty rate was $21.45 per hour;
(d)by s 45(1) of the FW Act and cl 28 of the CS Award, overtime at the same rates as had applied in respect of the period 1 January 2010 to 22 April 2010 although, by reason of the application of the transitional provisions, the time and a half rate for overtime worked on Monday to Saturday was $22.82 per hour, the double time rate for overtime worked on Monday to Saturday was $30.42 per hour, and the overtime rate for Sunday worked was $30.42 per hour.
Upon the commencement of the CS Award on 1 January 2010, South Jin became bound by cl 23.2 to make a superannuation contribution to a superannuation fund for the benefit of each employee, being 9% of each employee’s earnings prescribed by the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SGA Act). In the period from 16 February 2009 until 31 December 2009, South Jin had, in effect, been subject to the same obligation if it wished to avoid the additional taxation liability imposed by the SGA Act, but the FWO makes no claim in respect of that period.
Throughout the Relevant Period, South Jin was obliged to provide payslips to each of the trolley collectors within one working day of the making of a payment of wages. From 16 February 2009 to 30 June 2009, reg 19.20(1) of the Workplace Relations Regulations 1996 (Cth) (WR Regulations) required South Jin to issue to each trolley collector a written payslip relating to each payment. Regulation 19.20(2) required each payslip to be issued in electronic form or hard copy within one day of the payment to which the payslip related.
From 1 July 2009 to 21 November 2010, s 536(1) of the FW Act imposed a like obligation on South Jin. Section 536(2) required that the payslip be in the form, and include any information, prescribed by regulation. Regulation 3.46 of the Fair Work Regulations 2009 (Cth) (the FW Regulations) contains the relevant prescription.
Finally, South Jin was required at all times during the Relevant Period to maintain a record for each of its employees containing the content prescribed by the regulations in force from time to time. From 16 February 2009 to 30 June 2009, reg 19.4(1) of the WR Regulations required South Jin to make, or to cause to be made, a record relating to each of its employees, in accordance with Divs 3 and 4 of the WR Regulations.
Section 535 of the FW Act imposed a similar obligation on South Jin in respect of the period from 1 July 2009 to 21 November 2010. Regulation 3.32 of the FW Regulations specified the content of the records to be kept. That content was similar to that pertaining under the WR Act but, in addition, required the records to include South Jin’s own Australian Business Number (ABN) and, under reg 3.34 of the FW Regulations, the number of overtime hours worked by the employee during each day, or when the employee started and ceased working overtime hours.
The application of the Cleaning Services Award to trolley collectors
Counsel for the CTS Respondents submitted that the CS Award did not apply to trolley collectors at all until 1 July 2010 with the effect that the summary of South Jin’s obligations given above is not accurate. Counsel relied for this submission on statements made by Mr Stroop and Mr Vickery in their respective affidavits. However, the date on which the CS Award commenced to apply to trolley collectors is to be determined by reference to the orders made by the AIRC and by FWA. Those orders do not bear out the submissions of the CTS Respondents.
As noted earlier, the AIRC made the CS Award on 3 April 2009 ([2009] AIRCFB 345). By cl 2, the CS Award was stated to commence on 1 January 2010.
On 14 December 2009, the AIRC amended cl 2 and inserted some transitional provisions. However, the Award commencement date of 1 January 2010 remained. Clause B.1.15 required employers, from 1 January 2010, to pay at least the minimum wage stipulated in the tables in cl B.2.
When FWA varied the CS Award on 23 April 2010 so as to introduce transitional provisions relating to trolley collectors, it did not alter the Award’s commencement date. Section 165(2) of the FW Act provides expressly that a determination varying a modern award may not be specified to come into operation earlier than the day on which the determination was made unless one or other of two conditions were satisfied. Neither of these conditions was satisfied in the case of the variation made on 23 April 2010.
Accordingly, this submission of the CTS Respondents is rejected.
I set out earlier the effect of the FWA decision on 23 April 2010 on the rates applicable to trolley collectors. The challenge by the CTS Respondents to the accuracy of those rates did not rise above bare assertion.
In his opening submissions, counsel for the CTS Respondents made a different submission ([46]‑[47]), namely, that it should be inferred that the variations to the CS Award made on 23 April 2010 were intended to operate retrospectively. As I understood it, counsel contended by this submission that, although the variation made by the FWA on 23 April 2010 was expressly stated to come into effect on 23 April 2010, it should nevertheless be regarded as having come into effect on 1 January 2010. This was of course inconsistent with counsel’s later submission to the effect that the Award had not applied at all to trolley collectors until 1 July 2010.
The submission cannot be accepted because FWA did not even purport to invoke the power under s 165(2) to give retrospective operation to the variation.
I will proceed on the basis that the rates of pay and obligations set out earlier were the applicable rates and obligations.
The contraventions alleged against South Jin
The FWO alleges a number of contraventions by South Jin of the obligations summarised above.
First, the FWO alleges that, in the period from 1 January 2010 to 22 April 2010, South Jin failed to pay a rate which was at least equal to the applicable rate of $15.34 per hour.
Secondly, the FWO alleges that the 49 trolley collectors were at all times casual employees and that South Jin failed to pay them, throughout the Relevant Period, the casual loadings which were applicable from time to time.
Thirdly, the FWO alleges that South Jin failed to pay the 49 trolley collectors the applicable penalty rates for Saturday and Sunday work between 1 January and 22 April 2010 and between 1 July and 21 November 2010.
Fourthly, the FWO alleges that South Jin failed in the period from 1 January to 21 November 2010 to pay the required overtime payments to its employees.
Fifthly, the FWO alleges that from 1 January to 21 November 2010, South Jin did not pay any of the minimum superannuation contributions required by cl 23.2 of the CS Award.
Next, the FWO alleges that, until on or about 12 September 2010, South Jin did not issue employees any payslips at all, let alone in timely way and with the content required by the WR Regulations and later the FW Regulations. The FWO alleges that, while South Jin did issue payslips to its employees from on or about 12 September 2010, those payslips did not include all the information prescribed by reg 3.46 of the FW Regulations, because they did not include the number of the superannuation fund to which contributions would be made.
Finally, the FWO alleges that South Jin did not comply with its record keeping obligations. In particular, the FWO alleges that South Jin did not record in relation to each employee whether the employee’s employment was full‑time, part‑time, permanent, temporary or casual. The FWO also alleges that, after 1 July 2009, South Jin failed to make records of the overtime worked by each employee, as required.
As noted earlier, judgment in default of a defence was entered against South Jin by the FCC on 17 July 2012. The FCC made declarations that South Jin had committed each of the contraventions alleged by the FWO and, in addition, made orders that South Jin pay to each of 48 of the 49 employees the amounts underpaid to those employees. In total this was $165,323.77 before interest.
The FWO acknowledged that the default judgment and the orders with respect to payment, did not bind Mr Jin or the CTS Respondents. She accepted that the claims of accessorial liability against them required her to prove the primary contraventions by South Jin.
The FWO alleges that Mr Jin was knowingly concerned in all of South Jin’s alleged contraventions. She alleges that the CTS Respondents were knowingly concerned in South Jin’s underpayment contraventions, namely, its failures to pay casual loading in 2009; its failures to pay the minimum hourly rate required by cl 16 of the CS Award in the period from 1 January 2010 to 22 April 2010; its failures to pay the casual loadings required by cl 12.5(a) of the CS Award; and its failures to pay penalty rates for Saturday, Sunday and overtime work during 2010, but not that they were knowingly concerned in the contraventions of South Jin relating to the superannuation contributions, the provision of payslips and the record keeping.
There was no issue in the trial about the FWO’s standing to bring these proceedings: see ss 687(1) and 701 of the FW Act and s 718(1) of the WR Act as it continues to apply by virtue of the Transitional Act.
Were the trolley collectors casual employees?
The claim of the FWO that the trolley collectors were underpaid was principally, but not only, made on the basis that each trolley collector was a casual employee, with the consequence that South Jin was obliged to pay each the casual loading prescribed at different times by the WR Act, the Transitional Act and the CS Award.
It is convenient to address at this stage the question of whether the employees were casual employees. That determination has to be made in respect of two distinct periods within the Relevant Period: 16 February to 31 December 2009 when the employment of the employees was award free but subject to the provisions in the WR Act; and from 1 January to 21 November 2010 when the CS Award was applicable.
An admission by Mr Jin?
The FWO relied first on an admission in the first Defence filed by Mr Jin that the 49 employees were casuals. This admission was not repeated in a later Defence. The FWO, relying on the interaction between the Federal Circuit Court Rules 2001 (Cth) (FCCR 2001), on the one hand, and the Federal Court Rules 2011 (Cth) (FCR 2011), on the other, submitted that Mr Jin was nevertheless bound by the earlier admission.
In the Statement of Claim filed in the then Federal Magistrates Court on 27 June 2011, the FWO pleaded in [21(d)] that each of the 49 trolley collectors was employed by South Jin during the Relevant Period “on a casual basis”. In the Third Amended Statement of Claim (TASC) filed on 26 April 2012, the same allegation was made in [52(c)].
In his Defence filed on 21 October 2011, Mr Jin admitted the allegation in [21(d)]. However, in the defence to the TASC, Mr Jin said that he did not plead to number of the allegations, including those in [52], because he took the view that those pleas related to other respondents. He then pleaded in the alternative a denial to those paragraphs.
The FWO submitted that it had not been open to Mr Jin, without leave, to withdraw in the later Defence his admission that the employees had been employed on a casual basis. She relied in this respect on r 26.11(2) of the FCR 2011 which provides:
(2)However, a party must not withdraw an admission or any other plea that benefits another party, in a defence or subsequent pleading unless:
(a) the other party consents; or
(b) the Court gives leave.
The FWO submitted that FCR 26.11(2) applied to the pleadings in the Circuit Court by virtue of s 43(2) of the Federal Circuit Court of Australia Act 1999 (Cth) (the FCC Act). Section 43 provides (relevantly):
43 Practice and procedure
(1)The practice and procedure of the Federal Circuit Court of Australia is to be in accordance with Rules of Court made under this Act. However, this subsection is subject to any provision made by or under this or any other Act with respect to practice and procedure.
(2)In so far as the provisions applicable in accordance with subsection (1) are insufficient:
...
(b)the Rules of Court made under the Federal Court of Australia Act 1976 apply, with necessary modifications, so far as they are capable of application and subject to any directions of the Federal Circuit Court of Australia or a Judge, to the practice and procedure of the Federal Circuit Court of Australia in relation to the jurisdiction of the Federal Circuit Court of Australia under laws of the Commonwealth other than:
(i) the Family Law Act 1975; or
(ii) the Child Support (Assessment) Act 1989; or
(iii) the Child Support (Registration and Collection) Act 1988.
(3) In this section:
practice and procedure includes all matters in relation to which Rules of Court may be made under this Act.
FCCR 2001 r 4.05, which requires a defence to be filed to a statement of claim, contains a cross‑reference to s 43.
Thus, although the FCCR 2001 did not preclude the withdrawal without leave of an admission in an earlier pleading, the FWO submitted that s 43, in combination with r 26.11(2) of the FCR 2011, had that effect.
I uphold that admission. Mr Jin had not obtained the requisite leave and so his earlier admission stands. However, that admission does not bind the CTS Respondents. In their case, the question of whether the 49 employees were casuals is to be determined by reference to the evidence.
The concept of casual employment
In relation to that part of the Relevant Period which falls between 16 February and 31 December 2009, the question of whether the employees were casual arises in particular from s 185 of the WR Act. That section required that “a casual employee”, in defined circumstances, be paid a “casual loading” which was at least equal to the “guaranteed casual loading percentage”. The WR Act did not contain any definition of the term “casual employee” or its cognates. It is reasonable to infer that, subject to some qualifications to be mentioned shortly, the term was used with its meaning in the general law.
Although casual employment is common, its precise definition has proved elusive. In its original conception, casual employees were those whose work was intermittent or irregular (Doyle v Sydney Steel Co Ltd (1936) 56 CLR 545 at 555) so that the employees did not know when completing one period of work if, or when, they would be employed again. Casual employees were generally thought to be engaged under a series of separate and distinct contracts with each contract terminating on the completion of the task or period for which they were engaged. Being generally paid by the hour, their employment could be terminated on an hour’s notice.
In Doyle v Sydney Steel at 565, McTiernan J said of the term “casual worker” in the context of worker’s compensation legislation:
[T]he term “casual worker” is not capable of exact definition. Hamilton LJ said in Knight v Bucknill: “I think that ‘casual’ is here used not as a term of precision, but as colloquial term.” Each case is to be determined on its own facts, consideration being given not only to “the nature of the work but also the way in which the wages are paid, or the amount of the wages, the period of time over which the employment extends, indeed all the facts and circumstances of the case.” ...
(Citations omitted)
In more recent times, it has been recognised that employees may be casuals even though engaged continuously over an extended period: Australasian Meat Industry Employees’ Union v Sunland Enterprises Pty Ltd (1988) 24 IR 467 at 473; Ryde‑Eastwood Leagues Club Ltd v Taylor (1994) 56 IR 385 at 389.
In Reed v Blue Line Cruises Ltd (1996) 73 IR 420 at 425‑6, Moore J considered the term “casual employee” in the context of a regulation which excluded casual employees from the termination provisions in Pt VIA of the Industrial Relations Act 1988 (Cth):
A characteristic of engagement on a casual basis is, in my opinion, that the employer can elect to offer employment on a particular day or days and when offered, the employee can elect to work. Another characteristic is that there is no certainty about the period over which employment of this type will be offered. It is the informality, uncertainty and irregularity of the engagement that gives it the characteristic of being casual.
... In my opinion, a casual employee for the purposes of reg 30B is an employee who is, from time to time, offered employment for a limited period on the basis that the offer of employment might be accepted or rejected but in circumstances where it could be expected that further employment of the same type would or might be offered and accepted but there was no certainty about the period over which it would continue to be offered.
To similar effect, the Full Court in Hamzy v Tricon International Restaurants [2001] FCA 1589; (2001) 115 FCR 78 at [38] said:
The essence of casualness is the absence of a firm advance commitment as to the duration of the employee's employment or the days (or hours) the employee will work. But that is not inconsistent with the possibility of the employee's work pattern turning out to be regular and systematic.
(Emphasis added)
In addition to these features of casual employment, the authorities indicate that the characterisation of a worker’s employment as casual, or otherwise, is essentially a question of fact in which no single criterion is likely to be decisive. Instead, regard must be had to a number of matters, including the way in which the parties themselves regarded their relationship, any commitment by the employer or the worker to ongoing employment, the regularity or otherwise of the worker’s hours or days of work, how the worker was notified of each period of work, the payment of an hourly rate for the hours actually worked, any indication that the hourly rate was intended to encompass leave entitlements, the absence of payment of the benefits associated with employment of an indefinite nature such as paid annual leave, sick leave and public holidays, and whether the employer and worker were able to refuse to offer or accept, as the case may be, further work: Bernardino v Abbott [2004] NSWSC 430 at [21]‑[23]; Melrose Farm Pty Ltd t/as Milesaway Tours v Milward [2008] WASCA 175; (2008) 175 IR 455 at [106].
Implications from the Workplace Relations Act
In the present case, in relation to the period from 16 February to 31 December 2009, account must be taken of provisions in the WR Act itself which indicated that employment may be casual even if it was regular and systematic. Two provisions are pertinent in this respect. Division 6 of Pt 7 of the WR Act entitled employees, including “eligible casual employees” to paid parental leave. By s 264, an “eligible casual employee” was defined to be a casual employee who had (relevantly) been engaged by a particular employer “on a regular and systematic basis for a sequence of periods of employment during a period of at least 12 months”.
Section 638(1)(d) excluded “a casual employee engaged for a short period” from the termination of employment provisions. By s 638(4) a casual employee was taken to be engaged for a short period unless (relevantly) the employee was engaged by a particular employer on “a regular and systematic basis” for a sequence of periods of employment during a period of at least 12 months.
Each of these provisions was accordingly an express contemplation by the WR Act that the fact that a person may have been engaged on a regular and systematic basis was not by itself inconsistent with the person being a casual employee.
Implications from the Cleaning Services Award
In relation to the period from 1 January to 21 November 2010, regard must be had to the provisions of the CS Award. Like the WR Act, it did not contain a definition of “casual employment”. However, some implications can be drawn from the specification of the employment categories contained in cl 12. That clause provides:
12. Employment categories
12.1Employees under this award will be employed in one of the following categories:
(a) full‑time employment;
(b) part‑time employment; or
(c) casual employment.
12.2At the time of engagement, an employer will inform each employee of the terms of their engagement and in particular whether or not they are to be full‑time, part‑time or casual, their usual location of work and the employee’s classification. This will then be recorded in the time and wages record of the employee.
12.3Full‑time employment
A full‑time employee is an ongoing employee engaged to work an average of 38 ordinary hours per week. Such hours are to be arranged in accordance with clause 24 – Ordinary hours of work.
12.4 Part‑time employment
(a)An employer may employ a part‑time employee in any classification in this award. At the time of engagement the employer and the part‑time employee will agree in writing on a regular pattern of work, specifying at least the hours worked each day, which days of the week the employee will work and the actual starting and finishing times each day.
(b)A part‑time employee is an employee who:
(i)is engaged to work less than the full‑time hours of 38 per week;
(ii)has reasonably predictable hours of work; and
(iii)receives, in addition to the hourly rate for a full‑time employee, an allowance of 15% of the hourly rate. This allowance allows the employer to roster a part‑time employee to work up to 7.6 hours per day, five days per week or 38 ordinary hours per week without the payment of overtime.
(c)An employer is required to roster a part‑time employee in accordance with the provisions of clause 25 – Rostering, and for a minimum number of hours in accordance with clause 24.2.
(d)Where clause 25 – Rostering does not apply, any requirement by an employer that a part‑time employee works hours in addition to those specified in accordance with clause 12.4(a) will be subject to the provisions of clause 28 – Overtime.
(e)Subject to clause 12.4(b)(iii), a part‑time employee receives, on a pro rata basis, equivalent pay and conditions to those on full‑time employees who do the same kind of work.
12.5 Casual employment
Casual employees may only be engaged to perform work on an intermittent or irregular basis or to work uncertain hours or to replace a weekly employee who is rostered off or absent.
(a) Casual loading
Casual employees will be paid, in addition to the ordinary hourly rates and rates payable for shift and weekend work that apply to full‑time employees, an addition loading of 25% of the ordinary hourly rate for the classification under which they are employed.
As can be seen, cl 12 contemplates three categories of employment: full‑time employment, part‑time employment and casual employment and, implicitly, that each employee will be in one or other of these categories. Clause 12.2 requires an employer, at the time of engagement, to inform each employee of the terms of their engagement and, in particular, whether they are to be full‑time, part‑time or casual employees.
A full‑time employee is one whose employment is of an indefinite kind and who works an average of 38 ordinary hours each week. A part‑time employee is engaged to work less than the full‑time 38 hours, has “reasonably predictable” hours of work, and is entitled to a loading of 15% on the hourly rate. The CS Award contemplates that the employer and the part‑time employee will agree in writing, at the time of the engagement, on a regular pattern of work specifying at least the hours to be worked each day and the days of the week on which the employee will work (with actual starting and finishing times).
The CS Award contains prescriptions as to the manner in which full‑time employees may perform their hours of work. Clause 24 provides that the ordinary hours of a full‑time employee are not to exceed 38 in each week, are not to exceed 7.6 hours each day and are to be worked in five day periods. Clause 24 also permits the 38 hours to be worked on flexible rosters which average the hours over a four week cycle with the effect that an employee may have a rostered day off.
Clause 12.5 contemplates that casual employees may be engaged only to perform work on “an intermittent or irregular basis or to work uncertain hours”, unless they are replacing a weekly employee who is rostered off or absent.
The structure of cl 12 suggests that, at least in general, employees who are neither full‑time nor part‑time will be casuals. That is to say, unless the agreements which the employees make with the employer, or the working arrangements themselves, indicate that they are full‑time or part‑time, the employees will be regarded as casual.
The FWO submitted that cl 12.5 was not definitional in nature but merely prohibitory. That meant, it was said, that cl 12.5 operated in relation to those employees engaged as casuals so as to limit the kind of work arrangements which could be made in their case. I doubt that that is a correct understanding of the clause. Subclause 12.5 appears in a clause which describes the different kinds of employment under the Award. It appears to be the counterpart of cll 12.3 and 12.4 which are descriptive of full‑time and part‑time employment. That suggests that cl 12.5 is intended to be descriptive of the category of casual employees. Further, the use of the word “engaged” suggests that the Award is speaking to the time at which employees are taken on, that is, of the kind of contractual arrangement which an employer may have with casual employees.
On their face, the expressions “work on an intermittent or irregular basis” and work of “uncertain hours” in cl 12.5 stand in contradistinction to the concept of “reasonably predictable hours of work” to which cl 12.4(b)(ii) refers. Intermittent or irregular work, or work of uncertain hours, is work which is not “reasonably predictable”.
However, these distinctions are blurred to an extent by cll 24.2 and 25. Clause 24.2(a) requires employers to roster “part‑time and casual employees” for specified minimum engagement periods. Clause 25 requires employers to prepare a roster for all employees showing normal starting and finishing times (cl 25.1). Such a roster is alterable on seven days’ notice (cl 25.2). The reference to all employees suggests that it includes casuals.
The rostering contemplated by cl 24.2 and cl 25 is seemingly inconsistent with work which is intermittent, irregular or of uncertain hours. It suggests that, despite the description of casual employment in cl 12.5, such employment may nevertheless have some regularity about it.
The evidence of Mr Sarkar
The FWO lead evidence at the trial from only one trolley collector, Mr Sarkar. He worked for South Jin between 22 April and 5 June 2010, collecting trolleys at the Woolworths and Big W stores at West Lakes, Elizabeth and Fairview Park. The CS Award was in force in this period.
Mr Sarkar said that he was not given any roster telling him where and when he was to work. Instead, he received each night a telephone call or a text message from Mr Jin telling him where, and the hours, he should work on the following day. Generally he started at 10 am. The number of hours he worked each day varied from between seven and 11.
Mr Sarkar said that there had not been any discussion between Mr Jin and him as to whether he would be full‑time or casual.
Mr Sarkar’s work was interrupted by periods of sickness. He did not receive any sick pay.
On 4 June 2010, Mr Sarkar was quoted in an article published in The Advertiser regarding trolley collectors not being paid Award rates. He was given work on only one day after that date, but did not receive any notice of termination of his employment.
Mr Sarkar’s evidence about these matters was not challenged. I thought that he was an honest witness and accept his evidence.
The FWO tendered a wage record for Mr Sarkar provided to her by South Jin pursuant to a Requirement to Produce Records or Documents under s 709(d) of the FW Act. This showed that, in the week ending 25 April 2010, Mr Sarkar worked three days (two days of nine hours and one of 11); in the week ending 2 May, six days (three of eight hours, one of six, one of seven and one of nine hours); in the week ending 9 May, 5 days (two of eight hours, one of six, one of seven and one of nine hours); in the week ending 16 May, 5 days (two of seven hours, one of eight, one of nine and one of 12 hours); in the week ending 23 May, 5 days (three of nine hours, one of six and one of 12 hours); and nine hours on 5 June.
For reasons to be given later, I some doubts about the reliability of South Jin’s wage records in every respect. However, the wage record for Mr Sarkar confirms his evidence about the irregularity and lack of predictability of his hours.
In my opinion, Mr Sarkar’s evidence and the wage records bespeak casual employment of the kind discussed in the authorities and as contemplated by cl 12.5 of the CS Award. He did not receive the 15% part‑time employment loading. I have no difficulty in concluding that Mr Sarkar was a casual employee for the purposes of the CS Award.
The evidence of Jongsu Jeong
One of the 49 trolley collectors who is the subject of the action is Jongsu Jeong. South Jin’s wage records show that Mr Jeong regularly worked 39 hours each week with some work on each of the seven days in the week.
Mr Jeong identified himself to Ms Peters, a Fair Work Inspector, when she visited the Elizabeth Shopping Centre on 18 May 2010 as part of the FWO’s investigation.
On 7 October 2010, Ms Peters interviewed Mr Jeong with the assistance of an interpreter. Mr Jeong told Ms Peters that he was leaving the following day to return to Korea. Ms Peters subsequent attempts to contact Mr Jeong in Korea have not been successful. It seems that he remains in Korea.
In those circumstances, I was satisfied that ss 62 and 63 of the Evidence Act 1995 (Cth) permitted the reception into evidence of the record of Ms Peters’ interview of Mr Jeong and of the documents which he produced during that interview.
Mr Jeong said in the interview that he had worked for Mr Jin at the Elizabeth Shopping Centre; that he had commenced on 26 February 2010; that he had regarded himself as a permanent full‑time employee; that he had worked seven days a week; that the only days which he had off were public holidays and that he was not paid for those days; and that generally he worked 12 hours on Mondays, Tuesdays and Wednesdays, 14 hours on Thursdays, 13 hours on Fridays, 11 hours on Saturdays, and 7 hours on Sundays.
Mr Jeong said that he knew his starting time each day as, by reason of his being a full‑time employee, he had a “certain” starting time.
Mr Jeong produced a diary in which he had recorded his hours. That diary did not confirm fully Mr Jeong’s oral account of his hours of work but does indicate that he worked considerably more hours than those recorded in South Jin’s wage records.
Mr Jeong said that he was paid $8.00 per hour.
Mr Jeong also said that when he first arrived in Australia on 25 November 2009, he had been met at the airport by Mr and Mrs Jin and, while living in Australia, had lived in the Jin’s house.
This evidence concerning Mr Jeong was not contradicted, and I consider it appropriate to rely on it.
The reliability of the wage records
The FWO or her investigators had, at different times, required the production of wage and other records pursuant to s 709(d) and s 712 of the FW Act.
The submissions of both parties assumed the reliability of the wage records, albeit for different purposes. However, the position of the FWO was that the wage records should be taken as evidence only that the employees worked at least the hours shown and that it is likely that they worked more.
These wage records appear to be printouts of electronic records, although there is no indication that they were made progressively and not (as a whole) in retrospect. There is a separate page for each employee and, for some employees, more than one page. Each page commences with the name of South Jin and the name and personal details of the employee to whom the record relates. It also contains some details particular to the employee such as the employee’s commencement date, tax file number and superannuation fund.
The earliest of the records commences on 16 February 2009. All the records relating to the period 16 February to 31 December 2009 show that a flat hourly rate of $14.31 was paid for ordinary time, weekends and public holidays. The records for some employees in respect of the period from 1 January 2010 to 30 June 2010 show a flat hourly rate of $14.31 for ordinary time, weekend and public holiday work, and for others a flat hourly rate of $14.76 for work at those times.
In respect of the period after 1 July 2010, the wage records show different rates for ordinary time, Saturday, Sunday and public holiday work ($15.55, $17.11, $18.66 and $20.22 respectively). The derivation of these figures is not known. I observe, however, that the difference between each succeeding figure is uniformly $1.56. This uniform differential, which does not seems to have any basis in the rates of pay applicable to trolley collectors, raises by itself a doubt about the reliability of the records.
The wage records then record on a weekly basis the hours said to have been worked by the employee on each day in each week, together with the employee’s gross pay, tax deducted, net pay, superannuation contribution and the date of payment to the employee.
The wage records have several features which raise issues about their reliability. All employees appear to be in two categories. Thirty seven of the 39 employees are shown regularly to have worked 39 hours in each week, with work being performed on each of the seven days. Eleven are shown regularly to have worked 19.5 hours in each week, usually over four days. The 49th employee is Mr Sarkar, whose hours were irregular, apparently because of his illness. It seems remarkable that there was not more individual variation between the hours each employee worked, and the number of days in each week on which each employee worked. That is especially so having regard to the evidence of Mr Hills and Mr Vickery, the directors of TMS, that the demand for trolley collectors varies according to the season, day of the week and time of day. For example, the demand in the busy Christmas period is greater than at other times; the demand in the weeks in which pensions are paid is usually greater than in the non‑pension payment weeks, and factors such as the daily weather, sales, special events and school holidays mean that trading patterns (and the consequential demand for trolley collection services) vary from time to time.
In addition, although there is variance in the number of hours worked by each employee on the different days in each week, there is remarkable consistency in the hours shown to have been worked on the same day in each succeeding week.
The records show that employees did not work on those days which were public holidays. Yet the employees who were shown as working 39 hours in each week are still shown as having worked those hours in the weeks which included the public holiday, by virtue of having worked increased hours on the remaining days. It seems improbable that the employees in an industry of this kind would have needed to work additional hours in a public holiday week which matched exactly the hours they worked in a non‑public holiday week. This feature suggests an element of contrivance in the wage records.
I refer again to the different rates for ordinary time, Saturday, Sunday and public holiday work for those workers shown as having worked after 1 July 2010. They appear to be contrived rates without any relationship to the rates required by the applicable law.
I referred earlier to the inconsistency between the hours for Mr Jeong recorded in South Jin’s wage records and those which Mr Jeong recorded in his diary. Mr Jeong’s diary shows that there were many occasions on which he worked 10 or more hours a day whereas the South Jin records indicate that he did not work more than eight hours in any one day.
It is pertinent in this respect that, when interviewed by Ms Peters on 4 November 2011, Mr Jin said that Mr Jeong had worked more hours than those shown in the South Jin wage record “because he said that he wanted to earn more money, he asked me to give more work”.
I also observe that there are inconsistencies between South Jin’s wage records relating to Mr Sarkar and the hours of work which Mr Sarkar recorded for himself.
It is apparent that South Jin commenced new records for each trolley collector at 1 January 2010. Because that was part way through a working week, the hours for some days in that week appear in both the former and the new records. I observe that, in respect of at least three trolley collectors, there are inconsistencies between the records for some days in this week.
Finally, the hours of work recorded in South Jin’s wages records could not have been sufficient for the performance of all the work required of South Jin at the five shopping centres. I accept as reliable a calculation carried out by Ms Peters in this respect, using the week of 6 April to 12 April 2009 as an example. South Jin’s records show that a total of 156 hours were worked by trolley collectors in that week, an average of 31.2 hours at each of the five shopping centres. That is equivalent to one worker per shopping centre per week working less than 4.5 hours per day. I will refer later to the evidence which indicates that the Coles and Woolworths stores, especially those at the bigger shopping centres, could not have been serviced with this level of trolley collectors.
The involvement of Paul Hyun
My misgivings about the reliability of the wage records were increased by evidence indicating the involvement of a Mr Paul Hyun in South Jin’s business. Mr Hyun was the sole director of Honest and Frank Pty Ltd (H&F). H&F had previously been an employer of trolley collectors. CTS had subcontracted to H&F work which it had obtained by subcontract from ITM. It had commenced the sub‑contracts to South Jin shortly after terminating its contact with H&F.
During 2009, the FWO took proceedings in the South Australian Industrial Court (the SAIRC) against H&F and Mr Hyun. The FWO alleged a number of contraventions of the FW Act, including breaches of the obligations to make, keep and provide employee and payment records and, on two occasions, the making and providing to the FWO of false and misleading employee records. H&F admitted the contraventions and Mr Hyun admitted to having been personally involved in its contraventions. By a judgment delivered on 29 April 2010, the SAIRC imposed penalties on each of H&F and Mr Hyun: Fair Work Ombudsman v Honest and Frank Pty Ltd [2010] SAIRC 23.
In 2009, while those proceedings were on foot, Mr Hills and Mr Vickery took the view that, in the light of the matters disclosed in the SAIRC proceedings, they should ensure that H&F and, in particular Mr Hyun, did not have any involvement in the businesses of the companies to which CTS had contracted work it obtained from ITM.
On 16 October 2009, Mr Hills discussed the H&F litigation with Mr Stroop and told him of his concerns of a possible connection between Mr Jin and Mr Hyun. Mr Hills confirmed his concerns in a letter to Mr Stroop of 19 October 2009, saying (relevantly):
It would appear from the prosecutor’s brief that H&F are being charged with numerous counts of failure to keep proper payroll records etc in the period October 2007 to May 2008. Unfortunately, it also appears that yet again Paul Hyun has pleaded guilty to presenting falsified documents to an inspector.
This leads us with no choice but to request that CTS end all business association with Mr Hyun. We note that H&F ceased to be a sub‑contractor of CTS on 10 November 2008, however, we must be sure that the three corporate entities which replaced H&F are not “fronts” for Mr Hyun.
To achieve this, we require:
ŸProof as to officers and shareholders of the three companies. This may be an annual return or incorporation documents.
ŸA letter from the directors of South Jin Pty Ltd and Joon Ocean Pty Ltd detailing all payments made by the companies to Paul Hyun or any associated entity of Paul Hyun since 10 November 2008 and the basis of such payments (consultant, employee??) and confirming that no future payments beyond 16 October 2009 will be made from the companies’ funds to Mr Hyun for any reason.
...
Mr Stroop drafted the reply by Mr Jin to that letter dated 28 October 2009. The reply confirmed that South Jin had not paid Mr Hyun or any entities associated with him any money, that no payments of any kind would be made to him and that Mr Hyun would not be employed by South Jin without the express written approval of ITM.
Mr Stroop acknowledged in his cross‑examination that he had explained to Mr Jin at the time why ITM had requested the letter; that ITM had made it clear that it did not want Mr Hyun to have any association with its contracts; and that ITM had not subsequently given any approval for Mr Hyun to be involved in its contacts.
Despite this, the evidence discloses that Mr Stroop continued after 28 October 2009 to involve, and to recognise the involvement of, Mr Hyun in South Jin’s business. Mr Stroop sent several emails to Mr Hyun concerning the day to day performance of contracts which it had subcontracted to South Jin and the management of those contracts. On 27 November 2009, Mr Stroop sent an email to Mr Hyun (copied to Mr Jin) attaching an Incident Report concerning an injury suffered by a trolley collector at the Elizabeth Shopping Centre on the previous day. On 1 December 2009, Mr Stroop sent an email to Mr Hyun (copied to Mr Jin) conveying a request by Woolworths Regional Manager concerning the placement of trolleys at the Marion Shopping Centre. On 14 December 2009, Mr Stroop sent an email to Mr Hyun and Mr Jin attaching a spreadsheet of the Christmas trading hours at the Kurralta Park store. On 17 December 2009, Mr Stroop sent an email to Mr Hyun and Mr Jin forwarding on a request by the Manager of the Elizabeth Shopping Centre concerning an aspect of the conduct of trolley collectors at that Centre. On 27 January 2010, Mr Stroop sent the new roster for the Fairview Park Foodland to Mr Hyun (copied to Mr Jin). Earlier, December 2009, Mr Stroop had sent to Mr Hyun and Mr Jin information regarding the roster at the Norwood Foodland. On 5 March and 17 May 2010, Mr Stroop sent emails to Mr Hyun (copied to Mr Jin) passing on a report by the Manager of the Elizabeth Shopping Centre of unsafe practices adopted by trolley collectors.
Some of these emails were sent to Mr Hyun within minutes of Mr Stroop having received the report from the shopping centre manager.
There were other emails in early 2010 from the office of CTS to Mr Hyun, although the evidence did not indicate that these had been sent by Mr Stroop personally. One of these contained the results of an audit of the trolley collection at the Kurralta Park store carried out on behalf of ITM.
On their face, these emails seemed to reflect an understanding by Mr Stroop and CTS of a continued close involvement by Mr Hyun in the day to day affairs of South Jin.
Mr Stroop said that he had sent the emails to Mr Hyun because he had fluent English and Mr Jin did not. He said that he had been “using” Mr Hyun as a “tool” so that he could convey information to Mr Jin and in turn obtain information from Mr Jin.
I considered Mr Stroop’s evidence on this topic to be unimpressive. He appeared to be discomforted when the various emails were put to him in cross‑examination. His evidence had the hallmarks of a retrospective justification. I observe that none of the emails included any request for assistance by Mr Hyun in translation or for any report from Mr Jin. As I have said, the emails rather suggest a close involvement by Mr Hyun in the business of South Jin. It also seems implausible that Mr Stroop, having been told by Mr Hills on 19 October 2009 that there were, in effect, doubts about Mr Hyun’s honesty, would have thought that he could trust him in the way that his answers in cross‑examination supposed.
It is not to Mr Stroop’s credit that immediately before being confronted with the emails in cross‑examination, he had given the following evidence:
Q:You did not, after this letter went to ITM in October 2009, alert either Mr Vickery or Mr Hills to the fact that Mr Hyun did have an ongoing [association] with South Jin?
A:I’m not aware of any ongoing association with South Jin. I know he was a friend of his.
...
Q:Is it your evidence that there was no association between South Jin and Mr Hyun?
A:Business sense, correct. Yes.
These answers also contrasted starkly with Mr Stroop’s later evidence, after being confronted with the emails, that he had “routinely” passed on emails from ITM or a centre manager to Mr Hyun and Mr Jin.
In the circumstances, I am satisfied that Mr Hyun did, in 2009 and 2010, have a reasonably close involvement in the affairs of South Jin. That involvement and Mr Hyun’s conduct as disclosed in the proceedings in the SAIRC, added to my misgivings about the reliability of the South Jin wage records.
Conclusion on the South Jin wage records
For these reasons, I doubt that the South Jin wage records can be regarded as reliable. This limits the inferences which can be usefully drawn from them.
Like the FWO, I consider it appropriate to proceed on the basis that the hours of work disclosed in the wages records are at least those actually worked but that, beyond that, the wage records should be treated with circumspection.
Consideration of the employees other than Mr Sarkar
In relation to the remaining employees, the FWO relied on the following for the contention that they should be categorised as casual employees:
(a)The wages of all employees were calculated by the hour, and not by the week;
(b)The employees were paid only for time worked;
(c)Although annual leave and sick leave entitlements accrued progressively (WR Act ss 323(2), 235(2), 465(2); FW Act ss 87(2), 96(2)) South Jin’s records did not indicate any accrual, let alone payment, of annual or sick leave. Pro‑forma documents entitled “Employee Leave Records” on which the names of workers had been entered were completely blank with no record of accrual or payment of sick leave or annual leave. This was evidence, it was submitted, that the employees did not have any such entitlement, a circumstance consistent with them being casuals. Mr Jin admitted that South Jin had not paid annual leave, holiday pay or sick leave;
(d)The wage records showed that employees who did not work on public holidays were not paid;
(e)None of South Jin’s records showing payments of any kind to employees on termination of their employment;
(f)The South Jin wage records show variance in the number of hours worked by each employee each day in any given week;
(g)Admissions made by Mr Jin when interviewed with the assistance of an interpreter by Ms Peters on 17 August 2010:
Q:How do they know when to work? How do employees know when to work?
A:I call them then tomorrow only. I call them to come to work at certain time. So just communicating through the phone call.
Q:Do you call the night before, the week before? How much do you know in advance when someone will be working?
A:OK. So, night before. Yeah. If there is a reliable person goes on (sic), then no problem, but people just in the morning saying (sic) that, “I’m not well, I had a heavy drink last night and I can’t work”, that kind of information comes then he just phone directly to somebody who is available. But otherwise night before most of them are contacted.
(h)The varying demand for the services of trolley collectors from time to time such that the flexibility which casual employment allows must have been attractive to South Jin.
In relation to the period after 1 January 2010 when the CS Award was in force, the FWO relied on these additional matters:
(i)Even when employees were working a regular pattern of hours each week, that pattern did not conform with the requirements of cl 24 of the CS Award. For example, the wage records show employees regularly working seven days a week after week, whereas cl 24.1 contemplates the hours being worked in not more than five days in any one week;
(j)The wage records do not indicate any payment of the 15% loading in respect of part‑time employment.
Counsel for the CTS Respondents submitted that the diverse range of factors to be considered in determining whether employment was casual or otherwise meant that the character of the employment of each of the trolley collectors had to be determined on an employee‑by‑employee basis. This meant, so the submission ran, that the Court could not, on the evidence presented by the FWO, make the necessary determination. I do not accept that submission as an a priori proposition. Of course, the determinations must be made by reference to the circumstances of each case, but it does not follow that the Court need hear evidence from, or about, each trolley collector individually in order to make the determinations. If it is evident that there are no material distinctions between those in a group, the determination may be made by reference to the evidence concerning the group. The omission of the FWO to call evidence from more of the trolley collectors may make the Court’s task more difficult but does not mean necessarily that the assessment sought by the FWO cannot be made.
Counsel for the CTS Respondents emphasised the seeming regular and systematic engagement of employees and submitted that this was consistent with the employees having had a reasonable expectation of continued employment. Having regard in particular to ss 264 and 638 of the WR Act to which reference was made earlier, that submission does not have the force in respect of the period between 16 February and 31 December 2009 which it may otherwise have had. Further, even under the CS Award in which casual work is contrasted with work with “reasonably predictable hours”, a number of other indicia may indicate that, despite the regular and systematic nature of the work, the employment is nevertheless properly characterised as casual.
Counsel submitted that the circumstance that South Jin’s records did not contain any indication that paid leave had been provided was of little significance. This was so, he said, because there was no evidence that any employee had requested paid leave; because those who had had unpaid time off may have chosen simply to take leave without pay; and because it may simply be that South Jin was in breach of its obligations in not paying the employees monies to which they were entitled.
One cannot gainsay the first two of these matters as theoretic possibilities, but to my mind they are not persuasive. It is improbable that employees would have taken leave without pay if they, or South Jin, had thought that they had an entitlement to paid leave. The third alternative is however more plausible.
I agree with counsel for the CTS Respondents that the circumstance that the Court has heard evidence from only one trolley collector is a cause for pause. So also are the statements of Mr Jeong to Ms Peters that he regarded himself as a full‑time permanent employee and that he had certain starting times. His employment, and in particular, its regularity seem more in keeping with that of a full‑time employee for the purposes of the CS Award. It is pertinent that Mr Jeong did not receive payments of leave or payment for public holidays, but that is just as consistent with South Jin not having complied with its obligations in that respect as it is with him being a casual employee.
In the circumstances, I am not persuaded on the evidence that Mr Jeong was a casual employee.
I am not able to identify a basis by which Mr Jeong’s employment may be distinguished from the other employees shown in the wage records as having worked 39 hours over seven days in each week. Mr Jin did say that he let the employees know each night when they would be working on the following day, but it seems improbable that he could have done that to 37 employees. The fact that they were working (at least) 39 or more hours each week does suggest some regularity and certainty about their work. It is of course unusual for employees to be expected to work seven days in a week, and week on week, but that is so whether their employment is permanent or casual.
I am not satisfied that these employees have been shown to be casual. I will accordingly refer to these employees as “the Full‑time Employees”.
The position with respect to those shown as having worked regularly 19.5 hours over four days in each week is more difficult. Plainly they were not full‑time employees. The flexibility seen with casual work is more common for employees who are less than full‑time. I consider it probable that South Jin would have wished, in relation to these employees, to have the same flexibility which it sought in the case of Mr Sarkar, with the effect that there was an unpredictability about the place and hours of their work. That is consistent with them being casuals. The circumstance that these employees did not receive paid leave, or payment on public holidays, is also consistent with them being casual employees. It is this class of whom Mr Jin was probably speaking when he said that he would let them know each night of the work for the following day. I agree that the difference between these employees and the Full‑time Employees is a matter of degree only but nevertheless I regard it as significant.
It is true that the work of those shown as working 19.5 hours was in some respects regular and systematic but, as the authorities and the CS Award itself show, the regular nature of the work is not inconsistent with the employees being casual.
Although the position is not straightforward, I consider that the FWO has shown these employees to be casual. That conclusion can be reached with more confidence in respect of those employed after 1 January 2010, as the employees do not satisfy the description of full‑time or part‑time employees in the CS Award.
The finding that South Jin’s trolley collectors were full‑time and casual in these proportions derives support from statutory declarations made by Mr Stroop on 17 February 2009 and 20 October 2009. The declarations were part of the evidence put to the AIRC in support of the attempts to have trolley collection removed from the CS Award. In the first, Mr Stroop estimated that 85% of the employees of “our contractors/subcontractors” were full‑time employees and 15% casual employees. In the second, he said:
A recent survey with our subcontractors has shown that 85% of employees engaged by our subcontractors are full‑time employees. We directly employ a similar proportion of permanent to casual employees.
The employees I consider to be casual are:
·Ashin Maharjan
·Avi Narayan Baskota
·Biswajit Sarkar
·Dongog Kim
·Kumar Shrestha
·Kyewoon Lee
·Prabin Rajbhandari
·Rabin Bk
·Raj Kumar Aryal
·Sanju Shrestha
·Sehwan Kim
·Wenjin Liao
I will refer to these as the “Casual Employees”. Of these, seven (Wenjin Liao, Sehwan Kim, Rabin Bk, Prabin Rajbhandari, Kyewoon Lee, Dongog Kim and Avi Narayan Baskota) carried out at least some of their work in 2009, before the CS Award came into operation.
In summary, I proceed on the basis that those shown as working 19.5 hours in each week and Mr Sarkar were casuals and that those shown in the wage records as working 39 hours each week were permanent full‑time employees.
Were the trolley collectors underpaid?
For the evidence of what the trolley collectors were in fact paid, the FWO relied upon South Jin’s wage records. It may be that, just as the hours recorded in the wage records are of doubtful reliability, so also are the amounts of the payments. However, these are the records which South Jin produced to the FWO pursuant to ss 709(d) and 712 of the FW Act. Given the nature of the FWO’s investigation, and the obvious purpose of the request for production, it is reasonable to suppose that South Jin did not attempt to understate the wages it had paid. Further, with the exception of statements of Mr Jin when interviewed by Ms Peters to the effect that from time to time he gave cash payments to trolley collectors, there was no other evidence indicating that he paid more than the amounts shown in the wage records.
I proceed therefore on the basis that the wage records record the amounts said to have been paid by South Jin to, or on behalf of, the trolley collectors.
On this basis, it can be concluded that the Casual Employees were underpaid in both 2009 and 2010 because the hourly rates paid by South Jin to those employees did not include the applicable casual loading. In addition, those working on weekends were not paid the penalty rates which became applicable from 1 January 2010, and nor were they paid the overtime rates.
In respect of the Full‑time Employees, there was no underpayment in 2009 because South Jin did pay at the applicable rate of $14.31 per hour and the WR Act did not contain any provision for payment of overtime or weekend penalties.
The position is different, however, once the CS Award came into operation. In respect of the period from 1 January 2010 to 22 April 2010, the Full‑time Employees were underpaid because the payment by South Jin was at a flat hourly rate of $14.31 in respect of some employees and $14.76 in respect of others when it should, in each case, have been $15.34 per hour. In addition, there was no payment of penalty rates and there was no payment of overtime even though each of the Full‑time Employees was entitled to these payments.
I refer to Mr Stroop’s evidence concerning his countersigning of ITM questionnaires completed by Mr Jin as part of an ITM program to monitor the compliance of its contractors and subcontractors with the requirements of its contracts with the supermarkets. Mr Stroop said that he had signed the questionnaires only for the purpose of verifying that Mr Jin had completed the forms and not for the purpose of verifying that the information provided by Mr Jin in them was correct. This was not persuasive evidence. I do not accept that Mr Stroop’s understanding, at the time he countersigned each document, was that he was doing so only for the purpose of verifying to ITM that it was Mr Jin who had signed the document. It is apparent on the face of the questionnaires that he was verifying to ITM that the information provided by Mr Jin in the questionnaires was correct. This was another matter causing me to have doubts about the reliability of Mr Stroop’s evidence more generally.
For these reasons, I have concluded that considerable care is needed before acting on Mr Stroop’s evidence. There are aspects of his evidence which I do not accept at all.
The knowing involvement of the CTS Respondents
In the circumstances of this case, it is not necessary to distinguish between Mr Stroop and CTS. Mr Stroop’s knowledge can be imputed to CTS: s 826 of the WR Act and s 793 of the FW Act. Neither of the CTS Respondents made any submission to the contrary.
The FWO did not attempt to establish that Mr Stroop and CTS had knowledge of the hours being worked by each particular employee nor that each employee was being underpaid. Instead the FWO’s claim was that Mr Stroop and Mr Jin had the requisite knowledge because they must have known, and did actually know, that the amounts CTS was paying to South Jin were insufficient to allow it to comply with its statutory and award obligations with respect to wages and other entitlements. The FWO made this point with even greater force in respect of the period after 1 January 2010, when the CS Award came into operation.
In addition, the FWO also relied on what she contended was the detailed knowledge by the CTS Respondents of South Jin’s operations generally. It had that knowledge by a variety of means.
As already noted, the subcontracts of CTS with South Jin stipulated the contract price which CTS would pay, and stipulated the service levels to be met. CTS provided South Jin with the indicative rosters so that it knew, at least in a general way, of the number of hours for which South Jin would have to engage trolley collectors. The CTS Respondents knew the minimum rates of pay and other entitlements applicable from time to time which South Jin was obliged to pay under the WR Act, the FW Act and the CS Award. They were informed of these matters by ITM, which kept Mr Stroop and CTS up to date with the progress and outcome of the applications to the AIRC and to FWA, and the effect of the decisions of those entities on the rates payable. The CTS Respondents acknowledged that they knew that South Jin was legally obliged to pay minimum rates to its employees as well as other entitlements. Mr Stroop admitted that he knew the minimum rates of pay and the applicable entitlements for the employed trolley collectors because of the obligations of CTS under its contracts with ITM, because CTS employed and paid trolley collectors at other sites, and because CTS provided payroll services for subcontractors at other sites. Mr Stroop also admitted that he knew at relevant times that South Jin was obliged to effect workers compensation insurance in respect of its employees and to pay superannuation contributions for those employees. The CTS Respondents acknowledged that CTS provided South Jin with information and advice about the minimum entitlements of the employees under the WR Act, the Transitional Act and the CS Award both verbally and in the form rate sheets.
The CTS Respondents also acknowledged that they knew that the service hours under the contracts with Coles, Woolworths and Foodland and the indicative roster hours for each site required weekend work (other than in the period 23 April 2010 to 1 July 2010) for which South Jin had to pay penalty rates and other work for which South Jin had to pay overtime rates.
In addition to knowing the amount which it paid to South Jin pursuant to its subcontracts, the CTS Respondents knew that CTS had not made any additional payments to South Jin until 2 September 2010. They must have known that South Jin was reliant on the payments made under the subcontracts in order to meet its statutory and award obligations and I find that they were.
Apart from the matters already mentioned, the CTS Respondents had knowledge from other sources of the operations of South Jin. Mr Stroop made regular visits to the shopping centre sites in order to oversee the provision by South Jin of the trolley collecting services for which it had contracted. Mr Stroop said, however, that he made these visits for the purposes of ensuring that Coles, Woolworths and Foodland respectively were satisfied with the service being provided, and not for the purpose of checking the compliance by South Jin with its obligations concerning minimum pay and other entitlements.
ITM had a system in place by which it sought to monitor compliance by its contractors and their subcontractors with the requirements of its contracts with the supermarkets. I have already referred to the questionnaires ITM required CTS and its subcontractors to complete every six months. In addition, ITM required CTS to co‑sign the declarations provided by its subcontractors certifying that the information provided by the subcontractor was true and correct. Mr Hills produced the compliance questionnaires provided by CTS and South Jin for the monthly periods ending 31 December 2008, 30 June 2010 and 31 December 2010. He was unable to locate the compliance questionnaires for 2009. Question 13 in the compliance questionnaire was as follows:
Are all your staff being paid the correct Award rates of pay including Superannuation?
In each case Mr Stroop answered this question in the affirmative and indicated that the award being used was the “CSA”. I am satisfied that this was an abbreviation for the Cleaning Services Award.
The questionnaire forms also enquired whether CTS was using a subcontractor at the site and required it to have the subcontractor to sign the questionnaire as well. In each case Mr Jin signed the questionnaire. Mr Stroop also signed each of South Jin’s 2010 questionnaire forms (with one exception) opposite the printed words “Signed, certifying the above is true and correct”. By this means, Mr Stroop certified to ITM that staff were being paid the correct Award rates, including the superannuation and, in the 2010 year, that they were being paid pursuant to the CS Award. I reject his account that he was signing only to indicate that it was Mr Jin who had signed the questionnaires on behalf of South Jin.
On 16 October 2009, Mr Hills visited Adelaide and checked a number of aspects of the performance by CTS of its contracts with ITM. In a letter dated 19 October 2009 following this visit, Mr Hills raised a number of concerns. The letter commenced with the following statement:
If CTS wishes to be allowed by ITM to sub‑contract its trolley contracts, then CTS must be responsible for ensuring that its sub‑contractors act in full compliance of all legal and contractual obligations.
It was in this letter that Mr Hills raised ITM’s concerns about H&F to which I referred earlier and insisted that CTS terminate all businesses associations with Mr Hyun.
Mr Hills went on in the letter to require from CTS a letter from the accountant of (amongst others) South Jin that the individual wages record produced to Mr Hills had been properly incorporated into the payroll general ledger of each company since 10 November 2008, together with confirmation that the companies had met their other statutory obligations, including GST and superannuation. Mr Hills then went on to say:
Given the past history, we also require that CTS on a quarterly basis do a random check on individual payroll records of these 3 companies [which included South Jin] and report to ITM. Presumably there must exist a spreadsheet for a weekly/quarterly/annual payroll summary and checking names against a few weekly summaries taken at random through the quarter should establish whether the records match. We will also be requesting an annual letter of compliance from the company accountants for the foreseeable future.
Mr Stroop responded to this letter on 27 January 2010 saying (relevantly) that CTS had put in place requirements for payroll records to be submitted to its office by South Jin (and other contractors) on a three monthly basis for the purpose of a random audit; that CTS was requiring contractors who did not have their records prepared by CTS to submit “annual letters from their accountants stating their compliance with all regulatory requirements”; and that it was requiring “six monthly letters to be signed off by the contractors, stating that they have adhered to all company policies: ie, a statutory declaration [stating] that the appropriate remuneration according to the FMW, WorkCover, PAYG, Superannuation and occupational health and safety policies have been adopted”.
However, Mr Stroop’s evidence was that he did not recall doing the three monthly audits required by Mr Hills and that he had not himself checked the payroll records provided by South Jin. Instead he had left this to the payroll clerk employed by CTS. I thought that Mr Stroop’s evidence about this was unconvincing and consider that he paid closer attention to South Jin’s wage records than he was prepared to acknowledge.
Having regard to these matters, I am satisfied that the CTS Respondents had the requisite knowledge of several of the elements of the contraventions of ss 182(2) and 185(2) of the WR Act and of s 45 of the FW Act, to which I referred earlier. I add that I am satisfied that the CTS Respondents knew that the employment of trolley collectors was not covered by an Australian Pay and Classification Scale. That inference can be drawn given CTS’s own employment of trolley collectors.
The critical issue bearing on the claimed accessorial liability is whether the CTS Respondents knew that South Jin was underpaying its employees.
In respect of the period 16 February to 31 December 2009, the question is whether the CTS Respondents knew that South Jin was not paying the loading of 20% to the Casual Employees and whether they knew, when the CS Award came into operation, that South Jin was underpaying its employees.
As I have already indicated, the FWO’s claim in this respect did not turn on alleged knowledge by the CTS Respondents of the amounts paid to any particular employee. Instead, the FWO claim was that the CTS Respondents must have known that South Jin was underpaying its employees because CTS was not paying South Jin sufficient to allow it to comply with the Award obligations.
For this purpose, the FWO placed considerable reliance on a calculation of the “effective hourly rate” which CTS paid to South Jin in respect of each site. The FWO calculated the effective hourly rate by dividing the contract price paid by CTS to South Jin for each site by the number of hours shown on the indicative roster applicable to each site. The following table contains the effective hourly rates calculated in this manner.
Effective Hourly Rates
Kurralta Park Fairview Park Elizabeth Marion Shopping Centre West Lakes Indicative roster hours 91 109
(to 1.2.10)74.5
(from 2/2/10)184 295.5 184.75 Throughout the Relevant Period $14.95 $14.07 To 15 March 2009 Not calculable From 16 March 2009 $14.21 To 3 August 2009 $16.48 From 4 August 2009 $18.13 To 1 February 2010 $15.60 From 2 February 2010 $16.11
For ease of comparison, I summarise the hourly rates payable to trolley collectors as follows:
16 February 2009 to 31 December 2009 1 January 2010 to
22 April 201023 April 2010 to
30 June 20101 July 2010 to
21 November 2010$ $ $ $ Minimum hourly rate 14.31 15.34 14.31 15.21 Casual hourly rate 17.17 19.18 17.17 18.40 Saturday (non‑casual) N/A 23.01 N/A 16.73 Saturday (casual) N/A 26.85 N/A 19.92 Sunday (non‑casual) N/A 30.68 N/A 18.25 Sunday (casual) N/A 34.52 N/A 21.45 Overtime – Monday to Saturday (non‑casual) N/A 23.01
(first two hours)30.68
(thereafter)21.47
(first two hours)28.62
(thereafter)22.82
(first two hours)30.42
(thereafter)Overtime Sunday (non‑casual) N/A 30.68 28.62 30.42 Work after 6 pm, Monday to Friday
(non‑casual)N/A 17.64 N/A 17.49 Work after 6 pm, Monday to Friday
(casual)N/A 21.48 N/A 20.69
The effective hourly rates are slightly overstated as CTS did not pay South Jin in full the contract amounts upon which the FWO relied for the calculation. That is because CTS deducted amounts for uniforms and other items which it provided to South Jin’s employees.
As can be seen, two of these effective hourly rates (Marion and West Lakes) were less than the minimum hourly rate of $14.31 per hour payable from 16 February to 31 December 2009 and from 23 April to 30 June 2010 and nearly all were less than the rates applicable in the various categories after 1 January 2010.
On the basis of the submission that all of the trolley collectors were casuals, the FWO submitted that these payments were inadequate to allow South Jin to meet its statutory and award obligations to the trolley collectors, and that that was so obviously so that the CTS Respondents must have known it.
The force of that submission is weakened by my finding that 37 of the trolley collectors were full‑time and not casual. However, in my opinion, the FWO submission remains persuasive. Even though South Jin did not have to pay the casual loading in respect of those employees, it still had to pay (and presumably make provision for) payments of annual leave, sick leave, and public holidays. Mr Hills’ evidence was to the effect that, while the payment of the casual loading to casual employees made them more expensive than permanent employees, the difference was only about 3‑4%. In addition, South Jin had to pay the superannuation contributions and workcover levies. Mr Stroop acknowledged in cross‑examination that the difference between the costing for permanent and casual employees did not vary a great deal. His practice when costing was to take the base hourly rate and add an average of 27% for annual leave, superannuation, workcover and the other on costs.
Thus, the submission of the FWO retains some force.
The CTS Respondents submitted, however, that the FWO analysis based on the calculated effective hourly rate was flawed. This was because the calculations assumed that it had been necessary for South Jin to employ trolley collectors for the whole of the hours stated in the indicative rosters, when this was not so in fact. The CTS Respondents submitted that it was possible for the requisite levels of service to supermarkets to be provided with less than the hours shown in the indicative rosters, especially having regard to the times of non‑peak demand at the different sites. They also pointed out that, as the supermarkets tended to want a single hourly rate in the tender, ITM and CTS amortised all the costs in the hourly rate over the year. This meant that there were many hours for which ITM and CTS were receiving more than the actual costs incurred for that hour. Further, in order to provide a margin of error, ITM and CTS over estimated the hours shown in the indicative rosters. The combined effect of these factors was that the contracts could be performed, in fact, with less than the hours shown in the indicative rosters.
Mr Stroop claimed in his evidence that, even with a reduction of 20‑35% in the number of trolley collectors, South Jin could still have met the required service levels. Both Mr Hills and Mr Vickery agreed that some reduction in the hours of trolley collectors from those shown in the indicative rosters was feasible. Both said that they had encouraged their contractors in early 2010 to reduce the numbers of trolley collectors because of the higher rates payable under the CS Award.
Each of Mr Hills and Mr Vickery gave evidence of the kinds of reductions which were possible. I prefer the evidence of Mr Vickery to Mr Hills on this topic as he had more involvement in the day to day operations at each site. Mr Vickery disagreed that the reductions of the order suggested by Mr Stroop were practicable. Having regard to my assessment of Mr Stroop generally and this evidence of Mr Vickery, I do not accept Mr Stroop’s evidence that reductions in the range 20‑30% were possible. The reductions which Mr Vickery thought were reasonable tended to be of the order of about 15%.
I have, accordingly, recalculated the FWO’s effective hourly rate on the basis that it was possible for South Jin to perform its contracts with the hours shown on the indicative rosters reduced by 15%. The adjusted effective hourly rates are shown in the following table.
Adjusted Effective Hourly Rates Kurralta Park Fairview Park Elizabeth Marion Shopping Centre West Lakes Adjusted indicative roster hours 77.3 92.4
(to 1.2.10)63.3
(from 2/2/10)156.4 251.2 157 Throughout the Relevant Period $17.58 $16.56 To 15 March 2009 Not calculable From 16 March 2009 $16.72 To 3 August 2009 $19.39 From 4 August 2009 $21.33 To 1 February 2010 $18.35 From 2 February 2010 $18.95
Again, it can be seen that the rates payable under the CS Award well exceeded most of the adjusted effective rates.
I find that the CTS Respondents knew that this was so. Mr Stroop said that he had been told on or about 3 January 2010 by Mr Vickery that the CS Award came into operation 1 January 2010. He said that he immediately spoke to all his contractors, including South Jin, and informed them that they had to comply with the terms of the Award in respect of the first full pay period after 1 January 2010. I find therefore that the CTS Respondents knew the amounts which South Jin had to pay. They also knew the hours, and the spread of hours, to be worked by South Jin’s employees to meet the required service levels.
Mr Stroop said that he had explained to Mr Jin when negotiating the subcontracts with South Jin that he did not have to comply with the indicative rosters. In particular, he had told Mr Jin words to the following effect:
[30.1]You will not actually engage staff for the figures on the “rosters”. These are an indicative tool that we use when pricing the tender with the supermarkets only;
[30.2]You will need to work out the minimum number of staff that can service the store during the service hours, and the more efficiently you do it (whilst ensuring that all your employees are paid correctly) the more money you make.
Mr Stroop also said:
[139]I also note that I have had regular discussions with [Mr Jin], as to how he could increase profitability by reducing labour hours. This included at the time of negotiating/entering into the sub‑contracts, as well as from time to time thereafter. I did not diarise or keep records of such conversations so I cannot specifically identify the date and time they occurred, however they occurred on a regular basis.
I am disinclined to accept this evidence. It is inconsistent with the understanding of Mr Jin, as disclosed in his statements to Ms Peters on 4 November 2010 (set our earlier), that he had based the number of the employees at each site on the indicative rosters and had not departed from them. It is also inconsistent, to an extent, with the statements made by Mr Stroop himself when interviewed by Ms Peters on 18 April 2011. In reference to South Jin’s acceptance of the contract at Marion, the following exchange occurred:
Q:Having signed the Marion contract he may have been somewhat aware about what hours and employees. Did he seek advice from you or did you provide any advice about how many employees need to go to each other site from the other contracts?
A:He was given a copy of the rosters and the contracts to consider four weeks prior to making up his mind.
Q:So there was a roster. Did the roster specify how many employees?
A:How many employees, start and finishing times, …
…
Q:So what we’re referring to, just for the purposes of the recording, at the end of Exhibit ES2 is a store trolley collection roster and it has pusher 1 and pusher 2 and start and finish times for those employees, and a total.
A:Yeah.
…
Q:And so he was provided, are you saying, with something like this for each store?
A:Every single store.
…
Q:Are those – so that’s part of that contract?
A:It’s part of the contract …
…
Q:So is there a requirement to pass that onto each contractor who performs the actual service?
A:Is there a requirement to pass on? No. But is really dumb not to … from my perspective.
…
Q:… As one of the contracting parties for these five contracts … what’s your intention behind including the roster as part of the contract?
A:So he has a full understanding of what his obligations are.
Q:So it is an obligation under the contract?
A:Yeah.
Other evidence indicated that the “rosters” to which Mr Stroop referred were the indicative rosters.
These responses of Mr Stroop tended to confirm that compliance with the indicative rosters was expected. In fairness to Mr Stroop, I observe that elsewhere in the same interview he had described the indicative rosters as “the maximum hours that they need to work” and said that contractors such as South Jin probably did not work the total hours shown on the indicative rosters 100% of the time.However, the tenor of these statements seems quite different from the tenor of Mr Stroop’s evidence in [30] and [139] of his affidavit set out earlier.
Whether or not the indicative rosters had contractual force, these statements by Mr Stroop suggested that South Jin was expected to adhere reasonably closely to the hours shown.
In any event, Mr Stroop knew that South Jin did not reduce the hours in the way he said that he had suggested. This is evident in the following passage of his evidence:
[141]… I recall a number of occasions where I have said words to [Mr Jin] to the effect that he had too many staff on site, which creates inefficiencies. I also recall a number of occasions, particularly when the Award was being discussed, where I explained to [Mr Jin] as well as numerous other contractors, particularly in late 2009 and early 2010, that it was necessary to cut the number of hours worked by employees to ensure that they would be paid correctly. … The reality is, that when the cost of labour increased the supermarkets did not immediately agree to increase their rates. It was accordingly necessary to reduce labour hours to ensure that staff were properly paid.
I regard these passages as containing an implicit admission by Mr Stroop that he knew that the amounts which CTS was paying South Jin were insufficient to allow South Jin to meet its statutory and award obligations if he provided trolley collectors at each site in accordance with the indicative rosters. The same admission is implicit in another passage in Mr Stroop’s affidavit:
[70][O]nce the award came into effect, the hourly rates payable to employees increased, mostly because of entitlement to overtime and penalty rates for work after 6 pm, Saturday, Sunday and Public holidays. This meant that the contract rates paid to sub‑contractors would not be adequate to enable the sub‑contractors to pay their employees properly without a large cut in the amount of hours worked by employees.
(Emphasis added)
Despite my reservations about Mr Stroop’s evidence generally, I accept that, at least from February 2010, he was counselling South Jin to reduce the number of employees at each site. Mr Stroop knew by this time that the CS Award applied. He himself was being advised by Mr Vickery and Mr Hills that the only way to remain viable was to reduce the number of hours. It is probable that he would have given effect to that advice. It is not possible to tell whether or not South Jin did reduce the number trolley collectors, but if it did, it could not have reduced below the adjusted hours, and the CTS Respondents knew that that was so.
Later, CTS did make additional payments to South Jin with the first payment being made on or about 2 September 2010 ($56,381.00). In total, CTS paid South Jin an additional $142,479.00, of which it later recovered $115,274.92 in reimbursement from the supermarkets. The very fact that CTS made these payments is indicative of its recognition that, at least until 2 September, the amounts it had paid to South Jin were inadequate for it to comply with its award obligations.
Accessory liability – conclusions
I keep in mind two matters. It was open to South Jin to meet its wage obligations by aggregating the income it received from CTS. That is to say, it did not have to meet its obligations to employees at one site from only that income which it received in respect of that site. Secondly, the FWO alleges accessorial liability in respect of South Jin’s underpayment contraventions only, and not in respect of any failures by it to comply with other obligations, such as payment of annual leave, sick leave and the like. That is significant because it means that the focus should be on the cash flows available to South Jin.
I am not satisfied that the FWO has established that the CTS Respondents had knowledge that South Jin was underpaying its employees in the period between 16 February and 31 December 2009. I have reached this conclusion because South Jin’s records show that it was paying at the rate of $14.31 per hour. Its underpayments affected only those who were casuals. I am not satisfied that the FWO has shown that the CTS Respondents knew that South Jin was underpaying the casuals in this period. The number of casuals, on my findings, was relatively small. Even if CTS was paying South Jin less than the effective hourly rate at some sites, it was paying more than the effective hourly rate at other sites. South Jin thereby had the means of using monies received in respect of work at one site to make payments to trolley collectors at other sites. This has the consequence that CTS cannot be taken to have known, by the arrangements it had in place, that South Jin was underpaying the Casual Employees.
In these circumstances, I do not have the requisite degree of persuasion that the CTS Respondents knew of South Jin’s underpayments in the period from 16 February to 31 December 2009.
The position is different, however, in 2010. In the period from 1 January 2010 to 23 April 2010, South Jin was obliged to pay a minimum of $15.34 for ordinary time work, $19.18 to casuals, an hourly rate of $23.01 for Saturday work and $30.68 for Sunday work, and even higher rates for overtime. Even with reduced staff, the adjusted effective hourly rate was insufficient to allow South Jin to make these payments. The matters to which I referred above indicate that the CTS Respondents knew this. They proceeded in the hope that the major supermarkets would be persuaded to provide increased amounts, but this did not occur until well after this period. I conclude that the CTS Respondents knew that, by reason of its payment of insufficient amounts to allow South Jin to meet its award obligations in this period, that South Jin was underpaying its employees.
I am not satisfied that it has been shown that the CTS Respondents had the same knowledge in the period between 23 April and 30 June 2010. The differences between the adjusted effective hourly rates and the award obligations in this period are not so great that the CTS Respondents must have known that South Jin was underpaying the trolley collectors.
The conclusions with respect to the period from 1 January to 23 April 2010 apply in respect of the period from 1 July to 2 September 2010. I have applied the latter date because that is when CTS made the first additional lump sum payment to South Jin. There is no direct evidence of how South Jin applied that lump sum payment. It may well be that it was used to make additional payments in the period after 2 September 2010. Accordingly, it has not been established to my satisfaction that the CTS Respondents had knowledge that South Jin was continuing with underpayments after that date.
The CTS Respondents knew that South Jin employed some casuals. In the two statutory declarations made by Mr Stroop for use in the applications to the AIRC, he referred to surveys he had carried out of his own employees and of his contractors indicating that about 15% were casual. I find that he knew that this same proportion of South Jin’s employees was casual.
The CTS respondents participated with knowledge of the elements making up the contraventions. It is apparent that the CTS Respondents encouraged and expected South Jin to continue to provide trolley collection services, despite the inadequate payments to it. It was in the economic interest of CTS for South Jin to continue the trolley collection services, because in 2010 it was earning some $2,600‑$2,900 per week from the contracts being performed by South Jin.
The CTS Respondents may have encouraged South Jin to reduce the hours, but there were limits to the extent to which South Jin could do so, while maintaining adequate service levels. The CTS Respondents knew that. Their encouragement, whether it be express or implicit, was inculpatory conduct in the contraventions.
I find that the FWO has established the accessorial liability of the CTS Respondents in respect of the underpayments in the period from 1 January to 23 April 2010 and from 1 July to 2 September 2010, but not otherwise. In these circumstances, it is not necessary to consider the FWO submissions concerning the circumstances in which an omission to act may constitute conduct giving rise to accessorial liability.
Accessorial liability of Mr Jin
Mr Jin was the principal and Director of South Jin. He was involved personally in the day to day management of its trolley collection operations. There is no difficulty in imputing to him knowledge of South Jin’s operations and the matters concerning its employment of trolley collectors.
Mr Jin knew the trolley collectors who were employed and the hours which they worked. He knew the amounts which they were paid as he was responsible for making that payment.
By his defence, Mr Jin denied knowledge of the Award, superannuation and statutory obligations. However, as noted, he did not attend to give evidence.
I find that Mr Jin did have knowledge of the statutory obligations applicable in the period from 16 February to 31 December 2009 and the Award obligations applicable from 1 January 2010.
As to the former, I note that the subcontracts between South Jin and CTS (which were signed by Mr Jin on behalf of South Jin) included a number of express obligations with respect to employee entitlements, including:
[5](l) To ensure that any staff employed by the Sub‑Contractor to perform, or assist in the performance of work shall be paid in accordance with the appropriate industrial awards and shall receive such entitlements as may be applicable;
…
(o)To comply with all regulations under the Workers Compensation Act and the Occupational Health and Safety Act (SA);
(p)To pay Superannuation Levies as may be due for employees pursuant to the Federal Act.
By these means, Mr Jin’s attention was drawn to the existence of general obligations of these kinds.
Mr Jin’s knowledge of the source of his obligations with respect to employees appears to have been imperfect but nevertheless he had knowledge that obligations were imposed.
When interviewed by Ms Peters on 17 August 2010, Mr Jin gave the following responses:
Q: Who makes the decision to make payments to your employees?
A:Okay. When government decide – okay. When government changed the rule by law, then it’s a change, then CTS was informed by the government and then CTS is going to tell me.
Later, Mr Jin gave the following response:
Q:When the contract was offered to you, did you negotiate the rates of pay in it or how did the amount come about for the trolley collection services?
A:Okay. Okay. Yeah Eddie told – Eddie [Mr Stroop] told him the hourly rate was there by law, so that was told him.
Mr Vickery gave evidence of an “updated induction and compliance program” that ITM provided in April 2009. This program was directed to “compliance issues” in the trolley collection industry. As part of this program, a session was held in Adelaide on 28 April 2009. Mr Jin attended that session. The overheads used at the session indicate that the topics covered included the Australian Fair Pay Condition Standard (AFPC Standard), wage rates, casual employees, the rates applicable to casual employees, leave entitlements, public holidays, meal and rest breaks, record keeping, the issue and retention of pay slips to employees, general record keeping, pay records, superannuation records and audit processes. Attendees were informed of the AFPC Standard and of what was needed to be done to comply with that Standard.
English is not Mr Jin’s first language and I accept that he may have difficulties in understanding some of the matters addressed in the session. Nevertheless, it is apparent that he was provided with information on a number of matters relevant to these proceedings. The evidence also indicates that Mr Jin was informed about matters bearing upon the introduction of the CS Award. He attended a meeting at the office of CTS in February 2010 at which Mr Vickery provided information about the CS Award and the obligations imposed by it. Mr Stroop’s evidence was that he had passed onto Mr Jin information which he received from ITM about the introduction of the CTS Award.
Finally, I note that in July 2010, Mr Peters (an employee of CTS) sent to South Jin pay rate sheets showing the rates under the CS Award. It is reasonable to infer (and I do so infer) that these came to Mr Jin’s attention.
Mr Jin must also have known of the concerns about his compliance with award and statutory obligations. At the very least, he knew that this was so because of the requests by CTS that he produce his wage records and other information and, further, that he obtain a letter from his accountant certifying as to South Jin’s compliance with statutory entitlements.
In these circumstances, I am satisfied that Mr Jin had knowledge of each elements of the underpayment contraventions.
I am also satisfied that Mr Jin had knowledge of the obligation to make superannuation contributions. At the very least, he acquired that knowledge in the compliance session which he attended in April 2009.
Finally, in relation to the pay slips, I am satisfied that Mr Jin acquired the same knowledge at the least at the compliance session in April 2009.
In short, I consider that the FWO has made good the allegations of Mr Jin’s knowing involvement in each of the contraventions of South Jin I have found to be established.
Conclusion
In summary I have found that:
(a)Twelve of South Jin’s trolley collectors were casuals and the rest were full‑time employees;
(b)South Jin contravened s 182(3) and s 185(2) of the Workplace Relations Act in the period 16 February to 31 December 2009 by underpaying the Casual Employees;
(c)South Jin contravened the Cleaning Services Award by underpaying all of its trolley collectors in the period 1 January to 21 November 2010;
(d)South Jin contravened cl 23.2 of the Cleaning Services Award by failing to pay the minimum superannuation contributions in respect of all its trolley collectors in the period of 1 January to 21 November 2010;
(e)South Jin contravened reg 19.20(1) of the Workplace Relations Regulations in the period 16 February to 30 June 2009 and s 536(1) of the Fair Work Act in the period 1 July 2009 to 12 September 2010 by failing to issue pay slips;
(f)South Jin contravened reg 19.4(1) of the Workplace Relations Regulations in the period 16 February to 30 June 2009 and s 535 of the Fair Work Act in the period 1 July 2009 to 21 November 2010 by failing to keep proper employment records;
(g)Mr Jin was involved as an accessory in respect of all of South Jin’s contraventions;
(h)Coastal Trolley Services and Mr Stroop were knowingly involved in South Jin’s underpayment contraventions during the periods 1 January 2010 to 23 April 2010 and 1 July 2010 to 2 September 2010;
(i)In all other respects, the claims of the Fair Work Ombudsman should be dismissed.
The FWO is to prepare minutes of the orders appropriate to give effect to the conclusions in these reasons. Account should be taken in the preparation of the minutes of the desirability of avoiding any inconsistency with the declarations previously made by the Federal Circuit Court in respect of South Jin. I will hear from the parties as to the form of orders, penalties and any other matters.
I certify that the preceding three hundred and ninety-six (396) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White. Associate:
Dated: 18 December 2015
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